-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, lHze5dlm8F6V06mi3PfbhcWo6VxFzVbT2AjMCuaOUq5kaHyhVg/vUddUMKkWgqZO t8e61HTQ8aO/lBGsgsyeiQ== 0000950150-95-000090.txt : 19950518 0000950150-95-000090.hdr.sgml : 19950518 ACCESSION NUMBER: 0000950150-95-000090 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950107 FILED AS OF DATE: 19950221 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOOD 4 LESS SUPERMARKETS INC CENTRAL INDEX KEY: 0000835676 STANDARD INDUSTRIAL CLASSIFICATION: 5411 IRS NUMBER: 954222386 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-46750 FILM NUMBER: 95513847 BUSINESS ADDRESS: STREET 1: 777 S HARBOR BLVD CITY: LA HABRA STATE: CA ZIP: 90631 BUSINESS PHONE: 7147382000 MAIL ADDRESS: STREET 1: 777 SOUTH HARBOR BOULEVARD CITY: LAHABRA STATE: CA ZIP: 90631 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _______________ FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 _______________ FOR QUARTER ENDED COMMISSION FILE NUMBER JANUARY 7, 1995 33-31152
FOOD 4 LESS SUPERMARKETS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 95-4222386 (STATE OR OTHER JURISDICTION OF (I.R.S EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 777 SOUTH HARBOR BOULEVARD LA HABRA, CALIFORNIA 90631 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(714) 738-2000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO _____. AT FEBRUARY 14, 1995, THERE WERE 1,505,427 SHARES OF COMMON STOCK OUTSTANDING. AS OF SUCH DATE, NONE OF THE OUTSTANDING SHARES OF COMMON STOCK WERE HELD BY PERSONS OTHER THAN AFFILIATES AND EMPLOYEES OF THE REGISTRANT, AND THERE WAS NO PUBLIC MARKET FOR THE COMMON STOCK. 2 FOOD 4 LESS SUPERMARKETS, INC. INDEX
Page ---- PART I. FINANCIAL INFORMATION Item 1 Financial Statements Consolidated balance sheets as of January 7, 1995 and June 25, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Consolidated statements of operations for the 16 weeks ended January 7, 1995 and January 8, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Consolidated statements of operations for the 28 weeks ended January 7, 1995 and January 8, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Consolidated statements of cash flows for the 28 weeks ended January 7, 1995 and January 8, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 6 Consolidated statements of stockholder's equity as of January 7, 1995 and June 25, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS 1 4 FOOD 4 LESS SUPERMARKETS, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
January 7, June 25, ASSETS 1995 1994 ------------ ------------ (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 15,750 $ 32,996 Trade receivables, less allowances of $1,264 and $1,386 at January 7, 1995 and June 25, 1994, respectively 25,992 25,039 Notes and other receivables 777 1,312 Inventories 223,261 212,892 Patronage receivables from suppliers 5,093 2,875 Prepaid expenses and other 12,542 6,323 -------- -------- Total current assets 283,415 281,437 INVESTMENTS IN AND NOTES RECEIVABLE FROM SUPPLIER COOPERATIVES: A. W. G. 6,718 6,718 Certified and Others 5,694 5,984 PROPERTY AND EQUIPMENT: Land 23,488 23,488 Buildings 24,148 12,827 Leasehold improvements 106,484 97,673 Store equipment and fixtures 153,538 148,249 Transportation equipment 32,363 32,259 Construction in progress 14,459 12,641 Leased property under capital leases 78,222 78,222 Leasehold interests 93,226 93,464 -------- -------- 525,928 498,823 Less: Accumulated depreciation and amortization 155,758 134,089 -------- -------- Net property and equipment 370,170 364,734 OTHER ASSETS: Deferred financing costs, less accumulated amortization of $20,166 and $17,083 at January 7, 1995 and June 25, 1994, respectively 25,529 28,536 Goodwill, less accumulated amortization of $38,113 and $33,945 at January 7, 1995 and June 25, 1994, respectively 263,658 267,884 Other, net 29,438 24,787 -------- -------- $984,622 $980,080 ======== ========
The accompanying notes are an integral part of these consolidated balance sheets. 2 5 FOOD 4 LESS SUPERMARKETS, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
January 7, June 25, LIABILITIES AND STOCKHOLDER'S EQUITY 1995 1994 ------------ ------------ (unaudited) CURRENT LIABILITIES: Accounts payable $164,981 $180,708 Accrued payroll and related liabilities 39,976 42,805 Accrued interest 7,454 5,474 Other accrued liabilities 60,619 53,910 Income taxes payable 689 2,000 Current portion of self-insurance liabilities 28,616 29,492 Current portion of long-term debt 22,290 18,314 Current portion of obligations under capital leases 3,634 3,616 ------- ------- Total current liabilities 328,259 336,319 LONG-TERM DEBT 342,396 310,944 OBLIGATIONS UNDER CAPITAL LEASES 38,071 39,998 SENIOR SUBORDINATED DEBT 145,000 145,000 DEFERRED INCOME TAXES 14,740 14,740 SELF-INSURANCE LIABILITIES AND OTHER 55,701 64,058 COMMITMENTS AND CONTINGENCIES - - STOCKHOLDER'S EQUITY: Cumulative convertible preferred stock, $.01 par value, 200,000 shares authorized and 50,000 shares issued at January 7, 1995 and June 25, 1994 (aggregate liquidation value of $67.3 million and $62.2 million at January 7, 1995 and June 25, 1994, respectively) 64,541 58,997 Common stock, $.01 par value, 1,600,000 shares authorized; 1,519,632 shares issued at January 7, 1995 and June 25, 1994 15 15 Additional paid-in capital 107,650 107,650 Notes receivable from shareholders of parent (702) (586) Retained deficit (108,858) (94,586) ------- ------- 62,646 71,490 Treasury stock: 14,205 and 16,732 shares of common stock at January 7, 1995 and June 25, 1994, respectively (2,191) (2,469) -------- -------- Total stockholder's equity 60,455 69,021 -------- -------- $984,622 $980,080 ======= =======
The accompanying notes are an integral part of these consolidated balance sheets. 3 6 FOOD 4 LESS SUPERMARKETS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) (UNAUDITED)
16 Weeks 16 Weeks Ended Ended January 7, January 8, 1995 1994 ------------ ------------ SALES $ 805,967 $ 799,597 COST OF SALES (including purchases from related parties for the 16 weeks ended January 7, 1995 and January 8, 1994 of $58,202 and $58,453, respectively) 671,549 649,720 ---------- ---------- GROSS PROFIT 134,418 149,877 SELLING, GENERAL, ADMINISTRATIVE AND OTHER, NET 111,009 125,770 AMORTIZATION OF EXCESS COSTS OVER NET ASSETS ACQUIRED 2,381 2,360 RESTRUCTURING CHARGE 5,134 - ---------- ---------- OPERATING INCOME 15,894 21,747 INTEREST EXPENSE: Interest expense, excluding amortization of deferred financing costs 19,892 19,423 Amortization of deferred financing costs 1,784 1,709 ---------- ---------- 21,676 21,132 LOSS (GAIN) ON DISPOSAL OF ASSETS (1) 124 ---------- ---------- INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES (5,781) 491 PROVISION (BENEFIT) FOR INCOME TAXES (400) 400 ---------- ---------- NET INCOME (LOSS) $ (5,381) $ 91 ========== ========== PREFERRED STOCK ACCRETION $ 3,168 $ 2,698 ========== ========== LOSS APPLICABLE TO COMMON SHARES $ (8,549) $ (2,607) ========== ========== LOSS PER COMMON SHARE $ (5.68) $ (1.73) ========== ========= Average Number of Common Shares Outstanding 1,505,373 1,503,676 ========== ==========
The accompanying notes are an integral part of these consolidated statements. 4 7 FOOD 4 LESS SUPERMARKETS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS) (UNAUDITED)
28 Weeks 28 Weeks Ended Ended January 7, January 8, 1995 1994 ------------ ------------ SALES $1,404,665 $1,416,213 COST OF SALES (including purchases from related parties for the 28 weeks ended January 7, 1995 and January 8, 1994 of $99,367 and $106,060, respectively) 1,167,205 1,153,989 --------- --------- GROSS PROFIT 237,460 262,224 SELLING, GENERAL, ADMINISTRATIVE AND OTHER, NET 199,161 221,464 AMORTIZATION OF EXCESS COSTS OVER NET ASSETS ACQUIRED 4,168 4,132 RESTRUCTURING CHARGE 5,134 - ----------- ----------- OPERATING INCOME 28,997 36,628 INTEREST EXPENSE: Interest expense, excluding amortization of deferred financing costs 34,601 33,914 Amortization of deferred financing costs 3,083 2,948 --------- --------- 37,684 36,862 LOSS (GAIN) ON DISPOSAL OF ASSETS (459) 87 ---------- ----------- LOSS BEFORE PROVISION FOR INCOME TAXES (8,228) (321) PROVISION FOR INCOME TAXES 500 700 --------- --------- NET LOSS $ (8,728) $ (1,021) ========== ========== PREFERRED STOCK ACCRETION $ 5,544 $ 4,721 ========== ========== LOSS APPLICABLE TO COMMON SHARES $ (14,272) $ (5,742) ========== ========== LOSS PER COMMON SHARE $ (9.49) $ (3.82) =========== ========== Average Number of Common Shares Outstanding 1,504,288 1,504,245 ========= =========
The accompanying notes are an integral part of these consolidated statements. 5 8 FOOD 4 LESS SUPERMARKETS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (UNAUDITED)
28 Weeks 28 Weeks Ended Ended January 7, January 8, 1995 1994 ------------ ------------ CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Cash received from customers $1,404,665 $1,416,213 Cash paid to suppliers and employees (1,389,667) (1,361,103) Interest paid (32,621) (29,178) Income taxes refunded (paid) (1,811) 1,652 Interest received 836 486 Other, net 583 2,388 --------- --------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (18,015) 30,458 CASH PROVIDED (USED) BY INVESTING ACTIVITIES: Proceeds from sale of property and equipment 7,120 12,307 Payment for purchase of property and equipment (39,049) (20,404) Other, net (907) 61 --------- --------- NET CASH USED BY INVESTING ACTIVITIES (32,836) (8,036) CASH PROVIDED (USED) BY FINANCING ACTIVITIES: Payments of long-term debt (13,272) (10,395) Payments of capital lease obligation (1,909) (1,565) Net change in Revolving Loan 48,700 (4,900) Proceeds from issuance of debt - 28 Sale (purchase) of treasury stock, net 92 (726) Other, net (6) (161) --------- --------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 33,605 (17,719) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (17,246) 4,703 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 32,996 25,089 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 15,750 $ 29,792 ========= =========
The accompanying notes are an integral part of these consolidated statements. 6 9 FOOD 4 LESS SUPERMARKETS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (UNAUDITED)
28 Weeks 28 Weeks Ended Ended January 7, January 8, 1995 1994 ------------ ------------ RECONCILIATION OF NET LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Net loss $(8,728) $(1,021) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation and amortization 33,878 33,320 Restructuring charge 5,134 - Loss (gain) on sale of assets (459) 87 Change in assets and liabilities: Accounts and notes receivable (2,725) (9,568) Inventories (10,369) (16,106) Prepaid expenses and other (9,097) (5,659) Accounts payable and accrued liabilities (20,228) 23,752 Self-insurance liabilities (4,110) 3,301 Deferred income taxes - 1,714 Income taxes payable (1,311) 638 ------ ------ Total adjustments (9,287) 31,479 ------ ------ NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $(18,015) $30,458 ====== ====== SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES: Accretion of preferred stock $ 5,544 $ 4,721 ======= ======
The accompanying notes are an integral part of these consolidated statements. 7 10 FOOD 4 LESS SUPERMARKETS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Preferred Stock Common Stock Treasury Stock --------------------- ------------------ -------------------- Number Number Number of of of Shares Amount Shares Amount Shares Amount ------ ------ ------ ------ ------ ------ BALANCES AT JUNE 25, 1994 50,000 $58,997 1,519,632 $15 (16,732) $(2,469) Payment of Shareholders' Notes (unaudited) - - - - - - Issuance of Treasury Stock (unaudited) - - - - 3,644 340 Purchase of Treasury Stock (unaudited) - - - - (1,117) (62) Accretion of Preferred Stock (unaudited) - 5,544 - - - - Net loss (unaudited) - - - - - - ------ ------- --------- --- ------- ------- BALANCES AT JANUARY 7, 1995 (unaudited) 50,000 $64,541 1,519,632 $15 (14,205) $(2,191) ====== ======= ========= === ======= =======
Share- Add'l Total holders' Paid-In Retained Stockholder's Notes Capital Deficit Equity --------- ------- --------- ------------- BALANCES AT JUNE 25, 1994 $(586) $107,650 $ (94,586) $69,021 Payment of Shareholders' Notes (unaudited) 70 - - 70 Issuance of Treasury Stock (unaudited) (191) - - 149 Purchase of Treasury Stock (unaudited) 5 - - (57) Accretion of Preferred Stock (unaudited) - - (5,544) - Net loss (unaudited) - - (8,728) (8,728) ----- -------- --------- ------- BALANCES AT JANUARY 7, 1995 (unaudited) $(702) $107,650 $(108,858) $60,455 ===== ======== ========= =======
The accompanying notes are an integral part of these consolidated statements. 8 11 FOOD 4 LESS SUPERMARKETS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The consolidated balance sheet of Food 4 Less Supermarkets, Inc. (the "Company") as of January 7, 1995 and the consolidated statements of operations and cash flows for the interim periods ended January 7, 1995 and January 8, 1994 are unaudited, but include all adjustments (consisting of only normal recurring accruals) which the Company considers necessary for a fair presentation of its consolidated financial position, results of operations and cash flows for these periods. These interim financial statements do not include all disclosures required by generally accepted accounting principles, and, therefore, should be read in conjunction with the Company's financial statements and notes thereto included in the Company's latest annual report filed on Form 10-K. Results of operations for interim periods are not necessarily indicative of the results for a full fiscal year. The Company is a vertically integrated supermarket company with 266 stores located in Southern California, Northern California and certain areas of the midwest. The Company's Southern California division includes a manufacturing facility, with bakery and creamery operations, and a full-line warehouse and distribution facility. 2. SIGNIFICANT ACCOUNTING POLICIES Inventories Inventories, which consist of grocery products, are stated at the lower of cost or market. Cost has been principally determined using the last-in, first-out ("LIFO") method. If inventories had been valued using the first-in, first-out ("FIFO") method, inventories would have been higher by $16.2 million and $13.8 million at January 7, 1995 and June 25, 1994, respectively, and gross profit and operating income would have been greater by $1.4 million and $1.2 million for the 16 weeks ended January 7, 1995 and January 8, 1994, respectively, and by $2.4 million and $2.2 million for the 28 weeks ended January 7, 1995 and January 8, 1994, respectively. Income Taxes The Company provides for deferred income taxes under an asset and liability approach in accordance with Statement of Financial Accounting Standards No. 109 ("SFAS 109"), Accounting for Income Taxes. SFAS 109 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, SFAS 109 generally considers all expected future events other than enactments of changes in the tax law or rates. 3. RESTATEMENT The Company has restated the statement of operations for the 16 and 28 weeks ended January 8, 1994 to classify certain buying, occupancy and labor costs associated with making its products available for sale as cost of sales. These amounts were previously classified as selling, general, administrative, and other, net, and depreciation and amortization of property and equipment, and totalled $63.4 million and $114.3 million for the 16 and 28 weeks ended January 8, 1994, respectively. The Company has also classified a portion of its self-insurance cost as interest expense that was previously recorded in selling, general, administrative and other, net. This amount was $1.9 million and $3.3 million for the 16 and 28 weeks ended January 8, 1994, respectively. Depreciation and amortization costs not classified in cost of sales are included in selling, general, administrative and other, net. The change in classifications did not affect the net income (loss), income (loss) before provision for income taxes, or loss per common share. 9 12 4. RALPHS MERGER On September 14, 1994, the Company, Food 4 Less Holdings, Inc. ("Holdings"), and Food 4 Less, Inc. ("FFL") entered into a definitive Agreement and Plan of Merger (the "Merger") with Ralphs Supermarkets, Inc. ("Ralphs") and the stockholders of Ralphs. Pursuant to the terms of the Merger agreement, the Company will, subject to certain terms and conditions being satisfied or waived, be merged into Ralphs and Ralphs will become a wholly-owned subsidiary of Holdings. The Company and Ralphs have reached an agreement with the California Attorney General under which the Company and Ralphs, on a combined basis, will be required to sell 27 stores to other food retailers following the merger. In addition, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 has expired and the Federal Trade Commission has advised the Company that it has closed its investigation of the Merger. Conditions to the consummation of the Merger include, among other things, the completion of financing for the transaction and the receipt of other necessary consents. The purchase price for Ralphs is approximately $1.5 billion, including the assumption of debt. In connection with the Merger, FFL will merge into Holdings and Holdings will change its jurisdiction by merging into a newly formed Delaware corporation ("New Holdings"). The aggregate purchase price, payable to the stockholders of Ralphs in connection with the Merger, consists of $425 million in cash and $100 million initial principal amount of 13% Senior Subordinated Pay-in Kind Debentures due 2006 issued by New Holdings. In addition, the Company will enter into an agreement with a stockholder of Ralphs pursuant to which such stockholder will act as a consultant to the Company with respect to certain real estate and general commercial matters for a period of five years from the closing of the Merger in exchange for the payment of a consulting fee. The financing required to complete the Merger will include the issuance of significant additional equity by New Holdings, the issuance of new debt securities by the Company and New Holdings and the incurrence of additional bank financing by the Company. The equity issuance would be made to a group of investors led by Apollo Advisors, L.P., which has committed to purchase up to $150 million in New Holdings stock. It is presently anticipated that the issuance of new debt securities would be in the form of senior notes of the Company up to $400 million. The bank financing would be made pursuant to a commitment by Bankers Trust Company to provide up to $1,075 million in such financing. In connection with the receipt of new financing, the Company and Holdings will also be required to complete certain exchange offers, consent solicitations and or other transactions with the holders of theirs and Ralphs' currently outstanding debt securities. As of October 9, 1994, Ralphs had outstanding indebtedness of approximately $1,001 million. Ralphs had sales of $2,730 million, operating income of $152.1 million and earnings before income taxes of $30.3 million for its most recent reported fiscal year ended January 30, 1994. Upon consummation of the Merger, the operations and activities of the Company will be significantly impacted due to conversions of the Company's existing Southern California conventional stores to either Ralphs or Food 4 Less warehouse stores as well as the consolidation of various operating functions and departments. This consolidation may result in an additional restructuring charge. The amount of the additional restructuring charge is not presently determinable due to various factors, including uncertainties inherent in the completion of the Merger; however, the restructuring charge may be material in relation to the stockholder's equity and financial position of the Company at January 7, 1995. 5. RESTRUCTURING CHARGE The Company has converted 11 of its conventional supermarkets to warehouse stores. During the 28 weeks ended January 7, 1995, the Company recorded a restructuring charge for the write-off of property and equipment at the 11 stores of $5.1 million. 6. SUBSIDIARY REGISTRANTS Separate financial statements of the Company's subsidiaries (collectively, the "Subsidiary Guarantors") neither are included herein nor otherwise filed on Form 10-Q because such Subsidiary Guarantors are jointly and severally liable as guarantors of the Company's 10.45% Senior Notes due 2000 and 13-3/4% Senior Subordinated Notes due 2001, and the aggregate assets, earnings and equity of the Subsidiary Guarantors are substantially equivalent to the assets, earnings and equity of the Company on a consolidated basis. 10 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (UNAUDITED) The following table sets forth the selected unaudited operating results of the Company for the 16 and 28 weeks ended January 7, 1995 and January 8, 1994:
16 Weeks Ended 28 Weeks Ended -------------- -------------- January 7, 1995 January 8, 1994 January 7, 1995 January 8, 1994 --------------- --------------- ----------------- ----------------- (dollars in millions) (unaudited) Sales $806.0 100.0 % $799.6 100.0% $1,404.7 100.0 % $1,416.2 100.0 % Gross profit 134.4 16.7 % 149.9 18.7% 237.5 16.9 % 262.2 18.5 % Selling, general, administrative and other, net 111.0 13.8 % 125.8 15.7% 199.2 14.2 % 221.5 15.6 % Amortization of excess costs over net assets acquired 2.4 0.3 % 2.4 0.3% 4.2 0.3 % 4.1 0.3 % Restructuring charge 5.1 0.6 % 0.0 0.0% 5.1 0.4 % 0.0 0.0 % Operating income 15.9 2.0 % 21.7 2.7% 29.0 2.0 % 36.6 2.6 % Interest expense 21.7 2.7 % 21.1 2.6% 37.7 2.6 % 36.8 2.6 % Loss (gain) on disposal of assets 0.0 0.0 % 0.1 0.0% (0.5) 0.0 % 0.1 0.0 % Provision (benefit) for income taxes 0.4 0.0 % 0.4 0.1% 0.5 0.0 % 0.7 0.1 % Net income (loss) (5.4) (0.7)% 0.1 0.0% (8.7) (0.6)% (1.0) (0.1)%
Sales. Sales per week increased $0.4 million, or 0.8%, from $50.0 million in the 16 weeks ended January 8, 1994 to $50.4 million in the 16 weeks ended January 7, 1995 and decreased $0.4 million, or 0.8%, from $50.6 million in the 28 weeks ended January 8, 1994 to $50.2 million in the 28 weeks ended January 7, 1995. The increase in sales for the 16 weeks ended January 7,1995 resulted primarily from new and acquired stores opened since January 8, 1994, partially offset by a comparable store sales decline of 3.5%. The decline in sales for the 28 weeks ended January 7, 1995 resulted primarily from a 4.5% decline in comparable store sales, partially offset by sales from new and acquired stores opened since January 8, 1994. Management believes that the decline in comparable store sales is attributable to the weak economy in Southern California and, to a lesser extent, in the Company's other operating areas, and competitive store openings and remodels in Southern California. Gross Profit. Gross profit decreased as a percentage of sales from 18.7% in the 16 weeks ended January 8, 1994 to 16.7% in the 16 weeks ended January 7, 1995 and decreased from 18.5% in the 28 weeks ended January 8, 1994 to 16.9% in the 28 weeks ended January 7, 1995. Decreases in gross profit margin were primarily attributable to pricing and promotional activities related to the Company's "Total Value Pricing" program and an increase in the number of warehouse format stores (which have lower gross margins resulting from prices that are generally 5-12% below the prices in the Company's conventional stores) from 48 at January 8, 1994 to 87 at January 7, 1995. The decrease in the gross profit margin was partially offset by improvements in product procurement. Selling, General, Administrative and Other, Net. Selling, general, administrative and other expenses ("SG&A") were $125.8 million and $111.0 million for the 16 weeks and $221.5 million and $199.2 million for the 28 weeks ended January 8, 1994 and January 7, 1995, respectively. SG&A decreased as a percentage of sales from 15.7% to 13.8% and from 15.6% to 14.2% for the same periods. The Company experienced a reduction of workers' compensation and general liability self-insurance costs of $6.1 million and $9.7 million in the 16 and 28 weeks ended January 7, 1995, respectively, due to continued improvement in the cost and frequency of claims. The improved experience was due primarily to cost control programs implemented by the Company, including awards for stores with the best loss experience, specific achievable goals for each store, and increased monitoring of third-party administrators. In addition, the Company maintained tight control of administrative expenses and store level expenses, including payroll (due primarily to increased productivity), advertising, and other controllable store expenses. Because the Company's warehouse stores have lower SG&A than conventional stores, the increase in the number of warehouse stores, from 48 at January 8, 1994 to 87 at January 7, 1995, also contributed to decreased SG&A. The Company participates in multi-employer health and welfare plans for its store employees who are members of the United Food and Commercial Workers Union ("UFCW"). As part of the renewal of the Southern California UFCW contract in 11 14 October 1993, employers contributing to UFCW health and welfare plans are to receive a pro rata share of the excess reserves in the plans through a reduction of current employer contributions. The Company's share of the excess reserves was $24.2 million, of which the Company recognized $8.4 million in fiscal 1994 and $9.0 million and $13.7 million in the 16 and 28 weeks ended January 7, 1995, respectively. The remainder of the excess reserves will be recognized as the credits are taken in the future. On August 28, 1994, the Teamsters and the Company ratified a new contract which, among other things, provided for the vesting of sick pay benefits resulting in a one-time charge of $2.1 million. Restructuring Charge. The Company has converted 11 of its conventional supermarkets to warehouse stores. During the 28 weeks ended January 7, 1995, the Company recorded a restructuring charge for the write-off of property and equipment at the 11 stores of $5.1 million. Interest Expense. Interest expense (including amortization of deferred financing costs) was $21.1 million and $21.7 million for the 16 weeks and $36.8 million and $37.7 million for the 28 weeks ended January 8, 1994 and January 7, 1995, respectively. The increase in interest expense was primarily due to higher interest rates on the Term Loan and Revolving Credit Facility and increased borrowings on the Company's $70 million Revolving Credit Facility in the current year, partially offset by the reduction of indebtedness under the Term Loan as a result of amortization payments. Net Income (Loss). Primarily as a result of the factors discussed above, net income decreased from $0.1 million in the 16 weeks ended January 8, 1994 to a net loss of $5.4 million in the 16 weeks ended January 7, 1995 and net loss increased from $1.0 million in the 28 weeks ended January 8, 1994 to $8.7 million in the 28 weeks ended January 7, 1995. LIQUIDITY AND CAPITAL RESOURCES Cash flow from operations, amounts available under the Revolving Credit Facility and leases are the Company's principal sources of liquidity. The Company believes that these sources will be adequate to meet its anticipated capital expenditures, working capital needs and debt service requirements during fiscal 1995. However, there can be no assurance that the Company will continue to generate cash flow from operations at historical levels or that it will be able to make future borrowings under the Revolving Credit Facility. The Merger, which is subject to, among other things, the completion of the financing for the transaction and the receipt of other necessary consents, will require the issuance of significant additional equity by New Holdings, the issuance of new debt securities by the Company and New Holdings and the incurrence of additional bank financing by the Company. The equity issuance would be made to a group of investors led by Apollo Advisors, L.P., which has committed to purchase up to $150 million in New Holdings stock. It is presently anticipated that the issuance of new debt securities would be in the form of senior notes of the Company up to $400 million. The bank financing would be made pursuant to a commitment by Bankers Trust Company to provide up to $1,075 million in such financing. In connection with the receipt of new financing, the Company and Holdings will be required to complete certain exchange offers, consent solicitations and/or other transactions with the holders of the currently outstanding debt securities. The transaction will also require the assumption of approximately $160 million of other existing indebtedness of Ralphs. The proceeds of the foregoing financings will be used to acquire the outstanding stock of Ralphs, to repay certain existing indebtedness, and to pay fees and expenses in connection with the Merger and related transactions. The Ralphs purchase price is approximately $1.5 billion, including the assumption or repayment of debt. The consideration payable to the stockholders of Ralphs consists of $425 million in cash and $100 million initial principal amount of 13% Senior Subordinated Pay-in-Kind Debentures due 2006 to be issued by New Holdings. In addition, the Company will enter into an agreement with a stockholder of Ralphs pursuant to which such stockholder will act as a consultant to the Company with respect to certain real estate and general commercial matters for a period of five years from the closing of the Merger in exchange for the payment of a consulting fee. (See "Note 4 -- Ralphs Merger") During the 28-week period ended January 7, 1995, the Company used approximately $18.0 million of cash for its operating activities compared to cash provided by operating activities of $30.5 million for the 28 weeks ended January 8, 1994. The decrease in cash from operating activities is due primarily to changes in operating assets and liabilities for the 28 weeks ended January 7, 1995. The Company's principal use of cash in its operating activities is inventory purchases. The Company's 12 15 high inventory turnover allows it to finance a substantial portion of its inventory through trade payables, thereby reducing its short-term borrowing needs. At January 7, 1995, this resulted in a working capital deficit of $45.4 million. Cash used for investing activities was $32.8 million for the 28 weeks ended January 7, 1995. Investing activities consisted primarily of capital expenditures of $39.0 million, partially offset by $6.5 million of sale/leaseback transactions. The capital expenditures, net of the proceeds from sale/leaseback transactions, were financed primarily from cash provided by financing activities. The capital expenditures discussed above were made to build or acquire 20 new stores (13 of which have opened) and convert 11 conventional stores to the warehouse format (all of which have been completed). The Credit Agreement has been amended to, among other things, allow for the acceleration of the capital expenditures and other costs associated with the conversion of stores to the warehouse format. The Company currently anticipates that its aggregate capital expenditures for fiscal 1995 will be approximately $67.6 million. Consistent with its past practices, the Company intends to finance these capital expenditures primarily with cash provided by operations and through leasing transactions. At January 7, 1995, the Company had approximately $4.0 million of unused equipment leasing facilities. No assurance can be given that sources of financing for capital expenditures will be available or sufficient. However, the capital expenditure program has substantial flexibility and is subject to revision based on various factors, including business conditions, changing time constraints and cash flow requirements. Management believes that if the Company were to substantially reduce or postpone these programs, there would be no substantial impact on short-term operating profitability. However, management also believes that the construction of warehouse format stores is an important component of its operating strategy. In the long term, if these programs were substantially reduced, management believes its operating businesses, and ultimately its cash flow, would be adversely affected. The capital expenditures discussed above do not include potential acquisitions, including the Merger or the related costs of converting additional stores, which the Company could make to expand within its existing markets or to enter other markets. The Company has grown through acquisitions in the past and from time to time engages in discussions with potential sellers of individual stores, groups of stores or other retail supermarket chains. Cash provided by financing activities was $33.6 million for the 28 weeks ended January 7, 1995, which was primarily the $48.7 million of borrowings outstanding on the $70 million Revolving Credit Facility at January 7, 1995 partially offset by a $11.3 million repayment of the Term Loan. At January 7, 1995, $48.1 million of standby letters of credit had been issued under the $55 million Letter of Credit Facility. The Company is highly leveraged. At January 7, 1995, the Company's total long-term indebtedness (including current maturities) and stockholder's equity were $551.4 million and $60.5 million, respectively. EFFECTS OF INFLATION AND COMPETITION The Company's primary costs, inventory and labor, are affected by a number of factors that are beyond its control, including availability and price of merchandise, the competitive climate and general and regional economic conditions. As is typical of the supermarket industry, the Company has generally been able to maintain margins by adjusting its retail prices, but competitive conditions may from time to time render it unable to do so while maintaining its market share. SUBSIDIARY REGISTRANTS Separate financial statements of the Company's subsidiaries (collectively, the "Subsidiary Guarantors") are neither included herein nor otherwise filed on Form 10-Q because such Subsidiary Guarantors are jointly and severally liable as guarantors of the Company's Senior Notes and Subordinated Notes, and the aggregate assets, earnings and equity of the Subsidiary Guarantors are substantially equivalent to the assets, earnings and equity of the Company on a consolidated basis. 13 16 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. 19.1 Sixth Modification Agreement to the Credit Agreement dated as of November 22, 1994 by and among the Company, Alpha Beta Company, Cala Foods, Inc., Falley's, Inc. and Food 4 Less Merchandising, Inc. as Borrowers, Citicorp North America, Inc., Bankers Trust Company and Chemical Bank (successor in interest to Manufacturers Hanover Trust Company) as Co-Agents, Citicorp North America, Inc. as Administrative Agent and the Required Lenders and other Loan Parties, all as identified therein. 19.2 Seventh Modification Agreement to the Credit Agreement dated as of January 23, 1995 by and among the Company, Alpha Beta Company, Cala Foods, Inc., Falley's, Inc. and Food 4 Less Merchandising, Inc. as Borrowers, Citicorp North America, Inc., Bankers Trust Company and Chemical Bank (successor in interest to Manufacturers Hanover Trust Company) as Co-Agents, Citicorp North America, Inc. as Administrative Agent and the Required Lenders and other Loan Parties, all as identified therein. 27. Financial Data Schedule (b) Reports on Form 8-K None
14 17 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the County of Orange, State of California. Dated: February 20, 1995 FOOD 4 LESS SUPERMARKETS, INC. /s/ Ronald W. Burkle ---------------------------------------- Ronald W. Burkle Chief Executive Officer /s/ Greg Mays ---------------------------------------- Greg Mays Chief Financial Officer 15 EX-19.1 2 EXHIBIT 19.1/SIXTH MODIFICATION AGREEMENT 1 Exhibit 19.1 SIXTH MODIFICATION AGREEMENT This SIXTH MODIFICATION AGREEMENT, dated as of November 22, 1994, is made by and among (i) Food 4 Less Supermarkets, Inc., a Delaware corporation ("Supermarkets"), (ii) Alpha Beta Company, a California corporation ("Alpha Beta"), Cala Foods, Inc., a California corporation ("Cala"), Falley's, Inc., a Kansas corporation ("Falley's"), and Food 4 Less Merchandising, Inc., a California corporation (together with Alpha Beta, Cala and Falley's, the "Subsidiary Borrowers"), (iii) Bay Area Warehouse Stores, Inc., a California corporation, Bell Markets, Inc., a California corporation, Cala Co., a Delaware corporation, Food 4 Less GM, Inc., a California corporation, Food 4 Less of California, Inc., a California corporation, and Food 4 Less of Southern California, Inc., a Delaware corporation (together with Supermarkets and the Subsidiary Borrowers, the "Loan Parties"), (iv) the Lender Parties (as defined in the Credit Agreement referred to below) whose signatures appear on the execution pages hereof, (v) Bankers Trust Company, Citicorp North America, Inc. ("Citicorp") and Chemical Bank (successor in interest to Manufacturers Hanover Trust Company), as co-agents for the Lender Parties (in such capacity, the "Co-Agents"), and (vi) Citicorp, as administrative agent for the Lender Parties (in such capacity, the "Administrative Agent"). PRELIMINARY STATEMENTS: (1) Supermarkets, the Subsidiary Borrowers, the Lenders, the Designated Issuers of the Lenders, the Co-Agents and the Administrative Agent have entered into a Credit Agreement dated as of June 17, 1991, as amended by the First Modification Agreement dated as of January 24, 1992, the Second Modification Agreement dated as of April 13, 1992, the Third Modification Agreement dated as of September 15, 1992, the Fourth Modification Agreement dated as of October 9, 1992 and the Fifth Modification Agreement dated as of December 21, 1992 (as so amended, the "Credit Agreement"). Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined. (2) The Borrower has requested that the Required Lenders agree to amend certain provisions of the Credit Agreement as set forth herein to provide for the issuance by the Borrower of Notes in registered form. The undersigned Lender Parties have agreed to do so as hereinafter set forth upon the terms and conditions set forth below. SECTION 1. Amendments to Credit Agreement. Subject to the fulfillment of the conditions set forth in Section 2 hereof, the Credit Agreement is hereby amended as follows: 1 2 (a) Section 1.01 of the Credit Agreement is amended by adding the following definitions: "'Non-U.S. Lender' has the meaning set forth in Section 2.05(d)." "'Notes' means any promissory notes (including, without limitation, Registered Notes) delivered by any of the Borrowers pursuant to Section 2.05." "'Registered Note' means a Note that has been issued in registered form pursuant to Section 2.05(d)." "'U.S. Person' means any Person that is created or organized under the laws of the United States of America or any State thereof, or any estate or trust that is subject to United States Federal income taxation regardless of the source of its income." "'U.S. Taxes' means any present or future tax, assessment or other charge or levy imposed by or on behalf of the United States of America or any taxing authority thereof." (b) Section 2.05 of the Credit Agreement is amended by adding at the end thereof a new subsection (d) to read as follows: "(d) Any Lender that is not a U.S. Person (each such Person being a 'Non-U.S. Lender') and that could become completely exempt from withholding of U.S. Taxes in respect to payment of the Obligations due to such Lender hereunder relating to its Term Advances if the Note or Notes evidencing its Term Advances were in registered form for United States Federal income tax purposes, may request, in a notice to Supermarkets and the Agent, (i) the exchange of such Non-U.S. Lender's Note or Notes evidencing its Term Advances for a Registered Note or Registered Notes (in which case Supermarkets agrees to promptly thereafter exchange such Note or Notes for a Registered Note or Registered Notes), or (ii) if Supermarkets has not previously issued a Note or Notes evidencing such Non-U.S. Lender's Term Advances, the issuance of a Registered Note or Registered Notes to evidence its Term Advances (in which event Supermarkets agrees to promptly thereafter issue such Registered Note or Registered Notes) (which Notes in either such case shall be in substantially the form of Exhibit L-1, except that it shall be legended on the face thereof as a 'Registered Note' and shall be made payable to such Non-U.S. Lender or its registered assigns). Registered Notes may not be exchanged for Notes that are not in registered form." (c) Section 4.07 (e) of the Credit Agreement is amended by inserting the following after the first sentence thereof: 2 3 "If a Lender Party provides a form specified in clause (iii) above, such Lender Party shall deliver to Supermarkets an annual certificate stating that (A) such Lender Party is not a 'bank' within the meaning of Section 881(c)(3)(A) of the Internal Revenue Code and (ii) such Lender Party shall promptly notify Supermarkets after it obtains knowledge that any fact set forth in such form or certificate ceases to be true and correct or if it otherwise determines that it is no longer in a position to provide such form or certificate to Supermarkets." (d) Section 10.09 of the Credit Agreement is amended as follows: (i) By inserting after the last parenthetical phrase in clause (iii) of subsection (a) thereof the following: "and, in the case of an assignment of a Registered Note, such Note, duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the assigning Lender (as the registered holder thereof) to the assignee"; (ii) By inserting after the words "Assignment and Acceptance" the first time such words appear in the second sentence of subsection (a) thereof the following: "(which shall not be any earlier than the date on which the Agent so accepts and records the Assignment and Acceptance in the Register)"; (iii) By inserting after the words "Administrative Agent" in the first line of subsection (c) thereof the following: ", acting for this purpose as agent for the Borrower,"; (iv) By inserting after the first sentence of subsection (c) thereof the following: "The Agent shall incur no liability of any kind to any Loan Party, any Lender Party or any other Person with respect to its maintenance of the Register or the recordation of information therein."; (v) By deleting the word "may" in the original second sentence of subsection (c) thereof and inserting "shall" in lieu thereof, and by inserting after the word "hereunder" in the same sentence the following: "(and, in the case of Registered Notes, as the owner of the Registered Notes registered to it)"; (vi) By inserting after the words "Eligible Assignee" in subsection (d) thereof the following: "and, in the case of an assignment of a Registered Note, such Note, duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the assigning Lender (as the registered holder thereof) to the assignee"; and (vii) By adding after subsection (d) thereof a new subsection (d-1) to read in its entirety as follows: 3 4 "(d-1) Upon the acceptance by the Administrative Agent of the Assignment and Acceptance, the parties to such Assignment and Acceptance may at any time request that new Notes be issued to the assigning Lender and the assignee by (i) providing written notice of such request to the Administrative Agent and the applicable Borrower and (ii) delivering such assigning Lender's Notes, duly endorsed by (or accompanied by a written instrument of assignment or transfer duly executed by) the assigning Lender to the assignee, to the applicable Borrower (or, in the case of Registered Notes, to the Administrative Agent as agent for Supermarkets) for cancellation and exchange. The Administrative Agent, in the case of Registered Notes, shall register such transfer in the Register and shall forward the Registered Notes to Supermarkets for cancellation and exchange. Within five Business Days after its receipt of any Notes for cancellation and exchange pursuant to this subsection (d-1), together with notice from the Administrative Agent that is has accepted and recorded the Assignment and Acceptance, the applicable Borrower, at its own expense, shall execute and deliver to the assignee in exchange for the surrendered Notes a new Note or Notes payable to the order of such assignee (or, in the case of Registered Notes, payable to the assignee or its registered assigns) in an amount in each case equal to the applicable Commitment or Commitments assumed by it pursuant to such Assignment and Acceptance and, if the assigning Lender has retained any Commitments hereunder, a new Note or Notes payable to the order of the assigning Lender (or, in the case of Registered Notes, payable to the assignor or its registered assigns) in an amount in each case equal to the applicable Commitment or Commitments retained by it hereunder. Such new Note or Notes shall be in an aggregate principal amount equal to the aggregate principal amount of such surrendered Note or Notes, shall be dated the effective date of such Assignment and Acceptance and shall otherwise be in substantially the form of Exhibit L-1, L- 2 or L-3, as applicable. The Administrative Agent shall incur no liability of any kind to any Loan Party, any Lender Party or any other Person with respect to the transfer, surrender, cancellation or exchange of the Notes." (e) Schedule 1 to Exhibit B (Assignment and Acceptance) to the Credit Agreement is amended by inserting the following prior to the line that begins with the words "Designated Issuer": "Type of Note, if any (indicate Registered or Non-Registered) ____________________________" 4 5 SECTION 2. Conditions of Effectiveness. The effectiveness of this Sixth Modification Agreement and the amendments set forth in Section 1 hereof shall be subject to receipt by the Administrative Agent of counterparts of this Sixth Modification Agreement executed by (A) Supermarkets, each of the Subsidiary Borrowers, and each of the other Loan Parties and (B) the Required Lenders (or, as to any of the Required Lenders, advice satisfactory to the Administrative Agent that such Required Lenders have executed this Sixth Modification Agreement). SECTION 3. Reference to and Effect on the Loan Documents. (a) On and after the effectiveness of this Sixth Modification Agreement, (i) each reference in the Credit Agreement to its name, "this Agreement", "hereunder", "hereof" or words of like import referring thereto, and each reference in the other Loan Documents to such name, "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended hereby, and (ii) each reference in any Loan Document to any term defined in the Credit Agreement shall mean and be a reference to such term as defined therein after giving effect to the amendments set forth herein. (b) Except as specifically amended above, the Credit Agreement, the Guaranty and all other Loan Documents are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. (c) The execution, delivery and effectiveness of this Sixth Modification Agreement shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender Party under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. SECTION 4. Execution in Counterparts. This Sixth Modification Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. SECTION 5. GOVERNING LAW. THIS SIXTH MODIFICATION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW RULES OF ANY JURISDICTION). 5 6 S-1 IN WITNESS WHEREOF, the parties hereto have caused this Sixth Modification Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWERS: --------- FOOD 4 LESS SUPERMARKETS, INC. By: /s/ Mark A. Resnik -------------------------------- Title: Vice President ALPHA BETA COMPANY By: /s/ Mark A. Resnik -------------------------------- Title: Vice President CALA FOODS, INC. By: /s/ Mark A. Resnik -------------------------------- Title: Vice President FALLEY'S, INC. By: /s/ Mark A. Resnik -------------------------------- Title: Vice President FOOD 4 LESS MERCHANDISING, INC. By: /s/ Mark A. Resnik -------------------------------- Title: Vice President 7 S-2 OTHER LOAN PARTIES: ------------------ BAY AREA WAREHOUSE STORES, INC. By: /s/ Mark A. Resnik --------------------------------- Title: Vice President BELL MARKETS, INC. By: /s/ Mark A. Resnik --------------------------------- Title: Vice President CALA CO. By: /s/ Mark A. Resnik --------------------------------- Title: Vice President FOOD 4 LESS GM, INC. By: /s/ Mark A. Resnik --------------------------------- Title: Vice President FOOD 4 LESS OF CALIFORNIA, INC. By: /s/ Mark A. Resnik --------------------------------- Title: Vice President FOOD 4 LESS OF SOUTHERN CALIFORNIA, INC. By: /s/ Mark A. Resnik --------------------------------- Title: Vice President EX-19.2 3 EXHIBIT 19.2/SEVENTH MODIFICATION AGREEMENT 1 Exhibit 19.2 SEVENTH MODIFICATION AGREEMENT This SEVENTH MODIFICATION AGREEMENT, dated as of January 23, 1995, is made by and among (i) Food 4 Less Supermarkets, Inc., a Delaware corporation ("Supermarkets"), (ii) Alpha Beta Company, a California corporation ("Alpha Beta"), Cala Foods, Inc., a California corporation ("Cala"), Falley's, Inc., a Kansas corporation ("Falley's"), and Food 4 Less Merchandising, Inc., a California corporation (together with Alpha Beta, Cala and Falley's, the "Subsidiary Borrowers"), (iii) Bay Area Warehouse Stores, Inc., a California corporation, Bell Markets, Inc., a California corporation, Cala Co., a Delaware corporation, Food 4 Less GM, Inc., a California corporation, Food 4 Less of California, Inc., a California corporation, and Food 4 Less of Southern California, Inc., a Delaware corporation (together with Supermarkets and the Subsidiary Borrowers, the "Loan Parties"), (iv) the Lender Parties (as defined in the Credit Agreement referred to below) whose signatures appear on the execution pages hereof, (v) Bankers Trust Company, Citicorp North America, Inc. ("Citicorp") and Chemical Bank (successor in interest to Manufacturers Hanover Trust Company), as co-agents for the Lender Parties (in such capacity, the "Co-Agents"), and (vi) Citicorp, as administrative agent for the Lender Parties (in such capacity, the "Administrative Agent"). PRELIMINARY STATEMENTS: (1) Supermarkets, the Subsidiary Borrowers, the Lenders, the Designated Issuers of the Lenders, the Co-Agents and the Administrative Agent have entered into a Credit Agreement dated as of June 17, 1991, as amended by the First Modification Agreement dated as of January 24, 1992, the Second Modification Agreement dated as of April 13, 1992, the Third Modification Agreement dated as of September 15, 1992, the Fourth Modification Agreement dated as of October 9, 1992, the Fifth Modification Agreement dated as of December 21, 1992 and the Sixth Modification Agreement dated as of November 22, 1994 (as so amended, the "Credit Agreement"). Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined. (2) The Borrower has requested that the Required Lenders agree to amend certain provisions of the Credit Agreement as set forth herein. The undersigned Lender Parties have agreed to do so as hereinafter set forth upon the terms and conditions set forth below. SECTION 1. Amendments to Credit Agreement. Subject to the fulfillment of the conditions set forth in Section 3 hereof, the Credit Agreement is hereby amended as follows: 1 2 (a) Section 1.01 of the Credit Agreement is amended as follows: (i) The following definitions are added to Section 1.01 to read as follows: "Refinancing Date" means May 30, 1995. "Refinancing Event" means that the Borrower shall have fully prepaid the Advances and all other amounts owing to the Lenders under the terms of the Agreement. (ii) The definition of "Earnings" in Section 1.01 is amended by adding the following clause to the end thereof immediately following the words "added to the foregoing sum": "; and provided further, however, that for purposes of calculating Earnings for any Fiscal Quarter in Fiscal Year 1995. Earnings shall not include non-cash charges up to $8,000,000 in the aggregate for all such Fiscal Quarters incurred in such Fiscal Quarter for the disposition or write-off of Equipment, leases of Equipment or Leases in connection with the remodel and conversion of Stores from one format to another." (iii) The definition of "Adjusted Net Worth" in Section 1.01 is amended by adding after clause (c) thereof the following: ", plus (f) in the case of Supermarkets and its Subsidiaries on a consolidated basis, an amount equal to the product of (i) 100% minus the Effective Tax Rate for Fiscal Year 1995, times (ii) non-cash charges up to $8,000,000 in the aggregate for Fiscal Year 1995 for the disposition or write-off of Equipment, leases of Equipment or Leases in connection with the remodel and conversion of Stores from one format to another." (b) Section 4.01 of the Credit Agreement is amended by adding after subsection (d) thereof a new subsection (e) to read as follows: "(e) Refinancing Date Fee. In the event that the Refinancing Event shall not have occurred on or before the Refinancing Date, the Borrower hereby agrees to pay to the Administrative Agent on or before June 2, 1995, for the ratable account of the Lenders, a non-refundable fee in an amount equal to 0.25% of the sum of (a) the unpaid principal amount of the Term Advances of the Lenders outstanding as of May 30, 1995 plus (b) the aggregate amount of the Revolving Commitments and Letter of Credit Commitments of the Lenders outstanding as of May 30, 1995. The ratable share of each Lender shall be computed on the basis of the sum of the aggregate amount of the Term Advances owing to such Lender plus the aggregate amount of the Revolving Commitments and Letter of Credit Commitments of such Lender, in each case determined as of May 30, 1995." 2 3 (c) Section 7.02(e)(ii) of the Credit Agreement is amended by (1) deleting the figure under the heading "Amount" opposite "1995" and inserting in lieu of such figure "$58,000,000", and (2) deleting the figure under the heading "Amount" opposite "1996" and inserting in lieu of such figure $41,000,000". (d) Section 7.02(e)(iii)(A) of the Credit Agreement is amended by deleting the two lines under the heading "Fiscal Year 1995" and inserting in lieu thereof the following: "First Semiannual Period $15,100,000 Second Semiannual Period 15,500,000"
(e) Section 7.02(e)(iii)(B) of the Credit Agreement is amended by deleting the two lines under the heading "Fiscal Year 1996" and inserting in lieu thereof the following: "First Semiannual Period $2,000,000 Second Semiannual Period $2,000,000"
(f) Section 7.03(a)(ii) of the Credit Agreement is amended by deleting the lines that begin "Second Fiscal Quarter", "Third Fiscal Quarter" and "Fourth Fiscal Quarter" under the heading "Fiscal Year 1995" and inserting in lieu thereof the following: "Second Fiscal Quarter 0.93 to 1.00 Third Fiscal Quarter 0.93 to 1.00 Fourth Fiscal Quarter 1.02 to 1.00"
SECTION 2. Seventh Modification Fee. On or before January 25, 1995, the Borrower hereby agrees to pay to the Administrative Agent for the ratable account of each of the Responding Lenders (as hereinafter defined), a non-refundable fee (the "Seventh Modification Fee") in an amount equal to 0.05% of the sum of (a) the unpaid principal amount of the Term Advances of the Responding Lenders outstanding as of January 23, 1995 plus (b) the aggregate amount of the Revolving Commitments and Letter of Credit Commitments of the Responding Lenders outstanding as of January 23, 1995. As used herein, the term "Responding Lenders" shall mean and include each Lender that executes and delivers to the Administrative Agent this Seventh Modification Agreement on or before January 23, 1995 at 5:00 p.m. (Los Angeles time). The obligation of the Borrower to pay the Seventh Modification Fee (a) shall be in addition to the Borrower's obligations with respect to any other fees and amounts owing by the Borrower to the Lenders under the Credit Agreement, and (b) shall survive the making and repaying of Advances, the termination of all Letter of Credit Liability and the termination of the Credit Agreement. The ratable share of each such Responding Lender shall be computed on the basis of the sum of the aggregate 3 4 amount of the Term Advances owing to such Responding Lender plus the aggregate amount of the Revolving Commitments and Letter of Credit Commitments of each such Responding Lender, in each case determined as of January 23, 1995. SECTION 3. Conditions of Effectiveness. The effectiveness of this Seventh Modification Agreement and the amendments set forth in Section 1 hereof shall be subject to (a) receipt by the Administrative Agent of counterparts of this Seventh Modification Agreement executed by (1) Supermarkets, each of the Subsidiary Borrowers, and each of the other Loan Parties and (2) the Required Lenders (or, as to any of the Required Lenders, advice satisfactory to the Administrative Agent that such Required Lenders have executed this Seventh Modification Agreement), and (b) the payment by the Borrower to the Seventh Modification Fee in accordance with Section 2 hereof. SECTION 4. Reference to and Effect on the Loan Documents. (a) On and after the effectiveness of this Seventh Modification Agreement, (i) each reference in the Credit Agreement to its name, "this Agreement", "hereunder", "hereof", or words of like import referring thereto, and each reference in the other Loan Documents to such name, "thereunder", "thereof", or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as amended hereby, and (ii) each reference in any Loan Document to any term defined in the Credit Agreement shall mean and be a reference to such term as defined therein after giving effect to the amendments set forth herein. (b) Except as specifically amended above, the Credit Agreement, the Guaranty and all other Loan Documents are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. (c) The execution, delivery and effectiveness of this Seventh Modification Agreement shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender Party under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. SECTION 5. Execution in Counterparts. This Seventh Modification Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. SECTION 6. GOVERNING LAW. THIS SEVENTH MODIFICATION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW RULES OF ANY JURISDICTION). 4 5 S-1 IN WITNESS WHEREOF, the parties hereto have caused this Seventh Modification Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. BORROWERS: --------- FOOD 4 LESS SUPERMARKETS, INC. By: _____________________________________ Title: ALPHA BETA COMPANY By: ____________________________________ Title: CALA FOODS, INC. By: ____________________________________ Title: FALLEY'S, INC. By: ____________________________________ Title: FOOD 4 LESS MERCHANDISING, INC. By: ____________________________________ Title: 6 S-2 OTHER LOAN PARTIES: ------------------ BAY AREA WAREHOUSE STORES, INC. By: ____________________________________ Title: BELL MARKETS, INC. By: ____________________________________ Title: CALA CO. By: ____________________________________ Title: FOOD 4 LESS GM, INC. By: ____________________________________ Title: FOOD 4 LESS OF CALIFORNIA, INC. By: ____________________________________ Title: FOOD 4 LESS OF SOUTHERN CALIFORNIA, INC. By: ____________________________________ Title: 7 S-3 CO-AGENTS AND ADMINISTRATIVE AGENT: ---------------------------------- BANKERS TRUST COMPANY, as Co-Agent By: ____________________________________ Title: CITICORP NORTH AMERICA, INC., as Co-Agent and Administrative Agent By: _____________________________________ Title: CHEMICAL BANK (successor in interest to Manufacturers Hanover Trust Company), as Co-Agent By: _____________________________________ Title: LENDERS: ------- CITICORP NORTH AMERICA, INC. By: _____________________________________ Title: BANKERS TRUST COMPANY By: _____________________________________ Title: CHEMICAL BANK (successor in interest to Manufacturers Hanover Trust Company) By: _____________________________________ Title: 8 S-4 BANQUE PARIBAS By: _____________________________________ Title: THE CHASE MANHATTAN BANK, N.A. By: _____________________________________ Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By: _____________________________________ Title: THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED By: _____________________________________ Title: THE MITSUBISHI TRUST AND BANKING CORPORATION By: _____________________________________ Title: CAISSE NATIONALE DE CREDIT AGRICOLE By: _____________________________________ Title: 9 S-5 CREDIT LYONNAIS By: _____________________________________ Title: CREDIT LYONNAIS CAYMAN ISLAND BRANCH By: _____________________________________ Title: ABN AMRO BANK, N.V., LOS ANGELES INTERNATIONAL BRANCH By: _____________________________________ Title: BANCA COMMERCIALE ITALIANA LOS ANGELES FOREIGN BRANCH By: _____________________________________ Title: BANQUE FRANCAISE DU COMMERCE EXTERIEUR By: _____________________________________ Title: DRESDNER BANK AKTIENGESELLSCHAFT LOS ANGELES AGENCY By: _____________________________________ Title: 10 S-6 RAIFFEISEN ZENTRALBANK OESTERREICH By: _____________________________________ Title: SOCIETE GENERALE By: _____________________________________ Title: THE MITSUI TRUST AND BANKING CO., LIMITED, LOS ANGELES AGENCY By: _____________________________________ Title: UNION BANK By: _____________________________________ Title: UNITED STATES NATIONAL BANK OF OREGON By: _____________________________________ Title: 11 S-7 PILGRIM PRIME RATE TRUST By: _____________________________________ Title: VAN KAMPEN MERRITT PRIME RATE INCOME TRUST By: _____________________________________ Title: BANQUE NATIONALE DE PARIS By: _____________________________________ Title: RESTRUCTURED OBLIGATIONS BACKED BY SENIOR ASSETS, B.V. By: CHANCELLOR SENIOR SECURED MANAGEMENT, INC., as Portfolio Advisor By: ________________________________ Title: RESTRUCTURED OBLIGATIONS BACKED BY SENIOR ASSETS 2 (ROSA 2) By: CHANCELLOR SENIOR SECURED MANAGEMENT, INC., as Portfolio Advisor By: _______________________________ Title: 12 S-8 STRATA FUNDING By: CHANCELLOR SENIOR SECURED MANAGEMENT, INC., as Portfolio Advisor By: _______________________________ Title: CERES FINANCE LTD. By: CHANCELLOR SENIOR SECURED MANAGEMENT, INC., as Portfolio Advisor By: _______________________________ Title: GIROCREDIT BANK, NEW YORK BRANCH (formerly Girozentrale Vienna) By: _____________________________________ Title: NICHIJUKIN (USA) Limited By: _____________________________________ Title: PROSPECT STREET SENIOR PORTFOLIO, L.P. By: PROSPECT STREET SENIOR LOAN CORP., Managing General Partner By: _______________________________ Title: 13 S-9 BANQUE INDOSUEZ By: _____________________________________ Title: CITIBANK, N.A. By: _____________________________________ Title: MORGAN GUARANTY TRUST CO. By: _____________________________________ Title: DESIGNATED ISSUERS: ------------------ CITIBANK, N.A., as Designated Issuer for Citicorp North America, Inc. By: _____________________________________ Title: Vice President EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 OTHER JUN-24-1995 JUN-26-1994 JAN-07-1995 15,750 0 27,256 (1,264) 223,261 283,415 525,928 (155,758) 984,622 328,259 525,467 107,665 0 64,541 (111,751) 984,622 1,404,665 1,404,665 1,167,205 1,167,205 208,004 0 37,684 (8,228) 500 (8,728) 0 0 0 (8,728) (9.49) (9.49)
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