MINNEAPOLIS - Nash Finch here said it would take a pretax charge of about $6 million to $8.5 million in the second quarter after one of its customers was the subject of action by another creditor.
The wholesaler said the charge reflects "impairment of certain retail properties leased to the customer and additional bad debt expense related to accounts and notes receivable owed by this customer."
It was not clear last week whether that customer was Carter's Food Centers, the 14-store chain based in Charlotte, Mich., that has long been cited by industry sources as a potential liability for Nash Finch. Tom Robinson, president of Carter's, which is employee-owned, declined to comment to SN on reports that the chain was preparing to close its stores. An attorney for Carter's could not be reached for comment.
The chain, which was supported financially by Nash Finch as a lender and a leaseholder, was recently sued by a local produce supplier for nearly $1 million in unpaid invoices, and local reports said the company appeared to be letting its inventory run out in some stores. A manager at one store, when asked by SN if it was going to close, replied, "Not yet," and other managers told SN they had not been informed one way or the other.
Lee Ann Stewart, chief financial officer, Nash Finch, said it was against the company's policy to discuss specific customers by name. In a prepared statement, Nash Finch said the customer that caused the planned write-down accounted for about $20 million of Nash Finch's distribution sales in 2005, or less than 1%.
"Although not overly material to Nash Finch's operating cash flow, the write-down raises the broader question about how much exposure Nash Finch may have to other struggling customers," wrote analyst Steve Chick of J.P. Morgan Securities, New York, in a research note.
In the case of the produce supplier that has sued Carter's, the vendor late last week was awaiting a court decision about how the chain could come up with the money to repay its debt, according to David Bevins of Grand Rapids law firm Rhoades McKee, which represented J.A. Besteman Co., the supplier.
Besteman had originally sought more than $1 million owed to it by Carter's under the Perishable Agricultural Commodities Act, but settled on a total of $940,916, he said.
