UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| X |
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) |
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| OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period (12 weeks) ended June 18, 2011 |
or
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| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) |
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ________
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 Avenue South, P.O. Box 355 Minneapolis, Minnesota |
55440-0355 |
(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 ___
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the proceeding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes _X_ No ___
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer_____ Accelerated filer __X__ Non-accelerated filer ____ Smaller reporting company ____
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ___ No _X_
As of July 13, 2011, 12,136,507 shares of Common Stock of the Registrant were outstanding.
Index
Page No.
Part I FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Statements of Income
2
Consolidated Balance Sheets
3
Consolidated Statements of Cash Flows
4
Notes to Consolidated Financial Statements
5
Item 2.
Managements Discussion and Analysis of Financial
Condition and Results of Operations
16
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
25
Item 4.
Controls and Procedures
25
Part II OTHER INFORMATION
Item 1.
Legal Proceedings
25
Item 1A.
Risk Factors
25
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
25
Item 3.
Defaults upon Senior Securities
25
Item 4.
(Removed and Reserved)
25
Item 5.
Other Information
25
Item 6.
Exhibits
26
SIGNATURES
27
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
NASH-FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)
(In thousands, except per share amounts)
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| 12 Weeks Ended |
| 24 Weeks Ended |
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| June 18, |
| June 19, |
| June 18, | June 19, |
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| 2011 |
| 2010 |
| 2011 | 2010 |
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Sales |
| $ | 1,099,575 |
| 1,154,617 | $ | 2,199,384 | 2,334,310 |
| |||
Cost of sales |
| 1,008,998 |
| 1,060,280 |
| 2,019,818 | 2,148,153 |
| ||||
| Gross profit |
| 90,577 |
| 94,337 |
| 179,566 | 186,157 |
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Other costs and expenses: |
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| Selling, general and administrative |
| 60,241 |
| 62,835 |
| 122,818 | 127,482 |
| |||
| Depreciation and amortization |
| 8,367 |
| 8,170 |
| 16,950 | 16,755 |
| |||
| Interest expense |
| 5,355 |
| 5,366 |
| 10,814 | 10,624 |
| |||
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| Total other costs and expenses |
| 73,963 |
| 76,371 |
| 150,582 | 154,861 |
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| Earnings before income taxes |
| 16,614 |
| 17,966 |
| 28,984 | 31,296 |
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Income tax expense |
| 6,563 |
| 7,252 |
| 11,452 | 12,641 |
| ||||
Net earnings | $ | 10,051 |
| 10,714 | $ | 17,532 | 18,655 |
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Net earnings per share: |
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| Basic | $ | 0.79 |
| 0.83 | $ | 1.38 | 1.43 |
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| Diluted | $ | 0.77 |
| 0.81 | $ | 1.35 | 1.40 |
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Declared dividends per common share | $ | 0.18 |
| 0.18 | $ | 0.36 | 0.36 |
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Weighted average number of common shares |
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outstanding and common equivalent shares outstanding: |
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| Basic |
| 12,744 |
| 12,904 |
| 12,731 | 13,015 |
| |||
| Diluted |
| 13,042 |
| 13,263 |
| 13,029 | 13,352 |
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See accompanying notes to consolidated financial statements. |
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2
NASH-FINCH COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)
|
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| June 18, |
| January 1, |
Assets |
| 2011 |
| 2011 | ||
Current assets: |
| (unaudited) |
|
| ||
| Cash and cash equivalents | $ | 659 |
| 830 | |
| Accounts and notes receivable, net |
| 240,944 |
| 233,436 | |
| Inventories |
| 309,720 |
| 333,146 | |
| Prepaid expenses and other |
| 15,334 |
| 15,817 | |
| Deferred tax asset, net |
| 7,864 |
| 8,281 | |
|
| Total current assets |
| 574,521 |
| 591,510 |
|
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Notes receivable, net |
| 18,237 |
| 20,350 | ||
Property, plant and equipment: |
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|
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| ||
| Property, plant and equipment |
| 658,259 |
| 649,256 | |
| Less accumulated depreciation and amortization |
| (403,700) |
| (409,190) | |
Net property, plant and equipment |
| 254,559 |
| 240,066 | ||
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Goodwill |
| 166,856 |
| 167,166 | ||
Customer contracts and relationships, net |
| 16,871 |
| 18,133 | ||
Investment in direct financing leases |
| 2,831 |
| 2,948 | ||
Other assets |
| 10,336 |
| 10,502 | ||
|
| Total assets | $ | 1,044,211 |
| 1,050,675 |
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Liabilities and Stockholders' Equity |
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Current liabilities: |
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| Current maturities of long-term debt and capital lease obligations | $ | 3,001 |
| 3,159 | |
| Accounts payable |
| 207,694 |
| 230,082 | |
| Accrued expenses |
| 55,356 |
| 60,001 | |
|
| Total current liabilities |
| 266,051 |
| 293,242 |
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Long-term debt |
| 299,311 |
| 292,266 | ||
Capital lease obligations |
| 17,113 |
| 18,920 | ||
Deferred tax liability, net |
| 39,179 |
| 36,344 | ||
Other liabilities |
| 30,212 |
| 32,899 | ||
Commitments and contingencies |
| - |
| - | ||
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Stockholders' equity: |
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| Preferred stock - no par value. Authorized 500 shares; none issued |
| - |
| - | |
| Common stock - $1.66 2/3 par value. Authorized 50,000 shares; |
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| |
|
| issued 13,677 shares |
| 22,796 |
| 22,796 |
| Additional paid-in capital |
| 115,992 |
| 114,799 | |
| Common stock held in trust |
| (1,223) |
| (1,213) | |
| Deferred compensation obligations |
| 1,223 |
| 1,213 | |
| Accumulated other comprehensive loss |
| (10,833) |
| (10,984) | |
| Retained earnings |
| 316,630 |
| 303,584 | |
| Common stock in treasury; 1,541 and 1,569 shares, respectively |
| (52,240) |
| (53,191) | |
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| Total stockholders' equity |
| 392,345 |
| 377,004 |
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| Total liabilities and stockholders' equity | $ | 1,044,211 |
| 1,050,675 |
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See accompanying notes to consolidated financial statements. |
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3
NASH-FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
(In thousands)
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| 24 Weeks Ended | ||
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| June 18, |
| June 19, |
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| 2011 |
| 2010 |
Operating activities: |
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| Net earnings | $ | 17,532 |
| 18,655 | |||
| Adjustments to reconcile net earnings to net cash provided by operating activities: |
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| Depreciation and amortization |
| 16,950 |
| 16,755 | |
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| Amortization of deferred financing costs |
| 845 |
| 846 | |
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| Non-cash convertible debt interest |
| 2,610 |
| 2,413 | |
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| Amortization of rebateable loans |
| 2,066 |
| 2,531 | |
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| Provision for bad debts |
| 779 |
| 433 | |
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| Provision for (reversal of) lease reserves |
| 607 |
| (434) | |
|
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| Deferred income tax expense |
| 3,252 |
| 174 | |
|
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| Loss (gain) on sale of property, plant and equipment |
| 1,422 |
| (229) | |
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| LIFO charge (credit) |
| 2,632 |
| (362) | |
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| Asset impairments |
| 349 |
| 818 | |
|
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| Share-based compensation |
| 2,531 |
| 3,462 | |
|
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| Deferred compensation |
| 609 |
| 463 | |
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| Other |
| (584) |
| (387) | |
| Changes in operating assets and liabilities: |
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| Accounts and notes receivable |
| (5,548) |
| 17,099 | |
|
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| Inventories |
| 21,279 |
| (27,130) | |
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| Prepaid expenses |
| (446) |
| 157 | |
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| Accounts payable |
| (23,230) |
| (12,992) | |
|
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| Accrued expenses |
| (4,493) |
| (804) | |
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| Income taxes payable |
| 929 |
| (6,398) | |
|
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| Other assets and liabilities |
| (2,599) |
| 2,609 | |
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| Net cash provided by operating activities |
| 37,492 |
| 17,679 |
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Investing activities: |
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| Disposal of property, plant and equipment |
| 3,074 |
| 347 | |||
| Additions to property, plant and equipment |
| (33,110) |
| (10,369) | |||
| Business acquired, net of cash |
| (1,587) |
| - | |||
| Loans to customers |
| (2,285) |
| (600) | |||
| Payments from customers on loans |
| 672 |
| 1,102 | |||
| Other |
|
|
| (902) |
| (297) | |
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| Net cash used in investing activities |
| (34,138) |
| (9,817) |
Financing activities: |
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| Proceeds of revolving debt |
| 4,700 |
| 10,600 | |||
| Dividends paid |
| (4,364) |
| (4,549) | |||
| Repurchase of Common Stock |
| - |
| (15,191) | |||
| Payments of long-term debt |
| (251) |
| (233) | |||
| Payments of capital lease obligations |
| (1,577) |
| (1,839) | |||
| Increase (decrease) in outstanding checks |
| (1,526) |
| 3,285 | |||
| Other |
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| (507) |
| - | |
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| Net cash used in financing activities |
| (3,525) |
| (7,927) |
Net decrease in cash and cash equivalents |
| (171) |
| (65) | ||||
Cash and cash equivalents: |
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| Beginning of year |
| 830 |
| 830 | ||
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| End of period | $ | 659 |
| 765 | ||
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See accompanying notes to consolidated financial statements.
4
Nash-Finch Company and Subsidiaries
Notes to Consolidated Financial Statements
June 18, 2011
Note 1 Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended January 1, 2011.
The accompanying unaudited consolidated financial statements include all adjustments which are, in the opinion of management, necessary to present fairly the financial position of Nash-Finch Company and our subsidiaries (Nash Finch or the Company) at June 18, 2011, and January 1, 2011, the results of operations for the 12 and 24 weeks ended June 18, 2011 (second quarter 2011), and June 19, 2010 (second quarter 2010), and cash flows for the 24 weeks ended June 18, 2011, and June 19, 2010. Adjustments consist only of normal recurring items, except for any items discussed in the notes below. All material intercompany accounts and transactions have been eliminated in the unaudited 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 U.S. GAAP 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 Inventories
We use the LIFO method for valuation of a substantial portion of inventories. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on managements estimates of expected year-end inventory levels and costs. Because these estimates are subject to many factors beyond managements control, interim results are subject to the final year-end LIFO inventory valuation. If the FIFO method had been used, inventories would have been approximately $75.8 million higher on June 18, 2011 and $73.1 million higher on January 1, 2011. We recorded a LIFO charge of $2.1 million during the second quarter 2011 as compared to a LIFO credit of $0.3 million during the second quarter 2010. During year-to-date 2011, we recorded a LIFO charge of $2.6 million as compared to a LIFO credit of $0.4 million during year-to-date 2010.
Note 3 Share-Based Compensation
We account for share-based compensation awards in accordance with the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718 Compensation-Stock Compensation (ASC 718) which requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the awards ultimately expected to vest is recognized as expense over the requisite service period. We recognized share-based compensation expense as a component of selling, general and administrative expense in our Consolidated Statements of Income in the amount of $1.4 million during the second quarter 2011 versus $1.9 million during the second quarter 2010. During year-to-date 2011, share-based compensation expense was $2.5 million as compared to $3.5 million during year-to-date 2010.
We have four equity compensation plans under which incentive stock options, non-qualified stock options and other forms of share-based compensation have been, or may be, granted primarily to key employees and non-employee members of the Board of Directors. These plans include the 2009 Incentive Award Plan (as Amended and Restated as of March 2, 2010) (2009 Plan), the 2000 Stock Incentive Plan
5
(as amended and restated on July 14, 2008) (2000 Plan), the Director Deferred Compensation Plan, and the 1997 Non-Employee Director Stock Compensation Plan. These plans are more fully described in Part II, Item 8 in our Annual Report on Form 10-K for the fiscal year ended January 1, 2011 under the caption Footnote 10 Share-based Compensation Plans and in our Definitive Proxy Statement on Form DEF 14A filed on April 15, 2011.
Since 2005, awards have taken the form of performance units (including share units pursuant to our Long-Term Incentive Plan (LTIP)), restricted stock units (RSUs) and Stock Appreciation Rights (SARs).
Performance units have been granted during each of fiscal years 2005 through 2011 pursuant to our LTIP. These units vest at the end of a three-year performance period. All units under the 2007 plan were settled in shares of our common stock during the second quarter 2010. Under the 2008 plan, 104,111 units vested on January 1, 2011 and were settled in the second quarter 2011 for approximately 122,000 shares of common stock, of which approximately 96,000 were deferred by recipients until termination of employment as provided in the plan.
During year-to-date 2011, a total of 109,236 units were granted pursuant to our 2011 LTIP. Depending on a comparison of the Companys three-year compound annual growth rate of Consolidated EBITDA results to the Companys peer group and the Companys ranking on absolute return on net assets and compound annual growth rate for return on net assets among the companies in the peer group, a participant could receive a number of shares ranging from zero to 200% of the number of performance units granted. Because these units can only be settled in stock, compensation expense (for shares expected to vest) is recorded over the three-year period for the grant date fair value.
During fiscal 2006 through 2010, RSUs were awarded to certain executives of the Company. Awards vest in increments over the term of the grant or cliff vest on the fifth anniversary of the grant date, as designated in the award documents. In addition to the time vesting criteria, awards granted in 2008 and 2009 to two of the Companys executives include performance vesting conditions. The Company records expense for such awards over the service vesting period if the Company anticipates the performance vesting conditions will be satisfied.
On December 17, 2008, in connection with the Companys announcement of its planned acquisition of certain military distribution assets of GSC Enterprises, Inc., eight executives of the Company were granted a total of 267,345 SARs with a per share price of $38.44. The SARs are eligible to become vested during the 36 month period commencing on closing of the acquisition of the GSC assets which was January 31, 2009. The SARs will vest on (i) the first business day during the vesting period that follows the date on which the closing prices on NASDAQ for a share of Nash Finch common stock for the previous 90 market days is at least $55.00, (ii) a change in control occurs following the six month anniversary of the grant date or (iii) termination of the executives employment due to death or disability. Upon exercise, the Company will award the executive a number of shares of restricted stock equal to (a) the product of (i) the number of shares with respect to which the SAR is exercised and (ii) the excess, if any, of (x) the fair market value per share of common stock on the date of exercise over (y) the base price per share relating to such SAR, divided by (b) the fair market value of a share of common stock on the date such SAR is exercised. The restricted stock shall vest on the first anniversary of the date of exercise so long as the executive remains continuously employed with the Company.
The fair value of SARs is estimated on the date of grant using a modified binomial lattice model which factors in the market and service vesting conditions. The modified binomial lattice model used by the Company incorporates a risk-free interest rate based on the 5-year treasury rate on the date of the grant. The model uses an expected volatility calculated as the daily price variance over 60, 200 and 400 days prior to grant date using the Fair Market Value (average of daily high and low market price of Nash Finch common stock) on each day. Dividend yield utilized in the model is calculated by the Company as the average of the daily yield (as a percent of the Fair Market Value) over 60, 200 and 400 days prior to the grant date. The modified binomial lattice model calculated a fair value of $8.44 per SAR which is recorded over a derived service period of 3.55 years.
The following assumptions were used to determine the fair value of SARs granted during fiscal 2008:
6
Assumptions - SARs Valuation |
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Weighted-average risk-free interest rate |
| 1.37% |
Expected dividend yield |
| 1.86% |
Expected volatility |
| 35% |
Exercise price |
| $38.44 |
Market vesting price (90 consecutive market days at or above this price) | $55.00 | |
Contractual term |
| 5.1 years |
The following table summarizes activity in our share-based compensation plans during the year-to-date 2011:
(in thousands, except vesting periods) |
| Service Based Grants (Board Units and RSUs) |
| Weighted Average Remaining Restriction/ Vesting Period (Years) |
| Performance Based Grants (LTIP & Performance RSUs) |
| Weighted Average Remaining Restriction/ Vesting Period (Years) |
|
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| |
Outstanding at January 1, 2011 | 646.5 |
| 0.6 |
| 568.8 |
| 0.7 | |
Granted |
| 11.6 |
|
| 109.5 |
|
| |
Forfeited/cancelled |
| - |
|
|
| (16.1) |
|
|
Restrictions lapsed/ units settled |
| (33.2) |
|
|
| (104.1) |
|
|
Shares deferred upon vesting/settlement & dividend equivalents on deferred shares(1) |
| 36.6 |
|
|
| 96.4 |
|
|
Outstanding at June 18, 2011 |
| 661.5 |
| 0.3 |
| 654.5 |
| 0.8 |
|
|
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|
|
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Exercisable/unrestricted at January 1, 2011 |
| 322.1 |
|
|
| 323.7 |
|
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Exercisable/unrestricted at June 18,2011 |
| 358.6 |
|
|
| 316.0 |
|
|
(1)
Shares deferred upon vesting/settlement above are net of the performance adjustment factor applied to the units settled for the participants that deferred shares as provided in the plan.
(in thousands, except per share amounts) |
| Stock Appreciation Rights |
| Weighted Average Base/Exercise Price Per SAR |
|
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|
Outstanding at January 1, 2011 |
| 267.3 | $ | 38.44 |
Granted |
| - |
|
|
Exercised/restrictions lapsed |
| - |
|
|
Forfeited/cancelled |
| - |
|
|
Outstanding at June 18, 2011 |
| 267.3 |
| 38.44 |
|
|
|
|
|
Exercisable/unrestricted at January 1, 2011 |
| - |
|
|
Exercisable/unrestricted at June 18, 2011 |
| - |
|
|
The weighted-average grant-date fair value of time vesting equity units and performance vesting units granted during year-to-date 2011 was $35.58 and $39.69, respectively.
Note 4 Fair Value Measurements
ASC Topic 820 Fair Value Measurement (ASC 820) defines fair value, establishes a framework for measuring fair value and expands disclosures about financial and non-financial assets and liabilities recorded at fair value. It also applies under other accounting pronouncements that require or permit fair value measurements.
The fair value hierarchy for disclosure of fair value measurements under ASC 820 is as follows:
7
Our outstanding interest rate swap agreements are classified within level 2 of the valuation hierarchy as readily observable market parameters are available to use as the basis of the fair value measurement. As of June 18, 2011, we have recorded a fair value liability of $0.2 million in relation to our outstanding interest rate swap agreements as compared to $0.4 million as of January 1, 2011, which is included in accrued expenses on our Consolidated Balance Sheet.
Other Financial Assets and Liabilities
Financial assets with carrying values approximating fair value include cash and cash equivalents and accounts receivable. Financial liabilities with carrying values approximating fair value include accounts payable and outstanding checks. The carrying value of these financial assets and liabilities approximates fair value due to their short maturities.
The fair value of notes receivable approximates the carrying value at June 18, 2011 and January 1, 2011. Substantially all notes receivable are based on floating interest rates which adjust to changes in market rates.
Long-term debt, which includes the current maturities of long-term debt, at June 18, 2011, had a carrying value and fair value of $300.0 million and $305.6 million, respectively, and at January 1, 2011, had a carrying value and fair value of $292.9 million and $305.6 million, respectively. The fair value is based on interest rates that are currently available to us for issuance of debt with similar terms and remaining maturities.
We account for the impairment of long-lived assets in accordance with ASC Topic 360 Property, Plant, and Equipment. During each of the second quarters 2011 and 2010, asset impairments of $0.3 million were recognized. For year-to-date 2011 and 2010, asset impairments were $0.3 million and $0.8 million, respectively. We utilize a discounted cash flow model that incorporates unobservable level 3 inputs to test for long-lived asset impairment.
Note 5 Derivatives
We have market risk exposure to changing interest rates primarily as a result of our borrowing activities and commodity price risk associated with anticipated purchases of diesel fuel. Our objective in managing our exposure to changes in interest rates and commodity prices is to reduce fluctuations in earnings and cash flows. From time-to-time we use derivative instruments, primarily interest rate and commodity swap agreements, to manage risk exposures when appropriate, based on market conditions. We do not enter into derivative agreements for trading or other speculative purposes, nor are we a party to any leveraged derivative instrument.
The interest rate swap agreements are designated as cash flow hedges and are reflected at fair value in our Consolidated Balance Sheet and the related gains or losses on these contracts are deferred in stockholders equity as a component of other comprehensive income. As of June 18, 2011, and January 1, 2011, we had recorded a fair value liability of $0.2 million and $0.4 million, respectively, which are included in accrued expenses in our Consolidated Balance Sheet. Deferred gains and losses are amortized as an adjustment to interest expense over the same period in which the related items being hedged are recognized in income. However, to the extent that any of these contracts are not considered to be effective in accordance with ASC Topic 815 Derivatives and Hedging (ASC 815) in offsetting the change in the value of the items being hedged, any changes in fair value relating to the ineffective portion of these contracts are immediately recognized in income. Our two outstanding interest rate swaps have been considered effective in accordance with ASC 815 since they began during fiscal 2008.
Our interest rate swap agreements resulted in net payments of approximately $0.1 million and $0.3 million during the second quarters of fiscal 2011 and 2010, respectively, and resulted in net payments of $0.3 million and $0.5 million during year-to-date 2011 and 2010, respectively, which are included in interest expense on our Consolidated Statement of Income.
8
As of June 18, 2011, we had two outstanding interest rate swap agreements with notional amounts totaling $17.5 million as compared to $35.0 million as of June 19, 2010, as follows (amounts in thousands):
| Notional | Effective Date | Termination Date | Fixed Rate |
| $20,000 | 10/15/2009 | 10/15/2010 | 3.49% |
| 10,000 | 10/15/2010 | 10/15/2011 | 3.49% |
| Notional | Effective Date | Termination Date | Fixed Rate |
| $15,000 | 10/15/2009 | 10/15/2010 | 3.38% |
| 7,500 | 10/15/2010 | 10/15/2011 | 3.38% |
Note 6 Other Comprehensive Income
Other comprehensive income for the periods presented includes market value adjustments to reflect derivative instruments at fair value, pursuant to ASC 815. The components of comprehensive income are as follows:
|
| 12 Weeks |
|
| 24 Weeks |
| ||||
|
| Ended |
|
| Ended |
| ||||
(In thousands) |
| June 18, |
| June 19, |
|
| June 18, |
| June 19, |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings | $ | 10,051 |
| 10,714 |
|
| 17,532 |
| 18,655 |
|
Change in fair value of derivatives, net of tax |
| 75 | (1) | 115 | (2) |
| 151 | (3) | 186 | (4) |
Comprehensive income | $ | 10,126 |
| 10,829 |
|
| 17,683 |
| 18,841 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net of tax of $48. |
|
|
|
|
|
|
|
|
|
|
(2) Net of tax of $74. |
|
|
|
|
|
|
|
|
|
|
(3) Net of tax of $97. |
|
|
|
|
|
|
|
|
|
|
(4) Net of tax of $119. |
|
|
|
|
|
|
|
|
|
|
The gains reported in other comprehensive income during the second quarter and year-to-date periods of 2011 and 2010 reflect a change in fair value of our outstanding interest rate swap agreements during the respective periods. Please refer to Note 5 - Derivatives of this Form 10-Q for information related to our interest rate swap agreements.
Note 7 Long-term Debt and Bank Credit Facilities
Total debt outstanding was comprised of the following:
(In thousands) |
| June 18, 2011 |
| January 1, 2011 |
|
|
|
|
|
Asset-backed credit agreement: |
|
|
|
|
Revolving credit | $ | 158,800 |
| 154,100 |
Senior subordinated convertible debt, 3.50% due in 2035 |
| 139,320 |
| 136,710 |
Industrial development bonds, 5.60% to 6.00% due in various installments through 2014 |
|
1,620 |
|
1,830 |
Notes payable and mortgage notes, 7.95% due in various installments through 2013 |
| 255 |
| 296 |
Total debt |
| 299,995 |
| 292,936 |
Less current maturities |
| (684) |
| (670) |
Long-term debt | $ | 299,311 |
| 292,266 |
Asset-backed Credit Agreement
9
Our credit agreement is an asset-backed loan consisting of a $340.0 million revolving credit facility, which includes a $50.0 million letter of credit sub-facility (the Revolving Credit Facility). Provided no default is then existing or would arise, the Company may from time-to-time, request that the Revolving Credit Facility be increased by an aggregate amount (for all such requests) not to exceed $110.0 million. The Revolving Credit Facility has a 5-year term and will be due and payable in full on April 11, 2013. The Company can elect, at the time of borrowing, for loans to bear interest at a rate equal to the base rate, as defined in the credit agreement, or LIBOR plus a margin. The LIBOR interest rate margin was 2.00% as of June 18, 2011, and can vary quarterly in 0.25% increments between three pricing levels ranging from 1.75% to 2.25% based on the excess availability, which is defined in the credit agreement as (a) the lesser of (i) the borrowing base; or (ii) the aggregate commitments; minus (b) the aggregate of the outstanding credit extensions. As of June 18, 2011, $169.4 million was available under the Revolving Credit Facility after giving effect to outstanding borrowings and to $11.8 million of outstanding letters of credit primarily supporting workers compensation obligations.
The credit agreement contains no financial covenants unless and until (i) the continuance of an event of default under the credit agreement, or (ii) the failure of the Company to maintain excess availability (a) greater than 10% of the borrowing base for more than two (2) consecutive business days or (b) greater than 7.5% of the borrowing base at any time, in which event, the Company must comply with a trailing 12-month basis consolidated fixed charge covenant ratio of 1.0:1.0, which ratio shall continue to be tested each month thereafter until excess availability exceeds 10% of the borrowing base for 90 consecutive days.
The credit agreement contains standard covenants requiring the Company and its subsidiaries, among other things, to maintain collateral, comply with applicable laws, keep proper books and records, preserve the corporate existence, maintain insurance, and pay taxes in a timely manner. Events of default under the credit agreement are usual and customary for transactions of this type including, among other things: (a) any failure to pay principal there under when due or to pay interest or fees on the due date; (b) material misrepresentations; (c) default under other agreements governing material indebtedness of the Company; (d) default in the performance or observation of any covenants; (e) any event of insolvency or bankruptcy; (f) any final judgments or orders to pay more than $15.0 million that remain unsecured or unpaid; (g) change of control, as defined in the credit agreement; and (h) any failure of a collateral document, after delivery thereof, to create a valid mortgage or first-priority lien.
We are currently in compliance with all covenants contained within the credit agreement.
Senior Subordinated Convertible Debt
To finance a portion of the acquisition of distribution centers in 2005, we sold $150.1 million in aggregate issue price (or $322.0 million aggregate principal amount at maturity) of senior subordinated convertible notes due in 2035. The notes are our unsecured senior subordinated obligations and rank junior to our existing and future senior indebtedness, including borrowings under our Revolving Credit Facility. See our Annual Report on Form 10-K filed with the SEC for the fiscal year ended January 1, 2011, for additional information regarding the notes.
Note 8 Guarantees
We have guaranteed debt and lease obligations of certain food distribution customers. In the event these retailers are unable to meet their debt service payments or otherwise experience an event of default, we would be unconditionally liable for the outstanding balance of their debt and lease obligations ($9.0 million as of June 18, 2011, as compared to $9.4 million as of January 1, 2011), which would be due in accordance with the underlying agreements.
We have entered into debt and lease guarantees on behalf of certain food distribution customers that are accounted for under ASC Topic 460 - Guarantees (ASC 460). ASC 460 provides that at the time a company issues a guarantee, the company must recognize an initial liability for the fair value of the obligation it assumes under that guarantee. The maximum undiscounted payments we would be required to make in the event of default under the guarantees is $6.5 million, which is included in the $9.0 million total referenced above. These guarantees are secured by certain business assets and personal guarantees of the respective customers. We believe these customers will be able to perform under their respective agreements and that no payments will be required and no loss will be incurred under the guarantees. As required by ASC 460, a liability representing the fair value of the obligations assumed under the guarantees of $0.9 million is included in the accompanying consolidated financial statements for the guarantees accounted for under ASC 460. All of the other guarantees were issued prior to December 31, 2002 and are therefore not subject to the recognition and measurement provisions of ASC 460.
10
We have also assigned various leases to other entities. If the assignees were to become unable to continue making payments under the assigned leases, we estimate our maximum potential obligation with respect to the assigned leases to be $10.5 million as of June 18, 2011 as compared to $8.9 million as of January 1, 2011.
Note 9 Income Taxes
For the second quarter 2011 and 2010, our tax expense was $6.6 million and $7.3 million, respectively. During year-to-date 2011 and 2010, our tax expense was $11.5 million and $12.6 million, respectively.
The provision for income taxes reflects the Companys estimate of the effective rate expected to be applicable for the full fiscal year, adjusted for any discrete events, which are reported in the period that they occur. This estimate is re-evaluated each quarter based on the Companys estimated tax expense for the full fiscal year. During the second quarter 2010, the Company filed reports with various taxingauthorities which resulted in the refunds of tax payments. The effect of these discrete events in the second quarter was $0.1 million. For both the second quarter and year-to-date periods of 2011, the effective tax rate was 39.5% as compared to 40.4% for each of the second quarter and year-to-date periods of 2010.
The total amount of unrecognized tax benefits as of the end of the second quarter 2011 was $1.9 million. The net increase in unrecognized tax benefits of $0.1 million since March 26, 2011 is due to the increase in unrecognized tax benefits as a result of tax positions taken in prior periods. The total amount of tax benefits that if recognized would impact the effective tax rate was $0.4 million at the end of the second quarter 2011. We recognize interest and penalties accrued related to unrecognized tax benefits in income tax expense. At the end of the second quarter 2011, we had approximately $0.1 million for the payment of interest and penalties accrued.
We do not expect our unrecognized tax benefits to change significantly over the next 12 months.
The company or its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and local jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state or local examinations by tax authorities for years 2006 and prior.
Note 10 Pension and Other Postretirement Benefits
The following tables present the components of our pension and postretirement net periodic benefit cost:
12 Weeks Ended June 18, 2011 and June 19, 2010: |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
| Pension Benefits |
| Other Benefits | ||||
(In thousands) |
| 2011 |
| 2010 |
| 2011 |
| 2010 |
|
|
|
|
|
|
|
|
|
Interest cost | $ | 490 |
| 510 |
| 8 |
| 9 |
Expected return on plan assets |
| (433) |
| (428) |
| - |
| - |
Amortization of prior service cost |
| - |
| - |
| (5) |
| (7) |
Recognized actuarial loss (gain) |
| 363 |
| 323 |
| (3) |
| (1) |
Net periodic benefit cost | $ | 420 |
| 405 |
| - |
| 1 |
24 Weeks Ended June 18, 2011, and June 19, 2010: |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
| Pension Benefits |
| Other Benefits | ||||
(In thousands) |
| 2011 |
| 2010 |
| 2011 |
| 2010 |
|
|
|
|
|
|
|
|
|
Interest cost | $ | 979 |
| 1,020 |
| 16 |
| 18 |
Expected return on plan assets |
| (866) |
| (856) |
| - |
| - |
Amortization of prior service cost |
| - |
| - |
| (10) |
| (14) |
Recognized actuarial loss (gain) |
| 727 |
| 647 |
| (7) |
| (3) |
Net periodic benefit cost | $ | 840 |
| 811 |
| (1) |
| 1 |
|
|
|
|
|
|
|
|
|
Weighted-average assumptions used to determine net periodic benefit cost for the second quarter and year-to-date periods of 2011 and 2010 are as follows:
11
|
| Pension Benefits |
| Other Benefits | ||||
|
| 2011 |
| 2010 |
| 2011 |
| 2010 |
Weighted-average assumptions: |
|
|
|
|
|
|
|
|
Discount rate |
| 5.10% |
| 5.60% |
| 5.10% |
| 5.60% |
Expected return on plan assets |
| 6.00% |
| 6.50% |
| N/A |
| N/A |
Rate of compensation increase |
| N/A |
| N/A |
| N/A |
| N/A |
Total contributions to our pension plan in fiscal 2011 are expected to be $4.6 million.
Multi-employer pension plan
Certain of our unionized employees are covered by the Central States Southeast and Southwest Areas Pension Funds (the Plan), a multi-employer pension plan. Contributions are determined in accordance with the provisions of negotiated union contracts and are generally based on the number of hours worked. In fiscal 2010, the Company contributed $3.3 million to the Plan. Based on the most recent information available, we believe the present value of actuarial accrued liabilities of the Plan substantially exceeds the value of the assets held in trust to pay benefits. The underfunding is not a direct obligation or liability of the Company. Moreover, if the Company were to exit certain markets or otherwise cease making contributions to the Plan, the Company could trigger a substantial withdrawal liability. However, the amount of any increase in contributions will depend upon several factors, including the number of employers contributing to the Plan, results of the Companys collective bargaining efforts, investment returns on assets held by the Plan, actions taken by the trustees of the Plan, and actions that the Federal government may take. We are currently unable to reasonably estimate a withdrawal liability. Any adjustment for withdrawal liability will be recorded when it is probable that a liability exists and can be reasonably estimated.
A more detailed discussion of the risks associated with the Plan are contained in Part I, Item 1A, Risk Factors, of our Annual Report filed with the SEC on Form 10-K for the fiscal year ended January 1, 2011.
Note 11 Earnings Per Share
The following table reflects the calculation of basic and diluted earnings per share:
|
| Second Quarter |
| Year-to-Date | ||||
Ended | Ended | |||||||
(In thousands, except per share amounts) |
| June 18, 2011 |
| June 19, 2010 |
| June 18, 2011 |
| June 19, 2010 |
|
|
|
|
|
|
|
|
|
Net earnings | $ | 10,051 |
| 10,714 |
| 17,532 |
| 18,655 |
|
|
|
|
|
|
|
|
|
Net earnings per share-basic: |
|
|
|
|
|
|
|
|
Weighted-average shares outstanding |
| 12,744 |
| 12,904 |
| 12,731 |
| 13,015 |
|
|
|
|
|
|
|
|
|
Net earnings per share-basic | $ | 0.79 |
| 0.83 |
| 1.38 |
| 1.43 |
|
|
|
|
|
|
|
|
|
Net earnings per share-diluted: |
|
|
|
|
|
|
|
|
Weighted-average shares outstanding |
| 12,744 |
| 12,904 |
| 12,731 |
| 13,015 |
Shares contingently issuable |
| 298 |
| 359 |
| 298 |
| 337 |
Weighted-average shares and potential dilutive shares outstanding |
| 13,042 |
| 13,263 |
| 13,029 |
| 13,352 |
|
|
|
|
|
|
|
|
|
Net earnings per share-diluted | $ | 0.77 |
| 0.81 |
| 1.35 |
| 1.40 |
SARs are excluded from the calculation of diluted net earnings per share because the exercise price was greater than the market price of the stock and would have been anti-dilutive under the treasury stock method.
The senior subordinated convertible notes due in 2035 will be convertible at the option of the holder, only upon the occurrence of certain events, at an adjusted conversion rate of 9.6224 shares (initially 9.3120) of our
12
common stock per $1,000 principal amount at maturity of notes (equal to an adjusted conversion price of approximately $48.44 per share). Upon conversion, we will pay the holder the conversion value in cash up to the accreted principal amount of the note and the excess conversion value, if any, in cash, stock or both, at our option. The notes are only dilutive above their accreted value and for all periods presented the weighted average market price of the Companys stock did not exceed the accreted value. Therefore, the notes are not dilutive to earnings per share for any of the periods presented.
During the second quarters of 2011 and 2010, performance units granted under the 2008 LTIP Plan and 2007 LTIP Plan, respectively, were settled in shares of common stock, some of which were deferred by executives as required by the plan. Vested shares deferred by executives and board members are included in the calculation of basic earnings per share. Other performance units and RSUs granted during 2007, 2008, 2009, 2010 and 2011 pursuant to the 2000 Plan and 2009 Plan will be settled in shares of Nash Finch common stock. Unvested RSUs are not included in basic earnings per share until vested. All shares of time-restricted stock are included in diluted earnings per share using the treasury stock method, if dilutive. Performance units granted for the LTIP are only issuable if certain performance criteria are met, making these shares contingently issuable under ASC Topic 260 Earnings Per Share. Therefore, the performance units are included in diluted earnings per share at the payout percentage based on performance criteria results as of the end of the respective reporting period and then accounted for using the treasury stock method, if dilutive. For the second quarter 2011, approximately 60,000 shares related to the LTIP and 238,000 shares related to RSUs were included under shares contingently issuable in the calculation of diluted EPS as compared to approximately 143,000 shares related to the LTIP and 216,000 shares related to RSUs during the second quarter 2010. For year-to-date 2011, approximately 54,000 shares related to the LTIP and 244,000 shares related to RSUs were included under shares contingently issuable in the calculation of diluted EPS as compared to approximately 127,000 shares related to the LTIP and 210,000 shares related to RSUs during year-to-date 2010.
Note 12 Segment Reporting
We sell and distribute products that are typically found in supermarkets and operate three reportable operating segments. The military segment consists of seven distribution centers that distribute products to military commissaries and exchanges and one shared facility which services both military and independent food distribution customers. During fiscal 2010, our military distribution centers in Columbus, Georgia and Bloomington, Indiana became operational. Excluded from the military distribution center total are two adjacent military distribution centers we purchased during the third quarter of fiscal 2010 in Oklahoma City, Oklahoma, which are scheduled to become operational during fiscal 2012. Our food distribution segment consists of 14 distribution centers that sell to independently operated retail food stores, our corporate owned stores and other customers. The retail segment consists of 46 corporate-owned stores that sell directly to the consumer. During the second quarter 2011, we closed two and sold four retail stores.
During fiscal 2009 and fiscal 2010, we acquired facilities in Columbus, Georgia, Bloomington, Indiana and Oklahoma City, Oklahoma for expansion of our military distribution business. We have historically serviced military commissaries and exchanges outside of the military segments distribution network through distribution centers that are included in our food distribution segment. The revenue and segment profit associated with this business had previously been reported in the food distribution segment. We are currently in the process of transitioning the military business serviced by the food distribution segment to military distribution facilities and are scheduled to have all of the business transitioned during fiscal 2012. Accordingly, we revised our segment reporting during the fourth quarter of fiscal 2010 to include this business in our military segment, which impacts quarterly amounts previously reported during fiscal 2010. This revision had no impact on our consolidated financial statements in any period presented.
Certain prior year amounts shown below have been revised to conform to the current year presentation. Quarterly periods presented after the second quarter 2011 will be revised as shown the next time those periods are presented.
13
|
|
|
|
| Year-to-date |
|
|
|
| |||
| 2nd Quarter 2010 |
| 2nd Quarter 2010 |
| 3rd Quarter 2010 | |||||||
(In thousands) | As adjusted |
| As reported |
| As adjusted |
| As reported |
| As adjusted |
| As reported | |
|
|
|
|
|
|
|
|
|
|
|
| |
Segment revenue: |
|
|
|
|
|
|
|
|
|
|
| |
Military | $ | 515,785 |
| 456,588 |
| 1,055,419 |
| 934,585 |
| 699,655 |
| 620,822 |
Food Distribution | 514,982 |
| 574,179 |
| 1,037,174 |
| 1,158,008 |
| 652,670 |
| 731,503 | |
Retail | 123,850 |
| 123,850 |
| 241,717 |
| 241,717 |
| 158,556 |
| 158,556 | |
Total revenue | $ | 1,154,617 |
| 1,154,617 |
| 2,334,310 |
| 2,334,310 |
| 1,510,881 |
| 1,510,881 |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Segment profit: |
|
|
|
|
|
|
|
|
|
|
| |
Military | $ | 12,663 |
| 11,519 |
| 25,581 |
| 23,335 |
| 14,270 |
| 12,822 |
Food Distribution | 7,636 |
| 8,581 |
| 12,540 |
| 14,380 |
| 11,666 |
| 12,848 | |
Retail | 2,190 |
| 2,389 |
| 2,210 |
| 2,616 |
| 2,558 |
| 2,824 | |
Total segment profit | $ | 22,489 |
| 22,489 |
| 40,331 |
| 40,331 |
| 28,494 |
| 28,494 |
|
|
|
|
|
|
|
|
|
|
|
|
A summary of the major segments of the business is as follows:
|
| Second Quarter Ended | ||||||||||
|
| June 18, 2011 |
| June 19, 2010 | ||||||||
(In thousands) |
| Sales from external customers |
| Inter-segment sales |
| Segment profit |
| Sales from external customers |
| Inter-segment sales |
| Segment profit |
|
|
|
|
|
|
|
|
|
|
|
| |
Military | $ | 529,141 |
| - |
| 11,285 |
| 515,785 |
| - |
| 12,663 |
Food Distribution |
| 459,465 |
| 55,313 |
| 7,709 |
| 514,982 |
| 61,361 |
| 7,636 |
Retail |
| 110,969 |
| - |
| 2,128 |
| 123,850 |
| - |
| 2,190 |
Eliminations |
| - |
| (55,313) |
| - |
| - |
| (61,361) |
| - |
Total | $ | 1,099,575 |
| - |
| 21,122 |
| 1,154,617 |
| - |
| 22,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Year-to-Date Ended | ||||||||||
|
| June 18, 2011 |
| June 19, 2010 | ||||||||
(In thousands) |
| Sales from external customers |
| Inter-segment sales |
| Segment profit |
| Sales from external customers |
| Inter-segment sales |
| Segment profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
Military | $ | 1,066,581 |
| - |
| 23,432 |
| 1,055,419 |
| - |
| 25,581 |
Food Distribution |
| 909,772 |
| 110,235 |
| 13,554 |
| 1,037,174 |
| 119,653 |
| 12,540 |
Retail |
| 223,031 |
| - |
| 1,144 |
| 241,717 |
| - |
| 2,210 |
Eliminations |
| - |
| (110,235) |
| - |
| - |
| (119,653) |
| - |
Total | $ | 2,199,384 |
| - |
| 38,130 |
| 2,334,310 |
| - |
| 40,331 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Consolidated Statements of Income: |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
| Second Quarter Ended |
| Year-to-Date Ended | ||||
|
| June 18, |
| June 19, |
| June 18, |
| June 19, |
(In thousands) |
| 2011 |
| 2010 |
| 2011 |
| 2010 |
|
|
|
|
|
|
|
|
|
Total segment profit | $ | 21,122 |
| 22,489 |
| 38,130 |
| 40,331 |
Unallocated amounts: |
|
|
|
|
|
|
|
|
Interest |
| (4,508) |
| (4,523) |
| (9,146) |
| (9,035) |
Earnings before income taxes | $ | 16,614 |
| 17,966 |
| 28,984 |
| 31,296 |
|
|
|
|
|
|
|
|
|
14
ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Information and Cautionary Factors
the effect of competition on our food distribution, military and retail businesses;
macroeconomic and geopolitical events affecting commerce generally;
changes in consumer buying and spending patterns;
the success or failure of strategic plans, new business ventures or initiatives;
changes in credit risk from financial accommodations extended to new or existing customers;
limitations on financial and operating flexibility due to debt levels and debt instrument covenants;
changes in accounting standards;
technology failures that may have a material adverse effect on our business;
severe weather and natural disasters that may impact our supply chain;
unionization of a significant portion of our workforce;
costs related to a multi-employer pension plan which has liabilities in excess of plan assets;
changes in health care, pension and wage costs and labor relations issues;
product liability claims, including claims concerning food and prepared food products;
threats or potential threats to security;
unanticipated problems with product procurement; and
maintaining our reputation and corporate image.
· Retail formats designed to appeal to the needs of todays consumers.
In addition to the strategic initiatives already in progress, our 2011 initiatives consist of the following:
· Continue implementation of our military distribution center network expansion;
· Execute supply chain and center store initiatives within our food distribution segment;
· Implement cost reduction and profit improvement initiatives; and
· Identify aquisitions that support our strategic plan.
Our food distribution segment sells and distributes a wide variety of nationally branded and private label grocery products and perishable food products from 14 distribution centers to approximately 1,800 independent retail locations located in 28 states, primarily in the Midwest and Southeast regions of the United States.
Thus, changes in sales of the retail segment can have a disproportionate impact on the consolidated gross profit and SG&A as compared to similar changes in sales in our food distribution and military segments.
durring year-to-date 2011 as compared to the prior year. Domestic sales increased 0.6% while overseas sales increased 3.2% as compared to the comparable prior year-to-date period.
Domestic and overseas sales represented the following percentages of military segment sales:
During the second quarters of 2011 and 2010, our corporate store count changed as follows:
| |||||
During year-to-date 2011 and 2010, our corporate store count changed as follows:
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The tables above exclude corporate-owned stand-alone pharmacies and convenience stores.
Consolidated Selling, General and Administrative Expenses
Consolidated SG&A for the second quarter 2011 was 5.5% of sales, and was relatively flat in comparison to 5.4% of sales during the second quarter 2010. Consolidated SG&A for year-to-date 2011 was 5.6% of sales, also relatively flat in comparison to 5.5% of sales during year-to-date 2010.
Depreciation and Amortization Expense
Income tax expense is provided on an interim basis using managements estimate of the annual effective rate. Our effective tax rate for the full fiscal year is subject to change and may be impacted by changes to nondeductible items and tax reserve requirements in relation to our forecasts of operations, sales mix by taxing jurisdictions, or changes in tax laws and regulations. The effective income tax rate was 39.5% and 40.4% for the second quarters of 2011 and 2010, respectively. The effective income tax rate was also 39.5% and 40.4% for year-to-date 2011 and 2010, respectively.
Liquidity and Capital Resources
|
| 24 Weeks Ended |
|
| ||
(In thousands) |
| June 18, 2011 |
| June 19, 2010 |
| Increase/ (Decrease) |
|
|
|
|
|
|
|
Net cash provided by operating activities | $ | 37,492 |
| 17,679 |
| 19,813 |
Net cash used in investing activities |
| (34,138) |
| (9,817) |
| (24,321) |
Net cash used in financing activities |
| (3,525) |
| (7,927) |
| 4,402 |
Net decrease in cash and cash equivalents | $ | (171) |
| (65) |
| (106) |
2011 | 2010 | ||||||
exposure to changes in interest rates and commodity prices is to reduce fluctuations in earnings and cash flows. From time-to-time we use derivative instruments, primarily interest rate and commodity swap agreements, to manage risk exposures when appropriate, based on market conditions. We do not enter into derivative agreements for trading or other speculative purposes, nor are we a party to any leveraged derivative instrument.
Off-Balance Sheet Arrangements
The fair value for each reporting unit is determined based on an income approach which incorporates a discounted cash flow analysis which uses significant unobservable inputs, or level 3 inputs, as defined by the fair value hierarchy, and a market approach that utilizes current earnings multiples of comparable publicly-traded companies. The Company has weighted the valuation of its reporting units at 70% based on the income approach and 30% based on the market approach. The Company believes that this weighting is appropriate since it is often
difficult to find other comparable publicly-traded companies that are similar to our reporting units and it is our view that future discounted cash flows are more reflective of the value of the reporting units.
Critical Accounting Policies and Estimates
Recently Adopted and Proposed Accounting Standards
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
ITEM 4. Controls and Procedures
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
ITEM 3. Defaults Upon Senior Securities
ITEM 4. (Removed and Reserved).
Exhibits filed or furnished with this Form 10-Q:
| |
Fifth Restated Certificate of Incorporation of Nash-Finch Company | |
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer |
President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
EXHIBIT INDEX TO QUARTERLY REPORT
For the Quarter Ended June 18, 2011
Fifth Restated Certificate of Incorporation of Nash-Finch Company | ||
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer |