-----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, f3qlaYZSpXi02dyc1COciAQWzRvru4uQ1nDYIi+Yri9nejfbKOUwLQ1jB5sUVIok +HO2+gsW+OeoR/4dz1V4yA== 0000945723-95-000007.txt : 19950719 0000945723-95-000007.hdr.sgml : 19950719 ACCESSION NUMBER: 0000945723-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950430 FILED AS OF DATE: 19950614 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KASH N KARRY FOOD STORES INC CENTRAL INDEX KEY: 0000842913 STANDARD INDUSTRIAL CLASSIFICATION: 5411 IRS NUMBER: 954161591 STATE OF INCORPORATION: DE FISCAL YEAR END: 0730 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25260 FILM NUMBER: 95547103 BUSINESS ADDRESS: STREET 1: 6422 HARNEY RD CITY: TAMPA STATE: FL ZIP: 33610 BUSINESS PHONE: 8136210276 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarter ended April 30, 1995 Commission File No. 34-025260 KASH N' KARRY FOOD STORES, INC. (Exact name of registrant as specified in charter) Delaware 95-4161591 (State of incorporation) (IRS employer identification number) 6422 Harney Road, Tampa, Florida 33610 (Address of registrant's principal executive offices) (813) 621-0200 (Registrant's telephone number, including area code) The registrant 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 and has been subject to such filing requirements for the past 90 days. The registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. As of June 12, 1995, there were 3,100,000 shares outstanding of the registrant's common stock, $0.01 par value. Page 1 of 34 pages. (Exhibit Index appears on page 25). KASH N' KARRY FOOD STORES, INC. BALANCE SHEETS (Dollar Amounts in Thousands, Except Per Share Amounts) ASSETS Reorganized Predecessor Company Company ------------ ----------- April 30, July 31, 1995 1994 ------------ ----------- (Unaudited) (Note 1) Current assets: Cash and cash equivalents $ 7,244 $ 6,852 Accounts receivable 6,745 8,084 Inventories 83,206 76,094 Prepaid expenses and other current assets 3,433 12,805 --------- --------- Total current assets 100,628 103,835 Property and equipment, at cost, less accumulated depreciation 140,496 160,491 Favorable lease interests, less accumulated amortization of $692 and $13,543 29,262 12,312 Deferred financing costs, less accumulated amortization of $242 and $22,572 3,983 12,630 Reorganization value in excess of amounts allocable to identifiable assets, less accumulated amortization of $1,757 at April 30, 1995 97,573 -- Excess of cost over net assets acquired, less accumulated amortization of $16,288 at July 31, 1994 -- 96,758 Other assets 2,923 3,867 --------- --------- Total assets $374,865 $389,893 ========= ========= See accompanying notes to condensed financial statements. 2 KASH N' KARRY FOOD STORES, INC. BALANCE SHEETS (Dollar Amounts in Thousands, Except Per Share Amounts) LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Reorganized Predecessor Company Company ------------ ----------- April 30, July 31, 1995 1994 ------------ ----------- (Unaudited) (Note 1) Current liabilities: Current portion of long-term debt $ 5,583 $ 42,740 Accounts payable 40,900 34,908 Accrued payroll and benefits 9,308 5,579 Accrued interest 6,889 15,849 Taxes, other than income 4,578 6,056 Other accrued expenses 21,751 11,450 --------- --------- Total current liabilities 89,009 116,582 Long-term debt, less current obligations 220,091 317,381 Other long-term liabilities 15,742 12,334 Old Series B Cumulative Preferred Stock of $.01 par value and a stated value of $100 a share. Authorized 50,000 shares; 38,750 shares outstanding at July 31, 1994. -- 3,875 Old Series C Convertible Preferred Stock of $.01 par value. Authorized 100,000 shares; 77,500 shares outstanding at July 31, 1994. -- 775 Stockholders' equity (deficit): New Common Stock of $.01 par value. Authorized 5,500,000 shares; 3,100,000 shares outstanding at April 30, 1995. 31 -- Old Common Stock of $.01 par value. Authorized 4,000,000 shares; 2,819,589 shares outstanding at July 31, 1994. -- 28 Capital in excess of par value 46,464 77,695 Retained earnings (deficit) 3,528 (138,740) Less cost of treasury stock - 2,437 shares at July 31, 1994 -- (37) --------- --------- Total stockholders' equity (deficit) 50,023 (61,054) --------- --------- Total liabilities & stockholders' equity $374,865 $389,893 ========= ========= See accompanying notes to condensed financial statements. 3 KASH N' KARRY FOOD STORES, INC. CONDENSED STATEMENTS OF OPERATIONS (In Thousands) (Unaudited) Reorganized Predecessor Company Company ----------- -------------- Thirteen Thirteen Weeks Ended Weeks Ended April 30, May 1, 1995 1994 ----------- ----------- Sales $269,927 $279,806 Cost of sales 211,722 221,608 --------- ----------- Gross profit 58,205 58,198 Selling, general and administrative expenses 38,896 43,719 Depreciation and amortization 6,457 6,055 --------- ----------- Operating income 12,852 8,424 Interest expense 6,942 11,244 --------- ----------- Income (loss) before income taxes 5,910 (2,820) Provision for income taxes 3,189 -- --------- ---------- Net income (loss) $ 2,721 $ (2,820) ========= ========== Net income per common share (A)(B) $ 0.88 ========= (A) Based on a weighted average number of shares of common stock of 3,100,000 outstanding. (B) Net income per common share is not meaningful prior to January 1, 1995 due to the significant change in the capital structure in connection with the Restructuring. See accompanying notes to condensed financial statements. 4 KASH N' KARRY FOOD STORES, INC. CONDENSED STATEMENTS OF OPERATIONS (In Thousands) (Unaudited) Reorganized Predecessor Company Company ----------- -------------------------- Seventeen Twenty-Two Thirty-Nine Weeks Ended Weeks Ended Weeks Ended April 30, January 1, May 1, 1995 1995 1994 ----------- ----------- ----------- Sales $356,281 $426,681 $814,607 Cost of sales 280,662 340,802 647,524 --------- ----------- ---------- Gross profit 75,619 85,879 167,083 Selling, general and administrative expenses 51,122 68,819 133,846 Depreciation and amortization 8,436 10,234 18,166 Store closing and other costs -- -- 11,016 --------- --------- ---------- Operating income 16,061 6,826 4,055 Interest expense 9,344 13,719 33,757 --------- --------- ---------- Income (loss) before reorganization items, income taxes, extra- ordinary item and change in accounting principle 6,717 (6,893) (29,702) Reorganization items -- (219) -- --------- --------- ---------- Income (loss) before income taxes, extraordinary item and change in accounting principle 6,717 (7,112) (29,702) Provision for income taxes 3,189 -- -- --------- --------- ---------- Income (loss) before extra- ordinary item and change in accounting principle 3,528 (7,112) (29,702) Extraordinary item - gain on debt discharge -- 70,166 -- Cumulative effect of change in accounting principle - postretirement medical benefits -- (2,000) -- --------- --------- ---------- Net income (loss) $ 3,528 $ 61,054 $ (29,702) ========= ========= ========== Net income per common share (A)(B) $ 1.14 ========= (A) Based on a weighted average number of shares of common stock of 3,100,000 outstanding. (B) Net income per common share is not meaningful prior to January 1, 1995 due to the significant change in the capital structure in connection with the Restructuring. See accompanying notes to condensed financial statements. 5 KASH N' KARRY FOOD STORES, INC. STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Reorganized Predecessor Company Company ------------ ----------------------- Seventeen Twenty-Two Thirty-Nine Weeks Ended Weeks Ended Weeks Ended April 30, January 1, May 1, 1995 1995 1994 ----------- ----------- ----------- Net cash flow from operating activities: Net income (loss) $ 3,528 $61,054 $(29,702) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization, excluding deferred financing costs 8,436 10,234 18,166 Store closing and other costs -- -- 11,016 Amortization of deferred financing costs 494 1,152 2,190 Provision for income taxes 3,189 -- -- Reorganization items -- 219 -- Change in accounting principle -- 2,000 -- Gain on discharge of debt -- (70,166) -- (Increase) decrease in assets: Accounts receivable (983) 2,322 3,591 Inventories 3,908 (5,917) 11,366 Prepaid expenses and other assets (403) (194) (418) Increase (decrease) in liabilities: Accounts payable 4,192 1,800 (1,515) Accrued expenses and other liabilities 3,309 9,083 (8,841) --------- -------- --------- Net cash provided (used) by operating activities 25,670 11,587 5,853 ---------- -------- --------- Cash used by investing activities: Additions to property and equipment (1,509) (665) (8,322) Leased/financed asset additions -- -- (4,519) Proceeds from sale of property and equipment -- -- 429 ---------- -------- --------- Net cash used by investing activities (1,509) (665) (12,412) ---------- -------- --------- See accompanying notes to condensed financial statements. 6 KASH N' KARRY FOOD STORES, INC. STATEMENTS OF CASH FLOWS (Continued) (In Thousands) (Unaudited) Reorganized Predecessor Company Company ------------ ----------------------- Seventeen Twenty-Two Thirty-Nine Weeks Ended Weeks Ended Weeks Ended April 30, January 1, May 1, 1995 1995 1994 ----------- ----------- ----------- Cash provided (used) by financing activities: Borrowings under revolving loan facility $ 4,200 $ 15,800 $ 15,700 Borrowings under term loan facility -- 35,000 -- Additions to obligations under capital leases and notes payable -- -- 7,146 Repayments on revolving loan facility (11,168) (43,700) (2,900) Repayments on term loan facility (8,750) (17,228) (2,925) Repayments of other long-term liabilities (1,937) (7,363) (6,076) Sale of Common Stock -- 10,000 -- Other financing activities (251) (9,294) (980) --------- --------- ---------- Net cash provided (used) by financing activities (17,906) (16,785) 9,965 --------- --------- ---------- Net increase (decrease) in cash and cash equivalents 6,255 (5,863) 3,406 Cash and cash equivalents at beginning of period 989 6,852 2,145 --------- --------- ---------- Cash and cash equivalents at end of period $ 7,244 $ 989 $ 5,551 ========= ========= ========== See accompanying notes to condensed financial statements. 7 KASH N' KARRY FOOD STORES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (In Thousands) (Unaudited) 1. On September 3, 1994, the Company began to solicit acceptances of all impaired parties of a restructuring of the Company which would be implemented through the consummation of a "prepackaged" plan of reorganization under Chapter 11 of the United States Bankruptcy Code (the "Restructuring"). As a result of this solicitation, the voting requirements prescribed by Section 1126 of the Bankruptcy Code were satisfied, and on November 9, 1994 (the "Petition Date") the Company filed with the Bankruptcy Court a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code. On December 12, 1994, the Bankruptcy Court confirmed the plan of reorganization, and the Company emerged from bankruptcy on December 29, 1994 (the "Effective Date"). During the pendency of the bankruptcy case, the Company, with the Bankruptcy Court's approval, operated its business in the ordinary course, and paid all pre-petition and post-petition claims of the Company's general unsecured creditors, trade creditors and employees in full. In connection with the Restructuring: (i) Each $1,000 principal amount of the Company's Old Senior Floating Rate Notes was exchanged for (a) new Senior Floating Rate Notes due February 1, 2003 (the "New Senior Floating Rate Notes") in an original principal amount equal to $1,000 plus 100% of the accrued interest under the Old Senior Floating Rate Notes from and including February 3, 1994, through but not including the Petition Date, or, at such holder's election, (b) new 11.5% Senior Fixed Rate Notes due February 1, 2003 (the "New Senior Fixed Rate Notes") in the same original principal amount, or, at such holder's election, (c) an amount of New Senior Floating Rate Notes and an amount of New Senior Fixed Rate Notes equal, in the aggregate, to 100% of such claim; (ii) Each $1,000 principal amount of the Company's Old Senior Fixed Rate Notes was exchanged for (a) New Senior Floating Rate Notes in an original principal amount equal to $1,000 plus 100% of the accrued interest under the Old Senior Fixed Rate Notes from and including February 2, 1994, through but not including the Petition Date, or, at such holder's election, (b) New Senior Fixed Rate Notes in the same original principal amount, or, at such holder's election, (c) an amount of New Senior Floating Rate Notes and an amount of New Senior Fixed Rate Notes equal, in the aggregate, to 100% of such claim; (iii) the Old Subordinated Debentures were exchanged for newly-issued common stock of the Company representing 85 percent of the common stock outstanding on the Effective Date; (iv) Green Equity Investors, L.P. invested $10,000 cash in exchange for newly-issued common stock of the Company representing 15 percent of the common stock outstanding on the Effective Date; (v) the Company entered into a new credit agreement with The CIT Group/Business Credit, Inc. as Administrative Agent, and the lenders under its old bank credit agreement; and 8 KASH N' KARRY FOOD STORES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (In Thousands) (Unaudited) (vi) all of the existing preferred stock, common stock, and options and warrants to purchase common stock of the Company was extinguished. 2. The condensed financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the fiscal 1994 Form 10-K filed by the Company. The accompanying condensed financial statements have not been audited by independent accountants in accordance with generally accepted auditing standards, but in the opinion of management the condensed financial statements for the period ended May 1, 1994 includes all adjustments, consisting only of normal recurring adjustments, necessary to summarize fairly the Company's financial position and results of operations. The condensed financial statements as of and for the period ended April 30, 1995 reflect the Company's emergence from Chapter 11 and were prepared according to the principles of fresh start reporting contained in American Institute of Certified Public Accountants' Statement of Position 90-7 "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"). Operations during the period from the Effective Date through January 1, 1995 had no significant impact on the emergence transactions and as a result have not been separately identified. As a result of the implementation of fresh start accounting, the Company's condensed financial statements as of and for the period ending April 30, 1995 are not comparable to the Company's condensed financial statements of prior periods. Results for the periods ended April 30, 1995 or January 1, 1995 are not necessarily indicative of the results to be attained for the full year. The total reorganization value assigned to the Company's assets was estimated based on a ten-year projection of cash flow before debt service requirements discounted back to present value using a discount rate of 13.3% (representing the estimated weighted cost of capital), as well as by analyzing market cash flow multiples and applying a cash flow multiple of six to the Company's adjusted 12-month trailing cash flows. After extensive negotiations between independent investment banking firms representing the Company and an ad hoc committee of bondholders, the reorganization value was agreed to by the parties and confirmed by the Bankruptcy Court. The excess of the reorganization value over the value of the identifiable assets is reported as "Reorganization Value in Excess of Amounts Allocable to Identifiable Assets" and is being amortized over twenty years. Under the principles of fresh start accounting, the Company's total assets were recorded at this assumed reorganization value, with the reorganization value allocated to identifiable tangible and intangible assets on the basis of their estimated fair value. In addition, the Company's accumulated deficit was eliminated. The effect of the Restructuring and the implementation of fresh start accounting on the Company's condensed balance sheet as of January 1, 1995 was as follows: 9 KASH N' KARRY FOOD STORES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (In Thousands) (Unaudited) Fresh Start Pre-Fresh Balance Start Balance Adjustments Sheet Sheet January of Fair Value January 1, 1995 Restructuring Adjustment 1, 1995 (A) (B) ------------- ------------- ---------- -------- Cash and cash equivalents $ 9,166 $ (8,177) $ -- $ 989 Accounts receivable 5,762 -- -- 5,762 Inventories 82,011 -- 5,104 87,115 Prepaid expenses and other current assets 3,088 -- -- 3,088 --------- --------- --------- -------- Total current assets 100,027 (8,177) 5,104 96,954 Property and equipment, net 162,754 -- (17,775) 144,979 Favorable lease interests, net 11,673 -- 18,280 29,953 Deferred financing costs 17,769 (7,456) (6,088) 4,225 Reorganization value in excess of amounts alloc- able to identifiable assets -- -- 102,519 102,519 Excess of cost over net assets acquired 95,560 -- (95,560) -- Other assets 4,360 -- (1,498) 2,862 --------- --------- --------- -------- Total assets $392,143 $(15,633) $ 4,982 $381,492 ========= ========== ========= ======== Current liabilities, excluding current portion of long- term debt $ 82,983 $(12,617) $ 6,779 $ 77,145 Long-term debt, including current obligations 366,231 (119,486) (3,959) 242,786 Other long-term liabilities 6,226 -- 8,840 15,066 Redeemable preferred stock 4,650 (4,650) -- -- Common stock 28 3 -- 31 Treasury stock (37) 37 -- -- Capital in excess of par value 77,695 (31,231) 46,464 Accumulated deficit (145,633) 152,311 (6,678) -- --------- --------- --------- -------- Total liabilities and stockholders' equity $392,143 $(15,633) $ 4,982 $381,492 ========= ========== ========= ======== (A) To record the transactions applicable to the Restructuring as outlined in footnote 1 and eliminate the deficit in accumulated deficit. (B) To record the adjustments to state assets and liabilities at fair value, and to record the cumulative effect of $2,000 of adopting SFAS No. 106 as of the Effective Date in accordance with SOP 90-7. 10 KASH N' KARRY FOOD STORES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (In Thousands) (Unaudited) 3. Inventories consist of merchandise held for resale and are stated at the lower of cost or market; cost is determined using average cost, which approximates the first-in, first-out (FIFO) method. 4. The Company had a policy of classifying capital expenditures to be refinanced within one year as prepaid expenses and other current assets. These amounts have been classified as property and equipment at April 30, 1995. At July 31, 1994, prepaid expenses and other current assets included $9,987 of expenditures for construction in progress expected to be financed within one year. 5. Long-term debt consists of the following: April 30, July 31, 1995 1994 ----------- -------- New term loan and revolving credit facilities (A) $ 33,782 $ -- Old bank term and revolving credit facilities (A) -- 59,629 New Senior Floating Rate Notes (B) 22,953 -- New Senior Fixed Rate Notes (C) 121,162 -- Old Senior Floating Rate Notes (B) -- 85,000 Old Senior Fixed Rate Notes (C) -- 50,000 Subordinated Debentures -- 105,000 Mortgages payable 32,397 34,368 Capital lease obligations and other 15,380 26,124 --------- --------- Long-term debt including current portion 225,674 360,121 Less current portion (D) (5,583) (42,740) --------- --------- Long-term debt $220,091 $317,381 ========= ========= (A) In connection with the Restructuring, the Company entered into a new term loan and revolving credit agreement (the "New Credit Agreement") on December 29, 1994. At April 30, 1995, the Company's New Credit Agreement provides for borrowings of up to $26,250 under a term loan facility (with quarterly principal repayments of $1,750 and a $14,000 repayment due when the facility terminates on December 29, 1997) and a $50,000 revolving credit facility with a $25,000 sublimit for letters of credit. At April 30, 1995, the Company had $7,532 in borrowings under the working capital line, and had $12,558 of letters of credit issued against the revolving credit facility. Amounts outstanding under the 11 KASH N' KARRY FOOD STORES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (In Thousands) (Unaudited) term facility bear interest (11.5% at April 30, 1995) equal to the prime rate (as defined) plus 250 basis points. Amounts outstanding under the revolving credit facility bear interest (10.0% at April 30, 1995) equal to the prime rate plus 100 basis points. (B) The New Senior Floating Rate Notes mature on February 1, 2003, and bear interest (7.31% at April 30, 1995) payable August 1, 1995 and semiannually thereafter, at a rate equal to six-month LIBOR (as defined in the New Senior Floating Rate Note Indenture) plus 200 basis points. The New Senior Floating Rate Notes are redeemable in whole or in part, at the option of the Company, on not less than 30 nor more than 60 days' prior notice in amounts of $1,000 or an integral multiple thereof, at 100% of the principal amount and unpaid interest, if any, to the redemption date. Through August 1, 1995, all interest on the New Senior Floating Rate Notes may, at the option of the Company, be paid by issuing in lieu of cash additional New Senior Floating Rate Notes in an aggregate principal amount equal to the amount of interest due. The Old Senior Floating Rate Notes bore interest (5.88% at July 31, 1994) payable semiannually, at a rate equal to six-month LIBOR plus 250 basis points. (C) The New Senior Fixed Rate Notes mature on February 1, 2003, and bear interest at 11.5% per annum, payable August 1, 1995 and semiannually thereafter. The New Senior Fixed Rate Notes are redeemable in whole or in part, at the option of the Company, on not less than 30 nor more than 60 days' prior notice in amounts of $1,000 or an integral multiple thereof, at 100% of the principal amount and unpaid interest, if any, to the redemption date. Through February 1, 1996, all interest on the New Senior Fixed Rate Notes may, at the option of the Company, be paid by issuing in lieu of cash additional New Senior Fixed Rate Notes in an aggregate principal amount equal to the amount of interest due. The Old Senior Fixed Rate Notes bore interest, payable semiannually, at an annual rate of 12.375%. (D) The Company has prepaid the term loan through May 1, 1996. Therefore, there is no current portion of the term loan. 6. Reorganization items included in the condensed statements of operations consist of the following items: Adjustments to fair value $ 5,551 Gain on extinguishment of preferred stock 4,650 Provision for store closing costs (2,500) Provision for severance benefits (3,220) Provision for other restructuring activities (3,180) Professional fees (1,520) -------- $( 219) 12 KASH N' KARRY FOOD STORES, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (In Thousands) (Unaudited) 7. The Company has a retiree medical plan under which medical coverage is available to current retirees and those active employees who, on August 1, 1993, had attained age 65 with at least 15 years of service. In accordance with SOP 90-7, which the Company adopted on the Effective Date of the Restructuring, the provisions of Financial Accounting Standards Board Statement 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" were also adopted as of that date. The following table sets forth the projected actuarial present value of unfunded postretirement benefit obligations for the plan at April 30, 1995: Accumulated postretirement benefit obligation: Retirees $1,908 Fully eligible active plan participants 85 ------- Accrued postretirement benefit obligation $1,993 ======= The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 8.0%. 8. The difference between the provision for income taxes as reported and the amount calculated by applying the statutory federal and state rates to net income before taxes primarily relates to the tax effect of the amortization of Reorganization Value in Excess of Amounts Allocable to Identifiable Assets. 9. Certain items in the condensed statement of cash flows for the twenty-two weeks ended January 1, 1995 have been reclassified. 10. During the first quarter of fiscal 1994, the Company recorded a non-recurring charge of $11,016 which reflects expenses associated with a program of closing twelve under performing stores and expensing costs associated with unsuccessful financing activities. 13 KASH N' KARRY FOOD STORES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION This analysis should be read in conjunction with the condensed financial statements and related notes thereto included elsewhere in this document. The Company follows a 52/53 week fiscal year ending on the Sunday nearest to July 31. Historical results of operations are given for the thirteen weeks ended April 30, 1995 (the "1995 Three-Month Period"); the thirteen weeks ended May 1, 1994 (the "1994 Three-Month Period"); the seventeen weeks ended April 30, 1995 and the twenty-two weeks ended January 1, 1995, (combined, the "1995 Nine-Month Period"); and the thirty-nine weeks ended May 1, 1994 (the "1994 Nine-Month Period"). On November 9, 1994 (the "Petition Date"), the Company filed with the United States Bankruptcy Court a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code; on December 12, 1994, the Bankruptcy Court confirmed the Company's plan of reorganization (the "Restructuring"); and the Restructuring became effective on December 29, 1994 (the "Effective Date") when the Company emerged from bankruptcy. The financial statements as of April 30, 1995 and for the period then ended reflect the Company's emergence from Chapter 11 and were prepared according to the principles of fresh start reporting contained in American Institute of Certified Public Accountant's Statement of Position 90-7 "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"). Results of Operations The discussion below compares the results of operations for the 1995 Three-Month Period with the 1994 Three-Month Period; and the 1995 Nine-Month Period with the 1994 Nine-Month Period. Except as specifically acknowledged below, management believes that the impact of the Restructuring and the implementation of fresh start reporting did not significantly affect the results of operations for the 1995 Three-Month Period or the 1995 Nine-Month Period, and that the combined operating results of the individual seventeen week period and twenty-two week period ended April 30, 1995 and January 1, 1995, respectively, is indicative of the results of operations of the thirty-nine week period ended April 30, 1995. The following table compares certain income and expense line items as a percentage of sales: 1995 1994 1995 1994 Three- Three- Nine- Nine- Month Month Month Month Period Period Period Period ------ ------ ------ ------ Sales 100.0% 100.0% 100.0% 100.0% Gross Profit 21.6% 20.8% 20.6% 20.5% Selling, General and administrative expenses 14.4% 15.6% 15.3% 16.4% Depreciation and amortization 2.4% 2.2% 2.4% 2.2% Operating income 4.8% 3.0% 2.9% 0.5% Interest expense 2.6% 4.0% 2.9% 4.1% Pre-tax income (loss) 2.2% (1.0%) 0.0% (3.6%) Net income (loss) 1.0% (1.0%) (1) (3.6%)(2) 14 KASH N' KARRY FOOD STORES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (1) Net income for the 1995 Nine-Month Period is not meaningful for comparison purposes due to the gain on debt discharge and other reorganization items recorded for the twenty-two week period ended January 1, 1995. Net income, as a percentage of sales, for the seventeen weeks ended April 30, 1995 (post-Restructuring) was 1.0%. (2) Net income for the 1994 Nine-Month Period included expenses of $11,016, or 1.4% of sales, applicable to store closing and other costs. Sales. Sales for the 1995 Three-Month Period were $269.9 million, or $9.9 million less than the 1994 Three-Month Period. The decrease was attributable to a same store sales decrease of 1.85% combined with the net impact of three store closings and one new store opening during the last year. Sales for the 1995 Nine-Month Period were $783.0 million, or $31.6 million below the 1994 Nine-Month Period. Same store sales decreased 0.79% for the 1995 Nine-Month Period. In addition, the Company closed eighteen stores and opened two new stores in the 1994 fiscal year which had a net adverse impact on 1995 fiscal year sales. Gross Profit. The improvement in gross profit, as a percentage of sales, for the 1995 Three-Month Period and the 1995 Nine-Month Period was primarily due to improved perishable margins and increased efficiencies in store-level product preparation and handling costs. Partially offsetting these improvements was the receipt of substantially less promotional funds due in part to the credit restrictions placed on the Company by its vendors during the nine-month period preceding the Company's emergence from bankruptcy. Selling, General and Administrative Expenses. The reductions of selling, general and administrative expenses were due to lower store labor costs (approximately 0.3% of sales for the Three-Month Period and 0.2% of sales for the Nine-Month Period), reduced corporate overhead expenses (approximately 0.3% of sales for both the Three-Month Period and the Nine-Month Period) and lower advertising expenditures (approximately 0.6% of sales for the Three-Month Period and 0.5% of sales for the Nine-Month Period) associated with a comprehensive operational restructuring of the Company initiated during the year; and the elimination of operating costs associated with stores that were closed during the prior fiscal year. These improvements were partially offset by an increase in workers' compensation insurance reserves. Depreciation and Amortization. The increase in depreciation and amortization expenses is primarily attributable to increased amortization of intangible assets. Store Closing and Other Costs. During the first quarter of fiscal 1994, the Company recorded a non-recurring charge of $11.0 million. This charge included $1.9 million of costs associated with an unsuccessful bond offering, $4.2 million of favorable lease interests written off in connection with the closing of twelve underperforming stores, $4.0 million representing an adjustment to the expected lease liability on closed stores, net of sublease income, and $.9 million of other store closing and related expenses. 15 KASH N' KARRY FOOD STORES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Interest Expense. Interest expense for the 1994 Three-Month Period and the 1994 Nine-Month Period was primarily comprised of interest under the Old Bank Credit Agreement, the Old Senior Floating Rate Notes, the Old Senior Fixed Rate Notes, the Subordinated Debentures, and various mortgages and capital leases. For the 1995 Three-Month Period and the 1995 Nine-Month Period, interest expense was incurred on the Old Senior Floating Rate Notes, the Old Senior Fixed Rate Notes, and the Subordinated Debentures through, but not including, the Petition Date; and interest expense was incurred on the New Senior Floating Rate Notes and the New Senior Fixed Rate Notes from the Effective Date through April 30, 1995. In accordance with the provisions of the Restructuring, no interest was due to the holders of the Old Senior Floating Rate Notes, Old Senior Fixed Rate Notes, or Subordinated Debentures for the period between the Petition Date and the Effective Date, and therefore no interest expense was recorded for this period. As provided in the Restructuring, interest accrued from February 2, 1994, in the case of the Old Senior Fixed Rate Notes, and from February 3, 1994, in the case of the Senior Floating Rate Notes, through the Petition Date, was paid by issuing additional New Senior Floating Rate Notes and New Senior Fixed Rate Notes. Interest accrued on the Subordinated Debentures from February 1, 1994 through the Petition Date was converted into shareholders' equity. Reorganization Costs. In accordance with SOP 90-7, income and expenses directly related to the reorganization have been segregated and are separately disclosed. The major components consist of adjustments to fair value, gain on extinguishment of preferred stock, provision for store closing costs, provision for severance benefits, provision for other restructuring activities, and professional fees. Gain on Debt Discharge. The gain on debt discharge reflects the conversion of $105.0 million of Subordinated Debentures, plus accrued interest from February 1, 1994 through the Petition Date, into $39.5 million of shareholders' equity, resulting in a $70.2 million gain. The gain is presented net of the write-off of deferred financing costs associated with the debt discharged. Financial Condition Prior to the Petition Date, the Company's Old Bank Credit Agreement provided for a revolving credit facility with individual sublimits of $30.0 million for working capital loans and $25.0 million for letters of credit, with a maximum of $50.0 million outstanding under the total facility at any one time. During the weeks immediately preceding the bankruptcy filing, the Company, with the approval of its bank lenders, increased its cash position by fully drawing the remaining availability under its working capital line. On the Petition Date, the Bankruptcy Court approved the use of cash collateral and a letter of credit facility of $17.7 million under the Old Bank Credit Agreement, and additional debtor-in-possession financing provided by BankAmerica Business Credit, Inc. of $11.2 million, subject to certain terms and conditions. The Company entered into a new term loan and revolving credit agreement with The CIT Group/Business Credit Inc. and other lenders to provide a 3-year $35 million term loan facility and a 3-year $50 million revolving credit facility which took effect on the Effective Date. 16 KASH N' KARRY FOOD STORES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Beginning August 1, 1994, the Company implemented a short-term business strategy to improve the Company's financial performance. The focus of this strategy was to conserve capital, reduce administrative and operating expenses, and direct management attention toward the operation of existing stores. During fiscal 1995 the Company has significantly improved its liquidity as a result of the payment moratorium on interest due on the Old Senior Fixed Rate Notes, Old Senior Floating Rate Notes, and Subordinated Debentures; managing working capital; reducing operating expenses by $12.0 million on an annualized basis; and limiting capital expenditures. During the pendency of its bankruptcy case, the Company operated its business in the ordinary course, and paid all pre-petition and post-petition claims of the Company's general unsecured creditors, trade creditors, and employees in full. The provisions of the Restructuring, which are discussed in footnote 1 to the accompanying condensed financial statements, had an immediate beneficial impact on the Company's financial condition, primarily as a result of significantly deleveraging the Company's balance sheet, as indicated below: April 30, July 31, 1995 1994 --------- --------- (Dollar Amounts in Thousands) Current portion of long-term debt $ 5,583 $ 42,740 Total long-term debt 225,674 360,121 Operating cash flow (adjusted EBITDA) (1) 50,943 42,623 Total interest expense 27,600 (2) 45,390 Cash interest expense 11,600 (2) 42,440 Capital expenditures 4,729 15,471 Long-term debt/operating cash flow 4.43 8.45 Operating cash flow/total interest expense 1.85 0.94 Operating cash flow/cash interest expense 4.39 1.00 (1) Represents twelve month trailing earnings before net interest expense (which includes amortization of deferred financing costs), provision for income taxes, depreciation and amortization, store closing and other costs, reorganization items, extraordinary items, and cumulative effect of change in accounting principle. Operating cash flow (adjusted EBITDA) is presented here as a measure of the Company's debt service ability and should not be construed as an alternative to operating income (as determined in accordance with generally accepted accounting principles) or to cash flows from operating activities (as determined on the Statements of Cash Flows in the Company's financial statements). (2) Interest expense for the trailing twelve-month period is not meaningful due to the payment moratorium on the old senior notes and subordinated debentures. Therefore, total interest expense and cash interest expense as shown here represent annualized proforma amounts based on reported interest expense for the third quarter of 1995. 17 KASH N' KARRY FOOD STORES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION As a result of its increased liquidity, the Company has made prepayments totaling $15.8 million on its term loan facility (of which $8.8 million was paid subsequent to April 30, 1995). As of June 13, 1995, the outstanding principal balance under the term loan facility was $15.8 million, and the Company had $13.3 million in borrowings and $12.6 million in letters of credit outstanding under its revolving credit facility. The Company is still actively pursuing a sale-leaseback transaction on its eleven fee-owned store properties, which could provide up to $13 million of net proceeds to substantially eliminate the term loan. In addition, the Company expects to exercise its option of paying interest in kind on the New Floating Rate Notes and the New Fixed Rate Notes through August 1, 1995, and has the option of paying in kind the next subsequent semiannual interest payment on the New Senior Fixed Rates Notes, if necessary. The Company intends to repay the balance of the term loan subject to the closing of a sale-leaseback transaction as discussed above. However, if a sale-leaseback transaction is not completed, in order to offset the cash impact of the term loan principal repayments, the Company may exercise its option to pay in kind the interest due on the Senior Fixed Rate Notes through February 1, 1996. Consistent with its short-term business strategy, the Company does not anticipate opening or acquiring any new stores during the current fiscal year, but expects that capital expenditures of approximately $6.0 million will be used to upgrade its existing store facilities, including minor remodeling projects at 41 stores. The Company's tentative capital expenditure plans through the end of fiscal 1996 include the completion of two expansion remodels, eight major remodels, up to 40 minor remodeling projects and the construction of two new stores. The Company has entered into an interest rate swap through August 1995 to reduce its exposure to increases in short-term interest rates on the majority of its floating rate debt. The full exposure of the swap has been accrued in the condensed Company's condensed financial statements and there would be no material impact on the accompanying condensed financial statements as of April 30, 1995 by liquidating this contract. Based upon the Company's ability to generate working capital through its operations and its new $50.0 million revolving credit facility, the Company believes that it has the financial resources necessary to pay its capital obligations and implement its business plan. Effects of Inflation 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. 18 PART II - OTHER INFORMATION Item 1. Legal Proceedings. In its Quarterly Report on Form 10-Q for the quarter ended January 29, 1995, the Company reported that Ronald J. Floto, its former chief executive officer, filed a proof of claim in the bankruptcy proceeding styled In re: Kash n' Karry Food Stores, Inc., Case No. 94-1082 (HSB), pending in the United States District Court for the District of Delaware. Mr. Floto's claim seeks benefits allegedly owed to him in connection with his severance from the Company under certain employee benefit plans (the "Floto Agreements") and other compensation agreements between Mr. Floto and the Company. The total principal amount of Mr. Floto's claim is less than $1.5 million. On March 9, 1995, the Board of Directors of the Company appointed a committee to act as Plan Administrator under the Floto Agreements (the "Plan Administration Committee"). In response to the Company's objection to the proof of claim, on May 18, 1995, the bankruptcy judge entered an order holding Mr. Floto's claims in abeyance pending exhaustion of the claims review procedure set forth in the Floto Agreements. On June 9, 1995 the Plan Administration Committee rendered its written determination denying benefits to Mr. Floto. In accordance with the claims review procedure, Mr. Floto has the right to seek a review by the Plan Administration Committee of its decision. After Mr. Floto exhausts the claims review procedure, Mr. Floto could refer his claim back to the bankruptcy court for final determination. Except for the pending proof of claim, there are no material legal proceedings to which the Company is a party or to which any of its property is subject. The Company is a party to ordinary and routine litigation incidental to its business. Item 5. Other Information. On June 14, 1995 the Board of Directors of the Company declared a 50% stock dividend payable on July 17, 1995 to the holders of record of Common Stock on June 26, 1995 at the rate of one (1) share of such Common Stock for each two (2) shares of such Common Stock outstanding on June 26, 1995. 19 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits: Exhibit No. Description 2 First Amended Plan of Reorganization filed by the Company with the United States Bankruptcy Court of the District of Delaware on November 9, 1994, as amended by notices of technical modifications thereto filed on November 9, 1994, and December 12, 1994 (previously filed as Exhibit 2 to the Company's Quarterly Report on Form 10-Q for the period ended October 30, 1994). 3(i)(a) Restated Certificate of Incorporation filed with the Delaware Secretary of State on December 29, 1994 (previously filed as Exhibit 3(i) to the Company's Quarterly Report on Form 10-Q for the period ended January 29, 1995, which exhibit is hereby incorporated by reference). 3(i)(b) Certificate of Designations of Series A Junior Participating Preferred Stock filed with the Secretary of State of the State of Delaware on April 26, 1995 (previously filed as Exhibit 3(i)(b) to the Company's Registration Statement on Form S-1, Registration No. 33- 58999, which exhibit is hereby incorporated by reference). 3(ii)(a) Bylaws adopted October 12, 1988 (previously filed as Exhibit 3(ii)(a) to the Company's Quarterly Report on Form 10-Q for the period ended January 29, 1995, which exhibit is hereby incorporated by reference). 3(ii)(b) First Amendment to Bylaws adopted July 30, 1991 (previously filed as Exhibit 3(ii)(b) to the Company's Quarterly Report on Form 10-Q for the period ended January 29, 1995, which exhibit is hereby incorporated by reference). 3(ii)(c) Second Amendment to Bylaws adopted December 29, 1994 (previously filed as Exhibit 3(ii)(c) to the Company's Quarterly Report on Form 10-Q for the period ended January 29, 1995, which exhibit is hereby incorporated by reference). 3(ii)(d) Third Amendment to Bylaws adopted April 13, 1995 (filed herewith). 20 Exhibit No. Description 4.1 Indenture dated as of December 29, 1994, between the Company and Shawmut Bank Connecticut, N.A., as Trustee, relating to 11.5% Senior Fixed Rate Notes due 2003 (previously filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the period ended January 29, 1995, which exhibit is hereby incorporated by reference). 4.2 Indenture dated as of December 29, 1994, between the Company and IBJ Schroder Bank & Trust Company, as Trustee, relating to Senior Floating Rate Notes due 2003 (previously filed as Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the period ended January 29, 1995, which exhibit is hereby incorporated by reference). 4.3(a) Rights Agreement dated as of April 13, 1995 between the Company and Shawmut Bank Connecticut, N.A., as Rights Agent (previously filed as Exhibit 1 to the Company's Current Report on Form 8-K dated April 13, 1995, which exhibit is hereby incorporated by reference). 4.3(b) First Amendment to Rights Agreement dated as of June 13, 1995 (filed herewith). 4.4 Specimen form of Common Stock certificate (previously filed as Exhibit 4.4 to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 10.1(a) Services Agreement dated as of March 1, 1995 between the Company and GSI Outsourcing Corporation (previously filed as Exhibit 10.5(a) to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 10.1(b) First Amendment to Services Agreement between the Company and GSI Outsourcing Corporation (previously filed as Exhibit 10.5(b) to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 10.2(a) 1995 Non-Employee Director Stock Option Plan adopted on March 9, 1995 (previously filed as Exhibit 10.7(a) to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 21 Exhibit No. Description 10.2(b) Form of Non-Qualified Stock Option Agreement entered into between the Company and certain directors, as optionees, pursuant to the 1995 Non-Employee Director Stock Option Plan (previously filed as Exhibit 10.7(b) to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 10.3 Non-Qualified Stock Option Agreement dated as of January 17, 1995, between the Company and Green Equity Investors, L.P. (previously filed as Exhibit 10.8 to the Company's Registration Statement on Form S-1, Registration No. 33- 58999, which exhibit is hereby incorporated by reference). 10.4 Employment Agreement dated as of March 6, 1995, between the Company and Gary M. Shell (previously filed as Exhibit 10.11 to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 10.5 Employment Agreement dated as of March 16, 1995, between the Company and Cliff Smith (previously filed as Exhibit 10.12 to the Company's Registration Statement on Form S- 1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 10.6(a) 1995 Key Employee Stock Option Plan (previously filed as Exhibit 10.16(a) to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 10.6(b) Non-Qualified Stock Option Agreement dated March 9, 1995 between the Company and Ronald E. Johnson (previously filed as Exhibit 10.16(b) to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 10.6(c) Form of Non-Qualified Stock Option Agreement entered into between the Company and certain key employees, as optionees, pursuant to the 1995 Key Employee Stock Option Plan (previously filed as Exhibit 10.16(c) to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 11 Statement re computation of per share earnings (filed herewith). 27 Financial Data Schedule (filed herewith). 22 (b) Reports on Form 8-K: On a Form 8-K dated April 13, 1995, the Company reported that it had adopted a preferred stock purchase rights plan, and on a Form 8-K dated February 17, 1995, the Company reported on its dismissal of KPMG Peat Marwick LLP, and its engagement of Coopers & Lybrand, as its principal accountants. 23 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. KASH N' KARRY FOOD STORES, INC. Date: June 14, 1995 By: /s/ Raymond P. Springer --------------------------- Raymond P. Springer Senior Vice President, Administration Date: June 14, 1995 By: /s/ Richard D. Coleman --------------------------- Richard D. Coleman Vice President, Controller 24 EXHIBIT INDEX Sequentially Exhibit Numbered No. Description of Exhibit Page 2 First Amended Plan of Reorganization filed by the Company with the United States Bankruptcy Court of the District of Delaware on November 9, 1994, as amended by notices of technical modifications thereto filed on November 9, 1994, and December 12, 1994 (previously filed as Exhibit 2 to the Company's Quarterly Report on Form 10-Q for the period ended October 30, 1994). 3(i)(a) Restated Certificate of Incorporation filed with the Delaware Secretary of State on December 29, 1994 (previously filed as Exhibit 3(i) to the Company's Quarterly Report on Form 10-Q for the period ended January 29, 1995, which exhibit is hereby incorporated by reference). 3(i)(b) Certificate of Designations of Series A Junior Participating Preferred Stock filed with the Secretary of State of the State of Delaware on April 26, 1995 (previously filed as Exhibit 3(i)(b) to the Company's Registration Statement on Form S-1, Registration No. 33- 58999, which exhibit is hereby incorporated by reference). 3(ii)(a) Bylaws adopted October 12, 1988 (previously filed as Exhibit 3(ii)(a) to the Company's Quarterly Report on Form 10-Q for the period ended January 29, 1995, which exhibit is hereby incorporated by reference). 3(ii)(b) First Amendment to Bylaws adopted July 30, 1991 (previously filed as Exhibit 3(ii)(b) to the Company's Quarterly Report on Form 10-Q for the period ended January 29, 1995, which exhibit is hereby incorporated by reference). 3(ii)(c) Second Amendment to Bylaws adopted December 29, 1994 (previously filed as Exhibit 3(ii)(c) to the Company's Quarterly Report on Form 10-Q for the period ended January 29, 1995, which exhibit is hereby incorporated by reference). 25 Sequentially Exhibit Numbered No. Description of Exhibit Page 3(ii)(d) Third Amendment to Bylaws adopted April 13, 29 1995 (filed herewith). 4.1 Indenture dated as of December 29, 1994, between the Company and Shawmut Bank Connecticut, N.A., as Trustee, relating to 11.5% Senior Fixed Rate Notes due 2003 (previously filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the period ended January 29, 1995, which exhibit is hereby incorporated by reference). 4.2 Indenture dated as of December 29, 1994, between the Company and IBJ Schroder Bank & Trust Company, as Trustee, relating to Senior Floating Rate Notes due 2003 (previously filed as Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the period ended January 29, 1995, which exhibit is hereby incorporated by reference). 4.3(a) Rights Agreement dated as of April 13, 1995 between the Company and Shawmut Bank Connecticut, N.A., as Rights Agent (previously filed as Exhibit 1 to the Company's Current Report on Form 8-K dated April 13, 1995, which exhibit is hereby incorporated by reference). 4.3(b) First Amendment to Rights Agreement dated as 30 of June 13, 1995 (filed herewith). 4.4 Specimen form of Common Stock certificate (previously filed as Exhibit 4.4 to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 10.1(a) Services Agreement dated as of March 1, 1995 between the Company and GSI Outsourcing Corporation (previously filed as Exhibit 10.5(a) to the Company's Registration Statement on Form S-1, Registration No. 33- 58999, which exhibit is hereby incorporated by reference). 26 Sequentially Exhibit Numbered No. Description of Exhibit Page 10.1(b) First Amendment to Services Agreement between the Company and GSI Outsourcing Corporation (previously filed as Exhibit 10.5(b) to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 10.2(a) 1995 Non-Employee Director Stock Option Plan adopted on March 9, 1995 (previously filed as Exhibit 10.7(a) to the Company's Registration Statement on Form S-1, Registration No. 33- 58999, which exhibit is hereby incorporated by reference). 10.2(b) Form of Non-Qualified Stock Option Agreement entered into between the Company and certain directors, as optionees, pursuant to the 1995 Non-Employee Director Stock Option Plan (previously filed as Exhibit 10.7(b) to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 10.3 Non-Qualified Stock Option Agreement dated as of January 17, 1995, between the Company and Green Equity Investors, L.P. (previously filed as Exhibit 10.8 to the Company's Registration Statement on Form S-1, Registration No. 33- 58999, which exhibit is hereby incorporated by reference). 10.4 Employment Agreement dated as of March 6, 1995, between the Company and Gary M. Shell (previously filed as Exhibit 10.11 to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 10.5 Employment Agreement dated as of March 16, 1995, between the Company and Cliff Smith (previously filed as Exhibit 10.12 to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 27 Sequentially Exhibit Numbered No. Description of Exhibit Page 10.6(a) 1995 Key Employee Stock Option Plan (previously filed as Exhibit 10.16(a) to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 10.6(b) Non-Qualified Stock Option Agreement dated March 9, 1995 between the Company and Ronald E. Johnson (previously filed as Exhibit 10.16(b) to the Company's Registration Statement on Form S-1, Registration No. 33- 58999, which exhibit is hereby incorporated by reference). 10.6(c) Form of Non-Qualified Stock Option Agreement entered into between the Company and certain key employees, as optionees, pursuant to the 1995 Key Employee Stock Option Plan (previously filed as Exhibit 10.16(c) to the Company's Registration Statement on Form S-1, Registration No. 33-58999, which exhibit is hereby incorporated by reference). 11 Statement re computation of per share earnings 33 (filed herewith). 27 Financial Data Schedule (filed herewith). 34 28 EX-3.(II)(D) 2 EXHIBIT 3(ii)(d) [Conformed Copy] THIRD AMENDMENT TO BYLAWS OF KASH N' KARRY FOOD STORES, INC., a Delaware corporation The following amendment to the Bylaws of Kash n' Karry Food Stores, Inc. (the "Corporation") was adopted on April 13, 1995, at a special meeting of the Board of Directors of the Corporation, as permitted by Article XIV of the Bylaws: 1. The first sentence of Article III, Section 8, of the Bylaws of the Corporation, as amended effective December 29, 1994, is hereby deleted and replaced with the following: "At all meetings of the Board a majority of the whole Board shall be necessary and sufficient to constitute a quorum for the transaction of business." 2. The foregoing amendment became effective on April 13, 1995. DATED: June 12, 1995. /s/ Raymond P. Springer --------------------------------- Raymond P. Springer, Secretary of Kash n' Karry Food Stores, Inc. EX-4.3(B) 3 FIRST AMENDMENT TO THE EXHIBIT 4.3(b) RIGHTS AGREEMENT (Conformed Copy) THIS FIRST AMENDMENT to the Rights Agreement dated as of April 13, 1995 (the "Rights Agreement") between and among KASH N' KARRY FOOD STORES, INC., a Delaware corporation (the "Company"), and SHAWMUT BANK CONNECTICUT, N.A., as Rights Agent (the "Rights Agent"), is entered into this 13th day of June, 1995. Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Rights Agreement. WHEREAS, the Board of Directors of the Company has authorized and declared a dividend of one preferred share purchase right (a "Right") for each Common Share of the Company outstanding at the Close of Business on April 27, 1995 (the "Record Date"), each Right representing the right to purchase one one-hundredth of a Preferred Share, upon the terms and subject to the conditions set forth in the Rights Agreement, and has further authorized and directed the issuance of one Right with respect to each Common Share that shall become outstanding between the Record Date and the earliest of the Distribution Date, the Redemption Date and the Final Expiration Date; WHEREAS, the Company reserved the right from time to time to supplement or amend the Rights Agreement without the approval of any holders of Right Certificates in such manner as the Company may deem necessary or desirable, subject to certain limitations applicable from and after such time as any Person becomes an Acquiring Person; WHEREAS, as of the date hereof, no Person has become an Acquiring Person; and WHEREAS, the Company desires to amend Section 1(i) of the Rights Agreement to clarify the definition of the term "LGP;" NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: 1. Amendment. Section 1(i) of the Rights Agreement is hereby amended and restated in its entirety as follows: (i) "LGP" shall mean Leonard Green & Partners L.P., a limited partnership, and its Affiliates and Associates; provided that if LGP transfers to any Person beneficial ownership of all Common Shares then owned by LGP, then "LGP" shall mean such Person, and any other Person who may subsequently acquire all such shares, and such Person's Affiliates and Associates. 2. Incorporation. This First Amendment is hereby incorporated into and made a part of the Rights Agreement as if fully set forth therein. Except as modified herein, the Rights Agreement remains in full force and effect. In the event of any conflict between the provisions of the Rights Agreement and the provisions of this First Amendment, the provisions of this First Amendment shall govern. 2 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested, all as of the day and year first above written. KASH N' KARRY FOOD STORES, INC. Attest: By:/s/ Raymond P. Springer By:/s/ Ronald E. Johnson ------------------------ --------------------------------- RAYMOND P. SPRINGER RONALD E. JOHNSON Title: Secretary Title: Chairman of the Board, Chief Executive Officer and President SHAWMUT BANK CONNECTICUT, N.A. Attest: By: /s/ Joseph E. Fortuna By: /s/ Rockwell Spaulding ------------------------ -------------------------------- Name: Name: Title: Assistant Corporate Title: Vice President Trust Administrator 3 EX-11 4 EXHIBIT 11 KASH N' KARRY FOOD STORES, INC. COMPUTATION OF EARNINGS PER COMMON SHARE PRIMARY FULLY DILUTED EARNINGS EARNINGS Thirteen Weeks Ended April 30, 1995: Net Income $2,721,000 $2,721,000 ========= ========= Common Shares Outstanding at Beginning of Period 3,100,000 3,100,000 Shares Under Option -- 119,904 at End of Period ---------- --------- Average Number of Shares Outstanding 3,100,000 3,219,904 ========= ========= Net Income Per Common Share $ 0.88 $ 0.85 ======== ======== Seventeen Weeks Ended April 30, 1995: Net Income $3,528,000 $3,528,000 ========= ========= Common Shares Outstanding at Beginning of Period 3,100,000 3,100,000 Shares Under Option at End of Period -- 91,691 ---------- --------- Average Number of Shares Outstanding 3,100,000 3,191,691 ========= ========= Net Income Per Common Share $ 1.14 $ 1.11 ========= ========= EX-27 5
5 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE CONDENSED FINANCIAL STATEMENTS OF KASH N' KARRY FOOD STORES, INC. AS OF AND FOR THE PERIOD ENDED APRIL 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUL-31-1994 JAN-30-1995 APR-30-1995 7,244 0 6,745 0 83,206 100,628 146,649 6,153 374,865 89,009 220,091 31 0 0 49,992 374,865 269,927 269,927 211,722 257,075 0 0 6,942 5,910 3,189 2,721 0 0 0 2,721 $0.88 $0.85
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