MINNEAPOLIS - Three executives, including LeAnne Stewart, chief financial officer, will leave Nash Finch Co. here as part of a restructuring, the company said last week.
The organizational changes appear to be a first step in stabilizing the company for a turnaround under its new chief executive officer, Alec Covington. Covington joined the troubled distributor earlier this year and in a recent conference call emphasized a need to end rapid executive turnover so that the company can get a fresh start.
Nash Finch has lost several executives in the last few years, including former CEO Ron Marshall, who resigned in February along with Kathleen McDermott, executive vice president and general counsel, as the company faced investigation from the Securities and Exchange Commission and a class-action lawsuit alleging securities fraud (see related story). Controller Kathryn Miller resigned in June after only seven months at Nash; she replaced Mark Sorenson, who resigned in November.
Among the new appointees at Nash Finch are two executives from AmeriCold, the Atlanta-based distribution company where Covington formerly served as CEO.
"The enhancements to Nash Finch's organizational structure better position us to drive productivity, strengthen the operations of each business group and hone our competitive edge in the industry," Covington said in a statement.
The restructuring will result in the creation of a companywide supply chain management group, which will include warehouse operations, transportation, procurement and military distributions; and a food distribution group focusing on customer relations, merchandising and sales, Nash said. Certain functions that were previously a part of Nash Finch's military and food distribution groups - including warehouse operations, transportation and procurement- will be transitioned to supply chain management to improve operational efficiencies, Nash said.
Jeffery E. Poore, formerly senior vice president-military, has been named executive vice president, and will lead the new supply chain management group. Edward L. Brunot has been named senior vice president of military distribution, which will be organized within the supply chain group. Brunot is new to the company and a former senior vice president at AmeriCold.
Covington will lead the food distribution group until a new executive vice president is named, Nash said. Terry Littrell, who formerly held the position of senior vice president, food distribution, will assume the role of vice president, food distribution, Southeast region, Nash said.
Along with the changes, Stewart announced her intention to resign from her role as senior vice president, chief financial officer and treasurer. In addition, Bruce Cross, executive vice president, merchandising, and Joe R. Eulberg, senior vice president, human resources, will also leave the company.
Nash Finch said it would pay the three exiting executives a total of $4 million in severance and benefit costs, including $1.1 million to Stewart. The three executives were among 16 officers of the company who signed retention agreements last year after Marshall announced his pending resignation and the company disclosed financial troubles.
Stewart, who joined Nash Finch in 1999 and was named CFO in 2004, will stay with the company while it conducts a search for a new CFO, Nash said.
New appointments at Nash Finch include Calvin S. Sihilling, named executive vice president and chief information officer. Sihilling formerly served the same roles at AmeriCold and Richfood Holdings. Kathleen Mahoney, vice president and deputy general counsel at Nash Finch, was named senior vice president, secretary and general counsel. Mahoney had been serving that role on an interim basis since the resignation of McDermott.
MINNEAPOLIS - Nash Finch is expected to respond this month to an amended complaint in a class-action lawsuit alleging the distributor and several of its former executives falsely represented the benefits of its acquisition of two Roundy's distribution centers last year, a lawyer for the plaintiffs told SN.
The class-action suit was filed in December but was consolidated with other cases making similar allegations. The amended complaint, filed in late June in U.S. District Court here, details a number of integration difficulties Nash Finch encountered with the former Roundy's properties, and charges that company officials, including Ron Marshall, the former chief executive officer, and LeAnne Stewart, the chief financial officer who last week announced her resignation from Nash Finch, issued false statements about the deal to artificially inflate the stock price.
Typically, a company has 60 days to respond to a complaint, Nathan Prossor, an attorney for Minneapolis-based Lockridge Grindal Nauen, representing the plaintiffs, told SN last week. In addition, the suit alleges that Marshall's selling of $12.9 million in company stock last summer, and the subsequent announcement of his resignation in September, indicate "highly suspicious" activity that "confirm[s] ... knowing participation in the fraudulent scheme." Kathleen McDermott, the company's former general counsel who resigned last winter, also made suspicious trades, selling nearly all her holdings in company stock at the time, the suit alleges.
Separately, the Securities and Exchange Commission is conducting an investigation of insider selling by Nash officials. Nash Finch said it was participating in the ongoing investigation and the SEC said it would not comment unless specific action is taken.
Several of the allegations in the suit are based on information from former employees of Nash and the Westville and Lima distribution centers it acquired from Roundy's last March. The witnesses, identified only by their job titles, say Nash negatively impacted the results from the acquired properties by changing or discontinuing advertising programs with vendors, then charging fees to the vendors in an attempt to make up lost earnings. Such "abusive vendor billing practices" damaged relationships with vendors and caused the loss of numerous grocery customers, the suit said.
In addition, witnesses claim, earnings projections for various Nash Finch departments and facilities were adjusted to make up for underperformance at the Westville and Lima centers, indicating the company had knowledge of difficulties at the centers.
Nash Finch said in March 2005 that the acquisition of Lima and Westville would be immediately accretive to earnings, representing around $1 billion in annual sales. The company last July increased its annual earnings-per-share guidance to $3.70 to $3.89, only to lower guidance to $3.00 to $3.25 in October, citing integration difficulties associated with the purchase. Its actual full-year earnings, announced in March, were $3.13 a share.
The class contains "hundreds, if not thousands" of investors who held Nash Finch stock between Feb. 24, 2005, and Oct. 20, 2005. The case seeks, among other remedies, accounting for and disgorgement of insider trading proceeds, restitution of money lost by investors, and compensatory damages for the lead plaintiff.