-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IgkPEbhpxoRfYjTnFU6GNvW+ZroXcQ0Aui1P1VPxN8ar8JXvamzYAEl3sb0U8JKh pCN6rLUK2zxAlTf+wrnQ9Q== 0000912057-00-021680.txt : 20000505 0000912057-00-021680.hdr.sgml : 20000505 ACCESSION NUMBER: 0000912057-00-021680 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000325 FILED AS OF DATE: 20000504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NASH FINCH CO CENTRAL INDEX KEY: 0000069671 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 410431960 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00785 FILM NUMBER: 618915 BUSINESS ADDRESS: STREET 1: 7600 FRANCE AVE STREET 2: PO BOX 355 CITY: SOUTH MINNEAPOLIS STATE: MN ZIP: 55435-0355 BUSINESS PHONE: 6128320534 FORMER COMPANY: FORMER CONFORMED NAME: NASH CO DATE OF NAME CHANGE: 19710617 10-Q 1 10-Q 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 twelve weeks ended March 25, 2000 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) (952) 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 ------- ------- As of April 25, 2000, 11,413,527 shares of Common Stock of the Registrant were outstanding. PART I - FINANCIAL INFORMATION This report is for the twelve week interim period beginning January 2, 2000, through March 25, 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 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. NASH FINCH COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Operations (unaudited) (In thousands, except per share amounts)
Twelve Weeks Ended ---------------------------- March 25, March 27, 2000 1999 ------------ ------------- Total sales and revenues $ 892,673 934,797 Cost and expenses: Cost of sales 789,972 845,076 Selling, general and administrative 81,059 70,942 Depreciation and amortization 10,159 9,726 Interest expense 7,573 6,983 ------------ ------------- Total costs and expenses 888,763 932,727 Earnings before income taxes 3,910 2,070 Income taxes 1,658 878 ------------ ------------- Net earnings $ 2,252 1,192 ============ ============= Basic earnings per share: $ 0.20 0.11 Diluted earnings per share: $ 0.20 0.11 Weighted average number of common shares outstanding and common equivalent shares outstanding: Basic 11,406 11,332 Diluted 11,411 11,332 - ----------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements. NASH FINCH COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except per share amounts)
March 25, January 1, ASSETS 2000 2000 -------------- ------------ Current assets: (unaudited) Cash $ 13,259 16,389 Accounts and notes receivable, net 126,406 154,066 Inventories 262,547 264,232 Prepaid expenses 14,380 11,137 Deferred tax assets 19,334 19,739 -------------- ------------ Total current assets 435,926 465,563 Investments in affiliates 639 508 Notes receivable, net 17,878 20,712 Property, plant and equipment: Land 25,148 23,898 Buildings and improvements 135,861 136,119 Furniture, fixtures and equipment 297,730 288,156 Leasehold improvements 73,596 70,071 Construction in progress 11,736 11,073 Assets under capitalized leases 25,233 25,233 -------------- ------------ 569,304 554,550 Less accumulated depreciation and amortization (329,336) (318,924) -------------- ------------ Net property, plant and equipment 239,968 235,626 Goodwill, net 114,777 101,751 Other intangible assets, net 20,096 13,652 Investment in direct financing leases 15,254 15,444 Deferred tax asset, net 8,430 9,187 -------------- ------------ Total assets $ 852,968 862,443 ============== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Outstanding checks $ 47,757 54,974 Current maturities of long-term debt and capitalized lease obligations 3,162 3,117 Accounts payable 175,104 191,749 Accrued expenses 75,054 72,681 Income taxes 5,740 4,806 -------------- ------------ Total current liabilities 306,817 327,327 Long-term debt 321,921 314,091 Capitalized lease obligations 33,309 33,718 Deferred compensation 4,466 4,545 Other 10,145 10,088 Minority interest in subsidiary 2,395 - 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 11,641 shares in 2000 and 1999 19,402 19,402 Additional paid-in capital 18,247 18,247 Restricted stock (47) (57) Retained earnings 138,129 136,905 -------------- ------------ 175,731 174,497 Less cost of 230 and 231 shares of common stock in treasury, respectively (1,816) (1,823) -------------- ------------ Total stockholders' equity 173,915 172,674 -------------- ------------ Total liabilities and stockholders' equity $ 852,968 862,443 ============== ============ - ---------------------------------------------------------
See accompanying notes to condensed consolidated financial statements. NASH FINCH COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)
Twelve Weeks Ended ---------------------------- March 25, March 27, 2000 1999 ------------ ------------ Operating activities: Net earnings $ 2,252 1,192 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,159 9,726 Provision for bad debts 2,744 885 Provision for losses (recovery from) closed lease locations 291 (715) Deferred income tax expense 1,162 780 Deferred compensation (79) (551) Earnings of equity investments - (60) Other 28 (1,305) Changes in operating assets and liabilities: Accounts and notes receivable 31,480 3,745 Inventories 6,827 12,171 Prepaid expenses (3,065) (6,823) Accounts payable (19,490) 7,423 Accrued expenses (1,469) 6,850 Accrued expenses - special charges (1,075) (4,410) Income taxes 933 754 -------- -------- Net cash provided by operating activities 30,698 29,662 -------- -------- Investing activities: Disposal of property, plant and equipment 1,917 2,666 Additions to property, plant and equipment excluding capital leases (8,183) (7,549) Businesses acquired, net of cash (19,483) (3,406) Loans to customers (3,253) (5,938) Payments from customers on loans 3,426 6,143 Sale (repurchase) of receivables (6,700) 300 Other (778) 414 -------- -------- Net cash used for investing activities (33,054) (7,370) -------- -------- Financing activities: Proceeds from long-term debt - 449 Proceeds from revolving debt 8,000 5,000 Dividends paid (1,028) (1,021) Payments of short-term debt - (5,525) Payments of long-term debt (167) (272) Payments of capitalized lease obligations (371) (384) Decrease in outstanding checks (7,218) (10,661) Other 10 688 -------- -------- Net cash used for financing activities (774) (11,726) -------- -------- Net increase (decrease) in cash $ (3,130) 10,566 ======== ======== - ---------------------------------------------------------
See accompanying notes to condensed consolidated financial statements. NASH FINCH COMPANY AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity
- ------------------------------------------------------------------------------------------------------------------------------------ Fiscal period ended March 25, 2000 January 1, 2000 and January 2, 1999 (In thousands, except per share amounts) Common stock Additional Treasury stock Total -------------- paid-in Retained Restricted -------------- stockholders' Shares Amount capital earnings stock Shares Amount equity - ------------------------------------------------------------------------------------------------------------------------------------ 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) - - - 2,252 - - - 2,252 Dividend declared of $.09 per share - - - (1,028) - - - (1,028) Common stock issued for employee stock purchase plan - - - - - - - - Amortized compensation under restricted stock plan - - - - 1 - - 1 Repayment of notes receivable from holders of restricted stock - - - - 9 - - 9 Distribution of stock pursuant to performance awards - - - - - 1 7 7 -------- -------- -------- -------- -------- -------- -------- -------- Balance at March 25, 2000 11,641 $ 19,402 18,247 138,129 (47) (230) $ (1,816) 173,915 ======== ======== ======== ======== ======== ======== ======== ======== - ---------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements. NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2000 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 March 25, 2000, and January 1, 2000, and the results of operations and changes in cash flows for the 12-weeks ended March 25, 2000 and March 27, 1999, 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 $45.7 million and $46.2 million higher at March 25, 2000 and January 1, 2000, respectively. NOTE 3 The following table sets forth the computation of basic and diluted earnings per share.
Twelve Weeks Ended ------------------ March 25, March 27, 2000 1999 --------------- ---------------- Numerator: Net income $ 2,252 1,192 --------------- ---------------- Denominator: Denominator of basic earnings per share (weighted-average shares) 11,406 11,332 Effect of dilutive contingent shares 5 -- --------------- ---------------- Denominator for diluted earnings per share (adjusted weighted average shares) 11,411 11,332 =============== ================ Basic earnings per share $ .20 .11 =============== ================ Diluted earnings per share $ .20 .11 =============== ================
NOTE 4 On January 30, 2000 the Company acquired Hinky Dinky Supermarkets, Inc. ("HDSI") through a cash purchase of all of HDSI's outstanding capital stock. HDSI 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, for a cash amount subject to purchase price adjustments, and pending final determination of certain acquired asset and liability valuations. 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 March 25, 2000 and January 1, 2000 the Company had sold $44.2 million and $50.5 million, respectively, of accounts receivable on a non-recourse basis to NFFC. NFFC sold $35.1 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 following table details the activity during the first quarter, associated with the 1998 special charges relative to the food distribution component of the charge (in thousands):
1998 Food Distribution Rollforward ---------------------------------- Post Employment Benefits Exit Costs Total ---------------- -------------- ---------------- Balance 1/1/00 $ 1,743 670 2,413 Used in 2000 (2) (8) (10) ---------------- -------------- ---------------- Balance 3/25/00 $ 1,741 662 2,403 ================ ============== ================
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. During the first quarter of 2000, one of four remaining stores was closed, while the Company continues to market three other locations. 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 first quarter of 2000, the Company closed one store, a second location will be closed in the second quarter, with the remaining two locations closing before the end of the third quarter. Accordingly, the Company recorded charges of $.3 million, in costs related to the closures, to accrued expenses. The following table details 1998 special charge activity during the first quarter, relative to the retail component of the charge (in thousands):
1998 Retail Rollforward ----------------------- Lease Commitment Exit Costs Total ---------------- -------------- ---------------- Balance 1/1/00 $ 5,807 1,323 7,130 Used in 2000 (241) (79) (320) ---------------- -------------- ---------------- Balance 3/25/00 $ 5,566 1,244 6,810 ================ ============== ================
The aggregate 1998 special charges included $44.7 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 the future periods related to these matters. The impact of suspending depreciation on assets to be disposed of is not material. At March 25, 2000, special charge costs have been 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 during the first quarter, relative to the food distribution component of the charge (in thousands):
1997 Food Distribution Rollforward ---------------------------------- Post Lease Employment Commitments Benefits Exit Costs Total ------------------ ------------------ --------------- --------------- Balance 1/1/00 $ 1,590 274 1,106 2,970 Used in 2000 (260) (177) (260) (697) ------------------ ------------------ --------------- --------------- Balance 3/25/00 $ 1,330 97 846 2,273 ================== ================== =============== ===============
The Company has completely executed its 1997 food distribution consolidation plan. During the first quarter of 2000, continuing costs totaling $.7 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. 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 during the first quarter, relative to the retail component of the charge (in thousands):
1997 Retail Rollforward ----------------------- Lease Commitments Exit Costs Total ------------------ -------------- --------------- Balance 1/1/00 $ 800 267 1,067 Used in 2000 (35) (10) (45) ------------------ -------------- --------------- Balance 3/25/00 $ 765 257 1,022 ================== ============== ===============
Ten of the identified retail stores were closed during 1998 and 1999, and two stores are scheduled to be closed in 2000. One of the remaining 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 $9.2 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 March 25, 2000, special charge costs have been included in accrued expenses on the balance sheet. NOTE 7 A summary of the major segments of the business is as follows:
TWELVE WEEKS ENDED MARCH 25, 2000 Food All (In thousands) Distribution Retail Military Other Totals - -------------------------------------- -- ---------------- -- ------------- -- -------------- -- ------------ -- ----------------- Revenue from external customers $ 444,610 225,013 215,920 1,475 887,018 Intra segment revenue 128,714 - - 1,011 129,725 Segment profit and loss 9,589 4,586 4,525 (4) 18,696
TWELVE WEEKS ENDED MARCH 27, 1999 Food All (In thousands) Distribution Retail Military Other Totals - --------------------------------------- -- ---------------- -- ------------ -- --------------- -- ----------- -- ---------------- Revenue from external customers $ 543,414 162,589 224,175 568 930,746 Intra segment revenue 99,773 - - 1,177 100,950 Segment profit and loss 10,170 1,140 5,054 (181) 16,183
Reconciliation to statements of operations: (In thousands)
TWELVE WEEKS ENDED March 25, March 27, 2000 1999 -------------- ---------------- PROFIT AND LOSS Total profit for segments $ 18,696 16,183 Unallocated amounts: Adjustment of inventory to LIFO 500 (300) Unallocated corporate overhead (15,286) (13,813) -------------- ---------------- Income from continuing operations before income taxes $ 3,910 2,070 ============== ================
Prior year segment information has been restated to reflect a change in method of allocation of marketing revenues. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS REVENUES Total revenues for the twelve week first quarter were $892.7 million compared to $934.8 million, a decrease of 4.5%. Revenue declines were the result of several factors which included the consolidation of a number of distribution centers since last year, an industry wide downturn in retail grocery sales following Year 2000 stockpiling and the timing of the Easter holiday. Food distribution revenues during the quarter were $444.6 million compared to $543.4 million, a decrease of 18.2%. The negative impact is largely attributed to the transfer of business to the retail segment resulting from the acquisitions of two former customers, the 18-store chain Erickson stores in June 1999 and the 12-store chain controlled by Hinky Dinky Supermarkets, Inc., during the quarter. In addition, further execution of the Company's 1998 revitalization plan to streamline food distribution operations through consolidation, resulted in the closure of two distribution centers since last year, which also had an adverse affect on year over year food distribution comparisons. Retail segment revenues for the quarter were $225.0 million compared to $162.6 million last year, an increase of 38.4%. The improvement is primarily due to the acquisitions of the 18 Erickson stores in Minnesota and Wisconsin, the 12 Hinky Dinky stores in Nebraska and six stores in other market areas since last year. In addition, during the quarter, the Company completed construction and opened a second store in Rochester, Minnesota. Same store sales declined 1.4 % consistent with industry-wide reports of soft revenues during the first quarter. Also, the timing of the Easter holiday contributed to lower revenues in 2000. With the Company's continued emphasis on retail expansion, retail segment revenues now represent 25.4 % of total Company revenues compared to 17.6 % last year. Military segment revenues decreased 3.7% for the quarter compared to last year. The decrease reflects a general decline in revenues and is not specifically attributed to any loss of commissaries serviced or product lines carried. The Company expects improvement during the remainder of the year. GROSS MARGIN Gross margin for the quarter was 11.5% compared to 9.6% last year. The increase largely reflects the growing proportion of higher margin retail revenues to total revenues. In addition, efficiencies in warehousing and transportation resulting from facility consolidations have lowered cost of sales. Retail segment margins continue to increase as a greater proportion of revenues are derived from higher margin departments within the stores. Margin comparisons were also favorably affected by a LIFO credit of $.5 million compared to a charge last year of $.3 million. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE Selling, general and administrative expenses for the first quarter, as a percent of total revenues, were 9.1% compared to 7.6% a year ago. The increase primarily results from the greater proportion of retail business which typically operates at higher operating expense levels than food distribution. During the quarter the Company recorded additional provisions for bad debts of $2.7 million compared to $.9 million a year ago. The increase is based on the Company's ongoing assessment of customer credit relationships, and relates primarily to accounts in the Michigan market area. DEPRECIATION AND AMORTIZATION EXPENSE Depreciation and amortization expense for the quarter increased 4.5% compared to last year. The increase primarily reflects acquisitions of Erickson's, Hinky Dinky and six other retail stores. In addition, the expansion of the Lumberton, North Carolina distribution center, the completed construction of the store in Rochester, Minnesota and several other store improvement projects, since last year, contributed to the increased depreciation expense. Amortization of goodwill and other intangibles for the current and prior year quarters was $1.8 million and $1.5 million, respectively. INTEREST EXPENSE Interest expense for the quarter was $7.6 million, an increase of 8.5% over last year. The higher interest costs are attributed to higher net debt levels due to the acquisitions, which occurred since the prior year quarter, partially offset by proceeds from the sale of Nash-De Camp and two dairy subsidiaries and improved working capital management. Higher average borrowing rates compared to a year ago also factored into the increased expense level. EARNINGS BEFORE INCOME TAXES Earnings before income taxes for the quarter were $3.9 million compared to $2.1 million last year. The increase for the quarter reflects significant improvement in retail segment profitability, from $1.1 million last year to $4.6 million this year. Food distribution and military segments were even compared to last year, however, improvements are expected as productivity gains further impact profitability. 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. SPECIAL CHARGES 1998 SPECIAL CHARGES During the fourth quarter of 1998, the Company announced a five-year revitalization plan to streamline food distribution operations and build retail operations resulting in the Company recording special charges totaling $71.4 million (offset by $2.9 million of 1997 special charge adjustments). The new strategic plan's objectives were 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 food distribution 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 under 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. At March 25, 2000, ten stores have been closed and the Company continues to market three other locations. In the fourth quarter of 1999, the Company recorded an additional accrual of $4.7 million related to four corporately operated stores which have been identified 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. During the quarter, one store was closed with three remaining locations to be closed by the end of the third quarter. 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 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 for the quarter relative to food distribution and retail operations through March 25, 2000. 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 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 retail operations, the special charge of $5.2 million related to the closing of fourteen, 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 from United-A.G. Cooperative, Inc., an asset impairment charge of $1.0 relating to agricultural 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 for the quarter relative to food distribution and retail operations through March 25, 2000. 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. Cash flow provided from operations totaled $30.7 million for the quarter compared to $29.7 million last year. The increase in operating cash flow resulted primarily from improvements in asset management, in particular accounts receivable, partially offset by decreases in accounts payable. Working capital was $129.1 million at the end of the quarter compared to $138.2 million at year end. The current ratio at the end of the quarter remained at 1.42 as reported at the end of 1999. During the quarter the Company acquired Hinky Dinky Supermarkets Inc. and two other retail stores in separate transactions for cash totaling $19.5 million. The acquisitions were financed from the revolving credit facility. Other transactions affecting liquidity during the quarter were capital expenditures of $8.2 million and cash dividends paid to shareholders of $1.0 million. 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; and fully integrate acquisitions and realize expected synergies. 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: 27.1 Financial Data Schedule (b) REPORTS ON FORM 8-K. Not applicable. 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: May 4, 2000 By /s/ Ron Marshall ---------------- --------------------- Ron Marshall President and Chief Executive Officer By /s/LeAnne M. Stewart ------------------------- LeAnne M. Stewart Vice President and Corporate Controller NASH FINCH COMPANY EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q For the Twelve Weeks Ended March 25, 2000
Item No. Item Method of Filing - -------- ---- ---------------- 27.1 Financial Data Schedule Filed herewith
EX-27.1 2 EXHIBIT 27.1
5 1,000 3-MOS DEC-30-2000 JAN-02-2000 MAR-25-2000 13,259 0 149,985 23,579 262,547 435,926 569,304 329,336 852,968 306,817 321,921 0 0 19,402 154,513 852,968 892,673 892,673 789,972 88,474 0 2,744 7,573 3,910 1,658 2,252 0 0 0 2,252 .20 .20
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