e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the 12 weeks ended June 14, 2008
or
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No. 0-785
NASH-FINCH COMPANY
(Exact Name of Registrant as Specified in its Charter)
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DELAWARE
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41-0431960 |
(State or other jurisdiction of
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(IRS Employer |
incorporation or organization)
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Identification No.) |
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7600 France Avenue South, |
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P.O. Box 355 |
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Minneapolis, Minnesota
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55440-0355 |
(Address of principal executive offices)
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(Zip Code) |
(952) 832-0534
(Registrants telephone number including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. (See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the 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
Exchange Act). Yes o No þ
As of July 7, 2008, 12,784,531 shares of Common Stock of the Registrant were outstanding.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
NASH-FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Income (unaudited)
(In thousands, except per share amounts)
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12 Weeks Ended |
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24 Weeks Ended |
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June 14, |
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June 16, |
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June 14, |
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June 16, |
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2008 |
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2007 |
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2008 |
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2007 |
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Sales |
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$ |
1,042,388 |
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1,063,974 |
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$ |
2,064,298 |
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2,096,217 |
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Cost of sales |
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948,100 |
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967,892 |
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1,877,396 |
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1,909,414 |
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Gross profit |
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94,288 |
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96,082 |
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186,902 |
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186,803 |
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Other costs and expenses: |
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Selling, general and administrative |
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64,988 |
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65,488 |
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126,172 |
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132,047 |
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Special charges |
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(1,282 |
) |
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(1,282 |
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Depreciation and amortization |
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8,703 |
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8,901 |
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17,735 |
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17,983 |
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Interest expense |
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5,651 |
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5,671 |
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10,685 |
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11,266 |
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Total other costs and expenses |
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79,342 |
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78,778 |
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154,592 |
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160,014 |
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Earnings before income taxes |
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14,946 |
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17,304 |
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32,310 |
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26,789 |
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Income tax expense |
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4,838 |
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7,697 |
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10,925 |
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11,894 |
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Net earnings |
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$ |
10,108 |
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9,607 |
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$ |
21,385 |
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14,895 |
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Net earnings per share: |
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Basic |
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$ |
0.79 |
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0.71 |
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$ |
1.65 |
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1.11 |
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Diluted |
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$ |
0.77 |
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0.70 |
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$ |
1.62 |
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1.10 |
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Declared dividends per common share |
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$ |
0.180 |
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0.180 |
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$ |
0.360 |
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0.360 |
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Weighted average number of common shares
outstanding and common equivalent shares outstanding: |
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Basic |
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12,847 |
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13,492 |
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12,927 |
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13,465 |
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Diluted |
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13,068 |
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13,630 |
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13,184 |
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13,563 |
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See accompanying notes to consolidated financial statements.
2
NASH-FINCH COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)
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June 14, |
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December 29, |
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2008 |
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2007 |
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(unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
863 |
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862 |
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Accounts and notes receivable, net |
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194,791 |
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197,807 |
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Inventories |
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272,906 |
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246,762 |
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Prepaid expenses and other |
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21,269 |
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27,882 |
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Deferred tax asset, net |
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687 |
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4,621 |
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Total current assets |
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490,516 |
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477,934 |
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Notes receivable, net |
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14,990 |
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12,429 |
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Property, plant and equipment: |
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Property, plant and equipment |
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602,324 |
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617,241 |
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Less accumulated depreciation and amortization |
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(405,813 |
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(414,704 |
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Net property, plant and equipment |
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196,511 |
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202,537 |
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Goodwill |
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218,406 |
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215,174 |
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Customer contracts and relationships, net |
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26,704 |
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28,368 |
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Investment in direct financing leases |
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3,490 |
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4,969 |
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Other assets |
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12,674 |
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9,971 |
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Total assets |
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$ |
963,291 |
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951,382 |
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Liabilities and Stockholders Equity |
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Current liabilities: |
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Current maturities of long-term debt and capitalized lease obligations |
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$ |
3,914 |
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3,842 |
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Accounts payable |
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210,155 |
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209,402 |
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Accrued expenses |
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59,607 |
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69,113 |
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Total current liabilities |
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273,676 |
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282,357 |
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Long-term debt |
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296,116 |
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278,443 |
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Capitalized lease obligations |
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27,051 |
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29,885 |
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Deferred tax liability, net |
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11,964 |
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7,227 |
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Other liabilities |
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28,474 |
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37,854 |
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Commitments and contingencies |
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Stockholders equity: |
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Preferred stock no par value. Authorized 500 shares; none issued |
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Common stock $1.66 2/3 par value. Authorized 50,000 shares,
issued 13,603 and 13,559 shares, respectively |
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22,673 |
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22,599 |
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Additional paid-in capital |
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69,174 |
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61,446 |
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Common stock held in trust |
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(2,170 |
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(2,122 |
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Deferred compensation obligations |
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2,170 |
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2,122 |
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Accumulated other comprehensive income (loss) |
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(5,092 |
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(5,092 |
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Retained earnings |
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268,745 |
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252,142 |
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Common stock in treasury, 848 and 434 shares, respectively |
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(29,490 |
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(15,479 |
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Total stockholders equity |
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326,010 |
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315,616 |
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Total liabilities and stockholders equity |
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$ |
963,291 |
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951,382 |
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See accompanying notes to consolidated financial statements.
3
NASH-FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
(In thousands)
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24 Weeks Ended |
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June 14, |
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June 16, |
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2008 |
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2007 |
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Operating activities: |
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Net earnings |
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$ |
21,385 |
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14,895 |
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Adjustments to reconcile net earnings to net cash provided by operating activities: |
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Special charge |
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(1,282 |
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Depreciation and amortization |
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17,735 |
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17,983 |
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Amortization of deferred financing costs |
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1,360 |
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377 |
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Amortization of rebatable loans |
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1,878 |
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1,446 |
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Increase (decrease) in provision for bad debts |
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(1,212 |
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873 |
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Provision for lease reserves |
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(1,995 |
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(63 |
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Deferred income tax expense |
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8,671 |
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2,963 |
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LIFO charge |
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3,531 |
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1,615 |
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Stock-based compensation |
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3,965 |
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2,540 |
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Other |
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1,030 |
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1,124 |
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Changes in operating assets and liabilities: |
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Accounts and notes receivable |
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4,733 |
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6,856 |
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Inventories |
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(27,351 |
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(19,545 |
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Prepaid expenses |
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1,784 |
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2,630 |
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Accounts payable |
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(4,495 |
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649 |
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Accrued expenses |
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(10,638 |
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(1,179 |
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Income taxes payable |
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4,831 |
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8,468 |
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Other assets and liabilities |
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(2,301 |
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(283 |
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Net cash provided by operating activities |
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22,911 |
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40,067 |
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Investing activities: |
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Disposal of property, plant and equipment |
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246 |
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2,259 |
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Additions to property, plant and equipment |
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(9,884 |
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(5,804 |
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Business acquired, net of cash |
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(6,772 |
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Loans to customers |
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(5,102 |
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(433 |
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Other |
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349 |
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634 |
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Net cash used in investing activities |
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(21,163 |
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(3,344 |
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Financing activities: |
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Proceeds (payments) of revolving debt |
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136,600 |
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(25,300 |
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Dividends paid |
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(4,619 |
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(4,834 |
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Repurchase of common stock |
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(14,348 |
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Payments of long-term debt |
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(118,913 |
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(319 |
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Payments of capitalized lease obligations |
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(1,923 |
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(1,451 |
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Increase (decrease) in bank overdraft |
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3,988 |
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(6,590 |
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Payments of deferred financing costs |
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(2,868 |
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Other |
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336 |
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2,147 |
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Net cash used by financing activities |
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(1,747 |
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(36,347 |
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Net increase in cash and cash equivalents |
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1 |
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376 |
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Cash and cash equivalents: |
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Beginning of year |
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862 |
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958 |
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End of period |
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$ |
863 |
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1,334 |
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4
Nash-Finch Company and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)
June 14, 2008
Note 1 Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America (U.S. GAAP) for
interim financial information. Accordingly, they do not include all of the information and
footnotes required by U.S. GAAP for complete financial statements. For further information, refer
to the consolidated financial statements and footnotes included in our Annual Report on Form 10-K
for the year ended December 29, 2007.
The accompanying unaudited consolidated financial statements include all adjustments which
are, in the opinion of management, necessary to present fairly the financial position of Nash-Finch
Company and our subsidiaries (Nash Finch or the
Company) at June 14, 2008 and December 29, 2007, and the results
of operations and changes in cash flows for the 12 and 24 weeks ended June 14, 2008 (second quarter
2008) and June 16, 2007 (second quarter 2007). Adjustments consist only of normal recurring items,
except for any items discussed in the notes below. All material intercompany accounts and
transactions have been eliminated in the unaudited consolidated financial statements. Results of
operations for the interim periods presented are not necessarily indicative of the results to be
expected for the full year.
The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could differ from those
estimates.
Note 2 Inventories
We use the LIFO method for valuation of a substantial portion of inventories. An actual
valuation of inventory under the LIFO method can be made only at the end of each year based on the
inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on
managements estimates of expected year-end inventory levels and costs. Because these estimates
are subject to many factors beyond managements control, interim results are subject to the final
year-end LIFO inventory valuation. If the FIFO method had been used, inventories would have been
approximately $59.9 million and $56.4 million higher at June 14, 2008 and December 29, 2007,
respectively. In the second quarter 2008 we recorded LIFO charges of $2.4 million compared to $0.8
million for the second quarter 2007. Year-to-date LIFO charges recorded were $3.5 million and $1.6
million, respectively, at June 14, 2008 and June 16, 2007.
Note 3 Goodwill
As a result of the acquisition of two stores in the second quarter 2008, goodwill increased by
$3.2 million. The $3.2 million purchase price allocation to goodwill is preliminary. Changes in
the net carrying amount of goodwill for year-to-date 2008 were as follows (in thousands):
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Food |
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distribution |
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Military |
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Retail |
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Total |
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Goodwill as of December 29,
2007 |
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$ |
121,863 |
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25,754 |
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67,557 |
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215,174 |
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Acquisition of retail stores |
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3,232 |
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3,232 |
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Goodwill as of June 14, 2008 |
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$ |
121,863 |
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25,754 |
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70,789 |
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218,406 |
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5
Note 4 Share-Based Compensation
We account for share-based compensation awards in accordance with the provisions of Statement
of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment Revised, which
requires companies to estimate the fair value of share-based payment awards on the date of grant
using an option-pricing model. The value of the portion of the awards ultimately expected to vest
is recognized as expense over the requisite service period. We recognized share-based compensation
expense in our Consolidated Statements of Income of $2.0 and $4.0 million, respectively, for the 12
and 24 weeks ended June 14, 2008, versus expense of $1.6 and $2.5 million for the 12 and 24 weeks
ended June 16, 2007.
We have four equity compensation plans under which incentive stock options, non-qualified
stock options and other forms of share-based compensation have been, or may be, granted primarily
to key employees and non-employee members of the Board of Directors. The 1995 Director Stock
Option Plan was terminated as of December 27, 2004, and participation in the 1997 Non-Employee
Director Stock Compensation Plan was frozen as of December 31, 2004. 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 Stock Incentive Plan (2000 Plan), employees, non-employee directors,
consultants and independent contractors may be awarded incentive or non-qualified stock options,
shares of restricted stock, stock appreciation rights, performance units or stock bonuses.
Awards to non-employee directors under the 2000 Plan began in 2004 and have taken the form of
restricted stock units 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 following table summarizes information concerning outstanding and exercisable options
under the 2000 Plan as of June 14, 2008 (number of shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding |
|
|
Options Exercisable |
|
|
|
Number of |
|
|
Weighted |
|
|
Number of |
|
|
Weighted |
|
Range of Exercise |
|
Options |
|
|
Average |
|
|
Options |
|
|
Average |
|
Prices |
|
Outstanding |
|
|
Exercise Price |
|
|
Exercisable |
|
|
Exercise Price |
|
|
$17.35 17.95 |
|
|
3.4 |
|
|
|
|
|
|
|
3.4 |
|
|
|
|
|
24.55 35.36 |
|
|
26.0 |
|
|
|
|
|
|
|
19.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.4 |
|
|
$ |
27.39 |
|
|
|
22.4 |
|
|
$ |
27.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Since 2005, awards have taken the form of performance units (including share units pursuant to
our Long-Term Incentive Plan (LTIP)) and restricted stock units.
Performance
units were granted during 2005, 2006, 2007 and 2008 under the 2000
Plan pursuant to our LTIP. These units vest at the end of a three-year
performance period. The 2005 plan provided for payout in shares of our common stock or cash, or a
combination of both, at the election of the participant, and therefore was accounted for as a
liability award in accordance with SFAS 123(R). All units under the 2005 plan were settled in
shares of common stock during the second quarter 2008. The payout for units granted in 2005 was
determined by comparing our growth in Consolidated EBITDA (defined as net income, adjusted by (i)
adding thereto interest expense, provision for income taxes, depreciation and amortization expense,
and other non-cash charges that were deducted in computing net income for the period; (ii)
excluding the amount of any extraordinary gains or losses and gains or losses from sales of assets
other than inventory in the ordinary course of business; and (iii) subtracting cash payments made
during the period with respect to non-cash charges
6
incurred in a previous period) and return on net
assets (defined as net income divided by the sum of net fixed assets plus the difference between current assets and current liabilities) during the
performance period to the growth in those measures over the same period experienced by the
companies in a peer group selected by us.
In February 2008, the Compensation and Management Development Committee (the Committee) of
the Board of Directors amended the 2006 and 2007 LTIP plans 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 2006 and 2007 LTIP plans
by, among other things, adding a definition for Strategic Project and amending the definitions of
Net Assets, RONA and Free Cash Flow. The 2006 and 2007 LTIP Plans were amended as follows:
|
|
|
2006 LTIP Plan: The Committee amended the definition of RONA in the 2006 LTIP as
follows: RONA means the weighted average of the return on Net Assets for the fiscal
years during a Measurement Period. This is the quotient of (i) the sum of net income
for each fiscal year (or portion thereof) during the Measurement Period divided by (ii)
the sum of Average Net Assets for each fiscal year (or portion thereof) during the
measurement period. Each of the measures in (i) and (ii) shall be as reported by the
entity for the applicable fiscal periods in periodic reports filed with the Securities
and Exchange Commission (SEC) under the Exchange Act. Net Income will be adjusted by
(x) subtracting projected Strategic Project Consolidated EBITDA, offset by the
associated interest, depreciation and income taxes. If a Strategic Project generates
positive Consolidated EBITDA through July 1 of the year placed in service, the
adjustment for (x) 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 (x) above will be made through the first anniversary
date of the Strategic Project being placed in service. Weighting of the return on Net
Assets for the fiscal years during the Measurement Period shall be based upon the
Average Net Assets for each fiscal year. |
|
|
|
|
2007 LTIP Plan: The Committee amended the definition of net assets consistent
with the change to the 2006 LTIP Plan 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 10/29/07; (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 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 those plans at its February 2008
meeting; (1) removing the plan participants option to receive payout of the award in cash; instead
requiring that all awards
7
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 SFAS
123(R). 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.
In
the first quarter 2008, 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 (for shares expected to vest) is recorded over the
three-year period for the grant date fair value.
The following table summarizes activity in our share-based compensation plans during the
year-to-date period ended June 14, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Weighted |
|
Restricted |
|
Remaining |
|
|
|
|
|
|
Average |
|
Stock Awards/ |
|
Restriction/ |
(In thousands, except per share |
|
Stock Option |
|
Option Price |
|
Performance |
|
Vesting Period |
amounts) |
|
Shares |
|
Per Share |
|
Units |
|
(Years) |
|
Outstanding at December 29, 2007 |
|
|
35.1 |
|
|
$ |
25.85 |
|
|
|
907.0 |
|
|
|
1.9 |
|
Granted |
|
|
|
|
|
|
|
|
|
|
363.0 |
|
|
|
|
|
Exercised/restrictions lapsed * |
|
|
(5.5 |
) |
|
|
|
|
|
|
(46.0 |
) |
|
|
|
|
Forfeited/cancelled |
|
|
(0.2 |
) |
|
|
|
|
|
|
(233.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at June 14, 2008 |
|
|
29.4 |
|
|
$ |
27.39 |
|
|
|
991.0 |
|
|
|
1.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable/unrestricted at
December 29, 2007 |
|
|
28.1 |
|
|
$ |
25.40 |
|
|
|
168.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable/unrestricted at
June 14, 2008 |
|
|
22.4 |
|
|
$ |
27.32 |
|
|
|
113.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The exercised/restrictions lapsed amount above under Restricted Stock Awards/Performance Units
excludes 81,739 restricted stock units held by Alec Covington and 12,866 restricted stock units
held by Robert Dimond that vested during year-to-date 2008, respectively. Mr.
Covington and Mr. Dimond elected to defer the shares until
after their employment with the
Company ends. |
The weighted-average grant-date fair value of equity based restricted stock/performance units
granted was $37.17 during the 24 weeks ended June 14, 2008 versus $30.03 during the comparable
period ended June 16, 2007.
Note 5 Other Comprehensive Income
Other comprehensive income consists of market value adjustments to reflect derivative
instruments at fair value, pursuant to SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities.
During the quarter and year-to-date periods ended June 16, 2007 all interest rate swap
agreements were designated as cash flow hedges and were reflected at fair value in our Consolidated
Balance Sheet with the related gains or losses on these contracts deferred in stockholders equity
as a component of other comprehensive income.
8
During the first quarter 2008 our only outstanding
commodity swap agreement, which expired February 29, 2008, did not qualify for hedge accounting in accordance with SFAS No. 133, and the
corresponding change in fair value of the commodity swap agreement was recognized in earnings. The
components of comprehensive income are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 Weeks |
|
|
Year-to-date |
|
|
|
Ended |
|
|
Ended |
|
|
|
June 14, |
|
|
June 16, |
|
|
June 14, |
|
|
June 16, |
|
(In thousands) |
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
Net Earnings |
|
$ |
10,108 |
|
|
|
9,607 |
|
|
|
21,385 |
|
|
|
14,895 |
|
Change in fair value of derivatives, net of tax |
|
|
|
|
|
|
(80 |
) |
|
|
|
|
|
|
(200 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
10,108 |
|
|
|
9,527 |
|
|
|
21,385 |
|
|
|
14,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We offer deferred compensation arrangements, which allow certain employees, officers, and
directors to defer a portion of their earnings. The amounts deferred are held in a rabbi trust.
The assets of the rabbi trust include life insurance policies to fund our obligations under
deferred compensation arrangements for certain employees, officers and directors. The cash
surrender value of these policies is included in other assets on the Consolidated Balance Sheets.
The assets of the rabbi trust also include shares of Nash Finch common stock. These shares are
included in stockholders equity on the Consolidated Balance Sheets.
Note 6 Long-term Debt and Bank Credit Facilities
Total debt outstanding was comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
June 14, |
|
|
December |
|
(In thousands) |
|
2008 |
|
|
29, 2007 |
|
|
Senior secured credit facility: |
|
|
|
|
|
|
|
|
Revolving credit |
|
$ |
|
|
|
|
6,300 |
|
Term Loan B |
|
|
|
|
|
|
118,700 |
|
Asset-backed credit facility: |
|
|
|
|
|
|
|
|
Revolving credit |
|
|
142,900 |
|
|
|
|
|
Senior subordinated convertible debt, 3.50% due in 2035 |
|
|
150,087 |
|
|
|
150,087 |
|
Industrial development bonds, 5.60% to 5.75%
due in various installments through 2014 |
|
|
3,170 |
|
|
|
3,345 |
|
Notes payable and mortgage notes, 7.95% due
in various installments through 2013 |
|
|
520 |
|
|
|
559 |
|
|
|
|
|
|
|
|
Total debt |
|
|
296,677 |
|
|
|
278,991 |
|
Less current maturities |
|
|
(561 |
) |
|
|
(548 |
) |
|
|
|
|
|
|
|
Long-term debt |
|
$ |
296,116 |
|
|
|
278,443 |
|
|
|
|
|
|
|
|
Asset-backed Credit Facility
On April 11, 2008, we entered into our new credit facility which is an asset-backed loan
consisting of a $300.0 million revolving credit facility, which
includes a $50.0 million letter of
credit sub-facility (the Revolving Credit Facility). Provided no default is then existing or
would arise, the Company may from time-to-time, request that the Revolving Credit Facility be
increased by an aggregate amount (for all such requests) not to exceed $150.0 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
either base rate or LIBOR plus a margin. The LIBOR interest rate margin currently is 2.00%, but the
LIBOR interest rate margin will become adjustable after October 4, 2008. Once the margin becomes
adjustable, it 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 June 14, 2008, $141.2
million was
9
available under the Revolving Credit Facility after giving effect to outstanding
borrowings and to $15.9 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.
Senior Subordinated Convertible Debt
To finance a portion of the acquisition of distribution centers in 2005, we sold $150.1
million in aggregate issue price (or $322.0 million aggregate principal amount at maturity) of
senior subordinated convertible notes due in 2035. The notes are our unsecured senior subordinated
obligations and rank junior to our existing and future senior indebtedness, including borrowings
under our asset-backed credit facility. See our Annual Report on Form 10-K for the fiscal year
ended December 29, 2007 for additional information regarding the notes.
Note 7 Guarantees
We have guaranteed debt and lease obligations of certain food distribution customers. In the
event these retailers are unable to meet their debt service payments or otherwise experience an
event of default, we would be unconditionally liable for the outstanding balance of their debt and
lease obligations ($9.6 million as of June 14, 2008 as
compared to $7.6 million as of June 16, 2007), which would be due in accordance with the
underlying agreements.
We entered into a new lease guarantee in the second quarter 2008 with a food distribution
customer. The maximum undiscounted payments we would be required to make in the event of default
under the guarantee is $2.8 million, which is included in the $9.6 million total referenced above.
The maximum amount of the guarantee is reduced monthly during the approximate ten-year term of the
agreement, and is secured by a certain business assets and a personal guarantee from the affiliated
customer. We believe the customer will be able to perform under the lease agreement and
that no payments will be required and no loss will be incurred under the guarantee.
We have also assigned various leases to other entities. If the assignees were to become
unable to continue making payments under the assigned leases, we estimate our maximum potential
obligation with respect to the assigned leases to be
$10.1 million as of June 14, 2008 as compared to $12.3
million as of June 16, 2007.
Note 8 Income Taxes
For the second quarter 2008 and 2007, our tax expense was $4.8 million and $7.7 million,
respectively. For year-to-date 2008 and 2007, our tax expense was $10.9 million and $11.9 million,
respectively.
The provision for income taxes reflects the Companys estimate of the effective rate expected
to be applicable for the full fiscal year, adjusted for any discrete events, which are reported in
the period that they occur. This estimate is re-evaluated each quarter based on the Companys
estimated tax expense for the full fiscal year. During the second quarter 2008 the Company filed
claims with and received funds from various tax authorities. Accordingly, the Company reported the
effect of these discrete events in the second quarter 2008 as a decrease in tax expense of $1.2 million. The discrete events were reported as a reduction in
tax expense and reduced the
10
effective rate for the second quarter 2008 to 32.4%. The year-to-date
2008 effective rate was 33.8%. The effective rate for the second quarter and year-to-date 2007 was
44.5% and 44.4%, respectively.
During the next 12 months, the Company expects various state and local statutes of limitation
to expire. However, 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. With few exceptions, we are no longer
subject to U.S. federal, state or local examinations by tax authorities for years 2003 and prior.
Note 9 Pension and Other Postretirement Benefits
The following tables present the components of our pension and postretirement net periodic
benefit cost:
12 Weeks Ended June 14, 2008 and June 16, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Other Benefits |
(In thousands) |
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
Interest cost |
|
$ |
520 |
|
|
|
585 |
|
|
|
11 |
|
|
|
14 |
|
Expected return on plan assets |
|
|
(556 |
) |
|
|
(576 |
) |
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(149 |
) |
|
|
(161 |
) |
Recognized actuarial loss (gain) |
|
|
124 |
|
|
|
59 |
|
|
|
(1 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
87 |
|
|
|
64 |
|
|
|
(139 |
) |
|
|
(149 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
24 Weeks Ended June 14, 2008 and June 16, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
|
Other Benefits |
(In thousands) |
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
Interest cost |
|
$ |
1,039 |
|
|
|
1,170 |
|
|
|
22 |
|
|
|
28 |
|
Expected return on plan assets |
|
|
(1,112 |
) |
|
|
(1,154 |
) |
|
|
|
|
|
|
|
|
Amortization of prior service cost |
|
|
(1 |
) |
|
|
(7 |
) |
|
|
(298 |
) |
|
|
(322 |
) |
Recognized actuarial loss (gain) |
|
|
249 |
|
|
|
118 |
|
|
|
(1 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost |
|
$ |
175 |
|
|
|
127 |
|
|
|
(277 |
) |
|
|
(298 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average assumptions used to determine net periodic benefit cost for the first two
quarters of 2008 and first two quarters of 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits |
|
Other Benefits |
|
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
Weighted-average assumptions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
6.00 |
% |
|
|
6.00 |
% |
|
|
6.00 |
% |
|
|
6.00 |
% |
Expected return on plan assets |
|
|
7.00 |
% |
|
|
7.00 |
% |
|
|
N/A |
|
|
|
N/A |
|
Rate of compensation increase |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Total contributions to our pension plan in 2008 are expected to be $1.2 million.
11
Note 10 Earnings Per Share
The following table reflects the calculation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
|
Year-to-Date |
|
|
|
Ended |
|
|
Ended |
|
|
|
June 14, |
|
|
June 16, |
|
|
June 14, |
|
|
June 16, |
|
(In thousands, except per share amounts) |
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
Net earnings |
|
$ |
10,108 |
|
|
|
9,607 |
|
|
|
21,385 |
|
|
|
14,895 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share-basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding |
|
|
12,847 |
|
|
|
13,492 |
|
|
|
12,927 |
|
|
|
13,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share-basic |
|
$ |
0.79 |
|
|
|
0.71 |
|
|
|
1.65 |
|
|
|
1.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share-diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding |
|
|
12,847 |
|
|
|
13,492 |
|
|
|
12,927 |
|
|
|
13,465 |
|
Dilutive impact of options |
|
|
3 |
|
|
|
9 |
|
|
|
4 |
|
|
|
5 |
|
Shares contingently issuable |
|
|
218 |
|
|
|
129 |
|
|
|
253 |
|
|
|
93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares and potential dilutive shares outstanding |
|
|
13,068 |
|
|
|
13,630 |
|
|
|
13,184 |
|
|
|
13,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share-diluted |
|
$ |
0.77 |
|
|
|
0.70 |
|
|
|
1.62 |
|
|
|
1.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive options excluded from calculation (weighted-average
amount for period) |
|
|
5 |
|
|
|
71 |
|
|
|
|
|
|
|
71 |
|
Certain options were excluded from the calculation of diluted net earnings per share because
the exercise price was greater than the market price of the stock and would have been anti-dilutive
under the treasury stock method.
The senior subordinated convertible notes due 2035 will be convertible at the option of the
holder, only upon the occurrence of certain events, at an adjusted conversion rate of 9.4164 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 $49.50 per share). Upon conversion, we will pay the
holder the conversion value in cash up to the accreted principal amount of the note and the excess
conversion value, if any, in cash, stock or both, at our option. The notes are only dilutive above
their accreted value and for all periods presented the weighted average market price of the
Companys stock did not exceed the accreted value. Therefore, the notes are not dilutive to
earnings per share for any of the periods presented.
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 the second quarter 2008. Other performance and restricted stock units granted
during 2006, 2007 and 2008 pursuant to the 2000 Plan will pay out in shares of Nash Finch common
stock. Unvested restricted units 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 SFAS No. 128,
Earnings per Share. Therefore, the performance units are included in diluted earnings per share
at the payout percentage based on performance criteria results as of the end of the respective
reporting period and then accounted for using the treasury stock method, if dilutive. For the
second quarter 2008, approximately 91,000 shares related to the LTIP and 127,000 shares related to
RSUs were included under shares contingently issuable in the calculation of diluted EPS. For the
year-to-date period ended June 14, 2008, approximately 110,000 shares related to the LTIP and
143,000 shares related to RSUs were included under shares contingently issuable in the
calculation of diluted EPS.
12
Note 11 Segment Reporting
We sell and distribute products that are typically found in supermarkets and operate three
reportable operating segments. Our food distribution segment consists of 16 distribution centers
that sell to independently operated retail food stores, our corporate owned stores and other
customers. The military segment consists primarily of two distribution centers that distribute
products exclusively to military commissaries and exchanges. The retail segment consists of
corporate-owned stores that sell directly to the consumer.
A summary of the major segments of the business is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter Ended |
|
|
June 14, 2008 |
|
|
June 16, 2007 |
|
|
Sales from |
|
|
|
|
|
|
|
|
|
|
Sales from |
|
|
Inter- |
|
|
|
|
|
|
external |
|
|
Inter- |
|
|
Segment |
|
|
external |
|
|
segment |
|
|
Segment |
|
(In thousands) |
|
customers |
|
|
segment sales |
|
|
profit |
|
|
customers |
|
|
sales |
|
|
profit |
|
|
Food distribution |
|
$ |
600,081 |
|
|
|
70,975 |
|
|
|
22,885 |
|
|
|
633,065 |
|
|
|
70,234 |
|
|
|
21,343 |
|
Military |
|
|
304,612 |
|
|
|
|
|
|
|
11,091 |
|
|
|
290,459 |
|
|
|
|
|
|
|
10,170 |
|
Retail |
|
|
137,695 |
|
|
|
|
|
|
|
4,774 |
|
|
|
140,450 |
|
|
|
|
|
|
|
6,818 |
|
Eliminations |
|
|
|
|
|
|
(70,975 |
) |
|
|
|
|
|
|
|
|
|
|
(70,234 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,042,388 |
|
|
|
|
|
|
|
38,750 |
|
|
|
1,063,974 |
|
|
|
|
|
|
|
38,331 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date Ended |
|
|
June 14, 2008 |
|
|
June 16, 2007 |
|
|
Sales from |
|
|
|
|
|
|
|
|
|
|
Sales from |
|
|
Inter- |
|
|
|
|
|
|
external |
|
|
Inter- |
|
|
Segment |
|
|
external |
|
|
segment |
|
|
Segment |
|
(In thousands) |
|
customers |
|
|
segment sales |
|
|
profit |
|
|
customers |
|
|
sales |
|
|
profit |
|
|
Food distribution |
|
$ |
1,194,235 |
|
|
|
137,350 |
|
|
|
45,825 |
|
|
|
1,247,852 |
|
|
|
137,153 |
|
|
|
39,523 |
|
Military |
|
|
601,935 |
|
|
|
|
|
|
|
21,853 |
|
|
|
572,265 |
|
|
|
|
|
|
|
19,642 |
|
Retail |
|
|
268,128 |
|
|
|
|
|
|
|
9,317 |
|
|
|
276,100 |
|
|
|
|
|
|
|
11,639 |
|
Eliminations |
|
|
|
|
|
|
(137,350 |
) |
|
|
|
|
|
|
|
|
|
|
(137,153 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,064,298 |
|
|
|
|
|
|
|
76,995 |
|
|
|
2,096,217 |
|
|
|
|
|
|
|
70,804 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to Consolidated Statements of Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
|
Year-To-Date |
|
|
|
Ended |
|
|
Ended |
|
|
June 14, |
|
|
June 16, |
|
|
June 14, |
|
|
June 16, |
|
(In thousands) |
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
Total segment profit |
|
$ |
38,750 |
|
|
|
38,331 |
|
|
|
76,995 |
|
|
|
70,804 |
|
Unallocated amounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment of inventory to LIFO |
|
|
(2,397 |
) |
|
|
(807 |
) |
|
|
(3,531 |
) |
|
|
(1,615 |
) |
Special charges |
|
|
|
|
|
|
1,282 |
|
|
|
|
|
|
|
1,282 |
|
Unallocated corporate overhead |
|
|
(21,407 |
) |
|
|
(21,502 |
) |
|
|
(41,154 |
) |
|
|
(43,682 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
$ |
14,946 |
|
|
|
17,304 |
|
|
|
32,310 |
|
|
|
26,789 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
Note 12 Share Repurchase Program
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. The program
took effect on November 19, 2007 and will continue until the earlier of (1) the close of trading on
January 3, 2009 or (2) the date that the aggregate purchases under the repurchase program reaches
1,000,000 shares of our common stock. During the second quarter 2008, we repurchased 71,574 shares
at an average price per share of $32.57 and for year-to-date 2008 we have repurchased 429,082
shares at an average price per share of $33.44. Since the program took effect, we repurchased a
total of 842,038 shares at an average price per share of $34.83. The average prices per share
referenced above include commissions. As of June 14, 2008, there were 157,962 shares remaining on
the Board-approved share repurchase authorization.
Note
13 New Accounting Standard
In May 2008, the FASB issued FASB Staff Position (FSP) APB 14-1,
Accounting for
Convertible Debt and Debt Issued with Stock Purchase Warrants (FSP APB 14-1), which will
impact the accounting associated with our existing $150.1 million senior convertible notes. When
adopted FSP APB 14-1 will require us to recognize non-cash interest expense based on the market
rate for similar debt instruments without the conversion feature. Furthermore, it will require
recognizing interest expense in prior periods pursuant to retrospective accounting treatment. It is
expected that the cumulative effect upon adoption would be to record approximately $16.8 million
in pretax non-cash interest expense for prior periods and $4.0 million to $6.0 million in additional
pretax non-cash interest expense annually. FSP APB 14-1 is effective for financial statements
issued for fiscal years beginning after December 15, 2008.
Note 14 Legal Proceedings
Shareholder Litigation
On
March 11, 2008, the Company entered into a Stipulation of Settlement
(the Settlement Agreement) with respect to a putative securities fraud class action filed against
the Company and certain of its now former executive officers (together with the Company, the
Defendants). The Settlement Agreement was filed in the United States District Court for the
District of Minnesota (the Court) on March 11, 2008.
The complaint in this class action (the Complaint) alleges that the Defendants violated
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making misleading statements
regarding, among other things, the integration of the two distribution divisions acquired from
Roundys Supermarkets, Inc. on March 31, 2005, the performance of the Companys retail segment and
the Companys financial projections.
The Defendants denied, and continue to deny, in their entirety any and all allegations of
fraud or any wrongdoing in the Complaint. Neither the Settlement Agreement nor any of its terms or
conditions, nor the Companys decision to settle the lawsuit, should be construed as an admission
or concession of any kind of the merit or truth of any of the allegations of fraud or wrongdoing in
the Complaint, or of any fault, liability or wrongdoing whatsoever on the part of any and all of
the Defendants. Nonetheless, the Company has concluded that it is desirable to settle the lawsuit
to avoid the costs, risks and uncertainty of further litigation and trial, and to avoid the
distraction of protracted litigation.
The Settlement Agreement provides for Court certification of a settlement class, a full
release of all claims in the Complaint by the lead plaintiff and the settlement class and a
dismissal with prejudice of all claims in the Complaint, in consideration for payment of $6.8
million into a settlement fund. Such payment has been funded in full by the Companys insurance
coverage.
On April 15, 2008, the Court preliminarily approved the settlement and directed notice to the
settlement class of the proposed settlement. The Court approved the settlement on July 14, 2008
and entered an order certifying the settlement and dismissed the claims in the lawsuit with
prejudice. The settlement fund, less various costs of administration and plaintiffs costs and
attorneys fees, will be distributed to the settlement class members that have filed a valid and
approved claim.
Senior Subordinated Convertible Notes Litigation
On
September 10, 2007, the Company received a purported notice of default from certain hedge
funds which are beneficial owners purporting to hold at least 25% of the aggregate principal amount
of the Senior Subordinated Convertible Notes due 2035 (the Notes). The hedge funds alleged in
the notice that the Company was in breach of Section 4.08(a)(5) of the Indenture governing the Notes
(the Indenture) which provides for an adjustment of the conversion rate in the event of an
increase in the amount of certain cash dividends to holders of the
Companys common stock.
We believe that we made all required adjustments to the conversion rate on the Notes after we
increased the quarterly dividends paid to shareholders from $0.135 to $0.18 per share. However, to
avoid any uncertainty, we asked the Trustee to execute a Supplemental Indenture clarifying the
Companys obligations with respect to increases in quarterly dividends. The Indenture Trustee
filed an action in the Hennepin County District Court, in
14
Minneapolis, Minnesota asking the Court to determine whether it should execute the
Supplemental Indenture. In coordination with the Trustee, we filed a petition asking the Court to
determine that we properly adjusted the conversion rate on the Notes after we increased the amount
of the dividends we paid to shareholders.
The Court granted our request for a temporary restraining order, thus preventing the hedge
funds from declaring a default while the litigation was pending. The temporary restraining order
also tolled the 30 day cure period during which we could cure the alleged default should the Court
determine a default had occurred. The temporary restraining order would remain in effect until 10
days after the Court reached a decision on the underlying dispute.
On
May 30, 2008, the Hennepin County District Court issued an order
holding that the Company properly adjusted the conversion rate on the Notes after the Company increased the amount of
dividends it paid to its shareholders. The Court ordered the Trustee of the Notes to execute the
Supplemental Indenture which cured any ambiguity regarding the calculation of the conversion rate
adjustments following the Companys increase in quarterly dividends. The Court also dissolved the
Temporary Restraining Order, finding that the execution of the Supplemental Indenture obviated any
default noticed by the investors.
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 Roundys claims is 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 demand damages from Roundys in excess of $18.0 million.
On or about March 25, 2008, Roundys filed a motion for judgment on the pleadings with respect
to some, but not all, of the claims, asserted in our counterclaim. On May 27, 2008, we filed an
amended counterclaim which rendered Roundys motion moot. The amended counterclaim asserts claims
against Roundys for, among other things, breach of contract, fraud, and breach of the duty of good
faith and fair dealing. Our counterclaim demands damages from Roundys in excess of $18.0 million.
We intend to vigorously defend against Roundys complaint and to vigorously prosecute our claims
against it.
Due to uncertainties in the litigation process, the Company is unable to with certainty
estimate the financial impact or outcome of this lawsuit.
Securities and Exchange Commission Inquiry
In early 2006, we voluntarily contacted the SEC to discuss the results of an internal review
that focused on trading in our common stock by certain of our officers and directors. The Board of
Directors conducted the internal review with the assistance of outside counsel following an
informal inquiry from the SEC in November 2005 regarding such trading. We offered to provide
certain documents, and the SEC accepted the offer. We will continue to fully cooperate with the
SEC.
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.
15
ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Information and Cautionary Factors
This report contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements relate to trends and events that may affect our future financial position
and operating results. Any statement contained in this report that is not statements of historical
fact may be deemed forward-looking statements. For example, words such as may, will, should,
likely, expect, anticipate, estimate, believe, intend, potential or plan, or
comparable terminology, are intended to identify forward-looking statements. Such statements are
based upon current expectations, estimates 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 or contribute to
material differences include, but are not limited to the following:
|
|
the effect of competition on our distribution, military and retail businesses; |
|
|
general sensitivity to economic conditions, including volatility in energy prices, food
commodities and changes in market interest rates; |
|
|
our ability to identify and execute plans to expand our food distribution, military and
retail operations; |
|
|
possible changes in the military commissary system, including those stemming from the
redeployment of forces, congressional action and funding levels; |
|
|
our ability to identify and execute plans to improve the competitive position of our retail
operations; |
|
|
the success or failure of strategic plans, new business ventures or initiatives; |
|
|
|
changes in consumer buying and spending patterns; |
|
|
risks entailed by future acquisitions, including the ability to successfully integrate
acquired operations and retain the customers of those operations; |
|
|
changes in credit risk from financial accommodations extended to new or existing customers; |
|
|
significant changes in the nature of vendor promotional programs and the allocation of funds
among the programs; |
|
|
limitations on financial and operating flexibility due to debt levels and debt instrument
covenants; |
|
|
legal, governmental, legislative or administrative proceedings, disputes, or actions that
result in adverse outcomes, such as adverse determinations or developments with respect to the
litigation or Securities and Exchange Commission (SEC) inquiry discussed in Part I, Item 3
of our Annual Report on Form 10-K for the fiscal year ended December 29, 2007; |
|
|
technology failures that may have a material adverse effect on our business; |
|
|
|
severe weather and natural disasters that may impact our supply chain; |
|
|
|
changes in health care, pension and wage costs and labor relations issues; |
|
|
threats or potential threats to security or food safety; and |
|
|
unanticipated problems with product procurement. |
A more detailed discussion of many of these factors, as well as other factors, that could
affect Nash-Finch Company and our subsidiaries (Nash
Finch or the Company) results is contained in Part I, Item 1A, Risk Factors, of our Annual Report
on Form 10-K for the fiscal year ended December 29, 2007. You should carefully consider each of
these factors and all of the other information in this report. We believe that all forward-looking
statements are based upon reasonable assumptions when made. However, we caution that it is
impossible to predict actual results or outcomes and that accordingly you should not place undue
reliance on these statements. Forward-looking statements speak only as of the date when made and
we undertake no obligation to revise or update these statements in light of subsequent events or
developments. Actual results and outcomes may differ materially from anticipated results or
outcomes discussed in forward-looking statements. You are advised, however, to consult any future
disclosures we make on related subjects in future reports to the SEC.
16
Overview
In terms of revenue, we are the second largest publicly traded wholesale food distributor in
the United States serving the retail grocery industry and the military commissary and exchange
systems. Our business consists of three primary operating segments: food distribution, military
food distribution and retail.
In November 2006, we announced the launch of a new strategic plan, Operation Fresh Start,
designed to sharpen our focus and provide a strong platform to support growth initiatives. Built
upon extensive knowledge of current industry, consumer and market trends, and formulated to
differentiate the Company, the new strategy focuses activities on specific retail formats,
businesses and support services designed to delight consumers. The strategic plan encompasses
several important elements:
|
|
|
Emphasis on a suite of retail formats designed to appeal to the needs of todays
consumers including an initial focus on everyday value, Hispanic and extreme value
formats, as well as military commissaries and exchanges; |
|
|
|
|
Strong, passionate businesses in key areas including perishables, health and
wellness, center store, pharmacy and military supply, driven by the needs of each
format; |
|
|
|
|
Supply chain services focused on supporting our businesses with warehouse
management, inbound and outbound transportation management and customized solutions
for each business; |
|
|
|
|
Retail support services emphasizing best-in-class offerings in marketing,
advertising, merchandising, store design and construction, store brands, market
research, retail store support, retail pricing and license agreement opportunities; |
|
|
|
|
Store brand management dedicated to leveraging the strength of the Our Family
brand as a regional brand through exceptional product development coupled with
pricing and marketing support; and |
|
|
|
|
Integrated shared services company-wide, including IT support and
infrastructure, accounting, finance, human resources and legal. |
In addition to the strategic initiatives already in progress, our 2008 initiatives consist of
the following:
|
|
|
Invest in our retail formats, logistics capabilities and
center store systems; |
|
|
|
|
Pursue acquisitions that support our strategic plan; and |
|
|
|
|
Continue share repurchase program. |
Our food distribution segment sells and distributes a wide variety of nationally branded and
private label products to independent grocery stores and other customers primarily in the Midwest
and Southeast regions of the United States.
Our military segment contracts with manufacturers to distribute a wide variety of grocery
products to military commissaries and exchanges located primarily in the Mid-Atlantic region of the
United States, and in Europe, Puerto Rico, Cuba, the Azores and Egypt. We are the largest
distributor of grocery products to U.S. military commissaries and exchanges, with over 30 years of
experience acting as a distributor to U.S. military commissaries and exchanges.
Our retail segment operated 60 corporate-owned stores primarily in the Upper Midwest as of June 14,
2008. On April 1, 2008, we completed the acquisition of two stores located in Rapid City, SD and
Scottsbluff, NE. Primarily due to highly competitive conditions in which supercenters and other
alternative formats compete for price conscious customers, we closed or sold three retail stores in
2007 and one store in 2008. 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.
17
Results of Operations
Sales
The following tables summarize our sales activity for the 12 weeks ended June 14, 2008 (second
quarter 2008) compared to the 12 weeks ended June 16, 2007 (second quarter 2007) and the 24 weeks
ended June 14, 2008 (year-to-date 2008) compared to the 24 weeks ended June 16, 2007 (year-to-date
2007):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second quarter 2008 |
|
Second quarter 2007 |
|
Increase/(Decrease) |
|
|
|
|
|
|
Percent of |
|
|
|
|
|
Percent of |
|
|
|
|
(In thousands) |
|
Sales |
|
Sales |
|
Sales |
|
Sales |
|
$ |
|
% |
|
Segment Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food distribution |
|
$ |
600,081 |
|
|
|
57.6 |
% |
|
|
633,065 |
|
|
|
59.5 |
% |
|
|
(32,984 |
) |
|
|
(5.2 |
%) |
Military |
|
|
304,612 |
|
|
|
29.2 |
% |
|
|
290,459 |
|
|
|
27.3 |
% |
|
|
14,153 |
|
|
|
4.9 |
% |
Retail |
|
|
137,695 |
|
|
|
13.2 |
% |
|
|
140,450 |
|
|
|
13.2 |
% |
|
|
(2,755 |
) |
|
|
(2.0 |
%) |
|
|
|
|
|
|
|
Total Sales |
|
$ |
1,042,388 |
|
|
|
100.0 |
% |
|
|
1,063,974 |
|
|
|
100.0 |
% |
|
|
(21,586 |
) |
|
|
(2.0 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date 2008 |
|
Year-to-date 2007 |
|
Increase/(Decrease) |
|
|
|
|
|
|
Percent of |
|
|
|
|
|
Percent of |
|
|
|
|
(In thousands) |
|
Sales |
|
Sales |
|
Sales |
|
Sales |
|
$ |
|
% |
|
|
|
Segment Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food distribution |
|
$ |
1,194,235 |
|
|
|
57.8 |
% |
|
|
1,247,852 |
|
|
|
59.5 |
% |
|
|
(53,617 |
) |
|
|
(4.3 |
%) |
Military |
|
|
601,935 |
|
|
|
29.2 |
% |
|
|
572,265 |
|
|
|
27.3 |
% |
|
|
29,670 |
|
|
|
5.2 |
% |
Retail |
|
|
268,128 |
|
|
|
13.0 |
% |
|
|
276,100 |
|
|
|
13.2 |
% |
|
|
(7,972 |
) |
|
|
(2.9 |
%) |
|
|
|
|
|
|
|
Total Sales |
|
$ |
2,064,298 |
|
|
|
100.0 |
% |
|
|
2,096,217 |
|
|
|
100.0 |
% |
|
|
(31,919 |
) |
|
|
(1.5 |
%) |
|
|
|
|
|
|
|
The decrease in food distribution sales is attributable to the loss of a significant customer
which accounted for $34.3 and $70.5 million of additional sales in the second quarter 2007 and
year-to-date periods, respectively, versus the comparable 2008 periods. However, excluding the
impact of this customer, food distribution sales increased 0.2% and 1.4% in the second quarter 2008
and year-to-date periods, respectively, compared to the 2007 comparable periods, due primarily to
new account gains and increased comparable sales. The Easter holidays occurrence in the first
quarter 2008 versus the second quarter 2007 created an unfavorable variance in the second quarter
2008 sales of $6.4 million, or 1.1% of sales compared to last year.
Military
segment sales increased 4.9% during the second quarter 2008 and 5.2% year-to-date 2008
versus the comparable 2007 periods. The year-to-date 2008 sales increase is attributable to
increased volume of 1.8% and overall increases in commodity prices of 3.4%. The sales increases in
the second quarter 2008 reflected 7.8% stronger sales domestically and 1.2% weaker sales overseas
and the year-to-date 2008 sales increases reflected 6.5% stronger sales domestically and 2.2%
stronger sales overseas. Domestic and overseas sales represented the following percentages of
military segment sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter |
|
Year-to-date |
|
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
Domestic |
|
|
69.5 |
% |
|
|
67.6 |
% |
|
|
69.9 |
% |
|
|
69.1 |
% |
Overseas |
|
|
30.5 |
% |
|
|
32.4 |
% |
|
|
30.1 |
% |
|
|
30.9 |
% |
The decrease in retail sales for the second quarter 2008 and year-to-date periods is
attributable to the closure of four stores since the end of the second quarter 2007, partially
offset by the acquisition of two new stores in the second quarter 2008. Same store sales, which
compare retail sales for stores which were in operation for the same number of weeks in the
comparative periods, decreased 3.9% and 2.2% in the second quarter 2008 and year-to-date periods,
respectively, versus the comparable 2007 periods. The Easter
holidays occurrence in the first
quarter 2008 versus the second quarter 2007 created an unfavorable variance in the second
quarter 2008 sales of $2.3 million, or 1.7% of sales compared to last year.
18
During the second quarters of 2008 and 2007, our corporate store count changed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Second quarter |
|
|
|
Second quarter |
|
|
|
|
2008 |
|
|
|
2007 |
|
Number of stores at beginning of period |
|
|
58 |
|
|
|
62 |
|
Acquired stores |
|
|
2 |
|
|
|
|
|
Closed or sold stores |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of stores at end of period |
|
|
60 |
|
|
|
62 |
|
|
|
|
|
|
|
|
|
|
During year-to-date 2008 and 2007, our corporate store count changed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date |
|
|
|
Year-to-date |
|
|
|
|
2008 |
|
|
|
2007 |
|
Number of stores at beginning of period |
|
|
59 |
|
|
|
62 |
|
Acquired stores |
|
|
2 |
|
|
|
|
|
Closed or sold stores |
|
|
(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of stores at end of period |
|
|
60 |
|
|
|
62 |
|
|
|
|
|
|
|
|
|
|
Gross Profit
Consolidated gross profit was 9.1% of sales for the second quarter 2008 versus 9.0% for the
second quarter 2007. Our gross profit margin increased by 0.4% of sales in the second quarter 2008
relative to the comparable prior year period as a result of gains achieved from initiatives that
focused on better management of inventories and vendor relationships. However, the second quarter
2008 gross profit margin was negatively impacted by additional LIFO charges and transportation
costs of 0.2% and 0.1% of sales, respectively.
Consolidated gross profit was 9.1% of sales for year-to-date 2008 versus 8.9% for year-to-date
2007. Our gross profit margin increased by 0.5% of sales in year-to-date 2008 relative to the
comparable prior year period as a result of gains achieved from initiatives that focused on better
management of inventories and vendor relationships. However, our overall gross profit margin was
negatively affected by 0.1% of sales in year-to-date 2008 due to a sales mix shift between our
business segments between the years. This was due to a higher percentage of 2008 sales occurring
in the military segment and a lower percentage in the retail and food distribution segments which
have a higher gross profit margin. In addition, our year-to-date 2008 gross profit margin was
negatively impacted by additional LIFO charges and transportation costs of 0.1% and 0.1% of sales,
respectively.
Selling, General and Administrative Expenses
Consolidated SG&A for the second quarter 2008 were $65.0 million, or 6.2% of sales, as
compared to $65.5 million, or 6.2% of sales, for the comparable prior year period. SG&A for
year-to-date 2008 were $126.2 million, or 6.1% of sales, compared to $132.0 million, or 6.3% of
sales, for the comparable prior year period. The decrease in SG&A is primarily attributable to
decreased bad debt reserves due to improved receivable collection and the change in circumstances
related to a lease obligation that had previously been reserved.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date |
(In thousands) |
|
Segment |
|
|
2008 |
|
|
2007 |
|
|
Variance |
|
Bad debt reserves |
|
Food distribution |
|
$ |
(1,212 |
) |
|
|
873 |
|
|
|
(2,085 |
) |
Lease reserves |
|
Corporate overhead |
|
|
(1,995 |
) |
|
|
(63 |
) |
|
|
(1,932 |
) |
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
(3,207 |
) |
|
|
810 |
|
|
|
(4,017 |
) |
|
|
|
|
|
|
|
% of Sales |
|
|
|
|
|
|
(0.2% |
) |
|
|
0.0 |
% |
|
|
(0.2% |
) |
|
|
|
|
|
|
|
19
Special Charges
In the second quarter 2007, we reversed $1.6 million of previously established lease reserves
for one location after subleasing the property earlier than anticipated. We also recorded an
additional $0.3 million in charges due to revised lease commitment estimates for another property
in the second quarter 2007. There were no special charges recognized during the second quarter and
year-to-date 2008 periods.
Depreciation and Amortization Expense
Depreciation and amortization expense was $8.7 million for the second quarter 2008 compared to
$8.9 million for the comparable prior year period. Depreciation and amortization expense was
$17.7 million for year-to-date 2008 compared to $18.0 million for the comparable prior year period.
Interest Expense
Interest expense was $5.7 million for both the second quarter 2008 and 2007. Interest expense
for the second quarter 2008 included 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 decreased to $359.3 million during the second quarter 2008 from $360.9 million during the
second quarter 2007. The effective interest rate was 6.2% for the second quarter 2008 compared to
6.1% for the second quarter 2007. However, excluding the impact of the write-off of deferred
financing costs, the effective interest rate was 5.2% for the second quarter 2008.
Interest expense decreased to $10.7 million for year-to-date 2008 from $11.3 million in the
same period of 2007. Average borrowing levels decreased to $347.0 million during the year-to-date
2008 from $361.3 million during year-to-date 2007. The effective interest rate was 6.0% for
year-to-date 2008 as compared to 6.2% for year-to-date 2007. However, excluding the impact of the
write-off of deferred financing costs in the second quarter 2008, the effective interest rate was
5.4% for year-to-date 2008.
Income Taxes
Income tax expense is provided on an interim basis using managements estimate of the annual
effective rate. Our effective tax rate for the full fiscal year is subject to changes and may be
impacted by changes to nondeductible items and tax reserve requirements in relation to our
forecasts of operations, sales mix by taxing jurisdictions, or to changes in tax laws and
regulations. The effective income tax rate was 32.4% and 44.5% for the second quarter 2008 and
second quarter 2007, respectively. Year-to-date periods of 2008 and 2007 the effective tax rates
were 33.8% and 44.4% respectively.
During
the second quarter 2008, we filed claims with and received refunds from
various tax authorities. Accordingly we reported the effect of these discrete events in
the second quarter 2008. The lower effective tax rate for the quarter is the result of the
decrease in tax expense related to these discrete events. The effective rate for the second
quarter 2008 differed from statutory rates due to anticipated pre-tax income relative to certain
nondeductible expenses. We estimate the full year effective tax rate will be
approximately 37.6%. The estimated effective tax rate excludes potential discrete items arising during the remainder
of the year, such as adjustments to tax reserves or unrecognized tax benefits.
Net Earnings
Net earnings in second quarter 2008 were $10.1 million, or $0.77 per diluted share, as
compared to $9.6 million, or $0.70 per diluted share, in the second quarter 2007. Net earnings
year-to-date 2008 were $21.4 million, or $1.62 per diluted share, opposed to net earnings of $14.9
million, or $1.10 per diluted share, for the same period of the previous year.
20
Liquidity and Capital Resources
The following table summarizes our cash flow activity and should be read in conjunction with the
Consolidated Statements of Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date Ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/ |
(In thousands) |
|
June 14, 2008 |
|
June 16, 2007 |
|
(Decrease) |
|
Net cash provided by operating activities |
|
|
22,911 |
|
|
|
40,067 |
|
|
|
(17,156 |
) |
Net cash used in investing activities |
|
|
(21,163 |
) |
|
|
(3,344 |
) |
|
|
(17,819 |
) |
Net cash used by financing activities |
|
|
(1,747 |
) |
|
|
(36,347 |
) |
|
|
34,600 |
|
|
|
|
Net increase in cash and cash equivalents |
|
|
1 |
|
|
|
376 |
|
|
|
(375 |
) |
|
|
|
Cash flows from operating activities decreased $17.2 million in year-to-date 2008 as compared
to year-to-date 2007, primarily due to increased investment in inventory and a reduction in accrued
expenses. Cash provided by operating activities included the effect
of an increased investment in inventory due to inflationary increases of approximately $27.4 million in year-to-date 2008 compared to $19.5
million in the comparable prior year period. In addition, accrued expenses decreased by $10.6
million in year-to-date 2008 as compared to a reduction of $1.2 million in year-to-date 2007,
primarily due to increased bonus and profit sharing payments in 2008.
Net cash used in investing activities increased by $17.8 million in year-to-date 2008 as
compared to year-to-date 2007. The most significant factors for the year-over-year variance were
increased customer loans of $5.1 million in year-to-date 2008 as compared to $0.4 million in the
comparable prior year period and the acquisition of two new retail stores in 2008 for $6.8 million.
In addition, additions to property, plant and equipment increased to $9.9 million for year-to-date
2008 compared to $5.8 million for year-to-date 2007.
Cash used by financing activities decreased by $34.6 million in year-to-date 2008 as compared
to year-to-date 2007. The decrease in year-over-year cash used by financing activities is
primarily attributable to net borrowings under our bank credit facilities in the 2008 period
compared to net payments on bank credit facilities in the 2007 period. Proceeds of long-term and
revolving debt for year-to-date 2008 were $17.7 million as compared to payments of $25.6 million
for year-to-date 2007. This impact was offset by $14.3 million used to repurchase shares of our
common stock in year-to-date 2008.
During the remainder of fiscal 2008, we expect that cash flows 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 during the year to build inventories for certain holidays. Longer
term, we believe that cash flows from operations, short-term bank borrowing, 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.
Asset-backed Credit Facility
On April 11, 2008, we entered into our new credit facility which is an asset-backed loan
consisting of a $300.0 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 $150.0 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 either base rate or LIBOR plus a margin. The LIBOR interest rate margin currently is
2.00%, but the LIBOR interest rate margin will become adjustable after October 4, 2008. Once the
margin becomes adjustable, it 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.
21
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.
Our asset-backed 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
We also have outstanding $150.1 million in aggregate issue price (or $322.0 million in
aggregate principal amount at maturity) of senior subordinated convertible notes due in 2035. The
notes are unsecured senior subordinated obligations and rank junior to our existing and future
senior indebtedness, including borrowings under our asset-backed 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 daily at a rate
of 3.50% per year until the maturity date of the notes. See our Annual Report on Form 10-K for the
fiscal year ended December 29, 2007 for additional information.
Consolidated EBITDA (Non-GAAP Measurement)
The following is a reconciliation of EBITDA and Consolidated EBITDA to net income for the
trailing four quarters ended June 14, 2008 and June 16, 2007 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2007 |
|
|
2008 |
|
|
2008 |
|
|
Trailing |
|
Trailing four quarters ended June 14, 2008: |
|
Qtr 3 |
|
|
Qtr 4 |
|
|
Qtr 1 |
|
|
Qtr 2 |
|
|
4 Qtrs |
|
|
Net income |
|
$ |
15,405 |
|
|
|
8,480 |
|
|
|
11,277 |
|
|
|
10,108 |
|
|
|
45,270 |
|
Income tax expense |
|
|
2,832 |
|
|
|
4,016 |
|
|
|
6,087 |
|
|
|
4,838 |
|
|
|
17,773 |
|
Interest expense |
|
|
6,948 |
|
|
|
5,367 |
|
|
|
5,034 |
|
|
|
5,651 |
|
|
|
23,000 |
|
Depreciation and amortization |
|
|
11,902 |
|
|
|
8,997 |
|
|
|
9,032 |
|
|
|
8,703 |
|
|
|
38,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
37,087 |
|
|
|
26,860 |
|
|
|
31,430 |
|
|
|
29,300 |
|
|
|
124,677 |
|
LIFO charge |
|
|
1,077 |
|
|
|
2,399 |
|
|
|
1,134 |
|
|
|
2,397 |
|
|
|
7,007 |
|
Lease reserves |
|
|
614 |
|
|
|
|
|
|
|
(2,094 |
) |
|
|
99 |
|
|
|
(1,381 |
) |
Asset impairments |
|
|
640 |
|
|
|
87 |
|
|
|
395 |
|
|
|
401 |
|
|
|
1,523 |
|
Losses (gains) on sale of real estate |
|
|
|
|
|
|
(1,720 |
) |
|
|
|
|
|
|
|
|
|
|
(1,720 |
) |
Share-based compensation |
|
|
1,632 |
|
|
|
3,614 |
|
|
|
1,943 |
|
|
|
2,022 |
|
|
|
9,211 |
|
Subsequent cash payments on non-cash charges |
|
|
(918 |
) |
|
|
(1,011 |
) |
|
|
(2,184 |
) |
|
|
(612 |
) |
|
|
(4,725 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated EBITDA |
|
$ |
40,132 |
|
|
|
30,229 |
|
|
|
30,624 |
|
|
|
33,607 |
|
|
|
134,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2006 |
|
|
2007 |
|
|
2007 |
|
|
Trailing |
|
Trailing four quarters ended June 16, 2007: |
|
Qtr 3 |
|
|
Qtr 4 |
|
|
Qtr 1 |
|
|
Qtr 2 |
|
|
4 Qtrs |
|
|
Net income |
|
$ |
(4,617 |
) |
|
|
(26,368 |
) |
|
|
5,288 |
|
|
|
9,607 |
|
|
|
(16,090 |
) |
Income tax expense (benefit) |
|
|
(1,670 |
) |
|
|
1,275 |
|
|
|
4,197 |
|
|
|
7,697 |
|
|
|
11,499 |
|
Interest expense |
|
|
7,906 |
|
|
|
6,551 |
|
|
|
5,595 |
|
|
|
5,671 |
|
|
|
25,723 |
|
Depreciation and amortization |
|
|
12,685 |
|
|
|
9,447 |
|
|
|
9,082 |
|
|
|
8,901 |
|
|
|
40,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
|
14,304 |
|
|
|
(9,095 |
) |
|
|
24,162 |
|
|
|
31,876 |
|
|
|
61,247 |
|
LIFO charge |
|
|
1,590 |
|
|
|
117 |
|
|
|
808 |
|
|
|
807 |
|
|
|
3,322 |
|
Lease reserves |
|
|
4,455 |
|
|
|
2,675 |
|
|
|
(888 |
) |
|
|
825 |
|
|
|
7,067 |
|
Goodwill impairment |
|
|
|
|
|
|
26,419 |
|
|
|
|
|
|
|
|
|
|
|
26,419 |
|
Asset impairments |
|
|
2,522 |
|
|
|
4,127 |
|
|
|
866 |
|
|
|
275 |
|
|
|
7,790 |
|
Losses (gains) on sale of real estate |
|
|
25 |
|
|
|
37 |
|
|
|
|
|
|
|
(147 |
) |
|
|
(85 |
) |
Share-based compensation |
|
|
233 |
|
|
|
486 |
|
|
|
956 |
|
|
|
1,584 |
|
|
|
3,259 |
|
Subsequent cash payments on non-cash charges |
|
|
(1,862 |
) |
|
|
(686 |
) |
|
|
(700 |
) |
|
|
(663 |
) |
|
|
(3,911 |
) |
Earnings from discontinued operations, net of tax |
|
|
|
|
|
|
(160 |
) |
|
|
|
|
|
|
|
|
|
|
(160 |
) |
Special charges |
|
|
6,253 |
|
|
|
|
|
|
|
|
|
|
|
(1,282 |
) |
|
|
4,971 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated EBITDA |
|
$ |
27,520 |
|
|
|
23,920 |
|
|
|
25,204 |
|
|
|
33,275 |
|
|
|
109,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA and Consolidated EBITDA are measures used by management to measure operating
performance. EBITDA is defined as net income 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 income 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 income 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.
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.
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.
Pre-tax gains of $0.2 million and $0.5 million were recorded as a reduction to cost of sales during
the second quarter 2007 and year-to-date 2007, respectively. Our remaining commodity
swap agreement expired during the first quarter 2008 and was settled for fair market value.
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.
23
Critical Accounting Policies and Estimates
Our critical accounting policies are discussed in Part II, Item 7 of our annual report on Form
10-K for the fiscal year ended December 29, 2007, Managements Discussion and Analysis of
Financial Condition and Results of Operations under the caption Critical Accounting Policies.
There have been no material changes to these policies or the estimates used in connection therewith
during the 24 weeks ended June 14, 2008 with the exception of the following:
Goodwill
We maintain three reporting units for purposes of our Goodwill impairment testing, which are
the same as our reporting segments disclosed in Part I, Item 1
in this report under Note (11)
Segment Reporting. Goodwill for each of our reporting units is tested for impairment in
accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets, annually and/or when factors indicating impairment are present. Fair value is determined
primarily based on valuation studies performed by us, which utilize a discounted cash flow
methodology, where the discount rate reflects the weighted average cost of capital. Valuation
analysis requires significant judgments and estimates to be made by management. 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. We have either met or exceeded assumptions used in prior years goodwill impairment
models. None of the reporting units are more susceptible to economic conditions than others. The
cash flow model used to determine fair value is most sensitive to the discount rate and the EBITDA
margin rate applicable for each reporting segment as a percent of sales assumptions in the model.
For example, we performed a sensitivity analysis on both of these factors and determined that the
discount rate used could increase by a factor of 25.0% or EBITDA margin rate used could decrease
by 1.0% from the EBITDA margin rate utilized and the goodwill of our reporting segments would not be
impaired.
Recently Adopted and Proposed Accounting Standards
In May 2008, the FASB issued FASB Staff Position (FSP) APB 14-1, Accounting for Convertible
Debt and Debt Issued with Stock Purchase Warrants (FSP APB 14-1), which will impact the accounting
associated with our existing $150.1 million senior convertible notes. When adopted FSP
APB 14-1 will require us to recognize non-cash interest expense based on the market rate
for similar debt instruments without the conversion feature. Furthermore, it will require
recognizing interest expense in prior periods pursuant to retrospective accounting treatment. It is
expected that the cumulative effect upon adoption would be to record approximately $16.8 million in
pretax non-cash interest expense for prior periods and $4.0 million to $6.0 million in additional
pretax non-cash interest expense annually. FSP APB 14-1 is effective for financial statements
issued for fiscal years beginning after December 15, 2008.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring
fair value and expands disclosures about instruments recorded at fair value. SFAS 157 does not
require any new fair value measurements, but applies under other accounting pronouncements that
require or permit fair value measurements. The effective date of SFAS 157 for non-financial assets
and liabilities that are not recognized or disclosed on a recurring basis has been delayed to
fiscal years beginning after November 15, 2008. Effective
January 1, 2008, we adopted the
provisions of SFAS 157 related to financial assets and liabilities recognized or disclosed on a
recurring basis. The adoption of the effective portion of SFAS 157
had no impact on our
financial statements as we do not have any financial assets or liabilities required to
be recognized or disclosed on a recurring basis.
In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No.
48, Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109 (FIN
48). This interpretation prescribes a minimum recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or expected to be taken
in a tax return. This interpretation also provides guidance on recognition, measurement,
classification, interest and penalties, accounting in interim periods, disclosure and transition.
On December 31, 2006 we adopted the recognition and disclosure provisions of FIN 48. Please refer to Note 8 Income Taxes in the accompanying financial statements for
additional information regarding the impact of our adoption of FIN 48.
24
ITEM 3. 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. (See Part II, Item 7 of our December 29, 2007 Form 10-K and Part I, Item 2 of this report
under the caption Liquidity and Capital Resources).
ITEM 4. 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). 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.
There was no change in our internal control over financial reporting that occurred during the
period covered by this quarterly report that materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
Shareholder Litigation
On
March 11, 2008, we entered into a Stipulation of Settlement
(the Settlement Agreement) with respect to a putative securities fraud class action filed against
the Company and certain of its now former executive officers (together with the Company, the
Defendants). The Settlement Agreement was filed in the United States District Court for the
District of Minnesota (the Court) on March 11, 2008.
The complaint in this class action (the Complaint) alleges that the Defendants violated
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making misleading statements
regarding, among other things, the integration of the two distribution divisions acquired from
Roundys Supermarkets, Inc. on March 31, 2005, the
performance of our retail segment and
our financial projections.
The Defendants denied, and continue to deny, in their entirety any and all allegations of
fraud or any wrongdoing in the Complaint. Neither the Settlement Agreement nor any of its terms or
conditions, nor the Companys decision to settle the lawsuit, should be construed as an admission
or concession of any kind of the merit or truth of any of the allegations of fraud or wrongdoing in
the Complaint, or of any fault, liability or wrongdoing whatsoever on the part of any and all of
the Defendants. Nonetheless, we have concluded that it is desirable to settle the lawsuit
to avoid the costs, risks and uncertainty of further litigation and trial, and to avoid the
distraction of protracted litigation.
The Settlement Agreement provides for Court certification of a settlement class, a full
release of all claims in the Complaint by the lead plaintiff and the settlement class and a
dismissal with prejudice of all claims in the Complaint, in consideration for payment of $6.8
million into a settlement fund. Such payment has been funded in full
by our insurance
coverage.
On April 15, 2008, the Court preliminarily approved the settlement and directed notice to the
settlement class of the proposed settlement. The Court approved the settlement on July 14, 2008
and entered an order certifying the settlement and dismissed the claims in the lawsuit with
prejudice. The settlement fund, less various costs of administration and plaintiffs costs and
attorneys fees, will be distributed to the settlement class members that have filed a valid and
approved claim.
25
Senior Subordinated Convertible Notes Litigation
On
September 10, 2007, we received a purported notice of default from certain hedge
funds which are beneficial owners purporting to hold at least 25% of the aggregate principal amount
of the Senior Subordinated Convertible Notes due 2035 (the Notes). The hedge funds alleged in
the notice that we were in breach of Section 4.08(a)(5) of the Indenture governing the Notes
(the Indenture) which provides for an adjustment of the conversion rate in the event of an
increase in the amount of certain cash dividends to holders of our common stock.
We believe that we made all required adjustments to the conversion rate on the Notes after we
increased the quarterly dividends paid to shareholders from $0.135 to $0.18 per share. However, to
avoid any uncertainty, we asked the Trustee to execute a Supplemental
Indenture clarifying our obligations with respect to increases in quarterly dividends. The Indenture Trustee
filed an action in the Hennepin County District Court, in Minneapolis, Minnesota asking the Court
to determine whether it should execute the Supplemental Indenture. In coordination with the
Trustee, we filed a petition asking the Court to determine that we properly adjusted the conversion
rate on the Notes after we increased the amount of the dividends we paid to shareholders.
The Court granted our request for a temporary restraining order, thus preventing the hedge
funds from declaring a default while the litigation was pending. The temporary restraining order
also tolled the 30 day cure period during which we could cure the alleged default should the Court
determine a default had occurred. The temporary restraining order would remain in effect until 10
days after the Court reached a decision on the underlying dispute.
On
May 30, 2008, the Hennepin County District Court issued an order
holding that we
properly adjusted the conversion rate on the Notes after we increased the amount of
dividends we paid to our shareholders. The Court ordered the Trustee of the Notes to execute the
Supplemental Indenture which cured any ambiguity regarding the calculation of the conversion rate
adjustments following our increase in quarterly dividends. The Court also dissolved the
Temporary Restraining Order, finding that the execution of the Supplemental Indenture obviated any
default noticed by the investors.
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 Roundys claims is 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 demand damages from Roundys in excess of $18.0 million.
On or about March 25, 2008, Roundys filed a motion for judgment on the pleadings with respect
to some, but not all, of the claims, asserted in our counterclaim. On May 27, 2008, we filed an
amended counterclaim which rendered Roundys motion moot. The amended counterclaim asserts claims
against Roundys for, among other things, breach of contract, fraud, and breach of the duty of good
faith and fair dealing. Our counterclaim demands damages from Roundys in excess of $18.0 million.
We intend to vigorously defend against Roundys complaint and to vigorously prosecute our claims
against it.
Due
to uncertainties in the litigation process, we are unable to with certainty
estimate the financial impact or outcome of this lawsuit.
Securities and Exchange Commission Inquiry
In early 2006, we voluntarily contacted the SEC to discuss the results of an internal review
that focused on trading in our common stock by certain of our officers and directors. The Board of
Directors conducted the internal review with the assistance of outside counsel following an
informal inquiry from the SEC in November 2005 regarding such trading. We offered to provide
certain documents, and the SEC accepted the offer. We will continue to fully cooperate with the
SEC.
26
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 1A. Risk Factors
There have been no material changes in our risk factors contained in Part I, Item 1A, Risk
Factors, of our Annual Report on Form 10-K for the fiscal year ended December 29, 2007.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information about shares of common stock the Company acquired
during the second quarter 2008:
Issuer
Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) Total number |
|
|
(d) Maximum |
|
|
|
|
|
|
|
|
|
|
of shares |
|
|
number of |
|
|
|
(a) Total |
|
|
|
|
|
|
purchased as |
|
|
shares that may |
|
|
|
number of |
|
|
(b) Average |
|
|
part of publicly |
|
|
yet be purchased |
|
|
|
shares |
|
|
price paid per |
|
|
announced plans |
|
|
under plans or |
|
Period |
|
purchased (1) |
|
|
share (1) |
|
|
or programs (1) |
|
|
programs (1) |
|
Period 4 (March 23, 2008 to April 19, 2008) |
|
|
71,574 |
|
|
$ |
32.57 |
|
|
|
71,574 |
|
|
|
157,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
71,574 |
|
|
$ |
32.57 |
|
|
|
71,574 |
|
|
|
157,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
On November 13, 2007, the Company 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. The program took effect on November 19, 2007, and will continue until the earlier
of (1) the close of trading on January 3, 2009, or (2) the date that the aggregate
purchases under the repurchase program reaches 1,000,000 shares of our common stock. |
ITEM 3. Defaults upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
|
(a) |
|
The Company held its Annual Meeting of Stockholders on May 13, 2008. |
|
|
(b) |
|
Seven individuals were nominated by the Board to serve as directors for a one-year term
expiring at the 2009 Annual Meeting of Stockholders. All seven members were elected, with
the results of votes of stockholders as follows: |
|
|
|
|
|
|
|
|
|
Director Nominees |
|
Votes for |
|
|
Votes Against |
|
Robert L. Bagby |
|
|
10,158,492 |
|
|
|
1,288,966 |
|
Alec C. Covington |
|
|
11,427,904 |
|
|
|
19,554 |
|
Sam K. Duncan |
|
|
11,308,588 |
|
|
|
138,869 |
|
Mickey P. Foret |
|
|
9,923,286 |
|
|
|
1,524,172 |
|
Douglas A. Hacker |
|
|
10,170,118 |
|
|
|
1,277,340 |
|
Hawthorne L. Proctor |
|
|
11,425,883 |
|
|
|
21,575 |
|
William R. Voss |
|
|
11,409,530 |
|
|
|
37,928 |
|
27
(c) The following proposals were voted on and approved:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proposal |
|
Votes for |
|
|
Votes against |
|
|
Abstain |
|
Approval of amendment to
Restated Certificate of
Incorporation to declassify the
Board of Directors |
|
|
11,385,221 |
|
|
|
40,210 |
|
|
|
22,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approval of amendment to
Restated Certificate of
Incorporation to set number of
directors |
|
|
11,408,111 |
|
|
|
26,230 |
|
|
|
13,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approval of amendments to 2000
Stock Incentive Plan |
|
|
5,582,967 |
|
|
|
4,926,069 |
|
|
|
24,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratification of Ernst & Young
LLP as our independent
registered public accounting
firm |
|
|
11,145,578 |
|
|
|
293,276 |
|
|
|
8,603 |
|
ITEM 5. Other Information
None
28
ITEM 6. Exhibits
Exhibits filed or furnished with this Form 10-Q:
|
|
|
|
|
|
Exhibit |
|
|
|
No. |
|
Description |
|
|
|
|
|
|
3.1 |
|
Certificate of
Amendment to Restated Certificate of
Incorporation of the Company, effective May 13, 2008 |
|
|
|
|
|
|
4.1 |
|
First Supplemental Indenture to Senior Convertible Notes Due 2035 |
|
|
|
|
|
|
10.1 |
|
Nash Finch Company 2000 Stock Incentive Plan (as amended February 25, 2008) |
|
|
|
|
|
|
12.1 |
|
Calculation of Ratio of Earnings to Fixed Charges |
|
|
|
|
|
|
31.1 |
|
Rule 13a-14(a) Certification of the Chief Executive Officer |
|
|
|
|
|
|
31.2 |
|
Rule 13a-14(a) Certification of the Chief Financial Officer |
|
|
|
|
|
|
32.1 |
|
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer |
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
NASH-FINCH COMPANY
Registrant
|
|
Date: July 17, 2008 |
by /s/ Alec C. Covington
|
|
|
|
Alec C. Covington |
|
|
|
President and Chief Executive Officer |
|
|
|
|
|
Date: July 17, 2008 |
by /s/ Robert B. Dimond
|
|
|
|
Robert B. Dimond |
|
|
|
Executive Vice President and Chief Financial Officer |
|
|
30
NASH FINCH COMPANY
EXHIBIT INDEX TO QUARTERLY REPORT
ON FORM 10-Q
For the Quarter Ended June 14, 2008
|
|
|
|
|
Exhibit |
|
|
|
Method of |
No. |
|
Item |
|
Filing |
|
|
|
|
|
3.1
|
|
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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Incorporated by
reference |
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4.1
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First Supplemental Indenture to Senior Convertible Notes Due 2035
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Filed herewith |
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10.1
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Nash Finch Company 2000 Stock Incentive Plan (as amended
February 25, 2008)
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Incorporate by
reference |
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12.1
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Calculation of Ratio of Earnings to Fixed Charges
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Filed herewith |
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31.1
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Rule 13a-14(a) Certification of the Chief Executive Officer
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Filed herewith |
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31.2
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Rule 13a-14(a) Certification of the Chief Financial Officer
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Filed herewith |
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32.1
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Section 1350 Certification of Chief Executive Officer and Chief
Financial Officer
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Filed herewith |
31