UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended:
January 2, 2010
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TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the Transition Period
from to .
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Commission file
number: 0-785
NASH-FINCH COMPANY
(Exact name of Registrant as
specified in its charter)
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Delaware
(State of
Incorporation)
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41-0431960
(I.R.S. Employer
Identification No.)
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7600 France Avenue South
P.O. Box 355
Minneapolis, Minnesota
(Address of principal
executive offices)
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55440-0355
(Zip Code)
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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
$1.66-2/3
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 whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the proceeding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o 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, a non-accelerated filer
or a small reporting company. See the definitions of large
accelerated filer, accelerated filer and
small reporting company in
Rule 12b-2
of the Securities Exchange Act.
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o
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(Do not check if a smaller reporting company)
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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 20, 2009 (the
last business day of the Registrants most recently
completed second fiscal quarter) was $365,330,746, based on the
last reported sale price of $28.45 on that date on NASDAQ.
As of February 24, 2010, 12,807,022 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 19,
2010 (the 2010 Proxy Statement) are incorporated by
reference into Part III of this report, 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:
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the effect of competition on our food distribution, military and
retail businesses;
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general sensitivity to economic conditions, including the
uncertainty related to the current state of the economy in the
U.S. and worldwide economic slowdown; recent 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;
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macroeconomic and geopolitical events affecting commerce
generally;
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changes in consumer buying and spending patterns;
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our ability to identify and execute plans to expand our food
distribution, military and retail operations;
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possible changes in the military commissary system, including
those stemming from the redeployment of forces, congressional
action and funding levels;
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our ability to identify and execute plans to improve the
competitive position of our retail operations;
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the success or failure of strategic plans, new business ventures
or initiatives;
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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;
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changes in credit risk from financial accommodations extended to
new or existing customers;
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significant changes in the nature of vendor promotional programs
and the allocation of funds among the programs;
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limitations on financial and operating flexibility due to debt
levels and debt instrument covenants;
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legal, governmental, legislative or administrative proceedings,
disputes, or actions that result in adverse outcomes;
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failure of our internal control over financial reporting;
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changes in accounting standards;
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technology failures that may have a material adverse effect on
our business;
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severe weather and natural disasters that may impact our supply
chain;
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unionization of a significant portion of our workforce;
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costs related to a multi-employer pension plan;
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changes in health care, pension and wage costs and labor
relations issues;
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product liability claims, including claims concerning food and
prepared food products;
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threats or potential threats to security; and
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unanticipated problems with product procurement.
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A more detailed discussion of many of these factors is contained
in Part I, Item 1A, Risk Factors, of this
report on
Form 10-K.
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, we are
the second largest publicly traded wholesale food distributor in
the United States, in terms of revenue, serving the retail
grocery industry and the military commissary and exchange
systems. Our sales in fiscal 2009 exceeded $5.2 billion.
Our business currently consists of three primary operating
segments: food distribution, military food distribution and
retail. Financial information about our business segments for
the three most recent fiscal years is contained in Part II,
Item 8 of this report under Note (19)
Segment Information in the Notes to Consolidated
Financial Statements.
In November 2006, we announced the launch of a strategic plan,
Operation Fresh Start, designed to sharpen our focus and provide
a strong platform to support growth initiatives. Our strategic
plan is built upon extensive knowledge of current industry,
consumer and market trends, and formulated to differentiate the
Company. The strategic plan includes long-term initiatives to
increase revenues and earnings, improve productivity and cost
efficiencies of our Food Distribution, Retail, and Military
business segments, and leveraging our corporate support
services. The Company has strategic initiatives to improve
working capital, manage debt, and increase shareholder value
through capital expenditures with acceptable returns on
investment. Several important elements of the strategic plan
include:
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Supply chain services focused on supporting our businesses with
warehouse management, inbound and outbound transportation
management and customized solutions for each business;
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Growing the Military business segment through acquisition and
expansion of products and services, as well as creating
warehousing and transportation cost efficiencies with a
long-term distribution center strategic plan;
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Providing our independent retail customers with high level of
order fulfillment, broad product selection including leveraging
the Our Family brand , support services emphasizing
best-in-class
offerings in marketing, advertising, merchandising, store design
and construction, market research, retail store support, retail
pricing and license agreement opportunities; and
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Emphasis on a suite of retail formats designed to appeal to the
needs of todays consumers.
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The strategic plan includes the following long-term financial
targets:
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2% organic revenue growth
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4% Consolidated
EBITDA1
margin as a percentage of sales
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1 Consolidated
EBITDA is a measurement not recognized by accounting principals
generally accepted in the United States. Please refer to
Part II, Item 7 of this report under the caption
Consolidated EBITDA (Non-GAAP Measurement) for
the definition of Consolidated EBITDA.
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10% trailing four quarters Free Cash Flow as a percentage of Net
Assets2
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2.5 to 3.0x total leverage ratio (i.e., total debt divided by
trailing four quarters Consolidated EBITDA)
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We have made significant progress towards achieving our
long-term financial targets. From Fiscal 2006 to the end of
Fiscal 2009, our Consolidated EBITDA margin improved from 2.2%
of sales to 2.7% of sales and the debt leverage ratio has
improved by more than one full turn of Consolidated EBITDA from
3.11x to 2.02x. The organic revenue growth metric has been
negatively affected by the uncertain economic environment in
fiscal 2009 when our sales turned negative 0.6%. The ratio of
free cash flow to net assets metric improved to 10.6% in fiscal
2009.
During fiscal 2009, we acquired and substantially integrated
three distribution facilities acquired from GSC Enterprises,
Inc. into our military segment, implemented cost reduction and
working capital initiatives that reduced debt and strengthened
our financial position during a challenging business
environment. In addition to the strategic initiatives already in
progress, our 2010 initiatives include the following:
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Implement our military distribution center network expansion
including opening a new distribution center, completing the
integration of three distribution facilities acquired from GSC
Enterprises, and identifying alternative locations for future
expansion.
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Complete supply chain and center store initiatives within our
food distribution segment.
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Implement new cost reduction and profit improvement initiatives.
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Identify acquisitions that support our strategic plan.
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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 15 distribution centers to
approximately 1,700 independent retail locations located in
28 states across the United States. Our customers are
relatively diverse with the largest customer, excluding our
corporate-owned stores, consisting of a consortium of stores
representing 9.6%, and two others representing 4.5% and 3.0%, of
our fiscal 2009 food distribution sales. No other customer
represents greater than 3.0% of our food distribution business.
Several of our distribution centers also distribute products to
military commissaries and exchanges located in their respective
geographic areas.
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. 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.
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 24% of deliveries are made through
contract carriers.
2 Defined
as cash provided from operations less capital expenditures for
property, plant and 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).
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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 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 primarily sell and distribute nationally 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 high
quality private label products under the proprietary trademark
Our
Family3,
a long-standing brand of Nash Finch that offers an
alternative to national brands. In addition, we sell and
distribute a premium line of branded products under the Nash
Brothers Trading Company trademark and a lower priced line
of private label products under the Value Choice
trademark. Under our branded products, we offer over 2,600
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:
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promotional, advertising and merchandising programs;
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installation of computerized ordering, receiving and scanning
systems;
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retail equipment procurement assistance;
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providing contacts for accounting, budgeting and payroll
services;
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consumer and market research;
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remodeling and store development services;
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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
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NashNet, which provides supply chain efficiencies through
internet services.
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In fiscal 2009, 44% of food distribution revenues were from
customers with whom we had entered into long-term supply
agreements as compared to 39% in fiscal 2008. The long-term
supply agreements range from 2 to 20 years. These
agreements also may contain provisions that give us the
opportunity to purchase customers independent retail
businesses before any third party.
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
January 2, 2010, we had loans, net of reserves, of
$30.4 million outstanding to 32 of our food distribution
customers, and had guaranteed outstanding debt and lease
obligations of certain food distribution customers in the amount
of $13.5 million. We also, in the normal course of
business, sublease retail properties and assign retail property
leases to third parties. As of January 2, 2010, the present
value of our maximum contingent liability exposure, net of
reserves, with respect to the subleases and assigned leases was
$24.9 million and $8.0 million, respectively.
3 We
own or have the rights to various trademarks, tradenames and
service marks, including the following referred to in this
report:
AVANZA®,
Econofoods®,
Sun
Mart®,
Family Thrift
Center®,
Family Fresh
Market®,
Our
Family®,
Value
Choicetm,
Food
Pride®,
Fresh
Place®
and Nash Brothers Trading
Company®.
The trademark
IGA®,
referred to in this report, is the registered trademark of IGA,
Inc.
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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
January 2, 2010, we served 115 retail stores under the
IGA banner and 75 retail stores under our Food Pride
banner.
Military
Segment
Our military segment is one of the largest distributors, by
revenue, of grocery products to U.S. military commissaries
and exchanges. On January 31, 2009, the Company completed
the purchase from GSC Enterprises, Inc., of substantially all of
the assets relating to three wholesale food distribution centers
located in San Antonio, Texas, Pensacola, Florida and
Junction City, Kansas, including all inventory and customer
contracts related to the purchased facilities. On
December 1, 2009, we announced our purchase of a facility
in Columbus, Georgia which is scheduled to begin servicing
military commissaries and exchanges in the late third or fourth
fiscal quarter of 2010.
We serve 356 military commissaries and exchanges located in
33 states across the United States and the District of
Columbia, Europe, Puerto Rico, Cuba, the Azores and Egypt. Our
distribution centers 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 areas we serve and near
Atlantic ports used to ship grocery products to overseas
commissaries and exchanges. We have an outstanding reputation as
a supplier focused exclusively on U.S. military
commissaries and exchanges, based in large measure on our
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 products. These distributors act as drayage
agents for the manufacturers by purchasing and maintaining
inventories of products DeCA purchases from the manufacturers,
and providing handling, distribution and transportation services
for the manufacturers. Manufacturers must authorize the
distributors as their official representatives to DeCA, and the
distributors must adhere to DeCAs 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 and 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. Our
order handling and invoicing activities are facilitated by a
procurement and billing system developed specifically for MDV,
addresses the unique aspects of its business, and provides our
manufacturer customers with a web-based, interactive means of
accessing critical order, inventory and delivery information.
We have approximately 600 distribution contracts with
manufacturers that supply products to the DeCA commissary system
and various exchange systems. These contracts generally have an
indefinite term, but may
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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. Our ten largest manufacturer customers
represented approximately 46% of the military segments
fiscal 2009 sales.
Retail
Segment
Our retail segment is made up of 54 corporate-owned stores,
located primarily in the Upper Midwest, in the states of
Colorado, Iowa, Minnesota, Nebraska, North Dakota, Ohio, South
Dakota and Wisconsin. Our corporate-owned stores principally
operate under the Sun Mart, Econofoods, AVANZA,
Family Thrift Center, Pickn Save, Family Fresh
Market, Prairie Market, and Wholesale Food Outlet
banners. Our stores are typically located close to our
distribution centers in order to create certain operating and
logistical efficiencies. As of January 2, 2010, we operated
47 conventional supermarkets, five AVANZA grocery stores,
one Wholesale Food Outlet grocery store and one other
retail store. Our retail segment also includes one
corporate-owned pharmacy and one convenience store that are not
included in our store count.
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 and money transfers. 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. 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 grocery stores offer products
designed to meet the specific tastes and needs of Hispanic
shoppers.
Competition
Food
Distribution Segment
The food distribution segment is highly competitive 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, 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, order accuracy and
customer service is essential in maintaining our competitive
advantage. During fiscal 2009, our distribution centers had an
on-time delivery rate, defined as being within
1/2
hour of our committed delivery time, of 97.7%; and a fill rate,
defined as the percentage of cases shipped relative to the
number of cases ordered, of 96.7%. We believe we are an industry
leader with respect to these key metrics.
Military
Segment
We are one of five distributors with annual sales to the DeCA
commissary system in excess of $100 million that
distributes products via the frequent delivery system. 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
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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
Our retail segment is also highly competitive. 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 and regional chains. In 2009 and 2008, there were
two and four, respectively, of our stores that were impacted by
the opening of new supercenters in their markets and a total of
42 stores as of January 2, 2010, now compete with
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 promotions, 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 to be spent with us. 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. These
communications include discussions with respect to future
promotions, product cost, targeted retails and price
7
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 our ongoing
negotiations and commercial relationships with our vendors.
Trademarks
and Servicemarks
We own or license a number of trademarks, tradenames and
servicemarks that relate to our products and services, including
those mentioned in this report. We consider certain of these
trademarks, tradenames and servicemarks, such as Our
Family, Value Choice and Nash Brothers Trading
Company, to be of material value to the business conducted
by our food distribution and retail segments, and we actively
defend and enforce such trademarks, tradenames and servicemarks.
Employees
As of January 2, 2010, we employed 7,563 persons, of
whom 5,030 were employed on a full-time basis and 2,533 employed
on a part-time basis. Of our total number of employees, 721 were
represented by unions (9.5% of all employees) and consisted
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 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 and adversely affect our financial
performance.
Our businesses are highly competitive and are characterized by
high inventory turnover, narrow profit margins and increasing
consolidation. Our food distribution and military businesses
compete 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,
warehouse clubs, dollar stores and extreme value food stores.
8
Some of our food distribution and retail 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 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.
In the military food distribution business we face competition
from large national and regional food distributors as well as
smaller food distributors. Due to the narrow margins in the
military food distribution industry, it is of critical
importance for distributors to achieve economies of scale, which
are 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.
Our
business is sensitive to economic conditions that impact
consumer spending
Our business is sensitive to changes in overall economic
conditions that impact consumer spending, including
discretionary spending and buying habits. Economic downturns or
uncertainty has adversely affected overall demand and
intensified price competition, but also has caused consumers to
trade down by purchasing lower margin items and to
make fewer purchases in traditional supermarket channels.
Continued negative economic conditions affecting disposable
consumer income such as employment levels, business conditions,
changes in housing market conditions, the availability of
credit, interest rates, volatility in fuel and energy costs,
food price inflation or deflation, employment trends in our
markets and labor costs, the impact of natural disasters or acts
of terrorism, and other matters affecting consumer spending
could cause consumers to continue shifting even more of their
spending to lower-priced competitors. The continued general
reductions in the level of discretionary spending or shifts in
consumer discretionary spending to our competitors could
continue to adversely affect our growth and profitability.
The continued worldwide financial and credit market disruptions
have reduced the availability of liquidity and credit generally
necessary to fund a continuation and expansion of global
economic activity. The shortage of liquidity and credit combined
with substantial losses in equity markets has led to a worldwide
economic recession that could be prolonged. The general slowdown
in economic activity caused by an extended recession could
adversely affect our business. A continuation or worsening of
the current difficult financial and economic conditions could
adversely affect our customers ability to meet the terms
of sale or our suppliers ability to fully perform their
commitments to us.
Our
businesses could be negatively affected if we fail to retain
existing customers or attract significant numbers of new
customers.
Growing and increasing the profitability of our distribution
businesses 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
those businesses. 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.
9
Growing and increasing the profitability of our retail business
is dependent on increasing our market share in the markets our
retail stores are located. We plan to invest in redesigning some
of our retail stores into other formats in order to attract new
customers and increase our market share. Our results of
operations may be adversely impacted if we are unable to attract
significant numbers of new retail customers.
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.
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 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 create value
within our organization. These initiatives include designing and
reformatting our base of retail stores 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.
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 other risk
factors mentioned 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
results. 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.
10
Our
ability to operate effectively could be impaired by the risks
and costs associated with the current and future efforts to grow
our business through acquisitions.
Efforts to grow our business 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 locate suitable acquisition candidates and
successfully integrate such operations and personnel in a timely
and efficient manner while retaining the customer base of the
acquired operations. If we cannot locate suitable acquisition
candidates, 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:
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demands on management related to the significant increase in our
size after the acquisition of operations;
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difficulties in the assimilation of different corporate cultures
and business practices, such as those involving vendor
promotions, and of geographically dispersed personnel and
operations;
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|
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
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|
expenses of any undisclosed liabilities, such as those involving
environmental or legal matters.
|
Successful integration of new operations, including the
previously announced acquisition of three distribution
facilities from GSC Enterprises Inc. on January 31, 2009
and our December 1, 2009 purchase of a facility in
Columbus, Georgia, 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 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
January 2, 2010, we had loans, net of reserves, of
$30.4 million outstanding to 32 of our food distribution
customers and had guaranteed outstanding debt and lease
obligations of food distribution customers totaling
$13.5 million. In the normal course of business, we also
sublease retail properties and assign retail property leases to
third parties. As of January 2, 2010, the present value of
our maximum contingent liability exposure, net of reserves, with
respect to subleases and assigned leases was $24.9 million
and $8.0 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 could negatively
and potentially materially impact our operating results and
financial condition.
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
11
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 may affect our future
business strategies and operating results.
Covenants in the documents governing our outstanding or future
debt, 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, repurchasing shares of our stock and
making investments, loans or advances. If needs or opportunities
were identified that would require financial resources beyond
existing resources, obtaining those resources could increase our
borrowing costs, further reduce financial flexibility, require
alterations in strategies and affect future operating results.
Legal,
governmental, legislative or administrative proceedings,
disputes or actions that result in adverse outcomes or
unfavorable changes in government regulations may affect our
businesses and operating results.
Adverse outcomes in litigation, governmental, legislative or
administrative proceedings
and/or other
disputes may result in significant liability to the Company and
affect our profitability or impose restrictions on the manner in
which we conduct our business. Our businesses are also subject
to various federal, state and local laws and regulations with
which we must comply. Changes in applicable laws and regulations
that impose additional requirements or restrictions on the
manner in which we operate our businesses could increase our
operating costs.
Failure
of our internal control over financial reporting could
materially impact our business and results.
The Companys management is responsible for establishing
and maintaining adequate internal control over financial
reporting. An internal control system, no matter how well
designed and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system
are met. Because of the inherent limitations in all internal
control systems, internal control over financial reporting may
not prevent or detect misstatements. Any failure to maintain an
effective system of internal control over financial reporting
could limit our ability to report our financial results
accurately and timely or to detect and prevent fraud, and could
expose us to litigation or adversely affect the market price of
our common stock.
Changes
in accounting standards could materially impact our
results.
Generally accepted accounting principles and related accounting
pronouncements, implementation guidelines, and interpretations
for many aspects of our business, such as accounting for
insurance and self-insurance, inventories, goodwill and
intangible assets, store closures, leases, income taxes and
share-based payments, are highly complex and involve subjective
judgments. Changes in these rules or their interpretation could
significantly change or add significant volatility to our
reported earnings without a comparable underlying change in cash
flow from operations.
12
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.
Severe
weather and natural disasters can adversely impact our
operations, our suppliers or the availability and cost of
products we purchase.
Severe weather conditions and natural disasters could damage our
properties and adversely impact the geographic areas where we
conduct our business. Severe weather and natural disasters could
also affect the suppliers from whom we procure products and
could cause disruptions in our operations and affect our supply
chain efficiencies. In addition, unseasonably adverse climatic
conditions that impact growing conditions and the crops of food
producers may adversely affect the availability or cost of
certain products.
Unions
may attempt to organize our employees.
While our management believes that our employee relations are
good, we cannot be assured that we will not experience pressure
from labor unions or become the target of campaigns similar to
those faced by our competitors. The potential for unionization
could increase if the United States Congress passes the Federal
Employee Free Choice Act legislation. We have always respected
our employees right to unionize or not to unionize.
However, the unionization of a significant portion of our
workforce could increase our overall costs at the affected
locations and adversely affect our flexibility to run our
business in the most efficient manner to remain competitive or
acquire new business. In addition, significant union
representation would require us to negotiate wages, salaries,
benefits and other terms with many of our employees collectively
and could adversely affect our results of operations by
increasing our labor costs or otherwise restricting our ability
to maximize the efficiency of our operations.
Costs
related to a multi-employer pension plan may have a material
adverse effect on the Companys financial condition and
results of operations.
The Company participates in the Central States Southeast and
Southwest Areas Pension Funds (CSS or the
plan), a multi-employer pension plan, for certain
unionized employees. The Companys contributions to the
plan may escalate in future years should we withdrawal from the
plan or factors outside the Companys control, including
the bankruptcy or insolvency of other participating employers,
actions taken by trustees who manage the plan, government
regulations, a funding deficiency in the plan. Escalating costs
associated with the plan may have a material adverse effect on
the Companys financial condition and results of operations.
Effective July 9, 2009, the trustees of CSS formalized a
decision to terminate the participation of YRC Worldwide, Inc.
(formerly Yellow Freight and Roadway Express) and USF Holland,
Inc. from the pension fund. At this time, there is no change to
the funding obligations due from other participating employers
in the fund as a result of this termination; however, further
developments may necessitate a reevaluation of the funding
obligations at some point in the future.
Increases
in employee benefit costs and other labor relations issues may
lead to labor disputes and disruption of our
businesses.
If we are unable to control health care, pension and wage costs,
or gain operational flexibility under our collective bargaining
agreements, we may experience increased operating costs and an
adverse impact on future results of operations. There can be no
assurance that the Company will be able to negotiate the terms
of any expiring or expired agreement in a manner that is
favorable to the Company. Therefore, potential work disruptions
from labor disputes could result, which may affect future
revenues and profitability.
13
We are
subject to the risk of product liability claims, including
claims concerning food and prepared food products.
The sale of food and prepared food products for human
consumption may involve the risk of injury. Injuries may result
from tampering by unauthorized third parties, product
contamination or spoilage, including the presence of foreign
objects, substances, chemicals, other agents, or residues
introduced during the growing, storage, handling and
transportation phases. We cannot be sure that consumption of
products we distribute and sell will not cause a health-related
illness in the future or that we will not be subject to claims
or lawsuits relating to such matters.
Negative publicity related to these types of concerns, or
related to product contamination or product tampering, whether
valid or not, might negatively impact demand for products we
distribute and sell, or cause production and delivery
disruptions. We may need to recall products if any of these
products become unfit for consumption. Costs associated with
these potential actions could adversely affect our operating
results.
Threats
or potential threats to security may adversely affect our
business.
Threats or acts of terror, data theft, information espionage, or
other criminal activity directed at the food industry, the
transportation industry, or computer or communications systems,
including security measures implemented in recognition of actual
or potential threats, could increase security costs and
adversely affect our operations.
We
depend upon vendors to supply us with quality merchandise at the
right time and at the right price.
We depend heavily on our ability to purchase merchandise in
sufficient quantities at competitive prices. We have no
assurances of continued supply, pricing, or access to new
products and any vendor could at any time change the terms upon
which it sells to us or discontinue selling to us. Sales demands
may lead to insufficient in-stock positions of our merchandise.
Significant changes in our ability to obtain adequate product
supplies due to weather, food contamination, regulatory actions,
labor supply, or product vendor defaults or disputes that limit
our ability to procure products for sale to customers could have
an adverse effect on our operating results.
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.
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ITEM 1B.
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UNRESOLVED
STAFF COMMENTS
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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.
Food
Distribution Segment
The table below lists, as of January 2, 2010, 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.
14
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Approx. Size
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Location
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(Square Feet)
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Midwest Region:
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Omaha, Nebraska
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626,900
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Cedar Rapids, Iowa
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351,900
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St. Cloud, Minnesota
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329,000
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Sioux Falls, South Dakota(2)
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275,400
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Fargo, North Dakota
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288,800
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Rapid City, South Dakota(3)
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195,100
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Minot, North Dakota
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185,200
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Southeast Region:
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Lumberton, North Carolina(1)
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336,500
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Statesboro, Georgia(1)
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230,500
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Bluefield, Virginia
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187,500
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Great Lakes Region:
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Bellefontaine, Ohio
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666,000
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Lima, Ohio(4)
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608,300
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Bridgeport, Michigan(1)
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604,500
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Westville, Indiana
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631,900
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Cincinnati, Ohio
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403,300
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Total Square Footage
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5,920,800
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(1) |
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Leased facility. |
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(2) |
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Includes 79,300 square feet that we lease. |
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(3) |
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Includes 8,000 square feet that we lease. |
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(4) |
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Includes 94,000 square feet that we lease. |
Military
Segment
The table below lists the locations and sizes of our facilities
exclusively used in our military distribution business as of
January 2, 2010. Unless otherwise indicated, we own each of
these distribution centers.
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Approx. Size
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Location
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(Square Feet)
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Norfolk, Virginia(1)
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756,200
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Jessup, Maryland(1)
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115,200
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Junction City, Kansas(1)
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132,000
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Pensacola, Florida(1)
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355,900
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San Antonio, Texas
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486,800
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Columbus, Georgia(1)(2)
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432,400
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Total Square Footage
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2,278,500
|
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(1) |
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Leased facility. |
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(2) |
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Purchased on December 1, 2009 and scheduled to begin making
deliveries in the late third or fourth fiscal quarter of 2010. |
15
Retail
Segment
The table below contains selected information regarding our 54
corporate-owned stores as of January 2, 2010. We own the
facilities of 24 of these stores and lease the facilities of 30
of these stores.
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Number
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Areas
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Average
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Banner
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of Stores
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of Operation
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Square Feet
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Sun Mart
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21
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CO, MN, ND, NE
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32,855
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Econofoods
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16
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IA, MN, SD, WI
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32,711
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AVANZA
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5
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CO, NE
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34,945
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Family Thrift Center
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5
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NE, SD
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48,082
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Family Fresh Market
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2
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WI
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48,776
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Pick n Save
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2
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OH
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49,588
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Prairie Market
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1
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SD
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29,480
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Wholesale Food Outlet
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1
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IA
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19,620
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Other Stores
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1
|
|
|
MN
|
|
|
3,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table excludes one corporate-owned pharmacy and one
convenience store. As of January 2, 2010, the aggregate
square footage of our 54 retail grocery stores totaled
1,877,783 square feet.
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
Roundys
Supermarkets, Inc. v. Nash Finch
On February 11, 2008, Roundys Supermarkets, Inc.
(Roundys) filed suit against us claiming we
breached the Asset Purchase Agreement (APA), entered
into in connection with our acquisition of certain distribution
centers and other assets from Roundys, by not paying
approximately $7.9 million that Roundys claims is due
under the APA as a purchase price adjustment. We answered the
complaint denying any payment was due to Roundys and
asserted counterclaims against Roundys for, among other
things, breach of contract, misrepresentation, and breach of the
duty of good faith and fair dealing. In our counterclaim we
demand damages from Roundys in excess of
$18.0 million.
On or about March 25, 2008, Roundys filed a motion
for judgment on the pleadings with respect to some, but not all,
of the claims, asserted in our counterclaim. On May 27,
2008, we filed an amended counterclaim which rendered
Roundys motion moot. The amended counterclaim asserts
claims against Roundys for, among other things, breach of
contract, fraud, and breach of the duty of good faith and fair
dealing. Our counterclaim demands damages from Roundys in
excess of $18.0 million. Roundys filed an answer to
the counterclaims denying liability, and subsequently moved to
dismiss our counterclaims. The Court denied the motion in part
and granted the motion in part.
On September 14, 2009, we entered into a settlement
agreement with Roundys that fully resolves all claims
brought in the lawsuit. Under the terms of the settlement
agreement, both parties agreed to dismiss their claims against
the other in exchange for a release of claims. Neither party was
required to pay any money to the other. Subsequently, we have
recorded a $7.6 million gain in fiscal 2009 which represent
the reversal of the liability we had recorded in conjunction
with the disputed APA purchase price adjustment.
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.
16
PART II
|
|
ITEM 5.
|
MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Market
Information
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 24, 2010, there were 1,937 stockholders of record.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
2009
|
|
2008
|
|
Per Share
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
2009
|
|
2008
|
|
First Quarter
|
|
$
|
45.70
|
|
|
$
|
27.16
|
|
|
$
|
37.35
|
|
|
$
|
32.50
|
|
|
$
|
0.18
|
|
|
$
|
0.18
|
|
Second Quarter
|
|
|
34.36
|
|
|
|
27.69
|
|
|
|
38.60
|
|
|
|
30.97
|
|
|
|
0.18
|
|
|
|
0.18
|
|
Third Quarter
|
|
|
30.75
|
|
|
|
26.28
|
|
|
|
46.33
|
|
|
|
33.53
|
|
|
|
0.18
|
|
|
|
0.18
|
|
Fourth Quarter
|
|
|
37.49
|
|
|
|
28.00
|
|
|
|
45.94
|
|
|
|
35.83
|
|
|
|
0.18
|
|
|
|
0.18
|
|
On March 2, 2010, the Nash Finch Board of Directors
declared a cash dividend of $0.18 per common share, payable on
March 26, 2010, to stockholders of record as of
March 12, 2010.
Issuer
Purchases of Equity Securities
The following table provides information about shares of common
stock the Company acquired during the fourth quarter of fiscal
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of
|
|
|
(d)
|
|
|
|
(a)
|
|
|
|
|
|
shares purchased as
|
|
|
Maximum amount
|
|
|
|
Total number
|
|
|
(b)
|
|
|
part of publicly
|
|
|
that may be spent
|
|
|
|
of shares
|
|
|
Average price
|
|
|
announced plans or
|
|
|
under plans or
|
|
Period
|
|
purchased (1)
|
|
|
paid per share (1)
|
|
|
programs (1)
|
|
|
programs (1)
|
|
|
Period 12 (November 8, 2009 to December 5, 2009)
|
|
|
23,844
|
|
|
$
|
32.90
|
|
|
|
23,844
|
|
|
$
|
24,215,625
|
|
Period 13 (December 6, 2009 to January 2, 2010)
|
|
|
6,876
|
|
|
$
|
33.83
|
|
|
|
6,876
|
|
|
$
|
23,983,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
30,720
|
|
|
$
|
33.10
|
|
|
|
30,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
On November 10, 2009, our Board of Directors approved a
share repurchase program to spend up to $25.0 million to
purchase shares of the Companys common stock. The program
took effect on November 16, 2009 and will continue until
December 31, 2010. |
17
Total
Shareholder Return Graph
The line graph below compares the cumulative total shareholder
return on the Companys common stock for the last five
fiscal years with cumulative total return on the S&P
SmallCap 600 Index and the peer group index described below.
This graph assumes a $100 investment in each of Nash Finch
Company, the S&P SmallCap 600 Index and the peer group
index at the close of trading on January 3, 2005, and also
assumes the reinvestment of all dividends. The stock price
performance shown below is not necessarily indicative of future
performance.
Comparison
of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
January 2, 2010
The peer group represented in the line graph above includes the
following nine publicly traded companies: SuperValu Inc., Arden
Group, Inc., The Great Atlantic & Pacific Tea Company,
Inc., Ingles Markets, Incorporated, Ruddick Corporation, Spartan
Stores, Inc., United Natural Foods, Inc., Weis Markets, Inc. and
Core-Mark Holding Company, Inc.
From
time-to-time,
the peer group companies have changed due to merger and
acquisition activity, bankruptcy filings, company delistings and
other similar occurrences. There were no changes to the peer
group during fiscal 2009.
The performance graph above is being furnished solely to
accompany this Annual Report on
Form 10-K
pursuant to Item 201(e) of
Regulation S-K,
is not being filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, and is not to be
incorporated by reference into any filing of the Company,
whether made before or after the date hereof, regardless of any
general incorporation language in such filing.
18
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
NASH
FINCH COMPANY AND SUBSIDIARIES
Consolidated Summary of Operations
Five years ended January 2, 2010 (not covered by
Independent Auditors Report)
(Dollar amounts in thousands except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 (1)
|
|
|
2008 (6)
|
|
|
2007 (6)
|
|
|
2006 (6)
|
|
|
2005 (6)
|
|
|
|
(52 Weeks)
|
|
|
(53 Weeks)
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
(52 Weeks)
|
|
|
Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
5,212,655
|
|
|
$
|
4,633,494
|
|
|
$
|
4,464,035
|
|
|
$
|
4,581,563
|
|
|
$
|
4,514,687
|
|
Cost of sales
|
|
|
4,793,967
|
|
|
|
4,226,545
|
|
|
|
4,066,381
|
|
|
|
4,179,741
|
|
|
|
4,083,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
418,688
|
|
|
|
406,949
|
|
|
|
397,654
|
|
|
|
401,822
|
|
|
|
431,163
|
|
Selling, general and administrative
|
|
|
287,328
|
|
|
|
288,263
|
|
|
|
280,818
|
|
|
|
319,678
|
|
|
|
300,837
|
|
Gains on sale of real estate
|
|
|
|
|
|
|
|
|
|
|
(1,867
|
)
|
|
|
(1,130
|
)
|
|
|
(3,697
|
)
|
Special charges
|
|
|
6,020
|
|
|
|
|
|
|
|
(1,282
|
)
|
|
|
6,253
|
|
|
|
(1,296
|
)
|
Gain on acquisition of a business
|
|
|
(6,682
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on litigation settlement
|
|
|
(7,630
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill impairment
|
|
|
50,927
|
|
|
|
|
|
|
|
|
|
|
|
26,419
|
|
|
|
|
|
Depreciation and amortization
|
|
|
40,603
|
|
|
|
38,429
|
|
|
|
38,882
|
|
|
|
41,451
|
|
|
|
43,721
|
|
Interest expense
|
|
|
24,372
|
|
|
|
26,466
|
|
|
|
28,088
|
|
|
|
30,840
|
|
|
|
27,877
|
|
Income tax expense
|
|
|
20,972
|
|
|
|
20,646
|
|
|
|
16,984
|
|
|
|
4,198
|
|
|
|
24,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
2,778
|
|
|
|
33,145
|
|
|
|
36,031
|
|
|
|
(25,887
|
)
|
|
|
39,278
|
|
Net earnings from discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160
|
|
|
|
56
|
|
Cumulative effect of change in accounting principle, net of
income tax (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
2,778
|
|
|
$
|
33,145
|
|
|
$
|
36,031
|
|
|
$
|
(25,558
|
)
|
|
$
|
39,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
0.21
|
|
|
$
|
2.57
|
|
|
$
|
2.67
|
|
|
$
|
(1.91
|
)
|
|
$
|
3.04
|
|
Diluted earnings (loss) per share
|
|
$
|
0.21
|
|
|
$
|
2.52
|
|
|
$
|
2.64
|
|
|
$
|
(1.91
|
)
|
|
$
|
2.98
|
|
Cash dividends declared per common share
|
|
$
|
0.72
|
|
|
$
|
0.72
|
|
|
$
|
0.72
|
|
|
$
|
0.72
|
|
|
$
|
0.675
|
|
Selected Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pretax earnings (loss) from continuing operations as a percent
of sales
|
|
|
0.46
|
%
|
|
|
1.16
|
%
|
|
|
1.19
|
%
|
|
|
(0.47
|
)%
|
|
|
1.41
|
%
|
Net earnings (loss) as a percent of sales
|
|
|
0.05
|
%
|
|
|
0.72
|
%
|
|
|
0.81
|
%
|
|
|
(0.56
|
)%
|
|
|
0.87
|
%
|
Effective income tax rate
|
|
|
88.3
|
%
|
|
|
38.4
|
%
|
|
|
32.0
|
%
|
|
|
19.4
|
%
|
|
|
38.4
|
%
|
Current assets
|
|
$
|
557,816
|
|
|
$
|
467,951
|
|
|
$
|
477,934
|
|
|
$
|
457,053
|
|
|
$
|
512,207
|
|
Current liabilities
|
|
$
|
308,509
|
|
|
$
|
297,729
|
|
|
$
|
282,357
|
|
|
$
|
278,222
|
|
|
$
|
325,859
|
|
Net working capital
|
|
$
|
249,307
|
|
|
$
|
170,222
|
|
|
$
|
195,577
|
|
|
$
|
178,831
|
|
|
$
|
186,348
|
|
Ratio of current assets to current liabilities
|
|
|
1.81
|
|
|
|
1.57
|
|
|
|
1.69
|
|
|
|
1.64
|
|
|
|
1.57
|
|
Total assets
|
|
$
|
999,536
|
|
|
$
|
952,546
|
|
|
$
|
949,267
|
|
|
$
|
952,480
|
|
|
$
|
1,075,892
|
|
Capital expenditures
|
|
$
|
30,402
|
|
|
$
|
31,955
|
|
|
$
|
21,419
|
|
|
$
|
27,469
|
|
|
$
|
24,638
|
|
Long-term obligations (long-term debt and capitalized lease
obligations)
|
|
$
|
279,032
|
|
|
$
|
248,026
|
|
|
$
|
280,010
|
|
|
$
|
315,321
|
|
|
$
|
371,221
|
|
Stockholders equity
|
|
$
|
350,559
|
|
|
$
|
349,019
|
|
|
$
|
331,600
|
|
|
$
|
313,113
|
|
|
$
|
343,871
|
|
Stockholders equity per share (3)
|
|
$
|
27.36
|
|
|
$
|
27.23
|
|
|
$
|
25.26
|
|
|
$
|
23.39
|
|
|
$
|
25.84
|
|
Return on stockholders equity (4)
|
|
|
0.79
|
%
|
|
|
9.50
|
%
|
|
|
10.87
|
%
|
|
|
(8.27
|
)%
|
|
|
11.42
|
%
|
Common stock high price (5)
|
|
$
|
45.70
|
|
|
$
|
46.33
|
|
|
$
|
51.29
|
|
|
$
|
31.74
|
|
|
$
|
44.00
|
|
Common stock low price (5)
|
|
$
|
26.28
|
|
|
$
|
30.97
|
|
|
$
|
26.89
|
|
|
$
|
19.42
|
|
|
$
|
24.83
|
|
|
|
|
(1) |
|
Information presented for fiscal 2009 reflects our acquisition
on January 31, 2009, from GSC Enterprises, Inc., of three
wholesale food distribution centers which service military
commissaries and exchanges. 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 Financial Accounting Standards Board ASC
Topic 718 (originally issued as SFAS No. 123(R),
Share-Based Payment Revised) 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. |
|
(6) |
|
Prior year amounts have been restated to reflect the adoption of
ASC Subtopic 470-20 and the revised treatment of consigned
inventory sales in our military segment. Please refer to Note 1
and Note 3 of the Notes to Consolidated Financial Statements of
this
Form 10-K
for a further discussion of these items. |
19
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
Overview
In terms of revenue, we are the second largest publicly traded
wholesale food distributor in the United States serving the
retail grocery industry and the military commissary and exchange
systems. Our business consists of three primary operating
segments: food distribution, military food distribution and
retail.
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.
Our military segment contracts with manufacturers to distribute
a wide variety of grocery products to military commissaries and
exchanges located in the United States and the District of
Columbia, and in Europe, Puerto Rico, Cuba, the Azores and
Egypt. We have over 30 years of experience acting as a
distributor to U.S. military commissaries and exchanges. On
January 31, 2009, we completed the purchase from GSC
Enterprises, Inc., of substantially all of the assets relating
to three wholesale food distribution centers located in
San Antonio, Texas, Pensacola, Florida and Junction City,
Kansas, including all inventory and customer contracts related
to the purchased facilities (GSC acquisition). On
December 1, 2009, we announced our purchase of a facility
in Columbus, Georgia which is scheduled to begin servicing
military commissaries and exchanges in the late third or fourth
fiscal quarter of 2010.
Our retail segment operated 54 corporate-owned stores primarily
in the Upper Midwest as of January 2, 2010. On
April 1, 2008, we completed the acquisition of two stores
located in Rapid City, SD and Scottsbluff, NE and on May 1,
2009 we opened an
AVANZA®
store in Aurora, CO. Primarily due to highly competitive
conditions in which supercenters and other alternative formats
compete for price conscious customers, we closed or sold three
retail stores in 2007, four retail stores in 2008 and four
retail stores in 2009. We are implementing initiatives of
varying scope and duration with a view toward improving our
response to and performance under these highly competitive
conditions. These initiatives include designing and reformatting
some of our 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 goodwill
associated with our retail segment, and may incur restructuring
or other charges in connection with closure or sales activities.
The retail segment yields a higher gross profit percent of sales
and higher selling, general and administrative
(SG&A) expenses as a percent of sales compared
to our food distribution and military segments. Thus, changes in
sales of the retail segment can have a disproportionate impact
on consolidated gross profit and SG&A as compared to
similar changes in sales in our food distribution and military
segments.
Results
of Operations
The following discussion summarizes our operating results for
fiscal 2009 compared to fiscal 2008 and fiscal 2008 compared to
fiscal 2007. However, fiscal 2008 results are not directly
comparable to fiscal 2009 or 2007 because fiscal 2008 contained
an additional week.
Sales
The following tables summarize our sales activity for fiscal
2009, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Percent
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
Segment Sales:
|
|
Sales
|
|
|
of Sales
|
|
|
Change
|
|
|
Sales
|
|
|
of Sales
|
|
|
Change
|
|
|
Sales
|
|
|
of Sales
|
|
|
|
(In millions)
|
|
|
Food Distribution
|
|
$
|
2,655.0
|
|
|
|
50.9
|
%
|
|
|
(3.1
|
)%
|
|
$
|
2,740.5
|
|
|
|
59.1
|
%
|
|
|
1.8
|
%
|
|
$
|
2,693.3
|
|
|
|
60.3
|
%
|
Military
|
|
|
1,985.3
|
|
|
|
38.1
|
%
|
|
|
53.8
|
%
|
|
|
1,290.5
|
|
|
|
27.9
|
%
|
|
|
9.5
|
%
|
|
|
1,179.0
|
|
|
|
26.4
|
%
|
Retail
|
|
|
572.3
|
|
|
|
11.0
|
%
|
|
|
(5.0
|
)%
|
|
|
602.5
|
|
|
|
13.0
|
%
|
|
|
1.8
|
%
|
|
|
591.7
|
|
|
|
13.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales
|
|
$
|
5,212.6
|
|
|
|
100.0
|
%
|
|
|
12.5
|
%
|
|
$
|
4,633.5
|
|
|
|
100.0
|
%
|
|
|
3.8
|
%
|
|
$
|
4,464.0
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
The following table provides comparable sales for fiscal 2009 in
comparison to fiscal 2008 by excluding the first week of sales
from fiscal 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
|
Comparable
|
|
|
Comparable
|
|
(in millions)
|
|
Fiscal 2008
|
|
|
Week 1
|
|
|
52 Weeks of
|
|
|
Percent Change
|
|
Segment Sales:
|
|
Sales
|
|
|
Sales
|
|
|
Sales
|
|
|
2009 to 2008
|
|
|
Food Distribution
|
|
$
|
2,740.5
|
|
|
$
|
45.4
|
|
|
$
|
2,695.1
|
|
|
|
(1.5
|
)%
|
Military
|
|
|
1,290.5
|
|
|
|
20.9
|
|
|
|
1,269.6
|
|
|
|
56.4
|
%
|
Retail
|
|
|
602.5
|
|
|
|
11.2
|
|
|
|
591.3
|
|
|
|
(3.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales
|
|
$
|
4,633.5
|
|
|
$
|
77.5
|
|
|
$
|
4,556.0
|
|
|
|
14.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides comparable sales for fiscal 2008 in
comparison to fiscal 2007 by excluding the week 53 sales from
fiscal 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
|
|
|
|
|
|
|
|
Fiscal 2008
|
|
|
Comparable
|
|
|
Comparable
|
|
(in millions)
|
|
Fiscal 2008
|
|
|
Week 53
|
|
|
52 Weeks of
|
|
|
Percent Change
|
|
Segment Sales:
|
|
Sales
|
|
|
Sales
|
|
|
Sales
|
|
|
2008 to 2007
|
|
|
Food Distribution
|
|
$
|
2,740.5
|
|
|
$
|
45.3
|
|
|
$
|
2,695.2
|
|
|
|
0.1
|
%
|
Military
|
|
|
1,290.5
|
|
|
|
19.6
|
|
|
|
1,270.9
|
|
|
|
7.8
|
%
|
Retail
|
|
|
602.5
|
|
|
|
11.3
|
|
|
|
591.2
|
|
|
|
(0.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sales
|
|
$
|
4,633.5
|
|
|
$
|
76.2
|
|
|
$
|
4,557.3
|
|
|
|
2.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2009 food distribution sales decreased 3.1% in comparison
to fiscal 2008 and decreased 1.5% in comparison to fiscal 2008
after excluding the additional week of sales in fiscal 2008.
This decrease was due primarily to a decrease in sales to
existing customers which was driven by deflation in certain
perishable categories.
Fiscal 2008 food distribution sales increased 1.8% in comparison
to fiscal 2007 but remained relatively flat in comparison to
fiscal 2007 after adjusting for the additional week of sales.
However, fiscal 2007 sales included $72.8 million of
additional sales from a significant customer that transitioned
to a different supplier during fiscal 2007. Excluding the impact
of this customer and the additional week of sales in fiscal
2008, food distribution sales increased 2.9% as compared to
fiscal 2007, primarily due to new account gains and an increase
in sales to existing customers.
Fiscal 2009 military sales increased 53.8% in comparison to
fiscal 2008 and increased 56.4% in comparison to fiscal 2008
after excluding the additional week of sales in fiscal 2008
which is primarily attributable to the GSC acquisition. However,
after excluding the sales attributable to the acquired locations
and the additional week of sales in fiscal 2008, comparable
military segment sales increased by 2.6% in comparison to the
prior year. The comparable increase in military segment sales is
due to 3.6% stronger sales domestically.
Fiscal 2008 military sales increased 9.5% as compared to fiscal
2007. However, after excluding the additional week of sales in
fiscal 2008, military sales increased 7.8% as compared to fiscal
2007. The sales increase reflected 7.2% stronger sales
domestically and 7.9% stronger sales overseas as compared to
fiscal 2007, after adjusting for the additional week of sales in
fiscal 2008.
Domestic and overseas sales represented the following
percentages of military segment sales. Note that the business
acquired through the GSC acquisition services domestic military
bases only.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Domestic
|
|
|
80.9
|
%
|
|
|
70.1
|
%
|
|
|
70.2
|
%
|
Overseas
|
|
|
19.1
|
%
|
|
|
29.9
|
%
|
|
|
29.8
|
%
|
21
Retail sales for fiscal 2009 decreased 5.0% in comparison to
fiscal 2008 and decreased 3.2% in comparison to fiscal 2008
after excluding the additional week of sales in fiscal 2008. The
decrease in retail sales for fiscal 2009 was primarily
attributable to a 2.4% decrease in same store sales, which
compare retail sales for stores which were in operation for the
same number of weeks in the comparative periods, and the closure
of four stores during the year.
Retail sales for fiscal 2008 increased 1.8% in comparison to
fiscal 2007. However, after excluding the additional week of
sales in fiscal 2008, retail sales decreased 0.1% as compared to
fiscal 2007. The decrease in retail sales for fiscal 2008 was
attributable to a 0.8% decrease in same store sales, which
compare retail sales for stores which were in operation for the
same number of weeks in the comparative periods, and the closure
of four stores during the year. However, this was partially
offset by the acquisition of two stores in fiscal 2008.
During fiscal 2009, 2008 and 2007, our corporate store count
changed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
Fiscal Year
|
|
Fiscal Year
|
|
|
2009
|
|
2008
|
|
2007
|
|
Number of stores at beginning of year(1)(2)
|
|
|
57
|
|
|
|
59
|
|
|
|
62
|
|
New stores
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Acquired stores
|
|
|
|
|
|
|
2
|
|
|
|
|
|
Closed or sold stores
|
|
|
(4
|
)
|
|
|
(4
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of stores at end of year(3)(4)(5)
|
|
|
54
|
|
|
|
57
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Store count for fiscal 2009 excludes three corporate-owned
pharmacies and one convenience store. |
|
(2) |
|
Store counts for fiscal 2008 and 2007 exclude four
corporate-owned pharmacies. |
|
(3) |
|
Store count for fiscal 2009 excludes one corporate-owned
pharmacy and one convenience store. |
|
(4) |
|
Store count for fiscal 2008 excludes three corporate-owned
pharmacies and one convenience store. |
|
(5) |
|
Store count for fiscal 2007 excludes four corporate-owned
pharmacies. |
Gross
Profit
Consolidated gross profit for fiscal 2009 was 8.0% of sales
compared to 8.8% for fiscal 2008 and 8.9% for fiscal 2007. Our
fiscal 2009 gross profit margin was negatively affected by
0.6% of sales in comparison to fiscal 2008 due to a sales mix
shift between our business segments between the years. This was
due to a higher percentage of 2009 sales occurring in the
military segment due to the GSC acquisition and a lower
percentage in the retail and food distribution segments which
have a higher gross profit margin. In addition, high levels of
inflation resulted in higher than normal prior year gross profit
margin performance while declines in commodity prices during the
current year have had a negative impact on gross profit
performance.
Fiscal 2008 consolidated gross profit was negatively impacted by
additional
year-over-year
LIFO charges of 0.3% of sales, or $14.6 million, and a
sales mix shift between our business segments of 0.1% of sales.
The negative impact of the sales mix shift was due to a higher
percentage of 2008 sales occurring in the military segment,
which has a lower gross profit margin than the retail or food
distribution segments. However, our gross profit margin
increased 0.3% of sales in fiscal 2008 relative to fiscal 2007
as a result of gains achieved from initiatives that focused on
better management of inventories and vendor relationships.
Inventory markdown and wind down costs related to retail store
closings and retail markdown adjustments are included in cost of
sales and were $0.2 million, $0.4 million and
$3.1 million in fiscal 2009, 2008 and 2007, respectively.
22
Selling,
General and Administrative Expense
The following table outlines consolidated SG&A and the
significant factors affecting consolidated SG&A:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
|
|
% of
|
|
|
|
% of
|
|
|
|
% of
|
|
|
Segment
|
|
$
|
|
sales
|
|
$
|
|
sales
|
|
$
|
|
sales
|
|
|
|
|
(In millions except percentages)
|
|
SG&A
|
|
|
|
|
287.3
|
|
|
|
5.5
|
%
|
|
|
288.3
|
|
|
|
6.2
|
%
|
|
|
280.8
|
|
|
|
6.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant factors affecting SG&A:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail store impairments and lease reserves
|
|
Corporate overhead
|
|
|
5.3
|
|
|
|
0.1
|
%
|
|
|
0.9
|
|
|
|
0.0
|
%
|
|
|
2.6
|
|
|
|
0.1
|
%
|
Charges related to food distribution customers
|
|
Corporate overhead
|
|
|
|
|
|
|
0.0
|
%
|
|
|
(3.3
|
)
|
|
|
(0.1
|
)%
|
|
|
(0.1
|
)
|
|
|
0.0
|
%
|
Gain on sale of assets
|
|
Retail
|
|
|
(0.7
|
)
|
|
|
0.0
|
%
|
|
|
(0.6
|
)
|
|
|
0.0
|
%
|
|
|
(0.7
|
)
|
|
|
0.0
|
%
|
Acquisition and conversion costs
|
|
Military
|
|
|
1.9
|
|
|
|
0.0
|
%
|
|
|
0.5
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
Share-based compensation over prior year
|
|
Corporate overhead
|
|
|
1.4
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
Store opening expenses
|
|
Retail
|
|
|
0.7
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
Tax consulting fees
|
|
Corporate overhead
|
|
|
0.4
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total significant factors affecting SG&A
|
|
|
|
|
9.0
|
|
|
|
0.2
|
%
|
|
|
(2.5
|
)
|
|
|
(0.1
|
)%
|
|
|
1.8
|
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated SG&A for fiscal 2009 was 5.5% of sales as
compared to 6.2% of sales in fiscal 2008. Our SG&A margin
benefited by 0.6% of sales in fiscal 2009 due to the sales mix
shift between our business segments due to the higher level of
military sales due to the GSC acquisition relative to the other
business segments in 2009. In addition, certain variable
employee compensation and benefit expenses were
$11.4 million lower than those incurred during fiscal 2008
which contributed to a lower SG&A margin during fiscal 2009.
Consolidated SG&A for fiscal 2008 was 6.2% of sales as
compared to 6.3% of sales in fiscal 2007. A portion of the
change in SG&A as a percentage of sales was because 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 0.1% of sales in 2008.
Gain
on Sale of Real Estate
The gain on sale of real estate for fiscal 2007 was
$1.9 million and was primarily related to the sale of
unoccupied properties.
Special
Charge
A special charge of $6.0 million was recognized in fiscal
2009 due to an asset impairment in our food distribution
segment. The charge was comprised of the write-downs of
$5.5 million of leasehold improvements and
$0.5 million of fixtures and equipment. In fiscal 2007, we
recorded a reversal of $1.6 million of previously
established lease reserves for one location after subleasing the
property earlier than anticipated. This reversal was partially
offset by a charge of $0.3 million due to revised lease
commitment estimates.
Gain
on Acquisition of a Business
A gain on the acquisition of a business of $6.7 million
(net of tax) was recognized during fiscal 2009 related to the
GSC acquisition. The fair value of the identifiable assets
acquired and liabilities assumed of $84.8 million exceeded
the fair value of the purchase price of the business of
$78.1 million. Consequently, we reassessed the recognition
and measurement of identifiable assets acquired and liabilities
assumed and concluded that the valuation procedures and
resulting measures were appropriate.
23
Gain
on Litigation Settlement
A gain of $7.6 million was recognized in fiscal 2009
related to the settlement of litigation in connection with our
2005 acquisition of certain distribution centers and other
assets from Roundys Supermarkets, Inc
(Roundys). This gain represented the reversal
of the liability we had recorded in connection with this
litigation. Please refer to Part II, Item 8 in this
report under Note (16) Commitments and
Contingencies of this
Form 10-K
for additional information.
Goodwill
Impairment
Annually, we perform an impairment test of goodwill during the
fourth quarter based on conditions as of the end of our third
fiscal quarter in accordance with Financial Accounting Standards
Board (FASB) Accounting Standards Codification
(ASC) Topic 350 (ASC 350, originally
issued as Statement of Financial Accounting Standards
(SFAS) No. 142, Goodwill and Other
Intangible Assets). We recorded a goodwill impairment
charge of $50.9 million in fiscal 2009 that related to our
retail reporting unit. Please refer to Part II, Item 8
in this report under Note (1) Summary of
Significant Accounting Policies under the caption
Goodwill and Intangible Assets of this
Form 10-K
for additional information pertaining to our fiscal 2009
goodwill impairment analysis.
Depreciation
and Amortization Expense
Depreciation and amortization expense for fiscal 2009, 2008 and
2007 was $40.6 million, $38.4 million and
$38.9 million, respectively. The increase in depreciation
and amortization expense for fiscal 2009 in comparison to fiscal
2008 was primarily attributable to the GSC acquisition. The
decrease in depreciation and amortization expense for fiscal
2008 in comparison to fiscal 2007 was primarily due to reduced
capital lease amortization and reduced depreciation on fixtures
and equipment.
Interest
Expense
Interest expense decreased $2.1 million to
$24.4 million in fiscal 2009 as compared to
$26.5 million in fiscal 2008. Fiscal 2008 interest expense
includes the write-off of deferred financing costs of
$1.0 million associated with the refinancing of our senior
secured bank credit facility. Average borrowing levels increased
by $21.1 million from $341.6 million during fiscal
2008 to $362.7 million during fiscal 2009. The effective
interest rate was 4.6% for fiscal 2009 as compared to 5.4% for
fiscal 2008. However, excluding the impact of the write-off of
deferred financing costs, the effective interest rate was 5.1%
for fiscal 2008.
Interest expense decreased $1.6 million to
$26.5 million in fiscal 2008 as compared to
$28.1 million in fiscal 2007. Fiscal 2008 interest expense
includes the write-off of deferred financing costs of
$1.0 million associated with the refinancing of our senior
secured bank credit facility. Average borrowing levels decreased
by $6.4 million from $348.0 million during fiscal 2007
to $341.6 million during fiscal 2008. The effective
interest rate was 5.4% for fiscal 2008 as compared to 6.2% for
fiscal 2007. However, excluding the impact of the write-off of
deferred financing costs, the effective interest rate was 5.1%
for fiscal 2008.
The calculation of our effective interest rates excludes
non-cash interest required to be recognized on our senior
subordinated convertible notes under ASC Subtopic
470-20
(ASC
470-20,
originally issued as FASB Staff Position APB
14-1,
Accounting for Convertible Debt Instruments That May Be
Settled in Cash upon Conversion (Including Partial Cash
Settlement)). Non-cash interest expense recognized
under ASC
470-20 was
$4.9 million, $4.7 million and $4.2 million
during fiscal 2009, 2008 and 2007, respectively. Additionally,
the calculation of our average borrowing levels includes the
unamortized equity component of our senior subordinated
convertible notes that is required to be recognized under ASC
470-20. The
inclusion of the unamortized equity component brings the basis
in our senior subordinated convertible notes to
$150.1 million for purposes of calculating our average
borrowing levels, or their aggregate issue price, which we are
required to pay semi-annual cash interest on at a rate of 3.50%
until March 15, 2013.
24
Income
Tax Expense
The effective tax rate for income from continuing operations was
88.3%, 38.4% and 32.0% for fiscal 2009, 2008 and 2007,
respectively. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Federal statutory tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State taxes, net of federal income tax benefit
|
|
|
4.7
|
%
|
|
|
4.0
|
%
|
|
|
3.9
|
%
|
Non-deductible goodwill
|
|
|
73.6
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Change in tax contingencies
|
|
|
4.4
|
%
|
|
|
1.1
|
%
|
|
|
(5.1
|
)%
|
Gain on litigation settlement
|
|
|
(12.7
|
)%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Gain on acquisition of a business
|
|
|
(11.2
|
)%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Federal refund claim
|
|
|
(6.8
|
)%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Other net
|
|
|
1.3
|
%
|
|
|
(1.7
|
)%
|
|
|
(1.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
88.3
|
%
|
|
|
38.4
|
%
|
|
|
32.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The effective tax rate for fiscal 2009 was impacted by several
nonrecurring items and large non-deductible goodwill charges. In
fiscal 2009, we increased tax reserves by $2.7 million and
reversed previously unrecognized tax benefits of
$0.2 million primarily due to state statute of limitation
expirations and audit resolutions. Other items impacting the
rate include the litigation settlement related to Roundys
of $3.0 million, the gain on the acquisition of the GSC
assets of $2.7 million, and a refund on a claim made with
the Internal Revenue Service of $1.7 million. The effective
tax rate for fiscal 2008 was impacted by the reversal of
previously unrecognized tax benefits of $2.6 million,
primarily due to the filing of reports with various taxing
authorities which resulted in the settlement of uncertain tax
positions, a refund on a claim made with the Internal Revenue
Service of $1.2 million and an increase in reserves of
$2.7 million. The effective tax rate for fiscal 2007 was
also impacted by the reversal of previously unrecognized tax
benefits of $12.6 million, primarily due to statute of
limitation expirations, audit resolutions, and the filing of
reports with various taxing authorities which resulted in the
settlement of uncertain tax positions.
Net
Earnings
Net earnings for fiscal 2009 were $2.8 million, or $0.21
per diluted share, compared to net earnings of
$33.1 million, or $2.52 per diluted share, for fiscal 2008,
and net earnings of $36.0 million, or $2.64 per diluted
share, for fiscal 2007. 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.
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.
25
The following table summarizes our cash flow activity for fiscal
2009, 2008 and 2007 and should be read in conjunction with the
Consolidated Statements of Cash Flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Net cash provided by operating activities
|
|
$
|
102,373
|
|
|
$
|
111,999
|
|
|
$
|
83,616
|
|
Net cash used in investing activities
|
|
|
(105,670
|
)
|
|
|
(60,414
|
)
|
|
|
(18,487
|
)
|
Net cash provided by (used in) financing activities
|
|
|
3,303
|
|
|
|
(51,623
|
)
|
|
|
(65,225
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
$
|
6
|
|
|
$
|
(38
|
)
|
|
$
|
(96
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows were $102.4 million for fiscal 2009, a
decrease of $9.6 million from $112.0 million in fiscal
2008. The primary reason for the fiscal 2009 decrease in
operating cash flows was our net earnings, after adjusting for
reconciling items to convert it to net cash provided, were
$12.2 million lower than in fiscal 2008, which included one
additional week or earnings in comparison to fiscal 2009. In
addition, significant changes in operating assets and
liabilities consisted of a year-over year decrease in our
investment in our inventories of $52.6 million which was
offset by a
year-over-year
increase in our accounts receivable of $23.7 million, a
year-over year decrease in our accrued expenses of
$16.3 million, a
year-over-year
decrease in our accounts payable of $7.1 million and a
year-over-year
decrease in our income taxes payable of $6.2 million. The
year-over year increase in our accounts receivable was due to a
temporary timing difference related to our military accounts
receivable billing cycle that accelerated collections into the
last week of fiscal 2008 and the decrease in
year-over-year
accrued expense was primarily due to decreases in certain
variable employee compensation and benefit expense accruals.
Operating cash flows were $112.0 million for fiscal 2008,
an increase of $28.4 million from $83.6 million in
fiscal 2007. The primary reasons for the fiscal 2008 increase in
operating cash flows were due to
year-over-year
decreases in accounts and notes receivable of $28.7 million
due to increased collections and a
year-over-year
increase in income taxes payable of $22.3 million. However,
operating cash flows for fiscal 2008 were negatively impacted by
a
year-over-year
increase in our investment in inventories due to inflationary
increases of $21.5 million.
Cash used for investing activities were $105.7 million in
fiscal 2009, which was primarily attributable to the GSC
acquisition of $78.1 million and additions to property,
plant and equipment of $30.4 million. Cash used for
investing activities in fiscal 2008 were $60.4 million and
consisted primarily of additions to property, plant and
equipment of $32.0 million, loans to customers of
$24.1 million and the acquisition of a business, net of
cash, for $6.6 million. Fiscal 2007 cash used for investing
activities were $18.5 million which were primarily
attributable to additions to property, plant and equipment of
$21.4 million and loans to customer of $3.9 million,
which were partially offset by disposal of property, plant and
equipment of $5.0 million.
Cash provided by financing activities were $3.3 million for
fiscal 2009 which consisted primarily of proceeds of long-term
debt of $29.9 million, a decrease in outstanding checks of
$10.1 million and $9.2 million used to pay dividends
on our common stock. Cash used by financing activities was
$51.6 million for fiscal 2008 as $32.0 million was
used to pay down revolving and other long-term debt,
$14.3 million was used to repurchase shares of our common
stock and $9.2 million was used to pay dividends on our
common stock. Cash used by financing activities was
$65.2 million for fiscal 2007 as $35.6 million was
used to pay down revolving and other long-term debt,
$15.0 million was used to repurchase shares of our common
stock and $9.7 million was used to pay dividends on our
common stock.
Share
Repurchase
On November 10, 2009, our Board of Directors approved a
share repurchase program authorizing the Company to spend up to
$25.0 million to purchase shares of the Companys
common stock (2009 Repurchase Program). The 2009
Repurchase Program took effect on November 16, 2009 and
will continue to December 31, 2010. As of January 2,
2010, we have repurchased a total of 30,720 shares under
the 2009 Repurchase Program for $1.0 million, at an average
price per share of $33.10. The average prices per share
referenced above include commissions.
26
On November 13, 2007, we announced that our Board of
Directors had authorized a share repurchase program to purchase
up to 1,000,000 shares of the Companys common stock
(2007 Repurchase Program). The 2007 Repurchase
Program took effect on November 19, 2007 and concluded on
January 3, 2009. During fiscal 2008 we repurchased
429,082 shares at an average price per share of $33.44
under the 2007 Repurchase Program. Since the 2007 Repurchase
Programs inception, we repurchased a total of
842,038 shares at an average price per share of $34.83. The
average prices per share referenced above include commissions.
Contractual
Obligations and Commercial Commitments
The following table summarizes our significant contractual cash
obligations as of January 2, 2010, 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
|
|
|
2010
|
|
|
2011-2012
|
|
|
2013-2014
|
|
|
Thereafter
|
|
|
|
(In thousands)
|
|
|
Long-Term Debt (1)
|
|
$
|
258,217
|
|
|
$
|
627
|
|
|
$
|
1,374
|
|
|
$
|
124,852
|
|
|
$
|
131,364
|
|
Interest on Long-Term Debt (2)
|
|
|
200,030
|
|
|
|
9,327
|
|
|
|
16,946
|
|
|
|
11,486
|
|
|
|
162,271
|
|
Capital Lease Obligations (3)(4)
|
|
|
39,868
|
|
|
|
6,200
|
|
|
|
9,583
|
|
|
|
7,591
|
|
|
|
16,494
|
|
Operating Leases (3)
|
|
|
95,321
|
|
|
|
21,591
|
|
|
|
33,326
|
|
|
|
19,075
|
|
|
|
21,329
|
|
Benefit Obligations (5)
|
|
|
29,468
|
|
|
|
3,303
|
|
|
|
6,018
|
|
|
|
5,719
|
|
|
|
14,428
|
|
Purchase Obligations (6)
|
|
|
14,001
|
|
|
|
3,949
|
|
|
|
3,289
|
|
|
|
2,842
|
|
|
|
3,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (7)
|
|
$
|
636,905
|
|
|
$
|
44,997
|
|
|
$
|
70,536
|
|
|
$
|
171,565
|
|
|
$
|
349,807
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Refer to Part II, Item 8 in this report under Note
(8) Long-term Debt and Bank Credit
Facilities for additional information regarding long-term
debt. |
|
(2) |
|
The interest on long-term debt for periods subsequent to fiscal
2014 reflects our Senior Subordinated Convertible Debt accreted
interest for fiscal 2015 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 January 2, 2010, 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 Part II, Item 8 in this
report under Note (13) Leases in the
Notes to Consolidated Financial Statements and under the caption
Lease Commitments in the Critical Accounting
Policies section below. |
|
(4) |
|
Includes amounts classified as imputed interest. |
|
(5) |
|
Our benefit obligations include obligations related to
third-party sponsored defined benefit pension and
post-retirement benefit plans. For a further discussion see
Part II, Item 8 in this report under Note (18)
Pension and Other Post-retirement Benefits in the
Notes to Consolidated Financial Statements. |
|
(6) |
|
The amount of purchase obligations shown in the table represents
the amount of product we are contractually obligated to
purchase. 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. 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. |
|
(7) |
|
Payments for reserved tax contingencies are not included as the
timing of specific tax payments is not determinable. |
27
We have also made certain commercial commitments that extend
beyond 2009. 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 January 2, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
Commitment Expiration Per Period
|
|
Other Commercial
|
|
Amount
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
Fiscal
|
|
|
|
|
Commitments
|
|
Committed
|
|
|
2010
|
|
|
2011-2012
|
|
|
2013-2014
|
|
|
Thereafter
|
|
|
|
(In thousands)
|
|
|
Standby Letters of Credit(1)
|
|
$
|
12,635
|
|
|
$
|
4,700
|
|
|
$
|
7,935
|
|
|
$
|
|
|
|
$
|
|
|
Guarantees(2)
|
|
|
26,156
|
|
|
|
4,753
|
|
|
|
5,869
|
|
|
|
4,380
|
|
|
|
11,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Commercial
Commitments
|
|
$
|
38,791
|
|
|
$
|
9,453
|
|
|
$
|
13,804
|
|
|
$
|
4,380
|
|
|
$
|
11,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Letters of credit relate primarily to supporting workers
compensation obligations. |
|
(2) |
|
Refer to Part II, Item 8 of this report under Note
(14) Concentration of Credit Risk in the
Notes to Consolidated Financial Statements and under the caption
Guarantees of Debt and Lease Obligations of Others
in the Critical Accounting Policies section below for additional
information regarding debt guarantees, lease guarantees and
assigned leases. |
Asset-backed
Credit Agreement
On April 11, 2008, we entered into our credit agreement
which is an asset-backed loan consisting of a
$340.0 million revolving credit facility, which includes a
$50.0 million letter of credit
sub-facility
(the Revolving Credit Facility). Provided no default
is then existing or would arise, we may from
time-to-time,
request that the Revolving Credit Facility be increased by an
aggregate amount (for all such requests) not to exceed
$110.0 million.
The Revolving Credit Facility has a
5-year term
and will be due and payable in full on April 11, 2013. We
can elect, at the time of borrowing, for loans to bear interest
at a rate equal to the base rate or LIBOR plus a margin. The
LIBOR interest rate margin currently is 2.00% and can vary
quarterly in 0.25% increments between three pricing levels
ranging from 1.75% to 2.25% based on the excess availability,
which is defined in the credit agreement as (a) the lesser
of (i) the borrowing base; or (ii) the aggregate
commitments; minus (b) the aggregate of the outstanding
credit extensions.
The credit agreement contains no financial covenants unless and
until (i) the continuance of an event of default under the
credit agreement, or (ii) the failure of us to maintain
excess availability (A) greater than 10% of the borrowing
base for more than two (2) consecutive business days or
(B) greater than 7.5% of the borrowing base at any time, in
which event, we must comply with a trailing
12-month
basis consolidated fixed charge covenant ratio of 1.0:1.0, which
ratio shall continue to be tested each month thereafter until
excess availability exceeds 10% of the borrowing base for ninety
(90) consecutive days.
The credit agreement contains standard covenants requiring us,
among other things, to maintain collateral, comply with
applicable laws, keep proper books and records, preserve the
corporate existence, maintain insurance, and pay taxes in a
timely manner. Events of default under the credit agreement are
usual and customary for transactions of this type including,
among other things: (a) any failure to pay principal
thereunder when due or to pay interest or fees on the due date;
(b) material misrepresentations; (c) default under
other agreements governing material indebtedness of the Company;
(d) default in the performance or observation of any
covenants; (e) any event of insolvency or bankruptcy;
(f) any final judgments or orders to pay more than
$15.0 million that remain unsecured or unpaid;
(g) change of control, as defined in the credit agreement;
and (h) any failure of a collateral document, after
delivery thereof, to create a valid mortgage or first-priority
lien.
At January 2, 2010, $203.3 million was available under
the Revolving Credit Facility after giving effect to outstanding
borrowings and to $12.6 million of outstanding letters of
credit primarily supporting workers
28
compensation obligations. We are currently in compliance with
all covenants contained within the credit agreement.
Our Revolving Credit Facility represents one of our primary
sources of liquidity, both short-term and long-term, and the
continued availability of credit under that agreement is of
material importance to our ability to fund our capital and
working capital needs.
Senior
Subordinated Convertible Debt
On March 15, 2005, we completed a private placement of
$150.1 million in aggregate issue price (or
$322.0 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.
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 9.5652 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 $48.73 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. Our contractual obligation,
however, to maintain the effectiveness of the shelf registration
statement has expired. As a result, we removed from
registration, by means of a post-effective amendment filed on
July 24, 2007, all notes and common stock that remained
unsold at such time.
29
Debt
Obligations
For debt obligations, the following table presents principal
cash flows, related weighted average interest rates by expected
maturity dates and fair value as of January 2, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate
|
|
|
Variable Rate
|
|
|
|
Fair Value
|
|
|
Amount
|
|
|
Rate
|
|
|
Fair Value
|
|
|
Amount
|
|
|
Rate
|
|
|
|
(In thousands)
|
|
|
2010
|
|
|
|
|
|
$
|
627
|
|
|
|
6.0
|
%
|
|
|
|
|
|
$
|
|
|
|
|
|
|
2011
|
|
|
|
|
|
|
670
|
|
|
|
6.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
|
|
|
704
|
|
|
|
6.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
712
|
|
|
|
6.1
|
%
|
|
|
|
|
|
|
124,100
|
|
|
|
3.2
|
%
|
2014
|
|
|
|
|
|
|
40
|
|
|
|
5.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Thereafter
|
|
|
|
|
|
|
131,364
|
|
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
130,909
|
|
|
$
|
134,117
|
|
|
|
|
|
|
$
|
124,100
|
|
|
$
|
124,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
EBITDA (Non-GAAP Measurement)
The following is a reconciliation of EBITDA and Consolidated
EBITDA to net earnings for fiscal 2009, 2008 and 2007 (amounts
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net earnings
|
|
$
|
2,778
|
|
|
|
33,145
|
|
|
|
36,031
|
|
Income tax expense
|
|
|
20,972
|
|
|
|
20,646
|
|
|
|
16,984
|
|
Interest expense
|
|
|
24,372
|
|
|
|
26,466
|
|
|
|
28,088
|
|
Depreciation and amortization
|
|
|
40,603
|
|
|
|
38,429
|
|
|
|
38,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
88,725
|
|
|
|
118,686
|
|
|
|
119,985
|
|
LIFO charge
|
|
|
(3,033
|
)
|
|
|
19,740
|
|
|
|
5,091
|
|
Lease reserves
|
|
|
3,135
|
|
|
|
(1,832
|
)
|
|
|
551
|
|
Goodwill impairment
|
|
|
50,927
|
|
|
|
|
|
|
|
|
|
Asset impairments
|
|
|
2,460
|
|
|
|
2,555
|
|
|
|
1,868
|
|
Gains on sale of real estate
|
|
|
(54
|
)
|
|
|
|
|
|
|
(1,867
|
)
|
Gain on acquisition of a business
|
|
|
(6,682
|
)
|
|
|
|
|
|
|
|
|
Gain on litigation settlement
|
|
|
(7,630
|
)
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
9,084
|
|
|
|
8,792
|
|
|
|
7,786
|
|
Special charges
|
|
|
6,020
|
|
|
|
|
|
|
|
(1,282
|
)
|
Subsequent cash payments on non-cash charges
|
|
|
(2,815
|
)
|
|
|
(4,218
|
)
|
|
|
(3,292
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Consolidated EBITDA
|
|
$
|
140,137
|
|
|
|
143,723
|
|
|
|
128,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA and Consolidated EBITDA are measures used by management
to measure operating performance. EBITDA is defined as net
earnings before interest, taxes, depreciation, and amortization.
Consolidated EBITDA excludes certain non-cash charges and other
items that management does not utilize in assessing operating
performance and is a metric used to determine payout of
performance units pursuant to our Short-Term and Long-Term
Incentive Plans. The above table reconciles net earnings to
EBITDA and Consolidated EBITDA. Not all companies utilize
identical calculations; therefore, the presentation of EBITDA
and Consolidated EBITDA may not be comparable to other
identically titled measures of other companies. Neither EBITDA
or Consolidated EBITDA are recognized terms under GAAP and do
not purport to be an alternative to net earnings as an indicator
of operating performance or any other GAAP measure. In addition,
EBITDA and Consolidated EBITDA are not intended to be measures
of free cash flow for managements discretionary
30
use since they do not consider certain cash requirements, such
as interest payments, tax payments and capital expenditures.
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 exposure to changes in interest
rates and commodity prices is to reduce fluctuations in earnings
and cash flows. From
time-to-time
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 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. Deferred gains and losses are
amortized as an adjustment to expense over 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 effective in accordance with ASC Topic 815
(ASC 815, originally issued as
SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities) 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.
As of January 2, 2010, we had two outstanding interest rate
swap agreements with notional amounts totaling
$35.0 million. The notional amounts of the two outstanding
swaps are reduced annually as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
Effective Date
|
|
Termination Date
|
|
Fixed Rate
|
|
20,000
|
|
|
10/15/2009
|
|
|
|
10/15/2010
|
|
|
|
3.49
|
%
|
10,000
|
|
|
10/15/2010
|
|
|
|
10/15/2011
|
|
|
|
3.49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
Effective Date
|
|
Termination Date
|
|
Fixed Rate
|
|
15,000
|
|
|
10/15/2009
|
|
|
|
10/15/2010
|
|
|
|
3.38
|
%
|
7,500
|
|
|
10/15/2010
|
|
|
|
10/15/2011
|
|
|
|
3.38
|
%
|
From
time-to-time
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 made. Resulting gains and losses on
the fair market value of the commodity swap agreement are
immediately recognized as income or expense.
As of January 2, 2010, there were no commodity swap
agreements in existence. Our only commodity swap agreement in
place during fiscal 2008 expired during the first quarter and
was settled for fair market value. Pre-tax gains of
$0.4 million were recorded as a reduction to cost of sales
during fiscal 2007.
In addition to the previously discussed interest rate and
commodity swap agreements, from
time-to-time
we enter into fixed price fuel supply agreements to support our
food distribution segment. On January 1, 2009, we entered
into an agreement which required us to purchase a total of
252,000 gallons of diesel fuel per month at prices ranging from
$1.90 to $1.98 per gallon. The term of the agreement was for one
year and expired on December 31, 2009. During fiscal 2007
and 2008 we had a fixed price fuel supply agreement which
required us to purchase a total of 168,000 gallons of diesel
fuel per month at prices ranging from $2.28 to $2.49 per gallon.
The term of the agreement began on February 1, 2007, and
expired on December 31, 2007. These fixed price fuel
agreements qualified for the normal purchase
exception under ASC 815, therefore the fuel purchases under
these contracts are expensed as incurred as an increase to cost
of sales.
31
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 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.
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
(13) Leases in the 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 food distribution customers. In the event
these retailers are unable to meet their debt service
32
payments or otherwise experience an event of default, we would
be unconditionally liable for the outstanding balance of their
debt and lease obligations ($13.5 million as of
January 2, 2010 as compared to $15.1 million as of
January 3, 2009), which would be due in accordance with the
underlying agreements.
We have entered into loan and lease guarantees on behalf of
certain food distribution customers that are accounted for under
ASC Topic 460 (ASC 460, originally issued as FASB
Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements, Including Indirect Guarantees of
Indebtedness of Others). ASC 460 provides that at the
time a company issues a guarantee, the company must recognize an
initial liability for the fair value of the obligation it
assumes under that guarantee. The maximum undiscounted payments
we would be required to make in the event of default under the
guarantees is $10.3 million, which is included in the
$13.5 million total referenced above. These guarantees are
secured by certain business assets and personal guarantees of
the respective customers. We believe these customers will be
able to perform under the lease agreements and that no payments
will be required and no loss will be incurred under the
guarantees. As required by ASC 460, a liability representing the
fair value of the obligations assumed under the guarantees of
$1.1 million is included in the accompanying consolidated
financial statements. All of the other guarantees were issued
prior to December 31, 2002 and therefore not subject to the
recognition and measurement provisions of ASC 460.
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, net of reserves, to be
approximately $8.0 million as of January 2, 2010 as
compared to $10.1 million as of January 3, 2009. 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 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
(14) Concentration of Credit Risk in the
Notes to Consolidated Financial Statements 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 ASC Subtopic
360-10-35
(originally issued as SFAS No. 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 a rate which management has determined to be
consistent with assumptions used by market participants.
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
33
different judgments as to competition, strategies and market
conditions, with the potential for a corresponding adverse
effect on financial condition and operating results.
Goodwill
We maintain three reporting units for purposes of our goodwill
impairment testing, which are the same as our reporting segments
disclosed in Part II, Item 8 of this report under Note
(19) Segment Reporting. Goodwill for
each of our reporting units is tested for impairment in
accordance with ASC 350 annually
and/or when
factors indicating impairment are present, which requires a
significant amount of managements judgment. Such
indicators may include a decline in our expected future cash
flows, unanticipated competition, the loss of a major customer,
slower growth rates or a sustained significant decline in our
share price and market capitalization, among others. Any adverse
change in these factors could have a significant impact on the
recoverability of our goodwill and could have a material impact
on our consolidated financial statements.
In fiscal 2009, we began applying the provision of ASC Topic 820
(originally issued as SFAS No. 157, Fair
Value Measurements) in relation to our goodwill
impairment testing by applying, to the extent possible,
observable market inputs to arrive at the fair values of our
reporting units.
Our fair value for each reporting unit is determined based on an
income approach which incorporates a discounted cash flow
analysis and a market approach that utilizes current earnings
multiples for comparable publically-traded companies. Our income
approach is based on an estimate of five years of future cash
flows and a terminal value that factors in estimated long-term
growth. The estimate of future cash flows are dependent on our
knowledge and experience about past and current events and
assumptions about conditions we expect to exist, including
operating performance, economic conditions, long-term growth
rates, capital expenditures, changes in working capital and
effective tax rates. The discount rates applied to the income
approach reflect a weighted average cost of capital for
comparable publicly-traded companies which are adjusted for
equity and size risk premiums based on market capitalization.
We have weighted the valuation of our reporting units at 70%
based on the income approach and 30% based on the market
approach. We believe that this weighting is appropriate since it
is often difficult to find other appropriate publicly-traded
companies that are similar to our reporting units and it is our
view that future discounted cash flows are more reflective of
the value of the reporting units.
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 potentially resulting in impairment of the
goodwill. None of the reporting units are more susceptible to
economic conditions than others. The income approach and market
approach used to determine fair value are sensitive to changes
in discount rates and market trading multiples.
While we believe our estimates of fair value of our reporting
units are reasonable, there can be no assurance that
deterioration in economic conditions, customer relationships or
adverse changes to expectations of future performance will not
occur, resulting in a goodwill impairment loss. Please refer to
Part II, Item 8 in this report under Note
(1) Summary of Significant Accounting
Policies under the caption Goodwill and Intangible
Assets of this
Form 10-K
for additional information pertaining to our fiscal 2009
goodwill impairment analysis.
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. The 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.
We utilize the liability method of accounting for income taxes
as set forth in ASC Topic 740 (originally issued as
SFAS 109, Accounting for Income Taxes).
Under the liability method, deferred taxes are
34
determined based on the temporary differences between the
financial statement and tax basis of assets and liabilities
using tax rates expected to be in effect during the years in
which the basis differences reverse or are settled. A valuation
allowance is recorded when it is more likely than not that all
or a portion of the deferred tax assets will not be realized.
Changes in valuation allowances from period to period are
included in our tax provision in the period of change.
We establish reserves when, despite our belief that the tax
return positions are fully supportable, certain positions could
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 statutes of limitations. The effective tax
rate includes the impact of reserve provisions and changes to
reserves that are considered appropriate, as well as, related
penalties and interest. These reserves relate to various tax
years subject to audit by taxing authorities.
Income tax positions must meet a more-likely-than-not
recognition threshold at the effective date to be recognized. We
recognize potential accrued interest and penalties related to
the unrecognized tax benefits in income tax expense.
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. On a per claim basis,
our exposure for workers compensation is $0.6 million, auto
liability and general liability is $0.5 million and for
health insurance our exposure is $0.5 million. 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 ASC Topic 718 (ASC
718, originally issued as SFAS No. 123R,
Share-Based Payment Revised)
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. ASC 718 requires companies to estimate the
fair value of share-based payment awards on the date of grant.
The Company uses the grant date closing price per share of Nash
Finch common stock to estimate the fair value of Restricted
Stock Units (RSUs) and performance units granted pursuant to its
long-term incentive plan
35
(LTIP). The Company uses the Black-Scholes option-pricing model
to estimate the fair value of stock options. The Company uses a
lattice model to estimate the fair value of stock appreciation
rights (SARs) which contain market conditions. The value of the
portion of the awards ultimately expected to vest is recognized
as expense over the requisite service period which is derived
from the data in the lattice valuation model. Share-based
compensation is based on awards ultimately expected to vest, and
is reduced for estimated forfeitures. ASC 718 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
In May 2008, the FASB amended ASC
470-20
(originally issued as FASB Staff Position APB
14-1,
Accounting for Convertible Debt and Debt Issued with
Stock Purchase Warrants), which impacts the accounting
associated with our existing $150.1 million senior
convertible notes. ASC
470-20
requires us to recognize non-cash interest expense based on the
market rate for similar debt instruments without the conversion
feature. Furthermore, it requires recognizing interest expense
in prior periods pursuant to retrospective accounting treatment.
Effective January 4, 2009, we adopted the provisions of ASC
470-20.
In December 2007, the FASB amended ASC Topic 805 (ASC
805, originally issued as SFAS No. 141R,
Business Combinations). This standard
establishes principles and requirements for the reporting entity
in a business combination, including recognition and measurement
in the financial statements of the identifiable assets acquired,
the liabilities assumed, and any noncontrolling interest in the
acquiree. This statement also establishes disclosure
requirements to enable financial statement users to evaluate the
nature and financial effects of the business combination. ASC
805 is effective for fiscal years beginning on or after
December 15, 2008. Effective January 4, 2009, we
adopted the provisions of ASC 805.
The Company adopted the amended disclosure requirements of ASC
Topic 815 (ASC 815, originally issued as
SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB
Statement No. 133) on January 4, 2009. The
amendment to ASC 815 expands the disclosure requirements of
derivative and hedging activities with the intent to provide
users of financial statements with an enhanced understanding of:
(i) how and why an entity uses derivative instruments;
(ii) how derivative instruments and related hedged items
are accounted for under ASC 815 and its related interpretations;
and (iii) how derivative instruments and related hedged
items affect an entitys financial position, financial
performance and cash flows. The adoption did not have a material
impact on the Companys consolidated financial statements.
In May 2009, the FASB amended ASC Topic 855 (ASC
855, originally issued as SFAS No. 165,
Subsequent Events), which sets forth general
standards of accounting for and disclosure of events that occur
after the balance sheet date but before financial statements are
issued or are available to be issued. The Company adopted the
amended guidance of ASC 855 during the second quarter 2009. The
adoption did not have a material impact on the Companys
consolidated financial statements.
In June 2009, the FASB issued amendments to ASC Topic 810
(ASC 810, originally issued as
SFAS No. 167, Amendments to FASB
Interpretation No. 46(R)), which addresses the
elimination of the concept of a qualifying special purpose
entity. The amended guidance also replaces the
quantitative-based risks and rewards calculation for determining
which enterprise has a controlling financial interest in a
variable interest entity with an approach focused on identifying
which enterprise has the power to direct the activities of a
variable interest entity and the obligation to absorb losses of
the entity or the right to receive benefits from the entity.
Additionally, the amended guidance provides more timely and
useful information about an enterprises involvement with a
variable interest entity. The amendment to ASC 810 will become
effective during the first fiscal quarter of 2010. We do not
expect this amendment will have a material impact on our
consolidated financial statements.
36
In June 2009, the FASB issued ASC Topic 105 (ASC
105, originally issued as SFAS No. 168,
The FASB Accounting Standards
CodificationTM
and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162), which
establishes the FASB Accounting Standards Codification as the
source of authoritative accounting principles recognized by the
FASB to be applied in the preparation of financial statements in
conformity with generally accepted accounting principles. ASC
105 explicitly recognizes rules and interpretive releases of the
Securities and Exchange Commission (SEC) under
federal securities laws as authoritative GAAP for SEC
registrants. ASC 105 became effective in the third fiscal
quarter of 2009 and did not have a material impact on our
consolidated financial statements.
|
|
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 (7) Accounts and Notes
Receivable in the Notes to Consolidated Financial
Statements for more information.
The table below provides information about our debt obligations
that are sensitive to changes in interest rates. For debt
obligations, the table presents principal cash flows and related
weighted average interest rates by expected maturity dates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
|
|
Total
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
Thereafter
|
|
|
(In millions, except rates)
|
|
Debt with variable interest rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payable
|
|
$
|
124.1
|
|
|
$
|
124.1
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
124.1
|
|
|
$
|
|
|
|
$
|
|
|
Average variable rate payable
|
|
|
|
|
|
|
3.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2
|
%
|
|
|
|
|
|
|
|
|
Debt with fixed interest rates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal payable
|
|
$
|
130.9
|
|
|
$
|
134.1
|
|
|
$
|
0.6
|
|
|
$
|
0.7
|
|
|
$
|
0.7
|
|
|
$
|
0.7
|
|
|
$
|
0.1
|
|
|
$
|
131.3
|
|
Average fixed rate payable
|
|
|
|
|
|
|
3.6
|
%
|
|
|
6.0
|
%
|
|
|
6.2
|
%
|
|
|
6.2
|
%
|
|
|
6.1
|
%
|
|
|
5.6
|
%
|
|
|
3.5
|
%
|
37
|
|
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 (collectively, the Company)
as of January 2, 2010 and January 3, 2009, and the
related consolidated statements of income, stockholders
equity, and cash flows for each of the three years in the period
ended January 2, 2010. 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 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
January 2, 2010 and January 3, 2009, and the
consolidated results of their operations and their cash flows
for each of the three years in the period ended January 2,
2010, 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), Nash
Finch Companys internal control over financial reporting
as of January 2, 2010, based on criteria established in
Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
and our report dated March 4, 2010, expressed an
unqualified opinion thereon.
As discussed in Note 3 of the consolidated financial
statements, the Company adopted the provisions of Accounting
Standards Codification (ASC)
470-20,
Debt with Conversion and Other Options in the
fiscal year ending January 2, 2010.
Minneapolis, Minnesota
March 4, 2010
38
NASH
FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended
January 2, 2010,
|
|
|
|
|
|
|
|
|
|
January 3, 2009 and December 29, 2007
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Sales
|
|
$
|
5,212,655
|
|
|
$
|
4,633,494
|
|
|
$
|
4,464,035
|
|
Cost of sales
|
|
|
4,793,967
|
|
|
|
4,226,545
|
|
|
|
4,066,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
418,688
|
|
|
|
406,949
|
|
|
|
397,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
287,328
|
|
|
|
288,263
|
|
|
|
280,818
|
|
Gains on sales of real estate
|
|
|
|
|
|
|
|
|
|
|
(1,867
|
)
|
Special charges
|
|
|
6,020
|
|
|
|
|
|
|
|
(1,282
|
)
|
Gain on acquisition of a business
|
|
|
(6,682
|
)
|
|
|
|
|
|
|
|
|
Gain on litigation settlement
|
|
|
(7,630
|
)
|
|
|
|
|
|
|
|
|
Goodwill impairment
|
|
|
50,927
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
40,603
|
|
|
|
38,429
|
|
|
|
38,882
|
|
Interest expense
|
|
|
24,372
|
|
|
|
26,466
|
|
|
|
28,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other costs and expenses
|
|
|
394,938
|
|
|
|
353,158
|
|
|
|
344,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations before income taxes
|
|
|
23,750
|
|
|
|
53,791
|
|
|
|
53,015
|
|
Income tax expense
|
|
|
20,972
|
|
|
|
20,646
|
|
|
|
16,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
2,778
|
|
|
$
|
33,145
|
|
|
$
|
36,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.21
|
|
|
$
|
2.57
|
|
|
$
|
2.67
|
|
Diluted
|
|
|
0.21
|
|
|
|
2.52
|
|
|
|
2.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declared dividends per common share
|
|
$
|
0.72
|
|
|
$
|
0.72
|
|
|
$
|
0.72
|
|
See accompanying notes to consolidated financial statements.
39
NASH
FINCH COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
January 2,
|
|
|
January 3,
|
|
|
|
2010
|
|
|
2009
|
|
|
ASSETS
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
830
|
|
|
$
|
824
|
|
Accounts and notes receivable, net
|
|
|
250,767
|
|
|
|
185,943
|
|
Inventories
|
|
|
285,443
|
|
|
|
261,491
|
|
Prepaid expenses and other
|
|
|
11,410
|
|
|
|
13,909
|
|
Deferred tax assets
|
|
|
9,366
|
|
|
|
5,784
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
557,816
|
|
|
|
467,951
|
|
Notes receivable, net
|
|
|
23,343
|
|
|
|
28,353
|
|
Property, plant and equipment:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
637,167
|
|
|
|
590,894
|
|
Less accumulated depreciation and amortization
|
|
|
(422,529
|
)
|
|
|
(392,807
|
)
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
|
214,638
|
|
|
|
198,087
|
|
Goodwill
|
|
|
166,545
|
|
|
|
218,414
|
|
Customer contracts & relationships, net
|
|
|
21,062
|
|
|
|
24,762
|
|
Investment in direct financing leases
|
|
|
3,185
|
|
|
|
3,388
|
|
Other assets
|
|
|
12,947
|
|
|
|
11,591
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
999,536
|
|
|
$
|
952,546
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Outstanding checks
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt and capitalized lease
obligations
|
|
$
|
4,438
|
|
|
$
|
4,032
|
|
Accounts payable
|
|
|
240,483
|
|
|
|
220,610
|
|
Accrued expenses
|
|
|
60,524
|
|
|
|
73,087
|
|
Income taxes payable
|
|
|
3,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
308,509
|
|
|
|
297,729
|
|
Long-term debt
|
|
|
257,590
|
|
|
|
222,774
|
|
Capitalized lease obligations
|
|
|
21,442
|
|
|
|
25,252
|
|
Deferred tax liability, net
|
|
|
19,323
|
|
|
|
22,232
|
|
Other liabilities
|
|
|
42,113
|
|
|
|
35,539
|
|
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 13,675 and
13,665 shares, respectively
|
|
|
22,792
|
|
|
|
22,776
|
|
Additional paid-in capital
|
|
|
106,705
|
|
|
|
98,048
|
|
Restricted stock
|
|
|
|
|
|
|
|
|
Common stock held in trust
|
|
|
(2,342
|
)
|
|
|
(2,243
|
)
|
Deferred compensation obligations
|
|
|
2,342
|
|
|
|
2,243
|
|
Accumulated other comprehensive income
|
|
|
(10,756
|
)
|
|
|
(10,876
|
)
|
Retained earnings
|
|
|
261,821
|
|
|
|
268,562
|
|
Common stock in treasury, 863 and 848 shares, respectively
|
|
|
(30,003
|
)
|
|
|
(29,490
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
350,559
|
|
|
|
349,020
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
999,536
|
|
|
$
|
952,546
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
40
NASH
FINCH COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
2,778
|
|
|
$
|
33,145
|
|
|
$
|
36,031
|
|
Adjustments to reconcile net earnings to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Special charges non cash portion
|
|
|
6,020
|
|
|
|
|
|
|
|
(1,282
|
)
|
Impairment of retail goodwill
|
|
|
50,927
|
|
|
|
|
|
|
|
|
|
Gain on acquisition of a business
|
|
|
(6,682
|
)
|
|
|
|
|
|
|
|
|
Gain on litigation settlement
|
|
|
(7,630
|
)
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
40,603
|
|
|
|
38,429
|
|
|
|
38,882
|
|
Amortization of deferred financing costs
|
|
|
1,779
|
|
|
|
2,142
|
|
|
|
1,109
|
|
Non-cash convertible debt interest
|
|
|
4,944
|
|
|
|
4,651
|
|
|
|
4,216
|
|
Rebateable loans
|
|
|
4,095
|
|
|
|
2,992
|
|
|
|
2,200
|
|
Provision for bad debts
|
|
|
1,411
|
|
|
|
(1,292
|
)
|
|
|
1,234
|
|
Provision for lease reserves
|
|
|
3,136
|
|
|
|
(1,832
|
)
|
|
|
551
|
|
Deferred income tax expense
|
|
|
(10,764
|
)
|
|
|
3,622
|
|
|
|
25,071
|
|
Gain on sale of real estate and other
|
|
|
(137
|
)
|
|
|
(187
|
)
|
|
|
(2,371
|
)
|
LIFO charge
|
|
|
(3,033
|
)
|
|
|
19,740
|
|
|
|
5,092
|
|
Asset impairments
|
|
|
2,460
|
|
|
|
2,555
|
|
|
|
1,869
|
|
Share-based compensation
|
|
|
9,084
|
|
|
|
8,792
|
|
|
|
7,786
|
|
Deferred compensation
|
|
|
1,223
|
|
|
|
244
|
|
|
|
734
|
|
Other
|
|
|
(151
|
)
|
|
|
(742
|
)
|
|
|
20
|
|
Changes in operating assets and liabilities, net of effects of
acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable
|
|
|
(6,250
|
)
|
|
|
17,430
|
|
|
|
(11,246
|
)
|
Inventories
|
|
|
21,143
|
|
|
|
(31,489
|
)
|
|
|
(9,979
|
)
|
Prepaid expenses
|
|
|
(1,081
|
)
|
|
|
839
|
|
|
|
2,813
|
|
Accounts payable
|
|
|
(8,178
|
)
|
|
|
(1,037
|
)
|
|
|
1,924
|
|
Accrued expenses
|
|
|
(12,367
|
)
|
|
|
3,970
|
|
|
|
1,782
|
|
Income taxes payable
|
|
|
6,854
|
|
|
|
13,048
|
|
|
|
(9,213
|
)
|
Other assets and liabilities
|
|
|
2,189
|
|
|
|
(3,021
|
)
|
|
|
(13,607
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
102,373
|
|
|
|
111,999
|
|
|
|
83,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposal of property, plant and equipment
|
|
|
830
|
|
|
|
438
|
|
|
|
4,978
|
|
Additions to property, plant and equipment
|
|
|
(30,402
|
)
|
|
|
(31,955
|
)
|
|
|
(21,419
|
)
|
Business acquired, net of cash
|
|
|
(78,056
|
)
|
|
|
(6,566
|
)
|
|
|
|
|
Loans to customers
|
|
|
(2,350
|
)
|
|
|
(24,050
|
)
|
|
|
(3,856
|
)
|
Payments from customers on loans
|
|
|
4,769
|
|
|
|
1,588
|
|
|
|
1,854
|
|
Corporate-owned life insurance, net
|
|
|
(461
|
)
|
|
|
131
|
|
|
|
(46
|
)
|
Other
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(105,670
|
)
|
|
|
(60,414
|
)
|
|
|
(18,487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds (payments) of revolving debt
|
|
|
30,500
|
|
|
|
87,300
|
|
|
|
(35,000
|
)
|
Dividends paid
|
|
|
(9,239
|
)
|
|
|
(9,229
|
)
|
|
|
(9,702
|
)
|
Proceeds from exercise of stock options
|
|
|
196
|
|
|
|
329
|
|
|
|
2,002
|
|
Proceeds from employee stock purchase plan
|
|
|
|
|
|
|
238
|
|
|
|
498
|
|
Repurchase of common stock
|
|
|
(1,017
|
)
|
|
|
(14,348
|
)
|
|
|
(14,980
|
)
|
Payments of long-term debt
|
|
|
(595
|
)
|
|
|
(119,255
|
)
|
|
|
(626
|
)
|
Payments of capitalized lease obligations
|
|
|
(3,436
|
)
|
|
|
(3,639
|
)
|
|
|
(3,834
|
)
|
Increase (decrease) in outstanding checks
|
|
|
(10,065
|
)
|
|
|
9,951
|
|
|
|
(4,441
|
)
|
Payments of deferred financing costs
|
|
|
(2,874
|
)
|
|
|
(3,573
|
)
|
|
|
|
|
Tax benefit from exercise of stock options
|
|
|
(167
|
)
|
|
|
603
|
|
|
|
857
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
3,303
|
|
|
|
(51,623
|
)
|
|
|
(65,225
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
6
|
|
|
|
(38
|
)
|
|
|
(96
|
)
|
Cash at beginning of year
|
|
|
824
|
|
|
|
862
|
|
|
|
958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of year
|
|
$
|
830
|
|
|
$
|
824
|
|
|
$
|
862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non cash investing and financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of minority interest
|
|
$
|
|
|
|
$
|
64
|
|
|
$
|
|
|
See accompanying notes to consolidated financial statements.
41
NASH
FINCH COMPANY
Consolidated Statements of Stockholders Equity
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
Total
|
|
Fiscal Years Ended January 2, 2010,
|
|
Common
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Treasury
|
|
|
Stockholders
|
|
January 3, 2009 and December 29, 2007
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Stock
|
|
|
Equity
|
|
|
Balance at December 30, 2006
|
|
|
22,348
|
|
|
|
76,909
|
|
|
|
218,938
|
|
|
|
(4,582
|
)
|
|
|
(499
|
)
|
|
|
313,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
36,031
|
|
|
|
|
|
|
|
|
|
|
|
36,031
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loss on hedging activities, net of tax of ($295)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(461
|
)
|
|
|
|
|
|
|
(461
|
)
|
Minimum pension liability adjustment, net of tax of $180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
281
|
|
|
|
|
|
|
|
281
|
|
Minimum other post-retirement liability adjustment, net of tax
of ($211)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(330
|
)
|
|
|
|
|
|
|
(330
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,521
|
|
Dividends declared of $.72 per share
|
|
|
|
|
|
|
|
|
|
|
(9,702
|
)
|
|
|
|
|
|
|
|
|
|
|
(9,702
|
)
|
Share-based compensation
|
|
|
2
|
|
|
|
4,641
|
|
|
|
(352
|
)
|
|
|
|
|
|
|
|
|
|
|
4,291
|
|
Common stock issued upon exercise of options
|
|
|
125
|
|
|
|
1,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,003
|
|
Common stock issued for employee purchase plan
|
|
|
40
|
|
|
|
457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
497
|
|
Common stock issued for performance units
|
|
|
84
|
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,980
|
)
|
|
|
(14,980
|
)
|
Tax benefit associated with compensation plans
|
|
|
|
|
|
|
857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 29, 2007
|
|
$
|
22,599
|
|
|
$
|
84,658
|
|
|
$
|
244,915
|
|
|
$
|
(5,092
|
)
|
|
$
|
(15,479
|
)
|
|
$
|
331,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
33,145
|
|
|
|
|
|
|
|
|
|
|
|
33,145
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loss on hedging activities, net of tax of ($745)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,165
|
)
|
|
|
|
|
|
|
(1,165
|
)
|
Minimum pension liability adjustment, net of tax of ($2,710)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,239
|
)
|
|
|
|
|
|
|
(4,239
|
)
|
Minimum other post-retirement liability adjustment, net of tax
of ($243)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(380
|
)
|
|
|
|
|
|
|
(380
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,361
|
|
Dividends declared of $.72 per share
|
|
|
|
|
|
|
|
|
|
|
(9,229
|
)
|
|
|
|
|
|
|
|
|
|
|
(9,229
|
)
|
Share-based compensation
|
|
|
3
|
|
|
|
8,871
|
|
|
|
(269
|
)
|
|
|
|
|
|
|
338
|
|
|
|
8,943
|
|
Share-based compensation modified from liability to equity based
|
|
|
|
|
|
|
3,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,412
|
|
Common stock issued upon exercise of options
|
|
|
26
|
|
|
|
415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
441
|
|
Common stock issued for employee purchase plan
|
|
|
13
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
237
|
|
Common stock issued for performance units
|
|
|
135
|
|
|
|
(135
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,348
|
)
|
|
|
(14,348
|
)
|
Forfeiture of restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Tax benefit associated with compensation plans
|
|
|
|
|
|
|
603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 3, 2009
|
|
$
|
22,776
|
|
|
$
|
98,048
|
|
|
$
|
268,562
|
|
|
$
|
(10,876
|
)
|
|
$
|
(29,490
|
)
|
|
$
|
349,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
|
|
|
|
|
|
|
|
2,778
|
|
|
|
|
|
|
|
|
|
|
|
2,778
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred loss on hedging activities, net of tax of $304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
475
|
|
|
|
|
|
|
|
475
|
|
Minimum pension liability adjustment, net of tax of ($194)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(303
|
)
|
|
|
|
|
|
|
(303
|
)
|
Minimum other post-retirement liability adjustment, net of tax
of ($33)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52
|
)
|
|
|
|
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,898
|
|
Dividends declared of $.72 per share
|
|
|
|
|
|
|
|
|
|
|
(9,239
|
)
|
|
|
|
|
|
|
|
|
|
|
(9,239
|
)
|
Share-based compensation
|
|
|
|
|
|
|
8,045
|
|
|
|
(280
|
)
|
|
|
|
|
|
|
504
|
|
|
|
8,269
|
|
Stock appreciation rights
|
|
|
|
|
|
|
599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
599
|
|
Common stock issued upon exercise of options
|
|
|
13
|
|
|
|
183
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196
|
|
Common stock issued for performance units
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,017
|
)
|
|
|
(1,017
|
)
|
Tax benefit associated with compensation plans
|
|
|
|
|
|
|
(167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 2, 2010
|
|
$
|
22,792
|
|
|
$
|
106,705
|
|
|
$
|
261,821
|
|
|
$
|
(10,756
|
)
|
|
$
|
(30,003
|
)
|
|
$
|
350,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 2008
consisted of 53 weeks while fiscal years 2009 and 2007 each
consisted of 52 weeks. Our interim quarters consist of
12 weeks except for the third quarter which consists of
16 weeks. For fiscal 2008, the Companys fourth
quarter consisted of 13 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.
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 which are carried at fair value.
Revenue
Recognition
We recognize revenue when the sales price is fixed or
determinable, collectability is reasonably assured and the
customer takes possession of the merchandise.
Revenues for the food distribution segment are recognized upon
delivery of the product which is typically the same day the
product is shipped.
Revenues for the military segment are recognized upon the
delivery of the product to the commissary or commissaries
designated by the Defense Commissary Agency (DeCA), or in the
case of overseas commissaries, when the product is delivered to
the port designated by DeCA, which is when DeCA takes possession
of the merchandise and bears the responsibility for shipping the
product to the commissary or overseas warehouse.
Revenue is recognized for retail store sales when the customer
receives and pays for the merchandise at the point of sale.
Sales taxes collected from customers are remitted to the
appropriate taxing jurisdictions and are excluded from sales
revenue as the Company considers itself a pass-through conduit
for collecting and remitting sales taxes.
Based upon the nature of the products we sell, our customers
have limited rights or return, which are immaterial.
In fiscal 2009, the Company revised its treatment of consigned
inventory sales in our military segment. Prior to the revision,
consigned sales were recorded on a gross basis as sales and a
related amount recorded as a cost of sales. The Company has
revised its presentation for sales of consigned inventory to be
on a net basis. The revision reduced both sales and cost of
sales but did not have an impact on gross profit, earnings from
continuing operations before income taxes, net earnings, cash
flows or financial position for any period or their respective
trends. Certain prior year amounts shown below have been revised
to conform to the current year presentation.
43
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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|
|
|
|
|
|
|
|
|
|
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53 Weeks Ended
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|
|
|
|
|
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|
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|
January 3,
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|
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53 Weeks Ended
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2009
|
|
|
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January 3,
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|
|
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|
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As originally
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|
|
%
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|
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|
|
2009
|
|
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%
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(in 000s)
|
|
Reported
|
|
|
of Sales
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|
|
Adjustments
|
|
|
As revised
|
|
|
of Sales
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|
|
Sales
|
|
$
|
4,703,660
|
|
|
|
100.0
|
%
|
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(70,166
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)
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|
4,633,494
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|
100.0
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%
|
Cost of Sales
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|
4,296,711
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|
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|
91.3
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%
|
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(70,166
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)
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|
4,226,545
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|
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|
91.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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Gross Profit
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$
|
406,949
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|
|
8.7
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%
|
|
|
|
|
|
|
406,949
|
|
|
|
8.8
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%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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52 Weeks Ended
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December 29,
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52 Weeks Ended
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2007
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December 29,
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|
|
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As originally
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|
%
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|
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|
|
2007
|
|
|
%
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(in 000s)
|
|
Reported
|
|
|
of Sales
|
|
|
Adjustments
|
|
|
As revised
|
|
|
of Sales
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|
Sales
|
|
$
|
4,532,635
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|
|
|
100.0
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%
|
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(68,600
|
)
|
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|
4,464,035
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|
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|
100.0
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%
|
Cost of Sales
|
|
|
4,134,981
|
|
|
|
91.2
|
%
|
|
|
(68,600
|
)
|
|
|
4,066,381
|
|
|
|
91.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Gross Profit
|
|
$
|
397,654
|
|
|
|
8.8
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%
|
|
|
|
|
|
|
397,654
|
|
|
|
8.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Cost
of sales
Cost of sales includes the cost of inventory sold during the
period, including distribution costs, shipping and handling
fees, and vendor allowances and credits (see below). Advertising
costs, included in cost of goods sold, are expensed as incurred
and were $59.9 million, $58.2 million and
$53.7 million for fiscal 2009, 2008 and 2007, respectively.
Advertising income, included in cost of goods sold, was
approximately $55.8 million, $56.4 million and
$55.8 million for fiscal 2009, 2008 and 2007, 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.
Inventories
Inventories are stated at the lower of cost or market.
Approximately 86% of our inventories were valued on the
last-in,
first-out (LIFO) method at January 2, 2010 as compared to
approximately 84% at January 3, 2009. During fiscal 2009,
we recorded a LIFO credit of $3.0 million compared to a
$19.7 million charge in fiscal 2008 and a $5.1 million
charge in fiscal 2007. 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
$73.1 million, $76.1 million and $56.4 million
higher at January 2, 2010, January 3, 2009 and
December 29, 2007, respectively.
44
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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.
Net property, plant and equipment consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
January 2,
|
|
|
January 3,
|
|
|
|
2010
|
|
|
2009
|
|
|
Land
|
|
$
|
18,876
|
|
|
$
|
17,281
|
|
Buildings and improvements
|
|
|
214,959
|
|
|
|
196,954
|
|
Furniture, fixtures and equipment
|
|
|
289,713
|
|
|
|
275,888
|
|
Leasehold improvements
|
|
|
61,026
|
|
|
|
65,499
|
|
Construction in progress
|
|
|
5,928
|
|
|
|
4,453
|
|
Assets under capitalized leases
|
|
|
46,665
|
|
|
|
30,819
|
|
|
|
|
|
|
|
|
|
|
|
|
|
637,167
|
|
|
|
590,894
|
|
Accumulated depreciation and amortization
|
|
|
(422,529
|
)
|
|
|
(392,807
|
)
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
$
|
214,638
|
|
|
$
|
198,087
|
|
|
|
|
|
|
|
|
|
|
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 Financial Accounting Standards Board
(FASB) Accounting Standards Codification
(ASC) ASC Subtopic
360-10-35
(ASC
360-10-35,
originally issued as 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
the impairment evaluation. 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 as determined using an income approach.
The inputs used in the income approach use significant
unobservable inputs, or level 3 inputs, in the fair value
hierarchy. In fiscal 2009, 2008 and 2007, we recorded impairment
charges of $8.5 million, $2.6 million and
$1.9 million, respectively, within the selling,
general and administrative line of the 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
45
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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. On a per claim basis, our exposure for workers
compensation is $0.6 million, auto liability and general
liability is $0.5 million and for health insurance our
exposure is $0.5 million. 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.
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 ASC Topic 350 (ASC 350, originally
issued as Statement of Financial Accounting Standards
(SFAS) No. 142, Goodwill and Other
Intangible Assets) we test goodwill for impairment on
an annual basis in the fourth quarter or more frequently if we
believe indicators of impairment exist. Such indicators may
include a decline in our expected future cash flows,
unanticipated competition, slower growth rates or a sustained
significant decline in our share price and market
capitalization, among others. Any adverse change in these
factors could have a significant impact on the recoverability of
our goodwill and could have a material impact on our
consolidated financial statements.
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. 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.
Our fair value for each reporting unit is determined based on an
income approach which incorporates a discounted cash flow
analysis which uses significant unobservable inputs, or level 3
inputs, as defined by the fair value hierarchy, and a market
approach that utilizes current earnings multiples of comparable
publicly-traded companies. The Company has weighted the
valuation of its reporting units at 70% based on the income
approach and 30% based on the market approach. The Company
believes that this weighting is appropriate since it is often
difficult to find other comparable publicly-traded companies
that are similar to our reporting units and it is our view that
future discounted cash flows are more reflective of the value of
the reporting units.
We performed our annual impairment test of goodwill during the
fourth quarter of fiscal 2009 based on conditions as of the end
of our third quarter of fiscal 2009 and determined that no
indication of impairment existed in our food distribution and
military segments. The fair value of the food distribution
segment was approximately 24% higher than its carrying value,
while the military segments fair value exceeded its
carrying value by over 100%. We determined that an indication of
impairment existed in our retail segment in the first step of
the fiscal 2009 impairment analysis which required us to
calculate our retail segments implied fair value in the
second step of the impairment analysis. For the second step we
obtained appraisals for our real estate, fixtures and equipment
and assigned a fair value to any unrecognized intangible assets,
which included above and below market rents based on appraisals
for locations we lease, a fair value to our trade names and our
pharmacy scripts. Certain asset and liabilities carrying
values approximated fair value due to their short maturities
which included accounts receivable, inventories and accounts
payable. Based on its implied fair
46
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
value we were required to write-off $50.9 million of our
retail goodwill in fiscal 2009. The decline in the fair value of
our retail segment is reflective of a decline in long-term
growth assumptions and lower comparable market multiples.
Discount rates applied in our income approach during fiscal 2009
ranged from 8.75% to 10.25% and were reflective of the weighted
average cost of capital of comparable publically-trade companies
with an adjustment for equity and size premiums based on market
capitalization. Growth rates ranged from -2.5% to 2.0%. For the
food distribution segment to have an indication of impairment
the discount rate applied would need to increase over
300 basis points or the assumed long-term growth rate would
need to decrease by 1% with a corresponding increase in the
discount rate of over 200 basis points.
The accounting principles regarding goodwill acknowledge that
the observed market prices of individual trades of a
companys stock (and thus its computed market
capitalization) may not be representative of the fair value of
the company as a whole. Additional value may arise from the
ability to take advantage of synergies and other benefits that
flow from control over another entity. Consequently, measuring
the fair value of a collection of assets and liabilities that
operate together in a controlled entity is different from
measuring the fair value of that entitys individual common
stock. In most industries, including ours, an acquiring entity
typically is willing to pay more for equity securities that give
it a controlling interest than an investor would pay for a
number of equity securities representing less than a controlling
interest. We have taken into consideration the current trends in
our market capitalization and the current book value of our
equity in relation to fair values arrived at in our fiscal 2009
goodwill impairment analysis, including the implied control
premium, and have deemed the result to be reasonable.
During fiscal 2008 and 2007 we performed our annual impairment
test of goodwill during the fourth quarter based on conditions
as of the end of our third quarter in accordance with ASC 350,
and determined that no impairment was necessary based on the
conditions at that time.
Changes in the net carrying amount of goodwill were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food Distribution
|
|
|
Military
|
|
|
Retail
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Goodwill as of December 29, 2007
|
|
$
|
121,863
|
|
|
$
|
25,754
|
|
|
$
|
67,557
|
|
|
$
|
215,174
|
|
Acquisition of retail stores
|
|
|
|
|
|
|
|
|
|
|
3,240
|
|
|
|
3,240
|
|
Goodwill as of January 3, 2009
|
|
|
121,863
|
|
|
|
25,754
|
|
|
|
70,797
|
|
|
|
218,414
|
|
Retail store closures
|
|
|
|
|
|
|
|
|
|
|
(942
|
)
|
|
|
(942
|
)
|
Retail goodwill impairment
|
|
|
|
|
|
|
|
|
|
|
(50,927
|
)
|
|
|
(50,927
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill as of January 2, 2010
|
|
$
|
121,863
|
|
|
$
|
25,754
|
|
|
$
|
18,928
|
|
|
$
|
166,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer contracts & relationships intangibles were as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2, 2010
|
|
Estimated
|
|
|
Gross
|
|
Accum.
|
|
Net Carrying
|
|
Life
|
|
|
Carrying Value
|
|
Amort.
|
|
Amount
|
|
(years)
|
|
Customer contracts and relationships
|
|
$
|
42,798
|
|
|
$
|
(21,736
|
)
|
|
$
|
21,062
|
|
|
|
10-20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 3, 2009
|
|
Estimated
|
|
|
Gross
|
|
Accum.
|
|
Net Carrying
|
|
Life
|
|
|
Carrying Value
|
|
Amort.
|
|
Amount
|
|
(years)
|
|
Customer contracts and relationships
|
|
$
|
43,082
|
|
|
$
|
(18,320
|
)
|
|
$
|
24,762
|
|
|
|
5-20
|
|
47
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Other intangible assets included in other assets on the
consolidated balance sheets were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2, 2010
|
|
Estimated
|
|
|
Gross
|
|
Accum.
|
|
Net Carrying
|
|
Life
|
|
|
Carrying Value
|
|
Amort.
|
|
Amount
|
|
(years)
|
|
Franchise agreements
|
|
$
|
2,754
|
|
|
$
|
(1,410
|
)
|
|
$
|
1,344
|
|
|
|
5-25
|
|
Non-compete agreements
|
|
|
696
|
|
|
|
(453
|
)
|
|
|
243
|
|
|
|
4-10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 3, 2009
|
|
Estimated
|
|
|
Gross
|
|
Accum.
|
|
Net Carrying
|
|
Life
|
|
|
Carrying Value
|
|
Amort.
|
|
Amount
|
|
(years)
|
|
Franchise agreements
|
|
$
|
2,739
|
|
|
$
|
(1,291
|
)
|
|
$
|
1,448
|
|
|
|
5-25
|
|
Non-compete agreements
|
|
|
416
|
|
|
|
(360
|
)
|
|
|
56
|
|
|
|
5-7
|
|
Aggregate amortization expense recognized for fiscal 2009, 2008
and 2007 was $4.4 million, $4.0 million and
$4.4 million, respectively. The aggregate amortization
expense for the five succeeding fiscal years is expected to
approximate $3.6 million, $2.9 million,
$2.6 million, $2.2 million and $2.0 million for
fiscal years 2010 through 2014, 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. The 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.
We utilize the liability method of accounting for income taxes
as set forth in ASC Topic 740 (originally issued as
SFAS 109, Accounting for Income Taxes).
Under the liability method, deferred taxes are determined based
on the temporary differences between the financial statement and
tax basis of assets and liabilities using tax rates expected to
be in effect during the years in which the basis differences
reverse or are settled. A valuation allowance is recorded when
it is more likely than not that all or a portion of the deferred
tax assets will not be realized. Changes in valuation allowances
from period to period are included in our tax provision in the
period of change.
We establish reserves when, despite our belief that the tax
return positions are fully supportable, certain positions could
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 statutes of limitations. The effective tax
rate includes the impact of reserve provisions and changes to
reserves that are considered appropriate, as well as, related
penalties and interest. These reserves relate to various tax
years subject to audit by taxing authorities.
Income tax positions must meet a more-likely-than-not
recognition threshold at the effective date to be recognized. We
recognize potential accrued interest and penalties related to
the unrecognized tax benefits in income tax expense.
Financial
Instruments
We account for derivative financial instruments pursuant to ASC
Topic 815 (ASC 815, originally issued as
SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities). ASC 815 requires
48
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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, from time-to time 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
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. We estimate the fair value of share-based payment
awards on the date of the grant. We use the grant date closing
price per share of Nash Finch common stock to estimate the fair
value of Restricted Stock Units (RSUs) and performance units
granted pursuant to our long-term incentive plan (LTIP). We use
the Black-Scholes option-pricing model to estimate the fair
value of stock options and a lattice model to estimate the fair
value of stock appreciation rights (SARs) which contain certain
market conditions. For all types of awards, the value of the
portion of the awards ultimately expected to vest is recognized
as expense over the requisite service period.
Comprehensive
Income
We report comprehensive income in accordance with ASC Topic 220
(originally issued as SFAS No. 130, Reporting
Comprehensive Income). Other comprehensive income
refers to revenues, expenses, gains and losses that are not
included in net earnings such as minimum pension liability
adjustments and unrealized gains or losses on hedging
instruments, 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.
New
Accounting Standards
In May 2008, the FASB amended ASC
470-20
(originally issued as FASB Staff Position APB
14-1,
Accounting for Convertible Debt and Debt Issued with
Stock Purchase Warrants), which impacts the accounting
associated with our existing $150.1 million senior
convertible notes. ASC
470-20
requires us to recognize non-cash interest expense based on the
market rate for similar debt instruments without the conversion
feature. Furthermore, it requires recognizing interest expense
in prior periods pursuant to retrospective accounting treatment.
Effective January 4, 2009, we adopted the provisions of ASC
470-20.
In December 2007, the FASB amended ASC Topic 805 (ASC
805, originally issued as SFAS No. 141R,
Business Combinations). This standard
establishes principles and requirements for the reporting entity
in a business combination, including recognition and measurement
in the financial statements of the identifiable assets acquired,
the liabilities assumed, and any noncontrolling interest in the
acquiree. This statement also establishes disclosure
requirements to enable financial statement users to evaluate the
nature and financial
49
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
effects of the business combination. ASC 805 is effective for
fiscal years beginning on or after December 15, 2008.
Effective January 4, 2009, we adopted the provisions of ASC
805. Please see Footnote 2 Acquisition.
The Company adopted the amended disclosure requirements of ASC
Topic 815 (ASC 815, originally issued as
SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB
Statement No. 133) on January 4, 2009. The
amendment to ASC 815 expands the disclosure requirements of
derivative and hedging activities with the intent to provide
users of financial statements with an enhanced understanding of:
(i) how and why an entity uses derivative instruments;
(ii) how derivative instruments and related hedged items
are accounted for under ASC 815 and its related interpretations;
and (iii) how derivative instruments and related hedged
items affect an entitys financial position, financial
performance and cash flows. The adoption did not have a material
impact on the Companys consolidated financial statements.
In May 2009, the FASB amended ASC Topic 855 (ASC
855, originally issued as SFAS No. 165,
Subsequent Events), which sets forth general
standards of accounting for and disclosure of events that occur
after the balance sheet date but before financial statements are
issued or are available to be issued. The Company adopted the
amended guidance of ASC 855 during the second quarter 2009. The
adoption did not have a material impact on the Companys
consolidated financial statements.
In June 2009, the FASB issued amendments to ASC Topic 810
(ASC 810, originally issued as
SFAS No. 167, Amendments to FASB
Interpretation No. 46(R)), which addresses the
elimination of the concept of a qualifying special purpose
entity. The amended guidance also replaces the
quantitative-based risks and rewards calculation for determining
which enterprise has a controlling financial interest in a
variable interest entity with an approach focused on identifying
which enterprise has the power to direct the activities of a
variable interest entity and the obligation to absorb losses of
the entity or the right to receive benefits from the entity.
Additionally, the amended guidance provides more timely and
useful information about an enterprises involvement with a
variable interest entity. The amendment to ASC 810 will become
effective during the first fiscal quarter of 2010. We do not
expect this amendment will have a material impact on our
consolidated financial statements.
In June 2009, the FASB issued ASC Topic 105 (ASC
105, originally issued as SFAS No. 168,
The FASB Accounting Standards
CodificationTM
and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162), which
establishes the FASB Accounting Standards Codification as the
source of authoritative accounting principles recognized by the
FASB to be applied in the preparation of financial statements in
conformity with generally accepted accounting principles. ASC
105 explicitly recognizes rules and interpretive releases of the
Securities and Exchange Commission (SEC) under
federal securities laws as authoritative GAAP for SEC
registrants. ASC 105 became effective in the third fiscal
quarter of 2009 and did not have a material impact on our
consolidated financial statements.
On January 31, 2009, the Company completed the purchase
from GSC Enterprises, Inc. (GSC), of substantially
all of the assets relating to three military food distribution
centers located in San Antonio, Texas, Pensacola, Florida
and Junction City, Kansas serving military commissaries and
exchanges (Business). The Company also assumed
certain trade payables, accrued expenses and receivables
associated with the assets being acquired. The aggregate
purchase price paid was $78.1 million in cash.
Effective January 4, 2009, the Company adopted the
provisions of ASC Topic 805 (ASC 805, originally
issued as SFAS No. 141R, Business
Combinations). ASC 805 defines the acquirer in a
business combination as the entity that obtains control of one
or more businesses in a business combination and establishes the
acquisition date as the date that the acquirer achieves control.
ASC 805 requires an acquirer to recognize the
50
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
assets acquired, the liabilities assumed, and any noncontrolling
interest in the acquiree at the acquisition date, measured at
their fair values as of that date. ASC 805 also requires the
acquirer to recognize contingent consideration at the
acquisition date, measured at its fair value at that date.
The following table summarizes the fair values of the assets
acquired and liabilities of the Business assumed at the
acquisition date:
|
|
|
|
|
|
|
As of
|
|
|
|
January 31,
|
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Cash and cash equivalents
|
|
$
|
47
|
|
Accounts receivable
|
|
|
61,285
|
|
Inventories
|
|
|
42,061
|
|
Prepaid expenses and other
|
|
|
210
|
|
Property, plant and equipment
|
|
|
30,294
|
|
Other assets
|
|
|
890
|
|
|
|
|
|
|
Total identifiable assets acquired
|
|
|
134,787
|
|
Current liabilities
|
|
|
43,114
|
|
Accrued expenses
|
|
|
1,162
|
|
Deferred tax liability, net
|
|
|
4,272
|
|
Other long-term liabilities
|
|
|
1,456
|
|
|
|
|
|
|
Total liabilities assumed
|
|
|
50,004
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
84,783
|
|
|
|
|
|
|
The fair value of the net identifiable assets acquired and
liabilities assumed of $84.8 million exceeded the purchase
price of $78.1 million. Consequently, the Company
reassessed the recognition and measurement of identifiable
assets acquired and liabilities assumed and concluded that the
valuation procedures and resulting measures were appropriate. As
a result, the Company recognized a gain of $6.7 million
(net of tax) in fiscal 2009 associated with the acquisition of
the Business. The gain is included in the line item Gain
on acquisition of a business in the Consolidated Statement
of Income.
A contingency of $0.3 million is included in the other
long-term liabilities account in the table above related to a
payment the Company would be required to make in the event a
purchase option is not exercised associated with the lease of
the Pensacola, FL facility prior to October 10, 2010. The
Company has determined the range of the potential loss on the
contingency is zero to $1.0 million and the acquisition
date fair value of the contingency is $0.3 million based
upon a probability-weighted discounted cash flow valuation
technique. As of January 2, 2010, there were no changes in
the recognized amounts or range of outcomes associated with this
contingency.
The Company has recognized acquisition and integration costs of
$2.8 million during fiscal 2009.
Sales of the Business included in the Consolidated Statement of
Income for fiscal 2009 were $683.3 million. Although the
Company has made reasonable efforts to do so, synergies achieved
through the integration of the Business into the Companys
military segment, unallocated interest expense and the
allocation of shared overhead specific to the Business cannot be
precisely determined. Accordingly, the Company has deemed it
impracticable to calculate the precise impact the Business will
have on the Companys net earnings during fiscal 2009.
However, please refer to
Note 19-Segment
Reporting for a comparison of military segment sales and
profits for fiscal years 2009, 2008 and 2007.
51
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Supplemental
pro forma financial information
The unaudited pro forma financial information in the table below
combines the historical results for the Company and the
historical results for the Business for the 52 and 53 weeks
ended January 2, 2010 and January 3, 2009. 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.
|
|
|
|
|
|
|
|
|
|
|
52 Weeks Ended
|
|
53 Weeks Ended
|
|
|
January 2,
|
|
January 3,
|
|
|
2010
|
|
2009
|
|
|
(In thousands, except per share data)
|
|
Total revenues
|
|
$
|
5,274,945
|
|
|
|
5,348,799
|
|
Net earnings
|
|
|
2,944
|
|
|
|
36,096
|
|
Basic earnings per share
|
|
|
0.23
|
|
|
|
2.80
|
|
Diluted earnings per share
|
|
|
0.22
|
|
|
|
2.74
|
|
|
|
(3)
|
Change in
Accounting Principle
|
Effective January 4, 2009, the Company adopted the
provisions of ASC Subtopic
470-20
(ASC
470-20,
originally issued as FASB Staff Position APB
14-1,
Accounting for Convertible Debt and Debt Issued with
Stock Purchase Warrants), which impacts the accounting
associated with our senior convertible notes. ASC
470-20
requires us to recognize interest expense, including non-cash
interest, based on the market rate for similar debt instruments
without the conversion feature, which the Company determined to
be 8.0%. Furthermore, it requires retrospective accounting
treatment. Under ASC
470-20, the
liability component of convertible debt is measured upon
issuance using an 8.0% interest rate and an assumed eight year
life, as determined by the first date the holders may require
the Company redeem the note. The difference between the proceeds
from the issuance and the fair value of the liability is
assigned to equity. Additionally, ASC
470-20 states
that transaction costs incurred with third parties shall be
allocated to and accounted for as debt issuance costs and equity
issuance costs in proportion to the allocation of proceeds
between the liability and equity component, respectively.
The following table represents the Companys initial
measurement of the convertible debt as of March 15, 2005
and its retrospective measurement under ASC
470-20:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measurement under
|
|
Initial
|
|
|
|
|
ASC 470-20
|
|
Measurement
|
|
|
|
|
3/15/2005
|
|
3/15/2005
|
|
Change
|
|
|
(In millions)
|
|
Other assets
|
|
$
|
3.6
|
|
|
|
4.9
|
|
|
|
(1.3
|
)(a)
|
Long-term debt
|
|
|
110.8
|
|
|
|
150.1
|
|
|
|
(39.3
|
)(b)
|
Deferred tax liability, net
|
|
|
14.8
|
|
|
|
|
|
|
|
14.8
|
(c)
|
Additional paid-in capital
|
|
|
23.2
|
|
|
|
|
|
|
|
23.2
|
(d)
|
|
|
|
(a) |
|
Other assets represents the deferred financing cost asset
related to the debt issuance. The $1.3 million change
represents the portion of the costs allocated to equity in the
additional paid-in capital account under ASC
470-20. |
|
(b) |
|
The $39.3 million change in the carrying value of long-term
debt represents the difference between the fair value of the
long-term debt under ASC
470-20 and
the proceeds received upon issuance of the convertible notes,
which is allocated to equity. |
52
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(c) |
|
The Companys tax basis in the long-term debt and deferred
financing cost asset are $39.3 million and
$1.3 million higher than their book basis, resulting in a
$14.8 million net deferred tax liability. |
|
(d) |
|
The $23.2 million change in equity in the additional
paid-in capital account represent the following: |
|
|
|
|
|
|
|
(In millions)
|
|
Long-term debt reclassified to equity
|
|
$
|
39.3
|
|
Deferred financing costs reclassified to equity
|
|
|
(1.3
|
)
|
Deferred tax liability
|
|
|
(14.8
|
)
|
Total additional paid-in capital impact
|
|
|
23.2
|
|
The following tables represent the retrospective accounting
impact the adoption of ASC
470-20 had
on the Companys Consolidated Statement of Income and
Consolidated Balance Sheet for prior year periods presented in
this report:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Income
|
|
|
Fiscal 2008
|
|
Fiscal 2007
|
|
|
53 Weeks Ended
|
|
52 Weeks Ended
|
|
|
January 3,
|
|
December 29,
|
|
|
2009
|
|
2007
|
|
|
As
|
|
As
|
|
As
|
|
As
|
|
|
Adjusted
|
|
Reported
|
|
Adjusted
|
|
Reported
|
|
|
(In thousands, except EPS data)
|
|
Interest expense
|
|
$
|
26,466
|
|
|
|
21,523
|
|
|
$
|
28,088
|
|
|
|
23,581
|
|
Income tax expense
|
|
|
20,646
|
|
|
|
22,574
|
|
|
|
16,984
|
|
|
|
18,742
|
|
Net earnings
|
|
|
33,145
|
|
|
|
36,160
|
|
|
|
36,031
|
|
|
|
38,780
|
|
Basic EPS
|
|
|
2.57
|
|
|
|
2.81
|
|
|
|
2.67
|
|
|
|
2.88
|
|
Diluted EPS
|
|
|
2.52
|
|
|
|
2.75
|
|
|
|
2.64
|
|
|
|
2.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheet
|
|
|
Fiscal 2008
|
|
Fiscal 2007
|
|
|
January 3,
|
|
December 29,
|
|
|
2009
|
|
2007
|
|
|
As
|
|
As
|
|
As
|
|
As
|
|
|
Adjusted
|
|
Reported
|
|
Adjusted
|
|
Reported
|
|
|
(In thousands)
|
|
Other assets
|
|
$
|
11,591
|
|
|
|
13,997
|
|
|
$
|
7,856
|
|
|
|
9,971
|
|
Long-term debt
|
|
|
222,774
|
|
|
|
246,441
|
|
|
|
250,125
|
|
|
|
278,443
|
|
Deferred tax liability, net
|
|
|
22,233
|
|
|
|
13,940
|
|
|
|
17,446
|
|
|
|
7,227
|
|
Additional paid-in capital
|
|
|
98,048
|
|
|
|
74,836
|
|
|
|
84,657
|
|
|
|
61,446
|
|
Retained earnings
|
|
|
268,562
|
|
|
|
278,804
|
|
|
|
244,915
|
|
|
|
252,142
|
|
Total stockholders equity
|
|
|
349,020
|
|
|
|
336,050
|
|
|
|
331,600
|
|
|
|
315,616
|
|
|
|
(4)
|
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. These allowances 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
53
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
are either reflected directly on the vendors 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, 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 to be spent with us. 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. These
communications include discussions with respect to 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.
2004
Special Charge
In fiscal 2004, we recorded a charge of $34.9 million
related to the closure of 18 retail stores and our intent to
seek purchasers for our Denver area AVANZA retail stores.
The charge was reflected in the special charges line
within the consolidated statements of income.
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.
54
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In fiscal 2007, we reversed $1.6 million of previously
established lease reserves after subleasing a property earlier
than anticipated. This reversal was partially offset by a charge
of $0.3 million due to revised lease commitment estimates.
During fiscal 2009 and 2008, no special charges or reversal of
previous charges were recognized.
Following is a summary of the activity in the 2004 reserve
established for store dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Write-Down
|
|
|
Write-Down
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
of Tangible
|
|
|
of 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 at 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 at 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 at December 30, 2006
|
|
|
|
|
|
|
|
|
|
|
6,333
|
|
|
|
|
|
|
|
96
|
|
|
|
6,429
|
|
Change in estimates
|
|
|
|
|
|
|
|
|
|
|
(1,282
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,282
|
)
|
Used in 2007
|
|
|
|
|
|
|
|
|
|
|
(947
|
)
|
|
|
|
|
|
|
(1
|
)
|
|
|
(948
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 29, 2007
|
|
|
|
|
|
|
|
|
|
|
4,104
|
|
|
|
|
|
|
|
95
|
|
|
|
4,199
|
|
Change in estimates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Used in 2008
|
|
|
|
|
|
|
|
|
|
|
(855
|
)
|
|
|
|
|
|
|
|
|
|
|
(855
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 3, 2009
|
|
|
|
|
|
|
|
|
|
|
3,249
|
|
|
|
|
|
|
|
95
|
|
|
|
3,344
|
|
Change in estimates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Used in 2009
|
|
|
|
|
|
|
|
|
|
|
(923
|
)
|
|
|
|
|
|
|
(2
|
)
|
|
|
(925
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 3, 2009
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,326
|
|
|
$
|
|
|
|
$
|
93
|
|
|
$
|
2,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
Special Charge
In fiscal 2009, we recorded a special charge of
$6.0 million due to an asset impairment in our food
distribution segment. The charge was comprised of the
write-downs of $5.5 million of leasehold improvements and
$0.5 million of fixtures and equipment.
|
|
(6)
|
Long-Lived
Asset Impairment Charges
|
Impairment charges of $8.5 million, $2.6 million and
$1.9 million were recorded for long-lived asset impairments
in fiscal 2009, 2008 and 2007, respectively. The impairment
charges primarily related to six retail stores and one food
distribution center in 2009, eight retail stores in 2008 and
seven retail stores in fiscal 2007 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 ASC
360-10-35.
55
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(7)
|
Accounts
and Notes Receivable
|
Accounts and notes receivable at the end of fiscal 2009 and 2008
are comprised of the following components:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Customer notes receivable, current
|
|
$
|
7,227
|
|
|
$
|
8,434
|
|
Customer accounts receivable
|
|
|
229,884
|
|
|
|
160,202
|
|
Other receivables
|
|
|
18,769
|
|
|
|
22,101
|
|
Allowance for doubtful accounts
|
|
|
(5,113
|
)
|
|
|
(4,794
|
)
|
Net current accounts and notes receivable
|
|
$
|
250,767
|
|
|
$
|
185,943
|
|
|
|
|
|
|
|
|
|
|
Long-term customer notes receivable
|
|
$
|
23,917
|
|
|
$
|
29,090
|
|
Allowance for doubtful accounts
|
|
|
(574
|
)
|
|
|
(737
|
)
|
|
|
|
|
|
|
|
|
|
Net long-term notes receivable
|
|
$
|
23,343
|
|
|
$
|
28,353
|
|
|
|
|
|
|
|
|
|
|
Operating results include bad debt expense of $1.4 million
in fiscal 2009, the reversal of bad debt expense of
$1.3 million during fiscal 2008 and bad debt expense of
$1.2 million during fiscal 2007.
|
|
(8)
|
Long-term
Debt and Bank Credit Facilities
|
Long-term debt at the end of the fiscal 2009 and 2008 is
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Asset-backed credit agreement:
|
|
|
|
|
|
|
|
|
Revolving credit
|
|
$
|
124,100
|
|
|
|
93,600
|
|
Senior subordinated convertible debt, 3.50% due in 2035
|
|
|
131,364
|
|
|
|
126,420
|
|
Industrial development bonds, 5.60% to 5.75% due in various
installments through 2014
|
|
|
2,365
|
|
|
|
2,875
|
|
Notes payable and mortgage notes, 7.95% due in various
installments through 2013
|
|
|
388
|
|
|
|
474
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
258,217
|
|
|
|
223,369
|
|
Less current maturities
|
|
|
(627
|
)
|
|
|
(595
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
257,590
|
|
|
|
222,774
|
|
|
|
|
|
|
|
|
|
|
Asset-backed
Credit Agreement
On April 11, 2008, we entered into our credit agreement
which is an asset-backed loan consisting of a
$340.0 million revolving credit facility, which includes a
$50.0 million letter of credit
sub-facility
(the Revolving Credit Facility). Provided no default
is then existing or would arise, the Company may from
time-to-time,
request that the Revolving Credit Facility be increased by an
aggregate amount (for all such requests) not to exceed
$110.0 million. The Revolving Credit Facility has a
5-year term
and will be due and payable in full on April 11, 2013. The
Company can elect, at the time of borrowing, for loans to bear
interest at a rate equal to the base rate or LIBOR plus a
margin. The LIBOR interest rate margin currently is 2.00% and
can vary quarterly in 0.25% increments between three pricing
levels ranging from 1.75% to 2.25% based on the excess
availability, which is defined in the credit agreement as
(a) the lesser of (i) the borrowing base; or
(ii) the aggregate commitments; minus (b) the
aggregate of the outstanding credit extensions. At
January 2,
56
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
2010, $203.3 million was available under the Revolving
Credit Facility after giving effect to outstanding borrowings
and to $12.6 million of outstanding letters of credit
primarily supporting workers compensation obligations.
The credit agreement contains no financial covenants unless and
until (i) the continuance of an event of default under the
credit agreement, or (ii) the failure of the Company to
maintain excess availability (A) greater than 10% of the
borrowing base for more than two (2) consecutive business
days or (B) greater than 7.5% of the borrowing base at any
time, in which event, the Company must comply with a trailing
12-month
basis consolidated fixed charge covenant ratio of 1.0:1.0, which
ratio shall continue to be tested each month thereafter until
excess availability exceeds 10% of the borrowing base for ninety
(90) consecutive days.
The credit agreement contains standard covenants requiring the
Company and its subsidiaries, among other things, to maintain
collateral, comply with applicable laws, keep proper books and
records, preserve the corporate existence, maintain insurance,
and pay taxes in a timely manner. Events of default under the
credit agreement are usual and customary for transactions of
this type including, among other things: (a) any failure to
pay principal there under when due or to pay interest or fees on
the due date; (b) material misrepresentations;
(c) default under other agreements governing material
indebtedness of the Company; (d) default in the performance
or observation of any covenants; (e) any event of
insolvency or bankruptcy; (f) any final judgments or orders
to pay more than $15.0 million that remain unsecured or
unpaid; (g) change of control, as defined in the credit
agreement; and (h) any failure of a collateral document,
after delivery thereof, to create a valid mortgage or
first-priority lien.
We are currently in compliance with all covenants contained
within the credit agreement.
Senior
Subordinated Convertible Debt
To finance a portion of the acquisition from Roundys,
which consisted primarily of our Lima and Westville distribution
centers, we sold $150.1 million in aggregate issue price
(or $322.0 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 $63.35) 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,
57
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(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 9.5652 shares (initially
9.3120 shares) of our common stock per $1,000 Note (equal
to an adjusted conversion price of approximately $48.73 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. Our contractual obligation, however, to
maintain the effectiveness of the shelf registration statement
has expired. As a result, we removed from registration, by means
of a post-effective amendment filed on July 24, 2007, all
notes and common stock that remained unsold at such time.
Industrial
Development Bonds and Mortgages
At January 2, 2010, land in the amount of $1.4 million
and buildings and other assets with a depreciated cost of
approximately $3.2 million are pledged to secure
obligations under issues of industrial development bonds and
mortgages.
Maturities
of Long-term Debt
Aggregate annual maturities of long-term debt for the five
fiscal years after January 2, 2010, are as follows (in
thousands):
|
|
|
|
|
2010
|
|
$
|
627
|
|
2011
|
|
|
670
|
|
2012
|
|
|
704
|
|
2013
|
|
|
124,812
|
|
2014
|
|
|
40
|
|
Thereafter
|
|
|
131,364
|
|
|
|
|
|
|
Total
|
|
$
|
258,217
|
|
|
|
|
|
|
Interest paid was $17.8 million, $18.7 million and
$22.0 million in fiscal 2009, 2008 and 2007, respectively.
58
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(9)
|
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 exposure to changes in interest
rates and commodity prices is to reduce fluctuations in earnings
and cash flows. To achieve these objectives, from
time-to-time
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 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. Deferred gains and losses are
amortized as an adjustment to expense over 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 effective in accordance with ASC 815 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.
As of January 2, 2010, we had two outstanding interest rate
swap agreements with notional amounts totaling
$35.0 million. The notional amounts of the two outstanding
swaps are reduced as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
Effective Date
|
|
Termination Date
|
|
Fixed Rate
|
|
20,000
|
|
|
10/15/2009
|
|
|
|
10/15/2010
|
|
|
|
3.49
|
%
|
10,000
|
|
|
10/15/2010
|
|
|
|
10/15/2011
|
|
|
|
3.49
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
Effective Date
|
|
Termination Date
|
|
Fixed Rate
|
|
15,000
|
|
|
10/15/2009
|
|
|
|
10/15/2010
|
|
|
|
3.38
|
%
|
7,500
|
|
|
10/15/2010
|
|
|
|
10/15/2011
|
|
|
|
3.38
|
%
|
Interest rate swap agreements outstanding at January 2,
2010 and January 3, 2009 and their fair values are
summarized as follows:
|
|
|
|
|
|
|
January 2,
|
(In thousands, except
percentages)
|
|
2010
|
|
Notional amount (pay fixed/receive variable)
|
|
$
|
35,000
|
|
Fair value liability
|
|
|
(1,132
|
)
|
Average receive rate for effective swaps
|
|
|
2.6
|
%
|
Average pay rate for effective swaps
|
|
|
3.4
|
%
|
|
|
|
|
|
|
|
January 3,
|
(In thousands, except
percentages)
|
|
2009
|
|
Notional amount (pay fixed/receive variable)
|
|
$
|
52,500
|
|
Fair value liability
|
|
|
(1,911
|
)
|
Average receive rate for effective swaps
|
|
|
2.6
|
%
|
Average pay rate for effective swaps
|
|
|
3.4
|
%
|
From
time-to-time
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
59
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
commodity amount upon which the payments are made. Resulting
gains and losses on the fair market value of the commodity swap
agreement are immediately recognized as income or expense.
As of January 2, 2010, there were no commodity swap
agreements in existence. Our only commodity swap agreement in
place during fiscal 2008 expired during the first quarter and
was settled for fair market value. Pre-tax gains of
$0.4 million were recorded as a reduction to cost of sales
during fiscal 2007.
In addition to the previously discussed interest rate and
commodity swap agreements, from
time-to-time
we enter into a fixed price fuel supply agreements to support
our food distribution segment. On January 1, 2009, we
entered into an agreement which required us to purchase a total
of 252,000 gallons of diesel fuel per month at prices ranging
from $1.90 to $1.98 per gallon. The term of the agreement was
for one year and expired on December 31, 2009. During
fiscal 2007 and 2008 we had a fixed price fuel supply agreement
which required us to purchase a total of 168,000 gallons of
diesel fuel per month at prices ranging from $2.28 to $2.49 per
gallon. The term of the agreement began on February 1,
2007, and expired on December 31, 2007. These fixed price
fuel agreements qualified and were designated under the
normal purchase exception under ASC 815, therefore
the fuel purchases under these contracts are expensed as
incurred as an increase to cost of sales.
Total income tax expense is allocated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
(In thousands)
|
|
Income tax expense from continuing operations
|
|
$
|
20,972
|
|
|
$
|
20,646
|
|
|
$
|
16,984
|
|
Income tax expense from continuing operations is made up of the
following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
27,382
|
|
|
$
|
12,414
|
|
|
$
|
(493
|
)
|
State
|
|
|
3,231
|
|
|
|
1,656
|
|
|
|
337
|
|
Tax credits
|
|
|
(268
|
)
|
|
|
(130
|
)
|
|
|
(97
|
)
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(8,271
|
)
|
|
|
6,284
|
|
|
|
15,865
|
|
State
|
|
|
(1,102
|
)
|
|
|
422
|
|
|
|
1,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
20,972
|
|
|
$
|
20,646
|
|
|
$
|
16,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Federal statutory tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State taxes, net of federal income tax benefit
|
|
|
4.7
|
%
|
|
|
4.0
|
%
|
|
|
3.9
|
%
|
Non-deductible goodwill
|
|
|
73.6
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Change in tax contingencies
|
|
|
4.4
|
%
|
|
|
1.1
|
%
|
|
|
(5.1
|
)%
|
Gain on litigation settlement
|
|
|
(12.7
|
)%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Gain on acquisition of a business
|
|
|
(11.2
|
)%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Federal refund claim
|
|
|
(6.8
|
)%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Other net
|
|
|
1.3
|
%
|
|
|
(1.7
|
)%
|
|
|
(1.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
88.3
|
%
|
|
|
38.4
|
%
|
|
|
32.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
January 2,
|
|
|
January 3,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Compensation related accruals
|
|
$
|
16,812
|
|
|
$
|
12,528
|
|
Reserve for bad debts
|
|
|
2,264
|
|
|
|
2,200
|
|
Reserve for store shutdown and special charges
|
|
|
1,438
|
|
|
|
1,671
|
|
Workers compensation accruals
|
|
|
3,243
|
|
|
|
3,243
|
|
Pension accruals
|
|
|
6,540
|
|
|
|
6,347
|
|
Reserve for future rents
|
|
|
3,608
|
|
|
|
3,123
|
|
Other
|
|
|
3,216
|
|
|
|
3,928
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
37,121
|
|
|
|
33,040
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
5,120
|
|
|
|
5,431
|
|
Intangible assets
|
|
|
17,337
|
|
|
|
16,727
|
|
Inventories
|
|
|
8,263
|
|
|
|
11,571
|
|
Convertible debt interest
|
|
|
21,296
|
|
|
|
19,678
|
|
Other
|
|
|
2,060
|
|
|
|
1,448
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
54,075
|
|
|
|
54,855
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset (liability)
|
|
$
|
(16,954
|
)
|
|
$
|
(21,815
|
)
|
|
|
|
|
|
|
|
|
|
Our income tax expense from continuing operations was
$21.0 million, $20.6 million and $17.0 million
for fiscal years 2009, 2008 and 2007, respectively. The income
tax rate from continuing operations for fiscal 2009 was 88.3%
compared to 38.4% for fiscal 2008 and 32.0% for fiscal 2007. The
effective income tax rate for fiscal 2009, 2008 and 2007
represented income tax expense incurred on pre-tax income from
continuing operations. The effective tax rate for fiscal 2009
was impacted by the reversal of previously unrecognized tax
benefits of $0.2 million, the filing of reports with
various taxing authorities which resulted in the settlement of
uncertain tax positions, a refund on a claim made with the
Internal Revenue Service of $1.7 million, the
61
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
litigation settlement related to Roundys of
$3.0 million, the gain on the acquisition of the GSC assets
of $2.7 million, non deductible goodwill charges of
$17.2 million and an increase in reserves of
$2.7 million.
Net income taxes paid were $22.4 million,
$0.8 million, and $12.1 million during fiscal 2009,
2008 and 2007, respectively. Income tax benefits recognized
through stockholders equity were $0.0 million,
$0.6 million, and $0.9 million during fiscal years
2009, 2008 and 2007, respectively, as compensation expense for
tax purposes were in excess of amounts recognized for financial
reporting purposes.
At January 2, 2010, the total amount of unrecognized tax
benefits was $11.9 million compared to $9.4 million at
January 3, 2009. The net increase in unrecognized tax
benefits of $2.5 million since January 3, 2009 was
comprised of the following: $0.2 million due to a decrease
in the unrecognized tax benefits relating the expiration of the
applicable statutes of limitation and $2.7 million due to
the increase in unrecognized tax benefits as a result of tax
positions taken in the current period. The net reduction in
unrecognized tax benefits of $0.2 million during the year
ended January 3, 2009, was comprised of the following:
$2.6 million due to the reduction of unrecognized tax
benefits relating to prior period tax positions and
$2.8 million due to the increase in unrecognized tax
benefits as a result of tax positions taken in the current
period.
The following table summarizes the activity related to our
unrecognized tax benefits:
|
|
|
|
|
|
|
($ in thousands)
|
|
|
Unrecognized tax benefits opening balance at 1/04/09
|
|
$
|
9,438
|
|
Increases related to current year tax period
|
|
|
2,706
|
|
Lapse of statute of limitations
|
|
|
(239
|
)
|
|
|
|
|
|
Unrecognized tax benefits ending balance 1/02/10
|
|
$
|
11,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
|
Unrecognized tax benefits opening balance at 12/30/07
|
|
$
|
9,281
|
|
Increases related to current year tax period
|
|
|
2,740
|
|
Decreases related to prior year tax periods
|
|
|
(2,583
|
)
|
|
|
|
|
|
Unrecognized tax benefits ending balance 1/03/09
|
|
$
|
9,438
|
|
|
|
|
|
|
The total amount of tax benefits that if recognized would impact
the effective tax rate was $4.1 million at January 2,
2010 and $3.3 million at January 3, 2009. The accrual
for potential penalties and interest related to unrecognized tax
benefits increased by $0.2 million in 2009, and in total,
as of January 2, 2010, is $2.2 million. The accrual
for potential penalties and interest related to unrecognized tax
benefits did not materially change in fiscal 2008.
We do not expect our unrecognized tax benefits to change
significantly over the next 12 months.
The Company or one of its subsidiaries files income tax returns
in the U.S. federal jurisdiction and various state and
local jurisdictions. With few exceptions, we are no longer
subject to U.S. federal, state or local examinations by tax
authorities for years 2004 and prior.
|
|
(11)
|
Share-based
Compensation Plans
|
We account for share-based compensation awards in accordance
with the provisions of ASC Topic 718 (ASC 718,
originally issued as SFAS No. 123(R),
Share-Based Payment Revised)
which 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
years ended January 2, 2010, January 3, 2009 and
December 29, 2007, included
62
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 was based on the grant date fair value
estimated in accordance with the provisions of ASC 718.
Share-based compensation expense recognized in the consolidated
statements of income for years ended January 2, 2010,
January 3, 2009 and December 29, 2007, was based on
awards ultimately expected to vest, and therefore has been
reduced for estimated forfeitures.
Share-based compensation recognized under ASC 718 for the year
ended January 2, 2010, was $9.1 million. Share-based
compensation was $8.8 million during 2008 and
$7.8 million in fiscal 2007. Share-based compensation
amounts are included in selling, general &
administrative expense lines of our consolidated statements of
income.
We have four equity compensation plans under which incentive
performance units, stock appreciation rights and other forms of
share-based compensation have been, or may be, granted primarily
to key employees and non-employee members of the Board of
Directors. These plans include the 2009 Incentive Award Plan
(2009 Plan), the 2000 Stock Incentive Plan
(2000 Plan), the Director Deferred Compensation
Plan, and the 1997 Non-Employee Director Stock Compensation
Plan. The 1995 Director Stock Option Plan was terminated as
of December 27, 2004, and participation in the 1997
Non-Employee Director Stock Compensation Plan was frozen as of
December 31, 2004. No additional awards can be granted
under the 2000 stock incentive program effective May 20,
2009, the date our Shareholders approved the 2009 plan.
The Board adopted the Director Deferred Compensation Plan for
amounts deferred on or after January 1, 2005. The plan
permits non-employee directors to annually defer all or a
portion of his or her cash compensation for service as a
director, and have the amount deferred into either a cash
account or a share unit account. Each share unit is payable in
one share of Nash Finch common stock following termination of
the participants service as a director.
Under the 2000 Plan, employees, non-employee directors,
consultants and independent contractors were awarded incentive
or non-qualified stock options, shares of restricted stock,
stock appreciation rights or performance units.
Awards to non-employee directors under the 2000 Plan began in
2004 and ended in May 2008 and have taken the form of restricted
stock units (RSUs) 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 2008 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.
The 2009 Plan permits the grant of stock options, restricted
stock, restricted stock units, deferred stock, stock payments,
stock appreciation rights, performance awards and other stock or
cash awards to employees
and/or other
individuals who perform services for the Company and its
Subsidiaries.
Prior to 2005, the Company granted stock options to employees
and non-employee directors. The fair value of each option grant
was estimated as of the date of grant using the Black-Scholes
single option pricing model. Expected volatilities were based
upon historical volatility of our common stock which was
believed to be representative of future stock volatility. We
used 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 was based upon historical employee behavior and the
vesting period of the option grant. The risk-free interest rates
were 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.
63
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 January 2,
2010, January 3, 2009 or December 29, 2007 and no
options were outstanding as of January 2, 2010.
Since 2005, awards have taken the form of performance units
(including share units pursuant to our Long-Term Incentive Plan
(LTIP)), RSUs and Stock Appreciation Rights (SARS).
Performance units pursuant to our LTIP were granted during each
of fiscal years 2005 through 2009 under the 2000 Plan. These
units vest at the end of a three-year performance period. The
2005 plan provided for payout in shares of our common stock or
cash, or a combination of both, at the election of the
participant, and therefore was accounted for as a liability
award in accordance with SFAS 123(R). All units under the
2005 plan were settled in shares of our common stock during the
second quarter 2008. The payout for units granted in 2005 was
determined by comparing our growth in Consolidated
EBITDA (defined as net income, adjusted by (i) adding
thereto interest expense, provision for income taxes,
depreciation and amortization expense, and other non-cash
charges that were deducted in computing net income for the
period; (ii) excluding the amount of any extraordinary
gains or losses and gains or losses from sales of assets other
than inventory in the ordinary course of business; and
(iii) subtracting cash payments made during the period with
respect to non-cash charges incurred in a previous period) and
return on net assets (RONA) (defined as net income
divided by the sum of 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
us.
In February 2008, the Compensation and Management Development
Committee (the Committee) of the Board of Directors
amended the 2006 and 2007 LTIP plans to take into account the
Companys decision in the fall of 2007 to invest strategic
capital in support of its strategic plan. To ensure the
interests of management and shareholders remained aligned after
the decision to invest strategic capital, the Committee decided
in February 2008 to revise the 2006 and 2007 LTIP plans by,
among other things, adding a definition for Strategic Project
and amending the definitions of Net Assets, RONA and Free Cash
Flow. The 2006 and 2007 LTIP Plans were amended as follows:
|
|
|
|
|
2006 LTIP Plan: The Committee amended the definition of RONA in
the 2006 LTIP as follows: RONA means the weighted
average of the return on Net Assets for the fiscal years during
a Measurement Period. This is the quotient of (i) the sum
of net income for each fiscal year (or portion thereof) during
the Measurement Period divided by (ii) the sum of Average
Net Assets for each fiscal year (or portion thereof) during the
measurement period. Each of the measures in (i) and
(ii) shall be as reported by the entity for the applicable
fiscal periods in periodic reports filed with the Securities and
Exchange Commission (SEC) under the Exchange Act.
Net Income will be adjusted by (x) subtracting projected
Strategic Project Consolidated EBITDA, offset by the associated
interest, depreciation and income taxes. If a Strategic Project
generates positive Consolidated EBITDA through July 1 of the
year placed in service, the adjustment for (x) above will
only be made through July 1 of that year. If a Strategic Project
first generates positive Consolidated EBITDA after July 1 of the
year placed in service, then the adjustment for (x) above
will be made through the first anniversary date of the Strategic
Project being placed in service. Weighting of the return on Net
Assets for the fiscal years during the Measurement Period shall
be based upon the Average Net Assets for each fiscal year.
|
|
|
|
2007 LTIP Plan: The Committee amended the definition of
net assets consistent with the change to the 2006
LTIP Plan to allow for the impact on net assets resulting from
the Companys decision to expend strategic capital. Net
Assets is defined in the amended Plan as: Net Assets
means total assets minus current liabilities, excluding current
maturities of long-term debt and capitalized lease obligations
and further adjusted by (x) subtracting the additions of
Strategic Project PP&E and Strategic Project
|
64
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
Working Capital. Strategic Project means projects of
the following type that have been approved by the Committee:
(i) all Strategic Projects identified in the Companys
Five-Year Plan dated October 29, 2007; (ii) new retail
store additions; (iii) conversions of current retail stores
to a new format; (iv) conversion of current wholesale
distribution centers; (v) new wholesale distribution
centers or additions thereto; (vi) conversion of current
distribution network systems; (vii) conversion of current
wholesale or retail pricing and billing systems;
(viii) conversion of current wholesale or retail
merchandising systems; (ix) conversion of vendor income
management systems. If a Strategic Project generates positive
Consolidated EBITDA through July 1 of the year placed in
service, then the adjustment for (x) above will not be
made. If a Strategic Project first generates positive
Consolidated EBITDA after July 1 of the year placed in service,
then the adjustment for (x) above will be made during that
fiscal year only. Net Assets will be further adjusted upward by
the amount of any impairment of goodwill that the Company
records beginning with the affected year during the Measurement
Period. In addition, the Committee amended the definition of
Free Cash Flow to provide as follows: Free
Cash Flow means cash provided by operating activities
minus additions of property, plant and equipment
(PP&E); and (i) adding back the additions of
Strategic Project PP&E; (ii) adding back Strategic
Project Working Capital; and (iii) subtracting projected
Strategic Project Consolidated EBITDA, offset by the associated
cash interest and income taxes. If a Strategic Project generates
positive Consolidated EBITDA through July 1 of the year placed
in service, the adjustment for (iii) above will only be
made through July 1 of that year. If a Strategic Project first
generates positive Consolidated EBITDA after July 1 of the year
placed in service, then the adjustment for (iii) above will
be made through the first anniversary date of the Strategic
Project being placed in service.
|
The Committee made the following additional amendments to those
plans at its February 2008 meeting; (1) removing the plan
participants option to receive payout of the award in
cash; instead requiring that all awards be paid in stock; and
(2) automatically deferring settlement of stock payouts to
senior vice presidents, executive vice presidents and the CEO
until 30 days following termination of their employment or
until six months after termination of their employment if they
are determined to be specified employees under
409A(a)(2)(B)(i) of the Internal Revenue Code of 1986. The above
modifications resulted in replacement of the previously
outstanding liability awards with equity awards as defined by
ASC 718. Therefore, the total expense recognized over the
remaining service (vesting) period of the awards will equal the
grant date fair value times number of shares that ultimately
vest. The Company estimates expected forfeitures in determining
the compensation expense recorded each period. The Company
recorded nil and $0.1 million of incremental compensation
cost during fiscal 2009 and 2008, respectively, as a result of
modifying the 2006 and 2007 LTIP awards. The incremental
compensation cost is attributable to a small increase in the
number of units issued as replacement for the original
2006 units due to the effect of a lower market price per
share on the calculation of the targeted payout. The
modification of the 2006 awards had no impact on the
Companys ranking versus its peers on the applicable
performance metrics and resulting payout adjustment factor. As
of January 2, 2010 and January 3, 2009 the
modification of the performance metrics had no impact on the
expected payout under the 2007 plan.
During 2008, 119,821 units were granted pursuant to our
2008 LTIP. Depending on our ranking on compound annual growth
rate for Consolidated EBITDA among the companies in the peer
group and our free cash flow return on net assets performance
against targets established by the Committee for the 2008
awards, a participant could receive a number of shares ranging
from zero to 200% of the number of performance units granted.
Because these units can only be settled in stock, compensation
expense equal to the grant date fair value (for shares expected
to vest) is recorded over the three-year vesting period.
During 2009, 108,696 units were granted pursuant to our
2009 LTIP. Depending on a comparison of the Companys
cumulative three-year actual EBITDA results to the cumulative
three-year strategic plan EBITDA targets and the Companys
ranking on absolute return on net assets and compound annual
growth rate for
65
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
return on net assets among the companies in the peer group, a
participant could receive a number of shares ranging from zero
to 200% of the number of performance units granted. Because
these units can only be settled in stock, compensation expense
(for shares expected to vest) is recorded over the three-year
period for the grant date fair value.
All units under the 2006 LTIP plan were settled during the
second quarter 2009 for approximately 90,000 shares of our
common stock of which approximately 15,000 shares, net of
tax withholding of approximately 8,000 shares, were paid
out of treasury stock during the second quarter 2009 and the
remaining 67,000 shares deferred to future periods at the
election of the recipients.
102,133 units outstanding under the 2007 LTIP vested on
January 2, 2010 and are expected to be settled in the
second quarter 2010 upon final comparison of the Companys
results to those reported by its peers. The Company currently
estimates that it will settle the 2007 units for
approximately 182,000 shares of common stock, of which
approximately 138,000 shares will be deferred by the
recipients as provided in the plan.
We also maintained the 1999 Employee Stock Purchase Plan under
which our employees could 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 18,456 in fiscal 2007 under this plan.
Compensation expense related to this plan of $0.2 million
was recognized in 2007. This plan was terminated effective
January 1, 2008.
During fiscal years 2006 through 2009, RSUs were awarded to
certain executives of the Company. Awards vest in increments
over the term of the grant or cliff vest on the fifth
anniversary of the grant date, as designated in the award
documents. Compensation cost, net of projected forfeitures, is
recognized on a straight-line basis over the period between the
grant and vesting dates, with compensation cost for grants with
a graded vesting schedule recognized on a straight-line basis
over the requisite service period for each separately vesting
portion of the award as if the award was, in substance, multiple
awards. In addition to the time vesting criteria, awards granted
in 2008 and 2009 to two of the Companys executives include
performance vesting conditions. The Company records expense for
such awards over the service vesting period if the Company
anticipates the performance vesting conditions will be satisfied.
On February 27, 2007, Mr. Covington was granted a
total of 152,500 RSUs under the Companys 2000 Stock
Incentive Plan. The new RSU grant replaced a previous grant of
100,000 performance units awarded to Mr. Covington when he
joined the Company in 2006. The previous 100,000 unit grant
has been cancelled. The new grant delivers additional equity in
lieu of the cash tax gross up payment included in
the previous award; therefore no cash outlay will be required by
the Company. Vesting of the new RSU grant to Mr. Covington
will occur over a four year period, assuming
Mr. Covingtons continued employment with Nash Finch.
However, Mr. Covington will not receive the stock until six
months after the termination of his employment, whenever that
may occur. At the date of the modification, the Company deemed
it improbable that the performance vesting conditions of the
original awards would be achieved and therefore was not accruing
compensation expense related to the original grant. Accordingly,
the replacement of the previous grant had no immediate financial
impact but resulted in incremental compensation cost in periods
subsequent the modification due to the expectation that the
replacement awards will vest. As of January 2, 2010, the
Company has recognized cumulative compensation expense related
to the modified awards of $3.5 million versus
$1.8 million that would have been recorded for the original
awards based on actual and forecast performance relative to the
performance vesting conditions. The Company expects to record
total compensation $4.7 million for the replacement awards
over the
4-year
vesting period compared with $2.1 million for the original
awards.
On December 17, 2008, in connection with the Companys
announcement of its planned acquisition of certain military
distribution assets of GSC Enterprises, Inc. (GSC) as discussed
in Note 2 Acquisition , eight executives of the
Company were granted a total of 267,345 stock appreciation
rights (SARs) with a per share price of $38.44. The SARs are
eligible to become vested during the 36 month period
commencing on
66
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
closing of the acquisition of the GSC assets which was
January 31, 2009. The SARs will vest on the first business
day during the vesting period that follows the date on which the
closing prices on NASDAQ for a share of Nash Finch common stock
for the previous 90 market days is at least $55.00 or a change
in control occurs following the six month anniversary of the
grant date or termination of the executives employment due
to death or disability. Upon vesting and exercise, the Company
will award the executive a number of shares of restricted stock
equal to (a) the product of (i) the number of shares
with respect to which the SAR is exercised and (ii) the
excess, if any, of (x) the fair market value per share of
common stock on the date of exercise over (y) the base
price per share relating to such SAR, divided by (b) the
fair market value of a share of common stock on the date such
SAR is exercised. The restricted stock shall vest on the first
anniversary of the date of exercise so long as the executive
remains continuously employed with the Company.
The fair value of Stock Appreciation Rights (SARs) is estimated
on the date of grant using a modified binomial lattice model
which factors in the market and service vesting conditions. The
modified binomial lattice model used by the Company incorporates
a risk-free interest rate based on the
5-year
treasury rate on the date of the grant. The model uses an
expected volatility calculated as the daily price variance over
60, 200 and 400 days prior to grant date using the Fair
Market Value (average of daily high and low market price of Nash
Finch common stock) on each day. Dividend yield utilized in the
model is calculated by the Company as the average of the daily
yield (as a percent of the Fair Market Value) over 60, 200 and
400 days prior to the grant date. The modified binomial
lattice model calculated a fair value of $8.44 per SAR which
will be recorded over a derived service period of
3.55 years.
The following assumptions were used to determine the fair value
of SARs during fiscal 2008:
|
|
|
|
|
Assumptions SARs
Valuation
|
|
2008
|
|
Weighted-average risk-free interest rate
|
|
|
1.37
|
%
|
Expected dividend yield
|
|
|
1.86
|
%
|
Expected volatility
|
|
|
35
|
%
|
Exercise price
|
|
$
|
38.44
|
|
Market vesting price (90 consecutive market days at or above
this price)
|
|
$
|
55.00
|
|
Contractual term
|
|
|
5.1 years
|
|
The following tables summarize activity in our share-based
compensation plans during the fiscal year ended January 2,
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
|
Stock Option
|
|
|
Option Price per
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Share
|
|
|
Value
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Outstanding at January 3, 2009
|
|
|
18.0
|
|
|
$
|
30.56
|
|
|
|
|
|
Granted
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised/restrictions lapsed
|
|
|
(8.0
|
)
|
|
|
|
|
|
|
|
|
Forfeited/cancelled
|
|
|
(10.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 2, 2010
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares expected to vest
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable/unrestricted at January 3, 2009
|
|
|
18.0
|
|
|
$
|
30.56
|
|
|
$
|
276.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable/unrestricted at January 2, 2010
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
Service
|
|
Average
|
|
Performance
|
|
Average
|
|
|
Based
|
|
Remaining
|
|
Based Grants
|
|
Remaining
|
|
|
Grants
|
|
Restriction/
|
|
(LTIP &
|
|
Restriction/
|
|
|
(Board Units
|
|
Vesting
|
|
Performance
|
|
Vesting
|
|
|
and RSUs)
|
|
Period
|
|
RSUs)
|
|
Period
|
|
|
(In thousands, except per share amounts)
|
|
Outstanding at January 3, 2009
|
|
|
580.6
|
|
|
|
1.4
|
|
|
|
348.4
|
|
|
|
1.2
|
|
Granted
|
|
|
28.0
|
|
|
|
|
|
|
|
127.0
|
|
|
|
|
|
Exercised/units settled*
|
|
|
(1.8
|
)
|
|
|
|
|
|
|
(109.2
|
)
|
|
|
|
|
Forfeited/cancelled
|
|
|
|
|
|
|
|
|
|
|
(26.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 2, 2010
|
|
|
606.8
|
|
|
|
1.0
|
|
|
|
339.6
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares expected to vest**
|
|
|
586.0
|
|
|
|
1.6
|
|
|
|
200.3
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable/unrestricted at January 3, 2009
|
|
|
191.3
|
|
|
|
|
|
|
|
109.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable/unrestricted at January 2, 2010
|
|
|
273.6
|
|
|
|
|
|
|
|
102.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The exercised/units settled amount above under
Performance Based Grants (LTIP & Performance RSUs)
represents 2006 LTIP units which vested on January 3, 2009
and were settled during the second quarter 2009 for
90,221 shares of Nash Finch stock, of which 67,343 were
deferred by executives as provided in the plan. The amount
excludes executive RSUs which vested during the year but are
deferred until termination of employment with the Company as
provided in the plan. Such units are included in the
vested/restrictions lapsed line in the table below. |
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Weighted Average
|
|
|
Appreciation
|
|
Base/Exercise
|
|
|
Rights
|
|
Price Per SAR
|
|
|
(In thousands, except per share amounts)
|
|
Outstanding at January 3, 2009
|
|
|
267.3
|
|
|
$
|
38.44
|
|
Granted
|
|
|
|
|
|
|
|
|
Exercised/restrictions lapsed
|
|
|
|
|
|
|
|
|
Forfeited/cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 2, 2010
|
|
|
267.3
|
|
|
|
38.44
|
|
|
|
|
|
|
|
|
|
|
Shares expected to vest**
|
|
|
240.6
|
|
|
|
38.44
|
|
|
|
|
|
|
|
|
|
|
Exercisable/unrestricted at January 3, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable/unrestricted at January 2, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
** |
|
The shares expected to vest in the above tables
represent the following: For all grants, gross units outstanding
less managements estimate of forfeitures due to
termination of employment prior to vesting. For RSUs under
Performance Based Grants that include a performance
vesting condition based on a Nash Finch specific internal
target, the number of shares expected to be paid based on
managements current expectation of achieving the target.
Note that the shares expected to vest for LTIP does not include
an estimate of the adjustment factor upon settlement which is
partially dependent on external factors (the |
68
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
Companys results on plan performance metrics versus its
peer group). Note that shares expected to vest for SARs does not
factor probability of achieving the market condition required
for vesting. |
The weighted-average grant-date fair value of equity based
restricted stock/performance units granted was $33.35, $37.35
and $32.86 during fiscal years 2009, 2008 and 2007,
respectively. The weighted-average grant-date fair value of
equity based SARs granted during 2008 was $8.44 per SAR.
The following tables present the non-vested equity awards,
including options, restricted stock/performance units including
LTIP and stock appreciation rights.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
Weighted
|
|
|
Service Based
|
|
Weighted
|
|
Based Grants
|
|
Average Fair
|
|
|
Grants (Board
|
|
Average Fair
|
|
(LTIP &
|
|
Value at
|
|
|
Units and
|
|
Value at Date
|
|
Performance
|
|
Date of
|
|
|
RSUs)
|
|
of Grant
|
|
RSUs)
|
|
Grant
|
|
|
(In thousands, except per share amounts)
|
|
Non-vested at January 3, 2009
|
|
|
389.2
|
|
|
$
|
29.19
|
|
|
|
239.2
|
|
|
$
|
37.25
|
|
Granted
|
|
|
28.0
|
|
|
|
|
|
|
|
127.0
|
|
|
|
|
|
Vested/restrictions lapsed
|
|
|
(84.0
|
)
|
|
|
|
|
|
|
(102.1
|
)
|
|
|
|
|
Forfeited/cancelled
|
|
|
|
|
|
|
|
|
|
|
(26.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at January 2, 2010
|
|
|
333.2
|
|
|
$
|
29.39
|
|
|
|
237.5
|
|
|
$
|
36.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Weighted Average
|
|
|
Appreciation
|
|
Fair Value at Date
|
|
|
Rights
|
|
of Grant
|
|
|
(In thousands, except per share amounts)
|
|
Non-vested at January 3, 2009
|
|
|
267.3
|
|
|
$
|
8.44
|
|
Granted
|
|
|
|
|
|
|
|
|
Vested/restrictions lapsed
|
|
|
|
|
|
|
|
|
Forfeited/cancelled
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested at January 2, 2010
|
|
|
267.3
|
|
|
$
|
8.44
|
|
|
|
|
|
|
|
|
|
|
The total grant date fair value of stock options that vested
during the year was nil for 2009 and $0.1 million for each
of fiscal 2008 and 2007. The aggregate intrinsic value of stock
options exercised was approximately $42,000, $0.3 million
and $1.1 million during fiscal 2009, 2008 and 2007,
respectively. The total grant date fair value for all other
share-based awards that vested during the year was
$6.2 million, $6.7 million and $1.7 million for
fiscal 2009, 2008 and 2007, respectively. The value of
share-based liability awards paid during 2008 was
$0.8 million related to settlement of units outstanding for
2005 LTIP grants. No liability awards were settled during fiscal
2009 or 2007. As of January 2, 2010, the total unrecognized
compensation costs related to non-vested share-based
compensation arrangements under our stock-based compensation
plans was nil for stock options, $4.2 million for service
based awards, $1.8 million for performance based awards and
$1.4 million for stock appreciation rights. The costs are
expected to be recognized over a weighted-average period of
1.6 years for the service based awards, 1.2 years for
the performance based awards and 2.5 years for stock
appreciation rights.
Cash received from employees resulting from our share-based
compensation plans was $0.2 million, $0.6 million and
$2.5 million for the fiscal 2009, 2008 and 2007,
respectively. The Company had a net tax deficiency of
$0.1 million during 2009 recognized as a reduction of
paid-in-capital.
The actual tax benefit
69
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
realized for the tax deductions from share-based compensation
plans was $0.7 million and $1.0 million for the fiscal
years 2008 and 2007, respectively.
The following table sets forth the computation of basic and
diluted earnings per share for continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
2,778
|
|
|
$
|
33,145
|
|
|
$
|
36,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share (weighted-average
shares)
|
|
|
13,007
|
|
|
|
12,886
|
|
|
|
13,479
|
|
Effect of dilutive options and awards
|
|
|
371
|
|
|
|
275
|
|
|
|
163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per share (adjusted
weighted-average shares)
|
|
|
13,378
|
|
|
|
13,161
|
|
|
|
13,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share from continuing operations
|
|
$
|
0.21
|
|
|
$
|
2.57
|
|
|
$
|
2.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share from continuing operations
|
|
$
|
0.21
|
|
|
$
|
2.52
|
|
|
$
|
2.64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average anti-dilutive options excluded from calculation
|
|
|
|
|
|
|
|
|
|
|
23
|
|
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
9.5652 shares (initially 9.3120) of our common stock per
$1,000 principal amount at maturity of the notes (equal to an
adjusted conversion price of approximately $48.73 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 under the 2000 Plan for
the LTIP were payable in shares of Nash Finch common stock or
cash, or a combination of both, at the election of the
participant. No recipients notified the Company by the required
notification date for the 2005 awards that they wished to be
paid in cash. Therefore, all units under the 2005 plan were
settled in shares of common stock during the second quarter
2008. During fiscal 2009, performance units granted under the
2006 LTIP Plan were settled in shares of common stock. Other
performance units and RSUs granted during 2007, 2008 and 2009
pursuant to the 2000 Plan will pay out in shares of Nash Finch
common stock. Unvested RSUs 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 granted for the LTIP are
only issuable if certain performance criteria are met, making
these shares contingently issuable under ASC Topic 260
(originally issued as SFAS No. 128, Earnings
per Share). Therefore, the performance units are
included in diluted earnings per share at the payout percentage
based on performance criteria results as of the end of the
respective reporting period and then accounted for using the
treasury stock method, if dilutive. Shares related
70
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
to the LTIP and shares related to RSUs that are included under
effect of dilutive options and awards in the
calculation of diluted EPS are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
(In thousands)
|
|
LTIP
|
|
|
211
|
|
|
|
121
|
|
|
|
28
|
|
RSUs
|
|
|
160
|
|
|
|
150
|
|
|
|
127
|
|
A substantial portion of our store and warehouse properties are
leased. The following table summarizes assets under capitalized
leases:
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Building and improvements
|
|
$
|
46,665
|
|
|
$
|
30,819
|
|
Less accumulated amortization
|
|
|
(26,015
|
)
|
|
|
(24,851
|
)
|
|
|
|
|
|
|
|
|
|
Net assets under capitalized leases
|
|
$
|
20,650
|
|
|
$
|
5,968
|
|
|
|
|
|
|
|
|
|
|
Total future minimum sublease rents receivable related to
operating and capital lease obligations as of January 2,
2010, are $26.4 million and $8.2 million,
respectively. Future minimum payments for operating and capital
leases have not been reduced by minimum sublease rentals
receivable under non-cancelable subleases. At January 2,
2010, our future minimum rental payments under non-cancelable
leases (including properties that have been subleased) are as
follows:
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
Capital
|
|
|
|
Leases
|
|
|
Leases
|
|
|
|
(In thousands)
|
|
|
2010
|
|
$
|
21,591
|
|
|
$
|
6,200
|
|
2011
|
|
|
18,149
|
|
|
|
4,873
|
|
2012
|
|
|
15,177
|
|
|
|
4,710
|
|
2013
|
|
|
10,466
|
|
|
|
4,097
|
|
2014
|
|
|
8,609
|
|
|
|
3,494
|
|
Thereafter
|
|
|
21,329
|
|
|
|
16,494
|
|
|
|
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
95,321
|
|
|
$
|
39,868
|
|
|
|
|
|
|
|
|
|
|
Less imputed interest (rates ranging from 8.3% to 24.6%)
|
|
|
|
|
|
|
14,616
|
|
|
|
|
|
|
|
|
|
|
Present value of net minimum lease payments
|
|
|
|
|
|
|
25,252
|
|
Less current maturities
|
|
|
|
|
|
|
(3,810
|
)
|
|
|
|
|
|
|
|
|
|
Capitalized lease obligations
|
|
|
|
|
|
$
|
21,442
|
|
|
|
|
|
|
|
|
|
|
71
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Total rental expense under operating leases for fiscal 2009,
2008 and 2007 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Total rentals
|
|
$
|
41,318
|
|
|
$
|
40,822
|
|
|
$
|
40,457
|
|
Less: real estate taxes, insurance and other occupancy costs
|
|
|
(2,881
|
)
|
|
|
(3,614
|
)
|
|
|
(3,206
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rentals
|
|
|
38,437
|
|
|
|
37,208
|
|
|
|
37,251
|
|
Contingent rentals
|
|
|
(34
|
)
|
|
|
(108
|
)
|
|
|
(19
|
)
|
Sublease rentals
|
|
|
(7,450
|
)
|
|
|
(8,611
|
)
|
|
|
(10,061
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
30,953
|
|
|
$
|
28,489
|
|
|
$
|
27,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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.
|
|
(14)
|
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. 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 January 2, 2010, we have guaranteed outstanding debt
and lease obligations of a number of retailers in the amount of
$13.5 million. In the normal course of business, we also
sublease and assign to third parties various leases. As of
January 2, 2010, we estimate that the present value of our
maximum potential obligation, net of reserves, with respect to
the subleases to be approximately $24.9 million and
assigned leases to be approximately $8.0 million.
During fiscal 2008 and 2007, we entered into loan and lease
guarantees on behalf of certain food distribution customers that
are accounted for under ASC Topic 460 (ASC 460,
originally issued as FASB Interpretation No. 45,
Guarantors Accounting and Disclosure
Requirements, Including Indirect Guarantees of Indebtedness of
Others). ASC 460 provides that at the time a company
issues a guarantee, the company must recognize an initial
liability for the fair value of the obligation it assumes under
that guarantee. The maximum undiscounted payments we would be
required to make in the event of default under the guarantees is
$10.3 million, which is included in the $13.5 million
total referenced above. These guarantees are secured by certain
business assets and personal guarantees of the respective
customers. We believe these customers will be able to perform
under the lease agreements and that no payments will be required
and no loss will be incurred under the guarantees. As required
by ASC 460, a liability representing the fair value of the
obligations assumed under the guarantees of $1.1 million is
included in the accompanying consolidated financial statements.
All of the other guarantees were issued prior to
December 31, 2002 and therefore not subject to the
recognition and measurement provisions of ASC 460.
72
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(15)
|
Fair
Value of Financial Instruments
|
In September 2006, the FASB issued ASC Topic 820 (ASC
820, originally issued as SFAS No. 157,
Fair Value Measurements). ASC 820 defines
fair value, establishes a framework for measuring fair value and
expands disclosures about instruments recorded at fair value. It
also applies under other accounting pronouncements that require
or permit fair value measurements. Effective January 1,
2008, we adopted the provisions of ASC 820 related to financial
assets and liabilities recognized or disclosed on a recurring
basis. Additionally, beginning in fiscal 2009, we now apply ASC
820 to financial and non-financial assets and liabilities.
The fair value hierarchy for disclosure of fair value
measurements under ASC 820 is as follows:
Level 1: Quoted prices (unadjusted) in active
markets for identical assets or liabilities.
Level 2: Quoted prices, other than quoted prices
included in Level 1, that are observable for the assets or
liabilities, either directly or indirectly.
Level 3: Inputs that are unobservable for the
assets or liabilities.
Our outstanding interest rate swap agreements are classified
within level 2 of the valuation hierarchy as readily
observable market parameters are available to use as the basis
of the fair value measurement. As of January 2, 2010, we
have recorded a fair value liability of $1.1 million in
relation to our outstanding interest rate swap agreements.
Other
Financial Assets and Liabilities
Financial assets with carrying values approximating fair value
include cash and cash equivalents and accounts receivable.
Financial liabilities with carrying values approximating fair
value include accounts payable and outstanding checks. The
carrying value of these financial assets and liabilities
approximates fair value due to their short maturities.
The fair value of notes receivable approximates the carrying
value at January 2, 2010 and January 3, 2009.
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 $255.0 million and
$222.6 million at January 2, 2010 and January 3,
2009, respectively, utilizing discounted cash flows. The fair
value is based on interest rates that are currently available to
us for issuance of debt with similar terms and remaining
maturities.
Non-Financial
Assets
We account for the impairment of goodwill and the impairment of
long-lived assets in accordance with ASC 350 and ASC
360-10-35,
respectively. During fiscal 2009 we recognized a goodwill
impairment of $50.9 million and during fiscal 2009, 2008
and 2007 we recognized asset impairments of $8.5 million,
$2.6 million and $1.9 million, respectively. We
utilize a discounted cash flow model and market approach that
incorporate unobservable level 3 inputs to test for
goodwill and long-lived asset impairments.
|
|
(16)
|
Commitments
and Contingencies
|
Roundys
Supermarkets, Inc. v. Nash Finch
On February 11, 2008, Roundys Supermarkets, Inc.
(Roundys) filed suit against us claiming we
breached the Asset Purchase Agreement (APA), entered
into in connection with our acquisition of certain distribution
centers and other assets from Roundys, by not paying
approximately $7.9 million that Roundys
73
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
claims is due under the APA as a purchase price adjustment. We
answered the complaint denying any payment was due to
Roundys and asserted counterclaims against Roundys
for, among other things, breach of contract, misrepresentation,
and breach of the duty of good faith and fair dealing. In our
counterclaim we demand damages from Roundys in excess of
$18.0 million.
On or about March 25, 2008, Roundys filed a motion
for judgment on the pleadings with respect to some, but not all,
of the claims, asserted in our counterclaim. On May 27,
2008, we filed an amended counterclaim which rendered
Roundys motion moot. The amended counterclaim asserts
claims against Roundys for, among other things, breach of
contract, fraud, and breach of the duty of good faith and fair
dealing. Our counterclaim demands damages from Roundys in
excess of $18.0 million. Roundys filed an answer to
the counterclaims denying liability, and subsequently moved to
dismiss our counterclaims. The Court denied the motion in part
and granted the motion in part.
On September 14, 2009, we entered into a settlement
agreement with Roundys that fully resolves all claims
brought in the lawsuit. Under the terms of the settlement
agreement, both parties agreed to dismiss their claims against
the other in exchange for a release of claims. Neither party was
required to pay any money to the other. Subsequently, we have
recorded a $7.6 million gain in fiscal 2009 which represent
the reversal of the liability we had recorded in conjunction
with the disputed APA purchase price adjustment.
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.
|
|
(17)
|
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, were 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, which was subsequently amended effective
January 1, 2008, whereby we will make an annual matching
contribution to each participants plan account. The fiscal
2009 annual matching contribution provides that we will match
100% of the participants contributions up to 3% of the
participants eligible compensation for the year. In the
event the participants contributions exceed 3% of their
eligible compensation for the year, we will match 50% of the
next 2% of the participants eligible compensation for the
year. The contribution expense for our matching contributions to
the 401(k) plan reduced dollar for dollar the profit sharing
contributions that would otherwise have been made to the profit
sharing plan. During fiscal 2009, the Company eliminated the
discretionary component of the profit sharing plan but
maintained the annual matching contribution. Total profit
sharing expense (including the matching contribution) was
$4.5 million, $7.9 million and $6.1 million for
fiscal 2009, 2008 and 2007, 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 typically 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.
In February 2007, our Board of Directors fully vested the SERP
account of Alec C. Covington, our President and Chief Executive
Officer. Compensation expense related to the plan was
$0.9 million in fiscal 2009, $0.8 million in fiscal
2008 and $0.7 million in fiscal 2007.
74
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 ASC
Subtopic
710-10-45
(originally issued as 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. The
rabbi trust now holds corporate-owned life insurance which is
intended to fund potential future obligations. Assets in the
trust remain subject to the claims of our general creditors, and
the investment in the rabbi trust is classified in other
assets on our consolidated balance sheets.
|
|
(18)
|
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.
On December 30, 2006, we adopted the recognition and
disclosure provisions of ASC
Subtopic 715-20-65
(ASC
715-20-65,
originally issued as SFAS No. 158,
Employers Accounting for Defined Benefit Pension
and Other Postretirement Plans an amendment of FASB
Statements No. 87, 88, 106, and 132(R)). ASC
715-20-65
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 ASC Topic 715 (ASC 715,
originally issued as SFAS No. 87,
Employers Accounting for Pensions), all
of which were previously netted against the plans funded
status in our statement of financial position pursuant to the
provisions of ASC 715. 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 ASC
715-20-65.
75
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Accumulated other comprehensive income at January 2, 2010,
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
|
|
$
|
|
|
|
$
|
(52
|
)
|
|
$
|
(52
|
)
|
Unrecognized actuarial losses (gains)
|
|
|
16,687
|
|
|
|
(134
|
)
|
|
|
16,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized net periodic benefit cost
|
|
|
16,687
|
|
|
|
(186
|
)
|
|
|
16,501
|
|
Less deferred taxes
|
|
|
(6,508
|
)
|
|
|
73
|
|
|
|
(6,435
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,179
|
|
|
$
|
(113
|
)
|
|
$
|
10,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income at January 3, 2009,
consisted of the following amounts that had not yet been
recognized in net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-
|
|
|
|
|
|
|
|
|
|
retirement
|
|
|
|
|
|
|
Pension
|
|
|
Benefits
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Unrecognized prior service credits
|
|
$
|
|
|
|
$
|
(133
|
)
|
|
$
|
(133
|
)
|
Unrecognized actuarial losses (gains)
|
|
|
16,190
|
|
|
|
(137
|
)
|
|
|
16,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized net periodic benefit cost
|
|
|
16,190
|
|
|
|
(270
|
)
|
|
|
15,920
|
|
Less deferred taxes
|
|
|
(6,314
|
)
|
|
|
105
|
|
|
|
(6,209
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized net periodic benefit cost
|
|
$
|
9,876
|
|
|
$
|
(165
|
)
|
|
$
|
9,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
January 1, 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Post-
|
|
|
|
|
|
|
retirement
|
|
|
|
Pension
|
|
|
Benefits
|
|
|
|
(In thousands)
|
|
|
Unrecognized prior service (credits)
|
|
$
|
|
|
|
$
|
(30
|
)
|
Unrecognized actuarial losses (gains)
|
|
|
1,401
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,401
|
|
|
$
|
(37
|
)
|
|
|
|
|
|
|
|
|
|
76
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Funded Status
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
(38,564
|
)
|
|
$
|
(39,037
|
)
|
|
$
|
(845
|
)
|
|
$
|
(894
|
)
|
Interest cost
|
|
|
(2,327
|
)
|
|
|
(2,252
|
)
|
|
|
(48
|
)
|
|
|
(46
|
)
|
Participant contributions
|
|
|
|
|
|
|
|
|
|
|
(54
|
)
|
|
|
(86
|
)
|
Actuarial gain
|
|
|
(3,362
|
)
|
|
|
(485
|
)
|
|
|
3
|
|
|
|
25
|
|
Benefits paid
|
|
|
3,204
|
|
|
|
3,210
|
|
|
|
183
|
|
|
|
156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
|
(41,049
|
)
|
|
|
(38,564
|
)
|
|
|
(761
|
)
|
|
|
(845
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
|
28,659
|
|
|
|
35,380
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets
|
|
|
3,284
|
|
|
|
(4,590
|
)
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
913
|
|
|
|
1,079
|
|
|
|
129
|
|
|
|
70
|
|
Participant contributions
|
|
|
|
|
|
|
|
|
|
|
54
|
|
|
|
86
|
|
Benefits paid
|
|
|
(3,204
|
)
|
|
|
(3,210
|
)
|
|
|
(183
|
)
|
|
|
(156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of year
|
|
|
29,652
|
|
|
|
28,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
|
(11,397
|
)
|
|
|
(9,905
|
)
|
|
|
(761
|
)
|
|
|
(845
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
(41,049
|
)
|
|
$
|
(38,564
|
)
|
|
$
|
(761
|
)
|
|
$
|
(845
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the consolidated balance sheets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Benefits
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
Current liabilities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(119
|
)
|
|
$
|
(160
|
)
|
Non-current liabilities
|
|
|
(11,397
|
)
|
|
|
(9,905
|
)
|
|
|
(642
|
)
|
|
|
(685
|
)
|
Deferred taxes
|
|
|
6,508
|
|
|
|
6,314
|
|
|
|
(73
|
)
|
|
|
(105
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
10,179
|
|
|
|
9,876
|
|
|
|
(113
|
)
|
|
|
(165
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
5,290
|
|
|
$
|
6,285
|
|
|
$
|
(947
|
)
|
|
$
|
(1,115
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Components
of net periodic benefit cost (income)
The aggregate costs for our retirement benefits included the
following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
Other Benefits
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Interest cost
|
|
$
|
2,327
|
|
|
$
|
2,252
|
|
|
$
|
2,340
|
|
|
$
|
48
|
|
|
$
|
47
|
|
|
$
|
56
|
|
Expected return on plan assets
|
|
|
(1,790
|
)
|
|
|
(2,410
|
)
|
|
|
(2,307
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service cost
|
|
|
|
|
|
|
(2
|
)
|
|
|
(15
|
)
|
|
|
(82
|
)
|
|
|
(645
|
)
|
|
|
(645
|
)
|
Recognized actuarial loss (gain)
|
|
|
1,370
|
|
|
|
539
|
|
|
|
237
|
|
|
|
(5
|
)
|
|
|
(2
|
)
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost (gain)
|
|
$
|
1,907
|
|
|
$
|
379
|
|
|
$
|
255
|
|
|
$
|
(39
|
)
|
|
$
|
(600
|
)
|
|
$
|
(596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions
Weighted-average assumptions used to determine benefit
obligations at January 2, 2010 and January 3, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Discount rate
|
|
|
5.60
|
%
|
|
|
6.30
|
%
|
|
|
5.60
|
%
|
|
|
6.30
|
%
|
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 January 2, 2010 and
January 3, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
Other Benefits
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Discount rate
|
|
|
6.3
|
%
|
|
|
6.0
|
%
|
|
|
6.3
|
%
|
|
|
6.0
|
%
|
Expected return on plan assets
|
|
|
6.5
|
%
|
|
|
7.0
|
%
|
|
|
N/A
|
|
|
|
N/A
|
|
Rate of compensation increase
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Assumed health care cost trend rates were as follows:
|
|
|
|
|
|
|
|
|
|
|
January 2,
|
|
January 3,
|
|
|
2010
|
|
2009
|
|
Current year trend rate
|
|
|
9.00
|
%
|
|
|
10.00
|
%
|
Ultimate year trend rate
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Year of ultimate trend rate
|
|
|
2014
|
|
|
|
2014
|
|
Assumed health care cost trend rates have an effect on the
fiscal 2009 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
|
|
$
|
|
|
|
$
|
|
|
Effect on post-retirement benefit obligation
|
|
|
6
|
|
|
|
(6
|
)
|
78
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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. 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:
|
|
|
|
|
|
|
|
|
|
|
January 2,
|
|
January 3,
|
|
|
2010
|
|
2009
|
|
Equity securities
|
|
|
32
|
%
|
|
|
27
|
%
|
Debt securities
|
|
|
13
|
%
|
|
|
18
|
%
|
Guaranteed investment contract
|
|
|
55
|
%
|
|
|
55
|
%
|
Cash
|
|
|
0
|
%
|
|
|
0
|
%
|
Pension
Plan Investment Valuation
Equity and debt securities consist of mutual funds which are
public investment vehicles valued using the Net Asset Value
(NAV) provided by the administrator of the fund. The
NAV is based on the value of the underlying assets owned by the
fund, minus its liabilities, and then divided by the number of
shares outstanding. The NAV is a quoted price in an active
market and classified within level 1 of the fair value
hierarchy of ASC 820.
The guaranteed investment contract is an immediate participation
contract held with an insurance company that acts as custodian
of the pension plans assets. The group annuity contract is
stated at contract value as determined the custodian, which
approximates fair value. We evaluate the general financial
condition of the custodian as a component of validating whether
the calculated contract value is an accurate approximation of
fair value. The review of the general financial condition of the
custodian is considered obtainable/observable through the review
of readily available financial information the custodian is
required to file with the Securities and Exchange Commission.
The group annuity contract is classified within level 3 of
the valuation hierarchy of ASC 820.
The following tables sets forth by level, within the fair value
hierarchy of ASC 820, the plans assets at fair value as of
January 2, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at Fair Value
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
Equity securities
|
|
$
|
9,682
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,682
|
|
Debt securities
|
|
|
3,841
|
|
|
|
|
|
|
|
|
|
|
$
|
3,841
|
|
Guaranteed investment contract
|
|
|
|
|
|
|
|
|
|
|
16,128
|
|
|
$
|
16,128
|
|
Cash
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments
|
|
$
|
13,524
|
|
|
$
|
|
|
|
$
|
16,128
|
|
|
$
|
29,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table sets forth a summary of changes in the fair
value of the pension plans level 3 assets for the
year ended January 2, 2010:
|
|
|
|
|
|
|
Guaranteed
|
|
|
|
Investment Contract
|
|
|
|
(In thousands)
|
|
|
Balance at 1/3/2009
|
|
$
|
15,659
|
|
Interest income
|
|
|
975
|
|
Realized gains/(losses)
|
|
|
28
|
|
Purchases, sales, issuances and settlements (net)
|
|
|
(534
|
)
|
|
|
|
|
|
Balance at 1/2/2010
|
|
$
|
16,128
|
|
|
|
|
|
|
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
|
|
|
2010
|
|
$
|
3,184
|
|
|
$
|
119
|
|
2011
|
|
|
2,958
|
|
|
|
122
|
|
2012
|
|
|
2,832
|
|
|
|
106
|
|
2013
|
|
|
2,787
|
|
|
|
95
|
|
2014
|
|
|
2,767
|
|
|
|
70
|
|
2015 or later
|
|
|
14,221
|
|
|
|
207
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,749
|
|
|
$
|
719
|
|
|
|
|
|
|
|
|
|
|
Expected
Long-Term Rate of Return
The expected return assumption was 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. Management has reviewed these assumptions and takes
responsibility for the valuation of pension assets and
obligations.
Employer
Contributions
Pension
Plan
We anticipate making contributions of $0.9 million during
the measurement year ending December 31, 2010.
Multi-Employer
Plans
Approximately 6.3% 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 $3.5 million,
$3.4 million and $3.4 million in fiscal 2009, 2008 and
2007, respectively.
80
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We sell and distribute products that are typically found in
supermarkets. We have three reportable operating segments. Our
food distribution segment consists of 15 distribution centers
that sell to independently operated retail food stores and other
customers. The military segment consists primarily of five
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 overhead,
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-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 2009, 19% of such warehouse operational profits were
allocated to the retail operations compared to 18% and 19% in
fiscal 2008 and 2007, respectively.
Major
Segments of the Business
Year end January 2, 2010
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food
|
|
|
|
|
|
|
|
|
Distribution
|
|
Military
|
|
Retail
|
|
Total
|
|
Revenue from external customers
|
|
$
|
2,655,012
|
|
|
$
|
1,985,313
|
|
|
$
|
572,330
|
|
|
$
|
5,212,655
|
|
Inter-segment revenue
|
|
|
290,523
|
|
|
|
|
|
|
|
|
|
|
|
290,523
|
|
Interest revenue
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
(26
|
)
|
Interest expense (including capitalized lease interest)
|
|
|
(25
|
)
|
|
|
32
|
|
|
|
3,438
|
|
|
|
3,445
|
|
Depreciation expense
|
|
|
8,787
|
|
|
|
5,611
|
|
|
|
7,269
|
|
|
|
21,667
|
|
Segment profit
|
|
|
88,116
|
|
|
|
49,717
|
*
|
|
|
15,888
|
|
|
|
153,721
|
|
Assets
|
|
|
434,040
|
|
|
|
221,244
|
|
|
|
95,222
|
|
|
|
750,506
|
|
Expenditures for long-lived assets
|
|
|
7,705
|
|
|
|
10,760
|
|
|
|
5,301
|
|
|
|
23,766
|
|
|
|
|
* |
|
Military segment profit includes acquisition and integration
costs of $2.8 million. |
81
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Major
Segments of the Business
Year end January 3, 2009
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food
|
|
|
|
|
|
|
|
|
Distribution
|
|
Military
|
|
Retail
|
|
Total
|
|
Revenue from external customers
|
|
$
|
2,740,462
|
|
|
$
|
1,290,575
|
|
|
$
|
602,457
|
|
|
$
|
4,633,494
|
|
Inter-segment revenue
|
|
|
307,591
|
|
|
|
|
|
|
|
|
|
|
|
307,591
|
|
Interest revenue
|
|
|
(8
|
)
|
|
|
|
|
|
|
|
|
|
|
(8
|
)
|
Interest expense (including capitalized lease interest)
|
|
|
(7
|
)
|
|
|
|
|
|
|
3,278
|
|
|
|
3,271
|
|
Depreciation expense
|
|
|
9,359
|
|
|
|
2,039
|
|
|
|
6,769
|
|
|
|
18,167
|
|
Segment profit
|
|
|
100,275
|
|
|
|
49,125
|
|
|
|
21,335
|
|
|
|
170,735
|
|
Assets
|
|
|
451,222
|
|
|
|
150,151
|
|
|
|
99,128
|
|
|
|
700,501
|
|
Expenditures for long-lived assets
|
|
|
6,131
|
|
|
|
3,395
|
|
|
|
12,835
|
|
|
|
22,361
|
|
Major
Segments of the Business
Year end December 29, 2007
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Food
|
|
|
|
|
|
|
|
|
Distribution
|
|
Military
|
|
Retail
|
|
Total
|
|
Revenue from external customers
|
|
$
|
2,693,346
|
|
|
$
|
1,178,991
|
|
|
$
|
591,698
|
|
|
$
|
4,464,035
|
|
Inter-segment revenue
|
|
|
300,290
|
|
|
|
|
|
|
|
|
|
|
|
300,290
|
|
Interest revenue
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
|
|
|
(17
|
)
|
Interest expense (including capitalized lease interest)
|
|
|
(17
|
)
|
|
|
|
|
|
|
2,849
|
|
|
|
2,832
|
|
Depreciation expense
|
|
|
10,342
|
|
|
|
1,924
|
|
|
|
6,060
|
|
|
|
18,326
|
|
Segment profit
|
|
|
91,920
|
|
|
|
42,115
|
|
|
|
18,637
|
|
|
|
152,672
|
|
Assets
|
|
|
424,849
|
|
|
|
155,474
|
|
|
|
89,155
|
|
|
|
669,478
|
|
Expenditures for long-lived assets
|
|
|
3,647
|
|
|
|
3,078
|
|
|
|
3,191
|
|
|
|
9,916
|
|
82
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Reconciliation
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Total external revenue for segments
|
|
$
|
5,212,655
|
|
|
$
|
4,633,494
|
|
|
$
|
4,464,035
|
|
Inter-segment revenue from reportable segments
|
|
|
290,523
|
|
|
|
307,591
|
|
|
|
300,290
|
|
Elimination of inter-segment revenues
|
|
|
(290,523
|
)
|
|
|
(307,591
|
)
|
|
|
(300,290
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated revenues
|
|
$
|
5,212,655
|
|
|
$
|
4,633,494
|
|
|
$
|
4,464,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total profit for segments
|
|
$
|
153,721
|
|
|
$
|
170,735
|
|
|
$
|
152,672
|
|
Unallocated amounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment of inventory to LIFO
|
|
|
3,033
|
|
|
|
(19,740
|
)
|
|
|
(5,092
|
)
|
Unallocated corporate overhead
|
|
|
(90,369
|
)
|
|
|
(97,204
|
)
|
|
|
(95,847
|
)
|
Goodwill impairment
|
|
|
(50,927
|
)
|
|
|
|
|
|
|
|
|
Gain on acquisition of a business
|
|
|
6,682
|
|
|
|
|
|
|
|
|
|
Gain on litigation settlement
|
|
|
7,630
|
|
|
|
|
|
|
|
|
|
Special charge
|
|
|
(6,020
|
)
|
|
|
|
|
|
|
1,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
$
|
23,750
|
|
|
$
|
53,791
|
|
|
$
|
53,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets for segments
|
|
$
|
750,506
|
|
|
$
|
700,501
|
|
|
$
|
669,478
|
|
Unallocated corporate assets
|
|
|
322,803
|
|
|
|
331,186
|
|
|
|
338,860
|
|
Adjustment of inventory to LIFO
|
|
|
(73,077
|
)
|
|
|
(76,110
|
)
|
|
|
(56,369
|
)
|
Elimination of intercompany receivables
|
|
|
(696
|
)
|
|
|
(625
|
)
|
|
|
(587
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated assets
|
|
$
|
999,536
|
|
|
$
|
954,952
|
|
|
$
|
951,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Significant Items-2009 (In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
|
|
Reconciling
|
|
Consolidated
|
|
|
Totals
|
|
Items
|
|
Totals
|
|
Depreciation and amortization
|
|
$
|
21,667
|
|
|
$
|
18,936
|
|
|
$
|
40,603
|
|
Interest expense
|
|
|
3,445
|
|
|
|
20,927
|
|
|
|
24,372
|
|
Expenditures for long-lived assets
|
|
|
23,766
|
|
|
|
6,636
|
|
|
|
30,402
|
|
Other
Significant Items-2008 (In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
|
|
Reconciling
|
|
Consolidated
|
|
|
Total
|
|
Items
|
|
Totals
|
|
Depreciation and amortization
|
|
$
|
18,167
|
|
|
$
|
20,262
|
|
|
$
|
38,429
|
|
Interest expense
|
|
|
3,271
|
|
|
|
23,195
|
|
|
|
26,466
|
|
Expenditures for long-lived assets
|
|
|
22,361
|
|
|
|
9,594
|
|
|
|
31,955
|
|
83
NASH
FINCH COMPANY AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Other
Significant Items-2007 (In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
|
|
Reconciling
|
|
Consolidated
|
|
|
Totals
|
|
Items
|
|
Totals
|
|
Depreciation and amortization
|
|
$
|
18,326
|
|
|
$
|
20,556
|
|
|
$
|
38,882
|
|
Interest expense
|
|
|
2,832
|
|
|
|
25,256
|
|
|
|
28,088
|
|
Expenditures for long-lived assets
|
|
|
9,916
|
|
|
|
11,503
|
|
|
|
21,419
|
|
The reconciling items to adjust expenditures for depreciation,
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.
On March 4, 2010, the Company announced that it will
discontinue its supply relationship with a portion of a buying
group serviced out of the Companys distribution center in
Lumberton, North Carolina. While it is not known with certainty
which members ultimately will leave the buying group, it appears
as though it will result in a reduction of less than 3% of the
Companys annual sales. It is anticipated that the
transition of supply will be completed during the second quarter
of fiscal 2010.
84
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
|
|
13 Weeks
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
2009
|
|
2008 (1)
|
|
Sales
|
|
$
|
1,140,320
|
|
|
$
|
1,004,852
|
|
|
$
|
1,216,594
|
|
|
$
|
1,023,892
|
|
|
$
|
1,633,304
|
|
|
$
|
1,416,308
|
|
|
$
|
1,222,437
|
|
|
$
|
1,188,442
|
|
Cost of sales
|
|
|
1,045,201
|
|
|
|
912,238
|
|
|
|
1,117,565
|
|
|
|
929,604
|
|
|
|
1,504,350
|
|
|
|
1,294,143
|
|
|
|
1,126,851
|
|
|
|
1,090,560
|
|
Gross profit
|
|
|
95,119
|
|
|
|
92,614
|
|
|
|
99,029
|
|
|
|
94,288
|
|
|
|
128,954
|
|
|
|
122,165
|
|
|
|
95,586
|
|
|
|
97,882
|
|
Earnings (loss) from continuing operations before income taxes
|
|
|
17,526
|
|
|
|
16,281
|
|
|
|
16,114
|
|
|
|
13,838
|
|
|
|
31,655
|
|
|
|
13,029
|
|
|
|
(41,545
|
)
|
|
|
10,643
|
|
Income tax expense
|
|
|
3,106
|
|
|
|
5,665
|
|
|
|
6,576
|
|
|
|
4,406
|
|
|
|
9,728
|
|
|
|
5,344
|
|
|
|
1,562
|
|
|
|
5,231
|
|
Net earnings (loss)
|
|
|
14,420
|
|
|
|
10,616
|
|
|
|
9,538
|
|
|
|
9,432
|
|
|
|
21,927
|
|
|
|
7,685
|
|
|
|
(43,107
|
)
|
|
|
5,412
|
|
Net earnings (loss) as percentage of sales
|
|
|
1.26
|
%
|
|
|
1.06
|
%
|
|
|
0.78
|
%
|
|
|
0.92
|
%
|
|
|
1.34
|
%
|
|
|
0.54
|
%
|
|
|
(3.53
|
)%
|
|
|
0.46
|
%
|
Basic earnings (loss) per share
|
|
$
|
1.11
|
|
|
$
|
0.82
|
|
|
$
|
0.73
|
|
|
$
|
0.73
|
|
|
$
|
1.68
|
|
|
$
|
0.60
|
|
|
$
|
(3.31
|
)
|
|
$
|
0.42
|
|
Diluted earnings (loss) per share
|
|
$
|
1.08
|
|
|
$
|
0.80
|
|
|
$
|
0.72
|
|
|
$
|
0.72
|
|
|
$
|
1.64
|
|
|
$
|
0.58
|
|
|
$
|
(3.20
|
)
|
|
$
|
0.41
|
|
|
|
|
(1) |
|
Prior year amounts have been restated to reflect the adoption of
ASC Subtopic 470-20 and the revised treatment of consigned
inventory sales in our military segment. Please refer to Note 1
and Note 3 of the Notes to Consolidated Financial Financial
Statements of this
Form 10-K
for a further discussion of these items. |
Significant items by quarter include the following:
|
|
|
1. |
|
Goodwill impairment charge of $50.9 million in the fourth
quarter 2009. |
|
2. |
|
Gain on the acquisition of a business of $6.7 million, net
of tax, in the first quarter 2009. |
|
3. |
|
Gain on the settlement of litigation of $7.6 million in the
third quarter 2009. |
|
4. |
|
Acquisition and integration costs of $0.6 million,
$0.8 million, $0.9 million and $0.4 million in
the first, second, third and fourth quarters, respectively, of
fiscal 2009. |
|
5. |
|
Year-over-year
increase in share-based compensation expense of
$1.4 million in the first quarter 2009. |
|
6. |
|
Special charge of $6.0 million in the fourth quarter 2009. |
|
7. |
|
Pre-opening and
start-up
costs of $0.1 million and $0.6 million in the first
and second quarters, respectively, of fiscal 2009. |
|
8. |
|
Gain on the sale of intangible assets of $0.7 million in
the fourth quarter 2009. |
|
9. |
|
Retail store impairments and lease related charges of
$1.2 million, $0.9 million, $1.3 million and
$1.9 million in the first, second, third and fourth
quarters, respectively, of fiscal 2009. |
|
10. |
|
Year-over-year
increase in non-cash LIFO charges of $1.1 million,
$2.7 million, $8.8 million and $10.2 million in
the first, second, third and fourth quarters, respectively, of
2008. |
|
11. |
|
Reversal of bad debt and lease reserves related to food
distribution customers of $3.0 million and
$0.3 million in the first and fourth quarters,
respectively, of 2008. |
|
12. |
|
Gain on the sale of intangible assets of $0.2 million and
$0.4 million in the first and third quarters, respectively,
of 2008. |
|
13. |
|
Inventory markdown and wind down costs related to retail store
closings and retail markdown adjustments of $0.1 million in
the first quarter of 2008. |
|
14. |
|
Retail store impairments and lease reserves of
$0.3 million, $0.3 million and $0.6 million in
the first, second and third quarters, respectively, of 2008. |
|
15. |
|
Write-off of deferred financing costs of $1.0 million in
the second quarter of 2008. |
|
16. |
|
Acquisition costs of $0.5 million in the fourth quarter of
2008. |
85
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
Not applicable.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
Disclosure
Controls and Procedures
Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief
Financial Officer, we evaluated the effectiveness of the design
and operation of our disclosure controls and procedures (as
defined in
Rule 13a-15(e)
under the Securities Exchange Act of 1934). Based on that
evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that, as of the end of the period covered
by this report, our disclosure controls and procedures were
effective.
Changes
in Internal Control Over Financial Reporting
There was no change in our internal control over financial
reporting (as defined in
Rule 13a-15(f)
under the Exchange Act) 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.
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.
Managements
Annual Report On Internal Control Over Financial
Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting, as such term
is defined in
Rule 13a-15(f)
of the Securities Exchange Act. Under the supervision and with
the participation of our management, including our Chief
Executive Officer and our Chief Financial Officer, we conducted
an evaluation of the effectiveness of our internal control over
financial reporting as of January 2, 2010. In conducting
its evaluation, our management used the criteria set forth by
the framework in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission. Based on that evaluation, management
concluded our internal control over financial reporting was
effective as of January 2, 2010. This evaluation did not
include the internal controls related to the acquisition from
GSC Enterprises, Inc. relating to three military distribution
centers that occurred on January 31, 2009. Total assets and
sales related to this acquisition represent 5.5% and 13.1%,
respectively, of the related consolidated financial statement
amounts as of and for the year ended January 2, 2010 (see
Note 2).
Our internal control over financial reporting as of
January 2, 2010 has been audited by Ernst & Young
LLP, an independent registered public accounting firm, as stated
in their report included below.
86
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Nash Finch Company
We have audited Nash Finch Companys internal control over
financial reporting as of January 2, 2010, 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 included in the accompanying Management
Report On Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on 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, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, 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 the assets of the
company; (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 receipts and expenditures of the company
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.
As indicated in the accompanying Managements Annual Report
on Internal Control Over Financial Reporting, managements
assessment of and conclusion on the effectiveness of internal
control over financial reporting did not include the internal
controls related to the acquisition from GSC Enterprises, Inc.
relating to three military distribution centers included in the
January 2, 2010 consolidated financial statements of Nash
Finch Company and constituted 14.7% and 9.3% of total and net
assets, respectively, as of January 2, 2010 and 13.1% of
revenues for the year then ended. Our audit of internal control
over financial reporting of Nash Finch Company also did not
include an evaluation of the internal control over financial
reporting of GSC Enterprises, Inc.
In our opinion, Nash Finch Company maintained, in all material
respects, effective internal control over financial reporting as
of January 2, 2010, 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 January 2, 2010 and January 3,
2009, and the related consolidated statements of income,
stockholders equity,
87
and cash flows for each of the three years in the period ended
January 2, 2010, and our report dated March 4, 2010
expressed an unqualified opinion thereon.
Minneapolis, Minnesota
March 4, 2010
88
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
Not applicable.
PART III
|
|
ITEM 10.
|
DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT AND CORPORATE
GOVERNANCE
|
EXECUTIVE
OFFICERS OF THE REGISTRANT
The following table sets forth information about our executive
officers as of March 2, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year First Elected
|
|
|
|
|
|
|
or Appointed as an
|
|
|
Name
|
|
Age
|
|
Executive Officer
|
|
Title
|
|
Alec C. Covington
|
|
|
52
|
|
|
|
2006
|
|
|
President and Chief Executive Officer
|
Christopher A. Brown
|
|
|
47
|
|
|
|
2006
|
|
|
Executive Vice President, President and Chief Operating Officer
of Wholesale
|
Edward L. Brunot
|
|
|
46
|
|
|
|
2006
|
|
|
Senior Vice President, President and Chief Operating Officer of
MDV
|
Robert B. Dimond
|
|
|
48
|
|
|
|
2007
|
|
|
Executive Vice President, Chief Financial Officer and Treasurer
|
Kathleen M. Mahoney
|
|
|
55
|
|
|
|
2006
|
|
|
Executive Vice President, General Counsel and Secretary
|
Jeffrey E. Poore
|
|
|
51
|
|
|
|
2001
|
|
|
Executive Vice President, Supply Chain Management
|
Calvin S. Sihilling
|
|
|
60
|
|
|
|
2006
|
|
|
Executive Vice President and Chief Information Officer
|
Michael W. Rotelle III
|
|
|
50
|
|
|
|
2008
|
|
|
Senior Vice President, Human Resources
|
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 and President and Chief Operating Officer of Nash
Finch Wholesale since February 2010. Mr. Brown returned to
Nash Finch as Executive Vice President, Food Distribution in
November 2006. Prior to that time, he served for three years as
Chief Executive Officer of SimonDelivers, Inc., a leading
Minnesota-based online grocery delivery company. Prior to
joining SimonDelivers, Mr. Brown was our Executive Vice
President, Merchandising 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
and President and Chief Operating Officer of MDV since February
2009. Mr. Brunot joined Nash Finch in July 2006 as our
Senior Vice President, Military.
89
Mr. Brunot previously served as Senior Vice President,
Operations for AmeriCold Logistics, LLC from December 2002 to
May 2006, where he was responsible for 29 distribution
facilities in the Western Region. Before that, Mr. Brunot
was Vice President of Operations for CS Integrated from 1999 to
2002. Mr. Brunot served as a Captain in the United States
Army and holds a BS degree from the United States Military
Academy, West Point and an MS degree from the University of
Scranton.
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 emergence from bankruptcy
proceedings. Prior to that, he served as our Executive Vice
President, Chief Financial Officer and Treasurer from May 2002
to November 2004 and as our Chief Financial Officer and Senior
Vice President from September 2000 to May 2002. Before that,
Mr. Dimond held various financial roles with Kroger and
Smiths Food & Drug Centers, Inc. 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 Executive Vice
President, General Counsel and Secretary since November 2009.
Prior to that Ms. Mahoney served as our Senior Vice
President, General Counsel and Secretary since July 2006.
Ms. Mahoney joined Nash Finch as Vice President, Deputy
General Counsel in November 2004. Prior to working at Nash
Finch, she was the Managing Partner of 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, LLC 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
Northrop Institute of Technology.
Michael W. Rotelle III has served as our Senior Vice
President, Human Resources since October 2008. Mr. Rotelle
previously served as Executive Vice President, Human Resources
for Acosta Sales and Marketing Company, a sales and marketing
company serving the foodservice and grocery industries, from
November 2007 to October 2008, where he was responsible for
global Human Resource operations. Before that Mr. Rotelle
served as Senior Vice President, Human Resources for Tree of
Life, Inc. from August 2004 to November 2007. Prior to that
Mr. Rotelle was Vice President, Human Resources of the
Eastern Region of Richfood Holdings, Inc./ Supervalu Inc. from
August 1994 to August 2004. Before that Mr. Rotelle held
various operational and Human Resource positions with Rotelle,
Inc. Mr. Rotelle holds a Bachelor of Science degree in
Business Administration from Bloomsburg University.
The remaining information required by this item is incorporated
by reference to the sections titled Proposal Number
1: Election of Directors Information About Directors
and Nominees, Proposal Number 1:
90
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 of our 2010 Proxy Statement.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
The information required by this item is incorporated by
reference to the sections titled
Proposal Number 1: Election of
Directors Compensation of Directors,
Proposal Number 1: Election of
Directors Compensation and Management Development
Committee Interlocks and Insider Participation and
Executive Compensation and Other Benefits of our
2010 Proxy Statement.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
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 January 2, 2010:
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
|
|
|
1,271,952
|
(1)
|
|
$
|
37.94
|
(2)
|
|
|
867,262
|
(3)
|
Equity compensation plans not approved by security holders
|
|
|
19,554
|
|
|
|
|
|
|
|
24,402
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,291,506
|
|
|
$
|
37.94
|
|
|
|
891,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes stock options, stock appreciation rights, restricted
stock units and performance units awarded under the 2009
Incentive Award Plan (2009 Plan) and 2000 Stock
Incentive Plan (2000 Plan). |
|
(2) |
|
Each share unit acquired through the deferral of director
compensation under the 1997 Director Plan and each
performance unit acquired under the 2009 Plan and 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, the share units and
performance units outstanding at January 2, 2010 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 January 2,
2010. Grants under each plan may be in the form of any of the
types of awards noted: |
91
|
|
|
|
|
|
|
Plan
|
|
Number of Shares
|
|
Type of Award
|
|
2009 Plan
|
|
|
686,247
|
|
|
Stock options, restricted stock, stock
appreciation rights, performance
units, and stock bonuses.
|
2000 Plan
|
|
|
144,936
|
|
|
Stock options, restricted stock, stock
appreciation rights, performance
units, and stock bonuses.
|
1997 Director Plan
|
|
|
36,079
|
|
|
Share units
|
|
|
|
(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
In addition to the information set forth above, the information
required by this item is incorporated by reference to the
sections titled Security Ownership of Certain Beneficial
Owners and Security Ownership of Management of
our 2010 Proxy Statement.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
|
The information required by this item is incorporated by
reference to the sections titled Proposal Number 1:
Election of Directors Information About the Board of
Directors and Its Committees, Corporate
Governance Governance Guidelines
Independent Directors and Corporate
Governance Related Party Transaction Policy and
Procedures of our 2010 Proxy Statement.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
The information required by this item is incorporated by
reference to the sections titled Independent
Auditors Fees Paid to Independent Auditors and
Independent Auditors Pre-Approval of Audit and
Non-Audit Services of our 2010 Proxy Statement.
92
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 38
Consolidated Statements of Income for the fiscal years ended
January 2, 2010, January 3, 2009 and December 29,
2007 page 39
Consolidated Balance Sheets as of January 2, 2010 and
January 3, 2009 page 40
Consolidated Statements of Cash Flows for the fiscal years ended
January 2, 2010, January 3, 2009 and December 29,
2007 page 41
Consolidated Statements of Stockholders Equity for the
fiscal years ended January 2, 2010, January 3, 2009
and December 29, 2007 page 42
Notes to Consolidated Financial Statements pages 43
to 85
|
|
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 98
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)).
|
|
2
|
.2
|
|
Asset Purchase Agreement between GSC Enterprises, Inc., MKM
Management, L.L.C., Michael K. McKenzie, Grocery Supply
Acquisition Corp. and Nash-Finch Company, dated as of
December 17, 2008 (incorporated by reference to
Exhibit 1.01 to our current report on
Form 8-K
filed December 18, 2008 (File
No. 0-785)).
|
|
2
|
.3
|
|
First Amendment to Asset Purchase Agreement between GSC
Enterprises, Inc., MKM Management, L.L.C., Michael K. McKenzie,
Grocery Supply Acquisition Corp. and Nash-Finch Company, dated
as of January 31, 2009 (incorporated by reference to
Exhibit 10.1 to our current report on
Form 8-K
filed February 3, 2009 (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)).
|
93
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
3
|
.4
|
|
Certificate of Amendment to Restated Certificate of
Incorporation of the Company, effective May 13, 2008
(incorporated by reference to Exhibit 3.1 to our current
report on
Form 8-K
dated May 16, 2008 (File
No. 0-785)).
|
|
3
|
.5
|
|
Certificate of Amendment to the Nash-Finch Company Restated
Certificate of Incorporation, effective May 20, 2009
(incorporated by reference to Exhibit 3.1 to our current
report on
Form 8-K
filed May 26, 2009 (File
No. 0-785)).
|
|
3
|
.6
|
|
Fourth Restated Certificate of Incorporation of Nash Finch
Company, effective July 27, 2009 (incorporated by reference
to our Quarterly Report on
Form 10-Q
filed July 28, 2009 (File
No. 0-785)).
|
|
3
|
.7
|
|
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)).
|
|
3
|
.8
|
|
Amended and Restated Bylaws of Nash-Finch Company (as amended
May 13, 2008) (incorporated by reference to
Exhibit 3.2 to our current report on
Form 8-K/A
filed May 19, 2008 (File
No. 0-785)).
|
|
3
|
.9
|
|
Amended and Restated Bylaws of Nash Finch Company (as amended
May 20, 2009) (incorporated by reference to
Exhibit 3.2 to our current report on
Form 8-K/A
filed July 6, 2009 (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)).
|
|
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)).
|
|
4
|
.6
|
|
First Supplemental Indenture to Senior Convertible Notes Due
2035 (incorporated by reference to Exhibit 4.1 to our
Quarterly Report on
Form 10-Q
for the quarter ended June 14, 2008 (File
No. 0-785)).
|
|
4
|
.7
|
|
Notice of Adjustment of Conversion Rate of Senior Subordinated
Convertible Notes Due 2035 (incorporated by reference to
Exhibit 7.1 to our current report on
Form 8-K
filed March 25, 2009 (File
No. 0-785)).
|
|
10
|
.1
|
|
Credit Agreement, dated as of April 11, 2008, among Nash
Finch Company, Various Lenders and Bank of America, N.A. as
Administrative Agent (incorporated by reference to
Exhibit 10.1 to our current report on
Form 8-K
filed April 14, 2008 (File
No. 0-785)).
|
|
*10
|
.2
|
|
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
|
.3
|
|
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
|
.4
|
|
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)).
|
94
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
*10
|
.5
|
|
Amended and Restated Nash-Finch Company Deferred Compensation
Plan (incorporated by reference to our Annual Report on
Form 10-K
filed March 12, 2009 (File
No. 0-785)).
|
|
*10
|
.6
|
|
Nash-Finch Company 2000 Stock Incentive Plan (as amended
February 25, 2008) (incorporated by reference to
Exhibit 10.1 to our current report on
Form 8-K
filed May 16, 2008 (File
No. 0-785)).
|
|
*10
|
.7
|
|
Nash-Finch Company 2000 Stock Incentive Plan (as amended and
restated on July 14, 2008) (incorporated by reference to
our Annual Report on
Form 10-K
filed March 12, 2009 (File
No. 0-785)).
|
|
*10
|
.8
|
|
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
|
.9
|
|
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
|
.10
|
|
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
|
.11
|
|
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)).
|
|
*10
|
.12
|
|
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
|
.13
|
|
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
|
.14
|
|
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
|
.15
|
|
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
|
.16
|
|
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
|
.17
|
|
Amended and Restated Nash-Finch Company Director Deferred
Compensation Plan (incorporated by reference to our Annual
Report on
Form 10-K
filed March 12, 2009 (File
No. 0-785)).
|
|
*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
|
|
Nash-Finch Company Supplemental Executive Retirement Plan (as
amended and restated on July 14, 2008) (incorporated by
reference to our Annual Report on
Form 10-K
filed March 12, 2009 (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)).
|
95
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
*10
|
.23
|
|
Form of Amended and Restated Restricted Stock Unit Agreement
(for non-employee directors under the 2000 Stock Incentive Plan)
(incorporated by reference to our Annual Report on
Form 10-K
filed March 12, 2009 (File
No. 0-785)).
|
|
*10
|
.24
|
|
New Form of Restricted Stock Unit Award Agreement (for
non-employee directors under the 2000 Stock Incentive Plan)
(incorporated by reference to our Annual Report on
Form 10-K
filed March 12, 2009 (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
|
|
Form of Amended and Restated Restricted Stock Unit Award
Agreement (under the 2000 Stock Incentive Plan) (incorporated by
reference to Exhibit 10.3 to our
Form 10-Q
filed November 6, 2008 (File
No. 0-785)).
|
|
*10
|
.27
|
|
New Form of Executive Restricted Stock Unit Agreement (under the
2000 Stock Incentive Plan), effective July 14, 2008
(incorporated by reference to Exhibit 10.2 to our
Form 10-Q
filed November 6, 2008 (File
No. 0-785)).
|
|
*10
|
.28
|
|
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
|
.29
|
|
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
|
.30
|
|
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
|
.31
|
|
Amendment to the Letter Agreement between Nash-Finch Company and
Alec C. Covington dated February 27, 2007 (incorporated by
reference to Exhibit 10.1 to our
Form 8-K
filed March 1, 2007 (File
No. 0-785)).
|
|
*10
|
.32
|
|
Change in Control Agreement entered into by Nash-Finch Company
and Alec. C. Covington dated February 26, 2008
(incorporated by reference to Exhibit 10.1 to our
Form 8-K/A
filed February 28, 2008 (File
No. 0-785)).
|
|
*10
|
.33
|
|
Restricted Stock Unit Agreement between the Company and Alec C.
Covington dated February 27, 2007 (incorporated by
reference to Exhibit 10.2 to our
Form 10-Q
filed May 1, 2007 (File
No. 0-785)).
|
|
*10
|
.34
|
|
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)).
|
|
*10
|
.35
|
|
Amended Form of Change in Control Agreement for Senior and
Executive Vice Presidents, effective November 3, 2008
(incorporated by reference to Exhibit 10.1 to our
Form 10-Q
filed November 6, 2008 (File
No. 0-785)).
|
|
*10
|
.36
|
|
Form of Amended and Restated Indemnification Agreement
(incorporated by reference to Exhibit 10.1 to our
Form 10-Q
filed November 13, 2007 (File
No. 0-785)).
|
|
*10
|
.37
|
|
Stock Appreciation Rights Agreement under the Nash-Finch Company
2000 Stock Incentive Plan dated December 17, 2008
(incorporated by reference to Exhibit 10.2 to our
Form 8-K
filed February 3, 2009 (File
No. 0-785)).
|
|
*10
|
.38
|
|
Amended and Restated Stock Appreciation Rights Agreement under
the Nash-Finch Company 2000 Stock Incentive Plan dated
December 17, 2008 (incorporated by reference to our
Form 10-Q
filed May 4, 2009 (File
No. 0-785)).
|
|
10
|
.39
|
|
Nash-Finch Company Incentive Award Plan (incorporated by
reference to Exhibit 10.1 to our current report on
Form 8-K
filed May 26, 2009 (File
No. 0-785)).
|
|
10
|
.40
|
|
Nash Finch Company Performance Incentive Plan (incorporated by
reference to Exhibit 10.2 to our current report on
Form 8-K
filed May 26, 2009 (File
No. 0-785)).
|
|
12
|
.1
|
|
Computation of Ratio of Earnings to Fixed Charges (filed
herewith).
|
96
|
|
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
|
|
21
|
.1
|
|
Our subsidiaries (filed herewith).
|
|
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 (filed 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. |
97
NASH
FINCH COMPANY AND SUBSIDIARIES
Valuation and Qualifying Accounts
Fiscal Years ended January 2, 2010, January 3, 2009
and December 29, 2007
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charged to
|
|
|
Charged
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
(Reversed from)
|
|
|
(Credited)
|
|
|
|
|
|
Balance
|
|
|
|
Beginning
|
|
|
Costs and
|
|
|
to Other
|
|
|
|
|
|
at End
|
|
|
|
of Year
|
|
|
Expenses
|
|
|
Accounts(a)
|
|
|
Deductions
|
|
|
of Year
|
|
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended December 29, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts(c)
|
|
$
|
25,961
|
|
|
$
|
1,234
|
|
|
$
|
460
|
|
|
$
|
19,986
|
(b)
|
|
$
|
7,669
|
|
Provision for losses relating to leases on closed locations
|
|
|
15,072
|
|
|
|
552
|
|
|
|
|
|
|
|
2,422
|
(d)
|
|
|
13,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
41,033
|
|
|
$
|
1,786
|
|
|
$
|
460
|
|
|
$
|
22,408
|
|
|
$
|
20,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53 weeks ended January 3, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts(c)
|
|
$
|
7,669
|
|
|
$
|
(1,292
|
)
|
|
$
|
37
|
|
|
$
|
883
|
(b)
|
|
$
|
5,531
|
|
Provision for losses relating to leases on closed locations
|
|
|
13,202
|
|
|
|
(1,831
|
)
|
|
|
|
|
|
|
3,364
|
(d)
|
|
|
8,007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
20,871
|
|
|
$
|
(3,123
|
)
|
|
$
|
37
|
|
|
$
|
4,247
|
|
|
$
|
13,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52 weeks ended January 2, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts(c)
|
|
$
|
5,531
|
|
|
$
|
1,441
|
|
|
$
|
19
|
|
|
$
|
1,304
|
(b)
|
|
$
|
5,687
|
|
Provision for losses relating to leases on closed locations
|
|
|
8,007
|
|
|
|
3,135
|
|
|
|
|
|
|
|
1,891
|
(d)
|
|
|
9,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,538
|
|
|
$
|
4,576
|
|
|
$
|
19
|
|
|
$
|
3,195
|
|
|
$
|
14,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Recoveries on accounts previously written off, unless noted
otherwise |
|
(b) |
|
Reversal of reserve relating to write-offs |
|
(c) |
|
Includes current and non-current receivables |
|
(d) |
|
Net payments of lease obligations & termination fees |
98
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 4, 2010
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below on March 4, 2010 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/ Mickey
P. Foret*
Mickey
P. Foret
|
|
|
|
/s/ Robert
L. Bagby *
Robert
L. Bagby
|
|
/s/ Douglas
A. Hacker*
Douglas
A. Hacker
|
|
|
|
/s/ Sam
K. Duncan*
Sam
K. Duncan
|
|
/s/ Hawthorne
L. Proctor*
Hawthorne
L. Proctor
|
|
|
|
|
|
*By:
|
|
/s/ Kathleen
M. Mahoney
Kathleen
M. Mahoney
Attorney-in-fact
|
|
|
99
NASH-FINCH
COMPANY
EXHIBIT INDEX TO ANNUAL REPORT
ON
FORM 10-K
For Fiscal Year Ended January 2, 2010
|
|
|
|
|
|
|
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)
|
|
2
|
.2
|
|
Asset Purchase Agreement between GSC Enterprises, Inc., MKM
Management, L.L.C., Michael K. McKenzie, Grocery Supply
Acquisition Corp. and Nash-Finch Company, dated as of
December 17, 2008.
|
|
IBR
|
|
2
|
.3
|
|
First Amendment to Asset Purchase Agreement between GSC
Enterprises, Inc., MKM Management, L.L.C., Michael K. McKenzie,
Grocery Supply Acquisition Corp. and Nash-Finch Company, dated
as of January 31, 2009.
|
|
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
|
|
Certificate of Amendment to Restated Certificate of
Incorporation of the Company, effective May 13, 2008.
|
|
IBR
|
|
3
|
.5
|
|
Certificate of Amendment to the Nash-Finch Company Restated
Certificate of Incorporation, effective May 20, 2009.
|
|
IBR
|
|
3
|
.6
|
|
Fourth Restated Certificate of Incorporation of Nash Finch
Company, effective July 27, 2009.
|
|
IBR
|
|
3
|
.7
|
|
Nash-Finch Company Bylaws, as amended November 9, 2005.
|
|
IBR
|
|
3
|
.8
|
|
Amended and Restated Bylaws of Nash-Finch Company
(as amended May 13, 2008).
|
|
IBR
|
|
3
|
.9
|
|
Amended and Restated Bylaws of Nash Finch Company (as amended
May 20, 2009).
|
|
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
|
|
4
|
.5
|
|
Notice of Adjustment of Conversion Rate of the Senior
Subordinated Convertible Notes Due 2035.
|
|
IBR
|
|
4
|
.6
|
|
First Supplemental Indenture to Senior Convertible Notes Due
2035.
|
|
IBR
|
100
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
No.
|
|
Description
|
|
Method of Filing
|
|
|
10
|
.1
|
|
Credit Agreement, dated as of April 11, 2008, among Nash
Finch Company, Various Lenders and Bank of America, N.A. as
Administrative Agent.
|
|
IBR
|
|
10
|
.2
|
|
Nash-Finch Company Income Deferral Plan (as amended through
May 21, 2004).
|
|
IBR
|
|
10
|
.3
|
|
Second Declaration of Amendment to Nash-Finch Company Income
Deferral Plan (as amended through May 21, 2004).
|
|
IBR
|
|
10
|
.4
|
|
Nash-Finch Company Deferred Compensation Plan.
|
|
IBR
|
|
10
|
.5
|
|
Amended and Restated Nash-Finch Company Deferred Compensation
Plan.
|
|
IBR
|
|
10
|
.6
|
|
Nash-Finch Company 2000 Stock Incentive Plan.
|
|
IBR
|
|
10
|
.7
|
|
Nash-Finch Company 2000 Stock Incentive Plan (as amended and
restated on July 14, 2008).
|
|
IBR
|
|
10
|
.8
|
|
Form of Non-Statutory Stock Option Agreement (for employees
under the Nash-Finch Company 2000 Stock Incentive Plan).
|
|
IBR
|
|
10
|
.9
|
|
Description of Nash-Finch Company Long-Term Incentive Program
Utilizing Performance Unit Awards.
|
|
IBR
|
|
10
|
.10
|
|
Nash-Finch Company 1995 Director Stock Option Plan (as
amended on February 22, 2000 and February 19, 2002).
|
|
IBR
|
|
10
|
.11
|
|
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
|
.12
|
|
Form of Non-Statutory Stock Option Agreement (for non-employee
directors under the Nash-Finch Company 1995 Director Stock
Option Plan).
|
|
IBR
|
|
10
|
.13
|
|
Nash-Finch Company 1997 Non-Employee Director Stock Compensation
Plan (2003 Revision).
|
|
IBR
|
|
10
|
.14
|
|
Nash-Finch Company 1997 Non-Employee Director Stock Compensation
Plan (2003 Revision) First Declaration of Amendment.
|
|
IBR
|
|
10
|
.15
|
|
Nash-Finch Company 1997 Non-Employee Director Stock Compensation
Plan (2003 Revision) Second Declaration of Amendment.
|
|
IBR
|
|
10
|
.16
|
|
Nash-Finch Company Director Deferred Compensation Plan.
|
|
IBR
|
|
10
|
.17
|
|
Amended and Restated Nash-Finch Company Director Deferred
Compensation Plan.
|
|
IBR
|
|
10
|
.18
|
|
Nash-Finch Company Supplemental Executive Retirement Plan.
|
|
IBR
|
|
10
|
.19
|
|
Nash-Finch Company Supplemental Executive Retirement Plan
(as amended and restated on July 14, 2008).
|
|
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
|
|
Form of Amended and Restated Restricted Stock Unit Agreement
(for non-employee directors under the 2000 Stock Incentive Plan).
|
|
IBR
|
|
10
|
.24
|
|
New Form of Restricted Stock Unit Award Agreement (for
non-employee directors under the 2000 Stock Incentive Plan).
|
|
IBR
|
101
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
No.
|
|
Description
|
|
Method of Filing
|
|
|
10
|
.25
|
|
Form of Restricted Stock Unit Award Agreement (under the 2000
Stock Incentive Plan).
|
|
IBR
|
|
10
|
.26
|
|
Form of Amended and Restated Restricted Stock Unit Award
Agreement (under the 2000 Stock Incentive Plan).
|
|
IBR
|
|
10
|
.27
|
|
New Form of Executive Restricted Stock Unit Agreement (under the
2000 Stock Incentive Plan), effective July 14, 2008.
|
|
IBR
|
|
10
|
.28
|
|
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
|
.29
|
|
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
|
.30
|
|
Letter Agreement between Nash-Finch Company and Alec C.
Covington dated March 16, 2006.
|
|
IBR
|
|
10
|
.31
|
|
Amendment to the Letter Agreement between Nash-Finch Company and
Alec. C. Covington dated February 27, 2007.
|
|
IBR
|
|
10
|
.32
|
|
Change in Control Agreement entered into by Nash Finch Company
and Alec C. Covington dated February 26, 2008.
|
|
IBR
|
|
10
|
.33
|
|
Restricted Stock Unit Agreement between the Company and Alec C.
Covington dated February 27, 2007.
|
|
IBR
|
|
10
|
.34
|
|
Letter Agreement between Nash-Finch Company and Robert B Dimond
dated November 29, 2006.
|
|
IBR
|
|
10
|
.35
|
|
Amended Form of Change in Control Agreement for Senior and
Executive Vice Presidents, effective November 3, 2008.
|
|
IBR
|
|
10
|
.36
|
|
Form of Amended and Restated Indemnification Agreement.
|
|
IBR
|
|
10
|
.37
|
|
Stock Appreciation Rights Agreement under the Nash-Finch Company
2000 Stock Incentive Plan dated December 17, 2008.
|
|
IBR
|
|
10
|
.38
|
|
Amended and Restated Stock Appreciation Rights Agreement under
the Nash-Finch Company 2000 Stock Incentive Plan dated
December 17, 2008.
|
|
IBR
|
|
10
|
.39
|
|
Nash-Finch Company Incentive Award Plan.
|
|
IBR
|
|
10
|
.40
|
|
Nash Finch Company Performance Incentive Plan.
|
|
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
|
.3
|
|
Rule 13a-14(a)
Certification of the Chief Executive Officer.
|
|
E
|
|
31
|
.4
|
|
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
|
102