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 September 30, 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
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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
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(Address of principal executive offices) (Zip Code)
(262) 953-7999
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(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 September 30, 2000
----------------------------- ---------------------------------
Common Stock, $1.25 par value
Class A (Voting) 9,800 Shares
Class B (Non-voting) 1,017,425 Shares
<PAGE>
ROUNDY'S, INC.
INDEX
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Page No.
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PART I. Financial Information:
Condensed Consolidated Balance Sheets - 3
September 30, 2000 and January 1, 2000
Condensed Statements of Consolidated Earnings - 4
Thirteen Weeks and Thirty-nine Weeks Ended
September 30, 2000 and October 2, 1999
Condensed Statements of Consolidated Cash Flows - 5
Thirty-nine Weeks Ended September 30, 2000
and October 2, 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
SIGNATURE 12
<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------
ROUNDY'S, INC. AND SUBSIDIARIES
===============================
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2000 and January 1, 2000
(UNAUDITED)
September 30,2000 January 1,2000
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents........... $ 34,288,600 $ 68,385,800
Notes and accounts receivable, less
allowance for losses of $5,392,900
and $5,509,800, respectively...... 88,686,600 87,659,000
Merchandise inventories............. 203,100,600 166,514,000
Prepaid expenses.................... 5,428,600 5,362,000
Future income tax benefits.......... 9,031,800 8,026,800
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Total Current Assets............ 340,536,200 335,947,600
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OTHER ASSETS:
Notes receivable, less allowance for
losses of $7,137,000................ 4,421,100 10,650,600
Goodwill and other assets........... 116,930,700 9,532,000
Other real estate................... 6,227,000 5,705,000
Deferred income tax benefit......... 3,782,000 3,782,000
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Total Other Assets................ 131,360,800 29,669,600
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PROPERTY AND EQUIPMENT - Net.......... 189,516,600 131,707,500
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$661,413,600 $497,324,700
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<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 7,834,500 $ 24,734,500
Accounts payable.................... 198,587,000 174,893,000
Accrued expenses.................... 75,505,100 62,981,000
Income taxes........................ 14,142,700 5,402,600
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Total Current Liabilities......... 296,069,300 268,011,100
LONG-TERM DEBT,LESS CURRENT MATURITIES 179,811,500 48,563,600
OTHER LIABILITIES..................... 33,247,400 26,830,600
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Total Liabilities................. 509,128,200 343,405,300
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REDEEMABLE CLASS B COMMON STOCK....... 8,636,500 9,948,800
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STOCKHOLDERS' EQUITY:
Common Stock:
Voting (Class A).................. 12,300 15,000
Non-Voting (Class B).............. 1,370,700 1,356,600
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Total Common Stock.............. 1,383,000 1,371,600
Patronage dividends payable in common
stock............................... 3,078,000
Additional paid-in capital........... 39,591,100 36,305,800
Reinvested earnings.................. 121,002,300 104,346,400
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Total........................... 161,976,400 145,101,800
Less Treasury Stock, at cost......... 18,327,500 1,131,200
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Total Stockholders' Equity...... 143,648,900 143,970,600
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$661,413,600 $497,324,700
============ ============
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
<TABLE>
ROUNDY'S, INC. AND SUBSIDIARIES
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CONDENSED STATEMENTS OF CONSOLIDATED EARNINGS
FOR THE THIRTEEN WEEKS AND THIRTY-NINE WEEKS ENDED
September 30, 2000 AND October 2, 1999
(UNAUDITED)
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
September 30, 2000 October 2, 1999 September 30, 2000 October 2, 1999
------------------ --------------- ------------------ ---------------
<S> <C> <C> <C> <C>
REVENUES:
Net sales and service fees.. $ 754,362,700 $ 669,895,800 $2,189,614,000 $1,987,423,000
Other - net................. 780,900 882,600 3,287,400 3,231,800
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755,143,600 670,778,400 2,192,901,400 1,990,654,800
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COSTS AND EXPENSES:
Cost of sales............... 649,104,500 603,326,900 1,908,602,600 1,793,586,400
Operating and administrative 91,088,200 58,241,700 241,291,400 171,638,600
Interest.................... 3,325,800 1,630,100 10,969,500 4,892,600
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743,518,500 663,198,700 2,160,863,500 1,970,117,600
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EARNINGS BEFORE INCOME TAXES 11,625,100 7,579,700 32,037,900 20,537,200
PROVISION FOR INCOME TAXES.. 4,940,000 3,088,700 13,258,200 8,368,900
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NET EARNINGS................ $ 6,685,100 $ 4,491,000 $ 18,779,700 $ 12,168,300
============= ============= ============== ==============
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
ROUNDY'S, INC. AND SUBSIDIARIES
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CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 2000 AND OCTOBER 2, 1999
(UNAUDITED)
<CAPTION>
Thirty-nine Weeks Ended
September 30, 2000 October 2, 1999
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<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings.................................... $ 18,779,700 $ 12,168,300
Adjustments to reconcile net earnings to net
cash flows provided by operating activities:
Depreciation and amortization................... 21,585,100 13,832,700
(Decrease)increase in allowance for losses...... (48,300) 1,190,500
(Gain)loss on sale of assets.................... (949,400) 513,600
(Increase)decrease in operating assets, net of
the effect of acquisitions and disposition:
Accounts receivable............................. 6,120,700 (8,284,100)
Merchandise inventories......................... (4,819,900) (11,833,900)
Prepaid expenses................................ 1,626,900 1,889,500
Future income tax benefits...................... (1,005,000)
Other real estate............................... (522,000) 236,400
Other assets.................................... (2,158,300) (196,100)
Increase(decrease)in operating liabilities, net
of the effect of acquisitions and disposition:
Accounts payable................................ 1,935,000 20,291,900
Accrued expenses................................ 5,108,900 9,160,300
Income taxes.................................... 3,777,100 774,900
Other liabilities............................... 1,232,400 6,688,100
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Net cash flows provided by operating activities... 50,662,900 46,432,100
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Cash Flows From Investing Activities:
Capital expenditures............................ (23,358,800) (22,433,000)
Proceeds from sale of property and
Equipment and other productive assets......... 4,775,800 1,182,400
Payment for business acquisitions net of
cash acquired................................. (129,528,100) (6,682,500)
Decrease(increase) in notes receivable.......... 6,229,500 (2,204,000)
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Net cash flows used in investing activities....... (141,881,600) (30,137,100)
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<PAGE>
Cash Flows From Financing Activities:
Proceeds from long-term borrowing............... 176,800,400
Reductions in debt.............................. (116,461,500) (1,223,000)
Proceeds from sale of common stock.............. 1,106,400 1,637,100
Common stock purchased.......................... (4,323,800) (3,048,300)
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Net cash flows provided by (used in) financing
Activities...................................... 57,121,500 (2,634,200)
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Net (Decrease)Increase in cash and cash
Equivalents..................................... (34,097,200) 13,660,800
Cash and cash equivalents, beginning of period.... 68,385,800 72,094,500
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Cash and cash equivalents, end of period.......... $ 34,288,600 $ 85,755,300
=============== ===============
Cash paid during period: - Interest $ 8,962,500 $ 3,865,100
- Income Taxes 9,672,400 7,684,300
Liabilities assumed in business acquisition 49,987,200
<FN>
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1) In the opinion of the Company, the accompanying condensed consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) necessary to present fairly the consolidated
financial position as of September 30, 2000 and January 1, 2000, and
the consolidated results of operations for the thirteen and thirty-nine
weeks ended September 30, 2000 and October 2, 1999 and changes in
consolidated cash flows for the thirty-nine weeks ended September 30,
2000 and October 2, 1999.
2) The consolidated results of operations for the thirteen and thirty-nine
weeks ended September 30, 2000 and October 2, 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 September 30, 2000 and January 1, 2000,
66,460 and 76,559 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.
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 condensed 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
were included in the condensed 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.
<PAGE>
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:
Thirty-Nine Weeks Ended
September 30, 2000 October 2, 1999
------------------ ---------------
Net sales and service fees $2,237,230,400 $2,121,483,400
Net earnings 17,868,500 8,760,300
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
($127,089,300 at September 30, 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.
<PAGE>
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.
<TABLE>
<CAPTION>
For the thirteen weeks ended For the thirty-nine weeks ended
September 30, 2000 October 2, 1999 September 30, 2000 October 2, 1999
------------------ --------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Net Sales
Wholesale $ 661,494,300 $640,166,800 $1,973,407,000 $1,908,220,300
Retail 260,759,600 83,830,200 625,805,600 235,490,200
Eliminations (167,891,200) (54,101,200) (409,598,600) (156,287,500)
-------------- ------------- --------------- ---------------
Total $ 754,362,700 $669,895,800 $2,189,614,000 $1,987,423,000
============== ============= =============== ===============
Gross Profit
Wholesale $ 51,699,800 $ 49,118,300 $ 152,206,200 $ 144,961,200
Retail 56,327,900 18,193,500 135,291,300 51,161,200
Eliminations (2,769,500) (742,900) (6,486,100) (2,285,800)
-------------- ------------- --------------- ---------------
Total $ 105,258,200 $ 66,568,900 $ 281,011,400 $ 193,836,600
============== ============= =============== ===============
</TABLE>
September 30, 2000 January 1, 2000
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Identifiable Assets
Wholesale $ 310,035,600 $319,419,500
Retail 280,907,600 62,525,700
Corporate 70,470,400 115,379,500
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Total $ 661,413,600 $497,324,700
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
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 condensed
statements of consolidated earnings.
A summary of the period to period changes in the principal items included
in the condensed statements of consolidated earnings is shown below:
Comparison of
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13 Weeks Ended September 30, 39 Weeks Ended September 30,
2000 and October 2, 1999 2000 and October 2, 1999
Increase/<Decrease> Increase/<Decrease>
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Net sales and service fees $84,466,900 12.6% $202,191,000 10.2%
Cost of sales 45,777,600 7.6% 115,016,200 6.4%
Operating and admin.
expenses 32,846,500 56.4% 69,652,800 40.6%
Interest expense 1,695,700 104.0% 6,076,900 124.2%
Earnings before income taxes 4,045,400 53.4% 11,500,700 56.0%
Net sales and service fees increased approximately $84.5 million during the
third quarter of 2000 as compared to the third quarter of 1999. The loss of
wholesale customers resulted in a decrease of approximately $17.2 million.
The closing or sale of three Company-owned stores resulted in a decrease of
approximately $5.7 million. New Company-owned stores resulted in an
increase of approximately $179.4 million. The increase in inter-segment
revenues (eliminations) resulted in a decrease of approximately $113.8
million. Sales by existing Company-owned stores increased $3.2 million.
Sales to new and existing wholesale customers increased $38.6 million.
Net sales and service fees increased approximately $202.2 million during
the first three quarters of 2000 as compared to the first three quarters of
1999. The loss of wholesale customers resulted in a decrease of
approximately $44.3 million. The closing or sale of four Company-owned
stores resulted in a decrease of approximately $16.0 million. New Company-
owned stores resulted in an increase of approximately $402.2 million. The
increase in inter-segment revenues (eliminations) resulted in a decrease of
approximately $253.3 million. Sales by existing Company-owned stores
increased $4.1 million. Sales to new and existing wholesale customers
increased $109.5 million.
Cost of sales approximated 86.0% and 90.1% of net sales and service fees
for the thirteen weeks ended September 30, 2000 and October 2, 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 92.2% and 92.3% of wholesale net sales and
service fees for the thirteen weeks ended September 30, 2000 and October 2,
1999, respectively. Cost of sales for the retail segment approximated
78.4% and 78.3% of retail net sales and service fees for the thirteen weeks
ended September 30, 2000 and October 2, 1999, respectively.
<PAGE>
Year-to-date cost of sales approximated 87.2% and 90.2% of net sales and
service fees for the thirty-nine weeks ended September 30, 2000 and October
2, 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 92.3% and 92.4% of wholesale net
sales and service fees for the thirty-nine weeks ended September 30, 2000
and October 2, 1999, respectively. Cost of sales for the retail segment
approximated 78.4% and 78.3% of retail net sales and service fees for the
thirty-nine weeks ended September 30, 2000 and October 2, 1999, respectively.
Operating and administrative expenses approximated 12.1% and 8.7% of net
sales and service fees for the thirteen weeks ended September 30, 2000 and
October 2, 1999, respectively. Year-to-date operating and administrative
expenses approximated 11.0% and 8.6% of net sales and service fees for the
thirty-nine weeks ended September 30, 2000 and October 2, 1999, respectively.
This higher expense percentage is primarily due to the higher concentration
of retail store business.
Interest expense increased primarily as a result of higher borrowing levels
and partially due to a $763,900 prepayment penalty for the early
extinguishment of long-term debt that was paid.
No patronage dividends have been accrued as of September 30, 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 rates used for calculating the provision for income taxes
for the interim periods were 41.4% and 40.7% in 2000 and 1999, respectively.
Liquidity and Capital Resources
-------------------------------
The Company's current ratio decreased slightly from 1.25:1 at year-end to
1.15:1 at September 30, 2000. The consolidated long-term debt to equity
ratio has increased from 0.32:1 at January 1, 2000 to 1.18:1 at September
30, 2000, partially due to decreased equity levels (created by an
additional $17.2 million in treasury stock) and partially due to a $131.2
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 $1.6 million due to an additional $17.2 million in treasury
stock and common stock purchases of $4.3 million offset by reinvested
earnings of $18.8 million and proceeds from the sale of common stock of
$1.1 million.
<PAGE>
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 for
the thirteen weeks ended September 30, 2000. 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 $60,000,000 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.
<PAGE>
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: November 14, 2000 ROBERT D. RANUS
----------------- ---------------
Robert D. Ranus
Vice President and
Chief Financial Officer
(Principal Financial Officer)