-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JmjGGtiEQK7lqUw9q3qR8YPmLrdhD+nEjBSBdp4AeA9ERfznkE9iGcBH1xoLy9HH Bz+1oiBfF5OZK2EYG/cenw== 0000950134-03-000983.txt : 20030123 0000950134-03-000983.hdr.sgml : 20030123 20030123170432 ACCESSION NUMBER: 0000950134-03-000983 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030122 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: FILED AS OF DATE: 20030123 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLEMING COMPANIES INC /OK/ CENTRAL INDEX KEY: 0000352949 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & GENERAL LINE [5141] IRS NUMBER: 480222760 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08140 FILM NUMBER: 03522771 BUSINESS ADDRESS: STREET 1: 1945 LAKEPOINTE DRIVE CITY: LEWISVILLE STATE: TX ZIP: 73126 BUSINESS PHONE: 4058407200 MAIL ADDRESS: STREET 1: 1945 LAKEPOINT DRIVE CITY: LEWISVILLE STATE: TX ZIP: 75057 8-K 1 d02672e8vk.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): January 22, 2003 FLEMING COMPANIES, INC. ----------------------------------------- (Exact Name of Registrant as Specified in Charter) Oklahoma 1-8140 48-0222760 ------------------------------- ------------------------ ------------------------------------ (State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.) Incorporation)
1945 Lakepointe Drive, Lewisville, Texas 75057 ------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (972) 906-8000 ------------------------------------------------------------- (Registrant's telephone number, including area code) N/A ------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (c) Exhibits. The following exhibit is filed as part of this report: No. Exhibit - --- ------- 10.1 Second Amendment, dated as of January 22, 2003, to that certain Credit Agreement, dated as of June 18, 2002 and amended by that certain First Amendment, dated October 18, 2002, by and among Fleming Companies, Inc., the lenders from time to time party thereto, Deutsche Bank Trust Company Americas, as Administrative Agent, JPMorgan Chase Bank and Citicorp North America, Inc., as Syndication Agents, Lehman Commercial Paper Inc. and Wachovia Bank, National Association, as Documentation Agents, Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc., as Joint Book Managers, and Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers. ITEM 9. REGULATION FD DISCLOSURE. (a) On January 23, 2003, Fleming issued a press release announcing its earnings for the fourth quarter and year ended December 28, 2002. The full text of the press release is attached hereto as Exhibit 99.1. (b) Exhibits. The following exhibit is furnished with this report: No. Exhibit - --- ------- 99.1 Press Release dated January 23, 2003. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. FLEMING COMPANIES, INC. By: /s/ MARK SHAPIRO ----------------------------------- Mark Shapiro Senior Vice President, Finance and Operations Control Date: January 23, 2003 3 INDEX TO EXHIBITS
No. Exhibit - --- ------- 10.1 Second Amendment, dated as of January 22, 2003, to that certain Credit Agreement, dated as of June 18, 2002 and amended by that certain First Amendment, dated October 18, 2002, by and among Fleming Companies, Inc., the lenders from time to time party thereto, Deutsche Bank Trust Company Americas, as Administrative Agent, JPMorgan Chase Bank and Citicorp North America, Inc., as Syndication Agents, Lehman Commercial Paper Inc. and Wachovia Bank, National Association, as Documentation Agents, Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc., as Joint Book Managers, and Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers. 99.1 Press Release dated January 23, 2003.
EX-10.1 3 d02672exv10w1.txt SECOND AMENDMENT TO CREDIT AGREEMENT EXHIBIT 10.1 SECOND AMENDMENT SECOND AMENDMENT (this "Amendment"), dated as of January 22, 2003, among FLEMING COMPANIES, INC., the lenders party to the Credit Agreement referred to below (the "Lenders"), and DEUTSCHE BANK TRUST COMPANY AMERICAS, as Administrative Agent. All capitalized terms used herein and not otherwise defined herein shall have the respective meanings provided such terms in the Credit Agreement referred to below. WITNESSETH: WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties to a Credit Agreement, dated as of June 18, 2002 (as amended, modified and supplemented to, but not including the date hereof, the "Credit Agreement"); and WHEREAS, the parties hereto wish to amend the Credit Agreement on the terms and subject to the conditions contained herein; NOW, THEREFORE, it is agreed: 1. The definition of "Applicable Rate" in Section 1.01 of the Credit Agreement is hereby amended by inserting the following new text at the end thereof: "; PROVIDED FURTHER that during the period commencing on the Second Amendment Effective Date to and ending on the last day of the Borrower's fiscal quarter ending closest to March 31, 2003, the respective percentages in each column in the table above and the Applicable Rates applicable to B Term Loans as provided above shall be increased by 0.50%". 2. The definition of "Maximum Notes Prepayment Amount" in Section 1.01 of the Credit Agreement is hereby amended by inserting the following sentence at the end thereof: "Notwithstanding anything contained above, at all times during the period from the Second Amendment Effective Date to and including the last day of the Borrower's fiscal quarter ending closest to March 31, 2003, Maximum Notes Prepayment Amount shall instead mean $0." 3. Section 1.01 of the Credit Agreement is hereby further amended by inserting the following definitions in such Section in their proper alphabetical order: "ADJUSTED ASSET COVERAGE RATIO" means, at any time, the ratio of (i) (x) the consolidated net trade accounts receivable (net of allowances for doubtful accounts) of the Borrower and the Guarantors plus (y) the consolidated net inventory of the Borrower and the Guarantors at such time (valued on a First-in First-out (FIFO) basis), in each case only to the extent the Collateral Agent has a first priority perfected security interest therein (subject to no other Lien other than any statutory Lien on such inventory permitted pursuant to Section 6.01(h), but only if such Lien would not affect in any material respect the value of such inventory or the ability of the Collateral Agent to exercise its rights against such inventory pursuant to the Security Agreement), to (ii) the sum of (x) the aggregate amount of all principal of Loans outstanding at such time plus (y) the total LC Exposure at such time. Notwithstanding anything to the contrary contained in this definition, for the purposes of making determinations of the Adjusted Asset Coverage Ratio at any time, the Collateral Agent shall not be considered to have a first priority perfected security interest in any Inventory of the Borrower or any Guarantor which is located on real property (i) that the Borrower or the respective Guarantor leases (other than pursuant to an acquired or assumed lease) from a Person (other than the Borrower or any of its Subsidiaries) pursuant to a lease entered into after the Effective Date unless the lessor of such real property has executed and delivered to the Collateral Agent a Landlord-Lender Agreement or (ii) owned by the Borrower or one of its Subsidiaries that is subject to a mortgage (other than an acquired or assumed mortgage) entered into after the Effective Date in favor of a Person (other than the Borrower or any Subsidiary thereof) unless the mortgagee in respect thereof shall have executed and delivered to the Collateral Agent a Mortgagee Agreement. "SECOND AMENDMENT EFFECTIVE DATE" means the date upon which the Second Amendment to this Agreement, dated January 22, 2003 becomes effective. 4. Section 2.09(c) is hereby amended by deleting the second sentence of such Section and inserting the following new sentence in lieu thereof: "In addition, upon the Second Amendment Effective Date, the Revolving Commitments shall be permanently reduced to $475,000,000." 5. Section 5.01 of the Credit Agreement is hereby amended by (i) deleting the word "and" appearing at the end of clause (j) thereof, (ii) redesignating clause (k) thereof as clause (l) and (iii) inserting the following new clause (k) immediately following clause (j) thereof: "(k) within 10 Business Days after the last day of each fiscal month of the Borrower, a certificate of a Financial Officer setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 6.11 and 6.18 on the last day of such fiscal month; and" 6. Section 6.08(a) of the Credit Agreement is hereby amended by inserting the following new text at the end thereof: ", PROVIDED that, notwithstanding anything contained above in this clause (a), the aggregate amount of Capital Expenditures permitted to be made by the Borrower and its Subsidiaries during the period from the last day of the Borrower's fiscal quarter ending closest to December 31, 2002 to, but not including, the last day of the Borrower's fiscal quarter ending closest to March 31, 2003 shall be $50,000,000". 7. Section 6.10 of the Credit Agreement is hereby amended by (i) deleting the date "September 30, 2002" appearing in the table set forth in such Section and inserting the date "December 31, 2002" in lieu thereof and (ii) deleting the ratio "4.75:1.00" appearing in such table and inserting the ratio "5.00:1.00" in lieu thereof. 8. Section 6.18 is hereby added as follows: -2- "SECTION 6.18 ADJUSTED ASSET COVERAGE RATIO. The Borrower will not permit the Adjusted Asset Coverage Ratio to be less than 2.50:1.00 at any time during the period from the Second Amendment Effective Date to and including, the last day of the Borrower's fiscal quarter ending closest to March 31, 2003." 9. In order to induce the Lenders to enter into this Amendment, the Borrower hereby represents and warrants that (x) no Default or Event of Default exists on the Second Amendment Effective Date (as defined below), after giving effect to this Amendment, and (y) all of the representations and warranties contained in the Credit Agreement and in the other Loan Documents shall be true and correct in all material respects on the date hereof, both before and after giving effect to this Amendment, with the same effect as though such representations and warranties had been made on and as of such date. 10. This Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Credit Agreement or any other Loan Document. 11. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Borrower and the Administrative Agent. 12. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 13. This Amendment shall become effective on the date (the "Second Amendment Effective Date") when (i) the Borrower and the Required Lenders shall have signed a counterpart hereof and shall have delivered (including by way of telecopier) the same to the Administrative Agent at the address provided in Section 9.01(b) of the Credit Agreement by 2:00 p.m. (New York City time) on January 22, 2003 and (ii) the Borrower shall have paid to the Administrative Agent for distribution to each Lender who has delivered an executed counterpart hereof by 2:00 p.m. (New York City time) on January 22, 2003 as provided in clause (i) above a non-refundable cash fee in an amount equal to 12.5 basis points (0.125%) of an amount equal to the sum of the outstanding principal amount of Term Loans of such Lender and the Revolving Commitment of such Lender, in each case as same is in effect on the Second Amendment Effective Date (after giving effect to the reduction to the Revolving Commitments pursuant to this Amendment). 14. From and after the Second Amendment Effective Date, all references in the Credit Agreement and each of the other Loan Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement as modified hereby. * * * -3- 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/ Mark Shapiro ---------------------------------- Name: Mark Shapiro Title: Senior Vice President, Finance and Operations Control DEUTSCHE BANK TRUST COMPANY AMERICAS, Individually and as Administrative Agent By /s/ Marco Orlando ------------------------------------ Name: Marco Orlando Title: Director FORTIS CAPITAL CORP. By /s/ Eddie Matthews ------------------------------------ Name: Eddie Matthews Title: Senior Vice President FORTIS CAPITAL CORP. By /s/ John C. Preneta ------------------------------------ Name: John C. Preneta Title: Executive Vice President MIZUHO CORPORATE BANK, LTD. By /s/ Yuji Tanaka ------------------------------------ Name: Yuji Tanaka Title: Vice President VAN KAMPEN PRIME RATE INCOME TRUST By: Van Kampen Investment Advisory Corp. By /s/ Darvin D. Pierce ------------------------------- Name: Darvin D. Pierce Title: Executive Director VAN KAMPEN SENIOR INCOME TRUST By: Van Kampen Investment Advisory Corp. By /s/ Darvin D. Pierce ------------------------------- Name: Darvin D. Pierce Title: Executive Director VAN KAMPEN SENIOR FLOATING RATE FUND By: Van Kampen Investment Advisory Corp. By /s/ Darvin D. Pierce ------------------------------- Name: Darvin D. Pierce Title: Executive Director VAN KAMPEN CLO II, LIMITED By: Van Kampen Investment Advisory Corp., as Collateral Manager By /s/ Darvin D. Pierce ------------------------------- Name: Darvin D. Pierce Title: Executive Director KZH CNC LLC By /s/ Anthony Arrobino ----------------------------------- Name: Anthony Arrobino Title: Authorized Agent KZH CYPRESSTREE-1 LLC By /s/ Anthony Arrobino ----------------------------------- Name: Anthony Arrobino Title: Authorized Agent KZH ING-2 LLC By /s/ Anthony Arrobino ----------------------------------- Name: Anthony Arrobino Title: Authorized Agent KZH SOLEIL LLC By /s/ Anthony Arrobino ----------------------------------- Name: Anthony Arrobino Title: Authorized Agent KZH SOLEIL-2 LLC By /s/ Anthony Arrobino ----------------------------------- Name: Anthony Arrobino Title: Authorized Agent KZH STERLING LLC By /s/ Anthony Arrobino ----------------------------------- Name: Anthony Arrobino Title: Authorized Agent KZH WATERSIDE LLC By /s/ Anthony Arrobino ----------------------------------- Name: Anthony Arrobino Title: Authorized Agent MORGAN STANLEY PRIME INCOME TRUST By /s/ Peter Gerwitz ----------------------------------- Name: Peter Gerwitz Title: Vice President MUIRFIELD TRADING LLC By /s/ Diana L. Mushill ----------------------------------- Name: Diana L. Mushill Title: Asst. Vice President OLYMPIC FUNDING TRUST, SERIES 1999-1 By /s/ Diana L. Mushill ----------------------------------- Name: Diana L. Mushill Title: Authorized Agent HARBOUR TOWN FUNDING LLC By /s/ Diana L. Mushill ----------------------------------- Name: Diana L. Mushill Title: Asst. Vice President WINGED FOOT FUNDING TRUST By /s/ Diana L. Mushill ----------------------------------- Name: Diana L. Mushill Title: Authorized Agent JUPITER LOAN FUNDING LLC By /s/ Diana L. Mushill ----------------------------------- Name: Diana L. Mushill Title: Asst. Vice President DENALI CAPITAL LLC, managing member of DC Funding Partners, portfolio manager for DENALI CAPITAL CLO I, LTD., or an affiliate By /s/ John P. Thacker ----------------------------------- Name: John P. Thacker Title: Chief Credit Officer DENALI CAPITAL LLC, managing member of DC Funding Partners, portfolio manager for DENALI CAPITAL CLO II, LTD., or an affiliate By /s/ John P. Thacker ----------------------------------- Name: John P. Thacker Title: Chief Credit Officer AMERICAN EXPRESS CERTIFICATE COMPANY By: American Express Asset Management Group, Inc., as Collateral Manager By /s/ Yvonne E. Stevens ------------------------------- Name: Yvonne E. Stevens Title: Senior Managing Director IGB LIFE INSURANCE COMPANY By: American Express Asset Management Group, Inc., as Collateral Manager By /s/ Yvonne E. Stevens -------------------------------- Name: Yvonne E. Stevens Title: Senior Managing Director CENTURION C94 VI, LTD. By: American Express Asset Management Group, Inc., as Collateral Manager By /s/ Leanne Stavrakis -------------------------------- Name: Leanne Stavrakis Title: Director - Operations SEQUILS - CENTURION V, LTD. By: American Express Asset Management Group, Inc., as Collateral Manager By /s/ Leanne Stavrakis -------------------------------- Name: Leanne Stavrakis Title: Director - Operations SEQUILS - GLACE BAY, LTD. By: Royal Bank of Canada, as Collateral Manager By /s/ Melissa Marano -------------------------------- Name: Melissa Marano Title: Principal BLACK DIAMOND INTERNATIONAL FUNDING, LTD. By /s/ Alan Corkish ----------------------------------- Name: Alan Corkish Title: Director COMERICA BANK By /s/ Mark B. Grover ----------------------------------- Name: Mark B. Grover Title: First Vice President SANKATY ADVISORS, LLC, as Collateral Manager for Castle Hill II - INGOTS, Ltd., as Term Lender By /s/ Timothy M. Barns ----------------------------------- Name: Timothy M. Barns Title: Senior Vice President SANKATY ADVISORS, LLC, as Collateral Manager for Great Point CLO 1999-1 LTD., as Term Lender By /s/ Timothy M. Barns ----------------------------------- Name: Timothy M. Barns Title: Senior Vice President SANKATY ADVISORS, LLC, as Collateral Manager for Race Point CLO, Limited, as Term Lender By /s/ Timothy M. Barns ----------------------------------- Name: Timothy M. Barns Title: Senior Vice President SANKATY HIGH YIELD PARTNERS III, L.P. By /s/ Timothy M. Barns ----------------------------------- Name: Timothy M. Barns Title: Senior Vice President HARCH CLO I, LTD. By /s/ Michael E. Lewitt ----------------------------------- Name: Michael E. Lewitt Title: Authorized Signatory APEX (TRIMARAN) CDO I, LTD. By: Trimaran Advisors, L.L.C. By /s/ David M. Millison ------------------------------- Name: David M. Millison Title: Managing Director STANFIELD CARRERA CLO, LTD. By: Stanfield Capital Partners LLC, as its Asset Manager By /s/ Christopher A. Bondy ------------------------------- Name: Christopher A. Bondy Title: Partner BANK OF AMERICA, N.A. By /s/ William F. Sweeney ----------------------------------- Name: William F. Sweeney Title: Managing Director EX-99.1 4 d02672exv99w1.txt PRESS RELEASE DATED JANUARY 23, 2003 EXHIBIT 99.1 [FLEMING LOGO] NEWS RELEASE FOR IMMEDIATE RELEASE CONTACTS: Fleming Companies, Inc. (Media) Shane Boyd 972.906.2125 1945 Lakepointe Drive (Investors-Equity) Mark Shapiro 972.906.8110 P.O. Box 299013 (Investors-Debt) Clint Bryant 972.906.8142 Lewisville, Texas 75029 telephone 972.906.8000 facsimile 972.906.2402 www.fleming.com
FLEMING REPORTS FOURTH QUARTER AND FISCAL 2002 RESULTS Results Consistent with Revised Estimates; Balance Sheet Improvements Driven by Debt Reduction in Q4; Discussions Continue Regarding Kmart Supply Relationship DALLAS, TEXAS, JANUARY 23, 2003 - Fleming Companies, Inc. (NYSE: FLM) today reported earnings from continuing operations of $5.8 million for the fourth quarter of 2002, or $.11 per share on a diluted basis. This compares to earnings from continuing operations for the fourth quarter of 2001 of $8.6 million or $.19 per share, which included goodwill amortization of $3.4 million or $.06 per share. Continuing operations include Fleming's wholesale distribution business. Discontinued operations include Fleming's price-impact retail stores, which the company is in the process of divesting. As the company reported January 14, 2003, the fourth quarter results were impacted by numerous factors endemic to the supermarket industry. A deflationary and promotional retail environment and general softness in the economy affected earnings. Operating expenses were negatively affected by higher employment-related expenses such as pension, healthcare and insurance costs. Fleming also experienced certain costs in the fourth quarter, including impairments associated with customer leases, start-up costs associated with several new supply arrangements, expenses associated with the integration of Core-Mark International, and wind-down costs related to the company's exit from the Oklahoma City Division. These costs totaled approximately $.19 per diluted share. For the full fiscal year 2002, Fleming reported earnings from continuing operations of $40.2 million, or $.80 per share. This compares to earnings from continuing operations for fiscal year 2001 of $9.0 million or $.20 per share, which included goodwill amortization of $14.6 million or $.27 per share. EBITDAL (earnings before interest expense, taxes, depreciation, amortization and LIFO) from continuing operations for the fourth quarter and full fiscal year 2002 was $71.9 million and $322.3 million, respectively. EBITDAL from continuing operations for the fourth quarter and full fiscal year of 2001 was $71.0 million and $251.9 million, respectively. Sales from continuing operations for the fourth quarter and full year 2002 were $4.08 billion and $15.50 billion, respectively. This compares to sales from continuing operations for the fourth quarter and full year 2001 of $3.46 billion and $13.23 billion, respectively. Full-year 2002 sales from continuing operations represent a 17 percent increase over 2001, largely due to the acquisitions of the Core-Mark and Head Distributing businesses and, to a lesser extent, new supply arrangements with Albertson's, Target, and more than 100 supermarkets previously supplied by wholesaler C.B. Ragland. At fiscal year-end 2002, Fleming's net debt was approximately $1.95 billion, compared with $2.16 billion at the end of the third quarter 2002. Cash flow from operations in the fourth quarter of 2002 was $181 million, compared to $113 million in the fourth quarter of 2001 and $99 million in the fourth quarter of 2000. The company intends to continue to focus on strengthening its balance sheet by paying down debt. Fleming has no material scheduled debt maturities due until 2007. Fleming continues to be in compliance with all of its bank covenants. In light of the fourth quarter EBITDAL results and the anticipated amount and timing of the proceeds from the retail store divestiture, the company secured an amendment to the debt/EBITDA covenant in its credit agreement for the first quarter of 2003. A copy of this amendment will be filed with the Securities and Exchange Commission on Form 8-K. The company plans to continue coordinating with the lenders in its credit facility for an updated covenant package and structure that better reflects Fleming's substantial current asset base. "While our levels of earnings are not where we want them to be, we did make substantial progress in a number of strategic areas in 2002," said Fleming Chairman and Chief Executive Officer Mark Hansen. "A highlight of 2002 was the acquisitions of Core-Mark and Head Distributing, which allowed us to create a national distribution footprint that efficiently serves retailers of any format. Another key event of the year was our strategic decision to divest our retail stores, allowing us to fully focus resources on retail customers in our growing distribution business. "Operationally, we have continued to grow Fleming's business and diversify our customer base. We also maintained our focus on reducing costs and improving productivity to create a more efficient operation, which we believe creates a competitive advantage for our company. We are committed to continuing such necessary improvements, to match the ever-changing needs of our expanding customer base in today's rapidly evolving marketplace," said Hansen. KMART STATUS UPDATE AND GUIDANCE OUTLOOK Kmart recently announced widely anticipated closings of 326 stores. In light of these planned closings, Fleming is currently analyzing appropriate actions to adjust our distribution network as well as the resources currently applied to supply Kmart's stores. Fleming is also continuing discussions with Kmart regarding necessary modifications to the supply relationship, reflecting the changing realities of Kmart's business. This could include amending the agreement on mutually beneficial terms or the rejection of the contract through Kmart's bankruptcy court process. Fleming is committed to taking the appropriate actions that are in Fleming's best interests. Fleming intends to provide updated sales and earnings guidance for 2003 upon completion of the analysis and discussions with Kmart. Guidance will also reflect the current weakness in the nationwide retail environment, Fleming's previously announced divestiture of its company-owned retail operations, and the actions Fleming will take to adjust its internal operations as appropriate in response to these and other market conditions. CONFERENCE CALL AND WEBCAST A teleconference to review the contents of this release will be held Thursday, January 23, 2003 at 7:30 a.m. Central Standard Time. An audio webcast of the conference call will be available on the Internet at www.fleming.com. The conference call can also be accessed by calling 913.981.4900. An audio replay of the conference call will be available by calling 402.280.9273 from 12:30 p.m. Eastern Time on January 23 through midnight Eastern Time on February 6, 2003. The access code for the live call and audio replay is 435129. ABOUT FLEMING With its national, multi-tier supply chain network, Fleming is the #1 supplier of consumer package goods to retailers of all sizes and formats in the United States. Fleming serves nearly 50,000 retail locations, including supermarkets, convenience stores, supercenters, discount stores, concessions, limited assortment, drug, specialty, casinos, gift shops, military commissaries and exchanges and more. Fleming serves more than 600 North American stores of global supermarketer IGA. To learn more about Fleming, visit our Web site at http://www.fleming.com. FORWARD-LOOKING STATEMENT This document contains forward-looking statements regarding future events and the future performance of Fleming. These forward-looking statements are subject to a number of factors that could cause actual results to differ materially from those stated in this release, including without limitation: changes in general economic conditions; adverse effects of the changing industry and increased competition; sales declines and/or loss of customers; the ability of Kmart to emerge from bankruptcy, to assume the supply contract in the bankruptcy process, to operate pursuant to the terms of its debtor-in-possession financing or complete its reorganization; unanticipated problems with product procurement; exposure to litigation and other contingent losses; the inability to integrate acquired companies and to achieve operating improvements at those companies; the ability to successfully sell our retail operations; increases in labor costs and disruptions in labor relations with union bargaining units representing Fleming's employees; and the negative effects of Fleming's substantial indebtedness and the limitations imposed by restrictive covenants contained in Fleming's debt instruments. Additional information about these factors is contained in Fleming's reports and filings with the Securities and Exchange Commission, including its 2001 Form 10-K. The forward-looking statements speak only as of the date made and Fleming undertakes no obligation to update forward-looking statements to reflect developments or information obtained after the date of this release. ### (TABLES 1 THROUGH 5 FOLLOW) Fleming Companies, Inc. (NYSE: FLM) Consolidated Condensed Statements of Operations For the 12 weeks ended December 28, 2002, and December 29, 2001 (In thousands, except per share amounts)
2002 2001 ------------ ------------ (a) Net sales $ 4,077,277 $ 3,457,300 % change 17.9% Costs and expenses: Cost of sales 3,915,165 3,288,874 Selling and administrative 118,549 126,014 Interest expense 37,392 29,429 Interest income and other (3,287) (4,260) Impairment/restructuring charge -- 3,455 ------------ ------------ Total costs and expenses 4,067,819 3,443,512 ------------ ------------ Income from continuing operations before income taxes 9,458 13,788 Taxes on income 3,657 5,183 ------------ ------------ Income from continuing operations 5,801 8,605 Discontinued operations: Income (loss) from operations of discontinued retail (including impairment of $115.3 million) (157,087) 13,106 Taxes on income (loss) (61,513) 16,017 ------------ ------------ Loss on discontinued operations (95,574) (2,911) ------------ ------------ Net income (loss) $ (89,773) $ 5,694 ============ ============ Basic income (loss) per share: Continuing operations $ 0.11 $ 0.20 Discontinued operations (1.77) (0.07) ------------ ------------ Net income (loss) $ (1.66) $ 0.13 ============ ============ Diluted income (loss) per share: Continuing operations $ 0.11 $ 0.19 Discontinued operations (1.76) (0.07) ------------ ------------ Net income (loss) $ (1.65) $ 0.12 ============ ============ Weighted average shares outstanding: Basic 53,964 43,907 Diluted 54,306 45,778 Additional information: Depreciation: Continuing $ 24,854 $ 25,969 Discontinued $ -- $ 9,337 Goodwill amortization: Continuing $ -- $ 3,396 Discontinued $ -- $ 1,577 Operating earnings (b): Continuing $ 43,563 $ 42,412 % of sales 1.07% 1.23% % change 2.7% Discontinued $ (149,419) $ 20,415 EBITDAL (c): Continuing $ 71,940 $ 70,974 % of sales 1.76% 2.05% % change 1.4% Discontinued $ (148,464) $ 26,105
(a)- Adjusted for EITF 01-9 (reclass between net sales and cost of sales, no effect on gross margin). (b)- Transfer pricing from distribution to retail was historically recorded at cost; beginning with the 3rd quarter of 2002, it is recorded at market. (c)- See reconciliation of net income to EBITDAL on Table 5. TABLE 1 Fleming Companies, Inc. (NYSE: FLM) Consolidated Condensed Statements of Operations For the 52 weeks ended December 28, 2002 and December 29, 2001 (In thousands, except per share amounts)
2002 2001 ------------ ------------ (a) Net sales $ 15,502,920 $ 13,225,163 % change 17.2% Costs and expenses: Cost of sales 14,855,125 12,590,045 Selling and administrative 430,819 455,951 Interest expense 147,893 126,322 Interest income and other (23,541) (24,028) Litigation charge -- 48,628 Impairment/restructuring charge 27,361 13,866 ------------ ------------ Total costs and expenses 15,437,657 13,210,784 ------------ ------------ Income from continuing operations before income taxes 65,263 14,379 Taxes on income 25,113 5,419 ------------ ------------ Income from continuing operations 40,150 8,960 Discontinued operations: Income (loss) from operations of discontinued retail (including impairment of $115.3 million) (190,294) 48,420 Taxes on income (loss) (74,214) 30,603 ------------ ------------ Income (loss) on discontinued operations (116,080) 17,817 ------------ ------------ Income (loss) before extraordinary charge (75,930) 26,777 Extraordinary charge from early retirement of debt (net of taxes) (7,863) (3,469) ------------ ------------ Net income (loss) $ (83,793) $ 23,308 ============ ============ Basic income (loss) per share: Continuing operations $ 0.81 $ 0.21 Discontinued operations (2.35) 0.42 ------------ ------------ Before extraordinary charge (1.54) 0.63 Extraordinary charge from early retirement of debt (0.16) (0.08) ------------ ------------ Net income (loss) $ (1.70) $ 0.55 ============ ============ Diluted income (loss) per share: Continuing operations $ 0.80 $ 0.20 Discontinued operations (2.31) 0.40 ------------ ------------ Before extraordinary charge (1.51) 0.60 Extraordinary charge from early retirement of debt (0.16) (0.08) ------------ ------------ Net income (loss) $ (1.67) $ 0.52 ============ ============ Weighted average shares outstanding: Basic 49,426 42,588 Diluted 50,333 44,924 Additional information: Depreciation: Continuing $ 113,114 $ 107,850 Discontinued $ 35,666 $ 37,367 Goodwill amortization: Continuing $ -- $ 14,550 Discontinued $ -- $ 6,639 Operating earnings (b): Continuing $ 216,976 $ 179,167 % of sales 1.40% 1.35% % change 21.1% Discontinued $ (158,323) $ 50,146 EBITDAL (c): Continuing $ 322,322 $ 251,866 % of sales 2.08% 1.90% % change 28.0% Discontinued $ (114,934) $ 132,706
(a)- Adjusted for EITF 01-9 (reclass between net sales and cost of sales, no effect on gross margin). (b)- Transfer pricing from distribution to retail was historically recorded at cost; beginning with the 3rd quarter of 2002, it is recorded at market. (c)- See reconciliation of net income to EBITDAL on Table 5. TABLE 2 Fleming Companies, Inc. (NYSE: FLM) Consolidated Condensed Balance Sheet and Ratios (In thousands, except ratios)
December 28, December 29, 2002 2001 ------------ ------------ Assets Cash and cash equivalents $ 53,457 $ 17,325 Receivables, net 667,681 568,197 Inventory 946,331 902,933 Assets held for sale 463,670 571,352 Other current assets 163,873 88,133 ------------ ------------ Total current assets 2,295,012 2,147,940 Property and equipment, net 571,167 653,519 Other assets 1,131,753 853,234 ------------ ------------ Total assets $ 3,997,932 $ 3,654,693 Liabilities and shareholders' equity Accounts payable $ 983,119 $ 952,037 Current portion of LT debt and cap lease obligations 18,887 45,778 Liabilities held for sale (a) 140,128 157,001 Other current liabilities 351,029 228,949 ------------ ------------ Total current liabilities 1,493,163 1,383,765 Long-term debt and capital lease obligations 1,867,884 1,645,356 Other liabilities 122,883 127,353 Shareholders' equity 514,002 498,219 ------------ ------------ Total liabilities and shareholders' equity $ 3,997,932 $ 3,654,693 Ratios Accounts payable to inventory 103.9% 105.4% Net debt as a percentage of total capitalization (b)(c) 79.1% 78.3% Inventory turns (LTM) (d) 15.5 15.5 Days Sales Outstanding (e) 13.8 13.8
(a) Includes capital lease obligations of $114,830 and $119,906, respectively. (b) Ratio is calculated using total company debt including capital lease obligations in liabilities held for sale. (c) Non-cash pension adjustments and retail impairment charges increased the 2002 ratio by approximately 4.2%. (d) Inventory turns includes annualized average inventory and cost of sales for Core-Mark. (e) Days sales outstanding is calculated using average daily sales for the respective quarter. TABLE 3 Fleming Companies, Inc. (NYSE: FLM) Consolidated Condensed Statements of Cash Flows For the 12 and 52 weeks ended December 28, 2002 and December 29, 2001 (In thousands)
Q4 Q4 YTD YTD OPERATING ACTIVITIES: 2002 2001 2002 2001 ------------ ------------ ------------ ------------ Net income (loss) $ (89,773) $ 5,694 $ (83,793) $ 23,308 Adjustments to reconcile net income (loss) to net cash used by operating activities: Depreciation and amortization 24,854 40,279 148,780 166,406 Amortization in interest expense 2,164 1,880 8,762 6,809 Credit losses 7,432 17,333 16,229 37,795 Deferred income taxes (56,092) (1,880) (30,015) 36,165 Gain/loss on sale of business (3,638) (2,000) (3,638) (5,273) Impairment/restructuring and related 115,300 4,562 142,661 19,199 Cash payments on impair/restruct (4,296) (9,691) (25,965) (68,141) Cost of early debt retirement -- -- 13,119 5,787 Receivables 36,237 (41,137) 47,237 (104,458) Inventories 164,448 78,320 94,486 (139,032) Accounts payable (8,462) (44,184) (113,344) 21,714 Other assets and liabilities (7,245) 63,396 (151,195) (32,424) ------------ ------------ ------------ ------------ CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 180,929 112,572 63,324 (32,145) INVESTING ACTIVITIES: Collections on note receivable 9,554 6,316 41,681 30,691 Notes receivable funded (2,101) (1,175) (16,326) (21,879) Acquisitions 550 (703) (294,508) (121,373) Purchase of property and equipment (19,871) (69,909) (170,650) (238,413) Proceeds from sale of property and equipment 761 11,407 165,029 24,693 Proceeds from sale of businesses 26,500 -- 26,500 120,947 Other investing activities 3,692 1,978 21,969 15,575 ------------ ------------ ------------ ------------ CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 19,085 (52,086) (226,305) (189,759) FINANCING ACTIVITIES: Change in revolver (60,000) (220,000) (200,000) (100,000) Proceeds from long-term borrowings -- 293,140 880,940 793,742 Principal payments on long-term debt (99,013) (146,844) (588,060) (489,599) Payments on capital issuance and debt retirement (1,262) (6,799) (47,238) (30,775) Principal payments on capital lease obligations (5,954) (5,811) (21,362) (20,903) Sale of common stock 60 542 178,763 59,794 Dividends paid (1,082) (880) (3,930) (3,410) ------------ ------------ ------------ ------------ CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (167,251) (86,652) 199,113 208,849 INCREASE (DECREASE) IN CASH 32,763 (26,166) 36,132 (13,055) Cash balance, beginning of period 20,694 43,491 17,325 30,380 ------------ ------------ ------------ ------------ Cash balance, end of period $ 53,457 $ 17,325 $ 53,457 $ 17,325 ============ ============ ============ ============
TABLE 4 Fleming Companies, Inc. (NYSE: FLM) Net Income to EBITDAL Reconciliation For the 12 and 52 weeks ended December 28, 2002 and December 29, 2001 (In thousands)
QUARTER 4, 2002 QUARTER 4, 2001 --------------------------------------------- --------------------------------------------- TOTAL TOTAL CONTINUING DISCONTINUED COMPANY CONTINUING DISCONTINUED COMPANY ----------- ------------ ----------- ----------- ------------ ----------- Net income (loss) $ 5,801 $ (95,574) $ (89,773) $ 8,605 $ (2,911) $ 5,694 Taxes on income (loss) 3,657 (61,513) (57,856) 5,183 16,017 21,200 Interest expense 37,392 7,823 45,215 29,429 8,798 38,227 Depreciation/amortization 24,854 -- 24,854 29,365 10,914 40,279 LIFO charge (income) 200 800 1,000 -- (9,093) (9,093) Equity investment results 36 -- 36 772 -- 772 Transfer pricing adjustment (a) -- -- -- (2,380) 2,380 -- ----------- ----------- ----------- ----------- ----------- ----------- EBITDAL $ 71,940 $ (148,464) $ (76,524) $ 70,974 $ 26,105 $ 97,079
YTD, 2002 YTD, 2001 --------------------------------------------- --------------------------------------------- TOTAL TOTAL CONTINUING DISCONTINUED COMPANY CONTINUING DISCONTINUED COMPANY ----------- ------------ ----------- ----------- ------------ ----------- Net income (loss) before extraordinary charge $ 40,150 $ (116,080) $ (75,930) $ 8,960 $ 17,817 $ 26,777 Taxes on income (loss) 25,113 (74,214) (49,101) 5,419 30,603 36,022 Interest expense 147,893 32,126 180,019 126,322 39,212 165,534 Depreciation/amortization 113,114 35,666 148,780 122,400 44,006 166,406 LIFO charge (income) 2,800 1,650 4,450 -- (11,700) (11,700) Equity investment results (830) -- (830) 1,533 -- 1,533 Transfer pricing adjustment (a) (5,918) 5,918 -- (12,768) 12,768 -- ----------- ----------- ----------- ----------- ----------- ----------- EBITDAL $ 322,322 $ (114,934) $ 207,388 $ 251,866 $ 132,706 $ 384,572
(a)- Transfer pricing from distribution to retail was historically recorded at cost; beginning with the 3rd quarter of 2002, it is recorded at market. Table 5 -----END PRIVACY-ENHANCED MESSAGE-----