-----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, WN1DGDZXHVADBrF4rImp1XMbv6j8MfnDQVTbB+hLM9tnvum1Y3fGwdH06MKWSWdA k2YU6a11MXEdSRlS5p7lqg== 0000912057-97-002664.txt : 19970203 0000912057-97-002664.hdr.sgml : 19970203 ACCESSION NUMBER: 0000912057-97-002664 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961107 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970131 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NASH FINCH CO CENTRAL INDEX KEY: 0000069671 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 410431960 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-00785 FILM NUMBER: 97516150 BUSINESS ADDRESS: STREET 1: 7600 FRANCE AVE STREET 2: PO BOX 355 CITY: SOUTH MINNEAPOLIS STATE: MN ZIP: 55435-0355 BUSINESS PHONE: 6128320534 FORMER COMPANY: FORMER CONFORMED NAME: NASH CO DATE OF NAME CHANGE: 19710617 8-K/A 1 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ------------------- FORM 8-K/A Amendment No. 1 to Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 7, 1996 ------------------- NASH-FINCH COMPANY (Exact name of Registrant as specified in its charter) DELAWARE 0-785 41-0431960 (State of Incorporation) (Commission file (IRS Employer number) Identification No.) 7600 FRANCE AVENUE SOUTH P. O . BOX 355 MINNEAPOLIS, MINNESOTA 55440-0355 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code (612) 832-0534 ------------------------------- Item 7. Financial Statements and Exhibits (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED The audited consolidated balance sheets of Super Food Services, Inc. and subsidiaries as of August 26, 1995 and August 27, 1994 and the related audited consolidated statements of income and cash flows for each of the three fiscal years in the period ended August 26, 1995, including the independent public accountant's report thereon, dated October 19, 1995, as contained in Super Food Services, Inc.'s Form 10-K Annual Report for the fiscal year ended August 26, 1995, are incorporated by reference herein. The unaudited consolidated balance sheets of Super Food Services, Inc. and subsidiaries as of May 4, 1996 and the related unaudited consolidated statements of income and cash flows for the period ending May 4, 1996, as contained in Super Food Services, Inc.'s Form 10-Q Quarterly Report for the quarterly period ended May 4, 1996, are incorporated by reference herein. (b) PRO FORMA FINANCIAL INFORMATION In November 1996, Nash Finch Company (the "Company") acquired substantially all of the outstanding common stock, at $15.50 per share, of Super Food Services, Inc. ("SFS"). The aggregate cash purchase price paid by the Company was $171 million. The acquisition will be accounted for as a purchase. In January 1996, the Company acquired substantially all of the assets of Military Distributors of Virginia, Inc. ("MDV"). The aggregate purchase price paid by the Company consisted of $56.0 million in cash plus the assumption of liabilities totaling an additional $54.0 million. The assets acquired included certain real property, leasehold interests in real property and equipment, fixed assets, inventory, receivables, supplies and contractual rights. The terms of the acquisition were the result of arm's-length negotiations between the parties, and the acquisition was accounted for as a purchase. The accompanying unaudited pro forma combined financial statements are included herein as required by rules of the Securities and Exchange Commission ("SEC"). Such pro forma financial statements do not purport to be indicative of the results of future combined operations. The pro forma combined financial statements are based upon the historical financial statements of the Company, MDV and SFS, and should be read in conjunction with those historical financial statements as they appear elsewhere in this filing or previous filings with the SEC, as applicable. The historical financial information for Nash Finch at December 31, 1995, is derived from audited financial statements. All other historical financial information presented in these pro forma financial statements is derived from unaudited historical financial statements. The pro forma adjustments are based upon preliminary estimates, available information and certain assumptions that management deemed appropriate. Final purchase accounting adjustments will be made on the basis of appraisals and evaluations and, therefore, may differ from the pro forma adjustments presented herein. However, management does not expect that the final allocation of the purchase price will materially differ from the amounts presented herein. The unaudited pro forma combined balance sheet was prepared as if the transactions were consummated as of October 5, 1996. The unaudited pro forma combined statements of income for the year ended December 30, 1995 and for the nine months ended October 5, 1996 assume the acquisitions had been consummated as of January 1, 1995, the beginning of the fiscal year presented. The pro forma statements of income and the balance sheet presented have been adjusted for the effects of costs, expenses, assets and liabilities which might have been incurred or assumed had the acquisitions been effected on the dates indicated. The pro forma combination of the Company and MDV, and the Company (including MDV) and SFS has been prepared under the purchase method of accounting. Therefore, the purchase price for both acquisitions has been allocated based on the estimated fair values of the identified assets acquired and liabilities assumed. The excess purchase price over the fair value of net assets acquired has been recorded as goodwill in the accompanying pro forma financial statements and amortized over periods of 15 years and 25 years for MDV and SFS, respectively. UNAUDITED CONDENSED PRO FORMA COMBINED BALANCE SHEET For Nash Finch Company as of October 5, 1996 and Super Food Services, Inc. as of August 31, 1996 (In thousands)
Historical --------------------------------------------- Nash Finch Super Food Pro Forma Company Services, Inc. Combined Adjustments Pro Forma ------------ --------------- ---------- ------------ ---------- ASSETS Cash and cash equivalents $ 1,005 12,773 13,778 - 13,778 Accounts and notes receivable, net 143,988 58,290 202,278 - 202,278 Inventories 226,092 63,341 289,433 11,100 (1) 300,533 Other current assets 19,206 18,129 37,335 (575) (2) 36,760 ---------- -------- -------- -------- -------- Total Current Assets 390,291 152,533 542,824 10,525 553,349 Investments and noncurrent receivables 13,412 38,275 51,687 (534) (3) 51,153 Property, plant and equipment, net 198,813 59,331 258,144 6,175 (4) 264,319 Other assets 52,504 5,856 58,360 36,750 (5) 95,110 ---------- -------- -------- -------- -------- Total Assets $ 655,020 255,995 911,015 52,916 963,931 ---------- -------- -------- -------- -------- ---------- -------- -------- -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Short-term borrowings $ - 7,000 7,000 - 7,000 Current maturities of long-term obligations 7,304 991 8,295 - 8,295 Accounts payable 199,996 34,702 234,698 - 234,698 Accrued and other current liabilities 41,120 15,071 56,191 6,384 (6) 62,575 ---------- -------- -------- -------- -------- Total Current Liabilities 248,420 57,764 306,184 6,384 312,568 Long-term debt, less current maturities 156,185 30,000 186,185 170,000 (7) 356,185 Capitalized lease obligations 9,762 30,320 40,082 - 40,082 Deferred credits and other liabilities 9,808 325 10,133 14,118 (8) 24,251 Stockholders' equity 230,845 137,586 368,431 (137,586) 230,845 ---------- -------- -------- -------- -------- Total Liabilities & Stockholders' Equity $ 655,020 255,995 911,015 52,916 963,931 ---------- -------- -------- -------- -------- ---------- -------- -------- -------- --------
See accompanying notes to unaudited pro forma financial statements Notes to the Unaudited Condensed Pro Forma Combined Balance Sheet as of October 5, 1996. (1) To adjust inventory which was substantially valued at LIFO, to current fair value. (2) Other current assets have been adjusted to reflect fair value. (3) Adjustment to reflect the write off of an investment deemed to have no market value. (4) Adjustment to reflect step-up in basis to fair value for property, plant and equipment based upon preliminary independent appraisals. (5) Other assets include $7.1 million of other intangibles, $2.3 million of pension and deferred tax assets and $27.3 million in excess of fair market value of assets acquired of $27.3 million derived as follows: Purchase Price $ 175,642(a) Net book value of assets acquired (137,586) --------- 38,056 Allocation of Purchase Price in excess of net assets acquired Adjust inventory to estimated fair value (11,100) Adjust property and equipment to estimated fair value (6,175) Record estimated fair value of other intangibles (7,100) Record deferred taxes associated with pro forma adjustments 8,080 Record postretirement benefit obligation in excess of plan assets 1,900 Previously recorded goodwill 4,351 Adjust other assets to fair market value (712) --------- Goodwill recorded upon acquisition $ 27,300 --------- ---------
(a) Includes approximately $5.6 million of transaction costs. (6) Accrued and other current liabilities have been adjusted to reflect the fair value of liabilities assumed. (primarily transaction costs) (7) To record long-term debt associated with the acquisition. Debt was part of a $500 million unsecured revolving credit facility provided by a syndicate of banks, maturing five (5) years from the date of closing. The credit facility has a variable interest rate tied to movements in LIBOR. (8) To record deferred tax liabilities, postretirement benefit obligations and liabilities related to loan and lease guarantees. UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF INCOME For the Nine Months ended October 5, 1996 for Nash Finch Company and for the Nine Months ended August 31, 1996 for Super Food Services, Inc. (In thousands except per share amount)
Historical ----------------------------- Nash Finch Super Food Pro Forma Company (a) Services, Inc. Combined Adjustments Pro Forma -------------- -------------- --------- ----------- --------- Total sales and revenues $ 2,423,603 903,528 3,327,131 - 3,327,131 Cost and Expenses: Cost of sales 2,098,129 808,418 2,906,547 - 2,906,547 Selling, general and administrative and other operating expenses 264,259 85,594 349,853 - 349,853 Depreciation and amortization 24,870 6,084 30,954 1,694(1) 32,648 Interest expense 9,972 2,026 11,998 7,650(2) 19,648 ----------- --------- --------- --------- ---------- Total costs and expenses 2,397,230 902,122 3,299,352 9,344 3,308,696 Earnings before income taxes 26,373 1,406 27,779 (9,344) 18,435 Income taxes 10,681 551 11,232 3,738(3) 7,494 ----------- --------- --------- --------- ---------- Net earnings $ 15,692 855 16,547 (5,606) 10,941 ----------- --------- --------- --------- ---------- ----------- --------- --------- --------- ---------- Earnings per share $ 1.43 1.00 ----------- ----------- ----------- ----------- Weighted average number of common shares outstanding 10,992 ----------- -----------
_____________________________________________________________ See accompanying notes to unaudited pro forma financial statements (a) Includes results of operations for MDV from the date of acquisition (January 1996). UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF INCOME For the Fiscal Year Ended December 30, 1995 (a) (In thousands except per share amount)
Historical ----------------------------- Military Distributors of Pro Forma Nash Finch Virginia, Inc. Combined Adjustment Pro Forma ------------ --------------- ---------- ---------- ----------- Total revenues $ 2,888,836 416,456 3,305,292 - 3,305,292 Cost and expenses: Cost of sales 2,469,841 388,750 2,858,591 - 2,858,591 Selling, general and administrative, and other operating expenses 350,201 17,805 368,006 - 368,006 Depreciation and amortization 29,406 703 30,109 2,924 33,033 Interest expense 10,793 1,563 12,356 4,575 16,931 ------------ ------------ ------------ ------------ ------------ Total costs and expenses 2,860,241 408,821 3,269,062 7,499 3,276,561 Earnings before income taxes 28,595 7,635 36,230 (7,499) 28,731 Income taxes 11,181 3,054 14,235 (2,743) 11,492 ------------ ------------ ------------ ------------ ------------ Net earnings $ 17,414 4,581 21,995 (4,756) 17,239 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Earnings per share $ 1.60 ------------ ------------ Weighted average number of common shares outstanding Super Food Combined Pro Forma Services, Inc. Nash Finch Adjustment Pro Forma -------------- ---------- ---------- --------- Total revenues 1,174,794 4,480,086 - 4,480,086 Cost and expenses: Cost of sales 1,054,104 3,912,695 - 3,912,695 Selling, general and administrative, and other operating expenses 94,399 462,405 - 462,405 Depreciation and amortization 7,948 40,981 2,258(1) 43,239 Interest expense 3,042 19,973 10,200(2) 30,173 ------------ ------------ ------------ ------------ Total costs and expenses 1,159,493 4,436,054 12,458 4,448,512 Earnings before income taxes 15,301 44,032 (12,458) 31,574 Income taxes 5,922 17,414 (4,470)(3) 12,944 ------------ ------------ ------------ ------------ Net earnings 9,379 26,618 (7,988) 18,630 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Earnings per share 1.71 ------------ ------------ Weighted average number of common shares outstanding 10,875 ------------ ------------
- ----------------------------------------------------------------------- See accompanying notes to unaudited pro forma financial statements (a) The financial statements of SFS have been brought within 93 days of Nash Finch's fiscal year and by adding subsequent interim results to the fiscal year's data and deducting the comparable preceding year interim results. Notes to Unaudited Condensed Pro Forma Combined Statements of Income For the Nine Months ended October 5, 1996 and Fiscal Year Ended December 30, 1995. (1) Additional amortization and depreciation resulting from step-up in basis of property, plant and equipment and recording of goodwill. (2) Interest expense associated with the financing of the acquisition and based on an interest rate of 6%. A 1/8 percent variance in interest rates would cause interest expense to fluctuate by $212,500 annually. (3) To record income taxes at an estimated effective tax rate of 40%. (c) EXHIBITS 23.1 Consent of Arthur Andersen LLP. 99.1 Audited consolidated balance sheets of SFS and subsidiaries as of August 26, 1995 and August 27, 1994, and the related audited consolidated statements of income and cash flows for each of the three fiscal years in the period ended August 26, 1995, including the independent public accountant's report thereon, dated October 19, 1995, as contained in the SFS Annual Report on Form 10-K for the fiscal year ended August 26, 1995. 99.2 Unaudited consolidated summary balance sheets of SFS and subsidiaries as of May 4, 1996, May 6, 1995 and August 26, 1995, and the related unaudited consolidated summary statements of income and cash flows for the periods ended May 4, 1996 and May 6, 1995, as contained in the SFS Quarterly Report on Form 10-Q for the quarterly period ended May 4, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NASH-FINCH COMPANY ------------------ Registrant Date: January 31, 1997 BY: /s/ Lawrence A. Wojtasiak -------------------------- Lawrence A. Wojtasiak Controller EXHIBIT INDEX Exhibit Document - ------- -------- 23.1 Consent of Arthur Andersen LLP 99.1 Audited consolidated balance sheets of SFS and subsidiaries as of August 26, 1995 and August 27, 1994, and the related audited consolidated statements of income and cash flows for each of the three fiscal years in the period ended August 26, 1995, including the independent public accountant's report thereon, dated October 19, 1995, as contained in the SFS Annual Report on Form 10-K for the fiscal year ended August 26, 1995. 99.2 Unaudited consolidated summary balance sheets of SFS and subsidiaries as of May 4, 1996, May 6, 1995 and August 26, 1995, and the related unaudited consolidated summary statements of income and cash flows for the periods ended May 4, 1996 and May 6, 1995, as contained in the SFS Quarterly Report on Form 10-Q for the quarterly period ended May 4, 1996. EX-23.1 2 EXHIBIT 23.1 CONSENT ARTHUR ANDERSON EXHIBIT 23.1 [LETTERHEAD] CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Form 8-K/A of our report dated October 19, 1995 on the consolidated financial statements of Super Food Services, Inc. (the Company), incorporated by reference in the Nash-Finch Company Form 8-K/A File No. 0-785, and into Nash-Finch Company's previously filed Registration Statement File Nos; 33-64313 and 33-54487. It should be noted that we have not audited any financial statements of the Company as of any date or for any period subsequent to August 26, 1995. /s/ ARTHUR ANDERSEN LLP Cincinnati, Ohio January 31, 1997 EX-99.1 3 EXHIBIT 99.1 AUDITED CONSOLIDATED BAL SHEETS EXHIBIT 99.1 CONSOLIDATED STATEMENTS OF INCOME Super Food Services, Inc., and Subsidiaries For the Fiscal Years Ended August 26, 1995, August 27, 1994 and August 28, 1993 (amounts in thousands except per share amounts) - ----------------------------------------------------------------- 1995 1994 1993 - ----------------------------------------------------------------- Sales and Other Income $1,154,955 $1,130,095 $1,165,520 - ----------------------------------------------------------------- Costs and Expenses: Cost of sales, including warehouse and delivery expenses 1,103,110 1,079,057 1,113,224 Selling, general and administrative expenses 33,904 34,013 33,832 Interest expense 7,269 6,314 6,957 Interest income (4,139) (3,540) (3,651) - ----------------------------------------------------------------- Total costs and expenses 1,140,144 1,115,844 1,150,362 - ----------------------------------------------------------------- Income before Income Taxes 14,811 14,251 15,158 - ----------------------------------------------------------------- Provision for Income Taxes (Note 2) 5,746 5,424 5,942 - ----------------------------------------------------------------- Net Income $ 9,065 $ 8,827 $ 9,216 - ----------------------------------------------------------------- Weighted Average Number of Common Shares Outstanding 10,949 10,943 10,893 Earnings per Common Share $ .83 $ .81 $ .85 - ----------------------------------------------------------------- The accompanying notes are an integral part of these consolidated statements. 9 CONSOLIDATED BALANCE SHEETS Super Food Services, Inc., and Subsidiaries August 26, 1995 and August 27, 1994 (amounts in thousands) - ----------------------------------------------------------------- Assets 1995 1994 - ----------------------------------------------------------------- Current Assets: Cash $ 12,423 $ 15,834 - ----------------------------------------------------------------- Receivables Retailers--trade 59,832 60,680 --notes (current portion) 5,511 4,543 Suppliers and miscellaneous 8,620 8,210 - ----------------------------------------------------------------- 73,963 73,433 Less--Allowance for doubtful accounts (9,293) (7,733) - ----------------------------------------------------------------- 64,670 65,700 - ----------------------------------------------------------------- Merchandise inventory 67,181 63,343 - ----------------------------------------------------------------- Future tax benefits (Note 2) 4,569 6,768 Prepaid expenses and other 8,482 8,835 - ----------------------------------------------------------------- Total current assets 157,325 160,480 - ----------------------------------------------------------------- Notes Receivable from Retailers (long-term portion), net of allowance for doubtful accounts of $2,804 in 1995 and $3,265 in 1994) 17,653 16,179 - ----------------------------------------------------------------- Property and Equipment (Note 8): Land 1,998 1,998 Buildings 29,139 28,267 Equipment, vehicles and other 94,020 91,384 - ----------------------------------------------------------------- 125,157 121,649 Accumulated depreciation and amortization (64,612) (59,225) - ----------------------------------------------------------------- Net property and equipment 60,545 62,424 - ----------------------------------------------------------------- Other Assets: Investment in direct financing leases (Note 8) 16,556 15,278 Excess of purchase price over net tangible assets, net (Note 1) 4,339 4,405 Other 481 578 - ----------------------------------------------------------------- Total other assets 21,376 20,261 - ----------------------------------------------------------------- $256,899 $259,344 - ----------------------------------------------------------------- The accompanying notes are an integral part of these consolidated statements. 10 CONSOLIDATED BALANCE SHEETS Super Food Services, Inc., and Subsidiaries August 26, 1995 and August 27, 1994 (amounts in thousands) - ----------------------------------------------------------------- Liabilities and Shareholders' Equity 1995 1994 - ----------------------------------------------------------------- Current Liabilities: Accounts payable $ 36,650 $ 38,302 Notes payable to bank (Note 3) 5,000 9,000 Current maturities of long-term obligations 800 2,657 Current maturities of obligations under capitalized leases 864 904 Current portion of Florida closing liabilities - 1,250 Accrued payroll and vacation 3,143 2,857 Taxes other than income 2,252 2,423 Other current liabilities 8,624 9,655 - ----------------------------------------------------------------- Total current liabilities 57,333 67,048 - ----------------------------------------------------------------- Long-Term Debt Obligations (Note 3) 35,000 31,602 - ----------------------------------------------------------------- Obligations under Capitalized Leases (Note 8) 25,420 24,392 - ----------------------------------------------------------------- Long-Term Florida Closing Liabilities (Note 4) 972 2,404 - ----------------------------------------------------------------- Deferred Tax Liabilities (Note 2) 296 925 - ----------------------------------------------------------------- Commitments and Contingent Liabilities (Note 10) - ----------------------------------------------------------------- Shareholders' Equity (Notes 3, 5, and 6): Common Shares, par value $1.00, 35,000 shares authorized, 10,949 shares issued and outstanding in 1995 and 1994, respectively 10,949 10,949 Paid-in capital 29,408 29,408 Retained earnings 97,521 92,616 - ----------------------------------------------------------------- Total shareholders' equity 137,878 132,973 - ----------------------------------------------------------------- $256,899 $259,344 - ----------------------------------------------------------------- The accompanying notes are an integral part of these consolidated statements. 11 CONSOLIDATED STATEMENTS OF CASH FLOWS Super Food Services, Inc., and Subsidiaries For the Fiscal Years Ended August 26, 1995, August 27, 1994 and August 28, 1993 amounts in thousands) - ----------------------------------------------------------------- 1995 1994 1993 - ----------------------------------------------------------------- Cash Provided by (Used for) Operating Activities: Net income $ 9,065 $ 8,827 $ 9,216 Items not affecting cash- Depreciation and amortization 7,736 7,258 7,198 Future income tax benefits 1,570 1,576 3,473 Current items - Receivables 1,030 (1,454) 5,222 Merchandise inventory (3,838) 1,819 756 Prepaid expenses and other 353 (1,997) 1,828 Accounts payable and other (4,467) 4,209 400 Florida closing liabilities (2,682) (3,770) (8,619) - ----------------------------------------------------------------- Net cash provided by operating activities 8,767 16,468 19,474 - ----------------------------------------------------------------- Cash Provided by (Used for) Investing Activities: Additions of property and equipment (5,615) (18,030) (5,174) Increase in long-term notes receivable (9,673) (5,510) (9,970) Reduction of long-term notes receivable 8,199 7,300 5,952 Sales and retirement of property and equipment, net 486 99 1,849 - ----------------------------------------------------------------- Net cash used for investing activities (6,603) (16,141) (7,343) - ----------------------------------------------------------------- Cash Provided by (Used for) Financing Activities: Notes payable to bank (4,000) 9,000 (5,000) Long-term debt borrowing 10,000 - - Retirements of long-term debt and lease obligations (7,415) (4,400) (4,167) Proceeds from stock plans - 447 - Stock options exercised - - 116 Purchase of preferred shares - - (567) Cash dividends (4,160) (3,942) (3,703) - ----------------------------------------------------------------- Net cash provided by (used for) financing activities (5,575) 1,105 (13,321) - ----------------------------------------------------------------- Increase (Decrease) in Cash (3,411) 1,432 (1,190) Cash, Beginning of Year 15,834 14,402 15,592 - ----------------------------------------------------------------- Cash, End of Year $12,423 $15,834 $ 14,402 - ----------------------------------------------------------------- The accompanying notes are an integral part of these consolidated statements. 12
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Super Food Services, Inc., and Subsidiaries For the Fiscal Years Ended August 26, 1995, August 27, 1994 and August 28, 1993 (amounts in thousands except per share data) - ------------------------------------------------------------------------------------------ Common Shares ------------- Total Paid-in Retained Shareholders' Shares Amount Capital Earnings Equity - ------------------------------------------------------------------------------------------ Balance at August 29, 1992 10,891 $10,891 $28,903 $82,218 $122,012 Net income - - - 9,216 9,216 Cash dividends on common stock, $.34 per share - - - (3,703) (3,703) Common shares issued in connection with incentive plans, net 15 15 101 - 116 - ------------------------------------------------------------------------------------------ Balance at August 28, 1993 10,906 10,906 29,004 87,731 127,641 Net income - - - 8,827 8,827 Cash dividends on common stock, $.36 per share - - - (3,942) (3,942) Common shares issued in connection with incentive plans, net 43 43 404 - 447 - ------------------------------------------------------------------------------------------ Balance at August 27, 1994 10,949 10,949 29,408 92,616 132,973 Net income - - - 9,065 9,065 Cash dividends on common stock, $.38 per share - - - (4,160) (4,160) - ------------------------------------------------------------------------------------------ Balance at August 26, 1995 10,949 $10,949 $29,408 $97,521 $137,878 - ------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements. 13 NOTE 1 - ------ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (amounts in thousands except per share amounts) Principles of Consolidation The accompanying consolidated financial statements include Super Food Services, Inc., and subsidiaries (the "Company"). All significant intercompany balances and transactions have been eliminated. Fiscal Year The Company maintains its accounts on a fifty-two/fifty-three week year. The Fiscal years ended August 26, 1995, August 27, 1994 and August 28, 1993 all consisted of fifty-two weeks. Revenue Recognition Sales are recorded as products are shipped and services are rendered. Merchandise Inventory The Company uses the last-in, first-out (LIFO) method of determining cost for most (75% in 1995 and 76% in 1994) of its merchandise inventories. Remaining inventories are valued at the lower of cost or market using the first-in, first-out (FIFO) method. The Company believes that the LIFO method more fairly presents results of operations by eliminating the inflationary cost increases from inventory and thereby more appropriately matching current costs with current revenues. The effect of using LIFO was to reduce inventories at August 26, 1995 and August 27, 1994 by $11,869 and $11,120, respectively, and to increase cost of sales by $750 for 1995 and $144 for 1994 and decrease cost of sales by $1,436 for 1993. During Fiscal 1994, the Company liquidated certain LIFO inventories that were carried at lower costs prevailing in prior years. The effect of these liquidations was to increase earnings before income taxes by $144 or $.01 per share after tax for 1994. Property and Equipment Depreciation and amortization are provided over the estimated useful lives of the assets or the remaining terms of leases using the straight-line method. The rates used are as follows: Building . . . . . . . . . . . . . . . . . . . 2% to 5% per annum Equipment, vehicles and other. . . . . . .10% to 33 1/3% per annum Leasehold improvements . . . . . . . . . lesser of estimated useful life or lease term Capitalized leases . . . . . . . .. . . . . . . . . . . .lease term Excess of Purchase Price For acquisitions subsequent to November 1, 1970, the excess of purchase price of acquired companies over amounts assigned to net tangible assets (approximately $2,600) is being amortized over 40 years. For acquisitions prior to November 1, 1970, the excess (approximately $1,757) is not being amortized because, in management's opinion, the value of net assets acquired has not diminished. Earnings Per Common Share Earnings per common share is computed after deducting dividends on preferred shares and is based on the weighted average number of common and common equivalent shares outstanding during the year. The dilutive effects of unexercised stock options are not material and, therefore, are not included in earnings per share. Notes Receivable The Company has notes receivable from certain of its retailers. Generally, these notes require periodic payments of principal and interest and are secured by certain property, equipment, inventory and personal guarantees of the retailers. These notes bear interest based upon the prime rate. At August 26, 1995, the interest rates ranged from 6.00% to 11.00%. The Company generally recognizes interest income on these notes as the interest is collected. The effective rate of interest collected was 10% and 7% for 1995 and 1994, respectively. These notes mature as follows: - ------------------------------------------------------------------- 1996 $ 5,511 1997 4,021 1998 3,535 1999 2,385 2000 2,220 Thereafter 5,492 - ------------------------------------------------------------------- $23,164 - ------------------------------------------------------------------- 14 Segment Information The Company is engaged in a single line of business, the wholesale distribution of groceries. The Company supplies more than 850 allied retail stores in cities of varying sizes in six predominantly midwestern states. Although the Company monitors the creditworthiness of its customers, adjusting credit policies and limits as needed, a substantial portion of its customers' ability to discharge amounts owed is dependent upon the retail grocery economic environment. Sales to one customer accounted for approximately 13% of consolidated sales and other income of the Company during 1995. The Company does not believe that it is currently dependent upon any single customer. Reclassifications Certain reclassifications have been made to prior years' amounts to make them comparable with the classification of such amounts for Fiscal 1995. NOTE 2 - ------ INCOME TAXES (amounts in thousands) During the first quarter of Fiscal 1994, the Company adopted Statement of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes." This statement requires deferred tax recognition for all temporary differences in accordance with the liability method and requires adjustment of deferred tax assets and liabilities for enacted changes in tax laws and rates. Prior to the implementation of SFAS No. 109, the Company accounted for income taxes using Accounting Principles Board Opinion No. 11. As permitted under SFAS No. 109, prior years' financial statements have not been restated to reflect the change in accounting method. The cumulative effect of adopting SFAS No. 109 as of August 29, 1993 was immaterial. Additionally, the impact of the new standard on the provision for income taxes for the year ended August 27, 1994 was immaterial. The provision for income taxes consists of the following: - ------------------------------------------------------------------- 1995 1994 1993 - ------------------------------------------------------------------- Currently Payable - Federal $ 4,234 $ 5,239 $ 3,279 State 925 926 612 Deferred - Allowance for doubtful accounts (425) (1,353) (849) Tax depreciation over (under) book depreciation (233) 75 136 Expenses paid for Florida closing 1,620 1,436 3,366 Labor and benefits expenses (168) (637) (595) Other, net (207) (262) (7) - ------------------------------------------------------------------- $ 5,746 $ 5,424 $ 5,942 - ------------------------------------------------------------------- The effective income tax rate differs from the statutory federal income tax rate for the following reasons: - ------------------------------------------------------------------- 1995 1994 1993 - ------------------------------------------------------------------- Statutory Rate 35.0% 35.0% 34.67% State Income Taxes (net of federal tax benefit) 4.0 4.2 4.2 Surtax effect (0.7) (0.7) (0.67) Other, net 0.5 (0.4) 1.0 - ------------------------------------------------------------------- 38.8% 38.1% 39.2% - ------------------------------------------------------------------- Following are the temporary differences which gave rise to the significant deferred tax assets and liabilities as of August 26, 1995 and August 27, 1994, respectively: - ------------------------------------------------------------------- 1995 1994 --------------------------- Current Future Tax Benefits: Insurance accruals $ 958 $ 1,414 Employee benefits accruals 500 749 Bad debts 1,823 2,245 Inventory activities 997 1,115 Florida closing liabilities - 632 Other 291 613 Valuation allowance - - --------------------------- 4,569 6,768 --------------------------- Long-Term Future Tax Benefits (Liabilities): Accumulated depreciation (1,955) (3,767) Leasing activities 1,884 1,895 Florida closing liabilities (328) 947 Other 103 - Valuation allowance - - --------------------------- (296) (925) - ------------------------------------------------------------------- Totals $4,273 $ 5,843 - ------------------------------------------------------------------- 15 NOTE 3 - ------ DEBT OBLIGATIONS (amounts in thousands) Short-Term Credit Facilities Notes payable to banks of $5,000 at August 26, 1995 consist of two renewal notes bearing interest of 5.8125% and 6.0875%. The Company had unused commitments at August 26, 1995 for short-term borrowings of $59,000 at interest rates up to prime and on other terms upon which the Company and the banks may agree. Average short-term borrowings outstanding during 1995 were $19,299, with an average interest rate of 6.33%. The maximum amount outstanding at any period end was $31,000. No significant compensating balances were maintained at August 26, 1995. Long-Term Debt Obligations Long-term debt obligations consist of the following: - ------------------------------------------------------------------- 1995 1994 - ------------------------------------------------------------------- Unsecured Senior Notes $25,000 $25,000 Unsecured Senior Notes - 7,429 Note Payable to Bank 10,000 - Industrial Revenue Bonds 800 1,600 Term loan agreements and other notes - 230 Less amounts payable within one year (800) (2,657) - ------------------------------------------------------------------- $35,000 $31,602 - ------------------------------------------------------------------- Payments on the long-term debt obligations required during the next five Fiscal years are approximately: 1996, $800; 1997, $-0-; 1998, $-0-; 1999, $-0-; 2000, $25,000; and thereafter, $10,000. Unsecured Senior Notes The Company has $25,000 of 9.20% unsecured senior notes with three insurance companies due January, 2000. In 1993, the Company entered into an interest rate swap agreement with a bank with a $15,000 notional amount that expires in October, 1995, which is accounted for as a hedge, and, accordingly, income or expense related to the swap is recognized on an accrual basis. The purpose of the agreement is to modify the interest rate mix and to reduce the amount of fixed rate interest the Company is now paying on its long-term debt. The effect of this swap was to increase the Company's effective interest rate on $15,000 of borrowings from 9.20% to 9.96% in Fiscal 1995. Notes Payable to Banks The Company has $30,000 available under revolving credit agreements with three banks providing for a revolving credit facility of up to $10,000 each through December, 1995. At the end of each year, the agreements may be extended for an additional year if mutually agreed upon by the Company and the banks. At the end of the revolving period, the Company may convert the outstanding amount into a term loan to be paid in sixteen quarterly installments. The Company, at its option, may borrow at prime plus a spread over "LIBOR" or "CD" based interest rates, or at negotiated interest rates. At August 26, 1995, there was $10,000 borrowed under the revolving credit agreements with interest rate of 6.75%. The Company pays a fee on the unused portion of this credit facility. Industrial Revenue Bonds The Industrial Revenue Bonds are secured by an irrevocable letter of credit, bear interest at a variable rate equal to 50% of a base lending rate (4.50% at August 26, 1995) and are subject to a remarketing agreement under which the marketing agent may adjust the interest rate within stated limits to facilitate remarketing. If the bonds are not remarketed, payment for the bonds redeemed will be made by drawing upon the letter of credit. In such event, the Company has agreed to reimburse the letter of credit bank for such draw in amounts similar in proportion to the amortization of the then remaining outstanding principal amount of the bonds. Accordingly, the bonds have been classified as long-term debt. In July, 1986, the Company entered into a ten-year interest rate exchange agreement with a bank pursuant to which it pays a 7.21% fixed rate. These bonds are being repaid in annual installments of $800 through 1996. Loan Covenants Certain loan agreements contain various financial restrictions. The most restrictive of these require that funded debt may not exceed 60% of capitalization of the Company. The agreements also contain certain other restrictions with respect to additional borrowings, commitments and guarantees. NOTE 4 - ------ FLORIDA DIVISION CLOSING (amounts in thousands except per share amounts) In the third quarter of 1992, the Company recorded a special pretax charge of $22,986 in connection with the closing of the Company's Florida Division and the disposition of its assets. The closing was required as a result of the loss by the Florida Division of its single largest customer, Albertson's, which accounted for approximately 85% of its sales. This charge included provisions primarily for losses incurred on the disposition of the inventory and fixed assets, the estimated portion of the remaining lease obligations and the related operating costs necessary to maintain the Florida warehouse facilities until tenants could be found, 16 litigation costs in connection with the Company's lawsuit against Albertson's and other costs relating to the closing. The Company's contract claims against Albertson's were dismissed by the Circuit Court of Orange County, Florida in March, 1994 and the 5th District Court of Appeals of the State of Florida on January 3, 1995 affirmed the decision of the Circuit Court. The Company's motion for a rehearing and/or clarification or certification was denied. The remaining Florida closing liabilities at August 26, 1995 relates primarily to employee benefit costs. NOTE 5 - ------ PREFERRED SHARE PURCHASE RIGHTS PLAN On January 27, 1989, the Company's Board of Directors declared a dividend of one Preferred Share Purchase Right (Right) on each outstanding Common Share of the Company. A Right will be issued with each Common Share of the Company that becomes outstanding prior to the time the Rights become exercisable or expire. Under certain conditions, each Right may be exercised to purchase one one-hundredth share of a new series of Junior Participating Preferred Stock at an exercise price of $100. The Rights may not be exercised until ten days after (i) a public announcement that a person or group acquired or obtained the right to acquire 20% or more of the Company's Common Shares or (ii) commencement or public announcement of an offer for 20% or more of the Company's Common Shares. These Rights may cause substantial ownership dilution to a person or group who attempts to acquire the Company without approval of the Company's Board of Directors. The Rights, which do not have any voting privileges, expire on January 26, 1999, and may be redeemed by the Company at a price of $0.02 per Right at any time prior to a person's or group's acquisition of 20% or more of the Company's Common Shares. The preferred stock that may be purchased upon exercise of the Rights may not be redeemed and may be subordinate to other series of the Company's preferred stock designated in the future. In the event that the Company is acquired in a merger or other business combination transaction, provision will be made so that each holder of a Right will be entitled to buy the number of Common Shares of the surviving company, which at the time of such transaction would have a market value of two times the exercise price of the Right. In the event that any person or group owning 20% or more of the Common Shares of the Company (except pursuant to an offer for all outstanding Common Shares that the independent directors determine to be fair to and in the best interests of the Company and its shareholders) combines the Company in a merger in which the Company survives and its Common Shares are not changed, each holder of a Right (except rights held by the 20% owner) will be entitled to buy the number of Common Shares of the Company which at the time of the transaction have a value equal to two times the exercise price of the Right. NOTE 6 - ------ INCENTIVE PLANS Stock Option Plan The Company's 1986 Stock Option Plan (the 1986 Plan) permits the granting of incentive options, non-qualified options and/or stock appreciation rights to executive and key employees of the Company. The option price of the incentive options may not be less than 100% of the fair market value of the stock on the date of grant. The option price of the non-qualified options may not be less than 85% of the fair market value of the stock on the date of grant. The number of Common Shares which may be granted under the 1986 Plan may not exceed 300,000 after adjustment for the anti-dilution provisions of the Plan. At August 26, 1995, incentive options for 197,277 Common Shares have been granted under the 1986 Plan and 67,672 Common Shares were available for grant. The options outstanding are for a term of ten years and are exercisable in installments ranging from 10% to 25% per year on a cumulative basis beginning one year from the date of grant. Following is a summary of activity for the last three Fiscal years. - ------------------------------------------------------------------ Number of Shares Price Range - ------------------------------------------------------------------ Outstanding at August 29, 1992 203,949 $9.92-$18.13 Canceled or forfeited (6,672) 9.92 - ------------------------------------------------------------------ Outstanding at August 28, 1993 197,277 9.92- 18.13 - ------------------------------------------------------------------ Outstanding at August 27, 1994 197,277 9.92- 18.13 - ------------------------------------------------------------------ Outstanding at August 26, 1995 197,277 9.92- 18.13 - ------------------------------------------------------------------ Exercisable at August 26, 1995 151,563 9.92- 18.13 - ------------------------------------------------------------------ Restricted Stock Plan Under the terms of the Company's 1989 Restricted Stock Plan, the Company may award up to 150,000 Common Shares to a limited number of officers and key employees of the Company. Under the terms of the Plan, the restricted stock may not be sold, transferred or assigned by the recipient until the end of the restricted 17 recipient's employment is terminated prior to the end of the restricted period, except in the event of the death or disability of a recipient when a prorated number of shares will be issued based on the number of full months of employment. A recipient who retires during the restricted period will receive the full number of shares allocated under the Plan. During the restricted period, the recipient has the right to vote such shares and receive all dividends payable thereon. At August 26, 1995, there were no awards of restricted stock outstanding. Employee Stock Purchase Plan At August 26, 1995, 471,928 Common Shares are reserved under the Employee Stock Purchase Plan. Options are granted at the lower of 85% of the fair market value of the shares on the date of grant, or 100% of the fair market value on the date of exercise. Following is a summary of activity during the last three Fiscal years. - ----------------------------------------------------------------- Number of Shares Price Range - ----------------------------------------------------------------- Outstanding at August 29, 1992 62,057 $13.49 Withdrawals (23,685) 13.49 - ----------------------------------------------------------------- Outstanding at August 28, 1993 38,372 13.49 Exercised (42,503) 10.50 Granted 71,197 9.62 Withdrawals (9,379) 9.62-13.49 - ----------------------------------------------------------------- Outstanding at August 27, 1994 57,687 9.62 Withdrawals (6,796) 9.62 - ----------------------------------------------------------------- Outstanding at August 26, 1995 50,891 $ 9.62 - ----------------------------------------------------------------- Incentive Compensation Plan The Company has an Incentive Compensation Plan under which incentive compensation awards based on performance may be granted to officers and key employees of the Company by the Compensation Committee of the Board of Directors. Awards in the amount (in thousands) of $472, $475 and $494 were made in Fiscal years 1995, 1994 and 1993, respectively. NOTE 7 - ------ PENSION AND RETIREMENT PLANS: (amounts in thousands except per share amounts) Defined Benefit Plans The Company has qualified non-contributory retirement plans to provide retirement income for eligible full-time employees who are not covered by union retirement plans. Pension benefits under the plans are based on length of service and compensation. The Company contributes amounts necessary to meet minimum funding requirements. The plans' funded status at August 26, 1995 and August 27, 1994 were as follows: - ----------------------------------------------------------------- 1995 1994 - ----------------------------------------------------------------- Actuarial present value of benefit obligation: Vested benefits $ 26,994 $ 24,930 Nonvested benefits 362 432 - ----------------------------------------------------------------- Accumulated benefit obligation 27,356 25,362 Additional benefits based on future salary levels 3,084 3,020 - ----------------------------------------------------------------- Projected benefit obligation 30,440 28,382 Plan assets at fair value, principally listed securities (29,647) (27,261) - ----------------------------------------------------------------- Plan assets under projected benefit obligation 793 1,121 Unrecognized net asset 449 626 Unrecognized prior service costs (935) (790) Unrecognized net actuarial costs (1,377) (1,703) - ----------------------------------------------------------------- Net Prepaid Pension Cost $(1,070) $ (746) - ----------------------------------------------------------------- 18 Assumptions used in the determination of the above amounts include the following: - ----------------------------------------------------------------- 1995 1994 - ----------------------------------------------------------------- Discount rate for determining estimated obligations and interest cost 8.5% 8.5% Expected aggregate average long-term change in compensation 4.5% 4.5% Expected long-term return on assets 8.5% 8.5% - ----------------------------------------------------------------- Multi-Employer Plans Approximately 61% of the Company's employees are covered by collectively-bargained, multi-employer pension plans. Contributions are determined in accordance with the provisions of negotiated union contracts and generally are based on the number of hours worked. The Company does not have the information available to determine its share of the accumulated plan benefits or net assets available for benefits under the multi-employer plans. Other Retirement Plans The Company has adopted a non-qualified supplemental executive retirement plan which is available to certain officers designated as participants by the Board of Directors and provides for retirement benefits that participants would be entitled to receive under the qualified retirement plan were it not for limitations imposed by the Employment Retirement Income Security Act and federal tax law. Benefits under the non-qualified plan are payable to the participants and their spouses in the same manner and at the same time as benefits are payable under the Company's qualified retirement plan. These benefits aggregated approximately $2 million and $1.3 million at August 26, 1995 and August 27, 1994, respectively. The Company has established a grantor trust to provide funding for the benefits payable under the non-qualified plan. The trust is irrevocable and, with certain exceptions, the assets contributed to the trust can only be used to pay such benefits. The Company sponsors a 401(k) savings plan for eligible employees. This 401(k) plan is designed to encourage eligible employees to save and invest regularly. All employee contributions are voluntary and no contributions are made by the Company. Pension and Retirement Plan Expense Aggregate cost for the Company's retirement plans includes the following components: - ----------------------------------------------------------------- 1995 1994 1993 - ----------------------------------------------------------------- Defined Benefit Plan: Service cost benefits earned during the year $ 665 $ 782 $ 726 Interest cost on projected benefit obligation 2,366 2,153 2,099 Return on assets (2,982) (916) (3,173) Net amortization and deferral 592 (1,396) 1,027 - ----------------------------------------------------------------- Net pension expense 641 623 679 Multi-Employer Plans 2,395 2,339 2,347 Other Retirement Plans 643 294 135 - ----------------------------------------------------------------- Total Pension and Retirement Plan Expense $ 3,679 $ 3,256 $ 3,161 - ----------------------------------------------------------------- Early Retiree Health Care Benefits The Company provides early retiree health care benefits to certain employees who retire from the Company after January 1, 1989. These early retirees generally must have attained age 55 with 15 years of continuous service to be eligible for health care benefits. These benefits are subject to deductibles, copayment provisions and other limitations. Generally, company-provided health care benefits terminate when covered individuals become eligible for Medicare benefits or reach age 65, whichever comes first. The Company reserves the right to change or terminate the benefits at any time. In addition, certain union employees of the Company will continue to be covered by collectively bargained multi-employer plans. Costs under these union plans are recognized as expense when paid. The Company adopted the new method of accounting for post-retirement benefits (Financial Accounting Standards No. 106) effective August 29, 1993. This new standard requires that the expected cost of these benefits be charged to expense during the years that the employees render service. Prior to Fiscal 1994, all early retiree health care benefit costs were recognized as expense when paid and amounted to $202 in 1993. The Company has chosen to amortize the Accumulated Post-retirement Benefit Obligation (APBO) over 20 years on a straight-line basis, which approximates the average remaining service life of the participants. The Company has determined its SFAS No. 106 liability utilizing an outside actuary and the current provisions of such plans. These plans are unfunded. The Company's APBO at August 29, 1995 and August 27, 1994 was approximately $2.1 million and $2.5 million (pre-tax), respectively, and was based upon the following key assumptions. 19 - ----------------------------------------------------------------- Weighted average discount rate: 8% Retirement rates: Varies from 2% to 5% per year between Ages 55 through 61. Increases up to 10% to 25% per year between Ages 62 through 64. - ----------------------------------------------------------------- Health care costs trend rates: 8.5% for Fiscal 1995 and decreasing ratably to 4.5% by Fiscal 2003. - ----------------------------------------------------------------- A one percentage point change in the assumed health care costs trend rate would change the APBO by approximately $300. The Company's net periodic post-retirement benefit cost during 1995 includes the following: - ----------------------------------------------------------------- 1995 1994 - ----------------------------------------------------------------- Service cost (benefits earned during the period) $ 70 $ 89 Interest cost on APBO 163 188 Amortization of APBO 97 127 - ----------------------------------------------------------------- Net periodic post-retirement benefit cost $330 $404 - ----------------------------------------------------------------- In addition, the Company offers inactive employees other benefits prior to retirement. Management does not believe that such benefits are material to the Company's financial position, results of operations or cash flows. NOTE 8 - ------ LEASES: (amounts in thousands) The Company leases the majority of its operating facilities and a portion of its computers and warehouse equipment under leases varying in terms of up to 30 years. The Company also leases retail store locations which it in turn subleases to certain of its retail customers. Most of the subleases contain provisions calling for additional percentage rentals based on sales. In addition, the Company leases a portion of the delivery equipment used in its operations. Some of the leases may be cancelled on any anniversary date of the delivery of the equipment upon 120 days prior notice; however, the Company may be required to acquire the vehicle at its initial cost less accumulated depreciation, as defined. The annual rents are generally based on a flat charge plus a fixed fee per mile for operating and maintenance costs. Following is a summary of property and equipment under leases that have been capitalized and included in the accompanying balance sheets: - ----------------------------------------------------------------- 1995 1994 - ----------------------------------------------------------------- Buildings $11,536 $11,536 Equipment - 327 - ----------------------------------------------------------------- Total Property under Capitalized Leases 11,536 11,863 Accumulated Amortization (5,649) (5,478) - ----------------------------------------------------------------- Net Property under Capitalized Leases $ 5,887 $ 6,385 - ----------------------------------------------------------------- The following represents the minimum lease payments remaining at August 26, 1995 under the capitalized leases and the minimum sublease rentals to be received under direct financing leases (covering certain retail store facilities which are sublet to retail customers): - ----------------------------------------------------------------- Total Direct Capitalized Financing Leases Leases Net - ----------------------------------------------------------------- 1996 $ 3,811 $ 2,518 $ 1,293 1997 3,750 2,503 1,247 1998 3,711 2,461 1,250 1999 3,658 2,406 1,252 2000 3,666 2,414 1,252 2001 and thereafter 38,172 25,454 12,718 - ----------------------------------------------------------------- Total minimum lease payments 56,768 37,756 $19,012 _______ Less executory costs (1,905) (1,892) Less imputed interest (8.50% to 15.99%) (28,579) (18,745) - ----------------------------------------------------------------- Present value of minimum lease payments 26,284 17,119 Less current maturities (864) (563) - ----------------------------------------------------------------- Long-term obligations and investments $25,420 $ 16,556 - ----------------------------------------------------------------- 20 Total rental expense for all operating (noncapitalized) leases aggregated: - ----------------------------------------------------------------- Minimum Contingent Total - ----------------------------------------------------------------- 1995 Expense $ 9,662 $ 403 $10,065 Sublease Income (4,178) (370) (4,548) - ----------------------------------------------------------------- $ 5,484 $ 33 $ 5,517 - ----------------------------------------------------------------- 1994 Expense $ 9,849 $ 678 $10,527 Sublease Income (4,547) (701) (5,248) - ----------------------------------------------------------------- $ 5,302 $ (23) $ 5,279 - ----------------------------------------------------------------- 1993 Expense $ 9,801 $ 647 $10,448 Sublease Income (4,532) (640) (5,172) - ----------------------------------------------------------------- $ 5,269 $ 7 $ 5,276 - ----------------------------------------------------------------- The future minimum lease commitments as of August 26, 1995 for all noncancellable operating leases are as follows: - ----------------------------------------------------------------- Sublease Expense Income Net - ----------------------------------------------------------------- 1996 $ 7,811 $ (5,208) $ 2,603 1997 6,911 (4,823) 2,088 1998 5,866 (4,398) 1,468 1999 4,616 (3,539) 1,077 2000 3,155 (3,137) 18 2001 and thereafter 13,853 (13,796) 57 - ----------------------------------------------------------------- $42,212 $(34,901) $ 7,311 - ----------------------------------------------------------------- NOTE 9 - ------ TRANSACTIONS WITH RELATED PARTIES: (amounts in thousands) During the Fiscal years 1995, 1994 and 1993, the Company paid $2,347, $2,284 and $2,999, respectively, to an insurance firm for insurance premiums on various forms of coverage. The Chairman of the Board of the Company was a shareholder of said firm. In Fiscal 1995, the Chairman sold his stock interest and he no longer is a shareholder of said firm. The above transactions were made in the ordinary course of business and, in the opinion of the Company's management, were at rates as favorable to the Company as could be obtained from unrelated parties for comparable coverage. NOTE 10 - ------- COMMITMENTS AND CONTINGENT LIABILITIES: (amounts in thousands) The Company is a defendant in various legal proceedings arising out of the conduct of business. While the ultimate outcome of these lawsuits cannot be determined at this time, management is of the opinion that any liability, to the extent not provided for through insurance or otherwise, would not have a material adverse effect on the Company's financial position, results of operations or cash flows. The Company has guaranteed the payment of building leases for certain customers. The future minimum rentals aggregate approximately $4,636, with expiration dates beginning in 1995 through 2009. Certain of these leases also contain provisions for contingent rentals and options to extend, which the Company has also guaranteed. The Company has also guaranteed the payment of principal and interest on notes of certain customers payable to banks. The principal amount guaranteed is approximately $2,159 as of August 26, 1995. The guarantee agreements expire beginning in Fiscal 1996 through 2000. The Company has determined that it is not practical to estimate the fair value of either of the above guarantees. 21 NOTE 11 - ------- SUPPLEMENTAL CASH FLOWS INFORMATION: (amounts in thousands) Cash paid for interest and income taxes for the last three Fiscal years are as follows: - ----------------------------------------------------------------- 1995 1994 1993 - ----------------------------------------------------------------- Interest* $ 4,410 $ 3,276 $ 4,070 Income Taxes 3,737 3,793 1,481 - ----------------------------------------------------------------- * Excludes interest capitalized and imputed interest on leases. Capital lease transactions are considered non-cash items and accordingly, are not reflected in the consolidated statements of cash flows. Capital lease transactions for the last three Fiscal years are as follows: - ----------------------------------------------------------------- 1995 1994 1993 - ----------------------------------------------------------------- Capital lease obligations incurred $1,841 $ - $10,471 Capital lease obligations retired 107 - - - ----------------------------------------------------------------- NOTE 12 - ------- FAIR VALUE OF FINANCIAL INSTRUMENTS: (amounts in thousands) The following methods and assumptions were used to estimate the fair value disclosures for financial instruments: Cash, trade and supplier receivables, accounts payable and notes payable to bank: The carrying amount of these items approximates fair value due to their short-term nature. Notes receivable from retailers: The carrying amount approximates fair value as the receivables bear interest at a variable market rate which adjusts quarterly. Long-term debt obligations: The fair value of long-term debt obligations (excluding capital leases) is estimated using discounted cash flow analyses based on the current incremental borrowing rates for similar types of borrowing arrangements. The carrying amount and estimated fair value of the Company's long-term obligations at August 26, 1995 and August 27, 1994 are as follows: - ----------------------------------------------------------------- 1995 1994 - ----------------------------------------------------------------- Carrying amount $35,800 $34,529 Fair value $38,087 $36,109 - ----------------------------------------------------------------- Interest Rate Swap Agreement: The estimated fair value of the interest rate swap with a $15,000 notional value, based on a financial institution's valuation model, at August 26, 1995 was a payable of approximately $161, which is accrued at August 26, 1995. 22 REPORT OF INDEPENDENT PUBLIC ACCOUNTS: To the Shareholders and Board of Directors of Super Food Services, Inc.: We have audited the accompanying consolidated balance sheets of Super Food Services, Inc. (a Delaware corporation) and subsidiaries as of August 26, 1995 and August 27, 1994, and the related consolidated statements of income, cash flows and shareholders' equity for each of the three fiscal years in the period ended August 26, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Super Food Services, Inc. and subsidiaries as of August 26, 1995 and August 27, 1994, and the results of their operations and their cash flows for each of the three fiscal years in the period ended August 26, 1995, in conformity with generally accepted accounting principles. As discussed in Notes 2 and 7 to the Consolidated Financial Statements, effective August 29, 1993, the Company changed its method of accounting for income taxes and changed its method of accounting for post-retirement benefits other than pensions. Arthur Andersen LLP Dayton, Ohio, October 19, 1995 23 EX-99.2 4 EXHIBIT 99.2 UNAUDITED CONSOLIDATED BAL SHEETS EXHIBIT 99.2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements Super Food Services, Inc. and Subsidiaries Consolidated Summary Balance Sheets May 4, 1996, May 6, 1995 and August 26, 1995 May 4, 1996 May 6, 1995 Aug. 26, 1995 ------------- ------------- ------------- ASSETS Current Assets: Cash $ 8,106,913 $ 3,898,885 $ 12,423,314 ------------ ------------ ------------ Receivables: Retailer-trade 70,525,884 71,895,337 59,832,159 -notes (current portion) 5,510,885 4,543,046 5,510,885 Suppliers and miscellaneous 10,418,163 8,616,495 8,619,826 ------------ ------------ ------------ 86,454,932 85,054,878 73,962,870 Less Allowance for doubtful accounts (11,162,497) (9,422,380) (9,293,061) ------------ ------------ ------------ Net Receivables 75,292,435 75,632,498 64,669,809 ------------ ------------ ------------ Merchandise inventory 77,916,968 81,084,601 67,181,311 ------------ ------------ ------------ Future tax benefits 4,568,828 6,767,576 4,568,828 ------------ ------------ ------------ Prepaid expenses 8,377,104 7,827,347 8,481,566 ------------ ------------ ------------ Total Current Assets 174,262,248 175,210,907 157,324,828 Notes Receivable-Retailers (net long-term portion) 18,348,803 18,772,412 17,652,617 Land, Buildings and Equipment, net 60,810,721 62,321,622 60,544,780 Other Assets 20,836,745 19,993,297 21,376,314 ------------ ------------ ------------ Total Assets $274,258,517 $276,298,238 $256,898,539 ------------ ------------ ------------ ------------ ------------ ------------ The accompanying Notes are an integral part of these consolidated statements. These interim statements are unaudited. 4 LIABILITIES AND SHAREHOLDERS' EQUITY May 4, 1996 May 6, 1995 Aug. 26, 1995 ------------ ------------ ------------- Current Liabilities: Accounts payable $ 41,037,260 $ 39,728,351 $ 36,650,208 Notes payable to banks 14,000,000 21,000,000 5,000,000 Current maturities of long-term notes and mortgages payable 400,000 2,657,000 800,000 Current maturities of obligations under capitalized leases 864,173 797,024 864,173 Current portion of Florida closing liabilities 0 161,376 0 Accrued payroll and vacation 3,521,476 3,393,057 3,142,853 Taxes other than income 1,931,612 1,820,442 2,252,103 Other current liabilities 9,801,837 11,226,040 8,919,404 ------------ ------------ ------------ Total Current Liabilities 71,556,358 80,783,290 57,628,741 Long-term Notes and Mortgages Payable 35,000,000 35,405,286 35,000,000 Obligations Under Capitalized Leases 24,926,496 22,181,849 25,419,906 Long-term Florida Closing Liabilities 882,864 1,904,293 971,836 ------------ ------------ ------------ Total Liabilities 132,365,718 140,274,718 119,020,483 ------------ ------------ ------------ Shareholders' Equity: Common Shares, par value $1.00, 35,000,000 shares authorized 10,997,448 10,948,814 10,948,814 Paid-in capital 29,827,174 29,407,949 29,407,949 Retained earnings 101,068,177 95,666,757 97,521,293 ------------ ------------ ------------ Total Shareholders' Equity 141,892,799 136,023,520 137,878,056 ------------ ------------ ------------ Total Liabilities and Shareholders' Equity $274,258,517 $276,298,238 $256,898,539 ------------ ------------ ------------ ------------ ------------ ------------ The accompanying Notes are an integral part of these consolidated statements. These interim statements are unauditied. 5 SUPER FOOD SERVICES, INC. AND SUBSIDIARIES Consolidated Summary Statements of Income For the Twelve Weeks Ended May 4, 1996 and May 6, 1995 1996 1995 ------------- ------------- Sales and Other Income $259,907,791 $261,314,808 Cost and Expenses: Cost of Sales 247,342,006 249,349,220 Selling, General and Administrative Expenses 9,022,583 8,313,431 Interest expense 1,511,444 1,745,378 Interest income (955,276) (919,992) ------------ ------------ Total Costs and Expenses 256,920,757 258,488,037 ------------ ------------ Income Before Income Taxes 2,987,034 2,826,771 Provision for Income Taxes 1,135,619 1,095,904 ------------ ------------ Net Income $ 1,851,415 $ 1,730,867 ------------ ------------ ------------ ------------ Weighted Average Number of Common Shares outstanding 10,997,448 10,948,814 ------------ ------------ ------------ ------------ Earnings Per Common Share $ 0.17 $ 0.16 ------------ ------------ ------------ ------------ Dividends Declared Per Common Share $ 0.10 $ 0.095 ------------ ------------ ------------ ------------ The accompanying Notes are an integral part of these consolidated statements. These interim statements are unaudited. 6 SUPER FOOD SERVICES, INC. AND SUBSIDIARIES Consolidated Summary Statements of Income For the Thirty-Six Weeks Ended May 4, 1996 and May 6, 1995 1996 1995 ------------ ------------ Sales and Other Income $815,511,784 $792,439,344 Cost and Expenses: Cost of Sales 775,313,969 753,755,100 Selling, General and Administratiave Expenses 27,115,426 26,047,461 Interest expense 4,754,586 5,178,669 Interest income (2,763,244) (2,651,052) ------------ ------------ Total Costs and Expenses 804,420,737 782,330,178 ------------ ------------ Income Before Income Taxes 11,091,047 10,109,166 Provision for Income Taxes 4,245,216 3,939,066 ------------ ------------ Net Income $ 6,845,831 $ 6,170,100 ------------ ------------ ------------ ------------ Weighted Average Number of Common Shares outstanding 10,982,858 10,948,814 ------------ ------------ ------------ ------------ Earnings Per Common Share $ 0.62 $ 0.56 ------------ ------------ ------------ ------------ Dividends Declared Per Common Share $ 0.30 $ .285 ------------ ------------ ------------ ------------ The accompanying Notes are an integral part of these consolidated statements. These interim statements are unaudited. 7 SUPER FOOD SERVICES, INC. AND SUBSIDIARIES Consolidated Summary Statements of Cash Flows For the Thirty-Six Weeks Ended May 4, 1996 and May 6, 1995 1996 1995 ------------- ------------- CASH PROVIDED BY (USED FOR) OPERATIONS Net Income $ 6,845,831 $ 6,170,100 Items not affecting cash Depreciation and amortization 5,972,078 5,332,631 Current items (excluding cash and notes payable)- Receivables (10,622,626) (9,933,109) Merchandise Inventory (10,735,657) (17,741,623) Prepaid expenses and other 104,462 1,007,811 Accounts payable 4,387,052 1,426,406 Other current liabilities 981,087 620,096 Florida Closing Liabilities (88,972) (1,588,331) ------------ ------------ NET CASH USED FOR OPERATIONS (3,156,745) (14,706,019) ------------ ------------ CASH PROVIDED BY (USED FOR) INVESTING: Additions of property, equipment and direct financing leases (5,738,972) (5,002,233) Increase in long-term notes receivable (5,172,775) (6,989,393) Payments on long-term notes receivable 4,476,589 4,396,130 ------------ ------------ NET CASH USED FOR INVESTING (6,435,158) (7,595,496) ------------ ------------ CASH PROVIDED BY (USED FOR) FINANCING: Notes payable to banks (short-term) 9,000,000 12,000,000 Notes payable to bank (long-term) 0 10,000,000 Payments on term debt and capital leases (893,410) (8,514,075) Proceeds from Stock Purchase Plan/Stock Option Plan 467,859 0 Cash dividends (3,298,947) (3,120,003) ------------ ------------ NET CASH PROVIDED BY FINANCING 5,275,502 10,365,922 DECREASE IN CASH (4,316,401) (11,935,593) CASH, BEGINNING OF YEAR 12,423,314 15,834,478 ------------ ------------ CASH, END OF PERIOD $ 8,106,913 $ 3,898,885 ------------ ------------ ------------ ------------ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the year for: Interest (excludes interest capitalized and imputed interest on leases) $ 3,217,526 $ 3,489,984 ------------ ------------ ------------ ------------ Income taxes $ 5,758,600 $ 2,786,486 ------------ ------------ ------------ ------------ The accompanying Notes are an integral part of these consolidated statements. These interim statements are unaudited. 8 Super Food Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements 1. Financial Statements - The condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the informa- tion presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. 2. Accounting Policies - The interim financial information presented in this report has been prepared in accordance with the accounting policies described in the Notes to the Company's financial statements filed on the most recent Form 10-K. While management believes that the procedures followed in the preparation of interim information are reasonable, the accuracy of some estimated amounts is dependent upon facts that will exist or calculations that will be accomplished later in the fiscal year. Examples of such estimates (none individually significant) include unpaid expenses not invoiced and pension costs. In addition, an amount is expensed ratably for possible inventory shrinkage (based on prior experience and is adjusted to actual twice during the fiscal year) and to adjust the LIFO reserve (based upon the Company's best estimate of inflation to date). The information included in this Form 10-Q reflects all adjust- ments which are of a normal recurring nature and, in the opinion of management, necessary for a fair statement of the results of operations for the period presented. 3. Reclassifications - Certain reclassifications have been made to prior years' amounts to make them comparable with the classifications of such amounts for fiscal year 1996. -----END PRIVACY-ENHANCED MESSAGE-----