Food distributor Nash Finch Company has announced a net loss for the third quarter ended 7 October 2006 of US$4.6m, or $0.34 per diluted share, as compared to net earnings of $11.0m, or $0.83 per diluted share, for the third quarter of 2005.
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Total sales for the quarter were $1.427bn as compared to $1.465bn in the prior-year quarter, which Nash Finch said was attributable to the closing of underperforming retail stores and higher levels of customer attrition in the food distribution segment, partially offset by stronger sales in the military segment.
For the first 40 weeks of 2006, the company’s net earnings were $3.4m or $0.25 per diluted share, as compared to net earnings of $27.8m, or $2.12 per diluted share in the first 40 weeks of 2005.
Total sales for the first 40 weeks of 2006 were $3.532bn compared to $3.432bn in the prior-year period. The increase in sales primarily reflected the company’s acquisition of wholesale food distribution divisions located in Lima, Ohio and Westville, Indiana effective 31 March 2005 and stronger sales in the military segment, partially offset by a decline in the retail segment sales due to the closing of underperforming stores.
However, apart from the impact of the acquisition, food distribution sales declined in both the quarterly and year-to-date comparisons due to slower growth in new accounts and customer attrition and the company, while sales to our existing customer base have declined relative to 2005.
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By GlobalDataThe decrease in segment profit for the third quarter and year-to-date periods reflected a decline in food distribution margin due to a greater concentration of lower margin customers, less effective gross margin management and lower levels of productivity throughout the distribution network, the company said.
During the first 40 weeks of 2006, the company repaid $24.2m of revolving debt outstanding under its senior secured credit facility and $5.0m on its term loan.
The company said it continues to focus on effectively managing its working capital, reducing indebtedness and improving its cash flow and is currently in compliance with all of its debt covenants, but anticipates however, that it may not meet its total leverage ratio covenant at the end of the fourth quarter.
The company is taking steps to gain relief from its lenders by negotiating an amendment to its current credit facility, and is optimistic that its requested amendment will be granted.
Nash Finch added that it intends to rationalise its retail and food distribution businesses, but is expected to incur restructuring and impairment related charges in the range of $18.0 to $24.0m. It said the charges are expected to occur during the next three fiscal quarters, with approximately $15.0m non-cash charges reflecting the impairment of certain assets.
