<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------
FORM 8-K/A
Amendment No. 1 to
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest
event reported): November 7, 1996
-------------------
NASH-FINCH COMPANY
(Exact name of Registrant as specified in its charter)
DELAWARE 0-785 41-0431960
(State of Incorporation) (Commission file (IRS Employer
number) Identification No.)
7600 FRANCE AVENUE SOUTH
P. O . BOX 355
MINNEAPOLIS, MINNESOTA 55440-0355
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (612) 832-0534
-------------------------------
<PAGE>
Item 7. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
The audited consolidated balance sheets of Super Food Services, Inc. and
subsidiaries as of August 26, 1995 and August 27, 1994 and the related
audited consolidated statements of income and cash flows for each of the
three fiscal years in the period ended August 26, 1995, including the
independent public accountant's report thereon, dated October 19, 1995, as
contained in Super Food Services, Inc.'s Form 10-K Annual Report for the
fiscal year ended August 26, 1995, are incorporated by reference herein.
The unaudited consolidated balance sheets of Super Food Services, Inc. and
subsidiaries as of May 4, 1996 and the related unaudited consolidated
statements of income and cash flows for the period ending May 4, 1996, as
contained in Super Food Services, Inc.'s Form 10-Q Quarterly Report for the
quarterly period ended May 4, 1996, are incorporated by reference herein.
(b) PRO FORMA FINANCIAL INFORMATION
In November 1996, Nash Finch Company (the "Company") acquired substantially all
of the outstanding common stock, at $15.50 per share, of Super Food Services,
Inc. ("SFS"). The aggregate cash purchase price paid by the Company was $171
million. The acquisition will be accounted for as a purchase.
In January 1996, the Company acquired substantially all of the assets of
Military Distributors of Virginia, Inc. ("MDV"). The aggregate purchase
price paid by the Company consisted of $56.0 million in cash plus the
assumption of liabilities totaling an additional $54.0 million. The assets
acquired included certain real property, leasehold interests in real property
and equipment, fixed assets, inventory, receivables, supplies and contractual
rights. The terms of the acquisition were the result of arm's-length
negotiations between the parties, and the acquisition was accounted for as a
purchase.
The accompanying unaudited pro forma combined financial statements are
included herein as required by rules of the Securities and Exchange
Commission ("SEC"). Such pro forma financial statements do not purport to be
indicative of the results of future combined operations. The pro forma
combined financial statements are based upon the historical financial
statements of the Company, MDV and SFS, and should be read in conjunction
with those historical financial statements as they appear elsewhere in this
filing or previous filings with the SEC, as applicable. The historical
financial information for Nash Finch at December 31, 1995, is derived from
audited financial statements. All other historical financial information
presented in these pro forma financial statements is derived from unaudited
historical financial statements.
The pro forma adjustments are based upon preliminary estimates, available
information and certain assumptions that management deemed appropriate. Final
purchase accounting adjustments will be made on the basis of appraisals and
evaluations and, therefore, may differ from the pro forma adjustments presented
herein. However, management does not expect that the final allocation of the
purchase price will materially differ from the amounts presented herein.
The unaudited pro forma combined balance sheet was prepared as if the
transactions were consummated as of October 5, 1996. The unaudited pro forma
combined statements of income for the year ended December 30, 1995 and for the
nine months ended October 5, 1996 assume the acquisitions had been consummated
as of January 1, 1995, the beginning of the fiscal year presented. The pro
forma statements of income and the balance sheet presented have been adjusted
for the effects of costs, expenses, assets and liabilities which might have been
incurred or assumed had the acquisitions been effected on the dates indicated.
<PAGE>
The pro forma combination of the Company and MDV, and the Company (including
MDV) and SFS has been prepared under the purchase method of accounting.
Therefore, the purchase price for both acquisitions has been allocated based on
the estimated fair values of the identified assets acquired and liabilities
assumed. The excess purchase price over the fair value of net assets acquired
has been recorded as goodwill in the accompanying pro forma financial statements
and amortized over periods of 15 years and 25 years for MDV and SFS,
respectively.
<PAGE>
UNAUDITED CONDENSED PRO FORMA COMBINED BALANCE SHEET
For Nash Finch Company as of October 5, 1996 and
Super Food Services, Inc. as of August 31, 1996
(In thousands)
<TABLE>
<CAPTION>
Historical
---------------------------------------------
Nash Finch Super Food Pro Forma
Company Services, Inc. Combined Adjustments Pro Forma
------------ --------------- ---------- ------------ ----------
ASSETS
<S> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 1,005 12,773 13,778 - 13,778
Accounts and notes receivable, net 143,988 58,290 202,278 - 202,278
Inventories 226,092 63,341 289,433 11,100 (1) 300,533
Other current assets 19,206 18,129 37,335 (575) (2) 36,760
---------- -------- -------- -------- --------
Total Current Assets 390,291 152,533 542,824 10,525 553,349
Investments and noncurrent receivables 13,412 38,275 51,687 (534) (3) 51,153
Property, plant and equipment, net 198,813 59,331 258,144 6,175 (4) 264,319
Other assets 52,504 5,856 58,360 36,750 (5) 95,110
---------- -------- -------- -------- --------
Total Assets $ 655,020 255,995 911,015 52,916 963,931
---------- -------- -------- -------- --------
---------- -------- -------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ - 7,000 7,000 - 7,000
Current maturities of long-term obligations 7,304 991 8,295 - 8,295
Accounts payable 199,996 34,702 234,698 - 234,698
Accrued and other current liabilities 41,120 15,071 56,191 6,384 (6) 62,575
---------- -------- -------- -------- --------
Total Current Liabilities 248,420 57,764 306,184 6,384 312,568
Long-term debt, less current maturities 156,185 30,000 186,185 170,000 (7) 356,185
Capitalized lease obligations 9,762 30,320 40,082 - 40,082
Deferred credits and other liabilities 9,808 325 10,133 14,118 (8) 24,251
Stockholders' equity 230,845 137,586 368,431 (137,586) 230,845
---------- -------- -------- -------- --------
Total Liabilities & Stockholders' Equity $ 655,020 255,995 911,015 52,916 963,931
---------- -------- -------- -------- --------
---------- -------- -------- -------- --------
</TABLE>
See accompanying notes to unaudited pro forma financial statements
<PAGE>
Notes to the Unaudited Condensed Pro Forma Combined Balance Sheet
as of October 5, 1996.
(1) To adjust inventory which was substantially valued at LIFO,
to current fair value.
(2) Other current assets have been adjusted to reflect fair value.
(3) Adjustment to reflect the write off of an investment deemed to have
no market value.
(4) Adjustment to reflect step-up in basis to fair value for property, plant
and equipment based upon preliminary independent appraisals.
(5) Other assets include $7.1 million of other intangibles, $2.3 million of
pension and deferred tax assets and $27.3 million in excess of fair market
value of assets acquired of $27.3 million derived as follows:
<TABLE>
<S> <C>
Purchase Price $ 175,642(a)
Net book value of assets acquired (137,586)
---------
38,056
Allocation of Purchase Price in excess of net assets acquired
Adjust inventory to estimated fair value (11,100)
Adjust property and equipment to estimated fair value (6,175)
Record estimated fair value of other intangibles (7,100)
Record deferred taxes associated with pro forma adjustments 8,080
Record postretirement benefit obligation in excess of plan assets 1,900
Previously recorded goodwill 4,351
Adjust other assets to fair market value (712)
---------
Goodwill recorded upon acquisition $ 27,300
---------
---------
</TABLE>
(a) Includes approximately $5.6 million of transaction costs.
(6) Accrued and other current liabilities have been adjusted to reflect the
fair value of liabilities assumed. (primarily transaction costs)
(7) To record long-term debt associated with the acquisition. Debt was part
of a $500 million unsecured revolving credit facility provided by a
syndicate of banks, maturing five (5) years from the date of closing.
The credit facility has a variable interest rate tied to movements in
LIBOR.
(8) To record deferred tax liabilities, postretirement benefit obligations
and liabilities related to loan and lease guarantees.
<PAGE>
UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF INCOME
For the Nine Months ended October 5, 1996 for Nash Finch Company and for the
Nine Months ended August 31, 1996 for Super Food Services, Inc.
(In thousands except per share amount)
<TABLE>
<CAPTION>
Historical
-----------------------------
Nash Finch Super Food Pro Forma
Company (a) Services, Inc. Combined Adjustments Pro Forma
-------------- -------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Total sales and revenues $ 2,423,603 903,528 3,327,131 - 3,327,131
Cost and Expenses:
Cost of sales 2,098,129 808,418 2,906,547 - 2,906,547
Selling, general and administrative
and other operating expenses 264,259 85,594 349,853 - 349,853
Depreciation and amortization 24,870 6,084 30,954 1,694(1) 32,648
Interest expense 9,972 2,026 11,998 7,650(2) 19,648
----------- --------- --------- --------- ----------
Total costs and expenses 2,397,230 902,122 3,299,352 9,344 3,308,696
Earnings before income taxes 26,373 1,406 27,779 (9,344) 18,435
Income taxes 10,681 551 11,232 3,738(3) 7,494
----------- --------- --------- --------- ----------
Net earnings $ 15,692 855 16,547 (5,606) 10,941
----------- --------- --------- --------- ----------
----------- --------- --------- --------- ----------
Earnings per share $ 1.43 1.00
----------- -----------
----------- -----------
Weighted average number of common shares outstanding 10,992
-----------
-----------
</TABLE>
_____________________________________________________________
See accompanying notes to unaudited pro forma financial statements
(a) Includes results of operations for MDV from the date of acquisition
(January 1996).
<PAGE>
UNAUDITED CONDENSED PRO FORMA COMBINED STATEMENT OF INCOME
For the Fiscal Year Ended December 30, 1995 (a)
(In thousands except per share amount)
<TABLE>
<CAPTION>
Historical
-----------------------------
Military
Distributors of Pro Forma
Nash Finch Virginia, Inc. Combined Adjustment Pro Forma
------------ --------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Total revenues $ 2,888,836 416,456 3,305,292 - 3,305,292
Cost and expenses:
Cost of sales 2,469,841 388,750 2,858,591 - 2,858,591
Selling, general and
administrative, and other
operating expenses 350,201 17,805 368,006 - 368,006
Depreciation and amortization 29,406 703 30,109 2,924 33,033
Interest expense 10,793 1,563 12,356 4,575 16,931
------------ ------------ ------------ ------------ ------------
Total costs and expenses 2,860,241 408,821 3,269,062 7,499 3,276,561
Earnings before income taxes 28,595 7,635 36,230 (7,499) 28,731
Income taxes 11,181 3,054 14,235 (2,743) 11,492
------------ ------------ ------------ ------------ ------------
Net earnings $ 17,414 4,581 21,995 (4,756) 17,239
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Earnings per share $ 1.60
------------
------------
Weighted average number of common shares outstanding
<CAPTION>
Super Food Combined Pro Forma
Services, Inc. Nash Finch Adjustment Pro Forma
-------------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Total revenues 1,174,794 4,480,086 - 4,480,086
Cost and expenses:
Cost of sales 1,054,104 3,912,695 - 3,912,695
Selling, general and
administrative, and other
operating expenses 94,399 462,405 - 462,405
Depreciation and amortization 7,948 40,981 2,258(1) 43,239
Interest expense 3,042 19,973 10,200(2) 30,173
------------ ------------ ------------ ------------
Total costs and expenses 1,159,493 4,436,054 12,458 4,448,512
Earnings before income taxes 15,301 44,032 (12,458) 31,574
Income taxes 5,922 17,414 (4,470)(3) 12,944
------------ ------------ ------------ ------------
Net earnings 9,379 26,618 (7,988) 18,630
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings per share 1.71
------------
------------
Weighted average number of common shares outstanding 10,875
------------
------------
</TABLE>
- -----------------------------------------------------------------------
See accompanying notes to unaudited pro forma financial statements
(a) The financial statements of SFS have been brought within 93 days of Nash
Finch's fiscal year and by adding subsequent interim results to the fiscal
year's data and deducting the comparable preceding year interim results.
<PAGE>
Notes to Unaudited Condensed Pro Forma Combined Statements of Income
For the Nine Months ended October 5, 1996 and Fiscal Year Ended
December 30, 1995.
(1) Additional amortization and depreciation resulting from step-up in basis of
property, plant and equipment and recording of goodwill.
(2) Interest expense associated with the financing of the acquisition and based
on an interest rate of 6%. A 1/8 percent variance in interest rates would
cause interest expense to fluctuate by $212,500 annually.
(3) To record income taxes at an estimated effective tax rate of 40%.
(c) EXHIBITS
23.1 Consent of Arthur Andersen LLP.
99.1 Audited consolidated balance sheets of SFS and subsidiaries as of
August 26, 1995 and August 27, 1994, and the related audited
consolidated statements of income and cash flows for each of the three
fiscal years in the period ended August 26, 1995, including the
independent public accountant's report thereon, dated October 19,
1995, as contained in the SFS Annual Report on Form 10-K for the
fiscal year ended August 26, 1995.
99.2 Unaudited consolidated summary balance sheets of SFS and
subsidiaries as of May 4, 1996, May 6, 1995 and August 26, 1995, and
the related unaudited consolidated summary statements of income and
cash flows for the periods ended May 4, 1996 and May 6, 1995, as
contained in the SFS Quarterly Report on Form 10-Q for the quarterly
period ended May 4, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NASH-FINCH COMPANY
------------------
Registrant
Date: January 31, 1997 BY: /s/ Lawrence A. Wojtasiak
--------------------------
Lawrence A. Wojtasiak
Controller
<PAGE>
EXHIBIT INDEX
Exhibit Document
- ------- --------
23.1 Consent of Arthur Andersen LLP
99.1 Audited consolidated balance sheets of SFS and subsidiaries as of
August 26, 1995 and August 27, 1994, and the related audited
consolidated statements of income and cash flows for each of the three
fiscal years in the period ended August 26, 1995, including the
independent public accountant's report thereon, dated October 19,
1995, as contained in the SFS Annual Report on Form 10-K for the
fiscal year ended August 26, 1995.
99.2 Unaudited consolidated summary balance sheets of SFS and subsidiaries
as of May 4, 1996, May 6, 1995 and August 26, 1995, and the related
unaudited consolidated summary statements of income and cash flows for
the periods ended May 4, 1996 and May 6, 1995, as contained in the SFS
Quarterly Report on Form 10-Q for the quarterly period ended May 4,
1996.
<PAGE>
EXHIBIT 23.1
[LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 8-K/A of our report dated October 19, 1995 on the
consolidated financial statements of Super Food Services, Inc. (the Company),
incorporated by reference in the Nash-Finch Company Form 8-K/A File No.
0-785, and into Nash-Finch Company's previously filed Registration Statement
File Nos; 33-64313 and 33-54487. It should be noted that we have not audited
any financial statements of the Company as of any date or for any period
subsequent to August 26, 1995.
/s/ ARTHUR ANDERSEN LLP
Cincinnati, Ohio
January 31, 1997
<PAGE>
EXHIBIT 99.1
CONSOLIDATED STATEMENTS OF INCOME
Super Food Services, Inc., and Subsidiaries
For the Fiscal Years Ended August 26, 1995, August 27, 1994 and
August 28, 1993
(amounts in thousands except per share amounts)
- -----------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------
Sales and Other Income $1,154,955 $1,130,095 $1,165,520
- -----------------------------------------------------------------
Costs and Expenses:
Cost of sales, including
warehouse and delivery
expenses 1,103,110 1,079,057 1,113,224
Selling, general and
administrative
expenses 33,904 34,013 33,832
Interest expense 7,269 6,314 6,957
Interest income (4,139) (3,540) (3,651)
- -----------------------------------------------------------------
Total costs and
expenses 1,140,144 1,115,844 1,150,362
- -----------------------------------------------------------------
Income before Income
Taxes 14,811 14,251 15,158
- -----------------------------------------------------------------
Provision for Income
Taxes (Note 2) 5,746 5,424 5,942
- -----------------------------------------------------------------
Net Income $ 9,065 $ 8,827 $ 9,216
- -----------------------------------------------------------------
Weighted Average Number
of Common Shares
Outstanding 10,949 10,943 10,893
Earnings per
Common Share $ .83 $ .81 $ .85
- -----------------------------------------------------------------
The accompanying notes are an integral part of these consolidated
statements.
9
<PAGE>
CONSOLIDATED BALANCE SHEETS
Super Food Services, Inc., and Subsidiaries
August 26, 1995 and August 27, 1994
(amounts in thousands)
- -----------------------------------------------------------------
Assets 1995 1994
- -----------------------------------------------------------------
Current Assets:
Cash $ 12,423 $ 15,834
- -----------------------------------------------------------------
Receivables
Retailers--trade 59,832 60,680
--notes (current portion) 5,511 4,543
Suppliers and miscellaneous 8,620 8,210
- -----------------------------------------------------------------
73,963 73,433
Less--Allowance for doubtful
accounts (9,293) (7,733)
- -----------------------------------------------------------------
64,670 65,700
- -----------------------------------------------------------------
Merchandise inventory 67,181 63,343
- -----------------------------------------------------------------
Future tax benefits (Note 2) 4,569 6,768
Prepaid expenses and other 8,482 8,835
- -----------------------------------------------------------------
Total current assets 157,325 160,480
- -----------------------------------------------------------------
Notes Receivable from Retailers
(long-term portion), net of
allowance for doubtful accounts
of $2,804 in 1995 and $3,265
in 1994) 17,653 16,179
- -----------------------------------------------------------------
Property and Equipment (Note 8):
Land 1,998 1,998
Buildings 29,139 28,267
Equipment, vehicles and other 94,020 91,384
- -----------------------------------------------------------------
125,157 121,649
Accumulated depreciation and
amortization (64,612) (59,225)
- -----------------------------------------------------------------
Net property and equipment 60,545 62,424
- -----------------------------------------------------------------
Other Assets:
Investment in direct financing
leases (Note 8) 16,556 15,278
Excess of purchase price over net
tangible assets, net (Note 1) 4,339 4,405
Other 481 578
- -----------------------------------------------------------------
Total other assets 21,376 20,261
- -----------------------------------------------------------------
$256,899 $259,344
- -----------------------------------------------------------------
The accompanying notes are an integral part of these consolidated
statements.
10
<PAGE>
CONSOLIDATED BALANCE SHEETS
Super Food Services, Inc., and Subsidiaries
August 26, 1995 and August 27, 1994
(amounts in thousands)
- -----------------------------------------------------------------
Liabilities and
Shareholders' Equity 1995 1994
- -----------------------------------------------------------------
Current Liabilities:
Accounts payable $ 36,650 $ 38,302
Notes payable to bank (Note 3) 5,000 9,000
Current maturities of
long-term obligations 800 2,657
Current maturities of
obligations under capitalized
leases 864 904
Current portion of Florida
closing liabilities - 1,250
Accrued payroll and vacation 3,143 2,857
Taxes other than income 2,252 2,423
Other current liabilities 8,624 9,655
- -----------------------------------------------------------------
Total current liabilities 57,333 67,048
- -----------------------------------------------------------------
Long-Term Debt Obligations
(Note 3) 35,000 31,602
- -----------------------------------------------------------------
Obligations under Capitalized
Leases (Note 8) 25,420 24,392
- -----------------------------------------------------------------
Long-Term Florida Closing
Liabilities (Note 4) 972 2,404
- -----------------------------------------------------------------
Deferred Tax Liabilities (Note 2) 296 925
- -----------------------------------------------------------------
Commitments and Contingent
Liabilities (Note 10)
- -----------------------------------------------------------------
Shareholders' Equity (Notes 3, 5,
and 6):
Common Shares, par value $1.00,
35,000 shares authorized,
10,949 shares issued and
outstanding in 1995 and 1994,
respectively 10,949 10,949
Paid-in capital 29,408 29,408
Retained earnings 97,521 92,616
- -----------------------------------------------------------------
Total shareholders' equity 137,878 132,973
- -----------------------------------------------------------------
$256,899 $259,344
- -----------------------------------------------------------------
The accompanying notes are an integral part of these consolidated
statements.
11
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Super Food Services, Inc., and Subsidiaries
For the Fiscal Years Ended August 26, 1995, August 27, 1994 and
August 28, 1993
amounts in thousands)
- -----------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------
Cash Provided by (Used for)
Operating Activities:
Net income $ 9,065 $ 8,827 $ 9,216
Items not affecting cash-
Depreciation and
amortization 7,736 7,258 7,198
Future income tax
benefits 1,570 1,576 3,473
Current items -
Receivables 1,030 (1,454) 5,222
Merchandise inventory (3,838) 1,819 756
Prepaid expenses
and other 353 (1,997) 1,828
Accounts payable and
other (4,467) 4,209 400
Florida closing
liabilities (2,682) (3,770) (8,619)
- -----------------------------------------------------------------
Net cash provided
by operating
activities 8,767 16,468 19,474
- -----------------------------------------------------------------
Cash Provided by (Used for)
Investing Activities:
Additions of property
and equipment (5,615) (18,030) (5,174)
Increase in long-term
notes receivable (9,673) (5,510) (9,970)
Reduction of long-term
notes receivable 8,199 7,300 5,952
Sales and retirement
of property and
equipment, net 486 99 1,849
- -----------------------------------------------------------------
Net cash used
for investing
activities (6,603) (16,141) (7,343)
- -----------------------------------------------------------------
Cash Provided by (Used for)
Financing Activities:
Notes payable to bank (4,000) 9,000 (5,000)
Long-term debt borrowing 10,000 - -
Retirements of long-term
debt and lease
obligations (7,415) (4,400) (4,167)
Proceeds from stock plans - 447 -
Stock options exercised - - 116
Purchase of preferred
shares - - (567)
Cash dividends (4,160) (3,942) (3,703)
- -----------------------------------------------------------------
Net cash provided
by (used for)
financing
activities (5,575) 1,105 (13,321)
- -----------------------------------------------------------------
Increase (Decrease) in Cash (3,411) 1,432 (1,190)
Cash, Beginning of Year 15,834 14,402 15,592
- -----------------------------------------------------------------
Cash, End of Year $12,423 $15,834 $ 14,402
- -----------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements.
12
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
Super Food Services, Inc., and Subsidiaries
For the Fiscal Years Ended August 26, 1995, August 27, 1994 and August 28, 1993
(amounts in thousands except per share data)
- ------------------------------------------------------------------------------------------
Common Shares
-------------
Total
Paid-in Retained Shareholders'
Shares Amount Capital Earnings Equity
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at August 29, 1992 10,891 $10,891 $28,903 $82,218 $122,012
Net income - - - 9,216 9,216
Cash dividends on
common stock, $.34
per share - - - (3,703) (3,703)
Common shares issued
in connection with
incentive plans, net 15 15 101 - 116
- ------------------------------------------------------------------------------------------
Balance at August 28, 1993 10,906 10,906 29,004 87,731 127,641
Net income - - - 8,827 8,827
Cash dividends on
common stock,
$.36 per share - - - (3,942) (3,942)
Common shares issued
in connection with
incentive plans, net 43 43 404 - 447
- ------------------------------------------------------------------------------------------
Balance at August 27, 1994 10,949 10,949 29,408 92,616 132,973
Net income - - - 9,065 9,065
Cash dividends on
common stock, $.38
per share - - - (4,160) (4,160)
- ------------------------------------------------------------------------------------------
Balance at August 26, 1995 10,949 $10,949 $29,408 $97,521 $137,878
- ------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
13
<PAGE>
NOTE 1
- ------
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(amounts in thousands except per share amounts)
Principles of Consolidation
The accompanying consolidated financial statements include Super
Food Services, Inc., and subsidiaries (the "Company"). All
significant intercompany balances and transactions have been
eliminated.
Fiscal Year
The Company maintains its accounts on a fifty-two/fifty-three week
year. The Fiscal years ended August 26, 1995, August 27, 1994 and
August 28, 1993 all consisted of fifty-two weeks.
Revenue Recognition
Sales are recorded as products are shipped and services are
rendered.
Merchandise Inventory
The Company uses the last-in, first-out (LIFO) method of
determining cost for most (75% in 1995 and 76% in 1994) of its
merchandise inventories. Remaining inventories are valued at the
lower of cost or market using the first-in, first-out (FIFO)
method. The Company believes that the LIFO method more fairly
presents results of operations by eliminating the inflationary cost
increases from inventory and thereby more appropriately matching
current costs with current revenues. The effect of using LIFO was
to reduce inventories at August 26, 1995 and August 27, 1994 by
$11,869 and $11,120, respectively, and to increase cost of sales by
$750 for 1995 and $144 for 1994 and decrease cost of sales by
$1,436 for 1993. During Fiscal 1994, the Company liquidated
certain LIFO inventories that were carried at lower costs
prevailing in prior years. The effect of these liquidations was to
increase earnings before income taxes by $144 or $.01 per share
after tax for 1994.
Property and Equipment
Depreciation and amortization are provided over the estimated
useful lives of the assets or the remaining terms of leases using
the straight-line method. The rates used are as follows:
Building . . . . . . . . . . . . . . . . . . . 2% to 5% per annum
Equipment, vehicles and other. . . . . . .10% to 33 1/3% per annum
Leasehold improvements . . . . . . . . . lesser of estimated useful
life or lease term
Capitalized leases . . . . . . . .. . . . . . . . . . . .lease term
Excess of Purchase Price
For acquisitions subsequent to November 1, 1970, the excess of
purchase price of acquired companies over amounts assigned to net
tangible assets (approximately $2,600) is being amortized over 40
years. For acquisitions prior to November 1, 1970, the excess
(approximately $1,757) is not being amortized because, in
management's opinion, the value of net assets acquired has not
diminished.
Earnings Per Common Share
Earnings per common share is computed after deducting dividends on
preferred shares and is based on the weighted average number of
common and common equivalent shares outstanding during the year.
The dilutive effects of unexercised stock options are not material
and, therefore, are not included in earnings per share.
Notes Receivable
The Company has notes receivable from certain of its retailers.
Generally, these notes require periodic payments of principal and
interest and are secured by certain property, equipment, inventory
and personal guarantees of the retailers. These notes bear
interest based upon the prime rate. At August 26, 1995, the
interest rates ranged from 6.00% to 11.00%. The Company generally
recognizes interest income on these notes as the interest is
collected. The effective rate of interest collected was 10% and 7%
for 1995 and 1994, respectively. These notes mature as follows:
- -------------------------------------------------------------------
1996 $ 5,511
1997 4,021
1998 3,535
1999 2,385
2000 2,220
Thereafter 5,492
- -------------------------------------------------------------------
$23,164
- -------------------------------------------------------------------
14
<PAGE>
Segment Information
The Company is engaged in a single line of business, the wholesale
distribution of groceries. The Company supplies more than 850
allied retail stores in cities of varying sizes in six
predominantly midwestern states. Although the Company monitors the
creditworthiness of its customers, adjusting credit policies and
limits as needed, a substantial portion of its customers' ability
to discharge amounts owed is dependent upon the retail grocery
economic environment. Sales to one customer accounted for
approximately 13% of consolidated sales and other income of the
Company during 1995. The Company does not believe that it is
currently dependent upon any single customer.
Reclassifications
Certain reclassifications have been made to prior years' amounts to
make them comparable with the classification of such amounts for
Fiscal 1995.
NOTE 2
- ------
INCOME TAXES
(amounts in thousands)
During the first quarter of Fiscal 1994, the Company adopted
Statement of Financial Accounting Standards No. 109 (SFAS No. 109),
"Accounting for Income Taxes." This statement requires deferred tax
recognition for all temporary differences in accordance with the
liability method and requires adjustment of deferred tax assets and
liabilities for enacted changes in tax laws and rates. Prior to
the implementation of SFAS No. 109, the Company accounted for
income taxes using Accounting Principles Board Opinion No. 11. As
permitted under SFAS No. 109, prior years' financial statements
have not been restated to reflect the change in accounting method.
The cumulative effect of adopting SFAS No. 109 as of August 29,
1993 was immaterial. Additionally, the impact of the new standard
on the provision for income taxes for the year ended August 27,
1994 was immaterial.
<PAGE>
The provision for income taxes consists of the following:
- -------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------
Currently Payable -
Federal $ 4,234 $ 5,239 $ 3,279
State 925 926 612
Deferred -
Allowance for doubtful
accounts (425) (1,353) (849)
Tax depreciation over
(under) book
depreciation (233) 75 136
Expenses paid for
Florida closing 1,620 1,436 3,366
Labor and benefits
expenses (168) (637) (595)
Other, net (207) (262) (7)
- -------------------------------------------------------------------
$ 5,746 $ 5,424 $ 5,942
- -------------------------------------------------------------------
The effective income tax rate differs from the statutory federal
income tax rate for the following reasons:
- -------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------
Statutory Rate 35.0% 35.0% 34.67%
State Income Taxes (net
of federal tax benefit) 4.0 4.2 4.2
Surtax effect (0.7) (0.7) (0.67)
Other, net 0.5 (0.4) 1.0
- -------------------------------------------------------------------
38.8% 38.1% 39.2%
- -------------------------------------------------------------------
Following are the temporary differences which gave rise to the
significant deferred tax assets and liabilities as of August 26,
1995 and August 27, 1994, respectively:
- -------------------------------------------------------------------
1995 1994
---------------------------
Current Future Tax Benefits:
Insurance accruals $ 958 $ 1,414
Employee benefits accruals 500 749
Bad debts 1,823 2,245
Inventory activities 997 1,115
Florida closing liabilities - 632
Other 291 613
Valuation allowance - -
---------------------------
4,569 6,768
---------------------------
<PAGE>
Long-Term Future Tax Benefits
(Liabilities):
Accumulated depreciation (1,955) (3,767)
Leasing activities 1,884 1,895
Florida closing liabilities (328) 947
Other 103 -
Valuation allowance - -
---------------------------
(296) (925)
- -------------------------------------------------------------------
Totals $4,273 $ 5,843
- -------------------------------------------------------------------
15
<PAGE>
NOTE 3
- ------
DEBT OBLIGATIONS
(amounts in thousands)
Short-Term Credit Facilities
Notes payable to banks of $5,000 at August 26, 1995 consist of two
renewal notes bearing interest of 5.8125% and 6.0875%.
The Company had unused commitments at August 26, 1995 for
short-term borrowings of $59,000 at interest rates up to prime and
on other terms upon which the Company and the banks may agree.
Average short-term borrowings outstanding during 1995 were $19,299,
with an average interest rate of 6.33%. The maximum amount
outstanding at any period end was $31,000. No significant
compensating balances were maintained at August 26, 1995.
Long-Term Debt Obligations
Long-term debt obligations consist of the following:
- -------------------------------------------------------------------
1995 1994
- -------------------------------------------------------------------
Unsecured Senior Notes $25,000 $25,000
Unsecured Senior Notes - 7,429
Note Payable to Bank 10,000 -
Industrial Revenue Bonds 800 1,600
Term loan agreements and
other notes - 230
Less amounts payable within one year (800) (2,657)
- -------------------------------------------------------------------
$35,000 $31,602
- -------------------------------------------------------------------
Payments on the long-term debt obligations required during the
next five Fiscal years are approximately: 1996, $800; 1997, $-0-;
1998, $-0-; 1999, $-0-; 2000, $25,000; and thereafter, $10,000.
<PAGE>
Unsecured Senior Notes
The Company has $25,000 of 9.20% unsecured senior notes with
three insurance companies due January, 2000. In 1993, the Company
entered into an interest rate swap agreement with a bank with a
$15,000 notional amount that expires in October, 1995, which is
accounted for as a hedge, and, accordingly, income or expense
related to the swap is recognized on an accrual basis. The purpose
of the agreement is to modify the interest rate mix and to reduce
the amount of fixed rate interest the Company is now paying on its
long-term debt. The effect of this swap was to increase the
Company's effective interest rate on $15,000 of borrowings from
9.20% to 9.96% in Fiscal 1995.
Notes Payable to Banks
The Company has $30,000 available under revolving credit
agreements with three banks providing for a revolving credit
facility of up to $10,000 each through December, 1995. At the end
of each year, the agreements may be extended for an additional year
if mutually agreed upon by the Company and the banks. At the end
of the revolving period, the Company may convert the outstanding
amount into a term loan to be paid in sixteen quarterly
installments. The Company, at its option, may borrow at prime plus
a spread over "LIBOR" or "CD" based interest rates, or at negotiated
interest rates. At August 26, 1995, there was $10,000 borrowed
under the revolving credit agreements with interest rate of 6.75%.
The Company pays a fee on the unused portion of this credit
facility.
Industrial Revenue Bonds
The Industrial Revenue Bonds are secured by an irrevocable
letter of credit, bear interest at a variable rate equal to 50% of
a base lending rate (4.50% at August 26, 1995) and are subject to
a remarketing agreement under which the marketing agent may adjust
the interest rate within stated limits to facilitate remarketing.
If the bonds are not remarketed, payment for the bonds redeemed
will be made by drawing upon the letter of credit. In such event,
the Company has agreed to reimburse the letter of credit bank for
such draw in amounts similar in proportion to the amortization of
the then remaining outstanding principal amount of the bonds.
Accordingly, the bonds have been classified as long-term debt. In
July, 1986, the Company entered into a ten-year interest rate
exchange agreement with a bank pursuant to which it pays a 7.21%
fixed rate. These bonds are being repaid in annual installments of
$800 through 1996.
Loan Covenants
Certain loan agreements contain various financial
restrictions. The most restrictive of these require that funded
debt may not exceed 60% of capitalization of the Company. The
agreements also contain certain other restrictions with respect to
additional borrowings, commitments and guarantees.
NOTE 4
- ------
FLORIDA DIVISION CLOSING
(amounts in thousands except per share amounts)
In the third quarter of 1992, the Company recorded a special pretax
charge of $22,986 in connection with the closing of the Company's
Florida Division and the disposition of its assets. The closing
was required as a result of the loss by the Florida Division of its
single largest customer, Albertson's, which accounted for
approximately 85% of its sales. This charge included provisions
primarily for losses incurred on the disposition of the inventory
and fixed assets, the estimated portion of the remaining lease
obligations and the related operating costs necessary to maintain
the Florida warehouse facilities until tenants could be found,
16
<PAGE>
litigation costs in connection with the Company's lawsuit against
Albertson's and other costs relating to the closing. The Company's
contract claims against Albertson's were dismissed by the Circuit
Court of Orange County, Florida in March, 1994 and the 5th District
Court of Appeals of the State of Florida on January 3, 1995
affirmed the decision of the Circuit Court. The Company's motion
for a rehearing and/or clarification or certification was denied.
The remaining Florida closing liabilities at August 26, 1995
relates primarily to employee benefit costs.
NOTE 5
- ------
PREFERRED SHARE PURCHASE RIGHTS PLAN
On January 27, 1989, the Company's Board of Directors declared a
dividend of one Preferred Share Purchase Right (Right) on each
outstanding Common Share of the Company. A Right will be issued
with each Common Share of the Company that becomes outstanding
prior to the time the Rights become exercisable or expire. Under
certain conditions, each Right may be exercised to purchase one
one-hundredth share of a new series of Junior Participating
Preferred Stock at an exercise price of $100. The Rights may not
be exercised until ten days after (i) a public announcement that a
person or group acquired or obtained the right to acquire 20% or
more of the Company's Common Shares or (ii) commencement or public
announcement of an offer for 20% or more of the Company's Common
Shares. These Rights may cause substantial ownership dilution to
a person or group who attempts to acquire the Company without
approval of the Company's Board of Directors.
The Rights, which do not have any voting privileges, expire on
January 26, 1999, and may be redeemed by the Company at a price of
$0.02 per Right at any time prior to a person's or group's
acquisition of 20% or more of the Company's Common Shares. The
preferred stock that may be purchased upon exercise of the Rights
may not be redeemed and may be subordinate to other series of the
Company's preferred stock designated in the future.
In the event that the Company is acquired in a merger or other
business combination transaction, provision will be made so that
each holder of a Right will be entitled to buy the number of Common
Shares of the surviving company, which at the time of such
transaction would have a market value of two times the exercise
price of the Right. In the event that any person or group owning
20% or more of the Common Shares of the Company (except pursuant to
an offer for all outstanding Common Shares that the independent
directors determine to be fair to and in the best interests of the
Company and its shareholders) combines the Company in a merger in
which the Company survives and its Common Shares are not changed,
each holder of a Right (except rights held by the 20% owner) will
be entitled to buy the number of Common Shares of the Company which
at the time of the transaction have a value equal to two times the
exercise price of the Right.
NOTE 6
- ------
INCENTIVE PLANS
Stock Option Plan
The Company's 1986 Stock Option Plan (the 1986 Plan) permits the
granting of incentive options, non-qualified options and/or stock
appreciation rights to executive and key employees of the Company.
The option price of the incentive options may not be less than 100%
of the fair market value of the stock on the date of grant. The
option price of the non-qualified options may not be less than 85%
of the fair market value of the stock on the date of grant. The
number of Common Shares which may be granted under the 1986 Plan
may not exceed 300,000 after adjustment for the anti-dilution
provisions of the Plan. At August 26, 1995, incentive options for
197,277 Common Shares have been granted under the 1986 Plan and
67,672 Common Shares were available for grant. The options
outstanding are for a term of ten years and are exercisable in
installments ranging from 10% to 25% per year on a cumulative basis
beginning one year from the date of grant.
Following is a summary of activity for the last three Fiscal years.
- ------------------------------------------------------------------
Number of Shares Price Range
- ------------------------------------------------------------------
Outstanding at August 29, 1992 203,949 $9.92-$18.13
Canceled or forfeited (6,672) 9.92
- ------------------------------------------------------------------
Outstanding at August 28, 1993 197,277 9.92- 18.13
- ------------------------------------------------------------------
Outstanding at August 27, 1994 197,277 9.92- 18.13
- ------------------------------------------------------------------
Outstanding at August 26, 1995 197,277 9.92- 18.13
- ------------------------------------------------------------------
Exercisable at August 26, 1995 151,563 9.92- 18.13
- ------------------------------------------------------------------
Restricted Stock Plan
Under the terms of the Company's 1989 Restricted Stock Plan, the
Company may award up to 150,000 Common Shares to a limited number
of officers and key employees of the Company. Under the terms of
the Plan, the restricted stock may not be sold, transferred or
assigned by the recipient until the end of the restricted
17
<PAGE>
recipient's employment is terminated prior to the end of the
restricted period, except in the event of the death or disability
of a recipient when a prorated number of shares will be issued
based on the number of full months of employment. A recipient who
retires during the restricted period will receive the full number
of shares allocated under the Plan. During the restricted period,
the recipient has the right to vote such shares and receive all
dividends payable thereon. At August 26, 1995, there were no
awards of restricted stock outstanding.
Employee Stock Purchase Plan
At August 26, 1995, 471,928 Common Shares are reserved under the
Employee Stock Purchase Plan. Options are granted at the lower of
85% of the fair market value of the shares on the date of grant, or
100% of the fair market value on the date of exercise. Following
is a summary of activity during the last three Fiscal years.
- -----------------------------------------------------------------
Number of Shares Price Range
- -----------------------------------------------------------------
Outstanding at August 29, 1992 62,057 $13.49
Withdrawals (23,685) 13.49
- -----------------------------------------------------------------
Outstanding at August 28, 1993 38,372 13.49
Exercised (42,503) 10.50
Granted 71,197 9.62
Withdrawals (9,379) 9.62-13.49
- -----------------------------------------------------------------
Outstanding at August 27, 1994 57,687 9.62
Withdrawals (6,796) 9.62
- -----------------------------------------------------------------
Outstanding at August 26, 1995 50,891 $ 9.62
- -----------------------------------------------------------------
Incentive Compensation Plan
The Company has an Incentive Compensation Plan under which
incentive compensation awards based on performance may be granted
to officers and key employees of the Company by the Compensation
Committee of the Board of Directors. Awards in the amount (in
thousands) of $472, $475 and $494 were made in Fiscal years 1995,
1994 and 1993, respectively.
NOTE 7
- ------
PENSION AND RETIREMENT PLANS:
(amounts in thousands except per share amounts)
Defined Benefit Plans
The Company has qualified non-contributory retirement plans to
provide retirement income for eligible full-time employees who are
not covered by union retirement plans. Pension benefits under the
plans are based on length of service and compensation. The Company
contributes amounts necessary to meet minimum funding requirements.
The plans' funded status at August 26, 1995 and August 27, 1994
were as follows:
- -----------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------
Actuarial present value of
benefit obligation:
Vested benefits $ 26,994 $ 24,930
Nonvested benefits 362 432
- -----------------------------------------------------------------
Accumulated benefit
obligation 27,356 25,362
Additional benefits based on
future salary levels 3,084 3,020
- -----------------------------------------------------------------
Projected benefit obligation 30,440 28,382
Plan assets at fair value,
principally listed
securities (29,647) (27,261)
- -----------------------------------------------------------------
Plan assets under
projected benefit
obligation 793 1,121
Unrecognized net asset 449 626
Unrecognized prior service costs (935) (790)
Unrecognized net actuarial costs (1,377) (1,703)
- -----------------------------------------------------------------
Net Prepaid Pension Cost $(1,070) $ (746)
- -----------------------------------------------------------------
18
<PAGE>
Assumptions used in the determination of the above amounts include
the following:
- -----------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------
Discount rate for determining
estimated obligations and
interest cost 8.5% 8.5%
Expected aggregate average
long-term change in
compensation 4.5% 4.5%
Expected long-term
return on assets 8.5% 8.5%
- -----------------------------------------------------------------
Multi-Employer Plans
Approximately 61% of the Company's employees are covered by
collectively-bargained, multi-employer pension plans.
Contributions are determined in accordance with the provisions of
negotiated union contracts and generally are based on the number of
hours worked. The Company does not have the information available
to determine its share of the accumulated plan benefits or net
assets available for benefits under the multi-employer plans.
Other Retirement Plans
The Company has adopted a non-qualified supplemental executive
retirement plan which is available to certain officers designated
as participants by the Board of Directors and provides for
retirement benefits that participants would be entitled to receive
under the qualified retirement plan were it not for limitations
imposed by the Employment Retirement Income Security Act and
federal tax law. Benefits under the non-qualified plan are payable
to the participants and their spouses in the same manner and at the
same time as benefits are payable under the Company's qualified
retirement plan. These benefits aggregated approximately $2
million and $1.3 million at August 26, 1995 and August 27, 1994,
respectively. The Company has established a grantor trust to
provide funding for the benefits payable under the non-qualified
plan. The trust is irrevocable and, with certain exceptions, the
assets contributed to the trust can only be used to pay such
benefits.
The Company sponsors a 401(k) savings plan for eligible employees.
This 401(k) plan is designed to encourage eligible employees to
save and invest regularly. All employee contributions are
voluntary and no contributions are made by the Company.
Pension and Retirement Plan Expense
Aggregate cost for the Company's retirement plans includes the
following components:
- -----------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------
Defined Benefit Plan:
Service cost benefits
earned during the year $ 665 $ 782 $ 726
Interest cost on projected
benefit obligation 2,366 2,153 2,099
Return on assets (2,982) (916) (3,173)
Net amortization and
deferral 592 (1,396) 1,027
- -----------------------------------------------------------------
Net pension expense 641 623 679
Multi-Employer Plans 2,395 2,339 2,347
Other Retirement Plans 643 294 135
- -----------------------------------------------------------------
Total Pension and
Retirement Plan Expense $ 3,679 $ 3,256 $ 3,161
- -----------------------------------------------------------------
Early Retiree Health Care Benefits
The Company provides early retiree health care benefits to certain
employees who retire from the Company after January 1, 1989. These
early retirees generally must have attained age 55 with 15 years of
continuous service to be eligible for health care benefits. These
benefits are subject to deductibles, copayment provisions and other
limitations. Generally, company-provided health care benefits
terminate when covered individuals become eligible for Medicare
benefits or reach age 65, whichever comes first. The Company
reserves the right to change or terminate the benefits at any time.
In addition, certain union employees of the Company will continue
to be covered by collectively bargained multi-employer plans.
Costs under these union plans are recognized as expense when paid.
The Company adopted the new method of accounting for
post-retirement benefits (Financial Accounting Standards No. 106)
effective August 29, 1993. This new standard requires that the
expected cost of these benefits be charged to expense during the
years that the employees render service. Prior to Fiscal 1994, all
early retiree health care benefit costs were recognized as expense
when paid and amounted to $202 in 1993. The Company has chosen to
amortize the Accumulated Post-retirement Benefit Obligation (APBO)
over 20 years on a straight-line basis, which approximates the
average remaining service life of the participants. The Company
has determined its SFAS No. 106 liability utilizing an outside
actuary and the current provisions of such plans. These plans are
unfunded. The Company's APBO at August 29, 1995 and August 27,
1994 was approximately $2.1 million and $2.5 million (pre-tax),
respectively, and was based upon the following key assumptions.
19
<PAGE>
- -----------------------------------------------------------------
Weighted average
discount rate: 8%
Retirement rates: Varies from 2% to 5% per year
between Ages 55 through 61.
Increases up to 10% to 25% per
year between Ages 62 through 64.
- -----------------------------------------------------------------
Health care costs
trend rates: 8.5% for Fiscal 1995 and decreasing
ratably to 4.5% by Fiscal 2003.
- -----------------------------------------------------------------
A one percentage point change in the assumed health care costs
trend rate would change the APBO by approximately $300.
The Company's net periodic post-retirement benefit cost during 1995
includes the following:
- -----------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------
Service cost (benefits earned
during the period) $ 70 $ 89
Interest cost on APBO 163 188
Amortization of APBO 97 127
- -----------------------------------------------------------------
Net periodic post-retirement
benefit cost $330 $404
- -----------------------------------------------------------------
In addition, the Company offers inactive employees other benefits
prior to retirement. Management does not believe that such
benefits are material to the Company's financial position, results
of operations or cash flows.
NOTE 8
- ------
LEASES:
(amounts in thousands)
The Company leases the majority of its operating facilities and a
portion of its computers and warehouse equipment under leases
varying in terms of up to 30 years. The Company also leases retail
store locations which it in turn subleases to certain of its retail
customers. Most of the subleases contain provisions calling for
additional percentage rentals based on sales.
In addition, the Company leases a portion of the delivery equipment
used in its operations. Some of the leases may be cancelled on any
anniversary date of the delivery of the equipment upon 120 days
prior notice; however, the Company may be required to acquire the
vehicle at its initial cost less accumulated depreciation, as
defined. The annual rents are generally based on a flat charge
plus a fixed fee per mile for operating and maintenance costs.
Following is a summary of property and equipment under leases that
have been capitalized and included in the accompanying balance
sheets:
- -----------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------
Buildings $11,536 $11,536
Equipment - 327
- -----------------------------------------------------------------
Total Property under Capitalized
Leases 11,536 11,863
Accumulated Amortization (5,649) (5,478)
- -----------------------------------------------------------------
Net Property under Capitalized
Leases $ 5,887 $ 6,385
- -----------------------------------------------------------------
The following represents the minimum lease payments remaining at
August 26, 1995 under the capitalized leases and the minimum
sublease rentals to be received under direct financing leases
(covering certain retail store facilities which are sublet to
retail customers):
- -----------------------------------------------------------------
Total Direct
Capitalized Financing
Leases Leases Net
- -----------------------------------------------------------------
1996 $ 3,811 $ 2,518 $ 1,293
1997 3,750 2,503 1,247
1998 3,711 2,461 1,250
1999 3,658 2,406 1,252
2000 3,666 2,414 1,252
2001 and thereafter 38,172 25,454 12,718
- -----------------------------------------------------------------
Total minimum lease
payments 56,768 37,756 $19,012
_______
Less executory costs (1,905) (1,892)
Less imputed interest
(8.50% to 15.99%) (28,579) (18,745)
- -----------------------------------------------------------------
Present value of minimum
lease payments 26,284 17,119
Less current maturities (864) (563)
- -----------------------------------------------------------------
Long-term obligations
and investments $25,420 $ 16,556
- -----------------------------------------------------------------
20
<PAGE>
Total rental expense for all operating (noncapitalized) leases
aggregated:
- -----------------------------------------------------------------
Minimum Contingent Total
- -----------------------------------------------------------------
1995
Expense $ 9,662 $ 403 $10,065
Sublease Income (4,178) (370) (4,548)
- -----------------------------------------------------------------
$ 5,484 $ 33 $ 5,517
- -----------------------------------------------------------------
1994
Expense $ 9,849 $ 678 $10,527
Sublease Income (4,547) (701) (5,248)
- -----------------------------------------------------------------
$ 5,302 $ (23) $ 5,279
- -----------------------------------------------------------------
1993
Expense $ 9,801 $ 647 $10,448
Sublease Income (4,532) (640) (5,172)
- -----------------------------------------------------------------
$ 5,269 $ 7 $ 5,276
- -----------------------------------------------------------------
The future minimum lease commitments as of August 26, 1995 for all
noncancellable operating leases are as follows:
- -----------------------------------------------------------------
Sublease
Expense Income Net
- -----------------------------------------------------------------
1996 $ 7,811 $ (5,208) $ 2,603
1997 6,911 (4,823) 2,088
1998 5,866 (4,398) 1,468
1999 4,616 (3,539) 1,077
2000 3,155 (3,137) 18
2001 and thereafter 13,853 (13,796) 57
- -----------------------------------------------------------------
$42,212 $(34,901) $ 7,311
- -----------------------------------------------------------------
NOTE 9
- ------
TRANSACTIONS WITH RELATED PARTIES:
(amounts in thousands)
During the Fiscal years 1995, 1994 and 1993, the Company paid
$2,347, $2,284 and $2,999, respectively, to an insurance firm for
insurance premiums on various forms of coverage. The Chairman of
the Board of the Company was a shareholder of said firm. In Fiscal
1995, the Chairman sold his stock interest and he no longer is a
shareholder of said firm. The above transactions were made in the
ordinary course of business and, in the opinion of the Company's
management, were at rates as favorable to the Company as could be
obtained from unrelated parties for comparable coverage.
NOTE 10
- -------
COMMITMENTS AND CONTINGENT LIABILITIES:
(amounts in thousands)
The Company is a defendant in various legal proceedings arising out
of the conduct of business. While the ultimate outcome of these
lawsuits cannot be determined at this time, management is of the
opinion that any liability, to the extent not provided for through
insurance or otherwise, would not have a material adverse effect on
the Company's financial position, results of operations or cash
flows.
The Company has guaranteed the payment of building leases for
certain customers. The future minimum rentals aggregate
approximately $4,636, with expiration dates beginning in 1995
through 2009. Certain of these leases also contain provisions for
contingent rentals and options to extend, which the Company has
also guaranteed.
The Company has also guaranteed the payment of principal and
interest on notes of certain customers payable to banks. The
principal amount guaranteed is approximately $2,159 as of August
26, 1995. The guarantee agreements expire beginning in Fiscal 1996
through 2000. The Company has determined that it is not practical
to estimate the fair value of either of the above guarantees.
21
<PAGE>
NOTE 11
- -------
SUPPLEMENTAL CASH FLOWS INFORMATION:
(amounts in thousands)
Cash paid for interest and income taxes for the last three Fiscal
years are as follows:
- -----------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------
Interest* $ 4,410 $ 3,276 $ 4,070
Income Taxes 3,737 3,793 1,481
- -----------------------------------------------------------------
* Excludes interest capitalized and imputed interest on leases.
Capital lease transactions are considered non-cash items and
accordingly, are not reflected in the consolidated statements of
cash flows. Capital lease transactions for the last three Fiscal
years are as follows:
- -----------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------
Capital lease obligations
incurred $1,841 $ - $10,471
Capital lease obligations
retired 107 - -
- -----------------------------------------------------------------
NOTE 12
- -------
FAIR VALUE OF FINANCIAL INSTRUMENTS:
(amounts in thousands)
The following methods and assumptions were used to estimate
the fair value disclosures for financial instruments:
Cash, trade and supplier receivables, accounts payable and
notes payable to bank: The carrying amount of these items
approximates fair value due to their short-term nature.
Notes receivable from retailers: The carrying amount
approximates fair value as the receivables bear interest at a
variable market rate which adjusts quarterly.
Long-term debt obligations: The fair value of long-term debt
obligations (excluding capital leases) is estimated using
discounted cash flow analyses based on the current incremental
borrowing rates for similar types of borrowing arrangements.
The carrying amount and estimated fair value of the Company's
long-term obligations at August 26, 1995 and August 27, 1994 are as
follows:
- -----------------------------------------------------------------
1995 1994
- -----------------------------------------------------------------
Carrying amount $35,800 $34,529
Fair value $38,087 $36,109
- -----------------------------------------------------------------
Interest Rate Swap Agreement: The estimated fair value of the
interest rate swap with a $15,000 notional value, based on a
financial institution's valuation model, at August 26, 1995 was a
payable of approximately $161, which is accrued at August 26, 1995.
22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTS:
To the Shareholders and Board of Directors of Super Food Services,
Inc.:
We have audited the accompanying consolidated balance sheets of
Super Food Services, Inc. (a Delaware corporation) and subsidiaries
as of August 26, 1995 and August 27, 1994, and the related
consolidated statements of income, cash flows and shareholders'
equity for each of the three fiscal years in the period ended
August 26, 1995. 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 Super
Food Services, Inc. and subsidiaries as of August 26, 1995 and
August 27, 1994, and the results of their operations and their cash
flows for each of the three fiscal years in the period ended August
26, 1995, in conformity with generally accepted accounting
principles.
As discussed in Notes 2 and 7 to the Consolidated Financial
Statements, effective August 29, 1993, the Company changed its
method of accounting for income taxes and changed its method of
accounting for post-retirement benefits other than pensions.
Arthur Andersen LLP
Dayton, Ohio,
October 19, 1995
23
<PAGE>
EXHIBIT 99.2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Super Food Services, Inc. and Subsidiaries
Consolidated Summary Balance Sheets
May 4, 1996, May 6, 1995 and August 26, 1995
May 4, 1996 May 6, 1995 Aug. 26, 1995
------------- ------------- -------------
ASSETS
Current Assets:
Cash $ 8,106,913 $ 3,898,885 $ 12,423,314
------------ ------------ ------------
Receivables:
Retailer-trade 70,525,884 71,895,337 59,832,159
-notes (current
portion) 5,510,885 4,543,046 5,510,885
Suppliers and
miscellaneous 10,418,163 8,616,495 8,619,826
------------ ------------ ------------
86,454,932 85,054,878 73,962,870
Less Allowance for
doubtful accounts (11,162,497) (9,422,380) (9,293,061)
------------ ------------ ------------
Net Receivables 75,292,435 75,632,498 64,669,809
------------ ------------ ------------
Merchandise inventory 77,916,968 81,084,601 67,181,311
------------ ------------ ------------
Future tax benefits 4,568,828 6,767,576 4,568,828
------------ ------------ ------------
Prepaid expenses 8,377,104 7,827,347 8,481,566
------------ ------------ ------------
Total Current
Assets 174,262,248 175,210,907 157,324,828
Notes Receivable-Retailers
(net long-term portion) 18,348,803 18,772,412 17,652,617
Land, Buildings and
Equipment, net 60,810,721 62,321,622 60,544,780
Other Assets 20,836,745 19,993,297 21,376,314
------------ ------------ ------------
Total Assets $274,258,517 $276,298,238 $256,898,539
------------ ------------ ------------
------------ ------------ ------------
The accompanying Notes are an integral part of these consolidated statements.
These interim statements are unaudited.
<PAGE>
4
LIABILITIES AND SHAREHOLDERS' EQUITY
May 4, 1996 May 6, 1995 Aug. 26, 1995
------------ ------------ -------------
Current Liabilities:
Accounts payable $ 41,037,260 $ 39,728,351 $ 36,650,208
Notes payable to banks 14,000,000 21,000,000 5,000,000
Current maturities of
long-term notes and
mortgages payable 400,000 2,657,000 800,000
Current maturities of
obligations under
capitalized leases 864,173 797,024 864,173
Current portion of
Florida closing
liabilities 0 161,376 0
Accrued payroll and
vacation 3,521,476 3,393,057 3,142,853
Taxes other than
income 1,931,612 1,820,442 2,252,103
Other current
liabilities 9,801,837 11,226,040 8,919,404
------------ ------------ ------------
Total Current
Liabilities 71,556,358 80,783,290 57,628,741
Long-term Notes and
Mortgages Payable 35,000,000 35,405,286 35,000,000
Obligations Under
Capitalized Leases 24,926,496 22,181,849 25,419,906
Long-term Florida
Closing Liabilities 882,864 1,904,293 971,836
------------ ------------ ------------
Total Liabilities 132,365,718 140,274,718 119,020,483
------------ ------------ ------------
Shareholders' Equity:
Common Shares, par
value $1.00, 35,000,000
shares authorized 10,997,448 10,948,814 10,948,814
Paid-in capital 29,827,174 29,407,949 29,407,949
Retained earnings 101,068,177 95,666,757 97,521,293
------------ ------------ ------------
Total Shareholders'
Equity 141,892,799 136,023,520 137,878,056
------------ ------------ ------------
Total Liabilities and
Shareholders' Equity $274,258,517 $276,298,238 $256,898,539
------------ ------------ ------------
------------ ------------ ------------
The accompanying Notes are an integral part of these consolidated statements.
These interim statements are unauditied.
<PAGE>
5
SUPER FOOD SERVICES, INC. AND SUBSIDIARIES
Consolidated Summary Statements of Income
For the Twelve Weeks Ended May 4, 1996 and May 6, 1995
1996 1995
------------- -------------
Sales and Other Income $259,907,791 $261,314,808
Cost and Expenses:
Cost of Sales 247,342,006 249,349,220
Selling, General and
Administrative Expenses 9,022,583 8,313,431
Interest expense 1,511,444 1,745,378
Interest income (955,276) (919,992)
------------ ------------
Total Costs and Expenses 256,920,757 258,488,037
------------ ------------
Income Before Income Taxes 2,987,034 2,826,771
Provision for Income Taxes 1,135,619 1,095,904
------------ ------------
Net Income $ 1,851,415 $ 1,730,867
------------ ------------
------------ ------------
Weighted Average Number of
Common Shares outstanding 10,997,448 10,948,814
------------ ------------
------------ ------------
Earnings Per Common Share $ 0.17 $ 0.16
------------ ------------
------------ ------------
Dividends Declared Per
Common Share $ 0.10 $ 0.095
------------ ------------
------------ ------------
The accompanying Notes are an integral part of these consolidated statements.
These interim statements are unaudited.
<PAGE>
6
SUPER FOOD SERVICES, INC. AND SUBSIDIARIES
Consolidated Summary Statements of Income
For the Thirty-Six Weeks Ended May 4, 1996 and May 6, 1995
1996 1995
------------ ------------
Sales and Other Income $815,511,784 $792,439,344
Cost and Expenses:
Cost of Sales 775,313,969 753,755,100
Selling, General and
Administratiave Expenses 27,115,426 26,047,461
Interest expense 4,754,586 5,178,669
Interest income (2,763,244) (2,651,052)
------------ ------------
Total Costs and Expenses 804,420,737 782,330,178
------------ ------------
Income Before Income Taxes 11,091,047 10,109,166
Provision for Income Taxes 4,245,216 3,939,066
------------ ------------
Net Income $ 6,845,831 $ 6,170,100
------------ ------------
------------ ------------
Weighted Average Number of
Common Shares outstanding 10,982,858 10,948,814
------------ ------------
------------ ------------
Earnings Per Common Share $ 0.62 $ 0.56
------------ ------------
------------ ------------
Dividends Declared Per
Common Share $ 0.30 $ .285
------------ ------------
------------ ------------
The accompanying Notes are an integral part of these consolidated statements.
These interim statements are unaudited.
<PAGE>
7
SUPER FOOD SERVICES, INC. AND SUBSIDIARIES
Consolidated Summary Statements of Cash Flows
For the Thirty-Six Weeks Ended May 4, 1996 and May 6, 1995
1996 1995
------------- -------------
CASH PROVIDED BY (USED FOR) OPERATIONS
Net Income $ 6,845,831 $ 6,170,100
Items not affecting cash
Depreciation and amortization 5,972,078 5,332,631
Current items (excluding cash
and notes payable)-
Receivables (10,622,626) (9,933,109)
Merchandise Inventory (10,735,657) (17,741,623)
Prepaid expenses and other 104,462 1,007,811
Accounts payable 4,387,052 1,426,406
Other current liabilities 981,087 620,096
Florida Closing Liabilities (88,972) (1,588,331)
------------ ------------
NET CASH USED FOR OPERATIONS (3,156,745) (14,706,019)
------------ ------------
CASH PROVIDED BY (USED FOR) INVESTING:
Additions of property, equipment
and direct financing leases (5,738,972) (5,002,233)
Increase in long-term notes
receivable (5,172,775) (6,989,393)
Payments on long-term
notes receivable 4,476,589 4,396,130
------------ ------------
NET CASH USED FOR INVESTING (6,435,158) (7,595,496)
------------ ------------
CASH PROVIDED BY (USED FOR) FINANCING:
Notes payable to banks (short-term) 9,000,000 12,000,000
Notes payable to bank (long-term) 0 10,000,000
Payments on term debt
and capital leases (893,410) (8,514,075)
Proceeds from Stock Purchase
Plan/Stock Option Plan 467,859 0
Cash dividends (3,298,947) (3,120,003)
------------ ------------
NET CASH PROVIDED BY FINANCING 5,275,502 10,365,922
DECREASE IN CASH (4,316,401) (11,935,593)
CASH, BEGINNING OF YEAR 12,423,314 15,834,478
------------ ------------
CASH, END OF PERIOD $ 8,106,913 $ 3,898,885
------------ ------------
------------ ------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (excludes interest
capitalized and imputed
interest on leases) $ 3,217,526 $ 3,489,984
------------ ------------
------------ ------------
Income taxes $ 5,758,600 $ 2,786,486
------------ ------------
------------ ------------
The accompanying Notes are an integral part of these consolidated statements.
These interim statements are unaudited.
<PAGE>
8
Super Food Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Financial Statements -
The condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the informa-
tion presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the
financial statements and the notes thereto included in the
Company's latest annual report on Form 10-K.
2. Accounting Policies -
The interim financial information presented in this report has
been prepared in accordance with the accounting policies
described in the Notes to the Company's financial statements
filed on the most recent Form 10-K. While management believes
that the procedures followed in the preparation of interim
information are reasonable, the accuracy of some estimated
amounts is dependent upon facts that will exist or calculations
that will be accomplished later in the fiscal year. Examples
of such estimates (none individually significant) include
unpaid expenses not invoiced and pension costs. In addition,
an amount is expensed ratably for possible inventory shrinkage
(based on prior experience and is adjusted to actual twice
during the fiscal year) and to adjust the LIFO reserve (based
upon the Company's best estimate of inflation to date).
The information included in this Form 10-Q reflects all adjust-
ments which are of a normal recurring nature and, in the
opinion of management, necessary for a fair statement of the
results of operations for the period presented.
3. Reclassifications -
Certain reclassifications have been made to prior years'
amounts to make them comparable with the classifications of
such amounts for fiscal year 1996.
