e10vk
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
|
|
|
þ
|
|
ANNUAL REPORT PURSUANT TO
SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
|
For the fiscal year ended:
December 30, 2006
|
o
|
|
TRANSITION REPORT PURSUANT TO
SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
|
For the transition period
from to .
|
Commission file number: 0-785
NASH-FINCH COMPANY
(Exact name of Registrant as
specified in its charter)
|
|
|
Delaware
|
|
41-0431960
|
(State of
Incorporation)
|
|
(I.R.S. Employer Identification
No.)
|
|
|
|
7600 France Avenue South
P.O. Box 355
Minneapolis, Minnesota
|
|
55440-0355
(Zip Code)
|
(Address of principal executive
offices)
|
|
|
Registrants telephone number, including area code:
(952) 832-0534
Securities registered pursuant to Section 12(b) of the
Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
Common
Stock, par value
$1.662/3
per share
Common Stock Purchase Rights
Indicate by check mark if the Registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the Registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Securities
Exchange
Act. Yes o No þ
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months, and (2) has been subject to such filing
requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of Registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. (See definition of accelerated filer and
large accelerated filer in
Rule 12b-2
of the Securities Exchange Act).
Large accelerated
filer o Accelerated
filer þ Non-accelerated filer o
Indicate by check mark whether the Registrant is a shell company
(as defined in
Rule 12b-2
of the Securities Exchange
Act). Yes o No þ
The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of June 17, 2006 (the
last business day of the Registrants most recently
completed second fiscal quarter) was $262,470,743, based on the
last reported sale price of $19.68 on that date on NASDAQ.
As of February 26, 2007, 13,402,006 shares of Common
Stock of the Registrant were outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the Registrants definitive Proxy Statement for
its Annual Meeting of Stockholders to be held on May 15,
2007 (the 2007 Proxy Statement) are incorporated by
reference into Part III, as specifically set forth in
Part III.
Nash
Finch Company
PART I
Throughout this report, we refer to Nash-Finch Company, together
with its subsidiaries, as we, us,
Nash Finch or the Company.
Forward-Looking
Information
This report, including the information that is or will be
incorporated by reference into this report, contains
forward-looking statements that relate to trends and events that
may affect our future financial position and operating results.
Such statements are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. The
statements in this report that are not historical in nature,
particularly those that use terms such as may,
will, should, likely,
expect, anticipate,
estimate, believe or plan,
or comparable terminology, are forward-looking statements based
on current expectations and assumptions, and entail various
risks and uncertainties that could cause actual results to
differ materially from those expressed in such forward-looking
statements. Important factors known to us that could cause
material differences include the following:
|
|
|
|
|
the success or failure of strategic plans, new business ventures
or initiatives;
|
|
|
|
the effect of competition on our distribution, military and
retail businesses;
|
|
|
|
our ability to identify and execute plans to improve the
competitive position of our retail operations;
|
|
|
|
risks entailed by acquisitions, including the ability to
successfully integrate acquired operations and retain the
customers of those operations;
|
|
|
|
credit risk from financial accommodations extended to customers;
|
|
|
|
general sensitivity to economic conditions, including volatility
in energy prices and food commodities;
|
|
|
|
future changes in market interest rates;
|
|
|
|
our ability to identify and execute plans to expand our food
distribution operations;
|
|
|
|
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;
|
|
|
|
possible changes in the military commissary system, including
those stemming from the redeployment of forces, congressional
action and funding levels;
|
|
|
|
adverse determinations or developments with respect to the
litigation or SEC inquiry discussed in Part I, Item 3
of this report;
|
|
|
|
changes in consumer spending, buying patterns or food safety
concerns; and
|
|
|
|
unanticipated problems with product procurement.
|
A more detailed discussion of many of these factors is contained
in Part I, Item 1A, Risk Factors, of
this report. You should carefully consider each of these factors
and all of the other information in this report. We undertake no
obligation to revise or update publicly any forward-looking
statements. You are advised, however to consult any future
disclosures we make on related subjects in future reports to the
Securities and Exchange Commission (SEC).
Originally established in 1885 and incorporated in 1921, today
we are one of the leading food distribution companies in the
United States, with $4.6 billion in annual sales. Our
business consists of three primary operating segments: food
distribution, military food distribution and retail. We are the
second largest publicly traded wholesale food distributor in the
United States. Financial information about our business segments
for
1
the three most recent fiscal years is contained in Part II,
Item 8 of this report under Note (18)
Segment Information of Notes to Consolidated
Financial Statements.
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
todays consumers including everyday value, multicultural,
urban, extreme value and upscale 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.
|
Additional description of our business is found in Part II,
Item 7 of this report.
Food
Distribution Segment
Our food distribution segment sells and distributes a wide
variety of nationally branded and private label grocery products
and perishable food products from 16 distribution centers to
approximately 1,700 grocery stores located in 25 states
across the United States. Our customers are relatively diverse,
with the largest customer consisting of a consortium of stores
representing 8.3%, and four others representing 5.4%, 4.0%, 3.5%
and 3.0%, of our fiscal 2006 food distribution sales. No other
customer represents more than 3.0% of our food distribution
business. In fiscal 2006, 41% of our food distribution sales
were generated through customers with whom we have long-term
sales and service agreements. Several of our distribution
centers also distribute products to military commissaries and
exchanges located in their geographic areas.
On March 31, 2005, we completed the purchase from
Roundys Supermarkets, Inc. (Roundys) of
the net assets, including customer contracts, of Roundys
wholesale food distribution divisions in Westville, Indiana and
Lima, Ohio and two retail stores in Ironton, Ohio and Van Wert,
Ohio for $225.7 million. The Westville and Lima divisions
service over five hundred customers principally in Indiana,
Illinois, Ohio and Michigan.
Our distribution centers are strategically located to
efficiently serve our independent customer stores and our
corporate-owned stores. The distribution centers are equipped
with modern materials handling equipment for receiving, storing
and shipping merchandise and are designed for high-volume
operations at low unit costs. For fiscal 2006, our distribution
centers had an on-time delivery rate, defined as being within
1/2
hour of our committed delivery time, of 98.3%; a fill rate,
defined as the percentage of cases shipped relative to the
number of cases ordered, of 96.5%; and selector accuracy,
defined as percentage of cases selected matching the order as
submitted by the customer, of 99.7%. We continue to implement
operating initiatives to enhance productivity and expand
profitability while providing a higher level of service to our
distribution customers. Our distribution centers have varying
levels of available capacity giving us enough flexibility to
service additional customers by leveraging our existing fixed
cost base, which can enhance our profitability.
2
Depending upon the size of the distribution center and the
profile of the customers served, our distribution centers
typically carry a full line of national brand and private label
grocery products and perishable food products. Non-food items
and specialty grocery products are distributed from two
distribution centers located in Bellefontaine, Ohio and Sioux
Falls, South Dakota. We currently operate a fleet of tractors
and semi-trailers that deliver the majority of our products to
our customers. Approximately 25% of deliveries are made through
contracted cartage.
Our retailers order their inventory at regular intervals through
direct linkage with our information systems. Our food
distribution sales are made on a market price-plus-fee and
freight basis, with the fee based on the type of commodity and
quantity purchased. We promptly adjust our selling prices based
on the latest market information, and our freight policy
contains a fuel surcharge clause that allows us to partially
mitigate the impact of rising fuel costs.
Products
We sell and distribute primarily nationally advertised branded
products and a number of unbranded products, principally meat
and produce, which we purchase directly from various
manufacturers, processors and suppliers or through
manufacturers representatives and brokers. We also sell
and distribute premium quality private label products under the
proprietary trademark Our
Family1,
a long-standing private label of Nash Finch that offers a high
quality alternative to national brands. In addition, we sell and
distribute a lower-priced line of private label products under
the Value Choice trademark and a premium line of private
label products under the Our Family Pride trademark.
Under our private label line of products, we offer over 2,200
stock-keeping units of competitively priced, high quality
grocery products and perishable food products which compete with
national branded and other value brand products.
Services
To further strengthen our relationships with our food
distribution customers, we offer, either directly or through
third parties, a wide variety of support services to help them
develop and operate stores, as well as compete more effectively.
These services include:
|
|
|
|
|
promotional, advertising and merchandising programs;
|
|
|
|
installation of computerized ordering, receiving and scanning
systems;
|
|
|
|
providing contacts for retail accounting, budgeting and payroll
services;
|
|
|
|
retail equipment procurement assistance;
|
|
|
|
consumer and market research;
|
|
|
|
remodeling and store development services;
|
|
|
|
securing existing grocery stores that are for sale or lease in
the market areas we serve and occasionally acquiring or leasing
existing stores for resale or sublease to these
customers; and
|
|
|
|
NashNet, which provides supply chain efficiencies through
internet services.
|
We also provide financial assistance to our food distribution
customers, primarily in connection with new store development or
the upgrading and expansion of existing stores. As of
December 30, 2006, we had loans, net of reserves, of
$12.1 million outstanding to 50 of our food distribution
customers, and had guaranteed outstanding debt and lease
obligations of food distribution customers in the amount of
$8.0 million. We typically enter into long-term supply
agreements with independent customers, ranging from 2 to
20 years. In fiscal 2006, 41% of food distribution revenues
were from customers subject to such arrangements. These
1 We
own or have the rights to various trademarks, trade names and
service marks, including the following referred to in this
report:
AVANZA®,
Econofoods®,
Sun
Mart®,
Family Thrift
Center®,
Our
Family®,
Our Family
Pride®,
Fame®,
Value
Choicetm,
Food
Pride®
and Fresh
Place®.
The trademark
IGA®,
referred to in this report, is the registered trademark of IGA,
Inc.
3
agreements may also contain provisions that give us the
opportunity to purchase customers independent retail
businesses before any third party. In the normal course of
business, we also sublease retail properties and assign retail
property leases to third parties. As of December 30, 2006,
the present value of our maximum contingent liability exposure,
net of reserves, with respect to the subleases and assigned
leases was $44.0 million and $13.4 million,
respectively.
We distribute products to independent stores that carry the
IGA banner and our proprietary Food Pride banner.
We encourage our independent customers to join one of these
banner groups to receive many of the same marketing programs and
procurement efficiencies available to grocery store chains while
allowing them to maintain their flexibility and autonomy as
independents. To use either of these banners, these independents
must comply with applicable program standards. As of
December 30, 2006, we served 152 retail stores under the
IGA banner and 62 retail stores under our Food Pride
banner.
Military
Segment
Our military segment, Military Distributors of Virginia or the
MDV division, is the largest distributor by revenue of grocery
products to U.S. military commissaries and exchanges. The
MDV division serves over 200 military commissaries and exchanges
located in the continental United States, Europe, Cuba, Puerto
Rico, Egypt and the Azores. Commissaries and exchanges that we
serve in the United States are located primarily in the
Mid-Atlantic region, consisting of the states along the Atlantic
coast from New York to North Carolina. Our distribution centers
in Norfolk, Virginia and Jessup, Maryland are exclusively
dedicated to supplying products to military commissaries and
exchanges. These distribution centers are strategically located
among the largest concentration of military bases in the United
States and near Atlantic ports used to ship grocery products to
overseas commissaries and exchanges. Our MDV division has an
outstanding reputation as a supplier focused exclusively on
U.S. military commissaries and exchanges, based in large
measure on its excellent service metrics, which include fill
rate, on-time delivery and shipping accuracy.
The Defense Commissary Agency, also known as DeCA, operates a
chain of commissaries on U.S. military installations
throughout the world. DeCA contracts with manufacturers to
obtain grocery and related products for the commissary system.
Manufacturers either deliver the products to the commissaries
themselves or, more commonly, contract with distributors such as
us to deliver the product. These distributors act as drayage
agents for the manufacturers, purchasing and maintaining
inventories of products DeCA purchases from the manufacturers,
and providing handling, distribution and transportation services
for the manufacturers. Manufacturers who use distributors in
this fashion must authorize the distributors as their official
representatives to DeCA, and the distributors must adhere to
DeCA frequent delivery system procedures governing matters such
as product identification, ordering and processing, information
exchange and resolution of discrepancies. We obtain distribution
contracts with manufacturers through competitive bidding
processes and direct negotiations.
As commissaries need to be restocked, DeCA identifies each
manufacturer with which an order is to be placed for additional
products, determines which distributor is the
manufacturers official representative in a particular
region, and places a product order with that distributor under
the auspices of DeCAs master contract with the applicable
manufacturer. The distributor selects that product from its
existing inventory, delivers it to the commissary or
commissaries designated by DeCA, and bills the manufacturer for
the product shipped. The manufacturer then bills DeCA under the
terms of its master contract. Overseas commissaries are serviced
in a similar fashion, except that a distributors
responsibility is to deliver products as and when needed to the
port designated by DeCA, which in turn bears the responsibility
for shipping the product to the applicable commissary or
overseas warehouse.
After we ship a particular manufacturers products to
commissaries in response to an order from DeCA, we invoice the
manufacturer for the same purchase price previously paid by us
plus a service or drayage fee that is typically based on a
percentage of the purchase price, but may in some cases be based
on a dollar amount per case or pound of product handled.
MDVs order handling and invoicing activities are
facilitated by a procurement and billing system developed
specifically for MDV, addresses the unique aspects of its
business,
4
and provides MDVs manufacturer customers with a web-based,
interactive means of accessing critical order, inventory and
delivery information.
MDV has distribution contracts with over 400 manufacturers that
supply products to the DeCA commissary system and various
exchange systems. These contracts generally have an indefinite
term, but may be terminated by either party without cause upon
30 days prior written notice to the other party. The
contracts typically specify the commissaries and exchanges we
are to supply on behalf of the manufacturer, the
manufacturers products to be supplied, service and
delivery requirements and pricing and payment terms. The ten
largest manufacturer customers of our MDV division represented
47% of the military segments 2006 sales.
Retail
Segment
Our retail segment is made up of 62 corporate-owned stores,
located primarily in the Upper Midwest, in the states of
Colorado, Illinois, Iowa, Minnesota, Nebraska, North Dakota,
Ohio, South Dakota and Wisconsin. Our corporate-owned stores
principally operate under the Econofoods, Sun
Mart, Family Thrift Center, Pick n
Save, AVANZA, Wholesale Food Outlet and Food Bonanza
banners. Our stores are typically located close to our
distribution centers in order to create certain operating and
logistical efficiencies. As of December 30, 2006, we
operated 56 conventional supermarkets, 2 AVANZA grocery
stores, 2 Wholesale Food Outlet grocery stores, 1 Food
Bonanza grocery store and 1 other retail store.
Our conventional grocery stores offer a wide variety of high
quality grocery products and services. Many have specialty
departments such as fresh meat counters, delicatessens,
bakeries, eat-in cafes, pharmacies, dry cleaners, banks and
floral departments. These stores also provide services such as
check cashing, fax services, money wiring and phone cards. We
emphasize outstanding customer service and have created our
G.R.E.A.T. (Greet, React, Escort, Anticipate and Thank) Customer
Service Program to train every associate (employee) on the core
elements of providing exceptional customer service. A mystery
shopper visits each store every two weeks to measure performance
and we provide feedback on the results to management and store
personnel. The Fresh Place concept within our
conventional grocery stores is an umbrella banner that
emphasizes our high-quality perishable products, such as fresh
produce, deli, meats, seafood, baked goods, and takeout foods
for todays busy consumer. The AVANZA and
Wholesale Food Outlet grocery stores offer products
designed to meet the specific tastes and needs of Hispanic
shoppers.
During the period 2001 to 2006, our retail segment has declined
from 118 to 62 stores, and from 26% of our total sales to 14%,
for reasons discussed in Part II, Item 7,
Managements Discussion and Analysis of Financial
Condition and Results of Operations of this report.
Competition
Food
Distribution Segment
Competition is intense among the distributors in the food
distribution segment as evidenced by the low margin nature of
the business. Success in this segment is measured by the ability
to leverage scale in order to gain pricing advantages and
operating efficiencies, to provide superior merchandising
programs and services to the independent customer base and to
use technology to increase distribution efficiencies. We compete
with local, regional and national food distributors, as well as
with vertically-integrated national and regional chains using a
variety of formats, including supercenters, supermarkets and
warehouse clubs that purchase directly from suppliers and
self-distribute products to their stores. We face competition
from these companies on the basis of price, quality, variety and
availability of products, strength of private label brands,
schedules and reliability of deliveries, and the range and
quality of customer services. Continuing our quality service by
focusing on key metrics such as our on-time delivery rate, fill
rate, and customer satisfaction is essential in maintaining our
competitive advantage. We believe we are an industry leader in
on-time delivery rate and fill rate for fiscal 2006. In fiscal
2007 we will be substituting customer satisfaction for selector
accuracy as one of our key metrics.
5
Military
Segment
We are one of seven distributors with annual sales to the DeCA
commissary system in excess of $100 million. We estimate
that over 95% of DeCAs purchases from distributors via the
frequent delivery system are made through these seven
distributors. The remaining distributors that supply DeCA tend
to be smaller, regional and local providers. In addition,
manufacturers contract with others to deliver certain products,
such as baking supplies, produce, deli items, soft drinks and
snack items, directly to DeCA commissaries and service
exchanges. Because of the narrow margins in this industry, it is
of critical importance for distributors to achieve economies of
scale, which is typically a function of the density or
concentration of military bases within the geographic market(s)
a distributor serves, and the distributors share of that
market. As a result, no distributor in this industry has a
nationwide presence. Rather, distributors tend to concentrate on
specific regions, or areas within specific regions, where they
can achieve critical mass and utilize warehouse and distribution
facilities efficiently. In addition, distributors that operate
larger civilian distribution businesses tend to compete for DeCA
commissary business in areas where such business would enable
them to more efficiently utilize the capacity of their existing
civilian distribution centers. We believe the principal
competitive factors among distributors within this industry are
customer service, price, operating efficiencies, reputation with
DeCA and location of distribution centers. We believe our
competitive position is very strong with respect to all these
factors within the geographic areas where we compete.
Retail
Segment
Competition in the retail grocery business in our geographic
markets is intense. We compete with many organizations of
various sizes, ranging from national and regional chains that
operate a variety of formats (such as supercenters,
supermarkets, extreme value food stores and membership warehouse
club stores) to local grocery store chains and privately owned
unaffiliated grocery stores. Although our target geographic
areas have a relatively low presence of national and
multi-regional grocery store chains, we are facing increasing
competitive pressure from the expansion of supercenters,
primarily those operated by Wal-Mart Stores, Inc., and regional
chains. During 2006 and 2005, there were 2 and 14,
respectively, of our stores impacted by the opening of new
supercenters in their markets and a total of 42 stores as of
December 30, 2006 had sales impacted by supercenters.
Depending upon the market, we compete based on price, quality
and assortment, store appeal, including store location and
format, sales promotions, advertising, service and convenience.
We believe our ability to provide convenience, outstanding
perishable execution and exceptional customer service are
particularly important factors in achieving competitive success.
Vendor
Allowances and Credits
We participate with our vendors in a broad menu of promotions to
increase sales of products. These promotions fall into two main
categories, off-invoice allowances and performance-based
allowances, and are often subject to negotiation with our
vendors. In the case of off-invoice allowances, discounts are
typically offered by vendors with respect to certain merchandise
purchased by us during a specified period of time. We use
off-invoice allowances to support a variety of marketing
programs such as reduced price offerings for specific time
periods, food shows, pallet promotions and private label
promotions. The discounts are either reflected directly on the
vendor invoice, as a reduction from the normal wholesale prices
for merchandise to which the allowance applies, or we are
allowed to deduct the allowance as an offset against the
vendors invoice when it is paid.
In the case of performance-based allowances, the allowance or
rebate is based on our completion of some specific activity,
such as purchasing or selling product during a certain time
period. This basic performance requirement may be accompanied by
an additional performance requirement such as providing
advertising or special in-store promotion, tracking specific
shipments of goods to retailers, or to customers in the case of
our own retail stores, during a specified period (retail
performance allowances), slotting (adding a new item to the
system in one or more of our distribution centers) and
merchandising a new item, or achieving certain minimum purchase
quantities. The billing for these performance-based allowances
is normally in the form of a bill-back in which case
we are invoiced at the regular price with the understanding that
we may bill back the vendor for the requisite allowance when the
performance is satisfied. We also assess an administrative fee,
6
reflected on the invoices sent to vendors, to recoup our
reasonable costs of performing the tasks associated with
administering retail performance allowances.
We collectively plan promotions with our vendors and arrive at
the amount the respective vendor plans to spend on promotions
with us. Each vendor has its own method for determining the
amount of promotional funds budgeted to be spent with us during
the period. In most situations, the vendor allowances are based
on units we purchased from the vendor. In other situations, the
allowances are based on our past or anticipated purchases
and/or the
anticipated performance of the planned promotions. Forecasting
promotional expenditures is a critical part of our frequently
scheduled planning sessions with our vendors. As individual
promotions are completed and the associated billing is
processed, the vendors track our promotional program execution
and spend rate, and discuss the tracking, performance and spend
rate with us on a regular basis throughout the year, which may
be weekly, monthly, quarterly or annually. These communications
include future promotions, product cost, targeted retails and
price points, anticipated volume, promotion expenditures, vendor
maintenance, billing issues and procedures, new
items/discontinued items, and trade spend levels relative to
budget per event and per year, as well as the resolution of any
issues that arise between the vendor and us. In the future, the
nature and menu of promotional programs and the allocation of
dollars among them may change as a result of ongoing
negotiations and commercial relationships between vendors and us.
Trademarks
and Servicemarks
We own or license a number of trademarks, trade names and
servicemarks that relate to our products and services, including
those mentioned in this report. We consider certain of these
trademarks, trade names and servicemarks, such as Our Family
and Value Choice, to be of material value to the
business conducted by our food distribution and retail segments,
and we actively defend and enforce such trademarks, trade names
and servicemarks.
Employees
As of December 30, 2006, we employed 8,227 persons, of whom
4,847 were employed on a full-time basis and 3,380 employed on a
part-time basis. Of our total number of employees, 930 are
represented by unions (11.3% of all employees) and consist
primarily of warehouse personnel and drivers in our Ohio,
Indiana and Michigan distribution centers. We consider our
employee relations to be good.
Available
Information
Our internet website is www.nashfinch.com. The
references to our website in this report are inactive references
only, and the information on our website is not incorporated by
reference in this report. Through the Investor Relations portion
of our website and a link to a third-party content provider
(under the tab SEC Filings), you may access, free of
charge, our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to such reports filed or furnished pursuant to
Sections 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the
SEC. We have also posted on the Investor Relations
portion of our website, under the caption Corporate
Governance, our Code of Business Conduct that is
applicable to all our directors and employees, as well as our
Code of Ethics for Senior Financial Management that is
applicable to our Chief Executive Officer, Chief Financial
Officer and Corporate Controller. Any amendment to or waiver
from the provisions of either of these Codes that is applicable
to any of these three executive officers will be disclosed on
the Investor Relations portion of our website under
the Corporate Governance caption.
In addition to the other information in this
Form 10-K,
you should carefully consider the specific risk factors set
forth below in evaluating Nash Finch because any of the
following risks could materially affect our business, financial
condition, results of operations and future prospects. The risks
described below are not the
7
only ones we face. Additional risks and uncertainties not
currently known to us may also materially and adversely affect
us.
We
face substantial competition and our competitors may have
superior resources, which could place us at a competitive
disadvantage.
The food distribution and retail businesses are intensely
competitive, characterized by high inventory turnover, narrow
profit margins and increasing consolidation. Our food
distribution business competes not only with local, regional and
national food distributors, but also with vertically integrated
national and regional chains that employ a variety of formats,
including supercenters, supermarkets and warehouse clubs. Our
retail business, focused in the Upper Midwest, has historically
competed with traditional grocery stores and is increasingly
competing with alternative store formats such as supercenters
(primarily those operated by
Wal-Mart),
warehouse clubs, dollar stores and extreme value food stores.
The military food distribution business is also highly
competitive. Because of the narrow margins in the military food
distribution industry, it is of critical importance for
distributors to achieve economies of scale, which is typically a
function of the density or concentration of military bases in
the geographic markets a distributor serves and a
distributors share of that market. As a result, no
distributor in this industry has a nationwide presence and it is
very difficult, other than through acquisitions, to expand
operations in this industry beyond the geographic regions where
we currently can utilize our warehouse and distribution
capacity. We face competition in our military business from
large national and regional food distributors as well as smaller
food distributors.
Some of our competitors are substantially larger and may have
greater financial resources and geographic scope, lower
merchandise acquisition costs and lower operating expenses than
we do, intensifying price competition at the wholesale and
retail levels. Industry consolidation and the expansion of
alternative store formats, which have gained and continue to
gain market share at the expense of traditional grocery stores,
tend to produce even stronger competition for our food retail
business and for the independent customers of our distribution
business. To the extent our independent customers are acquired
by our competitors or are not successful in competing with other
retail chains and non-traditional competitors, sales by our
distribution business will also be affected. If we fail to
effectively implement strategies to respond to these competitive
pressures, our operating results could be adversely affected by
price reductions, decreased sales or margins, or loss of market
share.
Our
results of operations and financial condition could be adversely
affected if we are unable to improve the competitive position of
our retail operations.
Our retail food business faces extreme competition from regional
and national chains operating under a variety of formats that
devote square footage to selling food (i.e., supercenters,
supermarkets, extreme value stores, membership warehouse clubs,
dollar stores, drug stores, convenience stores, various formats
selling prepared foods, and other specialty and discount
retailers), as well as from independent food store operators in
the markets where we have retail operations. During fiscal 2006
we announced new strategic initiatives designed to provide steps
to creating value within our organization. These steps include
designing and reformatting our base of retail stores into
alternative formats to increase overall retail sales
performance. In connection with these efforts, there are
numerous risks and uncertainties, including our ability to
successfully identify which course of action will be most
financially advantageous for each retail store, our ability to
identify those initiatives that will be the most effective in
improving the competitive position of the retail stores we
retain, our ability to efficiently and timely implement these
initiatives, and the response of competitors to these
initiatives. If we are unable to improve the overall competitive
position of our remaining retail stores the operating
performance of that segment may continue to decline and we may
need to recognize additional impairments of our long-lived
assets and goodwill, be compelled to close or dispose of
additional stores and may incur restructuring or other charges
to our earnings associated with such closure and disposition
activities. In addition, we cannot assure you that we will be
able to replace any of the revenue lost from these closed or
sold stores from our other operations.
8
Our
ability to operate effectively could be impaired by the risks
and costs associated with the efforts to grow our business
through acquisitions.
Efforts to grow our food distribution segment may include
acquisitions. Acquisitions entail various risks such as
identifying suitable candidates, effecting acquisitions at
acceptable rates of return, obtaining adequate financing and
acceptable terms and conditions. Our success depends in a large
part on factors such as our ability to successfully integrate
such operations and personnel in a timely and efficient manner
and retain the customer base of the acquired operations. If we
cannot successfully integrate these operations and retain the
customer base, we may experience material adverse consequences
to our results of operations and financial condition. The
integration of separately managed businesses operating in
different markets involves a number of risks, including the
following:
|
|
|
|
|
demands on management related to the significant increase in our
size after the acquisition of operations;
|
|
|
|
difficulties in the assimilation of different corporate cultures
and business practices, such as those involving vendor
promotions, and of geographically dispersed personnel and
operations;
|
|
|
|
difficulties in the integration of departments, information
technology systems, operating methods, technologies, books and
records and procedures, as well as in maintaining uniform
standards and controls, including internal accounting controls,
procedures and policies; and
|
|
|
|
expenses of any undisclosed liabilities, such as those involving
environmental or legal matters.
|
Successful integration of new operations will depend on our
ability to manage those operations, fully assimilate the
operations into our distribution network, realize opportunities
for revenue growth presented by strengthened product offerings
and expanded geographic market coverage, maintain the customer
base and eliminate redundant and excess costs. We may not
realize the anticipated benefits or savings from an acquisition
to the extent or in the time frame anticipated, if at all, or
such benefits and savings may include higher costs than
anticipated.
Substantial
operating losses may occur if the customers to whom we extend
credit or for whom we guarantee loan or lease obligations fail
to repay us.
In the ordinary course of business, we extend credit, including
loans, to our food distribution customers, and provide financial
assistance to some customers by guaranteeing their loan or lease
obligations. We also lease store sites for sublease to
independent retailers. Generally, our loans and other financial
accommodations are extended to small businesses that are unrated
and may have limited access to conventional financing. As of
December 30, 2006 we had loans, net of reserves of
$12.1 million outstanding to 50 of our food distribution
customers and had guaranteed outstanding debt and lease
obligations of food distribution customers totaling
$8.0 million, including $3.0 million in loan
guarantees to one retailer. In the normal course of business, we
also sublease retail properties and assign retail property
leases to third parties. As of December 30, 2006, the
present value of our maximum contingent liability exposure, net
of reserves, with respect to subleases and assigned leases was
$44.0 million and $13.4 million, respectively. While
we seek to obtain security interests and other credit support in
connection with the financial accommodations we extend, such
collateral may not be sufficient to cover our exposure. Greater
than expected losses from existing or future credit extensions,
loans, guarantee commitments or sublease arrangements, which
could result from factors such as business difficulties
experienced by customers with the highest concentration of
credit exposure or in times of general economic difficulty or
uncertainty, could negatively and potentially materially impact
our operating results and financial condition.
Consumable
goods distribution is sensitive to economic conditions and
economic downturns or uncertainty may have a material adverse
effect on our financial condition and results of
operations.
The food distribution and retail industry is sensitive to
national and regional economic conditions, particularly those
that influence consumer confidence, spending and buying habits.
Economic downturns or uncertainty may not only adversely affect
overall demand and intensify price competition, but also cause
9
consumers to trade down by purchasing lower priced,
and often lower margin, items and to make fewer purchases in
traditional supermarket channels. These consumer responses,
coupled with the impact of general economic and other factors
such as increasingly volatile energy costs, food safety,
prevailing interest rates, food price inflation or deflation,
employment trends in our markets, and labor and energy costs,
can also have a significant impact on our operating results.
Increasing volatility in financial markets may cause these
factors to change with a greater degree of frequency and
magnitude.
We may
experience technology failures which could have a material
adverse effect on our business.
We have large, complex information technology systems that are
important to our business operations. Although we have an
off-site disaster recovery center and have installed security
programs and procedures, security could be compromised and
technology failures and systems disruptions could occur. This
could result in a loss of sales or profits or cause us to incur
significant costs, including payments to third parties for
damages.
Our
distribution business could be negatively affected if we fail to
retain existing customers or attract significant numbers of new
customers.
Increasing the growth and profitability of our distribution
business is dependent in large measure upon our ability to
retain existing customers and capture additional distribution
customers through our existing network of distribution centers,
enabling us to more effectively utilize the fixed assets in that
business. Our ability to achieve these goals is dependent, in
part, upon our ability to continue to provide a high level of
customer service, offer competitive products at low prices,
maintain high levels of productivity and efficiency,
particularly in the process of integrating new customers into
our distribution system, and offer marketing, merchandising and
ancillary services that provide value to our independent
customers. If we are unable to execute these tasks effectively,
we may not be able to attract significant numbers of new
customers and attrition among our existing customer base could
increase, either or both of which could have an adverse impact
on our revenue and profitability.
Changes
in vendor promotions or allowances, including the way vendors
target their promotional spending, and our ability to
effectively manage these programs could significantly impact our
margins and profitability.
We engage in a wide variety of promotional programs
cooperatively with our vendors. The nature of these programs and
the allocation of dollars among them evolve over time as the
parties assess the results of specific promotions and plan for
future promotions. These programs require careful management in
order for us to maintain or improve margins while at the same
time driving sales for us and for the vendors. A reduction in
overall promotional spending or a shift in promotional spending
away from certain types of promotions that we have historically
utilized could have a significant impact on our gross profit
margin and profitability. Our ability to anticipate and react to
changes in promotional spending by, among other things, planning
and implementing alternative programs that are expected to be
mutually beneficial to the manufacturers and us, will be an
important factor in maintaining or improving margins and
profitability. If we are unable to effectively manage these
programs, it could have a material adverse effect on our results
of operations and financial condition.
Our
debt instruments include financial and other covenants that
limit our operating flexibility and that may affect our future
business strategies and operating results.
Covenants in the documents governing our outstanding or future
debt, including our senior secured credit facility, or our
future debt levels, could limit our operating and financial
flexibility. Our ability to respond to market conditions and
opportunities as well as capital needs could be constrained by
the degree to which we are leveraged, by changes in the
availability or cost of capital, and by contractual limitations
on the degree to which we may, without the consent of our
lenders, take actions such as engaging in mergers, acquisitions
or divestitures, incurring additional debt, making capital
expenditures and making investments, loans or advances. If needs
or opportunities were identified that would require financial
resources beyond existing resources,
10
obtaining those resources could increase our borrowing costs,
further reduce financial flexibility, require alterations in
strategies and affect future operating results.
Our
military segment operations are dependant upon domestic and
international military distribution, and a change in the
military commissary system could negatively impact our results
of operations and financial condition.
Because our military segment sells and distributes grocery
products to military commissaries and exchanges in the U.S. and
overseas, any material changes in the commissary system, in
military staffing levels or in locations of bases may have a
corresponding impact on the sales and operating performance of
this segment. These changes could include privatization of some
or all of the military commissary system, relocation or
consolidation in the number of commissaries and exchanges, base
closings, troop redeployments or consolidations in the
geographic areas containing commissaries and exchanges served by
us, or a reduction in the number of persons having access to the
commissaries and exchanges.
We may
not be able to achieve the expected benefits from the
implementation of new strategic initiatives.
We have begun taking action to improve our competitive
performance through a series of strategic initiatives. The goal
of this effort is to develop and implement a comprehensive and
competitive business strategy, addressing the food distribution
industry environment and our position within the industry and
ultimately create increased shareholder value.
We may not be able to successfully execute our strategic
initiatives and realize the intended synergies, business
opportunities and growth prospects. Many of the risk factors
previously mentioned, such as increased competition, may limit
our ability to capitalize on business opportunities and expand
our business. Our efforts to capitalize on business
opportunities may not bring the intended result. Assumptions
underlying estimates of expected revenue growth or overall cost
savings may not be met or economic conditions may deteriorate.
Customer acceptance of new retail formats developed may not be
as anticipated, hampering our ability to attract new retail
customers or maintain our existing retail customer base.
Additionally, our management may have its attention diverted
from other important activities while trying to execute new
strategic initiatives. If these or other factors limit our
ability to execute our strategic initiatives, our expectations
of future results of operations, including expected revenue
growth and cost savings, may not be met.
The foregoing discussion of risk factors is not exhaustive, and
we do not undertake to revise any forward-looking statement to
reflect events or circumstances that occur after the date the
statement is made.
|
|
ITEM 1B.
|
UNRESOLVED
STAFF COMMENTS
|
Not applicable.
Our principal executive offices are located in Minneapolis,
Minnesota, and consist of approximately 126,000 square feet
of office space in a building that we own.
11
Food
Distribution Segment
The table below lists, as of December 30, 2006, the
locations and sizes of our distribution centers primarily used
in our food distribution operations. Unless otherwise indicated,
we own each of these distribution centers.
|
|
|
|
|
|
|
Approx. Size
|
|
Location
|
|
(Square Feet)
|
|
|
Midwest Region:
|
|
|
|
|
Omaha, Nebraska
|
|
|
626,900
|
|
Cedar Rapids, Iowa
|
|
|
351,900
|
|
St. Cloud, Minnesota
|
|
|
329,000
|
|
Sioux Falls, South Dakota (2)
|
|
|
297,400
|
|
Fargo, North Dakota
|
|
|
288,800
|
|
Rapid City, South Dakota (3)
|
|
|
195,100
|
|
Minot, North Dakota
|
|
|
185,200
|
|
Southeast Region:
|
|
|
|
|
Lumberton, North Carolina (1)
|
|
|
336,500
|
|
Statesboro, Georgia (1)
|
|
|
230,500
|
|
Bluefield, Virginia
|
|
|
187,500
|
|
Great Lakes Region:
|
|
|
|
|
Bellefontaine, Ohio
|
|
|
666,000
|
|
Lima, Ohio (4)
|
|
|
608,300
|
|
Bridgeport, Michigan (1)
|
|
|
604,500
|
|
Westville, Indiana
|
|
|
631,900
|
|
Cincinnati, Ohio
|
|
|
403,300
|
|
|
|
|
|
|
Total Square Footage
|
|
|
5,942,800
|
|
|
|
|
|
|
|
|
|
(1) |
|
Leased facility. |
|
(2) |
|
Includes 101,300 square feet that we lease. The Sioux Falls
facility represents two distinct distribution centers. |
|
(3) |
|
Includes 8,000 square feet that we lease. |
|
(4) |
|
Includes 94,000 square feet that we lease. |
Military
Segment
The table below lists, as of December 30, 2006, the
locations and sizes of our facilities exclusively used in our
military distribution business. We lease each of these
facilities. The Norfolk facilities comprise our distribution
center, while the Jessup facility is used as an intermediate
holding area for high velocity and large cube products to be
delivered to commissaries and exchanges in the northern portion
of the Mid-Atlantic region that we serve.
|
|
|
|
|
|
|
Approx. Size
|
|
Location
|
|
(Square Feet)
|
|
|
Norfolk, Virginia
|
|
|
733,200
|
|
Jessup, Maryland
|
|
|
115,200
|
|
|
|
|
|
|
Total Square Footage
|
|
|
848,400
|
|
|
|
|
|
|
12
Retail
Segment
The table below sets forth, as of December 30, 2006,
selected information regarding our 62 corporate-owned stores. We
own the facilities of 26 of these stores and lease the
facilities of 36 of these stores.
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Areas
|
|
Average
|
|
Banner
|
|
of Stores
|
|
|
of Operation
|
|
Square Feet
|
|
|
Econofoods
|
|
|
26
|
|
|
IA, IL, MN, SD, WI
|
|
|
35,886
|
|
Sun Mart
|
|
|
24
|
|
|
CO, MN, NE, ND
|
|
|
34,487
|
|
Family Thrift Center
|
|
|
4
|
|
|
SD
|
|
|
37,890
|
|
AVANZA
|
|
|
2
|
|
|
CO
|
|
|
29,339
|
|
Wholesale Food Outlet
|
|
|
2
|
|
|
CO, IA
|
|
|
31,570
|
|
Pickn Save
|
|
|
2
|
|
|
OH
|
|
|
49,239
|
|
Food Bonanza
|
|
|
1
|
|
|
NE
|
|
|
23,211
|
|
Other Stores
|
|
|
1
|
|
|
MN
|
|
|
3,512
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
62
|
|
|
|
|
|
|
|
The average square footage excludes the square footage
associated with four Company-owned pharmacies. As of
December 30, 2006, the aggregate square footage of our 62
retail grocery stores totaled 2,159,309 square feet.
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
Shareholder
Litigation
On December 19, 2005 and January 4, 2006, two
purported class action lawsuits were filed against us and
certain of our executive officers in the United States District
Court for the District of Minnesota on behalf of purchasers of
Nash Finch common stock during the period from February 24,
2005, the date we announced an agreement to acquire two
distribution divisions from Roundys, through
October 20, 2005, the date we announced a downward revision
to our earnings outlook for fiscal 2005. One of the complaints
was voluntarily dismissed on March 3, 2006 and a
consolidated complaint was filed on June 30, 2006. The
consolidated complaint alleges that the defendants violated the
Securities Exchange Act of 1934 by issuing false statements
regarding, among other things, the integration of the
distribution divisions acquired from Roundys, the
performance of our core businesses, our internal controls and
our financial projections, so as to artificially inflate the
price of our common stock. The defendants filed a joint motion
to dismiss the consolidated complaint, which the Court has taken
under advisement. We intend to vigorously defend against the
consolidated complaint. No damages have been specified. We are
unable to evaluate the likelihood of prevailing in this case at
this early stage of the proceedings, but do not believe the
eventual outcome will have a material impact on our financial
position or results of operations.
Securities
and Exchange Commission Inquiry
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.
13
|
|
ITEM 4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
EXECUTIVE
OFFICERS OF THE REGISTRANT
The following table sets forth information about our executive
officers as of February 26, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year First Elected
|
|
|
|
|
|
|
or Appointed as an
|
|
|
Name
|
|
Age
|
|
Executive Officer
|
|
Title
|
|
Alec C. Covington
|
|
|
50
|
|
|
|
2006
|
|
|
President and Chief Executive
Officer
|
Christopher A. Brown
|
|
|
44
|
|
|
|
2006
|
|
|
Executive Vice President, Food
Distribution
|
Edward L. Brunot
|
|
|
43
|
|
|
|
2006
|
|
|
Senior Vice President, Military
|
Robert B. Dimond
|
|
|
45
|
|
|
|
2007
|
|
|
Chief Financial Officer, Executive
Vice President and Treasurer
|
Kathleen M. Mahoney
|
|
|
52
|
|
|
|
2006
|
|
|
Senior Vice President, Secretary
and General Counsel
|
Jeffrey E. Poore
|
|
|
48
|
|
|
|
2001
|
|
|
Executive Vice President, Supply
Chain Management
|
Calvin S. Sihilling
|
|
|
57
|
|
|
|
2006
|
|
|
Executive Vice President and Chief
Information Officer
|
There are no family relationships between or among any of our
executive officers or directors. Our executive officers are
elected by the Board of Directors for one-year terms after
initial election, commencing with their election at the first
meeting of the Board of Directors immediately following the
annual meeting of stockholders and continuing until the next
such meeting of the Board of Directors.
Alec C. Covington has been our President and Chief
Executive Officer and a Director since May 2006.
Mr. Covington served as President and Chief Executive
Officer of Tree of Life, Inc., a marketer and distributor of
natural and specialty foods, from February 2004 to May 2006, and
for the same period as a member of the Executive Board of Tree
of Lifes parent corporation, Royal Wessanen nv, a
multi-national food corporation based in the Netherlands. From
April 2001 to February 2004, he was Chief Executive Officer of
AmeriCold Logistics, LLC, a provider of supply chain solutions
in the consumer packaged goods industry. Prior to that time,
Mr. Covington served as President of Richfood Inc., a
regional food distributor.
Christopher A. Brown has served as our Executive Vice
President, Food Distribution since November 2006. Prior to that
time, he served for three years as CEO of SimonDelivers, Inc., a
leading Minnesota-based online grocery delivery company. Prior
to joining SimonDelivers, Mr. Brown was the Executive Vice
President, Merchandising at Nash Finch from October 1999 to
September 2003 and responsible for all merchandising,
procurement, marketing, category management and advertising.
During the nine years prior to serving Nash Finch, he held
various management positions of increasing responsibility at
Richfood Holdings, Inc. Mr. Brown holds a BSBA degree from
Winona State University.
Edward L. Brunot has served as our Senior Vice President,
Military since July 2006. Prior to coming to Nash Finch,
Mr. Brunots extensive industry experience includes
three years at AmeriCold Logistics, LLC where he most recently
served as Senior Vice President, Operations. He also served as a
Captain in the United States Army and is a graduate of the
United States Military Academy, West Point.
Robert B. Dimond returned as our Executive Vice
President, Chief Financial Officer and Treasurer in January
2007. He previously served as Chief Financial Officer and Senior
Vice President of Wild Oats Markets, Inc., a leading national
natural and organic foods retailer, from April 2005 to December
2006. From January 2005 through March 2005, Mr. Dimond
served as Executive Vice President and Chief Financial Officer
of The Penn Traffic Company, a food retailer in the eastern
United States, in connection with its
14
emergence from bankruptcy proceedings. Prior to that, he served
as our Executive Vice President, Treasurer and Chief Financial
Officer from May 2002 to November 2004 and as our Chief
Financial Officer and Senior Vice President from September 2000
to May 2002. He previously served as Group Vice President and
Chief Financial Officer for the western region of Kroger
Company, a grocery retailer, from March 1999 to September 2000.
From February 1992 until March 1999, he served as Group Vice
President, Administration and Controller, for Smiths
Food & Drug Centers, Inc., a grocery retailer.
Mr. Dimond holds a BS degree in accounting from the
University of Utah and is a Certified Public Accountant.
Kathleen M. Mahoney has served as our Senior Vice
President, Secretary and General Counsel since July 2006.
Ms. Mahoney joined Nash Finch as Vice President, Deputy
General Counsel in November of 2004, most recently as interim
Secretary and General Counsel. Prior to working at Nash Finch,
she was the Managing Partner in the St. Paul office of Larson
King, LLP from July 2002 to November 2004. Previously, she spent
13 years with the law firm of Oppenheimer, Wolff &
Donnelly, LLP, where she served in a number of capacities
including Managing Partner of their St. Paul office, Chair
of the Labor and Employment Practice Group and Chair of the EEO
Committee. Ms. Mahoney also served as Special Assistant
Attorney General in the Minnesota Attorney Generals office
for six years. Ms. Mahoney earned her JD degree from
Syracuse University College of Law and a BA from Keene State
College.
Jeffrey E. Poore has served as our Executive Vice
President, Supply Chain Management since July 2006. He
previously served as our Senior Vice President, Military from
July 2004 to July 2006 and as our Vice President, Distribution
and Logistics from May 2001 to July 2004. Prior to joining Nash
Finch, Mr. Poore served in various positions with Supervalu
Inc., a food wholesaler and retailer, most recently as Vice
President, Logistics from January 1999 to April 2001. Before
that, Mr. Poore held various distribution and logistics
roles with Computer Sciences Corporation, Hills Department
Stores, Payless Shoe Stores and Payless Cashways. Mr. Poore
holds a BA from Loyola Marymount University.
Calvin S. Sihilling has served as our Executive Vice
President and Chief Information Officer since August 2006.
Mr. Sihilling previously served as Chief Information
Officer for AmeriCold Logistics from August 2001 to January
2006, where he was responsible for the oversight of Information
Technology, Transportation, Project Support, and the National
Service Center. Before that, Mr. Sihilling was CIO of the
Eastern Region of Richfood Holdings, Inc. / SuperValu
Inc. from August 1998 to August 2001. Prior to that,
Mr. Sihilling held various leadership positions at such
companies as Alex Lee, Inc., PepsiCo Food Systems,
Dr. Pepper Company and Electronic Data Systems.
Mr. Sihilling holds a BS from the Northrup Institute of
Technology.
15
PART II
|
|
ITEM 5.
|
MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Our common stock is quoted on the NASDAQ Global Select Market
and currently trades under the symbol NAFC. The following table
sets forth, for each of the calendar periods indicated, the
range of high and low closing sales prices for our common stock
as reported by the NASDAQ Global Select Market, and the
quarterly cash dividends paid per share of common stock. At
February 26, 2007, there were 2,404 stockholders of record.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
|
2006
|
|
|
2005
|
|
|
Per Share
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
2006
|
|
|
2005
|
|
|
First Quarter
|
|
$
|
31.74
|
|
|
$
|
24.99
|
|
|
$
|
44.00
|
|
|
$
|
35.27
|
|
|
$
|
0.180
|
|
|
$
|
0.135
|
|
Second Quarter
|
|
|
30.52
|
|
|
|
19.42
|
|
|
|
39.59
|
|
|
|
33.89
|
|
|
|
0.180
|
|
|
|
0.180
|
|
Third Quarter
|
|
|
24.86
|
|
|
|
19.56
|
|
|
|
43.90
|
|
|
|
36.40
|
|
|
|
0.180
|
|
|
|
0.180
|
|
Fourth Quarter
|
|
|
27.90
|
|
|
|
24.06
|
|
|
|
42.85
|
|
|
|
24.83
|
|
|
|
0.180
|
|
|
|
0.180
|
|
On February 27, 2007, the Nash Finch Board of Directors
declared a cash dividend of $0.18 per common share, payable
on March 30, 2007 to stockholders of record as of
March 16, 2007.
The following table summarizes purchases of Nash Finch common
stock by the trustee of the Nash Finch Company Deferred
Compensation Plans Trust during the fourth quarter 2006.
All such purchases reflect the reinvestment by the trustee of
dividends paid during the fourth quarter of 2006 on shares of
our common stock held in the Trust in accordance with the
requirements of the trust agreement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d)
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
Maximum Number
|
|
|
|
(a)
|
|
|
|
|
|
Total Number of
|
|
|
(or Approximate
|
|
|
|
Total
|
|
|
(b)
|
|
|
Shares Purchased
|
|
|
Dollar Value) of
|
|
|
|
Number
|
|
|
Average Price
|
|
|
as Part of Publicly
|
|
|
Shares that may Yet
|
|
|
|
of Shares
|
|
|
Paid per
|
|
|
Announced Plans
|
|
|
be Purchased Under
|
|
Period
|
|
Purchased
|
|
|
Share
|
|
|
or Programs
|
|
|
Plans or Programs
|
|
|
Period 11 (October 8 to
November 4, 2006)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period 12 (November 5 to
December 2, 2006)
|
|
|
899
|
|
|
$
|
26.10
|
|
|
|
(*
|
)
|
|
|
(*
|
)
|
Period 13 (December 3 to
December 30, 2006)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
899
|
|
|
$
|
26.10
|
|
|
|
(*
|
)
|
|
|
(*
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) |
|
The Nash Finch Company Deferred Compensation Plans
Trust Agreement requires that dividends paid on Company
common stock held in the Trust be reinvested in additional
shares of such common stock. |
16
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
NASH
FINCH COMPANY AND SUBSIDIARIES
Consolidated Summary of Operations
Five years ended December 30, 2006 (not covered by
Independent Auditors Report)
(Dollar amounts in thousands except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005 (1)
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
(53 Weeks)
|
|
|
(52 Weeks)
|
|
|
Sales
|
|
$
|
4,631,629
|
|
|
|
4,555,507
|
|
|
|
3,897,074
|
|
|
|
3,971,502
|
|
|
|
3,874,672
|
|
Cost of sales
|
|
|
4,229,807
|
|
|
|
4,124,344
|
|
|
|
3,474,329
|
|
|
|
3,516,460
|
|
|
|
3,408,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
401,822
|
|
|
|
431,163
|
|
|
|
422,745
|
|
|
|
455,042
|
|
|
|
466,263
|
|
Selling, general and administrative
|
|
|
319,678
|
|
|
|
300,837
|
|
|
|
299,727
|
|
|
|
326,716
|
|
|
|
350,305
|
|
Gains on sale of real estate
|
|
|
(1,130
|
)
|
|
|
(3,697
|
)
|
|
|
(5,586
|
)
|
|
|
(748
|
)
|
|
|
(3,826
|
)
|
Special charges
|
|
|
6,253
|
|
|
|
(1,296
|
)
|
|
|
34,779
|
|
|
|
|
|
|
|
(765
|
)
|
Goodwill impairment
|
|
|
26,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
7,204
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
41,451
|
|
|
|
43,721
|
|
|
|
40,241
|
|
|
|
42,412
|
|
|
|
39,988
|
|
Interest expense
|
|
|
26,644
|
|
|
|
24,732
|
|
|
|
27,181
|
|
|
|
34,729
|
|
|
|
30,429
|
|
Income tax expense
|
|
|
5,835
|
|
|
|
25,670
|
|
|
|
4,322
|
|
|
|
17,254
|
|
|
|
19,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing
operations
|
|
|
(23,328
|
)
|
|
|
41,196
|
|
|
|
14,877
|
|
|
|
34,679
|
|
|
|
30,580
|
|
Net earnings from discontinued
operations
|
|
|
160
|
|
|
|
56
|
|
|
|
55
|
|
|
|
413
|
|
|
|
|
|
Cumulative effect of change in
accounting principle, net of income tax (2)
|
|
|
169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,960
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(22,999
|
)
|
|
|
41,252
|
|
|
|
14,932
|
|
|
|
35,092
|
|
|
|
23,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(1.74
|
)
|
|
|
3.19
|
|
|
|
1.20
|
|
|
|
2.87
|
|
|
|
2.59
|
|
Discontinued operations
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
0.03
|
|
|
|
|
|
Cumulative effect of change in
accounting principle (2)
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.59
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
(1.72
|
)
|
|
|
3.19
|
|
|
|
1.20
|
|
|
|
2.90
|
|
|
|
2.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(1.74
|
)
|
|
|
3.13
|
|
|
|
1.18
|
|
|
|
2.85
|
|
|
|
2.52
|
|
Discontinued operations
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
0.03
|
|
|
|
|
|
Cumulative effect of change in
accounting principle (2)
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extraordinary change from early
extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.57
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
$
|
(1.72
|
)
|
|
|
3.13
|
|
|
|
1.18
|
|
|
|
2.88
|
|
|
|
1.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per common
share
|
|
$
|
0.72
|
|
|
|
0.675
|
|
|
|
0.54
|
|
|
|
0.36
|
|
|
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax earnings (loss) from
continuing operations as a percent of sales
|
|
|
(0.38
|
%)
|
|
|
1.47
|
%
|
|
|
0.49
|
%
|
|
|
1.31
|
%
|
|
|
1.29
|
%
|
Net earnings (loss) as a percent of
sales
|
|
|
(0.50
|
%)
|
|
|
0.91
|
%
|
|
|
0.38
|
%
|
|
|
0.88
|
%
|
|
|
0.61
|
%
|
Effective income tax rate
|
|
|
33.4
|
%
|
|
|
38.4
|
%
|
|
|
22.5
|
%
|
|
|
33.2
|
%
|
|
|
39.0
|
%
|
Current assets
|
|
$
|
457,053
|
|
|
|
512,207
|
|
|
|
400,587
|
|
|
|
415,810
|
|
|
|
468,281
|
|
Current liabilities
|
|
$
|
278,222
|
|
|
|
325,859
|
|
|
|
280,162
|
|
|
|
284,752
|
|
|
|
309,256
|
|
Net working capital
|
|
$
|
178,831
|
|
|
|
186,348
|
|
|
|
120,425
|
|
|
|
131,058
|
|
|
|
159,025
|
|
Ratio of current assets to current
liabilities
|
|
|
1.64
|
|
|
|
1.57
|
|
|
|
1.43
|
|
|
|
1.46
|
|
|
|
1.51
|
|
Total assets
|
|
$
|
954,303
|
|
|
|
1,077,424
|
|
|
|
815,628
|
|
|
|
886,352
|
|
|
|
947,922
|
|
Capital expenditures
|
|
$
|
27,469
|
|
|
|
24,638
|
|
|
|
22,327
|
|
|
|
40,728
|
|
|
|
52,605
|
|
Long-term obligations (long-term
debt and capitalized lease obligations)
|
|
$
|
347,854
|
|
|
|
407,659
|
|
|
|
239,603
|
|
|
|
326,583
|
|
|
|
405,376
|
|
Stockholders equity
|
|
$
|
294,380
|
|
|
|
322,578
|
|
|
|
273,928
|
|
|
|
256,457
|
|
|
|
221,479
|
|
Stockholders equity per share
(3)
|
|
$
|
21.95
|
|
|
|
24.22
|
|
|
|
21.64
|
|
|
|
21.10
|
|
|
|
18.44
|
|
Return on stockholders equity
(4)
|
|
|
(7.92
|
%)
|
|
|
12.77
|
%
|
|
|
5.43
|
%
|
|
|
13.52
|
%
|
|
|
13.81
|
%
|
Number of common stockholders of
record at year-end
|
|
|
2,505
|
|
|
|
2,322
|
|
|
|
2,579
|
|
|
|
2,841
|
|
|
|
2,797
|
|
Common stock high price (5)
|
|
$
|
31.74
|
|
|
|
44.00
|
|
|
|
38.66
|
|
|
|
24.70
|
|
|
|
33.18
|
|
Common stock low price (5)
|
|
$
|
19.42
|
|
|
|
24.83
|
|
|
|
18.06
|
|
|
|
4.26
|
|
|
|
7.12
|
|
17
|
|
|
(1) |
|
Information presented for fiscal 2005 reflects our acquisition
on March 31, 2005 of the Lima and Westville distribution
divisions of Roundys. More generally, discussion regarding
the comparability of information presented in the table above or
material uncertainties that could cause the selected financial
data not to be indicative of future financial condition or
results of operations can be found in Part 1, Item 1A.
of this report, Risk Factors, Part II,
Item 7 of this report, Managements Discussion
and Analysis of Financial Condition and Results of
Operations and Part II, Item 8 of this report in
our Consolidated Financial Statements and notes thereto. |
|
(2) |
|
Effect of adoption of EITF
No. 02-16,
Accounting by a Customer (Including a Reseller) for
Certain Consideration Received from a Vendor in fiscal
2002 and adoption of SFAS No. 123(R),
Share-Based Payment- Revised 2004, in fiscal
2006. |
|
(3) |
|
Based on outstanding shares at year-end. |
|
(4) |
|
Return based on continuing operations. |
|
(5) |
|
High and low closing sales price on NASDAQ. |
18
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Overview
We are the second largest publicly traded wholesale food
distribution company in the United States. Our business consists
of three primary operating segments: food distribution, military
and food retailing.
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
todays consumers including everyday value, multicultural,
urban, extreme value and upscale 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, we may from time to time identify and evaluate
acquisition opportunities in our food distribution and military
segments, and to the extent we believe such opportunities
present strategic benefits to those segments and can be achieved
in a cost-effective manner, complete such acquisitions.
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. On
March 31, 2005 we completed the purchase from Roundys
of the net assets, including customer contracts, of two
Roundys wholesale food distribution divisions and two
retail stores. We believe the acquisition of these two divisions
provides a valuable strategic opportunity for us to further
leverage our existing relationships in the regions in which
these divisions operate and to grow our food distribution
business in a cost-effective manner. The costs of integrating
these divisions had a temporary impact on margins, but have
positioned us to benefit from the synergies inherent in this
acquisition.
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, Cuba, Puerto Rico, Egypt and the
Azores. 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 62 corporate-owned stores primarily
in the Upper Midwest as of December 30, 2006. Primarily due
to intensely competitive conditions in which supercenters and
other alternative formats compete for price conscious customers,
same store sales in our retail business have declined since
2002, although the declines have moderated in more recent
periods. As a result, we closed or sold 25 retail stores (18 of
which were a part of the 2004 special charge) in 2004, nine
retail stores in 2005 and 16 retail stores in 2006. We are
taking and expect to take further initiatives of varying scope
and duration with a view
19
toward improving our response to and performance under these
difficult competitive conditions. Our strategic initiatives are
designed to provide steps to creating value within our
organization. These steps include designing and reformatting our
base of 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 additional
goodwill impairment associated with our retail segment, and may
incur restructuring or other charges in connection with closure
or sales activities.
Results
of Operations
The following discussion summarizes our operating results for
fiscal 2006 compared to fiscal 2005 and fiscal 2005 compared to
fiscal 2004.
Sales
The following tables summarize our sales activity for fiscal
2006, 2005 and 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
Percent
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
Segment sales:
|
|
Sales
|
|
|
of Sales
|
|
|
Change
|
|
|
Sales
|
|
|
of Sales
|
|
|
Change
|
|
|
Sales
|
|
|
of Sales
|
|
|
|
(In millions)
|
|
|
Food Distribution
|
|
$
|
2,787.7
|
|
|
|
60.2
|
%
|
|
|
4.4
|
%
|
|
$
|
2,669.3
|
|
|
|
58.6
|
%
|
|
|
36.1
|
%
|
|
$
|
1,961.2
|
|
|
|
50.3
|
%
|
Military
|
|
|
1,195.0
|
|
|
|
25.8
|
%
|
|
|
3.3
|
%
|
|
|
1,157.2
|
|
|
|
25.4
|
%
|
|
|
3.1
|
%
|
|
|
1,122.1
|
|
|
|
28.8
|
%
|
Retail
|
|
|
648.9
|
|
|
|
14.0
|
%
|
|
|
(11.0
|
%)
|
|
|
729.0
|
|
|
|
16.0
|
%
|
|
|
(10.4
|
%)
|
|
|
813.8
|
|
|
|
20.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales
|
|
$
|
4,631.6
|
|
|
|
100.0
|
%
|
|
|
1.7
|
%
|
|
$
|
4,555.5
|
|
|
|
100.0
|
%
|
|
|
16.9
|
%
|
|
$
|
3,897.1
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in fiscal 2006 food distribution sales versus the
same period in 2005 was due to the acquisition of the Lima and
Westville divisions in the second quarter 2005, adding an
estimated $185.7 million in sales to fiscal 2006 as
compared to fiscal 2005. Apart from the impact of the
acquisition, sales declined in fiscal 2006 due to slower growth
in new accounts and customer attrition. In addition, sales to
our existing customer base have also declined relative to 2005.
The increase in food distribution sales in fiscal 2005 as
compared to fiscal 2004 was primarily due to the acquisition of
the Lima and Westville divisions, which added
$630.0 million in sales, the majority of the total increase
in sales over fiscal 2004. Excluding the impact of the
acquisition, 2005 food distribution sales increased 4.0% over
fiscal 2004, primarily related to new accounts.
Military segment sales were up 3.3% in fiscal 2006 as compared
to fiscal 2005. The sales increase reflects increased product
line offerings that have resulted in new sales volumes
domestically. The increase in military segment sales in fiscal
2005 as compared to fiscal 2004 was largely due to increases in
domestic commissary customer traffic. Domestic and overseas
sales represented the following percentages of military segment
sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Domestic
|
|
|
69.7
|
%
|
|
|
68.6
|
%
|
|
|
67.4
|
%
|
Overseas
|
|
|
30.3
|
%
|
|
|
31.4
|
%
|
|
|
32.6
|
%
|
20
The decrease in retail sales for fiscal 2006 is attributable to
the closure or sale of 16 stores during fiscal 2006 and nine
stores during fiscal 2005 (store closures accounted for
$79.1 million of the $80.1 million drop in retail
sales) and a decline in same store sales. Same store sales,
which compare retail sales for stores which were in operation
for the same number of weeks in the comparative periods,
decreased 1.8% for 2006 as compared to 2005. The decline in
fiscal 2005 as compared to fiscal 2004 is due to the closure or
sale of 25 stores in 2004 and nine stores in 2005 and a decline
in same store sales of 4.1%, partially offset by the addition of
two stores as part of the Roundys acquisition. These
declines continue to reflect a difficult competitive environment
in which supercenters and other alternative formats compete for
price conscious consumers. During fiscal 2006 and 2005, our
corporate store count changed as follows:
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
Fiscal Year
|
|
|
|
2006
|
|
|
2005
|
|
|
Number of stores at beginning of
year
|
|
|
78
|
|
|
|
85
|
|
Acquired stores
|
|
|
|
|
|
|
2
|
|
Closed or sold stores
|
|
|
(16
|
)
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
Number of stores at end of year
|
|
|
62
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
Gross profit for fiscal 2006 was 8.7% of sales compared to 9.5%
for fiscal 2005 and 10.8% for fiscal 2004. The decline in gross
profit as a percentage of sales (gross profit margin) during the
2004-2006
period was partially due to a higher percentage of sales in the
food distribution and military segments as opposed to the retail
segment, which historically has a higher gross profit margin.
The decline in gross profit attributable to this shift in
revenues was approximately 0.2% of sales in 2006 and 0.4% of
sales in 2005. In addition, growth in our food distribution
business has largely come from lower margin customers. We
estimate that this shift in customer mix toward lower margin
food distribution customers decreased our overall gross profit
margins by 0.7% and 0.5% in 2006 and 2005, respectively.
Included in cost of sales are inventory markdown and wind down
costs related to retail store closings of $2.3 million,
$1.0 million and $4.1 million in fiscal 2006, 2005 and
2004, respectively. The 2004 markdown and wind down costs
include costs of $3.3 million associated with stores
referred to in the Special Charges narrative below.
Selling,
General and Administrative Expense
The following outlines selling, general and administrative
expenses (SG&A) and the significant factors affecting
SG&A:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
|
|
% of
|
|
|
|
$
|
|
|
Sales
|
|
|
$
|
|
|
Sales
|
|
|
$
|
|
|
Sales
|
|
|
|
(In millions except percentages)
|
|
|
SG&A
|
|
|
319.7
|
|
|
|
6.9
|
%
|
|
|
300.8
|
|
|
|
6.6
|
%
|
|
|
299.7
|
|
|
|
7.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant factors affecting
SG&A:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail store impairments and lease
costs on closed stores
|
|
|
7.5
|
|
|
|
0.2
|
%
|
|
|
1.4
|
|
|
|
0.0
|
%
|
|
|
0.1
|
|
|
|
0.0
|
%
|
Charges related to food
distribution customers
|
|
|
12.5
|
|
|
|
0.3
|
%
|
|
|
2.0
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
Severance costs
|
|
|
4.2
|
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradename impairment
|
|
|
2.0
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vacation standardization
|
|
|
2.0
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total significant factors
affecting SG&A
|
|
|
28.2
|
|
|
|
0.6
|
%
|
|
|
3.4
|
|
|
|
0.0
|
%
|
|
|
0.1
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A for fiscal 2006 was 6.9% of sales as compared to 6.6%
of sales in fiscal 2005 and 7.7% of sales in fiscal 2004. A
portion of the change in SG&A as a percentage of sales in
the
2004-2006
period is reflected
21
by the fact that our retail segment, which has higher SG&A
than our food distribution and military segments (as a
percentage of sales), represented a smaller percentage of our
total sales in each of these periods. The decrease in SG&A
attributable to this shift in revenues was approximately 0.4% of
sales in 2006 and 0.8% of sales in 2005. Impairment charges and
lease closure costs for retail stores that were either closed or
whose carrying values were impaired due to increased competition
within the stores respective market area were
$7.5 million, $1.4 million and $0.1 million in
fiscal 2006, 2005 and 2004, respectively.
Fiscal 2006 SG&A included $12.5 million of significant
charges related to food distribution customers. A second quarter
charge of $5.5 million reflected the impairment of certain
retail properties and additional bad debt expense as a result of
a customers bankruptcy. Charges of $7.0 million in
the third and fourth quarter were necessary to increase lease
reserves and bad debt provisions due to customers
deteriorating financial condition. Other significant charges in
fiscal 2006 SG&A included $4.2 million in executive
severance costs, $2.0 million reflecting the impairment of
the Fame tradename which was deemed to have no future
value and $2.0 million to standardize vacation policies at
various locations and ensure our vacation policy was competitive
in the marketplace.
Gain
on Sale of Real Estate
The gain on sale of real estate for fiscal 2006 was
$1.1 million compared to $3.7 million for fiscal 2005
and $5.6 million for fiscal 2004. The gain on sale of real
estate in all years was primarily related to the sale of
unoccupied properties.
Special
Charges
As previously discussed, we closed 18 retail stores at the end
of the second quarter of fiscal 2004 and sought purchasers for
our Denver area AVANZA retail stores. As a result of
these actions, we recorded a special charge of
$34.8 million which is reflected in the Special
charges line within the consolidated statements of income,
and $3.3 million of costs reflected in operating earnings,
primarily involving inventory markdowns related to the retail
store closures. The special charge included $22.6 million
of impairment charges on long-lived assets, $11.6 million
related to lease closure costs and $0.6 million in other
closure costs.
During fiscal 2005, we decided to continue to operate the
AVANZA retail stores and therefore recorded a reversal of
$1.5 million of the special charge related to these stores
because the assets of the stores were revalued at historical
cost less depreciation during the time
held-for-sale.
Partially offsetting this reversal was a $0.2 million
change in estimate for other property closure costs.
During fiscal 2006, we recorded $6.2 million of additional
charges, $5.5 million to write off capitalized lease assets
and $0.7 million to change estimates of lease commitments,
related to three properties included in the 2004 special charge.
Goodwill
Impairment
During fiscal 2006, we performed our annual impairment test of
goodwill during the fourth quarter based on conditions as of the
end of our third fiscal quarter in 2006 in accordance with
SFAS 142. The test, using an undiscounted operating cash
flow assumption, indicated an impairment of our retail segment
goodwill. The resulting analysis of the discounted cash flows of
the retail segment indicated an impairment necessitating a
charge of $26.4 million to retail goodwill. No impairment
was indicated or recorded in fiscal 2005 and fiscal 2004.
Depreciation
and Amortization Expense
Depreciation and amortization expense for fiscal 2006 decreased
by $2.3 million, or 5.2%, as compared to fiscal 2005. The
decrease was primarily due to lower depreciation expense for
software, fixtures and equipment and vehicles and reduced
depreciation as a result of store closings offset by increased
depreciation and amortization due to the purchase of the Lima
and Westville divisions. Depreciation and amortization expense
increased 8.6% during fiscal 2005 as compared to fiscal 2004
primarily due to increased depreciation
22
and amortization expense related to the acquisition of the Lima
and Westville divisions, including the amortization of a
$34.6 million customer contract intangible, partially
offset by the closure or sale of 34 retail stores during
fiscal 2004 and fiscal 2005.
Interest
Expense
Interest expense increased $1.9 million to
$26.6 million in fiscal 2006 as compared to
$24.7 million for fiscal 2005. The increase was largely due
to an increase in our effective interest rate from 5.7% for
fiscal 2005 to 6.2% for fiscal 2006 caused by rising interest
rates on variable rate debt offset somewhat by the impact of
interest rate swaps. Fiscal 2006 interest expense also included
the payment of a $0.5 million fee to amend covenants on our
senior secured credit facility. Average borrowing levels
decreased slightly from $407.2 million for fiscal 2005 to
$404.2 million for fiscal 2006.
Interest expense decreased $2.4 million to
$24.7 million in fiscal 2005 as compared to
$27.2 million for fiscal 2004, primarily due to a decrease
in the effective interest rate from 8.2% for fiscal 2004 to 5.7%
for fiscal 2005 caused by changes in the composition of our debt
as discussed in the Liquidity and Capital Resources
section below and the impact of interest rate swaps. The effect
of the decrease in our effective rate was partially offset by an
increase in the average borrowing levels from
$314.6 million for fiscal 2004 to $407.2 million for
fiscal 2005 and by the payment of a $0.8 million bridge
loan fee during the second quarter of 2005 in connection with
arrangement of our financing for the acquisition of the Lima and
Westville divisions.
Income
Tax Expense
The effective tax rate for income from continuing operations in
fiscal 2006 was 33.4% compared to 38.4% for fiscal 2005 and
22.5% for fiscal 2004. The effective tax rate for fiscal 2006
was impacted by non-deductible goodwill charges, which are added
back to the pre-tax loss from continuing operations to arrive at
taxable income. In fiscal 2006, we increased tax reserves by
$1.7 million. During fiscal years 2005 and 2004, we
reversed previously established income tax reserves of
$1.1 million and $3.3 million, respectively, primarily
due to the resolution of various federal and state tax issues
and statute expirations.
Refer to the tax rate table in Part II, Item 8 of this
report under Note (9) Income Taxes of
Notes to the Consolidated Financial Statements for the
comparative components of these rates.
Discontinued
Operations
Earnings from discontinued operations of $0.3 million in
fiscal 2006 and $0.1 million in fiscal 2005 and 2004 was a
result of the resolution of a contingency associated with the
sale of our Nash De-Camp produce growing and marketing
subsidiary in fiscal 1999.
Net
Earnings
Net earnings for fiscal 2006 were a loss of $23.0 million,
or $1.72 per diluted share, compared to net earnings of
$41.3 million, or $3.13 per diluted share, for fiscal
2005, and $14.9 million, or $1.18 per diluted share,
for fiscal 2004. Net earnings in each of the three years were
affected by a number of events included in the discussion above
that affected the comparability of results.
23
Some of the more significant of these events are summarized as
follows (items affecting earnings are shown net of tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2006
|
|
|
Fiscal 2005
|
|
|
Fiscal 2004
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
Diluted
|
|
|
|
$000s
|
|
|
EPS
|
|
|
$000s
|
|
|
EPS
|
|
|
$000s
|
|
|
EPS
|
|
|
Net earnings (loss) from
continuing operations as reported
|
|
$
|
(23,328
|
)
|
|
|
(1.74
|
)
|
|
|
41,196
|
|
|
|
3.13
|
|
|
|
14,877
|
|
|
|
1.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items affecting
earnings
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bridge loan fee
|
|
|
|
|
|
|
|
|
|
|
457
|
|
|
|
0.03
|
|
|
|
|
|
|
|
|
|
Call premium for early redemption
of senior subordinated notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,819
|
|
|
|
0.22
|
|
Write-off of unamortized finance
costs and original issuance discount on credit facility and
senior subordinated notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,525
|
|
|
|
0.12
|
|
Debt amendment fees
|
|
|
331
|
|
|
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special charges
|
|
|
3,821
|
|
|
|
0.29
|
|
|
|
(791
|
)
|
|
|
(0.06
|
)
|
|
|
20,950
|
|
|
|
1.66
|
|
Store closure cost reflected in
operations (Q2 2004)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,009
|
|
|
|
0.16
|
|
Goodwill impairment
|
|
|
25,744
|
|
|
|
1.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charges related to food
distribution customers
|
|
|
7,641
|
|
|
|
0.57
|
|
|
|
1,190
|
|
|
|
0.09
|
|
|
|
|
|
|
|
|
|
Retail store impairments and lease
costs on closed stores
|
|
|
4,552
|
|
|
|
0.34
|
|
|
|
890
|
|
|
|
0.07
|
|
|
|
81
|
|
|
|
.01
|
|
Inventory markdown and wind down
costs related to retail store closings
|
|
|
1,384
|
|
|
|
0.10
|
|
|
|
613
|
|
|
|
0.05
|
|
|
|
476
|
|
|
|
.04
|
|
Severance costs
|
|
|
2,585
|
|
|
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tradename impairment
|
|
|
1,229
|
|
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vacation standardization
|
|
|
1,208
|
|
|
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to tax reserves or
reversal of previously established tax reserves
|
|
|
1,688
|
|
|
|
0.13
|
|
|
|
(1,076
|
)
|
|
|
(0.08
|
)
|
|
|
(3,300
|
)
|
|
|
(0.27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total items affecting earnings
|
|
$
|
50,183
|
|
|
|
3.75
|
|
|
|
1,283
|
|
|
|
0.10
|
|
|
|
24,560
|
|
|
|
1.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
and Capital Resources
Historically, we have financed our capital needs through a
combination of internal and external sources. We expect that
cash flow from operations will be sufficient to meet our working
capital needs and enable us to reduce our debt, with temporary
draws on our revolving credit line needed during the year to
build inventories for certain holidays. Longer term, we believe
that cash flows from operations, short-term bank borrowings,
various types of long-term debt and lease and equity financing
will be adequate to meet our working capital needs, planned
capital expenditures and debt service obligations.
The following table summarizes our cash flow activity for fiscal
2006, 2005 and 2004 and should be read in conjunction with the
Consolidated Statements of Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Net cash provided by operating
activities
|
|
$
|
90,135
|
|
|
|
61,317
|
|
|
|
101,894
|
|
Net cash used in investing
activities
|
|
|
(24,509
|
)
|
|
|
(230,680
|
)
|
|
|
(8,280
|
)
|
Net cash provided by (used in)
financing activities
|
|
|
(65,925
|
)
|
|
|
165,591
|
|
|
|
(101,342
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash
equivalents
|
|
$
|
(299
|
)
|
|
|
(3,772
|
)
|
|
|
(7,728
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
Operating cash flows were $90.1 million for fiscal 2006, an
increase of $28.8 million from $61.3 million for
fiscal 2005. The primary reason for the increase in operating
cash flows for fiscal 2006 as compared to fiscal 2005 was a
decrease of $44.6 million in inventories during fiscal 2006
as compared to an increase of $31.3 million in inventories
in fiscal 2005. The decrease in fiscal 2006 inventories was due
to progress made in our distribution business rationalization
and integration of the Lima and Westville distribution centers
acquired from Roundys, decreased retail inventories as a
result of the sale or closure of 16 stores in fiscal 2006 and
increased focus on managing inventory levels. Operating cash
flows were $61.3 million for fiscal 2005, a decrease of
$40.6 million from $101.9 million from fiscal 2004.
The primary reason for the decrease in operating cash flows in
fiscal 2005 as compared to fiscal 2004 was an increase of
$31.3 million in inventories primarily due to new military
business and the integration of the Westville and Lima divisions.
Cash used for investing activities was $24.5 million in
fiscal 2006 primarily used for additions of property, plant and
equipment. Cash used for investing activities increased by
$222.4 in fiscal 2005 compared to fiscal 2004, primarily because
of the $226.4 million used for the acquisition of the Lima
and Westville divisions.
Cash used by financing activities was $65.9 million for
fiscal 2006 as $57.7 million was used to pay down the
revolving debt and other long-term debt. Financing activities
for fiscal 2005 primarily included proceeds from the private
placement of $150.1 million in convertible notes and net
receipts from revolving debt of $30.6 million to finance
the acquisition of the Westville and Lima divisions. Cash used
for financing in fiscal 2004 reflected early extinguishment of
the $165 million principal balance on our 8.5% Senior
Subordinated Notes, using proceeds from our senior secured bank
credit facility described below, as well as amounts used to pay
down our revolving credit facility during the year. At
December 30, 2006, credit availability under the senior
secured credit facility was $106.5 million.
Contractual
Obligations and Commercial Commitments
The following table summarizes our significant contractual cash
obligations as of December 30, 2006, and the expected
timing of cash payments related to such obligations in future
periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount Committed by Period
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
|
Contractual Cash
Obligations:
|
|
Committed
|
|
|
2007
|
|
|
2008-2009
|
|
|
2010-2011
|
|
|
Thereafter
|
|
|
|
(In thousands)
|
|
|
Long-Term Debt(1)
|
|
$
|
314,618
|
|
|
|
633
|
|
|
|
1,144
|
|
|
|
161,298
|
|
|
|
151,543
|
|
Interest on Long-Term Debt(2)
|
|
|
254,670
|
|
|
|
18,216
|
|
|
|
36,332
|
|
|
|
21,747
|
|
|
|
178,375
|
|
Capital Lease Obligations(3)(4)
|
|
|
62,365
|
|
|
|
7,154
|
|
|
|
14,170
|
|
|
|
11,773
|
|
|
|
29,268
|
|
Operating Leases(3)
|
|
|
134,044
|
|
|
|
23,932
|
|
|
|
41,557
|
|
|
|
30,730
|
|
|
|
37,825
|
|
Benefit Obligations(5)
|
|
|
27,963
|
|
|
|
3,048
|
|
|
|
5,875
|
|
|
|
5,338
|
|
|
|
13,702
|
|
Purchase Obligations(6)
|
|
|
74,962
|
|
|
|
42,014
|
|
|
|
31,248
|
|
|
|
1,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
868,622
|
|
|
|
94,997
|
|
|
|
130,326
|
|
|
|
232,586
|
|
|
|
410,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Refer to Part II, Item 8 in this report under Note
(7) Long-term Debt and Bank Credit
Facilities in Notes to Consolidated Financial Statements
and to the discussion of covenant compliance below for
additional information regarding long-term debt. |
|
(2) |
|
The interest on long-term debt for fiscal 2035 reflects our
Senior Subordinated Convertible Debt accreted interest for
fiscal 2013 through 2035, should the convertible debt remain
outstanding until maturity. Interest payments assume debt is
held to maturity. For variable rate debt the current interest
rates applicable as of December 30, 2006 were assumed for
the remainder of the term. |
|
(3) |
|
Lease obligations primarily relate to store locations for our
retail segment, as well as store locations subleased to
independent food distribution customers. A discussion of lease
commitments can be found in |
25
|
|
|
|
|
Part II, Item 8 in this report under Note
(12) Leases in Notes to Consolidated
Financial Statements and under the caption Lease
Commitments under Critical Accounting
Policies, below. |
|
(4) |
|
Includes amounts classified as imputed interest. |
|
(5) |
|
Our benefit obligations include obligations related to sponsored
defined benefit pension and post-retirement benefit plans. For a
further discussion see Part II, Item 8 in this report
under Note (17) Pension and Other
Post-retirement Benefits. |
|
(6) |
|
The majority of our purchase obligations involve purchase orders
made in the ordinary course of business, which are not included
in the table above. Our purchase orders are based on our current
needs and are fulfilled by our vendors within very short time
horizons. Any amounts for which we are liable under purchase
orders are reflected in our consolidated balance sheet as
accounts payable upon shipment of the underlying product. The
purchase obligations shown in this table also exclude agreements
that are cancelable by us without significant penalty, which
include contracts for routine outsourced services. The amount of
purchase obligations shown in the table represents the amount of
product we are contractually obligated to purchase to earn
$1.8 million in upfront contract monies received. Should we
not be able to fulfill these purchase obligations, we would be
only obligated to pay back the unearned upfront contract monies. |
We have also made certain commercial commitments that extend
beyond 2007. These commitments include standby letters of credit
and guarantees of certain food distribution customer debt and
lease obligations. The following summarizes these commitments as
of December 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitment Expiration per Period
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Commercial
|
|
Amounts
|
|
|
Less than
|
|
|
|
|
|
|
|
|
Over 5
|
|
Commitments
|
|
Committed
|
|
|
1 Year
|
|
|
1-3 Years
|
|
|
4-5 Years
|
|
|
Years
|
|
|
|
(In thousands)
|
|
|
Standby Letters of Credit(1)
|
|
$
|
18,453
|
|
|
|
18,453
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantees(2)
|
|
|
29,460
|
|
|
|
225
|
|
|
|
6,184
|
|
|
|
5,710
|
|
|
|
17,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Commercial Commitments
|
|
$
|
47,913
|
|
|
|
18,678
|
|
|
|
6,184
|
|
|
|
5,710
|
|
|
|
17,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Letters of credit relate primarily to supporting workers
compensation obligations and are renewable annually. |
|
(2) |
|
Refer to Part II, Item 8 of this report under Note
(13) Concentration of Credit Risk of
Notes to Consolidated Financial Statements and under the caption
Guarantees of Debt and Lease Obligations of Others
under Critical Accounting Policies, below, for
additional information regarding debt guarantees, lease
guarantees and assigned leases. |
Senior
Secured Credit Facility
Our senior secured credit facility consists of
$125.0 million in revolving credit, all of which may be
used for loans, and up to $40.0 million of which may be
used for letters of credit, and a $160.0 million Term
Loan B. The Term Loan B portion of the facility was
$175 million as of December 31, 2005 of which
$15.0 million has been permanently paid down. Borrowings
under the facility bear interest at either the Eurodollar rate
or the prime rate, plus in either case a margin spread that is
dependent on our total leverage ratio. We pay a commitment
commission on the unused portion of the revolver. The margin
spreads and the commitment commission are reset quarterly based
on changes to our total leverage ratio defined by the applicable
credit agreement. At December 30, 2006 and
December 31, 2005 the margin spreads for the revolver and
Term Loan B maintained as Eurodollar loans were 2.0% and
2.5%, respectively, and the commitment commission was 0.375%.
The margin spread for the revolver maintained at the prime rate
was 1.0%. The credit facility requires us to hedge a certain
portion of such borrowings through the use of interest rate
swaps, as we have done historically. At December 30, 2006,
credit availability under the senior secured credit facility was
$106.5 million.
26
On February 22, 2005, we entered into a First Amendment to
our credit facility permitting us to enter into the asset
purchase agreement with Roundys and to close and finance
the acquisition of the Lima and Westville divisions.
On November 28, 2006 we entered into a Second Amendment to
our credit facility which changed the existing total leverage
ratio covenant and increased the margin spread whenever the
total leverage ratio covenant exceeds to 2.50:1.00.
Our senior secured credit facility represents one of our primary
sources of liquidity, both short-term and long-term, and the
continued availability of credit under that facility is of
material importance to our ability to fund our capital and
working capital needs. The credit agreement governing the credit
facility contains various restrictive covenants, compliance with
which is essential to continued credit availability. Among the
most significant of these restrictive covenants are financial
covenants which require us to maintain predetermined ratio
levels related to interest coverage and leverage. These ratios
are based on EBITDA, on a rolling four quarter basis, with some
adjustments (Consolidated EBITDA). Consolidated
EBITDA is a non-GAAP financial measure that is defined in our
bank credit agreement as earnings before interest, income taxes,
depreciation and amortization, adjusted to exclude extraordinary
gains or losses, gains or losses from sales of assets other than
inventory in the ordinary course of business, upfront fees and
expenses incurred in connection with the execution and delivery
of the credit agreement, and non-cash charges (such as LIFO
charges, closed store lease costs, asset impairments and
share-based compensation), less cash payments made during the
current period on certain non-cash charges recorded in prior
periods. In addition, for purposes of determining compliance
with prescribed leverage ratios and adjustments in the credit
facilitys margin spread and commitment commission,
Consolidated EBITDA is calculated on a pro forma basis that
takes into account all permitted acquisitions, such as the
acquisition of the Lima and Westville divisions, that have
occurred since the beginning of the relevant four quarter
computation period. Consolidated EBITDA should not be considered
an alternative measure of our net income, operating performance,
cash flow or liquidity. It is provided as additional information
relative to compliance with our debt covenants. In addition, the
credit agreement requires us to maintain predetermined ratio
levels related to working capital coverage (the ratio of the sum
of net trade accounts receivable plus inventory to the sum of
loans and letters of credit outstanding under the new credit
agreement plus up to $60 million of additional secured
indebtedness permitted to be issued under the new credit
agreement).
The financial covenants specified in the credit agreement, as
amended, vary over the term of the credit agreement and can be
summarized as follows:
|
|
|
|
|
|
|
For The Fiscal
|
|
|
|
|
Periods Ending
|
|
|
Financial Covenants
|
|
Closest to
|
|
Required Ratio
|
|
Interest Coverage Ratio
|
|
12/31/04 through 9/30/07
12/31/07 and thereafter
|
|
3.50:1.00 (minimum)
4.00:1.00
|
Total Leverage Ratio
|
|
12/31/04 through 9/30/06
12/31/06 through 3/31/07
6/30/07 through 9/30/07
12/31/07 and thereafter
|
|
3.50:1.00 (maximum)
3.75:1.00
3.50:1.00
3.00:1.00
|
Senior Secured Leverage Ratio
|
|
12/31/04 through 9/30/06
12/31/06 through 9/30/07
12/31/07 and thereafter
|
|
2.75:1.00 (maximum)
2.50:1.00
2.25:1.00
|
Working Capital Ratio
|
|
12/31/04 through 9/30/05
12/31/05 through 9/30/08 Thereafter
|
|
1.50:1.00 (minimum)
1.75:1.00
2.00:1.00
|
27
As of December 30, 2006, we were in compliance with all
financial covenants as defined in our credit agreement which are
summarized as follows:
|
|
|
|
|
|
|
|
|
Financial Covenant
|
|
Required Ratio
|
|
|
Actual Ratio
|
|
|
Interest Coverage Ratio(1)
|
|
|
3.50:1.00 (minimum
|
)
|
|
|
3.95:1.00
|
|
Total Leverage Ratio(2)
|
|
|
3.75:1.00 (maximum
|
)
|
|
|
3.42:1.00
|
|
Senior Secured Leverage Ratio(3)
|
|
|
2.50:1.00 (maximum
|
)
|
|
|
1.56:1.00
|
|
Working Capital Ratio(4)
|
|
|
1.75:1.00 (minimum
|
)
|
|
|
2.71:1.00
|
|
|
|
|
(1) |
|
Ratio of Consolidated EBITDA for the trailing four quarters to
interest expense for such period. |
|
(2) |
|
Total outstanding debt to Consolidated EBITDA for the trailing
four quarters. |
|
(3) |
|
Total outstanding senior secured debt to Consolidated EBITDA for
the trailing four quarters. |
|
(4) |
|
Ratio of net trade accounts receivable plus inventory to the sum
of loans and letters of credit outstanding under the new credit
agreement plus certain additional secured debt. |
Any failure to comply with any of these financial covenants
would constitute an event of default under the bank credit
agreement, entitling a majority of the bank lenders to, among
other things, terminate future credit availability under the
agreement and accelerate the maturity of outstanding obligations
under that agreement. The following is a summary of the
calculation of Consolidated EBITDA for fiscal 2006, 2005 and
2004 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to
|
|
|
|
Qtr 1
|
|
|
Qtr 2
|
|
|
Qtr 3
|
|
|
Qtr 4
|
|
|
Date
|
|
|
Earnings (loss) from continuing
operations before income taxes
|
|
$
|
6,314
|
|
|
|
7,733
|
|
|
|
(6,287
|
)
|
|
|
(25,253
|
)
|
|
|
(17,493
|
)
|
Interest expense
|
|
|
6,067
|
|
|
|
6,120
|
|
|
|
7,906
|
|
|
|
6,551
|
|
|
|
26,644
|
|
Depreciation and amortization
|
|
|
9,702
|
|
|
|
9,617
|
|
|
|
12,685
|
|
|
|
9,447
|
|
|
|
41,451
|
|
LIFO charge (benefit)
|
|
|
462
|
|
|
|
461
|
|
|
|
1,590
|
|
|
|
117
|
|
|
|
2,630
|
|
Closed store lease costs
|
|
|
902
|
|
|
|
1,327
|
|
|
|
4,455
|
|
|
|
2,675
|
|
|
|
9,359
|
|
Goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,419
|
|
|
|
26,419
|
|
Asset impairments
|
|
|
1,547
|
|
|
|
3,247
|
|
|
|
2,522
|
|
|
|
4,127
|
|
|
|
11,443
|
|
Losses (gains) on sale of real
estate
|
|
|
33
|
|
|
|
(1,225
|
)
|
|
|
25
|
|
|
|
37
|
|
|
|
(1,130
|
)
|
Share-based compensation(a)
|
|
|
(187
|
)
|
|
|
634
|
|
|
|
233
|
|
|
|
486
|
|
|
|
1,166
|
|
Subsequent cash payments on
non-cash charges
|
|
|
(808
|
)
|
|
|
(656
|
)
|
|
|
(1,862
|
)
|
|
|
(686
|
)
|
|
|
(4,012
|
)
|
Special Charges
|
|
|
|
|
|
|
|
|
|
|
6,253
|
|
|
|
|
|
|
|
6,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated EBITDA
|
|
$
|
24,032
|
|
|
|
27,258
|
|
|
|
27,520
|
|
|
|
23,920
|
|
|
|
102,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to
|
|
|
|
Qtr 1
|
|
|
Qtr 2
|
|
|
Qtr 3
|
|
|
Qtr 4
|
|
|
Date
|
|
|
Earnings from continuing
operations before income taxes
|
|
$
|
11,361
|
|
|
|
16,041
|
|
|
|
18,100
|
|
|
|
21,364
|
|
|
|
66,866
|
|
Interest expense
|
|
|
4,187
|
|
|
|
6,578
|
|
|
|
7,919
|
|
|
|
6,048
|
|
|
|
24,732
|
|
Depreciation and amortization
|
|
|
8,374
|
|
|
|
10,614
|
|
|
|
14,357
|
|
|
|
10,376
|
|
|
|
43,721
|
|
LIFO charge (benefit)
|
|
|
577
|
|
|
|
828
|
|
|
|
(229
|
)
|
|
|
(452
|
)
|
|
|
724
|
|
Closed store lease costs
|
|
|
178
|
|
|
|
|
|
|
|
216
|
|
|
|
(191
|
)
|
|
|
203
|
|
Asset impairments
|
|
|
458
|
|
|
|
2,089
|
|
|
|
1,772
|
|
|
|
851
|
|
|
|
5,170
|
|
Gains on sale of real estate
|
|
|
|
|
|
|
(541
|
)
|
|
|
(556
|
)
|
|
|
(2,600
|
)
|
|
|
(3,697
|
)
|
Share-based compensation(a)
|
|
|
680
|
|
|
|
536
|
|
|
|
488
|
|
|
|
14
|
|
|
|
1,718
|
|
Subsequent cash payments on
non-cash charges
|
|
|
(1,375
|
)
|
|
|
(652
|
)
|
|
|
(752
|
)
|
|
|
(2,690
|
)
|
|
|
(5,469
|
)
|
Special charges
|
|
|
|
|
|
|
(1,296
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,296
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated EBITDA
|
|
$
|
24,440
|
|
|
|
34,197
|
|
|
|
41,315
|
|
|
|
32,720
|
|
|
|
132,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to
|
|
|
|
Qtr 1
|
|
|
Qtr 2
|
|
|
Qtr 3
|
|
|
Qtr 4
|
|
|
Date
|
|
|
Earnings (loss) from continuing
operations before income taxes
|
|
$
|
7,757
|
|
|
|
(25,639
|
)
|
|
|
22,620
|
|
|
|
14,461
|
|
|
|
19,199
|
|
Interest expense
|
|
|
6,706
|
|
|
|
6,677
|
|
|
|
8,429
|
|
|
|
5,369
|
|
|
|
27,181
|
|
Depreciation and amortization
|
|
|
10,156
|
|
|
|
9,800
|
|
|
|
11,615
|
|
|
|
8,670
|
|
|
|
40,241
|
|
LIFO charge (benefit)
|
|
|
392
|
|
|
|
783
|
|
|
|
1,043
|
|
|
|
1,307
|
|
|
|
3,525
|
|
Closed store lease costs
|
|
|
(129
|
)
|
|
|
1,146
|
|
|
|
643
|
|
|
|
3,211
|
|
|
|
4,871
|
|
Asset impairments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
853
|
|
|
|
853
|
|
Gains on sale of real estate
|
|
|
(82
|
)
|
|
|
(14
|
)
|
|
|
(3,317
|
)
|
|
|
(2,173
|
)
|
|
|
(5,586
|
)
|
Share-based compensation(a)
|
|
|
392
|
|
|
|
142
|
|
|
|
154
|
|
|
|
157
|
|
|
|
845
|
|
Subsequent cash payments on
non-cash charges
|
|
|
(565
|
)
|
|
|
(625
|
)
|
|
|
(1,633
|
)
|
|
|
(693
|
)
|
|
|
(3,516
|
)
|
Extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,204
|
|
|
|
7,204
|
|
Special charges
|
|
|
|
|
|
|
36,494
|
|
|
|
|
|
|
|
(1,715
|
)
|
|
|
34,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated EBITDA
|
|
$
|
24,627
|
|
|
|
28,764
|
|
|
|
39,554
|
|
|
|
36,651
|
|
|
|
129,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
The calculation of EBITDA has been revised for all periods
presented to include an adjustment for non-cash share-based
compensation. |
The credit agreement also contains covenants that limit our
ability to incur debt (including guaranteeing the debt of
others) and liens, acquire or dispose of assets, pay dividends
on and repurchase our stock, make capital expenditures and make
loans or advances to others, including customers.
Convertible
Subordinated Debt
On March 15, 2005 we completed a private placement of
$150.1 million in aggregate issue price (or
$322 million aggregate principal amount at maturity) of
senior subordinated convertible notes due 2035. The funds were
used to finance a portion of the acquisition of the Lima and
Westville divisions from Roundys. The notes are unsecured
senior subordinated obligations and rank junior to our existing
and future senior indebtedness, including borrowings under our
senior secured credit facility.
29
Cash interest at the rate of 3.50% per year is payable
semi-annually on the issue price of the notes until
March 15, 2013. After that date, cash interest will not be
payable, unless contingent cash interest becomes payable, and
original issue discount for non-tax purposes will accrue on the
notes at a daily rate of 3.50% per year until the maturity
date of the notes. On the maturity date of the notes, a holder
will receive $1,000 per note. Contingent cash interest will
be paid on the notes during any six-month period, commencing
March 16, 2013, if the average market price of a note for a
ten trading day measurement period preceding the applicable
six-month period equals 130% or more of the accreted principal
amount of the note, plus accrued cash interest, if any. The
contingent cash interest payable with respect to any six-month
period will equal an annual rate of 0.25% of the average market
price of the note for the ten trading day measurement period
described above.
The notes will be convertible at the option of the holder, only
upon the occurrence of certain events, at an adjusted conversion
rate of 9.4164 shares (initially 9.132 shares) 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 a combination of both, at our option.
We may redeem all or a portion of the notes for cash at any time
on or after the eighth anniversary of the issuance of the notes.
Holders may require us to purchase for cash all or a portion of
their notes on the 8th, 10th, 15th, 20th and
25th anniversaries of the issuance of the notes. In
addition, upon specified change in control events, each holder
will have the option, subject to certain limitations, to require
us to purchase for cash all or any portion of such holders
notes.
In connection with the closing of the sale of the notes, we
entered into a registration rights agreement with the initial
purchasers of the notes. In accordance with that agreement, we
filed with the Securities and Exchange Commission on
July 13, 2005 a shelf registration statement covering the
resale by security holders of the notes and the common stock
issuable upon conversion of the notes. The shelf registration
statement was declared effective by the Securities and Exchange
Commission on October 5, 2005.
Redemption
of Senior Subordinated Notes
On December 13, 2004, we redeemed the $165 million in
8.5% Senior Subordinated Notes (the Notes) Due
2008 at a redemption price of 102.833%, plus accrued and unpaid
interest on the notes as of the redemption date. We drew under
the Term Loan B to fund the redemption of these notes.
Charges recorded during the fourth fiscal quarter of 2004 for
redemption of the Notes and the refinancing of our credit
facility included a call premium of $4.7 million and
$2.5 million for unamortized finance costs and original
issue discount charge.
Debt
Obligations Generally
For debt obligations, the following table presents principal
cash flows, related weighted average interest rates by expected
maturity dates and fair value as of December 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate
|
|
|
Variable Rate
|
|
|
|
Fair Value
|
|
|
Amount
|
|
|
Rate
|
|
|
Fair Value
|
|
|
Amount
|
|
|
Rate
|
|
|
|
(In thousands)
|
|
|
2007
|
|
|
|
|
|
$
|
633
|
|
|
|
6.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
549
|
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
595
|
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
628
|
|
|
|
6.0
|
%
|
|
|
|
|
|
$
|
160,000
|
|
|
|
7.9
|
%
|
2011
|
|
|
|
|
|
|
670
|
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Thereafter
|
|
|
|
|
|
|
151,543
|
|
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
140,461
|
|
|
$
|
154,618
|
|
|
|
|
|
|
$
|
160,000
|
|
|
$
|
160,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
30
exposure to changes in interest rates and commodity prices is to
reduce fluctuations in earnings and cash flows. To achieve these
objectives, we use derivative instruments, primarily interest
rate and commodity swap agreements, to manage risk exposures
when appropriate, based on market conditions. We do not enter
into derivative agreements for trading or other speculative
purposes, nor are we a party to any leveraged derivative
instrument.
The interest rate swap and commodity swap agreements are
designated as cash flow hedges and are reflected at fair value
in our consolidated balance sheet and the related gains or
losses on these contracts are deferred in stockholders
equity as a component of accumulated other comprehensive income.
Deferred gains and losses are recognized as an adjustment to
expense in the same period in which the related items being
hedged are recognized in income. However, to the extent that any
of these contracts are not considered to be perfectly effective
in offsetting the change in the value of the items being hedged,
any changes in fair value relating to the ineffective portion of
these contracts are immediately recognized in the results of
operations.
Interest rate swap agreements are entered into for periods
consistent with related underlying exposures and do not
constitute positions independent of those exposures. Interest
rate swap agreements outstanding at December 30, 2006 and
December 31, 2005 and their fair values are summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
December 30,
2006
|
|
|
December 31,
2005
|
|
|
|
(In thousands, except percentages)
|
|
|
Notional amount (pay fixed/receive
variable)
|
|
$
|
90,000
|
|
|
|
185,000
|
|
Fair value asset
|
|
|
756
|
|
|
|
860
|
|
Average receive rate for effective
swaps
|
|
|
5.4
|
%
|
|
|
4.4
|
%
|
Average pay rate for effective
swaps
|
|
|
4.4
|
%
|
|
|
4.2
|
%
|
All of the interest rate swap agreements outstanding at
December 30, 2006 will expire in fiscal 2007 and the fair
value gains reported in other comprehensive income will be
reclassed into income as they expire.
The Company uses commodity swap agreements to reduce price risk
associated with anticipated purchases of diesel fuel. The
agreements call for an exchange of payments with the Company
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 based.
At December 30, 2006, the Company had no outstanding
commodity swap agreements.
The fair market value of the commodity swaps totaled
$1.5 million as of December 31, 2005. All of the
commodity swaps expired in fiscal 2006.
Off-Balance
Sheet Arrangements
As of the date of this report, we do not participate in
transactions that generate relationships with unconsolidated
entities or financial partnerships, often referred to as
structured finance or special purpose entities, which are
generally established for the purpose of facilitating
off-balance sheet arrangements or other contractually narrow or
limited purposes.
Critical
Accounting Policies
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenue and expenses, and related
disclosure of contingent assets and liabilities. Management
bases its estimates on historical experience and various other
assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities
that may not be readily apparent from other sources. Senior
management has discussed the development, selection and
disclosure of these estimates with the Audit Committee of our
Board of Directors and with our independent auditors.
An accounting policy is considered critical if it requires an
accounting estimate to be made based on assumptions about
matters that are highly uncertain at the time the estimate is
made, and if different estimates
31
that reasonably could have been used, or changes in the
accounting estimates that are reasonably likely to occur
periodically, could materially impact our financial statements.
We consider the following accounting policies to be critical and
could result in materially different amounts being reported
under different conditions or using different assumptions:
Customer
Exposure and Credit Risk
Allowance for Doubtful Accounts
Methodology. We evaluate the collectability of
our accounts and notes receivable based on a combination of
factors. In most circumstances when we become aware of factors
that may indicate a deterioration in a specific customers
ability to meet its financial obligations to us (e.g.,
reductions of product purchases, deteriorating store conditions,
changes in payment patterns), we record a specific reserve for
bad debts against amounts due to reduce the net recognized
receivable to the amount we reasonably believe will be
collected. In determining the adequacy of the reserves, we
analyze factors such as the value of any collateral, customer
financial statements, historical collection experience, aging of
receivables and other economic and industry factors. It is
possible that the accuracy of the estimation process could be
materially affected by different judgments as to the
collectability based on information considered and further
deterioration of accounts. If circumstances change (i.e.,
further evidence of material adverse creditworthiness,
additional accounts become credit risks, store closures), our
estimates of the recoverability of amounts due us could be
reduced by a material amount, including to zero. Refer to
Part II, Item 8 of this report under Note
(6) Accounts and Notes Receivable
of Notes to Consolidated Financial Statements for a discussion
of these allowances.
Lease Commitments. We have historically leased
store sites for sublease to qualified independent retailers at
rates that are at least as high as the rent paid by us. Under
terms of the original lease agreements, we remain primarily
liable for any commitments an independent retailer may no longer
be financially able to satisfy. We also lease store sites for
our retail segment. Should a retailer be unable to perform under
a sublease or should we close underperforming corporate stores,
we record a charge to earnings for costs of the remaining term
of the lease, less any anticipated sublease income. Calculating
the estimated losses requires that significant estimates and
judgments be made by management. Our reserves for such
properties can be materially affected by factors such as the
extent of interested
sub-lessees
and their creditworthiness, our ability to negotiate early
termination agreements with lessors, general economic conditions
and the demand for commercial property. Should the number of
defaults by
sub-lessees
or corporate store closures materially increase, the remaining
lease commitments we must record could have a material adverse
effect on operating results and cash flows. Refer to
Part II, Item 8 of this report under Note
(12) Leases of Notes to Consolidated
Financial Statements for a discussion of Lease Commitments.
Guarantees of Debt and Lease Obligations of
Others. We have guaranteed the debt and lease
obligations of certain of our 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 ($8.0 million as of
December 30, 2006), which would be due in accordance with
the underlying agreements. All of the guarantees were issued
prior to December 31, 2002 and therefore were not subject
to the recognition and measurement provisions of FASB
Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, an interpretation of FASB
Statements No. 5, 57 and 107 and a rescission of FASB
Interpretation No. 34 (FIN 45). We have also
assigned various leases to certain food distribution customers
and other third parties. If the assignees were to become unable
to continue making payments under the assigned leases, we
estimate our maximum potential obligation with respect to the
assigned leases to be approximately $13.4 million as of
December 30, 2006. In circumstances when we become aware of
factors that indicate deterioration in a customers ability
to meet its financial obligations guaranteed or assigned by us,
we record a specific reserve in the amount we reasonably believe
we will be obligated to pay on the customers behalf, net
of any anticipated recoveries from the customer. In determining
the adequacy of these reserves, we analyze factors such as those
described above in Allowance for Doubtful
Accounts Methodology and Lease
Commitments. It is possible that the accuracy of the
estimation process could be materially affected by different
judgments as to the obligations based on information considered
and further
32
deterioration of accounts, with the potential for a
corresponding adverse effect on operating results and cash
flows. Triggering these guarantees or obligations under assigned
leases would not, however, result in cross default of our debt,
but could restrict resources available for general business
initiatives. Refer to Part II, Item 8 of this report
under Note (13) Concentration of Credit
Risk for more information regarding customer exposure and
credit risk.
Impairment
of Long-lived Assets
Property, plant and equipment are tested for impairment in
accordance with SFAS 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, whenever
events or changes in circumstances indicate that the carrying
amounts of such long-lived assets may not be recoverable from
future net pretax cash flows. Impairment testing requires
significant management judgment including estimating future
sales and costs, alternative uses for the assets and estimated
proceeds from disposal of the assets. Estimates of future
results are often influenced by assessments of changes in
competition, merchandising strategies, human resources and
general market conditions, which may result in not recognizing
an impairment loss. Impairment testing is conducted at the
lowest level where cash flows can be measured and are
independent of cash flows of other assets. An asset impairment
would be indicated if the sum of the expected future net pretax
cash flows from the use of the asset (undiscounted and without
interest charges) is less than the carrying amount of the asset.
An impairment loss would be measured based on the difference
between the fair value of the asset and its carrying amount. We
generally determine fair value by discounting expected future
cash flows at the rate we utilize to evaluate potential
investments.
The estimates and assumptions used in the impairment analysis
are consistent with the business plans and estimates we use to
manage our business operations and to make acquisition and
divestiture decisions. The use of different assumptions would
increase or decrease the impairment charge. Actual outcomes may
differ from the estimates. It is possible that the accuracy of
the estimation of future results could be materially affected by
different judgments as to competition, strategies and market
conditions, with the potential for a corresponding adverse
effect on financial condition and operating results.
Goodwill
Goodwill for each of our reporting units is tested for
impairment in accordance with SFAS 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. 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 and impairment of the goodwill.
Income
Taxes
When preparing our consolidated financial statements, we are
required to estimate our income taxes in each of the
jurisdictions in which we operate. This process involves
estimating our actual current tax obligations based on expected
income, statutory tax rates and tax planning opportunities in
the various jurisdictions in which we operate. In the event
there is a significant unusual or one-time item recognized in
our results of operations, the tax attributable to that item
would be separately calculated and recorded in the period the
unusual or one-time item occurred.
Tax law requires certain items to be included in our tax return
at different times than the items are reflected in our results
of operations. As a result, the income tax expense reflected in
our statements of income is different than that shown on our tax
returns. Some of these differences are permanent, such as
expenses that are not deductible in our tax returns, and some
differences will reverse over time, such as depreciation expense
on property, plant and equipment. These temporary differences
result in deferred tax assets and liabilities, which are
included within our consolidated balance sheets. Deferred tax
assets generally represent items that can be used as a tax
deduction or credit in our tax returns in future years but have
already been recorded as an
33
expense in our statements of income. We must assess the
likelihood that our deferred tax assets will be recovered from
future taxable income, and to the extent we believe that
recovery is unlikely, we must establish a valuation reserve
against those deferred tax assets. Deferred tax liabilities
generally represent items for which we have already taken a
deduction in our tax returns but we have not recognized the
items as an expense in our statements of income. Significant
judgment is required in evaluating our tax positions, and in
determining our income tax expense, our deferred tax assets and
liabilities and any valuation allowance recorded against our net
deferred tax assets.
We establish reserves for income tax contingencies when, despite
our belief that the tax return positions are fully supportable,
certain positions are likely to be challenged and we may
ultimately not prevail in defending those positions. We adjust
these reserves in light of changing facts and circumstances,
such as the closing of a tax audit. Our effective tax rate
includes the impact of reserve provisions and changes to
reserves that are considered appropriate, as well as related
interest and penalties. These reserves relate to various tax
years subject to audit by taxing authorities. We believe that
our current reserves are adequate, and reflect the most probable
outcome of known tax contingencies. However, the ultimate
outcome may differ from our estimates and assumptions and could
impact the income tax expense reflected in our consolidated
statements of income.
Reserves
for Self Insurance
We are primarily self-insured for workers compensation,
general and automobile liability and health insurance costs. It
is our policy to record our self-insurance liabilities based on
claims filed and an estimate of claims incurred but not yet
reported. Workers compensation, general and automobile
liabilities are actuarially determined on a discounted basis. We
have purchased stop-loss coverage to limit our exposure to any
significant exposure on a per claim basis. Any projection of
losses concerning workers compensation, general and
automobile and health insurance liability is subject to a
considerable degree of variability. Among the causes of this
variability are unpredictable external factors affecting future
inflation rates, litigation trends, legal interpretations,
benefit level changes and claim settlement patterns. Although
our estimates of liabilities incurred do not anticipate
significant changes in historical trends for these variables,
such changes could have a material impact on future claim costs
and currently recorded liabilities. A 100 basis point
change in discount rates would increase our liability by
approximately $0.2 million
Vendor
Allowances and Credits
As is common in our industry, we use a third party service to
undertake accounts payable audits on an ongoing basis. These
audits examine vendor allowances offered to us during a given
year as well as cash discounts, freight allowances and duplicate
payments and establish a basis for us to recover overpayments
made to vendors. We reduce future payments to vendors based on
the results of these audits, at which time we also establish
reserves for commissions payable to the third party service
provider as well as for amounts that may not be collected. We
also establish reserves for future repayments to vendors for
disputed payment deductions related to accounts payable audits,
promotional allowances and other items. Although our estimates
of reserves do not anticipate changes in our historical payback
rates, such changes could have a material impact on our
currently recorded reserves.
Share-based
Compensation
On January 1, 2006, we adopted Statement of Financial
Accounting Standards (SFAS) No. 123(R),
Share-Based Payment Revised 2004,
using the modified prospective transition method. Beginning
in 2006, our results of operations reflect compensation expense
for newly issued stock options and other forms of share-based
compensation granted under our stock incentive plans, for the
unvested portion of previously issued stock options and other
forms of share-based compensation granted, and for our employee
stock purchase plan. SFAS 123(R) 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. Compensation
expense for the share-based payment awards granted subsequent to
January 1, 2006 is based on the grant date fair value
estimated in
34
accordance with the provisions of SFAS 123(R). Share-based
compensation is based on awards ultimately expected to vest, and
is reduced for estimated forfeitures. SFAS 123(R) requires
forfeitures be estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ
materially from those estimates. Significant judgment is
required in selecting the assumptions used for estimating fair
value of share-based compensation as well estimating forfeiture
rates. Further, any awards with performance conditions that can
affect vesting also add additional judgment in determining the
amount expected to vest. There can be significant volatility in
many of our assumptions and therefore our estimates of fair
value, forfeitures, etc. are sensitive to changes in these
assumptions.
New
Accounting Standards
On January 1, 2006, we adopted Statement of Financial
Accounting Standards (SFAS) No. 123(R),
Share-Based Payment- Revised 2004, using the
modified prospective transition method as described in
Part II, Item 8, Note 10.
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. The interpretation is effective for fiscal years
beginning after December 15, 2006 (i.e., the beginning of
the Companys fiscal year 2007). We do not expect that the
adoption of FIN 48 will have a material impact on our
consolidated financial statements.
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 fair value instruments. FASB 157
does not require any new fair value measurements, but applies
under other accounting pronouncements that require or permit
fair value measurements. SFAS 157 is effective for
financial statements issued for fiscal years beginning after
November 15, 2007 (our fiscal 2008). We believe that
implementation of FASB 157 will have little or no impact on our
Consolidated Financial Statements.
In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 158, Employers
Accounting for Defined Benefit Pension and Other Postretirement
Plans an amendment of FASB Statements No. 87,
88, 106, and 132(R) (SFAS 158). SFAS 158
requires plan sponsors of defined benefit pension and other
postretirement benefit plans (collectively, postretirement
benefit plans) to fully recognize the funded status of
their postretirement benefit plans in the statement of financial
position, measure the fair value of plan assets and benefit
obligations as of the date of the fiscal year-end statement of
financial position and provide additional disclosures. On
December 30, 2006 we adopted the recognition and disclosure
provisions of SFAS 158. The effect of adopting
SFAS 158 on our financial condition at December 30,
2006 has been included in the accompanying consolidated
financial statements. SFAS 158 did not have an effect on
our consolidated financial condition at December 31, 2005
or January 1, 2005. SFAS 158s provisions
regarding the change in measurement date of postretirement plans
are not applicable as we already use a measurement date that
corresponds with our year-end for our pension plan. See
Part II, Item 8, Note 17 for further discussion
on the effect of adopting SFAS 158 on our consolidated
financial statements.
In September 2006, the SEC issued Staff Accounting
Bulletin No. 108, Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current
Year Financial Statements (SAB 108), to address
diversity in practice in quantifying financial statement
misstatements. SAB 108 requires that we quantify
misstatements based on their impact on each of our financial
statements and related disclosures. On December 30, 2006,
we adopted SAB 108. Our adoption of SAB 108 did not
impact our financial statements.
35
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Our exposure in the financial markets consists of changes in
interest rates relative to our investment in notes receivable,
the balance of our debt obligations outstanding, and derivatives
employed from time to time to manage our exposure to changes in
interest rates and diesel fuel prices. We do not use financial
instruments or derivatives for any trading or other speculative
purposes.
We carry notes receivable because, in the normal course of
business, we make long-term loans to certain retail customers.
Substantially all notes receivable are based on floating
interest rates which adjust to changes in market rates. As a
result, the carrying value of notes receivable approximates
market value. Refer to Part II, Item 8 of this report
under Note 6 Accounts and
Notes Receivable in Notes to Consolidated Financial
Statements for more information. See disclosures set forth under
Item 7 under the caption Managements Discussion
and Analysis of Financial Condition and Results of
Operations Liquidity and Capital Resources.
The table below provides information about our financial
instruments that are sensitive to changes in interest rates,
including debt obligations and interest rate swap agreements.
For debt obligations, the table presents principal cash flows
and related weighted average interest rates by expected maturity
dates. For interest rate swap agreements, the table presents the
estimate of the differential between interest payable and
interest receivable under the swap agreements implied by the
yield curve utilized to compute the fair value of the interest
rate swaps.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of Financial Instruments
|
|
|
|
December 30,
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
|
|
|
|
|
|
Aggregate Payments by Fiscal Year
|
|
|
|
Value
|
|
|
Total
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
Thereafter
|
|
|
|
(In millions, except rates)
|
|
|
Debt with variable interest rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payable
|
|
$
|
160.0
|
|
|
|
160.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160.0
|
|
|
|
|
|
|
|
|
|
Average variable rate payable
|
|
|
|
|
|
|
7.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.9
|
%
|
|
|
|
|
|
|
|
|
Debt with fixed interest rates:
Principal payable
|
|
$
|
140.5
|
|
|
|
154.6
|
|
|
|
0.6
|
|
|
|
0.6
|
|
|
|
0.6
|
|
|
|
0.6
|
|
|
|
0.7
|
|
|
|
151.5
|
|
Average fixed rate payable
|
|
|
|
|
|
|
3.5
|
%
|
|
|
6.3
|
%
|
|
|
6.0
|
%
|
|
|
6.0
|
%
|
|
|
6.0
|
%
|
|
|
6.0
|
%
|
|
|
3.5
|
%
|
Fixed to variable interest rate
swaps amount receivable:
|
|
$
|
0.8
|
|
|
|
0.8
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average variable rate payable
|
|
|
|
|
|
|
4.4
|
%
|
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average fixed rate payable
|
|
|
|
|
|
|
5.4
|
%
|
|
|
5.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Nash-Finch Company
We have audited the accompanying consolidated balance sheets of
Nash-Finch Company and subsidiaries as of December 30, 2006
and December 31, 2005, and the related consolidated
statements of income, stockholders equity, and cash flows
for each of the three years in the period ended
December 30, 2006. Our audits also included the financial
statement schedule referenced in Part IV, Item 15(2)
of this report. These financial statements and schedule are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Nash-Finch Company and subsidiaries at
December 30, 2006 and December 31, 2005, and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended
December 30, 2006, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set
forth therein.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of Nash-Finch Companys internal control over
financial reporting as of December 30, 2006, based on
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated
February 28, 2007 expressed an unqualified opinion thereon.
As discussed in Note 10 of the consolidated financial
statements, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 123(R),
Share-Based Payment Revised 2004 in the
fiscal year ending December 30, 2006.
Minneapolis, Minnesota
February 28, 2007
37
NASH
FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal years ended
December 30, 2006,
|
|
|
|
|
|
|
|
|
|
December 31, 2005 and January 1, 2005
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Sales
|
|
$
|
4,631,629
|
|
|
|
4,555,507
|
|
|
|
3,897,074
|
|
Cost of sales
|
|
|
4,229,807
|
|
|
|
4,124,344
|
|
|
|
3,474,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
401,822
|
|
|
|
431,163
|
|
|
|
422,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
319,678
|
|
|
|
300,837
|
|
|
|
299,727
|
|
Gains on sale of real estate
|
|
|
(1,130
|
)
|
|
|
(3,697
|
)
|
|
|
(5,586
|
)
|
Special charges
|
|
|
6,253
|
|
|
|
(1,296
|
)
|
|
|
34,779
|
|
Goodwill impairment
|
|
|
26,419
|
|
|
|
|
|
|
|
|
|
Extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
7,204
|
|
Depreciation and amortization
|
|
|
41,451
|
|
|
|
43,721
|
|
|
|
40,241
|
|
Interest expense
|
|
|
26,644
|
|
|
|
24,732
|
|
|
|
27,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other cost and expenses
|
|
|
419,315
|
|
|
|
364,297
|
|
|
|
403,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing
operations before income taxes and cumulative effect of a change
in accounting principle
|
|
|
(17,493
|
)
|
|
|
66,866
|
|
|
|
19,199
|
|
Income tax expense
|
|
|
5,835
|
|
|
|
25,670
|
|
|
|
4,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing
operations before cumulative effect of a change in accounting
principle
|
|
|
(23,328
|
)
|
|
|
41,196
|
|
|
|
14,877
|
|
Earnings from discontinued
operations, net of income tax expense of $102, $36 and $36 in
2006, 2005 and 2004, respectively
|
|
|
160
|
|
|
|
56
|
|
|
|
55
|
|
Cumulative effect of a change in
accounting principle, net of income tax expense of $119 in 2006
|
|
|
169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(22,999
|
)
|
|
|
41,252
|
|
|
|
14,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations before
cumulative effect of a change in accounting principle
|
|
$
|
(1.74
|
)
|
|
|
3.19
|
|
|
|
1.20
|
|
Discontinued operations, net of
income tax expense
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
Cumulative effect of a change in
accounting principle, net of income tax expense
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) per share
|
|
$
|
(1.72
|
)
|
|
|
3.19
|
|
|
|
1.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations before
cumulative effect of a change in accounting principle
|
|
$
|
(1.74
|
)
|
|
|
3.13
|
|
|
|
1.18
|
|
Discontinued operations, net of
income tax expense
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
Cumulative effect of a change in
accounting principle, net of income tax expense
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) per share
|
|
$
|
(1.72
|
)
|
|
|
3.13
|
|
|
|
1.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
38
NASH
FINCH COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
December 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
958
|
|
|
|
1,257
|
|
Accounts and notes receivable, net
|
|
|
186,833
|
|
|
|
195,367
|
|
Inventories
|
|
|
241,875
|
|
|
|
289,123
|
|
Prepaid expenses and other
|
|
|
15,445
|
|
|
|
16,984
|
|
Deferred tax assets
|
|
|
11,942
|
|
|
|
9,476
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
457,053
|
|
|
|
512,207
|
|
Notes receivable, net
|
|
|
13,167
|
|
|
|
16,299
|
|
Property, plant and equipment:
|
|
|
|
|
|
|
|
|
Land
|
|
|
16,924
|
|
|
|
18,107
|
|
Buildings and improvements
|
|
|
194,793
|
|
|
|
193,181
|
|
Furniture, fixtures and equipment
|
|
|
311,280
|
|
|
|
311,778
|
|
Leasehold improvements
|
|
|
65,197
|
|
|
|
65,451
|
|
Construction in progress
|
|
|
1,148
|
|
|
|
1,876
|
|
Assets under capitalized leases
|
|
|
31,213
|
|
|
|
40,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
620,555
|
|
|
|
630,564
|
|
Less accumulated depreciation and
amortization
|
|
|
(400,750
|
)
|
|
|
(387,857
|
)
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
|
219,805
|
|
|
|
242,707
|
|
Goodwill
|
|
|
215,174
|
|
|
|
244,471
|
|
Customer contracts &
relationships, net
|
|
|
32,141
|
|
|
|
35,619
|
|
Investment in direct financing
leases
|
|
|
6,143
|
|
|
|
9,920
|
|
Deferred tax asset, net
|
|
|
|
|
|
|
1,667
|
|
Other assets
|
|
|
10,820
|
|
|
|
14,534
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
954,303
|
|
|
|
1,077,424
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Outstanding checks
|
|
$
|
13,335
|
|
|
|
10,787
|
|
Current maturities of long-term
debt and capitalized lease obligations
|
|
|
3,776
|
|
|
|
5,022
|
|
Accounts payable
|
|
|
196,168
|
|
|
|
217,368
|
|
Accrued expenses
|
|
|
64,747
|
|
|
|
83,539
|
|
Income taxes payable
|
|
|
196
|
|
|
|
9,143
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
278,222
|
|
|
|
325,859
|
|
Long-term debt
|
|
|
313,985
|
|
|
|
370,248
|
|
Capitalized lease obligations
|
|
|
33,869
|
|
|
|
37,411
|
|
Deferred tax liability, net
|
|
|
4,214
|
|
|
|
|
|
Other liabilities
|
|
|
29,633
|
|
|
|
21,328
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock no par
value
|
|
|
|
|
|
|
|
|
Authorized 500 shares ; none
issued
|
|
|
|
|
|
|
|
|
Common stock of
$1.662/3
par value
|
|
|
|
|
|
|
|
|
Authorized 50,000 shares,
issued 13,409 and 13,317 shares, respectively
|
|
|
22,348
|
|
|
|
22,195
|
|
Additional paid-in capital
|
|
|
53,697
|
|
|
|
49,430
|
|
Restricted stock
|
|
|
|
|
|
|
(78
|
)
|
Common stock held in trust
|
|
|
(2,051
|
)
|
|
|
(1,882
|
)
|
Deferred compensation obligations
|
|
|
2,051
|
|
|
|
1,882
|
|
Accumulated other comprehensive
income
|
|
|
(4,582
|
)
|
|
|
(4,912
|
)
|
Retained earnings
|
|
|
223,416
|
|
|
|
256,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
294,879
|
|
|
|
322,784
|
|
Less cost of 21 and 11 shares
of common stock in treasury, respectively
|
|
|
(499
|
)
|
|
|
(206
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
294,380
|
|
|
|
322,578
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
stockholders equity
|
|
$
|
954,303
|
|
|
|
1,077,424
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
39
NASH
FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(22,999
|
)
|
|
|
41,252
|
|
|
|
14,932
|
|
Adjustments to reconcile net
earnings (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Special charges non
cash portion
|
|
|
6,253
|
|
|
|
(1,296
|
)
|
|
|
34,779
|
|
Impairment of retail goodwill
|
|
|
26,419
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
(262
|
)
|
|
|
(92
|
)
|
|
|
(91
|
)
|
Extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
2,530
|
|
Depreciation and amortization
|
|
|
41,451
|
|
|
|
43,721
|
|
|
|
40,241
|
|
Amortization of deferred financing
costs
|
|
|
823
|
|
|
|
821
|
|
|
|
1,115
|
|
Amortization of rebatable loans
|
|
|
3,926
|
|
|
|
2,595
|
|
|
|
2,392
|
|
Provision for bad debts
|
|
|
5,600
|
|
|
|
4,851
|
|
|
|
4,220
|
|
Provision for lease reserves
|
|
|
7,042
|
|
|
|
(1,572
|
)
|
|
|
2,827
|
|
Deferred income tax expense
|
|
|
3,417
|
|
|
|
711
|
|
|
|
(12,487
|
)
|
Gain on sale of real estate and
other
|
|
|
(1,881
|
)
|
|
|
(4,505
|
)
|
|
|
(6,001
|
)
|
LIFO charge
|
|
|
2,630
|
|
|
|
724
|
|
|
|
3,525
|
|
Asset impairments
|
|
|
11,443
|
|
|
|
5,170
|
|
|
|
853
|
|
Share-based compensation
|
|
|
1,166
|
|
|
|
1,718
|
|
|
|
845
|
|
Cumulative effect of a change in
accounting principle
|
|
|
(288
|
)
|
|
|
|
|
|
|
|
|
Deferred compensation
|
|
|
(226
|
)
|
|
|
918
|
|
|
|
(276
|
)
|
Other
|
|
|
(1,192
|
)
|
|
|
2,542
|
|
|
|
1,832
|
|
Changes in operating assets and
liabilities, net of effects of acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable
|
|
|
5,889
|
|
|
|
(5,522
|
)
|
|
|
(11,270
|
)
|
Inventories
|
|
|
44,619
|
|
|
|
(31,295
|
)
|
|
|
19,421
|
|
Prepaid expenses
|
|
|
3,128
|
|
|
|
(1,202
|
)
|
|
|
(388
|
)
|
Accounts payable
|
|
|
(21,729
|
)
|
|
|
(1,298
|
)
|
|
|
13,617
|
|
Accrued expenses
|
|
|
(10,564
|
)
|
|
|
6,368
|
|
|
|
(17,780
|
)
|
Income taxes payable
|
|
|
(10,536
|
)
|
|
|
(1,677
|
)
|
|
|
206
|
|
Other assets and liabilities
|
|
|
(3,994
|
)
|
|
|
(1,615
|
)
|
|
|
6,852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
90,135
|
|
|
|
61,317
|
|
|
|
101,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposal of property, plant and
equipment
|
|
|
6,333
|
|
|
|
16,346
|
|
|
|
17,136
|
|
Additions to property, plant and
equipment
|
|
|
(27,469
|
)
|
|
|
(24,638
|
)
|
|
|
(22,327
|
)
|
Business acquired, net of cash
|
|
|
|
|
|
|
(226,351
|
)
|
|
|
|
|
Loans to customers
|
|
|
(5,767
|
)
|
|
|
(3,086
|
)
|
|
|
(4,364
|
)
|
Payments from customers on loans
|
|
|
2,165
|
|
|
|
7,797
|
|
|
|
2,916
|
|
Purchase of marketable securities
|
|
|
(233
|
)
|
|
|
(2,112
|
)
|
|
|
(2,610
|
)
|
Sale of marketable securities
|
|
|
921
|
|
|
|
2,927
|
|
|
|
1,113
|
|
Corporate owned life insurance, net
|
|
|
(320
|
)
|
|
|
(1,707
|
)
|
|
|
|
|
Other
|
|
|
(139
|
)
|
|
|
144
|
|
|
|
(144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(24,509
|
)
|
|
|
(230,680
|
)
|
|
|
(8,280
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds (payments) of revolving
debt
|
|
|
(41,600
|
)
|
|
|
30,600
|
|
|
|
14,674
|
|
Dividends paid
|
|
|
(9,611
|
)
|
|
|
(8,779
|
)
|
|
|
(6,673
|
)
|
Proceeds from exercise of stock
options
|
|
|
680
|
|
|
|
11,686
|
|
|
|
5,380
|
|
Proceeds from employee stock
purchase plan
|
|
|
502
|
|
|
|
567
|
|
|
|
654
|
|
Proceeds from long-term debt
|
|
|
|
|
|
|
150,087
|
|
|
|
175,000
|
|
Payments of long-term debt
|
|
|
(16,104
|
)
|
|
|
(10,425
|
)
|
|
|
(268,047
|
)
|
Payments of capitalized lease
obligations
|
|
|
(2,901
|
)
|
|
|
(2,623
|
)
|
|
|
(2,515
|
)
|
Increase (decrease) in outstanding
checks
|
|
|
2,549
|
|
|
|
(557
|
)
|
|
|
(12,006
|
)
|
Premium paid for early
extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
(4,674
|
)
|
Payments of deferred financing costs
|
|
|
|
|
|
|
(4,965
|
)
|
|
|
(3,135
|
)
|
Tax benefit from exercise of stock
options
|
|
|
68
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
(65,925
|
)
|
|
|
165,591
|
|
|
|
(101,342
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash
|
|
|
(299
|
)
|
|
|
(3,772
|
)
|
|
|
(7,728
|
)
|
Cash at beginning of year
|
|
|
1,257
|
|
|
|
5,029
|
|
|
|
12,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
958
|
|
|
|
1,257
|
|
|
|
5,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash
flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non cash investing and financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of minority interest
|
|
$
|
|
|
|
|
21
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
40
NASH
FINCH COMPANY
Consolidated Statements of Stockholders Equity
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and
|
|
|
Unrealized
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other Post-
|
|
|
(Loss) Gain on
|
|
|
(Loss)/Gain
|
|
Fiscal years ended December 30, 2006
|
|
Common Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Retirement
|
|
|
Marketable
|
|
|
on Hedging
|
|
December 31, 2005 and January 1, 2005
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Benefits
|
|
|
Securities
|
|
|
Activities
|
|
|
Balance at January 3, 2004
|
|
|
12,152
|
|
|
$
|
20,255
|
|
|
$
|
27,995
|
|
|
$
|
215,417
|
|
|
$
|
(4,778
|
)
|
|
$
|
|
|
|
$
|
(1,192
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred gain on hedging
activities, net of tax of $758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,186
|
|
Unrealized gains (losses) on
investments in rabbi trust, net of tax of $56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
|
|
|
|
|
|
Minimum pension liability
adjustment, net of tax benefit of $369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(565
|
)
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared of
$.54 share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,673
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury stock issued upon exercise
of options
|
|
|
|
|
|
|
|
|
|
|
(167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon exercise
of options
|
|
|
347
|
|
|
|
579
|
|
|
|
4,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for employee
stock purchase plan
|
|
|
40
|
|
|
|
66
|
|
|
|
587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to a rabbi trust
|
|
|
118
|
|
|
|
196
|
|
|
|
(196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit associated with
compensation plans
|
|
|
|
|
|
|
|
|
|
|
1,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized compensation under
restricted stock plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeiture of restricted stock
issued pursuant to performance awards
|
|
|
|
|
|
|
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2005
|
|
|
12,657
|
|
|
$
|
21,096
|
|
|
|
34,848
|
|
|
|
223,676
|
|
|
|
(5,343
|
)
|
|
|
87
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred gain on hedging
activities, net of tax of $918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,436
|
|
Unrealized gains (losses) on
investments in rabbi trust, net of tax benefit of $56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87
|
)
|
|
|
|
|
Minimum pension liability
adjustment, net of tax benefit of $619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(999
|
)
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared of
$.675 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,779
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon exercise
of options
|
|
|
633
|
|
|
|
1,054
|
|
|
|
10,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for employee
purchase plan
|
|
|
22
|
|
|
|
38
|
|
|
|
529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to a rabbi trust
|
|
|
4
|
|
|
|
6
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit associated with
compensation plans
|
|
|
|
|
|
|
|
|
|
|
3,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized compensation under
restricted stock plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
1
|
|
|
|
1
|
|
|
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
13,317
|
|
|
|
22,195
|
|
|
|
49,430
|
|
|
|
256,149
|
|
|
|
(6,342
|
)
|
|
|
|
|
|
|
1,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,999
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loss on hedging
activities, net of tax of $619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(969
|
)
|
Minimum pension liability
adjustment, net of tax of $271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
424
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to initially apply
SFAS Statement No. 158, net of tax of $559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
875
|
|
|
|
|
|
|
|
|
|
Dividends declared of $.72 per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,611
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
1
|
|
|
|
1
|
|
|
|
2,679
|
|
|
|
(123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon exercise
of options
|
|
|
35
|
|
|
|
59
|
|
|
|
621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for employee
purchase plan
|
|
|
25
|
|
|
|
42
|
|
|
|
460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for performance
units
|
|
|
27
|
|
|
|
45
|
|
|
|
445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued to a rabbi trust
|
|
|
4
|
|
|
|
6
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit associated with
compensation plans
|
|
|
|
|
|
|
|
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortized compensation under
restricted plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeiture of restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 30, 2006
|
|
|
13,409
|
|
|
$
|
22,348
|
|
|
$
|
53,697
|
|
|
$
|
223,416
|
|
|
$
|
(5,043
|
)
|
|
$
|
|
|
|
$
|
461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
41
NASH
FINCH COMPANY
Consolidated Statements of Stockholders
Equity (Continued)
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
Common stock
|
|
|
|
|
|
|
|
|
Total
|
|
Fiscal years ended December 31, 2005
|
|
Restricted
|
|
|
Compensation
|
|
|
Held in a Trust
|
|
|
Treasury Stock
|
|
|
Stockholders
|
|
December 31, 2005 and January 1, 2005
|
|
Stock
|
|
|
Obligation
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Equity
|
|
|
Balance at January 3, 2004
|
|
$
|
(475
|
)
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
(35
|
)
|
|
$
|
(765
|
)
|
|
$
|
256,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,932
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred gain on hedging
activities, net of tax of $758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,186
|
|
Unrealized gains (losses) on
investments in rabbi trust, net of tax of $56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
|
|
Minimum pension liability
adjustment, net of tax benefit of $369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(565
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,640
|
|
Dividend declared of $.54 share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,673
|
)
|
Treasury stock issued upon exercise
of options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
362
|
|
|
|
195
|
|
Common stock issued upon exercise
of options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,184
|
|
Common stock issued for employee
stock purchase plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
653
|
|
Common stock issued to a rabbi trust
|
|
|
|
|
|
|
1,652
|
|
|
|
(118
|
)
|
|
|
(1,652
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit associated with
compensation plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,714
|
|
Amortized compensation under
restricted stock plan
|
|
|
251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
251
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
|
|
|
|
207
|
|
|
|
547
|
|
Forfeiture of restricted stock
issued pursuant to performance awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(10
|
)
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2005
|
|
|
(224
|
)
|
|
|
1,652
|
|
|
|
(118
|
)
|
|
|
(1,652
|
)
|
|
|
(11
|
)
|
|
|
(206
|
)
|
|
|
273,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,252
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loss on hedging
activities, net of tax of $918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,436
|
|
Unrealized gains (losses) on
investments in rabbi trust, net of tax benefit of $56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87
|
)
|
Minimum pension liability
adjustment, net of tax benefit of $619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(999
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,602
|
|
Dividend declared of $.675 per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,779
|
)
|
Common stock issued upon exercise
of options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,685
|
|
Common stock issued for employee
purchase plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
567
|
|
Common stock issued to a rabbi trust
|
|
|
|
|
|
|
230
|
|
|
|
(6
|
)
|
|
|
(230
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit associated with
compensation plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,119
|
|
Amortized compensation under
restricted stock plan
|
|
|
146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
146
|
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2005
|
|
|
(78
|
)
|
|
|
1,882
|
|
|
|
(124
|
)
|
|
|
(1,882
|
)
|
|
|
(11
|
)
|
|
|
(206
|
)
|
|
|
322,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,999
|
)
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred gain on hedging
activities, net of tax of $619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(969
|
)
|
Minimum pension liability
adjustment, net of tax of $271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,544
|
)
|
Adjustment to initially apply
SFAS Statement No. 158, net of tax of $559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
875
|
|
Dividend declared of $.72 per
share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,611
|
)
|
Share-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,557
|
|
Common stock issued upon exercise
of options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
680
|
|
Common stock issued for employee
purchase plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
502
|
|
Common stock issued for performance
units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
490
|
|
Common stock issued to a rabbi trust
|
|
|
|
|
|
|
169
|
|
|
|
(7
|
)
|
|
|
(169
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit associated with
compensation plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
|
|
Amortized compensation under
restricted plan
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
|
|
Forfeiture of restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10
|
)
|
|
|
(293
|
)
|
|
|
(293
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 30, 2006
|
|
$
|
|
|
|
$
|
2,051
|
|
|
|
(131
|
)
|
|
$
|
(2,051
|
)
|
|
|
(21
|
)
|
|
$
|
(499
|
)
|
|
$
|
294,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements
42
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary
of Significant Accounting Policies
Fiscal
Year
The fiscal year of Nash-Finch Company (Nash Finch)
ends on the Saturday nearest to December 31. Fiscal year
2006, 2005 and 2004 consisted of 52 weeks. Our interim
quarters consist of 12 weeks except for the third quarter
which has 16 weeks.
Principles
of Consolidation
The accompanying financial statements include our accounts and
the accounts of our majority-owned subsidiaries. All material
inter-company accounts and transactions have been eliminated in
the consolidated financial statements.
Reclassifications
Certain reclassifications have been reflected in the
consolidated balance sheets and consolidated statements of cash
flows for prior years. These reclassifications did not have an
impact on operating earnings, earnings before income taxes, net
earnings, total cash flows or the financial position for any
period presented.
Cash
and Cash Equivalents
In the accompanying financial statements and for purposes of the
statements of cash flows, cash and cash equivalents include cash
on hand and short-term investments with original maturities of
three months or less.
Revenue
Recognition
Revenues for the food distribution and military segments are
recognized when the customer receives the product. Retail
segment revenues are recognized at the point of sale.
Cost
of sales
Cost of sales includes the cost of inventory sold during the
period, including distribution costs and shipping and handling
fees. Advertising costs, included in cost of goods sold, are
expensed as incurred and were $52.6 million,
$50.7 million and $44.9 million for fiscal 2006, 2005
and 2004, respectively. Advertising income, included in cost of
goods sold, offsetting advertising expense was approximately
$57.0 million, $53.4 million and $46.5 million
for fiscal 2006, 2005 and 2004, respectively.
Vendor
Allowances and Credits
We reflect vendor allowances and credits, which include
allowances and incentives similar to discounts, as a reduction
of cost of sales when the related inventory has been sold, based
on the underlying arrangement with the vendor. These allowances
primarily consist of promotional allowances, quantity discounts
and payments under merchandising arrangements. Amounts received
under promotional or merchandising arrangements that require
specific performance are recognized in the consolidated
statements of income when the performance is satisfied and the
related inventory has been sold. Discounts based on the quantity
of purchases from our vendors or sales to customers are
recognized in the consolidated statements of income as the
product is sold. When payment is received prior to fulfillment
of the terms, the amounts are deferred and recognized according
to the terms of the arrangement. (Refer to Note 2,
Vendor Allowances and Credits.)
Inventories
Inventories are stated at the lower of cost or market.
Approximately 83% and 84% of our inventories were valued on the
last-in,
first-out (LIFO) method at December 30, 2006 and
December 31, 2005,
43
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
respectively. During fiscal 2006, we recorded a LIFO charge of
$2.6 million compared to a $0.7 million charge in
fiscal 2005 and a $3.5 million charge in fiscal 2004. The
remaining inventories are valued on the
first-in,
first-out (FIFO) method. If the FIFO method of accounting for
inventories had been used, inventories would have been
$51.2 million, $48.6 million and $47.9 million
higher at December 30, 2006, December 31, 2005, and
January 1, 2005, respectively.
Capitalization,
Depreciation and Amortization
Property, plant and equipment are stated at cost. Assets under
capitalized leases are recorded at the present value of future
lease payments or fair market value, whichever is lower.
Expenditures which improve or extend the life of the respective
assets are capitalized while maintenance and repairs are
expensed as incurred.
Property, plant and equipment are depreciated on a straight-line
basis over the estimated useful lives of the assets which
generally range from
10-40 years
for buildings and improvements and
3-10 years
for furniture, fixtures and equipment. Capitalized leases and
leasehold improvements are amortized on a straight-line basis
over the shorter of the term of the lease or the useful life of
the asset.
Impairment
of Long-lived Assets
An impairment loss is recognized whenever events or changes in
circumstances indicate the carrying amount of an asset is not
recoverable. In applying Statement of Financial Accounting
Standards (SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, assets
are grouped and evaluated at the lowest level for which there
are identifiable cash flows that are largely independent of the
cash flows of other groups of assets. We have generally
identified this lowest level to be individual stores or
distribution centers; however, there are limited circumstances
where, for evaluation purposes, stores could be considered with
the distribution center they support. We allocate the portion of
the profit retained at the servicing distribution center to the
individual store when performing the impairment analysis in
order to determine the stores total contribution to us. We
consider historical performance and future estimated results in
its evaluation of potential impairment. If the carrying amount
of the asset exceeds expected undiscounted future cash flows, we
measure the amount of the impairment by comparing the carrying
amount of the asset to its fair value, generally measured by
discounting the expected future cash flows at the rate we
utilize to evaluate potential investments. In fiscal 2006, 2005
and 2004, we recorded impairment charges, other than amounts
separately classified as special charges, of $11.4 million,
$5.2 million and $0.9 million, respectively, within
the selling, general and administrative caption of
the consolidated statements of income.
Discontinued
Operations
On July 31, 1999, we sold the outstanding stock of our
wholly-owned produce growing and marketing subsidiary, Nash-De
Camp. Nash-De Camp had previously been reported as a
discontinued operation following a fourth quarter fiscal 1998
decision to sell the subsidiary. The net earnings from
discontinued operations of $0.2 million in fiscal 2006 and
$0.1 million in fiscal 2005 and 2004 reported under the
caption Discontinued operations were a result of the
resolution of a contingency associated with the sale.
Reserves
for Self Insurance
We are primarily self-insured for workers compensation,
general and automobile liability and health insurance costs. It
is our policy to record our self insurance liabilities based on
claims filed and an estimate of claims incurred but not yet
reported. Workers compensation and general and automobile
liabilities are actuarially determined on a discounted basis. We
have purchased stop-loss coverage to limit our exposure to any
significant exposure on a per claim basis. Any projection of
losses concerning workers compensation, general and
automobile and health insurance liability is subject to a
considerable degree of variability. Among
44
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the causes of this variability are unpredictable external
factors affecting future inflation rates, litigation trends,
legal interpretations, benefit level changes and claim
settlement patterns.
Goodwill
and Intangible Assets
Intangible assets, consisting primarily of goodwill and customer
contracts, resulting from business acquisitions, are carried at
cost. Separate intangible assets that are not deemed to have an
indefinite life are amortized over their useful lives. In
accordance with SFAS No. 142, Goodwill and Other
Intangible Assets (SFAS 142), we test
goodwill for impairment on an annual basis in the fourth quarter
or more frequently if we believe indicators of impairment exist.
The performance of the test involves a two-step process. The
first step of the impairment test involves comparing the fair
values of the applicable reporting units with their aggregate
carrying values, including goodwill. We generally determine the
fair value of our reporting units using the income approach
methodology of valuation that includes the discounted cash flow
method as well as other generally accepted valuation
methodologies. If the carrying amount of a reporting unit
exceeds the reporting units fair value, we perform the
second step of the goodwill impairment test to determine the
amount of impairment loss. The second step of the goodwill
impairment test involves comparing the implied fair value of the
affected reporting units goodwill with the carrying value
of that goodwill.
We performed our annual impairment test of goodwill during the
fourth quarter based on conditions as of the end of our third
fiscal quarter in 2006, in accordance with SFAS 142, and
determined that our retail segment goodwill was impaired
necessitating a charge of $26.4 million. The impairment was
due to decreased sales and cash flows in our retail segment as a
result of closing or selling retail stores and continued
declines in same store sales brought about by intense
competition from supercenters and other alternative formats.
Impairment tests performed as of the third quarter of 2005 and
third quarter of 2004 indicated that no impairment was necessary
based on the conditions at those times.
Changes in the net carrying amount of goodwill were as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
Military
|
|
|
Retail
|
|
|
Total
|
|
|
Goodwill as of January 1, 2005
|
|
$
|
23,158
|
|
|
|
25,754
|
|
|
|
98,523
|
|
|
|
147,435
|
|
Acquisition of food distribution
centers
|
|
|
98,566
|
|
|
|
|
|
|
|
|
|
|
|
98,566
|
|
Sale of retail stores
|
|
|
|
|
|
|
|
|
|
|
(1,530
|
)
|
|
|
(1,530
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill as of December 31,
2005
|
|
|
121,724
|
|
|
|
25,754
|
|
|
|
96,993
|
|
|
|
244,471
|
|
Resolution of estimates related to
2005 acquisition
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
|
139
|
|
Sale or closure of retail stores
|
|
|
|
|
|
|
|
|
|
|
(3,017
|
)
|
|
|
(3,017
|
)
|
Retail goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
(26,419
|
)
|
|
|
(26,419
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill as of December 30,
2006
|
|
$
|
121,863
|
|
|
|
25,754
|
|
|
|
67,557
|
|
|
|
215,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Customer contracts & relationships intangibles,
including $34.6 million (gross) related to the
Roundys acquisition were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 30, 2006
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Estimated
|
|
|
|
Carrying
|
|
|
Accum.
|
|
|
Carrying
|
|
|
Life
|
|
|
|
Value
|
|
|
Amort.
|
|
|
Amount
|
|
|
(years)
|
|
|
Customer contracts &
relationships
|
|
$
|
43,082
|
|
|
|
(10,941
|
)
|
|
|
32,141
|
|
|
|
5-20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Estimated
|
|
|
|
Carrying
|
|
|
Accum.
|
|
|
Carrying
|
|
|
Life
|
|
|
|
Value
|
|
|
Amort.
|
|
|
Amount
|
|
|
(years)
|
|
|
Customer contracts &
relationships
|
|
$
|
42,696
|
|
|
|
(7,077
|
)
|
|
|
35,619
|
|
|
|
1-20
|
|
Other intangible assets included in other assets on the
consolidated balance sheets were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 30, 2006
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Estimated
|
|
|
|
Carrying
|
|
|
Accum.
|
|
|
Carrying
|
|
|
Life
|
|
|
|
Value
|
|
|
Amort.
|
|
|
Amount
|
|
|
(years)
|
|
|
Trade names
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
n/a
|
|
Franchise agreements
|
|
|
2,694
|
|
|
|
(1,068
|
)
|
|
|
1,626
|
|
|
|
17-25
|
|
Non-compete agreements
|
|
|
1,034
|
|
|
|
(811
|
)
|
|
|
223
|
|
|
|
5-10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
Estimated
|
|
|
|
Carrying
|
|
|
Accum.
|
|
|
Carrying
|
|
|
Life
|
|
|
|
Value
|
|
|
Amort.
|
|
|
Amount
|
|
|
(years)
|
|
|
Trade names
|
|
$
|
3,300
|
|
|
|
(1,188
|
)
|
|
|
2,112
|
|
|
|
25
|
|
Franchise agreements
|
|
|
2,694
|
|
|
|
(960
|
)
|
|
|
1,734
|
|
|
|
5-25
|
|
Non-compete agreements
|
|
|
1,809
|
|
|
|
(1,212
|
)
|
|
|
597
|
|
|
|
3-10
|
|
Aggregate amortization expense recognized for fiscal 2006, 2005,
and 2004 was $4.4 million, $4.5 million, and
$1.6 million, respectively. In fiscal 2006 we incurred an
impairment charge of $2.0 million reflecting the impairment
of a tradename which was deemed to have no future value. The
aggregate amortization expense for the five succeeding fiscal
years is expected to approximate $4.0 million,
$3.8 million, $3.6 million, $3.4 million and
$2.7 million for fiscal years 2007 through 2011,
respectively.
Income
Taxes
When preparing our consolidated financial statements, we are
required to estimate our income taxes in each of the
jurisdictions in which we operate. This process involves
estimating our actual current tax obligations based on expected
income, statutory tax rates and tax planning opportunities in
the various jurisdictions in which we operate. In the event
there is a significant unusual or one-time item recognized in
our results of operations, the tax attributable to that item
would be separately calculated and recorded in the period the
unusual or one-time item occurred.
Deferred income taxes are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates expected to
apply to taxable income in
46
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the years in which those temporary differences are expected to
be recovered or settled. We maintain valuation allowances where
it is more likely than not all or a portion of the deferred tax
asset will not be realized. Changes in valuation allowances from
period to period are included in our tax provision in the period
of change. We have established reserves for income tax
contingencies. We establish reserves when, despite our belief
that the tax return positions are fully supportable, certain
positions are likely to be challenged and we may ultimately not
prevail in defending our positions. These reserves are adjusted
in light of changing facts and circumstances, such as the
closing of a tax audit or the expiration of a statute. The
effective tax rate includes the impact of reserve provisions and
changes to reserves that are considered appropriate, as well as
related interest and penalties. These reserves relate to various
tax years subject to audit by taxing authorities.
Financial
Instruments
We account for derivative financial instruments pursuant to
SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended.
SFAS No. 133 requires derivatives be carried at fair
value on the balance sheet and provides for hedge accounting
when certain conditions are met.
We have market risk exposure to changing interest rates
primarily as a result of our borrowing activities and to the
cost of fuel in our distribution operations. Our objective in
managing our exposure to changes in interest rates and the cost
of fuel is to reduce fluctuations in earnings and cash flows. To
achieve these objectives, we use derivative instruments,
primarily interest rate swap agreements and fuel hedges, to
manage risk exposures when appropriate, based on market
conditions. We do not enter into derivative agreements for
trading or other speculative purposes, nor are we a party to any
leveraged derivative instrument.
Share-based
compensation
On January 1, 2006, we adopted Statement of Financial
Accounting Standards (SFAS) No. 123(R),
Share-Based Payment Revised 2004,
using the modified prospective transition method. Beginning
in 2006, our results of operations reflect compensation expense
for newly issued stock options and other forms of share-based
compensation granted under our stock incentive plans, for the
unvested portion of previously issued stock options and other
forms of share-based compensation granted, and for our employee
stock purchase plan. Prior to adoption of SFAS 123(R), we
accounted for the share-based awards under the recognition and
measurement provisions of Accounting Principles Board Opinion
(APB) No. 25, Accounting for Stock Issued to
Employees, and related interpretations, as permitted
by SFAS No. 123, Accounting for Stock-Based
Compensation. Under this method of accounting, no
share-based employee compensation cost for stock option awards
was recognized for the fiscal years ended December 31, 2005
and January 1, 2005 because in all cases the option price
equaled or exceeded the market price at the date of the grant.
In accordance with the modified prospective method of
transition, results for prior periods have not been restated to
reflect this change in accounting principle.
Comprehensive
Income
We report comprehensive income in accordance with
SFAS No. 130, Reporting Comprehensive
Income. Other comprehensive income refers to revenues,
expenses, gains and losses that are not included in net
earnings, but rather are recorded directly in the Consolidated
Statements of Stockholders Equity.
Use of
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
47
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
New
Accounting Standards
On January 1, 2006, we adopted Statement of Financial
Accounting Standards (SFAS) No. 123(R),
Share-Based Payment- Revised 2004, using the
modified prospective transition method as described in
Part I, Item 1, Note 4.
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. The interpretation is effective for fiscal years
beginning after December 15, 2006 (i.e., the beginning of
our fiscal year 2007). We do not expect that the adoption of
FIN 48 will have a material impact on our consolidated
financial statements.
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 fair value instruments.
SFAS 157 does not require any new fair value measurements,
but applies under other accounting pronouncements that require
or permit fair value measurements. SFAS 157 is effective
for financial statements issued for fiscal years beginning after
November 15, 2007 (our fiscal 2008). We believe that
implementation of SFAS 157 will have little or no impact on
our Consolidated Financial Statements.
In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 158, Employers
Accounting for Defined Benefit Pension and Other Postretirement
Plans an amendment of FASB Statements No. 87,
88, 106, and 132(R) (SFAS 158). SFAS 158
requires plan sponsors of defined benefit pension and other
postretirement benefit plans (collectively, postretirement
benefit plans) to fully recognize the funded status of
their postretirement benefit plans in the statement of financial
position, measure the fair value of plan assets and benefit
obligations as of the date of the fiscal year-end statement of
financial position and provide additional disclosures. On
December 30, 2006 we adopted the recognition and disclosure
provisions of SFAS 158. The effect of adopting
SFAS 158 on our financial condition at December 30,
2006 has been included in the accompanying consolidated
financial statements. SFAS 158 did not have an effect on
our consolidated financial condition at December 31, 2005.
SFAS 158s provisions regarding the change in
measurement date of postretirement plans are not applicable as
we already use a measurement date that corresponds with our
year-end for our pension plan. See Note 17 for further
discussion on the effect of adopting SFAS 158 on our
consolidated financial statements.
In September 2006, the SEC issued Staff Accounting
Bulletin No. 108, Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current
Year Financial Statements ( SAB 108), to address
diversity in practice in quantifying financial statement
misstatements. SAB 108 requires that we quantify
misstatements based on their impact on each of our financial
statements and related disclosures. On December 30, 2006,
we adopted SAB 108. Our adoption of SAB 108 did not
impact our financial statements.
(2) Vendor
Allowances and Credits
We participate with our vendors in a broad menu of promotions to
increase sales of products. These promotions fall into two main
categories: off-invoice allowances and performance-based
allowances and are often subject to negotiation with vendors. In
the case of off-invoice allowances, discounts are typically
offered by vendors with respect to certain merchandise purchased
by us during a specified period of time. We use off-invoice
allowances to support a variety of marketing programs such as
reduced price offerings for specific time periods, food shows,
pallet promotions and private label promotions. The discounts
are either reflected directly on the vendor invoice, as a
reduction from the normal wholesale prices for merchandise to
which the
48
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
allowance applies, or we are allowed to deduct the allowance as
an offset against the vendors invoice when it is paid.
In the case of performance-based allowances, the allowance or
rebate is based on our completion of some specific activity,
such as purchasing or selling product during a certain time
period. This basic performance requirement may be accompanied by
an additional performance requirement such as providing
advertising or special in-store promotion, tracking specific
shipments of goods to retailers, or to customers in the case of
our own retail stores, during a specified period (retail
performance allowances), slotting (adding a new item to the
system in one or more of our distribution centers) and
merchandising a new item, or achieving certain minimum purchase
quantities. The billing for these performance-based allowances
is normally in the form of a bill-back in which case
we are invoiced at the regular price with the understanding that
we may bill back the vendor for the requisite allowance when the
performance is satisfied. We also assess an administrative fee,
reflected on the invoices sent to vendors, to recoup our
reasonable costs of performing the tasks associated with
administering retail performance allowances.
We collectively plan promotions with our vendors and arrive at
the amount the respective vendor plans to spend on promotions
with us. Each vendor has its own method for determining the
amount of promotional funds budgeted to be spent with us during
the period. In most situations, the vendor allowances are based
on units we purchase from the vendor. In other situations, the
allowances are based on our past or anticipated purchases
and/or the
anticipated performance of the planned promotions. Forecasting
promotional expenditures is a critical part of our frequently
scheduled planning sessions with our vendors. As individual
promotions are completed and the associated billing is
processed, the vendors track our promotional program execution
and spend rate, and discuss the tracking, performance and spend
rate with us on a regular basis throughout the year, variously
on a weekly, monthly, quarterly or annual basis. These
communications include future promotions, product cost, targeted
retails and price points, anticipated volume, promotion
expenditures, vendor maintenance, billing issues and procedures,
new items/discontinued items, and trade spend levels relative to
budget per event and per year, as well as the resolution of any
issues that arise between the vendor and us. In the future, the
nature and menu of promotional programs and the allocation of
dollars among them may change as a result of ongoing
negotiations and commercial relationships between vendors and us.
We have a vendor dispute resolution process to facilitate timely
research and resolution of disputed deductions from vendor
payments. We estimate and record a payable based on current and
historical claims.
(3) Business
Acquisitions
On March 31, 2005, Nash Finch completed the purchase of the
wholesale food and non-food distribution business conducted by
Roundys Supermarkets, Inc. (Roundys) out
of two distribution centers located in Lima, Ohio and Westville,
Indiana; the retail grocery business conducted by Roundys
from stores in Ironton, Ohio and Van Wert, Ohio; and
Roundys general merchandise and health and beauty care
products distribution business involving the customers of the
two purchased distribution centers (the Business).
Nash Finch also assumed certain trade payables and accrued
expenses associated with the assets being acquired, but did not
assume any indebtedness in connection with the acquisition. The
aggregate purchase price paid was $225.7 million in cash.
Nash Finch financed the acquisition by using cash on hand,
$70.0 million of borrowings under its senior secured credit
facility, and proceeds from the private placement of
$150.1 million in aggregate issue price (or
$322 million aggregate principal amount at maturity) of
senior subordinated convertible notes due 2035, the borrowings
and the sale of notes referred to as the financing
transactions. The acquisition of the Lima and Westville
divisions, we believe, provided us valuable strategic
opportunities enabling us to further leverage our existing
relationships in the regions in which these divisions operate
and to grow our food distribution business in a cost-effective
manner and thus contributed to a purchase price that resulted in
goodwill.
49
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Under business combination accounting, the total purchase price
was allocated to the net tangible assets and identifiable
intangible assets of the Business based on their estimated fair
values. The excess of the purchase price over the net tangible
assets and identifiable intangible assets was recorded as
goodwill. All of the goodwill is expected to be deductible for
tax purposes. Customer contracts and relationships are amortized
over a 20 year estimated useful life.
The following illustrates our allocation of the purchase price
to the assets acquired and liabilities assumed (in thousands):
|
|
|
|
|
Total current assets
|
|
$
|
77,237
|
|
Notes receivable, net
|
|
|
1,134
|
|
Net property, plant and equipment
|
|
|
58,950
|
|
Customer contracts and
relationships
|
|
|
34,600
|
|
Goodwill
|
|
|
98,705
|
|
Liabilities
|
|
|
(44,911
|
)
|
|
|
|
|
|
Total purchase price allocation
|
|
$
|
225,715
|
|
|
|
|
|
|
Pro
forma financial information
The unaudited pro forma financial information in the table below
combines the historical results for Nash Finch and the
historical results for the Business for the fifty-two week
periods ended December 31, 2005 and January 1, 2005,
after giving effect to the acquisition by Nash Finch of the
Business and the financing transactions described above as of
the beginning of each of the periods presented. This pro forma
financial information is provided for illustrative purposes only
and does not purport to be indicative of the actual results that
would have been achieved by the combined operations for the
periods presented or that will be achieved by the combined
operations in the future.
The following pro forma combined results of operations do not
include any cost savings that may result from the combination of
the Business and us.
|
|
|
|
|
|
|
|
|
|
|
Fifty-Two Weeks Ended
|
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except per share data)
|
|
|
Total revenues
|
|
$
|
4,760,402
|
|
|
|
4,853,387
|
|
Net income
|
|
|
43,155
|
|
|
|
20,451
|
|
Basic net income per share
|
|
|
3.33
|
|
|
|
1.64
|
|
Diluted net income per share
|
|
|
3.27
|
|
|
|
1.62
|
|
(4) Special
Charges
2004
Special Charge
In fiscal 2004, we closed 18 retail stores and sought purchasers
for our three Denver area AVANZA stores. As a result of
these actions, we recorded $36.5 million of charges
reflected in a Special charges line within the
Consolidated Statements of Income, and $3.3 million of
costs reflected in operating earnings, primarily involving
inventory markdowns related to the store closures. In a
subsequent 2004 period, we recorded a net reversal of
$1.6 million of the special charge because we were able to
settle five leases for less than initially estimated and
adjusted the estimate needed on four other properties as more
current market information was available.
50
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In fiscal 2005, we decided to continue to operate the three
Denver area AVANZA stores and therefore recorded a
reversal of $1.5 million of the special charge related to
the stores as the assets of these stores were revalued at
historical cost less depreciation during the time
held-for-sale.
Partially offsetting this reversal was a $0.2 million
change in estimate for one other property.
In fiscal 2006, we recorded additional charges related to two
properties included in the 2004 special charge of
$5.5 million to write down capitalized leases and
$0.9 million to reserve for lease commitments as a result
of lower than originally estimated sublease income.
Additionally, we reversed $0.2 million of a previously
recorded charge to change an estimate for another property.
Following is a summary of the activity in the 2004 reserve
established for store dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-
|
|
|
Write-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Down of
|
|
|
Down of
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Tangible
|
|
|
Intangible
|
|
|
Lease
|
|
|
|
|
|
Exit
|
|
|
|
|
|
|
Assets
|
|
|
Assets
|
|
|
Commitments
|
|
|
Severance
|
|
|
Costs
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Initial accrual
|
|
$
|
20,596
|
|
|
|
1,072
|
|
|
|
14,129
|
|
|
|
109
|
|
|
|
588
|
|
|
|
36,494
|
|
Change in estimates
|
|
|
889
|
|
|
|
|
|
|
|
(2,493
|
)
|
|
|
(23
|
)
|
|
|
|
|
|
|
(1,627
|
)
|
Used in 2004
|
|
|
(21,485
|
)
|
|
|
(1,072
|
)
|
|
|
(2,162
|
)
|
|
|
(86
|
)
|
|
|
(361
|
)
|
|
|
(25,166
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 1, 2005
|
|
|
|
|
|
|
|
|
|
|
9,474
|
|
|
|
|
|
|
|
227
|
|
|
|
9,701
|
|
Change in estimates
|
|
|
(1,531
|
)
|
|
|
|
|
|
|
235
|
|
|
|
|
|
|
|
|
|
|
|
(1,296
|
)
|
Used in 2005
|
|
|
1,531
|
|
|
|
|
|
|
|
(2,026
|
)
|
|
|
|
|
|
|
(55
|
)
|
|
|
(550
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
7,683
|
|
|
|
|
|
|
|
172
|
|
|
|
7,855
|
|
Change in estimates
|
|
|
5,516
|
|
|
|
|
|
|
|
737
|
|
|
|
|
|
|
|
|
|
|
|
6,253
|
|
Used in 2006
|
|
|
(5,516
|
)
|
|
|
|
|
|
|
(2,087
|
)
|
|
|
|
|
|
|
(76
|
)
|
|
|
(7,679
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 30, 2006
|
|
$
|
|
|
|
|
|
|
|
|
6,333
|
|
|
|
|
|
|
|
96
|
|
|
|
6,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1997
and 1998 Special Charges
We recorded special charges totaling $31.3 million in
fiscal 1997 and $71.4 million (offset by $2.9 million
of fiscal 1997 charge adjustments) in fiscal 1998. These charges
affected our food distribution and retail segments and were also
designed to redirect our technology efforts. All actions
contemplated by the charges are complete. During fiscal 2004, we
reversed $0.1 million of our fiscal 1998 and 1997 special
charges due to agreements reached to settle certain leases for
less than what we had originally estimated. At December 30,
2006, the remaining accrued liability was $1.0 million and
consisted primarily of lease commitments.
(5) Long-Lived
Asset Impairment Charges
Impairment charges of $11.4 million, $5.2 million, and
$0.9 million were recorded for long-lived asset impairments
in fiscal 2006, 2005 and 2004, respectively. In fiscal 2006,
these charges included $3.1 million of impairment charges
to write off capital leases subleased to a customer who declared
bankruptcy and an impairment charge of $2.0 million
reflecting the impairment of a tradename which was deemed to
have no future value. The remaining impairment charges primarily
related to 14 retail stores in 2006, 11 retail stores in fiscal
2005 and three retail stores in fiscal 2004 that were impaired
as a result of increased competition within the stores
respective market areas. The estimated undiscounted cash flows
related to these facilities indicated that the carrying value of
the assets may not be recoverable based on current expectations,
therefore these assets were written down in accordance with
SFAS No. 144.
51
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(6) Accounts
and Notes Receivable
Accounts and notes receivable at the end of fiscal 2006 and 2005
are comprised of the following components:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Customer notes receivable, current
|
|
$
|
20,927
|
|
|
|
4,987
|
|
Customer accounts receivable
|
|
|
168,525
|
|
|
|
169,006
|
|
Other receivables
|
|
|
23,023
|
|
|
|
28,027
|
|
Allowance for doubtful accounts
|
|
|
(25,642
|
)
|
|
|
(6,653
|
)
|
|
|
|
|
|
|
|
|
|
Net current accounts and notes
receivable
|
|
$
|
186,833
|
|
|
|
195,367
|
|
|
|
|
|
|
|
|
|
|
Long-term customer notes receivable
|
|
$
|
13,486
|
|
|
|
30,164
|
|
Other non-current receivables
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
|
(319
|
)
|
|
|
(13,865
|
)
|
|
|
|
|
|
|
|
|
|
Net long-term notes receivable
|
|
$
|
13,167
|
|
|
|
16,299
|
|
|
|
|
|
|
|
|
|
|
Operating results include bad debt expense totaling
$5.0 million, $4.9 million and $4.2 million
during fiscal 2006, 2005 and 2004, respectively.
Substantially all notes receivable are based on floating
interest rates which adjust to changes in market rates. As a
result, the carrying value of notes receivable approximates
market value.
(7) Long-term
Debt and Bank Credit Facilities
Long-term debt at the end of the fiscal 2006 and 2005 is
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Revolving credit
|
|
$
|
|
|
|
|
40,600
|
|
Term loan
|
|
|
160,000
|
|
|
|
175,000
|
|
Convertible subordinated debt,
3.50% due in 2035
|
|
|
150,087
|
|
|
|
150,087
|
|
Industrial development bonds,
5.60% to 5.75% due in various installments through 2014
|
|
|
3,790
|
|
|
|
5,110
|
|
Notes payable and mortgage notes,
7.95% to 8.00% due in various installments through 2013
|
|
|
741
|
|
|
|
1,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
314,618
|
|
|
|
372,322
|
|
Less current maturities
|
|
|
(633
|
)
|
|
|
(2,074
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
313,985
|
|
|
|
370,248
|
|
|
|
|
|
|
|
|
|
|
Senior
Secured Bank Credit Facility
Our senior secured credit facility, which was refinanced on
November 12, 2004, consists of $125.0 million in
revolving credit, all of which may be utilized for loans and up
to $40 million of which may be utilized for letters of
credit, and a $160.0 million Term Loan B. The Term
Loan B portion of the facility was $175.0 million as
of December 31, 2005 of which $15.0 million has been
permanently paid down. The facility is secured by a security
interest in substantially all of our assets not pledged under
other debt agreements. The revolving credit portion of the
facility has a five year term and the Term Loan B has a six year
term.
52
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Borrowings under the facility bear interest at the Eurodollar
rate or a prime rate plus, in either case, a margin increase
that is dependent on our total leverage ratio and a commitment
commission on the unused portion of the revolver. The margin
spreads and the commitment commission are reset quarterly based
on movement of a total leverage ratio defined by the agreement.
At December 30, 2006 the margin spreads for the revolver
and Term Loan B maintained as Eurodollar loans were 2.0%
and 2.5%, respectively and the commitment commission was 0.375%.
The margin spread for the revolver maintained at the prime rate
was 1.0%. At December 30, 2006, credit availability under
the senior secured credit facility was $106.5 million.
On February 22, 2005, we entered into a First Amendment of
the credit agreement governing our senior secured credit
facility. The First Amendment generally amended the credit
agreement so as to permit us to enter into an Asset Purchase
Agreement to acquire certain distribution centers and other
assets from Roundys and to close and finance that
acquisition, as described in Note 3 above.
On November 28, 2006 we entered into a Second Amendment to
our credit facility which changed the existing total leverage
ratio covenant and increased the margin spread by 0.25% whenever
the total leverage ratio covenant exceeds 2.50:1.00.
Outstanding letters of credit amounted to $18.5 million and
$17.6 million at December 30, 2006 and
December 31, 2005, respectively, primarily supporting
workers compensation obligations.
Senior
Subordinated Convertible Debt
To finance a portion of the acquisition from Roundys
described in Note 3 above, we sold $150.1 million in
aggregate issue price (or $322 million aggregate principal
amount at maturity) of senior subordinated convertible notes due
2035 in a private placement completed on March 15, 2005.
The notes are our unsecured senior subordinated obligations and
rank junior to our existing and future senior indebtedness,
including borrowings under our senior secured credit facility.
Cash interest at the rate of 3.50% per year is payable
semi-annually on the issue price of the notes until
March 15, 2013. After that date, cash interest will not be
payable, unless contingent cash interest becomes payable, and
original issue discount for non-tax purposes will accrue on the
notes at a daily rate of 3.50% per year until the maturity
date of the notes. On the maturity date of the notes, a holder
will receive $1,000 per note (a $1,000 Note).
Contingent cash interest will be paid on the notes during any
six-month period, commencing March 16, 2013, if the average
market price of a note for a ten trading day measurement period
preceding the applicable six-month period equals 130% or more of
the accreted principal amount of the note, plus accrued cash
interest, if any. The contingent cash interest payable with
respect to any six-month period will equal an annual rate of
0.25% of the average market price of the note for the ten
trading day measurement period described above.
The notes will be convertible at the option of the holder only
upon the occurrence of certain events summarized as follows:
(1) if the closing price of our stock reaches a specified
threshold (currently $64.35) for a specified period of time,
(2) if the notes are called for redemption,
(3) if specified corporate transactions or distributions to
the holders of our common stock occur,
(4) if a change in control occurs or,
(5) during the ten trading days prior to, but not on, the
maturity date.
Upon conversion by the holder, the notes convert at an adjusted
conversion rate of 9.4164 shares (initially
9.3120 shares) of our common stock per $1,000 Note (equal
to an adjusted conversion price of approximately
53
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$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 (or residual value
shares), if any, in cash, stock or both, at our option. The
conversion rate is adjusted upon certain dilutive events as
described in the indenture, but in no event shall the conversion
rate exceed 12.7109 shares per $1,000 Note. The number of
residual value shares cannot exceed 7.1469 shares per
$1,000 Note.
We may redeem all or a portion of the notes for cash at any time
on or after the eighth anniversary of the issuance of the notes.
Holders may require us to purchase for cash all or a portion of
their notes on the 8th, 10th, 15th, 20th and
25th anniversaries of the issuance of the notes. In
addition, upon specified change in control events, each holder
will have the option, subject to certain limitations, to require
us to purchase for cash all or any portion of such holders
notes.
In connection with the closing of the sale of the notes, we
entered into a registration rights agreement with the initial
purchasers of the notes. In accordance with that agreement, we
filed with the Securities and Exchange Commission a shelf
registration statement covering the resale by security holders
of the notes and the common stock issuable upon conversion of
the notes. The shelf registration statement was declared
effective by the Securities and Exchange Commission on
October 5, 2005.
Senior
Subordinated Notes
On December 13, 2004, we redeemed the $165 million
outstanding principal balance of our 8.5% Senior
Subordinated Notes Due 2008 (the Notes) at a
redemption price of 102.833%, plus accrued and unpaid interest
on the Notes as of the redemption date. We drew under the Term
Loan B portion of our senior secured credit facility to
fund the redemption of the Notes. Charges recorded during the
fourth fiscal quarter of 2004 for redemption of the Notes and
the refinancing of the credit facility include a call premium of
$4.7 million and $2.5 million for unamortized finance
costs and original issue discount charge.
Industrial
Development Bonds
At December 30, 2006, land in the amount of
$1.4 million and buildings and other assets with a
depreciated cost of approximately $3.7 million are pledged
to secure obligations under issues of industrial development
bonds.
Aggregate annual maturities of long-term debt for the five
fiscal years after December 30, 2006 are as follows (in
thousands):
|
|
|
|
|
2007
|
|
$
|
633
|
|
2008
|
|
|
549
|
|
2009
|
|
|
595
|
|
2010
|
|
|
160,628
|
|
2011
|
|
|
670
|
|
Thereafter
|
|
|
151,543
|
|
|
|
|
|
|
Total
|
|
$
|
314,618
|
|
|
|
|
|
|
Interest paid was $26.3 million, $22.9 million and
$27.2 million in fiscal 2006, 2005 and 2004, respectively.
(8) Derivative
Instruments
We have market risk exposure to changing interest rates
primarily as a result of our borrowing activities and changing
commodity prices 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
our
54
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
earnings and cash flows. To achieve these objectives, we use
derivative instruments, primarily interest rate and commodity
swap agreements, to manage risk exposures when appropriate,
based on market conditions. We do not enter into derivative
agreements for trading or other speculative purposes, nor are we
a party to any leveraged derivative instrument.
The interest rate swap and commodity swap agreements are
designated as cash flow hedges and are reflected at fair value
in our consolidated balance sheet and the related gains or
losses on these contracts are deferred in stockholders
equity as a component of other comprehensive income. However, to
the extent that any of these contracts are not considered to be
perfectly effective in offsetting the change in the value of the
items being hedged, any changes in fair value relating to the
ineffective portion of these contracts are immediately
recognized in income. We did not have any material
ineffectiveness in fiscal 2006, 2005 and 2004.
Interest
Rate Swap Agreements
We enter into interest rate swap agreements for periods
consistent with related underlying exposures and do not
constitute positions independent of those exposures. Interest
rate swap agreements outstanding at December 30, 2006 and
December 31, 2005 and their fair values are summarized as
follows:
|
|
|
|
|
|
|
|
|
|
|
December 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands, except percentages)
|
|
|
Notional amount (pay fixed/receive
variable)
|
|
$
|
90,000
|
|
|
|
185,000
|
|
Fair value asset
|
|
|
756
|
|
|
|
860
|
|
Average receive rate for effective
swaps
|
|
|
5.4
|
%
|
|
|
4.4
|
%
|
Average pay rate for effective
swaps
|
|
|
4.4
|
%
|
|
|
4.2
|
%
|
All of the interest rate swap agreements outstanding at
December 30, 2006 will expire in fiscal 2007 and the fair
value gains reported in other comprehensive income will be
reclassed into income as they expire.
Commodity
Swap Agreements
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 based. At December 30, 2006, we
had no outstanding commodity swap agreements.
The fair market value of the commodity swaps totaled
$1.5 million as of December 31, 2005. All of the
commodity swaps expired in fiscal 2006.
(9) Income
Taxes
Total income tax expense is allocated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Income tax expense from continuing
operations
|
|
$
|
5,835
|
|
|
|
25,670
|
|
|
|
4,322
|
|
Tax effect of discontinued
operations
|
|
|
102
|
|
|
|
36
|
|
|
|
36
|
|
Tax effect of change in accounting
principle
|
|
|
119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
$
|
6,056
|
|
|
|
25,706
|
|
|
|
4,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Income tax expense from continuing operations is made up of the
following components
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
2,770
|
|
|
|
22,807
|
|
|
|
11,800
|
|
State
|
|
|
85
|
|
|
|
2,541
|
|
|
|
1,355
|
|
Tax credits
|
|
|
(226
|
)
|
|
|
(158
|
)
|
|
|
(212
|
)
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
2,963
|
|
|
|
432
|
|
|
|
(7,737
|
)
|
State
|
|
|
243
|
|
|
|
48
|
|
|
|
(884
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,835
|
|
|
|
25,670
|
|
|
|
4,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense from continuing operations differed from
amounts computed by applying the federal income tax rate to
pre-tax income as a result of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Federal statutory tax rate
|
|
|
(35.0
|
)%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State taxes, net of federal income
tax benefit
|
|
|
2.5
|
|
|
|
4.1
|
|
|
|
3.9
|
|
Non-deductible goodwill
|
|
|
54.8
|
|
|
|
0.8
|
|
|
|
|
|
Change in tax contingencies
|
|
|
9.7
|
|
|
|
(1.6
|
)
|
|
|
(17.2
|
)
|
Other net
|
|
|
1.4
|
|
|
|
0.1
|
|
|
|
.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
33.4
|
%
|
|
|
38.4
|
%
|
|
|
22.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The income tax rate from continuing operations for fiscal 2006
was 33.4% compared to 38.4% for fiscal 2005 and 22.5% for fiscal
2004. The effective income tax rate for fiscal 2006 represents
income tax expense incurred on a pre-tax loss from continuing
operations. The effective tax rate for fiscal 2006 was impacted
by large non-deductible goodwill charges, which are added back
to the pre-tax loss from continuing operations to arrive at
taxable income. In fiscal 2006, we increased tax reserves by
$1.7 million. During fiscal years 2005 and 2004, we
reversed previously established income tax reserves of
$1.1 million and $3.3 million, respectively, primarily
due to the resolution of various federal and state tax issues
and statute expirations.
Net income taxes paid were $13.2 million,
$23.8 million and $15.4 million during fiscal 2006,
2005 and 2004, respectively. Income tax benefits were recognized
through stockholders equity of $0.1 million,
$3.1 million and $1.7 million during fiscal years
2006, 2005 and 2004, respectively, as compensation expense for
tax purposes in excess of amounts recognized for financial
reporting purposes.
We have established reserves for income tax contingencies. We
establish reserves when, despite our belief that the tax return
positions are fully supportable, certain positions are likely to
be challenged and we may ultimately not prevail in defending our
positions. These reserves are adjusted in light of changing
facts and circumstances, such as the closing of a tax audit or
the expiration of a statute. The effective tax rate includes the
impact of reserve provisions and changes to reserves that are
considered appropriate, as well as related interest and
penalties. These reserves relate to various tax years subject to
audit by taxing authorities.
56
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Compensation related accruals
|
|
$
|
8,185
|
|
|
|
7,431
|
|
Reserve for bad debts
|
|
|
9,450
|
|
|
|
7,262
|
|
Reserve for store shutdown and
special charges
|
|
|
2,955
|
|
|
|
4,241
|
|
Workers compensation accruals
|
|
|
4,104
|
|
|
|
4,181
|
|
Pension accruals
|
|
|
3,809
|
|
|
|
4,131
|
|
Reserve for future rents
|
|
|
5,878
|
|
|
|
2,979
|
|
Other
|
|
|
2,927
|
|
|
|
4,157
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
37,308
|
|
|
|
34,382
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
1,363
|
|
|
|
2,951
|
|
Intangible assets
|
|
|
8,866
|
|
|
|
4,963
|
|
Inventories
|
|
|
11,689
|
|
|
|
9,566
|
|
Convertible debt interest
|
|
|
4,988
|
|
|
|
2,096
|
|
Other
|
|
|
2,674
|
|
|
|
3,663
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
29,580
|
|
|
|
23,239
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
7,728
|
|
|
|
11,143
|
|
|
|
|
|
|
|
|
|
|
(10) Share-based
Compensation Plans
On January 1, 2006, we adopted Statement of Financial
Accounting Standards (SFAS) No. 123(R),
Share-Based Payment Revised 2004,
using the modified prospective transition method. Beginning
in 2006, our results of operations reflect compensation expense
for newly issued stock options and other forms of share-based
compensation granted under our stock incentive plans, for the
unvested portion of previously issued stock options and other
forms of share-based compensation granted, and for our employee
stock purchase plan. Prior to adoption of SFAS 123(R), we
accounted for the share-based awards under the recognition and
measurement provisions of Accounting Principles Board Opinion
(APB) No. 25, Accounting for Stock Issued to
Employees, and related interpretations, as permitted
by SFAS No. 123, Accounting for Stock-Based
Compensation. Under this method of accounting, no
share-based employee compensation cost for stock option awards
was recognized for the fiscal years ended December 31, 2005
and January 1, 2005 because in all cases the option price
equaled or exceeded the market price at the date of the grant.
In accordance with the modified prospective method of
transition, results for prior periods have not been restated to
reflect this change in accounting principle.
SFAS 123(R) requires companies to estimate the fair value
of share-based payment awards on the date of grant using an
option-pricing model. The value of the portion of the awards
ultimately expected to vest is recognized as expense over the
requisite service period. Share-based compensation expense
recognized in our Consolidated Statements of Income for fiscal
year ended December 30, 2006 included compensation expense
for the share-based payment awards granted prior to, but not yet
vested as of January 1, 2006, based on the grant date fair
value estimated in accordance with the pro forma provisions of
SFAS 123. Compensation expense for the share-based payment
awards granted subsequent to January 1, 2006 is based on
the grant date
57
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
fair value estimated in accordance with the provisions of
SFAS 123(R). Share-based compensation expense recognized in
the Consolidated Statements of Income for year ended
December 30, 2006 is based on awards ultimately expected to
vest, and therefore it has been reduced for estimated
forfeitures. SFAS 123(R) requires forfeitures to be
estimated at the time of grant and revised, if necessary, in
subsequent periods if actual forfeitures differ materially from
those estimates. As such, during the first fiscal quarter of
2006, we recorded a cumulative effect for a change in accounting
principle of $0.2 million in benefit, net of tax, as a
result of estimating forfeitures for our Long-Term Incentive
Program (LTIP). Under APB 25, forfeitures were reflected as
they occurred. The effect to earnings per share was a $0.01
increase in the period of adoption. We have three stock
incentive plans under which incentive stock options,
non-qualified stock options and other forms of stock-based
compensation have been, or may be, granted primarily to key
employees and non-employee members of the Board of Directors.
As of December 31, 2006, we had three plans under which
stock-based compensation grants are provided annually.
Under the 1995 Director Stock Option Plan (1995
Plan), each non-employee director received an annual grant
of a non-qualified stock option covering 5,000 shares of
our common stock in 2003. Each option has an exercise price
equal to the fair market value of a share of our stock on the
date of grant, becomes fully exercisable six months after the
date of grant, and has a five year term. As of December 27,
2004, we terminated the 1995 Plan.
Under the 1997 Non-Employee Director Stock Compensation Plan
(1997 Plan), each non-employee director received
prior to 2004 one-half of his or her annual retainer in shares
of our stock. As of December 31, 2003, the 1997 Plan was
amended to remove this feature. Participation in the 1997 Plan
was frozen as of December 31, 2004.
Under the 2000 Stock Incentive Plan (2000 Plan),
employees, non-employee directors and consultants may be awarded
incentive or non-qualified stock options, shares of restricted
stock, stock appreciation rights, performance units or stock
bonuses. As of December 30, 2006, only employees and
non-employee directors have received awards under the 2000 Plan.
Prior to 2005, awards to employees had commonly been
non-qualified stock options, each with an exercise price equal
to the fair market value of a share of our common stock on the
date of grant and a term of 5 years, becoming exercisable
in 20% increments 6, 12, 24, 36 and 48 months
after the date of the grant.
Performance units were granted during 2005 and 2006 under the
2000 Stock Incentive Plan pursuant to our Long Term Incentive
Plan. These units vest at the end of a three year performance
period. The payout, if any, for units granted in 2005 will be
determined by comparing our growth in Consolidated
EBITDA (defined as in our senior secured credit agreement)
and return on net assets (defined as net income divided by 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 the us. The Long Term
Incentive Plan was amended in 2006, and the payout, if any, for
units granted in 2006 will be determined on the basis described
above with return on net assets defined as the weighted average
of the return on net assets for the fiscal years during a
Measurement Period, where the return on net assets for each such
fiscal year shall be the quotient of (i) net income for
such fiscal year divided by (ii) the average of the
difference between total assets and current liabilities
(excluding current maturities of long-term debt and capital
lease obligations) determined as of the beginning and the end of
such fiscal year. The plan was amended to better align the
performance metric with current managements strategic
plan. The amendment resulted in the modification of prior awards
to four executives, with the remaining 2006 awards expected to
be modified in early fiscal 2007. The modification to the 2006
awards resulted in $0.3 million less share-based
compensation expense than would have been recorded under the
original metric. The performance units will pay out in shares of
our common stock or cash, or a combination of both, at the
election of the participant. Depending on our ranking among the
companies in the peer group, a participant could receive a
58
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
number of shares (or the cash value thereof) ranging from zero
to 200% of the number of performance units granted. Because
these units can be settled in cash or stock, compensation
expense is recorded over the three year period and adjusted to
market value each period. Performance units were also granted
under the 2000 Plan during 2001 to two executives in exchange
for phantom stock units those executives had accrued under a now
discontinued bonus and deferred compensation plan.
Awards to non-employee directors under the 2000 Plan began in
2004 and have taken the form of performance units, also referred
to as 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 2006 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.
Because these units can only be settled in stock and are
expensed over the six month vesting period.
We also maintain the 1999 Employee Stock Purchase Plan under
which our employees may purchase shares of our common stock at
the end of each six-month offering period at a price equal to
85% of the lesser of the fair market value of a share of our
common stock at the beginning or end of such offering period.
Employees purchased 27,544, 20,422 and 28,920 shares in
fiscal 2006, 2005 and 2004, respectively, under this plan. At
December 30, 2006, 30,781 shares of additional common
stock were available for purchase under this plan. Compensation
expense related to this plan of $0.2 million was recognized
in the fiscal 2006. No compensation expense related to this plan
was recognized in fiscal 2005 and 2004.
For stock options, the fair value of each option grant is
estimated as of the date of grant using the Black-Scholes single
option pricing model. Expected volatilities are based upon
historical volatility of our common stock which is believed to
be representative of future stock volatility. We use historical
data to estimate the amount of option exercises and terminations
with the valuation model primarily based on the vesting period
of the option grant. The expected term of options granted is
based upon historical employee behavior and the vesting period
of the option grant. The risk free interest rates are based on
the U.S. Treasury yield curve in effect at the time of
grant. Because our employee stock options have characteristics
significantly different from those of traded options, and
because changes in the input assumptions can materially affect
the fair value estimate, the existing models may not provide a
reliable single measure of the fair value of our employee stock
options. Management will continue to assess the assumptions and
methodologies used to calculate estimated fair value of
share-based compensation.
No options were granted during the years ended December 30,
2006 or December 31, 2005. The weighted-average grant date
fair value of stock options granted during the year ended
January 1, 2005 was $9.88. The following assumptions were
used to estimate the fair value using the Black-Scholes single
option pricing model as of the grant date for the last options
granted during fiscal year 2004:
|
|
|
|
|
Assumptions
|
|
2004
|
|
|
Weighted average risk-free
interest rate
|
|
|
3.40
|
%
|
Expected dividend yield
|
|
|
1.56
|
%
|
Expected option lives
|
|
|
2.5 years
|
|
Expected volatility
|
|
|
67
|
%
|
59
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes information concerning
outstanding and exercisable options as of December 30, 2006
(number of shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Number
|
|
|
Remaining
|
|
|
Weighted
|
|
|
Number of
|
|
|
Average
|
|
Range of
|
|
of Options
|
|
|
Contractual Life
|
|
|
Average
|
|
|
Options
|
|
|
Exercise
|
|
Exercise Prices
|
|
Outstanding
|
|
|
(In years)
|
|
|
Exercise Price
|
|
|
Exercisable
|
|
|
Price
|
|
|
$5.68
|
|
|
0.2
|
|
|
|
1.14
|
|
|
$
|
5.68
|
|
|
|
|
|
|
$
|
n/a
|
|
17.35 17.95
|
|
|
31.0
|
|
|
|
1.51
|
|
|
|
17.64
|
|
|
|
24.4
|
|
|
|
17.72
|
|
24.55 35.36
|
|
|
93.6
|
|
|
|
1.68
|
|
|
|
29.71
|
|
|
|
72.6
|
|
|
|
30.56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124.8
|
|
|
|
1.64
|
|
|
|
26.68
|
|
|
|
97.0
|
|
|
|
27.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value of the options outstanding as of
December 30, 2006 was $0.4 million. The weighted
average remaining contractual term of the options exercisable as
of December 30, 2006 was 1.43 years and the aggregate
intrinsic value was $0.3 million.
Share-based compensation recognized under SFAS 123(R) for
the year ended December 30, 2006 was $1.2 million,
excluding the cumulative effect of the accounting change in the
first fiscal quarter of 2006. Share-based compensation of
$1.7 million and $0.9 million for the fiscal years
ended December 30, 2005 and January 1, 2005,
respectively, was related to awards of performance units to our
non-employee directors and executives and a restricted stock
award to our former Chief Executive Officer.
On March 16, 2006, we entered into a letter agreement with
Alec C. Covington summarizing the terms of his employment as our
President and Chief Executive Officer. On May 1, 2006, the
start of his employment, Mr. Covington was granted 54,000
performance units denominated as restricted stock units under
the 2000 Stock Incentive Plan (2000 Plan). One-third of these
restricted stock units will vest on each of the first three
anniversaries of the grant date, assuming continued employment
with Nash Finch. On the same date, Mr. Covington was
granted 100,000 performance units under the same plan,
20 percent of which will vest on each of the first five
anniversaries of the grant date, if Nash Finch satisfies the
applicable performance criterion. Failure to satisfy the
performance criterion on any anniversary date will result in the
forfeiture of 20% of the performance units. At the start of his
employment, Mr. Covington was also awarded 49,623
performance units under the Nash Finch Long-Term Incentive Plan
for the three-year performance period covering fiscal years
2006-2008,
which will vest at the end of that performance period, assuming
continued employment with Nash Finch. The payment, if any, will
be subject to the same performance criterion (as modified) for
2006 executive awards described above.
On August 7, 2006 and November 6, 2006, we granted a
total of 150,000 performance units to four executives. The
performance units, denominated as restricted stock units under
the 2000 Plan, as amended, will vest in full on the fifth
anniversary of the grant date, assuming continued employment
with the Company.
60
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table illustrates the effect on net income and
earnings per share as if the fair value method had been applied
to all outstanding and unvested awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
|
|
|
|
December 30,
|
|
|
December 31,
|
|
|
January 1,
|
|
|
|
2006
|
|
|
2005
|
|
|
2005
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Net earnings (loss), as reported
|
|
$
|
(22,999
|
)
|
|
|
41,252
|
|
|
|
14,932
|
|
Add employee share-based
compensation included in net earnings:
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance units
|
|
|
628
|
|
|
|
1,572
|
|
|
|
594
|
|
Restricted stock
|
|
|
(255
|
)
|
|
|
146
|
|
|
|
251
|
|
Stock options and employee stock
purchase plan
|
|
|
793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,166
|
|
|
|
1,718
|
|
|
|
845
|
|
Tax benefit
|
|
|
(455
|
)
|
|
|
(670
|
)
|
|
|
(330
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee share-based compensation
included in net earnings, net of tax
|
|
|
711
|
|
|
|
1,048
|
|
|
|
515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deduct fair value share-based
employee compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance units
|
|
|
(628
|
)
|
|
|
(1,572
|
)
|
|
|
(594
|
)
|
Restricted stock
|
|
|
255
|
|
|
|
(146
|
)
|
|
|
(251
|
)
|
Stock options and employee stock
purchase plan
|
|
|
(793
|
)
|
|
|
(851
|
)
|
|
|
(1,827
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(1,166
|
)
|
|
|
(2,569
|
)
|
|
|
(2,672
|
)
|
Tax benefit
|
|
|
455
|
|
|
|
1,002
|
|
|
|
1,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value share-based employee
compensation included in net earnings, net of tax
|
|
|
(711
|
)
|
|
|
(1,567
|
)
|
|
|
(1,630
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss), as adjusted
|
|
$
|
(22,999
|
)
|
|
|
40,733
|
|
|
|
13,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic as reported
|
|
$
|
(1.72
|
)
|
|
|
3.19
|
|
|
|
1.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
pro forma
|
|
$
|
(1.72
|
)
|
|
|
3.15
|
|
|
|
1.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted as reported
|
|
$
|
(1.72
|
)
|
|
|
3.13
|
|
|
|
1.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
pro forma
|
|
$
|
(1.72
|
)
|
|
|
3.10
|
|
|
|
1.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
61
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes activity in our share-based
compensation plans during the fiscal year ended
December 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Restricted
|
|
|
Remaining
|
|
|
|
Stock
|
|
|
Option
|
|
|
|
|
|
Stock Awards/
|
|
|
Restriction/
|
|
|
|
Option
|
|
|
Price Per
|
|
|
Intrinsic
|
|
|
Performance
|
|
|
Vesting Period
|
|
|
|
Shares
|
|
|
Share
|
|
|
Value
|
|
|
Units
|
|
|
(in years)
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Outstanding at December 31,
2005
|
|
|
286.1
|
|
|
$
|
23.98
|
|
|
|
|
|
|
|
272.9
|
|
|
|
0.6
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
594.7
|
|
|
|
3.1
|
|
Exercised/restrictions lapsed
|
|
|
(35.5
|
)
|
|
|
19.19
|
|
|
|
|
|
|
|
(38.1
|
)
|
|
|
|
|
Forfeited/cancelled
|
|
|
(125.8
|
)
|
|
|
23.14
|
|
|
|
|
|
|
|
(210.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 30,
2006
|
|
|
124.8
|
|
|
|
26.68
|
|
|
$
|
377.5
|
|
|
|
618.9
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares expected to vest
|
|
|
108.4
|
|
|
$
|
27.23
|
|
|
|
|
|
|
|
564.3
|
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable/unrestricted at
December 31, 2005
|
|
|
143.6
|
|
|
$
|
25.23
|
|
|
|
|
|
|
|
175.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable/unrestricted at
December 30, 2006
|
|
|
97.0
|
|
|
$
|
27.33
|
|
|
$
|
269.5
|
|
|
|
171.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average grant-date fair value of equity based
restricted stock/performance units granted was $23.57, $34.47
and $23.23 during fiscal years 2006, 2005 and 2004,
respectively. Awards under our Long Term Incentive Plan, which
is a liability award remeasured at each financial statement
date, are not included in these values.
The following table presents the non-vested equity awards,
including options and restricted stock/performance units. The
table does not include units granted pursuant to our Long Term
Incentive Plan, which are liability awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Restricted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Stock Awards/
|
|
|
|
|
|
|
|
|
|
Fair
|
|
|
Performance
|
|
|
Weighted
|
|
|
|
Stock
|
|
|
Value at
|
|
|
Units
|
|
|
Average Fair
|
|
|
|
Option
|
|
|
Date of
|
|
|
(excluding
|
|
|
Value at Date
|
|
|
|
Shares
|
|
|
Grant
|
|
|
LTIP)
|
|
|
of Grant
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Non-vested at December 31,
2005
|
|
|
142.5
|
|
|
$
|
8.62
|
|
|
|
29.7
|
|
|
|
29.30
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
340.9
|
|
|
|
23.57
|
|
Vested/ restrictions lapsed
|
|
|
(54.9
|
)
|
|
|
8.52
|
|
|
|
(42.4
|
)
|
|
|
26.50
|
|
Forfeited/cancelled
|
|
|
(59.8
|
)
|
|
|
8.15
|
|
|
|
(18.8
|
)
|
|
|
29.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at December 30,
2006
|
|
|
27.8
|
|
|
|
9.83
|
|
|
|
309.4
|
|
|
|
23.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 30, 2006 the total unrecognized compensation
costs related to non-vested share-based compensation
arrangements under our stock-based compensation plans was
$0.4 million for stock options granted and
$4.8 million for performance units. The costs are expected
to be recognized over a weighted-average period of
0.8 years for stock options and 3.7 years for the
restricted stock and performance units.
Cash received from employees resultant from our
share-based compensation plans was $1.2 million,
$12.3 million and $6.0 million for the fiscal 2006,
2005 and 2004, respectively. The actual tax benefit realized
62
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
for the tax deductions from share based compensation plans was
$0.1, $3.1 and $1.7 million for the fiscal years 2006, 2005
and 2004, respectively. The intrinsic value of stock options
exercised was $0.2 million in 2006, $12.6 million in
2005 and $4.4 million in 2004.
(11) Earnings
per Share
The following table sets forth the computation of basic and
diluted earnings per share for continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
In thousands, except per share amounts)
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing
operations
|
|
$
|
(23,328
|
)
|
|
|
41,196
|
|
|
|
14,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per
share (weighted-average shares)
|
|
|
13,382
|
|
|
|
12,942
|
|
|
|
12,450
|
|
Effect of dilutive options and
awards
|
|
|
|
|
|
|
243
|
|
|
|
207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings
per share (adjusted weighted-average shares)
|
|
|
13,382
|
|
|
|
13,185
|
|
|
|
12,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
from continuing operations
|
|
$
|
(1.74
|
)
|
|
|
3.19
|
|
|
|
1.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
from continuing operations
|
|
$
|
(1.74
|
)
|
|
|
3.13
|
|
|
|
1.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average anti-dilutive
options excluded from calculation
|
|
|
205
|
|
|
|
81
|
|
|
|
316
|
|
Certain options were excluded from the diluted earnings per
share calculation because the exercise price was greater than
the market price of the stock or there was a loss from
continuing operations 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. Therefore, the notes are not currently dilutive
to earnings per share as they are only dilutive above the
accreted value.
Performance units granted during 2005 and 2006 under the 2000
Plan for the Long Term Incentive Plan will pay out in shares of
our common stock or cash, or a combination of both, at the
election of the participant. Other performance and restricted
stock units granted during 2006 pursuant to the 2000 Plan will
pay out in shares of our 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 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 only if the performance criteria are met as
of the end of the respective reporting period and then accounted
for using the treasury stock method, if dilutive.
63
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(12) Leases
A substantial portion of our store and warehouse properties are
leased. The following table summarizes assets under capitalized
leases:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Buildings and improvements
|
|
$
|
31,213
|
|
|
|
40,171
|
|
Less accumulated amortization
|
|
|
(22,816
|
)
|
|
|
(20,945
|
)
|
|
|
|
|
|
|
|
|
|
Net assets under capitalized leases
|
|
$
|
8,397
|
|
|
|
19,226
|
|
|
|
|
|
|
|
|
|
|
Total future minimum sublease rents receivable related to
operating and capital lease obligations as of December 30,
2006 are $46.1 million and $14.9 million,
respectively. Future minimum payments for operating and capital
leases have not been reduced by minimum sublease rentals
receivable under non-cancelable subleases. At December 30,
2006, our future minimum rental payments under non-cancelable
leases (including properties that have been subleased) are as
follows:
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
Capital
|
|
|
|
Leases
|
|
|
Leases
|
|
|
|
(In thousands)
|
|
|
2006
|
|
$
|
23,932
|
|
|
|
7,154
|
|
2007
|
|
|
21,471
|
|
|
|
7,150
|
|
2008
|
|
|
20,086
|
|
|
|
7,020
|
|
2009
|
|
|
17,147
|
|
|
|
6,698
|
|
2010
|
|
|
13,583
|
|
|
|
5,075
|
|
Thereafter
|
|
|
37,825
|
|
|
|
29,268
|
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
134,044
|
|
|
|
62,365
|
|
|
|
|
|
|
|
|
|
|
Less imputed interest (rates
ranging from 8.3% to 24.6%)
|
|
|
|
|
|
|
25,353
|
|
|
|
|
|
|
|
|
|
|
Present value of net minimum lease
payments
|
|
|
|
|
|
|
37,012
|
|
Less current maturities
|
|
|
|
|
|
|
(3,143
|
)
|
|
|
|
|
|
|
|
|
|
Capitalized lease obligations
|
|
|
|
|
|
$
|
33,869
|
|
|
|
|
|
|
|
|
|
|
Total rental expense under operating leases for fiscal 2006,
2005 and 2004 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Total rentals
|
|
$
|
43,612
|
|
|
|
44,837
|
|
|
|
42,742
|
|
Less: real estate taxes, insurance
and other occupancy costs
|
|
|
(2,906
|
)
|
|
|
(3,548
|
)
|
|
|
(4,284
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rentals
|
|
|
40,706
|
|
|
|
41,289
|
|
|
|
38,458
|
|
Contingent rentals
|
|
|
(18
|
)
|
|
|
(141
|
)
|
|
|
(159
|
)
|
Sublease rentals
|
|
|
(10,789
|
)
|
|
|
(9,990
|
)
|
|
|
(8,596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,899
|
|
|
|
31,158
|
|
|
|
29,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Most of our leases provide that we must pay real estate taxes,
insurance and other occupancy costs applicable to the leased
premises. Contingent rentals are determined on the basis of a
percentage of sales in excess of stipulated minimums for certain
store facilities. Operating leases often contain renewal
options. In
64
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
those locations in which it makes economic sense to continue to
operate, management expects that, in the normal course of
business, leases that expire will be renewed or replaced by
other leases.
(13) Concentration
of Credit Risk
We provide financial assistance in the form of loans to some of
our independent retailers for inventories, store fixtures and
equipment and store improvements. Loans are generally secured by
liens on real estate, inventory
and/or
equipment, personal guarantees and other types of collateral,
and are generally repayable over a period of five to seven
years. All of the guarantees were issued prior to
December 31, 2002 and therefore were not subject to the
recognition and measurement provisions of FASB Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, an interpretation of FASB
Statements No. 5, 57 and 107 and a rescission of FASB
Interpretation No. 34 (FIN 45). We establish
allowances for doubtful accounts based upon periodic assessments
of the credit risk of specific customers, collateral value,
historical trends and other information. We believe that
adequate provisions have been recorded for any doubtful
accounts. In addition, we may guarantee debt and lease
obligations of retailers. In the event these retailers are
unable to meet their debt service payments or otherwise
experience an event of default, we would be unconditionally
liable for the outstanding balance of their debt and lease
obligations, which would be due in accordance with the
underlying agreements.
As of December 30, 2006, we have guaranteed outstanding
debt and lease obligations of a number of retailers in the
amount of $8.0 million, including $3.0 million in loan
guarantees to one retailer. In the normal course of business, we
also sublease and assign to third parties various leases. As of
December 30, 2006, we estimate that the present value of
our maximum potential obligation, net of reserves, with respect
to the subleases to be approximately $44.0 million and
assigned leases to be approximately $13.4 million.
(14) Fair
Value of Financial Instruments
The estimated fair value of notes receivable approximates the
carrying value at December 30, 2006 and December 31,
2005. Substantially all notes receivable are based on floating
interest rates which adjust to changes in market rates.
The estimated fair value of our long-term debt, including
current maturities, was $300.5 million and
$339.7 million at December 30, 2006 and
December 31, 2005, respectively, utilizing discounted cash
flows.
The estimated fair value of our interest rate swap agreements is
the estimated amount we would have to pay or receive to
terminate the agreements based upon quoted market prices as
provided by the financial institutions which are counterparties
to the agreements.
(15) Commitments
and Contingencies
On December 19, 2005 and January 4, 2006, two
purported class action lawsuits were filed against us and
certain of our executive officers in the United States District
Court for the District of Minnesota on behalf of purchasers of
our common stock during the period from February 24, 2005,
the date we announced an agreement to acquire two distribution
divisions from Roundys, through October 20, 2005, the
date we announced a downward revision to our earnings outlook
for fiscal 2005. One of the complaints was voluntarily dismissed
on March 3, 2006 and a consolidated complaint was filed on
June 30, 2006. The consolidated complaint alleges that the
defendants violated the Securities Exchange Act of 1934 by
issuing false statements regarding, among other things, the
integration of the distribution divisions acquired from
Roundys, the performance of our core businesses, our
internal controls and our financial projections, so as to
artificially inflate the price of our common stock. The
defendants filed a joint motion to dismiss the consolidated
complaint, which the Court has taken under advisement. We intend
to vigorously defend against the consolidated complaint. No
damages have been specified. We are unable to evaluate the
likelihood of
65
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
prevailing in this case at this early stage of the proceedings,
but do not believe that the eventual outcome will have a
material impact on our financial position or results of
operations.
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 has accepted the offer. We continue to
fully cooperate with the SEC.
(16) Long-Term
Compensation Plans
We have a profit sharing plan which includes a 401(k) feature,
covering substantially all employees meeting specified
requirements. Profit sharing contributions, determined by the
Board of Directors, are made to a noncontributory profit sharing
trust based on profit performance. Effective January 1,
2003, we added a match to the 401(k) feature of this plan
whereby we will make an annual matching contribution to each
participants plan account equal to 50% of the lesser of
the participants contributions to the plan for the year or
6% of the participants eligible compensation for that
year. The contribution expense for our matching contributions to
the 401(k) plan will reduce dollar for dollar the profit sharing
contributions that would otherwise be made to the profit sharing
plan. Total profit sharing expense (including the matching
contribution) was $2.8 million, $6.6 million and
$5.8 million for fiscal 2006, 2005 and 2004, respectively.
On January 1, 2000, we adopted a Supplemental Executive
Retirement Plan (SERP) for key employees and
executive officers. On the last day of the calendar year, each
participants SERP account is credited with an amount equal
to 20% of the participants base salary for the year.
Benefits payable under the SERP vest based on years of
participation in the SERP, ranging from 0% vested for less than
five years of participation to 100% vested at
10 years participation (or age 60 if that occurs
sooner). Amounts credited to a SERP account, plus earnings, are
distributed following the executives termination of
employment. Earnings are based on the quarterly equivalent of
the average of the annual yield set forth for each month during
the quarter in the Moodys Corporate Bond Yield Averages.
Compensation expense related to the plan was $0.5 million
in fiscal 2006 and $0.6 million in fiscal 2005 and 2004.
We also have deferred compensation plans for a select group of
management or highly compensated employees and for non-employee
directors. The plans are unfunded and permit participants to
defer receipt of a portion of their base salary, annual bonus or
long-term incentive compensation in the case of employees, or
cash compensation in the case of non-employee directors, which
would otherwise be paid to them. The deferred amounts, plus
earnings, are distributed following the executives
termination of employment or the directors termination of
service on the Board. Earnings are based on the performance of
phantom investments elected by the participant from a portfolio
of investment options. Under the plans available to non-employee
directors, the investment options include share units that
correspond to shares of our common stock.
During fiscal 2004, we created and funded a benefits protection
trust to invest amounts deferred under these plans. The trust is
a grantor trust and accounted for in accordance with Emerging
Issues Task Force Issue
No. 97-14,
Accounting for Deferred Compensation Arrangements Where
Amounts Earned are Held in a Rabbi Trust and Invested.
A benefits protection or rabbi trust holds assets that would
be available to pay benefits under a deferred compensation plan
if the settler of the trust, such as us, is unwilling to pay
benefits for any reason other than bankruptcy or insolvency.
Assets in the trust remain subject to the claims of our general
creditors, and the investment in the rabbi trust is classified
as an investment in
available-for-sale
securities on our balance sheet.
66
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(17) Pension
and Other Post-retirement Benefits
One of our subsidiaries has a qualified non-contributory
retirement plan to provide retirement income for certain
eligible full-time employees who are not covered by a union
retirement plan. Pension benefits under the plan are based on
length of service and compensation. Our subsidiary contributes
amounts necessary to meet minimum funding requirements. This
plan has been curtailed and no new employees can enter the plan.
We provide certain health care benefits for retired employees
not subject to collective bargaining agreements. Such benefits
are not provided to any employee who left us after
December 31, 2003. Employees who left us on or before that
date become eligible for those benefits when they reach early
retirement age if they have met minimum age and service
requirements. Effective December 31, 2006, we terminated
these health care benefits for retired employees and their
spouses or dependents that were eligible for coverage under
Medicare. We provide coverage to retired employees and their
spouses until the end of the month in which they become eligible
for Medicare (which generally is age 65). Health care
benefits for retirees are provided under a self-insured program
administered by an insurance company.
Adoption
of SFAS 158
On December 30, 2006 we adopted the recognition and
disclosure provisions of SFAS 158. SFAS 158 required
us to recognize the funded status (i.e., the difference between
the fair value of plan assets and the projected benefit
obligations) of our pension plan and other post-retirement
benefits in the December 30, 2006 statement of
financial position, with a corresponding adjustment to
accumulated other comprehensive income, net of tax. The
adjustment to accumulated other comprehensive income at adoption
represents the net unrecognized actuarial losses, unrecognized
prior service costs, and unrecognized transition obligation
remaining from the initial adoption of SFAS 87, all of
which were previously netted against the plans funded
status in our statement of financial position pursuant to the
provisions of SFAS 87. These amounts will be subsequently
recognized as net periodic benefit cost pursuant to our
historical accounting policy for amortizing such amounts.
Further, actuarial gains and losses that arise in subsequent
periods and are not recognized as net periodic benefit cost in
the same periods will be recognized as a component of other
comprehensive income. Those amounts will be subsequently
recognized as a component of net periodic benefit cost on the
same basis as the amounts recognized in accumulated other
comprehensive income at the adoption of SFAS 158.
The incremental effects of adopting the provisions of
SFAS 158 on our statement of financial position at
December 30, 2006 are presented in the following table. The
adoption of SFAS 158 had no effect on our consolidated
income statement for the fiscal year ended December 30,
2006, or for any prior period presented, and it will not affect
our operating results in future periods. Had we not been
required to adopt SFAS 158 at December 30, 2006, we
would have recognized an additional minimum pension liability
pursuant to the
67
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
provisions of SFAS 87. The effect of recognizing the
additional minimum liability is included in the table below in
the column labeled Prior to Adopting SFAS 158.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 30, 2006
|
|
|
|
Prior to
|
|
|
Effect of
|
|
|
As Reported
|
|
|
|
Adopting
|
|
|
Adopting
|
|
|
at December 31,
|
|
|
|
SFAS 158
|
|
|
Statement 158
|
|
|
2006
|
|
|
|
(In thousands)
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid benefit cost
|
|
$
|
4,227
|
|
|
|
(4,227
|
)
|
|
|
|
|
Current liabilities
|
|
|
(9,701
|
)
|
|
|
9,701
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
(5,474
|
)
|
|
|
(5,474
|
)
|
Deferred income taxes
|
|
|
3,783
|
|
|
|
|
|
|
|
3,783
|
|
Accumulated other comprehensive
income
|
|
|
5,918
|
|
|
|
|
|
|
|
5,918
|
|
Other post-retirement benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
(2,598
|
)
|
|
|
2,405
|
|
|
|
(193
|
)
|
Non-current liabilities
|
|
|
|
|
|
|
(971
|
)
|
|
|
(971
|
)
|
Deferred income taxes
|
|
|
|
|
|
|
(559
|
)
|
|
|
(559
|
)
|
Accumulated other comprehensive
income
|
|
|
|
|
|
|
(875
|
)
|
|
|
(875
|
)
|
Accumulated other comprehensive income at December 30, 2006
consists of the following amounts that have not yet been
recognized in net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
|
|
|
|
|
Pension
|
|
|
Benefits
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Unrecognized prior service credits
|
|
$
|
(17
|
)
|
|
|
(1,422
|
)
|
|
|
(1,439
|
)
|
Unrecognized actuarial losses
(gains)
|
|
|
9,718
|
|
|
|
(12
|
)
|
|
|
9,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized net periodic benefit
cost
|
|
|
9,701
|
|
|
|
(1,434
|
)
|
|
|
8,267
|
|
Less deferred taxes
|
|
|
(3,783
|
)
|
|
|
559
|
|
|
|
(3,224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,918
|
|
|
|
(875
|
)
|
|
|
5,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Following is a summary of the unrecognized net periodic benefit
cost as of December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
|
|
|
|
|
Pension
|
|
|
Benefits
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Unrecognized prior service credits
|
|
$
|
(32
|
)
|
|
|
(173
|
)
|
|
|
(205
|
)
|
Unrecognized actuarial losses
|
|
|
10,429
|
|
|
|
233
|
|
|
|
10,662
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized net periodic benefit
cost
|
|
$
|
10,397
|
|
|
|
60
|
|
|
|
10,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The prior service costs (credits) and actuarial losses (gains)
included in other comprehensive income and expected to be
recognized in net periodic cost during the fiscal year ended
December 29, 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-
|
|
|
|
|
|
|
Retirement
|
|
|
|
Pension
|
|
|
Benefits
|
|
|
|
(In thousands)
|
|
|
Unrecognized prior service costs
(credits)
|
|
$
|
(15
|
)
|
|
|
(645
|
)
|
Unrecognized actuarial losses
(gains)
|
|
|
(234
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(249
|
)
|
|
|
(645
|
)
|
|
|
|
|
|
|
|
|
|
Funded
Status
The following table sets forth the actuarial present value of
benefit obligations and funded status of the curtailed pension
plan and curtailed post-retirement benefits for the years ended.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Post-Retirement Benefits
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
Funded Status
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
(41,630
|
)
|
|
|
(39,931
|
)
|
|
|
(3,560
|
)
|
|
|
(5,078
|
)
|
Service cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost
|
|
|
(2,267
|
)
|
|
|
(2,309
|
)
|
|
|
(70
|
)
|
|
|
(196
|
)
|
Participant contributions
|
|
|
|
|
|
|
|
|
|
|
(716
|
)
|
|
|
(1,311
|
)
|
Plan amendments
|
|
|
|
|
|
|
|
|
|
|
1,843
|
|
|
|
|
|
Actuarial (loss) gain
|
|
|
282
|
|
|
|
(2,183
|
)
|
|
|
248
|
|
|
|
1,442
|
|
Benefits paid
|
|
|
3,264
|
|
|
|
2,793
|
|
|
|
1,091
|
|
|
|
1,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
|
(40,351
|
)
|
|
|
(41,630
|
)
|
|
|
(1,164
|
)
|
|
|
(3,560
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
33,233
|
|
|
|
33,528
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
2,469
|
|
|
|
2,498
|
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
2,439
|
|
|
|
|
|
|
|
375
|
|
|
|
272
|
|
Participant contributions
|
|
|
|
|
|
|
|
|
|
|
716
|
|
|
|
1,311
|
|
Benefits paid
|
|
|
(3,264
|
)
|
|
|
(2,793
|
)
|
|
|
(1,091
|
)
|
|
|
(1,583
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
|
34,877
|
|
|
|
33,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
(5,474
|
)
|
|
|
(8,397
|
)
|
|
|
(1,164
|
)
|
|
|
(3,560
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
(40,351
|
)
|
|
|
(41,630
|
)
|
|
|
(1,164
|
)
|
|
|
(3,560
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Amounts recognized in the Consolidated Balance Sheets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Benefits
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(post
|
|
|
(pre
|
|
|
(post
|
|
|
(pre
|
|
|
|
SFAS
|
|
|
SFAS
|
|
|
SFAS
|
|
|
SFAS
|
|
|
|
158)
|
|
|
158)
|
|
|
158)
|
|
|
158)
|
|
|
|
(In thousands)
|
|
|
Prepaid benefit cost
|
|
$
|
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
(10,397
|
)
|
|
|
(193
|
)
|
|
|
(3,500
|
)
|
Non-current liabilities
|
|
|
(5,474
|
)
|
|
|
|
|
|
|
(971
|
)
|
|
|
|
|
Deferred taxes
|
|
|
3,783
|
|
|
|
4,055
|
|
|
|
(559
|
)
|
|
|
|
|
Accumulated other comprehensive
income
|
|
|
5,918
|
|
|
|
6,342
|
|
|
|
(875
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
4,227
|
|
|
|
2,000
|
|
|
|
(2,598
|
)
|
|
|
(3,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components
of net periodic benefit cost (income)
The aggregate costs for our retirement benefits included the
following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Benefits
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Service cost
|
|
$
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
Interest cost
|
|
|
2,267
|
|
|
|
2,309
|
|
|
|
2,376
|
|
|
|
70
|
|
|
|
196
|
|
|
|
293
|
|
Expected return on plan assets
|
|
|
(2,347
|
)
|
|
|
(2,111
|
)
|
|
|
(2,156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
(15
|
)
|
|
|
(15
|
)
|
|
|
(15
|
)
|
|
|
(593
|
)
|
|
|
(30
|
)
|
|
|
(30
|
)
|
Recognized actuarial loss (gain)
|
|
|
307
|
|
|
|
198
|
|
|
|
163
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost (gain)
|
|
$
|
212
|
|
|
|
381
|
|
|
|
370
|
|
|
|
(527
|
)
|
|
|
166
|
|
|
|
336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions
Weighted-average assumptions used to determine benefit
obligations at December 30, 2006 and December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Benefits
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Discount rate
|
|
|
6.00
|
%
|
|
|
5.50
|
%
|
|
|
6.00
|
%
|
|
|
5.50
|
%
|
Rate of compensation increase
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Weighted-average assumptions used to determine net periodic
benefit cost for years ended December 30, 2006 and
December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Benefits
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Discount rate
|
|
|
5.50
|
%
|
|
|
6.00
|
%
|
|
|
5.50
|
%
|
|
|
6.00
|
%
|
Expected return on plan assets
|
|
|
7.50
|
%
|
|
|
7.50
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Rate of compensation increase
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
70
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Assumed health care cost trend rates were as follows:
|
|
|
|
|
|
|
|
|
|
|
December 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Current year trend rate
|
|
|
9.00
|
%
|
|
|
9.00
|
%
|
Ultimate year trend rate
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Year of ultimate trend rate
|
|
|
2011
|
|
|
|
2010
|
|
Assumed health care cost trend rates have an effect on the
fiscal 2006 amounts reported for the health care plans. A
one-percentage point change in assumed health care cost trend
rates would have the following effects (in thousands):
|
|
|
|
|
|
|
|
|
|
|
1%
|
|
|
1%
|
|
|
|
Increase
|
|
|
Decrease
|
|
|
Effect on total of service and
interest cost components
|
|
$
|
1
|
|
|
|
(1
|
)
|
Effect on post-retirement benefit
obligation
|
|
|
17
|
|
|
|
(17
|
)
|
In December 2003, the Medicare Prescription Drug, Improvement
and Modernization Act of 2003 (the Act) became law in the United
States. The Act introduces a prescription drug benefit under
Medicare as well as a federal subsidy to sponsors of retiree
health care benefit plans that provide a benefit that is at
least actuarially equivalent to Medicare. The
benefit and subsidy introduced by the Act began in 2006. In May
2004, the FASB issued FASB Staff Position (FSP)
No. 106-2,
Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of
2003. FSP
106-2
requires an employer to initially account for any subsidy
received under the Act as an actuarial experience gain to the
accumulated postretirement benefit obligation (APBO), which
would be amortized over future service periods. Future subsidies
would reduce service cost each year. FSP
106-2 was
effective for us in the third fiscal quarter ended
October 9, 2004. We believe that our postretirement benefit
plan is not actuarially equivalent to Medicare Part D under
the Act and consequently will not receive significant subsidies
under the Act.
Pension
Plan Investment Policy, Strategy and Assets
Our investment policy is to invest in equity, fixed income and
other securities to cover cash flow requirements of the plan and
minimize long-term costs. The targeted allocation of assets is
30% Equity securities and 70% debt securities. The pension
plans weighted-average asset allocation by asset category
is as follows:
|
|
|
|
|
|
|
|
|
|
|
December 30,
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Equity securities
|
|
|
31
|
%
|
|
|
30
|
%
|
Debt securities
|
|
|
11
|
%
|
|
|
11
|
%
|
Guaranteed Investment Contract
|
|
|
50
|
%
|
|
|
59
|
%
|
Cash
|
|
|
8
|
%
|
|
|
|
|
71
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Estimated
Future Benefits Payments
The following benefit payments, which reflect expected future
service, as appropriate, are expected to be paid as follows:
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Other
|
|
Year
|
|
Benefits
|
|
|
Benefits
|
|
|
2007
|
|
$
|
2,850
|
|
|
|
198
|
|
2008
|
|
|
2,843
|
|
|
|
150
|
|
2009
|
|
|
2,753
|
|
|
|
128
|
|
2010
|
|
|
2,647
|
|
|
|
93
|
|
2011
|
|
|
2,504
|
|
|
|
95
|
|
2012 and later
|
|
|
13,359
|
|
|
|
343
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,956
|
|
|
|
1,007
|
|
|
|
|
|
|
|
|
|
|
Expected
Long-Term Rate of Return
The expected return assumption was reviewed by external
consultants, based on asset allocations and the expected return
and risk components of the various asset classes in the
portfolio. This assumption is assumed to be reasonable over a
long-term period that is consistent with the liabilities.
Employer
Contributions
Pension
Plan
We anticipate making contributions of $1.6 million during
the measurement year ending December 29, 2007.
Multi-Employer
Plans
Approximately 11.3% of our employees are covered by
collectively-bargained pension plans. Contributions are
determined in accordance with the provisions of negotiated union
contracts and are generally based on the number of hours worked.
We do not have the information available to reasonably estimate
our share of the accumulated plan benefits or net assets
available for benefits under the multi-employer plans. Amounts
contributed to those plans were $3.4 million,
$3.1 million and $1.9 million in fiscal 2006, 2005 and
2004, respectively.
(18) Segment
Information
We sell and distribute products that are typically found in
supermarkets. We have three reportable operating segments. Our
food distribution segment consists of 16 distribution centers
that sell to independently operated retail food 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.
We evaluate segment performance and allocate resources based on
profit or loss before income taxes, general corporate expenses,
interest and restructuring charges. The accounting policies of
the reportable segments are the same as those described in the
summary of accounting policies except we account for inventory
on a FIFO basis at the segment level compared to a LIFO basis at
the consolidated level.
Inter-segment sales are recorded on a market price-plus-fee and
freight basis. For segment financial reporting purposes, a
portion of the operational profits recorded at our distribution
centers related to corporate-
72
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
owned stores is allocated to the retail segment. Certain
revenues and costs from our distribution centers are
specifically identifiable to either the independent or
corporate-owned stores that they serve. The revenues and costs
that are specifically identifiable to corporate-owned stores are
allocated to the retail segment. Those that are specifically
identifiable to independent customers are recorded in the food
distribution segment. The remaining revenues and costs that are
not specifically identifiable to either the independent or
corporate-owned stores are allocated to the retail segment as a
percentage of corporate-owned store distribution sales to total
distribution center sales. For fiscal 2006, 23% of such
warehouse operational profits were allocated to the retail
operations compared to 23% and 27% in 2005 and 2004,
respectively.
Prior years segment information has been restated to
reflect an increased allocation of $2.0 million of bad debt
costs in fiscal 2005 from unallocated corporate overhead to the
food distribution segment and a decreased allocation of
$2.1 million of bad debts costs from unallocated corporate
overhead to the food distribution segment in fiscal 2004. We
believe that the allocation of these costs to the segment more
appropriately reflects where they are earned or incurred.
Major
Segments of the Business
Year End December 30, 2006
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
Military
|
|
|
Retail
|
|
|
Total
|
|
|
Revenue from external customers
|
|
$
|
2,787,669
|
|
|
|
1,195,041
|
|
|
|
648,919
|
|
|
|
4,631,629
|
|
Inter-segment revenue
|
|
|
332,067
|
|
|
|
|
|
|
|
|
|
|
|
332,067
|
|
Interest revenue
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
|
(53
|
)
|
Interest expense (incl. capital
lease interest)
|
|
|
(51
|
)
|
|
|
|
|
|
|
2,840
|
|
|
|
2,789
|
|
Depreciation expense
|
|
|
10,966
|
|
|
|
1,876
|
|
|
|
6,915
|
|
|
|
19,757
|
|
Segment profit
|
|
|
75,790
|
|
|
|
40,526
|
|
|
|
20,813
|
|
|
|
137,129
|
|
Assets
|
|
|
412,062
|
|
|
|
143,214
|
|
|
|
98,821
|
|
|
|
654,097
|
|
Expenditures for long-lived assets
|
|
|
9,097
|
|
|
|
4,091
|
|
|
|
3,034
|
|
|
|
16,222
|
|
Major
Segments of the Business
Year End December 31, 2005
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
Military
|
|
|
Retail
|
|
|
Total
|
|
|
Revenue from external customers
|
|
$
|
2,669,271
|
|
|
|
1,157,186
|
|
|
|
729,050
|
|
|
|
4,555,507
|
|
Inter-segment revenue
|
|
|
376,740
|
|
|
|
|
|
|
|
|
|
|
|
376,740
|
|
Interest revenue
|
|
|
(530
|
)
|
|
|
|
|
|
|
|
|
|
|
(530
|
)
|
Interest expense (incl. capital
lease interest)
|
|
|
(530
|
)
|
|
|
|
|
|
|
3,159
|
|
|
|
2,629
|
|
Depreciation expense
|
|
|
10,553
|
|
|
|
1,761
|
|
|
|
8,687
|
|
|
|
21,001
|
|
Segment profit
|
|
|
86,335
|
|
|
|
39,265
|
|
|
|
26,612
|
|
|
|
152,212
|
|
Assets
|
|
|
433,170
|
|
|
|
142,252
|
|
|
|
112,318
|
|
|
|
687,740
|
|
Expenditures for long-lived assets
|
|
|
9,036
|
|
|
|
2,555
|
|
|
|
2,362
|
|
|
|
13,953
|
|
73
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Major
Segments of the Business
Year End January 1, 2005
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
|
|
|
Military
|
|
|
Retail
|
|
|
Total
|
|
|
Revenue from external customers
|
|
$
|
1,961,179
|
|
|
|
1,122,056
|
|
|
|
813,839
|
|
|
|
3,897,074
|
|
Inter-segment revenue
|
|
|
411,515
|
|
|
|
|
|
|
|
|
|
|
|
411,515
|
|
Interest revenue
|
|
|
(392
|
)
|
|
|
|
|
|
|
(315
|
)
|
|
|
(707
|
)
|
Interest expense (incl. capital
lease interest)
|
|
|
(384
|
)
|
|
|
|
|
|
|
3,213
|
|
|
|
2,829
|
|
Depreciation expense
|
|
|
8,666
|
|
|
|
1,670
|
|
|
|
11,017
|
|
|
|
21,353
|
|
Segment profit
|
|
|
78,050
|
|
|
|
36,266
|
|
|
|
28,108
|
|
|
|
142,424
|
|
Assets
|
|
|
361,072
|
|
|
|
143,231
|
|
|
|
119,491
|
|
|
|
623,794
|
|
Expenditures for long-lived assets
|
|
|
7,858
|
|
|
|
2,689
|
|
|
|
4,666
|
|
|
|
15,213
|
|
Reconciliation
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Total external revenue for segments
|
|
$
|
4,631,629
|
|
|
|
4,555,507
|
|
|
|
3,897,074
|
|
Inter-segment revenue from
reportable segments
|
|
|
332,067
|
|
|
|
376,740
|
|
|
|
411,515
|
|
Elimination of intersegment
revenues
|
|
|
(332,067
|
)
|
|
|
(376,740
|
)
|
|
|
(411,515
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated revenues
|
|
$
|
4,631,629
|
|
|
|
4,555,507
|
|
|
|
3,897,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit or Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Total profit for segments
|
|
$
|
137,129
|
|
|
|
152,212
|
|
|
|
142,424
|
|
Unallocated amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment of inventory to LIFO
|
|
|
(2,630
|
)
|
|
|
(724
|
)
|
|
|
(3,525
|
)
|
Unallocated corporate overhead
|
|
|
(119,320
|
)
|
|
|
(85,918
|
)
|
|
|
(84,921
|
)
|
Goodwill impairment
|
|
|
(26,419
|
)
|
|
|
|
|
|
|
|
|
Special charge
|
|
|
(6,253
|
)
|
|
|
1,296
|
|
|
|
(34,779
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
before income taxes
|
|
$
|
(17,493
|
)
|
|
|
66,866
|
|
|
|
19,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets for segments
|
|
$
|
654,097
|
|
|
|
687,740
|
|
|
|
623,794
|
|
Unallocated corporate assets
|
|
|
352,064
|
|
|
|
440,005
|
|
|
|
240,673
|
|
Adjustment of inventory to LIFO
|
|
|
(51,278
|
)
|
|
|
(48,648
|
)
|
|
|
(47,924
|
)
|
Elimination of intercompany
receivables
|
|
|
(580
|
)
|
|
|
(1,673
|
)
|
|
|
(915
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated assets
|
|
$
|
954,303
|
|
|
|
1,077,424
|
|
|
|
815,628
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Other
Significant Items-2006 (In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
|
|
|
Reconciling
|
|
|
Consolidated
|
|
|
|
Totals
|
|
|
Items
|
|
|
Totals
|
|
|
Depreciation
|
|
$
|
19,757
|
|
|
|
21,694
|
|
|
|
41,451
|
|
Interest expense
|
|
|
2,789
|
|
|
|
23,855
|
|
|
|
26,644
|
|
Expenditures for long-lived assets
|
|
|
16,222
|
|
|
|
11,247
|
|
|
|
27,469
|
|
Other
Significant Items-2005 (In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
|
|
|
Reconciling
|
|
|
Consolidated
|
|
|
|
Totals
|
|
|
Items
|
|
|
Totals
|
|
|
Depreciation
|
|
$
|
21,001
|
|
|
|
22,720
|
|
|
|
43,721
|
|
Interest expense
|
|
|
2,629
|
|
|
|
22,103
|
|
|
|
24,732
|
|
Expenditures for long-lived assets
|
|
|
13,953
|
|
|
|
10,685
|
|
|
|
24,638
|
|
Other
Significant Items-2004 (In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
|
|
|
Reconciling
|
|
|
Consolidated
|
|
|
|
Totals
|
|
|
Items
|
|
|
Totals
|
|
|
Depreciation
|
|
$
|
21,353
|
|
|
|
18,888
|
|
|
|
40,241
|
|
Interest expense
|
|
|
2,829
|
|
|
|
24,352
|
|
|
|
27,181
|
|
Expenditures for long-lived assets
|
|
|
15,213
|
|
|
|
7,114
|
|
|
|
22,327
|
|
The reconciling items to adjust expenditures for depreciation,
interest revenue, interest expense and expenditures for
long-lived assets are for unallocated general corporate
activities. All revenues are attributed to and all assets are
held in the United States. Our market areas are in the Midwest,
Mid-Atlantic, Great Lakes and Southeast United States.
(19) Subsequent
Event Update
On November 14, 2006 and in our
Form 10-Q
for the sixteen weeks ended October 7, 2006 we announced
plans and provided an estimate of $18 to $24 million for
charges to be taken related to the closure of five of our retail
stores and the intention to rationalize our food distribution
business. During the fourth quarter of 2006, we closed the five
stores and recorded $5.5 million in asset impairment and
lease related charges related to these closures in addition to
incurring $1.1 million to liquidate the inventories and
close the stores. We have determined not to proceed with the
previously contemplated plan to rationalize food distribution
facilities in the near term. Accordingly, the estimated
restructuring and impairment charges ranging from $11.0 to
$17.0 million will not be incurred over the next two
quarters as originally announced.
75
NASH
FINCH COMPANY AND SUBSIDIARIES
Quarterly
Financial Information (Unaudited)
(In
thousands, except per share amounts and percent to
sales)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
|
12 Weeks
|
|
|
12 Weeks
|
|
|
16 Weeks
|
|
|
12 Weeks
|
|
A summary of quarterly financial information is Presented
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
Sales
|
|
$
|
1,034,759
|
|
|
|
882,238
|
|
|
|
1,070,764
|
|
|
|
1,085,252
|
|
|
|
1,426,967
|
|
|
|
1,464,781
|
|
|
|
1,099,139
|
|
|
|
1,123,236
|
|
Cost of sales
|
|
|
942,340
|
|
|
|
790,806
|
|
|
|
974,249
|
|
|
|
981,938
|
|
|
|
1,307,171
|
|
|
|
1,332,836
|
|
|
|
1,006,047
|
|
|
|
1,018,764
|
|
Gross Profit
|
|
|
92,419
|
|
|
|
91,432
|
|
|
|
96,515
|
|
|
|
103,314
|
|
|
|
119,796
|
|
|
|
131,945
|
|
|
|
93,092
|
|
|
|
104,472
|
|
Earnings (loss) from continuing
operations before income taxes and cumulative effect of a change
in accounting principle
|
|
|
6,314
|
|
|
|
11,361
|
|
|
|
7,733
|
|
|
|
16,041
|
|
|
|
(6,287
|
)
|
|
|
18,100
|
|
|
|
(25,253
|
)
|
|
|
21,364
|
|
Income tax expense (benefit)
|
|
|
2,627
|
|
|
|
4,386
|
|
|
|
3,603
|
|
|
|
6,301
|
|
|
|
(1,670
|
)
|
|
|
7,059
|
|
|
|
1,275
|
|
|
|
7,924
|
|
Earnings (loss) from continuing
operations before cumulative effect of a change in accounting
principle
|
|
|
3,687
|
|
|
|
6,975
|
|
|
|
4,130
|
|
|
|
9,740
|
|
|
|
(4,617
|
)
|
|
|
11,041
|
|
|
|
(26,528
|
)
|
|
|
13,440
|
|
Earnings from discontinued
operations, net of income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160
|
|
|
|
56
|
|
Cumulative effect of a change in
accounting principle, net of income tax expense
|
|
|
169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
3,856
|
|
|
|
6,975
|
|
|
|
4,130
|
|
|
|
9,740
|
|
|
|
(4,617
|
)
|
|
|
11,041
|
|
|
|
(26,368
|
)
|
|
|
13,496
|
|
Percent to sales
|
|
|
0.37
|
%
|
|
|
0.79
|
%
|
|
|
0.39
|
%
|
|
|
0.90
|
%
|
|
|
(0.75
|
)%
|
|
|
0.75
|
%
|
|
|
(2.40
|
)%
|
|
|
1.20
|
%
|
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations before
cumulative effect of a change in accounting principle
|
|
$
|
0.28
|
|
|
|
0.55
|
|
|
|
0.31
|
|
|
|
0.76
|
|
|
|
(0.34
|
)
|
|
|
0.85
|
|
|
|
(1.97
|
)
|
|
|
1.02
|
|
Discontinued operations, net of
income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
Cumulative effect of a change in
accounting principle, net of income tax expense
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
0.29
|
|
|
|
0.55
|
|
|
|
0.31
|
|
|
|
0.76
|
|
|
|
(0.34
|
)
|
|
|
0.85
|
|
|
|
(1.96
|
)
|
|
|
1.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations before
cumulative effect of a change in accounting principle
|
|
$
|
0.28
|
|
|
|
0.54
|
|
|
|
0.31
|
|
|
|
0.75
|
|
|
|
(0.34
|
)
|
|
|
0.83
|
|
|
|
(1.97
|
)
|
|
|
1.01
|
|
Discontinued operations, net of
income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
Cumulative effect of a change in
accounting principle, net of income tax expense
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
0.29
|
|
|
|
0.54
|
|
|
|
0.31
|
|
|
|
0.75
|
|
|
|
(0.34
|
)
|
|
|
0.83
|
|
|
|
(1.96
|
)
|
|
|
1.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant items by quarter include the following:
|
|
|
1. |
|
Net reversal of special charges of $1.3 million in the
second quarter of 2005 for the Denver AVANZA stores no
longer classified as
held-for-sale
and the change in estimate for other property closure costs. |
|
2. |
|
Bridge loan fee of $0.8 million in the second quarter of
2005 related to acquisition financing. |
|
3. |
|
Charge of $5.5 million in the second quarter of 2006
related to bankruptcy of a long-time customer. |
|
4. |
|
Net increase in special charges of $6.3 million in the
third quarter of 2006 to change estimates of 2004 special charge
for store dispositions based on updated assumptions and current
market conditions. |
76
|
|
|
5. |
|
Charges of $5.0 million in the third quarter and
$2.1 million in the fourth quarter of 2006 to increase
reserves for leases and receivables for customers experiencing
deteriorating financial condition in their operations. |
|
6. |
|
Charges of $4.2 million in the third quarter of 2006 for
severance costs due to senior management changes. |
|
7. |
|
Charge of $2.0 million in the third quarter of 2006 for the
impairment of trade name deemed to be of no future value. |
|
8. |
|
Goodwill impairment of $26.4 million in the fourth quarter
of 2006 for retail goodwill. |
|
9. |
|
Credit facility amendment fee of $0.5 million in the fourth
quarter of 2006. |
|
10. |
|
A Charge of $2.0 million to standardize vacation policies
at various locations and ensure our vacation policy was
competitive in the marketplace in 2006. |
|
11. |
|
Asset impairments and lease costs associated with closed retail
stores of $1.3 million, $0.2 million,
$0.6 million and $5.4 million in the first, second
third and fourth quarters, respectively, of 2006 and
$1.2 million and $0.2 million in the second and third
quarters, respectively, of 2005. |
|
12. |
|
Inventory markdown and wind down costs related to retail store
closings of $0.7 million, $0.2 million,
$0.3 million and $1.1 million in the first, second,
third and fourth quarters, respectively, of 2006 and
$0.1 million, $0.3 million, $0.4 million and
$0.2 million in the first, second, third and fourth
quarters, respectively, of 2005. |
77
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
Not applicable.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
Disclosure
Controls and Procedures
Our management, with the participation and under the supervision
of the Chief Executive Officer and Chief Financial Officer, has
evaluated the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act
Rule 13a-15(e))
as of the end of the period covered by this annual report. Based
on this evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls
and procedures are effective as of the end of the period covered
by this annual report to provide reasonable assurance that
material information required to be disclosed in the reports
that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified by the Securities and Exchange Commissions rules
and forms. A controls system, no matter how well designed and
operated, cannot provide absolute assurance that the objectives
of the controls system are met, and no evaluation of controls
can provide absolute assurance that all control issues and
instances of fraud, if any, within a company have been detected.
Management
Report On Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Internal
control over financial reporting is defined in
Rule 13a-15(f)
or 15d-15(f)
promulgated under the Securities Exchange Act of 1934 as a
process designed by, or under the supervision of, our principal
executive and principal financial officers and effected by our
board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for
external purposes in accordance with generally accepted
accounting principles and includes those policies and procedures
that:
|
|
|
|
|
Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions
of our assets;
|
|
|
|
Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and
that our receipts and expenditures are being made only in
accordance with authorizations of our management and
directors; and
|
|
|
|
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of our
assets that could have a material effect on the financial
statements.
|
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control
over financial reporting as of December 30, 2006. In making
this assessment, we used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control-Integrated Framework. Based on this assessment
we have concluded that as of December 30, 2006, our
internal control over financial reporting was effective based on
those criteria. Managements assessment of the
effectiveness of our internal control over financial reporting
as of December 30, 2006 has been audited by
Ernst & Young, LLP, Nash Finchs independent
registered public accounting firm as stated in their report
which is included on page 37 of this annual report on
Form 10-K
for the year ended December 30, 2006.
There was no change in our internal control over financial
reporting that occurred during our most recently completed
fiscal quarter that materially affected, or is reasonably likely
to materially affect, our internal control over financial
reporting.
78
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Nash-Finch Company
We have audited managements assessment, included in the
accompanying Management Report on Internal Control Over
Financial Reporting located in item 9A, that Nash-Finch
Company maintained effective internal control over financial
reporting as of December 30, 2006, based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria).
Nash-Finch Companys management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting. Our responsibility is to express an
opinion on managements assessment and an opinion on the
effectiveness of the Companys internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets;
(2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that our receipts and expenditures are being
made only in accordance with authorizations of management and
directors of the Company; and (3) provide reasonable
assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
Companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, managements assessment that Nash-Finch
Company maintained effective internal control over financial
reporting as of December 30, 2006, is fairly stated, in all
material respects, based on the COSO criteria. Also, in our
opinion, Nash-Finch Company maintained, in all material
respects, effective internal control over financial reporting as
of December 30, 2006, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Nash-Finch Company and
subsidiaries as of December 30, 2006 and December 31,
2005, and the related consolidated statements of income,
stockholders equity, and cash flows for each of the three
years in the period ended December 30, 2006 and our report
dated February 28, 2007 expressed an unqualified opinion
thereon.
Minneapolis, Minnesota
February 28, 2007
79
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
Not applicable.
PART III
|
|
ITEM 10.
|
DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE
GOVERNANCE
|
The information called for by Item 10 that appears in the
2007 Proxy Statement under the captions Proposal 1:
Election of Directors Information About Directors
and Nominees, Proposal 1: Election of
Directors Information About the Board of Directors
and Its Committees, Corporate Governance
Governance Guidelines, Corporate
Governance Director Candidates and
Section 16(a) Beneficial Ownership Reporting
Compliance is incorporated herein by reference. Certain
information regarding executive officers of the Registrant is
included in Part I of this Annual Report immediately
following Item 4 above.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
The information called for by Item 11 that appears in the
2007 Proxy Statement under the captions Proposal 1:
Election of Directors Compensation of
Directors, Executive Compensation and Other
Benefits and Corporate Governance
Compensation Committee Interlocks and Insider
Participation is incorporated herein by reference.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
|
Equity
Compensation Plan Information
The following table provides information about Nash Finch common
stock that may be issued upon the exercise of stock options, the
payout of share units or performance units, or the granting of
other awards under all of Nash Finchs equity compensation
plans in effect as of December 30, 2006:
Equity
Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
Number of Securities to
|
|
|
|
|
|
Remaining Available for
|
|
|
|
|
|
|
be Issued Upon
|
|
|
Weighted-Average
|
|
|
Future Issuance Under Equity
|
|
|
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Compensation Plans
|
|
|
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
(Excluding Securities
|
|
|
|
|
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Reflected in Column (a))
|
|
|
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
|
|
|
Equity compensation plans approved
by security holders
|
|
|
612,854
|
(1)
|
|
$
|
26.68
|
(2)
|
|
|
1,008,868
|
(3)
|
|
|
|
|
Equity compensation plans not
approved by security holders
|
|
|
5,356
|
|
|
|
|
|
|
|
34,245
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
618,210
|
|
|
$
|
26.68
|
|
|
|
1,043,113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes stock options and performance units awarded under the
2000 Stock Incentive Plan (2000 Plan), stock options
awarded under the 1995 Director Stock Option Plan
(1995 Director Plan), and share units acquired
by directors under the 1997 Non-Employee Director Stock
Compensation Plan (1997 Director Plan) net of
120,937 outstanding shares held by a benefits protection trust
with respect to such share units. |
|
(2) |
|
Each share unit acquired through the deferral of director
compensation under the 1997 Director Plan and each
performance unit granted under the 2000 Plan is payable in one
share of Nash Finch common stock following the
participants termination of service as an officer or
director. As they have no exercise price, |
80
|
|
|
|
|
the Share units and performance units outstanding at
December 31, 2005 are not included in the calculation of
the weighted average exercise price. |
|
|
|
(3) |
|
The following numbers of shares remained available for issuance
under each of our equity compensation plans at December 31,
2006. Grants under each plan may be in the form of any of the
types of awards noted: |
|
|
|
|
|
|
|
Plan
|
|
Number of Shares
|
|
|
Type of Award
|
|
2000 Plan
|
|
|
924,864
|
|
|
Stock options, restricted stock,
stock appreciation rights, performance units, and stock bonuses.
(709,840 of the available shares under the 2000 Plan must be
issued in the form of performance units)
|
1997 Director Plan
|
|
|
39,283
|
|
|
Share units
|
Employee Stock Purchase Plan
|
|
|
44,721
|
|
|
Stock options (IRC §423 plan)
|
|
|
|
|
|
|
|
|
|
|
(4) |
|
Shares remaining available for issuance under the Director
Deferred Compensation Plan. Each share unit acquired through the
deferral of director compensation under the Director Deferred
Compensation Plan is payable in one share of Nash Finch common
stock following the individuals termination of service as
a director. |
Description
of Plans Not Approved by Shareholders
Director Deferred Compensation Plan. The
Director Deferred Compensation Plan was adopted by the Board in
December 2004 as a result of amendments to the Internal Revenue
Code that affected the operation of non-qualified deferred
compensation arrangements for amounts deferred on or after
January 1, 2005. The Board reserved 50,000 shares of
Nash Finch common stock for issuance in connection with the
plan. The plan permits a participant to annually defer all or a
portion of his or her cash compensation for service as a
director, and have the amount deferred credited to either a cash
account or a share account. Amounts credited to a share account
are deemed to have purchased a number of share units determined
by dividing the amount deferred by the then-current market price
of a share of Nash Finch common stock. Each share unit
represents the right to receive one share of Nash Finch common
stock. The balance in a share account is payable only in stock
following termination of service as a director.
Security
Ownership of Certain Beneficial Owners and Management
The information called for by Item 12 that appears in the
2007 Proxy Statement under the captions Security Ownership
of Certain Beneficial Owners and Security Ownership
of Management is incorporated herein by reference.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
|
The information called for by Item 13 that appears in the
2007 Proxy Statement under the captions Proposal I:
Election of Directors Information About the Board of
Directors and Its Committees and Corporate
Governance Certain Relationships and Related
Transactions is incorporated by reference herein.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information called for by Item 14 that appears in the
2007 Proxy Statement under the captions Independent
Auditors Fees Paid to Independent Auditors and
Independent Auditors Pre-Approval of Audit and
Non-Audit Services is incorporated herein by reference.
81
PART IV
|
|
ITEM 15.
|
EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES
|
The following financial statements are included in this report
on the pages indicated:
Report of Independent Registered Public Accounting
Firm page 37
Consolidated Statements of Income for the fiscal years ended
December 30, 2006, December 31, 2005 and
January 1, 2005 page 38
Consolidated Balance Sheets as of December 30, 2006 and
December 31, 2005 page 39
Consolidated Statements of Cash Flows for the fiscal years ended
December 30, 2006, December 31, 2005 and
January 1, 2005 page 40
Consolidated Statements of Stockholders Equity for the
fiscal years ended December 30, 2006, December 31,
2005 and January 1, 2005 page 41 to 42
Notes to Consolidated Financial Statements
pages 43 to 75
|
|
2.
|
Financial
Statement Schedules.
|
The following financial statement schedule is included herein
and should be read in conjunction with the consolidated
financial statements referred to above:
Valuation and Qualifying Accounts page 86
Other Schedules. Other schedules are omitted
because the required information is either inapplicable or
presented in the consolidated financial statements or related
notes.
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
2
|
.1
|
|
Asset Purchase Agreement between
Roundys, Inc. and Nash-Finch Company, dated as of
February 24, 2005 (incorporated by reference to
Exhibit 2.1 to our current report on
Form 8-K
filed February 28, 2005 (File No. 0-785)).
|
|
3
|
.1
|
|
Restated Certificate of
Incorporation of the Company, effective May 16, 1985
(incorporated by reference to Exhibit 3.1 to our Annual
Report on
Form 10-K
for the fiscal year ended December 28, 1985 (File No.
0-785)).
|
|
3
|
.2
|
|
Certificate of Amendment to
Restated Certificate of Incorporation of the Company, effective
May 15, 1987 (incorporated by reference to Exhibit 4.5
to our Registration Statement on
Form S-3
(filed June 8, 1987 (File No.
33-14871)).
|
|
3
|
.3
|
|
Certificate of Amendment to
Restated Certificate of Incorporation of the Company, effective
May 16, 2002 (incorporated by reference to Exhibit 3.1
to our Quarterly Report on
Form 10-Q
for the quarter ended June 15, 2002 (File No. 0-785)).
|
|
3
|
.4
|
|
Nash-Finch Company Bylaws (as
amended November 9, 2005) (incorporated by reference to
Exhibit 3.1 to our current report on
Form 8-K
filed November 14, 2005 (File No. 0-785)).
|
|
4
|
.1
|
|
Stockholder Rights Agreement,
dated February 13, 1996, between the Company and Wells
Fargo Bank, N.A. (formerly known as Norwest Bank Minnesota,
National Association) (incorporated by reference to
Exhibit 4 to our current report on
Form 8-K
dated February 13, 1996 (File No. 0-785)).
|
|
4
|
.2
|
|
Amendment to Stockholder Rights
Agreement dated as of October 30, 2001 (incorporated by
reference to Exhibit 4.2 to Amendment No. 1 to our
Registration Statement on
Form 8-A
(filed July 26, 2002) (File No. 0-785)).
|
82
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
4
|
.3
|
|
Indenture dated as of
March 15, 2005 between Nash-Finch Company and Wells Fargo
Bank, National Association, as Trustee (including form of Senior
Subordinated Convertible Notes due 2035) (incorporated by
reference to Exhibit 10.1 to our current report on
Form 8-K
filed March 9, 2005 (File No. 0-785)).
|
|
4
|
.4
|
|
Registration Rights Agreement
dated as of March 15, 2005 between Nash-Finch Company and
Deutsche Bank Securities Inc., Merrill Lynch & Co. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated
(incorporated by reference to Exhibit 10.2 to our current
report on
Form 8-K
filed March 9, 2005 (File No. 0-785)).
|
|
4
|
.5
|
|
Notice of Adjustment of Conversion
Rate of the Senior Subordinated Convertible Notes Due 2035
(incorporated by reference to Exhibit 99.1 to our current
report on
Form 8-K
filed November 21, 2006 (File No. 0-785)).
|
|
10
|
.1
|
|
Credit Agreement dated as of
November 12, 2004 among Nash-Finch Company, Various Lenders
and Deutsche Bank Trust Company Americas, as administrative
agent (incorporated by reference to Exhibit 10.1 to our
Quarterly Report on
Form 10-Q
for the sixteen weeks ended October 9, 2004 (File No.
0-785)).
|
|
10
|
.2
|
|
First Amendment to Credit
Agreement dated as of November 12, 2004 among Nash-Finch
Company, Various Lenders and Deutsche Bank Trust Company
Americas, as administrative agent (incorporated by reference to
Exhibit 10.1 to our current report on
Form 8-K
filed February 28, 2005 (File No. 0-785)).
|
|
10
|
.3
|
|
Second Amendment to Credit
Agreement, dated November 28, 2006, among Nash-Finch
Company, the Lenders party thereto, and Deutsche Bank Trust
Company Americas, as Administrative Agent (incorporated by
reference to Exhibit 99.1 to our current report on
Form 8-K
filed November 28, 2006 (File No. 0-785)).
|
|
*10
|
.3
|
|
Form of Change in Control
Agreement (incorporated by reference to Exhibit 10.5 to our
Annual Report on
Form 10-K
for the fiscal year ended December 28, 2002 (File No.
0-785)).
|
|
*10
|
.4
|
|
Form of Executive Retention Letter
Agreement (incorporated by reference to Exhibit 10.1 to our
current report on
Form 8-K
filed September 21, 2005 (File No. 0-785)).
|
|
*10
|
.5
|
|
Nash-Finch Company Income Deferral
Plan (as amended through May 21, 2004) (incorporated by
reference to Exhibit 4.1 to our Registration Statement on
Form S-8
filed May 25, 2004 (File
No. 333-115849)).
|
|
*10
|
.6
|
|
Second Declaration of Amendment to
Nash-Finch Company Income Deferral Plan (as amended through
May 21, 2004) (incorporated by reference to
Exhibit 10.4 to our Annual Report on
Form 10-K
for the fiscal year ended January 1, 2005 (File No. 0-785)).
|
|
*10
|
.7
|
|
Nash-Finch Company Deferred
Compensation Plan (incorporated by reference to Exhibit 4.1
to our Registration Statement on
Form S-8
filed on December 30, 2004 (File
No. 333-121755)).
|
|
*10
|
.8
|
|
Nash-Finch Company 2000 Stock
Incentive Plan (as amended February 22, 2005) (incorporated
by reference to Exhibit 10.1 to our Registration Statement
on
Form S-8
filed May 12, 2005 (File No.
333-124863)).
|
|
*10
|
.9
|
|
Form of Non-Statutory Stock Option
Agreement (for employees under the Nash-Finch Company 2000 Stock
Incentive Plan) (incorporated by reference to Exhibit 10.7
to our Annual Report on
Form 10-K
for the fiscal year ended January 1, 2005 (File No. 0-785)).
|
|
*10
|
.10
|
|
Description of Nash-Finch Company
Long-Term Incentive Program Utilizing Performance Unit Awards
(incorporated by reference to Appendix I to our Proxy Statement
for our Annual Meeting of Stockholders on May 10, 2005
(filed March 21, 2005) (File No. 0-785)).
|
|
*10
|
.11
|
|
Nash-Finch Company
1995 Director Stock Option Plan (as amended on
February 22, 2000 and February 19, 2002) (incorporated
by reference to Exhibit 10.2 to our Quarterly Report on
Form 10-Q
for the quarter ended June 15, 2002 (File No. 0-785)).
|
|
*10
|
.12
|
|
First Declaration of Amendment to
the Nash-Finch Company 1995 Director Stock Option Plan (as
amended on February 22, 2000 and February 19, 2002)
(incorporated by reference to Exhibit 10.9 to our Annual
Report on
Form 10-K
for the fiscal year ended January 1, 2005 (File No.
0-785)).
|
83
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
*10
|
.13
|
|
Form of Non-Statutory Stock Option
Agreement (for non-employee directors under the Nash-Finch
Company 1995 Director Stock Option Plan) (incorporated by
reference to Exhibit 10.10 to our Annual Report on
Form 10-K
for the fiscal year ended January 1, 2005 (File No. 0-785)).
|
|
*10
|
.14
|
|
Nash-Finch Company 1997
Non-Employee Director Stock Compensation Plan (2003 Revision)
(incorporated by reference to Exhibit 10.9 to our Annual
Report on
Form 10-K
for the fiscal year ended January 3, 2004 (File No. 0-785)).
|
|
*10
|
.15
|
|
Nash-Finch Company 1997
Non-Employee Director Stock Compensation Plan (2003
Revision) First Declaration of Amendment
(incorporated by reference to Exhibit 10.12 to our Annual
Report on
Form 10-K
for the fiscal year ended January 1, 2005 (File No. 0-785)).
|
|
*10
|
.16
|
|
Nash-Finch Company 1997
Non-Employee Director Stock Compensation Plan (2003
Revision) Second Declaration of Amendment
(incorporated by reference to Exhibit 10.13 to our Annual
Report on
Form 10-K
for the fiscal year ended January 1, 2005 (File No. 0-785)).
|
|
*10
|
.17
|
|
Nash-Finch Company Director
Deferred Compensation Plan (incorporated by reference to
Exhibit 4.1 to our Registration Statement on
Form S-8
filed on December 30, 2004 (File No.
333-121754)).
|
|
*10
|
.18
|
|
Nash-Finch Company Supplemental
Executive Retirement Plan (incorporated by reference to
Exhibit 10.27 to our Annual Report on
Form 10-K
for the fiscal year ended January 1, 2000 (File No. 0-785)).
|
|
*10
|
.19
|
|
Restricted Stock Award Agreement
between the Company and Ron Marshall, effective as of
February 19, 2002 (incorporated by reference to
Exhibit 10.1 to our Quarterly Report on
Form 10-Q
for the quarter ended October 5, 2002 (File No. 0-785)).
|
|
*10
|
.20
|
|
Nash-Finch Company Performance
Incentive Plan (incorporated by reference to Exhibit 10.6
to our Quarterly Report on
Form 10-Q
for the quarter ended June 15, 2002 (File No. 0-785)).
|
|
*10
|
.21
|
|
Description of Nash-Finch Company
2005 Executive Incentive Program (incorporated by reference to
Exhibit 10.4 to our Quarterly Report on
Form 10-Q
for the twelve weeks ended March 26, 2005 (File No. 0-785)).
|
|
*10
|
.22
|
|
Form of Restricted Stock Unit
Award Agreement (for non-employee directors under the 2000 Stock
Incentive Plan) (incorporated by reference to Exhibit 10.19
to our Annual Report on
Form 10-K
for the fiscal year ended January 1, 2005 (File No. 0-785)).
|
|
*10
|
.23
|
|
Nash-Finch Company 2000 Stock
Incentive Plan Performance Unit Award Agreement dated as of
October 1, 2002 between the Company and Ron Marshall
(incorporated by reference to Exhibit 10.20 to our Annual
Report on
Form 10-K
for the fiscal year ended January 1, 2005 (File No. 0-785)).
|
|
*10
|
.24
|
|
Nash-Finch Company 2000 Stock
Incentive Plan Performance Unit Award Agreement dated as of
October 1, 2002 between the Company and Bruce A. Cross
(incorporated by reference to Exhibit 10.21 to our Annual
Report on
Form 10-K
for the fiscal year ended January 1, 2005 (File No. 0-785)).
|
|
*10
|
.25
|
|
Form of Restricted Stock Unit
Award Agreement (under the 2000 Stock Incentive Plan)
(incorporated by reference to Exhibit 10.1 to our
Form 8-K
filed August 11, 2006 (File No. 0-785)).
|
|
*10
|
.26
|
|
Nash-Finch Company 2000 Stock
Incentive Plan Performance Unit Award Agreement dated as of
May 1, 2006 between the Company and Alec C. Covington
(incorporated by reference to Exhibit 10.3 to our
Form 10-Q
for the quarter ended June 17, 2006 (File No. 0-785)).
|
|
*10
|
.27
|
|
Nash-Finch Company 2000 Stock
Incentive Plan Restricted Stock Unit Award Agreement dated as of
May 1, 2006 between the Company and Alec C. Covington
(incorporated by reference to Exhibit 10.2 to our
Form 10-Q
for the quarter ended June 17, 2006 (File No. 0-785)).
|
|
*10
|
.28
|
|
Letter Agreement between
Nash-Finch Company and Alec C. Covington dated March 16,
2006 (incorporated by reference to Exhibit 10.1 to our
Form 8-K
filed April 18, 2006 (File No. 0-785)).
|
|
*10
|
.29
|
|
Letter Agreement between
Nash-Finch Company and Robert B Dimond dated November 29,
2006 (incorporated by reference to Exhibit 10.1 to our
Form 8-K
filed December 21, 2006 (File
No. 0-785)).
|
|
12
|
.1
|
|
Computation of Ratio of Earnings
to Fixed Charges
|
|
21
|
.1
|
|
Our subsidiaries (filed herewith).
|
84
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
23
|
.1
|
|
Consent of Ernst & Young
LLP (filed herewith).
|
|
24
|
.1
|
|
Power of Attorney (filed herewith).
|
|
31
|
.1
|
|
Rule 13a-14(a)
Certification of the Chief Executive Officer (filed herewith).
|
|
31
|
.2
|
|
Rule 13a-14(a)
Certification of the Chief Financial Officer (filed herewith).
|
|
32
|
.1
|
|
Section 1350 Certification of
Chief Executive Officer and Chief Financial Officer (furnished
herewith).
|
|
|
|
|
A copy of any of these exhibits
will be furnished at a reasonable cost to any of our
stockholders, upon receipt from any such person of a
written request for any such exhibit. Such request should be
sent to Nash Finch Company, 7600 France Avenue South, P.O.
Box 355, Minneapolis, Minnesota, 55440-0355, Attention:
Secretary.
|
|
|
|
* |
|
Items that are management contracts or compensatory plans or
arrangements required to be filed as exhibits pursuant to
Item 15(a)(3) of
Form 10-K. |
85
NASH
FINCH COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Fiscal Years Ended December 30, 2006, December 31,
2005 and January 1, 2005
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charged
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Charged to
|
|
|
(Credited)
|
|
|
|
|
|
Balance
|
|
|
|
Beginning
|
|
|
Costs and
|
|
|
to Other
|
|
|
|
|
|
at End
|
|
Description
|
|
of Year
|
|
|
Expenses
|
|
|
Accounts(a)
|
|
|
Deductions
|
|
|
of Year
|
|
|
52 weeks ended
January 1, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful
receivables(c)
|
|
$
|
22,870
|
|
|
|
4,220
|
|
|
|
240
|
|
|
|
12,413
|
(b)
|
|
|
14,917
|
|
Provision for losses relating to
leases on closed locations
|
|
|
6,442
|
|
|
|
4,871
|
|
|
|
|
|
|
|
2,278
|
(d)
|
|
|
9,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
29,312
|
|
|
|
9,091
|
|
|
|
240
|
|
|
|
14,691
|
|
|
|
23,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended
December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful
receivables(c)
|
|
$
|
14,917
|
|
|
|
4,851
|
|
|
|
2,335
|
(e)
|
|
|
1,585
|
(b)
|
|
|
20,518
|
|
Provision for losses relating to
leases on closed locations
|
|
|
9,035
|
|
|
|
203
|
|
|
|
1,421
|
(f)
|
|
|
3,021
|
(d)
|
|
|
7,638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
23,952
|
|
|
|
5,054
|
|
|
|
3,756
|
|
|
|
4,606
|
|
|
|
28,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended
December 30, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful
receivables(c)
|
|
$
|
20,518
|
|
|
|
5,600
|
|
|
|
987
|
|
|
|
1,144
|
(b)
|
|
|
25,961
|
|
Provision for losses relating to
leases on closed locations
|
|
|
7,638
|
|
|
|
7,871
|
|
|
|
|
|
|
|
1,894
|
(d)
|
|
|
13,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,156
|
|
|
|
13,471
|
|
|
|
987
|
|
|
|
3,038
|
|
|
|
39,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Recoveries on accounts previously written off, unless noted
otherwise |
|
(b) |
|
Accounts charged off |
|
(c) |
|
Includes current and non-current receivables |
|
(d) |
|
Net payments of lease obligations & termination fees |
|
(e) |
|
Includes acquisition of $2,103 |
|
(f) |
|
Primarily relates to purchase accounting reserves |
86
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NASH-FINCH COMPANY
Alec C. Covington
President and Chief Executive Officer
Dated: March 1, 2007
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below on March 1, 2007 by
the following persons on behalf of the Registrant and in the
capacities indicated.
|
|
|
|
|
/s/ Alec
C. Covington
Alec
C. Covington, President and Chief Executive Officer (Principal
Executive Officer)
|
|
/s/ Robert
B. Dimond
Robert
B. Dimond, Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
|
|
/s/ William
R. Voss*
William
R. Voss, Chairman of the Board
|
|
/s/ Allister
P. Graham*
Allister
P. Graham, Director
|
|
|
|
/s/ Robert
L. Bagby*
Robert
L. Bagby, Director
|
|
/s/ John
H. Grunewald*
John
H. Grunewald, Director
|
|
|
|
/s/ Carole
F. Bitter*
Carole
F. Bitter, Director
|
|
/s/ Douglas
A.
Hacker* Douglas
A. Hacker, Director
|
|
|
|
/s/ Jerry
L. Ford*
Jerry
L. Ford, Director
|
|
/s/ William
H. Weintraub*
William
H. Weintraub, Director
|
|
|
|
/s/ Mickey
P. Foret*
Mickey
P. Foret, Director
|
|
|
|
|
|
|
|
*By:
|
|
/s/ Kathleen
M. Mahoney
Kathleen
M. Mahoney Kathleen M. Mahoney
Attorney-in-fact
|
|
|
87
NASH-FINCH
COMPANY
EXHIBIT INDEX TO ANNUAL REPORT
ON
FORM 10-K
For Fiscal Year Ended December 30, 2006
|
|
|
|
|
Exhibit
|
|
|
|
|
No.
|
|
Description
|
|
Method of Filing
|
|
2.1
|
|
Asset Purchase Agreement between
Roundys, Inc. and Nash-Finch Company, dated as of
February 24, 2005.
|
|
Incorporated by
reference (IBR)
|
3.1
|
|
Restated Certificate of
Incorporation of the Company, effective May 16, 1985.
|
|
IBR
|
3.2
|
|
Certificate of Amendment to
Restated Certificate of Incorporation of the Company, effective
May 15, 1987.
|
|
IBR
|
3.3
|
|
Certificate of Amendment to
Restated Certificate of Incorporation of the Company, effective
May 16, 2002.
|
|
IBR
|
3.4
|
|
Nash-Finch Company Bylaws, as
amended November 9, 2005.
|
|
IBR
|
4.1
|
|
Stockholder Rights Agreement,
dated February 13, 1996, between the Company and Wells
Fargo Bank, N.A. (formerly known as Norwest Bank Minnesota,
National Association).
|
|
IBR
|
4.2
|
|
Amendment to Stockholder Rights
Agreement dated as of October 30, 2001.
|
|
IBR
|
4.3
|
|
Indenture dated as of
March 15, 2005 between Nash-Finch Company and Wells Fargo
Bank, National Association, as Trustee (including form of Senior
Subordinated Convertible Notes due 2035).
|
|
IBR
|
4.4
|
|
Registration Rights Agreement
dated as of March 15, 2005 between Nash-Finch Company and
Deutsche Bank Securities Inc., Merrill Lynch & Co. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated.
|
|
IBR
|
10.1
|
|
Credit Agreement dated as of
November 12, 2004 among Nash-Finch Company, Various Lenders
and Deutsche Bank Trust Company Americas, as administrative
agent.
|
|
IBR
|
10.2
|
|
First Amendment to Credit
Agreement dated as of November 12, 2004 among Nash-Finch
Company, Various Lenders and Deutsche Bank Trust Company
Americas, as administrative agent.
|
|
IBR
|
10.3
|
|
Form of Change in Control
Agreement.
|
|
IBR
|
10.4
|
|
Form of Executive Retention Letter
Agreement.
|
|
IBR
|
10.5
|
|
Nash-Finch Company Income Deferral
Plan (as amended through May 21, 2004).
|
|
IBR
|
10.6
|
|
Second Declaration of Amendment to
Nash-Finch Company Income Deferral Plan (as amended through
May 21, 2004).
|
|
IBR
|
10.7
|
|
Nash-Finch Company Deferred
Compensation Plan.
|
|
IBR
|
10.8
|
|
Nash-Finch Company 2000 Stock
Incentive Plan.
|
|
IBR
|
10.9
|
|
Form of Non-Statutory Stock Option
Agreement (for employees under the Nash-Finch Company 2000 Stock
Incentive Plan).
|
|
IBR
|
10.10
|
|
Description of Nash-Finch Company
Long-Term Incentive Program Utilizing Performance Unit Awards.
|
|
IBR
|
10.11
|
|
Nash-Finch Company
1995 Director Stock Option Plan (as amended on
February 22, 2000 and February 19, 2002).
|
|
IBR
|
10.12
|
|
First Declaration of Amendment to
the Nash-Finch Company 1995 Director Stock Option Plan (as
amended on February 22, 2000 and February 19, 2002).
|
|
IBR
|
10.13
|
|
Form of Non-Statutory Stock Option
Agreement (for non-employee directors under the Nash-Finch
Company 1995 Director Stock Option Plan).
|
|
IBR
|
10.14
|
|
Nash-Finch Company 1997
Non-Employee Director Stock Compensation Plan (2003 Revision).
|
|
IBR
|
88
|
|
|
|
|
Exhibit
|
|
|
|
|
No.
|
|
Description
|
|
Method of Filing
|
|
10.15
|
|
Nash-Finch Company 1997
Non-Employee Director Stock Compensation Plan (2003
Revision) First Declaration of Amendment.
|
|
IBR
|
10.16
|
|
Nash-Finch Company 1997
Non-Employee Director Stock Compensation Plan (2003
Revision) Second Declaration of Amendment.
|
|
IBR
|
10.17
|
|
Nash-Finch Company Director
Deferred Compensation Plan.
|
|
IBR
|
10.18
|
|
Nash-Finch Company Supplemental
Executive Retirement Plan.
|
|
IBR
|
10.19
|
|
Restricted Stock Award Agreement
between the Company and Ron Marshall, effective as of
February 19, 2002.
|
|
IBR
|
10.20
|
|
Nash-Finch Company Performance
Incentive Plan.
|
|
IBR
|
10.21
|
|
Description of Nash-Finch Company
2005 Executive Incentive Program.
|
|
IBR
|
10.22
|
|
Form of Restricted Stock Unit
Award Agreement (for non-employee directors under the 2000 Stock
Incentive Plan).
|
|
IBR
|
10.23
|
|
Nash-Finch Company 2000 Stock
Incentive Plan Performance Unit Award Agreement dated as of
October 1, 2002 between the Company and Ron Marshall.
|
|
IBR
|
10.24
|
|
Nash-Finch Company 2000 Stock
Incentive Plan Performance Unit Award Agreement dated as of
October 1, 2002 between the Company and Bruce A. Cross.
|
|
IBR
|
10.25
|
|
Form of Restricted Stock Unit
Award Agreement (under the 2000 Stock Incentive Plan)
|
|
IBR
|
10.26
|
|
Nash-Finch Company 2000 Stock
Incentive Plan Performance Unit Award Agreement dated as of
May 1, 2006 between the Company and Alec C. Covington
|
|
IBR
|
10.27
|
|
Nash-Finch Company 2000 Stock
Incentive Plan Restricted Stock Unit Award Agreement dated as of
May 1, 2006 between the Company and Alec C. Covington
|
|
IBR
|
10.28
|
|
Letter Agreement between
Nash-Finch Company and Alec C. Covington dated March 16,
2006
|
|
IBR
|
10.29
|
|
Letter Agreement between
Nash-Finch Company and Robert B Dimond dated November 29,
2006
|
|
IBR
|
12.1
|
|
Computation of Ratio of Earnings
to Fixed Charges.
|
|
Filed Electronically(E)
|
21.1
|
|
Our subsidiaries.
|
|
E
|
23.1
|
|
Consent of Ernst & Young
LLP.
|
|
E
|
24.2
|
|
Power of Attorney.
|
|
E
|
31.1
|
|
Rule 13a-14(a)
Certification of the Chief Executive Officer.
|
|
E
|
31.2
|
|
Rule 13a-14(a)
Certification of the Chief Financial Officer.
|
|
E
|
32.2
|
|
Section 1350 Certification of
Chief Executive Officer and Chief Financial Officer.
|
|
E
|
89