<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
JULY 19, 1994
Date of Report
(Date of earliest event reported)
FLEMING COMPANIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
OKLAHOMA 1-8140 48-0222760
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
</TABLE>
6301 WATERFORD BOULEVARD, BOX 26647
OKLAHOMA CITY, OKLAHOMA 73126
(Address of Principal Executive Offices)
(405) 840-7200
Registrant's telephone number, including area code
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired:
HANIEL CORPORATION
Report of Independent Public Accountants.................... F-1
Consolidated Balance Sheets as of December 31, 1992 and 1993
and
June 30, 1994.............................................. F-2
Consolidated Statements of Income for the three years ended
December 31, 1993 and the six months ended June 30, 1993
and 1994................................................... F-3
Consolidated Statements of Stockholder's Equity for the
three years ended December 31, 1993 and the six months
ended June 30, 1994........................................ F-4
Consolidated Statements of Cash Flows for the three years
ended December 31, 1993 and the six months ended June 30,
1993 and 1994.............................................. F-5
Notes to Consolidated Financial Statements.................. F-6
(b) Pro forma financial information:
FLEMING AND HANIEL COMBINED
Pro Forma Financial Information -- Introduction............. F-17
Pro Forma Statements of Operations -- Interim period ended
1994 and fiscal year ended 1993............................ F-18
Notes to Pro Forma Statements of Operations................. F-19
Pro Forma Balance Sheet..................................... F-20
Notes to Pro Forma Balance Sheet............................ F-21
1
<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 hereunto duly authorized.
FLEMING COMPANIES, INC.
By: /s/ DONALD N. EYLER
-----------------------------------
Donald N. Eyler
SENIOR VICE PRESIDENT -- CONTROLLER
Date: September 2, 1994
2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Haniel Corporation:
We have audited the accompanying consolidated balance sheets of Haniel
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1992
and 1993, and the related consolidated statements of income, stockholder's
equity and cash flows for each of the three years in the period ended December
31, 1993. 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, the financial statements referred to above present fairly,
in all material respects, the financial position of Haniel Corporation and
subsidiaries as of December 31, 1992 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
As discussed in Note 6 to the financial statements, the Company changed its
method of accounting for income taxes in 1993 and restated prior year financial
statements to reflect the change. In addition, as discussed in Note 5 to the
financial statements, the Company changed its method of accounting for
postretirement benefits other than pensions, effective January 1, 1993.
ARTHUR ANDERSEN & CO.
Oklahoma City, Oklahoma,
March 11, 1994
F-1
<PAGE>
HANIEL CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------ JUNE 30,
1992 1993 1994
-------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash....................................... $ 2,703,700 $ 3,252,760 $ 2,461,225
Receivables-
Accounts receivable...................... 147,241,595 154,674,250 148,704,447
Notes receivable......................... 44,092,855 53,877,158 71,630,512
Less-Allowance for doubtful accounts..... (18,208,359) (18,160,262) (22,497,023)
-------------- -------------- --------------
173,126,091 190,391,146 197,837,936
Inventories................................ 441,534,444 415,560,007 372,250,362
Other current assets....................... 22,193,935 16,780,520 12,147,871
-------------- -------------- --------------
Total current assets................... 639,558,170 625,984,433 584,697,394
-------------- -------------- --------------
Direct financing leases, net of current
portion..................................... 2,604,875 2,280,345 2,110,575
Investments.................................. 1,897,725 1,805,165 1,503,210
Property and equipment, at cost
Land and buildings......................... 212,322,536 223,064,269 229,324,212
Furniture, fixtures and equipment.......... 200,407,415 225,683,911 237,002,425
Transportation equipment................... 83,047,275 85,122,869 83,906,755
Leasehold improvements..................... 56,589,307 64,903,194 64,589,031
-------------- -------------- --------------
552,366,533 598,774,243 614,822,423
Less-Accumulated depreciation and
amortization.............................. (218,254,460) (263,480,135) (282,075,739)
-------------- -------------- --------------
334,112,073 335,294,108 332,746,684
Intangible assets............................ 393,343,279 388,586,106 381,788,061
Other assets................................. 15,030,473 17,964,971 14,538,180
-------------- -------------- --------------
408,373,752 406,551,077 396,326,241
-------------- -------------- --------------
Total Assets........................... $1,386,546,595 $1,371,915,128 $1,317,384,104
-------------- -------------- --------------
-------------- -------------- --------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable........................... $ 253,759,183 $ 276,628,540 $ 235,885,834
Current portion of long-term debt and
capitalized lease obligations............. 32,862,051 20,048,742 15,821,059
Other current liabilities.................. 118,959,028 121,553,230 135,458,771
-------------- -------------- --------------
Total current liabilities.............. 405,580,262 418,230,512 387,165,664
-------------- -------------- --------------
Long-term debt, net of current portion....... 682,300,947 638,043,771 600,859,660
Capitalized lease obligations, net of current
portion..................................... 5,691,370 3,774,524 3,381,862
Deferred income taxes........................ 49,108,353 42,582,700 42,582,700
Other liabilities............................ 2,173,014 2,374,286 3,096,186
Commitments and Contingencies
Stockholder's Equity:
Common stock, par value $100 per share,
500,000 shares authorized, issued and
outstanding............................... 50,000,000 50,000,000 50,000,000
Additional paid-in capital................. 12,026,436 12,026,436 12,026,436
Retained earnings.......................... 179,666,213 204,882,899 218,271,596
-------------- -------------- --------------
241,692,649 266,909,335 280,298,032
-------------- -------------- --------------
Total Liabilities and Stockholder's
Equity................................ $1,386,546,595 $1,371,915,128 $1,317,384,104
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-2
<PAGE>
HANIEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------------------------- ----------------------------------
1991 1992 1993 1993 1994
---------------- ---------------- ---------------- ---------------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.................... $ 5,606,198,504 $ 5,684,888,683 $ 6,016,975,280 $ 3,237,938,862 $ 3,224,344,635
Costs and expenses:
Cost of goods sold......... 4,835,078,213 4,892,604,182 5,167,570,482 2,784,290,579 2,762,698,270
Selling, operating and
administrative expenses... 661,332,632 686,954,018 752,430,781 400,719,857 411,094,534
Interest:
Interest income............ 6,191,346 6,100,801 6,079,193 3,229,956 3,746,665
Interest expense........... (71,520,472) (62,022,838) (56,297,924) (31,150,028) (27,569,099)
---------------- ---------------- ---------------- ---------------- ----------------
Income before income taxes... 44,458,533 49,408,446 46,755,286 25,008,354 26,729,397
Provision for income taxes... 22,890,300 24,490,563 21,538,600 12,337,514 13,340,700
---------------- ---------------- ---------------- ---------------- ----------------
Net income............... $ 21,568,233 $ 24,917,883 $ 25,216,686 $ 12,670,840 $ 13,388,697
---------------- ---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ---------------- ----------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
HANIEL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------ PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1990............ 500,000 $ 50,000,000 $ 6,000,000 $ 131,669,709 $ 187,669,709
Cumulative effect of accounting
change (Note 6).................... -- -- -- 1,510,388 1,510,388
--------- ------------- -------------- -------------- --------------
Balance, December 31, 1990, as
restated............................. 500,000 50,000,000 6,000,000 133,180,097 189,180,097
Net income.......................... -- -- -- 21,568,233 21,568,233
--------- ------------- -------------- -------------- --------------
Balance, December 31, 1991............ 500,000 50,000,000 6,000,000 154,748,330 210,748,330
Net income.......................... -- -- -- 24,917,883 24,917,883
Capital contribution (Note 2)....... -- -- 6,026,436 -- 6,026,436
--------- ------------- -------------- -------------- --------------
Balance, December 31, 1992............ 500,000 50,000,000 12,026,436 179,666,213 241,692,649
Net Income.......................... -- -- -- 25,216,686 25,216,686
--------- ------------- -------------- -------------- --------------
Balance, December 31, 1993............ 500,000 50,000,000 12,026,436 204,882,899 266,909,335
Net income (unaudited).............. -- -- -- 13,388,697 13,388,697
--------- ------------- -------------- -------------- --------------
Balance, June 30, 1994
(unaudited)......................... 500,000 $ 50,000,000 $ 12,026,436 $ 218,271,596 $ 280,298,032
--------- ------------- -------------- -------------- --------------
--------- ------------- -------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
HANIEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------------- ----------------------------
1991 1992 1993 1993 1994
-------------- ------------- -------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................... $ 21,568,233 $ 24,917,883 $ 25,216,686 $ 12,670,840 $ 13,388,697
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment....................................... 46,306,580 46,152,193 50,255,461 26,768,610 26,680,948
Amortization of excess purchase price............ 9,156,576 9,253,793 9,930,338 5,412,126 5,352,524
Amortization of other noncurrent assets.......... 3,613,324 3,482,314 5,003,846 2,428,285 3,066,140
Deferred items................................... (688,696) 2,027,741 (6,324,381) 2,459,212 721,900
Changes in assets and liabilities:
Increase in receivables........................ (575,334) (17,682,429) (17,296,491) (31,660,300) (7,446,790)
Decrease (increase) in inventories............. (33,536,329) (261,128) 25,974,437 18,791,065 43,309,645
Decrease (increase) in other current assets.... 16,932,007 (2,551,500) 5,413,415 (2,520,416) 4,632,649
Increase (decrease) in accounts payable........ 77,406,313 (35,568,099) 22,869,357 (19,043,230) (40,742,706)
Increase (decrease) in other current
liabilities................................... (6,807,629) (7,359,969) 2,594,202 3,450,087 13,905,541
-------------- ------------- -------------- ------------- -------------
Net cash provided by operating activities.... 133,375,045 22,410,799 123,636,870 18,756,279 62,868,548
-------------- ------------- -------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Changes in long-term investments................... (437,990) 285,414 92,560 48,007 301,955
Proceeds from sale of property and equipment,
net............................................... 24,919,819 3,162,820 3,572,706 396,825 608,104
Capital expenditures............................... (49,333,751) (41,717,059) (55,010,202) (31,483,633) (24,741,628)
Reductions of (additions to) intangible and other
assets............................................ (1,654,937) (11,977,364) (13,111,509) (7,911,559) 1,806,172
-------------- ------------- -------------- ------------- -------------
Net cash used in investing activities........ $ (26,506,859) $ (50,246,189) $ (64,456,445) $ (38,950,360) $ (22,025,397)
-------------- ------------- -------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in direct financing leases................ $ 437,397 $ 449,513 $ 355,966 $ 188,912 $ 169,770
Repayments of capital lease obligations............ (849,198) (748,314) (1,916,846) (1,620,481) (392,662)
Changes in long-term debt.......................... (107,526,535) 22,371,304 (57,070,485) 23,337,259 (41,411,794
Capital contribution............................... -- 6,026,436 -- -- --
-------------- ------------- -------------- ------------- -------------
Net cash effect of financing activities...... (107,938,336) 28,098,939 (58,631,365) 21,905,690 (41,634,686)
-------------- ------------- -------------- ------------- -------------
Net increase (decrease) in cash.............. (1,070,150) 263,549 549,060 1,711,609 (791,535)
Cash at beginning of period.......................... 3,510,301 2,440,151 2,703,700 2,703,700 3,252,760
-------------- ------------- -------------- ------------- -------------
Cash at end of period................................ $ 2,440,151 $ 2,703,700 $ 3,252,760 $ 4,415,309 $ 2,461,225
-------------- ------------- -------------- ------------- -------------
-------------- ------------- -------------- ------------- -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for-
Interest (net of amounts capitalized)............ $ 70,347,000 $ 59,745,000 $ 58,916,000 $ 32,334,000 $ 26,213,000
Income taxes..................................... 20,243,000 26,523,000 22,537,000 10,887,000 7,865,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
HANIEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1993 AND 1994 IS UNAUDITED)
1. ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
Haniel Corporation is a United States subsidiary of Franz Haniel & Cie. GmbH
("Franz Haniel"). Haniel Corporation's principal operations consist of holding
investments in the companies described below. The consolidated financial
statements include the accounts of Haniel Corporation and its wholly owned
subsidiaries, Scrivner, Inc., Hanamerica Energy Corporation and their
subsidiaries, collectively referred to as (the "Company"). All significant
intercompany transactions and balances have been eliminated.
NOTES RECEIVABLE
Notes receivable amounts due beyond one year which total $33,324,000 at
December 31, 1992, $44,747,000 at December 31, 1993, and $55,078,000 at June 30,
1994, are included in current assets, primarily in anticipation of their sale to
banks. The majority of the notes receivable bear interest at prime plus 2% (8%
at December 31, 1993 and 9.25% at June 30, 1994) and are scheduled to mature
over the next five years and thereafter as follows: $16,552,508 in 1994;
$4,748,287 in 1995; $7,401,489 in 1996; $8,795,049 in 1997; $7,468,237 in 1998
and $26,664,942 thereafter.
INVENTORIES
As further discussed in Note 3, wholesale and retail grocery inventories are
priced at the lower of cost or market, with cost being determined by the
last-in, first-out (LIFO) method and the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Depreciation of property and equipment is computed primarily on the
straight-line method, based on the estimated useful lives of the assets as
follows:
<TABLE>
<CAPTION>
USEFUL
LIFE IN
YEARS
----------
<S> <C>
Buildings............................................................... 4 - 45
Furniture, fixtures and equipment....................................... 2 - 15
Transportation equipment................................................ 2 - 7
</TABLE>
Leasehold improvements are amortized over the shorter of their useful lives
or terms of their leases.
INTANGIBLE ASSETS
At December 31, 1992 and 1993 and June 30, 1994, unamortized intangible
assets attributable to excess purchase price over net assets acquired were
approximately $352,127,544, $342,502,204 and $337,373,805, respectively, which
are being amortized on a straight-line basis over 10 to 40 years. The remaining
amounts of $41,215,735, $46,083,902 and $44,414,256 as of December 31, 1992 and
1993 and June 30, 1994, respectively, consist of other acquired intangible
assets which are being amortized over 3 to 40 years. Accumulated amortization of
intangible assets was $45,635,636, $57,996,557 and $65,749,961 at December 31,
1992 and 1993 and June 30, 1994, respectively.
INCOME TAXES
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," in 1993 and elected to restate its prior
years' financial statements as discussed in Note 6. Deferred income taxes
reflect the estimated future tax effects of differences between financial
statement and tax bases of assets and liabilities at each year-end.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The methods and assumptions used to estimate the fair value of significant
financial instruments are discussed in the various footnotes.
F-6
<PAGE>
HANIEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1993 AND 1994 IS UNAUDITED)
1. ACCOUNTING POLICIES: (CONTINUED)
POSTEMPLOYMENT BENEFITS
In November 1992, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 112, "Employers' Accounting for Postemployment Benefits." The Company
will adopt SFAS No. 112 in 1994. The annual postemployment benefit expense
computed in accordance with the new standard will not have a material effect on
the Company's financial position or future results of operations.
INSURANCE
The Company self-insures the first $125,000 of medical coverage provided
certain of its employees, the physical damage coverage on its transportation
equipment and the first $350,000 of its workers compensation, general, and auto
liability coverage.
A provision for self-insured claims is recorded when sufficient information
is available to reasonably estimate the amount of the loss.
CAPITALIZATION OF INTEREST
Interest attributed to funds used to finance major capital expenditures is
capitalized as an additional cost of the related assets. Capitalization of
interest ceases when the related assets are substantially complete and ready for
their intended use.
2. POOLING OF INTERESTS:
Effective June 6, 1992, all of the outstanding stock of Food Holdings, Inc.
was acquired by Franz Haniel for $8,084,046 and contributed to the Company. The
purchase price over the net tangible assets was $6,026,436. Food Holdings'
primary asset is its 50% common stock interest in Gateway Foods, Inc. through a
holding company in which Scrivner holds the remaining 50% common stock interest.
The contribution of Food Holdings' common stock has been accounted for as a
pooling of interests and, accordingly, the financial statements have been
restated to include the accounts and operations of Food Holdings for all periods
beginning September 1989, the date Scrivner and Food Holdings acquired Gateway
Foods.
3. INVENTORIES:
All inventories are valued at the lower of cost or market. Costs are
determined through use of the LIFO and FIFO methods as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1992 1993 1994
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
LIFO................................................. $ 406,139 $ 399,657 $ 360,493
FIFO................................................. 35,395 15,903 11,757
--------- --------- -----------
$ 441,534 $ 415,560 $ 372,250
--------- --------- -----------
--------- --------- -----------
</TABLE>
Inventories on a FIFO basis would have been stated higher by approximately
$53,781,530 at December 31, 1992, $55,028,898 at December 31, 1993 and
$55,232,785 at June 30, 1994. Accordingly, reported net income would have
increased by approximately $356,000 and $121,000 for the six months ended June
30, 1993 and 1994, respectively, and by approximately $757,000 and $662,000 for
the years ended December 31, 1992 and 1993, respectively.
F-7
<PAGE>
HANIEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1993 AND 1994 IS UNAUDITED)
4. DEBT OBLIGATIONS:
NOTES PAYABLE
The Company has informal agreements with various banks from which it may
borrow up to $385,000,000 (subject to formal approval by the banks).
LONG-TERM DEBT
Long-term debt at December 31, 1992 and 1993 and June 30, 1994, consisted of
the following (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1992 1993 1994
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Unsecured notes, at rates approximating prime rate
minus 2%, to 12% due through various dates to
2003................................................ $ 5,298 $ 3,594 $ 2,951
Real estate mortgage notes, at fixed rates ranging
from 4% to 10.5% and variable rates at 60% of prime
rate, due serially through various dates to 2003.... 10,078 9,758 6,248
Amounts covered under revolving credit agreements.... 283,000 237,000 199,750
Amounts payable under Senior Term Notes.............. 166,000 157,000 157,000
Amounts payable under Senior Subordinated Notes...... 150,000 150,000 150,000
Amounts payable under Senior Notes................... 50,000 50,000 50,000
Amounts payable under Subordinated Notes............. 50,000 50,000 50,000
Other................................................ 39 39 39
--------- --------- -----------
714,415 657,391 615,988
Less-Current portion................................. 32,114 19,347 15,129
--------- --------- -----------
Long-term debt, net of current portion............. $ 682,301 $ 638,044 $ 600,859
--------- --------- -----------
--------- --------- -----------
</TABLE>
Scrivner's $180,000,000 revolving credit agreement and Gateway Foods'
$150,000,000 revolving credit agreement and $65,000,000 Senior Term loan were
refinanced with a five-year $430,000,000 revolving credit agreement dated
November 19, 1993.
Under terms of its revolving credit agreement, the Company may borrow up to
the lower of $430,000,000 or a Borrowing Base amount equal to a percentage of
the Company's eligible receivables and inventories, as defined in the agreement,
through November 19, 1998, at principally the prime interest rate, adjusted
certificate of deposit rate or a rate based on the Eurodollar London Interbank
interest rate ("LIBOR"). The Company is required to pay fees of 3/8 of 1% per
annum on the unborrowed portion. There are no requirements for maintaining
compensating balances. At December 31, 1992 and 1993 and June 30, 1994, the
Company had borrowings covered under its revolving credit agreements of
$283,000,000, $237,000,000 and $199,750,000, respectively.
The Company's $157,000,000 of Senior Term Notes at December 31, 1993 and
June 30, 1994 consist of $92,000,000 which bears interest at 10% and $65,000,000
which bears interest at 10.6%. The $92,000,000 Senior Term Note is payable in
annual installments of $8,000,000 in 1994 and $12,000,000 each year thereafter
through 2001. The $65,000,000 note is payable in annual installments of
$5,000,000 through 1996 and $10,000,000 each year thereafter through 2001.
The $150,000,000 Senior Subordinated Notes bear interest at 12.86%. The
notes are payable in annual installments of $30,000,000 beginning September 15,
1997 and each year thereafter through 2001.
F-8
<PAGE>
HANIEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1993 AND 1994 IS UNAUDITED)
4. DEBT OBLIGATIONS: (CONTINUED)
As of December 31, 1991, the Company had outstanding debt of $48,595,048 to
Franz Haniel and Haniel Finance B.V., a subsidiary of Franz Haniel. This debt
consisted of short-term borrowings bearing interest at various rates based on
LIBOR. In 1992, the weighted average interest rate on these borrowings was
approximately 4.85%. The Company incurred interest on its debt to Franz Haniel
and Haniel Finance B.V. of approximately $1,672,000 in 1992 and $3,463,000 in
1991.
In September 1992, Haniel borrowed $100,000,000 from two banks. The proceeds
of these loans were used to retire all notes payable to Haniel Finance B.V. and
Franz Haniel and Food Holdings' outstanding debt and accrued interest of
$43,020,841. The new debt consists of a $50,000,000 subordinated note payable
bearing interest at LIBOR plus 1 1/8% and $50,000,000 senior note payable
bearing interest at LIBOR plus 3/8 of 1%. The subordinated note matures in 1999
while the senior note matures in 1998. No principal payments are due until these
maturity dates.
The revolving credit agreement and the note agreements impose, among other
things, certain restrictions on the payment of cash dividends and provide that
neither the Company nor any subsidiary, without the consent of the holders of
the notes, shall (a) pledge any of its assets, except as provided in the loan
agreements, (b) enter into any merger or consolidation proceedings or dissolve,
sell, dispose of or lease all or substantially all of its assets or (c)
guarantee debt obligations of any other corporation or individual, except as
provided. Under the terms of these agreements, the Company has available
$5,000,000, plus 50% of net income recognized after December 31, 1993, for the
payment of cash dividends.
The real estate mortgage notes are collateralized by property and equipment
(primarily land, buildings and equipment) with a net book value of approximately
$9,238,000 and $8,617,000 at December 31, 1993 and June 30, 1994, respectively.
Payments on long-term debt as of December 31, 1993, for the next five years
are as follows (in thousands of dollars):
<TABLE>
<S> <C>
1994...................................................... $ 19,347
1995...................................................... 18,819
1996...................................................... 18,814
1997...................................................... 53,135
1998...................................................... 337,770
</TABLE>
At December 31, 1993 and June 30, 1994, the Company has interest rate cap
agreements on $170,000,000, which limit the interest rate the Company would pay
on its floating rate debt, from 7.5% to 11.5%.
The Company also enters into interest rate swap and forward rate agreements
in order to hedge the impact of future interest rate increases. At December 31,
1993 and June 30, 1994, the Company had an outstanding forward rate agreement of
$50,000,000, which matures in July 1994. There were no interest rate swap
agreements outstanding at December 31, 1993 or June 30, 1994. The differential
paid on the interest rate swap and forward rate agreements is recognized as
interest expense.
The fair value of long-term debt, interest rate cap and forward rate
agreements as of December 31, 1993, was determined using valuation techniques
that considered cash flows discounted at current market rates for similar types
of borrowing arrangements. At December 31, 1992 and 1993, the fair value of
debt, interest rate cap and forward rate agreements exceeded the carrying amount
by approximately $28,116,000 and $43,993,000, respectively.
F-9
<PAGE>
HANIEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1993 AND 1994 IS UNAUDITED)
5. BENEFIT PLANS:
The Company and its subsidiaries sponsor or contribute to various
contributory and noncontributory defined benefit pension plans and
noncontributory profit sharing plans. These plans provide for certain benefits
upon retirement or termination for all full-time employees not covered by
union-sponsored, collectively-bargained multiemployer pension plans. The Company
also has a nonqualified supplemental retirement plan for selected management
employees. Annual expense for the above-mentioned benefit plans is as follows
(in thousands of dollars):
<TABLE>
<CAPTION>
1991 1992 1993
--------- --------- ---------
<S> <C> <C> <C>
Pension and supplemental plans................................................... $ 676 $ 257 $ 215
Profit sharing plans............................................................. 6,333 7,097 7,053
Multiemployer plans.............................................................. 9,000 9,066 9,732
--------- --------- ---------
Total.......................................................................... $ 16,009 $ 16,420 $ 17,000
--------- --------- ---------
--------- --------- ---------
</TABLE>
The pension plan benefits are based on years of service and a percentage of
the participant's compensation during years of employment. The Company makes
annual contributions to the plans that comply with the minimum funding
provisions of the Employee Retirement Income Security Act. Such contributions
are intended to provide not only for benefits attributed to service to date, but
also for those expected to be earned in the future.
The following table sets forth the Company's defined benefit pension and
supplemental plans' funded status and amounts recognized in the Company's
financial statements (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31, 1992 DECEMBER 31, 1993
-------------------------- --------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Actuarial present value of accumulated benefit
obligations:
Vested........................................ $ 13,507 $ 130 $ 15,025 $ --
Total......................................... 13,755 3,239 15,247 2,685
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Projected benefit obligations................... 14,646 3,025 16,469 2,557
Plan assets at fair value....................... 17,543 455 17,346 737
------------ ------------ ------------ ------------
Plan assets in excess of or (less than)
projected benefit obligations.................. 2,897 (2,570) 877 (1,820)
Unrecognized net loss (gain).................... 235 127 2,031 (355)
Unrecognized prior service cost................. (52) 1,622 (47) 1,497
Unrecognized net asset.......................... (2,013) -- (1,738) --
------------ ------------ ------------ ------------
Pension asset (liability)....................... $ 1,067 $ (821) $ 1,123 $ (678)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
1991 1992 1993
--------- --------- ---------
<S> <C> <C> <C>
Net pension expense included the following components:
Service cost-benefits earned during the year.......................... $ 1,160 $ 796 $ 605
Interest expense on projected benefit obligation...................... 1,738 1,378 1,499
Actual return on plan assets.......................................... (1,919) (353) (603)
Net amortization and deferral......................................... (303) (1,564) (1,286)
--------- --------- ---------
Net periodic pension expense............................................ $ 676 $ 257 $ 215
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-10
<PAGE>
HANIEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1993 AND 1994 IS UNAUDITED)
5. BENEFIT PLANS: (CONTINUED)
The weighted-average discount rates and rates of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligations at December 31, 1993, were 8.25% to 9% and 5%,
respectively. The expected long-term rates of return on assets at December 31,
1993, were 8.75% to 9%. The Company computes pension expense using the projected
unit credit actuarial cost method.
The profit sharing plans maintained by the Company are for employees who
meet certain types of employment and length of service requirements.
Contributions and costs of these profit sharing plans are determined at the
discretion of the Board of Directors. However, the contributions to the profit
sharing plans shall not exceed the maximum amount deductible for Federal income
tax purposes.
For union-sponsored, multiemployer plans, contributions are made in
accordance with negotiated contracts.
The Company provides certain health care and life insurance benefits to
eligible retired employees covered under various group plans. Benefits,
eligibility requirements and cost-sharing provisions for employees vary by group
plan and/or bargaining unit. Generally, the plans pay a stated percentage of
most medical expenses reduced for any deductible and payments made by government
programs and other group coverage. Several of the group plans require retiree
contributions and the majority of the group plan's eligibility for retiree
benefits are frozen. The Company does not pre-fund these benefits and has the
right to modify or terminate certain of these plans in the future.
The Company adopted SFAS No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" as of the beginning of 1993. This new standard
requires that the expected cost of these postretirement benefits must be charged
to expense during the years that the employees render service. The Company has
elected to amortize the unfunded obligations that were measured as of the
beginning of 1993, over a period of 20 years. The effect of this change in
accounting was to decrease 1993 pre-tax income by $378,000. Prior to 1993, the
Company recognized postretirement health care and life insurance costs in the
year that the benefits were paid. Postretirement health care and life insurance
costs charged to expense in 1991 and 1992 were $1,296,000 and $1,267,000,
respectively.
F-11
<PAGE>
HANIEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1993 AND 1994 IS UNAUDITED)
5. BENEFIT PLANS: (CONTINUED)
The following table reconciles the plans' funded status to the accrued
postretirement health care and life insurance cost liability as reflected on the
balance sheet as of December 31, 1993 (in thousands of dollars):
<TABLE>
<CAPTION>
1993
---------
<S> <C>
Accumulated postretirement benefit obligation:
Retirees.............................................................................................. $ (6,627)
Other fully eligible participants..................................................................... (350)
Other active participants............................................................................. (1,103)
---------
(8,080)
Unrecognized actuarial loss............................................................................. 553
Unrecognized transition obligation...................................................................... 7,149
---------
Accrued postretirement health care cost liability................................................... $ (378)
---------
---------
Net postretirement health care cost for 1993 included the following components:
Service cost -- benefits attributed to service during the period...................................... $ 80
Interest cost on accumulated postretirement benefit obligation........................................ 595
Amortization of transition obligation over 20 years................................................... 376
Net amortization and deferral......................................................................... --
---------
Net postretirement health cost...................................................................... $ 1,051
---------
---------
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 8.25%. A 12.5% annual rate of increase in the per capita cost of
covered health care benefits was assumed for 1993; the rate was assumed to
decrease gradually to 6% in year 2006 and remain at that level thereafter. A 1%
increase in the assumed health care cost trend rates would increase the
accumulated postretirement benefit obligation as of December 31, 1993 by
approximately $531,000, and the total of the service and interest cost
components of net postretirement health care cost for the year then ended by
approximately $72,000.
6. PROVISION FOR INCOME TAXES:
The Company adopted SFAS No. 109, "Accounting for Income Taxes," in 1993,
and has elected to apply the provisions retroactively beginning with its year
ended December 31, 1983. It was not practical to restate prior to 1983. SFAS No.
109 utilizes the liability method and deferred taxes are determined based on the
estimated future tax effects of differences between the financial statement and
tax bases of assets and liabilities given the provisions of the enacted tax
laws. Prior to the implementation of SFAS No. 109, the Company accounted for
income taxes using Accounting Principles Board Opinion No. 11.
As a result of this change, retained earnings at December 31, 1990,
increased by $1,510,000, the cumulative effect of the change in the method of
accounting for income taxes. The effect of adopting SFAS No. 109 was not
material to the Company's statements of income for the years ended 1991, 1992
and 1993, other than the valuation allowance adjustment discussed below.
The Company reduced its valuation allowance by $3,187,000 for the year ended
December 31, 1993, as a result of the recognition of certain net operating loss
carryforwards for financial reporting purposes. The Company's ability to obtain
future benefit of its net operating loss carryforwards is attributable to the
restructuring of subsidiaries implemented in 1993, as discussed in Note 2.
F-12
<PAGE>
HANIEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1993 AND 1994 IS UNAUDITED)
6. PROVISION FOR INCOME TAXES: (CONTINUED)
Provision for income taxes has been made as follows (in thousands of
dollars):
<TABLE>
<CAPTION>
1991 1992 1993
--------- --------- ---------
<S> <C> <C> <C>
Federal:
Current.............................................................. $ 16,957 $ 15,104 $ 16,086
Deferred............................................................. 1,650 4,703 3,190
--------- --------- ---------
18,607 19,807 19,276
State (current and deferred)........................................... 4,283 4,684 5,450
--------- --------- ---------
22,890 24,491 24,726
Benefit of operating loss carryforward................................. -- -- (3,187)
--------- --------- ---------
$ 22,890 $ 24,491 $ 21,539
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision for income taxes differs from an amount computed at the
statutory rate as follows (in thousands of dollars):
<TABLE>
<CAPTION>
1991 1992 1993
--------- --------- ---------
<S> <C> <C> <C>
Income taxes at statutory rate (35% in 1993, 34% in 1992 and 1991)..... $ 15,116 $ 16,799 $ 16,364
Amortization of excess purchase price.................................. 3,028 3,036 3,541
Benefit of operating loss carryforward................................. -- -- (3,187)
State income taxes, net of Federal benefit............................. 2,668 2,965 2,805
Other, net............................................................. 2,078 1,691 2,016
--------- --------- ---------
$ 22,890 $ 24,491 $ 21,539
--------- --------- ---------
--------- --------- ---------
</TABLE>
The 1% increase in the Federal statutory tax rate increased the Company's
1993 provision for income taxes $1,540,000. This consisted of a $468,000
increase in the current tax provision and a $1,072,000 increase in the deferred
tax provision as a result of adjusting the deferred tax asset and liability
accounts recorded in the Company's balance sheets.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The following table
includes $1,780,000 of net current deferred tax liabilities, which are included
in other current
F-13
<PAGE>
HANIEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1993 AND 1994 IS UNAUDITED)
6. PROVISION FOR INCOME TAXES: (CONTINUED)
liabilities at December 31, 1993 and $4,965,000 of net deferred tax assets,
included in other current assets at December 31, 1992, in the consolidated
balance sheets. The following is a summary of the significant components of the
Company's deferred tax assets and liabilities (in thousands of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1992 1993
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards, expiring 2003 to 2008................................... $ 15,566 $ 7,501
Provision for obligations and contingencies to be settled in future periods............... 22,524 20,394
Other..................................................................................... 3,114 6,765
--------- ---------
Total deferred tax assets............................................................... 41,204 34,660
--------- ---------
Deferred tax liabilities:
Depreciation and amortization............................................................. 56,441 56,947
Inventories............................................................................... 14,354 14,354
Other..................................................................................... 6,585 7,721
--------- ---------
Total deferred tax liabilities.......................................................... 77,380 79,022
--------- ---------
Deferred tax valuation allowance............................................................ 7,967 --
--------- ---------
Net deferred tax liability.............................................................. $ 44,143 $ 44,362
--------- ---------
--------- ---------
</TABLE>
7. LEASES:
The Company leases certain of its operating facilities under terms ranging
up to twenty-five years. In addition, the Company leases certain equipment used
in its operations under terms ranging up to ten years.
The Company also leases certain facilities which it in turn subleases to
some of its independent retail store operators. Some of these agreements contain
provisions calling for additional rentals based on sales. Amounts attributable
to capitalized subleases have been included in direct financing leases in the
accompanying balance sheets.
The following is a summary of property and equipment under leases that have
been capitalized and included in the accompanying balance sheets (in thousands
of dollars):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1992 1993
--------- ---------
<S> <C> <C>
Land and buildings................................................................. $ 5,224 $ 3,688
Less-Accumulated depreciation.................................................... (2,426) (2,170)
--------- ---------
Net property under capital leases.................................................. $ 2,798 $ 1,518
--------- ---------
--------- ---------
</TABLE>
F-14
<PAGE>
HANIEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1993 AND 1994 IS UNAUDITED)
7. LEASES: (CONTINUED)
The following represents the minimum lease payments remaining at December
31, 1993, under the capitalized leases and the minimum sublease rentals to be
received under the direct financing leases, covering certain facilities which
are sublet to retail customers (in thousands of dollars):
<TABLE>
<CAPTION>
TOTAL DIRECT
CAPITAL FINANCING
LEASES SUBLEASES NET
------------ ----------- ---------
<S> <C> <C> <C>
1994.......................................................................... $ 1,330 $ (593) $ 737
1995.......................................................................... 1,202 (535) 667
1996.......................................................................... 1,060 (482) 578
1997.......................................................................... 777 (360) 417
1998.......................................................................... 732 (350) 382
Later years................................................................... 3,294 (1,859) 1,435
------------ ----------- ---------
Total minimum lease payments.............................................. 8,395 (4,179) $ 4,216
---------
---------
Less-Executory costs........................................................ (360) --
Less-Imputed interest (6% to 13.37%)........................................ (3,558) 1,574
------------ -----------
Present value of minimum lease payments....................................... 4,477 (2,605)
Less-Current maturities..................................................... (702) 325
------------ -----------
Long-term obligations and receivables..................................... $ 3,775 $ (2,280)
------------ -----------
------------ -----------
</TABLE>
Total rental expense for all operating (noncapitalized) leases amounted to
(in thousands of dollars):
<TABLE>
<CAPTION>
LEASE RENTALS 1991 1992 1993
- - -------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Minimum............................................................. $ 63,947 $ 76,404 $ 84,133
Contingent.......................................................... 4,650 5,012 3,188
Less-Sublease income.............................................. (36,728) (39,344) (38,737)
---------- ---------- ----------
$ 31,869 $ 42,072 $ 48,584
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The future minimum lease commitments as of December 31, 1993, for all
noncancelable operating leases are as follows (in thousands of dollars):
<TABLE>
<CAPTION>
SUBLEASE
EXPENSE INCOME NET
---------- ----------- ----------
<S> <C> <C> <C>
1994.............................................................. $ 85,198 $ (35,897) $ 49,301
1995.............................................................. 81,229 (33,648) 47,581
1996.............................................................. 76,078 (28,004) 48,074
1997.............................................................. 69,798 (23,807) 45,991
1998.............................................................. 63,089 (17,638) 45,451
Later years....................................................... 505,346 (53,435) 451,911
---------- ----------- ----------
$ 880,738 $ (192,429) $ 688,309
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
Most of the real estate and retail store leases have renewal options of up
to twenty-five years.
8. COMMITMENTS AND CONTINGENCIES:
During the year ended December 31, 1992 and 1993 and the six months ended
June 30, 1994, the Company sold $40,591,000, $51,036,000 and $12,138,000,
respectively, of its notes receivable to banks at cost.
F-15
<PAGE>
HANIEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JUNE 30, 1993 AND 1994 IS UNAUDITED)
8. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
The Company is contingently liable, up to approximately $13,630,000 and
$12,620,764, for any future losses experienced by the banks in connection with
sold notes receivable at December 31, 1993 and June 30, 1994, respectively.
The Company has guaranteed the payment of notes and leases made by certain
retail store operators to various banks and lessors. These contingent
liabilities totaled approximately $3,301,000 and $4,160,000 at December 31, 1993
and June 30, 1994. The Company derives interest income as a guarantor of the
notes and leases.
The Internal Revenue Service (the "IRS") has examined the Company's Federal
income tax returns for the years 1983 through 1987, and has issued notices of
proposed tax deficiencies for those years. The Company has formally protested
the IRS proposed deficiencies, and the entire matter is now being reviewed by
the IRS Appeals Office. The significant issues have been tentatively agreed to
for settlement, subject to final approval by the IRS. The Company has accrued
reserves sufficient to provide for the proposed settlement amounts. The Company
believes that the ultimate resolution of these matters will not have a material
adverse effect on its financial position or future results of operations.
F-16
<PAGE>
PRO FORMA FINANCIAL INFORMATION -- INTRODUCTION
The unaudited PRO FORMA financial information set forth below presents the
PRO FORMA statement of operations of the Company for the 28 weeks ended July 9,
1994 as if the acquisition of Haniel ("Acquisition") and the financing thereof
and the offering of $500 million of debt that will be registered with the
Securities and Exchange Commission ("Offering") and the use of proceeds
therefrom had occurred on December 26, 1993 and the PRO FORMA statement of
operations of the Company for the year ended December 25, 1993 as if the
Acquisition and the financing thereof and the Offering and the use of proceeds
therefrom had occurred on December 27, 1992. Also presented is the PRO FORMA
balance sheet of the Company at July 9, 1994 as if the Acquisition and the
financing thereof and the Offering and the use of proceeds therefrom had
occurred on such date.
The unaudited PRO FORMA financial information has been prepared on the basis
of assumptions described in the notes thereto and includes assumptions relating
to the allocation of the consideration paid for the Scrivner Group to the
related assets and liabilities based on preliminary estimates of their
respective fair values. The actual allocation of such consideration may differ
from that reflected in the PRO FORMA financial statements after valuation and
other studies are completed. The Acquisition has been accounted for using the
purchase method of accounting.
The unaudited PRO FORMA financial information does not necessarily represent
what the Company's financial position and results of operation would have been
if the Acquisition and the financing thereof and the Offering and the use of
proceeds therefrom had actually been completed as of the dates indicated, and
are not intended to project the Company's financial position or results of
operations for any future period.
The unaudited PRO FORMA financial information should be read in conjunction
with the consolidated financial statements of Fleming and Haniel and the related
notes thereto.
F-17
<PAGE>
PRO FORMA STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
INTERIM PERIOD ENDED 1994(A)(B)
--------------------------------------------------
THE SCRIVNER
FLEMING GROUP ADJUSTMENTS PRO FORMA
------- -------------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales.............................................. $6,916 $3,224 $10,140
Costs and expenses:
Cost of sales(c)....................................... 6,477 2,762 $ 1(d) 9,240
Selling and administrative(c)...................... 346 411 1(d) 759
2(e)
(1)(f)
Interest expense................................... 38 28 36(g) 102
Interest income(h)................................. (28) (4) (32)
Equity investment results.......................... 6 -- 6
------- ------ --- ---------
Total costs and expenses............................... 6,839 3,197 39 10,075
------- ------ --- ---------
Earnings before taxes.................................. 77 27 (39) 65
Taxes on income........................................ 34 14 (17)(h) 31
------- ------ --- ---------
Net earnings........................................... $ 43 $ 13 $(22) $ 34
------- ------ --- ---------
------- ------ --- ---------
Net earnings per share................................. $ 1.16 -- -- $ .92
------- ---------
------- ---------
Weighted average shares outstanding.................... 37 -- -- 37
------- ---------
------- ---------
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 1993(A)(B)
--------------------------------------------------
THE SCRIVNER
FLEMING GROUP ADJUSTMENTS PRO FORMA
------- -------------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales.............................................. $13,092 $6,017 $19,109
Costs and expenses:
Cost of sales(c)....................................... 12,327 5,168 $ 2(d) 17,497
Selling and administrative(c)...................... 558 752 2(d) 1,314
4(e)
(2)(f)
Interest expense................................... 78 56 61(g) 195
Interest income(h)................................. 63 6 69
Equity investment results.......................... 12 -- 12
Facilities consolidation and restructuring......... 108 -- 108
------- ------ --- ---------
Total costs and expenses............................... 13,020 5,970 67 19,057
------- ------ --- ---------
Earnings before taxes.................................. 72 47 (67) 52
Taxes on income........................................ 35 22 (30)(h) 27
------- ------ --- ---------
Earnings before extraordinary item(i).................. $ 37 $ 25 $(37) $ 25
------- ------ --- ---------
------- ------ --- ---------
Net earnings per share................................. $ 1.02 -- -- $ .68
------- ---------
------- ---------
Weighted average shares outstanding.................... 37 -- -- 37
------- ---------
------- ---------
(FOOTNOTES ON FOLLOWING PAGE)
</TABLE>
F-18
<PAGE>
NOTES TO PRO FORMA STATEMENTS OF OPERATIONS
(a) PRO FORMA statements of operations for the interim period ended 1994 and
fiscal year ended 1993 have been prepared by combining the consolidated
statement of operations of Fleming for the 28 weeks ended July 9, 1994 and
year ended December 25, 1993 with the consolidated statement of operations
of the Scrivner Group for the six months ended June 30, 1994 and year ended
December 31, 1993, respectively, assuming the Acquisition occurred at the
beginning of the respective periods. The Acquisition has been accounted for
using the purchase method of accounting.
(b) No adjustments have been made to reflect any of the potential cost savings
that the Company may realize from the Acquisition, including those from
increased buying power, facilities consolidation and reduced corporate
overhead. Nor have any adjustments been made to reflect potential cost
savings from the Company's plan to consolidate additional facilities,
reorganize management and re-engineer operations.
(c) PRO FORMA statement of operations captions for cost of sales and selling and
administrative expense are affected by classification differences between
Fleming's and Haniel's consolidated financial statements. Certain costs and
expenses included in determining cost of sales for Fleming are classified as
selling, operating and administrative expenses in Haniel's consolidated
financial statements. Subsequent to the Acquisition, account classification
will be conformed to that used by Fleming.
(d) To depreciate the estimated increase in the fair value of property and
equipment acquired over the Scrivner Group's historical cost related to such
property and equipment. Such fair values are based on estimates made at the
time of the Acquisition. Appraisals have not yet been completed.
(e) To reflect the net adjustment resulting from (i) the elimination of the
Scrivner Group's goodwill amortization during the period, and (ii) the
amortization over forty years of the excess of cost over the fair value of
assets and liabilities acquired and assumed in the Acquisition. Such fair
values are based on estimates made at the time of the Acquisition.
Appraisals have not yet been completed.
(f) To eliminate the salaries of former Scrivner Group officers who are not
Company associates and whose functions have been assumed by Fleming
officers.
(g) To reflect the net adjustment for the interim 1994 period and fiscal year
ended 1993 for (i) the elimination of interest expense associated with
approximately $616 million aggregate principal amount of Scrivner Group
indebtedness that was refinanced in connection with the Acquisition ($26
million and $53 million, respectively); (ii) the elimination of interest
expense associated with approximately $400 million aggregate principal
amount of Fleming indebtedness that was refinanced at the time of the
Acquisition ($9 million and $19 million, respectively); (iii) the
elimination of interest expense associated with $48.5 million of Fleming
Medium-Term Notes, based on an assumption that one-half of the Medium-Term
Notes subject to an offer to purchase such Medium-Term Notes, which offer
expires on September 20, 1994, are tendered ($2 million and $6 million,
respectively); (iv) the addition of interest expense associated with
indebtedness outstanding under Tranche A (as defined) and Tranche C (as
defined) of the Credit Agreement, after taking into account the effect of
interest rate protection agreements the Company has entered into with
respect to $1 billion of such indebtedness ($48 million and $93 million,
respectively); and (v) the addition of interest expense associated with the
Notes, including the amortization of related deferred debt issuance costs (
$25 million and $46 million, respectively).
Each incremental 25 basis point increase or decrease in the assumed interest
rate of the Fixed Rate Notes and the Floating Rate Notes would increase or
decrease annual interest expense on the Fixed Rate Notes and the Floating
Rate Notes by $937,500 and $312,500, respectively.
(h) To provide for income taxes at an assumed effective rate of 47% for all
adjustments except those relating to goodwill amortization.
(i) In 1993, the Company realized an extraordinary after-tax loss of $2.3
million related to the early retirement of indebtedness.
F-19
<PAGE>
PRO FORMA BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
AS OF THE SECOND QUARTER END, 1994(A)
--------------------------------------------------
THE SCRIVNER
FLEMING GROUP ADJUSTMENTS PRO FORMA
------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS)
ASSETS
Current assets:
Cash and cash equivalents............................ $ 7 $ 2 $ $ 9
Receivables.......................................... 273 198 471
Inventories.......................................... 804 372 48(b) 1,223
(1)(c)
Other current assets................................. 98 12 110
------- ------ ----- ---------
Total current assets................................. 1,182 584 47 1,813
Investments and notes receivable....................... 344 -- 344
Investment in direct financing leases.................. 237 2 239
Property and equipment, net............................ 618 333 (2)(d) 968
(15)(c)
34(e)
Other assets........................................... 107 16 (9)(d) 134
(1)(c)
(18)(f)
39(g)
Goodwill and intangible assets......................... 462 382 (337)(f) 1,013
506(h)
------- ------ ----- ---------
Total assets........................................... $2,950 $1,317 $244 $ 4,511
------- ------ ----- ---------
------- ------ ----- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 706 $ 236 $ $ 942
Current maturities of long-term debt................. 43 15 5(i) 63
Current obligations under capital leases............. 14 1 15
Other current liabilities............................ 139 135 13(j) 362
12(d)
25(c)
38(g)
------- ------ ----- ---------
Total current liabilities.......................... 902 387 93 1,382
Long-term debt......................................... 507 601 454(i) 1,562
Long-term obligations under capital leases............. 350 3 353
Deferred income taxes.................................. 17 43 (40)(h) 20
Other liabilities...................................... 89 3 7(d) 109
10(c)
Shareholders' equity:
Common stock, $2.50 par value per share.............. 93 50 (50)(k) 93
Capital in excess of par value....................... 491 12 (12)(k) 491
Reinvested earnings.................................. 513 218 (218)(k) 513
------- ------ ----- ---------
1,097 280 (280) 1,097
Less guarantee of ESOP debt.......................... 12 -- 12
------- ------ ----- ---------
Total shareholders' equity......................... 1,085 280 (280) 1,085
------- ------ ----- ---------
Total liabilities and shareholders' equity............. $2,950 $1,317 $244 $ 4,511
------- ------ ----- ---------
------- ------ ----- ---------
(FOOTNOTES ON FOLLOWING PAGE)
</TABLE>
F-20
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA BALANCE SHEET
(a) The PRO FORMA balance sheet has been prepared by combining the consolidated
balance sheet of Fleming as of July 9, 1994 with the consolidated balance
sheet of the Scrivner Group as of June 30, 1994 using the purchase method of
accounting and assuming the Acquisition had occurred as of the end of the
second quarter.
(b) To reflect purchase accounting adjustments required to revalue inventory at
estimated fair value. Such fair value is based on an estimate made at the
time of the Acquisition. Appraisals have not yet been completed.
(c) To record provisions for the costs related to the closure of eight Scrivner
Group distribution facilities and to reduce the carrying value of related
assets to estimated net realizable values.
(d) To reflect purchase accounting adjustments required to record the fair value
of liabilities assumed and assets acquired in the Acquisition, except as
otherwise described herein. Such fair values are based on estimates made at
the time of the Acquisition. Appraisals have not yet been completed.
(e) To reflect purchase accounting adjustments required to revalue property and
equipment at estimated fair value. Such fair value is based on an estimate
made at the time of the Acquisition. Appraisals have not yet been completed.
(f) To eliminate Scrivner Group goodwill and other intangible assets of the
Scrivner Group with no continuing value.
(g) To record debt issuance costs, investment advisory fees and other
acquisition-related expenses.
(h) To record the impact on goodwill and deferred income taxes resulting from
the adjustments described in these notes.
(i) To record the net effect of the elimination of indebtedness of Fleming and
the Scrivner Group refinanced in connection with the Acquisition and the
financing thereof, borrowings under Tranche A and Tranche C of the Credit
Agreement and the issuance of the Notes. On August 16, 1994, the Company
made an offer to purchase up to $97 million aggregate principal amount of a
series of Medium-Term Notes in accordance with the terms of the indenture
under which they were issued. The offer is scheduled to expire on September
20, 1994. The Company intends to finance any such repurchase by drawing
additional amounts under Tranche A of the Credit Agreement. For purposes of
calculating PRO FORMA indebtedness, it is assumed that $48.5 million of such
series of Medium-Term Notes is tendered.
(j) To conform the accounting policies of the Scrivner Group to those of Fleming
with respect to (i) assumptions used to determine pension obligations; and
(ii) recognition of the transition obligation for postretirement medical
benefits.
(k) To eliminate Scrivner Group equity accounts.
F-21
