Nash Finch Rings $15.4 Million in Q3 Profits
MINNEAPOLIS -- Lower costs and expenses helped Nash Finch Co. here post a profit for the third quarter vs. a year-ago loss while the food distributor's sales declined. In the quarter ended Oct. 6, Nash Finch's quarterly net earnings rang up $15.4 million, or $1.12 per share, compared to a net loss of $4.6 million, or $0.34 per share last year.
The company said third quarter earnings were affected by the effect of resolving two Internal Revenue Service examinations, 2003 statute of limitations expiration, and the filing of various reports to settle potential tax liabilities resulting in a decrease to income tax expense of approximately $4.9 million. Improved inventory management that led to higher gross margins and lower product cost, expense reduction in overall expense structure helped the company to report a profit.
Nash Finch's sales for the quarter declined to $1.367 billion from $1.427 billion in the prior year, while sales for the first 40 weeks 2007 were $3.463 billion vs. $3.532 billion in the prior-year period. The company said third quarter and year-to-date sales declines of 4.2 percent and 2 percent, respectively, resulted primarily from the move of a large customer to another supplier earlier this year, the closure of unprofitable retail stores, and to a lesser degree, customer attrition that occurred in 2006 that has not yet been fully offset by new customer gains in 2007.
In the food distribution segment, sales fell 6 percent to $810 million from $861 million last year, while the military distribution segment netted a 3 percent sales increase to $376 million from $365 million a year ago. Excluding the impact of the $44 million sales decrease during the quarter attributable to the loss of retail customer, South Bend., Ind.-based Martin's Super Markets, Nash Finch said its food distribution segment sales decrease would have been 0.8 percent -- a slight improvement to the year-to-date trend.
Net earnings for the first 40 weeks of 2007 were $30 million, or $2.22 per diluted share vs. net earnings of $3.4 million, or $0.25 per diluted share, in the prior-year period.
"These results reflect the stabilization of the operations within our core food distribution segment as compared to last year," said Alec Covington, Nash Finch's president/c.e.o. "Through our continued focus on inventory management practices, vendor relationships, and operational and overhead expense controls, we have seen significant improvement in our results. In addition, these actions are aiding our customers by providing additional promotional product allowances with deeper discounts resulting in improved overall product costs."
The retail segment sales decreases in both the third quarter and year-to-date comparisons are attributable to the closure of eight stores since the end of the third quarter 2006. Same store sales decreased 1.6 percent in the third quarter 2007 and were down 0.6 percent year-to-date when compared to the same periods in 2006.
The retail segment EBITDA comparisons for the quarter and year-to-date periods were lower due to costs incurred relative to unprofitable stores which were closed, along with expenses associated with a major third quarter marketing campaign launched by the company in one of its core markets. Retail segment EBITDA margins as a percent of sales were slightly improved from the prior year.
During the third quarter and 2007 year-to-date periods, the company repaid $16 million and $41.3 million, respectively, of debt on its senior credit facilities. Its stated key financial objectives remain focused on effectively managing its working capital, reducing indebtedness and improving cash flow. Its debt leverage ratio as of the end of the third quarter 2007 was 2.51, a significant improvement from 3.42 at the end of fiscal 2006.
The company also announced that it wants to declassify its board and is proposing directors be elected annually. Currently, its board is divided into three classes of directors, with the directors serving staggered terms. It plans to present the proposal for amendment at its 2008 annual meeting.
The company said third quarter earnings were affected by the effect of resolving two Internal Revenue Service examinations, 2003 statute of limitations expiration, and the filing of various reports to settle potential tax liabilities resulting in a decrease to income tax expense of approximately $4.9 million. Improved inventory management that led to higher gross margins and lower product cost, expense reduction in overall expense structure helped the company to report a profit.
Nash Finch's sales for the quarter declined to $1.367 billion from $1.427 billion in the prior year, while sales for the first 40 weeks 2007 were $3.463 billion vs. $3.532 billion in the prior-year period. The company said third quarter and year-to-date sales declines of 4.2 percent and 2 percent, respectively, resulted primarily from the move of a large customer to another supplier earlier this year, the closure of unprofitable retail stores, and to a lesser degree, customer attrition that occurred in 2006 that has not yet been fully offset by new customer gains in 2007.
In the food distribution segment, sales fell 6 percent to $810 million from $861 million last year, while the military distribution segment netted a 3 percent sales increase to $376 million from $365 million a year ago. Excluding the impact of the $44 million sales decrease during the quarter attributable to the loss of retail customer, South Bend., Ind.-based Martin's Super Markets, Nash Finch said its food distribution segment sales decrease would have been 0.8 percent -- a slight improvement to the year-to-date trend.
Net earnings for the first 40 weeks of 2007 were $30 million, or $2.22 per diluted share vs. net earnings of $3.4 million, or $0.25 per diluted share, in the prior-year period.
"These results reflect the stabilization of the operations within our core food distribution segment as compared to last year," said Alec Covington, Nash Finch's president/c.e.o. "Through our continued focus on inventory management practices, vendor relationships, and operational and overhead expense controls, we have seen significant improvement in our results. In addition, these actions are aiding our customers by providing additional promotional product allowances with deeper discounts resulting in improved overall product costs."
The retail segment sales decreases in both the third quarter and year-to-date comparisons are attributable to the closure of eight stores since the end of the third quarter 2006. Same store sales decreased 1.6 percent in the third quarter 2007 and were down 0.6 percent year-to-date when compared to the same periods in 2006.
The retail segment EBITDA comparisons for the quarter and year-to-date periods were lower due to costs incurred relative to unprofitable stores which were closed, along with expenses associated with a major third quarter marketing campaign launched by the company in one of its core markets. Retail segment EBITDA margins as a percent of sales were slightly improved from the prior year.
During the third quarter and 2007 year-to-date periods, the company repaid $16 million and $41.3 million, respectively, of debt on its senior credit facilities. Its stated key financial objectives remain focused on effectively managing its working capital, reducing indebtedness and improving cash flow. Its debt leverage ratio as of the end of the third quarter 2007 was 2.51, a significant improvement from 3.42 at the end of fiscal 2006.
The company also announced that it wants to declassify its board and is proposing directors be elected annually. Currently, its board is divided into three classes of directors, with the directors serving staggered terms. It plans to present the proposal for amendment at its 2008 annual meeting.