Nash Finch Company (NAFC) fourth-quarter 2011 earnings (excluding one-time items) of 97 cents per share beat the Zacks Consensus Estimate by 18.3%. However, it slipped 2.5% from the prior-year earnings of $1.00 per share, due to the ongoing macroeconomic headwinds and increasing competition. Net income from continuing operations came down to $12.7 million from $13.1 million in the prior-year quarter.
The adjusted earnings in the fourth quarter of 2011 were negatively affected by significant items of LIFO charges or credits, retail impairments, lease reserve reversal net of termination costs, and loss on write-down of long-lived assets, totaling $4.6 million or 35 cents per share.
Fiscal 2011 earnings increased 8.3% year over year to $3.89 per diluted share compared with $3.56 in the previous year. The fiscal year adjusted earnings surpassed the Zacks Consensus Estimate by 4 cents.
Including the after-tax impact of these one-time items, net earnings in the reported quarter were $8.2 million or 62 cents a share, as opposed to net earnings of $16.9 million, or $1.30 in the prior-year quarter.
Quarterly Details
Total sales of Nash Finch in the fourth quarter 2011 were $1.14 billion, down 0.86% from $1.15 billion in the prior-year quarter. Total comparable sales of Nash Finch shed 0.1% y/y in the fourth quarter of 2011, excluding the impact of lower sales due to closure of seven retail stores during the quarter.
Nash Finch’s cost of sales for the quarter remained flat year over year at $1.05 billion. Selling, general and administrative expense decreased to $60 million from $60.54 million in the prior-year quarter.
Earnings before interest, income tax, depreciation and amortization (EBITDA) in the fourth quarter of 2011 were $34.6 million, up 0.6% y/y from $34.4 million in the prior-year quarter.
Interest expense of Nash Finch for the quarter climbed to $7.1 million from $5.6 million in the fourth quarter of 2010.
Segment Update
Military Distribution: Sales in the quarter increased 5.4% to $564.0 million in the fourth quarter of 2011 from $534.9 million in the prior-year quarter. However, a portion of military sales was not included in the reported net sales of 2011as they were on a consignment basis.
The segment’s EBITDA increased 21.2% y/y to $3.0 million in the fourth quarter of 2011, with an EBITDA margin of 3.0% in the quarter under review, an expansion of 40 basis points from the previous year.
Food Distribution & Retail: The combined Food Distribution and Retail sales decreased 6.4% year-over-year to $572.5 million. The decrease was primarily attributable to the sale or closing of seven retail stores.
Total segment’s EBITDA decreased 14.6% y/y to $10.7 million from $14.6 million in the prior-year quarter. EBITDA margin also contracted from 3.1% to 2.9% in the fourth quarter of 2011.
Financial Update
Cash and cash equivalents of Nash Finch were $773 million as on December 31, 2011, versus $830 million as on January 1, 2011. Long-term debt decreased to $278.5 million at quarter-end from $292.3 million as on January 1, 2011.
Nash Finch continues to focus on effectively managing its balance sheet and is currently in compliance with all of its debt covenants. The debt leverage ratio at the end of the fourth quarter 2011 was 2.14x. Availability on the company’s revolving credit facility at the end of the quarter was $273.6 million.
Share Repurchase and Dividend
Nash Finch didn’t repurchase any shares in the fourth quarter of 2011, but the board of directors of Nash Finch declared a regular quarterly cash dividend of 18 cents per share of common stock.
The dividend will be paid March 23, 2012, to shareholders of record at the close of business on March 9, 2012.
Management declared that Nasch Finch will begin shipping product from the newest facility in Oklahoma City from the first quarter of 2012. It expects a lower EBITDA during 2012 due to increased competition and the anticipated start-up and operational transition costs that are to be incurred at the new Oklahoma facility.
Based in Minneapolis, Minnesota, Nash Finch Company operates as a wholesale food distributor in the United States. Its close competitor is SUPERVALU Inc. (SVU). Nash Finch currently has a Zacks #3 Rank which implies a short-term ‘Hold’ rating on the stock. However, on a long- term basis we remain ‘Neutral’ on the stock.
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