Fiscal Year Adjusted Consolidated EBITDA¹ Increased 2.6% to $145.7 Million and Adjusted EPS² Increased 9.3% to $3.89 per Diluted Share

MINNEAPOLIS--(BUSINESS WIRE)--Mar. 1, 2012-- Nash Finch Company (NASDAQ: NAFC), one of the leading food distribution companies in the United States, today announced financial results for the twelve week (fourth quarter) and fifty-two week (fiscal year) periods ended December 31, 2011.

Financial Results

Total company sales for the fourth quarter 2011 were $1.14 billion compared to $1.15 billion in the prior year quarter, a decrease of 0.9%. Excluding the impact of selling or closing seven retail stores, total company fourth quarter comparable sales increased 0.1% relative to the fourth quarter of last year. Total company sales for fiscal year 2011 were $4.81 billion compared to $4.99 billion in fiscal year 2010, a decrease of 3.7%. Excluding the impact of the sales decrease of $53.2 million attributable to the previously announced transition of a portion of a food distribution buying group to another supplier during 2010 and the effect of selling or closing seven retail stores of $39.1 million, total company fiscal year comparable sales decreased 1.9% relative to last year.

Consolidated EBITDA³, adjusted to exclude the impact of significant items totaling $1.2 million in both the fourth quarter 2011 and 2010, respectively, increased 0.6% to $34.6 million, or 3.0% of sales in the fourth quarter of 2011 as compared to $34.4 million, or 3.0% of sales in the fourth quarter of 2010. Including the impact of significant items, Consolidated EBITDA for the fourth quarter 2011 increased by 0.6% to $33.4 million, or 2.9% of sales, as compared to $33.2 million, or 2.9% of sales, in the prior year quarter. For fiscal year 2011, Consolidated EBITDA, adjusted to exclude the impact of significant items totaling $6.4 million and $4.5 million in 2011 and 2010, respectively, increased 2.6% to $145.7 million, or 3.0% of sales in 2011, compared to $142.0 million, or 2.8% of sales in 2010. Including the impact of significant items, Consolidated EBITDA for the fiscal year 2011 increased by 1.3% to $139.2 million, or 2.9% of sales, compared to $137.5 million, or 2.8% of sales, in the prior year period. Consolidated EBITDA is a non-GAAP financial measure that is reconciled to the most directly comparable GAAP financial results in the attached financial statements.

“We are pleased that the year over year Consolidated EBITDA, adjusted to exclude significant items, improved even though the economic environment remains difficult,” said Alec Covington, President and CEO of Nash Finch. “These results are consistent with our expectations.”

Net earnings in the fourth quarter, adjusted to exclude the impact of significant items totaling $4.6 million or $0.35 per diluted share in 2011 and a benefit of $3.9 million or $0.30 per diluted share in the 2010 quarter, decreased 2.5% to $12.7 million or $0.97 per diluted share in the fourth quarter of 2011, compared to $13.1 million or $1.00 per diluted share in the fourth quarter of 2010. Including the impact of significant items, our reported net earnings for the fourth quarter of 2011 were $8.2 million or $0.62 per diluted share, as compared to net earnings of $16.9 million, or $1.30 per diluted share, in the prior year quarter. For fiscal 2011, net earnings, adjusted to exclude the impact of significant items totaling $15.0 million or $1.15 per diluted share in 2011 and a benefit of $4.0 million or $0.30 per diluted share in 2010, increased 8.3% to $50.8 million or $3.89 per diluted share in 2011, compared to $46.9 million or $3.56 per diluted share in 2010. Including the impact of significant items, our reported net earnings for fiscal 2011 were $35.8 million or $2.74 per diluted share, compared to net earnings of $50.9 million or $3.86 per diluted share, in the prior year period.

The following table identifies the significant items affecting our Consolidated EBITDA, net earnings and diluted earnings per share for the fourth quarter and fiscal year 2011 and prior year results:

The military segment net sales increased 5.4% in the fourth quarter 2011 and 2.2% in the fiscal 2011 period compared to the prior year. However, a slightly larger portion of military sales during the current year have been on a consignment basis, which are not included in our reported net sales. The year-over-year increase in consignment sales was $3.4 million during the fourth quarter and $15.0 million in the fiscal year period. Including the impact of consignment sales, comparable military sales increased 5.8% in the fourth quarter 2011 and 2.7% in the fiscal 2011 period compared to the prior year.

The military segment EBITDA increased by $3.0 million or 21.2% in the fourth quarter 2011 and by $7.6 million or 12.4% in fiscal 2011 period compared to the same periods last year. The increase in military EBITDA is primarily due increased sales as well as cost savings achieved from opening the Columbus, Georgia and Bloomington, Indiana distribution centers and from improvements in inventory management. The military EBITDA as a percentage of sales in the current quarter was 3.0% as compared to 2.6% in the fourth quarter last year and 2.9% as compared to 2.7% in fiscal 2011 and 2010, respectively.

“We are proud to serve military families and in 2011 we focused our efforts on additions and improvements to our infrastructure that should enable us to serve even more military families. The capital investments we have made in new facilities have contributed significantly to the fiscal 2011 increase in our military segment EBITDA results. In the fourth quarter, we continued to attract new business to our Bloomington, Indiana military distribution center as a direct result of exceptional customer service being provided by our Bloomington team,” said Covington.

“We are pleased to announce that during the first quarter of 2012 we will begin shipping product from our newest facility in Oklahoma City, Oklahoma. While this facility and the continued momentum enjoyed in our newer facilities will no doubt add additional opportunities for MDV during 2012, the business environment has become extremely competitive in several parts of the country. As a result of the increased competition and the anticipated start-up and operational transition costs to be incurred at our new Oklahoma facility, we expect year over year EBITDA from our military segment to be lower in 2012 as compared to 2011,” said Covington.

“We have not allowed the increased competition or the less than favorable economic conditions to dampen our resolve to invest in our military footprint. The RONA results achieved by our military segment -- which are the highest level of results in our company -- are proving out the wisdom of those investments made during challenging times. We will continue our focus on delivering long term results for our shareholders, and not sacrifice long term strategy for short term gains,” continued Covington.

The combined food distribution and retail segment sales decrease in the fourth quarter and fiscal 2011 compared to the 2010 periods was 6.4% and 8.7%, respectively. The decrease in sales was negatively impacted in the quarter by $11.3 million due to the sale or closing of seven retail stores since the end of the third quarter of 2010. 2011 fiscal year sales were negatively affected by $39.1 million due to the reduction of these seven stores from our portfolio in addition to being impacted by the previously announced transition of a portion of a customer buying group to another supplier during the second quarter 2010 of $53.2 million. After adjusting to exclude these impacts, our comparable sales declined 4.8% for the fourth quarter and 5.5% in fiscal 2011. Retail same store sales declined 1.6% as compared to the prior year quarter and 2.1% in fiscal 2011.

The food distribution and retail segment EBITDA decreased by $2.9 million or 14.6% in the fourth quarter 2011 and by $5.7 million or 7.6% in the fiscal 2011 period compared to the same periods last year. The food distribution and retail segment EBITDA as a percentage of sales was 2.9% in the fourth quarter and fiscal year 2011 as compared to 3.1% and 2.8% in the prior year periods. The decrease in fourth quarter and fiscal year EBITDA was partially due to significant items of $0.8 and $2.8 million, respectively.

“We are pleased that during 2011 our year over year food distribution segment sales performance improved sequentially each quarter throughout the year, proof that investments we are making in new programs and services are delivering results. During 2012 we anticipate making additional investments in new program offerings designed to provide additional long term revenue growth in this segment. Due to these anticipated investments in addition to our expectation that food inflation will reduce to more normalized levels in 2012, we expect that our food distribution segment EBITDA results will be under pressure throughout 2012. It is our belief, however, that the investments we are making in this segment will provide growth opportunities within this segment beyond 2012,” said Covington.

Financial Target Progress

Improvements on our key financial targets have been achieved to date since the targets were announced as part of the Company’s strategic plan in November 2006. In particular, Consolidated EBITDA margin improved from 2.2% to 2.9% of sales and the debt leverage ratio has improved from 3.11x to 2.14x in fiscal 2006 compared to fiscal 2011. The ratio of free cash flow to net assets excluding the impact of strategic projects has increased from 8.7% in fiscal 2006 to 13.9% in fiscal 2011.

The following table charts the Company’s progress towards its long-term financial targets that are anticipated to be attained through successful execution of the strategic plan.

Liquidity

Total debt at the end of the fourth quarter of 2011 decreased by $17.0 million to $297.4 million since the beginning of the fiscal year. The Company continues to focus on effectively managing its balance sheet and is currently in compliance with all of its debt covenants. The debt leverage ratio as of 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. As previously announced, during the fourth quarter of 2011, the Company completed the refinancing of our Asset Based Lending agreement for a new five year $520 million dollar facility which will provide long term financial stability.

“We continue to benefit from an extremely strong balance sheet and are well positioned to benefit from opportunities that are accretive and create shareholder value,” said Alec Covington.

¹ Adjusted Consolidated EBITDA is defined as Consolidated EBITDA, as defined in footnote 3, adjusted for any significant charges.

² Adjusted EPS is defined as net earnings adjusted for any significant charges divided by diluted shares outstanding.

³ References to EBITDA, Consolidated EBITDA, and segment EBITDA are calculated as earnings before interest, income tax, depreciation and amortization, adjusted to exclude extraordinary gains or losses, gains or losses from sales of assets other than inventory in the ordinary course of business, and non-cash charges (such as LIFO, asset impairments, closed store lease costs and share-based compensation), less cash payments made during the current period on non-cash charges recorded in prior periods. Consolidated EBITDA should not be considered an alternative measure of our net income, operating performance, cash flows or liquidity. Consolidated EBITDA is provided as additional information as a key metric used to determine payout pursuant to our Short-Term and Long-Term Incentive Plans. The Company also believes investors find the information useful because it reflects the resources available for strategic investments including, for example, capital needs of the business, strategic acquisitions and debt service.

⁴ Organic Revenue Growth is the percentage change in revenues for a fiscal period(s) compared to the similar prior year fiscal period(s), excluding incremental revenue obtained through acquisitions.

⁵ Consolidated EBITDA Margin is calculated by dividing Consolidated EBITDA by sales.

⁶ Trailing Four Quarter Free Cash Flow to Net Assets ratio is defined as cash provided from operations less capital expenditures for property, plant & 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).

⁷ Trailing Four Quarter Free Cash Flow to Net Assets excluding impact of strategic projects ratio is defined as cash provided from operations less capital expenditures for property, plant & equipment (excluding capital expenditures for strategic projects) during the trailing four quarters divided by the average net assets (excluding average net assets generated from strategic projects) for the current period and prior year comparable period (total assets less current liabilities plus current portion of long-term debt and capital leases).

⁸ Total Leverage Ratio is defined as total debt (current portion of long-term debt and capital leases, long-term debt and capitalized lease obligations) divided by the trailing four quarters Consolidated EBITDA.

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A conference call to review the fourth quarter 2011 results is scheduled for 9 a.m. CT (10 a.m. ET) on March 1, 2012. Interested participants can listen to the conference call over the Internet by logging onto the “Investor Relations” portion of Nash Finch's website at http://www.nashfinch.com. A replay of the webcast will be available and the transcript of the call will be archived on the “Investor Relations” portion of Nash Finch's website under the heading “Audio Archives.” A copy of this press release and the other financial and statistical information about the periods to be discussed in the conference call will be available at the time of the call on the “Investor Relations” portion of the Nash Finch website under the caption “Press Releases.”

Nash Finch Company is a Fortune 500 company and one of the leading food distribution companies in the United States. Nash Finch’s core business, food distribution, serves independent retailers and military commissaries in 36 states, the District of Columbia, Europe, Cuba, Puerto Rico, the Azores, Bahrain and Egypt. The Company also owns and operates a base of retail stores, primarily supermarkets under the Econofoods®, Family Thrift Center®, AVANZA®, Family Fresh Markets®, Savers Choice^TM, Wally’s Supermarkets^TM and Sun Mart® trade names. Further information is available on the Company's website at www.nashfinch.com.

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements relate to trends and events that may affect our future financial position and operating results. Any statement contained in this release that is not statements of historical fact may be deemed forward-looking statements. For example, words such as “may,” “will,” “should,” “likely,” “expect,” “anticipate,” “estimate,” “believe,” “intend, ” “potential” or “plan,” or comparable terminology, are intended to identify forward-looking statements. Such statements are based upon current expectations, estimates 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 or contribute to material differences include, but are not limited to, the following:

• the effect of competition on our food distribution, military and retail businesses;

• general sensitivity to economic conditions, including the uncertainty related to the current state of the economy in the U.S. and worldwide economic slowdown; 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;

• macroeconomic and geopolitical events affecting commerce generally;

• changes in consumer buying and spending patterns;

• our ability to identify and execute plans to expand our food distribution, military and retail operations;

• possible changes in the military commissary system, including those stemming from the redeployment of forces, congressional action and funding levels;

• our ability to identify and execute plans to improve the competitive position of our retail operations;

• the success or failure of strategic plans, new business ventures or initiatives;

• 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;

• changes in credit risk from financial accommodations extended to new or existing customers;

• significant changes in the nature of vendor promotional programs and the allocation of funds among the programs;

• limitations on financial and operating flexibility due to debt levels and debt instrument covenants;

• legal, governmental, legislative or administrative proceedings, disputes, or actions that result in adverse outcomes;

• our ability to identify and remediate any material weakness in our internal controls that could affect our ability to detect and prevent fraud, expose us to litigation, or prepare financial statements and reports in a timely manner;

• changes in accounting standards;

• technology failures that may have a material adverse effect on our business;

• severe weather and natural disasters that may impact our supply chain;

• unionization of a significant portion of our workforce;

• costs related to a multi-employer pension plan which has liabilities in excess of plan assets;

• changes in health care, pension and wage costs and labor relations issues;

• product liability claims, including claims concerning food and prepared food products;

• threats or potential threats to security;

• unanticipated problems with product procurement; and

• maintaining our reputation and corporate image.

A more detailed discussion of many of these factors, as well as other factors that could affect the Company’s results, is contained in the Company’s periodic reports filed with the SEC. You should carefully consider each of these factors and all of the other information in this release. We believe that all forward-looking statements are based upon reasonable assumptions when made. However, we caution that it is impossible to predict actual results or outcomes and that accordingly you should not place undue reliance on these statements. Forward-looking statements speak only as of the date when made and we undertake no obligation to revise or update these statements in light of subsequent events or developments. Actual results and outcomes may differ materially from anticipated results or outcomes discussed in 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).

Source: Nash Finch Company

Nash Finch Company
Bob Dimond, 952-844-1060
Executive VP & CFO