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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 29, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM N/A
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COMMISSION FILE NUMBER 1-6068
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RINI-REGO SUPERMARKETS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
OHIO 34-0222970
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(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) (IRS EMPLOYER IDENTIFICATION NO.)
5300 RICHMOND ROAD, BEDFORD HEIGHTS, OHIO 44146
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (216) 292-7000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
9.75% SUBORDINATED DEBENTURES DUE DECEMBER 30, 2001 CINCINNATI STOCK EXCHANGE
- --------------------------------------------------- -------------------------
(TITLE OF EACH CLASS) (NAME OF EACH EXCHANGE ON WHICH REGISTERED)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
6.50% CONVERTIBLE SUBORDINATED DEBENTURES DUE JUNE 1, 1994
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(TITLE OF CLASS)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
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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 THIS FORM 10-K. [X]
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THE TOTAL MARKET VALUE OF REGISTRANT'S COMMON STOCK, WITHOUT PAR VALUE,
HELD BY PERSONS WHO ARE NOT AFFILIATES OF REGISTRANT WAS $883.38.*
THE REGISTRANT HAD 3,536,577 SHARES OF COMMON STOCK, WITHOUT PAR VALUE,
ISSUED AND OUTSTANDING ON SEPTEMBER 3, 1996.
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* This value assumes that the Company's Common Stock, without par value,
has the same market value as the Class A Common Stock, $.01 par value,
of Riser Foods, Inc. of $23.88 per share on September 3, 1996.
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PART I
ITEM 1. BUSINESS
Rini-Rego Supermarkets, Inc. ("RRS" or the "Company") was incorporated
under the laws of the State of Ohio on May 25, 1908. The Company and its
subsidiaries are engaged in the distribution of groceries and related items. All
references to RRS or the Company include RRS and its consolidated subsidiaries.
Retail Operations
- -----------------
As of September 16, 1996, the Company operated 37 retail supermarkets
in the northeast Ohio area, 30 of which operate under the conventional
"Rini-Rego Stop-N-Shop" neighborhood store format, and seven of which operate
under the updated and expanded "Rini-Rego Marketplace" format.
The Company's retail stores offer a large selection of food items,
including dry groceries, meat, dairy, produce, frozen foods, deli products and
baked goods, as well as a number of non-food items such as greeting cards and
health and beauty care items. Certain of the Company's stores also contain
specialty and service departments such as "fresh to go" prepared foods, service
meat, service seafood, service floral and general merchandise. In addition,
selected stores feature walk-in beer coolers, expanded periodical and book
selections, full service bank branches, one-hour photo processing and
"TicketMaster" ticket outlets.
The Company's merchandising strategy is to offer a broad selection of
quality products at competitive prices with an emphasis on superior customer
service, quality and one-stop shopping convenience. The Company sells most
nationally known brands of merchandise, regional brands and a variety of private
label products.
The Company has an ongoing program of remodeling, upgrading and
replacing its retail supermarket locations with either its conventional,
neighborhood store format or its Marketplace store format based upon the
location and demographics of the market that such store serves. Since the
introduction of the Company's Marketplace store format in fiscal 1994, the
Company has built, or remodeled and converted from its traditional format, seven
Marketplace stores with three additional locations in various stages of
construction or remodeling as Marketplace stores. Over the past five fiscal
years, the Company has also built or remodeled ten neighborhood stores with
three additional locations currently in various stages of construction or
remodeling.
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In general, the Company's Marketplace stores are larger than the
Company's neighborhood stores and range in size from approximately 60,000 to
75,000 square feet. The Marketplace stores feature updated decor packages and
fixturing and offer broader selections of traditional merchandise with
additional emphasis on fresh, high quality perishables, prepared food items and
a variety of service departments for one-stop shopping convenience.
Advertising and promotion are important factors in the Company's
merchandising strategy. All of the Company's stores are affiliated with the
Association of Stop-N-Shop Supermarkets (the "Association"), an association of
independent grocery retailers established as a cooperative advertising and
purchasing organization. The Association advertises in newspapers, circulars,
and television and radio advertising comparable to the other supermarket
companies which operate in the northeast Ohio market area. This advertising
generally features high demand products at competitive prices while emphasizing
the Company's quality image.
The Company offers the Stop-N-Shop Preferred Shoppers Club program
which is a free membership club that offers special values to its member
customers. These include "bonus buy" automatic discounts, "clipless coupons" and
other promotions, and in the future may be expanded to include check cashing
card capabilities.
All of the Company's retail supermarkets are equipped with electronic
checkout systems which are integrated with the Preferred Shoppers Club. A
majority of the Company's retail stores offer on-line debit and credit card
payment options. The Company also utilizes in-store microcomputers for various
tasks such as electronic time keeping, labor scheduling and shelf-price auditing
systems.
Wholesale Operations
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The Company operates one of the largest wholesale grocery distribution
operations in the Midwest doing business as "Seaway". The Company offers a
comprehensive selection of national brand, regional brand and private label
products to Company-operated retail stores, other independently-operated retail
grocery chains and independent grocers, primarily in northeast Ohio, and to a
lesser extent, in central Ohio, western Pennsylvania and southeastern Michigan.
The Company also supplies various products to PharMor, Inc., a regional deep
discount drug chain, and Hills Department Stores, Inc., a regional mass
merchandising chain at certain of their locations in additional states.
The Company is continually in the process of expanding its wholesale
customer base and increasing penetration in existing customers by upgrading its
available product lines to include a wider assortment of grocery, frozen foods,
dairy, meat, produce and bakery items.
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The Company offers its wholesale customers a wide variety of
operational support services which include advertising, promotion, marketing and
merchandising services, retail operations counseling, and technical and
information systems support. In addition, the Company assists wholesale
customers in the upgrading and/or enlarging of their stores by providing
inventory and equipment financing, store layout, equipment planning and design,
and engineering and construction services.
The Company utilizes an on-line computerized buying and inventory
control system for the purchase and sale of its inventory, Electronic Data
Interchange to process orders with its vendors and the Tripmaster on-board truck
computer system. The Company operates a trucking fleet consisting of 103
tractors, 132 refrigerated trailers and 121 dry trailers.
The Company purchases the majority of its products from large, national
manufacturers of consumer foods and grocery-related products and the remainder
of its products from several other suppliers. The Company is also a member of
various purchasing cooperatives which provide the Company with enhanced
purchasing opportunities and assistance with the development of its private
label program.
The Company operates its own health and beauty care/general merchandise
(HBC/GM) distribution facility and the Eagle Ice Cream Company which
manufactures branded ice cream and distributes purchased ice cream and frozen
novelty products.
Consistent with the industry practices of other food distribution
retailers and wholesalers, the Company maintains inventory levels at its
distribution centers and retail locations at levels which minimize out of stock
products for its customers. The Company permits the return of damaged or
defective products from customers.
Competition
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The supermarket industry is highly competitive and may be affected by
general economic conditions. During the past several years, competition in the
northeast Ohio market area has intensified due in part to a stagnant or
declining consumer population and an increase in the number of competitor's
stores. The Company continually emphasizes quality, customer service and value
to maintain its market share and compensate for the lack of population growth in
the Company's market area. The Company estimates that it is one of the largest
retailers in terms of grocery sales in the northeast Ohio market area.
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Competition at the retail level varies by store location.
Company-operated retail stores primarily compete with regional supermarket
chains and voluntary supermarket associations. The Company also competes with
supercenter format stores, warehouse and wholesale clubs, convenience stores,
deep discount drug stores and restaurants. The principal areas of competition
pertain to price, selection and quality of perishables and other food products,
customer service, store conditions and store location. These companies compete
with the Company's corporate stores at the retail level and the Company's
wholesale customers at the wholesale level.
The wholesale food distribution industry is also highly competitive in
the market area served by the Company. Management believes that the principal
competitive factors include service, price, breadth of product line and the
availability of support services to its wholesale customers. The Company
competes directly with regional and national wholesalers.
Seasonality and Regulation
- --------------------------
The Company's business is generally not seasonal in nature. The Company
anticipates that its compliance with federal, state and local laws relating to
the protection of the environment has not had and is not expected to have a
significant effect on the Company's capital expenditures, earnings or
competitive position.
Customers and Suppliers
- -----------------------
No single customer or group of customers under common control accounted
for 10% or more of the Company's consolidated revenues for the fiscal year ended
June 29, 1996 ("1996 Fiscal Year"). Groceries, general merchandise and raw
materials are generally available from many sources.
Employees
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As of June 29, 1996, the Company employed approximately 5,500 persons,
on both a full and part-time basis. The majority of the Company's work force is
unionized and are members of either the United Food and Commercial Workers
Union, Local No. 880 (retail) ("Local 880") or the International Brotherhood of
Teamsters, Local No. 507 (wholesale) ("Local 507"). The Company's contract with
Local 880, which is negotiated through the Cleveland Food Industry Committee
("CFIC"), expired on September 8, 1996 and has been extended indefinitely during
the pendency of contract renegotiations. The CFIC has reached a tentative
agreement with Local 880 subject to ratification by the members of Local 880
during October 1996. This contract can be terminated by local 880 upon seven
days notice. Retail operations have not been negatively impacted by this
situation. Members of the CFIC include the Company, the other members of the
Association and the Company's primary grocery store competitors, First National
Supermarkets, Inc. and Heinen's. The Company's contract with Local 507 is in
effect until April 1, 1998.
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Corporate Background
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On June 2, 1988, the Company's common and preferred shareholders
approved a Plan and Agreement of Merger dated as of April 7, 1988 providing for
the merger of Cleveland Food Sub, Inc., a wholly owned subsidiary of Riser
Foods, Inc. ("Riser"), with and into the Company (then known as Fisher Foods,
Inc. ("Fisher")), wherein the Company became the surviving corporation and a
subsidiary of Riser (the "Merger"). Simultaneously with the Merger, Riser also
became the parent company of Rini Holding Company ("Rini"), Rego Supermarkets,
Inc. ("Rego"), and American Seaway Foods, Inc. and two of its affiliated
partnerships (collectively, "Seaway"), through the exchange of Riser stock for
the stock of Fisher, Rini, Rego and Seaway (the "Combination") which was
effective June 8, 1988 (the "Effective Date").
On the Effective Date, the Company's Common Stock, without par value,
("Common Stock") ceased trading on the New York Stock Exchange. Each share of
Fisher Common Stock issued and outstanding at the Effective Date was exchanged
for one share of Riser Class A Common Stock, $.01 par value, and each share of
Fisher Preferred Stock, without par value, was exchanged for one share of Riser
Series A Cumulative Convertible Preferred Stock, $100 par value. Following the
Effective Date, Riser consolidated the wholesale operations of Seaway and Fisher
into one operating unit and consolidated its retail operations through the
merger of Rini and Rego into Fisher and changed Fisher's name to Rini-Rego
Supermarkets, Inc.
ITEM 2. PROPERTIES
The Company owns a warehouse and office facility in Bedford Heights,
Ohio, containing approximately 850,000 square feet which serves as the Company's
corporate headquarters and principal distribution center. This facility is
currently under construction to expand its capacity by approximately 115,000
additional square feet. The Company also owns the following properties: a
warehouse, office facility and garage in Maple Heights, Ohio containing
approximately 356,000 square feet, approximately 349,000 square feet of which is
used in its HBC/GM operations and approximately 7,000 square feet is leased to
an unaffiliated company; a warehouse and office facility in Cuyahoga Heights,
Ohio containing approximately 187,000 square feet of which approximately 140,000
square feet is leased to others and the remainder is used in its wholesale
operations; a warehouse facility in Cleveland, Ohio containing approximately
29,100 square feet which is used in its wholesale operations; and an ice cream
plant in Bedford, Ohio containing approximately 39,000 square feet.
Six retail store properties are owned by the Company, four of which are
used in its retail operations and two of which are subleased to unaffiliated
parties. The Company leases the remainder of its operating retail locations.
Most of the Company's leased properties are under long-term leases of varying
terms, the majority of which obligate the Company to pay certain increases in
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property taxes and insurance, percentage rent, common area and maintenance
charges. As of June 29, 1996, the aggregate minimum annual rentals of all
operating and capital leases with initial noncancellable terms of more than one
year were approximately $14,802,000.
During the 1996 Fiscal Year, the Company sold a warehouse facility in
Bedford Heights, Ohio to an unaffiliated party for $5,000,000. This facility,
which contained approximately 305,000 square feet, along with the Company's
Cash-n-Carry wholesale sales facility in Cleveland, Ohio were purchased by the
Company in the 1996 Fiscal Year for an aggregate purchase price of $6,000,000
pursuant to put options contained in leases with Seaway Development Company.
Seaway Development Company is an Ohio general partnership whose partners were
shareholders of Seaway prior to the Combination.
During the 1996 Fiscal Year, the Company purchased a 10.1 acre site in
Strongsville, Ohio from an unaffiliated party for a purchase price of $2,400,000
upon which it constructed a Marketplace store.
ITEM 3. LEGAL PROCEEDINGS
On August 14, 1996, a purported class action lawsuit JUDITH E.
CHAMBERLAIN, ET AL, V. THE AMERICAN TOBACCO COMPANY, INC. ET AL, Case No.
313491, was filed in the Court of Common Pleas, Cuyahoga County, Ohio asserting
claims against a substantial number of tobacco manufacturers (the
"Manufacturers"), two distributors of tobacco products and The Kroger Co. and
Riser Foods, Inc. as retailers that sold cigarettes through their stores
(collectively, the "Defendants"). The Defendants have filed a Notice of Removal
to transfer the case to the United States District Court of the Northern
District of Ohio, where it is presently pending as Case No. 196CV2005. The
Complaint asserts that through the fraudulent course of conduct, the
Manufacturers have manufactured, promoted, marketed, supplied and sold
cigarettes to millions of Ohioans while knowing, but concealing, that the
cigarettes contained a highly addictive drug, nicotine, and that they have
controlled and manipulated the amount of nicotine in the cigarettes with the
intention of creating and sustaining addiction to cigarettes. The Plaintiffs
purport to represent all nicotine dependent persons who are residents and/or
citizens of Ohio that have purchased and smoked cigarettes manufactured by the
tobacco companies that are Defendants, and certain persons affiliated with such
purported Plaintiffs. The Plaintiffs seek compensatory damages for economic
losses, personal injuries, emotional distress, as well as punitive and exemplary
damages and equitable relief, including the establishment of a medical
monitoring fund in order to remedy alleged violations by the Manufacturers of
the common law doctrines of fraud, civil conspiracy, negligent
misrepresentation, negligence, intentional infliction of emotional distress,
negligent infliction of serious emotional distress, product liability, breach of
express and implied warranties and violations of certain Ohio
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consumer protection laws. The complaint seeks similar relief against the
distributors and retailers, including Riser, for alleged negligence, strict
liability and breach of warranties.
On September 16, 1996, an additional purported class action lawsuit,
THOMAS COYNE (MAYOR OF BROOK PARK) AND TIMOTHY HAGAN (CUYAHOGA COUNTY
COMMISSIONER) ON BEHALF OF THE STATE OF OHIO AND ALL OHIO TAXPAYERS V. THE
AMERICAN TOBACCO COMPANY, INC. ET AL., Case No. CV 315249, was filed in the
Court of Common Pleas, Cuyahoga County, Ohio against all of the same Defendants.
This lawsuit contains substantially the same allegations and damage requests
with respect to the Company as in the CHAMBERLAIN lawsuit.
The Company's liability, if any, from these claims cannot be determined
at this time. However, the Company's management believes that it has meritorious
defenses to the allegations raised in the Complaints and the Company intends to
defend itself vigorously in this litigation. Management also believes that the
Company may have available certain rights to indemnification and/or insurance
with respect to the damage claims that may arise out of this litigation. Based
upon current information, the Company believes that any liability arising out of
this litigation will not have a material adverse effect on the financial
condition or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Market Information
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The Company's Common Stock ceased trading on the New York Stock
Exchange on June 8, 1988. As such, there is no established public trading market
for the Company's Common Stock and stock price information is not available.
Shareholders
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As of September 3, 1996 there were 2 shareholders of record of the
Company's Common Stock.
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Dividends
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It is the Company's current policy to retain earnings of the Company in
order to fund capital expenditures, which have primarily been used to expand or
remodel its existing retail store locations. The Company has not paid any
dividends on its Common Stock in the last two fiscal years. The payment of
dividends is also subject to restrictions contained in the Company's credit
facility.
The Company's parent, Riser Foods, Inc. has paid a regular quarterly
dividend of $.05 per share on each outstanding share of its Class A Common Stock
and Class B Common Stock since October 10, 1995, which quarterly dividend has
been increased to $.06 per share with the dividend payable on October 8, 1996 to
stockholders of record at the close of business on September 27, 1996. The
declaration and payment of dividends is subject to the discretion of Riser's
Board of Directors, and there can be no assurance that dividends will be paid in
the future. In determining whether to pay dividends (as well as the amount and
timing thereof), Riser's Board of Directors considers a number of factors,
including Riser's results of operations, financial condition and capital and
surplus requirements. The payment of dividends on the Riser's common stock is
limited by its credit facility to $2,828,000 and $3,232,000 during the fiscal
years ending in 1997 and 1998, respectively. The payment of dividends is
prohibited if Riser does not meet certain financial and other covenants
contained in the credit facility.
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ITEM 6. SELECTED FINANCIAL DATA
(in millions, except per share data, locations & ratios)
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6-29-96 7-1-95 7-2-94 7-2-93 6-27-92
(52 Weeks) (52 Weeks) (52 Weeks) (53 Weeks) (52 Weeks)
---------- ---------- ---------- ---------- ----------
Operations
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Net sales $ 1,285.2 $ 1,185.0 $ 1,121.6 $ 1,108.2 $ 979.3
Net income before
extraordinary
item and cumulative
effect of change in
accounting principle 16.6 11.6 1.5 6.2 8.1
Extraordinary item:
Utilization of net
operating loss
carryforwards - - - .3 -
Net income before
cumulative effect of
change in accounting
principle 16.6 11.6 1.5 6.5 8.1
Cumulative effect of
change in accounting
principle:
Accounting
for income taxes - - 6.9 - -
Net income 16.6 11.6 8.4 6.5 8.1
Per share data:
Net income from
continuing operations 2.05 1.42 .18 .75 .99
Extraordinary item - - - .03 -
Cumulative effect of
change in accounting
principle - - .85 - -
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Net income $ 2.05 $ 1.42 $ 1.03 $ .78 $ .99
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Dividends per common
share $ - $ - $ - $ - $ -
Retail locations -
weighted average 38 40 44 48 51
Financial Position
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Working capital $ 15.0 $ 23.9 $ 43.0 $ 24.3 $ 24.2
Property, equipment &
capital leases, net 124.0 118.1 108.5 101.1 91.0
Total assets 262.3 268.5 257.5 233.4 204.8
Long-term obligations
Debt 32.5 55.7 75.5 56.3 51.9
Capital leases 5.5 6.8 8.2 10.6 10.7
Liabilities-to-equity
ratio 1.9 2.6 3.0 3.1 3.1
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth items from the Company's Consolidated
Statements of Income as a percentage of net sales:
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1996 1995 1994
(52 Weeks) (52 Weeks) (52 Weeks)
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Net sales 100.00 100.00 100.00
Cost of goods sold 80.55 80.21 80.73
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Gross profit 19.45 19.79 19.27
SG&A expenses 16.88 17.61 17.35
Restructuring Charge - - 1.07
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Operating income 2.57 2.18 .85
Interest expense, net .41 .54 .63
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Income before taxes and 2.16 1.64 .22
accounting change
Provision for income taxes .87 .66 .08
-------- -------- --------
Net income before accounting
change 1.29 .98 .14
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The results of operations for the fiscal year ended June 29, 1996
continue to reflect the successful implementation of strategic initiatives which
were designed to improve operating performance and counter competitive and
economic pressures. The food distribution industry has encountered little or no
inflation over the past three years while operating costs, particularly labor
and occupancy, have contractually risen. The industry has also experienced
increased competition from non-traditional sources, such as convenience stores
and national mass merchandising chains, that has unfavorably impacted overall
industry sales and operating margins.
Net Sales
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Net sales increased 8.5% to $1.285 billion in 1996, 5.7% to $1.185
billion in 1995 and 1.2% to $1.122 billion in 1994. This trend of sales
increases over those of the prior years is the result of strategic initiatives
to remodel, reposition and enlarge Company-operated retail stores, aggressive
merchandising in Company-operated stores, expansion of the product lines offered
to the Company's independently-operated wholesale customers, sales to new
wholesale customers and an improved economic climate in the Company's primary
market area. Additionally, 1996 and 1995 sales were favorably impacted by a full
fifty-two weeks of operations of
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the Company's Health and Beauty Care/General Merchandise (HBC/GM) distribution
facility which was acquired in 1994.
The Company's strategic initiatives to remodel, reposition and expand
Company-operated retail stores have resulted in the consolidation and
enlargement of Company-operated retail stores. The following table details the
number, format and size of Company-operated retail stores between years:
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1996 1995 1994
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Beginning of year 38 42 45
Opened - - 2
Closed (1) (4) (5)
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End of year 37 38 42
====== ====== ======
Store Formats:
Rini-Rego Stop-N-Shop 32 33 37
Rini-Rego Marketplace 5 5 3
Other - - 2
Average store square
footage (37 stores) 47,995 47,330 46,586
</TABLE>
Sales in Company-operated retail stores increased over that of the prior
year by 5.3% in 1996 and 8.0% in 1995 as same store sales increases of 7.3% in
1996 and 9.1% in 1995 more than offset the loss of sales resulting from fewer
Company-operated retail stores. Adjusted for a 53rd week of sales in 1993, total
sales in Company-operated retail stores declined 5.4% in 1994 principally due
to a reduction in the number of Company-operated retail stores between years
coupled with declining same store sales of .4%. The reversal of same store sales
declines in 1995 was attributed to the Company's retail remodeling,
repositioning and expansion programs, aggressive merchandising, which included
the introduction of the Company's Preferred Shoppers Club, and an improved
economic climate. Additionally, the loss of sales associated with the closing a
total of nine Company-operated retail stores between 1995 and 1994 was offset by
the addition of two newer, larger Company-operated retail stores in May 1994.
The Company's trend of same store sales increases slowed in 1996 due to
the cycling of store remodels from prior years and the timing and nature of 1996
remodels. The Company completed three major remodeling projects during 1996 and
four major remodeling projects in each of 1995 and 1994. The Company anticipates
completing six major remodeling projects during 1997 which are dependent upon
the finalization of building plans, approval of local zoning boards,
accessibility of landlords, solicitation of building contractors and appropriate
weather conditions during the building season. The Company believes its trend of
retail sales increases will continue albeit at a slower rate due largely to
increased competition from competitors' new stores and
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merchandising strategies and continued competition from national mass
merchandising chains diversifying their product lines into grocery categories.
The Company's retail remodeling and repositioning initiatives, where
certain non-core stores were closed and certain core stores were remodeled,
expanded or consolidated into larger retail facilities, has proven successful,
yielding continued sales growth and improved operating leverage. Since the first
quarter of 1994, the Company has constructed or converted five former Rini-Rego
Stop-N-Shop stores to its Marketplace format. The Marketplace stores are larger,
averaging approximately 65,000 square feet, and meet the consumer's basic
grocery needs while offering an expanded product line, with emphasis on high
quality perishable departments and a variety of full service, consumer-oriented
departments.
During 1995, the Association of Stop-N-Shop Supermarkets, a northeast
Ohio advertising cooperative which includes all Company- operated retail stores,
introduced a new target marketing campaign, the Preferred Shoppers Club.
Participating shoppers receive a Preferred Shoppers Club card which entitles
them to extra discounts below normal sales prices. This program was the first of
its kind in northeast Ohio and allows the Company to offer its customers greater
value and will ultimately enhance the Company's ability to meet customer
purchasing requirements and preferences. The success of this program has
increased sales in Company-operated retail stores and proven a valuable
merchandising tool to combat competitive pressures from both traditional and
non-traditional grocery retailers. The Company's primary competitor introduced a
frequent shoppers card in March 1996. The introduction of the competitor's card
lessened the effect of the Company's Preferred Shoppers Card somewhat but has
not had a significant impact on sales in Company-operated retail stores.
However, it is still too early to assess the full impact of the competitor's
card program.
After adjusting for the 53rd week of sales in 1993, sales to
independently-operated retail stores continued a trend of increased sales over
that of the prior year with increases of 11.9% in 1996, 3.4% in 1995 and 13.9%
in 1994. Sales to independently-operated retail stores in 1996 increased
principally because of new sales to 102 PharMor stores primarily located in the
eastern third of the United States and the addition of new customers in the
southeast Michigan area. Fiscal 1995 sales benefited from new customer additions
as well as the improving economic climate which, in turn, increased sales to
independently-operated retail stores. The acquisition of an HBC/GM distribution
facility from the Company's former HBC/GM supplier increased sales in 1994.
The Company has continued to increase its wholesale sales penetration to
existing customers, primarily in the perishable, private label and HBC/GM
product lines. The Company continues to evaluate other markets outside its
primary market area for potential distribution opportunities. As part of its
1994 acquisition of an HBC/GM distribution facility, the Company began servicing
Hills Department Stores throughout the eastern third of
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the United States. In 1995, the Company opened a sales office in the Detroit
area focusing on meat distribution and new business development.
Total Company sales also benefited from an improved economy in the
Company's primary market area. The economy in northeast Ohio, which was stagnant
in 1994, began to expand early in 1995 and continued to improve throughout both
1995 and 1996. The improved economic climate, combined with the Company's
merchandising programs in both Company-operated retail stores and independently-
operated retail stores, resulted in consumers increasing the amount of their
average purchase and trading-up in many commodity lines.
Gross Profit
- ------------
Gross profit, as a percentage of sales, fluctuated from 19.27% in 1994
to 19.79% in 1995 and 19.45% in 1996. This fluctuation in the gross profit
percentage is principally a function of shifting sales mix between years. Sales
to independently-operated retail stores carry a lower gross profit percentage
than sales in Company-operated retail stores. As such, a shift in the mix of
these sales impacts overall gross profit percentages. Sales generated in
Company-operated retail stores as a percentage of total Company sales increased
from 50.6% in 1994 to 51.7% in 1995 and then decreased to 50.2 % in 1996. This
mirrors the shift in the gross profit percentage. The Company has been able to
maintain gross profit percentages on sales to independently-operated retail
stores and in Company-operated retail stores through improved procurement
systems, merchandising and effective inventory management.
Selling, General And Administrative (SG&A) Expenses
- ---------------------------------------------------
SG&A expenses, as a percentage of sales, were 16.88% in 1996, 17.61% in
1995 and 17.35% in 1994. These shifts also reflect the change in the sales mix
between years. Sales in Company-operated retail stores require higher SG&A costs
than sales to independently-operated retail stores. Accordingly, the SG&A
percentage increased and decreased with the above mentioned sales mix. The
Company has been able to minimize the impact of the shift of sales mix on the
SG&A percentage through improved productivity resulting from the implementation
of Total Quality Management initiatives and improved leverage of certain fixed
SG&A expenses over a higher sales volume.
Restructuring Charge
- --------------------
The Company recorded a restructuring charge in 1994 reflecting costs
associated with the Company's long range strategic initiatives to reposition its
Company-operated retail store operations. These initiatives include the
disposition of non-core stores and the consolidation of certain Company-operated
retail store locations into larger retail facilities.
14
<PAGE> 16
The Company's 1994 restructuring charge included a $4 million non-cash
charge to write down fixed assets to their net realizable value and an $8
million charge for future cash expenditures (principally occupancy costs net of
expected sublease income) related to the closing of thirteen Company-operated
retail stores. The Company utilized $1.7 million, $.6 million and $1.3 million
of cash for its restructuring charges in 1996, 1995 and 1994, respectively.
The Company closed five of the stores included in the restructuring
charge in fiscal 1994, four of these stores in 1995 and one in 1996. The
remainder of these Company-operated retail stores will be closed over the next
three to four years. The Company plans to operate approximately 35 to 38
expanded or newly remodeled Company-operated retail stores by the end of 1998,
which is expected to result in a limited reduction of overall employee levels.
The Company's restructuring charge reflects the Company's overall plan
to reposition its Company-operated retail stores, focusing on its Rini-Rego
Stop-N-Shop core-store format. The Company does not currently anticipate any
future restructuring charges.
Interest Expense, Net
- ---------------------
Interest expense, net of interest income, decreased from $7.0 million in
1994, to $6.4 million in 1995, to $5.3 million in 1996. These decreases are a
function of lower borrowing levels under the Company's bank credit facilities
which were the product of programs to reduce the investment in distribution
inventories and increase inventory turns and increased cash flow from
operations. The average interest rate charged under the Company's bank credit
facilities was 8.06% in 1996, 8.43% in 1995 and 6.74% in 1994. The increase in
this interest rate between 1995 and 1994 was principally the result of an
increase in the bank's prime lending rate. The decrease in this rate between
1996 and 1995 was the result of negotiated interest rate reductions in 1996 and
1995 and the Company's utilization of LIBOR pricing. The Company currently
borrows funds under its bank credit facilities at either the bank's prime
lending rate or 1.25% over LIBOR.
Income Taxes
- ------------
The Company provided income taxes at an effective tax rate of 40.1% in
1996, 40.3% in 1995 and 37.0% in 1994. The increase in the Company's effective
tax rate in 1995 represents a higher provision for federal income taxes as a
result of the Company being taxed at a higher federal tax rate and a higher
state income tax provision because of higher income for financial reporting
purposes. The lower effective tax rate in 1994 was also the result of a lower
provision for state income taxes due to lower income for
15
<PAGE> 17
financial reporting purposes. The Company accounts for the franchise tax portion
of its state income tax provision as an operating expense.
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109) in 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 a one-time income item of $6.9 million to reflect the cumulative effect
of the change in accounting for income taxes in 1994. The one-time income item
was principally the result of benefiting the expected utilization of net
operating loss carryforwards (NOL) and the adjustment of deferred tax balances
to reflect changes in statutory rates. See Note 4 of the Notes to Consolidated
Financial Statements for further discussion.
CAPITAL RESOURCES AND LIQUIDITY
The Company's primary source of capital has historically come from
internally generated funds. However, the Company's intensified capital
expenditure requirements and higher working capital needs associated with the
acquisition of its HBC/GM distribution facility increased the Company's reliance
on its bank credit facilities in 1994. During 1996 and 1995, debt levels
decreased due to an increase in net income, an increase in the distribution
inventory turns and the resulting decrease in working capital requirements and
the repayment of notes by independently-operated retailers.
Operating activities generated $51.1 million of cash in 1996, $46.8
million in 1995 and $13.6 million in 1994. In addition to increases in net
income, cash provided by operating activities was favorably impacted by the
above mentioned repayment of customer notes (1996), Company programs to maximize
its return on inventories and the timing of payments on accrued expenses and
other liabilities. The success of Company programs to lower distribution
inventories and increase inventory turns resulted in a greater percentage of
1996 and 1995 distribution inventories being financed through trade accounts
payable, without extending vendor terms, rather than through the Company's
revolving credit facilities. Accrued expenses and other liabilities increased in
1994 due primarily to the $12 million restructuring charge. In 1995, accrued
expenses and other liabilities increased because of increased income tax
accruals due to increased net income and larger payroll related accruals. In
1996, cash was utilized to pay accrued income taxes from the prior year as well
as 1996 tax estimates.
16
<PAGE> 18
The lower level of cash provided by operations in 1994 was a function of
lower earnings coupled with the increased working capital requirements of
expanded sales to independently-operated retailers. The food distribution
industry requires a significant investment in receivables and inventories to
meet customer needs. Increased levels of inventories were required in 1994 to
support the new HBC/GM distribution facility and forward buy opportunities.
Additional wholesale customer financing was also made available to support the
acquisition by two independently-operated wholesale customers of four former
Company-operated retail stores in the Akron/Canton area. These notes were repaid
during 1996. Cash provided by operating activities in 1994 was also impacted by
a $6.9 million non-cash credit for the adoption of SFAS No. 109.
Since cash provided by operating activities was utilized to reduce
borrowings under the Company's revolving lines of credit, and increased
inventory turns resulted in a higher trade accounts payable to FIFO inventory
ratio, working capital exclusive of deferred income taxes decreased to $5.9
million in 1996 from $13.9 million in 1995 and $36.4 million in 1994. The
Company's ratio of current assets to current liabilities, exclusive of deferred
income taxes, also decreased to 1.05:1 at the end of 1996 from 1.13:1 and 1.43:1
at the end of 1995 and 1994, respectively. These shifts reflect the changes in
working capital components that are discussed above.
Lower borrowing levels under the Company's bank credit facilities
reduced the Company's long-term liabilities to equity ratio to .56:1 at the end
of 1996 from 1.00:1 at the end of 1995 and 1.46:1 at the end of 1994. The
Company has continued to improve its ratio of total liabilities to equity
lowering it to 1.92:1 at the end of 1996 from 2.61:1 and 2.98:1 at the end of
1995 and 1994, respectively.
The Company utilized $31.2 million of cash flow for capital expenditures
in 1996 which is consistent with prior year levels. This amount reflects the
Company's acquisition of its Aurora Road and Cash-N-Carry distribution
facilities, which had previously been leased, and lower retail capital
expenditure levels. The Company used $20.9 million of its capital expenditures
on retail remodeling projects ($23.2 million in 1995 and $22.3 million in 1994),
$8.7 million for distribution facilities and equipment ($2.5 million in 1995 and
$3.4 million in 1994) and $1.6 million on data processing systems upgrades and
corporate equipment and vehicles ($2.4 million in 1995 and $1.4 million in
1994).
Retail capital expenditures were made to modernize and expand
Company-operated retail locations. At the end of 1996, the Company operated 37
retail locations compared to 38 retail locations at the same time last year. The
store closed during 1996 was closed temporarily during the construction of its
replacement store. The increase in distribution facilities and equipment
expenditures in
17
<PAGE> 19
1996 was partially offset by the sale of the Aurora Road facility at the end of
1996. This facility was not used by the Company for any significant operating
activities.
The Company anticipates the level of capital expenditures for the next
two fiscal years will be slightly higher than the previous three fiscal years
principally because of the acceleration of the Company's remodeling programs.
Capital expenditure levels will be maintained in the $35-45 million range over
the next three fiscal years which will complete the Company's remodeling and
expansion of its existing core stores. Additionally, the Company is expanding
its Bedford Heights, Ohio distribution facilities to meet the needs of its
distribution operations. The Company believes that cash flow from operations and
the unused portion of its bank credit facilities ($52.5 million at the end of
1996) will adequately fund planned capital expenditures, normal ongoing business
activities and scheduled debt principal repayments.
IMPACT OF INFLATION
Inflation increases the Company's major costs, inventory and labor.
Because of the high velocity of inventory turnover in the food distribution
industry and the Company's use of the Last-in, First-out (LIFO) valuation method
for a majority of its inventories, the impact of inflation is normally reflected
very quickly in the results of operations. The food distribution industry has
experienced little or no food price inflation over the last three years.
Accordingly, the Company's provisions for LIFO inventories for the past three
years were as follows: expense of $773,000 and $69,000 in 1996 and 1995,
respectively, and income of $486,000 in 1994. Experience indicates that highly
competitive market conditions may prevent the Company from fully recovering
inflation-driven costs through retail pricing alone.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
for the Impairment of Long-lived Assets and for Long-lived Assets to be
Disposed Of," must be adopted by the Company in the first quarter of fiscal
1997. This standard requires the Company to evaluate the recoverability of
long-lived assets based on expected future cash flows. The adoption of this
standard is not expected to have a material impact on the Company's financial
position or results of operations.
SFAS No. 123, "Accounting for Stock-Based Compensation," must be adopted
by the Company no later than the fiscal year ending June 28, 1997. This standard
establishes a fair value method for accounting for stock-based compensation
plans either through recognition or disclosure. The adoption of this standard is
not expected to have a material impact on the Company's financial position or
results of operations.
18
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company are set forth in
Item 14 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a description of the directors and executive officers
of the Company, whose terms as such will continue until their successors are
duly elected and qualified:
CHARLES A. RINI, SR., 58, has served as President of the Company since
February 4, 1994 and as a Director of the Company since July 16, 1988. From July
16, 1988 until February 4, 1994, Mr. Rini served as Secretary of the Company.
Mr. Rini is also the President, Chief Operating Officer and a Director of Riser.
ANTHONY C. REGO, 55, has served as Vice President and Secretary of the
Company since February 4, 1994 and as a Director of the Company since July 16,
1988. From July 16, 1988 until February 4, 1994, Mr. Rego served as President of
the Company. Mr. Rego is also Chairman of the Board of Directors and Chief
Executive Officer of Riser.
RONALD W. OCASEK, 50, has served as Chief Financial Officer and
Treasurer of the Company since June, 1989. From September, 1988
through May, 1989, he served as Vice President-Financial Operations
of Riser. Mr. Ocasek is also a Senior Vice President, Chief
Financial Officer, Treasurer and a Director of Riser.
ITEM 11. EXECUTIVE COMPENSATION
For the fiscal year ended June 29, 1996, none of the Company's executive
officers or directors were compensated by RRS. As a result, pursuant to Rule
402(a)(6) promulgated under the Securities Exchange Act of 1934, the summary
compensation table, option/SAR grants and exercises tables, long term incentive
plans table and defined benefit or actuarial plan disclosure are not included in
this report. The Company's executive officers and directors are paid by Riser in
their capacities as Riser executives.
19
<PAGE> 21
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth the number of shares and percentage of
shares of RRS Common Stock owned by persons beneficially owning more than five
percent and the shares owned by the directors and officers as a group, as of
September 3, 1996.
<TABLE>
<CAPTION>
% of
Name and Address Number of Shares Shares
---------------- ---------------- ------
<S> <C> <C>
Riser Foods, Inc. 3,536,540 99.99%
5300 Richmond Road
Bedford Heights, OH 44146
Directors and Officers
as a group (3 persons) -0- -0-
</TABLE>
The following table sets forth certain information, as of September 3,
1996, regarding beneficial ownership of Riser's Class A Common Stock and Class B
Common Stock owned by each director and officer of RRS. Unless otherwise
indicated, each of the owners listed has sole voting and investment power with
respect to the shares set forth opposite their names:
<TABLE>
<CAPTION>
No. of % No. %
Name of Class A Class A Class B Class B
Beneficial Owner Shares Shares Shares Shares
---------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Anthony C. Rego(1) 187,212 2.1 % 36,583 3.8%
Charles A. Rini, Sr.(2) 186,308 2.1 % 264,495 27.7%
Ronald W. Ocasek(3) 11,350 .1 % 0 0%
Directors and Officers
as a group (3 persons) 384,870 4.4 % 301,078 31.5%
- --------
<FN>
(1) Includes (i) 100 shares of Class A Common Stock owned by Mr. Rego's
wife, (ii) 64,497 shares of Class A Common Stock and 300 shares of Class B
Common Stock owned by his children as to which Mr. Rego disclaims beneficial
ownership, and (iii) assumes the exercise of options to purchase 9,000 shares
of Class A Common Stock at $7.31 per share.
(2) Includes (i) 11,500 shares of Class A Common Stock held in trust by Mr.
Rini as trustee for his benefit, (ii) 163,558 shares of Class A Common Stock
held in trust by Mr. Rini as trustee in 11 trusts for the benefit of his
children, (iii) 2,250 shares of Class A Common Stock owned by Mr. Rini's wife,
(iv) 6,000 shares of Class B Common Stock held in trust by Mr. Rini as trustee
in six trusts for the benefit of his children, and (v) assumes the exercise of
options to purchase 9,000 shares of Class A Common Stock at $7.31. Business
address is Riser Foods, Inc., 5300 Richmond Road, Bedford Heights, Ohio 44146.
(3) Assumes the exercise of options to purchase (i) 5,000 shares of Class A
Common Stock at $10.31 per share beginning October 4, 1993 and (ii) 6,000 shares
of Class A Common Stock at $7.31 per share beginning July 28, 1994.
</TABLE>
20
<PAGE> 22
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since the Effective Date, the Company has leased four retail
supermarket locations from Rini Realty Company ("Rini Realty"), an Ohio
corporation which is owned by affiliates of RRS and Riser, which include Charles
A. Rini, Sr., a Director and President of RRS and a Director, President and
Chief Operating Officer of Riser, Anthony Rini, a Director of Riser, Charles A.
Rini, a Director of Riser and Charles A. Rini, Jr., a Director of Riser. During
the 1996 Fiscal Year, the Company terminated a lease, which had an expiration
date of December 31, 2002, with Rini Realty and paid Rini Realty the sum of
$650,000. Since the Effective Date, the Company has also leased two retail
supermarket locations from Rego Realty Company ("Rego Realty"), an Ohio limited
partnership, which is owned by affiliates of RRS and Riser, including Anthony C.
Rego, the Vice President, Secretary and a Director of RRS and the Chairman and
Chief Executive Officer of Riser, Thomas A. Rego, Senior Vice President,
Secretary and a Director of Riser and Charles A. Rego, Senior Vice President and
a Director of Riser. The Company's management believes that the terms and
provisions of the leases with Rini Realty and Rego Realty reflect terms and
conditions which are customary in the retail grocery industry and are at least
as favorable to RRS as could be obtained from persons unrelated to RRS. Each of
the leases provides for a base rent plus additional percentage rent based on the
lessee's gross sales from such location and allows for an adjustment in the base
rent every five years. Each lease provides that the tenant will pay real estate
taxes, assessments, common area maintenance charges, insurance charges and
utility expenses. During the 1996 Fiscal Year, the Company paid Rini Realty and
Rego Realty annual fixed rent of $1,139,000 and $217,000, respectively. On May
1, 1987, the Company made a loan to Rego Realty in the principal amount of
$990,000 in connection with the acquisition of a supermarket location. This
loan, the largest outstanding balance of which was $749,273 during the 1996
Fiscal Year, bears interest at 7.5% and has an outstanding balance of $697,666
as of September 21, 1996.
From the Effective Date until July 14, 1995, the Company leased a
warehouse complex in Bedford Heights, Ohio and its Cash-n-Carry facility in
Cleveland, Ohio from Seaway Development Company. Seaway Development is an Ohio
general partnership whose partners were shareholders of Seaway prior to the
Combination. Monthly base rental was $58,478 and $6,609 for the Bedford Heights
and Cleveland properties, respectively. Payments under such leases, on an annual
basis, totaled $781,040. The Company believes the terms and conditions of the
leases from Seaway Development reflected then current market rental rates and
were at least as favorable to the Company as could be obtained from persons not
related to the Company. In July 1995, pursuant to put options contained in these
leases, the Company was required to purchase these two buildings at an aggregate
purchase price of $6,000,000.
21
<PAGE> 23
As of September 22, 1996 the Company had accounts and notes receivable
of approximately $4,190,000 due from other members of the Stop-N-Shop
Association. The Company has a 70% ownership and 38% voting interest in the
Stop-N-Shop Association. The accounts and notes receivable are primarily related
to arms length purchases of grocery related products and gift certificates by
other members of the Stop-N-Shop Association.
During the 1996 Fiscal Year, the Company engaged Kohrman Jackson &
Krantz as legal counsel. S. Lee Kohrman, a former director of the Company and a
director of Riser, is a partner in such law firm. In addition, Kohrman Jackson &
Krantz serves as legal counsel to Riser.
22
<PAGE> 24
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(A) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT:
1. Financial Statements Page
--------------------
Report of Independent Public Accountants 29
Consolidated Balance Sheets as of June 29, 1996
and July 1, 1995 30
Consolidated Statements of Income for the
three fiscal years ended June 29, 1996 32
Consolidated Statements of Stockholders' Equity
for the three fiscal years ended June 29, 1996 34
Consolidated Statements of Cash Flows for the
three fiscal years ended June 29, 1996 35
Notes to Consolidated Financial Statements 37
2. Financial Statement Schedules
-----------------------------
Financial Statement Schedules to the Consolidated Financial
Statements required by Article 12 of Regulation S-X are not required
under the related instruction or are inapplicable and therefore have
been omitted.
23
<PAGE> 25
3. Exhibits
--------
3.1 Certificate of Incorporation (previously filed as
Exhibit 3.1 to the Company's Annual Report on Form 10-K
filed with Securities and Exchange Commission (the
"Commission") on October 17, 1988 and incorporated
herein by reference)
3.2 Code of Regulations (previously filed as Exhibit 3.2 to
the Company's Annual Report on Form 10-K filed with the
Commission on October 17, 1988 and incorporated herein
by reference)
4.1 9-3/4% Subordinated Debentures due December 30, 2001 of
Rini-Rego Supermarkets, Inc. ("Rini-Rego") (previously
filed as Exhibit 4.3 to the Company's Annual Report on
Form 10-K filed with the Commission on September 25,
1992 and incorporated herein by reference)
4.2 Trust Indenture between American Seaway Foods, Inc.
("American") and Ameritrust Company National
Association as Trustee dated as of December 1, 1991
(previously filed as Exhibit 4.4 to the Company's
Annual Report on Form 10-K filed with the Commission on
September 25, 1992 and incorporated herein by
reference)
10.1 Amended and Restated Credit Agreement by and among
Rini-Rego, Society National Bank as agent ("Society")
for Society, The Bank of New York Commercial
Corporation, PNC Bank, National Association and Star
Bank, N.A. (collectively, the "Banks") dated as of May
27, 1993 (previously filed as Exhibit 10.42 to the
Company's Annual Report on Form 10-K filed with the
Commission on October 1, 1993 and incorporated herein
by reference)
10.2 Amended and Restated Credit Agreement by and among
American, Society and the Banks dated as of May 27,
1993 (previously filed as Exhibit 10.43 to the
Company's Annual Report on Form 10-K filed with the
Commission on October 1, 1993 and incorporated herein
by reference)
10.3 Amended and Restated Security Agreement by and among
Rini-Rego, Society and the Banks dated as of May 27,
1993 (previously filed as Exhibit 10.44 to the
Company's Annual Report on Form 10-K filed with the
Commission on October 1, 1993 and incorporated herein
by reference)
24
<PAGE> 26
10.4 Amended and Restated Security Agreement by and among
American, Society and the Banks dated as of May 27,
1993 (previously filed as Exhibit 10.45 to the
Company's Annual Report on Form 10-K filed with the
Commission on October 1, 1993 and incorporated herein
by reference)
10.5 Amended and Restated Security Agreement by and among
Seaway Food Service, Inc., Society and the Banks dated
as of May 27, 1993 (previously filed as Exhibit 10.46
to the Company's Annual Report on Form 10-K filed with
the Commission on October 1, 1993 and incorporated
herein by reference)
10.6 Amended and Restated Security Agreement by and among
Fisher Properties, Inc., Society and the Banks dated as
of May 27, 1993 (previously filed as Exhibit 10.47 to
the Company's Annual Report on Form 10-K filed with the
Commission on October 1, 1993 and incorporated herein
by reference)
10.7 Amended and Restated Guaranty Agreement by Riser dated
as of May 27, 1993 (previously filed as Exhibit 10.48
to the Company's Annual Report on Form 10-K filed with
the Commission on October 1, 1993 and incorporated
herein by reference)
10.8 Amended and Restated Guaranty Agreement by Rini-Rego
dated as of May 27, 1993 (previously filed as Exhibit
10.49 to the Company's Annual Report on Form 10-K filed
with the Commission on October 1, 1993 and incorporated
herein by reference)
10.9 Amended and Restated Guaranty Agreement by American
dated as of May 27, 1993 (previously filed as Exhibit
10.50 to the Company's Annual Report on Form 10-K filed
with the Commission on October 1, 1993 and incorporated
herein by reference)
10.10 Amended and Restated Guaranty Agreement by Seaway dated as
of May 27, 1993 (previously filed as Exhibit 10.51 to the
Company's Annual Report on Form 10-K filed with the
Commission on October 1, 1993 and incorporated herein by
reference)
10.11 Amended and Restated Guaranty Agreement by Fisher dated as
of May 27, 1993 (previously filed as Exhibit 10.52 to the
Company's Annual Report on Form 10-K filed with the
Commission on October 1, 1993 and incorporated herein by
reference)
25
<PAGE> 27
10.12 Form of Amendment No. 1 to Amended and Restated
Guaranty Agreement by Riser (executed as of May 16,
1994) (previously filed as Exhibit 10.53 to the
Company's Annual Report on Form 10-K filed with the
Commission on September 29, 1994 and incorporated
herein by reference)
10.13 Form of Amendment No. 1 to Amended and Restated Credit
Agreement by and among Rini-Rego, Society and the Banks
(executed as of May 16, 1994) (previously filed as Exhibit
10.54 to the Company's Annual Report on Form 10-K filed
with the Commission on September 29, 1994 and incorporated
herein by reference)
10.14 Form of Amendment No. 1 to Amended and Restated Credit
Agreement by and among American, Society and the Banks
(executed as of October 6, 1994) (previously filed as
Exhibit 10.57 to the Company's Quarterly Report on Form
10-Q filed with the Commission on May 17, 1995 and
incorporated herein by reference)
10.15 Form of Amendment No. 2 to Amended and Restated
Guaranty Agreement by Riser (executed as of October 6,
1994) (previously filed as Exhibit 10.55 to the
Company's Quarterly Report on Form 10-Q filed with the
Commission on May 17, 1995 and incorporated herein by
reference)
10.16 Form of Amendment No. 2 to Amended and Restated Credit
Agreement by and among Rini-Rego, Society and the Banks
(executed as of October 6, 1994) (previously filed as
Exhibit 10.56 to the Company's Quarterly Report on Form
10-Q filed with the Commission on May 17, 1995 and
incorporated herein by reference)
10.17 Form of Amendment No. 2 to Amended and Restated Credit
Agreement by and among American, Society and the Banks
(executed as of April 28, 1995) (previously filed as
Exhibit 10.60 to the Company's Quarterly Report on Form
10-Q filed with the Commission on May 17, 1995 and
incorporated herein by reference)
10.18 Form of Amendment No. 3 to Amended and Restated
Guaranty Agreement by Riser (executed as of April 28,
1995) (previously filed as Exhibit 10.58 to the
Company's Quarterly Report on Form 10-Q filed with the
Commission on May 17, 1995 and incorporated herein by
reference)
26
<PAGE> 28
10.19 Form of Amendment No. 3 to Amended and Restated Credit
Agreement by and among Rini-Rego, Society and the Banks
(executed as of April 28, 1995) (previously filed as
Exhibit 10.59 to the Company's Quarterly Report on Form
10-Q filed with the Commission on May 17, 1995 and
incorporated herein by reference)
10.20 Supplemental Retirement Plan (SERP) for Riser Foods,
Inc. (previously filed as Exhibit 10.20 to the
Company's Quarterly Report on Form 10-Q filed with the
Commission on May 17, 1996 and incorporated herein by
reference)
10.21 Form of Amendment No. 4 to Amended and Restated
Guaranty Agreement by Riser (executed as of August 20,
1996)
21 Subsidiaries of the Registrant
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K:
None
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.
By: /s/ Charles A. Rini, Sr.
------------------------
Charles A. Rini, Sr.
President and Director
27
<PAGE> 29
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 and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Charles A. Rini, Sr. President and September 25, 1996
- ------------------------ Director
Charles A. Rini, Sr.
/s/ Anthony C. Rego Vice President, September 25, 1996
- ------------------- Secretary and Director
Anthony C. Rego
/s/ Ronald W. Ocasek Chief Financial September 25, 1996
- -------------------- Officer and
Ronald W. Ocasek Treasurer (Principal
Accounting Officer)
28
<PAGE> 30
Report of Independent Public Accountants
To Rini-Rego Supermarkets, Inc.:
We have audited the accompanying consolidated balance sheets of RINI-REGO
SUPERMARKETS, INC. (an Ohio corporation) AND SUBSIDIARIES as of June 29, 1996
and July 1, 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three fiscal years in the
period ended June 29, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Rini-Rego Supermarkets, Inc.
and Subsidiaries as of June 29, 1996 and July 1, 1995, and the results of their
operations and their cash flows for each of the three fiscal years in the period
ended June 29, 1996, in conformity with generally accepted accounting
principles.
As explained in Note 4 to the Consolidated Financial Statements, effective
July 4, 1993, the Company changed its method of accounting for income taxes as
required by Statement of Financial Accounting Standards No. 109.
ARTHUR ANDERSEN LLP
Cleveland, Ohio,
August 30, 1996.
29
<PAGE> 31
RINI-REGO SUPERMARKETS, INC.
----------------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(dollars in thousands)
ASSETS
------
<TABLE>
<CAPTION>
June 29, July 1,
1996 1995
--------- ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,541 $ 4,075
Trade accounts receivable, net 36,903 38,272
Inventories 72,406 74,042
Deferred income taxes 9,066 10,022
Prepaid expenses 4,613 4,895
--------- ---------
Total current assets 126,529 131,306
PROPERTY, EQUIPMENT AND CAPITAL LEASES:
Land 7,351 4,230
Buildings and improvements 47,102 43,750
Equipment 80,309 76,700
Leasehold improvements 69,000 61,146
--------- ---------
203,762 185,826
Less - Allowances for depreciation,
amortization and loss on disposal
of fixed assets 79,762 67,729
--------- ---------
124,000 118,097
OTHER ASSETS:
Notes receivable 4,784 10,868
Deferred income taxes 4,947 6,119
Other 2,088 2,071
--------- ---------
Total other assets 11,819 19,058
--------- ---------
TOTAL ASSETS $262,348 $268,461
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these consolidated balance sheets.
30
<PAGE> 32
RINI-REGO SUPERMARKETS, INC.
----------------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(dollars in thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
June 29, July 1,
1996 1995
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 59,433 $ 52,209
Accrued expenses 41,790 45,210
Current portion of-
Debt 5,513 4,861
Capital lease obligations 1,284 1,392
Self insurance reserves 3,555 3,750
--------- ---------
Total current liabilities 111,575 107,422
LONG-TERM PORTION OF:
Debt 32,514 55,749
Capital lease obligations 5,531 6,840
Self insurance reserves 12,595 11,845
--------- ---------
50,640 74,434
OTHER LIABILITIES 10,191 12,231
STOCKHOLDERS' EQUITY:
Series A Preferred Stock - $100 par value; $8.00 cumulative
convertible, nonvoting; 30,000 shares authorized; 18,044
shares outstanding in 1995 - -
Common Stock - $.01 par value:
Class A - 20,000,000 shares authorized;
7,174,787 and 7,125,287 shares 72 71
outstanding in 1996 and 1995,
respectively
Class B - 5,000,000 shares authorized;
955,613 shares outstanding 10 10
Paid-in capital 36,138 35,546
Retained earnings 53,722 38,747
--------- ---------
Total stockholders' equity 89,942 74,374
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $262,348 $268,461
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these consolidated balance sheets.
31
<PAGE> 33
RINI-REGO SUPERMARKETS, INC.
----------------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------
June 29, July 1, July 2,
1996 1995 1994
(52 Weeks) (52 Weeks) (52 Weeks)
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES $1,285,209 $1,184,993 $1,121,604
COST OF GOODS SOLD 1,035,157 950,433 905,456
----------- ----------- -----------
Gross profit 250,052 234,560 216,148
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 217,006 208,716 194,626
RESTRUCTURING CHARGE - - 12,000
----------- ----------- -----------
Operating income 33,046 25,844 9,522
INTEREST EXPENSE (6,254) (7,559) (7,802)
INTEREST INCOME 936 1,208 788
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND
CHANGE IN ACCOUNTING PRINCIPLE 27,728 19,493 2,508
PROVISION FOR INCOME TAXES:
State and local 2,094 1,367 46
Federal 9,028 6,485 882
----------- ----------- -----------
11,122 7,852 928
NET INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 16,606 11,641 1,580
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE:
Accounting for income taxes - - 6,866
----------- ----------- -----------
NET INCOME 16,606 11,641 8,446
LESS PREFERRED STOCK DIVIDENDS 11 144 144
----------- ----------- -----------
NET INCOME FOR COMMON STOCKHOLDERS $ 16,595 $ 11,497 $ 8,302
=========== =========== ===========
</TABLE>
32
<PAGE> 34
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------
June 29, July 1, July 2,
1996 1995 1994
(52 Weeks) (52 Weeks) (52 Weeks)
----------- ----------- -----------
<S> <C> <C> <C>
NET INCOME PER COMMON SHARE:
Net income before cumulative
effect of change in accounting
principle $ 2.05 $ 1.42 $ .18
Cumulative effect of change in
accounting principle:
Accounting for income taxes - - .85
----------- ----------- -----------
NET INCOME PER COMMON SHARE $ 2.05 $ 1.42 $ 1.03
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 8,096,473 8,080,900 8,080,901
=========== =========== ===========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
33
<PAGE> 35
RINI-REGO SUPERMARKETS, INC.
----------------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
(in thousands, except per share data)
<TABLE>
<CAPTION>
Preferred Class A Class B Paid-In Retained
Stock Common Common Capital Earnings
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE AT JULY 3, 1993 $ 1,804 $ 71 $ 10 $ 35,546 $ 18,948
Net income - - - - 8,446
Preferred stock
dividends of
$8 per share - - - - (144)
--------- --------- --------- --------- ---------
BALANCE AT JULY 2, 1994 1,804 71 10 35,546 27,250
Net income - - - - 11,641
Preferred stock
dividends of
$8 per share - - - - (144)
Redemption of
Preferred Stock (1,804) - - - -
--------- --------- --------- --------- ---------
BALANCE AT JULY 1, 1995 - 71 10 35,546 38,747
Net income - - - - 16,606
Preferred stock
dividends of
$.61 per share - - - - (11)
Common stock
dividends of $.20
per share on Class
A and B Common
Stock - - - - (1,620)
Stock options
exercised - 1 - 384 -
Tax Benefit of stock
options exercised - - - 208 -
--------- --------- --------- --------- ---------
BALANCE AT JUNE 29, 1996 $ - $ 72 $ 10 $ 36,138 $ 53,722
========= ========= ========= ========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
34
<PAGE> 36
RINI-REGO SUPERMARKETS, INC.
----------------------------
AND SUBSIDIARIES
----------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------
June 29, July 1, July 2,
1996 1995 1994
(52 Weeks) (52 Weeks) (52 Weeks)
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,606 $ 11,641 $ 8,446
Adjustments to reconcile net income
to net cash provided by
operating activities:
Cumulative effect of change in
accounting principle - - (6,866)
Depreciation and amortization 17,862 17,448 14,804
Loss on sale of assets 688 828 639
Deferred income tax provision 2,128 (2,496) (3,269)
Changes in assets and liabilities:
Decrease (increase) in accounts
and notes receivable 7,453 171 (6,743)
Decrease (increase) in
inventories 1,636 237 (1,797)
Decrease (increase) in prepaid
expenses 282 (57) (231)
Increase in other assets (295) (343) (779)
Increase (decrease) in accounts
payable 7,224 6,595 (1,574)
Increase in self insurance reserves 555 1,314 474
(Decrease) increase in accrued
expenses and other liabilities (2,995) 11,671 10,395
Other changes (66) (240) 95
---------- ---------- ----------
Net cash provided by
operating activities $ 51,078 $ 46,769 $ 13,594
---------- ---------- ----------
</TABLE>
35
<PAGE> 37
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------
June 29, July 1, July 2,
1996 1995 1994
(52 Weeks) (52 Weeks) (52 Weeks)
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets $ (31,226) $ (28,050) $ (27,132)
Proceeds from sale of fixed assets 4,840 2,420 876
---------- ---------- ----------
Net cash used for investing activities (26,386) (25,630) (26,256)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving lines of credit 614,085 651,479 917,069
Repayments of revolving lines of credit (636,712) (666,655) (900,290)
Additional borrowings 5,093 1,425 6,914
Debt repayments (5,237) (6,165) (9,435)
Repayment of capital lease obligations (1,417) (1,380) (1,470)
Common stock dividends (1,620) - -
Stock options exercised 593 - -
Preferred stock dividends (11) (144) (144)
---------- ---------- ----------
Net cash (used for) provided by
financing activities (25,226) (21,440) 12,644
---------- ---------- ----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (534) (301) (18)
CASH AND CASH EQUIVALENTS, AT BEGINNING
OF YEAR 4,075 4,376 4,394
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, AT END
OF YEAR $ 3,541 $ 4,075 $ 4,376
========== ========== ==========
SUPPLEMENTAL DATA:
Interest paid $ 6,498 $ 7,571 $ 7,627
========== ========== ==========
Income taxes paid $ 13,390 $ 6,807 $ 6,417
========== ========== ==========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
36
<PAGE> 38
RINI-REGO SUPERMARKETS, INC.
----------------------------
AND SUBSIDIARIES
----------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(1) Summary of Significant Accounting Policies:
-------------------------------------------
PRESENTATION -- Rini-Rego Supermarkets, Inc. (RRS or the Company),
formerly known as Fisher Foods, Inc. (Fisher), is a 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 shareholder equity amounts (in thousands):
<TABLE>
<CAPTION>
June 29, July 1,
1996 1995
-------- --------
<S> <C> <C>
Preferred stock $ 1,811 $ 1,811
Common Stock 1,403 1,403
Paid-in capital 22,714 22,714
Retained earnings 65,371 48,776
-------- --------
$91,299 $74,704
======== ========
</TABLE>
SEGMENT INFORMATION -- The Company is engaged in one business segment,
the food distribution industry. The Company distributes national brand and
private label products through Company-operated and other independently-operated
retail stores throughout northeast and central Ohio, southeastern Michigan and
western Pennsylvania. The Company operates 37 retail locations in northeast
Ohio. The following is a detail of the number of Company-operated stores by
year:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Beginning of year 38 42 45
Opened - - 2
Closed (1) (4) (5)
---- ---- ----
End of year 37 38 42
==== ==== ====
</TABLE>
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of RRS and its subsidiaries. All material intercompany
accounts and transactions have been eliminated.
37
<PAGE> 39
USE OF ESTIMATES -- The preparation of 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.
RECENT ACCOUNTING PRONOUNCEMENTS -- Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-lived Assets
and for Long-lived Assets to be Disposed Of," must be adopted by the Company in
the first quarter of fiscal 1997. This standard requires the Company to evaluate
the recoverability of long-lived assets based on expected future cash flows. The
adoption of this standard is not expected to have a material impact on the
Company's financial position or results of operations.
SFAS No. 123, "Accounting for Stock-Based Compensation," must be
adopted by the Company no later than the fiscal year ending June 28, 1997. This
standard establishes a fair value method for accounting for stock-based
compensation plans either through recognition or disclosure. The adoption of
this standard is not expected to have a material impact on the Company's
financial position or results of operations.
FISCAL YEAR -- The Company's fiscal year ends on the Saturday closest
to June 30. Fiscal 1996, 1995, 1994 consist of the 52 weeks ended June 29, 1996,
July 1, 1995 and July 2, 1994, respectively.
CASH EQUIVALENTS -- The Company considers all highly liquid investments
with an initial maturity of three months or less to be cash equivalents.
INVENTORIES -- Inventories, principally perishable and nonperishable
food products, general merchandise, health and beauty care items and related
products for resale, are stated at the lower of cost or market. Cost is
determined through the use of the last-in, first-out (LIFO) method for a
majority of consolidated inventories: 81% at June 29, 1996 and 77% at July 1,
1995. The first-in, first-out (FIFO) method is used to determine cost for the
remaining inventories which consist principally of perishable products.
If the FIFO method had been used to determine cost for all Company
inventories, total inventories would have been higher than reported by
approximately $7,224,000 at June 29, 1996 and $6,452,000 at July 1, 1995.
PROPERTY, EQUIPMENT AND CAPITAL LEASES -- Property and equipment are
recorded at cost and depreciated using the straight-line method at annual rates
sufficient to amortize the cost of the assets during their estimated useful
lives. Accelerated depreciation methods are used for income tax purposes.
Amortization of property under capital leases is computed using the
straight-line method
38
<PAGE> 40
over the shorter of the estimated life of the asset or the term of
the lease. The following ranges of depreciable lives are used:
<TABLE>
<S> <C>
Buildings and Improvements 19 to 40 years
Leasehold Improvements 5 to 20 years
Equipment 3 to 15 years
</TABLE>
SELF INSURANCE RESERVES -- The Company is primarily self insured for
property loss, general liability costs and workers' compensation. Estimated
costs of these self insurance programs are accrued at current cost based on
projected settlements for claims and include estimates for claims incurred but
not reported. Any adjustments made to previously recorded reserves are reflected
in current operating results. Amounts charged to expense for self insured
liabilities were $4,394,000, $4,726,000, $3,940,000 in 1996, 1995 and 1994,
respectively.
REVENUE RECOGNITION -- Revenues from product sales are recognized upon
shipment of the product from warehouse distribution to independently-operated
retail stores and at the point of sale for Company-operated retail stores.
STORE PRE-OPENING COSTS -- Store pre-opening costs, primarily employee
training, inventory stocking and advertising, are charged to expense concurrent
with store openings.
ADVERTISING COSTS -- Costs incurred for producing and communicating
advertising are expensed when incurred.
RECLASSIFICATIONS -- Certain reclassifications have been made to prior
year financial statements to conform with current year presentation.
NET INCOME PER SHARE -- Net income per share is computed by dividing
net income less preferred stock dividends by the weighted average number of
common shares outstanding. Outstanding stock options do not have a significant
dilutive effect on net income per share.
(2) Trade Accounts and Notes Receivable:
------------------------------------
Trade accounts receivable include $2,992,000 and $5,386,000 of the
current portion of notes receivable at June 29, 1996 and July 1, 1995,
respectively. Trade accounts receivable are net of an allowance for doubtful
accounts of $2,766,000 at June 29, 1996 and $2,953,000 at July 1, 1995.
The Company's trade accounts and notes receivable are primarily with
various independently-operated wholesale customers who are engaged in retail
food distribution in northeast and central Ohio, western Pennsylvania and
southeastern Michigan.
39
<PAGE> 41
The Company's notes receivable principally arise from the financing of
store leaseholds, inventory and fixed assets related to the Company's
independently-operated wholesale customers. Loans to independent retailers, as
well as trade accounts receivable, are primarily collateralized by the
retailers' inventory, equipment and fixtures. The notes range in length from 1
to 7 years and primarily bear interest at prime plus 1.0% or 1.5%. Management
believes the estimated fair market value of the notes approximates net carrying
value at June 29, 1996 and July 1, 1995.
(3) Accrued Expenses:
----------------
Accrued expenses include the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Accrued payroll and related
expenses $ 13,359 $ 12,536
Accrued customer rebates 7,165 6,570
State and local taxes 5,683 5,752
Accrued income taxes 1,665 5,643
Closed facilities reserve,
current portion 1,945 3,458
Redeemed preferred stock - 1,895
(See Note 9)
Other accrued expenses 11,973 9,356
--------- ---------
$ 41,790 $ 45,210
========= =========
</TABLE>
40
<PAGE> 42
(4) Income Taxes:
-------------
At the beginning of 1994, the Company adopted the provisions
of SFAS No. 109 "Accounting for Income Taxes". 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 and the cumulative effect of
this accounting change was to increase 1994 net income 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 (NOL) and the adjustment of deferred tax balances to
reflect changes in statutory rates.
The income tax provision in the accompanying consolidated
statements of income differs from the provision at statutory rates as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Income before income taxes and
change in accounting principle $ 27,728 $ 19,493 $ 2,508
========= ========= =========
Tax provision at federal
statutory rates $ 9,705 $ 6,822 $ 853
State and local income taxes, net
of federal income tax benefit 1,361 889 30
Officers' life insurance 52 100 28
Other 4 41 17
--------- --------- ---------
Provision for income taxes $ 11,122 $ 7,852 $ 928
========= ========= =========
The Company's income tax provision consists of the following components
(in thousands):
1996 1995 1994
--------- --------- ---------
Current:
Federal $ 7,150 $ 8,281 $ 3,351
State and local 1,844 2,067 846
--------- --------- ---------
8,994 10,348 4,197
Deferred:
Federal 1,878 (1,796) (2,469)
State and local 250 (700) (800)
--------- --------- ---------
2,128 (2,496) (3,269)
--------- --------- ---------
Provision for income taxes $ 11,122 $ 7,852 $ 928
========= ========= =========
</TABLE>
41
<PAGE> 43
Significant components of the Company's net deferred tax asset at
June 29, 1996 and July 1, 1995, are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Property, equipment and capital
leases $ (5,894) $ (6,342)
State and local taxes other
than income (605) (601)
--------- ---------
(6,499) (6,943)
DEFERRED TAX ASSETS:
Reserve for uncollectible accounts 1,569 1,598
Closed facilities reserve 3,451 5,419
Self insurance reserves 6,122 5,957
Employees' retirement benefits 1,853 1,721
Accruals not currently deductible 3,728 4,205
Net operating loss carryforwards 6,529 7,156
Other 1,908 1,676
--------- ---------
25,160 27,732
VALUATION ALLOWANCE (4,648) (4,648)
--------- ---------
NET DEFERRED TAX ASSET $ 14,013 $ 16,141
========= =========
</TABLE>
The Company has gross NOL totaling $19,203,000 which expire as follows
(in thousands):
<TABLE>
<CAPTION>
Year NOL
---- --------
<S> <C>
2001 $13,815
2002 5,388
--------
$19,203
========
</TABLE>
SFAS No. 109 requires that the tax benefit of such NOL be recognized 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 requirements to meet profitability at
both the subsidiary level and consolidated level and tax regulations which limit
the annual amount of NOL available for deduction and carryforward period, the
Company does not currently believe it is more likely than not that the entire
amount of NOL will be utilized before they expire. As such, the valuation
allowance of $4,648,000 established upon the adoption of SFAS No. 109 is
maintained. To the extent it is determined that such valuation allowance is no
longer appropriate, income tax expense of future periods will be favorably
impacted.
42
<PAGE> 44
(5) Long-Term Debt:
---------------
Long-term debt is comprised of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Borrowings under bank credit facilities:
Revolving lines of credit $ - $22,627
Term loan 6,857 8,571
Taxable Variable Rate Demand Notes 7,000 9,000
9.75% Subordinated Debentures, less unamortized issuance discount of
$1,071 and $1,225 at 1996 and 1995, respectively, $655 due annually
beginning December 30, 1997, with remainder due in 2001 12,021 11,867
Financing leases 9,418 5,498
Real estate mortgages at rates
ranging from 8.75% to 10% 2,300 2,534
Other notes payable 431 513
-------- --------
38,027 60,610
Less - Current maturities 5,513 4,861
-------- --------
Long-term Debt $32,514 $55,749
======== ========
</TABLE>
The Company's bank credit facilities (Facilities), which provide for
revolving lines of credit, letters of credit and a term loan up to an aggregate
of $73.9 million, expire in July 1998. Effective March 1, 1996, the Company
negotiated new interest rates for borrowings under the Facilities. Interest
under the Facilities accrues at either the bank's prime lending rate or LIBOR
plus 1.25%, at the Company's option, with interest paid monthly. Commitment fees
representing .25% per annum of the unused portion of the facilities are paid
monthly. Agency fees of $5,000 are paid quarterly. The term loan is payable in
quarterly installments of $428,571 over five years with a balloon payment due in
April 1998. Available unused borrowing capacity under these Facilities at June
29, 1996 was approximately $52.5 million.
The Facilities consist of separate credit agreements for each of the
Company's significant operating entities (collectively the Consolidated Credit
Agreement). Borrowings under each entity's individual facility cannot exceed 85%
of the respective entity's qualified receivables, plus from 55% to 65% of
eligible inventories and 100% of eligible cash and cash equivalents, less
certain
43
<PAGE> 45
reserves and obligations, all as defined in the Consolidated Credit Agreement.
The Facilities are secured by substantially all the assets of Riser and each
individual credit facility is cross-guaranteed by all other subsidiaries and
guaranteed by Riser.
Among other covenants, the Consolidated Credit Agreement requires that
the Company maintain, on a consolidated basis, minimum levels of tangible net
worth and cash flows and a minimum ratio of liabilities to tangible net worth
which vary each fiscal year. The agreement further provides for limitations on
dividends and capital expenditures. The Company is in compliance with all
covenants at June 29, 1996.
The Company's Taxable Variable Rate Demand Notes (Notes) bear interest
at a variable rate based on the higher of the average 30-day or 90-day
commercial paper rate, plus a market increment which at June 29, 1996 was .125%,
payable monthly. Principal under the Notes is payable in annual installments of
$2,000,000 through December 1, 1997 and $3,000,000 on December 1, 1998. The
Notes are secured by a bank letter of credit. The bank letter of credit expires
in December 1998, has an annual fee of 1% on the outstanding note balance, and
is secured by the Facilities.
Concurrent with the issuance of the Notes, the Company entered into an
exchange transaction which fixed the higher of the 30-day or 90-day commercial
paper rate at 6.50% through December 1, 1994 at dollar amounts which correspond
to the Notes outstanding. Until the expiration of the exchange contract, the
Company recorded interest expense on the Notes as if the interest rate was fixed
at 6.50%.
The 9.75% Subordinated Debentures are recorded net of an original issue
discount, based on an imputed interest rate of 12%, which is being amortized
over the term of the indebtedness using the effective interest method. These
debentures, originally issued by a subsidiary of the Company, require semiannual
interest payments and may be redeemed at the Company's option at 100% of the
principal amount.
The Company finances certain store fixtures and equipment associated
with programs to remodel and expand its Company-operated retail stores under
financing agreements with seven year terms and bearing interest at rates ranging
from 6.9% to 9.2%.
Certain property with an aggregate net value for financial reporting
purposes of $10,953,000, was pledged to secure real estate first mortgages on
June 29, 1996.
44
<PAGE> 46
Future maturities of long-term debt as of June 29, 1996, are summarized
as follows (in thousands):
<TABLE>
<S> <C>
1997 $ 5,513
1998 9,718
1999 5,728
2000 2,894
2001 2,565
2002 and thereafter 11,609
--------
$38,027
========
</TABLE>
No quoted market prices are available for any of the Company's long-
term debt as it is not actively traded. However, management believes the
carrying values of the Company's borrowings under the Facilities, the Notes
and real estate mortgages approximate their fair values as all bear interest
at current market rates. It is not practical to estimate the fair value of the
Company's 9.75% Subordinated Debentures because of the inability to estimate
fair value without incurring excessive costs.
(6) Leases:
-------
The Company leases many of its retail store locations, warehouse
facilities and certain operating equipment under capital and operating leases.
Most of the retail store leases contain contingent rent clauses based on sales
levels. In most instances, the Company has the option to extend the term of the
lease. Some of the retail store locations and the warehouse facilities are
leased from parties that are related through common ownership and control.
Leased property under capital leases, which is included in property,
equipment and capital leases, consisted of the following amounts (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Buildings $10,455 $11,916
Equipment 1,316 1,509
-------- --------
11,771 13,425
Less - Allowance for
amortization (8,247) (8,862)
-------- --------
$ 3,524 $ 4,563
======== ========
</TABLE>
45
<PAGE> 47
The following is a schedule of future minimum lease payments under
noncancelable operating and capital leases as of June 29, 1996 (in thousands):
<TABLE>
<CAPTION>
Operating Leases Capital Leases
Related Unrelated Related Unrelated
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
1997 $ 1,508 $ 11,100 $ 167 $ 2,027
1998 1,534 9,950 180 1,466
1999 1,557 9,345 193 1,154
2000 1,557 8,075 193 1,112
2001 1,557 7,726 193 1,029
Thereafter 3,771 49,682 1,260 2,285
-------- --------- -------- ---------
$11,484 $ 95,878 2,186 9,073
======== =========
Less -
Amounts representing
executory costs - 414
Imputed interest 1,348 2,682
-------- ---------
Present value of net minimum
lease payments 838 5,977
Less - Current portion - 1,284
-------- ---------
$ 838 $ 4,693
======== =========
</TABLE>
The Company also subleases certain of its leased retail store
locations and a portion of its warehouses. Future minimum rental income
under subleases of operating and capital leases at June 29, 1996
amounted to $13,765,000.
Total rental expense for unrelated operating leases was as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Minimum rental $ 10,506 $ 10,223 $ 8,656
Contingent rental 263 336 141
Sublease rental income (1,789) (1,655) (1,976)
--------- --------- ---------
$ 8,980 $ 8,904 $ 6,821
========= ========= =========
</TABLE>
46
<PAGE> 48
Total rental expense for related operating leases was as follows
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Minimum rental $ 1,351 $ 2,101 $ 2,211
Contingent rental 68 35 35
Sublease rental income (778) (730) (591)
--------- --------- ---------
$ 641 $ 1,406 $ 1,655
========= ========= =========
</TABLE>
(7) Disposition of Facilities:
--------------------------
The Company provides for the estimated costs of closing facilities
concurrent with making the decision to close. The types of costs provided
primarily include future lease payments net of estimated sublease income and
expected losses on disposal of assets.
An analysis of the activity in the closed facilities reserve is as
follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Beginning balance $ 13,664 $ 14,887 $ 5,923
Restructuring charges - - 12,000
Payments and other
deductions (4,559) (1,223) (3,036)
--------- --------- ---------
Ending balance $ 9,105 $ 13,664 $ 14,887
========= ========= =========
</TABLE>
The 1994 restructuring charge represented estimated costs associated
with the Company's retail store consolidation plan to close smaller, outdated
Company-operated retail stores representing approximately 456,000 square feet.
Certain of these stores were replaced by newer, larger stores representing
approximately 431,000 square feet. Some of these newer stores are operated by
wholesale customers and the remaining stores are expanded Company-operated
retail stores. At June 29, 1996, the Company has closed ten stores included in
the 1994 restructuring charge.
47
<PAGE> 49
At June 29, 1996 the net book value of fixed assets and property
relating to closed facilities was $3,227,000. An allowance to reduce these
assets to their estimated net realizable value is included in the allowance for
depreciation, amortization and loss on disposal, while the long-term portion of
the reserve for closing facilities is classified in other liabilities on the
accompanying balance sheets.
(8) Employee Benefit Plans:
-----------------------
Riser sponsors an employee savings plan (401(k)) for all non-union
employees. Contributions to the plan are in the form of employee salary
deferrals and company matching funds. Amounts contributed and expensed for
company matching funds were $352,000 in 1996, $334,000 in 1995 and $227,000 in
1994.
The Company also participates in various multi-employer pension plans.
The plans provide for defined benefits to substantially all of the Company's
union employees. Amounts charged to pension cost and contributed to the plans
were approximately $5,619,000, $5,012,000 and $4,789,000, for 1996, 1995 and
1994, respectively. At the dates of the latest actuarial valuations, the
aggregate withdrawal liability for the multi-employer pension plans totaled
approximately $2,677,000.
The Company maintains retirement benefit arrangements for certain
former key executives of the Company. The plans primarily provide for payments
to these executives for life with a three-year extension for surviving spouses.
The Company recorded expense of $300,000 in 1995 and no expense in 1996 and
1994. The amount accrued for these plans was $2,710,000 at June 29, 1996 and
$2,923,000 at July 1, 1995.
During fiscal 1995, Riser established a Supplemental Executive
Retirement Plan (SERP) which will provide retirement benefits to participating
executives supplementing amounts currently limited under Riser's 401(k) Plan by
Internal Revenue Service regulations. These benefits will be made upon the
retirement, death or disability of the executive. Payments are made for the
life of the executive with a minimum benefit of 15 years to either the
executive or their beneficiary. The SERP also provides for reduced benefits in
the event of early retirement, death or disability. Riser discounts the net
present value of benefits under the SERP utilizing a 7.50% discount factor.
Vested benefits are not required to be funded; however, Riser has elected to
insure the lives of these executives to assist in the funding of the SERP
liability. Riser recorded $599,000 and $1,284,000 of expense related to the
SERP in fiscal 1996 and 1995, respectively, of which $145,000 and $943,000 in
fiscal 1996 and 1995, respectively, represented the vesting of prior service
costs.
48
<PAGE> 50
(9) Capital Stock:
--------------
Riser's Board of Director's unanimously approved on June 9, 1995 the
redemption of the Series A Preferred Stock on July 28, 1995 at $105 per share.
Accordingly, the Series A Preferred Stock is classified in accrued expenses on
July 1, 1995 and no amounts are outstanding at June 29, 1996.
The holders of Class A Common Stock are entitled to one vote per share
and holders of Class B Common Stock are entitled to 10 votes per share, except
with respect to the election of directors, at which time holders of Class A
Common Stock vote as a separate class and are entitled to elect 25% of the
total number of directors and the Class B Common Stockholders elect the
remaining directors. Amounts shown on the balance sheets are net of 1,553,630
shares of Class A Common stock outstanding that are held by a Riser subsidiary.
Riser has a Stock Incentive Plan which provides for both qualified and
non-qualified stock options, as well as stock appreciation rights and
restricted stock grants for employees, officers and directors of Riser. Under
the terms of the plan, up to 500,000 Class A Common Shares may be the subject
of options, stock appreciation rights or restricted stock grants. Stock options
must be issued at not less than fair value of the Class A Common Stock at the
date of grant and are exercisable for up to ten years from the date of grant.
Options outstanding under this plan are as follows:
<TABLE>
<CAPTION>
Class A
Common Option Price
Stock Per Share
-------- ------------
<S> <C> <C>
Balance - July 3, 1993 255,800 $7.31-$10.31
Granted - -
Forfeited (20,400) $7.31-$10.31
Exercised - -
--------
Balance - July 2, 1994 235,400 $7.31-$10.31
Granted 226,500 $7.25
Forfeited (13,000) $7.31-$10.31
Exercised -
--------
Balance - June 1, 1995 448,900 $7.25-$10.31
Granted - -
Forfeited (1,800) $7.31
Exercised (49,500) $7.31-$10.31
--------
Balance - June 29, 1996 397,600 $7.25-$10.31
========
Available for future grants 52,900
========
</TABLE>
49
<PAGE> 51
The options granted in 1995 were non-qualified options for federal
income tax purposes and are not exercisable until two years after grant.
At the date of Riser's business combination, options to purchase shares
of the Company's common stock, issued pursuant to the Company's Stock Option
Plan, were converted into options to acquire Class A Common Stock. These
outstanding options, totaling 7,000 at June 29, 1996, are at option prices
ranging from $9.25 to $15.13.
(10) Investment in Stop-N-Shop Supermarkets:
---------------------------------------
The Company has a 70% ownership and 38% voting interest in the
Association of Stop-N-Shop Supermarkets (Association), an association of
Cleveland grocery retailers that provides combined advertising and other
services to members. The Company accounts for this investment using the equity
method of accounting.
Amounts paid to the Association for services provided to the Company
totaled approximately $4,131,000, $3,686,000 and $3,429,000 for 1996, 1995 and
1994, respectively. The trade accounts payable balance in the accompanying
balance sheets include amounts due the Association of approximately $82,000 at
June 29, 1996 and $315,000 at July 1, 1995. The trade accounts receivable
balance in the accompanying balance sheets include amounts due from the
Association of approximately $1,668,000 at June 29, 1996 and $774,000 at July 1,
1995.
(11) Contingent Liabilities:
-----------------------
The Company, through one of its subsidiaries, is the guarantor of
certain lease obligations and mortgages of Dominick's Finer Foods, Inc., a
former subsidiary. The lease obligations guaranteed total approximately
$11,267,644 over the noncancelable terms of the obligations, some of which
extend to the year 2006. The Company has no collateral or security interests in
the lease obligations or mortgages. The Company is also the guarantor of certain
lease obligations for two of its independently-operated wholesale customers. The
lease obligations guaranteed total approximately $6,785,000 over the
noncancellable terms of the obligations, some of which extend to 2008. The
Company has an indemnification agreement with both of these customers.
Management believes that the contingent liability, if any, resulting from the
guarantee of these obligations will not have a material adverse effect on the
Company's consolidated financial position or results of its operations.
The Company has an agreement with Electronic Data Systems Corporation
(EDS) for the management and operation of the Company's
50
<PAGE> 52
data center. This agreement provides for minimum payments summarized as
follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 $ 3,584
1998 3,750
1999 1,948
--------
$ 9,282
========
</TABLE>
The agreement expires in December, 1998 and may be terminated by either
party upon six months notice and upon the payment of certain fees for
termination.
The Company is involved in a number of legal proceedings incidental to
its business. Management believes that the liability, if any, resulting from all
pending legal proceedings will not have a material adverse effect on the
Company's consolidated financial position or the results of its operations.
(12) Quarterly Financial Data (unaudited):
-------------------------------------
(in thousands, except per share data)
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------------
10/21/95 01/13/96 04/06/96 06/29/96
(16 Weeks) (12 Weeks) (12 Weeks) (12 Weeks)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales $377,387 $301,712 $305,758 $300,352
Gross profit 74,760 58,822 58,085 58,385
Income before
income taxes 5,292 7,742 6,846 7,848
Net income 3,122 4,552 4,055 4,877
Net income per
common share .38 .56 .50 .60
========= ========= ========= =========
Quarter Ended
-------------------------------------------------------------
10/22/94 01/14/95 04/08/95 07/01/95
(16 Weeks) (12 Weeks) (12 Weeks) (12 Weeks)
--------- --------- --------- ---------
Net sales $346,701 $282,118 $275,405 $280,769
Gross profit 67,340 55,970 54,841 56,409
Income before
income taxes 3,620 4,591 4,823 6,459
Net income 2,190 2,781 2,903 3,767
Net income per
common share .27 .34 .35 .46
========= ========= ========= =========
</TABLE>
51
<PAGE> 53
Exhibit Index
-------------
<TABLE>
<CAPTION>
Page No. Exhibit No. Description
<S> <C> <C>
53 10.21 Form of Amendment No. 4 To
Amended and Restated Guaranty
Agreement by Riser
60 21 Subsidiaries of the Registrant
61 27 Financial Data Schedule
</TABLE>
52
<PAGE> 1
EXHIBIT 10.21
-------------
AMENDMENT NO. 4
TO
AMENDED AND RESTATED
GUARANTY AGREEMENT
This Amendment No. 4 to Amended and Restated Guaranty
Agreement (this "Amendment"), made as of the 20th day of August, 1996, among
RISER FOODS, INC., a Delaware corporation (herein the "Guarantor"), the Banks
(as hereinafter defined), and KEYBANK NATIONAL ASSOCIATION (formerly known as
Society National Bank), as agent for the Banks (herein the "Agent").
WITNESSETH:
-----------
WHEREAS, the Guarantor has executed and delivered to the
financial institutions which are a party to the Credit Agreements (as defined
below) (the "Banks"), that certain Amended and Restated Guaranty Agreement,
dated as of May 27, 1993 (as amended pursuant to Amendment No. 1 to Amended and
Restated Guaranty Agreement, dated as of May 16, 1994, Amendment No. 2 to
Amended and Restated Guaranty Agreement, dated as of October 6, 1994, and
Amendment No. 3 to Amended and Restated Guaranty Agreement, dated as of April
28, 1995) (collectively the "Guaranty Agreement"), pursuant to which the
Guarantor unconditionally guaranteed the payment of all of the Obligations (as
defined in the Guaranty Agreement);
WHEREAS, Rini-Rego Supermarkets, Inc. (formerly known as
Fisher Foods, Inc.) an Ohio corporation ("Rini-Rego"), the Banks and the Agent
have entered into that certain Amended and Restated Credit Agreement, dated as
of May 27, 1993 (as amended pursuant to Amendment No. 1 to Amended and Restated
Credit Agreement, dated as of May 16, 1994, Amendment No. 2 to Amended and
Restated Credit Agreement, dated as October 6, 1994, and Amendment No 3 to
Amended and Restated Credit Agreement, dated as of April 28, 1995) (collectively
the "Rini-Rego Agreement"), pursuant to which the Banks have made certain
financial accommodations available to Rini-Rego;
WHEREAS, American Seaway Foods, Inc., an Ohio corporation
("American"), the Banks and the Agent have entered into that certain Amended and
Restated Credit Agreement, dated as of May 27, 1993 (as amended pursuant to
Amendment No. 1 to Amended and Restated Credit Agreement, dated as of October 6,
1994, and Amendment No. 2 to Amended and Restated Credit Agreement, dated April
28, 1995) (collectively the "American Agreement" and, together with the
Rini-Rego Agreement, the "Credit Agreements");
WHEREAS, the Banks which are signatories hereto constitute all
of the Banks for the purpose of amending the Guaranty Agreement pursuant to
Section 8.22 of the American Agreement and Section 8.21 of the Rini-Rego
Agreement; and
WHEREAS, the Guarantor, the Banks and the Agent desire further
to amend the Guaranty Agreement as set forth herein.
53
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Guarantor, the Banks
and the Agent do hereby agree as follows:
SECTION 1. DEFINED TERMS.
-------------------------
Each defined term used herein and not otherwise defined herein
shall have the meaning ascribed to such term in the Guaranty Agreement.
SECTION 2. AMENDMENTS TO THE GUARANTY AGREEMENT.
------------------------------------------------
The Guarantor, the Banks and the Agent hereby agree that the
following provisions of the Guaranty Agreement shall be amended, effective as of
the date hereof and subject to the terms and conditions hereof, as follows:
2.1 AMENDMENT TO SECTION 7(t). Section 7(t) shall be amended
to delete the covenant of Consolidated Capital Expenditures in its entirety and
to substitute in lieu thereof the following:
(t) CONSOLIDATED CAPITAL EXPENDITURES. The Guarantor shall not
make, for any Fiscal Year, any Consolidated Capital Expenditures that
would cause the Consolidated Capital Expenditures to exceed the maximum
amount of Consolidated Capital Expenditures allowed to have been made
during any Fiscal Year as set forth below:
<TABLE>
<CAPTION>
Consolidated
Capital Expenditures
Fiscal Year Maximum Amount
----------- --------------
<S> <C>
1993 $26,667,000
1994 $26,143,000
1995 $34,000,000
1996 $30,000,000
1997 $57,000,000
1998 $40,000,000
</TABLE>
PROVIDED, HOWEVER, that, in any Fiscal Year, the Guarantor may, in
addition to the Consolidated Capital Expenditures permitted for such
Fiscal Year also incur additional Consolidated Capital Expenditures
equal to the Consolidated Capital Expenditure Excess Amount from the
immediately preceding Fiscal Year. For purposes of calculating the
Guarantor's compliance with this Section 7(t), the amount of
Consolidated Capital Expenditures during any Fiscal Year shall be
applied first to the maximum amount set forth above and then to any
Consolidated Capital Expenditures Excess Amount available from the
immediately preceding Fiscal Year; PROVIDED, FURTHER, that the
Consolidated Capital Expenditures Maximum Amount for Fiscal Year 1996
shall exclude any and all transactions with respect to Building No. 5
and the Cash-n-Carry Building.
54
<PAGE> 3
2.2 AMENDMENT TO SCHEDULE I. Schedule I to the Guaranty shall
be amended to delete the Net Operating Cash Flow requirements contained thereon
and the Schedule I attached hereto shall be substituted in its entirety in lieu
thereof.
SECTION 3. REPRESENTATIONS AND WARRANTIES
-----------------------------------------
The Guarantor hereby represents and warrants to the Banks and
the Agent as follows:
3.1 THE AMENDMENT. This Amendment has been duly and validly
executed by an authorized executive officer of the Guarantor and constitutes the
legal, valid and binding obligation of the Guarantor enforceable against the
Guarantor in accordance with its terms.
3.2 GUARANTY AGREEMENT. The Guaranty Agreement, as amended by
this Amendment, remains in full force and effect and remains the valid and
binding obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms. The Guarantor hereby ratifies and confirms the
Guaranty Agreement as amended by this Amendment.
3.3 NONWAIVER. The execution, delivery, performance and
effectiveness of this Amendment shall not operate nor be deemed to be nor
construed as a waiver (i) of any right, power or remedy of the Banks or the
Agent under the Guaranty Agreement, nor (ii) of any term, provision,
representation, warranty or covenant contained in the Guaranty Agreement or any
other documentation executed in connection therewith. Further, none of the
provisions of this Amendment shall constitute, be deemed to be or construed as,
a waiver of any Default or Event of Default under the Guaranty Agreement as
amended by this Agreement.
3.4 REFERENCE TO AND EFFECT ON THE GUARANTY AGREEMENT.
Upon the effectiveness of this Amendment, each reference in the Guaranty
Agreement to "this Agreement", "hereunder", "hereof", "herein", or words of like
import shall mean and be a reference to the Guaranty Agreement, as amended
hereby and each reference to the Guaranty Agreement in any other document,
instrument or agreement executed and/or delivered in connection with the
Guaranty Agreement shall mean and be a reference to the Guaranty Agreement, as
amended by this Amendment.
SECTION 4. CONDITIONS PRECEDENT TO EFFECTIVENESS
------------------------------------------------
OF THIS AMENDMENT NO. 4.
------------------------
In addition to all of the other conditions and agreements set
forth herein, the effectiveness of this Amendment is subject to the following
conditions precedent:
4.1 THE AMENDMENT. The Banks and the Agent shall have
received this Amendment No. 4 to Amended and Restated Guaranty Agreement,
executed and delivered by a duly authorized officer of the Guarantor.
4.2 ACKNOWLEDGMENT OF BORROWERS. The Banks and the Agent shall
have received the Acknowledgment of Borrowers attached to this Amendment,
55
<PAGE> 4
executed and delivered by a duly authorized officer of each of Rini-Rego and
American.
4.3 GUARANTOR'S CERTIFICATE. The Banks and the Agent shall
have received a certificate, in form and substance satisfactory to the Agent,
executed for and on behalf of the Guarantor by the Chief Executive Officer and
the Secretary of the Guarantor and dated as of the date of this Amendment,
certifying (i) the Director's Resolutions of the Guarantor authorizing this
Amendment, and each document or other instrument executed in connection with the
Amendment, and (ii) compliance by the Guarantor with all representations,
warranties, covenants and conditions under the Guaranty as amended by this
Amendment.
4.4 OTHER DOCUMENTS. The Banks and the Agent shall have
received each additional document, instrument or piece of information reasonably
requested by the Agent, including, without limitation, any financing statements
as may be necessary to continue the perfection of the security interests created
by the Security Agreements.
SECTION 5. MISCELLANEOUS.
-------------------------
5.1 GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of Ohio.
5.2 SEVERABILITY. In the event any provision of this
Amendment should be invalid, the validity of the other provisions hereof and of
the Guaranty Agreement shall not be affected thereby.
5.3 COUNTERPARTS. This Amendment may be executed in one or
more counterparts, each of which, when taken together, shall constitute but one
and the same agreement.
IN WITNESS WHEREOF, the Guarantor has caused this Amendment
No. 4 to Amended and Restated Guaranty Agreement to be duly executed and
delivered by its duly authorized officer as of the date first above written.
RISER FOODS, INC.
By:_________________________________
Title:_______________________________
56
<PAGE> 5
ACCEPTED AND AGREED as of the date and year first above written by:
KEYBANK NATIONAL ASSOCIATION NBD BANK (formerly known as NBD Bank,
(formerly known as Society National N.A.) as a Bank
Bank), as a Bank and as Agent
By:_____________________________ By:_________________________________
Title:__________________________ Title:________________________________
NATIONAL CITY BANK, STAR BANK, N.A., as a Bank
as a Bank
By:_____________________________ By:_________________________________
Title:__________________________ Title:________________________________
57
<PAGE> 6
ACKNOWLEDGMENT OF BORROWERS
---------------------------
Each of the undersigned, RINI-REGO SUPERMARKETS, INC.
(formerly known as Fisher Foods, Inc.) and AMERICAN SEAWAY FOODS, INC. (formerly
known as Heritage Wholesalers, Inc.), each of which being a borrower of certain
sums from the Banks under the Agreements (as defined in the Guaranty Agreement),
hereby acknowledges and agrees to the terms of the foregoing Amendment No. 4 to
Amended and Restated Guaranty Agreement. Each of the undersigned represents and
warrants to the Banks and the Agent that the respective Credit Agreements (as
amended), executed and delivered by each of the undersigned, remain the valid
and binding obligations of each of the undersigned, respectively, enforceable
against it in accordance with their terms.
RINI-REGO SUPERMARKETS, INC. (formerly
known as Fisher Foods, Inc.)
By:_______________________________________
Title:_____________________________________
AMERICAN SEAWAY FOODS, INC. (formerly
known as Heritage Wholesalers, Inc.)
By:_______________________________________
Title:_____________________________________
Executed: August 23, 1996
58
<PAGE> 7
SCHEDULE I
TO
GUARANTY AGREEMENT
<TABLE>
<CAPTION>
FISCAL QUARTER MINIMUM REQUIRED
ENDING AMOUNT OF NET OPERATING
- -------------- CASH FLOW
-----------------------
<S> <C>
7/3/93 $17,391,000
10/23/93 $ 6,845,000
1/15/94 $10,980,000
4/9/94 $15,943,000
7/2/94 $18,542,000
10/22/94 $ 7,053,000
1/14/95 $11,312,000
4/8/95 $16,291,000
7/1/95 $23,632,000
10/21/95 $ 7,450,000
1/13/96 $12,035,000
4/6/96 $17,281,000
6/29/96 $25,015,000
10/19/96 $10,500,000
1/11/97 $17,500,000
4/5/97 $24,500,000
6/28/97 $35,000,000
10/18/97 $10,500,000
1/10/98 $17,500,000
4/4/98 $24,500,000
6/28/98 $35,000,000
</TABLE>
59
<PAGE> 1
Exhibit 21
----------
SUBSIDIARIES OF RINI-REGO SUPERMARKETS, INC.
American Seaway Foods, Inc. (fka Heritage Wholesalers, Inc.), an Ohio
corporation; names under which business conducted: Seaway, Seaway Foods, Seaway
Cash-n-Carry.
ASF Transportation, Inc. (fka Save-It Ohio, Inc.), an Ohio corporation.
Fisher Properties, Inc. (fka Fisher Auto Leasing, Inc.), an Ohio corporation.
60
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Rini-Rego Supermarkets, Inc. Consolidated Balance Sheet, Consolidated Statement
of Income, and Notes to the Consolidated Financial Statements for the fiscal
year ended June 29, 1996 and is qualified in its entirety by reference to such
Form 10-K for the fiscal year ended June 29, 1996.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> JUN-29-1996
<CASH> 3,541
<SECURITIES> 0
<RECEIVABLES> 39,669
<ALLOWANCES> 2,766
<INVENTORY> 72,406
<CURRENT-ASSETS> 126,529
<PP&E> 203,762
<DEPRECIATION> 79,762
<TOTAL-ASSETS> 262,348
<CURRENT-LIABILITIES> 111,575
<BONDS> 0
<COMMON> 82
0
0
<OTHER-SE> 89,860
<TOTAL-LIABILITY-AND-EQUITY> 262,348
<SALES> 1,285,209
<TOTAL-REVENUES> 1,285,209
<CGS> 1,035,157
<TOTAL-COSTS> 1,035,157
<OTHER-EXPENSES> 217,006
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,254
<INCOME-PRETAX> 27,728
<INCOME-TAX> 11,122
<INCOME-CONTINUING> 16,606
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,606
<EPS-PRIMARY> 2.05
<EPS-DILUTED> 2.05
</TABLE>
