SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended July 26, 1997.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period_________________ to ___________________.
Commission file number: 0-16900
RICHFOOD HOLDINGS, INC.
Incorporated under the laws I.R.S. Employer Identification
of Virginia No. 54-1438602
8258 Richfood Road
Mechanicsville, Virginia 23116
Telephone Number (804) 746-6000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x . No .
The number of shares outstanding of the Registrant's common stock as of
September 1, 1997, was as follows:
Common Stock, without par value: 47,499,691 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
<TABLE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollar amounts in thousands, except per share data)
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(Unaudited)
First Quarter Ended
--------------------------------------------------------
July 26, July 20,
1997 % 1996 %
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Sales $ 739,125 100.00 $ 753,383 100.00
Costs and expenses:
Cost of goods sold 659,733 89.26 675,484 89.66
Operating and adminis-
trative expenses 55,717 7.54 56,162 7.45
Interest expense 854 0.12 1,674 0.22
Interest income (941) (0.13) (758) (0.09)
----------- ---- ----------- ----
Earnings before income taxes 23,762 3.21 20,821 2.76
Income taxes 9,256 1.25 8,376 1.11
----------- ---- ----------- ----
Net earnings $ 14,506 1.96 $ 12,445 1.65
=========== ==== =========== ====
Net earnings per
common share $ .31 $ .26
=========== ===========
Cash dividends declared
per common share $ .04 $ .03
=========== ===========
Average common shares
outstanding 47,434,319 47,163,086
=========== ===========
See accompanying Notes to the Consolidated Financial Statements.
2
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
July 26, May 3,
1997 1997
(Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 21,382 $ 10,416
Receivables, less allowance for doubtful
accounts of $3,396 and $3,445 102,324 104,739
Inventories 169,141 163,510
Other current assets 13,741 14,426
------------ ------------
Total current assets 306,588 293,091
------------ ------------
Notes receivable, less allowance for
doubtful accounts of $1,836 and $1,886 33,036 34,639
Property and equipment, net 122,808 121,594
Goodwill, net 86,712 87,520
Other assets 42,742 44,636
------------ ------------
Total assets $ 591,886 $ 581,480
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt $ 10,527 $ 10,656
Accounts payable 181,936 209,207
Accrued expenses and other current liabilities 62,935 51,360
------------ ------------
Total current liabilities 255,398 271,223
------------ ------------
Long-term debt 43,294 32,069
Deferred credits and other 18,704 19,538
Shareholders' equity:
Preferred stock, without par value:
Authorized shares - 5,000,000;
none issued or outstanding - -
Common stock, without par value:
Authorized shares - 90,000,000;
issued and outstanding shares
47,495,154 and 47,401,770 73,592 72,258
Retained earnings 200,898 186,392
------------ ------------
Total shareholders' equity 274,490 258,650
------------ ------------
Total liabilities and shareholders' equity $ 591,886 $ 581,480
============ ===========
See accompanying Notes to the Consolidated Financial Statements.
3
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
(Unaudited)
-----------
July 26, July 20,
1997 1996
(12 weeks) (12 weeks)
- -----------------------------------------------------------------------------------------------------------------------------
Operating activities:
Net earnings $ 14,506 $ 12,445
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 7,254 6,709
Provision for doubtful accounts 896 785
Other, net (56) (85)
Changes in operating assets and liabilities:
Receivables 2,811 (6,306)
Inventories (5,631) 980
Other current assets 1,311 412
Accounts payable, accrued expenses
and other liabilities (15,308) 10,096
------------ -----------
Net cash provided by operating activities 5,783 25,036
------------ -----------
Investing activities:
Purchases of property and equipment (5,503) (3,684)
Issuance of notes receivable (1,577) (6,493)
Collections on notes receivable 1,888 2,079
Other, net (7) (2,409)
------------ -----------
Net cash used for investing activities (5,199) (10,507)
------------ -----------
Financing activities:
Net proceeds from (repayments on) long-term debt 11,096 (9,523)
Proceeds from issuance of common stock
under employee stock incentive plans 708 759
Cash dividends paid on common stock (1,422) (943)
------------ -----------
Net cash provided by (used for) financing activities 10,382 (9,707)
------------ ------------
Net increase in cash and cash equivalents 10,966 4,822
Cash and cash equivalents at beginning of period 10,416 17,415
------------ -----------
Cash and cash equivalents at end of period $ 21,382 $ 22,237
============ ===========
See accompanying Notes to the Consolidated Financial Statements.
</TABLE>
4
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO THE 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 May 3, 1997, which has been
derived from the audited consolidated balance sheet as of that date)
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 May 3, 1997
("fiscal 1997"). 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 Richfood Holdings, Inc. and
subsidiaries included in its Annual Report on Form 10-K for fiscal
1997. The results of operations for the twelve week period ended July
26, 1997, may not be indicative of the results that may be expected
for the fiscal year ending May 2, 1998 ("fiscal 1998").
Note 2. On September 30, 1996, a wholly-owned subsidiary of the Company
acquired substantially all of the assets and assumed certain
liabilities of Norristown Wholesale, Inc. ("Norristown"), a wholesale
distributor of produce and other perishable items headquartered in
Norristown, Pennsylvania. Assets acquired primarily consisted of
inventory, accounts receivable, warehouse and transportation
equipment and a customer list. The Company also assumed the lease for
Norristown's transportation fleet. The Company accounted for the
acquisition under the purchase method of accounting 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.
Note 3. On August 29, 1996, the Company's Board of Directors declared a
three-for-two common stock split payable September 30, 1996, to
shareholders of record on September 16, 1996. All references to
common share and per common shares data in the consolidated financial
statements for previously reported periods have been adjusted to
reflect the common stock split.
Note 4. The Company is party to various 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.
5
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Sales of $739.1 million for the twelve week period ended July 26, 1997,
consisted of $707.9 million of wholesale grocery sales and $73.9 million of
retail grocery sales. Wholesale grocery sales included $42.7 million of sales to
the Company's retail grocery division. Wholesale grocery sales decreased $14.2
million, or 2.0%, as compared to sales of $722.1 million for the same period
last fiscal year. This decrease was primarily attributable to the expiration of
the Acme Markets, Inc. supply agreement in June 1997, offset in part by sales to
new customers added subsequent to the first quarter of fiscal 1997, sales to
customers that continue to expand their retail operations and sales from the
Norristown produce business, which was acquired by the Company on September 30,
1996.
Retail grocery sales of $73.9 million decreased $3.1 million, or 4.0%,
compared to sales of $77.0 million for the same period last fiscal year. In
accordance with the Company's strategy of focusing on the METRO format, during
the fourth quarter of fiscal 1997, the number of BASICS stores was reduced by
three as a result of closing one BASICS, selling another BASICS and temporarily
closing a third BASICS while it is being converted to the METRO format. The
decrease in sales in the first quarter of fiscal 1998, compared to the same
period last fiscal year, resulting from the lower number of BASICS stores, was
offset in part by sales from one new METRO store opened in September 1996.
Comparable store sales decreased 1.0% for the first quarter of fiscal 1998,
compared to the first quarter of fiscal 1997.
Gross margin was 10.74% of sales for the twelve week period ended July
26, 1997, compared to 10.34% of sales for the same period last fiscal year. The
increase in gross margin was primarily attributable to the inclusion of the
higher gross margin Norristown produce business in the first quarter ended July
26, 1997, and the effects of the Company taking advantage of certain buying
opportunities during the quarter.
Operating and administrative expenses for the twelve week period ended
July 26, 1997, were $55.7 million, or 7.54% of sales, compared to $56.2 million,
or 7.45% of sales, for the same period last fiscal year. The increase in
operating and administrative expenses as a percent of sales was primarily
attributable to the inclusion of Norristown's higher operating expense ratio
produce business in the fiscal 1998 first quarter.
Interest expense for the twelve week period ended July 26, 1997, was
$0.9 million, compared to $1.7 million for the same period last fiscal year. The
decrease was primarily due to lower average debt levels for the twelve week
period ended July 26, 1997, compared to the same period last fiscal year. On
April 1, 1997, the Company redeemed the remaining $47.5 million outstanding
principal amount of its 10 5/8% Senior Subordinated Notes and in July 1997
repaid $9.0 million on the Company's 6.15% Senior Notes. These reductions in
debt were offset in part by increased borrowings under the Company's revolving
credit facilities to fund changes in working capital.
The Company's effective income tax rate was 38.9% and 40.2% for the
twelve week periods ended July 26, 1997, and July 20, 1996, respectively.
6
<PAGE>
Net earnings for the twelve week period ended July 26, 1997, were $14.5
million, or $0.31 per share, a 16.6% increase over net earnings of $12.5
million, or $0.26 per share for the same period last fiscal year.
Liquidity and Capital Resources
Cash and cash equivalents were $21.4 million at July 26, 1997, compared
to $10.4 million at May 3, 1997. Working capital was $51.2 million at July 26,
1997, and $21.9 million at May 3, 1997. The increase in working capital during
the first quarter of fiscal 1998 was primarily attributable to an increase in
inventories, resulting from the Company taking advantage of inventory buying
opportunities, and a reduction in accounts payable, primarily funded by
borrowings under long-term revolving credit facilities.
Net cash provided by operating activities for the twelve week period
ended July 26, 1997, was $5.8 million. This amount primarily consisted of net
earnings of $14.5 million and depreciation and amortization of $7.3 million,
offset in part by changes in working capital.
Net cash used for investing activities of $5.2 million for the twelve
week period ended July 26, 1997, primarily consisted of $5.5 million of capital
expenditures. The Company continued to invest in its wholesale grocery
facilities and equipment to maintain its efficient operations and also employed
capital in connection with the conversion of an existing BASICS store to the
METRO format during the first quarter of fiscal 1998.
Net cash provided by financing activities of $10.4 million for the
twelve week period ended July 26, 1997, consisted primarily of $11.1 million of
net proceeds from long-term debt. The $11.1 million of net proceeds primarily
related to borrowings under revolving credit facilities of $20.6 million at July
26, 1997, offset in part by a $9.0 million principal payment on the Company's
6.15% Senior Notes in July 1997. Net repayments on long-term debt for the twelve
week period ended July 20, 1996, consisted primarily of $9.0 million of
principal payments on the Company's 6.15% Senior Notes.
The Company's total debt was $53.8 million at July 26, 1997, compared
to $42.7 million at May 3, 1997. Shareholders' equity increased to $274.5
million at July 26, 1997, from $258.7 million at May 3, 1997. The ratio of total
debt to equity was 0.20 to 1 at July 26, 1997, and 0.17 to 1 at May 3, 1997.
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.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
RICHFOOD HOLDINGS, INC.
Date: September 5, 1997 By /s/ John C. Belknap
---------------------
John C. Belknap
Executive Vice President
and Chief Financial Officer
8
<PAGE>
EXHIBIT INDEX
Exhibit 11.1 Earnings Per Share Calculation
Exhibit 27.1 Financial Data Schedule
9
EXHIBIT 11.1
RICHFOOD HOLDINGS, INC.
COMPUTATION OF NET EARNINGS PER COMMON SHARE
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C>
First Quarter Ended
-----------------------------------
July 26, July 20,
1997 1996
---------------- ----------------
NET EARNINGS:
Net earnings $ 14,506 $ 12,445
================ ================
PRIMARY EARNINGS PER COMMON SHARE:
Weighted average number of
common shares outstanding 47,434,319 47,163,086
Net additional common shares
issuable upon exercise of dilutive
options, determined by
treasury stock method 376,027 465,867
---------------- ----------------
Common shares and equivalents 47,810,346 47,628,953
================ ================
Net earnings per common share (a) $ 0.30 $ 0.26
================ ================
FULLY DILUTED EARNINGS PER COMMON SHARE:
Common shares and equivalents 47,810,346 47,628,953
Net additional common shares
issuable upon exercise of dilutive
options, determined by
treasury stock method
using quarter-end market price,
if higher than average price - 84,564
---------------- ----------------
Common shares and equivalents (b) 47,810,346 47,713,517
================ ================
Net earnings per common share (a) $ 0.30 $ 0.26
================ ================
NOTE: (a) Dilution is less than 3%.
(b) The Company does not have any other potentially dilutive securities.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWELVE WEEK PERIOD ENDED JULY 26, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-02-1998
<PERIOD-END> JUL-26-1997
<CASH> 21,382
<SECURITIES> 0
<RECEIVABLES> 105,720
<ALLOWANCES> 3,396
<INVENTORY> 169,141
<CURRENT-ASSETS> 306,588
<PP&E> 236,192
<DEPRECIATION> 113,384
<TOTAL-ASSETS> 591,886
<CURRENT-LIABILITIES> 255,398
<BONDS> 0
0
0
<COMMON> 73,592
<OTHER-SE> 200,898
<TOTAL-LIABILITY-AND-EQUITY> 591,886
<SALES> 739,125
<TOTAL-REVENUES> 739,125
<CGS> 659,733
<TOTAL-COSTS> 659,733
<OTHER-EXPENSES> 55,717
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 854
<INCOME-PRETAX> 23,762
<INCOME-TAX> 9,256
<INCOME-CONTINUING> 14,506
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,506
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>
