As Filed with the United States Securities and Exchange
Commission on
April 28, 1998
Registration No. 33-57505
__________________________________________________________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
POST-EFFECTIVE AMENDMENT NO. 3
TO FORM S-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
ROUNDY'S, INC.
(Exact name of Registrant as specified in its charter)
WISCONSIN 39-0854535
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23000 Roundy Drive
Pewaukee, Wisconsin 53072
Telephone: (414) 547-7999
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Mr. Robert D. Ranus
Vice President and Chief Financial Officer
Roundy's, Inc.
23000 Roundy Drive
Pewaukee, WI 53072
(Name, address, including zip code and telephone number,
including area code, of agent for service)
With Copies to:
Andrew J. Guzikowski, Esq.
Whyte Hirschboeck Dudek S.C.
111 East Wisconsin Avenue, Suite 2100
Milwaukee, Wisconsin 53202
Telephone: (414) 273-2100
Approximate date of commencement of proposed sale to the
public: As promptly as practicable after the effective date of
this Registration Statement.
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, check the following box. X
If the registrant elects to deliver its latest annual
report to security holders or a complete and legible facsimile
thereof, pursuant to Item 11(a)(1) of this Form, check the
following box. __
_____________________________________________________________________
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
between
Prospectus and Items in Part I of Form S-2
Item Number and Caption Prospectus
Caption
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus.................. (Cover Page)
2. Inside Front and Outside Back
Cover Pages of Prospectus................. Available Information;
Incorporation of
Certain Documents
by Reference;
Table of Contents
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed Charges.... Prospectus
Summary;
Risk Factors
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Terms of Offering
6. Dilution.................................. Not Applicable
7. Selling Security Holders.................. Not Applicable
8. Plan of Distribution...................... Plan of Distribution
9. Description of Securities
to be Registered.......................... Description of Stock
10. Interests of Named Experts and Counsel.... Voting Trust
11. Information With Respect to
the Registrant............................ The Company;
Financial statements;
Selected Financial
Information;
Management's
Discussion and
Analysis of Results
of Operations and
Financial Condition;
Management
12. Incorporation of Certain
Information by Reference.................. Incorporation of
Certain Documents
By Reference
13. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities............ Indemnification
PROSPECTUS
ROUNDY'S, INC.
23000 Roundy Drive
Pewaukee, Wisconsin 53072
2,000 Shares Class A (Voting) Common Stock
147,734 Shares Class B (Non-voting) Common Stock
Roundy's, Inc. ("Roundy's") hereby offers from time to time shares
of Class A Common Stock ("Class A Common") and Class B Common Stock
("Class B Common") (together "Roundy's Stock") at an offering price per
share equal to the Book Value per share of Roundy's outstanding stock
at the end of the fiscal year prior to the year of purchase, adjusted
for subsequent stock dividends and stock splits. This offer is being
made exclusively to certain persons purchasing for investment who are
engaged in the operation of retail food stores and who are customers of
Roundy's, and to the Directors and certain key employees of Roundy's
and Trustees of the Roundy's, Inc. Voting Trust. Each share of Class A
Common is entitled to one (1) vote on all matters on which the
stockholders of Roundy's have voting rights. The Class B Common has no
voting rights except as provided by law. See "DESCRIPTION OF STOCK."
Purchasers of Class A Common must purchase exactly 100 shares for each
retail food store operated by such purchaser. The number of shares of
Class B Common which may be purchased is limited pursuant to certain
policies adopted by Roundy's Board of Directors. See "TERMS OF
OFFERING" and Exhibit E attached hereto. This Prospectus also relates
to shares of Class B Common which may be issued to stockholder-
customers of Roundy's as part of a patronage dividend (see "THE COMPANY-
- -Payment of Patronage Dividends") and in exchange for shares of Class A
Common held by stockholder-customers of Roundy's who have ceased to do
business with Roundy's. See "EXCHANGE OF CLASS A COMMON FOR CLASS B
COMMON."
This offering is not underwritten. There can be no assurance that
all or any part of the securities offered hereby will be sold. The
transfer of shares is restricted and there is and will be no market for
Roundy's Stock.
CERTAIN CONSIDERATIONS RELATED TO THE SECURITIES OFFERED HEREBY ARE
DISCUSSED UNDER "FACTORS TO BE CONSIDERED"
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Underwriting Aggregate
Price to Discounts and Proceeds to
Public(1) Commissions Company
_______________________________________________________________________
Class A Common Book Value None $ 208,700
_______________________________________________________________________
Class B Common Book Value None $15,416,043
- -----------------------------------------------------------------------
(1) The offering price per share is equal to the Book Value per share
of Roundy's outstanding stock at the end of the fiscal year prior
to the year of purchase, adjusted for subsequent stock dividends
and stock splits. The Book Value per share of Roundy's Stock at
January 3, 1998, was $104.35.
The date of this Prospectus is __________.
TABLE OF CONTENTS
Items Page
Available Information......................................... i
Incorporation of Certain Documents by Reference............... ii
Prospectus Summary............................................ 1
Risk Factors.................................................. 4
Market for Roundy's Stock and Related Stockholder Matters..... 6
Plan of Distribution.......................................... 7
Terms of Offering............................................. 7
Use of Proceeds............................................... 10
Exchange of Class A Common for Class B Common................. 10
Repurchase of Shares.......................................... 10
Capitalization................................................ 13
Selected Financial Information................................ 14
Management's Discussion and Analysis of
Results of Operations and Financial Condition............... 15
The Company................................................... 19
Management.................................................... 31
Description of Stock.......................................... 33
Voting Trust.................................................. 35
Legal Matters................................................. 37
Experts....................................................... 37
Indemnification............................................... 37
Index to Financial Statements................................. F-1
Exhibit A - Subscription Agreement............................ A-1
Exhibit B - Buying Deposit Agreement.......................... A-2
Exhibit C - Article V of the By-Laws.......................... A-4
Exhibit D - Policy Relating to Redemption of Stock by
Inactive Customer Shareholders and Former
Employees ........................................ A-6
Exhibit E -Policy Regarding Issuance and Sales of Roundy's,
Inc. Stock ....................................... A-13
No person has been authorized to give any information or make any
representations other than as contained in this Prospectus in connection
with the offering described herein. This Prospectus does not constitute
an offer to sell, or a solicitation of an offer to buy, to any person in
any state in which it is unlawful to make such offer or solicitation.
The delivery of this Prospectus at any time does not imply that there has
been no change in the affairs of the Company subsequent to its date of issue.
AVAILABLE INFORMATION
Roundy's is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "1934 Act") and in accordance
therewith files reports and other information with the United States
Securities and Exchange Commission (the "Commission"). Such reports and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 5th Street
N.W., Judiciary Plaza, Washington, D.C. 20549 and at the Commission's
regional offices at 7 World Trade Center, 13th Floor, New York, New York
10048 and Suite 1400, North Western Atrium Center, 14th Floor, 500 West
Madison Street, Chicago, Illinois 60661. The Commission maintains a
website that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.gov. Copies of such
material can also be obtained from the Public Reference Section of the
Commission at 450 5th Street, N.W., Judiciary Plaza, Washington, D.C. 20549
at prescribed rates. The Company will furnish annual reports to its
stockholders within 120 days after the end of each fiscal year, which
will include financial statements examined and reported on by independent
certified public accountants.
i
Roundy's has filed a Registration Statement under the Securities Act
of 1933, as amended, with respect to the issuance of the shares of
Roundy's Stock offered hereby. For further information, reference is
made to such Registration Statement, of which this Prospectus is a part,
and to the exhibits thereto, which are listed in such Registration
Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus incorporates certain documents by reference which
are not delivered herewith. The following documents filed with the
Commission under the 1934 Act (Commission File No. 33-57505) are
incorporated herein by reference but are not delivered herewith:
(a) Roundy's annual report filed with the Commission on Form 10-K
for the fiscal year ended January 3, 1998 (the "1997 Form 10-K");
(b) All other reports filed pursuant to Section 13(a) or 15(d) of
the 1934 Act since the end of the fiscal year covered by the annual
report referred to in (a), above.
Roundy's will provide, without charge to each person to whom this
Prospectus is delivered, a copy of any or all of such documents (other
than exhibits to such documents which are not specifically incorporated
by reference into the text of such documents) upon the oral or written
request of such person. Any such request should be directed to:
Roundy's, Inc., 23000 Roundy Drive, Pewaukee, Wisconsin 53072, Attention:
Robert D. Ranus, Telephone: (414) 547-7999.
Any statement contained in a document incorporated or deemed to be incorporated
herein by reference shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
herein by reference modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute part of this Prospectus and investors should rely
on such modified, superseded or replaced information and not on the information
contained in the documents incorporated by reference.
The discussions in this Prospectus and the materials incorporated herein
by reference contain forward-looking statements within the meaning of
Section 27A of the Securities Exchange Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements other than statements of historical facts included herein or
therein are forward-looking statements. In particular, without
limitation, terms such as "anticipate," "believe," "estimate," "expect,"
"indicate," "may be," "objective," "plan," "predict," "should," and
"will" are intended to identify forward-looking statements. Forward-
looking statements are subject to certain risks, uncertainties and
assumptions which could cause actual results to differ materially from
those predicted. Important factors that could cause actual results to
differ materially from such expectations ("Cautionary Factors") are
disclosed in the Company's 1997 Annual Report on Form 10-K (see
"Cautionary Factors" at the end of Item 1 therein. Although the Company
believes that the expectations reflected in such forward-looking
statements are reasonable; it can give no assurance that such
expectations will prove to have been correct. All subsequent written or
oral forward-looking statements attributable to the Company or persons
acting on behalf of the Company are expressly qualified in their entirety
by the Cautionary Factors. See "RISK FACTORS--Limitations on Investment
Return," "--Cooperative Tax Status," and "--Income Tax Liability for
Patronage Dividends."
ii
PROSPECTUS SUMMARY
The following is a brief summary of certain information contained
elsewhere in this Prospectus. The summary is necessarily incomplete
and selective and is qualified in its entirety by the detailed information
and financial statements appearing elsewhere and incorporated by reference
herein.
____________________
Factors to be Considered
- ------------------------
An investment in Roundy's Stock is subject to certain risks, which
should be carefully considered by investors.
See "RISK FACTORS TO BE CONSIDERED."
The Company and Its Business
- ----------------------------
Roundy's, Inc. and its subsidiaries (collectively the "Company") are
engaged principally in the wholesale distribution of food and non-food
products to supermarkets and warehouse food stores located in Wisconsin,
Illinois, Michigan, Indiana, Ohio, Kentucky, Missouri, Arkansas,
Pennsylvania, Tennessee and West Virginia. References in this Prospectus
to the "Company" mean Roundy's, Inc. and its subsidiaries. References in
this Prospectus to "Roundy's" mean Roundy's, Inc. excluding its subsidiaries.
The Company also owns and operates 13 retail warehouse food stores under
the names "Pick 'n Save" or "Park & Save," one limited assortment food store
under the name "Mor For Less" and 7 conventional stores under the names
"Ron & Lloyd's, "Park & Shop," "Price Less" or "Buy Low Foods." The Company
provides various ancillary services, including financial, engineering,
advertising, accounting, insurance and promotional services to its retail
customers. The Company services approximately 842 retailgrocery stores.
See "THE COMPANY" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION."
Basic Distinctions Between Classes of Stock; Voting Trust
- ---------------------------------------------------------
The issued and outstanding shares of Roundy's Stock are divided into two
classes: Class A Common, having voting rights on all matters submitted to a
vote of stockholders, and Class B Common, having no voting rights other than
those provided by law.
Approximately 71% of Roundy's Stock (including 100% of the outstanding
Class A Common) is owned by the owners of 126 retail grocery stores serviced
by Roundy's. The balance of the Company's customers are independent grocers
which do not own any Roundy's Stock.
Ownership of Class A Common is limited to 100 shares for each retail food
store operated by the stockholder-customer (or a corporation which the
stockholder-customer controls). There are also certain restrictions on the
number of shares of Class B Common which a stockholder may own, pursuant to
the terms of certain policies adopted by Roundy's Board of Directors.
These policies may be changed at any time. See "Basic Features of Offering"
below and "TERMS OF OFFERING." Class B Common shares have been, and
it is anticipated that they will continue to be, distributed in payment of
patronage dividends declared to stockholder-customers, if and when any such
patronage dividends are declared. See "Basic Features of Offering" below.
While dividends, other than patronage dividends, may be paid on either class
of Roundy's Stock, it is not anticipated that any such dividends will be paid in
the foreseeable future. See "MARKET FOR ROUNDY'S STOCK AND RELATED STOCKHOLDER
MATTERS" below. In the event of the liquidation of Roundy's, shares of Class A
Common and Class B Common will share ratably in the net assets of the
Company. See "DESCRIPTION OF STOCK."
All Class A Common outstanding on the date of this Prospectus is owned of
record by the Trustees of the Roundy's, Inc. Voting Trust. Roundy's will
request, but not require, all purchasers of Class A Common offered hereby
to deposit such shares in the Voting Trust in exchange for Voting Trust
Certificates. See "VOTING TRUST."
Basic Features of Offering
- --------------------------
The offering price of shares offered hereunder is the Book Value per
share of outstanding shares of such stock as reflected on the Company's
audited financial statements ("Book Value") as of the close of the Company's
fiscal year prior to the purchase of such stock, adjusted for subsequent
stock dividends and stock splits.
Each customer for whom Roundy's is the primary supplier is required to
subscribe for and purchase exactly one hundred (100) shares of Class A Common
for each retail store owned by such customer which store is principally
supplied by Roundy's (an "Active Customer").
Shares of Class B Common may be purchased or acquired by stockholder-
customers in one of the following ways:
(1) Subject to the limitations on purchases of Class B Common as
described under "TERMS OF OFFERING" and Exhibit E, a stockholder-
customer may subscribe for shares of Class B Common during three
"window" periods each year (consisting of the last two weeks of
May, August and November, respectively), pay the full price
therefore (Book Value as of the close of the fiscal year prior to
subscription) and receive certificates for the shares subscribed for.
A stockholder-customer may deposit funds with Roundy's pursuant to a
written agreement with Roundy's to fulfill the stockholder-customer's
buying deposit requirement. During the three "window" periods, the
stockholder-customer may subscribe for shares of Class B Common
(within applicable limits) and allocate some or all of such deposited
funds to the payment for such shares (at the Book Value as of the
close of the fiscal year preceding the year in which such subscription
is received). See "TERMS OF OFFERING--Buying Deposits; Application of
Deposited Funds."
(2) A stockholder-customer may acquire shares of Class B Common by
receipt of such shares in payment of a portion of a patronage
dividend, if and when any such patronage dividends are declared.
See "THE COMPANY--Payment of Patronage Dividends."
(3) Stockholder-customers of Roundy's who cease to do business with
Roundy's are required to exchange their Class A Common for Class B
Common, on a share for share basis. See "EXCHANGE OF CLASS A
COMMON FOR CLASS B COMMON."
In addition, Roundy's may offer shares of Class B Common to its
Directors and certain key employees, and to Trustees of the Roundy's, Inc.
Voting Trust at a price equal to the Book Value as of the close of the prior
fiscal year, or, in the case of key employees, as bonus shares at the
discretion of the Board of Directors or pursuant to employees' exercise of
stock options.
Use of Proceeds
- ---------------
The proceeds of this offering will be used for general working capital
purposes and for capital expenditures, as required. See "USE OF PROCEEDS."
Repurchase of Shares
- --------------------
Roundy's is obligated under its current stock redemption policy as set
forth in Exhibit D ("the Stock Redemption Policy") to repurchase shares of
Roundy's Stock upon request made by or on behalf of a stockholder who has
terminated or substantially reduced its relationship with Roundy's. This
obligation, however, is subject to change should the Stock Redemption Policy
be revised and is limited with respect to the aggregate dollar amount of
repurchases that may be made at any particular time. With certain exceptions,
shares will be repurchased under the Stock Redemption Policy over a five-year
period beginning on the first anniversary date of the stockholder-customer's
repurchase request. The repurchase price is the Book Value at the end of the
fiscal year preceding the date of the actual repurchase. Roundy's is not
obligated to repurchase any Roundy's Stock except under the Stock Redemption
Policy as it may be in effect from time to time. The Stock Redemption Policy
may be amended or rescinded at any time by the Board of Directors.
See "REPURCHASE OF SHARES."
Summary Financial Data
- ----------------------
The following table sets forth certain data as to the
Company for, and as of the end of, each of the last three
fiscal years:
Fiscal Years
------------------------------
1997 1996 1995
(Dollars in Thousands)
Earnings Statement Data:
Net Sales and Service Fees........$2,610,697 $2,579,010 $2,488,196
Earnings Before Patronage
Dividends and Income Taxes... 25,206 23,466 20,251
Patronage Dividends................... 5,687 5,568 5,129
Net Earnings....................... 11,204 10,267 9,022
Balance Sheet Data:
Total Assets........................ 440,310 434,641 407,337
Working Capital.......................84,074 90,498 90,740
Long-term Debt (less current
maturities)........................83,458 93,615 78,850
Stockholders' Equity(1)..............122,460 109,945 100,033
(1) Includes redeemable common stock. Also includes patronage
dividends payable in Class B Common of $3,738,000, $3,779,000 and
$3,405,000 in 1997,1996 and 1995, respectively.
See "SELECTED FINANCIAL INFORMATION" and "INDEX TO FINANCIAL STATEMENTS."
RISK FACTORS
Lack of Market for Roundy's Stock
- ---------------------------------
The shares offered hereby may not be sold or otherwise
transferred or pledged by the record holder thereof without
Roundy's written consent. Although Roundy's is obligated
under its current Stock Redemption Policy to repurchase its
shares from a customer which has terminated its business
relationship with Roundy's and which tenders such stock for
repurchase, this obligation is limited in various respects,
including (without limitation) as to the maximum amount
which Roundy's will pay for stock repurchases in any fiscal
year. Further, the Stock Redemption Policy, and therefore,
Roundy's obligation to repurchase shares of Roundy's stock,
may be modified or rescinded at any time without prior
notice. See "REPURCHASE OF SHARES."
Limitations on Investment Return
- --------------------------------
Although Roundy's may pay patronage dividends to its
stockholder-customers in certain circumstances, no assurance
can be given as to when or whether patronage dividends will
be paid in the future. No patronage dividends were paid for
1994. Roundy's only obligation to pay patronage dividends
is that imposed by Article V of its By-Laws (see Exhibit C),
and these By-Law provisions may be amended or repealed at
any time by Roundy's Board of Directors. There can be no
assurance that Roundy's will have in any year sufficient net
earnings from Roundy's cooperative business and consolidated
net earnings to permit the payment of patronage dividends.
See "THE COMPANY -- Payment of Patronage Dividends."
Dividends other than patronage dividends have not been paid
by Roundy's, and it is not anticipated that any such
dividends will be paid. Consequently, owners of Class B
Common who are not stockholder-customers cannot expect to
receive any patronage or other dividends of any kind.
Accordingly, a purchaser of the securities offered hereby
may be unable to realize a return on its investment, or
realize all or a portion of the value of shares purchased,
except in the event of the repurchase of such shares by
Roundy's, or the liquidation of Roundy's.
Limitations on Purchasers
- -------------------------
This offering is being made only to persons who are
engaged in the operation of retail food stores which are
customers of Roundy's, and to the Directors and certain key
employees of Roundy's, and to Trustees of the Roundy's, Inc.
Voting Trust. The amount of Class A Common (the only class
having voting rights and substantially all of which is owned
by Roundy's stockholder-customers) which may be purchased by
any such person is limited, no person being permitted to own
more than 100 shares for each Active Customer operated by
such person. The amount of Class B Common which may be
purchased is also limited, pursuant to policies adopted by
the Board of Directors of Roundy's (which policies may be
changed at any time). See "TERMS OF OFFERING" and Exhibit E
attached hereto.
Sale of All Shares Offered Not Assured
- --------------------------------------
Because (a) there are limitations upon who may purchase
shares hereunder and upon how many shares of Class A Common
and Class B Common any person may own or purchase, (b)
there is uncertainty as to whether future patronage
dividends will be paid and, if paid, the amount, if any,
that may be paid in shares of Class B Common, and (c) this
offering is not underwritten, there can be no assurance that
all or any portion of the shares offered hereby will be
sold. See "PLAN OF DISTRIBUTION."
Limitations on Stockholders' Ability to Elect Directors
- -------------------------------------------------------
As of the date of this Prospectus, all of the
outstanding Class A Common has been deposited in a Voting
Trust, the Trustees of which are authorized to vote the
shares in their discretion for the election of a majority of
Roundy's Directors. With respect to the election of four
Retailer Directors (one in each year and an additional one
every third year) and on most other matters, the Trustees
must vote shares held in the Voting Trust as directed by a
vote of the holders of outstanding Voting Trust Certificates
(with each share of Class A Common in the Trust entitling
the certificate holder thereof to one vote). The seven
Trustees of the Voting Trust, one of whom is a Director of
Roundy's, may be deemed to be in "control" of the Company.
Purchasers of the Class A Common offered hereby will be
requested, but not required, to deposit such shares in the
Voting Trust. Shares of Class A Common deposited in the
Voting Trust are subject to a limited right of withdrawal
after such shares have been on deposit for five years. See
"VOTING TRUST."
Lien on Shares
- --------------
Roundy's has a lien on all Roundy's Stock held by its
stockholders, whether presently outstanding or issued in the
future, as security for the payment, from time to time and
as often as the same may become due and payable, of any and
all obligations of the owner thereof to the Company. See
"DESCRIPTION OF STOCK."
Cooperative Tax Status
- ----------------------
Although Roundy's is incorporated as a Wisconsin
business corporation, it has historically operated and
anticipates that it will (although it is not obligated to)
continue to operate as a cooperative, reporting its tax
liability in accordance with rules applicable to
corporations operating on a cooperative basis. The
applicable laws, regulations, rulings and judicial
interpretations do not precisely define a cooperative for
income tax purposes. Therefore, no assurance can be given
that the cooperative income tax status of Roundy's could not
be challenged successfully by the Internal Revenue Service.
If such status were to be challenged successfully, Roundy's
would incur a significant income tax liability.
Income Tax Liability for Patronage Dividends
- --------------------------------------------
A purchaser of shares will be required to report as
gross income, for federal income tax purposes, the patronage
dividends, if any, distributed by Roundy's to such
purchaser. Shares of Class B Common issued as a portion of
a patronage dividend must be reported as income at their
full stated dollar amount, along with cash received as the
other portion of such dividends. Although a minimum of 20%
of each recipient's total annual patronage dividend is
required to be paid by Roundy's in cash, the cash portion
may be insufficient, depending upon the income tax bracket
of each recipient, to provide funds for the full payment of
the federal income tax liability incurred by the recipient
with respect to such patronage dividends. Shares of Class B
Common distributed as patronage dividends are subject to
state income taxes in Wisconsin, and may be subject to such
taxes in other states. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION"
and "THE COMPANY."
Competition
- ------------
The grocery industry, including the wholesale food
distribution business, is characterized by intense
competition and low profit margins. The Company competes
with a number of local and regional grocery wholesalers and
with a number of major businesses which market their
products directly to retailers, including companies having
greater assets and larger sales volume than the Company.
The Company's
customers and the Company's corporate stores also compete at
the retail level with several chain store organizations
which have integrated wholesale and retail operations.
MARKET FOR ROUNDY'S STOCK AND RELATED STOCKHOLDER MATTERS
The transfer of shares of Class A Common and Class B
Common is restricted and there is no market for Roundy's
Stock. As of April 4, 1998 all of the outstanding shares
of Roundy's Class A (voting) Common Stock were held of record
by the Roundy's, Inc. Voting Trust. There is also no market
for Roundy's Voting Trust Certificates and there were 65
holders of such Certificates on April 4, 1998. On April 4,
1998 an aggregate of 209 persons held shares of Roundy's
Class B Common and/or Voting Trust Certificates. Except
for patronage dividends (see "THE COMPANY--Payment of
Patronage Dividends"), no dividends have ever been paid on
the Common Stock of Roundy's. There is no intention of
paying dividends, other than patronage dividends, in the
foreseeable future.
PLAN OF DISTRIBUTION
The shares offered hereby are being offered only by
Roundy's, through its officers, directors and employees.
Roundy's is primarily concerned with attracting
stockholders who can effectively use the services of
Roundy's and whose trade with Roundy's will be mutually
beneficial. Sale of shares offered hereby is limited
primarily to individuals, partnerships or corporations which
are engaged in the operation of retail food stores and which
purchase merchandise from or through Roundy's. Company
employees whose duties consist of sales of merchandise to
retail food stores are not authorized to accept stock
subscriptions or to sell shares of stock to any person. No
salesmen or securities dealers are or ever have been
employed for the sale of Roundy's Stock, and no officer,
director or employee directly or indirectly receives any
commission, bonus, or other separate compensation for sales
of Roundy's Stock.
TERMS OF OFFERING
Limitation on Offerees and Purchasers
- -------------------------------------
This offering is limited to individuals, partnerships
and corporations engaged in the operation of retail food
stores which are Active Customers of Roundy's. Shares of
Class B Common may also be sold hereunder to the Directors
and certain key employees of Roundy's and to Trustees of the
Roundy's, Inc. Voting Trust.
Required Purchases of Class A Common
- ------------------------------------
Shares of Class A Common offered hereby must be
purchased in units of 100 shares. No person may own any
Class A Common unless such person owns and operates at least
one Active Customer. Each retailer for whom Roundy's is the
primary source of supply is required to purchase and own 100
shares of Class A Common for each Active Customer operated
by such person. No person may own more than 100 shares of
Class A Common for each Active Customer operated by such
person. Under certain policies adopted by Roundy's Board of
Directors, there are limits on the number of shares of Class
B Common which may be purchased. See "Methods Of Acquiring
Shares of Class B Common" below.
Methods of Acquiring Shares of Class B Common
- ---------------------------------------------
Shares of Class B Common may be purchased or acquired
in one of the following ways:
(1) A stockholder-customer may subscribe for shares of
Class B Common during three "window" periods each year
(consisting of the last two weeks of May, August and
November, respectively), pay the full price therefor
(Book Value as of the close of the fiscal year prior to
subscription adjusted for subsequent stock dividends
and stock splits) and receive certificates for the
shares subscribed for. Pursuant to the terms of
certain policies which have been adopted by Roundy's
Board of Directors as set forth in Exhibit E attached
hereto (the "Issuance Policy"), the total number of
shares that a stockholder-customer may purchase in one
year is limited to 15% of the stockholder-customer's
buying deposit deficit for active customers with a
buying deposit deficit, and 5% of the buying deposit
for active customers without a buying deposit deficit;
provided, that certain new stockholder-customers are
entitled each year to purchase shares up to 30% of
their buying deposit. See "Buying Deposit; Application
of Deposited Funds" below and Exhibit E attached
hereto.
A stockholder-customer may deposit funds with Roundy's
pursuant to a written agreement with Roundy's to
fulfill the stockholder-customer's buying deposit
requirement. During the three "window" periods, the
stockholder-customer may subscribe for shares of Class
B Common (within applicable limits) and allocate some
or all of such deposited funds to the payment for such
shares (at the Book Value as of the close of the fiscal
year preceding the year in which such subscription is
received).
(2) A stockholder-customer may acquire shares of Class
B Common by receipt of such shares in payment of a
portion of a patronage dividend. There can be no
assurance that Roundy's will have in any year
sufficient net earnings from Roundy's cooperative
business and consolidated net earnings to permit the
payment of patronage dividends. See "THE COMPANY--
Payment of Patronage Dividends."
(3) Stockholder-customers of Roundy's who cease to do
business with Roundy's are required to exchange their
Class A Common for Class B Common, on a share for share
basis. See "EXCHANGE OF CLASS A COMMON FOR CLASS B
COMMON."
In addition, Roundy's may offer shares of Class B
Common to its Directors and certain key employees, and to
Trustees of the Roundy's, Inc. Voting Trust at a price equal
to the Book Value as of the close of the prior fiscal year,
or, in the case of key employees, as bonus shares at the
discretion of the Board of Directors or pursuant to
employees' exercise of stock options.
Offering Price
- --------------
The offering price of each share of Class A Common and
Class B Common is equal to the Book Value as of the close of
the previous fiscal year, adjusted for subsequent stock
dividends and stock splits. Shares are not sold during any
year until the Book Value at the end of the immediately
preceding fiscal year has been determined.
The same value will also be assigned to each share of
Class B Common issued as a portion of a patronage dividend.
That is, shares, if any, distributed in 1999 (for
example) as patronage dividends accrued with respect to
purchases from Roundy's during 1998 will be valued at
the Book Value of outstanding shares determined as of the
end of the Roundy's 1998 fiscal year.
The Book Value of outstanding Roundy's Stock (both
Class A Common and Class B Common) at the end of the
1997 fiscal year was $104.35 per share. Roundy's
By-Laws prohibit the payment of any patronage dividend in
any year unless sufficient earnings have been retained to
increase the Book Value of the outstanding Roundy's Stock by
8% during that year. See "THE COMPANY."
Buying Deposits; Application of Deposited Funds
- -----------------------------------------------
Each stockholder-customer of Roundy's is required to
maintain a buying deposit for each Active Customer it
operates in an amount equal to the greater of $20,000 or the
estimated amount of purchases by the Active Customer from
Roundy's over a two week period (subject to Roundy's
reserved right to increase the amount of the deposit
required of any Active Customer). This buying deposit
requirement may be satisfied by either a cash deposit in the
specified amount (bearing no interest), or the collateral
pledge of Class A Common and/or Class B Common. In either
case, a stockholder-customer may make its entire buying
deposit by a payment in cash at the outset of its customer
relationship, or it may fulfill part or all of its buying
deposit requirement by means of weekly or monthly payments, in
accordance with an amortization schedule forming a part of
the Buying Deposit Agreement between such stockholder-
customer and Roundy's (the form of Buying Deposit Agreement
is attached hereto as Exhibit B). If a stockholder-customer
elects to fulfill its buying deposit requirements through
periodic installment payments, such stockholder-customer may
apply amounts so deposited toward the subscription price of shares
(in accordance with the limitations described above) at the time
such shares are subscribed for. Neither the execution of a
Buying Deposit Agreement, nor the deposit of funds by a
stockholder-customer pursuant to such Buying Deposit
Agreement, will constitute a subscription agreement or an
agreement of any kind on the part of the stockholder-
customer to purchase, or on the part of Roundy's to sell,
any shares of Roundy's Stock. See "THE COMPANY--Stockholder-
Customers" and Exhibit B attached hereto. Buying deposits
satisfied by deposit of cash are reflected on the Company's
balance sheet as accounts payable.
Stockholder-customers who have already satisfied their
buying deposit requirements may nevertheless elect to
subscribe for and purchase shares subject to the limitations
described above under "Methods of Acquiring Shares of Class
B Common."
Issuance of Class B Common As Patronage Dividends
- -------------------------------------------------
If shares of Class B Common are issued as patronage
dividends, such shares, when issued, will be fully paid and
non-assessable at the time of issuance, except as otherwise
provided by Wisconsin law (see "DESCRIPTION OF STOCK").
Further, such shares shall be subject to Roundy's lien
against all outstanding shares to secure the payment of the
stockholder-customer's obligations to the Company. See "THE
COMPANY--Stockholder-Customers." Finally, such shares shall
be applied to satisfy (in whole or in part) the buying
deposit deficit of stockholder-customers with a buying
deposit deficit. If such stockholder-customer has elected
to pay its buying deposit in periodic installments, such
shares shall be applied to such installments in the inverse
order of their due dates.
USE OF PROCEEDS
The net proceeds to be received from the sale of the
Class A Common and Class B Common offered hereby will be
added to the working capital of the Company and used for
general working capital purposes, including the purchase of
merchandise to be resold by Roundy's and the maintenance of
adequate inventories of such merchandise, and for capital
expenditures as required. The Company's principal source of
working capital has been from borrowings, rather than from
the proceeds of the sale of equity securities, and it is
expected that this will continue to
be true in the future.
EXCHANGE OF CLASS A COMMON FOR CLASS B COMMON
Stockholder-customers of Roundy's, upon termination of
Active Customer status, are required to surrender their
shares of Class A Common in exchange for Class B Common, on
a share for share basis, in accordance with a provision of
Roundy's By-Laws. Roundy's has imposed this requirement to
comply with the Internal Revenue Code and the regulations
thereunder governing federal income taxation of corporations
operating on a cooperative basis. See "THE COMPANY-
Operation as a Cooperative." Under Section 1036 of the
Internal Revenue Code, as amended, no gain or loss is
recognized for federal income tax purposes by a stockholder
who exchanges common stock of a corporation for other common
stock of the same corporation. See "REPURCHASE OF SHARES."
REPURCHASE OF SHARES
The following description of the Stock Redemption
Policy is necessarily selective and is qualified in its
entirety by the full text of the Stock Redemption Policy
which is attached as Exhibit D.
Roundy's Articles of Incorporation provide that the
Board of Directors may cause Roundy's to repurchase or
redeem shares of Roundy's Stock on such terms as the Board
deems appropriate (without consent of the stockholders)
subject to applicable Wisconsin law. The Board of Directors
has adopted the Stock Redemption Policy setting forth
conditions under which Roundy's will repurchase or redeem
its Common Stock (See Exhibit D). Absent the Stock
Redemption Policy, Roundy's would have no obligation
(whether under its Articles of Incorporation, By-Laws or
otherwise) to repurchase any Roundy's Stock. Considering
the restrictions on ownership and resale of Roundy's Stock
(See "DESCRIPTION OF STOCK - Restrictions on Transfer"), a
stockholder might have no means to liquidate an investment
in Roundy's Stock if no redemption policy were to exist
requiring Roundy's to repurchase such shares.
The Stock Redemption Policy provides that Roundy's will
repurchase shares of Roundy's Stock following a request by
the stockholder or his or her legal representative made
during one of three open "window periods" (the last two
weeks of May, August and November of each year) after the
occurrence of a "customer-shareholder termination" or an
"employee-shareholder termination" as defined in the Stock
Redemption Policy. A "customer-shareholder termination"
occurs whenever a retail food store principally supplied by
Roundy's (an "Active Customer") which is owned by a
stockholder either ceases to be an Active Customer or ceases
to be owned or operated by such stockholder. An "employee-
shareholder termination" occurs when a stockholder's
employment relationship with the Company is terminated for
any reason. Under the Stock Redemption Policy, Roundy's is
not required to repurchase Roundy's Stock held by a
stockholder during the period he or she is an Active
Customer or is employed by the Company.
The Stock Redemption Policy requires Roundy's to
acknowledge promptly in writing receipt of a repurchase
request. Once a repurchase request is so acknowledged by
Roundy's, the request becomes irrevocable except with the
prior written consent of the Board of Directors.
The obligation to repurchase stock under the Stock
Redemption Policy arises, as to the number of shares
covered by a repurchase request, in annual 20% increments
during the five year period beginning on the repurchase
request date. On each of the first through the fifth
anniversary dates of the repurchase request date (a
"repurchase target date"), Roundy's is obligated to purchase
20% of the aggregate number of shares of Roundy's Stock for
which a proper repurchase request has been received.
However, if a "customer-shareholder termination" or an
"employee-shareholder termination" occurs as a result of the
death of the stockholder, the estate of such stockholder may
elect (by written notice to Roundy's within 180 days after
such death) to have not more than the first $50,000 in value
of stock repurchased on an accelerated basis within 180 days
after Roundy's receipt of such election notice. Each share
shall continue to be outstanding for all purposes until
actually repurchased.
The repurchase price for the shares under the Stock
Redemption Policy shall be the Book Value as of the end of
the fiscal year preceding the actual date of repurchase, as
adjusted for subsequent stock splits and stock dividends.
Because the repurchase price will fluctuate based on changes
in Book Value from year to year, the repurchase price
payable for any 20% increment to be repurchased at a later
repurchase target date may be greater or less than that
payable for a 20% increment repurchased at an earlier date
pursuant to the same repurchase request. There is no
assurance that Book Value will increase from one year to the
next and it may decline.
Under the Stock Redemption Policy, based upon pending
repurchase requests received by Roundy's on or prior to the
end of its preceding fiscal year (but without taking into
account any requests for accelerated repurchase, if any,
which may have been received from an estate of a deceased
shareholder), 20,779 shares of Class B Common are
expected to be repurchased in 1998 at the Book Value per
share as of January 3, 1998 of $104.35, for a total repurchase
obligation of $2,168,289. In addition, based upon such pending
requests, Roundy's presently expects to repurchase
16,604 shares in 1999, 14,719 shares in 2000, 5,178 shares in 2001,
and 3,815 shares in 2002. The repurchase price in each year after
1998 will be Book Value per share of the Roundy's Stock
as of the end of the fiscal year immediately preceding the
date of repurchase, assuming the Stock Redemption Policy
remains unchanged. The number of shares of Class B Common
subject to repurchase requests in years after 1998 may
change based upon receipt of additional repurchase requests
after January 3, 1998 or if Roundy's should
exercise its discretion to effect one or more "Non-Policy
Redemptions," or otherwise agree to repurchase shares other
than on the terms prescribed by the Stock Redemption Policy,
as discussed below.
Roundy's obligation to repurchase shares under the
Stock Redemption Policy is subject to any limitations on
repurchases that may be contained in present or future
lending or other agreements of the Company (the "Contract
Limits"). These generally consist of covenants and
restrictions of a type frequently encountered in similar
transactions, such as stockholders' equity to capital
ratios, debt to capital ratios, liability to net worth
ratios and maintenance of certain amounts of working capital
and stockholders' equity. There is no assurance that these
Contract Limits will not be modified. In the event the
Contract Limits preclude Roundy's during a given period of
time from repurchasing shares which are the subject of a
repurchase request, or if required repurchases are delayed
for any other reason (in either case, a "Suspension"),
repurchases shall be resumed promptly thereafter in the order
of the redemption target dates which occurred during the period
of the Suspension regardless of the dates the repurchase requests were
received and such suspended repurchases shall be made under
the Stock Redemption Policy prior to redemptions becoming
due on any subsequent redemption target dates.
Notwithstanding the foregoing provisions, stock having a
repurchase price of not in excess of $50,000 may be
repurchased on an accelerated basis in the sole discretion
of Roundy's in cases of demonstrated hardship.
The Stock Redemption Policy may be amended or rescinded
at any time by the Board of Directors of Roundy's, subject
only to the provision that no such amendment or rescission
may reduce the price payable for shares which have been
properly tendered for redemption prior to the date on which
the Board of Directors takes action to effect such amendment
or rescission. Any such changes could have a material
adverse effect upon a stockholder-customer's right to cause
Roundy's to repurchase shares of Roundy's stock.
Any stockholder-customer who fails to surrender its
Class A Common for an equal number of shares of Class B
Common (See "EXCHANGE OF CLASS A COMMON FOR CLASS B COMMON")
within 90 days following a customer-shareholder termination
is not eligible for repurchase of shares under the Stock
Redemption Policy. In addition, the Stock Redemption Policy
does not apply, according to its terms, to any person who,
at the time of such repurchase, is asserting a challenge to
the authority of Roundy's or its Board of Directors to have
adopted any prior, then current or pending redemption policy
or is then asserting a challenge to the enforceability or
validity of Roundy's interpretation or application of any
provision of the then current or any prior redemption
policy.
Notwithstanding the Stock Redemption Policy, the Board
of Directors may cause Roundy's to repurchase or redeem
stock of active or inactive customers or current or former
employees on any other terms or under such other
circumstances as the Board deems appropriate, all without
the consent or approval of the other stockholders. For
example, the Board may authorize an accelerated repurchase
for hardship purposes on terms differing from those provided
for in the Stock Redemption Policy (a "Non-Policy
Redemption"). The fact that any one stockholder may be
given a Non-Policy Redemption shall not give rise to similar
redemption rights for any other stockholders and shall not
be construed to modify the Stock Redemption Policy.
CAPITALIZATION
The following table sets forth the consolidated
capitalization of the Company as of January 3, 1998:
To Be Out-
standing If
All Stock
Offered Here-
Outstanding by is Sold(1)
----------- -------------
SHORT-TERM INDEBTEDNESS:
Current maturities of
long-term debt................ $10,156,800 $10,156,800
Total short-term debt... $10,156,800 $10,156,800
LONG-TERM INDEBTEDNESS:
Senior unsecured notes payable:
9.26%, due 1999 to 2001.... $ 7,500,000 $ 7,500,000
7.57% to 8.26%, due
1999 to 2008............... 18,500,000 18,500,000
6.94%, due 1999 to 2003.... 32,142,900 32,142,900
7.86%, due 2000 to 2006.... 25,000,000 25,000,000
Other long-term debt......... 314,900 314,900
----------- -----------
Total long-term debt $83,457,800 $83,457,800
=========== ===========
Redeemable Common Stock(3) $ 6,375,300 $ 6,375,300
STOCKHOLDERS' EQUITY:
Common Stock:
Voting (Class A), $1.25 par
value, 60,000 shares author-
ized, 12,600 issued and out-
outststanding, 14,600 as adjusted. 15,800 18,300
Non-Voting (Class B), $1.25 par
value, 2,400,000 shares author-
ized, 1,138,380 issued,
1,286,114 as adjusted......... 1,346,600 1,607,600
Total Common Stock............ 1,362,400 1,625,900
Patronage dividends payable in
common stock(2)............. 3,738,000 3,738,000
Additional paid-in capital.... 28,588,300 44,025,900
Reinvested earnings........... 83,527,500 83,527,500
----------- ------------
117,216,200 132,917,300
Less treasury stock, at cost.. 1,131,200 1,131,200
------------ ------------
Total Stockholders' Equity $116,085,000 $131,786,100
============ =============
(1) The column "To Be Outstanding" reflects the sale and
issuance of Roundy's shares of Class A Common and Class B
Common hereunder, although this offering is not
underwritten and there is no assurance that any of such
shares offered will be sold.
(2) Over the past several years, Roundy's has issued shares
of Roundy's Class B Common as the major portion of its
patronage dividend payments. (See "THE COMPANY.") It
is expected that shares of Roundy's Class B Common will
be issued in this manner in the future.
(3) As of January 3, 1998, 61,095 shares were subject to redemption.
SELECTED FINANCIAL INFORMATION
The selected financial information for the five-year
period ended January 3, 1998 should be read
in conjunction with the Roundy's, Inc. and Subsidiaries
Consolidated Financial Statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Fiscal Year
(Dollars in thousands, except per-share data and ratios)
1997 1996 1995 1994 1993
--------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net sales and service
fees.................. $2,610,697 $2,579,010 $2,488,196 $2,461,510 $2,480,254
Earnings before
patronage dividends
and income taxes..... 25,206 23,466 20,251 11,055 20,053
Patronage dividends.... 5,687 5,568 5,129 0 5,301
Earnings before income
taxes................ 19,519 17,898 15,122 11,055 14,752
Net earnings............ 11,204 10,267 9,022 6,554 8,028
Total assets............ 440,310 434,641 407,337 404,652 380,092
Long-term debt.......... 83,458 93,615 78,850 88,227 113,045
Stockholders' equity(1).. 122,460 109,945 100,033 90,419 86,066
Book Value per share..... 104.35 94.30 85.15 77.40 71.65
Ratio of current assets
to current liabilities.. 1.39:1 1.42:1 1.43:1 1.43:1 1.64:1
Ratio of long-term debt to
stockholders' equity..... .68:1 .85:1 .79:1 .98:1 1.31:1
</TABLE>
(1) Includes redeemable common stock. Also includes
patronage dividends payable in Class B Common of
$3,738,000, $3,779,000, $3,405,000 and $3,263,000 for
1997, 1996, 1995 and 1993, respectively. There were
no patronage dividends for 1994 because the Company
did not meet the requirement to increase the Book Value
of its Common Stock by 10%.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
LIQUIDITY & CAPITAL RESOURCES
- -------------------------------
Two years ago we emphasized the Company's dedication to
developing, implementing and building its financial
strength, utilizing a disciplined approach under the
framework of Roundy's corporate strategic plan.
Keys to achieving the goals and objectives outlined in the
strategic plan were sales growth, continued profitability
and a strong capital structure. The 1997 financial results
have moved the Company a long way in the direction of
achieving many of its short-term goals. Specifically,
Roundy's achieved record sales, profits and the lowest ratio
of long-term debt to equity in over a decade.
In conjunction with the operating records, the Company
continued to strengthen its balance sheet and its cash flow
from operations. During each of the last two fiscal years,
Roundy's was able to retire $10.2 million in debt. Further,
it did not have to maximize the use of its revolving credit
agreement but rather utilized cash flow from
operations as the primary source for capital. In this
regard, cash flow from operations continued to improve, up
24.1% from 1996 and up 92.9% from 1995. The strong internal
cash flow also allowed the Company to reduce its total debt
and to maintain its low average cost of debt at 7.7%, both
for 1997 and 1996.
Additionally, average borrowings continued to decline.
These borrowings were $102.1 million in 1997 compared to
$106.1 million in 1996. With the repayment of debt and the
decline in average borrowings, Roundy's long-term debt to
equity ratio dropped to 0.68:1 in 1997 versus 0.85:1 in
1996.
The lowering of debt and the enhancing of interest income
through overnight investment of excess cash was the result
of several factors. Emphasis continues to be placed on
lowering inventory levels, which declined $4.7 million in
1997 compared to 1996 and $12.3 million compared to 1995.
Average equity in inventory declined to 33.5% in 1997 versus
34.3% in 1996. Lastly, average days sales outstanding in
accounts receivable declined to 9.2 days in 1997 versus 10.0
days in 1996.
An essential element in building and strengthening the
Company is a prudent capital expenditure program. In 1997,
the Company's capital expenditures exceeded $22.7 million
which was down $16.6 million from 1996's record year of
$39.3 million. Approximately $9.4 million and $7.8 million,
respectively, were spent for fleet additions and on
corporate retail stores in 1997. Further, the Company
purchased the stores of a former retail customer which
included fixed assets valued at $2.3 million. In excess of
$3.6 million was spent to remodel the Bluemound Pick `n Save
store and to open the new Oshkosh store. The balance of
capital expenditures was for warehouse enhancements,
warehouse equipment, computers and computer systems. A
decision was made to standardize all key systems within the
Company. In this regard, over $2.2 million was expended on
communications hardware and software and other data
processing equipment in an effort to facilitate that
process, maximize processing capabilities, reduce data
transmission costs and standardize all major systems within
the Company. The goal is to utilize standardization to (1)
bring all divisions' data processing capabilities to a
desired level of performance, (2) reduce day to day
processing costs, (3) facilitate changes to more modern
systems and (4) coordinate this effort with the Company's
Year 2000 project.
The Company's 1997 and 1996 capital structures are
summarized in the table below:
Capital Structure (in 1997 1996
millions)
Long-term debt $ 83.4 40.5% $ 93.6 46.0%
Stockholders' equity 122.5 59.5 109.9 54.0
Total capital $205.9 100.0% $203.5 100.0%
An important ratio which management continues to monitor is
the Company's current ratio. The Company's goal is to
maintain a strong current ratio and minimize the investment
of corporate resources in receivables and inventory. As
noted previously, average days sales outstanding in accounts
receivable has declined over 8.0% from 1996 and 14.8% from
1995. Further, inventory turns improved to 15.4 turns in
1997 compared to 14.6 turns for 1996 and 14.1 turns for
1995. The implementation of a standard, modern buying
system at all divisions, reducing investment in inventory
and expanding of electronic purchasing with a greater number
of vendors resulted in a 1997 current ratio of 1.39:1 versus
1.42:1 for 1996. This ratio meets credit agreement
requirements and is in line with the Company's strategic
goal for maintaining an appropriate current ratio while
minimizing its working capital investment.
Book value per share increased 10.7% in 1997 to $104.35 per
share from $94.30 per share for 1996. Patronage dividends
were also up 2.1% to $5.7 million for 1997 versus $5.6
million for 1996. Finally, stockholders' equity in 1997
increased $12.5 million or 11.4% compared to 1996 and
increased $22.4 million or 22.4% from 1995.
RESULTS OF OPERATIONS
- ---------------------
The year 1997 represented a 53 week year for Roundy's. Net
sales and fees for the year increased $31.7 million or 1.2%
compared to 1996 and $122.5 million or 4.9% compared to
1995. These increases were significant during a time of low
inflation and intense competition. Further, the increases
were in all areas of the business including wholesale
grocery, non-foods and corporate retail store operations.
The Company had a net decrease of four Company operated
stores in 1997 compared to 1996 and a net decline of five
stores compared to 1995. An effort was made to dispose of
unprofitable stores, which will strengthen ongoing total
retail operations. In this regard, the Company acquired
three stores from a former customer during the year, and the
volume generated from these stores was a major reason for
the growth at retail in 1997. Finally, the non-foods
divisions continue to grow achieving a 3.6% increase in
sales compared to 1996 and a 7.5% increase compared to 1995.
Gross profits in total are relatively flat compared to 1996
levels, but up 0.34% over 1995. The modest increase over
1995 in gross profits is indicative of the increasing
competitive pressure. During 1997, certain divisions began
implementing programs which were directed at lowering
product cost to retailers. The full impact of these
programs will be realized in 1998, but there was some impact
in 1997. The primary reason for the modest increase in
gross profits for 1997 and 1996 compared to 1995 is the
growth in corporate retail sales. These sales, which
maintain a higher gross profit percent than wholesale sales,
have increased an average of 13.7% over the past two years.
Some continuing programs directed at improving Company gross
profits include expansion of category management,
implementation of modern buying systems and expanded
promotional programs.
Operating and administrative expenses, as a percent to net
sales and service fees, were down 0.20% from 1996 but were
up 0.21% from 1995. A major goal of the Company's strategic
plan is the reduction of operating and administrative
expenses. These expenses, excluding corporate retail
operations and depreciation expenses, reflect a declining
trend. Excluding both of these expenses, 1997 operating and
administrative expenses were 5.43% of net sales and service
fees compared to 5.55% in 1996 and 5.70% in 1995. The
declining percentage is the result of several factors
including a reduction in bad debt expense, down $2.9 million
from 1996 and $3.5 million from 1995, improved efficiencies
due to more modern data processing systems and payroll
reductions.
The growth in Company-owned retail operations has increased
the overall operating and administrative expense ratio due
to its higher wage expense and operating costs as a percent
to sales, versus wholesale operations. Further, the cost of
closing non-performing corporate stores has impacted the
1997 percentage modestly. The retail impact on the
Company's operating and administrative expense ratio
represents a challenge for management, but it is recognized
that corporate stores are essential to Roundy's achieving
many of the key goals and objectives of its strategic plan.
The future challenge is to continue to grow retail within
the guidelines of the strategic plan and improve
productivity in the wholesale divisions to control the
impact on total costs of operations.
The Company has undertaken a major effort to upgrade and
standardize all major computer systems. The new systems
have been a key factor in allowing the Company to achieve
greater efficiencies and reduce staff. In contrast, the cost
of new systems and other required capital expenditures has
caused depreciation expense to increase to 0.66% of net
sales and service fees for 1997 versus 0.63% for 1996 and
0.55% for 1995.
Interest expense continued on a positive trend as a percent
of sales. In 1997, interest expense represented 0.31% of
net sales and service fees versus 0.33% in 1996 and 0.32% in
1995. 1996's percentage was up modestly from 1995, due to
the financing of the high level of capital expenditures in
1996. In 1997, a major emphasis was placed on establishing
a five year program for capital expenditures to achieve a
more balanced spending program and a better management of
resources. Additionally, steps were taken to further reduce
inventory levels and improve inventory turns. This, coupled
with a reduction in accounts receivable and the growth in
cash flow generated from internal sources, enabled the
Company to reduce borrowings and lower interest expense.
The effective income tax rates for 1997, 1996 and 1995 were
42.6%, 42.6% and 40.3%, respectively. The effective rate
continues to be unfavorably impacted by goodwill from the
recent purchases of retail grocery stores.
Net earnings continued a strong, positive trend, achieving a
record level of 0.43% of net sales and service fees compared
to 0.40% for 1996 and 0.36% for 1995. Management firmly
believes that its efforts in developing and executing the
program identified in its strategic plan are the main
factors enabling the Company to reach higher earnings
levels. Record sales levels, improved systems, reductions
in inventory and accounts receivable have all contributed to
lower operating expenses, lower borrowing levels and record
earnings in 1997.
The Company has developed preliminary plans to address the
possible exposures related to the impact on its computer
systems for the Year 2000. Key financial, information and
operational systems have been assessed and detailed plans
have been developed to address systems modifications
required. The cost of achieving Year 2000 compliance is
estimated to be approximately $8 million over the normal
cost of software upgrades and replacements. This amount will
be incurred during 1998 and 1999.
SUBSEQUENT EVENT
- -----------------
In the early morning hours of February 27, 1998, the Company
experienced a fire at its Evansville, Indiana warehouse.
Because of high winds, the fire completely destroyed that
frozen food facility, including both the building and all of
the inventory contained therein. There were no injuries and
the employees working at the time of the fire were able to
save all the tractors and trailers on the premises.
Shortly after the fire was put out, the Company began
working on transferring the business to Lima, Ohio and South
Bend, Indiana warehouses. The first priority was to put the
customers back in service with respect to their frozen food
needs. The second priority will be the planning for the
replacement of the frozen food warehouse.
The Company cannot reasonably estimate, at this time, the
total loss experienced or the exact amount to be recovered
under its insurance policies. Preliminary indications are
that such amounts may be significant. However, it is
believed that total losses will not exceed the Company's
insurance coverage limits, which include both business
interruption and property loss coverage.
THE COMPANY
General
Roundy's, Inc. and its subsidiaries (collectively the
"Company") are engaged principally in the wholesale
distribution of food and non-food products to supermarkets
and warehouse food stores located in Wisconsin, Illinois,
Michigan, Indiana, Ohio, Kentucky, Missouri, Arkansas,
Pennsylvania, Tennessee and West Virginia. The Company also
owns and operates 13 retail warehouse food stores under the
names "Pick 'n Save" or "Park & Save," one limited
assortment food store under the name "Mor For Less" and 7
conventional food stores under the names "Ron &
Lloyd's," "Park & Shop," "Price Less" or "Buy Low Foods."
The Company offers its retail customers a complete line of
nationally-known name brand merchandise, as well as a number
of its own private and controlled labels. The Company services
842 retail grocery stores.
In addition to the distribution and sale of food and
nonfood products, the Company provides specialized support
services for retail grocers, including promotional
merchandising and advertising programs, accounting and inven
tory control, store development and financing and assistance
with other aspects of store management. The Company
maintains a staff of trained retail counselors who advise
and assist individual owners and managers with store
operations.
Roundy's, Inc. was incorporated in 1952 under the
Wisconsin Business Corporation Law. The Company's executive
offices are located at 23000 Roundy Drive, Pewaukee,
Wisconsin 53072, and its telephone number is (414) 547-7999.
Operation as a Cooperative
- --------------------------
Roundy's has historically operated its food wholesale
business on a cooperative basis, and therefore determined
its Federal income tax liabilities under Subchapter T of the
Internal Revenue Code, which governs the taxation of
corporations operating on a cooperative basis.
Substantially all of Roundy's outstanding Class A (Voting)
Common is owned by the owners ("stockholder-customers") of
126 retail grocery stores serviced by Roundy's. These
stockholder-customers, who own approximately 71% of the
combined total of Class A Common and Class B Common, may
receive patronage dividends from Roundy's based on the sales
of Roundy's to such stockholder-customers. The patronage
dividend is payable at least 20% in cash and the remainder
in Class B Common. Patronage dividends for the years ended
January 3, 1998 and December 28,1996 and December 30, 1995 were payable 30%
in cash and 70% in Class B Common. See "Payment Of Patronage Dividends".
See "Payment of Patronage Dividends." Under Subchapter T of the Internal
Revenue Code, patronage dividends are deducted by Roundy's in determining
taxable income, and are generally taxable to the stockholder-customers
(including the value of the Class B Common), for Federal income tax purposes.
Roundy's anticipates that in the future it will
continue to operate on a cooperative basis in substantially
this manner, although it is not required to do so and its
operation on this basis, as well as its practice of paying
patronage dividends, could be terminated at any time by
action of the Board of Directors.
The subsidiaries of Roundy's do not operate as
cooperatives. The customers serviced by these subsidiaries
are independent grocers, operating 716 retail stores.
They do not receive patronage dividends. In addition,
approximately 29% of the outstanding combined Class A
Common and Class B Common is held by employees or former
customers of Roundy's and, although they participate in the
accumulation of equity in the Company, they do not receive
patronage dividends and do not own any Class A Common.
The applicable laws, regulations, rulings and judicial
decisions affecting the determination of whether a
corporation is operating on a cooperative basis for Federal
income tax purposes under Subchapter T of the Internal
Revenue Code are subject to interpretation. Although
management believes that Roundy's qualifies as a cooperative
for such purposes, Roundy's has not obtained, and does not
intend to seek a ruling or other assurance from the IRS that
this is the case. If the Internal Revenue Service were to
challenge the cooperative status of Roundy's, and if
Roundy's were to be unsuccessful in defending such status,
Roundy's might incur a Federal income tax liability with
respect to patronage dividends previously paid to
stockholder-customers during the tax years in question and
reflected as tax deductions by Roundy's. Roundy's
thereafter might incur significantly increased consolidated
Federal income tax liabilities in future tax years.
Wholesale Food Distribution
- ---------------------------
The Company distributes a broad range of food and
nonfood products to its customers and to corporate-owned
retail stores. The Company has seven product lines: dry
grocery, frozen food, fresh produce, meat, dairy products,
bakery goods and nonfood products. The Company has no long-
term purchase commitments and management believes that the
Company is not dependent upon any single source of supply.
No source of supply accounted for more than 8% of the
Company's purchases in fiscal 1997.
The Company sells brand name merchandise of unrelated
manufacturers, including most nationally advertised brands.
In addition, the Company sells numerous products under
private and controlled labels, including but not limited to
"Roundy's," "Old Time," "Shurfine" and "Buyers' Choice."
Private label product sales for the Company accounted for
$179,032,000, $175,459,000 and $166,045,000 of the Company's
sales during fiscal years ended January 3, 1998, December 28,1996
and December 30 1995, respectively.
As described above, Roundy's, exclusive of its
subsidiaries, has historically operated on a cooperative
basis with respect to its wholesale food distribution
business. Roundy's cooperative operations accounted for
approximately 37% of the Company's consolidated net sales
and service fees for fiscal 1997, 1996 and 1995.
At January 3, 1998, Roundy's had 68 stockholder-customers
actively engaged in the retail grocery business, operating
a total of 126 retail grocery stores. Roundy's cooperative
wholesale food business is focused primarily in Wisconsin,
where all but 4 of these 126 retail grocery stores are located
(4 are in Illinois). At January 3, 1998 the Company (including its
subsidiaries) had 716 independent retail food store
customers. Sales by the Company to the independent retail
food stores accounted for 52%, 52% and 54% of the
Company's consolidated net sales and service fees for fiscal
1997, 1996 and 1995, respectively.
The Company's primary marketing objective is to be the
principal source of supply to both its stockholder-customers
and other independent retailers. In an 11 state area the
Company serviced 126 retail grocery stores operated by
its stockholder-customers, 716 retail stores operated by
non-stockholders and 21 Company-owned and operated retail
stores during fiscal 1997. Of the Company's consolidated
net sales and service fees for this period, $640,614,200 or 24.5%
were attributable to five customers, with one customer
accounting for $271,689,800 or 10.4% of such sales.
Approximately 79% or 683 retail stores purchased less than
$3,000,000 each from the Company in fiscal 1997. 113 customers
owned more than one retail food store, with one customer owning 16
retail food stores.
The Company generally distributes its various product
lines by a fleet of 320 tractor cabs and 650 trailers
and some products are shipped direct from manufacturers to
customer locations. Most customers order
for their stores on a weekly basis and receive deliveries
from one to five days a week. Orders are generally
transmitted directly to a warehouse computer center for
prompt assembly and dispatch of shipments. The Company has
retail counselors and merchandising specialists who serve
its customers in a variety of ways, including the analysis
of and recommendation on store facilities and equipment;
development of programs and objectives for establishing
efficient methods and procedures for receipt, handling,
processing, checkout and other operations; informing
customers on latest industry trends; assisting and dealing
with training needs of customers; and, if the need arises,
acting as liaison or problem solver between the Company and
the customers. The retail counselors and specialists are
assigned a specific geographic area and periodically visit
each customer within their assigned area.
The Company renders statements to its customers on a
weekly basis to coincide with regular delivery schedules.
Roundy's accounts of single store owners are considered
delinquent if not paid on the statement date. Accounts of
multiple store owners are considered delinquent if not paid
within three days of the statement date. Accounts of
Roundy's subsidiaries are considered delinquent if not paid
within seven days of the statement date. The majority of
accounts are collected via the Automated Clearing House
("ACH") system. Delinquent accounts are charged interest at
the rate of prime plus 5%, computed on a daily basis.
During each of the past three fiscal years, the Company's
bad debt expense has been less than .24% of sales. In
1997, 1996 and 1995, the Company's bad debt
expense was $2,389,100, $5,302,600 and $5,871,500, respectively.
Retail Food Stores
- ------------------
The Company operates three types of corporate stores
(high volume-limited service retail "warehouse" stores, high
value-limited assortment retail stores and conventional
retail stores). The high volume-limited service warehouse
stores are designated as "Pick 'n Save" or "Park & Save"
which generally offer, at discount prices, complete food and
general merchandise lines to the customer, emphasizing
higher demand items, with stores ranging from 33,000 to
73,000 square feet per store. The high value-limited
assortment retail stores are designated as "Mor For Less" is
24,000 square feet and emphasizes low cost, high value lines
to the customer. Conventional retail stores operated
under the names "Ron & Lloyd's," "Park & Shop," "Price Less"
or "Buy Low Foods" generally emphasize full service to the customer
at competitive prices. These stores range from 9,000 to 42,000
square feet. The number of stores operated by the Company
at the end of its three most recent fiscal years was as
follows:
Type of Store 1997 1996 1995
High Value-Limited Assort-
ment and High Volume-Limited
Service Stores (Warehouse
food stores)..................... 14 16 15
Conventional Retail Stores....... 7 11 7
Sales of Company-operated stores during the three most
recent fiscal years were $291,613,000, $275,761,000 and
$226,513,000 for fiscal 1997, 1996 and 1995, respectively. The
additional volume of wholesale sales generated by the retail
stores owned and operated by the Company helps to reduce the
overhead of the business and increases the Company's return
to its stockholders.
Employees
- ---------
At January 3, 1998, the Company had
employed full-time 1,128 executive, administrative and
clerical employees, 1,267 warehouse and processing
employees and drivers and 768 retail employees and had
employed 1,908 part-time employees. Substantially all
of the Company's warehouse employees, drivers and retail
employees are represented by unions, with contracts expiring
in 1998 through 2001. The Company considers its
employee relations to be normal. There have been no
significant work stoppages during the last five years.
Substantially all full-time employees are covered by group
life, accident, and health and disability insurance.
Competition
- -----------
The grocery industry, including the wholesale food
distribution business, is characterized by intense
competition and low profit margins. The shifting of market
share among competitors is typical of the wholesale food
business as competitors attempt to increase sales in any
given market. In order to compete effectively, the Company
must have the ability to meet rapidly fluctuating
competitive market prices, provide a wide range of
perishable and nonperishable products, make prompt and
efficient delivery, and provide the related services which
are required by modern supermarket operations.
The Company competes with a number of local and
regional grocery wholesalers and with a number of major
businesses which market their products directly to
retailers, including companies having greater assets and
larger sales volume than the Company. The Company's
customers and the Company's corporate stores also compete at
the retail level with several chain store organizations
which have integrated wholesale and retail operations. The
Company's competitors range from small local businesses to
large national and international businesses. The Company's
success is in large part dependent upon the ability of its
independent retail customers to compete with larger grocery
store chains.
In the Milwaukee area, the "Pick 'n Save" group, which
consists of both independently-owned and Company-owned
stores, continues to be the market share leader with 49%
of households in the Milwaukee metropolitan statistical area
purchasing "most of their groceries" from "Pick 'n Save" as
reported in the Milwaukee Journal Consumer Analysis Survey
taken in the Fall of 1997.
In competing for customers, emphasis is placed on high
quality and a wide assortment of product, low service fees
and reliability of scheduled deliveries. The Company
believes that the range and quality of other business
services provided to retail store customers by the
wholesaler are increasingly important factors, and that
success in the wholesale food industry is dependent upon the
success of the Company's customers who are also engaged in
an intensely competitive, low profit margin industry.
Stockholder-Customers
- ---------------------
Substantially all of Roundy's (but not its
subsidiaries) customers are also stockholders of Roundy's.
Roundy's does not require that its stockholders buy
merchandise exclusively from Roundy's or that they purchase
a minimum amount of merchandise in order to remain
stockholders; however, for a stockholder-customer to remain
a holder of Class A Common, Roundy's must be such
stockholder-customer's principal source of supply. See
"EXCHANGE OF CLASS A COMMON FOR CLASS B COMMON." In order
to continue to be supplied by Roundy's, stockholders must
meet certain minimum order quantities.
Generally, Roundy's will stop selling to a shareholder
only when there has been nonpayment for merchandise
delivered or indebtedness payable to Roundy's or the
stockholder defaults in the payment of indebtedness that
Roundy's has guaranteed. In the event of such a
termination, Roundy's will repurchase such person's Common
Stock subject to the limitations described under "REPURCHASE
OF SHARES."
Each customer of Roundy's is required to maintain a
buying deposit for each Active Customer it operates in an
amount equal to the greater of $20,000 or the estimated
amount of purchases by the Active Customer from Roundy's
over a two week period (subject to Roundy's reserved right
to increase the amount of the deposit required of any
stockholder-customer). This deposit requirement may be
satisfied by either a cash deposit in the specified amount
(bearing no interest), or the collateral pledge of Class A
Common and/or Class B Common. In either case, a stockholder-
customer may make its entire deposit or payment in cash at
the outset of its customer relationship, or it may fulfill
part or all of its buying deposit requirement by means of
weekly or monthly payments, in accordance with an
amortization schedule forming a part of the Buying Deposit
Agreement between such stockholder-customer and Roundy's.
See "TERMS OF OFFERING--Buying Deposits; Application Of
Deposited Funds," and Exhibit B attached hereto.
In addition to the buying deposit described above,
Roundy's By-Laws provide that Roundy's has a lien against
all outstanding Class A Common and Class B Common as
security for the payment, from time to time and as often as
the same may become due and payable, of any and all
obligations of the holder to Roundy's and no shares of stock
held by a stockholder-customer will be transferred on the
books of Roundy's until all obligations of the stockholder-
customer to Roundy's have been paid in full. To perfect its
lien, Roundy's retains physical possession of the stock
certificate and provides the stockholder with a photocopy
thereof. If, at the time of a repurchase of stock from a
stockholder-customer, that person has an unpaid obligation
to Roundy's, or to any of its subsidiaries, the amount of
that obligation will be deducted from the proceeds payable
upon the repurchase of that stock. For a description of
other restrictions on transfer of stock contained in the
Company's By-Laws, see "DESCRIPTION OF STOCK--Restrictions
on Transfer."
Payment of Patronage Dividends
- ------------------------------
Roundy's is obligated by Article V of its By-Laws, as
amended, to pay a patronage dividend to its stockholder-
customers out of and based upon net earnings from business
done by Roundy's with such stockholder-customers in any
fiscal year in an amount which would reduce the net earnings
of the Company to such amount as will result in an increase
of 8% in the Book Value of the outstanding Roundy's Stock
as of the close of such fiscal year (calculated after the
payment of patronage dividends). The rate of increase in
Book Value was 10% for the three years in the period ended
January 3, 1998. For example, Book Value at January 3,
1998 was $104.35 per share. No patronage dividends for the
year ending January 2, 1999, may be paid until $8.35 (8% of $104.35)
per share is added to such Book Value. Based upon the number of
shares outstanding at January 3, 1998 earnings in the aggregate
amount of $9,499,753 must be retained before patronage dividends
may be paid. Any increase in Book Value over $8.35 must be
distributed in the form of patronage dividends to the extent
permitted by the Internal Revenue Code. Income from the
operations of subsidiaries and other income, from such
sources as investments in securities and the sale or
exchange of capital assets, constitutes income derived from
sources other than patronage and is not distributed as
patronage dividends. Consequently, the Book Value may
increase by more than minimum growth percentage required by
Article V of the By-Laws in any year.
The Board of Directors annually reviews Article V of its
By-Laws to insure the requirements contained therein are
consistent with Company goals. The increases in Book Value of
Roundy's Stock outstanding for the last three years are as follows:
Fiscal Increase in Book Minimum Requirement
Year Value Per Share Per Article V of By-Laws
- ------- ---------------- ------------------------
1997 10.7% 10%
1996 10.7% 10%
1995 10.0% 10%
There can be no assurance that patronage dividends will
be paid in the future, or, if paid, the amount or form of
payment thereof. Roundy's is under no obligation to pay
patronage dividends except to the extent provided by Article
V of its By-Laws, and these By-Law provisions are subject to
modification or repeal at any time by the Board of
Directors. A copy of Article V of the By-Laws, as amended,
is attached hereto as Exhibit C.
Patronage dividends, when paid, are payable in the
fiscal year following the fiscal year in which accrued. At
least 20% of the amount of patronage dividend must be paid
in cash, but a greater percentage may be paid in cash
depending on the cash needs of the Company at the time and
the necessity of compliance with the terms of the Company's
credit agreements.
Patronage dividends, if any, are determined on the
basis of qualifying sales by Roundy's to its stockholder-
customers. The amount distributed to any customer-
stockholder is therefore based on that customer's sales
volume and not its stock holdings. While stockholder-
customers effecting larger purchases from Roundy's may have
a greater stock equity interest in Roundy's, the voting
power of such customers will not increase in proportion
because each stockholder-customer is permitted to hold only
100 shares of Class A Common for each retail store it
operates, and the shares of Class B Common distributed as
patronage dividends are non-voting shares. (See
"DESCRIPTION OF STOCK" and "VOTING TRUST".)
Sections 1381 through 1388 of the Internal Revenue Code
provide that if 20% or more of the total patronage dividend
is paid in cash and the balance in "qualified written
notices of allocation", then Roundy's, when computing its
taxable income, may deduct the total patronage dividend in
determining its taxable income. Stockholder-customers who
receive "qualified written notices of allocation" (Class B
Common issued by Roundy's) are, in turn, required to include
the full stated dollar amount of the Class B Common and the
cash received in their respective tax returns as income when
received. A "written notice of allocation" becomes
"qualified" when the stockholder-customer consents to take
the Class B Common into its income at the stated dollar
amount. This consent occurs when a person signs a written
consent or when such person becomes a stockholder or remains
a stockholder after receiving written notice and a copy of
Roundy's By-Law provision stating that a person becoming or
remaining a stockholder of Roundy's shall be deemed to have
given the requisite consent. Each new stockholder-customer
is required to sign a consent which makes the certificates
representing shares of Class B Common issued to that
stockholder qualified written notices of allocation. The
requirement to pay 20% of the patronage dividend in cash has
had no material adverse effect on Roundy's.
The following table sets forth the total amount of
patronage dividends paid to stockholder-customers with
respect to purchases during the past four years, the
percentage paid in cash and in securities and the number of
shares of Class B Common issued:
Securities
Year Ended Total Dividend Cash % % No. of Shares
January 3, 1998 $5,687,000 30 70 36,386
December 28, 1996 5,568,300 30 70 40,013
December 30, 1995 5,128,500 30 70 39,928
In each year in which patronage dividends are paid, the
Board of Directors determines the percentage to be paid in
cash and in Class B Common shares. This percentage is
applied to the dollar amounts determined as the patronage
dividend payable to each respective stockholder-customer, to
determine the number of Class B Common shares to be
distributed to such person. The total dollar amounts
payable in cash and in securities in any given year to all
stockholder-customers will not correspond exactly to the
given percentages, principally because of rounding to avoid
the issuance of fractional shares, and because patronage
dividends payable to former stockholder-customers whose
shares have been redeemed during the fiscal year are, in
most cases, paid entirely in cash. Although a minimum of
20% of each recipient's total annual patronage dividend is
required to be paid by Roundy's in cash, the cash portion
may be insufficient, depending upon the income tax bracket
of each recipient, to provide funds for the full payment of
the federal income tax liability incurred by the recipient
with respect to such patronage dividends.
The preceding discussion is only a summary of the most
significant aspects of the taxation of cooperatives under
the Internal Revenue Code, based on the understanding of the
management of Roundy's, and should not be construed as tax
advice to any individual stockholder, each of which should
consult its own tax advisor for individual tax advice.
Roundy's may in its sole discretion pay patronage
dividends to nonstockholder-customers. No such dividends
have been paid in the last four years. Persons who are not
customers of Roundy's are not entitled to receive patronage
dividends. Computation of the amount of patronage dividends
payable to stockholder-customers in any year is made after
the determination of patronage dividends, if any, payable to
nonstockholder-customers.
For further information with respect to patronage
dividends, reference is made to Article V of Roundy's By-
Laws, attached hereto as Exhibit C.
Stockholder-Customer Services
- -----------------------------
Roundy's provides a variety of services described below
to its stockholder-customers to help them maintain a
competitive position within the retail grocery industry.
Roundy's charges for certain of these services and provides
other services as a general stockholder-customer benefit.
Such services are generally not offered to customers who are
not stockholders, but upon specific request of such a
customer some of these services may be rendered for a fee,
in the discretion of the officers of Roundy's. Overall, the
net income generated by these services is not material.
Roundy's services to stockholder-customers include the
following:
1. Pricing Services. Substantially all of the stockholder-
customers of Roundy's participate in one of three voluntary
pricing program options. Under each option, the individual
retailer retains full resale pricing discretion.
a. Zone Pricing. For each item Roundy's delivers to
stockholder-customer stores there have been established
several suggested retail price zones. The stockholder-
customer elects to have his merchandise invoiced and priced
at one of these zones based on his competitive situation and
location in the trading area. The retail
price that he chooses will be indicated on all of his
invoices and on up to ten cases of each item in every
delivery. Approximately 44% of the stockholder-customers
participate in the suggested zone pricing service.
b. Custom Pricing. Stockholder-customers who wish to
create and maintain their own unique pricing structure
participate in the "custom pricing" program. Subscribing
stockholder-customers provide Roundy's with the retail price
they wish to maintain on each item, and Roundy's indicates
these figures on the invoices and on up to ten cases of each
item in each delivery. The stockholder-customer may update
this pricing structure weekly in accordance with changes in
wholesale costs and competitive activity in his particular
market area. Approximately 100% of the stockholder-
customers participate in custom pricing.
c. Special Individual Pricing ("SIP"). Those
stockholder-customers desiring a more competitive pricing
structure than zone pricing but with less administrative
requirements than custom pricing may choose a SIP schedule.
This allows a stockholder-customer to select from each of
the zones certain categories of merchandise to meet his
particular competitive needs. Suggested retail prices are
changed periodically to reflect changes in the wholesale
cost of the item. In all cases the stockholder-customer may
make price changes on merchandise within their stores as
required by their own competitive market situation.
2. Ordering Assistance. Roundy's provides various
programs to increase the speed and efficiency of the order
transmittal process. It sells or rents to retailers
electronic units with which the retailer can transmit his
orders electronically by telephone.
3. Point of Sale Host-Computer Support. Upon request,
Roundy's will provide assistance to the retailer and
computer support in connection with the retailer's adoption
and use of scanners at the checkout counter.
4. Velocity Reports. If desired, Roundy's can provide
detailed summaries of all items ordered by the retailer from
Roundy's, together with pricing, prior period, and profit
margin data.
5. Store Engineering. Roundy's Store Engineering
department aids stockholder-customers in equipment
procurement, store engineering and site development
activities. For a fee, Roundy's will provide plat plans,
floor plans, elevations and other drawings for new or
remodeled stores, construction cost estimates and design
consultation. In addition, the department can procure many
types of store fixtures and equipment at a price reflecting
a volume discount.
6. Customer Loans. Roundy's has maintained a continuous
effort to assist qualified stockholder-customers and
independent retailers to remodel and expand existing retail
locations and to develop new retail outlets. The Company's
loans receivable as of January 3, 1998 are summarized in the
table below(2).
Outstanding
Number Balance Range of Range of
of Original as of Interest Maturity
Loans Amount JanDec. 3,1998 Rates Dates
--------- --------- --------------- ---------- -----------
Inventory,
Equipment
Loans 124 $34,772,600 $24,427,000 Variable(1) 19987-2011
(1) Variable rates based on the Company's cost of borrowing.
(2) The Company has guaranteed customer bank loans and
customer leases amounting to $480,000 and $756,900,
respectively at January 3, 1998. These amounts are not
included in the table above.
7. Lease Program. The Company has a lease program under
which it may in its discretion lease store sites and
equipment for sublease to qualified customers. This enables
customers to compete with large grocery store chains for
store sites at favorable rates. The Company presently has
such real estate and equipment leases with lease terms from
1998 to 2018. Aggregate lease rentals received under this
program were $21,249,900, $21,628,300 and $22,045,500 in 1997,
1996 and 1995, respectively.
8. Retail Accounting. Roundy's has a retail accounting
program available for stockholder-customers using its data
processing equipment and expertise. The service includes
general ledger, payroll, personnel reports, sales and income
tax returns, accounts payable and financial reporting.
Stockholder-customers may select any one or more parts of
the program or the complete package. Approximately 74 stores
participate in this program. The service charges
depend on the services received by the stockholder-customer.
9. Group Advertising. Roundy's regularly sponsors
institutional brand advertising of Roundy's and Old Time
products for all stores on a continuing basis. This
advertising, which may include TV, radio, newspaper and
anniversary sales is intended to help promote the sales of
the Roundy's private label products. All stockholder-
customers may utilize Roundy's Group Advertising Program.
Each week these retailers receive ad planners with suggested
feature items together with window signs, shelf talkers and
newspaper layouts. The Group Advertising Staff assists the
stores in the improvement of their local advertising program.
10. Bakery Program. Retailers participate in Roundy's
bakery program, taking advantage of centralized buying.
Three programs are offered: rack service stocked by the
bakery representative, with and without returns on unsold
merchandise, and drop shipments without returns. All
programs are delivered directly from the supplier to the
retailer, but are billed through Roundy's.
11. Merchandising. Roundy's merchandising service advises
customers on such matters as in-store promotions, internal
store arrangements and shelf utilization.
12. Insurance. Roundy's has a general insurance agency
that markets commercial property and casualty, personal
lines, all group products, and life insurance. The agency
primarily specializes in programs for the food industry.
13. Real Estate. Roundy's has a real estate department
that provides site surveys, financial projections, business
valuations, lease negotiations, and sales of supermarkets
and residential properties.
14. Retail Training Programs. Roundy's has instituted and
maintained an ongoing training program for its stockholder-
customers. The planned programs include professionally
conducted seminars relating to all departments of the store
and management. The programs are also geared to present the
retailers with up-to-date information on market changes and
new innovations on energy, productivity and scanning. The
program also makes available to the retailer a film library,
home study courses, programmed instructions, manuals and an
audiscan program to train fully all of the retailer's
employees.
15. Miscellaneous Advisory Services. Roundy's has retail
counselors and merchandising specialists, who serve the
stockholder-customers in a variety of ways, including the
analysis of and recommendations on store facilities and
equipment; development of programs and objectives for
establishing efficient methods and procedures for receipt,
handling, processing, checkout and other operations; informing
stockholder-customers on latest industry trends; assisting
in dealing with training needs of stockholder-customers;
and, if the need arises, acting as liaison or problem-solver
between Roundy's and the stockholder-customer. The retail
counselors and specialists are assigned specific geographic
areas and periodically visit each customer within their
assigned areas.
Real Estate
- -----------
The Company's principal executive offices are located
in Pewaukee, Wisconsin. These offices are on a 5-acre site.
A portion of these facilities are owned by Roundy's and the
remainder are leased from a third party.
Wholesale activities are conducted by the Company from
the following warehouses:
Approximate
Warehouse
Location Products Distributed Square Footage
- --------- --------------------- ----------------
Wauwatosa, Wisconsin All product lines, 745,000 (O)
(Two facilities) except nonfood products 192,000 (L)
Mazomanie, Wisconsin Dry groceries and 225,000 (L)
nonfood products
Westville, Indiana All product lines, 557,000 (O)
except nonfood products
Lima, Ohio All product lines, 460,000 (O)
(Two facilities) except produce and 94,000 (L)
nonfood products
Eldorado, Illinois Dry groceries and 384,000 (O)
dairy products
Van Wert, Ohio Nonfood products 115,000 (L)
South Bend, Indiana Frozen foods 84,000 (L)
Muskegon, Michigan All product lines, 215,000 (O)
except produce
O = Owned L = Leased
The Company believes its current properties are well
maintained and, in general, are adequately sized to house
existing operations.
The Company is subject to regulation by the United States
Food and Drug Administration and to certain state and local
health regulations in connection with the operations of its
facilities and its wholesale food business. The Company has
not been subject to any actions brought under such
regulations in the past five years.
Subsequent Event
- ----------------
In the early morning hours of February 27, 1998, the Company
experienced a fire at its Evansville, Indiana warehouse.
Because of high winds, the fire completely destroyed that
frozen food facility, including both the building and all of
the inventory contained therein. There were no injuries and
the employees working at the time of the fire were able to
save all the tractors and trailers on the premises. Shortly
after the fire was put out, the Company began working on
transferring the business to the Lima, Ohio and South Bend,
Indiana warehouses. The first priority was to put the
customers back in service with respect to their frozen foods
needs. The second priority will be the planning for the
replacement of the frozen food warehouse. The Company
cannot reasonably estimate, at this time, the total loss
experienced or the exact amount to be recovered under its
insurance policies. Preliminary indications are that such
amounts may be significant. However, it is believed that
total losses will not exceed the Company's insurance
coverage limits, which include both business interruption
and property loss coverage.
Transportation
- ---------------
The Company's transportation fleet for distribution
operations as of December January 3, 1998 consisted
of 320 tractor cabs, 650 trailers and 10 straight
delivery trucks. In addition, the Company owns 45
automobiles. Approximately 98% of the fleet is owned by
the Company and the balance is leased.
Computers
- ---------
The Company owns most of its computers and related
peripheral equipment. The computers are used for inventory
control, billing and all other general accounting purposes.
The computer systems are adequate for the Company's
operations.
Legal Proceedings
The Company is not involved in any material litigation
as either a plaintiff or defendant, nor is any other
material litigation contemplated by Roundy's or, to the best
of its knowledge, threatened against it. Although, the
Company is involved in various claims and litigation arising
in the normal course of business, in the opinion of
management, the ultimate resolution of these actions will
not materially affect the consolidated financial position,
results of operations or cash flows of the Company.
MANAGEMENT
The Directors and Executive Officers of Roundy's are as follows:
Position(s) Held with Roundy's
Name Age and Business Experience
- ------------------ ------ -----------------------------------
Gerald F. Lestina 55 President and Chief Executive Officer
since 1995; President and Chief Operating
Officer 1993-1995; Vice President of
Wisconsin Region 1992-1993; President of
Milwaukee Division 1986-1993; Director
since 1991 (term expires 1999)
Roger W. Alswager 49 Vice President of Real Estate since 1989
Londell J. Behm 47 Vice President of Advertising since 1987
Ralph D. Beketic 51 Vice President-Wholesale since 1996;
Vice President-Wisconsin Region 1996;
President of Milwaukee Division since
1993; Vice President of Sales-Milwaukee
Division 1991-1993
David C. Busch 49 Vice President of Administration since
1993; Vice President of Human Resources
1990-1993
Edward G. Kitz 44 Vice President, Secretary & Treasurer
since 1995; Vice President & Treasurer
since 1989-1994
Charles H. 55 Vice President of Logistics and Planning
Kosmaler, Jr. since 1993; Vice President of Adminis-
trative Efficiencies 1992-1993
Debra A. Lawson 42 Vice President of Human Resources since
1997; Vice President Administration-
Milwaukee Division 1994-1996; Director of
Consumer Affairs, Training and Development
1991-1993
John E. Paterson 50 Vice President-Distribution since 1997;
Vice President of Operations-Milwaukee
Division 1993-1996; Vice President of
Distribution for Quincy, Florida Division
of SUPERVALU INC. 1991-1993
Robert D. Ranus 57 Vice President and Chief Financial Officer
since 1987; Director since 1987 (term
expires 2000)
Michael J. Schmitt 49 Vice President-Sales and Development since
1995; Vice President, Northern Region
1992-1995
Marion H. Sullivan 51 Vice President of Marketing since 1989
Robert E. Bartels 60 Director since 1994 (term expires 2000);
President and Chief Executive Officer of
Martin's Super Markets, Inc., South Bend,
Indiana
Charles R. Bonson 51 Director since 1994 (term expires 2000);
President of Bonson's Foods, Inc., Eagle
River, Wisconsin
Robert S. Gold 55 Director since 1998 (term expires 2001);
President and Stockholder of B.& H. Gold
Corporation, Gold's Market, Inc. and
Gold's, Inc., in Brown Deer, Grafton and
Milwaukee, Wisconsin
Gary N. Gundlach 54 Director since 1990 (term expires 1999);
Owner of Pick 'n Save retail grocery
stores in Columbus, DeForest, McFarland,
Stoughton and Sun Prairie, Wisconsin
George C. Kaiser 65 Director since 1986 (term expires 2001);
Chairman and Chief Executive Officer,
Hanger Tight Company since 1988; Chief
Executive Officer, George C. Kaiser and
Co. since 1988; Director of The Baird
Funds, Inc. since 1992
Patrick D. McAdams 48 Director since 1995 (term expires 2001);
General Manager and Treasurer of McAdams,
Inc., Oconomowoc, Wisconsin
Brenton H. Rupple 73 Director since 1993 (term expires 1999);
Retired Chairman of Robert W. Baird & Co.,
Milwaukee, Wisconsin
Gary R. Sarner 51 Director since 1997 (term expires 2001);
Chairman, Total Logistic Control, LLC
since 1996, President and Chief Operating
Officer, Christiana Companies, Inc. 1996-
1997
Directors of Roundy's are elected by class and
generally serve three-year terms; approximately one-third of
the Board of Directors is elected annually. Of the ten
current members of the Board of Directors, two are currently
Executive Officers of Roundy's (Messrs. Lestina and Ranus)
and four are "Retailer Directors" (Messrs. Bonson, Gold,
Gundlach and McAdams). The terms of the Roundy's, Inc. Voting
Trust provide that each year the Trustees will vote to elect one
stockholder-customer, chosen by a plurality vote of the Voting Trust
Certificate Holders, to serve a three-year term as Director;
however, the Roundy's, Inc. Voting Trust provides that in
every third year, Voting Trust Certificate Holders will
choose two Retailer Directors. Therefore, at any time there
should be four Retailer Directors serving. See VOTING
TRUST.
DESCRIPTION OF STOCK
Authorized Shares
- -----------------
Roundy's is authorized by its Articles of Incorporation
to issue 60,000 shares of Class A Common, $1.25 par value,
and 2,400,000 shares of Class B Common, $1.25 par value. On
April 4, 1998 123,400 shares of Class A Common and 1,158,760
shares of Class B Common were outstanding.
Voting Rights
- -------------
Holders of Class A Common are entitled to one vote for
each share held, on all matters which are submitted to a
vote of stockholders. Stockholders are not entitled to
cumulative voting rights. All of the shares of Class A
Common outstanding as of the date of this Prospectus are
owned of record by the Trustees of the Voting Trust. Shares
deposited in the Voting Trust will be voted in the manner
provided in the Voting Trust Agreement. See "VOTING TRUST."
Except as otherwise required by law, holders of Class B
Common are not entitled to vote on any matter submitted to a
vote of the stockholders. The Wisconsin Statutes provide
that the holders of the outstanding shares of a class of
stock must be entitled to vote as a class upon any proposed
merger, share exchange, sale of all or substantially all
assets of a company or any amendment to the articles of
incorporation which would, in either case, alter the rights,
preferences, or relative status of the shares in any of a
number of specified ways. These are the only circumstances
in which holders of Class B Common are entitled to vote as
stockholders.
Dividend Rights
- ----------------
Holders of Class A Common and Class B Common are
entitled to such dividends as may be declared by the Board
of Directors. However, Roundy's does not expect to pay any
dividends in the foreseeable future other than patronage
dividends as described under "THE COMPANY--Payment of
Patronage Dividends." Stockholders who are not customers of
Roundy's are not entitled to receive patronage dividends.
Liquidation Rights
- -------------------
In the event of the voluntary or involuntary
liquidation of Roundy's, the holders of Class A Common and
Class B Common will be entitled to share ratably in the
assets of Roundy's remaining after payment of all Roundy's
liabilities.
Repurchase of Shares
- ---------------------
Subject to certain limitations, Roundy's is obligated
to repurchase Class A Common and Class B Common upon written
request from stockholders who have terminated or
substantially reduced their customer or employee
relationships with Roundy's. Roundy's may, but is not
obligated to, purchase shares held by other stockholders.
See "REPURCHASE OF SHARES."
Restrictions on Transfer
- -------------------------
Roundy's Articles of Incorporation provide that no
shares of Class A Common or Class B Common may be
transferred for any purpose (including, but not limited to,
sales, gifts, testate or intestate inheritance or pledge)
unless and until (i) such transfer has received the prior
written consent of Roundy's or (ii) Roundy's has agreed in
writing to repurchase such shares and has failed to satisfy
such obligation.
The certificates representing Class A and Class B
Common bear a legend setting forth the foregoing limitations
on the resale of such shares.
Other Restrictions and Rights
- -----------------------------
The Class A Common and Class B Common, the full
consideration for which has been paid, will not be subject
to any further calls or assessments by Roundy's. However,
Section 180.0622(2)(b) of the Wisconsin Business Corporation
Law imposes on stockholders personal liability in an amount
equal to the par value of their respective shares, or in an
amount equal to the consideration paid for such shares in
the case of no-par value stock, for all debts owing to
employees of Roundy's for services performed for Roundy's,
not exceeding six months' service in any one case. In a
split decision without precedential value, the Supreme Court
of Wisconsin has affirmed a lower court ruling holding that
"par value," for purposes of this statute, should be
construed to mean the "subscription price paid for the
stock."
Roundy's has a first lien upon any shares of its stock
held by any stockholder for the amount of any indebtedness
payable to the Company by such stockholder. To perfect its
lien, Roundy's retains physical possession of the stock
certificate and provides the stockholder with a photocopy
thereof. No sale or transfer of any such stock shall be
made until all such indebtedness to the Company shall have
been paid in full. See "THE COMPANY--Stockholder-
Customers."
Transfer Agent
- ---------------
Roundy's acts as its own transfer agent for its Class A
and Class B Common.
Reports to Stockholders
- -----------------------
Roundy's will furnish annual reports to its
stockholders within 120 days after the end of each fiscal
year which will include financial statements audited by
independent certified public accountants.
VOTING TRUST
Each purchaser of Class A Common is requested, but not
required, to deposit such shares in the Roundy's, Inc.
Voting Trust (the "Trust"). Such requests will be made only
by means of a Prospectus relating to the Voting Trust
Certificates.
The Trust was established in August, 1971, (was amended
and restated in 1983 and was further amended in 1986 and in
1995), as the successor to an initial voting trust created
at the time of the organization of Roundy's. The Trust has
an indefinite term, although it may be terminated upon the
vote of the Voting Trust Certificate Holders as provided
therein. The main purpose for the establishment of the
Trust, and its predecessor, was to insure the stability of
management necessary to obtain long-term warehouse and other
financing. At present, the Trust owns of record all of the
outstanding Class A Common.
Stockholders depositing shares of Class A Common in the
Trust will receive Voting Trust Certificates evidencing
beneficial ownership of the number of shares deposited.
Such certificates are not negotiable or transferable.
The Voting Trust Agreement authorizes the Trustees to
vote all shares deposited in the Trust, in their discretion,
for the election of all but four of the Directors (there are
currently ten Directors). On other matters submitted to a
vote of stockholders (including the election of one Director
each year), the Trustees are required to vote the shares
deposited in the Trust as a block as directed by a vote of
the holders of outstanding Voting Trust Certificates (with
each share of Class A Common in the Trust entitling the
depositor thereof to one vote). With respect to the
election of the Director to be elected by the Voting Trust
Certificate holders, the candidate receiving the greatest
number of votes from among the Voting Trust Certificate
holders shall receive all of the votes represented by shares
held in the Voting Trust. On all other matters submitted to
a vote of the Voting Trust Certificate holders, the shares
of Class A Common held in the Voting Trust shall be voted as
directed by a majority of the Voting Trust Certificate
holders (except that, with respect to certain fundamental
matters submitted to a vote of stockholders, including the
merger of Roundy's, liquidation or sale of all its assets,
the requisite approval is increased to a two-thirds majority
of Voting Trust Certificate holders unless such action has
been recommended by the Board of Directors). The Wisconsin
Business Corporation Law provides shareholders of Wisconsin
business corporations, such as Roundy's, with the right to
dissent from certain corporate actions (for example, a
merger, consolidation, certain amendments to the Articles of
Incorporation, and certain other specified corporate
transactions) and receive "fair value" for their shares in
lieu of any other consideration offered for such shares in
connection with the proposed transaction or action
("Dissenter's Rights"). Although the shares of Class A
common are held of record by the Trustees of the Voting
Trust, the Voting Trust Agreement specifies that Voting
Trust Certificate holders are entitled to exercise any
Dissenter's Rights which arise from a proposed corporate
action or transaction on the part of Roundy's, and the
Voting Trust Agreement specifies the procedure for a Voting
Trust Certificate holder to notify the Trustees of his, her
or its intention to exercise such Dissenters' Rights. The
Voting Trust Agreement provides further that: (a) in the
event the Voting Trust is terminated upon the effectiveness
of such corporate action or transaction on the part of
Roundy's, then shares of Class A Common shall be distributed
to the Voting Trust Certificate holder who shall thereafter
be responsible for complying with the appropriate statutory
procedures for obtaining "fair value" for such shares , and
(b) that, if the Voting Trust is not terminated upon the
effectiveness of such corporate action or transaction on the
part of Roundy's, then a Voting Trust Certificate holder who has
notified the Trustees of his, her or its intention to
exercise Dissenters' Rights shall be deemed to have
withdrawn such shares from the Voting Trust and such shares
will be distributed to such dissenting shareholder in
accordance with the Voting Trust Agreement. A meeting of
Voting Trust Certificate holders is held prior to each
meeting of stockholders for the purpose of presenting to the
Certificate holders the matters to be voted upon at the
stockholders' meeting. The format of the Voting Trust
Certificate holders' meeting follows that of a customary
meeting of stockholders with respect to notice and the
opportunity to vote in person or by proxy.
Persons holding certificates issued with respect to
shares deposited in the Trust (as amended and restated)
prior to September 16, 1983 who agreed to the amended and
restated Voting Trust Agreement prior to December 17, 1983
have an annual right to withdraw such shares from the Trust.
All other Voting Trust Certificate holders must wait until
their shares of Class A Common have been on deposit for five
full years before becoming entitled to withdrawal rights.
No more than one-third of the total number of shares of
Class A Common outstanding may be withdrawn in any single
calendar year. The Trustees give notice of this right of
withdrawal to each person entitled to withdraw shares on or
before January 31 of each year, and all withdrawals must
take place during the months of February or March.
In addition to the revisions to the Voting Trust
Agreement constituting Amendment 1995-1, the Voting Trust
Agreement was amended to increase the number of retailer
directors to four, and corresponding amendments were made to
the related provisions of the Voting Trust Agreement (for
example, the number of Retailer-Trustees' terms expiring
will now be two in every third year, meaning there will be
two vacancies to be filled every third year and that the
advisory committee will nominate 5 instead of three to fill
2 seats instead of one).
All cash dividends received by the Trustees on the
shares of Class A Common deposited in the Trust will be paid
by them to the Voting Trust Certificate holders. Any stock
dividends payable in Class A Common will be retained by the
Trustees and a like number of additional Voting Trust
Certificates will be issued to the depositors. In the event
of a liquidation of Roundy's, all money or property received
by the Trustees with respect to the stock deposited in the
Trust will be distributed
among the depositors in proportion to their respective stock
interests in the Trust.
The Voting Trust Agreement provides that there shall be
seven Trustees, consisting of two "Officer Trustees"
(currently Gerald F. Lestina and Edward G. Kitz), who shall
be officers of Roundy's; two "Independent Trustees"
(currently Bronson J. Haase and Robert R. Spitzer),
who shall be persons having executive business management experience
who are independent from the management and stockholders of Roundy's;
and three "Retailer Trustees" (currently Victor C. Burnstad,
David J. Spiegelhoff and David A. Ulrich), who shall be stockholder-
customers of Roundy's but may not be Directors. The term of an
Officer Trustee is determined by the Board of Directors, and an
Officer Trustee automatically ceases to be a Trustee upon ceasing to be an
officer of Roundy's. Retailer Trustees and Independent Trustees serve
five-year terms. Successor trustees are appointed by majority vote of
the remaining Trustees.
Mr. Burnstad is President and stockholder of Burnstad Bros., Inc.,
a stockholder-customer of Roundy's. Mr. Spiegelhoff is Vice President of
Portage Pick 'N Saves, Inc. and Super Foods Market, Inc., stockholder-
customers of Roundy's. Mr. Ulrich is principal stockholder of Mega Marts,
Inc., a stockholder-customer of Roundy's. For information concerning
Mr. Lestina and Mr. Kitz see "MANAGEMENT."
The Voting Trust may be deemed to be an "affiliate" of
Roundy's, and the Trustees of the Voting Trust, as a group,
may be considered to be "parents" of Roundy's, as these
terms are defined in the Securities Act of 1933, as amended,
and the regulations thereunder.
LEGAL MATTERS
The legality of the Class A Common and Class B Common
offered hereby has been passed upon by Whyte Hirschboeck
Dudek S.C., 111 East Wisconsin Avenue, Suite 2100,
Milwaukee, Wisconsin 53202.
EXPERTS
The consolidated financial statements of Roundy's, Inc.
and subsidiaries and the related consolidated financial
statement schedules as of January 3, 1998 and December 28, 1996
and for each of the three years in the period ended January 3, 1998
and incorporated by reference in this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as
stated in their reports, which are included and incorporated
by reference herein, and have been so included and
incorporated in reliance upon the reports of such firm given
upon their authority as experts in accounting and auditing.
INDEMNIFICATION
Roundy's has, in its By-Laws, established a policy
indemnifying officers and directors for liabilities and
expenses arising out of their actions in their capacities as
officers and directors. This would include indemnification
for certain liabilities on the part of officers and
directors under the Securities Act of 1933 (the "Securities
Act"). It is the public policy of the state of Wisconsin,
as expressed in Section 180.0859 of the Wisconsin Business
Corporation Law, to require or permit indemnification
against claims arising under federal law and state
securities laws.
However, insofar as indemnification for liabilities
arising under the Securities Act may be permitted to
directors, officers or persons controlling Roundy's pursuant
to the foregoing provisions, Roundy's has been informed that
in the opinion of the United States Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore
unenforceable.
INDEX TO FINANCIAL STATEMENTS
Page
Roundy's, Inc. and Subsidiaries Audited Financial Statements:
Independent Auditors' Report F-2
Statements of Consolidated Earnings for each of the
three years in the period ended January 3, 1998 F-3
Consolidated Balance Sheets at January 3, 1998
and December 28, 1996 F-4
Statements of Consolidated Stockholders' Equity
for each of the three years in the period
ended January 3, 1998 F-6
Statements of Consolidated Cash Flows for each of
the three years in the period ended January 3, 1998 F-7
Notes to Financial Statements F-8
Independant Auditor's Report
To the stockholders and Directors of Roundy's, Inc.:
We have audited the accompanying consolidated balance sheets of
Roundy's, Inc. and its subsidiaries as of January 3, 1998 and December 28,
1996 and the related statements of consolidated earnings, stockholders'
equity and cash flows for each of the three years in the period ended
January 3, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the companies at
January 3, 1998 and December 28, 1996, and the results of their operations
and their cash flows for each of the three years in the period ended
January 3, 1998 in conformity with generally accepted
accounting principles.
Milwaukee, Wisconsin
February 20, 1998
STATEMENTS OF CONSOLIDATED EARNINGS
For The Years Ended January 3, 1998, December 28, 1996 and December 30, 1995
1997 1996 1995
Revenues:
Net sales and service fees $2,610,696,700 $2,579,010,200 $2,488,196,200
Other - net 3,695,700 4,494,700 3,966,100
-------------- --------------- --------------
2,614,392,400 2,583,504,900 2,492,162,300
-------------- --------------- --------------
Cost and Expenses:
Cost of sales 2,362,355,200 2,333,216,600 2,260,039,400
Operating and administrative 218,610,500 218,342,700 203,943,400
Interest 8,220,900 8,479,900 7,929,000
-------------- -------------- -------------
2,589,186,600 2,560,039,200 2,471,911,800
-------------- -------------- -------------
Earnings Before Patronage
Dividends 25,205,800 23,465,700 20,250,250
Patronage Dividends 5,687,000 5,568,300 5,128,500
------------- ------------ ------------
Earnings Before Income Taxes 19,518,800 17,897,400 15,122,000
------------- ------------ ------------
Provision (Credit) for
Income Taxes
Current-Federal 7,786,000 5,255,200 7,255,500
-State 1,722,300 859,800 1,177,400
Deferred (1,193,100) 1,515,500 (2,333,000)
------------- ----------- ----------
8,315,200 7,630,000 6,099,900
------------- ----------- ----------
Net Earnings $11,203,600 $10,267,400 $9,022,100
============ =========== ==========
CONSOLIDATED BALANCE SHEETS
As of January 3, 1998 and December 28, 1996
Assets 1997 1996
------------- ------------
Current Assets:
Cash and cash equivalents $ 52,366,900 $ 40,342,300
Notes and accounts receivable, less
allowance for losses, $5,648,700 and
$6,314,700, respectively 86,998,500 98,593,300
Merchandise inventories 150,898,000 155,562,300
Prepaid expenses 5,216,200 2,741,000
Refundable and future income tax benefits 6,227,800 7,817,400
------------ -------------
Total current assets 301,707,400 305,056,300
------------ -------------
Other Assets:
Notes receivable, less allowance for
losses, $5,299,000 and $5,576,000
respectively 11,604,600 12,386,600
Other real estate 7,152,500 4,439,700
Goodwill and other assets 13,696,700 12,100,600
Deferred income tax benefit 2,848,000 1,922,000
------------ ------------
Total other assets 35,301,800 30,848,900
------------ ------------
Property and Equipment - At Cost:
Land 5,602,000 5,343,900
Buildings 69,445,600 69,084,600
Equipment 115,757,400 101,679,800
Leasehold improvements 14,715,100 13,467,600
------------ -------------
205,520,100 189,575,900
Less accumulated depreciation
and amortization 102,219,500 90,840,100
------------ -------------
Property and equipment - net 103,300,600 98,735,800
------------ -------------
$ 440,309,800 $ 434,641,000
============= =============
See notes to consolidated financial
statements.
CONSOLIDATED BALANCE SHEETS
As of January 3, 1998 and December 28, 1996
Liabilities and Stockholders' Equity 1997 1996
------------- -------------
Current Liabilities:
Current maturities of long-term debt $ 10,156,800 $ 10,225,800
Accounts payable 155,001,500 159,038,100
Accrued expenses 50,148,300 44,358,400
Income taxes 2,327,100 936,100
------------ -------------
Total current liabilities 217,633,700 214,558,400
------------ -------------
Long-Term Debt, Less Current Maturities 83,457,800 93,614,600
Other Liabilities 16,758,000 16,522,700
------------ -------------
Total liabilities 317,849,500 324,695,700
Commitments and Contingencies (Note 10)
Redeemable Common Stock 6,375,300 6,217,100
Stockholders' Equity:
Common stock
Voting (Class A) 15,800 16,300
Non-voting (Class B) 1,346,600 1,325,200
------------ -------------
Total common stock 1,362,400 1,341,500
Patronage dividends payable in
common stock 3,738,000 3,779,000
Additional paid-in capital 28,588,300 24,920,600
Reinvested earnings 83,527,500 75,051,100
------------ -------------
117,216,200 105,092,200
------------ -------------
Less:
Treasury stock, at cost 1,131,200 1,131,200
Amount related to recording
minimum pension liability 0 232,800
------------- -------------
1,131,200 1,364,000
------------- -------------
Total stockholders' equity 116,085,000 103,728,200
------------- -------------
$ 440,309,800 $ 434,641,000
============= =============
<PAGE>
<TABLE>
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 3, 1998, DECEMBER 28, 1996 AND DECEMBER 30, 1995
<CAPTION>
Common Stock
------------------------------------ Patronage
Class A Class B Dividends Additional
------------------------------------ Payable in Paid-in Reinvested
Shares Amount Shares Amount Common Stock Capital Earnings
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 14,000 $17,500 1,082,792 $1,353,500 $21,741,200 $61,879,600
Net earnings 9,022,100
Common stock issued 200 200 12,755 16,000 931,400
Common stock purchased (800) (1,000) (17,446) (21,800) (384,500) (1,329,300)
Redeemable common stock (52,204) (65,300) (1,066,000) (3,313,900)
Patronage dividends payable
in common stock $3,405,000
-----------------------------------------------------------------------------------
Balance, December 30, 1995 13,400 16,700 1,025,897 1,282,400 3,405,000 21,222,100 66,258,500
Net earnings 10,267,400
Common stock issued 600 800 51,806 64,800 (3,405,000) 4,312,900
Common stock purchased (1,000) (1,200) (10,433) (13,100) (449,200) (980,300)
Redeemable common stock (7,090) (8,900) (165,200) (494,500)
Patronage dividends payable
in common stock 3,779,000
-----------------------------------------------------------------------------------
Balance, December 28, 1996 13,000 16,300 1,060,180 1,325,200 3,779,000 24,920,600 75,051,100
Net earnings 11,203,600
Common stock issued 1,100 1,400 51,219 64,000 (3,779,000) 4,756,700
Common stock purchased (1,500) (1,900) (15,539) (19,400) (568,900) (1,332,200)
Redeemable common stock (18,575) (23,200) (520,100) (1,395,000)
Patronage dividends payable
in common stock 3,738,000
-----------------------------------------------------------------------------------
Balance, January 3, 1998 12,600 $15,800 1,077,285 $1,346,600 $3,738,000 $28,588,300 $83,527,500
===================================================================================
Treasury Stock, January 3,
1998 and December 28, 1996 13,285 $1,131,200
=====================
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Years Ended January 3, 1998, December 28, 1996, and December 30, 1995
1997 1996 1995
------------ ------------ -------------
Cash Flows From Operating Activities:
Net Earnings $ 11,203,600 $ 10,267,400 $ 9,022,100
Adjustments to reconcile net earnings
to net cash flows provided by
operating activities:
Depreciation and amortization 17,132,300 16,326,800 13,594,400
Allowance for losses 2,389,100 5,302,600 5,871,500
Loss (gain) on sale of property
and equipment 612,900 (1,233,500) 451,900
Patronage dividends payable in
common stock 3,738,000 3,779,000 3,405,000
(Increase) decrease in operating assets:
Accounts receivable 8,975,000 (2,818,400) (6,768,000)
Merchandise inventories 5,808,200 10,319,700 (6,008,400)
Prepaid expenses (2,450,300) 2,453,500 713,500
Refundable and future income tax
benefits 1,589,600 679,400 (2,805,000)
Other real estate (2,712,800) 219,700 1,924,800
Goodwill and other assets (76,500) (413,400) 1,208,700
Deferred income tax benefit (1,087,000) (860,100) 472,000
Increase (decrease) in operating
liabilities:
Accounts payable (4,036,600) (7,237,800) (485,400)
Accrued expenses 6,092,900 1,470,600 6,060,500
Income taxes 1,391,000 864,300 (3,899,600)
Other liabilities 235,300 200,200 2,538,200
Net cash flows provided by operating ------------ ----------- ------------
activities 48,804,700 39,320,000 25,296,200
------------ ----------- ------------
Cash Flows From Investing Activities:
Capital expenditures (22,726,700) (39,291,800) (24,216,300)
Proceeds from sale of property
and equipment 1,740,200 5,763,400 5,296,500
Payment for business acquisition net
of cash acquired (3,967,400) (13,918,700)
(Increase) decrease in notes receivable 1,059,000 3,927,500 (6,342,800)
Net cash flows used in investing ------------ ------------ ------------
activities (23,894,900) (43,519,600) (25,262,600)
------------ ------------ ------------
Cash Flows From Financing Activities:
Proceeds from long-term borrowings 25,000,000
Principal payments of long-term debt (10,156,800) (10,235,600) (9,376,500)
Increase (decrease) in current
maturities of long-term debt (69,000) 6,449,300 (1,902,100)
Proceeds from sale of common stock 1,043,100 973,500 947,600
Common stock purchased (3,702,500) (4,027,300) (3,589,400)
Net cash flows (used in) provided by ------------ ------------ ------------
financing activities (12,885,200) 18,159,900 (13,920,400)
------------ ------------ ------------
Net Increase (Decrease) in Cash and
Cash Equivalents 12,024,600 13,960,300 (13,886,800)
Cash And Cash Equivalents,
Beginning of Year 40,342,300 26,382,000 40,268,800
------------ ------------ ------------
Cash And Cash Equivalents, End Of Year $ 52,366,900 $40,342,300 $26,382,000
============= ============ ============
Cash Paid During The Year For:
Interest $ 8,084,600 $ 8,545,900 $ 8,116,000
Income Taxes 6,433,100 6,965,100 12,319,000
Supplemental Noncash Financing
Activities-Patronage Dividends
Payable in Common Stock 3,738,000 3,779,000 3,405,000
See notes to consolidated financial statements.
NOTES To CONSOLIDATED
FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Description of business-The Company is primarily engaged in the
distribution of food products and related non-food items through retail
supermarkets, many of which are owned by stockholder-customers or the
Company.
Fiscal year-The Company's fiscal year is the 52 or 53 week period ending
the Saturday nearest to December 31. The year ended January 3, 1998
included 53 weeks. The years ended December 28, 1996 and December 30, 1995
included 52 weeks.
Consolidation practice-The financial statements include the accounts of the
Company and its subsidiaries. Significant intercompany balances and
transactions are eliminated.
Use of estimates-The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Cash and cash equivalents-The Company considers all highly liquid
investments, with maturities of three months or less when acquired, to be
cash equivalents.
Inventories-Inventories are recorded at the lower of cost, on the first-in,
first-out method, or market.
Goodwill and long-lived assets-The excess of cost over the fair value of
net assets of businesses acquired (goodwill) is being amortized on a
straight-line basis over 20 years. Accumulated amortization at January 3,
1998 and December 28, 1996 was $4,267,800 and $3,517,800, respectively. The
Company periodically evaluates the carrying value of long-lived assets in
accordance with Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." The Company analyzes the future recoverability
of the long-lived assets using the related undiscounted future cash flows
of the business and recognizes any adjustments to its carrying value on a
current basis.
Depreciation-Depreciation and amortization of property and equipment are
computed primarily on the straight-line method over their estimated useful
lives, which are generally thirty-one years for buildings, three to ten
years for equipment and five to twenty years for leasehold improvements.
Equipment under capitalized leases is amortized over the terms of the
respective leases.
Closed facilities reserve-When a facility is closed the remaining
investment, net of expected salvage value, is expensed. For properties
under lease agreements, the present value of any remaining future liability
under the lease, net of expected sublease recovery, is also expensed. The
amounts charged to operations in 1997, 1996 and 1995 for the present value
of these remaining future liabilities were not significant.
Income Taxes-The Company provides income taxes in accordance with Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
which requires an asset and liability approach to financial accounting and
reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial statement and tax
bases of assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
New accounting pronouncement-In June 1997, the Financial Accounting
Standards Board issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Statement is effective for fiscal
1998. The Company is in the process of evaluating the disclosure
requirements. The adoption of SFAS No. 131 will not have a material impact
on the Company's Consolidated Financial Statements.
2. ACQUISITIONS
On September 15, 1997, The Company purchased a grocery retailer for
$3,967,400 in cash. On June 22, 1996, the Company purchased all of the
outstanding stock of a grocery retailer for $13,918,700 in cash. The
acquisitions have been accounted for as purchases and the results of
operations have been included in the Consolidated Financial Statements
since the dates of acquisition. On an unaudited pro-forma basis, the effect
of the acquisitions was not significant to the Company's 1997 and 1996
results of operations.
3. PATRONAGE DIVIDENDS
The Company's By-Laws require that for each of the last three fiscal years,
to the extent permitted by the Internal Revenue Code, patronage dividends
are to be paid out of earnings from business done with stockholder-
customers in an amount which will reduce the net earnings of the Company to
an amount which will result in a 10% increase in the book value of its
common stock. The dividends are payable at least 20% in cash and the
remainder in Class B common stock. Dividends for the years ended January 3,
1998, December 28, 1996 and December 30, 1995 were payable 30% in cash.
4. NOTES AND ACCOUNTS RECEIVABLE
The Company extends long-term credit to certain independent retailers it
serves to be used primarily for store expansion or improvements. Loans to
independent retailers are primarily collateralized by the retailer's
inventory, equipment, personal assets and pledges of Company stock.
Interest rates are generally in excess of the prime rate and terms of the
notes are up to 15 years. Included in current notes and accounts receivable
are amounts due within one year totalling $7,523,400 and $10,190,000 at
January 3, 1998 and December 28, 1996, respectively. The Company is exposed
to credit risk with respect to accounts receivable, although it is
generally limited due to short payment terms. The Company continually
monitors its receivables with customers by reviewing, among other things,
credit terms, collateral and guarantees.
5. LONG-TERM DEBT
Long-term debt, exclusive of current maturities, consists of the following
at the respective year-ends:
Senior notes payable 1997 1996
9.26% due 1999 to 2001 $7,500,000 $10,000,000
7.57% to 8.26% due 1999 to 2008 18,500,000 19,700,000
6.94% due 1999 to 2003 32,142,900 38,571,400
7.86% due 2000 to 2006 25,000,000 25,000,000
Other long-term debt 314,900 343,200
Total $83,457,800 $93,614,600
At January 3, 1998, $60,000,000 was available to the Company under its
revolving credit agreements, all of which was unused. The loan agreements
include, among other provisions, minimum working capital and net worth
requirements and limit stock repurchases and total debt outstanding.
Repayment of principal on long-term debt outstanding is as follows:
1998 $10,156,800
1999 10,159,700
2000 24,734,400
2001 13,738,000
2002 11,242,000
Thereafter 23,583,700
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, as defined in Statement of Financial
Accounting Standards No. 107, "Disclosures About Fair Value of Financial
Instruments," consist primarily of accounts and notes receivable, accounts
payable, notes payable and long-term debt. The carrying amounts for
accounts and notes receivable and accounts payable and notes payable
approximate their fair values. Based on the borrowing rates currently
available to the Company for long-term debt with similar terms and
maturities, the fair value of long-term debt, including current maturities,
is approximately $93,460,000 and $102,750,000 as of January 3, 1998 and
December 28, 1996, respectively.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Continued
7. STOCKHOLDERS' EQUITY
The authorized capital stock of the Company is 60,000 shares of Class A
common stock and 2,400,000 shares of Class B common stock with a par value
of $1.25 a share. Inactive customers are required to exchange Class A
voting stock held for Class B non-voting stock.
The issuance and redemption of common stock is based on the book value
thereof as of the preceding year end. The year-end book value was $104.35,
$94.30 and $85.15 for 1997, 1996 and 1995, respectively. The Company is
obligated, upon request, to repurchase common stock held by inactive
customers or employees. The amount available for such repurchases in any
year is subject to limitations under certain loan agreements.
Class B common stock which is subject to redemption is reflected outside of
stockholdersO equity. Redeemable common stock is held by inactive
customers and former employees. As of January 3, 1998 and December 28,
1996, 61,095 and 65,929 shares, respectively, were subject to redemption.
The Class B common stock subject to redemption is payable over a five year
period based upon the book value at the preceding fiscal year end. The
Company expects to repurchase shares of 20,779, 16,604, 14,719, 5,178 and
3,815 in 1998, 1999, 2000, 2001 and 2002, respectively.
In conjunction with the 1996 acquisition discussed in Note 2, 13,285 shares
of Class B common stock were owned by the acquired Company. The fair market
value of the shares as of June 22, 1996 acquisition date has been reflected
in the Consolidated Balance Sheet as treasury stock.
Effective November 1991, the Board of Directors adopted the 1991 Stock
Incentive Plan (the "Plan") under which up to 75,000 shares of Class B
common stock may be issued pursuant to the exercise of stock options. The
Plan also authorizes the grant of up to 25,000 stock appreciation rights
("SARs"). Options and SARs may be granted to senior executives and key
employees of the Company by the Executive Compensation Committee of the
Board of Directors. No options or SARs may be granted under the Plan after
November 30, 2001.
Option and SAR transactions are as follows:
Options
Weighted
Average
Options SARS Price Price
-------- ------ -------------- ----------
Outstanding, December 31, 1994 39,500 18,500 $53.10-$65.10 $57.80
Granted 9,500 4,500 77.40 77.40
Exercised (3,400) (1,550) 53.10-65.10 60.82
Cancelled (2,000) (2,350) 53.10-65.10 54.80
------ ------- --------------
Outstanding, December 30, 1995 43,600 19,100 53.10-77.40 61.97
Exercised (1,600) (2,226) 53.10-77.40 68.29
Cancelled (500) (834 77.40 77.40
------- ------- -------------
Outstanding, December 28, 1996 41,500 16,000 53.10-77.40 61.54
Granted 4,300 4,200 94.30 94.30
------- ------- -------------
Outstanding January 3, 1998 45,800 20,200 $53.10-$94.30 64.62
======= ======= ==============
Exercisable at January 3, 1998 39,880 13,347 $53.10-$94.30 62.97
======= ======= ==============
Available for grant after January
3, 1998 5,200 984
======= ======
The following table summarizes information concerning outstanding and
excercisable options:
Stock Options Outstanding Stock Options
Exercisable
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Of Contractual Exercise Of Exercise
Exercise Price Shares Life Price Shares Price
$50.00-65.00 24,500 4.3 $55.06 22,250 $54.99
$65.01-80.00 17,000 6.9 70.89 16,200 71.17
$80.01-95.00 4,300 9.3 94.30 1,430 94.30
-----------------------------------------------------
45,800 $64.62 39,880 $62.97
=======================================================
Options granted become exercisable based on the vesting rate which ranges
from 20% at the date of grant to 100% eight years from the date of grant.
SAR holders are entitled, upon exercise of a SAR, to receive cash in an
amount equal to the excess of the book value per share of the Company's
common stock as of the last day of the Company's fiscal year immediately
preceding the date the SAR is exercised over the base price of the SAR.
SARs granted become exercisable based on the vesting rate which ranges from
20% on the last day of the fiscal year of the grant to 100% eight years
from the last day of the fiscal year of the grant. Compensation expense was
not material in 1997, 1996 and 1995. In the event of a change in control of
the Company, all options and SARs previously granted and not exercised,
become exercisable.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," but applies Accounting
Principles Board Opinion No. 25 and related interpretations in accounting
for its plans. Compensation expense was immaterial for 1997, 1996 and 1995.
If the Company had elected to recognize compensation cost for the Plan
based on the fair value of the options at the grant dates, consistent with
the method prescribed by SFAS No. 123, the decrease in 1997, 1996 and 1995
net earnings would have been less than $60,000.
8. EMPLOYEE BENEFIT PLANS
Substantially all non-union employees of the Company and employees of its
subsidiaries are covered by defined benefit pension plans. Benefits are
based on either years of service and the employee's highest compensation
during five of the most recent ten years of employment or on stated amounts
for each year of service. The Company intends to annually contribute only
the minimum contributions required by applicable regulations.
The following sets forth the funded status of the plans at January 3, 1998
and December 28, 1996:
1997 1996
---------------------- ---------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Actuarial present value of: Benefits Assets Benefits Assets
- ----------------------------- --------- ----------- ----------- ----------
Vested benefit obligation $601,800 $35,961,300 $25,136,600 $5,211,100
======== =========== =========== ==========
Accumulated benefit obligatio $601,800 $38,625,300 $27,197,200 $5,347,300
======== =========== =========== ==========
Projected benefit obligation $601,800 $45,291,500 $32,399,900 $5,347,300
Plan assets (primarily listed
stocks and bonds)at market value 636,600 36,994,500 28,647,200 4,630,600
-------- ----------- ----------- ----------
Projected benefit obligation
less than or (in excess of)
plan assets 34,800 (8,297,000) (3,752,700) (716,700)
Unrecognized net loss 7,600 4,832,800 907,600 333,900
Prior service cost not yet
recognized in net periodic
pension cost 288,000 240,100 83,800
Unrecognized net asset (721,400) (776,500) (118,900)
Adjustment required to
recognize minimum liability (393,900)
-------- ----------- ------------ ---------
Accrued pension cost $42,400 $(3,897,600 $(3,381,500) $(811,800)
======== ============ ============= ==========
The assumptions used in the accounting were as follows:
1997 1996 1995
Discount Rate 7.25% 7.75% 7.75%
Rate of increase in compensation levels 4.00% 4.00% 4.00%
Expected long-term rate of return of 9.00% 9.00% 9.00%
assets
The changes in the discount rate in 1997 resulted in a $3,534,500 increase
in the projected benefit obligation in 1997 and is expected to result in an
increase in the 1998 pension expense of approximately $270,000. In
accordance with Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions," the Company has recorded a minimum
liability of which $232,800, net of income taxes, is reflected as a
reduction of stockholders' equity in 1996.
Net pension cost for the foregoing defined benefit plans includes the
following components:
1997 1996 1995
Service cost benefits earned during the year $2,238,700 $2,155,300 $1,652,800
Interest on projected benefit obliation 2,937,100 2,608,900 2,191,100
Actual return on plan assets (3,916,700)(3,361,100) (4,424,500)
Net amortization and deferral 785,500 575,600 1,989,200
----------------------------------
Net pension cost $2,044,600 $1,978,700 $1,408,600
==================================
The Company and its subsidiaries also participate in various multi-employer
plans which provide defined benefits to employees under collective
bargaining agreements. Amounts charged to pension expense for such plans
were $4,530,300, $4,296,100 and $3,611,600 in 1997, 1996 and 1995
respectively. Also, the Company has a defined contribution plan covering
substantially all salaried and hourly employees not covered by a collective
bargaining agreement. Total expense for the plan amounted to $858,400,
$556,600 and $541,500 in 1997, 1996 and 1995, respectively.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Continued
9. INCOME TAXES
Federal income tax at the statutory rates of 35% in 1997, 1996 and 1995 and
income tax expense as reported, are reconciled as follows:
1997 1996 1995
Federal income tax at statutory rates $6,831,600 $6,264,100 $5,292,700
State income taxes, net of federal tax
tax benefits 1,119,500 930,700 765,300
Other - net 364,100 435,200 41,900
----------- ----------- -----------
Income tax expense $8,315,200 $7,630,000 $6,099,900
=========== =========== ===========
The approximate tax effects of temporary differences at January 3, 1998 and
December 28, 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------------ --------------------------------------
Assets Liabilities Total Assets Liabilities Total
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful accounts $ 1,057,000 $1,057,000 $ 1,285,000 $1,285,000
Inventories $(1,264,200) (1,264,200) $(1,314,200) (1,314,200)
Employee benefits 5,213,000 5,213,000 4,225,000 4,225,000
Accrued expenses not currently
deductable 1,222,000 1,222,000 1,926,000 1,926,000
---------- ------------ ---------- ----------- ------------ ----------
Current 7,492,000 (1,264,200) 6,227,800 7,436,000 (1,314,200) 6,121,800
----------- ------------ ---------- ---------- ------------ -----------
Allowance for doubtful accounts 2,142,000 2,142,000 2,254,000 2,254,000
Depreciation and amortization (6,773,000) (6,773,000) (6,989,000) (6,989,000)
Employee benefits 4,115,000 4,115,000 3,971,000 3,971,000
Accrued expenses not currently
deductable 3,583,000 3,583,000 2,906,000 2,906,000
Other (219,000) (219,000) (220,000) (220,000)
----------- ------------ ---------- ----------- ------------ -----------
Noncurrent 9,840,000 (6,992,000) 2,848,000 9,131,000 (7,209,000) 1,922,000
------------ ------------ ---------- ----------- ------------ -----------
Total $17,332,000 $(8,256,200) $9,075,800 $16,567,000 $(8,523,200) $8,043,800
=========== ============ ========== =========== ============ ===========
10. LEASE OBLIGATIONS AND CONTINGENT LIABILITIES
Rental payments and related subleasing rentals under operating leases are
as follows:
Rental Payments
---------------------- Subleasing
Minimum Contingent Rentals
1995 $35,264,400 $422,900 $22,045,500
1996 31,711,700 486,600 21,628,300
1997 28,625,700 406,600 21,249,900
Contingent rentals may be paid under certain store leases on the basis of
the store's sales in excess of stipulated amounts.
Future minimum rental payments under long-term operating leases are as
follows at January 3, 1998:
1998 $31,323,600
1999 30,275,500
2000 29,200,600
2001 27,635,600
2002 27,072,100
Thereafter 191,451,000
Total $336,958,400
Total minimum rentals to be received in the future under non-cancelable
subleases as of January 3, 1998 are $251,371,000.
The Company has guaranteed customer bank loans and customer leases
amounting to $480,000 and $756,900, respectively, at January 3, 1998.
The Company is involved in various claims and litigation arising in the
normal course of business. In the opinion of management, the ultimate
resolution of these actions will not materially affect the consolidated
financial position, results of operations or cash flows of the Company.
11. EARNINGS PER SHARE
Earnings per share are not presented because they are not deemed
meaningful. See Notes 3 and 7 relating to patronage dividends and common
stock repurchase requirements.
Exhibit A
ROUNDY'S, INC.
Subscription Agreement
The undersigned customer/employee/director of Roundy's, Inc.
("Roundy's") hereby subscribes for and agrees to purchase _______
shares of Class A Common Stock and/or ______ shares of Class B
Common Stock of Roundy's, at the price per share set forth below,
being equal to the Book Value per share of such Common Stock as of
the close of the most recently ended fiscal year of Roundy's, as
determined by Roundy's audited financial statements and adjusted
for subsequent stock dividends and stock splits. The undersigned
acknowledges receipt of a Prospectus dated ______________, 19__
relating to Roundy's offer of the Class A or Class B Common Stock
subscribed for hereby.
The undersigned represents that the undersigned is purchasing
such securities for the undersigned's own account, for investment
only and not for resale or distribution. The undersigned further
acknowledges and understands that in no event may the Class A nor
Class B Common Stock be pledged, transferred or hypothecated
without Roundy's prior written consent. The undersigned
acknowledges and agrees to be bound by the provisions of Section
7.11 of Roundy's By-Laws (as the same may be amended and in effect
from time to time) imposing limitations on the ownership of
Roundy's Class A Common Stock and providing for the conversion of
shares of Class A Common Stock into shares of Class B Common Stock,
upon the occurrence of a "Customer/Shareholder Termination" as that
term is defined in Roundy's By-Laws.
This paragraph applies only to subscriptions by customers with
a Buying Deposit Deficit: The shares purchased hereby shall become
a part of the undersigned's Buying Deposit pursuant to the Buying
Deposit Agreement previously entered into by the undersigned for
the Store Location (Customer Number) set forth below. If so
indicated below, the undersigned hereby directs Roundy's to apply
the amount set forth below, from funds previously deposited by the
undersigned with Roundy's, against the subscription price provided
for herein.
Roundy's, by accepting this Subscription Agreement, agrees to
be bound by the Statement of Policy Regarding Repurchase of Stock
set forth as Exhibit D to Roundy's Prospectus, as such Statement of
Policy may be amended from time to time.
_________________________________
Legal Name of Subscriber
Applicable Federal
Identification or By_______________________________
Social Security Number
_________________________________
(Name) (Title)
Date:______________, _____ Customer Number _________
(If applicable)
Mailing Address:
________________________________
City ___________________________
State __________________Zip_____
Price per Share: $___________________
Total Subscription Price: $___________________
Amount to be applied from funds on deposits: $___________________
Cash remitted with this Subscription Agreement:
$___________________
Agreement Accepted:
Roundy's, Inc.
By:________________________________
Date:_____________________________
A-1
Exhibit B
ROUNDY'S, INC.
Buying Deposit Agreement
The undersigned customer of Roundy's, Inc. ("Roundy's") hereby
agrees to establish a Buying Deposit with Roundy's in the total
amount set forth below, and to make monthly installment payments of
such Buying Deposit to Roundy's as set forth below. The amount of
the Buying Deposit has been computed as an amount equal to the
estimated amount of purchases by the undersigned from Roundy's,
with respect to the store location identified below ("Store
Location") over a two week period, with a minimum amount of
$20,000. The total Buying Deposit will be established by periodic
payments to be made by the undersigned to Roundy's in accordance
with the amortization schedule set forth below. It is understood
that Roundy's shall have the right to increase the amount of the
Buying Deposit at any time, in which event the amortization
schedule set forth below shall be adjusted accordingly.
To fulfill its obligation to establish such Buying Deposit,
the undersigned may from time to time subscribe for and purchase
shares of Roundy's Class A and/or Class B Common Stock pursuant to
Roundy's Policy Regarding Issuance and Sales of Roundy's Stock
(adopted December 7, 1993; effective January 1, 1994, as amended)
(a copy of which the undersigned acknowledges having received as an
exhibit to the Prospectus dated _______, _____ for Roundy's Common
Stock (the "Prospectus"), which has been provided to the
undersigned). The undersigned acknowledges that such Policy may be
amended, modified, suspended or terminated at any time and from
time to time in the discretion of Roundy's Board of Directors, and
that by accepting this Buying Deposit Agreement, Roundy's has not
undertaken any obligation to issue or sell any shares of its stock
to the undersigned except to the extent provided in such Policy, as
the same may exist and be in effect from time to time.
Installment payments made to Roundy's from time to time will
be retained by Roundy's as a part of the undersigned's Buying
Deposit, and will be applied to the undersigned's purchase of
shares of Roundy's Common Stock only at such times and in such
amounts as the undersigned may designate (subject to the preceding
paragraph and the Policy described therein) pursuant to a
subscription agreement executed by the undersigned in the form
attached hereto.
Roundy's, by accepting this Buying Deposit Agreement, agrees
to be bound by the Statement of Policy Regarding Repurchase of
Stock set forth as Exhibit D to the Prospectus, as such Statement
of Policy may be amended from time to time.
The undersigned understands that patronage dividends, if any,
paid to the undersigned in Class B Common Stock from and after the
date hereof, until the Buying Deposit is satisfied, will be
credited against the installment payments of the undersigned's
Buying Deposit in the inverse order of the due dates of such
installments, at a price per share equal to the Book Value of such
shares as of the fiscal year-end immediately preceding the date of
their issuance.
Upon termination of the customer status of the undersigned
with Roundy's for any reason or if the undersigned at any time
shall not have made payments due from it to Roundy's in the manner
and within the time limits established by Roundy's, Roundy's shall
have the right to reimburse itself out of the undersigned's Buying
Deposit for any amounts owed to Roundy's by the undersigned.
A-2
Exhibit B
If the undersigned has previously entered into any prior
Buying Deposit Agreement(s) for the Store Location, this Buying
Deposit Agreement supersedes and cancels such prior Agreement(s) in
their entirety.
_______________________ ________________________________
Applicable Federal Legal Name of Subscriber
Identification or
Social Security Number By______________________________
________________________________
(Name) (Title)
Date:__________________, _____ Customer Number
Mailing Address:
________________________________
City ___________________________
State___________________________
Zip Code __________________
BUYING DEPOSIT - MONTHLY INSTALLMENT PAYMENTS
1. Total Buying Deposit _______________________
2. Less down payment _______________________
3. Balance to be amortized _______________________
4. Estimated weekly retail sales _______________________
Check Monthly Buying Deposit
Installment
Weekly Retail Sales One 1st Year 2nd Year 3rd
Year
$ 40,000 - $100,000 _____ $ 300 $ 400
$ 500
$100,000 - $200,000 _____ 750 900
1,050
Over $200,000 _____ 1,000 1,250
1,500
Payment beginning (nearest 15th day of month following down
payment)
Approved:_____________________________________________
Retail Counselor, Roundy's, Inc.
Accepted:_____________________________________________
Sales Manager, Roundy's, Inc.
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Exhibit C
Article V of By-Laws of Roundy's, Inc., as amended by the Board of
Directors on February 24, 1998
FISCAL YEAR
ACCOUNTING AND PATRONAGE REBATES
The corporation is obligated to its Common stockholders on a
patronage basis or bases for all amounts received by it resulting
from sales to them as defined and limited herein.
5.1 Patronage Dividends. Patronage dividends shall accrue to
Class A Common shareholders of the corporation out of net earnings
from business done with such shareholders and shall be determined
and distributed for each fiscal year pursuant to existing
provisions of the Internal Revenue Code; provided further that
patronage dividends of the corporation will be determined on the
basis of the net sales of the corporation to each Class A Common
shareholder and paid in an amount which will reduce net income of
the corporation to such amount as will result in an increase of
eight percent (8%) in the net book value (as determined by the
corporation's independent certified public accountants) of the
corporation's outstanding shares as of the close of such fiscal
year. The computation of the amount of patronage dividends payable
to Class A Common shareholders shall be made after the
determination of patronage dividends payable to non-shareholder
customers.
5.2 Determination of Patronage Dividends. Patronage
dividends shall be determined from the records of the corporation
as soon as practicable after the close of the corporation's fiscal
year, and the Class A Common stockholders shall be promptly advised
of the amount of their respective patronage dividend and the method
of payment of such patronage dividend.
5.3 Consent. Each person who hereafter becomes a Class A
Common stockholder of this corporation and each Class A Common
stockholder of this corporation on the effective date of this By-
Law who continues as a Class A Common stockholder after such date
shall, by such act alone, consent that the amount of any
distributions with respect to his patronage occurring after January
3, 1976 which are made in written notices of allocation (as defined
in Section 1388 of the Internal Revenue Code) and which are
received by him from the corporation, will be taken into account by
him at their stated dollar amounts in the manner provided in
Section 1385(a) of the Internal Revenue Code in the taxable year in
which such written notices of allocation are received by him.
5.4 Payment of Patronage Dividends.
(a) Patronage dividends are payable in the fiscal year
following the fiscal year in which accrued, in money, qualified
written notices of allocation (as defined by the Internal Revenue
Code) or other property (except non-qualified written notices of
allocation as defined by the Internal Revenue Code) provided,
however, that at least twenty percent (20%) of the amount of a
patronage dividend shall be paid in money or by qualified check as
defined by the Internal Revenue Code.
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5.5 Corporate Accounting and Fiscal Year.
(a) The accounts of the corporation shall be kept on the
accrual basis and reflect assets, liabilities, stockholders'
equities and operations in accordance with generally accepted
accounting principles.
(b) The fiscal year of the corporation shall be on a 52-
53 week basis ending on the Saturday nearest to December 31st as
that method permits.
5.6 Patronage Dividends to Nonstockholders. The corporation
may, in its sole discretion, enter into written agreements
obligating itself to pay patronage dividends to nonstockholder-
customers.
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Exhibit D
ROUNDY'S, INC. POLICY RELATING TO REDEMPTION OF STOCK
BY INACTIVE CUSTOMER SHAREHOLDERS AND FORMER EMPLOYEES
ARTICLE 1
Repurchase of Shares by Corporation
1.01 Agreement to Repurchase. Upon the terms and subject to
the conditions set forth in this Policy (including the applicable
provisions of Articles 2 and 3, below), the Corporation shall be
obligated to repurchase its shares of Class A Common Stock and
Class B Common Stock after proper request by the holder thereof, or
his or its legal representative, at any time after the occurrence
of a Customer/ Shareholder Termination with respect to such stock
or an Employee/ Shareholder Termination with respect to such
holder.
1.02 Repurchase in Increments. The Corporation's obligation
to repurchase stock shall accrue, subject to the other terms and
conditions of this Policy, in annual 20% increments during the five
year period beginning on the Repurchase Request Date with respect
to such stock. Beginning on the first anniversary date of the
Repurchase Request Date, the Corporation shall become obligated to
purchase in accordance herewith 20% of the aggregate number of
shares of Class A and Class B Common Stock as to which a proper
repurchase request has been received. Such percentage shall be
increased to 40% on the second anniversary date of the Repurchase
Request Date, 60% on the third anniversary date, 80% on the fourth
anniversary date and 100% on the fifth anniversary date of the
Repurchase Request Date. Regardless of the foregoing, in the event
that a Customer/Shareholder Termination or an Employee/Shareholder
Termination occurs as a result of the death of the shareholder and
the estate of such shareholder specifically so elects by written
notice to the Secretary of the Corporation within 180 days
thereafter, the repurchase of not more than the first $50,000 in
value of stock shall be accelerated to the date 180 days after
receipt by the Secretary of such written election. Each share
shall continue to be outstanding for all purposes until actually
repurchased.
1.03 Calculation of Repurchase Price. The repurchase price
for each share of stock of the Corporation shall be the Book Value
of such share at the date of repurchase.
1.04 Form of Repurchase Request. A proper repurchase request
for purposes hereof shall consist of a written notification to the
Secretary of the Corporation specifying the number of shares to be
repurchased, the reason for such repurchase request, and the date
or dates on which a Customer/Shareholder Termination or
Employee/Shareholder Termination occurred with respect to the stock
covered by such repurchase request. Such repurchase request must
be made in accordance with the procedures specified in Section
2.02, below.
1.05 Acknowledgment By Corporation of Repurchase Request.
Subject to the conditions set forth in the Policy (including the
applicable provisions of Articles 2 and 3, below), the Secretary
shall promptly acknowledge in writing receipt of a repurchase
request. Such acknowledgment shall set forth, among other things,
the Repurchase Target Dates with respect to the shares covered by
the repurchase request and the Book Value of the shares at the
Repurchase Request Date, and shall enumerate such documents and
instruments as may be reasonably required to be delivered to assure
the Secretary that the Corporation will receive unencumbered title
to the shares to be repurchased.
Neither such acknowledgment nor any other communication made by the
Corporation pursuant to this Policy shall be deemed to be an
agreement to purchase shares for purposes of this Policy, except
subject to all the terms and conditions hereof. After such
acknowledgment has been given by the Secretary, a stock repurchase
request shall be irrevocable except with the written consent of the
Board of Directors.
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1.06 Payment of Repurchase Price. Subject to the terms and
conditions of this Policy, the Corporation shall repurchase shares
subject to a proper repurchase request by payment of the full
purchase price in cash or by check within 10 days after the later
of the Repurchase Target Date or the date on which the appropriate
stock certificates have been received, in negotiable form, together
with any such other documents or instruments as the Secretary shall
have requested in its acknowledgment notice given under Section
1.05, all in form reasonably acceptable to the Secretary; provided,
however, that in no event shall the Corporation be obligated to
repurchase shares within 90 days after the end of its fiscal year.
By mutual agreement of the Corporation and the shareholder, such
shares may be repurchased at any time prior to the Repurchase
Target Date, but only if no other shareholder has been assigned an
earlier Repurchase Target Date and such shares have not yet been
actually repurchased.
1.07 Limitation on Corporation's Obligation to Repurchase.
The Corporation's obligation to repurchase shares hereunder is
subject to (i) all restrictions which may be imposed by applicable
law from time to time, and (ii) the limitations (if any) on
repurchases of shares contained in any lending or other agreements
of the Corporation in force from time to time. In the event the
Corporation is precluded during a given period of time from
repurchasing shares which are the subject of a repurchase request
because of such limitations or if required repurchases are delayed
for any other reason (in either case, a "Suspension"), repurchases
shall be resumed promptly thereafter in the order of the Repurchase
Target Dates which occurred during the period of the Suspension,
regardless of the dates the repurchase requests were received and
such suspended repurchases shall be made prior to repurchases
becoming due on any subsequent Repurchase Target Date.
Notwithstanding the foregoing provisions, stock having a repurchase
price of not in excess of $50,000 per shareholder may, in the sole
discretion of the Corporation, be repurchased on an accelerated
basis in cases of demonstrated hardship.
1.08 Authority Reserved.
(a) No provision of this Policy shall be construed as
limiting the Corporation's authority to repurchase outstanding
shares of its stock at the discretion of the Board of Directors or
the officers on any other terms at any time; provided however, that
no such discretionary purchases shall occur if a Repurchase Target
Date has passed with respect to shares required to be repurchased
under this Policy and such shares have not yet been repurchased.
(b) No provision of this Policy shall be construed as
limiting the authority of the Board of Directors to amend, revise
or rescind this Policy. This Policy does not create, and should
not be understood as creating, any vested rights or contractual
obligations of the Corporation except, and only to the extent, that
no amendment, revision or rescission shall reduce the Repurchase
Price payable by the Corporation for shares with respect to which
the Repurchase Request Date precedes the date of the resolution of
the Board of Directors effecting such amendment, revision or
rescission.
1.09 Adjustments. For all purposes hereof, in the event of a
stock split or similar capital change (excluding regular stock issu
ances associated with the Corporation's patronage dividends),
equitable adjustment will be made to the number of shares to be
repurchased and the repurchase price.
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ARTICLE 2
Additional Conditions to Repurchase Obligations
2.01 Notification to Corporation of Certain Termination
Events. Each shareholder (or his or its legal representative)
shall, as soon as possible after the occurrence of a
Customer/Shareholder Termination or an Employee/Shareholder
Termination (occurring otherwise than as a result of the death or
retirement of the employee), give written notice of the same to the
Secretary of the Corporation, stating the nature and date of such
event. If it shall come to the attention of the Corporation that
such an event has occurred and no such notice has been received,
the Secretary shall give written notice of the same to the record
holder of such shares. Any determination so made in good faith by
the Corporation, including any determination as to the date upon
which a retail food store became or ceased to be an Active
Customer, or upon which a Customer/Shareholder Termination or an
Employee/Shareholder Termination occurred, shall be final and
binding on all persons.
2.02 Timing of Repurchase Requests. Requests by shareholders
to have their shares of stock redeemed or repurchased pursuant to
this policy will be accepted by the Corporation when made in
accordance with the following procedures:
(a) When Repurchase Requests May Be Made. Requests by a
shareholder to have its stock repurchased or redeemed will be
accepted only if made during one of three (3) "window" periods each
year -- after the first, second and third fiscal quarters of the
Corporation, consisting of the last two weeks of May, August and
November, respectively. These "window" periods are subject to
closure or modification by management or the Board of Directors of
the Corporation if, in the best judgment of management or the
Board, it would be inappropriate for the Corporation to be engaged
in the purchase or sale of its shares at such time. Requests for
redemption will be deemed to have been duly made during these
periods if they are received in writing at the Corporation's
Pewaukee office during the window period or, if received
thereafter, if they were postmarked during the window period.
(b) Authority Of The Board To Suspend Or Deviate From
These Requirements. The Board of Directors reserves at all times
the authority to alter, suspend or deviate from the requirements of
this Section 2.02, in its discretion, to the extent it determines
such action to be appropriate.
(c) Effective Date. The provisions of this Section 2.02
will be effective commencing January 1, 1994.
2.03 Limitations on Ownership of Class A Common Stock.
(a) No person may directly or indirectly beneficially
own shares of Class A Common Stock except a Person who or which
directly or indirectly owns an Active Customer or the trustees of a
voting trust formed by and for the benefit of such Persons. No
Person may directly or indirectly beneficially own more than 100
shares of Class A Common Stock, except that (i) a Person owning and
operating (or controlling) more than one Active Customer at
different locations may own not more than 100 shares of Class A
Common Stock for each such Active Customer, and (ii) the trustees
of a voting trust as set forth in the preceding sentence may be the
record holders of such number of shares as may be owned in the
aggregate by the depositors thereof.
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(b) Any holder of shares of Class A Common Stock shall
immediately present his or its certificate(s) representing the same
to the Secretary of the Corporation, in negotiable form, upon the
occurrence of a Customer/Shareholder Termination with respect to an
Active Customer owned and operated (or controlled) by such
shareholder.
In the event such shareholder has theretofore owned more than 100
shares of Class A Common Stock, there shall be presented to the
Corporation 100 of such shares for each such Active Customer as to
which a Customer/ Shareholder Termination has occurred. Upon
receipt of such certificate(s), the Corporation shall issue to and
in the name of the
record holder thereof a replacement certificate for a like number
of shares of Class B Common Stock. In the event any holder shall
fail to surrender such certificates to the Corporation within
thirty (30) days after the Customer/Shareholder Termination, the
Corporation may, at any time thereafter, by written notice to the
record holder thereof, deem such shares of Class A Common Stock to
have been converted into a like number of shares of Class B Common
Stock; and thereafter, such shares of Class A Common Stock shall
not be deemed outstanding for any purpose and the certificate(s)
therefor shall evidence only the right to receive a certificate
representing a like number of shares of Class B Common Stock upon
proper presentation to the Corporation in negotiable form. The
obligations of a shareholder hereunder to surrender and exchange
shares of Class A Common Stock shall be binding upon the legal
representatives or successors or such shareholder, any purported
transferee, and any nominee or trustee of a voting trust holding
shares of Class A Common Stock for the benefit of such shareholder,
upon notice from the Corporation or otherwise that a
Customer/Shareholder Termination has occurred.
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ARTICLE 3
Effective Date
3.01 Effective Date. The repurchase provisions set forth in
Article 1 of this Policy shall not apply to shares as to which
repurchase requests have been filed before January 1, 1991,
provided, however, that if the second, third, fourth or fifth
anniversary dates of a Repurchase Request Date occur on or after
January 1, 1991, the repurchase provisions set forth in Article 1
shall apply to the 20% increments which would be purchased on such
anniversary dates as if this Policy had been in effect on the
Repurchase Request Date.
3.02 Applicability.
(a) The repurchase provisions set forth in Article 1 of
this Policy shall not apply:
(1) With respect to the shares owned by any person
who directly, indirectly or beneficially owns shares of Class A
Common Stock in violation of the limitations on ownership contained
in Section 2.02(a), above (the "Ownership Limitation") if the
shares of Class A Common Stock are determined by the Corporation to
have been held in violation of such Ownership Limitations for a
period of ninety (90) days or more.
(2) With respect to any shares owned by any person
who is a Claimant, as defined herein.
(b) In the event that a shareholder who filed a
repurchase request on or after January 1, 1991, subsequently
becomes subject to the provisions contained in Sections 3.02(a)(1)
or (2), the Corporation shall be under no obligation at any time
thereafter to repurchase (or continue to repurchase, if the
repurchase in increments had already commenced) any shares from
such shareholder.
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ARTICLE 4
Definitions
4.01 Whenever used in this Policy;
(a) "Active Customer" means a retail food store whose
principal source of supply is purchases from the Corporation.
(b) "Book Value" at any given date means the Book Value
of a share of Common Stock (determined according to the annual
financial statements prepared by the Corporation, as audited and
certified by the Corporation's independent auditors) as of the end
of the fiscal year immediately preceding the fiscal year in which
such date occurs.
(c) "Claimant" means any shareholder of the Corporation
who has asserted and not irrevocably withdrawn such assertion or is
otherwise then asserting (in or in anticipation of any litigation
or other proceeding) a challenge (1) to the authority of the
Corporation or its Board of Directors to adopt any pending
Redemption Policy or to have adopted the then current Redemption
Policy or any prior Redemption Policy or to amend or revise any of
the same or (2) to the enforceability or validity or the
Corporation's interpretation or application of any provision of the
then current or any prior Redemption Policy.
(d) "Customer/Shareholder Termination" occurs whenever an
Active Customer owned and operated (or controlled) by a shareholder
of the Corporation either (A) ceases to be an Active Customer, or
(B) ceases to be owned and operated (or controlled) by such
shareholder, whether by reason of the death, adjudication of
incompetency or complete retirement from business by reason of age
or disability of such shareholder (if an individual), the
dissolution or termination of such shareholder (if a Person other
than an individual), adjudication in bankruptcy, transfer of the
Active Customer or the entity owning or controlling it, or
otherwise. In the event the above shall occur with respect to one
or more but not all Active Customers owned and operated (or
controlled) by a single shareholder of the Corporation, a
Customer/Shareholder Termination shall be deemed to have occurred
with respect to that fraction of each class of Common Stock owned
by such shareholder as is equal to the fraction produced by
dividing the number of Active Customers owned and operated (or
controlled) by such shareholder after such event(s) by the number
of Active Customers so owned and operated (or controlled)
immediately before such event(s).
(e) "Employee/Shareholder Termination" occurs, with
respect to a shareholder who is an employee of the Corporation,
upon the cessation of such person's employment relationship with
the Corporation for any reason.
(f) "Person" includes any individual, corporation,
partnership, joint venture, trust, estate or any other legal
entity.
(g) "Redemption Policy" means any written policy adopted by
the Board of Directors of the Corporation pursuant to Section 3.4
of the Articles of Incorporation setting forth terms, conditions or
provisions under which the Corporation will (during the term of
such policy) repurchase, redeem or otherwise acquire shares of the
Corporation's stock from shareholders of the Corporation.
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(h) "Repurchase Request Date" with respect to a share of
stock means the date of actual receipt by the Secretary of the
Corporation of a written request for repurchase of such share which
complies with Section 1.04 of this Policy.
(i) "Repurchase Target Date" with respect to a share of
stock means the date upon which the Corporation is to become obli
gated to repurchase such share of stock in accordance with Section
1.02 of this Policy. If such date is not a day on which business
is generally conducted in the Corporation's main offices, then the
"Repurchase Target Date" shall be the next subsequent business day.
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Exhibit E
POLICY REGARDING ISSUANCE AND SALES OF ROUNDY'S, INC. STOCK
(As Adopted by the Board of Directors on December 7, 1993)
Roundy's, Inc. will make shares of its Class B Common Stock
("Stock") available for purchase from time to time on the following
terms and conditions:
(1) Persons to Whom Shares Will Be Issued. Shares of the
Company's Stock will be made available for purchase by:
- the Company's existing shareholders who are active
retailers doing business with the Roundy's
Cooperative ("Retailers");
- new Retailers; and
- employees of Roundy's, Inc. ("Employees"), upon the
recommendation of the Chief Executive Officer and the
approval of the Board of Directors or the Compensation
Committee of the Board.
Stock will not be made available to "inactive" retailers, even
if they have not yet tendered their stock for repurchase pursuant
to the inactive shareholder repurchase policy.
(2) Times at Which Stock Will Be Made Available for Purchase.
Stock will be made available for purchase by eligible purchasers
during three (3) "window" periods each year -- after the first,
second and third fiscal quarters of the Company consisting of the
last two weeks of May, August and November, respectively. These
"window" periods are subject to closure or modification by
management or the Board of Directors if, in the best judgment of
management or the Board, it would be inappropriate for the Company
to be engaged in the purchase or sale of its shares at such time.
Eligible purchasers wishing to purchase shares during any such
"window" period must deliver to the Company, within such "window"
period, a signed subscription agreement, in the form specified by
the Company, along with full payment of the subscription price of
the shares.
(3) Price at Which Shares Will Be Issued. When issued pursuant
to this policy, shares will be issued at a price equal to their
book value as of the preceding fiscal year end.
(4) Number of Shares Which Any Purchaser Shall Be Eligible to
Purchase. The terms set out in this Paragraph 4 are subject at all
times to the restrictions and limitations with respect to timing of
purchases as set out in Section (2) above.
(i) Retailers. The number of shares a Retailer will be
eligible to purchase will depend in part on the number of shares
already held by such Retailer relative to the number of shares
which such Retailer would be expected to hold under Roundy's
"Buying Deposit" policy. Roundy's encourages each of its Retailers
to purchase and hold shares of the Company's Stock having a total
"book value" equal to not less than twice the average amount of
such Retailer's weekly purchases from Roundy's. This amount is
referred to as the Retailer's "Buying Deposit." These shares are
pledged to Roundy's to secure the Retailer's accounts receivable
due Roundy's, as well as any other indebtedness of the Retailer to
Roundy's. The excess (if any) of a Retailer's
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Buying Deposit over the number of shares of Stock which such
Retailer holds at any time is referred to herein as such Retailer's
"Buying Deposit Deficit." For purposes of this policy, each
Retailer's Buying Deposit Deficit will be predetermined as of the
first day of each of the Company's fiscal years, based on purchases
by such Retailer during the immediately preceding fiscal year.
(A) Current Active Retailers Which Have a Buying Deposit
Deficit. Existing active Retailers which have a Buying
Deposit Deficit (other than an "Incremental Buying Deposit
Deficit" or an "Initial Buying Deposit Deficit" as defined
in Paragraphs (B) and (C) below) referred to herein in as a
"Regular Buying Deposit Deficit") will be entitled to purchase,
in each "window" period described in Section (2) above, shares
equal to five percent (5%) of their Regular Buying Deposit
Deficit.
(B) Current Active Retailers Which Create Or Increase Their
Buying Deposit Deficit Through Expansion Or Addition Of New
Store Facilities. In the case of a Retailer which expands
its store facilities or adds new facilities, and thereby
creates a Buying Deposit Deficit or increases its Buying
Deposit Deficit over its Regular Buying Deposit Deficit
(referred to herein as an "Incremental Buying Deposit Deficit"),
such Retailer will be entitled to purchase (in addition to
shares which may be purchased under the preceding Paragraph
(A) shares up to but not greater than fifty percent (50%)
of its Incremental Buying Deposit Deficit, but only if
such shares are purchased in the first "window" period,
as described in Section (2) above, following the date on
which the new or expanded store facility first opens, or
in the immediately following "window" period (unless the
Company does not authorize the sale of its shares during
either of such "window" periods, in which event such shares
must be purchased at the earliest time thereafter at which
the Company authorizes sales of its shares). The remainder
of such Retailer's Incremental Buying Deposit Deficit will
become part of its Regular Buying Deposit Deficit, and will
be subject to the provisions of Paragraph (A) above.
Notwithstanding the foregoing, a Retailer to which
Roundy's or any of its subsidiaries has loaned funds
(other than extensions of trade credit in the ordinary
course of business) or with respect to which Roundy's or
any of its subsidiaries has guaranteed indebtedness (other
than a guaranty or other contingent liability for rentals
due under leases of store facilities or the equipment therein)
will not be eligible to purchase shares up to fifty percent of
the Incremental Buying Deposit Deficit as described above.
In that event, all of such Retailer's Incremental Buying
Deposit Deficit will become part of its Regular Buying Deposit
Deficit, and will be subject to the provisions of Paragraph
(A) above.
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(C) New Retailers. New Retailers (those who do not, as
of January 1, 1994, do business with the Roundy's
Cooperative, either directly or through an
affiliated entity) will be eligible to purchase, in
each "window" period described in Section (2) above,
shares equal to 10% of their Buying Deposit at the
level at which it is initially established ("Initial
Buying Deposit"). If such Retailer's Buying Deposit
Deficit increases in any subsequent fiscal year to a
level greater than its Initial Buying Deposit
Deficit, such increase will constitute a Regular
Buying Deposit Deficit, and will be subject to the
provisions of Paragraph (A), above.
(D) Retailers With No Buying Deposit Deficit. A Retailer
which has no Regular Buying Deposit Deficit and no
Incremental Buying Deposit Deficit, and which is not
a new Retailer eligible to purchase shares equal to its
Initial Buying Deposit under the preceding Paragraph (C),
will be eligible to purchase in each year shares having a
total book value equal to five percent (5%) of its Buying
Deposit (as such Buying Deposit is determined as of the
first day of each fiscal year); provided that such shares
must be purchased in the first "window" period of each
fiscal year (unless the Company does not authorize the sale
of its shares during such "window" period, under Section (2)
above, in which event such shares must be purchased
at the earliest time thereafter at which the Company
authorizes sales of its shares).
Notwithstanding the foregoing, a Retailer to which Roundy's
or any of its subsidiaries has loaned funds (other than
extensions of trade credit in the ordinary course of
business) or with respect to which Roundy's or any of its
subsidiaries has guaranteed indebtedness (other than a
guaranty or other contingent liability for rentals due under
leases of store facilities or the equipment therein) will
not be eligible to purchase shares if it has no Regular
Buying Deposit Deficit, Incremental Buying Deposit Deficit,
or Initial Buying Deposit Deficit.
(E) Closed Window Periods. Except as expressly provided
otherwise in Paragraphs (B) and (D) above, shares which any
Retailer would have been entitled to purchase pursuant to
this subsection (4)(I) in any "window" period, but for the
fact that such "window" period was closed pursuant to
Section (2) above, shall not increase the number of shares
which such Retailer shall be entitled to purchase in any
subsequent "window" period or at any other time.
(ii) Inactive Retailer-Shareholders. Inactive Retailers will
not be permitted to acquire any additional shares.
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(iii) Employees. An Employee may purchase shares in such
amount as may be authorized by the Board of Directors or the
Compensation Committee of the Board, upon the recommendation
of the Chief Executive Officer; provided, that any employee
desiring to purchase shares shall advise the Company of his or
her desire to do so prior to the end of the first fiscal
quarter of any year, and, if approval for the purchase of such
shares is granted, such shares shall be purchased in three
approximately equal installments in each of the three "window"
periods occurring during such year.
(5) Discretion Of The Board To Deviate From Or Modify The Policy.
The Board of Directors of the Company at all times retains the
discretion to alter, suspend, or deviate from the above
policy, in its discretion, to the extent that it determines
such action to be appropriate. However, it is not anticipated
that any such deviations from, modifications to, or
suspensions of this policy will be made except in the case of
significant transactions or events outside the ordinary course
of the Company's business.
(6) Effective Date. These policies will be effective commencing
January 1, 1994, except that Section (2) hereof, as revised,
will be effective as of January 1, 1995.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 15. Indemnification of Directors and Officers.
Article VIII of Roundy's By-Laws provides for indemnification
by Roundy's of its Directors and Officers against liabilities
incurred in their capacities as such. The following summary is
subject to the specific provisions of said Article VIII and the
capitalized terms used therein are specifically defined in said
Article VIII:
Generally, Article VIII of Roundy's By-Laws requires
Roundy's to indemnify a Director or Officer for all Liability
and Expenses arising out of any claim made against such person
or in a Proceeding in which such person was a Party, unless
such Liability results from the person's Breach of Duty (which
generally includes a willful failure to deal fairly with
Roundy's or its stockholders while subject to a conflict of
interest; a transaction from which the Director or Officer
derived improper personal profit; a knowing violation of
criminal law; willful misconduct; or intentional or reckless
statements or omissions regarding matters under Board
consideration). Indemnification includes the reimbursement or
advancement or expenses. Article VIII sets forth specific
procedures for requesting indemnification and for determining
whether indemnification is proper. Article VIII provides that
it is not the exclusive source for rights of an Officer or
Director to indemnification.
Management believes that Roundy's policy with respect to
indemnification as expressed in Article VIII of the By-Laws is
consistent with application provisions of the Wisconsin Business
Corporation Law respecting indemnification of Directors and
Officers.
Item 16. Exhibits.
---------
The following exhibits are filed as part of the Registration
Statement or, where so indicated, have previously been filed with
the Commission by Registrant and are incorporated herein by
reference.
3.1 Articles of Incorporation of the Registrant, as amended,
incorporated herein by reference to Exhibit 4.1 of
Registrant's Registration Statement on Form S-2 (File No.
2-94485), dated December 5, 1984.
3.2 By-Laws of the Company, as amended February 24, 1998,
incorporated herein by reference to Exhibit 3.2 of
Registrant's Annual Report on Form 10-K for fiscal year ended
January 3, 1998, filed with the Commission on April 2, 1998,
Commission File No. 33-57505.
II-1
4.1 Policy Relating to Redemption of Stock by Inactive Customer
Shareholders and Former Employees. FILED HEREWITH (included
as Exhibit D to the Prospectus which forms a part of this
Registration Statement).
4.2 Note Agreement dated December 15, 1991 (effective December 30,
1991), between Roundy's, Inc. and Massachusetts Mutual Life
Insurance Company and United of Omaha Life Insurance Company,
incorporated herein by reference to Exhibit 4.9 of
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 28, 1991, filed with the Commission on March
26, 1992, Commission File No. 2-66296.
4.3 Note Agreement dated December 15, 1992 between Roundy's, Inc.
and Connecticut Mutual Life Insurance Company, The Ohio
National Life Insurance Company, Provident Mutual Life
Insurance Company of Philadelphia, Providentmutual Life and
Annuity Company of America, Guarantee Mutual Life Company,
Woodmen Accident and Life Company and United of Omaha Life
Insurance Company, incorporated herein by reference to Exhibit
4.11 of Registrant's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993, filed with the Commission on March
30, 1993, Commission File No. 2-66296.
4.4 Policy Regarding Issuance and Sales of Roundy's, Inc. Stock.
FILED HEREWITH (included as Exhibit E to the Prospectus which
forms a part of this Registration Statement).
4.5 Note Agreement dated December 22, 1993 (effective December 22,
1993), between Roundy's, Inc. and The Variable Annuity Life
Insurance Company, The Life Insurance Company of Virginia,
Phoenix Home Life Mutual Insurance Company, Phoenix American
Life Insurance Company, Washington National Insurance Company,
and TMG Life Insurance Company, incorporated herein by
reference to Exhibit 4.14 of Registrant's Annual Report on
Form 10-K for the fiscal year ended January 1, 1994, filed
with the Commission on March 31, 1994, Commission File No. 2-
66296.
4.6 Form of Subscription Agreement
FILED HEREWITH (included as Exhibit A to the Prospectus which
forms a part of this Registration Statement).
4.7 Form of Buying Deposit Agreement
FILED HEREWITH (included as Exhibit B to the Prospectus which
forms a part of this Registration Statement).
4.8 Article V of Registrant's By-Laws "Fiscal Year Accounting and
Patronage Rebates," as amended on February 24, 1998.
FILED HEREWITH (included as Exhibit C to the Prospectus which
forms a part of this Registration Statement).
4.9 First Amendment dated May 1, 1996 to Note Agreements dated
December 15, 1991 and Note Agreements dated December 15, 1992
and Note Agreements dated December 22, 1993, incorporated
herein by reference to Exhibit 4.16 of Registrant's Form 10-Q
for the quarterly period ended June 29, 1996, filed with the
Commission on August 13, 1996, Commission File No. 33-57505.
II-2
4.10 Note Agreement dated May 15, 1996 between Roundy's, Inc. and
The Ohio National Life Insurance, Phoenix American Life
Insurance Company, Provident Mutual Life Insurance,
Providentmutual Life and Annuity Company of America, United of
Omaha Life Insurance Company, John Alden Life Insurance
Company, Oxford Life Insurance Company, The Security Mutual
Life Insurance Company of Lincoln, Nebraska and Woodman
Accident and Life Company, incorporated herein by reference to
Exhibit 4.17 of Registrant's Form 10-Q for the quarterly
period ended June 29, 1996, filed with the Commission on
August 13, 1996, Commission File No. 33-57505.
4.11 Credit Agreement dated December 13, 1996, between Roundy's,
Inc. and PNC Bank, NA (as agent), incorporated herein by
reference to Exhibit 4.11 of Registrant's Annual Report on
Form 10-K for the fiscal year ended December 28, 1996, filed
with the Commission on March 26, 1997, Commission File No. 33-
57505.
5.1 Opinion of Whyte Hirschboeck Dudek S.C. as to legality of
issuance of securities, incorporated herein by reference to
Exhibit 5.1 of Registrant's Registration Statement on Form S-2
(File No. 33-57505), dated May 1, 1995.
9 Amended and Restated Voting Trust Agreement dated September
16, 1983, incorporated herein by reference to Exhibit 9 of
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1983, filed with the Commission on March 30,
1984, Commission File No. 2-66296.
9(a) Amendments No. 1 and 2, dated April 8, 1986 to Amended and
Restated Voting Trust Agreement, incorporated herein by
reference to Exhibit 9(a) of Registrant's Registration
Statement on Form S-2 (File No. 2-66296), dated April 29,
1986.
9(b) Amendment No. 1987-1 to Amended and Restated Voting Trust
Agreement, incorporated herein by reference to Exhibit 9(b) of
Registrant's Registration Statement on Form S-2 (File No. 2-
66296), dated April 29, 1987.
9(c) Amendment 1995-1 to the Roundy's, Inc. Voting Trust Agreement,
incorporated herein by reference to Exhibit 9(c) of
Registrant's Registration Statement on Form S-2 (File No. 33-
57505), dated May 1, 1995.
9(d) Amendment 1995-2 to the Roundy's, Inc. Voting Trust Agreement,
incorporated herein by reference to Exhibit 9(d) of
Registrant's Registration Statement on Form S-2 (File No. 33-
57505), dated April 26, 1996.
10.1 Deferred Compensation Agreement between the Registrant and cer
tain executive officers including Messrs. Ranus, Beketic,
Sullivan, and Schmitt,incorporated herein by reference to
Exhibit 10.1 of Registrant's Registration Statement on Form S-
2 (File No. 33-57505) dated April 24, 1997.
10.1(a)Amendment to Deferred Compensation Agreement between
Registrant and certain executive officers including Messrs.
Ranus, Beketic, Sullivan, and Schmitt, dated March 31, 1998.
FILED HEREWITH.
10.2 Directors and Officers Liability and Corporation Reimbursement
Policy issued by American Casualty Company of Reading,
Pennsylvania (CNA Insurance Companies) as of June 13, 1986,
incorporated herein by reference to Exhibit 10.3 of
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 3, 1987, filed with the Commission on April 3,
1987, Commission File No. 2-66296.
II-3
10.2(a)Declarations page for renewal through November 1, 1998 of
Directors and Officers Liability and Corporation Reimbursement
Policy incorporated herein by reference to Exhibit 10.2(a) of
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998, filed with the Commission on March 31,
1998, Commission File No. 33-57505.
10.3 1991 Stock Incentive Plan, revised February 9, 1993,
incorporated herein by reference to Exhibit 10.6 of
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 2, 1993, filed with the Commission on March 30,
1993, Commission File No. 2-66296.
10.4 Severance and Non-Competition Agreement dated April 13, 1998
between the Registrant and Gerald F. Lestina. FILED HEREWITH.
10.5 Roundy's, Inc. Deferred Compensation Plan, effective March 19,
1996, incorporated herein by reference to Exhibit 10.5 of
Registrant's Registration Statement on Form S-2 (File No. 33-
57505), dated April 26, 1996.
23.1 Consent of Deloitte & Touche LLP.
FILED HEREWITH.
24.1 Powers of Attorney of Certain Officers and Directors of
Registrant
FILED HEREWITH (included as part of Signature Page).
27.1 Financial Data Schedule
FILED HEREWITH.
Item 17. Undertakings.
(a) Rule 415 Offering. The undersigned registrant hereby
undertakes
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
II-4
(b) Filings Incorporating Subsequent Exchange Act Documents by
Reference. The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the Securities
Act of 1933, as amended, each filing of the registrant's
annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934, as amended (and, where
applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange
Act of 1934, as amended) that is incorporated by reference in
the registration statement shall be deemed to be a new
Registration Statement relating to the securities offered
therein and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(e) Incorporated Annual and Quarterly Reports. The undersigned
registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the
prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulation S-X are
not set forth in the prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such
interim financial information.
(h) Request for Acceleration of Effective Date or Filing of
Registration Statement on Form S-8. The undersigned
registrant hereby undertakes that, insofar as indemnification
for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment for the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to
believe that it meets all the requirements for filing on Form S-2
and has duly caused this Post-Effective Amendment No. 3 to
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the town of Pewaukee,
State of Wisconsin, on April 28, 1998.
ROUNDY'S, INC.
By ROBERT D. RANUS
------------------
Robert D. Ranus
Vice President and
Chief Financial Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Robert D. Ranus,
his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent,
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-
fact and agent or his substitute, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Post-Effective Amendment No. 3 to Registration
Statement has been signed this 28th day of April, 1998 by the
following persons in the capacities indicated:
Signature Title
GERALD F. LESTINA
- ------------------ Director, President and
Gerald F. Lestina Chief Executive Officer
ROBERT D. RANUS
- ---------------- Director, Vice President and
Robert D. Ranus Chief Financial Officer and
Principal Accounting Officer
Signature Title
ROBERT E. BARTELS
- ------------------ Director
Robert E. Bartels
CHARLES R. BONSON
- ------------------ Director
Charles R. Bonson
ROBERT S. GOLD
- --------------- Director
Robert S. Gold
GARY N. GUNDLACH
- ----------------- Director
Gary N. Gundlach
GEORGE C. KAISER
- ----------------- Director
George C. Kaiser
GERLAD F. LESTINA
- ----------------- Director
Gerald F. Lestina
PATRICK D. McADAMS
- ------------------ Director
Patrick D. McAdams
BRENTON H. RUPPLE
- ----------------- Director
Brenton H. Rupple
GARY R. SARNER
- -------------- Director
Gary R. Sarner
ROUNDY'S, INC.
FORM S-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
INDEX TO EXHIBITS
Exhibit Description and Incorporation by Reference
3.1 Articles of Incorporation of the Registrant, as amended,
incorporated herein by reference to Exhibit 4.1 of
Registrant's Registration Statement on Form S-2 (File No.
2-94485), dated December 5, 1984.
3.2 By-Laws of the Company, as amended February 24, 1998,
incorporated herein by reference to Exhibit 3.2 of
Registrant's Annual Report on Form 10-K for fiscal year ended
January 3, 1998, filed with the Commission on April 2, 1998,
Commission File No. 33-57505.
4.1 Policy Relating to Redemption of Stock by Inactive Customer
Shareholders and Former Employees. FILED HEREWITH (included
as Exhibit D to the Prospectus which forms a part of this
Registration Statement).
4.2 Note Agreement dated December 15, 1991 (effective December 30,
1991), between Roundy's, Inc. and Massachusetts Mutual Life
Insurance Company and United of Omaha Life Insurance Company,
incorporated herein by reference to Exhibit 4.9 of
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 28, 1991, filed with the Commission on March
26, 1992, Commission File No. 2-66296.
4.3 Note Agreement dated December 15, 1992 between Roundy's, Inc.
and Connecticut Mutual Life Insurance Company, The Ohio
National Life Insurance Company, Provident Mutual Life
Insurance Company of Philadelphia, Providentmutual Life and
Annuity Company of America, Guarantee Mutual Life Company,
Woodmen Accident and Life Company and United of Omaha Life
Insurance Company, incorporated herein by reference to Exhibit
4.11 of Registrant's Annual Report on Form 10-K for the fiscal
year ended January 2, 1993, filed with the Commission on March
30, 1993, Commission File No. 2-66296.
4.4 Policy Regarding Issuance and Sales of Roundy's, Inc. Stock.
FILED HEREWITH (included as Exhibit E to the Prospectus which
forms a part of this Registration Statement).
4.5 Note Agreement dated December 22, 1993 (effective December 22,
1993), between Roundy's, Inc. and The Variable Annuity Life
Insurance Company, The Life Insurance Company of Virginia,
Phoenix Home Life Mutual Insurance Company, Phoenix American
Life Insurance Company, Washington National Insurance Company,
and TMG Life Insurance Company, incorporated herein by
reference to Exhibit 4.14 of Registrant's Annual Report on
Form 10-K for the fiscal year ended January 1, 1994, filed
with the Commission on March 31, 1994, Commission File No. 2-
66296.
4.6 Form of Subscription Agreement
FILED HEREWITH (included as Exhibit A to the Prospectus which
forms a part of this Registration Statement).
4.7 Form of Buying Deposit Agreement
FILED HEREWITH (included as Exhibit B to the Prospectus which
forms a part of this Registration Statement).
4.8 Article V of Registrant's By-Laws "Fiscal Year Accounting and
Patronage Rebates," as amended on February 24, 1998.
FILED HEREWITH (included as Exhibit C to the Prospectus which
forms a part of this Registration Statement).
4.9 First Amendment dated May 1, 1996 to Note Agreements dated
December 15, 1991 and Note Agreements dated December 15, 1992
and Note Agreements dated December 22, 1993, incorporated
herein by reference to Exhibit 4.16 of Registrant's Form 10-Q
for the quarterly period ended June 29, 1996, filed with the
Commission on August 13, 1996, Commission File No. 33-57505.
4.10 Note Agreement dated May 15, 1996 between Roundy's, Inc. and
The Ohio National Life Insurance, Phoenix American Life
Insurance Company, Provident Mutual Life Insurance,
Providentmutual Life and Annuity Company of America, United of
Omaha Life Insurance Company, John Alden Life Insurance
Company, Oxford Life Insurance Company, The Security Mutual
Life Insurance Company of Lincoln, Nebraska and Woodman
Accident and Life Company, incorporated herein by reference to
Exhibit 4.17 of Registrant's Form 10-Q for the quarterly
period ended June 29, 1996, filed with the Commission on
August 13, 1996, Commission File No. 33-57505.
4.11 Credit Agreement dated December 13, 1996, between Roundy's,
Inc. and PNC Bank, NA (as agent), incorporated herein by
reference to Exhibit 4.11 of Registrant's Annual Report on
Form 10-K for the fiscal year ended December 28, 1996, filed
with the Commission on March 26, 1997, Commission File No. 33-
57505.
5.1 Opinion of Whyte Hirschboeck Dudek S.C. as to legality of
issuance of securities, incorporated herein by reference to
Exhibit 5.1 of Registrant's Registration Statement on Form S-2
(File No. 33-57505), dated May 1, 1995.
9 Amended and Restated Voting Trust Agreement dated September
16, 1983, incorporated herein by reference to Exhibit 9 of
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1983, filed with the Commission on March 30,
1984, Commission File No. 2-66296.
9(a) Amendments No. 1 and 2, dated April 8, 1986 to Amended and
Restated Voting Trust Agreement, incorporated herein by
reference to Exhibit 9(a) of Registrant's Registration
Statement on Form S-2 (File No. 2-66296), dated April 29,
1986.
9(b) Amendment No. 1987-1 to Amended and Restated Voting Trust
Agreement, incorporated herein by reference to Exhibit 9(b) of
Registrant's Registration Statement on Form S-2 (File No. 2-
66296), dated April 29, 1987.
9(c) Amendment 1995-1 to the Roundy's, Inc. Voting Trust Agreement,
incorporated herein by reference to Exhibit 9(c) of
Registrant's Registration Statement on Form S-2 (File No. 33-
57505), dated May 1, 1995.
9(d) Amendment 1995-2 to the Roundy's, Inc. Voting Trust Agreement,
incorporated herein by reference to Exhibit 9(d) of
Registrant's Registration Statement on Form S-2 (File No. 33-
57505), dated April 26, 1996.
10.1 Deferred Compensation Agreement between the Registrant and
certain executive officers including Messrs. Ranus, Beketic,
Sullivan, and Schmitt, incorporated herein by reference to
Exhibit 10.1, of Registrant's Registration Statement on Form S-
2 (File No. 33-57505) dated April 24, 1997.
10.1(a) Amendment to Deferred Compensation Agreement between the
Registrant and certain executive officers including Messrs.
Ranus, Beketic, Sullivan, and Schmitt, dated March 31, 1998.
FILED HEREWITH.
10.2 Directors and Officers Liability and Corporation Reimbursement
Policy issued by American Casualty Company of Reading,
Pennsylvania (CNA Insurance Companies) as of June 13, 1986,
incorporated herein by reference to Exhibit 10.3 of
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 3, 1987, filed with the Commission on April 3,
1987, Commission File No. 2-66296.
10.2(a)Declarations page for renewal through November 1, 1998 of
Directors and Officers Liability and Corporation Reimbursement
Policy, incorporated herein by reference to Exhibit 10.2(a) of
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 3, 1998, filed with the Commission on March 31,
1998, Commission File No. 33-57505.
10.3 1991 Stock Incentive Plan, revised February 9, 1993,
incorporated herein by reference to Exhibit 10.6 of
Registrant's Annual Report on Form 10-K for the fiscal year
ended January 2, 1993, filed with the Commission on March 30,
1993, Commission File No. 2-66296.
10.4 Severance and Non-Competition Agreement dated April 13, 1998
between the Registrant and Gerald F. Lestina. FILED HEREWITH
10.5 Roundy's, Inc. Deferred Compensation Plan, effective March 19,
1996, incorporated herein by reference to Exhibit 10.5 of
Registrant's Registration Statement on Form S-2 (File No. 33-
57505), dated April 26, 1996.
23.1 Consent of Deloitte & Touche LLP.
FILED HEREWITH.
24.1 Powers of Attorney of Certain Officers and Directors of
Registrant
FILED HEREWITH (included as part of Signature Page).
27.1 Financial Data Schedule
FILED HEREWITH.
</TABLE>
EXHIBIT 10.1(a)
AMENDMENT TO DEFERRED COMPENSATION AGREEMENT
THIS AMENDMENT, made this 31st day of March, 1998, between
ROUNDY'S, INC., a Wisconsin corporation ("Roundy's") and
[_______________] ("Employee").
RECITALS:
1. The Employee and Roundy's are parties to a "Deferred
Compensation Agreement" date as of April 16, 1997 (the
"Existing Agreement").
2. The Parties desire to amend the Existing Agreement in the
manner set forth herein.
AGREEMENT:
Therefore, in consideration of the premises and the Employee's
continued employment with Roundy's, Roundy's and the Employee
hereby agree as follows:
1. Amendment of Existing Agreement. Subsection 6(b) of the
Existing Agreement is deleted and replaced in its entirety with the
following:
"(b) For purposes of this Agreement, the term "Good Reason"
means either of the following (in either case, effected
by Roundy's (or the subsidiary or affiliate by which the
Employee is employed), without the Employee's voluntary
concurrence): (i) any material diminution in the total
value of the Employee's compensation, including for this
purpose all compensation in all forms, whether in cash or
otherwise, and whether current or deferred, or (ii) the
substantial diminution of or adverse change in the
Employee's authority, functions or responsibilities, to
the point that the Employee's job functions and level of
responsibility in the Company (or in its successor, or in
the business unit that comprises substantially the
business of the Company as it existing preceding the
Change of Control) are not reasonably commensurate with
the level of responsibility or the functions associated
with the Employee's position with the Company immediately
preceding the Change of Control."
2. Agreement Otherwise Remains in Effect. Except as
expressly set forth above, the Existing Agreement remains in force
and effect in accordance with its original terms.
IN WITNESS WHEREOF, the parties have executed this Amendment,
as of the date first written above.
ROUNDY'S, INC.
By:
Gerald F. Lestina, President & CEO
Attest:
Edward G. Kitz, Vice President,
Secretary & Treasurer
[________________], Employee
EXHIBIT 10.4
SEVERANCE AND NON-COMPETITION AGREEMENT
AGREEMENT, entered into this __ day of April, 1998
("Effective Date"), between ROUNDY'S, INC., a Wisconsin
corporation ("Roundy's" or the "Company"), and GERALD F.
LESTINA ("Mr. Lestina").
RECITALS:
1. Mr. Lestina is employed by the Company as its President
and Chief Executive Officer, and is also a member of
its Board of Directors. A change in the ownership or
control of Roundy's or its business could result in a
displacement of certain key employees, including Mr.
Lestina, and/or a material change in the methods of
operation of Roundy's business.
2. In the course of his employment with the Company, Mr.
Lestina has acquired and will continue to acquire a
great deal of valuable, proprietary and confidential
knowledge and information regarding the Company's
business, its products and services, and its marketing
and business development strategies, and other
proprietary information of potential value to the
Company's competitors.
3. As an incentive for Mr. Lestina to continue in the
Company's employ and to help secure Mr. Lestina's
continued commitment to the Company, and in
consideration for his agreement not to compete with the
Company following the termination of his employment
under certain conditions, the Company wishes to
undertake to make certain payments and provide certain
benefits to Mr. Lestina upon the termination of his
employment under the circumstances set out herein, and
provide certain financial benefits to Mr. Lestina in
the event of the termination of his employment
following a "Change of Control" (as hereinafter
defined) of the Company.
AGREEMENT:
In consideration of the premises, and the mutual
covenants and agreements contained herein, the Company and
Mr. Lestina agree as follows:
1. Termination of Mr. Lestina's Employment by the Company
without Good Cause, or by Mr. Lestina for Good Reason.
Upon the Company's termination of Mr. Lestina's
employment (unless such employment is terminated for
"Good Cause" (as that term is defined below)), or Mr.
Lestina's termination of his employment for "Good
Reason" (as that term is defined below) (either of
those events being referred to herein as a "Qualifying
Termination"), the Company will pay to Mr. Lestina the
Severance Benefit (as that term is defined below), pro
rata over a period of two (2) years following the
"Termination Date" (as hereinafter defined), without
interest; provided that in the event such a Qualifying
Termination occurs within a period of three (3) years
following a "Change of Control" (as hereinafter
defined) of the Company, then the entire amount of the
Severance Benefit shall be paid in a lump sum within
thirty (30) days after the Termination Date. The date
upon which Mr. Lestina's employment with the Company
ceases is referred to herein as the "Termination Date."
2. Continuation of Certain Fringe Benefits. Upon a
Qualifying Termination, the Company (in addition to the
payment of the Severance Benefit as provided in the
preceding Section 1) will continue to provide to Mr.
Lestina, at no cost to him, those health and/or life
insurance benefits (if any) to which he was entitled or
which were provided or made available to the him by the
Company as of the Termination Date, for a period of two
(2) years following the Termination Date.
3. Additional Post-Retirement Insurance Benefits. If Mr.
Lestina ceases to be employed with the Company
(including by reason of his death) at any time after
his attaining age 55 and while he is then an officer
and a director of the Company (unless his employment is
terminated by the Company for Good Cause), the Company
will continue to provide the following benefit:
(a) Until the death of Mr. Lestina and his spouse
(except as provided below), at no cost to Mr.
Lestina, but subject to the provisions of this
Section 3, the Company will provide coverage for
Mr. Lestina and his spouse under the employee
health, medical and life insurance plans
maintained by the Company for its most senior
executive personnel, in accordance with the terms
of such plans as the same may exist and be in
effect from time to time (the "Company Plans"), or
the substantial equivalent thereof.
(b) After either Mr. Lestina or his spouse
attains age 65, the coverage provided to him or
her under this Section 3 will consist of a
"Medicare Supplement" policy of health insurance,
the benefits of which are secondary to any
benefits available under Medicare, such that the
total benefits available under Medicare and such
Medicare Supplement policy, when combined, are the
substantial equivalent of the benefits available
under the Company Plans.
(c) In the event of Mr. Lestina's death, the
benefits to be provided under paragraphs (a) and
(b) this Section 3 will be provided to his spouse
until the date of her remarriage.
(d) Notwithstanding the foregoing, the benefits
to be provided under this Section 3 will cease if
and when Mr. Lestina (i) accepts other employment
the terms of which include a health or medical
insurance benefit reasonably comparable to that to
be provided under this Section 3 (or would include
such a benefit but for Mr. Lestina's election to
forego it), or (ii) accepts other employment in
violation of, or otherwise breaches or violates
the provisions of, Section 5 hereof.
(e) The benefits to be provided under this
Section 3 are not intended to duplicate those
provided under the preceding Section 2.
Accordingly, the Company shall not be obligated to
provide the benefits described in this Section 3
at any time during which the benefits described in
the preceding Section 2 are being provided.
(f) References in this Section 3 to Mr Lestina's
"spouse" are intended to refer only to the person
who is his spouse as of the date of this
Agreement, and not to any other person who may be
his spouse at any time in the future.
4. Definitions.
(a) For purposes of this Agreement, the term "Good
Cause" means only (i) the wilful commission by Mr.
Lestina of a material act of dishonesty or moral
turpitude involving the Company; (ii) Mr.
Lestina's conviction of a felony, or his pleading
guilty or nolo contendere to the same; (iii) Mr.
Lestina's gross negligence in the performance of
his duties and responsibilities as an officer of
the Company; (iv) the wilful failure of Mr.
Lestina to carry out the duties and
responsibilities of his office, or to follow a
specific and lawful directive of the Board of
Directors of the Company (provided such directive
is consistent with his position as the President
and Chief Executive Officer of the Company), but
only if such failure continues for ten days after
Mr. Lestina has been provided with written notice
of such failure (which notice includes a
description of the nature of the failure and
specifies the actions to be taken by Mr. Lestina
to rectify it); (v) Mr. Lestina's wilful
disclosure of material proprietary confidential
information of the Company to or for the benefit
of a competitor of the Company, to the extent such
information was not available publicly; or (vi)
any intentional misrepresentation by Mr. Lestina
to the shareholders or directors of the Company.
For purposes of the preceding definition, no act,
failure to act, or omission on the part of Mr.
Lestina will be deemed to have been "wilful" or
"intentional" if done or omitted to be done in
good faith and in the reasonable belief that it
was in or not opposed to the best interests of the
Company. Any such act or omission or failure to
act based upon the advice of counsel for the
Company will be conclusively deemed to have been
done or omitted to be done in good faith and in
the best interests of the Company.
(b) For purposes of this Agreement, the term "Good
Reason" means either of the following (in either
case, effected by the Company, without Mr.
Lestina's voluntary concurrence): (i) any material
diminution in the total value of Mr. Lestina's
compensation, including for this purpose all
compensation in all forms, whether in cash or
otherwise, and whether current or deferred; or
(ii) the substantial diminution of or adverse
change in the nature or scope of Mr. Lestina's
authority, powers, functions, duties or
responsibilities (without regard to any title or
office he may nominally hold), to the point that
he no longer holds a senior executive management
position in the Company or its successor (or,
following a Change of Control, in the business
unit that comprises substantially the business of
the Company as it existed preceding such Change of
Control).
(c) For purposes of this Agreement, the term
"Severance Benefit" means the sum of the
following, multiplied by two (2): (i) Mr.
Lestina's annual base salary as established and in
effect as of the Termination Date; plus (ii) the
amount of any bonus and/or incentive compensation
paid or payable to Mr. Lestina for the fiscal year
preceding the fiscal year of the Company in which
the Termination Date occurs (the "Prior Year
Bonus"), or, if greater, the amount of such bonus
and/or incentive compensation for the fiscal year
of the Company in which the Termination Date
occurs (the "Current Year Bonus"). If the amount
of the bonus or incentive compensation described
in the preceding clause (ii) cannot be determined
as of the date when the benefits to be paid
hereunder are to be paid, then the amount to be
paid at such time shall be determined on the basis
of the Prior Year Bonus, and such amount shall be
adjusted, if necessary, to reflect the Current
Year Bonus, as soon as practical after the amount
of the Current Year Bonus can be determined.
(d) For purposes of this Agreement, a "Change of
Control" of Roundy's shall be deemed to occur:
(i) If any person or group of persons
(as defined in Rule 13d-5 under the
Securities Exchange Act of 1934, as amended
(the "Exchange Act")), together with its
affiliates (but not including the Roundy's,
Inc. Voting Trust), becomes the "beneficial
owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of
thirty percent (30%) or more of the then
outstanding Common Stock of Roundy's, or
thirty percent (30%) of more of the then
outstanding securities of Roundy's entitled
generally to vote for the election of
Directors of Roundy's ("Voting Securities");
provided, that if the person so acquiring
such Common Stock or Voting Securities is
itself a corporation or other entity, such
acquisition will constitute a Change of
Control only if less than 70% of the
outstanding common stock or voting securities
of such corporation or other entity are held
by persons who, immediately before such
acquisition, held beneficially Common Stock
or Voting Securities of Roundy's; or
(ii) Upon the merger or share exchange
of Roundy's with any other corporation, the
sale or other disposition of substantially
all of the assets of Roundy's, or the
liquidation or dissolution of Roundy's,
unless, in any such case, immediately
thereafter at least 70% of the outstanding
Common Stock and 70%of the outstanding Voting
Securities of the corporation or entity
surviving such merger or share exchange, or
acquiring such assets, is held beneficially
by persons who, immediately before such
merger or share exchange or acquisition of
assets, held beneficially Common Stock or
Voting Securities of Roundy's; or
(iii) If the Board of Directors of
Roundy's (by the affirmative vote of at least
2/3 of the directors then in office),
immediately prior to any other action
proposed to be taken by Roundy's or by the
stockholders of Roundy's, determines that
such proposed action, if taken, would
constitute a Change of Control of Roundy's,
and such action is thereafter taken.
5. Noncompetition.
(a) Subject to the provisions of paragraph (d) of this
Section 5, for a period of one (1) year following
a Qualifying Termination, Mr. Lestina will not,
directly or indirectly, as a principal, agent,
owner, employee, trustee, beneficiary, partner, co-
venturer, officer, director, stockholder (other
than as a stockholder of less than 5% of the stock
of a publicly traded corporation) or in any other
capacity, engage in, have an interest in or become
associated with any entity, firm, business,
activity or enterprise which is engaged in the
wholesale distribution of groceries and which
(either directly or through a subsidiary or
affiliate) has a warehouse or distribution
facility in the "Proscribed Territory," as that
term is defined below. The "Proscribed Territory"
means (i) the area consisting of the States of
Wisconsin, Michigan, Illinois, Indiana, and Ohio,
plus (ii) to the extent not included within (i),
the area encompassed within a radius of four
hundred (400) miles of any warehouse or
distribution facility operated by the Company or
any affiliate of the Company as of the Termination
Date.
(b) Mr. Lestina acknowledges and agrees that the
restrictions set forth in this Section 5 are
founded on valuable consideration and are
reasonable in duration and geographic area in view
of the circumstances under which this Agreement is
entered into, and that such restrictions are
necessary to protect the legitimate interests of
the Company. In the event that any provision of
this Section 5 is determined to be invalid by any
court of competent jurisdiction, the provisions of
this Section 5 shall be deemed to have been
amended and the parties will execute any documents
and take whatever action is necessary to evidence
such amendment, so as to eliminate or modify any
such invalid provision and to carry out the intent
of this Section 5 so to render the terms of this
Section 5 enforceable in all respects as so
modified.
(c) Mr. Lestina acknowledges and agrees that
irreparable injury will result to the Company in
the event Mr. Lestina breaches any covenant
contained in this Section 5, and that the remedy
at law for such breach will be inadequate.
Therefore, if Mr. Lestina engages in any act in
violation of the provisions of this Section 5, the
Company shall be entitled, in addition to such
other remedies and damages as may be available to
it by law or under this Agreement, to injunctive
or other equitable relief to enforce the
provisions of this Section 5.
(d) Notwithstanding the foregoing, this Section 5
shall not apply in the event of a Qualifying
Termination of Mr. Lestina's employment within a
period of three (3) years following a Change of
Control.
6. Term and Termination. This Agreement will become
effective as of the Effective Date and continue in
effect thereafter until October 10, 2007, unless sooner
terminated by the mutual agreement of the Company and
Mr. Lestina; provided that the expiration of the term
of this Agreement shall not impair the obligations of
the Company to make the payments and provide the
benefits under Sections 1, 2 and 3 hereof to the extent
that such obligations relate to a cessation of Mr.
Lestina's employment that occurred prior to the
expiration of such term.
7. Severability. The provisions of this Agreement are
severable. If any part of this Agreement is held to be
void or unenforceable or contrary to law, the Company
shall have the option to either terminate this
Agreement in its entirety, in which case it shall be
entitled to the return of (or be relieved of the
obligation to pay) any amounts paid (or which would
otherwise be payable) to Mr. Lestina hereunder, or it
may require that the balance of the Agreement
nonetheless shall remain in full force and effect.
Notwithstanding the preceding sentence, if any court of
competent jurisdiction shall determine that any
geographic or time restraint provided in this Agreement
is too broad as to the area or time covered, such
restraint may be reduced to whatever extent the court
deems reasonable and such restraint may be enforced as
reduced.
8. Effect on Retiree Health Benefits Policy. Mr. Lestina
acknowledges that the benefits provided hereunder (in
particular the benefits described in Section 3 hereof)
are intended to be in lieu of any benefits to which he
may now be or hereafter become entitled under the
Company's existing policy relating to the provision of
health insurance benefits to its retired
officer/directors, as embodied in certain resolutions
adopted by the Company's directors on December 10, 1980
(the "1980 Retiree Medical Benefit Policy"). The
Company has not and does not hereby acknowledge any
obligation to Mr. Lestina or any of its other
employees, officers or directors by reason of the
existence of the 1980 Retiree Medical Benefit Policy,
and reserves the right to modify, limit, cancel or
terminate that Policy at any time.
9. Notices. All notices under this Agreement shall be in
writing and any notice shall be considered to be given
and received in all respects on the day it is
personally delivered or deposited in the United States
mail, first class, postage prepaid, addressed as
follows or to such other address as may be designated
by one party to the other by notice duly given
(provided, that written notice given in any other
manner shall nonetheless be effective when actually
received by the party entitled to receive it):
If to the Company: Roundy's, Inc.
23000 Roundy Drive
P.O. Box 473
Pewaukee, WI 53072
Attn: Secretary
If to Mr. Lestina: Gerald F. Lestina
c/o Roundy's, Inc.
23000 Roundy Drive
P.O. Box 473
Pewaukee, WI 53072
10. No Contract of Employment. Nothing contained herein is
intended to create or constitute a contract of
employment between the Company and Mr. Lestina, or to
impose on the Company any obligation to continue the
employment of Mr. Lestina or to confer on Mr. Lestina
any rights to such continued employment.
11. Assignment. This Agreement may not be assigned by the
Company without the written consent of Mr. Lestina,
except that if the Company shall transfer substantially
all of its business or assets to another corporation or
other form of business or other entity, this Agreement
may be assigned to such a successor and it shall be
binding upon and inure to such successor's benefit.
Mr. Lestina may not assign, pledge or encumber this
Agreement or any interest herein.
12. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto, the
Company's successors and assigns and Mr. Lestina's
heirs and legal representatives. If the Company merges
or consolidates with or into any other corporation or
entity (whether or not the Company is the surviving
entity in such transaction), or transfers all or
substantially all of its business or assets to another
corporation or other form of business or other entity,
all references herein to the Company shall be deemed
references to the corporation or other entity surviving
such merger or consolidation or to which such assets or
business are transferred.
13. Costs of Enforcement. If any action or proceeding is
brought by either party to enforce any provision of
this Agreement, or to recover damages for the breach
hereof, the prevailing party shall be entitled to
recover from the other party its reasonable costs and
expenses (including reasonable attorneys' fees)
incurred in such action or proceeding.
14. Amendment. This Agreement may be amended only by a
written instrument executed by the parties hereto or
their respective successors, assigns, heirs or legal
representatives, as applicable.
15. Effect on Prior Agreements. This Agreement terminates
and cancels in their entirety (a) the Severance and Non-
Competition Agreement between the Company and Mr.
Lestina dated June 1, 1995, and (ii) the Deferred
Compensation Agreement between the Company and Mr.
Lestina dated April 16, 1997.
16. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the
State of Wisconsin.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
ROUNDY'S, INC.
By:
Its:
Gerald F. Lestina
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective
Amendment No. 3 to the Registration Statement No. 33-57505 of
Roundy's, Inc. on Form S-2 of our reports dated February 20, 1998,
included and incorporated by reference in the Annual Report on Form
10-K of Roundy's, Inc. for the year ended January 3, 1998, and to
the use of our report dated February 20, 1998, appearing in the
Prospectus, which is part of this Registration Statement. We also
consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE, LLP
Milwaukee, Wisconsin
April 28, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROUNDY'S
INC. FORM 10-K 405 FOR THE PERIOD ENDED 01-03-98 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JAN-03-1998
<CASH> 52,366,900
<SECURITIES> 0
<RECEIVABLES> 86,998,500
<ALLOWANCES> 0
<INVENTORY> 150,898,000
<CURRENT-ASSETS> 301,707,400
<PP&E> 205,520,100
<DEPRECIATION> 102,219,500
<TOTAL-ASSETS> 440,309,800
<CURRENT-LIABILITIES> 217,633,700
<BONDS> 83,457,800
0
0
<COMMON> 1,362,400
<OTHER-SE> 114,722,600
<TOTAL-LIABILITY-AND-EQUITY> 440,309,800
<SALES> 2,610,696,700
<TOTAL-REVENUES> 2,614,392,400
<CGS> 2,362,355,200
<TOTAL-COSTS> 2,362,355,200
<OTHER-EXPENSES> 221,908,400
<LOSS-PROVISION> 2,389,100
<INTEREST-EXPENSE> 8,220,900
<INCOME-PRETAX> 19,518,800
<INCOME-TAX> 8,315,200
<INCOME-CONTINUING> 11,203,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,203,600
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
