UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the twenty-four weeks ended June 17, 1995
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 410431960
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7600 France Ave. South, Minneapolis, Minnesota 55435
(Address of principal executive offices) (Zip Code)
(612) 832-0534
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
---- ----
Number of shares of common stock outstanding at July 19, 1995:
10,874,915 shares
-----------------
PART I - FINANCIAL INFORMATION
This report is for the twenty-four week interim period beginning January 1,
1995, through June 17, 1995.
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 accountants 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.
NASH FINCH COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 17, 1995
NOTE 1
The accompanying financial statements include all adjustments which are, in
the opinion of management, necessary to present fairly the financial position of
the Company and its subsidiaries at June 17, 1995 and December 31, 1994, and the
results of operations for the 24-weeks ending June 17, 1995 and June 18, 1994,
and the changes in cash flows for the 24-week periods ending June 17, 1995 and
June 18, 1994, 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.
NOTE 2
The Company uses the LIFO method for valuation of a substantial portion of
inventories. If the FIFO method had been used, inventories would have been
approximately $43.9 million higher at June 17, 1995 and at December 31, 1994.
NOTE 3
Earnings per share are computed by dividing net earnings by the weighted
average number of common shares outstanding during each period presented.
Options granted under the Company's qualified stock plan are considered common
stock equivalents for the purpose of earnings per share data, but have been
excluded from the computation since the dilutive effect is not material.
NOTE 4
On April 2, 1992, the Company sold customer notes totaling $22.8 million.
The notes having maturities through the year 2000, were sold at face value with
limited recourse as to certain notes. The Company is responsible for collection
of the notes and remits the principal plus a floating rate of interest to the
purchaser on a monthly basis. Proceeds from the sale of the notes receivable
were used to pay off short-term bank debt.
Remaining balances on the notes receivable sold totaled $2.3 million at
June 17, 1995.
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Earnings (Unaudited)
(In thousands, except per share amounts)
Twelve Weeks Ended Twenty-four Weeks Ended
------------------------- -------------------------
June 17, June 18, June 17, June 18,
1995 1994 1995 1994
---------- ---------- ---------- ----------
Revenues
Net sales $ 663,708 656,346 1,277,606 1,266,481
Other revenues 12,806 14,016 22,506 22,046
---------- ---------- ---------- ----------
Total revenues 676,514 670,362 1,300,112 1,288,527
Cost and Expenses:
Cost of sales 575,582 566,167 1,109,894 1,093,863
Selling, general and administrative
and other operating expenses 81,671 85,307 156,709 161,942
Depreciation and amortization 6,780 7,409 13,570 14,472
Interest expense 2,646 2,718 5,585 5,169
---------- ---------- ---------- ----------
Total costs and expenses 666,679 661,601 1,285,758 1,275,446
Earnings before income taxes 9,835 8,761 14,354 13,081
Income taxes 3,983 3,549 5,813 5,298
---------- ---------- ---------- ----------
Net earnings $ 5,852 5,212 8,541 7,783
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of
common shares outstanding 10,875 10,872 10,875 10,872
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings per share $ 0.54 0.48 0.79 0.72
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
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See accompanying notes to consolidated financial statements.
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
June 17, December 31,
Assets 1995 1994
------ ---------- -----------
(Unaudited)
Current assets:
Cash on hand $ 941 1,078
Accounts and notes receivable, net 100,762 98,859
Inventories 189,036 198,637
Prepaid expenses 15,626 8,626
Deferred tax assets 2,824 2,322
---------- -----------
Total current assets 309,189 309,522
Investments at net equity 8,184 7,432
Notes receivable, noncurrent 16,050 16,441
Property, plant and equipment:
Land 27,481 27,556
Buildings and improvements 107,677 107,149
Furniture, fixtures, and equipment 211,487 214,564
Leasehold improvements 27,220 28,205
Construction in progress 2,511 2,039
Assets under capitalized leases 11,755 12,423
---------- -----------
388,131 391,936
Less accumulated depreciation and amortization (207,220) (204,965)
---------- -----------
Net property, plant and equipment 180,911 186,951
---------- -----------
Intangible assets, net 7,082 7,810
Other assets 3,232 3,448
---------- -----------
Total assets $ 524,648 531,604
---------- -----------
---------- -----------
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Outstanding checks, net of cash in banks $ 3,857 18,649
Short-term debt payable to banks 35,700 41,400
Current maturities of long-term debt and
capitalized lease obligations 3,984 5,685
Accounts payable 125,726 122,602
Accrued expenses 35,472 29,585
Income taxes 5,847 2,144
---------- -----------
Total current liabilities 210,586 220,065
Long-term debt 83,583 85,289
Capitalized lease obligations 10,419 10,671
Deferred compensation 7,974 8,526
Other 1,184 784
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 11,224 shares 18,706 18,706
Additional paid-in capital 11,982 11,977
Foreign curency translation adjustment - net of a
$361 deferred tax benefit (572) (572)
Retained earnings 183,838 179,212
---------- -----------
213,954 209,323
Less cost of 349 shares of common stock in treasury (3,052) (3,054)
---------- -----------
Total stockholders' equity 210,902 206,269
---------- -----------
Total liabilities and stockholders' equity $ 524,648 531,604
---------- -----------
---------- -----------
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See accompanying notes to consolidated financial statements
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
(In thousands) Twenty-four Weeks Ended
-----------------------------
June 17, 1995 June 18, 1994
------------- -------------
Cash flows from operating activities:
Net earnings $ 8,541 7,783
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13,570 14,472
Provision for bad debts 1,429 283
Provision for losses on closed lease locations 31 250
Deferred income taxes (266) 2,649
Deferred compensation (552) (279)
Earnings of equity investments (463) (754)
Other 151 23
Changes in current assets and liabilities:
Accounts and notes receivable (2,071) (15,742)
Inventories 9,501 4,864
Prepaid expenses (7,000) (5,383)
Accounts payable 3,125 4,774
Accrued expenses 5,667 5,126
Income taxes 3,704 644
----------- -----------
Net cash provided by operating activities 35,667 18,710
----------- -----------
Cash flows from investing activities:
Dividends received 890 618
Disposal of property, plant and equipment 1,980 6,207
Additions to property, plant and equipment
excluding capital leases (8,560) (17,607
Business acquired -- (8,307)
Investment in unconsolidated company (1,179) --
Loans to customers (4,765) (4,908)
Payments from customers on loans 3,981 3,560
Other (72) (34)
----------- -----------
Net cash used for investing activities (7,745) (20,471)
----------- -----------
Cash flows from financing activities:
Dividends paid (3,915) (3,914)
Proceeds (Payments) of short-term debt (5,700) 7,600
Payments of long-term debt (3,389) (1,260)
Payments of capitalized lease obligations (270) (60)
Other 7 6
----------- -----------
Net cash (used for) provided by
financing activities (13,267) 2,372
----------- -----------
Net increase in cash $ 14,655 611
----------- -----------
----------- -----------
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See accompanying notes to consolidated financial statements.
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
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Fiscal period ended June 17, 1995,
December 31, 1994 and January 1, 1994
(In thousands, except per share amounts) Foreign
Common stock Additional currency Treasury stock Total
--------------------- paid-in Retained translation ------------------- stockholders'
Shares Amount capital earnings adjustment Shares Amount equity
------------------------------------------------------------------------------------------------------------------------------------
Balance at January 2, 1993 $ 11,224 18,706 11,944 163,624 -- (352) $ (3,070) 191,204
Net earnings -- -- -- 15,874 -- -- -- 15,874
Dividend declared of $.72 per share -- -- -- (7,828) -- -- -- (7,828)
Treasury stock issued upon exercise
of options and other insignificant
items -- -- 10 -- -- 1 4 14
---------- --------- --------- ---------- ---------- ---------- ---------- ----------
Balance at January 1, 1994 11,224 18,706 11,954 171,670 -- (351) (3,066) 199,264
Net earnings -- -- -- 15,480 -- -- -- 15,480
Dividend declared of $.73 per share -- -- -- (7,938) -- -- -- (7,938)
Treasury stock issued upon exercise
of options and other insignificant
items -- -- 23 -- -- 2 12 35
Foreign currency translation
adjustment - net of a $381 -- -- -- -- (572) -- -- (572)
---------- --------- --------- ---------- ---------- ---------- ---------- ----------
Balance at December 31, 1994 11,224 18,706 11,977 179,212 (572) (349) (3,054) 206,269
Net earnings -- -- -- 8,541 -- -- 8,541
Dividend declared of $.36 per share -- -- -- (3,915) -- -- (3,915)
Treasury stock issued upon exercise
of options and other insignificant
items -- -- 5 -- -- -- 2 7
---------- --------- --------- ---------- ---------- ---------- ---------- ----------
Balance at June 17, 1995 $ 11,224 16,706 11,982 183,838 (572) (349) $ (3,052) 210,902
---------- --------- --------- ---------- ---------- ---------- ---------- ----------
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See accompanying notes to consolidated financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
During the second quarter of 1995, total revenues were $676.5 million
compared to $670.3 million in 1994, an increase of .9%. On a year to date
basis, total revenues also increased .9% from $1.289 billion last year to $1.300
billion this year. Wholesale revenues increased over last year by 7.7% and 6.4%
for the quarter and year to date, respectively, reflecting the volume of a
number of new independent accounts during the first half of the year. In
addition, the sale of six corporate owned retail stores to existing independent
customers also favorably impacted wholesale revenues compared with last year.
Partially offsetting the revenue gains at wholesale, retail revenues were
negatively affected by the net reduction of nine stores since the end of the
second quarter of 1994. In addition to selling stores, the Company closed
thirteen under-performing stores and acquired ten from existing or former
customers including six in Kentucky in December 1994. Same store sales declined
2.7% for second quarter and 3.0% for the year to date compared to last year,
largely due to growing competition in certain market areas.
Gross margins were 14.9% for the second quarter this year compared to 15.5%
for the same period last year. On a year to date basis, margins were 14.6%
compared to 15.1% last year. The decrease for both periods reflected a greater
proportion of wholesale sales which typically achieve lower gross margins.
Although consolidated gross margins reflect a decline, margins for the quarter
and year to date improved for both the wholesale and retail segments of the
business. The implementation of a regional buying office to procure the product
needs of several distribution centers resulted in consolidating volume, thereby
lowering product costs and improving margins. On the retail side, margin
improvements were attributed to a more effective marketing plan and better
product merchandising, especially in the higher margin specialty departments of
the stores.
Selling, general and administrative expenses as a percent of total revenues
were 12.1% for both the quarter and year to date, compared to 12.7% and 12.6%
for the prior year quarter and year to date, respectively. Productivity gains
and tighter cost controls at the wholesale level contributed to the decrease in
overall expenses compared to last year. The Company has developed an evaluation
process and is currently implementing performance measurements which it believes
will further improve productivity and eliminate costs. Expense levels were also
favorably impacted by a greater proportion of wholesale business which typically
has lower operating expenses.
Partially offsetting gains, operating expenses for the quarter include
higher costs associated with a review of the Company's management information
systems. Management recognizes the need to monitor and evaluate its systems in
accordance with current technological advances.
Depreciation and amortization expenses decreased 8.4% and 6.2% for quarter
and year to date, respectively, compared to the same periods last year. The
decrease reflects the reduction in property, plant and equipment resulting from
the sale and closing of a number of retail stores since last year.
Interest expense for the second quarter decreased 2.6% compared to last
year due to lower average short-term borrowings. On a year to date basis,
interest costs increased 8.0% over last year because of higher average short-
term borrowings and higher interest rates.
The effective tax rate for all periods reported was 40.5%. Income tax
expense increased this year because of higher pretax earnings.
Net earnings for the quarter were $5.9 million, an increase of 12.2% over
last year. The earnings improvement is attributed to strong operating results
for both the wholesale and retail segments of the business.
LIQUIDITY AND CAPITAL RESOURCES
At the end of the second quarter, the Company had lines of credit with
banks totaling $112.5 million of which $45 million were informally committed.
Borrowing under these lines was $35.7 million at the end of the second quarter
compared with $41.4 at year end and $47.8 million at the end of the first
quarter of 1995.
In the ordinary course of business the Company makes loans to retail
customers to finance the purchase, enlargement or remodeling of store facilities
and for inventory in such facilities. During the third quarter the Company
intends to sell approximately $16 million of these customer loans to a bank for
cash. The proceeds of this sale will be used to reduce short term bank debt.
Capital expenditures for plant, property and equipment were $8.6 million
for the first two quarters of 1995 compared with $17.6 million for a similar
period in 1994. Capital expenditures for 1995 are budgeted at $31.3 million
compared to actual 1994 expenditures of $35.0 million, excluding acquisitions.
PART II - OTHER INFORMATION
---------------------------
Items 1, 2, 3 and 5 are not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The annual meeting of stockholders was held May 9, 1995.
(b) Not required. (Proxies were solicited pursuant to Regulation 14, there was
no solicitation in opposition to management's nominees, and all such
nominees were elected.)
(c) (i) ELECTION OF DIRECTORS. Four incumbent directors were elected to serve
for three-year terms. (The terms of the other seven directors do not
expire until 1996 and 1997.)
The director nominees and voting results are as follows:
Votes Broker
Nominees Vote For Withheld Non-votes
-------- -------- -------- ---------
Alfred N. Flaten 9,288,551.644 109,919.295 -0-
Allister P. Graham 9,329,583.927 68,987.012 -0-
Richard G. Lareau 9,253,844.821 144,726.118 -0-
Jerome O. Rodysill 9,186,387.927 212,183,012 -0-
(ii) APPROVAL OF 1995 DIRECTOR STOCK OPTION PLAN. Stockholders approved
the adoption of the Nash Finch Company 1995 Director Stock Option Plan.
Voting results are as follows: votes for - 8,379,830.022; votes against -
531,872.071; abstentions - 473,068.846; broker non-votes - 13,800.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
3(ii).1 Bylaws of the Company, as amended effective May 9, 1995.
10.1 Excerpt from Board minutes relating to compensation of
Board Chair.
10.2 Nash Finch Company 1995 Director Stock Option Plan.
27 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 August 1, 1995 By /s/ Alfred N. Flaten
--------------------- ----------------------
Alfred N. Flaten
President and Chief
Executive Officer
Date August 1, 1995 By /s/ Robert F. Nash
----------------------- ------------------------------
Robert F. Nash
Vice President and Treasurer
Index to Exhibits
-----------------
Exhibit
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3(ii).1 Bylaws of the Company, as amended effective May 9, 1995.
10.1 Excerpt from Board minutes relating to compensation of
Board Chair.
10.2 Nash Finch Company 1995 Director Stock Option Plan.
27 Financial Data Schedule.