<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
/ X / OF THE SECURITIES EXCHANGE ACT OF 1934
For the twenty-four weeks ended June 20, 1998
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-785
NASH-FINCH COMPANY
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 41-0431960
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7600 France Ave. South, Edina, Minnesota 55435
(Address of principal executive offices) (Zip Code)
(612) 832-0534
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
Number of shares of common stock outstanding at July 31, 1998:
11,339,905 shares
<PAGE>
PART I - FINANCIAL INFORMATION
This report is for the twenty-four week interim period beginning
January 4, 1998, through June 20, 1998.
The accompanying financial information has been prepared in conformity
with generally accepted accounting principles and practices, and methods of
applying accounting principles and practices, (including consolidation
practices) as reflected in the financial information included in the Company's
Annual Report on Form 10-K, filed with the Securities and Exchange Commission
for the preceding fiscal year. The financial statements included in this
quarterly report include all adjustments which are, in the opinion of
management, necessary to a fair presentation of the Company's financial
position and results of operations for the interim period.
The information contained herein has not been audited by independent
auditors and is subject to any adjustments which may develop in connection
with the annual audit of its accounts by Ernst & Young LLP, the Company's
independent auditors.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-four Weeks Ended
------------------------ ------------------------
June 20, June 14, June 20, June 14,
1998 1997 1998 1997
----------- -------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 969,023 960,600 1,894,981 1,896,597
Other revenues 13,816 14,850 24,959 26,685
----------- -------- --------- ---------
Total revenues 982,839 975,450 1,919,940 1,923,282
Cost and expenses:
Cost of sales 885,868 869,791 1,732,830 1,721,850
Selling, general and administrative expenses 73,989 76,145 141,698 148,433
Special charges (1,262) - (1,262) -
Depreciation and amortization 11,300 10,888 22,378 21,793
Interest expense 6,764 7,500 13,624 14,821
----------- -------- --------- ---------
Total costs and expenses 976,659 964,324 1,909,268 1,906,897
Earnings before income taxes and
extraordinary charge 6,180 11,126 10,672 16,385
Income taxes 2,564 4,662 4,429 6,865
----------- -------- --------- ---------
Earnings before extraordinary charge 3,616 6,464 6,243 9,520
Extraordinary charge from early extinguishment
of debt, net of income tax benefit of $3,951 - - 5,569 -
----------- -------- --------- ---------
$ 3,616 6,464 674 9,520
----------- -------- --------- ---------
----------- -------- --------- ---------
Basic earnings per share:
Earnings before extraordinary charge $ .32 .58 .55 .85
Extraordinary charge from early extinguishment
of debt - - (.49) -
----------- -------- --------- ---------
Net earnings $ .32 .58 .06 .85
----------- -------- --------- ---------
----------- -------- --------- ---------
Diluted earnings per share:
Earnings before extraordinary charge $ .32 .57 .55 .84
Extraordinary charge from early extinguishment
of debt - - (.49) -
----------- -------- --------- ---------
Net earnings $ .32 .57 .06 .84
----------- -------- --------- ---------
----------- -------- --------- ---------
Weighted average number of common and
common equivalent shares outstanding:
Basic 11,314 11,220 11,307 11,206
Diluted 11,364 11,347 11,363 11,333
</TABLE>
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See accompanying notes to condensed consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 20, January 3,
1998 1998
-------- ---------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 831 933
Accounts and notes receivable, net 174,224 173,962
Inventories 275,446 287,801
Prepaid expenses 20,136 22,582
Deferred tax assets 9,072 9,072
--------- -------
Total current assets 479,709 494,350
Investments in affiliates 6,901 7,679
Notes receivable, noncurrent 23,489 23,092
Property, plant and equipment:
Land 30,400 31,229
Buildings and improvements 135,941 137,070
Furniture, fixtures and equipment 311,131 306,762
Leasehold improvements 61,399 60,578
Construction in progress 42,167 28,485
Assets under capitalized leases 24,878 25,048
--------- -------
605,916 589,172
Less accumulated depreciation and amortization (326,252) (312,939)
--------- -------
Net property, plant and equipment 279,664 276,233
Intangible assets, net 71,586 70,732
Investment in direct financing leases 16,825 19,094
Deferred tax asset - net 2,621 2,622
Other assets 10,572 11,081
--------- -------
Total assets $ 891,367 904,883
--------- -------
--------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Outstanding checks $ 25,800 36,271
Short-term debt payable to banks 811 11,300
Current maturities of long-term debt and
capitalized lease obligations 2,784 7,964
Accounts payable 200,084 177,548
Accrued expenses 70,957 60,599
Income taxes 5,116 737
--------- -------
Total current liabilities 305,552 294,419
Long-term debt 313,747 325,489
Capitalized lease obligations 35,796 38,517
Deferred compensation 6,550 6,768
Other 7,150 14,072
Stockholders' equity:
Preferred stock - no par value
Authorized 500 shares; none issued - -
Common stock of $1.66 2/3 par value
Authorized 25,000 shares; 11,575 shares issued in 1998
and 1997 19,292 19,292
Additional paid-in capital 17,924 17,648
Restricted stock (378) (391)
Retained earnings 187,579 190,984
--------- -------
224,417 227,533
Less cost of 236 shares and 252 shares of
common stock in treasury, respectively. (1,845) (1,915)
--------- -------
Total stockholders' equity 222,572 225,618
--------- -------
Total liabilities and stockholders' equity $ 891,367 904,883
--------- -------
--------- -------
</TABLE>
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See accompanying notes to condensed consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Twenty-four Weeks Ended
-----------------------
June 20, June 14,
1998 1997
--------- --------
<S> <C> <C>
Operating activities:
Net earnings $ 674 9,520
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Provision for (use of) special charge (2,764) -
Depreciation and amortization 22,378 21,793
Provision for bad debts 976 2,139
Provision for (use of) losses on closed lease locations 443 (295)
Extraordinary charge - write off deferred financing costs 142 -
Deferred income taxes - 1,978
Deferred compensation (218) (392)
Earnings of equity investments (231) (539)
Other 209 869
Changes in operating assets and liabilities:
Accounts and notes receivable 2,055 (11,633)
Inventories 13,841 10,369
Prepaid expenses 2,485 (3,171)
Accounts payable and outstanding checks 12,065 (5,232)
Accrued expenses 5,619 10,449
Income taxes 4,379 1,181
-------- -------
Net cash provided by operating activities 62,053 37,036
-------- -------
Investing activities:
Dividends received 800 1,600
Disposals of property, plant and equipment, net 2,864 6,110
Additions to property, plant and equipment
excluding capital leases (25,151) (22,666)
Business acquired (1,846) (16,633)
Loans to customers (7,788) (7,536)
Payments from customers on loans 7,650 5,829
Sale (repurchase) of receivables (3,001) -
Other (3,684) (359)
-------- -------
Net cash used in investing activities (30,156) (33,655)
-------- -------
Financing activities:
(Payment) Proceeds from revolving debt (74,000) 20,000
Dividends paid (4,079) (4,045)
Payments of short-term debt (10,489) (14,693)
Proceeds from long-term debt 165,000 -
Payments of long-term debt (107,983) (4,371)
Payments of capitalized lease obligations (743) (463)
Other 296 179
-------- -------
Net cash used in financing activities (31,998) (3,393)
-------- -------
Net decrease in cash $ (101) (12)
-------- -------
-------- -------
</TABLE>
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See accompanying notes to condensed consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Fiscal period ended June 20, 1998,
January 3, 1998 and December 28, 1996 Foreign
(In thousands, except per share amounts) Common Stock Additional currency
-------------------- paid-in Retained translation
Shares Amount capital earnings adjustment
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 30, 1995 11,224 $ 18,706 12,013 188,578 (950)
Net earnings - - - 20,032 -
Dividend declared of $.75 per share - - - (8,288) -
Shares issued in connection with acquisition of a
business 350 584 5,064 - -
Treasury stock issued upon exercise of options - - 47 - -
Issuance of restricted stock - - (308) - -
Amortized compensation under restricted stock plan - - - - -
Treasury stock purchased - - - - -
------ ------ ------ ------- -------
Balance at December 28, 1996 11,574 19,290 16,816 200,322 (950)
Net earnings (loss) - - - (1,228) -
Dividend declared of $.72 per share - - - (8,110) -
Treasury stock issued upon exercise of options - - 354 - -
Amortized compensation under restricted stock plan - - - - -
Repayment of notes receivable from holder of
restricted stock - - - - -
Distribution of stock pursuant to performance awards - - 460 - -
Treasury stock purchased - - - - -
Foreign currency translation adjustment - - - - 950
Other 1 2 18 - -
------ ------ ------ ------- -------
Balance at January 3, 1998 11,575 19,292 17,648 190,984 -
Net earnings (loss) - - - 674 -
Dividend declared of $.18 per share - - - (4,079) -
Treasury stock issued upon exercise of options - - 47 - -
Amortized compensation under restricted stock plan - - - - -
Distribution of stock pursuant to performance awards - - 226 - -
Treasury stock purchased - - - - -
Other - - - - -
- - 3 - -
------ ------ ------ ------- -------
Balance at June 20, 1998 (unaudited) 11,575 $ 19,292 17,924 187,579 -
------ ------ ------ ------- -------
------ ------ ------ ------- -------
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<CAPTION>
Treasury Stock Total
Restricted ---------------------- stockholders'
Stock Shares Amount equity
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 30, 1995 - (346) $ (3,034) 215,313
Net earnings - - - 20,032
Dividend declared of $.75 per share - - - (8,288)
Shares issued in connection with acquisition of a business - - - 5,648
Treasury stock issued upon exercise of options - 6 42 89
Issuance of restricted stock (524) 40 995 163
Amortized compensation under restricted stock plan 24 - - 24
Treasury stock purchased - (7) (120) (120)
----- ----- ------- -------
Balance at December 28, 1996 (500) (307) (2,117) 232,861
Net earnings (loss) - - - (1,228)
Dividend declared of $.72 per share - - - (8,110)
Treasury stock issued upon exercise of options - 29 143 497
Amortized compensation under restricted stock plan 29 - - 29
Repayment of notes receivable from holder of
restricted stock 80 - - 80
Distribution of stock pursuant to performance awards - 30 148 608
Treasury stock purchased - (4) (89) (89)
Foreign currency translation adjustment - - - 950
Other - - - 20
----- ----- ------- -------
Balance at January 3, 1998 (391) (252) (1,915) 225,618
Net earnings - - - 674
Dividend declared of $.36 per share - - - (4,079)
Treasury stock issued upon exercise of options - 4 21 68
Amortized compensation under restricted stock plan 13 - - 13
Distribution of stock pursuant to performance awards - 13 65 291
Treasury stock purchased - - - -
Other - - - -
- (1) (16) (13)
----- ----- ------- -------
Balance at June 20, 1998 (unaudited) (378) (236) $ (1,845) 222,572
----- ----- ------- -------
----- ----- ------- -------
</TABLE>
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See accompanying notes to condensed consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 20, 1998
NOTE 1
The accompanying financial statements include all adjustments which are,
in the opinion of management, necessary to present fairly the financial
position of the Company and its subsidiaries at June 20, 1998 and January 3,
1998, and the results of operations for the 12 and 24-weeks ending June 20,
1998 and June 14, 1997, and the changes in cash flows for the 24-week periods
ending June 20, 1998 and June 14, 1997, respectively. All material
intercompany accounts and transactions have been eliminated in the
condensed financial statements. Results of operations for the interim
periods presented are not necessarily indicative of the results to be
expected for the full year.
Effective with the second quarter of 1998, warehousing and transportation
expenses, historically classified as selling, general and administrative
expenses and other operating expenses, are reclassified as cost of sales.
Amounts in prior periods were reclassified to conform with current
presentation. The amounts reclassified were $25.1 million and $24.3 million
for the current and prior year quarter, respectively, and $51.7 million and
$51.2 million for the current and prior year to date, respectively. The
reclassifications have impact on neither operating income nor net income and
conform the Company's financial reporting with the reporting practices of
other large food wholesale distribution companies.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
NOTE 2
The Company uses the LIFO method for valuation of a substantial portion of
inventories. If the FIFO method had been used, inventories would have been
approximately $43.3 million and $43.1 million higher at June 20, 1998 and at
January 3, 1998, respectively.
NOTE 3
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER
SOFTWARE DEVELOPED FOR OR OBTAINED FOR INTERNAL USE. Although the SOP is
effective beginning on January 1, 1999, the Company has chosen early adoption
as of January 4 1998. The SOP requires the capitalization of certain costs
incurred after the date of adoption in connection with developing or obtaining
software for internal use. Certain costs that are required to be capitalized
by the SOP were previously being
<PAGE>
expensed as incurred by the Company. As a result of this change in
accounting, the Company capitalized $1.4 million and $2.9 million, for the
quarter and year to date, respectively, in payroll and payroll-related costs
for employees who are directly involved with and devote time to internal-use
software development projects.
NOTE 4
Pursuant to the provisions of Statement of Financial Accounting Standards
No. 128, EARNINGS PER SHARE, the weighted average shares used in computing
basic and diluted earnings per share (EPS) are as follows:
<TABLE>
<CAPTION>
(in thousands of shares) 12 weeks ended 24 weeks ended
----------------------- ----------------------
June 20, June 14, June 20, June 14,
1998 1997 1998 1997
----------------------- ----------------------
<S> <C> <C> <C> <C>
Shares for computation of basic EPS 11,314 11,220 11,307 11,206
Effect of assumed option exercises 24 44 30 44
Effect of contingent shares 26 83 26 83
----------------------- --------------------
Shares for computation of diluted EPS 11,364 11,347 11,363 11,333
----------------------- --------------------
----------------------- --------------------
</TABLE>
NOTE 5
On December 29, 1997, a Receivables Purchase Agreement (the "Agreement")
was executed by the Company, Nash Finch Funding Corporation ("NFFC"), a wholly-
owned subsidiary of the Company, and a certain third party purchaser (the
"Purchaser") pursuant to a securitization transaction. On this date the
Company sold $44.6 million of accounts receivable on a non-recourse basis to
NFFC. NFFC sold $37.0 million of its undivided interest in such receivables to
the Purchaser, subject to specified collateral requirements. NFFC maintains a
variable undivided interest in these receivables and is subject to losses on
its share of the receivables and, accordingly, maintains an allowance for
doubtful accounts. The Agreement is a five-year $50 million revolving
receivable purchase facility allowing the Company to sell additional
receivables to NFFC, and NFFC to sell, from time to time, variable undivided
interests in these receivables to the Purchaser. At June 20, 1998, the
balance of receivables sold under the revolving agreement was $ 34.0 million.
On September 8, 1995, the Company entered into an agreement with a
financial institution which allowed the Company to sell, on a revolving basis,
customer notes receivable. Although the agreement lapsed on December 28, 1996,
the notes, which have maturities through the year 2002, were sold at face value
with recourse. As a result, the Company is contingently liable should these
notes become uncollectible. The remaining balances of such
<PAGE>
sold notes receivable totaled $7.6 million and $ 9.1 million at June 20,
1998 and January 3, 1998, respectively.
NOTE 6
During the third quarter of 1997, the Company recorded special charges,
totaling $31.3 million relative to asset impairment and consolidation of
certain warehouses and retail stores. During 1998 the Company closed
distribution facilities in Lexington, Kentucky and Lincoln, Nebraska and
closed or sold a total of five retail stores. Costs totaling $1.5 million
incurred as a result of the shut down of these units were charged to accrued
expenses. In addition, $1.3 million associated with the planned closing of a
retail store was reflected as special charges income following the sale of
the store. At June 20, 1998, accrued liabilities established for purposes of
the special charges total $13.3 million.
NOTE 7
On April 24, 1998, the Company completed the sale of $165 million 8.5% senior
subordinated notes due May 1, 2008, using the net proceeds from the offering
after fees and expenses, to reduce certain amounts borrowed under its revolving
credit facility.
In the first quarter of 1998, in conjunction with the planned senior
subordinated debt offering, the Company prepaid $106.3 million of senior
notes, and paid prepayment premiums and wrote off related deferred financing
costs totaling $9.5 million. This transaction resulted in an extraordinary
charge of $5.6 million or $.49 per share net of income tax benefits of
$4.0 million.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES
Total revenues for the second quarter of 1998 were $982.8 million compared to
$975.4 million last year, an increase of .8%. On a year to date basis, revenues
were $1.920 billion compared to $1.923 billion last year, a decline of .2%.
Revenue gains for the quarter were largely attributed to the acquisition of the
business and assets of United-A.G. Cooperative, Inc.("United-A.G.")in June 1997,
offset by retail segment sales declines. Year to date revenues continue to
reflect soft market conditions in certain areas of the Midwest and the loss of
some portion of the business as a result of closing the Lexington, Kentucky
distribution center in the first quarter of 1998.
Wholesale segment revenues for the quarter increased 2.9% from $771.7 million
last year to $794.1 million. On a year to date basis, wholesale revenues were
$1.554 billion compared to $1.528 billion last year, an increase of 1.7%. The
increases were principally related to the United-A.G. acquisition.
Retail segment sales for the quarter and year to date were $176.8 million and
$347.5 million, respectively, compared to $190.1 million and $375.3 million for
the same periods last year. The declines are largely due to the closing or sale
of 15 stores since the end of the second quarter of 1997, partially offset by
the opening or purchase of seven stores during the same period. Same store
sales for the quarter increased .3% but declined .3% year to date compared to
last year.
GROSS MARGINS
Gross margins for the quarter were 9.9% compared to 10.8% last year. On a year
to date basis, margins were 9.8% in 1998 compared to 10.5% for the first half of
1997. The decline this year is partially attributed to the greater proportion
of lower margin wholesale business. During the quarter, wholesale segment
business represented 80.8% of the Company's consolidated revenues compared to
79.1% for the same period last year. Retail margins declined as a result of
continuing competitive pressures in certain markets.
Although food prices generally showed deflation, price increases in tobacco and
tobacco-related products resulted in a LIFO charge of $.8 million for the
quarter, compared to $.3 million last year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expenses as a percent of total revenues were
7.5% and 7.4% for the quarter and year to
<PAGE>
date, respectively, compared to 7.8% and 7.7% for the comparable periods last
year. Expense levels compare favorably to last year because of the
increasing proportion of wholesale business which typically operates at lower
expense levels than retail. The Company changed accounting policies when it
adopted Statement of Position (SOP) 98-1 which resulted in the capitalization
of $1.4 million for the quarter and $2.9 million year to date, of internal
development costs related to HORIZONS. Since these costs had been previously
expensed, this change in accounting increased diluted earnings per share by
$.07 and $.15 per share for the quarter and year to date, respectively.
Information system expenses primarily related to HORIZONS increased $.5
million and $1.3 million for the quarter and year to date, respectively,
compared to last year, partially offsetting the effect of the accounting
change.
The HORIZONS project is expected to increase operating expense for the remainder
of 1998 and until roll-out and implementation are completed.
During the quarter, the Company recorded expenses of $1.3 million for continuing
lease costs related to real estate in North Carolina. A lease assigned to a
third party was reassigned back to the Company following that party's bankruptcy
petition.
SPECIAL CHARGES
During the quarter, the Company completed an assignment of a lease and sale of
certain assets related to a retail store included in the special charges
recorded in 1997. As a result of this transaction, $1.3 million in accrued
costs were reflected as special charges income during the second quarter.
DEPRECIATION EXPENSE
Depreciation and amortization expense increased 1.6% and 2.7% for the quarter
and year to date, respectively, compared to last year. The increases reflect
capital additions placed in service since last year, somewhat offset by the
reduction in depreciable assets resulting from the sale of retail stores, and
lower depreciation resulting from the write down of impaired assets recorded as
part of the special charges last year. Amortization of goodwill and other
intangibles for the current and prior year quarter were $1.6 and $1.5 million,
respectively. Depreciation expense related to HORIZONS increased $.4 million and
$.8 million for the quarter and year to date, respectively, compared to the same
periods last year. Depreciation expense is expected to increase as
implementation of HORIZONS continues, and greater portions of the developed
software is ready for use.
INTEREST EXPENSE
Interest expense decreased from $7.5 million in the prior year quarter, to $6.8
million this year, a decline of 9.8%. The reduction is attributed to lower debt
levels brought about by the sale of receivables at the end of 1997 and improved
asset management. Also, the Company reduced its long-term borrowing
<PAGE>
rates through the sale of $165.0 million of senior subordinated notes which
was completed during the quarter.
INCOME TAXES
The effective tax rate for 1998 is estimated at 41.5%, compared to 41.9% last
year.
EXTRAORDINARY CHARGE
During the first quarter of 1998, in conjunction with a planned senior
subordinated debt offering, the Company prepaid $106.3 million of senior notes,
and paid prepayment premiums and wrote off related deferred financing costs
totaling $9.5 million, all with drawings under the Company's revolving credit
facility. This transaction resulted in an extraordinary charge of $5.6 million
or $.49 per share after income tax benefits of $4.0 million.
NET EARNINGS
Net earnings for the quarter were $3.6 million compared to $6.5 million last
year, a reduction of 55.9%. The decline is attributed to weak performance at
retail resulting from heightened competition in several market areas and lower
results from certain wholesale operations, in particular, Super Food. In
addition, Nash DeCamp's performance for the quarter was negatively impacted by
adverse weather conditions in both California and Chile.
YEAR 2000
The Company's HORIZONS project incorporates resolution of year 2000 issues.
To the extent that HORIZONS is not implemented throughout the Company, there
is a remediation process underway which will insure that all of the Company's
systems are year 2000 compliant.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed capital needs through a combination of
internal and external sources. These sources include cash flow from operations,
short-term bank borrowings, various types of long-term debt, lease and equity
financing.
Operating activities generated positive net cash flows of $62.1 million during
the quarter compared to $37.0 million a year ago. The increase is primarily due
to reduction in inventory and receivables and an increase in accounts payables.
Working capital was $174.2 million at the end of the quarter, a reduction
<PAGE>
of $25.8 million, or 12.9%, during the first half of 1998. The current ratio
decreased from 1.68 at the end of fiscal 1997 to 1.57 at the end of the first
quarter.
At June 20, 1998, the Company had $.8 million in short-term debt compared to
$11.3 million at the end of last year.
On April 24, 1998, the Company completed the sale of $165 million 8.5% senior
subordinated notes due May 1, 2008, using the net proceeds from the offering,
after fees and expenses, to reduce certain amounts borrowed under its revolving
credit facility.
Other transactions affecting liquidity during the quarter include capital
expenditures of $11.7 million, of which approximately $7.8 million related to
HORIZONS, and payment of a cash dividend of $.18 per share.
On June 8, 1998 the Company acquired five retail stores from Harris Supermarkets
of Greenville, Inc. a former customer based in Greenville, North Carolina, for
cash totaling approximately $1.8 million. Subsequent to the quarter close, the
Company sold three stores to Miracle Mart, Inc., a new wholesale customer in
Mandan, North Dakota, for approximately $4.7 million in cash.
The Company believes that borrowing under the revolving credit facility, sale of
subordinated notes, other credit agreements, cash flows from operating
activities and lease financings will be adequate to meet the Company's working
capital needs, planned capital expenditures and debt service obligations for the
foreseeable future.
FORWARD-LOOKING STATEMENTS
The information contained in this Form 10-Q includes forward-looking statements
made under the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements can be identified by the
use of words like "believes," "expects," "may," "will," "should," "anticipates"
or similar expressions, as well as discussions of strategy. Although such
statements represent management's current expectations based on available data,
they are subject to risks, uncertainties and other factors which could cause
actual results to differ materially from those anticipated. Such risks,
uncertainties and other factors may include, but are not limited to, the
ability to: meet debt service obligations and maintain future financial
flexibility; respond to continuing competitive pricing pressures; retain
existing independent wholesale customers and attract new accounts; successfully
implement the HORIZONS system in a timely manner and without substantial
unexpected cost; otherwise address year 2000 issues as they affect the Company,
its customers and vendors; and fully integrate acquisitions and realize
expected synergies.
<PAGE>
PART II - OTHER INFORMATION
Items 1, 2, and 3 are not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The annual meeting of stockholders was held on May 12, 1998.
(b) Not required. (Proxies were solicited pursuant to Regulation 14A
under the Securities Exchange Act of 1934, there was no solicitation
in opposition to management's nominees as listed in the proxy
statement, and all of such nominees were elected.)
(c) At the annual meeting, the following proposals were presented to the
shareholders and voted upon: (1) election of directors,
(2) elimination of the classified structure of the Board of
Directors, and (3) prompt sale of the Company to the highest bidder.
(1) ELECTION OF DIRECTORS.
Four director nominees were elected to serve for three-year terms
expiring in 2001, all of whom were incumbent directors. The terms
of the other seven directors do not expire until 1999 and 2000.
The director nominees and voting results are as follows:
Votes Broker
Nominee Votes For Withheld Non-Votes
------- ------------- ----------- ---------
Alfred N. Flaten * 9,332,488.594 326,632.186 - 0 -
Allister P. Graham 9,427,697.105 231,423.675 - 0 -
Richard G. Lareau 9,376,142.632 282,978.148 - 0 -
Jerome O. Rodysill 9,400,979.503 258,141.277 - 0 -
* Alfred N. Flaten resigned from the Board of Directors and
retired as President and Chief Executive Officer of the
Company as of June 1, 1998. Effective on that date, the
Board of Directors elected Ron Marshall, who succeeded
Mr. Flaten as President and Chief Executive Officer, to
fill the vacancy on the Board created by Mr. Flaten's
resignation.
(2) ELIMINATION OF THE CLASSIFIED STRUCTURE OF THE BOARD OF DIRECTORS.
A stockholder proposal was introduced to request the Board of
Directors to take the necessary steps, in accordance with state
law, to declassify the Board of Directors so that all directors
are elected annually. This stockholder proposal provided that
such declassification was to be effected in a manner that did not
affect the unexpired terms of directors previously elected.
The voting results are as follows:
<PAGE>
Votes For Votes Against Abstentions Broker Non-Votes
------------- ------------- ----------- ----------------
4,046,659.698 3,795,176.683 57,803.399 1,759,481
(3) PROMPT SALE OF NASH FINCH COMPANY TO THE HIGHEST BIDDER.
A stockholder proposal was introduced to urge the Board of
Directors to arrange for the prompt sale of Nash Finch Company
to the highest bidder.
The voting results are as follows:
Votes For Votes Against Abstentions Broker Non-Votes
----------- ------------- ----------- ----------------
708,131.464 7,106,763.067 84,745.249 1,759,481
ITEM 5. OTHER INFORMATION.
As of the date of the 1998 Annual Stockholders' Meeting, Rule
14a-4(c) under the Securities and Exchange Act of 1934 provided that a proxy
could grant discretionary authority to vote on matters at an annual
stockholders' meeting if (i) the person or persons soliciting the proxy
did not know that such matters were to be presented at the annual
stockholders' meeting at least a reasonable time before the solicitation and
(ii) a specific statement to that effect is made in the proxy statement or
form of proxy. In a recent release by the Securities and Exchange Commission,
Rule 14a-4(c) was revised to remove the ambiguity of a "reasonable time" and
establish a bright-line test for when proxies could grant discretionary
authority to vote on matters not submitted to the company in compliance with
Rule 14a-8.
As revised, Rule 14a-4(c) provides that a proxy can grant
discretionary authority to vote on matters at an annual stockholders' meeting
if (i) the company has not received notice of the matter at least 45 days
before the date on which the company first mailed its proxy materials for the
prior year's annual stockholders' meeting and (ii) a specific statement that
the company has not received such notice is included in the proxy
statement or form of proxy. As a result of the revisions, the Company hereby
gives notice to all stockholders that the deadline for submitting non-Rule
14a-8 stockholder proposals for the Company's 1999 Annual Stockholders'
Meeting is February 22, 1999. Any stockholder proposals submitted after
February 22, 1999, will be considered untimely for purposes of Rules 14a-4
and 14a-5(e).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
4.1 Indenture dated as of April 24, 1998 between the Company, the
Guarantors, and U.S. Bank Trust National Association
4.2 Form of Company's 8.5% Senior Subordinated Notes due 2008,
Series A
4.3 Form of Company's 8.5% Senior Subordinated Notes due 2008,
Series B
27.1 Financial Data Schedule
27.2 Financial Data Schedule
Restatement of 1st QTR
(b) REPORTS ON FORM 8-K.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NASH-FINCH COMPANY
------------------
Registrant
Date: August 4, 1998 By /s/ John R. Scherer
-------------------------------------
John R. Scherer
Chief Financial Officer
By /s/ Lawrence A. Wojtasiak
-------------------------------------
Lawrence A. Wojtasiak
Controller
<PAGE>
NASH FINCH COMPANY
EXHIBIT INDEX TO QUARTERLY REPORT
ON FORM 10-Q
For the Twenty Four Weeks Ended June 20, 1998
ITEM NO. ITEM METHOD OF FILING
- -------- ---- ----------------
4.1 Indenture dated as of April 24, Incorporated by reference to
1998 between the Company, the Exhibit 4.2 to the Company's
Guarantors, and U.S. Bank Trust Registration Statement on Form
National Association S-4 filed May 22, 1998
(File No. 333-53363).
4.2 Form of Company's 8.5% Senior Contained in the Indenture
Subordinated Notes due 2008, Series A filed as Item No. 4.1.
4.3 Form of Company's 8.5% Senior Contained in the Indenture
Subordinated Notes due 2008, Series B filed as Item No. 4.1.
27.1 Financial Data Schedule Filed herewith.
27.2 Financial Data Schedule Filed herewith.
Restatement of 1st QTR.
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<PAGE>
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<S> <C>
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<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> MAR-29-1998
<PERIOD-END> JUN-20-1998
<CASH> 831
<SECURITIES> 0
<RECEIVABLES> 154,396
<ALLOWANCES> 19,828
<INVENTORY> 275,446
<CURRENT-ASSETS> 479,709
<PP&E> 605,916
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0
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<TOTAL-LIABILITY-AND-EQUITY> 891,367
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<INTEREST-EXPENSE> 6,764
<INCOME-PRETAX> 6,180
<INCOME-TAX> 2,564
<INCOME-CONTINUING> 3,616
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> MAR-28-1998
<CASH> 773
<SECURITIES> 0
<RECEIVABLES> 157,168
<ALLOWANCES> 19,466
<INVENTORY> 287,991
<CURRENT-ASSETS> 501,480
<PP&E> 597,211
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0
0
<COMMON> 19,292
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<TOTAL-LIABILITY-AND-EQUITY> 912,423
<SALES> 925,958
<TOTAL-REVENUES> 937,101
<CGS> 846,962<F2>
<TOTAL-COSTS> 78,626<F3>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 160
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<CHANGES> 0
<NET-INCOME> (2,941)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
<FN>
<F1>LOSS FROM EARLY EXTINGUISHMENT OF DEBT NET OF INCOME TAX BENEFIT OF $3,951
<F2>RECLASS $25,113 FROM TOTAL COSTS
<F3>RECLASS $25,113 TO CGS
</FN>
</TABLE>
