Filed Pursuant to Rule 424(b)(5)
Registration Number 333-86816
PROSPECTUS SUPPLEMENT
(To Prospectus dated May 21, 2002)
8,000,000 SHARES
[FLEMING LOGO]
COMMON STOCK
- --------------------------------------------------------------------------------
Fleming Companies, Inc. is offering 8,000,000 shares of common stock.
Concurrently with this offering, we are offering $200,000,000 aggregate
principal amount of our 9 1/4% Senior Notes due 2010.
The closing of this offering is conditioned on the closing of the acquisition of
Core-Mark International, Inc. and the other related financings.
Our common stock is listed on the New York Stock Exchange under the symbol
"FLM." On June 12, 2002, the last reported sale price of our common stock on the
New York Stock Exchange was $19.40 per share.
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE S-8 OF THIS PROSPECTUS SUPPLEMENT.
<Table>
<Caption>
PER SHARE TOTAL
--------- ------------
PUBLIC OFFERING PRICE....................................... $19.40 $155,200,000
UNDERWRITING DISCOUNTS AND COMMISSIONS...................... $ 0.92 $ 7,360,000
PROCEEDS TO US (BEFORE EXPENSES)............................ $18.48 $147,840,000
</Table>
We have granted the underwriters a 30-day option to purchase up to an additional
1,200,000 shares of common stock to cover over-allotments, which option was
exercised in full on June 13, 2002.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Lehman Brothers and Deutsche Bank Securities, on behalf of the underwriters,
expect to deliver the shares of common stock to purchasers on or about June 18,
2002.
- --------------------------------------------------------------------------------
Joint Book-Running Managers
LEHMAN BROTHERS DEUTSCHE BANK SECURITIES
------------------------------
WACHOVIA SECURITIES MORGAN STANLEY
JUNE 13, 2002
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary......... S-1
Risk Factors.......................... S-8
Concurrent Offering................... S-15
Use of Proceeds....................... S-15
Price Range of Common Stock........... S-16
Dividend Policy....................... S-16
Capitalization........................ S-17
Selected Consolidated Financial Data
of Fleming.......................... S-18
Selected Consolidated Financial Data
of Core-Mark........................ S-20
Unaudited Pro Forma Condensed
Consolidated Financial
Information......................... S-22
Business.............................. S-32
Management............................ S-44
Principal and Management
Shareholders........................ S-48
Description of Common Stock........... S-51
</Table>
<Table>
<Caption>
PAGE
----
Description of Indebtedness........... S-54
Underwriting.......................... S-56
United States Federal Tax
Considerations...................... S-59
Legal Matters......................... S-63
Independent Auditors.................. S-63
PROSPECTUS
About This Prospectus................. 1
Where You Can Find More Information... 1
Special Note Regarding Forward-Looking
Statements.......................... 2
The Company........................... 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges.... 4
Description of Debt Securities........ 4
Plan of Distribution.................. 12
Legal Matters......................... 13
Experts............................... 13
</Table>
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INDUSTRY DATA
In this prospectus supplement and the accompanying prospectus, we rely on
and refer to information regarding market data obtained from internal surveys,
market research, publicly available information and industry publications.
Although we believe the information is reliable, we cannot guarantee the
accuracy or completeness of the information and have not independently verified
it.
ABOUT THIS PROSPECTUS SUPPLEMENT
We provide information to you about this offering in two separate
documents. The accompanying prospectus provides general information, some of
which may not apply to this offering, and this prospectus supplement describes
the specific details regarding this offering. Generally, when we refer to this
"prospectus," we are referring to both documents combined. Additional
information is incorporated by reference in this prospectus. If information in
this prospectus supplement is inconsistent with the accompanying prospectus, you
should rely on this prospectus supplement.
You should rely only upon the information contained or incorporated by
reference in this prospectus. We have not, and the underwriters have not,
authorized any other person to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. This prospectus does not constitute an offer to sell, or a solicitation of
an offer to buy, any of the securities offered hereby by any person in any
jurisdiction in which it is unlawful for such person to make such an offer or
solicitation. You should assume the information appearing in this prospectus
supplement, the accompanying prospectus and the documents incorporated by
reference is accurate only as of their respective dates. Our business, financial
condition, results of operations and prospects may have changed since those
dates.
Our trademarks, service marks and trade names include "Fleming," "FlexPro,"
"FlexStar," "FlexMate," "Piggly Wiggly," "Sentry," "Super 1 Foods," "Festival
Foods," "Head Distributing Company," "Jubilee Foods," "Jamboree Foods,"
"MEGAMARKET," "Minter-Weisman Co.," "Shop 'N Kart," "American Family," "ABCO
Desert Market," "Big Star," "Big T," "Buy for Less," "County Pride Markets,"
"Rainbow Foods," "Red Fox," "Shop N Bag," "Super Duper," "Super Foods," "Super
Thrift," "Thriftway," "Value King," "PWPETRO," "Piggly Wiggly xpress,"
"yes!LESS," "Big Bear" and "Big Dollar." This prospectus also contains
trademarks, service marks, copyrights and trade names of other companies.
PROSPECTUS SUPPLEMENT SUMMARY
In this prospectus supplement, the words "Fleming," "the Company," "our,"
"us" and "we" refer to Fleming Companies, Inc. and its subsidiaries. The
following summary contains basic information about us and this offering. It
likely does not contain all the information that is important to you. For a more
complete understanding of this offering, we encourage you to read this entire
prospectus supplement, the accompanying prospectus and the other documents to
which we have referred you. Unless otherwise indicated, all information in this
prospectus supplement includes the full exercise of the underwriters' over-
allotment option relating to this offering.
FLEMING COMPANIES, INC.
INTRODUCTION
Fleming is an industry leader in the distribution of consumer package
goods. We believe that our network of "multi-tier" distribution centers offers
retailers of varying size and format a low-cost supply chain alternative to
other distribution competitors or to self-distribution. Multi-tier distribution
allows us to optimize the particular volume, value and velocity characteristics
of each product that we distribute, thereby increasing our efficiency and
lowering our costs.
On April 23, 2002, we signed an agreement to acquire Core-Mark
International, Inc. ("Core-Mark"), a distributor of consumer package goods to
convenience stores and other retailers in the western United States and western
Canada. Following our acquisition of Core-Mark (the "Acquisition"), our
distribution group will serve approximately 50,000 retail locations across the
United States and western Canada, including approximately 3,000 supermarkets,
approximately 40,000 convenience stores and approximately 7,000 supercenters,
discount stores, limited assortment stores, drug stores, specialty stores and
other stores. We believe that the Acquisition will further transform our
distribution group into an efficient, nationwide, multi-tier supply chain for
consumer package goods to retailers of any size and format.
On a pro forma basis after giving effect to the Acquisition, our
distribution group net sales were $16.6 billion for 2001 and $4.8 billion for
the 16 weeks ended April 20, 2002. Our distribution group represented
approximately 87% of our pro forma total net sales in 2001 and for the 16 weeks
ended April 20, 2002. To supply our customers, we currently have a network of 24
high velocity case-pick and flow-through distribution centers, 7 high velocity
piece-pick distribution centers and 5 low velocity case-pick and piece-pick
distribution centers, that have a total of approximately 21 million square feet
of warehouse space. The Acquisition will add 19 high velocity piece-pick
distribution centers that have a total of approximately 1.9 million square feet
of warehouse space to further enhance our ability to supply our customers
nationwide.
Our retail group operates 109 price impact supermarkets that offer everyday
low prices, typically below the prices of market-leading conventional
supermarkets, and that have a focus on high-quality perishables. These stores
typically cost less to build, maintain and operate than conventional
supermarkets. In addition, we operate 17 limited assortment stores under the
yes!LESS(R) banner. Limited assortment stores offer a narrow selection of
low-price, private label food and other consumable goods and general merchandise
at deep-discount prices. Our retail group net sales were $2.4 billion for 2001
and $669 million for the 16 weeks ended April 20, 2002, representing
approximately 13% of our total net sales for each respective period, on a pro
forma basis after giving effect to the Acquisition. Of those amounts,
approximately $2.0 billion and $669 million were attributable to continuing
retail formats for each respective period.
S-1
COMPETITIVE STRENGTHS
Interconnected Network of Multi-Tier, High-Volume, Low-Cost Distribution
Centers: Our network of multi-tier distribution centers optimizes the
particular volume, value and velocity characteristics of each product that we
distribute. We employ case-pick (in which products are selected in case
quantities and aggregated and distributed on pallets), piece-pick (in which
products are selected in single-unit quantities and distributed in totes) and
flow-through (in which products are distributed in full pallet quantities)
distribution methods. Our multi-tier process further segregates products into
high velocity items (which are characterized by fast inventory turns, such as
tobacco products, candy and paper products) and low velocity items (which are
characterized by slower inventory turns, such as health and beauty products,
general merchandise and specialty items). Consequently, we are able to serve
consumer package goods retailers of any size and format. We also believe that
our distribution center volumes are among the highest in the consumer package
goods distribution industry. With high volume comes the opportunity to operate
more efficiently by reducing costs through economies of scale, which enables us
to provide our customers with lower-cost merchandise and services.
National Distribution Capabilities: We believe that, following the
Acquisition, we will be the only distributor of consumer package goods capable
of meeting the growing need for a national supply chain which can serve all
retail formats anywhere in the United States. In addition, we believe we will be
one of only two suppliers capable of distributing consumer package goods to
convenience stores and related convenience-oriented retailers across the United
States and western Canada.
Efficient Centralized Purchasing: We currently make category management
decisions and negotiate with vendors for approximately 84% of our merchandise
procurement from one location, our customer support center near Dallas, Texas.
We believe our customer support center is one of the largest volume-buying
locations of consumable goods in the United States. Centralized purchasing
benefits us and ultimately, our customers, in several ways. It allows us to
lower our cost of goods through aggregated purchasing power, and it lowers our
administrative costs by eliminating the redundancy involved in purchasing
through multiple locations. It also makes it less expensive for our vendors to
serve us, which we believe in turn reduces our cost of goods. We believe that
our centralized purchasing capabilities are valuable to national retailers, as
well as the smaller independent retailers that make up our traditional customer
base.
Diverse Distribution Customer Base: We distribute to approximately 20,000
retail store locations that operate in a wide variety of formats across the
United States. Following the Acquisition, our distribution group will serve an
additional 30,000 convenience stores and other retail locations in the western
United States and western Canada. On a pro forma basis after giving effect to
the Acquisition, other than Kmart, which accounted for 17% of our net sales in
2001, no customer accounted for more than approximately 2% of our fiscal 2001
net sales.
Successful Price Impact Retail Format: Our price impact supermarkets offer
name-brand and private label consumable goods at significantly lower prices than
conventional supermarkets. We keep prices low by leveraging our existing
distribution and procurement capabilities and maintaining a lower cost structure
associated with operating these stores. We believe this format is profitable
because we offer a reduced number of product selections, focus on high-turnover
products and product categories, employ flow-through distribution methods that
reduce product storage and handling expense and minimize store operating costs.
Experienced Management Team: Our management team is led by Mark Hansen,
Chairman and Chief Executive Officer, who has been with Fleming since 1998.
Since Mr. Hansen joined us, we have further strengthened our management team
through the addition of a number of experienced officers across key functional
areas of our organization including information technology, logistics,
merchandising and supply chain management, retail store operations, finance and
human resources. These executives bring substantial experience from leading food
wholesale, supermarket, supercenter and general merchandise retailers.
S-2
BUSINESS STRATEGY
Our business strategy is to use our competitive strengths to achieve sales
and earnings growth in both our distribution group and retail group. As
principal elements of our strategy, we intend to:
Further Grow Sales to New Channel Retailers: We believe that our network
of multi-tier distribution centers strategically positions us to grow our sales
to new channel retailers. In recent years, consumers have been shifting their
purchases of food and other consumable goods away from conventional full-service
grocery stores toward these other retail channels. For this reason, we have
moved beyond our historic focus on conventional full-service grocery stores and
have successfully targeted convenience stores and other convenience-related
retailers, supercenters, discount stores, price impact stores, dollar stores,
ethnic food stores, limited-assortment stores, drug stores, military exchanges
and other specialty retailers.
Grow Sales to Traditional Format Customers: Despite being the largest
distributor in the wholesale grocery industry, we currently account for a small
percentage of sales in this traditional core market, representing substantial
room for additional growth. Many of our potential customers are currently served
by local or regional wholesalers that cannot offer the efficiencies produced by
our nationwide network of multi-tier distribution centers and our centralized
purchasing. Our repositioned distribution group has already enabled us to
increase sales to existing and new customers in this sector, and we expect to be
able to continue this trend.
Grow Sales to Self-Distributing Chain Supermarkets: In addition to
enabling us to grow our sales of consumer package goods and other merchandise to
new channel retailers and our traditional format customers, we believe that we
can employ our network of multi-tier distribution centers to expand our
distribution capabilities to serve large, national chain supermarkets that
currently self-distribute. For example, in March 2002, we entered into an
agreement with Albertson's, Inc. to supply 39 Albertson's stores in Oklahoma and
Nebraska beginning in July 2002 for the next five years. We believe that our
national presence, our multi-tier distribution platform and our centralized
purchasing capabilities will provide national chain supermarkets with a
compelling alternative to self-distribution. We are seeking additional
opportunities to establish similar relationships with other major supermarket
chains.
Continue to Improve Working Capital Management and Reduce Costs: We intend
to improve our working capital management primarily by further developing our
centralized procurement operations, taking advantage of the efficiencies created
by our multi-tier distribution network, and by continuing to develop and
implement our "F-1" supply chain technologies to better integrate our
distribution centers and our central procurement operations.
S-3
THE OFFERING
Common Stock offered.......... 8,000,000 shares
Over-allotment option......... 1,200,000 shares
Common Stock to be outstanding
after the offering............ 53,805,000 shares
Dividend Policy............... We have historically declared cash dividends of
$.02 per share on a quarterly basis on our
common stock.
Use of Proceeds............... We intend to use the net proceeds from this
offering, the concurrent debt offering and
borrowings under our new credit facility to
fund our obligations in connection with our
pending acquisition of Core-Mark International,
Inc. and to repay debt. See "Use of Proceeds."
The closing of this offering is conditioned on
the closing of the Acquisition and the other
related financings. We expect to enter into a
new credit facility in conjunction with these
offerings and the Acquisition. This new credit
facility will consist of a $425 million term
loan and a $550 million revolving facility and
will be secured by accounts receivables,
inventory and the capital stock of certain of
our subsidiaries.
New York Stock Exchange
symbol........................ FLM
The number of shares outstanding after the equity offering is based on the
number of shares of our stock outstanding as of May 13, 2002. Unless we indicate
otherwise, all information in this prospectus supplement includes the full
exercise of the underwriters' over-allotment option and excludes 5,574,264
shares reserved for issuance on the exercise of options granted and 49,621
shares available for grant under our stock option plans. At the annual meeting
of our stockholders on May 14, 2002, an additional 4.25 million shares were
approved and available for grant under our stock option and restricted stock
plans.
See "Risk Factors" in this prospectus supplement for a discussion of
certain factors that you should consider before making an investment in our
common stock.
S-4
SUMMARY HISTORICAL CONSOLIDATED AND UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The following table displays our summary financial data for the periods
ended and as of the dates indicated. We derived the historical data for the
fiscal years ended December 25, 1999, December 30, 2000 and December 29, 2001
and as of those dates from our audited consolidated financial statements. We
derived the historical data for the 16 weeks ended April 21, 2001 and April 20,
2002 and as of those dates from our unaudited consolidated condensed financial
statements, which include all adjustments that management considers necessary
for a fair presentation of our financial position and results of operation for
those periods. The historical data for the 16 weeks ended April 20, 2002 are not
necessarily indicative of the results that may be expected for any other interim
period or for the full fiscal year ending December 28, 2002. The summary
unaudited pro forma income statement data give effect to the Acquisition and the
use of proceeds from this offering, the concurrent debt offering and our new
credit facility as if each of these transactions had occurred at the beginning
of the period. The summary unaudited pro forma balance sheet data give effect to
these transactions as if each of these transactions had occurred on April 20,
2002. The summary pro forma financial data are not intended to represent our
financial position or results of operations had these transactions been
completed as of such dates or to project our financial position or results of
operations for any future period or date. You should read the information set
forth below together with the other financial information contained or
incorporated by reference in this prospectus supplement and the accompanying
prospectus.
<Table>
<Caption>
HISTORICAL PRO FORMA
------------------------------------------------------------------ ---------
FISCAL YEAR ENDED(1) 16 WEEKS ENDED 52 WEEKS
------------------------------------------ --------------------- ENDED
DECEMBER 25, DECEMBER 30, DECEMBER 29, APRIL 21, APRIL 20, APRIL 20,
1999(2) 2000(3) 2001(4) 2001(5) 2002(6) 2002
------------ ------------ ------------ --------- --------- ---------
INCOME STATEMENT DATA:
Net sales(7)................................. $14,218 $14,369 $15,558 $4,137 $4,686 $19,603
Costs and expenses:
Cost of sales(7)........................... 12,781 13,022 14,367 3,771 4,347 18,302
Selling and administrative................. 1,262 1,187 961 315 255 1,002
Interest expense........................... 165 175 166 58 50 184
Interest income and other.................. (30) (25) (24) (9) (7) (23)
Impairment/restructuring charge (credit)... 103 213 (24) (27) -- 3
Litigation charge (credit)................. -- (2) 49 2 -- 49
------- ------- ------- ------ ------ -------
Total costs and expenses............... 14,281 14,570 15,495 4,110 4,645 19,517
------- ------- ------- ------ ------ -------
Earnings (loss) before taxes................. (63) (201) 63 27 41 86
Taxes on income (loss)....................... (18) (79) 36 11 16 48(8)
------- ------- ------- ------ ------ -------
Earnings (loss) before extraordinary
charge(9).................................. (45) (122) 27 16 25 38
Extraordinary charge from early retirement of
debt (net of taxes)........................ -- -- (4) (4) -- --
------- ------- ------- ------ ------ -------
Net earnings (loss)(9)................. $ (45) $ (122) $ 23 $ 12 $ 25 $ 38(8)
======= ======= ======= ====== ====== =======
Diluted earnings (loss) per share(10)........ $ (1.17) $ (3.15) $ 0.52 $ 0.29 $ 0.52 $ 0.69(8)
BALANCE SHEET DATA: (AT END OF PERIOD)
Cash and cash equivalents.................. $ 7 $ 30 $ 17 $ 27 $ 4 $ 5
Total assets............................... 3,573 3,403 3,655 3,176 3,824 4,443
Total debt (including current maturities
and capital leases)...................... 1,694 1,669 1,811 1,636 1,917 2,203
Shareholders' equity....................... 561 427 498 494 518 687
OTHER FINANCIAL AND OPERATING DATA:
EBITDA(11)................................. $ 281 $ 154 $ 385 $ 137 $ 137 $ 446
Adjusted EBITDA(12)........................ 411 456 476 136 137 538
Depreciation and amortization(13).......... 158 169 166 51 46 184
Capital expenditures....................... 166 151 238 48 61 259
Adjusted EBITDA to interest expense........ 2.92x
Net debt to Adjusted EBITDA(14)............ 4.09x
</Table>
S-5
- ------------
(1) Fiscal 2000 is a 53-week year; all other years are 52 weeks.
(2) The results in 1999 reflect an impairment/restructuring charge with related
costs totaling $137 million ($92 million after-tax) related to our strategic
plan. Such period also reflects unusual items ($31 million charge to close
ten conventional retail stores, income of $22 million from extinguishing a
portion of the self-insured workers' compensation liability, interest income
of $9 million related to refunds in federal income taxes from prior years,
and $6 million in gains from the sale of distribution facilities) netting to
$6 million of income ($3 million after-tax).
(3) The results in 2000 reflect an impairment/restructuring charge with related
costs totaling $309 million ($183 million after-tax) relating to our
strategic plan. Such period also reflects unusual items ($10 million charge
related primarily to asset impairment on retail stores, income of $2 million
relating to litigation settlements, and $9 million in gains from the sale of
distribution facilities) netting to less than $1 million of income ($1
million loss after-tax).
(4) The results in 2001 reflect an impairment/restructuring credit totaling $24
million ($25 million after-tax reflecting the tax expense impact of goodwill
permanent differences from the sale of certain retail stores) relating to
our strategic plan. Such period also reflects unusual items ($49 million in
charges relating to litigation settlements, $20 million in charges relating
to Kmart's bankruptcy reorganization and $2 million due to early retirement
of debt) netting to approximately $70 million in charges ($42 million
after-tax).
(5) The results in the first quarter of 2001 reflect an impairment/restructuring
net credit totaling $1 million (less than $1 million after-tax) relating to
our strategic plan. Such period also reflects unusual items ($2 million in
charges relating to litigation settlements and approximately $2 million in
charges due to early retirement of debt) netting to approximately $3 million
in charges ($2 million after-tax).
(6) During the first quarter of 2002 we adopted SFAS No. 142 and ceased
amortizing goodwill cost. No prior period restatements were made. Goodwill
amortization for any of the prior years reported did not exceed $33 million.
Also, cash and cash equivalents and total debt amounts exclude amounts
related to the 10 1/2% senior subordinated notes due 2004 and related
transaction fees as these amounts are being held in trust to redeem the
notes in June 2002.
(7) During the first quarter of 2002, we adopted EITF 01-9 and reduced sales and
cost of sales for all prior periods with the impact on any year reported not
exceeding $75 million. The adoption had no effect on gross margins or
earnings.
(8) The pro forma combined effective tax rate of 56% for the 52 weeks ended
April 20, 2002 includes the impact of an unusual tax gain related to our
disposition of non-strategic retail operations and the pro forma
amortization of goodwill from our planned acquisition of Core-Mark, most of
which would not have been tax deductible. Our effective tax rate would have
been approximately 40% absent these two items since we will not amortize
goodwill in accordance with SFAS 142 and do not anticipate another similar
tax gain. This effective tax rate of approximately 40% would have
represented a pro forma combined tax expense of $34.0 million, net income of
$52.1 million and diluted income per share of $0.95.
(9) On December 30, 2001, we adopted SFAS 142, Accounting for Goodwill and Other
Intangible Assets, which eliminated periodic amortization of goodwill. If we
had applied the nonamortization provisions of SFAS 142 for each of the
periods presented, earnings (loss) before extraordinary charge would have
been $(26) million for 1999, $(103) million for 2000, $46 million for 2001,
$22 million for the 16 weeks ended April 21, 2001; and $60 million for the
pro forma 52 weeks ended April 20, 2002; and net earnings (loss) would have
been $(26) million for 1999, $(103) million for 2000, $42 million for 2001,
$18 million for the 16 weeks ended April 21, 2001, and $60 million for the
pro forma 52 weeks ended April 20, 2002.
(10) See note (9). If we had applied the nonamortization provisions of SFAS 142
for all periods presented our diluted earnings (loss) per share would have
been $(0.67) for 1999, $(2.67) for 2000, $0.94 for 2001, $0.42 for the 16
weeks ended April 21, 2001, and $1.08 for the pro forma 52 weeks ended
April 20, 2002.
(11) EBITDA is earnings before extraordinary items, interest expense, income
taxes, depreciation and amortization, equity investment results and LIFO
provision. EBITDA should not be considered as an alternative measure of our
net income, operating performance, cash flow or liquidity. We provide it as
additional information related to our ability to service debt; however,
conditions may require conservation of funds for other uses. Although we
believe EBITDA enhances your understanding of our financial condition, this
measure, when viewed individually, is not necessarily a better indicator of
any trend as compared to measures (e.g., net sales, net earnings, net cash
flows, etc.) conventionally computed in accordance with GAAP. Amounts
presented may not be comparable to similar measures disclosed by other
companies.
S-6
(12) Adjusted EBITDA is EBITDA less unusual adjustments (e.g., strategic plan
charges and specific litigation charges). The following table reconciles
EBITDA to Adjusted EBITDA:
<Table>
<Caption>
HISTORICAL PRO FORMA
------------------------------------------------------------------ ---------
FISCAL YEAR ENDED 16 WEEKS ENDED 52 WEEKS
------------------------------------------ --------------------- ENDED
DECEMBER 25, DECEMBER 30, DECEMBER 29, APRIL 21, APRIL 20, APRIL 20,
1999 2000 2001 2001 2002 2002
------------ ------------ ------------ --------- --------- ---------
EBITDA.......................................... $281 $154 $385 $137 $137 $446
Add back:
Non-cash strategic plan charges................ 78 121 (12) (18) -- 6
Non-cash unusual adjustments................... 14 8 20 -- -- 20
---- ---- ---- ---- ---- ----
EBITDA excluding non-cash strategic plan charges
and unusual adjustments........................ 373 283 393 119 137 472
Add back:
Cash related strategic plan charges............ 58 181 36 17 -- 19
Cash related unusual adjustments............... (20) (8) 47 -- -- 47
---- ---- ---- ---- ---- ----
Adjusted EBITDA................................. $411 $456 $476 $136 $137 $538
==== ==== ==== ==== ==== ====
</Table>
(13) Depreciation and amortization expense includes goodwill amortization, if
any, and excludes amortization of debt cost which is reflected in interest
expense.
(14) Net debt is calculated as total debt (including capital lease obligations)
less cash and cash equivalents.
S-7
RISK FACTORS
This offering involves a high degree of risk. You should consider carefully
the risks described below, together with the other information in or
incorporated by reference into this prospectus supplement and the accompanying
prospectus, before you make a decision to purchase our common stock. If any of
the following risks actually occur, our business, financial condition, operating
results and prospects could be materially adversely affected, which in turn
could adversely affect the price of our common stock.
WE HAVE A SUBSTANTIAL AMOUNT OF DEBT AND DEBT SERVICE OBLIGATIONS, WHICH COULD
ADVERSELY AFFECT OUR FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR
OBLIGATIONS UNDER OUR OUTSTANDING DEBT INSTRUMENTS.
We have a substantial amount of debt outstanding. The following chart shows
certain important credit statistics as of April 20, 2002, on a pro forma basis
after giving effect to the Acquisition and as adjusted for this offering, the
concurrent debt offering and borrowings under our new credit facility.
<Table>
<Caption>
AT APRIL 20, 2002,
AS ADJUSTED
------------------
(IN THOUSANDS)
Total debt (including capital leases)....................... 2,202,719
Shareholders' equity........................................ 687,382
Total capitalization........................................ 2,890,101
Debt to capitalization...................................... 76.2%
</Table>
The amount of our debt could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations with respect to
our outstanding debt instruments;
- require us to dedicate a substantial portion of our cash flow to payments
on our debt, which in turn may limit our ability to pursue our growth
strategy;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to fund future working capital, capital expenditures
and other general corporate requirements;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate; and
- limit, along with the financial and other restrictive covenants in our
debt, among other things, our ability to borrow additional funds. If we
fail to comply with those covenants, it could result in an event of
default which, if not cured or waived, could have a material adverse
effect on our financial condition.
We and our subsidiaries may be able to incur substantial additional debt in
the future, including secured debt. The terms of the indentures governing our
outstanding debt and our new credit facility do not fully prohibit us or our
subsidiaries from doing so. As of April 20, 2002, on a pro forma basis after
giving effect to the Acquisition and as adjusted for this offering and the
concurrent debt offering, our new credit facility would have permitted
additional borrowings of up to approximately $400 million, all of which would be
secured. If new debt is added to our and our subsidiaries' current debt levels,
the related risks that we and they now face could intensify.
Our ability to make payments on and to refinance our debt will depend on
our financial and operating performance, which may fluctuate significantly from
quarter to quarter and is subject to prevailing economic conditions and to
financial, business and other factors beyond our control.
We cannot assure you that our business will generate sufficient cash flow
from operations or that future borrowings will be available to us under our
credit facility in an amount sufficient to enable us to pay our debt or to fund
our other liquidity needs. We may need to refinance all or a portion of our debt
on
S-8
or before maturity. We cannot assure you that we will be able to refinance any
of our debt on commercially reasonable terms or at all.
WE MAY BE MATERIALLY ADVERSELY AFFECTED BY THE BANKRUPTCY OF KMART CORPORATION.
Kmart Corporation is our largest customer, accounting for 17% of our net
sales in 2001, on a pro forma basis after giving effect to the Acquisition. We
began shipments under a ten-year agreement in April 2001, with full
implementation in July 2001. On January 22, 2002, Kmart and certain of its
subsidiaries filed voluntary petitions for relief under Chapter 11 of the U.S.
Bankruptcy Code. Shortly thereafter, we and Kmart entered into a critical vendor
agreement under the terms of which Kmart paid us $76 million of indebtedness and
we agreed to supply Kmart for two years. We will assert a prepetition claim in
the bankruptcy proceeding for obligations under our ten-year distribution
agreement. A material portion of this claim may not be paid by Kmart.
The terms of our distribution agreement provide that Kmart can terminate
if, among other things, the volume of Kmart's purchases decline by certain
amounts, if we materially breach our obligations, including a failure to
maintain specified service levels, or if we experience certain types of changes
of control. Kmart can also elect to terminate the distribution agreement on
12-months written notice given after the fifth anniversary of its effective
date, with the termination to take place at the end of a transition period of up
to an additional 12 months at Kmart's discretion.
Subject to the effect of the critical vendor agreement, Kmart has the right
to assume or reject the distribution agreement with us. If Kmart rejects it, a
breach by Kmart will result, effective immediately prior to the bankruptcy
filing date, but we may still have to supply Kmart for a 12-month transition
period. If Kmart assumes the distribution agreement, it would be required to
cure all defaults, including payment of our prepetition claim. Because Kmart is
a substantial portion of our business, negative information about Kmart's
performance, financial condition, business prospects and progress through its
bankruptcy may adversely affect the market for and prices of our common stock.
We cannot predict what effect this bankruptcy will have on us, but Kmart's
announced plan to close 283 stores will result in the elimination of sales to
those stores. Further, a failure by Kmart to successfully reorganize or to
continue as a going concern would have a material adverse effect on us. Also,
although no material litigation is currently outstanding, we may be involved in
litigation related to the Kmart bankruptcy.
THE INDENTURE GOVERNING OUR NEW SENIOR NOTES, OUR NEW CREDIT FACILITY AND OUR
OTHER EXISTING INDEBTEDNESS CONTAIN PROVISIONS THAT COULD MATERIALLY RESTRICT
OUR BUSINESS.
The indenture governing our new senior notes, our new credit facility and
our other existing indebtedness contain a number of significant covenants that,
among other things, restrict our ability to:
- dispose of assets;
- incur additional debt;
- guarantee third-party obligations;
- repay other debt or amend other debt instruments;
- create liens on assets;
- enter into capital leases;
- make investments, loans or advances;
- make acquisitions or engage in mergers or consolidations;
- make capital expenditures; and
- engage in certain transactions with our subsidiaries and affiliates.
S-9
In addition, under our new credit facility, we are required to meet a
number of financial ratios and tests.
Our ability to comply with these covenants may be affected by events beyond
our control. If we breach any of these covenants or restrictions, it could
result in an event of default under our credit facility and the documents
governing our other existing indebtedness, which would permit our lenders to
declare all amounts borrowed thereunder to be due and payable, together with
accrued and unpaid interest, and our senior lenders could terminate their
commitments to make further extensions of credit under our credit facility. If
we were unable to repay debt to our secured lenders, they could proceed against
the collateral securing the debt.
IF THE CUSTOMERS TO WHOM WE LEND MONEY OR FOR WHOM WE GUARANTEE STORE LEASE
OBLIGATIONS FAIL TO REPAY US, IT COULD HARM OUR FINANCIAL RESULTS.
We provide subleases, extend loans to and make investments in many of our
retail store customers, often in conjunction with the establishment of long-term
supply contracts. As of December 29, 2001, on a pro forma basis after giving
effect to the Acquisition, we had an aggregate of $119 million in outstanding
loans to our customers. Our loans to our customers are generally not investment
grade and are highly illiquid. We also have investments in customers through
direct financing leases of real property and equipment, lease guarantees,
operating leases or credit extensions for inventory purchases.
Although we have strict credit policies and apply cost/benefit analyses to
these investment decisions, we face the risk that credit losses from existing or
future investments or commitments could adversely affect our financial results.
On a pro forma basis after giving effect to the Acquisition, our credit loss
expense from receivables as well as from investments in customers was $40
million in 2001 (including a $17 million charge relating to the Kmart
bankruptcy) and $1 million for the 16 weeks ended April 20, 2002.
VARIOUS CHANGES IN THE DISTRIBUTION AND RETAIL MARKETS IN WHICH WE OPERATE HAVE
LED AND MAY
CONTINUE TO LEAD TO REDUCED SALES AND MARGINS FOR US AND LOWER PROFITABILITY FOR
OUR CUSTOMERS.
The distribution and retail markets in which we operate are undergoing
accelerated change as distributors and retailers seek to lower costs and provide
additional services in an increasingly competitive environment. An example of
this is the growing trend of large self-distributing chains consolidating to
reduce costs and gain efficiencies. Eating away from home and alternative format
food stores, such as warehouse stores and supercenters, have taken market share
from traditional supermarket operators, including independent grocers, many of
whom are our customers. Vendors, seeking to ensure that more of their
promotional fees and allowances are used by retailers to increase sales volume,
increasingly direct promotional dollars to large self-distributing chains. We
believe that these changes have led to reduced sales, reduced margins and lower
profitability among many of our customers and, consequently, for us. If the
strategies we have developed in response to these changing market conditions are
not successful, it could harm our financial condition and business prospects.
CONSUMABLE GOODS DISTRIBUTION IS A LOW-MARGIN BUSINESS AND IS SENSITIVE TO
ECONOMIC CONDITIONS.
We derive most of our revenues from the consumable goods distribution
industry. This industry is characterized by a high volume of sales with
relatively low profit margins. A significant portion of our sales are at prices
that are based on product cost plus a percentage markup. Consequently, our
results of operations may be negatively impacted when consumable goods prices go
down, even though our percentage markup may remain constant. The consumable
goods industry is also sensitive to national and regional economic conditions,
and the demand for our consumable goods has been adversely affected from time to
time by economic downturns.
S-10
WE FACE COMPETITION IN BOTH OUR DISTRIBUTION AND RETAIL MARKETS, AND IF WE ARE
UNABLE TO COMPETE EFFECTIVELY IN THESE MARKETS, IT COULD HARM OUR BUSINESS.
Our distribution group operates in a highly competitive market. We face
competition from local, regional and national food distributors on the basis of
price, quality and assortment, schedules and reliability of deliveries and the
range and quality of services provided. We also compete with retail supermarket
chains that self-distribute, purchasing directly from vendors and distributing
products to their supermarkets for sale to the consumer. Consolidation of
self-distributing chains may produce even stronger competition for our
distribution group.
Our retail group competes with other food outlets on the basis of price,
quality and assortment, store location and format, sales promotions,
advertising, availability of parking, hours of operation and store appeal.
Traditional mass merchandisers have gained a growing foothold in food marketing
and distribution with alternative store formats, such as warehouse stores and
supercenters, which depend on concentrated buying power and low-cost
distribution technology. We expect that stores with alternative formats will
continue to increase their market share in the future. Retail consolidations not
only produce stronger competition for our retail group, but may also result in
declining sales in our distribution group if our existing customers are acquired
by self-distributing chains.
Some of our competitors have greater financial and other resources than we
do. In addition, consolidation in the industry, heightened competition among our
vendors and new entrants could create additional competitive pressures that
reduce our margins and adversely affect our business. If we fail to successfully
respond to these competitive pressures or to implement our strategies
effectively, it could have a material adverse effect on our financial condition
and business prospects.
BECAUSE WE OWN AND OPERATE REAL ESTATE, WE FACE THE RISK OF BEING HELD LIABLE
FOR ENVIRONMENTAL DAMAGES THAT MAY OCCUR ON OUR PROPERTIES.
Our facilities and operations are subject to various laws, regulations and
judicial and administrative orders concerning protection of the environment and
human health, including provisions regarding the transportation, storage,
distribution, disposal or discharge of certain materials. In conformity with
these provisions, we have a comprehensive program for testing, removal,
replacement or repair of our underground fuel storage tanks and for site
remediation where necessary. Although we have established reserves that we
believe will be sufficient to satisfy the anticipated costs of all known
remediation requirements, we cannot assure you that these reserves will be
sufficient.
We and others have been designated by the U.S. Environmental Protection
Agency and by similar state agencies as potentially responsible parties under
the Comprehensive Environmental Response, Compensation and Liability Act, or
CERCLA, or similar state laws, as applicable, with respect to EPA-designated
Superfund sites. While liability under CERCLA for remediation at these sites is
generally joint and several with other responsible parties, we believe that, to
the extent we are ultimately determined to be liable for the expense of
remediation at any site, such liability will not result in a material adverse
effect on our consolidated financial position or results of operations.
WE ARE A PARTY TO OR THREATENED WITH VARIOUS LITIGATION AND CONTINGENT LOSS
SITUATIONS ARISING IN THE ORDINARY COURSE OF OUR BUSINESS AND CORE-MARK'S
BUSINESS. IF ANY PROCEEDING IS RESOLVED AGAINST US, IT COULD HARM OUR FINANCIAL
CONDITION AND BUSINESS PROSPECTS.
We are a party to or threatened with various other litigation and
contingent loss situations arising in the ordinary course of our business
including:
- disputes with customers and vendors;
- disputes with owners or creditors of financially troubled or failed
customers;
- disputes with employees;
- disputes with insurance carriers;
S-11
- disputes with landlords and lessees;
- disputes with tax authorities;
- litigation involving health and other effects of cigarette smoking and
other uses of tobacco; and
- litigation by the U.S. Department of Justice to recover federal Medicare
costs allegedly connected to smoking;
some of which may be for substantial amounts. We incur the costs of defending
any such litigation whether or not a claim has merit. We intend to vigorously
defend against all lawsuits, but we cannot predict the outcome of any case. An
unfavorable outcome in any case could harm our business and financial results.
BECAUSE WE SELL FOOD AND OTHER PRODUCTS, WE ARE SUBJECT TO PRODUCT LIABILITY
CLAIMS.
Like any other seller of food and other consumer products, we face the risk
of exposure to product liability claims in the event that people who purchase
products we sell become injured or experience illness from those products. We
believe that we have sufficient primary and excess umbrella liability insurance
to protect us against any product liability claims that may arise. However, this
insurance may not continue to be available at a reasonable cost, or, even if it
is available, it may not be adequate to cover our liabilities. We generally seek
contractual indemnification and insurance coverage from parties supplying our
products, but this indemnification or insurance coverage is limited, as a
practical matter, to the creditworthiness of the indemnifying party and the
policy limits of any insurance provided by suppliers. If we do not have adequate
insurance or contractual indemnification to cover our liabilities, product
liability claims could materially reduce our earnings.
OUR CURRENT STRATEGY INVOLVES GROWTH THROUGH ACQUISITIONS, WHICH REQUIRES US TO
INCUR SUBSTANTIAL COSTS AND POTENTIAL LIABILITIES FOR WHICH WE MAY NEVER REALIZE
THE ANTICIPATED BENEFITS.
As part of our growth strategy for our distribution group, we intend to
continue to seek strategic acquisitions of other distributors on a selective
basis. In addition, our retail group intends to selectively acquire stores
operated by others on a strategic basis. Since the beginning of 2001, we have
acquired several businesses.
On April 23, 2002, we signed a merger agreement to acquire Core-Mark
International, Inc., a distributor of consumer package goods to nearly 30,000
convenience stores and other retailers in the western United States and western
Canada from its network of 19 distribution centers. Also in April 2002, we
acquired Head Distributing Company, a wholesale distributor that operates two
piece-pick distribution centers and serves approximately 3,000 retail locations
in six southeastern states. In March 2002, we signed an agreement with
Albertson's, Inc. to acquire Albertson's distribution center in Tulsa, Oklahoma
and to supply 39 Albertson's stores in Oklahoma and Nebraska for the next five
years. We expect that shipments under this arrangement, which is subject to
customary closing conditions, will commence in July 2002. In September 2001, we
purchased certain assets and inventory of Miller & Hartman South, LLC, a
wholesale distributor serving over 1,800 convenience stores in Kentucky and
surrounding states. In April 2001, we acquired Minter-Weisman Co., a wholesale
distribution company serving over 800 convenience stores in Minnesota, Wisconsin
and surrounding states.
In May 2002, we purchased seven stores located in the Dallas, Texas
metropolitan area, which we operate under our price impact format. In September
2001, we purchased five Smith's Food & Drug Stores located in New Mexico and
Texas from Kroger Co. which we operate under our price impact format. In April
2001, we also purchased seven Food 4 Less stores located in Central California
from Whitco Foods, Inc. which we continue to operate as price impact stores
under the Food 4 Less banner.
We cannot assure you that we will be able to continue to implement our
growth strategy, or that this strategy will ultimately be successful. We
regularly engage in evaluations of potential acquisitions and are in various
stages of discussion regarding possible acquisitions, certain of which, if
consummated, could be
S-12
significant to us, including the Acquisition. Any potential acquisitions may
result in significant transaction expenses, increased interest and amortization
expense, increased capital expenditures, increased depreciation expense and
increased operating expense, any of which could have a material adverse effect
on our operating results.
Achieving the benefits of these acquisitions will depend in part on our
ability to integrate those businesses with our business in an efficient manner.
We cannot assure you that this will happen or that it will happen in an
efficient manner. Our consolidation of operations following these acquisitions
may require substantial attention from our management. The diversion of
management attention and any difficulties encountered in the transition and
integration process could have a material adverse effect on our ability to
achieve expected net sales, operating expenses and operating results for these
acquired businesses. We cannot assure you that we will realize any of the
anticipated benefits of any acquisition, and if we fail to realize these
anticipated benefits, our operating performance could suffer.
Furthermore, we may not be able to identify suitable acquisition candidates
in the future, obtain acceptable financing or consummate any future
acquisitions.
WE OPERATE IN A COMPETITIVE LABOR MARKET, AND A SUBSTANTIAL NUMBER OF OUR
EMPLOYEES ARE COVERED BY COLLECTIVE BARGAINING AGREEMENTS.
Our continued success will depend on our ability to attract and retain
qualified personnel in both our distribution and retail groups. We compete with
other businesses in our markets with respect to attracting and retaining
qualified employees. A shortage of qualified employees would require us to
enhance our wage and benefits packages in order to compete effectively in the
hiring and retention of qualified employees or to hire more expensive temporary
employees. In addition, approximately 44%, or approximately 9,200, of our
employees are covered by collective bargaining agreements, most of which expire
at various times over the course of the next five years. In addition, Core-Mark
is a party to a number of local collective bargaining agreements. These
agreements, most of which expire at various times over the course of the next
five years, cover an aggregate of approximately 9%, or approximately 260, of
Core-Mark's employees.
We cannot assure you that we or Core-Mark will be able to renew our
respective collective bargaining agreements, that our labor costs will not
increase, that we will be able to recover any increases through increased prices
charged to customers or that we will not suffer business interruptions as a
result of strikes or other work stoppages. If we fail to attract and retain
qualified employees, to control our labor costs, or to recover any increased
labor costs through increased prices charged to our customers, it could harm our
business.
OUR BYLAWS MAY PREVENT US FROM EFFECTIVELY DEFENDING AGAINST CERTAIN TAKEOVER
ATTEMPTS AND MAY RESULT IN DEFAULTS OCCURRING UNDER OUR INDEBTEDNESS IN THE EVEN
THAT CERTAIN TYPES OF CHANGES OF CONTROL OF OUR COMPANY OCCUR.
Our bylaws contain a provision that prohibits us from adopting a
shareholder rights plan or any other form of "poison pill" without the prior
approval of holders of at least a majority of the shares of our outstanding
capital stock. This provision limits the flexibility of our board of directors
in negotiating with potential hostile acquirors and may result in our board of
directors being unable to prevent a takeover of our company at a price that it
believes is inadequate. Additionally, the indenture for the concurrent debt
offering and the agreements governing our existing indebtedness contain, and any
future other agreements relating to other indebtedness to which we become a
party may contain, provisions that provide that a change of control of our
company constitutes a default or otherwise requires repayment of amounts
borrowed under these agreements. It is unclear whether our bylaws would prohibit
us from repaying our indebtedness upon a change of control without the consent
of a majority of our stockholders. Any failure to repay or offer to repay such
indebtedness, as the case may be, would constitute an event of default under the
agreements governing our existing indebtedness and the new senior notes and may
constitute an event of default under any future agreements relating to other
indebtedness to which we become a party which would likely have an adverse
effect on the value of our common stock.
S-13
OUR STOCK PRICE HAS BEEN AND IS LIKELY TO CONTINUE TO BE VOLATILE, WHICH MAY
MAKE IT DIFFICULT FOR YOU TO SELL OUR COMMON STOCK WHEN YOU WANT TO AT A PRICE
YOU FIND ATTRACTIVE.
For our fiscal year ended December 29, 2001 the high sales price of our
common stock was $37.89 and the low sales price was $10.75. The trading price of
our common stock is likely to continue to be highly volatile. Our stock price
could be subject to wide fluctuations in response to a variety of factors,
including the following:
- actual or anticipated variations in quarterly results;
- new products or services offered by us or our competitors;
- changes in financial estimates by securities analysts;
- conditions or trends in the distribution and retail industries;
- our announcement of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;
- adverse or unfavorable publicity regarding us or our services;
- additions or departures of key personnel; and
- sales of common stock by us and our existing stockholders.
In addition, because we depend on Kmart for a substantial portion of our
business, negative information about Kmart's performance, financial condition
and business prospects has in the past and may continue to adversely affect the
market for and prices of our common stock.
TERRORIST ATTACKS AND OTHER ACTS OF VIOLENCE OR WAR MAY AFFECT THE MARKET FOR
OUR COMMON STOCK, THE MARKETS IN WHICH WE OPERATE, OUR OPERATIONS AND OUR
PROFITABILITY.
Terrorist attacks may negatively affect our operations and your investment.
There can be no assurance that there will not be further terrorist attacks
against the United States or U.S. businesses. These attacks or armed conflicts
may directly impact our physical facilities or those of our suppliers or
customers. Furthermore, these attacks may make travel and the transportation of
our supplies and products more difficult and more expensive and ultimately
affect our sales.
Also as a result of terrorism, the United States has entered into an armed
conflict which could have a further impact on our sales, our supply chain, and
our ability to deliver product to our customers. Political and economic
instability in some regions of the world may also result and could negatively
impact our business. The consequences of any armed conflict are unpredictable,
and we may not be able to foresee events that could have an adverse effect on
our business or your investment.
More generally, any of these events could cause consumer confidence and
spending to decrease or result in increased volatility in the United States and
worldwide financial markets and economy. They also could result in a worsening
of economic conditions in the United States or abroad. Any of these occurrences
could have a significant impact on our operating results, revenues and costs and
may result in the volatility of the market price for our securities and on the
future price of our securities.
S-14
CONCURRENT OFFERING
Concurrently with this offering, we are offering $200 million aggregate
principal amount of our 9 1/4% Senior Notes due 2010. The closing of this
offering is conditioned on the closing of the Acquisition and the other related
financings.
USE OF PROCEEDS
Our net proceeds from this offering (including the full exercise of the
underwriters' over-allotment option) and the concurrent debt offering will be
approximately $365 million, after deducting underwriting discounts and estimated
offering expenses. We intend to use the net proceeds from this offering and the
concurrent debt offering, together with initial borrowings under our new credit
facility and cash on hand, to fund the Acquisition, to repay the outstanding
indebtedness under our existing credit facility and other indebtedness and to
pay related fees and expenses.
The following table summarizes the estimated sources and uses of funds from
this offering, the concurrent debt offering and our new credit facility. The
actual amounts may differ from those shown below on the closing date of these
transactions.
<Table>
<Caption>
SOURCES OF FUNDS
(IN MILLIONS)
- ----------------
New Fleming revolving credit facility(1).................... $118
New Fleming term loan(1).................................... 425
9 1/4% Senior Notes due 2010................................ 200
Common Stock................................................ 178
Available cash from Core-Mark............................... 35
----
Total Sources..................................... $956
====
</Table>
<Table>
<Caption>
USES OF FUNDS
(IN MILLIONS)
- -------------
Purchase of Core-Mark equity(2)............................. $295
Repay existing Fleming revolving credit facility(3)......... 381
Repay existing Fleming term loan(3)......................... 109
Repay Core-Mark receivables securitization facility(4)...... 55
Repay Core-Mark 11 3/8% Senior Subordinated Notes due
2003(5)................................................... 75
Fees and expenses of the transactions(6).................... 41
----
Total Uses........................................ $956
====
</Table>
- ------------
(1) Our new credit facility will consist of a $550 million revolving facility
and a $425 million term loan.
(2) If the Acquisition is not consummated on or before June 30, 2002 we will pay
an additional $7 million in cash to purchase the Core-Mark equity.
(3) The stated interest rate on borrowings under our existing credit facility is
equal to a referenced index rate, normally the London interbank offered
interest rate, or LIBOR, plus a margin. The level of the margin is dependent
upon credit ratings on our senior secured bank debt. Our existing revolving
credit facility matures on July 25, 2003. Our existing term loan matures on
July 25, 2004.
(4) Core-Mark's obligations under its receivables securitization facility
currently bear interest at either LIBOR or the commercial paper rate plus a
margin and mature in January 2003. This facility will be repaid as soon as
practicable following the closing of the Acquisition.
(5) We intend to call Core-Mark's 11 3/8% Senior Subordinated Notes due 2003 for
redemption upon consummation of the Acquisition at a redemption price of
102.844% of the aggregate outstanding principal amount thereof, plus accrued
and unpaid interest to the redemption date.
(6) Includes the redemption premium for Core-Mark's 11 3/8% Senior Subordinated
Notes due 2003 and the accrued and unpaid interest thereon to the redemption
date.
S-15
PRICE RANGE OF COMMON STOCK
Our common stock is quoted on the New York Stock Exchange under the symbol
"FLM."
The following table sets forth the high and low per share sales prices for
our common stock as quoted on the New York Stock Exchange and dividends paid per
share on our common stock for each period indicated:
<Table>
<Caption>
CASH
HIGH LOW DIVIDENDS
------ ------ ---------
FISCAL 2000
First Quarter........................................... $16.25 $ 8.69 $0.02
Second Quarter.......................................... 16.56 12.75 0.02
Third Quarter........................................... 17.63 12.38 0.02
Fourth Quarter.......................................... 15.06 10.31 0.02
FISCAL 2001
First Quarter........................................... $26.80 $10.75 $0.02
Second Quarter.......................................... 36.14 23.97 0.02
Third Quarter........................................... 37.89 23.55 0.02
Fourth Quarter.......................................... 29.60 18.05 0.02
FISCAL 2002
First Quarter........................................... $24.49 $15.50 $0.02
Second Quarter (through June 12, 2002).................. $26.10 $19.30 0.02
</Table>
On June 12, 2002, the closing price of our common stock on the New York
Stock Exchange was $19.40 per share.
DIVIDEND POLICY
We have paid cash dividends on our common stock for 85 consecutive years.
Dividends are generally declared on a quarterly basis with holders as of the
record date being entitled to receive the cash dividend on the payment date. We
paid cash dividends of $.02 per share on a quarterly basis in each quarter of
2002, 2001 and 2000.
S-16
CAPITALIZATION
The following table sets forth (a) our current maturities of long-term debt
and capital leases and our consolidated capitalization at April 20, 2002 and (b)
our current maturities of long-term debt and capital leases and our consolidated
capitalization at April 20, 2002 as adjusted to give effect to the Acquisition,
this offering (including the full exercise of the underwriters' over-allotment
option), the concurrent debt offering and our new credit facility, after
deducting underwriting discounts and commissions and estimated offering expenses
and our application of the net proceeds therefrom.
<Table>
<Caption>
AT APRIL 20, 2002
---------------------------
ACTUAL(1) AS ADJUSTED(2)
---------- --------------
(IN THOUSANDS)
Current maturities of long-term debt and capital leases.... $ 61,498 $ 26,001
Long-term debt:
New revolving credit facility............................ -- 79,667
New term loan facility................................... -- 420,750
Existing revolving credit facility....................... 310,000 --
Existing term loan facility.............................. 69,010 --
Long-term obligations under capital leases............... 328,295 328,295
10 1/8% senior notes due 2008............................ 348,225 348,225
9 1/4% senior notes due 2010............................. -- 200,000
10 5/8% senior subordinated notes due 2007............... 400,000 400,000
9 7/8% senior subordinated notes due 2012................ 260,260 260,260
5 1/4% convertible senior subordinated notes due 2009.... 150,000 150,000
Other debt (including discounts)......................... (10,479) (10,479)
---------- ----------
Total long-term debt (including current maturities)... 1,916,809 2,202,719
Total shareholders' equity............................ 517,909 687,382
---------- ----------
Total capitalization (including current maturities)... $2,434,718 $2,890,101
========== ==========
</Table>
- ------------
(1) Does not include our $250 million of 10 1/2% Senior Subordinated Notes due
2004 outstanding at April 20, 2002, which we redeemed on June 1, 2002.
(2) The "As Adjusted" column gives effect to our repayment of certain
indebtedness of Core-Mark in connection with the Acquisition. As of March
31, 2002, Core-Mark had $76 million outstanding under its receivables
securitization facility and $75 million aggregate principal amount of its
11 3/8% Senior Subordinated Notes due 2003 outstanding. We intend to repay
Core-Mark's obligations under its receivables securitization facility, which
currently bears interest at either LIBOR or the commercial paper rate, plus
a margin and mature in January 2003, as soon as practicable following the
consummation of the Acquisition. We intend to call Core-Mark's 11 3/8%
Senior Subordinated Notes due 2003 for redemption upon consummation of the
Acquisition at a redemption price of 102.844% of the aggregate outstanding
principal amount thereof, plus accrued and unpaid interest to the redemption
date.
S-17
SELECTED CONSOLIDATED FINANCIAL DATA OF FLEMING
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The information presented below for, and as of the end of, each of the
fiscal years in the five-year period ended December 29, 2001 is derived from our
audited consolidated financial statements. The information presented below for,
and as of the end of, the 16 weeks ended April 21, 2001 and April 20, 2002 is
derived from our unaudited consolidated condensed financial statements, which
include all adjustments that management considers necessary for a fair
presentation of our financial position and results of operations for those
periods. The information for, and as of the end of, the 16 weeks ended April 20,
2002 is not necessarily indicative of the results that may be expected for any
other interim period or for the full fiscal year ending December 28, 2002. You
should read the information set forth below together with the other financial
information contained or incorporated by reference in this prospectus supplement
and the accompanying prospectus.
<Table>
<Caption>
FISCAL YEAR ENDED(1) 16 WEEKS ENDED
------------------------------------------------------------------------ ---------------------
DECEMBER 27, DECEMBER 26, DECEMBER 25, DECEMBER 30, DECEMBER 29, APRIL 21, APRIL 20,
1997(2) 1998(3) 1999(4) 2000(5) 2001(6) 2001(7) 2002(8)
------------ ------------ ------------ ------------ ------------ --------- ---------
INCOME STATEMENT DATA:
Net sales(9)................... $14,916 $14,629 $14,218 $14,369 $15,558 $4,137 $4,686
Costs and expenses:
Cost of sales(9).............. 13,508 13,179 12,781 13,022 14,367 3,771 4,347
Selling and administrative.... 1,172 1,251 1,262 1,187 961 315 255
Interest expense.............. 163 161 165 175 166 58 50
Interest income and other..... (30) (25) (30) (25) (24) (9) (7)
Impairment/restructuring
charge (credit)............. -- 653 103 213 (24) (27) --
Litigation charge (credit).... 21 8 -- (2) 49 2 0
------- ------- ------- ------- ------- ------ ------
Total costs and expenses.... 14,834 15,227 14,281 14,570 15,495 4,110 4,645
------- ------- ------- ------- ------- ------ ------
Earnings(loss) before taxes.... 82 (598) (63) (201) 63 27 41
Taxes on income(loss).......... 44 (87) (18) (79) 36 11 16
------- ------- ------- ------- ------- ------ ------
Earnings(loss) before
extraordinary charge(10)...... 38 (511) (45) (122) 27 16 25
Extraordinary charge from early
retirement of debt (net of
taxes)........................ (13) -- -- -- (4) (4) --
------- ------- ------- ------- ------- ------ ------
Net earnings(loss)(10)...... $ 25 $ (511) $ (45) $ (122) $ 23 $ 12 $ 25
======= ======= ======= ======= ======= ====== ======
Diluted earnings(loss) per
share(11)..................... $ 0.67 $(13.48) $ (1.17) $ (3.15) $ 0.52 $ 0.29 $ 0.52
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and cash equivalents..... $ 30 $ 6 $ 7 $ 30 $ 17 $ 27 $ 4
Total assets.................. 3,924 3,491 3,573 3,403 3,655 3,176 3,824
Total debt (including current
maturities and capital
leases)..................... 1,563 1,566 1,694 1,669 1,811 1,636 1,917
Shareholders' equity.......... 1,090 570 561 427 498 494 518
OTHER FINANCIAL AND OPERATING
DATA:
Cash flows provided by (used
in) operating activities.... $ 113 $ 141 $ 118 $ 127 $ (32) $ (116) $ (43)
Cash flows provided by (used
in) investing activities.... (54) (163) (213) (48) (190) 84 (49)
Cash flows provided by (used
in) financing activities.... (92) (2) 96 (55) 209 29 342
EBITDA(12).................... 441 (237) 281 154 385 137 137
Adjusted EBITDA(13)........... 460 431 411 456 476 136 137
Depreciation and
amortization(14)............ 173 180 158 169 166 51 46
Capital expenditures.......... 129 200 166 151 238 48 61
Ratio of earnings to fixed
charges(15)................. 1.41x -- -- -- 1.29x 1.43x 1.65x
</Table>
- ------------
(1) Fiscal 2000 is a 53-week year; all other years are 52 weeks.
(2) The results in 1997 reflect a charge of $19 million ($9 million after-tax)
related to the settlement of a lawsuit against us. Such period also
reflects an extraordinary charge of $22 million ($13 million after-tax)
related to a recapitalization.
(3) The results in 1998 reflect an impairment/restructuring charge with related
costs totaling $668 million ($543 million after-tax) related to the
strategic plan.
(4) The results in 1999 reflect an impairment/restructuring charge with related
costs totaling $137 million ($92 million after-tax) related to our
strategic plan. Such period also reflects unusual items ($31 million charge
to close 10 conventional retail stores, income of $22 million from
extinguishing a portion of the self-insured workers' compensation
liability, interest income of $9 million related to refunds in federal
income taxes from prior years, and $6 million in gains from the sale of
distribution facilities) netting to $6 million of income ($3 million
after-tax).
(5) The results in 2000 reflect an impairment/restructuring charge with related
costs totaling $309 million ($183 million after-tax) relating to our
strategic plan. Such period also reflects unusual items ($10 million charge
related primarily to asset impairment on retail stores, income of $2
million relating to litigation settlements, and $9 million in gains from
the sale of distribution facilities) netting to less than $1 million of
income ($1 million loss after-tax).
S-18
(6) The results in 2001 reflect an impairment/restructuring credit totaling $24
million ($25 million after-tax reflecting the tax expense impact of
goodwill permanent differences from the sale of certain retail stores)
relating to our strategic plan. Such period also reflects unusual items
($49 million in charges relating to litigation settlements, $20 million in
charges relating to Kmart's bankruptcy reorganization and $2 million due to
early retirement of debt) netting to approximately $70 million in charges
($42 million after-tax).
(7) The results in the first quarter of 2001 reflect an
impairment/restructuring net credit totaling $1 million (less than $1
million after-tax) relating to our strategic plan. Such period also
reflects unusual items ($2 million in charges relating to litigation
settlements and approximately $2 million in charges due to early retirement
of debt) netting to approximately $3 million in charges ($2 million
after-tax).
(8) During the first quarter of 2002, we adopted SFAS No. 142 and ceased
amortizing goodwill cost. No prior period restatements were made. Goodwill
amortization for any of the prior years reported did not exceed $33
million. Also, cash and cash equivalents and total debt amounts exclude
amounts related to the 10 1/2% senior subordinated notes due 2004 and
related transaction fees as these amounts are being held in trust to redeem
the notes in June, 2002.
(9) During the first quarter of 2002, we adopted EITF 01-9 and reduced sales
and cost of sales for all prior periods with the impact on any year
reported not exceeding $75 million. The adoption had no effect on gross
margins or earnings.
(10) On December 30, 2001, we adopted SFAS 142, Accounting for Goodwill and
Other Intangible Assets, which eliminated periodic amortization of
goodwill. If we had applied the nonamortization provisions of SFAS 142 for
each of the periods presented, earnings (loss) before extraordinary charge
would have been $70 million for 1997, $(480) million for 1998, $(26)
million for 1999, $(103) million for 2000, $46 million for 2001, and $22
million for the 16 weeks ended April 21, 2001; and net earnings (loss)
would have been $57 million for 1997, $(480) million for 1998, $(26)
million for 1999, $(103) million for 2000, $42 million for 2001, and $18
million for the 16 weeks ended April 21, 2001.
(11) See Note (10). If we had applied the nonamortization provisions of SFAS 142
for all periods presented our diluted earnings (loss) per share would have
been $1.50 for 1997, $(12.67) for 1998, $(0.67) for 1999, $(2.67) for 2000,
$0.94 for 2001, and $0.42 for the 16 weeks ended April 21, 2001.
(12) EBITDA is earnings before extraordinary items, interest expense, income
taxes, depreciation and amortization, equity investment results and LIFO
provision. EBITDA should not be considered as an alternative measure of our
net income, operating performance, cash flow or liquidity. We provide it as
additional information related to our ability to service debt; however,
conditions may require conservation of funds for other uses. Although we
believe EBITDA enhances your understanding of our financial condition, this
measure, when viewed individually, is not necessarily a better indicator of
any trend as compared to conventionally computed measures (e.g., net sales,
net earnings, net cash flows, etc.). Amounts presented may not be
comparable to similar measures disclosed by other companies.
(13) Adjusted EBITDA is EBITDA less unusual adjustments (e.g., strategic plan
charges and specific litigation charges). The following table reconciles
EBITDA to Adjusted EBITDA:
<Table>
<Caption>
HISTORICAL
------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED 16 WEEKS ENDED
------------------------------------------------------------------------ ---------------------
DECEMBER 27, DECEMBER 26, DECEMBER 25, DECEMBER 30, DECEMBER 29, APRIL 21, APRIL 20,
1997 1998 1999 2000 2001 2001 2002
------------ ------------ ------------ ------------ ------------ --------- ---------
EBITDA......................... $441 $(237) $281 $154 $385 $137 $137
Add back:
Non-cash strategic plan
charges..................... -- 594 78 121 (12) (18) --
Non-cash unusual
adjustments................. -- -- 14 8 20 -- --
---- ----- ---- ---- ---- ---- ----
EBITDA excluding non-cash
strategic plan charges and
unusual adjustments........... 441 357 373 283 393 119 137
Add back:
Cash related strategic plan
charges..................... -- 74 58 181 36 17 --
Cash related unusual
adjustments................. 19 -- (20) (8) 47 -- --
---- ----- ---- ---- ---- ---- ----
Adjusted EBITDA................ $460 $ 431 $411 $456 $476 $136 $137
==== ===== ==== ==== ==== ==== ====
</Table>
(14) Depreciation and amortization expense includes goodwill amortization, if
any, and excludes amortization of debt cost which is reflected in interest
expense.
(15) For purposes of computing this ratio, earnings consist of earnings before
income taxes and fixed charges. Fixed charges consist primarily of interest
expense, including amortization of deferred debt issuance costs and
one-third of rental expense (the portion considered representative of the
interest factor). Earnings were insufficient to cover fixed charges by $598
million, $63 million and $202 million for the fiscal years ended December
26, 1998, December 25, 1999 and December 30, 2000, respectively.
S-19
SELECTED CONSOLIDATED FINANCIAL DATA OF CORE-MARK
The following table sets forth selected historical consolidated financial
and other data for Core-Mark International, Inc. The historical financial data
as of the end of and for each year in the five-year period ended December 31,
2001 have been derived from Core-Mark's audited consolidated financial
statements. The information presented below for, and as of the end of, the
three-month period ended March 31, 2001 and 2002 is derived from Core-Mark's
unaudited condensed consolidated financial statements, which include all
adjustments that Core-Mark's management considers necessary for a fair
presentation of Core-Mark's financial position and results of operations for
those periods. The information for, and as of the end of, the three months ended
March 31, 2002 is not necessarily indicative of the results that may be expected
for any other interim period or for the full fiscal year ended December 31,
2002. You should read the information set forth below together with the other
financial information contained or incorporated by reference in this prospectus
supplement and the accompanying prospectus.
<Table>
<Caption>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------------- -------------------
1997 1998 1999 2000 2001 2001 2002
---------- ---------- ---------- ---------- ---------- -------- --------
(IN THOUSANDS)
STATEMENT OF INCOME DATA:
Net sales................................ $2,395,867 $2,476,376 $2,838,107 $3,035,379 $3,425,024 $754,266 $825,153
Costs of goods sold(1)................... 2,216,162 2,295,659 2,643,069 2,840,334 3,211,160 705,121 774,297
---------- ---------- ---------- ---------- ---------- -------- --------
Gross profit(1).......................... 179,705 180,717 195,038 195,045 213,864 49,145 50,856
Operating and administrative expenses.... 148,902 150,977 155,128 160,143 169,691 42,150 41,463
---------- ---------- ---------- ---------- ---------- -------- --------
Operating income(1)...................... 30,803 29,740 39,910 34,902 44,173 6,995 9,393
Interest expense, net.................... 18,181 15,402 12,696 12,852 11,121 3,042 2,488
Amortization of debt refinancing
costs(2)............................... 1,498 2,204 1,274 1,274 1,274 318 318
---------- ---------- ---------- ---------- ---------- -------- --------
Income before income taxes............... 11,124 12,134 25,940 20,776 31,778 3,635 6,587
Income tax expense(3).................... 4,834 4,925 5,740 9,721 14,268 1,633 2,832
---------- ---------- ---------- ---------- ---------- -------- --------
Net income(4)............................ $ 6,290 $ 7,209 $ 20,200 $ 11,055 $ 17,510 $ 2,002 $ 3,755
========== ========== ========== ========== ========== ======== ========
OTHER DATA:
EBITDAL(5)............................... $ 41,597 $ 56,419 $ 53,493 $ 50,129 $ 59,446 $ 9,867 $ 11,664
Cash provided by (used in):
Operating activities................... 17,547 5,933 40,781 (1,925) 28,211 48,867 11,964
Investing activities................... (30,739) (5,311) (6,575) (7,620) (7,916) (517) (152)
Financing activities................... 3,549 9,533 (42,789) 21,282 (23,150) (56,617) (12,467)
Depreciation and amortization(6)......... 7,528 8,065 7,912 8,911 9,678 2,475 2,052
LIFO expense(1).......................... 3,266 18,614 5,671 6,316 5,595 397 219
Capital expenditures..................... 9,378 5,311 6,575 7,620 7,916 517 152
</Table>
<Table>
<Caption>
AS OF DECEMBER 31, AS OF
---------------------------------------------------- MARCH 31,
1997 1998 1999 2000 2001 2002
-------- -------- -------- -------- -------- ---------
(IN THOUSANDS)
BALANCE SHEET DATA:
Total assets.............................................. $336,580 $359,390 $350,068 $374,876 $390,141 $376,465
Total debt, including current maturities.................. 197,012 208,124 165,335 186,617 163,467 151,000
</Table>
- ------------
(1) Core-Mark's U.S. inventories are valued at the lower of cost or market.
Cost of goods sold is determined on a last-in, first-out (LIFO) basis.
During periods of rising prices, the LIFO method of costing inventories
generally results in higher costs being charged against income compared to
the FIFO method ("LIFO expense") while lower costs are retained in
inventories. Conversely, during periods of declining prices or a decrease
of Core-Mark's inventory quantities, the LIFO method of costing inventories
generally results in lower costs being charged against income compared to
the FIFO method ("LIFO income"). During the year ended December 31, 1998,
Core-Mark recognized LIFO expense of $18.6 million, primarily due to
several very large increases in domestic cigarette wholesale prices during
1998. However, the LIFO expense in 1998 was more than offset by profits
resulting from such price increases.
(2) Amortization of debt refinancing costs reflects the amortization of all
costs associated with issuing, restructuring and refinancing debt.
(3) Prior to 1999, Core-Mark had a significant valuation allowance that reduced
certain deferred tax assets, based upon management's assessment that it was
more likely than not that these deferred tax assets would not be realized.
However, as a result of Core-Mark's earnings history, in 1999 Core-Mark's
management concluded that the tax benefits related to future deductions,
including net operating loss carryforwards, were more likely than not to be
realized. Therefore, in 1999, Core-Mark
S-20
recorded a $6.2 million decrease in its valuation allowance, which resulted
in a one-time reduction of its tax rate of approximately 24%.
(4) On January 1, 2002, Core-Mark adopted SFAS 142, Accounting for Goodwill and
Other Intangibles. If Core-Mark had applied the nonamortization provisions
of SFAS 142 to all periods presented, net income would have been $8 million
for 1997, $9 million for 1998, $22 million for 1999, $13 million for 2000,
$20 million for 2001, and $2.5 million for the three months ended March 31,
2001.
(5) EBITDAL represents operating income before depreciation, amortization and
LIFO expense, each as defined herein. EBITDAL should not be considered in
isolation or as a substitute for net income, operating income, cash flows
or other consolidated income or cash flow data prepared in accordance with
generally accepted accounting principles, or as a measure of a company's
profitability or liquidity. EBITDAL is included because it is one measure
used by certain investors to determine a company's ability to service its
indebtedness.
(6) Depreciation and amortization includes depreciation on property and
equipment, amortization of goodwill and other non-cash charges, and
excludes amortization of debt refinancing costs.
S-21
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following pro forma consolidated information has been derived by the
application of pro forma adjustments to the consolidated financial statements of
(i) Fleming as of April 20, 2002 and Core-Mark as of March 31, 2002; (ii)
Fleming for the 52 weeks ended December 29, 2001 and Core-Mark for the 12 months
ended December 31, 2001; (iii) Fleming for the 16 weeks ended April 20, 2002 and
Core-Mark for the three months ended March 31, 2002; and (iv) Fleming for the 52
weeks ended April 20, 2002 and Core-Mark for the 12 months ended March 31, 2002.
The pro forma consolidated balance sheet gives effect to Fleming's proposed
acquisition of Core-Mark (the "Acquisition") for approximately $295 million in
cash, plus Fleming's assumption of all of Core-Mark's net debt outstanding as of
the closing of the Acquisition (which we currently expect to be approximately
$95 million at the time of the closing, which is currently expected to occur in
mid-June 2002, for a total purchase price of approximately $390 million) and the
related financing transactions (together with the Acquisition, the
"Transactions") as if they had occurred as of April 20, 2002. The pro forma
consolidated statements of income give effect to the Acquisition and the related
financing transactions as if they had occurred (i) on December 31, 2000, with
respect to the pro forma consolidated statement of income for the 52 weeks ended
December 29, 2001; (ii) on December 30, 2001, with respect to the pro forma
consolidated statement of income for the 16 weeks ended April 20, 2002; and
(iii) on April 22, 2001, with respect to the pro forma consolidated statement of
income for the 52 weeks ended April 20, 2002. The adjustments necessary to
fairly present this pro forma consolidated financial information have been made
based on available information and in the opinion of Fleming's management are
reasonable and are described in the accompanying notes. This pro forma
information reflects our assumption that the Acquisition will be financed by a
combination of borrowings under a new credit facility and public offerings of
debt and equity. The pro forma consolidated financial information should not be
considered indicative of actual results that would have been achieved had the
Acquisition and the related financing transactions been consummated on the
respective dates indicated and do not purport to indicate balance sheet data or
income statement data as of any future date or for any future period. We cannot
assure you that the assumptions used in the preparation of the pro forma
consolidated financial information will prove to be correct.
The pro forma adjustments were applied to the historical consolidated
financial statements to reflect and account for the Acquisition and the related
financing transactions. As a result, these adjustments have no impact on the
historical basis of the assets and liabilities. Our purchase of Core-Mark is not
complete. We expect to complete the Acquisition in June 2002. Our allocation of
the agreed-upon purchase price will depend on the fair values of the assets and
liabilities at the date of the Acquisition. Our final allocation of purchase
price may differ from this presentation due to potential changes in working
capital, our fair value analysis of leases, and the appraisal results for
identifiable intangibles.
S-22
PRO FORMA COMBINING BALANCE SHEET INFORMATION
AS OF APRIL 20, 2002
(IN THOUSANDS)
<Table>
<Caption>
PRO FORMA
FLEMING CORE-MARK ADJUSTMENTS PRO FORMA
---------- --------- ----------- ----------
ASSETS
Current Assets:
Cash and cash equivalents.......................... $ 3,974 $ 23,542 $ (23,000)(a) $ 4,516
Cash held by Trustee for refinancing............... 263,125 263,125
Receivables, net................................... 588,321 130,902 -- 719,223
Inventories........................................ 954,174 118,278 52,133(b) 1,124,585
Assets held for sale............................... 28,666 -- -- 28,666
Other current assets............................... 76,169 8,610 (27,804)(c) 56,975
---------- -------- --------- ----------
Total current assets.......................... 1,914,429 281,332 1,329 2,197,090
Investments and notes receivable, net.................. 102,073 -- -- 102,073
Investment in direct financing leases.................. 76,941 -- -- 76,941
Property and equipment................................. 1,676,372 77,970 (46,555)(d) 1,707,787
Less accumulated depreciation and amortization......... (734,388) (46,555) 46,555(d) (734,388)
---------- -------- --------- ----------
Net property and equipment.................... 941,984 31,415 -- 973,399
Other assets........................................... 233,693 6,034 75,385(e) 315,112
Goodwill, net.......................................... 554,388 57,684 166,122(f) 778,194
---------- -------- --------- ----------
Total assets.................................. $3,823,508 $376,465 242,836 $4,442,809
========== ======== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................... $ 835,205 $114,972 $ -- $ 950,177
Current maturities of long-term debt............... 39,747 76,000 (111,497)(g) 4,250
Current obligations under capital leases........... 21,751 -- -- 21,751
Debt to be refinanced.............................. 263,125 -- -- 263,125
Other current liabilities.......................... 183,711 43,622 (4,869)(h) 222,464
---------- -------- --------- ----------
Total current liabilities..................... 1,343,539 234,594 (116,366) 1,461,767
Long-term debt......................................... 1,527,016 75,000 246,407(i) 1,848,423
Long-term obligations under capital leases............. 328,295 -- -- 328,295
Other liabilities...................................... 106,749 12,527 (2,334)(j) 116,942
Shareholders' equity:
Common stock....................................... 111,661 55 22,945(k) 134,661
Capital in excess of par value..................... 562,235 26,121 120,352(k) 708,708
Reinvested earnings (deficit)...................... (96,551) 37,443 (37,443)(k) (96,551)
Accumulated other comprehensive income --
Cumulative currency translation adjustments... -- (5,447) 5,447(k) --
Additional minimum pension liability.......... (59,436) (3,828) 3,828(k) (59,436)
---------- -------- --------- ----------
Total shareholders' equity................ 517,909 54,344 115,129 687,382
---------- -------- --------- ----------
Total liabilities and shareholders' equity.... $3,823,508 $376,465 $ 242,836 $4,442,809
========== ======== ========= ==========
</Table>
S-23
NOTES TO UNAUDITED PRO FORMA COMBINING BALANCE SHEET
(DOLLARS IN THOUSANDS)
For the purpose of determining the pro forma effect of the transactions on
Fleming's Consolidated Balance Sheet as of April 20, 2002, the following pro
forma adjustments have been made:
<Table>
(a) Cash and cash equivalents --
Reflect Core-Mark cash used to reduce debt.................. $ (23,000)
=========
(b) Inventories:
Eliminate Core-Mark LIFO inventory reserve -- offset to
deferred tax.......................................... $ 20,853
Eliminate Core-Mark LIFO inventory reserve -- offset to
goodwill.............................................. 31,280
---------
$ 52,133
=========
(c) Other current assets:
Reclass Core-Mark current deferred tax liability to
Fleming current deferred tax asset.................... $ (4,869)
Eliminate Core-Mark LIFO inventory reserve (see note
(b)).................................................. (20,853)
Eliminate Core-Mark prepaid pension amount............. (2,082)
---------
$ (27,804)
=========
(d) Property and equipment:
Offset Core-Mark accumulated depreciation and
amortization against cost of property and equipment
with our initial assumption that net book value
approximates fair value............................... $ (46,555)
Eliminate Core-Mark accumulated depreciation and
amortization.......................................... 46,555
---------
$ --
=========
(e) Other assets:
Reclass Core-Mark long-term deferred tax liability to
Fleming long-term deferred tax asset.................. $ (3,005)
Eliminate existing Core-Mark deferred financing costs
due to early debt retirement.......................... (1,501)
Reflect estimated financing costs from the debt portion
of the transaction.................................... 24,875
Reflect deferred tax adjustment on Core-Mark pension
liability............................................. (936)
Reflect estimate of other intangibles acquired as a
result of this transaction............................ 55,952
---------
$ 75,385
=========
(f) Goodwill, net:
Eliminate existing Core-Mark net goodwill.............. $ (57,684)
Reflect goodwill from this transaction................. 223,806
---------
$ 166,122
=========
(g) Current maturities of long-term debt:
Reflect payment of existing Core-Mark debt............. $ (76,000)
Reflect current maturity of new term loan.............. 4,250
Repay existing term loan............................... (39,747)
---------
$(111,497)
=========
(h) Other current liabilities --
Reclass Core-Mark current deferred tax liability to
Fleming current deferred tax asset (see note (c))..... $ (4,869)
=========
(i) Long-term debt:
Payment of existing Core-Mark debt..................... $ (75,000)
Reflect redemption premium on existing Core-Mark
debt.................................................. 2,133
</Table>
S-24
NOTES TO UNAUDITED PRO FORMA COMBINING BALANCE SHEET -- CONTINUED
(DOLLARS IN THOUSANDS)
<Table>
Reflect new financing to fund the transaction.......... 659,027
Repay existing term loan and credit facility........... (379,010)
Reflect estimated transaction fees:
Debt (see note (e))............................... 24,875
Equity (see note (k))............................. 9,007
Merger and acquisition............................ 5,375
---------
$ 246,407
=========
(j) Other liabilities:
Reclass Core-Mark long-term deferred tax liability to
Fleming long-term deferred tax asset (see note (e))... $ (3,005)
Adjust Core-Mark post-retirement liability............. 671
---------
$ (2,334)
=========
(k) Shareholders' equity:
Eliminate Core-Mark common stock....................... $ (55)
Issue Fleming common stock ($2.50 par value, 9,200
shares)............................................... 23,000
---------
22,945
Eliminate Core-Mark common stock -- excess capital
impact................................................ (26,121)
Issue Fleming common stock -- excess capital impact
($19.40 per share less par value, 9,200 shares)....... 155,480
Reflect equity transaction fees........................ (9,007)
---------
120,352
Eliminate Core-Mark retained earnings.................. (37,443)
Eliminate Core-Mark currency translation adjustments... 5,447
Eliminate Core-Mark additional minimum pension
liability............................................. 3,828
---------
$ 115,129
=========
</Table>
S-25
PRO FORMA COMBINING INCOME STATEMENT INFORMATION
52 WEEKS ENDED DECEMBER 29, 2001
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
PRO FORMA
FLEMING CORE-MARK ADJUSTMENTS PRO FORMA
----------- ---------- ----------- -----------
Net sales...................................... $15,558,102 $3,425,024 $ -- $18,983,126
Costs and expenses (income):
Cost of sales.............................. 14,368,199 3,211,160 76,680(a) 17,656,039
Selling and administrative................. 960,590 169,691 (61,978)(b) 1,068,303
Interest expense........................... 165,534 12,395 13,194(c) 191,123
Interest income and other.................. (24,053) -- (834)(d) (24,887)
Impairment/restructuring credit............ (23,595) -- -- (23,595)
Litigation charge.......................... 48,628 -- -- 48,628
----------- ---------- --------- -----------
Total costs and expenses.............. 15,495,303 3,393,246 27,062 18,915,611
----------- ---------- --------- -----------
Income before taxes............................ 62,799 31,778 (27,062) 67,515
Taxes on income(f)............................. 36,022 14,268 (7,905)(e) 42,385
----------- ---------- --------- -----------
Income before extraordinary charge(g).......... 26,777 17,510 (19,157) 25,130
Extraordinary charge from early retirement of
debt (net of taxes).......................... (3,469) -- -- (3,469)
----------- ---------- --------- -----------
Net income(g)......................... $ 23,308 $ 17,510 $ (19,157) $ 21,661
=========== ========== ========= ===========
Basic income per share:
Income before extraordinary charge(f)(h)... $ 0.63 $ 0.49
Extraordinary charge from early retirement
of debt (net of taxes)................... (0.08) (0.07)
----------- -----------
Net income(f)(h)...................... $ 0.55 $ 0.42
=========== ===========
Diluted income per share:
Income before extraordinary charge(f)(i)... $ 0.60 $ 0.46
Extraordinary charge from early retirement
of debt (net of taxes)................... (0.08) (0.06)
----------- -----------
Net income(f)(i)...................... $ 0.52 $ 0.40
=========== ===========
Weighted average shares outstanding:
Basic...................................... 42,588 9,200(j) 51,788
Diluted(i)................................. 44,924 9,200(k) 54,124
</Table>
S-26
PRO FORMA COMBINING INCOME STATEMENT INFORMATION
16 WEEKS ENDED APRIL 20, 2002
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
PRO FORMA
FLEMING CORE-MARK ADJUSTMENTS PRO FORMA
---------- --------- ----------- ----------
Net sales......................................... $4,686,139 $825,153 $ -- $5,511,292
Costs and expenses (income):
Cost of sales................................. 4,346,460 774,297 18,711(a) 5,139,468
Selling and administrative.................... 255,012 41,463 (17,312)(b) 279,163
Interest expense.............................. 50,413 2,806 5,068(c) 58,287
Interest income and other..................... (6,966) -- (141)(d) (7,107)
---------- -------- ----------- ----------
Total costs and expenses................. 4,644,919 818,566 6,326 5,469,811
---------- -------- ----------- ----------
Income before taxes............................... 41,220 6,587 (6,326) 41,481
Taxes on income................................... 16,611 2,832 (2,728)(e) 16,715
---------- -------- ----------- ----------
Net income............................... $ 24,609 $ 3,755 $ (3,598) $ 24,766
========== ======== =========== ==========
Basic income per share............................ $ 0.56 $ 0.46
========== ==========
Diluted income per share.......................... $ 0.52 $ 0.44
========== ==========
Weighted average shares outstanding:
Basic......................................... 44,175 9,200(j) 53,375
Diluted....................................... 50,601 9,200(k) 59,801
</Table>
S-27
PRO FORMA COMBINING INCOME STATEMENT INFORMATION
52 WEEKS ENDED APRIL 20, 2002
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
PRO FORMA
FLEMING CORE-MARK ADJUSTMENTS PRO FORMA
----------- ---------- ----------- -----------
Net sales...................................... $16,106,882 $3,495,911 $ -- $19,602,793
Costs and expenses (income):
Cost of sales.............................. 14,943,544 3,280,336 77,425(a) 18,301,305
Selling and administrative................. 898,289 169,004 (65,000)(b) 1,002,293
Interest expense........................... 158,445 11,841 13,748(c) 184,034
Interest income and other.................. (22,098) -- (736)(d) (22,834)
Impairment/restructuring charge............ 3,264 -- -- 3,264
Litigation charge.......................... 48,628 -- -- 48,628
----------- ---------- ----------- -----------
Total costs and expenses.............. 16,030,072 3,461,181 25,437 19,516,690
----------- ---------- ----------- -----------
Income before taxes............................ 76,810 34,730 (25,437) 86,103
Taxes on income(f)............................. 40,890 15,467 (8,393)(e) 47,964
----------- ---------- ----------- -----------
Net income(g)......................... $ 35,920 $ 19,263 $ (17,044) $ 38,139
=========== ========== =========== ===========
Basic income per share(f)(h)................... $ 0.82 $ 0.72
=========== ===========
Diluted income per share(f)(i)................. $ 0.79 $ 0.69
=========== ===========
Weighted average shares outstanding:
Basic...................................... 43,813 9,200(j) 53,013
Diluted(i)................................. 50,866 4,245(k) 55,111
</Table>
S-28
NOTES TO UNAUDITED PRO FORMA COMBINING INCOME STATEMENTS
(DOLLARS IN THOUSANDS)
Fleming's Financial Statements for the 52 weeks ended December 29, 2001
reflect the retroactive reclassification to decrease net sales and cost of sales
by approximately $70 million with no effect on gross margin due to the adoption
of EITF 01-9. Core-Mark early adopted EITF 01-9 in 2001.
For the purpose of determining the pro forma effect of the transactions on
Fleming's Consolidated Income Statement for the 52 weeks ended April 20, 2002,
the Consolidated Income Statement information for Fleming's 16 weeks ended April
20, 2002 was combined with the Consolidated Income Statement information for
Fleming's 52 weeks ended December 29, 2001, and the Consolidated Income
Statement information for Fleming's 16 weeks ended April 21, 2001 was
subtracted. Fleming has presented information for the 52 weeks ended April 20,
2002 because Fleming's first quarter of 2001 includes results related to our
disposition of conventional retail operations.
For the purpose of determining the pro forma effect of the transactions on
Fleming's Consolidated Income Statements for the 52 weeks ended December 29,
2001, the 16 weeks ended April 20, 2002 and the 52 weeks ended April 20, 2002,
the following pro forma adjustments have been made:
<Table>
(a) The adjustment to cost of sales reflects the following:
</Table>
<Table>
<Caption>
52 WEEKS 16 WEEKS 52 WEEKS
ENDED ENDED ENDED
DECEMBER 29, APRIL 20, APRIL 20,
2001 2002 2002
------------ --------- ---------
Reclass Core-Mark distribution and
warehouse expense from selling and
administrative (see note (b))......... $ 76,680 $ 18,711 $ 77,425
======== ======== ========
</Table>
<Table>
(b) The adjustment to selling and administrative reflects the following:
</Table>
<Table>
<Caption>
52 WEEKS 16 WEEKS 52 WEEKS
ENDED ENDED ENDED
DECEMBER 29, APRIL 20, APRIL 20,
2001 2002 2002
------------ --------- ---------
Reclass Core-Mark distribution and
warehouse expense to cost of sales
(see note (a))........................ $(76,680) $(18,711) $(77,425)
Eliminate Core-Mark goodwill
amortization.......................... (2,083) -- (1,562)
Amortize goodwill acquired as a result
of the transaction (estimate of 20
years)................................ 11,190 -- 8,392
Amortize other intangible assets
acquired as a result of the
transaction (estimate of 10 years).... 5,595 1,399 5,595
-------- -------- --------
$(61,978) $(17,312) $(65,000)
======== ======== ========
</Table>
S-29
NOTES TO UNAUDITED PRO FORMA COMBINING INCOME STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
<Table>
(c) The adjustment for interest expense reflects the following:
</Table>
<Table>
<Caption>
52 WEEKS 16 WEEKS 52 WEEKS
ENDED ENDED ENDED
DECEMBER 29, APRIL 20, APRIL 20,
2001 2002 2002
------------ --------- ---------
Reclassify Core-Mark interest income
from interest expense (see note
(d)).................................. $ 834 $ 141 $ 736
Eliminate Core-Mark interest expense to
reflect debt repayment................ (13,229) (2,947) (12,577)
Reflect Fleming interest expense on new
financing to fund the transaction..... 25,589 7,874 25,589
-------- -------- --------
$ 13,194 $ 5,068 $ 13,748
======== ======== ========
</Table>
<Table>
(d) The adjustment for interest income and other reflects the following:
</Table>
<Table>
<Caption>
52 WEEKS 16 WEEKS 52 WEEKS
ENDED ENDED ENDED
DECEMBER 29, APRIL 20, APRIL 20,
2001 2002 2002
------------ --------- ---------
Reclassify Core-Mark interest income
from interest expense (see note
(c)).................................. $ (834) $ (141) $ (736)
======== ======== ========
</Table>
<Table>
(e) The adjustment for taxes on income reflects the following:
</Table>
<Table>
<Caption>
52 WEEKS 16 WEEKS 52 WEEKS
ENDED ENDED ENDED
DECEMBER 29, APRIL 20, APRIL 20,
2001 2002 2002
------------ --------- ---------
Eliminate Core-Mark taxes on income..... $(14,268) $ (2,832) $(15,467)
Reflect tax provision on Core-Mark
results of operations net of pro forma
adjustments........................... 6,363 104 7,074
-------- -------- --------
$ (7,905) $ (2,728) $ (8,393)
======== ======== ========
</Table>
<Table>
(f) The pro forma combined effective tax rates of 63% for the 52 weeks ended December
29, 2001 and 56% for the 52 weeks ended April 20, 2002 include the impact of an
unusual tax gain related to our disposition of non-strategic retail operations and
the pro forma amortization of goodwill from our planned acquisition of Core-Mark,
most of which would not have been tax deductible. Our effective tax rate for both
periods would have been approximately 40% absent these two items since we will not
amortize goodwill in accordance with SFAS 142 and do not anticipate another similar
tax gain. For the 52 weeks ended December 29, 2001, our effective tax rate of
approximately 40% would have represented a pro forma combined tax expense of $27.3
million, net income before extraordinary item of $40.2 million, net income of $36.8
million, basic income per share before extraordinary item of $0.78, basic income per
share of $0.71, diluted income per share before extraordinary item of $0.74 and
diluted income per share of $0.67. For the 52 weeks ended April 20, 2002, our
effective tax rate of approximately 40% would have represented a pro forma combined
tax expense of $34.0 million, net income of $52.1 million, basic income per share of
$0.98 and diluted income per share of $0.95.
</Table>
S-30
NOTES TO UNAUDITED PRO FORMA COMBINING INCOME STATEMENTS -- CONTINUED
(DOLLARS IN THOUSANDS)
<Table>
(g) On December 30, 2001 we adopted SFAS 142, Accounting for Goodwill and Other
Intangible Assets. If we had applied the nonamortization provisions of SFAS 142 to
all periods presented, our pro forma combined income before extraordinary charge for
the 52 weeks ended December 29, 2001, would have been $56 million and our pro forma
combined net income would have been $52 million for the 52 weeks ended December 29,
2001, and $60 million for the 52 weeks ended April 20, 2002. Our historical numbers
include goodwill amortization of $21 million for the year ended December 29, 2001
and $15 million for the 52 weeks ended April 20, 2002. If we had applied the
nonamortization provisions of SFAS 142 to our historical amounts, our income before
extraordinary item for the year ended December 29, 2001 would have been $46 million
($1.01 per diluted share) and our net income would have been $42 million ($0.94 per
diluted share) for the year ended December 29, 2001 and $49 million ($1.06 per
diluted share) for the 52 weeks ended April 20, 2002.
(h) See note (g). If we had applied the nonamortization provisions of SFAS 142 to all
periods presented, our pro forma combined basic earnings per share before
extraordinary charge for the 52 weeks ended December 29, 2001, would have been $1.07
per share, our pro forma combined basic earnings per share would have been $1.00 for
the 52 weeks ended December 29, 2001 and $1.13 for the 52 weeks ended April 20,
2002.
(i) See note (g). If we had applied the nonamortization provisions of SFAS 142 to all
periods presented, our pro forma combined diluted earnings per share before
extraordinary charge for the 52 weeks ended December 29, 2001, would have been $1.02
and our pro forma combined diluted earnings per share would have been $0.96 for the
52 weeks ended December 29, 2001, and $1.08 for the 52 weeks ended April 20, 2002.
Our 5 1/4% convertible notes would be dilutive for all periods presented. The
diluted weighted average shares would have been 58,072,000 shares for the 52 weeks
ended December 29, 2001 and 60,066,000 shares for the 52 weeks ended April 20, 2002.
(j) The adjustment for basic weighted average shares outstanding reflects the following:
</Table>
<Table>
<Caption>
52 WEEKS 16 WEEKS 52 WEEKS
ENDED ENDED ENDED
DECEMBER 29, APRIL 20, APRIL 20,
2001 2002 2002
------------ --------- ---------
Reflect Fleming common shares issued to
partially fund the transaction
(including the exercise of the
underwriters' over-allotment
option)............................... 9,200 9,200 9,200
======== ======== ========
</Table>
<Table>
(k) The adjustment for diluted weighted average shares outstanding reflects the
following:
</Table>
<Table>
<Caption>
52 WEEKS 16 WEEKS 52 WEEKS
ENDED ENDED ENDED
DECEMBER 29, APRIL 20, APRIL 20,
2001 2002 2002
------------ --------- ---------
Reflect Fleming common shares issued to
partially fund the transaction
(including the exercise of the
underwriters' over-allotment
option)............................... 9,200 9,200 9,200
Reflect adjustment to Fleming's diluted
weighted average shares outstanding
due to the impact of Fleming's 5 1/4%
convertible notes (anti-dilutive for
the 52 weeks ended April 20, 2002).... -- -- (4,955)
-------- -------- --------
9,200 9,200 4,245
======== ======== ========
</Table>
S-31
BUSINESS
INTRODUCTION
Fleming is an industry leader in the distribution of consumer package
goods. We believe that our network of "multi-tier" distribution centers offers
retailers of varying size and format a low-cost supply chain alternative to
other distribution competitors or to self-distribution. Multi-tier distribution
allows us to optimize the particular volume, value and velocity characteristics
of each product that we distribute, thereby increasing our efficiency and
lowering our costs.
On April 23, 2002, we signed an agreement to acquire Core-Mark
International, Inc. ("Core-Mark"), a distributor of consumer package goods to
convenience stores and other retailers in the western United States and western
Canada. Following our acquisition of Core-Mark (the "Acquisition"), our
distribution group will serve approximately 50,000 retail locations across the
United States and western Canada, including approximately 3,000 supermarkets,
approximately 40,000 convenience stores and approximately 7,000 supercenters,
discount stores, limited assortment stores, drug stores, specialty stores and
other stores. We believe that the Acquisition will further transform our
distribution group into an efficient, nationwide, multi-tier supply chain for
consumer package goods to retailers of any size and format.
On a pro forma basis after giving effect to the Acquisition, our
distribution group net sales were $16.6 billion for 2001 and $4.8 billion for
the 16 weeks ended April 20, 2002. Our distribution group represented
approximately 87% of our pro forma total net sales in 2001 and for the 16 weeks
ended April 20, 2002. To supply our customers, we currently have a network of 24
high velocity case-pick and flow-through distribution centers, 7 high velocity
piece-pick distribution centers and 5 low velocity case-pick and piece-pick
distribution centers, that have a total of approximately 21 million square feet
of warehouse space. The Acquisition will add 19 high velocity piece-pick
distribution centers that have a total of approximately 1.9 million square feet
of warehouse space to further enhance our ability to supply our customers
nationwide.
Our retail group operates 109 price impact supermarkets that offer everyday
low prices, typically below the prices of market-leading conventional
supermarkets, and that have a focus on high-quality perishables. These stores
typically cost less to build, maintain and operate than conventional
supermarkets. In addition, we operate 17 limited assortment stores under the
yes!LESS(R) banner. Limited assortment stores offer a narrow selection of
low-price, private label food and other consumable goods and general merchandise
at deep-discount prices. Our retail group net sales were $2.4 billion for 2001
and $669 million for the 16 weeks ended April 20, 2002, representing
approximately 13% of our total net sales for each respective period, on a pro
forma basis after giving effect to the Acquisition. Of those amounts,
approximately $2.0 billion and $669 million were attributable to continuing
retail formats for each respective period.
COMPETITIVE STRENGTHS
Interconnected Network of Multi-Tier, High-Volume, Low-Cost Distribution
Centers: Our network of multi-tier distribution centers optimizes the
particular volume, value and velocity characteristics of each product that we
distribute. We employ case-pick (in which products are selected in case
quantities and aggregated and distributed on pallets), piece-pick (in which
products are selected in single-unit quantities and distributed in totes) and
flow-through (in which products are distributed in full pallet quantities)
distribution methods. Our multi-tier process further segregates products into
high velocity items (which are characterized by fast inventory turns, such as
tobacco products, candy and paper products) and low velocity items (which are
characterized by slower inventory turns, such as health and beauty products,
general merchandise and specialty items). Consequently, we are able to serve
consumer package goods retailers of any size and format. We also believe that
our distribution center volumes are among the highest in the consumer package
goods distribution industry. With high volume comes the opportunity to operate
more efficiently by reducing costs through economies of scale, which enables us
to provide our customers with lower-cost merchandise and services.
S-32
National Distribution Capabilities: We believe that, following the
Acquisition, we will be the only distributor of consumer package goods capable
of meeting the growing need for a national supply chain which can serve all
retail formats anywhere in the United States. In addition, we believe we will be
one of only two suppliers capable of distributing consumer package goods to
convenience stores and related convenience-oriented retailers across the United
States and western Canada.
Efficient Centralized Purchasing: We currently make category management
decisions and negotiate with vendors for approximately 84% of our merchandise
procurement from one location, our customer support center near Dallas, Texas.
We believe our customer support center is one of the largest volume-buying
locations of consumable goods in the United States. Centralized purchasing
benefits us and ultimately, our customers, in several ways. It allows us to
lower our cost of goods through aggregated purchasing power, and it lowers our
administrative costs by eliminating the redundancy involved in purchasing
through multiple locations. It also makes it less expensive for our vendors to
serve us, which we believe in turn reduces our cost of goods. We believe that
our centralized purchasing capabilities are valuable to national retailers, as
well as the smaller independent retailers that make up our traditional customer
base.
Diverse Distribution Customer Base: We distribute to approximately 20,000
retail store locations that operate in a wide variety of formats across the
United States. Following the Acquisition, our distribution group will serve an
additional 30,000 convenience stores and other retail locations in the western
United States and western Canada. On a pro forma basis after giving effect to
the Acquisition, other than Kmart, which accounted for 17% of our net sales in
2001, no customer accounted for more than approximately 2% of our fiscal 2001
net sales.
Successful Price Impact Retail Format: Our price impact supermarkets offer
name-brand and private label consumable goods at significantly lower prices than
conventional supermarkets. We keep prices low by leveraging our existing
distribution and procurement capabilities and maintaining a lower cost structure
associated with operating these stores. We believe this format is profitable
because we offer a reduced number of product selections, focus on high-turnover
products and product categories, employ flow-through distribution methods that
reduce product storage and handling expense and minimize store operating costs.
Experienced Management Team: Our management team is led by Mark Hansen,
Chairman and Chief Executive Officer, who has been with Fleming since 1998.
Since Mr. Hansen joined us, we have further strengthened our management team
through the addition of a number of experienced officers across key functional
areas of our organization including information technology, logistics,
merchandising and supply chain management, retail store operations, finance and
human resources. These executives bring substantial experience from leading food
wholesale, supermarket, supercenter and general merchandise retailers.
BUSINESS STRATEGY
Our business strategy is to use our competitive strengths to achieve sales
and earnings growth in both our distribution group and retail group. As
principal elements of our strategy, we intend to:
Further Grow Sales to New Channel Retailers: We believe that our network
of multi-tier distribution centers strategically positions us to grow our sales
to new channel retailers. In recent years, consumers have been shifting their
purchases of food and other consumable goods away from conventional full-service
grocery stores toward these other retail channels. For this reason, we have
moved beyond our historic focus on conventional full-service grocery stores and
have successfully targeted convenience stores and other convenience-related
retailers, supercenters, discount stores, price impact stores, dollar stores,
ethnic food stores, limited-assortment stores, drug stores, military exchanges
and other specialty retailers.
Grow Sales to Traditional Format Customers: Despite being the largest
distributor in the wholesale grocery industry, we currently account for a small
percentage of sales in this traditional core market, representing substantial
room for additional growth. Many of our potential customers are currently served
by local or regional wholesalers that cannot offer the efficiencies produced by
our nationwide network of
S-33
multi-tier distribution centers and our centralized purchasing. Our repositioned
distribution group has already enabled us to increase sales to existing and new
customers in this sector, and we expect to be able to continue this trend.
Grow Sales to Self-Distributing Chain Supermarkets: In addition to
enabling us to grow our sales of consumer package goods and other merchandise to
new channel retailers and our traditional format customers, we believe that we
can employ our network of multi-tier distribution centers to expand our
distribution capabilities to serve large, national chain supermarkets that
currently self-distribute. For example, in March 2002, we entered into an
agreement with Albertson's, Inc. to supply 39 Albertson's stores in Oklahoma and
Nebraska beginning in July 2002 for the next five years. We believe that our
national presence, our multi-tier distribution platform and our centralized
purchasing capabilities will provide national chain supermarkets with a
compelling alternative to self-distribution. We are seeking additional
opportunities to establish similar relationships with other major supermarket
chains.
Continue to Improve Working Capital Management and Reduce Costs: We intend
to improve our working capital management primarily by further developing our
centralized procurement operations, taking advantage of the efficiencies created
by our multi-tier distribution network, and by continuing to develop and
implement our "F-1" supply chain technologies to better integrate our
distribution centers and our central procurement operations.
OUR DISTRIBUTION GROUP
Our distribution group sells food and non-food products to supermarkets,
convenience stores, supercenters, discount stores, limited assortment stores,
drug stores, specialty stores and other stores across the United States. On a
pro forma basis after giving effect to the Acquisition, our distribution group
net sales were $16.6 billion for fiscal 2001 and $4.8 billion for the 16 weeks
ended April 20, 2002, excluding sales to our own retail stores. Sales to our own
retail stores totaled $1.2 billion during fiscal 2001 and $372 million for the
16 weeks ended April 20, 2002.
Following the Acquisition, we will have a nationwide network of multi-tier
distribution centers that employ piece-pick, case-pick and flow-through
distribution methods. We believe that our network of multi-tier distribution
centers offers retailers of varying size and format a low-cost alternative to
other distribution competitors or to self-distribution, partly because our
network allows us to address the particular volume, value and velocity
characteristics of each product that we distribute. In particular, we believe
there is an increasing demand for a national network of distribution facilities
that can uniformly meet the piece-pick needs of large-scale retail chains.
S-34
The following map displays the location of our distribution centers, on a
pro forma basis after giving effect to the Acquisition.
[MAP OF DISTRIBUTION CENTERS]
We employ the high velocity case-pick method to distribute items that turn
over quickly, such as fast-moving grocery items. This method allows us to select
products in case quantities and then aggregate and distribute them on pallets.
We use flow-through distribution methods to distribute items that move rapidly
through the distribution center, such as bulk paper, water and promotional
grocery items, in full pallet quantities. We have 24 high velocity case-pick and
flow-through distribution centers. We use the high velocity piece-pick method to
distribute high-turn consumer goods such as tobacco, candy, snacks, fast food
and beverages to convenience-oriented retailers. This method selects products in
single-unit quantities and distributes them in totes. On a pro forma basis after
giving effect to the Acquisition, we will have 26 high velocity piece-pick
distribution centers. We use low velocity case-pick and piece-pick distribution
methods to distribute products that turn the least often, such as health and
beauty aids, general merchandise and specialty and slow-moving grocery items. We
have 5 low velocity case-pick and piece-pick distribution centers.
Cross-docking of product between facilities allows us to maximize the
efficiency of our truck fleet, reduce costly truck miles and, consequently,
lower our costs.
Customers Served. Our distribution group serves a wide variety of retail
operations located in all 50 states and the Caribbean including supermarkets,
convenience stores, supercenters, discount stores, limited assortment stores,
drug stores, specialty stores and other stores.
On a pro forma basis after giving effect to the Acquisition, our top ten
customers accounted for approximately 26% of our total net sales during 2001 and
approximately 28% of our total net sales for the 16 weeks ended April 20, 2002.
On a pro forma basis after giving effect to the Acquisition, Kmart Corporation,
our largest customer, represented approximately 17% of our total net sales in
2001 and 19% of our total net sales for the 16 weeks ended April 20, 2002. On a
pro forma basis after giving effect to the Acquisition, no other single customer
represented more than approximately 2% of our net sales for fiscal 2001 or the
16 weeks ended April 20, 2002.
S-35
Pricing. Our distribution segment uses market research and cost analyses
as a basis for pricing its products and services. We have three basic marketing
programs for our distribution business: FlexMate, FlexPro and FlexStar.
The FlexMate marketing program prices product to customers at a quoted sell
price, a selling price established by us that might include a mark-up. Under the
FlexPro and FlexStar programs, grocery, frozen and dairy products are priced at
their net acquisition value, which is generally comparable to the net cash price
paid by the distribution segment. Customers pay fees for specific activities
related to the selection and distribution of products. Certain vendor allowances
and service income are passed through to the customer under the FlexPro and
FlexStar programs, but service charges are different between the two programs.
Private Label. Fleming's private label brands are Fleming-owned brands
that we offer exclusively to our customers. Our predominant brand is BestYet,
and we also offer a growing number of products under two additional private
brands: Exceptional Value, our opening price-point brand, and Comida Sabrosa,
our line of Hispanic food products. We recently introduced BestYet meat and a
re-formatted BestYet health and beauty care line. Private label lines are
designed to offer quality products that are equal or superior in quality to
comparable nationally advertised brands and value brand products at more
competitive prices. We believe our private label brands generate higher margins
for us and for our customers than nationally advertised brands and other value
brand products because we are able to acquire them at lower costs.
We offer two controlled labels, IGA and Piggly Wiggly brands, which are
national quality brands. Controlled labels are brands to which we have exclusive
distribution rights to a particular customer or in a specific region and are
offered only in stores operating under specific banners, which we may or may not
control.
Procurement. We currently make category management decisions and negotiate
with vendors for approximately 84% of our merchandise procurement from one
location, our customer support center near Dallas, Texas. This makes more
efficient use of our procurement staff, improves buying efficiency and reduces
the cost of goods. We believe our customer support center is one of the largest
buying locations of consumable goods in the United States. We believe that our
centralized purchasing capabilities and the volume discount pricing we have
achieved are valuable to our customers. We make a small percentage of our
procurement decisions at the distribution center level where local market needs
and trends can best be addressed, such as decisions regarding ethnic products,
and where transportation costs may be minimized.
Facilities and Transportation. Our distribution group operates a network
of 24 high-velocity case-pick and flow-through distribution centers, 7
high-velocity piece-pick distribution centers and 5 low-velocity case-pick and
piece-pick distribution centers that are responsible for the distribution of
national brands and private label Fleming brands, including groceries, meat,
dairy and delicatessen products, frozen foods, produce, bakery goods and a
variety of related food and non-food items. All facilities are equipped with
modern material handling equipment for receiving, storing and shipping large
quantities of merchandise. Our distribution centers comprise approximately 21
million square feet of warehouse space. Additionally, the distribution group
rents, on a short-term basis, approximately 904,000 square feet of off-site
temporary storage space. The Acquisition will add 19 high-velocity piece-pick
distribution centers that have a total of approximately 1.9 million square feet
of warehouse space.
Transportation arrangements and operations vary by distribution center and
may vary by customer. Some customers prefer to handle product delivery
themselves, others prefer us to deliver products, and still others ask us to
coordinate delivery with a third party. Accordingly, many of our distribution
centers maintain a truck fleet to deliver products to customers, and several of
our distribution centers also engage dedicated contract carriers to deliver
products. We increase the utilization of our truck fleet by back-hauling
products from suppliers and others, thereby reducing the number of empty miles
traveled. To further increase our fleet utilization, we have made our truck
fleet available to other firms on a for-hire carriage basis.
S-36
Capital Invested in Customers. As part of our services to retailers, we
provide capital to certain customers by extending credit for inventory
purchases, by becoming primarily or secondarily liable for store leases, by
leasing equipment to retailers and by making secured loans to customers. At
April 20, 2002, on a pro forma basis after giving effect to the Acquisition, we
were the primary lessee of approximately 600 retail store locations subleased to
and operated by customers. In making credit and investment decisions, we
consider many factors, including estimated return on capital, assumed risks and
benefits (including our ability to secure long-term supply contracts with these
customers).
At December 29, 2001, on a pro forma basis after giving effect to the
Acquisition, we had loans outstanding to customers totaling $119 million. We
also have investments in customers through direct financing leases of real
property and equipment, lease guarantees, operating leases or credit extensions
for inventory purchases. On a pro forma basis after giving effect to the
Acquisition, our credit loss expense from receivables as well as from
investments in customers was $40 million in 2001 (including a $17 million charge
relating to the Kmart bankruptcy) and $1 million for the 16 weeks ended April
20, 2002.
Cost-Reduction Initiatives. To strengthen our position as a low-cost
supplier to our retail customers and increase our profitability, we instituted a
"culture of thrift" among our employees and developed initiatives to reduce our
expenses. This program focuses on five areas: merchandising and procurement,
logistics and distribution, shared services and finance, retail operations and
customer relations. In the merchandising and procurement functions, we have
lowered cost of goods and administrative costs by centralizing most of our
procurement functions, which were conducted in individual distribution centers,
into one national procurement center near Dallas, which we believe is one of the
largest buyer locations of consumable goods in the United States. The logistics
and distribution functions have removed costs associated with back-haul,
in-bound transportation and other logistics functions. In addition, we
established a new shared services center in Oklahoma City where we have
centralized the management of our accounting, human resources, information
technology and other support services. We have also achieved progress in the
rollout of our "F1" supply chain technologies that we are currently developing
and implementing to better integrate our distribution centers and our central
procurement operations. These new technologies will include transportation,
warehouse management and procurement software applications. The transportation
management software and processes will provide us with the ability to track all
freight movement, whether it is inbound, outbound or inter-facility, resulting
in more efficient and effective routing and fleet management. In the first
quarter of 2002, we installed transportation management software in our Geneva,
Northeast, Warsaw, Memphis, Garland, Kansas City, Lincoln and Massillon
divisions. Retail operations have taken steps to reduce labor costs and reduce
store operating costs, and certain administrative functions have also been
centralized for retail operations. Finally, customer relations has established a
single point of contact for each customer to eliminate many paper-based
processes and improve customer communications.
Core-Mark's Distribution Group. Core-Mark maintains 19 primary
distribution facilities, of which 15 are located in the western United States
and four are located in western Canada. In addition, Core-Mark operates a
significant facility for one of its customers, which is 100% dedicated to
servicing that customer's convenience retail locations. Each of Core-Mark's
distribution facilities is outfitted with modern equipment (including freezers
and coolers as required) for receiving, stocking, order selection and loading a
large volume of customer orders on trucks for delivery. Each facility provides
warehouse, distribution, sales and support functions for its geographic area
under the supervision of a division manager.
OUR RETAIL GROUP
At May 15, 2002, our retail group operated 109 price impact supermarkets
primarily under the Food 4 Less and Rainbow Foods banners. In addition, at May
15, 2002, we operated 17 limited assortment stores under the yes!LESS(R) banner,
11 of which we opened in 2001.
S-37
As part of our strategic plan, we sold or closed 238 of our conventional
format supermarkets in order to focus resources on growing our price impact
stores and improving financial results. The following chart illustrates the
number of supermarkets and limited assortment stores we operated as of the dates
indicated:
<Table>
<Caption>
DECEMBER 25, DECEMBER 30, DECEMBER 29, MAY 15,
1999 2000 2001 2002
------------ ------------ ------------ -------
CONTINUING STORES
Price Impact........................... 71 74 99 109
Limited Assortment..................... -- 6 17 17
--- --- --- ---
Subtotal............................. 71 80 116 126
NON-STRATEGIC STORES................... 171 107 -- --
--- --- --- ---
TOTAL................................ 242 187 116 126
=== === === ===
</Table>
Price Impact Supermarkets. At May 15, 2002, our retail group operated 109
price impact supermarkets, of which 42 are located in Minnesota, 26 in Northern
California, 13 in Wisconsin, seven in the Salt Lake City, Utah area, 13 in
Texas, seven in the Phoenix, Arizona area, and one in Las Cruces, New Mexico.
These stores average approximately 45,000 square feet and offer deep-discount,
everyday low prices well below those offered by conventional supermarkets and
carry prices for grocery products that are also generally lower than
supercenters. Our price impact supermarkets are also known for their quality
meat and produce offerings. Our price impact supermarkets that have been open at
least one year generated average weekly sales of approximately $450,000 per
store for the year ended December 29, 2001.
Our price impact supermarkets serve price-sensitive middle-income consumers
who often have larger-than-average families. These stores have a wider trade
area than conventional supermarkets yet are generally more convenient to shop
than supercenters. Our price impact supermarkets offer name-brand food and
consumable goods at significantly lower prices than conventional format retail
store operators because of the many low-cost features of our stores. These
features include: offering a reduced number of product selections, focusing on
popular, name-brand products and product categories, employing flow-through
distribution methods which reduce product storage and handling expense and
minimizing store operating costs.
These stores do not cost as much as conventional stores to construct and
maintain, as price impact stores typically feature cement floors, cinder block
walls, exposed ceiling and walk-in freezers and coolers which combine the
typically separate storage and display areas. In addition, price impact stores
produce lower operating expenses, primarily as a result of less labor content
due to pallet or case-loading display racks, fewer product categories offered
due to focusing on the more popular items, self bagging, and elimination of
staffed service departments.
We believe price-sensitive consumers are underserved on a nationwide basis.
Because price impact stores cost less to build and maintain than conventional
supermarkets, we expect to be able to grow our price impact supermarket
operations while incurring lower capital expenditures. We believe the success of
our price impact stores is based on an underserved trade area and does not
require significant market share. As a result, we spend less on advertising and
marketing for these stores compared to conventional format stores.
Limited Assortment Stores. In 2000, we began to develop our limited
assortment retail concept operating under the yes!LESS(R) trade name, operating
stores averaging 12,000 to 15,000 square feet of selling space. Our yes!LESS(R)
concept is designed to appeal to a needs-based consumer, primarily with low
price private label food and other consumables and an attractive selection of
general merchandise products at opening price points. With 11 stores opened in
2001, as of May 15, 2002, there were 17 yes!LESS(R) retail stores open, 16 in
Texas and one in Louisiana.
S-38
PRODUCTS
We supply a full line of national brands and Fleming brands, including
groceries, meat, dairy and delicatessen products, frozen foods, produce, bakery
goods and a variety of general merchandise, health and beauty care and other
related items. During 2001, the total number of SKUs carried in our distribution
centers was approximately 42,000. During 2001, our product mix as a percentage
of sales was approximately 61% groceries, 33% perishables and 6% general
merchandise.
Core-Mark's Products. Core-Mark distributes a full line of national brands
and Core-Mark brands, including cigarettes and other tobacco products, food
products such as candy, fast food, snacks, groceries, non-alcoholic beverages,
and non-food products such as film, batteries and other sundries and health and
beauty care products, a total of approximately 31,000 SKUs. During 2001,
cigarette net sales constituted approximately 72% of Core-Mark's total net
sales.
SUPPLIERS
We purchase our products from numerous vendors and growers. As a large
customer with centralized procurement, we are able to secure favorable terms and
volume discounts on many of our purchases, leading to lower unit costs. We
purchase products from a diverse group of suppliers and believe we have adequate
sources of supply for substantially all of our products.
COMPETITION
Our distribution group operates in a competitive market. Our primary
competitors are national, regional and local food and consumer package goods
distributors and national chains that perform their own distribution. The
convenience retail distribution business is comprised of one other national
distributor in the United States (McLane, a subsidiary of Wal-Mart) and a number
of large, multi-regional and smaller local distributors. The principal factors
on which we compete include price, quality and assortment of product lines,
schedules and reliability of delivery and the range and quality of customer
services.
The primary competitors of our retail group supermarkets are national,
regional and local grocery chains, as well as supercenters, independent
supermarkets, convenience stores, drug stores, restaurants and fast food
outlets. Principal competitive factors include price, quality and assortment,
store location and format, sales promotions, advertising, availability of
parking, hours of operation and store appeal.
INTELLECTUAL PROPERTY
We or our subsidiaries use many trade names registered either by us or by
third parties from whom we license the rights to use such trade names at either
the federal or state level or a combination of both, such as Piggly Wiggly,
PWPETRO, Piggly Wiggly xpress, Super 1 Foods, Festival Foods, Jubilee Foods,
Jamboree Foods, MEGAMARKET, Shop 'N Kart, ABCO Desert Market, American Family,
Big Star, Big T, Big Bear, Big Dollar, Buy for Less, County Pride Markets,
Rainbow Foods, Red Fox, Sentry, Shop N Bag, Super Duper, Super Foods, Super
Thrift, Thriftway, Value King and yes!LESS.
We license the Food 4 Less service mark and trade name from Ralphs Grocery
Company, a subsidiary of Kroger Co., and have the exclusive right to use and
sublicense the name in certain areas of California. We also have the exclusive
license to use and sublicense the name in all other states, excluding certain
areas of Southern California and certain areas in various other states
previously licensed to others by Ralphs or its predecessors. Additionally,
should the rights to such a previously licensed area terminate, we would
automatically obtain the exclusive license for that area. The Food 4 Less
license agreement generally provides for protected trade area status for five
years after the date that we, our franchisees or Ralphs commit to entering a new
market area under the Food 4 Less banner. However, we are not prohibited by the
licensing agreement from opening stores under a different trade name in any of
these areas.
S-39
EMPLOYEES
At April 20, 2002, we had approximately 21,000 full-time and part-time
employees, with 10,000 employed by the distribution group, 9,000 by the retail
group and 2,000 employed in shared services, customer support and other
functions.
Approximately 44% of our employees are covered by collective bargaining
agreements with the International Brotherhood of Teamsters; Chauffeurs,
Warehousemen and Helpers of America; the United Food and Commercial Workers; the
International Longshoremen's and Warehousemen's Union; the Retail, Wholesale and
Department Store Union; and the International Union of Operating Engineers. Most
of these agreements expire at various times throughout the next five years. We
consider our employee relations in general to be satisfactory.
Core-Mark's Employees. At December 31, 2001, Core-Mark had 2,916
employees. Core-Mark is a party to local collective bargaining agreements with
the International Brotherhood of Teamsters, United Food Commercial Workers and
the Industrial Wood and Allied Workers of Canada. Core-Mark is currently in
negotiations with the union in Victoria. These agreements, most of which expire
at various times over the course of the next five years, cover an aggregate of
approximately 9%, or approximately 260, of Core-Mark's employees. In addition,
in April 2002, 13 of 21 of Core-Mark's drivers in Denver, Colorado filed a
petition with the National Labor Relations Board seeking an election to
determine whether they may be represented by Teamsters Local Union No. 961 for
collective bargaining purposes under Section 7 of the National Labor Relations
Act. In May 2002, Core-Mark's drivers in Tacoma, Washington filed a petition
with the National Labor Relations Board seeking an election to determine whether
they may be represented by Teamsters Local Union No. 313 for collective
bargaining purposes under Section 7 of the National Labor Relations Act. In June
2002, Core-Mark's drivers in Flagstaff, Arizona filed a petition with the
National Labor Relations Board seeking an election to determine whether they may
be represented by Teamsters Local Union No. 17 for collective bargaining
purposes under Section 7 of the National Labor Relations Act.
S-40
PROPERTIES
The following chart displays our distribution group facilities, on a pro
forma basis after giving effect to the Acquisition. Except as otherwise
indicated in the table below, we lease all of our properties.
<Table>
<Caption>
APPROXIMATE
LOCATION SQUARE FEET
- -------- -----------
(IN THOUSANDS)
HIGH VELOCITY CASE-PICK (24 FACILITIES):
Ewa Beach, HI....................... 361
Ft. Wayne, IN....................... 1,043
Fresno, CA**........................ 828
Garland, TX*........................ 1,175
Geneva, AL.......................... 793
Kansas City, KS..................... 937
La Crosse, WI*...................... 907
Lafayette, LA*...................... 443
Lincoln, NE......................... 516
Lubbock, TX**....................... 762
Massillon, OH*...................... 874
Memphis, TN**....................... 1,071
Miami, FL*.......................... 764
Milwaukee, WI*...................... 600
Minneapolis, MN*.................... 480
Nashville, TN....................... 941
North East, MD**.................... 591
Phoenix, AZ**....................... 1,033
Sacramento, CA**.................... 787
Salt Lake City, UT**................ 555
South Brunswick, NJ................. 526
Superior, WI*....................... 371
Tulsa, OK(2)........................ 748
Warsaw, NC**........................ 672
------
Total........................ 17,778
LOW VELOCITY CASE-PICK AND PIECE-PICK (5 FACILITIES):
King of Prussia, PA................. 377
La Crosse, WI*...................... 163
Memphis, TN**....................... 495
Sacramento, CA...................... 439
Topeka, KS.......................... 223
------
Total........................ 1,697
</Table>
<Table>
<Caption>
APPROXIMATE
LOCATION SQUARE FEET
- -------- -----------
(IN THOUSANDS)
HIGH VELOCITY PIECE-PICK (26 FACILITIES):
Adel, GA............................ 79
Albuquerque, NM(3).................. 96
Altoona, PA*........................ 172
Denver, CO(3)....................... 91
Bakersfield, CA(3).................. 70
Corona, CA(3)....................... 201
Corona, CA (AMI Consolidation
Facility)(3)...................... 57
Ft. Worth, TX(3).................... 113
Grants Pass, OR(3).................. 43
Hayward, CA(3)...................... 130
Las Vegas, NV(3).................... 100
Leitchfield, KY**................... 169
Los Angeles, CA(3).................. 194
Marshfield, WI*..................... 157
Plymouth, MN........................ 239
Portland, OR(3)..................... 112
Romeoville, IL...................... 125
Sacramento, CA(3)................... 187
Sacramento, CA (Arctic Cascade
Consolidation Facility)(3)........ 22
Salt Lake City, UT(3)............... 109
Smyrna, GA.......................... 125
Spokane, WA(3)...................... 78
Calgary, Alberta(3)................. 76
Vancouver, BC(3).................... 70
Victoria, BC(3)..................... 48
Winnipeg, Manitoba(3)............... 55
------
Total........................ 2,918
TEMPORARY STORAGE FACILITIES:
Typically rented on a short-term
basis............................... 904
------
Total Distribution Square
Footage.................... 22,393
======
</Table>
- ---------------
* Owned
** Owned and leased
(1) We expect to close our high velocity case-pick facility in Oklahoma City,
Oklahoma and our low velocity case-pick and piece-pick facility in Dallas,
Texas this fall. These facilities are not reflected in the table above.
(2) We expect to occupy and operate these facilities in July 2002 upon closing
the transactions contemplated by our agreement with Albertson's.
(3) We expect to occupy and operate this facility upon consummation of the
Acquisition.
In addition, we have closed five other facilities in various states, which
we are actively marketing.
As of May 15, 2002, our retail group operated 126 supermarkets in a variety
of formats in Arizona, California, Minnesota, New Mexico, Louisiana, Texas, Utah
and Wisconsin. Our continuing chains
S-41
included 109 price impact supermarkets and 17 limited assortment stores. For
more information, see the subsection "Our Retail Group."
Our shared service center office is located in Oklahoma City, Oklahoma. The
shared service center occupies leased office space totaling approximately
229,000 square feet. Our customer support center near Dallas, Texas occupies
leased office space totaling approximately 153,000 square feet.
We own and lease other significant assets, such as inventories, fixtures
and equipment and capital leases.
Core-Mark's Properties. Core-Mark does not own any real property.
Core-Mark's principal executive offices are located in South San Francisco,
California, and consist of approximately 22,000 square feet of leased office
space. In addition, Core-Mark leases approximately 13,000 square feet in
Vancouver, British Columbia for its tax and information technology departments
and eight small offices for use by sales personnel in certain parts of the
United States and Canada. Core-Mark also leases its 19 primary distribution
facilities, 15 of which are located in the western United States and four in
western Canada, which are shown in the table above. Each distribution facility
is equipped with modern equipment (including freezers and coolers at 18
facilities) for receiving, stocking, order selection and shipping a large volume
of customer orders.
LEGAL PROCEEDINGS
We are a party to or threatened with various litigation and contingent loss
situations arising in the ordinary course of our business including disputes
with customers and vendors, owners or creditors of financially troubled or
failed customers, suppliers, landlords, employees regarding labor conditions,
wages, workers' compensation matters and alleged discriminatory practices,
insurance carriers and tax authorities. In this regard, we are currently in
binding arbitration with one of our convenience store customers, Clark Retail
Enterprises, Inc., regarding the required mix of annual minimum purchases under
a supply agreement and related product service charges. We seek to rescind the
supply agreement and to recover our damages, and Clark seeks to terminate the
supply agreement and recover its damages. The parties are currently in
settlement discussions. The outcome of this matter could have an effect on our
financial results.
Our facilities and operations are subject to various laws, regulations and
judicial and administrative orders concerning protection of the environment and
human health, including provisions regarding the transportation, storage,
distribution, disposal or discharge of certain materials. In conformity with
these provisions, we have a comprehensive program for testing, removal,
replacement or repair of our underground fuel storage tanks and for site
remediation where necessary. We have established reserves that we believe will
be sufficient to satisfy the anticipated costs of all known remediation
requirements.
We and others have been designated by the U.S. Environmental Protection
Agency and by similar state agencies as potentially responsible parties under
the Comprehensive Environmental Response, Compensation and Liability Act, or
CERCLA, or similar state laws, as applicable, with respect to EPA-designated
Superfund sites. While liability under CERCLA for remediation at these sites is
generally joint and several with other responsible parties, we believe that, to
the extent we are ultimately determined to be liable for the expense of
remediation at any site, such liability will not result in a material adverse
effect on our consolidated financial position or results of operations. We are
committed to maintaining the environment and protecting natural resources and
human health and to achieving full compliance with all applicable laws,
regulations and orders.
We have received notice from a distributor in the State of Washington
alleging that Fleming's operation of Core-Mark subsequent to consummation of the
Acquisition would violate an existing noncompetition agreement in the states of
Washington and Oregon. Fleming does not believe that its future operation of
Core-Mark's existing distribution centers in these jurisdictions is precluded by
this agreement.
S-42
LEGAL PROCEEDINGS AFFECTING CORE-MARK
Manufacturers and distributors of cigarettes and other tobacco products are
currently facing a number of significant issues that affect the business
environment in which they operate including: proposed additional governmental
regulation; actual and proposed excise tax increases; increased litigation
involving health and other effects of cigarette smoking and other uses of
tobacco; and litigation by the U.S. Department of Justice to recover federal
Medicare costs allegedly connected to smoking.
Legislation has been introduced in Congress that would grant the FDA
authority to regulate tobacco products. Although no such legislation passed
during the year 2001, the prospects for similar legislation in the future are
uncertain. If such legislation is passed, we cannot assure you that the FDA
would not promulgate regulations that would result in a material reduction in
the consumption of tobacco products in the United States.
In November 1998, 46 states, five territories and the District of Columbia
entered into a settlement of approximately $250 billion with four major tobacco
companies to resolve litigation over smoking-related costs incurred by state
Medicaid programs.
Included in the terms of the settlement are conditions that tobacco
companies participating in the settlement may not: target youth in the
advertising, promotion or marketing of tobacco products (including the use of
cartoons in such promotion); use tobacco brand names to sponsor concerts,
athletic events or other events in which a significant percentage of the
audience is under 18 years of age; advertise products in conspicuous places
outdoors (such as billboards) or on transit vehicles; merchandise a tobacco
brand name through the marketing, distribution or sale of apparel or other
merchandise; provide free samples of tobacco products in any area except an
adults-only facility; distribute or sell cigarettes in pack sizes of less than
20; or lobby state legislatures on certain anti-tobacco initiatives (such as
limitations on youth access to vending machines).
S-43
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors are as follows:
<Table>
<Caption>
NAME AGE PRESENT POSITION
- ---- --- ----------------
EXECUTIVE OFFICERS:
Mark S. Hansen....................... 47 Chairman and Chief Executive Officer
Robert A. Allen(1)................... 53 Executive Vice President and President,
Convenience Stores
J.R. Campbell........................ 58 Executive Vice President, Merchandising and
Supply
Thomas G. Dahlen..................... 48 Executive Vice President and President, Retail
and Corporate Marketing
E. Stephen Davis..................... 61 Executive Vice President and President,
Wholesale
Ronald B. Griffin.................... 48 Executive Vice President and Chief Information
Officer
William H. Marquard.................. 42 Executive Vice President, Business Development
Scott M. Northcutt................... 40 Executive Vice President, Human Resources
Neal J. Rider........................ 40 Executive Vice President and Chief Financial
Officer
Michael J. Carey..................... 55 Senior Vice President, Western Operations
Charles L. Hall...................... 51 Senior Vice President, Real Estate and Store
Development
Carlos M. Hernandez.................. 47 Senior Vice President, General Counsel and
Secretary
Matthew H. Hildreth.................. 37 Senior Vice President, Finance and Treasurer
Timothy R. LaBeau.................... 47 Senior Vice President, Operations
William A. Merrigan.................. 57 Senior Vice President, Logistics
Philip B. Murphy..................... 53 Senior Vice President, Procurement
Mark D. Shapiro...................... 42 Senior Vice President, Finance and Operations
Control
Thomas A. Zatina..................... 50 Senior Vice President, Northern Operations
DIRECTORS:
Mark S. Hansen....................... 47 Chairman and Chief Executive Officer
Herbert M. Baum...................... 65 Director
Kenneth M. Duberstein................ 58 Director
Archie R. Dykes...................... 71 Director
Carol B. Hallett..................... 64 Director
Robert S. Hamada..................... 64 Director
Alice M. Peterson.................... 49 Director
</Table>
- ------------
(1) Mr. Allen will be appointed our Executive Vice President and President,
Convenience Stores immediately following the consummation of the
Acquisition.
EXECUTIVE OFFICERS
Mark S. Hansen joined us as Chairman and Chief Executive Officer in
November 1998. Prior to joining us, Mr. Hansen served as President and Chief
Executive Officer of SAM's Club, a division of Wal-Mart Stores, Inc., from 1997
through 1998. Prior to joining Wal-Mart, Mr. Hansen served in multiple
capacities at PETsMART, Inc., a retailer of pet food, pet supplies and related
products, including as President and Chief Executive Officer from 1989 to 1997.
Prior to 1989, Mr. Hansen served in various management capacities in the
supermarket industry. He serves as an executive advisory board member of Swander
Pace Capital and is a director of Applebee's Restaurants and Amazon.com.
Robert A. Allen has been Chief Executive Officer of Core-Mark since January
1998 and President of Core-Mark since January 1996. Mr. Allen served as Chief
Operating Officer of Core-Mark from January
S-44
1996 to December 1997. Prior to 1996, he served as Senior Vice President,
Distribution of Core-Mark from 1992 through 1995. Mr. Allen has been a director
of Core-Mark since 1994.
J.R. Campbell joined us as our Executive Vice President, Merchandising and
Supply in January 2002. Prior to joining us, Mr. Campbell served for over 20
years in various capacities at Wal-Mart Stores, Inc., including Senior Vice
President and General Merchandise Manager of Wal-Mart Stores, Senior Vice
President of Merchandising for Sam's Club, and most recently as President,
Global Sourcing Division of Wal-Mart Stores.
Thomas G. Dahlen joined us as our Executive Vice President and President,
Retail and Corporate Marketing in April 2001. From 1999 until joining us, Mr.
Dahlen served as President and Chief Executive Officer of Furrs Supermarkets,
Inc. and was its President and Chief Executive Officer when it filed for Chapter
11 bankruptcy protection in February 2001. From 1994 until 1999, Mr. Dahlen
served in multiple capacities at Ralphs Supermarkets Division of the Yucaipa
Companies, including Executive Vice President from 1998 to 1999, and Senior Vice
President, Sales and Marketing from 1994 to 1998.
E. Stephen Davis joined us in 1960 and has served as our Executive Vice
President and President, Wholesale since February 2000. Prior to that, Mr. Davis
has served us in various positions, including Executive Vice President, Food
Distribution from 1998 to February 2000, Executive Vice President, Operations
from 1997 to 1998, Executive Vice President, Food Operations from 1996 to 1997
and Executive Vice President, Distribution from 1995 to 1996.
Ronald B. Griffin joined us as Executive Vice President and Chief
Information Officer in January 2002. Prior to joining us, Mr. Griffin served for
over 10 years in various capacities at The Home Depot, Inc., including most
recently as Senior Vice President and Chief Information Officer.
William H. Marquard joined us as Executive Vice President, Business
Development and Chief Knowledge Officer in June 1999. From 1991 until joining
us, Mr. Marquard was a partner in the consulting practice of Ernst & Young.
Scott M. Northcutt joined us as Senior Vice President, Human Resources in
January 1999 and he became Executive Vice President, Human Resources in February
2000. From 1997 until joining us, Mr. Northcutt was Vice President-People Group
at SAM's Club, a division of Wal-Mart Stores, Inc. From 1988 to 1995, he served
as Vice President-Human Resources and from 1995 to 1996, he served as Vice
President-Store Operations at Dollar General Corporation.
Neal J. Rider joined us as Executive Vice President and Chief Financial
Officer in January 2000. From 1999 until joining us, Mr. Rider was Executive
Vice President and Chief Financial Officer at Regal Cinemas, Inc. From 1980 to
1999, Mr. Rider served in multiple capacities at American Stores Company,
including Treasurer and Controller responsibilities from 1994 to 1997 before
becoming Chief Financial Officer in 1998.
Michael J. Carey joined us in 1983 and has served as our Senior Vice
President, Western Operations since June 2000. Prior to that, Mr. Carey served
as our Operating Group President from 1998 to June 2000, our President, LaCrosse
Division from 1996 to 1998, and our Director of IGA Marketing from 1994 to 1996.
Charles L. Hall joined us as Senior Vice President, Real Estate and Store
Development in June 1999. From 1998 until joining us, he was Senior Vice
President-Real Estate and Store Development at Eagle Hardware and Garden, Inc.
From 1992 to 1998, he served as Vice President of Real Estate Development at
PETsMART, Inc.
Carlos M. Hernandez joined us in March 2000 as Associate General Counsel
and Assistant Secretary and has served as our Senior Vice President, General
Counsel and Secretary since February 2001. Prior to joining us, Mr. Hernandez
was employed in various capacities at Armco Inc. from 1981 to 1999, and then as
an attorney at AK Steel Holding Corporation from October to December 1999.
S-45
Matthew H. Hildreth joined us as Senior Vice President, Finance and
Treasurer in May 2001. Prior to joining us, Mr. Hildreth served in various
positions at JPMorgan since 1989, including most recently as Vice President and
Sector Head of North American Trucking for JPMorgan's Transportation and
Logistics Group.
Timothy R. LaBeau joined us in January 2002 as Senior Vice President of
Operations. Prior to joining us, Mr. LaBeau served as President and Chief
Executive Officer of American Sales Company, a subsidiary of Royal Ahold, from
1998 to December 2001. Prior to that, Mr. LaBeau served as Executive Vice
President of Merchandising and Procurement for Ahold USA from 1994 to 1998.
William A. Merrigan joined us in November 2000 and has served as our Senior
Vice President, Logistics since May 2001. Prior to joining us, Mr. Merrigan
served as Senior Vice President of Logistics at Nash Finch Company from 1998 to
November 2000. Prior to that, Mr. Merrigan served in various senior positions at
Wakefern Food Corporation from 1986 to 1998, including most recently as Vice
President of Logistics and Transportation.
Philip B. Murphy joined us in October 2000 as Vice President of Grocery,
and has served as our Senior Vice President, Procurement since May 2001. Prior
to that, Mr. Murphy served as Senior Vice President and General Manager of
Services at PETsMART, Inc. from 1995 to 2000.
Mark D. Shapiro joined us in June 2001 as Senior Vice President, Finance.
Prior to joining us, Mr. Shapiro served in various positions at Big Lots, Inc.
since 1992, including most recently as Senior Vice President and Chief Financial
Officer.
Thomas A. Zatina joined us in June 2001 as Senior Vice President, Northern
Operations. Prior to joining us, Mr. Zatina served in various positions at
Bozzuto's, Inc., a Connecticut-based wholesale distributor, since 1986,
including most recently as Executive Vice President and Chief Operating Officer.
DIRECTORS
Herbert M. Baum joined us as a director in 1998. He is Chairman, president
and chief executive officer of The Dial Corporation (a consumer products
company). Prior to joining The Dial Corporation in August 2000, Mr. Baum served
as president and chief operating officer of Hasbro, Inc. from January 1999. From
1993 to 1998, Mr. Baum served as chairman and chief executive officer of Quaker
State Corporation. From 1978 to 1993, Mr. Baum served in a variety of positions
for Campbell Soup Company where his last position held was President Campbell
North and South America. Mr. Baum is a director of Grocery Manufacturers of
America, The Dial Corporation, Midas, Inc., Meredith Corporation, PepsiAmerica,
Inc. (formerly Whitman Corporation), and Action Performance Companies, Inc.
Kenneth M. Duberstein joined us as a director in May 2001. He is chairman
and Chief Executive Officer of The Duberstein Group, Inc., an independent
strategic planning and consulting company. Prior to that, Mr. Duberstein served
President Reagan in various capacities, including Chief of Staff from 1988 to
1989, Deputy Chief of Staff from 1987 to 1988 and Assistant and Deputy Assistant
to the President for Legislative Affairs from 1981 to 1983. Mr. Duberstein is a
director of The Boeing Company, Conoco, Inc., Fannie Mae, GVG, The St. Paul
Companies, Inc., and serves on the Board of Governors for the American Stock
Exchange and the National Association of Securities Dealers. He also serves as
Vice Chairman of the Kennedy Center for Performing Arts, Chairman of Ethics
Oversight Committee for the U.S. Olympics Committee, Trustee of Franklin &
Marshall College and Johns Hopkins University, and serves on the Council on
Foreign Relations, the Institute of Politics at the John F. Kennedy School of
Government at Harvard University and the National Alliance to End Homelessness.
Archie R. Dykes joined us as a director in 1981. He is chairman and chief
executive officer of Capital City Holdings, Inc. (a venture capital
organization). He is senior chairman and a director of PepsiAmerica, Inc.
(formerly Whitman Corporation), Midas, Inc. and the Employment Corporation. A
former chancellor of the University of Kansas and of the University of
Tennessee, Mr. Dykes also serves as a trustee of the Kansas University Endowment
Association and of the William Allen White Foundation.
S-46
Carol B. Hallett joined us as a director in 1993. She is president and
chief executive officer of the Air Transport Association of America, Washington,
D.C. (the nation's oldest and largest airline trade organization). Prior to
joining the Air Transport Association in April 1995, Mrs. Hallett served as
senior government relations advisor with Collier, Shannon, Rill & Scott from
February 1993 to March 1995. From November 1989 through January 1993, Mrs.
Hallett served as the Commissioner of the United States Customs Service. From
September 1986 to May 1989, she served as the U.S. Ambassador to The
Commonwealth of the Bahamas. From July 1983 to August 1986, Mrs. Hallett served
as the national vice chairman and field director of Citizens for America. Mrs.
Hallett also served three terms in the California legislature and as minority
leader in the State Assembly. Mrs. Hallett is a director of Mutual of Omaha
Insurance Company. She is a trustee for the Junior Statesmen of America. Mrs.
Hallett also serves on the President's Cabinet of California Polytechnic State
University.
Robert S. Hamada joined us as a director in February 2001. He has been the
Chief Executive Officer of Merchant's Exchange since July 2001. An
internationally known authority in finance, Mr. Hamada was a member of the
faculty of the University of Chicago from 1966 until 2001, during which time he
served as Dean from 1993 to June 2001, as the Edward Eagle Brown Distinguished
Service Professor of Finance at the Graduate School of Business, as director of
the Center for International Business and Research from 1992 to 1993, as deputy
dean for the faculty at the Graduate School of Business from 1985 to 1990, and
as director of the Center for Research in Security Prices from 1980 to 1985. Mr.
Hamada is a director of Northern Trust Corporation, A.M. Castle & Co., Flying
Food Fare, Window to the World Communications, Inc., Merchant's Exchange, Terra
Foundation for the Arts, and the National Bureau of Economic Research.
Alice M. Peterson joined us as a director in 1998. She is the President of
Loretto Group, a finance strategy and consulting firm. She served as President
of RIM Finance, LLC (a wholly-owned subsidiary of the Canadian company, Research
In Motion Limited, the maker of BlackBerry wireless handheld devices), from
December 2000 to September 2001. From April 2000 to September 2000, Ms. Peterson
served as Chief Executive Officer of GuidanceResources.com (an Internet-based
service that employers provide as a value-added benefit to enhance employee
productivity). From October 1998 to February 2000, Ms. Peterson served as vice
president and general manager of Sears Online, the unit of Sears, Roebuck and
Co. where all business-to-consumer Internet activities are conducted, including
interactive marketing. Ms. Peterson was vice president and treasurer of Sears,
Roebuck and Co. from 1993 to 1998. She joined that company in 1989 as corporate
director of finance, became managing director -- corporate finance in 1992, and
vice president -- treasurer in 1993. Prior to joining Sears, Ms. Peterson served
as assistant treasurer of Kraft, Inc. from 1988 to 1989. From 1984 to 1988, Ms.
Peterson served in a variety of financial positions for PepsiCo, Inc. where her
last position held was director of capital markets. Ms. Peterson is a director
of RIM Finance, LLC and she serves on the Ravinia Festival Board of Trustees.
S-47
PRINCIPAL AND MANAGEMENT SHAREHOLDERS
This table indicates how many shares of our common stock and stock
equivalent units were beneficially owned as of March 21, 2002 by each of our
directors and our five most highly-compensated executive officers who retained
their positions as of March 21, 2002 and by beneficial owners of more than 5% of
our common stock as of the dates indicated in the footnotes to the table. No
director or executive officer owns in excess of 1% of our outstanding shares
except for Mr. Hansen. As of March 21, 2002, 44,516,965 shares of our common
stock were issued and outstanding (53,716,965 as adjusted to give effect to this
offering).
<Table>
<Caption>
EXECUTIVE PERCENT OF CLASS
SHARES OF DIRECTORS' OFFICERS' OWNED
COMMON STOCK STOCK STOCK ------------------------
BENEFICIALLY EQUIVALENT EQUIVALENT PRIOR TO THE AFTER THE
NAME OWNED(1) UNITS(2) UNITS(3) OFFERING OFFERING
- ---- ------------ ---------- ---------- ------------ ---------
Mark S. Hansen(4)(5)................ 990,649 -- 100,000 2.19% 1.82%
Herbert M. Baum(5)(6)............... 6,250 1,631 -- * *
Archie R. Dykes(6).................. 14,984 5,314 -- * *
Kenneth M. Duberstein(5)............ -- -- -- * *
Carol B. Hallett(5)(6).............. 8,439 5,612 -- * *
Robert S. Hamada(5)................. 4,000 306 -- * *
Edward C. Joullian(6)(7)............ 29,105 14,337 -- * *
Alice M. Peterson(6)................ 13,750 2,250 -- * *
Thomas G. Dahlen(4)(5).............. 144,993 -- 66,000 * *
E. Stephen Davis(4)(5)(6)(7)........ 198,593 -- 66,000 * *
William H. Marquard(4).............. 156,000 -- 50,000 * *
Neal J. Rider(4)(7)................. 289,217 -- 66,000 * *
All directors and executive officers
as a group (24
persons)(4)(5)(6)(7).............. 2,228,184 29,450 918,000 4.83% 4.02%
FMR Corp.(8)........................ 5,744,152 -- -- 12.90% 10.69%
82 Devonshire Street
Boston, Massachusetts 02109
Mellon Financial Corporation(9)..... 6,222,897 -- -- 13.98% 11.58%
One Mellon Center
Pittsburgh, Pennsylvania 15258
Southeastern Asset Management,
Inc.(10).......................... 7,790,900 -- -- 17.50% 14.50%
6410 Poplar Avenue, Suite 900
Memphis, Tennessee 38119
</Table>
- ---------------
* Less than 1%
(1) This column includes our common stock held by directors and officers or by
certain members of their families (for which the directors and executive
officers have sole or shared voting or investment power), our common stock
which the officers have the right to acquire within 60 days of March 21,
2002 under our stock option and stock incentive plans, and shares of our
restricted common stock, subject to forfeiture, awarded under our stock
incentive plans.
(2) These stock equivalent units are payable in cash only when a director
ceases to be a member of the board. These units are not exercisable within
60 days of March 21, 2002, and therefore are not included in the columns
entitled "Shares of Common Stock Beneficially Owned" and "Percent of Class
Owned."
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(3) These units are not exercisable within 60 days of March 21, 2002, and
therefore are not included in the columns entitled "Shares of Common Stock
Beneficially Owned" and "Percent of Class Owned." In November of 2001, we
converted the following stock equivalent units to stock options:
<Table>
Hansen.................................................... 200,000 stock equivalent units
Dahlen.................................................... 134,000 stock equivalent units
Davis..................................................... 134,000 stock equivalent units
Marquard.................................................. 100,000 stock equivalent units
Rider..................................................... 134,000 stock equivalent units
</Table>
All officers as a group (including those named above): 992,000 stock
equivalent units converted into stock options.
(4) The amounts shown include shares which the following persons have the right
to acquire within 60 days of March 21, 2002 under our stock option and
stock incentive plans:
<Table>
Hansen...................................................... 699,999 shares
Dahlen...................................................... 142,000 shares
Davis....................................................... 131,750 shares
Marquard.................................................... 112,500 shares*
Rider....................................................... 242,000 shares
</Table>
All directors and officers as a group (including those named above):
1,652,999.
* Includes 6,250 securities underlying options as to which Mr. Marquard can
only exercise upon instructions from a third party for shares that Mr.
Marquard will not beneficially own upon exercise.
(5) The following shares of restricted stock have been excluded from the share
totals for individuals named in the table and all directors and officers as
a group as they do not have voting or investment power with respect to such
shares:
<Table>
Hansen.................................................. 100,000 shares of restricted stock
Baum.................................................... 3,500 shares of restricted stock
Duberstein.............................................. 3,500 shares of restricted stock
Hallett................................................. 3,500 shares of restricted stock
Hamada.................................................. 3,500 shares of restricted stock
Dahlen.................................................. 25,000 shares of restricted stock
Davis................................................... 100,000 shares of restricted stock
</Table>
All directors and officers as a group (including those named above):
295,666 shares of restricted stock.
(6) The individuals and group named in the table have sole voting power with
respect to the following shares of restricted stock:
<Table>
Baum........................................................ 5,250 shares
Dykes....................................................... 8,750 shares
Hallett..................................................... 5,250 shares
Joullian.................................................... 8,750 shares
Peterson.................................................... 8,750 shares
Davis....................................................... 8,000 shares
</Table>
All directors and officers as a group (including those named above): 45,550
shares.
(7) The individuals and group named in the table have shared voting and
investment power with respect to the following shares of common stock:
<Table>
Joullian.................................................... 20,355 shares
Davis....................................................... 9,000 shares
Rider....................................................... 20,000 shares
</Table>
All directors and officers as a group (including those named above): 85,611
shares.
S-49
(8) In a Schedule 13G filed February 11, 2002, FMR Corp. disclosed that it held
5,744,152 shares of our common stock, had sole power to vote or direct the
vote of 416,500 of the shares and had sole power to dispose of, or direct
the disposition of, all shares.
(9) In a Schedule 13G filed January 9, 2002, Mellon Financial Corporation
disclosed that it held 6,222,897 shares of our common stock and that it
shared voting power with respect to 385,400 shares with The Boston Company,
Inc. and The Boston Company Asset Management L.L.C. and shared dispositive
power with respect to 9,700 shares with The Boston Company, Inc. In the
same Schedule 13G, Mellon Financial Corporation disclosed that it had sole
voting power with respect to 5,202,597 shares and sole dispositive power
with respect to 6,196,622 shares.
(10) In a Schedule 13G filed March 7, 2002, Southeastern Asset Management, Inc.
disclosed that it held 7,790,900 shares of our common stock and that it
shared voting and dispositive power with respect to 6,419,000 of the held
shares with Longleaf Partners Small-Cap Fund. In the same Schedule 13G,
Southeastern Asset Management disclosed that it had sole power to vote
694,900 shares, had sole power to dispose of 1,371,900 shares, and had no
voting power with regard to 677,000 shares. The Schedule 13G identifies Mr.
O. Mason Hawkins as Chairman of the Board and Chief Executive Officer of
Southeastern Asset Management, but Mr. Hawkins does not claim any voting or
dispositive power with regard to the shares of Fleming common stock held by
Southeastern.
S-50
DESCRIPTION OF COMMON STOCK
GENERAL
Our authorized capital stock consists of 100,000,000 shares of common
stock, par value $2.50 per share, and 2,000,000 shares of preferred stock, par
value $10.00 per share. As of May 13, 2002, 44,605,000 shares of our common
stock were issued and outstanding and no shares of our preferred stock were
issued and outstanding.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share held
with respect to all matters as to which the common stock is entitled to vote.
Except as otherwise required by law, the holders of our common stock vote
together with the holders of all shares of our preferred stock that are entitled
to vote, and not as a separate class. Voting rights for the election of
directors are noncumulative. Subject to the preferential and other dividend
rights of holders of our preferred stock, holders of our common stock are
entitled to receive any dividends, payable in cash, stock or otherwise, that our
board of directors may declare at any time or from time to time out of legally
available funds. In the event of our liquidation, dissolution or winding up,
after distribution in full of any preferential or other amounts owed to holders
of our preferred stock, holders of our common stock are entitled to receive all
of our remaining assets, ratably in proportion to the number of shares of common
stock they hold. Holders of our common stock have no conversion, preemptive or
subscription rights, and shares of our common stock are not subject to
redemption. All outstanding shares of our common stock are fully paid and
nonassessable.
ANTI-TAKEOVER PROVISIONS IN OUR CERTIFICATE OF INCORPORATION AND OKLAHOMA LAW
Limitation on Shareholder Rights Plan -- Bylaws. Our bylaws contain a
provision which limits our ability to "adopt or maintain a poison pill,
shareholder rights plan, rights agreement or any other form of "poison pill"
which is designed to or which has the effect of making acquisitions of large
holdings of the Corporation's shares of stock more difficult or expensive ...
unless such a plan is first approved by a majority shareholder vote" and
prohibits the amendment, alteration, deletion or modification of such bylaw by
the board of directors without prior shareholder approval.
Business Combination -- Certificate of Incorporation. Our certificate of
incorporation provides that certain business combinations and transactions
involving us and a holder of 10% or more of our outstanding common stock, which
we refer to in our certificate of incorporation as an "interested shareholder,"
must be approved by the holders of at least 80% of the outstanding shares of our
common stock that are not held by interested shareholders, unless:
- three-fourths of our directors who are not affiliated with an interested
shareholder approve the transaction; or
- certain minimum price criteria and procedural safeguards are satisfied.
If the 80% vote requirement does not apply to a given transaction, then the
vote otherwise required by Oklahoma law would apply. Oklahoma law requires,
except as provided in Section 1090.3 of the Oklahoma General Corporation Act
(see below) or the Oklahoma control shares law (see below), the favorable vote
of a majority of the outstanding shares of voting stock of a corporation to
adopt a merger or consolidation, for the sale, lease or exchange of all or
substantially all of the assets of the corporation, or for a reclassification,
recapitalization, reorganization or similar transaction.
Business Combinations -- Oklahoma Statutes. In addition, we are subject to
Section 1090.3 of the Oklahoma General Corporation Act. In general, this statute
prohibits a publicly-held Oklahoma
S-51
corporation from engaging in any business combination with any interested
shareholder for a period of three years following the date that the shareholder
became an interested shareholder, unless:
- prior to the date the shareholder became an interested shareholder, the
board of directors of the corporation approved either the business
combination or the transaction that resulted in the shareholder becoming
an interested shareholder;
- upon consummation of the transaction that resulted in the shareholder
becoming an interested shareholder, the interested shareholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who
are directors and also officers, and employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
- subsequent to the date that the shareholder became an interested
shareholder, the business combination is approved by the board of
directors and authorized at an annual or special meeting of shareholders,
and not by written consent, by the affirmative vote of at least
two-thirds of the outstanding voting stock not held by the interested
shareholder.
Section 1090.3 of the Oklahoma General Corporation Act defines "business
combination" to include:
- any merger or consolidation involving the corporation and the interested
shareholder;
- sale, pledge, transfer or other disposition of 10% or more of the assets
of the corporation involving the interested shareholder;
- subject to exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the
interested shareholder; or
- receipt by the interested shareholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 1090.3 of the Oklahoma General Corporation Act defines
an "interested shareholder" as any person that owns 15% or more of the
outstanding voting stock of the corporation or any person affiliated with or
controlling or controlled by such person.
Oklahoma Control Shares Law. The Oklahoma control shares law, if
applicable, eliminates voting rights with respect to control shares after a
control share acquisition unless the right to vote is approved by the
affirmative vote of a majority of all voting power excluding interested shares,
i.e., shares held by the acquiring person, officers of the company and any
employee of the company who is also a director of the company. "Control shares"
means issued and outstanding shares having 20% or more of all voting power.
Certain acquisitions of control shares are excluded from the elimination of
voting power provisions, e.g., shares acquired pursuant to a merger or
acquisition to which the company is a party to the agreement of merger or
acquisition.
Certificate of Incorporation -- Greenmail. Our certificate of
incorporation requires a majority of the voting power of the company to approve
the purchase by us of shares from a shareholder who owns 5% or more of our
outstanding shares within two years after the person acquired such shares.
Annual Election of Directors. Our bylaws provide that candidates for our
board of directors may be nominated only by our board of directors or by a
shareholder who gives written notice to us not less than 60 nor more than 90
days prior to the meeting of shareholders at which the directors are to be
elected. However, directors may be elected without a meeting by unanimous
written consent of the shareholders.
Our board of directors may consist of not less than three nor more than 20
members to be determined from time to time by our board. We amended our
certificate of incorporation in 1999 to phase out our classified board. All of
our directors are now of one class and serve for a term ending at the annual
meeting following the annual meeting at which each director was elected. Between
shareholder meetings, our board may appoint new directors to fill vacancies or
newly created directorships.
S-52
Shareholder Action by Written Consent. Our shareholders may act by written
consent without a meeting if the consent or consents are signed by the holders
of all of the outstanding stock entitled to vote on the matter.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Oklahoma law permits, and our certificate of incorporation contains, a
provision eliminating our directors' liability to us or our shareholders for
monetary damages for breach of fiduciary duty, except for liability:
- for any breach of the director's duty of loyalty to us or our
shareholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or which the director knows to be a violation of law;
- under Section 1053 of the Oklahoma General Corporation Act (generally,
liability for unlawful dividends or stock repurchases); or
- for any transaction from which the director derived an improper personal
benefit.
In addition, our bylaws contain provisions indemnifying our directors and
officers to the fullest extent permitted by the Oklahoma General Corporation
Act, but such provisions are not exclusive of other rights to indemnification
pursuant to agreement, vote of shareholders or disinterested directors or
otherwise. We believe that these provisions will assist us in attracting and
retaining qualified individuals to serve as our directors and officers.
TRANSFER AGENT
The transfer agent and registrar for our common stock is First Chicago
Trust Company, a division of Equiserve. First Chicago Trust Company's telephone
number is (800) 317-4445.
S-53
DESCRIPTION OF INDEBTEDNESS
SENIOR SECURED CREDIT FACILITY
Concurrently with the closing of this offering, we will enter into a new
senior secured credit facility consisting of a $550 million revolving credit
facility (which includes a $225 million letter of credit subfacility), with a
final maturity of five years from closing or, if earlier, June 29, 2007, and a
$425 million amortizing term loan with a maturity of six years from closing. In
addition, incremental term loans may be extended under the new credit facility
by lenders agreeing to provide same up to $250 million aggregate principal
amount, provided that the loans are permitted under the terms of our existing
indebtedness. After consummation of the Acquisition, borrowings under the
revolving credit facility may be used for general corporate purposes. Letters of
credit may also be used for general corporate purposes and are needed primarily
for insurance reserves associated with our normal risk management activities. To
the extent that any of these letters of credit would be drawn, payments would be
financed by borrowings under our revolving credit facility. Incremental term
loans, if extended, may be used only to finance acquisitions and to repay or
redeem indebtedness, including loans under the revolving credit facility. The
stated interest rate on borrowings under our credit facility will be equal to a
referenced index interest rate, normally the London interbank offered interest
rate, or LIBOR, plus a margin. The level of the margin for borrowings under our
revolving credit facility will be dependent upon our total leverage ratio and
the average utilization of our revolving credit facility.
The new credit facility (and related interest rate protection agreements,
foreign currency exchange agreements, commodity price hedging agreements and
certain overdraft facilities) will be guaranteed by substantially all of our
subsidiaries. In addition, our obligations under the new credit facility (and
related interest rate protection agreements, foreign currency exchange
agreements, commodity price hedging agreements and certain overdraft facilities)
and the obligations of our subsidiaries under the guarantees will be secured by
a first priority security interest in substantially all our accounts and
inventories and those of our subsidiaries that are guarantors, and in
substantially all the capital stock or other equity interests owned by us or our
subsidiaries that are guarantors.
Our new credit facility will contain customary covenants associated with
similar facilities, including but not limited to the following more significant
covenants:
- maintenance of a total leverage ratio;
- maintenance of a minimum fixed charge coverage ratio and a minimum
adjusted fixed charge coverage ratio;
- maintenance of a minimum asset coverage ratio;
- a limitation on capital expenditures;
- a limitation on acquisitions and investments, including, while any
revolving loans are outstanding, the amount of cash and cash equivalents;
- a limitation on restricted payments, including dividends; and
- a limitation on incurrence of indebtedness and liens.
The closing of our new credit facility is conditioned upon, among other things,
the closing of this offering, the Acquisition and the other related financings.
The commitments under our new credit facility will be terminated in the
event of a defined change of control.
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10 1/8% SENIOR NOTES DUE 2008
Our $355 million of 10 1/8% Senior Notes due 2008 are general unsecured
obligations, equal in right of payment to all of our existing and future senior
indebtedness and are guaranteed on a senior unsecured basis by each guarantor of
the Notes.
9 1/4% SENIOR NOTES DUE 2010
Our $200 million of 9 1/4% Senior Notes due 2010 are general unsecured
obligations, equal in right of payment to all of our existing and future senior
indebtedness and are guaranteed on a senior unsecured basis by each of our
domestic subsidiaries that guarantee our obligations under our new credit
facility or our existing note indentures.
10 5/8% SENIOR SUBORDINATED NOTES DUE 2007
Our $400 million of 10 5/8% Senior Subordinated Notes due 2007 are general
unsecured obligations, subordinated in right of payment to all of our existing
and future senior indebtedness and are guaranteed on a senior subordinated basis
by each guarantor of the Notes.
9 7/8% SENIOR SUBORDINATED NOTES DUE 2012
Our $260 million of 9 7/8% Senior Subordinated Notes due 2012 are general
unsecured obligations, subordinated in right of payment to all of our existing
and future senior indebtedness and are guaranteed on a senior subordinated basis
by each guarantor of the Notes.
5 1/4% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2009
Our $150 million of 5 1/4% Convertible Senior Subordinated Notes due 2009
are general unsecured obligations, subordinated in right of payment to all of
our existing and future senior indebtedness and are guaranteed on a senior
subordinated basis by each guarantor of the Notes.
S-55
UNDERWRITING
Under the underwriting agreement, each of the underwriters named below, for
whom Lehman Brothers Inc. and Deutsche Bank Securities Inc., as joint
book-running managers, and Morgan Stanley & Co. Incorporated and First Union
Securities, Inc., as co-managers, are acting as representatives, has agreed to
purchase from us the respective number of shares of common stock shown opposite
its name below:
<Table>
<Caption>
NUMBER OF
UNDERWRITER SHARES
- ----------- ---------
Lehman Brothers Inc. ....................................... 2,800,000
Deutsche Bank Securities Inc. .............................. 2,800,000
First Union Securities, Inc. ............................... 1,000,000
Morgan Stanley & Co. Incorporated........................... 1,000,000
J.P. Morgan Securities Inc. ................................ 400,000
---------
Total............................................. 8,000,000
=========
</Table>
The underwriting agreement provides that the underwriters are obligated to
purchase, subject to certain conditions, all of the shares of common stock in
the offering if any are purchased, other than those covered by the
over-allotment option described below. The conditions contained in the
underwriting agreement include the requirements that:
- the representations and warranties we made to the underwriters are true,
- there is no material change in the financial markets, and
- we deliver to the underwriters customary closing documents.
We have granted to the underwriters a 30-day option to purchase, in whole
or in part, up to an aggregate of an additional 1,200,000 shares at the public
offering price less underwriting discounts and commissions, which option was
exercised in full on June 13, 2002. This option may be exercised to cover
over-allotments, if any, made in connection with the offering. Each underwriter
will be obligated, subject to certain conditions, to purchase its pro rata
portion of these additional shares based on the underwriter's percentage
underwriting commitment in the offering as indicated on the preceding table. The
foregoing limitations do not apply to stabilizing transactions, syndicate
covering transactions and penalty bids for the purpose of pegging, fixing or
maintaining the price of the common stock, in accordance with Regulation M under
the Exchange Act.
The underwriters have advised us that they propose to offer shares of
common stock directly to the public at the offering price on the cover of this
prospectus supplement and to selected dealers, who may include the underwriters,
at such offering price less a selling concession not in excess of $0.55 per
share. The underwriters may allow, and the selected dealers may re-allow, a
discount from the concession not in excess of $0.10 per share to other dealers.
After the offering, the underwriters may change the public offering price and
other offering terms.
The following table summarizes the underwriting discounts and commissions
we will pay to the underwriters. These amounts are shown assuming both no
exercise and full exercise of the underwriters' over-allotment option to
purchase up to 1,200,000 additional shares. The underwriting fee is the
difference between the initial price to the public and the amount the
underwriters pay us for the shares.
<Table>
<Caption>
NO EXERCISE FULL EXERCISE
----------- -------------
Per share paid by us........................................ $ 0.92 $ 0.92
Total............................................. $7,360,000 $8,464,000
</Table>
We estimate that the expenses of this offering, excluding underwriting
discounts and commissions summarized in the table above, will be approximately
$150,000.
S-56
The underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids or purchases for the purpose of
pegging, fixing or maintaining the price of the common stock, in accordance with
Regulation M of the Exchange Act.
- Over-allotment involves sales by the underwriters of shares in excess of
the number of shares the underwriters are obligated to purchase, which
creates a syndicate short position. The short position may be either a
covered short position or a naked short position. In a covered short
position, the number of shares over-allotted by the underwriters is not
greater than the number of shares that they may purchase in the
over-allotted options. In a naked short position, the number of shares
involved is greater than the number of shares in the over-allotment
options. The underwriters may close out any short position by either
exercising their over-allotment options and/or purchasing shares in the
open market.
- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions. In determining the source of shares to
close out the short position, the underwriters will consider, among other
things, the price at which they may purchase shares through the
over-allotment option. If the underwriters sell more shares than could be
covered by the over-allotment option, which is called a naked short
position, the position can only be closed out by buying shares in the
open market. A naked short position is more likely to be created if the
underwriters are concerned that there could be downward pressure on the
price of the shares in the open market after pricing that could adversely
affect investors who purchase in the offering.
- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may have the effect of raising or maintaining the market price of our
common stock or preventing or retarding a decline in the market price of our
common stock. As a result, the price of the common stock may be higher than the
price that might otherwise exist in the open market. These transactions may be
effected on the NYSE or otherwise and, if commenced, may be discontinued at any
time.
Neither we nor any of the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters make a representation that the underwriters will
engage in these stabilizing transactions or that any transaction, once
commenced, will not be discontinued without notice.
In connection with the offering, we and substantially all of our executive
officers and directors have agreed that we and they will not, subject to certain
limited exceptions, directly or indirectly, offer, sell, pledge or otherwise
dispose of any shares of common stock or any securities convertible into or
exchangeable or exercisable for common stock or enter into any swap or other
derivative transaction with similar effect as a sale of common stock, for a
period of 90 days from the date of this prospectus supplement without the prior
written consent of Lehman Brothers Inc. The restrictions in this paragraph do
not apply to:
- the sale of common stock to the underwriters in this offering, including
shares sold pursuant to the over-allotment option,
- the sale or transfer of shares of common stock to us by our directors or
executive officers in connection with the exercise of a currently
outstanding option, warrant or right, or
S-57
- our issuance of options under any of our currently effective employee
benefit plans, stock option or incentive plans or of shares of common
stock upon the exercise of a currently outstanding option, warrant or
right or the conversion of a security outstanding on the date of this
prospectus.
We have agreed to indemnify, under certain circumstances, the underwriters
against liabilities relating to the offering, including liabilities under the
Securities Act of 1933, as amended, and liabilities arising from breaches of the
representations and warranties contained in the underwriting agreement, and to
contribute, under certain circumstances, to payments that the underwriters may
be required to make for these liabilities.
This prospectus supplement and the accompanying prospectus are not, and
under no circumstances are to be construed as, an advertisement or a public
offering of shares in Canada or any province or territory thereof. Any offer or
sale of shares in Canada will be made only under an exemption from the
requirements to file a prospectus supplement or prospectus and an exemption form
the dealer registration requirement in the relevant province or territory of
Canada in which such offer or sale is made.
Purchasers of the shares of common stock may be required to pay stamp taxes
and other charges under the laws and practices of the country of purchase, in
addition to the offering price on the cover of this prospectus supplement.
A prospectus in electronic format may be made available on the Internet
sites or through other online services maintained by one or more of the
underwriters and/or selling group members participating in this offering, or by
their affiliates. In those cases, prospective investors may view offering terms
online, and, depending upon the particular underwriter or selling group member,
prospective investors may be allowed to place orders online. The underwriters
may agree with us to allocate a specific number of shares for sale to online
brokerage account holders. Any such allocation for online distributions will be
made by the underwriters on the same basis as other allocations.
Other than the prospectus supplement in electronic format, the information
on any underwriter's or selling group member's web site and any information
contained in any other web site maintained by an underwriter or selling group
member is not part of this prospectus supplement or the registration statement,
has not been approved and/or endorsed by us or any underwriter or selling group
member in its capacity as underwriter or selling group member and should not be
relied upon by investors.
Certain of the underwriters or their respective affiliates from time to
time have provided in the past and may provide in the future investment banking,
commercial lending and financial advisory services to us in the ordinary course
of business. Affiliates of Deutsche Bank Securities Inc., First Union
Securities, Inc. and J.P. Morgan Securities Inc. are lenders under our existing
credit facility. Additionally, we expect that affiliates of each of the
Underwriters will be lenders under our new credit facility.
First Union Securities, Inc. is a subsidiary of Wachovia Corporation and
conducts its investment banking, institutional and capital markets businesses
under the trade name of Wachovia Securities. Any references to "Wachovia
Securities" in this prospectus supplement, however, do not include Wachovia
Securities, Inc., a separate broker-dealer subsidiary of Wachovia Corporation
and an affiliate of First Union Securities, Inc.
S-58
UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a summary of certain U.S. federal income and estate tax
considerations relating to the purchase, ownership and disposition of the common
stock by holders thereof, but does not purport to be a complete analysis of all
the potential tax considerations relating thereto. This summary is based upon
the provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury Regulations promulgated under the Code, administrative rulings and
judicial decisions as of the date hereof. These authorities may be changed,
perhaps retroactively, so as to result in U.S. federal income and estate tax
consequences different from those set forth below. We have not sought any ruling
from the Internal Revenue Service or an opinion of counsel with respect to the
statements made and the conclusions reached in the following summary, and there
can be no assurance that the Internal Revenue Service will agree with such
statements and conclusions.
This summary assumes that the common stock is held as a capital asset. This
summary also does not address the tax considerations arising under the laws of
any foreign, state or local jurisdiction. In addition, this discussion does not
address all tax considerations that may be applicable to a holder's particular
circumstances or to holders that may be subject to special tax rules, including,
without limitation:
- holders subject to the alternative minimum tax;
- banks, insurance companies, or other financial institutions;
- tax-exempt organizations;
- dealers in securities or commodities;
- traders in securities that elect to use a mark-to-market method of
accounting for their securities holdings;
- U.S. holders (as defined below) whose "functional currency" is not the
U.S. dollar;
- persons that will hold the common stock as a position in a hedging
transaction, "straddle," "conversion transaction" or other risk reduction
transaction; or
- persons deemed to sell the common stock under the constructive sale
provisions of the Code.
If a partnership holds the common stock, the tax treatment of a partner in
the partnership will generally depend upon the status of the partner and the
activities of the partnership. If you are a partner of a partnership holding our
common stock, you should consult your tax advisor regarding the tax consequences
of the ownership and disposition of the common stock.
THIS SUMMARY OF CERTAIN U.S. FEDERAL TAX CONSIDERATIONS IS FOR GENERAL
INFORMATION ONLY AND IS NOT TAX ADVICE. YOU ARE URGED TO CONSULT YOUR TAX
ADVISOR WITH RESPECT TO THE APPLICATION OF U.S. FEDERAL INCOME TAX LAWS TO YOUR
PARTICULAR SITUATION AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE U.S.
FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN
OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
CONSEQUENCES TO U.S. HOLDERS
The following is a summary of the U.S. federal income tax consequences that
will apply to you if you are a U.S. holder of our common stock. Certain
consequences to "non-U.S. holders" of our common stock are described under
"-- Consequences to Non-U.S. Holders" below. "U.S. holder" means a beneficial
owner of common stock that is:
- a citizen or resident of the U.S. as determined for federal income tax
purposes;
- a corporation or partnership created or organized in or under the laws of
the U.S. or any political subdivision of the U.S.;
S-59
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
- a trust that (1) is subject to the supervision of a court within the U.S.
and the control of one or more U.S. persons or (2) has a valid election
in effect under applicable Treasury Regulations to be treated as a U.S.
person.
DIVIDENDS
Any distributions on the common stock will be treated as a dividend (and
hence taxable as ordinary income) to the extent of our current or accumulated
earnings and profits, as determined under U.S. federal income tax principles. To
the extent that the amount of the distribution exceeds our current and
accumulated earnings and profits, the excess first will be treated as a return
of capital that will reduce the holder's tax basis in the common stock, and any
remaining portion will be taxable to the holder as capital gains. Any such
capital gain will be long-term capital gain if the holder has held the common
stock for more than one year at the time of the exchange. A dividend received by
a corporate holder may be (i) eligible for a dividends-received deduction
(subject to applicable exceptions and limitations) and (ii) subject to the
"extraordinary dividend" provisions of section 1059 of the Code.
SALE, EXCHANGE OR OTHER TAXABLE DISPOSITION OF COMMON STOCK
You will generally recognize gain or loss upon the sale, exchange,
redemption or other taxable disposition of common stock equal to the difference
between the amount realized upon the sale, exchange or other disposition and
your adjusted tax basis in the common stock. Your adjusted tax basis in each
share of common stock will generally equal the amount you paid for such share.
Any gain or loss recognized on a disposition of the common stock will be capital
gain or loss. If you are an individual and have held the common stock for more
than one year, such capital gain will generally be subject to tax at a maximum
rate of 20%. Your ability to deduct capital losses may be limited.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments of dividends on the common stock and the proceeds received upon
the sale or other disposition of such common stock may be subject to information
reporting and backup withholding tax. Payments to certain holders (including,
among others, corporations and certain tax-exempt organizations) are generally
not subject to information reporting or backup withholding. Payments to a U.S.
holder will be subject to information reporting and backup withholding tax if
such holder:
- fails to furnish its taxpayer identification number ("TIN"), which, for
an individual, is ordinarily his or her social security number;
- furnishes an incorrect TIN;
- is notified by the Internal Revenue Service that it has failed to
properly report payments of interest or dividends; or
- fails to certify, under penalties of perjury, that it has furnished a
correct TIN and that the Internal Revenue Service has not notified the
U.S. holder that it is subject to backup withholding.
The amount of any reportable payments, including dividends, made to a U.S.
holder (other than to holders which are exempt recipients) and the amount of tax
withheld, if any, with respect to such payments will be reported to such U.S.
holder and to the Internal Revenue Service for each calendar year.
A U.S. holder should consult its tax advisor regarding its qualification
for an exemption from backup withholding and information reporting and the
procedures for obtaining such an exemption, if applicable. The backup
withholding tax is not an additional tax, and taxpayers may use amounts withheld
as a credit against their U.S. federal income tax liability or may claim a
refund as long as they timely provide certain information to the Internal
Revenue Service.
S-60
CONSEQUENCES TO NON-U.S. HOLDERS
The following is a summary of the U.S. federal tax consequences that will
apply to you if you are a non-U.S. holder of common stock. The term "non-U.S.
holder" means a beneficial owner of common stock that is not a U.S. holder.
Special rules may apply to certain non-U.S. holders such as "controlled
foreign corporations," "passive foreign investment companies" and "foreign
personal holding companies." Such entities should consult their tax advisors to
determine the U.S. federal, state, local and other tax consequences that may be
relevant to them.
DIVIDENDS
If distributions are paid on shares of our common stock, such distributions
will constitute dividends for U.S. federal income tax purposes to the extent
paid from our current or accumulated earnings and profits, as determined under
U.S. federal income tax principles, and then will constitute a return of capital
that is applied against and reduce your adjusted tax basis in our common stock,
and then as gain. Dividends paid to a non-U.S. holder will generally be subject
to withholding of U.S. federal income tax at the rate of 30%. Non-U.S. holders
should consult any applicable income tax treaties that may provide for a
reduction of, or exemption from, withholding taxes. If the dividend is
effectively connected with the non-U.S. holder's conduct of a trade or business
in the U.S., the dividend will not be subject to any withholding tax (provided
certain certification requirements are met, as described below) but will be
subject to U.S. federal income tax imposed on net income on the same basis that
applies to U.S. persons generally. In addition, if you are a foreign
corporation, you may be subject to a branch profits tax equal to 30% (or lower
applicable treaty rate) of your effectively connected earnings and profits for
the taxable year, subject to adjustments, that are effectively connected with
your conduct of a trade or business in the U.S. For this purpose, dividends will
be included in the earnings and profits of such foreign corporation.
In order to claim the benefit of a tax treaty or to claim exemption from
withholding because the income is effectively connected with the conduct of a
trade or business in the U.S., a non-U.S. holder must provide a properly
executed IRS Form W-8BEN for treaty benefits or W-8ECI for effectively connected
income (or such successor forms as the IRS designates), prior to the payment of
dividends. These forms must be periodically updated. Non-U.S. holders may obtain
a refund of any excess amounts withheld by timely filing an appropriate claim
for refund. If a non-U.S. holder holds our common stock through a foreign
partnership or a foreign intermediary, the foreign partnership or foreign
intermediary will also be required to comply with certain certification
requirements.
SALE, EXCHANGE OR OTHER TAXABLE DISPOSITION OF COMMON STOCK
A non-U.S. holder will generally not be subject to U.S. federal income tax,
including by way of withholding, on gain recognized on a sale or other
disposition of our common stock unless any one of the following is true:
- the gain is effectively connected with the non-U.S. holder's conduct of a
trade or business in the U.S.;
- the non-U.S. holder is a nonresident alien individual present in the U.S.
for 183 or more days in the taxable year of the disposition and certain
other requirements are met;
- you are subject to Internal Revenue provisions applicable to certain U.S.
expatriates; or
- our common stock constitutes a United States real property interest by
reason of our status as a "United States real property holding
corporation" (a "USRPHC") for U.S. federal income tax purposes at any
time during the shorter of (i) the period after June 18, 1980, during
which you hold our common stock or (ii) the 5-year period ending on the
date you dispose of our common stock.
S-61
We believe that we are not currently and will not become a USRPHC. However,
because the determination of whether we are a USRPHC depends on the fair market
value of our United States real property interests relative to the fair market
value of our other business assets, there can be no assurance that we will not
become a USRPHC in the future. As long as our common stock is regularly traded
on an established securities market, however, such common stock will be treated
as United States real property interests only if, in general, a non-U.S. holder
holds more than 5 percent of such regularly traded common stock.
A holder described in the first bullet point above will be required to pay
U.S. federal income tax on the net gain derived from the sale of common stock,
except as otherwise required by an applicable tax treaty. If such holder is a
foreign corporation, it may also be required to pay a branch profits tax at a
30% rate or a lower rate if so specified by an applicable income tax treaty. A
holder described in the second bullet point above will be required to pay a 30%
U.S. federal income tax on the gain derived from the sale, which may be offset
by U.S. source capital losses, even though the holder is not considered a
resident of the U.S. A holder described in the third bullet point above should
consult its tax advisor to determine the U.S. federal, state, local and other
tax consequences that may be relevant to such holder.
U.S. FEDERAL ESTATE TAXES
Our common stock owned or treated as owned by an individual who at the time
of death is a non-U.S. holder will be included in his or her estate for U.S.
federal estate tax purposes, unless an applicable estate tax treaty provides
otherwise.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Backup withholding will likely not apply to payments made by us or our
paying agents, in their capacities as such, to a non-U.S. holder of common stock
if the holder has provided the required certification that it is not a U.S.
person as described above. However, certain information reporting may still
apply with respect to dividend payments even if certification is provided.
Payments of the proceeds of a disposition or redemption of common stock by a
non-U.S. holder made to or through a foreign office of a broker will not be
subject to information reporting or backup withholding, unless the broker is:
- a U.S. person;
- a controlled foreign corporation for U.S. federal income tax purposes;
- a foreign person 50% or more of whose gross income is effectively
connected with a U.S. trade or business for a specified three-year
period; or
- a foreign partnership, if at any time during its tax year, one or more of
its partners are U.S. persons, as defined in Treasury Regulations, who in
the aggregate hold more than 50% of the income or capital interest in the
partnership or if, at any time during its tax year, the foreign
partnership is engaged in a U.S. trade or business.
You will be subject to information reporting, but not backup withholding,
with respect to any payment of the proceeds of a sale of common stock effected
outside the United States by a foreign office of such broker unless such broker
has documentary evidence in its records that you are not a United States person
and certain other conditions are met, or you otherwise establish an exemption.
You will be subject to backup withholding and information reporting with respect
to any payment of the proceeds of a sale of common stock effected by the United
States office of a broker unless you properly certify under penalties of perjury
as to your foreign status and certain other conditions are met or you otherwise
establish an exemption.
Currently applicable Treasury Regulations establish reliance standards with
regard to the certification requirements described above.
S-62
A non-U.S. holder should consult its tax advisor regarding application of
withholding and backup withholding in its particular circumstance and the
availability of and procedure for obtaining an exemption from withholding and
backup withholding under current Treasury Regulations. In this regard, the
current Treasury Regulations provide that a certification may not be relied on
if we or our agent (or other payor) knows or has reasons to know that the
certification may be false. Any amounts withheld under the backup withholding
rules from a payment to a non-U.S. holder will be allowed as a credit against
the holder's U.S. federal income tax liability or such holder may claim a
refund, provided the required information is furnished timely to the Internal
Revenue Service.
LEGAL MATTERS
Certain legal matters in connection with the common stock offered hereby
will be passed upon for us by Latham & Watkins, San Francisco, California and
for the Underwriters by Cahill Gordon & Reindel, New York, New York.
INDEPENDENT AUDITORS
Our consolidated financial statements as of December 29, 2001 and December
30, 2000 and for each of the three years in the period ended December 29, 2001
incorporated by reference in this prospectus supplement and the accompanying
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report incorporated by reference herein. Core-Mark's
consolidated financial statements as of December 31, 2001 and December 31, 2000
and for each of the three years in the period ended December 31, 2001
incorporated by reference in this prospectus supplement and the accompanying
prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report incorporated by reference herein.
S-63
$600,000,000
FLEMING COMPANIES, INC.
DEBT SECURITIES AND COMMON STOCK
---------------------
We may from time to time sell up to $600,000,000 aggregate initial offering
price of our debt securities, our common stock, $2.50 par value per share, or
any combination of our debt securities and our common stock.
These debt securities may consist of notes, debentures or other types of
debt. We will provide specific terms of these debt securities in supplements to
this prospectus. Our payment obligations under any series of debt securities may
be guaranteed by one or more of our subsidiaries which are co-registrants. You
should read this prospectus and any prospectus supplement carefully before you
invest.
This prospectus provides a general description of the securities we may
offer. The specific terms of the securities offered by this prospectus will be
set forth in a supplement to this prospectus and will include:
- in the case of common stock, the number of shares, purchase price and
terms of the offering and sale thereof; and
- in the case of debt securities, the specific designation, aggregate
principal amount, purchase price, maturity, interest rate, time of
payment of interest, terms (if any) for the subordination or redemption
thereof, and any other specific terms of the debt securities.
Our common stock is traded on the New York Stock Exchange under the symbol
"FLM". On May 17, 2002, the last reported sale price for our common stock on the
New York Stock Exchange was $24.44 per share.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAVE THESE
ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this prospectus is May 21, 2002.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS AND ANY ACCOMPANYING PROSPECTUS SUPPLEMENT. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT. WE ARE
OFFERING TO SELL THE SECURITIES, AND SEEKING OFFERS TO BUY THE SECURITIES, ONLY
IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS AND ANY ACCOMPANYING PROSPECTUS SUPPLEMENT IS ACCURATE ONLY
AS OF THE DATE OF THIS PROSPECTUS AND THE DATE OF ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS AND ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT OR ANY SALES OF THE SECURITIES. WHEN WE
DELIVER THIS PROSPECTUS AND ANY ACCOMPANYING PROSPECTUS SUPPLEMENT, WE ARE NOT
IMPLYING THAT THE INFORMATION IS CURRENT AS OF THE DATE OF THE DELIVERY OR SALE.
IN THIS PROSPECTUS AND ANY ACCOMPANYING PROSPECTUS SUPPLEMENT, UNLESS OTHERWISE
INDICATED, THE "COMPANY", "WE", "US" AND "OUR" REFER TO FLEMING COMPANIES, INC.
AND ITS CONSOLIDATED SUBSIDIARIES.
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
About this Prospectus....................................... 1
Where You Can Find More Information......................... 1
Special Note Regarding Forward-Looking Statements........... 2
The Company................................................. 3
Use of Proceeds............................................. 3
Ratio of Earnings to Fixed Charges.......................... 4
Description of Debt Securities.............................. 4
Plan of Distribution........................................ 12
Legal Matters............................................... 13
Experts..................................................... 13
</Table>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that Fleming Companies,
Inc. and the co-registrants (together, the "registrants") filed with the
Securities and Exchange Commission utilizing a "shelf" registration process.
Under this shelf registration process, the registrants may sell any combination
of the securities described in this prospectus in one or more offerings up to a
total dollar amount of $600,000,000. This prospectus provides you with a general
description of the securities the registrants may offer. Each time the
registrants sell securities, the registrants will provide a prospectus
supplement that will contain specific information about the terms of that
offering. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with additional information described under the
next heading "Where You Can Find More Information".
WHERE YOU CAN FIND MORE INFORMATION
Fleming Companies, Inc. files annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You can inspect and copy these reports, proxy statements and other information
at the public reference facilities of the Securities and Exchange Commission in
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference room. The Securities and Exchange Commission also maintains
a web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with it
(http://www.sec.gov). Information contained in our web site is not part of this
prospectus. You can inspect reports and other information we file at the office
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The registrants have filed a registration statement and related exhibits
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended. The registration statement contains additional information about us and
the securities. You may inspect the registration statement and exhibits without
charge at the office of the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and you may obtain copies from the
Securities and Exchange Commission at prescribed rates.
The Securities and Exchange Commission allows us to "incorporate by
reference" the information Fleming Companies, Inc. files with it, which means
that we can disclose important information to you by referring to those
documents. The information incorporated by reference is an important part of
this prospectus, and information that Fleming Companies, Inc. files later with
the Securities and Exchange Commission will automatically update and supersede
that information. The registrants incorporate by reference the following
documents Fleming Companies, Inc. filed with the Securities and Exchange
Commission pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended (Securities and Exchange Commission file number 001-08140) (other than
information in such documents that is deemed not to be filed):
- Our Annual Report on Form 10-K for the year ended December 29, 2001
(including information specifically incorporated by reference into our
Form 10-K from our Proxy Statement for our 2002 Annual Meeting of
Shareholders);
- Our Quarterly Report on Form 10-Q for the quarter ended April 20, 2002;
- Our Current Reports on Form 8-K filed with the Securities and Exchange
Commission on April 2, 2002, April 16, 2002, April 24, 2002 (other than
the information furnished pursuant to Item 9 of such report, which
information is deemed not to be filed) and May 20, 2002;
- Description of Fleming Companies, Inc.'s common stock contained in our
registration statement on Form 8-A filed with the Securities and Exchange
Commission on April 19, 1983, including any amendments or reports filed
for the purpose of updating such description; and
1
- all documents filed by Fleming Companies, Inc. with the Securities and
Exchange Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this prospectus and before we stop
offering the securities (other than those portions of such documents
described in paragraphs (i), (k), and (l) of Item 402 of Regulation S-K
promulgated by the Securities and Exchange Commission and other than
information in such documents that is deemed not to be filed).
You may request a copy of these filings at no cost, by writing us at the
following address or telephoning us at the following number:
Fleming Companies, Inc.
1945 Lakepointe Drive, Box 299013
Lewisville, Texas 75029
Attention: Investor Relations
(972) 906-8000
You should rely only on the information incorporated by reference or
provided in this prospectus and any prospectus supplement. The registrants have
not authorized anyone else to provide you with different information.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements other than statements of historical facts included or
incorporated by reference in this prospectus, including, without limitation,
statements regarding our future financial position, business strategy and our
management's plans and objectives for future operations, are forward-looking
statements. Forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may", "will", "expect", "intend",
"estimate", "anticipate", "believe" or "continue" or the negative thereof or
variations thereon or similar terminology. Although we believe that the
expectations reflected in these forward-looking statements are reasonable, these
expectations may not prove to be correct. These forward-looking statements and
our business and prospects are subject to a number of factors that could cause
actual results to differ materially, including:
- our ability to obtain capital or obtain it on acceptable terms;
- unanticipated problems with product procurement;
- adverse effects of the changing industry environment and increased and
intense competition;
- sales declines and loss of customers;
- negative effects of Kmart Corporation's bankruptcy reorganization;
- exposure to litigation and other contingent losses;
- failure to achieve the expected results of our growth plans;
- the inability to integrate acquired companies and to achieve operating
improvements at those companies;
- increases in labor costs and disruptions in labor relations with union
bargaining units representing our employees;
- negative effects of our substantial indebtedness and the limitations
imposed by restrictive covenants contained in our debt instruments; and
- goodwill impairment due to changes in markets.
These and other risk factors are described in our Securities and Exchange
Commission reports, including but not limited to the Annual Report on Form 10-K
for the fiscal year ended December 29, 2001. All subsequent written and oral
forward-looking statements attributable to us, or persons acting on
2
our behalf, are expressly qualified in their entirety by the cautionary
statements. We undertake no obligation to update forward-looking statements to
reflect developments or information obtained after the date on the cover page of
this prospectus.
THE COMPANY
We are an industry leader in the distribution of consumer package goods.
Through our distribution group, we distribute products to customers that operate
approximately 3,000 supermarkets, approximately 10,000 convenience stores and
over 2,000 supercenters, discount stores, limited assortment stores, drug
stores, specialty stores and other stores across the United States.
As of May 15, 2002, our retail group operated 126 stores, predominantly
supermarkets that focus on low prices and high quality perishables, comprised of
109 price impact supermarkets that offer everyday low prices typically below the
prices of market-leading conventional supermarkets and 17 limited assortment
stores under the yes!LESS(R) banner that offer a narrow selection of low-price,
private label food and other consumable goods and general merchandise at
deep-discount prices.
Our principal executive offices are located at 1945 Lakepointe Drive,
Lewisville, Texas 75057. Our telephone number at that location is (972)
906-8000.
RECENT DEVELOPMENTS
Core-Mark Acquisition. On April 23, 2002, we signed a merger agreement to
acquire Core-Mark International, Inc. ("Core-Mark"), a distributor of consumer
package goods to convenience stores and other retailers in the western United
States and western Canada. We will pay approximately $295 million in cash to
acquire Core-Mark. In addition, we will assume all of Core-Mark's outstanding
debt as of the closing of the merger, which we estimate to be approximately $95
million. Core-Mark distributes consumer package goods to nearly 30,000
convenience stores and other retailers from its network of 19 distribution
centers and had fiscal 2001 sales of approximately $3.4 billion.
Our acquisition of Core-Mark is subject to a number of customary closing
conditions. Although we cannot assure you that any or all of these conditions
will be satisfied, we believe that we will complete the acquisition during our
second fiscal quarter of 2002.
We intend to finance our acquisition of Core-Mark with a combination of
available cash, borrowings under a new credit facility and the net proceeds from
public offerings of debt and/or equity securities.
Head Distributing Acquisition. On April 23, 2002, we acquired Head
Distributing Company ("Head Distributing") for approximately $40 million in
cash, which amount is subject to potential future de minimus adjustment as
provided in an agreement among us and Head Distributing's stockholders. Head
Distributing operates two piece-pick distribution facilities and serves
approximately 3,000 retail locations in six southeastern states and had fiscal
2001 sales of approximately $350 million.
During the first quarter of 2002, we adopted EITF 01-9 and restated sales
and cost of sales for all prior periods. This adoption reduced sales and cost of
sales by $70 million for 2001 and by a lesser amount for each of the prior
years. The adoption had no effect on gross margins or earnings.
USE OF PROCEEDS
Unless we indicate otherwise in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of the securities for general
corporate purposes, which may include, but are not limited to, funding our
obligations in the acquisition of Core-Mark, including repaying the debt we will
assume from Core-Mark in connection with the acquisition, and for working
capital, capital expenditures and other potential acquisitions. We will set
forth in the applicable prospectus supplement our intended use for the net
proceeds received from our sale of any securities.
3
RATIO OF EARNINGS TO FIXED CHARGES
Our ratios of earnings to fixed charges for the periods indicated are as
follows:
<Table>
<Caption>
FISCAL YEAR ENDED 16 WEEKS
------------------------------------------------------------------------ ENDED
DECEMBER 27, DECEMBER 26, DECEMBER 25, DECEMBER 30, DECEMBER 29, APRIL 20,
1997 1998 1999 2000 2001 2002
------------ ------------ ------------ ------------ ------------ ---------
Ratio of earnings to fixed
charges(1).............. 1.41x -- -- -- 1.29x 1.65x
</Table>
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(1) For purposes of computing this ratio, earnings consist of earnings before
income taxes and fixed charges. Fixed charges consist primarily of interest
expense, including amortization of deferred debt issuance costs and
one-third of rental expense (the portion considered representative of the
interest factor). Earnings were insufficient to cover fixed charges by $598
million, $63 million and $202 million for the fiscal years ended December
26, 1998, December 25, 1999 and December 30, 2000, respectively.
DESCRIPTION OF DEBT SECURITIES
This prospectus describes certain general terms and provisions of our debt
securities. When we offer to sell a particular series of debt securities, we
will describe the specific terms of the series in a supplement to this
prospectus. We will also indicate in the supplement whether the general terms
and provisions described in this prospectus apply to a particular series of debt
securities.
We may offer under this prospectus up to $600,000,000 aggregate principal
amount of debt securities, or if debt securities are issued at a discount, or in
a foreign currency or composite currency, such principal amount as may be sold
for an initial public offering price of up to $600,000,000. The debt securities
will represent our direct obligations and will rank equally with all of our
other unsubordinated indebtedness, unless otherwise specified in the applicable
prospectus supplement. Any series of debt securities may be guaranteed by one or
more of our subsidiaries which are co-registrants.
The debt securities offered hereby will be issued under an indenture
between us and a trustee. We have summarized select portions of the indenture
below. The summary is not complete. We have filed a copy of the indenture as an
exhibit to the registration statement and you should read the indenture for
provisions that may be important to you. Capitalized terms used in the summary
below have the meanings specified in the indenture.
When we refer to "we", "our", "us" and the "company" in this section, we
mean Fleming Companies, Inc. excluding, unless the context otherwise requires or
as otherwise expressly stated, our subsidiaries.
GENERAL
The terms of each series of debt securities will be established by or
pursuant to a resolution of our board of directors and detailed or determined in
the manner provided in an officers' certificate or by a supplemental indenture.
The particular terms of each series of debt securities will be described in a
prospectus supplement relating to the series, including any pricing supplement.
We can issue an unlimited amount of debt securities under the indenture
that may be in one or more series with the same or various maturities, at par,
at a premium, or at a discount. We will set forth in a prospectus supplement
(including any pricing supplement) relating to any series of debt securities
being
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offered, the initial offering price, the aggregate principal amount and the
following terms of the debt securities, if applicable:
- the title of the debt securities;
- the price or prices (expressed as a percentage of the aggregate principal
amount) at which we will sell the debt securities;
- any limit on the aggregate principal amount of the debt securities;
- the date or dates on which we will pay the principal on the debt
securities;
- the rate or rates (which may be fixed or variable) per annum or the
method used to determine the rate or rates (including any commodity,
commodity index, stock exchange index or financial index) at which the
debt securities will bear interest, the date or dates from which interest
will accrue, the date or dates on which interest will commence and be
payable and any regular record date for the interest payable on any
interest payment date;
- the place or places where principal of, premium, and interest on the debt
securities will be payable;
- whether the debt securities rank as senior subordinated debt securities
or subordinated debt securities;
- the terms of any guarantee of any debt securities;
- the terms and conditions upon which we may redeem the debt securities;
- any obligation we have to redeem or purchase the debt securities pursuant
to any sinking fund or analogous provisions or at the option of a holder
of debt securities;
- the dates on which and the price or prices at which we will repurchase
the debt securities at the option of the holders of debt securities and
other detailed terms and provisions of these repurchase obligations;
- the denominations in which the debt securities will be issued, if other
than denominations of $1,000 and any integral multiple thereof;
- whether the debt securities will be issued in the form of certificated
debt securities or global debt securities;
- the portion of principal amount of the debt securities payable upon
declaration of acceleration of the maturity date, if other than the
principal amount;
- the currency of denomination of the debt securities;
- the designation of the currency, currencies or currency units in which
payment of principal of, premium and interest on the debt securities will
be made;
- if payments of principal of, premium or interest on the debt securities
will be made in one or more currencies or currency units other than that
or those in which the debt securities are denominated, the manner in
which the exchange rate with respect to these payments will be
determined;
- the manner in which the amounts of payment of principal of, premium or
interest on the debt securities will be determined, if these amounts may
be determined by reference to an index based on a currency or currencies
other than that in which the debt securities are denominated or
designated to be payable or by reference to a commodity, commodity index,
stock exchange index or financial index;
- whether, the ratio at which and the terms and conditions upon which, if
any, the debt securities will be convertible into or exchangeable for our
common stock or our other securities or securities of another person;
- any provisions relating to any security provided for the debt securities;
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- any addition to or change in the Events of Default described in this
prospectus or in the indenture with respect to the debt securities and
any change in the acceleration provisions described in this prospectus or
in the indenture with respect to the debt securities;
- any addition to or change in the covenants described in this prospectus
or in the indenture with respect to the debt securities;
- any other terms of the debt securities, which may modify or delete any
provision of the indenture as it applies to that series; and
- any depositaries, interest rate calculation agents, exchange rate
calculation agents or other agents with respect to the debt securities.
In addition, the indenture does not limit our ability to issue subordinated
debt securities. Any subordination provisions of a particular series of debt
securities will be set forth in the officers' certificate or supplemental
indenture related to that series of debt securities and will be described in the
relevant prospectus supplement.
We may issue debt securities that provide for an amount less than their
stated principal amount to be due and payable upon declaration of acceleration
of their maturity pursuant to the terms of the indenture. We will provide you
with information on the federal income tax considerations and other special
considerations applicable to any of these debt securities in the applicable
prospectus supplement.
If we denominate the purchase price of any of the debt securities in a
foreign currency or currencies or a foreign currency unit or units, or if the
principal of and any premium and interest on any series of debt securities is
payable in a foreign currency or currencies or a foreign currency unit or units,
we will provide you with information on the restrictions, elections, general tax
considerations, specific terms and other information with respect to that issue
of debt securities and such foreign currency or currencies or foreign currency
unit or units in the applicable prospectus supplement.
TRANSFER AND EXCHANGE
Each debt security will be represented by either one or more global
securities registered in the name of The Depository Trust Company, as Depositary
(the "Depositary"), or a nominee of the Depositary (we will refer to any debt
security represented by a global debt security as a "book-entry debt security"),
or a certificate issued in definitive registered form (we will refer to any debt
security represented by a certificated security as a "certificated debt
security"), as described in the applicable prospectus supplement. Except as
described under "Global Debt Securities and Book-Entry System" below, book-
entry debt securities will not be issuable in certificated form.
Certificated Debt Securities. You may transfer or exchange certificated
debt securities at any office we maintain for this purpose in accordance with
the terms of the indenture. No service charge will be made for any transfer or
exchange of certificated debt securities, but we may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
with a transfer or exchange.
You may transfer certificated debt securities and the right to receive the
principal of, premium and interest on certificated debt securities only by
surrendering the old certificate representing those certificated debt
securities, and either we or the trustee will reissue the old certificate to the
new holder or we or the trustee will issue a new certificate to the new holder.
Global Debt Securities and Book-Entry System. Each global debt security
representing book-entry debt securities will be deposited with, or on behalf of,
the Depositary, and registered in the name of the Depositary or a nominee of the
Depositary.
The Depositary has indicated it intends to follow the following procedures
with respect to book-entry debt securities.
Ownership of beneficial interests in book-entry debt securities will be
limited to persons that have accounts with the Depositary for the related global
debt security ("participants") or persons that may hold
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interests through participants. Upon the issuance of a global debt security, the
Depositary will credit, on its book-entry registration and transfer system, the
participants' accounts with the respective principal amounts of the book-entry
debt securities represented by the global debt security beneficially owned by
such participants. The accounts to be credited will be designated by any
dealers, underwriters or agents participating in the distribution of the
book-entry debt securities. Ownership of book-entry debt securities will be
shown on, and the transfer of the ownership interests will be effected only
through, records maintained by the Depositary for the related global debt
security (with respect to interests of participants) and on the records of
participants (with respect to interests of persons holding through
participants). The laws of some states may require that certain purchasers of
securities take physical delivery of such securities in definitive form. These
laws may impair the ability to own, transfer or pledge beneficial interests in
book-entry debt securities.
So long as the Depositary for a global debt security, or its nominee, is
the registered owner of that global debt security, the Depositary or its
nominee, as the case may be, will be considered the sole owner or holder of the
book-entry debt securities represented by such global debt security for all
purposes under the indenture. Except as described herein, beneficial owners of
book-entry debt securities will not be entitled to have securities registered in
their names, will not receive or be entitled to receive physical delivery of a
certificate in definitive form representing securities and will not be
considered the owners or holders of those securities under the indenture.
Accordingly, to exercise any rights of a holder under the indenture, each person
beneficially owning book-entry debt securities must rely on the procedures of
the Depositary for the related global debt security and, if that person is not a
participant, on the procedures of the participant through which that person owns
its interest.
We understand, however, that under existing industry practice, the
Depositary will authorize the persons on whose behalf it holds a global debt
security to exercise certain rights of holders of debt securities, and the
indenture provides that we, the trustee and our respective agents will treat as
the holder of a debt security the persons specified in a written statement of
the Depositary with respect to that global debt security for purposes of
obtaining any consents or directions required to be given by holders of the debt
securities pursuant to the indenture.
We will make payments of principal of, and premium and interest on
book-entry debt securities to the Depositary or its nominee, as the case may be,
as the registered holder of the related global debt security. We, the trustee
and any other agent of ours or agent of the trustee will not have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a global debt
security or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
We expect that the Depositary, upon receipt of any payment of principal of,
premium or interest on a global debt security, will immediately credit
participants' accounts with payments in amounts proportionate to the respective
amounts of book-entry debt securities held by each participant as shown on the
records of the Depositary. We also expect that payments by participants to
owners of beneficial interests in book-entry debt securities held through those
participants will be governed by standing customer instructions and customary
practices, as is now the case with the securities held for the accounts of
customers in bearer form or registered in "street name", and will be the
responsibility of those participants.
We will issue certificated debt securities in exchange for each global debt
security if the Depositary is at any time unwilling or unable to continue as
Depositary or ceases to be a clearing agency registered under the Exchange Act,
and a successor Depositary registered as a clearing agency under the Exchange
Act is not appointed by us within 120 days. In addition, we may at any time and
in our sole discretion determine not to have any of the book-entry debt
securities of any series represented by one or more global debt securities and,
in that event, we will issue certificated debt securities in exchange for the
global debt securities of that series. Any certificated debt securities issued
in exchange for a global debt security will be registered in such name or names
as the Depositary shall instruct the trustee. We expect that such instructions
will be based upon directions received by the Depositary from participants with
respect to ownership of book-entry debt securities relating to such global debt
security.
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We have obtained the foregoing information in this section concerning the
Depositary and the Depositary's book-entry system from sources we believe to be
reliable, but we take no responsibility for the accuracy of this information.
NO PROTECTION IN THE EVENT OF A CHANGE OF CONTROL
Unless we state otherwise in the applicable prospectus supplement, the debt
securities will not contain any provisions which may afford holders of the debt
securities protection in the event we have a change in control or in the event
of a highly leveraged transaction (whether or not such transaction results in a
change in control).
COVENANTS
Unless we state otherwise in the applicable prospectus supplement and in a
supplement to the indenture, the debt securities will not contain any
restrictive covenants, including covenants restricting us or any of our
subsidiaries from incurring, issuing, assuming or guarantying any indebtedness
secured by a lien on any of our or our subsidiaries' property or capital stock,
or restricting us or any of our subsidiaries from entering into any sale and
leaseback transactions.
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may not, in a single transaction or a series of related transactions,
consolidate with or merge with or into any other person or sell, assign, convey,
transfer or lease or otherwise dispose of all or substantially all of our
properties and assets to any person or group of affiliated persons if such
transaction or transactions, in the aggregate, would result in a sale,
assignment, conveyance, transfer, lease or disposal of all or substantially all
of our properties and assets on a consolidated basis to any other person or
group of affiliated persons, unless at the time and after giving effect thereto:
- either:
- we are the surviving or continuing corporation; or
- the person (if other than us) formed by such consolidation or into which
we are merged or the person which acquires by sale, assignment,
conveyance, transfer, lease or disposition our properties and assets
substantially as an entirety is a corporation duly organized and validly
existing under the laws of the United States, any state thereof or the
District of Columbia and, in any case, expressly assumes, by a
supplemental indenture, executed and delivered to the trustee, in form
satisfactory to the trustee, all of our obligations under the debt
securities and the indenture, and the indenture remains in full force
and effect;
- immediately before and immediately after giving effect to the transaction
on a pro forma basis (and treating any debt not previously an obligation
of ours which becomes an obligation of ours in connection with or as a
result of the transaction as having been incurred at the time of the
transaction), no Default or Event of Default (as defined below) has
occurred and is continuing; and
- we deliver, or caused to be delivered, to the trustee, in form and
substance satisfactory to the trustee, an officers' certificate and an
opinion of counsel, each to the effect that the consolidation, merger,
sale, assignment, conveyance, transfer, lease or other transaction and
the supplemental indenture in respect thereto, if required, comply with
the provisions set forth in the preceding bullet points and that all
conditions precedent provided for in the indenture relating to the
transaction have been complied with.
EVENTS OF DEFAULT
"Event of Default" means with respect to any series of debt securities, any
of the following:
- default in the payment of any interest upon any debt security of that
series when it becomes due and payable, and continuance of that default
for a period of 30 days;
8
- default in the payment of principal of or premium on any debt security of
that series when due and payable;
- default in the deposit of any sinking fund payment, when and as due in
respect of any debt security of that series;
- default in the performance, or breach, of any other covenant or agreement
by us in the indenture (other than a default in the performance, or
breach, of a covenant or agreement that is specifically dealt with in the
immediately preceding bullet points or that has been included in the
indenture solely for the benefit of a series of debt securities other
than that series), which default continues uncured for a period of 60
days after we receive written notice from the trustee or we and the
trustee receive written notice from the holders of at least 25% in
aggregate principal amount of the then outstanding debt securities of
that series as provided in the indenture;
- a default in the payment of the principal of any debt of ours (including
a default with respect to debt securities of any series other than that
series) or any of our subsidiaries shall have occurred under any
agreements, indentures or instruments under which we or any of our
subsidiaries then has outstanding debt in excess of $50 million when the
same shall become due and payable in full and such default shall have
continued after any applicable grace period and shall not have been cured
or waived, or an event of default as defined in any of these agreements,
indentures or instruments shall have occurred and the debt thereunder, if
not already matured at its final maturity in accordance with its terms,
shall have been accelerated;
- certain events of bankruptcy, insolvency or reorganization; and
- any other Event of Default provided with respect to debt securities of
that series that is described in the applicable prospectus supplement
accompanying this prospectus.
No Event of Default with respect to a particular series of debt securities
(except as to certain events of bankruptcy, insolvency or reorganization)
necessarily constitutes an Event of Default with respect to any other series of
debt securities. An Event of Default may also be an event of default under our
bank credit agreements in existence from time to time and under certain
guaranties by us of any subsidiary indebtedness. In addition, certain Events of
Default or an acceleration under the indenture may also be an event of default
under some of our other indebtedness outstanding from time to time.
If an Event of Default with respect to debt securities of any series at the
time outstanding occurs and is continuing, then the trustee or the holders of
not less than 25% in aggregate principal amount of the then outstanding debt
securities of that series may, by written notice to us (and to the trustee if
given by the holders), declare to be due and payable immediately the principal
(or, if the debt securities of that series are discount securities, that portion
of the principal amount as may be specified in the terms of that series) and
premium of all debt securities of that series. In the case of an Event of
Default resulting from certain events of bankruptcy, insolvency or
reorganization, the principal (or such specified amount) and premium of all
outstanding debt securities will become and be immediately due and payable
without any declaration or other act by the trustee or any holder of outstanding
debt securities. At any time after a declaration of acceleration with respect to
debt securities of any series has been made, but before the trustee has obtained
a judgment or decree for payment of the money due, the holders of a majority in
aggregate principal amount of the then outstanding debt securities of that
series may, subject to our having paid or deposited with the trustee a sum
sufficient to pay overdue interest and principal which has become due other than
by acceleration and certain other conditions, rescind and annul such
acceleration if all Events of Default, other than the non-payment of accelerated
principal and premium with respect to debt securities of that series, have been
cured or waived as provided in the indenture. For information as to waiver of
defaults see the discussion under "-- Modification and Waiver" below. We refer
you to the prospectus supplement relating to any series of debt securities that
are discount securities for the particular provisions relating to acceleration
of a portion of the principal amount of the discount securities upon the
occurrence of an Event of Default and the continuation of an Event of Default.
9
The indenture provides that the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holder of outstanding debt securities, unless the trustee receives indemnity
satisfactory to it against any loss, liability or expense. Subject to certain
rights of the trustee, the holders of a majority in aggregate principal amount
of the then outstanding debt securities of any series shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or exercising any trust or power conferred on the
trustee with respect to the debt securities of that series.
No holder of any debt security of any series will have any right to
institute any proceeding, judicial or otherwise, with respect to the indenture
or for the appointment of a receiver or trustee, or for any remedy under the
indenture, unless:
- that holder has previously given to the trustee written notice of a
continuing Event of Default with respect to debt securities of that
series; and
- the holders of at least 25% in aggregate principal amount of the then
outstanding debt securities of that series have made written request, and
offered reasonable indemnity, to the trustee to institute such proceeding
as trustee, and the trustee shall not have received from the holders of a
majority in aggregate principal amount of the then outstanding debt
securities of that series a direction inconsistent with that request and
has failed to institute the proceeding within 60 days.
Notwithstanding the foregoing, the holder of any debt security will have an
absolute and unconditional right to receive payment of the principal of, premium
and any interest on that debt security on or after the due dates expressed in
that debt security and to institute suit for the enforcement of payment.
The indenture requires us, within 90 days after the end of our fiscal year,
to furnish to the trustee a statement as to compliance with the indenture. The
indenture provides that the trustee may withhold notice to the holders of debt
securities of any series of any Default or Event of Default (except in payment
on any debt securities of that series) with respect to debt securities of that
series if it in good faith determines that withholding notice is in the interest
of the holders of those debt securities.
MODIFICATION AND WAIVER
We and the trustee may modify and amend the indenture with the consent of
the holders of at least a majority in aggregate principal amount of the then
outstanding debt securities of each series affected by the modifications or
amendments. We and the trustee may not make any modification or amendment
without the consent of the holder of each affected debt security then
outstanding if that amendment will:
- change the amount of debt securities whose holders must consent to an
amendment or waiver;
- reduce the rate of or extend the time for payment of interest (including
default interest) on any debt security;
- reduce the principal of or premium on or change the fixed maturity of any
debt security or reduce the amount of, or postpone the date fixed for,
the payment of any sinking fund or analogous obligation with respect to
any series of debt securities;
- reduce the principal amount of discount securities payable upon
acceleration of maturity;
- waive a default in the payment of the principal of, premium or interest
on any debt security (except a rescission of acceleration of the debt
securities of any series by the holders of at least a majority in
aggregate principal amount of the then outstanding debt securities of
that series and a waiver of the payment default that resulted from that
acceleration);
- make the principal of or premium or interest on any debt security payable
in currency other than that stated in the debt security;
- make any change to certain provisions of the indenture relating to, among
other things, the right of holders of debt securities to receive payment
of the principal of, premium and interest on those
10
debt securities and to institute suit for the enforcement of any payment
and to waivers or amendments; or
- waive a redemption payment with respect to any debt security or change
any of the provisions with respect to the redemption of any debt
securities.
Except for certain specified provisions, the holders of at least a majority
in aggregate principal amount of the then outstanding debt securities of any
series may on behalf of the holders of all debt securities of that series waive
our compliance with provisions of the indenture. The holders of a majority in
aggregate principal amount of the then outstanding debt securities of any series
may on behalf of the holders of all the debt securities of that series waive any
past default under the indenture with respect to that series and its
consequences, except a default in the payment of the principal of, premium or
any interest on any debt security of that series; provided, however, that the
holders of a majority in aggregate principal amount of the then outstanding debt
securities of any series may rescind an acceleration and its consequences,
including any related payment default that resulted from the acceleration.
DEFEASANCE OF DEBT SECURITIES AND CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
Legal Defeasance. The indenture provides that, unless otherwise provided
by the terms of the applicable series of debt securities, we may be discharged
from any and all obligations in respect of the debt securities of any series
(except for certain obligations to register the transfer or exchange of debt
securities of the series, to replace stolen, lost or mutilated debt securities
of the series, and to maintain paying agencies and certain provisions relating
to the treatment of funds held by paying agents). We will be so discharged upon
the deposit with the trustee, in trust, of money and/or U.S. Government
Obligations or, in the case of debt securities denominated in a single currency
other than U.S. dollars, Foreign Government Obligations (as defined below),
that, through the payment of interest and principal in accordance with their
terms, will provide money in an amount sufficient in the opinion of a nationally
recognized firm of independent public accountants to pay and discharge each
installment of principal, premium and interest on and any mandatory sinking fund
payments in respect of the debt securities of that series on the stated maturity
of such payments in accordance with the terms of the indenture and those debt
securities.
This discharge may occur only if, among other things, we have delivered to
the trustee an officers' certificate and an opinion of counsel stating that we
have received from, or there has been published by, the United States Internal
Revenue Service a ruling or, since the date of execution of the indenture, there
has been a change in the applicable United States federal income tax law, in
either case to the effect that holders of the debt securities of such series
will not recognize income, gain or loss for United States federal income tax
purposes as a result of the deposit, defeasance and discharge and will be
subject to United States federal income tax on the same amount and in the same
manner and at the same times as would have been the case if the deposit,
defeasance and discharge had not occurred.
Defeasance of Certain Covenants. The indenture provides that, unless
otherwise provided by the terms of the applicable series of debt securities,
upon compliance with certain conditions:
- we may omit to comply with the restrictive covenants contained in
Sections 4.2 through 4.6 and Section 5.1 of the indenture, as well as any
additional covenants contained in a supplement to the indenture, a board
resolution or an officers' certificate delivered pursuant to the
indenture; and
- Events of Default under Section 6.1(e) of the indenture will not
constitute a Default or an Event of Default with respect to the debt
securities of that series.
The conditions include:
- depositing with the trustee money and/or U.S. Government Obligations or,
in the case of debt securities denominated in a single currency other
than U.S. dollars, Foreign Government Obligations, that, through the
payment of interest and principal in accordance with their terms, will
provide money in an amount sufficient in the opinion of a nationally
recognized firm of independent
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public accountants to pay principal, premium and interest on and any
mandatory sinking fund payments in respect of the debt securities of that
series on the stated maturity of those payments in accordance with the
terms of the indenture and those debt securities; and
- delivering to the trustee an opinion of counsel to the effect that the
holders of the debt securities of that series will not recognize income,
gain or loss for United States federal income tax purposes as a result of
the deposit and related covenant defeasance and will be subject to United
States federal income tax in the same amount and in the same manner and
at the same times as would have been the case if the deposit and related
covenant defeasance had not occurred.
Covenant Defeasance and Events of Default. In the event we exercise our
option not to comply with certain covenants of the indenture with respect to any
series of debt securities and the debt securities of that series are declared
due and payable because of the occurrence of any Event of Default, the amount of
money and/or U.S. Government Obligations or Foreign Government Obligations on
deposit with the trustee will be sufficient to pay amounts due on the debt
securities of that series at the time of their stated maturity but may not be
sufficient to pay amounts due on the debt securities of that series at the time
of the acceleration resulting from the Event of Default. However, we will remain
liable for those payments.
"Foreign Government Obligations" means, with respect to debt securities of
any series that are denominated in a currency other than U.S. dollars:
- direct obligations of the government that issued or caused to be issued
such currency for the payment of which obligations its full faith and
credit is pledged, which are not callable or redeemable at the option of
the issuer thereof; or
- obligations of a person controlled or supervised by or acting as an
agency or instrumentality of that government the timely payment of which
is unconditionally guaranteed as a full faith and credit obligation by
that government, which are not callable or redeemable at the option of
the issuer thereof.
GOVERNING LAW
The indenture and the debt securities will be governed by, and construed in
accordance with, the internal laws of the State of New York.
PLAN OF DISTRIBUTION
We may sell securities to or through underwriters and also may sell
securities directly to purchasers or through agents. We will name any
underwriter or agent involved in the offer and sale of securities in the
applicable prospectus supplement.
We may distribute the securities from time to time in one or more
transactions:
- at a fixed price or prices, which may be changed;
- at market prices prevailing at the time of sale;
- at prices related to such prevailing market prices; or
- at negotiated prices.
We may also, from time to time, authorize dealers, acting as our agents, to
offer and sell securities upon the terms and conditions set forth in the
applicable prospectus supplement. In connection with the sale of securities, we,
or the purchasers of securities for whom the underwriters may act as agents, may
compensate underwriters in the form of discounts, concessions or commissions.
Underwriters may sell the securities to or through dealers, and those dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agent. Underwriters, dealers and agents participating in the distribution
of securities may be deemed to be underwriters under the Securities Act, and any
discounts or commissions they receive from
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us and any profit they realize on resale of the securities may be deemed to be
underwriting discounts and commissions under the Securities Act. We will
describe in the applicable prospectus supplement any compensation we pay to
underwriters or agents in connection with the offering of securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers.
We may enter into agreements to indemnify underwriters, dealers and agents
who participate in the distribution of securities against certain liabilities,
including liabilities under the Securities Act.
To facilitate the offering of securities, certain persons participating in
the offering may engage in transactions that stabilize, maintain or otherwise
affect the price of the securities. This may include over-allotments or short
sales of the securities, which involve the sale by persons participating in the
offering of more securities than we sold to them. In these circumstances, these
persons would cover such over-allotments or short positions by making purchases
in the open market or by exercising their over-allotment option, if any. In
addition, these persons may stabilize or maintain the price of the securities by
bidding for or purchasing securities in the open market or by imposing penalty
bids, whereby selling concessions allowed to dealers participating in the
offering may be reclaimed if securities sold by them are repurchased in
connection with stabilization transactions. The effect of these transactions may
be to stabilize or maintain the market price of the securities at a level above
that which might otherwise prevail in the open market. These transactions may be
discontinued at any time.
Certain of the underwriters, dealers or agents and their associates may
engage in transactions with and perform services for us in the ordinary course
of our business.
LEGAL MATTERS
Latham & Watkins of San Francisco, California, and McAfee & Taft of
Oklahoma City, Oklahoma, each will issue an opinion about certain legal matters
with respect to the securities for us. Any underwriters will be advised about
the other issues relating to any offering by their own legal counsel.
EXPERTS
Our consolidated financial statements incorporated in this prospectus by
reference to our Annual Report on Form 10-K for the fiscal year ended December
29, 2001 and Core-Mark's consolidated financial statements as of December 31,
2001 and 2000, and for each of the three years in the period ended December 31,
2001 incorporated in this prospectus by reference to our Current Report on Form
8-K filed with the Securities and Exchange Commission on May 20, 2002 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports, which are also incorporated in this prospectus by reference, and have
been so incorporated in reliance upon such report given upon the authority of
said firm as experts in auditing and accounting.
13
8,000,000 SHARES
[FLEMING LOGO]
COMMON STOCK
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PROSPECTUS SUPPLEMENT
JUNE 13, 2002
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Joint Book-Running Managers
LEHMAN BROTHERS
DEUTSCHE BANK SECURITIES
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WACHOVIA SECURITIES
MORGAN STANLEY
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