20
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 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 October 14, 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. Employer Identification
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 Registrant's common
stock as of November 17, 1995, was as follows:
Common Stock, without par value: 31,249,756 shares.
Page 1 of 15 pages.
Exhibit Index appears on page 13.
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollar amounts in thousands, except per share data)
(Unaudited)
Second Quarter Ended
October 14, October 15,
1995 1994
(12 Weeks) % (12 Weeks) %
Sales $ 387,156 100.00 $ 344,618 100.00
Costs and expenses, net:
Cost of goods sold 353,080 91.20 313,537 90.98
Operating and adminis-
trative expenses 23,369 6.03 21,745 6.31
Interest expense 857 0.22 1,271 0.37
Interest income (705) (0.18) (737) (0.21)
Earnings before income taxes 10,555 2.73 8,802 2.55
Income taxes 4,018 1.04 3,399 0.98
Net earnings $ 6,537 1.69 $ 5,403 1.57
Net earnings per
common share $ 0.31 $ 0.25
Cash dividends declared
per common share $ 0.030 $ 0.025
Average common shares
outstanding 21,431,668 21,404,686
See accompanying Notes to the Consolidated Financial
Statements.
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollar amounts in thousands, except per share data)
(Unaudited)
Year-to-Date
October 14, October 15,
1995 1994
(24 Weeks) % (24 Weeks) %
Sales $ 782,932 100.00 $ 641,084 100.00
Costs and expenses, net:
Cost of goods sold 713,792 91.17 585,214 91.28
Operating and adminis-
trative expenses 47,842 6.11 38,387 5.99
Interest expense 1,838 0.23 2,126 0.33
Interest income (1,400) (0.18) (1,361) (0.21)
Earnings before income taxes 20,860 2.67 16,718 2.61
Income taxes 7,957 1.02 6,446 1.01
Net earnings $ 12,903 1.65 $ 10,272 1.60
Net earnings per
common share $ 0.60 $ 0.48
Cash dividends declared
per common share $ 0.030 $ 0.025
Average common shares
outstanding 21,429,928 21,378,573
See accompanying Notes to the Consolidated Financial
Statements.
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
October 14, April 29,
1995 1995
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,635 $ 9,678
Receivables, less allowance for doubtful
accounts of $2,845 and $2,783 70,586 60,500
Inventories 101,635 87,793
Other current assets 5,495 6,046
Total current assets 179,351 164,017
Notes receivable, less allowance for
doubtful accounts of $1,043 and $1,077 30,214 25,769
Property and equipment, net 81,829 83,418
Other assets 36,184 35,130
Total assets $ 327,578 $ 308,334
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt
and capital lease obligations $ 2,460 $ 3,052
Accounts payable 102,353 95,379
Accrued expenses and other current
liabilities 23,466 22,065
Total current liabilities 128,279 120,496
Long-term debt and capital lease
obligations 49,306 50,305
Deferred credits and other 16,158 15,224
Stockholders' equity:
Preferred stock, without par value; authorized
5,000,000 shares; none issued or outstanding - -
Common stock, without par value; authorized
60,000,000 shares; issued & outstanding
21,431,805 and 21,424,459 shares 24,625 24,529
Retained earnings 109,210 97,780
Total stockholders' equity 133,835 122,309
Total liabilities and stockholders' equity $ 327,578 $ 308,334
See accompanying Notes to the Consolidated Financial
Statements.
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
Year-to-Date
October 14, October 15,
1995 1994
(24 Weeks) (24 Weeks)
Operating activities:
Net earnings $ 12,903 $ 10,272
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization 7,578 5,993
Provision for doubtful accounts 1,535 923
Other, net (457) (1,191)
Changes in operating assets and liabilities:
Receivables (14,650) (11,827)
Inventories (13,842) (14,190)
Other current assets 460 530
Accounts payable, accrued expenses
and other liabilities 9,232 14,429
Net cash provided by
operating activities 2,759 4,939
Investing activities:
Purchases of property and equipment (3,662) (2,183)
Business acquisition, net
of cash acquired - (50,766)
Issuance of notes receivable (8,001) (8,658)
Collections on notes receivable 6,575 6,965
Other, net (3,142) 260
Net cash used for investing activities (8,230) (54,382)
Financing activities:
Net proceeds of (repayments on)
long-term debt (1,589) 35,094
Proceeds from issuance of common stock
under employee stock incentive plans 89 29
Cash dividends paid on common stock (1,072) (962)
Net cash provided by (used for)
financing activities (2,572) 34,161
Net decrease in cash and
cash equivalents (8,043) (15,282)
Cash and cash equivalents at
beginning of period 9,678 17,009
Cash and cash equivalents at
end of period $ 1,635 $ 1,727
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 and
twenty-four week periods ended October 14, 1995, may not
be indicative of the results that may be expected for
the fiscal year ending April 27, 1996 ("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. 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 Company's
Consolidated Statements 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 distributor
headquartered in Norfolk, Virginia. As a result of
that acquisition, the Company serves as a wholesale
supplier to Camellia's 46 retail stores and most of the
120 independent retail stores that previously had been
served by Camellia's wholesale division. The purchase
price of the acquisition was approximately $7.1 million.
See Note 2 to the Consolidated Financial Statements
included in the Company's Annual Report on Form 10-K
for fiscal 1995.
Note 3. Effective October 15, 1995 (the "Effective Time"),
SR Acquisition, Inc., a wholly-owned subsidiary of
Richfood Holdings, Inc. ("Richfood"), was merged (the
"Merger") with and into Super Rite Corporation ("Super
Rite") pursuant to an Agreement and Plan of
Reorganization, dated as of June 26, 1995, and amended
as of October 13, 1995 (the "Agreement"), and a related
Plan of Merger. As a result, at the Effective Time,
Super Rite became a wholly-owned subsidiary of Richfood
and each outstanding share of common stock, no par
value, $.01 stated value per share, of Super Rite
("Super Rite Common Stock") was converted into the right
to acquire 1.0205 shares of common stock, no par value,
of Richfood ("Richfood Common Stock"). Under the terms
of the Agreement, Richfood issued 9,770,188 shares of
Richfood Common Stock to the shareholders of Super Rite
and outstanding options to acquire shares of Super Rite
Common Stock were converted into options to acquire
approximately 230,000 shares of Richfood Common Stock.
The acquisition will be accounted for on a pooling-of-
interests basis.
Sales and net earnings of the separate companies, and
their respective subsidiaries, for the twenty-four week
period preceding the Effective Time, and the
corresponding period in the prior fiscal year, are as
follows:
(Unaudited)
Twenty-four weeks ended
October 14, 1995 October 15, 1994
(Amounts in thousands)
Sales
Richfood Holdings, Inc. $ 782,932 $ 641,084
Super Rite Corporation 703,863 691,833 (a)
Net income
Richfood Holdings, Inc. $ 12,903 $ 10,172
Super Rite Corporation 6,054 5,921 (a)
(a) Reflects operating results of Super Rite Corporation
and subsidiaries for the twenty-six week period
February 27, 1994 to August 27, 1994.
The Company is in the process of conforming Super Rite's
accounting standards to the Company's and when completed, the
prior historical consolidated financial statements will be
restated,in accordance with the pooling-of-interests method.
Note 4. In connection with the Merger, Super Rite, its
directors and Richfood were named as defendants in a
class action suit 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
Richfood Holdings, Inc., C.A. No. 14379. The claims in
the Class Action were brought by a purported stockholder
of Super Rite on behalf of a purported class of persons
(the "Class") consisting of all stockholders 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, the Class Action asserts that the Merger was
unfair to the stockholders of Super Rite. The plaintiff
did not attempt to obtain an injunction against
consummation of the Merger and has not amended its
initial complaint. Super Rite, Richfood and the other
defendants believe that the plaintiff's allegations are
factually inaccurate and without merit. If the plaintiff
elects to pursue the Class Action, Super Rite, Richfood
and the other defendants 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 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Recent Development
As described in Note 3 to the Notes to Consolidated
Financial Statements included herein, at the Effective Time,
Super Rite became a wholly-owned subsidiary of Richfood and
each outstanding share of Super Rite Common Stock was
converted into the right to acquire 1.0205 shares of Richfood
Common Stock. Richfood issued 9,770,188 shares of Richfood
Common Stock in the Merger, resulting in former Super Rite
shareholders holding approximately 31 percent of the
outstanding shares of Richfood Common Stock. The Agreement
and the issuance of Richfood Common Stock in connection with
the Merger were approved by the shareholders of Super Rite and
Richfood at separate meetings held on October 12, 1995.
Super Rite is a full service wholesale food distributor
supplying more than 240 retail supermarkets in Pennsylvania,
New Jersey, Maryland, Delaware, Virginia and West Virginia.
Super Rite also operates a retail grocery division, consisting
of ten METRO superstores in the Baltimore, Maryland and Dover,
Delaware markets, and five BASICS supermarkets in metropolitan
Baltimore. Super Rite will operate as a separate, wholly-
owned subsidiary of Richfood. The combined company is
expected to have annual net sales in excess of $3.0 billion
and to serve over 1,700 retail grocery stores in the Mid-
Atlantic region.
Additional information with respect to the Merger is set
forth in the Joint Proxy Statement/Prospectus included in
Richfood's Registration Statement on Form S-4 (File No. 33-
62413), which is incorporated by reference herein.
Results of Operations
Sales for the twelve week period ended October 14, 1995,
were $387.2 million, an increase of $42.6 million, or 12.3%,
compared to sales of $344.6 million for the twelve week period
ended October 15, 1994. Sales for the twenty-four week period
ended October 14, 1995, were $782.9 million, an increase of
$141.8 million, or 22.1%, compared to sales of $641.1 million
for the twenty-four week period ended October 15, 1994. These
increases were primarily attributable to sales to former
customers of the wholesale division of Camellia Food Stores,
Inc., which was acquired by the Company in April 1995, and the
inclusion of twenty-four weeks of Rotelle sales in the fiscal
1996 operating results, as compared to approximately eight
weeks of Rotelle sales included in the second quarter of
fiscal 1995.
Gross margin was 8.80% for the twelve week period ended
October 14, 1995, compared to 9.02% for the same period last
year. Gross margin was 8.83% for the twenty-four week period
ended October 14, 1995, compared to 8.72% for the twenty-four
week period ended October 15, 1994.
Operating and administrative expenses for the twelve week
period ended October 14, 1995, were $23.4 million, or 6.03% of
sales, compared to $21.7 million, or 6.31% of sales, for the
twelve week period ended October 15, 1994. The decrease in
operating and administrative expenses, as a percent of sales,
was primarily due to the Company's continued focus on
operating efficiency and cost control. Operating and
administrative expenses for the twenty-four week period ended
October 14, 1995, were $47.8 million, or 6.11% of sales,
compared to $38.4 million, or 5.99% of sales, for the twenty-
four week period ended October 15, 1994. The increase in
operating and administrative expenses, as a percent of sales,
for the twenty-four week period ended October 14, 1995, as
compared to the twenty-four week period ended October 15,
1994, was primarily due to the inclusion of twenty-four weeks
of operating expenses of Rotelle (which operates on a higher
operating expense ratio than that of Richfood's principal
operating subsidiary, Richfood, Inc.) in the twenty-four week
period ended October 14, 1995, as compared to approximately
eight weeks of Rotelle operating expenses included in the
twenty-four week period ended October 15, 1994.
Interest expense for the twelve and twenty-four week
periods ended October 14, 1995, was $0.9 million and $1.8
million, respectively, compared to interest expense of $1.3
million and $2.1 million,
respectively, for the comparable periods of the prior fiscal
year. The decrease is primarily due to lower average
institutional borrowings in the current fiscal year periods.
Interest income for the twelve and twenty-four week
periods ended October 14, 1995, was $0.7 million and $1.4
million, respectively, the same as interest income for the
corresponding periods of the prior fiscal year.
The Company's effective income tax rate was 38.1% for the
twelve and twenty-four week periods ended October 14, 1995,
compared to 38.6% for the twelve and twenty-four week periods
ended October 15, 1994.
Liquidity and Capital Resources
Cash and cash equivalents were $1.6 million at October
14, 1995, compared to $9.7 million at April 29, 1995.
Net cash provided by operating activities for the twenty-
four week period ended October 14, 1995, was $2.8 million.
This amount includes net earnings of $12.9 million and
depreciation and amortization of $7.6 million, which were
offset in part by seasonal changes in operating assets and
liabilities, including receivables, inventory and accounts
payable. The higher depreciation and amortization expense for
the twenty-four week period ended October 14, 1995, compared
to depreciation and amortization expense of $6.0 million for
the same period last fiscal year, is primarily attributable to
twenty-four weeks of Rotelle depreciation and amortization
expense in the fiscal 1996 operating results, as compared to
approximately eight weeks of Rotelle depreciation and
amortization expense included in the second quarter of fiscal
1995. Working capital increased from $43.5 million at April
29, 1995, to $51.1 million at October 14, 1995. The ratio of
current assets to current liabilities was 1.40 to 1 at October
14, 1995, compared to 1.36 to 1 at April 29, 1995.
Net cash used for investing activities for the twenty-
four week period ended October 14, 1995, included $3.7 million
of capital expenditures and $8.0 million of loans issued to
retailers, which were offset in part by $6.6 million of loan
repayments by retailers. During the twenty-four week period
ended October 15, 1994, net cash used for investing activities
of $54.4 million included $50.8 million, net of cash acquired,
to purchase Rotelle (see Note 2 to the Notes to Consolidated
Financial Statements).
Net cash used for financing activities of $2.6 million
for the twenty-four week period ended October 14, 1995,
consisted primarily of $1.6 million of net repayments on long-
term debt obligations and $1.1 million of cash dividends paid
on Richfood Common Stock. Net cash provided by financing
activities during the twenty-four week period ended October
15, 1994 was $34.2 million, and included $35.1 million of net
proceeds from long-term debt used primarily to finance the
Rotelle acquisition (see Note 2 to the Notes to Consolidated
Financial Statements).
At the Effective Time, Super Rite became a wholly-owned
subsidiary of Richfood. See "Recent Development".
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.
<page.
PART II - OTHER INFORMATION
Item 1 . Legal Proceedings
See Note 4 to the Notes to Consolidated
Financial Statements included herein.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on
October 12, 1995. The following proposals were submitted to
the shareholders:
(1) To consider and to vote upon the Agreement with
respect to the acquisition of Super Rite;
(2) To elect 13 directors of Richfood to serve until the
next annual meeting of shareholders; and
(3) To ratify the appointment by the Board of Directors
of KPMG Peat Marwick LLP to serve as
independent auditors for the current fiscal year.
Shareholders approved the Agreement, elected all nominees
for director and ratified the appointment of KPMG Peat Marwick
LLP. The number of votes cast with respect to the above
matters was as follows:
Withheld
For Against Authority Abstain
Agreement and Plan of
Reorganization 15,893,740 14,166 - 136,570
Election of Directors
Donald D. Bennett 17,720,329 - 30,495 -
Roger L. Gregory 17,714,469 - 36,355 -
Grace E. Harris 17,714,354 - 36,470 -
John C. Jamison 17,260,379 - 490,445 -
Michael E. Julian, Jr. 17,623,559 - 127,275 -
G. Gilmer Minor, III 17,720,029 - 30,375 -
Claude B. Owen, Jr. 17,597,229 - 153,595 -
John F. Rotelle 17,616,288 - 134,536 -
Albert F. Sloan 17,597,129 - 153,695 -
John E. Stokely 17,715,329 - 35,495 -
George H. Thomazin 17,597,229 - 153,595 -
James E. Ukrop 17,720,329 - 30,495 -
Edward Villanueva 17,621,588 - 129,236 -
KPMG Peat Marwick LLP
as Independent Auditors 17,726,563 5,891 - 18,380
No other business came before the meeting.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 2.1 - Agreement and Plan of Reorganization, dated
June 26, 1995, by and between Richfood Holdings,
Inc. and Super Rite Corporation (incorporated
herein by reference to Richfood's Joint Proxy
Statement/Prospectus dated September 7, 1995, and filed
with the Securities and Exchange Commission
on September 7, 1995, as part of Richfood's
Registration Statement on Form S-4(File No. 33-62413))
Exhibit 2.2 - Amendment, dated as of October 13, 1995, to
the Agreement and Plan of Reorganization by and
between Richfood Holdings,Inc. and Super Rite
Corporation (filed as exhibit 2.2 to Richfood's
Current Report on Form 8-K dated October
15, 1995, and incorporated by reference herein)
Exhibit 2.3 - Plan of Merger (incorporated by reference to
Richfood's Joint Proxy Statement/Prospectus,
dated September 7, 1995, and filed with the
Securities and Exchange Commission on September
7, 1995, in connection with Richfood's
Registration Statement on Form S-4 (File No. 33-
62413))
Exhibit 11.1 - Earnings Per Share Computation
(a) for the twelve week periods ended October
14, 1995 and October 15, 1994.
(b) for the twenty-four week periods ended
October 14, 1995 and October 15, 1994.
Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K
None
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: November 28, 1995
By /s/ John E. Stokely
John E. Stokely
President & Chief
Operating Officer
Date: November 28, 1995 By /s/ J. Stuart Newton
J. Stuart Newton
Senior Vice President
and Chief Financial Officer
EXHIBIT INDEX
Exhibit Page
Exhibit 2.1 - Agreement and Plan of Reorganization, dated
June 26, 1995, by and between Richfood Holdings,
Inc. and Super Rite Corporation (incorporated
herein by reference to Richfood's Joint Proxy
Statement/Prospectus dated September 7, 1995,
and filed with the Securities and Exchange
Commission on September 7, 1995, as part of
Richfood's Registration Statement on Form S-4
(File No. 33-62413))
Exhibit 2.2 - Amendment, dated as of October 13, 1995, to
the Agreement and Plan of Reorganization by
and between Richfood Holdings,Inc. and Super Rite
Corporation (filed as exhibit 2.2 to Richfood's
Current Report on Form 8-K dated October
15, 1995, and incorporated by reference herein)
Exhibit 2.3 - Plan of Merger (incorporated by reference to
Richfood's Joint Proxy Statement/Prospectus,
dated September 7, 1995, and filed with the
Securities and Exchange Commission on September
7, 1995, in connection with Richfood's
Registration Statement on Form S-4 (File No. 33-
62413))
Exhibit 11.1 - Earnings Per Share Computation
(a) for the twelve week periods ended October
14, 1995 and October 15, 1994.
(b) for the twenty-four week periods ended
October 14, 1995 and October 15, 1994.
Exhibit 27.1 - Financial Data Schedule