10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the fiscal year ended: January 1, 2011
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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 number: 0-785
NASH-FINCH COMPANY
(Exact name of Registrant as specified in its charter)
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Delaware
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41 -0431960 |
(State of Incorporation)
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(I.R.S. Employer Identification No.) |
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7600 France Avenue South
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55440-0355 |
P.O. Box 355
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(Zip Code) |
Minneapolis, Minnesota |
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(Address of principal executive offices) |
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Registrants telephone number, including area code: (952) 832-0534
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $1.66-2/3 per share
Common Stock Purchase Rights
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. Yes o No þ
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act.
Yes o No þ
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, and (2)
has been subject to such filing requirements for the past 90 days. Yes þ No o
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 o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of Registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a small reporting company. See the definitions of large accelerated
filer, accelerated filer and small reporting company in Rule 12b-2 of the Securities Exchange
Act.
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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Do not check if a smaller reporting company. |
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Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Securities Exchange Act). Yes o No þ
The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June
19, 2010 (the last business day of the Registrants most recently completed second fiscal quarter)
was $450,761,160, based on the last reported sale price of $36.37 on that date on NASDAQ.
As of February 22, 2011, 12,108,622 shares of Common Stock of the Registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrants definitive Proxy Statement for its Annual Meeting of Stockholders to
be held on May 18, 2011 (the 2011 Proxy Statement) are incorporated by reference into Part III of
this report, as specifically set forth in Part III.
Nash Finch Company
Index
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Nash Finch Company
PART I
Throughout this report, we refer to Nash-Finch Company, together with its subsidiaries, as
we, us, Nash Finch or the Company.
Forward-Looking Information
This report, including the information that is or will be incorporated by reference into this
report, contains forward-looking statements that relate to trends and events that may affect our
future financial position and operating results. Such statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. The statements in this
report that are not historical in nature, particularly those that use terms such as may, will,
should, likely, expect, anticipate, estimate, believe or plan, or comparable
terminology, are forward-looking statements based on current expectations and assumptions, and
entail various risks and uncertainties that could cause actual results to differ materially from
those expressed in such forward-looking statements. Important factors known to us that could cause
material differences include the following:
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the effect of competition on our food distribution, military and retail businesses; |
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general sensitivity to economic conditions, including the uncertainty related to the
current state of the economy in the U.S. and worldwide economic slowdown; disruptions to the
credit and financial markets in the U.S. and worldwide; changes in market interest rates;
continued volatility in energy prices and food commodities; |
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macroeconomic and geopolitical events affecting commerce generally; |
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changes in consumer buying and spending patterns; |
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our ability to identify and execute plans to expand our food distribution, military and
retail operations; |
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possible changes in the military commissary system, including those stemming from the
redeployment of forces, congressional action and funding levels; |
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our ability to identify and execute plans to improve the competitive position of our retail
operations; |
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the success or failure of strategic plans, new business ventures or initiatives; |
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our ability to successfully integrate and manage current or future businesses we acquire,
including the ability to manage credit risks and retain the customers of those operations; |
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changes in credit risk from financial accommodations extended to new or existing customers; |
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significant changes in the nature of vendor promotional programs and the allocation of
funds among the programs; |
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limitations on financial and operating flexibility due to debt levels and debt instrument
covenants; |
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legal, governmental, legislative or administrative proceedings, disputes, or actions that
result in adverse outcomes; |
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failure of our internal control over financial reporting; |
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changes in accounting standards; |
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technology failures that may have a material adverse effect on our business; |
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severe weather and natural disasters that may impact our supply chain; |
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unionization of a significant portion of our workforce; |
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costs related to a multi-employer pension plan which has liabilities in excess of plan
assets; |
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changes in health care, pension and wage costs and labor relations issues; |
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product liability claims, including claims concerning food and prepared food products; |
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threats or potential threats to security; |
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unanticipated problems with product procurement; and |
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maintaining our reputation and corporate image. |
A more detailed discussion of many of these factors is contained in Part I, Item 1A, Risk
Factors, of this report on Form 10-K. You should carefully consider each of these factors and all
of the other information in this report. We undertake no obligation to revise or update publicly
any forward-looking statements. You are advised, however, to consult any future disclosures we make
on related subjects in future reports to the Securities and Exchange Commission (SEC).
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ITEM 1. BUSINESS
Originally established in 1885 and incorporated in 1921, we are the second largest publicly
traded wholesale food distributor in the United States, in terms of revenue, serving the retail
grocery industry and the military commissary and exchange systems. Our sales in fiscal 2010 were
approximately $5.0 billion. Our business currently consists of three primary operating segments:
military food distribution, food distribution and retail. Financial information about our business
segments for the three most recent fiscal years is contained in Part II, Item 8 of this report
under Note (18) Segment Information in the Notes to Consolidated Financial Statements.
In November 2006, we announced the launch of a strategic plan, Operation Fresh Start, designed
to sharpen our focus and provide a strong platform to support growth initiatives. Our strategic
plan is built upon extensive knowledge of current industry, consumer and market trends, and is
formulated to differentiate the Company. The strategic plan includes long-term initiatives to
increase revenues and earnings, improve productivity and cost efficiencies of our Military, Food
Distribution and Retail business segments, and leveraging our corporate support services. The
Company has strategic initiatives to improve working capital, manage debt, and increase shareholder
value through capital expenditures with acceptable returns on investment. Several important
elements of the strategic plan include:
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Supply chain services focused on supporting our businesses with warehouse management,
inbound and outbound transportation management and customized solutions for each business; |
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Growing the Military business segment through acquisition and expansion of products and
services, as well as creating warehousing and transportation cost efficiencies with a
long-term distribution center strategic plan; |
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Providing our independent retail customers with high level of order fulfillment, broad
product selection including leveraging the Our Family brand , support services
emphasizing best-in-class offerings in marketing, advertising, merchandising, store design
and construction, market research, retail store support, retail pricing and license
agreement opportunities; and |
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Retail formats designed to appeal to the needs of todays consumers. |
The strategic plan includes the following long-term financial targets:
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2% organic revenue growth |
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4% Consolidated EBITDA1 as a percentage of sales |
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10% trailing four quarters Free Cash Flow as a percentage of Net
Assets2 |
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2.5 to 3.0x total leverage ratio (i.e., total debt divided by trailing four
quarters Consolidated EBITDA) |
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Consolidated EBITDA is a measurement not recognized by accounting
principles generally accepted in the United States. Please refer to Part II, Item
7 of this report under the caption Consolidated EBITDA (Non-GAAP Measurement) for
the definition of Consolidated EBITDA. |
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Defined as cash provided from operations less capital expenditures for
property, plant and equipment during the trailing four quarters divided by the
average net assets for the current period and prior year comparable period (total
assets less current liabilities plus current portion of long-term debt and capital
leases). Please refer to Part II, Item 7 of this report under the caption Free
Cash Flow as a percentage of Net Assets (Non-GAAP Measurement) for the definition
of Free Cash Flow as a percentage of Net Assets. |
We have made significant progress towards achieving our long-term financial targets.
From fiscal 2006 to the end of fiscal 2010, our Consolidated EBITDA margin improved from 2.2% of
sales to 2.8% of sales and the debt leverage ratio has improved by nearly one full turn of
Consolidated EBITDA from 3.11x to 2.29x. The ratio of free cash flow to net assets metric was 0.9%
in fiscal 2010, however, excluding strategic investments made during the year, primarily associated
with the expansion of our military food distribution
business, our free cash flow to net assets metric was 8.4%. The organic revenue growth metric has
been negatively affected by the economic environment in fiscal 2010 and was negative 5.4%.
During fiscal 2010, we continued expansion activities associated with our military food
distribution business, including our Columbus, Georgia facility becoming operational, and our
purchases of new properties in Bloomington, Indiana and two adjacent facilities in Oklahoma City,
Oklahoma, while continuing to maintain
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conservative debt levels in relation to our strategic
target. Additionally, we continued cost reduction and working capital initiatives during a
challenging business environment. In addition to the strategic initiatives already in progress,
our 2011 initiatives include the following:
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Continued implementation of our military distribution center network
expansion. |
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Execute supply chain and center store initiatives within our food
distribution segment. |
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Implement cost reduction and profit improvement initiatives. |
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Identify acquisitions that support our strategic plan. |
Additional description of our business is found in Part II, Item 7 of this report.
Military Segment
Our military segment is one of the largest distributors, by revenue, of grocery products to
U.S. military commissaries and exchanges. On January 31, 2009, the Company completed the purchase
from GSC Enterprises, Inc., of substantially all of the assets relating to three wholesale food
distribution centers located in San Antonio, Texas, Pensacola, Florida and Junction City, Kansas,
including all inventory and customer contracts related to the purchased facilities. On December 1,
2009, we purchased a facility in Columbus, Georgia, which began servicing military commissaries and
exchanges in the third quarter of fiscal 2010. During the third quarter of fiscal 2010, we
purchased a facility in Bloomington, Indiana and two adjacent facilities in Oklahoma City, Oklahoma
for expansion of our military food distribution business. The Bloomington, Indiana facility became
operational during the fourth quarter of fiscal 2010, while the Oklahoma City, Oklahoma facilities
are scheduled to become operational during fiscal 2012. In addition, we purchased the real
estate associated with our Pensacola, Florida facility, which had previously been a leased
facility, during the third quarter of fiscal 2010.
We serve 181 military commissaries and over 200 exchanges located in 33 states across the
United States and the District of Columbia, Europe, Puerto Rico, Cuba, the Azores and Egypt. Our
military distribution centers are exclusively dedicated to supplying products to military
commissaries and exchanges. These distribution centers are strategically located among the
largest concentration of military bases in the areas we serve and near Atlantic ports used to ship
grocery products to overseas commissaries and exchanges. We have an outstanding reputation as a
distributor focused exclusively on U.S. military commissaries and exchanges, based in large measure
on our excellent service metrics, which include fill rate, on-time delivery and shipping accuracy.
The Defense Commissary Agency, also known as DeCA, operates a chain of commissaries on U.S.
military installations throughout the world. DeCA contracts with manufacturers to obtain grocery
and related products for the commissary system. Manufacturers either deliver the products to the
commissaries themselves or, more commonly, contract with distributors such as us to deliver the
products. These distributors act as drayage agents for the manufacturers by purchasing and
maintaining inventories of products DeCA purchases from the manufacturers, and providing handling,
distribution and transportation services for the manufacturers. Manufacturers must authorize the
distributors as their official representatives to DeCA, and the distributors must adhere to DeCAs
frequent delivery system procedures governing matters such as product identification, ordering and
processing, information exchange and resolution of discrepancies. We obtain distribution contracts
with manufacturers through competitive bidding processes and direct negotiations.
As commissaries need to be restocked, DeCA identifies each manufacturer with which an order is
to be placed for additional products, determines which distributor is the manufacturers official
representative in a particular region, and places a product order with that distributor under the
auspices of DeCAs master
contract with the applicable manufacturer. The distributor selects that product from its existing
inventory, delivers it to the commissary or commissaries designated by DeCA, and bills the
manufacturer for the product shipped. The manufacturer then bills DeCA under the terms of its
master contract. Overseas commissaries are serviced in a similar fashion, except that a
distributors responsibility is to deliver products as and when needed to the port designated by
DeCA, which in turn bears the responsibility for shipping the product to the applicable commissary
or overseas warehouse.
After we ship a particular manufacturers products to commissaries in response to an order
from DeCA, we invoice the manufacturer for the product price plus a service and or drayage fee that
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based on a percentage of the purchase price, but may in some cases be based on a
dollar amount per case or pound of product handled. Our order handling and invoicing activities
are facilitated by a procurement and billing system developed specifically for the military
business, which addresses the unique aspects of its business, and provides our manufacturer
customers with a web-based, interactive means of accessing critical order, inventory and delivery
information.
We have approximately 600 distribution contracts with manufacturers that supply products to
the DeCA commissary system and various exchange systems. These contracts generally have an
indefinite term, but may be terminated by either party without cause upon 30 days prior written
notice to the other party. The contracts typically specify the commissaries and exchanges we are
to supply on behalf of the manufacturer, the manufacturers products to be supplied, service and
delivery requirements and pricing and payment terms. Our ten largest manufacturer customers
represented approximately 43% of the military segments fiscal 2010 sales.
Food Distribution Segment
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 across the United States.
During the third quarter of fiscal 2010, we closed our food distribution center in Bridgeport,
Michigan at the end of its lease term. Our customers are relatively diverse with the largest
customer, excluding our corporate-owned stores, consisting of a consortium of stores representing
7.6%, and two others representing 5.6% and 3.5%, of our fiscal 2010 food distribution sales. No
other customer represents greater than 3.0% of our food distribution business.
Our distribution centers are strategically located to efficiently serve our independent
customer stores and our corporate-owned stores. The distribution centers are equipped with modern
materials handling equipment for receiving, storing and shipping merchandise and are designed for
high volume operations at low unit costs. We continue to implement operating initiatives to
enhance productivity and expand profitability while providing a higher level of service to our
distribution customers. Our distribution centers have varying levels of available capacity giving
us enough flexibility to service additional customers by leveraging our existing fixed cost base,
which can enhance our profitability.
Depending upon the size of the distribution center and the profile of the customers served,
our distribution centers typically carry a full line of national brand and private label grocery
products and perishable food products. Non-food items and specialty grocery products are
distributed from two distribution centers located in Bellefontaine, Ohio and Sioux Falls, South
Dakota. We currently operate a fleet of tractors and semi-trailers that deliver the majority of
our products to our customers. Approximately 23% of deliveries are made through contract carriers.
Our retailers order their inventory at regular intervals through direct linkage with our
information systems. Our food distribution sales are made on a market price plus fee and freight
basis, with the fee based on the type of commodity and quantity purchased. We adjust our selling
prices based on the latest market information, and our freight policy contains a fuel surcharge
clause that allows us to mitigate the impact of rising fuel costs.
Products
We primarily sell and distribute nationally branded products and a number of unbranded
products, principally meat and produce, which we purchase directly from various manufacturers,
processors and suppliers or through manufacturers representatives and brokers. We also sell and
distribute high quality private label products under the proprietary trademark Our
Family1, a long-standing brand of Nash Finch that offers an alternative to national
brands. In addition, we sell and distribute a premium line of branded products
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We own or have the rights to various trademarks, tradenames
and service marks, including the following referred to in this report: AVANZA®,
Econofoods®, Sun Mart®, Family Thrift Center®, Family Fresh Market®, Our
Family®, Value Choice, Food Pride®, Fresh Place® and Nash Brothers Trading
Company®. The trademark IGA®, referred to in this report, is the registered
trademark of IGA, Inc. |
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under the Nash
Brothers Trading Company trademark, a lower priced line of private label products under the Value
Choice trademark and private label products for two of our independent customer groups. We offer
over 3,400 stock-keeping units of competitively priced, high quality grocery products and
perishable food products which compete with national branded and other value brand products.
Services
To further strengthen our relationships with our food distribution customers, we offer, either
directly or through third parties, a wide variety of support services to help them develop and
operate stores, as well as compete more effectively. These services include:
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promotional, advertising and merchandising programs; |
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installation of computerized ordering, receiving and scanning systems; |
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retail equipment procurement assistance; |
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providing contacts for accounting, budgeting and payroll services; |
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consumer and market research; |
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remodeling and store development services; |
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securing existing grocery stores that are for sale or lease in the market areas we
serve and occasionally acquiring or leasing existing stores for resale or sublease to
these customers; and |
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NashNet, which provides supply chain efficiencies through internet services. |
During fiscal 2010 and 2009, 49% of food distribution revenues were from customers with whom
we had entered into long-term supply agreements. The long-term supply agreements range from 2 to
20 years. These agreements also may contain provisions that give us the opportunity to purchase
customers independent retail businesses before any third party.
We also provide financial assistance to our food distribution customers, primarily in
connection with new store development or the upgrading and expansion of existing stores. As of
January 1, 2011, we had loans, net of reserves, of $25.6 million outstanding to 33 of our food
distribution customers, and had guaranteed outstanding debt and lease obligations of certain food
distribution customers in the amount of $9.4 million. We also, in the normal course of business,
sublease retail properties and assign retail property leases to third parties. As of January 1,
2011, the present value of our maximum contingent liability exposure, net of reserves, with respect
to the subleases and assigned leases was $22.8 million and $8.9 million, respectively.
We distribute products to independent stores that carry the IGA banner and our proprietary
Food Pride banner. We encourage our independent customers to join one of these banner groups to
receive many of the same marketing programs and procurement efficiencies available to grocery store
chains while allowing them to maintain their flexibility and autonomy as independents. To use
either of these banners, these independents must comply with applicable program standards. As of
January 1, 2011, we served 107 retail stores under the IGA banner and 58 retail stores under our
Food Pride banner.
Retail Segment
Our retail segment is made up of 52 corporate-owned stores, located primarily in the Upper
Midwest, in the states of Colorado, Iowa, Minnesota, Nebraska, North Dakota, Ohio, South Dakota and
Wisconsin. Our corporate-owned stores principally operate under the Sun Mart, Econofoods, AVANZA,
Family Thrift Center, Pick n Save, Family Fresh Market, Prairie Market and Wholesale Food Outlet
banners. Our stores are typically located close to our distribution centers in order to create
certain operating and logistical efficiencies. As of January 1, 2011, we operated 45 conventional
supermarkets, five AVANZA grocery stores, one Wholesale Food Outlet grocery store and one other
retail store. Our retail segment also includes three corporate-owned pharmacies and one
convenience store that are not included in our store count.
Our conventional grocery stores offer a wide variety of high quality grocery products and
services. Many have specialty departments such as fresh meat counters, delicatessens, bakeries,
eat-in cafes, pharmacies, banks and floral departments. These stores also provide services such as
check cashing, fax services and
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money transfers. We emphasize outstanding customer service and
have created our G.R.E.A.T. (Greet, React, Escort, Anticipate and Thank) Customer Service Program
to train every associate (employee) on the core elements of providing exceptional customer service.
The Fresh Place concept within our conventional grocery stores is an umbrella banner that
emphasizes our high quality perishable products, such as fresh produce, deli, meats, seafood, baked
goods and takeout foods for todays busy consumer. The AVANZA grocery stores offer products
designed to meet the specific tastes and needs of Hispanic shoppers.
Competition
Military Segment
We are one of five distributors with annual sales to the DeCA commissary system in excess of
$100 million that distributes products via the frequent delivery system. The remaining
distributors that supply DeCA tend to be smaller, regional and local providers. In addition,
manufacturers contract with others to deliver certain products, such as baking supplies, produce,
deli items, soft drinks and snack items, directly to DeCA commissaries and service exchanges.
Because of the narrow margins in this industry, it is of critical importance for distributors to
achieve economies of scale, which is typically a function of the density or concentration of
military bases within the geographic market(s) a distributor serves, and the distributors share of
that market. As a result, no distributor in this industry has a nationwide presence. Rather,
distributors tend to concentrate on specific regions, or areas within specific regions, where they
can achieve critical mass and utilize warehouse and distribution facilities efficiently. In
addition, distributors that operate larger non-military specific distribution businesses tend to
compete for DeCA commissary business in areas where such business would enable them to more
efficiently utilize the capacity of their existing distribution centers. We believe the principal
competitive factors among distributors within this industry are customer service, price, operating
efficiencies, reputation with DeCA and location of distribution centers. We believe our
competitive position is very strong with respect to all these factors within the geographic areas
where we compete.
Food Distribution Segment
The food distribution segment is highly competitive as evidenced by the low margin nature of
the business. Success in this segment is measured by the ability to leverage scale in order to
gain pricing advantages and operating efficiencies, to provide superior merchandising programs and
services to the independent customer base and to use technology to increase distribution
efficiencies. We compete with local, regional and national food distributors, as well as with
vertically integrated national and regional chains using a variety of formats, including
supercenters, supermarkets and warehouse clubs that purchase directly from suppliers and
self-distribute products to their stores. We face competition from these companies on the basis of
price, quality, variety, availability of products, strength of private label brands, schedules and
reliability of deliveries and the range and quality of customer services.
Continuing our quality service by focusing on key metrics such as our on-time delivery rate,
fill rate, order accuracy and customer service is essential in maintaining our competitive
advantage. During fiscal 2010, our distribution centers had an on-time delivery rate, defined as
being within 1/2 hour of our committed delivery time, of 96.8%; and a fill rate, defined as the
percentage of cases shipped relative to the number of cases ordered, of 96.6%. We believe we are
an industry leader with respect to these key metrics.
Retail Segment
Our retail segment is also highly competitive. We compete with many organizations of various
sizes, ranging from national and regional chains that operate a variety of formats (such as
supercenters, supermarkets, extreme value food stores and membership warehouse club stores) to
local grocery store chains and privately owned unaffiliated grocery stores. Although our target
geographic areas have a relatively low presence of national and multi-regional grocery store
chains, we are facing increasing competitive pressure from the expansion of supercenters and
regional chains. During fiscal 2010 and fiscal 2009, there were three and two, respectively, of
our stores that were impacted by the opening of new supercenters in their markets and a total of 42
stores as of January 1, 2011, now compete with supercenters. Depending upon the market, we compete
based on price, quality and assortment, store appeal (including store location and format), sales
promotions, advertising, service and convenience. We believe our ability to provide convenience,
outstanding perishable execution and exceptional customer service are particularly important
factors in achieving competitive success.
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Vendor Allowances and Credits
We participate with our vendors in a broad menu of promotions to increase sales of products.
These promotions fall into two main categories, off-invoice allowances and performance-based
allowances, and are often subject to negotiation with our vendors. In the case of off-invoice
allowances, discounts are typically offered by vendors with respect to certain merchandise
purchased by us during a specified period of time. We use off-invoice allowances to support a
variety of marketing programs such as reduced price offerings for specific time periods, food
shows, pallet promotions and private label promotions. The discounts are either reflected directly
on the vendor invoice, as a reduction from the normal wholesale prices for merchandise to which the
allowance applies, or we are allowed to deduct the allowance as an offset against the vendors
invoice when it is paid.
In the case of performance-based allowances, the allowance or rebate is based on our
completion of some specific activity, such as purchasing or selling product during a certain time
period. This basic performance requirement may be accompanied by an additional performance
requirement such as providing advertising or special in-store promotions, tracking specific
shipments of goods to retailers (or to customers in the case of our own retail stores) during a
specified period (retail performance allowances), slotting (adding a new item to the system in one
or more of our distribution centers) and merchandising a new item, or achieving certain minimum
purchase quantities. The billing for these performance-based allowances is normally in the form of
a bill-back in which case we are invoiced at the regular price with the understanding that we may
bill back the vendor for the requisite allowance when the performance is satisfied. We also assess
an administrative fee, reflected on the invoices sent to vendors, to recoup our reasonable costs of
performing the tasks associated with administering retail performance allowances.
We collectively plan promotions with our vendors and arrive at the amount the respective
vendor plans to spend on promotions with us. Each vendor has its own method for determining the
amount of promotional funds to be spent with us. In most situations, the vendor allowances are
based on units we purchased from the vendor. In other situations, the allowances are based on our
past or anticipated purchases and/or the anticipated performance of the planned promotions.
Forecasting promotional expenditures is a critical part of our frequently scheduled planning
sessions with our vendors. As individual promotions are completed and the associated billing is
processed, the vendors track our promotional program execution and spend rate, and discuss the
tracking, performance and spend rate with us on a regular basis throughout the year. These
communications include discussions with respect to future promotions, product cost, targeted
retails and price points, anticipated volume, promotion expenditures, vendor maintenance, billing
issues and procedures, new items/discontinued items, and trade spend levels relative to budget per
event and per year, as
well as the resolution of any issues that arise between the vendor and us. In the future, the
nature and menu of promotional programs and the allocation of dollars among them may change as a
result of our ongoing negotiations and commercial relationships with our vendors.
Trademarks and Servicemarks
We own or license a number of trademarks, tradenames and servicemarks that relate to our
products and services, including those mentioned in this report. We consider certain of these
trademarks, tradenames and servicemarks, such as Our Family, Value Choice and Nash Brothers Trading
Company, to be of material value to the business conducted by our food distribution and retail
segments, and we actively defend and enforce such trademarks, tradenames and servicemarks.
Employees
As of January 1, 2011, we employed 6,822 persons, of whom 4,474 were employed on a full-time
basis and 2,348 employed on a part-time basis. Of our total number of employees, 638 were
represented by unions (9.4% of all employees) and consisted primarily of warehouse personnel and
drivers in our Ohio and Indiana distribution centers. We consider our employee relations to be
good.
Available Information
9
Our internet website is www.nashfinch.com. The references to our website in this
report are inactive references only, and the information on our website is not incorporated by
reference in this report. Through the Investor Relations portion of our website and a link to a
third-party content provider (under the tab SEC Filings), you may access, free of charge, our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to such reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file
such material with, or furnish it to, the SEC. We have also posted on the Investor Relations
portion of our website, under the caption Corporate Governance, our Code of Business Conduct that
is applicable to all our directors and employees, as well as our Code of Ethics for Senior
Financial Management that is applicable to our Chief Executive Officer, Chief Financial Officer and
Corporate Controller. Any amendment to or waiver from the provisions of either of these Codes that
is applicable to any of these three executive officers will be disclosed on the Investor Relations
portion of our website under the Corporate Governance caption.
ITEM 1A. RISK FACTORS
In addition to the other information in this Form 10-K, you should carefully consider the
specific risk factors set forth below in evaluating Nash Finch because any of the following risks
could materially affect our business, financial condition, results of operations and future
prospects.
We face substantial competition, and our competitors may have superior resources, which could place
us at a competitive disadvantage and adversely affect our financial performance.
Our businesses are highly competitive and are characterized by high inventory turnover, narrow
profit margins and increasing consolidation. Our food distribution and military businesses compete
not only with local, regional and national food distributors, but also with vertically integrated
national and regional chains that employ a variety of formats, including supercenters, supermarkets
and warehouse clubs. Our retail business, focused in the Upper Midwest, has historically competed
with traditional grocery stores and is increasingly competing with alternative store formats such
as supercenters, warehouse clubs, dollar stores and extreme value food stores.
Some of our food distribution and retail competitors are substantially larger and may have
greater financial resources and geographic scope, lower merchandise acquisition costs and lower
operating expenses than we do, intensifying price competition at the wholesale and retail levels.
Industry consolidation and the expansion of alternative store formats, which have gained and
continue to gain market share at the expense of
traditional grocery stores, tend to produce even stronger competition for our retail business and
for the independent customers of our distribution business. To the extent our independent
customers are acquired by our competitors or are not successful in competing with other retail
chains and non-traditional competitors, sales by our distribution business will also be affected.
If we fail to effectively implement strategies to respond to these competitive pressures, our
operating results could be adversely affected by price reductions, decreased sales or margins, or
loss of market share.
In the military food distribution business we face competition from large national and
regional food distributors as well as smaller food distributors. Due to the narrow margins in the
military food distribution industry, it is of critical importance for distributors to achieve
economies of scale, which are typically a function of the density or concentration of military
bases in the geographic markets a distributor serves and a distributors share of that market. As
a result, no distributor in this industry has a nationwide presence and it is very difficult, other
than through acquisitions, to expand operations in this industry beyond the geographic regions
where we currently can utilize our warehouse and distribution capacity.
Our business is sensitive to economic conditions that impact consumer spending.
Our business is sensitive to changes in overall economic conditions that impact consumer
spending, including discretionary spending and buying habits. Economic downturns or uncertainty
has adversely affected overall demand and intensified price competition, but also has caused
consumers to trade down by purchasing lower margin items and to make fewer purchases in
traditional supermarket channels. Continued negative economic conditions affecting disposable
consumer income such as employment levels, business conditions, changes in housing market
conditions, the availability of credit, interest rates, volatility in fuel and energy
10
costs, food price inflation or deflation, employment trends in our markets and labor costs, the impact of
natural disasters or acts of terrorism, and other matters affecting consumer spending could cause
consumers to continue shifting even more of their spending to lower-priced competitors. The
continued general reductions in the level of discretionary spending or shifts in consumer
discretionary spending to our competitors could continue to adversely affect our growth and
profitability.
The worldwide financial and credit market disruptions have reduced the availability of liquidity
and credit generally necessary to fund a continuation and expansion of global economic activity.
The shortage of liquidity and credit combined with substantial losses in equity markets has led to
a worldwide economic recession that could be prolonged. The general slowdown in economic activity
caused by an extended recession could adversely affect our business. A continuation or worsening
of the current difficult financial and economic conditions could adversely affect our customers
ability to meet the terms of sale or our suppliers ability to fully perform their commitments to
us.
Macroeconomic and geopolitical events may adversely affect our customers, access to products, or
lead to general cost increases which could negatively impact our results of operations and
financial condition.
Recent events in foreign countries which have resulted in political instability and social
unrest and significant deficits in the United States at both the federal and state levels could
adversely affect our businesses and customers. Adverse economic or geopolitical events could
potentially reduce our access or increase prices associated with products sourced abroad. Such
adverse events could lead to significant increases in the price of the products we procure, fuel
and other supplies used in our business, utilities, or taxes that cannot be fully recovered through
price increases. In addition, disposable consumer income could be affected by these events which
could have a negative impact on our results of operations and financial condition.
Our businesses could be negatively affected if we fail to retain existing customers or attract
significant numbers of new customers.
Growing and increasing the profitability of our distribution businesses is dependent in large
measure upon our ability to retain existing customers and capture additional distribution customers
through our existing network of distribution centers, enabling us to more effectively utilize the
fixed assets in those businesses. Our ability to achieve these goals is dependent, in part, upon
our ability to continue to provide a high level of
customer service, offer competitive products at low prices, maintain high levels of productivity
and efficiency, particularly in the process of integrating new customers into our distribution
system, and offer marketing, merchandising and ancillary services that provide value to our
independent customers. If we are unable to execute these tasks effectively, we may not be able to
attract significant numbers of new customers and attrition among our existing customer base could
increase, either or both of which could have an adverse impact on our revenue and profitability.
Growing and increasing the profitability of our retail business is dependent on increasing our
market share in the markets our retail stores are located. We plan to invest in redesigning some
of our retail stores into other formats in order to attract new customers and increase our market
share. Our results of operations may be adversely impacted if we are unable to attract significant
numbers of new retail customers.
Our military segment operations are dependent upon domestic and international military
distribution, and a change in the military commissary system, or level of governmental funding,
could negatively impact our results of operations and financial condition.
Because our military segment sells and distributes grocery products to military commissaries
and exchanges in the U.S. and overseas, any material changes in the commissary system, the level of
governmental funding to DeCA, military staffing levels or in locations of bases may have a
corresponding impact on the sales and operating performance of this segment. These changes could
include privatization of some or all of the military commissary system, relocation or consolidation
in the number of commissaries and exchanges, base closings, troop redeployments or consolidations
in the geographic areas containing commissaries and exchanges served by us, or a reduction in the
number of persons having access to the commissaries and exchanges.
11
Our results of operations and financial condition could be adversely affected if we are unable to
improve the competitive position of our retail operations.
Our retail food business faces competition from regional and national chains operating under a
variety of formats that devote square footage to selling food (i.e., supercenters, supermarkets,
extreme value stores, membership warehouse clubs, dollar stores, drug stores, convenience stores,
various formats selling prepared foods, and other specialty and discount retailers), as well as
from independent food store operators in the markets where we have retail operations. During
fiscal 2006, we announced new strategic initiatives designed to create value within our
organization. These initiatives include designing and reformatting our base of retail stores to
increase overall retail sales performance. In connection with these efforts, there are numerous
risks and uncertainties, including our ability to successfully identify which course of action will
be most financially advantageous for each retail store, our ability to identify those initiatives
that will be the most effective in improving the competitive position of the retail stores we
retain, our ability to efficiently and timely implement these initiatives, and the response of
competitors to these initiatives. If we are unable to improve the overall competitive position of
our remaining retail stores the operating performance of that segment may continue to decline and
we may need to recognize additional impairments of our long-lived assets and goodwill, be compelled
to close or dispose of additional stores and may incur restructuring or other charges to our
earnings associated with such closure and disposition activities. In addition, we cannot assure
you that we will be able to replace any of the revenue lost from these closed or sold stores from
our other operations.
We may not be able to achieve the expected benefits from the implementation of new strategic
initiatives.
We have begun taking action to improve our competitive performance through a series of
strategic initiatives. The goal of this effort is to develop and implement a comprehensive and
competitive business strategy, addressing the food distribution industry environment and our
position within the industry and ultimately create increased shareholder value.
We may not be able to successfully execute our strategic initiatives and realize the intended
synergies, business opportunities and growth prospects. Many of the other risk factors mentioned
may limit our ability to capitalize on business opportunities and expand our business. Our efforts
to capitalize on business opportunities may not bring the intended results. Assumptions underlying
estimates of expected
revenue growth or overall cost savings may not be met or economic conditions may deteriorate.
Customer acceptance of new retail formats developed may not be as anticipated, hampering our
ability to attract new retail customers or maintain our existing retail customer base.
Additionally, our management may have its attention diverted from other important activities while
trying to execute new strategic initiatives. If these or other factors limit our ability to
execute our strategic initiatives, our expectations of future results of operations, including
expected revenue growth and cost savings, may not be met.
Our ability to operate effectively could be impaired by the risks and costs associated with the
current and future efforts to grow our business through acquisitions.
Efforts to grow our business may include acquisitions. Acquisitions entail various risks such
as identifying suitable candidates, effecting acquisitions at acceptable rates of return, obtaining
adequate financing and acceptable terms and conditions. Our success depends in a large part on
factors such as our ability to identify suitable acquisition candidates and successfully integrate
such operations and personnel in a timely and efficient manner while retaining the customer base of
the acquired operations. If we cannot identify suitable acquisition candidates, successfully
integrate these operations and retain the customer base, we may experience material adverse
consequences to our results of operations and financial condition. The integration of separately
managed businesses operating in different markets involves a number of risks, including the
following:
|
|
|
demands on management related to the significant increase in our size after the
acquisition of operations; |
|
|
|
|
difficulties in the assimilation of different corporate cultures and business
practices, such as those involving vendor promotions, and of geographically dispersed personnel and operations; |
12
|
|
|
difficulties in the integration of departments, information technology systems,
operating methods, technologies, books and records and procedures, as well as in
maintaining uniform standards and controls, including internal accounting controls,
procedures and policies; and |
|
|
|
|
expenses of any undisclosed liabilities, such as those involving environmental or
legal matters. |
Successful integration of new operations, including the acquisition of three distribution
facilities from GSC Enterprises Inc. on January 31, 2009, our December 1, 2009 purchase of a
facility in Columbus, Georgia, and our purchases of a facility in Bloomington, Indiana and two
adjacent facilities in Oklahoma City, Oklahoma during the third quarter of fiscal 2010 will depend
on our ability to manage those operations, fully assimilate the operations into our distribution
network, realize opportunities for revenue growth presented by strengthened product offerings and
expanded geographic market coverage, maintain the customer base and eliminate redundant and excess
costs. We may not realize the anticipated benefits or savings from an acquisition in the time
frame anticipated, if at all, or such benefits and savings may include higher costs than
anticipated.
Substantial operating losses may occur if the customers to whom we extend credit or for whom we
guarantee loan or lease obligations fail to repay us.
In the ordinary course of business, we extend credit, including loans, to our food
distribution customers, and provide financial assistance to some customers by guaranteeing their
loan or lease obligations. We also lease store sites for sublease to independent retailers.
Generally, our loans and other financial accommodations are extended to small businesses that are
unrated and may have limited access to conventional financing. As of January 1, 2011, we had
loans, net of reserves, of $25.6 million outstanding to 33 of our food distribution customers and
had guaranteed outstanding debt and lease obligations of food distribution customers totaling $9.4
million. In the normal course of business, we also sublease retail properties and assign retail
property leases to third parties. As of January 1, 2011, the present value of our maximum
contingent liability exposure, net of reserves, with respect to subleases and assigned leases was
$22.8 million and $8.9 million, respectively. While we seek to obtain security interests and other
credit support in connection with the financial accommodations we extend, such collateral may not
be sufficient to cover our exposure. Greater than expected losses from existing or future credit
extensions, loans, guarantee commitments or sublease arrangements could negatively and potentially
materially impact our operating results and financial condition.
Changes in vendor promotions or allowances, including the way vendors target their promotional
spending, and our ability to effectively manage these programs could significantly impact our
margins and profitability.
We engage in a wide variety of promotional programs cooperatively with our vendors. The
nature of these programs and the allocation of dollars among them evolve over time as the parties
assess the results of specific promotions and plan for future promotions. These programs require
careful management in order for us to maintain or improve margins while at the same time driving
sales for us and for the vendors. A reduction in overall promotional spending or a shift in
promotional spending away from certain types of promotions that we have historically utilized could
have a significant impact on our gross profit margin and profitability. Our ability to anticipate
and react to changes in promotional spending by, among other things, planning and implementing
alternative programs that are expected to be mutually beneficial to the manufacturers and us, will
be an important factor in maintaining or improving margins and profitability. If we are unable to
effectively manage these programs, it could have a material adverse effect on our results of
operations and financial condition.
Our debt instruments include financial and other covenants that limit our operating flexibility and
may affect our future business strategies and operating results.
Covenants in the documents governing our outstanding or future debt, or our future debt
levels, could limit our operating and financial flexibility. Our ability to respond to market
conditions and opportunities as well as capital needs could be constrained by the degree to which
we are leveraged, by changes in the availability or cost of capital, and by contractual limitations
on the degree to which we may, without the consent of our lenders, take actions such as engaging in
mergers, acquisitions or divestitures, incurring additional debt, making capital expenditures,
repurchasing shares of our stock and making investments, loans or advances. If needs or
opportunities were identified that would require financial resources beyond existing resources,
obtaining those
13
resources could increase our borrowing costs, further reduce financial flexibility,
require alterations in strategies and affect future operating results.
Legal, governmental, legislative or administrative proceedings, disputes or actions that result in
adverse outcomes or unfavorable changes in government regulations may affect our businesses and
operating results.
Adverse outcomes in litigation, governmental, legislative or administrative proceedings and/or
other disputes may result in significant liability to the Company and affect our profitability or
impose restrictions on the manner in which we conduct our business. Our businesses are also
subject to various federal, state and local laws and regulations with which we must comply.
Changes in applicable laws and regulations that impose additional requirements or restrictions on
the manner in which we operate our businesses could increase our operating costs.
Failure of our internal control over financial reporting could materially impact our business and
results.
The Companys management is responsible for establishing and maintaining adequate internal
control over financial reporting. An internal control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. Because of the inherent limitations in all internal control systems, internal
control over financial reporting may not prevent or detect misstatements. Any failure to maintain
an effective system of internal control over financial reporting could limit our ability to report
our financial results accurately and timely or to detect and prevent fraud, and could expose us to
litigation or adversely affect the market price of our common stock.
Changes in accounting standards could materially impact our results.
Generally accepted accounting principles and related accounting pronouncements, implementation
guidelines, and interpretations for many aspects of our business, such as accounting for insurance
and self-insurance, inventories, goodwill and intangible assets, store closures, leases, income
taxes and share-based
payments, are highly complex and involve subjective judgments. Changes in these rules or
their interpretation could significantly change or add significant volatility to our reported
earnings without a comparable underlying change in cash flow from operations.
We may experience technology failures which could have a material adverse effect on our business.
We have large, complex information technology systems that are important to our business
operations. Although we have an off-site disaster recovery center and have installed security
programs and procedures, security could be compromised and technology failures and systems
disruptions could occur. This could result in a loss of sales or profits or cause us to incur
significant costs, including payments to third parties for damages.
Severe weather and natural disasters can adversely impact our operations, our suppliers or the
availability and cost of products we purchase.
Severe weather conditions and natural disasters could damage our properties and adversely
impact the geographic areas where we conduct our business. Severe weather and natural disasters
could also affect the suppliers from whom we procure products and could cause disruptions in our
operations and affect our supply chain capabilities. In addition, unseasonably adverse climatic
conditions that impact growing conditions and the crops of food producers may adversely affect the
availability or cost of certain products.
Unions may attempt to organize our employees.
While our management believes that our employee relations are good, we cannot be assured that
we will not experience pressure from labor unions or become the target of campaigns similar to
those faced by our competitors. The potential for unionization could increase if the United States
Congress passes the Federal Employee Free Choice Act legislation. We have always respected our
employees right to unionize or not to unionize. However, the unionization of a significant
portion of our workforce could increase our overall costs at the affected locations and adversely
affect our flexibility to run our business in the most efficient manner to
14
remain competitive or
acquire new business. In addition, significant union representation would require us to negotiate
wages, salaries, benefits and other terms with many of our employees collectively and could
adversely affect our results of operations by increasing our labor costs or otherwise restricting
our ability to maximize the efficiency of our operations.
Costs related to a multi-employer pension plan, which has liabilities in excess of plan assets, may
have a material adverse effect on the Companys financial condition and results of operations.
The Company participates in the Central States Southeast and Southwest Areas Pension Funds
(CSS or the plan), a multi-employer pension plan, for certain unionized employees. The
Companys contributions to the plan may escalate in future years should we withdraw from the plan
or factors outside the Companys control, including the bankruptcy or insolvency of other
participating employers, actions taken by trustees who manage the plan, government regulations, or
a funding deficiency in the plan. Escalating costs associated with the plan may have a material
adverse effect on the Companys financial condition and results of operations.
CSS adopted a rehabilitation plan as a result of its actuarial certification for the plan year
beginning January 1, 2008 which placed the plan in critical status. The Actuarial Certification of
Plan Status as of January 1, 2010 certified that the Central States Pension Fund remains in
critical status with a funded percentage of 63.1%. The plan adopted an updated rehabilitation plan
effective December 31, 2010 which implements additional measures to improve the plans funded
level, including establishing an increased minimum retirement age and actuarially adjusting certain
pre-age 65 benefits for participants who retire after July 1, 2011. Despite these changes, we can
make no assurances of the extent to which the updated rehabilitation plan will improve the funded
status of the plan.
Effective July 9, 2009, the trustees of CSS formalized a decision to terminate the
participation of YRC Worldwide, Inc. (formerly Yellow Freight and Roadway Express, YRC) and USF
Holland, Inc. from
the pension fund. Under an agreement between the Teamsters and YRC dated September 24, 2010,
YRC would resume participation in the plan in July 2011 at a reduced contribution rate. It is our
understand that the Trustees of the plan have not yet agreed to accept this agreement. At this
time, there is no change to the funding obligations due from other participating employers in the
fund as a result of this termination; however, further developments may necessitate a reevaluation
of the funding obligations at some point in the future.
The underfunding of the plan 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 liability. Any
adjustment for withdrawal liability will be recorded when it is probable that a liability exists
and can be reasonably estimated.
Increases in employee benefit costs and other labor relations issues may lead to labor disputes and
disruption of our businesses.
If we are unable to control health care, pension and wage costs, or gain operational
flexibility under our collective bargaining agreements, we may experience increased operating costs
and an adverse impact on future results of operations. There can be no assurance that the Company
will be able to negotiate the terms of any expiring or expired agreement in a manner that is
favorable to the Company. Therefore, potential work disruptions from labor disputes could result,
which may affect future revenues and profitability.
We are subject to the risk of product liability claims, including claims concerning food and
prepared food products.
The sale of food and prepared food products for human consumption may involve the
risk of injury. Injuries may result from tampering by unauthorized third parties, product
contamination or spoilage, including the presence of foreign objects, substances, chemicals, other
agents, or residues introduced during the growing, storage, handling and transportation phases. We
cannot be sure that consumption of products we distribute and sell will not cause a health-related
illness in the future or that we will not be subject to claims or lawsuits relating to such
matters.
15
Negative publicity related to these types of concerns, or related to product contamination or
product tampering, whether valid or not, might negatively impact demand for products we distribute
and sell, or cause production and delivery disruptions. We may need to recall products if any of
these products become unfit for consumption. Costs associated with these potential actions could
adversely affect our operating results.
Threats or potential threats to security may adversely affect our business.
Threats or acts of terror, data theft, information espionage, or other criminal activity
directed at the food industry, the transportation industry, or computer or communications systems,
including security measures implemented in recognition of actual or potential threats, could
increase security costs and adversely affect our operations.
We depend upon vendors to supply us with quality merchandise at the right time and at the right price.
We depend heavily on our ability to purchase merchandise in sufficient quantities at
competitive prices. We have no assurances of continued supply, pricing, or access to new products
and any vendor could at any time change the terms upon which it sells to us or discontinue selling
to us. Sales demands may lead to insufficient in-stock positions of our merchandise.
Significant changes in our ability to obtain adequate product supplies due to weather, food
contamination, regulatory actions, labor supply, or product vendor defaults or disputes that limit
our ability to procure products for sale to customers could have an adverse effect on our operating
results.
Maintaining our reputation and corporate image is essential to our business success.
Our success depends on the value and strength of our corporate name and reputation. Our name,
reputation and image are integral to our business as well as to the implementation of our
strategies for expanding our business. Our business, prospects, financial condition and results
of operations could be adversely affected if our public image or reputation were to be tarnished by
negative publicity including dissemination via print, broadcast and social media and other forms of
Internet-based communications. Adverse publicity about regulatory or legal action against us could
damage our reputation and image, undermine our customers confidence and reduce long-term demand
for our products and services, even if the regulatory or legal action is unfounded or not material
to our operations. Any of these events could have a negative impact on our results of operations
and financial condition.
The foregoing discussion of risk factors is not exhaustive and we do not undertake to revise
any forward-looking statement to reflect events or circumstances that occur after the date the
statement is made.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our principal executive offices are located in Minneapolis, Minnesota and consist of
approximately 135,400 square feet of office space in a building that we own.
Military Segment
The table below lists the locations and sizes of our facilities exclusively used in our
military distribution business as of January 1, 2011. Unless otherwise indicated, we own each of
these distribution centers. Leased locations for our military segment have original lease terms
ranging from five to 20 years plus renewal options ranging up to five years. The military segment
lease expirations range from December 2011 to November 2029.
The lease that expires in December 2011 pertains to our Junction City, Kansas facility which
requires lease payments be made to the holders of outstanding industrial revenue bonds. As of
January 1, 2011, all of
16
the outstanding industrial revenue bonds are held by the Company, and upon
expiration of the lease term, the Company will take title to the property upon redemption of the
outstanding bonds.
|
|
|
|
|
|
|
Approx. Size |
Location |
|
(Square Feet) |
Norfolk, Virginia (2) |
|
|
756,200 |
|
Jessup, Maryland (1) |
|
|
115,200 |
|
Junction City, Kansas (1) (3) |
|
|
132,000 |
|
Pensacola, Florida |
|
|
355,900 |
|
San Antonio, Texas |
|
|
486,800 |
|
Columbus, Georgia (1) (3) |
|
|
531,900 |
|
Bloomington, Indiana (4) |
|
|
302,600 |
|
Oklahoma City, Oklahoma (5) |
|
|
544,200 |
|
|
|
|
|
|
Total Square Footage |
|
|
3,224,800 |
|
|
|
|
|
|
|
|
|
(1) |
|
Leased facility. |
|
(2) |
|
Leased facility as of January 1, 2011, however, the property was purchased from the landlord
on January 3, 2011. Please see Part 2, Item 8, Note 19 Other Information of this Form
10-K for further information regarding the purchase of this property. |
|
(3) |
|
Leased locations requiring periodic lease payments to the holders of outstanding industrial
revenue bonds. As of January 1, 2011, all outstanding industrial revenue bonds associated
with these locations were held by the Company. |
|
(4) |
|
Purchased during the third quarter of fiscal 2010 and became operational during the fourth
quarter of fiscal 2010. |
|
(5) |
|
Two adjacent properties purchased during the third quarter of fiscal 2010 which are scheduled
to become operational during fiscal 2012. |
Food Distribution Segment
The table below lists, as of January 1, 2011, the locations and sizes of our distribution
centers primarily used in our food distribution operations. Unless otherwise indicated, we own
each of these distribution centers. Leased locations of our food distribution segment have
original lease terms ranging from 15 to 20 years plus renewal options ranging up to five years.
The food distribution segment lease expirations range from July 2015 to July 2016.
17
|
|
|
|
|
|
|
Approx. Size |
Location |
|
(Square Feet) |
Midwest Region: |
|
|
|
|
Omaha, Nebraska |
|
|
626,900 |
|
Cedar Rapids, Iowa |
|
|
351,900 |
|
St. Cloud, Minnesota |
|
|
329,000 |
|
Sioux Falls, South Dakota (2) |
|
|
275,400 |
|
Fargo, North Dakota |
|
|
288,800 |
|
Rapid City, South Dakota (3) |
|
|
195,100 |
|
Minot, North Dakota |
|
|
185,200 |
|
|
|
|
|
|
Southeast Region: |
|
|
|
|
Lumberton, North Carolina (1) |
|
|
336,500 |
|
Statesboro, Georgia (1) |
|
|
230,500 |
|
Bluefield, Virginia |
|
|
187,500 |
|
|
|
|
|
|
Great Lakes Region: |
|
|
|
|
Bellefontaine, Ohio |
|
|
666,000 |
|
Lima, Ohio (4) |
|
|
617,000 |
|
Westville, Indiana |
|
|
631,900 |
|
Cincinnati, Ohio |
|
|
403,300 |
|
|
|
|
|
|
|
|
|
|
|
Total Square Footage |
|
|
5,325,000 |
|
|
|
|
|
|
|
|
|
(1) |
|
Leased facility. |
|
(2) |
|
Includes 79,300 square feet that we lease. |
|
(3) |
|
Includes 8,000 square feet that we lease. |
|
(4) |
|
Includes 99,500 square feet that we lease. |
Retail Segment
The table below contains selected information regarding our 52 corporate-owned stores as of
January 1, 2011. We own the facilities of 22 of these stores and lease the facilities of 30 of
these stores.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
Average |
|
Banner |
|
Stores |
|
|
Areas of Operation |
|
|
Square Feet |
|
Sun Mart |
|
|
20 |
|
|
|
CO, MN, ND, NE |
|
|
33,359 |
|
Econofoods |
|
|
16 |
|
|
|
IA, MN, SD, WI |
|
|
32,711 |
|
AVANZA |
|
|
5 |
|
|
|
CO, NE |
|
|
34,945 |
|
Family Thrift Center |
|
|
4 |
|
|
|
SD |
|
|
48,449 |
|
Family Fresh Market |
|
|
2 |
|
|
|
WI |
|
|
48,776 |
|
Pick n Save |
|
|
2 |
|
|
|
OH |
|
|
49,588 |
|
Prairie Market |
|
|
1 |
|
|
|
SD |
|
|
29,480 |
|
Wholesale Food Outlet |
|
|
1 |
|
|
|
IA |
|
|
19,620 |
|
Other Stores |
|
|
1 |
|
|
|
MN |
|
|
3,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table excludes three corporate-owned stand-alone pharmacies and one convenience store. As
of January 1, 2011, the aggregate square footage of our 52 retail grocery stores totaled 1,808,393
square feet.
ITEM 3. LEGAL PROCEEDINGS
Roundys Supermarkets, Inc. v. Nash Finch
On February 11, 2008, Roundys Supermarkets, Inc. (Roundys) filed suit against us claiming
we breached the Asset Purchase Agreement (APA), entered into in connection with our acquisition
of certain
18
distribution centers and other assets from Roundys, by not paying approximately $7.9
million that Roundys claimed was due under the APA as a purchase price adjustment. We answered
the complaint denying any payment was due to Roundys and asserted counterclaims against Roundys
for, among other things, breach of contract, misrepresentation, and breach of the duty of good
faith and fair dealing. In our counterclaim we demanded damages from Roundys in excess of $18.0
million.
On September 14, 2009, we entered into a settlement agreement with Roundys that fully
resolved all claims brought in the lawsuit. Under the terms of the settlement agreement, both
parties agreed to dismiss their claims against the other in exchange for a release of claims.
Neither party was required to pay any money to the other. We recorded a $7.6 million gain in
fiscal 2009 which represented the reversal of the liability we had recorded in conjunction with the
disputed APA purchase price adjustment.
Other
We are also engaged from time-to-time in routine legal proceedings incidental to our business.
We do not believe that these routine legal proceedings, taken as a whole, will have a material
impact on our business or financial condition.
ITEM 4. RESERVED
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is quoted on the NASDAQ Global Select Market and currently trades under the
symbol NAFC. The following table sets forth, for each of the calendar periods indicated, the range
of high and low closing sales prices for our common stock as reported by the NASDAQ Global Select
Market, and the quarterly cash dividends paid per share of common stock. At February 22, 2011,
there were 1,822 stockholders of record.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
2010 |
|
2009 |
|
Per Share |
|
|
High |
|
Low |
|
High |
|
Low |
|
2010 |
|
2009 |
First Quarter |
|
$ |
37.66 |
|
|
$ |
32.87 |
|
|
$ |
45.70 |
|
|
$ |
27.16 |
|
|
$ |
0.18 |
|
|
$ |
0.18 |
|
Second Quarter |
|
|
38.10 |
|
|
|
33.65 |
|
|
|
34.36 |
|
|
|
27.69 |
|
|
$ |
0.18 |
|
|
$ |
0.18 |
|
Third Quarter |
|
|
43.62 |
|
|
|
34.20 |
|
|
|
30.75 |
|
|
|
26.28 |
|
|
$ |
0.18 |
|
|
$ |
0.18 |
|
Fourth Quarter |
|
|
43.78 |
|
|
|
36.08 |
|
|
|
37.49 |
|
|
|
28.00 |
|
|
$ |
0.18 |
|
|
$ |
0.18 |
|
On March 1, 2011, the Nash Finch Board of Directors declared a cash dividend of
$0.18 per common share, payable on March 25, 2011, to stockholders of record as of March 11, 2011.
Issuer Purchases of Equity Securities
The following table provides information about shares of common stock the Company acquired
during the fourth quarter of fiscal 2010:
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) Total number |
|
|
|
|
|
|
|
|
|
|
|
|
of shares |
|
(d) Maximum |
|
|
(a) Total |
|
|
|
|
|
purchased as part |
|
amount that |
|
|
number of |
|
(b) Average |
|
of publicly |
|
may be spent |
|
|
shares |
|
price paid per |
|
announced plans |
|
under plans or |
Period |
|
purchased (1) |
|
share (1) |
|
or programs (1) |
|
programs (1) |
Period 13 (December 5, 2010 to January 1, 2011) |
|
|
60,499 |
|
|
$ |
41.55 |
|
|
|
60,499 |
|
|
$ |
|
|
|
|
|
(1) |
|
On November 10, 2009, our Board of Directors approved a share repurchase program to
spend up to $25.0 million to purchase shares of the Companys common stock. The program
took effect on November 16, 2009 and expired on December 31, 2010, during which time we
repurchased 673,974 shares for approximately $23.8 million. |
Total Shareholder Return Graph
The line graph below compares the cumulative total shareholder return on the Companys
common stock for the last five fiscal years with cumulative total return on the S&P SmallCap 600
Index and the peer group index described below. This graph assumes a $100 investment in each of
Nash Finch Company, the S&P SmallCap 600 Index and the peer group index at the close of trading on
December 31, 2005, and also assumes the reinvestment of all dividends. The stock price performance
shown below is not necessarily indicative of future performance.
The peer group represented in the line graph above includes the following nine publicly traded
companies: SuperValu Inc., Arden Group, Inc., The Great Atlantic & Pacific Tea Company, Inc.,
Ingles Markets, Incorporated, Ruddick Corporation, Spartan Stores, Inc., United Natural Foods,
Inc., Weis Markets, Inc. and Core-Mark Holding Company, Inc. The peer group cumulative return is
weighted by market capitalization of each peer company as of the beginning of the five-year
performance period. The decline of the peer group initial investment is representative of the
bankruptcy filing of The Great Atlantic & Pacific Tea Company, Inc. during fiscal 2010 and a
significant decline in the value of the common stock of SuperValu, Inc.
From time-to-time, the peer group companies have changed due to merger and acquisition
activity, bankruptcy filings, company delistings and other similar occurrences. There were no
changes to the peer group during fiscal 2010.
The performance graph above is being furnished solely to accompany this Annual Report on Form
10-K pursuant to Item 201(e) of Regulation S-K, is not being filed for purposes of Section 18 of
the Securities
20
Exchange Act of 1934, as amended, and is not to be incorporated by reference into
any filing of the Company, whether made before or after the date hereof, regardless of any general
incorporation language in such filing.
21
ITEM 6. SELECTED FINANCIAL DATA
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Summary of Operations
Five years ended January 1, 2011 (not covered by Independent Auditors Report)
(Dollar amounts in thousands except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
2009 (1) |
|
2008 |
|
2007 |
|
2006 |
|
|
(52 Weeks) |
|
(52 Weeks) |
|
(53 Weeks) |
|
(52 Weeks) |
|
(52 Weeks) |
Results of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
4,991,979 |
|
|
$ |
5,212,655 |
|
|
$ |
4,633,494 |
|
|
$ |
4,464,035 |
|
|
$ |
4,581,563 |
|
Cost of sales |
|
|
4,591,191 |
|
|
|
4,793,967 |
|
|
|
4,226,545 |
|
|
|
4,066,381 |
|
|
|
4,179,741 |
|
|
|
|
Gross profit |
|
|
400,788 |
|
|
|
418,688 |
|
|
|
406,949 |
|
|
|
397,654 |
|
|
|
401,822 |
|
Selling, general and administrative |
|
|
269,140 |
|
|
|
287,328 |
|
|
|
288,263 |
|
|
|
280,818 |
|
|
|
319,678 |
|
Gains on sale of real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,867 |
) |
|
|
(1,130 |
) |
Special charges |
|
|
|
|
|
|
6,020 |
|
|
|
|
|
|
|
(1,282 |
) |
|
|
6,253 |
|
Gain on acquisition of a business |
|
|
|
|
|
|
(6,682 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on litigation settlement |
|
|
|
|
|
|
(7,630 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill impairment |
|
|
|
|
|
|
50,927 |
|
|
|
|
|
|
|
|
|
|
|
26,419 |
|
Depreciation and amortization |
|
|
36,119 |
|
|
|
40,603 |
|
|
|
38,429 |
|
|
|
38,882 |
|
|
|
41,451 |
|
Interest expense |
|
|
23,403 |
|
|
|
24,372 |
|
|
|
26,466 |
|
|
|
28,088 |
|
|
|
30,840 |
|
Income tax expense |
|
|
21,185 |
|
|
|
20,972 |
|
|
|
20,646 |
|
|
|
16,984 |
|
|
|
4,198 |
|
|
|
|
Earnings (loss) from continuing operations |
|
|
50,941 |
|
|
|
2,778 |
|
|
|
33,145 |
|
|
|
36,031 |
|
|
|
(25,887 |
) |
Net earnings from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160 |
|
Cumulative effect of change in accounting
principle, net of income tax (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
169 |
|
|
|
|
Net earnings (loss) |
|
$ |
50,941 |
|
|
$ |
2,778 |
|
|
$ |
33,145 |
|
|
$ |
36,031 |
|
|
$ |
(25,558 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
|
$ |
3.97 |
|
|
$ |
0.21 |
|
|
$ |
2.57 |
|
|
$ |
2.67 |
|
|
$ |
(1.91 |
) |
Diluted earnings (loss) per share |
|
$ |
3.86 |
|
|
$ |
0.21 |
|
|
$ |
2.52 |
|
|
$ |
2.64 |
|
|
$ |
(1.91 |
) |
Cash dividends declared per common share |
|
$ |
0.72 |
|
|
$ |
0.72 |
|
|
$ |
0.72 |
|
|
$ |
0.72 |
|
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax earnings (loss) from continuing
operations as a percent of sales |
|
|
1.44 |
% |
|
|
0.46 |
% |
|
|
1.16 |
% |
|
|
1.19 |
% |
|
|
(0.47 |
)% |
Net earnings (loss) as a percent of sales |
|
|
1.02 |
% |
|
|
0.05 |
% |
|
|
0.72 |
% |
|
|
0.81 |
% |
|
|
(0.56 |
)% |
Effective income tax rate |
|
|
29.4 |
% |
|
|
88.3 |
% |
|
|
38.4 |
% |
|
|
32.0 |
% |
|
|
19.4 |
% |
Current assets |
|
$ |
591,510 |
|
|
$ |
557,816 |
|
|
$ |
467,951 |
|
|
$ |
477,934 |
|
|
$ |
457,053 |
|
Current liabilities |
|
$ |
293,242 |
|
|
$ |
308,509 |
|
|
$ |
297,729 |
|
|
$ |
282,357 |
|
|
$ |
278,222 |
|
Net working capital |
|
$ |
298,268 |
|
|
$ |
249,307 |
|
|
$ |
170,222 |
|
|
$ |
195,577 |
|
|
$ |
178,831 |
|
Ratio of current assets to current liabilities |
|
|
2.02 |
|
|
|
1.81 |
|
|
|
1.57 |
|
|
|
1.69 |
|
|
|
1.64 |
|
Total assets |
|
$ |
1,050,675 |
|
|
$ |
999,536 |
|
|
$ |
952,546 |
|
|
$ |
949,267 |
|
|
$ |
952,480 |
|
Capital expenditures |
|
$ |
59,295 |
|
|
$ |
30,402 |
|
|
$ |
31,955 |
|
|
$ |
21,419 |
|
|
$ |
27,469 |
|
Long-term obligations (long-term debt and
capitalized lease obligations) |
|
$ |
311,186 |
|
|
$ |
279,032 |
|
|
$ |
248,026 |
|
|
$ |
280,010 |
|
|
$ |
315,321 |
|
Stockholders equity |
|
$ |
377,004 |
|
|
$ |
350,559 |
|
|
$ |
349,019 |
|
|
$ |
331,600 |
|
|
$ |
313,113 |
|
Stockholders equity per share (3) |
|
$ |
31.14 |
|
|
$ |
27.36 |
|
|
$ |
27.23 |
|
|
$ |
25.26 |
|
|
$ |
23.39 |
|
Return on stockholders equity (4) |
|
|
13.51 |
% |
|
|
0.79 |
% |
|
|
9.50 |
% |
|
|
10.87 |
% |
|
|
(8.27 |
)% |
Common stock high price (5) |
|
$ |
43.78 |
|
|
$ |
45.70 |
|
|
$ |
46.33 |
|
|
$ |
51.29 |
|
|
$ |
31.74 |
|
Common stock low price (5) |
|
$ |
32.87 |
|
|
$ |
26.28 |
|
|
$ |
30.97 |
|
|
$ |
26.89 |
|
|
$ |
19.42 |
|
|
|
|
(1) |
|
Information presented for fiscal 2009 reflects our acquisition on January
31, 2009, from GSC Enterprises, Inc., of three wholesale food distribution
centers which service military commissaries and exchanges. More generally,
discussion regarding the comparability of information presented in the table
above or material uncertainties that could cause the selected financial data not
to be indicative of future financial condition or results of operations can be
found in Part 1, Item 1A of this report, Risk Factors, Part II, Item 7 of
this report, Managements Discussion and Analysis of Financial Condition and
Results of Operations and Part II, Item 8 of this report in our Consolidated
Financial Statements and notes thereto. |
|
(2) |
|
Effect of adoption of revisions to ASC Topic 718 in fiscal 2006. |
|
(3) |
|
Based on outstanding shares at year-end. |
|
(4) |
|
Return based on continuing operations. |
|
(5) |
|
High and low closing sales price on NASDAQ. |
22
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
In terms of revenue, we are the second largest publicly traded wholesale food distributor in
the United States serving the military commissary and exchange systems and the retail grocery
industry. Our business consists of three primary operating segments: military food distribution,
food distribution and retail.
Our military segment contracts with manufacturers to distribute a wide variety of grocery
products to military commissaries and exchanges located in the United States and the District of
Columbia, and in Europe, Puerto Rico, Cuba, the Azores and Egypt. We have over 30 years of
experience acting as a distributor to U.S. military commissaries and exchanges. On January 31,
2009, we completed the purchase from GSC Enterprises, Inc., of substantially all of the assets
relating to three wholesale food distribution centers located in San Antonio, Texas, Pensacola,
Florida and Junction City, Kansas, including all inventory and customer contracts related to the
purchased facilities (GSC acquisition). On December 1, 2009, we purchased a facility in Columbus,
Georgia which began servicing military commissaries and exchanges in the third quarter of fiscal
2010. During the third quarter of fiscal 2010, we purchased a facility in Bloomington, Indiana and
two adjacent facilities in Oklahoma City, Oklahoma for expansion of our military food distribution
business. The Bloomington, Indiana facility became operational during the fourth quarter of fiscal
2010, while the Oklahoma City, Oklahoma facilities are scheduled to become operational during fiscal 2012. In addition, we purchased the real estate associated with our Pensacola, Florida
facility, which had previously been a leased facility, during the third quarter of fiscal 2010.
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. During the third quarter of fiscal 2010, we closed our
food distribution center in Bridgeport, Michigan at the end of its lease term and transitioned the
majority of the business to our Lima, Ohio distribution center.
Our retail segment operated 52 corporate-owned stores primarily in the Upper Midwest as of
January 1, 2011. Primarily due to highly competitive conditions in which supercenters and other
alternative formats compete for price conscious customers, we closed or sold four retail stores in
2008, four retail stores in 2009 and two retail stores in 2010. We are implementing initiatives of
varying scope and duration with a view toward improving our response to and performance under these
highly competitive conditions. These initiatives include designing and reformatting some of our
retail stores into alternative formats to increase overall retail sales performance. As we
continue to assess the impact of performance improvement initiatives and the operating results of
individual stores, we may need to recognize additional impairments of long-lived assets and
goodwill associated with our retail segment, and may incur restructuring or other charges in
connection with closure or sales activities. The retail segment yields a higher gross profit
percent of sales and higher selling, general and administrative (SG&A) expenses as a percent of
sales compared to our food distribution and military segments. Thus, changes in sales of the
retail segment can have a disproportionate impact on consolidated gross profit and SG&A as compared
to similar changes in sales in our food distribution and military segments.
Results of Operations
The following discussion summarizes our operating results for fiscal 2010 compared to fiscal
2009 and fiscal 2009 compared to fiscal 2008. However, fiscal 2008 results are not directly
comparable to fiscal 2009 or fiscal 2010 because fiscal 2008 contained an additional week.
Sales
The following tables summarize our sales activity for fiscal 2010, 2009 and 2008. Certain
prior year sales amounts for our food distribution and military segments below have been revised to
conform to our current year presentation. Please refer to Part II, Item 8 in this report under
Note (18) Segment Reporting of this Form 10-K for additional information regarding our segment
reporting revision.
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
Percent |
|
|
Percent |
|
|
|
|
|
|
Percent |
|
|
Percent |
|
|
|
|
|
|
Percent |
|
(in millions) |
|
Sales |
|
|
of Sales |
|
|
Change |
|
|
Sales |
|
|
of Sales |
|
|
Change |
|
|
Sales |
|
|
of Sales |
|
Segment Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Military |
|
$ |
2,290.0 |
|
|
|
45.9 |
% |
|
|
1.6 |
% |
|
$ |
2,254.4 |
|
|
|
43.2 |
% |
|
|
45.0 |
% |
|
$ |
1,555.2 |
|
|
|
33.6 |
% |
Food Distribution |
|
|
2,183.7 |
|
|
|
43.7 |
% |
|
|
(8.5 |
)% |
|
|
2,385.9 |
|
|
|
45.8 |
% |
|
|
(3.6 |
)% |
|
|
2,475.8 |
|
|
|
53.4 |
% |
Retail |
|
|
518.3 |
|
|
|
10.4 |
% |
|
|
(9.4 |
)% |
|
|
572.3 |
|
|
|
11.0 |
% |
|
|
(5.0 |
)% |
|
|
602.5 |
|
|
|
13.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales |
|
$ |
4,992.0 |
|
|
|
100.0 |
% |
|
|
(4.2 |
)% |
|
$ |
5,212.6 |
|
|
|
100.0 |
% |
|
|
12.5 |
% |
|
$ |
4,633.5 |
|
|
|
100.0 |
% |
|
|
|
|
|
|
|
The following table provides comparable sales for fiscal 2009 in comparison to fiscal
2008 by excluding the first week of sales from fiscal 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008 |
|
|
|
|
|
|
|
|
|
|
Fiscal 2008 |
|
|
Comparable |
|
|
Comparable |
|
(in millions) |
|
Fiscal 2008 |
|
|
Week 1 |
|
|
52 Weeks of |
|
|
Percent Change |
|
Segment Sales: |
|
Sales |
|
|
Sales |
|
|
Sales |
|
|
2009 to 2008 |
|
Military |
|
$ |
1,555.2 |
|
|
$ |
24.7 |
|
|
$ |
1,530.5 |
|
|
|
47.3 |
% |
Food Distribution |
|
|
2,475.8 |
|
|
|
41.6 |
|
|
|
2,434.2 |
|
|
|
(2.0 |
)% |
Retail |
|
|
602.5 |
|
|
|
11.2 |
|
|
|
591.3 |
|
|
|
(3.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales |
|
$ |
4,633.5 |
|
|
$ |
77.5 |
|
|
$ |
4,556.0 |
|
|
|
14.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company sales declined 4.2% during fiscal 2010 as compared to the comparable prior
year period. However, excluding the additional sales of $59.4 million attributable to acquired
military locations during the first quarter 2010 and the previously announced transition of a
portion of a food distribution customer buying group to another supplier of $95.2 million during
the second quarter 2010, total Company comparable sales declined 3.6% during fiscal 2010.
Total Company sales increased 12.5% during fiscal 2009 in comparison to fiscal 2008 and
increased 14.4% in comparison to fiscal 2008 after excluding the additional week of sales in fiscal
2008. Excluding the $683.3 million of sales attributable to the acquisition of three military
distribution centers on January 31, 2009 and the extra week of sales in fiscal 2008, total company
comparable sales for fiscal 2009 decreased 0.6%.
Fiscal 2010 military sales increased 1.6% in comparison to the fiscal 2009. However,
excluding the non-comparable sales attributable to the acquired locations during the first quarter
2010 of $59.4 million, fiscal 2010 comparable military segment sales decreased by 1.1% in
comparison to the prior year. The comparable decrease in fiscal 2010 military sales is due to a
1.4% decrease in domestic sales which was partially offset by a 0.8% increase in sales overseas.
Fiscal 2009 military sales increased 45.0% in comparison to fiscal 2008 and increased 47.3% in
comparison to fiscal 2008 after excluding the additional week of sales in fiscal 2008. However,
after excluding the sales attributable to the acquired locations and the additional week of sales
in fiscal 2008, comparable military segment sales increased by 2.7% in comparison to the prior
year. The comparable increase in military segment sales is due to 3.5% stronger sales
domestically.
Domestic and overseas sales represented the following percentages of military segment sales.
Note that the business acquired through the GSC acquisition services domestic military bases only.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
|
2008 |
|
Domestic |
|
|
83.3 |
% |
|
|
83.2 |
% |
|
|
75.2 |
% |
Overseas |
|
|
16.7 |
% |
|
|
16.8 |
% |
|
|
24.8 |
% |
24
Fiscal 2010 food distribution sales decreased 8.5% in comparison to fiscal 2009, which is
primarily attributable to the previously announced transition of a portion of a food distribution
customer buying group to another supplier during the second quarter 2010 which accounted for $95.2
million in sales during fiscal 2009 and a decline in comparable sales to existing customers.
Excluding the impact of the customer transition, food distribution sales declined 4.7%. The
decrease in comparable sales to existing customers was partially attributable to deflation in
certain product categories.
Fiscal 2009 food distribution sales decreased 3.6% in comparison to fiscal 2008 and decreased
2.0% in comparison to fiscal 2008 after excluding the additional week of sales in fiscal 2008.
This decrease was due primarily to a decrease in sales to existing customers which was driven by
deflation in certain perishable categories.
Retail sales for fiscal 2010 decreased 9.4% in comparison to fiscal 2009. The decrease in
retail sales for fiscal 2010 was primarily attributable to a 5.0% decrease in same store sales,
which compare retail sales for stores which were in operation for the same number of weeks in the
comparative periods, and the closure of two stores during the year.
Retail sales for fiscal 2009 decreased 5.0% in comparison to fiscal 2008 and decreased 3.2% in
comparison to fiscal 2008 after excluding the additional week of sales in fiscal 2008. The
decrease in retail sales for fiscal 2009 was primarily attributable to a 2.4% decrease in same
store sales, which compare retail sales for stores which were in operation for the same number of
weeks in the comparative periods, and the closure of four stores during the year.
During fiscal 2010, 2009 and 2008, our corporate store count changed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year |
|
Fiscal Year |
|
Fiscal Year |
|
|
2010 |
|
2009 |
|
2008 |
Number of stores at beginning of year |
|
|
54 |
|
|
|
57 |
|
|
|
59 |
|
New stores |
|
|
|
|
|
|
1 |
|
|
|
|
|
Acquired stores |
|
|
|
|
|
|
|
|
|
|
2 |
|
Closed or sold stores |
|
|
(2 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of stores at end of year |
|
|
52 |
|
|
|
54 |
|
|
|
57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table excludes corporate-owned stand-alone pharmacies and convenience stores.
Gross Profit
Consolidated gross profit for fiscal 2010 was 8.0% of sales compared to 8.0% for fiscal 2009
and 8.8% for fiscal 2008.
The fiscal 2010 gross profit margin remained flat at 8.0% in comparison to the prior year.
Our fiscal 2010 gross profit margin was positively impacted by 0.2% of sales driven primarily by
higher gross margin performance in our food distribution and military segments. However, our gross
profit margin was negatively affected by 0.2% of sales in fiscal 2010 due to a sales mix shift
between our business segments between the years. This was due to a higher percentage of 2010 sales
occurring in the military segment which have a lower gross profit margin than the retail and food
distribution segments.
Our fiscal 2009 gross profit margin was negatively affected by 0.6% of sales in comparison to
fiscal 2008 due to a sales mix shift between our business segments between the years. This was due
to a higher percentage of 2009 sales occurring in the military segment due to the GSC acquisition
and a lower percentage in the retail and food distribution segments which have a higher gross
profit margin. In addition, high levels of inflation resulted in higher than normal prior year
gross profit margin performance while declines in commodity prices during the current year have had
a negative impact on gross profit performance.
25
Inventory markdown and wind down costs related to retail store closings and retail
markdown adjustments are included in cost of sales and were $0.2 million, $0.2 million and $0.4
million in fiscal 2010, 2009 and 2008, respectively.
Selling, General and Administrative Expense
The following table outlines consolidated SG&A and the significant factors affecting
consolidated SG&A:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
|
|
|
|
|
% of |
|
(in millions except percentages) |
|
Segment |
|
|
|
|
|
|
sales |
|
|
|
|
|
|
sales |
|
|
|
|
|
|
sales |
|
|
|
SG&A |
|
|
|
|
|
$ |
269.1 |
|
|
|
5.4 |
% |
|
|
287.3 |
|
|
|
5.5 |
% |
|
|
288.3 |
|
|
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant factors affecting SG&A: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail store impairments and lease reserves |
|
Corporate overhead |
|
|
0.4 |
|
|
|
0.0 |
% |
|
|
5.3 |
|
|
|
0.1 |
% |
|
|
0.9 |
|
|
|
0.0 |
% |
Reversal of food distribution customers reserves |
|
Food distribution |
|
|
|
|
|
|
0.0 |
% |
|
|
|
|
|
|
0.0 |
% |
|
|
(3.3 |
) |
|
|
-0.1 |
% |
Gain on sale of assets |
|
Retail |
|
|
(0.3 |
) |
|
|
0.0 |
% |
|
|
(0.7 |
) |
|
|
0.0 |
% |
|
|
(0.6 |
) |
|
|
0.0 |
% |
Acquisition and conversion costs |
|
Military |
|
|
1.7 |
|
|
|
0.0 |
% |
|
|
1.9 |
|
|
|
0.0 |
% |
|
|
0.5 |
|
|
|
0.0 |
% |
Share-based compensation over prior year |
|
Corporate overhead |
|
|
|
|
|
|
0.0 |
% |
|
|
1.4 |
|
|
|
0.0 |
% |
|
|
|
|
|
|
0.0 |
% |
Store opening expenses |
|
Retail |
|
|
|
|
|
|
0.0 |
% |
|
|
0.7 |
|
|
|
0.0 |
% |
|
|
|
|
|
|
0.0 |
% |
Food distribution center closing costs |
|
Food distribution |
|
|
0.8 |
|
|
|
0.0 |
% |
|
|
|
|
|
|
0.0 |
% |
|
|
|
|
|
|
0.0 |
% |
Tax consulting fees |
|
Corporate overhead |
|
|
|
|
|
|
0.0 |
% |
|
|
0.4 |
|
|
|
0.0 |
% |
|
|
|
|
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total significant factors affecting SG&A |
|
|
|
|
|
$ |
2.6 |
|
|
|
0.1 |
% |
|
|
9.0 |
|
|
|
0.2 |
% |
|
|
(2.5 |
) |
|
|
-0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated SG&A for fiscal 2010 was 5.4% of sales as compared to 5.5% of sales in
fiscal 2009. Our SG&A margin benefited by 0.2% of sales in fiscal 2010 due to the sales mix shift
between our business segments due to the higher level of military sales relative to the other
business segments in 2010. However, we experienced acquisition and conversion costs of $1.7
million and costs associated with the closing of a food distribution center of $0.8 million that
negatively impacted our SG&A margin during fiscal 2010.
Consolidated SG&A for fiscal 2009 was 5.5% of sales as compared to 6.2% of sales in fiscal
2008. Our SG&A margin benefited by 0.6% of sales in fiscal 2009 due to the sales mix shift between
our business segments due to the higher level of military sales due to the GSC acquisition relative
to the other business segments in 2009. In addition, certain variable employee compensation and
benefit expenses were $11.4 million lower than those incurred during fiscal 2008 which contributed
to a lower SG&A margin during fiscal 2009.
Special Charge
A special charge of $6.0 million was recognized in fiscal 2009 due to asset impairments in our
food distribution segment. The charge included write-downs of $5.5 million to leasehold
improvements and $0.5 million to fixtures and equipment.
Gain on Acquisition of a Business
26
A gain on the acquisition of a business of $6.7 million (net of tax) was recognized during
fiscal 2009 related to the GSC acquisition. The fair value of the identifiable assets acquired and
liabilities assumed of $84.8 million exceeded the fair value of the purchase price of the business
of $78.1 million. Consequently, we reassessed the recognition and measurement of identifiable
assets acquired and liabilities assumed and concluded that the valuation procedures and resulting
measures were appropriate.
Gain on Litigation Settlement
A gain of $7.6 million was recognized in fiscal 2009 related to the settlement of litigation
in connection with our 2005 acquisition of certain distribution centers and other assets from
Roundys Supermarkets, Inc (Roundys). This gain represented the reversal of the liability we
had recorded in connection with this litigation. Please refer to Part II, Item 8 in this report
under Note (15) Commitments and Contingencies of this Form 10-K for additional information.
Goodwill Impairment
Annually, we perform an impairment test of goodwill during the fourth quarter based on
conditions as of the end of our third fiscal quarter in accordance with Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC) Topic 350 (ASC 350). No
goodwill impairment changes were recorded during fiscal 2010 or fiscal 2008. We recorded a
goodwill impairment charge of $50.9 million in fiscal 2009 that related to our retail reporting
unit. Please refer to Part II, Item 8 in this report under Note (1) Summary of Significant
Accounting Policies under the caption Goodwill and Intangible Assets of this Form 10-K for
additional information pertaining to our annual goodwill impairment analysis.
Depreciation and Amortization Expense
Depreciation and amortization expense for fiscal 2010, 2009 and 2008 was $36.1 million, $40.6
million and $38.4 million, respectively. The decrease in depreciation and amortization expense for
fiscal 2010 in comparison to fiscal 2009 is attributable to lower depreciation and amortization
expense in our food distribution and retail segments. The increase in depreciation and
amortization expense for fiscal 2009 in comparison to fiscal 2008 was primarily attributable to the
GSC acquisition.
Interest Expense
Interest expense decreased $1.0 million to $23.4 million in fiscal 2010 as compared to $24.4
million in fiscal 2009. Average borrowing levels decreased by $29.1 million from $362.7 million
during fiscal 2009 to $333.6 million during fiscal 2010. The effective interest rate was 4.5% for
fiscal 2010 as compared to 4.6% for fiscal 2009.
Interest expense decreased $2.1 million to $24.4 million in fiscal 2009 as compared to $26.5
million in fiscal 2008. Fiscal 2008 interest expense includes the write-off of deferred financing
costs of $1.0 million associated with the refinancing of our senior secured bank credit facility.
Average borrowing levels increased by $21.1 million from $341.6 million during fiscal 2008 to
$362.7 million during fiscal 2009. The effective interest rate was 4.6% for fiscal 2009 as
compared to 5.4% for fiscal 2008. However, excluding the impact of the write-off of deferred
financing costs, the effective interest rate was 5.1% for fiscal 2008.
The calculation of our effective interest rates excludes non-cash interest required to be
recognized on our senior subordinated convertible notes under ASC Subtopic 470-20. Non-cash
interest expense recognized under ASC 470-20 was $5.3 million, $4.9 million and $4.7 million during
fiscal 2010, 2009 and 2008, respectively. Additionally, the calculation of our average borrowing
levels includes the unamortized equity component of our senior subordinated convertible notes that
is required to be recognized under ASC Subtopic 470-20. The inclusion of the unamortized equity
component brings the basis in our senior subordinated convertible notes to $150.1 million for
purposes of calculating our average borrowing levels, or their aggregate issue price, which we are
required to pay semi-annual cash interest on at a rate of 3.50% until March 15, 2013.
Income Tax Expense
27
The effective tax rate for income from continuing operations was 29.4%, 88.3% and 38.4% for
fiscal 2010, 2009 and 2008, respectively. Income tax expense from continuing operations differed
from amounts computed by applying the federal income tax rate to pre-tax income as a result of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
|
2008 |
Federal statutory tax rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
State taxes, net of federal income tax benefit |
|
|
3.7 |
% |
|
|
4.7 |
% |
|
|
4.0 |
% |
Non-deductible goodwill |
|
|
0.0 |
% |
|
|
73.6 |
% |
|
|
0.0 |
% |
Change in tax contingencies |
|
|
(8.0 |
)% |
|
|
4.4 |
% |
|
|
1.1 |
% |
Gain on litigation settlement |
|
|
0.0 |
% |
|
|
(12.7 |
)% |
|
|
0.0 |
% |
Gain on acquisition of a business |
|
|
0.0 |
% |
|
|
(11.2 |
)% |
|
|
0.0 |
% |
Federal refund claim |
|
|
0.0 |
% |
|
|
(6.8 |
)% |
|
|
0.0 |
% |
Other, net |
|
|
(1.3 |
)% |
|
|
1.3 |
% |
|
|
(1.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
29.4 |
% |
|
|
88.3 |
% |
|
|
38.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The effective tax rate for fiscal 2010 was impacted by the increase in tax reserves of $3.4
million and the reversal of previously unrecognized tax benefits of $13.6 million primarily due to
statute of limitation expirations and audit resolutions. In fiscal 2009, we increased tax reserves
by $2.7 million and reversed previously unrecognized tax benefits of $0.2 million also, primarily
due to state statute of limitation expirations and audit resolutions. Other items impacting the
rate in 2009 include a large non-deductible goodwill charge, the litigation settlement related to
Roundys of $3.0 million, the gain on the acquisition of the GSC assets of $2.7 million, and a
refund on a claim made with the Internal Revenue Service of $1.7 million. The effective tax rate
for fiscal 2008 was impacted by the reversal of previously unrecognized tax benefits of $2.6
million, primarily due to the filing of reports with various taxing authorities which resulted in
the settlement of uncertain tax positions, a refund on a claim made with the Internal Revenue
Service of $1.2 million and an increase in reserves of $2.7 million.
Net Earnings
Net earnings for fiscal 2010 were $50.9 million, or $3.86 per diluted share, compared to net
earnings of $2.8 million, or $0.21 per diluted share, for fiscal 2009, and net earnings of $33.1
million, or $2.52 per diluted share, for fiscal 2008. Net earnings in each of the three years were
affected by a number of events included in the discussion above that affected the comparability of
results.
Liquidity and Capital Resources
Historically, we have financed our capital needs through a combination of internal and
external sources. We expect that cash flow from operations will be sufficient to meet our working
capital needs and enable us to reduce our debt, with temporary draws on our revolving credit line
needed during the year to build inventories for certain holidays. Longer term, we believe that cash
flows from operations, short-term bank borrowings, various types of long-term debt and lease and
equity financing will be adequate to meet our working capital needs, planned capital expenditures
and debt service obligations. There can be no assurance, however, that we will continue to
generate cash flows at current levels as our business is sensitive to trends in consumer spending
at our customer locations and our owned retail food stores, as well as certain factors outside of
our control, including, but not limited to, the current and future state of the U.S. and global
economy, competition, recent and potential future disruptions to the credit and financial markets
in the U.S. and worldwide and continued volatility in food and energy commodities. Please see Part
I, Item 1A Risk Factors of this Form 10-K for a more detailed discussion of potential factors
that may have an impact on our liquidity and capital resources.
The following table summarizes our cash flow activity for fiscal 2010, 2009 and 2008 and
should be read in conjunction with the consolidated statements of cash flows:
28
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2010 |
|
2009 |
|
2008 |
|
Net cash provided by operating activities |
|
$ |
66,116 |
|
|
$ |
102,373 |
|
|
$ |
111,999 |
|
Net cash used in investing activities |
|
|
(57,938 |
) |
|
|
(105,670 |
) |
|
|
(60,414 |
) |
Net cash provided by (used in) financing activities |
|
|
(8,178 |
) |
|
|
3,303 |
|
|
|
(51,623 |
) |
|
|
|
Net change in cash and cash equivalents |
|
$ |
|
|
|
$ |
6 |
|
|
$ |
(38 |
) |
|
|
|
Operating cash flows were $66.1 million for fiscal 2010, a decrease of $36.3 million from
$102.4 million in fiscal 2009. An increase in our investment in our inventories of $47.8 million
during fiscal 2010 as compared to a decline in our inventories of $21.1 million during fiscal 2009
is the primary factor driving the decline in operating cash flows during fiscal 2010 as compared to
fiscal 2009. The increase in our inventories during fiscal 2010 was primarily driven by expansion
activities associated with our military food distribution business. However, the impact our
inventory investment had on our operating cash flows was partially offset by a year-over-year
decline in our accounts receivable of $20.9 million.
Operating cash flows were $102.4 million for fiscal 2009, a decrease of $9.6 million from
$112.0 million in fiscal 2008. The primary reason for the fiscal 2009 decrease in operating cash
flows was our net earnings, after adjusting for reconciling items to convert it to net cash
provided, were $12.2 million lower than in fiscal 2008, which included one additional week or
earnings in comparison to fiscal 2009. In addition, significant changes in operating assets and
liabilities consisted of a $21.1 million decrease in our investment in our inventories during
fiscal 2009 in comparison to a $31.5 million increase during fiscal 2008 which was offset by a
year-over-year increase in our accounts receivable of $23.7 million, a year-over year decrease in
our accrued expenses of $16.3 million, a year-over-year decrease in our accounts payable of $7.1
million and a year-over-year decrease in our income taxes payable of $6.2 million. The year-over
year increase in our accounts receivable was due to a temporary timing difference related to our
military accounts receivable billing cycle that accelerated collections into the last week of
fiscal 2008 and the decrease in year-over-year accrued expense was primarily due to decreases in
certain variable employee compensation and benefit expense accruals.
Cash used for investing activities was $57.9 million in fiscal 2010, which consisted primarily
of additions to property, plant and equipment of $59.3 million. The additions to property, plant
and equipment during fiscal 2010 consisted primarily of expansion activities associated with our
military distribution business, including the purchase of new facilities in Bloomington, Indiana
and Oklahoma City, Oklahoma during the third quarter fiscal 2010, the addition of fixtures and
equipment and conversion activities associated with our Columbus, Georgia facility, and our
purchase of our Pensacola, Florida property during the fourth quarter of fiscal 2010, which had
previously been a leased location. Cash used for investing activities was $105.7 million in fiscal
2009, which was primarily attributable to the GSC acquisition of $78.1 million and additions to
property, plant and equipment of $30.4 million. Cash used for investing activities in fiscal 2008
were $60.4 million and consisted primarily of additions to property, plant and equipment of $32.0
million, loans to customers of $24.1 million and the acquisition of a business, net of cash, for
$6.6 million.
Cash used by financing activities was $8.2 million for fiscal 2010 which consisted primarily
of $22.0 million used to repurchase shares of our common stock and $8.9 million in dividend
payments, which was partially offset by net proceeds of long-term debt of $29.4 million. Cash
provided by financing activities was $3.3 million for fiscal 2009 which consisted primarily of net
proceeds of long-term debt of $29.9 million, a decrease in outstanding checks of $10.1 million and
$9.2 million used to pay dividends on our common stock. Cash used by financing activities was
$51.6 million for fiscal 2008 as $32.0 million was used to pay down long-term debt, $14.3 million
was used to repurchase shares of our common stock and $9.2 million was used to pay dividends on our
common stock.
Share Repurchase
On November 10, 2009, our Board of Directors approved a share repurchase program authorizing
the Company to spend up to $25.0 million to purchase shares of the Companys common stock (2009
Repurchase Program). The 2009 Repurchase Program took effect on November 16, 2009 and expired on
December 31, 2010. During fiscal 2010, we repurchased a total of 643,234 shares for $22.8 million,
at an average price per
29
share of $35.42. During fiscal 2009, we repurchased a total of 30,720 shares for $1.0 million, at
an average price per share of $33.10.
On November 13, 2007, we announced that our Board of Directors had authorized a share
repurchase program to purchase up to 1,000,000 shares of the Companys common stock (2007
Repurchase Program). The 2007 Repurchase Program took effect on November 19, 2007 and concluded
on January 3, 2009. During fiscal 2008 we repurchased 429,082 shares at an average price per share
of $33.44 under the 2007 Repurchase Program.
The average prices per share referenced above include commissions.
Contractual Obligations and Commercial Commitments
The following table summarizes our significant contractual cash obligations as of January 1,
2011, and the expected timing of cash payments related to such obligations in future periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount Committed By Period |
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount |
|
|
|
|
|
|
Fiscal 2012- |
|
|
Fiscal 2014- |
|
|
|
|
(in thousands) |
|
Committed |
|
|
Fiscal 2011 |
|
|
2013 |
|
|
2015 |
|
|
Thereafter |
|
|
Contractual Cash Obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt (1) |
|
$ |
292,936 |
|
|
$ |
670 |
|
|
$ |
155,516 |
|
|
$ |
40 |
|
|
$ |
136,710 |
|
Interest on Long-Term Debt (2) |
|
|
192,314 |
|
|
|
9,428 |
|
|
|
15,168 |
|
|
|
11,086 |
|
|
|
156,632 |
|
Capital Lease Obligations (3) (4) |
|
|
33,413 |
|
|
|
4,826 |
|
|
|
8,800 |
|
|
|
6,760 |
|
|
|
13,027 |
|
Operating Leases (3) |
|
|
86,804 |
|
|
|
20,517 |
|
|
|
32,336 |
|
|
|
18,994 |
|
|
|
14,957 |
|
Benefit Obligations (5) |
|
|
29,804 |
|
|
|
3,212 |
|
|
|
6,008 |
|
|
|
5,803 |
|
|
|
14,781 |
|
Purchase Obligations (6) |
|
|
11,549 |
|
|
|
3,777 |
|
|
|
3,462 |
|
|
|
1,900 |
|
|
|
2,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (7) |
|
$ |
646,820 |
|
|
$ |
42,430 |
|
|
$ |
221,290 |
|
|
$ |
44,583 |
|
|
$ |
338,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Refer to Part II, Item 8 in this report under Note (7) Long-term Debt and Bank
Credit Facilities for additional information regarding long-term debt. |
|
(2) |
|
The interest on long-term debt for periods subsequent to fiscal 2015 reflects our
Senior Subordinated Convertible Debt accreted interest for fiscal 2016 through 2035, should
the convertible debt remain outstanding until maturity. Interest payments assume debt is held
to maturity. For variable rate debt the current interest rates applicable as of January 1,
2011, were assumed for the remainder of the term. |
|
(3) |
|
Lease obligations primarily relate to store locations for our retail segment, as well
as store locations subleased to independent food distribution customers. A discussion of
lease commitments can be found in Part II, Item 8 in this report under Note (12) Leases
in the Notes to Consolidated Financial Statements and under the caption Lease Commitments in
the Critical Accounting Policies section below. |
|
(4) |
|
Includes amounts classified as imputed interest. |
|
(5) |
|
Our benefit obligations include obligations related to third-party sponsored defined
benefit pension and post-retirement benefit plans. For a further discussion see Part II, Item
8 in this report under Note (17) Pension and Other Post-retirement Benefits in the Notes
to Consolidated Financial Statements. |
|
(6) |
|
The amount of purchase obligations shown in the table represents the amount of product
we are contractually obligated to purchase. The majority of our purchase obligations involve
purchase orders made in the ordinary course of business, which are not included in the table
above. Our purchase orders are based on our current needs and are fulfilled by our vendors
within very short time horizons. The purchase obligations shown in this table also exclude
agreements that are cancelable by us without significant penalty, which include contracts for
routine outsourced services. |
|
(7) |
|
Payments for reserved tax contingencies are not included as the timing of specific tax
payments is not determinable. |
We have also made certain commercial commitments that extend beyond 2010. These
commitments include standby letters of credit and guarantees of certain food distribution customer
debt and lease obligations. The following summarizes these commitments as of January 1, 2011:
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Commitment Expiration Per Period |
|
Other Commercial Commitments (in |
|
Amount |
|
|
|
|
|
|
Fiscal 2012- |
|
|
Fiscal 2014- |
|
|
|
|
thousands) |
|
Committed |
|
|
Fiscal 2011 |
|
|
2013 |
|
|
2015 |
|
|
Thereafter |
|
|
Standby Letters of Credit (1) |
|
$ |
11,700 |
|
|
$ |
11,335 |
|
|
$ |
365 |
|
|
$ |
|
|
|
$ |
|
|
Guarantees (2) |
|
|
22,578 |
|
|
|
3,863 |
|
|
|
6,325 |
|
|
|
4,687 |
|
|
|
7,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Commercial Commitments |
|
$ |
34,278 |
|
|
$ |
15,198 |
|
|
$ |
6,690 |
|
|
$ |
4,687 |
|
|
$ |
7,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Letters of credit relate primarily to supporting workers compensation obligations. |
|
(2) |
|
Refer to Part II, Item 8 of this report under Note (13) Concentration of Credit
Risk in the Notes to Consolidated Financial Statements and under the caption Guarantees of
Debt and Lease Obligations of Others in the Critical Accounting Policies section below for
additional information regarding debt guarantees, lease guarantees and assigned leases. |
Asset-backed Credit Agreement
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, we 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. We can elect, at the time of borrowing, for loans to bear interest at a rate equal to the
base rate or LIBOR plus a margin. The LIBOR interest rate margin currently is 2.00% 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.
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 us 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, we 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 ninety (90) consecutive days.
The credit agreement contains standard covenants requiring us, 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 thereunder 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.
At January 1, 2011, $174.2 million was available under the Revolving Credit Facility after
giving effect to outstanding borrowings and to $11.7 million of outstanding letters of credit
primarily supporting workers compensation obligations. We are currently in compliance with all
covenants contained within the credit agreement.
Our Revolving Credit Facility represents one of our primary sources of liquidity, both
short-term and long-term, and the continued availability of credit under that agreement is of
material importance to our ability to fund our capital and working capital needs.
Senior Subordinated Convertible Debt
31
On March 15, 2005, we completed a private placement of $150.1 million in aggregate issue price
(or $322.0 million aggregate principal amount at maturity) of senior subordinated convertible notes
due 2035. The funds were used to finance a portion of the acquisition of the Lima and Westville
divisions from Roundys. The notes are unsecured senior subordinated obligations and rank junior
to our existing and future senior indebtedness, including borrowings under our Revolving Credit
Facility.
Cash interest at the rate of 3.50% per year is payable semi-annually on the issue price of the
notes until March 15, 2013. After that date, cash interest will not be payable, unless contingent
cash interest becomes payable, and original issue discount for non-tax purposes will accrue on the
notes at a daily rate of 3.50% per year until the maturity date of the notes. On the maturity date
of the notes, a holder will receive $1,000 per note. Contingent cash interest will be paid on the
notes during any six-month period, commencing March 16, 2013, if the average market price of a note
for a ten trading day measurement period preceding the applicable six-month period equals 130% or
more of the accreted principal amount of the note, plus accrued cash interest, if any. The
contingent cash interest payable with respect to any six-month period will equal an annual rate of
0.25% of the average market price of the note for the ten trading day measurement period described
above.
The notes will be convertible at the option of the holder, only upon the occurrence of certain
events, at an adjusted conversion rate of 9.5222 shares (initially 9.3120) of our common stock per
$1,000 principal amount at maturity of notes (equal to an adjusted conversion price of
approximately $48.95 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 a combination of both, at our option.
We may redeem all or a portion of the notes for cash at any time on or after the eighth
anniversary of the issuance of the notes. Holders may require us to purchase for cash all or a
portion of their notes on the 8th, 10th, 15th, 20th and 25th anniversaries of the issuance of the
notes. In addition, upon specified change in control events, each holder will have the option,
subject to certain limitations, to require us to purchase for cash all or any portion of such
holders notes.
In connection with the closing of the sale of the notes, we entered into a registration rights
agreement with the initial purchasers of the notes. In accordance with that agreement, we filed
with the Securities and Exchange Commission on July 13, 2005, a shelf registration statement
covering the resale by security holders of the notes and the common stock issuable upon conversion
of the notes. The shelf registration statement was declared effective by the Securities and
Exchange Commission on October 5, 2005. Our contractual obligation, however, to maintain the
effectiveness of the shelf registration statement has expired. As a result, we removed from
registration, by means of a post-effective amendment filed on July 24, 2007, all notes and common
stock that remained unsold at such time.
Debt Obligations
For debt obligations, the following table presents principal cash flows, related weighted
average interest rates by expected maturity dates and fair value as of January 1, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate |
|
|
|
|
|
|
Variable Rate |
|
(in thousands) |
|
Fair Value |
|
|
Amount |
|
|
Rate |
|
|
Fair Value |
|
|
Amount |
|
|
Rate |
|
|
2011 |
|
|
|
|
|
$ |
670 |
|
|
|
6.0 |
% |
|
|
|
|
|
$ |
|
|
|
|
|
|
2012 |
|
|
|
|
|
|
704 |
|
|
|
6.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
|
|
|
|
712 |
|
|
|
6.1 |
% |
|
|
|
|
|
|
154,100 |
|
|
|
2.6 |
% |
2014 |
|
|
|
|
|
|
40 |
|
|
|
5.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
136,710 |
|
|
|
3.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
151,458 |
|
|
$ |
138,836 |
|
|
|
|
|
|
$ |
154,100 |
|
|
$ |
154,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA (Non-GAAP Measurement)
32
The following is a reconciliation of EBITDA and Consolidated EBITDA to net earnings for fiscal
2010, 2009 and 2008 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Net earnings |
|
$ |
50,941 |
|
|
|
2,778 |
|
|
|
33,145 |
|
Income tax expense |
|
|
21,185 |
|
|
|
20,972 |
|
|
|
20,646 |
|
Interest expense |
|
|
23,403 |
|
|
|
24,372 |
|
|
|
26,466 |
|
Depreciation and amortization |
|
|
36,119 |
|
|
|
40,603 |
|
|
|
38,429 |
|
|
|
|
EBITDA |
|
|
131,648 |
|
|
|
88,725 |
|
|
|
118,686 |
|
LIFO charge (credit) |
|
|
53 |
|
|
|
(3,033 |
) |
|
|
19,740 |
|
Lease reserves |
|
|
320 |
|
|
|
3,135 |
|
|
|
(1,832 |
) |
Goodwill impairment |
|
|
|
|
|
|
50,927 |
|
|
|
|
|
Asset impairments |
|
|
937 |
|
|
|
2,460 |
|
|
|
2,555 |
|
Gains on sale of real estate |
|
|
|
|
|
|
(54 |
) |
|
|
|
|
Gain on acquisition of a business |
|
|
|
|
|
|
(6,682 |
) |
|
|
|
|
Gain on litigation settlement |
|
|
|
|
|
|
(7,630 |
) |
|
|
|
|
Share-based compensation |
|
|
7,871 |
|
|
|
9,084 |
|
|
|
8,792 |
|
Special charges |
|
|
|
|
|
|
6,020 |
|
|
|
|
|
Settlement of pre-acquisition contingency |
|
|
(310 |
) |
|
|
|
|
|
|
|
|
Subsequent cash payments on non-cash charges |
|
|
(3,055 |
) |
|
|
(2,815 |
) |
|
|
(4,218 |
) |
|
|
|
|
|
|
|
|
|
|
Total Consolidated EBITDA |
|
$ |
137,464 |
|
|
|
140,137 |
|
|
|
143,723 |
|
|
|
|
|
|
|
|
|
|
|
EBITDA and Consolidated EBITDA are measures used by management to measure operating
performance. EBITDA is defined as net earnings before interest, taxes, depreciation, and
amortization. Consolidated EBITDA excludes certain non-cash charges and other items that
management does not utilize in assessing operating performance and is a metric used to determine
payout of performance units pursuant to our Short-Term and Long-Term Incentive Plans. The above
table reconciles net earnings to EBITDA and Consolidated EBITDA. Not all companies utilize
identical calculations; therefore, the presentation of EBITDA and Consolidated EBITDA may not be
comparable to other identically titled measures of other companies. Neither EBITDA or Consolidated
EBITDA are recognized terms under GAAP and do not purport to be an alternative to net earnings as
an indicator of operating performance or any other GAAP measure. In addition, EBITDA and
Consolidated EBITDA are not intended to be measures of free cash flow for managements
discretionary use since they do not consider certain cash requirements, such as interest payments,
tax payments and capital expenditures.
Free Cash Flow as a percentage of Net Assets (Non-GAAP Measurement)
The following is a reconciliation of Free Cash Flow to cash provided by operations and a
reconciliation of Net Assets to Total Assets:
33
|
|
|
|
|
|
|
|
|
|
|
52 Weeks Ended |
|
|
|
|
|
(In thousands) |
|
January 1, 2011 |
|
|
|
|
|
Free cash flow / Net assets |
|
|
|
|
|
|
|
|
Net cash provided by operations |
|
$ |
66,116 |
|
|
|
|
|
Less capital expenditures |
|
|
(59,295 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow |
|
$ |
6,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic project adjustment (trailing 4 quarters) |
|
|
51,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted free cash flow (trailing 4 quarters) |
|
$ |
58,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2011 |
|
|
January 2, 2010 |
|
Net assets |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,050,675 |
|
|
|
999,536 |
|
Less current liabilities |
|
|
(293,242 |
) |
|
|
(308,509 |
) |
Plus current maturities of long-term
debt and capitalized lease obligations |
|
|
3,159 |
|
|
|
4,438 |
|
|
|
|
|
|
|
|
Net assets |
|
$ |
760,592 |
|
|
|
695,465 |
|
|
|
|
|
|
|
|
|
|
Strategic project adjustment |
|
|
(52,985 |
) |
|
|
(9,879 |
) |
|
|
|
|
|
|
|
Adjusted net assets |
|
$ |
707,607 |
|
|
|
685,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average net assets (simple average) |
|
$ |
728,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted average net assets (simple average) |
|
$ |
696,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow/ net assets |
|
|
0.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow/ net assets (ex. strategic projects) |
|
|
8.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow and the ratio of free cash flow to net assets are measures used by management
to measure operating performance and the ratio of free cash flow to net assets is a metric used to
determine payout of performance units pursuant to one of our Long-Term Incentive Plans. Our free
cash flow to net assets ratio is defined as cash provided from operations less capital expenditures
for property, plant and equipment during the trailing four quarters divided by the average Net
Assets for the current period and prior year comparable period (total assets less current
liabilities plus current portion of long-term debt and capital leases). Free cash flow is not a
recognized term under GAAP and does not purport to be an alternative to net earnings as an
indicator of operating performance or any other GAAP measure. In addition, free cash flow is not
intended to represent the residual cash flow available for discretionary expenditures as certain
non-discretionary expenditures, including debt service payments, are not deducted from the measure.
Derivative Instruments
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. Deferred gains and
losses are amortized as an adjustment to 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 (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.
34
As of January 1, 2011, we had two outstanding interest rate swap agreements with notional
amounts totaling $17.5 million, as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional |
|
Effective Date |
|
Termination Date |
|
Fixed Rate |
$10,000 |
|
|
10/15/2010 |
|
|
|
10/15/2011 |
|
|
|
3.49 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional |
|
Effective Date |
|
Termination Date |
|
Fixed Rate |
$7,500 |
|
|
10/15/2010 |
|
|
|
10/15/2011 |
|
|
|
3.38 |
% |
From time-to-time we use commodity swap agreements to reduce price risk associated with
anticipated purchases of diesel fuel. The agreements call for an exchange of payments with us
making payments based on fixed price per gallon and receiving payments based on floating prices,
without an exchange of the underlying commodity amount upon which the payments are made. Resulting
gains and losses on the fair market value of the commodity swap agreement are immediately
recognized as income or expense.
As of January 1, 2011, there were no commodity swap agreements in existence. Our only
commodity swap agreement in place during fiscal 2008 expired during the first quarter and was
settled for fair market value.
In addition to the previously discussed interest rate and commodity swap agreements, from
time-to-time we enter into fixed price fuel supply agreements to support our food distribution
segment. On January 1, 2009, we entered into an agreement which required us to purchase a total of
252,000 gallons of diesel fuel per month at prices ranging from $1.90 to $1.98 per gallon. The
term of the agreement was for one year and expired on December 31, 2009. The fixed price fuel
agreement qualified for the normal purchase exception under ASC 815, therefore the fuel purchases
under the contract were expensed as incurred as an increase to cost of sales.
Off-Balance Sheet Arrangements
As of the date of this report, we do not participate in transactions that generate
relationships with unconsolidated entities or financial partnerships, often referred to as
structured finance or special purpose entities, which are generally established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies
The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and
liabilities. Management bases its estimates on historical experience and various other assumptions
that are believed to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that may not be readily
apparent from other sources. Senior management has discussed the development, selection and
disclosure of these estimates with the Audit and Finance Committee of our Board of Directors and
with our independent auditors.
An accounting policy is considered critical if it requires an accounting estimate to be made
based on assumptions about matters that are highly uncertain at the time the estimate is made, and
if different estimates that reasonably could have been used, or changes in the accounting estimates
that are reasonably likely to occur periodically, could materially impact our financial statements.
We consider the following accounting policies to be critical and could result in materially
different amounts being reported under different conditions or using different assumptions:
Customer Exposure and Credit Risk
35
Allowance for Doubtful Accounts Methodology. We evaluate the collectability of our
accounts and notes receivable based on a combination of factors. In most circumstances when we
become aware of factors that may indicate a deterioration in a specific customers ability to meet
its financial obligations to us (e.g., reductions of product purchases, deteriorating store
conditions, changes in payment patterns), we record a specific reserve for bad debts against
amounts due to reduce the net recognized receivable to the amount we reasonably believe will be
collected. In determining the adequacy of the reserves, we analyze factors such as the value of
any collateral, customer financial statements, historical collection experience, aging of
receivables and other economic and industry factors. It is possible that the accuracy of the
estimation process could be materially affected by different judgments as to the collectability
based on information considered and further deterioration of accounts. If circumstances change
(i.e., further evidence of material adverse creditworthiness, additional accounts become credit
risks, store closures), our estimates of the recoverability of amounts due us could be reduced by a
material amount, including to zero.
As of January 1, 2011, we have recorded an allowance for doubtful accounts reserve for our
accounts and notes receivables of $6.2 million as compared to $5.7 million as of January 2, 2010.
During fiscal 2010, we recorded additional allowance for doubtful account reserves of $0.7 million
and experienced write-offs of $0.2 million.
Lease Commitments. We have historically leased store sites for sublease to qualified
independent retailers at rates that are at least as high as the rent paid by us. Under terms of
the original lease agreements, we remain primarily liable for any commitments an independent
retailer may no longer be financially able to satisfy. We also lease store sites for our retail
segment. Should a retailer be unable to perform under a sublease or should we close
underperforming corporate stores, we record a charge to earnings for costs of the remaining term of
the lease, less any anticipated sublease income. Calculating the estimated losses requires that
significant estimates and judgments be made by management. Our reserves for such properties can be
materially affected by factors such as the extent of interested sub-lessees and their
creditworthiness, our ability to negotiate early termination agreements with lessors, general
economic conditions and the demand for commercial property. Should the number of defaults by
sub-lessees or corporate store closures materially increase; the remaining lease commitments we
must record could have a material adverse effect on operating results and cash flows. Refer to
Part II, Item 8 of this report under Note (12) Leases in the Notes to Consolidated Financial
Statements for a discussion of Lease Commitments.
As of January 1, 2011, we have recorded a provision for losses related to leases on closed
locations of $6.8 million as compared to $9.3 million as of January 2, 2010. During fiscal 2010,
we recorded additional provisions for losses related to leases on closed locations of $0.3 million,
which was partially offset by payments made of $2.8 million.
Guarantees of Debt and Lease Obligations of Others. We have guaranteed the 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 ($9.4
million as of January 1, 2011 as compared to $13.5 million as of January 2, 2010), which would be
due in accordance with the underlying agreements.
We have entered into loan and lease guarantees on behalf of certain food distribution
customers that are accounted for under ASC Topic 460. ASC Topic 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 $6.7 million, which is included in
the $9.4 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 the lease agreements and that no payments will be required and no loss will be
incurred under the guarantees. As required by ASC Topic 460, a liability representing the fair
value of the obligations assumed under the guarantees of $1.0 million is included in the
accompanying consolidated financial statements. All of the other guarantees were issued prior to
December 31, 2002 and therefore not subject to the recognition and measurement provisions of ASC
Topic 460.
We have also assigned various leases to certain food distribution customers and other third
parties. If the assignees were to become unable to continue making payments under the assigned
leases, we estimate our
36
maximum potential obligation with respect to the assigned leases, net of reserves, to be
approximately $8.9 million as of January 1, 2011 as compared to $8.0 million as of January 2, 2010.
In circumstances when we become aware of factors that indicate deterioration in a customers
ability to meet its financial obligations guaranteed or assigned by us, we record a specific
reserve in the amount we reasonably believe we will be obligated to pay on the customers behalf,
net of any anticipated recoveries from the customer. In determining the adequacy of these
reserves, we analyze factors such as those described above in Allowance for Doubtful Accounts
Methodology and Lease Commitments. It is possible that the accuracy of the estimation process
could be materially affected by different judgments as to the obligations based on information
considered and further deterioration of accounts, with the potential for a corresponding adverse
effect on operating results and cash flows. Triggering these guarantees or obligations under
assigned leases would not, however, result in cross default of our debt, but could restrict
resources available for general business initiatives. Refer to Part II, Item 8 of this report
under Note (13) Concentration of Credit Risk in the Notes to Consolidated Financial Statements
for more information regarding customer exposure and credit risk.
Impairment of Long-Lived Assets
Property, plant and equipment are tested for impairment in accordance with ASC Subtopic
360-10-35 whenever events or changes in circumstances indicate that the carrying amounts of such
long-lived assets may not be recoverable from future net pretax cash flows. Impairment testing
requires significant management judgment including estimating future sales and costs, alternative
uses for the assets and estimated proceeds from disposal of the assets. Estimates of future
results are often influenced by assessments of changes in competition, merchandising strategies,
human resources and general market conditions, which may result in not recognizing an impairment
loss. Impairment testing is conducted at the lowest level where cash flows can be measured and are
independent of cash flows of other assets. An asset impairment would be indicated if the sum of
the expected future net pretax cash flows from the use of the asset (undiscounted and without
interest charges) is less than the carrying amount of the asset. An impairment loss would be
measured based on the difference between the fair value of the asset and its carrying amount. We
generally determine fair value by discounting expected future cash flows at a rate which management
has determined to be consistent with assumptions used by market participants.
The estimates and assumptions used in the impairment analysis are consistent with the business
plans and estimates we use to manage our business operations and to make acquisition and
divestiture decisions. The use of different assumptions would increase or decrease the impairment
charge. Actual outcomes may differ from the estimates. It is possible that the accuracy of the
estimation of future results could be materially affected by different judgments as to competition,
strategies and market conditions, with the potential for a corresponding adverse effect on
financial condition and operating results.
Goodwill
We maintain three reporting units for purposes of our goodwill impairment testing, which are
the same as our reporting segments disclosed in Part II, Item 8 of this report under Note (18)
Segment Reporting. Goodwill for each of our reporting units is tested for impairment in
accordance with ASC 350 annually and/or when factors indicating impairment are present, which
requires a significant amount of managements judgment. Such indicators may include a decline in
our expected future cash flows, unanticipated competition, the loss of a major customer, slower
growth rates or a sustained significant decline in our share price and market capitalization, among
others. Any adverse change in these factors could have a significant impact on the recoverability
of our goodwill and could have a material impact on our consolidated financial statements.
During fiscal 2009, we began applying the provision of ASC Topic 820 in relation to our
goodwill impairment testing by applying, to the extent possible, observable market inputs to arrive
at the fair values of our reporting units.
Our fair value for each reporting unit is determined based on an income approach which
incorporates a discounted cash flow analysis and a market approach that utilizes current earnings
multiples for comparable publically-traded companies. Our income approach is based on an estimate
of five years of future cash flows and a terminal value that factors in estimated long-term growth.
The estimate of future cash flows are dependent on our knowledge and experience about past and
current events and assumptions about conditions
37
we expect to exist, including operating performance, economic conditions, long-term growth rates,
capital expenditures, changes in working capital and effective tax rates. The discount rates
applied to the income approach reflect a weighted average cost of capital for comparable
publicly-traded companies which are adjusted for equity and size risk premiums based on market
capitalization.
We have weighted the valuation of our reporting units at 70% based on the income approach and
30% based on the market approach. We believe that this weighting is appropriate since it is often
difficult to find other appropriate 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.
Our estimates could be materially impacted by factors such as competitive forces, customer
behaviors, changes in growth trends and specific industry conditions, with the potential for a
corresponding adverse effect on financial condition and operating results potentially resulting in
impairment of the goodwill. None of the reporting units are more susceptible to economic
conditions than others. The income approach and market approach used to determine fair value are
sensitive to changes in discount rates and market trading multiples.
We performed our fiscal 2010 annual impairment test of goodwill during the fourth quarter of
fiscal 2010 based on conditions as of the end of our third quarter of fiscal 2010 and determined
that no indication of impairment existed in any of our reporting segments. The fair value of the
retail segment was approximately 13% higher than its carrying value, while the food distribution
segments fair value exceeded its carrying value by approximately 17% and the military segments
fair value was approximately 54% higher than its carrying value.
Discount rates applied in our income approach during fiscal 2010 ranged from 8.75% to 10.5%
and were reflective of the weighted average cost of capital of comparable publically-trade
companies with an adjustment for equity and size premiums based on market capitalization. Growth
rates ranged from -2.5% to 2.0%. For the food distribution segment to have an indication of
impairment the discount rate applied would need to increase over 2.0% or the assumed long-term
growth rate would need to decrease by 2.0% with a corresponding increase in the discount rate of
over 1.0%. For the retail segment to have an indication of impairment the discount rate applied
would need to increase approximately 2.0% or the assumed long-term growth rate would need to
decrease by 2.0% with a corresponding increase in the discount rate of over 1.0%.
While we believe our estimates of fair value of our reporting units are reasonable, there can
be no assurance that deterioration in economic conditions, customer relationships or adverse
changes to expectations of future performance will not occur, resulting in a goodwill impairment
loss. Please refer to Part II, Item 8 in this report under Note (1) Summary of Significant
Accounting Policies under the caption Goodwill and Intangible Assets of this Form 10-K for
additional information pertaining to our annual goodwill impairment analysis.
Income Taxes
When preparing our consolidated financial statements, we are required to estimate our income
taxes in each of the jurisdictions in which we operate. The process involves estimating our actual
current tax obligations based on expected income, statutory tax rates and tax planning
opportunities in the various jurisdictions in which we operate. In the event there is a
significant unusual or one-time item recognized in our results of operations, the tax attributable
to that item would be separately calculated and recorded in the period the unusual or one-time item
occurred.
We utilize the liability method of accounting for income taxes as set forth in ASC Topic 740.
Under the liability method, deferred taxes are determined based on the temporary differences
between the financial statement and tax basis of assets and liabilities using tax rates expected to
be in effect during the years in which the basis differences reverse or are settled. A valuation
allowance is recorded when it is more likely than not that all or a portion of the deferred tax
assets will not be realized. Changes in valuation allowances from period to period are included in
our tax provision in the period of change.
We establish reserves when, despite our belief that the tax return positions are fully
supportable, certain positions could be challenged and we may ultimately not prevail in defending
our positions. These
38
reserves are adjusted in light of changing facts and circumstances, such as the closing of a tax
audit or the expiration of statutes of limitations. The effective tax rate includes the impact of
reserve provisions and changes to reserves that are considered appropriate, as well as, related
penalties and interest. These reserves relate to various tax years subject to audit by taxing
authorities.
Income tax positions must meet a more-likely-than-not recognition threshold at the effective
date to be recognized. We recognize potential accrued interest and penalties related to the
unrecognized tax benefits in income tax expense.
Reserves for Self Insurance
We are primarily self-insured for workers compensation, general and automobile
liability and health insurance costs. It is our policy to record our self-insurance liabilities
based on claims filed and an estimate of claims incurred but not yet reported. Workers
compensation, general and automobile liabilities are actuarially determined on a discounted basis.
We have purchased stop-loss coverage to limit our exposure to any significant exposure on a per
claim basis. On a per claim basis, our exposure for workers compensation is $0.6 million, auto
liability and general liability is $0.5 million and for health insurance our exposure is $0.4
million. Any projection of losses concerning workers compensation, general and automobile and
health insurance liability is subject to a considerable degree of variability. Among the causes of
this variability are unpredictable external factors affecting future inflation rates, litigation
trends, legal interpretations, benefit level changes and claim settlement patterns. Although our
estimates of liabilities incurred do not anticipate significant changes in historical trends for
these variables, such changes could have a material impact on future claim costs and currently
recorded liabilities. A 100 basis point change in discount rates would increase our liability by
approximately $0.2 million.
Vendor Allowances and Credits
As is common in our industry, we use a third party service to undertake accounts payable
audits on an ongoing basis. These audits examine vendor allowances offered to us during a given
year as well as cash discounts, freight allowances and duplicate payments and establish a basis for
us to recover overpayments made to vendors. We reduce future payments to vendors based on the
results of these audits, at which time we also establish reserves for commissions payable to the
third party service provider as well as for amounts that may not be collected. We also establish
reserves for future repayments to vendors for disputed payment deductions related to accounts
payable audits, promotional allowances and other items. Although our estimates of reserves do not
anticipate changes in our historical payback rates, such changes could have a material impact on
our currently recorded reserves.
Share-based Compensation
ASC Topic 718 requires companies to estimate the fair value of share-based payment awards on
the date of grant. The Company uses the grant date closing price per share of Nash Finch common
stock to estimate the fair value of Restricted Stock Units (RSUs) and performance units granted
pursuant to its long-term incentive plan (LTIP). The Company uses the Black-Scholes option-pricing
model to estimate the fair value of stock options. No options were granted during fiscal 2010,
fiscal 2009 or fiscal 2008 and no options were outstanding as of January 1, 2011. The Company uses
a lattice model to estimate the fair value of stock appreciation rights (SARs) which contain market
conditions. The value of the portion of the awards ultimately expected to vest is recognized as
expense over the requisite service period which is derived from the data in the lattice valuation
model. Share-based compensation is based on awards ultimately expected to vest, and is reduced for
estimated forfeitures. ASC Topic 718 requires forfeitures be estimated at the time of grant and
revised, if necessary, in subsequent periods if actual forfeitures differ materially from those
estimates. Significant judgment is required in selecting the assumptions used for estimating fair
value of share-based compensation as well estimating forfeiture rates. Further, any awards with
performance conditions that can affect vesting also add additional judgment in determining the
amount expected to vest. There can be significant volatility in many of our assumptions and
therefore our estimates of fair value, forfeitures, etc. are sensitive to changes in these
assumptions.
39
Please refer to Part II, Item 8 in this Form 10-K under Note (10) Share-based Compensation
Plans for a comprehensive discussion related to our share-based compensation plans.
New Accounting Standards
In June 2009, the FASB issued amendments to ASC Topic 810 (ASC 810), which addresses the
elimination of the concept of a qualifying special purpose entity. The amended guidance also
replaces the quantitative-based risks and rewards calculation for determining which enterprise has
a controlling financial interest in a variable interest entity with an approach focused on
identifying which enterprise has the power to direct the activities of a variable interest entity
and the obligation to absorb losses of the entity or the right to receive benefits from the entity.
Additionally, the amended guidance provides more timely and useful information about an
enterprises involvement with a variable interest entity. Effective January 3, 2010, we adopted
the amended provisions of ASC 810 which had no impact on our consolidated financial statements.
On December 15, 2009, the FASB issued Accounting Standards Update No. 2010-06, Fair Value
Measurements and Disclosures Topic 820 Improving Disclosures about Fair Value Measurements. This
ASU requires some new disclosures and clarifies some existing disclosure requirements about fair
value measurement as set forth in ASC Subtopic 820-10. The FASBs objective is to improve these
disclosures and, thus, increase the transparency in financial reporting. The Company adopted the
provision of ASU 2010-06 effective January 3, 2010. The adoption of this ASU did not have a
material impact on the Companys consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure in the financial markets consists of changes in interest rates relative to our
investment in notes receivable, the balance of our debt obligations outstanding and derivatives
employed from time to time to manage our exposure to changes in interest rates and diesel fuel
prices. We do not use financial instruments or derivatives for any trading or other speculative
purposes.
We carry notes receivable because, in the normal course of business, we make long-term loans
to certain retail customers. Substantially all notes receivable are based on floating interest
rates which adjust to changes in market rates. As a result, the carrying value of notes receivable
approximates market value. Refer to Part II, Item 8 of this report under Note (6) Accounts and
Notes Receivable in the Notes to Consolidated Financial Statements for more information.
The table below provides information about our debt obligations that are sensitive to changes
in interest rates. For debt obligations, the table presents principal cash flows and related
weighted average interest rates by expected maturity dates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except rates) |
|
Value |
|
Total |
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
2015 |
|
Thereafter |
Debt with variable interest rate: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payable |
|
$ |
154.1 |
|
|
$ |
154.1 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
154.1 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Average variable rate payable |
|
|
|
|
|
|
2.6 |
% |
|
|
|
|
|
|
|
|
|
|
2.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt with fixed interest rates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payable |
|
$ |
151.5 |
|
|
$ |
138.8 |
|
|
$ |
0.7 |
|
|
$ |
0.7 |
|
|
$ |
0.7 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
136.7 |
|
Average fixed rate payable |
|
|
|
|
|
|
3.5 |
% |
|
|
6.0 |
% |
|
|
6.2 |
% |
|
|
6.1 |
% |
|
|
5.6 |
% |
|
|
|
|
|
|
3.5 |
% |
40
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Nash-Finch Company
We have audited the accompanying consolidated balance sheet of Nash-Finch Company (a Minnesota
Corporation) and subsidiaries (collectively, the Company) as of January 1, 2011, and the related
consolidated statement of income, stockholders equity and cash flows for the year ended January 1,
2011. Our audit of the basic financial statements included the financial statement schedule
referenced in Part IV, Item 15(2) of this report. These financial statements and financial
statement schedule are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements and financial statement schedule based on our
audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Nash-Finch Company and subsidiaries as of January 1,
2011, and the results of their operations and their cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of America. Also in
our opinion, the related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material respects, the information
set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Nash-Finch Company and subsidiaries internal control over financial
reporting as of January 1, 2011, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our
report dated March 3, 2011, expressed an unqualified opinion thereon.
/s/ Grant Thornton LLP
Minneapolis, Minnesota
March 3, 2011
41
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Nash-Finch Company
We have audited the accompanying consolidated balance sheet of Nash Finch Company and subsidiaries
(collectively, the Company) as of January 2, 2010, and the related consolidated statements of
income, stockholders equity, and cash flows for each of the two years in the period ended January
2, 2010. Our audits also included the financial statement schedule referenced in Part IV, Item
15(2) of this report. These financial statements and schedule are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Nash Finch Company and subsidiaries at January 2,
2010, and the consolidated results of their operations and their cash flows for each of the two
years in the period ended January 2, 2010, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
March 4, 2010 except as to Note 18 as to which the date is March 3, 2011
42
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal years ended January 1, 2011, |
|
|
|
|
|
|
|
|
|
January 2, 2010 and January 3, 2009 |
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
Sales |
|
$ |
4,991,979 |
|
|
$ |
5,212,655 |
|
|
$ |
4,633,494 |
|
Cost of sales |
|
|
4,591,191 |
|
|
|
4,793,967 |
|
|
|
4,226,545 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
400,788 |
|
|
|
418,688 |
|
|
|
406,949 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
269,140 |
|
|
|
287,328 |
|
|
|
288,263 |
|
Special charges |
|
|
|
|
|
|
6,020 |
|
|
|
|
|
Gain on acquisition of a business |
|
|
|
|
|
|
(6,682 |
) |
|
|
|
|
Gain on litigation settlement |
|
|
|
|
|
|
(7,630 |
) |
|
|
|
|
Goodwill impairment |
|
|
|
|
|
|
50,927 |
|
|
|
|
|
Depreciation and amortization |
|
|
36,119 |
|
|
|
40,603 |
|
|
|
38,429 |
|
Interest expense |
|
|
23,403 |
|
|
|
24,372 |
|
|
|
26,466 |
|
|
|
|
|
|
|
|
|
|
|
Total other costs and expenses |
|
|
328,662 |
|
|
|
394,938 |
|
|
|
353,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
72,126 |
|
|
|
23,750 |
|
|
|
53,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
21,185 |
|
|
|
20,972 |
|
|
|
20,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
50,941 |
|
|
$ |
2,778 |
|
|
$ |
33,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
3.97 |
|
|
$ |
0.21 |
|
|
$ |
2.57 |
|
Diluted |
|
|
3.86 |
|
|
|
0.21 |
|
|
|
2.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declared dividends per common share |
|
$ |
0.72 |
|
|
$ |
0.72 |
|
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
outstanding and common equivalent shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
12,819 |
|
|
|
13,007 |
|
|
|
12,886 |
|
Diluted |
|
|
13,186 |
|
|
|
13,378 |
|
|
|
13,161 |
|
See accompanying notes to consolidated financial statements.
43
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
January 1, 2011 |
|
|
January 2, 2010 |
|
Assets |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
830 |
|
|
$ |
830 |
|
Accounts and notes receivable, net |
|
|
233,436 |
|
|
|
250,767 |
|
Inventories |
|
|
333,146 |
|
|
|
285,443 |
|
Prepaid expenses and other |
|
|
15,817 |
|
|
|
11,410 |
|
Deferred tax assets |
|
|
8,281 |
|
|
|
9,366 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
591,510 |
|
|
|
557,816 |
|
|
|
|
|
|
|
|
|
|
Notes receivable, net |
|
|
20,350 |
|
|
|
23,343 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment: |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
649,256 |
|
|
|
637,167 |
|
Less accumulated depreciation and amortization |
|
|
(409,190 |
) |
|
|
(422,529 |
) |
|
|
|
|
|
|
|
Net property, plant and equipment |
|
|
240,066 |
|
|
|
214,638 |
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
167,166 |
|
|
|
166,545 |
|
Customer contracts & relationships, net |
|
|
18,133 |
|
|
|
21,062 |
|
Investment in direct financing leases |
|
|
2,948 |
|
|
|
3,185 |
|
Other assets |
|
|
10,502 |
|
|
|
12,947 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
1,050,675 |
|
|
$ |
999,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current maturities of long-term debt and capitalized lease obligations |
|
$ |
3,159 |
|
|
$ |
4,438 |
|
Accounts payable |
|
|
230,082 |
|
|
|
240,483 |
|
Accrued expenses |
|
|
60,001 |
|
|
|
60,524 |
|
Income taxes payable |
|
|
|
|
|
|
3,064 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
293,242 |
|
|
|
308,509 |
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
292,266 |
|
|
|
257,590 |
|
Capital lease obligations |
|
|
18,920 |
|
|
|
21,442 |
|
Deferred tax liability, net |
|
|
36,344 |
|
|
|
19,323 |
|
Other liabilities |
|
|
32,899 |
|
|
|
42,113 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
Preferred stock no par value |
|
|
|
|
|
|
|
|
Authorized 500 shares; none issued |
|
|
|
|
|
|
|
|
Common stock of $1.66 2/3 par value |
|
|
|
|
|
|
|
|
Authorized 50,000 shares, issued 13,677 and 13,675 shares, respectively |
|
|
22,796 |
|
|
|
22,792 |
|
Additional paid-in capital |
|
|
114,799 |
|
|
|
106,705 |
|
Common stock held in trust |
|
|
(1,213 |
) |
|
|
(2,342 |
) |
Deferred compensation obligations |
|
|
1,213 |
|
|
|
2,342 |
|
Accumulated other comprehensive loss |
|
|
(10,984 |
) |
|
|
(10,756 |
) |
Retained earnings |
|
|
303,584 |
|
|
|
261,821 |
|
Common stock in treasury, 1,569 and 863 shares, respectively |
|
|
(53,191 |
) |
|
|
(30,003 |
) |
|
|
|
|
|
|
|
Total stockholders equity |
|
|
377,004 |
|
|
|
350,559 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
1,050,675 |
|
|
$ |
999,536 |
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
44
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
|
2008 |
|
|
|
Fiscal Years Ended January 1, 2011, January 2, 2010 and January 3, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
50,941 |
|
|
$ |
2,778 |
|
|
$ |
33,145 |
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Special charges non cash portion |
|
|
|
|
|
|
6,020 |
|
|
|
|
|
Impairment of retail goodwill |
|
|
|
|
|
|
50,927 |
|
|
|
|
|
Gain on acquisition of a business |
|
|
|
|
|
|
(6,682 |
) |
|
|
|
|
Gain on litigation settlement |
|
|
|
|
|
|
(7,630 |
) |
|
|
|
|
Depreciation and amortization |
|
|
36,119 |
|
|
|
40,603 |
|
|
|
38,429 |
|
Amortization of deferred financing costs |
|
|
1,834 |
|
|
|
1,779 |
|
|
|
2,142 |
|
Non-cash convertible debt interest |
|
|
5,346 |
|
|
|
4,944 |
|
|
|
4,651 |
|
Rebateable loans |
|
|
4,096 |
|
|
|
4,095 |
|
|
|
2,992 |
|
Provision for (reversal of) bad debts |
|
|
808 |
|
|
|
1,411 |
|
|
|
(1,292 |
) |
Provision for (reversal of) lease reserves |
|
|
320 |
|
|
|
3,136 |
|
|
|
(1,832 |
) |
Deferred income tax expense (benefit) |
|
|
12,211 |
|
|
|
(10,764 |
) |
|
|
3,622 |
|
Gain on sale of real estate and other |
|
|
(503 |
) |
|
|
(137 |
) |
|
|
(187 |
) |
LIFO charge (credit) |
|
|
53 |
|
|
|
(3,033 |
) |
|
|
19,740 |
|
Asset impairments |
|
|
937 |
|
|
|
2,460 |
|
|
|
2,555 |
|
Share-based compensation |
|
|
7,871 |
|
|
|
9,084 |
|
|
|
8,792 |
|
Deferred compensation |
|
|
1,075 |
|
|
|
1,223 |
|
|
|
244 |
|
Other |
|
|
(753 |
) |
|
|
(151 |
) |
|
|
(742 |
) |
Changes in operating assets and liabilities, net of effects of acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable |
|
|
14,659 |
|
|
|
(6,250 |
) |
|
|
17,430 |
|
Inventories |
|
|
(47,756 |
) |
|
|
21,143 |
|
|
|
(31,489 |
) |
Prepaid expenses |
|
|
1,913 |
|
|
|
(1,081 |
) |
|
|
839 |
|
Accounts payable |
|
|
(9,963 |
) |
|
|
(8,178 |
) |
|
|
(1,037 |
) |
Accrued expenses |
|
|
809 |
|
|
|
(12,367 |
) |
|
|
3,970 |
|
Income taxes payable |
|
|
(9,384 |
) |
|
|
6,854 |
|
|
|
13,048 |
|
Other assets and liabilities |
|
|
(4,517 |
) |
|
|
2,189 |
|
|
|
(3,021 |
) |
|
|
|
Net cash provided by operating activities |
|
|
66,116 |
|
|
|
102,373 |
|
|
|
111,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Disposal of property, plant and equipment |
|
|
783 |
|
|
|
830 |
|
|
|
438 |
|
Additions to property, plant and equipment |
|
|
(59,295 |
) |
|
|
(30,402 |
) |
|
|
(31,955 |
) |
Business acquired, net of cash |
|
|
|
|
|
|
(78,056 |
) |
|
|
(6,566 |
) |
Loans to customers |
|
|
(1,368 |
) |
|
|
(2,350 |
) |
|
|
(24,050 |
) |
Payments from customers on loans |
|
|
2,366 |
|
|
|
4,769 |
|
|
|
1,588 |
|
Corporate-owned life insurance, net |
|
|
(427 |
) |
|
|
(461 |
) |
|
|
131 |
|
Other |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(57,938 |
) |
|
|
(105,670 |
) |
|
|
(60,414 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from revolving debt |
|
|
30,000 |
|
|
|
30,500 |
|
|
|
87,300 |
|
Dividends paid |
|
|
(8,930 |
) |
|
|
(9,239 |
) |
|
|
(9,229 |
) |
Proceeds from exercise of stock options |
|
|
|
|
|
|
196 |
|
|
|
329 |
|
Proceeds from employee stock purchase plan |
|
|
|
|
|
|
|
|
|
|
238 |
|
Repurchase of common stock |
|
|
(21,970 |
) |
|
|
(1,017 |
) |
|
|
(14,348 |
) |
Payments of long-term debt |
|
|
(628 |
) |
|
|
(595 |
) |
|
|
(119,255 |
) |
Payments of capitalized lease obligations |
|
|
(3,529 |
) |
|
|
(3,436 |
) |
|
|
(3,639 |
) |
Increase (decrease) in outstanding checks |
|
|
(3,083 |
) |
|
|
(10,065 |
) |
|
|
9,951 |
|
Payments of deferred financing costs |
|
|
|
|
|
|
(2,874 |
) |
|
|
(3,573 |
) |
Tax benefit from exercise of stock options |
|
|
(38 |
) |
|
|
(167 |
) |
|
|
603 |
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
(8,178 |
) |
|
|
3,303 |
|
|
|
(51,623 |
) |
|
|
|
Net increase (decrease) in cash |
|
|
|
|
|
|
6 |
|
|
|
(38 |
) |
Cash at beginning of year |
|
|
830 |
|
|
|
824 |
|
|
|
862 |
|
|
|
|
Cash at end of year |
|
$ |
830 |
|
|
$ |
830 |
|
|
$ |
824 |
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
Non cash investing and financing activities
Acquisition of minority interest |
|
$ |
|
|
|
$ |
|
|
|
$ |
64 |
|
See accompanying notes to consolidated financial statements.
45
NASH FINCH COMPANY
Consolidated Statements of Stockholders Equity
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
other |
|
|
|
|
|
|
Total |
|
Fiscal years ended January 1, 2011, |
|
(shares |
|
|
Common |
|
|
paid-in |
|
|
Retained |
|
|
comprehensive |
|
|
Treasury |
|
|
stockholders |
|
January 2, 2010 and January 3, 2009 |
|
outstanding) |
|
|
stock |
|
|
capital |
|
|
earnings |
|
|
income (loss) |
|
|
stock |
|
|
equity |
|
|
Balance at December 29, 2007 |
|
|
13,125 |
|
|
$ |
22,599 |
|
|
$ |
84,658 |
|
|
$ |
244,915 |
|
|
$ |
(5,092 |
) |
|
$ |
(15,479 |
) |
|
$ |
331,601 |
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,145 |
|
|
|
|
|
|
|
|
|
|
|
33,145 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loss on hedging
activities, net of tax of ($745) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,165 |
) |
|
|
|
|
|
|
(1,165 |
) |
Minimum pension liability
adjustment, net of tax of ($2,710) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,239 |
) |
|
|
|
|
|
|
(4,239 |
) |
Minimum other post-retirement
liability adjustment, net of tax of
($243) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(380 |
) |
|
|
|
|
|
|
(380 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,361 |
|
Dividends declared of $.72 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,229 |
) |
|
|
|
|
|
|
|
|
|
|
(9,229 |
) |
Share-based compensation |
|
|
|
|
|
|
3 |
|
|
|
8,871 |
|
|
|
(269 |
) |
|
|
|
|
|
|
338 |
|
|
|
8,943 |
|
Share-based compensation modified from
liability to equity based |
|
|
|
|
|
|
|
|
|
|
3,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,412 |
|
Common stock issued upon exercise of options |
|
|
23 |
|
|
|
26 |
|
|
|
415 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
441 |
|
Common stock issued for employee purchase plan |
|
|
8 |
|
|
|
13 |
|
|
|
224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
237 |
|
Common stock issued for performance units |
|
|
77 |
|
|
|
135 |
|
|
|
(135 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of shares |
|
|
(415 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,348 |
) |
|
|
(14,348 |
) |
Forfeiture of restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
(1 |
) |
Tax benefit associated with compensation plans |
|
|
|
|
|
|
|
|
|
|
603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 3, 2009 |
|
|
12,818 |
|
|
|
22,776 |
|
|
|
98,048 |
|
|
|
268,562 |
|
|
|
(10,876 |
) |
|
|
(29,490 |
) |
|
|
349,020 |
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,778 |
|
|
|
|
|
|
|
|
|
|
|
2,778 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loss on hedging
activities, net of tax of $304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
475 |
|
|
|
|
|
|
|
475 |
|
Minimum pension liability
adjustment, net of tax of ($194) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(303 |
) |
|
|
|
|
|
|
(303 |
) |
Minimum other post-retirement
liability adjustment, net of tax of
($33) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52 |
) |
|
|
|
|
|
|
(52 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,898 |
|
Dividends declared of $.72 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,239 |
) |
|
|
|
|
|
|
|
|
|
|
(9,239 |
) |
Share-based compensation |
|
|
|
|
|
|
|
|
|
|
8,045 |
|
|
|
(280 |
) |
|
|
|
|
|
|
504 |
|
|
|
8,269 |
|
Stock appreciation rights |
|
|
|
|
|
|
|
|
|
|
599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
599 |
|
Common stock issued upon exercise of options |
|
|
8 |
|
|
|
13 |
|
|
|
183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196 |
|
Common stock issued for performance units |
|
|
1 |
|
|
|
3 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of shares |
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,017 |
) |
|
|
(1,017 |
) |
Tax benefit associated with compensation plans |
|
|
|
|
|
|
|
|
|
|
(167 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(167 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 2, 2010 |
|
|
12,812 |
|
|
|
22,792 |
|
|
|
106,705 |
|
|
|
261,821 |
|
|
|
(10,756 |
) |
|
|
(30,003 |
) |
|
|
350,559 |
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,941 |
|
|
|
|
|
|
|
|
|
|
|
50,941 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loss on hedging
activities, net of tax of $272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
426 |
|
|
|
|
|
|
|
426 |
|
Minimum pension liability
adjustment, net of tax of ($434) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(679 |
) |
|
|
|
|
|
|
(679 |
) |
Minimum other post-retirement
liability adjustment, net of tax of
$16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,713 |
|
Dividends declared of $.72 per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,930 |
) |
|
|
|
|
|
|
|
|
|
|
(8,930 |
) |
Share-based compensation |
|
|
24 |
|
|
|
|
|
|
|
7,566 |
|
|
|
(248 |
) |
|
|
|
|
|
|
793 |
|
|
|
8,111 |
|
Stock appreciation rights |
|
|
|
|
|
|
|
|
|
|
570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
570 |
|
Common stock issued for performance units |
|
|
|
|
|
|
4 |
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock transferred from rabbi trust |
|
|
(85 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,200 |
) |
|
|
(1,200 |
) |
Repurchase of shares |
|
|
(643 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,781 |
) |
|
|
(22,781 |
) |
Tax benefit associated with compensation plans |
|
|
|
|
|
|
|
|
|
|
(38 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(38 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2011 |
|
|
12,108 |
|
|
$ |
22,796 |
|
|
$ |
114,799 |
|
|
$ |
303,584 |
|
|
$ |
(10,984 |
) |
|
$ |
(53,191 |
) |
|
$ |
377,004 |
|
|
|
|
See accompanying notes to consolidated financial statements.
46
(1) Summary of Significant Accounting Policies
Fiscal Year
The fiscal year of Nash-Finch Company (Nash Finch) ends on the Saturday nearest to December
31. Fiscal 2008 consisted of 53 weeks while fiscal years 2010 and 2009 each consisted of 52 weeks.
Our interim quarters consist of 12 weeks except for the third quarter which consists of 16 weeks.
For fiscal 2008, the Companys fourth quarter consisted of 13 weeks.
Principles of Consolidation
The accompanying financial statements include our accounts and the accounts of our
majority-owned subsidiaries. All material inter-company accounts and transactions have been
eliminated in the consolidated financial statements.
Reclassification
Certain prior year segment amounts have been revised to conform to the current year
presentation. This revision had no impact on the Companys consolidated financial statements in
any period presented. Please refer to Note 18 Segment Reporting for additional information
pertaining to our segment reclassification that occurred during fiscal 2010.
Cash and Cash Equivalents
In the accompanying financial statements and for purposes of the statements of cash flows,
cash and cash equivalents include cash on hand and short-term investments with original maturities
of three months or less when purchased which are carried at fair value.
Accounts and Notes Receivable
We evaluate the collectability of our accounts and notes receivable based on a combination of
factors. In most circumstances when we become aware of factors that may indicate a deterioration
in a specific customers ability to meet its financial obligations to us (e.g., reductions of
product purchases, deteriorating store conditions, changes in payment patterns), we record a
specific reserve for bad debts against amounts due to reduce the net recognized receivable to the
amount we reasonably believe will be collected. In determining the adequacy of the reserves, we
analyze factors such as the value of any collateral, customer financial statements, historical
collection experience, aging of receivables and other economic and industry factors. It is
possible that the accuracy of the estimation process could be materially affected by different
judgments as to the collectability based on information considered and further deterioration of
accounts. If circumstances change (i.e., further evidence of material adverse creditworthiness,
additional accounts become credit risks, store closures), our estimates of the recoverability of
amounts due us could be reduced by a material amount, including to zero.
Revenue Recognition
We recognize revenue when the sales price is fixed or determinable, collectability is
reasonably assured and the customer takes possession of the merchandise.
Revenues for the military segment are recognized upon the delivery of the product to the
commissary or commissaries designated by the Defense Commissary Agency (DeCA), or in the case of
overseas commissaries, when the product is delivered to the port designated by DeCA, which is when
DeCA takes possession of the merchandise and bears the responsibility for shipping the product to
the commissary or overseas warehouse.
Revenues for the food distribution segment are recognized upon delivery of the product which
is typically the same day the product is shipped.
47
Revenue is recognized for retail store sales when the customer receives and pays for the
merchandise at the point of sale. Sales taxes collected from customers are remitted to the
appropriate taxing jurisdictions and are excluded from sales revenue as the Company considers
itself a pass-through conduit for collecting and remitting sales taxes.
Based upon the nature of the products we sell, our customers have limited rights of return,
which are immaterial.
Cost of sales
Cost of sales includes the cost of inventory sold during the period, including distribution
costs, shipping and handling fees, and vendor allowances and credits (see below). Advertising
costs, included in cost of goods sold, are expensed as incurred and were $61.1 million, $63.1
million and $60.5 million for fiscal 2010, 2009 and 2008, respectively. Advertising income,
included in cost of goods sold, was approximately $60.1 million, $64.5 million and $64.7 million
for fiscal 2010, 2009 and 2008, respectively.
Vendor Allowances and Credits
We reflect vendor allowances and credits, which include allowances and incentives similar to
discounts, as a reduction of cost of sales when the related inventory has been sold, based on the
underlying arrangement with the vendor. These allowances primarily consist of promotional
allowances, quantity discounts and payments under merchandising arrangements. Amounts received
under promotional or merchandising arrangements that require specific performance are recognized in
the consolidated statements of income when the performance is satisfied and the related inventory
has been sold. Discounts based on the quantity of purchases from our vendors or sales to customers
are recognized in the consolidated statements of income as the product is sold. When payment is
received prior to fulfillment of the terms, the amounts are deferred and recognized according to
the terms of the arrangement.
Inventories
Inventories are stated at the lower of cost or market. Approximately 88% of our inventories
were valued on the last-in, first-out (LIFO) method at January 1, 2011 as compared to approximately
86% at January 2, 2010. During fiscal 2010, we recorded a LIFO charge of $0.1 million compared to
a LIFO credit of $3.0 million in fiscal 2009 and a LIFO charge of $19.7 million in fiscal 2008.
The remaining inventories are valued on the first-in, first-out (FIFO) method. If the FIFO method
of accounting for inventories had been applied to all inventories, inventories would have been
higher by $73.1 million and $73.1 million at January 1, 2011 and January 2, 2010, respectively.
Capitalization, Depreciation and Amortization
Property, plant and equipment are stated at cost. Assets under capitalized leases are
recorded at the present value of future lease payments or fair market value, whichever is lower.
Expenditures which improve or extend the life of the respective assets are capitalized while
maintenance and repairs are expensed as incurred.
Property, plant and equipment are depreciated on a straight-line basis over the estimated
useful lives of the assets which generally range from 10-40 years for buildings and improvements
and 3-10 years for furniture, fixtures and equipment. Capitalized leases and leasehold
improvements are amortized on a straight-line basis over the shorter of the term of the lease or
the useful life of the asset.
Net property, plant and equipment consisted of the following (in thousands):
48
|
|
|
|
|
|
|
|
|
|
|
January 1, |
|
|
January 2, |
|
|
|
2011 |
|
|
2010 |
|
Land |
|
$ |
21,486 |
|
|
$ |
18,876 |
|
Buildings and improvements |
|
|
235,096 |
|
|
|
214,959 |
|
Furniture, fixtures and equipment |
|
|
286,708 |
|
|
|
289,713 |
|
Leasehold improvements |
|
|
58,805 |
|
|
|
61,026 |
|
Construction in progress |
|
|
13,575 |
|
|
|
5,928 |
|
Assets under capitalized leases |
|
|
33,586 |
|
|
|
46,665 |
|
|
|
|
|
|
|
|
|
|
|
649,256 |
|
|
|
637,167 |
|
Accumulated depreciation and amortization |
|
|
(409,190 |
) |
|
|
(422,529 |
) |
|
|
|
|
|
|
|
Net property, plant and equipment |
|
$ |
240,066 |
|
|
$ |
214,638 |
|
|
|
|
|
|
|
|
Impairment of Long-Lived Assets
An impairment loss is recognized whenever events or changes in circumstances indicate the
carrying amount of an asset is not recoverable. In applying Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) ASC Subtopic 360-10-35 assets are grouped and
evaluated at the lowest level for which there are identifiable cash flows that are largely
independent of the cash flows of other groups of assets. We have generally identified this lowest
level to be individual stores or distribution centers; however, there are limited circumstances
where, for evaluation purposes, stores could be considered with the distribution center they
support. We allocate the portion of the profit retained at the servicing distribution center to
the individual store when performing the impairment analysis in order to determine the stores
total contribution to us. We consider historical performance and future estimated results in the
impairment evaluation. If the carrying amount of the asset exceeds expected undiscounted future
cash flows, we measure the amount of the impairment by comparing the carrying amount of the asset
to its fair value as determined using an income approach. The inputs used in the income approach
use significant unobservable inputs, or level 3 inputs, in the fair value hierarchy. In fiscal
2010, 2009 and 2008, we recorded impairment charges of $0.9 million, $8.5 million and $2.6 million,
respectively.
Reserves for Self-Insurance
We are primarily self-insured for workers compensation, general and automobile liability and
health insurance costs. It is our policy to record our self-insurance liabilities based on claims
filed and an estimate of claims incurred but not yet reported. Workers compensation, general and
automobile liabilities are actuarially determined on a discounted basis. We have purchased
stop-loss coverage to limit our exposure to any significant exposure on a per claim basis. On a
per claim basis, our exposure for workers compensation is $0.6 million, auto liability and general
liability is $0.5 million and for health insurance our exposure is $0.4 million. Any projection of
losses concerning workers compensation, general and automobile and health insurance liability is
subject to a considerable degree of variability. Among the causes of this variability are
unpredictable external factors affecting future inflation rates, litigation trends, legal
interpretations, benefit level changes and claim settlement patterns. Although our estimates of
liabilities incurred do not anticipate significant changes in historical trends for these
variables, such changes could have a material impact on future claim costs and currently recorded
liabilities. A 100 basis point change in discount rates would increase our liability by
approximately $0.2 million.
Goodwill and Intangible Assets
Intangible assets, consisting primarily of goodwill and customer contracts resulting from
business acquisitions, are carried at cost. Goodwill is not amortized and customer contracts and
other intangible assets that are not deemed to have an indefinite life are amortized over their
useful lives. In accordance with ASC Topic 350, we test goodwill for impairment on an annual basis
in the fourth quarter or more frequently if we believe indicators of impairment exist. Such
indicators may include a decline in our expected future cash flows, unanticipated competition,
slower growth rates or a sustained significant decline in our share price and market
capitalization, among others. Any adverse change in these factors could have a significant impact
on the recoverability of our goodwill and could have a material impact on our consolidated
financial statements.
49
The goodwill impairment test involves a two-step process. The first step of the impairment
test involves comparing the fair values of the applicable reporting units with their aggregate
carrying values, including goodwill. If the carrying amount of a reporting unit exceeds the
reporting units fair value, we perform the
second step of the goodwill impairment test to determine the amount of impairment loss. The
second step of the goodwill impairment test involves comparing the implied fair value of the
affected reporting units goodwill with the carrying value of that goodwill.
Our 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.
We performed our fiscal 2010 annual impairment test of goodwill during the fourth quarter of
fiscal 2010 based on conditions as of the end of our third quarter of fiscal 2010 and determined
that no indication of impairment existed in any of our reporting segments. The fair value of the
retail segment was approximately 13% higher than its carrying value, while the food distribution
segments fair value exceeded its carrying value by approximately 17% and the military segments
fair value was approximately 54% higher than its carrying value.
Discount rates applied in our income approach during fiscal 2010 ranged from 8.75% to 10.50%
and were reflective of the weighted average cost of capital of comparable publically-trade
companies with an adjustment for equity and size premiums based on market capitalization. Growth
rates ranged from -2.5% to 2.0%. For the food distribution segment to have an indication of
impairment the discount rate applied would need to increase over 2.0% or the assumed long-term
growth rate would need to decrease by 2.0% with a corresponding increase in the discount rate of
over 1.0%. For the retail segment to have an indication of impairment the discount rate applied
would need to increase approximately 2.0% or the assumed long-term growth rate would need to
decrease by 2.0% with a corresponding increase in the discount rate of over 1.0%.
The accounting principles regarding goodwill acknowledge that the observed market prices of
individual trades of a companys stock (and thus its computed market capitalization) may not be
representative of the fair value of the company as a whole. Additional value may arise from the
ability to take advantage of synergies and other benefits that flow from control over another
entity. Consequently, measuring the fair value of a collection of assets and liabilities that
operate together in a controlled entity is different from measuring the fair value of that entitys
individual common stock. In most industries, including ours, an acquiring entity typically is
willing to pay more for equity securities that give it a controlling interest than an investor
would pay for a number of equity securities representing less than a controlling interest. We have
taken into consideration the current trends in our market capitalization and the current book value
of our equity in relation to fair values arrived at in our fiscal 2010 goodwill impairment
analysis, including the implied control premium, and have deemed the result to be reasonable.
We determined that an indication of impairment existed in our retail segment in the first step
of the fiscal 2009 goodwill impairment analysis which required us to calculate our retail segments
implied fair value in the second step of the impairment analysis. For the second step we obtained
appraisals for our real estate, fixtures and equipment and assigned a fair value to any
unrecognized intangible assets, which included above and below market rents based on appraisals for
locations we lease, a fair value to our trade names and our pharmacy scripts. Certain asset and
liabilities carrying values approximated fair value due to their short maturities which included
accounts receivable, inventories and accounts payable. Based on its implied fair value we were
required to write-off $50.9 million of our retail goodwill in fiscal 2009. The decline in the fair
value of our retail segment was reflective of a decline in long-term growth assumptions and lower
comparable market multiples.
During fiscal 2010, $0.6 million of retail goodwill was recorded for the value of a store
buy-out agreement for one of our minority owned retail locations. Additionally, we transferred
$8.9 million of
50
goodwill from our food distribution segment to our military segment related to a
segment reporting revision that occurred during fiscal 2010, which is discussed in further detail
in Note 19 Segment Reporting of this Form 10-K.
Changes in the net carrying amount of goodwill were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food |
|
|
|
|
|
|
|
(in thousands) |
|
Military |
|
|
Distribution |
|
|
Retail |
|
|
Total |
|
Goodwill as of January 3 , 2009 |
|
$ |
25,754 |
|
|
$ |
121,863 |
|
|
$ |
70,797 |
|
|
$ |
218,414 |
|
Retail store closures |
|
|
|
|
|
|
|
|
|
|
(942 |
) |
|
|
(942 |
) |
Retail goodwill impairment |
|
|
|
|
|
|
|
|
|
|
(50,927 |
) |
|
|
(50,927 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill as of January 2, 2010 |
|
|
25,754 |
|
|
|
121,863 |
|
|
|
18,928 |
|
|
|
166,545 |
|
Food distribution to military revision |
|
|
8,885 |
|
|
|
(8,885 |
) |
|
|
|
|
|
|
|
|
Retail store buy-out agreement |
|
|
|
|
|
|
|
|
|
|
621 |
|
|
|
621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill as of January 1, 2011 |
|
$ |
34,639 |
|
|
$ |
112,978 |
|
|
$ |
19,549 |
|
|
$ |
167,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer contracts and relationships intangibles were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2011 |
|
|
|
|
Gross |
|
|
|
|
|
Net |
|
Estimated |
|
|
Carrying |
|
Accum. |
|
Carrying |
|
Life |
|
|
Value |
|
Amort. |
|
Amount |
|
(years) |
Customer contracts and relationships |
|
$ |
42,317 |
|
|
$ |
(24,184 |
) |
|
$ |
18,133 |
|
|
|
10-20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2, 2010 |
|
|
|
|
Gross |
|
|
|
|
|
Net |
|
Estimated |
|
|
Carrying |
|
Accum. |
|
Carrying |
|
Life |
|
|
Value |
|
Amort. |
|
Amount |
|
(years) |
Customer contracts and relationships |
|
$ |
42,798 |
|
|
$ |
(21,736 |
) |
|
$ |
21,062 |
|
|
|
10-20 |
|
Other intangible assets included in other assets on the consolidated balance sheets were
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2011 |
|
|
|
|
Gross |
|
|
|
|
|
Net |
|
Estimated |
|
|
Carrying |
|
Accum. |
|
Carrying |
|
Life |
|
|
Value |
|
Amort. |
|
Amount |
|
(years) |
Franchise agreements |
|
$ |
2,694 |
|
|
$ |
(1,501 |
) |
|
$ |
1,193 |
|
|
|
17-25 |
|
Non-compete agreements |
|
|
346 |
|
|
|
(167 |
) |
|
|
179 |
|
|
|
4-10 |
|
Pharmacy scripts |
|
|
1,134 |
|
|
|
(600 |
) |
|
|
534 |
|
|
|
5 |
|
License agreements |
|
|
53 |
|
|
|
(29 |
) |
|
|
24 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2, 2010 |
|
|
|
|
Gross |
|
|
|
|
|
Net |
|
Estimated |
|
|
Carrying |
|
Accum. |
|
Carrying |
|
Life |
|
|
Value |
|
Amort. |
|
Amount |
|
(years) |
Franchise agreements |
|
$ |
2,754 |
|
|
$ |
(1,410 |
) |
|
$ |
1,344 |
|
|
|
5-25 |
|
Non-compete agreements |
|
|
696 |
|
|
|
(453 |
) |
|
|
243 |
|
|
|
4-10 |
|
Pharmacy scripts |
|
|
1,064 |
|
|
|
(379 |
) |
|
|
685 |
|
|
|
5 |
|
License agreements |
|
|
660 |
|
|
|
(571 |
) |
|
|
89 |
|
|
|
1-5 |
|
Aggregate amortization expense recognized for fiscal 2010, 2009 and 2008 was $3.4
million, $4.4 million and $4.0 million, respectively. The aggregate amortization expense for the
five succeeding fiscal years is expected to approximate $3.1 million, $2.6 million, $2.3 million,
$2.0 million and $1.8 million for fiscal years 2011 through 2015, respectively.
51
Income Taxes
When preparing our consolidated financial statements, we are required to estimate our income
taxes in each of the jurisdictions in which we operate. The process involves estimating our actual
current tax
obligations based on expected income, statutory tax rates and tax planning opportunities in
the various jurisdictions in which we operate. In the event there is a significant, unusual or
one-time item recognized in our results of operations, the tax attributable to that item would be
separately calculated and recorded in the period the unusual or one-time item occurred.
We utilize the liability method of accounting for income taxes as set forth in ASC Topic 740.
Under the liability method, deferred taxes are determined based on the temporary differences
between the financial statement and tax basis of assets and liabilities using tax rates expected to
be in effect during the years in which the basis differences reverse or are settled. A valuation
allowance is recorded when it is more likely than not that all or a portion of the deferred tax
assets will not be realized. Changes in valuation allowances from period to period are included in
our tax provision in the period of change.
We establish reserves when, despite our belief that the tax return positions are fully
supportable, certain positions could be challenged and we may ultimately not prevail in defending
our positions. These reserves are adjusted in light of changing facts and circumstances, such as
the closing of a tax audit or the expiration of statutes of limitations. The effective tax rate
includes the impact of reserve provisions and changes to reserves that are considered appropriate,
as well as, related penalties and interest. These reserves relate to various tax years subject to
audit by taxing authorities.
Income tax positions must meet a more-likely-than-not recognition threshold at the effective
date to be recognized. We recognize potential accrued interest and penalties related to the
unrecognized tax benefits in income tax expense.
Financial Instruments
We account for derivative financial instruments pursuant to ASC Topic 815. ASC Topic 815
requires derivatives be carried at fair value on the balance sheet and provides for hedge
accounting when certain conditions are met.
We have market risk exposure to changing interest rates primarily as a result of our borrowing
activities and to the cost of fuel in our distribution operations. Our objective in managing our
exposure to changes in interest rates and the cost of fuel is to reduce fluctuations in earnings
and cash flows. To achieve these objectives, from time-to time we use derivative instruments,
primarily interest rate swap agreements and fuel hedges, 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.
Share-based compensation
Our results of operations reflect compensation expense for newly issued stock options and
other forms of share-based compensation granted under our stock incentive plans, for the unvested
portion of previously issued stock options and other forms of share-based compensation granted, and
for our employee stock purchase plan. We estimate the fair value of share-based payment awards on
the date of the grant. We use the grant date closing price per share of Nash Finch common stock to
estimate the fair value of Restricted Stock Units (RSUs) and performance units granted pursuant to
our long-term incentive plan (LTIP). We use the Black-Scholes option-pricing model to estimate the
fair value of stock options and a lattice model to estimate the fair value of stock appreciation
rights (SARs) which contain certain market conditions. For all types of awards, the value of the
portion of the awards ultimately expected to vest is recognized as expense over the requisite
service period.
Comprehensive Income
52
We report comprehensive income in accordance with ASC Topic 220. Other comprehensive income
refers to revenues, expenses, gains and losses that are not included in net earnings such as
minimum pension and other post retirement liabilities adjustments and unrealized gains or losses on
hedging instruments, but rather are recorded directly in the consolidated statements of
stockholders equity.
Use of Estimates
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.
New Accounting Standards
In June 2009, the FASB issued amendments to ASC Topic 810 (ASC 810), which addresses the
elimination of the concept of a qualifying special purpose entity. The amended guidance also
replaces the quantitative-based risks and rewards calculation for determining which enterprise has
a controlling financial interest in a variable interest entity with an approach focused on
identifying which enterprise has the power to direct the activities of a variable interest entity
and the obligation to absorb losses of the entity or the right to receive benefits from the entity.
Additionally, the amended guidance provides more timely and useful information about an
enterprises involvement with a variable interest entity. Effective January 3, 2010, we adopted
the amended provisions of ASC 810 which had no impact on our consolidated financial statements.
On December 15, 2009, the FASB issued Accounting Standards Update No. 2010-06, Fair Value
Measurements and Disclosures Topic 820 Improving Disclosures about Fair Value Measurements. This
ASU requires some new disclosures and clarifies some existing disclosure requirements about fair
value measurement as set forth in ASC Subtopic 820-10. The FASBs objective is to improve these
disclosures and, thus, increase the transparency in financial reporting. The Company adopted the
provision of ASU 2010-06 effective January 3, 2010. The adoption of this ASU did not have a
material impact on the Companys consolidated financial statements.
(2) Acquisition
On January 31, 2009, the Company completed the purchase from GSC Enterprises, Inc. (GSC), of
substantially all of the assets relating to three military food distribution centers located in San
Antonio, Texas, Pensacola, Florida and Junction City, Kansas serving military commissaries and
exchanges (Business). The Company also assumed certain trade payables, accrued expenses and
receivables associated with the assets being acquired. The aggregate purchase price paid was $78.1
million in cash.
Effective January 4, 2009, the Company adopted the provisions of ASC Topic 805 (ASC 805,
originally issued as SFAS No. 141R, Business Combinations). ASC 805 defines the acquirer in a
business combination as the entity that obtains control of one or more businesses in a business
combination and establishes the acquisition date as the date that the acquirer achieves control.
ASC 805 requires an acquirer to recognize the assets acquired, the liabilities assumed, and any
non-controlling interest in the acquiree at the acquisition date, measured at their fair values as
of that date. ASC 805 also requires the acquirer to recognize contingent consideration at the
acquisition date, measured at its fair value at that date.
The following table summarizes the fair values of the assets acquired and liabilities of the
Business assumed at the acquisition date:
53
|
|
|
|
|
As of January 31, 2009 |
|
|
|
|
(in thousands) |
|
|
|
|
Cash and cash equivalents |
|
$ |
47 |
|
Accounts receivable |
|
|
61,285 |
|
Inventories |
|
|
42,061 |
|
Prepaid expenses and other |
|
|
210 |
|
Property, plant and equipment |
|
|
30,294 |
|
Other assets |
|
|
890 |
|
|
|
|
|
|
|
|
|
|
Total identifiable assets acquired |
|
|
134,787 |
|
|
|
|
|
|
Current liabilities |
|
|
43,114 |
|
Accrued expenses |
|
|
1,162 |
|
Deferred tax liability, net |
|
|
4,272 |
|
Other long-term liabilities |
|
|
1,456 |
|
|
|
|
|
Total liabilities assumed |
|
|
50,004 |
|
|
|
|
|
|
|
|
|
|
Net assets acquired |
|
$ |
84,783 |
|
|
|
|
|
The fair value of the net identifiable assets acquired and liabilities assumed of $84.8
million exceeded the purchase price of $78.1 million. Consequently, the Company reassessed the
recognition and measurement of identifiable assets acquired and liabilities assumed and concluded
that the valuation procedures and resulting measures were appropriate. As a result, the Company
recognized a gain of $6.7 million (net of tax) in fiscal 2009 associated with the acquisition of
the Business. The gain is included in the line item Gain on acquisition of a business in the
consolidated statement of income.
A contingency of $0.3 million is included in the other long-term liabilities account in the
table above related to a payment the Company would have been required to make in the event a
purchase option was not exercised associated with the sublease of the Pensacola, FL facility prior
to October 10, 2010. The Company determined the range of the potential loss was zero to $1.0
million and the acquisition date fair value of the contingency was $0.3 million based upon a
probability-weighted discounted cash flow valuation technique. The Company exercised the purchase
option during the third quarter of fiscal 2010. The resulting gain recognized from the settlement
of this contingency is included on the selling, general and administrative line on our consolidated
statement of income.
Although the Company has made reasonable efforts to do so, synergies achieved through the
integration of the Business into the Companys military segment, unallocated interest expense and
the allocation of shared overhead specific to the Business cannot be precisely determined.
Accordingly, the Company has deemed it impracticable to calculate the precise impact the Business
had on the Companys net earnings during fiscal 2009. However, please refer to Note 18 Segment
Reporting for a comparison of military segment sales and profits for fiscal years 2010, 2009 and
2008.
Supplemental pro forma financial information
The unaudited pro forma financial information in the table below combines the historical
results for the Company and the historical results for the Business for the 52 weeks ended January
2, 2010 and the 53 weeks ended January 3, 2009. This pro forma financial information is provided
for illustrative purposes only and does not purport to be indicative of the actual results that
would have been achieved by the combined operations for the periods presented or that will be
achieved by the combined operations in the future.
54
|
|
|
|
|
|
|
|
|
|
|
52 Weeks Ended |
|
53 Weeks Ended |
|
|
January 2, |
|
January 3, |
(in thousands, except per share data) |
|
2010 |
|
2009 |
Total revenues |
|
$ |
5,274,945 |
|
|
|
5,348,799 |
|
Net earnings |
|
|
2,944 |
|
|
|
36,096 |
|
Basic earnings per share |
|
|
0.23 |
|
|
|
2.80 |
|
Diluted earnings per share |
|
|
0.22 |
|
|
|
2.74 |
|
(3) Vendor Allowances and Credits
We participate with our vendors in a broad menu of promotions to increase sales of products.
These promotions fall into two main categories: off-invoice allowances and performance-based
allowances. These
allowances are often subject to negotiation with our vendors. In the case of off-invoice
allowances, discounts are typically offered by vendors with respect to certain merchandise
purchased by us during a specified period of time. We use off-invoice allowances to support a
variety of marketing programs such as reduced price offerings for specific time periods, food
shows, pallet promotions and private label promotions. The discounts are either reflected directly
on the vendors invoice, as a reduction from the normal wholesale prices for merchandise to which
the allowance applies, or we are allowed to deduct the allowance as an offset against the vendors
invoice when it is paid.
In the case of performance-based allowances, the allowance or rebate is based on our
completion of some specific activity, such as purchasing or selling product during a certain time
period. This basic performance requirement may be accompanied by an additional performance
requirement such as providing advertising or special in-store promotion, tracking specific
shipments of goods to retailers (or to customers in the case of our own retail stores) during a
specified period (retail performance allowances), slotting (adding a new item to the system in one
or more of our distribution centers) and merchandising a new item, or achieving certain minimum
purchase quantities. The billing for these performance-based allowances is normally in the form of
a bill-back, in which case we are invoiced at the regular price with the understanding that we
may bill back the vendor for the requisite allowance when the performance is satisfied. We also
assess an administrative fee, reflected on the invoices sent to vendors, to recoup our reasonable
costs of performing the tasks associated with administering retail performance allowances.
We collectively plan promotions with our vendors and arrive at the amount the respective
vendor plans to spend on promotions with us. Each vendor has its own method for determining the
amount of promotional funds to be spent with us. In most situations, the vendor allowances are
based on units we purchase from the vendor. In other situations, the allowances are based on our
past or anticipated purchases and/or the anticipated performance of the planned promotions.
Forecasting promotional expenditures is a critical part of our frequently scheduled planning
sessions with our vendors. As individual promotions are completed and the associated billing is
processed, the vendors track our promotional program execution and spend rate, and discuss the
tracking, performance and spend rate with us on a regular basis throughout the year. These
communications include discussions with respect to future promotions, product cost, targeted
retails and price points, anticipated volume, promotion expenditures, vendor maintenance, billing
issues and procedures, new items/discontinued items and trade spend levels relative to budget per
event and per year, as well as the resolution of any issues that arise between the vendor and us.
In the future, the nature and menu of promotional programs and the allocation of dollars among them
may change as a result of ongoing negotiations and commercial relationships between vendors and us.
We have a vendor dispute resolution process to facilitate timely research and resolution of
disputed deductions from vendor payments. We estimate and record a payable based on current and
historical claims.
(4) Special Charges
In fiscal 2009, we recorded a special charge of $6.0 million due to asset impairments in our
food distribution segment. The charge included write-downs of $5.5 million to leasehold
improvements and $0.5 million to fixtures and equipment.
55
(5) Long-Lived Asset Impairment Charges
Impairment charges of $0.9 million, $8.5 million and $2.6 million were
recorded for long-lived asset impairments in fiscal 2010, 2009 and 2008, respectively. The
impairment charges primarily related to four retail stores in 2010, six retail stores and one food
distribution center in 2009 and eight retail stores in 2008 that were impaired as a result of
increased competition within the respective market areas. The estimated undiscounted cash flows
related to these facilities indicated that the carrying value of the assets may not be recoverable
based on current expectations, therefore these assets were written down in accordance with ASC
360-10-35.
(6) Accounts and Notes Receivable
Accounts and notes receivable at the end of fiscal 2010 and 2009 are comprised of the
following components:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2010 |
|
|
2009 |
|
Customer notes receivable, current |
|
$ |
5,364 |
|
|
$ |
7,227 |
|
Customer accounts receivable |
|
|
218,050 |
|
|
|
229,884 |
|
Other receivables |
|
|
15,753 |
|
|
|
18,769 |
|
Allowance for doubtful accounts |
|
|
(5,731 |
) |
|
|
(5,113 |
) |
|
|
|
|
|
|
|
Net current accounts and notes receivable |
|
$ |
233,436 |
|
|
$ |
250,767 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term customer notes receivable |
|
$ |
20,811 |
|
|
$ |
23,917 |
|
Allowance for doubtful accounts |
|
|
(461 |
) |
|
|
(574 |
) |
|
|
|
|
|
|
|
Net long-term notes receivable |
|
$ |
20,350 |
|
|
$ |
23,343 |
|
|
|
|
|
|
|
|
Operating results include bad debt expense of $0.8 million in fiscal 2010, $1.4 million
in fiscal 2009 and the reversal of bad debt expense of $1.3 million during fiscal 2008.
(7) Long-term Debt and Bank Credit Facilities
Long-term debt as of the end of the fiscal 2010 and 2009 is summarized as follows:
|
|
|
|
|
|
|
|
|
(In thousands) |
|
2010 |
|
|
2009 |
|
|
Asset-backed credit agreement: |
|
|
|
|
|
|
|
|
Revolving credit |
|
$ |
154,100 |
|
|
|
124,100 |
|
Senior subordinated convertible debt, 3.50% due in 2035 |
|
|
136,710 |
|
|
|
131,364 |
|
Industrial development bonds, 5.60% to 5.75% due in various installments through 2014 |
|
|
1,830 |
|
|
|
2,365 |
|
Notes payable and mortgage notes, 7.95% due in various installments through 2013 |
|
|
296 |
|
|
|
388 |
|
|
|
|
|
|
|
|
Total debt |
|
|
292,936 |
|
|
|
258,217 |
|
Less current maturities |
|
|
(670 |
) |
|
|
(627 |
) |
|
|
|
|
|
|
|
Long-term debt |
|
$ |
292,266 |
|
|
|
257,590 |
|
|
|
|
|
|
|
|
Asset-backed Credit Agreement
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
56
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 or LIBOR plus a margin. The LIBOR interest rate margin currently is 2.00%
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.
At January 1, 2011, $174.2 million was available under the Revolving Credit Facility after
giving effect to outstanding borrowings and to $11.7 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 ninety (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 from Roundys, which consisted primarily of our Lima
and Westville distribution centers, we sold $150.1 million in aggregate issue price (or $322.0
million aggregate principal amount at maturity) of senior subordinated convertible notes due 2035
in a private placement completed on March 15, 2005. 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.
Cash interest at the rate of 3.50% per year is payable semi-annually on the issue price of the
notes until March 15, 2013. After that date, cash interest will not be payable, unless contingent
cash interest becomes payable, and original issue discount for non-tax purposes will accrue on the
notes at a daily rate of 3.50% per year until the maturity date of the notes. On the maturity date
of the notes, a holder will receive $1,000 per note (a $1,000 Note). Contingent cash interest
will be paid on the notes during any six-month period, commencing March 16, 2013, if the average
market price of a note for a ten trading day measurement period preceding the applicable six-month
period equals 130% or more of the accreted principal amount of the note, plus accrued cash
interest, if any. The contingent cash interest payable with respect to any six-month period will
equal an annual rate of 0.25% of the average market price of the note for the ten trading day
measurement period described above.
The notes will be convertible at the option of the holder only upon the occurrence of certain
events summarized as follows:
57
|
(1) |
|
if the closing price of our stock reaches a specified threshold (currently
$63.64) for a specified period of time, |
|
|
(2) |
|
if the notes are called for redemption, |
|
|
(3) |
|
if specified corporate transactions or distributions to the holders of our
common stock occur, |
|
|
(4) |
|
if a change in control occurs or, |
|
|
(5) |
|
during the ten trading days prior to, but not on, the maturity date. |
Upon conversion by the holder, the notes convert at an adjusted conversion rate of 9.5222
shares (initially 9.3120 shares) of our common stock per $1,000 Note (equal to an adjusted
conversion price of approximately $48.95 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 (or residual value shares), if any, in cash, stock or both, at our option. The conversion
rate is adjusted upon certain dilutive events as described in the indenture, but in no event shall
the conversion rate exceed 12.7109 shares per $1,000 Note. The number of residual value shares
cannot exceed 7.1469 shares per $1,000 Note.
We may redeem all or a portion of the notes for cash at any time on or after the eighth
anniversary of the issuance of the notes. Holders may require us to purchase for cash all or a
portion of their notes on the 8th, 10th, 15th, 20th and 25th anniversaries of the issuance of the
notes. In addition, upon specified change in control events, each holder will have the option,
subject to certain limitations, to require us to purchase for cash all or any portion of such
holders notes.
In connection with the closing of the sale of the notes, we entered into a registration rights
agreement with the initial purchasers of the notes. In accordance with that agreement, we filed
with the Securities and Exchange Commission a shelf registration statement covering the resale by
security holders of the notes and the
common stock issuable upon conversion of the notes. The shelf registration statement was
declared effective by the Securities and Exchange Commission on October 5, 2005. Our contractual
obligation, however, to maintain the effectiveness of the shelf registration statement has expired.
As a result, we removed from registration, by means of a post-effective amendment filed on July
24, 2007, all notes and common stock that remained unsold at such time.
Industrial Development Bonds and Mortgages
At January 1, 2011, land in the amount of $1.4 million and buildings and other assets with a
depreciated cost of approximately $3.0 million are pledged to secure obligations under issues of
industrial development bonds and mortgages.
Maturities of Long-term Debt
Aggregate annual maturities of long-term debt for the five fiscal years after January 1, 2011,
are as follows (in thousands):
|
|
|
|
|
2011 |
|
$ |
670 |
|
2012 |
|
|
704 |
|
2013 |
|
|
154,812 |
|
2014 |
|
|
40 |
|
2015 |
|
|
|
|
Thereafter |
|
|
136,710 |
|
|
|
|
|
Total |
|
$ |
292,936 |
|
|
|
|
|
Interest paid was $16.6 million, $17.8 million and $18.7 million during fiscal 2010,
fiscal 2009 and fiscal 2008, respectively.
(8) Derivative Instruments
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
58
managing our exposure to changes in interest rates and commodity prices is to reduce
fluctuations in earnings and cash flows. To achieve these objectives, 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 January 1,
2011, and January 2, 2010, we had recorded a fair value liability of $0.4 million and $1.1 million,
respectively, which was 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 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 interest rate swap agreements
resulted in recognizing interest expense of $1.0 million, $1.5 million and $0.1 million in fiscal
2010, fiscal 2009 and fiscal 2008, respectively.
As of January 1, 2011, we had two outstanding interest rate swap agreements with notional
amounts totaling $17.5 million, as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional |
|
Effective Date |
|
Termination Date |
|
Fixed Rate |
$10,000 |
|
|
10/15/2010 |
|
|
|
10/15/2011 |
|
|
|
3.49 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional |
|
Effective Date |
|
Termination Date |
|
Fixed Rate |
$7,500 |
|
|
10/15/2010 |
|
|
|
10/15/2011 |
|
|
|
3.38 |
% |
Interest rate swap agreements outstanding at January 1, 2011 and January 2, 2010 and their
fair values are summarized as follows:
|
|
|
|
|
|
|
January |
(In thousands, except percentages) |
|
1, 2011 |
Notional amount (pay fixed/receive variable) |
|
$ |
17,500 |
|
Fair value liability |
|
|
(433 |
) |
Average receive rate for effective swaps |
|
|
0.3 |
% |
Average pay rate for effective swaps |
|
|
3.4 |
% |
|
|
|
|
|
|
|
January |
(In thousands, except percentages) |
|
2, 2010 |
Notional amount (pay fixed/receive variable) |
|
$ |
35,000 |
|
Fair value liability |
|
|
(1,132 |
) |
Average receive rate for effective swaps |
|
|
2.6 |
% |
Average pay rate for effective swaps |
|
|
3.4 |
% |
From time-to-time we use commodity swap agreements to reduce price risk associated with
anticipated purchases of diesel fuel. The agreements call for an exchange of payments with us
making payments based on fixed price per gallon and receiving payments based on floating prices,
without an exchange of the underlying commodity amount upon which the payments are made. Resulting
gains and losses on the fair market value of the commodity swap agreement are immediately
recognized as income or expense.
As of January 1, 2011, there were no commodity swap agreements in existence. Our only
commodity swap agreement in place during fiscal 2008 expired during the first quarter and was
settled for fair market value.
59
In addition to the previously discussed interest rate and commodity swap agreements, from
time-to-time we enter into a fixed price fuel supply agreements to support our food distribution
segment. On January 1, 2009, we entered into an agreement which required us to purchase a total of
252,000 gallons of diesel fuel per month at prices ranging from $1.90 to $1.98 per gallon. The
term of the agreement was for one year and expired on December 31, 2009. The fixed price fuel
agreement qualified and was designated under the normal purchase exception under ASC 815,
therefore the fuel purchases under the contract was expensed as incurred as an increase to cost of
sales.
(9) Income Taxes
|
|
Income tax expense is made up of the following components: |
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
2008 |
|
Current: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
6,268 |
|
|
$ |
27,382 |
|
|
$ |
12,414 |
|
State |
|
|
783 |
|
|
|
3,231 |
|
|
|
1,656 |
|
Tax credits |
|
|
(400 |
) |
|
|
(268 |
) |
|
|
(130 |
) |
Deferred: |
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
13,154 |
|
|
|
(8,271 |
) |
|
|
6,284 |
|
State |
|
|
1,380 |
|
|
|
(1,102 |
) |
|
|
422 |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
21,185 |
|
|
$ |
20,972 |
|
|
$ |
20,646 |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense differed from amounts computed by applying the federal income tax rate to
pre-tax income as a result of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Federal statutory tax rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
State taxes, net of federal income tax benefit |
|
|
3.7 |
% |
|
|
4.7 |
% |
|
|
4.0 |
% |
Non-deductible goodwill |
|
|
0.0 |
% |
|
|
73.6 |
% |
|
|
0.0 |
% |
Change in tax contingencies |
|
|
(8.0 |
)% |
|
|
4.4 |
% |
|
|
1.1 |
% |
Gain on litigation settlement |
|
|
0.0 |
% |
|
|
(12.7 |
)% |
|
|
0.0 |
% |
Gain on acquisition of a business |
|
|
0.0 |
% |
|
|
(11.2 |
)% |
|
|
0.0 |
% |
Federal refund claim |
|
|
0.0 |
% |
|
|
(6.8 |
)% |
|
|
0.0 |
% |
Other, net |
|
|
(1.3 |
)% |
|
|
1.3 |
% |
|
|
(1.7 |
)% |
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
29.4 |
% |
|
|
88.3 |
% |
|
|
38.4 |
% |
|
|
|
|
|
|
|
|
|
|
The tax effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities are as follows:
60
|
|
|
|
|
|
|
|
|
|
|
January 1, |
|
|
January 2, |
|
(in thousands) |
|
2011 |
|
|
2010 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Compensation related accruals |
|
$ |
19,566 |
|
|
$ |
16,812 |
|
Reserve for bad debts |
|
|
2,440 |
|
|
|
2,264 |
|
Reserve for store shutdown and special charges |
|
|
1,024 |
|
|
|
1,438 |
|
Workers compensation accruals |
|
|
3,493 |
|
|
|
3,243 |
|
Pension accruals |
|
|
7,030 |
|
|
|
6,540 |
|
Reserve for future rents |
|
|
2,671 |
|
|
|
3,608 |
|
Other |
|
|
4,505 |
|
|
|
3,216 |
|
|
|
|
|
|
|
|
Total deferred tax assets |
|
|
40,729 |
|
|
|
37,121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
11,995 |
|
|
|
5,120 |
|
Intangible assets |
|
|
21,899 |
|
|
|
17,337 |
|
Inventories |
|
|
12,407 |
|
|
|
8,263 |
|
Convertible debt interest |
|
|
23,022 |
|
|
|
21,296 |
|
Other |
|
|
572 |
|
|
|
2,059 |
|
|
|
|
|
|
|
|
Total deferred tax liabilities |
|
|
69,895 |
|
|
|
54,075 |
|
|
|
|
|
|
|
|
Net deferred tax liability |
|
$ |
(29,166 |
) |
|
$ |
(16,954 |
) |
|
|
|
|
|
|
|
Our income tax expense from continuing operations was $21.2 million, $21.0 million and $20.6
million for fiscal years 2010, 2009 and 2008, respectively. The income tax rate from continuing
operations for fiscal 2010 was 29.4% compared to 88.3% for fiscal 2009 and 38.4% for fiscal 2008.
The effective income tax rate for fiscal 2010, 2009 and 2008 represented income tax expense
incurred on pre-tax income from continuing operations. The effective tax rate for fiscal 2010 was
impacted by the reversal of previously unrecognized tax benefits of $13.6 million primarily due to
statute of limitation closures and audit resolutions and an increase in reserves of $3.4 million.
Net income taxes paid were $23.9 million, $22.4 million, and $0.8 million during fiscal 2010,
2009 and 2008, respectively. Income tax benefits recognized through stockholders equity were $0.0
million, $0.0 million, and $0.6 million during fiscal years 2010, 2009 and 2008, respectively, as
compensation expense for tax purposes were in excess of amounts recognized for financial reporting
purposes.
At January 1, 2011, the total amount of unrecognized tax benefits was $1.7 million compared to
$11.9 million at January 2, 2010. The net decrease in unrecognized tax benefits of $10.2 million
since January 2,
2010 was comprised of the following: $3.5 million due to a decrease in the unrecognized tax
benefits relating the expiration of the applicable statutes of limitation, $7.8 million due to the
reduction of unrecognized tax benefits relating to prior period tax positions, $2.3 million due to
the reduction of unrecognized tax benefits relating to current period tax positions and $3.4
million due to the increase in unrecognized tax benefits as a result of tax positions taken in the
current period. The net increase in unrecognized tax benefits of $2.5 million during the year
ended January 2, 2010, was comprised of the following: $0.2 million due to a decrease in the
unrecognized tax benefits relating to the expiration of the applicable statutes of limitation and
$2.7 million due to the increase in unrecognized tax benefits as a result of tax positions taken in
the current period.
The following table summarizes the activity related to our unrecognized tax benefits:
61
|
|
|
|
|
($ in thousands) |
|
|
|
|
Unrecognized tax benefits opening balance at 1/03/10 |
|
$ |
11,905 |
|
Increases related to current year tax period |
|
|
3,409 |
|
Decreases related to current year tax periods |
|
|
(2,288 |
) |
Decreases related to prior year tax periods |
|
|
(7,779 |
) |
Lapse of statute of limitations |
|
|
(3,500 |
) |
|
|
|
|
Unrecognized tax benefits ending balance 1/01/11 |
|
$ |
1,747 |
|
|
|
|
|
|
|
|
|
|
($ in thousands) |
|
|
|
|
Unrecognized tax benefits opening balance at 1/04/09 |
|
$ |
9,438 |
|
Increases related to current year tax period |
|
|
2,706 |
|
Lapse of statute of limitations |
|
|
(239 |
) |
|
|
|
|
Unrecognized tax benefits ending balance 1/02/10 |
|
$ |
11,905 |
|
|
|
|
|
The total amount of tax benefits that if recognized would impact the effective tax rate was
$0.4 million at January 1, 2011 and $4.1 million at January 2, 2010. The accrual for potential
penalties and interest related to unrecognized tax benefits decreased by $2.1 million in 2010, and
in total, as of January 2, 2010, is $0.1 million. The accrual for potential penalties and interest
related to unrecognized tax benefits increased by $0.2 million in fiscal 2009.
We do not expect our unrecognized tax benefits to change significantly over the next 12
months.
The Company or one of its subsidiaries files income tax returns in the U.S. federal
jurisdiction and various state and local jurisdictions. During fiscal 2010, we completed an audit
by the federal tax authorities of our 2008 tax year. No adjustments that would have a substantial
impact on the effective tax rate occurred. With few exceptions, we are no longer subject to U.S.
federal, state or local examinations by tax authorities for years 2006 and prior.
(10) Share-based Compensation Plans
We account for share-based compensation awards in accordance with the provisions of ASC Topic
718 (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.
Share-based compensation expense recognized in our consolidated statements of income for fiscal
years ended January 2, 2010 and January 3, 2009 included compensation expense for the share-based
payment awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date
fair value estimated in accordance with the pro forma provisions of ASC 718. Compensation expense
for the share-based payment awards granted subsequent to January 1, 2006 was based on the grant
date fair value estimated in accordance with the provisions of ASC 718. Share-based compensation
expense recognized in the consolidated statements of income for years ended January 1, 2011,
January 2, 2010, and January 3, 2009 was based on awards ultimately expected to vest, and therefore
has been reduced for estimated forfeitures.
Share-based compensation recognized under ASC 718 for the year ended January 1, 2011 was $7.9
million. Share-based compensation was $9.1 million during 2009 and $8.8 million in fiscal 2008.
Share-based compensation amounts are included in selling, general & administrative expense line of
our consolidated statements of income.
We have four equity compensation plans under which incentive performance units, stock
appreciation rights 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 (2009 Plan), the 2000 Stock Incentive Plan (2000 Plan), the
Director Deferred Compensation Plan, and the 1997 Non-Employee Director Stock Compensation Plan.
No additional awards can be granted under the 2000 stock incentive program effective May 20, 2009,
the date our Shareholders approved the 2009 plan.
62
The Board adopted the Director Deferred Compensation Plan for amounts deferred on or after
January 1, 2005. The plan permits non-employee directors to annually defer all or a portion of his
or her cash compensation for service as a director, and have the amount deferred into either a cash
account or a share unit account. Each share unit is payable in one share of Nash Finch common
stock following termination of the participants service as a director.
Under the 2000 Plan, employees, non-employee directors, consultants and independent
contractors were awarded incentive or non-qualified stock options, shares of restricted stock,
stock appreciation rights or performance units.
Awards to non-employee directors under the 2000 Plan began in 2004 and ended in May 2008 and
have taken the form of restricted stock units (RSUs) that are granted annually to each
non-employee director as part of his or her annual compensation for service as a director. The
number of such units awarded to each director in 2008 was determined by dividing $45,000 by the
fair market value of a share of our common stock on the date of grant. Each of these units vest
six months after issuance and will entitle a director to receive one share of our common stock six
months after the directors service on our Board ends.
The 2009 Plan permits the grant of stock options, restricted stock, restricted stock units,
deferred stock, stock payments, stock appreciation rights, performance awards and other stock or
cash awards to employees and/or other individuals who perform services for the Company and its
Subsidiaries.
Since 2005, awards have taken the form of performance units (including share units pursuant to
our Long-Term Incentive Plan (LTIP)), RSUs and Stock Appreciation Rights (SARS).
Performance units pursuant to our LTIP were granted during each of fiscal years 2007 through
2009 under the 2000 Plan and during fiscal 2010 under the 2009 Plan. These units vest at the end
of a three-year performance period.
In February 2008, the Compensation and Management Development Committee (the Committee) of
the Board of Directors amended the 2007 LTIP plan to take into account the Companys decision in
the fall of 2007 to invest strategic capital in support of its strategic plan. To ensure the
interests of management and shareholders remained aligned after the decision to invest strategic
capital, the Committee decided in February 2008 to revise the 2007 LTIP plan by, among other
things, adding a definition for Strategic Project and amending the definitions of Net Assets, RONA
and Free Cash Flow. The 2007 LTIP Plan was amended as follows:
|
|
|
2007 LTIP Plan: The Committee amended the definition of net assets to allow
for the impact on net assets resulting from the Companys decision to expend strategic
capital. Net Assets is defined in the amended Plan as: Net Assets means total
assets minus current liabilities, excluding current maturities of long-term debt and
capitalized lease obligations and further adjusted by (x) subtracting the additions of
Strategic Project PP&E and Strategic Project Working Capital. Strategic Project
means projects of the following type that have been approved by the Committee: (i) all
Strategic Projects identified in the Companys Five-Year Plan dated October 29, 2007;
(ii) new retail store additions; (iii) conversions of current retail stores to a new
format; (iv) conversion of current wholesale distribution centers; (v) new wholesale
distribution centers or additions thereto; (vi) conversion of current distribution
network systems; (vii) conversion of current wholesale or retail pricing and billing
systems; (viii) conversion of current wholesale or retail merchandising systems; (ix)
conversion of vendor income management systems. If a Strategic Project generates
positive Consolidated EBITDA through July 1 of the year placed in service, then the
adjustment for (x) above will not be made. If a Strategic Project first generates
positive Consolidated EBITDA after July 1 of the year placed in service, then the
adjustment for (x) above will be made during that fiscal year only. Net Assets will be
further adjusted upward by the amount of any impairment of goodwill that the Company
records beginning with the affected year during the Measurement Period. In addition,
the Committee amended the definition of Free Cash Flow to provide as follows: Free
Cash Flow
|
63
|
|
|
means cash provided by operating activities minus additions of property,
plant and equipment (PP&E); and (i) adding back the additions of Strategic Project
PP&E; (ii) adding back Strategic Project Working Capital; and (iii) subtracting
projected Strategic Project Consolidated EBITDA, offset by the associated cash interest
and income taxes. If a Strategic Project generates positive Consolidated EBITDA through
July 1 of the year placed in service, the adjustment for (iii) above will only be made
through July 1 of that year. If a Strategic Project first generates positive
Consolidated EBITDA after July 1 of the year placed in service, then the adjustment for
(iii) above will be made through the first anniversary date of the Strategic Project
being placed in service. |
The Committee made the following additional amendments to the 2007 plan at its February 2008
meeting; (1) removing the plan participants option to receive payout of the award in cash; instead
requiring that all awards be paid in stock; and (2) automatically deferring settlement of stock
payouts to senior vice presidents, executive vice presidents and the CEO until 30 days following
termination of their employment or until six months after termination of their employment if they
are determined to be specified employees under 409A(a)(2)(B)(i) of the Internal Revenue Code of
1986. The above modifications resulted in replacement of the previously outstanding liability
awards with equity awards as defined by ASC 718. Therefore, the total expense recognized over the
remaining service (vesting) period of the awards will equal the grant date fair value times number
of shares that ultimately vest. The Company estimates expected forfeitures in determining the
compensation expense recorded each period. The Company recorded no incremental compensation cost
as a result of modifying the 2007 LTIP awards.
During 2008, 119,821 units were granted pursuant to our 2008 LTIP. Depending on our ranking
on compound annual growth rate for Consolidated EBITDA among the companies in the peer group and
our free cash flow return on net assets performance against targets established by the Committee
for the 2008 awards, 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 equal to the grant date fair value (for shares expected to vest) is recorded
over the three-year vesting period.
During 2010, 123,128 units were granted pursuant to our 2010 LTIP and during 2009, 108,696
units were granted pursuant to our 2009 LTIP. Under each plan, depending on a comparison of the
Companys cumulative three-year actual EBITDA results to the cumulative three-year strategic plan
EBITDA targets 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.
All units under the 2006 LTIP plan were settled during the second quarter 2009 for
approximately 90,000 shares of our common stock of which approximately 15,000 shares, net of tax
withholding of approximately 8,000 shares, were paid out of treasury stock during the second
quarter 2009 and the remaining 67,000 shares deferred to future periods at the election of the
recipients.
On January 2, 2010, 102,133 units outstanding under the 2007 LTIP vested and were settled in
the second quarter 2010 for approximately 182,000 shares of common stock of which approximately
22,000 shares, net of tax withholding of 10,900 shares were paid out of treasury stock during the
second quarter of 2010 and the remaining 149,000 shares deferred to future periods at the election
of the recipients.
On January 1, 2011, 104,111 units outstanding under the 2008 LTIP vested and are expected to
be settled in the second quarter of 2011 upon final comparison of the Companys results to those
reported by its peers.
During fiscal years 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. Compensation cost, net of projected forfeitures,
is recognized on a straight-line basis over the period between the grant and vesting dates, with
compensation cost for grants with a
64
graded vesting schedule recognized on a straight-line basis
over the requisite service period for each separately vesting portion of the award as if the award
was, in substance, multiple awards. 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 February 27, 2007, Mr. Covington was granted a total of 152,500 RSUs under the Companys
2000 Stock Incentive Plan. The new RSU grant replaced a previous grant of 100,000 performance
units awarded to Mr. Covington when he joined the Company in 2006. The previous 100,000 unit grant
has been cancelled. The new grant delivers additional equity in lieu of the cash tax gross up
payment included in the previous award; therefore no cash outlay will be required by the Company.
Vesting of the new RSU grant to Mr. Covington will occur over a four year period, assuming Mr.
Covingtons continued employment with Nash Finch. However, Mr. Covington will not receive the stock
until six months after the termination of his employment, whenever that may occur. At the date of
the modification, the Company deemed it improbable that the performance vesting conditions of the
original awards would be achieved and therefore was not accruing compensation expense related to
the original grant. Accordingly, the replacement of the previous grant had no immediate financial
impact but resulted in incremental compensation cost in periods subsequent to the modification due
to the expectation that the replacement awards will vest. As of January 1, 2011, the Company has
recognized cumulative compensation expense related to the modified awards of $4.4 million versus
$2.0 million that would have been recorded for the original awards based on actual and forecasted
performance relative to the performance vesting conditions. The Company expects to record total
compensation $4.7 million for the replacement awards over the 4-year vesting period compared with
$2.1 million for the original awards.
On December 17, 2008, in connection with the Companys announcement of its planned acquisition
of certain military distribution assets of GSC Enterprises, Inc. (GSC) as discussed in Note 2
Acquisition , eight executives of the Company were granted a total of 267,345 stock appreciation
rights (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 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 or a change in control occurs following the six month anniversary of
the grant date or termination of the executives employment due to death or disability. Upon
vesting and 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 Stock Appreciation Rights (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 will be recorded
over a derived service period of 3.55 years.
The following assumptions were used to determine the fair value of SARs during fiscal 2008:
65
|
|
|
|
|
Assumptions - SARs Valuation |
|
2008 |
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 tables summarize activity in our share-based compensation plans during the
fiscal year ended January 1, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
Service |
|
Average |
|
Performance |
|
Average |
|
|
Based |
|
Remaining |
|
Based Grants |
|
Remaining |
|
|
Grants |
|
Restriction/ |
|
(LTIP & |
|
Restriction/ |
|
|
(Board Units |
|
Vesting |
|
Performance |
|
Vesting |
(in thousands, except per share amounts) |
|
and RSUs) |
|
Period |
|
RSUs) |
|
Period |
Outstanding at January 2, 2010 |
|
|
606.8 |
|
|
|
1.0 |
|
|
|
408.1 |
|
|
|
1.0 |
|
Granted |
|
|
40.1 |
|
|
|
|
|
|
|
123.7 |
|
|
|
|
|
Forfeited/cancelled |
|
|
|
|
|
|
|
|
|
|
(11.9 |
) |
|
|
|
|
Exercised/units settled |
|
|
(49.0 |
) |
|
|
|
|
|
|
(102.1 |
) |
|
|
|
|
Shares deferred upon vesting/settlement &
dividend equivalents on deferred shares* |
|
|
48.6 |
|
|
|
|
|
|
|
151.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2011 |
|
|
646.5 |
|
|
|
0.6 |
|
|
|
568.8 |
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares expected to vest** |
|
|
641.4 |
|
|
|
1.6 |
|
|
|
205.0 |
|
|
|
2.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable/unrestricted at January 2, 2010 |
|
|
273.6 |
|
|
|
|
|
|
|
102.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable/unrestricted at January 1, 2011 |
|
|
322.1 |
|
|
|
|
|
|
|
323.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
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. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
Stock |
|
|
Average |
|
|
|
Appreciation |
|
|
Base/Exercise |
|
(in thousands, except per share amounts) |
|
Rights |
|
|
Price Per SAR |
|
Outstanding at January 2, 2010 |
|
|
267.3 |
|
|
$ |
38.44 |
|
Granted |
|
|
|
|
|
|
|
|
Exercised/restrictions lapsed |
|
|
|
|
|
|
|
|
Forfeited/cancelled |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 1, 2011 |
|
|
267.3 |
|
|
|
38.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares expected to vest** |
|
|
240.6 |
|
|
|
38.44 |
|
|
|
|
|
|
|
|
Exercisable/unrestricted at January 2, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable/unrestricted at January 1, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
|
|
|
** |
|
The shares expected to vest in the above tables represent the following: For all grants,
gross units outstanding less managements estimate of forfeitures due to termination of employment
prior to vesting. For RSUs under Performance Based Grants that include a performance vesting
condition based on a Nash Finch specific internal target, the number of shares expected to be paid
based on managements current expectation of achieving the target. Note that the shares expected
to vest for LTIP does not include an estimate of the adjustment factor upon settlement which is
partially dependent on external factors (the Companys results on plan performance metrics versus
its peer group). Note that shares expected to vest for SARs does not factor probability of
achieving the market condition required for vesting. |
The weighted-average grant-date fair value of equity based restricted stock/performance units
granted was $35.83, $33.35 and $37.35 during fiscal years 2010, 2009 and 2008, respectively. The
weighted-average grant-date fair value of equity based SARs granted during 2008 was $8.44 per SAR.
The following tables present the non-vested equity awards, including options, restricted
stock/performance units including LTIP and stock appreciation rights.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance |
|
Weighted |
|
|
Service Based |
|
Weighted |
|
Based Grants |
|
Average Fair |
|
|
Grants (Board |
|
Average Fair |
|
(LTIP & |
|
Value at |
|
|
Units and |
|
Value at Date |
|
Performance |
|
Date of |
(in thousands, except per share amounts) |
|
RSUs) |
|
of Grant |
|
RSUs) |
|
Grant |
Non-vested at January 2, 2010 |
|
|
333.2 |
|
|
$ |
29.39 |
|
|
|
237.5 |
|
|
$ |
36.32 |
|
Granted |
|
|
40.1 |
|
|
|
|
|
|
|
123.7 |
|
|
|
|
|
Vested/restrictions lapsed |
|
|
(49.0 |
) |
|
|
|
|
|
|
(104.1 |
) |
|
|
|
|
Forfeited/cancelled |
|
|
|
|
|
|
|
|
|
|
(11.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at January 1, 2011 |
|
|
324.3 |
|
|
$ |
29.65 |
|
|
|
245.2 |
|
|
$ |
35.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Stock |
|
Average Fair |
|
|
Appreciation |
|
Value at Date |
(in thousands, except per share amounts) |
|
Rights |
|
of Grant |
Non-vested at January 2, 2010 |
|
|
267.3 |
|
|
$ |
8.44 |
|
Granted |
|
|
|
|
|
|
|
|
Vested/restrictions lapsed |
|
|
|
|
|
|
|
|
Forfeited/cancelled |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at January 1, 2011 |
|
|
267.3 |
|
|
$ |
8.44 |
|
|
|
|
|
|
|
|
|
|
No stock options were outstanding for any of fiscal 2010. The total grant date fair value of
stock options that vested during the year was nil for 2009 and $0.1 million for fiscal 2008. The
aggregate intrinsic value of stock options exercised was approximately $42,000 and $0.3 million
during fiscal 2009 and 2008, respectively. The total grant date fair value for all other
share-based awards that vested during the year was $5.5 million, $6.2 million and $6.7 million for
fiscal 2010, 2009 and 2008, respectively. The value of share-based liability awards paid during
2008 was $0.8 million related to settlement of units outstanding for 2005 LTIP grants. No
liability awards were settled during fiscal 2010 or 2009. As of January 1, 2011, the total
unrecognized compensation costs related to non-vested share-based compensation arrangements under
our stock-based compensation plans was $2.5 million for service based awards, $2.6 million for
performance based awards and $0.9 million for stock appreciation rights. The costs are expected to
be recognized over a weighted-average period of 1.6 years for the service based awards, 2.1 years
for the performance based awards and 1.5 years for stock appreciation rights.
Cash received from employees resulting from our share-based compensation plans was nil, $0.2
million and $0.6 million for fiscal 2010, 2009 and 2008, respectively. The Company had a net tax
deficiency
67
of $0.0 million and $0.1 million during 2010 and 2009, respectively recognized as a reduction of
paid-in-capital. The actual tax benefit realized for the tax deductions from share-based
compensation plans was $0.7 million for fiscal year 2008.
(11) Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts) |
|
2010 |
|
|
2009 |
|
|
2008 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
50,941 |
|
|
$ |
2,778 |
|
|
$ |
33,145 |
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share (weighted-average shares) |
|
|
12,819 |
|
|
|
13,007 |
|
|
|
12,886 |
|
Effect of dilutive options and awards |
|
|
367 |
|
|
|
371 |
|
|
|
275 |
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per share (adjusted weighted-average shares) |
|
|
13,186 |
|
|
|
13,378 |
|
|
|
13,161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
3.97 |
|
|
$ |
0.21 |
|
|
$ |
2.57 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
3.86 |
|
|
$ |
0.21 |
|
|
$ |
2.52 |
|
|
|
|
|
|
|
|
|
|
|
The senior subordinated convertible notes due 2035 will be convertible at the option of the
holder, only upon the occurrence of certain events, at an adjusted conversion rate of 9.5222 shares
(initially 9.3120) of our common stock per $1,000 principal amount at maturity of the notes (equal
to an adjusted conversion price of approximately $48.95 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. Therefore, the notes are
not currently dilutive to earnings per share as they are only dilutive above the accreted value.
Performance units granted during 2005 under the 2000 Plan for the LTIP were payable in shares
of Nash Finch common stock or cash, or a combination of both, at the election of the participant.
No recipients notified the Company by the required notification date for the 2005 awards that they
wished to be paid in cash. Therefore, all units under the 2005 plan were settled in shares of
common stock during fiscal 2008. During fiscal 2010 and 2009, performance units granted under the
2007 LTIP Plan and 2006 LTIP Plan, respectively, were settled in shares of common stock, some of
which were deferred by executives as required by the plans. Other performance units and RSUs
granted during fiscal 2007, 2008, 2009 and 2010 pursuant to the 2000 Plan and 2009 Plan will pay
out 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. 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. Shares related to the
LTIP and shares related to RSUs that are included under effect of dilutive options and awards in
the calculation of diluted EPS are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal |
|
Fiscal |
|
Fiscal |
(in thousands) |
|
2010 |
|
2009 |
|
2008 |
LTIP |
|
|
150 |
|
|
|
211 |
|
|
|
121 |
|
RSUs |
|
|
217 |
|
|
|
160 |
|
|
|
150 |
|
68
(12) Leases
A substantial portion of our store and warehouse properties are leased. The
following table summarizes assets under capitalized leases:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2010 |
|
|
2009 |
|
Building and improvements |
|
$ |
33,586 |
|
|
$ |
46,665 |
|
Less accumulated amortization |
|
|
(14,089 |
) |
|
|
(26,015 |
) |
|
|
|
|
|
|
|
Net assets under capitalized leases |
|
$ |
19,497 |
|
|
$ |
20,650 |
|
|
|
|
|
|
|
|
Total future minimum sublease rents receivable related to operating and capital lease
obligations as of January 1, 2011, are $23.9 million and $7.0 million, respectively. Future
minimum payments for operating and capital leases have not been reduced by minimum sublease rentals
receivable under non-cancelable subleases. At January 1, 2011, our future minimum rental payments
under non-cancelable leases (including properties that have been subleased) are as follows:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Operating Leases |
|
|
Capital Leases |
|
2011 |
|
$ |
20,517 |
|
|
$ |
4,826 |
|
2012 |
|
|
17,432 |
|
|
|
4,703 |
|
2013 |
|
|
14,904 |
|
|
|
4,097 |
|
2014 |
|
|
11,297 |
|
|
|
3,494 |
|
2015 |
|
|
7,697 |
|
|
|
3,265 |
|
Thereafter |
|
|
14,957 |
|
|
|
13,027 |
|
|
|
|
|
|
|
|
Total minimum lease payments |
|
$ |
86,804 |
|
|
$ |
33,412 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less imputed interest (rates ranging from 8.3% to 24.6%) |
|
|
|
|
|
|
12,003 |
|
|
|
|
|
|
|
|
|
Present value of net minimum lease payments |
|
|
|
|
|
|
21,409 |
|
Less current maturities |
|
|
|
|
|
|
(2,489 |
) |
|
|
|
|
|
|
|
|
Capitalized lease obligations |
|
|
|
|
|
$ |
18,920 |
|
|
|
|
|
|
|
|
|
Total rental expense under operating leases for fiscal 2010, 2009 and 2008 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
2008 |
|
Total rentals |
|
$ |
38,859 |
|
|
$ |
41,318 |
|
|
$ |
40,822 |
|
Less: real estate taxes, insurance and other occupancy costs |
|
|
(2,716 |
) |
|
|
(2,881 |
) |
|
|
(3,614 |
) |
|
|
|
|
|
|
|
|
|
|
Minimum rentals |
|
|
36,143 |
|
|
|
38,437 |
|
|
|
37,208 |
|
Contingent rentals |
|
|
(78 |
) |
|
|
(34 |
) |
|
|
(108 |
) |
Sublease rentals |
|
|
(6,881 |
) |
|
|
(7,450 |
) |
|
|
(8,611 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
29,184 |
|
|
$ |
30,953 |
|
|
$ |
28,489 |
|
|
|
|
|
|
|
|
|
|
|
Most of our leases provide that we must pay real estate taxes, insurance and other occupancy
costs applicable to the leased premises. Contingent rentals are determined on the basis of a
percentage of sales in excess of stipulated minimums for certain store facilities. Operating
leases often contain renewal options. In those locations in which it makes economic sense to
continue to operate, management expects that, in the normal course of business, leases that expire
will be renewed or replaced by other leases.
(13) Concentration of Credit Risk
We provide financial assistance in the form of loans to some of our independent retailers for
inventories, store fixtures and equipment and store improvements. Loans are generally secured by
liens on real estate, inventory and/or equipment, personal guarantees and other types of
collateral, and are generally repayable over a period of five to seven years. We establish
allowances for doubtful accounts based upon periodic assessments of the credit risk of specific
customers, collateral value, historical trends and other information. We believe that adequate
provisions have been recorded for any doubtful accounts. In addition,
69
we may guarantee debt and lease obligations of retailers. 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, which would
be due in accordance with the underlying agreements.
As of January 1, 2011, we have guaranteed outstanding debt and lease obligations of a number
of retailers in the amount of $9.4 million. In the normal course of business, we also sublease and
assign to third parties various leases. As of January 1, 2011, we estimate that the present value
of our maximum potential obligation, net of reserves, with respect to the subleases to be
approximately $22.8 million and assigned leases to be approximately $8.9 million.
We have entered into loan and lease guarantees on behalf of certain food distribution
customers that are accounted for under ASC Topic 460. ASC Topic 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 $6.7 million, which is included in
the $9.4 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 the lease agreements and that no payments will be required and no loss will be
incurred under the guarantees. As required by ASC Topic 460, a liability representing the fair
value of the obligations assumed under the guarantees of $1.0 million is included in the
accompanying consolidated financial statements. All of the other guarantees were issued prior to
December 31, 2002 and therefore not subject to the recognition and measurement provisions of ASC
Topic 460.
(14) Fair Value of Financial Instruments
In September 2006, the FASB issued ASC Topic 820. ASC Topic 820 defines fair value,
establishes a framework for measuring fair value and expands disclosures about instruments recorded
at fair value. It also applies under other accounting pronouncements that require or permit fair
value measurements. Effective January 1, 2008, we adopted the provisions of ASC 820 related to
financial assets and liabilities recognized or disclosed on a recurring basis. Additionally,
beginning in fiscal 2009, we now apply ASC 820 to financial and non-financial assets and
liabilities.
The fair value hierarchy for disclosure of fair value measurements under ASC 820 is as
follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Quoted prices, other than quoted prices included in Level 1, that are observable for
the assets or liabilities, either directly or indirectly.
Level 3: Inputs that are unobservable for the assets or liabilities.
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 January 1, 2011, we have recorded a fair value liability of $0.4 million
in relation to our outstanding interest rate swap agreements.
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 January 1, 2011 and
January 2, 2010. Substantially all notes receivable are based on floating interest rates which
adjust to changes in market rates.
70
The estimated fair value of our long-term debt, including current maturities, was $305.6
million and $255.0 million at January 1, 2011 and January 2, 2010, respectively, utilizing
discounted cash flows. The fair value is based on interest rates that are currently available to
us for issuance of debt with similar terms and remaining maturities.
Non-Financial Assets
We account for the impairment of goodwill and the impairment of long-lived assets in
accordance with ASC 350 and ASC 360-10-35, respectively. During fiscal 2009 we recognized a
goodwill impairment of $50.9 million and during fiscal 2010, 2009 and 2008 we recognized asset
impairments of $0.9 million, $8.5 million and $2.6 million, respectively. We utilize a discounted
cash flow model and market approach that incorporate unobservable level 3 inputs to test for
goodwill and long-lived asset impairments.
(15) Commitments and Contingencies
Roundys Supermarkets, Inc. v. Nash Finch
On February 11, 2008, Roundys Supermarkets, Inc. (Roundys) filed suit against us claiming
we breached the Asset Purchase Agreement (APA), entered into in connection with our acquisition
of certain distribution centers and other assets from Roundys, by not paying approximately $7.9
million that Roundys claimed was due under the APA as a purchase price adjustment. We answered
the complaint denying any payment was due to Roundys and asserted counterclaims against Roundys
for, among other things, breach of contract, misrepresentation, and breach of the duty of good
faith and fair dealing. In our counterclaim we demanded damages from Roundys in excess of $18.0
million.
On September 14, 2009, we entered into a settlement agreement with Roundys that fully
resolved all claims brought in the lawsuit. Under the terms of the settlement agreement, both
parties agreed to dismiss their claims against the other in exchange for a release of claims.
Neither party was required to pay any money to the other. We recorded a $7.6 million gain in
fiscal 2009 which represented the reversal of the liability we had recorded in conjunction with the
disputed APA purchase price adjustment.
Other
We are also engaged from time-to-time in routine legal proceedings incidental to our business.
We do not believe that these routine legal proceedings, taken as a whole, will have a material
impact on our business or financial condition.
(16) Long-Term Compensation Plans
We have a profit sharing plan which includes a 401(k) feature, covering substantially all
employees meeting specified requirements. Profit sharing contributions, determined by the Board of
Directors, were made to a noncontributory profit sharing trust based on profit performance.
Effective January 1, 2003, we added a match to the 401(k) feature of this plan, which was
subsequently amended effective January 1, 2008, whereby we will make an annual matching
contribution to each participants plan account. The fiscal 2009 annual matching contribution
provided that we would match 100% of the participants contributions up to 3% of the participants
eligible compensation for the year. In the event the participants contributions exceeded 3% of
their eligible compensation for the year, we would match 50% of the next 2% of the participants
eligible compensation for the year. The contribution expense for our matching contributions to the
401(k) plan reduced dollar for dollar the profit sharing contributions that would otherwise have
been made to the profit sharing plan. During fiscal 2009, the Company eliminated the discretionary
component of the profit sharing plan but maintained the annual matching contribution. During
fiscal 2010, the Company modified the annual matching contribution to make it discretionary based
on Company profitability. Total profit sharing expense (including the matching contribution) was
$2.5 million, $4.5 million and $7.9 million for fiscal 2010, 2009 and 2008, respectively.
71
On January 1, 2000, we adopted a Supplemental Executive Retirement Plan (SERP) for key
employees and executive officers. On the last day of the calendar year, each participants SERP
account is credited with an amount equal to 20% of the participants base salary for the year.
Benefits payable under the SERP typically vest based on years of participation in the SERP, ranging
from 0% vested for less than five years of participation to 100% vested at 10 years participation
(or age 60 if that occurs sooner). Amounts credited to a SERP account, plus earnings, are
distributed following the executives termination of employment. Earnings are based on the
quarterly equivalent of the average of the annual yield set forth for each month during the quarter
in the Moodys Corporate Bond Yield Averages. In February 2007, our Board of Directors fully
vested the SERP account of Alec C. Covington, our President and Chief Executive Officer.
Compensation expense related to the plan was $0.9 million in fiscal 2010, $0.9 million in fiscal
2009 and $0.8 million in fiscal 2008.
We also have deferred compensation plans for a select group of management or highly
compensated employees and for non-employee directors. The plans are unfunded and permit
participants to defer receipt of a portion of their base salary, annual bonus or long-term
incentive compensation in the case of employees, or cash compensation in the case of non-employee
directors, which would otherwise be paid to them. The deferred amounts, plus earnings, are
distributed following the executives termination of employment or the directors termination of
service on the Board. Earnings are based on the performance of phantom investments elected by the
participant from a portfolio of investment options. Under the plans available to non-employee
directors, the investment options include share units that correspond to shares of our common
stock.
During fiscal 2004, we created and funded a benefits protection trust to invest amounts
deferred under these plans. The trust is a grantor trust and accounted for in accordance with ASC
Subtopic 710-10-45. A benefits protection or rabbi trust holds assets that would be available to
pay benefits under a deferred compensation plan if the settler of the trust, such as us, is
unwilling to pay benefits for any reason other than bankruptcy or insolvency. The rabbi trust now
holds corporate-owned life insurance which is intended to fund potential future obligations.
Assets in the trust remain subject to the claims of our general creditors, and the investment in
the rabbi trust is classified in other assets on our consolidated balance sheets.
(17) Pension and Other Post-retirement Benefits
One of our subsidiaries has a qualified non-contributory retirement plan to provide retirement
income for certain eligible full-time employees who are not covered by a union retirement plan.
Pension benefits under the plan are based on length of service and compensation. Our subsidiary
contributes amounts necessary to meet minimum funding requirements. This plan has been curtailed
and no new employees can enter the plan.
We provide certain health care benefits for retired employees not subject to collective
bargaining agreements. Such benefits are not provided to any employee who left us after December
31, 2003. Employees who left us on or before that date become eligible for those benefits when
they reach early retirement age if they have met minimum age and service requirements. Effective
December 31, 2006, we terminated these health care benefits for retired employees and their spouses
or dependents that were eligible for coverage under Medicare. We provide coverage to retired
employees and their spouses until the end of the month in which they become eligible for Medicare
(which generally is age 65). Health care benefits for retirees are provided under a self-insured
program administered by an insurance company.
On December 30, 2006, we adopted the recognition and disclosure provisions of ASC Subtopic
715-20-65. ASC Topic 715-20-65 required us to recognize the funded status (i.e., the difference
between the fair value of plan assets and the projected benefit obligations) of our pension plan
and other post-retirement benefits in the December 30, 2006, statement of financial position, with
a corresponding adjustment to accumulated other comprehensive income, net of tax. The adjustment
to accumulated other comprehensive income at adoption represents the net unrecognized actuarial
losses, unrecognized prior service costs, and unrecognized transition obligation remaining from the
initial adoption of ASC Topic 715, all of which were previously netted against the plans funded
status in our statement of financial position. These amounts will be subsequently recognized as
net periodic benefit cost pursuant to our historical accounting policy for amortizing such amounts.
Further, actuarial gains and losses that arise in subsequent periods and are not recognized as net
periodic benefit cost in the same periods will be recognized as a component of other comprehensive
income.
72
Those amounts will be subsequently recognized as a component of net periodic benefit cost on the
same basis as the amounts recognized in accumulated other comprehensive income at the adoption of
ASC Topic 715-20-65.
Accumulated other comprehensive income at January 1, 2011, consists of the following amounts
that have not yet been recognized in net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post- |
|
|
|
|
|
|
|
|
|
|
retirement |
|
|
|
|
(in thousands) |
|
Pension |
|
|
Benefits |
|
|
Total |
|
Unrecognized prior service credits |
|
$ |
|
|
|
$ |
(21 |
) |
|
$ |
(21 |
) |
Unrecognized actuarial losses (gains) |
|
|
17,800 |
|
|
|
(206 |
) |
|
|
17,594 |
|
|
|
|
|
|
|
|
|
|
|
Unrecognized net periodic cost (benefit) |
|
|
17,800 |
|
|
|
(227 |
) |
|
|
17,573 |
|
Less deferred taxes (benefit) |
|
|
(6,942 |
) |
|
|
88 |
|
|
|
(6,854 |
) |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
10,858 |
|
|
$ |
(139 |
) |
|
$ |
10,719 |
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income at January 2, 2010, consisted of the following amounts
that had not yet been recognized in net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post- |
|
|
|
|
|
|
|
|
|
|
retirement |
|
|
|
|
(in thousands) |
|
Pension |
|
|
Benefits |
|
|
Total |
|
Unrecognized prior service credits |
|
$ |
|
|
|
$ |
(52 |
) |
|
$ |
(52 |
) |
Unrecognized actuarial losses (gains) |
|
|
16,687 |
|
|
|
(134 |
) |
|
|
16,553 |
|
|
|
|
|
|
|
|
|
|
|
Unrecognized net periodic cost (benefit) |
|
|
16,687 |
|
|
|
(186 |
) |
|
|
16,501 |
|
Less deferred taxes (benefit) |
|
|
(6,508 |
) |
|
|
73 |
|
|
|
(6,435 |
) |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
10,179 |
|
|
$ |
(113 |
) |
|
$ |
10,066 |
|
|
|
|
|
|
|
|
|
|
|
The prior service credits and actuarial losses (gains) included in other comprehensive income
and expected to be recognized in net periodic cost during the fiscal year ended December 31, 2011
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post- |
|
|
|
|
|
|
|
retirement |
|
(in thousands) |
|
Pension |
|
|
Benefits |
|
Unrecognized prior service credits |
|
$ |
|
|
|
$ |
(21 |
) |
Unrecognized actuarial losses (gains) |
|
|
1,576 |
|
|
|
(16 |
) |
|
|
|
|
|
|
|
Total |
|
$ |
1,576 |
|
|
$ |
(37 |
) |
|
|
|
|
|
|
|
Funded Status
The following table sets forth the actuarial present value of benefit obligations and funded
status of the curtailed pension plan and curtailed post-retirement benefits for the years ended.
73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Other Post-retirement Benefits |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Funded Status |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year |
|
$ |
(41,049 |
) |
|
$ |
(38,564 |
) |
|
$ |
(761 |
) |
|
$ |
(845 |
) |
Interest cost |
|
|
(2,211 |
) |
|
|
(2,327 |
) |
|
|
(39 |
) |
|
|
(48 |
) |
Participant contributions |
|
|
|
|
|
|
|
|
|
|
(44 |
) |
|
|
(54 |
) |
Actuarial gain (loss) |
|
|
(3,005 |
) |
|
|
(3,362 |
) |
|
|
78 |
|
|
|
3 |
|
Benefits paid |
|
|
3,140 |
|
|
|
3,204 |
|
|
|
22 |
|
|
|
183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year |
|
|
(43,125 |
) |
|
|
(41,049 |
) |
|
|
(744 |
) |
|
|
(761 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year |
|
|
29,652 |
|
|
|
28,659 |
|
|
|
|
|
|
|
|
|
Actual return on plan assets |
|
|
2,345 |
|
|
|
3,284 |
|
|
|
|
|
|
|
|
|
Employer contributions |
|
|
905 |
|
|
|
913 |
|
|
|
(22 |
) |
|
|
129 |
|
Participant contributions |
|
|
|
|
|
|
|
|
|
|
44 |
|
|
|
54 |
|
Benefits paid |
|
|
(3,140 |
) |
|
|
(3,204 |
) |
|
|
(22 |
) |
|
|
(183 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year |
|
|
29,762 |
|
|
|
29,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status |
|
|
(13,363 |
) |
|
|
(11,397 |
) |
|
|
(744 |
) |
|
|
(761 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation |
|
$ |
(43,125 |
) |
|
$ |
(41,049 |
) |
|
$ |
(744 |
) |
|
$ |
(761 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the consolidated balance sheets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Other Benefits |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Current liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
(118 |
) |
|
$ |
(119 |
) |
Non-current liabilities |
|
|
(13,363 |
) |
|
|
(11,397 |
) |
|
|
(626 |
) |
|
|
(642 |
) |
Deferred tax asset (liability) |
|
|
6,942 |
|
|
|
6,508 |
|
|
|
(88 |
) |
|
|
(73 |
) |
Accumulated other comprehensive loss (income) |
|
|
10,858 |
|
|
|
10,179 |
|
|
|
(139 |
) |
|
|
(113 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized |
|
$ |
4,437 |
|
|
$ |
5,290 |
|
|
$ |
(971 |
) |
|
$ |
(947 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of net periodic benefit cost (income)
The aggregate costs for our retirement benefits included the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Other Benefits |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
Interest cost |
|
$ |
2,211 |
|
|
$ |
2,327 |
|
|
$ |
2,252 |
|
|
$ |
39 |
|
|
$ |
48 |
|
|
$ |
47 |
|
Expected return on plan assets |
|
|
(1,854 |
) |
|
|
(1,790 |
) |
|
|
(2,410 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service credits |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
(30 |
) |
|
|
(82 |
) |
|
|
(645 |
) |
Recognized actuarial loss (gain) |
|
|
1,401 |
|
|
|
1,370 |
|
|
|
539 |
|
|
|
(6 |
) |
|
|
(5 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost (gain) |
|
$ |
1,758 |
|
|
$ |
1,907 |
|
|
$ |
379 |
|
|
$ |
3 |
|
|
$ |
(39 |
) |
|
$ |
(600 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions
Weighted-average assumptions used to determine benefit obligations at January 1, 2011 and
January 2, 2010:
74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
Other Benefits |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
Discount rate |
|
|
5.10 |
% |
|
|
5.60 |
% |
|
|
5.10 |
% |
|
|
5.60 |
% |
Rate of compensation increase |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Weighted-average assumptions used to determine net periodic benefit cost for years ended
January 1, 2011 and January 2, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
Other Benefits |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
Discount rate |
|
|
5.6 |
% |
|
|
6.3 |
% |
|
|
5.6 |
% |
|
|
6.3 |
% |
Expected return on plan assets |
|
|
6.5 |
% |
|
|
6.5 |
% |
|
|
N/A |
|
|
|
N/A |
|
Rate of compensation increase |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Assumed health care cost trend rates were as follows:
|
|
|
|
|
|
|
|
|
|
|
January 1, 2011 |
|
January 2, 2010 |
Current year trend rate |
|
|
8.00 |
% |
|
|
9.00 |
% |
Ultimate year trend rate |
|
|
5.00 |
% |
|
|
5.00 |
% |
Year of ultimate trend rate |
|
|
2014 |
|
|
|
2014 |
|
Assumed health care cost trend rates have an effect on the fiscal 2010 amounts reported for
the health care plans. A one-percentage point change in assumed health care cost trend rates would
have the following effects (in thousands):
|
|
|
|
|
|
|
|
|
|
|
1% |
|
1% |
|
|
Increase |
|
Decrease |
Effect on total of service and interest cost components |
|
$ |
|
|
|
$ |
|
|
Effect on post-retirement benefit obligation |
|
|
2 |
|
|
|
(2 |
) |
In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003
(the Act) became law in the United States. The Act introduces a prescription drug benefit under
Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans that provide
a benefit that is at least actuarially equivalent to Medicare. We believe that our
postretirement benefit plan is not actuarially equivalent to Medicare Part D under the Act and
consequently will not receive significant subsidies under the Act.
Pension Plan Investment Policy, Strategy and Assets
Our investment policy is to invest in equity, fixed income and other securities to cover cash
flow requirements of the plan and minimize long-term costs. The targeted allocation of assets is
30% equity securities and 70% debt securities. The pension plans weighted-average asset
allocation by asset category is as follows:
|
|
|
|
|
|
|
|
|
|
|
January 1, |
|
January 2, |
|
|
2011 |
|
2010 |
Equity securities |
|
|
34 |
% |
|
|
32 |
% |
Debt securities |
|
|
13 |
% |
|
|
13 |
% |
Group annuity contract |
|
|
53 |
% |
|
|
55 |
% |
Cash |
|
|
0 |
% |
|
|
0 |
% |
75
Pension Plan Investment Valuation
Equity and debt securities consist of mutual funds which are public investment vehicles valued
using the Net Asset Value (NAV) provided by the administrator of the fund. The NAV is based on
the value of the underlying assets owned by the fund, minus its liabilities, and then divided by
the number of shares outstanding. The NAV is a quoted price in an active market and classified
within level 1 of the fair value hierarchy of ASC 820.
The group annuity contract is an immediate participation contract held with an insurance
company that acts as custodian of the pension plans assets. The group annuity contract is stated
at contract value as determined by the custodian, which approximates fair value. We evaluate the
general financial condition of the custodian as a component of validating whether the calculated
contract value is an accurate approximation of fair value. The review of the general financial
condition of the custodian is considered obtainable/observable through the review of readily
available financial information the custodian is required to file with the Securities and Exchange
Commission. The group annuity contract is classified within level 3 of the valuation hierarchy of
ASC 820.
The following tables sets forth by level, within the fair value hierarchy of ASC 820, the
plans assets at fair value as of January 1, 2011 and January 2, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at fair value - January 1, 2011 |
|
(in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Equity securities |
|
$ |
9,992 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
9,992 |
|
Debt securities |
|
|
3,771 |
|
|
|
|
|
|
|
|
|
|
|
3,771 |
|
Group annuity contract |
|
|
|
|
|
|
|
|
|
|
15,999 |
|
|
|
15,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments |
|
$ |
13,763 |
|
|
$ |
|
|
|
$ |
15,999 |
|
|
$ |
29,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at fair value - January 2, 2010 |
|
(in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Equity securities |
|
$ |
9,682 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
9,682 |
|
Debt securities |
|
|
3,841 |
|
|
|
|
|
|
|
|
|
|
|
3,841 |
|
Group annuity contract |
|
|
|
|
|
|
|
|
|
|
16,128 |
|
|
|
16,128 |
|
Cash |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments |
|
$ |
13,524 |
|
|
$ |
|
|
|
$ |
16,128 |
|
|
$ |
29,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables set forth a summary of changes in the fair value of the pension plans
level 3 assets for the years ended January 1, 2011 and January 2, 2010:
|
|
|
|
|
|
|
Group |
|
(in thousands) |
|
annuity contract |
|
Balance at 1/2/2010 |
|
$ |
16,128 |
|
Interest income |
|
|
918 |
|
Realized gains/(losses) |
|
|
194 |
|
Purchases, sales, issuances and settlements (net) |
|
|
(1,241 |
) |
|
|
|
|
Balance at 1/1/2011 |
|
$ |
15,999 |
|
|
|
|
|
76
|
|
|
|
|
|
|
Group |
|
(in thousands) |
|
annuity contract |
|
Balance at 1/3/2009 |
|
$ |
15,659 |
|
Interest income |
|
|
975 |
|
Realized gains/(losses) |
|
|
28 |
|
Purchases, sales, issuances and settlements (net) |
|
|
(534 |
) |
|
|
|
|
Balance at 1/2/2010 |
|
$ |
16,128 |
|
|
|
|
|
Estimated Future Benefits Payments
The following benefit payments, which reflect expected future service, as appropriate, are
expected to be paid as follows:
|
|
|
|
|
|
|
|
|
Year |
|
Pension Benefits |
|
|
Other Benefits |
|
2011 |
|
$ |
3,094 |
|
|
$ |
118 |
|
2012 |
|
|
2,937 |
|
|
|
103 |
|
2013 |
|
|
2,876 |
|
|
|
92 |
|
2014 |
|
|
2,834 |
|
|
|
69 |
|
2015 |
|
|
2,844 |
|
|
|
56 |
|
2016 or later |
|
|
14,592 |
|
|
|
189 |
|
|
|
|
|
|
|
|
|
|
$ |
29,177 |
|
|
$ |
627 |
|
|
|
|
|
|
|
|
Expected Long-Term Rate of Return
The expected return assumption was based on asset allocations and the expected return and risk
components of the various asset classes in the portfolio. This assumption is assumed to be
reasonable over a long-term period that is consistent with the liabilities. Management has
reviewed these assumptions and takes responsibility for the valuation of pension assets and
obligations.
Employer Contributions
Pension Plan
We anticipate making contributions of $3.0 million during the measurement year ending December
31, 2011.
Multi-Employer Plans
Approximately 6.6% of our employees are covered by collectively-bargained pension plans.
Contributions are determined in accordance with the provisions of negotiated union contracts and
are generally based on the number of hours worked. Amounts contributed to those plans were $3.3
million, $3.5 million and $3.4 million in fiscal 2010, 2009 and 2008, respectively.
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. 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
77
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 liability. Any adjustment
for withdrawal liability will be recorded when it is probable that a liability exists and can be
reasonably estimated.
(18) Segment Information
We sell and distribute products that are typically found in supermarkets and operate three
reportable operating segments. The military segment consists primarily of seven distribution
centers that distribute products exclusively to military commissaries and exchanges. During fiscal
2010, our military distribution centers in Columbus, Georgia and Bloomington, Indiana became
operational. Excluded from the military distribution center totals 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. During the third quarter of fiscal 2010, we closed
our food distribution center in Bridgeport, Michigan at the end of its lease term. The retail
segment consists of 52 corporate-owned stores that sell directly to the consumer. We closed two
retail stores during fiscal 2010.
We evaluate segment performance and allocate resources based on profit or loss before income
taxes, interest associated with corporate debt and other discrete items. The accounting policies
of the reportable segments are the same as those described in the summary of accounting policies.
Inter-segment sales are recorded on a market price-plus-fee and freight basis. For segment
financial reporting purposes, a portion of the operational profits recorded at our distribution
centers related to corporate-owned stores is allocated to the retail segment. Certain revenues and
costs from our distribution centers are specifically identifiable to either the independent or
corporate-owned stores that they serve. The revenues and costs that are specifically identifiable
to corporate-owned stores are allocated to the retail segment. Those that are specifically
identifiable to independent customers are recorded in the food distribution segment. The remaining
revenues and costs that are not specifically identifiable to either the independent or
corporate-owned stores are allocated to the retail segment as a percentage of corporate-owned store
distribution sales to total distribution center sales. For fiscal 2010, 23% of such warehouse
operational profits were allocated to the retail operations compared to 18% and 19% in fiscal 2009
and 2008, respectively.
In fiscal 2010, the Company revised its calculation of segment profit and unallocated
corporate overhead to present segment profitability on a fully-allocated basis, with the exception
of costs associated with corporate debt and other discrete items as shown in the as adjusted
columns below. In addition, LIFO expenses or credits are now allocated to the business segments.
Management believes the revised calculation of segment profit more accurately represents the
operating profitability of the reporting segments, on a pre-tax basis. This revision had no impact
on the Companys consolidated financial statements in any period presented. Previously, interest
expense was included in unallocated corporate overhead.
In addition, during late fiscal 2009 and fiscal 2010, the Company acquired military food
distribution centers in Columbus, Georgia, Bloomington, Indiana and two adjacent facilities in
Oklahoma City, Oklahoma. The Company has historically serviced military commissaries and exchanges
outside of the military segments distribution network through distribution centers that are
included in the Companys food distribution segment. The revenue and segment profit associated
with that business has previously been reported in the food distribution segment. The Company is
currently in the process of transitioning the military business serviced by the food distribution
segment to military distribution facilities and is scheduled to have all of the business
transitioned by fiscal 2012. Accordingly, we have revised our segment reporting to include that
business in our military segment, which impacts amounts previously reported during fiscal 2009 and
2008. The revenue and segment profit associated with that business that was included in the food
distribution segment represented approximately $269.1 million and $5.5 million during fiscal 2009,
respectively, and was $264.7 million and $6.5 million during fiscal 2008, respectively. This
revision had no impact on the Companys consolidated financial statements in any period presented.
Certain prior year amounts, as shown in the following two tables, have been revised to conform
to the current year presentation.
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2009 |
|
|
|
As |
|
|
Unallocated Corporate |
|
|
Food Distribution to |
|
|
As |
|
(In thousands) |
|
Reported |
|
|
Overhead Revision |
|
|
Military Reclassification |
|
|
adjusted |
|
Revenue from external customers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Military |
|
$ |
1,985,313 |
|
|
|
|
|
|
|
269,082 |
|
|
$ |
2,254,395 |
|
Food Distribution |
|
|
2,655,012 |
|
|
|
|
|
|
|
(269,082 |
) |
|
|
2,385,930 |
|
Retail |
|
|
572,330 |
|
|
|
|
|
|
|
|
|
|
|
572,330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment revenue |
|
$ |
5,212,655 |
|
|
|
|
|
|
|
|
|
|
$ |
5,212,655 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment depreciation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Military |
|
$ |
5,611 |
|
|
|
78 |
|
|
|
|
|
|
$ |
5,689 |
|
Food Distribution |
|
|
8,787 |
|
|
|
14,441 |
|
|
|
|
|
|
|
23,228 |
|
Retail |
|
|
7,269 |
|
|
|
4,417 |
|
|
|
|
|
|
|
11,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment depreciation |
|
$ |
21,667 |
|
|
|
|
|
|
|
|
|
|
$ |
40,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Military |
|
$ |
221,244 |
|
|
|
110,866 |
|
|
|
37,091 |
|
|
$ |
369,201 |
|
Food Distribution |
|
|
434,040 |
|
|
|
100,378 |
|
|
|
(37,091 |
) |
|
|
497,327 |
|
Retail |
|
|
95,222 |
|
|
|
32,336 |
|
|
|
|
|
|
|
127,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets |
|
$ |
750,506 |
|
|
|
|
|
|
|
|
|
|
$ |
994,086 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment capital expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Military |
|
$ |
10,760 |
|
|
|
|
|
|
|
|
|
|
$ |
10,760 |
|
Food Distribution |
|
|
7,705 |
|
|
|
5,193 |
|
|
|
|
|
|
|
12,898 |
|
Retail |
|
|
5,301 |
|
|
|
1,443 |
|
|
|
|
|
|
|
6,744 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets |
|
$ |
23,766 |
|
|
|
|
|
|
|
|
|
|
$ |
30,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Military |
|
$ |
49,717 |
|
|
|
(7,186 |
) |
|
|
5,526 |
|
|
$ |
48,057 |
|
Food Distribution |
|
|
88,116 |
|
|
|
(43,730 |
) |
|
|
(5,526 |
) |
|
|
38,860 |
|
Retail |
|
|
15,888 |
|
|
|
(15,492 |
) |
|
|
|
|
|
|
396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment profit |
|
$ |
153,721 |
|
|
|
|
|
|
|
|
|
|
$ |
87,313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment of inventory to LIFO |
|
|
3,033 |
|
|
|
(3,033 |
) |
|
|
|
|
|
|
|
|
Gain on acquisition of a business |
|
|
6,682 |
|
|
|
|
|
|
|
|
|
|
|
6,682 |
|
Gain on litigation settlement |
|
|
7,630 |
|
|
|
|
|
|
|
|
|
|
|
7,630 |
|
Goodwill impairment |
|
|
(50,927 |
) |
|
|
|
|
|
|
|
|
|
|
(50,927 |
) |
Special charge |
|
|
(6,020 |
) |
|
|
|
|
|
|
|
|
|
|
(6,020 |
) |
Interest |
|
|
|
|
|
|
(20,928 |
) |
|
|
|
|
|
|
(20,928 |
) |
Unallocated corporate overhead |
|
|
(90,369 |
) |
|
|
90,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
$ |
23,750 |
|
|
|
|
|
|
|
|
|
|
$ |
23,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008 |
|
|
|
As |
|
|
Unallocated Corporate |
|
|
Food Distribution to |
|
|
As |
|
(In thousands) |
|
Reported |
|
|
Overhead Revision |
|
|
Military Reclassification |
|
|
adjusted |
|
Revenue from external customers: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Military |
|
$ |
1,290,575 |
|
|
|
|
|
|
|
264,659 |
|
|
$ |
1,555,234 |
|
Food Distribution |
|
|
2,740,462 |
|
|
|
|
|
|
|
(264,659 |
) |
|
|
2,475,803 |
|
Retail |
|
|
602,457 |
|
|
|
|
|
|
|
|
|
|
|
602,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment revenue |
|
$ |
4,633,494 |
|
|
|
|
|
|
|
|
|
|
$ |
4,633,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment depreciation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Military |
|
$ |
2,039 |
|
|
|
63 |
|
|
|
|
|
|
$ |
2,102 |
|
Food Distribution |
|
|
9,359 |
|
|
|
15,745 |
|
|
|
|
|
|
|
25,104 |
|
Retail |
|
|
6,769 |
|
|
|
4,454 |
|
|
|
|
|
|
|
11,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment depreciation |
|
$ |
18,167 |
|
|
|
|
|
|
|
|
|
|
$ |
38,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Military |
|
$ |
150,151 |
|
|
|
19,065 |
|
|
|
38,343 |
|
|
$ |
207,559 |
|
Food Distribution |
|
|
451,222 |
|
|
|
139,958 |
|
|
|
(38,343 |
) |
|
|
552,837 |
|
Retail |
|
|
99,128 |
|
|
|
88,427 |
|
|
|
|
|
|
|
187,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets |
|
$ |
700,501 |
|
|
|
|
|
|
|
|
|
|
$ |
947,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment capital expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Military |
|
$ |
3,395 |
|
|
|
|
|
|
|
|
|
|
$ |
3,395 |
|
Food Distribution |
|
|
6,131 |
|
|
|
4,579 |
|
|
|
|
|
|
|
10,710 |
|
Retail |
|
|
12,835 |
|
|
|
5,015 |
|
|
|
|
|
|
|
17,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment assets |
|
$ |
22,361 |
|
|
|
|
|
|
|
|
|
|
$ |
31,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Military |
|
$ |
49,125 |
|
|
|
(13,476 |
) |
|
|
6,455 |
|
|
$ |
42,104 |
|
Food Distribution |
|
|
100,275 |
|
|
|
(64,888 |
) |
|
|
(6,455 |
) |
|
|
28,932 |
|
Retail |
|
|
21,335 |
|
|
|
(15,385 |
) |
|
|
|
|
|
|
5,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment profit |
|
$ |
170,735 |
|
|
|
|
|
|
|
|
|
|
$ |
76,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment of inventory to LIFO |
|
|
(19,740 |
) |
|
|
19,740 |
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
(23,195 |
) |
|
|
|
|
|
|
(23,195 |
) |
Unallocated corporate overhead |
|
|
(97,204 |
) |
|
|
97,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
$ |
53,791 |
|
|
|
|
|
|
|
|
|
|
$ |
53,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Segments of the Business
Year end January 1, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food |
|
|
|
|
(in thousands) |
|
Military |
|
Distribution |
|
Retail |
|
Total |
Revenue from external customers |
|
$ |
2,289,987 |
|
|
$ |
2,183,730 |
|
|
$ |
518,262 |
|
|
$ |
4,991,979 |
|
Inter-segment revenue |
|
|
|
|
|
|
258,175 |
|
|
|
|
|
|
|
258,175 |
|
Interest revenue |
|
|
|
|
|
|
(37 |
) |
|
|
|
|
|
|
(37 |
) |
Interest expense (including capitalized lease interest) |
|
|
12 |
|
|
|
(36 |
) |
|
|
3,633 |
|
|
|
3,609 |
|
Depreciation expense |
|
|
6,269 |
|
|
|
19,674 |
|
|
|
10,176 |
|
|
|
36,119 |
|
Segment profit |
|
|
51,301 |
|
|
|
33,650 |
|
|
|
6,660 |
|
|
|
91,611 |
|
Assets |
|
|
441,866 |
|
|
|
490,467 |
|
|
|
115,470 |
|
|
|
1,047,803 |
|
Expenditures for long-lived assets |
|
|
48,356 |
|
|
|
8,777 |
|
|
|
2,162 |
|
|
|
59,295 |
|
80
Major Segments of the Business
Year end January 2, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food |
|
|
|
|
(in thousands) |
|
Military |
|
Distribution |
|
Retail |
|
Total |
Revenue from external customers |
|
$ |
2,254,395 |
|
|
$ |
2,385,930 |
|
|
$ |
572,330 |
|
|
$ |
5,212,655 |
|
Inter-segment revenue |
|
|
|
|
|
|
290,523 |
|
|
|
|
|
|
|
290,523 |
|
Interest revenue |
|
|
|
|
|
|
(26 |
) |
|
|
|
|
|
|
(26 |
) |
Interest expense (including capitalized lease interest) |
|
|
32 |
|
|
|
(25 |
) |
|
|
3,438 |
|
|
|
3,445 |
|
Depreciation expense |
|
|
5,689 |
|
|
|
23,228 |
|
|
|
11,686 |
|
|
|
40,603 |
|
Segment profit |
|
|
48,057 |
|
|
|
38,860 |
|
|
|
396 |
|
|
|
87,313 |
|
Assets |
|
|
369,201 |
|
|
|
497,327 |
|
|
|
127,558 |
|
|
|
994,086 |
|
Expenditures for long-lived assets |
|
|
10,760 |
|
|
|
12,898 |
|
|
|
6,744 |
|
|
|
30,402 |
|
Major Segments of the Business
Year end January 3, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food |
|
|
|
|
(in thousands) |
|
Military |
|
Distribution |
|
Retail |
|
Total |
Revenue from external customers |
|
$ |
1,555,234 |
|
|
$ |
2,475,803 |
|
|
$ |
602,457 |
|
|
$ |
4,633,494 |
|
Inter-segment revenue |
|
|
|
|
|
|
307,591 |
|
|
|
|
|
|
|
307,591 |
|
Interest revenue |
|
|
|
|
|
|
(8 |
) |
|
|
|
|
|
|
(8 |
) |
Interest expense (including capitalized lease interest) |
|
|
|
|
|
|
(7 |
) |
|
|
3,278 |
|
|
|
3,271 |
|
Depreciation expense |
|
|
2,102 |
|
|
|
25,104 |
|
|
|
11,223 |
|
|
|
38,429 |
|
Segment profit |
|
|
42,104 |
|
|
|
28,932 |
|
|
|
5,950 |
|
|
|
76,986 |
|
Assets |
|
|
207,559 |
|
|
|
552,837 |
|
|
|
187,555 |
|
|
|
947,951 |
|
Expenditures for long-lived assets |
|
|
3,395 |
|
|
|
10,710 |
|
|
|
17,850 |
|
|
|
31,955 |
|
Reconciliation
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
2008 |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
Total external revenue for segments |
|
$ |
4,991,979 |
|
|
$ |
5,212,655 |
|
|
$ |
4,633,494 |
|
Inter-segment revenue from reportable segments |
|
|
258,175 |
|
|
|
290,523 |
|
|
|
307,591 |
|
Elimination of inter-segment revenues |
|
|
(258,175 |
) |
|
|
(290,523 |
) |
|
|
(307,591 |
) |
|
|
|
|
|
|
|
|
|
|
Total consolidated revenues |
|
$ |
4,991,979 |
|
|
$ |
5,212,655 |
|
|
$ |
4,633,494 |
|
|
|
|
|
|
|
|
|
|
|
Profit (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
Total profit for segments |
|
$ |
91,611 |
|
|
$ |
87,313 |
|
|
$ |
76,986 |
|
Unallocated amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
(19,485 |
) |
|
|
(20,928 |
) |
|
|
(23,195 |
) |
Goodwill impairment |
|
|
|
|
|
|
(50,927 |
) |
|
|
|
|
Gain on acquisition of a business |
|
|
|
|
|
|
6,682 |
|
|
|
|
|
Gain on litigation settlement |
|
|
|
|
|
|
7,630 |
|
|
|
|
|
Special charge |
|
|
|
|
|
|
(6,020 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
$ |
72,126 |
|
|
$ |
23,750 |
|
|
$ |
53,791 |
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Total assets for segments |
|
$ |
1,047,803 |
|
|
$ |
994,086 |
|
|
$ |
947,951 |
|
Unallocated corporate assets |
|
|
2,872 |
|
|
|
5,450 |
|
|
|
4,595 |
|
|
|
|
|
|
|
|
|
|
|
Total consolidated assets |
|
$ |
1,050,675 |
|
|
$ |
999,536 |
|
|
$ |
952,546 |
|
|
|
|
|
|
|
|
|
|
|
All revenues are attributed to and all assets are held in the United States. Our market areas
are in the Midwest, Mid-Atlantic, Great Lakes and Southeast United States.
81
(19) Other Information
On January 3, 2011, the Company purchased the real estate associated with our military food
distribution facility in Norfolk, Virginia for approximately $27.5 million. This facility had
previously been a leased location.
NASH FINCH COMPANY AND SUBSIDIARIES
Quarterly Financial Information (Unaudited)
(In thousands, except per share amounts and percent to sales)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
Second Quarter |
|
Third Quarter |
|
Fourth Quarter |
|
|
12 Weeks |
|
12 Weeks |
|
16 Weeks |
|
12 Weeks |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
Sales |
|
$ |
1,179,693 |
|
|
$ |
1,140,320 |
|
|
$ |
1,154,617 |
|
|
$ |
1,216,594 |
|
|
$ |
1,510,881 |
|
|
$ |
1,633,304 |
|
|
$ |
1,146,788 |
|
|
$ |
1,222,437 |
|
Cost of sales |
|
|
1,087,873 |
|
|
|
1,045,201 |
|
|
|
1,060,280 |
|
|
|
1,117,565 |
|
|
|
1,388,926 |
|
|
|
1,504,350 |
|
|
|
1,054,112 |
|
|
|
1,126,851 |
|
Gross profit |
|
|
91,820 |
|
|
|
95,119 |
|
|
|
94,337 |
|
|
|
99,029 |
|
|
|
121,955 |
|
|
|
128,954 |
|
|
|
92,676 |
|
|
|
95,586 |
|
Earnings before income taxes |
|
|
13,330 |
|
|
|
17,526 |
|
|
|
17,966 |
|
|
|
16,114 |
|
|
|
22,830 |
|
|
|
31,655 |
|
|
|
18,000 |
|
|
|
(41,545 |
) |
Income tax expense |
|
|
5,389 |
|
|
|
3,106 |
|
|
|
7,252 |
|
|
|
6,576 |
|
|
|
7,484 |
|
|
|
9,728 |
|
|
|
1,060 |
|
|
|
1,562 |
|
Net earnings (loss) |
|
|
7,941 |
|
|
|
14,420 |
|
|
|
10,714 |
|
|
|
9,538 |
|
|
|
15,346 |
|
|
|
21,927 |
|
|
|
16,940 |
|
|
|
(43,107 |
) |
Net earnings (loss) as percentage of sales |
|
|
0.67 |
% |
|
|
1.26 |
% |
|
|
0.93 |
% |
|
|
0.78 |
% |
|
|
1.02 |
% |
|
|
1.34 |
% |
|
|
1.48 |
% |
|
|
(3.53 |
%) |
Basic earnings (loss) per share |
|
$ |
0.61 |
|
|
$ |
1.11 |
|
|
$ |
0.83 |
|
|
$ |
0.73 |
|
|
$ |
1.21 |
|
|
$ |
1.68 |
|
|
$ |
1.34 |
|
|
$ |
(3.31 |
) |
Diluted earnings (loss) per share |
|
$ |
0.59 |
|
|
$ |
1.08 |
|
|
$ |
0.81 |
|
|
$ |
0.72 |
|
|
$ |
1.18 |
|
|
$ |
1.64 |
|
|
$ |
1.30 |
|
|
$ |
(3.20 |
) |
|
|
|
Significant items by quarter include the following: |
|
1. |
|
Conversion and opening costs related to opening of new military food distribution facilities of
$0.4 million, $0.3 million, $1.1 million and $1.1 million during the first, second, third and
fourth quarters, respectively, of fiscal 2010. |
|
2. |
|
Closing costs related to a food distribution facility of $1.2 million and $0.5 million during
the second and third quarters, respectively, of fiscal 2010. |
|
3. |
|
The reversal of previously recorded income tax reserves of $2.2 million and $4.7 million during
the third and fourth quarters, respectively, of fiscal 2010. |
|
4. |
|
Goodwill impairment charge of $50.9 million in the fourth quarter 2009. |
|
5. |
|
Gain on the acquisition of a business of $6.7 million, net of tax, in the first quarter 2009. |
|
6. |
|
Gain on the settlement of litigation of $7.6 million in the third quarter 2009. |
|
7. |
|
Acquisition and integration costs of $0.6 million, $0.8 million, $0.9 million and $0.4 million
in the first, second, third and fourth quarters, respectively, of fiscal 2009. |
|
8. |
|
Special charge of $6.0 million in the fourth quarter 2009. |
|
9. |
|
Pre-opening and start-up costs of $0.1 million and $0.6 million in the first and second
quarters, respectively, of fiscal 2009. |
|
10. |
|
Gain on the sale of intangible assets of $0.7 million in the fourth quarter 2009. |
|
11. |
|
Retail store impairments and lease related charges of $1.2 million, $0.9 million, $1.3 million
and $1.9 million in the first, second, third and fourth quarters, respectively, of fiscal 2009. |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934).
82
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded
that, as of the end of the period covered by this report, our disclosure controls and procedures
were effective.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rule
13a-15(f) under the Exchange Act) that occurred during our most recently completed fiscal quarter
that materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Managements Annual Report On Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rule 13a-15(f) of the Securities Exchange Act.
Under the supervision and with the participation of our management, including our Chief Executive
Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting as of January 1, 2011. In conducting its evaluation, our
management used the criteria set forth by the framework in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that
evaluation, management concluded our internal control over financial reporting was effective as of
January 1, 2011.
Our internal control over financial reporting as of January 1, 2011 has been audited by Grant
Thornton LLP, an independent registered public accounting firm, as stated in their report included
below.
83
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Nash Finch Company
We have audited Nash-Finch Company and subsidiaries (a Minnesota Corporation) internal control
over financial reporting as of January 1, 2011, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Nash-Finch Company and subsidiaries management is responsible for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Managements Annual Report
on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on
Nash-Finch Company and subsidiaries internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Nash-Finch Company and subsidiaries maintained, in all material respects, effective
internal control over financial reporting as of January 1, 2011, based on criteria established in
Internal ControlIntegrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheet of Nash-Finch Company and subsidiaries as of
January 1, 2011, and the related consolidated statements of income, stockholders equity, and cash
flows for the year ended January 1, 2011 and our report dated March 3, 2011 expressed an
unqualified opinion thereon.
Grant Thornton LLP
Minneapolis, Minnesota
March 3, 2011
84
ITEM 9B. OTHER INFORMATION
Not applicable.
PART III
|
|
|
ITEM 10. |
|
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE GOVERNANCE |
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information about our executive officers as of March 3, 2011:
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Year First |
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Elected or |
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Appointed as |
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an Executive |
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Name |
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Age |
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Officer |
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Title |
Alec C. Covington
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53 |
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2006 |
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President and Chief Executive Officer |
Christopher A. Brown
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48 |
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2006 |
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Executive Vice President, President and Chief Operating Officer of Wholesale |
Edward L. Brunot
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47 |
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2006 |
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Senior Vice President, President and Chief Operating Officer of MDV |
Robert B. Dimond
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49 |
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2007 |
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Executive Vice President, Chief Financial Officer and Treasurer |
Kathleen M. Mahoney
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56 |
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2006 |
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Executive Vice President, General Counsel and Secretary |
Jeffrey E. Poore
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52 |
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2001 |
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Executive Vice President, Supply Chain Management |
Calvin S. Sihilling
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61 |
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2006 |
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Executive Vice President and Chief Information Officer |
Michael W. Rotelle
III
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51 |
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2008 |
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Senior Vice President, Human Resources |
There are no family relationships between or among any of our executive officers or directors.
Our executive officers are elected by the Board of Directors for one-year terms after initial
election, commencing with their election at the first meeting of the Board of Directors immediately
following the annual meeting of stockholders and continuing until the next such meeting of the
Board of Directors.
Alec C. Covington has been our President and Chief Executive Officer and a Director since May
2006. Mr. Covington served as President and Chief Executive Officer of Tree of Life, Inc., a
marketer and distributor of natural and specialty foods, from February 2004 to May 2006, and for
the same period as a member of the Executive Board of Tree of Lifes parent corporation, Royal
Wessanen NV, a multi-national food corporation based in the Netherlands. From April 2001 to
February 2004, he was Chief Executive Officer of AmeriCold Logistics, LLC, a provider of supply
chain solutions in the consumer packaged goods industry. Prior to that time, Mr. Covington served
as President of Richfood Inc., a regional food distributor.
Christopher A. Brown has served as our Executive Vice President and President and Chief
Operating Officer of Nash Finch Wholesale since February 2010. Mr. Brown returned to Nash Finch as
Executive Vice President, Food Distribution in November 2006. Prior to that time, he served for
three years as Chief Executive Officer of SimonDelivers, Inc., a leading Minnesota-based online
grocery delivery company. Prior to joining SimonDelivers, Mr. Brown was our Executive Vice
President, Merchandising from October 1999 to September 2003 and responsible for all merchandising,
procurement, marketing, category management and advertising. During the nine years prior to
serving Nash Finch, he held various management positions of increasing responsibility at Richfood
Holdings, Inc. Mr. Brown holds a BSBA degree from Winona State University.
85
Edward L. Brunot has served as our Senior Vice President and President and Chief Operating
Officer of MDV since February 2009. Mr. Brunot joined Nash Finch in July 2006 as our Senior Vice
President, Military. Mr. Brunot previously served as Senior Vice President, Operations for
AmeriCold Logistics, LLC from December 2002 to May 2006, where he was responsible for 29
distribution facilities in the Western Region. Before that, Mr. Brunot was Vice President of
Operations for CS Integrated from 1999 to 2002. Mr. Brunot served as a Captain in the United
States Army and holds a BS degree from the United States Military Academy, West Point and an MS
degree from the University of Scranton.
Robert B. Dimond returned as our Executive Vice President, Chief Financial Officer and
Treasurer in January 2007. He previously served as Chief Financial Officer and Senior Vice
President of Wild Oats Markets, Inc., a leading national natural and organic foods retailer, from
April 2005 to December 2006. From January 2005 through March 2005, Mr. Dimond served as Executive
Vice President and Chief Financial Officer of The Penn Traffic Company, a food retailer in the
eastern United States, in connection with its emergence from bankruptcy proceedings. Prior to
that, he served as our Executive Vice President, Chief Financial Officer and Treasurer from May
2002 to November 2004 and as our Chief Financial Officer and Senior Vice President from September
2000 to May 2002. Before that, Mr. Dimond held various financial roles with Kroger and Smiths
Food & Drug Centers, Inc. Mr. Dimond holds a BS degree in accounting from the University of Utah
and is a Certified Public Accountant.
Kathleen M. Mahoney has served as our Executive Vice President, General Counsel and Secretary
since November 2009. Prior to that Ms. Mahoney served as our Senior Vice President, General
Counsel and Secretary since July 2006. Ms. Mahoney joined Nash Finch as Vice President, Deputy
General Counsel in November 2004. Prior to working at Nash Finch, she was the Managing Partner of
the St. Paul office of Larson King, LLP from July 2002 to November 2004. Previously, she spent 13
years with the law firm of Oppenheimer, Wolff & Donnelly, LLP, where she served in a number of
capacities including Managing Partner of their St. Paul office, Chair of the Labor and Employment
Practice Group and Chair of the EEO Committee. Ms. Mahoney also served as Special Assistant
Attorney General in the Minnesota Attorney Generals office for six years. Ms. Mahoney earned her
JD degree from Syracuse University College of Law and a BA from Keene State College.
Jeffrey E. Poore has served as our Executive Vice President, Supply Chain Management since
July 2006. He previously served as our Senior Vice President, Military from July 2004 to July 2006
and as our Vice President, Distribution and Logistics from May 2001 to July 2004. Prior to joining
Nash Finch, Mr. Poore served in various positions with Supervalu Inc., a food wholesaler and
retailer, most recently as Vice President, Logistics from January 1999 to April 2001. Before that,
Mr. Poore held various distribution and logistics roles with Computer Sciences Corporation, Hills
Department Stores, Payless Shoe Stores and Payless Cashways. Mr. Poore holds a BA from Loyola
Marymount University.
Calvin S. Sihilling has served as our Executive Vice President and Chief Information Officer
since August 2006. Mr. Sihilling previously served as Chief Information Officer for AmeriCold
Logistics, LLC from August 2001 to January 2006, where he was responsible for the oversight of
Information Technology, Transportation, Project Support, and the National Service Center. Before
that, Mr. Sihilling was CIO of the Eastern Region of Richfood Holdings, Inc./SuperValu Inc. from
August 1998 to August 2001. Prior to that, Mr. Sihilling held various leadership positions at such
companies as Alex Lee, Inc., PepsiCo Food Systems, Dr. Pepper Company and Electronic Data Systems.
Mr. Sihilling holds a BS from the Northrop Institute of Technology.
Michael W. Rotelle III has served as our Senior Vice President, Human Resources since October
2008. Mr. Rotelle previously served as Executive Vice President, Human Resources for Acosta Sales
and Marketing Company, a sales and marketing company serving the foodservice and grocery
industries, from November 2007 to October 2008, where he was responsible for global Human Resource
operations. Before that Mr. Rotelle served as Senior Vice President, Human Resources for Tree of
Life, Inc. from August 2004 to November 2007. Prior to that Mr. Rotelle was Vice President, Human
Resources of the Eastern Region of Richfood Holdings, Inc./ Supervalu Inc. from August 1994 to
August 2004. Before that Mr. Rotelle held various operational and Human Resource positions with
Rotelle, Inc. Mr. Rotelle holds a Bachelor of Science degree in Business Administration from
Bloomsburg University.
86
The remaining information required by this item is incorporated by reference to the
sections titled Proposal Number 1: Election of DirectorsInformation About Directors and
Nominees, Proposal Number 1: Election of DirectorsInformation About the Board of Directors and
Its Committees, Corporate GovernanceGovernance Guidelines, Corporate GovernanceDirector
Candidates and Section 16(a) Beneficial Ownership Reporting Compliance of our 2011 Proxy
Statement.
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ITEM 11. |
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EXECUTIVE COMPENSATION |
The information required by this item is incorporated by reference to the sections titled
Proposal Number 1: Election of DirectorsCompensation of Directors, Proposal Number 1: Election
of DirectorsCompensation and Management Development Committee Interlocks and Insider
Participation and Executive Compensation and Other Benefits of our 2011 Proxy Statement.
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ITEM 12. |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS |
Equity Compensation Plan Information
The following table provides information about Nash Finch common stock that may be issued upon
the exercise of stock options, the payout of share units or performance units, or the granting of
other awards under all of Nash Finchs equity compensation plans in effect as of January 1, 2011:
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Equity Compensation Plan Information |
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Number of securities to be |
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Number of securities remaining |
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issued upon exercise of |
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available for future issuance |
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outstanding options, |
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under equity compensation plans |
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warrants and rights |
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(excluding securities reflected in |
Plan category |
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(a) |
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column (a)) (c) |
Equity compensation
plans approved by
security holders |
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1,436,577 |
(1) |
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649,069 |
(2) |
Equity compensation
plans not approved
by security holders |
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20,146 |
(3) |
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1,436,577 |
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669,215 |
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(1) |
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Includes stock options, stock appreciation rights, restricted stock units and performance
units awarded under the 2009 Incentive Award Plan (2009 Plan) and 2000 Stock Incentive Plan
(2000 Plan). |
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(2) |
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The following numbers of shares remained available for issuance under each of our equity
compensation plans at January 1, 2011. Grants under each plan may be in the form of any of the
types of awards noted: |
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Plan |
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Number of Shares |
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Type of Award |
2009 Plan
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538,682 |
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Stock options, restricted stock,
stock appreciation rights,
performance units, and stock
bonuses. |
2000 Plan
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74,760 |
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Stock options, restricted stock,
stock appreciation rights,
performance units, and stock
bonuses. |
1997 Director Plan
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35,627 |
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Share units |
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(3) |
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Shares remaining available for issuance under the Director Deferred Compensation Plan. Each
share unit acquired through the deferral of director compensation under the Director Deferred
Compensation Plan is |
87
payable in one share of Nash Finch common stock following the individuals termination of service
as a director.
Description of Plans Not Approved by Shareholders
Director Deferred Compensation Plan. The Director Deferred Compensation Plan was
adopted by the Board in December 2004 as a result of amendments to the Internal Revenue Code that
affected the operation of non-qualified deferred compensation arrangements for amounts deferred on
or after January 1, 2005. The Board reserved 50,000 shares of Nash Finch common stock for issuance
in connection with the plan. The plan permits a participant to annually defer all or a portion of
his or her cash compensation for service as a director, and have the amount deferred credited to
either a cash account or a share account. Amounts credited to a share account are deemed to have
purchased a number of share units determined by dividing the amount deferred by the then-current
market price of a share of Nash Finch common stock. Each share unit represents the right to
receive one share of Nash Finch common stock. The balance in a share account is payable only in
stock following termination of service as a director.
Security Ownership of Certain Beneficial Owners and Management
In addition to the information set forth above, the information required by this item is
incorporated by reference to the sections titled Security Ownership of Certain Beneficial Owners
and Security Ownership of Management of our 2011 Proxy Statement.
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ITEM 13. |
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
The information required by this item is incorporated by reference to the sections titled
Proposal Number 1: Election of DirectorsInformation About the Board of Directors and Its
Committees, Corporate GovernanceGovernance GuidelinesIndependent Directors and Corporate
GovernanceRelated Party Transaction Policy and Procedures of our 2011 Proxy Statement.
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ITEM 14. |
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PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The information required by this item is incorporated by reference to the sections titled
Independent AuditorsFees Paid to Independent Auditors and Independent AuditorsPre-Approval
of Audit and Non-Audit Services of our 2011 Proxy Statement.
PART IV
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ITEM 15. |
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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
1. |
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Financial Statements. |
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The following financial statements are included in this report on the pages indicated: |
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Reports of Independent Registered Public Accounting Firms pages 41 to 42 |
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Consolidated Statements of Income for the fiscal years ended January 1, 2011, January 2,
2010 and January 3, 2009
page 43 |
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Consolidated Balance Sheets as of January 1, 2011 and January 2, 2010 page 44 |
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Consolidated Statements of Cash Flows for the fiscal years ended January 1, 2011, January
2, 2010 and January 3, 2009
page 45 |
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Consolidated Statements of Stockholders Equity for the fiscal years ended January 1, 2011,
January 2, 2010 and
January 3, 2009 page 46 |
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88
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Notes to Consolidated Financial Statements pages 47 to 82 |
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2. |
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Financial Statement Schedules. |
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The following financial statement schedule is included herein and should be read in
conjunction with the consolidated financial statements referred to above: |
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Valuation and Qualifying Accounts page 94 |
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Other Schedules. Other schedules are omitted because the required information is either
inapplicable or presented in the consolidated financial statements or related notes. |
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3. |
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Exhibits. |
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Exhibit |
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No. |
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Description |
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*2.1
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Asset Purchase Agreement between Roundys, Inc. and Nash-Finch Company, dated as of February
24, 2005 (incorporated by reference to Exhibit 2.1 to our current report on Form 8-K filed
February 28, 2005 (File No. 0-785)). |
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*2.2
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Asset Purchase Agreement between GSC Enterprises, Inc., MKM Management, L.L.C., Michael K.
McKenzie, Grocery Supply Acquisition Corp. and Nash-Finch Company, dated as of December 17,
2008 (incorporated by reference to Exhibit 1.01 to our current report on Form 8-K filed
December 18, 2008 (File No. 0-785)). |
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*2.3
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First Amendment to Asset Purchase Agreement between GSC Enterprises, Inc., MKM Management,
L.L.C., Michael K. McKenzie, Grocery Supply Acquisition Corp. and Nash-Finch Company, dated as
of January 31, 2009 (incorporated by reference to Exhibit 10.1 to our current report on Form
8-K filed February 3, 2009 (File No. 0-785)). |
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3.1
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Restated Certificate of Incorporation of the Company, effective May 16, 1985 (incorporated by
reference to Exhibit 3.1 to our Annual Report on Form 10-K for the fiscal year ended December
28, 1985 (File No. 0-785)). |
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3.2
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Certificate of Amendment to Restated Certificate of Incorporation of the Company, effective
May 15, 1987 (incorporated by reference to Exhibit 4.5 to our Registration Statement on Form
S-3 (filed June 8, 1987 (File No. 33-14871)). |
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3.3
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Certificate of Amendment to Restated Certificate of Incorporation of the Company, effective
May 16, 2002 (incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q
for the quarter ended June 15, 2002 (File No. 0-785)). |
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3.4
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Certificate of Amendment to Restated Certificate of Incorporation of the Company, effective
May 13, 2008 (incorporated by reference to Exhibit 3.1 to our current report on Form 8-K dated
May 16, 2008 (File No. 0-785)). |
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3.5
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Certificate of Amendment to the Nash-Finch Company Restated Certificate of Incorporation,
effective May 20, 2009 (incorporated by reference to Exhibit 3.1 to our current report on Form
8-K filed May 26, 2009 (File No. 0-785)). |
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3.6
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Fourth Restated Certificate of Incorporation of Nash Finch Company, effective July 27, 2009
(incorporated by reference to Exhibit 3.2 to our Quarterly Report on Form 10-Q filed July 28,
2009 (File No. 0-785)). |
89
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Exhibit |
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No. |
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Description |
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3.7
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Nash-Finch Company Bylaws (as amended November 9, 2005) (incorporated by reference to
Exhibit 3.1 to our current report on Form 8-K filed November 14, 2005 (File No. 0-785)). |
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3.8
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Amended and Restated Bylaws of Nash-Finch Company (as amended May 13, 2008) (incorporated by
reference to Exhibit 3.2 to our current report on Form 8-K/A filed May 19, 2008 (File No.
0-785)). |
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3.9
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Amended and Restated Bylaws of Nash Finch Company (as amended May 20, 2009) (incorporated by
reference to Exhibit 3.2 to our current report on Form 8-K/A filed July 6, 2009 (File No.
0-785)). |
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3.10
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Amended and Restated Bylaws of Nash Finch Company (as amended February 28, 2011) (filed
herewith). |
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4.1
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Stockholder Rights Agreement, dated February 13, 1996, between the Company and Wells Fargo
Bank, N.A. (formerly known as Norwest Bank Minnesota, National Association) (incorporated by
reference to Exhibit 4 to our current report on Form 8-K dated February 13, 1996 (File No.
0-785)). |
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4.2
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Amendment to Stockholder Rights Agreement dated as of October 30, 2001 (incorporated by
reference to Exhibit 4.2 to Amendment No. 1 to our Registration Statement on Form 8-A (filed
July 26, 2002) (File No. 0-785)). |
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4.3
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Indenture dated as of March 15, 2005 between Nash-Finch Company and Wells Fargo Bank,
National Association, as Trustee (including form of Senior Subordinated Convertible Notes due
2035) (incorporated by reference to Exhibit 10.1 to our current report on Form 8-K filed March
9, 2005 (File No. 0-785)). |
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4.4
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Registration Rights Agreement dated as of March 15, 2005 between Nash-Finch Company and
Deutsche Bank Securities Inc., Merrill Lynch & Co. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated (incorporated by reference to Exhibit 10.2 to our current report on Form 8-K
filed March 9, 2005 (File No. 0-785)). |
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4.5
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Notice of Adjustment of Conversion Rate of the Senior Subordinated Convertible Notes Due 2035
(incorporated by reference to Exhibit 99.1 to our current report on Form 8-K filed November
21, 2006 (File No. 0-785)). |
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4.6
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First Supplemental Indenture to Senior Convertible Notes Due 2035 (incorporated by reference
to Exhibit 4.1 to our Quarterly Report on Form 10-Q for the quarter ended June 14, 2008 (File
No. 0-785)). |
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4.7
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Notice of Adjustment of Conversion Rate of Senior Subordinated Convertible Notes Due 2035
(incorporated by reference to Exhibit 7.1 to our current report on Form 8-K filed March 25,
2009 (File No. 0-785)). |
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10.1
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Credit Agreement, dated as of April 11, 2008, among Nash Finch Company, Various Lenders and
Bank of America, N.A. as Administrative Agent (incorporated by reference to Exhibit 10.1 to
our current report on Form 8-K filed April 14, 2008 (File No. 0-785)). |
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**10.2
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Nash-Finch Company Income Deferral Plan (as amended through May 21, 2004) (incorporated by
reference to Exhibit 4.1 to our Registration Statement on Form S-8 filed May 25, 2004 (File
No. 333-115849)). |
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**10.3
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Second Declaration of Amendment to Nash-Finch Company Income Deferral Plan (as amended
through May 21, 2004) (incorporated by reference to Exhibit 10.4 to our Annual Report on Form
10-K for the fiscal year ended January 1, 2005 (File No. 0-785)). |
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**10.4
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Nash-Finch Company Deferred Compensation Plan (incorporated by reference to Exhibit 4.1 to
our Registration Statement on Form S-8 filed on December 30, 2004 (File No. 333-121755)). |
90
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Exhibit |
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No. |
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Description |
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**10.5
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Amended and Restated Nash-Finch Company Deferred Compensation Plan (incorporated by
reference to Exhibit 10.8 to our Annual Report on Form 10-K filed March 12, 2009 (File No.
0-785)). |
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**10.6
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Nash-Finch Company 2000 Stock Incentive Plan (as amended February 25, 2008) (incorporated by
reference to Exhibit 10.1 to our current report on Form 8-K filed May 16, 2008 (File No.
0-785)). |
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**10.7
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Nash-Finch Company 2000 Stock Incentive Plan (as amended and restated on July 14, 2008)
(incorporated by reference to Exhibit 10.10 to our Annual Report on Form 10-K filed March 12,
2009 (File No. 0-785)). |
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**10.8
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Form of Non-Statutory Stock Option Agreement (for employees under the Nash-Finch Company
2000 Stock Incentive Plan) (incorporated by reference to Exhibit 10.7 to our Annual Report on
Form 10-K for the fiscal year ended January 1, 2005 (File No. 0-785)). |
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**10.9
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Description of Nash-Finch Company Long-Term Incentive Program Utilizing Performance Unit
Awards (incorporated by reference to Appendix I to our Proxy Statement for our Annual Meeting
of Stockholders on May 10, 2005 (filed March 21, 2005)
(File No. 0-785)). |
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**10.10
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Form of Non-Statutory Stock Option Agreement (for non-employee directors under the
Nash-Finch Company 1995 Director Stock Option Plan) (incorporated by reference to Exhibit
10.10 to our Annual Report on Form 10-K for the fiscal year ended January 1, 2005 (File No.
0-785)). |
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**10.11
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Nash-Finch Company 1997 Non-Employee Director Stock Compensation Plan (2003 Revision)
(incorporated by reference to Exhibit 10.9 to our Annual Report on Form 10-K for the fiscal
year ended January 3, 2004 (File No. 0-785)). |
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**10.12
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Nash-Finch Company 1997 Non-Employee Director Stock Compensation Plan (2003 Revision)
First Declaration of Amendment (incorporated by reference to Exhibit 10.12 to our Annual
Report on Form 10-K for the fiscal year ended January 1, 2005 (File No. 0-785)). |
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**10.13
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Nash-Finch Company 1997 Non-Employee Director Stock Compensation Plan (2003 Revision)
Second Declaration of Amendment (incorporated by reference to Exhibit 10.13 to our Annual
Report on Form 10-K for the fiscal year ended January 1, 2005 (File No. 0-785)). |
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**10.14
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Nash-Finch Company Director Deferred Compensation Plan (incorporated by reference to
Exhibit 4.1 to our Registration Statement on Form S-8 filed on December 30, 2004 (File No.
333-121754)). |
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**10.15
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Amended and Restated Nash-Finch Company Director Deferred Compensation Plan (incorporated
by reference to Exhibit 10.20 to our Annual Report on Form 10-K filed March 12, 2009 (File No.
0-785)). |
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**10.16
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Nash-Finch Company Supplemental Executive Retirement Plan (incorporated by reference to
Exhibit 10.27 to our Annual Report on Form 10-K for the fiscal year ended January 1, 2000
(File No. 0-785)). |
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**10.17
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Nash-Finch Company Supplemental Executive Retirement Plan (as amended and restated on
July 14, 2008) (incorporated by reference to Exhibit 10.22 to our Annual Report on Form 10-K
filed March 12, 2009 (File No. 0-785)). |
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**10.18
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Nash-Finch Company Performance Incentive Plan (incorporated by reference to Exhibit 10.6 to
our Quarterly Report on Form 10-Q for the quarter ended June 15, 2002 (File No. 0-785)). |
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**10.19
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Description of Nash-Finch Company 2005 Executive Incentive Program (incorporated by
reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q for the twelve weeks ended
March 26, 2005 (File No. 0-785)). |
91
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Exhibit |
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No. |
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Description |
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**10.20
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Form of Restricted Stock Unit Award Agreement (for non-employee directors under the
2000 Stock Incentive Plan) (incorporated by reference to Exhibit 10.19 to our Annual Report on
Form 10-K for the fiscal year ended January 1, 2005 (File No. 0-785)). |
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**10.21
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Form of Amended and Restated Restricted Stock Unit Agreement (for non-employee directors
under the 2000 Stock Incentive Plan) (incorporated by reference to Exhibit 10.26 to our Annual
Report on Form 10-K filed March 12, 2009 (File No. 0-785)). |
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**10.22
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New Form of Restricted Stock Unit Award Agreement (for non-employee directors under the
2000 Stock Incentive Plan) (incorporated by reference to Exhibit 10.27 to our Annual Report on
Form 10-K filed March 12, 2009 (File No. 0-785)). |
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**10.23
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Form of Restricted Stock Unit Award Agreement (under the 2000 Stock Incentive Plan)
(incorporated by reference to Exhibit 10.1 to our Form 8-K filed August 11, 2006 (File No.
0-785)). |
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**10.24
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Form of Amended and Restated Restricted Stock Unit Award Agreement (under the 2000 Stock
Incentive Plan) (incorporated by reference to Exhibit 10.3 to our Form 10-Q filed November 6,
2008 (File No. 0-785)). |
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**10.25
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New Form of Executive Restricted Stock Unit Agreement (under the 2000 Stock Incentive
Plan), effective July 14, 2008 (incorporated by reference to Exhibit 10.2 to our Form 10-Q
filed November 6, 2008 (File No. 0-785)). |
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**10.26
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Nash-Finch Company 2000 Stock Incentive Plan Performance Unit Award Agreement dated as of
May 1, 2006 between the Company and Alec C. Covington (incorporated by reference to Exhibit
10.3 to our Form 10-Q for the quarter ended June 17, 2006 (File No. 0-785)). |
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**10.27
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|
Nash-Finch Company 2000 Stock Incentive Plan Restricted Stock Unit Award Agreement dated as
of May 1, 2006 between the Company and Alec C. Covington (incorporated by reference to Exhibit
10.2 to our Form 10-Q for the quarter ended June 17, 2006 (File No. 0-785)). |
|
|
|
**10.28
|
|
Letter Agreement between Nash-Finch Company and Alec C. Covington dated March 16, 2006
(incorporated by reference to Exhibit 10.1 to our Form 8-K filed April 18, 2006 (File No.
0-785)). |
|
|
|
**10.29
|
|
Amendment to the Letter Agreement between Nash-Finch Company and Alec C. Covington dated
February 27, 2007 (incorporated by reference to Exhibit 10.1 to our Form 8-K filed March 1,
2007 (File No. 0-785)). |
|
|
|
**10.30
|
|
Change in Control Agreement entered into by Nash-Finch Company and Alec. C. Covington dated
February 26, 2008 (incorporated by reference to Exhibit 10.1 to our Form 8-K/A filed February
28, 2008 (File No. 0-785)). |
|
|
|
**10.31
|
|
Change in Control Agreement entered into by Nash-Finch Company and Alec. C. Covington dated
February 28, 2011 (filed herewith). |
|
|
|
**10.32
|
|
Restricted Stock Unit Agreement between the Company and Alec C. Covington dated February
27, 2007 (incorporated by reference to Exhibit 10.2 to our Form 10-Q filed May 1, 2007 (File
No. 0-785)). |
|
|
|
**10.33
|
|
Letter Agreement between Nash-Finch Company and Robert B. Dimond dated November 29, 2006
(incorporated by reference to Exhibit 10.1 to our Form 8-K filed December 21, 2006 (File No.
0-785)). |
|
|
|
**10.34
|
|
Amended Form of Change in Control Agreement for Senior and Executive Vice Presidents,
effective November 3, 2008 (incorporated by reference to Exhibit 10.1 to our Form 10-Q filed
November 6, 2008 (File No. 0-785)). |
92
|
|
|
Exhibit |
|
|
No. |
|
Description |
|
|
|
**10.35
|
|
Form of Amended and Restated Indemnification Agreement (incorporated by reference to
Exhibit 10.1 to our Form 10-Q filed November 13, 2007 (File No. 0-785)). |
|
|
|
**10.36
|
|
Stock Appreciation Rights Agreement under the Nash-Finch Company 2000 Stock Incentive Plan
dated December 17, 2008 (incorporated by reference to Exhibit 10.2 to our Form 8-K filed
February 3, 2009 (File No. 0-785)). |
|
|
|
**10.37
|
|
Amended and Restated Stock Appreciation Rights Agreement under the Nash-Finch Company 2000
Stock Incentive Plan dated December 17, 2008 (incorporated by reference to Exhibit 10.1 to our
Form 10-Q filed May 4, 2009 (File No. 0-785)). |
|
|
|
**10.38
|
|
Nash-Finch Company Incentive Award Plan (incorporated by reference to Exhibit 10.1 to our
current report on Form 8-K filed May 26, 2009 (File No. 0-785)). |
|
|
|
**10.39
|
|
Nash Finch Company Performance Incentive Plan (incorporated by reference to Exhibit 10.2 to
our current report on Form 8-K filed May 26, 2009 (File No. 0-785)). |
|
|
|
12.1
|
|
Computation of Ratio of Earnings to Fixed Charges (filed herewith). |
|
|
|
21.1
|
|
Our subsidiaries (filed herewith). |
|
|
|
23.1
|
|
Consent of Grant Thornton LLP (filed herewith). |
|
|
|
23.2
|
|
Consent of Ernst & Young LLP (filed herewith). |
|
|
|
24.1
|
|
Power of Attorney (filed herewith). |
|
|
|
31.1
|
|
Rule 13a-14(a) Certification of the Chief Executive Officer (filed herewith). |
|
|
|
31.2
|
|
Rule 13a-14(a) Certification of the Chief Financial Officer (filed herewith). |
|
|
|
32.1
|
|
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer (filed herewith). |
|
|
|
|
|
A copy of any of these exhibits will be furnished at a reasonable cost to any of our stockholders, upon receipt from any
such person of a written request for any such exhibit. Such request should be sent to Nash Finch Company, 7600 France
Avenue South, P.O. Box 355, Minneapolis, Minnesota, 55440-0355, Attention: Secretary. |
|
|
|
* |
|
The Company agrees to furnish supplementary to the SEC upon request by the SEC any omitted
schedule or exhibit. |
|
** |
|
Items that are management contracts or compensatory plans or arrangements required to be
filed as exhibits pursuant to Item 15(a)(3) of Form 10-K. |
93
NASH FINCH COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Fiscal Years ended January 1, 2011, January 2, 2010 and January 3, 2009
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charged to |
|
|
Charged |
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
(Reversed |
|
|
(Credited) to |
|
|
|
|
|
|
Balance |
|
|
|
Beginning of |
|
|
from) Costs |
|
|
Other Accounts |
|
|
|
|
|
|
at End of |
|
Description |
|
Year |
|
|
and Expenses |
|
|
(a) |
|
|
Deductions |
|
|
Year |
|
53 weeks ended January 3, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts (c) |
|
$ |
7,669 |
|
|
$ |
(1,292 |
) |
|
$ |
37 |
|
|
$ |
883 |
(b) |
|
$ |
5,531 |
|
Provision for losses relating to leases on closed locations |
|
|
13,202 |
|
|
|
(1,831 |
) |
|
|
|
|
|
|
3,364 |
(d) |
|
|
8,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
20,871 |
|
|
$ |
(3,123 |
) |
|
$ |
37 |
|
|
$ |
4,247 |
|
|
$ |
13,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended January 2, 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts (c) |
|
$ |
5,531 |
|
|
$ |
1,441 |
|
|
$ |
19 |
|
|
$ |
1,304 |
(b) |
|
$ |
5,687 |
|
Provision for losses relating to leases on closed locations |
|
|
8,007 |
|
|
|
3,135 |
|
|
|
|
|
|
|
1,891 |
(d) |
|
|
9,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
13,538 |
|
|
$ |
4,576 |
|
|
$ |
19 |
|
|
$ |
3,195 |
|
|
$ |
14,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended January 1, 2011: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts (c) |
|
$ |
5,687 |
|
|
$ |
663 |
|
|
$ |
1 |
|
|
$ |
160 |
(b) |
|
$ |
6,191 |
|
Provision for losses relating to leases on closed locations |
|
|
9,251 |
|
|
|
320 |
|
|
|
|
|
|
|
2,723 |
(d) |
|
|
6,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
14,938 |
|
|
$ |
983 |
|
|
$ |
1 |
|
|
$ |
2,883 |
|
|
$ |
13,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Recoveries on accounts previously written off, unless noted otherwise |
|
(b) |
|
Reversal of reserve relating to write-offs |
|
(c) |
|
Includes current and non-current receivables |
|
(d) |
|
Net payments of lease obligations and termination fees |
94
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
|
|
|
|
|
Dated: March 3, 2011 |
NASH-FINCH COMPANY
|
|
|
By |
/s/ Alec C. Covington
|
|
|
|
Alec C. Covington |
|
|
|
President and Chief Executive Officer |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been
signed below on March 3, 2011 by the following persons on behalf of the Registrant and in the
capacities indicated.
|
|
|
/s/ Alec C. Covington
|
|
/s/ Robert B. Dimond |
|
|
|
Alec C. Covington, President and Chief Executive
Officer (Principal Executive
Officer)
|
|
Robert B. Dimond, Executive Vice President
and Chief Financial Officer (Principal
Financial and Accounting Officer) |
|
|
|
/s/ William R. Voss*
|
|
/s/ Mickey P. Foret* |
|
|
|
William R. Voss, Chairman of the Board
|
|
Mickey P. Foret |
|
|
|
/s/ Robert L. Bagby *
|
|
/s/ Douglas A. Hacker* |
|
|
|
Robert L. Bagby
|
|
Douglas A. Hacker |
|
|
|
/s/ Sam K. Duncan*
|
|
/s/Hawthorne L. Proctor* |
|
|
|
Sam K. Duncan
|
|
Hawthorne L. Proctor |
|
|
|
|
|
|
|
|
|
*By: |
/s/ Kathleen M. Mahoney
|
|
|
|
Kathleen M. Mahoney |
|
|
|
Attorney-in-fact |
|
|
95
NASH-FINCH COMPANY
EXHIBIT INDEX TO ANNUAL REPORT
ON FORM 10-K
For Fiscal Year Ended January 1, 2011
|
|
|
|
|
Exhibit |
|
|
|
|
No. |
|
Description |
|
Method of Filing |
|
|
|
|
|
2.1
|
|
Asset Purchase Agreement between Roundys, Inc.
and Nash-Finch Company, dated as of February 24,
2005.
|
|
Incorporated by
reference (IBR) |
|
|
|
|
|
2.2
|
|
Asset Purchase Agreement between GSC Enterprises,
Inc., MKM Management, L.L.C., Michael K.
McKenzie, Grocery Supply Acquisition Corp. and
Nash-Finch Company, dated as of December 17,
2008.
|
|
IBR |
|
|
|
|
|
2.3
|
|
First Amendment to Asset Purchase Agreement
between GSC Enterprises, Inc., MKM Management,
L.L.C., Michael K. McKenzie, Grocery Supply
Acquisition Corp. and Nash-Finch Company, dated
as of January 31, 2009.
|
|
IBR |
|
|
|
|
|
3.1
|
|
Restated Certificate of Incorporation of the
Company, effective May 16, 1985.
|
|
IBR |
|
|
|
|
|
3.2
|
|
Certificate of Amendment to Restated Certificate
of Incorporation of the Company, effective May
15, 1987.
|
|
IBR |
|
|
|
|
|
3.3
|
|
Certificate of Amendment to Restated Certificate
of Incorporation of the Company, effective May
16, 2002.
|
|
IBR |
|
|
|
|
|
3.4
|
|
Certificate of Amendment to Restated Certificate
of Incorporation of the Company, effective May
13, 2008.
|
|
IBR |
|
|
|
|
|
3.5
|
|
Certificate of Amendment to the Nash-Finch
Company Restated Certificate of Incorporation,
effective May 20, 2009
|
|
IBR |
|
|
|
|
|
3.6
|
|
Fourth Restated Certificate of Incorporation of
Nash Finch Company, effective July 27, 2009
|
|
IBR |
|
|
|
|
|
3.7
|
|
Nash-Finch Company Bylaws, as amended November 9,
2005.
|
|
IBR |
|
|
|
|
|
3.8
|
|
Amended and Restated Bylaws of Nash-Finch Company
(as amended May 13, 2008).
|
|
IBR |
|
|
|
|
|
3.9
|
|
Amended and Restated Bylaws of Nash Finch Company
(as amended May 20, 2009)
|
|
IBR |
|
|
|
|
|
3.10
|
|
Amended and Restated Bylaws of Nash Finch Company
(as amended February 28, 2011)
|
|
Filed Electronically (E) |
|
|
|
|
|
4.1
|
|
Stockholder Rights Agreement, dated February 13,
1996, between the Company and Wells Fargo Bank,
N.A. (formerly known as Norwest Bank Minnesota,
National Association).
|
|
IBR |
|
|
|
|
|
4.2
|
|
Amendment to Stockholder Rights Agreement dated
as of October 30, 2001.
|
|
IBR |
96
|
|
|
|
|
Exhibit |
|
|
|
|
No. |
|
Description |
|
Method of Filing |
|
|
|
|
|
4.3
|
|
Indenture dated as of March 15, 2005 between
Nash-Finch Company and Wells Fargo Bank, National
Association, as Trustee (including form of Senior
Subordinated Convertible Notes due 2035).
|
|
IBR |
|
|
|
|
|
4.4
|
|
Registration Rights Agreement dated as of March
15, 2005 between Nash-Finch Company and Deutsche
Bank Securities Inc., Merrill Lynch & Co. and
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
|
|
IBR |
|
|
|
|
|
4.5
|
|
Notice of Adjustment of Conversion Rate of the
Senior Subordinated Convertible Notes Due 2035.
|
|
IBR |
|
|
|
|
|
4.6
|
|
First Supplemental Indenture to Senior
Convertible Notes Due 2035.
|
|
IBR |
|
|
|
|
|
10.1
|
|
Credit Agreement, dated as of April 11, 2008,
among Nash Finch Company, Various Lenders and
Bank of America, N.A. as Administrative Agent.
|
|
IBR |
|
|
|
|
|
10.2
|
|
Nash-Finch Company Income Deferral Plan (as
amended through May 21, 2004).
|
|
IBR |
|
|
|
|
|
10.3
|
|
Second Declaration of Amendment to Nash-Finch
Company Income Deferral Plan (as amended through
May 21, 2004).
|
|
IBR |
|
|
|
|
|
10.4
|
|
Nash-Finch Company Deferred Compensation Plan.
|
|
IBR |
|
|
|
|
|
10.5
|
|
Amended and Restated Nash-Finch Company Deferred
Compensation Plan.
|
|
IBR |
|
|
|
|
|
10.6
|
|
Nash-Finch Company 2000 Stock Incentive Plan.
|
|
IBR |
|
|
|
|
|
10.7
|
|
Nash-Finch Company 2000 Stock Incentive Plan (as
amended and restated on July 14, 2008).
|
|
IBR |
|
|
|
|
|
10.8
|
|
Form of Non-Statutory Stock Option Agreement (for
employees under the Nash-Finch Company 2000 Stock
Incentive Plan).
|
|
IBR |
|
|
|
|
|
10.9
|
|
Description of Nash-Finch Company Long-Term
Incentive Program Utilizing Performance Unit
Awards.
|
|
IBR |
|
|
|
|
|
10.10
|
|
Form of Non-Statutory Stock Option Agreement (for
non-employee directors under the Nash-Finch
Company 1995 Director Stock Option Plan).
|
|
IBR |
|
|
|
|
|
10.11
|
|
Nash-Finch Company 1997 Non-Employee Director
Stock Compensation Plan (2003 Revision).
|
|
IBR |
|
|
|
|
|
10.12
|
|
Nash-Finch Company 1997 Non-Employee Director
Stock Compensation Plan (2003 Revision) First
Declaration of Amendment.
|
|
IBR |
|
|
|
|
|
10.13
|
|
Nash-Finch Company 1997 Non-Employee Director
Stock Compensation Plan (2003 Revision) Second
Declaration of Amendment.
|
|
IBR |
97
|
|
|
|
|
Exhibit |
|
|
|
|
No. |
|
Description |
|
Method of Filing |
|
|
|
|
|
10.14
|
|
Nash-Finch Company Director Deferred Compensation
Plan.
|
|
IBR |
|
|
|
|
|
10.15
|
|
Amended and Restated Nash-Finch Company Director
Deferred Compensation Plan.
|
|
IBR |
|
|
|
|
|
10.16
|
|
Nash-Finch Company Supplemental Executive
Retirement Plan.
|
|
IBR |
|
|
|
|
|
10.17
|
|
Nash-Finch Company Supplemental Executive
Retirement Plan (as amended and restated on July
14, 2008).
|
|
IBR |
|
|
|
|
|
10.18
|
|
Nash-Finch Company Performance Incentive Plan.
|
|
IBR |
|
|
|
|
|
10.19
|
|
Description of Nash-Finch Company 2005 Executive
Incentive Program.
|
|
IBR |
|
|
|
|
|
10.20
|
|
Form of Restricted Stock Unit Award Agreement
(for non-employee directors under the 2000 Stock
Incentive Plan).
|
|
IBR |
|
|
|
|
|
10.21
|
|
Form of Amended and Restated Restricted Stock
Unit Agreement (for non-employee directors under
the 2000 Stock Incentive Plan).
|
|
IBR |
|
|
|
|
|
10.22
|
|
New Form of Restricted Stock Unit Award Agreement
(for non-employee directors under the 2000 Stock
Incentive Plan).
|
|
IBR |
|
|
|
|
|
10.23
|
|
Form of Restricted Stock Unit Award Agreement
(under the 2000 Stock Incentive Plan).
|
|
IBR |
|
|
|
|
|
10.24
|
|
Form of Amended and Restated Restricted Stock
Unit Award Agreement (under the 2000 Stock
Incentive Plan).
|
|
IBR |
|
|
|
|
|
10.25
|
|
New Form of Executive Restricted Stock Unit
Agreement (under the 2000 Stock Incentive Plan),
effective July 14, 2008.
|
|
IBR |
|
|
|
|
|
10.26
|
|
Nash-Finch Company 2000 Stock Incentive Plan
Performance Unit Award Agreement dated as of May
1, 2006 between the Company and Alec C.
Covington.
|
|
IBR |
|
|
|
|
|
10.27
|
|
Nash-Finch Company 2000 Stock Incentive Plan
Restricted Stock Unit Award Agreement dated as of
May 1, 2006 between the Company and Alec C.
Covington.
|
|
IBR |
|
|
|
|
|
10.28
|
|
Letter Agreement between Nash-Finch Company and
Alec C. Covington dated March 16, 2006.
|
|
IBR |
|
|
|
|
|
10.29
|
|
Amendment to the Letter Agreement between
Nash-Finch Company and Alec. C. Covington dated
February 27, 2007.
|
|
IBR |
|
|
|
|
|
10.30
|
|
Change in Control Agreement entered into by Nash
Finch Company and Alec C. Covington dated
February 26, 2008.
|
|
IBR |
98
|
|
|
|
|
Exhibit |
|
|
|
|
No. |
|
Description |
|
Method of Filing |
|
|
|
|
|
10.31
|
|
Change in Control Agreement entered into by Nash
Finch Company and Alec C. Covington dated
February 28, 2011.
|
|
E |
|
|
|
|
|
10.32
|
|
Restricted Stock Unit Agreement between the
Company and Alec C. Covington dated
February 27,
2007.
|
|
IBR |
|
|
|
|
|
10.33
|
|
Letter Agreement between Nash-Finch Company and
Robert B Dimond dated November 29, 2006.
|
|
IBR |
|
|
|
|
|
10.34
|
|
Amended Form of Change in Control Agreement for
Senior and Executive Vice Presidents, effective
November 3, 2008.
|
|
IBR |
|
|
|
|
|
10.35
|
|
Form of Amended and Restated Indemnification
Agreement.
|
|
IBR |
|
|
|
|
|
10.36
|
|
Stock Appreciation Rights Agreement under the
Nash-Finch Company 2000 Stock Incentive Plan
dated December 17, 2008.
|
|
IBR |
|
|
|
|
|
10.37
|
|
Amended and Restated Stock Appreciation Rights
Agreement under the Nash-Finch Company 2000 Stock
Incentive Plan dated December 17, 2008
|
|
IBR |
|
|
|
|
|
10.38
|
|
Nash-Finch Company Incentive Award Plan
|
|
IBR |
|
|
|
|
|
10.39
|
|
Nash Finch Company Performance Incentive Plan
|
|
IBR |
|
|
|
|
|
12.1
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
E |
|
|
|
|
|
21.1
|
|
Our subsidiaries.
|
|
E |
|
|
|
|
|
23.1
|
|
Consent of Grant Thornton LLP.
|
|
E |
|
|
|
|
|
23.2
|
|
Consent of Ernst & Young LLP. |
|
|
|
|
|
|
|
24.1
|
|
Power of Attorney.
|
|
E |
|
|
|
|
|
31.1
|
|
Rule 13a-14(a) Certification of the Chief
Executive Officer.
|
|
E |
|
|
|
|
|
31.2
|
|
Rule 13a-14(a) Certification of the Chief
Financial Officer.
|
|
E |
|
|
|
|
|
32.1
|
|
Section 1350 Certification of Chief Executive
Officer and Chief Financial Officer.
|
|
E |
99