Nash-Finch Company : Nash Finch Reports First Quarter 2012 Results
04/27/2012| 03:05am US/Eastern
Recommend:
0
Nash Finch Company (NASDAQ: NAFC), one of the leading food distribution
companies in the United States, today announced financial results for
the twelve weeks (first quarter) ended March 24, 2012.
Financial Results
Total Company sales for the first quarter 2012 were $1.06 billion
compared to $1.10 billion in the prior-year quarter, a decrease of 3.7%.
Excluding the impact of selling or closing six retail stores, total
company first quarter comparable sales decreased 3.1% relative to last
year.
Consolidated EBITDA1, adjusted to exclude the impact of
significant items totaling $1.0 million in both the first quarter 2012
and 2011, respectively, was $23.9 million, or 2.3% of sales in the first
quarter of 2012 as compared to $30.8 million, or 2.8% of sales in the
first quarter of 2011. Including the impact of significant items,
Consolidated EBITDA for the first quarter 2012 was $22.8 million, or
2.2% of sales, as compared to $29.8 million, or 2.7% of sales, in the
prior year quarter.
"As anticipated, we, along with the industry in general, experienced
lower price inflation trends during the first quarter, which played a
part in the decline in EBITDA during the first quarter of 2012," said
Alec Covington President and CEO of Nash Finch. "In addition,
investments we made in key marketing programs also impacted our EBITDA
results, but those programs will better position our food distribution
and retail segments for improved revenue growth in the future."
"We recently completed the acquisition of 12 Bag 'N Save stores in the
Omaha, NE area and welcome these associates and customers to the Nash
Finch family. We expect this acquisition to be accretive to shareholders
in 2012 and we are moving swiftly to integrate these new stores into our
Nash Finch corporate retail group."
Net earnings in the first quarter, adjusted to exclude the impact of
significant items totaling $0.7 million or $0.05 per diluted share in
2012 and $1.8 million or $0.14 per diluted share in the 2011 quarter,
were $6.2 million or $0.47 per diluted share in the first quarter of
2012, compared to $9.3 million or $0.71 per diluted share in the first
quarter of 2011. Including the impact of significant items, our reported
net earnings for the first quarter of 2012 were $5.5 million or $0.42
per diluted share, as compared to net earnings of $7.5 million, or $0.57
per diluted share, in the prior year quarter, and are detailed in the
table below.
The following table identifies the significant items affecting our
Consolidated EBITDA, net earnings and diluted earnings per share for the
first quarter 2012 and prior year results:
(dollars in millions except per share amounts)
1st Quarter
2012
2011
Significant items
Transaction costs related to business acquisition
$
(0.2
)
-
Military distribution center conversion and transition costs
(0.8
)
(1.0
)
Significant charges impacting Consolidated EBITDA
$
(1.0
)
(1.0
)
Military distribution center non-cash pre-opening expense
(0.2
)
-
Non-cash loss on sale of retail stores
-
(2.0
)
Total significant charges impacting earnings before tax
$
(1.2
)
(3.0
)
Income tax on significant net charges
0.5
1.2
Total significant charges impacting net earnings
$
(0.7
)
(1.8
)
Diluted earnings per share impact from significant items
(0.05
)
(0.14
)
Diluted earnings per share, as reported
0.42
0.57
Diluted earnings per share, as adjusted
$
0.47
0.71
Military Distribution Results
(dollars in millions)
1st Quarter
2012
2011
Net Sales
$
531.3
537.4
Segment EBITDA1
13.4
15.1
Percentage of Sales
2.5
%
2.8
%
The military segment net sales decreased 1.1% in the first quarter 2012
compared to first quarter 2011, primarily due to decreased sales to
overseas commissaries.
The military segment EBITDA decreased by $1.7 million in the first
quarter 2012 compared to the prior year period. Military EBITDA as a
percentage of sales declined to 2.5% in the first quarter 2012 as
compared to 2.8% in the prior year.
"We continue to be under pressure in this segment due to increased
competition, but are resolute in our plan to deliver the first military
distribution world wide platform jointly with our West Coast strategic
partners, Coastal Pacific Food Distributors. During the first quarter
our newest distribution center in Oklahoma City came online and I am
pleased to report the operation is running smoothly. I congratulate all
of the associates involved in this achievement," said Covington.
Food Distribution & Retail Results
(dollars in millions)
1st Quarter
2012
2011
Sales
Food Distribution
$
424.6
450.3
Retail
102.7
112.1
Total
$
527.3
562.4
Segment EBITDA1
Food Distribution
$
6.5
10.6
Retail
2.9
4.1
Total
$
9.4
14.7
Percentage of Sales
Food Distribution
1.5
%
2.3
%
Retail
2.8
%
3.7
%
Total
1.8
%
2.6
%
Sales for the combined food distribution and retail segment decreased by
6.2% in the first quarter 2012 as compared to the prior year quarter.
The decrease in sales was negatively impacted in the quarter by $11.0
million due to the sale or closing of six retail stores since the end of
the fourth quarter of 2010. After adjusting to exclude this impact, our
comparable sales declined 4.4% for the first quarter. The decline was
primarily due to a reduction in sales to existing wholesale customers in
addition to a same store sales decline of 1.4% in our retail stores.
The food distribution and retail segment EBITDA decreased by $5.3
million in the first quarter 2012 compared to the same period last year.
The food distribution and retail segment EBITDA as a percentage of sales
was 1.8% in the first quarter 2012 as compared to 2.6% in the prior year
period. The decrease in first quarter EBITDA was partially due to higher
inflation in the previous year quarter resulting in a higher than normal
prior year gross margin performance. In addition, declines in perishable
commodity prices in the current year have also temporarily impacted
gross margin performance.
"We are pleased with the improving trends in same store sales achieved
by both our food distribution and retail segments in spite of an
unusually mild winter, however, we are disappointed with the EBITDA
results achieved by those segments. The results were partially due to a
decrease in inflation and the lag between the investments we are making
and the results we believe those investments will deliver," said
Covington. "We have already seen increased product movement in produce
and private label, two of the major initiatives being launched this year
to help fuel future growth in both our food distribution and retail
segments."
Financial Target Progress
Improvements on our key financial targets have been achieved to date
since the targets were announced as part of the Company's strategic plan
in November 2006. Our debt leverage ratio has improved from 3.11x in
fiscal 2006 to 2.39x in the first quarter 2012. In addition, the ratio
of free cash flow to net assets excluding the impact of strategic
projects has increased from 8.7% in fiscal 2006 to 9.8% in the first
quarter 2012.
The following table charts the Company's progress towards its long-term
financial targets that are anticipated to be attained through successful
execution of the strategic plan.
Financial Targets
1st
Long-term
Quarter
Fiscal
Fiscal
Fiscal
Fiscal
Fiscal
Target
2012
2011
2010
2009
2008
2007
Organic Revenue Growth2
2.0%
(4.1%)
(3.8%)
(5.4%)
(0.6%)
3.1%
(2.6%)
Consolidated EBITDA Margin3
4.0%
2.2%
2.9%
2.8%
2.7%
3.1%
2.9%
Trailing Four Quarter Free Cash Flow / Net Assets4
6.6%
6.8%
0.9%
10.6%
12.0%
9.2%
Trailing Four Quarter Free Cash Flow to Net
Assets excluding impact of strategic projects(5)
10.0%
9.8%
13.9%
8.4%
13.1%
14.0%
9.7%
Total Leverage Ratio6
2.5 - 3.0 x
2.39x
2.14x
2.29x
2.02x
1.75x
2.20x
Liquidity
Total debt at the end of the first quarter 2012 decreased by $21.6
million to $316.0 million as compared to the end of the first quarter
2011. The Company continues to focus on effectively managing its balance
sheet and is currently in compliance with all of its debt covenants. The
debt leverage ratio as of the end of the first quarter 2012 was 2.39x.
Availability on the Company's revolving credit facility at the end of
the quarter was $252.4 million.
1 References to EBITDA, Consolidated EBITDA, and segment
EBITDA are calculated as earnings before interest, income tax,
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, and non-cash charges (such as LIFO,
asset impairments, closed store lease costs and share-based
compensation), less cash payments made during the current period on
non-cash charges recorded in prior periods. Consolidated EBITDA should
not be considered an alternative measure of our net income, operating
performance, cash flows or liquidity. Consolidated EBITDA is provided as
additional information as a key metric used to determine payout pursuant
to our Short-Term and Long-Term Incentive Plans. The Company also
believes investors find the information useful because it reflects the
resources available for strategic investments including, for example,
capital needs of the business, strategic acquisitions and debt service.
2 Organic Revenue Growth is the percentage change in revenues
for a fiscal period(s) compared to the similar prior year fiscal
period(s), excluding incremental revenue obtained through acquisitions.
3 Consolidated EBITDA Margin is calculated by dividing
Consolidated EBITDA by sales.
4 Trailing Four Quarter Free Cash Flow to Net Assets ratio is
defined as cash provided from operations less capital expenditures for
property, plant & equipment during the trailing four quarters divided by
the average net assets for the current period and prior year comparable
period (total assets less current liabilities plus current portion of
long-term debt and capital leases).
5 Trailing Four Quarter Free Cash Flow to Net Assets
excluding impact of strategic projects ratio is defined as cash provided
from operations less capital expenditures for property, plant &
equipment (excluding capital expenditures for strategic projects) during
the trailing four quarters divided by the average net assets (excluding
average net assets generated from strategic projects) for the current
period and prior year comparable period (total assets less current
liabilities plus current portion of long-term debt and capital leases).
6 Total Leverage Ratio is defined as total debt (current
portion of long-term debt and capital leases, long-term debt and
capitalized lease obligations) divided by the trailing four quarters
Consolidated EBITDA.
A conference call to review the first quarter 2012 results is scheduled
at 10 a.m. CT (11 a.m. ET) on April 27, 2012. Interested participants
can listen to the conference call over the Internet by logging onto the
"Investor Relations" portion of Nash Finch's website at http://www.nashfinch.com.
A replay of the webcast will be available and the transcript of the call
will be archived on the "Investor Relations" portion of Nash Finch's
website under the heading "Audio Archives." A copy of this press release
and the other financial and statistical information about the periods to
be discussed in the conference call will be available at the time of the
call on the "Investor Relations" portion of the Nash Finch website under
the caption "Press Releases."
Nash Finch Company is a Fortune 500 company and one of the leading food
distribution companies in the United States. Nash Finch's core business,
food distribution, serves independent retailers and military
commissaries in 36 states, the District of Columbia, Europe, Cuba,
Puerto Rico, the Azores, Bahrain and Egypt. The Company also owns and
operates a base of retail stores, primarily supermarkets under the
Econofoods®, Family Thrift Center®, AVANZA®, Family Fresh Market®,
Savers Choice™, Bag 'N Save® and Sun Mart® trade names. Further
information is available on the Company's website at www.nashfinch.com.
This release contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.Such
statements relate to trends and events that may affect our future
financial position and operating results.Any statement contained
in this release that is not statements of historical fact may be deemed
forward-looking statements.For example, words such as "may,"
"will," "should," "likely," "expect," "anticipate," "estimate,"
"believe," "intend, " "potential" or "plan," or comparable terminology,
are intended to identify forward-looking statements.Such
statements are based upon current expectations, estimates and
assumptions, and entail various risks and uncertainties that could cause
actual results to differ materially from those expressed in such
forward-looking statements.Important factors known to us that
could cause or contribute to material differences include, but are not
limited to, the following:
? the effect of competition on our food distribution, military
and retail businesses;
? general sensitivity to economic conditions, including the
uncertainty related to the current state of the economy in the U.S. and
worldwide economic slowdown; disruptions to the credit and financial
markets in the U.S. and worldwide; changes in market interest rates;
continued volatility in energy prices and food commodities;
? macroeconomic and geopolitical events affecting commerce
generally;
? changes in consumer buying and spending patterns;
? our ability to identify and execute plans to expand our food
distribution, military and retail operations;
? possible changes in the military commissary system, including
those stemming from the redeployment of forces, congressional action and
funding levels;
? our ability to identify and execute plans to improve the
competitive position of our retail operations;
? the success or failure of strategic plans, new business
ventures or initiatives;
? our ability to successfully integrate and manage current or
future businesses we acquire, including the ability to manage credit
risks and retain the customers of those operations;
? changes in credit risk from financial accommodations extended
to new or existing customers;
? significant changes in the nature of vendor promotional
programs and the allocation of funds among the programs;
? limitations on financial and operating flexibility due to debt
levels and debt instrument covenants;
? legal, governmental, legislative or administrative proceedings,
disputes, or actions that result in adverse outcomes;
? our ability to identify and remediate any material weakness in
our internal controls that could affect our ability to detect and
prevent fraud, expose us to litigation, or prepare financial statements
and reports in a timely manner;
? changes in accounting standards;
? technology failures that may have a material adverse effect on
our business;
? severe weather and natural disasters that may impact our supply
chain;
? unionization of a significant portion of our workforce;
? costs related to a multi-employer pension plan which has
liabilities in excess of plan assets;
? changes in health care, pension and wage costs and labor
relations issues;
? product liability claims, including claims concerning food and
prepared food products;
? threats or potential threats to security;
? unanticipated problems with product procurement; and
? maintaining our reputation and corporate image.
A more detailed discussion of many of these factors, as well as other
factors that could affect the Company's results, is contained in the
Company's periodic reports filed with the SEC.You should
carefully consider each of these factors and all of the other
information in this release.We believe that all forward-looking
statements are based upon reasonable assumptions when made.However,
we caution that it is impossible to predict actual results or outcomes
and that accordingly you should not place undue reliance on these
statements.Forward-looking statements speak only as of the date
when made and we undertake no obligation to revise or update these
statements in light of subsequent events or developments.Actual
results and outcomes may differ materially from anticipated results or
outcomes discussed in forward-looking statements. You are advised,
however, to consult any future disclosures we make on related subjects
in future reports to the Securities and Exchange Commission (SEC).
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per share amounts)
12 Weeks Ended
March 24,
March 26,
2012
2011
Sales
$
1,058,634
1,099,809
Cost of sales
977,911
1,010,820
Gross profit
80,723
88,989
Gross profit margin
7.6
%
8.1
%
Other costs and expenses:
Selling, general and administrative
58,312
62,577
Depreciation and amortization
8,204
8,583
Interest expense
5,138
5,459
Total other costs and expenses
71,654
76,619
Earnings before income taxes
9,069
12,370
Income tax expense
3,615
4,889
Net earnings
$
5,454
7,481
Net earnings per share:
Basic
$
0.42
0.59
Diluted
$
0.42
0.57
Declared dividends per common share
$
0.18
0.18
Weighted average number of common shares
outstanding and common equivalent shares outstanding:
Basic
12,951
12,719
Diluted
13,135
13,016
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)
Assets
March 24, 2012
December 31, 2011
Current assets:
Cash and cash equivalents
$
700
773
Accounts and notes receivable, net
246,603
243,763
Inventories
322,386
308,621
Prepaid expenses and other
15,859
17,329
Deferred tax assets
6,157
6,896
Total current assets
591,705
577,382
Notes receivable, net
23,442
23,221
Property, plant and equipment:
688,060
686,794
Less accumulated depreciation and amortization
(418,486
)
(413,695
)
Net property, plant and equipment
269,574
273,099
Goodwill
171,092
170,941
Customer contracts and relationships, net
14,863
15,399
Investment in direct financing leases
2,603
2,677
Other assets
11,240
11,049
Total assets
$
1,084,519
1,073,768
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt and capital lease obligations
$
2,533
2,932
Accounts payable
234,898
234,722
Accrued expenses
49,199
61,459
Total current liabilities
286,630
299,113
Long-term debt
298,146
278,546
Capital lease obligations
15,358
15,905
Deferred tax liability, net
41,002
40,671
Other liabilities
35,657
34,910
Commitments and contingencies
-
-
Stockholders' equity:
Preferred stock - no par value.
Authorized 500 shares; none issued
-
-
Common stock of $1.66 2/3 par value
Authorized 50,000 shares; 13,727 and 13,677 shares issued,
respectively
22,918
22,878
Additional paid-in capital
118,191
118,222
Common stock held in trust
(1,254
)
(1,254
)
Deferred compensation obligations
1,254
1,254
Accumulated other comprehensive loss
(14,707
)
(14,707
)
Retained earnings
333,564
330,470
Treasury stock at cost; 1,541 and 1,569 shares
(52,240
)
(52,240
)
Total stockholders' equity
407,726
404,623
Total liabilities and stockholders' equity
$
1,084,519
1,073,768
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
12 Weeks Ended
March 24,
March 26,
2012
2011
Operating activities:
Net earnings
$
5,454
7,481
Adjustments to reconcile net earnings to net cash provided by (used
in) operating activities:
Depreciation and amortization
8,204
8,583
Amortization of deferred financing costs
290
423
Non-cash convertible debt interest
1,390
1,292
Amortization of rebateable loans
1,155
1,204
Provision for (recovery of) bad debts
(279
)
444
Provision for lease reserves
-
448
Deferred income tax expense
277
1,976
Loss (gain) on sale of property, plant and equipment
(476
)
1,775
LIFO charge
182
501
Asset impairments
62
-
Share-based compensation
1,094
1,159
Deferred compensation
353
332
Other
(45
)
(111
)
Changes in operating assets and liabilities, net of effects of
acquisitions:
Accounts and notes receivable
(2,556
)
(5,687
)
Inventories
(13,946
)
5,098
Prepaid expenses
(1,721
)
(688
)
Accounts payable
(9,768
)
(10,232
)
Accrued expenses
(11,167
)
(9,485
)
Income taxes payable
2,699
732
Other assets and liabilities
(169
)
369
Net cash provided by (used in) operating activities
(18,967
)
5,614
Investing activities:
Disposal of property, plant and equipment
635
323
Additions to property, plant and equipment
(4,063
)
(28,966
)
Business acquired, net of cash
(1,560
)
(519
)
Loans to customers
251
336
Payments from customers on loans
(178
)
(153
)
Other
(151
)
-
Net cash used in investing activities
(5,066
)
(28,979
)
Financing activities:
Proceeds from revolving debt
18,600
22,600
Dividends paid
(2,198
)
(2,180
)
Payments of long-term debt
(765
)
(16
)
Payments of capital lease obligations
(571
)
(574
)
Decrease in outstanding checks
9,396
3,457
Payments of deferred financing costs
(41
)
-
Tax benefit from share-based compensation
66
-
Other
(527
)
-
Net cash provided by financing activities
23,960
23,287
Net decrease in cash
(73
)
(78
)
Cash at beginning of period
773
830
Cash at end of period
$
700
752
NASH FINCH COMPANY AND SUBSIDIARIES
Supplemental Data (Unaudited)
March 24,
March 26,
Other Data (In thousands)
2012
2011
Total debt
$
316,037
337,646
Stockholders' equity
$
407,726
383,540
Capitalization
$
723,763
721,186
Debt to total capitalization
43.7%
46.8%
Non-GAAP Data
Consolidated EBITDA (a)
$
132,246
138,761
Leverage ratio - trailing 4 qtrs. (debt to consolidated EBITDA) (b)
2.39x
2.43x
Comparable GAAP Data
Debt to earnings before income taxes (b)
5.73
4.74
(a)
Consolidated EBITDA, as defined in our credit agreement, is
earnings before interest, income tax, 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, and non-cash charges (such as LIFO,
asset impairments, closed store lease costs and share-based
compensation), less cash payments made during the current period
on non-cash charges recorded in prior periods. Consolidated EBITDA
should not be considered an alternative measure of our net income,
operating performance, cash flows or liquidity. The amount of
Consolidated EBITDA is provided as a metric used to determine
payout of performance units pursuant to our Long-Term Incentive
Plan.
(b)
Leverage ratio is defined as the Company's total debt at March 24,
2012 and March 26, 2011, divided by Consolidated EBITDA for the
respective four trailing quarters. The most comparable GAAP ratio
is debt at the same date divided by earnings from continuing
operations before income taxes for the respective four trailing
quarters.
Derivation of Consolidated EBITDA; Segment Consolidated
EBITDA and Segment Profit (in thousands)
FY2012
2011
2011
2011
2012
Rolling
Qtr 2
Qtr 3
Qtr 4
Qtr 1
4 Qtrs
Earnings before income taxes
$
16,614
16,737
12,707
9,069
55,127
Add/(deduct)
LIFO charge
2,131
7,085
4,503
181
13,900
Depreciation and amortization
8,367
10,738
8,016
8,204
35,325
Interest expense
5,355
7,014
7,066
5,138
24,573
Closed store lease costs
159
24
124
-
307
Asset impairment
349
13
191
62
615
Net loss (gain) on sale of real estate and other assets
(391
)
(106
)
41
(476
)
(932
)
Stock compensation
1,372
1,761
1,137
1,094
5,364
Subsequent cash payments on non-cash charges
(572
)
(650
)
(369
)
(442
)
(2,033
)
Total Consolidated EBITDA
$
33,384
42,616
33,416
22,830
132,246
2011
2011
2011
2012
Rolling
Segment Consolidated EBITDA
Qtr 2
Qtr 3
Qtr 4
Qtr 1
4 Qtrs
Military
$
14,835
21,348
17,061
13,400
66,644
Food Distribution
13,791
15,907
10,747
6,539
46,984
Retail
4,758
5,361
5,608
2,891
18,618
$
33,384
42,616
33,416
22,830
132,246
2011
2011
2011
2012
Rolling
Segment profit
Qtr 2
Qtr 3
Qtr 4
Qtr 1
4 Qtrs
Military
$
11,285
14,666
12,314
10,474
48,739
Food Distribution
7,709
6,177
4,014
2,338
20,238
Retail
2,128
1,790
2,668
661
7,247
Unallocated:
Interest
(4,508
)
(5,896
)
(6,289
)
(4,404
)
(21,097
)
$
16,614
16,737
12,707
9,069
55,127
FY2011
2010
2010
2010
2011
Rolling
Qtr 2
Qtr 3
Qtr 4
Qtr 1
4 Qtrs
Earnings before income taxes
$
17,966
22,830
18,000
12,370
71,166
Add/(deduct)
LIFO charge (credit)
(321
)
285
129
501
594
Depreciation and amortization
8,170
10,883
8,481
8,583
36,117
Interest expense
5,366
7,123
5,656
5,459
23,604
Settlement of pre-acquisition contingency
-
(310
)
-
448
138
Closed store lease costs
(434
)
725
29
-
320
Asset impairment
301
108
11
1,796
2,216
Stock compensation
1,857
2,717
1,692
1,159
7,425
Subsequent cash payments on non-cash charges
(969
)
(578
)
(768
)
(504
)
(2,819
)
Total Consolidated EBITDA
$
31,936
43,783
33,230
29,812
138,761
2010
2010
2010
2011
Rolling
Segment Consolidated EBITDA
Qtr 2
Qtr 3
Qtr 4
Qtr 1
4 Qtrs
Military
$
14,542
17,412
14,081
15,107
61,142
Food Distribution
12,623
18,889
14,570
10,581
56,663
Retail
4,771
7,482
4,579
4,124
20,956
$
31,936
43,783
33,230
29,812
138,761
2010
2010
2010
2011
Rolling
Segment profit
Qtr 2
Qtr 3
Qtr 4
Qtr 1
4 Qtrs
Military
$
12,663
14,270
11,450
12,147
50,530
Food Distribution
7,636
11,666
9,444
5,845
34,591
Retail
2,190
2,558
1,892
(984
)
5,656
Unallocated:
Interest
(4,523
)
(5,664
)
(4,786
)
(4,638
)
(19,611
)
$
17,966
22,830
18,000
12,370
71,166
Nash Finch Company Bob Dimond, 952-844-1060 Executive
VP & CFO
Recommend:
