Nash Finch Company (Nasdaq: NAFC), a Fortune 500 Minneapolis-based food retailer and distributor, today reported for the second quarter ended June 16, 2001 that net earnings rose 20 percent to $5.3 million, or 44 cents per diluted share, compared to net earnings of $4.4 million, or 38 cents per diluted share, reported for the second quarter of 2000. Total revenues for the second quarter of 2001 were $949.6 million versus revenues of $905.9 million in the second quarter of 2000, a 5 percent increase.
EBITDA (earnings from operations before interest, taxes, depreciation, amortization, LIFO and non-recurring items) totaled $28.5 million in the second quarter of 2001, or 3.0 percent of sales, which is a 12 percent increase over EBITDA in the second quarter of 2000 of $25.4 million, or 2.8 percent of sales.
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“We are very pleased with the continued trend line in our earnings performance. In fact, this is our seventh consecutive quarter with year-over-year improvement in comparable earnings. The strategy we laid out three years ago and the hard work of our associates is clearly reflected in our strong earnings momentum,” said Ron Marshall, president and chief executive officer. “Based on this performance, we are revising our earnings guidance for 2001 to a range of $1.70 to $1.75 per share, which is an improvement from the previously announced range of $1.55 to $1.65 per share. This is a 26 to 30 percent increase over last year’s E.P.S. of $1.35. A key factor in our revised earnings guidance is that we now expect EBITDA for 2001 to improve 15 to 16 percent over last year.”
For the first 24 weeks of 2001, total revenues increased 4 percent to $1.85 billion compared to $1.78 billion in the prior year period. Net earnings rose 29 percent to $8.5 million, or 72 cents per diluted share, versus $6.6 million, or 58 cents per diluted share, in the first 24 weeks of 2000. EBITDA for the 24-week period in 2001 increased 17 percent to $53.4 million, or 2.9 percent of sales, from $45.5 million, or 2.6 percent of sales, in the first 24 weeks of 2000.
“We had a strong first quarter, with the momentum continuing through the second quarter and we fully expect into the rest of the year. Our focus on quality, innovative products and promotions continues to earn us new business. At the same time, we’re building a culture which is keenly focused on cost improvement,” said Marshall.
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By GlobalDataRevenues in Nash Finch’s retail segment for the second quarter 2001 were $237.1 million compared to revenues of $245.2 million in the second quarter of 2000, or a 3 percent decrease. Retail segment EBITDA in the second quarter of 2001 was $12.3 million, or 5.2 percent of sales, versus $11.5 million, or 4.7 percent of sales, in the second quarter of 2000. Retail segment profit in the second quarter 2001 improved by 5 percent to $8.7 million, compared to $8.3 million in the second quarter of 2000.
A key factor in the decreased second quarter revenues this year compared to second quarter last year was the company’s announcement that its corporate retail business was exiting the Southeast Region. The stores are being sold to undisclosed buyers who are wholesale customers of Nash Finch’s food distribution business. The agreements contain multi-year sales and service provisions whereby the stores will continue to be supplied by Nash Finch. The divestiture allows the company to focus its retail operations in the Upper Midwest where it currently owns 97 retail stores. The majority of the sale transactions have been completed and the company expects the final transactions to be completed early in the third quarter.
Excluding the stores in the Southeast region, revenues increased 2 percent compared to the second quarter of last year. Same-store-sales, excluding the stores in the Southeast Region, were down one percent in the second quarter of 2001 compared to the second quarter of 2000 and were flat for the first 24 weeks of 2001 compared to the same period in 2000.
Also during the second quarter, the company announced that Lonnie Eggers had joined the management team of Nash Finch’s retail operations. Eggers was named vice president of retail operations and is responsible for the company’s retail stores. He has over 30 years of retail experience, primarily with Baker’s Supermarkets in Omaha, Nebraska, and reports to Michael Petersen, executive vice president and president of retail operations.
“We are particularly proud of the retail management talent we have recently attracted to the company. These are people with a wealth of knowledge and experience in running strong, profitable retail chains,” said Marshall. “Best of all, they have a passion for creating an in-store customer experience that builds revenue and profitability. We are already benefiting from their contributions to the company.”
Nash Finch’s food distribution segment improved revenues in the second quarter of 2001 by 8 percent to $478.3 million, compared to $444.4 million in the second quarter of 2000. Segment EBITDA increased to $16.2 million in the second quarter of 2001, or 3.4 percent of sales, from $15.3 million in the second quarter to 2000, which also was 3.4 percent of sales. Profit in the food distribution segment was $13.6 million in the second quarter of 2001, a 13 percent increase from profit in the second quarter of 2000 of $12.0 million.
In May, the company announced $60 million in new annualized revenues from over 40 suppliers to military commissaries. The new volume is being serviced from the company’s distribution centers in Cincinnati, Ohio and Cedar Rapids, Iowa for shipment to military bases in the central region of the United States. This new business will be included in the food distribution segment for reporting purposes because these centers, along with several other existing centers, currently serve corporate stores, independent retailers, as well as military bases.
In addition to the increased volume in military distribution, the company’s food distribution segment captured new wholesale business totaling $25 million in annualized revenues from independent retailers during the second quarter. Combined with the $45 million in new annualized revenues announced for first quarter, the food distribution segment’s new wholesale business from independent retailers and military suppliers is over $130 million year-to-date in annualized revenues.
The company also reported that quality standards for the food distribution segment remained very strong during second quarter. The company regularly monitors on-time deliveries, selector accuracy and fill-rate metrics against an industry-leading set of standards.
Nash Finch’s store brands continued to have significant growth, with sales of private label products during the first 24 weeks of 2001 increasing over 18% compared to the first 24 weeks of 2000. Store brands include Nash Finch’s private label products under the Our Family®, IGA® and Fame® brands. In addition, Nash Finch’s Signature Program of branded products, introduced last year to corporate stores and independent retailers, is also producing strong sales growth. The program includes Bernini(TM) Pizza, Cinnfully Good(TM) Cinnamon Rolls, and other items which are exclusively available at Nash Finch’s company-owned or supplied stores. The company attributes the strong growth rates in store brands and Signature items to innovative promotions, in- store displays and aggressive pricing strategies available as Nash Finch leverages its buying power across its corporate stores and the over 2000 independent retailers supplied through the company’s food distribution operations.
During the quarter, the company announced the addition of Jeffrey Poore to the management team of the food distribution segment. Poore was named Vice President of Distribution and Logistics, reporting to Jerry Nelson, President of Food Distribution. Poore has over 20 years of logistics experience, most recently with SuperValu, Inc.
“Our continued performance improvement in our food distribution segment can be attributed to a set of factors, from our focus on quality standards to our ability to deliver to the retailer a set of innovative products and merchandising support unlike they can receive from any other supplier,” said Marshall. “Our private label products and our Signature Program are yielding great results for our corporate stores and our independent retailers. As we have helped our existing independent retailers to be more successful in their business, that same success translates into increased earnings 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 second quarter of 2001 to $234.1 million, up 8 percent from revenues of $216.0 million in the second quarter of 2000. Military EBITDA increased to $5.9 million, compared to $5.5 million in the second quarter of 2000, consistently representing 2.5 percent of sales. Profit in the military segment was $5.6 million in the second quarter of 2001, a 12 percent improvement from profits of $5.0 million in the second quarter of 2000.
Outlook
“Our performance to-date in 2001 has further affirmed our strategy and business plan,” said Marshall. “We use the term ‘performance-driven’ to describe our operating expectations and we are applying that expectation to everything we do. We will remain focused on delivering exceptional value to customers. At the same time, we continue to explore opportunities to enhance shareholder value.”
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. The company owns and operates a base of 97 retail stores, principally supermarkets under the Econofoods, Sun Mart and Family Thrift Center trade names. Independent retailers and military commissaries in approximately 30 states and Europe are key customers of Nash Finch’s food distribution business. Further information is available on the company’s website at http://www.nashfinch.com
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.
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (unaudited)
(In thousands, except per share amounts)
Twelve Weeks Twenty-four Weeks
Ended Ended
June 16, June 17, June 16, June 17,
2001 2000 2001 2000
Total sales and revenues $949,559 905,894 1,854,498 1,783,169
Cost and expenses:
Cost of sales 842,447 802,367 1,644,320 1,584,511
Selling, general and
administrative 79,380 78,166 158,043 151,903
Depreciation and amortization 10,631 10,023 21,278 19,904
Interest expense 8,085 7,770 16,287 15,373
Total cost and expenses 940,543 898,326 1,839,928 1,771,691
Earnings before income taxes 9,016 7,568 14,570 11,478
Income taxes 3,733 3,209 6,032 4,867
Net earnings 5,283 4,359 8,538 6,611
Basic earnings per share: $0.46 0.38 0.74 0.58
Diluted earnings per share: 0.44 0.38 0.72 0.58
Weighted average number of common
shares outstanding and common
equivalent shares outstanding:
Basic 11,579 11,408 11,543 11,407
Diluted 12,025 11,413 11,876 11,412
EBITDA (a) $28,548 25,376 53,433 45,469
EBITDA as a percent of revenue 3.01% 2.80% 2.88% 2.55%
NOTES
(a) 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.
NASH FINCH COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
June 16, December 30, June 17,
2001 2000 2000
(unaudited) (unaudited)
Assets
Current assets:
Cash $8,380 1,534 1,419
Accounts and notes receivable, net 131,736 132,992 127,419
Inventories 262,562 270,481 252,485
Other current assets 32,366 28,532 32,153
Total current assets 435,044 433,539 413,476
Investments and noncurrent
receivables 37,682 32,454 32,000
Property, plant and equipment, net 260,135 256,516 247,468
Goodwill, net 112,824 113,584 114,364
Other assets 48,335 44,735 43,633
Total assets $894,020 880,828 850,941
Liabilities and Stockholders’ Equity
Current liabilities:
Current maturities of long-term
debt and capitalized lease
obligations $5,716 4,646 3,641
Accounts payable 247,332 240,724 224,030
Accrued and other liabilities 90,276 79,416 76,302
Total current liabilities 343,324 324,786 303,973
Long-term debt 294,082 308,618 319,628
Capitalized lease obligations 48,120 45,046 33,803
Deferred credits and other
liabilities 15,220 17,838 16,268
Stockholders’ equity 193,274 184,540 177,269
Total liabilities and
stockholders’ equity $894,020 880,828 850,941
NASH FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows (unaudited)
(In thousands)
Twenty-four Weeks Ended
June 16, June 17,
2001 2000
Operating activities:
Net earnings $8,538 6,611
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 21,278 19,904
Provision for bad debts 2,210 4,167
Deferred income taxes 2,131 988
Other (99) 194
Changes in operating assets and
liabilities 67,742 32,352
Net cash provided by
operating activities 101,800 64,216
Investing activities:
Net increase in property, plant and
equipment (17,294) (21,873)
Business acquired, net of cash
acquired (1,070) (20,431)
Loans to customers (6,287) (13,587)
Repurchase of receivables (3,950) (10,920)
Other (6,324) (792)
Net cash used for investing
activities (34,925) (67,603)
Financing activities:
(Payments) proceeds from long-term
debt (17,962) 5,544
Proceeds from short-term debt — 400
Dividends paid (2,090) (2,055)
Decrease in outstanding checks (41,380) (16,230)
Other 1,403 758
Net cash used for financing
activities (60,029) (11,583)
Net decrease in cash $6,846 (14,970)
Supplemental disclosure of cash flow
information:
Non cash investing and financing
activities
Purchase of real estate under
capital leases $3,866 954
Acquisition of minority
interests $4,294 —
Twenty-Four Weeks
Twelve Weeks Ended Ended
June 16, June 17, June 16, June 17,
2001 2000 2001 2000
EBITDA Reconciliation ($ Thousands)
Pre-tax earnings 9,016 7,568 14,570 11,478
Add/(deduct)
LIFO 662 (313) 862 (813)
Depreciation and amortization 10,631 10,023 21,278 19,904
Interest expense 8,085 7,770 16,287 15,373
Closed store lease costs — 328 282 954
Gains on sales of real estate 154 — 154 (1,427)
Total EBITDA 28,548 25,376 53,433 45,469
Other Data ($ Thousands)
Cash from operations – 2nd qtr. $69,615 33,796 $101,800 64,216
Debt to EBITDA – trailing 4 qtrs.
EBITDA 3.1 3.8 3.1 3.8
Interest coverage – trailing 4
qtrs. 3.2 2.9 3.2 2.9
Debt to total capitalization 64% 67% 64% 67%
Total debt $347,918 357,072 $347,918 357,072
Capital spending – 2nd qtr. $7,414 15,816 $20,413 23,999
Capitalization $541,192 534,341 $541,192 534,341
Stockholders’ Equity $193,274 177,269 $193,274 177,269
