Nash Finch Beats Overall

Nash Finch Company’s (NAFC - Analyst Report) second-quarter 2012 earnings (excluding one-time items) of 69 cents per share surpassed the Zacks Consensus Estimate of 59 cents by 17.0%.

However, it plunged 25.0% from prior-year quarter’s earnings of 92 cents per share, due to the ongoing macro-economic headwinds and increasing competition.

Quarterly Details

Nash Finch’s total sales in the second quarter 2012 were $1.09 billion, marginally down from $1.10 billion in the prior-year quarter. The takeover of 12 Bag ‘N Save stores boosted total company sales by $13.0 million. Sales were above the Zacks Consensus Estimate of $1.08 billion.

Nash Finch’s total comparable sales dipped 1.5% year over year in the reported quarter, excluding the impact of lower sales due to regular sale/closing of retail stores.

Adjusted EBITDA in the second quarter of 2012 was $27.8 million or 2.5% of sales, as compared with $34.4 million or 3.1% of sales in the prior-year quarter. Selling, general and administrative expenses went up to $62.9 million from $60.2 million in the prior-year quarter.

Segment Update

Military Distribution: Sales declined 1.1% to $523.2 million in the second quarter of 2012 from $529.1 million in the prior-year quarter. The decrease in sales is attributed to the increased competition faced by the company in this segment

The segment’s EBITDA decreased to $11.8 million in the second quarter of 2012 from $14.8 million in the prior-year quarter. EBITDA margin was 2.3% in the reported quarter, down 50 basis points from the previous-year quarter.

Food Distribution & Retail: The combined Food Distribution and Retail sales was almost flat compared to year-ago quarter at $569.6 million. The decrease was primarily attributable to the sale/closing of retail stores.

Segment’s EBITDA decreased to $14.4 million from $18.5 million in the prior-year quarter. EBITDA margin contracted 80 basis points year over year to 2.5% in the reported quarter.

Financial Update

Cash and cash equivalents for Nash Finch were $857 million as of June 16, 2012, versus $700 million as on March 24, 2012. Long-term debt went up to $337.4 million at quarter-end from $298.1 million as on March 24, 2012.

Share Repurchase and Dividend

Nash Finch did not repurchase any shares in the first quarter of 2012. Nash Finch’s board of directors declared a regular quarterly cash dividend of 18 cents per share of common stock payable on September 7, 2012 to shareholders of record at the close of business on August 24, 2012.

Guidance

The company expects EBITDA to improve in the third quarter on the back of potential improvement in its food distribution business due to discontinuation of supply to Kmart which had been generating loss for several years.

Our Recommendation

Nash Finch currently has a Zacks #3 Rank, which implies a short-term Hold rating.

Based in Minneapolis, Minnesota, Nash Finch operates as a wholesale food distributor in the United States. Its close competitor is Supervalu Inc. (SVU - Analyst Report).