<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 forty weeks ended October 9, 1999
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 November 17, 1999:
11,343,967 shares
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
This report is for the forty week interim period beginning January 3,
1999, through October 9, 1999.
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 the Company's independent auditors.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Sixteen Weeks Ended Forty Weeks Ended
--------------------------- ---------------------------
October 9, October 10, October 9, October 10,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total sales and revenues $ 1,289,156 1,282,533 3,159,903 3,188,568
Cost and expenses:
Cost of sales 1,150,965 1,167,211 2,837,735 2,901,008
Selling, general and administrative 109,307 88,368 254,251 214,305
Special charges - - - (1,262)
Depreciation and amortization 13,394 13,760 32,548 35,596
Interest expense 9,454 8,691 23,318 22,313
------------ ------------ ------------ ------------
Total costs and expenses 1,283,120 1,278,030 3,147,852 3,171,960
Earnings from continuing operations before
income taxes and extraordinary charge 6,036 4,503 12,051 16,608
Income taxes 2,559 1,984 5,110 6,791
------------ ------------ ------------ ------------
Earnings from continuing operations before
extraordinary charge 3,477 2,519 6,941 9,817
Discontinued operations:
Earnings (loss) from discontinued operations,
net of income tax (benefit) - 879 - (176)
Earnings from disposal of discontinued
operations, including profit of $1,017 during
the phase out period, net of income tax of $3,587 4,566 - 4,566 -
------------ ------------ ------------ ------------
Earnings before extraordinary charge 8,043 3,398 11,507 9,641
Extraordinary charge from early
extinguishment of debt, net of income tax
benefit of $3,951 - - - 5,569
------------ ------------ ------------ ------------
Net earnings $ 8,043 3,398 11,507 4,072
============ ============ ============ ============
Basic earnings per share:
Earnings from continuing operations $ 0.31 0.22 0.62 0.87
Earnings (loss) from discontinued operations 0.40 0.08 0.40 (0.02)
------------ ------------ ------------ ------------
Earnings before extraordinary charge 0.71 0.30 1.02 0.85
Extraordinary charge from early
extinguishment of debt, net of income
tax benefit - - - (0.49)
------------ ------------ ------------ ------------
Net earnings per share $ 0.71 0.30 1.02 0.36
============ ============ ============ ============
Diluted earnings per share:
Earnings from continuing operations $ 0.31 0.22 0.61 0.87
Earnings (loss) from discontinued operations 0.40 0.08 0.40 (0.02)
------------ ------------ ------------ ------------
Earnings before extraordinary charge 0.71 0.30 1.01 0.85
Extraordinary charge from early
extinguishment of debt, net of income
tax benefit - - - (0.49)
------------ ------------ ------------ ------------
Net earnings (loss) per share $ 0.71 0.30 1.01 0.36
============ ============ ============ ============
Weighted average number of common shares
outstanding and common equivalent shares
outstanding:
Basic 11,334 11,314 11,333 11,310
Diluted 11,343 11,340 11,343 11,336
</TABLE>
- ------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
October 9, January 2,
1999 1999
-------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,301 848
Accounts and notes receivable, net 164,231 169,748
Inventories 275,015 267,040
Prepaid expenses 12,051 13,154
Deferred tax assets 33,421 16,318
-------------- ------------
Total current assets 486,019 467,108
Investments 556 4,805
Notes receivable, noncurrent 23,550 12,936
Property, plant and equipment:
Land 22,982 25,386
Buildings and improvements 134,571 130,988
Furniture, fixtures and equipment 287,812 302,450
Leasehold improvements 61,821 61,983
Construction in progress 24,434 10,107
Assets under capitalized leases 27,841 24,878
-------------- ------------
559,461 555,792
Less accumulated depreciation and amortization (318,835) (333,414)
-------------- ------------
Net property, plant and equipment 240,626 222,378
Intangible assets, net 108,677 69,141
Investment in direct financing leases 15,625 16,155
Deferred tax asset - net 3,662 31,908
Other assets 7,969 8,664
-------------- ------------
Total assets $ 886,684 833,095
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Outstanding checks $ 29,114 33,329
Short-term debt payable to banks 15,800 5,525
Current maturities of long-term debt and
capitalized lease obligations 3,172 2,563
Accounts payable 215,555 189,382
Accrued expenses 94,732 97,683
Income taxes 2,272 2,991
-------------- ------------
Total current liabilities 360,645 331,473
Long-term debt 313,918 293,280
Capitalized lease obligations 34,107 34,667
Deferred compensation 4,585 6,450
Other 8,452 10,752
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, issued 11,575 shares
in 1999 and 1998 19,292 19,292
Additional paid-in capital 17,953 17,944
Restricted stock (75) (113)
Retained earnings 129,630 121,185
-------------- -----------
166,800 158,308
Less cost of 231 shares and 234 shares of
common stock in treasury, respectively. (1,823) (1,835)
-------------- -----------
Total stockholders' equity 164,977 156,473
-------------- -----------
Total liabilities and stockholders' equity $ 886,684 833,095
============== ===========
</TABLE>
- ----------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Forty Weeks Ended
----------------------------
October 9, October 10,
1999 1998
------------ ------------
<S> <C> <C>
Operating activities:
Net earnings $ 11,507 4,072
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 32,548 36,620
Provision for bad debts 2,608 1,878
(Recovery from) provision for losses
closed lease locations (509) 1,178
Extraordinary charges - extinguishment of debt - 9,520
Deferred income taxes 9,022 -
Deferred compensation (2,683) (404)
Earnings from equity investments (718) (201)
Other (386) (2,120)
Changes in operating assets and liabilities:
Accounts and notes receivable (82) (4,090)
Inventories 7,340 (10,216)
Prepaid expenses 3,742 5,027
Accounts payable 13,048 38,398
Accrued expenses (5,634) 12,387
Accrued expenses - special charge (7,148) (3,595)
Income taxes (434) 5,986
------------ ----------
Net cash provided by operating activities 62,221 94,440
------------ ----------
Investing activities:
Dividends received - 799
Disposal of property, plant and equipment 26,158 11,994
Additions to property, plant and equipment
excluding capital leases (41,512) (39,980)
Business acquired, net of cash acquired (58,792) (2,895)
Loans to customers (22,812) (12,118)
Payments from customers on loans 22,558 12,205
Sale (repurchase) of receivables 1,125 (7,400)
Proceeds from sale of dairy operations 5,302 -
Other (1,030) (4,624)
------------ ----------
Net cash used for investing activities (69,003) (42,019)
------------ ----------
Financing activities:
Proceeds from long-term debt 649 165,000
Proceeds (payments) from revolving debt 7,000 (79,000)
Dividends paid (3,062) (6,121)
Proceeds (payments) from short-term debt 9,909 50
Payments of long-term debt (2,505) (108,219)
Payments of capitalized lease obligations (1,246) (1,205)
Extinguishment of debt - (9,378)
Decrease in outstanding checks (4,215) (13,866)
Other 705 364
------------ ----------
Net cash provided by (used in) financing
activities 7,235 (52,375)
------------ ----------
Net increase in cash $ 453 46
============ ==========
</TABLE>
- --------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Stockholders'
Equity
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Fiscal period ended October 9, 1999
January 2, 1999 and January 3, 1998
(In thousands, except per share amounts) Foreign
Common Stock Additional currency
--------------------- paid-in Retained translation
Shares Amount capital earnings adjustment
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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) - - - (61,637) -
Dividend declared of $.72 per share - - - (8,162) -
Treasury stock issued upon exercise of
options - - 47 - -
Amortized compensation under restricted
stock plan - - - - -
Repayment of notes receivable from holders
of restricted stock - - - - -
Distribution of stock pursuant to
performance awards - - 246 - -
Treasury stock purchased - - - - -
Other 3 - -
--------- ---------- ---------- ----------- -----------
Balance at January 2, 1999 11,575 19,292 17,944 121,185 -
Net earnings - - - 11,507 -
Dividend declared of $.27 per share - - - (3,062) -
Amortized compensation under restricted
stock plan - - - - -
Repayment of notes receivable from holders
of restricted stock - - - - -
Distribution of stock pursuant to
performance awards - - 9 - -
--------- ---------- ---------- ----------- -----------
Balance at October 9, 1999 (unaudited) 11,575 $19,292 17,953 129,630 -
========= ========== ========== =========== ===========
<CAPTION>
-------------------------------------------------
Treasury Stock Total
Restricted ------------------- stockholders'
stock Shares Amount equity
-------------------------------------------------
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 (loss) - - - (61,637)
Dividend declared of $.72 per share - - - (8,162)
Treasury stock issued upon exercise of
options - 4 21 68
Amortized compensation under restricted
stock plan 72 - - 72
Repayment of notes receivable from holders
of restricted stock 206 - - 206
Distribution of stock pursuant to
performance awards - 15 75 321
Treasury stock purchased - (1) (16) (16)
Other - - - 3
--------- --------- --------- ---------
Balance at January 2, 1999 (113) (234) (1,835) 156,473
Net earnings - - - 11,507
Dividend declared of $.27 per share - - - (3,062)
Amortized compensation under restricted
stock plan 13 - - 13
Repayment of notes receivable from holders
of restricted stock 25 - - 25
Distribution of stock pursuant to
performance awards - 3 12 21
--------- --------- --------- ----------
Balance at October 9, 1999 (unaudited) (75) (231) $ (1,823) 164,977
========= ========= ========= ==========
</TABLE>
- -----------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 9, 1999
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 October 9, 1999, and January
2, 1999, and the result of operations for the 16-weeks ended October 9, 1999
and October 10, 1998, and the 40-week periods ended October 9, 1999 and
October 10, 1998, and the changes in cash flows for the 40-week periods ended
October 9, 1999 and October 10, 1998, respectively. All material intercompany
accounts and transactions have been eliminated in the consolidated financial
statements. Results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full year.
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 $47.7 million and $47.1 million higher at October 9,
1999 and January 2, 1999, respectively.
NOTE 3
The following table sets forth the computation of basic and diluted
earnings per share.
<TABLE>
<CAPTION>
Sixteen Weeks Ended Forty Weeks Ended
------------------------------- --------------------------------
October 9, October 10, October 9, October 10,
1999 1998 1999 1998
------------ ------------- -------------- --------------
<S> <C> <C> <C> <C>
Numerator:
Earnings from continuing $
operations 3,477 2,519 6,941 9,817
------------ ------------- -------------- --------------
Denominator:
Denominator of basic earnings per
share; weighted-average shares 11,334 11,314 11,333 11,310
Effect of dilutive securities:
Contingent shares 9 26 10 26
------------ ------------- -------------- --------------
Dilutive common shares 9 26 10 26
Denominator for diluted earnings
per share; adjusted weighted
average shares 11,343 11,340 11,343 11,336
============ ============= ============== ==============
Basic earnings per share $ .31 .22 .62 .87
============ ============= ============== ==============
Diluted earnings per share $ .31 .22 .61 .87
============ ============= ============== ==============
</TABLE>
<PAGE>
NOTE 4
On June 10, 1999 the Company acquired Erickson's Diversified
Corporation (Erickson's) through a cash purchase of all of Erickson's
outstanding capital stock. Erickson's operates 18 supermarkets in Minnesota
and Wisconsin with annual sales of approximately $200 million. In addition to
the stores, the acquisition includes a number of real estate holdings in the
two state market area. The acquisition was accounted for as a purchase, with
the cash purchase price totaling $59.0 million initially allocated based on
estimated fair values at date of acquisition, pending final determination of
certain acquired asset and liability valuations. This preliminary allocation
has resulted in acquired goodwill of approximately $43.0 million, which is
being amortized on a straight line basis over 40 years.
The following unaudited pro forma information presents a summary of
consolidated earnings from continuing operations before extraordinary charge as
if the acquisition had taken place at the beginning of 1998.
<TABLE>
<CAPTION>
Forty Weeks Ended
---------------------------------------
October 9, 1999 October 10, 1998
--------------- ----------------
<S> <C> <C>
Revenues $3,210,844 $3,275,046
Earnings from continuing operations
before extraordinary charge 6,618 9,387
Basic and Diluted earnings per share .58 .83
</TABLE>
These unaudited pro forma results have been prepared for comparative
purposes only and include certain adjustments such as additional amortization
expense on acquired goodwill and increased interest expense on acquisition
debt. They do not purport to be indicative of the results of operations that
actually would have resulted had the acquisition occurred on the date
indicated, or may result in the future.
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. 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. 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. As of October 9,
1999 and January 2, 1999 the Company had sold $45.3 million and $45.7
million, respectively, of accounts receivable on a non-recourse basis to
NFFC. NFFC sold $37.9 million and $36.8
<PAGE>
million, respectively, of its undivided interest in such receivables to the
Purchaser, subject to specified collateral requirements.
NOTE 6
1998 SPECIAL CHARGES
During the fourth quarter of 1998, the Company recorded special
charges, totaling $68.5 million relative to abandonment and impairment of
assets, and consolidation of certain warehouse and retail stores. During the
first three quarters of 1999, the Company closed distribution centers in
Appleton, Wisconsin, Grand Island, Nebraska and Liberal, Kansas, and closed
five retail stores. Costs totaling $3.5 million incurred as a result of the
closure of these units were charged to accrued expenses. During the second
quarter of 1999, accruals in the amount of $1.2 million were reversed. These
reversals were primarily for properties originally scheduled for closure that
were sold. At October 9, 1999, remaining accrued liabilities established as a
result of the 1998 special charges totaled $21.4 million.
1997 SPECIAL CHARGES
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 the third
quarter of 1999 the company announced the closing of the distribution center
in Denver, Colorado and closed its distribution center in Rocky Mount, North
Carolina. During the first three quarters of 1999, costs totaling $2.2
million incurred as a result of the closing of certain warehouses and retail
stores were charged to accrued expenses. During the second quarter additional
accruals in the amount of $1.5 million were recorded primarily for additional
losses for write-downs of tangible assets on locations that have been closed
and additional lease costs for one retail store and one warehouse location
closed in the second quarter of 1999. Also in the second quarter, accruals in
the amount of $0.3 million were reversed. These reversals resulted primarily
from the final lease settlement and exit from the Lexington, Kentucky
warehouse which was closed in 1998. At October 9, 1999, remaining accrued
liabilities established for purposes of the 1997 special charges totaled $6.5
million.
<PAGE>
NOTE 7
A summary of the Major Segments of the Business is as follows:
SIXTEEN WEEKS ENDED OCTOBER 9, 1999
<TABLE>
<CAPTION>
All
(In thousands) Wholesale Retail Military Other Totals
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers $ 699,367 293,292 288,393 1,630 1,282,682
Intra segment revenues 169,877 - - 1,301 171,178
Segment pretax profit
(loss) 12,254 6,465 7,262 (43) 25,938
<CAPTION>
SIXTEEN WEEKS ENDED OCTOBER 10, 1998
All
(In thousands) Wholesale Retail Military Other Totals
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers $ 780,069 221,149 275,310 1,070 1,277,598
Intra segment revenues 130,794 - - 732 131,526
Segment pretax profit
(loss) 14,472 1,281 6,804 (61) 22,496
<CAPTION>
FORTY WEEKS ENDED OCTOBER 9, 1999
All
(In thousands) Wholesale Retail Military Other Totals
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers $ 1,779,985 631,146 731,617 3,089 3,145,837
Intra segment revenues 375,318 - - 3,503 378,821
Segment pretax profit
(loss) 32,195 10,005 19,224 (364) 61,060
<CAPTION>
FORTY WEEKS ENDED OCTOBER 10, 1998
All
(In thousands) Wholesale Retail Military Other Totals
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers $ 1,915,009 568,941 693,767 2,238 3,179,955
Intra segment revenues 340,364 - - 2,032 342,396
Segment pretax profit
(loss) 35,002 3,808 17,695 (63) 56,442
</TABLE>
<PAGE>
Reconciliation to statements of operations
(In thousands)
<TABLE>
<CAPTION>
16 WEEKS ENDED OCTOBER 9, 1999 AND OCTOBER 10, 1998
1999 1998
-------------------- ------------------
<S> <C> <C>
PROFIT OR LOSS
Total profit for segments $ 25,938 22,496
Unallocated amounts
Adjustment of inventory to LIFO (250) (750)
Unallocated corporate overhead (19,652) (17,243)
-------------------- ------------------
Income from continuing operations
before income taxes $ 6,036 4,503
==================== ==================
<CAPTION>
40 WEEKS ENDED OCTOBER 9, 1999 AND OCTOBER 10, 1998
1999 1998
-------------------- ------------------
<S> <C> <C>
PROFIT OR LOSS
Total profit for segments $ 61,060 56,442
Unallocated amounts
Adjustment of inventory to LIFO (550) (1,000)
Unallocated corporate overhead (48,459) (38,834)
-------------------- ------------------
Income from continuing operations
before income taxes $ 12,051 16,608
==================== ==================
</TABLE>
NOTE 8
On June 30, 1999 the Company sold its majority interest in Gillette
Dairy of the Black Hills, Inc. and Nebraska Dairies, Inc. to Marigold Foods,
Inc. ("Marigold"). Marigold purchased all of the outstanding shares of each
company for cash. The Company realized $15.9 million in cash and recognized a
pretax gain of $3.1 million.
On July 31, 1999 the Company sold the outstanding stock of Nash
DeCamp Company to Agriholding, Inc. of Pebble Beach, California. Nash DeCamp
has previously been reported as a discontinued operation. As a result of the
sale the Company realized $17.1 million in cash and recognized a pretax
reversal of a charge, taken for discontinued operations in the fourth quarter
of 1998, in the amount of $8.2 million.
On November 1, 1999 the company announced its intent to acquire
Fairway Foods of Michigan, Inc., ("Fairway Foods") a Menominee, Michigan
based wholesale subsidiary of Fairway Foods, Inc., which is a subsidiary of
Holiday Companies through a cash purchase of outstanding stock. The
acquisition is expected to be completed in the first quarter of 2000.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES
Total revenues for the sixteen week third quarter were $1.289 billion an
increase of .5% compared to the prior year quarter. For the forty weeks,
total revenues were $3.160 billion compared to $3.189 billion last year, a
decline of .9%. Revenue improvements during the quarter are attributed to the
retail segment, particularly the acquisition of the Erickson stores. The
decline for the forty weeks is principally related to the wholesale segment
which has experienced competitive pressures and the consolidation of a number
of distribution facilities since last year.
Wholesale revenues during the quarter were $699.4 million compared to $780.1
million, a decrease of 10.3%. On a year to date basis, wholesale revenues
were $1.780 billion, a decrease of 7.1% compared to last year. Revenues for
the quarter were negatively impacted by the shift of business to the retail
segment following the acquisition of the Erickson stores in early June.
During the quarter the Company announced that it had reached an agreement to
purchase certain assets of Midwest Wholesale Food, Inc., a wholesale supplier
to grocery stores in the Detroit metro area. As a result, the Company began
servicing, from its Bridgeport, Michigan distribution center, 55 independent
retailers who were previously supplied by Midwest. This additional volume has
improved productivity and provided some relief from the competitive pressures
experienced by the Company in its Michigan market area. In accordance with
the Company's revitalization plan to streamline wholesale operations
announced in the fourth quarter of 1998, the Rocky Mount distribution center
was closed in July, with the business transferred to the Company's newly
expanded Lumberton facility.
Retail segment revenues for the quarter were $293.3 million compared to
$221.1 million last year, an increase of 32.6%. The improvement is primarily
due to the acquisition of 18 Erickson stores in Minnesota and Wisconsin, two
stores in Cheyenne, Wyoming and two stores in Myrtle Beach , South Carolina.
Same store sales increased .8% resulting in positive sales growth in four of
the past five quarters. Intense competition continued however, in the
Company's Iowa market, partially offsetting same store sales gains realized
in other market regions. On a year to date basis, retail segment sales
increased 10.9% compared to last year.
Military segment revenues increased 4.8% for the quarter over last year and
5.5% on a year to date basis. The increase is attributed to the introduction
of new product lines and stronger overseas business.
<PAGE>
GROSS MARGIN
Gross margin for the quarter was 10.7% compared to 9.0% last year. The
increase reflects the growth in the proportion of retail revenues to total
revenues resulting from the Erickson's acquisition. In addition, a number of
operational factors have contributed to improvements in third quarter
margins: better overall margins for the retail segment as a result of a
greater proportion of revenues derived from higher margin departments within
the stores, improvements at wholesale due to efficiencies in warehousing and
transportation which lower the cost of sales, reduced LIFO impact of $.3
million during the quarter compared to $.8 million last year. On a year to
date basis, margins for the forty weeks of 1999 were 10.2% compared to 9.0%
for the same period last year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling , general and administrative expenses for the third quarter, as a
percent of total revenues, were 8.5% compared 7.0% a year ago. The increase
primarily results from the greater proportion of retail business which
typically operates at higher operating expense levels than wholesale. Also,
contributing to the increase are $2.8 million of costs related to the
Company's Year 2000 remediation program and $1.0 million in costs associated
with administrative staff reductions which were initiated throughout the
Company during the quarter. For the year to date, selling, general and
administrative expenses were 8.1% in 1999 compared to 6.7% in 1998. Again the
primary factors for the increased expense relate to Year 2000 remediation
costs of $10.9 million and the growing proportion of retail business for the
forty week period.
DEPRECIATION EXPENSE
Depreciation and amortization expense for the quarter decreased 2.7% compared
to last year. The decrease reflects a reduction in depreciable assets since
last year due to the closing of four distribution centers, closing or sale of
sixteen retail stores and the write down of impaired assets as part of the
restructuring charge recorded at the end of 1998. The decrease was partially
offset by the acquisition of Ericksons and other retail stores. On a year to
date basis, depreciation and amortization expense decreased 8.6%.
Amortization of goodwill and other intangibles for the current and prior year
quarters was $2.4 million and $2.0 million, respectively. For the forty
weeks, amortization expense was $5.5 million for 1999 and $5.4 million 1998.
INTEREST EXPENSE
Interest expense for the quarter was $9.5 million, an increase of 8.8% over
last year. The higher interest costs are attributed to higher net debt levels
due to the acquisition of Ericksons partially offset from proceeds from the
sale of Nash DeCamp and the dairy operations and higher average borrowing
rates compared to a year
<PAGE>
ago. Year to date interest expense was $23.3 million compared to $22.3
million last year, an increase of 4.5%.
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EXTRAORDINARY
CHARGE
Earnings from continuing operations before income taxes and
extraordinary charge for the quarter and year to date were $6.0 million and
$12.1 million, respectively, compared to $4.5 million and $16.6 million,
respectively, last year. The increase for the quarter reflects improved
retail segment profitability, and a gain on the sale of the dairy operations,
partially offset by Year 2000 remediation costs. On a year to date basis, the
reduction this year is primarily attributed to Year 2000 remediation costs.
INCOME TAXES
The effective income tax rate for 1999 is estimated at 42.4%
compared to a tax rate benefit of 32.2% for 1998. The 1998 annual rate was
significantly affected by losses related to the restructuring charges.
EXTRAORDINARY CHARGE
During the first quarter of 1998, 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, after income tax
benefits of $3.9 million.
DISCONTINUED OPERATIONS
In October 1998, the Company adopted a plan to sell its produce
growing and marketing subsidiary, Nash-De Camp Company . At January 2, 1999
the Company recorded an estimated pretax loss resulting from the expected
sale of Nash-De Camp Company of $27.5 million, which includes a provision for
anticipated operating losses until disposal of $1.8 million.
On July 31, 1999 the Company completed the sale of Nash-De Camp Company to
Agriholding, Inc., a private company. The transaction was structured as a
sale of all outstanding stock of Nash-De Camp for a cash amount of $17.1
million and impacted third quarter results by $4.6 million.
YEAR 2000
The Company is executing its remediation plan toward resolving Year 2000
issues. The plan addresses the modification and/or replacement of existing
business critical software and the identification of the non-information
technology systems that may be affected by Year 2000. In addition, the plan
assesses the readiness of third parties and the related risks to the Company
of their non-compliance. To expedite this Year 2000 solution, the Company has
reallocated
<PAGE>
internal resources and has contracted outside resources to assist in the
remediation effort. The Company's plan to assess and update systems for Year
2000 compliance consists of three major phases: 1) Conducting a complete
INVENTORY and assessment of potentially affected business areas, 2)
REMEDIATION of affected systems and 3) TESTING remediated components. The
chart below shows the percent complete of each phase as of the end of the
third quarter of 1999:
<TABLE>
<CAPTION>
Inventory Remediation Testing
--------- ----------- -------
<S> <C> <C> <C>
I/T Systems 100% 95% 94%
Non-I/T Systems 100% 100% 100%
</TABLE>
The Company completed all mission-critical areas of the project in the third
quarter of 1999. The current information technology systems focus is related
to non-mission critical areas. In addition, the Company is finalizing its due
diligence projects, including rollover planning and event management.
The total cost for Year 2000 remediation is estimated at approximately $18.5
million, which includes $4.0 million for the purchase of new equipment that
will be capitalized and $14.5 million will be expensed. Project expenses
totaling $3.3 million, $4.3 and $2.8 million were incurred in the first,
second and third quarters of 1999, respectively, primarily for internal and
external costs associated with the modification of existing software and
testing. Total remaining expense associated with the Year 2000 project is
estimated to be $1.1 million. Capital expenditures to date have been $1.9
million.
The costs or consequences of incomplete or untimely resolution of the Year
2000 issue may have a material effect on the Company's business, results of
operations and financial condition. However, at this time, the Company is
unable to measure the monetary impact of any such failure to comply or
failure of other parties on which it is dependent.
The Company has established contingency plans to provide viable alternatives
for the Company's core business processes. The plans describe the
communications, operations and activities necessary in the event of a Year
2000 systems related failure. Contingency planning is 100% complete with
plans in place. The event management process will address the execution of
the contingency plans.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCE
Historically, the Company has financed its 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
and lease financing.
Cash flow provided from operations totaled $62.2 million for the
quarter compared to $94.4 million last year. The decline in operating cash
flow resulted primarily from changes in working capital partially offset by
higher net income for the current forty week period. Working capital was
$125.4 million at the end of the quarter compared to $135.6 million at year
end. The current ratio decreased from 1.41 at the end of 1998 to 1.35 at the
end of the third quarter.
During the quarter the Company completed the sales of its produce
growing and marketing subsidiary and its equity interest in two dairy
operations. The combination of these transactions resulted in cash proceeds
totaling $33.0 million, which was used to pay down the revolving credit
facility.
Transactions affecting liquidity during the forty week period
include the acquisition of the Erickson stores for $59.0 million in cash,
capital expenditures of $41.5 million, cash dividends of $3.1 million and the
acquisition of retail stores in Wyoming and South Carolina for approximately
$2.4 million in cash.
The Company believes that borrowing under the revolving credit
facility, proceeds from its sale of subordinated notes in 1998, other credit
agreements, cash flows from operating activities and lease financing 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 Report includes
forward-looking statements made under the safe harbor provisions of the
Private Securities Litigation by the use of words like "believes," "expects,"
"may," "will," "should," "anticipates," or similar expressions, 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; 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, 3, 4 and 5 are not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
10.1 Fifth Amendment to Credit Agreement
27.1 Financial Data Schedule
(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: November 19, 1999 By /s/ John A. Haedicke
-------------------------
John A. Haedicke
Executive Vice President and Chief
Financial and Administrative Officer
By /s/ Lawrence A. Wojtasiak
-------------------------
Lawrence A. Wojtasiak
Controller
<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: NOVEMBER 19, 1999 By
------------------------------------
John A. Haedicke
Executive Vice President and Chief
Financial and Administrative Officer
By
------------------------------------
Lawrence A. Wojtasiak
Controller
<PAGE>
NASH FINCH COMPANY
EXHIBIT INDEX TO QUARTERLY REPORT
ON FORM 10-Q
For the Forty Weeks Ended October 9, 1999
<TABLE>
<CAPTION>
Item No. Item Method of Filing
- -------- ---- ----------------
<S> <C> <C>
10.1 Fifth Amendment to the Credit Agreement Filed herewith
27.1 Financial Data Schedule Filed herewith
</TABLE>
<PAGE>
NASH-FINCH COMPANY
FIFTH AMENDMENT TO CREDIT AGREEMENT
Harris Trust and Savings Bank,
as Administrative Agent Chicago, Illinois
Other Banks party to the
Credit Agreement
Ladies and Gentlemen:
We refer to the Credit Agreement dated as of October 8, 1996 (such
Credit Agreement, as heretofore amended and as may be amended from time to
time, being hereinafter referred to as the "CREDIT AGREEMENT") and currently
in effect between you and us. Capitalized terms used without definition below
shall have the same meanings herein as they have in the Credit Agreement.
The Borrower has requested that the Banks make certain modifications
to the borrowing arrangements provided for in the Credit Agreement and the
Banks have agreed to accommodate such request by the Borrower on the terms
and conditions set forth herein.
1 . CURRENT ASSET COLLATERAL.
Upon the effectiveness of this Amendment as hereinafter set forth,
Section 3 of the Credit Agreement shall be amended by inserting the following
new Section immediately at the end thereof:
SECTION 3.10. DOMESTIC CURRENT ASSET COLLATERAL. (a)
GENERALLY. The Loans and other Obligations and Hedging Liability shall
be secured by valid and perfected first Liens on all inventory and
accounts receivable of the Borrower and each Material Subsidiary and
all books and records of the Borrower and its Material Subsidiaries
related to any of the foregoing inventory or accounts receivable and
all proceeds of the foregoing, in each case limited by and pursuant to
a Security Agreement in the form or substantially the form of Exhibit 0
hereto, as each such Agreement may from time to time be modified or
amended (the "SECURITY AGREEMENT"); PROVIDED, HOWEVER, that (i) no such
Liens need be granted on, and the Collateral shall not include,
accounts receivable subject to securitizations, inventory subject to
purchase money security interests, inventory subject to capitalized
leases, and inventory on consignment to any Debtor, in each case to the
extent provided in the Security Agreement, (ii) such Liens need not be
perfected on (a) any Collateral which is covered by (i) above, (b) any
Collateral located outside the United States in the ordinary course of
business, and (c) any loans made by any Debtor in the ordinary course
of business to retail customers outstanding as of June 1, 1999 or to
finance capital improvements by, or provide working capital to, such
customers, in each case to the extent such loans do not directly or
indirectly constitute trade credit, and (iii) such Liens may be subject
to (a) the rights of holders of purchase money security interests, (b)
the rights of lessors under capitalized leases, and (c) the rights of
consignors under consignments, in each case to the extent such
arrangements are permitted in the Credit Agreement. The liens in the
Collateral shall be granted to the Administrative Agent for the ratable
account of the Banks and shall be valid and perfected first Liens
subject, however, to the proviso appearing at the end of the
immediately preceding sentence. The Borrower agrees that it will, and
will cause its Subsidiaries to, from time to time at the request of the
Administrative Agent, execute and deliver
<PAGE>
such documents and do such acts and things, as the Administrative
Agent may reasonably request in order to provide for or perfect such
Liens on the Collateral, except to the extent any of the foregoing
represents action to perfect Liens on Collateral located outside the
United States in accordance with the Security Agreement. The
Administrative Agent agrees to execute and deliver such documents
(including UCC releases) and do such acts and things, as the Borrower
or any Subsidiary may reasonably request in order to confirm that the
Collateral does not include any Property which the forgoing provisions
of this Section 3. 10 exclude from the Collateral.
(b) LANDLORD'S WAIVERS. Notwithstanding anything herein or in any
Collateral Document to the contrary, the obligations of the Borrower and its
Subsidiaries to provide landlord's and mortgagee's waivers in form and
substance satisfactory to the Administrative Agent (collectively being
hereinafter referred to as "WAIVERS") with respect to locations of Collateral
(collectively, the "WAIVER LOCATIONS") which (x) are not owned by the
Borrower or any subsidiary or (y) if so owned, are subject to a mortgage in
favor of a third party shall be deemed satisfied by the following: (i) the
Borrower and its Subsidiaries shall use reasonable efforts to obtain a Waiver
for each Waiver Location at which is situated inventory aggregating in excess
of $500,000 and at all times on and after August 15, 1999, the Borrower and
its Subsidiaries shall have furnished Waivers for Waiver Locations, the
Collateral consisting of inventory at which is situated, when added to the
Collateral consisting of inventory situated at locations that are not Waiver
Locations is more than 90% of the aggregate value of all Collateral
consisting of inventory; (ii) the Borrower shall pay, and shall cause its
Subsidiaries to pay, when due all rents and other charges due under any
lease- or mortgage, as applicable, for such location or, with notice to the
Administrative Agent, will in good faith contest its obligation to make such
payments by appropriate proceedings which prevent enforcement of the matter
under contest; and (iii) the Borrower will, and will cause its Subsidiaries
to, furnish the Administrative Agent such information as the Administrative
Agent shall reasonably request to confirm the Borrower and its Subsidiaries
are in compliance with their respective obligations described in the
immediately preceding clause (ii).
(c) RELEASES. Notwithstanding anything herein or in the Loan
Documents to the contrary, the Lien of the Administrative Agent pursuant to
the Collateral Documents on any Property sold or otherwise disposed of as
otherwise permitted by Section 3(f) of the Security Agreement shall be
released upon the written request of the Borrower, if (A) at the time of such
sale or other disposition and immediately after giving effect thereto, no
Default or Event of Default shall occur or be continuing and (B) the net
proceeds of such sale or other disposition are paid to the Administrative
Agent for application in reduction of the Obligations if and to the extent
required herein or by the Loan Documents. The Administrative Agent shall, at
the Borrower's expense, execute and deliver such instruments (including UCC
termination statements) as the Borrower may from time to time reasonably
request to confirm such release made pursuant to the immediately preceding
sentence.
2. OTHER AMENDMENTS.
Upon satisfaction of the conditions precedent to effectiveness set
forth below, the Credit Agreement shall be amended (effective as of June 1,
1999) as follows:
SECTION 2.01. NEW APPLICABLE MARGIN. (a) Section 1.3(c) of the
Credit Agreement shall be amended by deleting the text appearing before the
proviso therein and inserting the following in lieu therefor:
<PAGE>
"(c) APPLICABLE MARGIN. With respect to Committed Loans and the
facility fee payable under Section 4.1 hereof, the "Applicable Margin" shall
mean the rate specified for such Obligation below, subject to adjustment as
hereinafter provided:
<TABLE>
<CAPTION>
When Following Applicable Applicable Applicable
Status Exists Margin Margin Margin
For Base Rate For Eurodollar Loans Is: For Facility Fee Is:
Loans Is:
<S> <C> <C> <C>
Level I Status 0.000% .875% 0.125%
Level II Status 0.250% 1.250% 0.250%
Level III Status 0.375% 1.375% 0.375%
Level IV Status 0.500% 1.50% 0.500%
Level V Status 0.750% 1.750% 0.500%"
</TABLE>
SECTION 2.02. APPLICATION OF HEDGING LIABILITIES. Section 5.1 of the
Credit Agreement shall be amended as follows:
(a) Section 5.1 shall be amended by inserting the phrase ", Hedging
Liabilities" after the word "Notes" as it appears in the line two of the
second paragraph thereof; and
(b) Section 5. 1 (c) shall be amended in its entirety and as amended
shall be stated to read as follows:
(c) third, to the payment of the principal of the Notes, the
Hedging Liability, any liabilities in respect of Reimbursement
Obligations and to the Administrative Agent to be held as collateral
security for any undrawn Letters of Credit (until the Administrative
Agent is holding an amount of cash equal to the then outstanding amount
of all such Letters of Credit), the aggregate amount paid to or held as
collateral security for the Banks to be allocated pro rata as among the
Banks (or the Affiliates thereof in the case of the Hedging Liability)
in accord with the then respective aggregate unpaid principal balances
of such indebtedness and liabilities owing to each such party;
SECTION 2.03. NEW DEFINITIONS. Section 6.1 of the Credit Agreement
shall be amended by inserting the following new definitions in the
appropriate alphabetical location:
"COLLATERAL" means all properties, rights, interests and
privileges from time to time subject to the Liens Granted to
the Administrative Agent by the Collateral Documents.
"COLLATERAL DOCUMENTS" means the Security Agreement and all
other security agreements, assignments, financing statements
and other documents as shall from time to time secure the
Obligations.
"ERICKSON ACQUISITION " MEANS the acquisition by the Borrower
of the capital stock of Erickson pursuant TO the Erickson
Purchase Agreement.
"ERICKSON" means Erickson's Diversified Corporation, a
Wisconsin corporation.
<PAGE>
"ERICKSON PURCHASE AGREEMENT" means the Stock Purchase
Agreement dated as of May 3, 1999 by and among the Borrower
and the shareholders of Erickson's Diversified Corporation.
"HEDGING ARRANGEMENTS" means any interest rate swaps, interest
rate caps, interest rate collars or other interest rate
hedging arrangements as the Borrower may from time to time
enter into with any one or more of the Banks or their
Affiliates to hedge against interest rate risk on the Loans. -
"HEDGING LIABILITY" means the liability of the Borrower to the
Banks, their Affiliates or any of the foregoing in respect of
the Hedging Arrangements. Unless and until the amount of the
Hedging Liability is fixed and determined, the Hedging
Liability shall be deemed to be the market value OF the
relevant Hedging Arrangements, as reasonably determined by the
Banks or their Affiliates party to such Arrangements.
"GUARANTEED LIABILITIES" MEANS the Obligations and the Hedging
Liability.
SECTION 2.04. REVISED DEFINITIONS. Section 6.1 of the Credit
Agreement shall be amended by deleting the definitions of "LOAN DOCUMENTS"
and "SUBSIDIARY GUARANTY AGREEMENT" and replacing them in their entirety
which shall be stated to read as follows:
"LOAN DOCUMENTS" means this Agreement, the Collateral Documents, the
Notes, the Applications, the Letters of Credit, and each Subsidiary
Guarantee Agreement delivered to the Administrative Agent pursuant to
Sections 8.1 or 9.1 hereof, as applicable.
"SUBSIDIARY GUARANTEE AGREEMENT" means a letter to the Administrative
Agent in the form of Exhibit I hereto executed by a Subsidiary whereby
it acknowledges it is party hereto as a Guarantor under Section 13 and
any amendments hereof.
SECTION 2.05. NEW LEVERAGE RATIO LEVEL. Section 9.9 of the Credit
Agreement shall be amended and as so amended shall be restated in its
entirety to read as follows:
"SECTION 9.9. LEVERAGE RATIO. The Borrower shall not, as of the
close of any fiscal quarter of the Borrower set forth below, permit the
Leverage Ratio to be more than the amount set forth to the right of such
quarter:
As of Close of each Fiscal Quarter:
<TABLE>
<CAPTION>
Leverage Ratio Shall
From and Including To and Including Not be More Than:
<S> <C> <C>
1st fiscal quarter of 3rd fiscal quarter of 4.75 to 1
fiscal year 1998 fiscal year 1998
4th fiscal quarter of 1st fiscal quarter of 4.50 to 1
fiscal year 1998 fiscal year 1999
2nd fiscal quarter of 2nd fiscal quarter of 4.75 to 1
fiscal year 1999 fiscal year 1999
3rd fiscal quarter of 1st fiscal quarter of 4.25 to 1
fiscal year 1999 fiscal year 2000
<PAGE>
2nd fiscal quarter of each fiscal quarter 4.00 to 1
fiscal year 2000 thereafter
</TABLE>
SECTION 2.06. ACQUISITION LIMIT. Subsection (h) of Section 9.14 of the
Credit Agreement shall be amended by inserting the following immediately at the
end thereof:
" and (v) except in the case of the Erickson Acquisition,
either (1) the aggregate amount of cash and cash equivalents expended
by the Borrower and its Subsidiaries as consideration for such
acquisition, when taken together with the aggregate amount of cash and
cash equivalents expended by the Borrower and its Subsidiaries as
consideration for all other acquisitions (other than the Erickson
Acquisition) on or at any time after January 1, 1999 on a cumulative
basis (the aggregate of the consideration for the acquisition in
question and all such other acquisitions being hereinafter referred to
the "AGGREGATE CUMULATIVE ACQUISITION CONSIDERATION"), does not exceed
$40,000,000 or (2) if the Aggregate Cumulative Acquisition
Consideration exceeds $40,000,000, both (A) the aggregate amount of
cash and cash equivalents expended as consideration for the acquisition
in question is less than $5,000,000 and (B) the aggregate purchase
price due from the Borrower and its Subsidiaries as consideration for
such acquisition (including the assumption of indebtedness but
excluding any such consideration in the form of capital stock of the
Borrower) does not exceed the product of 4.5 and EBITDA reasonably
attributable to the Person (in the case of an acquisition of such
Person's Voting Stock) or the Property so acquired (in the case of an
acquisition of such Person's Property), in each case for such Person's
twelve most recently completed monthly accounting periods ("EBITDA" for
such purposes to mean EBITDA as such term is defined herein, but with
such Person and its subsidiaries substituted in such definition and all
ancillary definitions in the place and stead of the Borrower and its
Subsidiaries).
SECTION 2.07. PERMITTED INDEBTEDNESS FOR HEDGING LIABILITY. Section
9.12 of the Credit Agreement shall be amended by striking the "." at the end
and adding "PROVIDED, HOWEVER; that the forgoing shall not restrict nor
operate to prevent the Hedging Liability owing to the Administrative Agent
and the Banks and (in the case of Hedging Liability) their Affiliates."
SECTION 2.08. PERMITTED LIENS. Section 9.13 of the Credit Agreement
shall be amended by striking "and" at the end of Section (e); striking the
"." at the end of Section (f) and replacing it with "; and"; and adding a new
Section (g) which shall be stated to read "the Liens granted in favor of the
Administrative Agent for the benefit of the Banks pursuant to the Collateral
Documents."
SECTION 2.09 ADDITIONAL EVENTS OF DEFAULT. Section 10 of the Credit
Agreement shall be amended as follows:
(a) Section 10.1(b) shall be amended by deleting the ";"
appearing at the end of the sentence and replacing it with "or of any
provision in any Loan Documents dealing with the use, disposition or
remittance of the proceeds of Collateral or requiring the maintenance
of insurance thereon;";
(b) Section 10. 1 (d) of the Credit Agreement shall be amended by
deleting the ";" appearing at the end of the sentence and replacing it with
"or any of the Collateral Documents shall for any reason fail to create a
valid and perfected first priority Lien in favor of the Administrative Agent
in any Collateral purported to be covered thereby except as expressly
permitted by the terms thereof,";
<PAGE>
SECTION 2.10. CONFLICT OF PROVISIONS. Section 12 of the Credit
Agreement shall be amended by adding a new Section 12.11 which shall be
stated to read as follows:
"SECTION 12.11. CONFLICT. In the event of a conflict between the
provisions of this Section 12 and the provision of any Collateral
Document regarding the rights, duties and obligations of the
Administrative Agent, the provisions of this Section 12 shall govern."
SECTION 2. 11. COLLATERAL DOCUMENTS NOT SUPERSEDED. Section 14 of
the Credit Agreement shall be amended by adding a new Section 14.21 which
shall be stated to read as follows:
"SECTION 14.21. TERMS OF COLLATERAL DOCUMENTS NOT SUPERSEDED. Nothing
contained herein shall be deemed or construed to permit any act or
omission which is prohibited by the terms of any Collateral Document,
the covenants and agreements contained herein being in addition to and
not in substitution for the covenants and agreements contained in the
Collateral Documents."
SECTION 2.12. ADDITIONAL GUARANTEES. Section 13 of the Credit
Agreement shall be amended as follows:
(a) Section 13 shall be amended by replacing the phrase
"indebtedness guaranteed hereby" wherever it is found therein with the
phrase "Guaranteed Liabilities";
(b) Section 13.1 shall be amended by replacing the phrase
"indebtedness of the Borrower" with the phrase "Guaranteed
Liabilities";
(c) Section 13.2(c) shall be amended by replacing ";" at the
end of the sentences with "or other instrument or document for any
Hedging Arrangements;";
(d) Section 13.2(g) shall be amended by inserting the phrase
"or any other instrument or documents for any Hedging Arrangements"
after the word "Document" as it appears in line three thereof; and
inserting the phrase "or on the Guaranteed Liabilities" after the word
"Documents" as it appears in line five thereof;
(e) Section 13.3 shall be amended by inserting the phrase ",
Guaranteed Liabilities" after the word "Note" as it appears in lines
four and six thereof; and
<PAGE>
(f) Section 13.4(b) shall be amended by replacing the word
"Obligations" appearing in line one with the phrase "Guaranteed
Liabilities".
3. WAIVER OF NASH-DE CAMP AND DAIRY SALES.
The Borrower is currently involved in negotiations to sell the
capital stock of Nash-De Camp Company ("NASH-DE CAMP") (such sale of Nash-De
Camp, to the extent made at arm's length to an unaffiliated third party,
being hereinafter referred to as the "NASH-DE CAMP SALE") and certain dairies
known as Nebraska Dairies, Inc. ("NEBRASKA DAIRIES") and Gillette Dairy of
the Black Hills, Inc. ("GILLETTE") (the sale of Nebraska Dairies and
Gillette, to the extent made at arm's length to an unaffiliated third party,
being hereinafter referred to as the "DAIRY SALES"). The Borrower has
requested that the Banks waive compliance with those provisions of the Credit
Agreement which would otherwise prohibit the Nash-De Camp Sale and Dairy
Sales, to the extent such sales are consummated. Accordingly, upon the
effectiveness of this Amendment as hereinafter set forth, the Banks hereby
waive compliance with Section 9.15(g) and Section 9.16 of the Credit
Agreement to the extent, and only to the extent, the same would otherwise
prohibit consummation of the Nash-De Camp Sale and Dairy Sales and hereby
agree that consummation of the Nash-De Camp Sale and Dairy Sales will not
cause any Default or Event of Default under such Sections. Upon such
effectiveness of this Amendment, the Banks also hereby agree that the Nash-De
Camp Sale and Dairy Sales shall be excluded from subsequent determinations of
whether other sales, transfers, leases or other dispositions of property
comply with such Section 9.15(g); PROVIDED, HOWEVER, the Borrower need not
provide the Administrative Agent with a Lien on the assets of Nash-De Camp
Company, Nebraska Dairies or Gillette except on such assets as to which the
Borrower has notified the Administrative Agent that the Borrower no longer
intends to pursue its sale of such assets as part of the Nash-De Camp Sale or
the Dairy Sales, as the case may be (the Borrower hereby agreeing to promptly
provide such notice), and in the event the Borrower so decides not to pursue
such a sale of such assets, such Lien on such assets shall be provided within
sixty (60) days after such notice.
Notwithstanding anything herein or in any Loan Document to the
contrary, upon the consummation of the Nash-De Camp Sale and the Dairy Sales,
if the Borrower so requests the Banks in writing, the Banks will release
their Liens and the Guaranties of Nash-De Camp, Nebraska Dairy and Gillette
under the Loan Documents on any assets if and to the extent that at the time
of such release and immediately after giving effect thereto, no Default or
Event of Default shall occur or be continuing.
4. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction
of all of the following conditions precedent:
(a) The Borrower and the Required Banks shall have executed this
Amendment.
(b) Each Guarantor shall have accepted this Amendment in the space
provided for that purpose below.
<PAGE>
(c) The Administrative Agent shall have received the following for
the account of the Banks (each to be properly executed and completed) and the
same shall have been approved as to form and substance by the Banks:
(i) Erickson Purchase Agreement;
(ii) Security Agreement from Nash-Finch Company and
each Material Subsidiary; and
(iii) UCC Financing Statements required by the
Administrative Agent.
(d) The Administrative Agent shall have received evidence of the
insurance required by the Security Agreement.
(e) The Borrower shall have executed that certain fee letter dated
as of May 18, 1999 in connection with this Amendment.
(f) The Administrative Agent shall have received, for the account of
the Banks, an opinion of the Borrower's counsel with respect to this
Amendment, such opinion to be in form and substance reasonably acceptable to
the Administrative Agent and the Required Banks.
(g) The Borrower and the Guarantors shall be in full compliance with
the terms of the Credit Agreement and no Event of Default or Default shall
have occurred or be continuing after giving effect to this Amendment.
(h) Legal matters incident to the execution and delivery of this
Amendment shall be satisfactory to the Required Banks and their counsel.
Upon the satisfaction of such conditions precedent, this Amendment shall take
effect as of June 1, 1999.
5. REPRESENTATIONS REAFFIRMED.
In order to induce the Banks to execute and deliver this Agreement,
the Borrower hereby represents to the Banks that as of the date hereof and as
of the time that this Amendment becomes effective, each of the
representations and warranties set forth in Section 7 of the Credit
Agreement, after giving effect to the amendments made hereby, are and shall
be true and correct (except that the representations contained in Section 7.4
shall be deemed to refer to the most recent financial statements of the
Borrower delivered to the Banks).
6. MISCELLANEOUS.
This Amendment may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each of which when so
executed shall be an original but all of which shall constitute one and the
same instrument. Except as specifically amended and modified hereby, all of
the terms and conditions of the Credit Agreement shall stand and remain
unchanged and in full force and effect. No reference to this Amendment need
be made in any note, instrument or other document making reference to the
Credit Agreement, any reference to the Credit Agreement in any such note,
instrument or other document to be deemed to be a reference to the Credit
Agreement as amended hereby. The Borrower confirms its agreement to pay the
reasonable fees and disbursements of Messrs. Chapman and
<PAGE>
Cutler, counsel to the Administrative Agent, in connection with the
preparation, execution and delivery of this Amendment and the transactions
and documents contemplated hereby. This instrument shall be construed and
governed by and in accordance with the laws of the State of Illinois (without
regard to principles of conflicts of laws).
<PAGE>
Dated as of this 28th day of May 1999, but effective as of June 1,
1999.
NASH-FINCH COMPANY
By
-------------------------------
Its
----------------------------
Accepted and agreed to as of the date last above written.
HARRIS TRUST AND SAVINGS BANK, in its
individual capacity as a Bank and as
Administrative Agent
By
-------------------------------
Its
----------------------------
PNC BANK, NATIONAL ASSOCIATION
By
-------------------------------
Its
----------------------------
ABN AMRO BANK N.V.
By
-------------------------------
Its
----------------------------
By
-------------------------------
Its
----------------------------
THE BANK OF TOKYO-MITSUBISHI, LTD.
CHICAGO BRANCH
By
-------------------------------
Its
----------------------------
<PAGE>
CIBC INC.
By
-------------------------------
Its
----------------------------
ISTITUTO BANCARIO SANPAOLO DI TORINO
ISTITUTO MOBILLARE ITALIANO SPA
By
-------------------------------
Its
----------------------------
KEYBANK, N.A.
By
-------------------------------
Its
----------------------------
COMMERZBANK AKTIENGESELLSCHAFT
CHICAGO BRANCH
By
-------------------------------
Its
----------------------------
THE FUJI BANK, LIMITED
By
-------------------------------
Its
----------------------------
CREDIT AGRICOLE INDOSUEZ
By
-------------------------------
Its
----------------------------
By
-------------------------------
Its
----------------------------
<PAGE>
FIRST BANK NATIONAL ASSOCIATION
By
-------------------------------
Its
----------------------------
MELLON BANK, N.A.
By
-------------------------------
Its
----------------------------
SUNTRUST BANK, ATLANTA
By
-------------------------------
Its
----------------------------
THE MITSUBISHI TRUST AND BANKING CORPORATION
By
-------------------------------
Its
----------------------------
NATIONAL CITY BANK, successor by merger
to NATIONAL CITY BANK OF COLUMBUS
By
-------------------------------
Its
----------------------------
THE SANWA BANK, LIMITED
By
-------------------------------
Its
----------------------------
<PAGE>
THE SUMITOMO BANK, LIMITED
By
-------------------------------
Its
----------------------------
BANKERS TRUST COMPANY
By
-------------------------------
Its
----------------------------
THE BANK OF NEW YORK
By
-------------------------------
Its
----------------------------
MITSUI TRUST AND BANKING COMPANY, LIMITED
By
-------------------------------
Its
----------------------------
FIRSTAR BANK OF MINNESOTA, N.A.
By
-------------------------------
Its
----------------------------
SUNTRUST BANK, CENTRAL FLORIDA N.A.
By
-------------------------------
Its
----------------------------
<PAGE>
CRESTAR BANK
By
-------------------------------
Its
----------------------------
<PAGE>
GUARANTORS' CONSENT
Each of the undersigned has heretofore executed and delivered to the
Administrative Agent a Subsidiary Guarantee Agreement and hereby consents to
the Amendment to the Credit Agreement as set forth above and confirms that
its Subsidiary Guarantee Agreement and all of each of the undersigned's
obligations thereunder remain in full force and effect and, without limiting
the foregoing, acknowledges and agrees that the Guaranteed Liabilities, as
defined in the Amendment to the Credit Agreement, constitutes the
indebtedness which is guaranteed by the undersigned under its Subsidiary
Guarantee Agreement. Each of the undersigned further agrees that the consent
of the undersigned to any further amendments to the Credit Agreement shall
not be required as a result of this consent having been obtained, except to
the extent, if any, required by its Subsidiary Guarantee Agreement.
NASH-DE CAMP COMPANY
By
-------------------------------
Its
----------------------------
PIGGLY WIGGLY NORTHLAND CORPORATION
By
-------------------------------
Its
----------------------------
GTL TRUCKLINES, INC.
By
-------------------------------
Its
----------------------------
T.J. MORRIS COMPANY
By
-------------------------------
Its
----------------------------
GILLETTE DAIRY OF THE BLACK HILLS, INC.
By
-------------------------------
Its
----------------------------
<PAGE>
NEBRAKSKA DAIRIES, INC.
By
-------------------------------
Its
----------------------------
FORREST TRANSPORTATION SERVICE, INC.
By
-------------------------------
Its
----------------------------
SUPER FOOD SERVICES, INC.
By
-------------------------------
Its
----------------------------
KENTUCKY FOOD STORES, INC.
By
-------------------------------
Its
----------------------------
GRAY BEAR, INC.
By
-------------------------------
Its
----------------------------
FAME MARKETING CORP.
By
-------------------------------
Its
----------------------------
SUPER FOODS, INC.
By
-------------------------------
Its
----------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> OCT-09-1999
<CASH> 1,301
<SECURITIES> 0
<RECEIVABLES> 186,886
<ALLOWANCES> 22,655
<INVENTORY> 275,015
<CURRENT-ASSETS> 486,019
<PP&E> 559,461
<DEPRECIATION> 318,835
<TOTAL-ASSETS> 886,684
<CURRENT-LIABILITIES> 360,645
<BONDS> 313,918
0
0
<COMMON> 19,292
<OTHER-SE> 145,685
<TOTAL-LIABILITY-AND-EQUITY> 886,684
<SALES> 3,159,903
<TOTAL-REVENUES> 3,159,903
<CGS> 2,837,735
<TOTAL-COSTS> 284,191
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,608
<INTEREST-EXPENSE> 23,318
<INCOME-PRETAX> 12,051
<INCOME-TAX> 5,110
<INCOME-CONTINUING> 6,941
<DISCONTINUED> 4,566<F1>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,507
<EPS-BASIC> 1.02
<EPS-DILUTED> 1.01
<FN>
<F1>DISPOSAL OF DISCONTINUED OPERATION NET OF INCOME TAX OF $3,587.
</FN>
</TABLE>
