Nash Finch Reports Second Quarter 2013 Results

Nash Finch Reports SecondQuarter 2013 Results

Total Company Sales Increased 9.1%

Adjusted EPS¹of $0.64

MINNEAPOLIS--(BUSINESS WIRE)-- Nash Finch Company (NAS: NAFC) , one of the leading food distribution companies in the United States, today announced financial results for the twelve weeks (second quarter) ended June 15, 2013.

Financial Results

Total Company sales for the second quarter 2013 were $1.20 billion compared to $1.10 billion in the prior-year quarter, an increase of 9.1%. The acquisition of twelve Bag 'N Save and eighteen No Frills stores last year contributed to a net increase in total Company sales of $23.1 million, which is comprised of a $50.9 million increase in Retail segment sales being partially offset by a $27.8 million decrease in Food Distribution segment sales that are now reported in the Retail segment.

Adjusted Consolidated EBITDA², was $26.9 million, or 2.2% of sales in the second quarter of 2013 as compared to $27.8 million, or 2.5% of sales in the second quarter of 2012. Consolidated EBITDA³ was adjusted to exclude the impact of significant items that net to zero and a charge of $1.6 million in the second quarter of 2013 and 2012, respectively. Including the impact of significant items, Consolidated EBITDA for the second quarter 2013 was $26.9 million, or 2.2% of sales, as compared to $26.2 million, or 2.4% of sales, in the prior year quarter.

"We are pleased to report strong sales growth across all three of our business segments in the second quarter. The strategic investments made last year are now becoming evident in our top-line," said Alec Covington, President and CEO of Nash Finch. "Consolidated EBITDA came in relatively flat as expected compared to the prior year. We will continue to see pressure on the military segment gross margin until the fourth quarter when we cycle the reductions made to contractual margin rates."

Adjusted Net Earnings⁴ were $8.4 million or $0.64 per diluted share in the second quarter 2013 compared to $9.0 million or $0.69 per diluted share in the second quarter 2012. Net earnings were adjusted to exclude the impact of significant items totaling a benefit of $0.5 million or $0.04 per diluted share in 2013 and a charge of $94.0 million or $7.24 per diluted share in 2012. Including the impact of significant items, our reported net earnings for the second quarter of 2013 were $8.9 million or $0.68 per diluted share, as compared to a net loss of $85.0 million or $6.55 per diluted share in 2012.

The following table identifies the significant items affecting our Consolidated EBITDA, net earnings and diluted earnings per share for the second quarter 2013 and prior year results:

Military Distribution Results

The Military segment net sales increased 2.2% to $537.5 million in the second quarter compared to the prior year. The Military segment EBITDA was $6.9 million or 1.3% of sales, in the second quarter 2013 as compared to $11.8 million, or 2.2% of sales, in the second quarter 2012. The decrease in Military EBITDA was primarily due to declines in margins related to lower inflation year-over-year and reduced contractual margin rates as well as from incurring several large casualty insurance claims related to transportation accidents.

"We were pleased to see military sales increase a solid 2.2% during the second quarter," said Covington. "The military management team has worked diligently to attract new business to utilize our world-wide military distribution network, and we look forward to the addition of perishable and frozen capacity in our new Landover facility early next year, which is the final milestone in the completion of our worldwide network," continued Covington.

Food Distribution & Retail Results

The combined Food Distribution and Retail segment sales increased 15.4% to $667.3 million in the second quarter of 2013 as compared to the prior year period. The increase in Retail sales was primarily attributable to the Bag 'N Save and No Frills acquisitions, which were responsible for a $50.9 million year-over-year increase in sales in the second quarter of 2013. Because Bag 'N Save and No Frills were Food Distribution customers, these acquisitions were also responsible for a $27.8 million decrease in Food Distribution sales in the second quarter of 2013. Retail same store sales declined 4.1% in 2013 as compared to the prior year quarter.

The combined Food Distribution and Retail segment EBITDA was $20.0 million, or 3.0% of sales, in the second quarter 2013 as compared to $14.4 million, or 2.5% of sales, in the second quarter 2012. The increase in second quarter EBITDA was primarily due to increased retail sales from the acquisitions and a gain on early termination of a long-term supply agreement with a food distribution customer.

"Sales showed strong growth in both of the Food Distribution and Retail segments during the second quarter. The increases were driven by the addition of new Food Distribution customers as well as in Retail due to the Omaha store acquisitions last year," said Covington. "We recently realigned the Food Distribution organizational structure to place more focus on sales, new business development and customer service. We are already beginning to see the benefits of this change."

Liquidity

Total debt at the end of the second quarter 2013 was $433.0 million as compared to $373.3 million at the end of fiscal 2012. The Company continues to focus on effectively managing its balance sheet and is currently in compliance with all of its debt covenants. The Total Debt Leverage Ratio⁵ as of the end of the second quarter 2013 was 4.05. Availability on the Company's revolving credit facility at the end of the quarter was $184.3 million.

Merger

On July 22, 2013, the Company announced that it had entered into a definitive merger agreement under which Nash Finch and Spartan Stores will combine in an all-stock merger valued at approximately $1.3 billion, including existing net debt at each company. The Merger Agreement was unanimously approved by the Company's Board of Directors. Upon closing, which is expected by the end of calendar 2013, each share of the Company's common stock will be converted into 1.2 shares of Spartan's common stock. Spartan Stores shareholders will own approximately 57.7% of the equity of the combined company and Nash Finch shareholders will own approximately 42.3% of the Company's common stock

¹ Adjusted EPS is defined as earnings per share adjusted for any significant items.

² Adjusted Consolidated EBITDA is defined as EBITDA adjusted for any significant items.

³ References to EBITDA, Consolidated EBITDA, and segment EBITDA are calculated as earnings (loss) 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 (loss), 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 Adjusted Net Earnings is defined as net earnings adjusted for any significant items.

⁵ 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.

A conference call to review the second quarter 2013 results is scheduled at 9:30 a.m. CT (10:30 a.m. ET) on July 25, 2013. 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 is a Fortune 500 company and the largest food distributor serving military commissaries and exchanges in the United States. Nash-Finch's core businesses include distributing food to military commissaries and retailers located in 44 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 Family Fresh Market®, Econofoods®, Family Thrift Center®, No Frills®, Bag 'n Save®, AVANZA®, and Sun Mart® trade names. Further information is available on the Company's website, 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 traditional and alternative 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 including a shift to non-traditional retail channels;

• 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, changes in funding levels or the effect of mandated reductions or sequestration of government expenditures;

• 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 and ability to access capital to support capital spending and growth opportunities;

• 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;