UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 22, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission File No. 1-6068
RINI-REGO SUPERMARKETS, INC.
(Exact name of Registrant as specified in its charter)
Ohio 34-0222970
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5300 Richmond Road, Bedford Heights, Ohio 44146
(Address of principal executive offices)
Registrant's telephone number, including area code: (216) 292-7000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 12, 13 or 15(d) of the Securities and
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
November 25, 1994
Common Stock, No Par Value 3,536,577
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RINI-REGO SUPERMARKETS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands of dollars)
10/22/94 7/2/94
---------- ----------
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,245 $ 4,376
Trade accounts receivable, net 38,312 38,460
Inventories 73,554 74,279
Deferred income taxes 6,583 6,583
Prepaid expenses 4,386 4,854
---------- ----------
126,080 128,552
PROPERTY, EQUIPMENT AND CAPITAL LEASES 179,849 173,841
Less-Allowances for depreciation, amorti-
zation and loss on disposal of fixed assets 70,247 65,308
---------- ----------
109,602 108,533
OTHER ASSETS:
Notes receivable 9,631 10,851
Deferred income taxes 7,062 7,062
Other 2,659 2,519
---------- ----------
19,352 20,432
---------- ----------
TOTAL ASSETS $ 255,034 $ 257,517
========== ==========
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10/22/94 7/2/94
---------- ----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 52,375 $ 45,614
Accrued expenses 27,586 29,911
Current portion of long-term liabilities 10,035 10,035
---------- ----------
89,996 85,560
LONG-TERM LIABILITIES:
Debt 62,091 71,274
Capital lease obligations 13,223 12,404
Self insurance reserves 10,560 10,531
OTHER LIABILITIES 12,329 13,067
STOCKHOLDERS' EQUITY:
Preferred Stock--18,044 shares 1,804 1,804
Class A Common Stock--7,125,287 shares 71 71
Class B Common Stock--955,613 shares 10 10
Paid-in capital 35,546 35,546
Retained earnings 29,404 27,250
---------- ----------
66,835 64,681
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 255,034 $ 257,517
========== ==========
The accompanying Notes to Consolidated Condensed Financial Statements
are an integral part of these balance sheets.
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RINI-REGO SUPERMARKETS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands of dollars, except share and per share data)
(unaudited)
Sixteen Weeks Ended
10/22/94 10/23/93
------------ ------------
<S> <C> <C>
NET SALES $ 346,701 $ 327,973
COST OF GOODS SOLD 279,361 264,912
------------ ------------
Gross profit 67,340 63,061
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 61,815 57,645
------------ ------------
Operating income 5,525 5,416
INTEREST EXPENSE, NET (1,905) (1,980)
------------ ------------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE
AND INCOME TAXES 3,620 3,436
PROVISION FOR INCOME TAXES 1,430 1,350
------------ ------------
NET INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 2,190 2,086
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE:
Accounting for income taxes - 6,866
------------ ------------
NET INCOME 2,190 8,952
LESS PREFERRED STOCK DIVIDENDS 36 36
------------ ------------
NET INCOME FOR COMMON
STOCKHOLDERS $ 2,154 $ 8,916
============ ============
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Sixteen Weeks Ended
10/22/94 10/23/93
------------ ------------
PER SHARE DATA:
NET INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE $ .27 $ .25
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE:
Accounting for income taxes - .85
------------ ------------
NET INCOME PER COMMON SHARE $ .27 $ 1.10
============ ============
DIVIDENDS PER COMMON SHARE $ - $ -
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 8,080,900 8,080,901
============ ============
The accompanying Notes to Consolidated Condensed Financial Statements
are an integral part of these statements.
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RINI-REGO SUPERMARKETS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(unaudited)
Sixteen Weeks Ended
10/22/94 10/23/93
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,190 $ 8,952
Adjustments to reconcile net
income to net cash provided
by (used for) operating
activities:
Depreciation and amortization 5,185 4,496
Cumulative effect of change
in accounting principle - (6,866)
Changes in assets and
liabilities 5,979 (9,136)
------------ ------------
Net cash provided by (used
for) operating activities 13,354 (2,554)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets (6,083) (10,309)
Proceeds from sale of fixed
assets 52 426
------------ ------------
Net cash used for investing
activities (6,031) (9,883)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving
lines of credit 195,488 189,011
Repayments of revolving lines
of credit (204,165) (178,842)
Additions to mortgage notes
payable - 2,608
Debt repayments (560) (951)
Additions to capital lease
obligations 1,425 -
Repayments of capital lease
obligations (606) (504)
Preferred stock dividends (36) (36)
------------ ------------
Net cash provided by (used
for) financing activities (8,454) 11,286
------------ ------------
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Sixteen Weeks Ended
10/22/94 10/23/93
------------ ------------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (1,131) (1,151)
CASH AND CASH EQUIVALENTS, AT
BEGINNING OF PERIOD 4,376 4,394
------------ ------------
CASH AND CASH EQUIVALENTS, AT
END OF PERIOD $ 3,245 $ 3,243
============ ============
SUPPLEMENTAL DATA:
Interest Paid $ 2,011 $ 1,564
============ ============
Income Taxes Paid $ 1,340 $ 1,941
============ ============
The accompanying Notes to Consolidated Condensed Financial Statements
are an integral part of these statements.
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RINI-REGO SUPERMARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
OCTOBER 22, 1994
(1) Basis of Presentation:
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with the instructions to Form 10-Q and
therefore do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. The results of
operations for the sixteen weeks ended October 22, 1994 are not necessarily
indicative of the results to be expected for the fiscal year ending July 1,
1995. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments necessary for a fair
statement of the financial position at the dates indicated and of the results
of operations for the interim periods presented.
Rini-Rego Supermarkets, Inc. ("RRS" or the "Company"), formerly known as
Fisher Foods, Inc., is a wholly owned subsidiary of Riser Foods, Inc.
("Riser"). The accompanying financial statements of the Company are
presented on the "push down accounting" basis, for financial reporting
purposes only, with the equity section of the accompanying balance sheet
reflecting the equity of Riser. The separate financial statements of the
Company would reflect the following shareholders' equity amounts (in
thousands):
10/22/94 7/2/94
---------- -----------
Preferred stock $ 1,811 $ 1,811
Common stock 1,403 1,403
Paid-in capital 22,714 22,714
Retained earnings 39,433 37,279
---------- -----------
$ 65,361 $ 63,207
(2) Debt:
The Company's bank credit facilities (the Facilities), which were
increased by $10 million during the first quarter of 1995, provide for
revolving lines of credit and letters of credit up to an aggregate of $71
million and a term loan which currently has $9.4 million outstanding. The
Company increased its availability to meet the needs of its capital
expenditure plan. The Facilities are secured by substantially all of the
Company's assets. Borrowings under the revolving lines of credit are due in
June 1996 but may be extended to June 1998 upon consent of the banks.
Borrowings under the lines of credit and term loan accrue interest at .25%
over the Bank's Prime Interest Rate. Facilities' fees and interest are paid
monthly. Available unused borrowing capacity under the Facilities at October
22, 1994 was approximately $21.3 million.
(3) Change in Accounting Principle - Accounting for Income Taxes:
During the first quarter of fiscal 1994, the Company adopted Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(SEAS No. 109). This Statement requires that the liability method of
accounting for income taxes be used rather than the deferred method
previously used. The Company elected not to restate prior years' financial
statements. The cumulative effect of this accounting change was to increase
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1994 first quarter earnings by $6,866,000 or $.85 per share. The cumulative
effect is principally the result of benefiting the expected utilization of
tax net operating loss carryforwards (NOLs) and the adjustment of deferred
tax balances to reflect changes in statutory rates.
Significant components of the Company's net deferred tax asset as of
October 22, 1994 and July 2, 1994 are as follows (in thousands):
DEFERRED TAX LIABILITIES:
Property, equipment
and capital leases $ (5,619)
State and local taxes other
than income (459)
---------
(6,078)
DEFERRED TAX ASSETS:
Reserve for uncollectible
accounts 1,280
Closed facilities reserves 6,123
Self insurance reserves 4,858
Employees' retirement benefits 1,058
Accruals not currently deductible 2,296
Net operating loss carryforwards 7,782
Other 974
---------
24,371
VALUATION ALLOWANCE (4,648)
---------
NET DEFERRED TAX ASSET $ 13,645
=========
The Company has gross NOLs totaling $22,890,000 which expire as follows
(in thousands):
Year NOL
2000 $ 643
2001 16,859
2002 5,388
--------
$22,890
========
SFAS No. 109 requires that the tax benefit of such NOLs be recognized as an
asset to the extent the Company assesses the utilization of such NOLs to be
"more likely than not". Based upon the Company's history of prior earnings,
expectation for future earnings and tax regulations which limit the annual
amount of NOLs available for deduction, the Company does not believe the
entire amount of NOLs will be utilized before they expire. As such, a
valuation reserve of $4,648,000 has been established due to the uncertainty
of future NOL realization.
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The Company's Statements of Operations for the sixteen weeks ended
October 22, 1994 and October 23, 1993 reflect net income tax provisions at
the various statutory income tax rates to which the Company is subject.
There were no significant differences between financial reporting and taxable
income.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Net sales increased 5.71% during the first quarter of 1995. The
increase in sales is primarily attributed to increased sales related to a
full quarter's operation of the Company's Health and Beauty Care/General
Merchandise (HBC/GM) distribution facility, favorable results associated with
its retail remodeling and restructuring plan and an improving economic
environment in the Company's primary market area, northeast Ohio and western
Pennsylvania.
Wholesale sales during the first quarter of 1995 have increased 7.06%
over the same period last year. The Company acquired an HBC/GM distribution
facility from its former HBC/GM supplier midway through the first quarter of
1994, increasing its product offerings and adding approximately 150 Hills
Department Stores as new customers. Sales related to this facility and a
full 16 weeks of operations during 1995 accounted for 3.3% of the Company's
wholesale sales increase.
The strengthening of the economy in the Company's primary market area
also benefitted the independent retailers supplied by the Company's
distribution facilities, thereby increasing wholesale sales. The Company is
continuing to seek additional sales via increased sales penetration to
existing customers, especially in perishable and HBC/GM product lines, and
the addition of new wholesale customers outside of its existing distribution
territory.
Sales in Company-operated retail stores have increased 4.52% over the
prior year. Sales in Company-operated retail stores operating the same 16
weeks in both years increased 4.3%. Same-store sales gains in the Company-
operated retail stores are attributed to the continued remerchandising of
Company-operated retail stores, the success of the Company's retail
remodeling and restructuring plan and an improving economic environment. The
loss of sales associated with the closing of six Company-operated retail
stores between years was partially offset by the acquisition of two
additional Company-operated retail stores in May 1994.
As part of the Company's program to remodel and remerchandise Company-
operated retail stores, the Company introduced its first Marketplace store
format during the first quarter of 1994. The Company converted two former
Rini-Rego stores to the Marketplace format in late 1994 and its fourth
Marketplace conversion occurred in the first quarter of 1995. The Company's
Marketplace stores are larger, approximately 70,000 square feet, and meet the
consumers basic grocery needs while offering expanded product lines, with
emphasis on high quality perishable departments, and a variety of full
service, customer oriented departments. The success of the Marketplace
format and other remodeling and remerchandising programs were realized during
the current year.
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Late in the first quarter of 1995, Stop-N-Shop Supermarkets, which
include the Company's Rini-Rego and Marketplace stores, launched a new target
marketing campaign: Preferred Shoppers Club. Area shoppers receive a
Preferred Shoppers Club card which entitles them to extra markdowns below
weekly sales prices. This program is the first of its kind in northeast Ohio
and allows the Company to offer its customers greater value and will
ultimately enhance its ability to track and understand the buying habits and
purchasing preferences of our customers.
Company-operated retail store sales increases were also favorably
impacted by the Company's restructuring plan. As part of the restructuring,
certain non-core stores were closed, while core stores were remodeled and
other locations were consolidated to larger retail facilities. The Company
closed one store and completed the conversion of an other store to the
Marketplace store format during the first quarter of 1995.
Gross profit, as a percentage of sales, increased from 19.23% in the
first quarter of 1994 to 19.42% in 1995. The continuing trend of a shift in
the Company's sales mix from sales in Company-operated retail stores to sales
to independently-operated retail stores, which carry a lower gross profit,
was offset by the favorable impact of remerchandising Company-operated retail
stores, the easing of deflationary pressures in certain food categories and
improved procurement opportunities.
Selling, general and administrative (SG&A) expenses, as a percentage of
sales, increased between years from 17.58% to 17.83% during the first
quarter. The Company's programs to remodel and remerchandise Company-
operated retail stores, while improved gross profit percentages, also
demanded higher SG&A costs, particularly in occupancy and depreciation.
Additionally, the Company incurred higher labor costs associated with the
Company's incentive programs which are tied to the Company's performance.
These increases more than offset declines in SG&A related to the shift in
sales to independently-operated retail stores, which carry lower SG&A
percentages, and the disposition of Company-operated retail stores which
operated at high SG&A percentages.
Interest expense, net, decreased $75,000 in the first quarter of 1995
compared to 1994. This decrease was related to lower borrowing levels under
the Company's bank credit facilities and lower fixed debt levels as a result
of scheduled debt repayments. Lower borrowing levels were associated with
Company programs to decrease its inventory investment in its distribution
facilities. At October 22, 1994, distribution inventory levels were
approximately 23% lower than that of the previous year. Lower debt levels
were partially offset by increases in the Company's average interest rate
under its bank credit facilities, from 6.00% in the first quarter of 1994 to
7.55% in the current year. The increase in the average interest rate was
related to increases in the bank's prime lending rate.
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS
No. 109). This statement requires that the liability method of accounting
for income taxes be used rather than the deferred method previously used.
The Company adopted the provision of SFAS No. 109 during the first quarter of
1994. The Company elected not to restate prior year's financial statements
and recorded the cumulative effect of the accounting change. As a result,
the Company recorded an income item of $6.9 million to reflect the cumulative<PAGE>
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effect of the change in accounting for income taxes. See Note (3) of the
Notes to Consolidated Condensed Financial Statements for a further
discussion.
The Company provided income taxes at an effective rate of 39.5% in the
first quarter of 1995 compared to 39.3% in fiscal 1994. Taxes were provided
at the various statutory income tax rates to which the Company is subject.
Liquidity and Sources of Capital
The Company's primary source of capital has historically come from
internally generated funds. Working capital requirements traditionally have
increased during the first quarter to meet the needs of second quarter
holiday sales. During the current year, Company programs to manage
distribution inventory levels greatly reduced this trend, converting excess
inventory levels to cash. Greater working capital requirements associated
with the Company's HBC/GM acquisition and new wholesale customer financing
increased the Company's utilization of its revolving credit facilities in
fiscal 1994.
Operating activities generated $13.4 million of cash compared to
utilizing $2.6 million in the prior year. This increase in cash from
operations was a function of lower working capital requirements associated
with the above mentioned reduction in distribution inventory levels, which
decreased from $94.8 million at October 23, 1993 to $80.6 million at October
22, 1994, and a decrease in the level of wholesale customer financing.
Cash flow from operations included net income of $2.2 million and non-
cash charges for depreciation and amortization of $5.2 million and provision
for LIFO of $.6 million. Significant balance sheet changes included
increases in accounts payable of $6.8 million, coupled with decreases in
accounts and notes receivable of $1.4 million, offset by decreases in accrued
expenses and other liabilities of $3.1 million.
Working capital decreased to $36.1 million at the end of the first
quarter of 1995 from $43.0 million at the end of 1994, principally
representing a decline in the Company seasonal inventory build. The
Company's ratio of current assets to current liabilities also decreased to
1.40:1 at the end of the first quarter of 1995 from 1.50:1 at the end of
1994. The Company's ratio of liabilities to equity also improved from 2.98:1
at the end of 1994 to 2.82:1 at the end of the first quarter of 1995. These
trends were consistent with the reduction in working capital demands noted
above.
In the first quarter of 1995, the Company utilized $6.1 million of cash
flow for capital expenditures compared to $10.3 million over the same period
last year. The Company maintained levels of capital expenditures consistent
with last year: for the enhancement of its retail core-stores ($4.4
million), upgrades of its data processing systems and corporate equipment
($.8 million) and improved distribution facilities and equipment ($.9
million). The decline between years was primarily associated with
acquisition of the HBC/GM distribution facility during the first quarter of
1994.
The level of capital expenditures for 1995 is expected to be higher than
1994. The Company completed one store remodel during the first quarter and
three additional stores were in progress. Additionally, the Company is
Sequential Page 13 of 14
required, pursuant to the terms of its leases, to purchase its Aurora Road
warehouse facility and Cash-N-Carry branch in June 1995 for $6 million. The
Company believes that cash flow from operations and the unused portion of the
bank credit facilities ($21.3 million at the end of the first quarter of
1995) will adequately fund planned capital expenditures, normal ongoing
business activities and debt principle repayments.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
RINI-REGO SUPERMARKETS, INC.
(Registrant)
/s/ Charles A. Rini, Sr.
December 2, 1994 By: Charles A. Rini, Sr.
President and Director
/s/ Ronald W. Ocasek
December 2, 1994 By: Ronald W. Ocasek
Chief Financial Officer and
Treasurer, (Principal
Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> JUL-01-1995
<PERIOD-END> OCT-22-1994
<CASH> 3245
<SECURITIES> 0
<RECEIVABLES> 38312
<ALLOWANCES> 0
<INVENTORY> 73554
<CURRENT-ASSETS> 126080
<PP&E> 179849
<DEPRECIATION> 70247
<TOTAL-ASSETS> 255034
<CURRENT-LIABILITIES> 89996
<BONDS> 85874
<COMMON> 81
0
1804
<OTHER-SE> 64950
<TOTAL-LIABILITY-AND-EQUITY> 255034
<SALES> 346701
<TOTAL-REVENUES> 346701
<CGS> 279361
<TOTAL-COSTS> 279361
<OTHER-EXPENSES> 61815
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1905
<INCOME-PRETAX> 3620
<INCOME-TAX> 1430
<INCOME-CONTINUING> 2190
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2190
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
