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NASH FINCH CO
10-Q, 2000-11-15
GROCERIES & RELATED PRODUCTS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

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FORM 10-Q

(Mark One)

/x/	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Forty weeks ended October 7, 2000

or

/ /	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-785

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NASH-FINCH COMPANY
(Exact Name of Registrant as Specified in its Charter)

(952) 832-0534
(Registrant's telephone number including area code)

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    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    

    As of November 7, 2000, 11,484,707 shares of Common Stock of the Registrant were outstanding.

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PART I—FINANCIAL INFORMATION

    This report is for the forty week interim period beginning January 2, 2000, through October 7, 2000.

    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 fairly present 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.

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NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (unaudited)
(In thousands, except per share amounts)

				Sixteen Weeks Ended					Forty Weeks Ended
				October 7, 2000			October 9, 1999		October 7, 2000		October 9, 1999
Total sales and revenues				$	1,220,468		1,289,156		3,030,803		3,159,903
Cost and expenses:
	Cost of sales				1,077,562		1,150,964		2,678,088		2,837,735
	Selling, general and administrative				111,139		109,308		273,791		254,251
	Depreciation and amortization				14,355		13,393		34,810		32,548
	Interest expense				10,444		9,453		25,668		23,318
		Total cost and expenses			1,213,500		1,283,118		3,012,357		3,147,852
		Earnings from continuing operations before income taxes			6,968		6,038		18,446		12,051
Income taxes					2,954		2,561		7,821		5,110
		Earnings from continuing operations			4,014		3,477		10,625		6,941
Discontinued operations:
	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
	Net earnings			$	4,014		8,043		10,625		11,507
Basic earnings per share:
	Earnings from continuing operations			$	0.35		0.31		0.93		0.62
	Earnings from discontinued operations				—		0.40		—		0.40
	Net earnings per share			$	0.35		0.71		0.93		1.02
Diluted earnings per share:
	Earnings from continuing operations			$	0.35		0.31		0.93		0.61
	Earnings from discontinued operations				—		0.40		—		0.40
	Net earnings per share			$	0.35		0.71		0.93		1.01
Weighted average number of common shares outstanding and common equivalent shares outstanding:
	Basic				11,471		11,334		11,433		11,333
	Diluted				11,476		11,343		11,438		11,343

See accompanying notes to condensed consolidated financial statements.

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NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands, except per share amounts)

				October 7, 2000			January 1, 2000
				(unaudited)
Assets
Current assets:
	Cash			$	9,771		16,389
	Accounts and notes receivable, net				126,069		154,066
	Inventories				287,457		264,232
	Prepaid expenses				11,767		11,137
	Deferred tax assets				16,629		19,739
		Total current assets			451,693		465,563
Investments in affiliates					497		508
Notes receivable, net					33,482		20,712
Property, plant and equipment:
	Land				23,390		23,898
	Buildings and improvements				136,662		136,119
	Furniture, fixtures and equipment				306,405		288,156
	Leasehold improvements				71,350		70,071
	Construction in progress				12,816		11,073
	Assets under capitalized leases				35,270		25,233
					585,893		554,550
	Less accumulated depreciation and amortization				(331,117	)	(318,924)
		Net property, plant and equipment			254,776		235,626
Goodwill, net					111,953		101,751
Other intangible assets, net					18,391		13,652
Investment in direct financing leases					14,855		15,444
Deferred tax asset, net					9,882		9,187
		Total assets		$	895,529		862,443
Liabilities and Stockholders' Equity
Current liabilities:
	Outstanding checks			$	54,640		54,974
	Current maturities of long-term debt and capitalized lease obligations				3,209		3,117
	Accounts payable				208,168		191,749
	Accrued expenses				68,636		72,681
	Income taxes				6,675		4,806
		Total current liabilities			341,328		327,327
Long-term debt					315,295		314,091
Capitalized lease obligations					42,870		33,718
Deferred compensation					4,418		4,545
Other					8,414		10,088
Minority interest in subsidiary					2,502		—
Stockholders' equity:
	Preferred stock—no par value Authorized 500 shares; none issued				—		—
	Common stock of $1.662/3 par value Authorized 25,000 shares, issued 11,711 and 11,641 shares, respectively				19,518		19,402
	Additional paid-in capital				18,561		18,247
	Restricted stock				(28	)	(57)
	Retained earnings				144,441		136,905
					182,492		174,497
Less cost of 227 and 231 shares of common stock in treasury, respectively					(1,790	)	(1,823)
	Total stockholders' equity				180,702		172,674
	Total liabilities and stockholders' equity			$	895,529		862,443

See accompanying notes to condensed consolidated financial statements.

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NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)

					Forty Weeks Ended
					October 7, 2000			October 9, 1999
Operating activities:
	Net earnings				$	10,625		11,507
	Adjustments to reconcile net income to net cash provided by operating activities:
		Discontinued operations				—		(8,153)
		Depreciation and amortization				34,810		32,548
		Provision for bad debts				5,702		2,608
		Provision for losses (recovery from) closed lease locations				(667	)	(509)
		Deferred income tax expense				2,415		9,022
		Deferred compensation				(127	)	(2,683)
		Earnings of equity investments				(120	)	(718)
		Other				157		(386)
	Changes in operating assets and liabilities:
		Accounts and notes receivable				30,635		(82)
		Inventories				(17,936	)	7,340
		Prepaid expenses				(493	)	3,670
		Accounts payable				13,370		12,652
		Accrued expenses				(6,274	)	(21,563)
		Accrued expenses—special charges				(3,631	)	(7,148)
		Income taxes				1,869		(434)
		Net cash provided by operating activities				70,335		37,671
Investing activities:
	Disposal of property, plant and equipment					10,940		26,158
	Additions to property, plant and equipment					(40,466	)	(41,512)
	Business acquired, net of cash					(19,890	)	(58,792)
	Loans to customers					(26,378	)	(22,812)
	Payments from customers on loans					10,230		22,558
	(Repurchase) sale of receivables					(7,245	)	1,125
	Proceeds from sale of dairy operation, net of gain					—		12,769
	Proceeds from sale of Nash-De Camp					—		17,083
	Other					(1,054	)	(1,030)
		Net cash used for investing activities				(73,863	)	(44,453)
Financing activities:
	Proceeds from long-term debt					—		649
	Proceeds from revolving debt					2,000		7,000
	Dividends paid					(3,089	)	(3,062)
	Proceeds of short-term debt					—		9,909
	Payments of long-term debt					(792	)	(2,505)
	Payments of capitalized lease obligations					(1,325	)	(1,246)
	Decrease in outstanding checks					(334	)	(4,215)
	Other					450		705
		Net cash (used by) provided for financing activities				(3,090	)	7,235
			Net (decrease) increase in cash		$	(6,618	)	453
Supplemental disclosure of cash flow information:
	Non-cash investing and financing activities
		Purchase of real estate under capital leases			$	13,249		—

See accompanying notes to condensed consolidated financial statements.

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NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Fiscal period ended October 7, 2000, January 1, 2000 and January 2, 1999
(In thousands, except per share amounts)

			Common stock											Treasury stock
								Additional paid-in capital		Retained earnings		Restricted stock							Total stockholders' equity
			Shares		Amount									Shares		Amount
Balance at January 3, 1998			11,575		$	19,292		17,648		190,984		(391	)	(252	)	$	(1,915	)	225,618
Net earnings (loss)			—			—		—		(61,637	)	—		—			—		(61,637)
Dividend declared of $.72 per share			—			—		—		(8,162	)	—		—			—		(8,162)
Treasury stock issued upon exercise of options			—			—		47		—		—		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			—			—		246		—		—		15			75		321
Treasury stock purchased			—			—		—		—		—		(1	)		(16	)	(16)
Other								3		—		—		—			—		3
Balance at January 2, 1999			11,575			19,292		17,944		121,185		(113	)	(234	)		(1,835	)	156,473
Net earnings (loss)			—			—		—		19,803		—		—			—		19,803
Dividend declared of $.36 per share			—			—		—		(4,083	)	—		—			—		(4,083)
Common stock issued for employee stock purchase plan			66			110		294		—		—		—			—		404
Amortized compensation under restricted stock plan			—			—		—		—		13		—			—		13
Repayment of notes receivable from holders of restricted stock			—			—		—		—		43		—			—		43
Distribution of stock pursuant to performance awards			—			—		9		—		—		3			12		21
Balance at January 1, 2000			11,641			19,402		18,247		136,905		(57	)	(231	)		(1,823	)	172,674
Net earnings (loss)			—			—		—		10,625		—		—			—		10,625
Dividend declared of $.27 per share			—			—		—		(3,089	)	—		—			—		(3,089)
Common stock issued for employee stock purchase plan			70			116		309		—		—		—			—		425
Amortized compensation under restricted stock plan			—			—		—		—		3		—			—		3
Repayment of notes receivable from holders of restricted stock			—			—		—		—		26		—			—		26
Distribution of stock pursuant to performance awards			—			—		5		—		—		4			33		38
Balance at October 7, 2000 (unaudited)			11,711		$	19,518		18,561		144,441		(28	)	(227	)	$	(1,790	)	180,702

See accompanying notes to condensed consolidated financial statements.

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Nash Finch Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
October 7, 2000

Note 1

    The accompanying financial statements include all adjustments which are, in the opinion of management, necessary to fairly present the financial position of the Company and its subsidiaries at October 7, 2000, and January 1, 2000, and the results of operations for the 16 and 40-weeks ended October 7, 2000 and October 9, 1999, and the changes in cash flows for the 40-weeks ended  October 7, 2000 and October 9, 1999, respectively. All material intercompany accounts and transactions have been eliminated in the consolidated financial statements. Certain prior year amounts have been reclassified to conform to current year presentations. These changes had no impact on previously reported results of operations or stockholders' equity. Revenues for the food distribution and military segments are recognized when product is shipped and retail revenues are recognized at the point of sale. 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.

    In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, which is required to be adopted for fiscal years beginning after June 15, 2000. Because of its limited use of derivatives, the Company does not expect adoption of the new Statement to have a significant effect on earnings or financial position.

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 $45.1 million and $46.2 million higher at October 7, 2000 and January 1, 2000, respectively.

Note 3

    The following table sets forth the computation of basic and diluted earnings per share.

				Sixteen Weeks Ended					Forty Weeks Ended
				October 7, 2000			October 9, 1999		October 7, 2000		October 9, 1999
Numerator:
	Income from continuing operations			$	4,014		3,477		10,625		6,941
Denominator:
	Denominator of basic earnings per share (weighted-average shares)				11,471		11,334		11,433		11,333
	Effect of dilutive contingent shares				5		9		5		10
	Denominator for diluted earnings per share (adjusted weighted average shares)				11,476		11,343		11,438		11,343
Basic earnings per share				$	.35		.31		.93		.62
Diluted earnings per share				$	.35		.31		.93		.61

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Note 4

    On January 30, 2000 the Company acquired Hinky Dinky Supermarkets, Inc. ("Hinky Dinky") through a cash purchase of all of Hinky Dinky's outstanding capital stock. Hinky Dinky is the majority owner of twelve supermarkets located in Nebraska with annual sales of approximately $90 million. The acquisition was accounted for as a purchase.

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 7, 2000 and January 1, 2000 the Company had sold $41.8 million and $50.5 million, respectively, of accounts receivable on a non-recourse basis to NFFC. NFFC sold $34.6 million and $41.8 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 $71.4 million (offset by $2.9 million of 1997 special charge adjustments) as a result of the Company's revitalization plan designed to redirect its technology efforts, optimize warehouse capacity through consolidation, and to close, sell or reassess underperforming businesses and investments.

    In connection with the implementation of the Company's 1998 revitalization plan, the 1998 special charges included $17.0 million to streamline the Company's food distribution operations. The charges provided for post-employment and pension benefit costs, write-down to fair value of tangible assets to be disposed of, and other costs to exit three warehouse facilities. The Company believed the strategy of closing underutilized warehouses and concentrating sales volume into existing warehouses would improve operational efficiency and lower distribution costs.

    In accordance with the 1998 revitalization plan, the Company completed the closure of its Appleton, Wisconsin distribution center during 1999. During the fourth quarter of 1999, after considering both internal and external factors, the Company decided to indefinitely defer the closure of the remaining two distribution centers scheduled for closing in the 1998 plan. The Company continues to incur costs for the Appleton facility which has not been sold or subleased. Certain of these costs are charged to accrued expenses.

    The following table details the activity through the third quarter of 2000, associated with the 1998 special charges relative to the food distribution component of the charge (in thousands):

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    Under the 1998 special charge, twelve under-performing corporately operated retail stores and one store jointly developed with a food distribution customer were designated for closure and a $9.5 million charge was recorded. At October 7, 2000, all stores were either closed or sold. In the fourth quarter of 1999, the Company recorded charges of $4.7 million, including $1.0 million to write down assets to fair value, related to four additional corporately operated stores which have been identified for closure. During the forty weeks of 2000, the Company closed three stores, with the remaining location scheduled for closing in early 2001. Accordingly, the Company recorded charges of $1.1 million, in costs related to the closures, to accrued expenses.

    The following table details 1998 special charge activity through the third quarter of 2000, relative to the retail component of the charge (in thousands):

    The aggregate 1998 special charges included $44.9 million for the abandonment of assets primarily related to an information systems project which was terminated, asset impairments related to ten owned retail stores and the write-off of an equity investment in a joint venture with an independent retailer it continues to service. No additional charges are anticipated in future periods related to these matters.

    The impact of suspending depreciation on assets to be disposed of is not material. At October 7, 2000, remaining special charge liabilities are included in accrued expenses on the balance sheet.

1997 Special Charges

    In 1997 the Company accelerated its plan to strengthen its competitive position. Coincident with the implementation of the plan, the Company recorded special charges totaling $31.3 million impacting the Company's food distribution and retail segments, as well as the produce growing and marketing segment discontinued during 1998.

    The aggregate special charges included $14.5 million for the consolidation or downsizing of seven underutilized warehouses. The following table details 1997 special charge activity through the third quarter of 2000 relative to the food distribution component of the charge (in thousands):

    The Company has completely executed its 1997 food distribution consolidation plan. As of October 7, 2000, continuing costs totaling $1.9 million related to the closures, were charged to accrued expenses. The Company continues to incur costs for those distribution centers that have not been sold or subleased. Certain of these costs are charged to accrued expenses.

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    In retail operations, the special charge of $5.2 million related to the closing of fourteen, principally leased, stores. The following table details special charge activity, through the third quarter of 2000, relative to the retail component of the charge (in thousands):

Ten of the fourteen identified retail stores were closed during 1998 and 1999, two stores were closed though the third quarter of 2000. One of the remaining two stores identified for closure was subleased in 1999, to another party, while management decided in 1999 to keep another location open.

    The aggregate 1997 special charges included $9.1 million for impairment of seven retail stores, impairment of agriculture assets of Nash-De Camp Company (the Company's former produce growing and marketing subsidiary which was divested during 1999), and other charges related to abandonment of system software, loss on the sale of an equity investment in a foreign operation, and the write-down of idle real estate to fair value. The 1997 special charges also included $2.5 million of integration costs associated with a business acquisition. No additional charges are anticipated in future periods relative to these matters.

The impact of suspending depreciation on assets to be disposed of is not material. At October 7, 2000, remaining special charge liabilities are included in accrued expenses on the balance sheet.

Note 7

    A summary of the major segments of the business is as follows (in thousands):

Sixteen weeks ended October 7, 2000

		Food Distribution			Retail		Military		All Other		Totals
Revenue from external customers		$	592,373		322,268		300,991		1,388		1,217,020
Intra segment revenue			179,639		—		—		1,066		180,705
Segment profit and (loss)			11,923		10,339		6,953		(24	)	29,191

Sixteen weeks ended October 9, 1999

		Food Distribution			Retail		Military		All Other		Totals
Revenue from external customers		$	699,367		293,292		288,393		1,630		1,282,682
Intra segment revenue			169,877		—		—		1,301		171,178
Segment profit and (loss)			13,573		7,030		5,838		(43	)	26,398

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Forty weeks ended October 7, 2000

		Food Distribution			Retail		Military		All Other		Totals
Revenue from external customers		$	1,488,900		792,560		733,815		4,074		3,019,349
Intra segment revenue			444,077		—		—		2,876		446,953
Segment profit and (loss)			33,523		23,203		16,513		(32	)	73,207

Forty weeks ended October 9, 1999

		Food Distribution			Retail		Military		All Other		Totals
Revenue from external customers		$	1,779,985		631,146		731,617		3,089		3,145,837
Intra segment revenue			375,318		—		—		3,503		378,821
Segment profit and (loss)			36,266		11,750		15,727		(364	)	63,379

Reconciliation to statements of operations:
(In thousands)

Sixteen weeks ended October 7, 2000 and October 9, 1999

				2000			1999
Profit and loss
Total profit for segments				$	29,191		26,398
Unallocated amounts:
	Adjustment of inventory to LIFO				243		(250)
	Unallocated corporate overhead				(22,466	)	(20,110)
Income from continuing operations before income taxes				$	6,968		6,038

Forty weeks ended October 7, 2000 and October 9, 1999

				2000			1999
Profit and loss
Total profit for segments				$	73,207		63,379
Unallocated amounts:
	Adjustment of inventory to LIFO				1,055		(550)
	Unallocated corporate overhead				(55,816	)	(50,778)
Income from continuing operations before income taxes				$	18,446		12,051

    Prior year and year to date segment information has been restated to reflect a change in method of allocation of marketing revenues.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Revenues

    Total revenues for the 16 week third quarter were $1.220 billion compared to $1.289 billion, a decrease of 5.3%. For the forty weeks, total revenues declined 4.1% from $3.160 billion last year to $3.031 billion. The decline was primarily due to the closing of five distribution centers in 1999 as part of the Company's strategic plan.

    During the quarter, the Company announced that it has gained the food distribution business of Food Farm, Inc., a group of independent retailers based in Kinston, North Carolina, operating 63 stores under the Piggly Wiggly banner. This business, which represents an estimated $200 million in annualized revenues for the Southeast region, will be phased in early in the fourth quarter. The Company also has been successful in adding additional food distribution business to its Midwest and Central regions, the full benefit of which, estimated at $125 million in annualized sales, will be realized during the fourth quarter.

    Food distribution revenues for the 16 weeks were $592.4 million compared to $699.4 million, a decrease of 15.3%. The decline is largely attributed to two factors: the acquisition of a previous food distribution customer, Hinky Dinky, in January 2000, which resulted in the reporting of revenues in the retail segment instead of the food distribution segment, and the closure of five distribution centers in 1999, resulting in a loss of distribution volume compared to the current year. However, the announced addition of new business is expected to improve the year over year comparisons in the fourth quarter. For the 40 weeks, food distribution revenues were $1.489 billion compared to $1.780 billion last year, again reflecting primarily the shift in business from food distribution to the retail segment and the effect of closing distribution centers last year.

    Retail segment revenues for the third quarter were $322.3 million compared to $293.3 million last year, an increase of 9.9%. The improvement in revenues is attributed to the acquisition of 12 Hinky Dinky stores in Nebraska, and the opening of new replacement stores in Marshalltown and Cedar Rapids, Iowa, and an additional store in Rochester, Minnesota, since the year ago quarter. The Company has also been testing two alternative store formats which have contributed to revenue increases and offer future growth potential. One format targets the Latin market, which is a fast-growing segment in several of the Company's market areas; the other, a limited assortment grocery discount store, is designed for the value-conscious consumer. The Company currently operates four limited assortment stores and three Latin oriented stores. During the quarter, the Company sold four stores to existing food distribution customers, closed a store which was replaced by a new store in Cedar Rapids, Iowa, and closed one under-performing location. At the end of the quarter, the Company operated 122 stores.

    Same store sales increased 2.0% for the third quarter and .7% year-to-date compared to last year. Retail segment sales for the 40 weeks were $792.6 million compared to $631.1 million last year, an increase of 25.6%. With the Company's continued emphasis on retail segment growth, segment revenues for the 40 weeks represent 26.2% of total Company revenues compared to 20.1% last year.

    Military segment revenues increased 4.4% for the third quarter, resulting in a year-to-date increase over last year of .3%. The improvement for the quarter reflects the addition of new distribution business in Europe and North Carolina, awarded to the Company by a major manufacturer. The Company provides distribution services to military commissaries primarily under contractual arrangements with manufacturers.

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Gross Margin

    Gross margin for the third quarter and year-to-date was 11.7% and 11.6%, respectively, compared to 10.7% and 10.2%, respectively, last year. The increases largely reflect the growing proportion of higher margin retail revenues to total revenues. However, efficiencies in warehousing and transportation resulting from facility consolidations, operational and system improvements continue to be a growing factor in lowering cost of sales. The Company monitors costs by closely analyzing key measures of operating performance such as equipment utilization, on-time delivery, product fill rates and non-procurement costs per case of product handled and shipped, against predetermined targets.

    Retail segment margins continue to increase as a result of improved coordination of Company-wide merchandising programs and a greater proportion of revenues being derived from higher margin specialty departments within the stores.

    Margins were also favorably affected by LIFO credits of $.2 million for the quarter and $1.1 million for the year-to-date compared to LIFO charges of $.3 million for the quarter and $.6 million year to date last year.

Selling, General and Administrative Expenses

    Selling, general and administrative expenses for the third quarter, as a percent of total revenues, were 9.1% compared to 8.5% a year ago. On a year-to-date basis, expenses were 9.0% compared to 8.0% last year. The increase primarily results from the growing proportion of retail business which operates at higher operating expense levels than the food distribution segment. During the quarter, the Company recorded an additional provision for bad debts of $1.5 million, increasing the total for the year to $5.7 million, compared to $2.6 million last year. The increase relates primarily to accounts in the highly competitive Michigan and Ohio market areas.

Depreciation and Amortization Expense

    Depreciation and amortization expense increased 7.2% for the quarter and 7.0% year-to-date over last year. The increases are due to the acquisition of the Hinky Dinky stores, expansion of the Lumberton distribution center, and completed construction and remodels of several stores since last year. Amortization of goodwill and other intangibles was $2.8 million and $6.9 million, for the third quarter and year-to-date, respectively, compared to $2.4 million and $5.5 million, respectively, last year. The additional expense reflects amortization of goodwill related to the acquisition of Erickson's Diversified Corporation ("Erickson's") in June, 1999, and Hinky Dinky.

Interest Expense

    Interest expense increased $1.0 million or 10.5% for the quarter, and $2.4 million or 10.1% year-to-date, compared to last year. The increased interest costs are primarily attributed to higher average variable borrowing rates compared to last year. For the 40 weeks, average borrowing rates were 8.1% this year compared to 6.8% last year.

Earnings before income taxes

    Earnings before income taxes for the quarter were $7.0 million compared to $2.9 million last year, excluding a gain of $3.1 million from the sale of the dairy operations. The improvement over last year is largely attributed to the contribution of the retail segment which increased profitability by 47.1%. The successful integration of the Hinky Dinky stores and the continued strong performance in the Erickson's stores since acquisition, continue to be significant factors contributing to the improvement.

    Food distribution profits were negatively impacted by the closure of five distribution centers in 1999, which resulted in a loss of distribution volume in 2000, and start up costs of approximately

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$1.0 million, associated with the new Piggly Wiggly business in the Southeast region to be realized in the fourth quarter.

    The military segment recognized sales and profit increases in the quarter compared to last year. Profit increased 19.1% over last year largely due to newly acquired business.

Income Taxes

    The effective income tax rate for 2000 is estimated at 42.4%, unchanged from 1999. Income tax expense increased due to higher pretax earnings for the 16 and 40 weeks compared to last year.

Special Charges

1998 Special Charges

    During the fourth quarter of 1998, the Company announced a five-year revitalization plan to streamline wholesale operations and build retail operations resulting in the Company recording special charges totaling $71.4 million (offset by $2.9 million of 1997 charge adjustments). The new strategic plan's objectives are to: leverage Nash Finch's scale by centralizing operations; improve operational efficiency; and develop a strong retail competency. The Company also redirected technology efforts and set out to close, sell or reassess underperforming businesses and investments.

    In connection with the implementation of the Company's 1998 revitalization plan, the 1998 special charges included $17.0 million to streamline the Company's wholesale operations by closing three warehouses. The charges provided for post-employment and pension benefit costs, write-down to fair value of tangible assets to be disposed of, and other costs to exit the facilities. The Company believed the strategy of closing underutilized warehouses and concentrating sales volume into existing warehouses would improve operational efficiency and lower distribution costs.

    In accordance with the 1998 revitalization plan, the Company completed the closure of its Appleton, Wisconsin distribution center during 1999. During the fourth quarter of 1999, after considering both internal and external factors, the Company decided to indefinitely defer the closure of the remaining two distribution centers scheduled for closing in the 1998 plan.

    Under the 1998 revitalization plan 12 under-performing corporately operated retail stores and one store jointly developed with a food distribution customer were designated for closure and a $9.5 million charge was recorded. The stores were primarily located in geographic areas where the Company could not attain a strong market presence. The Company's focus is to develop corporate stores that can dominate their primary trade areas. As of October 7, 2000, all stores have either been closed or sold.

    In the fourth quarter of 1999, the Company also recorded an additional accrual of $4.7 million related to four corporately operated stores which were announced for closure. Three stores are located in the highly competitive Iowa market and the fourth is in North Carolina. The accrual consists of $3.3 million of non-cancelable lease obligations and related costs required under lease agreements, $1.0 million to write-down to fair value assets held for disposal, and $.4 million of post-closing facility exit costs. As of October 7, 2000, three stores were closed with one remaining location scheduled to be closed in early 2001.

    The aggregate 1998 special charges included $34.4 million for the abandonment of assets primarily related to the Company's Horizons information system project. The abandoned assets related to purchased software and internal and external in-process software development.

    The remainder of the 1998 special charges consisted of a $10.3 million provision for asset impairment primarily related to ten owned retail stores. Increased competition resulting in declining market share, deterioration of operating performance and inadequate projected cash flows were the factors indicating impairment. The impaired assets, which include leasehold improvements and store

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equipment, were measured based on a comparison of the assets' net book value to the present value of the stores' estimated cash flows.

    The tables included in Note (6) of Notes to Condensed Consolidated Financial Statements contain a rollforward of 1998 special charges activity through the third quarter of 2000 relative to food distribution and retail operations.

1997 Special Charges

    In 1997, the Company accelerated its plan to strengthen its competitive position. Coincident with the implementation of the plan, the Company recorded special charges totaling $31.3 million, impacting the Company's food distribution and retail segment, as well as the produce growing and marketing segment discontinued during 1998.

    The aggregate special charges included $14.5 million for the consolidation or downsizing of seven underutilized warehouses. The charges provided for non-cancelable lease obligations, write-down to fair value of tangible assets to be disposed of, and other costs to exit the facilities. Also included are post-employment benefit costs consistent with existing practice and the unamortized portion of goodwill for one of the locations.

    As a result of management changes during 1998, all actions to be taken under the 1997 plan were reevaluated by the Company's new management team. Substantially all actions contemplated by the 1997 plan were reaffirmed in 1998 and implemented. However, some actions included in the 1997 plan were modified. In 1999, the Company completed closure of the remaining distribution centers included in the original 1997 special charges, as modified in 1998. These included Grand Island, Nebraska; Liberal, Kansas; Denver, Colorado and Rocky Mount, North Carolina. The Company continues to incur costs for those distribution centers that have not been sold or subleased. Certain of these costs are charged to accrued expenses.

    In 1999 the Company completed closure of the remaining distribution centers included in the original 1997 special charges, as modified in 1998.

    In retail operations, the special charge of $5.2 million related to the closing of 14, principally leased, stores. The charge covers provisions for continuing non-cancelable lease obligations, anticipated losses on disposals of tangible assets, including abandonment of leasehold improvements, and the write-off of intangible assets.

    The aggregate 1997 special charges contained a provision of $5.4 million for impaired assets of seven retail stores. Declining market share due to increasing competition, deterioration of operating performance and forecasted future results that were less than previously planned were the factors leading the impairment determination.

    The remaining 1997 special charges included $2.5 million of integration costs associated with the acquisition of the business and certain assets of United-A.G. Cooperative, Inc., an asset impairment charge of $1.0 million relating to agriculture assets of Nash-De Camp, the Company's produce growing and marketing subsidiary, and $2.8 million in other asset write-downs.

    The tables included in Note (6) of Notes to Condensed Consolidated Financial Statements contain a rollforward of 1997 special charges activity through the third quarter of 2000 relative to food distribution and retail operations.

LIQUIDITY AND CAPITAL RESOURCES

    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.

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    Cash flow provided from operations for the 40 weeks of 2000 totaled $70.3 million compared to $37.7 million last year. The increase in operating cash flow is attributed to changes in the components of working capital, in particular, decreases in accounts receivables and a net increase in accounts payable and accrued expenses. Working capital declined $27.9 million to $110.4 million largely due to reductions in accounts receivable, the proceeds of which were used to fund capital additions. The current ratio at the end of the third quarter of 2000 was 1.32 compared to 1.42 reported at the end of 1999.

    During the 40 weeks of 2000 the Company acquired Hinky Dinky and two other retail stores in separate transactions for cash totaling $19.9 million. The acquisitions were financed primarily by cash flows from operations. Capital expenditures through the third quarter were $40.5 million, primarily directed toward upgrading and remodeling the retail stores. Capital expenditures for the year are expected to be $60.0 million, funded principally through cash flows from operations. Other transactions affecting liquidity during the 40 week period were cash dividends paid to shareholders of $3.1 million.

    The Company is currently seeking to refinance its revolving credit facility which matures in October 2001. It intends to reach a definitive agreement on a $250 million credit facility and complete the transaction during the fourth quarter.

    The Company believes that borrowing under the credit facility, 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; and fully integrate acquisitions and realize expected synergies.

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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		Nash Finch Profit Sharing Plan—1994 Revision—Sixth Declaration of Amendment
	10.2		Nash Finch Profit Sharing Plan—1994 Revision—Seventh Declaration of Amendment
	10.3		Nash Finch Profit Sharing Plan—1994 Revision—Eight Declaration of Amendment
	27.1		Financial Data Schedule

(b)

Reports on Form 8-K.

Not applicable.

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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 15, 2000		By:		/s/ RON MARSHALL    Ron Marshall President and Chief Executive Officer
		By:		/s/ ROBERT B. DIMOND    Robert B. Dimond Senior Vice President and Chief Financial Officer

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NASH FINCH COMPANY EXHIBIT INDEX TO QUARTERLY REPORT
ON FORM 10-Q
For the Forty Weeks Ended October 7, 2000

Item No.		Item		Method of Filing
10.1		Nash Finch Profit Sharing Plan—1994 Revision Sixth Declaration of Amendment		Filed herewith
10.2		Nash Finch Profit Sharing Plan—1994 Revision Seventh Declaration of Amendment		Filed herewith
10.3		Nash Finch Profit Sharing Plan—1994 Revision Eighth Declaration of Amendment		Filed herewith
27.1		Financial Data Schedule		Filed herewith

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QuickLinks

PART I—FINANCIAL INFORMATION
Nash Finch Company and Subsidiaries Notes to Condensed Consolidated Financial Statements October 7, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Charges

PART II—OTHER INFORMATION

Items 1, 2, 3, 4 and 5 are not applicable.
Item 6. Exhibits and Reports on Form 8-K.

SIGNATURES
NASH FINCH COMPANY EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q For the Forty Weeks Ended October 7, 2000

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