UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 2, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____________ to _______________
Commission file number: 33-57505
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Roundy's,Inc.
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(Exact name of registrant as specified in its charter)
Wisconsin 39-0854535
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23000 Roundy Drive
Pewaukee, Wisconsin 53072
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (414)547-7999
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Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
As of March 30, 1999, 11,700 shares of Class A (voting)
Common Stock and 1,162,009 shares of Class B (non-voting)
Common Stock were outstanding. All of the outstanding
shares of Class A Common Stock on March 30, 1999 were held
of record by the Roundy's, Inc. Voting Trust which may be
deemed an affiliate of the registrant. There is no
established public trading market for either class of such
stock.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
--------- -------------------
Portions of Annual Report to Part II, Items 6, 7, 8
Stockholders for the year
ended January 2, 1999
PART I
The discussions in this Annual Report on Form 10-K and in
the Company's 1998 Annual Report to stockholders
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 herein (see "Cautionary Factors" at the end of
Item 1, below). 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.
ITEM 1. Business.
---------
GENERAL
-------
Roundy's, Inc. and its subsidiaries (collectively the "Company") are
engaged principally in the wholesale distribution of food and nonfood
products to supermarkets and warehouse food stores located in Wisconsin,
Illinois, Michigan, Indiana, Ohio, Kentucky, Missouri, Arkansas,
Minnesota, Pennsylvania, Tennessee and West Virginia. The Company also
owns and operates 13 retail warehouse food stores under the name "Pick
'n Save" or "Park & Save," one limited assortment food store under the
name "Mor For Less" and 5 conventional food stores under the names
"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 806 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 inventory
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. Unless the context indicates otherwise, as used herein, the
term "Company" refers to Roundy's, Inc. and its subsidiaries and the term
"Roundy's" refers to Roundy's, Inc. without its subsidiaries. Roundy's
operates on a 52 or 53 week fiscal year ending on the Saturday closest to
December 31. In this report, unless the context indicates otherwise, the
terms "1998" and "fiscal 1998" refer to the 52-week fiscal year ended January
2, 1999; the terms "1997" and "fiscal 1997" refer to the 53-week fiscal year
ended January 3, 1998; and the terms "1996" and "fiscal 1996" refer to the
52-week fiscal year ended December 28, 1996.
CAPITAL STRUCTURE/PATRONAGE DIVIDENDS
-------------------------------------
As of January 2, 1999, all of Roundy's outstanding Class A (Voting) Common
Stock is owned by the owners ("stockholder-customers") of 119 retail grocery
stores serviced by Roundy's. These stockholder-customers, who own
approximately 72% of the combined total of Class A Common and Class B Common,
may receive patronage dividends from Roundy's based on the level of their
purchases from Roundy's. Approximately 28% of the outstanding combined Class
A Common and Class B Common Stock 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. Roundy's is obligated by Article 5 of its By-Laws, as amended, to pay
a patronage dividend to its stockholders-customers out of and based upon the
net earnings from business done by Roundy's with such stockholder-customers in
any fiscal year in an amount which would reduce the net income of the Company
to such amount as will result in an increase of 8% in the book value of
outstanding Roundy's stock as of the close of such year (calculated after the
payment of patronage dividends). In the event that such net earnings level is
not reached, no patronage dividends will be paid for that year. In February
1998, the Board of Directors adopted a resolution amending the By-Laws to
change the required increase in net book value per share from 10% to 8%,
beginning in fiscal 1998. The patronage dividend is payable at least 20% in
cash and the remainder in Class B Common. Patronage dividends for fiscal 1998,
1997 and 1996 were payable 30% in cash and 70% in Class B Common.
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. 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 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 successfully challenge
Roundy's cooperative 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 which were deducted by Roundy's.
Roundy's thereafter might incur significantly increased consolidated Federal
income tax liabilities in future tax years.
Roundy's subsidiaries do not operate as cooperatives. The customers serviced
by these subsidiaries are independent grocers, operating 687 retail stores.
They do not receive patronage dividends.
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.
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 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 $173,339,000, $179,032,000 and $175,459,000 of the Company's sales
during fiscal 1998, 1997 and 1996, respectively. 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 9% of the Company's purchases in fiscal 1998.
As described above, Roundy's, not including its subsidiaries, has historically
operated on a cooperative basis with respect to its wholesale food
distribution business. Roundy's cooperative operations accounted for
approximately 39% of the Company's consolidated net sales and service fees
for fiscal 1998, and 37% for fiscal 1997 and 1996. At January 2, 1999,
Roundy's had 59 stockholder-customers actively engaged in the retail grocery
business, operating a total of 119 retail grocery stores. Roundy's
cooperative wholesale food business is focused primarily in Wisconsin,
where all but 3 of the 119 retail grocery stores are located
(3 are in Illinois). At January 2, 1999 the Company (including its
subsidiaries) had 687 independent retail food store customers. Sales by the
Company to the independent retail food stores accounted for 50%, 52% and
52% of the Company's consolidated net sales and service fees for fiscal 1998,
1997 and 1996, 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
a 12 state area the Company serviced 119 retail grocery stores operated by
its stockholder-customers, 687 retail stores operated by non-stockholders and
19 Company-owned and operated retail stores during fiscal 1998. Of the
Company's consolidated net sales and service fees for this period,
$679,498,400 or 26.4% were attributable to five customers, with one customer
accounting for $294,483,400 or 11.4% of such sales. Approximately 78%
or 642 retail stores purchased less than $3,000,000 each from the Company in
fiscal 1998. 105 customers owned more than one retail food store, with one
customer owning 17 retail food stores.
Services to Customers
- ---------------------
Stockholder-customers are provided, and independent retailers are offered,
a variety of services to help them maintain a competitive position within
the retail grocery industry. These services include pricing services,
ordering assistance, point-of-sale host-computer support, detailed
reports of purchases, store engineering, retail accounting, group advertising,
centralized bakery purchasing, merchandising, insurance, real estate services
and retail training. The Company charges its stockholder-customers for
some of these services, however, the income generated by such charges is not
material. The foregoing services are also available to the Company's
independent retailers on a fee basis.
Customer Loans, Guarantees and Leases
- -------------------------------------
The Company 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 and has made
various loans to these individuals and entities for such purposes.
Loans outstanding as of January 2, 1999 were as follows:
Outstanding
Number Balance Range of Range of
of Original as of Interest Maturity
Loans Amount Jan. 2, 1999 Rates Dates
----- ---------- ------------ ----------- ----------
Inventory
equipment
Loans 111 $45,741,200 $23,385,000 Variable(1) 1999-2011
(1) Variable rates based on the Company's cost of borrowing.
The Company's guarantees of customer bank loans and customer leases amounted
to $106,700 and $430,100, respectively at January 2, 1999.
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 1999 to 2018. Aggregate lease rentals received
under this program were $23,207,000, $21,249,900 and $21,628,300 in
fiscal 1998, 1997 and 1996, respectively.
Marketing and Distribution of Products
- --------------------------------------
The Company generally distributes its various product lines by a fleet of 270
tractor cabs and 640 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.
Terms of Sales and Bad Debt Experience
- --------------------------------------
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 0.21% of sales. In 1998, 1997
and 1996, the Company's bad debt expense was $2,189,300, $2,389,100 and
$5,302,600, respectively.
Roundy's stockholder-customers are required to maintain buying deposits with
Roundy's equal to the greater of the average amount of a stockholder-customer's
purchases over a two-week period or $20,000. The book value of Class A and
Class B Common Stock of Roundy's owned by a stockholder-customer is credited
against the buying deposit requirement, and Roundy's has a lien against all
such stock to secure any indebtedness to Roundy's.
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
store, 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 "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 1998 1997 1996
-------------- ---- ---- ----
High Value-Limited Assortment
and High Volume-Limited
Service Stores....................... 13 14 16
Conventional Retail Stores........... 6 7 11
Sales of Company-operated stores during the three most recent fiscal years
were $284,127,500, $291,612,600 and $275,761,300 for fiscal 1998, 1997 and
1996, 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 2, 1999, the Company employed full-time 1,100 executive,
administrative and clerical employees, 1,334 warehouse and processing
employees and drivers and 742 retail employees, and had 2,017 part-time
employees. Substantially all of the Company's warehouse employees,
drivers and retail employees are represented by unions, with contracts
expiring in 1999 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 52% 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 1998.
In competing for customers, emphasis is placed on high quality and a wide
assortment of products, 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.
CAUTIONARY FACTORS
------------------
This report and other documents or oral statements which have been and will
be prepared or made in the future contain or may contain forward-looking
statements by or on behalf of the Company. Such statements are based on
management's expectations at the time they are made. In addition to the
assumptions and other factors referred to specifically in connection with
such statements, the following factors, among others, could cause actual
results to differ materially from those contemplated. These factors are in
addition to any other cautionary statements, written or oral, which may be
made or referred to in connection with any such forward-looking statement.
Factors that could cause actual results to differ materially from those
contemplated include:
Wholesale Business Risks - The Company's sales and earnings at wholesale are
dependent on the Company's ability to retain existing customers and attract
new customers, as well as its ability to control costs. Certain factors could
adversely impact the Company's results, including: decline of its independent
retailer customer base due to competition and other factors; loss of
corporate retail sales due to increased competition and other risks detailed
more fully below; consolidations of retailers or competitors; increased self-
distribution by chain retailers; increase in operating costs; the possibility
that the Company will incur additional costs and expenses due to further
investment in, or consolidation of, distribution centers; entry of new or
non-traditional distribution systems into the industry.
Retail Business Risks - The Company's retail segment faces risks which may
prevent the Company from maintaining or increasing retail sales and earnings
including: competition from other retail chains, supercenters,
non-traditional competitors, and emerging alternative formats; operating
risks of certain strategically important retail operations;and adverse impact
from the entry of other retail chains, supercenters and non-traditional or
emerging competitors into markets where the Company has a retail concentration.
Litigation - The Company is involved in various litigation matters arising in
the normal course of business. While the Company believes that it is
currently not subject to any material litigation, the costs and other effects
of legal and administrative cases and proceedings and settlements are
impossible to predict with certainty. The current environment for litigation
involving food wholesalers may increase the risk of litigation being commenced
against the Company. The Company would incur the costs of defending any
such litigation whether or not any claim had merit.
Year 2000 - The Company faces risks associated with potential business
interruptions and other risks because of the "Year 2000" issue, including the
risk that the Company's Year 2000 plan may not adequately address Year 2000
issues faced by the Company, or that the estimated cost of implementing such
plan may be materially greater than expected. Certain Cautionary Factors
specific to the Year 2000 issue are identified in the discussion of the
Year 2000 issue contained in the Company's Annual Report under the caption
"Financial Review - Year 2000" which Cautionary Factors are incorporated
herein by this reference.
THE FOREGOING SHOULD NOT BE CONSTRUED AS EXHAUSTIVE AND THE COMPANY DISCLAIMS
ANY OBLIGATION TO UPDATE ANY FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR
CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS OR TO REFLECT THE OCCURRENCE OF
ANTICIPATED OR UNANTICIPATED EVENTS.
ITEM 2. Properties.
-----------
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)
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, 515,000 (O)
(two facilities) except produce and 94,000 (L)
nonfood products
Eldorado, Illinois Dry groceries and 384,000 (O)
dairy products
Evansville, Indiana Frozen food, meat 136,000 (O)
and 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.
Transportation
- --------------
The Company's transportation fleet for distribution operations as of
January 2, 1999 consisted of 270 tractor cabs, 640 trailers and 3 straight
delivery trucks. In addition, the Company owns 46 automobiles. The fleet is
primarily owned by the Company.
Computers
- ---------
The Company owns most of its computer and related peripheral equipment. The
computers are used for inventory control, billing and all other general
accounting purposes. The Company believes that the computer systems are
adequate for the Company's operations. For information regarding the
Company's Year 2000 compliance efforts, see "Managements Discussion and
Analysis of Financial Condition and Results of Operation - Other Matters -
Year 2000" in the Company's Annual Report.
ITEM 3. Legal Proceedings.
------------------
The Company is involved in various litigation matters arising in the normal
course of business. It is the view of management that the Company's recovery
or liability, if any, under pending litigation is not expected to have a
material effect on the Company's financial position or results of
operations, although no assurance to that effect can be given.
See "Cautionary Statements - Litigation" above.
ITEM 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1998.
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
-----------------------------------------------------
The transfer of shares of Roundy's Class A Common and Roundy's Class B
Common is substantially restricted, and there is no established public
trading market for Roundy's stock. As of January 2, 1999, all of the
outstanding shares of Roundy's Class A (voting) Common Stock were held of
record by the Roundy's, Inc. Voting Trust. Further information on the
Voting Trust is found in Item 12 of this report. There is also no established
public trading market for Roundy's Voting Trust Certificates and there were 59
holders of such Certificates on January 2, 1999. On January 2, 1999 an
aggregate of 208 persons held shares of Roundy's Class B Common Stock and/or
Voting Trust Certificates. Except for patronage dividends (see Item 1, Business,
and Note 3 to Roundy's financial statements), 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.
ITEM 6. Selected Financial Data.
------------------------
The information required by this Item is incorporated by reference from the
Registrant's Annual Report to Stockholders for the fiscal year ended
January 2, 1999 (the "Annual Report") under the caption "Selected Financial
Data."
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation.
-----------------------------------------------------------
The information required by this Item is incorporated by reference from the
Annual Report under the caption "Financial and Operational Review."
ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk.
----------------------------------------------------------
The Company is not presenting any information concerning market risk because
the Company does not engage in any foreign-currency transactions or conduct
any business which is denominated in foreign currencies or outside the United
States. Further, the Company does not believe that its capital structure is
market-sensitive because all of its outstanding material loans bear interest
at a fixed rate.
ITEM 8. Financial Statements and Supplementary Data.
--------------------------------------------
The required Financial Statements are incorporated by reference from the
Annual Report; see response to Item 14(a)(1), of this report. The
required financial statement schedules are filed with this report; see
the response to Item 14(a)(2) of this report. Supplementary data is not
furnished pursuant to Item 30(a)(5) of Regulation S-K.
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
------------------------------------------------------------
None.
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
---------------------------------------------------
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 56 President and Chief Executive officer
since 1995; President And Chief Operating
Officer 1993-1995; Director since 1991
(term expires 1999)
Roger W. Alswager 50 Vice President of Real Estate since 1989
Londell J. Behm 48 Vice President of Advertising since 1987
Ralph D. Beketic 52 Vice President-Wholesale since 1996;
President of Milwaukee Division 1993-1995
David C. Busch 50 Vice President of Administration since 1993
Edward G. Kitz 45 Vice President, Secretary & Treasurer
since 1995; Vice President & Treasurer
1989-1994
Charles H. Kosmaler, Jr 56 Vice President Planning and Information
Services since 1999; Vice President of
Logistics and Planning 1993-1998
Debra A. Lawson 43 Vice President of Human Resources since 1997;
Vice President Administration-Milwaukee
Division 1994-1996
John E. Paterson 51 Vice President-Distribution since 1997;
Vice President of Operations-Milwaukee
Division 1993-1996
Robert D. Ranus 58 Vice President and Chief Financial Officer
since 1987; Director since 1987
(term expires 2000)
Michael J. Schmitt 50 Vice President-Sales and Development since
1995; Vice President, Northern Region 1992-
1995
Marion H. Sullivan 52 Vice President of Marketing since 1989
Robert E. Bartels 61 Director since 1994 (term expires 2000);
President and Chief Executive Officer of
Martin's Super Markets, Inc., South Bend,
Indiana
Charles R. Bonson 52 Director since 1994 (term expires 2000);
President of Bonson's Foods, Inc., Eagle
River, Wisconsin
Robert S. Gold 56 Director since 1998 (term expires 2001);
President and Stockholder of B. & H. Gold
Corporation, Gold's Market, Inc., Gold's, Inc.
and Gold's of Mequon, LLC in Brown Deer,
Milwaukee, Grafton and Mequon, Wisconsin
Gary N. Gundlach 55 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 66 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 49 Director since 1995 (term expires 2001);
General Manager and Treasurer of McAdams, Inc.,
Wales, Wisconsin
Brenton H. Rupple 74 Director since 1993 (term expires 1999);
Retired Chairman of Robert W. Baird & Co.,
Milwaukee, Wisconsin
Gary R. Sarner 52 Director since 1997 (term expires 2001);
Chairman, Total Logistic Control, LLC since
1996; President and Chief Operating Officer,
Christiana Companies, Inc. 1992-1997
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.
ITEM 11. Executive Compensation.
-----------------------
The following table shows the compensation for the past three years of
Roundy's five most highly compensated executive officers performing policy
making functions for Roundy's, including the Chief Executive Officer (the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
--------------------------
Annual Compensation(2)
Long-Term
Compensation All Other
Name and Securities Compen-
Principal Underlying sation
Position Year Salary (1) Bonus Options (3)
- -------------------- ---- ---------- ------- ------------ ----------
Gerald F. Lestina 1998 $380,000 $114,000 4,000 $12,152
President and Chief 1997 371,058 105,120 - 9,994
Executive Officer 1996 338,000 95,316 - 8,645
Robert D. Ranus 1998 227,500 68,250 - 8,829
Vice President and 1997 221,077 62,496 - 11,409
Chief Financial 1996 213,000 60,066 - 9,812
Officer
Ralph D. Beketic 1998 182,000 54,600 - 13,147
Vice President 1997 177,981 50,400 - 5,562
Wholesale 1996 137,096 38,775 - 1,937
Marion H. Sullivan 1998 172,000 51,600 - 6,993
Vice President of 1997 167,981 47,520 - 8,910
Marketing 1996 146,000 41,172 - 7,211
Michael J. Schmitt 1998 160,000 48,000 - 6,880
Vice President of 1997 157,596 44,640 - 8,580
Sales & Development 1996 138,174 39,010 - 7,093
(1) Includes amounts (if any) deferred pursuant to Roundy's Deferred
Compensation Plan.
(2) Pursuant to applicable SEC regulations, perquisites and other
personal benefits are omitted because they did not exceed the
lesser of either $50,000 or 10% of the total of salary and bonus.
(3) The amounts shown in this column for 1998, 1997, and 1996,
respectively, were derived from the following figures. Term life
insurance premiums paid by Roundy's and Roundy's contributions to
the 401(k) plan, respectively, for the named executive officers
are shown below. For 1998 - Mr. Lestina: $7,152 and $5,000. Mr.
Ranus: $3,829 and $5,000. Mr. Beketic: $9,347 and $3,800. Mr.
Sullivan: $2,725 and $4,268. Mr. Schmitt: $3,192 and $3,688.
For 1997 - Mr. Lestina: $6,819 and $3,175. Mr. Ranus: $7,861
and $3,547. Mr. Beketic: $2,670 and $2,891. Mr. Sullivan:
$6,019 and $2,891. Mr. Schmitt: $6,061 and $2,518. For 1996 -
Mr. Lestina: $6,270 and $2,375. Mr. Ranus: $7,732 and $2,080.
Mr. Beketic: $666 and $1,271. Mr. Sullivan: $5,851 and $1,360.
Mr. Schmitt: $5,911 and $1,182.
Life Insurance
- --------------
The executive officers of Roundy's are each covered by $250,000 of executive
equity life insurance. In addition, executives are covered by a group life
carve-out plan in the amount of three times salary, which is in lieu of the
group term life insurance provided to substantially all nonunion employees
under a Roundy's-sponsored Plan. The executive officers of Roundy's are also
covered by an executive isability income insurance wrap-around plan which is
in ddition to the disability income insurance provided to substantially all
nonunion employees under a Roundy's-sponsored Plan.
Loan Guarantees
- ---------------
The Board of Directors of the Company has authorized the Company to guarantee
the repayment of any loans incurred by senior executives and key employees for
the purpose of exercising certain stock options granted by the Company. The
guarantee is limited to a total aggregate principal amount of loans of
$2,000,000. There were no employee guarantees outstanding as of January 2,
1999.
Change in Control
- -----------------
Roundy's has Deferred Compensation Agreements with certain executive officers,
including Messrs. Lestina, Ranus, Beketic, Sullivan and Schmitt. The
Deferred Compensation Agreements provide generally that the Company will pay
to the employee a "deferred compensation amount," if at any time within three
years after the occurrence of a "change in control" of the Company, the
employee's employment is terminated by the Company, other than for "good
cause." If the termination date occurs within two years after the date
on which a "change in control" occurs, the "deferred compensation amount"
will be equal to the "monthly benefit amount" times twenty-four. If the
termination date occurs more than two years, but not more than three years,
after the date on which a "change of control" occurs, the "deferred
compensation amount" will be equal to the "monthly benefit amount" times
twenty-four minus the number of calendar months between the date two years
after the date on which a "change of control" occurs and the termination date.
The "monthly benefit amount" is equal to 1/12 of the employee's annual base
salary. The number by which the "monthly benefit amount" is multiplied to
determine the "deferred compensation amount" is defined as the "monthly
multiplier." If the employee becomes entitled to the payment of a "deferred
compensation amount," the Company will continue to provide to the employee
those health and life insurance benefits to which the employee was entitled
as of the termination date for that number of months following the termination
date which is equal to the "monthly multiplier."
Deferred Compensation Plan
- --------------------------
The Company established a Deferred Compensation Plan (the "Plan"), applicable
to Officers who have been elected by the Board of Directors, ("Elected
Officers"), to assist the Elected Officers in deferring income until their
retirement, death, or other termination of employment. The Plan participants
may make deferral commitments that are not less than $10,000 over a period of
not more than 7 years and not less than $2,000 in any one year. The
aggregate annual deferral may not exceed $100,000 per calendar year for all
participants combined unless the Company's Board of Director approves an
amount in excess of that limit. For 1998, the Board of Directors approved an
annual deferral of $136,000. Monthly interest is credited to each
participant's account based on the Moody's Long Term Bond Rate in effect on
January 1 of each year plus 2%. The Company established a Trust to hold
assets to be used to pay benefits under the Plan, however, the rights of any
participant, beneficiary or estate to benefits under the Plan are solely
those of an unsecured creditor of the Company. Upon death of a participant
prior to termination of employment and before any periodic payments have
started, the Company will pay to the participant's Designated Beneficiary a
pre-retirement death benefit equal to five times the total aggregate deferral
commitment of the participant payable in equal annual installments over a
ten-year period. The Company has purchased life insurance policies on the
lives of the participants to fund its liabilities under the Plan.
Severance and Non-Competition Agreement
- ---------------------------------------
Roundy's has a severance and non-competition agreement with Gerald F. Lestina.
This agreement continues in effect until October 10, 2007. Upon Roundy's
termination of Mr. Lestina's employment (other than for "good cause" as
defined in the agreement), or Mr. Lestina's termination of his employment
(for "good reason" as defined in the agreement), Roundy's will pay Mr. Lestina
a "severance benefit" over a period of two years following the termination
date, without interest, provided that if such termination occurs within a
three year period following a "change in control," as defined in the
agreement, then the entire amount of the severance benefit shall be paid in
a lump sum within 30 days after the termination date. The "severance benefit"
means the sum of the following multiplied by two: (i) Mr. Lestina's annual
base salary in effect as of the termination date; plus (ii) the amount of
any bonus paid or payable to Mr. Lestina for the preceding fiscal year.
Upon a termination, Roundy's will continue to provide to Mr. Lestina those
health and life insurance benefits to which he was entitled as of the
termination date, for a period of two years. If Mr. Lestina ceases to be
employed by Roundy's (including by reason of his death) at any time after
attaining age 55 and while he is then an officer and a director of Roundy's
(unless employment is terminated for "good cause"), Roundy's will provide
coverage for Mr. Lestina and his spouse under the employee health, medical and
life insurance plans maintained by Roundy's for its executive personnel,
until, in addition to other parameters, the deaths of Mr. Lestina and his
spouse.
For a period of one year following the termination of Mr. Lestina's
employment under circumstances giving rise to Roundy's obligation to pay the
severance benefit under this agreement, Mr. Lestina agrees not to compete with
Roundy's in the states of Wisconsin, Michigan, Illinois, Indiana and
Ohio, plus to the extent not included in those states, the area encompassed
within a radius of 400 miles of any warehouse or distribution facility
operated by Roundy's, or any affiliate of Roundy's, as of the termination date.
Other
- -----
Pursuant to a resolution of the Board of Directors of Roundy's, if Mr. Ranus
ceases to be employed by Roundy's (including by reason of his death) at any
time after attaining age 55 and while he is then an officer and a director of
Roundy's (unless employment is terminated for "good cause"), Roundy's will
provide coverage for Mr. Ranus and his spouse under the employee health,
medical and life insurance plans maintained by Roundy's for its executive
personnel, until, in addition to other parameters, the deaths of Mr. Ranus
and his spouse.
Stock Incentive Plan
- ---------------------
Effective November 1, 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 Compen-sation Committee of the Board of Directors.
No options or SARs may be granted under the Plan after November 30, 2001.
Options granted become exercisable based on a vesting schedule 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 fair market value, as defined in the plan,
per share of the Company's common stock as of the date on which 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. In the event of a change in control of the
Company, all options and SARs previously granted and not exercised, become
exercisable.
Option/SAR Grants
- -----------------
During fiscal 1998 Mr. Lestina was the only Named Executive Oficer who was
granted options or SARS. The following table provides information regarding
such grants.
<TABLE>
<CAPTION>
Number of % of Potential Realizable
Secuirities Total Op- Value at Assumed
Underlying tions/SARS Exer- Annual Rates of Stock
(A)Options Granted cise or Price Appreciation
(B)SARS Employees Base Price for Option Term
Name Granted(1) in 1998(2) ($/Share) Expiration Date 5%($) 10%($)
- ----------------- ---------- ----------- --------- --------------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gerald F. Lestina (A) 4,000 95.2 104.35 3/31/2008 262,520 665,240
(B) - - - - - -
</TABLE>
(1) These options become exercisable in accordance with the vesting
schedule under the plan.
(2) Roundy's granted options representing 4,200 shares and
800 freestanding SARs to employees in 1998.
Option/SAR Exercises
- --------------------
The following table provides information on the Named Executive Officers'
option and SAR exercises in 1998 and the value of unexercised options at
January 2, 1999.
<TABLE>
<CAPTION>
Number of
Unexercised
Shares (A)Options Value ($) of
Acquired (B)SARs Unexercised In-The
on Exercise at 01/02/99 Money (A)Options
(A)Options Value($) Exercisable/ (B)SARs at 01/02/99
Name (B)SARs Realized Unexercisable Exercisable/Unexercisable
- ----------------- ----------- ---------- -------------- -------------------------
<S> <C> <C> <C> <C> <C>
Gerald F. Lestina (A) - - 17,500/4,000 871,825 41,800
(B) - - - - - -
Robert D. Ranus (A) - - 10,500/ - 597,725 -
(B) - - - - - -
Ralph D. Beketic (A) - - 1,900/100 78,520 5,605
(B) - - 1,600/400 75,910 20,515
Marion H. Sullivan (A) - - 1,300/200 77,950 11,775
(B) - - 2,150/350 114,045 19,230
Michael J. Schmitt (A) - - 2,700/800 147,530 41,595
(B) - - 1,300/200 77,950 11,775
</TABLE>
Retirement Plan
- ----------------
Benefits under the Roundy's, Inc. Retirement Plan are, in general, an amount
equal to 50% of average compensation minus 50% of the participant's primary
Social Security benefit; provided, however, that if the employee has fewer
than 25 years of credited service, the monthly amount so determined is
multiplied by a fraction, the numerator of which is the years of credited
service and the denominator of which is 25. In addition, if credited service
is greater than 25 years, the benefit is increased by 1% of average
compensation for each year of credited service in excess of 25 years to a
maximum of 10 additional years.
The following table sets forth the estimated annual pensions (before
deduction of the Social Security offset described below) which persons in
specified categories would receive if they had retired on January 2, 1999,
at the age of 65:
<TABLE>
<CAPTION>
Average Annual
Compensation Annual Pension After Specified
During Last Years of Credited Service
Five Completed
Calendar Years 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years
- -------------- -------- -------- -------- -------- -------- --------
<C> <C> <C> <C> <C> <C> <C>
$100,000 $20,000 $30,000 $40,000 $ 50,000 $ 55,000 $ 60,000
125,000 25,000 37,500 50,000 62,500 68,800 75,000
150,000 29,800 44,700 59,600 74,500 82,000 89,400
175,000 30,800 46,200 61,600 77,000 84,700 92,400
200,000 31,100 46,700 62,400 78,100 86,100 93,900
225,000 33,000 50,700 68,300 85,900 95,800 104,700
250,000 35,000 54,600 74,200 93,800 105,600 115,400
300,000 37,300 59,200 81,200 103,100 117,300 128,300
400,000 37,300 59,200 81,200 103,100 117,300 128,300
450,000 37,300 59,200 81,200 103,100 117,300 130,000
500,000 37,300 59,200 81,200 103,100 122,800 130,000
</TABLE>
All of the Named Executive Officers are covered by the Roundy's, Inc.
Retirement Plan. Their average annual compensation would be the combined
amount listed under Salary and Bonus shown in the Summary Compensation Table.
The estimated credited years of service for each of the Named Executive
Officers is as follows: Mr. Lestina: 29 years, Mr. Ranus: 12 years,
Mr. Beketic: 8 years, Mr. Sullivan: 11 years, and Mr. Schmitt: 21 years.
Supplemental Plan
- -----------------
Messrs. Lestina, Ranus, Beketic and Sullivan participate in the Roundy's, Inc.
Supplemental Employee Retirement Plan (the "Supplemental Plan") which is
designed to supplement the retirement benefits which are payable through the
Roundy's, Inc. Retirement Plan (the "Retirement Plan"), so that the effects
of the limitation on compensation under the Retirement Plan due to Section
401(a) (17) of the Internal Revenue Code are eliminated. The benefit under
the Supplemental Plan is equal to the difference between (i) 50% of the
participant's final average annual earnings for the last 5 years and (ii)
the value of the participant's benefits under the Retirement Plan, payable
in the form of a 15 year term certain annuity. A survivor benefit is payable
to the participant's beneficiary. The Company established a Trust to hold
assets to be used to pay benefits under the Supplemental Plan, however, the
rights of any participant, beneficiary or estate to benefits under the
Supplemental Plan are solely those of an unsecured creditor of Roundy's.
Roundy's has purchased life insurance policies on the lives
of the participant's to fund its liabilities under the Supplemental Plan.
Directors Compensation
- ----------------------
Directors who are employees of Roundy's receive no fees for serving as
Directors. Customer-directors each received $500 per meeting during 1998;
outside Directors each received $15,000, prorated on an annual basis, plus
$500 per Board of Directors meeting plus $500 per committee meeting not held
the same day as a Board of Directors meeting for their services during 1998.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
---------------------------------------------------------------
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 January 2, 1999, 11,900 shares of Class A
Common and 1,127,053 shares of Class B Common were outstanding. Roundy's
as a Voting Trust (the "Trust") which was established in August, 1971
(was amended and restated in 1983 and was further amended in 1986 and 1995),
as the successor to an initial voting trust created at the time Roundy's was
organized. 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. As of March 30, 1999, all of the outstanding
shares of Roundy's Class A Common held by current stockholder-customers were
on deposit in the Trust. 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 avote of stockholders (including the election
of one Retailer Director each year and two every three years), 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).
The Trustees of the Trust currently are Victor C. Burnstad, Bronson J. Haase,
Edward G. Kitz, Gerald F. Lestina, David J. Spiegelhoff, and Robert R.
Spitzer. Mr. Lestina is President and Chief Executive Officer of Roundy's,
Inc., and is a member of Roundy's Board of Directors. Mr. Kitz is Vice
President, Secretary and Treasurer of Roundy's, Inc. 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 Spiegelhoff Super Food Market, Inc., stockholder-customers of Roundy's.
In the event of the death, resignation, incapacity or inability of any of
the Trustees, a successor Trustee may be named by a majority of the remaining
Trustees. There is currently one trustee position vacant. Vacancies need
not be filled, except that there must be at least three Trustees acting as
such at all times, and one Trustee must always be a stockholder-customer
(or a principal of an entity which is a stockholder-customer) of Roundy's.
The following table sets forth the beneficial ownership of equity securities
of Roundy's as of March 30, 1999, by (i) each director; (ii) each Named
Executive Officer; (iii) all directors and executive officers as a group;
and (iv) each person who is known to the Company to be the beneficial
owner of 5% or more of either of the outstanding classes shown. Except as
set forth in the table below, no other person (or group who, directly or
indirectly, through any relationship , has or shares the power to vote, or
to direct the voting) owns of record or is known by Roundy's to own
beneficially more than 5% of the outstanding Roundy's Voting Trust
Certificates representing shares of Class A Common, or Roundy's Class B
Common Stock.
<TABLE>
<CAPTION>
Beneficial Ownership (1)
---------------------------------------
Class A Common Class B Common
---------------------------------------
Number Percent Number Percent
of of of of
Shares Class Shares Class
(2) (2)
-------- ------- ------- --------
<S> <C> <C> <C> <C>
Woodman's Food Market, Inc. (3) 700 5.98% 104,827 9.02%
McAdams, Inc. (4) 700 5.98% 76,988 6.63%
Mega Marts, Inc. and NDC, Inc (5) 1,600 13.68% 126,443 10.88%
Ultra Mart, Inc. (6) 700 5.98% 55,025 4.74%
Gerald F. Lestina (7) -(8) -(8) 21,939 1.86%
Robert D. Ranus (9) -(8) -(8) 14,875 1.27%
George C. Kaiser (10) -(8) -(8) 4,167 *
Brenton H. Rupple -(8) -(8) 300 *
Robert E. Bartels (11) -(8) -(8) 4,916 *
Gary R. Sarner -(8) -(8) 833 *
George E. Prescott (12) 600 5.13% 80,798 6.95%
Gary N. Gundlach (13) 500 4.27% 26,475 2.28%
Robert S. Gold (18) 400 3.42% 34,340 2.96%
Charles R. Bonson (14) 200 1.71% 21,027 1.81%
Patrick D. McAdams (4) 700 5.98% 76,988 6.63%
Ralph D. Beketic (15) -(8) -(8) 1,900 *
Marion H. Sullivan (16) -(8) -(8) 1,300 *
Michael J. Schmitt (17) -(8) -(8) 4,517 *
All Directors and Executive 1,800 15.38% 226,827 18.80%
Officers as a Group (19)
</TABLE>
(1) Direct ownership except as otherwise noted, and except
that all shares of Class A Common Stock shown in the
table are owned of record by the Trustees of the
Roundy's, Inc. Voting Trust.
(2) Asterisk (*) denotes less than 1%.
(3) Voting and investment power over the shares owned by
Woodman's Food Market, Inc., whose address is 2919
North Lexington, Janesville, Wisconsin 53545, is solely
held by its owner, Willard R. Woodman, Jr.
(4) Voting and investment power over the shares owned by
McAdams, Inc., whose address is 1807 North Wales Road,
Wales, Wisconsin 53183, is solely held by its owner,
John A. McAdams. The shares shown for Patrick D.
McAdams reflect all shares owned by McAdams, Inc. of
which Patrick D. McAdams is General Manager and
Treasurer.
(5) Voting and investment power over the shares owned by
Mega Marts, Inc. and NDC, Inc., whose address is 150 W.
Holt Avenue, Milwaukee, Wisconsin 53207, is solely held
by a trust.
(6) Voting and investment power over the shares owned by
Ultra Mart, Inc., whose address is W173 N9170 St.
Francis Drive, Menomonee Falls, Wisconsin 53051, is
solely held by its owner, Robert A. Farrell.
(7) Includes options for 18,833 shares that are exercisable
within 60 days of March 30, 1999.
(8) The Class A Common may only be held by the owners
("stockholder-customers") of retail grocery stores
serviced by Roundy's.
(9) Includes options for 10,500 shares that are exercisable
within 60 days of March 30, 1999.
(10) Includes 167 shares owned by FTC Master Profit Sharing
Plan for George C. Kaiser & Company.
(11) Includes 3,949 shares owned by Martin's Super Markets,
Inc., of which Mr. Bartels is President and
shareholder.
(12) Includes 600 shares of Class A Common Stock and 52,040
shares of Class B Common Stock owned by Prescott's
Supermarkets, Inc. of which Mr. Prescott is the
principal shareholder; also includes 11,895 shares of
Class B Common Stock owned by the George E. Prescott
and Judith A. Prescott Revocable Trust of which George
E. Prescott is Trustee; also includes 16,863 shares of
Class B Common Stock held in certain Trusts for the
benefit of certain members of Mr. Prescott's family, as
to which 16,863 shares Mr. Prescott disclaims
beneficial ownership.
(13) Relates to shares owned by Gary N. Gundlach, as sole
proprietor and of G.E.M., Inc. of which Mr. Gundlach is
principal shareholder.
(14) Relates to shares owned by Bonson's Foods, Inc. of
which Mr. Bonson is principal shareholder.
(15) Includes options for 1,900 shares that are exercisable
within 60 days of March 30, 1999.
(16) Includes options for 1,300 shares that are exercisable
within 60 days of March 30, 1999.
(17) Includes options for 2,700 shares that are exercisable
within 60 days of March 30, 1999.
(18) Relates to shares owned by Robert S. Gold, as a sole
proprietor, and B. & H. Gold Corp., Gold's Market, Inc.,
Gold's, Inc. and Gold's of Mequon, LLC, of which Mr. Gold
is principal shareholder.
(19) The group of directors and executive officers who
control stockholder-customers and therefor may
beneficially own Class A Common (see Note (4)) consists
of four (4) persons: Messrs. Gold, Gundlach, Bonson and
McAdams. The group of directors and executive officers
who own or may own Class B Common consists of twenty
(20) persons. The total shown for Class B Common for
the group includes options for 44,433 shares that are
exercisable within 60 days of March 30, 1999, but does
not include options for an additional 4,567 shares that
have been granted but are not exercisable within 60
days of March 30, 1999.
ITEM 13. Certain Relationships and Related Transactions.
-----------------------------------------------
Messrs. Bartels, Bonson, Gold, Gundlach, and McAdams, directors of Roundy's,
Messrs. Burnstad, and Spiegelhoff, Trustees of the Voting Trust, and Woodman's
Food Market, Inc., Mega Marts, Inc. (and NDC, Inc.), Ultra Mart, Inc. and
Prescott Supermarkets, Inc., beneficial owners of more than 5% of the
outstanding Voting Trust Certificates, each own and/or operate retail food
stores which purchase merchandise from the Company as a supplier in the
ordinary course of business. Retail food stores owned by directors or
Retailer Trustees purchase from the Company on the same basis and conditions
as all other stockholder-customers of Roundy's. During the last 3 years, the
aggregate amount of purchases from the Company for each of the foregoing were
as follows:
1998 1997 1996
------------ ------------ ------------
Robert E. Bartels $118,724,800 $114,306,000 $ 96,608,000
Charles R. Bonson 14,043,000 8,471,000 7,616,000
Victor C. Burnstad 20,540,000 19,320,000 19,053,000
Robert S. Gold 61,681,000 52,712,000 48,212,000
Gary N. Gundlach 48,643,000 47,514,000 46,680,000
Patrick D. McAdams 88,239,000 70,639,000 63,003,000
David J. Spiegelhoff 39,948,000 20,469,000 19,278,000
Woodman's Food Market, Inc 54,195,000 51,395,000 52,805,000
Mega Marts, Inc. and NDC,Inc. 294,483,000 271,690,000 219,310,000
Ultra Mart, Inc. 96,383,000 93,015,000 90,722,000
Prescott Supermarkets, Inc 81,668,000 78,218,000 70,757,000
Ultra Mart, Inc. agreed to sublease land and buildings from the Company for
a period of five to 15 years at seven store sites, for an aggregate annual
rental of approximately $2,500,000.
Prescott Supermarkets, Inc. has agreed to sublease land and buildings from
the Company for periods of one to 14 years at five store sites, for an
aggregate annual rental of approximately $1,724,000.
Gary N. Gundlach has agreed to sublease land and buildings from the Company
for periods of 10 to 16 years at four store sites, for an aggregate annual
rental of approximately $926,000.
McAdams, Inc. agreed to sublease land and buildings from the Company for
periods of 11 and 12 years at two store sites, for an aggregate annual rental
of approximately $555,000.
Mega Marts, Inc. agreed to sublease land and buildings from the Company for
periods of one to 16 years at seven store sites and one additional storage
site, for an aggregate annual rental of approximately $2,320,000.
B. & H. Gold Corporation, Gold's Market, Inc., Gold's, Inc. and Gold's of
Mequon, LLC, have agreed to sublease land and buildings from the Company
for periods of seven to 25 years at four store sites, for an aggregate
annual rental of approximately $1,206,000.
Burnstad Bros., Inc. has agreed to sublease land and a building from the
Company for a period of four years, for an annual rental of approximately
$44,000. In November, 1997, Burnstad Bros., Inc. issued promissory notes
to Roundy's, Inc. in the amount of $48,200. The amount outstanding as of
February 27, 1999 was $24,000.
Spiegelhoff's Super Food Market, Inc. and Portage Pick `n Save's, Inc., have
agreed to sublease land and buildings from the Company for periods of eight
to 18 years at four store sites, for an aggregate annual rental of
approximately $1,065,000.
The Company has made payments in fiscal 1998 aggregating $1,650,800 for
handling, order selecting and storage of frozen food, meat and ice cream to
Total Logistic Control, LLC of which Mr. Sarner is Chairman.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.
(a)(1) Financial Statements
The following consolidated financial statements of the
Company are incorporated by reference from its Annual Report
to Stockholders for the year ended January 2, 1999, filed as
an exhibit hereto:
Independent Auditors' Report
Statements of Consolidated Earnings for each of the three years
in the period ended January 2, 1999, January 3, 1998 and
December 28, 1996.
Consolidated Balance Sheets at January 2, 1999 and
January 3, 1998
Statements of Consolidated Stockholders' Equity for each of
the three years in the period ended January 2, 1999,
January 3, 1998 and December 28, 1996
Statements of Consolidated Cash Flows for each of the three
years in the period ended Janaury 2, 1999, January 3, 1998
and December 28, 1996.
Notes to Financial Statements
(a)(2) Financial Statement Schedules as of January 2, 1999
Page
Independent Auditors' Report....................... 27
Schedule VIII - Valuation and qualifying
accounts........................... 28
All other schedules are omitted because they are not
applicable or the required information is shown in the
financial statements or the notes thereto.
(a)(3) Exhibits
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,
incorporated herein by reference to Exhibit 4.1 of
the 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 (included as Exhibit D to the prospectus which
forms a part of the 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, incorporated herein by reference to Exhibit
4.11 of Registrant's Registration Statement on Form S-
2 (File No. 33-57505) filed with the Commission on
January 30, 1995 (included as Exhibit E to the
prospectus which forms a part of the 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, incorporated by
reference to Exhibit 4.14 of Registrant's
Registration Statement on Form S-2 (File No. 33-
57505) filed with the Commission on January 30, 1995
(included as Exhibit A to the prospectus which forms
a part of the Registration Statement).
4.7 Form of Buying Deposit Agreement, incorporated by
reference to Exhibit 4.15 of Registrant's
Registration Statement on Form S-2 (File No. 33-
57505) filed with the Commission on January 30, 1995
(included as Exhibit B to the prospectus which forms
a part of the Registration Statement).
4.8 Article V of Registrant's By-Laws "Fiscal Year
Accounting and Patronage Rebates," as amended on
February 24, 1998, incorporated by reference to
Exhibit 4.8 of Registrant's Registration Statement on
Form S-2 (File No. 33-57505) filed with the
Commission on April 28, 1998 (included as Exhibit C
to the prospectus which forms a part of the
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.
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,
incorporated herein by reference to Registrant's Registration
Statement on Form S-2 (File No. 33-57505) filed with the
Commission on April 28, 1998.
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,
1999 of Directors and Officers Liability and
Corporation Reimbursement Policy. FILED HEREWITH.
10.3 Severance and Non-Competition Agreement dated April
13, 1998 between the Registrant and Gerald F.
Lestina, incorporated herein by reference to Exhibit
10.4 of Registrant's Registration Statement on Form S-
2 dated April 28, 1998, Commission File No. 33-57505.
10.4 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.
10.5 1991 Stock Incentive Plan, as amended June 3, 1998,
incorporated herein by reference to Exhibit 10.6 of
Registrant's Form 10-Q for the quarterly period ended
October 3, 1998, filed with the Commission on November 10,
1998, Commission File No. 33-57505.
10.6 Form of Stock Appreciation Rights Agreement for certain executive
officers including Beketic, Sullivan and Schmitt, incorporated
herein by reference to exhibit 10.7 of Registrant's Form 10-Q for
the quarterly period ended October 3, 1998, filed with the Commission
on November 10, 1998, Commission File No. 33-57505.
10.7 Amendment to Severance and Non-Competition Agreement between the
Registrant and Gerald F. Lestina, incorporated herein by reference
to exhibit 10.8 of Registrant's Form 10-Q for the quarterly period
ended October 3, 1998, filed with the Commission on November 10, 1998,
Commission File No. 33-57505.
10.8 Form of Second Amendment to Deferred Compensation Agreement for certain
executive officers including Ranus, Beketic, Sullivan and Schmitt,
incorporated herein by reference to exhibit 10.9 of Registrant's Form
10-Q for the quarterly period ended October 3, 1998, filed with the
Commission on November 10, 1998, Commission File No. 33-57505.
13 Portions of 1998 Annual Report to Stockholders of
Roundy's, Inc. (except to the extent incorporated by
reference, the Annual Report to Stockholders shall
not be deemed to be filed with the Securities and
Exchange Commission as part of this Annual Report on
Form 10-K)
21 Subsidiaries of Roundy's, Inc.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the
last quarter of 1998.
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Directors of Roundy's, Inc.:
We have audited the consolidated financial statements of
Roundy's, Inc. and its subsidiaries as of January 2, 1999
and January 3, 1998, and for each of the three years in the
period ended January 2, 1999 and have issued our report
thereon dated February 19, 1999; such consolidated financial
statements and report are included in your 1998 Annual
Report to Stockholders and are incorporated herein by
reference. Our audits also included the financial statement
schedule of Roundy's, Inc. listed in Item 14(a)(2). This
financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such
consolidated financial statement schedule, when considered
in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
February 19, 1999
<TABLE>
<CAPTION>
SCHEDULE VIII
ROUNDY'S, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
COLUMN COLUMN COLUMN COLUMN COLUMN
A B C D E
ADDITIONS
(1) (2)
Balance at Charged Charged Balance
Beginning To Cost To Other At End
Description Of Period & Expenses Accounts Deductions(A) of Period
- --------------------------- ---------- ----------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED January 2, 1999:
Allowance for Losses:
Current receivables $5,648,700 $1,473,500 $ 760,600 $6,361,600
Notes receivable, long term 5,299,000 716,000 - 6,015,000
YEAR ENDED January 3, 1998:
Allowance for Losses:
Current receivables: $6,314,700 $2,389,100 $3,055,100 $5,648,700
Notes receivable, long term 5,576,000 - 277,000 5,299,000
YEAR ENDED December 28, 1996:
Allowance for Losses:
Current receivables $8,431,300 $4,367,600 $6,484,200 $6,314,700
Notes receivable, long term 4,641,000 935,000 - 5,576,000
(A) Amounts in Column D represent accounts written off less recoveries.
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, Roundy's, Inc. has duly
caused this report to be signed on its behalf of the
undersigned, thereunto duly authorized.
ROUNDY'S, INC.
GERALD F. LESTINA ROBERT D. RANUS
- ----------------------------- --------------------
By: Gerald F. Lestina By: Robert D. Ranus
(Principal Executive Officer) (Principal Financial
Officer and Principal
Accounting Officer)
Date: March 30, 1999
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons (constituting a majority of the Board of Directors)
on behalf of the Registrant and in the capacities and on the
dates indicated:
ROBERT E. BARTELS GERALD F. LESTINA
- ------------------ -------------------
Robert E. Bartels Gerald F. Lestina
March 30, 1999 March 30, 1999
(Director) (Director)
PATRICK D. MCADAMS
- ------------------ -------------------
Charles R. Bonson Patrick D. McAdams
March 30, 1999 March 30, 1999
(Director) (Director)
ROBERT S. GOLD ROBERT D. RANUS
- --------------- ---------------
Robert S. Gold Robert D. Ranus
March 30, 1999 March 30, 1999
(Director (Director)
GARY N. GUNDLACH BRENTON H. RUPPLE
- ---------------- ------------------
Gary N. Gundlach Brenton H. Rupple
March 30, 1999 March 30, 1999
(Director) (Director)
GEORGE C. KAISER GARY R. SARNER
- ---------------- ---------------
George C. Kaiser Gary R. Sarner
March 30, 1999 March 30, 1999
(Director) (Director)
SUPPLEMENTAL INFORMATION TO BE
FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION 15(d)
OF THE ACT BY REGISTRANTS
WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT
Registrant's annual report to securityholders for the year
ended January 2, 1999 is incorporated by reference in this
report.
Registrant does not furnish proxy soliciting material to its
securityholders.
INDEX TO EXHIBITS
Exhibit Description
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
Commissiion on April 2, 1998, Commission File No. 33-
57505.
4.1 Policy Relating to Redemption of Stock by Inactive
Customer Shareholders and Former Employees,
incorporated herein by reference to Exhibit 4.1 of
the 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 (included as Exhibit D to the prospectus which
forms a part of the 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, incorporated herein by reference to Exhibit
4.11 of Registrant's Registration Statement on Form S-
2 (File No. 33-57505) filed with the Commission on
January 30, 1995 (included as Exhibit E to the
prospectus which forms a part of the 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, incorporated by
reference to Exhibit 4.14 of Registrant's
Registration Statement on Form S-2 (File No. 33-
57505) filed with the Commission on January 30, 1995
(included as Exhibit A to the prospectus which forms
a part of the Registration Statement).
4.7 Form of Buying Deposit Agreement, incorporated by
reference to Exhibit 4.15 of Registrant's
Registration Statement on Form S-2 (File No. 33-
57505) filed with the Commission on January 30, 1995
(included as Exhibit B to the prospectus which forms
a part of the Registration Statement).
4.8 Article V of Registrant's By-Laws "Fiscal Year
Accounting and Patronage Rebates," as amended on
December 12, 1989, incorporated by reference to
Exhibit 4.16 of Registrant's Registration Statement
on Form S-2 (File No. 33-57505) filed with the
Commission on January 30, 1995 (included as Exhibit C
to the prospectus which forms a part of the
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 at
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.
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,
incorporated herein by reference to Registrant's Registration
Statement on Form S-2 (File No. 33-57505) filed with the
Commission on April 28, 1998.
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. FILED HEREWITH.
10.3 Severance and Non-Competition Agreement dated April
13, 1998 between the Registrant and Gerald F.
Lestina, incorporated herein by reference to Exhibit
10.4 of Registrant's Registration Statement on Form S-
2 dated April 28, 1998, Commission File No. 33-57505.
10.4 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.
10.5 1991 Stock Incentive Plan, as amended June 3, 1998,
incorporated herein by reference to Exhibit 10.6 of
Registrant's Form 10-Q for the quarterly period ended
October 3, 1998, filed with the Commission on November 10,
1998, Commission File No. 33-57505.
10.6 Form of Stock Appreciation Rights Agreement for
certain executive officers including Beketic,
Sullivan and Schmitt, incorporated herein by
reference to exhibit 10.7 of Registrant's Form 10-Q
for the quarterly period ended October 3, 1998, filed
with the Commission on November 10, 1998, Commission
File No. 33-57505
10.7 Amendment to Severance and Non-Competition Agreement
between the Registrant and Gerald F. Lestina,
incorporated herein by reference to exhibit 10.8 of
Registrant's Form 10-Q for the quarterly period ended
October 3, 1998, filed with the Commission on
November 10, 1998, Commission File No. 33-57505.
10.8 Form of Second Amendment to Deferred Compensation
Agreement for certain executive officers including
Ranus, Beketic, Sullivan and Schmitt, incorporated
herein by reference to exhibit 10.9 of Registrant's
Form 10-Q for the quarterly period ended October 3,
1998, filed with the Commission on November 10, 1998,
Commission File No. 33-57505.
13 Portions of 1998 Annual Report to Stockholders of
Roundy's, Inc. (except to the extent incorporated by
reference, the Annual Report to Stockholders shall
not be deemed to be filed with the Securities and
Exchange Commission as part of this Annual Report on
Form 10-K)
21 Subsidiaries of Roundy's, Inc.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the
last quarter of 1998.
Exhibit 10.2(a)
Executive Protection Policy
DECLARATIONS
EXECUTIVE PROTECTION POLICY
Policy Number 8132-05-32C
Federal Insurance Company, a stock
insurance company, incorporated
under the laws of Indiana, herein
called the Company.
Item 1. Parent Organization:
ROUNDY'S, INC.
23000 ROUNDY DRIVE
PEWAUKEE, WISCONSIN
53072
Item 2. Policy Period: From 12:01 A.M. on NOVEMBER 01, 1998
To 12:01 A.M. NOVEMBER 01, 2001
Local time at the address shown in
Item 1.
Item 3. Coverage Summary
Description
GENERAL TERMS AND CONDITIONS
EXECUTIVE LIABILITY AND INDEMNIFICATION
Item 4. Termination of
Prior Policies: 8132-05-32C
THE EXECUTIVE LIABILITY AND INDEMNIFICATION, FIDUCIARY LIABILITY,
OUTSIDE DIRECTORSHIP LIABILITY AND EMPLOYMENT PRACTICES LIABILITY
COVERAGE SECTIONS (WHICHEVER ARE APPLICABLE) ARE ALL WRITTEN ON A
CLAIMS MADE BASIS. EXCEPT AS OTHERWISE PROVIDED, THESE COVERAGE
SECTIONS COVER ONLY CLAIMS FIRST MADE AGAINST THE INSURED DURING
THE POLICY PERIOD. PLEASE READ CAREFULLY.
In witness whereof, the Company issuing this policy has caused
this policy to be signed by its authorized officers, but it shall
not be valid unless also signed by a duly authorized
representative of the Company.
FEDERAL INSURANCE COMPANY
HENRY A. GULICK DEAN R. OFFURE
_______________________ ______________________
Secretary President
OCTOBER 15, 1998 ROBERT HAMBURGER
_______________________ ----------------------
Date Authorized
Representative
In Memoriam
David A. Ulrich, Sr. will be remembered as a man of vision and
determination. His innovative leadership was an asset that will be sorely
missed. The energy, dedication and perseverance that marked the way he led
his companies also helped change the landscape of southeastern Wisconsin.
He was a community-minded individual that made immeasurable contributions
in the Milwaukee area. Sadly, David Ulrich died in October 1998, after a
courageous battle with cancer.
From his revolutionary Pick `n Save food malls, to the industry-leading
concepts for Tri City National Bank, his impact on his hometown is clearly
evident. In addition, Mr. Ulrich served on the board of directors for
Roundy's from 1970-72, as well as serving two terms as a Roundy's trustee.
He first served from April 1986 until February 1990, and then from April
1994 until his death.
David will be sadly missed by his family, friends and colleagues.
<TABLE>
Selected Financial Data
-----------------------
<CAPTION>
($000 omitted except for
per share data and ratios) 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales and service fees... $2,576,222 $2,610,697 $2,579,010 $2,488,196 $2,461,510
Net earnings ................ 11,898 11,204 10,267 9,022 6,554
Patronage dividends ......... 5,976 5,687 5,568 5,129 0
Total assets ................ 462,41 440,310 434,641 407,337 404,652
Long-term debt .............. 73,298 83,458 93,615 78,850 88,227
Stockholders' equity (1)..... 134,811 122,460 109,945 100,033 90,419
Book value per share ........ 114.80 104.35 94.30 85.15 77.40
Working capital ............. 84,743 84,074 90,498 90,740 91,814
Current ratio ............... 1.36:1 1.39:1 1.42:1 1.43:1 1.43:1
Earnings before patronage
dividends as a percent of net
sales and service fees ...... 1.01% .97% .91% .81% .45%
(1) Includes redeemable common stock
</TABLE>
Message To Our Stockholders
"There is no substitute for hard work."
-Thomas Edison
As I open this year's letter to the Roundy's family, the words of one of
the 20th Century's greatest inventors, Thomas Edison, strike me as defining
the spirit that has driven Roundy's through its 126-year history.
Hard work, dedication and devotion to a cause are what drove Edison, and it
is those same traits, which have made this Company a market leader. It is
part of our character as a Company. Now that we are poised to enter a new
millennium, it is that character which will bring us new prosperity.
Throughout this Company's history, we have survived through adversity and
prospered when many believed it was not possible, and we have thrived
because of the spirit that makes Roundy's a unique organization of people
who work together as a team. There is a lot of hard work that goes into
making Roundy's the market leader, and the challenges of 1998 showed we
were up to the task.
I said last year that as we enter the new millennium, Roundy's is on the
threshold of unbridled prosperity. The spirit that the people who make up
this Company showed during 1998 has convinced me that I am not wrong in
that prediction.
That is because, like Edison, we believe in hard work. It is because we all
believe in providing our customers with high quality at a low price. It is
because we have never forgotten our roots. It is because we are active
members of our community.
As you review the year, I am sure that you, too, will see the same spirit
that has driven this Company for 126 years. And you, too, will understand
that while looking back on the challenges of 1998, we have many reasons to
be grateful and enthusiastic about the future.
THE YEAR IN REVIEW
"It was the best of times, it was the worst of times."
- Charles Dickens
The opening line of Dickens' timeless book, "A Tale of Two Cities," is
often used. But it could easily have been described the year 1998 for
Roundy's.
Indeed, 1998 represented both the best of times and the worst of times for
us.
But we endured. In fact, we became stronger.
We closed the year in a position both to meet the challenge of the worst of
times and build on the best of times.
It would be entirely accurate to describe 1998 as a year of challenges.
Here are but a few of the hurdles we faced during 1998:
A major Chicago-based chain opened seven stores in the Milwaukee
marketing area.
Supercenters continued to proliferate throughout our marketing region.
Two opened in Wisconsin and five more opened throughout the Midwest
region.
A fire destroyed our distribution facility in Evansville in February
1998 resulting in a loss of approximately $60 million in sales.
The first phase of Year 2000 ("Y2K") compliance resulted in an
additional expense, of approximately $4.9 million during the course of
this past year.
None of these developments were welcome news in 1998. But the test of any
institution is its ability to endure hardships and even learn to thrive
from them. I believe that Roundy's is made up of people who can rise to the
occasion and overcome these issues, bringing our Company into the new
millennium in an even stronger position than ever.
In fact, I brought up the worst news first because the good news is so much
better. In spite of the challenges we faced in 1998, this year proved to be
one of the most successful in the Company's 126 -year history.
For Roundy's, 1998 represented the best of times at many other levels. Here
are some examples of that success:
Earnings before patronage dividends were $26,022,400, which is a
Company record. This amount as a percent to sales was 1.01%, which
represents the highest ratio in 16 years, dating just prior to the
acquisition of Scot Lad Foods.
In addition to stock growth of 10.01%, we paid out a patronage
dividend of $5,975,700, which is also a Company record.
Net earnings reached record levels for the fourth consecutive year.
For the first time in our history, a division of Roundy's, the
Milwaukee Division, had revenue in excess of $1 billion.
While sales decreased 1.32% to $2,576,222,100, the decrease was
totally due to the Evansville fire and the fact that 1997 was a 53-week
year.
Operating and administrative expenses excluding depreciation and
amortization decreased $5.2 million. As a percent to sales, this ratio
is the lowest it has been in nineteen years. If the $4.9 million of Y2K
additional expenses was omitted, it would have been another Company
record.
Long-term debt decreased $10.2 million. Our long-term debt to equity
ratio of 0.54:1 is the lowest ratio in twenty years.
As you can easily see, the setbacks of 1998, though undesirable, were
overcome by a series of positive factors that I believe represent our
institutional strength, and the commitment of people who have worked
together as a team to ensure our continued success.
Wholesale Operations
Probably the most dramatic event for Roundy's in 1998 was the loss of our
Evansville Perishable Center to a fire that destroyed the facility. Our
Lima and South Bend Divisions were quick to respond to servicing the
Evansville Division's customers by successfully taking on the extra
business.
The Company showed that it was able to overcome such a calamity because of
the great dedication these two divisions displayed.
The completely rebuilt Perishable Center in Evansville was brought into
full operation in January 1999. The new facility is larger and more
technologically advanced than its predecessor and will provide a tremendous
tool in servicing customers in the Southern Midwest area.
Improvements to the Milwaukee Distribution Center during the year included
the Produce Department re-rack project. This project enabled the division
to divide the area into three different temperature zones and it expanded
pallet storage capacity by 20%. The second phase of this project was to
expand the Dairy Department dock by 30 feet. The new dock included a safer
and more sanitary work environment.
The Van Wert Division experienced significant opportunities in operations.
A three-year lease extension on the property was signed, which allowed the
division to move forward with several re-organizational moves in order to
maximize the profitability of the facility. The operations staff was
upgraded and warehouse shifts were reorganized. The process of analyzing
and adjusting the division's store service and delivery frequency programs
began in 1998 and will continue into 1999.
The Mazomanie Division doubled its sortation and loading capacity by
upgrading its selection and reserve storage capabilities. Rapistan Demag,
an industry leader in conveyors and sortation technology, was contracted
for the project. New equipment, as well as improved management practices,
resulted in record productivity levels for the facility.
The warehouse management system, EXE, was installed in the Eldorado,
Muskegan, Van Wert and the new Evansville Divisions to improve the
productivity and merchandising control.
All Roundy's distribution facilities were introduced to a new efficiency
tool called, Performance Analysis Report ("PAR"). The purpose of a PAR is
to measure performance and compare actual versus budgeted operating
results. Every division will record their PAR results to be used for
planning, improvements and budgeting.
The XATA tractor monitoring system was installed in the tractor fleets of
the Westville and Lima Divisions, allowing better tracking of vehicle and
driver activities. These two divisions join the Milwaukee Division in
utilizing this valuable tool.
In addition, driver productivity increased to an all-time high since the
implementation of unit compensation in the Milwaukee Division. As a
result, the division did not increase the tractor or trailer fleet despite
a 4.2% increase in warehouse sales.
Each of our divisions experienced new business.
Our Westville and Muskegon Divisions generated annualized sales totaling
$44 million of which $26.1 million was related to the acquisition of six
Orchard Market stores in Michigan.
Our Lima Division produced fourteen new stores, equaling $48 million per
year in purchases.
In spite of the loss of the perishable center, our Evansville Division
brought on eight new customers, totaling $12 million in purchases.
Our Milwaukee Division began to service three new Pick `n Save stores
located in Appleton, Sussex and Mequon.
Our Van Wert General Merchandise facility began a supply agreement with a
major national discount drug chain in 1998. This non-foods division now
supplies approximately sixty of their stores in our general trade area with
general merchandise product in approximately twenty departments or
categories. The purchases from this group alone were approximately $7
million.
Management Information Systems
Management Information Systems continues to mature in terms of the network,
open systems and people. As stated in last year's annual report, our focus
in 1998 was directed at our Y2K efforts.
We entered the year with a very ambitious project plan that would result in
Y2K compliant code in the second quarter of 1999. Although the Evansville
fire diverted and temporarily delayed these efforts in 1998, this goal
should, however, be achieved. Testing, which is an important ingredient
for a project of this magnitude, will continue through the change in the
millennium to ensure an uninterrupted flow of product to our customers.
We continued, in 1998, to install the standardized warehouse management
system in the new Evansville freezer. In addition, a total replacement and
upgrade of the system will be made in the Milwaukee distribution facility.
By mid-1999, the software and hardware running the warehouse systems in all
distribution centers will be identical. This unprecedented achievement
will allow centralized management of all mission critical systems from
Pewaukee via the network.
As we continue to standardize, centralization will continue to play an
important part in this theme. In 1999, all division mainframes will be
phased out and once again, the associated processing will be done at a
central location - Pewaukee.
Moreover, Roundy's will be structured to take advantage of re-engineering
the enterprise using a data model, which incorporates industry best
practices coupled with new development tools. This will enable us to bring
new business applications into production more quickly than our
competition. Our first segment of business to employ this methodology will
be the order entry/billing process.
Coupled to this dramatic upgrade in the network and hardware is a parallel
change in the skill levels required by associates to develop and use these
new business applications. These new skill levels, obtained internally and
externally, will enable Roundy's to execute rapid deployment of technology,
at the right cost and in the right place, in order to maintain our role as
leaders in our marketplace.
Retail Operations
With the support of its retailers, Roundy's increased its media budget and
awarded Meyer Wallis, an advertising agency, a contract to create a new
image for our media presentation. An aggressive campaign on "Simplified
Savings" was met with enthusiasm. The days of kiosks and coupon clipping
are gone and customers are much happier with simplified shopping at Pick `n
Save.
This new advertising campaign also focused on several new messages we
wanted our customers to remember about the Pick `n Save stores. Two major
messages were - we carried "USDA Choice Meat" and we carried "Name Brands"
in the Pick `n Save produce departments. These two quality statements
reassured our customers that Pick `n Save could be counted on to deliver
the lowest prices and the best quality. Our slogan, "When you're picky
about meat, shop Pick `n Save" created a message to our customers,
employees and management.
Outside of Wisconsin, the plan was a simple-review of under-performing
stores and sell or close those locations that didn't meet the minimum
return on investment requirements. In the remainder of 1999, we will
continue to review the stores in the same manner.
Pick `n Save began a long-term strategic process that will lead us into
future years. Fueled by the success of a simplified savings program with
the Pick `n Save "Advantage Card," the next step will be target marketing
to our customers and to our competitors' customers.
THE FUTURE
"You can never plan the future by the past."
-Edmund Burke
Now that 1998 is behind us, we must look to the future - the next
millennium. Our Company has been in business for over 126 years. New
competition from alternative format stores, rapidly changing technology,
changing consumer demands and the ability to attract and keep good people
are hurdles which must be crossed.
To meet these challenges, a company must be prepared to act decisively and
have sufficient resources to move forward and not live in the past. I
believe that Roundy's is poised to meet the challenges of the new
millennium and forge our position as a leader in our industry. Our balance
sheet is strong and we have a talented staff. More importantly, we
recognized the need and we devoted a significant amount of time and
resources to refine our Strategic Plan. The result is that we have a
Strategic Plan that, I believe, will take Roundy's into the next millennium
poised for even greater success. Our core strategy is directed at growing
the Company, both through internal growth and through acquisitions.
Corporate goals have been defined to support a growth strategy and all
divisional plans were aligned to insure Roundy's achieves the overall
growth objectives. Finally, our plan recognizes the importance of customer
and associate satisfaction and how critical they are to us. We at Roundy's
know that our long-term future is tied to the success of our retailers,
stockholders and the support of all Roundy's associates. In crafting our
Strategic Plan, our ultimate goal is to become the dominant food wholesaler
within the Midwest region. With the continued support and dedication of
our customers and associates, I believe we will achieve this goal.
A CLOSING THOUGHT
"No one can guarantee success... but only deserve it."
- Winston S. Churchill
Churchill made the above comment in reference to war. But it aptly
describes the attitude of the people who make up this Company - we deserve
success because we have worked hard. And together, we have attained it.
I believe that this great Company is successful - and deservedly so -
because Roundy's is made up of hard working, dedicated people at every
level of the organization. We, as an institution, have never forgotten our
roots, roots that include a strong work ethic that makes Roundy's a company
that will not only deserve success, but will continually achieve it.
We faced many challenges in 1998, and no doubt we will face them again as
we enter the new millennium. But as 1998 proved, this Company will meet
every challenge that is thrust upon it.
I firmly believe this Company is well-poised to expand on its role as the
market leader as we move into the new millennium and I want to thank
everyone - stockholders, customers, associates - for helping to put us in
that position.
Because of you, we can look forward to the new millennium with excitement
and anticipation of greater successes in the future.
Sincerely,
GERALD F. LESTINA
Gerald F. Lestina
President and
Chief Executive Officer
Financial & Operational Review
Capital Structure (in millions)
1998 1997
-------------- --------------
Long-term debt .................... $ 73.3 35.2% $ 83.4 40.5%
Stockholders' equity .............. 134.8 64.8 122.5 59.5
Total capital ..................... $208.1 100.0% $205.9 100.0%
LIQUIDITY AND CAPITAL RESOURCES
When we look back at fiscal 1998, it can only be described as a "Year of
Opportunities." In February 1998 a fire completely destroyed the
Evansville Division; throughout the year, super-centers and combination
food-drugstores expanded in our markets and in 1998 the term "Y2K" became
important to Management at all levels.
To address these opportunities, Management established functional teams.
These teams looked to the Company's long-range Strategic Plan as their
roadmap for moving forward. Further, the teams engaged outside advisors to
obtain independent assurance that the basic strategies being followed
continued to be sound. The result was that the Company was able to make
timely decisions and move expeditiously to take advantage of these
opportunities. Specifically, a decision was made to rebuild the Evansville
Division in the same location. New marketing and promotional programs were
developed and implemented to meet the competition from alternative formats.
A plan to address Year 2000 ("Y2K") issues was finalized and put into
action.
The new Evansville facility was built at a cost of $10.8 million. Since
the Company had not finalized its insurance claim for the estimated fire
loss as of January 2, 1999, a significant portion of the construction cost
was financed by Roundy's through internally generated funds. Cash advances
of $3.3 million were received from the insurance carrier to cover
construction and debris removal costs. Total capital expenditures for 1998
including the net cost of the new Evansville facility were $24.9 million
compared to $22.7 million in 1997 and $39.3 million in 1996. The bulk of
the other 1998 capital expenditures were for (1) new computer hardware and
software to upgrade divisional warehouse systems, (2) retail store remodels
and store purchases, and (3) warehouse equipment and facility improvements.
In total, 1998 capital expenditures were comparable to 1997 levels.
However, they were $14.4 million below 1996 expenditures, primarily because
the Company purchased the Westville Division warehouse in 1996 for
approximately $20 million in addition to its normal capital expenditures.
It had leased this building previously. The Company, during the past three
years, has expended in excess of $99 million for new capital items
including capital assets obtained through business acquisitions.
Total cash flows provided from operations increased $9.9 million compared
to 1997 and $19.4 million compared to 1996. There were several factors
which contributed to the positive trend including (1) improved earnings,
(2) improved vendor payment terms, and (3) a decrease in accounts
receivable. The higher accounts payable levels were created primarily by
the Company's decision to rebuild Evansville. During the period when the
building was being rebuilt, Evansville customers were supplied by both the
Lima and the South Bend Divisions. Inventories in these divisions
increased to accommodate both the variety and supply needs of those
customers. In December 1998, the Evansville replacement facility was
completed and the process of stocking the warehouse began. To minimize any
imposition on the Lima and South Bend customers or the Evansville retailers
during this holiday period, both the Lima and South Bend Divisions
continued to purchase inventory to supply the Evansville customers while
the process of restocking the new facility commenced. Roundy's was able to
maximize its payment terms during this period.
As always, developing a quality customer base and emphasizing
collectibility in accordance with terms has been a high priority of
Management. Accordingly, in late 1997, the Company broadened its credit
control procedures. The new control procedures were fully operational
throughout fiscal 1998. This included a Corporate Finance Committee,
expanded Management reports and comprehensive reviews directed at customer
creditworthiness. The result was for fiscal 1998 that the Company's
combined ratio of "accounts receivable days sales outstanding" averaged 8.6
days compared to 9.2 days in 1997 and 10.0 days in 1996. This resulted in
a $6.9 million decline in accounts receivable.
As a result of its strong cash flow, the Company was able to decrease its
average outstanding debt. Average outstanding debt for 1998 was $91.9
million versus $102.1 million for 1997 and $106.1 for 1996. The Company
has a $60 million borrowing line available, but none was used in 1998.
With the positive trend of lower debt, Roundy's long-term debt to equity
ratio declined to 0.54:1 at the end of 1998 versus 0.68:1 in 1997 and
0.85:1 in 1996. The average interest rates applicable to borrowings during
1998, 1997 and 1996 were 7.7%.
With improved Management controls and positive cash flows, the Company was
able to invest excess funds in various interest earning vehicles during
1998. Daily investments averaged approximately $41.9 million in 1998
versus $26.7 million in 1997.
The Company's 1998 and 1997 capital structure is summarized in the table
above.
The Company's financial condition remains strong. We believe that our
cash, other liquid assets, operating cash flows and access to capital
markets, taken together, provide adequate resources to fund ongoing
operating requirements and future capital expenditures related to the
expansion of our existing business and the development of new projects for
the coming year.
RESULTS OF OPERATIONS
NET SALES AND SERVICE FEES
Net sales and service fees for the year were off approximately $34.5
million or 1.3% compared to 1997. The retail segment's net sales were down
approximately $7.5 million in 1998 compared to 1997. This decrease was
primarily due to a fewer number of retail stores and partially due to the
additional week in 1997, a 53-week year. The wholesale segment decreased
approximately $27 million. This decrease was primarily due to the sales
lost at the Eldorado and Evansville Divisions because of the fire that
destroyed the Evansville facility, and partially due to the 53rd week in
1997. A new marketing program developed to combat the growth of super
centers in Roundy's markets stimulated sales and helped partially offset
the sales decline due to the fire. Net sales for 1997 increased $31.7
million or 1.2% over 1996. This increase was primarily due to the
additional week in 1997.
GROSS PROFITS
Overall 1998 gross profits were comparable to 1997 and 1996, at
approximately 9.5%. The 1998 retail segment gross profits, as a percent to
net sales, have continued to exceed 20%. However, due to increasing
competitive pressures, the wholesale segment's 1998 gross profit has
continued to decline. This gross profit, as a percent to net sales, was
7.5% in 1998 compared to 7.7% in 1997 and 7.9% in 1996. With the continued
influx of competition from alternative format and food/drug combination
stores throughout Roundy's markets, the Company continued to keep price
increases at minimum levels. The strategy is to develop and promote value-
added programs, which are competitively priced and directed at
strengthening the Company's customer base. The challenge is to continue to
offer such programs, keep customers financially strong and, in turn,
contribute to Roundy's long-term financial success.
OPERATING AND ADMINISTRATIVE EXPENSES
Operating and administrative expenses, as a percent to net sales and
service fees, were down to 8.3% in 1998 from 8.4% in 1997 and 8.5% in 1996.
The reduction of expenses, as a percent to net sales, has been a major goal
of the Company's Strategic Plan. This expense percentage, excluding
depreciation and amortization, is also declining. The 1998 operating and
administrative expenses, excluding depreciation and amortization, were 7.6%
of net sales and service fees compared to 7.7% in 1997 and 7.8% in 1996.
Several factors contributed to this downward trend. Specifically, the
decline from 1997 was in large part due to efforts to consolidate
functional duties in both the wholesale and non-food warehouses including
procurement and transportation. During fiscal 1998, a major effort was
made to reposition the fleet in an effort to maximize its longevity and
productiveness without unduly increasing repairs and maintenance costs.
Another initiative included programs directed to reduce workers'
compensation type accidents through enhanced training, pre-work exercises
and constant reminders of safety.
Further, in the early part of fiscal 1998, Management undertook a major
initiative to reduce costs including reduced staffing and travel and
eliminating activities considered not contributing to the overall goals of
the Company. These efforts helped offset the $4.9 million of Y2K costs
which were incurred in 1998, while such costs were minor in 1997 and 1996.
Even with a significant financial effort undertaken in 1998 to resolve Y2K
issues, the Company continued to grow its business and execute its
Strategic Plan.
The growth in Company-owned retail operations, since 1995, has increased
the overall ratio of operating and administrative expenses to sales. The
retail segment, in comparison to the wholesale segment, maintains a higher
wage expense and operating costs as a percent to sales. The challenge is
to find quality associates for Corporate retail stores. Since this is an
issue confronting many industries, the cost of wages and benefits continue
to escalate. Additionally, the cost of training associates also continues
to climb which in turn contributes to the increase in operating and
administrative expenses in the retail segment.
In total, however, the Company has been able to overcome the higher cost
ratio at retail and drive costs from operations as demonstrated by the fact
that the Company's ratio of sales per full-time equivalent associate has
increased the past three years to $615,000 for 1998 versus $612,000 for
1997 and $603,000 for 1996.
INTEREST EXPENSE
The positive trend in interest expense continues both in absolute dollars
and as a percent of sales. In 1998, interest expense was 0.28% of net
sales and service fees compared to 0.31% in 1997 and 0.33% in 1996. As a
result of the growth in cash flow generated by solid earnings and
operational efficiencies, the Company has been able to reduce borrowings
resulting in lower interest expense.
TAXES
The effective income tax rates for 1998, 1997 and 1996 were 40.7%, 42.6%,
and 42.6%, respectively.
The reason for the improvement is due entirely to the Company's efforts to
reduce state and local taxes.
EARNINGS
Net earnings continued on a positive trend, achieving a record level of
0.46% of net sales and service fees compared to 0.43% for 1997 and 0.40%
for 1996. Management firmly believes that its efforts in developing,
executing and achieving the programs identified in its Strategic Plan are
the main reasons leading to higher earnings levels.
OTHER MATTERS
EVANSVILLE FIRE
On February 28, 1998 a fire totally destroyed the Evansville Division
Warehouse. The Company serviced the Evansville customers from its Lima,
Ohio and South Bend, Indiana facilities. As a result of the fire, however,
the Company lost approximately $60 million in sales.
A decision was made to rebuild the warehouse in the same location. As of
January 2, 1999, the new facility was essentially complete and was fully
operational by January 30, 1999. The Company settled its inventory claim
with its insurance carrier in late 1998. However, the insurance recovery
for the loss of the building and equipment, extra costs incurred to service
these customers while the warehouse was being rebuilt and the business
interruption portions of the claim covering the lost business have not been
concluded as of year end.
YEAR 2000
The Company is continuing the implementation of its comprehensive plans to
address the possible impact of Year 2000 issues on operations throughout
its divisions. Progress is being monitored and reported to management and
to the Board of Directors on a periodic basis.
On an enterprise-wide basis, as of January 2, 1999, the Company has
completed the approximate percentages of its expected Year 2000 activities
for its systems set forth in the following table. The table also shows the
targeted date for the substantial completion of each Year 2000 activity:
<TABLE>
<CAPTION>
Assessment Remediation Testing Implementation
--------------- -------------- --------------- ----------------
System Percent Target Percent Target Percent Target Percent Target
Complete Date Complete Date Complete Date Complete Date
-------- ------ -------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IT Systems:
Procurement, including EDI Systems with
product suppliers ..................... 100% - 100% - 100% - 30% 3/99
Warehouse management, order processing
and distribution systems .............. 100% - 95% 2/99 80% 3/99 80% 6/99
General (includes financial reporting,
billing and collection and other
administrative systems ................ 100% - 100% - 90% 3/99 80% 3/99
Non-IT System:
Office Systems ........................ 100% - 100% - 100% - 95% 1/99
Facilities ............................ 100% - 100% - 100% - 100% -
Other Non-IT Systems .................. 100% - n/a - n/a - 85% 3/99
</TABLE>
Efforts are continuing to contact all suppliers and service providers and
coordinate appropriate measures necessary to assure the continuation of
product deliveries and services. However, because there is a range of
alternative suppliers for comparable products, the Company continues to
focus on addressing potential problems in its critical distribution network
to its customers, and is encouraging and assisting its customers in their
assessment of Year 2000 issues to help them minimize disruptions at the
customer level which could adversely impact the Company's ability to
distribute its products.
The Company's business depends upon its ability to deliver inventory to its
customers in a timely fashion. The Company believes that the worst case
scenario associated with the Year 2000 Issue is if, as a result of
disruptions or malfunctions, the Company is unable to process and deliver
customer orders consistent with the time-sensitive nature of this process.
The extent of such potential impact cannot be determined with reliability
at this time due, in large part, to the lack of comprehensive information
as to the Year 2000 readiness of the Company's business partners (which the
Company is attempting to assemble). The Company is working with key
suppliers and customers to develop action and contingency plans designed to
minimize the risk of such disruptions. These plans are expected to be in
place approximately June 1999.
Contingency plans for internal operating systems are also expected to be in
place by June 1999.
The Company estimates total costs to be incurred to address the Year 2000
issues will be approximately $8.8 million, of which approximately $4.9
million had been spent as of January 2, 1999. Of the total cost,
approximately $6.9 million (78%) will be spent on remediation and testing,
and approximately $1.3 million (15%) will be spent to upgrade packaged
software applications. Incremental costs, including the costs of third-
party contractors to modify existing systems and internal costs, are
expensed as incurred, with the funds coming from the Company's general
operations, and are included in Operating and Administrative Expenses.
The Company has deferred certain IT projects as a result of its focus on
Year 2000 issues; however, the deferrals are not expected to have a
material impact on the Company's business or financial condition.
The Company believes it is taking reasonable steps which, when fully
implemented, will prevent major business interruptions and minimize the
Company's risk of exposure to liability to third parties due to the Year
2000 Issue. There can be no assurance, however, that the Company will be
successful in its efforts. Further, the costs of the Company's efforts to
address the Year 2000 Issue and the dates on which the Company believes it
will complete the projects described above are based upon Management's best
estimates. There also can be no assurance that these estimates will prove
to be accurate, and the actual cost and progress on these projects could
differ materially from those currently anticipated. The reasonableness of
the Company's efforts, and the project time lines and budgets, were derived
based on information the Company believes to be reliable and by making
numerous assumptions regarding future events. For additional details about
the Company's Year 2000 efforts and the risks associated with Year 2000
issues, see the Company's quarterly report on Form 10-Q for the quarter
ended October 3, 1998. Statements made herein or any past statements made
or contained herein are deemed Year 2000 readiness statements and are
subject to the Year 2000 Information and Readiness Disclosure Act.
Independent Auditors' 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 2, 1999 and January 3,
1998 and the related statements of consolidated earnings, stockholders'
equity and cash flows for each of the three years in the period ended
January 2, 1999. 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 2, 1999 and January 3, 1998, and the results of their operations
and their cash flows for each of the three years in the period ended
January 2, 1999 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
February 19, 1999
<TABLE>
<CAPTION>
Statements of Consolidated Earnings
For The Years Ended January 2, 1999, January 3, 1998 and December 28, 1996
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Net sales and service fees ........... $2,576,222,100 $2,610,696,700 $2,579,010,200
Other-net ............................ 2,428,500 3,695,700 4,494,700
-------------- -------------- --------------
2,578,650,600 2,614,392,400 2,583,504,900
-------------- -------------- --------------
Costs and Expenses:
Cost of sales ........................ 2,330,300,800 2,362,355,200 2,333,216,600
Operating and administrative ......... 215,034,300 218,610,500 218,342,700
Interest ............................. 7,293,100 8,220,900 8,479,900
-------------- -------------- --------------
2,552,628,200 2,589,186,600 2,560,039,200
-------------- -------------- --------------
Earnings Before Patronage Dividends ..... 26,022,400 25,205,800 23,465,700
Patronage Dividends ..................... 5,975,700 5,687,000 5,568,300
-------------- -------------- --------------
Earnings Before Income Taxes ............ 20,046,700 19,518,800 17,897,400
-------------- -------------- --------------
Provision (Credit) for Income Taxes:
Current-Federal ...................... 8,400,000 7,786,000 5,255,200
-State ........................ 1,539,000 1,722,300 859,800
Deferred ............................. (1,790,000) (1,193,100) 1,515,000
-------------- -------------- --------------
8,149,000 8,315,200 7,630,000
-------------- -------------- --------------
Net Earnings ............................ $ 11,897,700 $ 11,203,600 $ 10,267,400
============== ============== ==============
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
As Of January 2, 1999 and January 3, 1998
1998 1997
------------ -----------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents ............................ $ 72,094,500 $ 52,366,900
Notes and accounts receivable, less allowance for ....
losses, $6,361,600 and $5,648,700, respectively ...... 78,489,000 86,998,500
Merchandise inventories .............................. 159,743,100 150,898,000
Prepaid expenses ..................................... 5,347,000 5,216,200
Future income tax benefits ........................... 6,373,800 6,227,800
------------ ------------
Total current assets ............................ 322,047,400 301,707,400
------------ ------------
Other Assets:
Notes receivable, less allowance for losses,
$6,015,000 and $5,299,000, respectively ........... 11,013,000 11,604,600
Goodwill and other assets ............................ 10,140,600 13,696,700
Other real estate .................................... 4,081,300 7,152,500
Deferred income tax benefit .......................... 4,492,000 2,848,000
------------ ------------
Total other assets .............................. 29,726,900 35,301,800
------------ ------------
Property and Equipment-At Cost:
Land ................................................. 5,640,500 5,602,000
Buildings ............................................ 75,843,500 69,445,600
Equipment ............................................ 120,581,900 115,757,400
Leasehold improvements ............................... 12,526,400 14,715,100
------------ ------------
214,592,300 205,520,100
Less accumulated depreciation and amortization ....... 103,955,000 102,219,500
------------ ------------
Property and equipment-net ...................... 110,637,300 103,300,600
------------ ------------
$462,411,600 $440,309,800
============ ============
</TABLE>
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities of long-term debt ................. $ 10,159,700 $ 10,156,800
Accounts payable ..................................... 165,801,200 155,001,500
Accrued expenses ........................ ............ 56,924,600 50,148,300
Income taxes ......................................... 4,418,600 2,327,100
------------ ------------
Total current liabilities ....................... 237,304,100 217,633,700
------------ ------------
Long-Term Debt, Less Current Maturities ................. 73,298,100 83,457,800
Other Liabilities ....................................... 16,998,100 16,758,000
------------ ------------
Total liabilities ............................... 327,600,300 317,849,500
------------ ------------
Commitments and Contingencies (Note 10)
Redeemable Common Stock ................................. 9,007,700 6,375,300
Stockholders' Equity:
Common stock:
Voting (Class A) ................................... 14,900 15,800
Non-voting (Class B) ............................... 1,327,300 1,346,600
------------ ------------
Total common stock .............................. 1,342,200 1,362,400
Patronage dividends payable in common stock ......... 4,060,000 3,738,000
Additional paid-in capital ........................... 31,582,600 28,588,300
Reinvested earnings .................................. 89,950,000 83,527,500
------------ ------------
126,934,800 117,216,200
Less:
Treasury stock, at cost ............................ 1,131,200 1,131,200
------------ ------------
Total stockholders' equity ...................... 125,803,600 116,085,000
------------ ------------
$462,411,600 $440,309,800
============ ============
See note to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements Of Consolidated Stockholders' Equity
For The Years Ended January 2, 1999, January 3, 1998 and December 28, 1996
Common Stock
--------------------------------------- Patronage
Class A Class B Dividends Additional
--------------------------------------- Paybable in Paid-in Reinvested
Shares Amount Shares Amount Common Stock Capital Earnings
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 30, 1995 .......... 13,400 $16,700 1,025,897 $1,182,400 $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
Net earnings ..................... 11,897,700
Common stock issued .............. 500 600 50,857 63,600 (3,738,000) 5,160,900
Common stock purchased ........... (1,200) (1,500) (28,120) (35,200) (945,900) (2,364,300)
Redeemable common stock .......... (38,148) (47,700) (1,220,700) (3,110,900)
Patronage dividends payable in
common stock .................. 4,060,000
---------------------------------------------------------------------------------------
Balance, January 2, 1999 ............ 11,900 $14,900 1,061,874 $1,327,300 $4,060,000 $31,582,600 $89,950,000
=======================================================================================
Treasury Stock, January 2, 1999,
January 3, 1998 and December 28,1996 ...... 13,285 $1,131,200
======================
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statements Of Consolidated Cash Flows
For The Years Ended January 2, 1999, January 3, 1998 and December 28, 1996
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net earnings ......................................................................... $11,897,700 $11,203,600 $10,267,400
Adjustments to reconcile net earnings to net cash flows provided by operating activities:
Depreciation and amortization..................................................... 18,782,300 17,132,300 16,326,800
Allowance for losses ............................................................. 2,189,300 2,389,100 5,302,600
Loss (gain) on sale of property and equipment .................................... 2,527,300 612,900 (1,233,500)
Patronage dividends payable in common stock ...................................... 4,060,000 3,738,000 3,779,000
(Increase) decrease in operating assets net of the effects of business acquisitions:
Notes and accounts receivable .................................................... 6,899,000 8,975,000 (2,818,400)
Merchandise inventories ......................................................... (8,398,300) 5,808,200 10,319,700
Prepaid expenses ................................................................ (129,100) (2,450,300) 2,453,500
Future income tax benefits ...................................................... (146,000) 1,589,600 679,400
Goodwill and other assets .................................................... (433,900) (76,500) (413,400)
Other real estate .............................................................. 3,071,200 (2,712,800) 219,700
Deferred income tax benefit .................................................... (1,644,000) (1,087,000) (860,100)
Increase (decrease) in operating liabilities:
Accounts payable .............................................................. 10,804,400 (4,036,600) (7,237,800)
Accrued expenses .............................................................. 6,877,200 6,092,900 1,470,600
Income taxes ................................................................... 2,091,500 1,391,000 864,300
Other liabilities .............................................................. 240,100 235,300 200,200
----------- ----------- -----------
Net cash flows provided by operating activities .................................... 58,688,700 48,804,700 39,320,000
----------- ----------- -----------
Cash Flows From Investing Activities:
Capital expenditures - net of insurance proceeds.................................... (24,936,000) (22,726,700) (39,291,800)
Proceeds from sale of property and equipment ....................................... 4,004,700 1,740,200 5,763,400
Payment for business acquisition net of cash acquired............................... (4,586,300) (3,967,400) (13,918,700)
Decrease in notes receivable .................................................... 320,000 1,059,000 3,927,500
----------- ----------- -----------
Net cash flows used in investing activities ........................................ (25,197,600) (23,894,900) (43,519,600)
----------- ----------- -----------
Cash Flows From Financing Activities:
Principal payments of long-term debt ............................................... (10,159,700) (10,156,800) (10,235,600)
Increase (decrease) in current maturities of long-term debt ........................ 2,900 (69,000) 6,449,300
Proceeds from sale of common stock ................................................ 1,487,100 1,043,100 973,500
Common stock purchased ......................................................... (5,093,800) (3,702,500) (4,027,300)
Proceeds from long-term borrowings ................................................. 25,000,000
----------- ----------- -----------
Net cash flows (used in) provided by financing activities .......................... (13,763,500) (12,885,200) 18,159,900
----------- ----------- -----------
Net Increase in Cash and Cash Equivalents ............................................ 19,727,600 12,024,600 13,960,300
Cash And Cash Equivalents, Beginning Of Year .......................................... 52,366,900 40,342,300 26,382,000
----------- ----------- -----------
Cash And Cash Equivalents, End Of Year ................................................ $72,094,500 $52,366,900 $40,342,300
=========== =========== ===========
Cash Paid During The Year For:
Interest ........................................................................ $ 7,487,600 $ 8,084,600 $ 8,545,900
Income Taxes ................................................................... 7,853,400 6,433,100 6,965,100
Supplemental Noncash Financing Activities-Patronage Dividends Payable in Common Stock.. 4,060,000 3,738,000 3,779,000
See notes to consolidated financial statements.
</TABLE>
Notes To Consolidated
Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Fiscal year-The Company's fiscal year is the 52 or 53 week period ending
the Saturday nearest to December 31. The years ended January 2, 1999 and
December 28, 1996 included 52 weeks. The year ended January 3, 1998
included 53 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 2,
1999 and January 3, 1998 was $5,714,000 and $4,267,800, 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-nine years for buildings, three to ten
years for equipment and ten to twenty years for leasehold improvements.
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 1998, 1997 and 1996 for the present value
of these remaining future liabilities were not significant.
Income Taxes-The Company provides income taxes in accordance with SFAS 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 March 1998, the American Institute of
Certified Public Accountants issued Statement of Position ("SOP") No 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." The SOP is effective for fiscal years beginning after
December 15, 1998. The Company is in the process of evaluating the impact
on the Consolidated Financial Statements. The adoption of the SOP is not
expected to have a material impact on the Company's Consolidated Financial
Statements.
2. ACQUISITIONS
On December 8, 1998, the Company purchased a grocery retailer for
$4,586,300 in cash. 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 1998, 1997 and
1996 results of operations.
3. PATRONAGE DIVIDENDS
The Company's By-Laws require that, to the extent permitted by the Internal
Revenue Code, patronage dividends are to be paid out of earnings from
business activities with stockholder-customers in an amount which will
reduce the net earnings of the Company to an amount which will result in an
8% increase in the book value of its common stock. For years prior to 1998,
a 10% increase in book value was required. The dividends are payable at
least 20% in cash and the remainder in Class B common stock. Dividends for
the years ended January 2, 1999, January 3, 1998 and December 28, 1996 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 $6,357,000 and $7,523,400 at
January 2, 1999 and January 3, 1998, 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:
1998 1997
----------- -----------
Senior unsecured notes payable
9.26%, due 2000 to 2001 ......... $5,000,000 $7,500,000
7.57% to 8.26%, due 2000 to 2008. 17,300,000 18,500,000
6.94%, due 2000 to 2003 ......... 25,714,300 32,142,900
7.86%, due 2000 to 2006 ......... 25,000,000 25,000,000
Other long-term debt ............... 283,800 314,900
----------- -----------
Total ............................. $73,298,100 $83,457,800
=========== ===========
At January 2, 1999, $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:
1999 .......... $ 10,159,700
2000 .......... 24,734,400
2001 .......... 13,738,000
2002 .......... 11,242,000
2003 .......... 11,246,400
Thereafter ...... 12,337,300
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, as defined in SFAS 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, 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 $83,950,000 and $93,460,000 as of
January 2, 1999 and January 3, 1998, respectively.
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 $114.80,
$104.35 and $94.30 for 1998, 1997 and 1996, 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
stockholders' equity. Redeemable common stock is held by inactive
customers and former employees. As of January 2, 1999 and January 3, 1998,
78,464 and 61,095 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 24,012, 22,405, 12,863, 11,500 and
7,684 in 1999, 2000, 2001, 2002 and 2003, 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 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:
<TABLE>
<CAPTION>
Options
Weighted
Options SARs Price Average Price
------- ------ --------------- ---------------
<S> <C> <C> <C> <C>
Outstanding, December 30, 1995 ... 43,600 19,100 $53.10 - $77.40 $61.97
Exercised ................ (1,600) (2,266) 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
Granted .................. 4,200 800 104.35 104.35
------ ------ --------------
Outstanding, January 2, 1999 ..... 50,000 21,000 $53.10 -$104.35 67.96
====== ====== ===============
Excercisable at January 2, 1999 .. 43,966 17,816 $53.10 -$104.35 64.92
====== ====== ===============
Available for grant after
January 2, 1999 ................ 1,000 184
====== ======
</TABLE>
The following table summarizes information concerning currently outstanding
and excercisable options:
<TABLE>
<CAPTION>
Stock Options Outstanding Stock Options Excercisable
-------------------------------- --------------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
of Contractual Exercise Of Exercise
Range of Exercise Price Shares Life Price Shares Price
----------------------- ------ ----------- -------- ------- --------
<C> <C> <C> <C> <C> <C>
$50.00 - 65.00 24,500 3.3 $ 55.06 23,200 $ 55.00
$65.01 - 80.00 17,000 5.9 70.89 16,400 71.10
$80.01 - 95.00 4,300 8.3 94.30 4,300 94.30
$95.01 - 110.00 4,200 9.3 104.35 66 104.35
------ --------- -------- ------- --------
50,000 $ 67.96 43,966 $ 64.92
====== ======== ======= ========
</TABLE>
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 an SAR, to receive cash in an
amount equal to the excess of the Fair Market Value per share of the
Company's common stock as of the date on which 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 1998, 1997 and 1996. 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 1998, 1997 and 1996.
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 1998, 1997 and 1996
net earnings would have been less than $80,000.
8. EMPLOYEE BENEFIT PLANS
Substantially all non-union employes 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 Financial Accounting Standards Board ("FASB") issued SFAS 132,
"Employers' Disclosures about Pension and Other Postretirement Benefits,"
in February 1998. The new standard does not change the measurement or
recognition of costs for pension or other postretirement plans. It
standardizes disclosures and eliminates those that are no longer useful.
The following tables, prepared in accordance with the new standard, set
forth pension obligations and plan assets as of January 2, 1999 and January
3, 1998:
1998 1997
------------- --------------
Change in benefit obligation:
Benefit Obligation - Beginning of Year ...... $45,893,300 $37,747,200
Service cost ................................ 2,811,400 2,238,700
Interest cost ............................... 3,272,400 2,937,100
Actuarial loss .............................. 2,282,200 4,522,500
Benefits paid ............................... (1,680,200) (1,552,200)
------------ ------------
Benefit Obligation - End of the Year ........ $52,579,100 $45,893,300
============ ============
Change in plan assets:
Fair Value - Beginning of Year .............. $37,631,100 $33,277,800
Actual return on plan assets ................ 3,247,100 3,916,700
Company contribution ........................ 3,323,600 1,988,800
Benefits paid ............................... (1,680,200) (1,552,200)
------------ ------------
Fair Value - End of the Year ................ $42,521,600 $37,631,100
============ ============
Funded status:
As of year end .............................. $(10,057,500) $(8,262,200)
Unrecognized cost:
Actuarial and investment (gains) losses, net. 7,295,700 4,840,400
Prior service cost .......................... 252,200 288,000
Transition asset ............................ (547,300) (721,400)
------------- ------------
Accrued benefit cost ........................ $ (3,056,900) $(3,855,200)
============= =============
<TABLE>
<CAPTION>
The components of pension cost are as follows: 1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Benefits earned during the year .................... $2,811,400 $2,238,700 $2,155,300
Interest cost on projected benefit obligation....... 3,272,400 2,937,100 2,608,900
Expected return on plan assets ..................... (3,444,100) (2,993,000) (2,651,500)
Net amortization and deferral
Unrecognized net loss............................... 23,900 1,800
Unrecognized prior service cost .................... 35,900 35,900 38,300
Unrecognized net asset ............................. (174,100) (174,100) (174,100)
---------- ---------- ----------
Net pension cost ................................... $2,525,400 $2,044,600 $1,978,700
========== ========== ==========
The assumptions used in the accounting were as follows:
Discount rate ..................................... 7.00% 7.25% 7.75%
Rate of increase in compensation levels ............ 4.00% 4.00% 4.00%
Expected long-term rate of return on assets ........ 9.00% 9.00% 9.00%
</TABLE>
The change in the discount rate in 1998 resulted in a $2,100,000 increase
in the projected benefit obligation in 1998 and is expected to result in an
increase in the 1999 pension expense of approximately $298,000.
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 $4,655,000, $4,530,300 and $4,296,100 in 1998, 1997 and 1996,
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 $1,181,400,
$858,400 and $556,600 in 1998, 1997 and 1996, respectively.
9. INCOME TAXES
Federal income tax at the statutory rates of 35% in 1998, 1997 and 1996 and
income tax expense as reported are reconciled as follows:
1998 1997 1996
---------- ---------- ----------
Federal income tax at statutory rates . $7,016,400 $6,831,600 $6,264,100
State income taxes, net of federal
tax benefits........................ 1,000,300 1,119,500 930,700
Other-net ............................. 132,300 364,100 435,200
---------- ---------- ----------
Income tax expense .................... $8,149,000 $8,315,200 $7,630,000
========== ========== ==========
The approximate tax effects of temporary differences at January 2, 1999 and
January 3, 1998 are as follows:
<TABLE>
<CAPTION>
1998 1997
----------------------------------- ----------------------------------------
Assets Liabilities Total Assets Liabilities Total
---------- ----------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Allowance for doubtful accounts ............ $ 1,084,000 $ 1,084,000 $ 1,057,000 $1,057,000
Inventories ................................ $(1,419,200) (1,419,200) $(1,264,200) (1,264,200)
Employee benefits .......................... 5,764,000 5,764,000 5,213,000 5,213,000
Accrued expenses not currently deductable .. 945,000 945,000 1,222,000 1,222,000
----------- ----------- ----------- ----------- ----------- ----------
Current .................................... 7,793,000 (1,419,200) 6,373,800 7,492,000 (1,264,200) 6,227,800
----------- ----------- ----------- ----------- ----------- ----------
Allowance for doubtful accounts ............ 2,431,000 2,431,000 2,142,000 2,142,000
Depreciation and amortization .............. (6,602,000) (6,602,000) (6,773,000) (6,773,000)
Employee benefits .......................... 5,067,000 5,067,000 4,115,000 4,115,000
Accrued expenses not currently deductable .. 3,828,000 3,828,000 3,583,000 3,583,000
Other ...................................... (232,000) (232,000) (219,000) (219,000)
----------- ----------- ----------- ----------- ----------- ----------
Noncurrent ................................. 11,326,000 (6,834,000) 4,492,000 9,840,000 (6,992,000) 2,848,000
----------- ----------- ----------- ----------- ----------- ----------
Total ...................................... $19,119,000 $(8,253,200) $10,865,800 $17,332,000 $(8,256,200) $9,075,800
=========== =========== =========== =========== =========== ==========
10. LEASE OBLIGATIONS AND CONTINGENT LIABILITIES
Rental payments and related subleasing rentals under operating leases are
as follows:
RENTAL PAYMENTS
-------------------------
SUBLEASING
MINIMUM CONTINGENT RENTALS
----------- ----------- ------------
1996 ............. $31,711,700 $ 486,600 $21,628,300
1997 ............. 28,625,700 406,600 21,249,900
1998 ............. 29,883,200 414,300 23,207,000
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 2, 1999:
1999 ........... $29,383,600
2000 ........... 27,978,100
2001 ........... 26,208,700
2002 ........... 25,517,900
2003 ........... 24,532,100
Thereafter ..... 173,039,300
-----------
Total .......... $306,659,700
============
Total minimum rentals to be received in the future under non-cancelable
subleases as of January 2, 1999 are $236,080,300.
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.
12. EVANSVILLE FIRE
During fiscal 1998, fire destroyed the Evansville, Indiana warehouse,
inventory and equipment. The Division supplied frozen food and meat
products to Roundy's customers in the Southern Midwest area. Discussions
are in process with the insurance carrier relating to the inventory,
building and equipment and estimated business interruption losses incurred.
Through January 2, 1999, cash advances aggregating $7.4 million were
received from the insurance carrier relative to (1) the cost of the
inventory destroyed in the fire ($4.1 million), (2) a partial advance on
the replacement cost of the destroyed building and equipment ($3.0 million)
and (3) to cover certain costs of demolishing the building and removing
debris from the site ($0.3 million).
The Company elected to rebuild the facility on the existing site and
completed the project in January 1999 at a cost of approximately $10.8
million. The new facility was fully operational by January 30, 1999, again
supplying frozen food and meat products to Roundy's customers.
The Company is in negotiations with the insurance carrier regarding an
overall settlement of its claims. Due to the complexity of the loss, the
Company anticipates that the final settlement may require an extended
period of negotiation. However, Management believes that the Company's
insurance coverage was sufficient and that the final settlement with its
insurance carrier will not have a material adverse impact on the Company's
future financial statements.
13. SEGMENT REPORTING
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which the Company has adopted in
the current year.
The Company and its subsidiaries sell and distribute food and nonfood
products that are typically found in supermarkets. The Company's wholesale
distribution segment sells to both corporately and independently owned
retail food stores, while the retail segment sells directly to the
consumer.
Gross Profit represents net sales, less cost of sales.
Identifiable assets are those used exclusively by that industry segment.
Corporate assets are principally cash and cash equivalents, notes
receivable, corporate office facilities and equipment.
1998 1997 1996
-------------- -------------- --------------
NET SALES
Wholesale ......... $2,512,268,000 $2,503,067,600 $2,483,307,100
Retail ......... 284,127,500 291,612,600 275,761,300
Eliminations ...... (220,173,400) (183,983,500) (180,058,200)
-------------- -------------- --------------
Total ........... $2,576,222,100 $2,610,696,700 $2,579,010,200
============== ============== ==============
GROSS PROFIT
Wholesale ......... $ 188,767,200 $ 191,931,500 $ 195,639,200
Retail ............ 60,132,300 59,048,700 52,583,000
Eliminations ...... (2,978,200) (2,638,700) (2,428,600)
-------------- -------------- --------------
Total ........... $ 245,921,300 $ 248,341,500 $ 245,793,600
============== ============== ==============
IDENTIFIABLE ASSETS
Wholesale ......... $ 304,332,200 $ 296,886,900 $ 313,589,800
Retail ............ 54,856,500 59,645,800 53,834,600
Corporate ......... 103,232,900 83,777,100 67,216,600
-------------- -------------- --------------
Total ............ $ 462,411,600 $ 440,309,800 $ 434,641,000
============== ============== ==============
DEPRECIATION AND AMORTIZATION
Wholesale ......... $ 8,311,100 $ 7,393,000 $ 6,533,400
Retail ........... 4,296,800 4,070,700 53,680,100
Corporate ......... 6,174,400 5,668,600 66,113,300
-------------- -------------- --------------
Total ........... $ 18,782,300 $ 17,132,300 $ 16,326,800
============== ============== ==============
CAPITAL EXPENDITURES
Wholesale ......... $ 12,942,400 $ 6,266,000 $ 30,109,000
Retail ............ 3,353,400 5,565,700 5,360,000
Corporate ......... 8,640,200 10,895,000 3,822,800
-------------- -------------- --------------
Total ........... $ 24,936,000 $ 22,726,700 $ 39,291,800
============== ============== ==============
Divisional Map
1. Corporate Office - Roundy's, Inc.
23000 Roundy Drive
Pewaukee, WI 53072
2. Milwaukee Division
11300 W. Burleigh Street
Wauwatosa, WI 53222
3. Roundy's General Merchandise Division
400 Walter Road
Mazomanie, WI 53560
4. Eldorado Division
Route 45 South
Eldorado, IL 62930
5. Evansville Perishable Division
4501 Peters Road
Evansville, IN 47711
6. Westville Division
6500 South U.S. 421
Westville, IN 46391
7. South Bend Perishable Division
2107 Western Avenue
South Bend, IN 46619
8. Muskegon Division
1764 Creston Street
Muskegon, MI 49443
9. Van Wert Division
1200 N. Washington
Van Wert, OH 45891
10. Lima Division
1100 Prosperity Road
Lima, OH 45802
BOARD OF DIRECTORS
Brenton H. Rupple
Milwaukee, WI
Gary R. Sarner
Chairman
Total Logistic Control, LLC
Milwaukee, WI
Patrick D. McAdams
McAdams, Inc
Wales, WI
Gerald F. Lestina
President & CEO
Charles R. Bonson
Bonson's Foods, Inc.
Eagle River, WI
George C. Kaiser
Milwaukee, WI
Robert E. Bartels
Martin's Super Markets, Inc.
South Bend, IN
Gary N. Gundlach
Pick 'n Save - Stoughton
Stoughton, WI
Robert S. Gold
Gold's of Mequon, LLC
Mequon, WI
Robert D. Ranus
Vice President & Chief Financial Officer
ELECTED CORPORATE OFFICERS
Gerelad F. Lestina
President & CEO
Ralph D. Beketic
Vice President - Wholesale
David C. Busch
Vice President of Administration
Edward G. Kitz
Vice President, Secretary & Treasurer
Charles H. Kosmaler, Jr.
Vice President - Planning and Information Services
Robert D. Ranus
Vice President & Chief Financial Officer
Michael J. Schmitt
Vice President - Sales and Development
Marion H. Sullivan
Vice President of Marketing
Advisory Committe
Kent Burnstad
Burnstad's Supermarket
701 E. Clifton Street
Tomah, WI 54660
Tom Czerwonka
Pick 'n Save - Two Rivers
1010 22nd Street
Two Rivers, WI 54241
Bob Glisch
Mega Marts, Inc.
150 W. Holt Avenue
Milwaukee, WI 53207
Frank Serio
Pick 'n Save - Cudahy
5851 South Packard Avenue
Cudahy, WI 53110
Mark Stinebrink
Pick 'n Save - Lake Geneva
100 East Geneva Square
Lake Geneva, WI 53147
John Stone
Pick 'n Save - Baraboo
615 Highway 136
West Baraboo, WI 53913
TRUSTEES
Gerald F. Lestina
President & CEO
Edward G. Kitz
Vice President, Secretary & Treasurer
Victor C. Burnstad
Burnstad Bros. Inc.
Tomah, WI
David J. Spiegelhoff
Pick 'n Save - Burlington
Burlington, WI
Bronson J. Haase
President & CEO
Wisconsin Gas Company
Milwaukee, WI
Robert R. Spitzer
President Emeritus
Milwaukee School of Engineering
Milwaukee, WI
</TABLE>
EXHIBIT 21
ROUNDY'S, INC.
Subsidiaries
Roundy's, Inc. has twelve wholly-owned first-tier subsidiaries, each a
Wisconsin corporation (except as otherwise noted) doing business under
their corporate names. These subsidiaries are:
Badger Assurance, Ltd.(1) Kee Wholesale, Inc.
CD of Wisconsin, Inc. Midland Grocery of Michigan, Inc.(6)
Holt Public Storage, Inc. Old Time, Inc.
I.T.A., Inc. Ropak, Inc.
Jondex Corp. Scot Lad Foods, Inc.
Kee Trans, Inc. WFC Foods, Inc.(2)
Six Wisconsin corporations doing business under their corporate names
are wholly-owned subsidiaries of Ropak, Inc. These corporations are:
Insurance Planners, Inc. Shop-Rite, Inc.
Pick 'n Save Warehouse Foods,Inc. Villard Avenue Shop-Rite, Inc.
Sheboygan Land Corporation Rindt Enterprises, Inc.
Four corporations doing business under their corporate names are wholly-
owned subsidiaries of Scot Lad Foods, Inc. These corporations are:
Bonnie Baking Co., Inc.(3) Cardinal Foods, Inc. (5)
Spring Lake Merchandise, Inc.(4) Scot Lad-Lima, Inc.(4)
Two corporations doing business under their corporate names are wholly-
owned subsidiaries of Cardinal Foods, Inc. These corporations are:
Wilson's Cardinal Supermarket, Inc (4) Gardner Food Galleries, Inc.(4)
One corporation doing business under its corporate name is a subsidiary
of Shop-Rite, Inc. and is partially owned by Cardinal Foods, Inc. The
corporation is:
The Midland Grocery Company(4)
One corporation doing business under its corporate name is a 50% owned
subsidiary of Jondex Corp. The corporation is:
Clintonville Land Co., LLC
_____________
(1) A Bermuda corporation. (4) An Ohio corporation.
(2) An Illinois corporation. (5) A Delaware corporation.
(3) An Indiana corporation. (6) A Michigan corporation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROUNDY'S
INC. FROM 10-K405 FOR THE PERIOD ENDED 01-02-99 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> JAN-02-1999
<CASH> 72,094,500
<SECURITIES> 0
<RECEIVABLES> 78,489,000
<ALLOWANCES> 0
<INVENTORY> 159,743,100
<CURRENT-ASSETS> 322,047,400
<PP&E> 214,592,300
<DEPRECIATION> 103,955,000
<TOTAL-ASSETS> 462,411,600
<CURRENT-LIABILITIES> 237,304,100
<BONDS> 73,298,100
0
0
<COMMON> 1,342,200
<OTHER-SE> 123,330,200
<TOTAL-LIABILITY-AND-EQUITY> 462,411,600
<SALES> 2,576,222,100
<TOTAL-REVENUES> 2,578,650,600
<CGS> 2,330,300,800
<TOTAL-COSTS> 2,330,300,800
<OTHER-EXPENSES> 218,820,700
<LOSS-PROVISION> 2,189,300
<INTEREST-EXPENSE> 7,293,100
<INCOME-PRETAX> 20,046,700
<INCOME-TAX> 8,149,000
<INCOME-CONTINUING> 11,897,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,897,700
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
