-----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, N8uAc+FacQJIcu8+c7IDrN6DTNL0hRk7+OOkile6AzebvhAbVmw6vJ2LZEG1KqQ+ rFui10RpFZq+6QTfeu3SPA== 0001047469-98-000464.txt : 19980109 0001047469-98-000464.hdr.sgml : 19980109 ACCESSION NUMBER: 0001047469-98-000464 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961228 FILED AS OF DATE: 19980108 SROS: CSE 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: 0131 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 001-08140 FILM NUMBER: 98502782 BUSINESS ADDRESS: STREET 1: 6301 WATERFORD BLVD STREET 2: P O BOX 26647 CITY: OKLAHOMA CITY STATE: OK ZIP: 73126 BUSINESS PHONE: 4058407200 MAIL ADDRESS: STREET 1: P O BOX 26647 CITY: OKLAHOMA CITY STATE: OK ZIP: 73216-0647 10-K405/A 1 FORM 10-K/A - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K/A (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NO. 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 73126 OKLAHOMA CITY, OKLAHOMA (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area (405) 840-7200 code 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 21, 1997, 37,800,000 common shares were outstanding. The aggregate market value of the common shares (based upon the closing price on February 21, 1997 of these shares on the New York Stock Exchange) of Fleming Companies, Inc. held by nonaffiliates was approximately $637 million. DOCUMENTS INCORPORATED BY REFERENCE A portion of Part III has been incorporated by reference from the registrant's proxy statement dated March 18, 1997, in connection with its annual meeting of shareholders to be held on April 30, 1997. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Several events have shaped Fleming's results of operations and capital and liquidity position during each of the past three fiscal years. Since 1993, changes in the food marketing and distribution industry have reduced sales and increased competitive pressures for the company and many of its customers. In January 1994, the company announced a strategic plan to transform its operations to better serve its customers and achieve higher profitability. As part of this plan, the company consolidated food distribution facilities, reorganized its management group and reengineered the way it prices and sells grocery, frozen and dairy products and retail services. In July 1994, the company acquired Scrivner Inc. ("Scrivner"), adding $6 billion in annual food distribution sales and more than 175 retail stores. The company also dealt with business and litigation challenges during this period: the bankruptcy of a major customer in 1994, the addition by foreclosure in early 1996 of a 71-store customer in Arizona and several litigation developments. Each of these events is discussed in more detail below: CHANGING INDUSTRY ENVIRONMENT. The food marketing and distribution industry is undergoing accelerated change as producers, manufacturers, distributors and retailers seek to lower costs and increase services in an increasingly competitive environment of relatively static overall demand. Alternative format food stores (such as warehouse stores and supercenters) have gained retail food market share at the expense of traditional supermarket operators, including independent grocers, many of whom are Fleming customers. Vendors, seeking to ensure that more of their promotional fees and allowances are used by retailers to increase sales volume, increasingly direct promotional dollars to large self-distributing chains, alternative formats and other channels of distribution. The company believes that these changes have led to reduced sales, reduced margins and lower profitability among many of its customers and at the company itself. CONSOLIDATIONS, REORGANIZATION AND REENGINEERING. In the fourth quarter of 1991, the company commenced a five-unit wholesale food facilities consolidation plan and a reduction-in-force initiative at selected operating units and staff locations (the "1991 Plan"). In 1992 and 1993, $24 million and $28 million, respectively, of cost were charged to the 1991 Plan reserves and $4 million of reserves remained at the end of 1993 to cover future year's estimated carrying costs of undisposed properties from the closed facilities. Subsequent years' annual expenses of these properties, e.g., rent, property taxes, insurance, were charged to the reserves and an additional $2.5 million expense was recorded in 1993. The 1991 Plan was completed in 1993. In the fourth quarter of 1993, the company developed a comprehensive plan to consolidate five additional facilities, reorganize its operational and managerial structure and reengineer the way it prices and markets certain goods and retail services (the "1993 Plan"). The company's goals were: (i) to gain operational efficiencies by closing certain facilities and consolidating operations into larger, more efficient facilities; (ii) to reduce costs by removing a layer of management and closing regional operations; and (iii) to combat recent negative industry trends by offering a flexible marketing plan designed to permit customers to reduce the cost of the goods and services purchased from the company and thereby gain a competitive advantage for Fleming. The estimated costs of significant actions believed necessary to implement the 1993 Plan were identified (such as asset impairments and severance costs) and a charge totaling $105 million was recorded along with related reserves. Certain additional costs (such as employee training expenses and the costs of designing and implementing the flexible marketing plan) were anticipated but were not included in the charge. These additional costs are being expensed as incurred. By year-end 1993, approximately $24 million of consolidation and severance costs were charged to the 1993 reserve leaving a balance of approximately $81 million. 2 At inception, the company expected the 1993 Plan to be completed and the reserve to be fully utilized by the end of 1996. The acquisition of Scrivner in mid-1994 (which was not anticipated when the 1993 Plan was established) and the subsequent integration of Scrivner into Fleming's operations delayed implementation of many components of the 1993 Plan. During 1994, $28 million was charged to the reserve as the company consolidated (or partially consolidated) four facilities, recognized impairments related to asset dispositions and made some planned reductions in work force. During 1995, the company charged $21 million against the 1993 reserve as continuing expenses were recognized in completing four of the planned five facilities consolidations and the anticipated asset impairments relating to retail store dispositions were recognized. During the year, the company noted certain customer resistance to transferring operations to consolidated facilities. To reduce these disruptive logistical changes, the company targeted an alternative general merchandise center for consolidation. The closure of the alternate site will be less expensive than initially estimated. Accordingly, $9 million of the 1993 reserve was reversed in the third quarter of 1995 and taken into income as a change in estimate. Many of the 1993 Plan's components are interdependent and certain actions cannot begin until other actions are completed. For example, full work force reductions and certain transportation initiatives could not be implemented until the company's new marketing plan was available at each product supply center. During 1995 and early 1996, the company experienced unanticipated customer resistance to the changes required by the new flexible marketing plan and the pace of implementing the 1993 Plan slowed as the company developed alternatives to overcome this resistance. Consequently, actions dependent on the implementation of the new marketing plan were also slowed and, in some cases, rescheduled to 1997. During 1996, only $3 million was charged against the reserve. Alternative marketing plans are being developed and implementation of the 1993 Plan is expected to accelerate so as to be substantially complete by the end of 1998. While customer reaction to the initial implementation of the flexible marketing plan (which is a critical component of reengineering) caused some operational disruption and loss of sales, the company believes that the 1993 Plan will reduce costs throughout the company and strengthen the company's overall competitive position. SCRIVNER. In July 1994, Fleming purchased Scrivner for approximately $390 million in cash and the assumption of $670 million of indebtedness while refinancing approximately $340 million of its own debt. To finance the transaction, the company entered into a $2.2 billion bank credit agreement, $500 million of which was refinanced with Fixed Rate and Floating Rate Senior Notes prior to the end of 1994. During 1994 and 1995, the company consolidated nine distribution centers acquired in the Scrivner acquisition (in addition to the consolidations which were anticipated as part of the 1993 Plan). The costs of these consolidations were charged to separate purchase accounting reserves established at the time of the acquisition. 3 Because the company quickly integrated Scrivner's operations, it is difficult to estimate the impact Scrivner had on sales, gross margins or earnings. However, Scrivner's significant retail food presence substantially increased Fleming's corporate-owned retail stores from 139 before the acquisition to approximately 345 (including 283 supermarkets) immediately following the acquisition. This substantial increase in retail food operations not only added to total sales, but also raised both gross margin and selling and administrative expenses as retail food operations typically operate at higher levels in these areas than do food distribution operations. Interest expense increased as a result of increased borrowing levels due to the acquisition and to higher interest rates attributable in substantial part to lower credit ratings for the company's long-term debt. Interest expense rose from $78 million in 1993 to $120 million in 1994 and $175 million in 1995 before falling to $163 million in 1996. Goodwill amortization was $23.1 million in 1994, $30.1 million in 1995 and $32.0 million in 1996; the increase from 1994 was principally due to Scrivner. The acquisition of Scrivner and its integration into Fleming also caused significant delays in implementing the 1993 Plan. MEGAFOODS. In August 1994, Megafoods, Inc. and certain of its affiliates ("Megafoods" or the "debtor"), filed Chapter 11 bankruptcy proceedings in Phoenix, Arizona. The company estimates that prior to bankruptcy, annualized sales to Megafoods approximated $335 million. By 1995, sales to Megafoods were approximately $87 million and by 1996, there were no sales. The company filed claims for indebtedness for goods sold on open account, equipment leases and secured loans totaling approximately $28 million and for substantial contingent claims for store subleases and lease guarantees extended by the company for the debtor's benefit. Megafoods brought an adversary proceeding seeking, among other things, damages against the company. The company recorded losses resulting from deteriorating collateral values of $6.5 million in 1994 and $3.5 million in 1995, and in 1996 recorded $5.8 million to reflect continuing deterioration and the effects of a proposed settlement of the company's claim and the debtor's allegations. ABCO. At year-end 1994, the company was the largest single shareholder (approximately 48% of stock outstanding), the major supplier and the second largest creditor of ABCO Markets, Inc. ("ABCO"), a supermarket chain located in Arizona. By the fall of 1995, the company's investments in, and loans to, ABCO totaled approximately $39 million. In September 1995, ABCO defaulted on both its bank debt and its debt to the company. The company exercised a warrant to gain an additional 3% of ABCO's capital stock and purchased the bank's preferred position for $21 million. In January 1996, the company foreclosed and acquired all of ABCO's assets consisting of approximately 71 stores at the time of foreclosure. Certain of ABCO's minority shareholders have challenged this action and are seeking rescission and/or damages. LITIGATION. In March 1996, a jury in central Texas returned verdicts in David's Supermarkets, Inc. v. Fleming ("David's") which resulted in a judgment of $211 million against Fleming. In response, the company established a reserve of $7.1 million and amended its former bank credit agreement to facilitate posting a partially collateralized supersedeas bond. Pursuant to the amendment, pricing for borrowing under the former credit agreement was increased. The judgment was vacated in June 1996, and the company's reserve was reduced to $650,000. During the third quarter of 1996, the company recorded a charge of $20 million to reflect an announced settlement agreement reached in lawsuits involving a failed grocery diverter, Premium 4 Sales Corporation. See the Litigation and Contingencies note to the company's financial statements and Item 3. Legal Proceedings for a further discussion of certain litigation and contingent liability issues. CREDIT POLICIES. In 1995, Fleming began imposing stricter credit policies and applying cost/benefit analyses to loans to and investments made in its distribution customers. Traditionally, food distributors have used the availability of financial assistance as a competitive tool. Fleming believes that its stricter credit policies have resulted in decreased sales. Management believes that the combination of these events has negatively affected the company's financial performance during the past three years. However, management also believes that the company's ultimate success will depend on its ability to continue to cut costs while expanding profitable operations. The company has revised its marketing plans and is taking other steps to reverse sales declines. These initiatives include increased marketing emphasis and expanded offerings of Fleming Retail Services, streamlining and expanding Fleming Brands, developing and marketing additional foodservice products and growing retail food operations through remodels, new store development and selective acquisitions. While the company believes considerable progress has been made to date, no assurance can be given that the company will be successful in continuing to cut costs, in reversing sales declines or in increasing higher margin activities. 5 However, starting with the fourth quarter of 1995, a trend of improvement in the company's adjusted earnings per share began to develop reflecting some success in countering the negative impact of the events outlined above. After adjusting for litigation charges, charges for the disposition of retail food operations and other nonoperating items, adjusted earnings per share for the past eight quarters were as follows: 1995 1996 --------- --------- First quarter....................................... $ .40 $ .25 Second quarter...................................... $ .39 $ .30 Third quarter....................................... $ .10 $ .19 Fourth quarter...................................... $ .11 $ .27 RESULTS OF OPERATIONS Set forth in the following table is information regarding the company's net sales and certain components of earnings expressed as a percent of sales which are referred to in the accompanying discussion: 1996 1995 1994 ----------- ----------- ----------- Net sales................................ 100.00% 100.00% 100.00% Gross margin............................. 8.99 8.06 7.14 Less: Selling and administrative............... 7.73 6.79 5.93 Interest expense......................... .99 1.00 .77 Interest income.......................... (.29) (.33) (.36) Equity investment results................ .11 .16 .09 Litigation settlement.................... .12 -- -- Facilities consolidation................. -- (.05) -- Total.................................... 8.66 7.57 6.43 Earnings before taxes.................... 0.33 0.49 0.71 Taxes on income.......................... 0.17 0.25 0.35 Net earnings............................. 0.16% 0.24% 0.36% Note: 1994 was a 53-week year. The results of Scrivner are included beginning the third quarter of 1994 and the consolidated results of ABCO are included beginning December 1995. 1996 AND 1995 NET SALES. Sales for 1996 decreased by $1.01 billion, or 6%, to $16.49 billion from $17.50 billion for 1995. In addition to the factors mentioned above, several other factors, none of which are individually material to sales, adversely affected sales in 1996, including: loss of market share at certain company- 6 owned retail stores; the sale or closing of 62 corporate stores; stricter credit policies; and a reduced amount of new business caused by the adverse publicity surrounding the David's litigation. See "Litigation and Contingencies". The company measures inflation using data derived from the average cost of a ton of product sold by the company. For 1996, food price inflation was 2.3%, compared to 1.3% in 1995. GROSS MARGIN. Gross margin for 1996 increased by $71 million, or 5%, to $1.48 billion from $1.41 billion for 1995 and increased as a percentage of net sales to 8.99% from 8.06% for 1995. The increase in gross margin was principally due to new retail operations, primarily the addition of ABCO. Retail operations typically have a higher gross margin and higher selling and administrative expenses than food distribution operations. During 1996, the company also implemented increases in certain charges to its customers and vendors, increasing gross margin comparisons to 1995. Product handling expenses, consisting of warehouse, transportation and building expenses, were lower as a percentage of net sales in 1996 compared to 1995, reflecting the cost controls and the benefits of the company's facility consolidations and transportation outsourcing efforts in 1995 and 1994. The company also achieved food distribution productivity increases during 1996 of 2.6%. Food price inflation resulted in a LIFO charge in 1996 of $6.0 million compared to a charge of $2.9 million for 1995. SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses for 1996 increased by $85 million, or 7%, to $1.27 billion from $1.19 billion for 1995 and increased as a percentage of net sales to 7.73% for 1996 from 6.79% in 1995. The increase was principally due to: higher retail expenses resulting from additional retail operations; a $12 million charge related to the divestiture of retail stores; and higher legal expense in 1996 compared to 1995. During 1996, a $1.6 million gain from the sale of certain notes receivable was recorded; a similar gain of $3.9 million was recorded in 1995. The increase in Corporate expenses under Operating Earnings shown in "Segment Information" in the notes to consolidated financial statements include the aforementioned increase in legal expense, a write-down of certain international equity investments and increased incentive compensation expense. The company has a significant amount of credit extended to certain customers through various methods. These methods include customary and extended credit terms for inventory purchases, secured loans with terms generally up to ten years, and equity investments in and secured and unsecured loans to certain customers. In addition, the company guarantees debt and lease obligations of certain qualified customers. Credit loss expense is included in selling and administrative expenses and for 1996 decreased by $4 million to $27 million from $31 million for 1995. Since 1994, tighter credit practices and reduced emphasis on credit extensions to and investments in customers have resulted in less exposure and a decrease in credit loss expense. Offsetting the decreases in 1996 from 1995 was $3.8 million of credit losses related to the bankruptcy of Megafoods, reflecting the estimated deterioration in the company's collateral. An additional $2.0 million was recorded to selling and administrative expense, but not credit loss, during the third quarter of 1996 for the expected loss on the proposed settlement. See "Litigation and Contingencies". INTEREST EXPENSE. Interest expense for 1996 decreased $12 million to $163 million from $175 million for 1995. Lower average borrowing levels offset in part by higher borrowing costs for bank debt in 1996 compared to 1995 primarily accounted for the improvement. In February and April 1996, the company amended its bank credit agreement first to provide greater financing flexibility and subsequently to increase the company's capacity for letters of credit in order to partially secure a supersedeas bond in connection with the David's litigation. These amendments effectively increased the company's bank debt borrowing margin by almost .5%. In August 1996, Moody's Investors Service ("Moody's") lowered its credit ratings on the company's senior unsecured debt to Ba3 from Ba1. The downgrade resulted in a .25% increase in the company's bank debt borrowing margin which increased interest expense on borrowing 7 under the bank credit agreement at an estimated annualized cost of $2 million. Moody's rating on the company's bank debt is currently Ba2. In September 1996, Standard & Poor's Ratings Group ("Standard & Poor's") lowered its credit ratings on the company to BB from BB+, and on the company's senior unsecured debt to B+ from BB-. The downgrade did not result in an additional increase in the company's bank debt borrowing margin. The company's derivative agreements consist of simple "floating-to-fixed rate" interest rate caps and swaps. For 1996, interest rate hedge agreements contributed $10 million of interest expense, compared to $7 million in 1995, due to lower average floating interest rates. The company enters into interest rate hedge agreements to manage interest costs and exposure to changing interest rates. The credit agreement with the company's bank group requires the company to provide interest rate protection on a substantial portion of the indebtedness outstanding thereunder. The company has entered into interest rate swaps and caps covering $850 million aggregate principal amount of floating rate indebtedness. The company's hedged position exceeds the hedge requirements set forth in the company's bank credit agreement. The stated interest rate on the company's floating rate indebtedness is equal to the London interbank offered interest rate ("LIBOR") plus a margin. The average fixed interest rate paid by the company on the interest rate swaps was 6.95%, covering $600 million of floating rate indebtedness. The interest rate swap agreements, which were implemented through six counterparty banks and at year-end 1996 have an average remaining life of two years, provide for the company to receive substantially the same LIBOR that the company pays on its floating rate indebtedness. For the remaining $250 million, the company has purchased interest rate cap agreements from two counterparty banks. The agreements cap LIBOR at 7.33% over the next 2 years. Payments made or received under interest rate swap and cap agreements are included in interest expense. With respect to the interest rate hedge agreements, the company believes its exposure to potential loss due to counterparty nonperformance is minimized primarily due to the relatively strong credit ratings of the counterparty banks for their unsecured long-term debt (A- or higher from Standard & Poor's and A1 or higher from Moody's) and the size and diversity of the counterparty banks. The hedge agreements are subject to market risk to the extent that market interest rates for similar instruments decrease and the company terminates the hedges prior to maturity. See "Long-Term Debt" in the notes to consolidated financial statements for further discussion. INTEREST INCOME. Interest income for 1996 was $49 million compared to $58 million in 1995. In 1996, the company sold (with limited recourse) $35 million of notes receivable late in the third quarter. In 1995, $77 million of notes receivable were sold with limited recourse in the second quarter. Both of these sales reduced the amount of notes receivable available to produce interest income. EQUITY INVESTMENT RESULTS. The company's portion of operating losses from equity investments for 1996 decreased by $9 million to $18 million from $27 million for 1995. The results of operations of ABCO, accounted for under the equity method during most of 1995, are not included in 1996 equity investment results due to the acquisition of ABCO. This resulted in an improvement in equity investment results in 1996 compared to 1995. The remainder of the improvement is due to improved results of operations in certain of the underlying equity investment entities. FACILITIES CONSOLIDATION. In the first quarter of 1995, management changed its facilities consolidation estimates with respect to the general merchandising operations portion of the consolidation, reorganization and reengineering plan. The revised estimate reflected reduced expense and cash outflow. Accordingly, during the first quarter of 1995, the company reversed $9 million of the provision for facilities consolidation. No changes were made to the estimates in 1996. 8 In 1993, the company recorded a $108 million facilities consolidation and restructuring charge. During 1996, $3 million of restructuring and consolidation costs were charged to the related reserve, compared to $24 million in 1995, reflecting the lower level of activity occurring in 1996. Additional charges to the $18 million of remaining reserves are anticipated in 1997, although the amount is not yet known. TAXES ON INCOME. The effective tax rate for both 1996 and 1995 was 51.1%. CERTAIN ACCOUNTING MATTERS. See notes to consolidated financial statements for a discussion of new accounting standards adopted in 1996, none of which had a material effect on results of operations or financial position. OTHER. Several factors negatively affecting cash flows from operations and earnings in 1996 are likely to continue for the near term. Management believes that these factors include lower sales, operating losses in certain company-owned retail stores and litigation-related costs. 1995 AND 1994 NET SALES. Net sales for 1995 increased by $1.78 billion, or 11%, to $17.50 billion from $15.72 billion for 1994. Notwithstanding the positive effects of the Scrivner acquisition in the third quarter of 1994, net sales in 1995 were adversely impacted by the combined effects of the organization and operational changes introduced in 1995. In addition, several other factors, none of which were individually material to sales, adversely affected sales in 1995, including: sales lost to normal attrition which were not replaced; the loss of business from Megafoods; the closing or sale of certain corporate stores; and the expiration of a temporary sales agreement with Albertson's Inc. as its Florida distribution center came on line. The company's tighter credit policies also had a negative effect on generating replacement sales. Fleming measures inflation using data derived from the average cost of a ton of product sold by the company. Food price inflation was 1.3% in 1995 compared to a negligible rate in 1994. GROSS MARGIN. Gross margin for 1995 increased by $288 million, or 26%, to $1.41 billion from $1.12 billion for 1994 and increased as a percentage of net sales to 8.06% for 1995 from 7.14% for 1994. The primary reason for the increase was additional retail operations, principally related to the Scrivner acquisition, which typically have a higher gross margin than food distribution. Product handling expenses, which consist of warehouse, truck and building expenses, was approximately the same as a percentage of net sales in 1995 as in 1994. In food distribution, reduced vendor income due to the accelerated trend to Every Day Low Costing ("EDLC") negatively impacted gross margin and certain other margin items that are passed through to customers under the Flexible Marketing Plan. This gross margin impact was only partially offset by increases in related charges to customers. SELLING AND ADMINISTRATIVE EXPENSE. Selling and administrative expense for 1995 increased by $257 million, or 28%, to $1.19 billion from $933 million for 1994 and increased as a percentage of net sales to 6.79% for 1995 from 5.93% in 1994. Retail operations typically have higher selling and administrative expenses than food distribution operations and the full year of retail acquired from Scrivner was the primary reason for the increase. Goodwill amortization also increased as a result of the acquisition. In addition, the technology-related aspects of the various reengineering initiatives resulted in an increase in expense. The increase in corporate expenses under Operating Earnings shown in "Segment Information" in the notes to consolidated financial statements is the result of these reengineering initiatives. Credit loss expense included in selling and administrative expenses decreased in 1995 by $30 million to $31 million from $61 million for 1994. Tighter credit practices and reduced emphasis on credit extensions to and investments in customers resulted in less exposure and a decrease in credit loss expense. INTEREST EXPENSE. Interest expense for 1995 increased $55 million to $175 million from $120 million for 1994. The increase was due principally to higher borrowing due to the Scrivner acquisition, higher 9 interest rates in the capital and credit markets, and an increase in the interest rates for the company resulting from changes in the company's credit rating brought about by increased leverage due to the acquisition and disappointing performance. Interest rates are fixed on the majority of the company's debt as a result of hedges. See "Long-Term Debt" in the notes to consolidated financial statements for further discussion of the company's derivative agreements, which consist of simple interest rate caps and swaps. For 1995, the interest rate hedge agreements contributed $7 million of interest expense, compared to $6 million in 1994. INTEREST INCOME. Interest income for 1995 increased by $1 million to $58 million from $57 million for 1994. Increases in interest income resulting from earnings on the notes receivable acquired in the Scrivner loan portfolio were nearly offset by the June 1995 sale of $77 million of notes receivable with limited recourse. The sale reduced the amount of notes receivable available to produce interest income during 1995. EQUITY INVESTMENT RESULTS. The company's portion of operating losses from equity investments for 1995 increased by $12 million to $27 million from $15 million for 1994. Certain of the strategic multi-store customers in which the company has made equity investments under its joint venture program experienced increased losses when compared to 1994. Additionally, losses from retail stores which are part of the company's equity store program and are accounted for under the equity method also increased. At the end of 1995 with the acquisition of a majority equity position in ABCO, the company began to consolidate the results of operations and the financial position of ABCO. In early 1996, the company acquired all the assets of ABCO through foreclosure in cancellation of $66 million of ABCO indebtedness to the company. FACILITIES CONSOLIDATION. In the first quarter of 1995, management changed its estimates with respect to the general merchandising operations portion of the reengineering plan. The revised estimate reflects reduced expense and cash outflow. Accordingly, during the first quarter the company reversed $9 million of the related provision. TAXES ON INCOME. The company's effective tax rate for 1995 increased to 51.1% from 50.0% for 1994. The increase was primarily due to increased goodwill amortization with no related tax deduction, operations in states with higher tax rates and the significance of certain other nondeductible expenses to pretax earnings. LIQUIDITY AND CAPITAL RESOURCES During 1996, the company continued to reduce long-term debt incurred in connection with the 1994 acquisition of Scrivner and reduced long-term debt by $186 million. This level of prepayment exceeded required repayments by $132 million. Set forth below is certain information regarding the company's capital structure at the end of 1996:
CAPITAL STRUCTURE ---------------------------------------------- 1996 1995 ---------------------- ---------------------- (IN MILLIONS) Long-term debt............................. $ 1,216 45.5% $ 1,402 48.8% Capital lease obligations.................. 381 14.2 388 13.5 Total debt................................. 1,597 59.7 1,790 62.3 Shareholders' equity....................... 1,076 40.3 1,083 37.7 --------- ----- --------- ----- Total capital.............................. $ 2,673 100.0% $ 2,873 100.0% --------- ----- --------- ----- --------- ----- --------- -----
Note: The above table includes current maturities of long-term debt and current obligations under capital leases. 10 Operating activities generated $328 million of net cash flows for 1996 compared to $399 million in 1995. The decrease was principally due to the Premium litigation settlement and a decrease in accounts payable that was primarily caused by the company's inventory reduction efforts. Working capital was $221 million at year end, a decrease from $364 million at year-end 1995. The current ratio decreased to 1.16 to 1, from 1.28 to 1 at year-end 1995. Management believes that cash flows from operating activities and the company's ability to borrow under the credit agreement will be adequate to meet working capital needs, capital expenditures and other cash needs for the foreseeable future. However, the company's future cash flow from operating activities is likely to be negatively impacted by certain factors discussed in "Results of Operations--Other". Furthermore, in the event an unfavorable outcome in one or more contingent matters referred to in "Litigation and Contingencies" produces a material adverse effect on the company, or an increase in the likelihood of such an outcome, the company's access to capital under its bank credit agreement could be impeded or the company's debt obligations accelerated. In such event, the company could be forced to seek replacement capital which might not be available on acceptable terms. In pursuit of the company's stated goal of reducing the ratio of debt to equity, the company may seek to sell assets or equity securities and apply the proceeds to early debt reduction. Additionally, scheduled amortization of the company's long-term debt obligations requires principal reductions of approximately $233 million in 1999, $175 million in 2000 and $501 million in 2001. If anticipated net cash flows from operations appear to be insufficient to satisfy these obligations, the company may seek to liquidate assets, issue additional debt or equity, or otherwise refinance such obligations. The company's current capital structure includes bank loans under the company's bank credit agreement which consists of a $591 million amortizing term loan with final maturity of June 2000 and a $596 million revolving credit facility with final maturity of July 1999. Other components of the company's capital structure consist of $300 million of 10.625% seven-year senior notes, $200 million of floating rate seven-year senior notes, each of which matures in December 2001, $99 million of medium-term notes and $6 million of other debt. The company's principal sources of liquidity are cash flows from operating activities and borrowings under its bank credit agreement. At year-end 1996, $591 million was borrowed on the amortizing term loan facility, $92 million of letters of credit had been issued (reducing bank credit capacity on a dollar-for-dollar basis) and $20 million was borrowed under the $596 million revolving credit facility of the bank credit agreement. During 1996, the bank credit agreement was amended to change certain of the financial covenant measures reflecting more current business results and conditions and to enable the company to pursue an appeal of the initial judgment rendered in the David's litigation. See "Litigation and Contingencies". The more significant provisions of the amendments increased the amount of allowable letters of credit, reduced the dividend limit to $.08 per share per quarter, reduced the amount of permitted capital expenditures, excluded certain litigation costs and noncash charges from the calculations for certain financial covenants, and adjusted the borrowing margin, facility and commitment fees, all of which increased the cost of bank debt for the company. Borrowings under the credit agreement are guaranteed by substantially all of the company's subsidiaries and are secured by the company's accounts receivable, inventories and a pledge of the stock of the subsidiary guarantors. The company also pledged intercompany receivables as security for its medium-term notes and to provide guarantees from the subsidiary guarantors. Additionally, the company has provided guarantees from the subsidiary guarantors in favor of the $500 million senior notes maturing in December 2001. 11 The bank credit agreement and the indentures for the senior notes contain customary covenants associated with similar facilities. The bank credit agreement currently contains the following more significant financial covenants: maintenance of a consolidated debt-to-net worth ratio of not more than 2.25 to 1; maintenance of a minimum consolidated net worth of at least $903 million; maintenance of a fixed charge coverage ratio of at least 1.1 to 1; a limitation on dividend payments of $.08 per share, per quarter; and limitations on capital expenditures. Covenants associated with the senior notes are generally less restrictive than those of the bank credit agreement. At year-end 1996, the company would have been allowed to borrow an additional $484 million under the company's revolving credit facility contained in the bank credit agreement. Under the company's most restrictive borrowing covenant, which is the fixed charge coverage ratio, $55 million of additional fixed charges could have been incurred. The company is currently in compliance with all financial covenants under the bank credit agreement and senior notes. Continued compliance will depend on the company's ability to generate sufficient earnings and cash flow and on the outcome of certain litigation matters. See "Litigation and Contingencies". The company's senior unsecured debt is rated Ba3 by Moody's and B+ by Standard & Poor's. In addition, the company has a corporate rating of BB by Standard & Poor's and the company's bank debt is rated Ba2 by Moody's. The rating by Moody's reflects a downgrade announced in August 1996. Moody's action resulted from their announced concerns over structural changes in the industry and lower sales, earnings and cash flow reported by the company. The rating by Standard & Poor's reflects a downgrade announced in September 1996. Standard & Poor's action resulted from its announced concerns over lower than anticipated operating results and continuing difficulties with the implementation of the company's reengineering program. Pricing under the bank credit agreement automatically increases or decreases with respect to certain credit rating declines or improvements, respectively, based upon Moody's and Standard & Poor's ratings of the company's senior unsecured debt. The credit agreement may be terminated in the event of a defined change of control. Under the indentures for the senior notes, the note holders may require the company to repurchase the notes in the event of a defined change of control coupled with a defined decline in credit ratings. At year-end 1996, the company had a total of $96 million of contingent obligations under undrawn letters of credit (including $92 million issued under the bank credit agreement), primarily related to insurance reserves associated with its normal risk management activities. To the extent that any of these letters of credit would be drawn, payments would be financed by borrowing under the credit agreement. Capital expenditures for 1996 were approximately $129 million compared to approximately $114 million in 1995. The $15 million increase from the prior year is due to a higher level of company-owned retail store expansion and remodel activity. Management expects that 1997 capital expenditures, excluding acquisitions, if any, will approximate $145 million. The company makes investments in and loans to certain retail customers. Net investments and loans decreased $74 million, from $314 million to $240 million due primarily to the sale of notes and more restrictive credit policies. In 1996 and 1995, the company sold $35 million and $77 million of notes, respectively, and may sell additional notes in the future. Long-term debt and capital lease obligations decreased $193 million to $1.6 billion during 1996 as a result of: reduced working capital requirements and retailer financing; continued sale of notes, other assets and operations. Shareholders' equity at the end of 1996 was $1.1 billion which is essentially unchanged from year-end 1995. The debt-to-capital ratio at the end of 1996 was 59.7%, a decrease from year-end 1995, because cash flows available for debt repayment exceeded the original scheduled maturities of $73 million. The company's long-term target ratio is between 50% to 55%. Total capital was $2.7 billion at year-end 1996, 12 lower than at year-end 1995 due to lower total debt outstanding and due to a decrease in shareholders' equity for an additional pension liability. The composite interest rate for total funded debt (excluding capital lease obligations) before the effect of interest rate hedges was 8.3% at year-end 1996, versus 7.8% in 1995. Including the effect of interest rate hedges, the composite interest rate of debt was 8.9% and 8.4% at the end of 1996 and 1995, respectively. Dividend payments in 1996 were $.36 per share or 50% of net earnings per share, compared to $1.20 per share or 107% of net earnings per share in 1995. One of the bank credit agreement amendments in 1996 limits dividends per share to no more than $.08 per share per quarter. LITIGATION AND CONTINGENCIES From time to time the company faces litigation or other contingent loss situations resulting from owning and operating its assets, conducting its business or complying (or allegedly failing to comply) with federal, state and local rules, regulations, ordinances and laws which may subject the company to material contin-gent liabilities. In accordance with applicable accounting standards, the company records as a liability amounts reflecting such exposure when a loss is deemed by management to be both "probable" and "quantifiable" or "reasonably estimable." During 1996, certain losses associated with litigation matters (excluding the company's legal fees and other costs) were recorded as follows: Premium: In the third quarter of 1996, an agreement was reached to settle two related lawsuits pending against the company, and others, in the U.S. District Court in Miami related to a failed grocery diverter, Premium Sales Corporation. Under the agreement, all claims will be dismissed in exchange for a $19.5 million payment plus $500,000 for costs and expenses. The company recorded a charge of $20 million during the third quarter of 1996 in anticipation of the settlement and deposited that amount into an escrow account in December pending finalization. The settlement is subject to, among other conditions, court approval and receipt by the company of releases from investors (including those who might not be bound by the settlement). The company has the right to withdraw the escrowed funds and terminate the settlement if such conditions are not met. As of the date of the financial statements, non-released claims held by investors who would not otherwise be bound by the settlement were estimated to be substantial. In the event the settlement is not consummated, the company expects the litigation will resume. David's: Based on the vacation of the judgment entered against the company in the David's litigation, the charge recorded during the first quarter of 1996 of approximately $7 million was reversed during the second quarter. Although the company denies any liability or wrongdoing, the company has been unable to document that prices paid by the plaintiff for a small amount of product during the three years in question conformed to the terms of plaintiff's agreement with the company. Accordingly, during the second quarter of 1996, the company recorded a charge of approximately $650,000, which includes approximately $200,000 of disputed overcharges and approximately $450,000 of interest, fees and other sums. During the third and fourth quarters, an additional $14,000 per quarter was recorded as additional interest. Megafoods: In August 1996, the court approved a settlement of both the debtor's adversary proceeding against the company and the company's disputed claims in the bankruptcy proceedings of a former customer and certain of its affiliates ("Megafoods"). The settlement is subject to approval by the creditors of a revised plan which will encompass the settlement. Under the terms of the settlement, the company will retain the $12 million working capital deposit, relinquish its secured and unsecured claims in exchange for the right to receive 10% of distributions, if any, made to the unsecured creditors and pay the debtor $2.5 million in exchange for the furniture, fixtures and 13 equipment from 17 of its stores (located primarily in Texas) and two Texas warehouses. The company agreed to lease to the reorganized debtor the furniture, fixtures and equipment in 14 of the stores for nine years (or until, in each case, the expiration of the store lease) at an annual rental of $18,000 per store. In October 1996, the debtor announced an agreement to sell its 16 Phoenix stores to a local retail grocery chain for net proceeds of approximately $22 million. In January 1997, the debtor filed a joint liquidating plan which incorporates the settlement. While there are apparent inconsistencies between the liquidating plan and the settlement agreement, the company expects that the economics of the settlement will remain essentially unchanged. The company recorded charges of $6.5 million in 1994, $3.5 million in 1995 and $5.8 million in 1996. The company remains exposed to contingent liabilities for stores subleased by the company to Megafoods and for certain leasehold guarantees extended by the company to third parties on Megafoods' behalf. If the settlement is consummated, the company will make an additional payment of $2.5 million to the debtor's estate. Net assets recorded related to Megafoods at year-end 1996 approximate $2.8 million. In addition, the company discloses material loss contingencies in the notes to its financial statements when the likelihood of a material loss has been determined to be greater than "remote" but less than "probable." Such contingent matters are discussed in the "Litigation and Contingencies" note to the consolidated financial statements, which appear elsewhere, and are incorporated by reference, herein. Also see Part I., Item 3. Legal Proceedings of the company's Annual Report on Form 10-K for the fiscal year ended December 28, 1996. An adverse outcome experienced in one or more of such matters, or an increase in the likelihood of such an outcome, could have a material adverse effect on the company's business, results of operations, cash flow, capital, access to capital or financial condition. FORWARD-LOOKING INFORMATION This annual report contains forward-looking statements of expected future developments. The company wishes to ensure that such statements are accompanied by meaningful cautionary statements pursuant to the safe harbor established in the Private Securities Litigation Reform Act of 1995. The forward-looking statements in the annual report refer to, among other matters: the company's ability to implement measures to reverse sales declines, cut costs and improve earnings; the company's ability to expand portions of its business or enter new facets of its business which it believes will be more profitable than its food distribution business; the company's expectations regarding the adequacy of capital and liquidity; and the receptiveness of the company's customers to its reengineered programs. These forward-looking statements reflect management's expectations and are based upon currently available data; however, actual results are subject to future events and uncertainties which could materially impact actual performance. The company's future performance also involves a number of risks and uncertainties. Among the factors that can cause actual performance to differ materially are: continued competitive pressures with respect to pricing and the implementation of the company's reengineering programs, the inability to achieve cost savings due to unexpected developments, changed plans regarding capital expenditures, adverse developments with respect to litigation and contingency matters, world and national economic conditions, and the impact of such conditions on consumer spending. 14 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 8th day of January 1998. FLEMING COMPANIES, INC. By: /s/ ROBERT E. STAUTH ------------------------------------ Robert E. Stauth CHAIRMAN AND CHIEF EXECUTIVE OFFICER (PRINCIPAL EXECUTIVE OFFICER) By: /s/ HARRY L. WINN, JR. ------------------------------------ Harry L. Winn, Jr EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER (PRINCIPAL FINANCIAL OFFICER) By: /s/ KEVIN J. TWOMEY ------------------------------------ Kevin J. Twomey VICE PRESIDENT--CONTROLLER (PRINCIPAL ACCOUNTING OFFICER) 15 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 8th day of January 1998. NAME TITLE - ------------------------------------------------------ ----------------------- /s/ ROBERT E. STAUTH ------------------------------------------- (Chairman of the Board) Robert E. Stauth /s/ CAROL B. HALLETT* ------------------------------------------- (Director) Carol B. Hallett /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 /s/ ARCHIE R. DYKES* ------------------------------------------- (Director) Archie R. Dykes *By: /s/ HARRY L. WINN, JR. -------------------------------------- Harry L. Winn, Jr. ATTORNEY-IN-FACT - ------------------------ * A Power of Attorney authorizing Harry L. Winn, Jr. 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 24. 16 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements:
PAGE NUMBER ----------------- - - Consolidated Statements of Earnings--For the years ended December 28, 1996, December 30, 1995, and December 31, 1994 - - Consolidated Balance Sheets--At December 28, 1996, and December 30, 1995 - - Consolidated Statements of Shareholders' Equity--For the years ended December 28, 1996, December 30, 1995, and December 31, 1994 - - Consolidated Statements of Cash Flows--For the years ended December 28, 1996, December 30, 1995, and December 31, 1994 - - Notes to Consolidated Financial Statements--For the years ended December 28, 1996, December 30, 1995, and December 31, 1994 - - Independent Auditors' Report - - Quarterly Financial Information (Unaudited)
(a) 2. Financial Statement Schedule: Schedule II--Valuation and Qualifying Accounts (a) 3. (c) Exhibits:
EXHIBIT PAGE NUMBER OR INCORPORATION NUMBER BY REFERENCE TO - ---------- ----------------------------- 3.1 Certificate of Incorporation Exhibit 4.1 to Form S-8 dated September 3, 1996 3.2 By-Laws Exhibit 4.2 to Form S-8 dated September 3, 1996 4.0 Credit Agreement, dated as of July 19, 1994, among Exhibit 4.0 to Form 8-K dated Fleming Companies, Inc., the Banks listed therein and July 19, 1994 Morgan Guaranty Trust Company of New York, as Managing Agent 4.1 Pledge Agreement, dated as of July 19, 1994, among Exhibit 4.1 to Form 8-K dated Fleming Companies, Inc. and Morgan Guaranty Trust Company July 19, 1994 of New York, as Collateral Agent 4.2 Security Agreement dated as of July 19, 1994, between Exhibit 4.2 to Form 8-K dated Fleming Companies, Inc. in favor of Morgan Guaranty Trust July 19, 1994 Company of New York, as Collateral Agent 4.3 Amendment No. 1 to Credit Agreement, dated as of July 21, Exhibit 4.3 to Form 8-K dated 1994 July 19, 1994 4.4 Amendment No. 2 to Credit Agreement dated as of November Exhibit 4.4 to Form 10-K for 14, 1994 year ended December 31, 1994
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EXHIBIT PAGE NUMBER OR INCORPORATION NUMBER BY REFERENCE TO - ---------- ----------------------------- 4.5 Amendment No. 3 to Credit Agreement dated as of June 30, Exhibit 4.5 to Form 10-K for 1995 year ended December 30, 1995 4.6 Amendment No. 4 to Credit Agreement dated as of February Exhibit 4.6 to Form 10-K for 15, 1996 year ended December 30, 1995 4.7 Waiver to Credit Agreement dated as of April 1, 1996 Exhibit 4.14 to Form 10-K for year ended December 30, 1995 4.8 Amendment No. 5 to Credit Agreement dated as of April 4, Exhibit 4.15 to Form 10-K for 1996 year ended December 30, 1995 4.9 Amendment No. 6 to Credit Agreement dated as of October Exhibit 4.0 to Form 10-Q for 21, 1996 quarter ended October 5, 1996 4.10 Indenture dated as of December 1, 1989, between the Exhibit 4 to Registration Registrant and Morgan Guaranty Trust Company of New York, Statement No. 33-29633 as trustee 4.11 Indenture dated as of December 15, 1994, between the Exhibit 4.9 to Form 10-K for Registrant, Subsidiary Guarantors and Texas Commerce Bank year ended December 31, 1994 National Association, as Trustee, regarding $300 million of 10 5/8% Senior Notes 4.12 Indenture dated as of December 15, 1994, between the Exhibit 4.10 to Form 10-K for Registrant, Subsidiary Guarantors and the Texas Commerce year ended December 31, 1994 Bank National Association, as Trustee, regarding $200 million of Floating Rate Senior Notes 4.13 Rights Agreement dated as of February 27, 1996 between Exhibit 4.0 to Form 8-K dated Fleming Companies, Inc. And Liberty Bank and Trust February 27, 1996 Company of Oklahoma City, N. A. Effective as of the close of business on July 6, 1996 4.14 First Amendment to Rights Agreement 4.15 Agreement to furnish copies of other long-term debt instruments 10.0 Dividend Reinvestment and Stock Purchase Plan, as amended Exhibit 28.1 to Registration Statement No. 33-26648 and Exhibit 28.3 to Registration Statement No. 33-45190 10.1* 1985 Stock Option Plan Exhibit 28(a) to Registration Statement No. 2-98602
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EXHIBIT PAGE NUMBER OR INCORPORATION NUMBER BY REFERENCE TO - ---------- ----------------------------- 10.2* Form of Award Agreement for 1985 Stock Option Plan (1994) Exhibit 10.6 to Form 10-K for year ended December 25, 1993 10.3* 1990 Stock Option Plan Exhibit 28.2 to Registration Statement No. 33-36586 10.4* Form of Award Agreement for 1990 Stock Option Plan (1994) Exhibit 10.8 to Form 10-K for year ended December 25, 1993 10.5* Fleming Management Incentive Compensation Plan Exhibit 10.4 to Registration Statement No. 33-51312 10.6* Directors' Deferred Compensation Plan Exhibit 10.5 to Registration Statement No. 33-51312 10.7* Amended and Restated Supplemental Retirement Plan Exhibit 10.10 to Form 10-K for year ended December 31, 1994 10.8* Form of Amended and Restated Supplemental Retirement Exhibit 10.11 to Form 10-K Income Agreement for year ended December 31, 1994 10.9* Godfrey Company 1984 Non-qualified Stock Option Plan Appendix II to Registration Statement No. 33-18867 10.10* Form of Amended and Restated Severance Agreement between Exhibit 10.13 to Form 10-K the Registrant and certain of its officers for year ended December 31, 1994 10.11* Fleming Companies, Inc. 1990 Stock Incentive Plan dated Exhibit B to Proxy Statement February 20, 1990 for year ended December 30, 1989 10.12* Fleming Companies, Inc. 1996 Stock Incentive Plan dated Exhibit A to Proxy Statement February 27, 1996 for year ended December 30, 1995 10.13* Phase I of Fleming Companies, Inc. Stock Incentive Plan Exhibit 10.16 to Form 10-K and Form of Awards Agreement for year ended December 30, 1989
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EXHIBIT PAGE NUMBER OR INCORPORATION NUMBER BY REFERENCE TO - ---------- ----------------------------- 10.14* Phase II of Fleming Companies, Inc. Stock Incentive Plan Exhibit 10.12 to Form 10-K for year ended December 26, 1992 10.15* Phase III of Fleming Companies, Inc. Stock Incentive Plan Exhibit 10.17 to Form 10-K for year ended December 25, 1993 10.16* Amendment No. 1 to the Fleming Companies, Inc 1996 Stock Incentive Plan 10.17* Fleming Companies, Inc. Directors' Stock Equivalent Plan Exhibit 10.14 to Form 10-K for year ended December 28, 1991 10.18* Supplemental Income Trust Exhibit 10.20 to Form 10-K for year ended December 31, 1994 10.19* First Amendment to Fleming Companies, Inc. Supplemental Income Trust 10.20* Form of Employment Agreement between Registrant and Exhibit 10.20 to Form 10-K certain of the employees for year ended December 31, 1994 10.21* Economic Value Added Incentive Bonus Plan Exhibit A to Proxy Statement for year ended December 31, 1994 10.22* Agreement between the Registrant and William J. Dowd Exhibit 10.24 to Form 10-K for year ended December 30, 1995 10.23* Amended and Restated Supplemental Retirement Income Agreement for Robert E. Stauth 10.24* Supplemental Retirement Income Agreement of Fleming Companies, Inc. And William J. Dowd 12 Computation of ratio of earnings to fixed charges 21 Subsidiaries of the Registrant
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EXHIBIT PAGE NUMBER OR INCORPORATION NUMBER BY REFERENCE TO - ---------- ----------------------------- 23 Consent of Deloitte & Touche LLP 24 Power of attorney instruments signed by certain directors and officers of the Registrant appointing Harry L. Winn, Jr., Executive Vice President 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 27 Financial Data Schedule
* Management contract, compensatory plan or arrangement. (b) Reports on Form 8-K: Registrant filed under Item 5. dated February 28, 1997 disclosing that a significant customer had filed suit against the registrant and certain officers and an employee of the registrant in New Mexico claiming it has been overcharged for products under its supply agreement and alleges various causes of action, among them breach of contract, misrepresentation, fraud and violation of certain of New Mexico's trade practice statutes. The customer seeks an unspecified monetary award, including punitive and treble damages, and a declaratory judgment terminating the supply agreement. 21 -----END PRIVACY-ENHANCED MESSAGE-----