THE FOLLOWING ITEMS WERE THE SUBJECT OF A FORM 12B-25 FILED ON MARCH 29, 1996,
RELATED TO FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 30, 1995. THESE ITEMS
ARE NOW AVAILABLE AND INCLUDED HEREIN: PART I. ITEM 3. LEGAL PROCEEDINGS; PART
II. ITEM 6. SELECTED FINANCIAL DATA; PART II. ITEM 7. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS; PART II. ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA; AND PART IV. ITEM 14. EXHIBITS,
FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K (WITH RESPECT TO THE
FINANCIAL STATEMENTS, INDEPENDENT AUDITORS' REPORT, UNAUDITED QUARTERLY
FINANCIAL INFORMATION, FINANCIAL STATEMENT SCHEDULE AND EXHIBIT NUMBER 23 -
CONSENT OF INDEPENDENT AUDITORS).
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 30, 1995
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number 1-8140
FLEMING COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 48-0222760
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6301 Waterford Boulevard, Box 26647
Oklahoma City, Oklahoma 73126
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (405) 840-7200
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
Common Stock, $2.50 Par Value and New York Stock Exchange
Common Stock Purchase Rights Pacific Stock Exchange
Midwest Stock Exchange
9.5% Debentures New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. ____
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 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
As of February 24, 1996, 37,704,000 common shares were outstanding.
The aggregate market value of the common shares (based upon the closing price of
these shares on the New York Stock Exchange) of Fleming Companies, Inc. held by
not affiliates was approximately $740 million.
Documents Incorporated by Reference
A portion of Part III has been incorporated by reference from the registrant's
proxy statement dated March 12, 1996, in connection with its annual meeting of
shareholders to be held on May 1, 1996.
<PAGE>
PART I
ITEM 3. LEGAL PROCEEDINGS
(1) David's Supermarkets, Inc. vs. Fleming Companies, Inc., et al. Case No.
246-93, In the District Court of Johnson County, Texas.
David's Supermarkets, Inc. ("David's") filed suit against the company and a
former officer in August, 1993 alleging that the company charged excessive
prices under two selling plan arrangements from 1989 through 1991. Plaintiff
asserted breach of contract, fraud and violation of the Texas Deceptive Trade
Practices Act ("DTPA"). Following a four-week trial the jury found the com-
pany's disputed overcharges amounted to $2.8 million and rendered verdicts
against the company for $72.5 million for breach of contract, $200.9 million
for fraud and $207.5 million for violation of the DTPA and against the former
officer, jointly and severally with the company, for $51 million for fraud and
$53.8 million for violation of the DTPA.
On March 22, 1996, the plaintiff filed a motion for judgment on its claim under
the DTPA reserving the right to recover under any alternative theory supported
by the verdict in the event the judgment on the DTPA verdict is in any way
modified or reversed by any court.
On April 4, 1996, the company and its banks amended the company's bank credit
agreement increasing the letter of credit subfacility to permit the company to
post a supersedeas bond necessary to perfect its appeal and waiving certain
effects of the judgment or certain potential liens which may arise thereunder.
On April 12, 1996, plaintiff's motion for judgment was granted in the amount
of $207.5 million plus pre-judgment interest of $3.7 million and post-judgment
interest at the rate of 10% per annum. The company posted the bond immediately
after the judgment was granted and will appeal the judgment.
(2) Kenneth Steiner and Charles Miller, et al. vs. Fleming Companies, Inc. et
al., Case No. CIV 96-0480, United States District Court for the Western District
of Oklahoma.
Lawrence B. Hollin, et al. vs. Fleming Companies, Inc., et al., Case No. CIV 96-
0484, United States District Court for the Western District of Oklahoma.
Ronald T. Goldstein, et al. vs. Fleming Companies, Inc., et al., Case No. CIV
96-0510, United States District Court for the Western District of Oklahoma.
These cases were filed in the United States District Court for the Western
District of Oklahoma on or prior to April 12, 1996, as purported class actions
by certain company stockholders against the company and certain company
officers, including the chief executive officer, for alleged breach of the
securities laws for alleged failure to properly disclose and account for the
David's litigation described above as well as the allegedly pervasive and
wrongful conduct of the defendants which gave rise to the David's litigation.
The plaintiffs seek damages in undetermined but significant amounts as the
results of the alleged wrongdoing of the defendants, costs and expenses
including attorneys' and expert fees. The company denies these allegations
and intends to vigorously defend the actions.
(3) Robert Mark, et al. vs. Fleming Companies, Inc., et al., Case No. CIV 96-
0506, United States District Court for the Western District of Oklahoma.
The lawsuit was filed April 4, 1996 as a purported class action by plaintiff and
other holders of the company's 10 5/8% fixed rate ($300 million) and floating
rate ($200 million) senior notes due 2001 (the "Notes") against the com-
pany and certain officers of the company, including the chief executive officer,
alleging unlawful failure to disclose the existence of the David's litigation
described above in the December, 1994 registration statement and prospectus
under which the Notes were sold. In addition, the company and the officer
defendants are alleged to have failed to accrue an appropriate reserve
as the result of the lawsuit in violation of securities laws.
The plaintiffs seek damages of an undetermined but significant amount, costs and
expenses, including reasonable attorney's fees and expert fees and other costs
and disbursements. Registrant denies the allegations and intends to vigorously
defend the suit.
(4) Tropin v. Thenen, et al., Case No. 93-2502-Civ-Moreno, United States
District Court, Southern District of Florida.
Walco Investments, Inc., et al. v. Thenen, et al., Case No. 93-2534-CIV-Moreno,
United States District Court, Southern District of Florida.
On December 21, 1993, these cases were filed in the United States District Court
for the Southern District of Florida. Both cases name numerous defendants,
including a former subsidiary of the registrant and four former employees of
former subsidiaries of registrant. The cases contain similar factual
allegations. Plaintiffs allege, among other things, that former employees of
subsidiaries participated in fraudulent activities by taking money for con-
firming diverting transactions which had not occurred and that, in so doing,
they acted within the scope of their employment. Plaintiffs also allege that a
former subsidiary allowed its name to be used in furtherance of the alleged
fraud. The allegations against registrant's former subsidiary include common
law fraud, breach of contract and negligence, conversion, and civil theft. In
addition, allegations were made against the former subsidiary claiming it
violated the federal Racketeer Influenced and Corrupt Organizations Act and
comparable state law. Plaintiffs seek damages, treble damages, attorneys' fees,
costs, expenses and other appropriate relief. While the amount of damages
sought under most claims is not specified, plaintiffs allege that hundreds of
millions of dollars were lost as the result of the matters complained of.
Registrant denies the allegations and is vigorously defending the actions.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Notes to Consolidated Financial Statements.
(5) Richard E. Ieyoub, Attorney General ex rel., State of Louisiana v. The
American Tobacco Company, et al., Case No. 96-1209, 14th Judicial District
Court, Parish of Calcasieu, State of Louisiana
In March, 1996 the Attorney General of the State of Louisiana brought this
action against numerous named tobacco companies and distributors (including
Malone & Hyde, a former subsidiary of registrant), claiming that the defendants'
products and conduct were the cause of thousands of Louisiana deaths, injuries
and illnesses and millions of dollars of state health-care and related
expenditures. Further, that defendants' products are unreasonably dangerous,
hazardous and toxic. Plaintiff prays for an injunction, compensatory damages
in an amount sufficient to repay the state for the sums it has expended and
will expend in the future on account of the defendant's wrongful conduct,
punitive damages, interest and attorney fees. Although Registrant has not
been served it has been indemnified by one of the tobacco companies and will
vigorously defend the action.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(In millions, except
per share amounts) 1995 1994(a) 1993 1992 1991
______________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net sales $17,502 $15,724 $13,096 $12,894 $12,851
Earnings before
extraordinary
loss and
cumulative
effect(b) 42 56 37 119 64
Net earnings per
common share(b) 1.12 1.51 1.02 3.33 1.82
Total assets 4,297 4,608 3,103 3,118 2,958
Long-term debt
and capital
leases 1,717 1,995 1,004 1,038 952
Cash dividends paid
per common share 1.20 1.20 1.20 1.20 1.14
______________________________________________________________________________
</TABLE>
See Item 3. Legal proceedings, notes to consolidated financial statements,
including Subsequent Events, and the financial review included in Items 7 and
8.
(a) The results in 1994 reflect the July 1994 acquisition of Scrivner Inc.
(b) In 1993 and 1992, the company recorded an after-tax loss of $2.3 million
and $5.9 million, respectively, for early retirement of debt. In 1991, the
company changed its method of accounting for postretirement health care
benefits, resulting in a charge to net earnings of $9.3 million.
The results in 1993 include an after-tax charge of approximately $62
million for additional facilities consolidations, re-engineering,
impairment of retail-related assets and elimination of regional operations.
In 1995 management changed its estimates with respect to the general
merchandising portion of the reengineering plan and reversed $4 million,
after tax benefits, of the related provision.
The company instituted a plan late in 1991 to reduce costs and increase
operating efficiency by consolidating four distribution centers into
larger, higher volume and more efficient facilities. The after-tax charge
was $41.4 million.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
In 1994, the company embarked upon a plan to restructure its organizational
alignment, reengineer its operations and consolidate its distribution
facilities. The company's objective is to lower net acquisition cost of product
to retail customers while providing the company with a fair and adequate return
for its products and services. To achieve this objective, management has made
major organizational changes, implemented the Fleming Flexible Marketing Plan
("FFMP") in approximately 40% of its food distribution sales base, or 17 of its
35 operating units, and increased its investment in technology. The actions
contemplated by the reengineering plan will affect the company's food and
general merchandise wholesaling operations as well as certain retail operations.
Although a significant number of reengineering initiatives have been completed,
more are planned. The timing of the remaining initiatives has been lengthened
while the company refocuses on financial performance and refines FFMP in
response to customers and vendors. Accordingly, completion dates are not known.
Beginning in the third quarter of 1994, results were materially affected by the
acquisition of Scrivner. Sales increased dramatically and gross margin and
selling and administrative expenses as a percent of sales are significantly
higher due to the higher percentage of retail food operations in Scrivner.
Interest expense increased materially as a result of both increased borrowing
levels and higher interest rates due to the acquisition of Scrivner. In
addition, expense for the amortization of goodwill also increased significantly.
As part of the reengineering plan, the company has closed four distribution
centers and plans to close one additional facility. In addition, since the
Scrivner acquisition, the company has closed nine former Scrivner distribution
centers.
Results of Operations
Set forth in the following table is information regarding the company's net
sales and certain components of earnings expressed as a percent of sales:
<TABLE>
<CAPTION>
_____________________________________________________________________________
1995 1994 1993
<S> <C> <C> <C>
Net sales 100.00% 100.00% 100.00%
Gross margin 8.06 7.14 5.84
Less:
Selling and administrative 6.79 5.93 4.23
Interest expense 1.00 .77 .60
Interest income (.33) (.36) (.45)
Equity investment results .16 .09 .09
Facilities consolidation
and restructuring (.05) - .82
_____________________________________________________________________________
Total 7.57 6.43 5.29
_____________________________________________________________________________
Earnings before taxes .49 .71 .55
Taxes on income .25 .35 .26
_____________________________________________________________________________
Net earnings .24% .36% .29%
_____________________________________________________________________________
1994 was a 53-week year. Certain reclassifications have been made to prior
years' amounts to conform to the current year's classification. The results of
Scrivner are included since the acquisition. Net earnings in 1993 are before
the extraordinary loss.
1995 and 1994
Net Sales. Net sales for 1995 increased by $1.78 billion, or 11%, to $17.50
billion from $15.72 billion for 1994. Notwithstanding the positive effects of
the Scrivner acquisition, net sales in 1995 were adversely impacted by the
following, none of which was individually material to sales: sales lost due to
normal attrition which were not replaced as marketing efforts were directed
toward implementing FFMP; the loss of business of Megafoods Stores, Inc.
("Megafoods"); the closing or sale of certain corporate stores; the sale of a
distribution center and consolidation of others; and the expiration of a
temporary agreement with Albertson's, Inc. as its Florida distribution center
came on line. The company's tighter credit policies also had a negative effect
on generating replacement sales. Management established a sales organization
late in 1995 which is dedicated to prospecting for new accounts.
Fleming measures inflation using data derived from the average cost of a ton of
product sold by the company. Food price inflation was approximately 1% in 1995
compared to a negligible rate in 1994.
Gross Margin. Gross margin for 1995 increased by $288 million, or 26%, to $1.41
billion from $1.12 billion for 1994 and increased as a percentage of net sales
to 8.06% for 1995 from 7.14% for 1994. The primary reason for the increase is
more retail operations, principally related to the Scrivner acquisition. Retail
operations typically have a higher gross margin than wholesale operations.
Product handling expenses, which consist of warehouse, truck and building
expenses, were approximately the same as a percentage of net sales in 1995 as in
1994. In food distribution, reduced vendor income due to the accelerated trend
to Every Day Low Costing ("EDLC") negatively impacted gross margin. Further,
certain margin items that are passed through to customers under FFMP were only
partially offset by increases in FFMP-related charges to customers. In 1996,
the company is implementing increases in certain charges to its customers under
FFMP and also developing programs to charge vendors for services which are no
longer subsidized under EDLC.
Selling and Administrative Expense. Selling and administrative expense for 1995
increased by $257 million, or 28%, to $1.19 billion from $933 million for 1994
and increased as a percentage of net sales to 6.79% for 1995 from 5.93% in 1994.
Retail operations typically have higher selling expenses than wholesale
operations and the full year of retail acquired from Scrivner was the primary
reason for the increase. Goodwill amortization also increased as a result of
the acquisition. In addition, the technology-related aspects of the various
reengineering initiatives resulted in an increase in expense. The increase in
the Corporate line under Operating Earnings shown in "Segment Information" in
the Notes to Consolidated Financial Statements is the result of this reengi-
neering initiative. The slower-paced nature of the remaining reengineering
initiatives along with the January 1996 reduction in headquarters headcount
should mitigate expense increases in 1996.
Credit loss expense included in selling and administrative expenses decreased in
1995 by $30 million to $31 million from $61 million for 1994. Tighter credit
practices and reduced emphasis on credit extensions to and investments in
customers have resulted in less exposure and a decrease in credit loss expense.
While there can be no assurance that credit losses from existing or future
investments or commitments will not have a material adverse effect on results of
operations or financial position, the results thus far of these new practices
and emphasis have been very positive. Additional credit loss, if any, related
to the bankruptcy of Megafoods could result in a loss of up to $20 million in
excess of the credit loss accrued to date. See "Litigation and Contingencies"
in the Notes to Consolidated Financial Statements for further discussion.
Interest Expense. Interest expense for 1995 increased $55 million to $175
million from $120 million for 1994. The increase was due principally to higher
borrowing resulting from the Scrivner acquisition, higher interest rates in the
capital and credit markets, and an increase in the interest rates for the com-
pany due to changes in the company's credit rating brought about by the acquisi-
tion and performance. Interest expense was expected to be lower in 1996 due to
the substantial amount of debt repaid in 1995. However, increases in interest
expense related to the David's litigation will offset the savings from reduced
borrowings. See "Subsequent Events" in the Notes to Consolidated Financial
Statements. The majority of the company's debt has fixed rates as a result of
the hedge agreements. See "Liquidity and Capital Resources."
The company enters into interest rate hedge agreements to manage interest costs
and exposure to changing interest rates. See "Long-Term Debt" in the Notes to
Consolidated Financial Statements for further discussion of the company's
derivative agreements, which consist of simple interest rate caps and swaps.
For 1995, the interest rate hedge agreements contributed $7 million of interest
expense, compared to $6 million in 1994.
Interest Income. Interest income for 1995 increased by $1 million to $58 mil-
lion from $57 million for 1994. Increases in interest income resulting from
earnings on the notes receivable acquired in the Scrivner loan portfolio were
nearly offset by the June 1995 sale of $77 million of notes receivable with
limited recourse. The sale reduced the amount of notes receivable available to
produce interest income during 1995 and will continue to do so in 1996.
Equity Investment Results. The company's portion of operating losses from
equity investments for 1995 increased by $12 million to $27 million from $15
million for 1994. Certain of the strategic multi-store customers in which the
company has made equity investments under its business development venture
program experienced increased losses when compared to 1994. Management expects
improved results for such investments in 1996. Additionally, losses from retail
stores, which are part of the company's equity store program and are accounted
for under the equity method, also increased.
In late 1995, the company consolidated the results of operations and financial
position of ABCO Markets, Inc. ("ABCO"), a 71-store supermarket chain located in
Arizona, as a result of the company's majority equity position. In early 1996,
the company acquired all the assets of ABCO through a UCC foreclosure in
cancellation of $66 million of ABCO indebtedness to the company. Certain of
ABCO minority shareholders have challenged this action seeking recision and/or
damages.
Facilities consolidation. In the first quarter of 1995, management changed its
estimates with respect to the general merchandising operations portion of the
reengineering plan. The revised estimate reflects reduced expense and cash
outflow. Accordingly, during the first quarter the company reversed $9 million
of the related provision.
Taxes on Income. The company's effective tax rate for 1995 increased to 51.1%
from 50.0% for 1994. The increase was primarily due to increased goodwill
amortization with no related tax deduction and the significance of certain other
nondeductible expenses to pretax earnings.
Other. Several factors negatively affecting earnings in 1995 are likely to
continue. Management believes that these factors include: lower sales; little
or no food price inflation; and operating losses in certain company-owned retail
stores.
In February, 1996, trial commenced in the David's litigation in Johnson County,
Texas (see Item 3., Legal Proceedings, and "Litigation and Contingencies" and
"Subsequent Events" in Notes to Consolidated Financial Statements included
elsewhere herein). On March 14 and 15, 1996, the jury found against Fleming for
$2.8 million of disputed overcharges and returned alternative verdicts against
the company of $72.5 million (breach of contract), $200.9 million (fraud) and
$207.5 million (violation of the Texas Deceptive Trade Practices Act, or DTPA).
Plaintiff elected to pursue the DTPA verdict and on April 12, 1996, the court
granted judgment against the defendants in the amount of $207.5 million plus
pre-judgment interest of $3.7 million and post-judgment interest at the
rate of 10% per annum. Immediately after the judgment was granted, Fleming
posted a supersedeas bond in the amount of $230 million (which includes interest
for one year) to stay enforcement of the judgment while pursuing an appeal. As
collateral for the bond, Fleming provided its sureties with letters of credit
obtained under its recently amended bank credit amendment (see "Liquidity and
Capital Resources - Recent Developments" herein.)
Based on management's present assessment of the ultimate outcome, a charge of
approximately $7 million is expected in the first quarter of 1996.
However, the failure to substantially reduce the amount of the judgment
through the appeal would have a material adverse effect on the company. The
cost of the bond and letter of credit requirements, as well as attorney's fees,
is expected to be approximately $3 million annually which will negatively
impact future earnings. The appellate process may take up to three years,
or longer.
In view of the large award in the David's litigation, assertions of
similar allegations could occur in future or continuing litigation.
Management is unable to predict a potential range of monetary exposure,
if any, to the company. However, if successfully asserted, any unfavorable
outcome could have a material adverse effect on the company.
Moody's and Standard & Poor's have placed the company's rated debt under review
for possible downgrade and CreditWatch with negative implications, respectively,
due in part to the uncertainties created by the judgment. A downgrade in the
company's rated debt is likely to result in increased borrowing costs under
the bank credit agreement. Additionally, the costs of amending the bank credit
agreement will be amortized over the remaining term of the bank credit
agreement. The amendment also calls for increased facility fees and commitment
fees, but such increased charges are not expected to be material in 1996.
From the date of the jury verdict through April 12, 1996, the company and
certain officers, including the chief executive officer, were named as
defendants in three class action lawsuits filed by certain of its stockholders
and one class action lawsuit filed by certain noteholders, each in the U. S.
District Court for the Western District of Oklahoma, alleging that the company
failed to properly disclose the David's litigation as well as for the
allegedly pervasive and wrongful conduct of the defendants which gave rise to
the David's litigation. The plaintiffs seek undetermined but significant
damages. The company denies these allegations and intends to vigorously
defend the actions. Management is unable to predict a potential range of
monetary exposure, if any, to the company. However, an unfavorable outcome
could have a material adverse effect on the company. See Item 3., Legal
Proceedings, and "Litigation and Contingencies" and "Subsequent Events" in
Notes to Consolidated Financial Statements.
The company has been named in two related legal actions filed in the U.S.
District Court in Miami. The litigation is complex and the ultimate outcome
cannot presently be determined. Furthermore, the company is unable to predict a
potential range of monetary exposure, if any, to the company. Based on the
recovery sought, an unfavorable judgment could have a material adverse effect on
the company.
Certain Accounting Matters. See Notes to Consolidated Financial Statements for
a discussion of new accounting standards adopted in 1995, or issued in 1995 that
will be effective for 1996, none of which is expected to have a material effect
on results of operations or financial position.
1994 and 1993
Net Sales. Net sales for 1994 increased by $2.63 billion, or 20%, to $15.72
billion from $13.10 billion for 1993. The increase in net sales was attrib-
utable to the $2.76 billion of net sales generated by Scrivner operations since
the acquisition. Without Scrivner, net sales would have declined by $100 mil-
lion, or .8%, due to several factors, none of which was individually material
to net sales, including: the expiration of the temporary agreement with
Albertson's, Inc., as its distribution center came on line; the sale of a dis-
tribution center; and the loss of business due to the bankruptcy of Megafoods.
These losses were partially offset by the addition of business from Kmart,
Florida retail operations acquired in the fourth quarter of 1993 ("Hyde Park")
and Randall's Food Markets, Inc. Food price inflation in 1994 was negligible.
Gross Margin. Gross margin for 1994 increased by $358 million, or 47%, to $1.12
billion from $765 million for 1993 and increased as a percentage of net sales to
7.14% for 1994 from 5.84% for 1993. The increase in gross margin was due to
additional retail stores, principally the 179 stores acquired with Scrivner in
mid-1994 as well as 21 Hyde Park stores acquired in late 1993 and 24 Consumers
stores acquired in mid-1994. In addition, product handling expenses decreased
as a percentage of net sales for 1994 from 1993 due in part to the positive
impact of the company's facilities consolidation program and to higher fees
charged to certain customers. These gross margin increases were partially off-
set by charges to income of $6 million resulting from the LIFO method of in-
ventory valuation in 1994 compared to credits to income of $7 million in 1993.
Selling and Administrative Expense. Selling and administrative expense for 1994
increased by $378 million, or 68%, to $933 million from $554 million for 1993
and increased as a percentage of net sales to 5.93% for 1994 from 4.23% in 1993.
This increase was due primarily to the mid-1994 acquisition of Scrivner,
particularly its retail operations, as well as the acquisition of 21 Hyde Park
stores in late 1993 and 24 Consumers stores in mid-1994. Selling and
administrative expenses also increased due to additional goodwill amortization,
principally related to the Scrivner acquisition, and the absence of several
non-recurring items that occurred in 1993. The increase in the Corporate line
under Operating earnings shown in "Segment Information" in the Notes to
Consolidated Financial Statements is the result of the aforementioned absence of
non-recurring items and the increase in staff expense.
Credit loss expense included in selling and administrative expense for 1994
increased by $9 million to $61 million from $52 million in 1993. This increase,
including the $6.5 million credit loss attributable to the bankruptcy of
Megafoods (see "Litigation and Contingencies" in the Notes to Consolidated
Financial Statements), was primarily due to the continued difficult retail
environment and low levels of food price inflation.
Interest Expense. Interest expense for 1994 increased $42 million to $120
million from $78 million for 1993. The increase was due to the indebtedness
incurred to finance the Scrivner acquisition and higher interest rates imposed
on the company as a result thereof. Without these factors, interest expense for
1994 is estimated to have been approximately the same as 1993. For 1994, the
interest rate hedge agreements described above contributed $6 million to inter-
est expense.
Interest Income. Interest income for 1994 decreased by $2 million to $57 mil-
lion from $59 million for 1993. There were no note sales in 1994.
Equity Investment Results. The company's portion of operating losses from
equity investments for 1994 increased by $3 million to $15 million from $12 mil-
lion for 1993. The increase resulted primarily from losses related to the com-
pany's investments in small retail operators under the company's equity store
program, offset in part by improved results from investments in strategic multi-
store customers under the company's business development venture program.
Taxes on Income. The company's effective tax rate for 1994 increased to 50.0%
from 48.0% for 1993 primarily as a result of the lower-than-expected earnings
for 1994, Scrivner's operations in states with higher tax rates and increased
goodwill amortization with no related tax deduction.
Early Debt Retirement. In 1993, the company recorded an extraordinary loss
related to the early retirement of debt. The company retired $63 million of
9.5% debentures at a cost of $2 million, net of tax benefits of $2 million.
</TABLE>
<TABLE>
Liquidity and Capital Resources
<CAPTION>
_____________________________________________________________________________
Capital Structure ($ in millions) 1995 1994
_____________________________________________________________________________
<S> <C> <C> <C> <C>
Long-term debt $1,402 48.8% $1,752 54.8%
Capital lease obligations 388 13.5 369 11.5
_____________________________________________________________________________
Total debt 1,790 62.3 2,121 66.3
Shareholders' equity 1,083 37.7 1,079 33.7
_____________________________________________________________________________
Total capital $2,873 100.0% $3,200 100.0%
_____________________________________________________________________________
</TABLE>
Includes current maturities of long-term debt and current obligations under
capital leases.
Fleming reduced long-term debt levels incurred in connection with the 1994
acquisition of Scrivner by $350 million and reduced commitments under the
company's revolving credit and term loan agreement from $1.7 billion to $1.25
billion during 1995.
The company's principal sources of liquidity are cash flows from operating
activities and borrowings under the bank credit agreement. Borrowings under the
bank credit agreement totaled $735 million at the end of 1995 and averaged $861
million during the year. At year end, the amortizing term loan balance was $659
million and $76 million was drawn on the $595 million revolving credit facility.
Final maturities are July 1999 for the revolving credit facility and June 2000
for the term loan.
Borrowings under the bank credit agreement are guaranteed by substantially all
of the company's subsidiaries and are secured by the company's accounts re-
ceivable, inventories and a pledge of the stock of the subsidiary guarantors.
The company was also required to pledge intercompany receivables as security for
its medium-term notes and its 9.5% debentures and to provide guarantees from
the subsidiary guarantors. Additionally, the company has provided guarantees
from the subsidiary guarantors in favor of the $500 million seven-year senior
notes issued in December 1994, the proceeds of which were used to prepay a $500
million two-year tranche of the credit agreement.
The bank credit agreement and the indentures for the senior notes contain
customary covenants associated with similar facilities. At year end 1995 the
credit agreement contained the following more significant covenants:
consolidated-debt-to-net-worth ratio of not more than 2.45 to 1; minimum
consolidated net worth of at least $883 million; fixed charge coverage ratio of
at least 1.25 to 1; a limitation on restricted payments (including dividends and
company stock repurchases) and additional indebtedness; and limitations on
capital expenditures. The fixed charge coverage ratio was amended in February
1996 to a minimum requirement of 1.1 to 1 beginning in the first quarter of
1996. Covenants associated with the senior notes are generally less
restrictive than those of the credit agreement. At year-end 1995, the company
was in compliance with all financial covenants under the credit agreement and
the senior note indentures. Continued compliance over the near term will depend
on the company's ability to generate sufficient earnings. See "Recent develop-
ments" below.
Pricing under the bank credit agreement automatically increases with respect to
certain credit rating declines. Despite the effect of reduced earnings and
action by Standard & Poor's in June 1995 to reduce its rating of the company's
debt, the company believes that appropriate means are available to maintain
adequate liquidity for the foreseeable future at acceptable rates. The com-
pany's credit ratings for its senior unsecured long-term debt are Ba1 and BB-
by Moody's and Standard & Poor's, respectively. See "Recent developments"
below.
The bank credit agreement may be terminated in the event of a defined change of
control. Under the indentures for the senior notes, the note holders may re-
quire the company to repurchase the notes in the event of a defined change of
control coupled with a defined decline in credit ratings.
At year-end 1995, the company had $146 million of contingent obligations under
undrawn letters of credit, primarily related to insurance reserves associated
with its normal risk management activities. To the extent that any of these
letters of credit would be drawn, payments would be financed by borrowings under
the bank credit agreement.
Operating activities generated $399 million of net cash flows for 1995 compared
to $333 million in 1994. The increase is principally due to lower working
capital requirements partially offset by lower deferred taxes. Working capital
was $364 million at year end, a decrease from $496 million at year-end 1994.
The current ratio decreased to 1.28 to 1, from 1.38 to 1 at year-end 1994.
Management believes that cash flows from operating activities and the company's
ability to borrow under the bank credit agreement will be adequate to meet
working capital needs, capital expenditures and other cash needs.
Capital expenditures for 1995 were approximately $114 million compared to
approximately $140 million in 1994. The decrease from the prior year is due to
a reduced level of expansion projects in 1995 as compared to 1994. Management
expects that 1996 capital expenditures, excluding acquisitions, if any, will
approximate $130 million.
During 1995, borrowings under uncommitted bank lines averaged $10 million and
ranged up to $120 million. Borrowings outstanding at year-end 1995 were $50
million.
Fleming makes investments in and loans to its retail customers, primarily in
conjunction with the establishment of long-term supply agreements. Net
investments and loans decreased $157 million, from $471 million to $314 million
due primarily to the sale of notes and more restrictive credit policies. There
was a $77 million sale of notes in 1995, compared to no sale in 1994. The com-
pany may sell additional notes in the future.
Long-term debt and capital lease obligations decreased $331 million to $1.79
billion during 1995 as a result of: increased cash flow; reduced working capital
requirements, capital expenditures and retailer financing; increased sale of
notes and other assets; and other financing activities, all of which were
partially offset by increased cash outflows related to facilities consolidation
actions and reengineering activities. Shareholders' equity at the end of 1995
was $1.08 billion.
The year-end 1995 debt-to-capital ratio decreased to 62.3%, below last year's
ratio of 66.3%. The company's long-term target ratio is approximately 50%.
Total capital was $2.87 billion at year end, down from $3.2 billion the prior
year.
The composite interest rate for total funded debt (excluding capital lease
obligations) before the effect of interest rate hedges was 7.8% at year-end
1995, versus 7.6% a year earlier. Including the effect of interest rate hedges,
the composite interest rate of debt was 8.4% at the end of both 1995 and 1994.
The dividend payments of $1.20 per share in 1995 and 1994 were 107% and 79% of
net earnings per share in 1995 and 1994, respectively.
Recent developments. In connection with the David's litigation described above
(also see Item 3. Legal Proceedings and "Subsequent Events" in the Notes to
Consolidated Financial Statements), in order to obtain the letters of credit
necessary to collateralize the supersedeas bond, the company obtained an
amendment to the bank credit agreement dated April 4, 1996. The amendment also
waived the effects of the judgment and any liens resulting therefrom so long as
the appeals process is proceeding. Letters of credit support the supersedeas
bond and are considered a use of the company's borrowing capacity under the bank
credit agreement.
Moody's and Standard & Poor's have placed the company's rated debt under review
for possible downgrade and CreditWatch with negative implications, respectively,
due in part to the uncertainties created by the judgment.
On March 28, 1996, the Board of Directors cut the quarterly cash dividend
from $.30 per share to $.02 per share for the second quarter of 1996.
The amended bank credit agreement limits dividend payments to $.08 per share,
per quarter beginning in the second quarter of 1996. After considering
the effect of the recently issued letters of credit related to the supersedeas
bond, which are considered a use of the company's borrowing capacity, and the
related bank credit agreement amendment, at year-end 1995 the company would
have been allowed to borrow an additional $190 million. Management believes
that the cash flows from operating activities and the company's ability to
borrow under the amended bank credit agreement will be adequate to meet working
capital needs, capital expenditures and other cash needs for the next twelve
months.
The company is currently in compliance with all covenants under the amended
bank credit agreement.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Part IV, Item 14(a) 1. Financial Statements.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements: Page Number
o Consolidated Statements of Earnings -
For the years ended December 30, 1995,
December 31, 1994, and December 25, 1993
o Consolidated Balance Sheets -
At December 30, 1995, and December 31, 1994
o Consolidated Statements of Shareholders' Equity -
For the years ended December 30, 1995,
December 31, 1994, and December 25, 1993
o Consolidated Statements of Cash Flows -
For the years ended December 30, 1995,
December 31, 1994, and December 25, 1993
o Notes to Consolidated Financial Statements -
For the years ended December 30, 1995,
December 31, 1994, and December 25, 1993
o Independent Auditors' Report
o Quarterly Financial Information (Unaudited)
(a) 2. Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
(a) 3., (c) Exhibits:
Page Number or
Exhibit Incorporation by
Number Description Reference to
4.14 Waiver to Credit Agreement
dated as of April 1, 1996
4.15 Amendment No. 5 to Credit
Agreement dated as of
April 4, 1996
23 Consent of Deloitte & Touche LLP
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Fleming has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized on the 15th day of April 1996.
FLEMING COMPANIES, INC.
ROBERT E. STAUTH
By: Robert E. Stauth
Chairman and
Chief Executive Officer
(Principal executive officer)
HARRY L. WINN, JR.
By: Harry L. Winn, Jr.
Executive Vice President and
Chief Financial Officer
(Principal financial officer)
KEVIN J. TWOMEY
By: Kevin J. Twomey
Vice President - Controller
(Principal accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 15th day of April 1996.
ROBERT E. STAUTH ARCHIE R. DYKES * CAROL B. HALLETT *
Robert E. Stauth Archie R. Dykes Carol B. Hallett
(Chairman of the Board) (Director) (Director)
JAMES G. HARLOW, JR. * LAWRENCE M. JONES * EDWARD C. JOULLIAN III *
James G. Harlow, Jr. Lawrence M. Jones Edward C. Joullian III
(Director) (Director) (Director)
HOWARD H. LEACH * GUY O. OSBORN *
Howard H. Leach Guy O. Osborn
(Director) (Director)
HARRY L. WINN, JR.
Harry L. Winn, Jr.
(Attorney-in-fact)
*A Power of Attorney authorizing Harry L. Winn, Jr. to sign the Annual Report
on Form 10-K on behalf of each of the indicated directors of Fleming Companies,
Inc. has been filed herein as Exhibit 24.
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
For the years ended December 30, 1995, December 31, 1994, and December 25,
1993
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Net sales $17,501,572 $15,723,691 $13,096,124
Costs and expenses:
Cost of sales 16,091,039 14,601,050 12,331,099
Selling and administrative 1,189,199 932,588 554,149
Interest expense 175,390 120,071 78,029
Interest income (58,206) (57,148) (58,923)
Equity investment results 27,240 14,793 11,865
Facilities consolidation and (8,982) --- 107,827
restructuring
Total costs and expenses 17,415,680 15,611,354 13,024,046
Earnings before taxes 85,892 112,337 72,078
Taxes on income 43,891 56,168 34,598
Earnings before extraordinary 42,001 56,169 37,480
loss
Extraordinary loss from early --- --- 2,308
retirement of debt
Net earnings $42,001 $ 56,169 $ 35,172
Net earnings per share:
Earnings before extraordinary $1.12 $1.51 $1.02
loss
Extraordinary loss --- --- .06
Net earnings per share $1.12 $1.51 $ .96
Weighted average shares out- 37,577 37,254 36,801
standing
</TABLE>
Sales to customers accounted for under the equity method were approximately
$1.5 billion in 1995 and $1.6 billion each year for 1994 and 1993.
See notes to consolidated financial statements.
CONSOLIDATED BALANCE SHEETS
At December 30, 1995, and December 31, 1994
(In thousands)
<TABLE>
<CAPTION>
Assets 1995 1994
<S> <C> <C>
Current assets:
Cash and cash equivalents $4,426 $ 28,352
Receivables 340,215 364,884
Inventories 1,207,329 1,301,980
Other current assets 98,801 124,865
Total current assets 1,650,771 1,820,081
Investments and notes receivable 271,763 402,603
Investment in direct financing leases 225,552 230,357
Property and equipment:
Land 59,364 66,702
Buildings 406,302 366,109
Fixtures and equipment 667,087 656,068
Leasehold improvements 202,751 199,713
Leased assets under capital leases 192,022 167,362
1,527,526 1,455,954
Less accumulated depreciation (532,364) (467,830)
and amortization
Net property and equipment 995,162 988,124
Other assets 132,338 179,332
Goodwill 1,021,099 987,832
Total assets $4,296,685 $4,608,329
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $1,001,123 $ 960,333
Current maturities of long-term debt 53,917 110,321
Current obligations under capital leases 19,452 15,780
Other current liabilities 211,863 237,197
Total current liabilities 1,286,355 1,323,631
Long-term debt 1,347,987 1,641,390
Long-term obligations under capital leases 368,876 353,403
Deferred income taxes 40,179 51,279
Other liabilities 169,966 160,071
Commitments and contingencies
Shareholders' equity:
Common stock, $2.50 par value, authorized -
100,000 shares, issued and outstanding -
37,716 and 37,480 shares 94,291 93,705
Capital in excess of par value 501,474 494,966
Reinvested earnings 501,214 503,962
Cumulative currency translation adjustment (4,549) (2,972)
1,092,430 1,089,661
Less ESOP note (9,108) (11,106)
Total shareholders' equity 1,083,322 1,078,555
Total liabilities and shareholders' equity $4,296,685 $4,608,329
</TABLE>
Receivables include $27 million and $37 million in 1995 and 1994,
respectively, due from customers accounted for under the equity method.
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 30, 1995, December 31, 1994, and December 25,
1993
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Common stock:
Beginning of year 37,480 $ 93,705 36,940 $ 92,350 36,698 $ 91,746
Incentive stock and
stock ownership plans 236 586 540 1,355 242 604
End of year 37,716 94,291 37,480 93,705 36,940 92,350
Capital in excess of par value:
Beginning of year 494,966 489,044 482,107
Incentive stock and
stock ownership plans 6,508 5,922 6,937
End of year 501,474 494,966 489,044
Reinvested earnings:
Beginning of year 503,962 492,250 501,231
Net earnings 42,001 56,169 35,172
Cash dividends, $1.20 per share (44,749) (44,457) (44,153)
End of year 501,214 503,962 492,250
Cumulative currency
translation adjustment:
Beginning of year (2,972) (288) ---
Currency translation adjustments (1,577) (2,684) (288)
End of year (4,549) (2,972) (288)
ESOP note:
Beginning of year (11,106) (12,950) (14,650)
Payments 1,998 1,844 1,700
End of year (9,108) (11,106) (12,950)
Total shareholders' equity,
end of year $1,083,322 $1,078,555 $1,060,406
</TABLE>
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 30, 1995, December 31, 1994, and December 25,
1993
(In thousands)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 42,001 $ 56,169 $ 35,172
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 180,796 145,910 101,103
Credit losses 30,513 61,218 52,018
Deferred income taxes 12,052 30,430 (24,471)
Equity investment results 27,240 14,793 11,865
Consolidation and reserve
activities, net (44,375) (29,304) 87,211
Change in assets and liabilities,
excluding effect of acquisitions:
Receivables 7,156 1,964 (16,420)
Inventories 149,676 57,689 58,625
Other assets 38,995 13,346 (48,984)
Accounts payable 6,390 30,691 (38,472)
Other liabilities (46,489) (50,083) (10,883)
Other adjustments, net (4,956) 39 1,779
Net cash provided by
operating activities 398,999 332,862 208,543
Cash flows from investing activities:
Collections on notes receivable 88,441 111,149 82,497
Notes receivable funded (103,771) (122,206) (130,846)
Notes receivable sold 77,063 --- 67,554
Businesses acquired (10,654) (387,488) (51,110)
Proceeds from sale of businesses - 6,682 ---
Purchase of property and equipment (116,769) (150,057) (55,554)
Proceeds from sale of
property and equipment 29,907 14,917 2,955
Investments in customers (11,298) (12,764) (37,196)
Proceeds from sale of investments 17,649 4,933 7,077
Other investing activities (4,169) (2,793) 197
Net cash used in
investing activities (33,601) (537,627) (114,426)
Cash flows from financing activities:
Proceeds from long-term borrowings 93,000 2,225,751 331,502
Principal payments on long-term debt (452,690) (1,912,717) (373,693)
Principal payments on
capital lease obligations (17,269) (13,990) (11,316)
Sale of common stock under
incentive stock and
stock ownership plans 7,094 7,277 7,541
Dividends paid (44,749) (44,457) (44,153)
Other financing activities 25,290 (30,381) (7,076)
Net cash provided by (used in)
financing activities (389,324) 231,483 (97,195)
Net increase (decrease) in cash
and cash equivalents (23,926) 26,718 (3,078)
Cash and cash equivalents,
beginning of year 28,352 1,634 4,712
Cash and cash equivalents,
end of year $ 4,426 $ 28,352 $ 1,634
</TABLE>
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 30, 1995, December 31, 1994, and December 25,
1993
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS: The company markets food and food-related products to
supermarkets in 42 states, the District of Columbia and several foreign
countries. The company also operates approximately 370 company-owned stores
in several geographic areas. The company's operation encompasses two major
businesses: food and general merchandise distribution, and company-owned
retail operations.
FISCAL YEAR: The company's fiscal year ends on the last Saturday in December.
Fiscal years 1995 and 1993 were 52 weeks; 1994 was 53 weeks. The impact of the
additional week in 1994 is not material to the results of operations or
financial position.
BASIS OF PRESENTATION: The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
all material subsidiaries. Material intercompany items have been eliminated.
The equity method of accounting is used for investments in certain entities in
which the company has an investment in common stock of between 20% and 50%.
Under the equity method, original investments are recorded at cost and adjusted
by the company's share of earnings or losses of these entities and for
declines in estimated realizable values deemed to be other than temporary.
CASH AND CASH EQUIVALENTS: Cash equivalents consist of liquid investments
readily convertible to cash with a maturity of three months or less. The
carrying amount for cash equivalents is a reasonable estimate of fair value.
RECEIVABLES: Receivables include the current portion of customer notes
receivable of $42 million in 1995 and $68 million in 1994. Receivables are
shown net of allowance for credit losses of $35 million in 1995 and $40
million in 1994. The company extends credit to its retail customers located
over a broad geographic base. Regional concentrations of credit risk are
limited.
The company measures its estimates of impaired loans in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 114 - Accounting by
Creditors for Impairment of a Loan, as amended by SFAS No. 118 - Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures. The
1995 adoption of SFAS No. 114 and No. 118 did not materially impact amounts
previously reported. Interest income on impaired loans is recognized only
when payments are received.
INVENTORIES: Inventories are valued at the lower of cost or market. Most
grocery and certain perishable inventories, aggregating approximately 80% of
total inventories in both 1995 and 1994, are valued on a last-in, first-out
(LIFO) method. The cost for the remaining inventories was determined by the
first-in, first-out (FIFO) method. Current replacement cost of LIFO
inventories was greater than the carrying amounts by approximately $22 million
and $19 million at year-end 1995 and 1994, respectively.
PROPERTY AND EQUIPMENT: Property and equipment are recorded at cost or, for
leased assets under capital leases, at the present value of minimum lease
payments. Depreciation, as well as amortization of assets under capital
leases, are based on the estimated useful asset lives using the straight-line
method. Asset impairments are recorded when events or changes in
circumstances indicate that the carrying amount of the assets may not be
recoverable. Such impairment losses are measured by the excess of the
carrying amount of the asset over its fair value. In 1995, SFAS No. 121 -
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of was issued. The company will adopt SFAS No. 121 in 1996
and does not expect a material impact on the company's financial position or
results of operations.
The estimated useful lives used in computing depreciation and amortization
are: buildings and major improvements - 20 to 40 years; warehouse,
transportation and other equipment - 3 to 10 years; and data processing
equipment - 5 to 7 years.
GOODWILL: The excess of purchase price over the value of net assets of
businesses acquired is amortized on the straight-line method over periods not
exceeding 40 years. Goodwill is shown net of accumulated amortization of $127
million and $97 million in 1995 and 1994, respectively. Goodwill is written
down if it is probable that estimated undiscounted operating income generated
by the related assets will be less than the carrying amount.
FINANCIAL INSTRUMENTS: Interest rate hedge transactions and other financial
instruments are utilized to manage interest rate exposure. The difference
between amounts to be paid or received is accrued and recognized over the life
of the contracts. The methods and assumptions used to estimate the fair value
of significant financial instruments are discussed in the Investments and
Notes Receivable and Long-Term Debt notes.
TAXES ON INCOME: Deferred income taxes arise from temporary differences
between financial and tax bases of certain assets and liabilities.
FOREIGN CURRENCY TRANSLATION: Net exchange gains or losses resulting from the
translation of assets and liabilities of an international investment are
included in shareholders' equity.
NET EARNINGS PER SHARE: Earnings per share are computed based on net earnings
divided by the weighted average shares outstanding. The impact of common
stock options on earnings per share is immaterial.
RECLASSIFICATIONS: Certain reclassifications have been made to prior years'
amounts to conform to the current year's classification.
ACQUISITIONS
In July 1994, the company acquired all the outstanding stock of Haniel
Corporation, the parent of Scrivner Inc. ("Scrivner"). The company paid $388
million in cash and refinanced substantially all of Scrivner's existing $670
million indebtedness.
The acquisition was accounted for as a purchase and the results of operations
of Scrivner are included in the consolidated financial statements since the
beginning of the third quarter of 1994. The purchase price was allocated
based on estimated fair values at the date of the acquisition. The excess of
purchase price over assets acquired of $583 million is being amortized on a
straight-line basis over 40 years.
The following unaudited pro forma information presents a summary of
consolidated results of operations of the company and Scrivner as if the
acquisition had occurred at the beginning of 1993, with pro forma adjustments
to give effect to amortization of goodwill, interest expense on acquisition
debt and certain other adjustments, together with related income tax effects.
<TABLE>
<CAPTION>
(In millions, except per share amounts) 1994 1993
<S> <C> <C>
Net sales $ 18,947 $19,113
Net earnings $43 $19
Net earnings per share $1.15 $.53
</TABLE>
In late 1995, the company consolidated the results of operations and financial
position of a 71-store supermarket chain with operations in Arizona, and
acquired all of the assets of the operations in January 1996. In 1994, the
company acquired the remaining common stock of a supermarket operator of a
24-store chain with locations in Missouri and Kansas. In 1993, the company
acquired the assets or common stock of three businesses: distribution center
assets located in Garland, Texas, and certain assets and common stock of two
supermarket operators in southern Florida. These acquisitions were accounted
for as purchases. The results of these entities are not material to the
company in the respective years.
INVESTMENTS AND NOTES RECEIVABLE
Investments and notes receivable consist of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
<S> <C> <C>
Investments in and advances
to customers $103,941 $163,090
Notes receivable from customers 142,015 219,852
Other investments and receivables 25,807 19,661
Investments and notes receivable $271,763 $402,603
</TABLE>
The company extends long-term credit to certain retail customers. Loans are
primarily collateralized by inventory and fixtures. Interest rates are above
prime with terms up to 10 years. The carrying amount of notes receivable
approximates fair value because of the variable interest rates charged on the
notes.
The company's recorded investment in notes receivable with no related credit
loss allowance is $233 million. Impaired notes, including current portion,
total $28 million, with related allowances of $17 million. There were no
impaired loans without reserves. The average recorded investment in impaired
loans during 1995 was $30 million, with $1 million of related interest income
recognized during the year.
Investments in and advances to customers are shown net of reserves of $14
million and $9 million in 1995 and 1994, respectively.
The company has sold certain notes receivable at face value with limited
recourse. The outstanding balance at year-end 1995 on all notes sold is $95
million, of which the company is contingently liable for $15 million should
all the notes become uncollectible.
LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
<S> <C> <C>
Term bank loans, due 1996 to 2000,
average interest rates of 6.7% and 6.6% $ 659,497 $ 800,000
10.625% senior notes due 2001 300,000 300,000
Floating rate senior notes due 2001, annual
payments of $1,000 in 1999 and 2000,
interest rates of 8.1% and 8.7% 200,000 200,000
Medium-term notes, due 1997 to 2003,
average interest rates of 7.1% and 6.9% 99,000 155,950
Revolving bank credit, average interest
rate of 6.6% for both years 76,000 280,000
Uncommitted credit lines, average
interest rates of 6.4% 50,000 -
Mortgaged real estate notes and other debt,
varying interest rates from 4% to
14.4%, due 1996 to 2003 17,407 15,761
1,401,904 1,751,711
Less current maturities 53,917 110,321
Long-term debt $1,347,987 $1,641,390
</TABLE>
FIVE-YEAR MATURITIES: Aggregate maturities of long-term debt for the next
five years are as follows: 1996-$54 million; 1997-$126 million; 1998-$177
million; 1999-$216 million; and 2000-$186 million.
REVOLVING CREDIT AND TERM LOAN AGREEMENT: The company has a $1.25 billion
committed revolving credit and term loan agreement with a group of banks. The
bank credit agreement carries an annual facility fee on the total revolving
credit portion and a commitment fee on the unused amount of the revolving
credit portion. Interest rates are based on various money market rate options
selected by the company at the time of borrowing. Borrowings under the
revolving credit portion of the bank credit agreement mature in 1999 and the
amortizing term bank loan matures in 2000.
The bank credit agreement and senior note indentures contain customary
covenants associated with similar facilities. The bank credit agreement
contains the following financial covenants: consolidated-debt-to-net-worth
ratio of not more than 2.45 to 1; minimum consolidated net worth of at least
$883 million; and fixed charge coverage ratio of at least 1.25 to 1. The
company is in compliance with all financial covenants under the bank credit
agreement and senior note indentures. At year-end 1995, the restricted
payments test would have allowed the company to pay dividends or repurchase
capital stock in the aggregate amount of $51 million. The consolidated-
debt-to-net-worth test would have allowed the company to borrow an
additional $837 million. The fixed charge coverage test would have allowed
the company to incur an additional $12 million of annual interest or net
rental expense. The fixed charge coverage ratio was amended in February 1996
to a minimum requirement of 1.1 to 1 beginning in the first quarter of 1996.
The bank credit agreement and the senior note indentures also place
significant restrictions on the company's ability to incur additional
indebtedness, to create liens or other encumbrances, to make certain payments,
investments, loans and guarantees and to sell or otherwise dispose of a
substantial portion of assets to, or merge or consolidate with, an
unaffiliated entity.
The bank credit agreement contains a provision that, in the event of a defined
change of control, the agreement may be terminated. The indentures for the
senior notes provide an option for the note holders to require the company to
repurchase the notes in the event of a defined change of control and defined
decline in credit ratings.
MEDIUM-TERM NOTES: The company has registered $565 million in medium-term
notes. Of this, $290 million may be issued from time to time, at fixed or
floating rates, as determined at the time of issuance. Under the bank credit
agreement, new issues of certain kinds of debt must have a maturity after
December 2000. The security provisions for the bank credit agreement required
the company to equitably and ratably secure the medium-term notes. Security
for the medium-term notes consists of guarantees from most of the company's
subsidiaries and a pledge of intercompany receivables.
INTEREST EXPENSE: Components of interest expense are as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Interest costs incurred:
Long-term debt $135,254 $ 83,748 $ 44,628
Capital lease obligations 36,132 33,718 31,355
Other 4,712 2,969 2,046
Total incurred 176,098 120,435 78,029
Less interest capitalized 708 364 ---
Interest expense $175,390 $120,071 $ 78,029
</TABLE>
EARLY RETIREMENT OF DEBT: In 1993 the company recorded extraordinary losses
for early retirement of $63 million of 9.5% debentures. The loss was $2
million, after income tax benefits of $2 million, or $.06 per share. The
funding source for the early redemption was the sale of notes receivable.
DERIVATIVES: The company enters into interest rate hedge agreements with the
objective of managing interest costs and exposure to changing interest rates.
The classes of derivative financial instruments used include interest rate
swaps and caps. The bank credit agreement requires the company to provide
interest rate protection on a substantial portion of the related outstanding
indebtedness. Strategies for achieving the company's objectives have resulted
in the company maintaining interest rate swaps and caps covering $850 million
and $1 billion aggregate principal amount of floating rate indebtedness at
year-end 1995 and 1994, respectively. These amounts exceed the requirements
set forth in the bank credit agreement. The maturities for hedge agreements
range from 1997 to 2000. The counterparties to these agreements are major
national and international financial institutions.
The interest rate employed on most of the company's floating rate indebtedness
is equal to the London interbank offered rate ("LIBOR") plus a margin. The
average fixed interest rate paid by the company on the interest rate swaps is
6.95%, covering $600 million of floating rate indebtedness. The interest rate
swap agreements, which were implemented through six counterparty banks, and
which have an average remaining life of 2.9 years, provide for the company to
receive substantially the same LIBOR that the company pays on its floating
rate indebtedness. The company has purchased interest rate cap agreements
from an additional two counterparty banks for an additional $250 million of
its floating rate indebtedness. The agreements cap LIBOR at 7.33% over the
next three years.
The notional amounts of interest rate swaps and caps do not represent amounts
exchanged by the parties and are not a measure of the company's exposure to
credit or market risks. The amounts exchanged are calculated on the basis of
the notional amounts and the other terms of the hedge agreements. Notional
amounts are not included in the consolidated balance sheet.
The company believes its exposure to potential loss due to counterparty
nonperformance is minimized primarily due to the relatively strong credit
ratings of the counterparty banks for their unsecured long-term debt (A- or
higher from Standard & Poor's Ratings Group or A2 or higher from Moody's
Investor Service, Inc.) and the size and diversity of the counterparty banks.
The hedge agreements are subject to market risk to the extent that market
interest rates for similar instruments decrease, and the company terminates
the hedges prior to maturity. Changes in the fair value of the hedge
agreements offset changes in the fair value of the referenced debt. In 1995,
the company terminated $150 million notional principal of interest rate swaps
at an immaterial cost. These terminations occurred because the company repaid
more referenced debt than scheduled.
Derivative financial instruments are reported in the balance sheet where the
company has made a cash payment upon entering into or terminating the
transaction. The carrying amount is amortized over the initial life of the
hedge agreement. The company had a financial basis of $5 million and $7
million in the interest rate cap agreements at year-end 1995 and 1994,
respectively. In addition, accrued interest payable or receivable for the
interest rate agreements is included in the balance sheet. Payments made
under obligations or received for receivables are accounted for as interest
expense.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of long-term debt was
determined using valuation techniques that considered cash flows discounted at
current market rates and management's best estimate for instruments without
quoted market prices. At year-end 1995 and 1994, the carrying value of debt
exceeded the fair value by $38 million and $14 million, respectively.
For derivatives, the fair value was estimated using termination cash values.
At year-end 1995, interest rate hedge agreement values would represent an
obligation of $27 million, and at year-end 1994, an asset of $32 million.
SUBSIDIARY GUARANTEE OF SENIOR NOTES: The senior notes are guaranteed by all
direct and indirect subsidiaries of the company (except for certain
inconsequential subsidiaries), all of which are wholly owned. The guarantees
are joint and several, full, complete and unconditional. There are currently
no restrictions on the ability of the subsidiary guarantors to transfer funds
to the company in the form of cash dividends, loans or advances. Full
financial statements for the subsidiary guarantors are not presented herein
because management does not believe such information would be material.
The summarized financial information, which includes allocations of material
corporate-related expenses, for the combined subsidiary guarantors may not
necessarily be indicative of the results of operations or financial position
had the subsidiary guarantors been operated as independent entities.
<TABLE>
<CAPTION>
(In millions) 1995 1994
<S> <C> <C>
Current assets $251 $754
Noncurrent assets $487 $1,405
Current liabilities $104 $501
Noncurrent liabilities $1 $875
</TABLE>
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
<S> <C> <C> <C>
Net sales $2,842 $3,318 $11,759
Costs and expenses $2,787 $3,341 $11,674
Earnings (loss) before
extraordinary loss $27 $(12) $44
Net earnings (loss) $27 $(12) $42
</TABLE>
During 1995 and 1994, a significant number of subsidiaries were merged into
the parent company, resulting in a substantial reduction in the amounts
appearing in the summarized financial information.
LEASE AGREEMENTS
CAPITAL AND OPERATING LEASES: The company leases certain distribution
facilities with terms generally ranging from 20 to 30 years, while lease terms
for other operating facilities range from 1 to 15 years. The leases normally
provide for minimum annual rentals plus executory costs and usually include
provisions for one to five renewal options of five years.
The company leases company-owned retail store facilities with terms generally
ranging from 3 to 20 years. These agreements normally provide for contingent
rentals based on sales performance in excess of specified minimums. The
leases usually include provisions for one to three renewal options of two to
five years. Certain other equipment is leased under agreements ranging from
two to eight years with no renewal options.
Accumulated amortization related to leased assets under capital leases was $53
million and $45 million at year-end 1995 and 1994, respectively.
Future minimum lease payment obligations for leased assets under capital
leases as of year-end 1995 are set forth below:
<TABLE>
<CAPTION>
(In thousands) Lease
Years Obligations
<S> <C>
1996 $ 24,864
1997 23,676
1998 23,228
1999 22,893
2000 21,582
Later 181,187
Total minimum lease payments 297,430
Less estimated executory costs 226
Net minimum lease payments 297,204
Less interest 131,706
Present value of net minimum lease payments 165,498
Less current obligations 9,246
Long-term obligations $156,252
</TABLE>
Future minimum lease payments required at year-end 1995 under operating leases
that have initial noncancelable lease terms exceeding one year are presented
in the following table:
<TABLE>
<CAPTION>
(In thousands) Facility Facilities Equipment Equipment Net
Years Rentals Subleased Rentals Subleased Rentals
<S> <C> <C> <C> <C> <C>
1996 $ 176,027 $ 75,682 $31,402 $2,667 $ 129,080
1997 158,496 69,213 20,180 2,328 107,135
1998 147,072 60,393 13,031 1,546 98,164
1999 131,934 48,469 8,169 839 90,795
2000 119,134 38,699 2,895 570 82,760
Later 792,339 170,536 261 61 622,003
Total lease
payments $1,525,002 $462,992 $75,938 $8,011 $1,129,937
</TABLE>
The following table shows the composition of total annual rental expense under
noncancelable operating leases and subleases with initial terms of one year or
greater:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Minimum rentals $199,834 $160,065 $126,040
Contingent rentals 1,654 866 182
Less sublease income 92,108 77,684 57,308
Rental expense $109,380 $ 83,247 $ 68,914
</TABLE>
DIRECT FINANCING LEASES: The company leases retail store facilities for
sublease to customers with terms generally ranging from 5 to 25 years. Most
leases provide for a contingent rental based on sales performance in excess of
specified minimums. The leases and subleases usually contain provisions for
one to four renewal options of two to five years.
The following table shows the future minimum rentals receivable under direct
financing leases and future minimum lease payment obligations under capital
leases in effect at year-end 1995:
<TABLE>
<CAPTION>
(In thousands) Lease Rentals Lease
Years Receivable Obligations
<S> <C> <C>
1996 $ 43,332 $ 30,782
1997 40,560 30,936
1998 38,848 30,912
1999 35,563 30,817
2000 32,088 29,503
Later 247,768 233,744
Total minimum lease payments 438,159 386,694
Less estimated executory costs 1,727 1,719
Net minimum lease payments 436,432 384,975
Less unearned income 193,454 ---
Less interest --- 162,145
Present value of net minimum
lease payments 242,978 222,830
Less current portion 17,426 10,206
Long-term portion $225,552 $212,624
</TABLE>
Contingent rental income and contingent rental expense is not material.
FACILITIES CONSOLIDATION AND RESTRUCTURING
The results in 1993 included a charge of $108 million for facilities
consolidations, reengineering, impairment of retail-related assets and
elimination of regional operations. Components of the charge provided for
severance costs, impaired property and equipment, product handling and damage,
and impaired other assets. Four distribution centers have been closed and one
additional facility will be closed as part of the facilities consolidation
plan. Reengineering has occurred at 17 of the company's operating units.
Most impaired retail-related assets have been disposed or subleased. Regional
operations have been eliminated. In 1995 management changed its estimates
with respect to the general merchandising operations portion of the
reengineering plan and reversed $9 million of the related provision.
Facilities consolidation and restructuring reserve activities are:
<TABLE>
<CAPTION>
Reengineering/ Consolidation
Severance Costs/Asset
(In thousands) Total Costs Impairments
<S> <C> <C> <C>
Balance, year-end 1992 $ 29,892 $ 8,148 $21,744
Charged to costs and expenses 107,827 25,136 82,691
Expenditures and write-offs (52,198) (8,148) (44,050)
Balance, year-end 1993 85,521 25,136 60,385
Expenditures and write-offs (31,142) (2,686) (28,456)
Balance, year-end 1994 54,379 22,450 31,929
Credited to income (8,982) - (8,982)
Expenditures and write-offs (24,080) (6,690) (17,390)
Balance, year-end 1995 $ 21,317 $15,760 $ 5,557
</TABLE>
TAXES ON INCOME
Components of taxes on income (tax benefit) are as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Current:
Federal $24,817 $18,536 $48,742
State 7,022 7,202 10,327
Total current 31,839 25,738 59,069
Deferred:
Federal 9,850 22,188 (20,160)
State 2,202 8,242 (4,311)
Total deferred 12,052 30,430 (24,471)
Taxes on income $43,891 $56,168 $34,598
</TABLE>
Deferred tax expense (benefit) relating to temporary differences includes the
following components:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Depreciation and amortization $(23,398) $ (4,967) $ 516
Asset valuations and reserves 26,040 20,396 (28,849)
Equity investment results (312) 6,255 (6,767)
Credit losses 2,897 11,728 (5,417)
Prepaid expenses (71) 374 3,200
Lease transactions (1,170) (1,448) (2,307)
Noncompete agreements (100) 388 2,170
Associate benefits 2,249 (4,215) 10,800
Note sales (144) (2,547) 1,880
Acquired loss carryforwards 1,639 1,616 -
Other 4,422 2,850 303
Deferred tax expense (benefit) $12,052 $30,430 $(24,471)
</TABLE>
Temporary differences that give rise to deferred tax assets and liabilities as
of year-end 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
<S> <C> <C>
DEFERRED TAX ASSETS:
Depreciation and amortization $ 8,709 $ 6,028
Asset valuations and
reserve activities 75,215 78,622
Associate benefits 68,783 68,595
Credit losses 23,885 26,775
Equity investment results 9,440 10,969
Lease transactions 11,840 11,009
Inventory 15,954 14,993
Acquired loss carryforwards 6,198 10,690
Other 19,183 18,533
Gross deferred tax assets 239,207 246,214
Less valuation allowance (4,514) (4,514)
Total deferred tax assets 234,693 241,700
DEFERRED TAX LIABILITIES:
Depreciation and amortization 128,924 154,688
Equity investment results 2,166 4,036
Lease transactions 1,825 1,743
Inventory 59,113 63,666
Associate benefits 23,402 19,060
Asset valuations and reserve activities 8,025 7,379
Note sales 3,495 3,373
Prepaid expenses 3,578 3,799
Other 17,620 13,876
Total deferred tax liabilities 248,148 271,620
Net deferred tax liability $ (13,455) $ (29,920)
</TABLE>
The valuation allowance relates to $4 million of acquired loss carryforwards
that, if utilized, will be reversed to goodwill in future years. Management
believes it is more likely than not that all other deferred tax assets will be
realized.
The effective income tax rates are different from the statutory federal income
tax rates for the following reasons:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0%
State income taxes, net of
federal tax benefit 7.0 8.9 5.4
Acquisition-related differences 8.4 6.9 6.9
Other .7 (.8) .7
Effective rate 51.1% 50.0% 48.0%
</TABLE>
SEGMENT INFORMATION
The following table sets forth the composition of the company's net sales,
operating earnings, depreciation and amortization, capital expenditures and
identifiable assets. Food distribution includes food and general merchandise
distribution.
<TABLE>
<CAPTION>
(In millions) 1995 1994 1993
<S> <C> <C> <C>
NET SALES
Food distribution $16,665 $15,543 $13,109
Less sales elimination 2,529 1,953 957
Net food distribution 14,136 13,590 12,152
Retail food 3,366 2,134 944
Total $17,502 $15,724 $13,096
OPERATING EARNINGS
Food distribution $282 $263 $245
Retail food 52 27 19
Corporate (113) (100) (53)
Total operating earnings 221 190 211
Interest expense 175 120 78
Interest income (58) (57) (59)
Equity investment results 27 15 12
Facilities consolidation and
restructuring (9) --- 108
Earnings before taxes $86 $112 $ 72
DEPRECIATION AND AMORTIZATION
Food distribution $115 $ 99 $ 80
Retail food 43 33 15
Corporate 23 14 6
Total $181 $146 $101
CAPITAL EXPENDITURES
Food distribution $66 $107 $ 42
Retail food 30 26 8
Corporate 18 7 3
Total $114 $140 $53
IDENTIFIABLE ASSETS
Food distribution $3,021 $3,262
Retail food 588 547
Corporate 688 799
Total $4,297 $4,608
</TABLE>
SHAREHOLDERS' EQUITY
The company offers a Dividend Reinvestment and Stock Purchase Plan which
offers shareholders the opportunity to automatically reinvest their dividends
in common stock at a 5% discount from market value. Shareholders also may
purchase shares at market value by making cash payments up to $5,000 per
calendar quarter. Such programs resulted in 283,000 and 270,000 new shares in
1995 and 1994, respectively.
The company has a rights plan designed to protect stockholders should the
company become the target of coercive and unfair takeover tactics.
Stockholders have one right for each share of common stock held. When
exercisable, each right entitles stockholders (other than any defined
acquiror) to buy one share of common stock at an exercise price of $150 (the
"Exercise Price") in the event of certain defined events that constitute a
change of control or to exchange the right upon the payment of the Exercise
Price for that number of shares of company common stock determined by dividing
twice the Exercise Price ($300) by the then current market price of the common
stock. Furthermore, if the company is involved in a merger or other business
combination or sale of a specified percentage of assets or earning power, the
rights (other than those held by the acquiror) may be used to purchase, for
the Exercise Price, that number of shares of the acquiror's common stock
determined by dividing twice the Exercise Price by the then current market
price of the acquiror's common stock. The rights expire on July 6, 1996.
In February 1996, the company adopted a new rights plan to replace the current
plan upon its expiration. The new plan operates in a manner substantially
identical to the existing plan except that each right initially entitles the
stockholder (other than the acquiror) to purchase 1/100 of a share of new
preferred stock and the Exercise Price is $75. The new rights plan expires on
July 6, 2006.
The company has severance agreements with certain management associates. The
agreements generally provide two years' salary to these associates if the
associate's employment terminates within two years after a change of control.
In the event of a change of control, a supplemental trust will be funded to
provide these salary obligations.
The company's employee stock ownership plan (ESOP) established in 1990 allows
substantially all associates to participate. In 1990, the ESOP entered into a
note with a bank to finance purchase of the shares. In 1994, the company paid
off the note and entered into a note from the ESOP. The ESOP will repay to
the company the remaining loan balance with proceeds from company
contributions. The receivable from the ESOP is presented as a reduction of
shareholders' equity.
The company makes contributions based on fixed debt service requirements of
the ESOP note. Such contributions were approximately $2 million per year in
1995, 1994 and 1993. Dividends used by the ESOP for debt service and interest
and compensation expense recognized by the company were not material.
The company's stock option plans allow the granting of nonqualified stock
options and incentive stock options, with or without stock appreciation rights
(SARs), to key associates.
In 1995 and 1994, options with SARs were exercisable for 14,000 and 20,000
shares, respectively. Options without SARs were exercisable for 1,865,000
shares in 1995 and 790,000 shares in 1994. At year-end 1995, there were
208,000 shares available for grant under the stock option plans.
The company has a stock incentive plan that allows awards to key associates of
up to 400,000 restricted shares of common stock and phantom stock units. At
year-end 1995, 81,000 shares were available for grant under the stock
incentive plan. Shares granted are recorded at the market value when issued
and amortized to expense as earned. The unamortized portion was $4 million at
year-end 1995 and is netted against capital in excess of par value within
shareholders' equity.
Stock option and stock incentive transactions are as follows:
<TABLE>
<CAPTION>
(Shares in thousands) Options Price Range
<S> <C> <C>
Outstanding, year-end 1993 983 $ 4.72 - 42.13
Granted 1,782 $24.81 - 29.75
Exercised (7) $ 4.72 - 25.19
Canceled and forfeited (288) ---
Outstanding, year-end 1994 2,470 $10.29 - 42.13
Granted 118 $19.44 - 26.44
Exercised (10) $10.29 - 24.94
Canceled and forfeited (457) ---
Outstanding, year-end 1995 2,121 $19.44 - 42.13
</TABLE>
In the event of a change of control, the company may accelerate the vesting
and payment of any award or make a payment in lieu of an award.
In 1995, SFAS No. 123 - Accounting for Stock-Based Compensation was issued
which establishes a fair value method and disclosure standards for stock-based
employee compensation arrangements such as stock purchase plans and stock
options. The company will continue to follow the provisions of Accounting
Principles Board Opinion No. 25 for such stock-based compensation arrangements
and disclose the effects of applying SFAS No. 123 in the notes to the 1996
financial statements.
ASSOCIATE RETIREMENT PLANS
The company sponsors retirement and profit sharing plans for substantially all
non-union and some union associates. The major plans are funded and have plan
assets that exceed the accumulated benefit obligation.
Contributory profit sharing plans maintained by the company are for associates
who meet certain types of employment and length of service requirements.
Company contributions under these defined contribution plans are made at the
discretion of the board of directors. Expenses for these plans were $3
million, $6 million and $2 million in 1995, 1994 and 1993, respectively.
Benefit calculations for the company's defined benefit pension plans are
primarily a function of years of service and final average earnings at the
time of retirement. Final average earnings are the average of the highest
five years of compensation during the last 10 years of employment. The
company funds these plans by contributing the actuarially computed amounts
that meet funding requirements.
The following table sets forth the company's major defined benefit pension
plans' funded status and the amounts recognized in the statements of earnings.
Substantially all the plans' assets are invested in listed stocks, short-term
investments and bonds. The significant actuarial assumptions used in the
calculation of funded status for 1995 and 1994, respectively are: discount
rate - 7.25% and 8.75%; compensation increases - 4.0% and 4.5%; and return on
assets - 9.5% for both years.
<TABLE>
<CAPTION>
(In thousands) 1995 1994
<S> <C> <C>
Actuarial present
value of accumulated
benefit obligations:
Vested $207,731 $169,132
Total $213,390 $176,380
Projected benefit
obligations $229,649 $191,637
Plan assets at
fair value 222,434 185,180
Projected benefit
obligation in
excess of
plan assets 7,215 6,457
Unrecognized net
loss (37,330) (37,980)
Unrecognized prior
service cost (1,039) (1,684)
Unrecognized
net asset 1,391 159
Prepaid pension cost $(29,763) $(33,048)
</TABLE>
Net pension expense includes the following components:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Service cost $ 11,348 $ 7,288 $ 5,074
Interest cost 16,367 15,258 13,432
Actual (return) loss
on plan assets (45,217) 5,064 (19,103)
Net amortization
and deferral 29,807 (17,036) 6,756
Net pension expense $ 12,305 $ 10,574 $ 6,159
</TABLE>
The company also has nonqualified supplemental retirement plans for selected
associates. These plans are unfunded with a projected benefit obligation of
$23 million and $17 million; and unrecognized prior service and actuarial
losses of $11 million and $6 million at year-end 1995 and 1994, respectively,
based on actuarial assumptions consistent with the funded plans. The net
pension expense for the unfunded plans was $3 million, $2 million and $3
million for 1995, 1994 and 1993, respectively.
Certain associates have pension and health care benefits provided under
collectively bargained multiemployer agreements. Expenses for these benefits
were $75 million, $56 million and $44 million for 1995, 1994 and 1993,
respectively.
ASSOCIATE POSTRETIREMENT HEALTH CARE BENEFITS
The company offers a comprehensive major medical plan to eligible retired
associates who meet certain age and years of service requirements. This
unfunded defined benefit plan generally provides medical benefits until
Medicare insurance commences.
Components of postretirement benefits expense are as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Service cost $ 137 $ 223 $ 140
Interest cost 1,642 1,542 1,628
Amortization of net loss 141 196 138
Postretirement expense $1,920 $1,961 $1,906
</TABLE>
The composition of the accumulated postretirement benefit obligation (APBO)
and the amounts recognized in the balance sheets are presented below.
<TABLE>
<CAPTION>
(In thousands) 1995 1994
<S> <C> <C>
Retirees $17,197 $16,385
Fully eligible actives 811 1,046
Others 2,216 2,569
APBO 20,224 20,000
Unrecognized net loss (587) (2,010)
Accrued postretirement benefit cost $19,637 $17,990
</TABLE>
The weighted average discount rate used in determining the APBO was 7.25% and
8.75% for 1995 and 1994, respectively. For measurement purposes in 1995 and
1994, a 12% and 14%, respectively, annual rate of increase in the per capita
cost of covered medical care benefits was assumed. In 1995, the rate was
assumed to decrease to 6.5% by the year 2003, then remain level. In 1994, the
rate was assumed to decrease to 8% by 2000, then to 7.5% in 2001 and
thereafter. If the assumed health care cost increased by 1% for each future
year, the current cost and the APBO would have increased by approximately 4%
to 6% for all periods presented.
The company also provides other benefits for certain inactive associates.
Expenses related to these benefits are immaterial.
SUPPLEMENTAL CASH FLOWS INFORMATION
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Acquisitions:
Fair value of assets acquired $142,458 $1,575,323 $111,077
Less:
Liabilities assumed or created 63,873 1,198,050 9,057
Existing company investment 51,126 (15,281) 50,628
Cash acquired 16,805 5,066 282
Cash paid, net of cash acquired $ 10,654 $ 387,488 $ 51,110
Cash paid during the year for:
Interest, net of
amounts capitalized $171,141 $ 98,254 $ 79,634
Income taxes, net of refunds $ (9,593) $ 40,414 $ 74,320
Direct financing leases
and related obligations $ 28,568 $ 15,640 $ 33,594
Property and equipment
additions by capital leases $ 8,840 $ 30,606 $ 21,011
</TABLE>
LITIGATION AND CONTINGENCIES
The company and several other defendants have been named in two suits filed in
U.S. District Court in Miami, Florida. The plaintiffs predicate liability on
the part of the company as a consequence of an allegedly fraudulent scheme
conducted by Premium Sales Corporation and others in which unspecified but
large losses in the Premium-related entities occurred to the detriment of a
purported class of investors which has brought one of the suits. The
other suit is by the receiver/trustee of the estates of Premium and
certain of its affiliated entities. Plaintiffs seek actual damages, treble
damages, attorneys' fees, costs, expenses and other appropriate relief. While
the amount of damages sought under most claims is not specified, plaintiffs
allege that hundreds of millions of dollars were lost as the result of the
allegations contained in the complaints.
The litigation is complex and the ultimate outcome, which is not expected to
be known for over one year, cannot presently be determined. Furthermore,
management is unable to predict a potential range of monetary exposure, if any,
to the company. Based on the large recovery sought, an unfavorable result
could have a material adverse effect on the company. Management believes,
however, that a material adverse effect on the company's consolidated
financial position is less than probable. The company is vigorously
defending the actions.
The company and one of its former subsidiaries were named in a lawsuit filed
in District Court in Johnson County, Texas, in which the plaintiff alleges
liability on the part of the company as the result of breach of contract,
fraud, conspiracy and violation of the Texas Deceptive Trade Practices Act.
Plaintiff seeks actual damages alleged to equal or exceed $50 million,
treble damages, exemplary damages, attorneys' fees, interest and costs.
The case went to trial in February 1996.
Management is unable to predict a potential range of monetary exposure, if any,
to the company, but believes the claims asserted are without merit and that a
material adverse effect on the company's consolidated financial position is
less than probable. However, based on the large recovery sought, an unfavorable
result could have a material adverse effect on the company. The company is
vigorously defending the litigation.
A customer of the company and certain of its affiliates filed Chapter 11
bankruptcy proceedings in the U.S. Bankruptcy Court in Arizona. As of the
date of filing, the debtors' total indebtedness to the company for goods sold
on open account, equipment leases and loans aggregated approximately $28
million, for which claims have been filed in the bankruptcy proceedings.
The company holds collateral with respect to a substantial portion of these
obligations and will continue to pursue collection of its claims through
the reorganization proceeding. The debtor is also liable or contingently
liable to the company under store sublease or lease guarantee agreements.
The company is partially secured as to these obligations. The debtor has also
filed an adversary proceeding against the company seeking subordination of the
company's claims, return of a $12 million deposit and affirmative relief for
damages. Absent appeal, the ultimate outcome of these proceedings are
expected within one year. The company took a charge of $6.5 million in
1994 and approximately $3.5 million in 1995. Financial exposure, if any, with
respect to the subordination of the company's claims and the $12 million
deposit could result in a loss of up to $20 million in excess of the amount
accrued.
The company's facilities are subject to various laws and regulations regarding
the discharge of materials into the environment. In conformity with these
provisions, the company has a comprehensive program for testing and removal,
replacement or repair of its underground fuel storage tanks and for site
remediation where necessary. The company has established reserves that it
believes will be sufficient to satisfy anticipated costs of all known
remediation requirements. In addition, the company is addressing several
other environmental cleanup matters involving its properties, all of which the
company believes are immaterial.
The company has been designated by the U.S. Environmental Protection Agency
("EPA") as a potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") with others, with respect
to EPA-designated Superfund sites. While liability under CERCLA for remedia-
tion at such sites is joint and several with other responsible parties,
the company believes that, to the extent it is ultimately determined
to be liable for clean up at any site, such liability will not result in a
material adverse effect on its consolidated financial position or results of
operations.
The company is committed to maintaining the environment and protecting natural
resources and to achieving full compliance with all applicable laws and
regulations.
The company is a party to various other litigation, possible tax assessments
and other matters, some of which are for substantial amounts, arising in the
ordinary course of business. While the ultimate effect of such actions cannot
be predicted with certainty, the company expects that the outcome of these
matters will not result in a material adverse effect on its consolidated
financial position or results of operations.
At year-end 1995, the company has aggregate contingent liabilities for future
minimum rental commitments made on behalf of customers with a present value of
approximately $90 million.
SUBSEQUENT EVENTS
The lawsuit filed in Johnson County, Texas (David's Supermarkets, Inc. v.
Fleming Companies, Inc., ("David's"); see Litigation and Contingencies note)
went to trial on February 19, 1996 and on March 14 and 15, 1996 the jury
reached a verdict against the company. The company considered the claims
to be without merit. However, following a four-week trial the jury found the
company's disputed overcharges amounted to $2.8 million and rendered a
verdict against the company. David's filed a motion for judgment on its
claim for $207.5 million for violation of the Texas Deceptive Trade Practices
Act ("DTPA") reserving the right to recover under any alternative
theory supported by the verdict in the event the judgment on the DTPA
is in any way modified or reversed on appeal.
On April 4, 1996, the company and its banks amended the company's credit
agreement to increase the letter of credit subfacility in order for the
company to obtain a supersedeas appeal bond. See Long-Term Debt note.
On April 12, 1996, plaintiff's motion for judgment was granted in the
amount of $207.5 million plus pre-judgment interest of $3.7 million and
post-judgment interest at the rate of 10% per annum. The company posted
the bond immediately after the judgment was granted and will appeal the
judgment.
The company posted the bond amount through arrangements with several
sureties. The bond is secured by letters of credit which are supported
by the bank credit agreement. The cost of the bond and letter of credit
requirements, as well as attorney's fees, is expected to be approximately
$3 million annually which will negatively impact future earnings.
Based on management's present assessment of the ultimate outcome, a charge
of approximately $7 million is expected in the first quarter of 1996.
In view of the large amount of the award, an unfavorable result from the
appellate process would have a material adverse effect on the company.
The appellate process may take up to three years, or longer.
In view of the large award in the David's litigation, assertions
of similar allegations could occur in future or continuing litigation.
Management is unable to predict the potential range of monetary exposure,
if any, to the company. However, if successfully asserted, any unfavorable
outcome could have a material adverse effect on the company.
On March 28, 1996, the Board of Directors cut the quarterly cash dividend
from $.30 per share to $.02 per share for the second quarter of 1996.
The bank credit agreement amendment limits dividend payments beginning
in the second quarter of 1996 to $.08 per share, per quarter. After
considering the effect of the recently issued letters of credit related
to the supersedeas bond, which are considered a use of the company's
borrowing capacity, and the related bank credit agreement amendment, at
year-end 1995 the company would have been allowed to borrow an additional
$190 million. Management believes that the cash flows from operating
activities and the company's ability to borrow under the amended bank
credit agreement will be adequate to meet working capital needs, capital
expenditures and other cash needs for the next twelve months. The company
is currently in compliance with all covenants under the amended bank
credit agreement.
Moody's and Standard & Poor's have placed the company's rated debt under
review for possible downgrade and CreditWatch with negative implications,
respectively, due in part to the uncertainties created by the judgment.
From the date of the jury verdict through April 12, 1996, the company and
certain officers, including the chief executive officer, were named as
defendants in three class action lawsuits filed by certain of its stock-
holders and one class action lawsuit filed by certain noteholders, each
in the U.S. District Court for the Western District of Oklahoma, alleging
the company failed to properly disclose and account for the David's
litigation. The plaintiffs seek undetermined but significant damages.
The company denies these allegations and intends to vigorously defend the
actions. Management is unable to predict a potential range of monetary
exposure, if any, to the company. However, an unfavorable outcome would
have a material adverse effect on the company.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Fleming Companies, Inc.
We have audited the accompanying consolidated balance sheets of Fleming
Companies, Inc. and subsidiaries as of December 30, 1995 and December 31, 1994,
and the related consolidated statements of earnings, shareholders' equity, and
cash flows for each of the three years in the period ended December 30, 1995.
Our audits also included the financial statement schedule listed in the index
at item 14. These financial statements and financial statement schedule are
the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of Fleming Companies,
Inc. and subsidiaries as of December 30, 1995 and December 31, 1994, and the
results of their operations and their cash flows for each of the three years
in the period ended December 30, 1995, in conformity with generally accepted
accounting principles. Also, in our opinion such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Deloitte & Touche LLP
Oklahoma City, Oklahoma
February 22, 1996
(April 12, 1996 as to effects of a jury verdict,
other resulting legal proceedings and related matters
discussed in Subsequent Events note)
<PAGE>
QUARTERLY FINANCIAL INFORMATION
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
1995 First Second Third Fourth Year
<S> <C> <C> <C> <C> <C>
Net sales $5,458,982 $4,000,070 $3,898,361 $4,144,159 $17,501,572
Costs and expenses:
Cost of sales 5,020,518 3,676,391 3,599,252 3,794,878 16,091,039
Selling and administrative 364,081 264,817 258,020 302,281 1,189,199
Interest expense 56,397 40,046 38,603 40,344 175,390
Interest income (19,481) (14,393) (11,673) (12,659) (58,206)
Equity investment results 6,473 3,074 6,658 11,035 27,240
Facilities consolidation (8,982) --- --- --- (8,982)
Total costs and expenses 5,419,006 3,969,935 3,890,860 4,135,879 17,415,680
Earnings before taxes 39,976 30,135 7,501 8,280 85,892
Taxes on income 20,428 15,399 3,833 4,231 43,891
Net earnings $19,548 $14,736 $3,668 $4,049 $42,001
Net earnings per share $.52 $.39 $.10 $.11 $1.12
Dividends paid per share $.30 $.30 $.30 $.30 $1.20
Weighted average shares
outstanding 37,497 37,546 37,619 37,675 37,577
</TABLE>
<TABLE>
<CAPTION>
1994 First Second Third Fourth Year
<S> <C> <C> <C> <C> <C>
Net sales $4,032,176 $2,885,028 $4,125,774 $4,680,713 $15,723,691
Costs and expenses:
Cost of sales 3,780,871 2,701,353 3,808,438 4,310,388 14,601,050
Selling and administrative 198,143 143,018 279,249 312,178 932,588
Interest expense 22,139 16,345 36,929 44,658 120,071
Interest income (15,879) (11,596) (14,125) (15,548) (57,148)
Equity investment results 3,257 2,640 5,130 3,766 14,793
Total costs and expenses 3,988,531 2,851,760 4,115,621 4,655,442 15,611,354
Earnings before taxes 43,645 33,268 10,153 25,271 112,337
Taxes on income 19,248 14,671 7,437 14,812 56,168
Net earnings $ 24,397 $ 18,597 $ 2,716 $ 10,459 $ 56,169
Net earnings per share $.66 $.50 $.07 $.28 $1.51
Dividends paid per share $.30 $.30 $.30 $.30 $1.20
Weighted average shares
outstanding 37,093 37,247 37,332 37,424 37,254
</TABLE>
The first quarter of both years consists of 16 weeks; all other quarters are
12 weeks, except for the fourth quarter of 1994 which was 13 weeks. The year
1994 was a 53-week year.
The results of Scrivner are included effective at the beginning of the third
quarter of 1994.
Certain reclassifications have been made to conform to 1995 classifications.
See notes to consolidated financial statements, including Subsequent Events.
<PAGE>
SCHEDULE II
FLEMING COMPANIES, INC.
AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 30, 1995,
DECEMBER 31, 1994, AND DECEMBER 25, 1993
(In thousands)
<TABLE>
<CAPTION>
Allowance
for
Credit Losses Current Noncurrent
<S> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
BALANCE, December 26, 1992 $ 43,531 $25,298 $18,233
Charged to costs and expenses 52,018
Uncollectible accounts written off, (32,954)
less recoveries
BALANCE, December 25, 1993 62,595 $44,320 $18,275
Acquired reserves,
Scrivner acquisition, July 19, 1994 25,950
Charged to costs and expenses 61,218
Uncollectible accounts written off,
less recoveries (101,196)
BALANCE, December 31, 1994 48,567 $39,506 $9,061
Charged to costs and expenses 30,513
Uncollectible accounts written off,
less recoveries (25,676)
BALANCE, December 30, 1995 $ 53,404 $35,136 $18,268
</TABLE>
EXHIBIT 4.14
WAIVER
WAIVER (this "Waiver") dated as of April 1, 1996,
under the $2,200,000,000 Credit Agreement dated as of July
19, 1994 (as heretofore amended, the "Credit Agreement")
among FLEMING COMPANIES, INC., the BANKS party thereto, the
AGENTS party thereto and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Managing Agent.
W I T N E S S E T H:
WHEREAS, the Borrower has advised the Banks that
due to the David's Supermarkets Litigation (as defined
below) it needs certain waivers under the Credit Agreement
and, subject to the terms and conditions hereof, the Banks
party hereto are willing to grant certain waivers under the
Credit Agreement, as more fully set forth herein.
NOW, THEREFORE, the parties hereto agree as
follows:
SECTION 1. Definitions. (a) Unless otherwise
specifically defined herein, each term used herein that is
defined in the Credit Agreement shall have the meaning
assigned to such term in the Credit Agreement.
(b) In addition, the following term shall have
the following meaning:
"David's Supermarkets Litigation" means David's
Supermarkets, Inc. v. Fleming Companies, Inc., et al., No.
246-93 (District Court, 18th Judicial District, Johnson
County, Texas), including the verdict or any judgment
entered therein or any payment of such judgment or in
settlement thereof.
SECTION 2. Certain Waivers. (a) The Banks
hereby waive the requirements of clause (c) of Section 3.01
of the Credit Agreement to the limited extent that the
representations and warranties contained in Sections 4.04(c)
and 4.05 of the Credit Agreement are not true solely on
account of the David's Supermarkets Litigation, and any
representation and warranty deemed made by the Borrower on
or after the date hereof pursuant to Section 3.01 of the
Credit Agreement shall be deemed qualified to such extent.
(b) The Banks hereby waive any Default that may
have occurred as a result of the Borrower at any time prior
to the date hereof having made or been deemed to have made
the representations and warranties set forth in Sections
4.04(c) and 4.05 of the Credit Agreement without
qualification by reference to the David's Supermarkets
Litigation.
(c) The Banks hereby waive (i) any Default under
any Operative Agreement that may occur as a result of any
Lien existing in favor of the plaintiff in the David's
Supermarkets Litigation (A) in the nature of a garnishment
against Receivables from Texas customers of the Borrower or
any of its Subsidiaries or (B) arising by virtue of the
filing of an abstract of a judgment in the David's
Supermarkets Litigation and (ii) the requirements of clause
(c) of Section 3.01 of the Credit Agreement to the limited
extent that any representation and warranty of the Borrower
or a Subsidiary in the other Operative Agreements is not
true solely on account of the existence of such Liens, and
any representation and warranty deemed made by the Borrower
on or after the date hereof pursuant to Section 3.01 of the
Credit Agreement shall be deemed qualified to the extent set
forth in clauses (i) and (ii).
(d) The foregoing waivers (including the
references to any representation and warranty made on or
after the date hereof being deemed qualified) shall be
effective solely during the period ending 5:00 P.M. (New
York City time) on April 10, 1996 and, in the case of clause
(c), thereafter shall not apply to any such Lien even if
such Lien first arose during such period.
SECTION 3. Borrowings. The Borrower agrees that
during the period from the date hereof until 5:30 P.M. (New
York City time) on April 10, 1996, it will not give any
Notice of Borrowing for Tranche A Loans in an amount in
excess of its actual cash needs in the ordinary course of
business (net of other sources of funds available or
expected to be available to it, including previous
Borrowings, but not including any need in respect of the
David's Supermarkets Litigation) during the three-day period
beginning with the related date of Borrowing, determined
consistent with the Borrower's historical cash management
practices and in light of any failure or projected failure
of the Borrower to receive payment from Texas customers on
account of Liens of the character described Section 2(c), as
certified in reasonable detail by the Borrower's Chief
Financial Officer or Treasurer in a certificate accompanying
such Notice of Borrowing, provided that the maximum amount
of Borrowings that the Borrower may make the subject of a
Notice of Borrowing while this Waiver is in effect may not
exceed $60,000,000.
SECTION 4. Representations Correct; No Default.
The Borrower represents and warrants that, except as
expressly waived hereby, on and as of the date hereof (i)
the representations and warranties contained in the Credit
Agreement and each other Operative Agreement are true as
though made on and as of the date hereof and (ii) no Default
has occurred and is continuing.
SECTION 5. Counterparts; Effectiveness. (a)
This Waiver may be signed in any number of counterparts,
each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same
instrument.
(b) This Waiver shall become effective as of the
date hereof when the Managing Agent shall have received duly
executed counterparts hereof signed by the Borrower and the
Required Banks (or, in the case of any Bank as to which an
executed counterpart shall not have been received, the
Managing Agent shall have received telegraphic, telex or
other written confirmation from such party of execution of a
counterpart hereof by such Bank).
(c) Except as expressly set forth herein, the
waivers contained herein shall not constitute a waiver or
amendment of any term or condition of the Credit Agreement
or any other Operative Agreement, and all such terms and
conditions shall remain in full force and effect and are
hereby ratified and confirmed in all respects.
SECTION 4. Governing Law. THIS WAIVER SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused
this Waiver to be duly executed by their respective
authorized officers as of the day and year first above
written.
FLEMING COMPANIES, INC.
By
Title:
BANKS
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By
Title:
THE BANK OF NOVA SCOTIA
By
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
By
Title:
CREDIT SUISSE
By
Title:
By
Title:
DEUTSCHE BANK AG NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By
Title:
By
Title:
THE FUJI BANK, LIMITED
By
Title:
NATIONSBANK OF TEXAS, N.A.
By
Title:
SOCIETE GENERALE, SOUTHWEST AGENCY
By
Title:
THE SUMITOMO BANK LTD.
HOUSTON AGENCY
By
Title:
THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH
By
Title:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By
Title:
THE TORONTO-DOMINION BANK
By
Title:
UNION BANK OF SWITZERLAND,
HOUSTON AGENCY
By
Title:
By
Title:
FIRST INTERSTATE BANK OF CALIFORNIA
By
Title:
By
Title:
WACHOVIA BANK OF GEORGIA,
NATIONAL ASSOCIATION
By
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By
Title:
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND",
NEW YORK BRANCH
By
Title:
By
Title:
THE SANWA BANK LIMITED,
DALLAS AGENCY
By
Title:
BANQUE NATIONALE DE PARIS
By
Title:
BOATMEN'S FIRST NATIONAL BANK
OF OKLAHOMA
By
Title:
CITIBANK N.A.
By
Title:
DAI-ICHI KANGYO BANK, LTD.
NEW YORK BRANCH
By
Title:
THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY
By
Title:
LTCB TRUST COMPANY
By
Title:
THE MITSUBISHI BANK, LIMITED
HOUSTON AGENCY
By
Title:
NATIONAL WESTMINSTER BANK Plc
NASSAU BRANCH
By
Title:
NATIONAL WESTMINSTER BANK Plc
NEW YORK BRANCH
By
Title:
UNITED STATES NATIONAL BANK
OF OREGON
By
Title:
BANK OF AMERICA ILLINOIS
By
Title:
PNC BANK, NATIONAL ASSOCIATION
By
Title:
BANK OF HAWAII
By
Title:
THE BANK OF TOKYO, LTD.,
DALLAS AGENCY
By
Title:
BANQUE PARIBAS
By
Title:
By
Title:
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By
Title:
By
Title:
BAYERISCHE VEREINSBANK AG,
LOS ANGELES AGENCY
By
Title:
By
Title:
BHF-BANK AKTIENGESELLSCHAFT,
NEW YORK BRANCH
By
Title:
By
Title:
DG BANK
DEUTSCHE GENOSSENSCHAFTSBANK
By
Title:
By
Title:
FIRST HAWAIIAN BANK
By
Title:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By
Title:
LIBERTY BANK AND TRUST COMPANY
OF OKLAHOMA CITY, N.A.
By
Title:
MANUFACTURERS AND TRADERS
TRUST COMPANY
By
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By
Title:
THE MITSUI TRUST AND BANKING
COMPANY, LIMITED
By
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, New York Branch
By
Title:
By
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, Cayman Islands
Branch
By
Title:
By
Title:
THE YASUDA TRUST AND BANKING
COMPANY, LTD.
By
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By
Title:
BANK HAPOALIM B.M.,
LOS ANGELES BRANCH
By
Title:
By
Title:
THE BANK OF IRELAND
By
Title:
KREDIETBANK N.V.
By
Title:
By
Title:
MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION
By
Title:
THE SUMITOMO BANK OF CALIFORNIA
By
Title:
THE SUMITOMO TRUST & BANKING CO.,
LTD. NEW YORK BRANCH
By
Title:
EXHIBIT 4.15
AMENDMENT NO. 5 TO CREDIT AGREEMENT
AMENDMENT dated as of April 4, 1996, to the $2,200,000,000 Credit
Agreement dated as of July 19, 1994 (as heretofore amended, the "Credit
Agreement") among FLEMING COMPANIES, INC., the BANKS party thereto, the AGENTS
party thereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Managing
Agent.
W I T N E S S E T H:
WHEREAS, the Borrower has advised the Banks that due to the
David's Supermarkets Litigation (as defined below) it needs certain amendments
of and waivers under the Credit Agreement and, subject to the terms and
conditions hereof, the Banks party hereto are willing to agree to such
amendments and waivers;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise
specifically defined herein, each term used herein that is defined in the
Credit Agreement shall have the meaning assigned to such term in the Credit
Agreement. Each reference to "hereof," "hereunder," "herein" and "hereby" and
each other similar reference and each reference to "this Agreement" and each
other similar reference contained in the Credit Agreement shall from and after
the date hereof refer to the Credit Agreement as amended hereby.
SECTION 2. Amendments and Waivers of Sections 4.04(c) and 4.05 of
the Credit Agreement. (a) Section 1.01 of the Credit Agreement is amended by
adding a new definition reading as follows:
"David's Supermarkets Litigation" means David's
Supermarkets, Inc. v. Fleming Companies, Inc., et al., No. 246-93
(District Court, 18th Judicial District, Johnson County, Texas),
including the verdict or any judgment entered therein or any payment of
such judgment or in settlement thereof.
(b) The Banks hereby waive the requirements of clause (c) of
Section 3.01 of the Credit Agreement to the limited extent that the
representations and warranties contained in Sections 4.04(c) and 4.05 of the
Credit Agreement are not true solely on account of the David's Supermarkets
Litigation, and any representation and warranty deemed made by the Borrower on
or after the date hereof pursuant to Section 3.01 of the Credit Agreement
shall be deemed qualified to such extent.
(c) The Banks hereby waive any Default that may have occurred as
a result of the Borrower at any time prior to the date hereof having made or
been deemed to have made the representations and warranties set forth in
Sections 4.04(c) and 4.05 of the Credit Agreement without qualification by
reference to the David's Supermarkets Litigation.
(d) The waivers set forth in Sections 2(b) and (c) (including the
references to any representation and warranty made on or after the date hereof
being deemed qualified) shall be effective solely during the period ending on
the 30th day after the date on which a judgment on the verdict is entered in
the David's Supermarkets Litigation, provided that such waivers shall
thereafter be effective during any period during which the Borrower has made
effective provision for a stay of enforcement of the judgment in the David's
Supermarket Litigation.
SECTION 3. Waivers of Certain Liens. (a) The Banks hereby waive
(i) any Default under any Operative Agreement that may occur as a result of
any Lien existing in favor of the plaintiff in the David's Supermarket
Litigation (A) in the nature of a garnishment against Receivables from Texas
customers of the Borrower or any of its Subsidiaries or (B) arising by virtue
of the filing of an abstract of a judgment in the David's Supermarket
Litigation and (ii) the requirements of clause (c) of Section 3.01 of the
Credit Agreement to the limited extent that any representation and warranty of
the Borrower or a Subsidiary in the other Operative Agreements is not true
solely on account of the existence of such Liens, and any representation and
warranty deemed made by the Borrower on or after the date hereof pursuant to
Section 3.01 of the Credit Agreement shall be deemed qualified to the extent
set forth in clauses (i) and (ii).
(b) The waivers set forth in Section 3(a) (including the
references to any representation and warranty made on or after the date hereof
being deemed qualified) shall be effective solely during the period ending on
the 30th day after the date on which a judgment on the verdict is entered in
the David's Supermarkets Litigation and thereafter shall not apply to any such
Lien even if such Lien first arose during such period, provided that if on or
before the last day of such period the Borrower has made effective provision
for a stay of enforcement of the judgment in the David's Supermarkets
Litigation, such waivers shall thereafter remain in effect during any period
during which stay of enforcement is in effect.
SECTION 4. Borrowings. The Borrower agrees that during the
period from the date hereof to the earlier of (i) the date on which it has
made effective provision for a stay of enforcement of the judgment in the
David's Supermarkets Litigation and (ii) the 30th day after the date on which
a judgment on the verdict is entered in the David's Supermarkets Litigation,
it will not give any Notice of Borrowing for Tranche A Loans in an amount in
excess of its actual cash needs in the ordinary course of business (net of
other sources of funds available or expected to be available to it, including
previous Borrowings, but not including any need in respect of the David's
Supermarkets Litigation other than fees and expenses in connection with this
Amendment and the Waiver dated as of April 1, 1996, and defense and appeal
costs in connection with such Litigation) during the three-day period
beginning with the related date of Borrowing, determined consistent with the
Borrower's historical cash management practices and in light of any failure or
projected failure of the Borrower to receive payment from Texas customers on
account of Liens of the character described in Section 3(c), as certified in
reasonable detail by the Borrower's Chief Financial Officer or Treasurer in a
certificate accompanying such Notice of Borrowing.
SECTION 5. Amendment of Amount of Letter of Credit Commitment.
Section 1.01 of the Credit Agreement is hereby amended by changing the dollar
amount set forth in the definition of "Letter of Credit Commitment" from
"$200,000,000" to "$450,000,000".
SECTION 6. Calculation of Certain Covenants. The Banks hereby
agree that for purposes of calculating compliance with the covenants contained
in Sections 5.07, 5.08 and 5.09 of the Credit Agreement, Consolidated Net
Worth as at any date and Consolidated Net Income for any period shall be
calculated on a pro-forma basis excluding (i) any charges taken for the
Borrower's actual or contingent liability to make payment of the judgment in
the David's Supermarkets Litigation (but not including any amount attributable
to fees and expenses of the Borrower's counsel) and (ii) expenses incurred in
connection with this Amendment or the obtaining or maintaining of a
supersedeas bond with respect to the David's Supermarkets Litigation.
SECTION 7. Amendment to Restricted Payments Covenant. Section
5.14 of the Credit Agreement is hereby amended to read in its entirety as
follows:
SECTION 5.14. Restricted Payments. Neither the Borrower nor any
Subsidiary will declare or make any Restricted Payment except, so long as no
Default has occurred and is continuing, (i) during any fiscal quarter prior to
the second fiscal quarter of 1996, cash dividends in an aggregate amount that,
together with cash dividends declared or made during the three fiscal quarters
immediately preceding the quarter during which such cash dividend is declared
or made, do not exceed the Restricted Payments Cap, (ii) during any fiscal
quarter after the first fiscal quarter of 1996 until the Rating Target Date,
cash dividends on shares of common stock at a rate not in excess of $.08 per
share per fiscal quarter (such rate to be adjusted from time to time to
reflect any stock splits) and (iii) after the Rating Target Date, cash
dividends in an aggregate amount in any fiscal year of the Borrower not
exceeding the higher of the Restricted Payments Cap and an amount equal to 33
1/3% of Consolidated Net Income for the four fiscal quarters most recently
ended minus the amount of any cash dividends declared or made during the three
fiscal quarters immediately preceding the quarter during which such cash
dividend is declared or made. Nothing in this Section shall prohibit the
payment of any dividend or distribution within 45 days after the declaration
thereof if such declaration was not prohibited by this Section.
SECTION 8. Amendment to Capital Expenditure Limitations. Section
5.16 of the Credit Agreement is hereby amended by changing the table found
therein to read in its entirety as follows:
Period Amount
Effective Date through
December 31, 1994 155,000,000
January 1, 1995 through
December 31, 1995 155,000,000
January 1, 1996 through
December 31, 1996 140,000,000
January 1, 1997 through
December 31, 1997 155,000,000
January 1, 1998 through
December 31, 1998 160,000,000
January 1, 1999 through
December 31, 1999 170,000,000
January 1, 2000 through
December 31, 2000 180,000,000
SECTION 9. Amendment to Margin Levels.
(a) Amendment to Definition of "Rating Level". Section 1.01 of
the Credit Agreement is hereby amended by changing the definition of "Rating
Level" to read in its entirety as follows:
"Rating Level" means, with respect to the Borrower at any
time, the category established as follows:
(a) Rating Level I means that a rating of the Borrower's
senior unsecured long-term debt of BBB+ or higher by S&P or Baa1
or higher by Moody's is currently in effect;
(b) Rating Level II means that a rating of the Borrower's
senior unsecured long-term debt of BBB by S&P or Baa2 by Moody's
is currently in effect;
(c) Rating Level III means that a rating of the Borrower's
senior unsecured long-term debt of BBB- by S&P or Baa3 by Moody's
is currently in effect;
(d) Rating Level IV means that a rating of the Borrower's
senior unsecured long-term debt of BB+ by S&P or Ba1 by Moody's is
currently in effect;
(e) Rating Level V means that a rating of the Borrower's
senior unsecured long-term debt of BB by S&P or Ba2 by Moody's is
currently in effect;
(f) Rating Level VI means that a rating of the Borrower's
senior unsecured long-term debt of BB- by S&P or Ba3 by Moody's is
currently in effect; and
(g) Rating Level VII means that (1) a rating of the
Borrower's senior unsecured long-term debt below BB- by S&P or
below Ba3 by Moody's is currently in effect or (2), subject to the
provisions of Section 1.03, neither S&P nor Moody's has any rating
of such debt currently in effect.
If on any day the conditions for two Rating Levels are met
(each such Rating Level, a "Split Rating" and together, the "Split
Ratings"), then the applicable Rating Level for such day shall be the
Split Rating with the lower number (i.e., based on the higher rating);
provided that (i) if the numbers of the Split Ratings are two or three
numbers apart, the applicable Rating Level shall be the Rating Level one
number lower than the Split Rating with the higher number, (ii) if the
numbers of the Split Ratings are four or five numbers apart, the
applicable Rating Level shall be the Rating Level two numbers below the
Split Rating with the higher number, and (iii) if the numbers of the
Split Ratings are six numbers apart, Rating Level IV shall be deemed to
exist.
(b) Amendment to Base Rate Margin. The table set out in Section
2.05(a) is hereby amended to read in its entirety as follows:
Rating Level Base Rate Margin Additional Margin
I, II, III 0% 0.1250%
IV 0% 0.1875%
V 0% 0.2500%
VI 0.1250% 0.3750%
VII 0.625% 0.3750%
(c) Amendment to CD Margin. The table set out in Section 2.05(b)
is hereby amended to read in its entirety as follows:
Rating Level CD Margin Additional Margin
I 0.3750% 0.1250%
II 0.4500% 0.1250%
III 0.5750% 0.1250%
IV 0.8125% 0.1875%
V 1.1250% 0.2500%
VI 1.2500% 0.3750%
VII 1.7500% 0.3750%
(d) Amendment to Euro-Dollar Margin. The table set out in Section
2.05(c) is amended to read in its entirety as follows:
Euro-Dollar
Rating Level Margin Additional Margin
I 0.2500% 0.1250%
II 0.3250% 0.1250%
III 0.4500% 0.1250%
IV 0.6875% 0.1875%
V 1.0000% 0.2500%
VI 1.1250% 0.3750%
VII 1.6250% 0.3750%
(e) Amendment to Commitment Fee Rate. The table set out in Section
2.07(a)(i) is hereby amended to read in its entirety as follows:
Rating Level Commitment Fee Rate
I 0.0000%
II 0.0250%
III 0.0625%
IV 0.0875%
V, VI or VII 0.1250%
(f) Amendment to Facility Fee Rate. The table set out in Section
2.07(b) is hereby amended to read in its entirety as follows:
Rating Level Facility Fee Rate
I, II or III 0.1250%
IV 0.1875%
V 0.2500%
VI or VII 0.3750%
(g) Amendment to Letter of Credit Fee Rate. The table set out in
Section 2.07(c) is hereby amended to read in its entirety as follows:
Rating Level Letter of Credit Fee Rate
I 0.2500%
II 0.3250%
III 0.4500%
IV 0.6875%
V 1.0000%
VI 1.1250%
VII 1.6250%
(h) For the sake of avoidance of doubt, the parties confirm
that since the Credit Watch Period is no longer relevant, no Margins or Fee
Rates have been specified for it.
SECTION 10. Addition of Morgan Guaranty Trust Company of New York
as Issuing Bank. Section 1.01 of the Credit Agreement is hereby amended by
changing the definition of "Issuing Bank" to read in its entirety as follows:
"Issuing Bank" means NationsBank of Texas, N.A., Societe
Generale, Southwest Agency, or Morgan Guaranty Trust Company of New
York, as issuer of a Letter of Credit.
SECTION 11. Representations Correct; No Default. The Borrower
represents and warrants that, except as expressly waived hereby, on and as of
the date hereof (i) the representations and warranties contained in the Credit
Agreement and each other Operative Agreement are true as though made on and as
the date hereof and (ii) no Default has occurred and is continuing.
SECTION 12. Counterparts; Effectiveness; Etc. (a) This
Amendment may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto were
upon the same instrument.
(b) This Amendment shall become effective as of the date hereof
when the Managing Agent shall have received duly executed counterparts hereof
signed by the Borrower and the Required Banks (or, in the case of any Bank as
to which an executed counterpart shall not have been received, the Managing
Agent shall have received telegraphic, telex or other written confirmation
from such party of execution of a counterpart hereof by such Bank). When the
amendments contained in Section 9 become effective, interest on Fixed Rate
Loans outstanding on the date of effectiveness shall accrue for each day
during the applicable Interest Period on or after such date with a CD Margin
or Euro-Dollar Margin giving effect to such amendments.
(c) Promptly after this Amendment has become effective, the
Borrower shall pay (i) to the Managing Agent for the account of each Bank in
immediately available funds, an amendment fee in an amount equal to .25% of
the sum (as at the opening of business on the date hereof) of (A) the Tranche
A Commitment of such Bank and (B) the aggregate outstanding principal amount
of the Tranche C Loans of such Bank, and (ii) to the Managing Agent for its
own account in immediately available funds, an agent fee in the amount
previously agreed to between the Borrower and the Managing Agent.
(d) Except as expressly set forth herein, the waivers contained
herein shall not constitute a waiver or amendment of any term or condition of
the Credit Agreement or any other Operative Agreement, and all such terms and
conditions shall remain in full force and effect and are hereby ratified and
confirmed in all respects.
SECTION 13. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed by their respective authorized officers as of the day and
year first above written.
FLEMING COMPANIES, INC.
By
Title:
BANKS
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By
Title:
THE BANK OF NOVA SCOTIA
By
Title:
CANADIAN IMPERIAL BANK OF COMMERCE
By
Title:
CREDIT SUISSE
By
Title:
By
Title:
DEUTSCHE BANK AG NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By
Title:
By
Title:
THE FUJI BANK, LIMITED
By
Title:
NATIONSBANK OF TEXAS, N.A.
By
Title:
SOCIETE GENERALE, SOUTHWEST AGENCY
By
Title:
THE SUMITOMO BANK LTD.
HOUSTON AGENCY
By
Title:
THE SUMITOMO BANK, LIMITED
NEW YORK BRANCH
By
Title:
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By
Title:
THE TORONTO-DOMINION BANK
By
Title:
UNION BANK OF SWITZERLAND,
HOUSTON AGENCY
By
Title:
By
Title:
FIRST INTERSTATE BANK OF CALIFORNIA
By
Title:
By
Title:
WACHOVIA BANK OF GEORGIA,
NATIONAL ASSOCIATION
By
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By
Title:
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND",
NEW YORK BRANCH
By
Title:
By
Title:
THE SANWA BANK LIMITED,
DALLAS AGENCY
By
Title:
BANQUE NATIONALE DE PARIS
By
Title:
BOATMEN'S FIRST NATIONAL BANK
OF OKLAHOMA
By
Title:
CITIBANK N.A.
By
Title:
DAI-ICHI KANGYO BANK, LTD.
NEW YORK BRANCH
By
Title:
THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY
By
Title:
LTCB TRUST COMPANY
By
Title:
THE MITSUBISHI BANK, LIMITED
HOUSTON AGENCY
By
Title:
NATIONAL WESTMINSTER BANK Plc
NASSAU BRANCH
By
Title:
NATIONAL WESTMINSTER BANK Plc
NEW YORK BRANCH
By
Title:
UNITED STATES NATIONAL BANK
OF OREGON
By
Title:
BANK OF AMERICA ILLINOIS
By
Title:
PNC BANK, NATIONAL ASSOCIATION
By
Title:
BANK OF HAWAII
By
Title:
THE BANK OF TOKYO, LTD.,
DALLAS AGENCY
By
Title:
BANQUE PARIBAS
By
Title:
By
Title:
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR
By
Title:
By
Title:
BAYERISCHE VEREINSBANK AG,
LOS ANGELES AGENCY
By
Title:
By
Title:
BHF-BANK AKTIENGESELLSCHAFT,
NEW YORK BRANCH
By
Title:
By
Title:
DG BANK
DEUTSCHE GENOSSENSCHAFTSBANK
By
Title:
By
Title:
FIRST HAWAIIAN BANK
By
Title:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By
Title:
LIBERTY BANK AND TRUST COMPANY
OF OKLAHOMA CITY, N.A.
By
Title:
MANUFACTURERS AND TRADERS
TRUST COMPANY
By
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By
Title:
THE MITSUI TRUST AND BANKING
COMPANY, LIMITED
By
Title:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
By
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, New York Branch
By
Title:
By
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, Cayman Islands
Branch
By
Title:
By
Title:
THE YASUDA TRUST AND BANKING
COMPANY, LTD.
By
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By
Title:
BANK HAPOALIM B.M.,
LOS ANGELES BRANCH
By
Title:
By
Title:
THE CHASE MANHATTAN BANK, N.A.
By
Title:
KREDIETBANK N.V.
By
Title:
By
Title:
MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION
By
Title:
THE SUMITOMO BANK OF CALIFORNIA
By
Title:
THE SUMITOMO TRUST & BANKING CO., LTD.
NEW YORK BRANCH
By
Title:
BANK OF IRELAND, CAYMAN ISLANDS BRANCH
By
Title:
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in:
(I) Registration Statement No. 2-98602 (1985 Stock Option Plan) on
Form S-8;
(ii) Registration Statement No. 33-18867 (Godfrey Company 1981 Stock
Option Plan and 1984 Nonqualified Stock Option Plan) on Form S-8;
(iii) Registration Statement No. 33-36586 (1990 Fleming Stock Option
Plan) on Form S-8;
(iv) Registration Statement No. 33-56241 (Dividend Reinvestment and
Stock Purchase Plan) on Form S-3;
(v) Registration Statement No. 33-61860 (Debt Securities, Series C) on
Form S-3;
(vi) Registration Statement No. 33-55369 (Senior Notes) on Form S-3
of our report dated February 22, 1996 (April 12, 1996 as to effects of a jury
verdict, other resulting legal proceedings and related matters discussed in
Subsequent Events note) appearing in this Annual Report on Form 10-K of
Fleming Companies, Inc. for the year ended December 30, 1995.
DELOITTE & TOUCHE LLP
Oklahoma City, Oklahoma
April 12, 1996
