Nash Finch Company (Nasdaq: NAFC), a Fortune 500 Minneapolis-based food retailer and distributor, today reported for the third quarter ended October 6, 2001, that net earnings rose 50 percent to $6.0 million, or 50 cents per diluted share, compared to net earnings of $4.0 million, or 35 cents per diluted share, reported for the third quarter of 2000. Total revenues for the third quarter of 2001 were $1.275 billion versus revenues of $1.205 billion for the third quarter of 2000, a 6 percent increase.

EBITDA (earnings from operations before interest, taxes, depreciation, amortization, LIFO and non-recurring items) totaled $36.8 million in the third quarter of 2001, or 2.9 percent of sales, an 18 percent increase over EBITDA in the third quarter of 2000 of $31.3 million, or 2.6 percent of sales.

Excluding goodwill amortization, which will no longer occur beginning in 2002 due to a new accounting pronouncement, net earnings would have been $7.5 million for the third quarter and $18.2 million year-to-date, resulting in diluted earnings per share of 62 cents and $1.53 for the third quarter and year-to-date, respectively.

“This is our eighth consecutive quarter of year-over-year improvement in comparable earnings and we are very pleased with our performance,” said Ron Marshall, president and chief executive officer. “Our ongoing focus on outstanding execution, continual improvement and cost elimination continues to drive the company’s results.”

For the first 40 weeks of 2001, total revenues increased 5 percent to $3.129 billion compared to $2.988 billion in the prior year period. Net earnings rose 38 percent to $14.6 million, or $1.23 per diluted share, versus $10.6 million, or 93 cents per diluted share, in the first 40 weeks of 2000. EBITDA for the 40-week period in 2001 increased 17 percent to $90.2 million, or 2.9 percent of sales, from $76.8 million, or 2.6 percent of sales, in the first 40 weeks of 2000.

“Our first three quarters demonstrate strong growth in total revenues, as well as substantially increased net earnings and EBITDA,” said Marshall. “Our earnings guidance for the fourth quarter is 52 to 54 cents per diluted share. This brings the earnings for the year to a range of $1.75 to $1.77 per diluted share, exceeding previously announced guidance of $1.70 to $1.75. For 2002, excluding acquisitions, we are pleased to announce an earnings range of $2.00 to $2.05 per diluted share, calculated on a comparable basis to 2001 earnings. Excluding the effect of goodwill amortization of 40 cents per share, 2002 earnings are expected to range between $2.40 and $2.45 per diluted share.”

Business Segments

Revenues in Nash Finch’s retail segment for the third quarter of 2001 were $314.9 million compared to revenues of $322.3 million in the third quarter of 2000, a 2 percent decrease. Retail segment EBITDA in the third quarter of 2001 was $17.3 million, or 5.5 percent of sales, versus $15.1 million, or 4.7 percent of sales, in the third quarter of 2000. Retail segment profit in the third quarter 2001 improved by 23 percent to $12.7 million, compared to $10.3 million in the third quarter of 2000.

Contributing to the decreased third quarter revenues was the company’s complete exit of corporate-owned retail stores in the Southeast Region. However, in August, the company completed the acquisition of U Save Foods, Inc., a 14-store chain with annual sales of approximately $145 million, operating in Nebraska, Kansas and Colorado. As a result of this acquisition, Nash Finch became the largest supermarket chain in Nebraska with 31 stores. Following the acquisition, all U Save stores were re-bannered as Sun Mart® and were grand opened on October 3, 2001. Factoring in various integration related costs, we expect the U Save acquisition to be accretive to 2001 earnings per share by approximately 4 cents and by approximately 14 cents in 2002. If the chain had been part of the retail segment for the entire quarter, revenue growth of approximately 4 percent would have occurred.

Same-store sales were down 2.3 percent in the third quarter of 2001 and were down .9 percent for the first 40 weeks of 2001. In order to gain future marketing flexibility, Nash Finch reduced promotional activity in certain markets this summer, relative to last summer, which resulted in a significant margin increase. Going forward, Nash Finch intends to drive promotional activity in key marketing areas.

In July, the company announced that Rafael Hernandez and Stacey Mack had joined the management team of Nash Finch’s retail operations. Hernandez, who joins Nash Finch from Fiesta Mart, a Texas-based chain of 40 supermarkets and leading retailer targeting the Hispanic market, is director of ethnic retail. He is responsible for development and expansion of the company’s Hispanic retail format.

“We are thrilled to announce the new banner for our Hispanic stores — Avanzando(TM),” said Marshall. “Avanzando means ‘to progress’ or ‘to advance.’ And this is just what our new format represents. It will truly be a new, progressive shopping experience for the Hispanic supermarket customer with an appealing mix of merchandise, services and store environment. The first Avanzando stores will open early next year in Denver, Colorado with as many as ten stores opening per year.”

Mack joins Nash Finch as director of extreme value retailing, overseeing the expansion of the Buy n Save® format, with experience at several companies, including director of retail operations for Aldi, Inc. Starting in 2002, the Buy n Save format will expand in the Upper Midwest at a rate of at least ten stores per year. Both Hernandez and Mack report directly to Michael Petersen, executive vice president and president of retail operations.

“One of our key strategies is to capitalize on growth opportunities for Nash Finch. After extensive research and development, we know these two store formats, Avanzando and Buy n Save, have significant potential,” stated Marshall. “We are very pleased to have the kind of talent, drive and experience Rafael and Stacey offer, enabling us to begin rolling out these two exciting retail concepts. Their contributions are already having a powerful impact.”

Nash Finch’s food distribution segment revenues improved in the third quarter of 2001 by 13 percent to $655.9 million, compared to $582.4 million in the third quarter of 2000. Segment EBITDA increased to $22.2 million in the third quarter of 2001, or 3.4 percent of sales, from $16.4 million in the third quarter of 2000, or 2.8 percent of sales. Profit in the food distribution segment was $18.6 million in the third quarter of 2001, a 56 percent increase from profit in the third quarter of 2000 of $11.9 million.

In September, the company announced $70 million in additional annualized revenues from several new market-leading customers. This brings the annualized business gained in 2001 to more than $220 million including $20 million related to another recently captured account. These new business gains are a direct reflection of the confidence customers place in the high quality performance of Nash Finch’s food distribution business metrics including on-time delivery, selector accuracy and fill-rate.

Nash Finch’s store brands, including Our Family®, IGA and Fame®, continue to show consistent growth. Sales of private label products during the first 40 weeks of 2001 increased over 18% compared to the first 40 weeks of 2000. In addition, Nash Finch’s Signature Program of branded products, introduced last year, is also demonstrating strong sales growth. The newest signature item, Our Signature(TM) Angus Premium Beef, expands the items exclusively available at Nash Finch’s company-owned or supplied stores. In addition, several new vendors recently joined the Signature Partner Program such as Nash Finch’s Country Classic Breads(TM) with Campbell’s Prego Sauces and ConAgra’s Homestyle Bakes partnered with Nash Finch’s Kooky Cookie(TM) promotion. Finally, Nash Finch is also developing a Hispanic line of private label products under the Avanzando brand.

Nash Finch began the roll-out of NashNet(TM) in September. NashNet is a retail internet solution providing independent and company-owned retail stores affordable, internet-based technology to access Nash Finch merchandising programs and reports from anywhere. The current features of NashNet include new item introduction, promotional offerings, ordering capability, on-line catalogs, reports, invoices and e-News. This has reduced our new item cycle time and increased awareness of and response to Nash Finch promotional offerings.

“We continue to grow the top-line of our food distribution segment by earning the business of new customers and satisfying the needs of our existing customers. These retailers appreciate our relentless pursuit of the highest performance metrics in the industry,” said Marshall. “In addition, we provide our customers a powerful set of tools including NashNet, innovative products, and outstanding merchandising programs and services. This translates into a winning formula for both our customers and for Nash Finch.”

The military segment of Nash Finch, which operates distribution centers exclusively dedicated to serving military bases on the east coast of the United States and Europe, increased revenue in the third quarter of 2001 to $304.1 million, up 1 percent from revenues of $299.8 million in the third quarter of 2000. Military EBITDA increased to $7.7 million, compared to $7.5 million in the third quarter of 2000, both representing 2.5 percent of sales. Military segment profit was $7.2 million in the third quarter of 2001, up 3 percent from profits of $7.0 million in the third quarter of 2000.

“The tragic events of September 11 have affected all of us in varying ways,” stated Marshall. “Our military business was certainly impacted during the quarter although not significantly. Based on information currently available, we expect overall sales to remain stable for the remainder of the year. It is important to note that the primary customers of the domestic military commissaries we supply include many civilian contract workers and retired military staff who are unaffected by any change in military troop deployment or movement.”

Growth Strategy

“We continue to see the rewards of the strategic business plan we introduced three years ago,” concluded Marshall. “Going forward, we will continue to remain focused on a four-pronged growth strategy. First, the wholesale segment will continue to successfully grow through new account capture. Second, our conventional retail store base will continue to expand through acquisition. Third, the roll-out of our Avanzando retail format will capitalize on the rapidly growing Hispanic market, and finally, through the expansion of our extreme value retailing format, Buy n Save, we will leverage the opportunity to serve the low income segment of the population.”

Nash Finch Company is a Fortune 500 company and one of the leading food retail and distribution companies in the United States with over $4 billion in annual revenues. Nash Finch currently owns and operates 111 stores in the Upper Midwest, principally supermarkets under the Econofoods®, Sun Mart® and Family Thrift Center(TM) trade names. In addition to its retail operations, independent retailers and military commissaries in approximately 28 states and Europe are key customers of Nash Finch’s food distribution business. Further information is available on the company’s website at

Forward-looking statements combined in this news release are made under the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated. Such factors may include, but are not limited to: general business conditions, the impact of competition, and other risks detailed from time to time in the Company’s periodic reports available from the Security and Exchange Commission.

Condensed Consolidated Statements
of Operations (unaudited)
(In thousands, except per share

Sixteen Weeks Ended Forty Weeks Ended
October 6, October 7, October 6, October 7,
2001 2000 2001 2000

Total sales and revenues $1,274,843 1,204,533 3,129,341 2,987,702

Cost and expenses:
Cost of sales 1,136,018 1,071,528 2,780,338 2,656,039
Selling, general and
administrative 103,894 101,417 261,937 253,320
Depreciation and
amortization 14,139 13,992 35,417 33,896
Interest expense 10,472 10,628 26,759 26,001
Total cost and expenses 1,264,523 1,197,565 3,104,451 2,969,256

Earnings before income
taxes 10,320 6,968 24,890 18,446

Income taxes 4,272 2,954 10,304 7,821

Net earnings 6,048 4,014 14,586 10,625

Basic earnings per share: $0.52 0.35 1.26 0.93

Diluted earnings per share: 0.50 0.35 1.23 0.93

Weighted average number of
common shares outstanding
and common equivalent
shares outstanding:
Basic (a) 11,684 11,471 11,599 11,433
Diluted (b) 12,065 11,476 11,889 11,438

EBITDA (c) $36,774 31,321 90,207 76,790
EBITDA as a percent of
revenues 2.88% 2.60% 2.88% 2.57%

(a) Excluding goodwill amortization, basic EPS would have been $.64 for
the quarter ended 10/06/2001, $.48 for the quarter ended
10/07/2000, $1.57 for the year-to-date ended 10/06/2001 and $1.23 for
the year-to-date ended 10/07/2000

(b) Excluding goodwill amortization, diluted EPS would have been $.62 for
the quarter ended 10/06/2001, $.48 for the quarter ended
10/07/2000, $1.53 for the year-to-date ended 10/06/2001 and $1.23 for
the year-to-date ended 10/07/2000

(c) EBITDA (operating cash flow) represents earnings from operations
before interest, income tax,
depreciation, amortization, LIFO, gains from the sale of real estate,
special charges and other
non-recurring items.

Condensed Consolidated Balance Sheets
(In thousands)

October 6, December 30, October 7,
2001 2000 2000
(unaudited) (unaudited)

Current assets:
Cash $22,844 1,534 9,771
Accounts and notes receivable, net 134,717 132,992 126,069
Inventories 290,565 270,481 287,457
Other current assets 24,185 28,532 28,396
Total current assets 472,311 433,539 451,693

Investments and noncurrent receivables 36,661 32,454 33,979

Property, plant and equipment, net 273,076 256,516 254,776

Goodwill, net 138,103 113,584 111,953
Other assets 49,802 44,735 43,128

Total assets $969,953 880,828 895,529

Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term
debt and capitalized lease
obligations $5,666 4,646 3,209
Accounts payable 289,088 240,724 262,808
Accrued and other liabilities 105,778 79,416 75,311
Total current liabilities 400,532 324,786 341,328

Long-term debt 308,445 308,618 315,295
Capitalized lease obligations 47,588 45,046 42,870
Deferred credits and other liabilities 13,926 17,838 15,334

Stockholders’ equity 199,462 184,540 180,702

Total liabilities and
stockholders’ equity $969,953 880,828 895,529

Condensed Consolidated Statements
of Cash Flows (unaudited)
(In thousands)

Forty Weeks Ended
October 6, October 7,
2001 2000
Operating activities:
Net earnings $14,586 10,625
Adjustments to reconcile net income
to net cash provided by operating
Depreciation and amortization 35,417 33,896
Provision for bad debts 3,763 5,702
Deferred income taxes 6,052 2,415
Other 564 (757)
Changes in operating assets and
liabilities 85,656 17,540
Net cash provided by operating
activities 146,038 69,421

Investing activities:
Net increase in property, plant and
equipment (26,355) (29,526)
Business acquired, net of cash
acquired (46,904) (19,890)
Loans to customers (4,837) (16,148)
Sale (repurchase) of receivables 675 (7,245)
Other (8,043) (1,054)
Net cash used for investing
activities (85,464) (73,863)

Financing activities:
(Payments) proceeds from long-term
debt (3,593) 1,208
Dividends paid (3,146) (3,089)
Decrease in outstanding checks (34,402) (334)
Other 1,877 39

Net cash used for financing
activities (39,264) (2,176)
Net increase (decrease) in
cash $21,310 (6,618)

Supplemental disclosure of cash flow
Non cash investing and financing
Purchase of real estate under
capital leases $3,866 13,249
Acquisition of minority
interests $4,294 —

Sixteen Weeks Ended Forty Weeks Ended
October October October October
6, 7, 6, 7,
2001 2000 2001 2000
EBITDA Reconciliation
(In thousands)

Pre-tax earnings (a) 10,320 6,968 24,890 18,446

LIFO 1,799 (242) 2,661 (1,055)
Depreciation and
amortization 14,139 13,992 35,417 33,896
Interest expense 10,472 10,628 26,759 26,001
Closed store lease
costs — 242 282 1,196
(Gains)/losses on sales
of real estate 44 (267) 198 (1,694)
Total EBITDA 36,774 31,321 90,207 76,790

Other Data (In thousands)

Cash from operations –
3rd qtr. $44,238 5,205 $146,038 69,421
Debt to EBITDA – trailing
4 qtrs. EBITDA 3.0 3.6 3.0 3.6
Interest coverage –
trailing 4 qtrs. 3.4 3.0 3.4 3.0
Debt to total
capitalization 64% 67% 64% 67%
Total debt $361,699 361,374 $361,699 361,374
Capital spending –
3rd qtr. $10,103 16,467 $30,516 40,466
Capitalization $561,161 542,076 $561,161 542,076
Stockholders’ Equity $199,462 180,702 $199,462 180,702

(a) Pre-tax earnings reflect continuing operations only