-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, D9UwrDIR7+yuS6N9CJ/ILntuTD6ctOSr5jqOLcg4HSWMSv5tNSDHr00QdBTJ+3Xd Nl4THtz/bgtR06O7IUrhJw== 0000909334-94-000007.txt : 19940608 0000909334-94-000007.hdr.sgml : 19940608 ACCESSION NUMBER: 0000909334-94-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940416 FILED AS OF DATE: 19940531 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLEMING COMPANIES INC /OK/ CENTRAL INDEX KEY: 0000352949 STANDARD INDUSTRIAL CLASSIFICATION: 5140 IRS NUMBER: 480222760 STATE OF INCORPORATION: OK FISCAL YEAR END: 1227 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08140 FILM NUMBER: 94532410 BUSINESS ADDRESS: STREET 1: 6301 WATERFORD BLVD STREET 2: P O BOX 26647 CITY: OKLAHOMA CITY STATE: OK ZIP: 73126 BUSINESS PHONE: 4058407200 10-Q 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 16, 1994 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission file number 1-8140 FLEMING COMPANIES, INC. (Exact name of registrant as specified in its charter) OKLAHOMA 48-0222760 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6301 Waterford Boulevard, Box 26647 Oklahoma City, Oklahoma 73126 (Address of principal executive offices) (Zip Code) (405) 840-7200 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ The number of shares outstanding of each of the issuer's classes of common stock, as of May 13, 1994 is as follows: Class Shares Outstanding Common stock, $2.50 par value 37,230,000 FLEMING COMPANIES, INC. INDEX Page No. Part I. FINANCIAL INFORMATION: Item 1. Financial Statements Consolidated Condensed Statements of Earnings - 16 Weeks Ended April 16, 1994, and April 17, 1993 3 Consolidated Condensed Balance Sheets - April 16, 1994, and December 25, 1993 4 Consolidated Condensed Statements of Cash Flows - 16 Weeks Ended April 16, 1994, and April 17, 1993 5 Notes to Consolidated Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II. OTHER INFORMATION: Item 4. Results of Votes of Security Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12 Consolidated Condensed Statements of Earnings For the 16 weeks ended April 16, 1994, and April 17, 1993 (In thousands, except per share amounts)
_________________________________________________________________ First Interim Period 1994 1993 _________________________________________________________________ Net sales $4,031,980 $4,044,894 Costs and expenses: Cost of sales 3,777,967 3,803,545 Selling and administrative 201,535 170,893 Interest expense 21,828 23,481 Interest income (16,252) (18,548) Equity investment results 3,257 2,067 __________ __________ Total costs and expenses 3,988,335 3,981,438 __________ __________ Earnings before taxes 43,645 63,456 Taxes on income 19,248 26,081 __________ __________ Net earnings $ 24,397 $ 37,375 ========== ========== Net earnings per share $.66 $1.02 Dividends paid per share $.30 $.30 Weighted average shares outstanding 37,093 36,722 _________________________________________________________________
Sales to customers accounted for under the equity method were approximately $435 million and $464 million in 1994 and 1993, respectively. Fleming Companies, Inc. See notes to consolidated condensed financial statements. Consolidated Condensed Balance Sheets (In thousands)
_________________________________________________________________ April 16, December 25, Assets 1994 1993 _________________________________________________________________ Current assets: Cash and cash equivalents $ 1,580 $ 1,634 Receivables 281,982 301,514 Inventories 854,505 923,280 Other current assets 98,609 134,229 __________ __________ Total current assets 1,236,676 1,360,657 Investments and notes receivable 332,716 309,237 Investment in direct financing leases 242,254 235,263 Property and equipment 1,047,638 1,061,905 Less accumulated depreciation and amortization 417,398 426,846 __________ __________ Property and equipment, net 630,240 635,059 Other assets 93,222 90,633 Goodwill 466,939 471,783 __________ __________ Total assets $3,002,047 $3,102,632 ========== ========== Liabilities and Shareholders' Equity _________________________________________________________________ Current liabilities: Accounts payable $ 645,805 $ 682,988 Current maturities of long-term debt 37,808 61,329 Current obligations under capital leases 13,906 13,172 Other current liabilities 165,006 161,043 __________ __________ Total current liabilities 862,525 918,532 Long-term debt 599,194 666,819 Long-term obligations under capital leases 351,584 337,009 Deferred income taxes 21,500 27,500 Other liabilities 91,203 92,366 Shareholders' equity: Common stock, $2.50 par value per share 92,548 92,350 Capital in excess of par value 490,720 489,044 Reinvested earnings 505,564 492,250 Cumulative currency translation adjustment (288) (288) __________ __________ 1,088,544 1,073,356 Less guarantee of ESOP debt 12,503 12,950 __________ __________ Total shareholders' equity 1,076,041 1,060,406 __________ __________ Total liabilities and shareholders' equity $3,002,047 $3,102,632 ========== ==========
Receivables include $44.8 million and $48.3 million in 1994 and 1993, respectively, due from customers accounted for under the equity method. Fleming Companies, Inc. See notes to consolidated condensed financial statements. Consolidated Condensed Statements of Cash Flows For the 16 weeks ended April 16, 1994, and April 17, 1993 (In thousands)
_________________________________________________________________ 1994 1993 _________________________________________________________________ Net cash provided by operating activities $ 142,479 $ 65,257 Cash flows from investing activities: Collections on notes receivable 20,849 27,369 Notes receivable funded (40,601) (47,157) Purchase of property and equipment (17,071) (12,030) Proceeds from sale of property and equipment 376 543 Investments in customers (2,534) (20,541) Proceeds from sale of investments 1,576 4,468 Other investing activities (2,036) (304) _________ ________ Net cash used in investing activities (39,441) (47,652) _________ ________ Cash flows from financing activities: Proceeds from long-term borrowings 155,000 168,916 Principal payments on long-term debt (245,699) (174,620) Principal payments on capital lease obligations (4,002) (3,333) Sale of common stock under incentive stock and stock ownership plans 1,874 2,422 Dividends paid (11,084) (11,008) Other financing activities 820 459 _________ ________ Net cash used in financing activities (103,091) (17,164) _________ ________ Net increase (decrease) in cash and cash equivalents (54) 441 Cash and cash equivalents, beginning of period 1,634 4,712 _________ ________ Cash and cash equivalents, end of period $ 1,580 $ 5,153 ========= ======== Supplemental information: Cash paid for interest $ 18,342 $ 20,518 Cash paid for income taxes $ 8,070 $ 24,793 ========= ========
Fleming Companies, Inc. See notes to consolidated condensed financial statements. Notes to Consolidated Condensed Financial Statements 1. The consolidated condensed balance sheet as of April 16, 1994, and the consolidated condensed statements of earnings and cash flows for the 16-week periods ended April 16, 1994, and April 17, 1993, have been prepared by the company, without audit. In the opinion of management, all adjustments necessary to present fairly the company's financial position at April 16, 1994, and the results of operations and cash flows for the periods presented have been made. All such adjustments are of a normal, recurring nature. Primary earnings per share are calculated using the weighted average shares outstanding. The impact of outstanding stock options on primary earnings per share is not material. 2. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and related notes included in the company's 1993 annual report on Form 10-K. 3. The LIFO method of inventory valuation is used for determining the cost of most grocery and certain perishable inventories. The excess of current cost of LIFO inventories over their stated value was $11.3 million at April 16, 1994, and $12.5 million at December 25, 1993. 4. In December 1993, the company and numerous other defendants were named in two suits filed in U.S. District Court in Miami. The plaintiffs allege liability as a consequence of an alleged fraudulent scheme conducted by Premium Sales Corporation and others in which unspecified but large losses in the Premium-related entities occurred to the detriment of a purported class of investors which has brought one of the suits. The other suit is by the receiver/trustee of the estates of Premium and certain of its affiliated entities. Both actions are in their early procedural stages and the ultimate outcome cannot presently be determined. Accordingly, no provision for liability, if any, has been made in the accompanying financial statements. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The company's principal sources of liquidity are cash flows from operating activities, bank lines of credit and commercial paper borrowings. The company also has available for issuance from time to time up to $290 million of registered debt securities. Commercial paper borrowings are supported by two revolving credit agreements totaling $600 million. Cash flows from operating activities in the first quarter of 1994 were $143 million, a significant increase from the $65 million in the comparable period in 1993. The primary reason for the increased cash flows are decreases in inventories combined with lower reductions in accounts payable. This decline in inventories is due to lower product levels required after the December 1993 holidays. Management believes that cash flows from operating activities and the company's access to capital markets, including its ability to borrow under bank lines, will be adequate to meet capital needs. Working capital was $374 million at the end of the quarter, a $68 million decrease from year end. This is primarily due to declines in inventory and accounts receivable, offset by a decline in accounts payable. The current ratio decreased slightly to 1.43 to 1. The debt-to-capital ratio decreased by 2.2% to 48.2%. Total debt and capital leases fell by $76 million to $1 billion in the quarter. Capital expenditures were $16 million during the quarter. Management expects total 1994 capital expenditures, excluding acquisitions, to approximate $90 to $100 million. The company's long-term debt agreements contain various covenants and restrictions including restrictions on additional indebtedness, payment of cash dividends and acquisition of the company's common stock. None of these covenants negatively impacts the company's liquidity or capital resources at this time. Under the most restrictive covenants, reinvested earnings of approximately $113 million were available at quarter end for cash dividends and acquisition of the company's stock. Results of Operations Sales for the first quarter (16 weeks) of 1994 were $4.03 billion, essentially even with the same period in 1993. Increases in sales resulted from the Garland, Texas facility acquired in the 3rd quarter of 1993, additional business from Kmart and from Florida retail operations acquired late in 1993. These increases were offset by declining business with Wal-Mart and the anticipated loss of Albertson's business early in 1994 as the related supply contract expired. Tonnage of product shipped decreased by 2.5% compared to the same period in 1993. Inflation had an insignificant positive impact on sales. The company expects sales for the balance of 1994 to continue the pattern established during the first quarter with new business offsetting lost business. In the third and fourth quarters of 1994, sales comparisons to 1993 will not be affected by the additions of the Garland facility and Florida retail operations, respectively. Gross margin improved by $12.7 million, or 31 basis points, over the same period in 1993, increasing to 6.30% of net sales. Retail operations, principally the Florida retail operations, resulted in 38 basis points of the increase. Retail operations typically have a higher gross margin than wholesale operations. This positive comparison should continue through the third quarter, as the supermarkets were purchased in the fourth quarter of 1993. Also benefiting gross margin comparisons was a 12 basis point improvement in transportation fees charged to customers. Product handling expenses, consisting of warehouse, truck and building expenses, were the same as the 1993 period. The credit to income resulting from the LIFO method of inventory valuation was 13 basis points lower, due to the company's expectation of a low level of food price inflation for all of 1994. In the first quarter of 1993, the company experienced food price deflation of 0.3%. The remaining six basis points of decline were due to various factors. Selling and administrative expenses increased by $30.6 million, or 76 basis points. This is principally due to a 44 basis point increase in retail expenses related to retail operations. Florida retail operations were the main contributor to the increase since they were not in last year's results. This comparison should continue through the third quarter of 1994. As more fully described in its 1993 Annual Report on Form 10-K, the company has a significant amount of credit extended to its customers through various methods. These methods include customary and extended credit terms for inventory purchases, secured loans with terms generally up to ten years, and equity investments in and secured and unsecured loans to certain customers. In addition, the company guarantees debt and lease obligations of certain customers. Usually, these capital investments are made in and guarantees extended to customers with whom the company enjoys long-term supply agreements. Credit loss expense included in selling and administrative expenses was $15 million, or 37 basis points in 1994. This represents a $5 million, or 12 basis point, increase over 1993. The increase related primarily to adverse developments in certain customers in the company's equity store program. Management monitors the status of credit and investment exposure and believes it has provided adequate allowances for potential losses. However, due to the nature of its customers and the highly competitive retail grocery environment, there is no assurance that events resulting in future losses will not occur. Management expects that credit losses for all of 1994 will be only slightly lower than those experienced in 1993. Interest expense decreased $1.7 million, or 7 percent, compared to the same 16-week period in 1993. The company's weighted average borrowing rate declined from the prior year period, principally as a result of the fourth quarter 1993 early redemption of $67 million of 9.5% debentures. If interest rates continue to increase, management expects that interest expense for the year 1994 will be somewhat higher than 1993. Interest income declined by $2.3 million, or 12.4 percent, compared to 1993. The decline is due principally to a decrease in the average balance of loans outstanding to retailers. Notes sold late in 1993 to third parties have resulted in lower note receivable balances. Another source of interest income is direct financing leases. Direct financing lease income increased, partially offsetting the decline in interest income. Management may sell to third parties a portion of the direct financing lease receivables in transactions similar to the note sales. Equity investment results generated losses of $3.3 million, an increase of $1.2 million compared to 1993. Business development ventures experienced improved financial performance, but losses from retail stores accounted for under the equity method that are part of the company's equity store program more than offset this improvement. The company's effective tax rate increased to 44.1%, primarily as a result of a higher federal tax rate due to the tax law enacted in 1993. Earnings were $24.4 million, down 34.7% from 1993's first quarter. Net earnings per share in 1994 were $.66 versus $1.02 for last year's results. Management does not expect that 1994 core earnings from operations will improve from 1993 levels. Continuing low levels of inflation and lower LIFO credits than those experienced in 1993 are anticipated. As more fully described in its 1993 Annual Report on Form 10-K, the company has a plan to consolidate facilities and restructure its organizational alignment and operations. Actions taken since year end were consistent with the plan, both in timing and specific events. Four of the five distribution center closings have been completed or are in process. Cash payments related to the facilities consolidations are not yet significant. The earnings benefits related to consolidating the facilities will be realized as closed operations are fully assimilated into the facilities receiving the relocated business. Various aspects of the re-engineering plan are in the process of being implemented, but have not yet resulted in any significant cash expenditures or benefits. The status of the retail supermarket locations leased or owned by the company that are no longer viable strategic sites for stores is the same as originally contemplated by management. Activity consists of cash lease payments to lessors and attempts to dispose of the locations. During the first quarter, management closed the regional staff offices and terminated or relocated approximately 110 affected associates. Cash severance payments to terminated associates and relocation payments to associates transferred within the company are consistent with management's expectations. Recent Events On May 19, 1994 the United States Bankruptcy Court for the District of New Mexico approved the company's claim in the amount of $8 million filed in the matter of Rubus Realty Company, a former customer. Following the conclusion of the bankruptcy proceedings, the company expects to recover 50% to 70% of such amount over an 18-month period. The claim represents, among other things, the future economic benefit which would have been realized upon fulfillment of a long-term supply contract. Recovery under the claim will represent earnings to the company. As previously announced, the company has agreed to sell substantially all of the assets of its Royal Foods dairy and deli distribution business located in New Jersey. The transaction is expected to be finalized during the second quarter of 1994; however, the company no longer expects the sale to generate any significant gain or loss. On May 31, 1994, the company reached an agreement in principle to acquire all of the outstanding capital stock of Haniel Corporation. Haniel is the holding company for and owns all of the outstanding capital stock of Scrivner, Inc., the third- largest food wholesaler in the United States. The parties are currently negotiating a definitive agreement, the consummation of which will be conditioned upon, among other things, the expiration of applicable regulatory waiting periods. The total cost to the company, including transaction costs and refinancing existing debt of Scrivner and Haniel, will approximate $1.1 billion. The company expects to finance the acquisition initially with borrowings under a bank credit facility currently under negotiation. The company believes it will continue to have adequate liquidity and access to capital following consummation of the transaction. Other In December 1993, the company and numerous other defendants were named in two lawsuits filed in U.S. District Court in Miami. The litigation is in its preliminary stages. Management has been unable to conclude that an adverse resolution is not reasonably likely or predict the potential liability, if any, to the company. However, management does not believe that an adverse outcome is likely that would materially affect the company's consolidated financial position. PART II. OTHER INFORMATION Item 4. Results of Votes of Security Holders - - --------------------------------------------- The company held its annual meeting on April 27, 1994. Directors reelected were R. Randolph Devening, Carol B. Hallett, Lawrence M. Jones, and Robert E. Stauth. Directors whose terms of office continued were Archie R. Dykes, James G. Harlow, Edward C. Joullian III, Howard H. Leach, John A. McMillan, Guy A. Osborn and Dean Werries. Shareholders ratified Deloitte & Touche as independent auditors for 1994. The number of votes cast for the above matters is as follows (votes in thousands):
Withheld Election of Directors For Against Authority Abstain - - --------------------- ------ ------- --------- ------- R. Randolph Devening 32,850 --- 423 --- Carol B. Hallett 32,684 --- 589 --- Lawrence M. Jones 32,842 --- 431 --- Robert E. Stauth 32,846 --- 427 --- Deloitte & Touche as independent auditors 33,121 53 --- 99
No other business came before the meeting. Item 5. Other Information - - -------------------------- On May 18, 1994, Harry L. Winn, Jr. joined the company as executive vice president and chief financial officer. R. Randolph Devening will continue in the position of Vice Chairman. Item 6. Exhibits and Reports on Form 8-K - - ----------------------------------------- (a) Exhibits: Exhibit Number Page Number - - -------------- ----------- 12 Computation of Ratio of Earnings to Fixed Charges 14 (b) Reports on Form 8-K: - - ----------------------- None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FLEMING COMPANIES, INC. (Registrant) Date May 31, 1994 /s/ Donald N. Eyler Donald N. Eyler Senior Vice President - Controller (Chief Accounting Officer) EXHIBIT INDEX
Paper (P) or Exhibit Electronic (E) - - ------- -------------- 12. Computation of Ratio of Earnings to Fixed Charges E
EX-12 2 EXHIBIT Exhibit 12 FLEMING COMPANIES, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Fiscal Year Ended the Last Saturday in December - - ---------------------------------------------- 1989 1990 1991 1992 1993 ---- ---- ---- ---- ---- (In thousands of dollars) Earnings: Pretax income $139,480 $164,501 $104,329 $194,941 $72,078 Fixed charges, net 120,769 117,877 117,865 105,726 102,303 ------- ------- ------- ------- ------- Total earnings $260,249 $282,378 $222,194 $300,667 $174,381 ======= ======= ======= ======= ======= Fixed charges: Interest expense $96,425 $93,643 $93,353 $81,102 $78,029 Portion of rental charges deemed to be interest 22,945 22,836 22,907 23,027 22,969 Capitalized inter- est and debt issuance cost amortization 2,163 1,250 1,464 1,287 1,005 ------- ------- ------- ------- ------- Total fixed charges $121,533 $117,729 $117,724 $105,416 $102,003 ======= ======= ======= ======= ======= Ratio of earnings to fixed charges 2.14 2.40 1.89 2.85 1.71 ==== ==== ==== ==== ==== 16 Weeks Ended ----------------------- April 16, April 17, 1994 1993 ---- ---- (In thousands of dollars) Earnings: Pretax income $43,645 $63,456 Fixed charges, net 28,836 31,015 ------ ------ Total earnings $72,481 $94,471 ====== ====== Fixed charges: Interest expense $21,828 $23,481 Portion of rental charges deemed to be interest 6,582 7,191 Capitalized interest and debt issuance cost amortization 326 243 ------ ------ Total fixed charges $28,736 $30,915 ====== ====== Ratio of earnings to fixed charges 2.52 3.06 ==== ====
"Earnings" consists of income before income taxes and fixed charges excluding capitalized interest. Capitalized interest amortized during the respective periods is added back to earnings. "Fixed charges, net" consists of interest expense, an estimated amount of rental expense which is deemed to be representative of the interest factor and amortization of capitalized interest and debt issuance cost. The pro forma ratio of earnings to fixed charges is omitted as it is not applicable. -----END PRIVACY-ENHANCED MESSAGE-----