UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission File Number 002-94984
Roundy's, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-0854535
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23000 Roundy Drive, Pewaukee, Wisconsin 53072
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(262) 953-7999
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report)
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at April 1, 2000
- ----------------------------- ----------------------------
Common Stock, $1.25 par value
Class A (Voting) 9,700 Shares
Class B (Non-voting) 1,036,668 Shares
<PAGE>
ROUNDY'S, INC.
INDEX
Page No.
PART I. Financial Information:
Condensed Consolidated Balance Sheets - 3
April 1, 2000 and January 1, 2000
Condensed Statements of Consolidated Earnings - 4
Thirteen Weeks Ended
April 1, 2000 and April 3, 1999
Condensed Statements of Consolidated Cash Flows 5
-
Thirteen Weeks Ended April 1, 2000
and April 3, 1999
Notes to Condensed Consolidated Financial 6
Statements
Management's Discussion and Analysis of 9
Financial Condition and Results of
Operations
PART II. Other Information 11
SIGNATURES 12
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ROUNDY'S, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
April 1, 2000 to January 1, 2000
(Unaudited)
April 1, 2000 January 1, 2000
------------- ---------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............. $ 36,180,400 $ 68,385,800
Notes and accounts receivable, less
allowance for losses, $5,404,100
and $5,509,800, respectively ........ 91,715,000 87,659,000
Merchandise inventories ............... 197,364,800 166,514,000
Prepaid expenses ...................... 6,329,800 5,362,000
Future income tax benefits ............ 8,043,300 8,026,800
------------ ------------
Total Current Assets ................ 339,633,300 335,947,600
------------ ------------
OTHER ASSETS:
Notes receivable, less allowance for
losses, $7,137,000 .................. 9,380,800 10,650,600
Goodwill and other assets ............. 119,133,700 9,532,000
Other real estate ..................... 5,755,100 5,705,000
Deferred income tax benefit ........... 3,782,000 3,782,000
------------ ------------
Total Other Assets .................. 138,051,600 29,669,600
------------ ------------
PROPERTY AND EQUIPMENT - Net ............ 184,352,400 131,707,500
------------ ------------
$662,037,300 $497,324,700
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt .. $ 7,834,500 $ 24,734,500
Accounts payable ...................... 191,684,600 174,893,000
Accrued expenses ...................... 68,956,200 62,981,000
Income taxes .......................... 11,375,800 5,402,600
------------ ------------
Total Current Liabilities ........... 279,851,100 268,011,100
LONG-TERM DEBT, LESS CURRENT MATURITIES.. 207,935,700 48,563,600
OTHER LIABILITIES ....................... 32,358,700 26,830,600
------------ ------------
Total Liabilities ................... 520,145,500 343,405,300
------------ ------------
REDEEMABLE CLASS B COMMON STOCK ......... 9,948,800 9,948,800
STOCKHOLDERS' EQUITY:
Common Stock:
Voting (Class A) .................... 12,100 15,000
Non-Voting (Class B) ................ 1,382,200 1,356,600
------------ ------------
Total Common Stock ................ 1,394,300 1,371,600
Patronage dividends payable in common
stock ................................. 3,078,000
Additional paid-in capital ............. 39,139,000 36,305,800
Reinvested earnings .................... 109,737,200 104,346,400
------------ ------------
Total 150,270,500 145,101,800
------------ ------------
Less treasury stock, at cost ........... 18,327,500 1,131,200
------------ ------------
Total Stockholders' Equity ........ 131,943,000 143,970,600
------------ ------------
$662,037,300 $497,324,700
============ ============
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
ROUNDY'S, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS
FOR THE THIRTEEN WEEKS ENDED
April 1, 2000 AND April 3, 1999
(UNAUDITED)
Thirteen Weeks Ended
April 1, 2000 April 3, 1999
REVENUES: ------------- -------------
Net sales and service fees ......... $672,420,900 $650,613,800
Other - net ........................ 1,977,800 1,028,000
------------ ------------
674,398,700 651,641,800
------------ ------------
COSTS AND EXPENSES:
Cost of sales ...................... 600,634,300 588,852,900
Operating and administrative ....... 61,718,800 56,143,500
Interest ........................... 2,104,600 1,634,300
------------ ------------
664,457,700 646,630,700
------------ ------------
EARNINGS BEFORE INCOME TAXES ....... 9,941,000 5,011,100
PROVISION FOR INCOME TAXES ......... 4,051,000 2,042,000
------------ ------------
NET EARNINGS ....................... $ 5,890,000 $ 2,969,100
============ ============
See Notes to Condensed Consolidated Financial Statements.
<TABLE>
<CAPTION>
ROUNDY'S, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED APRIL 1, 2000 AND APRIL 3, 1999
(UNAUDITED)
Thirteen Weeks Ended
April 1, 2000 April 3, 1999
------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings ................................. $ 5,890,000 $ 2,969,100
Adjustments to reconcile net earnings to net
cash flows provided by operating
activities:
Depreciation and amortization ............... 5,180,300 4,366,700
(Decrease) increase in allowance for losses .. (110,200) 403,300
(Gain) loss on sale of assets ................ (1,165,600) 94,900
(Increase) decrease in operating assets net of
the effect of acquisitions and disposition:
Accounts receivable .......................... 3,154,200 (10,718,100)
Merchandise inventories ...................... 915,900 4,742,100
Prepaid expenses ............................. 725,700 1,685,600
Future income tax benefits ................... (16,500)
Other real estate ............................ (50,100)
Other assets ................................. (1,165,700) (17,000)
Increase(decrease)in operating liabilities net
of the effect of acquisitions and disposition:
Accounts payable ............................. (4,967,400) (4,038,300)
Accrued expenses ............................. (1,440,000) 4,867,900
Income taxes ................................. 1,010,200 (768,200)
Other liabilities ........................... 343,700 91,500
------------ ------------
Net cash flows provided by operating activities 8,304,500 3,679,500
------------ ------------
Cash Flows from Investing Activities:
Capital expenditures ......................... (4,150,500) (7,248,600)
Proceeds from sale of property and
equipment and other productive assets ...... 4,157,100 422,400
Payment for business acquisitions net of cash
acquired ................................... (168,528,100)
Decrease in notes receivable ................. 1,269,800 293,500
------------ ------------
Net cash flows used in investing activities .... (167,251,700) (6,532,700)
------------ ------------
Cash Flows from Financing Activities:
Proceeds from long term borrowings ........... 215,486,400
Reductions in debt ........................... (88,023,300) (1,207,600)
Proceeds from sale of common stock ........... 16,000 11,800
Common stock purchased ....................... (737,300) (310,900)
------------ ------------
Net cash flows provided by (used in) financing
activities ................................... 126,741,800 (1,506,700)
------------ ------------
Net decrease in cash and cash equivalents ...... (32,205,400) (4,359,900)
Cash and cash equivalents, beginning of period . 68,385,800 72,094,500
------------ ------------
Cash and cash equivalents, end of period ....... $ 36,180,400 $ 67,734,600
============ ============
Cash paid during the period: - Interest $ 2,699,300 $ 1,215,600
- Income Taxes 3,107,300 2,842,300
Liabilities assumed in business acquisition: 49,987,200
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1) In the opinion of the Company, the accompanying consolidated
financial statements contain all adjustments (consisting only
of normal recurring accruals) necessary to present fairly the
consolidated financial position as of April 1, 2000, and
January 1, 2000 and the consolidated results of operations for
the thirteen weeks ended April 1, 2000 and April 3, 1999, and
changes in consolidated cash flows for the thirteen weeks ended
April 1, 2000 and April 3, 1999.
2) The consolidated results of operations for the thirteen weeks
ended April 1, 2000 and April 3, 1999 are not necessarily
indicative of the results to be expected for the full fiscal
year.
3) Earnings per share are not presented because they are not
deemed to be meaningful.
4) Class B common stock that is subject to redemption is reflected
outside of stockholders' equity. As of April 1, 2000 and
January 1, 2000, 76,559 shares 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.
5) 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. Settlements have been reached on the inventory, building and
equipment. Discussions are in process with the insurance carrier
relating to the business interruption losses incurred.
Due to the complexity of the claim, 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.
6) On February 2, 2000, the Company purchased seven grocery retail
stores for cash of approximately $37.7 million. Operating results
of such stores have been included in the statement of consolidated
earnings since the acquisition date. Goodwill of approximately
$21.5 million resulted from the purchase and is being amortized over
20 years. The pro forma effects of the acquisition are not
material.
The acquisition was accounted for as a purchase and the
financial statements reflect the preliminary allocation of the
purchase price to the assets acquired based on their estimated
fair values. Such allocation could change based upon the
receipt of various appraisals and the completion of the
assessment of fair values, however, such changes are not
anticipated to be significant.
<PAGE>
7) On March 31, 2000, the Company acquired all of the outstanding
stock of Mega Marts, Inc. ("Mega") for approximately $123.9
million in cash and notes payable. Mega owned and operated 16
retail grocery stores. Also on March 31, 2000, the Company
acquired certain assets of NDC, Inc. (an affiliate of Mega)
consisting of a retail grocery store known as the "Tri-City
Pick `n Save" ("TCPS") for approximately $11.2 million in cash,
subject to post-closing adjustments. The acquisition was
effective at the end of the day on April 1, 2000 and the
operating results of Mega and TCPS will be included in the
statement of consolidated earnings after the effective date.
Goodwill and a covenant not to compete aggregating
approximately $84.5 million resulted from the purchase and are
being amortized over periods up to 20 years.
The Company financed the acquisitions with the proceeds of a
new Credit Agreement and $39 million in promissory notes issued
to the shareholders of Mega.
The acquisitions were accounted for as purchases and the
financial statements reflect the preliminary allocation of the
purchase price to the assets acquired and liabilities assumed
based on their estimated fair values. Included in the assets
of Mega were 132,330 shares of the Company's Class A and B
common stock. A portion of the purchase price was allocated to
such treasury shares acquired based on the net book value of
the Company's common stock as of January 1, 2000. The purchase
price allocated to the remaining assets acquired and
liabilities assumed could change based upon the receipt of
various appraisals and the completion of the assessment of fair
values, however, such changes are not anticipated to be
significant.
Unaudited pro forma consolidated results of operations,
including Mega and TCPS as if they had been acquired at the
beginning of 2000 and as of the beginning of 1999 follows:
Thirteen Weeks Ended
April 1, 2000 April 3, 1999
Net sales and service fees $720,037,300 $692,780,800
Net earnings 4,978,800 1,794,500
Pro forma results are not necessarily indicative of what would
have occurred had the acquisition been consummated as of the
beginning of the periods. Pro forma results include
amortization of intangible assets resulting from the purchase
and additional interest expense as if funds borrowed in
connection with the acquisition had been outstanding from the
beginning of each period.
8) On March 31, 2000, the Company entered into a Credit Agreement
in the maximum aggregate amount of $250,000,000 with various
lenders. The Credit Agreement provides for a $170,000,000
revolving loan commitment and an $80,000,000 term loan.
The Company used proceeds from the Credit Agreement to retire
current debt outstanding of approximately $78 million and for
the acquisition described in Note (7). The Credit Agreement
includes covenants that, among others, limits stock repurchases
and additional borrowing and provides for minimum working
capital and net worth requirements ($120,000,000 at April 1,
2000).
On April 4, 2000 the Company entered into a five-year interest
rate swap agreement under which the Company pays a fixed rate
of 7.32% and receives a floating LIBOR rate. The effect of the
rate swap agreement is to fix the rate on $60,000,000 of
borrowings.
9) Segment Reporting. The Company and its subsidiaries sell and
distribute food and nonfood products that are typically found
in supermarkets primarily located in the Midwest. The
Company's wholesale distribution segment sells to both
corporate and independently owned retail food stores, while the
retail segment sells directly to the consumer.
Gross Profit represents net sales, less cost of sales.
Eliminations represent the activity between wholesale and
Company owned retail stores. Inter-segment revenues are
recorded at amounts consistent with those charged to
independent retail stores.
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.
Thirteen Weeks Ended
April 1, 2000 April 3, 1999
NET SALES: ------------- --------------
Wholesale $637,300,200 $628,654,600
Retail 105,905,300 70,824,800
Eliminations (70,784,600) (48,865,600)
------------ ------------
TOTAL $672,420,900 $650,613,800
============ ============
GROSS PROFIT:
Wholesale $ 49,974,600 $ 47,289,300
Retail 22,864,300 15,255,700
Eliminations (1,052,300) (784,100)
------------ ------------
TOTAL $ 71,786,600 $ 61,760,900
============ ============
April 1, 2000 January 1, 2000
IDENTIFIABLE ASSETS ------------- ---------------
Wholesale $312,471,100 $319,419,500
Retail 285,762,700 62,525,700
Corporate 63,803,500 115,379,500
------------ ------------
TOTAL $662,037,300 $497,324,700
============ ============
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
The following is Management's discussion and analysis of certain
significant factors, which have affected the Company's results of
operations during the periods included in the accompanying
statements of consolidated earnings.
A summary of the period to period changes in the principal items
included in the statements of consolidated earnings is shown below:
Comparison of
13 Weeks Ended April 1, 2000
and April 3, 1999
Increase/<Decrease>
Net sales and service fees $21,807,100 3.4%
Cost of sales 11,781,400 2.0
Operating and admin. 5,575,300 9.9
expenses Interest expense 470,300 28.8
Earnings before income taxes 4,929,900 98.4
Net sales and service fees increased approximately $21.8 million
during the first quarter of 2000 as compared to the first quarter of
1999. The loss of wholesale customers resulted in a decrease of
approximately $8.5 million. The closing or sale of four Company-
owned stores resulted in a decrease of approximately $4.5 million.
New Company-owned stores resulted in an increase of approximately
$40.5 million. Sales by existing Company-owned stores decreased
$0.9 million. Sales to new and existing wholesale customers
decreased $4.8 million, net. This decrease from the first quarter
of 1999 is partially due to the Easter Holiday being in the first
quarter of 1999 and in the second quarter of 2000.
Other - net revenues increased approximately $1.0 million. This
increase is primarily due to the gain on the sale of the Oshkosh
retail grocery store.
Cost of sales approximated 89.3% and 90.5% of net sales and service
fees for the thirteen weeks ended April 1, 2000 and April 3, 1999,
respectively. This lower cost of sales percentage is primarily due
to the higher concentration of retail store business. Cost of
sales, for the wholesale segment approximated 91.4% and 92.0% of
wholesale net sales and service fees for the thirteen weeks ended
April 1, 2000 and April 3, 1999, respectively. Cost of sales for
the retail segment approximated 78.4% and 78.5% of retail net sales
and service fees for the thirteen weeks ended April 1, 2000 and
April 3, 1999, respectively.
Operating and administrative expenses approximated 9.2% and 8.6% of
net sales and service fees for the thirteen weeks ended April 1,
2000 and April 3, 1999, respectively. This higher expense
percentage is primarily due to the higher concentration of retail
store business.
<PAGE>
Interest expense increased primarily as a result of the $763,900
prepayment penalty for the early extinguishment of long-term debt
that was paid during the quarter ended April 1, 2000.
No patronage dividends were declared or accrued as of April 1, 2000.
The Company's By-Laws require that, to the extent permitted by the
Internal Revenue Code, patronage dividends be paid out of earnings
from business done with stockholder-customers in an amount which
will reduce net earnings of the Company to such amount as will
result in an eight percent increase in the book value of its common
stock.
The income tax rate used for calculating the provision for income
taxes for the interim periods was 40.7% in 2000 and 1999.
Liquidity and Capital Resources
The Company's current ratio decreased slightly from 1.25:1 at year-
end to 1.21:1 at April 1, 2000. The consolidated long-term debt to
equity ratio has increased from 0.32:1 at January 1, 2000 to 1.47:1
at April 1, 2000, partially due to decreased equity levels (created
by an additional $17.2 million in treasury stock) and partially due
to a $159.4 million increase in long-term debt incurred to finance
the business acquisitions (see notes 6, 7 and 8 of Notes to
Condensed Consolidated Financial Statements).
Stockholders' equity, including redeemable common stock, decreased
approximately $12.0 million due to an additional $17.2 million in
treasury stock and $0.7 million in stock redemptions offset by
reinvested earnings of $5.9 million.
II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
27.1 Financial Data Schedule
(b) Reports on Form 8-K -- There were no reports on Form 8-K filed
during the thirteen weeks ended April 1, 2000. However, on April
14, 2000, the Company filed a Form 8-K stating that on March 31,
2000, the Company, consummated the acquisition of: all of the
outstanding stock of Mega Marts, Inc. from the shareholders of
Mega for a purchase price of approximately $123.9 million,
subject to post-closing adjustments; and certain of the assets of
NDC, Inc. consisting of a retail grocery store known as the "Tri-
City Pick 'n Save" for a purchase price of approximately
$11.2 million, subject to post-closing adjustments. The Company
financed the acquisitions utilizing the proceeds of a new Credit
Agreement (see below) and issued approximately $39 million in
promissory notes to certain of the shareholders of Mega.
On March 31, 2000, the Company also entered into a Credit
Agreement in the maximum aggregate amount of $250,000,000 with
various lenders (the "Credit Agreement"). The Credit Agreement
provides for a $170,000,000 revolving loan commitment and an
$80,000,000 term loan. Following are the material components of
the application of the proceeds of the Credit Agreement which
were drawn on March 31, 2000 (the total amount drawn was
approximately $175.5 million): (i) approximately $15.0 million
was used to pay indebtedness of Mega; (ii) approximately
$96.2 million was paid to the shareholders of Mega and to NDC,
Inc.; (iii) approximately $63.0 million was used to retire long-
term indebtedness of the Company; and (iv) the remaining
approximately $1.3 million was used to pay other expenses,
primarily transaction costs. On April 4, 2000 the Company
entered into a five-year interest rate swap agreement under which
the Company pays a fixed rate of 7.32% and receives a floating
LIBOR rate. The effect of the rate swap agreement is to fix the
rate on $60,0000,000 of borrowings.
Also, on February 2, 2000, the Company consummated the
acquisition of substantially all of the assets of Ultra Mart,
Inc. ("Ultra"), an operator of seven retail grocery stores, for a
purchase price of approximately $37.7 million.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROUNDY'S, INC.
(Registrant)
Date: April 28, 2000 ROBERT D. RANUS
---------------
Robert D. Ranus
Vice President and
Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ROUNDY'S,
INC. FORM 10-Q FOR THE QUARTER ENDING APRIL 1, 2000 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-END> APR-01-2000
<CASH> 36,180,400
<SECURITIES> 0
<RECEIVABLES> 91,715,000
<ALLOWANCES> 0
<INVENTORY> 197,364,800
<CURRENT-ASSETS> 339,633,300
<PP&E> 297,637,500
<DEPRECIATION> 5,180,300
<TOTAL-ASSETS> 662,037,300
<CURRENT-LIABILITIES> 279,851,100
<BONDS> 207,935,700
0
0
<COMMON> 1,394,300
<OTHER-SE> 130,548,700
<TOTAL-LIABILITY-AND-EQUITY> 662,037,300
<SALES> 672,420,900
<TOTAL-REVENUES> 674,398,700
<CGS> 600,634,300
<TOTAL-COSTS> 600,634,300
<OTHER-EXPENSES> 61,829,000
<LOSS-PROVISION> (110,200)
<INTEREST-EXPENSE> 2,104,600
<INCOME-PRETAX> 9,941,000
<INCOME-TAX> 4,051,000
<INCOME-CONTINUING> 5,890,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,890,000
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
