-----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, MOlG5wUbwiitEbqT8wwt2jZEVShZ2iY5a6eHM5FP24xT6+Sb3gLGBQLzsfgE+G/C 2Ke6fvB+lNCyH0wq9ttw7A== 0000912057-94-001046.txt : 19940328 0000912057-94-001046.hdr.sgml : 19940328 ACCESSION NUMBER: 0000912057-94-001046 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19931225 FILED AS OF DATE: 19940325 SROS: CSE SROS: MSE SROS: NYSE SROS: PSE 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-K SEC ACT: 34 SEC FILE NUMBER: 001-08140 FILM NUMBER: 94517922 BUSINESS ADDRESS: STREET 1: 6301 WATERFORD BLVD STREET 2: P O BOX 26647 CITY: OKLAHOMA CITY STATE: OK ZIP: 73126 BUSINESS PHONE: 4058407200 10-K 1 DOC 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - ---- ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 25, 1993 or ____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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) Registrant's telephone number, including area code (405)840-7200 ---------------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ------------------- ------------------------- Common Stock, $2.50 Par Value and New York Stock Exchange Common Stock Purchase Rights Pacific Stock Exchange Chicago Stock Exchange 9.5% Debentures New York Stock Exchange - ---------------------------------------------------------------------------- Securities registered pursuant to Section 12(g) of the Act: None ---------------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. X -------- 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 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 ------- ------- As of February 18, 1994, 37,158,000 common shares were outstanding. The aggregate market value of the common shares (based upon the closing price of these shares on the New York Stock Exchange) of Fleming Companies, Inc. held by nonaffiliates was approximately $.9 billion. DOCUMENTS INCORPORATED BY REFERENCE A portion of Part III has been incorporated by reference from the registrant's proxy statement dated March 14, 1994, in connection with its annual meeting of shareholders to be held on April 27, 1994. PART I ITEM 1. BUSINESS Fleming Companies, Inc. (hereinafter referred to as "Fleming," the "registrant" or the "company") was incorporated in Kansas in 1915 and in 1981 was reincorporated as an Oklahoma corporation. Fleming is engaged primarily in the wholesale distribution of food and related products. The company currently serves as the principal source of supply for 4,700 retail food stores, including 2,900 supermarkets, in 36 states in the U.S. and several foreign countries. These supermarkets have a total area of 80 million square feet. These are predominantly independent stores, many of which operate and advertise under a common name to promote greater consumer recognition. Fleming's retail customers (hereinafter referred to as "customers") also include national and regional corporate chains. The company distributes a wide variety of both national and private brand groceries, meats, dairy and delicatessen products, frozen foods, fresh produce, and a variety of general merchandise and related items. In addition, Fleming offers a full range of support services, including collateralized long-term financing of certain customers, which enables the customers to compete with other types of food stores in their respective market areas. The company also owns and operates 72 supermarkets. See "Company- Operated Retail Stores". The company's wholesale distribution of food and related products is its dominant business as defined by Statement of Financial Accounting Standards No. 14; therefore, segment information is not required. On January 18, 1994, the company announced the details of a plan to consolidate facilities and restructure its organizational alignment and operations. Management's objective is to improve company performance by eliminating functions and operations that do not add economic value. As a result, registrant has closed five regional offices and also will close five distribution centers and relocate two operations. When completed, these actions will reduce employment by about 2,000, or 9% of the company's work force, and lower operating costs by approximately $65 million annually. The plan resulted from a thorough review, which began in October 1993, of all operations and business strategies. The 1993 fourth quarter results reflect a charge of $101.3 million resulting directly from facilities consolidation restructuring. This is in addition to $6.5 million provided for a facilities consolidation in the second quarter. The plan consists of four categories: facilities consolidation, re-engineering, retail-related assets and elimination of regional operations. The actions contemplated by the plan will affect the company's food and general merchandise wholesaling operations as well as certain retailing assets. In early 1994, the company announced that it would close its Fort Worth, Joplin and Tupelo facilities as part of the plan. The pending closing of the Topeka food distribution facility was previously announced. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." DISTRIBUTION FACILITIES. Fleming currently operates 28 food distribution divisions which handle food and related products including groceries, meat, produce, frozen foods, dairy products and certain nonfood items. Five general merchandise divisions distribute general merchandise, health and beauty care items, prescription drug products, and other nonfood items. Two additional divisions distribute dairy, delicatessen and fresh meat products. All are equipped with modern materials handling equipment for receiving, storing and shipping large quantities of merchandise. In total, the company's distribution facilities, including outside storage, comprise approximately 21 million square feet of warehouse space. See "Recent Developments." -2- PRODUCTS. The company purchases its inventory requirements from numerous processors, manufacturers and growers, and believes it generally has adequate and alternate sources of supply for most of the products handled. Fleming purchases product on a volume basis and strives to maintain optimum inventory turnover rates while optimizing service levels. Most grocery purchases are subject to a cash discount if paid within specified days of receipt of merchandise. Fleming operates a central procurement program for fresh meats and produce and for products sold primarily under private brands, including canned goods, frozen foods, general merchandise and dairy products. Private brands include Bonnie Hubbard-R-, Captain's Cove-R-, Fleming's-R-, Hyde Park-R-, IGA-R-, Marquee-R-, Montco-R-, P.S. - Personally Selected-R-, Piggly Wiggly-R-, Rainbow-R-, Royal-TM-, Sentry-R-, Sunrise-TM- and TV-R-. Private brands are an important source of sales and are slightly more profitable to Fleming than national brands. Billings to customers for merchandise are generally based on an agreed price that includes Fleming's defined cost, to which is added a fee determined by the volume of the customer's purchases. A delivery charge is usually added based on order size and mileage. In some geographic areas, billings are determined by percentage mark-up. Payment may be received upon delivery of the order, or within credit terms that generally are weekly or semiweekly. A cash deposit from the customer may be required. RETAIL STORES SERVED. The retail stores served by Fleming range in size from small convenience outlets to conventional supermarkets to large superstores, combination units and price impact stores. Fleming's principal customers are supermarkets carrying a wide variety of grocery, meat, produce, frozen food and dairy products. Most customers also handle an assortment of nonfood items, including health and beauty care, and general merchandise such as housewares, soft goods and stationery. Many supermarkets also operate one or more specialty departments such as in-store bakeries, delicatessens, seafood and floral departments. Fleming seeks to expand its customer base through a variety of means. See "Services to Customers" and "Capital Invested in Customers". Sales by store format are comprised of: conventional - 46%; superstore - 23%; price impact - 17%; and combination 14%. Sales for 1993 by the company's operating regions are dispersed as follows: Mid-South - 25%; Western - 24%; Mid-America - 20%; Southern - 19%; and Eastern - 12%. Sales by customer type are comprised of: single-store independents - 20%; multiple-store independents - - 33%; voluntary chains - 5%; corporate chains - 35%; and company-operated locations - 7%. The mix of product sales for 1993 was: groceries - 52%; perishables - 42%; and general merchandise - 6%. Voluntary chains are retail stores licensed to do business under a common trade name and generally participate in group advertising and promotional activities. See "Franchise Operations." The company considers a chain as 11 or more stores under common ownership. At 1993 year end, Fleming was serving 810 corporate chain stores, compared to 840 a year ago. Many of the customers served by Fleming have entered into sales service plan agreements with Fleming which are terminable upon notice by either party. Certain customers also have signed mid-term or long-term supply agreements. The agreements set forth the terms under which Fleming provides products and services to the stores. -3- SERVICES TO CUSTOMERS. In addition to supplying retail stores with their inventory requirements, Fleming offers a wide variety of services designed to enhance the customer's ability to compete and to attract new retailers. Such services include merchandising and marketing assistance, advertising, consumer education programs, retail electronic services and employee training. The costs of some of these services are included in the fees charged by Fleming in connection with its sale of food products and related items. Charges are made separately for services such as retail accounting, electronic services, leasing and financing. Another important service that Fleming offers is assistance in the development and expansion of retail stores. Fleming provides, for a fee, site selection and market surveys; store design, layout and decor assistance; and equipment and fixture planning. Fleming also develops sales promotions for customers including travel, continuity and other incentive programs. CAPITAL INVESTED IN CUSTOMERS. As part of its services to retailers, Fleming executes prime leases on store locations for sublease to certain customers. Sublease rentals are generally higher than the base rental to Fleming. At the end of 1993, Fleming was the primary lessee of 770 retail store locations subleased to and operated by customers. In certain circumstances, the company has also guaranteed the lease obligations of certain customers. In addition to extending credit for inventory purchases, Fleming also assists customers by making capital available in the form of loans and equity investments. The composition of Fleming's portfolio of loans to (including current portion) and investments in customers is presented below. Amounts are in millions.
Business Total Loans to Development Equity Retail and Equity in Customers with Ventures Stores Stores Equity Customers No Equity Investments Total ----------- ------ ------ ---------------- --------------------- ----- 1993 - ---- Loans $ 78 $55 $ 2 $135 $178 $313 Equity Investments 28 15 12 55 - 55 ---- --- --- ---- ---- ---- Total $106 $70 $14 $190 $178 $368 ---- --- --- ---- ---- ---- ---- --- --- ---- ---- ---- 1992 - ---- Loans $114 $49 $ - $163 $193 $356 Equity Investments 18 18 10 46 - 46 ---- --- --- ---- ---- ---- Total $132 $67 $10 $209 $193 $402 ---- --- --- ---- ---- ---- ---- --- --- ---- ---- ----
Fleming makes equity investments in certain customers under its equity store program or as business development ventures. Fleming also makes secured loans to these customers. These investments and loans decreased from $209 million to $190 million during 1993. Losses of $12 million were recorded under the equity method associated with such investments in 1993, compared to $16 million recorded in 1992. Equity investments in customers totaled $55 million and $46 million at year end 1993 and 1992, including $12 million and $10 million in 1993 and 1992, respectively, invested in company-owned retail stores held for resale to qualified buyers. Loans to customers in whom the company held an equity interest totaled approximately $135 million at year-end 1993, compared to $163 million at year-end 1992. During 1993, $68 million of notes evidencing loans were sold, compared to $45 million sold in 1992. The loan portfolio is net of reserves of $18 million in 1993 and 1992. -4- Through its equity store program, the company invests capital in customers. The customer is permitted to purchase the company's investment over a five to ten year period. At year-end 1993, equity investments in 51 customers under this program totaled $15 million compared to $18 million at year end 1992. Loans to these customers were $55 million in 1993 and $49 million in 1992. Upon review and approval by its board of directors, the company invests in strategic multi-store customers as business development ventures. These customers, many of whom are highly leveraged, are usually medium-sized retail chains who have entered into long-term supply agreements with the company. At year-end 1993, the company had equity investments of approximately $28 million in 10 business development ventures compared to investments of $18 million in 12 ventures in 1992. At the end of 1993, the company had secured loans totaling approximately $78 million to these entities compared to $114 million in 1992. In addition, the company has guaranteed $35 million of loans to one such venture. The company also makes loans to customers in which it has no equity investment, primarily for store expansions or improvements. These loans are generally secured by inventory and store fixtures, bear interest at rates at or above prime, and are for terms of up to ten years. Such loans totaled approximately $178 million and $193 million at year-end 1993 and 1992, respectively. Fleming does not believe its loans to customers would be investment grade if rated. Furthermore, its equity investments are highly illiquid. However, the company has systems and controls in place to monitor the performance of its equity investments and the more than 800 outstanding loans to customers totaling $313 million and $356 million in 1993 and 1992, respectively. For equity stores and business development ventures, the company has active representation on the customer's board of directors. The company also conducts periodic credit reviews and receives and analyzes the customers' financial statements. Retail counselors visit the customers' locations regularly. On an ongoing basis, senior management reviews the company's largest investments and credit exposures. In making credit and investment decisions, the company considers many factors including anticipated risk, expected return on capital utilized and the benefits to be derived from sustained or increased product sales. Sales to stores served by the company through the equity store program and business development ventures were approximately $1.6 billion in 1993, or approximately 12% of total net sales. Although the company has in the past and may in the future sustain operating losses associated with capital investments in customers, management believes that on balance the economic benefit to the company including the benefit of increased product sales outweighs the increased risk of making such capital investments. COMPANY-OPERATED RETAIL STORES. At year end, the company operated 72 supermarkets located in four states. The average size of these stores is 38,000 square feet. Company-operated stores do business in a variety of formats, from conventional supermarkets to price impact stores. All locations are served by Fleming distribution divisions. The number of company-operated stores increased during 1993 and 1992 due to purchases of retail locations in both years. Management intends to continue to increase ownership of company-operated stores. The growth plan includes evaluating markets currently served as well as identifying appropriate acquisition candidates in specific niche markets. INTERNATIONAL ACTIVITIES. The company has a 49% interest in a joint venture with one of Mexico's largest retailers, Grupo Gigante, to develop and operate price impact supermarkets in Mexico. Four stores were in operation at the end of 1993 and two stores are planned for opening in 1994. The company's pro-rata investment in the venture is $13 million. -5- In the fall of 1993 the company (35%) and an affiliate of a leading Australian food wholesaler (65%) capitalized a Singapore corporation in order to acquire and develop food distribution businesses throughout Asia. The company has an option to purchase and the Australian shareholder has a right to require the company to purchase an additional 14%. The Singapore corporation holding minority interests has formed joint ventures to operate food distribution centers with local supermarket operators in each of Singapore and Malaysia and plans additional joint ventures in other Pacific Rim countries. The company's committed investment, including the additional 14% interest in the Singapore corporation, is approximately $7.5 million. The company has export sales aggregating $212 million in 1993. International sales activities have been consolidated under Fleming International, Ltd., a wholly owned subsidiary. Principal areas in which these sales were made are: the Caribbean, Central America, Japan, Mexico, the Pacific Rim, and South America. The company will continue to explore expansion of its international activities. Fleming currently exports both private label and branded products, and has established working alliances with many companies to expand their international sales through Fleming. FRANCHISE OPERATIONS. The company offers its customers the opportunity to franchise a concept or license a common trade name. This program helps the customer compete by providing, as part of the franchise or license program, state-of-the-art business concepts, group advertising, private label products and other benefits. Fleming is the franchisor or has the right to license retailers to use certain trade names such as Big Star-R-, Big T-R-, Checkers-R-, Food 4 Less-R-, IGA-R-, MEGA MARKET-R-, Minimax-R-, Piggly Wiggly-R-, Sentry-R-, Shop 'n Bag-R-, Shop 'n Kart-R-, Super 1 Foods-R-, Super Save-R-, Thriftway-R-, United Supers-R- and Value King-R-. While these rights are collectively significant, none of the individual trade names is considered material to the company's operation. At year end 1993, the company franchised or licensed approximately 1,700 stores. RELATED ACTIVITIES. The company operates dairy facilities in Nashville, Tenn., and Baton Rouge, La. These automated facilities process milk products, including regular and low fat milk, as well as cultured items such as cottage cheeses, sour cream and dips marketed under private and national brands, In addition, these facilites process fruit juices and soft drinks. The company owns an 80% interest in a limited assortment retail format, Sav-U-Foods-R-. These are small stores located in Southern California that carry fewer varieties of products than conventional stores while offering very competitive pricing. There are currently 20 stores in operation with plans to have at least 50 open by the end of 1994. These stores are supplied from a separate distribution center. Fleming owns and operates two drug stores, two retail liquor stores and a bakery, all located in Wisconsin. Most distribution divisions operate a truck fleet to deliver products to customers. The company increases the utilization of its truck fleet by backhauling products from many suppliers, thereby reducing the number of empty miles traveled. To further increase its fleet utilization, the company has made its truck fleet available to other firms on a for-hire carriage basis. COMPETITION. Fleming competes with several other wholesale food distributors in most of its market areas on the basis of product price, quality and assortment, schedules and reliability of deliveries, the range and quality of services provided and its willingness to invest capital in customers. -6- The sales volume of wholesale food distributors is dependent on the level of sales achieved by the retail food stores they serve. Retail stores served by Fleming compete with other retail food outlets in their areas on the basis of product price, quality and assortment, store location, sales promotions, advertising, availability of parking, hours of operation, cleanliness and attractiveness. Fleming believes that the designs and locations of its distribution divisions enable it to serve its customers in an efficient manner and that its purchasing systems and standards enable it to provide such customers with a wide assortment of products at competitive prices. EMPLOYEES. Fleming had approximately 23,300 associates at year end 1993. RECENT DEVELOPMENTS. In January 1994, the company announced that it has signed a letter of intent to sell substantially all the assets of its Royal Foods dairy and deli products distribution business located in Woodbridge, New Jersey, to DiGiorgio Corporation. The transaction, at March 24, 1994 is subject to execution of a definitive agreement and receipt of certain third party consents. The company expects to record a pre-tax gain of approximately $3 million on the transaction, $3 million less than the original estimate. Annual sales of the operation are approximately $300 million and future financial results will not be adversely affected as a result of the transaction. The company's Royal Foods distribution center located in Maryland is not part of the proposed sale and will continue to supply perishable products to customers of the Philadelphia division. -7- ITEM 2. PROPERTIES The following table sets forth information with respect to Fleming's major distribution facilities.
SIZE, IN FOOD THOUSANDS OF OWNED OR DISTRIBUTION SQUARE FEET LEASED ------------ ------------ -------- El Paso, TX (1) 465 Leased Ewa Beach, HI 196 Leased Fort Worth, TX (2) 447 Owned Fresno, CA 380 Owned Geneva, AL 345 Leased Garland, TX 1,206 Owned Houston, TX 662 Leased Johnson City, TN 235 Owned Joplin, MO (2) 264 Leased Kansas City, KS 424 Leased Lafayette, LA 430 Owned Lincoln, NE 255 Leased Lubbock, TX (1) 378 Owned Marshfield, WI 156 Owned Massilon, OH 470 Owned Memphis, TN 780 Owned Miami, FL 763 Owned Milwaukee, WI 600 Owned Nashville, TN 734 Leased Oklahoma City, OK 410 Leased Philadelphia, PA 830 Leased Phoenix, AZ 912 Owned Portland, OR 323 Owned Sacramento, CA 593 Owned Salt Lake City, UT 361 Owned San Antonio, TX 482 Leased Sikeston, MO 481 Owned Topeka, KS (2) 299 Leased Tupelo, MS (2) 194 Leased ------- 14,075 GENERAL MERCHANDISE AND OTHER DISTRIBUTION ---------------------- Dallas, TX 170 Leased King of Prussia, PA 377 Leased Memphis, TN 339 Owned North East, MD (3) 107 Owned Sacramento, CA 294 Owned Topeka, KS 179 Leased Woodbridge, NJ (3) 194 Leased ----- 1,660
-8- OUTSIDE STORAGE Outside storage facilities - typically rented on a short-term basis. 5,160 ----- Total square feet 20,895 ------ ------ (1) Comprise the Lubbock distribution operation. (2) The company has announced that it will close this facility in 1994 and transfer its customers to other company-operated facilities. (3) Comprise the Royal distribution operation. At the end of 1993, Fleming operated a delivery fleet consisting of approximately 1,800 power units and 3,700 trailers. Most of this equipment is owned by the company. Company-operated retail stores occupy approximately 2.7 million square feet which is primarily leased. ITEM 3. LEGAL PROCEEDINGS TROPIN V. THENEN ET AL., (INCLUDING MALONE & HYDE, INC., AND FLEMING COMPANIES, INC.) CASE NO. 93-1092-CIV-MORENO. UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF FLORIDA. WALCO INVESTMENTS, INC., ET AL. V. THENEN, ET AL., (INCLUDING MALONE & HYDE, INC., AND FLEMING COMPANIES, INC.) CASE NO. 93-1092-CIV-MORENO, UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF FLORIDA. On December 21, 1993, these cases were filed in the United States District Court for the Southern District of Florida. Both cases name numerous defendants, including registrant, its subsidiary Malone & Hyde, Inc., and four former associates of subsidiaries of registrant. These cases contain similar factual allegations. As to registrant, Malone & Hyde, and the former associates, plaintiffs allege, among other things, that the former associates participated in fraudulent activities by taking money for confirming diverting transactions which had not occurred and that, in so doing, the former associates acted within the scope of their employment. Plaintiffs also allege that Malone & Hyde allowed its name to be used in furtherance of the alleged fraud. The allegations against registrant and Malone & Hyde include common law fraud, breach of contract, aiding and abetting a violation of Section 10(b) of the Securities and Exchange Act of 1934, negligence, and demand for repayment of monies allegedly received by the confirmers. In addition, allegations were made against Malone & Hyde claiming it violated the federal Racketeer Influenced and Corrupt Organizations Act and comparable state law. Plaintiffs seek damages, treble damages, attorneys fees, costs, expenses and other appropriate relief. While the amount of damages sought under most claims is not specified, plaintiffs allege that hundreds of millions of dollars were lost as the result of the matters complained of. Registrant and Malone & Hyde, Inc. deny the allegations of the complaints and will vigorously defend the actions. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." -9- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. -10- EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information concerning the executive officers of the company as of March 24, 1994:
Year First Became Name (age) Present Position An Officer - ---------- ---------------- ---------- E. Dean Werries (64) Chairman of the Board 1970 Robert E. Stauth (49) President and 1987 Chief Executive Officer R. Randolph Devening (52) Vice Chairman and 1980 Chief Financial Officer Gerald G. Austin (56) Executive Vice President-Operations 1982 E. Stephen Davis (53) Executive Vice President-Distribution 1981 Glenn E. Mealman (59) Executive Vice President- 1977 National Accounts James E. Stuard (59) Executive Vice President- Division Operations 1979 David R. Almond (54) Senior Vice President-General Counsel 1989 and Secretary Darreld R. Easter (57) Senior Vice President-Marketing 1988 Donald N. Eyler (62) Senior Vice President-Controller 1981 Larry A. Wagner (47) Senior Vice President-Human Resources 1989 Ronald C. Anderson (51) Vice President-General Merchandise 1993 Mark K. Batenic (45) Vice President-Division Operations 1994 Dixon E. Simpson (51) Vice President-Division Operations 1994
No family relationship exists among any of the executive officers listed above. Executive officers are elected by the board of directors for a term of one year beginning with the annual meeting of shareholders held in April or May of each year. Each of the executive officers has been employed by the company or its subsidiaries for the preceding five years except for Messrs. Devening, Almond and Anderson. -11- Mr. Devening returned to the company in June 1989 as executive vice president and chief financial officer and was elected to his present position in 1993. From 1979 to January 1987, he was associated with the company, being elected executive vice president-finance and administration in 1982. From January 1987 to June 1989, he was vice president and chief financial officer of Genentech, Inc., a pharmaceutical products company. Mr. Almond joined the company in May 1989 as senior vice president-general counsel. He assumed the additional role of corporate secretary in 1992. Since 1985 until joining the company, he was senior vice president-general counsel and administration of Wilson Foods Corp., a processor of meat products. In 1990, Wilson Foods Corp. filed for protection under Chapter 11 of the United States Bankruptcy Code and subsequently had a reorganization plan approved by the court. Mr. Anderson joined the company in his present position in July 1993. Since 1986, until joining the company, he was vice president of McKesson Corporation, a distributor of pharmaceutical and related products, where he was responsible for its service merchandising division. Mr. Werries will retire effective April 27, 1994 as chairman of the board. Mr. Stauth will then become chairman, president and chief executive officer. Mr. Stuard will retire effective December 1, 1994. -12- PART II ------- ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Fleming common stock is traded on the New York, Chicago and Pacific stock exchanges. The ticker symbol is FLM. As of December 31, 1993, the 36.9 million outstanding shares were owned by 11,200 shareholders of record and approximately 19,300 beneficial owners whose shares are held in street name by brokerage firms and financial institutions. According to the New York Stock Exchange Composite Transactions tables, the high and low prices of Fleming common stock during each calendar quarter of the past two years are shown below.
1993 1992 ---- ---- Quarter High Low High Low ------- ----- --- ----- --- First $34.38 $30.75 $35.00 $28.38 Second 33.75 31.25 34.38 29.75 Third 33.75 31.13 35.13 29.00 Fourth 33.25 23.75 32.63 27.25
Cash dividends on Fleming common stock have been paid for 77 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. Record and payment dates are normally as shown below:
Record Dates: Payment Dates: ------------- -------------- February 20 March 10 May 20 June 10 August 20 September 10 November 20 December 10
Cash dividends of $.30 per share were paid on each of the above four payment dates in 1992 and 1993. ITEM 6. SELECTED FINANCIAL DATA
- ------------------------------------------------------------------------------- (In thousands, except per share amounts) 1993 1992 1991 1990 1989 - ------------------------------------------------------------------------------- Net sales $13,092,145 $12,893,534 $12,851,129 $11,932,767 $12,045,310 Earnings before extraordinary loss and cumulative effect(a) 37,480 118,904 64,365 97,256 80,076 Net earnings per common share(a) 1.02 3.33 1.82 3.06 2.54 Total assets 3,102,632 3,117,705 2,958,416 2,767,696 2,689,321 Long-term debt and capital leases 1,003,828 1,038,183 951,864 981,488 990,614 Cash dividends paid per common share 1.20 1.20 1.14 1.03 1.00
-13- (a) In 1993 and 1992, the company recorded an after-tax loss of $2.3 million and $5.9 million, respectively, for early retirement of debt. In 1991, the company changed its method of accounting for postretirement health care benefits, resulting in a charge to net earnings of $9.3 million. The results in 1993 include an after-tax charge of approximately $62 million for additional facilities consolidations, re-engineering, impairment of retail-related assets and elimination of regional operations. The company instituted a plan late in 1991 to reduce costs and increase operating efficiency by consolidating four distribution centers into larger, higher volume and more efficient facilities. The after-tax charge was $41.4 million. During 1989, the company sold all of its preferred stock investment and approximately 60% of its common stock investment in the purchaser of White Swan, Inc., resulting in an after-tax gain of $8.2 million. The remaining common stock investment was sold in 1990, resulting in an after-tax gain of approximately $3.6 million. See notes to consolidated financial statements and the financial review included in Item 7 and 8. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES Fleming continues to experience excellent access to the capital markets. The company refinanced at lower interest rates $28 million of term debt through borrowings on bank lines and the issuance of medium-term notes. Also, proceeds from the sale of $68 million of long-term retailer notes receivable were applied to the early redemption of $63 million of 9.5% debentures purchased at the required premium. Additional customer notes receivable may be sold in the future with the proceeds used to reduce debt. The company registered an additional $264 million of debt securities with the Securities and Exchange Commission. Medium-term notes in the amount of $61 million were issued in 1993 with maturities ranging from four to seven years with an average interest rate of 5.9%. The remaining $290 million of registered securities are available for sale from time to time and allow the company to maintain adequate access to the debt capital markets. In addition, three-year loans totaling $65 million were consummated with three banks. In January 1994, a similar $20 million loan was closed and a maturing loan was extended for 2.5 years. The company has established public and private commercial paper programs. Two revolving credit agreements, $400 million maturing in October 1997 and $200 million maturing in October 1994, serve as backup lines for the company's commercial paper programs and for borrowings under uncommitted lines, assuring adequate liquidity. These credit facilities, with a strong group of banks led by Morgan Bank, were established in October to replace a similar $500 million facility which was scheduled to expire in November 1994. -14- During 1993, the company made no borrowings under any of its committed agreements. The interest rate for the facilities is based on various money market rates selected by the company at the time of borrowing. Management intends to renew the $200 million credit agreement prior to its maturity. The committed credit agreements and seven term bank loans contain various covenants, including restrictions on additional indebtedness, payment of cash dividends and acquisition of the company's common stock. None of these covenants negatively impact the company's liquidity or capital resources at this time. Reinvested earnings of approximately $92 million were available at year end for cash dividends and acquisition of the company's stock. Each of these credit agreements may be terminated in the event of a defined change of control of the company. Uncommitted bank lines were used during the year when their rates were lower than commercial paper rates. During 1993, borrowings under these lines averaged $170 million, ranging from $81 million to $435 million, and were $145 million at year-end 1993. Commercial paper borrowings averaged $151 million, ranging from $15 million to $226 million, and were $166 million at year end. The company's long-term debt and commercial paper continue to carry investment grade ratings of BBB/Baa2 and A-2/P-2, respectively. However, the ratings of Baa2 and P-2 were put under review with negative implications in January 1994 by Moody's Investors Service. Fleming makes investments in and loans to its retail customers, primarily in conjunction with the establishment of long-term supply agreements. Such investments and loans were made at a lesser rate in 1993 than in 1992. At year end these investments and loans of $379 million, combined with total trade receivables of $232 million, were $611 million, an $83 million net decrease from 1992. After a $68 million sale of notes, net investments and loans decreased $33 million. In addition, net trade receivables decreased $50 million. Cash flow from operations, one of the company's primary sources of liquidity, was $209 million in 1993, up $119 million from 1992. The increase is attributable to reduced trade receivables and inventories. Trade receivables in 1993 had a turnover rate of 45.3 times, up from 43.1 times the prior year. Inventory turns increased slightly to 13.1 times in 1993, compared to 12.8 times the year before. Capital expenditures were $53 million in 1993 compared to $62 million in 1992. In both years these were for normal additions and replacements of warehouse and transportation equipment and leasehold improvements. Capital expenditures in 1994 are expected to be approximately $100 million, excluding any possible acquisitions. The increase is primarily attributable to expansion projects at several distribution centers to accommodate new customers, including Kmart. The company's capital structure is as presented below. Amounts include current maturities of long-term debt and current obligations under capital leases.
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Capital Structure (In Millions) 1993 1992 - -------------------------------------------------------------------------------- Long-term debt $ 728 34.0% $ 772 36.0% Capital lease obligations 350 16.4 314 14.6 - -------------------------------------------------------------------------------- Total debt 1,078 50.4 1,086 50.6 Shareholders' equity 1,060 49.6 1,060 49.4 - -------------------------------------------------------------------------------- Total capital $2,138 100.0% $2,146 100.0% - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
-15- Long-term debt and capital lease obligations decreased $8 million to $1.08 billion during 1993. Shareholders' equity at the end of 1993 remained $1.06 billion, unchanged from the prior year. The year-end debt-to-capital ratio decreased to 50.4%, slightly below last year's ratio of 50.6%. The company's long-term target ratio is approximately 50%. Total capital was $2.14 billion at year end, essentially unchanged from the prior year. The composite interest rate of total debt (excluding capital lease obligations) before the effect of interest rate swaps was 4.8% at year end, a reduction from 5.8% a year earlier, principally due to lower short-term rates and to a lesser extent the company's refinancing activities in the first half of 1993. Including the effect of interest rate swaps, the composite interest rate of debt was 4.9% and 5.9% at the end of 1993 and 1992, respectively. The dividend payments of $1.20 per common share in 1993 and 1992 were 125% and 38% of primary net earnings per common share in 1993 and 1992, respectively. The payout ratio would have been 44% in 1993 before fourth quarter charges for facilities consolidation and restructuring and debt prepayment and 36% in 1992 before fourth quarter charges for debt prepayment. The company's policy toward cash dividends is to pay out approximately one-third of trailing 12 months earnings. The company has adequate liquidity to provide for cash needs of approximately $83 million for the facilities consolidation and restructuring plan. RESULTS OF OPERATIONS NET SALES Sales increased 1.5% in 1993 over 1992 compared to a .3% increase in 1992 over 1991. The 1993 sales increase is primarily due to a full year of Baker's in 1993, compared to 12 weeks in 1992, and the addition of the Garland facility in August. Also contributing to the increase were new customers, including Kmart. For 1993, the company again experienced food price deflation of .1% compared to deflation of 1% in 1992 and inflation of .8% in 1991. The company's outlook for 1994 is for a low level of food price inflation. Tonnage of food product sold in 1993 was essentially the same as 1992. In 1992, tonnage of food product sold versus 1991 increased 1.6%, compared to a 6.1% increase achieved in 1991. The lower tonnage growth rates experienced in 1993 and 1992 reflect sluggish retail food industry sales and the lack of net expansion of the company's customer base as new business was roughly matched by business lost. Sales for 1994 will be positively affected by the addition of the recently acquired retail stores in Florida, a full year of operation at the Garland facility and new business resulting in part from the supply agreement signed with Kmart. These sales gains will be offset by the expiration of a contract with Albertson's in Florida in early 1994 and declining business with Wal-Mart. -16- COMPONENTS OF EARNINGS Components of earnings, before the early debt retirement in 1993 and 1992, and before the accounting change in 1991, expressed as a percent of sales are:
- -------------------------------------------------------------------------------- 1993 1992 1991 - -------------------------------------------------------------------------------- Gross margin (sales less cost of sales) 5.85% 5.64% 5.82% Less expense: Selling and administrative 4.27 3.84 4.18 Interest expense .60 .63 .73 Interest income (.48) (.46) (.48) Equity investment results .09 .12 .06 Facilities consolidation and restructuring .82 - .52 - ----------------------------------------------------------------------------- Total costs and expenses 5.30 4.13 5.01 - ----------------------------------------------------------------------------- Earnings before taxes .55 1.51 .81 Taxes on income .26 .59 .31 - ------------------------------------------------------------------------------ Net Margin .29% .92% .50% - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
GROSS MARGIN Gross margin as a percent of sales improved by 21 basis points, rising to 5.85% in 1993 compared to 5.64% in 1992. The increase in gross margin in 1993 was due to retail operations, which accounted for a 44 point favorable comparison. Retail food operations typically have a higher gross margin than wholesale operations. The margin increase is principally the effect of a full year of Baker's operations compared to only fourth quarter operations in 1992 and, to a lesser extent, the Florida operations acquired late in 1993. Gross margin comparisons for the first three quarters of 1994 will continue to benefit from the effects of the Florida operations. Product handling expense was nine basis points better. Higher product cost accounted for the rest of the difference. The 18 basis point decrease in gross margin in 1992 compared to 1991 is due to several factors. The absence of company-operated retail stores sold in December 1991 and the presence of Baker's stores acquired at the beginning of the fourth quarter of 1992 caused 14 basis points of the decrease. Increased transportation expenses in 1992 contributed 10 basis points to the decrease in gross margin. This was due principally to the company's facilities consolidation program that resulted in trucks driving farther to deliver product. Gross margin in the fourth quarter of 1992 was increased by $4.9 million, or four basis points (annual effect) from the favorable resolution of certain litigation. The LIFO method of inventory valuation increased gross margin by $9.3 million, an increase of $4.5 million or four basis points from 1991. -17- SELLING AND ADMINISTRATIVE Selling and administrative expenses in 1993 were 4.27% of sales, compared to 3.84% in 1992. Retail operations have higher selling expenses than wholesale operations, and this was the main reason for the $63.4 million increase. Reductions in other selling and administrative categories were more than offset by the increase in credit loss expense discussed below. During the second quarter of 1993, selling and administrative expenses were affected by several nonrecurring items. The company recorded $11.2 million of pretax income resulting from cash received in the favorable resolution of a litigation matter and a $1.2 million accrual for expected settlements in other legal proceedings. Management estimated that the company's previously disclosed contingent liability for lease obligations exceeded previously established reserves by $2 million and recorded this amount as an expense. A $4.6 million gain from a real estate transaction was also recorded during the quarter. Selling and administrative expenses in 1991 were increased by $15 million due to unusual charges related to litigation settlements and the write-down of a nonoperating asset. Comparing 1992 to 1991, selling and administrative expenses were reduced by $42.1 million. In addition to the unusual charges, the absence of selling expenses related to company-operated retail stores sold at the end of 1991 and additional selling expenses related to Baker's operation led to a net reduction of $25 million. Also contributing to the positive result in 1992 compared to 1991 were the effects of cost controls and the benefits of certain completed facilities consolidations. Gains on the sales of customer notes receivable were reductions to selling and administrative expenses of $3.2 million, $2.5 million and $2.7 million in 1993, 1992 and 1991, respectively. The company invests a significant amount of capital in its customers through various methods consisting of customary or extended credit terms for inventory purchases, secured loans with terms up to ten years, and minority equity investments in qualifying customers under the company's equity store program. In addition, the company may guarantee debt and lease obligations of certain customers. Usually, such capital investments are made in and guarantees are extended to customers with whom the company enjoys long-term supply agreements. A significant portion of the company's net trade receivables and investments in customer notes receivable is related to multi-store, medium-sized retail chains in which the company holds an equity interest, referred to as business development ventures. Selling and administrative expenses include credit loss expense of $52 million in 1993, $28.3 million in 1992, and $17.3 million in 1991. The increases in 1993 and 1992 are due to the combined effect on customers' financial conditions of sluggish retail sales, intensified retail competition and lack of food price inflation. Credit losses increased in the fourth quarter of 1993, due to adverse developments in certain of the company's equity store program investments. 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 future losses will not occur. -18- INTEREST EXPENSE Interest expense in 1993 declined $3.1 million to $78 million. The improvement is due to lower short-term rates and refinancings in late 1992 and the first half of 1993. The company's borrowing strategy seeks to minimize interest expense while achieving a target range of exposure to floating interest rates and balancing its debt instruments across a range of maturities. The company enters into interest rate hedge agreements to manage interest costs and exposure to changing interest rates. Interest expense in 1992 improved over 1991, dropping by $12.3 million to $81.1 million as a result of lower interest rates. As a percent of sales, interest expense was .60%, .63% and .73% in 1993, 1992 and 1991, respectively. INTEREST INCOME Interest income consists primarily of interest earned on notes receivable from customers. Also included is income generated from direct financing leases of retail stores and related equipment. In 1993, 1992 and 1991, interest income was $62.9 million, $59.5 million and $61.4 million, respectively. The increase in 1993 results from higher outstanding notes receivable and direct financing leases, partially offset by a slight decline in the interest rate. The decrease in 1992 compared to 1991 was due to lower interest rates prevailing in 1992 versus 1991, partially offset by the effect of higher average notes receivable balances. EQUITY INVESTMENT RESULTS Losses resulting from investments in certain customers accounted for under the equity method were $11.9 million in 1993 compared to $15.1 million in 1992 and $7.7 million in 1991. The improvement in 1993 is due to improved operating performance by certain of the company's business development ventures. Such ventures were responsible for equity method losses of $6 million in 1993, compared to $11 million in 1992 and $4.1 million in 1991. The increase from 1991 to 1992 resulted from poor performance by certain of the company's business development ventures. For 1994, the continued effects on customers of a lack of food price inflation and intense competition may result in higher losses. However, the benefits to the company outweigh these losses. FACILITIES CONSOLIDATION AND RESTRUCTURING On January 18, 1994, the company announced the details of a plan to consolidate facilities and restructure its organizational alignment and operations. Management's objective is to improve company performance by eliminating functions and operations that do not add economic value. The plan resulted from a thorough review, which began in October 1993, of all operations and business strategies. The 1993 fourth quarter results reflect a charge of $101.3 million resulting directly from facilities consolidation and restructuring. This is in addition to $6.5 million provided for a facilities consolidation in the second quarter. The plan consists of four categories: facilities consolidation, re-engineering, retail-related assets and elimination of regional operations. The actions contemplated by the plan will affect the company's food and general merchandise wholesaling operations as well as certain retailing assets. Cash requirements related to the charge are estimated to be $31 million in 1994 and $52 million in 1995 and thereafter. The cash requirements are expected to be provided by internally generated cash flows and through capital raised in the debt markets. -19- Facilities consolidations will result in the closure of five distribution centers, the relocation of two operations, consolidation of one center's administrative function, and completion of the 1991 facilities consolidation actions. Disclosures of specific facilities affected are made as closing actions commence. Approximately 400 associate positions are expected to be eliminated through facilities consolidations. The closures and relocations are anticipated to be completed primarily in 1994. Expected losses on disposition of the related property through sale or sublease are provided for through the estimated disposal dates. The total provision for facilities consolidation is approximately $60 million. Detail components include: severance costs - $15 million, impaired property and equipment - $13 million, other related asset impairments and obligations - $11 million, lease and holding costs - $10 million, completion of actions contemplated in the 1991 restructure charge - $7 million and product handling and damage - $4 million. The actions are not expected to result in a material reduction of revenues. Increased transportation expense likely will result due to trucks driving farther to serve customers, although expected savings due to administrative expenses, working capital and productivity improvements will be far more significant. The costs to complete activities contemplated in the 1991 restructure charge result principally from the deterioration of the California bay area commercial real estate market. Management's 1991 estimate of real estate values and demand has been adversely affected by the decline in sales values and increase in available competing properties. Increased costs in the consolidation were partially offset by a change in management's plans regarding the originally planned construction of a large, new facility in the Kansas City area. The revised plan calls for enlarging and utilizing existing facilities with a lower associated capital outlay. It is not practical to separately estimate reduced depreciation and amortization, labor or operating costs. Management does anticipate that, in the aggregate, a positive annual pretax earnings impact of approximately $20 million will result once the facilities consolidation plan is fully implemented. The re-engineering component of the charge provides for the cash costs associated with terminating an expected 1,500 associates displaced by the re-engineering plan, which will be implemented beginning in 1994. Annual payroll savings are projected to be approximately $40 million. The provision for re-engineering is approximately $25 million. Certain retail supermarket locations leased or owned by the company have been deemed to no longer represent viable strategic sites for stores due to size, location or age. The charge includes the present value of lease payments on these locations, as well as holding costs until disposition, the write-off of capital lease assets recorded for certain of the locations, and the expected loss on a location closed in 1994. The charge consists principally of cash costs for lease payments and write-down of property. Annual savings from these actions are expected to be $1 million. The provision for retail-related assets is approximately $15 million. Elimination of the company's regional operations in early 1994 will result in cash severance payments to approximately 100 associates, as well as transferring approximately 60 associates. Completion of the actions is expected in mid-1994. The annual savings are expected to be $4 million, principally in payroll costs. The provision for eliminating regions is approximately $8 million, including the write-down to estimated fair value of certain related assets. -20- The 1991 restructuring plan was initiated to reduce costs and increase future operating efficiency by consolidating several distribution centers into larger, higher volume and more efficient facilities. The charge of $67 million included severance benefits, lease terminations, asset disposals and the impairment of related assets. The plan has resulted in the closing or consolidation of four facilities whose operations were assimilated into other distribution centers. Cash expenditures related to the 1991 facilities consolidation charge were $12 million and $22 million in 1993 and 1992, respectively. It is not practical to specifically quantify the operating efficiencies and economies of scale that resulted from the 1991 consolidation actions. Additional estimated costs, related primarily to asset dispositions in process, were made in the 1993 charge as discussed. EARLY DEBT RETIREMENT In the fourth quarters of 1993 and 1992, the company recorded extraordinary losses for early retirement of debt. In 1993, the company retired $63 million of 9.5% debentures at a cost of $2.3 million, after tax benefits of $2.1 million. In 1992, the company recorded a charge of $5.9 million, after tax benefits of $3.7 million. The 1992 costs related to retiring the $172.5 million of convertible notes, $30 million of the 9.5% debentures and certain other debt. Lower future interest costs will result from the actions in both years, as well as the elimination of the dilutive effect associated with the potential issuance of common shares into which the notes were convertible. TAXES ON INCOME The effective income tax rates were 48%, 39% and 38.3% in 1993, 1992 and 1991, respectively. The 1993 rate was higher than previous years because of the significance of the facilities consolidation and restructuring charge. Pretax income was reduced, resulting in nondeductible items for tax purposes having a much larger impact on the effective rate. In addition, the federal rate increased by 1% because of the new tax law enacted in 1993. The combined state income tax rate increased by 1% in 1993 compared to 1992 for the same reasons as the federal rate. The 1992 effective rate was reduced because of favorable settlements of possible tax assessments recorded in prior years. The 1991 rate was lower primarily due to one-time benefits related to the difference in the financial and tax basis in an insurance subsidiary sold in 1991 and a lower combined state income tax rate. The expected 1994 effective rate is 44%. OTHER In 1993, the company reduced the discount rate assumption used to determine its obligations for defined benefit pension plans and postretirement benefits. The 1% decline will cause pension and postretirement benefit expense recognized in 1994 to increase by approximately $3 million compared to 1993. Considering the various factors discussed above, management does not anticipate that 1994 earnings from core operations will be improved over those of 1993. In December 1993, the company and numerous other defendants were named in two lawsuits filed in U. S. District Court in Miami. Because 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. -21- Statement of Financial Accounting Standards No. 114 - Accounting by Creditors for Impairment of a Loan will be effective for the first quarter of the company's 1995 fiscal year. This statement requires that loans determined to be impaired be measured by the present value of expected future cash flows discounted at the loan's effective interest rate. Management has not yet determined the impact, if any, on the consolidated statements of earnings or financial position. Statement of Financial Accounting Standards No. 112 - Employers' Accounting for Postemployment Benefits is not applicable to benefits offered to company associates. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Part IV, Item 14(a) 1. Financial Statements. ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. -22- PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated herein by reference to pages 3 through 6 of the company's proxy statement dated March 14, 1994, in connection with its annual meeting of shareholders to be held on April 27, 1994. Information concerning Executive Officers of the company is included in Part I herein which is incorporated in this Part III by reference. ITEM 11. EXECUTIVE COMPENSATION Incorporated herein by reference to pages 12 through 20 of the company's proxy statement dated March 14, 1994, in connection with its annual meeting of shareholders to be held on April 27, 1994. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated herein by reference to pages 9 through 11 of the company's proxy statement dated March 14, 1994, in connection with its annual meeting of shareholders to be held on April 27, 1994. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. -23- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K PAGE NUMBER IN FORM 10-K (a) 1. Financial Statements: o Consolidated Statements of Earnings - For the years ended December 25, 1993, December 26, 1992, and December 28, 1991 30 o Consolidated Balance Sheets - At December 25, 1993, and December 26, 1992 31 o Consolidated Statements of Shareholders' Equity - For the years ended December 25, 1993, December 26, 1992, and December 28, 1991 33 o Consolidated Statements of Cash Flows - For the years ended December 25, 1993, December 26, 1992, and December 28, 1991 34 o Notes to Consolidated Financial Statements - For the years ended December 25, 1993, December 26, 1992, and December 28, 1991 35 o Independent Auditors' Report 52 o Quarterly Financial Information (Unaudited) 53 (a) 2. Financial Statement Schedules: o Independent Auditors' Report on Schedules 52 o Schedule V - Property and Equipment 55 o Schedule VI - Accumulated Depreciation and Amortization of Property and Equipment 56 o Schedule VIII - Valuation and Qualifying Accounts 57 All other financial statement schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements or notes thereto. -24- (a), (c) 3. Exhibits: PAGE NUMBER OR EXHIBIT INCORPORATION BY NUMBER REFERENCE TO 3.1 Certificate of Incorporation Exhibit 3.1 to Report on Form 10-K for year ended December 28, 1991. 3.2 By-Laws Exhibit 28.2 to Report on Form 8-K dated August 22, 1989. 4.1 $400,000,000 Credit Agreement Exhibit 4.1 to dated as of October 21, 1993, among Report on Form 10-Q the Registrant, the banks listed for the quarter ended in the Agreement and Morgan October 2, 1993. Guaranty Trust Company of New York, as Agent 4.2 Amendment No. 1, dated January 12, 58 1994, to $400,000,000 Credit Agreement 4.3 $200,000,000 Credit Agreement dated Exhibit 4.2 to Report as of October 21, 1993, among the on Form 10-Q for the Registrant, the banks listed in the quarter ended Agreement and Morgan Guaranty Trust October 2, 1993. Company of New York, as Agent 4.4 Amendment No. 1, dated January 17, 63 1994, to $200,000,000 Credit Agreement 4.5 Agreement to furnish copies of 69 other long-term debt instruments 4.6 Rights Agreement dated as of Exhibit 28 to July 7, 1986, between the Report on Form Registrant and Morgan 8-K dated June 24, Guaranty Trust Company of New York 1986. 4.7 Amendment to Rights Agreement Exhibit 28.1 to dated as of August 22, 1989, Report on Form 8-K between the Registrant dated August 22, and First Chicago Trust Company 1989. of New York, as Rights Agent 4.8 Indenture dated as of December 1, Exhibit 4 to 1989, between the Registrant and Registration Morgan Guaranty Trust Company of Statement New York, as trustee No. 33-29633. -25- PAGE NUMBER OR EXHIBIT INCORPORATION BY NUMBER REFERENCE TO 10.1 Investment Advisor Agreement Exhibit 10.17 to between the Registrant and The Form 10-K for year First Boston Corporation dated ended December 30, November 27, 1989 1989. 10.2 Investment Advisor Agreement Exhibit 10.18 to between the Registrant and Merrill Form 10-K for year Lynch, Pierce, Fenner & Smith ended December 30, Incorporated dated December 5, 1989 1989. 10.3 Agreement and Plan of Exhibit 2.1 to Reorganization by and among Registration Fleming Companies, Inc., Statement No. Cornhusker Acquisition and 33-51312. Baker's Supermarkets, Inc. dated August 25, 1992 10.4 Dividend Reinvestment and Exhibit 28.1 to Stock Purchase Plan, as Registration amended Statement No. 33-26648 and Exhibit 28.3 to Registration Statement No. 33-45190. 10.5* 1985 Stock Option Plan Exhibit 28(a) to Registration Statement No. 2-98602. 10.6* Form of Award Agreement for 70 1985 Stock Option Plan (1994) 10.7* 1990 Stock Option Plan Exhibit 28.2 to Registration Statement No. 33-36586. 10.8* Form of Award Agreement for 74 1990 Stock Option Plan (1994) 10.9* Fleming Management Incentive Exhibit 10.4 to Compensation Plan Registration Statement No. 33-51312. 10.10* Directors' Deferred Exhibit 10.5 to Compensation Plan Registration Statement No. 33-51312. 10.11* Supplemental Retirement Plan Exhibit 10.7 to Registration Statement No. 33-51312. -26- PAGE NUMBER OR EXHIBIT INCORPORATION BY NUMBER REFERENCE TO 10.12* Godfrey Company 1984 Non- Appendix II to qualified Stock Option Plan Registration Statement No. 33-18867. 10.13* Form of Severance Agreement Exhibit 10.14 to between the Registrant and Form 10-K for year certain of its officers ended December 31, 1988. 10.14* Fleming Companies, Inc. 1990 Exhibit B to Stock Incentive Plan dated Proxy Statement February 20, 1990 for year ended December 30, 1989. 10.15* Phase I of Fleming Companies, Inc. Exhibit 10.16 to Stock Incentive Plan and Form of Form 10-K for year Awards Agreement ended December 30, 1989. 10.16* Phase II of Fleming Companies, Inc. Exhibit 10.12 to Form Stock Incentive Plan 10-K for year ended December 26, 1992. 10.17* Phase III of Fleming Companies, Inc. 80 Stock Incentive Plan 10.18* Fleming Companies, Inc. Directors' Exhibit 10.14 to Stock Equivalent Plan Form 10-K for year ended December 28, 1991. 10.19* Agreement between the Registrant 84 and E. Dean Werries 10.20* Agreement between the Registrant 85 and James E. Stuard 10.21* Agreement between the Registrant 87 Robert F. Harris 11 Earnings per share computation 93 12 Computation of ratio of earnings to 97 fixed charges 21 Subsidiaries of the Registrant 98 23 Consent of Deloitte & Touche 99 -27- PAGE NUMBER OR EXHIBIT INCORPORATION BY NUMBER REFERENCE TO 24 Power of attorney instruments signed 100 by certain directors and officers of the Registrant appointing R. Randolph Devening, Vice Chairman and Chief Financial Officer, as attorney-in-fact and agent to sign the Annual Report on Form 10-K on behalf of said directors and officers 99 Company Undertaking 102 * Management contract, compensatory plan or arrangement. (b) Reports on Form 8-K: Form 8-K filed December 16, 1993 disclosed that the company's fourth quarter and full year 1993 results will be below expectations. Reasons for the less than expected results include an increase in the provision for credit losses, a significant LIFO charge and weak sales. Form 8-K filed January 20, 1994 disclosed the press release made by the company on January 18, 1994 announcing details of its planned restructuring. Registrant recorded a pre-tax charge of approximately $101 million in the fourth quarter of 1993 resulting from the restructuring. -28- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Fleming has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 24th day of March 1994. FLEMING COMPANIES, INC. /S/ ROBERT E. STAUTH ---------------------------------------- By: Robert E. Stauth (President and Chief Executive Officer) /S/ R. RANDOLPH DEVENING ---------------------------------------- By: R. Randolph Devening (Vice Chairman and Chief Financial Officer) /S/ DONALD N. EYLER --------------------------------------------- By: Donald N. Eyler (Senior Vice President and Controller) (Chief Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the 25th day of March 1994. /S/ E. DEAN WERRIES * /S/ ROBERT E. STAUTH * /S/ R. RANDOLPH DEVENING * - ------------------------- ------------------------- -------------------------- E. Dean Werries Robert E. Stauth R. Randolph Devening (Chairman of the Board) (Director) (Director) /S/ ARCHIE R. DYKES * /S/ CAROL B. HALLETT * /S/ JAMES G. HARLOW, JR. * - ------------------------- ------------------------- -------------------------- Archie R. Dykes Carol B. Hallett James G. Harlow, Jr. (Director) (Director) (Director) /S/ R. D. HARRISON * /S/ LAWRENCE M. JONES * /S/ EDWARD C. JOULLIAN III* - ------------------------- ------------------------- --------------------------- R. D. Harrison Lawrence M. Jones Edward C. Joullian III (Director) (Director) (Director) /S/ HOWARD H. LEACH * /S/ JOHN A. MCMILLAN * /S/ GUY O. OSBORN * - ------------------------- -------------------------- ------------------------- Howard H. Leach John A. McMillan Guy O. Osborn (Director) (Director) (Director) /S/ R. RANDOLPH DEVENING - --------------------------- *By: R. Randolph Devening (Attorney-in-Fact) *A Power of Attorney authorizing R. Randolph Devening to sign the Annual Report on Form 10-K on behalf of each of the indicated directors of Fleming Companies, Inc. has been filed herein as Exhibit 25. -29- CONSOLIDATED STATEMENTS OF EARNINGS For the years ended December 25, 1993, December 26, 1992, and December 28, 1991 (In thousands, except per share amounts)
1993 1992 1991 ---------- ---------- ---------- Net sales $13,092,145 $12,893,534 $12,851,129 Costs and expenses: Cost of sales 12,326,778 12,166,858 12,103,080 Selling and administrative 558,470 494,983 537,058 Interest expense 78,029 81,102 93,353 Interest income (62,902) (59,477) (61,381) Equity investment results 11,865 15,127 7,690 Facilities consolidation and restructuring 107,827 - 67,000 ---------- ---------- ---------- Total costs and expenses 13,020,067 12,698,593 12,746,800 Earnings before taxes 72,078 194,941 104,329 Taxes on income 34,598 76,037 39,964 ---------- ---------- ---------- Earnings before extraordinary loss and cumulative effect of accounting change 37,480 118,904 64,365 Extraordinary loss from early retirement of debt 2,308 5,864 - Cumulative effect of change in accounting for postretirement health care benefits - - 9,270 ---------- ---------- ---------- Net earnings $ 35,172 $ 113,040 $ 55,095 ---------- ---------- ---------- ---------- ---------- ---------- Net earnings available to common shareholders $35,172 $113,040 $51,955 ---------- ---------- ---------- ---------- ---------- ---------- Net earnings per common share: Primary before extraordinary loss and accounting change $1.02 $3.33 $1.82 Extraordinary loss .06 .16 - Accounting change - - .28 ---------- ---------- ---------- Primary $ .96 $3.16 $1.54 ---------- ---------- ---------- ---------- ---------- ---------- Fully diluted before extraordinary loss and accounting change $1.02 $3.21 $1.82 Extraordinary loss .06 .15 - Accounting change - - .28 ---------- ---------- ---------- Fully diluted $ .96 $3.06 $1.54 ---------- ---------- ---------- ---------- ---------- ---------- Weighted average common shares outstanding 36,801 35,759 35,759 ---------- ---------- ---------- ---------- ---------- ----------
Sales to customers accounted for under the equity method were approximately $1.6 billion, $1.3 billion and $1 billion in 1993, 1992 and 1991, respectively. See notes to consolidated financial statements. -30- CONSOLIDATED BALANCE SHEETS At December 25, 1993, and December 26, 1992 (In thousands, execept per share amounts)
ASSETS 1993 1992 ------ ------ Current assets: Cash and cash equivalents $ 1,634 $ 4,712 Receivables 301,514 349,324 Inventories 923,280 959,134 Other current assets 134,229 90,040 --------- --------- Total current assets 1,360,657 1,403,210 Investments and notes receivable 309,237 344,000 Investment in direct financing leases 235,263 213,956 Property and equipment: Land 49,580 46,293 Buildings 268,317 251,320 Fixtures and equipment 466,904 438,068 Leasehold improvements 133,897 123,734 Leased assets under capital leases 143,207 152,737 --------- --------- 1,06l,905 1,012,152 Less accumulated depreciation and amortization 426,846 401,446 --------- --------- Net property and equipment 635,059 610,706 Other assets 90,633 79,686 Goodwill 471,783 466,147 --------- --------- Total assets $3,102,632 $3,117,705 --------- --------- --------- ---------
-31- LIABILITIES AND SHAREHOLDERS' EQUITY 1993 1992 ---- ---- CURRENT LIABILITIES: Accounts payable $ 682,988 $ 717,484 Current maturities of long-term debt 61,329 36,474 Current obligations under capital leases 13,172 10,927 Other current liabilities 161,043 110,051 --------- --------- Total current liabilities 918,532 874,936 Long-term debt 666,819 735,565 Long-term obligations undercapital leases 337,009 302,618 Deferred income taxes 27,500 39,194 Other liabilities 92,366 104,958 Shareholders' equity: Common stock, $2.50 par value, authorized -1 00,000 shares, issued and outstanding - 36,940 and 36,698 shares 92,350 91,746 Capital in excess of par value 489,044 482,107 Reinvested earnings 492,250 501,231 Cumulative currency translation adjustment (288) - --------- --------- 1,073,356 1,075,084 Less guarantee of ESOP debt 12,950 14,650 --------- --------- Total shareholders' equity 1,060,406 1,060,434 --------- --------- Total liabilities and shareholders' equity $3,102,632 $3,117,705 --------- --------- --------- ---------
Receivables include $48.3 million and $48.9 million in 1993 and 1992, respectively, due from customers accounted for under the equity method. See notes to consolidated financial statements. -32- CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the years ended December 25, 1993, December 26, 1992, and December 28, 1991 (In thousands)
1993 1992 1991 ------------------- ------------------- -------------------- Shares Amount Shares Amount Shares Amount ------ ------ ------ ------ ------ ------ Preferred stock: Beginning of year 50 $ 50,000 Redemption (50) (50,000) ------ -------- End of year - - ------ -------- ------ -------- Common stock: Beginning of year 36,698 $ 91,746 35,433 $ 88,584 30,548 76,369 Incentive stock and stock ownership plans 242 604 191 478 285 715 Stock issued for acquisition - - 1,074 2,684 - - Stock offering - - - - 4,600 11,500 ------ --------- ------ --------- ------ ------ End of year 36,940 92,350 36,698 91,746 35,433 88,584 ------ --------- ------ --------- ------ ------ ------ ------ ------ Capital in excess of par value: Beginning of year 482,107 445,501 287,665 Stock offering, net - - 148,436 Incentive stock and stock ownership plans 6,937 5,165 9,400 Stock issued for acquisition - 31,441 - --------- --------- ------ End of year 489,044 482,107 445,501 --------- --------- ------ Reinvested earnings: Beginning of year 501,231 431,120 418,085 Net earnings 35,172 113,040 55,095 Cash dividends: Common ($1.20 per share in 1993 and 1992, $1.14 in 1991) (44,153) (42,929) (38,920) Preferred - - (3,140) --------- --------- ------ End of year 492,250 501,231 431,120 --------- --------- ------ Cumulative currency translation adjustment: Beginning of year - Current translation adjustments (288) --------- End of year (288) --------- Guarantee of ESOP debt: Beginning of year (14,650) (16,218) (17,665) Payments 1,700 1,568 1,447 --------- --------- ------ End of year (12,950) (14,650) (16,218) --------- --------- ------ Total shareholders equity end of year $1,060,406 $1,060,434 $948,987 --------- --------- ------ --------- --------- ------
See notes to consolidated financial statements. -33- CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 25, 1993, December 26, 1992, and December 28, 1991 (In thousands)
1993 1992 l991 ---- ---- ---- Cash flows from operating activities: Net earnings $ 35,172 $113,040 $ 55,095 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 101,103 93,827 91,252 Credit losses 52,018 28,258 l7,281 Deferred income taxes (24,471) ll,343 (34,l58) Equity investment results 11,865 l5,l28 7,690 Facilities consolidation and reserve activities, net 87,211 (3l,226) 53,l50 Postretirement health care benefits - - l5,000 Change in assets and liabilities: Receivables (16,420) (75,924) (45,094) Inventories 58,625 (440) (74,500) Other assets (48,984) (l0,2l8) (3l,l24) Accounts payable (38,472) (4l,285) 37,l66 Other liabilities (10,883) (l6,566) 4,25l Other adjustments, net 1,779 3,918 (634) ------- ------- ------- Net cash provided by operating activities 208,543 89,855 95,375 ------- ------- ------- Cash flows from investing activities: Collections on notes receivable 82,497 88,85l 95,045 Notes receivable funded (130,846) (l68,8l4) (l93,643) Notes receivable sold 67,554 44,970 8l,986 Purchase of property and equipment (55,554) (66,376) (67,295) Proceeds from sale of property and equipment 2,955 3,603 4,748 Investments in customers (37,196) (l7,3l5) (2l,l08) Businesses acquired (51,110) (8,233) - Proceeds from sale of investments 7,077 9,763 7,l56 Other investing activities 197 (353) (8,428) ------- ------- ------- Net cash used in investing activities (114,426) (113,904) (101,539) ------- ------- ------- Cash flows from financing activities: Proceeds from long-term borrowings 331,502 462,726 353,38l Principal payments on long-term debt (373,693) (383,l88) (432,364) Principal payments on capital lease obligations (11,316) (l0,904) (ll,565) Sale of common stock under incentive stock and stock ownership plans 7,541 5,653 8,870 Dividends paid (44,153) (42,929) (4l,979) Redemption of preferred stock - (19,100) (30,900) Proceeds from common stock sale - - l59,936 Other financing activities (7,076) (4,587) 588 ---------- ------- ------- Net cash provided by (used in) financing activities (97,195) 7,67l 5,967 ------- ------- ------- Net decrease in cash and cash equivalents (3,078) (l6,378) (l97) Cash and cash equivalents, beginning of year 4,712 21,090 21,287 ------- ------- ------- Cash and cash equivalents, end of year $ 1,634 $ 4,712 $ 21,090 ------- ------- ------- ------- ------- -------
See notes to consolidated financial statements. -34- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FISCAL YEAR: The company's fiscal year ends on the last Saturday in December. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include all material subsidiaries. Material intercompany items have been eliminated. The equity method of accounting is used for investments in certain customers. CASH AND CASH EQUIVALENTS: Cash equivalents consist of liquid investments readily convertible to cash with a maturity of three months or less. The carrying amount for cash equivalents is a reasonable estimate of fair value. RECEIVABLES: Receivables include the current portion of customer notes receivable of $69.9 million (1993) and $67.8 million (1992). Receivables are shown net of allowance for credit losses of $44.3 million (1993) and $25.3 million (1992). The company extends credit to its retail customers located over a broad geographic base. Regional concentrations of credit risk are limited. INVENTORIES: Inventories are valued at the lower of cost or market. Most grocery and certain perishable inventories are valued on a last-in, first-out (LIFO) method. Other inventories are valued on a first-in, first-out (FIFO) method. PROPERTY AND EQUIPMENT: Property and equipment are recorded at cost or, for leased assets under capital leases, at the present value of minimum lease payments. Depreciation, as well as amortization of assets under capital leases, are based on the estimated useful asset lives using the straight-line method. GOODWILL: The excess of purchase price over the value of net assets of businesses acquired is amortized on the straight-line method over periods not exceeding 40 years. Goodwill is shown net of accumulated amortization of $74.2 million (1993) and $60 million (1992). Goodwill is written down if it is probable that estimated operating income generated by the related assets will be less than the carrying amount. ACCOUNTS PAYABLE: Accounts payable include $8.8 million (1993) and $11.2 million (1992) of issued checks that have not yet cleared the company's bank accounts, less deposits in transit. FINANCIAL INSTRUMENTS: Interest rate hedge transactions and other financial instruments are utilized to manage interest rate exposure. The difference between amounts to be paid or received is accrued and recognized over the life of the contracts. -35- TAXES ON INCOME: Deferred income taxes arise from temporary differences between financial and tax bases of certain assets and liabilities. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS: The methods and assumptions used to estimate the fair value of significant financial instruments are discussed in the Investments and Notes Receivable, and Long-Term Debt notes. FOREIGN CURRENCY TRANSLATION: Net exchange gains or losses resulting from the translation of assets and liabilities of an international investment are included in shareholders' equity. NET EARNINGS PER COMMON SHARE: Primary earnings per common share are computed based on net earnings, less dividends on preferred stock in 1991, divided by the weighted average common shares outstanding. The impact of common stock options on primary earnings per common share is not materially dilutive. Fully diluted earnings per common share assume conversion of the convertible subordinated notes that were redeemed during 1992. RECLASSIFICATIONS: Certain reclassifications have been made to prior year amounts to conform to current year classifications. INVENTORIES Inventories are valued as follows:
Dec. 25, Dec. 26, (In thousands) 1993 1992 - -------------- -------- -------- LIFO method $638,383 $689,358 FIFO method 284,897 269,776 -------- -------- Inventories $923,280 $959,134 -------- ------- -------- -------
Current replacement cost of LIFO inventories were greater than the carrying amounts by approximately $12.5 million at December 25, 1993, and $19.3 million at December 26, 1992. INVESTMENTS AND NOTES RECEIVABLE Investments and notes receivable consist of the following:
Dec. 25, Dec. 26, (In thousands) 1993 1992 - -------------- -------- -------- Investments in and advances to customers $164,292 $176,092 Notes receivable from customers 133,935 157,655 Other investments and receivables 11,010 10,253 -------- -------- Investments and notes receivable $309,237 $344,000 -------- -------- -------- --------
-36- The company extends long-term credit to certain retail customers it serves. Loans are primarily collateralized by inventory and fixtures. Investments and notes receivable are shown net of allowance for credit losses of $18.3 million and $18.2 million in 1993 and 1992, respectively. Interest rates are above prime with terms up to 10 years. The carrying amount of notes receivable approximates fair value because of the variable interest rates charged on the notes. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards (SFAS) No. 114 - Accounting by Creditors for Impairment of a Loan. This new statement requires that loans determined to be impaired be measured by the present value of expected future cash flows discounted at the loan's effective interest rate. The new standard is effective for the first quarter of the company's 1995 fiscal year. The company has not yet determined the impact, if any, on the consolidated statements of earnings or financial position. The company has sold certain notes receivable at face value with limited recourse. The outstanding balance at year end 1993 on all notes sold is $155.4 million, of which the company is contingently liable for $31.3 million should all the notes become uncollectible. The company guarantees bank debt of $35 million for a customer. -37- LONG-TERM DEBT Long-term debt consists of the following:
Dec. 25, Dec. 26, (In thousands) 1993 1992 -------- -------- Medium-term notes, due 1994 to 2003, average interest rates of 7.5% and 8.3% $222,450 $194,450 Commercial paper, average interest rate of 3.3% in 1993 165,866 - Unsecured term bank loans, due 1994 to 1996, average interest rates of 3.7% and 4.2% 160,000 95,000 Unsecured credit lines, average interest rates of 3.3% and 3.9% 145,000 340,000 9.5% Debentures, due 2010, annual sinking fund payments of $5,000 commencing in 1997 7,000 70,000 Guaranteed bank loan of employee stock ownership plan 12,950 14,650 Mortgaged real estate notes and other debt, varying interest rates from 3.5% to 8%, due 1994 to 2019 14,882 57,939 -------- -------- 728,148 772,039 Less current maturities 61,329 36,474 -------- -------- Long-term debt $666,819 $735,565 -------- -------- -------- --------
Aggregate maturities of long-term debt for the next five years are as follows: 1994-$61.3 million; 1995-$140.3 million; 1996-$69 million; 1997-$13.8 million and 1998-$27.8 million. In 1993 and 1992, the company recorded extraordinary losses for early retirement of debt. In 1993, the company retired $63 million of the 9.5% debentures. The extraordinary loss was $2.3 million, after income tax benefits of $2.1 million, or $.06 per share. The funding source for the early redemption was the sale of notes receivable. In 1992, the company retired the $172.5 million of convertible subordinated notes, $30 million of the 9.5% debentures and certain other debt. The extraordinary loss was $5.9 million, after income tax benefits of $3.7 million, or $.15 per share. Funding sources related to the 1992 early retirement were bank lines, medium-term notes, sale of notes receivable and commercial paper. The company has two commercial paper programs supported by committed $400 million and $200 million revolving credit agreements with a group of banks. Currently, the company limits -38- the amount of commercial paper issued at any time plus the amount of borrowing under uncommitted credit lines to the unused credit available through the committed credit agreements. The $400 million credit agreement matures in October 1997. The $200 million credit agreement matures in October 1994, but the company intends to renew the agreement prior to maturity. At year end, the company had no borrowings under the agreements which carry combined annual facility and commitment fees of .25% and .15% for the $400 million agreement and the $200 million agreement, respectively. The interest rate is based on various money market rates selected by the company at the time of borrowing. The credit agreements contain various covenants, including restrictions on additional indebtedness, payment of cash dividends and acquisition of the company's common stock. None of these covenants negatively impact the company's liquidity or capital resources at this time. Reinvested earnings of approximately $92 million were available at year end for cash dividends and acquisition of the company's stock. The agreements contain a provision that, in the event of a defined change of control, the credit agreements may be terminated. The company has registered $565 million in medium-term notes. Of this, the remaining $289.6 million may be issued from time to time, at fixed or floating interest rates, as determined at the time of issuance. The unsecured term bank loans have original maturities of three years and bear interest at floating rates. Unsecured credit lines have original maturities of generally less than one year and bear interest at floating rates. The loans contain essentially the same covenants as the revolving credit agreements and are prepayable without penalty. The carrying value of assets collateralized under mortgaged real estate notes and other debt was approximately $9.4 million and $123 million at year end 1993 and 1992, respectively. Components of interest expense are as follows:
(In thousands) 1993 1992 1991 ------ ------ ------ Interest costs incurred: Long-term debt $44,628 $50,524 $64,068 Capital lease obligations 31,355 29,103 26,915 Other 2,046 1,475 2,539 ------- ------- ------- Total incurred 78,029 81,102 93,522 Less interest capitalized - - 169 ------- ------- ------- Interest expense $78,029 $81,102 $93,353 ------- ------- ------- ------- ------- -------
-39- The company's employee stock ownership plan (ESOP) allows substantially all associates to participate. The ESOP purchased 640,000 shares of common stock from the company at $31.25 per share, resulting in proceeds of $20 million. The ESOP borrowed the money from a bank. The company guaranteed the bank loan. The loan balance is presented in long-term debt with an offset as a reduction of shareholders' equity. The ESOP will repay the loan with proceeds from company contributions. The company makes contributions based on fixed debt service requirements of the ESOP loan. The ESOP used $.6 million of common stock dividends for debt service in each of 1993, 1992 and 1991. During 1993, 1992 and 1991, the company recognized $1.1 million, $.9 million and $.8 million, respectively, in compensation expense. Interest expense of $.5 million, $.7 million and $1.3 million was recognized at average rates of 3.7%, 4.4% and 7.7% in 1993, 1992 and 1991, respectively. The company enters into interest rate hedge agreements to manage interest costs and exposure to changing interest rates. At year end 1993 and 1992, agreements were in place that effectively fixed rates on $70 million and $270 million, respectively, of the company's floating rate debt. Additionally, for both years, $60 million of agreements convert fixed rate debt to floating and a $100 million transaction hedges the company's risk of fluctuation between prime rate and LIBOR. The maturities for such agreements range from 1995 to 1998. The counterparties to these agreements are major national and international financial institutions. The fair value of long-term debt as of year end 1993 and 1992 was determined using valuation techniques that considered cash flows discounted at current market rates and management's best estimate for instruments without quoted market prices. At year end 1993 and 1992, the fair value of debt exceeded the carrying amount by $13.8 million and $16.5 million, respectively. For interest rate swap agreements, the fair value was estimated using termination cash values. At year end 1993, swap agreements had no fair value. At year end 1992, swap agreements had a fair value of $1.7 million. The company does not have any financial basis in the hedge agreements other than accrued interest payable or receivable. LEASE AGREEMENTS CAPITAL AND OPERATING LEASES: The company leases certain distribution facilities with terms generally ranging from 20 to 30 years, while lease terms for other operating facilities range from 1 to 15 years. The leases normally provide for minimum annual rentals plus executory costs and usually include provisions for one to five renewal options of five years. -40- The company leases company-operated retail store facilities with terms generally ranging from 3 to 20 years. These agreements normally provide for contingent rentals based on sales performance in excess of specified minimums. The leases usually include provisions for one to three renewal options of two to five years. Certain equipment is leased under agreements ranging from 2 to 8 years with no renewal options. Accumulated amortization related to leased assets under capital leases was $41.7 million and $59.5 million at year end 1993 and 1992, respectively. Future minimum lease payment obligations for leased assets under capital leases as of year end 1993 are set forth below:
(In thousands) LEASE YEARS OBLIGATIONS - ----- ----------- 1994 $ 16,719 1995 16,672 1996 16,554 1997 16,244 1998 15,816 Later 143,209 Total minimum lease payments 225,214 Less estimated executory costs 332 -------- Net minimum lease payments 224,882 Less interest 101,754 ------- Present value of net minimum lease payments 123,128 Less current obligations 5,618 ------- Long-term obligations $117,510 ------- -------
Future minimum lease payments required at year end 1993 under operating leases that have initial noncancelable lease terms exceeding one year are presented in the following table:
(In thousands) FACILITY FACILITIES EQUIPMENT NET YEARS RENTALS SUBLEASED RENTALS RENTALS - ----- -------- ---------- --------- ------- 1994 $ 92,936 $ 46,105 $16,407 $ 63,238 1995 83,905 43,084 10,277 51,098 1996 77,680 39,733 5,057 43,004 1997 71,364 36,700 1,219 35,883 1998 64,559 32,702 347 32,204 Later 368,039 165,396 - 202,643 ------- ------- ------ ------- Total minimum lease payments $758,483 $363,720 $33,307 $428,070 ------- ------- ------ ------- ------- ------- ------ -------
-41- The following table shows the composition of total annual rental expense under noncancelable operating leases and subleases with initial terms of one year or greater:
(In thousands) 1993 1992 1991 - -------------- ------- ------- ------- Minimum rentals $126,040 $123,189 $119,819 Contingent rentals 182 247 415 Less sublease income 57,308 54,348 51,506 ------- ------- ------- Rental expense $ 68,914 $ 69,088 $ 68,728 ------- ------- ------- ------- ------- -------
At year end 1993, the company is contingently liable for future minimum rental commitments of $335 million. DIRECT FINANCING LEASES: The company leases retail store facilities for sublease to customers with terms generally ranging from 5 to 25 years. Most leases provide for a contingent rental based on sales performance in excess of specified minimums. Sublease rentals are generally higher than the rental paid. The leases and subleases usually contain provisions for one to four renewal options of two to five years. The following table shows the future minimum rentals to be received under direct financing leases and future minimum lease payment obligations under capital leases in effect at December 25, 1993:
(In thousands) LEASE RENTALS LEASE YEARS RECEIVABLE OBLIGATIONS - ----- ------------- ----------- 1994 $ 41,633 $ 29,375 1995 40,560 29,553 1996 39,083 29,617 1997 36,751 29,646 1998 33,229 29,599 Later 293,696 277,785 ------- ------- Total minimum lease payments 484,952 425,575 Less estimated executory costs 2,062 2,055 ------- ------- Net minimum lease payments 482,890 423,520 Less unearned income 235,813 - Less interest - 196,467 ------- ------- Present value of net minimum lease payments 247,077 227,053 Less current portion 11,814 7,554 ------- ------- Long-term portion $235,263 $219,499 ------- ------- ------- -------
Contingent rental income and contingent rental expense were not material in 1993, 1992 or 1991. -42- FACILITIES CONSOLIDATION AND RESTRUCTURING The results in 1993 include a charge of $107.8 million for additional facilities consolidations, re-engineering, impairment of retail-related assets and elimination of regional operations. Facilities consolidations will result in the closure of five distribution centers, the relocation of two operations, the consolidation of a center's administrative function and completion of the 1991 facilities consolidation actions. The related charge provides for severance costs, impaired property and equipment, product handling and damage, and impaired other assets. The re-engineering component of the charge provides for severance costs of terminating associates displaced by the re-engineering plan. Impairment of retail-related assets provides for the present value of lease payments and assets associated with certain retail supermarket locations leased or owned by the company. These sites are no longer strategically viable due to size, location or age. Elimination of regional operations in early 1994 will result in cash severance payments to affected associates. The 1991 restructuring plan was initiated to reduce costs and increase operating efficiency by consolidating four distribution centers into larger, higher volume and more efficient facilities. The $67 million charge included associate severance, lease terminations and impairment of related assets. The plan has resulted in the closing or consolidation of four facilities whose operations were assimilated into other distribution centers. Additional estimated costs, related primarily to asset dispositions in process, were made in the 1993 charge. TAXES ON INCOME Components of taxes on income (tax benefit) are as follows:
(In thousands) 1993 1992 1991 - -------------- ------ ------ ------ Current: Federal $48,742 $55,473 $56,634 State 10,327 11,814 8,849 ------ ------ ------ Total current 59,069 67,287 65,483 ------ ------ ------ Deferred: Federal (20,160) 7,280 (21,500) State (4,311) 1,470 (4,019) ------ ------ ------ Total deferred (24,471) 8,750 (25,519) ------ ------ ------ Taxes on income $34,598 $76,037 $39,964 ------ ------ ------ ------ ------ ------
-43- Deferred tax expense (benefit) relating to temporary differences includes the following components:
(In thousands) 1993 1992 1991 ---- ---- ---- Depreciation $ 516 $ 2,161 $ (301) Facilities consolidation and reserve activities (31,519) 10,989 (20,977) Retirement benefits 13,094 517 (350) Investment valuation (6,767) (4,292) (1,717) Credit losses (5,417) (4,539) 421 Prepaid expenses 3,200 - - Asset dispositions 2,670 3,818 186 Lease transactions (2,307) (230) (509) Noncompete agreement 2,170 2,552 2,556 Associate benefits (2,115) (3,494) (6,525) Note sales 1,880 623 1,038 Other 124 645 659 ------ ------ ------ Deferred tax expense (benefit) $(24,471) $ 8,750 $(25,519) ------ ------ ------ ------ ------ ------
Temporary differences that give rise to deferred tax assets and liabilities as of December 25, 1993, are as follows:
DEFERRED DEFERRED TAX TAX (In thousands) ASSETS LIABILITIES --------- ----------- Depreciation $ 4,333 $ 88,609 Facilities consolidation and reserve activities 51,942 - Associate benefits 31,878 - Credit losses 22,579 - Investment valuation 13,848 1,758 Lease transactions 8,857 1,623 Inventory 7,743 18,401 Asset dispositions 5,580 - Acquired loss carryforwards 4,514 - Retirement benefits - 16,568 Note sales - 3,555 Prepaid expenses - 3,200 Other 8,954 8,582 ------- ------- Gross deferred taxes 160,228 142,296 Valuation allowance (6,514) - ------- ------- Total deferred taxes $153,714 $142,296 ------- ------- ------- ------- Total deferred taxes, December 26, 1992 $112,904 $125,957 ------- ------- ------- -------
The effect of the increase in the federal statutory rate to 35% on deferred tax assets and liabilities was immaterial. The -44- valuation allowance contains $4.5 million of acquired loss carryforwards that, if utilized, will be reversed to goodwill in future years. The effective income tax rates are different from the statutory federal income tax rates for the following reasons:
(In thousands) 1993 1992 1991 ---- ---- ---- Statutory rate 35.0% 34.0% 34.0% State income taxes, net of federal tax benefit 5.4 4.4 3.1 Acquisition-related differences 6.6 2.3 4.7 Possible assessments - (1.4) 2.1 Sale of insurance subsidiary - - (4.8) Other 1.0 (.3) (.8) ---- ---- ---- Effective rate 48.0% 39.0% 38.3% ---- ---- ---- ---- ---- ----
SHAREHOLDER'S EQUITY The company offers a Dividend Reinvestment and Stock Purchase Plan which offers shareholders the opportunity to automatically reinvest their dividends in common stock at a 5% discount from market value. Shareholders also may purchase shares at market value by making cash payments up to $5,000 per calendar quarter. Shareholders reinvested dividends in 174,000 and 157,000 new shares in 1993 and 1992, respectively. Additional shares totaling 9,000 and 13,000 in 1993 and 1992, respectively, were purchased at market value by shareholders. The company has a shareholder rights plan designed to protect shareholders should the company become the target of coercive and unfair takeover tactics. Shareholders have one right for each share of stock held. When exercisable, each right entitles shareholders to buy one share of common stock at a specific price in the event of certain defined actions that constitute a change of control. The rights expire on July 6, 1996. The company has severance agreements with certain management associates. The agreements generally provide two years' salary to these associates if the associate's employment terminates within two years after a change of control. In the event of a change of control, a supplemental trust will be funded to provide these salary obligations. INCENTIVE STOCK PLANS The company's stock option plans allow the granting of nonqualified stock options and incentive stock options, with or without stock appreciation rights (SARs), to key associates. -45- In 1993 and 1992, options with SARs were exercisable for 35,000 and 46,000 shares, respectively. Options without SARs were exercisable for 841,000 shares in 1993 and 805,000 shares in 1992. At year end 1993, there were 1.5 million shares available for grant under the stock option plans. Stock option transactions are as follows:
(Shares in thousands) Options Price Range ------- ------------- Outstanding, December 29, 1990 1,225 $4.72 - 42.13 Exercised (34) $12.88 - 37.06 Canceled and forfeited (23) - ------- ------------- Outstanding, December 28, 1991 1,168 $4.72 - 42.13 Granted 4 $30.00 Exercised (28) $12.88 - 29.81 Canceled and forfeited (60) - ------- ------------- Outstanding, December 26, 1992 1,084 $4.72 - 42.13 Exercised (59) $20.33 - 31.75 Canceled and forfeited (42) - ------- ------------- Outstanding, December 25, 1993 983 $4.72 - 42.13 ------- ------------ ------- ------------
The company has a stock incentive plan that allows awards to key associates of up to 400,000 restricted shares of common stock and phantom stock units. The company has issued 133,000 restricted common shares, net of 10,000 shares forfeited in 1993. These shares were recorded at the market value when issued, $4.4 million, and are amortized to expense as earned. The unamortized portion, $1.8 million and $2.1 million in 1993 and 1992, respectively, is netted against capital in excess of par value within shareholders' equity. In the event of a change of control, the company may accelerate the vesting and payment of any award or make a payment in lieu of an award. ASSOCIATE RETIREMENT PLANS The company sponsors retirement and profit sharing plans for substantially all nonunion and some union associates. The company also has nonqualified, unfunded supplemental retirement plans for selected associates. These plans comprise the company's defined benefit pension plans. Contributory profit sharing plans maintained by the company are for associates who meet certain types of employment and length of service requirements. Company contributions under these defined contribution plans are made at the discretion of the board of directors. Expenses for these plans were $2 million, $1.1 million and $.8 million in 1993, 1992 and 1991, respectively. -46- Benefit calculations for the company's defined benefit pension plans are primarily a function of years of service and final average earnings at the time of retirement. Final average earnings are the average of the highest five years of compensation during the last 10 years of employment. The company funds these plans by contributing the actuarially computed amounts that meet funding requirements. The following table sets forth the company's defined benefit pension plans' funded status and the amounts recognized in the statements of earnings. Substantially all the plans' assets are invested in listed stocks, short-term investments and bonds. The significant actuarial assumptions used in the calculation of funded status for 1993 and 1992 are: discount rate - 7.5% and 8.5%, respectively; compensation increases - 4% and 5%, respectively; and return on assets - 9.5% and 10%, respectively.
December 25, 1993 December 26, 1992 ----------------- ----------------- Assets Accumulated Assets Accumulated Exceed Benefits Exceed Benefits Accumulated Excced Accumulated Exceed (In thousands) Benefits Assets Benefits Assets - ---------------------------------------------------------------------- Actuarial present value of accumulated benefit obligations: Vested $166,474 $9,587 $129,248 $11,701 Total $174,332 $16,577 $135,895 $12,444 -------- ------- -------- ------- -------- ------- -------- ------- Projected benefit obligations $187,833 $18,302 $149,108 $13,886 Plan assets at fair value 176,307 - 139,989 - -------- ------- -------- ------- Projected benefit obligation in excess of plan assets 11,526 18,302 29,119 13,886 Unrecognized net loss (42,195) (7,672) (19,800) (5,416) Unrecognized prior service cost (2,293) (777) (2,910) - Unrecognized net asset (obligation) 291 (216) 1,447 (749) ------- ------- -------- ------ Pension liability (asset) $(32,671) $ 9,637 $(12,144) $ 7,721 -------- ------- -------- ------- -------- ------- -------- -------
-47- Net pension expense includes the following components:
(In thousands) 1993 1992 1991 ------- ------- ------- Service cost $ 5,323 $ 4,997 $ 4,651 Interest cost 14,792 13,503 11,955 Actual return on plan assets (19,103) (8,159) (24,159) Net amortization and deferral 8,039 (5,030) 15,170 ------- ------- ------- Net pension expense $ 9,051 $ 5,311 $ 7,617 ------- ------- ------- ------- ------- -------
Certain associates have pension and health care benefits provided under collectively bargained multiemployer agreements. Expenses for these benefits were $44 million, $40 million and $37.1 million for 1993, 1992 and 1991, respectively. ASSOCIATE POSTRETIREMENT HEALTH CARE BENEFITS In 1991, the company adopted SFAS No. 106 - Employers' Accounting for Postretirement Benefits Other Than Pensions. The company elected to recognize immediately the accumulated postretirement benefit obligation, resulting in a charge to net earnings of $9.3 million. The effect of the change on 1991 net earnings, excluding the cumulative effect upon adoption, was not material. The company offers a comprehensive major medical plan to eligible retired associates who meet certain age and years of service requirements. This unfunded defined benefit plan generally provides medical benefits until Medicare insurance commences. Components of postretirement benefits expense are as follows:
(In thousands) 1993 1992 1991 ------ ------ ------ Service cost $ 140 $ 108 $ 194 Interest cost 1,628 1,430 1,210 Amortization of net loss 138 - - ----- ----- ----- Postretirement expense $1,906 $1,538 $1,404 ----- ----- ----- ----- ----- -----
-48- The composition of the accumulated postretirement benefit obligation (APBO) and the amounts recognized in the balance sheets are presented below.
(In thousands) 1993 1992 ------ ------ Retirees $13,299 $13,824 Fully eligible actives 1,916 1,695 Others 1,680 1,485 APBO 16,895 17,004 Unrecognized net loss 3,333 - ------ ------ Accrued postretirement benefit cost $13,562 $17,004 ------ ------ ------ ------
During 1993, a postretirement benefit obligation was settled. No additional benefit payments will be made for this terminated obligation. The weighted average discount rate used in determining the APBO was 7.5% and 9.5% for 1993 and 1992, respectively. For measurement purposes in 1993 and 1992, a 14% and 15%, respectively, annual rate of increase in the per capita cost of covered medical care benefits was assumed. In 1993, the rate was assumed to decrease to 8% by 2000, then to 7.5% in 2001 and thereafter. In 1992, the rate was assumed to decrease to 8% by 1999 and remain at 8% thereafter. If the assumed health care cost increased by 1% for each future year, the current cost and the APBO would have increased by 3% to 5% for all periods presented. The company also provides other benefits for certain inactive associates. Expenses related to these benefits are immaterial. SUPPLEMENTAL CASH FLOWS INFORMATION
(In thousands) 1993 1992 1991 ------ ------ ------ Cash paid during the year for: Interest, net of amounts capitalized $79,634 $82,051 $91,301 Income taxes $74,320 $65,884 $61,437 Direct financing leases and related obligations $33,594 $27,507 $44,055 Property and equipment additions by capital leases $21,011 $22,513 $9,182
-49- In 1993, the company acquired the assets or common stock of three businesses. In August, the company purchased distribution center assets located in Garland, Texas. In September and November, the company purchased certain assets and the common stock, respectively, of two supermarket operators in southern Florida. The acquisitions were accounted for as purchases. The results of these entities are not material to the company. Cash paid for the acquisitions, net of cash acquired, was $51.1 million. The fair value of assets acquired was $111.1 million, with liabilities assumed or created of $9 million. In 1992, the company acquired the common stock of Baker's Supermarkets, the operator of 10 supermarkets located in Omaha, Neb. The acquisition was accounted for as a purchase. The results of Baker's operations are not material to the company. The company issued 1,073,512 shares of common stock at a price of $31.79 per share, or $34.1 million. The fair value of assets acquired was $88.7 million, with liabilities assumed or created of $39.8 million. Cash paid for the acquisition, net of cash acquired, was $8.2 million. LITIGATION AND CONTINGENCIES 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 on the part of the company 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. Because the litigation is in its preliminary stages, management has been unable to conclude that an adverse resolution is not reasonably likely and its ultimate outcome cannot presently be determined. Accordingly, management cannot predict the potential liability, if any, to the company. However, the company has begun an investigation and, based on available information, management does not believe that an adverse outcome is likely that would materially affect the company's consolidated financial position. The company intends to vigorously defend against the suits. The company's facilities are subject to various laws and regulations regarding the discharge of materials into the environment. In conformity with these provisions, the company has a comprehensive program for testing and removal, replacement or repair of its underground fuel storage tanks and for site remediation where necessary. The company has established reserves that it believes will be sufficient to satisfy anticipated costs of all known remediation requirements. In -50- addition, the company is addressing several other environmental cleanup matters involving its properties, all of which the company believes are immaterial. From time to time the company is named as a potentially responsible party, with others, with respect to EPA-designated superfund sites. Under current law, the company's liability for remediation of such sites may be joint and several with other responsible parties, regardless of the extent of the company's use of the sites in relation to other users. However, the company believes that, to the extent it is ultimately determined to be liable for hazardous waste deposited at any site, such liability will not result in a material adverse effect on its consolidated financial position or results of operations. The company is committed to maintaining the environment and protecting natural resources and to achieving full compliance with all applicable laws and regulations. The company is a party to various other litigation, possible tax assessments and other matters, some of which are for substantial amounts, arising in the ordinary course of business. While the ultimate effect of such actions cannot be predicted with certainty, the company expects that the outcome of these matters will not result in a material adverse effect on its consolidated financial position or results of operations. -51- To the Board of Directors and Shareholders Fleming Companies, Inc. We have audited the accompanying consolidated balance sheets of Fleming Companies, Inc. and subsidiaries as of December 25, 1993 and December 26, 1992, and the related consolidated statements of earnings, shareholders' equity, and cash flows for each of the three years in the period ended December 25, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14. These financial statements and financial statement schedules are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Fleming Companies, Inc. and subsidiaries as of December 25, 1993 and December 26, 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 25, 1993 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedules when considered in relation to the basic consolidated statements taken as a whole, present fairly in all material respects the information set forth therein. /s/ Deloitte & Touche Oklahoma City, Oklahoma February 10, 1994 -52- QUARTERLY FINANCIAL INFORMATION (In thousands, except per share amounts) (Unaudited)
- --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- 1993 First Second Third Fourth Year - --------------------------------------------------------------------------------------------------------- Net sales $4,044,894 $2,964,655 $2,936,010 $3,146,586 $13,092,145 Costs and expenses: Cost of sales 3,803,545 2,787,087 2,767,074 2,969,072 12,326,778 Selling and administrative 170,893 121,366 125,106 141,105 558,470 Interest expenses 23,481 17,804 17,796 18,948 78,029 Interest income (18,548) (14,469) (14,885) (15,000) (62,902) Equity investment results 2,067 805 2,952 6,041 11,865 Facilities consolidation and restructuring - 6,500 - 101,327 107,827 - --------------------------------------------------------------------------------------------------------- Total costs and expenses 3,981,438 2,919,093 2,898,043 3,221,493 13,020,067 - --------------------------------------------------------------------------------------------------------- Earnings (loss) before taxes 63,456 45,562 37,967 (74,907) 72,078 Taxes on income (tax benefit) 26,081 18,726 17,662 (27,871) 34,598 - --------------------------------------------------------------------------------------------------------- Earnings (loss) before extraordinary loss 37,375 26,836 20,305 (47,036) 37,480 Extraordinary loss from early retirement of debt - - - 2,308 2,308 - --------------------------------------------------------------------------------------------------------- Net earnings (loss) $ 37,375 $ 26,836 $ 20,305 $ (49,344) $ 35,172 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Net earnings (loss) per share: Primary before extraordinary loss $1.02 $.73 $.55 $(1.28) $1.02 Extraordinary loss - - - .06 .06 - --------------------------------------------------------------------------------------------------------- Primary $1.02 $.73 $.55 $(1.34) $.96 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Fully diluted before extraordinary loss $1.02 $.73 $.55 $(1.28) $1.02 Extraordinary loss - - - .06 .06 - --------------------------------------------------------------------------------------------------------- Fully diluted $1.02 $.73 $.55 $(1.34) $ .96 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Dividends paid per share $.30 $.30 $.30 $.30 $1.20 Weighted average shares outstanding 36,722 36,780 36,833 36,896 36,801 - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
The first quarter of both years consists of 16 weeks, all other quarters are 12 weeks. The second quarter of 1993 includes $11.2 million of pretax income resulting from the favorable resolution of a litigation matter and a $1.2 million accrual for charges in other legal proceedings. Also included is a $2 million charge for an increase to previously established reserves related to the company's contingent liability for lease obligations. The company also recorded a $4.6 million gain from a real estate transaction during the second quarter of 1993. The effective tax rate was increased in the third quarter of 1993 due to the new tax law enacted in August 1993. See discussion of facilities consolidation and restructuring charges in the notes to consolidated financial statements. -53- QUARTERLY FINANCIAL INFORMATION (In thousands, except per share amounts) (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------- 1992 First Second Third Fourth Year - ------------------------------------------------------------------------------------------------------------------------ Net sales $3,905,861 $2,955,934 $2,926,805 $3,104,934 $12,893,534 Costs and expenses: Cost of sales 3,678,598 2,796,876 2,773,220 2,918,164 12,166,858 Selling and administrative 151,033 107,633 107,154 129,163 494,983 Interest expense 26,332 18,577 18,626 17,567 81,102 Interest income (17,032) (14,524) (13,585) (14,336) (59,477) Equity investment results 3,486 3,931 4,013 3,697 15,127 - ------------------------------------------------------------------------------------------------------------------------ Total costs and expenses 3,842,417 2,912,493 2,889,428 3,054,255 12,698,593 - ------------------------------------------------------------------------------------------------------------------------ Earnings before taxes 63,444 43,441 37,377 50,679 194,941 Taxes on income 24,749 16,943 14,573 19,772 76,037 - ------------------------------------------------------------------------------------------------------------------------ Earnings before extraordinary loss 38,695 26,498 22,804 30,907 118,904 Extraordinary loss from early retirement of debt - - - 5,864 5,864 - ------------------------------------------------------------------------------------------------------------------------ Net earnings $ 38,695 $ 26,498 $ 22,804 $ 25,043 $ 113,040 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ Net earnings per share: Primary before extraordinary loss $1.09 $.75 $.64 $.84 $3.33 Extraordinary loss - - - .16 .15 - ------------------------------------------------------------------------------------------------------------------------ Primary $1.09 $.75 $.64 $.68 $3.16 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ Fully diluted before extraordinary loss $1.04 $.72 $.62 $.83 $3.21 Extra ordinary loss - - - .16 .15 - ------------------------------------------------------------------------------------------------------------------------ Fully diluted $1.04 $.72 $.62 $.68 $3.06 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ Dividends paid per share $.30 $.30 $.30 $.30 $1.20 Weighted average common shares outstanding 35,449 35,493 35,541 36,657 35,759 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
The fourth quarter of 1992 reflects $4.9 million of income related to litigation settlement. -54- SCHEDULE V ---------- FLEMING COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES ----------------------------- SCHEDULE V - PROPERTY AND EQUIPMENT ----------------------------------- YEARS ENDED DECEMBER 25, 1993, DECEMBER 26, 1992, AND DECEMBER 28, 1991 ---------------------------------------- (In thousands)
Leased Lease- Assets Fixtures hold Under and Improve- Capital Land Buildings Equipment ments Leases Total ------- --------- --------- -------- -------- -------- BALANCE, December 29, 1990 $44,802 $239,481 $368,777 $113,422 $120,237 $886,719 Additions at cost 1,756 8,517 56,507 5,722 9,181 81,683 Retirements or sales (146) (725) (30,038) (3,204) (1,708) (35,821) ------- --------- --------- -------- -------- ---------- BALANCE, December 28, 1991 46,412 247,273 395,246 115,940 127,710 932,581 Additions at cost 23 5,014 53,194 7,961 22,490 88,682 Business acquired --- --- 10,469 1,576 13,629 25,674 Retirements or sales (142) (967) (20,841) (1,743) (11,092) (34,785) ------- --------- --------- -------- -------- ---------- BALANCE, December 26, 1992 46,293 251,320 438,068 123,734 152,737 1,012,152 Additions at cost 4 7,257 39,859 7,613 21,011 75,744 Businesses acquired 5,354 15,620 19,956 7,132 1,509 49,571 Retirements, impairments or sales (2,071) (5,880) (30,979) (4,582) (32,050) (75,562) ------- --------- --------- -------- -------- ---------- BALANCE, December 25, 1993 $49,580 $268,317 $466,904 $133,897 $143,207 $1,061,905 ------- --------- --------- -------- -------- ---------- ------- --------- --------- -------- -------- ----------
In general, the estimated useful lives used in computing depreciation and amortization are: buildings and major improvements - 20 to 40 years; warehouse, transportation and other equipment - 3 to 10 years; mechanized warehouse equipment - 15 years; and data processing equipment - 5 to 7 years. Impairments in 1993 includes $16.7 million of property writedown recognized through facilities consolidation and restructuring charge. -55- SCHEDULE VI ----------- FLEMING COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES ----------------------------- SCHEDULE VI - ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT ------------------------------------------ YEARS ENDED DECEMBER 25, 1993, DECEMBER 26, 1992 AND DECEMBER 28, 1991 --------------------------------------- (In thousands)
Leased Lease- Assets Fixtures hold Under and Improve- Capital Buildings Equipment ments Leases Total --------- --------- -------- ------- -------- BALANCE, December 29, 1990 $42,323 $179,570 $32,536 $53,877 $308,306 Charged to costs and expenses 10,275 47,147 8,524 6,750 72,696 Retirement or sales (417) (21,314) (2,133) (1,708) (25,572) --------- --------- -------- ------- -------- BALANCE, December 28, 1991 52,181 205,403 38,927 58,919 355,430 Charged to costs and expenses 10,077 47,539 7,943 6,262 71,821 Retirement or sales (661) (17,876) (1,633) (5,635) (25,805) --------- --------- -------- ------- -------- BALANCE, December 26, 1992 61,597 235,066 45,237 59,546 401,446 Charged to costs and expenses 10,892 49,709 9,130 6,853 76,584 Retirement, impairments or sales (183) (23,934) (2,337) (24,730) (51,184) --------- --------- -------- ------- -------- BALANCE, December 25, 1993 $72,306 $260,841 $52,030 $41,669 $426,846 --------- --------- -------- ------- -------- --------- --------- -------- ------- --------
Impairments in 1993 includes $1.3 million of accumulated amortization written off through facilities consolidation and restructuring charge. -56- SCHEDULE VIII ------------- FLEMING COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES ----------------------------- SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS ------------------------------------------------- YEARS ENDED DECEMBER 25, 1993, DECEMBER 26, 1992, AND DECEMBER 28, 1991 ---------------------------------------- (In thousands)
Allowance for ALLOWANCE FOR DOUBTFUL ACCOUNTS Credit Losses Current Noncurrent - ------------------------------- ------------- ------- ---------- BALANCE, December 29, 1990 $28,232 Charged to costs and expenses 17,281 Charge for noncurrent account impairments 7,428 Uncollectible accounts written off, less recoveries (20,183) ------ BALANCE, December 28, 1991 32,758 $25,330 $7,428 ------ ----- ------ ----- Charged to costs and expenses 28,258 Uncollectible accounts written off, less recoveries (17,485) ------ BALANCE, December 26, 1992 43,531 $25,298 $18,233 ------ ----- ------ ----- Charged to costs and expenses 52,018 Uncollectible accounts written off, 32,954 less recoveries BALANCE, December 25, 1993 $62,595 $44,320 $18,275 ------- ------- ------- ------- ------- -------
-57- EX-4.2 2 DOC 2 EXHIBIT 4.2 AMENDMENT NO. 1 TO CREDIT AGREEMENT AMENDMENT dated as of January 17, 1994, to the $400,000,000 Credit Agreement dated as of October 21, 1993 (the "Credit Agreement") among FLEMING COMPANIES, INC., the BANKS party thereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent. W I T N E S S E T H: WHEREAS, the entities named above are parties to the Credit Agreement; WHEREAS, the parties hereto desire to amend the Credit Agreement to effect the amendment reflected herein; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically defined herein, each term used herein that is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. Each reference to "hereof," "hereunder," "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Credit Agreement shall from and after the date hereof refer to the Credit Agreement as amended hereby. SECTION 2. AMENDMENT OF SECTION 5.09 OF THE CREDIT AGREEMENT. Section 5.09 of the Credit Agreement is hereby amended in its entirety to read as follows: "As of the last day of each fiscal quarter of the Borrower, the ratio of Net Earnings Available for Fixed Charges to Consolidated Fixed Charges, in each case for the four fiscal quarters ending on such day, shall not be less than 1.6 to 1; PROVIDED that Net Earnings Available For Fixed Charges for any period shall be calculated on a pro forma basis excluding any charge of up to $101,300,000 for the Borrower Special Charges. "Borrower Special Charges" means the charges to the Borrower's earnings in December 1993 relating to the consolidation of certain of the Borrower's facilities and operations, as approved by the board of directors of the Borrower at a meeting on January 17, 1994." SECTION 3. COUNTERPARTS; EFFECTIVENESS. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment shall become effective when the Agent shall have received duly executed counterparts hereof signed by the Borrower and the Required Banks (or, in the case of any Bank as to which an executed counterpart shall not have been received, the Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party) and, once so effective, Section 2 hereof shall be given effect retroactively to December 25, 1993. -58- SECTION 4. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. FLEMING COMPANIES, INC. By /S/ JOHN M. THOMPSON ------------------------------ Name: John M. Thompson Title: Vice President and Treasurer MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /S/ MICHAEL C. MAUER ------------------------------ Name: Michael C. Mauer Title: Vice President J.P. MORGAN DELAWARE By /S/ D.J. MORRIS ------------------------------ Name: David J. Morris Title: Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /S/ JODY B. SCHNEIDER ------------------------------ Name: Jody B. Schneider Title: Vice President By /S/ C.L. TURNER, III ------------------------------ Name: C.L. Turner, III Title: Vice President BOATMEN'S FIRST NATIONAL BANK OF OKLAHOMA By /S/ K. RANDY ROPER ------------------------------ Name: K. Randy Roper Title: Senior Vice President CREDIT SUISSE By /S/ WILLIAM P. MURRAY ------------------------------ Name: William P. Murray Title: Member of Senior Management By /S/ KRISTINN R. KRISTINSSON ------------------------------ Name: Kristinn R. Kristinsson Title: Member of Senior Management -59- TEXAS COMMERCE BANK, NATIONAL ASSOCIATION By /S/ JOHN P. DEAN ------------------------------ Name: John P. Dean Title: Senior Vice President CIBC, INC. By /S/ J.D. WESTLAND ------------------------------ Name: J.D. Westland Title: Vice President NATIONSBANK OF TEXAS, N.A. By /S/ BIANCA HEMMEN ------------------------------ Name: Bianca Hemmen Title: Vice President By /S/ STEVEN A. DEILY ------------------------------ Name: Steven A. Deily Title: Senior Vice President SWISS BANK CORPORATION By /S/ THAD D. RASCHE ------------------------------ Name: Thad D. Rasche Title: Director Merchant Banking By /S/ NEIL R. GUNN ------------------------------ Name: Neil R. Gunn Title: Associate Director Merchant Banking UNION BANK OF SWITZERLAND By /S/ A. IMHOLZ ------------------------------ Name: Alfred W. Imholz Title: First Vice President By /S/ JAN BUETTGEN ------------------------------ Name: Jan Buettgen Title: Assistant Vice President THE BANK OF NOVA SCOTIA By /S/ A.S. NORSWORTHY ------------------------------ Name: A.S. Norsworthy Title: Assistant Agent THE TORONTO-DOMINION BANK By /S/ F.B. HAWLEY ------------------------------ Name: F.B. Hawley Title: Mgr. Cr. Amin. -60- WACHOVIA BANK OF GEORGIA, N.A. By /S/ TERRY KATON ------------------------------ Name: Terry Katon Title: Assistant Vice President THE FIRST NATIONAL BANK OF CHICAGO By /S/ SHARON A. HUEBNER ------------------------------ Name: Sharon A. Huebner Title: Vice President KREDIETBANK, N.V. By /S/ PATRICIA A. MCCANN ------------------------------ Name: Patricia A. McCann Title: Vice President By /S/ ROBERT SNAUFFER ------------------------------ Name: Robert Snauffer Title: Vice President BANQUE NATIONALE DE PARIS, HOUSTON AGENCY By /S/ HENRY F. SETINA ------------------------------ Name: Henry F. Setina Title: Vice President FIRST INTERSTATE BANK OF CALIFORNIA By /S/ W. J. BAIRD ------------------------------ Name: William J. Baird Title: Vice President FIRST TENNESSEE BANK NATIONAL ASSOCIATION By /S/ GEORGE COULOUBARITSIS ------------------------------ Name: George Couloubaritsis Title: Vice President THE FUGI BANK, LIMITED By /S/ DAVID KELLEY ------------------------------ Name: David Kelley Title: Vice President and Senior Manager LIBERTY BANK AND TRUST COMPANY OF OKLAHOMA CITY, N.A. By /S/ LAURA CHRISTOFFERSON ------------------------------ Name: Laura Christofferson Title: Vice President -61- THE MITSUBISHI BANK, LTD., HOUSTON AGENCY By SHOJI HONDA ------------------------------ Name: Shoji Honda Title: General Manager NORDDEUTSCHE LANDESBANK GIROZENTRALE By /S/ S.K. HUNTER ------------------------------ Name: Stephen K. Hunter Title: Senior Vice President By /S/ STEPHANIE HOEVERMANN ------------------------------ Name: Stephanie Hoevermann Title: Vice President PNC BANK, NATIONAL ASSOCIATION By /S/ TAMARA R. O'CONNOR ------------------------------ Name: Tamara R. O'Connor Title: Vice President SOCIETE GENERALE, SOUTHWEST AGENCY By /S/ RICHARD M. LEWIS ------------------------------ Name: Richard M. Lewis Title: Assistant Vice President By /S/ CHRISTOPHER SPEITZ ------------------------------ Name: Christopher Speitz Title: Vice President BANK IV KANSAS, N.A. By /S/ MIKE WEGENG ------------------------------ Name: Mike Wegeng Title: Vice President FIRST NATIONAL BANK OF OMAHA By /S/ R.W. TRITSEL ------------------------------ Name: R.W. Tritsel Title: Vice President THE SANWA BANK LIMITED, DALLAS AGENCY By /S/ MASAO YANO ------------------------------ Name: Masao Yano Title: Vice President -62- EX-4.4 3 DOC 3 EXHIBIT 4.4 AMENDMENT NO. 1 TO CREDIT AGREEMENT AMENDMENT dated as of January 17, 1994, to the $200,000,000 Credit Agreement dated as of October 21, 1993 (the "Credit Agreement") among FLEMING COMPANIES, INC., the BANKS party thereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent. W I T N E S S E T H: WHEREAS, the entities named above are parties to the Credit Agreement; WHEREAS, the parties hereto desire to amend the Credit Agreement to effect the amendment reflected herein; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically defined herein, each term used herein that is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. Each reference to "hereof," "hereunder," "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Credit Agreement shall from and after the date hereof refer to the Credit Agreement as amended hereby. SECTION 2. AMENDMENT OF SECTION 5.09 OF THE CREDIT AGREEMENT. Section 5.09 of the Credit Agreement is hereby amended in its entirety to read as follows: "As of the last day of each fiscal quarter of the Borrower, the ratio of Net Earnings Available for Fixed Charges to Consolidated Fixed Charges, in each case for the four fiscal quarters ending on such day, shall not be less than 1.6 to 1; PROVIDED that Net Earnings Available For Fixed Charges for any period shall be calculated on a pro forma basis excluding any charge of up to $101,300,000 for the Borrower Special Charges. "Borrower Special Charges" means the charges to the Borrower's earnings in December 1993 relating to the consolidation of certain of the Borrower's facilities and operations, as approved by the board of directors of the Borrower at a meeting on January 17, 1994." SECTION 3. COUNTERPARTS; EFFECTIVENESS. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment shall become effective when the Agent shall have received duly executed counterparts hereof signed by the Borrower and the Required Banks (or, in the case of any Bank as to which an executed counterpart shall not have received, the Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party) and, once so effective, Section 2 hereof shall be given effect retroactively to December 25, 1993. -63- SECTION 4. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. FLEMING COMPANIES, INC. By /s/ John M. Thompson ------------------------------- Name:John M. Thompson Title: Vice President and Treasurer MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ Michael C. Mauer ------------------------------ Name: Michael C. Mauer Title: Vice President J.P. MORGAN DELAWARE By /s/ D.J. Morris ------------------------------ Name: David J. Morris Title: Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ Jody B. Schneider ------------------------------ Name: Jody B. Schneider Title: Vice President By /s/ C.L. Turner, III ------------------------------ Name: C.L. Turner, III Title: Vice President BOATMEN'S FIRST NATIONAL BANK OF OKLAHOMA By /s/ K. Randy Roper ------------------------------ Name: K. Randy Roper Title: Senior Vice President CREDIT SUISSE By /s/ Jan Kofol ------------------------------ Name: Jan Kofol Title: Member of Senior Management -64- By /s/ Harry R. Olsen ------------------------------ Name: Harry R. Olsen Title: Member of Senior Management TEXAS COMMERCE BANK, NATIONAL ASSOCIATION By /s/ John P. Dean ------------------------------ Name: John P. Dean Title: Senior Vice President CIBC, INC. By /s/ J.D. Westland ------------------------------ Name: J.D. Westland Title: Vice President NATIONSBANK OF TEXAS, N.A. By /s/ Bianca Hemmen ------------------------------ Name: Bianca Hemmen Title: Vice President By /s/ Steven A. Deily ------------------------------ Name: Steven A. Deily Title: Senior Vice President SWISS BANK CORPORATION By /s/ Thad D. Rasche ------------------------------ Name: Thad D. Rasche Title: Director Merchant Banking By /s/ W.A. McDonnell ------------------------------ Name: William A. McConnell Title: Associate Director Merchant Banking UNION BANK OF SWITZERLAND By /s/ A. Imholz ------------------------------ Name: Alfred W. Imholz Title: First Vice President By /s/ Jan Buettgen ------------------------------ Name: Jan Buettgen Title: Assistant Vice President -65- THE BANK OF NOVA SCOTIA By /s/ A.S. Norsworthy ------------------------------ Name: A.S. Norsworthy Title: Assistant Agent THE TORONTO-DOMINION BANK By /s/ F.B. Hawley ------------------------------ Name: F.B. Hawley Title: Mgr. Cr. Amin. WACHOVIA BANK OF GEORGIA, N.A. By /s/ Terry Katon ------------------------------ Name: Terry Katon Title: Assistant Vice President THE FIRST NATIONAL BANK OF CHICAGO By /s/ Sharon A. Huebner ------------------------------ Name: Sharon A. Huebner Title: Vice President KREDIETBANK, N.V. By /s/ Patricia A. McCann ------------------------------ Name: Patricia A. McCann Title: Vice President By /s/ Robert Snauffer ------------------------------ Name: Robert Snauffer Title: Vice President BANQUE NATIONALE DE PARIS, HOUSTON AGENCY By /s/ Henry F. Setina ------------------------------ Name: Henry F. Setina Title: Vice President FIRST INTERSTATE BANK OF CALIFORNIA By /s/ William J. Baird ------------------------------ Name: William J. Baird Title: Vice President FIRST TENNESSEE BANK NATIONAL ASSOCIATION By /s/ George Couloubaritsis ------------------------------ Name: George Couloubaritsis Title: Vice President -66- THE FUGI BANK, LIMITED By /s/ David Kelley ------------------------------ Name: David Kelley Title: Vice President and Senior Manager LIBERTY BANK AND TRUST COMPANY OF OKLAHOMA CITY, N.A. By /s/ Laura Christofferson ------------------------------- Name: Laura Christofferson Title: Vice President THE MITSUBISHI BANK, LTD., HOUSTON AGENCY By /s/ Shoji Honda ------------------------------ Name: Shoji Honda Title: General Manager NORDDEUTSCHE LANDESBANK GIROZENTRALE By /s/ S.K. Hunter ------------------------------ Name: S.K. Hunter Title: Senior Vice President By /s/ Stephanie Hoevermann ------------------------------- Name: Stephanie Hoevermann Title: Vice President PNC BANK, NATIONAL ASSOCIATION By /s/ Tamara R. O'Connor ------------------------------ Name: Tamara R. O'Connor Title: Vice President SOCIETE GENERALE, SOUTHWEST AGENCY By /s/ Richard M. Lewis ---------------------------- Name: Richard M. Lewis Title: Assistant Vice President By /s/ Christopher Speitz ------------------------------ Name: Christopher Speitz Title: Vice President BANK IV KANSAS, N.A. By /s/ Mike Wegeng ------------------------------ Name: Mike Wegeng Title: Vice President -67- FIRST NATIONAL BANK OF OMAHA By /s/ R.W. Tritsel ------------------------------ Name: R.W. Tritsel Title: Vice President THE SANWA BANK LIMITED, DALLAS AGENCY By /s/ Masao Yano ------------------------------ Name: Masao Yano Title: Vice President -68- EX-4.5 4 DOC 4 EXHIBIT 4.5 ----------- INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES -------------------------------------- The Registrant has various long-term debt agreements which define the rights of the holders of the related debt securities of the Registrant. No agreement with respect to the Registrant's long-term debt exceeds 10% of total assets, except the $400,000,000 Credit Agreement dated as of October 21, 1993 (as amended) (incorporated by reference) and the Indenture dated as of December 1, 1990 (incorporated by reference). Debt agreements that do not exceed 10% of total assets have not been filed. The Registrant agrees to furnish copies of any unfiled debt agreements to the Commission upon request. FLEMING COMPANIES, INC. -------------------------------- (Registrant) Date March 24, 1994 By /s/ DONALD N. EYLER --------------------- ------------------------------ Donald N. Eyler Sr. Vice President-Controller (Chief Accounting Officer) -69- EX-10.6 5 DOC 5 EXHIBIT 10.6 NON-QUALIFIED PERFORMANCE STOCK OPTION AGREEMENT UNDER THE FLEMING COMPANIES, INC. 1985 STOCK OPTION PLAN THIS NON-QUALIFIED PERFORMANCE STOCK OPTION AGREEMENT (the "Option Agreement"), made as of this 16th day of February, 1994, at Oklahoma City, Oklahoma, by and between ___________________________________________ (hereinafter referred to as the "Participant"), and Fleming Companies, Inc. (hereinafter referred to as the "Company"): W I T N E S S E T H: WHEREAS, the Participant is a key management associate of the Company or one of its subsidiaries, and it is important to the Company that the Participant be encouraged to remain in the employ of the Company or one of its subsidiaries; and WHEREAS, in recognition of such facts, the Company desires to provide to the Participant an opportunity to purchase shares of the common stock of the Company, as hereinafter provided, pursuant to the "Fleming Companies, Inc. 1985 Stock Option Plan" (the "Plan"). NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for good and valuable consideration, the Participant and the Company hereby agree as follows: 1. GRANT OF STOCK OPTION. The Company hereby grants to the Participant a Non-Qualified Stock Option (the "Stock Option") as described under Sections 83 and 421 of the Internal Revenue Code of 1986, as amended, to purchase all or any part of an aggregate of __________________________ (______) shares of its common stock (the "Stock") of the Company as set forth below, under and subject to the terms and conditions of this Option Agreement and the Plan, each of which is incorporated herein by reference and made a part hereof for all purposes. The purchase price per share for each share of Stock to be purchased hereunder shall be $24.9375. 2. TIMES OF EXERCISE OF STOCK OPTION. (a) EXERCISE AFTER DETERMINATION DATE. After, and only after, the conditions of paragraph 8 hereof have been satisfied, the Participant shall be eligible to exercise that portion of his Stock Option pursuant to the schedule set forth hereinafter. If the Participant's employment with the Company (or its parent or any one or more of its subsidiaries) remains full-time and continuous at all times prior to any of the "Determination Dates" as such term is hereinafter defined, then the Participant shall be entitled, subject to the applicable provisions of the Plan and this Option Agreement having been satisfied, to exercise on or after the applicable Determination Date, on a cumulative basis, the number of shares of Stock determined by multiplying the aggregate number of shares set forth in the foregoing paragraph 1 by the designated percentage set forth hereafter. For purposes of this Option Agreement, the term "Determination Date" shall mean the date on which the Compensation and Organization Committee of the Board of Directors of the Company (the "Committee") certifies that the average of the last reported sales price of the -70- Stock on the New York Stock Exchange Composite Transactions report for any twenty (20) consecutive business day period shall have equaled or exceeded a target stock price set forth below (the "Target Stock Price"). In order to fulfill the certification requirement, the Committee shall meet in person or by telephone or act by unanimous written consent no later than thirty days after the achievement of a Target Stock Price for the required period.
Percent of Stock Target Stock Price Option Exercisable ------------------ ------------------ $28 10% $31 20% $34 30% $37 40% $40 50% $43 60% $47 70% $50 80% $53 90% $56 100%
(b) ADJUSTMENTS TO TARGET STOCK PRICE. In case of a recapitalization, stock split, merger, stock dividend, reorganization, combination, liquidation, or other change in the Stock (an "Adjustment Event"), the Target Stock Prices shall be automatically adjusted to reflect such Adjustment Event. 3. TERM OF STOCK OPTION. The term of the Stock Option ("Option Period") shall be for a period of 10 years from the date hereof, but no such option shall be exercisable within six months from the date of grant; and, the Stock Option may not be exercised at any time unless the Participant shall have been in the full-time continuous employ of the Company, the parent or one or more of its subsidiaries, from the date hereof to the date of the exercise of the Stock Option. The holder of the Stock Option shall not have any of the rights of a stockholder with respect to the shares of Stock covered by the Stock Option except and only to the extent that one or more certificates for such shares of Stock shall be delivered to him upon the due exercise of the Stock Option. No Stock Option may be exercised by the Participant (or such Participant's personal representative in the event of his death) after the expiration of the Option Period applicable to such Stock Option. 4. NONTRANSFERABILITY OF STOCK OPTIONS. Except as otherwise herein provided, any Stock Option granted shall not be transferable otherwise than by will or the laws of descent and distribution, and the Stock Option may be exercised, during the lifetime of the Participant, only by him. More particularly (but without limiting the generality of the foregoing), the Stock Option may not be assigned, transferred (except as provided above), pledged or hypothecated in any way, shall not be assignable by operation of law and shall not be subject to execution, attachment, or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Stock Option contrary to the provisions hereof shall be null and void and without effect. -71- 5. EMPLOYMENT. So long as the Participant shall continue to be a full-time and continuous employee of the Company or one or more of its subsidiaries, any Stock Option granted to him shall not be affected by any change of duties or position. Nothing in the Plan or in this Option Agreement shall confer upon the Participant any right to continue in the employ of the Company or any of its subsidiaries, or interfere in any way with the right of the Company or its parent or of any of its subsidiaries to terminate such Participant's employment at any time. 6. EXPIRATION OF OPTION PERIOD UPON TERMINATION OF EMPLOYMENT. Stock Options shall be exercisable only by the Participant while actively employed by the Company or a subsidiary, except that (i) any such Stock Option granted and which is otherwise exercisable, may be exercised by the personal representative of a deceased Participant within 12 months after the death of such Participant (but not beyond the Option Period of such Stock Option), and (ii) if a Participant terminates his employment with the Company or a subsidiary on account of Retirement (as defined in the Plan), or incurring a Disability (as defined in the Plan), as the case may be, such Participant may exercise any Stock Option which is otherwise exercisable at any time within three months after such date of termination. If a Participant should die during the applicable three month period following the date of such Participant's Retirement or termination on account of Disability, the rights of the personal representative of such deceased Participant as such relate to any Stock Options granted to such deceased Participant shall be governed in accordance with subparagraph (i) of this paragraph 6. 7. METHOD OF EXERCISING STOCK OPTION. (a) Subject to the provisions of paragraph 2 of this Option Agreement, the manner of exercising the Stock Option herein granted shall be by written notice to the Company at least two days before the date the Stock Option, or part thereof, is to be exercised, and in any event prior to the expiration of the Option Period. Such notice shall state the election to exercise the Stock Option and the number of shares of Stock with respect to that portion of the Stock Option being exercised and shall be signed by the person or persons so exercising the Stock Option. The notice shall be accompanied by payment of the full purchase price of such shares, including payment of all required state and federal withholding taxes, in which event the Company shall deliver a certificate or certificates representing such shares to the person or persons entitled thereto as soon as practicable after the notices shall be received. (b) Payment for shares of Stock purchased under this Option Agreement may be made in common stock of the Company or a combination of cash and common stock of the Company. In the event that common stock of the Company is utilized in consideration for the purchase of Stock upon the exercise of a Stock Option then, such common stock shall be valued at the "fair market value" as defined in the Plan. (c) In the event the Stock Option is exercised, pursuant to the foregoing provisions of this paragraph 7, by any person or persons other than the Participant in the event of the death of the Participant, such notice shall also be accompanied by appropriate proof of the right of such person or persons to exercise the Stock Option. The notice so required shall be given by personal delivery to the Secretary of the Company or by registered or certified mail, addressed to the Company at P. O. Box 26647, Oklahoma City, Oklahoma 73126 and it shall be deemed to have been given when it is so personally delivered or when it is deposited in the United States mail in an envelope addressed to the Company, as aforesaid, properly stamped for delivery as a registered or certified letter. -72- 8. SECURITIES LAW RESTRICTIONS. Stock Options shall be exercised and Stock issued only upon compliance with the Securities Act of 1933, as amended (the "Act"), and any other applicable securities law, or pursuant to an exemption therefrom. 9. NOTICES. All notices or other communications relating to the Plan and this Option Agreement as it relates to the Participant shall be in writing and shall be mailed (U.S. Mail) by the Company to the Participant at the then current address as maintained by the Company or such other address as the Participant may advise the Company in writing. IN WITNESS WHEREOF, the Company has caused this Option Agreement to be duly executed by its officers thereunto duly authorized, and the Participant has hereunto set his hand and seal, all on the day and year first above written. COMPANY: FLEMING COMPANIES, INC. By ________________________________ Larry A. Wagner, Senior Vice President Human Resources PARTICIPANT: ___________________________________ Name ______________________________ -73- EX-10.8 6 DOC 6 EXHIBIT 10.8 ------------ NON-QUALIFIED PERFORMANCE STOCK OPTION AGREEMENT UNDER FLEMING COMPANIES, INC. 1990 STOCK OPTION PLAN THIS NON-QUALIFIED PERFORMANCE STOCK OPTION AGREEMENT (the "Option Agreement"), made as of this 16th day of February, 1994, at Oklahoma City, Oklahoma by and between ________________________________________________________ (hereinafter referred to as the "Participant"), and Fleming Companies, Inc. (hereinafter referred to as the "Company"): W I T N E S S E T H: WHEREAS, the Participant is a key employee of the Company, its parent or any subsidiary of the Company, and it is important to the Company that the Participant be encouraged to remain in the employ of the Company, its parent or any subsidiary of the Company; and WHEREAS, in recognition of such facts, the Company desires to provide to the Participant an opportunity to purchase shares of the common stock of the Company, as hereinafter provided, pursuant to the "Fleming Companies, Inc. 1990 Stock Option Plan" (the "Plan"). NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for good and valuable consideration, the Participant and the Company hereby agree as follows: 1. GRANT OF STOCK OPTION. The Company hereby grants to the Participant a nonqualified stock option (the "Stock Option") as described in Sections 83 and 421 of the Internal Revenue Code of 1986 (the "Code") to purchase all or any part of an aggregate of _______________________________ (______) shares of its common stock (the "Stock") of the Company as set forth below, under and subject to the terms and conditions of this Option Agreement and the Plan, each of which is incorporated herein by reference and made a part hereof for all purposes. The purchase price per share for each share of Stock to be purchased hereunder shall be $24.9375. 2. TIMES OF EXERCISE OF STOCK OPTION. (a) EXERCISE AFTER DETERMINATION DATE. After, and only after, the conditions of Section 9 hereof have been satisfied, the Participant shall be eligible to exercise that portion of his Stock Option pursuant to the schedule set forth hereinafter. If the Participant's employment with the Company (or its parent or of any one or more of the subsidiaries of the Company) remains full- time and continuous at all times prior to any of the "Determination Dates" as such term is hereinafter defined, then the Participant shall be entitled, subject to the applicable provisions of the Plan and this Option Agreement having been satisfied, to exercise on or after the applicable Determination Date, on a cumulative basis, the number of shares of Stock determined by multiplying the aggregate number of shares set forth in the foregoing Section 1 by the designated percentage set forth hereafter. For purposes of this Option Agreement, the term "Determination Date" -74- shall mean the date on which the Compensation and Organization Committee of the Board of Directors of the Company (the "Committee") certifies that the average of the last reported sales price of the Stock on the New York Stock Exchange Composite Transactions report for any twenty (20) consecutive business day period shall have equaled or exceeded a target stock price set forth below (the "Target Stock Price"). In order to fulfill the certification requirement, the Committee shall meet in person or by telephone or act by unanimous written consent no later than thirty days after the achievement of a Target Stock Price for the required period.
Percent of Stock Target Stock Price Option Exercisable ------------------ ------------------ $28 10% $31 20% $34 30% $37 40% $40 50% $43 60% $47 70% $50 80% $53 90% $56 100%
(b) ADJUSTMENTS TO TARGET STOCK PRICE. In case of a recapitalization, stock split, merger, stock dividend, reorganization, combination, liquidation, or other change in the Stock (an "Adjustment Event"), the Target Stock Prices shall be automatically adjusted to reflect such Adjustment Event. 3. TERM OF STOCK OPTION. Except as specifically provided to the contrary in this Option Agreement or in the Plan, with regard to the death of a Participant, no Stock Option shall be exercisable within six months from nor more than ten years after the date of grant (the "Option Period"). Stock Options shall be exercisable only by the Participant while actively employed by the Company or a subsidiary, except that (i) any such Stock Option granted and which is otherwise exercisable, may be exercised by the personal representative of a deceased Participant within 12 months after the death of such Participant and (ii) if a Participant terminates his employment with the Company or a subsidiary, such Participant may exercise any Stock Option which is otherwise exercisable at any time within three months of such date of termination. If a Participant should die during the applicable three month period following the date of such Participant's termination, the rights of the personal representative of such deceased Participant as such relate to any Stock Options granted to such deceased Participant shall be governed in accordance with this Section 3(i). 4. NONTRANSFERABILITY OF STOCK OPTIONS. Except as otherwise herein provided, any Stock Option granted shall not be transferable otherwise than by will or the laws of descent and distribution, and the Stock Option may be exercised, during the lifetime of the Participant, only by him. More particularly (but without limiting the generality of the foregoing), the Stock Option may not be assigned, transferred (except as provided above), pledged or hypothecated in any way, shall not be assignable by operation of law and shall not be subject to execution, attachment, or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Stock Option contrary to the provisions hererof shall be null and void and without effect. -75- 5. EMPLOYMENT. So long as the Participant shall continue to be a full- time and continuous employee of the Company, its parent or one of more of the subsidiaries of the Company, any Stock Option granted to him shall not be affected by any change of duties or position. Nothing in the Plan or in this Option Agreement shall confer upon the Participant any right to continue in the employ of the Company, its parent or any of the subsidiaries of the Company, or interfere in any way with the right of the Company, its parent or any of the subsidiaries of the Company to terminate such Participant's employment at any time. 6. SPECIAL RULES WITH RESPECT TO STOCK OPTIONS. With respect to Stock Options granted hereunder, the following special rules shall apply: (a) ACCELERATION OF OTHERWISE UNEXERCISABLE STOCK OPTION ON TERMINATION OF EMPLOYMENT OR DEATH. The Committee, in its sole discretion, may permit (i) a Participant who terminates employment with the Company or a subsidiary or (ii) the personal representative of a deceased Participant, to exercise and purchase (within three months of such date of termination of employment or 12 months in the case of a deceased Participant) all or any part of the shares subject to the Stock Option on the date of the Participant's death or termination, notwithstanding that all installments, if any, with respect to such Stock Option, had not accrued on such date. Provided, such discretionary authority of the Committee may not be exercised with respect to any Stock Option (or portion thereof) if the applicable six month waiting period for exercise had not expired except in the event of the death of the Participant when the personal representative of the deceased Participant may, with the consent of the Committee, exercise such Stock Option notwithstanding the fact that the applicable six month waiting period had not yet expired. (b) NUMBER OF STOCK OPTIONS GRANTED. Participants may be granted more than one Stock Option. In making any such determination, the Committee shall obtain the advice and recommendation of the officers of the Company, its parent, or a subsidiary of the Company which have supervisory authority over such Participants. Further, the granting of a Stock Option under this Option Agreement shall not affect any outstanding Stock Option previously granted to a Participant under the Plan. (c) RIGHT TO EXERCISE UPON COMPANY CEASING TO EXIST. Where dissolution or liquidation of the Company or any merger, consolidation or combination in which the Company is not the surviving corporation occurs, the Participant shall have the right immediately prior to such dissolution, liquidation, merger, consolidation or combination, as the case may be, to exercise, in whole or in part, his then remaining Stock Options whether or not then exercisable. Provided, the foregoing notwithstanding, after the Participant has been afforded the opportunity to exercise his then remaining Stock Options as provided in this Section 6(c), and to the extent such Stock Options are not timely exercised as provided in this Section 6(c), then, the terms and provisions of this Option Agreement and the Plan will thereafter continue in effect, and the Participant will be entitled to exercise any such remaining and unexercised Stock Options in accordance with the terms and provisions of this Option Agreement and the Plan as such Stock Options thereafter become exercisable. Provided, further, that for the purposes of this Section 6(c), if any merger, consolidation or combination occurs in which the Company is not the surviving corporation and is the result of a mere change in the identity, form or place of organization of the Company accomplished in accordance with Section 368(a)(1)(F) of the Code, then, such event will not cause an acceleration of the exercisability of such Stock Option granted hereunder. -76- (d) ASSUMPTION OF OUTSTANDING STOCK OPTIONS. To the extent permitted by the applicable provisions of the Code, any successor to the Company succeeding to, or assigned the business of, the Company as the result of or in connection with a corporate merger, consolidation, combination, reorganization or liquidation transaction shall assume Stock Options outstanding under this Option Agreement or issue new Stock Options in place of such outstanding Stock Options. Provided, such assumption of outstanding Stock Options is to be made on a fair and equivalent basis in accordance with the applicable provisions of Section 425(a) of the Code; provided, further, in no event will such assumption result in a modification of any Stock Option as defined in Section 425(h) of the Code. (e) PAYMENT OF WITHHOLDING TAXES. Upon the exercise of any Stock Option as provided herein, no such exercise shall be permitted, nor shall any Stock be issued to any Participant until the Company receives full payment for the Stock purchased which shall include any required state and federal withholding taxes. Further, upon the exercise of any Stock Option the Participant may direct the Company to retain from the shares of Stock to be issued upon exercise of the Stock Option that number of initial shares of Stock (based on fair market value) that would satisfy the requirements for withholding any amounts due upon the exercise. 7. METHOD OF EXERCISING STOCK OPTION. (a) PROCEDURES FOR EXERCISE. Subject to the provisions of Section 2 of this Option Agreement, the manner of exercising the Stock Option herein granted shall be by written notice to the Company at least two days before the date the Stock Option, or part thereof, is to be exercised, and in any event prior to the expiration of the Option Period. Such notice shall state the election to exercise the Stock Option and the number of shares of Stock with respect to that portion of the Stock Option being exercised, and shall be signed by the person or persons so exercising the Stock Option. The notice shall be accompanied by payment of the full purchase price of such shares, in which event the Company shall deliver a certificate or certificates representing such shares to the person or persons entitled thereto as soon as practicable after the notices shall be received. (b) FORM OF PAYMENT. Payment for shares of Stock purchased under this Option Agreement shall be made in full and in cash or check made payable to the Company. Provided, payment for shares of Stock purchased under this Option Agreement may also be made in common stock of the Company or a combination of cash and common stock of the Company. In the event that common stock of the Company is utilized in consideration for the purchase of Stock upon the exercise of a Stock Option, then, such common stock shall be valued at the "fair market value" as defined in Section 1.6 of the Plan. In addition to the foregoing procedure which may be available for the exercise of any Stock Option, the Participant may deliver to the Company a notice of exercise including an irrevocable instruction to the Company to deliver the stock certificate representing the shares subject to a Stock Option to a broker authorized to trade in the common stock of the Company. Upon receipt of such notice, the Company will acknowledge receipt of the executed notice of exercise and forward this notice to the broker. Upon receipt of the copy of the notice which has been acknowledged by the Company, and without waiting for issuance of the actual stock certificate with respect to the exercise of the Stock Option, the broker may sell the Stock (or that portion of the Stock necessary to cover the Option Price and any withholding taxes due, if any). Upon receipt of the stock -77- certificate from the Company, the broker will deliver directly to the Company that portion of the sales proceeds to cover the Option Price and any withholding taxes. Further, the broker may also facilitate a loan to the Participant upon advance receipt of the exercise notice for issuance of the actual stock certificate as an alternative means of financing and facilitating the exercise of any Stock Option. For all purposes of effecting the exercise of a Stock Option, the date on which the Participant gives the notice of exercise to the Company will be the date he becomes bound contractually to take and pay for the shares of Stock underlying the Stock Option. No Stock shall be issued to the Participant until the Company receives full payment for the Stock purchased under the Stock Option which shall include any required state and federal withholding taxes. (c) FURTHER INFORMATION. In the event the Stock Option is exercised, pursuant to the foregoing provisions of this Section 7, by any person or persons other than the Participant in the event of the death of the Participant, such notice shall also be accompanied by appropriate proof of the right of such person or persons to exercise the Stock Option. The notice so required shall be given by personal delivery to the Secretary of the Company or by registered or certified mail, addressed to the Company at 6301 Waterford Boulevard, Oklahoma City, Oklahoma 73118, and it shall be deemed to have been given when it is so personally delivered or when it is deposited in the United States mail in an envelope addressed to the Company, as aforesaid, properly stamped for delivery as a registered or certified letter. 8. ACCELERATION OF OPTIONS UPON CHANGE OF CONTROL. In the event that a Change of Control (as defined herein) has occurred with respect to the Company, any and all Stock Options will become automatically fully vested and immediately exercisable with such acceleration to occur without the requirement of any further act by either the Company or the Participant. For the purposes of this Section 8, the term "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors; provided, however, that the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company; (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii), and (iii) of this Section 8(a); or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. -78- 9. SECURITIES LAW RESTRICTIONS. Stock Options shall be exercised and Stock issued only upon compliance with the Securities Act of 1993, as amended (the "Act"), and any other applicable securities law, or pursuant to an exemption therefrom. 10. NOTICES. All notices or other communications relating to the Plan and this Option Agreement as it relates to the Participant shall be in writing and shall be mailed (U.S. mail) by the Company to the Participant at the then current address as maintained by the Company or such other address as the Participant may advise the Company in writing. IN WITNESS WHEREOF, the Company has caused this Option Agreement to be duly executed by its officers thereunto duly authorized, and the Participant has hereunto set his hand and seal, all on the day and year first above written. COMPANY: FLEMING COMPANIES, INC. an Oklahoma corporation By __________________________________________ Larry A. Wagner, Senior Vice President Human Resources PARTICIPANT: __________________________________________ Name______________________________________ -79- EX-10.17 7 DOC 7 EXHIBIT 10.17 FLEMING COMPANIES, INC. PHASE III OF THE FLEMING COMPANIES, INC. 1990 STOCK INCENTIVE PLAN WHEREAS, the Board of Directors of Fleming Companies, Inc. (the "Company") has adopted the "Fleming Companies, Inc. 1990 Stock Incentive Plan" (herein the "Plan"), a copy of which is attached hereto as Exhibit "A"; and WHEREAS, the Compensation and Organization Committee (the "Committee") of the Board of Directors of the Company has been delegated the responsibility of implementing and administering the Plan and making Awards to Key Associates of the Company under the Plan; and WHEREAS, the Committee has created Phase III of the Plan to provide for Restricted Stock Awards to certain Key Associates of the Company. NOW THEREFORE, BE IT RESOLVED, that the Committee does hereby create, establish and adopt Phase III of the Plan as herein described and declare and grant the following awards: ARTICLE I (PHASE III) Section 1. DEFINITIONS. The following terms as used herein shall have the following meanings. All other capitalized terms shall have the meaning ascribed to them in the Plan. 1.01 "Awards Agreement" means the agreement each of the Participants shall execute as described in Section 2 of Article II. 1.02 "Participants" means those Key Associates set forth in Section 3 of this Article I. 1.03 "Phase III Performance Cycle" shall mean a period of time commencing February 16, 1994, and ending on February 15, 2004, unless all of the Restricted Stock awarded under this Phase III shall have become Vested Stock on an earlier date, in which event the Phase III Performance Cycle shall end on such date. 1.04 "Restrictions" means as to the Restricted Stock to be issued to each Participant under this Phase III those restrictions set forth in Section 7.1 of the Plan. 1.05 "Vested Stock" means Restricted Stock as to which all Restrictions have been removed in accordance with this Article I. Section 2. OBJECTIVES. The Committee has determined the following objectives of Phase III of the Plan: (i) To reward the creation of shareholder value; (ii) To emphasize stock ownership by the Key Associates; and -80- (iii) To provide strong incentive to the Key Associates to increase the per share price of the Company's common stock. Section 3. PARTICIPANTS. The Participants of Phase III of the Plan shall be those persons listed on Exhibit "B" hereto (herein called the "Participant" or "Participants"). Section 4. PHASE III AWARDS. Phase III Awards shall be made in shares of Restricted Stock to the Participants as provided in Article II hereof. 4.01 VOTING RIGHTS AND DIVIDENDS. Each Participant shall have all of the voting rights attributable to the shares of Restricted Stock issued to him. However, dividends declared and paid by the Company with respect to the shares of Restricted Stock (the "Accrued Dividends") shall not be paid to the participant until such Restricted Stock becomes Vested Stock. Such Accrued Dividends shall be held by the Company as a general obligation and paid to the Participant at the time the underlying Restricted Stock becomes Vested Stock. In accordance with Section 5.3(b) of the Plan, the right to vote such shares and to receive the Accrued Dividends shall terminate with respect to unvested shares of Restricted Stock of any Participants whose Award has been forfeited as provided in the Plan. 4.02 ESCROW. The Restricted Stock issued to each Participant shall be escrowed with the Secretary of the Company subject to the removal of the Restrictions placed thereon or forfeiture pursuant to the terms of this Article I. 4.03 RESTRICTIVE LEGEND. The Restricted Stock shall bear the following legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED STOCK, HAVING BEEN ISSUED PURSUANT TO THE 'FLEMING COMPANIES, INC. 1990 STOCK INCENTIVE PLAN' (THE 'PLAN'), ARE SUBJECT TO THE TERMS AND PROVISIONS OF PHASE III OF THE PLAN ADOPTED BY THE COMPENSATION AND ORGANIZATION COMMITTEE OF THE BOARD OF DIRECTORS ON FEBRUARY 16, 1994, AND BEAR THE RESTRICTIONS ON ALIENATION SET FORTH IN SECTION 7.1 OF THE PLAN. COPIES OF THE PLAN AND PHASE III OF THE PLAN MAY BE OBTAINED FROM THE OFFICE OF THE SECRETARY OF THE COMPANY." Violation of the foregoing restrictive legend shall result in immediate forfeiture of all Restricted Stock. Section 5. PERFORMANCE GOALS. In order for the Participant to "earn" the Restricted Stock free and clear of the Restrictions, the following Performance Goals shall have been attained by the Company. 5.01 PERFORMANCE GOALS - STOCK PRICE APPRECIATION. During the Phase III Performance Cycle before any of the Restricted Stock awarded to the Participants hereunder shall become Vested Stock, the average of the last reported sales price of the Common Stock as reported on the New York Stock Exchange Composite Transactions report for any twenty (20) consecutive business day period shall have equalled or exceeded the target stock price set forth below (the "Target Stock Price"). In the event the Target Stock Price is achieved during the Phase III Performance Cycle, the Participants will have earned and be vested with the percentage indicated of the Restricted Stock awarded to them as set forth in the Performance Vesting Schedule below: -81- PERFORMANCE VESTING SCHEDULE
% OF SHARES VESTED TARGET STOCK PRICES 20% $43.00 40% $47.00 60% $50.00 80% $53.00 100% $56.00
5.02 PERFORMANCE GOALS - ADJUSTMENTS. In the case of a recapitalization, stock split, merger, stock dividend, reorganization, combination, liquidation or other change in the Common Stock (an "Adjustment Event"), the Target Stock Prices shall be automatically adjusted to reflect such Adjustment Event. The Committee shall promptly notify all Participants of any such adjustments. 5.03 VESTED STOCK - REMOVAL OF RESTRICTIONS. Upon Restricted Stock becoming Vested Stock, all Restrictions shall be removed from the certificates representing such stock and the Secretary of the Company shall deliver to the Participant certificates representing such Vested Stock free and clear of all Restrictions together with a check in the amount of all Accrued Dividends attributed to such Vested Stock without interest thereon; provided, however, prior to such delivery, the Committee shall have certified in writing that a Target Stock Price has been met. In order to fulfil the certification requirement, the Committee shall meet in person or by telephone or act by unani- mous written consent no later than thirty days after the achievement of a Target Stock Price for the required period. 5.04 TERMINATION. All Restricted Stock awarded to a Participant under this Phase III that has not become Vested Stock shall be forfeited at the end of the Phase III Performance Cycle, and all Restricted Stock that has not become Vested Stock shall be forfeited upon the termination from the employ of the Company of such Participant for any reason except as follows: (i) DEATH, DISABILITY OR RETIREMENT. Restricted Stock which achieves the Target Stock Price in accordance with Section 5.01 during the year of the death, Disability or Retirement of a Participant may become Vested Stock and payable to the Participant or to his estate, as the case may be, at the discretion of the Committee. All other Restricted Stock shall be forfeited. (ii) CHANGE OF CONTROL. (a) In the event of a Change of Control all Restricted Stock and Accrued Dividends shall be forfeited, but the Participant shall have earned and be paid by the Company a sum of money equal to his then current annual base salary if such event occurs in the first year of the Phase III Performance Cycle; two-thirds of his then current annual base salary if such event occurs in the second year of the Phase III Performance Cycle; and one- third of his then current annual base salary if such event occurs in the third year of the Phase III Performance Cycle. (b) In addition to the payment provided for in Section 5.04(ii)(a) above, the Company shall also pay to the Participant any Gross-Up Payment determined in accordance with Section 9.2 of the Plan. -82- Section 6. THE PLAN. The Plan and all of its terms and provisions attached hereto as Exhibit "A" are herein incorporated by reference. In the event there is a conflict between this Phase III and the Plan, the Plan shall control. ARTICLE II (THE AWARDS) Section 1. THE AWARDS. The Committee hereby makes the Awards to the Participants listed on Exhibit "B" hereto in the number of restricted shares set forth opposite the names of the Participants listed on Exhibit "B" hereto. Section 2. AWARDS AGREEMENT. Each of the Participants shall execute and deliver to the Secretary of the Company a copy of the Awards Agreement in the form attached hereto as Exhibit "C" upon delivery to the Secretary of the shares of Restricted Stock set opposite his name in Section 1 above. Dated this 16th day of February, 1994. "Committee" /S/ JAMES G. HARLOW, JR. ------------------------- James G. Harlow, Jr., Chairman /S/ RICHARD D. HARRISON ------------------------ Richard D. Harrison /S/ EDWARD C. JOULLIAN III --------------------------- Edward C. Joullian III /S/ HOWARD H. LEACH -------------------- Howard H. Leach /S/ JOHN A. MCMILLAN --------------------- John A. McMillan -83- EX-10.19 8 DOC 8 Exhibit 10.19 AGREEMENT BETWEEN E DEAN WERRIES AND FLEMING COMPANIES, INC. ------------------------------------------------------------ 1. At the October 19, 1993, board meeting will relinquish the Chief Executive Officer title. 2. Through the Annual Meeting in 1994 will serve the company as Chairman of the Board. 3. As Chairman, he will report to the Board of Directors. 4. Salary: No change in salary through the Annual Meeting in 1994. 5. Consulting Fee: Beginning with the 1994 Annual Meeting, he will receive a consulting fee of $200,000 annually paid in quarterly installments. This will continue until the Annual Meeting in 1997. 6. Expenses: Will be reimbursed for all reasonable business and travel expenses incurred in the course of conducting company business. 7. Office Space: During the consulting period, he will be provided with a suitable office of a size and with furnishings and other appointments and secretarial and other assistants as are provided to key management associates of the company. 8. Automobile: During the consulting period, he shall be entitled to the use of a company automobile and the reimbursement of related business expenses (gasoline and repairs), in accordance with the plans, past practices, programs and policies of the company with respect to key management associates of the company, as approved and interpreted by the Chief Executive Officer. 9. In keeping with current board policy, he may remain on the Board of Directors until age 70, if so nominated by the company and elected by the shareholders. 10. There will be a mutual understanding on what role he will have in the company beginning in October 1993 through the Annual Meeting 1994. 11. As a consultant to the company, he will take direction exclusively from the Chief Executive Officer and/or the Board of Directors. FLEMING COMPANIES, INC. /s/ E. Dean Werries /s/ Robert E. Stauth ---------------------------- ----------------------------- E. Dean Werries By: Robert E. Stauth APPROVED: COMPENSATION COMMITTEE OF FLEMING COMPANIES, INC. By: /s/ James G. Harlow, Jr., Chairman --------------------------------- James G. Harlow, Jr., Chairman -84- EX-10.20 9 DOC 9 EXHIBIT 10.20 FLEMING COMPANIES, INC. 6301 Waterford Blvd. P. O. Box 26647 Oklahoma City, OK 73126-0647 405/840-7200 _______________________________________________________________________________ Corporate Staff November 18, 1993 Mr. James E. Stuard 6921 Brentfield Dallas, Texas 75248 Dear Jim: This letter will recap the mutual understanding we had November 16, 1993, regarding your future employment with the company. 1. You will remain as a full-time associate until December 1, 1994. 2. You will remain on the payroll at full salary, benefits, and bonus program until April 1, 1995, at which time you will retire from the company. 3. At the time of your retirement, you will receive your age 62 benefits, which are as follows: Age 62 Pension $138,864 "B" Account Equivalent 26,688 Age 62 SERP 54,420 -------- $219,972
You do have the option to take your "B" account in a lump sum, thus, reducing the above number $26,688. 4. During the five months beginning December 1, 1994, until April 1, 1995, you will work on a part-time basis, or as needed, acting as a consultant to your replacement and/or the company. 5. We agree that if the health of either you or your wife should preclude you from performing your duties in a satisfactory manner, you may retire from the company and be given your age 62 retirement benefit. We understand that should this actually be necessary, you agree to provide whatever access we might desire from your medical records and/or you doctors in order to assure ourselves that this action is necessary. 6. Upon your retirement, you will be provided with a life insurance policy on your life in the amount equal to one times your ending salary. -85- Mr. James E. Stuard November 18, 1993 Page 2 7. The company will pay for your insurance premium until both you and your wife reach age 65. 8. For 1994 FICP purposes, you will participate as if you had worked full time until December 31, 1994. 9. In recognition of your valuable service to the company, we will pay you a $50,000 bonus on December 1, 1993, and an additional $50,000 bonus on December 1, 1994. Since this is extraordinary income, these two bonus payments will not be used in calculating your final average earnings in determining your retirement income. I am enclosing two copies of this letter. If its contents accurately reflect our understanding, please sign at the bottom of both, retain one copy for your file, and forward the other one to me. Jim, I want you to know that I am extremely excited about your continued involvement with our company and know that your support will prove to be very beneficial to all of us. Sincerely, /s/ Robert E. Stauth Robert E. Stauth President & CEO /s/JAMES E. STUARD 11/26/93 ------------------------- -------- James E. Stuard Date -86- EX-10.21 10 DOC 10 Exhibit 10.21 AGREEMENT --------- THIS AGREEMENT (the "Agreement") is entered into by and among FLEMING COMPANIES, INC. ("Fleming"), MALONE & HYDE, INC. ("Malone & Hyde" and collec- tively with Fleming the "Companies") and ROBERT F. HARRIS (the "Consultant"), this ___ day of __________, 1993. In consideration of the mutual covenants set forth and for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Consultant and the Companies agree as follows: ARTICLE I AGREEMENT AND RELEASE --------------------- 1.1 AGREEMENT AND COBRA. The Companies and the Consultant have reached a mutual understanding with respect to Consultant's retirement from active employment with the Companies. Consultant's duties shall cease effective January 22, 1994 (the "Effective Date") at which time he shall assume the duties of a consultant as provided in Article II below. Until the Effective Date Consultant shall receive his normal salary and benefits. Upon the termination of Consultant's employment on the Effective Date, Consultant shall be offered continuation of health care coverage under the Consolidated Omnibus Budget Reconciliation Act of 1984 ("COBRA"). 1.2 OUTPLACEMENT SERVICES AND COOPERATION. From January 22, 1994, through December 31, 1994 (the "Consulting Period") the Companies shall provide Consultant with outplacement services at their expense. Consultant shall continue to cooperate with the Companies during the Consulting Period and so long thereafter as requested by the Companies on ongoing business matters and litigation of the Companies, including specifically the LaGatta litigation pending in federal court in Nashville and the Taylor litigation pending in state court in Shreveport, Louisiana. 1.3 AUTOMOBILE. On January 22, 1994, or as soon thereafter as practicable, Malone & Hyde will transfer to Consultant full ownership of and clear title to the Buick Park Avenue automobile now being used by Consultant without charge or cost to Consultant except for income or other taxes arising from the transfer, which will be Consultant's responsibility. Thereafter, all costs of ownership, operation, maintenance, and insurance of the car shall be the responsibility of Consultant. Title papers will be transferred to Consultant as soon as practicable. 1.4 1994 VACATION. Consultant shall in 1994 take his vacation earned in 1993 only after June 1, 1994, or in lieu thereof at Consultant's option, Companies shall pay Consultant on June 1, 1994, for such vacation (the "Vacation Pay"). -87- 1.5 PENSION. Beginning January 1, 1995, Consultant will receive (i) for his lifetime only, a pension of $25,766 annually (ii) until Consultant is age 62, a social security bridge for Consultant and his spouse of $17,544 annually. Beginning January 22, 1994, Consultant will receive pre-medicare insurance until both Consultant and his spouse are eligible for medicare so long as Consultant does not elect COBRA coverage or become employed elsewhere. 1.6 RELEASE. In consideration of the provisions of this Agreement, Consultant hereby releases the Companies, their subsidiaries, affiliates and related companies, and their employees, officers, directors, and agents from any liability, claim or cause of action arising out of or related to his employment with, or the termination of his employment from, the Companies. In agreeing to and signing this release, Consultant recognizes that he is waiving any right he may have to file any lawsuits against the Companies, their subsidiaries, affiliates and related companies, and their employees, officers, directors, and agents or to collect any financial or other award as the result of any claims made with any state or federal agencies, or to make any claims whatsoever against the Companies, their subsidiaries, affiliates and related companies, and their employees, officers, directors, and agents, including any claim Consultant has that he was discriminated against because of his race, sex, national origin, physical disability, religion or age in violation of the Title VII of the Civil Rights Act, or the Age Discrimination in Employment Act (enforced by the Equal Employment Opportunity Commission) or the Fair Employment Statutes of Tennessee, Tenn. CA SECTION 4-21-101 et seq., CA SECTION 50-2-201 et seq. and CA SECTION 8-50-103 et seq. (enforced by the Tennessee Human Rights Commission and the Tennessee Commission for Human Development). 1.7 OLDER WORKERS BENEFIT PROTECTION ACT. Consultant acknowledges that he has been advised of his rights to seek the services of legal counsel and that the Companies have encouraged him to do so. Consultant further acknowledges that he has up to twenty-one (21) days from the date of this Agreement and receipt of the Companies' offer as set forth herein, or through December __, 1993, to accept the offer. If Consultant accepts the Companies' offer, such acceptance shall be manifested by his signing of this Agreement. Consultant also understands that he has seven (7) days from his signing of this Agreement within which to change his mind, after which this Agreement becomes final and binding on all parties. 1.8 RESIGNATION. As of the Effective Date, Consultant hereby resigns from each elected or appointed position he holds with Fleming, Malone & Hyde, and their subsidiaries. ARTICLE II CONSULTING ENGAGEMENT --------------------- 2.1 CONSULTING ENGAGEMENT. The Companies hereby engage Consultant as a consultant and advisor and Consultant agrees to accept such engagement for the Consulting Period upon the terms and conditions set forth herein. During the Consulting Period, Consultant agrees to act to the best of his ability the service of the Companies; provided, however, nothing contained herein shall prevent Consultant from engaging in other endeavors not in conflict with the business of the Companies or their subsidiaries or his duties and responsibilities under this Agreement or in violation of Section 2.6 of this Agreement. -88- 2.2 CONSULTING DUTIES. Consultant shall take direction from Jerry Austin or Bob Stauth or their designee. During the Consulting Period, Consultant shall render such service and promote the name and goodwill of the Companies as they may reasonably request so that the Companies may have the benefit of Consultant's experience and knowledge of the business and affairs of the Companies and his reputation and contacts in the Companies' businesses. Consultant agrees that he will be available for advice and counsel to the officers and directors of the Companies at all reasonable times by telephone, letter, or in person during the Consulting Period. 2.3 STATUS OF CONSULTANT. Consultant shall be an independent contractor and not an "associate" or "employee" of the Companies. Accordingly, the Companies shall not withhold amounts of applicable federal and state income, withholding and employment taxes from the fees to be paid Consultant hereunder unless otherwise required by law. Consultant shall be solely responsible for and shall pay all of such taxes. 2.4 TERM. The term of the Consulting Period shall commence on January 22, 1994 and end on December 31, 1994. 2.5 CONSULTING FEE; EXPENSES. In recognition of the valuable and meritorious services performed on behalf of the Companies by Consultant throughout the years in which he has served the Companies as an officer and associate, and in consideration of Consultant's agreeing to make himself reasonably available to render to the Companies the services provided in Section 2.2, during the Consulting Period Consultant shall receive a consulting fee (the "Consulting Fee") of One Hundred Eighty-Nine Thousand Seven Hundred Eighty-Six Dollars ($189,786) payable in installments of $36,150 on January 22, 1994, and in equal installments of Fifty-One Thousand Two Hundred Twelve Dollars ($51,212) each on April 1, 1994, July 1, 1994 and October 1, 1994. In addition, Consultant shall be reimbursed for all reasonable business and travel expenses incurred by Consultant for the benefit of the Companies, in accordance with the policies of the Companies with respect to key management associates, as approved by the Chief Financial Officer of Fleming. 2.6 NONCOMPETITION COVENANT. During the Consulting Period, Consultant shall not directly or indirectly, own, manage, operate, join, advise, control or otherwise engage or participate in or be connected as an employee, partner, investor, stockholder, creditor, guarantor, advisor or consultant in, the busi- ness of selling or distributing food and related products, groceries, frozen foods, dairy, health and beauty care and general merchandise products, or associated items at retail or wholesale (the "Food Business"), to any person or any entity; provided, however, Consultant may hold stock representing up to five percent of the equity of a company engaged in the Food Business. In the event that Consultant violates this paragraph, Consultant shall forfeit all of the unpaid portion of the Consulting Fee and shall be required to reimburse the Companies for any portion of the Consulting Fee paid to Consultant prior to such breach. -89- ARTICLE III TERMINATION ----------- 3.1 TYPES OF TERMINATION. This Agreement may be terminated prior to December 31, 1994 as follows: 3.1.1 DEATH OR DISABILITY. By the Companies upon the death or Disability of Consultant. Disability means Consultant has been totally incapacitated by bodily injury or physical or mental disease so as to be prevented from engaging in any comparable occupation or employment for remuneration or profit, and such total incapacity will, in the opinion of a qualified physician who has been approved by Consultant (or if applicable, the person legally empowered to make such decisions on behalf of the Consultant) and Fleming, be permanent and continuous during the remainder of the Consultant's life. 3.1.2 CAUSE. By the Companies for Cause. Cause means (i) the conviction of the Consultant of a felony under federal, state or local criminal law, or (ii) willful and gross misconduct by the Consultant that is materially detrimental to the Companies or their subsidiaries, or (iii) a violation by the Consultant of Sections 2.6 and 4.1 hereof, each as determined in good faith by a written resolution adopted by the affirmative vote of at least two-thirds of all Fleming directors. 3.1.3 INVOLUNTARY TERMINATION. An Involuntary Termination by the Companies, meaning for reasons other than Cause, the Consultant's death or Disability. 3.1.4 VOLUNTARY TERMINATION. A Voluntary Termination, meaning by Consultant for reasons other than Cause, the Consultant's death or Disability. 3.2 NOTICE OF TERMINATION. Any termination by one party shall be communicated by a written notice to the other party in accordance with the terms of this Agreement. The notice must (a) indicate the specific termination provision in this Agreement relied upon, (b) set forth the facts claimed as the basis for the termination, (c) if applicable, include a copy of the resolution of the Fleming Board of Directors, and (d) specify a date of termination, which date shall be the last day of the month of such notice. 3.3 OBLIGATIONS OF THE COMPANIES UPON TERMINATION. 3.3.1 DEATH OR DISABILITY. In the event of the death of the Consultant, the Companies shall continue to pay (a) the Consulting Fee during the Consulting Period and (b) to the extent not already taken or paid, the Vacation Pay, to the Consultant's legal representative. In the event of the Disability of the Consultant, the Companies shall continue to pay (a) the Consulting Fee during the Consulting Period and (b) to the extent not already taken or paid, the Vacation Pay, to the Consultant or his legal representative. In either event, any approved expenses due under Subsection 2.5 not reimbursed by the Companies shall be paid to the Consultant or his legal representative. In either event, with the exception of the Consulting Fee and the Vacation Pay, the Companies shall have no further obligation to Consultant or his legal representative pursuant to this Agreement. -90- 3.3.2 CAUSE. If this Agreement is terminated for Cause, the Companies shall have no further obligation to the Consultant from the date of Fleming's determination that Cause exists except for Vacation Pay to the extent not already taken or paid. 3.3.3 VOLUNTARY TERMINATION. If this Agreement is terminated voluntarily by the Consultant, the Companies shall have no further obligation to the Consultant from the date of such Voluntary Termination except for Vacation Pay to the extent not already taken or paid. 3.3.4 INVOLUNTARY TERMINATION. If this Agreement is terminated because of Involuntary Termination, the Companies shall continue to pay (a) the Consulting Fee during the Consulting Period and (b) to the extent not already taken or paid, the Vacation Pay, to the Consultant notwithstanding such termination. ARTICLE IV GENERAL MATTERS --------------- 4.1 CONFIDENTIAL INFORMATION. Consultant shall hold in a fiduciary capacity for the benefit of the Companies all secret or confidential information, knowledge or data relating to the Companies or any of their subsidiaries, and their respective businesses, which is known to Consultant and which shall not be or become public knowledge. After termination of this Agreement, Consultant shall not, without the prior written consent of the Companies, communicate or divulge any such information, knowledge or data to anyone other than the Companies and those designated by it unless required by law. 4.2 ASSIGNMENT. This Agreement is personal to Consultant and without the prior written consent of the Companies shall not be assignable by Consultant. 4.3 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Oklahoma, without reference to principles of conflict of laws. 4.4 NOTICES. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: IF TO CONSULTANT: ---------------- Robert F. Harris 775 Pleasant Grove Road Route 1, Box 188 Moscow, Tennessee 38057 IF TO THE COMPANIES: ___________________ Fleming Companies, Inc. 6301 Waterford Boulevard P.O. Box 26647 Oklahoma City, Oklahoma 73126 Attention: Robert E. Stauth President and Chief Executive Officer -91- or such other address as either party shall have furnished to the other in writing in accordance herewith. Notices and communications shall be effective when actually received by the addressee. IN WITNESS WHEREOF, Consultant has hereunto set his hand and the Companies have caused these presents to be executed in their names on their behalf, all as of the day and year first above written. Consultant: _________________________________ Robert F. Harris Companies: FLEMING COMPANIES, INC. By______________________________ Robert E. Stauth, President and Chief Executive Officer MALONE & HYDE, INC. By______________________________ David R. Almond Vice President-Secretary -92- EX-11 11 DOC 11 EXHIBIT 11 FLEMING COMPANIES, INC. EARNINGS PER SHARE COMPUTATION (In thousands, except per share amounts)
YEAR ENDED -------------------------- DECEMBER 25, DECEMBER 26, 1993 1992 ------------ ------------ PRIMARY EARNINGS PER COMMON SHARE Reconciliation of net earnings from consolidated condensed statements of earnings to amount used in primary earnings per share computation: Earnings before extraordinary loss and accounting change applicable to common shares $37,480 $118,904 Weighted average common shares outstanding used to compute primary earnings per share 36,801 35,759 Add common share equivalents- common shares issuable under stock option and stock purchase plans 26 33 ------ ------ Weighted average common shares outstanding, as adjusted 36,827 35,792 ------ ------ ------ ------ Primary earnings per common share before extraordinary item and accounting change $1.02(a) $3.32(b) ----- ----- ----- ----- (a) Agrees to the related amounts shown in the consolidated condensed statements of earnings. (b) This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB No. 15 because it results in dilution of less than 3% or is antidilutive.
-93- EXHIBIT 11 (Continued) FLEMING COMPANIES, INC. EARNINGS PER SHARE COMPUTATION (In thousands, except per share amounts)
YEAR ENDED -------------------------- DECEMBER 25, DECEMBER 26, 1993 1992 ------------ ------------ (PRIMARY EARNINGS PER COMMON SHARE, cont'd) - ---------------------------- Extraordinary item $2,308 $5,864 ------ ------- ------ ------- Weighted average common shares outstanding, as adjusted 36,827 35,792 ------ ------- ------ ------- Loss per share related to extraordinary item $ .06(a) $.16(a) ----- ------- ----- ------- Earnings applicable to common shares $35,172 $113,040 ------ ------- ------ ------- Weighted average common shares outstanding, as adjusted 36,827 35,792 ------ ------- ------ ------- Primary earnings per common share $.96(a) $3.16(b) ------ ------- ------ ------- (a) Agrees to the related amounts shown in the consolidated condensed statements of earnings. (b) This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB No. 15 because it results in dilution of less than 3% or is antidilutive.
-94- EXHIBIT 11 (Continued) FLEMING COMPANIES, INC. EARNINGS PER SHARE COMPUTATION (In thousands, except per share amounts)
YEAR ENDED ----------------------------- DECEMBER 25, DECEMBER 26, 1993 1992 FULLY DILUTED EARNINGS PER COMMON SHARE - ---------------------- Reconciliation of net earnings, as adjusted in primary computation above, to amount used for fully diluted computation in consolidated condensed statements of earnings: Earnings before extraordinary loss and accounting change applicable to common shares $37,480 $118,904 Add interest on 6.5% convertible notes, net of tax effect --- 5,681 ------- -------- Net earnings, as adjusted $37,480 $124,585 ------- -------- ------- -------- Weighted average common shares outstanding, as adjusted in primary computation to amount used for fully diluted earnings per share 36,827 35,792 Add shares issuable from assumed conversion of 6.5% convertible notes --- 2,989 ------ ------ Weighted average common shares outstanding, as adjusted 36,827 38,781 ------ ------ ------ ------ Fully diluted net earnings per common share $1.02(a) $3.21(a) ----- ----- ----- ----- (a) Agrees to the related amounts shown in the consolidated condensed statements of earnings. (b) This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB No. 15 because it results in dilution of less than 3% or is antidilutive.
-95- EXHIBIT 11 (Continued) FLEMING COMPANIES, INC. EARNINGS PER SHARE COMPUTATION (In thousands, except per share amounts)
Year Ended -------------------------- DECEMBER 25, DECEMBER 26, 1993 1992 ------------ ----------- (FULLY DILUTED EARNINGS PER COMMON SHARE, cont'd) Extraordinary item $2,308 $5,864 ------ ------ Weighted average common shares outstanding, as adjusted 36,827 38,781 ------ ------ ------ ------ Loss per share related to extraordinary item and accounting change $.06(a) $.15(a) ---- ---- Net earnings $35,172 $113,040 Add interest on 6.5% convertible notes, net of tax effect --- 5,681 ------- -------- Earnings applicable to common shares $35,172 $118,721 ------- --------- ------- --------- Weighted average common shares outstanding, as adjusted 36,827 38,781 ------ ------ ------ ------ Fully diluted earnings per common share $.96(a) $3.06(a) ---- ----- ---- ----- (a) Agrees to the related amounts shown in the consolidated condensed statements of earnings. (b) This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although not required by footnote 2 to paragraph 14 of APB No. 15 because it results in dilution of less than 3% or is antidilutive.
-96- EX-12 12 DOC 12 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 interest 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 ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
"Earnings" consist of income from continuing operations before income taxes and fixed charges excluding capitalized interest. Capitalized interest amortized during the respective periods is added back to earnings. "Fixed charges, net" consist 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. The company has guaranteed indebtedness of a customer. The related fixed charges are not significant and are not presented in the computation of the ratios. -97- EX-21 13 DOC 13 Exhibit 21 FLEMING COMPANIES, INC. AND CONSOLIDATED SUBSIDIARIES SUBSIDIARIES OF THE REGISTRANT The following table sets forth Fleming's active wholly owned subsidiaries:
Name Jurisdiction of Organization ---- ---------------------------- Baker's Supermarkets, Inc. Nebraska Crestwood Bakery (1) Wisconsin Fleming Foods of Alabama, Inc. Alabama Fleming Foods of Ohio, Inc. Ohio Fleming Foods of Tennessee, Inc. Tennessee Fleming Foods of Texas, Inc. Texas Fleming Foods West, Inc. California Fleming Franchising, Inc. Delaware Fleming International, Ltd. Oklahoma Fleming Technology Leasing Corporation Missouri Fleming Transportation Service, Inc. Oklahoma Hub City Foods Incorporated (1) Wisconsin Malone & Hyde, Inc. (2) Delaware Selected Products, Inc. (3) Texas Sentry Markets, Inc. (1) Wisconsin (1) Wholly owned subsidiary of Malone & Hyde, Inc. (2) Malone & Hyde, Inc. has 12 smaller active subsidiaries other than Crestwood Bakery, Hub City Foods Incorporated and Sentry Markets, Inc., all of which are wholly owned except Dairy Fresh of Louisiana, Inc. that is 51% owned. (3) Selected Products, Inc. has one subsidiary, Fleming Foods East, Inc.
Not included above are 4 retail equity store corporations in which Fleming owns more than 50% of the voting securities as described under "Capital Invested in Retailers" in Item 1 hereto. In addition, the company has other subsidiaries that are not reflected herein. In the aggregate, these are not significant. -98- EX-23 14 DOC 14 Exhibit 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in: (i) Registration Statement No. 2-98602 (1985 Stock Option Plan) on Form S-8; (ii) Registration Statement No. 33-18867 (Godfrey Company 1981 Stock Option Plan and 1984 Nonqualified Stock Option Plan) on Form S-8; (iii) Registration Statement No. 33-36586 (1990 Fleming Stock Option Plan) on Form S-8; (iv) Registration Statement No. 33-45190 (Dividend Reinvestment and Stock Purchase Plan) on Form S-3; (v) Registration Statement No. 33-61860 ($350,550,000 Debt Securities, Series C) on Form S-3 dated April 30, 1993 of our report dated February 10, 1994, appearing in the Annual Report on Form 10-K of Fleming Companies, Inc. for the year ended December 25, 1993. Deloitte & Touche Oklahoma City, Oklahoma March 23, 1994 -99- EX-25 15 DOC 15 EXHIBIT 25 POWER OF ATTORNEY We, the undersigned officers and directors of Fleming Companies, Inc. (hereinafter the "Company"), hereby severally constitute Robert E. Stauth, R. Randolph Devening and David R. Almond, and each of them severally, our true and lawful attorneys with full power to them and each of them to sign for us, and in our names as officers or directors, or both, of the Company, the Annual Report on Form 10-K for the fiscal year ended December 25, 1993, and any and all amendments thereto, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and to perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. Dated this 17th day of February, 1994. SIGNATURE TITLE \S\ ROBERT E. STAUTH President, Chief Executive Officer, and - ------------------------- Director (principal executive officer) Robert E. Stauth \S\ R. RANDOLPH DEVENING Vice Chairman, Chief Financial Officer - -------------------------- and Director (principal financial R. Randolph Devening officer) \S\ DONALD N. EYLER Senior Vice President - Controller - -------------------------- (principal accounting officer) Donald N. Eyler \S\ E. DEAN WERRIES Chairman and Director - -------------------------- E. Dean Werries \S\ ARCHIE R. DYKES Director - -------------------------- Archie R. Dykes \S\ CAROL B. HALLETT Director - -------------------------- Carol B. Hallett \S\ JAMES G. HARLOW, JR. Director - -------------------------- James G. Harlow, Jr. \S\ R. D. HARRISON Director - -------------------------- R. D. Harrison \S\ LAWRENCE M. JONES Director - -------------------------- Lawrence M. Jones -100- \S\ EDWARD C. JOULLIAN III Director - ------------------------------ Edward C. Joullian III \S\ HOWARD H. LEACH Director - ------------------------------ Howard H. Leach \S\ JOHN A. MCMILLAN Director - ------------------------------ John A. McMillan \S\ GUY A. OSBORN Director - ------------------------------ Guy A. Osborn -101- EX-99. 16 EXHIBIT 99 Exhibit 99 FORM S-8 UNDERTAKING The following is incorporated by reference in Item 21 of Part II of the registrant's registration statements on Form S-8: Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. -102- -----END PRIVACY-ENHANCED MESSAGE-----