SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, DC. 20549
FORM 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 22, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15
(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period_______________________
to
___________________.
Commission file number: 0-16900
RICHFOOD HOLDINGS, INC.
Incorporated under
the laws I.R.S.EmployerIdentification
of Virginia No.54-1438602
8258 Richfood Road
Mechanicsville, Virginia 23111
Telephone Number (804) 746-6000
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13
or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter
period that the Registrant was required to file such
reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes
x . No___.
The number of shares outstanding of the Registrants
common stock as of August 25, 1995, was as follows:
Common Stock, without par value: 21,431,645 shares.
ITEM 1. FinancialStatements
RICHFOOD HOLDINGS, INC. AND
SUBSIDIARIES CONSOLIDATED
STATEMENTS OF EARNINGS
(Dollar amounts in thousands, except per share
data)
(Unaudited)
First Quarter Ended
July 22, July23,
1995 1994
(12 Weeks) % (12 Weeks) %
Sales $ 395,776 100.00 $ 296,466 100.00
Costs and expenses, net:
Cost of goods sold 360,712 91.14 271,677 91.64
Operating and adminis-
trative expenses 24,473 6.18 16,642 5.61
Interest expense 981 0.25 855 0.29
Interest income (695) (0.18) (624) (0.21)
Earnings before income 10,305 2.61 7,916 2.67
Income taxes 3,939 1.00 3,048 1.03
taxes
Net earnings $ 6,366 1.61 $ 4,868 1.64
Net earnings per
common share $ 0.30 $ 0.23
Cash dividends declared
per common share $ 0.025 $0.025
Average common shares
outstanding 21,428,187 21,352,819
See accompanying notes to the consolidated financial
statements.
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
July 22, April 29,
1995 1995
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 3,025 $9,678
Receivables, less allowance for
doubtful accounts of $2,803 and
$2,783 70,448 60,500
Inventories 93,039 87,793
Other current assets 5,863 6,046
Total current assets 172,375 164,017
Notes receivable, less allowance
for doubtful accounts of
$1,077 and $1,077 24,547 25,769
Property and equipment, net 82,444 83,418
Other assets 36,014 35,130
Total assets $ 315,380 $ 308,334
Liabilities and Stockholders
Equity
Current liabilities:
Current installments of
long-term debt
and capital lease obligations $ 3,300 $ 3,052
Accounts payable 96,888 95,379
Accrued expenses and other current
liabilities 22,164 22,065
Total current liabilities 122,352 120,496
Long-term debt and capital lease
obligations 49,303 50,305
Deferred credits and other 14,956 15,224
Stockholders equity:
Preferred stock, without par value - -
Common stock, without par value 24,624 24,529
Retained earnings 104,145 97,780
Total stockholders equity 128,769 122,309
Total liabilities and
stockholders equity $ 315,380 $ 308,334
See accompanying Notes to the Consolidated
Financial Statements.
Richfood Holings,Inc Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
First Quarter Ended
July 22, July 23,
1995 1994
(12 Weeks)(12 Weeks)
Operating activities:
Net earnings $ 6,366 $ 4,868
Adjustments to reconcile net
earnings to net cash
used for operating
activities: Depreciation
and amortization 3,779 2,700
Provision for doubtful
accounts 587 462
Other, net (1,308) (913)
Changes in operating
assets and liabilities:
Receivables (10,418) (6,079)
Inventories (5,246) (1,261)
Other current assets 560 343
Accounts payable,
accrued expense
and other liabilities 2,364 (125)
Net cash used for
operating activities (3,316) (5)
Investing activities:
Purchases of property
and equipment (1,689) (827)
Issuance of notes receivable (3,849) (7,062)
Collections on notes
receivable 4,233 4,133
Other, net (801) 54
Net cash used for
investing activities (2,106) (3,702)
Financing activities:
Repayments on long-term debt,
net of proceeds (784) (486)
Proceeds from issuance of common
stock under employee stock
incentive plan 89 29
Cash dividends paid on
common stock (536) (427)
Net cash used for financing
activities (1,231) (884)
Net decrease in cash and
cash equivalents (6,653) (4,591)
Cash and cash equivalents at
beginning of period 9,678 17,009
Cash and cash equivalents at
end of period $ 3,025 $12,418
See accompanying Notes to the Consolidated Financial
Statements.
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The consolidated financial statements of Richfood
Holdings,
Inc. and subsidiaries("the Company") presented herein are
unaudited (except for the consolidated balance sheet as of
April 29, 1995, which has been derived from the audited
consolidated balance sheet as of that date), and have been
prepared by the Company pursuant to the rules and regulations
of the Securities and Exchange Commission. The accounting
policies and principles used to prepare these interim
consolidated financial statements are consistent in all
material respects with those reflected in the consolidated
financial statements included in the Annual Report on Form 10-K
for the fiscal year ended April 29, 1995 (fiscal 1995).
In the opinion of management, such consolidated financial
statements include all adjustments, consisting of normal
recurring adjustments and the use of estimates, necessary to
summarize fairly the Company's financial position and results
of operations. Certain information and note disclosures
normally included in consolidated financial statements
prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and
regulations. These consolidated financial statements should
be read in conjunction with the consolidated financial
statements and notes thereto included in the Annual
Report on Form 10-K for fiscal 1995. The results of operations
for the twelve week period ended July 22, 1995, may
not be indicative of the results that may be expected
for the fiscal year ending April 27, 1996 (of fiscal
1996).
Note 2
On August 23, 1994, the Company acquired all of the outstanding
common stock of Rotelle, Inc. (Rotelle), a wholesale frozen
food distributor headquartered near Philadelphia,Pennsylvania.
The purchase price of the acquisition was $50.7 million and was
funded by borrowings under a new $35.0 million revolving credit
facility, together with internally generated funds and
borrowings under an existing revolving credit facility.The
Company accounted for the acquisition under the purchase
method of accounting. Accordingly, the results of operations
of the acquired business have been included in the
Companys Consolidated Statement of Earnings since the date of
the acquisition. On April 3, 1995, the Company acquired certain
assets and assumed certain contracts of the wholesale
grocery division of Camellia Food Stores, Inc.
(Camellia), a wholesale and retail food distributer
headquartered in Norfolk, Virginia. As result of that
acquisition, the Company serves as wholesale supplier to
Camellias 46 retail stores and most of the 120 independent
retail stores that previously had been served by Camellias
wholesale division. The purchase price of the
acquisition was approximately $7.1 million. See Note 2 to
the Consolidated Financial Statements included in the Companys
Annual Report on Form 10-K for fiscal 1995.
Note 3 On June 26, 1995, the Company announced the signing of a
definitive Agreement and Plan of Reorganization (the Reorganization
Agreement) with Super Rite Corporation (Super
Rite), headquartered Harrisburg,Pennsylvania, pursuant to which the
Company will acquire Super Rite through a tax-free merger ( the
Merger). Super Rite is a fullservice wholesale food distributor
supplying 238 supermarkets in Pennsylvania, New Jersey, Maryland,
Delaware, Virginia and West Virginia. Super Rite also operates a
retail grocery divisionconsisting of eight METRO superstores and
seven BASICS supermarkets. The following description of the
acquisition is qualified in itsentirety by reference to the
Companys Current Report on Form 8K dated June 26, 1995, which is
incorporated herein by reference.Under the terms of the
Reorganization Agreement, the Company will issue 1.0205 shares ofits
common stock for each outstanding share of Super Rite common stock,
representing a value of $22.00 per Super Rite share based upon the
Company's average stock price for the thirty trading days preceding
June 26, 1995.Super Rite had approximately 9.6 million shares of
common stock outstanding at June 3, 1995. Upon consummation of the
Merger, former Super Rite shareholders will hold approximately 31%
of the Company's total common stock outstanding. Prior to the
execution of the Reorganization Agreement,the transaction was
approved by the boards of directors of both companies, but
remains subject to approval by the shareholders of both
companies and other customary closing conditions. The transaction
is expected to be accounted for as a pooling of interests
and is currently expected to be completed by the end of calendar
1995.
After the Merger is completed, Super Rite will operate
as a separate, wholly-owned subsidiary of the Company. The
combined company is expected to have annual net sales in
excess of $3.0 billion, based on the most recent fiscal
year results for the Company and Super Rite. The combined
company is expected to serve over 1,700 retail
grocery stores throughout the Mid-Atlantic region.
Note 4. In connection with the Merger, Super Rite, its directors
and the Company have been named as defendants in a class
actionsuit commenced in the Court of Chancery, County of New Castle,
Delaware(the Class Action), entitled Harbor Finance Partners v.
Alex Grass, David Gundling, John Ryder, Martin L. Grass, H. Irwin
Levy, Neil Norry,Peter Vanderveen, Super Rite Corporation and
RichfoodHoldings, Inc., C.A. No. 14379. The claims in the Class
Action are brought by a purported stockholder of Super Rite on
behalf of a purported class of persons (the Class) consisting
of allstockholders of Super Rite, except the named defendants and
any person, firm, trust, corporation or other entity related to
or affiliated with any of the defendants. Among other things,
theClass Action asserts that: the Merger is unfair to the
stockholders of Super Rite; the defendants have and are continuing to
prevent the Class from receiving the maximum value per share that
could be received in a merger or business combination;
thedefendants wrongfully failed or refused to obtain or at empt
to obtain a purchaser for the assets of Super Rite at a price higher
than that being offered; the defendants breached or aided and
abetted the breach of the fiduciary and other common law duties
owed to theClass, including failure to include in the Reorganizaton
Agreement a mechanism protecting against significant fluctuation in the
price of the Companys common stock; and the Class would be
irreparably damaged were the Merger consummated. The complaint
seeks, among other things, a preliminary and permanent injunction
against the consummation of the Merger, a judgment ordering that the
defendants comply with their fiduciary and other common law duties,
and, in the event the Merger is consummated, an order rescinding it
and setting it aside, and an award of rescissory and/or
compensatory damages against the defendants. Super Rite, the
Company and the other defendants believe that the plaintiffs
allegations are factually inaccurate and without merit and
intend to defend themselves vigorously.
The Company is party to other legal actions that are
incidental to its business. While the outcome of such
legal actions cannot be predicted with certainty, the Company
believes that the outcome of any of these proceedings, or
all of them combined, will not have a material adverse
effect on its consolidated financial position or business.
ITEM 1. Legal Proceedings
See Note 4 to the Notes to Consolidated Financial
Statements included herein.
ITEM 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations Results of Operations
Sales for the twelve week period ended July 22, 1995, were
$395.8 million, a 33.5% increase over sales of $296.5 million for the
twelve week period ended July 23,1994. The Company's principal
operating subsidiary,Richfood, Inc. ("Richfood"), recorded sales of
$322.2 million for the first quarter of fiscal 1996, compared to sales
of $296.5 million for the first quarter of fiscal 1995. The increase
was primarily attributable to sales to former customers of Camellia.
Rotelle, acquired by the Company in August 1994, recorded sales
of $73.6 million for the first quarter of fiscal 1996.
Gross margin was 8.86% for the first quarter of fiscal 1996,
compared to 8.36% for the same quarter last year. The increase
is primarily attributable to higher margin frozen food sales by
Rotelle.
Operating and administrative expenses for the twelve week period
ended July 22, 1995, were $24.5 million, or 6.18% of sales, compared
to $16.6 million or 5.61% of sales, for the twelve week period ended
July 23, 1994. The increase was primarily due to a higher operating
expense ratio for Rotelle increase was partially offset by
Richfood's ability to achieve additional economies of scale and
further efficiencies in its operations as a result of additional
sales volume associated with the Camellia acquisition.
Interest expense for the twelve week period ended July 22,
1995, increased to $1.0 million from $0.9 million for the first quarter
of last fiscal year. The increase is due to higher average interest
rates under the Company's variable rate borrowing facilities and
additional borrowings incurred by the Company, primarily to finance the
acquisition of Rotelle.
Interest income was $0.7 million for the first quarter of fiscal
1996, compared to $0.6 million for the first quarter of fiscal 1995.
Average notes receivable (consisting primarily of secured loans to
the Company's retail customers) were $34.0 million at the quarter
ended July 22, 1995, compared to $37.3 million at the quarter
ended July 23, 1994. The Company's effective interest rate earned
on retailer loans, most of which bear interest at a variable rate,
increased for the first quarter of fiscal 1996 compared to the first
quarter of fiscal 1995, due to increases in the prime lending rate,
which serves as the reference rate for most of these loans.
The Companys effective income tax rate was 38.2% for the
quarter ended July 22, 1995, compared to 38.5% for the first quarter
last fiscal year.
Liquidity and Capital Resources
Cash and cash equivalents were $3.0 million at July 22, 1995,
compared to $12.4 million at July 23, 1994.
Net cash used for operating activities for the twelve week period
ended July 22, 1995, was $3.3 million. This amount includes net
earnings of $6.4 million and depreciation and amortization of $3.8
million. The increase in depreciation and amortization expense for
the twelve week period ended July 22, 1995, compared to
depreciation and amortization expense of $2.7 million for the
same period last year, is primarily attributable to the Rotelle
acquisition. Working capital increased from $43.5 million at April
29, 1995, to $50.0 million at July 22, 1995. The ratio of current
assets to current liabilities was 1.41 to 1 at July 22, 1995, compared
to 1.36 to 1 at April 29, 1995.
Net cash used for investing activities for the twelve week
period ended July 22, 1995, included $1.7 million of capital
expenditures and $3.8 million for the issuance of secured loans
to retailers. Capital expenditures consisted primarily of material
handling equipment, and order management marketing systems. Loans
issued to retailers decreased in the first quarter of fiscal 1996,
compared to the first quarter of fiscal 1995. The fiscal 1995 quarter
included $3.9 million of loans to the purchasers of four retail grocery
stores formerly operated under the BASICS trade name.
Net cash used for financing activities of $1.2 million for the
twelve week period ended July 22, 1995, consisted primarily of $0.8
million of net repayments on long-term debt obligations and $0.5
million of cash dividends paid on the Company's Common Stock.
The Company believes that it has the ability to continue to
generate adequate capital for liquidity from its operations and
through borrowings under its long-term debt facilities to maintain
its competitive position and expand its business.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 2.1 - Agreement and Plan of Reorganization,
dated as of June 26, 1995, between the Company and
SuperRite
Exhibit 11.1 - Earnings Per Share Computation
Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K.
1. Current Report on Form 8-K, dated June 26, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RICHFOOD HOLDINGS, INC.
Date: August 30, 1995
By /s/ John E. Stokely
John E. Stokely
President & Chief
Operating Officer
Date: August 30, 1995
By /s/ John V. Marklin
John V. Marklin
Senior Vice President-
Finance and Chief
Financial Officer
EXHIBIT INDEX
Exhibit Page
2.1 Agreement and Plan of Reorganization, dated as of June 26,
1995,between the Company and Super Rite (incorporated by
reference to the Companys Current Report on Form 8-K dated
June 26, 1995 (Commission File No. 0-16900))
11.1 Earnings Per Share Computation
27.1 Financial Data Schedule