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 January 7, 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
2000 Richfood Road, P. O. Box 26967
Richmond, Virginia 23261
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
February 15, 1995 was as follows:
Common Stock, without par value: 21,424,351 shares.
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Third Quarter Ended
(Dollar amounts in January 7, January 8,
thousands, except 1995 1994
per share data) (12 Weeks) % (12 Weeks) %
Sales $ 380,458 100.00 $ 294,556 100.00
Costs and expenses, net:
Cost of goods sold 346,004 90.94 269,953 91.65
Operating and adminis-
trative expenses 23,766 6.25 15,542 5.28
Interest expense 1,218 0.32 995 0.34
Interest income (783) (0.21) (723) (0.25)
Earnings from continuing
operations before
income taxes 10,253 2.70 8,789 2.98
Income taxes 3,923 1.04 3,384 1.15
Earnings from continuing
operations 6,330 1.66 5,405 1.83
Loss from discontinued
operations, net
of taxes - - (389) (0.13)
Net earnings $ 6,330 1.66% $ 5,016 1.70%
=========== ====== =========== ======
Earnings (loss) per
common share:
Continuing operations $ 0.30 $ 0.25
Discontinued operations - (0.01)
Net earnings per
common share $ 0.30 $ 0.24
=========== ==========
Cash dividends declared
per common share $ 0.025 $ 0.02
=========== ==========
Average common shares
outstanding 21,408,677 21,253,483
=========== ===========
See Accompanying Notes to the Consolidated Financial Statements.
2.
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Year-to-Date
(Dollar amounts in January 7, January 8,
thousands, except 1995 1994
per share data) (36 Weeks) % (36 Weeks) %
Sales $1,021,542 100.00 $ 871,844 100.00
Costs and expenses, net:
Cost of goods sold 931,218 91.16 799,274 91.68
Operating and adminis-
trative expenses 62,112 6.08 48,681 5.58
Interest expense 3,345 0.33 2,951 0.34
Interest income (2,105) (0.21) (2,156) (0.25)
Earnings from continuing
operations before
income taxes 26,972 2.64 23,094 2.65
Income taxes 10,369 1.01 8,821 1.01
Earnings from continuing
operations 16,603 1.63 14,273 1.64
Loss from discontinued
operations, net
of taxes - - (389) (0.05)
Net earnings $ 16,603 1.63% $ 13,884 1.59%
========== ==== =========== ====
Earnings (loss) per
common share:
Continuing operations $ 0.78 $ 0.67
Discontinued operations - (0.02)
Net earnings per
common share $ 0.78 $ 0.65
========== ==========
Cash dividends declared
per common share $ 0.075 $ 0.06
========== ==========
Average common shares
outstanding 21,388,737 21,209,475
========== ==========
See Accompanying Notes to the Consolidated Financial Statements.
3.
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 7, April 30,
1995 1994
(Amounts in thousands) (Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 3,753 $ 17,009
Receivables, less allowance for doubtful
accounts of $2,872 and $1,311 64,184 44,238
Inventories 104,840 73,887
Other current assets 5,784 10,041
Total current assets 178,561 145,175
Notes receivable, less allowance for
doubtful accounts of $1,593 and $1,443 27,281 27,200
Property and equipment, net 84,049 38,181
Other assets 35,350 24,967
Total assets $ 325,241 $ 235,523
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt
and capital lease obligations $ 2,859 $ 1,789
Accounts payable 98,910 65,966
Accrued expenses and other current
liabilities 24,208 11,328
Total current liabilities 125,977 79,083
Long-term debt and capital lease
obligations 71,020 47,744
Deferred credits and other 13,724 10,475
Stockholders' equity:
Preferred stock, without par value - -
Common stock, without par value 24,485 23,701
Retained earnings 90,035 74,520
Total stockholders' equity 114,520 98,221
Total liabilities and stockholders' equity $ 325,241 $ 235,523
========= =========
See Accompanying Notes to the Consolidated Financial Statements.
4.
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Year-to-Date
January 7, January 8,
1995 1994
(Amounts in thousands) (36 Weeks) (36 Weeks)
Operating activities:
Net earnings $ 16,603 $ 13,884
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 9,521 7,207
Provision for doubtful accounts 1,536 1,722
Other, net (1,870) (840)
Changes in operating assets
and liabilities:
Receivables (4,091) (7,950)
Inventories (15,602) (3,206)
Other current assets 584 1,250
Accounts payable, accrued
expenses and other
liabilities 22,832 12,396
Net cash provided by operating
activities 29,513 24,463
Investing activities:
Purchases of property and equipment (3,469) (7,779)
Business acquisition, net of
cash acquired (50,766) -
Issuance of notes receivable (9,681) (14,016)
Collections on notes receivable 8,311 6,952
Other, net 404 93
Net cash used for investing activities (55,201) (14,750)
Financing activities:
Proceeds from (repayments of)
long-term debt, net 13,912 (8,788)
Proceeds from issuance of common
stock under employee stock
incentive plans 34 91
Cash dividends paid on common stock (1,514) (1,222)
Net cash provided by (used for)
financing activities 12,432 (9,919)
Net decrease in cash
and cash equivalents (13,256) (206)
Cash and cash equivalents at
beginning of period 17,009 2,292
Cash and cash equivalents at
end of period $ 3,753 $ 2,086
========== ==========
See Accompanying Notes to the Consolidated Financial Statements.
5.
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 30, 1994,
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 30, 1994 ("fiscal
1994"). 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 1994. The results of
operations for the twelve and thirty-six week periods ended
January 7, 1995 may not be indicative of the results that may be
expected for the fiscal year ending April 29, 1995 ("fiscal
1995").
Note 2. The Company completed the acquisition of all of the outstanding
common stock of Rotelle, Inc. on August 23, 1994, for a total
purchase price of $52.7 million. The stock purchase agreement
provides, among other things, that the sellers shall indemnify the
Company and Rotelle against certain liabilities. The Company has
asserted claims against the sellers for indemnification under the
stock purchase agreement which may result in a reduction in the
purchase price;
6.
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
however, the Company does not expect that the amount of any such
reduction will be material. The purchase price was financed under
a new $35 million revolving credit facility between Richfood
Holdings, Inc. and Crestar Bank, Richmond, Virginia, together with
internally generated funds and borrowings under an existing
revolving credit facility between the Company's wholly owned
subsidiary, Richfood, Inc., and Crestar Bank. The new credit
facility, which bears interest at a variable rate equal to LIBOR
plus 0.55% per annum, with interest payable monthly, is payable in
full in July 1996. Rotelle's assets at the time of acquisition
consisted primarily of $49.1 million of property and equipment,
$18.1 million of accounts receivable and $15.4 million of
inventory. Rotelle's liabilities at the time of the acquisition
consisted primarily of $17.2 million of accounts payable, $6.7
million of accrued expenses and $10.4 million of long-term debt.
Note 3. The Company is party to various 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.
7.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Sales for the twelve week period ended January 7, 1995, were $380.5
million, an increase of $85.9 million or 29.2% compared to sales of $294.6
million for the twelve week period ended January 8, 1994. Sales for the
thirty-six week period ended January 7, 1995, were $1.02 billion, an increase
of $149.7 million, or 17.2%, compared to sales of $871.8 million for the
thirty-six week period ended January 8, 1994. The increase in sales was
primarily attributable to sales by Rotelle, Inc. of $80.8 million for the
twelve week period ended January 7, 1995 and $136.0 million for the period
from its acquisition by the Company on August 23, 1994 to January 7, 1995.
Sales for Richfood, Inc., the Company's principal operating subsidiary,
increased $5.1 million or 1.7%, to $299.7 million for the third quarter of
fiscal 1995, up from $294.6 million for the third quarter of fiscal 1994.
Richfood, Inc.'s increase in sales was primarily due to sales to former
"Safeway" and "Basics" stores acquired by Richfood, Inc. customers in December
1993 and June 1994, respectively, offset in part by the effect of certain
customer store closings.
Gross margin was 9.06% for the third quarter of fiscal 1995, compared to
8.35% for the third quarter of fiscal 1994. Gross margin for the thirty-six
week period ended January 7, 1995, was 8.84%, compared to 8.32% for the
thirty-six week period ended January 8, 1994. The increase was primarily
attributable to higher margin frozen food sales of Rotelle, Inc. Richfood,
Inc.'s gross margin for the third quarter of fiscal 1995 and for the
thirty-six week period ended January 7, 1995, was 8.31% and 8.39%,
respectively, compared to 8.35% and 8.32%, respectively, for the same periods
last fiscal year.
Operating and administrative expenses for the twelve and thirty-six week
periods ended January 7, 1995, were $23.8 million (6.25% of sales) and $62.1
million (6.08% of sales), respectively, compared to operating and
administrative expenses of $15.5 million (5.28% of sales) and $48.7 million
(5.58% of sales), respectively, for the comparable periods of last fiscal
year. The increases were primarily due to a higher operating expense ratio
for Rotelle, Inc., which is characteristic of wholesale frozen food
distribution operations. Richfood, Inc.'s operating and
8.
administrative expenses were $15.9 million, or 5.28% of sales in the third
quarter of fiscal 1995, compared to $15.5 million or 5.28% of sales, in the
third quarter of fiscal 1994. The Company continues to emphasize operating
expense control and efficiency in its operations.
Interest expense for the twelve and thirty-six week periods ended
January 7, 1995, was $1.2 million and $3.3 million, respectively, compared to
interest expense of $1.0 million and $3.0 million, respectively, for the
comparable periods of last fiscal year. The increase is primarily due to
institutional borrowings incurred to finance the Rotelle, Inc. acquisition and
higher interest rates for the debt incurred under the Company's variable rate
credit facilities.
Interest income for the twelve and thirty-six week periods ended January
7, 1995, was $0.8 million and $2.1 million, respectively, compared to interest
income of $0.7 million and $2.2 million, respectively, for the comparable
periods of last fiscal year. Average notes receivable were $36.5 million for
the thirty-six week period ended January 7, 1995, compared to $39.8 million
for the thirty-six week period ended January 8, 1994.
For the twelve and thirty-six week periods ending January 8, 1994, the
Company recorded a charge of $0.4 million (net of the tax benefit) related to
discontinued operations of three retail Pack 'n Save grocery stores. See
Exhibit 13.1, "Portions of Richfood Holdings, Inc.'s 1994 Annual Report to
Stockholders", to the Company's Form 10K for the fiscal year ended April 30,
1994 for additional information about this discontinued operation.
The Company's effective income tax rate was 38.2% and 38.4% for the
twelve and thirty-six week periods ended January 7, 1995, respectively,
compared to 38.5% and 38.2%, for the respective twelve and thirty-six week
periods ended January 8, 1994.
9.
Liquidity and Capital Resources
Cash and cash equivalents were $3.8 million at January 7, 1995, compared
to $17.0 million at April 30, 1994.
Net cash provided by operating activities was $29.5 million for the
thirty-six week period ended January 7, 1995. This amount included net
earnings of $16.6 million and depreciation and amortization of $9.5 million,
which were offset in part by seasonal changes in operating assets and
liabilities, including receivables, inventory, and accounts payable. Working
capital decreased from $66.1 million at May 1, 1994 to $52.6 million at
January 7, 1995. The ratio of current assets to current liabilities was 1.42
to 1 at January 7, 1995 compared to 1.84 to 1 at May 1, 1994. The decrease in
working capital was primarily due to the use of internally generated funds to
finance a portion of the purchase price for the Rotelle, Inc. acquisition in
August 1994.
During the thirty-six week period ended January 7, 1995, net cash used
for investing activities of $55.2 million included $50.8 million, net of cash
acquired, to purchase Rotelle, Inc. (see note 2). During such period the
Company also incurred capital expenditures of $3.5 million and issued loans to
retailers totalling $9.7 million, which were offset in part by $8.3 million of
loan repayments by retailers.
Net cash provided by financing activities during the thirty-six week
period ended January 7, 1995, was $12.4 million. This included $13.9 million
of net proceeds borrowed under long-term debt facilities primarily to finance
the Company's acquisition of Rotelle, Inc. and seasonal working capital
requirements. The Company also paid $1.5 million of cash dividends on its
Common Stock during the first three quarters of the current fiscal year.
The Company believes that it has adequate capital and liquidity to
maintain its competitive position and expand its business.
10.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11.1: Earnings Per Share Computation
(a) for the twelve week
periods ended January
7, 1995 and January
8, 1994
(b) for the thirty-six week
periods ended January
7, 1995 and January 8,
1994
Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K:
1. None
11.
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: February 20, 1995 By /s/ Donald D. Bennett
Donald D. Bennett
President & Chief
Executive Officer
Date: February 20, 1995 By /s/ John E. Stokely
John E. Stokely
Executive Vice
President - Finance &
Administration
12.
EXHIBIT INDEX
Exhibit
11.1 Earnings per Share Computation
(a) for the twelve week periods ended
January 7, 1995, and January 8, 1994
(b) for the thirty-six week periods
ended January 7, 1995, and January 8, 1994
27.1 Financial Data Schedule
13.