-----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, RN5PVlblvxWGH1yDJ5oHT5w66NhTAA9EqJnyebR1OvaXZpyk6nPb4c+s3666spxh /m8y4KQ3lmRP70MANVdHdQ== 0001047469-98-019516.txt : 19980513 0001047469-98-019516.hdr.sgml : 19980513 ACCESSION NUMBER: 0001047469-98-019516 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980328 FILED AS OF DATE: 19980512 SROS: NASD 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: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00785 FILM NUMBER: 98617210 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 FORM 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 28, 1998 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) / / OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-785 NASH-FINCH COMPANY (Exact Name of Registrant as Specified in its Charter) DELAWARE 41-0431960 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 7600 France Ave. South, Edina, Minnesota 55435 (Address of principal executive offices) (Zip Code)
(612) 832-0534 (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------ ------ Number of shares of common stock outstanding at May 7, 1998: 11,339,663 shares PART I - FINANCIAL INFORMATION This report is for the twelve week interim period beginning January 4, 1998, through March 28, 1998. The accompanying financial information has been prepared in conformity with generally accepted accounting principles and practices, and methods of applying accounting principles and practices, (including consolidation practices) as reflected in the financial information included in the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission for the preceding fiscal year. The financial statements included in this quarterly report include all adjustments which are, in the opinion of management, necessary to a fair presentation of the Company's financial position and results of operations for the interim period. The information contained herein has not been audited by independent certified public auditors and is subject to any adjustments which may develop in connection with the annual audit of its accounts by Ernst & Young LLP, the Company's independent auditors. -2- NASH FINCH COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (Loss) (In thousands, except per share amounts)
Twelve Weeks Ended -------------------------------- March 28, March 22, 1998 1997 ------------ ----------- Revenues: Net sales $ 925,958 935,997 Other revenues 11,143 11,835 ------------ ----------- Total revenues 937,101 947,832 Cost and expenses: Cost of sales 820,360 825,189 Selling, general and administrative and other operating expenses 94,310 99,158 Depreciation and amortization 11,078 10,905 Interest expense 6,860 7,321 ------------ ----------- Total costs and expenses 932,608 942,573 Earnings before income taxes and extraordinary charge 4,493 5,259 Income taxes 1,865 2,203 ------------ ----------- Earnings before extraordinary charge 2,628 3,056 Extraordinary charge from early extinguishment of debt, net of income tax benefit of $3,951 (5,569) - ------------ ----------- Net earnings (loss) $ (2,941) 3,056 ------------ ----------- ------------ ----------- Basic and diluted earnings (loss) per share: Earnings before extraordinary charge $ .23 .27 Extraordinary charge from early extinguishment of debt (.49) - ------------ ----------- Net earnings (loss) $ (.26) .27 ------------ ----------- ------------ ----------- Weighted average number of common and common equivalent shares outstanding Basic 11,301 11,193 Diluted 11,362 11,321
- ------------------------------------------------------------ See accompanying notes to consolidated financial statements. -3- NASH FINCH COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands)
March 28, January 3, ASSETS 1998 1998 - ------ -------------- ------------- Current assets: (unaudited) Cash $ 773 933 Accounts and notes receivable, net 176,634 173,962 Inventories 287,991 287,801 Prepaid expenses 23,742 22,582 Deferred tax assets 12,340 9,072 ------------ ----------- Total current assets 501,480 494,350 Investments in affiliates 7,681 7,679 Notes receivable, noncurrent 23,600 23,092 Property, plant and equipment: Land 30,548 31,229 Buildings and improvements 136,591 137,070 Furniture, fixtures and equipment 307,285 306,762 Leasehold improvements 61,003 60,578 Construction in progress 36,906 28,485 Assets under capitalized leases 24,878 25,048 ------------ ----------- 597,211 589,172 Less accumulated depreciation and amortization (319,203) (312,939) ------------ ----------- Net property, plant and equipment 278,008 276,233 Intangible assets, net 69,305 70,732 Investment in direct financing leases 18,901 19,094 Deferred tax asset - net 2,622 2,622 Other assets 10,826 11,081 ------------ ----------- Total assets $ 912,423 904,883 ------------ ----------- ------------ ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Outstanding checks $ 22,110 36,271 Short-term debt payable to banks 16,155 11,300 Current maturities of long-term debt and capitalized lease obligations 2,769 7,964 Accounts payable 203,246 177,548 Accrued expenses 71,086 60,599 Income taxes - 737 ------------ ----------- Total current liabilities 315,366 294,419 Long-term debt 324,145 325,489 Capitalized lease obligations 38,116 38,517 Deferred compensation 6,682 6,768 Other 7,144 14,072 Stockholders' equity: Preferred stock - no par value Authorized 500 shares; none issued - - Common stock of $1.66 2/3 par value Authorized 25,000 shares, issued 11,575 shares issued in 1998 and 1997 19,292 19,292 Additional paid-in capital 17,908 17,648 Restricted stock (384) (391) Retained earnings 186,005 190,984 ------------ ----------- 222,821 227,533 Less cost of 237 shares and 252 shares of common stock in treasury, respectively. (1,851) (1,915) ------------ ----------- Total stockholders' equity 220,970 225,618 ------------ ----------- Total liabilities and stockholders' equity $ 912,423 904,883 ------------ ----------- ------------ -----------
- -------------------------------------------------------------------------- See accompanying notes to condensed consolidated financial statements. -4- NASH FINCH COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)
Twelve Weeks Ended ---------------------------------- March 28, 1998 March 22, 1997 -------------- -------------- Operating activities: Net earnings (loss) $ (2,941) $ 3,056 Adjustments to reconcile net earnings to net cash provided by operating activities: Provision for (use of) special charge (850) - Depreciation and amortization 11,078 10,905 Provision for bad debts 160 1,293 Provision for (use of) losses on closed lease locations (680) (153) Extraordinary charge - write off deferred financing costs 142 - Deferred income taxes (3,268) (1,618) Deferred compensation (86) (311) Earnings (loss) of equity investments (220) (377) Other 108 773 Changes in operating assets and liabilities: Accounts and notes receivable 9,127 12,056 Inventories (190) 2,251 Prepaid expenses (1,160) (5,908) Accounts payable and outstanding checks 11,537 (29,145) Accrued expenses 5,037 8,849 Income taxes (737) 3,311 --------- -------- Net cash provided by operating activities 27,057 4,982 --------- -------- Investing activities: Dividends received - 800 Disposals of property, plant and equipment, net 2,189 1,292 Additions to property, plant and equipment excluding capital leases (13,474) (7,939) Loans to customers (5,389) (4,632) Payments from customers on loans 5,035 1,485 Sale (repurchase) of receivables (11,700) - Other (30) 28 --------- -------- Net cash used in investing activities (23,369) (8,966) --------- -------- Financing activities: Proceeds from revolving debt 100,000 15,000 Dividends paid (2,038) (2,015) Payments of short-term debt 4,855 (6,550) Payments of from long-term debt (106,570) (2,264) Payments of capitalized lease obligations (370) (275) Other 275 53 --------- -------- Net cash (used in) provided by financing activities (3,848) 3,949 --------- -------- Net decrease in cash $ (160) (35) --------- -------- --------- --------
- ---------------------------------------------------------------- See accompanying notes to consolidated financial statements. -5- NASH FINCH COMPANY AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity
- ----------------------------------------------------------------------------------------------------------------------------- Fiscal period ended March 28, 1998, January 3, 1998 and December 28, 1996 (In thousands, except per share amounts) Foreign Common Stock Additional currency --------------------- paid-in Retained translation Shares Amount capital earnings adjustment - ------------------------------------------------------------------------------------------------------------------------------ Balance at December 30, 1995 11,224 $ 18,706 12,013 188,578 (950) Net earnings - - - 20,032 - Dividend declared of $.75 per share - - - (8,288) - Shares issued in connection with acquisition of a business 350 584 5,064 - - Treasury stock issued upon exercise of options - - 47 - - Issuance of restricted stock - - (308) - - Amortized compensation under restricted stock plan - - - - - Treasury stock purchased - - - - - ------ ------ ------ ------- ---- Balance at December 28, 1996 11,574 19,290 16,816 200,322 (950) Net earnings (loss) - - - (1,228) - Dividend declared of $.72 per share - - - (8,110) - Treasury stock issued upon exercise of options - - 354 - - Amortized compensation under restricted stock plan - - - - - Repayment of notes receivable from holder of restricted stock - - - - - Distribution of stock pursuant to performance awards - - 460 - - Treasury stock purchased - - - - - Foreign currency translation adjustment - - - - 950 Other 1 2 18 - - ------ ------ ------ ------- ---- Balance at January 3, 1998 11,575 19,292 17,648 190,984 - Net earnings (loss) - - - (2,941) - Dividend declared of $.18 per share - - - (2,038) - Treasury stock issued upon exercise of options - - 33 - - Amortized compensation under restricted stock plan - - - - - Distribution of stock pursuant to performance awards - - 226 - - Treasury stock purchased - - - - - Foreign currency translation adjustment - - - - - Other - - - - - - - 1 - ------ ------ ------ ------- ---- Balance at March 28, 1998 (unaudited) 11,575 $ 19,292 17,908 186,005 - ------ ------ ------ ------- ---- ------ ------ ------ ------- ---- NASH FINCH COMPANY AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity - ----------------------------------------------------------------------------------------------------------------- Fiscal period ended March 28, 1998, January 3, 1998 and December 28, 1996 (In thousands, except per share amounts) Treasury Stock Total Restricted -------------------- stockholders' Stock Shares Amount equity - ----------------------------------------------------------------------------------------------------------------- Balance at December 30, 1995 - (346) $ (3,034) 215,313 Net earnings - - - 20,032 Dividend declared of $.75 per share - - - (8,288) Shares issued in connection with acquisition of a - business - - - 5,648 Treasury stock issued upon exercise of options - 6 42 89 Issuance of restricted stock (524) 40 995 163 Amortized compensation under restricted stock plan 24 - - 24 Treasury stock purchased - (7) (120) (120) ------ ----- ----- ------- Balance at December 28, 1996 (500) (307) (2,117) 232,861 Net earnings (loss) - - - (1,228) Dividend declared of $.72 per share - - - (8,110) Treasury stock issued upon exercise of options - 29 143 497 Amortized compensation under restricted stock plan 29 - - 29 Repayment of notes receivable from holder of restricted stock 80 - - 80 Distribution of stock pursuant to performance awards - 30 148 608 Treasury stock purchased - (4) (89) (89) Foreign currency translation adjustment - - - 950 Other - - - 20 ---- ----- ----- ------- Balance at January 3, 1998 (391) (252) (1,915) 225,618 Net earnings (loss) - - - (2,941) Dividend declared of $.18 per share - - - (2,038) Treasury stock issued upon exercise of options - 3 15 48 Amortized compensation under restricted stock plan 7 - - 7 Distribution of stock pursuant to performance awards - 13 65 291 Treasury stock purchased - - - - Foreign currency translation adjustment - - - - Other - - - - - (1) (16) (15) ------ ----- ----- ------- Balance at March 28, 1998 (unaudited) (384) (237) $ (1,851) 220,970 ------ ----- ----- ------- ------ ----- ----- -------
- ------------------------------------------------------------- See accompanying notes to consolidated financial statements. -6- NASH FINCH COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 28, 1998 NOTE 1 The accompanying financial statements include all adjustments which are, in the opinion of management, necessary to present fairly the financial position of the Company and its subsidiaries at March 28, 1998 and January 3, 1998, and the results of operations for the 12-weeks ending March 28, 1998 and March 22, 1997, and the changes in cash flows for the 12-week periods ending March 28, 1998 and March 22, 1997, 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 $42.6 million and $43.1 million higher at March 28, 1998 and at January 3, 1998, respectively. NOTE 3 In March 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED FOR OR OBTAINED FOR INTERNAL USE. Although the SOP is effective beginning on January 1, 1999, the Company has chosen early adoption as of January 4 1998. The SOP requires the capitalization of certain costs incurred after the date of adoption in connection with developing or obtaining software for internal use. Certain costs that are required to be capitalized by the SOP were previously being expensed as incurred by the Company. As a result of this change in accounting, during the quarter the Company capitalized $1.5 million in payroll and payroll-related costs for employees who are directly involved with and devote time to internal-use software development projects. NOTE 4 Pursuant to the provisions of Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE, the weighted average shares used in computing basic and diluted earnings per share (EPS) are as follows: -7-
(in thousands of shares) Twelve Weeks Ended ------------------------ March 28, March 23, 1998 1997 -------- --------- Shares for computation of basic EPS 11,301 11,193 Effect of assumed option exercises 35 45 Effect of contingent shares 26 83 ------ ------ Shares for computation of diluted EPS 11,362 11,321 ------ ------ ------ ------
NOTE 5 On December 29, 1997, a Receivables Purchase Agreement (the "Agreement") was executed by the Company, Nash Finch Funding Corporation ("NFFC"), a wholly-owned subsidiary of the Company, and a certain third party purchaser (the "Purchaser") pursuant to a securitization transaction. On this date the Company sold $44.6 million of accounts receivable on a non-recourse basis to NFFC. NFFC sold $37.0 million of its undivided interest in such receivables to the Purchaser, subject to specified collateral requirements. NFFC maintains a variable undivided interest in these receivables and is subject to losses on its share of the receivables and, accordingly, maintains an allowance for doubtful accounts. The Agreement is a five-year $50 million revolving receivable purchase facility allowing the Company to sell additional receivables to NFFC, and NFFC to sell, from time to time, variable undivided interests in these receivables to the Purchaser. At March 28, 1998, the balance of receivables sold under the revolving agreement was $25.3 million. On September 8, 1995, the Company entered into an agreement with a financial institution which allowed the Company to sell on a revolving basis customer notes receivable. Although the agreement lapsed on December 28, 1996, the notes, which have maturities through the year 2002, were sold at face value with recourse. As a result, the Company is contingently liable should these notes become uncollectible. The remaining balances of such sold notes receivable totaled $8.4 million and $9.1 million at March 28, 1998 and January 3, 1998, respectively. NOTE 6 During the third quarter of 1997, the Company recorded special charges, totaling $31.3 million relative to asset impairment and consolidation of certain warehouses and retail stores. During the first quarter the Company closed distribution facilities in Lexington, Kentucky and Lincoln, Nebraska and closed or sold a total of four retail stores. Costs totaling $.9 million dollars incurred as a result of the shut down of these units were charged to accrued expenses. At March 28, 1998, accrued liabilities established for purposes of the special charges total $15.2 million. -8- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS REVENUES Total revenues for the first quarter 1998 were $937.1 million compared to $947.8 million last year, a decrease of 1.1%. The decline related to both the wholesale and retail segments of the Company. Although wholesale revenues for the quarter were positively impacted by sales resulting from the acquisition of the business and assets of United-A.G. Cooperative, Inc. in June 1997, overall wholesale segment revenues declined. Lower revenues were attributed to the planned consolidation of a distribution center in Lexington, Kentucky, and soft market conditions in certain areas of the Midwest. Also, the military division reported lower revenues compared to last year when such revenues were exceptionally high. This reflected reduced sales to European commissaries as well as somewhat lower sales by military commissaries along the East Coast. Retail segment revenues were impacted by the closing or sale of twelve under-performing stores since the first quarter of fiscal 1997. Same store sales declined 1.2% as a result of continuing competitive market conditions in several market areas in the upper Midwest. GROSS MARGINS Gross margins for the quarter were 12.5% compared to 12.9% last year. The decline this year is partially attributed to the growing proportion of lower margin wholesale business. During the quarter wholesale segment business represented 81.3% of the Company's consolidated revenues compared to 79.9% for the same period last year. Food price deflation during the period resulted in a LIFO credit of $.5 million compared to $.25 million last year. Retail margins were flat compared to last year. Gains in dry grocery were offset by greater promotional activities in the perishables departments, primarily produce and dairy products. Margins compared to last year were also negatively affected by the timing of religious holidays which occurred later in the second quarter this year. OPERATING EXPENSE Operating expense for the quarter as a percent of revenues was 10.1% compared to 10.5% last year. Expense levels continue to be positively affected by the increased wholesale business which operates at lower expense levels than retail. The Company changed accounting procedures when it adopted Statement of Position (SOP) 98-1 which resulted in $1.5 million of internal development costs related to the HORIZONS project being -9- capitalized during the quarter. Previously these costs had been expensed as incurred. During the quarter, the Company continued to execute its strategic plan to consolidate selected warehouses by closing its distribution center in Lexington, Kentucky, and transferring a substantial portion of that facility's volume to the Company's Cincinnati, Ohio and Bluefield, Virginia distribution centers. Although costs associated with the closing had been provided for through the special charge recorded last year, certain expenses totaling approximately $.7 million associated with transferring the business were incurred during the quarter. Some unaccrued expenses may continue until shutdown is complete, but these are not expected to have a material impact on the second quarter. DEPRECIATION EXPENSE Depreciation and amortization expense increased 1.6% compared to last year. The increase reflects capital additions placed in service since last year, offset by the reduction in depreciable assets resulting from the sale of retail stores, and lower depreciation resulting from the write down of impaired assets recorded as part of the special charge last year. Amortization of goodwill and other intangibles for the current and prior year quarter was $1.5 million. Depreciation expense is expected to increase during 1998 as implementation of HORIZONS continues, and greater portions of the developed software are ready for use. INTEREST EXPENSE Interest expense decreased from $7.3 million in the prior year quarter, to $6.9 million this year, a decline of 6.3%. The reduction is attributed to lower debt levels brought about by the sale of receivables at the end of 1997 and improved asset management. While the Company reduced its long-term borrowing rates through refinancing, interest expense is expected to increase because a greater portion of total debt is now based on a fixed interest rate which is higher than the revolving debt rate it replaced. INCOME TAXES The effective tax rate for 1998 is estimated at 41.5%, compared to 41.9% last year. EARNINGS BEFORE EXTRAORDINARY CHARGE Earnings before extraordinary charge were $2.6 million or $.23 per share for the first quarter, compared to $3.1 million or $.27 per share last year. The change in accounting for direct software development costs resulted in an after tax benefit of $.8 million, or $.08 per share. Conversely, costs associated with the transfer of business from Lexington, Kentucky to other facilities adversely affected after tax earnings by $.4 million, or $.04 per share. -10- EXTRAORDINARY CHARGE In conjunction with a planned senior subordinated debt offering, the Company prepaid $106.3 million of senior notes, and paid prepayment premiums and wrote off related deferred financing costs totaling $9.5 million, all with drawings under the Company's revolving credit facility. This transaction resulted in an extraordinary charge of $5.6 million or $.49 per share after income tax benefits of $4.0 million. YEAR 2000 The Company's resolution to the year 2000 issue is substantially incorporated in the system design of the HORIZONS project. In addition, since all segments of the Company will not be initially impacted by HORIZONS, the Company has been actively engaged in a process designed to mitigate any detrimental effects from the year 2000 to any of these segments. The Company has also initiated communications with its significant suppliers and large customers to determine the extent to which the Company's interface systems and operations are vulnerable to those third parties' failure to rectify their own year 2000 services. However, there can be no guarantee that the failure of its system, or others' systems, to operate properly beyond 1999, would not have an adverse effect on the Company's results of operations or financial condition. The Company expects to be completed with year 2000 compliance in mid-1999 and believes that, with the HORIZONS project and modifications of its existing software and systems, year 2000 compliance will not pose significant operating problems. Costs associated with a substantial portion of year 2000 compliance coincide with the new software and system design of the HORIZONS project. The cost of year 2000 compliance for business operations not affected by HORIZONS is not expected to have a material effect on results of operations. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has financed the 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, leasing and equity financing. Operating activities generated positive net cash flows of $27.1 million during the quarter compared to $5.0 million a year ago. The increase is primarily due to higher accounts payables and accrued expenses and lower accounts receivable. Working capital was $186.1 million at the end of the quarter, a reduction of $13.8 million during the quarter. The current ratio decreased from 1.68 at the end of fiscal 1997 to 1.59 at the end of the first quarter. -11- At March 28, 1998, the Company had $16.2 million in short-term debt compared to $11.3 million at the end of last year. During the quarter and in conjunction with a planned senior subordinated debt offering, the Company prepaid $106.3 million of senior notes and paid prepayment premiums of $9.4 million, all of which were financed temporarily through its existing revolving credit facility. On April 24, 1998, the Company completed the sale of $165 million 8.5% senior subordinated notes due May 1, 2008, using the net proceeds from the offering after fees and expenses, to reduce certain amounts borrowed under its revolving credit facility. Other transactions affecting liquidity during the quarter include capital expenditures of $13.4 million, of which approximately $4.0 million related to HORIZONS, and payment of a cash dividend of $.18 per share on March 13, 1998 to shareholders of record on February 27, 1998. The Company believes that borrowing under the revolving credit facility, sale of subordinated notes, other credit agreements, cash flows from operating activities and lease financings will be adequate to meet the Company's working capital needs, planned capital expenditures and debt service obligations for the foreseeable future. FORWARD-LOOKING STATEMENTS The information contained in this Form 10-Q includes forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can be identified by the use of words like "believes," "expects," "may," "will," "should," "anticipates" or similar expressions, as well as discussions of strategy. Although such statements represent management's current expectations based on available data, they are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those anticipated. Such risks, uncertainties and other factors may include, but are not limited to, the ability to: meet debt service obligations and maintain future financial flexibility; respond to continuing competitive pricing pressures; retain existing independent wholesale customers and attract new accounts; successfully implement the HORIZONS system in a timely manner and without substantial unexpected cost; otherwise address year 2000 issues as they affect the Company, its customers and vendors; and fully integrate acquisitions and realize expected synergies. -12- 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 Third Amendment to Credit Agreement 27.1 Financial Data Schedule (b) REPORTS ON FORM 8-K. Not applicable. -13- 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 12, 1998 By /s/ Alfred N. Flaten ---------------------- Alfred N. Flaten President and Chief Executive Officer By /s/ John R. Scherer ---------------------- John R. Scherer Chief Financial Officer -14- NASH-FINCH COMPANY EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q For the Twelve Weeks Ended March 28, 1998
Item No. Item Method of Filing - -------- ---- ---------------- 10.1 Third Amendment to Credit Agreement Filed herewith. 27.1 Financial Data Schedule Filed herewith.
-15- EX-10.1 2 EXHIBIT 10.1 NASH-FINCH COMPANY THIRD 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 herein set forth. 1. AMENDMENTS Upon satisfaction of the conditions precedent to effectiveness set forth below, the Credit Agreement shall be amended as follows: SECTION 1.01. NEW DEFINITIONS. Section 6.1 of the Credit Agreement shall be amended by inserting the following new definitions in the appropriate alphabetical location: `SENIOR FUNDED DEBT' means, as of any time the same is to be determined, Total Funded Debt other than the Senior Subordinated Debt. `SENIOR LEVERAGE RATIO' means, as of any time the same is to be determined, the ratio of Senior Funded Debt at such time to EBITDA for the then four most recently completed fiscal quarters of the Borrower. `SENIOR SUBORDINATED DEBT' means any debt securities to be issued by the Borrower substantially concurrent with the satisfaction of all of the conditions precedent set forth in Section 3 of the Third Amendment to this Agreement on the terms, or on substantially the same terms but in no event more burdensome on the Borrower in any material respect than the terms, in each case contained in the February 23, 1998, 5:41 p.m. draft of the Description of Notes to be included in the Offering Memorandum for such debt securities (the "SUBORDINATED NOTE DESCRIPTION") which has previously been forwarded to the Banks; PROVIDED, HOWEVER, that (i) such debt securities shall bear interest prior to maturity or default at a rate per annum not exceeding 12% per annum; (ii) such debt securities shall not be subject to any call or similar option to require mandatory prepayment (other than (A) by reason of a "CHANGE OF CONTROL" as such term is defined in the Subordinated Note Description and (B) in the case of an "ASSET SALE" as such term is defined in the Subordinated Note Description) at any time prior to five calendar years following the issuance of such debt securities; (iii) such debt securities shall not require (other than upon the occurrence of any "EVENT OF DEFAULT" as such term is defined in the Subordinated Note Description) any scheduled payment or prepayment of principal thereon, or any scheduled acquisition or retirement thereof by the issuer, in each case prior to ten calendar years following the issuance of such debt securities; (iv) no covenant relating to the financial performance or financial condition of the Borrower or any Subsidiary shall govern the maturity or amortization of such debt securities other than the financial covenant described in the Subordinated Note Description that would prohibit the Borrower and its Subsidiaries from incurring additional Indebtedness (other than (A) the Obligations, (B) Indebtedness outstanding as of the date of issuance of such debt securities, and (C) the other Indebtedness which the Subordinated Note Description states will be permitted whether or not the Borrower is in compliance with such financial covenant) if the Consolidated Fixed Charge Coverage Ratio (as such term is defined in the Subordinated Note Description) were, after giving effect to such incurrence, less than a level that is no higher than 2.25 to 1; and (v) the proceeds of such debt securities are used solely for any one or more of the following: (A) the prepayment (including any applicable prepayment premiums) of the Existing NF Term Debt and the Existing Super Food Debt, (B) the payment of reasonable fees, commissions and underwriting discounts directly incurred and payable by the Borrower in connection with the issuance of the Senior Subordinated Debt and (C) the prepayment of the Loans hereunder. SECTION 1.02. The definition of "EXISTING DEBT" appearing in Section 6.1 of the Credit Agreement shall be amended by inserting the following sentence immediately at the end thereof: -2- "Any reference in this Agreement to any Existing Debt shall be deemed a reference to such Existing Debt as listed on the relevant Exhibit attached hereto, as the same may from time to time be modified or amended (but without any increase in the principal amount thereof)." SECTION 1.03. NEW LIMITS ON AGGREGATE INDEBTEDNESS. Section 9.12 of the Credit Agreement shall be amended in its entirety and as so amended shall be restated to read as follows: "SECTION 9.12. LIMIT ON AGGREGATE INDEBTEDNESS. The Borrower shall not permit any Subsidiary to issue, incur, assume, create or have outstanding any Indebtedness (other than (i) intercompany Indebtedness owed to the Borrower or any other Subsidiary, (ii) liabilities of the Subsidiaries under the Subsidiary Guarantee Agreements, (iii) liabilities of the Subsidiaries on their Guarantees of the Senior Subordinated Debt and (iv) liabilities incurred in connection with securitization transactions permitted by Section 9.15 hereof) aggregating more than 5% of Total Assets." SECTION 1.04. SUBSIDIARY GUARANTEES. Section 9.14 of the Credit Agreement is hereby amended by adding thereto a new sentence immediately at the end thereof which reads as follows: "Notwithstanding anything contained herein to the contrary, nothing contained in this Section 9.14 shall operate to prohibit the execution by the Subsidiaries of Guarantees of the Senior Subordinated Debt if and so long as any and all of the holders' claims for payment on such Guarantees are subordinated in right of payment to the prior payment of the Loans and other obligations under the Loan Documents on the same or substantially the same terms as the Senior Subordinated Debt." SECTION 1.05. SPECIAL PURPOSE VEHICLE. Section 9.1 of the Credit Agreement is hereby amended by adding thereto a new sentence immediately at the end thereof which reads as follows: "Notwithstanding anything contained herein to the contrary, neither Nash-Finch Funding Corp. nor any other Subsidiary of the Borrower shall be required to execute a Subsidiary Guarantee Agreement if and so long as the sole purpose and function of such Subsidiary is to act as a special purpose vehicle for a securitization or other similar transaction permitted by Section 9.15 hereof involving accounts receivable of, or loans owed to, the Borrower or any other Subsidiary." SECTION 1.06. NEW LEVERAGE RATIO LEVELS. Section 9.9 of the Credit Agreement shall be amended and as so amended shall be restated in its entirety to read as follows: -3- "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: Leverage Ratio Shall From and Including To and Including Not be More Than: ------------------ ---------------- ----------------- 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 1st fiscal quarter of 4.25 to 1 fiscal year 1999 fiscal year 2000 2nd fiscal quarter of each fiscal quarter 4.00 to 1 fiscal year 2000 thereafter SECTION 1.07. NEW INTEREST COVERAGE RATIO LEVELS. Section 9.10 shall be amended and as so amended shall be restated in its entirety to read as follows: SECTION 9.10. INTEREST COVERAGE RATIO. The Borrower shall not, as of the close of any fiscal quarter of the Borrower set forth below, permit the Interest Coverage Ratio to be less than the amount set forth to the right of such period: As of Close of each Fiscal Quarter: Interest Coverage Ratio Shall From and Including To and Including Not be Less Than: ------------------ ---------------- ----------------- 1st fiscal quarter of 1st fiscal quarter of 2.50 to 1 fiscal year 1998 fiscal year 2000 2d fiscal quarter of each fiscal quarter 2.75 to 1 fiscal year 2000 thereafter SECTION 1.08 SECURITIZATION OF LOANS RECEIVABLE. Section 9.15 of the Credit Agreement shall be amended by inserting the following new sentence immediately at the end thereof: -4- "Notwithstanding the foregoing, this Section shall neither apply to nor operate to prohibit the sale by the Borrower or any Subsidiary of loans receivable owing the Borrower and its Subsidiaries in the ordinary course of their business to Persons other than Affiliates provided that (i) such sale is part of a securitization or similar financing transaction and (ii) the aggregate face amount of loans receivable sold and outstanding at any one time, when taken together with the aggregate face amount of accounts receivable sold and outstanding pursuant to securitization or similar financing transactions permitted by Section 9.15 above, does not exceed $75,000,000. SECTION 1.09. RESTRICTED PAYMENT OF SUB DEBT. Section 9 of the Credit Agreement shall be amended by adding thereto a new Section 9.21 which reads as follows: "SECTION 9.21. SUB DEBT PAYMENTS. The Company will not, and will not permit any Subsidiary to, directly or indirectly make any payment or other distribution on or in respect of any principal, interest or premium, if any, of any of the Senior Subordinated Debt or otherwise acquire, prepay or retire any of such indebtedness (such payments, distributions, acquisitions, prepayments or retirements being hereinafter referred to collectively as "SUB DEBT PAYMENTS") if: (x) such Sub Debt Payment would be made prior to the scheduled maturity thereof or prior to any other times required for payment thereof as are in force and effect as of the date of issuance of such Indebtedness; or (y) such Sub Debt Payment would be prohibited under the terms of any instrument subordinating such indebtedness to the prior payment of the Loans or any of the other obligations under the Loan Documents; PROVIDED, HOWEVER, that the immediately preceding clause (x) of this Section shall not prohibit (A) a Sub Debt Payment consisting of the Company's exercise of the option described in the Offering Memorandum for its redemption of the Senior Subordinated Debt out of the proceeds of, and substantially concurrent with, the Borrower's issuance and sale through an underwritten public offering of its capital stock provided that (i) not more than 50% of the net proceeds of such offering (net proceeds for such purposes to mean a gross proceeds of such offering net of reasonable underwriting discounts and commissions and other reasonable costs directly incurred and payable as a result of such offering) are so used, (ii) not more than 35% of the Senior Subordinated Debt then -5- outstanding is so prepaid and (iii) at the time of such Sub Debt Payment and immediately after giving effect thereto, no Default or Event of Default shall occur or be continuing and (B) Sub Debt Payments out of the proceeds of Asset Sales (as defined in the Subordinated Note Description) as and to the extent described in the Subordinated Note Description provided that at the time of each such Sub Debt Payment and immediately after giving effect thereto, no Default or Event of Default shall occur or be continuing." SECTION 1.10. NEW SENIOR LEVERAGE RATIO. Section 9 of the Credit Agreement shall be amended by adding thereto a new Section 9.22 which reads as follows: SECTION 9.22. SENIOR LEVERAGE RATIO. The Borrower shall not, as of the close of any fiscal quarter of the Borrower set forth below, permit the Senior Leverage Ratio to be more than the amount set forth to the right of such period: As of Close of each Fiscal Quarter: Senior Leverage Ratio Shall From and Including To and Including Not be More Than: ------------------ ---------------- ----------------- 1st fiscal quarter of 1st fiscal quarter of 3.50 to 1 fiscal year 1998 fiscal year 1999 2nd fiscal quarter of 1st fiscal quarter of 3.25 to 1 fiscal year 1999 fiscal year 2000 2nd fiscal quarter of each fiscal quarter 3.00 to 1 fiscal year 2000 thereafter SECTION 1.11. NEW INTEREST COVERAGE RATIO DEFINITION. The definition of "INTEREST COVERAGE RATIO" appearing in Section 6.1 of the Credit Agreement shall be amended in its entirety and as so amended shall be restated to read as follows: "`INTEREST COVERAGE RATIO' means, for any period of four consecutive fiscal quarters of the Borrower ending with the most recently completed such fiscal quarter, the ratio of EBITDA to Interest Expense for such period." SECTION 1.12. ADDITIONAL CHANGE OF CONTROL. The definition of "CHANGE OF CONTROL" appearing in Section 6.1 of the Credit Agreement shall be amended by inserting the following new sentence immediately at the end thereof: -6- "A "CHANGE OF CONTROL" shall also include each similar event (including for such purposes, any event similarly defined) entitling any holder of the Senior Subordinated Debt to accelerate its maturity or require its purchase prior to scheduled maturity by the Borrower or any Subsidiary." SECTION 1.13. CONSOLIDATED NET INCOME. The definition of the term "CONSOLIDATED NET INCOME" in Section 6.1 of the Credit Agreement shall be amended by inserting the following immediately at the end thereof: "The foregoing to the contrary notwithstanding, for purposes of determining Consolidated Net Income for each period which includes the third fiscal quarter of the Borrower for its 1997 fiscal year, Consolidated Net Income shall not include a deduction for the Third Quarter 1997 Charge." 2. REDUCTION OF COMMITMENTS. By its execution hereof, each of the parties hereto acknowledges that the Commitments have heretofore already been reduced to an aggregate amount equal to $360,000,000 in accordance with the provisions of Section 3.6 of the Credit Agreement, effective as of March 2, 1998. 3. 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) The Borrower shall have received gross proceeds from the issuance of the Senior Subordinated Debt in an amount not less than $140,000,000 and the Administrative Agent shall have received assurances reasonably satisfactory to it of the foregoing. (c) Legal matters incident to the Borrower's issuance of the Senior Subordinated Debt shall be satisfactory to the Required Banks and their counsel. (d) Legal matters incident to the execution and delivery of this Amendment shall be satisfactory to the Required Banks and their counsel. Notwithstanding the foregoing, Sections 1.03 and 1.05 of this Amendment shall be effective as of December 1, 1997 upon satisfaction of the conditions precedent set forth in Sections 3(a) and 3(d) above. -7- 4. 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). 5. 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 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). -8- Dated as of this 23rd day of March, 1998. NASH-FINCH COMPANY By -------------------------------- Name: --------------------------- Title: -------------------------- 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 /s/ [ILLEGIBLE] -------------------------------- Its Vice President PNC BANK, NATIONAL ASSOCIATION By /s/ James A. Wisne -------------------------------- Its Assistant Vice President ----------------------------- ABN AMRO BANK N.V. By -------------------------------- Its ----------------------------- By -------------------------------- Its ----------------------------- THE BANK OF TOKYO-MITSUBISHI, LTD., CHICAGO BRANCH By /s/ [ILLEGIBLE] -------------------------------- Its [ILLEGIBLE] ----------------------------- -9- CIBC Inc. By /s/ [ILLEGIBLE] -------------------------------- Its [ILLEGIBLE] ----------------------------- ISTITUTO BANCARIO SANPAOLO DI TORINO SPA By -------------------------------- Its ----------------------------- KEYBANK, N.A. By /s/ [ILLEGIBLE] -------------------------------- Its Vice President ----------------------------- COMMERZBANK AKTIENGESELLSCHAFT CHICAGO BRANCH By /s/ [ILLEGIBLE] -------------------------------- Its [ILLEGIBLE] ----------------------------- By /s/ [ILLEGIBLE] -------------------------------- Its [ILLEGIBLE] ----------------------------- CREDIT LYONNAIS, CHICAGO BRANCH By -------------------------------- Its ----------------------------- THE FUJI BANK, LIMITED By /s/ [ILLEGIBLE] -------------------------------- Its Joint General Manager ----------------------------- -10- CAISSE NATIONALE DE CREDIT AGRICOLE By -------------------------------- Its ----------------------------- FIRST BANK NATIONAL ASSOCIATION By /s/ [ILLEGIBLE] -------------------------------- Its Vice President ----------------------------- MELLON BANK, N.A. By /s/ Martin J. Randal -------------------------------- Its Assistant Vice President ----------------------------- THE SAKURA BANK, LIMITED By -------------------------------- Its ----------------------------- SUNTRUST BANK, ATLANTA By /s/ [ILLEGIBLE] -------------------------------- Its Vice President ----------------------------- THE MITSUBISHI TRUST AND BANKING CORPORATION By /s/ [ILLEGIBLE] -------------------------------- Its Chief Manager ----------------------------- NATIONAL CITY BANK OF COLUMBUS By /s/ [ILLEGIBLE] -------------------------------- Its Vice President ----------------------------- -11- THE SANWA BANK, LIMITED By /s/ Kenneth C. Eichwald -------------------------------- Its First Vice President and Assistant General Manager ----------------------------- THE SUMITOMO BANK, LIMITED By /s/ Ken Ichiko Kobayashi -------------------------------- Its Joint General Manager ----------------------------- BANKERS TRUST COMPANY By /s/ James Reilly -------------------------------- Its Vice President ----------------------------- THE BANK OF NEW YORK By /s/ [ILLEGIBLE] -------------------------------- Its Vice President ----------------------------- MITSUI TRUST AND BANKING COMPANY, LIMITED By /s/ Margaret Holloway -------------------------------- Its Vice President & Manager ----------------------------- -12- EX-27.1 3 EXHIBIT 27.1 - FDS
5 1,000 3-MOS JAN-02-1999 JAN-04-1998 MAR-28-1998 773 0 157,168 19,466 287,991 501,480 597,211 319,203 912,423 315,366 324,145 0 0 19,292 203,529 912,423 925,958 937,101 820,360 105,228 0 160 6,860 4,493 1,865 2,628 0 (5,569) 0 (2,941) (.26) (.26) Loss from early extinguishment of debt, net of income tax benefit of $3,951.
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