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 April 9, 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)
Delaware 34-0222970
(State or other jurisdiction of (I.R.S. 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 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Outstanding at
May 12, 1994
Class A Common Stock, $.01 Par Value 8,678,918
Class B Common Stock, $.01 Par Value 955,613
PAGE
<PAGE>
Sequential Page 2 of 14
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements
RINI-REGO SUPERMARKETS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands of dollars)
April 9, July 3,
1994 1993
ASSETS ---------- ----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,316 $ 4,394
Trade accounts receivable, net 34,539 36,039
Inventories 85,139 72,482
Deferred income taxes 6,778 -
Prepaid expenses 5,114 4,607
---------- ----------
134,886 117,522
PROPERTY, EQUIPMENT AND CAPITAL LEASES 173,152 157,043
Less-Allowances for depreciation, amorti-
zation and loss on disposal of fixed assets 68,859 55,965
---------- ----------
104,293 101,078
OTHER ASSETS:
Notes receivable 11,992 6,495
Deferred income taxes 7,646 5,921
Other 2,871 2,413
---------- ----------
22,509 14,829
---------- ----------
TOTAL ASSETS $ 261,688 $ 233,429
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 43,049 $ 47,188
Accrued liabilities 27,442 31,172
Current portion of long-term liabilities 15,962 15,427
---------- ----------
86,453 93,787
LONG-TERM LIABILITIES:
Debt 78,684 56,318
Capital lease obligations 11,515 10,591
Self insurance reserves 9,702 9,053
OTHER LIABILITIES 13,591 6,349
DEFERRED INCOME TAXES - 952
SHAREHOLDERS' EQUITY:
Preferred Stock--18,044 shares 1,804 1,804
Class A Common Stock--7,125,288 shares 71 71
Class B Common Stock--955,613 shares 10 10
Paid-in capital 35,546 35,546
Retained earnings 24,312 18,948
---------- ----------
61,743 56,379
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 261,688 $ 233,429
========== ==========
The accompanying Notes to Consolidated Condensed Financial
statements are an integral part of these consolidated balance sheets.
</TABLE>
PAGE
<PAGE>
Sequential Page 3 of 14
<TABLE>
<CAPTION>
RINI-REGO SUPERMARKETS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands of dollars, except share and per share data)
(unaudited)
40 Weeks Ended 12 Weeks Ended
April 9, April 3, April 9, April 3,
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES $ 858,228 $ 840,386 $ 259,490 $ 245,980
COST OF GOODS SOLD 694,623 676,943 210,276 198,557
---------- ---------- ---------- ----------
Gross profit 163,605 163,443 49,214 47,423
SELLING, GENERAL &
ADMINISTRATIVE EXPENSE 148,514 149,419 45,114 43,418
RESTRUCTURING CHARGE 12,000 5,000 12,000 -
---------- ---------- ---------- ----------
Operating profit (loss) 3,091 9,024 (7,900) 4,005
INTEREST EXPENSE, NET 5,275 4,807 1,664 1,515
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE AND INCOME
TAXES (2,184) 4,217 (9,564) 2,490
PROVISION (CREDIT) FOR
INCOME TAXES (790) 1,700 (3,690) 1,000
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE (1,394) 2,517 (5,874) 1,490
CUMULATIVE EFFECT TO
JULY 4, 1993 OF CHANGE IN
INCOME TAX ACCOUNTING 6,866 - - -
---------- ---------- ---------- ----------
NET INCOME (LOSS) 5,472 2,517 (5,874) 1,490
LESS PREFERRED STOCK
DIVIDENDS 108 108 36 36
---------- ---------- ---------- ----------
NET INCOME (LOSS) APPLICABLE
TO COMMON SHARES $ 5,364 $ 2,409 $ (5,910) $ 1,454
========== ========== ========== ==========
PAGE
<PAGE>
Sequential Page 4 of 14
40 Weeks Ended 12 Weeks Ended
April 9, April 3, April 9, April 3,
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PER SHARE DATA:
NET INCOME (LOSS) PER
COMMON SHARE BEFORE
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE $ (.19) $ .30 $ (.73) $ .18
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE .85 - - -
---------- ---------- ---------- ----------
NET INCOME (LOSS) PER
COMMON SHARE $ .66 $ .30 $ (.73) $ .18
========== ========== ========== ==========
DIVIDENDS PER COMMON
SHARE - - - -
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 8,080,901 8,080,881 8,080,901 8,080,901
========== ========== ========== ==========
The accompanying Notes to Consolidated Condensed Financial
Statements are an integral part of these consolidated statements.
</TABLE>
PAGE
<PAGE>
Sequential Page 5 of 14
<TABLE>
<CAPTION>
RINI-REGO SUPERMARKETS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(unaudited)
40 Weeks Ended 12 Weeks Ended
April 9, April 3, April 9, April 3,
1994 1993 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 5,472 $ 2,517 $ (5,874) $ 1,490
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation & Amort. 11,189 10,932 3,436 3,891
Cumulative effect of
change in ac-
counting principle (6,866) - - -
Changes in assets
and liabilities (15,747) (9,256) (5,605) (11,414)
--------- --------- --------- ---------
Cash provided by (used for)
operating activities (5,952) 4,193 (8,043) (6,033)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of fixed assets (19,255) (19,811) (4,201) (6,245)
Proceeds from sale of
fixed assets 539 777 84 366
--------- --------- --------- ---------
Cash used for investing
activities (18,716) (19,034) (4,117) (5,879)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings under
revolving credit
facility 682,182 475,697 260,142 155,068
Repayments of revolving
credit facility (658,267) (456,312) (248,037) (143,605)
Reduction of long-term
debt, net (1,545) (3,889) (564) (124)
Additions to (reduction of)
capital lease obligations 1,328 (453) 549 212
Preferred stock dividends (108) (108) (36) (36)
--------- --------- --------- ---------
Cash provided by financing
activities 23,590 14,935 12,054 11,515
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (1,078) 94 (106) (397)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 4,394 3,377 3,422 3,868
--------- --------- --------- ---------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 3,316 $ 3,471 $ 3,316 $ 3,471
========= ========= ========= =========
SUPPLEMENTAL DATA:
Interest Paid $ 5,421 $ 5,422 $ 1,510 $ 1,189
========= ========= ========= =========
Taxes Paid $ 5,601 $ 3,128 $ 2,909 $ 861
========= ========= ========= =========
The accompanying Notes to Consolidated Condensed Financial
Statements are an integral part of these consolidated statements.
</TABLE>
PAGE
<PAGE>
<TABLE>
Sequential Page 6 of 14
RINI-REGO SUPERMARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 9, 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
twelve and forty weeks ended April 9, 1994 are not necessarily
indicative of the results to be expected for the fiscal year ending
July 2, 1994. 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.
The consolidated financial statements include the accounts of
Rini-Rego Supermarkets, Inc. and its subsidiaries ("RRS" or the
"Company"). The Company is a wholly owned subsidiary of Riser
Foods, Inc. ("Riser"). All material intercompany accounts and
transactions have been eliminated. 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):
April 9, July 3,
1994 1993
---------- ----------
Preferred stock $ 1,811 $ 1,811
Common stock 1,403 1,403
Paid-in capital 22,714 22,714
Retained earnings 34,341 28,977
---------- ----------
$ 60,269 $ 54,905
========== ==========
(2) Debt:
The Company's bank credit facilities (the Facilities) provide
for revolving lines of credit and letters of credit up to an
aggregate of $61 million and a term loan which currently has $10.3
million outstanding. The Facilities are secured by the Company's
eligible inventory and receivables, as defined. 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 .5% over the
Bank's Prime Interest Rate and is paid monthly.
PAGE
<PAGE>
Sequential Page 7 of 14
Available unused borrowing capacity under these Facilities at
April 9, 1994 was approximately $2.6 million. The Company has
renegotiated the Facilities to include a $10 million increase in
the aggregate credit available under its revolving lines of credit,
pending majority bank approval.
(3) Employee Stock Option Plan:
On July 28, 1992 the Company granted options to several key
employees to purchase 184,700 shares of Class A Common Stock (the
1992 Options) under the Company's Stock Incentive Plan for Key
Employees. The exercise price of the 1992 Options is $7.31 per
share of Class A Common Stock which approximated the fair market
value at the date of grant. The 1992 Options will not become
exercisable until July 28, 1994 (except in certain limited
circumstances) and will expire on July 28, 2002 if not exercised.
The 1992 Options are non-qualified options for Federal Income Tax
purposes.
(4) Restructuring Charge:
The Company provided restructuring charges in both fiscal
years in connection with the Company's long range strategic plan to
restructure its retail operations. This plan included the
disposition of non-core stores in fiscal 1993 and plans to
consolidate corporate retail stores during the next four years.
The Company provides for the estimated costs of closing
facilities concurrent with making the decision to close facilities.
The types of costs provided in these restructuring charges included
anticipated losses on the disposal of fixed assets, employee
severance costs and other benefits for terminated employees,
estimated withdrawal liabilities for multi-employer pension plans
and future lease payments net of estimated sublease income.
The $12 million restructuring charge recorded during the third
quarter of fiscal 1994 reflected costs associated with the
Company's store consolidation plan. Over the next four years, the
Company plans to close 14 small, outdated corporate retail
locations comprised of approximately 456,000 square feet. These
locations will be replaced by seven newer, larger facilities
representing approximately 431,000 square feet. Two of these newer
locations will be operated by wholesale customers and the remaining
five will be new or expanded corporate retail stores.
The $5 million restructuring charge recorded during the second
quarter of fiscal 1993 reflected the costs associated with the
Company's disposition of non-core stores. During fiscal 1993, the
Company closed its five remaining Carl's stores in the Akron-Canton
area along with a former Carl's location in Bedford, Ohio and a
Food Centre location in Brunswick, Ohio. These closings were the
result of the Company's decision to focus efforts on its core store
format, Rini-Rego Stop-N-Shop.
PAGE
<PAGE>
Sequential Page 8 of 14
(5) Change in Accounting Principles - 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" (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 elected not to
restate prior years' financial statements. The cumulative effect
of this accounting change was to increase first quarter earnings by
$6,866,000 or $.85 per share. The cumulative effect is principally
the result of benefiting the expected utilization of net operating
loss carryforwards 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 July 3, 1993, after giving effect to SFAS No. 109, are as
follows (in thousands):
<S> <C>
DEFERRED TAX LIABILITIES:
Property $ (5,459)
State and local taxes other
than income (402)
Other (9)
---------
(5,870)
DEFERRED TAX ASSETS:
Reserve for uncollectible
accounts 1,440
Closed facilities reserves 2,303
Self insurance reserves 4,688
Employees' retirement benefits 1,123
Accruals not currently deductible 2,085
Net operating loss carryforwards 8,409
Other 814
---------
20,862
VALUATION ALLOWANCE (4,648)
---------
NET DEFERRED TAX ASSET $ 10,344
=========
The Company has tax net operating loss carryforwards (NOL)
totaling $24,733,000 which expire as follows (in thousands):
<S> <C>
Year NOL
2000 $ 2,486
2001 16,859
2002 5,388
--------
$24,733
========
<PAGE>
Sequential Page 9 of 14
SFAS No. 109 requires that the tax benefit of such NOL be recorded
as an asset to the extent the Company assesses the utilization of
such NOL 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 NOL available for
deduction, the Company does not believe the entire amount of NOL
will be utilized before they expire. As such, a valuation reserve
of $4,648,000 has been established for that portion of the NOL
which the Company does not believe it will benefit prior to their
expiration.
The Company Statements of Operations for the twelve and forty
weeks ended April 9, 1994 and April 3, 1993 reflect net income tax
provisions at the various statutory income tax rates to which the
Company is subject. The primary difference between financial
reporting and taxable income is the restructuring charge recorded
in the third quarter of fiscal 1994. The Company has provided for
deferred taxes on this item.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The Company's net sales for the twelve and forty weeks ended
April 9, 1994 increased between years 5.50% and 2.12%,
respectively. Increased wholesale sales have been partially offset
by lower retail sales. Wholesale sales growth has been favorably
impacted by new customers and the acquisition of a new Health and
Beauty Care/General Merchandise (HBC/GM) distribution facility.
Retail sales have been negatively impacted by fewer corporate
retail stores, the effects of increased competition, deflation in
some food products and the general economic environment. These
sales trends continue the Company's shift in sales from retail to
wholesale.
Wholesale sales for the third quarter of fiscal 1994 increased
14.49% over the same period last year. For the forty weeks ended
April 9, 1994, wholesale sales have risen 14.34%. Sales to
existing wholesale customers also have been impacted by the same
economic pressures facing the Company's corporate retail stores.
The Company has been able to more than offset sales declines in
certain of its wholesale customers through the acquisition of new
customers and expanded distribution opportunities, which include
the Company's new HBC/GM distribution facility. During the first
quarter of fiscal 1994, the Company completed the full cycling of
new customers acquired as a result of a competitor's bankruptcy.
The Company is continuing to seek new customers, many of whom
are outside existing distribution channels, to expand its
distribution territory. The Company's wholesale customers are
primarily located in northeast Ohio and western Pennsylvania. The
Company also seeks to increase sales to existing wholesale
customers by increasing perishable and HBC/GM sales penetration.
PAGE
<PAGE>
Sequential Page 10 of 14
The Company acquired the warehouse facility and certain
inventory and equipment of its previous HBC/GM supplier during the
first quarter of fiscal 1994. This supplier had earlier sought
protection from creditors with a Chapter 11 bankruptcy filing. The
Company used these assets to begin operations of its own HBC/GM
distribution facility. This new facility services existing
wholesale customers as well as a new mass merchandising chain.
Sales in the Company's corporate retail stores declined 2.32%
between years during the third quarter of fiscal 1994. Year-to-
date retail sales have fallen 7.53% over the same period last year.
This decline in sales is primarily attributed to the closing of 8
corporate retail stores between years.
Same store sales increased .66% during the third quarter,
however, year-to-date, same store sales are still below last year
by 1.04%. Third quarter same store sales increases are attributed
to increased promotional activity and the inclement weather in
January and February of 1994. Cold weather conditions forced
consumers into more one-stop shopping and increased average sales
per customer at corporate retail stores.
The year-to-date same store sales decline continues a trend of
declining sales from the previous year. Sales declines in
corporate retail stores are attributed to increased competition,
particularly non-union and non-traditional grocery retailers. Also
negatively impacting the Company's retail sales trend is deflation
in certain food products and the overall economic climate of the
Company's retail market, northeast Ohio. Company programs to
remodel and remerchandise existing corporate retail stores to
combat sales declines are continuing. The Company has realized
sales gains in past remodelling projects which have been more than
offset by sales declines attributed to the overall economic climate
and increased competition.
Gross margin as a percentage of sales declined between years
during both the third quarter (from 19.3% to 19.0%) and year-to-
date (from 19.4% to 19.1%). These decreases in gross margin
percentage reflect the Company's shift in sales mix to wholesale
customers which carry a lower gross margin percentage than sales in
corporate retail stores. In the prior year, corporate retail
stores accounted for 53.5% of total Company sales during the third
quarter and 55.9% year-to-date. During the third quarter and year-
to-date in fiscal 1994, these percentages fell to 49.5% and 50.6%,
respectively.
The Company has been able to maintain both retail and
wholesale gross margin percentages between years despite the
current economic climate. During the third quarter of fiscal 1994,
the Company's primary retail competitor initiated a price reduction
program targeted at certain retail sales categories. Although this
strategy was targeted principally at warehouse clubs, discount and
drug stores, it has impacted the Company's retail gross margins.
The impact of this pricing strategy will be to lower overall retail
margins within the northeast Ohio market.
<PAGE>
Sequential 11 of 14
The Company has been able to mitigate the impact of these
factors on its gross margin through remerchandising corporate
retail stores and improved buying opportunities resulting from its
increased wholesale customer base. The Company also lowered its
provision for Last-in, First-out (LIFO) inventories from $744,000
during the third quarter last year to $462,000 this year. Year-to-
date, the Company's provision for LIFO was reduced from $2.5
million last year to $1.5 million in the current fiscal year. This
lower provision reflects the current lack of inflationary pressures
and the lowering of certain LIFO inventory levels.
Selling, general and administrative (SG&A) expenses, as a
percentage of sales, also declined between years during both the
third quarter (from 17.7% to 17.4%) and year-to-date (from 17.8% to
17.3%). These decreases again reflect the shift in sales to
wholesale customers. While having lower gross margins, these sales
also require lower SG&A expenses. Additionally, the corporate
retail stores which were closed between years operated at high SG&A
percentages and their disposition benefitted the Company's overall
SG&A percentage.
The Company has recorded charges in both years reflecting
costs associated with the Company's long range strategic plans to
restructure its retail operations. These plans include the
disposition of non-core stores, increased capital expenditures to
expand and/or modernize corporate core stores (Rini-Rego Stop-N-
Shop) and the consolidation of certain corporate retail store
locations in larger retail facilities.
In the third quarter of fiscal 1994, the Company recorded a
$12 million restructuring charge to account for its store
consolidation plan. This charge reflects the Company's plan to
close and consolidate corporate retail stores replacing them with
new or expanded corporate retail stores or new or remodelled stores
to be operated by wholesale customers. The plan will replace
approximately 456,000 square feet of small, outdated retail
locations with 431,000 square feet of new, modernized facilities.
The Company's plan is to operate approximately 35 to 40 expanded or
newly remodelled corporate stores by the end of fiscal 1997.
In May 1994, the Company acquired two Acme grocery store
locations from the Fred W. Albrecht Grocery Company. These
locations (82,000 and 75,000 square feet) meet the Company's long
range strategic plan of operating larger stores. The stores will
be converted to Rini-Rego Stop-N-Shop stores and will replace three
small, outdated Rini-Rego Stop-N-Shop stores closed in conjunction
with the Acme acquisition. Earlier in fiscal 1994, the Company
closed a small, outdated corporate retail store which was replaced
by a new, larger store operated by a wholesale customer. The
Company plans to close ten additional corporate retail stores over
the next three to four years, replacing them with three new
corporate retail stores and a newly remodelled wholesale customer
location.
PAGE
<PAGE>
Sequential Page 12 of 14
The $5 million restructuring charge recorded during the second
quarter of fiscal 1993 reflected the Company's plan to dispose of
non-core store formats. The Company decided to close its remaining
five Carl's stores in the Akron-Canton area along with a former
Carl's location in Bedford, Ohio. The Company also declined to
renew its lease on a Food Centre location in Brunswick, Ohio.
These stores were not classified as core stores and could not be
formatted to fit the Company's long range strategic plan. The
Company was able to sell four of the Akron-Canton locations to
wholesale customers who now operate the locations as Apples. See
Note (4) of the Notes to Consolidated Condensed Financial
Statements for a further discussion of these charges.
Interest expense, net increased $149,000 between years during
the third quarter and has increased $468,000 year-to-date. This
increase is due to increased borrowings under the Company's bank
credit facility needed to fund the Company's increased working
capital and capital expenditure requirements. Additionally, the
Company acquired the HBC/GM facility subject to a mortgage which
also increased the Company's debt level.
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 fiscal 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 has recorded a one-time income
item of $6.9 million to reflect the cumulative effect of the change
in accounting for income taxes. See Note (5) of the Notes to
Consolidated Condensed Financial Statements for a further
discussion.
The Company provided income taxes at an effective tax rate of
36% in fiscal 1994 compared to 40.5% in fiscal 1993. Taxes are
provided at the various statutory 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. Greater working capital
requirements associated with the Company's HBC/GM acquisition and
higher levels of capital expenditures have increased the Company's
utilization of its bank credit facility during the first 40 weeks
of fiscal 1994.
Operating activities utilized $6 million of cash this year
compared to providing $4.2 million of cash during the same period
last year. The decrease between years is primarily attributed to
the above mentioned HBC/GM acquisition, increased customer
financing and the timing of the payment of seasonal merchandise.
<PAGE>
Sequential Page 13 of 14
Cash utilized by operating activities included net income of
$5.5 million which contained a non-cash credit of $6.9 million
related to the adoption of SFAS No. 109 and non-cash charges for
depreciation and amortization of $11.2 million and LIFO of $1.5
million. Significant balance sheet changes included increases in
FIFO inventories ($14.2 million), wholesale customer financing
(i.e. notes receivable, $4.0 million), and decreases in accounts
payable ($4.1 million) and accrued expenses ($3.0 million). These
were partially offset by increases in the Company's closed
facilities reserves due to the third quarter restructuring charge
($12.0 million).
The food distribution industry requires a significant
investment in receivables and inventories to meet customer needs.
Offsetting traditional seasonal declines in FIFO inventories at
this time were increased levels of inventory required to support
the new HBC/GM distribution facility and forward buy opportunities.
Additional wholesale customer financing was made available to
support the acquisition by two wholesale customers of four former
corporate retail stores in the Akron-Canton area. Increased retail
store size associated with Company programs to remodel and expand
existing retail locations also increased inventory requirements.
Working capital, exclusive of deferred income taxes, increased
$18.0 million from $23.7 million at the end of fiscal 1993 to $41.7
million at the end of the third quarter of fiscal 1994. The
Company's ratio of current assets to current liabilities, exclusive
of deferred income taxes, increased from 1.25 at the end of fiscal
1993 to 1.48 at the end of the third quarter of fiscal 1994. These
increases reflect the increased working capital demands of the
HBC/GM facility.
The Company's ratio of liabilities to equity increased from
3.14 at the end of fiscal 1993 to 3.24 at the end of the third
quarter of fiscal 1994. This ratio was unfavorably impacted by the
third quarter restructuring charge which was partially offset by
the Company's adoption of SFAS No. 109.
The Company utilized 19.3 million of cash flow for capital
expenditures, principally to continue programs of enhancing its
retail core-store format ($15.6 million) and to acquire the new
HBC/GM facility and upgrade warehouse/distribution equipment ($3.2
million). At the end of the third quarter, the Company had no
major remodelling projects under construction.
The level of capital expenditures for fiscal 1994 is expected
to be slightly higher than the fiscal 1993 level. The Company
believes that cash flow from operations and the unused portion of
the renegotiated bank credit facility will supply adequate funds
for planned capital expenditures, normal ongoing business
activities and debt principal repayments. Available unused
borrowing capacity under the Company's bank credit facility was
approximately $2.6 million at the end of the third quarter of
fiscal 1994.
<PAGE>
Sequential Page 14 of 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K under
Item 5 on March 25, 1994 regarding the acquisition
of the Cleveland Acme stores.
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the
Securities and 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.
May 23, 1994 By: Charles A. Rini, Sr.
President
/s/ Ronald W. Ocasek
May 23, 1994 By: Ronald W. Ocasek
Chief Financial Officer and
Treasurer
</TABLE>
<PAGE>
