<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 5, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A
Commission File No. 1-9914
RISER FOODS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 34-1570363
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5300 Richmond Road, Bedford Heights, Ohio 44146
(Address of principal executive offices)
Registrant's telephone number, including area code: (216) 292-7000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at
May 5, 1997
Class A Common Stock, $.01 Par Value 8,853,118
Class B Common Stock, $.01 Par Value 901,912<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
RISER FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands of dollars)
<TABLE>
<CAPTION>
4/5/97 6/29/96
---------- ----------
ASSETS (unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,454 $ 3,541
Trade accounts receivable, net 32,043 36,903
Inventories 78,783 72,406
Deferred income taxes 9,066 9,066
Prepaid expenses 5,638 4,613
---------- ----------
Total current assets 128,984 126,529
PROPERTY, EQUIPMENT AND
CAPITAL LEASES: 234,861 203,762
Less-Allowances for
depreciation, amortization
and loss on disposal of
fixed assets 90,641 79,762
---------- ----------
144,220 124,000
OTHER ASSETS:
Deferred income taxes 4,947 4,947
Notes receivable 3,901 4,784
Other 2,089 2,088
---------- ----------
Total other assets 10,937 11,819
---------- ----------
TOTAL ASSETS $ 284,141 $ 262,348
========== ==========
</TABLE>
The accompanying Notes to Consolidated Condensed Financial
Statements are an integral part of these statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
4/5/97 6/29/96
---------- ----------
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 58,715 $ 59,433
Accrued expenses 40,931 41,790
Current portion of long-term liabilities 8,400 10,352
---------- ----------
Total current liabilities 108,046 111,575
LONG-TERM LIABILITIES:
Debt 47,991 32,514
Capital lease obligations 4,698 5,531
Self insurance reserves 13,701 12,595
---------- ----------
Total long-term liabilities 66,390 50,640
OTHER LIABILITIES 6,247 10,191
STOCKHOLDERS' EQUITY:
Class A Common Stock--7,296,788 and
7,174,787 shares outstanding at
4/5/97 and 6/29/96, respectively 73 72
Class B Common Stock--901,912 and
955,613 shares outstanding at
4/5/97 and 6/29/96, respectively 9 10
Paid-in capital 36,693 36,138
Retained earnings 66,683 53,722
---------- ----------
Total stockholders' equity 103,458 89,942
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 284,141 $ 262,348
========== ==========
</TABLE>
The accompanying Notes to Consolidated Condensed Financial
Statements are an integral part of these statements.<PAGE>
<PAGE>
RISER FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands of dollars, except share and per share data)
(unaudited)
<TABLE>
<CAPTION>
40 Weeks Ended: 12 Weeks Ended:
4/5/97 4/6/96 4/5/97 4/6/96
----------- ---------- --------- -----------
<S> <C> <C> <C> <C>
NET SALES $1,030,675 $ 984,857 $ 304,298 $ 305,758
COST OF GOODS SOLD 827,910 793,190 243,078 247,673
----------- ---------- ---------- ----------
Gross profit 202,765 191,667 61,220 58,085
SELLING, GENERAL &
ADMINISTRATIVE
EXPENSE 174,614 167,507 51,922 50,036
----------- ---------- ---------- ----------
Operating income 28,151 24,160 9,298 8,049
INTEREST EXPENSE (3,507) (5,106) (1,085) (1,345)
INTEREST INCOME 350 826 104 142
----------- ---------- ---------- ----------
INCOME BEFORE INCOME
TAXES AND
EXTRAORDINARY ITEM 24,994 19,880 8,317 6,846
PROVISION FOR INCOME
TAXES 9,994 8,151 3,322 2,791
----------- ---------- ---------- ----------
NET INCOME BEFORE
EXTRAORDINARY ITEM 15,000 11,729 4,995 4,055
EXTRAORDINARY ITEM:
Loss on early extinguish-
ment of debentures net
of tax benefit
of $380 (570) - (570) -
----------- ---------- ---------- ----------
NET INCOME $ 14,430 $ 11,729 $ 4,425 $ 4,055
LESS PREFERRED STOCK
DIVIDENDS - 11 - -
----------- ---------- ---------- ----------
NET INCOME FOR
COMMON
STOCKHOLDERS $ 14,430 $ 11,718 $ 4,425 $ 4,055
=========== ========== ========== ==========
/TABLE
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
40 Weeks Ended: 12 Weeks Ended:
4/5/97 4/6/96 4/5/97 4/6/96
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE
Net Income Before
Extraordinary Item $ 1.84 $ 1.45 $ .61 $ .50
Extraordinary Item (.07) - (.07) -
---------- ---------- ---------- ----------
NET INCOME PER
COMMON SHARE $ 1.77 $ 1.45 $ .54 $ .50
========== ========== ========== ==========
DIVIDENDS PER
COMMON SHARE $ .18 $ .15 $ .06 $ .05
========== ========== ========== ==========
WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 8,150,621 8,088,996 8,178,407 8,101,560
========== ========== ========== ==========
</TABLE>
The accompanying Notes to Consolidated Condensed Financial
Statements are an integral part of these statements.<PAGE>
<PAGE>
RISER FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(unaudited)
<TABLE>
<CAPTION>
40 Weeks Ended: 12 Weeks Ended:
4/5/97 4/6/96 4/5/97 4/6/96
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 14,430 $ 11,729 $ 4,425 $ 4,055
Adjustments to reconcile
net income to net cash
provided by (used for)
operating activities:
Depreciation & amort. 14,701 13,348 4,739 4,150
Loss on early
extinguishment
of debentures 950 - 950 -
Changes in assets
and liabilities (4,438) 7,725 (7,465) (8,379)
--------- --------- --------- ---------
Net cash provided by
(used for) operating
activities 25,643 32,802 2,649 (174)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of fixed assets (36,588) (21,162) (12,344) (4,433)
Proceeds from sales of
fixed assets 174 204 63 102
--------- --------- --------- ---------
Net cash used for
investing activities (36,414) (20,958) (12,281) (4,331)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings under
revolving lines
of credit 183,223 614,085 99,787 188,219
Repayments of
revolving lines
of credit (147,259) (624,474) (76,370) (182,379)
Additional borrowings - 5,093 - -
Early redemption of
debentures (13,092) - (13,092) -
Debt repayments (10,218) (4,572) (444) (424)
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
40 Weeks Ended: 12 Weeks Ended:
4/5/97 4/6/96 4/5/97 4/6/96
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Repayments of capital
lease obligations (1,056) (1,074) (309) (331)
Exercise of stock
options 555 245 307 134
Common stock
dividends (1,469) (1,215) (492) (406)
Preferred stock
dividends - (11) - -
-------- -------- ------- --------
Net cash provided by
(used for) financing
activities 10,684 (11,923) 9,387 4,813
-------- -------- -------- --------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS (87) (79) (245) 308
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 3,541 4,075 3,699 3,688
-------- -------- -------- --------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 3,454 $ 3,996 $ 3,454 $ 3,996
======== ======== ======== ========
SUPPLEMENTAL DATA:
Interest Paid $ 3,460 $ 4,882 $ 1,089 $ 982
======== ======== ======== ========
Income Taxes Paid $ 7,672 $10,306 $ 4,547 $ 4,588
======== ======== ======== ========
</TABLE>
The accompanying Notes to Consolidated Condensed Financial
Statements are an integral part of these statements.<PAGE>
<PAGE>
RISER FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 5, 1997
(1) Basis of Presentation:
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with the instructions
to Form 10-Q and therefore do not include all information and
footnotes necessary for a fair presentation of financial position,
results of operations and cash flows in conformity with generally
accepted accounting principles. The results of operations for the
twelve and forty weeks ended April 5, 1997 are not necessarily
indicative of the results for the fiscal year ending June 28, 1997.
In the opinion of management, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
necessary for a fair presentation of the financial position at the
dates indicated and of the results of operations for the interim
periods presented.
(2) Debt:
The Company amended its bank credit facilities (the
Facilities) during the second quarter of fiscal 1997. These
amended Facilities provide for revolving lines of credit and
letters of credit up to an aggregate of $85.0 million and terminate
on October 31, 2001. Interest under the Facilities now accrues at
either the bank's prime lending rate or LIBOR plus a margin that
ranges from .30% to .75% depending upon the Company's consolidated
leverage ratio. Among other covenants, the Facilities require that
the Company maintain minimum levels of consolidated net worth and
consolidated leverage and interest coverage ratios, all as defined.
Available unused borrowing capacity under the Facilities was
approximately $43.0 million at April 5, 1997.
On March 31, 1997, the Company redeemed all of its outstanding
9.75% Subordinated Debentures at par plus applicable accrued
interest. This redemption resulted in a loss on early
extinguishment of debentures of $570,000 which is net of applicable
tax benefits of $380,000. The loss was primarily the result of the
Company's write-off of the remaining original issue discount
related to these debentures. The Company utilized borrowings under
the Facilities to fund this transaction.
(3) Changes in Equity:
The Company's Board of Directors unanimously approved the
redemption of the Company's Series A Preferred Stock on June 9,
1995. The outstanding shares of preferred stock were redeemed on
July 28, 1995 at a redemption price of $105 per share plus
accumulated dividends. The Company redeemed 18,044 shares at a<PAGE>
<PAGE>
total redemption price of $1,894,620 plus accumulated dividends of
$11,007 during the first quarter of fiscal 1996.
The declaration and payment of dividends is subject to the
discretion of the Company's Board of Directors and there can be no
assurance that dividends will be paid in the future. Year-to-date,
the Company has paid dividends on its Common Stock totalling
$1,748,969 (of which $279,654 was paid to a wholly owned subsidiary
of the Company) and $1,448,049 (of which $233,045 was paid to a
wholly owned subsidiary of the Company) in fiscal 1997 and 1996,
respectively.
The Company has a Stock Incentive Plan (the Plan) which
provides for both qualified and non-qualified stock options, as
well as stock appreciation rights and restricted stock grants for
employees, officers and directors. Stock options must be issued at
not less than the fair value of the Class A Common Stock at the
date of grant and are exercisable for up to ten years from the date
of grant. The options outstanding under the plan are exercisable
at option prices ranging from $7.25 to $23.63 per share. Options
for 68,300 and 31,600 shares of Class A Common Stock were exercised
at prices ranging from $7.25 to $10.31 per share during the first
forty weeks of fiscal 1997 and 1996, respectively.
On August 19, 1996, the Company granted options to several key
employees to purchase 52,100 shares of Class A Common Stock (the
1997 Options) under the Plan. The exercise price of the 1997
options is $23.63 per share which approximated their fair market
value at the date of grant. The 1997 Options are not exercisable
until August 19, 1998 (except in certain limited instances) and
will expire on August 19, 2006 if not exercised. The 1997 Options
are non-qualified options for Federal Income Tax purposes and the
Company recorded no expense associated with this grant.
(4) Subsequent Event:
Subsequent to the end of the third quarter of fiscal 1997, the
Company announced that it has reached a definitive agreement to
merge with Giant Eagle, Inc., a privately held, Pittsburgh-based
retail supermarket chain and wholesale distributor. Giant Eagle
will acquire all of the Company's outstanding Class A and Class B
stock for $42 per share for a total of $403 million, which includes
the assumption of approximately $47 million of debt and the
acquisition of existing options. The transaction will be financed
under a firm commitment that Giant Eagle has received from a major
U.S. bank. Giant Eagle will shortly commence a tender offer to
acquire all the outstanding shares of Riser Class A stock and,
following the closing of the tender offer, will acquire all
outstanding Class B stock in a merger. The transaction is subject
to required regulatory approvals and other customary terms and
conditions and the merger is also subject to stockholder approvals.
In connection with the merger agreement, certain stockholders, who
<PAGE>
<PAGE>
own approximately 12.7% of the Class A stock and approximately 57%
of of the Class B stock, have agreed not to transfer their shares
except in accordance with the tender offer and have agreed to vote
their shares in favor of the merger. Although there is no
assurance that the transaction will be consummated, Giant Eagle and
Riser expect that the tender offer will be closed in June 1997.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The following table sets forth items from the Company's
Consolidated Condensed Statements of Income as a percentage of net
sales:
<TABLE>
<CAPTION>
40 Weeks Ended: 12 Weeks Ended:
4/5/97 4/6/96 4/5/97 4/6/96
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales 100.00 100.00 100.00 100.00
Cost of goods sold 80.33 80.54 79.88 81.00
-------- -------- -------- --------
Gross profit 19.67 19.46 20.12 19.00
Selling, general &
administrative expense 16.94 17.01 17.06 16.36
-------- -------- -------- --------
Operating income 2.73 2.45 3.06 2.64
Interest expense (.34) (.52) (.36) (.44)
Interest income .03 .09 .03 .04
-------- -------- -------- --------
Income before income taxes
and extraordinary item 2.42 2.02 2.73 2.24
Provision for income taxes .97 .83 1.09 .91
-------- -------- -------- --------
Net income before
extraordinary item 1.45 1.19 1.64 1.33
======== ======== ======== ========
</TABLE>
The results of operations for the twelve and forty weeks ended
April 5, 1997 continue to reflect successful implementation of
strategic initiatives designed to improve operating performance and
counter competitive and economic pressures. The food distribution
industry has encountered little or no top line price inflation
between years while operating costs, particularly labor and
occupancy, have contractually risen. Overall industry sales and
operating margins have been challenged by continued competition
from non-traditional sources, such as convenience stores and
national mass merchandising chains.<PAGE>
<PAGE>
Net Sales
In the third quarter of fiscal 1997, net sales decreased .48%
to $304.3 million from $305.8 million in fiscal 1996. Year-to-
date, fiscal 1997 net sales have increased 4.65% to $1,030.7
million from $984.9 million last year. Fiscal 1997 third quarter
results ended a trend of increased sales over those of the prior
year that resulted from strategic initiatives to remodel,
reposition and enlarge Company-operated retail stores, aggressive
merchandising in Company-operated stores, the expansion of product
lines sold to the Company's independently-operated retail customers
and a continued favorable economic climate in the Company's primary
market area. The principle reason for the decline in sales during
the third quarter of fiscal 1997 was the timing of the Easter
holiday, a cycling of wholesale sales gains and one-time shipments
to a wholesale customer last year.
The Company's strategic initiatives to remodel and reposition
Company-operated retail stores have resulted in the consolidation
and enlargement of certain stores. The following table details the
number, format and square footage of Company-operated retail stores
between years:
1997 1996
--------- ---------
Number of Company-operated
retail stores:
Beginning of year 37 38
Opened 3 --
Closed (4) --
--------- ---------
End of third quarter 36 38
========= =========
Store Formats:
Rini-Rego Stop-N-Shop 29 33
Rini-Rego Marketplace 7 5
Square footage:
Total - end of quarter 1,810,400 1,841,600
Average store size 50,289 48,463
Sales in Company-operated retail stores increased over those
of the prior year 1.86% in the third quarter and 2.75% year-to-
date. These percentages have been negatively impacted by the
timing of the Easter holiday. Traditionally, sales in Company-
operated retail stores are at their lowest point the week following
the Easter holiday. The third quarter of fiscal 1996 did not
include the historically low sales for the week after Easter as
Easter fell on the first day of the fourth quarter last year.
Fiscal 1997 third quarter results did, however, include this<PAGE>
<PAGE>
historically low sales week. To adjust for this timing difference,
the Company's comparison of sales in Company-operated retail stores
below will include sales from the first week of the fourth quarter.
Same store sales in the 33 Company-owned retail stores open in
both years increased 1.45% in the thirteen weeks ended April 12,
1997 and 1.91% in the forty-one weeks ended April 12, 1997. These
same store sales increases combined with the opening of three
larger replacement stores more than offset sales losses resulting
from two less Company-operated retail stores between years.
Including the sales of the three replacement stores in fiscal 1997
and the stores they replaced in fiscal 1996, sales for the 36
stores servicing the same communities between years increased 4.59%
in the thirteen week period and 4.58% in the forty-one week period.
This continues a trend of same store sales increases which began in
the fourth quarter of fiscal 1994. The increase in same store
sales is attributed to the Company's retail remodeling and
repositioning programs, aggressive merchandising including the
Company's Preferred Shoppers Club card and a favorable economic
climate. The rate of same store sales increases has slowed during
the last four quarters as Company-operated retail stores have
cycled against prior year remodeling projects and the timing of new
store expansion projects which fell late in the first and third
quarters of fiscal 1997.
The Company's retail remodeling and repositioning initiatives,
where certain non-core stores were closed and certain core stores
were remodeled, expanded or consolidated into larger retail
facilities, has proven successful, yielding continued sales growth
and improved operating leverage. Since the first quarter of 1994,
the Company has constructed or converted seven former Rini-Rego
Stop-N-Shop stores to its Marketplace format. The Marketplace
stores are larger, averaging approximately 65,000 square feet, and
meet the consumer's basic grocery needs while offering an expanded
product line, with emphasis on high quality perishable departments
and a variety of full service, consumer-oriented departments. The
Company opened its eighth Marketplace store in May 1997.
Through the Association of Stop-N-Shop Supermarkets, a
northeast Ohio advertising cooperative which includes all Company-
operated retail stores, as well as other independently-operated
retail customers serviced by the Company, the Company offers its
customers the Preferred Shoppers Club. Participating shoppers
receive a Preferred Shoppers Club card which entitles them to extra
discounts below normal sales prices and other incentives. This
program allows the Company to offer its customers greater value and
will ultimately enhance the Company's ability to meet customer
purchasing requirements and preferences. The success of this
program has increased sales in Company-operated retail stores and
other independently-operated retail customers serviced by the
Company and proven a valuable merchandising tool to combat
competitive pressures from both traditional and non-traditional
grocery retailers. The Company's primary competitor introduced a<PAGE>
<PAGE>
frequent shoppers card in March 1996. The introduction of the
competitor's card lessened the effect of the Company's Preferred
Shoppers card somewhat but has not had a significant negative
impact on sales in Company-operated retail stores.
The Company expects its trend of same store sales increases to
continue at levels realized during the fourth quarter of fiscal
1996 and the first forty weeks of fiscal 1997. The Company expects
to continue its plans to remodel core stores by focusing on its
Marketplace store format, where demographics so dictate, or its
traditional Neighborhood store format. The Company also plans to
continue to aggressively merchandise through its Preferred Shoppers
Club to augment existing store sales.
Net sales to independently-operated retail customers through
Company distribution facilities decreased 2.78% in the thirteen
weeks ended April 12, 1997 and increased 6.50% in the forty-one
weeks ended April 12, 1997. Sales declines during the thirteen
weeks ended April 12, 1997 were attributed to one-time sales of
$2.6 million to a wholesale customer during the third quarter of
fiscal 1996, the timing of the Easter holiday and the closing of
several independently-operated retail customers between years.
Additionally, several independently-operated retail customers have
been negatively impacted by heightened competition from national
mass merchandising chains entering the Company's primary market.
Year-to-date, these declines were partially offset by increased
penetration in existing stores serviced by the Company.
In the forty-one weeks ended April 12, 1997, sales to
independently-operated retail customers benefited from strategic
initiatives targeting the expansion of the Company's primary
wholesale distribution territory and expansion of the Company's
product lines. Sales to independently-operated retail customers
increased principally because of expanded product offerings to 103
PharMor and 155 Hills stores serviced by the Company, which are
primarily located in the eastern third of the United States.
As a percentage of net sales, year-to-date gross profit
increased from 19.46% in fiscal 1996 to 19.67% in fiscal 1997. For
the third quarter, gross profit increased from 19.00% for fiscal
1996 to 20.12% in fiscal 1997. These increases in the gross profit
as a percentage of net sales are a function of shifting sales mix
between years and product discounting and other charges which
occurred in fiscal 1996.
Sales in Company-operated retail stores carry a higher gross
profit percentage than sales to independently-operated retail
customers. As such, a shift in the mix of these sales impacts
overall gross profit percentages. Sales generated in
Company-operated retail stores as a percentage of total Company
sales decreased from 50.7% in the first forty weeks of fiscal 1996
to 49.7% in the first forty weeks of fiscal 1997. For the third
quarter, this percentage increased from 49.0% in fiscal 1996 to<PAGE>
<PAGE>
50.1% in fiscal 1997.
Third quarter gross profit percentages were not only impacted
by the above mentioned shift in sales mix. During the third
quarter of fiscal 1996, gross profit percentages on sales to
independently-operated retail customers were negatively impacted by
one-time conversion allowances and rebates for new customers.
There were no such one-time charges in the third quarter of fiscal
1997. Through the first forty weeks of fiscal 1996, the gross
profit percentage was also negatively impacted by the closing of
the Company's in-store pharmacies and higher than normal
discounting of health and beauty care and general merchandise
inventory in Company-operated retail stores. During fiscal 1997,
the Company did not incur any substantial write-downs or
discounting of retail inventories.
In general, the Company has been able to maintain gross profit
percentages on sales to independently-operated retail customers and
in Company-operated retail stores through improved procurement
systems, merchandising and effective inventory management.
Selling, general and administrative (SG&A) expense also
decreased as a percentage of net sales from 17.01% in the first
forty weeks of fiscal 1996 to 16.94% in fiscal 1997. The major
reason for this decline is the shift in mix of business toward
sales to independently-operated retail customers, productivity
gains and better expense leverage. In the third quarter, SG&A
expense as a percentage of net sales rose from 16.36% in fiscal
1996 to 17.06% in fiscal 1997. This shift reflects the above
mentioned change in the sales mix between years. Sales in
Company-operated retail stores require higher SG&A costs than sales
to independently-operated retail customers. Accordingly, the SG&A
percentage increased with a change in mix.
Interest expense declined $260,000 in the third quarter of
fiscal 1997 and $1.6 million year-to-date. These decreases are a
function of overall lower average borrowing levels and lower
effective interest rates under the Company's bank credit
facilities. Lower borrowing levels were the result of programs to
reduce the investment in distribution inventories by increasing
inventory turns, debt repayments and the Company's increased cash
flow from operations. The effective interest rate recognized under
the Company's bank credit facilities was 6.50% and 7.63% in the
third quarters of fiscal 1997 and 1996, respectively. Year-to-
date, the effective interest rate recognized under the Company's
bank credit facilities was 6.91% in fiscal 1997 and 8.28% in fiscal
1996. The decrease in these rates was the result of negotiated
interest rate reductions and the Company's utilization of LIBOR
pricing.
The Company provided for income taxes at an effective tax rate
of 40.0% in fiscal 1997 compared to 41.0% in fiscal 1996. Taxes
were provided at the various statutory rates to which the Company<PAGE>
<PAGE>
is subject and there were no significant differences between
financial reporting and taxable income. The primary reason for the
decrease in the Company's effective tax rate is a lower state and
local tax provision reflecting the Company's present filing status.
The Company provides for the franchise tax portion of its state
income tax provision as an operating expense.
During the third quarter of fiscal 1997, the Company recorded
an extraordinary charge of $570,000, which was net of applicable
tax benefits of $380,000, related to the early retirement of its
9.75% Subordinated Debentures. The charge was principally the
result of the Company's write-off of the unamortized balance of the
debentures' original issue discount. The Company utilized
borrowings under its bank credit facilities to fund this
transaction.
CAPITAL RESOURCES AND LIQUIDITY
Near the end of the third quarter of 1997, debt levels
increased as a result of increased capital expenditures and higher
working capital requirements associated with the Company's expanded
distribution facilities and forward buy opportunities.
Operating activities generated $25.6 million of cash in fiscal
1997 compared to $32.8 million in fiscal 1996. In adjusting net
income to net cash provided by operating activities for fiscal
1997, the major changes in assets and liabilities include decreases
of accounts and notes receivable of $5.7 million (decrease of $4.1
million in fiscal 1996), accounts payable of $.7 million (decrease
of $2.3 million in fiscal 1996) and accrued expenses and other
liabilities of $3.8 million (increase of $1.2 million in fiscal
1996) and increases in inventories of $6.4 million (decrease of
$4.2 million in fiscal 1996), prepaid expenses of $1.0 million
(increase of $.7 million in fiscal 1996) and self insurance
reserves of $1.1 million (increase of $.4 million in fiscal 1996).
The decrease in accounts and notes receivable and the increase
in prepaid expenses during the third quarter of fiscal 1997 are
normal seasonal fluctuations. During the third quarter of fiscal
1997, the Company increased seasonal inventory levels and turn
inventory levels to meet anticipated sales requirements and take
advantage of forward buying opportunities. Historically, the
Company has reduced inventory levels following the Easter
holiday season. However, increased sales to independently-operated
retail customers and the impact of construction underway in the
Company's primary distribution facility caused an increase in
inventory levels at the end of the third quarter of fiscal 1997.
Trade accounts payable, as a percentage of FIFO inventories,
decreased from 74.6% at the end of fiscal 1996 to 67.1% at the end
of the third quarter of fiscal 1997.
As a result of the foregoing, working capital increased to
$20.9 million from $15.0 million at the end of fiscal 1996. At the<PAGE>
<PAGE>
same time, the Company's current ratio increased from 1.13:1 at the
end of fiscal 1996 to 1.19:1 at the end of the third quarter of
fiscal 1997. Increased working capital requirements, principally
inventory, were offset by a reduction in the current portion of
long-term liabilities, primarily debt associated with the amending
of the Company's bank credit facilities. Increased borrowings
under the Company's bank credit facilities partially offset by net
income increased the Company's long-term liabilities to equity
ratio from .56:1 at the end of fiscal 1996 to .64:1 at the end of
the third quarter of fiscal 1997. The Company's ratio of total
liabilities to equity decreased to 1.75:1 at the end of the third
quarter of fiscal 1997 from 1.92:1 at the end of fiscal 1996.
The Company utilized $36.6 million of cash flow for capital
expenditures. This amount is approximately $15.4 million higher
than last year's level and reflects the Company's investment of
$26.8 million ($12.2 million last year) in three new retail
locations and other retail remodeling projects, $6.3 million ($7.8
million last year) for the expansion of distribution facilities
and new equipment and $3.5 million ($1.2 million last year) on data
processing systems upgrades. Fiscal 1996 capital expenditures for
distribution facilities included the acquisition of the Company's
Aurora Road and Cash-N-Carry distribution facilities which had
previously been leased. The Aurora Road facility was subsequently
sold prior to the end of fiscal 1996.
The level of capital expenditures for fiscal 1997 will be
higher than the previous three fiscal years principally because of
the acceleration of the Company's remodeling programs and the
expansion of its distribution facilities. After fiscal 1997,
annual capital expenditure levels are expected to be maintained in
the $30-$35 million range over the next three fiscal years until
the Company has completed the remodeling or expansion of its core
stores. The Company believes that cash flow from operations and
the unused portion of its bank credit facilities will adequately
fund planned capital expenditures of approximately $45 million in
fiscal 1997, normal ongoing business activities and scheduled debt
repayments.
IMPACT OF INFLATION
Inflation increases the Company's major costs, inventory and
labor. Because of the high velocity of inventory turnover in the
food distribution industry and the Company's use of the LIFO
valuation method for a majority of its inventory, the impact of
inflation is normally reflected very quickly in the results of
operations. The food distribution industry has experienced
little or no food inflation over the last three years. Experience
indicates that highly competitive market conditions may prevent the
Company from fully recovering inflation-driven costs through retail
pricing alone. The Company's provision for LIFO inventories was
the same in both years: $462,000 for the third quarter and $1.5
million year-to-date.<PAGE>
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (the Reform
Act)
Certain information included in this report and other Company
filings under the Securities Act of 1933 and the Securities and
Exchange Act of 1934, as well as other information which may be
provided by the Company including written and oral statements made
by its representatives, may contain forward-looking statements as
defined in the Reform Act. All statements, other than those
containing historical facts, which include words or phrases such as
"will likely result", "are expected to be", "will continue", "is
anticipated", "estimate", "project", "believe" or words of similar
import are intended to identify forward-looking statements within
the meaning of the Reform Act. In reviewing such information it
should be noted that actual results may differ materially from
those projected or suggested in such forward-looking statements.
Forward-looking statements are conditioned upon a number of
factors and were derived utilizing numerous assumptions. Many of
these factors have previously been identified in other Company
filings or statements made by or on behalf of the Company. Without
limiting the foregoing, there is no assurance that the transaction
with Giant Eagle, Inc. referenced in Note 4 of the Notes to
Consolidated Condensed Financial Statements in this Form 10-Q
will be consummated, or if consummated, when such closing will
occur.<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 2. Other Information
Reference is made to the transactions with Giant Eagle,
Inc. referenced in Note 4 of the Notes to Consolidated
Condensed Financial Statements in this Form 10-Q.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The Company filed one Report on Form 8-K under Item 5 -
Other Events on March 24, 1997 relating to the Company's
redemption of its 9.75% Subordinated Debentures and filed
three Reports on Form 8-K under Item 5 - Other Events on
May 2, 1997, May 6, 1997 and May 15, 1997 relating to
negotiations for a tender offer for its common stock.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
RISER FOODS, INC.
(Registrant)
May 19, 1997 /s/ Anthony C. Rego
By: Anthony C. Rego
Chairman of the Board and
Chief Executive Officer
May 19, 1997 /s/ Ronald W. Ocasek
By: Ronald W. Ocasek
Senior Vice President,
Chief Financial Officer
and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Riser
Foods, Inc. Consolidated Condensed Balance Sheet, Consolidated Condensed
Statement of Income, and Notes to the Consolidated Condensed Financial
Statements for the third quarter ended 4/5/97 and is qualified in its entirety
by reference to such Form 10-Q for the third quarter ended 4/5/97
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-END> APR-05-1997
<CASH> 3,454
<SECURITIES> 0
<RECEIVABLES> 32,043
<ALLOWANCES> 3,861
<INVENTORY> 78,783
<CURRENT-ASSETS> 128,984
<PP&E> 234,861
<DEPRECIATION> 90,641
<TOTAL-ASSETS> 284,141
<CURRENT-LIABILITIES> 108,046
<BONDS> 0
<COMMON> 82
0
0
<OTHER-SE> 103,376
<TOTAL-LIABILITY-AND-EQUITY> 284,141
<SALES> 1,030,675
<TOTAL-REVENUES> 1,030,675
<CGS> 827,910
<TOTAL-COSTS> 827,910
<OTHER-EXPENSES> 174,614
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,507
<INCOME-PRETAX> 24,994
<INCOME-TAX> 9,994
<INCOME-CONTINUING> 15,000
<DISCONTINUED> 0
<EXTRAORDINARY> (570)
<CHANGES> 0
<NET-INCOME> 14,430
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.77
</TABLE>
