AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 19, 1996
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
RICHFOOD HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Virginia 54-1438602
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
8258 RICHFOOD ROAD DONALD D. BENNETT
MECHANICSVILLE, VIRGINIA 23111 CHAIRMAN OF THE BOARD AND
(804) 746-6000 CHIEF EXECUTIVE OFFICER
(Address, including Zip Code, 8258 RICHFOOD ROAD
and MECHANICSVILLE, VIRGINIA 23111
telephone number, including (804) 746-6000
area code, of registrant's (Name, address, including Zip
principal executive offices) Code,
and telephone number, including
area code, of agent for
service)
</TABLE>
The Commission is requested to send copies of all communications to:
<TABLE>
<S> <C>
GARY E. THOMPSON WINTHROP B. CONRAD, JR.
HUNTON & WILLIAMS DAVIS POLK & WARDWELL
RIVERFRONT PLAZA, EAST TOWER 450 LEXINGTON AVENUE
951 EAST BYRD STREET NEW YORK, NEW YORK 10017
RICHMOND, VIRGINIA 23219
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.[ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[ ]
CALCULATION OF REGISTRATION FEE
[CAPTION]
<TABLE>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE
SECURITIES TO BE REGISTERED REGISTERED PER SHARE* OFFERING PRICE*
<S> <C> <C> <C>
Common Stock, without
par value 3,925,845 shares $26.875 $105,507,084
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Common Stock, without
par value $36,381.75
</TABLE>
* Estimated solely for the purpose of computing the registration fee. This
amount was calculated pursuant to Rule 457(c) on the basis of $26.875 per
share, which was the average of the high and low prices of the registrant's
Common Stock on March 12, 1996, as reported on The Nasdaq National Market.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION
DATED MARCH 19, 1996
3,450,000 SHARES
[Richfood logo here]
COMMON STOCK
(WITHOUT PAR VALUE)
All of the Common Stock, without par value (the "Common Stock"), of Richfood
Holdings, Inc. (the "Company"), offered hereby is being sold by the selling
shareholders named herein (the "Selling Shareholders"). See "Selling
Shareholders." The Company will not receive any of the proceeds from the sale of
the Common Stock by the Selling Shareholders.
The Common Stock is quoted on The Nasdaq National Market ("Nasdaq") under the
symbol "RCHF." On March 18, 1996, the last reported sales price of the Common
Stock, as quoted on Nasdaq, was $27.25 per share. See "Price Range of Common
Stock and Dividend Policy."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT (1) SHAREHOLDERS (2)
Per Share $ $ $
Total (3) $ $ $
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Expenses of the offering, estimated at $345,000, will be paid by the
Company.
(3) The Selling Shareholders have granted to the Underwriters an option,
exercisable within 30 days after the date of this Prospectus, to purchase up to
an additional 475,845 shares of Common Stock on the same terms as set forth
above, solely to cover over-allotments, if any. If such option is exercised in
full, the total Price to Public, Underwriting Discount and Proceeds to Selling
Shareholders will be $ , $ and $ , respectively. See "Underwriting."
The shares of Common Stock being offered by this Prospectus are offered by the
Underwriters, subject to prior sale, when, as and if delivered to and accepted
by the Underwriters, and subject to approval of certain legal matters by Davis
Polk & Wardwell, counsel for the Underwriters. It is expected that delivery of
the certificates representing the shares of Common Stock offered hereby will be
made against payment therefor on or about , 1996, at the offices of J.P.
Morgan Securities Inc., 60 Wall Street, New York, New York.
J.P. MORGAN & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
INTERSTATE/JOHNSON LANE
CORPORATION
WHEAT FIRST BUTCHER SINGER
, 1996
*********************
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there[el]be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of any
State.
<PAGE>
No person is authorized to give any information or to make any representations
not contained or incorporated by reference in this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company, any Selling Shareholder or any Underwriter. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, the Common Stock in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create any
implication that there has been no change in the affairs of the Company
subsequent to the date hereof.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information................................. 3
Incorporation of Certain Documents by Reference....... 3
Prospectus Summary.................................... 4
Price Range of Common Stock and Dividend Policy....... 7
Capitalization........................................ 8
Selected Financial and Operating Data................. 9
Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 12
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Business.............................................. 17
Management............................................ 24
Description of Capital Stock.......................... 26
Selling Shareholders.................................. 30
Underwriting.......................................... 31
Legal Matters......................................... 32
Experts............................................... 32
Index to Consolidated Financial Statements............ F-1
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. IN CONNECTION WITH
THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 10B-6A UNDER
THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports and definitive
proxy or information statements filed by the Company can be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Judiciary Plaza, Washington, D.C. 20549, and at its
Regional Offices located at the Citicorp Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can also be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. The Common Stock is quoted on
Nasdaq, and reports, proxy statements and other information concerning the
Company may be inspected and copied at the offices of Nasdaq, 1725 K Street,
N.W., Washington, D.C. 20006.
This Prospectus constitutes a part of the registration statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Reference is made to such
Registration Statement and the exhibits relating thereto for further information
with respect to the Company and the shares of Common Stock offered hereby. The
Underwriters of the shares of Common Stock offered hereby are herein
collectively referred to as the "Underwriters."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
(File No. 0-16900) under the Exchange Act are incorporated herein by reference
and made a part hereof:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended April
29, 1995, as amended by Form 10-K/A1 dated September 6, 1995;
(b) the Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended July 22, 1995, October 14, 1995, and January 6, 1996, as amended
by Form 10-Q/A1 dated March 19, 1996;
(c) the Company's Current Reports on Form 8-K dated June 26, 1995, October
15, 1995, and November 30, 1995; and
(d) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A dated April 29, 1988, together with
any further amendments or reports filed for the purpose of updating such
description.
In addition, the consolidated financial statements and financial statement
schedules, and independent auditors' reports thereon, listed in Part IV, Item
14, of the Annual Report on Form 10-K of Super Rite Corporation (Commission File
No. 0-17965), as amended, for the fiscal year ended March 4, 1995, are
incorporated herein by reference and made a part hereof.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering of Common Stock made hereby shall
be deemed to be incorporated by reference into this Prospectus and to be made a
part hereof from their respective dates of filing. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein (or in any other subsequently filed document that is
or is deemed to be incorporated by reference herein) modifies or supersedes such
previous statement. Any such statement so modified or superseded shall not be
deemed to constitute a part hereof except as so modified or superseded.
The Company will furnish without charge, upon written or oral request, to each
person to whom a copy of this Prospectus is delivered, a copy of any or all of
the documents incorporated by reference herein, other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference
therein). Requests should be directed to Daniel R. Schnur, Esq., Senior Vice
President, General Counsel and Secretary, Richfood Holdings, Inc., 8258 Richfood
Road, Mechanicsville, Virginia 23111 (telephone 804-746-6000).
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. REFERENCES HEREIN TO A
PARTICULAR FISCAL YEAR OF THE COMPANY SHALL MEAN FOR FISCAL 1995, THE 52 WEEK
PERIOD ENDED APRIL 29, 1995, FOR FISCAL 1994, THE 52 WEEK PERIOD ENDED APRIL 30,
1994, AND FOR FISCAL 1993, THE 52 WEEK PERIOD ENDED MAY 1, 1993. UNLESS THE
CONTEXT OTHERWISE REQUIRES, REFERENCES IN THIS PROSPECTUS TO THE "COMPANY" OR
"RICHFOOD" SHALL REFER TO RICHFOOD HOLDINGS, INC., A VIRGINIA CORPORATION, AND
ITS CONSOLIDATED SUBSIDIARIES. THE SUPER RITE ACQUISITION, AS DEFINED BELOW
UNDER "RECENT ACQUISITION," HAS BEEN ACCOUNTED FOR AS A POOLING OF INTERESTS,
WHICH REQUIRES THAT THE HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF RICHFOOD
AND SUPER RITE CORPORATION AS OF AND FOR THE PERIODS ENDED PRIOR TO THE
EFFECTIVE TIME OF THE MERGER BE COMBINED AS IF THE MERGER HAD OCCURRED AS OF THE
EARLIEST PERIOD PRESENTED. ACCORDINGLY, UNLESS OTHERWISE SPECIFIED, THE
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF RICHFOOD AND OTHER FINANCIAL AND
OPERATIONAL DATA PRESENTED HEREIN HAVE BEEN RESTATED TO INCLUDE THE FINANCIAL
RESULTS OF SUPER RITE CORPORATION.
THE COMPANY
The Company is the leading wholesale food distributor in its Mid-Atlantic
operating region and the fourth largest wholesale food distributor in the United
States. Richfood supplies a comprehensive selection of national brand and
private label grocery products, dairy products, frozen foods, fresh produce
items, meats, delicatessen and bakery products and non-food items from its three
modern, highly efficient distribution centers. The Company's distribution
centers are strategically located within its operating region and have capacity
to accommodate additional growth. The Company services more than 1,700 retail
grocery stores, including leading regional chains and smaller independent
retailers throughout the Mid-Atlantic region, offering its customers a
dependable supply and prompt delivery of over 32,000 grocery and non-grocery
items at competitive prices.
Since joining Richfood in 1990, the current management team has implemented a
business strategy focused on reducing and controlling costs, increasing
efficiency and pursuing profitable growth. The success of this strategy has been
reflected in the growth of the Company's sales from $2.19 billion for fiscal
1992 to $2.99 billion for fiscal 1995, an 11.0% compound annual growth rate, and
in the Company's operating profit, which has grown from $47.6 million to $81.6
million over the same period, a 19.7% compound annual growth rate.
Management believes that, as a result of its strategic focus on cost control,
logistics and distribution, the Company is now one of the most efficient
wholesale food distributors in the United States. Over the past five fiscal
years, the Company has reduced and controlled costs by (i) capitalizing on its
size to improve its purchasing power, (ii) rationalizing product purchasing and
pricing systems, (iii) implementing a pricing system that encourages efficient
use of the Company's services and (iv) instituting productivity-based warehouse
management incentives. Over the same period, the Company has significantly
improved the efficiency of its logistics and distribution functions by, among
other things, implementing state-of-the-art computer systems related to
purchasing, inventory management and fleet loading and routing. These
improvements have permitted the Company to drive substantially increased volume
through its distribution system and to increase capacity utilization
significantly, thereby benefiting from its operating leverage. As a result of
the cost savings and efficiencies realized by the Company under its current
management team, from fiscal 1992 to fiscal 1995 the Company's operating profit
as a percent of sales has increased from 2.2% to 2.7%, annual inventory turnover
has improved from 16.3x to 18.8x and working capital funding requirements have
been reduced substantially.
Richfood has increased sales to existing customers and attracted new customers
by using the Company's purchasing power, low cost structure and efficient
distribution system to provide products to its customers at the lowest available
prices, while offering its customers a wide variety of services to support their
competitive position. Since 1990, customer penetration, the percentage of
customers' sales supplied by Richfood, has increased from approximately 50% to
over 60% for customers supplied by Richfood's Mechanicsville, Virginia
distribution center. In addition, management believes that opportunities exist
to increase significantly the customer penetration rate, now approximately 50%,
for the Company's recently acquired Harrisburg, Pennsylvania distribution
center. See " -- Recent Acquisition." The Company has also successfully
attracted new customers and has benefitted from growth by the leading regional
chains and smaller, independent retail grocers that it serves.
The Company has also increased sales through strategic acquisitions. Since 1990,
the Company has completed five acquisitions, which have more than doubled its
sales, added large, modern distribution centers in Harrisburg and West Point,
Pennsylvania, and enhanced its presence in various regional markets. See
" -- Recent Acquisition" and "Business -- Business Strategy." The
4
<PAGE>
Company pursues strategic targets that are well run, established wholesale
operations, with modern facilities and capacity to accommodate anticipated
growth, and that complement the Company's existing operations and geographic
service area.
The Company's wholesale operations consist of: (i) Richfood, Inc., founded in
1935, a full service grocery wholesaler based in Richmond, Virginia, which
operates a 1.3 million square foot distribution center that is one of the
largest and most efficient in the industry; (ii) Super Rite Corporation ("Super
Rite"), a full service wholesale food distributor based in Harrisburg,
Pennsylvania, which operates over 800,000 square feet of warehouse space,
including a 635,000 square foot highly efficient, automated distribution center;
and (iii) Rotelle, Inc. ("Rotelle"), based in West Point, Pennsylvania, one of
the largest frozen food distributors in the United States, which operates a 6.3
million cubic foot automated frozen food distribution center. The Company's
wholesale operations also include the Richfood Dairy, located in Richmond, which
is the largest fluid dairy in Virginia and consists of a 65,000 square foot
facility capable of processing and packaging over 500,000 gallons per week of
milk and other dairy products, fruit juices, bottled water and related items.
See "Business -- Wholesale Operations."
The Company's Retail Grocery Division operates eleven 45,000 to 60,000 square
foot "superstores" under the METRO tradename, and six smaller traditional
supermarkets under the BASICS tradename, in the metropolitan Baltimore, Maryland
and Dover, Delaware markets. The Company's Retail Grocery Division was acquired
in connection with Richfood's acquisition of Super Rite, and accounted for 10.2%
of the Company's sales for fiscal 1995. See "Business -- Retail Operations."
The Company is a Virginia corporation formed in 1987. The mailing address and
telephone number of the Company's principal executive offices are P.O. Box
26967, Richmond, Virginia 23261, (804)746-6000.
RECENT ACQUISITION
Effective October 15, 1995, the Company completed its acquisition of Super Rite
through a stock-for-stock merger (the "Super Rite Acquisition"). Super Rite,
with fiscal 1995 sales of $1.47 billion, is a full service wholesale food
distributor supplying more than 240 retail supermarkets in Pennsylvania, New
Jersey, Maryland, Delaware, Virginia and West Virginia. Super Rite also operates
the Company's Retail Grocery Division, consisting of eleven 45,000 to 60,000
square foot "superstores" in the Baltimore, Maryland and Dover, Delaware markets
operating under the METRO tradename, and six smaller traditional supermarkets in
metropolitan Baltimore, Maryland, operating under the BASICS tradename. Super
Rite operates as a separate, wholly-owned subsidiary of the Company. The Company
issued 9,770,188 shares of Common Stock in the Super Rite Acquisition, resulting
in former Super Rite shareholders holding approximately 31% of the outstanding
shares of Common Stock. The shares of Common Stock held by the Selling
Shareholders and offered hereby were received by such persons in the Super Rite
Acquisition.
Super Rite operates over 800,000 square feet of warehouse space, including a
635,000 square foot highly efficient, automated distribution center in
Harrisburg, Pennsylvania. Super Rite's distribution system complements the
Company's existing operations, and its service area is geographically contiguous
with the northern portion of the area served by Richfood's Mechanicsville,
Virginia distribution center. As a result of the Super Rite Acquisition, the
Company anticipates that it will achieve significant cost savings, operating
efficiencies and growth opportunities resulting from: (i) combining the
purchasing volume of both companies, thereby increasing purchasing power; (ii)
centralizing and eliminating certain duplicative corporate and administrative
functions; (iii) selling certain higher-margin products to Super Rite customers
that are offered by Richfood but that were previously offered on a limited basis
by Super Rite, such as frozen foods, fresh produce, meats and delicatessen and
dairy products; (iv) consolidating distribution networks to achieve logistical
efficiencies and higher capacity utilization; and (v) realizing interest expense
savings by refinancing certain Super Rite indebtedness at the lower rates
available to the combined Company.
5
<PAGE>
THE OFFERING
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<S> <C>
COMMON STOCK OFFERED BY THE SELLING
SHAREHOLDERS (1)(2)....................................... 3,450,000 shares
COMMON STOCK OUTSTANDING (3)................................ 31,317,203 shares
NASDAQ TRADING SYMBOL....................................... "RCHF"
DIVIDEND POLICY............................................. The Company has paid cash dividends on the Common Stock since
September 1991. The amount of future dividends, if any, will
depend on general business conditions encountered by the
Company, its earnings, financial condition and capital
requirements and such other factors as the Company's Board of
Directors may deem relevant. See "Price Range of Common Stock
and Dividend Policy."
</TABLE>
(1) All of the Common Stock offered hereby is currently issued and outstanding
and is being sold by the Selling Shareholders. The Company will not receive any
of the proceeds from the sale of the Common Stock by the Selling Shareholders.
See "Selling Shareholders."
(2) Assumes that the Underwriters' over-allotment option to purchase up to
475,845 shares will not be exercised. See "Underwriting."
(3) Excludes approximately 995,000 shares of Common Stock issuable upon the
exercise of all outstanding stock options as of March 18, 1996, at a weighted
average exercise price of approximately $14.30 per share.
6
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is quoted on Nasdaq under the symbol "RCHF." The following
table sets forth, for the periods indicated, the high and low closing sales
prices of the Common Stock as reported by Nasdaq and the cash dividends declared
by Richfood per outstanding share of Common Stock. Super Rite did not pay
dividends on its outstanding common stock for the periods indicated. The
Company's fiscal year is a 52-53 week period ending on the Saturday nearest
April 30th.
<TABLE>
<CAPTION>
CASH
DIVIDEND
HIGH LOW DECLARED
<S> <C> <C> <C>
Fiscal Year ended May 1, 1993
First Quarter $ 9 11/16 $ 8 7/16 $ .0175
Second Quarter 9 7/16 7 7/8 .0175
Third Quarter 10 3/4 8 1/8 .0175
Fourth Quarter 14 1/2 10 5/16 .0175
Fiscal Year ended April 30, 1994
First Quarter $15 5/8 $12 3/4 $ .0200
Second Quarter 16 3/4 15 1/16 .0200
Third Quarter 17 1/2 15 1/4 .0200
Fourth Quarter 18 1/4 15 1/4 .0200
Fiscal Year ended April 29, 1995
First Quarter $16 3/4 $13 1/2 $ .0250
Second Quarter 16 1/2 13 3/4 .0250
Third Quarter 17 14 3/4 .0250
Fourth Quarter 20 16 1/4 .0250
Fiscal Year ending April 27, 1996
First Quarter $24 1/4 $19 1/2 $ .0250
Second Quarter 26 3/4 22 3/4 .0300
Third Quarter 29 24 3/4 .0300
Fourth Quarter (through March 18, 1996) 28 1/2 23 5/8 --
</TABLE>
On March 18, 1996, the last reported sale price of the Common Stock on Nasdaq
was $27.25 per share.
The Company has paid cash dividends on its Common Stock since September 1991.
The record date for the payment of dividends for the third quarter of fiscal
1996 was March 15, 1996. Purchasers of Common Stock offered hereby will not be
entitled to the third quarter dividend, which is expected to be paid on April 1,
1996. The Company expects to continue paying cash dividends on its Common Stock
when justified by the Company's financial condition. The amount of future
dividends, if any, will depend on general business conditions encountered by the
Company, its earnings, financial condition and capital requirements and such
other factors as the Company's Board of Directors (the "Company's Board") may
deem relevant.
7
<PAGE>
CAPITALIZATION
The table below sets forth the capitalization of the Company as of January 6,
1996. The offering will have no effect on the Company's capitalization. This
table should be read in conjunction with the consolidated financial statements
of the Company and the notes thereto appearing elsewhere, or incorporated by
reference, in this Prospectus.
<TABLE>
<CAPTION>
AS OF
IN THOUSANDS JANUARY 6, 1996
<S> <C>
Long-term debt and capital lease obligations, including current maturities:
6.15% Senior Notes $ 45,000
10.625% Senior Subordinated Notes (1) 65,325
Other 4,606
Capital lease obligations 1,573
Total long-term debt and capital lease obligations 116,504
Shareholders' equity (2):
Preferred stock, without par value; authorized 5,000 shares;
none issued or outstanding --
Common stock, without par value; authorized 60,000 shares;
issued and outstanding 31,247 shares 64,826
Retained earnings 120,213
Total shareholders' equity 185,039
Total capitalization $ 301,543
</TABLE>
(1) The 10.625% Senior Subordinated Notes, due April 1, 2002 (the "Super Rite
Notes"), were issued by Super Rite Foods, Inc., a wholly-owned subsidiary of
Super Rite, in April 1992 in the original aggregate principal amount of $75.0
million. During the twelve week period ended January 6, 1996, the Company
repurchased, at market prices above par, approximately $9.7 million in principal
amount of Super Rite Notes, and recorded an extraordinary loss, net of tax, of
$1.0 million primarily related to such repurchases. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations." After January 6,
1996, and through the date of this Prospectus, the Company has repurchased, at
market prices above par, an additional $17.5 million principal amount of Super
Rite Notes, and expects to record an extraordinary loss, net of tax, of
approximately $1.1 million during the fourth quarter of fiscal 1996 related to
such repurchases. The Company expects to continue to effect open market
repurchases of Super Rite Notes, from time to time, when the market prices
therefor are economically beneficial in relation to the Company's cost of funds.
In addition, the Company expects to call the Super Rite Notes for redemption on
April 1, 1997, the first permitted redemption date therefor, at their redemption
price of 105.31% of par.
(2) Excludes approximately 1.0 million shares of Common Stock issuable upon the
exercise of all outstanding stock options as of January 6, 1996, at a weighted
average exercise price of approximately $14.00 per share.
8
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The following tables set forth selected financial and operating data with
respect to the Company as of the dates and for the periods indicated. The
financial data for each of the fiscal years in the three-year period ended April
29, 1995, and as of April 29, 1995, and April 30, 1994, have been derived from
the audited consolidated financial statements of the Company included elsewhere
in this Prospectus. Such consolidated financial statements have been audited by
KPMG Peat Marwick LLP, in reliance on the report of Coopers & Lybrand L.L.P. The
unaudited financial data as of May 1, 1993, and May 2, 1992, and for fiscal 1992
have been derived from combining the separate audited historical consolidated
financial statements of Richfood (prior to giving effect to the Super Rite
Acquisition) and Super Rite, and reflect, in the opinion of the Company, all
adjustments, consisting primarily of conforming accounting adjustments,
necessary for a fair presentation of such data on a pooled basis. The financial
data as of and for the thirty-six week periods ended January 6, 1996, and
January 7, 1995, have been derived from unaudited consolidated financial
statements of the Company, which, in the opinion of the Company, reflect all
adjustments, consisting of normal recurring accruals and conforming accounting
adjustments, necessary for a fair presentation thereof. The results of
operations for the thirty-six week period ended January 6, 1996, are not
necessarily indicative of future financial results. These data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of the
Company and the notes thereto appearing elsewhere, or incorporated by reference,
in this Prospectus.
The Super Rite Acquisition has been accounted for as a pooling of interests,
which requires that the historical consolidated financial statements of Richfood
and Super Rite as of and for the periods ended prior to the effective time of
the merger be combined as if the merger had occurred as of the earliest period
presented. Accordingly, the consolidated financial statements of the Company
presented herein have been restated to include the financial results of Super
Rite.
In accordance with Commission regulations regarding a transaction that has been
accounted for as a pooling of interests, Richfood's historical consolidated
financial statements as of and for the fiscal years ended April 29, 1995 (52
weeks), April 30, 1994 (52 weeks), May 1, 1993 (52 weeks), and May 2, 1992 (53
weeks), were combined, respectively, with amounts included in Super Rite's
historical consolidated financial statements as of and for the fiscal years
ended March 4, 1995 (53 weeks), February 26, 1994 (52 weeks), February 27, 1993
(52 weeks), and February 29, 1992 (52 weeks), subject to certain adjustments to
conform accounting practices and methods. Similarly, amounts included in
Richfood's historical consolidated financial statements as of and for the
thirty-six weeks ended January 7, 1995, were combined with the historical
consolidated financial statements of Super Rite as of and for the thirty-nine
weeks ended November 26, 1994, subject to certain adjustments to conform
accounting practices and methods. Consistent with the requirements of the
Commission that will apply to the Company's Annual Report on Form 10-K for
fiscal 1996, the Company has not prepared historical financial statements for
fiscal 1991 reflecting the Super Rite Acquisition and, accordingly, such
information is not presented herein.
9
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
(CONTINUED)
<TABLE>
<CAPTION>
36 WEEKS ENDED FISCAL YEAR ENDED
JANUARY 6, JANUARY 7, APRIL 29, APRIL 30, MAY 1, MAY 2,
IN THOUSANDS, EXCEPT PER SHARE DATA 1996 1995 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Sales $ 2,251,312 $ 2,089,081 $ 2,992,735 $ 2,545,676 $ 2,357,706 $ 2,186,097
Cost of goods sold 2,029,874 1,880,272 2,695,020 2,295,235 2,120,762 1,962,934
Gross profit 221,438 208,809 297,715 250,441 236,944 223,163
Operating and administrative expenses 160,425 150,750 216,099 186,912 191,058 175,613
Operating profit 61,013 58,059 81,616 63,529 45,886 47,550
Merger and integration costs (1) 11,993 -- -- -- -- --
Loss on disposal of assets (2) -- -- -- 13,148 9,188 --
Interest expense 9,887 13,074 18,312 17,534 17,619 16,895
Interest income (2,281) (2,105) (3,339) (3,178) (3,686) (1,256)
Earnings before income taxes and
extraordinary losses 41,414 47,090 66,643 36,025 22,765 31,911
Income taxes 17,625 19,491 27,425 14,654 8,454 12,761
Earnings before extraordinary losses 23,789 27,599 39,218 21,371 14,311 19,150
Extraordinary losses, net of tax (3) 1,002 -- -- -- 5,042 --
Net earnings (4) 22,787 27,599 39,218 21,371 9,269 19,150
Preferred stock dividends -- -- -- -- 8,838 3,791
Net earnings applicable to common stock $ 22,787 $ 27,599 $ 39,218 $ 21,371 $ 431 $ 15,359
Earnings per share applicable to
common stock:
Earnings before extraordinary losses $ .76 $ .89 $ 1.26 $ .70 $ .18 $ .54
Net earnings $ .73 $ .89 $ 1.26 $ .70 $ .01 $ .54
Weighted average common shares outstanding 31,218 31,124 31,141 30,515 30,192 28,283
Cash dividends declared per common share $ .085 $ .075 $ .100 $ .080 $ .070 $ .050
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
JANUARY 6, JANUARY 7, APRIL 29, APRIL 30, MAY 1, MAY 2,
IN THOUSANDS 1996 1995 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net working capital (5) $ 42,794 $ 74,343 $ 43,399 $ 63,838 $ 62,028 $ 36,912
Total assets 558,823 586,356 580,770 487,904 487,266 418,353
Total long-term debt and capital lease
obligations, including current maturities 116,504 203,642 178,531 181,576 208,875 131,873
Shareholders' equity 185,039 149,174 160,330 121,868 95,395 93,966
</TABLE>
<TABLE>
<CAPTION>
36 WEEKS ENDED FISCAL YEAR ENDED
JANUARY 6, JANUARY 7, APRIL 29, APRIL 30, MAY 1, MAY 2,
DOLLARS IN THOUSANDS 1996 1995 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL RATIOS AND OTHER DATA:
Operating profit as a percent of sales 2.71% 2.78% 2.73% 2.50% 1.95% 2.18%
Earnings before interest, taxes, depreciation
and
amortization (6) $ 69,383 $ 76,696 $ 105,519 $ 72,771 $ 57,226 $ 65,708
Inventory turnover (7) -- -- 18.80 16.18 15.40 16.32
Return on average assets (8) -- -- 7.34% 4.38% 2.05% 4.94%
Return on average common shareholders'
equity (9) -- -- 27.79% 19.67% 0.46% 21.59%
Debt to equity ratio (10) .63 1.37 1.11 1.49 2.19 1.40
</TABLE>
10
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
(CONTINUED)
(1) Merger and integration costs consist of a one-time charge in connection with
the Super Rite Acquisition, and relate primarily to transaction costs associated
with the merger, severance costs and costs related to the conversion of certain
BASICS stores to the METRO store format. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(2) Loss on disposal of assets relates primarily to charges associated with the
write down of assets at certain closed retail store locations to their net
realizable values. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(3) The extraordinary loss, net of tax, of $1.0 million for the thirty-six week
period ended January 6, 1996, relates primarily to the repurchase, at market
prices above par, of approximately $9.7 million principal amount of Super Rite
Notes. The extraordinary loss, net of tax, of $5.0 million for fiscal 1993
relates primarily to the early redemption of the then-outstanding Super Rite
Foods, Inc. 13 1/4% Notes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(4) Excluding merger and integration costs, the loss on disposal of assets and
the extraordinary losses, net earnings would have been $31,589 and $27,599 for
the thirty-six weeks ended January 6, 1996, and January 7, 1995, respectively,
and $39,218, $29,171, $20,087 and $19,150 for fiscal 1995, 1994, 1993 and 1992,
respectively.
(5) Net working capital is calculated by deducting cash and current liabilities
from current assets.
(6) Excluding merger and integration costs and the loss on disposal of assets,
earnings before interest, taxes, depreciation and amortization would have been
$81,376 and $76,696 for the thirty-six weeks ended January 6, 1996, and January
7, 1995, respectively, and $105,519, $85,919, $66,414 and $65,708 for fiscal
1995, 1994, 1993 and 1992, respectively.
(7) Inventory turnover is calculated by dividing cost of goods sold for the
period by the average inventory balance, which is computed by adding beginning
and ending inventory balances and dividing such sum by two.
(8) Excluding the loss on disposal of assets and the extraordinary loss, return
on average assets would have been 7.34%, 5.98%, 4.44% and 4.94% for fiscal 1995,
1994, 1993 and 1992, respectively.
(9) Excluding the loss on disposal of assets, the extraordinary loss and
preferred stock dividends, return on average common shareholders' equity would
have been 27.79%, 26.86%, 21.22% and 26.92% for fiscal 1995, 1994, 1993 and
1992, respectively.
(10) For purposes of calculating this ratio, debt includes capital lease
obligations and current maturities.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Super Rite Acquisition has been accounted for as a pooling of interests,
which requires that the historical consolidated financial statements of Richfood
and Super Rite as of and for the periods ended prior to the effective time of
the merger be combined as if the merger had occurred as of the beginning of the
earliest period presented. Accordingly, the consolidated financial statements
discussed and analyzed below reflect the combined operations of Richfood and
Super Rite.
The Company's fiscal year is a 52-53 week period ending on the Saturday nearest
April 30th. References herein to a particular fiscal year of the Company shall
mean: for fiscal 1996 year to date, the 36 week period ended January 6, 1996;
for fiscal 1995, the 52 week period ended April 29, 1995; for fiscal 1994, the
52 week period ended April 30, 1994; and for fiscal 1993, the 52 week period
ended May 1, 1993. Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the Company's
consolidated financial statements and the notes thereto included elsewhere in
this Prospectus. See "Prospectus Summary -- Recent Acquisition."
RESULTS OF OPERATIONS
The following table presents the major components of the Company's Consolidated
Statements of Earnings as a percentage of sales:
<TABLE>
<CAPTION>
36 WEEKS ENDED FISCAL YEAR ENDED
JANUARY JANUARY APRIL APRIL
6, 7, 29, 30, MAY 1,
1996 1995 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Sales 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of goods sold 90.16 90.00 90.05 90.16 89.95
Gross margin 9.84 10.00 9.95 9.84 10.05
Operating and administrative expenses 7.13 7.22 7.22 7.34 8.10
Operating profit 2.71 2.78 2.73 2.50 1.95
Merger and integration costs 0.53 -- -- -- --
Loss on disposal of assets -- -- -- 0.52 0.39
Interest expense 0.44 0.63 0.61 0.69 0.75
Interest income (0.10) (0.10) (0.11) (0.13) (0.15)
Earnings before income taxes and extraordinary losses 1.84 2.25 2.23 1.42 0.96
Income taxes 0.78 0.93 0.92 0.58 0.36
Earnings before extraordinary losses 1.06 1.32 1.31 0.84 0.60
Extraordinary losses, net of tax 0.05 -- -- -- 0.21
Net earnings 1.01% 1.32% 1.31% 0.84% 0.39%
</TABLE>
COMPARISON OF THIRTY-SIX WEEKS ENDED JANUARY 6, 1996, WITH THIRTY-SIX WEEKS
ENDED JANUARY 7, 1995
Sales for the thirty-six week period ended January 6, 1996, of $2.25 billion
consisted of $2.14 billion of wholesale grocery sales, including intersegment
sales of $101.8 million, and $211.0 million of retail grocery sales. Wholesale
grocery sales of $2.14 billion increased $146.8 million, or 7.4%, over sales of
$2.00 billion for the same period last fiscal year. Excluding the three
additional weeks in the fiscal 1995 year to date period for Super Rite,
wholesale grocery sales would have increased $221.7 million, or 11.5%. This
increase in wholesale grocery sales was primarily attributable to: thirty-six
weeks of Rotelle sales in the fiscal 1996 year to date period, as compared to
twenty weeks of Rotelle sales included in the fiscal 1995 year to date period;
sales to new customers served as a result of the Company's acquisition of the
wholesale division of Camellia Food Stores, Inc. ("Camellia"); sales to new
customers of Super Rite; and sales to customers who expanded their retail
operations.
Retail grocery sales of $211.0 million decreased $9.9 million, or 4.5%, from
sales of $220.8 million for the same period last fiscal year. Excluding the
three additional weeks in the fiscal 1995 year to date period for Super Rite,
retail grocery sales would have increased $7.2 million, or 3.5%. This increase
in retail grocery sales was primarily attributable to the effect of increased
12
<PAGE>
sales from five METRO stores opened between March 1994 and September 1995, which
was partially offset by the loss of sales from the closing of two BASICS stores
in the fourth quarter of fiscal 1995.
Gross margin was 9.84% for the thirty-six week period ended January 6, 1996,
compared to 10.00% for the same period last fiscal year. The decrease in gross
margin is primarily the result of increased sales by Super Rite in lower-margin
dry grocery product lines.
Operating and administrative expenses for the thirty-six week period ended
January 6, 1996, were $160.4 million, or 7.13% of sales, compared to $150.8
million, or 7.22% of sales, for the same period last fiscal year. The decrease
in operating and administrative expenses as a percent of sales was primarily due
to the Company's continued focus on operating efficiency and cost control and
its commitment to realizing the synergies available from the Super Rite
Acquisition.
The Company's operating results for the thirty-six week period ended January 6,
1996, include a one-time charge for merger and integration costs of $12.0
million, or $7.8 million on an after-tax basis, in connection with the Super
Rite Acquisition. This charge relates primarily to transaction costs associated
with the Super Rite Acquisition, severance costs and costs related to the
conversion of certain BASICS locations to the METRO store format.
Interest expense for the thirty-six week period ended January 6, 1996, was $9.9
million, compared to interest expense of $13.1 million for the same period last
fiscal year. The decrease for the 1996 year to date period is primarily due to
lower average borrowings under revolving credit facilities, the early
extinguishment of $9.7 million of Super Rite Notes and the repayment of
borrowings under a $25.0 million Super Rite term loan facility.
Interest income for the thirty-six week period ended January 6, 1996, was $2.3
million, as compared to interest income of $2.1 million for the same period last
fiscal year.
The Company's effective income tax rate was 42.6% for the thirty-six week period
ended January 6, 1996, compared to 41.4% for the same period last fiscal year.
The higher effective tax rate for the fiscal 1996 period is attributable to
certain non-deductible merger and integration costs associated with the Super
Rite Acquisition.
The extraordinary loss, net of tax, of $1.0 million for the thirty-six week
period ended January 6, 1996, primarily related to the repurchase, at market
prices above par, of approximately $9.7 million principal amount of Super Rite
Notes and is comprised of (i) the amount paid in excess of their par value and
(ii) the write-off of related deferred financing costs. The Company expects to
continue to repurchase Super Rite Notes, from time to time, when market prices
therefor are economically beneficial in relation to the Company's cost of funds.
In addition, the Company expects to call the Super Rite Notes for redemption on
April 1, 1997, the first permitted redemption date, at their redemption price of
105.31% of par.
Net earnings for the thirty-six week period ended January 6, 1996, were $22.8
million, or $0.73 per share. Excluding the effects of the one-time charge
related to the Super Rite Acquisition and the extraordinary loss related to
early extinguishment of debt, net earnings for the thirty-six week period ended
January 6, 1996, were $31.6 million, or $1.01 per share, representing a 14.5%
increase over net earnings of $27.6 million, or $0.89 per share, for the same
period last fiscal year.
COMPARISON OF FISCAL 1995 WITH FISCAL 1994
Fiscal 1995 results of operations include the effects of two strategic
acquisitions completed by the Company during the fiscal year: on August 23,
1994, the Company acquired all of the outstanding common stock of Rotelle, a
wholesale frozen food distributor located in West Point, Pennsylvania; and on
April 3, 1995, the Company acquired certain assets and assumed certain contracts
of Camellia, a retail and wholesale food distributor located in Norfolk,
Virginia. Each of these acquisitions was accounted for under the purchase method
of accounting and, accordingly, the results of operations of the acquired
businesses have been included in the Company's results from the respective dates
that the acquisitions were completed.
Sales for fiscal 1995 of $2.99 billion consisted of $2.86 billion of wholesale
grocery sales, including intersegment sales of $169.4 million, and $304.7
million of retail grocery sales. Wholesale grocery sales of $2.86 billion for
fiscal 1995 increased $397.5 million, or 16.2%, over sales of $2.46 billion for
fiscal 1994. This increase in wholesale grocery sales for fiscal 1995 was
primarily attributable to sales of $235.2 million recorded by Rotelle after its
acquisition by the Company, the growth of existing customers' retail operations
and the additional fifty-third week of Super Rite wholesale grocery sales in the
fiscal 1995 operating results. Retail grocery sales of $304.7 million for fiscal
1995 increased $44.0 million, or 16.9%, over sales of $260.7 million for fiscal
1994. This increase in retail grocery sales for fiscal 1995 was primarily due to
sales of three new METRO superstores opened during the fiscal year, sales gains
in comparable METRO stores and the additional fifty-third week of retail grocery
sales in the fiscal 1995 operating results. Excluding the effect of the
additional week of retail grocery sales in fiscal 1995 for Super Rite, same
store sales increased 7.0%.
13
<PAGE>
Gross margin increased to 9.95% of sales for fiscal 1995, compared to 9.84% of
sales for fiscal 1994. The increase in gross margin in fiscal 1995 was primarily
attributable to Rotelle's higher margin frozen food sales and increased gross
margin in the METRO stores. These increases were offset in part as a result of a
greater percentage of Super Rite sales being in lower-margin dry grocery product
lines in fiscal 1995 as compared to fiscal 1994.
Operating and administrative expenses were 7.22% of sales in fiscal 1995,
compared to 7.34% of sales in fiscal 1994. Lower operating and administrative
expenses as a percent of sales in fiscal 1995 as compared to fiscal 1994
reflects the incremental leveraging of fixed expenses in the Company's wholesale
operations through increased sales, offset in part by the higher operating
expense ratio for Rotelle's frozen food wholesale operation and expenses
incurred in the transition of the Camellia sales volume to the Company's
Mechanicsville, Virginia distribution center.
During fiscal 1994, the Company recognized a loss on the disposal of assets of
$13.1 million, which included an additional reserve of $7.0 million related to
the write down of the assets of five closed retail grocery stores located in the
Washington, D.C. area to their estimated net realizable values. This additional
reserve of $7.0 million increased the fiscal 1993 reserve of $9.2 million
related to these stores. Also included in the loss on the disposal of assets in
fiscal 1994 is $6.1 million related to the write down of the assets of three
retail grocery stores located in Raleigh, North Carolina, to their estimated net
realizable values. The assets related to these eight stores were sold during
fiscal 1995.
Interest expense increased $0.8 million in fiscal 1995 over fiscal 1994, due to
increasing average interest rates under the Company's variable rate borrowing
facilities and additional borrowings made by the Company, primarily to finance
the Company's acquisition of Rotelle in fiscal 1995.
Interest income was $3.3 million in fiscal 1995, versus $3.2 million in fiscal
1994. Average notes receivable (relating primarily to secured loans to the
Company's retail customers) were $37.3 million and $43.7 million for fiscal 1995
and 1994, respectively. The Company's effective interest rate earned on its
portfolio of loans to retailers, most of which bear interest at a variable rate
equal to the prime lending rate plus 2%, increased during fiscal 1995, primarily
due to increases in the prime lending rate.
The Company's effective income tax rate was 41.2% for fiscal 1995 compared to
40.7% for fiscal 1994. The increase was primarily attributable to higher
nondeductible amortization expenses in fiscal 1995.
COMPARISON OF FISCAL 1994 WITH FISCAL 1993
Sales for fiscal 1994 of $2.55 billion consisted of $2.46 billion in wholesale
grocery sales, including intersegment sales of $174.9 million, and $260.7
million in retail grocery sales. Wholesale grocery sales of $2.46 billion for
fiscal 1994 increased $243.6 million, or 11.0%, over sales of $2.22 billion for
fiscal 1993. This increase in wholesale grocery sales for fiscal 1994 was
primarily attributable to the first full year of sales volume associated with
the Company's acquisition of the Civilian Wholesale Division of B. Green & Co.,
Inc. (the "Civilian Division") in January 1993, and the growth of existing
customers' retail operations. Sales to former customers of the Civilian Division
were $207.7 million in fiscal 1994, compared to $67.0 million in fiscal 1993.
Retail grocery sales of $260.7 million for fiscal 1994 decreased $48.5 million,
or 15.7%, from sales of $309.2 million for fiscal 1993. This decrease in retail
grocery sales for fiscal 1994 was primarily due to the exclusion of sales from
seven Washington, D.C. area retail grocery stores. Two of these stores were
closed during the fourth quarter of fiscal 1994, and the remaining five were
sold in fiscal 1995. During this period, the Company began focusing its retail
efforts on expanding its presence in the metropolitan Baltimore market.
Gross margin was 9.84% of sales for fiscal 1994 compared to 10.05% of sales for
fiscal 1993. This decrease in gross margin is primarily attributable to the
exclusion from operating results in fiscal 1994 of the higher gross margin sales
associated with the Washington, D.C. area retail grocery stores.
Operating and administrative expenses decreased to 7.34% of sales in fiscal 1994
from 8.10% of sales in fiscal 1993, primarily due to the leveraging of fixed
expenses in the Company's wholesale operations through increased sales, the
exclusion of operating and administrative expenses associated with the
Washington, D.C. area retail grocery stores and a one-time payment in fiscal
1993 to B. Green & Co., Inc. of $3.0 million for interim warehouse services and
certain other acquisition costs incurred in the acquisition of the Civilian
Division in fiscal 1993. These decreases in operating and administrative
expenses in fiscal 1994 were offset in part by the inclusion in fiscal 1994 of a
full year of amortization expense related to the supply agreements and
noncompetition agreements purchased in connection with the acquisition of the
Civilian Division.
During fiscal 1994, the Company recognized a loss on the disposal of assets of
$13.1 million related to the write down of the assets of eight retail grocery
stores to their estimated net realizable values. The assets related to these
eight stores were sold during fiscal 1995.
14
<PAGE>
Interest income decreased to $3.2 million in fiscal 1994 from $3.7 million in
fiscal 1993. The Company's effective interest rate earned on its retailer loans
declined in fiscal 1994 from fiscal 1993 due to the suspension of interest
payable on certain retailer loans in the first half of fiscal 1994.
The Company's effective income tax rate for fiscal 1994 was 40.7% compared to
37.1% for fiscal 1993. The increase was primarily attributable to higher
nondeductible amortization expenses and an increase in the statutory federal
income tax rate for corporations from 34% to 35% that became effective January
1, 1993, and an increase in fiscal 1994 taxable income in states with higher
income tax rates.
The extraordinary loss, net of tax, of $5.0 million for fiscal 1993 related
primarily to the early redemption of the then-outstanding Super Rite Foods, Inc.
13 1/4% Notes and the related write-off of deferred financing costs.
Preferred stock dividends in fiscal 1993 were $8.8 million, reflecting the early
redemption of two classes of preferred stock of Super Rite. The $8.8 million
consisted primarily of a charge of $7.8 million reflecting the excess of the
redemption price over the book value of the preferred stock.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $4.1 million at January 6, 1996, compared to
$29.4 million at April 29, 1995, and $21.1 million at April 30, 1994.
NET CASH PROVIDED BY OPERATING ACTIVITIES
The Company's operations continue to generate significant cash to support the
Company's growth. Net cash provided by operating activities for the thirty-six
week period ended January 6, 1996, was $51.7 million. This amount included: net
earnings of $22.8 million; adjustments to conform the fiscal year end of the
pooled company, including net earnings of $2.5 million and non-cash components
of $2.0 million; depreciation and amortization of $20.4 million; and the effects
of seasonal changes in operating assets and liabilities, including inventory and
accounts payable. The adjustments to conform the fiscal year end of the pooled
company consist of Super Rite's net earnings for the eight week period between
March 4, 1995, its former fiscal year end, and Richfood's April 29, 1995, fiscal
year end, and certain non-cash components, primarily depreciation and
amortization, for the same period.
Net cash provided by operating activities was $100.4 million and $63.0 million
for fiscal 1995 and 1994, respectively. These amounts included net earnings of
$39.2 million in fiscal 1995 and $21.4 million in fiscal 1994, and depreciation
and amortization of $23.9 million in fiscal 1995 and $22.4 million in fiscal
1994.
Working capital was $46.9 million at January 6, 1996, $72.8 million at April 29,
1995, and $84.9 million at April 30, 1994. The decrease in working capital from
April 29, 1995, to January 6, 1996, related primarily to a reduction in cash and
cash equivalents that were utilized during the third quarter of fiscal 1996 to
reduce long-term debt. The decrease in working capital from April 30, 1994, to
April 29, 1995, was primarily due to the Company's continued focus on efficient
inventory and accounts payable management.
The Company's working capital needs are financed primarily through cash provided
by operations. The Company also utilizes, on a short-term basis, two unsecured
$20.0 million revolving lines of credit. One of the revolving lines of credit
may be increased to $40.0 million at the option of the Company. Amounts drawn
under these lines of credit are typically repaid within a few business days. The
revolving lines of credit expire in fiscal 1998. There were no borrowings
outstanding under the facilities at January 6, 1996.
NET CASH USED FOR INVESTING ACTIVITIES
Net cash used for investing activities was $13.3 million for the thirty-six week
period ended January 6, 1996, $77.7 million for fiscal 1995 and $20.4 million
for fiscal 1994. The increase from fiscal 1994 to fiscal 1995 in net cash used
for investing activities was primarily attributable to the Company's purchase of
Rotelle for $50.7 million in fiscal 1995.
Capital expenditures were $9.5 million for the thirty-six week period ended
January 6, 1996, $20.0 million for fiscal 1995, and $20.7 million for fiscal
1994. Capital expenditures for all periods included capital employed for the
addition of new METRO "superstores" and the conversion of existing BASICS stores
to the METRO format. In addition, capital expenditures for such periods also
included the purchase of warehouse racking and material handling equipment at
the Company's distribution centers and improvements to the dairy. Fiscal 1994
capital expenditures also included $4.5 million to construct a 67,000 square
foot
15
<PAGE>
freezer expansion at the Mechanicsville, Virginia distribution center. The
Company anticipates that fiscal 1997 capital expenditures will be approximately
$10.0 million for its wholesale operations and approximately $11.0 million for
its retail operations. Budgeted capital expenditures for the wholesale
operations include certain material handling equipment, improvements at the
distribution centers and dairy plant and further investments in technology.
Budgeted capital expenditures for the Retail Grocery Division include the
addition of three new METRO stores in the Baltimore, Maryland market and the
conversion of certain BASICS stores to the METRO format.
The Company remains committed to providing secured financing to support the
growth of its retail customers. Loans issued to retailers were $9.0 million for
the thirty-six week period ended January 6, 1996, $15.9 million for fiscal 1995
and $16.8 million for fiscal 1994. Collections on loans were $9.0 million for
the thirty-six week period ended January 6, 1996, $12.4 million for fiscal 1995
and $16.8 million for fiscal 1994.
The Company financed its $50.7 million acquisition of Rotelle during fiscal 1995
with borrowings under a $35.0 million revolving credit facility with a
commercial bank, together with internally generated funds and borrowings under
an existing revolving credit facility. The $35.0 million revolving credit
facility was repaid in full in fiscal 1995.
NET CASH USED FOR FINANCING ACTIVITIES
Net cash used for financing activities was $63.6 million for the thirty-six week
period ended January 6, 1996, $14.4 million for fiscal 1995 and $27.9 million
for fiscal 1994.
During the thirty-six week period ended January 6, 1996, the Company made $62.0
million of net repayments on long-term debt and revolving credit facilities. The
$62.0 million of net repayments primarily related to the repayment of
outstanding borrowings under a $25.0 million revolving credit facility, a $25.0
million term loan facility and the early extinguishment of $9.7 million of Super
Rite Notes. Fiscal 1995 net repayments of long-term debt and revolving credit
facilities consisted primarily of the complete payoff of the $35.0 million
revolving credit facility.
During fiscal 1994, the Company issued $45.0 million of its 6.15% Senior Notes
due July 1, 2000 (the "Senior Notes"), the net proceeds of which were used to
repay in full the $40.0 million bridge loan facility incurred to finance the
acquisition of the Civilian Division and for general corporate purposes. The
Senior Notes require semi-annual interest payments and, commencing on July 1,
1996, five annual sinking fund payments of $9.0 million of principal plus
accrued interest.
The Company's long-term debt, including capital leases and current maturities,
was $116.5 million at January 6, 1996, compared to $178.5 million at April 29,
1995. The ratio of long-term debt, including capital leases and current
maturities, to equity was 0.63 to 1 at January 6, 1996, and 1.11 to 1 at April
29, 1995.
The Company increased the cash dividend on the Common Stock to $0.10 per share
in fiscal 1995 from $0.08 per share in fiscal 1994 and $0.07 per share in fiscal
1993. Cash dividends paid were $2.0 million in fiscal 1995, $1.6 million in
fiscal 1994 and $1.4 million in fiscal 1993. Shareholders' equity increased to
$160.3 million at April 29, 1995, up from $121.9 million at April 30, 1994.
Since January 6, 1996, the Company has repurchased, at market prices above par,
an additional $17.5 million principal amount of Super Rite Notes, and expects to
record an extraordinary loss, net of tax, of approximately $1.1 million during
the fourth quarter of fiscal 1996 related to such repurchases.
The Company believes that it has the ability to continue to generate adequate
funds from its operations and through borrowings under its long-term debt
facilities to maintain its competitive position and expand its business.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 114, "Accounting by
Creditors for Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan -- Income Recognition and Disclosures" must be adopted
by the Company no later than the fiscal year ending April 27, 1996. SFAS No.
121, "Accounting for Impairment of Long-lived Assets and for Long-lived Assets
to be Disposed of," and SFAS No. 123, "Accounting for Stock-Based Compensation,"
must be adopted by the Company no later than the fiscal year ending May 3, 1997.
The adoption of these accounting standards is not expected to have a material
impact on the Company's financial position or results of operations.
16
<PAGE>
BUSINESS
The Company is the leading wholesale food distributor in its Mid-Atlantic
operating region and the fourth largest wholesale food distributor in the United
States. Richfood supplies a comprehensive selection of national brand and
private label grocery products, dairy products, frozen foods, fresh produce
items, meats, delicatessen and bakery products and non-food items from its three
modern, highly efficient distribution centers. The Company's distribution
centers are strategically located within its operating region and have capacity
to accommodate additional growth. The Company services more than 1,700 retail
grocery stores, including leading regional chains and smaller independent
retailers throughout the Mid-Atlantic region, offering its customers a
dependable supply and prompt delivery of over 32,000 grocery and non-grocery
items at competitive prices.
The Company's wholesale operations consist of: (i) Richfood, Inc., founded in
1935, a full service grocery wholesaler based in Richmond, Virginia, which
operates a 1.3 million square foot distribution center that is one of the
largest and most efficient in the industry; (ii) Super Rite, a full service
wholesale food distributor based in Harrisburg, Pennsylvania, which operates
over 800,000 square feet of warehouse space, including a 635,000 square foot
highly efficient, automated distribution center; and (iii) Rotelle, based in
West Point, Pennsylvania, one of the largest frozen food distributors in the
United States, which operates a 6.3 million cubic foot automated frozen food
distribution center. The Company's wholesale operations also include the
Richfood Dairy, located in Richmond, which is the largest fluid dairy in
Virginia and consists of a 65,000 square foot facility capable of processing and
packaging over 500,000 gallons per week of milk and other dairy products, fruit
juices, bottled water and related items.
The Company's Retail Grocery Division operates eleven 45,000 to 60,000 square
foot "superstores" under the METRO tradename, and six smaller traditional
supermarkets under the BASICS tradename, in the metropolitan Baltimore, Maryland
and Dover, Delaware markets. The Company's Retail Grocery Division was acquired
in connection with the Super Rite Acquisition, and accounted for 10.2% of the
Company's sales for fiscal 1995.
BUSINESS STRATEGY
Since joining Richfood in 1990, the current management team has implemented a
business strategy focused on reducing and controlling costs, increasing
efficiency and pursuing profitable growth. The success of this strategy has been
reflected in the growth of the Company's sales from $2.19 billion for fiscal
1992 to $2.99 billion for fiscal 1995, an 11.0% compound annual growth rate, and
in the Company's operating profit, which has grown from $47.6 million to $81.6
million over the same period, a 19.7% compound annual growth rate. The key
elements of the Company's strategy include:
REDUCING AND CONTROLLING COSTS; INCREASING EFFICIENCY IN LOGISTICS AND
DISTRIBUTION
Management believes that, as a result of its strategic focus on cost control,
logistics and distribution, the Company is now one of the most efficient
wholesale food distributors in the United States. Over the past five fiscal
years, the Company has reduced and controlled costs by (i) capitalizing on its
size to improve its purchasing power, (ii) rationalizing product purchasing and
pricing systems, (iii) implementing a pricing system that encourages efficient
use of the Company's services and (iv) instituting productivity-based warehouse
management incentives. Over the same period, the Company has significantly
improved the efficiency of its logistics and distribution functions by, among
other things, implementing state-of-the-art computer systems related to
purchasing, inventory management and fleet loading and routing. These
improvements have permitted the Company to drive substantially increased volume
through its distribution system and to increase capacity utilization
significantly, thereby benefitting from its operating leverage. As a result of
the cost savings and efficiencies realized by the Company under its current
management team, from fiscal 1992 to fiscal 1995 the Company's operating profit
as a percent of sales has increased from 2.2% to 2.7%, annual inventory turnover
has improved from 16.3x to 18.8x and working capital funding requirements have
been reduced substantially.
INCREASING SALES
The Company's purchasing power, low cost structure and efficient service levels
permit Richfood to offer lower prices and better service to support the
competitive position of its retail customers, while increasing customer
penetration, attracting new customers within its operating region and supporting
customers in their efforts to open new retail sites served by Richfood. Since
1990, customer penetration, the percentage of customers' sales supplied by
Richfood, has increased from approximately 50% to over 60% for customers
supplied by Richfood's Mechanicsville, Virginia distribution center. Although
there can be no assurance as to future results, management believes that
opportunities exist to increase significantly Super Rite's customer penetration
rate, which is now approximately 50%, as Super Rite previously offered its
customers a limited selection of certain higher-margin
17
<PAGE>
perishable products. See " -- Pursuing Strategic Acquisitions." The Company has
also successfully attracted new customers and has benefitted from growth by the
leading regional chains and smaller independent retail grocers that it serves.
The Company believes that its success depends upon the success of its retail
customers. Accordingly, Richfood supports its existing customers, and pursues
its goal of increasing customer penetration and attracting new customers, by (i)
using the Company's purchasing power, low cost structure and efficient
distribution system to provide products to its customers at the lowest available
prices, (ii) assisting its retail customers in adapting to changes in consumer
preferences and to competition in the marketplace and (iii) offering its retail
customers a wide variety of retail support services typical of those offered by
large retail chains to their individual stores. As a result of these
initiatives, Richfood is able to provide its retail customers with the
competitive advantages associated with large purchasing power and extensive
retail services similar to those of large supermarket chains, while each
customer retains its regional focus and flexibility to respond to local
demographics and market conditions.
PURSUING STRATEGIC ACQUISITIONS
Consolidation trends in the food distribution industry present opportunities for
strategic acquisitions by the Company. The Company pursues strategic targets
that are well run, established wholesale operations, with modern facilities and
capacity to accommodate anticipated growth, and that complement the Company's
existing operations and geographic service area. Since 1990, the Company has
completed five acquisitions, which have more than doubled its sales, added
large, modern distribution centers in Harrisburg and West Point, Pennsylvania,
and enhanced its presence in various regional markets.
The Company began a series of strategic acquisitions in fiscal 1991 with the
purchase of the Waynesboro, Virginia division of Fleming Foods of Virginia,
Inc., which increased the Company's presence in the western portion of its
operating region. On January 22, 1993, the Company acquired certain assets and
assumed certain contracts of the Civilian Division of B. Green & Company, Inc.,
a wholesale and retail grocery distributor headquartered in Baltimore, Maryland.
The acquisition of the Civilian Division increased significantly the Company's
presence in the Baltimore/Washington, D.C. market, while permitting the Company
to achieve greater efficiency and productivity from its existing warehousing and
delivery operations. On August 23, 1994, the Company acquired all of the
outstanding common shares of Rotelle, one of the largest wholesale frozen food
distributors in the United States. Rotelle, through its state-of-the-art
distribution center, distributes frozen food, ice cream and frozen bakery
products to its customers. In addition, Rotelle operates a USDA-inspected meat
cutting facility and an ice manufacturing facility. On April 3, 1995, the
Company acquired certain assets and assumed certain contracts of the wholesale
division of Camellia, a retail and wholesale food distributor located in
Norfolk, Virginia. As a result of that acquisition, the Company serves as
wholesale supplier to Camellia's 46 retail stores, and most of the 120
independent retail stores previously served by Camellia's wholesale division.
The Camellia acquisition also has permitted the Company to achieve additional
efficiencies and economies of scale in its business.
Effective October 15, 1995, the Company completed the Super Rite Acquisition.
Super Rite, with fiscal 1995 sales of $1.47 billion, is a full service wholesale
food distributor supplying more than 240 retail supermarkets in Pennsylvania,
New Jersey, Maryland, Delaware, Virginia and West Virginia. Super Rite also
operates the Company's Retail Grocery Division, consisting of eleven 45,000 to
60,000 square foot "superstores" in the Baltimore, Maryland and Dover, Delaware
markets operating under the METRO tradename, and six smaller traditional
supermarkets in metropolitan Baltimore, Maryland, operating under the BASICS
tradename. Super Rite operates as a separate, wholly-owned subsidiary of the
Company. The Company issued 9,770,188 shares of Common Stock in the Super Rite
Acquisition, resulting in former Super Rite shareholders holding approximately
31% of the outstanding shares of Common Stock. The shares of Common Stock held
by the Selling Shareholders and offered hereby were received by such persons in
the Super Rite Acquisition. The Super Rite Acquisition has been accounted for as
a pooling of interests.
Super Rite operates over 800,000 square feet of warehouse space, including a
635,000 square foot highly efficient, automated distribution center in
Harrisburg, Pennsylvania. Super Rite's distribution system complements the
Company's existing operations, and its service area is geographically contiguous
with the northern portion of the area served by Richfood's Mechanicsville,
Virginia distribution center. As a result of the Super Rite Acquisition, the
Company anticipates that it will achieve significant cost savings, operating
efficiencies and growth opportunities resulting from: (i) combining the
purchasing volume of both companies, thereby increasing purchasing power; (ii)
centralizing and eliminating certain duplicative corporate and administrative
functions; (iii) selling certain higher-margin products line to Super Rite
customers that are offered by Richfood but that were previously offered on a
limited basis by Super Rite, such as frozen foods, fresh produce, meats and
delicatessen and dairy products; (iv) consolidating distribution networks to
achieve logistical efficiencies and higher capacity utilization; and (v)
realizing interest expense savings by refinancing certain Super Rite
indebtedness at the lower rates available to the combined Company.
18
<PAGE>
The Company's substantial growth since 1990 is largely attributable to
acquisitions, particularly the acquisition of Super Rite in fiscal 1996. While
the Company believes that additional acquisition opportunities consistent with
its strategic criteria may arise from time to time, no assurance can be given
that the Company will consummate additional strategic acquisitions.
WHOLESALE OPERATIONS
CUSTOMER BASE; PRINCIPAL MARKETS
The Company services more than 1,700 retail grocery stores, including leading
regional chains and smaller independent retailers, in Virginia, Maryland,
Pennsylvania, Delaware, West Virginia, North Carolina, Washington, D.C., New
Jersey and New York. The Company's regional chain customers are high quality,
growth-oriented operations, and include: Giant Food Stores, Inc. based in
Carlisle, Pennsylvania ("Giant of Carlisle"); Farm Fresh, Inc. based in Norfolk,
Virginia ("Farm Fresh of Virginia"); Shoppers Food Warehouse Corp. ("Shoppers");
Ukrop's Super Markets, Inc. ("Ukrop's"); Acme Markets, Inc. ("Acme"); Genuardi's
Super Markets, Inc.; Redner's Markets, Inc.; Camellia Food Stores, Inc.; and the
Company's own METRO/BASICS stores. Customer store sizes range from 4,500 square
feet to 60,000 square feet.
Richfood, Inc. and Super Rite are the principal sources of wholesale supply for
most of their customers, while Rotelle is the principal source of frozen food
supply for most of its customers. Since 1990, customer penetration has increased
from approximately 50% to over 60% for customers of Richfood, Inc.'s
Mechanicsville, Virginia distribution center. Although there can be no assurance
as to future results, management believes that opportunities exist to increase
significantly Super Rite's customer penetration rate, which is now approximately
50%. Super Rite previously offered its customers a limited selection of certain
higher-margins perishable products, such as frozen foods, fresh produce, meats
and delicatessen and dairy products, that are offered by Richfood.
As reflected in the following table, the Company's five largest customers
accounted for approximately 50% of its sales in fiscal 1995:
<TABLE>
<CAPTION>
SALES
TO CUSTOMERS
FISCAL 1995
CUSTOMER (IN MILLIONS)
<S> <C>
Giant of Carlisle $ 452.7
Farm Fresh of Virginia 395.3
Shoppers 291.9
Ukrop's 197.7
Acme 152.0
</TABLE>
The Company has enjoyed long-term supply relationships with most of its
principal customers: Ukrop's has been a Richfood customer for over 48 years;
Farm Fresh of Virginia has been a Richfood customer for over 24 years; Acme has
been a Rotelle customer for over 20 years; Giant of Carlisle has been a Super
Rite customer for 16 years; and Shoppers has been a Super Rite customer for five
years.
Richfood is a party to multi-year supply agreements with most of its larger
customers that secure the Company's position as principal supplier to all stores
owned by such customers. Such supply agreements generally include minimum
purchase requirements by dollar amount and category of goods and may be subject
to adjustment as the customer acquires or disposes of stores. The Company's
supply agreements with Giant of Carlisle, Farm Fresh of Virginia, Shoppers and
Acme expire in December 1999, December 2001, July 1996 and July 1997,
respectively. While the Company has no reason to believe that its supply
agreement with Shoppers will not be extended, the loss of such customer could
have a material adverse effect on the Company's business. Overall, sales to
customers covered by supply agreements accounted for approximately 71% of fiscal
1995 wholesale division sales, including intersegment sales.
Management believes that the loss of one of the Company's larger customers could
have a material adverse effect on its business. However, management believes
that the Company's purchasing power, low cost structure and efficient service
levels, coupled with its commitment to the success of its retail customers,
should enable the Company to operate profitably in the event of the loss of a
large customer.
PRODUCTS AND PURCHASING
The Company supplies a comprehensive selection of national brand and private
label grocery products, dairy products, frozen foods, fresh produce items,
meats, delicatessen and bakery products and non-food items from its three
modern, highly-efficient
19
<PAGE>
distribution centers. The Company offers its customers a dependable supply and
prompt delivery of over 32,000 grocery and non-grocery items at competitive
prices. The Company's business strategy includes assisting its retail customers
in adapting to changes in consumer preferences and in the marketplace so they
remain competitive. Accordingly, the Company continually changes and enhances
its product offerings to meet changing consumer demands.
The Company supplies more than 30,000 national brand products, which accounted
for approximately 90% of the Company's total wholesale grocery sales in fiscal
1995. The Company also offers private label products to its customers. Private
label products allow retail customers to carry single labels on a store-wide
basis similar to chain stores, while providing consumers a lower-priced
alternative to national brands. The Company currently offers 1,286 products
under the "RICHFOOD" label, 186 products under the budget-priced "ECON" label,
112 products under the "IGA" label and 240 products under the "FROSTY ACRES"
label. The Company also coordinates private labels for certain regional
supermarket chains in the Mid-Atlantic region. In fiscal 1995, private label
products, including private label products packaged for certain customers,
accounted for approximately 10% of the Company's total wholesale grocery sales.
The Company is currently introducing its private label products to customers of
Super Rite, which historically did not have an extensive private label program.
The Company purchases products for resale from over 1,500 vendors in the United
States and overseas, and is not substantially dependent on any single source of
supply. The Company believes that its size enables it to purchase products at
the lowest available manufacturers' prices. The Company monitors manufacturers'
prices and uses its purchasing power to secure products at the best terms
available. In addition, because the Company maintains purchasing departments
associated with each of its three distribution centers, Richfood is able to take
advantage of regional buying opportunities. The Company purchases long-term
quantities of inventory items when manufacturers' prices are advantageous
("forward-buys"). In particular, the Company purchases sufficient quantities of
certain staple items when offered at a discount and if justified after giving
effect to carrying costs.
PRODUCT PRICING
The Company sells products to its customers at landed vendor invoice cost. The
customer is also charged a service fee and a delivery fee based upon the
characteristics of the order. The fee structure includes incentives to encourage
customers to increase their purchases from the Company and to order and accept
merchandise for delivery more efficiently, thereby increasing the Company's
efficiency. Such incentives include minimum delivery fees that encourage
economic order quantities and lower fees for off-peak deliveries. Over the past
several years, the Company's pricing system, together with increased
efficiencies in purchasing operations, have resulted in more
competitively-priced merchandise and have placed the Company and its retail
customers in a stronger market position.
LOGISTICS AND DISTRIBUTION
The Company is highly focused on reducing and controlling costs and on improving
efficiency in the logistics and distribution areas of its business. Over the
past five fiscal years, the Company's current management team has implemented
improvements in the logistics and distribution areas of its business that have
permitted Richfood to drive substantially increased volume through its
distribution system and to increase capacity utilization, thereby benefitting
from its operating leverage. These improvements have included: (i) implementing
state-of-the-art computer systems related to purchasing, inventory management
and fleet loading and routing; (ii) instituting a pricing system that encourages
customers to utilize the Company's services efficiently; and (iii) introducing
warehouse management practices that reward workers for enhanced productivity.
Management believes that, as a result of its strategic focus on cost control,
logistics and distribution, the Company is now one of the most efficient
wholesale food distributors in the United States.
The Company distributes its products out of its three main distribution centers:
Richfood, Inc.'s 1.3 million square foot Mechanicsville, Virginia distribution
center; Super Rite's 635,000 square foot automated distribution facility in
Harrisburg, Pennsylvania; and Rotelle's 6.3 million cubic foot frozen food
distribution facility in West Point, Pennsylvania. The Company's customers are
generally located within 200 miles of one of the Company's distribution centers.
Products are delivered to the Company's distribution centers by manufacturers,
common carriers and the Company's own fleet of trucks on return to its
distribution centers from deliveries to customers ("back-hauls"). The Company
employs a management information system that enables it to lower its inbound
transportation costs by making optimum use of its own fleet for back-haul
opportunities. In addition, "drop shipments" are sent directly to retailers by
suppliers under programs established by the Company.
The Company produces and distributes catalogs with weekly updates indicating
manufacturers' prices and wholesale prices to customers for each of its more
than 32,000 products. In addition, the Company's sales personnel use
telemarketing to advise
20
<PAGE>
customers of periodic special prices and product offerings. Customers place
orders through direct computer links to the Company. Customers' orders are then
assembled in the appropriate distribution center, shrink-wrapped to ensure order
completeness and staged according to the required delivery sequence. In fiscal
1995, the Mechanicsville, Virginia distribution center maintained an in-stock
service level of approximately 98%.
Products are delivered from the Company's distribution centers to retail
customers by the Company's drivers and contract carriers via trucks leased or
owned by the Company. In dispatching trucks for both pick-ups and deliveries,
the Company employs a computerized routing system designed to optimize delivery
efficiency and minimize drive time, wait time and excess mileage. Over the past
five fiscal years, improvements in the Company's fleet loading and routing
systems have permitted the Company to reduce the overall size of its fleet and
the cost per mile driven, even as the number of stores served has increased. The
Company currently leases 177 tractors, 205 refrigerated trailers and 335 dry
trailers, and owns 114 tractors, 131 refrigerated trailers and 124 dry trailers.
All of the Company's fleet utilizes on-board computer systems that monitor
vehicle speeds, fuel efficiency, idle time and other statistical information.
During fiscal 1995, the Mechanicsville, Virginia distribution center achieved an
on time delivery record of approximately 97%.
Customers are billed for goods sold on a weekly basis with payment generally due
the following week. The Company reviews credit histories on an individual basis
and requires customers to provide collateral to secure outstanding accounts when
appropriate.
RETAIL SUPPORT
The Company's largest customers generally find it cost efficient to perform
their own retail support services and have selected the Company as a supplier
because of its competitive prices. The Company's smaller customers, however,
generally do not have the resources to perform the retail services that large
national chains provide to their individual stores. The Company offers a wide
variety of retail support services to assist its smaller customers. Customers
decide individually which services to use and are charged a fee for such
services.
Services offered by the Company include retail development, retail sales
consulting, marketing and merchandising assistance, data processing and
customized software, and financial planning and analysis. The Company's retail
development services are focused on store planning and development, and include
advising retailers on site planning through construction, lease negotiation,
product display and promotion. This assistance also includes demographic
studies, engineering support, contracting assistance and layout strategy. Retail
sales counselors assist customers with detailed analyses of their stores'
operations, pricing, advertising, delivery schedules, inventory control and
merchandising plans, to help each customer enhance its competitive position.
Marketing services include developing marketing strategies, designing and
producing signs and flyers and coordinating print and media campaigns. The
Company provides data processing services and customized software to many of its
customers, which allows them to manage accounting functions, time-and-attendance
data and inventories. The Company also assists customers in strategic planning
and capital budgeting as well as in cash management and overall financial
planning.
The Company provides secured financing to retailers, primarily to finance store
acquisitions, construction and remodeling, generally at a variable interest rate
equal to the prime lending rate plus 2%. The Company has developed credit
criteria intended to ensure that such loans are made only with appropriate
collateral and in situations that are expected to contribute to the Company's
growth. The Company believes that its current financing arrangements provide it
with the necessary flexibility to offer financing to its customers as a tool to
expand its business. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
At January 6, 1996, the Company had an aggregate $34.0 million of secured loans
outstanding to its retail customers. The Company expects to continue to provide
secured financing to creditworthy retail customers as part of its strategy to
retain existing business and attract new business. The amount of customer
financing that may be provided by the Company in future years is not presently
determinable since such amount will depend upon, among other things, the number
of store sites that are offered for sale or available for development in the
Company's service area and the availability of alternative sources of financing.
RETAIL OPERATIONS
The Company's Retail Grocery Division was acquired in connection with the Super
Rite Acquisition, and accounted for 10.2% of the Company's sales for fiscal
1995. The Company's Retail Grocery Division operates eleven 45,000 to 60,000
square foot "superstores" under the METRO tradename, and six smaller traditional
supermarkets under the BASICS tradename, in the metropolitan Baltimore, Maryland
and Dover, Delaware markets.
21
<PAGE>
The Company believes that the METRO format offers significant opportunities for
growth. The METRO stores feature an expanded selection of higher-margin
perishables and prepared foods together with value-oriented dry groceries and
in-store banking facilities. In fiscal 1995, METRO/BASICS was the second largest
grocery retailer in the Baltimore market. The Company expects to open three new
METRO locations in the Baltimore market in fiscal 1997, and is considering
converting certain of the BASICS stores to the METRO format.
COMPETITION
The food distribution industry is highly competitive. The Company faces
competition from national, regional and local food distributors on the basis of
price, quality and assortment, frequency and reliability of deliveries and the
range and quality of services provided. In addition, the Company's customers and
its own Retail Grocery Division compete with retail supermarket chains that
provide their own distribution function, purchasing directly from producers and
distributing products to their supermarkets for sale to consumers.
The Company's principal wholesale competitors include Fleming Companies, Inc.,
SuperValu Inc., Nash Finch Company, DiGiorgio Company, Nassau-Suffolk Frozen
Food Co., Inc. and Burris Foods, Inc. Within the Company's Mid-Atlantic service
area, the primary retail grocery competitors of the Company's customers and the
Retail Grocery Division include Food Lion, Inc., Winn Dixie Stores, Inc., Giant
Food, Inc. based in Landover, Maryland, The Kroger Co. (in western Virginia),
Weis Supermarkets, Inc. and The Great Atlantic & Pacific Tea Co.
The Company believes that it can compete successfully on the wholesale level
while supporting the competitive efforts of its customers by pursuing its
business strategy focused on reducing and controlling costs, increasing
efficiency and pursuing profitable growth. In particular, the Company enhances
its competitive position by using its purchasing power, low cost structure and
efficient distribution system to provide products to its customers at the lowest
available prices, while offering its customers a wide variety of services to
support their competitive position. In addition, the Company expects to continue
to pursue opportunities for customers to acquire additional stores that become
available within and adjacent to the Company's principal service area.
PROPERTIES
The Company's three principal facilities are: Richfood, Inc.'s 1.3 million
square foot distribution center located in Mechanicsville, Virginia (the
"Mechanicsville Facility"); Super Rite's leased 635,000 square foot automated
distribution facility located in Harrisburg, Pennsylvania (the "Harrisburg
Facility"); and Rotelle's 6.3 million cubic foot highly automated frozen food
distribution facility located in West Point, Pennsylvania (the "West Point
Facility").
The Mechanicsville Facility, one of the largest single grocery distribution
centers in the country, is situated on a 400 acre site, of which only 100 acres
are currently utilized. Richfood also has a long-term lease for a 550,000 square
foot warehouse in Chester, Virginia. Richfood currently utilizes approximately
355,000 square feet of the Chester warehouse, primarily to store bulk purchases
and forward-buys, and subleases the remainder of the warehouse to third parties.
The Chester warehouse, which formerly served as a regional grocery distribution
center, is available to supplement the Mechanicsville Facility to accommodate
additional growth.
The Harrisburg Facility is a 635,000 square foot state-of-the-art distribution
center that utilizes fully automated inventory handling equipment. The lease for
the Harrisburg Facility expires in 2025. The Company also operates 160,480
square feet of refrigerated warehouse space in neighboring Shiremanstown,
Pennsylvania, under a lease that expires in 2015. See "Selling Shareholders."
The West Point Facility is a highly automated, frozen food distribution facility
with 6.3 million cubic feet of refrigerated space. In addition, there are
approximately 185,000 square feet of office space and truck maintenance
facilities associated with this facility.
22
<PAGE>
Richfood's fluid dairy, located in Richmond, Virginia, is a 65,000 square foot
facility capable of processing and packaging over 500,000 gallons per week of
milk and other dairy products, fruit juices, bottled water and related items.
This facility is owned by Richfood.
The Company also operates seventeen retail stores in the Baltimore, Maryland and
Dover, Delaware markets. These retail locations are all leased on a long-term
basis with lease terms, including options, exceeding five years.
Each of the foregoing facilities is well-maintained and in good operating
condition. The Company believes that each of its facilities has adequate
capacity to meet the demands of anticipated growth.
EMPLOYEE RELATIONS
Management believes that relations with the Company's employees are excellent.
At January 6, 1996, the Company employed approximately 550 salaried and 4,197
non-salaried associates, compared to 555 salaried and 3,886 non-salaried
associates employed at April 29, 1995.
The Company is party to a five-year collective bargaining agreement that expires
in April 1996 covering its transportation unit employees at the Mechanicsville
Facility. The Company is in the process of re-negotiating this agreement and
anticipates entering into a new multi-year collective bargaining agreement on
substantially similar terms as the existing agreement with these employees.
While the Company has no reason to believe that it will not enter into a new
collective bargaining agreement prior to the expiration of the existing
agreement, any work stoppages or disruptions related to the failure to enter
into a new agreement could have a material adverse effect upon the Company's
business. The Company is also party to a four-year collective bargaining
agreement that expires in July 1998 covering warehouse employees at the West
Point Facility and two four-year collective bargaining agreements that expire in
June 1997 covering its Retail Grocery Division employees. The Company is not a
party to any other collective bargaining agreements, nor is it aware of any
pending union petitions related to its employees.
23
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below are the names, ages and positions, and brief descriptions of the
business experience, of the Company's executive officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION IN THE COMPANY
<S> <C> <C>
Donald D. Bennett 59 Chairman of the Board and Chief Executive Officer of the Company
John E. Stokely 43 Director; President and Chief Operating Officer of the Company
Gary L. Conrad 50 Executive Vice President -- Distribution and Logistics of the Company
Edgar E. Poore 62 Executive Vice President of the Company
J. Stuart Newton 41 Senior Vice President and Chief Financial Officer of the Company
Janet G. Hildebrand 47 Senior Vice President -- Human Resources and Benefits of the Company
Daniel R. Schnur 36 Senior Vice President, General Counsel and Secretary of the Company
David W. Hoover 32 Vice President -- Finance of the Company
Alec C. Covington 39 Executive Vice President and Chief Operating Officer of Richfood, Inc.
Peter Vanderveen 64 President and Chief Operating Officer of Super Rite Foods, Inc.
David G. Gundling 45 President and Chief Operating Officer of the wholesale division of
Super Rite Foods, Inc.
John D. Ryder 48 President and Chief Operating Officer of the retail division of Super
Rite Foods, Inc.
John F. Rotelle 60 Director; Chairman of Rotelle
Christopher A. Brown 33 President and Chief Operating Officer of Rotelle
Roger L. Gregory 42 Director
Grace E. Harris 62 Director
John C. Jamison 61 Director
Michael E. Julian, Jr. 45 Director
G. Gilmer Minor, III 55 Director
Claude B. Owen, Jr. 50 Director
Albert F. Sloan 66 Director
George H. Thomazin 55 Director
James E. Ukrop 58 Director
Edward Villaneuva 60 Director
</TABLE>
DONALD D. BENNETT, age 59, was elected Chairman of the Board and Chief Executive
Officer of the Company in June 1995. Mr. Bennett formerly served as President
and Chief Executive Officer of the Company from May 1990 to June 1995.
JOHN E. STOKELY, age 43, was elected President and Chief Operating Officer of
the Company in June 1995 after serving as Executive Vice President -- Finance
and Administration of the Company from August 1993 to June 1995. Mr. Stokely was
formerly Senior Vice President -- Finance and Chief Financial Officer of the
Company from April 1991 to August 1993 and Vice President -- Finance and Chief
Financial Officer (and Secretary from August 1990 to January 1991) of the
Company from August 1990 to April 1991.
GARY L. CONRAD, age 50, was elected Executive Vice President -- Distribution and
Logistics of the Company in February 1996. Mr. Conrad formerly served as
Richfood, Inc.'s Executive Vice President -- Distribution and Logistics from
June 1995 to February 1996, Senior Vice President -- Distribution and Logistics
from October 1994 to June 1995 and Vice President -- Distribution and Logistics
from January 1988 to October 1994.
EDGAR E. POORE, age 62, was elected Executive Vice President of the Company in
June 1995. Mr. Poore formerly served as Executive Vice President and Chief
Operating Officer of the Company from 1989 to June 1995.
J. STUART NEWTON, age 41, was elected Senior Vice President and Chief Financial
Officer of the Company in November 1995. Mr. Newton formerly served as Vice
President -- Finance and Treasurer of Best Products Co., Inc. from June 1994 to
November 1995 and as Vice President and Controller of Best Products Co., Inc.
from 1991 to June 1994. Mr. Newton was Vice President, Finance and Treasurer of
Perry Drug Stores, Inc. from 1988 to 1991.
24
<PAGE>
JANET G. HILDEBRAND, age 47, was elected Senior Vice President -- Human
Resources and Benefits of the Company in September 1995. Ms. Hildebrand formerly
served as Director, Compensation and Benefits, of BASF Corporation from March
1992 to September 1995, and Manager, Employee Savings and Disability Plans, of
BASF Corporation from March 1991 to March 1992.
DANIEL R. SCHNUR, age 36, was elected Senior Vice President, General Counsel and
Secretary of the Company in June 1995. Mr. Schnur formerly served as the
Company's Vice President, General Counsel and Secretary from January 1992 to
June 1995, and General Counsel and Secretary from January 1991 to January 1992.
DAVID W. HOOVER, age 32, was elected Vice President -- Finance of the Company in
August 1993. Mr. Hoover formerly served as Director, Planning and Analysis, of
the Company from December 1990 to August 1993.
ALEC C. COVINGTON, age 39, was elected Executive Vice President and Chief
Operating Officer of Richfood, Inc. in October 1995. Mr. Covington formerly
served as President and Chief Operating Officer of Houchens Industries, Inc.
from June 1993 to October 1995. From 1990 to 1993, Mr. Covington served as
President of the Quincy, Florida division of SuperValu Inc. and President of the
Greenville, Kentucky division of Wetterau, Inc.
PETER VANDERVEEN, age 64, was elected President and Chief Operating Officer of
Super Rite Foods, Inc. in June 1980.
DAVID G. GUNDLING, age 45, was elected President and Chief Operating Officer of
the wholesale division of Super Rite Foods, Inc. in October 1995. Mr. Gundling
formerly served as Executive Vice President of Super Rite Foods, Inc. from 1987
to 1995.
JOHN D. RYDER, age 48, was elected President and Chief Operating Officer of the
retail division of Super Rite Foods, Inc. in 1990.
JOHN F. ROTELLE, age 60, was elected Chairman of Rotelle in October 1995. Mr.
Rotelle formerly was President of Rotelle, having served in such capacity since
1959.
CHRISTOPHER A. BROWN, age 33, was elected President and Chief Operating Officer
of Rotelle in October 1995. Mr. Brown formerly served as Executive Vice
President and Chief Operating Officer of Rotelle from August 1994 to October
1995. Mr. Brown was formerly Richfood, Inc.'s Executive Vice
President -- Procurement and Marketing from September 1993 to August 1994,
Senior Vice President -- Procurement from September 1992 to September 1993 and
Vice President -- Procurement from February 1991 to August 1992.
ROGER L. GREGORY, age 42, is Managing Partner of Wilder & Gregory, a law firm.
GRACE E. HARRIS, age 62, is Provost and Vice President for Academic Affairs of
Virginia Commonwealth University.
JOHN C. JAMISON, age 61, is Chairman of Mallardee Associates, a corporate
financial advisory firm, and a Limited Partner of Goldman, Sachs & Co., an
investment banking and brokerage firm. Mr. Jamison was formerly President and
Chief Executive Officer of The Mariner's Museum, an international maritime
museum, from 1990 to 1992. Mr. Jamison is also a director of Hershey Foods
Corporation and Best Products Co., Inc.
MICHAEL E. JULIAN, JR., age 45, is Chairman of the Board, President and Chief
Executive Officer of Farm Fresh of Virginia, a retail grocery chain.
G. GILMER MINOR, III, age 55, is Chairman of the Board, President and Chief
Executive Officer of Owens & Minor, Inc., a wholesale distributor of medical,
pharmaceutical and surgical supplies. Mr. Minor also serves as a director of
Crestar Financial Corporation.
CLAUDE B. OWEN, JR., age 50, is Chairman of the Board and Chief Executive
Officer of DIMON Incorporated, the successor to Dibrell Brothers, Incorporated,
an importer and exporter of leaf tobacco and fresh cut flowers. Mr. Owen was
formerly the Chairman of the Board, Chief Executive Officer and President of
Dibrell Brothers, Incorporated. Mr. Owen also serves as a director of American
National Bankshares, Inc.
ALBERT F. SLOAN, age 66, was Chairman of the Board of Lance, Inc., a
manufacturer of cookies, crackers and snack foods, from 1990 to April 1995. Mr.
Sloan also serves as a director of Basset Furniture Industries, Inc., Cato
Corporation and PCA International, Inc.
GEORGE H. THOMAZIN, age 55, is President of Thomazin Enterprises, a business
investment firm. Mr. Thomazin formerly served as Chief Executive Officer of
Continental Brokers Co., a food brokerage firm, from 1989 to 1992.
JAMES E. UKROP, age 58, is Vice-Chairman of the Board and Chief Executive
Officer of Ukrop's, a retail grocery chain. Mr. Ukrop was formerly President and
Chief Executive Officer of Ukrop's. Mr. Ukrop also serves as a director of Legg
Mason, Inc. and Owens & Minor, Inc.
EDWARD VILLANEUVA, age 60, is a financial consultant. Mr. Villaneuva is also a
director of Circuit City Stores, Inc.
25
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 60,000,000 shares of Common
Stock and 5,000,000 shares of preferred stock, no par value (the "Preferred
Stock"). As of the date of this Prospectus, 31,317,203 shares of Common Stock
and no shares of Preferred Stock were issued and outstanding. The Company will
issue no additional shares as part of the offering of Common Stock contemplated
hereby. See "Capitalization" and "Selling Shareholders."
COMMON STOCK
GENERAL
The holders of validly issued and outstanding shares of Common Stock are
entitled to one vote per share on each matter that is properly presented to
shareholders for a vote. A majority of the votes cast decides each matter
presented at a meeting of the shareholders (assuming a quorum is present),
except for the election of directors, which requires a plurality of the votes
cast, and certain matters for which a different vote is required by express
provision of law, the Company's Articles of Incorporation (the "Articles") or
the Company's Bylaws (the "Bylaws"). No cumulative voting is permitted.
Holders of Common Stock have no preemptive rights and have no rights to convert
their Common Stock into any other securities. In addition, there are no
redemption or sinking fund provisions applicable to shares of Common Stock.
In the event of a liquidation, dissolution or winding up of the Company, each
share of Common Stock entitles its holder to participate ratably in any assets
remaining after payment of all liabilities and obligations of the Company and
all preferential amounts to which the holders of shares of Preferred Stock, or
any other class of stock having prior rights, may be entitled.
Subject to the rights of any holders of shares of any class of stock having
prior rights as to dividends, the holders of Common Stock are entitled to
receive ratably such dividends as the Company's Board may declare out of funds
legally available therefor, when and if so declared. The payment by the Company
of dividends, if any, rests within the discretion of the Company's Board and
will depend upon general business conditions encountered by the Company, its
earnings, financial condition and capital requirements and such other factors as
the Company's Board may deem relevant. The Company has entered into certain
credit agreements that include financial covenants restricting the payment of
dividends, as described in the notes to the consolidated financial statements
included elsewhere in this Prospectus.
TRANSFER RESTRICTIONS
The Articles establish certain restrictions on the original issuance and
transfer of Common Stock.
Shares of Common Stock may not be transferred to any person who, immediately
following such transfer would, together with such person's Affiliates and
Associates (each, as defined below), be the beneficial owner of more than 20% of
such shares, unless the proposed transfer is approved by the Company's Board.
The Articles provide that an attempt to transfer shares of Common Stock without
prior approval by the Company's Board to any person who would thereafter own
more than 20% of such shares shall be null and void and shall not be recognized
by the Company for any purpose, except that the Company's Board may elect to
recognize such attempted transfer and simultaneously redeem such shares at their
"restricted share redemption price" (generally the lowest price actually paid by
the transferee for shares of Common Stock during the two-year period immediately
before the attempted transfer or, if such price cannot be determined readily by
the Company's Board, then the lowest closing price for such shares in their
principal trading market during such period).
The Articles require record holders of Common Stock to disclose to the Company
upon demand information with respect to beneficial ownership of the shares then
held by them. The Company may enforce the restrictions on the transfer of shares
of Common Stock by polling registered holders with respect to the beneficial
ownership of their shares and by monitoring filings with the Commission by
persons beneficially owning 5% or more of the Common Stock as required pursuant
to Section 13(d) of the Exchange Act.
TRADING MARKET AND TRANSFER AGENT
Shares of Common Stock are traded in the over-the-counter market on Nasdaq under
the symbol "RCHF." The transfer agent and registrar for shares of Common Stock
is First Union National Bank of North Carolina, 230 South Tryon Street, 11th
Floor, Charlotte, North Carolina 28288-1153.
26
<PAGE>
PREFERRED STOCK
The Company's Board may determine the preferences, limitations and relative
rights, to the extent permitted by the Virginia Stock Corporation Act (the
"VSCA"), of any class or series of shares of Preferred Stock before issuance of
such shares. The issuance of such shares does not require the approval of the
holders of Common Stock.
The Company's Board is authorized, without further action by the shareholders,
to issue up to 5,000,000 shares of Preferred Stock, in one or more series, with
such voting powers, preferences, special rights, qualifications, limitations or
restrictions as may be set forth in resolutions providing for the issue thereof
adopted by the Company's Board. As of the date hereof, the Company has no shares
of Preferred Stock outstanding.
The holders of a series of Preferred Stock outstanding will be entitled to
receive dividends, if and when declared by the Company's Board, at the dividend
rate for such series. In addition, the holders of Preferred Stock will be
entitled to receive the amount of any participation right granted by the
Company's Board. If any shares of a series of Preferred Stock are outstanding,
the Company may not declare or pay dividends on the Common Stock or any other
class of stock junior to the Preferred Stock, unless all accrued dividends on
such Preferred Stock have been paid or declared and set aside for payment.
The holders of a series of Preferred Stock will be entitled to a liquidation
preference of the fixed liquidation price (including any premium for voluntary
liquidation) for such series plus any accrued and unpaid dividends and the
amount required by any participation right. Upon any liquidation, dissolution or
winding up of the Company, and after payment of such preferential amounts,
holders of the Preferred Stock will have no right or claim to any of the
remaining assets of the Company.
The Company has no present intention to issue any of its authorized shares of
Preferred Stock. However, any issuance of shares of Preferred Stock in the
future could adversely affect the rights of holders of shares of the Common
Stock and may discourage an acquisition or change in control of the Company.
CERTAIN PROVISIONS OF VIRGINIA LAW, THE ARTICLES AND BYLAWS
BOARD OF DIRECTORS; REMOVAL; VACANCIES
The VSCA provides that the board of directors of a Virginia corporation shall
consist of a number of individuals specified in or fixed in accordance with the
bylaws of the corporation or, if not specified in or fixed in accordance with
the bylaws, then a number specified in or fixed in accordance with the articles
of incorporation of the corporation.
The Bylaws provide that the number of members of the Company's Board shall be 13
and shall be subject to change as provided in the Articles. The Articles provide
the Company's Board may amend the Bylaws from time to time to increase or
decrease the number of directors by up to 30% of the number of directors last
elected by the Company's shareholders; PROVIDED, that any decrease in the number
of directors may not shorten an incumbent director's term or reduce any quorum
or voting requirements until such person ceases to be a director.
The Articles provide further that no person shall be eligible to serve as a
member of the Company's Board if such person is "related" to an existing
director or nominee. A person is deemed to be "related" to an existing director
or nominee if such person is an "Affiliate" or an "Associate" of an existing
director or nominee or if such person is an Affiliate, Associate or employee of
a single "Customer." The Articles define an "Affiliate" as any person that
directly or indirectly controls, is controlled by or is under the common control
with the person specified. The Articles define an "Associate" of any person as
including (a) a corporation of which such person owns beneficially 10% or more
of any class of equity securities, (b) a trust or an estate in which such person
has a substantial beneficial interest or as to which such person serves as a
fiduciary and (c) a relative or spouse of such person who shares the same home.
For purposes of this provision, a "Customer" means any person engaged in the
sale of grocery products which uses the Company as its primary source of supply
for such products (or such other persons as may be determined by a majority of
the Company's Board).
Pursuant to the VSCA, a member of the Company's Board may be removed with or
without cause by a majority of the votes entitled to be cast at a meeting of
shareholders called expressly for that purpose at which a quorum is present. If
a director is elected by a voting group of shareholders, only the shareholders
of that voting group may participate in the vote to remove such director.
The Bylaws provide that any vacancy occurring on the Company's Board may be
filled by the affirmative vote of the majority of the remaining directors,
though less than a quorum of the Company's Board, and the term of any director
so elected shall expire at the next annual meeting of shareholders and when his
successor is elected.
27
<PAGE>
The Bylaws provide that, subject to the rights of holders of any class of
Preferred Stock, a shareholder may nominate one or more persons for election as
directors at a meeting only if written notice of such shareholder's nomination
has been given to the Secretary of the Company not less than fifty nor more than
seventy-five days before the first anniversary of the date of the Company's
proxy statement in connection with the last meeting of shareholders called for
the election of directors. Each notice must contain: (i) the name, age, business
address and, if known, residential address of each nominee; (ii) the principal
occupation or employment of each nominee; and (iii) the number and class of
capital shares of the Company beneficially owned by each nominee. The Secretary
of the Company delivers all such notices to the Nominating Committee of the
Company's Board for review. After such review, the Nominating Committee makes
its recommendation regarding nominees to the Company's Board. The chairman of
any shareholders' meeting called for the election of directors may determine
that a shareholder nomination was not made in accordance with the procedures and
declare to the meeting that the defective nomination shall be disregarded.
The Bylaws also provide that for business to be properly brought before an
annual meeting by a shareholder, the shareholder must have given timely notice
thereof in writing to the Secretary of the Company. To be timely, a
shareholder's notice must be given, either by personal delivery or by mail, to
the Secretary not less than sixty days before the first anniversary of the date
of the Company's proxy statement in connection with the last annual meeting. The
notice must contain, as to each matter the shareholder proposes to bring before
the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting; (ii) the name and record address of the shareholder
proposing such business; (iii) the class, series and number of the Company's
shares beneficially owned by the shareholder; and (iv) any material interest of
the shareholder in such business. If business is brought before an annual
meeting without complying with these provisions, the chairman of the meeting
shall declare that the business was not properly brought before the meeting, and
such business shall not be transacted.
LIABILITY OF OFFICERS AND DIRECTORS
The Articles provide that no officer or director shall be liable to the Company
or its shareholders for monetary damages except for liability resulting from
such person's having engaged in willful misconduct or a knowing violation of the
criminal law or of any federal or state securities law.
Virginia law permits, and the Articles require, indemnification of the Company's
directors and officers in a variety of circumstances, which may include
liabilities under the Securities Act. The Articles require indemnification of
(i) any person who was or is a party to any proceeding by reason of the fact
that he is or was an officer or director of the Company and (ii) any director or
officer who is or was serving at the request of the Company as a director,
trustee, partner or officer of another entity, unless in each case such person
engaged in willful misconduct or a knowing violation of the criminal law. In
addition, Virginia law may under certain circumstances eliminate the liability
of officers and directors in a shareholder or derivative proceeding.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions or otherwise, the Company has been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
ANTI-TAKEOVER STATUTES
The VSCA contains provisions governing "Affiliated Transactions." These
provisions, with several exceptions discussed below, require approval of
material acquisition transactions between a Virginia corporation and any holder
of more than 10 percent of any class of its outstanding voting shares (an
"Interested Shareholder") by the holders of at least two-thirds of the remaining
voting shares. Affiliated Transactions subject to this approval requirement
include mergers, share exchanges, material dispositions of corporate assets not
in the ordinary course of business, any dissolution of the corporation proposed
by or on behalf of an Interested Shareholder or any reclassification, including
reverse stock splits, recapitalization or merger of the corporation with its
subsidiaries, which increases the percentage of voting shares owned beneficially
by an Interested Shareholder by more than five percent.
For three years following the time that an Interested Shareholder becomes an
owner of 10 percent of the outstanding voting shares, a Virginia corporation
cannot engage in an Affiliated Transaction with such Interested Shareholder
without approval of two-thirds of the voting shares other than those shares
beneficially owned by the Interested Shareholder, and majority approval of the
"Disinterested Directors." A Disinterested Director means, with respect to a
particular Interested Shareholder, a member of the board of directors who was
(i) a member on the date on which an Interested Shareholder became an Interested
28
<PAGE>
Shareholder or (ii) recommended for election by, or was elected to fill a
vacancy and received the affirmative vote of, a majority of the Disinterested
Directors then on the board. At the expiration of the three-year period, the
statute requires approval of Affiliated Transactions by two-thirds of the voting
shares other than those beneficially owned by the Interested Shareholder.
The principal exceptions to the special voting requirement apply to transactions
proposed after the three-year period has expired and require either that the
transaction be approved by a majority of the corporation's Disinterested
Directors or that the transaction satisfy the fair-price requirements of the
statute. In general, the fair-price requirements provide that in a two-step
acquisition transaction, the Interested Shareholder must pay the shareholders in
the second step either the same amount of cash or the same amount and type of
consideration paid to acquire the Virginia corporation's shares in the first
step.
None of the foregoing limitations and special voting requirements applies to a
transaction with an Interested Shareholder (i) whose acquisition of shares
making such person an Interested Shareholder was approved in advance by a
majority of the Virginia corporation's Disinterested Directors or (ii) who was
an Interested Shareholder on the date the corporation became subject to these
provisions by virtue of its having 300 shareholders of record.
These provisions were designed to deter certain takeovers of Virginia
corporations. In addition, the statute provides that, by affirmative vote of a
majority of the voting shares other than shares owned by any Interested
Shareholder, a corporation can adopt an amendment to its articles of
incorporation or bylaws providing that the Affiliated Transactions provisions
shall not apply to the corporation. Richfood has not adopted any such amendment.
The VSCA also contains provisions relating to "control share acquisitions,"
which are transactions causing the voting strength of any person acquiring
beneficial ownership of shares of a public corporation in Virginia to meet or
exceed certain threshold percentages (20%, 33 1/3% or 50%) of the total votes
entitled to be cast for the election of directors. Shares acquired in a control
share acquisition have no voting rights unless (i) the voting rights are granted
by a majority vote of all outstanding shares other than those held by the
acquiring person or any officer or employee director of the corporation or (ii)
the articles of incorporation or bylaws of the corporation provide that these
Virginia law provisions do not apply to acquisitions of its shares. The
acquiring person may require that a special meeting of the shareholders be held
to consider the grant of voting rights to the shares acquired in the control
share acquisition. These provisions were designed to deter certain takeovers of
Virginia public corporations. The Articles provide that the control share
acquisition provisions of the VSCA shall not apply to acquisitions of shares of
Common Stock of the Company.
29
<PAGE>
SELLING SHAREHOLDERS
In connection with the Super Rite Acquisition, certain former shareholders of
Super Rite who are subject to the resale restrictions of Rule 145 of the
Securities Act were granted registration rights (the "Registration Rights") with
respect to shares of Common Stock they received in the merger. The Registration
Rights provide that the Company will pay all Commission and state "Blue Sky"
filing fees, all fees and expenses of the Company's counsel and accountants and
all printing and mailing fees related to such registration of shares, while the
holders of Registration Rights will pay all underwriting fees, commissions and
expenses and fees and expenses of any counsel or accountants retained by such
holders in connection with such registration. The Registration Statement of
which this Prospectus forms a part is filed by the Company pursuant to the
written request of holders of the Registration Rights in accordance with the
terms thereof. The Company has also agreed to include in this Registration
Statement shares of Common Stock held by certain Selling Shareholders who do not
hold Registration Rights.
The table below sets forth certain information with respect to the Selling
Shareholders, assuming no exercise of the Underwriters' over-allotment option.
In the event the Underwriters' over-allotment option is exercised, the shares
subject to such option shall be sold by the Selling Shareholders on a PRO RATA
basis in proportion to the number of shares being sold by such persons in the
offering, as listed below.
<TABLE>
<CAPTION>
OWNERSHIP
OWNERSHIP PRIOR TO NUMBER OF SUBSEQUENT
SHARES TO TO OFFERING (1)
OFFERING (1) PERCENT BE SOLD NUMBER PERCENT
NUMBER OF TOTAL IN OF OF TOTAL
OF SHARES SHARES OFFERING SHARES SHARES
<S> <C> <C> <C> <C> <C>
Alex Grass (2)(3) 1,203,770 3.84% 1,057,863 145,907 .47%
Louise Grass (2)(3) 5,102 .02 4,484 618 .00
Martin Grass (3)(4) 1,404,333 4.48 1,234,116 170,217 .54
Martin Grass Trust (3)(4) 452,541 1.45 397,689 54,852 .18
Elizabeth Grass Weese Trust (3) 207,842 .66 182,650 25,192 .08
Trusts f/b/o Linda Grass Shapiro's Children (3) 207,842 .66 182,650 25,192 .08
Peter Vanderveen (5) 65,020 .21 43,957 21,063 .07
Peter Vanderveen and Lois Vanderveen (5) 243,758 .78 214,212 29,546 .09
David Gundling (6) 146,927 .47 126,985 19,942 .06
H. Irwin Levy (7) 3,069 .01 2,697 372 .00
Neil Norry (7) 3,069 .01 2,697 372 .00
</TABLE>
(1) Unless otherwise noted, the persons named in the table, to the Company's
knowledge, have sole voting and investment power with respect to all shares of
Common Stock shown as being beneficially owned by them.
(2) Mr. Alex Grass currently serves as the Chairman of the Board of Super Rite
and its wholly-owned subsidiary, Super Rite Foods, Inc. Prior to the Super Rite
Acquisition, Mr. Grass served as Chairman of the Board, President and Chief
Executive Officer of Super Rite and Super Rite Foods, Inc. Mr. Grass is party to
a three-year consulting agreement with the Company pursuant to which he receives
annual payments of $250,000. Mr. Grass, and his wife Mrs. Louise Grass, may be
deemed, under the rules of the Commission, to share voting and investment power
with respect to the shares of Common Stock shown as being beneficially owned by
them.
(3) The Company leases its Harrisburg, Pennsylvania distribution center, a
refrigerated warehouse and four of its retail grocery store locations from
entities in which Mr. Alex Grass, Mr. Martin Grass and certain other members of
the Grass family (including certain beneficiaries of the Selling Shareholders
that are trusts) have varying ownership interests. The aggregate rental expense
under such leases was approximately $5.5 million in fiscal 1995.
(4) Mr. Martin Grass formerly served as Vice Chairman, Executive Vice President
and Treasurer of Super Rite. Mr. Grass is party to a three-year consulting
agreement with the Company pursuant to which he receives annual payments of
$100,000.
(5) Mr. Vanderveen is President of Super Rite and Super Rite Foods, Inc. Mr.
Vanderveen, and his wife Mrs. Lois Vanderveen, may be deemed, under the rules of
the Commission, to share voting and investment power with respect to the shares
of Common Stock shown as being beneficially owned by them.
(6) Mr. Gundling is President and Chief Operating Officer of the wholesale
division of Super Rite Foods, Inc.
(7) Messrs. Levy and Norry were formerly directors of Super Rite.
30
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions set forth in an Underwriting
Agreement, dated the date hereof (the "Underwriting Agreement"), the
Underwriters named below, for whom J.P. Morgan Securities Inc., Donaldson,
Lufkin & Jenrette Securities Corporation, Interstate/Johnson Lane Corporation
and Wheat, First Securities, Inc. are acting as representatives (the
"Representatives"), have severally agreed to purchase, and the Selling
Shareholders have severally agreed to sell to them, the respective number of
shares of Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
<S> <C>
J.P. Morgan Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Interstate/Johnson Lane Corporation
Wheat, First Securities, Inc.
Total 3,450,000
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and certain other conditions. The Underwriters
are obligated to take and pay for all such shares of Common Stock, if any are
taken.
The Underwriters propose initially to offer such shares of Common Stock directly
to the public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After the
shares of Common Stock are released for sale to the public, the offering price
and such concessions may be changed.
The Selling Shareholders have granted to the Underwriters an option, expiring at
the close of business on the 30th day after the date of this Prospectus, to
purchase up to 475,845 additional shares of Common Stock at the public offering
price, less the underwriting discount. The Underwriters may exercise such option
solely for the purpose of covering over-allotments, if any. To the extent that
the Underwriters exercise such option, each Underwriter will have a firm
commitment, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number set forth next to such
Underwriter's name in the preceding table bears to the total number of shares of
Common Stock offered hereby.
The Company and certain of its shareholders, including the Selling Shareholders,
have agreed not to offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for shares of Common Stock, for a period of 120 days after the date
hereof, without the prior written consent of J.P. Morgan Securities Inc., with
certain limited exceptions.
Pursuant to regulations promulgated by the Commission, market makers in the
Common Stock who are Underwriters or prospective underwriters ("passive market
makers") may, subject to certain limitations, make bids for or purchases of
shares of Common Stock until the earlier of the time of commencement (the
"Commencement Date") of offers or sales of the Common Stock contemplated by this
Prospectus or the time at which a stabilizing bid for such shares is made. In
general, on and after the date two days prior to the Commencement Date (i) such
market makers' net daily purchases of the Common Stock may not exceed 30% of the
average daily trading volume in such stock for the two full consecutive calendar
months immediately preceding the filing date of the Registration Statement of
which this Prospectus forms a part, (ii) such market makers may not effect
transactions in, or display bids for, the Common Stock at a price that exceeds
the highest bid for the Common Stock by persons who are not passive market
makers and (iii) bids by passive market makers must be identified as such.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
31
<PAGE>
LEGAL MATTERS
Certain matters with respect to the validity of the securities being offered
hereby will be passed upon for the Company by Hunton & Williams, Riverfront
Plaza, East Tower, 951 East Byrd Street, Richmond, Virginia 23219, and for the
Underwriters by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York
10017.
This Prospectus includes forward looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. Although
the Company believes that its expectations are based on reasonable assumptions,
it can give no assurance that its goals or strategies will be achieved.
Important factors that could cause actual results to differ materially from
those reflected in the forward looking statements made herein include: any delay
in realizing, or inability to realize, the anticipated synergies related to the
Super Rite Acquisition; any failure to implement successfully the Company's
plans to expand Super Rite's product offerings; and any other factors and
assumptions related to forward-looking statements set forth elsewhere in this
Prospectus.
EXPERTS
The consolidated financial statements of the Company as of April 29, 1995, and
April 30, 1994, and for each of the fiscal years in the three-year period ended
April 29, 1995 (after giving effect to the Super Rite Acquisition), have been
included or incorporated by reference herein and in the Registration Statement
in reliance on the report of KPMG Peat Marwick LLP, independent auditors, set
forth herein (which report expresses reliance on the report of Coopers & Lybrand
L.L.P., independent auditors, included herein). The consolidated financial
statements and schedules of the Company as of April 29, 1995, and April 30,
1994, and for each of the fiscal years in the three-year period ended April 29,
1995 (prior to giving effect to the Super Rite Acquisition), have been
incorporated by reference herein and in the Registration Statement in reliance
on the reports of KPMG Peat Marwick LLP, independent auditors, incorporated by
reference herein. The consolidated financial statements and schedules of Super
Rite and subsidiaries as of March 4, 1995, and February 26, 1994, and for each
of the fiscal years in the three-year period ended March 4, 1995, have been
incorporated by reference herein and in the Registration Statement in reliance
on the report of Coopers & Lybrand L.L.P., independent auditors, set forth
herein. Such consolidated financial statements are included or incorporated by
reference herein in reliance upon the respective reports of such firms given
upon their authority as experts in accounting and auditing.
32
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Unaudited Interim Consolidated Financial Statements:
Consolidated Statements of Earnings for the Thirty-Six Weeks Ended January 6, 1996, and January 7, 1995 F- 2
Consolidated Balance Sheets as of January 6, 1996, and April 29, 1995 F- 3
Consolidated Statements of Cash Flows for the Thirty-Six Weeks Ended January 6, 1996, and January 7, 1995 F- 4
Notes to Unaudited Interim Consolidated Financial Statements F- 5
Audited Consolidated Financial Statements:
Independent Auditors' Reports F- 7
Consolidated Statements of Earnings for the Fiscal Years Ended April 29, 1995, April 30, 1994, and May 1, 1993 F- 9
Consolidated Balance Sheets as of April 29, 1995, and April 30, 1994 F-10
Consolidated Statements of Shareholders' Equity for the Fiscal Years Ended April 29, 1995, April 30, 1994, and
May 1, 1993 F-11
Consolidated Statements of Cash Flows for the Fiscal Years Ended April 29, 1995, April 30, 1994, and May 1, 1993 F-12
Notes to Audited Consolidated Financial Statements F-13
</TABLE>
F-1
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
(UNAUDITED)
36 WEEKS ENDED
PERCENT PERCENT
JANUARY 6, OF JANUARY 7, OF
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 SALES 1995 SALES
<S> <C> <C> <C> <C>
Sales $ 2,251,312 100.00% $ 2,089,081 100.00%
Costs and expenses, net:
Cost of goods sold 2,029,874 90.16 1,880,272 90.00
Operating and administrative expenses 160,425 7.13 150,750 7.22
Merger and integration costs 11,993 0.53 -- --
Interest expense 9,887 0.44 13,074 0.63
Interest income (2,281) (0.10) (2,105) (0.10)
Earnings before income taxes and extraordinary loss 41,414 1.84 47,090 2.25
Income taxes 17,625 0.78 19,491 0.93
Earnings before extraordinary loss 23,789 1.06 27,599 1.32
Extraordinary loss, net of tax (note 4) 1,002 0.05 -- --
Net earnings $ 22,787 1.01% $ 27,599 1.32%
Earnings per share applicable to common stock:
Earnings before extraordinary loss $ 0.76 $ 0.89
Extraordinary loss, net of tax 0.03 --
Net earnings $ 0.73 $ 0.89
Cash dividends declared per common share $ 0.085 $ 0.075
Weighted average common shares outstanding 31,218,195 31,124,023
</TABLE>
See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
F-2
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
JANUARY 6, APRIL 29,
(DOLLAR AMOUNTS IN THOUSANDS) 1996 1995
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,149 $ 29,381
Receivables, less allowance for doubtful accounts of $2,982 and $3,667 97,959 107,651
Inventories 165,923 147,005
Other current assets 23,754 20,302
Total current assets 291,785 304,339
Notes receivable, less allowance for doubtful accounts of $1,619 and $1,077 28,352 26,988
Property and equipment, net 122,929 130,261
Goodwill, net 75,188 79,732
Other assets 40,569 39,450
Total assets $ 558,823 $ 580,770
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt and capital lease obligations $ 11,205 $ 11,618
Accounts payable 178,806 162,189
Accrued expenses and other current liabilities 54,831 57,752
Total current liabilities 244,842 231,559
Long-term debt and capital lease obligations 105,299 166,913
Deferred credits and other 23,643 21,968
Shareholders' equity:
Preferred stock, without par value; authorized 5,000,000 shares; none issued or outstanding -- --
Common stock, without par value; authorized 60,000,000 shares; issued and outstanding
31,247,164 and 31,199,663 shares 64,826 63,978
Retained earnings 120,213 96,352
Total shareholders' equity 185,039 160,330
Total liabilities and shareholders' equity $ 558,823 $ 580,770
</TABLE>
See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
F-3
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(UNAUDITED)
36 WEEKS ENDED
JANUARY 6, JANUARY 7,
(AMOUNTS IN THOUSANDS) 1996 1995
<S> <C> <C>
Operating activities:
Net earnings $ 22,787 $ 27,599
Adjustments to conform the fiscal year end of pooled company:
Net earnings 2,548 --
Non-cash components 1,959 --
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 20,363 18,637
Provision for doubtful accounts 3,276 1,536
Extraordinary loss -- loss on debt extinguishment, non-cash components 673 --
Other, net (2,805) (1,870)
Changes in operating assets and liabilities, net of effect of acquisition:
Receivables 5,617 (12,685)
Inventories (22,867) (16,141)
Other current assets 729 371
Accounts payable, accrued expenses and other liabilities 19,427 22,850
Net cash provided by operating activities 51,707 40,297
Investing activities:
Acquisition, net of cash acquired -- (50,766)
Purchases of property and equipment (9,504) (17,251)
Issuance of notes receivable (9,038) (9,681)
Collections on notes receivable 9,031 8,311
Other, net (3,823) 1,611
Net cash used for investing activities (13,334) (67,776)
Financing activities:
Net proceeds of (repayments on) long-term debt (62,027) 11,632
Proceeds from issuance of common stock under employee stock incentive plans 431 34
Cash dividends paid on common stock (2,009) (1,514)
Net cash provided by (used for) financing activities (63,605) 10,152
Net decrease in cash and cash equivalents (25,232) (17,327)
Cash and cash equivalents at beginning of period 29,381 21,088
Cash and cash equivalents at end of period $ 4,149 $ 3,761
</TABLE>
See accompanying Notes to Unaudited Interim Consolidated Financial Statements.
F-4
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.
The consolidated financial statements of Richfood Holdings, Inc. and
subsidiaries (the "Company") presented herein are unaudited (except for the
consolidated balance sheet as of April 29, 1995, which has been derived from the
audited consolidated balance sheet as of that date and restated for the effect
of the Super Rite Corporation ("Super Rite") acquisition accounted for as a
pooling of interests, see note 3), and have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
The accounting policies and principles used to prepare these interim
consolidated financial statements are consistent in all material respects with
those reflected in the consolidated financial statements included in the Annual
Report on Form 10-K for the fiscal year ended April 29, 1995 ("fiscal 1995") and
the consolidated financial statements included herein. In the opinion of
management, such consolidated financial statements include all adjustments,
consisting of normal recurring adjustments and the use of estimates, necessary
to summarize fairly the Company's financial position and results of operations.
Certain information and note disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto of the Company included in
its Annual Report on Form 10-K for fiscal 1995, and the consolidated financial
statements and notes thereto of Super Rite included in its Annual Report on Form
10-K for the fiscal year ended March 4, 1995. The results of operations for the
thirty-six week period ended January 6, 1996, may not be indicative of the
results that may be expected for the fiscal year ending April 27, 1996 ("fiscal
1996").
NOTE 2.
On August 23, 1994, the Company acquired all of the outstanding common stock of
Rotelle, Inc. ("Rotelle"), a wholesale frozen food distributor headquartered in
West Point, Pennsylvania. The purchase price of the Rotelle acquisition was
$50.7 million. The Company accounted for the acquisition under the purchase
method of accounting. Accordingly, the results of operations of the acquired
business have been included in the Company's Consolidated Statements of Earnings
since the date of the acquisition. On April 3, 1995, the Company acquired
certain assets and assumed certain contracts of the wholesale grocery division
of Camellia Food Stores, Inc. ("Camellia"), a wholesale and retail food
distributor headquartered in Norfolk, Virginia. As a result of that acquisition,
the Company serves as a wholesale supplier to Camellia's 46 retail stores and
most of the 120 independent retail stores previously served by Camellia's
wholesale division. The purchase price of the Camellia acquisition was
approximately $7.1 million. See note 2 to the consolidated financial statements
included herein and in the Company's Annual Report on Form 10-K for fiscal 1995.
NOTE 3.
Effective October 15, 1995 (the "Effective Time"), SR Acquisition, Inc., a
wholly-owned subsidiary of Richfood Holdings, Inc. ("Richfood"), was merged (the
"Merger") with and into Super Rite pursuant to an Agreement and Plan of
Reorganization, dated as of June 26, 1995, and amended as of October 13, 1995
and February 6, 1996 (the "Agreement"), and a related Plan of Merger. As a
result, at the Effective Time, Super Rite became a wholly-owned subsidiary of
Richfood and each outstanding share of common stock, no par value, $.01 stated
value per share, of Super Rite was converted into the right to receive 1.0205
shares of common stock, no par value, of Richfood. Under the terms of the
Agreement, Richfood issued 9,770,188 shares of Richfood common stock to the
shareholders of Super Rite, and all outstanding options to acquire shares of
Super Rite common stock were converted into options to acquire approximately
230,000 shares of Richfood common stock. The acquisition has been accounted for
as a pooling of interests and, accordingly, the consolidated financial
statements for periods prior to the combination have been restated to include
the accounts of Super Rite. The fiscal 1995 year-to-date consolidated financial
statements presented, which present thirty-six weeks, include thirty-nine weeks
of Super Rite's financial information. Richfood has conformed certain of Super
Rite's accounting practices and methods to its own in conjunction with the
restatement of the prior historical consolidated financial statements in
accordance with the pooling of interests method.
Super Rite previously used the fiscal year ending on the Saturday closest to
February 29th or March 1st for financial reporting purposes. In order to conform
to Richfood's fiscal year, Super Rite's net earnings of $2.5 million on sales of
$228.1 million for the eight week period from March 4, 1995, to April 29, 1995,
have been reflected as a direct adjustment to retained earnings.
F-5
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Sales and net earnings of the separate companies, and their respective
subsidiaries, for the twenty-four week period preceding the Effective Time and
the comparable prior year period, and for the thirty-six week period ended
January 7, 1995, are as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
JANUARY 7,
OCTOBER 14, 1995 OCTOBER 15, 1994 1995
(24 WEEKS) (24 WEEKS) (36 WEEKS)
<S> <C> <C> <C>
(AMOUNTS IN THOUSANDS)
Sales:
Richfood Holdings, Inc. $ 782,932 $ 641,084 $ 1,021,542
Super Rite Corporation 703,244 691,833(a) 1,068,603(b)
Adjustments to conform certain of Super Rite's accounting practices
and methods (1,666) (709) (1,064)
Combined $ 1,484,510 $ 1,332,208 $ 2,089,081
Net earnings:
Richfood Holdings, Inc. $ 12,903 $ 10,172 $ 16,603
Super Rite Corporation 6,054 5,921(a) 9,191(b)
Adjustments to conform certain of Super Rite's accounting practices
and methods 1,070 1,320 1,805
Combined $ 20,027 $ 17,413 $ 27,599
</TABLE>
(a) Reflects operating results of Super Rite Corporation and subsidiaries for
the twenty-six week period from February 27, 1994, to August 27, 1994.
(b) Reflects operating results of Super Rite Corporation and subsidiaries for
the thirty-nine week period from February 27, 1994, to November 26, 1994.
Adjustments to conform certain of Super Rite's accounting practices and methods
to those of Richfood primarily relate to the accounting for inventories, store
pre-opening and closing expenses, insurance and certain other operating
expenses.
NOTE 4.
The extraordinary loss, net of tax, of $1.0 million for the thirty-six week
period ended January 6, 1996, primarily related to the repurchase, at market
prices above par, of approximately $9.7 million principal amount of Super Rite
Notes and is comprised of (i) the amount paid in excess of their par value, and
(ii) the write-off of related deferred financing costs. The Company expects to
continue to repurchase Super Rite Notes, from time to time, when market prices
therefor are economically beneficial in relation to the Company's cost of funds.
In addition, the Company expects to call the Super Rite Notes for redemption on
April 1, 1997, the first permitted redemption date, at their redemption price of
105.31% of par.
NOTE 5.
The Company is party to legal actions that are incidental to its business. While
the outcome of such legal actions cannot be predicted with certainty, the
Company believes that the outcome of any of these proceedings, or all of them
combined, will not have a material adverse effect on its consolidated financial
position or operations.
F-6
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Richfood Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Richfood
Holdings, Inc. and subsidiaries as of April 29, 1995 and April 30, 1994, and the
related consolidated statements of earnings, shareholders' equity and cash flows
for each of the fiscal years in the three-year period ended April 29, 1995. The
consolidated financial statements give effect to the merger on October 15, 1995
of a wholly-owned subsidiary of Richfood Holdings, Inc. with and into Super Rite
Corporation, which has been accounted for using the pooling of interests method
as described in note 2 to the consolidated financial statements. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the consolidated
financial statements of Super Rite Corporation, which consolidated financial
statements reflect total assets constituting approximately 48% and 52% of the
related consolidated financial statement totals at April 29, 1995 and April 30,
1994, respectively, and reflect net sales constituting approximately 49%, 49%
and 54% of the related consolidated financial statement totals for fiscal 1995,
1994 and 1993, respectively. The consolidated financial statements of Super Rite
Corporation were audited by other auditors, whose report thereon has been
furnished to us, and our opinion expressed herein, insofar as it relates to the
amounts included for Super Rite Corporation, is based solely on the report of
the other auditors.
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 and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Richfood Holdings, Inc. and
subsidiaries as of April 29, 1995 and April 30, 1994, and the results of their
operations and their cash flows for each of the fiscal years in the three-year
period ended April 29, 1995, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Richmond, Virginia
March 15, 1996
F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Super Rite Corporation
Harrisburg, Pennsylvania
We have audited the consolidated balance sheets of Super Rite Corporation and
subsidiaries as of March 4, 1995 and February 26, 1994 and the related
consolidated statements of income, cash flows and shareholders' equity for the
fifty-three week period ended March 4, 1995 and for each of the fifty-two week
periods in the two-year period ended February 26, 1994 (not presented herein).
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Super
Rite Corporation and subsidiaries as of March 4, 1995 and February 26, 1994, and
the consolidated results of their operations and their cash flows for the
fifty-three week period ended March 4, 1995 and for each of fifty-two week
periods in the two-year period ended February 26, 1994 in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Harrisburg, Pennsylvania
April 21, 1995, except for
the sixth paragraph of
Note 6 which is dated as
of May 5, 1995
F-8
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE APRIL 29, PERCENT APRIL 30, PERCENT MAY 1, PERCENT
DATA) 1995 OF SALES 1994 OF SALES 1993 OF SALES
<S> <C> <C> <C> <C> <C> <C>
Sales (notes 2 and 12) $ 2,992,735 100.00% $ 2,545,676 100.00% $ 2,357,706 100.00%
Costs and expenses, net:
Cost of goods sold 2,695,020 90.05 2,295,235 90.16 2,120,762 89.95
Operating and administrative expenses 216,099 7.22 186,912 7.34 191,058 8.10
Loss on disposal of assets (note 7) -- -- 13,148 0.52 9,188 0.39
Interest expense 18,312 0.61 17,534 0.69 17,619 0.75
Interest income (3,339) (0.11) (3,178) (0.13) (3,686) (0.15)
Earnings before income taxes and extraordinary loss 66,643 2.23 36,025 1.42 22,765 0.96
Income taxes (note 8) 27,425 0.92 14,654 0.58 8,454 0.36
Earnings before extraordinary loss (note 2) 39,218 1.31 21,371 0.84 14,311 0.60
Extraordinary loss, net of tax (note 7) -- -- -- -- 5,042 0.21
Net earnings (note 2) 39,218 1.31% 21,371 0.84% 9,269 0.39%
Preferred stock dividends of pooled company -- -- 8,838
Net earnings applicable to common stock $ 39,218 $ 21,371 $ 431
Earnings per share applicable to common stock:
Earnings before extraordinary loss $ 1.26 $ 0.70 $ 0.18
Extraordinary loss, net of tax -- -- 0.17
Net earnings $ 1.26 $ 0.70 $ 0.01
Cash dividends declared per common share $ 0.10 $ 0.08 $ 0.07
Weighted average common shares outstanding 31,140,926 30,514,503 30,192,221
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-9
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL APRIL
29, 30,
(DOLLAR AMOUNTS IN THOUSANDS) 1995 1994
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents (note 1(c)) $ 29,381 $ 21,088
Receivables, less allowance for doubtful accounts of $3,667 and $2,075 (note 4) 107,651 84,418
Inventories (note 3) 147,005 139,742
Other current assets (note 8) 20,302 19,312
Total current assets 304,339 264,560
Notes receivable, less allowance for doubtful accounts of $1,077 and $1,443 (note 4) 26,988 27,312
Property and equipment, net (note 5) 130,261 81,018
Goodwill, net (note 1(f)) 79,732 75,281
Other assets (notes 1(f) and 11) 39,450 39,733
Total assets $580,770 $487,904
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt and capital lease obligations (notes 5 and 6) $ 11,618 $ 7,104
Accounts payable 162,189 129,988
Accrued expenses and other current liabilities 57,752 42,542
Total current liabilities 231,559 179,634
Long-term debt and capital lease obligations (notes 5 and 6) 166,913 174,472
Deferred credits and other (notes 8 and 11) 21,968 11,930
Shareholders' equity (notes 9 and 10):
Preferred stock, without par value; authorized 5,000,000 shares; none issued or outstanding -- --
Common stock, without par value; authorized 60,000,000 shares; issued and outstanding
31,199,663 and 31,067,034 shares 63,978 62,593
Retained earnings 96,352 59,275
Total shareholders' equity 160,330 121,868
Commitments and contingent liabilities (notes 5, 6, 11 and 13)
Total liabilities and shareholders' equity $580,770 $487,904
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-10
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK RETAINED
(DOLLAR AMOUNTS IN THOUSANDS) SHARES DOLLARS EARNINGS TOTAL
<S> <C> <C> <C> <C>
Balance at May 2, 1992 29,996,202 $53,311 $ 40,655 $ 93,966
Net earnings -- -- 9,269 9,269
Issuance of common stock under employee stock incentive plans 377,946 1,915 -- 1,915
Tax benefit from stock issued -- 560 -- 560
Dividends declared on preferred stock of pooled company -- -- (8,838) (8,838)
Cash dividends declared on common stock -- -- (1,477) (1,477)
Balance at May 1, 1993 30,374,148 55,786 39,609 95,395
Net earnings -- -- 21,371 21,371
Issuance of common stock under employee stock incentive plans 364,775 2,321 -- 2,321
Tax benefit from stock issued -- 1,039 -- 1,039
Shares canceled/surrendered (43,145) (646) -- (646)
Exercises of contingent stock options of pooled company 371,256 4,093 -- 4,093
Cash dividends declared on common stock -- -- (1,705) (1,705)
Balance at April 30, 1994 31,067,034 62,593 59,275 121,868
Net earnings -- -- 39,218 39,218
Issuance of common stock under employee stock incentive plans 150,668 1,305 -- 1,305
Tax benefit from stock issued -- 378 -- 378
Shares canceled/surrendered (18,039) (298) -- (298)
Cash dividends declared on common stock -- -- (2,141) (2,141)
Balance at April 29, 1995 31,199,663 $63,978 $ 96,352 $160,330
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-11
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
APRIL APRIL
29, 30, MAY 1,
(AMOUNTS IN THOUSANDS) 1995 1994 1993
<S> <C> <C> <C>
Operating activities:
Net earnings $ 39,218 $ 21,371 $ 9,269
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 23,903 22,390 20,528
Provision for doubtful accounts 4,490 2,938 6,555
Deferred income taxes 1,821 (4,762) (5,425)
Extraordinary loss -- loss on debt extinguishment, non-cash component (note 7) -- -- 8,127
Provision for loss on disposal of assets (note 7) -- 13,148 9,188
Other, net 382 1,916 147
Changes in operating assets and liabilities, net of effects of acquisitions:
Receivables (4,838) (4,309) (9,107)
Inventories 13,337 6,508 3,107
Other current assets 1,516 1,284 (7,775)
Accounts payable, accrued expenses and other liabilities 20,578 2,515 15,712
Net cash provided by operating activities 100,407 62,999 50,326
Investing activities:
Acquisitions, net of cash acquired (note 2) (56,977) -- (52,045)
Purchases of property and equipment (19,976) (20,736) (17,474)
Proceeds from sale of property and equipment 4,230 -- --
Issuance of notes receivable (15,902) (16,823) (35,782)
Collections on notes receivable 12,425 16,830 25,751
Other, net (1,493) 329 (1,418)
Net cash used for investing activities (77,693) (20,400) (80,968)
Financing activities:
Net proceeds from (repayment of) revolving credit facilities -- (11,772) 1,483
Proceeds from long-term debt -- 45,000 181,350
Principal payments on long-term debt and capital lease obligations (12,481) (59,755) (117,796)
Redemption of junior preferred stock of pooled company (note 10) -- -- (14,950)
Redemption of exchangeable preferred stock of pooled company (note 10) -- -- (15,029)
Proceeds from issuance of common stock under employee stock incentive plans 93 291 456
Cash dividends paid on common stock (2,033) (1,648) (1,367)
Net cash provided by (used for) financing activities (14,421) (27,884) 34,147
Net increase in cash and cash equivalents 8,293 14,715 3,505
Cash and cash equivalents at beginning of fiscal year 21,088 6,373 2,868
Cash and cash equivalents at end of fiscal year $ 29,381 $ 21,088 $ 6,373
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-12
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) PRINCIPLES OF CONSOLIDATION AND PRESENTATION
The Consolidated Financial Statements of Richfood Holdings, Inc. and
subsidiaries (the "Company") as of and for the fiscal years ended April 29, 1995
(fiscal 1995), April 30, 1994 (fiscal 1994) and May 1, 1993 (fiscal 1993)
include the accounts of Richfood Holdings, Inc. and all subsidiaries after the
elimination of significant intercompany transactions and balances. See note 2
for information on the restatement of the Consolidated Financial Statements for
the fiscal 1996 business combination that was accounted for as a pooling of
interests.
(B) FISCAL YEAR
The Company reports on a 52-53 week fiscal year ending the Saturday nearest
April 30.
(C) CASH AND CASH EQUIVALENTS
Cash equivalents of $25,156 and $16,376 at April 29, 1995 and April 30, 1994,
respectively, consist of money market funds, repurchase agreements and
certificates of deposit. For purposes of the Consolidated Statements of Cash
Flows, the Company considers all highly liquid investments with initial
maturities of three months or less to be cash equivalents. Cash and cash
equivalents at April 29, 1995 and April 20, 1994 include $752 and $1,481,
respectively, of certificates of deposit that are pledged under agreements
related to certain insurance contracts of the Company's captive insurance
subsidiary.
(D) INVENTORIES
The Company values inventories at the lower of cost or market with the cost of
the majority of inventories determined using the last-in, first-out (LIFO)
method. Cost for the remaining inventories is determined using the first-in,
first-out (FIFO) method.
(E) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost or, in the case of assets under
capital leases, at the lesser of the fair value of the leased property or the
present value of minimum lease payments at the inception of the lease, less
accumulated depreciation and amortization.
Depreciation is computed using the straight-line method over the estimated
useful lives of the respective assets. Assets under capital leases are amortized
over the lesser of their useful lives or the terms of the respective leases
using the straight-line method. In general, the estimated useful lives for
computing depreciation and amortization are: 20 to 45 years for buildings; 3 to
15 years for vehicles, fixtures and equipment; and 2 to 9 years for assets under
capital leases.
(F) GOODWILL AND OTHER ASSETS
The excess of cost over the fair value of net assets of businesses acquired
(goodwill) is being amortized on a straight-line basis generally over 40 years.
The Company's policy is to record an impairment loss against the unamortized
goodwill in the period when it is determined that the carrying amount of the
asset may not be recoverable. An evaluation is made quarterly and is based on
such factors as the occurrence of a significant event, a significant change in
the environment in which the business operates or if the expected future net
cash flows (undiscounted and without interest) would become less than the
carrying amount of the asset.
Other assets primarily consist of supply agreements, the prepaid pension asset
(note 11) and lease acquisition costs. The supply agreements generally provide
that the Company will be the principal supplier for the customers and generally
include minimum purchase requirements by product category. Supply agreements are
recorded at their acquisition cost and are being amortized on a straight-line
basis over the terms of the respective supply agreements. Supply agreements
included in other assets were $22,942 (net of $14,100 accumulated amortization)
and $24,093 (net of $8,272 accumulated amortization) at April 29, 1995 and April
30, 1994, respectively. An evaluation of the recorded value for supply
agreements is made periodically and is based on
F-13
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
such factors as the relationship with the applicable customer and expectations
as to future revenues under the applicable contract. Lease acquisition costs
incurred, principally for the purchase of existing store locations, are being
amortized on a straight-line basis over the terms of the respective leases.
Other assets also include noncompetition agreements which are being amortized on
a straight-line basis over the terms of the respective agreements.
(G) STORE PRE-OPENING COSTS
Costs associated with the Company opening its new stores are charged to expense
as incurred.
(H) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the differences between the financial statement and
tax bases of existing asset and liabilities. Deferred tax assets and liabilities
are measured using income tax rates expected to apply to taxable income in the
years in which temporary differences are expected to be recovered or settled.
(I) FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments include cash and cash equivalents, accounts and notes
receivable, accounts payable and long-term debt reported in the Consolidated
Balance Sheets. The carrying amounts for cash and cash equivalents, accounts
receivable, accounts payable and certain notes receivable approximate fair value
at April 29, 1995 and April 30, 1994 because of the short-term nature of these
financial instruments. The carrying amount of certain notes receivable and
long-term debt, which are subject to variable interest rates, approximate fair
value at April 29, 1995 and April 30, 1994 due to variable interest rates
related to these financial instruments. The fair value of long-term debt with
fixed interest rates approximates the carrying value at April 29, 1995 and April
30, 1994 and is calculated by discounting scheduled cash flows through maturity
using estimated rates currently offered for long-term debt with similar terms
and average maturities. Financial instruments also include an interest rate swap
agreement (see note 6) which approximates fair value at April 29, 1995 and April
30, 1994.
(J) EARNINGS PER COMMON SHARE
Earnings per common share amounts are computed based on net earnings, reduced
for preferred dividends, divided by the weighted average number of common shares
outstanding during the respective years presented. Stock options are not
considered as common stock equivalents in the earnings per share calculations
because they have no material dilutive effect.
(2) MERGER AND ACQUISITIONS
On October 15, 1995, Super Rite Corporation ("Super Rite") became a wholly-owned
subsidiary of Richfood Holdings, Inc. ("Richfood") and each outstanding share of
common stock of Super Rite was converted into the right to acquire 1.0205 shares
of common stock of Richfood. Under the terms of the merger, Richfood issued
9,770,188 shares of common stock to the shareholders of Super Rite and
outstanding options to acquire shares of Super Rite common stock were converted
into options to acquire approximately 230,000 shares of Richfood common stock.
The merger has been accounted for using the pooling of interests method and,
accordingly, the Consolidated Financial Statements for periods prior to October
15, 1995 have been restated to include the accounts of Super Rite. Super Rite
previously used the fiscal year ending on the Saturday closest to February 29th
or March 1st for its financial reporting purposes. Super Rite's consolidated
balance sheets at its fiscal year-ends of March 4, 1995 and February 26, 1994
have been combined with those of Richfood for its fiscal year-ends of April 29,
1995 and April 30, 1994, respectively. Super Rite's results of operations for
its fifty-three week fiscal 1995, fifty-two week fiscal 1994 and fifty-two week
fiscal 1993 periods have been combined with those of Richfood for its fifty-two
week fiscal 1995, 1994 and 1993 periods, respectively. Richfood has conformed
certain of Super Rite's accounting methods to the Company's in conjunction with
the restatements of the prior years' historical consolidated financial
statements, in accordance with the pooling of interests method. Adjustments to
conform certain of Super Rite's accounting practices and methods to those of the
Company primarily relate to the accounting for inventories, store pre-opening
and closing expenses, insurance and certain other operating expenses. The
cumulative effect of conforming accounting practices and methods on periods
prior to fiscal 1993 was a $7,427 decrease in retained earnings at May 2, 1992.
F-14
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Super Rite is a full service wholesale food distributor, headquartered in
Harrisburg, Pennsylvania, and supplies more than 240 retail supermarkets in the
Mid-Atlantic region. At April 29, 1995, Super Rite operated a retail grocery
division, consisting of ten superstores in the Baltimore, Maryland and Dover,
Delaware markets operating under the METRO tradename, and five supermarkets in
metropolitan Baltimore, Maryland operating under the BASICS tradename.
Sales and earnings information of the separate companies, and their respective
subsidiaries, for fiscal 1995, fiscal 1994 and fiscal 1993 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
APRIL 29, APRIL 30, MAY 1,
1995 1994 1993
<S> <C> <C> <C>
Sales:
Richfood Holdings, Inc. $1,520,450 $1,287,402 $1,091,438
Super Rite Corporation 1,473,822 1,259,234 1,267,106
Adjustments to conform certain of Super Rite Corporation's accounting practices
and methods (1,537) (960) (838)
Combined $2,992,735 $2,545,676 $2,357,706
Earnings (loss) before extraordinary loss:
Richfood Holdings, Inc. $ 25,401 $ 17,175 $ 15,843
Super Rite Corporation 12,951 5,053 (158)
Adjustments to conform certain of Super Rite Corporation's accounting practices
and methods 866 (857) (1,374)
Combined $ 39,218 $ 21,371 $ 14,311
Net earnings (loss):
Richfood Holdings, Inc. $ 25,401 $ 17,175 $ 15,843
Super Rite Corporation 12,951 5,053 (5,200)
Adjustments to conform certain of Super Rite Corporation's accounting practices
and methods 866 (857) (1,374)
Combined $ 39,218 $ 21,371 $ 9,269
</TABLE>
On August 23, 1994, the Company acquired all of the outstanding common stock of
Rotelle, Inc. ("Rotelle"), a wholesale frozen food distributor headquartered in
West Point, Pennsylvania. The purchase price of the acquisition was $50,700 and
was funded by borrowings under a new $35,000 revolving credit facility, together
with internally generated funds and borrowings under an existing revolving
credit facility (note 6).
The Company accounted for the Rotelle acquisition under the purchase method and,
accordingly, the results of operations of the acquired business have been
included in the Company's Consolidated Statements of Earnings since the date of
acquisition.
The following unaudited pro forma financial information presents the results of
operations of the Company as if the acquisition had occurred as of the beginning
of fiscal 1994:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
APRIL 29, APRIL 30,
1995 1994
<S> <C> <C>
Sales $3,085,360 $2,883,509
Net earnings 40,016 21,752
Net earnings per common share $ 1.28 $ 0.71
</TABLE>
F-15
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Fair value of assets acquired and liabilities assumed in the purchase of Rotelle
are as follows:
<TABLE>
<CAPTION>
FAIR VALUE AS OF
AUGUST 23,
1994
<S> <C>
Current assets $ 36,049
Noncurrent assets 55,957
Total assets 92,006
Current liabilities 25,040
Noncurrent liabilities 16,266
Total liabilities 41,306
Net cash paid $ 50,700
</TABLE>
On April 3, 1995 the Company acquired certain assets and assumed certain
contracts of Camellia Food Stores, Inc. ("Camellia"), a wholesale and retail
grocery distributor headquartered in Norfolk, Virginia. In connection with the
transaction, the Company acquired Camellia's wholesale inventory, customer notes
and fluid dairy operation and assumed the lease for Camellia's truck fleet.
Additionally, in connection with this acquisition, the Company entered into
five-year supply agreements with Camellia and certain other independent retail
customers. The purchase price of the acquisition was approximately $7,100.
On January 22, 1993, the Company acquired certain assets and assumed certain
contracts of the Civilian Wholesale Division of B. Green & Company, Inc., a
wholesale and retail grocery distributor headquartered in Baltimore, Maryland.
In connection with the transaction, the Company acquired substantially all of
the inventory, customer supply agreements and certain customer notes and
accounts receivable of B. Green & Company, Inc.'s Civilian Wholesale Division.
The purchase price of the acquisition was $52,045.
(3) INVENTORIES
At April 29, 1995 and April 30, 1994, approximately 84% and 94%, respectively,
of total inventories were valued using the LIFO method. Costs for the remaining
inventories were determined using the FIFO method. If all inventories were
valued at the lower of FIFO cost or market, inventories would have been higher
by approximately $6,647 at April 29, 1995 and $5,016 at April 30, 1994, and net
earnings would have been higher by approximately $935 for fiscal 1995, $209 for
fiscal 1994 and $1,071 for fiscal 1993. The FIFO value of inventories
approximates their replacement cost.
(4) NOTES RECEIVABLE
The Company's notes receivable are due principally from customers and relate
primarily to financing for store acquisitions and improvements. The related
operating profit generated from these financing activities is not significant.
The majority of such notes bear interest at the prime rate plus 2% (11% at April
29, 1995) and have remaining terms ranging from 1 to 7 years. Collateral
securing such notes varies, but may include inventory, equipment, fixtures,
accounts receivable, contract rights, personal assets and pledges of Company
stock. Receivables shown in current assets include $8,141 and $6,105 at April
29, 1995 and April 30, 1994, respectively, related to current maturities of
these notes receivable.
F-16
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(5) PROPERTY AND EQUIPMENT AND LEASES
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
AS OF
APRIL APRIL
29, 30,
1995 1994
<S> <C> <C>
Land $ 5,471 $ 1,271
Buildings 62,469 39,027
Fixtures and equipment 108,521 80,402
Leasehold improvements 26,834 21,292
Trucks and autos 6,473 6,243
Assets under capital leases:
Truck fleet 5,502 5,598
Buildings 662 2,384
Other (computer and office equipment) 2,288 4,258
Total property and equipment 218,220 160,475
Less accumulated depreciation and amortization 87,959 79,457
Property and equipment, net $130,261 $ 81,018
</TABLE>
Capital lease obligations have imputed interest rates that are principally at
6.5% and are due in varying monthly amounts through fiscal 2002. Capital lease
payments generally include executory costs which cover taxes, maintenance,
insurance and other related expenses.
Capital lease assets and obligations incurred and satisfied are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
APRIL 29, APRIL 30, MAY 1,
1995 1994 1993
<S> <C> <C> <C>
Capital lease assets and obligations incurred $ 29 $ 53 $4,391
Capital lease obligations satisfied $ 3,668 $ 3,382 $2,055
</TABLE>
Future minimum lease payments under capital leases at April 29, 1995 are as
follows:
<TABLE>
<CAPTION>
LEASE
FISCAL YEAR OBLIGATIONS
<S> <C>
1996 $ 2,429
1997 1,365
1998 370
1999 59
2000 59
Later years 67
Total future minimum lease payments 4,349
Less:
Executory costs 1,145
Imputed interest 267
Obligations under capital leases, including current installments of $1,707 $ 2,937
</TABLE>
The Company leases certain warehouse, office and storage facilities, equipment
and retail stores under noncancelable operating leases that expire within 20
years from April 29, 1995. The leases, which expire at various times through
2015, have renewal options from 10 to 25 years and are accounted for as
operating leases. The majority of the leases are renewable and provide for the
payment of taxes, insurance, maintenance and contingent rentals based on sales
volume (for retail store leases) by the Company. The Company subleases certain
warehouse space and certain retail stores to third parties.
F-17
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The Company's Harrisburg, Pennsylvania distribution center, refrigerated
warehouse space and certain retail locations are leased from various
partnerships, the partners of which are related parties of Super Rite. The
annual rent expense was $5,475, $5,067 and $4,558 in fiscal 1995, fiscal 1994
and fiscal 1993, respectively. The leases, which expire at various dates through
2015, have renewal options from 10 to 25 years and are accounted for as
operating leases. Future minimum lease rentals to be paid under these leases are
$4,904 for fiscal 1996, $4,918 for fiscal 1997, $4,948 for fiscal 1998, $4,987
for fiscal 1999, $5,014 for fiscal 2000 and $89,366 for all subsequent fiscal
years.
As of April 29, 1995, minimum rentals to be paid and minimum sublease rentals to
be received on noncancelable operating leases with remaining terms greater than
one year are as follows:
<TABLE>
<CAPTION>
MINIMUM MINIMUM
LEASE SUBLEASE
RENTALS TO RENTALS TO NET
FISCAL YEAR BE PAID BE RECEIVED RENTALS
<S> <C> <C> <C>
1996 $ 24,815 $ 7,043 $ 17,772
1997 23,588 6,105 17,483
1998 22,223 5,911 16,312
1999 20,971 5,566 15,405
2000 18,334 5,193 13,141
Later years 175,868 39,573 136,295
Total $ 285,799 $ 69,391 $216,408
</TABLE>
Total annual rental expense under noncancelable operating leases with terms
greater than one year are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
APRIL 29, APRIL 30, MAY 1,
1995 1994 1993
<S> <C> <C> <C>
Minimum rentals $ 26,993 $ 25,021 $ 24,804
Less sublease income (8,280) (7,515) (7,319)
Rental expense $ 18,713 $ 17,506 $ 17,485
</TABLE>
In connection with various guarantees of certain customer store leases, the
Company is contingently liable, in the event of customer nonperformance, for
future lease payments aggregating approximately $1,026 at April 29, 1995. The
related leases expire at varying dates over the next 7 years.
(6) LONG-TERM DEBT
Long-term debt, including capital lease obligations, consists of the following:
<TABLE>
<CAPTION>
AS OF
APRIL APRIL
29, 30,
1995 1994
<S> <C> <C>
Senior Subordinated Notes, unsecured, interest rate of 10 5/8%, due April 1, 2002 $ 75,000 $ 75,000
Senior Notes, interest rate of 6.15%, unsecured, due July 1996 to July 2000 45,000 45,000
Term Loan Facility, secured, interest rate of 9.48%, due February 28, 1999 25,000 30,000
Revolving Credit Facilities, secured, interest rate of 8.88% and 6.08%,
due March 20, 1997 25,000 25,000
Other long-term debt, including obligations under capital leases (note 5) 8,531 6,576
Total long-term debt and capital lease obligations 178,531 181,576
Less current installments 11,618 7,104
Long-term debt and capital lease obligations, net of current installments $166,913 $174,472
</TABLE>
F-18
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
On July 16, 1993, the Company issued $45,000 aggregate principal amount of 6.15%
Senior Notes, due over a term of seven years. The Senior Notes require
semiannual interest payments and, commencing on July 1, 1996, five annual
sinking fund payments consisting of principal of $9,000 plus accrued interest
through July 2000. The Senior Notes also include an optional redemption
provision whereby the Company may elect to redeem all, or any portion, of the
debt prior to maturity subject to certain make-whole provisions.
On April 14, 1992, Super Rite issued $75,000 aggregate principal amount of
10 5/8% Senior Subordinated Notes, due 2002. The Senior Subordinated Notes
require semiannual interest payments on April 1 and October 1 in each year to
holders of record at the close of business on March 15th or September 15th
preceding the interest payment date. The Senior Subordinated Notes include an
optional redemption provision whereby Super Rite may elect to redeem all, or any
portion, of the notes at a declining redemption price (initially 105.31% of par)
at any time from and after April 1, 1997.
On March 20, 1992, Super Rite entered into the 1992 Credit Agreement (the
"Credit Agreement") with banks which provides for a $40,000 term loan facility
(the "Term Loan Facility") and two revolving credit facilities (the "Revolving
Credit Facilities") available for an aggregate amount of up to $60,000. On March
23, 1992, Super Rite borrowed the entire $40,000 available under the Term Loan
Facility and used those borrowings, and borrowings under the Revolving Credit
Facilities, to repay all amounts outstanding under the 1989 Credit Agreement
(see note 7). All assets of Super Rite were pledged as collateral for the loans.
The Revolving Credit Facilities mature in March 1997. Repayment of the Term Loan
Facility under the Credit Agreement consists of a $6,000 payment plus accrued
interest in fiscal 1996, fiscal 1997 and fiscal 1998 and a $7,000 payment or the
unpaid balance, plus accrued interest in fiscal 1999. There was a $2,472
mandatory prepayment requirement for fiscal 1995. Interest on the outstanding
balances of the Credit Agreement are payable monthly in arrears at either of the
following rates, as selected by Super Rite: (a) the bank's "Base Rate" plus a
margin of 0.75% per annum or (b) the 30, 60, or 90 day "LIBOR Rate" plus a
margin of 2.5% per annum. As required by the Credit Agreement, Super Rite
entered into an interest Swap Agreement with the bank on August 24, 1992 to
reduce the potential impact of increases in interest rates (the "Swap
Agreement"). The Swap Agreement substituted the floating interest rate on
$25,000 of the Term Loan Facility for a fixed rate effective October 1, 1992.
Under the Swap Agreement, Super Rite pays the bank a fixed interest rate of
9.475%, and the bank will pay the variable rate interest due under the Term Loan
Facility. The Swap Agreement will mature on October 2, 1995. At March 4, 1995,
Super Rite was not in compliance with certain convenants contained in the Credit
Agreement; however, Super Rite subsequently obtained a waiver or amendment of
these convenants from the bank curing the events of default as of March 4, 1995.
The Company maintains an unsecured $20,000 revolving line of credit, increasing
to $40,000 at the option of the Company. The revolving line of credit expires
July 31, 1996. Borrowings under the facility bear interest at a floating rate,
reset daily, equal to the lesser of (i) the prime rate or (ii) an alternative
rate quoted daily by the commercial bank that will not exceed LIBOR plus 0.45%,
and includes a 0.25% fee on the average daily unused portion of the facility.
There were no borrowings outstanding under the revolving line of credit facility
at April 29, 1995 or April 30, 1994.
On August 23, 1994, the Company entered into a $35,000 revolving credit facility
with a commercial bank to finance a portion of the purchase price for its
acquisition of Rotelle (note 2). Subsequent to the initial funding of the
facility, the Company elected to reduce the line of credit commitment from
$35,000 to $10,000. The revolving line of credit expires in July 1996 and is
secured by all personal property of Rotelle. Borrowings under the facility,
other than on an overnight basis, bear interest equal to the lesser of (i) the
prime rate or (ii) LIBOR (6.05% at April 29, 1995) plus 0.50%. Borrowings under
the facility, made on an overnight basis, bear interest as agreed upon between
the commercial bank and the Company. The facility includes a 0.25% fee on the
average daily unused portion of the $10,000 commitment. There were no borrowings
outstanding under this facility at April 29, 1995.
Future principal repayments on long-term debt, excluding obligations under
capital leases, for the five fiscal years subsequent to the fiscal year ended
April 29, 1995 are: fiscal 1996 -- $9,911; fiscal 1997 -- $15,923; fiscal
1998 -- $40,607; fiscal 1999 -- $16,153; and fiscal 2000 -- $9,000.
The Company's long-term debt facilities contain covenants that, among other
things, limit the incurrence of additional indebtedness; prohibit certain liens
on the Company's assets; require the Company to maintain a minimum net worth;
limit Richfood, Inc.'s and Super Rite's ability to transfer funds to Richfood
Holdings, Inc. in the form of loans, advances or cash dividends and require the
Company to meet certain financial ratios as of each quarter end. Under the most
restrictive of these covenants, at
F-19
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
April 29, 1995, (i) the Company had approximately $80,420 of retained earnings
available for cash dividends. (ii) approximately $38,300 of Richfood, Inc.'s net
assets of $98,200 were subject to restrictions on transfer to Richfood Holdings,
Inc. and (iii) approximately $41,610 of Super Rite's net assets of $46,812 were
subject to restriction on transfer to Richfood Holdings, Inc.
The Company has issued $14,508 in standby letters of credit with financial
institutions. These letters of credit are subject to annual renewal and will be
replaced with similar letters of credit in the normal course of business.
In connection with guarantees related to certain customer notes payable to third
parties, the Company is contingently liable, in the event of customer
nonperformance, for principal payments under the notes aggregating approximately
$7,917 at April 29, 1995. Collateral held by the third parties varies but may
include inventory, equipment, fixtures, accounts receivable, contract rights,
real property and pledged stock.
Interest payments made under long-term debt, including interest payments made
under capital leases, were $17,076 for fiscal 1995, $16,533 for fiscal 1994 and
$17,079 for fiscal 1993.
(7) EXTRAORDINARY LOSS AND LOSS ON DISPOSAL OF ASSETS
On April 14, 1992, Super Rite received net proceeds of $72,800 from the issuance
of 10 5/8% Senior Subordinated Notes. A portion of the net proceeds from the
issuance of the Senior Subordinated Notes was used to redeem all outstanding
13 1/4% Super Rite Foods, Inc. Senior Subordinated Notes for an aggregate
redemption price of $56,169 plus accrued interest. As a result of the
redemption, the Company recorded an extraordinary loss, net of income taxes, of
$4,436 which related to the premium paid on the repurchase of the notes and
unamortized deferred financing costs.
On March 20, 1992, Super Rite entered into the 1992 Credit Agreement and, as a
result of the refinancing, the Company recorded an extraordinary loss, net of
income taxes, of $606 which related to the unamortized deferred financing costs
of its 1989 Credit Agreement.
On February 27, 1993, Super Rite announced plans to sell its remaining seven
supermarkets in the Washington, D.C. area in connection with its strategy to
concentrate its retail operations in the metropolitan Baltimore, Maryland
market. The Company recorded a loss on the sale of these stores of $9,188 in
fiscal 1993. During fiscal 1994, two of these stores were closed and a
definitive sales agreement was signed for three of the stores on February 26,
1994. During fiscal 1994, the provision for loss on disposal of assets was
increased by $6,975, representing primarily the loss on the sale of the stores
and estimated operating losses through the date of closing. During fiscal 1995,
the remaining stores were sold. The $2,500 and $4,000 operating losses generated
by these stores in fiscal 1995 and 1994, respectively, were charged against the
provision for loss on disposal of assets and, accordingly, have not been
included in the Company's results of operations for fiscal 1995 and fiscal 1994.
Sales and operating loss for these stores were $120,209 and $867 for fiscal
1993, respectively.
During fiscal 1994, the Company adopted a formal plan to sell the assets of
three retail Pack n Save grocery stores located in Raleigh, North Carolina and
the sale was completed in fiscal 1995. As a result, for the fiscal year ended
April 30, 1994, the Company recorded a $6,173 provision for loss on disposal of
assets in the fourth quarter to write down the assets of the Packn Save stores
to their estimated net realizable values. The Company incurred a loss from
operations relating to the Packn Save stores of $547, net of tax benefits of
$294, for the period from November 27, 1993 through April 30, 1994. Sales for
the Packn Save stores were $12,292 for the period from November 27, 1993 through
April 30, 1994.
F-20
<PAGE>
(8) INCOME TAXES
The components of income tax expense (benefit) related to earnings before income
taxes are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
APRIL 29, 1995 APRIL 30, 1994 MAY 1, 1993
<S> <C> <C> <C>
Current:
Federal $ 21,502 $ 16,289 $ 11,765
State 4,102 3,127 2,114
25,604 19,416 13,879
Deferred:
Federal 876 (4,595) (4,831)
State 945 (167) (594)
1,821 (4,762) (5,425)
Income taxes $ 27,425 $ 14,654 $ 8,454
Income tax payments $ 21,160 $ 17,148 $ 14,719
</TABLE>
Income tax expense differs from the amounts resulting from applying the
statutory federal income tax rate to earnings before income taxes as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
APRIL 29, 1995 APRIL 30, 1994 MAY 1, 1993
<S> <C> <C> <C>
Taxes computed using federal statutory rate 35.00% 35.00% 34.00%
State income taxes, net of federal income tax benefit 4.28 4.55 3.41
Nondeductibility of goodwill amortization expense 1.11 2.05 3.16
Change in valuation allowance 1.08 1.30 (1.42)
Other, net (0.32) (2.22) (2.01)
Effective tax rate 41.15% 40.68% 37.14%
</TABLE>
F-21
<PAGE>
Deferred income taxes for fiscal 1995 and fiscal 1994 reflect the net income tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. Significant components of deferred tax assets and liabilities at April
29, 1995 and April 30, 1994 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
APRIL 29, 1995 APRIL 30, 1994
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 1,620 $ 1,418
Inventories 2,105 1,417
Deferred revenue 1,890 --
Accrued expenses 15,013 14,172
Accrual for loss on disposal of assets -- 2,161
Other 1,883 1,179
Total deferred tax assets 22,511 20,347
Valuation allowance (1,418) (695)
Total deferred tax assets, net 21,093 19,652
Deferred tax liabilities:
Property and equipment -- depreciation (11,499) (6,573)
Retirement plan (3,304) (3,038)
Lease acquisition costs (2,054) (2,332)
Other (345) (274)
Total deferred tax liabilities (17,202) (12,217)
Net deferred tax assets 3,891 7,435
Net current deferred tax assets 17,885 11,638
Net noncurrent deferred tax liabilities (13,994) (4,203)
Net deferred tax assets $ 3,891 $ 7,435
</TABLE>
The Company has sufficient taxable income in the available carryback periods and
future taxable income from reversing taxable temporary differences to realize
substantially all of its deferred tax assets at April 29, 1995. Management
believes, based on the Company's history of generating earnings and expectations
of future earnings, that it is more likely than not that its net deferred tax
assets, net of the valuation allowance, will be realized.
(9) STOCK OPTION PLANS
The Company's Omnibus Stock Incentive Plan (the "Omnibus Plan") authorizes the
granting of a maximum of 900,000 shares of common stock (subject to adjustment
to reflect certain dilutive events), in the form of shares of restricted common
stock, incentive stock options and nonqualified stock options with or without
stock appreciation rights (SARs), to certain employees. Options to purchase the
Company's common stock are granted at a price no less than the fair market value
of the stock on the date of grant (if the option is an incentive stock option)
or 50% of the fair market value of the stock on the date of grant (if the option
is a nonqualified stock option). Options to purchase 534,950 shares remain
outstanding under the Omnibus Plan at April 29, 1995.
The Company's Long-Term Incentive Plan (the "Incentive Plan") provided for the
granting of a maximum of 1,000,000 shares of common stock (subject to adjustment
to reflect certain dilutive events), in the form of shares of restricted common
stock, incentive stock options and nonqualified stock options with or without
SARs, to certain employees. Options to purchase the Company's common stock were
granted at a price no less than the fair market value of the stock on the date
of grant (if the option was an incentive stock option) or 85% of the fair market
value of the stock on the date of grant (if the option was a nonqualified stock
option). As a result of the adoption of the Omnibus Plan, no further grants may
be made under the Incentive Plan. Options to purchase 96,750 shares of common
stock remain outstanding under the Incentive Plan at April 29, 1995.
Super Rite approved an amendment to its Omnibus Stock Incentive Plan on June 17,
1993 which authorized an increase in nonqualified incentive awards available for
grant from 100,000 to 1,000,000 shares of common stock, in the form of shares of
restricted common stock, stock options and nonqualified stock options with or
without SARs, to certain employees. Options to
F-22
<PAGE>
purchase common stock were granted at a price no less than the fair market value
of the stock on the date of grant. Options to purchase 257,767 shares of common
stock remained outstanding under the Super Rite Omnibus Plan at April 29, 1995.
The Company's Non-Employee Directors Stock Option Plan (the "Directors' Stock
Plan") authorizes the granting of a maximum of 75,000 shares of common stock
(subject to adjustment to reflect certain dilutive events), in the form of
nonqualified stock options. The Directors' Stock Plan provides for each eligible
director to receive, on September 1 of each year, an option to purchase 1,000
shares of common stock. Options to purchase the Company's common stock are
granted at the fair market value of the stock on the date of grant. Options to
purchase 10,000 shares of common stock remain outstanding under the Directors'
Stock Plan at April 29, 1995.
The number of shares (in thousands) subject to outstanding stock options
(adjusted for the effects of the Super Rite merger) is as follows:
<TABLE>
<CAPTION>
OPTIONS
SHARES PRICE RANGE
<S> <C> <C>
Outstanding at May 2, 1992 766 $ 2.63- 6.56
Granted 271 8.56- 9.57
Exercised (248) 2.63- 6.56
Canceled (2) 8.56
Outstanding at May 1, 1993 787 2.63- 9.57
Granted 288 8.69-15.50
Exercised (213) 2.63- 8.56
Canceled (30) 3.83-15.50
Outstanding at April 30, 1994 832 3.83-15.50
Granted 202 14.75-15.88
Exercised (114) 3.83-15.50
Canceled (20) 3.83-15.50
Outstanding at April 29, 1995 900 $ 3.83-15.88
Exercisable at April 29, 1995 329 $ 3.83-15.50
</TABLE>
Super Rite maintained a stock compensation agreement whereby certain key
executives were granted 288,993 shares of common stock subject to the
achievement of certain financial goals. The shares were earned over a five-year
period ending in fiscal 1994. In the event that these financial goals were not
attained for the fiscal year, the unawarded shares of stock were carried over to
the next succeeding fiscal year. Shares earned totaled 115,596 in fiscal 1994.
At April 29, 1995, all 288,993 shares have been earned and distributed. Super
Rite also maintained an employment agreement whereby an officer has been granted
144,491 shares of common stock as long as such officer remains an employee of
the Company. Shares totaling 29,938 were earned in fiscal 1995, fiscal 1994 and
fiscal 1993. At April 29, 1995 all shares have been earned. Under the terms of a
contingent stock option agreement, Super Rite issued 371,256 option shares in
February 1994. Compensation expense charged (credited) to expense was $2,166 and
($614) for fiscal 1994 and fiscal 1993, respectively.
(10) PREFERRED STOCK OF SUPER RITE
Super Rite Senior Cumulative Redeemable Exchangeable Preferred Stock -- On June
15, 1992, Super Rite redeemed all its Exchangeable Preferred Stock for $15,029
which was $4,570 greater than book value. The stock was redeemable at any time
at a redemption price equal to $10.00 per share plus accrued but unpaid
dividends. The stock accrued cumulative quarterly dividends at an annual rate of
15% of the liquidation preference value of $10.00 per share; however, Super Rite
had the option, and the Credit Agreement required, the payment of the dividends
in additional shares of Exchangeable Preferred Stock through 1995. During 1993,
Super Rite issued 63,101 shares of Exchangeable Preferred Stock as dividends
in-kind, which were recorded at $633. The stock increased for the accretion of
the redemption premium of $85 in 1993.
Super Rite Junior Cumulative Redeemable Preferred Stock -- On May 14, 1992,
Super Rite redeemed all the Junior Preferred Stock for $14,950 which was $3,224
greater than book value. The stock was redeemable at the option of Super Rite at
any time. The non-voting stock accrued cumulative annual dividends at 15% of the
liquidation preference value of $100 per share, payable quarterly; however,
Super Rite had the option, and the Credit Agreement required, the payment of
dividends in
F-23
<PAGE>
additional shares of Junior Preferred Stock through 1995. During 1993, Super
Rite issued 4,462 shares of Junior Preferred Stock as dividends in-kind, which
were recorded at $291. The stock increased for the accretion of the redemption
premium of $35 in 1993.
Super Rite Junior Cumulative Redeemable Preferred Stock - On May 14, 1992, Super
Rite redeemed all the Junior Preferred Stock for $14,950 which was $3,224
greater than book value. The stock was redeemable at the option of Super Rite at
any time. The non-voting stock accrued cumulative annual dividends at 15% of the
liquidation preference value of $100 per share, payable quarterly; however,
Super Rite had the option, and the Credit Agreement required, the payment of
dividends in additional shares of Junior Preferred Stock through 1995. During
1993, Super Rite issued 4,462 shares of Junior Preferred Stock as dividends
in-kind, which we recorded at $291. The stock increased for the accretion of the
redemption premium of $35 in 1993.
(11) RETIREMENT PLANS
Substantially all of the Company's employees are covered by defined benefit
plans. The majority of the Company's employees are covered by noncontributory
defined benefit plans sponsored by the Company. In addition, the Company
sponsors a noncontributory defined benefit plan for union employees under
collective bargaining agreements with its Rotelle subsidiary.
The Richfood Employees' Retirement Plan covers employees who meet certain age
and service requirements. Retirement benefits vest after 5 years of service and
are based on years of service and average final compensation. The Company's
funding policy has been to contribute annually the maximum amount deductible for
income tax purposes. No contributions were permitted under this policy in any of
the fiscal years presented. Plan assets at April 29, 1995 consist primarily of
equity securities, U.S. government and agency obligations, mortgage-backed
securities and corporate obligations.
Super Rite Foods has various retirement plans for salaried and certain
hourly-paid employees not covered by union pension plans who meet certain age
and service requirements. Amounts charged to earnings for these retirement plans
totaled $1,074, $985 and $815 in fiscal 1995, fiscal 1994 and fiscal 1993,
respectively.
The Rotelle, Inc. Pension Plan covers hourly-paid union employees of Rotelle.
Hourly-paid union employees of Rotelle become participants in the Rotelle, Inc.
Pension Plan on their date of hire. Retirement benefits vest after 5 years of
service and are based on a fixed dollar payment per month and years of credited
service. The Company currently contributes to the plan on a monthly basis.
Assets held under the plan at April 29, 1995 consist primarily of mutual funds
and guaranteed insurance contracts included in a common trust fund of a
financial institution.
The funded status of the plans are as follows:
<TABLE>
<CAPTION>
APRIL 30,
APRIL 29, 1995 1994
ASSETS EXCEED ACCUMULATED ASSETS EXCEED
ACCUMULATED BENEFITS ACCUMULATED
BENEFITS EXCEED ASSETS BENEFITS
<S> <C> <C> <C>
Actuarial present value of vested benefit obligation $21,236 $ 5,081 $19,457
Accumulated benefit obligation $22,398 $ 5,250 $20,570
Fair value of plan assets $47,708 $ 4,275 $44,843
Projected benefit obligation 34,782 5,290 31,771
Plan assets in excess of (less than) projected benefit obligation 12,926 (1,015) 13,072
Unrecognized net transition asset (5,949) (37) (6,830)
Unrecognized prior service cost -- 160 --
Unrecognized net loss 1,525 164 1,568
Minimum liability -- (247) --
Net pension asset (liability) $ 8,502 $ (975) $ 7,810
<CAPTION>
ACCUMULATED
BENEFITS
EXCEED ASSETS
<S> <C>
Actuarial present value of vested benefit obligation $1,644
Accumulated benefit obligation $1,726
Fair value of plan assets $1,401
Projected benefit obligation 1,726
Plan assets in excess of (less than) projected benefit obligation (325)
Unrecognized net transition asset (43)
Unrecognized prior service cost 182
Unrecognized net loss 159
Minimum liability (298)
Net pension asset (liability) $ (325)
</TABLE>
F-24
<PAGE>
The following are the components of net retirement income related to the defined
benefit plans:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
APRIL 29, APRIL 30, MAY 1,
1995 1994 1993
<S> <C> <C> <C>
Service cost -- present value of benefits earned during the year $ 2,109 $ 1,676 $ 1,459
Interest cost on projected benefit obligation 2,781 2,203 2,053
Expected return on plan assets, net of amount deferred (4,034) (3,073) (3,737)
Net amortization and deferral (1,128) (1,711) (789)
Net retirement income $ (272) $ (905) $(1,014)
</TABLE>
The weighted average discount rate assumed by the Company for all plans ranged
from 7% to 8% for all years presented. The Company assumed an expected long-term
rate of return of 9% and a projected increase in compensation up to 6% for all
plans for years presented.
The Company maintains two nonqualified, unfunded supplemental retirement plans
for selected management personnel. Supplemental retirement plans benefits vest
after specified years of service requirements are met and are based on years of
service and average final compensation. The Company established a trust that
maintains life insurance policies to act as a financing source for one of the
plans. The cash surrender value of the life insurance policies was $846 at April
29, 1995 and $644 at April 30, 1994. The projected benefit obligation for this
plan was $831 at April 29, 1995 and $823 at April 30, 1994, and is included in
deferred credits and other on the accompanying Consolidated Balance Sheets. The
projected benefit obligation for the second plan was $587, $526 at April 29,
1995 and $354 at April 30, 1994 and is included in deferred credits and other on
the accompanying Consolidated Balance Sheets.
The Company maintains defined contribution employee savings and stock ownership
plans under section 401(k) of the Internal Revenue Code. These plans are offered
to substantially all employees who meet certain age and service requirements and
allow for participant pretax contributions and employer matching contributions.
The Company contributed $783, $763 and $592 to the plans for fiscal 1995, fiscal
1994 and fiscal 1993, respectively. Super Rite also maintains a Key Employee
Profit Sharing Plan for employees who have three or more years of service. Super
Rite's contributions to the plan are at its discretion and were approximately
$145, $132 and $121 for fiscal 1995, fiscal 1994 and fiscal 1993, respectively.
Certain employees are covered under union-sponsored, collectively bargained,
multi-employer pension plans. The Company's contribution to these plans was
$348, $397 and $480 in fiscal 1995, fiscal 1994 and fiscal 1993, respectively.
(12) SIGNIFICANT CUSTOMERS
Sales to three customers accounted for 15%, 13% and 10% of the Company's sales
in fiscal 1995, 16%, 15% and 10% of sales in fiscal 1994, and 16%, 13% and 11%
of sales in fiscal 1993, respectively. The Company maintains supply agreements
with these customers which expire in December 1999, December 2001 and July 1996,
respectively.
(13) LITIGATION AND RELATED MATTERS
The Company is party to various legal actions that are incidental to its
business. While the outcome of legal actions cannot be predicted with certainty,
the Company believes that the outcome of any of these proceedings, or all of
them combined, will not have a material adverse effect on its consolidated
financial position or business.
(14) INDUSTRY SEGMENTS
At April 29, 1995 the Company operated a wholesale grocery division and fifteen
retail grocery stores in the Mid-Atlantic region. The Company provides a full
range of grocery, dairy, frozen food, produce and meat products to chains and
independent retailers throughout the region. Sales by industry segment include
sales to unaffiliated customers, as reported in the Consolidated Statements of
Earnings, and sales between industry segments, which are accounted for on terms
comparable to unaffiliated customers.
Operating profit is sales, less cost of sales, operating and administrative
expenses and loss on disposal of assets. Identifiable assets by segment, except
for goodwill, are those assets used directly in the operations of that unit.
F-25
<PAGE>
The following is industry segment information:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
APRIL 29, APRIL 30, MAY 1,
1995 1994 1993
<S> <C> <C> <C>
Sales:
Wholesale grocery $2,857,374 $2,459,840 $2,216,217
Retail grocery 304,718 260,734 309,205
Intersegment sales (169,357) (174,898) (167,716)
Total sales $2,992,735 $2,545,676 $2,357,706
Operating profit (loss):
Wholesale grocery $ 78,705 $ 64,058 $ 47,884
Retail grocery 2,911 (13,677)(a) (11,186)(a)
Total operating profit 81,616 50,381 36,698
Interest expense (18,312) (17,534) (17,619)
Interest income 3,339 3,178 3,686
Earnings before income taxes and extraordinary loss $ 66,643 $ 36,025 $ 22,765
Identifiable assets:
Wholesale grocery $ 505,810 $ 415,472 $ 408,988
Retail grocery 74,960 72,432 78,278
Total identifiable assets $ 580,770 $ 487,904 $ 487,266
Depreciation and amortization:
Wholesale grocery $ 19,119 $ 16,415 $ 13,440
Retail grocery 4,784 5,975 7,088
Total depreciation and amortization $ 23,903 $ 22,390 $ 20,528
Capital expenditures:
Wholesale grocery $ 6,276 $ 9,295 $ 5,894
Retail grocery 13,700 11,441 11,580
Total capital expenditures $ 19,976 $ 20,736 $ 17,474
</TABLE>
(a) Includes loss on disposal of assets of $13,148 and $9,188 in fiscal 1994 and
fiscal 1993, respectively.
F-26
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses, other than underwriting discounts and commissions, in
connection with the
offering are as follows:
<TABLE>
<S> <C>
SEC Registration Fee..................................................................................... $ 36,382
NASD Filing Fee.......................................................................................... 11,050
Accounting Fees and Expenses*............................................................................ 100,000
Legal Fees and Expenses*................................................................................. 150,000
Blue Sky Fees and Expenses (including counsel fees)*..................................................... 15,000
Printing Expenses*....................................................................................... 30,000
Miscellaneous*........................................................................................... 2,568
Total $ 345,000
</TABLE>
*Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The VSCA permits, and the Company's Articles of Incorporation require,
indemnification of the Company's directors and officers in a variety of
circumstances, which may include liabilities under the Securities Act. Under
sections 13.1-697 and 13.1-702 of the VSCA, a Virginia corporation generally is
authorized to indemnify its directors and officers in civil or criminal actions
if they acted in good faith and, in the case of criminal actions, had no
reasonable cause to believe that the conduct was unlawful. The Company's
Articles of Incorporation require indemnification of directors and officers with
respect to any liability, expenses and other amounts incurred by them by reason
of having been a director or officer, except in the case of willful misconduct
or a knowing violation of criminal law. The Company's Articles of Incorporation
provide that, to the full extent that the VSCA permits elimination of the
liability of directors or officers, no director or officer of the Company shall
be liable to the Company or its shareholders for any monetary damages.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1 Form of Underwriting Agreement*
2.1 Agreement and Plan of Reorganization, dated June 26, 1995, by and between Richfood Holdings, Inc. and
Super Rite Corporation (incorporated by reference to the Company's Joint Proxy Statement/Prospectus
dated September 7, 1995, and filed with the Securities and Exchange Commission on September 7, 1995, as
part of the Company's Registration Statement on Form S-4 (File No. 33-62413))
2.2 Amendment No. 1, dated October 13, 1995, to the Agreement and Plan of Reorganization by and between
Richfood Holdings, Inc. and Super Rite Corporation (incorporated by reference to Exhibit 2.2 to the
Company's Current Report on Form 8-K dated October 15, 1995, File No. 0-16900)
2.3 Amendment No. 2, dated February 6, 1996, and effective as of October 15, 1995, to the Agreement and
Plan of Reorganization by and between Richfood Holdings, Inc. and Super Rite Corporation (incorporated
by reference to Exhibit 2.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended
January 6, 1996, File No. 0-16900)
4.1 Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the quarter ended July 24, 1993, File No. 0-16900)
4.2 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company's
Annual Report of Form 10-K for the fiscal year ended April 29, 1995, File No. 0-16900)
4.3 Specimen of certificate representing Common Stock (incorporated by reference to Exhibit 1 to Amendment
No. 1 to the Company's Registration Statement on Form 8-A, File No. 0-16900)
4.4 Form of Custody Agreement and Power of Attorney*
5 Opinion of Hunton & Williams, counsel to the Company*
23.1 Consent of KPMG Peat Marwick LLP*
23.2 Consent of Coopers & Lybrand L.L.P.*
23.3 Consent of Hunton & Williams (included in Exhibit 5 hereto)*
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
24 Power of Attorney (included on signature page to this Registration Statement)
27 Financial Data Schedule*
</TABLE>
*Filed herewith.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Securities Act of
1933, each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933, and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of such Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(3) For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(4) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Mechanicsville, Virginia, on this
19th day of March, 1996.
RICHFOOD HOLDINGS, INC.
(registrant)
By: /s/ DONALD D. BENNETT
DONALD D. BENNETT
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each of the directors and/or officers of the registrant whose signature appears
below hereby appoints Donald D. Bennett, John E. Stokely and Daniel R. Schnur,
or any of them, as his or her attorney-in-fact to sign in his or her name and on
his or her behalf in any and all capacities stated below, and to file with the
Securities and Exchange Commission, any and all amendments, including
post-effective amendments to this registration statement, making such changes in
the registration statement as appropriate, and generally to do all such things
in their behalf in their capacities as officers and directors to enable the
registrant to comply with the provisions of the Securities Act of 1933 and all
requirements of the Securities and Exchange Commission. Pursuant to the
requirements of the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities indicated on March 19, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
By /s/ DONALD D. BENNETT Chairman of the Board of Directors and Chief Executive
DONALD D. BENNETT Officer
(principal executive officer)
By /s/ JOHN E. STOKELY Director, President and Chief Operating Officer
JOHN E. STOKELY
By /s/ ROGER L. GREGORY Director
ROGER L. GREGORY
By /s/ GRACE E. HARRIS Director
GRACE E. HARRIS
By /s/ JOHN C. JAMISON Director
JOHN C. JAMISON
By /s/ MICHAEL E. JULIAN, JR. Director
MICHAEL E. JULIAN, JR.
By /s/ G. GILMER MINOR, III Director
G. GILMER MINOR, III
</TABLE>
II-3
<PAGE>
<TABLE>
<S> <C>
By /s/ CLAUDE B. OWEN, JR. Director
CLAUDE B. OWEN, JR.
By /s/ JOHN F. ROTELLE Director
JOHN F. ROTELLE
By /s/ ALBERT F. SLOAN Director
ALBERT F. SLOAN
By /s/ GEORGE H. THOMAZIN Director
GEORGE H. THOMAZIN
By /s/ JAMES E. UKROP Director
JAMES E. UKROP
By /s/ EDWARD VILLANEUVA Director
EDWARD VILLANEUVA
By /s/ J. STUART NEWTON Senior Vice President and Chief
J. STUART NEWTON Financial Officer (principal financial officer)
By /s/ DAVID W. HOOVER Vice President-Finance
DAVID W. HOOVER (principal accounting officer)
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
<C> <S> <C>
1 Form of Underwriting Agreement
2.1 Agreement and Plan of Reorganization, dated June 26, 1995, by and between Richfood
Holdings, Inc. and Super Rite Corporation (incorporated by reference to the Company's
Joint Proxy Statement/Prospectus dated September 7, 1995, and filed with the
Securities and Exchange Commission on September 7, 1995, as part of the Company's
Registration Statement on Form S-4 (File No. 33-62413))
2.2 Amendment No. 1, dated October 13, 1995, to the Agreement and Plan of Reorganization
by and between Richfood Holdings, Inc. and Super Rite Corporation (incorporated by
reference to Exhibit 2.2 to the Company's Current Report on Form 8-K dated October 15,
1995, File No. 0-16900)
2.3 Amendment No. 2, dated February 6, 1996, and effective as of October 15, 1995, to the
Agreement and Plan of Reorganization by and between Richfood Holdings, Inc. and Super
Rite Corporation (incorporated by reference to Exhibit 2.4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended January 6, 1996, File No. 0-16900)
4.1 Amended and Restated Articles of Incorporation of the Company (incorporated by
reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended July 24, 1993, File No. 0-16900)
4.2 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2
to the Company's Annual Report of Form 10-K for the fiscal year ended April 29, 1995,
File No. 0-16900)
4.3 Specimen of certificate representing Common Stock (incorporated by reference to
Exhibit 1 to Amendment No. 1 to the Company's Registration Statement on Form 8-A, File
No. 0-16900)
4.4 Form of Custody Agreement and Power of Attorney
5 Opinion of Hunton & Williams, counsel to the Company
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Hunton & Williams (included in Exhibit 5 hereto)
24 Power of Attorney (included on signature page to this Registration Statement)
27 Financial Data Schedule
</TABLE>
RICHFOOD HOLDINGS, INC.
3,450,000 Shares
Common Stock
Underwriting Agreement
March __, 1996
J.P. Morgan Securities Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
Wheat, First Securities, Inc.
Interstate/Johnson Lane Corporation
As Representatives
of the Several Underwriters
Listed in Schedule I hereto
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Dear Ladies and Gentlemen:
The persons named in Schedule II hereto (the "Firm Selling
Shareholders") propose to sell to the several Underwriters listed in Schedule I
hereto (the "Underwriters"), for whom you are acting as representatives (the
"Representatives"), and the Underwriters propose to purchase from such Firm
Selling Shareholders, an aggregate of 3,450,000 shares of common stock, without
par value, of Richfood Holdings, Inc., a Virginia corporation (the "Company"),
which are referred to herein as the "Underwritten Shares."
In addition, the persons named in Schedule III hereto (the
"Optional Selling Shareholders," and together with the Firm Selling
Shareholders, the "Selling Shareholders") propose to sell to the several
Underwriters,
<PAGE>
for the sole purpose of covering over-allotments in connection with the sale of
the Underwritten Shares, at the option of the Underwriters, up to an additional
475,845 shares of Common Stock (the "Option Shares"). The Underwritten Shares
and the Option Shares are herein referred to as the "Shares."
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
statement on Form S-3 (file no. 333- ), including a prospectus, relating to the
Shares. The registration statement as amended at the time when it shall become
effective, or, if a post-effective amendment is filed with respect thereto, as
amended by such post-effective amendment at the time of its effectiveness,
including in each case information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act, is referred to in this Agreement as the "Registration
Statement," and the prospectus in the form first used to confirm sales of Shares
is referred to in this Agreement as the "Prospectus." Any reference in this
Agreement to the Registration Statement, any preliminary prospectus or the
Prospectus shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Securities Act, as
of the effective date of the Registration Statement or the date of such
preliminary prospectus or the Prospectus, as the case may be and any reference
to "amend," "amendment" or "supplement" with respect to the Registration
Statement, any preliminary prospectus or the Prospectus shall be deemed to refer
to and include any documents filed after such date under the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the Commission
thereunder (collectively, the "Exchange Act") that are deemed to be incorporated
by reference therein.
The Company and the Selling Shareholders wish to confirm as
follows their agreement with you and the other several Underwriters on whose
behalf you are acting, in connection with the several purchases of the Shares by
the Underwriters:
1. Each Firm Selling Shareholder hereby agrees to sell to each
Underwriter as hereinafter provided, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase at a price of
[$ ] per share (the "Purchase
2
<PAGE>
Price") from such Firm Selling Shareholder the respective number of Underwritten
Shares (subject to such adjustments to eliminate any fractional shares as the
Representatives in their sole discretion may make) that bears the same
proportion to the number of Underwritten Shares to be sold by such Firm Selling
Shareholder to the Underwriters as set forth on Schedule II hereto as the number
of Underwritten Shares set forth opposite the name of such Underwriter on
Schedule I hereto (or such number of Underwritten Shares increased as set forth
in Section 11 hereof), bears to the total number of Underwritten Shares.
In addition, each Optional Selling Shareholder agrees to sell
to the several Underwriters as hereinafter provided and, on the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, the Underwriters shall have the option to purchase,
severally and not jointly, from each Optional Selling Shareholder up to the
maximum number of Option Shares set forth opposite such Optional Selling
Shareholder's name on Schedule III hereto at the Purchase Price for the sole
purpose of covering over-allotments (if any) in the sale of Underwritten Shares
by the several Underwriters.
If any Option Shares are to be purchased, the number of Option
Shares to be purchased by each Underwriter shall be the number of Option Shares
which bears the same ratio to the aggregate number of Option Shares being
purchased as the number of Underwritten Shares set forth opposite the name of
such Underwriter in Schedule I hereto (or such number of Underwritten Shares
increased as set forth in Section 11 hereof) bears to the aggregate number of
Underwritten Shares being purchased from the Firm Selling Shareholders by the
several Underwriters, subject, however, to such adjustments to eliminate any
fractional shares as the Representatives in their sole discretion shall make.
The Underwriters may exercise the option to purchase the
Option Shares at any time (but not more than once) on or before the thirtieth
day following the date of this Agreement, by written notice from the
Representatives to the Attorneys-in-Fact (as defined below). Such notice shall
set forth the aggregate number of Option Shares as to which the option is being
exercised and the date and time when the Option Shares are to be delivered and
paid for which may be the same date and time as the Closing Date (as hereinafter
defined) but shall not be earlier than the Closing Date nor later than the tenth
full Business Day (as hereinafter defined) after the date of such notice (unless
such time and date are postponed in accordance with the
3
<PAGE>
provisions of Section 11 hereof). Such notice shall be given at least two
Business Days prior to the date and time of delivery specified therein.
Certificates in transferable form for the Shares (including
any Option Shares) which each of the Selling Shareholders agrees to sell
pursuant to this Agreement have been placed in custody with the Company, as
custodian (the "Custodian"), for delivery under this Agreement pursuant to a
Custody Agreement executed by each Selling Shareholder (individually, a "Custody
Agreement"). Each Selling Shareholder agrees that (i) the Shares of such Selling
Shareholder represented by the certificates held in custody pursuant to such
Selling Shareholder's Custody Agreement are subject to the interests of the
Underwriters, (ii) the arrangements made by such Selling Shareholder for such
custody are, except as specifically provided in such Selling Shareholder's
Custody Agreement, irrevocable, and (iii) the obligations of such Selling
Shareholder hereunder and under such Selling Shareholder's Power (as defined
below) and Custody Agreement shall not be terminated by any act of such Selling
Shareholder or by operation of law, whether by the dissolution or liquidation of
such Selling Shareholder or the occurrence of any other event. If any Selling
Shareholder shall dissolve or liquidate or if any other event shall occur before
the delivery of the Shares hereunder, certificates for the Shares of such
Selling Shareholder shall be delivered to the Underwriters by Alex Grass or any
other person to be named as an attorney-in-fact (collectively, the
"Attorneys-in-Fact"), acting as agents and attorneys-in-fact of such Selling
Shareholder pursuant to an irrevocable power of attorney (individually, a
"Power") as included in the Custody Agreement in accordance with the terms and
conditions of this Agreement and such Selling Shareholder's Power and Custody
Agreement as if such dissolution or liquidation or other event had not occurred,
regardless of whether or not the Attorneys-in-Fact or any Underwriter shall have
received notice of such dissolution, liquidation or other event. Each
Attorney-in-Fact is authorized, on behalf of each of the Selling Shareholders,
to, among other acts, execute this Agreement and any receipts, notices, requests
and instructions in connection with the sale of the Shares to be sold hereunder
by such Selling Shareholder, to make delivery of the certificates for such
Shares, to receive the proceeds of the sale of such Shares, to give receipts for
such proceeds, to pay therefrom any expenses to be borne by such Selling
Shareholder in connection with the sale and public offering of such Shares, to
distribute the balance thereof to such Selling Shareholder and to take such
other action as may be
4
<PAGE>
necessary or desirable in connection with the transactions
contemplated by this Agreement.
2. The Company and the Selling Shareholders understand that
the Underwriters intend (i) to make a public offering of the Shares as soon
after the Registration Statement and this Agreement have become effective as in
the judgment of the Representatives is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
3. Payment for the Shares shall be made to the Custodian or
its order by certified or official bank check or checks payable in New York
Clearing House or other next day funds at the office of J.P. Morgan Securities
Inc., 60 Wall Street, New York, New York 10260 at 10:00 A.M., New York City
time, in the case of the Underwritten Shares, on ____________, 1996, or at such
other time on the same or such other date, not later than the fifth Business Day
thereafter, as the Representatives and the Attorneys-in-Fact on behalf of the
Selling Shareholders may agree upon in writing or, in the case of the Option
Shares, on the date and time specified by the Representatives in the written
notice of the Underwriters' election to purchase such Option Shares. The time
and date of such payment for the Underwritten Shares are referred to herein as
the Closing Date and the time and date for such payment for the Option Shares,
if other than the Closing Date, are herein referred to as the Additional Closing
Date. As used herein, the term "Business Day" means any day other than a day on
which banks are permitted or required to be closed in New York City.
Payment for the Shares to be purchased on the Closing Date or
the Additional Closing Date, as the case may be, shall be made against delivery
to the Representatives for the respective accounts of the several Underwriters
of the Shares to be purchased on such date registered in such names and in such
amounts as the Representatives shall request in writing not later than two full
Business Days prior to the Closing Date or the Additional Closing Date, as the
case may be with any transfer taxes payable in connection with the transfer to
the Underwriters of the Shares duly paid. The certificates for the Shares will
be made available for inspection and packaging by the Representatives at the
office of J.P. Morgan Securities Inc. not later than 1:00 P.M., New York City
time, on the Business Day prior to the Closing Date or the Additional Closing
Date, as the case may be.
4. The Company represents and warrants to each
Underwriter that:
5
<PAGE>
(a) no order preventing or suspending the use of any
preliminary prospectus has been issued by the Commission, and each
preliminary prospectus filed as part of the Registration Statement as
originally filed or as part of any amendment thereto, or filed pursuant
to Rule 424 under the Securities Act, complied when so filed in all
material respects with the Securities Act, and did not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information relating to any Underwriter furnished to
the Company in writing by such Underwriter through the Representatives
expressly for use therein;
(b) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that
purpose has been instituted or, to the knowledge of the Company,
threatened by the Commission; and the Registration Statement and
Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) comply, or will
comply, as the case may be, in all material respects with the
Securities Act and do not and will not, as of the applicable effective
date as to the Registration Statement and any amendment thereto and as
of the date of the Prospectus and any amendment or supplement thereto,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Prospectus, as amended or
supplemented at the Closing Date, if applicable, will not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; except that
the foregoing representations and warranties shall not apply to
statements or omissions in the Registration Statement or the Prospectus
made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by such Underwriter
through the Representatives expressly for use therein;
(c) the documents incorporated by reference in
the Prospectus, when they were filed with the
Commission, conformed in all material respects to the
6
<PAGE>
requirements of the Exchange Act and none of such documents contained
an untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and any
further documents so filed and incorporated by reference in the
Prospectus, when such documents are filed with the Commission, will
conform in all material respects to the requirements of the Exchange
Act, and will not contain an untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading;
(d) the financial statements of the Company, and the related
notes thereto, included or incorporated by reference in the
Registration Statement and the Prospectus present fairly the
consolidated financial position of the Company and its consolidated
subsidiaries as of the dates indicated and the results of their
operations and the changes in their consolidated cash flows for the
periods specified; said financial statements have been prepared in
conformity with generally accepted accounting principles applied on a
consistent basis, and the supporting schedules included or incorporated
by reference in the Registration Statement present fairly the
information required to be stated therein;
(e) since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any material adverse change, in or affecting the general affairs,
business, prospects, management, financial position, shareholders'
equity or results of operations of the Company and its subsidiaries,
taken as a whole ("Material Adverse Change") or any development
involving a prospective Material Adverse Change, otherwise than as set
forth or contemplated in the Prospectus; and except as set forth or
contemplated in the Prospectus neither the Company nor any of its
subsidiaries has entered into any transaction or agreement (whether or
not in the ordinary course of business) material to the Company and its
subsidiaries taken as a whole;
(f) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the state
of its incorporation, with power and authority (corporate and other) to
own its
7
<PAGE>
properties and conduct its business as described in the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties, or conducts any
business, so as to require such qualification, other than where the
failure to be so qualified or in good standing would not have a
material adverse effect on the Company and its subsidiaries taken as a
whole ("Material Adverse Effect");
(g) each of the Company's subsidiaries has been duly
incorporated and is validly existing as a corporation under the laws of
its jurisdiction of incorporation, with power and authority (corporate
and other) to own its properties and conduct its business as described
in the Prospectus, and has been duly qualified as a foreign corporation
for the transaction of business and is in good standing under the laws
of each jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, other than where the
failure to be so qualified or in good standing would not have a
Material Adverse Effect; and all the outstanding shares of capital
stock of each subsidiary of the Company have been duly authorized and
validly issued, are fully-paid and non-assessable, and (except in the
case of foreign subsidiaries, for directors' qualifying shares) are
owned by the Company, directly or indirectly, free and clear of all
liens, encumbrances, security interests and claims;
(h) this Agreement and each of the Custody Agreements have
been duly authorized, executed and delivered by the Company and each of
the Custody Agreements constitutes a valid and binding agreement of the
Company, enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency, or
similar laws affecting creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable
principles of general applicability; to the best of the Company's
knowledge, this Agreement and the Custody Agreement of each Selling
Shareholder have been duly authorized, executed and delivered by or on
behalf of such Selling Shareholder; the Custody Agreement of each
Selling Shareholder constitutes a valid and binding agreement of such
Selling Shareholder, enforceable in accordance with its terms except as
(i) the enforceability thereof may be limited by bankruptcy,
insolvency, or similar laws affecting creditors' rights
8
<PAGE>
generally and (ii) the availability of equitable
remedies may be limited by equitable principles of
general applicability;
(i) the authorized capital stock of the Company conforms as to
legal matters to the description thereof set forth in the Registration
Statement and the Prospectus, and all of the outstanding shares of
capital stock of the Company (including the Shares to be sold by the
Selling Shareholders) have been duly authorized and validly issued, are
fully-paid and non-assessable and are not subject to any preemptive or
similar rights; and, except as described in or expressly contemplated
by the Prospectus, there are no outstanding rights (including, without
limitation, preemptive rights), warrants or options to acquire, or
instruments convertible into or exchangeable for, any shares of capital
stock or other equity interest in the Company or any of its
subsidiaries, or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any capital stock
of the Company or any such subsidiary, any such convertible or
exchangeable securities or any such rights, warrants or options;
(j) neither the Company nor any of its subsidiaries is, or
with the giving of notice or lapse of time or both would be, in
violation of or in default under, its articles of incorporation or
by-laws or any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them or any of their
respective properties is bound, except for violations and defaults
which individually and in the aggregate could not be expected to have a
Material Adverse Effect; the sale of the Shares by the Selling
Shareholders and the performance by the Company and each Selling
Shareholder of their respective obligations under this Agreement and
the Custody Agreement and the consummation of the transactions
contemplated herein and therein will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument to which the Company, any of the
Company's subsidiaries, or to the best of the Company's knowledge, any
Selling Shareholder is a party or by which the Company, any of the
Company's subsidiaries, or to the best of the Company's knowledge, any
Selling Shareholder is bound, or to which any of the property or assets
of the
9
<PAGE>
Company, any of the Company's subsidiaries, or to the best of the
Company's knowledge, any Selling Shareholder is subject, nor will any
such action result in any violation of the provisions of the Articles
of Incorporation, the Bylaws of the Company or, to the best of the
Company's knowledge, the organizational documents of any Selling
Shareholder, or any applicable law or statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company, its subsidiaries or any of their
respective properties or, to the best of the Company's knowledge, any
Selling Shareholder or any of its properties; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the sale of the
Shares by the Selling Shareholders or the consummation by the Company
or, to the best of the Company's knowledge, the Selling Shareholders of
the transactions contemplated by this Agreement and the Custody
Agreements except such consents, approvals, authorizations,
registrations or qualifications as have been obtained under the
Securities Act and as may be required under state securities or Blue
Sky Laws in connection with the purchase and distribution of the Shares
by the Underwriters;
(l) other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened to which the Company or any of its
subsidiaries is or may be a party or to which any property of the
Company or any of its subsidiaries is or may be the subject which, if
determined adversely to the Company, could individually or in the
aggregate reasonably be expected to have a Material Adverse Effect,
and, to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others; and there are no contracts or other documents of a character
required to be filed as an exhibit to the Registration Statement or
required to be described in the Registration Statement or the
Prospectus which are not filed or described as required;
(m) the Company and its subsidiaries have good and marketable
title in fee simple to all items of real property and good and
marketable title to all personal property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as
are described or referred to in the Prospectus or such as
10
<PAGE>
do not materially affect the value of such property and do not
interfere with the use made or proposed to be made of such property by
the Company and its subsidiaries; and any real property and buildings
held under lease by the Company and its subsidiaries are held by them
under valid, existing and enforceable leases with such exceptions as
are not material and do not interfere with the use made or proposed to
be made of such property and buildings by the Company or its
subsidiaries;
(n) no relationship, direct or indirect, exists between or
among the Company or any of its subsidiaries on the one hand, and the
directors, officers, shareholders, customers or suppliers of the
Company or any of its subsidiaries on the other hand, which is required
by the Securities Act to be described in the Registration Statement and
the Prospectus which is not so described;
(o) no person has the right to require the Company to register
any securities for offering and sale under the Securities Act by reason
of the filing of the Registration Statement with the Commission or the
sale of the Shares by the Selling Shareholders;
(p) the Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect;
(q) in the ordinary course of its business, the Company
conducts a periodic review of the effect of Environmental Laws on the
business, operations and properties of the Company and its
subsidiaries, in the course of which it identifies and evaluates
material associated costs and liabilities (including, without
limitation, any material capital or operating
11
<PAGE>
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any
material related constraints on operating activities and any material
potential liabilities to third parties). On the basis of such review,
the Company has reasonably concluded that such associated costs and
liabilities could not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect; and
(r) the Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
5. Each Selling Shareholder represents and
warrants to each Underwriter that:
(a) such Selling Shareholder has, and immediately prior to the
Closing Date and any Additional Closing Date such Selling Shareholder
will have, good and valid title to the Shares to be sold on such
Closing Date or Additional Closing Date, as the case may be, by such
Selling Shareholder, free and clear of all liens, encumbrances,
equities or claims and, upon delivery of the Shares to be delivered on
such Closing Date or Additional Closing Date by such Selling
Shareholder pursuant to this Agreement and payment therefor pursuant
hereto, good and valid title to such Shares, free and clear of all
liens, encumbrances, equities or claims, will pass to the several
Underwriters;
(b) such Selling Shareholder now has, and on the Closing Date
and any Additional Closing Date will have, full right, power and
authority, to enter into and perform its obligations under, this
Agreement and the Custody Agreement of such Selling Shareholder will
not contravene any provision of applicable law, or the certificate of
incorporation or by-laws of such Selling Shareholder (if such Selling
Shareholder is a corporation), or any agreement or other instrument
binding upon such Selling Shareholder or any judgment, order or decree
of any governmental body, agency or court having jurisdiction over such
Selling Shareholder, and no consent, approval, authorization or order
of or qualification with any governmental body or agency is required
for the performance by such Selling Shareholder of its obligations
under this Agreement and the Custody Agreement of such Selling
Shareholder except such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale of
the Shares;
12
<PAGE>
(c) this Agreement and the Custody Agreement of such Selling
Shareholder have been duly authorized, executed and delivered by or on
behalf of such Selling Shareholder; the Custody Agreement and of such
Selling Shareholder are valid and binding agreements of such Selling
Shareholder, enforceable in accordance with their terms except as (i)
the enforceability thereof may be limited by bankruptcy, insolvency, or
similar laws affecting creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable
principles of general applicability;
(d) the execution and delivery by or on behalf of such Selling
Shareholder of this Agreement and the Custody Agreement of such Selling
Shareholder, the sale of the Shares to be sold by such Selling
Shareholder pursuant to this Agreement, the compliance by such Selling
Shareholder with all of the provisions of this Agreement and the
Custody Agreement of such Selling Shareholder and the consummation of
the transactions herein and therein contemplated, will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which
such Selling Shareholder is a party or by which such Selling
Shareholder is bound, or to which any of the property or assets of such
Selling Shareholder is subject, nor will any such action conflict with
or result in a breach or violation of any of the provisions of the
certificate or articles of incorporation or by-laws of, or other
organizational documents governing, such Selling Shareholder, if such
Selling Shareholder is a corporation, or if such Selling Shareholder is
some other form of legal entity, the organizational or other documents
governing such entity, or any applicable law or statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over such Selling Shareholder or the property or assets of
such Selling Shareholder; and no consent, approval, authorization,
order, registration or qualification of or with any such court or
governmental body or agency is required for the execution and delivery
by or on behalf of such Selling Shareholder of this Agreement or the
Custody Agreement of such Selling Shareholder, the sale of the Shares
to be sold by such Selling Shareholder pursuant to this Agreement, the
compliance by such Selling Shareholder with all of the provisions of
this Agreement and the Custody Agreement of such Selling Shareholder or
the consummation by such Selling Shareholder of the
13
<PAGE>
transactions herein and therein contemplated, except such consents,
approvals, authorizations, registrations or qualifications as have been
obtained under the Securities Act and as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Shares;
(e) certificates in negotiable form for all Shares to be sold
by such Selling Shareholder under this Agreement have been irrevocably
delivered to the Custodian for the purpose of effecting delivery under
this Agreement;
(f) such Selling Shareholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares;
(g) the Shares to be sold by such Selling Shareholder pursuant
to this Agreement have been duly authorized and are validly issued,
fully paid and non-assessable; and
(h) all information relating to such Selling Shareholder
furnished by or on behalf of such Selling Shareholder for use in the
Registration Statement and Prospectus is, and on the Closing Date will
be, true, correct and complete; to the extent that any statements or
omissions relating to such Selling Shareholder made in the Registration
Statement, the Prospectus or any amendment or supplement thereto are
made in reliance upon and in conformity with information furnished by
or on behalf of such Selling Shareholder for use therein, the
Registration Statement and Prospectus, as amended or supplemented,
comply, or will comply, as the case may be, in all material respects
with the Securities Act and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment
thereto and as of the date of the Prospectus and any amendment or
supplement thereto, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
6. The Company covenants and agrees with the
several Underwriters as follows:
14
<PAGE>
(a) to use its best efforts to cause the Registration
Statement to become effective at the earliest possible time and, if
required, to file the final Prospectus with the Commission within the
time periods specified by Rule 424(b) and Rule 430A under the
Securities Act;
(b) to deliver, at the expense of the Company, to the
Representatives, six signed copies of the Registration Statement (as
originally filed) and each amendment thereto, in each case including
exhibits and documents incorporated by reference therein, and to each
other Underwriter a conformed copy of the Registration Statement (as
originally filed) and each amendment thereto, in each case without
exhibits but including the documents incorporated by reference therein
and, during the period mentioned in paragraph (e) below, to each of the
Underwriters as many copies of the Prospectus (including all amendments
and supplements thereto and documents incorporated by reference
therein) as the Representatives may reasonably request;
(c) before filing any amendment or supplement to the
Registration Statement or the Prospectus, whether before or after the
time the Registration Statement becomes effective, to furnish to the
Representatives a copy of the proposed amendment or supplement for
review and not to file any such proposed amendment or supplement to
which the Representatives reasonably object;
(d) to advise the Representatives promptly, and to deliver any
written communications from the Commission or any state securities
commission, (i) when the Registration Statement shall become effective,
(ii) when any amendment to the Registration Statement shall have become
effective, (iii) of any request by the Commission for any amendment to
the Registration Statement or any amendment or supplement to the
Prospectus or for any additional information, (iv) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation or threatening of any
proceeding for that purpose, and (v) of the receipt by the Company of
any notification with respect to any suspension of the qualification of
the Shares for offer and sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and to use its best
efforts to prevent the issuance of any
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<PAGE>
such stop order or notification and, if issued, to
obtain as soon as possible the withdrawal thereof;
(e) if, during such period of time after the first date of the
public offering of the Shares as in the opinion of counsel for the
Underwriters a prospectus relating to the Shares is required by law to
be delivered in connection with sales by the Underwriters or any
dealer, any event shall occur as a result of which it is necessary to
amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading, or if it is necessary to
amend or supplement the Prospectus to comply with law, forthwith to
prepare and furnish, at the expense of the Company, to the Underwriters
and to the dealers (whose names and addresses the Representatives will
furnish to the Company) to which Shares may have been sold by the
Representatives on behalf of the Underwriters and to any other dealers
upon request, such amendments or supplements to the Prospectus as may
be necessary so that the statements in the Prospectus as so amended or
supplemented will not, in the light of the circumstances when the
Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus will comply with law;
(f) to endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as the
Representatives shall reasonably request and to continue such
qualification in effect so long as reasonably required for distribution
of the Shares and to pay all fees and expenses (including fees and
disbursements of counsel to the Underwriters) reasonably incurred in
connection with such qualification; provided that the Company shall not
be required to file a general consent to service of process in any
jurisdiction;
(g) to make generally available to its security holders and to
the Representatives as soon as practicable an earnings statement
covering a period of at least twelve months beginning with the first
fiscal quarter of the Company occurring after the effective date of the
Registration Statement, which shall satisfy the provisions of Section
11(a) of the Securities Act and Rule 158 of the Commission promulgated
thereunder;
(h) so long as the Shares are outstanding, to
furnish to the Representatives copies of all reports or
other communications (financial or other) furnished to
16
<PAGE>
holders of Shares, and copies of any reports and
financial statements furnished to or filed with the
Commission or any national securities exchange;
(i) for a period of 120 days after the date of the Prospectus,
without the prior written consent of J.P. Morgan Securities Inc. not to
(i) offer, sell, contract to sell or grant any option to purchase or
otherwise dispose of any shares of common stock of the Company or any
securities convertible into or exercisable or exchangeable for shares
of common stock of the Company other than the Shares to be sold
hereunder and any shares of common stock of the Company issued upon the
exercise of options granted under existing employee stock option plans
or (ii) file any registration statement under the Securities Act with
respect to shares of common stock of the Company or any securities
convertible into or common exercisable or exchangeable for shares of
common stock of the Company; and
(j) to pay all costs and expenses incident to the performance
of the obligations hereunder of the Company and the Selling
Shareholders, including without limiting the generality of the
foregoing, all costs and expenses (i) incident to the preparation,
issuance, execution and delivery of the unlegended certificates
evidencing the Shares, (ii) incident to the preparation, printing and
filing under the Securities Act of the Registration Statement, the
Prospectus and any preliminary prospectus (including in each case all
exhibits, amendments and supplements thereto), (iii) incurred in
connection with the registration or qualification of the Shares under
the laws of such jurisdictions as the Representatives may designate
(including filing fees and fees of counsel for the Underwriters and its
disbursements), (iv) in connection with the quotation on The Nasdaq
National Market, (v) related to the filing with, and clearance of the
offering by, the National Association of Securities Dealers, Inc. and
(vi) in connection with the printing (including word processing and
duplication costs) and delivery of this Agreement, all other agreements
relating to underwriting and syndication arrangements, the Preliminary
and Supplemental Blue Sky Memoranda and the furnishing to the
Underwriters and dealers of copies of the Registration Statement and
the Prospectus, including mailing and shipping, as herein provided.
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<PAGE>
7. Each of the Selling Shareholders covenants
and agrees with the several Underwriters as follows:
(a) such Selling Shareholder will do or perform all things
required to be done or performed by such Selling Shareholder prior to
the Closing Date or any Additional Closing Date, as the case may be, to
satisfy all conditions precedent to the delivery of the Shares pursuant
to this Agreement;
(b) in order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Shareholder agrees to deliver to you prior
to or at the Closing Date or the Additional Closing Date, as
applicable, a properly completed and executed United States Treasury
Department Form W-9 or Form W-8, as applicable (or other applicable
forms or statements specified by Treasury Department regulations in
lieu thereof);
(c) for a period of 120 days after the date of this Agreement
not to offer, sell, contract to sell or otherwise dispose of any shares
of common stock of the Company or any securities convertible into or
exercisable or exchangeable for shares of common stock of the Company
without the prior written consent of J.P. Morgan Securities Inc., other
than the Shares to be sold hereunder, any shares of common stock of the
Company issued upon the exercise of outstanding options, the grant of
options under existing employee stock option plans, and shares issuable
upon the exercise of warrants outstanding on the date hereof; and
(d) such Selling Shareholder agrees to pay or cause to be paid
all taxes, if any, on the transfer and sale of the Shares being sold by
such Selling Shareholder.
8. The several obligations of the Underwriters
hereunder to purchase the Underwritten Shares are subject to
the following additional conditions:
(a) the Registration Statement shall have become effective (or
if a post-effective amendment is required to be filed under the
Securities Act, such post-effective amendment shall have become
effective) not later than 5:00 P.M., New York City time, on the date
hereof; and no stop order suspending the
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<PAGE>
effectiveness of the Registration Statement shall be in effect, and no
proceedings for such purpose shall be pending before or threatened by
the Commission; and all requests for additional information shall have
been complied with to the satisfaction of the Representatives;
(b) the representations and warranties of the Company
contained herein are true and correct on and as of the Closing Date as
if made on and as of the Closing Date and the Company shall have
complied with all agreements and all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date;
(c) subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, there shall not have occurred any
downgrading, nor shall any notice have been given of (i) any intended
or potential downgrading or (ii) any review or possible change that
does not indicate an improvement, in the rating accorded any securities
of or guaranteed by the Company by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act;
(d) since the respective dates as of which information is
given in the Registration Statement and the Prospectus there shall not
have been any Material Adverse Change or any development involving a
prospective Material Adverse Change, otherwise than as set forth or
contemplated in the Prospectus, the effect of which in the judgment of
the Representatives makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares on the terms and
in the manner contemplated in the Prospectus;
(e) the Representatives shall have received on and as of the
Closing Date a certificate of an executive officer of the Company
satisfactory to the Representatives to the effect set forth in
subsections (a) through (c) of this Section and to the further effect
that there has not occurred any Material Adverse Change, or any
development involving a prospective Material Adverse Change, from that
set forth or contemplated in the Registration Statement and the
Prospectus;
(f) Hunton & Williams, counsel for the Company, shall have
furnished to the Representatives their written opinion, dated the
Closing Date, in form and
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<PAGE>
substance satisfactory to the Representatives, to the
effect that:
(i) the Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation, with power and
authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus;
(ii) the Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it
owns or leases properties, or conducts any business, so as to
require such qualification, other than where the failure to be
so qualified or in good standing would not have a Material
Adverse Effect;
(iii) each of the Company's subsidiaries has been duly
incorporated and is validly existing as a corporation under
the laws of its jurisdiction of incorporation with power and
authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus and has
been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified
and in good standing would not have a Material Adverse Effect;
and all of the outstanding shares of capital stock of each
subsidiary have been duly and validly authorized and issued,
are fully paid and non-assessable, and (except in the case of
foreign subsidiaries, for directors' qualifying shares) are
owned directly or indirectly by the Company, free and clear of
all liens, encumbrances, equities or claims;
(iv) other than as set forth or contemplated in the
Prospectus, there are no legal or governmental proceedings
pending or, to the best of such counsel's knowledge,
threatened to which the Company or any of its subsidiaries is
or may be a party or to which any property of the Company or
its subsidiaries is or may be the subject which, if determined
adversely to the Company or such subsidiaries, could
individually or in the aggregate reasonably be expected to
have a
20
<PAGE>
Material Adverse Effect; to the best of such counsel's
knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others; and such
counsel does not know of any contracts or other documents of a
character required to be filed as an exhibit to the
Registration Statement or required to be described in the
Registration Statement or the Prospectus which are not filed
or described as required;
(v) this Agreement and each of the Custody
Agreements have been duly authorized, executed and
delivered by the Company;
(vi) the sale of the Shares by the Selling
Shareholders and the performance by the Company and the
Selling Shareholders of their respective obligations under
this Agreement and the Custody Agreements and the consummation
of the transactions contemplated herein and therein will not
result in any violation of the provisions of the Articles of
Incorporation or any law or statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company and its subsidiaries, the
Selling Shareholders or any of their respective properties;
and no consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency
or body is required for the sale of the Shares by the Selling
Shareholders or the consummation by the Company or the Selling
Shareholders of the transactions contemplated by this
Agreement or the Custody Agreements;
(vii) the authorized capital stock of the Company
conforms as to legal matters to the description thereof
contained in the Registration Statement and the Prospectus;
(viii) the shares of capital stock of the Company
outstanding (including the Shares to be sold by the Selling
Shareholders) have been duly and validly authorized and issued
by the Company, are registered in the books of the Company as
fully paid and conform to the description thereof in the
Prospectus; the holders of shares of common stock of the
Company are not subject to any preemptive or similar rights
under the laws of Virginia, the Articles of Incorporation or
the
21
<PAGE>
Bylaws; the registered holders have good and valid title to
their respective shares of common stock of the Company on the
assumption that they have not entered into any liens,
encumbrances, equities or claims which could give rise to any
equitable interest on the part of any third party in respect
of such shares of Common Stock;
(ix) the Shares to be issued and sold by the Company
hereunder have been duly authorized, and when delivered to and
paid for the Underwriters in accordance with the terms of this
Agreement, will be validly issued, fully paid and
non-assessable and the issuance of the Shares is not subject
to any preemptive or similar rights;
(x) the compliance by the Company and the Selling
Shareholders with their respective obligations under this
Agreement and the Custody Agreements and the consummation of
the transactions contemplated herein and therein do not
conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other similar
agreement or instrument of which such counsel has knowledge,
after inquiry of the Company's and its subsidiaries' officers,
to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of
its subsidiaries is subject;
(xi) assuming the representations of each Selling
Shareholder in the Custody Agreement of such Selling
Shareholder are true and correct (such counsel having made no
independent investigation with respect thereto), no consent,
approval, authorization, order, registration or qualification
of or with any court or governmental agency or body is
required for the sale of the Shares by the Selling
Shareholders or the consummation by the Selling Shareholders
or the Company of the other transactions contemplated by this
Agreement and the Custody Agreements, except such consents,
approvals, authorizations, registrations or qualifications as
have been obtained under the Securities Act and as may be
required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the
Underwriters;
22
<PAGE>
(xii) each of the Custody Agreements constitutes a
valid and binding agreement of the Company, enforceable in
accordance with its terms except as (a) the enforceability
thereof may be limited by bankruptcy, insolvency, or similar
laws affecting creditors' rights generally and (b) the
availability of equitable remedies may be limited by equitable
principles of general applicability;
(xiii) neither the Company nor any of its subsidiaries is,
or with the giving of notice or lapse of time or both would
be, in violation of or in default under, its Articles of
Incorporation or Bylaws or any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known
to such counsel to which the Company or any of its
subsidiaries is a party or by which it or any of them or any
of their respective properties is bound, except for violations
and defaults which individually and in the aggregate are not
material to the Company and its subsidiaries taken as a whole;
the issue and sale of the Shares and the performance by the
Company of its obligations under this Agreement and the
consummation of the transactions contemplated herein will not
conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other material
agreement or instrument known to such counsel to which the
Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound or to which any of
the property or assets of the Company or any of its
subsidiaries is subject, nor will any such action result in
any violation of the provisions of the Articles of
Incorporation, or the Bylaws of the Company or any applicable
law or statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the
Company, its subsidiaries or any of their respective
properties;
(xiv) the statements in the Prospectus under
"Description of Capital Stock" and "Underwriting," in the
Prospectus incorporated by reference from Item 3 of Part I of
the Company's Annual Report on Form 10-K for the year ended
April 29, 1995 and in the Registration Statement in Item 15,
insofar as such statements constitute a summary of the legal
matters, documents or proceedings referred to therein, fairly
present the information called for
23
<PAGE>
with respect to such legal matters, documents or
proceedings; and
(xv) such counsel (A) is of the opinion that each
document incorporated by reference in the Registration
Statement and the Prospectus (except for the financial
statements included therein as to which such counsel need
express no opinion) complied as to form in all material
respects, when filed with the Commission, with the Exchange
Act; (B) is of the opinion that the Registration Statement and
the Prospectus and any amendments and supplements thereto
(except for the financial statements included therein as to
which such counsel need express no opinion) comply as to form
in all material respects with the requirements of the
Securities Act and (C) believes that (except for the financial
statements included therein as to which such counsel need
express no belief) the Registration Statement and the
prospectus included therein at the time the Registration
Statement became effective did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and that the Prospectus as
amended or supplemented, if applicable, does not contain any
untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading.
In rendering such opinions, such counsel may rely (A)
as to matters involving the application of laws other than the laws of
the United States, the State of Virginia and the State of New York, to
the extent such counsel deems proper and to the extent specified in
such opinion, if at all, upon an opinion or opinions (reasonably
satisfactory to Underwriters' counsel) of other counsel reasonably
acceptable to the Underwriters' counsel, familiar with the applicable
laws; and (B) as to matters of fact, to the extent such counsel deems
proper, on certificates of responsible officers of the Company and
certificates or other written statements of officials of jurisdictions
having custody of documents respecting the corporate existence or good
standing of the Company. The opinion of such counsel for the Company
shall state that the opinion of any such other counsel is in form
satisfactory to such counsel and, in such counsel's opinion, the
24
<PAGE>
Underwriters and they are justified in relying thereon. With respect to
the matters to be covered in subparagraph (xvii) above, counsel may
state their opinion and belief is based upon their participation in the
preparation of the Registration Statement and the Prospectus and any
amendment or supplement thereto (including the documents incorporated
by reference therein) and review and discussion of the contents thereof
but is without independent check or verification except as specified.
(g) Counsel for each Selling Shareholder (which counsel shall
be acceptable to the Representatives), shall have furnished to the
Representatives their written opinion, dated the Closing Date, in form
and substance satisfactory to the Representatives, to the effect that:
(i) such Selling Shareholder has full right, power
and authority, and all authorization and approval required by
law, to enter into this Agreement and the Custody Agreement of
such Selling Shareholder and to sell, assign, transfer and
deliver the Shares to be sold by such Selling Shareholder
pursuant to this Agreement;
(ii) each of this Agreement and the Custody Agreement
of such Selling Shareholder has been duly authorized, executed
and delivered by or on behalf of such Selling Shareholder;
(iii) the Custody Agreement of such Selling
Shareholder is a valid and binding agreements of
such Selling Shareholder;
(iv) upon delivery of the Shares being sold by such
Selling Shareholder pursuant to this Agreement and payment
therefor as contemplated herein, the Underwriters will acquire
good and valid title to such Shares, free and clear of all
liens, encumbrances, equities or claims;
(v) the execution and delivery by or on behalf of
such Selling Shareholder of this Agreement and the Custody
Agreement of such Selling Shareholder, the sale of the Shares
to be sold by such Selling Shareholder pursuant to this
Agreement, the compliance by such Selling Shareholder with all
of the provisions of this Agreement and the Custody Agreement
of such Selling Shareholder and the consummation of the
25
<PAGE>
transactions herein and therein contemplated do not, to the
best of such counsel's knowledge after due inquiry, conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which such Selling Shareholder is a party or by
which such Selling Shareholder is bound or to which any of the
property or assets of such Selling Shareholder is subject, nor
does any such action conflict with or result in any breach or
violation of any of the provisions of the certificate or
articles of incorporation or by-laws of such Selling
Shareholder, if such Selling Shareholder is a corporation, or
if such Selling Shareholder is some other form of legal
entity, the organizational or other documents governing such
entity, or any applicable law or statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over such Selling Shareholder or any of its
property or assets;
(vi) no consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body having jurisdiction over such
Selling Shareholder or any property or assets of such Selling
Shareholder is required for the execution and delivery by or
on behalf of such Selling Shareholder of this Agreement or the
Custody Agreement of such Selling Shareholder, the sale of the
Shares to be sold by such Selling Shareholder pursuant to this
Agreement, the compliance by such Selling Shareholder with all
of the provisions of this Agreement and the Custody Agreement
of such Selling Shareholder or the consummation by such
Selling Shareholder of the transactions contemplated herein
and therein, except such consents, approvals, authorizations,
registrations or qualifications as have been obtained under
the Securities Act and as may be required under state
securities or Blue Sky laws in connection with the purchase
and distribution of the Shares by the Underwriters; and
(vii) the descriptions in the Registration Statement,
the Prospectus and any amendment or supplement thereto of
agreements, whether written or oral, and of other documents to
which the
26
<PAGE>
Selling Shareholder or any of its affiliates (other than the
Company) is a party, are accurate and fairly present the
information required to be shown with respect thereto by Form
S-3 under the Securities Act. There are no agreements, whether
written or oral, or other documents to which the Selling
Shareholder or any of its affiliates (other than the Company)
is a party, which, to the knowledge of such counsel, exist
that are required by the Securities Act or the rules and
regulations to be described in the Registration Statement or
filed as exhibits to the Registration Statement that are not
described or filed as required.
(h) on the effective date of the Registration Statement and
the effective date of the most recently filed post-effective amendment
to the Registration Statement and also on the Closing Date, KPMG Peat
Marwick LLP shall have furnished to the Representatives letters, dated
the respective dates of delivery thereof, in form and substance
satisfactory to the Representatives, containing statements and
information of the type customarily included in accountants "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained or incorporated by reference in
the Registration Statement and the Prospectus;
(i) the Representatives shall have received on and as of the
Closing Date an opinion of Davis Polk & Wardwell, counsel to the
Underwriters, with respect to the Registration Statement, the
Prospectus and other related matters as the Representatives may
reasonably request, and such counsel shall have received such papers
and information as they may reasonably request to enable them to pass
upon such matters;
(j) the Selling Shareholders shall have complied
with all agreements and satisfied all conditions on
their part to be performed or satisfied at or prior to
the Closing Date; and
(k) on or prior to the Closing Date the Company and each
Selling Shareholder shall have furnished to the Representatives such
further certificates and documents as the Representatives shall
reasonably request.
The several obligations of the Underwriters to purchase Option Shares hereunder
on the Additional Closing Date are, unless otherwise agreed by the Underwriters,
subject to the
27
<PAGE>
delivery to the Representatives on the Additional Closing Date of such documents
as they may reasonably request.
9. The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages and liabilities
(including, without limitation the legal fees and other expenses incurred in
connection with any suit, action or proceeding or any claim asserted) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
such Underwriter through the Representatives expressly for use therein; provided
that the foregoing indemnity with respect to any preliminary prospectus shall
not inure to the benefit of any Underwriter (or to the benefit of any person
controlling such Underwriter) from whom the person asserting any such losses,
claims, damages or liabilities purchased Shares if such untrue statement or
omission or alleged untrue statement or omission made in such preliminary
prospectus is eliminated or remedied in the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) and, if required by law, a copy of the Prospectus (as so amended or
supplemented) shall not have been furnished to such person at or prior to the
written confirmation of the sale of such Shares to such person.
Each Selling Shareholder, except Alex Grass and Martin Grass,
agrees, severally and not jointly, to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the Exchange
Act, from and against any and all losses, claims, damages and liabilities
(including, without limitation the legal fees and other expenses incurred in
connection with any suit, action or proceeding or any claim asserted) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Registration
28
<PAGE>
Statement or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) or any preliminary
prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only with reference to information relating to such
Selling Shareholder furnished in writing by or on behalf of such Selling
Shareholder for use in the Registration Statement, the Prospectus, any amendment
or supplement thereto, or any preliminary prospectus. Notwithstanding the
foregoing, no Selling Shareholder shall be liable hereunder for any amount in
excess of the total proceeds (before deducting expenses) received by such
Selling Shareholder from the Underwriters for the Shares sold by such Selling
Shareholder hereunder.
Each of Alex Grass and Martin Grass agrees, severally and not
jointly, to indemnify and hold harmless each Underwriter and each person, if
any, who controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act and the Company, its directors,
its officers who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of either such Section, from and against
any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
any suit, action or proceeding or any claim asserted) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading. Notwithstanding the foregoing, neither Alex
Grass nor Martin Grass shall be liable hereunder for any amount in excess of the
total proceeds (before deducting expenses) received by such Selling Shareholder
from the Underwriters for the Shares sold by Such Shareholder hereunder.
Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement, the Selling Shareholders and each person who
controls the Company or any Selling Shareholder within the meaning of Section 15
of the Securities Act and Section 20 of the Exchange Act, from and against any
and all losses, claims, damages and liabilities (including, without limitation
the legal fees and other expenses incurred in connection with
29
<PAGE>
any suit, action or proceeding or any claim asserted) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only with reference to information
relating to such Underwriter furnished to the Company in writing by such
Underwriter through the Representatives expressly for use in the Registration
Statement, the Prospectus, any amendment or supplement thereto, or any
preliminary prospectus.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
three preceding paragraphs, such person (the "Indemnified Person") shall
promptly notify the person against whom such indemnity may be sought (the
"Indemnifying Person") in writing, and the Indemnifying Person, upon request of
the Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Person has failed within
a reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood that the Indemnifying Person shall not, in connection with any
proceeding or related proceeding in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) (a) for all Underwriters and all persons, if any, who control any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, (b) for the Company, its directors, its officers
who sign the Registration Statement and each person, if any, who controls the
Company within the meaning of either such Section and (c) for all Selling
Shareholders
30
<PAGE>
and all persons, if any, who control any Selling Shareholder within the meaning
of either such Section, and that all such fees and expenses shall be reimbursed
as they are incurred. Any such separate firm for the Underwriters and such
control persons of the Underwriters shall be designated in writing by J.P.
Morgan Securities Inc.; any such separate firm for the Company, its directors,
its officers who sign the Registration Statement and such control persons of the
Company shall be designated in writing by the Company; and any such separate
firm for the Selling Shareholders and such control persons of Selling
Shareholders shall be designated by the Attorneys-in-Fact. The Indemnifying
Person shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees to indemnify any
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall have requested an Indemnifying Person to reimburse
the Indemnified Person for fees and expenses of counsel as contemplated by the
third sentence of this paragraph, the Indemnifying Person agrees that it shall
be liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after receipt
by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying
Person shall not have reimbursed the Indemnified Person in accordance with such
request prior to the date of such settlement. No Indemnifying Person shall,
without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on claims
that are the subject matter of such proceeding.
If the indemnification provided for in the first, second and
third paragraphs of this Section 9 is unavailable to an Indemnified Person in
respect of any losses, claims, damages or liabilities referred to therein, then
each Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Selling Shareholders on the one hand
and the Underwriters on the other hand from the offering of the
31
<PAGE>
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Selling Shareholders on the one hand and the Underwriters on
the other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Shareholders on the one hand and the Underwriters on the other shall be deemed
to be in the same respective proportions as the net proceeds from the offering
of the Shares (before deducting expenses) received by the Selling Shareholders
and the total underwriting discounts and the commissions received by the
Underwriters, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate public offering price of the Shares. The
relative fault of the Company and the Selling Shareholders on the one hand and
the Underwriters on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Selling Shareholders or by the Underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters
agree that it would not be just and equitable if contribution pursuant to this
Section 9 were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an Indemnified
Person as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 9, in no event (i)
shall an Underwriter be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages that such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission and (ii)
shall any Selling Shareholder be required to contribute any amount in excess
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<PAGE>
of the amount by which the total proceeds (before deducting expenses) received
by such Selling Shareholder from the Underwriters for the Shares sold by such
Selling Shareholder hereunder exceeds the amount of any damages that such
Selling Shareholder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 9 are several in proportion to the
respective number of Shares set forth opposite their names in Schedule I hereto,
and not joint.
The indemnity and contribution agreements contained in this
Section 9 are in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
The indemnity and contribution agreements contained in this
Section 9 and the representations and warranties of the Company and the Selling
Shareholders set forth in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, by or on behalf of any Selling Shareholder or any person
controlling any Selling Shareholder or by or on behalf of the Company, its
officers or directors or any person controlling the Company and (iii) acceptance
of and payment for any of the Shares.
10. Notwithstanding anything herein contained, this Agreement
(or the obligations of the several Underwriters with respect to the Option
Shares) may be terminated in the absolute discretion of the Representatives, by
notice given to the Company and the Attorneys-in-Fact, if after the execution
and delivery of this Agreement and prior to the Closing Date (or, in the case of
the Option Shares, prior to the Additional Closing Date) (i) trading generally
shall have been suspended or materially limited on or by any of the New York
Stock Exchange, the American Stock Exchange, The Nasdaq National Market, the
National Association of Securities Dealers, Inc., the Chicago Board Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii)
trading of any securities of the Company shall have been suspended or materially
limited in any over-the-counter market, (iii) a general moratorium on commercial
banking activities in New York shall have been declared by either
33
<PAGE>
U.S. Federal or New York State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in the judgment of the Representatives, is material and
adverse and which, in the judgment of the Representatives, makes it
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus.
11. This Agreement shall become effective upon the later of
(x) execution and delivery hereof by the parties hereto and (y) release of
notification of the effectiveness of the Registration Statement (or, if
applicable, any post-effective amendment) by the Commission.
If, on the Closing Date or the Additional Closing Date, as the
case may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they have agreed to purchase hereunder on such date,
and the aggregate number of Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase is not more than one-tenth
of the aggregate number of Shares to be purchased on such date, the other
Underwriters shall be obligated severally in the proportions that the number of
Shares set forth opposite their respective names in Schedule I hereto bears to
the aggregate number of Underwritten Shares set forth opposite the names of all
such non-defaulting Underwriters, or in such other proportions as the
Representatives may specify, to purchase the Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase on such
date; provided that in no event shall the number of Shares that any Underwriter
has agreed to purchase pursuant to Section 1 be increased pursuant to this
Section 11 by an amount in excess of one-ninth of such number of Shares without
the written consent of such Underwriter. If, on the Closing Date or the
Additional Closing Date, as the case may be, any Underwriter or Underwriters
shall fail or refuse to purchase Shares which it or they have agreed to purchase
hereunder on such date, and the number of Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Shares to be
purchased on such date, and arrangements satisfactory to the Representatives,
the Selling Shareholders and the Company for the purchase of such Shares are not
made within 36 hours after such default, this Agreement (or the obligations of
the several Underwriters to purchase the Option Shares, as the case may be)
shall terminate without liability on the part of any non-defaulting Underwriter,
the Selling Shareholders or the Company. In any such case the Representatives,
the Selling Shareholders or the Company shall have the right to postpone
34
<PAGE>
the Closing Date (or, in the case of the Option Shares, the Additional Closing
Date), but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and in the Prospectus or in any
other documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
12. If this Agreement shall be terminated by the Underwriters,
or any of them, because of any failure or refusal on the part of the Company or
any Selling Shareholder to comply with the terms or to fulfill any of the
conditions of this Agreement, or if for any reason the Company or any Selling
Shareholder shall be unable to perform its obligations under this Agreement or
the Custody Agreement of such Selling Shareholder or any condition of the
Underwriters' obligations cannot be fulfilled, the Company agrees to reimburse
the Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
fees and expenses of their counsel) reasonably incurred by such Underwriters in
connection with this Agreement or the offering contemplated hereunder.
13. This Agreement shall inure to the benefit of and be
binding upon the Company, each Selling Shareholder, the Underwriters, any
controlling persons referred to herein and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any other person, firm or corporation any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. No purchaser of Shares from any Underwriter shall be
deemed to be a successor by reason merely of such purchase.
14. Any action by the Underwriters hereunder may be taken by
the Representatives jointly or by J.P. Morgan Securities Inc. alone on behalf of
the Underwriters, and any such action taken by the Representatives jointly or by
J.P. Morgan Securities alone shall be binding upon the Underwriters. All notices
and other communications hereunder shall be in writing and shall be deemed to
have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be given to the
Representatives c/o J.P. Morgan Securities Inc., 60 Wall Street, New York, New
York 10260 (telex: _______); Attention: Syndicate Department. Notices to the
Company shall be given to it at
35
<PAGE>
- ----------------------, -------------, ----------------,
(telex:________); Attention:___________.
15. This Agreement may be signed in counterparts, each of
which shall be an original and all of which together shall constitute one and
the same instrument. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
conflicts of laws provisions thereof.
36
<PAGE>
If the foregoing is in accordance with your understanding,
please sign and return four counterparts hereof.
Very truly yours,
RICHFOOD HOLDINGS, INC.
By:_________________________
Title:
EACH OF THE SELLING SHAREHOLDERS
NAMED IN SCHEDULES II AND III
HERETO
By:
Name: Alex Grass
Attorney-in-Fact
Accepted: _______________, 1996
J.P. MORGAN SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
WHEAT, FIRST SECURITIES, INC.
INTERSTATE/JOHNSON LANE CORPORATION
Acting severally on behalf of
themselves and the
several Underwriters listed
in Schedule I hereto.
By: J.P. Morgan Securities Inc.
Acting on behalf of itself and the
several Underwriters listed in
Schedule I hereto.
By: ________________________
Title:
37
<PAGE>
SCHEDULE I
Number of Shares
Underwriter To Be Purchased
J.P. Morgan Securities Inc. . . . . . . . . . . . . . . .
Donaldson, Lufkin & Jenrette
Securities Corporation. . . . . . . . . . . . . . . . .
Wheat, First Securities, Inc. . . . . . . . . . . . . . .
Interstate/Johnson Lane
Corporation . . . . . . . . . . . . . . . . . . . . . .
----------------
Total: . . . . . . . . . . . .
1
<PAGE>
SCHEDULE II
Number of
Underwritten
Shares
Selling Shareholder To Be Sold
Alex Grass........................................ 1,057,863
Louise Grass...................................... 4,484
Martin Grass...................................... 1,234,116
Trust f/b/o Martin Grass' Children................ 397,689
Elizabeth Grass Weese Trust....................... 182,650
Trusts f/b/o Linda Grass Shapiro's Children....... 182,650
Peter Vanderveen.................................. 43,957
Peter Vanderveen and Lois Vanderveen.............. 214,212
David Grundling................................... 126,985
H. Irwin Levy..................................... 2,697
Neil Norry........................................ 2,697
Total: ....................................... 3,450,000
2
<PAGE>
SCHEDULE III
Maximum
Number of Optional Shares
Selling Shareholder To Be Sold
Total: ......................................... ----------------
<PAGE>
RICHFOOD HOLDINGS, INC.
SECONDARY OFFERING OF COMMON STOCK
CUSTODY AGREEMENT
AND POWER OF ATTORNEY
The undersigned (the "Shareholder") has irrevocably elected, pursuant
to an election form submitted by the undersigned to Richfood Holdings, Inc. (the
"Company") in compliance with the registration rights provisions of the
Agreement and Plan of Reorganization, by and between the Company and Super Rite
Corporation (the "Registration Rights Provisions"), to sell _____ shares of
common stock, without par value (the "Common Stock") of the Company, such shares
being represented by the certificate(s) described in such election form (the
"Certificates"), to certain underwriters for whom J.P. Morgan Securities Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation, Interstate/Johnson Lane
Corporation and Wheat, First Securities, Inc. are acting as representatives
(collectively, the "Underwriters"), pursuant to the terms and conditions of the
Underwriting Agreement referred to below. The Shareholder understands that the
Underwriters propose to offer the shares of Common Stock purchased from the
Shareholder for sale to the public and that, in connection with such offering,
the Company has filed a Registration Statement on Form S-3, No. 333 -
___________ (the "Registration Statement") with the Securities and Exchange
Commission to register all of the shares of Common Stock tendered for sale by
the Selling Shareholders (as defined below) under the Securities Act of 1933, as
amended (the "Securities Act").
1. Definitions. When used herein, the following terms shall have the
following meanings, unless the context otherwise requires:
"Attorney": Alex Grass, as attorney-in-fact for the
Shareholder appointed pursuant to Section 12 hereof.
"Final Prospectus": The form of final prospectus relating to
the Securities and included in the Registration Statement, including any
information omitted therefrom at the time of effectiveness of such Registration
Statement in accordance with the rules and regulations of the Securities and
Exchange Commission under the Securities Act.
"NASDAQ": The Nasdaq National Market.
"Offering": The offering of the Securities to the
public pursuant to the Registration Statement.
"Securities": The shares of Common Stock that the
Shareholder has elected to sell in the Offering.
"Selling Shareholders": Those shareholders of the
Company who, together with the undersigned, have elected pursuant
<PAGE>
to an election form submitted to the Company to sell all or a portion of the
shares of Common Stock held by such shareholders in connection with the
Offering.
"Underwriting Agreement": The agreement by and among the
Company, the Selling Shareholders and the Underwriters pursuant to which the
Underwriters shall agree, severally and not jointly and subject to certain
conditions, to purchase the Securities from the Selling Shareholders and to
offer such Securities for sale to the public pursuant to the Registration
Statement.
2. Deposit of Certificates. The Shareholder herewith deposits with the
Company, as Custodian, the Certificates. Each such Certificate is in negotiable
form (the "Custodian"), or is accompanied by a duly executed stock power or
powers in blank, bearing the Shareholder's signature.
3. Negotiation of Underwriting Agreement. The Shareholder hereby
authorizes and directs the Company to negotiate an Underwriting Agreement on the
Shareholder's behalf, subject in form and substance to the approval of the
Attorney, that shall provide for the sale of the Securities to the Underwriters
on a firm commitment basis with an underwriting discount to the Underwriters not
to exceed %. The Company hereby agrees to use its best efforts to negotiate
an Underwriting Agreement on behalf of the Shareholder meeting the conditions
specified herein. The Shareholder understands and acknowledges that the
obligations of the Underwriters pursuant to the Underwriting Agreement shall be
subject to (i) approval of certain legal matters by counsel to the Underwriters,
and (ii) various other conditions including, without limitation, certain market
conditions.
4. Expenses of Offering. In accordance with the Registration Rights
Provisions, the Company shall pay all costs and expenses associated with the
Offering, except the underwriting discount paid to the Underwriters in
connection with the sale of the Securities to the public and the fees and
expenses of any attorneys or advisors retained by any individual selling
Shareholder in connection with the Offering or the transactions contemplated
hereby. The Shareholder shall pay the Underwriter the underwriting discount, set
forth in the Underwriting Agreement, allocable to the Securities of the
Shareholder sold in the Offering and shall pay the fees and expenses of any
attorneys or advisors retained by the individual Shareholder in connection with
the Offering and the transactions contemplated hereby.
5. Authorization of the Custodian to Act. The Custodian is hereby
authorized and directed, subject to the instructions of the Attorney as provided
in Section 11 hereof, to (a) hold the
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<PAGE>
Certificates delivered herewith in custody; (b) permit the Company's transfer
agent to examine the Certificates, together with any related stock powers,
certificates of qualification or other documents, so as to satisfy the transfer
agent that the Custodian holds the shares of Common Stock delivered herewith in
transferable form; (c) cause to be issued, against surrender of the
Certificates, new certificates (which certificates shall not bear any legends),
registered in such names and denominations as the Underwriters shall have
instructed; (d) cause to deliver such new certificates to the Underwriters at
the time and date for delivery in accordance with the Underwriting Agreement
(each such time and date of delivery of any shares of Common Stock pursuant to
the Underwriting Agreement, a "Time of Delivery") for the accounts of the
Underwriters under the Underwriting Agreement; (e) on the Shareholder's behalf,
accept and acknowledge receipt of payment by check, in accordance with the
Underwriting Agreement, of the purchase price for the Securities, net of the
underwriting discount and any taxes, fees and expenses to be paid by the
Shareholder pursuant to the Underwriting Agreement; and (f) deliver such check
to the Shareholder at the address listed below.
6. Representations, Warranties and Agreements. Without limiting
paragraph 7 in any respect, the Shareholder hereby represents and warrants as
follows:
(a) The Shareholder has, and at each Time of Delivery will
have, full right and power and all authorizations and approvals required by law
or otherwise to enter into this Custody Agreement and the Underwriting
Agreement, to carry out the terms and provisions hereof and of the Underwriting
Agreement and to make all of the representations, warranties and agreements
contained herein and in the Underwriting Agreement as of the date hereof and as
of the date such Underwriting Agreement is executed and at each Time of
Delivery.
(b) This Custody Agreement is, and the Underwriting Agreement
will be, the valid and binding agreements of the Shareholder in accordance with
their respective terms.
(c) The execution and delivery of this Custody Agreement and
the consummation of the transactions contemplated hereby and the fulfillment of
the terms hereof will not conflict with or result in the breach of any of the
terms, provisions, or conditions of, or constitute a default under, any note,
indenture, mortgage, deed or declaration of trust, agreement, or other
instrument, if any, to which the Shareholder is a party or by which Shareholder
is bound, or any existing law, order, rule, regulation, writ, injunction,
judgment or decree of any government, governmental instrumentality, agency or
body, arbitration tribunal or court, domestic or foreign, having jurisdiction
over the Shareholder or the Shareholder's property.
3
<PAGE>
(d) When the Securities are accepted for payment by the
Underwriters, and upon payment of the purchase price therefor, the Underwriters
will acquire good, marketable and unencumbered title to the Securities, free and
clear of all liens, restrictions, charges, encumbrances and adverse claims.
(e) The Shareholder will not directly or indirectly sell any
shares of Common Stock prior to the Offering (other than the Securities to the
Underwriters in accordance with the Underwriting Agreement).
(f) The Shareholder is not directly or indirectly affiliated
or associated with any member of the National Association of Securities Dealers,
Inc. (whether by means of employment, family relationship, shareholdings or
otherwise).
(g) Except as set forth below, since May 1, 1994: (i) the
Shareholder has not, and no member of Shareholder's immediate family has,
entered into any transaction or series of transactions with the Company or any
of its subsidiaries involving an amount in excess of $60,000; (ii) the
Shareholder has not, and no member of Shareholder's immediate family,
corporation (other than the Company) or partnership of which Shareholder or
members of Shareholder's immediate family are executive officers, or own more
than 10 percent of any class of equity securities or partnership interests has,
become indebted to the Company for an amount in excess of $60,000; and (iii) the
Shareholder has not served as an executive officer of, or owned, directly or
indirectly, in excess of 10 percent equity interest in, any firm, corporation or
other business entity (A) that has made or proposes to make during the coming
fiscal year payments to the Company or its subsidiaries in excess of $_____
million; (B) to which the Company or its subsidiaries was indebted for an amount
in excess of $__________ million; or (C) to which the Company made, or proposes
to make during the coming fiscal year, payments in excess of $__________
million. (Attach a sheet, if necessary)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The foregoing representations, warranties and agreements, together with
any information provided in response to subparagraph (g) above, are made, or
provided, for the benefit of the Attorney, the Company, the Underwriters and
their respective representatives, agents and assigns and may be relied upon by
such persons or entities. The Shareholder understands and agrees
4
<PAGE>
that (i) any information provided in response to subparagraph (g) above may be
used by the Company in the preparation of the Final Prospectus, and (ii) certain
of the representations and warranties included in this Section 6 shall be
included in the Underwriting Agreement and made by the Attorney on behalf of the
Shareholder. In the event any such information, representation or warranty is
untrue or incorrect in any material respect, the Shareholder shall be obligated,
pursuant to the Underwriting Agreement, to indemnify each of the Company and the
Underwriters for any losses, including attorneys' fees and expenses, that the
Company or the Underwriters may suffer as a result of such misrepresentation or
inaccuracy.
7. Certificates. (a) The Shareholder, for the benefit of the Attorney,
the Company and the Underwriters, hereby certifies that the representations and
warranties and agreements to be made by the Shareholder in the Underwriting
Agreement (in substantially the form provided to the Shareholder) will be true
and correct at and as of the date such Underwriting Agreement is executed and at
and as of each Time of Delivery;
(b) For purposes of rendering an opinion pursuant to the
Underwriting Agreement, Hunton & Williams; Neuberger, Quinn, Gielen, Rubin &
Gibber, P.A.; and Davis Polk & Wardwell (and such other counsel as may be
required to render an opinion pursuant thereto) may rely on the representations
and warranties of the Shareholder set forth herein and in the Underwriting
Agreement as if said representations and warranties had been set forth in a
separate certificate directed to said counsel at and as of each Time of
Delivery; and
(c) For purposes of delivering any certificate on behalf of
the Shareholder which may be required in connection with the delivery of the
Shareholder's securities pursuant to the Underwriting Agreement, the Attorney
may rely on the representations and warranties of the Shareholder set forth
herein and in the Underwriting Agreement as if said representations and
warranties had been set forth in a separate certificate directed to the Attorney
at and as of each Time of Delivery.
8. Offering Not Conducted. If the Underwriting Agreement is not entered
into for any reason, or if the Securities are not accepted by the Underwriters
against payment therefor in accordance with the provisions of the Underwriting
Agreement or if the Underwriting Agreement is otherwise terminated, the
Custodian, after all obligations of the Shareholder under this Agreement and the
Underwriting Agreement, for expenses or otherwise, have been fulfilled, shall
promptly cause to be delivered to the Shareholder the Certificates delivered by
the Shareholder hereunder, together with all stock powers and other
5
<PAGE>
documents delivered to the Custodian in connection with such stock certificates.
9. Dividend and Voting Rights. Until the Securities have been delivered
to the Underwriters against payment therefor in accordance with the Underwriting
Agreement, the Shareholder shall retain all rights of ownership with respect to
the Securities, including the right to vote and to receive any dividends and
payments due on the Securities, except the right to dispose of the Securities,
which right is subject to the terms and conditions contained in this Agreement
and, following execution of the Underwriting Agreement on behalf of the
Shareholder, the Underwriting Agreement.
10. Effect of the Company's Signature. The Company's execution of this
Agreement shall evidence its acknowledgment, as Custodian, of receipt of the
Certificates and shall constitute the acceptance by the Company of the
authorizations and duties herein contained and the agreement of the Company to
carry out and perform its duties hereunder, regardless of the capacity in which
the Company is required to exercise such duties.
11. Liability and Indemnification of the Company. The Company is
authorized to take any and all actions hereunder as it shall, in its own
discretion, determine. The Company, regardless of the capacity in which it acts
hereunder, assumes no responsibility or liability to the Shareholder or to any
other person, other than to deal with the Securities in accordance with the
provisions of this Agreement. The Shareholder agrees to indemnify and hold the
Company harmless with respect to anything done by it in good faith in connection
with any and all matters contemplated herein or by the Underwriting Agreement,
regardless of the capacity in which it acts. The Company, in its capacity as
Custodian, shall be entitled to act and rely upon any statement, request, notice
or instruction respecting this Agreement given by the Attorney.
12. Power of Attorney. (a) The Shareholder hereby irrevocably appoints
Alex Grass as such Shareholder's attorney-in-fact with full power and authority
in the name, and on behalf, of the Shareholder to do and perform the following
as fully as could the Shareholder if personally present and acting:
(i) Subject to limitations and conditions set forth
herein, to sell, assign and transfer the Securities to the Underwriters and, in
connection therewith, to agree upon the underwriting discount and the price at
which the Securities will be initially offered to the public by the Underwriters
pursuant to the Underwriting Agreement;
(ii) For the purpose of effecting such sale and
subject to Section 3 hereof, to: (A) execute and deliver on
6
<PAGE>
behalf of the Shareholder an Underwriting Agreement among the Company, the
Selling Shareholders and the Underwriters; (B) comply with all provisions of the
Underwriting Agreement, including the making of all representations, warranties
and agreements provided in the Underwriting Agreement to be made by the
Shareholder (provided that all such representations, warranties and covenants
are several and not joint); (C) execute and deliver all documents on behalf of
the Shareholder required by the Underwriting Agreement; (D) exercise all
authority given to the Shareholder by the Underwriting Agreement; and (E) agree
or covenant on behalf of the Shareholder that the Shareholder, for a period of
one hundred twenty (120) days after the date of the Final Prospectus, (1) will
not, directly or indirectly, sell any shares of Common Stock without the prior
written consent of J. P. Morgan Securities Inc., and (2) has not and will not
distribute any prospectus or other offering material for the purpose of offering
or selling the Securities or any other shares of Common Stock held by the
Shareholder;
(iii) To give such orders and instructions to the
Custodian as the Attorney may in his sole discretion determine, with respect to:
(A) the transfer on the books of the Company of the Securities in order to
effect the sale to the Underwriters (including the names in which new stock
certificates representing the Securities are to be issued and the denominations
thereof); (B) the delivery to or for the account of the Underwriters of
Certificates against receipt by the Custodian of the purchase price to be paid
therefor; and (C) the disposition of the net proceeds from the sale of the
Securities in accordance with paragraph 5 hereof;
(iv) If necessary, to endorse (in blank or otherwise)
on behalf of the Shareholder the Certificates delivered hereunder, as well as
the stock powers attached to such stock certificates; and
(v) To make, execute, acknowledge and deliver all
such other orders, receipts, notices, requests, instructions, certificates,
letters and other writings, including communications to the Securities and
Exchange Commission, the National Association of Securities Dealers, Inc. and
the securities or Blue Sky commissions of any jurisdiction, and amendments to
the Underwriting Agreement, and in general to do all things and to take all
actions that the Attorney, in his sole discretion, may consider necessary or
proper in connection with or to carry out the aforesaid sale of Securities to
the Underwriters.
(b) This power of attorney and all authority conferred hereby
are granted and conferred subject to the interests of the Underwriter and the
Company and in consideration of those interests, and for the purpose of
completing the transactions
7
<PAGE>
contemplated herein and the Underwriting Agreement. This power of attorney and
all authority conferred hereby is coupled with an interest and shall be
irrevocable and shall not be terminated by any act of the Shareholder, or
operation of law, whether by the death, incapacity, insolvency or dissolution of
the Shareholder, or the occurrence of any other event. If the Shareholder should
die, become incapacitated or insolvent or should dissolve or if any other such
event shall occur before the delivery of the Securities to the Underwriters
pursuant to the Underwriting Agreement, the Certificates shall be delivered by
or on behalf of the Shareholder in accordance with the terms and conditions of
this Agreement and the Underwriting Agreement, and actions taken by the Attorney
pursuant to this power of attorney shall be as valid as if such death,
incapacity or other event had not occurred, regardless of whether the Custodian,
the Attorney or any of them shall have received notice thereof.
(c) The Shareholder hereby ratifies all that the Attorney
shall do by virtue of this power of attorney.
(d) The Shareholder agrees to hold the Attorney free and
harmless from any and all loss, damage or liability that he may sustain as a
result of any action taken in good faith hereunder.
13. Irrevocability. This agreement shall not be terminated by operation
of law or upon the occurrence of any event whatsoever, including the death,
incapacity or insolvency of the Shareholder (if the Shareholder is an
individual), or by the death or incapacity of any executor or trustee (if the
Shareholder is an estate or trust), or the termination of such estate or trust,
or by the dissolution or insolvency of the Shareholder (if the Shareholder is a
partnership or corporation), or by the occurrence of any other event or events,
and the obligations of the Shareholder under the Underwriting Agreement
similarly are not to be subject to termination. If any such event occurs,
whether with or without notice thereof to the Company, the Attorney or any other
person or entity, the Company shall nevertheless be authorized to deliver and
deal with the Certificates, the shares represented thereby and any stock into
which such shares are converted on the Shareholder's behalf in accordance with
the terms and provisions of this Agreement and the Underwriting Agreement as if
such event had not occurred. Notwithstanding the foregoing, if the Underwriting
Agreement shall not have been executed by all parties thereto before the close
of business on May 31, 1996, then, from and after such date, the Shareholder
shall have the power, by giving written notice to the Attorney, at the address
set forth below, to terminate this agreement, subject, however, to all lawful
action taken or performed by the Attorney pursuant to this power of attorney
before the actual receipt of such notice.
8
<PAGE>
14. Acceptance by the Custodian of this Custody Agreement by the
execution hereof shall constitute an acknowledgment by the Custodian of receipt
of the Certificates and the acceptance by the Custodian of the authorization
herein conferred and shall evidence the Custodian's agreement to carry out and
perform this Custody Agreement in accordance with its terms.
15. This Custody Agreement may be executed in any number of
counterparts, which together shall constitute one and the same instrument.
16. This Custody Agreement for all purposes shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia.
17. Any notice given pursuant to this Custody Agreement shall be deemed
given if in writing and delivered in person, or if given by telephone or
telegraph if subsequently confirmed in writing (i) to the Shareholder at the
address set forth below the Shareholder's signature, (ii) to the Company, at its
office, 8258 Richfood Road, Mechanicsville, Virginia 23111, and (iii) to the
Underwriters, c/o J. P. Morgan Securities Inc., 60 Wall Street, New York, New
York, 10260. The Custodian shall be entitled to act and rely upon any statement,
request or notice with respect to the Custody Agreement given to the Custodian
on behalf of the Shareholder if the same shall be made or given to the Custodian
by any of the Attorneys acting on behalf of the Shareholder.
IN WITNESS WHEREOF, the undersigned, having read and agreed to all the
terms and conditions set forth herein, has executed this Agreement as of March
___, 1996.
[Name as it appears on the Certificates]
----------------------------------------
Signature
----------------------------------------
----------------------------------------
----------------------------------------
(Address to which payment should be sent)
9
<PAGE>
ACKNOWLEDGMENT
On this _____ day of __________, 1996, before me appeared
___________________, the person who signed the foregoing instrument, who
acknowledged that he or she signed it on behalf of the identified corporation
with full authority to do so.
STATE OF ___________________ )
)
COUNTY OF _________________ )
Subscribed and sworn to before me this ____ day of _________________,
1996.
My commission expires: _________________.
------------------------
Notary Public
10
<PAGE>
ACCEPTED:
RICHFOOD HOLDINGS, INC.
- ---------------------------------------
By: Daniel R. Schnur
Title: Senior Vice President,
Secretary and General Counsel
11
EXHIBIT 5
March 19, 1996
The Board of Directors
Richfood Holdings, Inc.
8258 Richfood Road
Mechanicsville, Virginia 23111
RICHFOOD HOLDINGS, INC.
REGISTRATION STATEMENT ON FORM S-3
Lady and Gentlemen:
We have acted as counsel to Richfood Holdings, Inc., a Virginia corporation
(the "Company"), in connection with its Registration Statement on Form S-3 as
filed with the Securities and Exchange Commission on March 19, 1996 (the
"Registration Statement"), with respect to 3,925,845 shares of the Company's
Common Stock, without par value (the "Shares"), which are proposed to be offered
and sold as described in the Registration Statement.
In rendering this opinion, we have relied upon, among other things, our
examination of such records of the Company and certificates of its officers and
of public officials as we have deemed necessary.
Based upon the foregoing and the further qualifications stated below, we
are of the opinion that:
1. The Company is duly incorporated, validly existing and in good standing
under the laws of the Commonwealth of Virginia; and
2. The 3,925,845 Shares covered by the Registration Statement have been
duly authorized and are legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
statement made in reference to this firm under the caption "Legal Matters" in
the Registration Statement.
Very truly yours,
/s/ HUNTON & WILLIAMS
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Richfood Holdings, Inc.:
We consent to the inclusion in the registration statement on Form S-3 of
Richfood Holdings, Inc. of our report dated March 15, 1996, relating to the
consolidated balance sheets of Richfood Holdings, Inc. and subsidiaries as of
April 29, 1995 and April 30, 1994, and the related consolidated statements of
earnings, shareholders' equity and cash flows for each of the fiscal years in
the three-year period ended April 29, 1995. Our report dated March 15, 1996
refers to the fact that the consolidated financial statements included in the
registration statement give effect to the merger on October 15, 1995 of a
wholly-owned subsidiary of Richfood Holdings, Inc. with and into Super Rite
Corporation, which has been accounted for using the pooling of interests method.
We also consent to incorporation by reference in the registration statement on
Form S-3 of Richfood Holdings, Inc. of our reports dated June 5, 1995, relating
to the consolidated balance sheets of Richfood Holdings, Inc. and subsidiaries
as of April 29, 1995 and April 30, 1994, the related consolidated statements of
earnings, shareholders' equity and cash flows, and the related financial
statement schedules, for each of the fiscal years in the three-year period ended
April 29, 1995 (such consolidated financial statements and financial statement
schedules are prior to retroactive restatement to account for the pooling of
interests with Super Rite Corporation), which reports are included in or
incorporated by reference into the Form 10-K of Richfood Holdings, Inc. for the
fiscal year ended April 29, 1995, incorporated by reference into the
registration statement. We further consent to the references to our firm under
the headings "Selected Financial and Operating Data" and "Experts" in the
prospectus.
/s/ KPMG Peat Marwick LLP
Richmond, Virginia
March 18, 1996
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this registration statement of
Richfood Holdings, Inc. on Form S-3 of our report dated April 21, 1995, except
for the sixth paragraph of Note 7 which is dated as of May 5, 1995, on our
audits of the consolidated financial statements and financial statement
schedules of Super Rite Corporation as of March 4, 1995 and
February 26, 1994 and for the fifty-three week period ended March 4, 1995 and
for each of the fifty-two week periods in the two-year period ended February 26,
1994, which report is included in the 1995 annual report on Form 10-K, as
amended by Form 10-K/A, which is incorporated by reference in this Registration
Statement on Form S-3.
/s/ COOPERS & LYBRAND L.L.P.
One South Market Square
Harrisburg, Pennsylvania
March 18, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> APR-29-1995
<PERIOD-END> APR-29-1995
<CASH> 29,381
<SECURITIES> 0
<RECEIVABLES> 107,651
<ALLOWANCES> 3,667
<INVENTORY> 147,005
<CURRENT-ASSETS> 304,339
<PP&E> 218,220
<DEPRECIATION> 870,959
<TOTAL-ASSETS> 580,770
<CURRENT-LIABILITIES> 231,559
<BONDS> 0
63,978
0
<COMMON> 0
<OTHER-SE> 160,330
<TOTAL-LIABILITY-AND-EQUITY> 580,770
<SALES> 2,992,735
<TOTAL-REVENUES> 2,992,735
<CGS> 2,695,020
<TOTAL-COSTS> 2,695,020
<OTHER-EXPENSES> 216,099
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,312
<INCOME-PRETAX> 66,643
<INCOME-TAX> 27,425
<INCOME-CONTINUING> 39,218
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,218
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.26
</TABLE>
