UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: January 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 33-22998
RALPHS GROCERY COMPANY
(Exact name of registrant as specified in its charter)
Delaware 31-1241926
(IRS Employer Identification
No.)
(State or other jurisdiction of
incorporation or organization)
1100 West Artesia Boulevard, Compton, California,
90220
(Address of principal executive offices)
Registrant's telephone number, including area code:(310)
884-9000
Securities registered pursuant to Section 12(b) of the
Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
None
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( )
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K (X)
----
No voting stock of the registrant is held by non-affiliates
of the registrant.
Number of shares of the registrant's Common Stock, $1.00 per
value, outstanding as of January 30, 1994--100.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Registration Statement on
Form S-1, Registration No. 33-47634, as amended, portions of
Registration Statement on Form S-4, Registration No. 33-61812,
portions of Annual Report on Form 10-K dated April 29, 1993
and portions of the Quarterly Report on Form 10-Q dated
September 1, 1992, are incorporated by reference into Part IV.
<PAGE>
<PAGE>
PART 1
ITEM 1. BUSINESS
General
Founded in 1873, Ralphs Grocery Company ("Ralphs" or
the "Company") is one of the leading supermarket chains in
Southern California. Ralphs operates 165 stores supported
by its centrally located and efficient warehousing,
distribution and manufacturing facilities. Ralphs is a
wholly owned subsidiary of Ralphs Supermarkets, Inc.
("Holding Company"), a Delaware Corporation. The common
stock of the Holding Company is held by The Edward J.
DeBartolo Corporation - 60.34%; Camdev Properties, Inc.
- - - 12.81%; Bank of Montreal - 10.13%; Banque Paribas - 10.13%;
and Federated Department Stores, Inc. - 6.59%.
Recapitalization Plan
As part of a recapitalization plan implemented by the
Company in 1992 and completed in 1993, (the "Recapitalization
Plan") in 1993 the Company sold $150.0 million aggregate
principal amount of its 9% Senior Subordinated notes due
2003 (the "Initial Notes") pursuant to Rule 144A under the
Securities Act of 1933, as amended (the "Securities Act").
The proceeds of the Initial Notes were used to (i) purchase
for cancellation $60.0 million aggregate principal amount
of the Company's 14% Senior Subordinated Debentures due 2000
(the "14% Subordinated Debentures") from a noteholder who
had made an unsolicited offer to sell such 14% Subordinated
Debentures, (ii) defease the remaining $38.1 million
aggregate principal amount of the 14% Subordinated
Debentures, (iii) prepay $36.1 million of borrowings under
the Company's $350.0 million 1992 term loan facility which
had been entered into as part of the Recapitalization Plan
and (iv) pay fees and expenses associated with such
transactions and for other purposes. Pursuant to a
registration rights agreement entered into with the purchasers
of the Initial Notes, the Company offered to exchange up
to $150.0 million aggregate principal amount of its 9%
Series B Senior Subordinated Notes due 2003 (the "Exchange
Notes") for the Initial Notes (the "Exchange Offer"). On
June 24, 1993, the Company completed the exchange of $149.7
million aggregate principal amount of Exchange Notes for
Initial Notes ($.3 million of Initial Notes remain
outstanding). The terms of the Exchange Notes are
substantially identical (including principal amount, interest
rate and maturity) in all respects to the terms of the Initial
Notes except that the Exchange Notes are freely transferable
by the holders thereof (with certain exceptions).
<PAGE>
Business of the Company
New Stores and Remodeling
During the last five fiscal years, Ralphs has opened 46
new stores and remodeled 87 stores at a cost of
approximately $283.6 million. A majority of these new and
remodeled stores offer expanded produce and European-style
seafood departments, service delicatessens, fresh bakeries
and a broad selection of general merchandise. With enhanced
decor reflecting contemporary interior design, these stores
are designed to provide a quality shopping experience. At
the end of the year ended January 30, 1994 ("Fiscal 1993"),
92% of Ralphs' stores were newly built or remodeled within the
past seven years.
The history of store openings, closings and remodelings
since 1989 is set forth below:
<TABLE>
<CAPTION>
Fiscal Year
-----------------------------------
1989 1990 1991 1992 1993
<S> <C> <C> <C> <C> <C>
Beginning store count . 134 142 150 158 159
Stores opened . . . . . . 10 13 9 6 8
Stores closed or sold . . 2 5 1 5 2
Ending store count. . . . 142 150 158 159 165
Stores remodeled. . . . . 38 13 7 23 6
</TABLE>
Ralphs selects most new store sites from developers'
proposals. The sites, some of which are in high growth
areas and others of which are in established areas, are
researched and analyzed by Ralphs' personnel. Each site is
monitored for population shifts, zoning changes, traffic
patterns, nearby new construction and competitors stores,
in an effort to determine sales potential. Ralphs actively
participates with developers in order to obtain Ralphs'
objectives for the site, including adequate parking and
complimentary co-tenant mix.
Remodeling usually involves enhancing a store's decor
through fixture replacement, upgrading of service
departments and improvements to lighting systems. In order
to minimize the disruptive effect on sales, most stores are
kept open during the remodeling period. The primary
objectives of remodeling are to improve the attractiveness
of stores, increase sales of higher margin product
categories and, where feasible, to increase selling area.
<PAGE>
Since it has operated in Southern California for 121
years, Ralphs has many well-established store locations in
highly populated metropolitan areas. Ralphs has pursued a
strategy in recent years of acquiring strategic locations in
high-growth master-planned communities. In response to the
negative impact of the current economic climate on new home
sales in Southern California, Ralphs' current new store
development program reflects an increased emphasis on
attractive development opportunities in more mature, highly
populated areas.
The Company plans to open 7 to 11 new stores and remodel
4 to 6 stores in fiscal 1994. Most of the new stores
anticipated for fiscal 1994 are expected to open in the fourth
quarter. Management believes that operating cash flow,
supplemented by capital and operating leases, should be
sufficient to meet Ralphs' operating needs and scheduled
capital expenditures.
Remodelings and openings, among other things, are
subject to the availability of developers' financing,
agreements with developers and landlords, local zoning
regulations, construction schedules and other factors,
including costs, often beyond Ralphs' control. Accordingly,
there can be no assurance that the schedule will be met.
Further, Ralphs expects increasing competition for new store
sites, and it is possible that this competition might
adversely affect the timing of its new store opening program.
Some of the above mentioned factors adversely affected the
anticipated store remodeling and opening schedule set forth in
the Company's Annual Report on Form 10-K dated April 29, 1993.
Merchandising and Marketing
Management operates its stores under a single format
which allows it to achieve operating economies. Every store
uses the Ralphs name, however, each store is merchandised to
appeal to the local community which it serves.
Ralphs stocks between 20,000 and 30,000 merchandise
items in its stores. Management believes that Ralphs offers
a substantial supermarket product selection and that this is
a significant aspect of its marketing offering. Ralphs
emphasizes name-brand grocery products; quality and
freshness in its produce, meat, seafood, delicatessen and
bakery products; and broad selection in all departments.
Service delicatessen departments are present in 163,
on-premises bakery facilities are present in 151, floral
departments are present in 165 and European-style seafood
departments are present in 149 of Ralphs' stores.
Ralphs' marketing strategy is to provide a combination
of wide product selection, quality and freshness of
perishable products, competitive prices and double coupons
supporting Ralphs' advertising theme "Everything You Need.
Everytime You Shop". In addition, Ralphs emphasizes store
ambiance and cleanliness, fast and friendly service, the
convenience of debit and credit card payment (including
in-store branch banks) and 24-hour operations.
In February 1994, Ralphs launched the Ralphs Savings
Plan, a new marketing campaign specifically designed to
enhance customer value. The Ralphs Savings Plan is
comprised of six major components: Guaranteed Low Prices
(GLPs), Price Breakers, Big Buys, Multi-Buys, Ralphs Brand
Products and Double Coupons. GLPs guarantee low prices on
approximately 600 to 1,000 high volume items that are surveyed
and updated every four weeks. Price Breakers are weekly
advertised items that offer significant savings. Big Buys
are club size items at prices competitive to club store
prices and Multi-Buys offer Ralphs' shoppers the opportunity
to purchase club store quantities of regular sized items
at prices competitive to club store prices. In conjunction
with this new campaign Ralphs private label offering of over
2,000 products provides value to the customer. Private label
sales represented 17.3% of sales at fiscal year-end.
As part of Ralphs' effort to keep pace with its
changing marketplace, customers are invited to comment on
Ralphs' operations through "We'd Like to Know" cards available
at each store. Several hundred cards are received each month.
The cards are analyzed on an individual basis by store and
district by senior management, enabling Ralphs to respond
promptly to customer observations and suggestions.
Information Systems and Technology
Ralphs' management utilizes technology and industrial
engineering methods to enhance operating efficiency. Every
checkout lane in every Ralphs' store has a point of sale
terminal. Information from these terminals is utilized to
allocate shelf space, select merchandise based on the buying
patterns of each store, reduce out-of-stocks and increase
efficiency at the checkstand and in the warehouses.
Industrial engineering methods are used to schedule labor
thereby improving productivity at the store level and in
warehousing and distribution operations.
Ralphs was the first supermarket chain in the western
United States to adopt scanning in all of its stores and has
upgraded this equipment through the purchase of IBM 4680
point-of-sale computers. All Ralphs' stores use laser
scanning equipment, operating through an integrated computer
system, to scan the Universal Product Code, which provides
prices and descriptions for most products.
Ralphs has a Uniform Communications Standard purchase
order system that electronically links Ralphs to major
suppliers via computer. This system has enabled the automated
processing of purchase orders which management believes
reduces the lead time required for product purchases. In
Fiscal 1993, Ralphs completed installation of an industry
standard, direct store delivery receiving system for goods
delivered directly by vendors. This system allows the receipt
of each order to be recorded electronically, thereby
confirming product retail price and purchase authorization.
This system has reduced the incidence of billing errors and
unauthorized deliveries.
Industrial engineering standards have been established
for all major work functions in Ralphs' stores, ranging from
stocking to checkout. Performance of each major department
in each store is measured weekly against these standards.
Similar measurements are made in Ralphs' distribution,
warehouse and manufacturing operations. Ralphs believes
that its application of quantitative methods to the
operation of the business has given it a competitive
advantage and has better enabled management to run its
business efficiently and to control costs.
Distribution and Warehouse Operations
Ralphs' distribution and warehouse facilities are all
located in Southern California. In Fiscal 1993, approximately
82% of goods supplied to Ralphs' stores were provided through
its own warehouse and distribution facilities; the remaining
18% were delivered directly by vendors to the stores. In
November 1987, Ralphs opened a 17 million cubic foot
highrise automated storage and retrieval system ("ASRS")
warehouse for non-perishable items, at a cost of
approximately $50.0 million. This facility significantly
increased capacity and improved the efficiency of Ralphs'
warehouse operations. The automated warehouse has a ground
floor area of 170,000 square feet and capacity of
approximately 50,000 pallets. Guided by computer software,
ten-story high cranes move pallets from the receiving dock to
programmed locations in the ASRS warehouse, while recording
the location and time of storage. Goods are retrieved and
delivered by the cranes to conveyors leading to the adjacent
grocery "picking" warehouse where individual store orders are
filled and shipped.
<PAGE>
The ASRS facility can hold substantially more inventory
and requires fewer employees to operate than a conventional
warehouse of equal size. This facility has reduced Ralphs'
warehousing costs of non-perishable items markedly, enabling
it to take advantage of advance buying opportunities and
minimize "out-of-stocks." Ralphs engages in forward-buy
purchases to take advantage of special prices or to delay
the impact of upcoming price increases by purchasing and
warehousing larger quantities of merchandise than
immediately required.
In mid-1992, Ralphs opened a 5.4 million cubic foot
facility designed to process and store all perishable
products (the "Perishables Service Center" or "PSC"). This
facility cost approximately $35.0 million and has enabled
Ralphs to have the ability to deliver perishable products to
its stores on a daily basis, thereby improving the freshness
and quality of these products. The facility contains an
energy efficient refrigeration system and a computer system
designed to document the location and anticipated delivery
time of all inventory. The PSC has consolidated the
operations of three existing facilities and holds more
inventory than the facilities it replaced, thereby reducing
Ralphs' warehouse distribution costs.
All Ralphs' stores are within a three hour drive from
the distribution and warehousing facilities. This
geographical concentration combined with Ralphs' efficient
order system shortens the lead time between the placement of
a merchandise order and its receipt.
As part of its distribution operations Ralphs operates a
modern fleet of 193 tractors and 577 trailers, of which 183
tractors and 394 trailers are leased, with the remainder
being owned by Ralphs.
Manufacturing
Food products manufactured or processed by Ralphs
accounted for estimated sales of $301.7 million (11.1% of
total sales) during Fiscal 1993. Wholesale sales to third
parties of manufactured or processed products were
approximately $2.5 million for the same period. By
manufacturing or processing certain products, Ralphs is able
to improve its merchandising mix, resulting in higher
operating margins and enhanced quality control.
Ralphs' manufacturing operations produce a variety of
dairy and other products, including fluid milk, ice cream,
yogurt and bottled waters and juices as well as packaged
ice, cheese and salad preparations. Ralphs contracts with
meat processors to provide a full line of whole and
prefabricated cuts. Ralphs ceased operating its bakery
operations during the second quarter of Fiscal 1993 at its
102,000 square foot facility in Los Angeles in conjunction
with an increased emphasis on in-store bakeries. The
Company provided a restructuring charge of approximately
$7.1 million and $2.4 million during the year ended January
31, 1993 ("Fiscal 1992"), and Fiscal 1993, respectively, to
record the costs of closing the bakery operation. The
following table sets forth information concerning Ralphs'
other manufacturing and processing facilities, all of which
are owned:
Building
Facility Sq. Feet Location
-------- ---------- ---------
Milk processing . . . . . . 28,000 Compton
Ice cream processing. . . . 9,000 Compton
Delicatessen kitchen. . . . 23,000 Compton
Competition
The supermarket business is characterized by high sales
volume, high inventory turnover and low gross profit
margins. The business is highly competitive in Southern
California. Principal competitive factors in the
supermarket business include store locations, the
combination of price and quality that give the consumer the
greatest perceived value, availability and breadth of
selection, quality of products and service, store
environment, including cleanliness, and promotions. Ralphs'
management believes, based on its marketing research, that
consumers perceive Ralphs as offering a combination of
convenience, competitive prices and a wide variety of
quality products and services in a pleasant shopping
environment. Ralphs' management believes that its
competitive strengths are its desirable store locations and
sites in combination with a strong consumer franchise, its
commitment and ability to adapt new and existing technology
to the supermarket business, its efficient manufacturing,
warehousing and distribution facilities, its experienced
management team and its well-trained employees.
Ralphs competes with several large supermarket chains,
including Vons, Lucky Stores, Alpha Beta Markets, Hughes and
Stater Brothers and with other smaller supermarket chains, as
well as independent grocery stores and warehouse club/discount
merchandisers. Certain of Ralphs' competitors are larger in
terms of capital and sales volume and may have greater
financial resources and access to capital than does Ralphs.
<TABLE>
Employees
<CAPTION>
At January 30, 1994, Ralphs had 6,136 full-time
and 8,776 part-time employees as follows:
Union Nonunion Total
------ -------- ------
<S> <C> <C> <C>
Hourly. . . . . . . . 13,573 259 13,832
Salaried. . . . . . . -- 1,080 1,080
------ ------ ------
Total employees . . 13,573 1,339 14,912
====== ====== ======
</TABLE>
Ralphs has collective bargaining agreements with unions
representing 13,573 of Ralphs' hourly employees. Ralphs'
agreement with the International Brotherhood of Teamsters
expires in September 1994 and its agreement with the United
Food and Commercial Workers Union expires in October 1996.
Ralphs believes it has good relations with its employees.
<PAGE>
Pursuant to its collective bargaining agreements,
Ralphs contributes to various union-sponsored, multi-employer
pension plans.
Government Regulation
Ralphs is subject to regulation by a variety of
governmental agencies, including but not limited to the
California Department of Alcoholic Beverage Control, the
California Department of Agriculture, the U.S. Food and Drug
Administration, the U.S. Department of Agriculture and state
and local health departments.
ITEM 2. PROPERTIES
Ralphs owns the locations of 41 and leases the
locations of 124 of its 165 supermarkets. It owns 11 and
leases five of its 16 distribution, warehouse and
administrative facilities. Ralphs owns its three
manufacturing and processing facilities. Ralphs'
properties are located in six Southern California counties
(Los Angeles, Orange, Ventura, San Bernardino, Riverside and
San Diego). See Note 6 of the Notes to Consolidated Financial
Statements of Ralphs included elsewhere in this Form 10-K.
Ralphs believes that its properties are adequately
maintained and are adequate for its business needs.
On January 17, 1994, an earthquake in Southern California
caused considerable damage in Los Angeles and
surrounding areas. Several Ralphs supermarkets suffered
earthquake damage with 54 stores completely shutdown on the
morning of January 17th. Thirty-four stores reopened within
one day and an additional 17 stores reopened within three
days. Suffering major structural damage were three stores in
the San Fernando Valley area of Los Angeles. All three stores
have since reopened for business with the last reopening on
April 15, 1994. Management believes that there was some
negative impact on sales from the temporary disruption of
business resulting from the earthquake.
Ralphs is insured for earthquake losses. The pre-tax
financial impact, net of insurance claims, is expected to be
approximately $11 million and the Company has reserved for
this loss in Fiscal 1993.
The number of stores and facilities operated and the
square feet of space at January 30, 1994 consisted of:
Units Gross Space Selling Space
----- ----------- -------------
(in thousands)
Stores. . . . . . . . 165 6,874.4 4,818.6
Distribution, warehouse
and administrative
facilities. . . . . 16 1,693.0 --
Manufacturing and
processing facil-
ities . . . . . . . 3 60.0 --
---- ------- -------
TOTAL . . . . . . 184 8,627.4 4,818.6
==== ======= =======
The number of stores by size classification as of January
30, 1994 is as follows:
Average Average
No. of Gross Selling
Stores Gross Square Feet Square Feet Square Feet
- - ------ ----------------- ----------- -----------
1 23,000 -- 25,000 23,000 17,156
11 25,001 -- 30,000 28,634 19,120
23 30,001 -- 35,000 32,720 22,573
41 35,001 -- 40,000 37,458 25,849
57 40,001 -- 45,000 43,340 31,202
19 45,001 -- 50,000 46,603 31,860
13 50,001 -- 84,280 68,630 48,327
ITEM 3. LEGAL PROCEEDING
In December 1992, three California state antitrust class
action suits were commenced in Los Angeles Superior Court
against Ralphs and other major supermarket chains located in
Southern California, alleging that they conspired to refrain
from competing in and to fix the price of fluid milk above
competitive prices. Specifically, class actions were
commenced by Diane Barela and Neila Ross, Ron Moliare and
Paul C. Pfeifle on December 7, December 14, and December 23,
1992 respectively. To date, the Court has yet to certify
any of these classes, while a Demurrer to the complaints
was denied. Ralphs intends to continue to vigorously pursue
its defense in these actions.
On March 25, 1991, George A. Koteen Associates, Inc.
("Koteen Associates") commenced an action in San Diego
Superior Court alleging that Ralphs breached an alleged
utility rate consulting agreement. In December 1992, a jury
returned a verdict of $4,949,084 in favor of Koteen
Associates and in March 1993, attorney's fees and certain
other costs were awarded to the plaintiff. Ralphs has
appealed the judgment and fully reserved in Fiscal 1992
against an adverse judgement.
Environmental Matters
In January 1991, the California Regional Water Quality
Control Board for the Los Angeles Region (the "Regional
Board") requested Ralphs to conduct a subsurface
characterization of Ralphs' Atwater property. This request
was part of an ongoing effort by the Regional Board, in
connection with the U.S. Environmental Protection Agency (the
"EPA"), to identify contributors to groundwater contamination
in the San Fernando Valley. Significant parts of the San
Fernando Valley, including the area where Ralphs'
Atwater property is located, have been designated federal
Superfund sites because of regional groundwater contamination.
On June 18, 1991, the EPA made its own request for information
concerning the Atwater property. Since that time, the
Regional Board has requested further investigations. Because
the Regional Board and the EPA are only collecting information
at this time and have not given notice of any specific action
or claim against Ralphs, it is not possible to estimate the
amounts of any possible claims in connection with the Atwater
property.
In 1994, Ralphs completed the remediation of the
mineral oil release at its bakery located at the Atwater
property in Los Angeles. Ralphs' environmental consultants
do not contemplate that there will be any further regulatory
requirements with respect to this matter.
The Company is involved in a number of other legal
proceedings, none of which is expected to have a material
impact on the financial conditions or business of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) Market Information.
There is no established public trading market for the
Company's common equity.
(b) Holders.
The Company is a wholly owned subsidiary of the Holding
Company.
(c) Dividends.
In February 1994, the Board of Directors of the Company
authorized a dividend of $10.0 million to be paid to the
Holding Company and the Board of Directors of the Holding
Company authorized distribution of this dividend to its
shareholders subject to certain restrictive covenants in
the instruments governing certain of Ralphs' indebtedness that
impose limitation on the declarations or payment of dividends.
The Company is currently seeking an amendment to the
Credit Agreement dated as of July 22, 1992 as amended
(the "1992 Credit Agreement") to allow the payment of
the dividend to the Holding Company for distribution to
the Holding Company's stockholders. The proposed fee for
the amendment is approximately $500,000.
The Holding Company and the stockholders of the Holding
Company entered into a Registration Rights and Corporate
Governance Agreement (the "Registration Rights Agreement")
which provides for certain aspects of corporate governance
of the Company and the Holding Company. Pursuant to the
terms of the Registration Rights Agreement, Ralphs is
obligated to provide the Holding Company, by dividend,
pursuant to a services agreement or otherwise, with funds
sufficient to enable the Holding Company to perform its duties
as the holding company of Ralphs' stock and to perform its
obligations set forth in the Registration Rights Agreement.
ITEM 6. SELECTED FINANCIAL DATA
The following table presents historical selected
financial data derived from the audited financial statements
of the Company for the fiscal years ended January 28, 1990,
February 3, 1991, February 2, 1992, January 31, 1993 and
January 30, 1994. The information set forth below should
be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations,"
the Financial Statements and related notes thereto, included
elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
Year Year Year Year Year
Ended Ended Ended Ended Ended
Jan. 28, Feb. 3, Feb. 2, Jan. 31, Jan. 30,
1990 1991(a) 1992 1993 1994
------- -------- ------- ------- ------
<S> (dollars in millions)
Income Statement Data: <C> <C> <C> <C> <C>
Sales. . . . . . . . . . . $2,556.1 $2,799.1 $2,889.2 $2,843.8 $2,730.2
Cost of sales . . . . . . . 2,051.1 2,225.4 2,275.2 2,217.2 2,093.7
------- -------- -------- -------- --------
Gross profit . . . . . . . 505.0 573.7 614.0 626.6 636.5
Selling,general & admin-
istrative expenses. . . . 391.0 435.8 456.6 466.7 467.6
Provision for equity
appreciation rights . . . 26.0 15.3 18.3 -- --
Amortization of excess of
cost over net assets
acquired. . . . . . . . . 11.7 11.0 11.0 11.0 11.0
Provision for restructuring(b) -- -- -- 7.1 2.4
Provision for postretirement
benefits other than
pensions . . . . . . . . -- 2.2 2.6 3.3 3.4
Provision for tax indem-
nification payments to
Federated. . . . . . . . -- -- 10.0 -- --
------ ------- ------- ------ ------
Operating income(loss) . . 76.3 109.4 115.5 138.5 152.1
Other (income) expenses:
Interest 130.9 128.5 130.2 125.6 108.8
(Gain)loss on disposal of
assets. . . . . . . . . . 3.1 6.4 13.0(c) 2.6 1.9
Provision for legal settle-
ment. . . . . . . . . . -- -- -- 7.5 --
Provision for earthquake
losses (d). . . . . . . . -- -- -- -- 11.0
------ ------- ------- ------ ------
Earnings(loss) before income
taxes, cumulative effect of
change in accounting and
extraordinary item. . . . . (57.7) (25.5) (27.7) 2.8 30.4
Income tax expense (benefit). 12.0 12.8 13.5 8.3 (108.0)(e)
------ ------- ------- ------ ------
Earnings(loss) before cumula-
tive effect of change in
accounting and extraordinary
item . . . . . . . . . . . (69.7) (38.3) (41.2) (5.5) 138.4
Cumulative effect of change in
accounting for postretirement
benefits other than pensions. -- (13.1) -- -- --
------ ------- ------- ------ ------
Earnings(loss) before extra-
ordinary item . . . . . . . (69.7) (51.4) (41.2) (5.5) 138.4
Extraordinary item--debt re-
financing, net of tax benefit
of $4.2 . . . . . . . . . . -- -- -- (70.6) --
------ ------- -------- ------- ------
Net earnings(loss) $ (69.7) $(51.4) $(41.2) $(76.1) $138.4
==== ==== ==== ==== ====
Ratio of earnings to fixed
charges (f). . . . . . . . --(g) --(g) --(g) 1.02 1.24
==== ==== ==== ==== ====
Operating and Other Data:
EBITDA (h) . . . . . . . . $ 188.8 $207.0 $225.8 $227.3 $230.2
EBITDA margin (i). . . . . 7.4% 7.4% 7.8% 8.0% 8.4%
Depreciation and
amortization (j). . . . . $ 81.6 $ 75.2 $ 76.6 $ 76.9 $74.5
Capital expenditures . . . $ 103.5 $ 87.6 $ 50.4 $102.7 $62.2
Ratio of EBITDA to interest
expense . . . . . . . . . 1.44 1.61 1.73 1.81 2.12
Ratio of EBITDA to cash
interest expense (k). . . 1.56 1.76 1.95 2.15 2.48
Ratio of total debt to
EBITDA. . . . . . . . . . 5.26 4.78 4.11 4.39 4.34
Store Data:
Stores open at end of
period (l). . . . . . . . 142 150 158 159 165
Number of remodels (l) . . 38 13 7 23 6
Sales per selling square
foot (l)(m) . . . . . . . $ 631 $ 649 $ 628 $ 617 $567
Balance Sheet Data (end of
period):
Total assets . . . . . . . $1,404.8 $1,406.4 $1,357.6 $1,388.5 $1,483.7
Total debt (n) . . . . . . 994.0 989.1 928.4 998.7 998.9
Stockholder's equity
(deficit) . . . . . . . . $ 35.4 $ (16.0) $ (57.2)$ (133.3) $ 5.1
<FN>
(a) The fiscal year was comprised of 53 weeks as compared to 52
weeks with respect to the other fiscal years presented.
(b) Charge for expenses relating to closing of central bakery
operations.
(c) Includes approximately $12.2 million representing a reserve
against losses related to the closing of three stores.
(d) Represents reserve for losses, net of insurance claims,
resulting from January 17, 1994 Southern California earthquake.
(e) Includes recognition of $109.1 million of deferred income tax
benefit and $1.1 million current income tax expense for Fiscal 1993
(See Note 11 of the Notes to Consolidated Financial Statements).
(f) For purposes of computing this ratio, earnings consist of
earnings before income taxes, cumulative effect of change in
accounting, extraordinary item and fixed charges. Fixed charges
consist of interest expense (including amortization of self-
insurance reserves discount), capitalized interest, amortization
of deferred debt issuance costs and one-third of rental expense
(the portion deemed representative of the interest factor).
(g) Earnings before income taxes, cumulative effect of change in
accounting, extraordinary item and fixed charges were
insufficient to cover fixed charges for fiscal 1989, 1990 and
1991 by $57.7 million, $25.5 million and $27.7 million,
respectively.
(h) EBITDA represents net earnings before taking into
consideration interest expense, income tax expense, depreciation
expense, amortization expense, provisions for equity appreciation
rights, tax indemnification payments to Federated Department
Stores, Inc. (See Item 13. "Certain Relationships and Related
Transactions"), postretirement benefits, the LIFO provision,
extraordinary item relating to debt refinancing, provision for
legal settlement, provision for restructuring, reserves for
earthquake losses and loss on disposal of assets.
(i) EBITDA margin represents EBITDA as a percentage of sales.
(j) For fiscal 1989, 1990, 1991, 1992 and 1993 the amount
includes amortization of the excess of cost over net assets
acquired of $11.7 million, $11.0 million, $11.0 million, $11.0
million and $11.0 million respectively.
(k) Excludes charges relating to amortization of debt issuance
costs, self-insurance discount, lease valuation reserves and
other miscellaneous charges which are categorized by Ralphs as
non-cash interest expense.
(l) Data relating to stores is expressed in actual numbers.
(m) Sales per selling square foot are based on total store
selling square footage at the end of the fiscal year.
(n) Total debt includes long-term debt, current maturities of
long-term debt, capital lease obligations and redeemable
preferred stock.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview and Basis of Presentation
The following discussion of Ralphs' financial condition and
results of operations should be read in conjunction with the
Consolidated Financial Statements and notes thereto included
elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
February 2, 1992 January 31,1993 January 30, 1994
---------------- ---------------- ----------------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Sales. . . . . . . . . . $2,889.2 100.0% $2,843.8 100.0% $2,730.2 100.0%
Cost of sales. . . . . . 2,275.2 78.8 2,217.2 78.0 2,093.7 76.7
-------- ------ -------- ------ -------- ------
Gross profit. . . . . 614.0 21.2 626.6 22.0 636.5 23.3
Selling, general and
administrative expenses. 456.6 15.8 466.7 16.4 467.6 17.1
Provision for equity
appreciation rights . . 18.3 0.6 -- -- -- --
Amortization of excess
of cost over net assets
acquired. . . . . . . . 11.0 0.4 11.0 0.4 11.0 0.4
Provision for restruct-
uring (a) . . . . . . . -- -- 7.1 0.2 2.4 0.1
Provision for postretire-
ment benefits other than
pensions. . . . . . . . 2.6 0.1 3.3 0.1 3.4 0.1
Provision for tax indem-
nification. . . . . . . 10.0 0.3 -- -- -- --
-------- ------ -------- ------ -------- ------
Operating Income. . . 115.5 4.0 138.5 4.9 152.1 5.6
Other expenses:
Interest . . . . . . . 130.2 4.5 125.6 4.4 108.8 4.0
Loss on disposal of
assets . . . . . . . 13.0 0.5 2.6 0.1 1.9 0.1
Provision for legal
settlement. . . . . . -- -- 7.5 0.3 -- --
Provision for earthquake
losses (b). . . . . . -- -- -- -- 11.0 0.4
-------- ------ -------- ------ -------- ------
Earnings(loss) before
income taxes, and extra-
ordinary item . . . . . (27.7) (1.0) 2.8 0.1 30.4 1.1
Income tax expense
(benefit). . . . . . . . 13.5 0.4 8.3 0.3 (108.0) (4.0)
-------- ------ -------- ------ -------- ------
Earnings(loss) before
extraordinary item. . . (41.2) (1.4) (5.5) (0.2) 138.4 5.1
Extraordinary item--debt
refinancing, net of tax
benefit of $4.2 . . . . -- -- (70.6) (2.5) -- --
-------- ------ -------- ------ -------- ------
Net earnings(loss). . $ (41.2) (1.4)% $(76.1) (2.7)% $138.4 5.1%
==== ==== ==== ==== ==== ===
Other Data:
EBITDA(c). . . . . . . . $ 225.8 7.8% $227.3 8.0% $230.2 8.4%
Depreciation and
amortization(d) . . . . 76.6 2.7 76.9 2.7 74.5 2.7
LIFO charge. . . . . . . 2.8 0.1 1.1 0.0 (2.1) (0.1)
<FN>
(a) Charge for expenses relating to closing of central bakery
operation.
(b) Represents reserve for losses, net of insurance claims,
resulting from January 17, 1994 Southern California earthquake.
(c) EBITDA represents net earnings before taking into
consideration interest expense, income tax expense, depreciation
expense, amortization expense, provisions for equity appreciation
rights, tax indemnification payments to Federated Department
Stores, Inc., postretirement benefits, the LIFO provision,
extraordinary item relating to debt refinancing, provision for
legal settlement, provision for restructuring, reserves for
earthquake losses and loss on disposal of assets.
(d) For the fiscal years ended 1991, 1992 and 1993 the amount
includes amortization of excess cost over net assets acquired of
$11.0 million, $11.0 million and $11.0 million, respectively.
</TABLE>
Results of Operations
Fiscal 1993 v. Fiscal 1992
Sales
For the 52 weeks ended January 30, 1994 ("Fiscal 1993"),
sales were $2.730 billion, a decrease of $113.6 million or
4.0% compared to the 52 weeks ended January 31, 1993
("Fiscal 1992").
During Fiscal 1993, Ralphs opened eight new stores, four in
Los Angeles County, two in Orange County and two in Riverside
County, and remodeled six stores. Two of the eight new stores
replaced the two stores closed during the fiscal year.
Comparable store sales decreased 5.8%, which included an
increase of 0.6% for replacement stores, from $2.823 billion to
$2.659 billion in Fiscal 1993. Ralphs' sales continue to be
adversely affected by the significant recession in Southern
California, continuing competitive new store and remodeling
activity and recent pricing and promotional changes by
competitors. The recession, high unemployment and competitive
store openings contributed to the declines in both total and
comparable store sales.
During the first quarter of fiscal year ending January 29,
1995 ("Fiscal 1994") comparable store sales were substantially
similar to the fourth quarter of Fiscal 1993, except that during
the last three weeks of the quarter comparable store sales were
lower. The Company believes these lower comparable store sales
levels were due to the impact on the consumer of property and
income tax payments.
Ralphs continued to take steps to mitigate the impact of the
weak retailing environment in its markets. These actions
included continuing the active remodeling program commenced in
the fall of 1988. In February 1994, Ralphs launched the Ralphs
Savings Plan, a new marketing campaign specifically designed to
enhance customer value.
Cost of Sales
Cost of sales decreased $123.5 million or 5.6% from $2.217
billion in Fiscal 1992 to $2.094 billion in Fiscal 1993. As a
percentage of sales, cost of sales declined to 76.7% in Fiscal
1993 from 78.0% in Fiscal 1992. The decrease in cost of sales as
a percentage of sales was the result of savings in warehousing
and distribution costs, the pass-through of increased operating
costs and increases in relative margins where allowed by
competitive conditions.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $.9
million or 0.2% from $466.7 million in Fiscal 1992 to $467.6
million in Fiscal 1993. As a percentage of sales, selling,
general and administrative expenses increased from 16.4% in
Fiscal 1992 to 17.1% in Fiscal 1993. The increase in selling,
general and administrative expenses as a percent of sales was the
result of several factors including the continuing soft sales
environment. Increases in expense were partially offset by
cost savings programs instituted by Ralphs. The Company is
continuing its expense reduction program, which is showing
positive results.
Operating Income
Operating income in Fiscal 1993 increased to $152.1 millon
from $138.5 million in Fiscal 1992, a 9.8% increase. Operating
margin increased in Fiscal 1993 to 5.6% from 4.9% in Fiscal 1992.
This increase was primarily the result of the aforementioned
improvements in Ralphs' cost of sales percentage. EBITDA
improved to $230.2 million or 8.4% of sales in Fiscal 1993 from
$227.3 million or 8.0% of sales in Fiscal 1992.
Ralphs participates in multi-employer pension plans and
health and welfare plans administered by various trustees for
substantially all union employees. Contributions to these plans
are based upon negotiated contractual rates. The United Food and
Commercial Workers health and welfare benefit plans were
overfunded and those employers who contributed to these plans are
to receive a pro-rata share of the excess reserve in these health
care benefit plans through a reduction in current maintenance
payments. Ralphs share of the excess reserve was approximately
$24.5 million of which $11.8 million was recognized in Fiscal 1993
and the remainder will be recognized in Fiscal 1994. Since employers
are required to make contributions to the benefit funds at
whatever level is necessary to maintain plan benefits, there can
be no assurance that plan maintenance payments will remain at
current levels.
Partially offsetting the reduction of health and welfare
maintenance payments was a $6.0 million contract ratification
bonus paid by the Company at the conclusion of contract
negotiations with the United Food and Commercial Workers Union in
Fiscal 1993.
Interest Expense
Net interest expense for Fiscal 1993 was $108.8 million,
compared to $125.6 million for Fiscal 1992. On July 30, 1992
Ralphs initiated the Recapitalization Plan, which was completed
during the first quarter of 1993. The Recapitalization Plan was
designed to reduce interest expense and improve financial
flexibility. See discussion of Recapitalization Plan under
Item 1 of Part 1. Included as interest expenses during Fiscal 1993
was $92.8 million, representing interest expenses for the 14%
Subordinated Debentures, the Initial Notes and Exchange Notes, the
10 1/4% Senior Subordinated Notes, the 1992 Credit Agreement,
certain secured mortgage notes in the aggregate principal amount
of $175.6 million and which bear interest at 9.65% (the "Mortgage
Notes"), interest on capitalized and operating leases, and
other collateralized and miscellaneous debts as compared to
$105.5 million for Fiscal 1992. Also included in interest
expense for Fiscal 1993 was $16.0 million representing certain
other charges relating to amortization of debt issuance
costs, self-insurance discount, lease valuation reserves and
other miscellaneous charges (categorized by Ralphs as non-cash
interest expense) as compared to $20.1 million for Fiscal 1992.
Investment income has been offset against interest expenses.
Earthquake Losses
On January 17, 1994, an earthquake in Southern California
caused considerable damage in Los Angeles and surrounding areas.
Several Ralphs supermarkets suffered earthquake damage with 54
stores completely shutdown on the morning of January 17th.
Thirty-four stores reopened within one day and an additional
17 stores reopened within three days. Suffering major structural
damage were three stores in the San Fernando Valley area of
Los Angeles. All three stores have since reopened for business
with the last reopening on April 15, 1994. Management believes
that there was some negative impact on sales resulting from the
temporary disruption of business resulting from the earthquake.
Ralphs is insured for earthquake losses. The pre-tax
financial impact, net of insurance claims, is expected to be
approximately $11 million and the Company has reserved for this
loss in Fiscal 1993.
Income Taxes
In Fiscal 1993, the Company recorded the incremental
impact of The Omnibus Budget Reconciliation Act of 1993 on net
deductible temporary differences and increased its deferred
income tax assets by a net amount of $109.1 million. Income
tax expense (benefit) for Fiscal 1993 includes recognition of
$109.1 million of deferred income tax benefit and $1.1 million
current income tax expense for Fiscal 1993 (See Note 11 of
the Notes to Consolidated Financial Statements).
Net Earnings
In Fiscal 1993, Ralphs reported net earnings of $138.4
million compared to a net loss of $76.1 million for Fiscal 1992.
This increase in net earnings was primarily the result of the
Company's recognition of $109.1 million of deferred income tax
benefit for Fiscal 1993 and the following items recorded in
Fiscal 1992: 1) the consummation of the Recapitalization Plan,
which resulted in an extraordinary charge, net of tax benefit, of
$70.6 million, 2) a provision of $7.1 million made for expenses
related to the closure of the central bakery operation, (an
additional charge of $2.4 million was recorded in Fiscal 1993)
and 3) a provision of $7.5 million made for the maximum loss
under a judgement rendered against the Company.
Results of Operations
Fiscal 1992 v. Fiscal 1991
Sales
For the 52 weeks ended January 31, 1993, sales were $2.844
billion, a decrease of $45.4 million or 1.6% compared to Fiscal
1991 (the 52 weeks ended February 2, 1992).
During Fiscal 1992, Ralphs opened six new stores, three in
Los Angeles County, one in Riverside County, one in San
Bernardino County and one in San Diego County, closed five stores
and remodeled 23 stores.
Comparable stores sales decreased 3.5%, which included an
increase of 0.6% for replacement stores, from $2.859 billion to
$2.759 billion in Fiscal 1992. Ralphs' sales continued to be
adversely affected by the significant recession in Southern
California, continuing competitive new store and remodeling
activity and pricing and promotional changes by competitors.
The recession, high unemployment and competitive store openings
contributed to the declines in both total and comparable stores
sales. An additional factor adversely affecting such sales was
the unusually strong first quarter Fiscal 1991 performance which
management attributes to the effect of the Persian Gulf crisis.
Cost of Sales
Cost of sales decreased $58.0 million or 2.5% from $2.275
billion in Fiscal 1991 to $2.217 billion in Fiscal 1992. As a
percentage of sales, cost of sales declined to 78.0% in Fiscal
1992 from 78.8% in Fiscal 1991. The decrease in cost of sales
as a percentage of sales was the result of the pass-through of
increased operating costs, an increase in the mix of above
average gross margin products and increases in relative margins
where allowed by competitive conditions.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $10.1
million or 2.2% from $456.6 million in Fiscal 1991 to $466.7
million in Fiscal 1992. As a percentage of sales, selling,
general and administrative expenses increased from 15.8% in
Fiscal 1991 to 16.4% in Fiscal 1992. The increase in selling,
general and administrative expenses as a percent of sales was the
result of several factors including the continuing soft sales
environment. Other factors impacting selling, general and
administrative expenses during Fiscal 1992 were increases in
union wage rates. These expense increases were partially offset
by significant cost savings programs instituted by Ralphs. These
programs were intensified in the third quarter of 1992 due to the
prolonged period of soft sales experienced in Southern
California.
Operating Income
Operating income in Fiscal 1992 increased to $138.5 million
from $115.5 million in Fiscal 1991, a 20.0% increase. Operating
margin increased in Fiscal 1992 to 4.9% from 4.0% in Fiscal 1991.
This increase was primarily the result of the aforementioned
improvements in Ralphs' cost of sales percentage and the vesting
of then outstanding rights under Ralphs' 1988 Equity Appreciation
Rights Plan. EBITDA improved to $227.3 million or 8.0% of sales
in Fiscal 1992 from $225.8 million or 7.8% of sales in Fiscal
1991.
Interest Expense
Net interest expense for Fiscal 1992 was $125.6 million,
including an adjustment of $2.3 million related to additional
interest on self-insurance, compared to $130.2 million for Fiscal
1991. On July 30, 1992 Ralphs initiated the Recapitalization
Plan, which was designed to reduce interest expense and improve
financial flexibility. The first part of the Recapitalization
Plan consisted of a tender offer for the 14% Subordinated
Debentures (of which $301.9 million were tendered), the issuance
of $300 million 10 1/4% Senior Subordinated Notes, and a new
$470.0 million bank facility (consisting of a $350.0 million term
loan and a $120.0 million working capital credit line). The 1992
Credit Agreement replaced the 1988 Credit Agreements, which were
paid in full, including termination of existing interest rate
swap agreements. Included as interest expenses during Fiscal
1992 was $105.5 million, representing interest expenses for the
14% Subordinated Debentures, the 10 1/4% Senior Subordinated
Notes, the 1988 Credit Agreements, the 1992 Credit Agreement,
certain secured mortgage notes in the aggregate principal amount
of $176.0 million and which bear interest at 9.65% (the "Mortgage
Notes"), interest on capitalized and operating leases, and other
collateralized and miscellaneous debt as compared to $115.8
million for Fiscal 1991. Also included in interest expense for
Fiscal 1992 was $20.1 million representing certain other charges
relating to amortization of debt issuance costs, self-insurance
discount, lease valuation reserves and other miscellaneous
charges (categorized by Ralphs as non-cash interest expense) as
compared to $14.4 million for Fiscal 1991. Investment income has
been offset against interest expenses.
In the fourth quarter of Fiscal 1992, Ralphs entered into an
interest rate cap agreement with an effective date of November 6,
1992 and a three-year maturity. The interest rate cap hedges the
interest rate in excess of 6.5% LIBOR on $105.0 million principal
amount against increases in short-term rates. This agreement
satisfies interest rate protection requirements under the 1992
Credit Agreement. In addition to the interest rate cap
agreement, Ralphs entered into an interest rate swap agreement on
$150.0 million notional principal amount. Under the interest
rate swap agreement, Ralphs is required to pay interest at LIBOR
fixed at the end of each six month calculation period and Ralphs
will receive interest payments at LIBOR fixed at the beginning of
each six month calculation period. An increase or decrease of
one-half percent (0.5%) in the LIBOR interest rate during a six
month calculation period would result in an increase or decrease
in interest payments of $.375 million. This interest rate swap
agreement has a three-year term expiring November 6, 1995.
Ralphs is exposed to credit loss in the event of nonperformance
by the other party to the interest rate swap agreement. However,
Ralphs does not anticipate nonperformance by the counterpart.
Recapitalization Charges
In Fiscal 1992 Ralphs incurred a non-recurring pre-tax
charge totalling $74.7 million in connection with the retirement
of the $400.0 million aggregate principal amount of the 14%
Subordinated Debentures and the write-off of deferred financing
costs related to the $400.0 million principal amount of the 14%
Subordinated Debentures and the 1988 Credit Agreements, charges
incurred to terminate interest rate swap agreements and costs
related to a prospective equity offering. Incurrence of the non-
recurring pre-tax charges resulted in a substantial reduction in
income taxes payable in Fiscal 1992. See "Recapitalization
Plan."
Net Loss
In Fiscal 1992, Ralphs reported a net loss of $76.1 million
compared to a loss of $41.2 million for Fiscal 1991. This
increase in the loss was primarily the result of the consummation
of the Recapitalization plan, which resulted in an extraordinary
charge, net of tax benefit of $70.6 million. In addition, a
provision of $7.1 million was made for expenses related to the
closing of the central bakery operation and a provision of $7.5
million was made for the maximum loss under a judgement rendered
against the Company in December 1992.
Liquidity and Capital Resources
Ralphs' total long-term debt (including current maturities)
at January 30, 1994 was $998.9 million. All mandatory principal
reductions required by the various agreements were satisfied
during Fiscal 1993. Management believes that operating cash
flow, supplemented by capital and operating leases, should be
sufficient to meet Ralphs' operating needs and scheduled capital
expenditures and will enable Ralphs to service its debt in
accordance with its terms. It is possible, however, that
additional financing may be required and there is no assurance
that such financing will be available, or, if available, will be
on terms acceptable to Ralphs.
Working capital was a deficit of $73.0 million at January
30, 1994. Supermarket operators typically require small amounts
of working capital since inventory is generally sold prior to the
time that payments to suppliers are due. Therefore, cash
provided from operations is frequently used for non-current
purposes such as investing and financing activities. Included in
working capital was $71.0 million in current maturities on
long-term debt. Ralphs' primary sources of liquidity during
Fiscal 1993 were cash flow from operations and borrowings under
the 1992 Credit Agreement. Cash flow provided from operating
activities after payment of interest expense and before capital
expenditures was $104.0 million for Fiscal 1993. Capital
expenditures for Fiscal 1993 were $62.2 million.
In Fiscal 1993, the Company recorded the incremental impact
of The Omnibus Budget Reconciliation Act of 1993 on deductible
temporary differences and increased its deferred income tax
assets by a net amount of $109.1 million. The Company believes
it is more likely than not that the recorded net deferred tax asset
will be realized (see Note 11 of the Notes to Consolidated
Financial Statements).
The 1992 Working Capital Facility is a $120.0 million credit
line which is available for working capital requirements and
general corporate purposes. Up to $60.0 million of the 1992
Working Capital Facility may be used to support standby letters
of credit and up to $10.0 million in the aggregate may be
borrowed on same-day notice as swing-line loans. The letters of
credit may be used to cover workers' compensation contingencies
and for such other purposes as are permitted under the 1992
Credit Agreement. The 1992 Working Capital Facility is a non-
amortizing line of credit available through the earlier of June
30, 1998 or the date the 1992 Credit Agreement is paid in full.
Borrowings under the 1992 Working Capital Facility generally are
required to be reduced to zero for 30 consecutive days in each
period of twelve consecutive months. There were no borrowings
under the Working Capital Facility as of January 30, 1994. The
amount available under the 1992 Credit Agreement's Working
Capital Facility was $68.9 million at January 30, 1994. Effective
May 1, 1994, the letter of credit required by the State
of California to support worker's compensation contingencies was
increased from $41.7 million to $43.1 million. This increase
reduces the amount available under the 1992 Working Capital
Facility.
During Fiscal 1993 cash used in investing activities was
$45.5 million. This amount reflects increased capital
expenditures related to store remodels and new store openings
(including store acquisitions) and, to a lesser extent, expansion
of other warehousing, distribution and manufacturing facilities
and equipment, including data processing and computer systems.
Cash used in financing activities was approximately $49.6
million for Fiscal 1993. This amount reflects the effects of the
offering of the Initial Notes and the application of the proceeds
therefrom. Reductions of capital lease obligations of $8.5
million reduced cash flow.
During Fiscal 1993 cash provided from operating activities
of $104.0 million, cash used in investing activities of $45.5
million and cash used in financing activities of $49.6 million,
resulted in a net increase in cash and cash equivalents of $8.9
million at January 30, 1994 as compared to January 31, 1993.
In recent years, Ralphs has utilized capital leases and off-
balance sheet financing to fund a portion of its capital
expenditures. Cash used in investing activities was $102.5
million for Fiscal 1992 and $41.9 million for Fiscal 1991. Cash
provided from operating activities amounted to $53.7 million for
Fiscal 1992 and $96.1 million for Fiscal 1991.
<PAGE>
<TABLE>
Annual principal payments and maturities are as follows (in thousands):
<CAPTION>
Fiscal Fiscal Fiscal Fiscal Fiscal There-
1994 1995 1996 1997 1998 after
------ ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
1992 Credit Agreement. . .$ 55,000 $ 65,000 $ 70,000 $ 70,000 $ 40,000 $ 0
Mortgage Notes . . . . . . 1,474 2,324 2,507 2,708 2,928 166,072
Initial Notes and Exchange
Notes . . . . . . . . . . 0 0 0 0 0 150,000
10 1/4% Senior Subordinated
Notes . . . . . . . . . . 0 0 0 0 0 300,000
Capitalized leases . . . . 11,052 10,423 8,802 9,008 7,478 14,387
Other senior debt. . . . . 3,449 3,825 2,447 0 0 0
------ ------ ------ ------ ------ -------
$ 70,975 $ 81,572 $ 83,756 $ 81,716 $ 50,406 $630,459
</TABLE>
<PAGE>
Effect of Inflation
Inflation has not had a major impact on the operations of
Ralphs during the past three years. As is typical of the
supermarket industry, Ralphs has generally been able to maintain
margins by adjusting its retail prices, but competitive
conditions may from time to time render it unable to do so while
maintaining its market share.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Information called for by this item is set forth in the
Company's financial statements and supplementary data contained
in this report. Specific financial statements and supplementary
data can be found at the pages listed in the following index.
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report. . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets at January 31, 1993 and
January 30, 1994 . . . . . . . . . . . . . . . . . . . . F-3
Years ended February 2, 1992, January 31, 1993, and
January 30, 1994:
Consolidated Statements of Operations . . . . . . . F-4
Consolidated Statements of Cash Flows . . . . . . . F-5
Consolidated Statements of Stockholders' Equity . . F-6
Notes to Consolidated Financial Statements. . . . . . . . . F-7
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the
Company's accountants on accounting and financial disclosure
during the applicable periods.
<PAGE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is provided with respect to the
directors and executive officers of Ralphs as of May 2, 1994:
YEARS OF
RALPHS SERVICE
-------------------
MANAGERIAL
NAME AGE POSITION POSITIONS TOTAL
- - ---------------------- --- -------------------------- --------- -----
Byron E. Allumbaugh 62 Chairman, Chief Executive 35 35
Officer and Director
Alfred A. Marasca 52 President, Chief Operating 29 37
Officer and Director
Terry Peets 49 Executive Vice President 17 17
Gene A. Brown 58 Senior Vice President, Human 28 29
Resources and Public Relations
Edmund Kevin Davis 40 Senior Vice President, Sales 13 19
and Merchandising
R.Alexander Detrick 52 Senior Vice President, 19 19
Corporate Strategy and
Development
Alan G. Gray 58 Senior Vice President, 33 43
Administration
Jan Charles Gray 46 Senior Vice President, 19 30
General Counsel and Secretary
Lee R. Mueller 53 Senior Vice President, 32 38
Store Operations
Alan J. Reed 47 Senior Vice President & Chief 21 21
Financial Officer
Jane Rice 52 Senior Vice President & Chief 10 10
Information Officer
James A. Warren 59 Senior Vice President, 32 38
Distribution & Manufacturing
Edward J. DeBartolo, 84 Director
Edward J. DeBartolo,Jr. 47 Director
Anthony W. Liberati 61 Director
G.William Miller 69 Director
David M. Petrone 49 Director
Richard L. Posen 43 Director
Richard S. Sokolov 44 Director
Peter J. Solomon 55 Director
Marie Denise DeBartolo York 43 Director
<PAGE>
<PAGE>
The Board of Directors is classified into three classes,
each class to have as equal a number of directors as possible.
The Class A directors, Messrs. DeBartolo, Jr., Liberati, Sokolov
and Mrs. DeBartolo York have been elected for a term that expires
at the annual meeting of stockholders in 1995, the Class B
directors, Messrs. DeBartolo, Miller and Petrone, have been
elected for a term that expires at the annual meeting of
stockholders in 1996, and the Class C directors, Messrs.
Allumbaugh, Marasca, Posen and Solomon, have been elected for a
term that expires at the annual meeting of stockholders in 1994.
At each annual meeting of stockholders, successors to the class
of directors whose term expires at that annual meeting will be
elected for a three-year term.
Mr. Patrick W. Collins, Vice Chairman and Director, retired
from Ralphs and resigned from the Board of Directors in February
1994.
Composition of the Board of Directors of Ralphs and the
Holding Company is identical at the present time, as are the
officers of the two companies. Officers are elected annually and
are subject to removal at any time, with or without cause, by the
Board of Directors of the Holding Company or Ralphs, as the case
may be.
Mr. Allumbaugh has been Chairman and Chief Executive Officer
since 1976 and a Director since 1988. He also is a Director of
the H.F. Ahmanson Company, El Paso Natural Gas Company and
Ultramar, Inc.
Mr. Marasca has been President, Chief Operating Officer
and a Director since February 1994. He was President
from February 1993 to February 1994, Executive Vice President,
Retail from 1991 until 1993 and Executive Vice President,
Marketing from 1985 to 1991.
Mr. Ralph H. Liebman, Executive Vice President, Support
Group, retired from Ralphs in April 1994.
Mr. Peets has been Executive Vice President since February
1994. He was Senior Vice President, Marketing from 1991 to
February 1994, Senior Vice President, Merchandising from 1990 to
1991, Group Vice President, Merchandising from 1988 to 1990 and
Group Vice President, Store Operations from 1987 to 1988.
Mr. Brown has been Senior Vice President, Human Resources
and Public Relations, since 1987.
Mr. Davis has been Senior Vice President, Sales and
Merchandising since February 1994. He was Group Vice President,
Sales and Merchandising from 1992 to February 1994 and Vice
President of Sales and Advertising from 1988 to 1992.
Mr. Detrick has been Senior Vice President, Corporate
Strategy and Development, since 1982.
Mr. Alan G. Gray has been Senior Vice President,
Administration since 1993. He was Group Vice President, Store
Operations from 1985 to 1992 and Group Vice President,
Administration from 1992 to 1993.
Mr. Jan Charles Gray has been Senior Vice President, General
Counsel and Secretary since 1988. He was Senior Vice President
and General Counsel from 1985 to 1988 and Vice President and
General Counsel from 1978 to 1985.
Mr. Mueller has been Senior Vice President, Store Operations
since 1993. He was Group Vice President, Store Operations from
1985 to 1993.
Mr. Reed has been Senior Vice President and Chief Financial
Officer since 1988. He was Senior Vice President, Finance from
1985 to 1988.
Ms. Rice has been Senior Vice President and Chief
Information Officer since February 1994. She was Group Vice
President, Management Information Systems from 1993 to February
1994, Vice President, Management Information Services from 1992
to 1993 and Vice President, Information Services from 1988 to 1992.
Mr. Warren has been Senior Vice President, Distribution and
Manufacturing since 1993. He was Group Vice President,
Distribution from 1986 to 1993.
Mr. DeBartolo has been a Director since February 1994. He
also is Chairman and Chief Executive Officer of EJDC, and has
been a director of EJDC since 1944. He founded EJDC in 1944 and
has been its Chief Executive Officer for nearly 50 years. Since
April 1994 he has been Vice Chairman and a Director of the
DeBartolo Realty Corporation. Mr. DeBartolo helped establish
the International Council of Shopping Centers and is a member
of the Urban Land Institute. In connection with a proceeding
brought by the SEC in the United States District Court for
the District of Columbia entitled SEC v. Paul A. Bilzerian
et al., Mr. DeBartolo, without admitting or denying any allegations,
consented to the entry of a permanent injunction on June 29, 1989
enjoining him from engaging in any transactions or course of
business which would constitute or would aid and abet violations
of certain specified federal securities laws and rules. Mr. DeBartolo
is the father of Edward J. DeBartolo, Jr.
Mr. DeBartolo, Jr., has been a Director since 1992. Since April
1994 he has been Chairman of the Board and a Director of the DeBartolo
Realty Corporation. Since 1979 he has been President and Chief
Administrative Officer and since 1973 he has been a Director of
The Edward J. DeBartolo Corporation. Mr. DeBartolo, Jr., is the
son of Edward J. DeBartolo.
Mr. Liberati has been a Director since 1992. Since April 1994
he has been a Director of the DeBartolo Realty Corporation. Since
1982 he has been Senior Vice President, Corporate Planning/Finance
and a Director of the Edward J. DeBartolo Corporation. Mr. Liberati
serves as a Director of Pennsylvania Capital Bank.
Mr. Miller has been a Director since 1990. Since 1983 he
has been Chairman of G. William Miller & Co., Inc., a merchant
banking firm. He is a former Secretary of the U.S. Treasury and
a former Chairman of the Federal Reserve Board, and has served as
Chairman and Chief Executive Officer of Federated Stores, Inc.
from January 1990 to February 1992. Mr. Miller serves as a
Director of the DeBartolo Realty Corporation, Federated Department
Stores, Inc., Gulf Canada Resources Limited, Klienwort Benson
Australian Income Fund, Inc. and Repligen Corporation.
Mr. Petrone has been a Director since 1992. Mr. Petrone
served as Vice Chairman of Wells Fargo & Co. from October 1986 to
March 1992. Since March 1993, Mr. Petrone has been a principal
in Petrone, Petri & Company, a firm engaged in real estate
finance and investments. Mr. Petrone serves as a Director of
Health Science Properties and Jacobs Engineering Group, Inc.
Mr. Posen has been a Director since 1992. Since 1984 he has
been a partner of the law firm of Willkie Farr & Gallagher.
Willkie Farr & Gallagher acts as legal counsel to Ralphs from
time to time.
Mr. Sokolov has been a Director since 1992. Since April
1994 he has been President and Chief Executive Officer and a Director
of the DeBartolo Realty Corporation. From 1986 to March 1994
he was Senior Vice President and General Counsel of The Edward J.
DeBartolo Corporation. In connection with the proceeding brought
by the Securities and Exchange Commission in the United States
District Court for the District of Columbia entitled SEC v. Paul
A. Bilzerian et al., Mr. Sokolov, without admitting or denying
any allegations, consented to the entry of a permanent injunction
on June 29, 1989 enjoining him from engaging in any transactions
or courses of business which would constitute or would aid and
abet violations of certain specified federal securities laws and
rules.
Mr. Solomon has been a Director since 1992. Since June 1991
he has been President of Peter J. Solomon Securities Corp.
("PSS") and since February 1989 he has been Chairman of the Peter
J. Solomon Company Limited. From 1984 to May 1989, Mr. Solomon
was Vice Chairman of Shearson Lehman Hutton, Inc. Mr. Solomon is
also a director of Bradlees, Inc., Centennial Cellular Corp.,
Century Communications Corporation, Charrette Corporation, Culbro
Corporation, Monro Muffler Brake, Inc., Office Depot, Inc.,
and Phillips-Van Heusen Corporation. PSS acts as financial advisor
to Ralphs from time to time and was paid a fee in connection with
the sale of the Initial Notes.
Mrs. DeBartolo York has been a Director since February 1994.
She is the Executive Vice President of Personnel and Corporate
Marketing/Communications and a Director of The Edward J. DeBartolo
Corporation. Mrs. DeBartolo York is the daughter of Edward J. DeBartolo.
The Board of Directors of Ralphs has an Executive Committee,
and Audit Committee and a Compensation Committee. The current
members of the Executive Committee are Messrs. Allumbaugh,
Marasca and Sokolov. The current members of the Audit Committee
are Messrs. Liberati, Miller and Petrone. The current members of
the Compensation Committee are Messrs. DeBartolo, Jr., Miller and
Solomon.
The Certificate of Incorporation, as amended, of Ralphs (the
"Certificate") provides that the Directors of Ralphs are
protected to the fullest extent permitted by Delaware law against
monetary damages for breach of the directors' fiduciary duty of
care to Ralphs and its stockholder, the Holding Company. This
provision in the Certificate does not eliminate the duty of care,
and in appropriate circumstances equitable remedies such as
injunction, rescission or other forms of non-monetary relief
would remain available under Delaware law. In addition, each
Director will continue to be subject to liability for breach of
the director's duty of loyalty to the Holding Company, for acts
or omissions not taken or made in good faith or involving
intentional misconduct, for knowing violations of law, for
actions leading to improper personal benefit to the director, and
for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision
also does not affect a director's responsibilities under any
other laws, such as federal securities laws. Ralphs is insured
for certain losses incurred in connection with Ralphs'
indemnifying its directors and officers.
ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes the compensation for services
rendered during the prior three fiscal years paid to the CEO and
the six most highly compensated executive officers other than
the CEO of Ralphs.
<PAGE>
<TABLE>
<CAPTION>
------------Long Compensation-----------
Annual Compensation ---------Awards--------Payouts-
---------------------------------------- Restricted
Other Annual Stock Options/ LTIP All other
Name and Salary Bonuses Compensation Awards SARs
Payouts Compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($) (1)
- - ------------------ ---- ------- --------- ------------ --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
Byron E. Allumbaugh,
Chairman & Chief
Executive Officer 1993 645,000 387,000 N/A N/A N/A N/A
38,575
1992 620,000 372,000 N/A N/A 587,753 N/A
31,886
1991 580,000 348,000 N/A N/A N/A N/A N/A
Patrick W. Collins,
Vice Chairman and
Chief Operating
Officer 1993 568,750 341,250 N/A N/A N/A N/A
16,062
1992 543,750 326,250 N/A N/A 308,812 N/A
14,886
1991 518,750 311,250 N/A N/A N/A N/A N/A
Alfred A. Marasca,
President 1993 340,000 204,000 N/A N/A N/A N/A
8,177
1992 296,250 148,125 N/A N/A 308,812 N/A
1,485
1991 280,500 140,000 N/A N/A N/A N/A N/A
Ralph H. Liebman,
Executive Vice
President,Support
Group 1993 296,250 148,125 N/A N/A N/A N/A
28,857
1992 281,250 140,625 N/A N/A 231,609 N/A
15,426
1991 266,250 133,125 N/A N/A N/A N/A N/A
<PAGE>
Alan J. Reed, Senior
Vice President,
Finance and Chief
Financial Officer 1993 222,500 111,250 N/A N/A N/A N/A
12,904
1992 211,250 105,625 N/A N/A 154,406 N/A
9,569
1991 196,250 98,125 N/A N/A N/A N/A N/A
Jan Charles Gray,
Senior Vice
President, General
Counsel and
Secretary 1993 207,500 103,750 N/A N/A N/A N/A
13,584
1992 196,250 98,125 N/A N/A 154,406 N/A
13,593
1991 181,250 90,625 N/A N/A N/A N/A N/A
Terry Peets,
Senior Vice
President,
Marketing 1993 192,500 96,250 N/A N/A N/A N/A
10,337
1992 182,500 91,250 N/A N/A 154,406 N/A
10,237
1991 171,250 85,625 N/A N/A N/A N/A N/A
</TABLE>
<PAGE>
<PAGE>
(1) Represents (i) insurance premiums and the dollar value of the
remainder of premiums paid under the Senior Executive Supplemental
Benefit Plan, and (ii) Ralphs' contributions under the Ralphs
Thrift Incentive Plan. The respective amount paid for Messrs.
Allumbaugh, Collins, Marasca, Liebman, Reed, J. Gray and Peets
are as follows: (A) Insurance premiums; $ 18,500, $13,270,
$8,890, $26,250, $6,662, $7,250 and $4,210; (B) dollar value
of remainder of premiums; $18,500, $0, $6,600, $0, $4,025,
$4,500 and $4,210; (C) incentive plan contributions; $1,575,
$2,792, $2,687, $2,607, $2,217, $1,834 and $1,917.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no grants of stock options or SARs in Fiscal 1993.
<PAGE>
<PAGE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1993 AND FISCAL
YEAR-END OPTION/SAR VALUES
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
Value FY-End (#) FY-End ($)
Shares Acquired Realized Exercisable/ Exercisable/
Name on Exercise (#)(1) ($) Unexercisable(2)
Unexercisable(3)
- - -------------------- ------------------ ---------- ---------------- ---------------
<S> <C> <C> <C> <C>
Byron E. Allumbaugh. . . 70,000 1,961,646 235,102/ 0/
562,651 5,884,935
Patrick W. Collins . . . 240,000 (4) 6,725,642 (4) 123,524/ 0/
185,288 0
Alfred A. Marasca. . . . 9,000 252,212 61,762/ 0/
319,050 2,017,692
Ralph H. Liebman . . . . 9,000 252,212 46,322/ 0/
257,287 2,017,692
Alan J. Reed . . . . . . 7,000 196,165 30,882/ 0/
179,524 1,569,316
Jan Charles Gray . . . . 5,000 140,118 30,882/ 0/
163,524 1,120,939
Terry Peets . . . . . . 5,000 140,118 30,882/ 0/
163,524 1,120,939
<FN>
(1) Represents SARs exercised under the Ralphs 1988 Equity Appreciation Rights
Plan.
(2) Each number represents the aggregate number of Options and SARs
outstanding, as currently exercisable/unexercisable. Options and SARs
were granted under different plans, not in tandem. All SARs are free
standing.
(3) Represents value of SARs, based on a value of $28.0235 per SAR
at the time of exercise. Outstanding options are not currently
in-the-money, based on current estimates of the fair market value of
the Common Stock.
(4) Pursuant to the retirement provisions of the Equity Appreciation
Rights Plan, Patrick W. Collins exercised all outstanding SARs,
based on a value of $28.0235 per SAR at the time of exercise.
</TABLE>
<PAGE>
Executive Employment Contracts
Ralphs has entered into employment contracts with Messrs.
Allumbaugh, Marasca, Reed, J. Gray and Peets currently
providing for their employment at annual base salaries of $650,000,
$340,000, $225,000, $210,000 and $195,000 respectively. These
employment contracts expire on April 30, 1996. Ralphs has
also entered into employment contracts providing for aggregate
base salaries of $906,000 with Messrs. Brown, Detrick, A. Gray,
Mueller and Warren. Messrs. Collins and Liebman retired February
and April of 1994, respectively. Each contract provides that
the employee's employment and remuneration may be terminated
by Ralphs (i) for cause based upon the employee's gross misconduct,
felony conviction (other than a traffic or moving violation),
serious breach of Ralphs policy or similar transgression; (ii) for
failure to render services for a continuous period of 12 months
due to disability; or (iii) for a material breach of the
contract. An employee's remuneration under an employment
contract will also be terminated upon the employee's voluntary
resignation or retirement. Ralphs can advise an employee in
writing that his services will no longer be required, which will
be treated as a suspension of services. If a suspension of
service occurs, the employee continues to be treated as an
employee for all purposes for the term of the agreement. The
employee is entitled to continued compensation until termination
of the contract, subject to an offset equal to 50% of any
compensation received from another business (except from
businesses or investments previously owned by the employee before
the date the suspension of services or termination for which
there will be no deduction) or 100% if such business is a
competing business (as defined in the employment contract).
Retirement Plans
Retirement Plan. The Ralphs Grocery Company Retirement Plan
(the "Retirement Plan") is a defined benefit pension plan for
salaried and hourly nonunion employees with at least one year of
credited service (1,000 hours). Ralphs makes annual contributions
to the Retirement Plan in such amounts as are actuarially required
to fund the benefits payable to participants in accordance with
the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
Supplemental Executive Retirement Plan. To allow Ralphs'
retirement program to provide benefits based upon a participant's
total compensation and without regard to other ERISA or tax code
pension plan limitations, eligible executive employees of Ralphs
participate in the Ralphs Grocery Company Supplemental Executive
Retirement Plan (the "Supplemental Plan"). The Supplemental Plan
also modifies the benefit formula under the Retirement Plan in
other respects.
The following table sets forth the combined estimated annual
benefits payable in the form of a (single) life annuity under
both the Retirement Plan and the Supplemental Plan (unreduced by the
cash surrender value of any life insurance policies) to a participant
in both plans who is retiring at a normal retirement date of
January 1, 1994 for the specified final average salaries and
years of credited service.
<TABLE>
<CAPTION>
---------------Years of Credit Service-----------------
Final Average Salary 15 20 25 30 35
- - -------------------- ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 100,000 $ 19,484 $ 25,978 $ 32,473 $ 38,967 $45,462
200,000 54,763 73,017 73,017 83,967 97,962
300,000 84,763 113,017 113,017 113,017 113,017
400,000 114,763 153,017 153,017 153,017 153,017
600,000 174,763 233,017 233,017 233,017 233,017
800,000 234,763 313,017 313,017 313,017 313,017
1,000,000 294,763 393,017 393,017 393,017 393,017
1,200,000 354,763 473,017 473,017 473,017 473,017
</TABLE>
Messrs. Allumbaugh, Marasca, Reed, J. Gray and Peets have
completed 35, 37, 20, 30 and 16 years of credited service,
respectively. Messrs. Collins and Liebman retired with 24 and
42 years of credited service, respectively. Compensation covered
by the plan includes both salary and bonus. The calculation of
retirement benefits generally is based on average compensation for
the highest five years of the ten years preceding retirement.
The benefits earned by a participant under the Supplemental
Plan are reduced by any benefits which the participant has earned
under the Retirement Plan and may be offset under certain
circumstances by the cash surrender value of life insurance
policies maintained by Ralphs pursuant to the Split Dollar
Life Insurance Agreements entered into by Ralphs and the executive.
Benefits are not subject to any deduction for social security offset.
Compensation Committee Interlocks and Insider Participation
The following persons served as members of the Compensation
Committee of the Board during Fiscal 1993: Edward J. DeBartolo, Jr.,
G. William Miller and Peter J. Solomon. Mr. Solomon is the President of
Peter J. Solomon Securities Corp. ("PSS"), and is the Chairman of the
Peter J. Solomon Company Ltd. PSS acts as financial advisor to
Ralphs. Edward J. DeBartolo, Jr. is the President and a director
of EJDC. In connection with the acquisition of a majority of the
Holding Company's Common Stock on February 3, 1992, EJDC agreed
to the EJDC Guaranty. See Item 13. "Certain Relationships and
Related Transactions".
The foregoing summaries of the various benefit plans and
agreements described above are qualified by reference to such
plans and agreements, copies of which have been filed as exhibits
to this Annual Report on Form 10-K.
Director Compensation
Directors who are not employees of the Holding Company or of
Ralphs are paid a fee of $15,000 per year for serving on the
Board of Directors and $2,500 for each Board meeting attended.
All directors are also reimbursed for their out-of-pocket travel
and related expenses incurred in attending all Board and
committee meetings.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
a) Security Ownership of Certain Beneficial Owners
As of the date hereof, 100% of the outstanding capital stock
of the Company is owned by the Holding Company and approximately
60.3% of the outstanding shares of Common Stock of the Holding
Company (the "EJDC Holding Company Common Stock") are owned
beneficially by EJDC. Consequently, EJDC will have the ability
to exercise control over the business and affairs of the Holding
Company by virtue of its continuing ability to elect a majority
of the Holding Company's Board of Directors and its voting power
with respect to actions requiring stockholder approval. By
virtue of its ownership of the Common Stock of the Holding
Company, EJDC will have the ability to exercise similar control
over the business and affairs of Ralphs. EJDC, a corporation
controlled by Mr. Edward J. DeBartolo, is primarily engaged in
shopping mall and other real estate development activities.
EJDC has pledged all the Holding Company Common Stock owned
by it to secure a substantial loan facility. Significant
principal payments commence in late-1995 under the EJDC
Restructuring on a semi-annual basis with a maturity in 1998.
EJDC has discussed the merits of a sale of its interest in
The Holding Company with its financial and legal advisors and
with management of Ralphs. EDJC has had certain discussions
regarding a potential sale to a third party. Since Ralphs
is outside of EJDC's core business, it is likely that its interest
in The Holding Company will be sold at some time prior to the
aforementioned maturity and such sale could take place at any
time. In the absence of consents from Ralphs' lenders, such
a sale would constitute an event of default under the 1992
Credit Agreement, the Mortgagee Notes and other indebtness of
Ralphs and would permit the holders of in excess of $500 million
of debt on the date hereof to require Ralphs to repurchase such
debt. Neither the holders of the Exchange Notes, the Initial Notes
nor the 10 1/4% Senior Subordinated Notes would have such rights
unless such a sale were accompanied by certain other events.
Furthermore, if EJDC were to default on indebtedness secured by
the EJDC Holding Company Common Stock, EJDC's lenders might elect
to foreclose on their collateral, including the EJDC Holding
Company Common Stock, thereby causing a transfer in ownership
of the shares and a change in control of the Holding Company
(which might also occur upon a voluntary sale by EJDC). Such
change in control would permit certain holders of a substantial
amount of Ralphs indebtedness to require the repurchase of
such indebtedness by Ralphs.
<PAGE>
<TABLE>
The following table sets forth certain information regarding
the beneficial ownership of the Holding Company Common Stock as of the
date hereof. By virtue of their ownership of the Holding Company
Common Stock, the following entities may be deemed to own a
corresponding percentage of the Common Stock.
<CAPTION>
Shares
Beneficially Owned (1)
Name Address Number Percent
- - --------------------------------- -------- --------
<S> <C> <C>
The Edward J. DeBartolo Corporation (2)(3) 15,440,600 60.34%
7620 Market Street
Youngstown, Ohio 44512
Camdev Properties Inc. (2) 3,276,681 12.81
400 King Street West
Suite 5800
Toronto, Ontario M5H 3Y8
Bank of Montreal (2) 2,591,815 10.13
700 Louisiana, Suite 4400
Houston, Texas 77002
Banque Paribas (2) 2,591,815 10.13
757 Seventh Avenue
New York, New York 10019
Federated Department Stores, Inc. (2) 1,686,369 6.59
7 West Seventh Street
Cincinnati, Ohio 45202
<FN>
(1) Unless otherwise indicated in the footnotes to this table,
each of the stockholders named in this table has sole voting and
investment owner with respect to the shares shown as beneficially
owned by it.
(2) The principal stockholders have certain registration rights
pursuant to the Registration Rights Agreement.
(3) All shares indicated are owned of record by EJDC, which is
indirectly controlled by Edward J. DeBartolo, who would be deemed
to beneficially own the shares of Common Stock owned by EJDC.
Edward J. DeBartolo, Jr. is the son of Edward J. DeBartolo.
</TABLE>
b) Security Ownership of Management
As of the date hereof, no officer or director of the Company
beneficially owns any equity securities of the Company.
c) Changes in Control
None.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EJDC guaranties Ralphs' obligations as a self-insurer of
worker's compensation liabilities in the State of California (the
"EJDC Guaranty"). In connection with the EJDC Guaranty, Ralphs
unconditionally agreed to reimburse EJDC for any payments made
under the EJDC Guaranty and for the cost of insurance up to
$200,000 to cover liabilities incurred pursuant to the EJDC
Guaranty. Further, Ralphs agreed to pay EJDC a guarantee fee of
$33,500 for each month the EJDC Guaranty is in effect ($402,000
was paid in Fiscal 1993).
In connection with the bankruptcy reorganization of
Federated Department Stores, Inc. and its affiliates, Federated
Department Stores, Inc. agreed to pay certain potential tax
liabilities relating to Ralphs previously being a member of the
affiliated group of companies comprising Federated and its
subsidiaries. In consideration thereof, the Holding Company and
Ralphs agreed to pay Federated Department Stores, Inc. a total of
$10.0 million, payable $1.0 million on each of February 3, 1992,
1993, 1994, 1995 and 1996 and $5.0 million on February 3, 1997.
The five $1.0 million installments are to be paid by Ralphs and
the $5.0 million payments is the joint obligation of the Holding
Company and Ralphs. In the event Federated Department Stores,
Inc. is required to pay certain tax liabilities, the Holding
Company and Ralphs have agreed to reimburse Federated Department
Stores, Inc. up to an additional $10.0 million, subject to
certain adjustments. This additional obligation, if any, is the
joint and several obligation of the Holding Company and Ralphs.
The $5.0 million payment and the potential $10.0 million payment
will be paid in cash or stock of the Holding Company. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and Note 1 of the Notes to Financial
Statements.
In addition, EJDC and the other current holders of Common
Stock are parties to an agreement providing for various aspects
of corporate governance (the "Registration Rights Agreement")
relating to the Holding Company and Ralphs. Pursuant
to the Registration Rights Agreement, Ralphs is obligated
to provide the Holding Company, by dividend, pursuant to a
services agreement or otherwise, with funds sufficient to enable
the Holding Company to perform its duties as the holding company
of Ralphs' stock and to perform its obligations set forth in the
Equity Registration Rights Agreement.
Moreover, pursuant to a service agreement, dated February 3,
1992 (the "Service Agreement"), between Ralphs and the Holding
Company, the Holding Company agreed to perform certain
accounting, advisory, capital raising and other services for
Ralphs and Ralphs agreed to pay to the Holding Company an amount
equal to the Holding Company's direct and indirect costs of
performing such services. Management believes that amounts to be
paid under the Service Agreement will not be material to the
business or financial condition of Ralphs.
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS
ON FORM 8-K.
(A) Documents filed as part of this report:
(1) Financial Statements.
See Financial Statements Index included in Item 8
of Part II of this form 10-K.
(2) Financial Statement Schedules:
Location in
This Report
-----------
Schedule V-Property, Plant & Equipment. . . . S-1
Schedule VI-Accumulated Depreciation and
Amortization of Property, Plant &
Equipment . . . . . . . . . . . . . . . . . S-2
Schedule VIII-Valuation and Qualifying
Accounts. . . . . . . . . . . . . . . . . . S-3
Schedule IX-Short-Term Borrowings . . . . . . S-4
(3) Exhibits
See Index to Exhibits following signature page.
A copy of the exhibits listed herein can be obtained by
writing:
Jan Charles Gray
Senior Vice President,
General Counsel & Secretary
Ralphs Grocery Company
P.O. Box 54143
Los Angeles, CA 90054
(B) Reports on Form 8-K
Not applicable.
<PAGE>
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.
Date: May 2, 1994 RALPHS GROCERY COMPANY
By: /s/ Jan Charles Gray
---------------------------------
Jan Charles Gray
Senior Vice President,
General Counsel and Secretary
<PAGE>
<PAGE>
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.
Signatures Title Date
- - ------------------------------- -------------------- --------------
/s/ Byron E. Allumbaugh Chairman of the May 2, 1994
- - ------------------------------- Board, Chief Executive
Byron E. Allumbaugh Officer and Director
(Principal Executive
Officer)
/s/ Alfred A. Marasca President, Chief May 2, 1994
- - ------------------------------- Operating Officer
Alfred A. Marasca and Director
/s/ Jan Charles Gray Senior Vice May 2, 1994
- - ------------------------------- President and General
Jan Charles Gray Counsel and Secretary
/s/ Alan J. Reed Senior Vice May 2, 1994
- - ------------------------------- President and Chief
Alan J. Reed Financial Officer
(Principal Financial
Officer)
/s/ Robert W. Gossman Group Vice May 2, 1994
- - ------------------------------- President and
Robert W. Gossman Controller (Principal
Accounting Officer)
<PAGE>
<PAGE>
Signatures Title Date
- - ------------------------------- ------------------ --------------
/s/ Edward J. DeBartolo Director May 2, 1994
- - -------------------------------
Edward J. DeBartolo
/s/ Edward J. DeBartolo Jr. Director May 2, 1994
- - -------------------------------
Edward J. DeBartolo Jr.
/s/ Anthony W. Liberati Director May 2, 1994
- - -------------------------------
Anthony W. Liberati
/s/ G. William Miller Director May 2, 1994
- - -------------------------------
G. William Miller
/s/ David M. Petrone Director May 2, 1994
- - -------------------------------
David M. Petrone
/s/ Richard L. Posen Director May 2, 1994
- - -------------------------------
Richard L. Posen
/s/ Richard S. Sokolov Director May 2, 1994
- - -------------------------------
Richard S. Sokolov
/s/ Peter J. Solomon Director May 2, 1994
- - -------------------------------
Peter J. Solomon
/s/ Marie Denise DeBartolo York Director May 2, 1994
- - -------------------------------
Marie Denise DeBartolo York
<PAGE>
<PAGE>
RALPHS GROCERY COMPANY
INDEX TO EXHIBITS
The following exhibits are filed as a separate section of this report:
Sequentially
Exhibit No. Description of Exhibit Numbered Page
- - ----------- ------------------------------------- ----------------
10.27 Employment Agreements between Ralphs
Grocery Company and each of Jan Charles
Gray and Terry Peets, as amended
The following exhibits are incorporated herein by reference:
Exhibit No. Description of Exhibit Reference To
- - ----------- ------------------------------------- ----------------
3.1 Restated Certificate of Incorporation Exhibit 3.1 to
Registration State-
ment No. 33-47634
on Form S-1.
3.2 By-Laws Exhibit 3.2 to
Registration State-
ment No. 33-47634
on Form S-1.
10.1 Ralphs Grocery Company Retirement Exhibit 10.1 to
Plan, as amended Registration State-
ment No. 33-47634
on Form S-1.
10.2 Ralphs Grocery Company Supplemental Exhibit 10.2 to
Retirement Plan, as amended Registration State-
ment No. 33-47634
on Form S-1.
10.3 Outline of Benefits under the Ralphs Exhibit 10.3 to
Grocery Company Senior Executive Registration State-
Medical Plan ment No. 33-47634
on Form S-1.
10.4 Guidelines for the Ralphs Grocery Exhibit 10.4 to
Company Management Incentive Plan Registration State-
ment No. 33-47634
on Form S-1.
10.5 Ralphs Grocery Company Savings Plan Exhibit 10.5 to
Plus Primary Registration State-
ment No. 33-47634
on Form S-1.
10.6 Ralphs Grocery Company Savings Plan Exhibit 10.6 to
Plus Basic Registration State-
ment No. 33-47634
on Form S-1.
10.7 Tax Indemnification Agreement Exhibit 10.7 to
Registration State-
ment No. 33-47634
on Form S-1.
10.8 Comprehension Settlement Agreement Exhibit 10.8 to
Registration State-
ment No. 33-47634
on Form S-1.
10.9 Tax Election Agreement Exhibit 10.9 to
Registration State-
ment No. 33-47634
on Form S-1.
10.10 Indenture between Ralphs Grocery Company Exhibit 10.10 to
and United States Trust Company, as Registration State-
Trustee, dated as of August 26, 1988, ment No. 33-47634
including form of 14% Senior Subordin- on Form S-1.
ated Debentures due 2000 attached as
Exhibit A thereto, with respect to the
14% Senior Subordinated Debentures
due 2000
10.11 Supplemental Indenture between Ralphs Exhibit 4.2 to
Grocery Company and United States Registrant's Quart-
Trust Company of New York, as Trustee, erly Report on Form
dated as of May 29, 1992, with respect 10-Q dated September
to the 14% Senior Subordinated Debent- 1, 1992 and filed on
ures due 2000 September 2, 1992
10.12 Amended Restated Ralphs Grocery Company Exhibit 10.11 to
1988 Equity Appreciation Rights Plan Registration State-
and Equity Appreciation Rights Agree- ment No. 33-47634
ment on Form S-1.
10.13 Ralphs Supermarkets, Inc. Non-qualified Exhibit 10.12 to
Stock Option Plan Registration State-
ment No. 33-47634
on Form S-1.
10.14 Registration Rights and Corporate Exhibit 10.13 to
Governance Agreement, as amended Registration State-
ment No. 33-47634
on Form S-1.
10.15 Agreement of Assumption and Guarantee Exhibit 10.14 to
of Workers' Compensation Liabilities Registration State-
ment No. 33-47634
on Form S-1.
10.16 Reimbursement Agreement Exhibit 10.15 to
Registration State-
ment No. 33-47634
on Form S-1.
10.17 Ralphs Grocery Company 1988 Credit Exhibit 10.16 to
Agreements Registration State-
ment No. 33-47634
on Form S-1.
10.18 Commitment Letter relating to 1992 Exhibit 10.17 to
Credit Agreement Registration State-
ment No. 33-47634
on Form S-1.
10.19 Credit Agreement, dated as of July 22, Exhibit 10.19 to
1992 (the "1992 Credit Agreement"), Registrant's Annual
among Ralphs Grocery Company, Bankers Report on Form 10-K
Trust Company and the Lenders named filed on April 29,1993
therein
10.20 First Amendment and Limited Waiver, Exhibit 10.20 to
dated as of March 19, 1993, to the Registrant's Annual
1992 Credit Agreement Report on Form 10-K
filed on April 29,1993
10.21 Ralphs Grocery Company Promissory Notes, Exhibit 10.18 to
Deeds of Trust and Security Agreements Registration State-
with Metropolitan Life Insurance ment No. 33-47634
Company, as amended on or prior to on Form S-1.
May 1, 1992
10.22 Amendments dated as of July 30, 1992 and Exhibit 10.22 to
March 30, 1993, to Ralphs Grocery Company Registrant's Annual
Promissory Notes, Deeds of Trust and Report on Form 10-K
Security Agreements with Metropolitan filed on April 29,1993
Life Insurance Company, as amended
10.23 Employment Agreements between Ralphs Exhibit 10.19 to
Grocery Company and each of Byron Registration State-
Allumbaugh, Patrick Collins, Alfred ment No. 33-47634
Marasca and Ralph Liebman on Form S-1.
10.23(a) Employment Agreement between Ralphs Exhibit 10.23(a) to
Grocery Company and Alan Reed, as Registrant's Annual
amended Report on Form 10-K
filed on April 29,1993
10.24 Indenture between Ralphs Grocery Exhibit 4.3 to
Grocery Company and United States Trust Registrant's Quarterly
Company, as Trustee, dated as of July Report on Form 10-Q
29, 1992, with respect to the 10 1/4% dated September 1,
Senior Subordinated Notes due 2002 1992 and filed on
September 2, 1992
10.25 Indenture between Ralphs Grocery Company Exhibit 4.1 to
and United States Trust Company, as Registration Statement
Trustee dated as of March 30, 1993 No. 33-61812 on
(the "1993 Indenture") with respect to Form S-4
the Initial Notes and the Exchange Notes
10.26 Supplemental Indenture dated as of Exhibit 4.2 to
June 23, 1993, to the 1993 Indenture Registration Statement
No.33-61812 on Form S-4
<PAGE>
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
------
Independent Auditor's Report. . . . . . . . . . . . . . F-2
Consolidated Balance Sheets at January 31, 1993
and January 30, 1994. . . . . . . . . . . . . . . . F-3
Years ended February 2, 1992, January 31, 1993
and January 30, 1994:
Consolidated Statements of Operations. . . . . . . F-4
Consolidated Statements of Cash Flows. . . . . . . F-5
Consolidated Statements of Stockholder's Equity. . F-6
Notes to Consolidated Financial Statements. . . . . . . F-7
Financial Statement Schedules
Schedule V - Property, Plant and Equipment . . . . S-1
Schedule VI - Accumulated Depreciation and
Amortization of Property, Plant and Equipment . . S-2
Schedule VIII - Valuation and Qualifying Accounts. S-3
Schedule IX - Short-Term Borrowings. . . . . . . . S-4
<PAGE>
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Ralphs Grocery Company:
We have audited the consolidated financial statements of Ralphs Grocery
Company and subsidiary as listed in the accompanying index. In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedules as listed in the accompanying index. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules 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 consolidated 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 financial position of Ralphs
Grocery Company and subsidiary as of January 30, 1994 and January 31, 1993,
and the results of their operations and their cash flows for each of the years
in the three-year period ended January 30, 1994, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
As discussed in Note 2 to the consolidated financial statements, Ralphs
Grocery Company changed its method of accounting for income taxes in the
fiscal year ended February 2, 1992 to adopt the provisions of the Financial
Accounting Standard Board's Statement of Financial Standards No. 109,
"Accounting for Income Taxes."
KPMG Peat Marwick
Los Angeles, California
April 8, 1994
<PAGE>
<PAGE>
<TABLE>
RALPHS GROCERY COMPANY
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
<CAPTION>
January 31, January 30,
1993 1994
ASSETS ---------- ----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents. . . . . . . . $ 46,192 $ 55,080
Accounts receivable. . . . . . . . . . . 19,117 30,420
Inventories. . . . . . . . . . . . . . . 207,023 202,354
Prepaid expenses and other current assets 16,543 18,111
--------- ---------
Total current assets . . . . . . . . 288,875 305,965
Property, plant and equipment, net . . . 610,665 601,897
Excess of cost over net assets acquired,
net . . . . . . . . . . . . . . . . . . 387,410 376,414
Beneficial lease rights, net . . . . . . 60,757 55,553
Deferred debt issuance costs, net. . . . 27,999 26,583
Deferred income taxes. . . . . . . . . . -- 109,125
Other assets . . . . . . . . . . . . . . 12,792 8,113
--------- ---------
Total assets . . . . . . . . . . . . $1,388,498 $1,483,650
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term debt . . $ 66,465 $ 70,975
Short-term debt. . . . . . . . . . . . . 31,100 --
Bank overdrafts. . . . . . . . . . . . . 37,061 37,716
Accounts payable . . . . . . . . . . . . 120,709 138,554
Accrued expenses . . . . . . . . . . . . 127,788 101,543
Current portion of self-insurance
reserves. . . . . . . . . . . . . . . . 27,732 30,138
--------- ---------
Total current liabilities . . . . . 410,855 378,926
Long-term debt . . . . . . . . . . . . . 932,226 927,909
Self-insurance reserves. . . . . . . . . 45,247 49,872
Lease valuation reserve. . . . . . . . . 35,941 32,575
Other non-current liabilities. . . . . . 97,526 89,299
--------- --------
Total liabilities . . . . . . . . . 1,521,795 1,478,581
Stockholder's equity:
Common stock, $1 par value per share.
Authorized 1,000 shares; issued and
outstanding, 100 shares at January 31,
1993 and January 30, 1994. . . . . . . . -- --
Additional paid-in capital . . . . . . . 175,548 175,548
Accumulated deficit. . . . . . . . . . . (308,845) (170,479)
--------- --------
Total stockholder's equity. . . . . (133,297) 5,069
Commitments and contingencies (See Notes --------- --------
2 and 8)
Total liabilities and stockholder's
equity. . . . . . . . . . . . . . . $1,388,498 $1,483,650
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
<PAGE>
RALPHS GROCERY COMPANY
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Year Ended Year Ended Year Ended
February 2, 1992 January 31, 1993 January 30, 1994
$(000) % $(000) % $(000) %
-------- ------ -------- ----- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Sales. . . . . . . 2,889,222 100.0 2,843,816 100.00 2,730,157 100.00
Cost of sales. . . 2,275,237 78.8 2,217,197 78.0 2,093,727 76.7
---------- ----- ---------- ----- ---------- ------
Gross profit . . 613,985 21.2 626,619 22.0 636,430 23.3
Selling, general and
administrative
expenses . . . . 456,602 15.8 466,737 16.4 467,630 17.1
Provision for equity
appreciation rights 18,321 0.6 -- -- -- --
Amortization of excess
of cost over net
assets acquired. . 10,996 0.4 10,997 0.4 10,996 0.4
Provision for
restructuring. . . -- -- 7,100 0.2 2,374 0.1
Provision for post-
retirements benefits
other than pensions. 2,627 0.1 3,275 0.1 3,370 0.1
Provision for tax
indemnification pay-
ments to Federated
Department Stores,
Inc. . . . . . . . 10,000 0.3 -- -- -- --
------- ---- ------ ----- ------- ----
Operating income 115,439 4.0 138,510 4.9 152,060 5.6
Other expenses:
Interest. . . . . 130,206 4.5 125,611 4.4 108,755 4.0
Loss on disposal
of assets. . . . 12,967 0.5 2,607 0.1 1,940 0.1
Provision for legal
settlement . . . -- -- 7,500 0.3 -- --
Provision for earth-
quake losses . . -- -- -- -- 11,048 0.4
------- ---- -------- ---- ------- ----
Earnings (loss) before
income taxes and
extraordinary item. (27,734) (1.0) 2,792 0.1 30,317 1.1
Income tax expense
(benefit) . . . . . 13,506 0.4 8,346 0.3 (108,049) (4.0)
-------- ---- ------- ---- ------- ----
Earnings (loss) before
extraordinary item . (41,240) (1.4) (5,554) (0.2) 138,366 5.1
Extraordinary item-
debt refinancing,
net of tax benefit
of $4,173. . . . . . -- -- (70,538) (2.5) -- --
------ ---- ------ ---- ------ ----
Net earnings (loss) . (41,240) (1.4) (76,092) (2.7) 138,366 5.1
==== === ==== === ==== ===
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
<PAGE> RALPHS GROCERY COMPANY
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<CAPTION>
Year End Year End Year End
February 2, January 31, January 30,
1992 1993 1994
----------- ---------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . $ (41,240) $ (76,092) $ 138,366
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depreciation and amortization. . . 76,552 76,873 74,452
Amortization of discounts and
deferred debt issuance costs. . . 8,564 20,978 9,768
LIFO charge (credit) . . . . . . . 2,829 1,115 (2,054)
Loss on sale of assets . . . . . . 12,967 6,841 4,314
Provision for equity appreciation
rights. . . . . . . . . . . . . . 18,321 -- --
Provision for postretirement benefits 2,627 3,275 3,370
Provision for tax indemnification
payments to Federated Department
Stores, Inc.. . . . . . . . . . . 10,000 -- --
Provision for legal settlement . . -- 7,500 --
Other changes in assets and liabilities:
Accounts receivable. . . . . . . . 20,660 6,376 326
Inventories at replacement cost. . (21,523) (13,682) 6,724
Prepaid expenses and other current
assets. . . . . . . . . . . . . . (4,446) 3,703 (1,658)
Other assets . . . . . . . . . . . 2,133 (616) 4,449
Interest payable . . . . . . . . . (1,448) (13,393) (4,822)
Accounts payable and accrued
liabilities . . . . . . . . . . . 1,606 23,054 (1,622)
Income taxes payable . . . . . . . 822 (527) (1,480)
Deferred tax asset . . . . . . . . -- -- (109,125)
Business interruption credit . . . -- -- (581)
Earthquake losses. . . . . . . . . -- -- (11,048)
Self insurance reserves. . . . . . 6,575 8,456 7,031
Other liabilities. . . . . . . . . 1,095 (170) (12,407)
------- ------- --------
Cash provided by operating
activities. . . . . . . . . . . . 96,094 53,691 104,003
Cash flows from investing activities:
Capital expenditures . . . . . . . (50,355) (102,697) (62,181)
Proceeds from sale of property,
plant and equipment . . . . . . . 8,498 219 16,700
------- ------- --------
Cash used in investing activities. (41,857) (102,478) (45,481)
<PAGE>
<PAGE>
Cash flows from financing activities:
Net borrowings under lines of credit 29,000 2,100 (31,100)
Redemption of preferred stock . . . -- (3,000) --
Capitalized financing and acquisition
costs. . . . . . . . . . . . . . . (573) (22,426) (5,108)
Increase (decrease) in bank over-
drafts. . . . . . . . . . . . . . (7,193) (8,865) 655
Proceeds from issuance of long-
term debt . . . . . . . . . . . . 2,000 668,269 150,000
Principal payments on long-term
debt. . . . . . . . . . . . . . . (75,361) (577,902) (164,081)
------- ------- --------
Cash provided by (used in)
financing activities. . . . . . . (52,127) 58,176 (49,634)
------- ------- --------
Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . 2,110 9,389 8,888
Cash and cash equivalents at begin-
ning of period . . . . . . . . . . . 34,693 36,803 46,192
------- ------- --------
Cash and cash equivalents at end
of period. . . . . . . . . . . . . . $ 36,803 $ 46,192 $ 55,080
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
<PAGE>
<TABLE>
RALPHS GROCERY COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(dollars in thousands)
<CAPTION>
Common Stock
-------------------- Additional
Outstanding Paid-In Accumulated
Shares Amount Capital Deficit Total
----------- ------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balances at February
3, 1991 . . . . . . . 100 $ -- $ 175,548 $(191,513) $(15,965)
Net Loss . . . . . . . -- -- -- (41,240) (41,240)
---- ------- --------- --------- --------
Balances at February
2, 1992 . . . . . . . 100 -- 175,548 (232,753) (57,205)
Net Loss . . . . . . . -- -- -- (76,092) (76,092)
---- ------- --------- --------- --------
Balances at January
31, 1993 . . . . . . . 100 -- 175,548 (308,845) (133,297)
Net Earnings . . . . . -- -- -- 138,366 138,366
---- ------- --------- --------- --------
Balances at January
30, 1994. . . . . . . 100 $ -- $ 175,548 $(170,479) $ 5,069
==== ======= ========= ======== =====
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
<PAGE>
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION
At February 2, 1992, Ralphs Grocery Company, ("Ralphs") was
an indirect wholly owned subsidiary of Federated Stores, Inc.
("Federated"). Two wholly owned subsidiaries of Federated,
Federated Holdings III, Inc. ("Holdings III") and Allied Stores
Corporation ("Allied") directly owned the common stock of Ralphs,
approximately 84% and 16% respectively. In January 1990 Holdings
III and Allied, and certain other subsidiaries of Federated, each
filed petitions for relief under Chapter 11, Title 11 of the
United States Code ("Chapter 11"). In March 1990, Federated
filed a petition for relief under Chapter 11. Pursuant to the
plans of reorganization for Federated and certain of its subsidiaries,
Ralphs Supermarket, Inc. (the "Holding Company") was formed to hold
the outstanding shares of common stock of Ralphs. On February 3,
1992, Holdings III and Allied contributed their shares of Ralphs
to the Holding Company in exchange for the issuance by the Holding
Company of Holding Company shares in the same proportion in Ralphs
shares were owned ("Internal Reorganization"). For financial
reporting purposes, the Holding Company's investment in Ralphs was
recorded at predecessor cost. For Federal tax purposes, a new
basis was established at the Holding Company as more fully described
in Note 11.
Under the plans of reorganization for Federated, Holdings III
and certain other subsidiaries of Federated (the "FSI Plan"), all
Holding Company shares of common stock held by Holdings III were
to be distributed to certain creditors of Federated and Holdings
III, including The Edward J. DeBartolo Corporation ("EJDC"), Bank
of Montreal ("BMO"), Banque Paribas ("BP") and Camdev Properties
Inc. ("Camdev"), and Federated. The FSI Plan was confirmed by
the Bankruptcy Court in January 1992 and was consummated on
February 3, 1992. Under the plan of reorganization of Allied and
certain affiliates including Federated Department Stores, Inc.
(the "Allied-Federated Plan"), a portion of Allied's Holding
Company shares were to be distributed to BMO and BP. The
Allied-Federated Plan was confirmed by the Bankruptcy Court in
January 1992 and was consummated shortly after the FSI Plan.
Thus, following consummation of both the FSI Plan and the
Allied-Federated Plan and the transfer on July 19, 1993 of the
shares of common stock in Holding Company held by Federated
Stores, Inc. to Camdev, Ralphs is a wholly owned subsidiary of
the Holding Company which in turn is owned by the following entities:
F-7
<PAGE>
<PAGE>
Approximate Percent
Ownership of
Holding Company
Common Stock As
of July 19, 1993
-------------------
EJDC. . . . . . . . . . . . . . . . . . 60.4%
BMO . . . . . . . . . . . . . . . . . . 10.1%
BP. . . . . . . . . . . . . . . . . . . 10.1%
Camdev. . . . . . . . . . . . . . . . . 12.8%
Federated Department Stores, Inc
(as successor by merger to Allied). . 6.6%
Pursuant to certain agreements entered into contemporaneously
with the effectiveness of the FSI Plan and the Allied-Federated
Plan, certain income tax liabilities of Ralphs, Federated, Allied,
Federated Department Stores, Inc. and other affiliates have been
settled with the Internal Revenue Service. In addition, Ralphs
and certain affiliates including Federated Department Stores,
Inc., Allied and Federated (the "Affiliated Group") entered
into an agreement (the "Tax Indemnity Agreement") pursuant to
which Federated Department Stores, Inc. agreed to pay certain tax
liabilities, if any, relating to Ralphs being a member of the
Affiliated Group. The Tax Indemnity Agreement provides a formula
to determine the amount of additional tax liabilities through
February 3, 1992 that Ralphs would be obligated to pay the Affiliated
Group. However, such additional liability, if any, is limited
to $10 million subject to certain adjustments.
Under the Tax Indemnity agreement, the Holding Company and
Ralphs have agreed to pay Federated Department Stores, Inc. $1.0
million each year for five years starting on February 3, 1992,
and an additional $5.0 million on February 3, 1997. These total
payments of $10.0 have been recorded in Ralphs' financial
statements at February 2, 1992. The five $1.0 million
installments are to be paid by Ralphs and the $5.0 million is the
joint obligation of the Holding Company and Ralphs. Also, in the
event Federated Department Stores, Inc. is required to pay
certain tax liabilities on behalf of Ralphs, the Holding Company
and Ralphs have agreed to reimburse Federated Department Stores,
Inc. up to an additional $10.0 million, subject to certain
adjustments. This additional obligation is the joint and several
obligation of the Holding Company and Ralphs. The $5.0 million
payment and the potential $10.0 million payment may be paid, at
the option of the Holding Company and Ralphs, in cash or newly
issued Holding Company Common Stock.
F-8
<PAGE>
<PAGE>
In connection with the consummation of the FSI Plan and the
Allied-Federated Plan, Ralphs and certain parties entered into an
agreement (the "Comprehensive Settlement Agreement") pursuant to
which the parties thereto, among other things, agreed to deliver
releases to the various parties to the Comprehensive Settlement
Agreement as well as certain additional parties. Under the
Comprehensive Settlement Agreement, Ralphs received general
releases from Allied, Federated, Federated Department Stores,
Inc. and certain other affiliates which released it from any and
all claims which could have been asserted by the parties thereto
prior to the effective dates of FSI Plan and the Allied-Federated
Plan other than for claims arising under the Comprehensive
Settlement Agreement, the FSI Plan, the Allied-Federated Plan and
the Tax Indemnity Agreement.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Reporting Period
Ralphs' fiscal year ends on the Sunday closest to January 31.
Fiscal year-ends are as follows:
February 2, 1992 (Fiscal 1991)
January 31, 1993 (Fiscal 1992)
January 30, 1994 (Fiscal 1993)
(b) Cash and Cash Equivalents
For purposes of the statements of cash flows, Ralphs considers
all highly liquid debt instruments with original maturities of
three months or less to be cash equivalents.
(c) Inventories
Inventories are stated at the lower cost or market. Cost is
determined primarily using the last-in, first-out (LIFO) method.
The replacement cost of inventories exceeded the LIFO inventory
cost by $15.535 million and $17.589 million at January 30, 1994
and January 31, 1993, respectively.
(d) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Property
and equipment held under capital leases are stated at the present
value of the minimum lease payments at the inception of the
lease.
Depreciation of plant and equipment is calculated using the
straight-line method over the estimated useful lives of assets.
Plant and equipment held under capital leases and leasehold
F-9
<PAGE>
<PAGE>
improvements are amortized using the straight-line method over
the shorter of the lease term or the estimated useful life of the
asset. Useful lives range from 10 to 40 years for buildings and
improvements and 3 to 20 years for fixtures and equipment.
Interest is capitalized in connection with the construction
of major facilities. The capitalized interest is recorded as
part of the asset to which it relates and is amortized over the
asset's estimated useful life. Interest cost capitalized during
fiscal 1991, 1992 and 1993 was $.510 million, $1.074 million, and
$.740 million, respectively.
(e) Deferred Debt Issuance Costs
Direct costs incurred as a result of financing transactions
are capitalized and amortized over the terms of the applicable
debt agreements using the effective interest method.
(f) Pre-opening Costs
Pre-opening costs of new stores are deferred and expensed at
the time the store opens.
(g) Self Insurance Reserves
Ralphs is self-insured for a portion of workers'
compensation, general liability and automobile accident claims.
Ralphs establishes reserve provisions based on an independent
actuary's review of claims filed and an estimate of claims
incurred but not yet filed.
(h) Excess of Cost Over Net Assets Acquired
The excess of cost over net assets acquired, resulting from
the May 3, 1988 acquisition of Ralphs is being amortized using
the straight-line method over 40 years. Accumulated amortization
aggregated $52.4 million and $63.4 million at January 31, 1993
and January 30, 1994, respectively.
(i) Acquired Leases
Beneficial lease rights and lease valuation reserves are
recorded based on differences between contractual rents under
existing lease agreements and the fair value of entering such
lease agreements as of the May 3, 1988 acquisition of Ralphs.
Beneficial lease rights are amortized using the straight- line
method over the terms of the leases. Lease valuation reserves
are amortized using the interest method over the terms of the
leases.
F-10
<PAGE>
<PAGE>
(j) Discounts and Promotional Allowances
Promotional allowances and vendor discounts are recorded as
a reduction of cost of sales in the accompanying statements of
operations. Allowance proceeds received in advance are deferred
and recognized over the period earned.
(k) Income Taxes
Through February 2, 1992, Ralphs operated under a
tax-sharing agreement with Federated and was included in the
consolidated Federal tax returns of Federated. Through January
28, 1990, Ralphs was included in the combined state tax returns
of Federated; however, Ralphs filed separate state tax
returns subsequent to January 28, 1990. Under the tax-sharing
agreement, tax-sharing payments were made to Federated based on the
amount that Ralphs would be liable for had Ralphs filed separate
tax returns, taking into account applicable carryback and
carryforward provision of the tax laws.
Subsequent to February 2, 1992, the Holding Company is
responsible for filing tax returns with the Internal Revenue
Service and state taxing authorities. Ralphs is included in the
tax filings of the Holding Company. Prior to February 3, 1992
Ralphs paid alternative minimum tax to Federated under its tax
sharing agreement. As a result of the Internal Reorganization,
Ralphs will not be entitled to offset its future Federal regular
tax liability with the payments made to Federated.
Effective for the fiscal year ended February 2, 1992, Ralphs
adopted Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes." At the date of adoption such
change had no impact on the consolidated financial results.
F-11
<PAGE>
(l) Postretirement Medical Benefits
Effective for the fiscal year ended February 3, 1991, Ralphs
adopted SFAS 106, "Employers' Accounting for Postretirement
Benefits other Than Pensions", which requires that the cost of
postretirement benefits other than pensions be recognized in the
financial statements over an employee's service with Ralphs.
(m) Reclassification
Certain amounts in the accompanying financial statements
have been reclassified to conform to the current year's
presentation.
(n) Consolidation Policy
The consolidated financial statements include the accounts
of Ralphs Grocery Company and its wholly owned subsidiary,
collectively referred to as the Company. All material
intercompany balances and transactions are eliminated in consolidation.
(o) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for which
it is practicable to estimate that value:
(i) Cash and short-term investments
The carrying amount approximates fair value
because of the short maturity of those instruments.
(ii) Long-term debt
The fair value of Ralphs' long-term debt is
estimated based on the quoted market prices for the
same or similar issues or on the current rates
offered to Ralphs for debt of the same remaining
maturities.
(iii) Interest Rate Swap Agreements
The fair value of interest rate swap agreements
is the estimated amount that Ralphs would receive or
pay to terminate the swap agreements at the
reporting date, taking into account current
interest rates and the current credit-worthiness of
F-12 the swap counterparties.
<PAGE>
<PAGE>
(3) Property, Plant and Equipment
</TABLE>
<TABLE>
Property, plant and equipment is summarized as follows:
<CAPTION>
January 31, January 30,
1993 1994
----------- ----------
(dollars in thousands)
<S> <C> <C>
Land. . . . . . . . . . . . . . . $ 156,487 $ 159,904
Buildings and improvements. . . . 180,639 191,179
Leasehold improvements. . . . . . 149,273 161,341
Fixtures and equipment. . . . . . 349,697 354,626
Capital leases. . . . . . . . . . 69,058 86,964
--------- ---------
905,154 954,014
Less: Accumulated depreciation. . (266,127) (312,746)
Less: Accumulated capital lease
amortization. . . . . . . . . . (28,362) (39,371)
--------- ---------
Property, plant and equipment,
net . . . . . . . . . . . . . . $ 610,665 $ 601,897
========= =========
</TABLE>
(4) Accrued Expenses
<TABLE>
<CAPTION>
Accrued expenses are summarized as follows:
January 31, January 30,
1993 1994
----------- ----------
(dollars in thousands)
<S> <C> <C>
Accrued wages, vacation and
sick leave. . . . . . . . . . . $ 38,238 $ 34,763
Taxes other than income tax . . . 13,285 11,084
Interest. . . . . . . . . . . . . 15,912 11,090
Other . . . . . . . . . . . . . . 60,353 44,606
-------- --------
$ 127,788 $ 101,543
======== ========
</TABLE>
F-13
<PAGE>
<PAGE>
(5) Long-term Debt
Long-term debt is summarized as follows:
January 31, January 30,
1993 1994
----------- ----------
(dollars in thousands)
First mortgage notes payable in
monthly installments,
commencing June 1, 1994 of
$1,553,000 including interest
at an effective rate of 9.651%;
interest only payable monthly
prior to June 1, 1994. Final
payment due June 1, 1999.
Secured by land and buildings
with a net book value of $190.8
million. . . . . . . . . . . . . $178,482 $178,013
Notes payable in varying monthly
installments including interest
ranging from 11.5% to 18.96%.
Final payment due through November
30, 1996. Secured by equipment
with a net book value of $30.0
million . . . . . . . . . . . . . 17,920 9,721
Capitalized lease obligations at
interest rates ranging from 7.25%
to 14% maturing at various dates
through 2009 (note 6) . . . . . . 54,181 61,150
Note payable to bank . . . . . . . 350,000 300,000
Senior Subordinated Debentures,
14% due 2000. . . . . . . . . . . 98,108 --
Initial Notes and Exchange Notes . -- 150,000
Senior Subordinated Debentures,
10 1/4%, due 2002 . . . . . . . . 300,000 300,000
------- -------
Total long-term debt . . . . . . . 998,691 998,884
Less current maturities. . . . . . (66,465) (70,975)
------- -------
Long-term debt . . . . . . . . . . $932,226 $927,909
======== ========
During the third quarter of 1992, the Company implemented a
recapitalization plan (the "Recapitalization Plan") which was
completed during the first quarter of 1993 by the Company's
offering of $150.0 million aggregate principal amount of its 9%
Senior Subordinated notes due 2003 (the "Initial Notes") in
private placement under the Securities Act of 1933, as amended
(the "Securities Act"). The proceeds of the Initial Notes were
used to
F-14
<PAGE>
<PAGE>
(i) purchase for cancellation of $60.0 million aggregate
principal amount of the Company's 14% Senior Subordinated
Debentures due 2000 (the "14% Subordinated Debentures") from a
noteholder who had made an unsolicited offer to sell such 14%
Subordinated Debentures, (ii) defease the remaining $38.1 million
aggregate principal amount of the 14% Subordinated Debentures,
(iii) prepay $36.1 million of borrowings under the Company's
$350.0 million 1992 term loan facility entered into as part of
the Recapitalization Plan and (iv) pay fees and expenses
associated with such transactions and for other purposes. As
part of a registration rights agreement entered into with the
initial purchasers of the Initial Notes, the Company agreed to
offer to exchange up to $150.0 million aggregate principal amount
of the Exchange Notes for all of the outstanding Initial Notes (the
"Exchange Offer"). The terms of the Exchange Notes are
substantially identical (including principal amount, interest
rate and maturity) in all respects to the terms of the Initial
Notes except that the Exchange Notes are freely transferable by
the holders thereof (with certain exceptions) and are not subject
to any covenant upon the Company regarding registration under the
Securities Act. On June 24, 1993, the Company completed the
Exchange Offer exchanging $149.7 million aggregate principal
amount of Exchange Notes for Initial Notes ($.3 million of
Initial Notes remain outstanding).
The note payable to bank and working capital line, under the
1992 Credit Agreement, are secured by first priority liens on
Ralphs' inventory and receivables, servicemarks and registered
trademarks, equipment (other than equipment located at facilities
subject to existing liens in favor of equipment financiers) and
after-acquired real property interests and all existing real
property interests (other than those that are subject to prior
encumbrances) and bears interest at the rates, as selected by
Ralphs as follows: (i) 1 3/4% over the prime rate, or (ii) 2 3/4%
over the Eurodollar Rate. Interest calculated pursuant to (i)
above is payable quarterly, otherwise interest is payable
quarterly or at the selected borrowings option maturity. During the 52
weeks ended January 30, 1994, interest rates under these borrowings
ranged from 5.9375% to 7.75%. Ralphs is required to pay an
annual administrative fee of $300,000 pursuant to the 1992 Credit
Agreement as well as a commitment fee of 0.5% on the average
daily amounts available for borrowing under the $120.0 million
working capital credit line.
F-15
<PAGE>
<PAGE>
The 1992 Credit Agreement, which includes a $350.0 million
term loan and $120.0 million working capital credit line, also
supports up to $60.0 million of letters of credit which reduce
the available borrowings on the credit line. The 1992 Credit
Agreement is subject to quarterly principal payment requirements,
which commenced on March 31, 1993, with payment in full on June
30, 1998. As of January 30, 1994, $51.1 million of letters of
credit were outstanding, with $68.9 million available under the
working capital credit line.
In the fourth quarter of Fiscal 1992, Ralphs entered into an
interest rate cap agreement with an effective date of November 6,
1992 and a three-year maturity. The interest rate cap hedges the
interest rate in excess of 6.5% LIBOR on $105.0 million principal
amount against increases in short-term rates. This agreement
satisfies interest rate protection requirements under the 1992
Credit Agreement. In addition to the interest rate cap agreement,
Ralphs entered into an interest rate swap agreement on $150.0
million notional principal amount. Under the interest rate swap
agreement, Ralphs is required to pay interest at LIBOR fixed at
the end of each six month calculation period and Ralphs will
receive interest payments at LIBOR fixed at the beginning of each
six month calculation period. An increase or decrease of one-
half percent (0.5%) in the LIBOR interest rate during a six month
calculation period would result in an increase or decrease in
interest payments of $.375 million. This interest rate swap
agreement has a three-year term expiring November 6, 1995.
Ralphs is exposed to credit loss in the event of nonperformance
by the other party to the interest rate swap agreement. However,
Ralphs does not anticipate nonperformance by the counterpart.
The Initial Notes and Exchange Notes are unsecured
obligations of Ralphs subordinated in right of payment to
amounts due on the aforementioned senior debt. Interest at
9% is payable each April 1 and October 1 through April 1,
2003, when the notes mature.
The 10 1/4% Senior Subordinated Debentures are unsecured
obligations of Ralphs subordinated in right of payment to amounts
due on the senior debt. Interest at 10 1/4% is payable each
January 15 and July 15 through July 15, 2002, when the debentures
mature.
The aforementioned debt agreements contain various
restrictive covenants pertaining to net worth levels, limitations
on additional indebtedness and capital expenditures, financial
ratios and dividends.
F-16
<PAGE>
<PAGE>
The aggregate maturities on long-term debt for each of the
five years subsequent to fiscal 1992 as follows:
(dollars in thousands)
1994. . . . . . . . . . . . . . $ 70,975
1995. . . . . . . . . . . . . . 81,572
1996. . . . . . . . . . . . . . 83,756
1997. . . . . . . . . . . . . . 81,716
1998. . . . . . . . . . . . . . 50,406
1999 and thereafter . . . . . . 630,459
__________
$ 998,884
==========
(6) Leases
Ralphs has leases for retail store facilities, warehouses
and manufacturing plants for periods up to 30 years. Generally,
the lease agreements include renewal options for five years each.
Under most leases, Ralphs is responsible for property taxes,
insurance, maintenance and expense related to the lease property.
Certain store leases require excess rentals based on a percentage
of sales at that location. Certain equipment is leased by Ralphs
under agreements ranging from 3 to 15 years. The agreements
usually do not include renewal option provisions.
<TABLE>
Minimum rental payments due under capital leases and
operating leases subsequent to fiscal 1993 are as follows:
<CAPTION>
Capital Operating
Leases Leases Total
------- --------- ----------
(dollars in thousands)
<S> <C> <C> <C>
1994. . . . . . . . . . . . . . $ 17,043 $ 57,264 $ 74,307
1995. . . . . . . . . . . . . . 15,172 55,424 70,596
1996. . . . . . . . . . . . . . 12,381 53,998 66,379
1997. . . . . . . . . . . . . . 11,607 51,124 62,731
1998. . . . . . . . . . . . . . 9,286 47,211 56,497
1999 and thereafter . . . . . . 18,247 321,149 339,396
--------- --------- ---------
Total minimum lease payments. . 83,736 $586,170 $669,906
========= =========
Less amounts representing
interest . . . . . . . . . . . (22,586)
---------
Present value of net minimum
lease payments . . . . . . . . 61,150
Less current portion of lease
obligations. . . . . . . . . . (11,052)
---------
Long-term capital lease
obligations. . . . . . . . . . $ 50,098
=========
</TABLE>
F-17
<PAGE>
<PAGE>
<TABLE>
Total rent expense is summarized as follows:
<CAPTION>
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
February 2, January 31, January 30,
1992 1993 1994
----------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Capital Leases
Contingent rentals. . . . . . . $ 2,358 $ 2,443 $ 2,241
Rentals from subleases. . . . . (2,133) (2,144) (2,048)
Operating Leases
Minimum rentals . . . . . . . . 42,156 49,001 54,965
Contingent rentals. . . . . . . 4,081 5,058 3,645
Rentals from subleases. . . . . (1,057) (1,123) (1,150)
--------- --------- ---------
$ 45,405 $ 53,235 $57,653
========= ========= ========
</TABLE>
(7) Self-Insurance
Ralphs is a qualified self-insurer in the State of
California for worker's compensation and for automobile
liability. For fiscal 1991, 1992 and 1993 self insurance loss
provisions amounted to (in thousands) $25,549, $25,950 and
$30,323, respectively.
(8) Commitments and Contingencies
In December 1992, three California state antitrust class
action suits were commenced in Los Angeles Superior Court against
Ralphs and other major supermarket chains located in Southern
California, alleging that they conspired to refrain from
competing in and to fix the price of fluid milk above competitive
prices. Specifically, class actions were commenced by Diane
Barela and Neila Ross, Ron Moliare and Paul C. Pfeifle on
December 7, December 14, and December 23, 1992 respectively.
Ralphs intends to vigorously pursue its defense in these actions.
On March 25, 1991, George A. Koteen Associates, Inc. ("Koteen
Associates") commenced an action in San Diego Superior Court
alleging that Ralphs breached an alleged utility rate consulting
agreement. In December 1992, a jury returned a verdict of
$4,949,084 in favor of Koteen Associates and in March 1993,
attorney's fees and certain other costs were awarded to the
plaintiff. Ralphs has appealed the judgment and fully reserved
in Fiscal 1992 against an adverse judgement.
F-18
<PAGE>
Environmental Matters
In 1993, Ralphs completed the remediation of the mineral oil
release at its bakery located at the Atwater property in Los
Angeles. Ralphs' environmental consultants do not contemplate
that there will be any further regulatory requirements with
respect to this matter.
Ralphs is a party to several pending legal proceedings and
claims incurred in the normal course of business. In the opinion
of management, based in part on the advice of counsel, these
matters are adequately covered by insurance or will not have a
material effect on Ralphs' financial position or results of
operations.
F-19
<PAGE>
<PAGE>
(9) Redeemable Preferred Stock
Ralphs' non-voting preferred stock consisted of 10,000,000
shares of authorized $.01 par value preferred stock. At February
3, 1991 and February 2, 1992, 170,000 shares of Class A Preferred
Stock and 130,000 shares of Class B preferred stock were issued
and outstanding. All of the outstanding shares of preferred stock
were redeemed by Ralphs during February 1992 at their initial issuance
price of $3.0 million.
(10) Equity Appreciation Rights Plans
Effective August 26, 1988, Ralphs adopted an Equity
Appreciation Plan ("1988 Plan"), whereby certain officers
received equity rights representing, in aggregate, the right to receive
15% of the increase in the appraised value (as defined in the 1988
Plan) of the Ralphs' equity over an initial value of $120.0
million. The 1988 Plan was amended in January 1992 by agreement
among Ralphs and the Equity Rights holders ("Amended Plan").
Under the Amended Plan, all outstanding Equity Rights are
vested in full are no longer subject to forfeiture by the
holders, except in the event a holder's employment is terminated for
cause within the meaning of the Amended Plan. The appraised value or
Ralphs' equity is to be determined as of May 1 each year by an
investment banking company engaged for this purpose utilizing the
methodology specified in the Amended Plan (which is unchanged
from that specified in the 1988 Plan); however, under the Amended Plan
the appraised value of Ralphs' equity for purposes of the plan
may not be less than $400.0 million nor exceed $517.0 million. The
amount of equity rights redeemable at any given time is defined
in each holders' separate agreement. On exercise of an equity
right, the holder will be entitled to receive a pro rata percentage of
any such increase in appraised value. In addition, the Amended Plan
provides for the possible additional further payment to the
holder of each exercised Equity Right of an amount equal to the
"Deferred Value" of such Equity Right as defined in the Amended Plan.
Ralphs did not incur any expense under the Equity Appreciation Rights
Plan in fiscal 1992 and fiscal 1993.
<TABLE>
<CAPTION>
The amount of Equity Rights redeemable for each of the five
years subsequent to fiscal 1993 are as follows:
(dollars in thousands)
<S> <C>
1994. . . . . . . . . . . . . . . . . $ 7,251
1995. . . . . . . . . . . . . . . . . 7,251
1996. . . . . . . . . . . . . . . . . 7,251
1997. . . . . . . . . . . . . . . . . 5,185
1998. . . . . . . . . . . . . . . . . 13,318
--------
$ 40,256
========
</TABLE>
F-20
<PAGE>
(11) Income Taxes
<TABLE>
Income tax expense (benefit) consists of the following:
<CAPTION>
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
February 2, January 31, January 30,
1992 1993 1994
----------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Current
Federal . . . . . . . . . . . . $ 9,224 $ 4,173 $ (2,424)
State . . . . . . . . . . . . . 4,282 -- 3,500
--------- --------- ----------
$ 13,506 $ 4,173 $ 1,076
--------- --------- ----------
Deferred
Federal . . . . . . . . . . . . $ -- $ -- $(109,125)
State . . . . . . . . . . . . . -- -- --
--------- --------- ----------
$ -- $ -- $(109,125)
--------- --------- ----------
Total income tax expense
(benefit). . . . . . . . . . $ 13,506 $ 4,173 $(108,049)
========= ========= ========
</TABLE>
<TABLE>
<CAPTION>
Income tax expense (benefit) has been classified in the accompanying
statements of operations as follows:
1991 1992 1993
----------- ---------- ----------
<S> <C> <C> <C>
Earnings before extraordinary
items . . . . . . . . . . . . . . $ 13,506 $ 8,346 $(108,049)
Extraordinary item. . . . . . . . -- (4,173) --
--------- --------- ----------
Net tax expense (benefit) . . . . $ 13,506 $ 4,173 $(108,049)
========= ========= ========
</TABLE>
<TABLE>
The differences between income tax expense and income taxes computed
using the top marginal U.S. Federal income tax rate of 34% for both
Fiscal 1991 and 1992 and, for Fiscal 1993, of 35% applied to earnings
(loss) before income taxes (including, in Fiscal 1992, the extraordinary
loss of $74.8 million) were as follows:
F-21
<PAGE>
<CAPTION>
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
February 2, January 31, January 30,
1992 1993 1994
----------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Amount of expected expense
(benefit) computed using
the statutory Federal rate. . . . $ (9,430) $ (24,450) $ 10,611
Utilization of financial
operating loss . . . . . . . . -- -- (10,611)
Amortization of excess cost
over net assets acquired . . . 3,356 3,356 --
State income taxes, net of
Federal income tax benefit . 4,282 -- 3,500
Accounting limitation
(recognition) of deferred
tax benefit. . . . . . . . . . 6,139 20,041 (109,125)
Alternative minimum tax . . . . 9,224 4,173 625
Other, net. . . . . . . . . . . (65) 1,053 (3,049)
--------- --------- ---------
Total income tax expense
(benefit). . . . . . . . . . $ 13,506 $ 4,173 $(108,049)
========= ========= =======
</TABLE>
<TABLE>
<CAPTION>
Ralphs' deferred tax assets, recorded under SFAS 109, were comprised of
the following:
52 Weeks 52 Weeks
Ended Ended
January 31, January 30,
1993 1994
-------------- -----------
(dollars in thousands)
<S> <C> <C>
Deductible intangible assets $ -- $ 56,000
Net operating loss carryforward
and tax credit. . . . . . . . . . . 5,907 40,125
Self insurance accrual . . . . . . . 8,951 43,000
Software basis difference and
amortization. . . . . . . . . . . . 9,320 --
Fees collected in advance. . . . . . 5,572 --
Property, plant and equipment basis
difference and depreciation . . . . 25,914 21,000
Equity appreciation rights . . . . . -- 16,000
Favorable lease basis differences. . -- 16,000
State deferred taxes . . . . . . . . -- 17,000
Other. . . . . . . . . . . . . . . . 16,539 40,000
--------- ---------
72,203 249,125
Less valuation allowance. . . . . . (72,203) (140,000)
--------- ---------
Total $ -- $ 109,125
========= =========
</TABLE>
<PAGE>
<PAGE>
On October 15, 1992, Ralphs filed an election with the Internal Revenue
Service under Section 338(h)(10). Under this Section, Ralphs is required to
restate, for Federal tax purposes, its assets and liabilities to fair market
value as of February 3, 1992. The effect of this transaction is to record
a new Federal tax basis to reflect a change of control for Federal tax
purposes resulting from the Internal Reorganization. No change of control
for financial reporting purposes was affected.
In August, 1993, The Omnibus Budget Reconciliation Act of 1993 (the "Act")
was enacted. The Act increased the Federal income tax rate from 34 to 35
percent for filers whose taxable income exceeded $10.0 million. In the
current year, the effect of the Federal income tax rate change was to
increase the net deferred tax assets. In addition, the Act also provided
for the deductibility of certain intangibles, including costs in excess
gross assets acquired.
The Act has significantly impacted the aggregate deferred tax asset
position of Ralphs at January 30, 1994. Ralphs elected to retroactively
apply certain provisions of the Act related to the February 3, 1992
change of control for Federal tax purposes. As such, approximately
$610.7 million in excess of cost over net assets acquired became fully
deductible for Federal tax purposes. This amount is deductible over
15 years. This excess in the tax basis and financial statement basis
of excess of cost over net assets acquired aggregated $153.0 million
at January 30, 1994.
During the year ended January 30, 1994, Ralphs has recorded the
incremental impact of the Act on deductible temporary differences and
increased its deferred income tax assets by a net amount of $109.1 million.
The decision to reduce the valuation allowance was based upon several factors.
Specific among them, was the Company's completion of its restructuring plan
which effectively reduced estimated interest expense by approximately $9.0 as
compared to the year ended January 31, 1993. In addition, the January 31,
1993 operating results were negatively effected by several charges including
provisions for restructuring, legal settlements and a loss on retirement of
debt all aggregating approximately $90 million on a pre-tax basis.
Although there can be no assurance as to future taxable income,
the Company believes that, based upon the above mentioned events, as
well as the Company's expectation of future taxable income, it is more
likely than not that the recorded deferred tax asset will be realized.
In order to realize the net deferred tax asset currently recorded,
Ralphs will need to generate sufficient future taxable income, assuming
current tax rates, of approximately $300.0 million.
At January 30, 1994, the Company has Federal net operating loss (NOL)
carryforwards of approximately $115.0 million and Federal and state
Alternative Minimum Tax Credit carryforwards of approximately $2.1 million
which can be used to offset Federal taxable income and regular taxes payable,
respectively. The NOL carryforwards begin expiring in 2008.
F-23
<PAGE>
<PAGE>
During the past two fiscal years, the Company has generated Federal
taxable losses of approximately $115.0 million versus financial pre-tax
losses of approximately $42.0 million for the same periods. These
differences result principally from excess tax versus financial amortization
on certain intangible assets (excess of cost over net assets acquired),
as well as several other originating temporary differences.
(12) Employee Benefit Plans
Ralphs has a defined benefit pension plan covering substantially all
employees not already covered by collective bargaining agreements with at
least one year of credit service (defined at 1,000 hours). Ralphs' policy
is to fund pension costs at or above the minimum annual requirement.
<TABLE>
<CAPTION>
The following actuarially determined components were included in the net
pension expense:
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
February 2, January 31, January 30,
1992 1993 1994
----------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Service cost. . . . . . . . . . . $1,806 $ 2,076 $ 2,228
Interest cost on projected benefit
obligation . . . . . . . . . . . 2,079 2,471 2,838
Actual return on assets . . . . . (3,291) (2,794) (2,695)
Net amortization and deferral . . 992 237 (46)
------- ------- -------
Net pension expense. . . . . . $1,586 $ 1,990 $ 2,325
======= ======= =======
</TABLE>
F-24
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
The funded status of Ralphs' pension plan, (based on December
31, 1992 and 1993 asset values), is as follows:
January 31, January 30,
1993 1994
----------- -----------
(dollars in thousands)
<S> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation. . . . . . . $18,608 $29,659
Accumulated benefit obligation . . . . 20,887 29,950
Projected benefit obligation . . . . . 33,378 42,690
Plan assets at fair value . . . . . . . . 30,684 32,968
------- -------
Projected benefit obligation in excess
of Plan Assets . . . . . . . . . . . . . (2,694) (9,722)
Unrecognized net gain . . . . . . . . . . (1,959) 4,567
Unrecognized prior service cost . . . . . 46 (1,778)
Unrecognized net asset. . . . . . . . . . -- --
------- -------
Accrued pension cost. . . . . . . . . $(4,607) $(6,933)
======= =======
</TABLE>
Service costs for fiscal 1991, 1992 and 1993 were calculated
using a rate of increase in future compensation levels of 6% and
discount rate of 8.5%. Certain assumptions will be revised to
reflect future trends in fiscal 1994. The discount rate will be
reduced to 7.75% to reflect current decline in interest rates
and the rate of increase in future compensation levels will be 5%
for fiscal 1994. A long-term rate of return on assets of 9% was
used for fiscal 1992 and 1993.
Plan assets consist primarily of debt securities, guaranteed
interest contracts and a money market fund. Plan benefits are
based primarily on years of service and on average compensation
during the last years of employment.
On February 23, 1990, Ralphs adopted a Supplemental
Executive Retirement Plan covering certain key officers of Ralphs.
Earned vested benefits under the Plan were $4,246,300 at December 31,
1992 and $5,075,000 at December 31, 1993. Under certain circumstances,
the cash surrender value of certain split-dollar life insurance
policies purchased under split-dollar life insurance agreement
will offset Ralphs' obligations under the Supplemental Executive
Retirement Plan.
F-25
<PAGE>
<PAGE>
Ralphs participates in multi-employer pension plans and
health and welfare plans administered by various trustees for
substantially all union employees. Contributions to these plans
are based upon negotiated contractual rates. The United Food and
Commercial Workers health and welfare benefit plans were
overfunded and those employers who contributed to these plans are
to receive a pro-rata share of the excess reserve in these health
care benefit plans through a reduction in current maintenance
payments. Ralphs share of the excess reserve was approximately
$24.5 million of which $11.8 million was recognized in FY 1993
and the remainder will be recognized in FY 1994. Since employers
are required to make contributions to the benefit funds at
whatever level is necessary to maintain plan benefits, there can
be no assurance that plan maintenance payments will remain at
current levels.
<TABLE>
<CAPTION>
The expense related to these plans is summarized as follows:
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
February 2, January 31, January 30,
1992 1993 1994
----------- ----------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Multi-employer pension plans . . $ 7,370 $ 7,973 $17,687
======= ======= =======
Multi-employer health and
welfare . . . . . . . . . . . . $73,250 $71,183 $45,235
======= ======= =======
</TABLE>
Ralphs maintains the Ralphs Grocery Company Savings Plan
Plus--Prime and the Ralphs Grocery Savings Plan Plus - Basic
(collectively referred to as the"401(k) Plan") covering substantially
all employees who are not covered by collective bargaining
agreements and who have at least one year of credited service
(defined at 1,000 hours). The 401(k) Plan provided for both
pre-tax and after-tax contributions by participating employees.
With certain limitations, participants may elect to contribute
from 1% to 10% of their annual compensation on a pre-tax basis
to the Plan. Ralphs has committed to match a minimum of 20%
of an employee's contribution to the 401(k) Plan that do not
exceed 5% of the employee's compensation. Expenses under the
401(k) Plan for fiscal 1991, 1992 and 1993 were $377,335, $407,961
and $431,774, respectively.
<PAGE>
Ralphs has an executive incentive compensation plan which
covers approximately 39 key employees. Benefits to participants
are earned based on a percentage of base compensation upon
attainment of a targeted formula of earnings. Expense under this
plan for fiscal 1991, 1992 and 1993 was $2.4 million, $2.5
million and $2.6 million, respectively.
Ralphs has also adopted an incentive plan for certain
members of management. Benefits to participants are earned based
on a percentage of base compensation upon attainment of a targeted
formula of earnings. Expense under this plan for fiscal 1991,
1992 and 1993 was $2.8 million, $2.8 million and $3.0 million,
respectively.
F-26
The aforementioned incentive plans may be cancelled by the
Board of Directors at any time.
Ralphs sponsors a postretirement medical benefit plan
(Postretirement Medical Plan) covering substantially all
employees who are not members of a collective bargaining
agreement and who retire under certain age and service
requirements.
The Postretirement Medical Plan is a traditional type
medical plan providing outpatient, inpatient and various other
covered services. Such benefits are funded from Ralphs' general
assets. The calendar year deductible is $1,180 per individual,
indexed to the Medical Consumer Price Index.
On February 3, 1991, Ralphs adopted Statement of Financial
Accounting Standards (SFAS) 106, "Employees' Accounting for
Postretirement Benefits other Than Pension," which required that
the cost of future benefits under the Postretirement Medical Plan
be recognized in the financial statements over an employee's
service with Ralphs. At the beginning of fiscal 1990, Ralphs
elected to immediately recognize the transition obligation in
accordance with the provision of SFAS 106. Previously, expenses
were recognized as paid.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
The net periodic cost of the Postretirement Medical Plan
includes the following components:
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
February 2, January 31, January 30,
1992 1993 1994
----------- ----------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Service cost. . . . . . . . . . $1,323 $1,908 $1,767
Interest cost . . . . . . . . . 1,304 1,367 1,603
Return on plan assets . . . . . -- -- --
Net amortization and deferral . -- -- --
------ ------ ------
Net postretirement benefit cost $2,627 $3,275 $3,370
====== ====== ======
</TABLE>
F-27
<PAGE>
<TABLE>
<CAPTION>
The funded status of the postretirement benefit plan is as
follows:
52 Weeks 52 Weeks
Ended Ended
January 31, January 30,
1993 1994
----------- ----------
(dollars in thousands)
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees. . . . . . . . . . . . . $ 2,218 $ 1,237
Fully eligible plan participants. 441 357
Other active plan participants. . 16,675 16,062
Plan assets at fair value . . . . -- --
------- -------
Funded status . . . . . . . . . . (19,334) (17,656)
Plan assets in excess of projected
obligations . . . . . . . . . . -- --
Unrecognized gain (loss). . . . . 1,694 6,302
Unrecognized prior service cost . -- --
------ --------
Accrued postretirement benefit
obligation. . . . . . . . . . . $(21,028) $(23,958)
</TABLE>
Service cost was calculated using a medical cost trend of
10.5% for fiscal 1992 and 1993. Certain assumptions will be
revised to reflect future trends. The discount rate will be
reduced to 7.75% in 1994 to reflect current decline in interest
rates. The long term rate of return of plan assets is not
applicable as the plan is not funded.
F-28
<PAGE>
The effect on a one-percent increase in the medical cost
trend would increase the fiscal 1993 service and interest cost of
24%. The accumulated postretirement benefit obligation at
January 30, 1994 would also increase by 31%.
(13) Quarterly Results (unaudited)
<TABLE>
Quarterly results for fiscal 1992 and 1993 are as follows:
<CAPTION>
Extraordinary
Item,net of Net
Gross Operating Income income tax Earnings/
Sales Profit Income Taxes benefit (Loss)
----- ------ --------- ------ ---------- -----
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C>
FY 1992 Quarters
12 weeks ended 04/26/92. .$ 677.0 $146.7 $ 35.1 $ 3.9 $ -- $ 2.2
12 weeks ended 07/19/92. . 660.3 143.5 33.0 3.9 -- 1.7
12 weeks ended 10/11/92. . 631.4 137.0 28.8 1.3 (55.8) (58.6)
16 weeks ended 01/31/93. . 875.1 199.4 41.6 (.8) (14.8) (21.4)
------- ------ ------ ----- ----- ------
Total. . . . . . . . . .$2,843.8 $626.6 $138.5 $ 8.3 $(70.6) $(76.1)
======== ====== ====== ===== ====== ======
FY 1993 Quarters
12 weeks ended 04/25/93. .$ 632.4 $142.4 $ 31.4 $ 1.0 $ -- $ 3.9
12 weeks ended 07/18/93. . 629.0 145.2 36.8 (1.0) -- 12.9
12 weeks ended 10/10/93. . 612.8 141.5 31.7 -- -- 7.0
16 weeks ended 01/30/94. . 856.0 207.4 52.2 (108.0) -- 114.6
------- ------ ------ ----- ----- ------
Total. . . . . . . . . .$2,730.2 $636.5 $152.1 $(108.0) $ -- $138.4
======== ====== ====== ===== ====== ======
</TABLE>
<TABLE>
(14) Supplemental Cash Flow Information
<CAPTION>
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
February 2, January 31, January 30,
1992 1993 1994
---------- ---------- ----------
(dollars in thousands)
<S> <C> <C> <C>
Supplemental cash flow disclosures:
Interest paid, net of amounts
capitalized. . . . . . . . . . $115,159 $118,391 $ 93,738
Income taxes paid. . . . . . . . $ 12,643 $ 7,169 $ 2,423
Capital lease assets and
obligations assumed. . . . . . $ 3,847 $ -- $ 15,395
</TABLE>
F-29
<PAGE>
<PAGE>
(15) Stock Option Plan
On February 3, 1992, 3,162,235 options for Common Stock of
the Holding Company were granted under the Ralphs Nonqualified
Stock Option Plan. All options were vested, but not exercisable,
on the date of the grant. Options granted to certain officers
become exercisable at the rate of 20% on each September 30 of
calendar years 1992 through 1996. Options granted to other officers
become exercisable as to 10% of the grant on each of September
30, 1992 and 1993, 15% on each of September 30, 1994 through
September 30, 1997, and 20% on September 20, 1998.
<TABLE>
The following table summarizes the Ralphs Non- qualified
Stock Option Plan.
<CAPTION>
Number of
Options Price Range
--------- -----------
<S> <C> <C>
Options Outstanding at January
30, 1994:
Beginning of year. . . . . . . . . 3,162,235 $20.21
Granted. . . . . . . . . . . . . . -- --
Exercised. . . . . . . . . . . . . -- --
Cancelled. . . . . . . . . . . . . -- --
Expired. . . . . . . . . . . . . . -- --
--------- --------
End of year . . . . . . . . . . 3,162,235 $20.21
--------- --------
Exercisable at end of year. . . . . . 811,760 --
--------- --------
Available for grant at end of year. . -- --
--------- --------
Options Outstanding at January
31, 1993:
Beginning of year. . . . . . . . . -- --
Granted. . . . . . . . . . . . . . 3,162,235 $20.21
Exercised. . . . . . . . . . . . . -- --
Cancelled. . . . . . . . . . . . . -- --
Expired. . . . . . . . . . . . . . -- --
--------- --------
End of year . . . . . . . . . . 3,162,235 $20.21
--------- --------
Exercisable at end of year. . . . . . 405,880 --
--------- --------
Available for grant at end of year. . -- --
--------- --------
</TABLE>
F-30
<PAGE>
<PAGE>
The option price for outstanding options at January 30, 1994
assumes a grant date fair market value of Common Stock of the
Holding Company equal to $20.21 per share, which represents the
high end of a range of estimated values of the Common Stock of
the Holding Company on February 3, 1992, the date of the grant.
RALPHS GROCERY COMPANY
<TABLE>
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
(in thousands)
<CAPTION>
Balance Other Balance
beginning Changes- at end
Description of Period Additions Retirements add(deduct) of Period
- - --------------------- ---------- --------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
52 Weeks ended
January 30, 1994:
Land. . . . . . . . . . $156,487 $ 4,206 $ -- $ (789) $ 159,904
Buildings & improvements 180,639 16,730 (6,290) 100 191,179
Leasehold improvements. 149,273 8,670 (159) 3,557 161,341
Fixtures & equipment. . 349,697 33,361 (30,299) 1,867 354,626
Capitalized leases. . . 69,058 15,395 (358) 2,869 86,964
-------- -------- -------- ------ --------
Total. . . . . . . . $905,154 $ 78,362 $(37,106) $7,604 $954,014
======== ======== ======== ====== =======
52 Weeks ended
January 31, 1993:
Land. . . . . . . . . . $145,344 $ 11,143 $ -- $ -- $156,487
Buildings & improvements 151,896 28,657 (31) 117 180,639
Leasehold improvements. 140,989 8,843 (442) (117) 149,273
Fixtures & equipment. . 317,832 48,336 (16,471) -- 349,697
Capitalized leases. . . 70,151 -- (668) (425) 69,058
-------- -------- -------- ------ --------
Total. . . . . . . . $826,212 $ 96,979 $(17,612) $ (425) $905,154
======== ======== ======== ======
=======
52 Weeks ended
February 2, 1992:
Land. . . . . . . . . . $143,410 $ 1,864 $ -- $ 70 (a) $145,344
Buildings & improvements 136,205 16,558 (15) (852)(a) 151,896
Leasehold improvements. 144,385 (11) (3,497) 112 140,989
Fixtures & equipment. . 301,482 31,944 (16,264) 670 317,832
Capitalized leases. . . 69,228 3,847 (2,924) -- 70,151
-------- -------- -------- ------ --------
Total. . . . . . . . $794,710 $ 54,202 $(22,700) $ -- $826,212
======== ======== ======== ====== =======
- - -----------
<FN>
(a) Reclassification to/from other accounts.
</TABLE>
S-1
<PAGE>
<PAGE> RALPHS GROCERY COMPANY
<TABLE>
SCHEDULE VI--ACCUMULATED DEPRECIATION
AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
(in thousands)
Balance Other Balance
beginning Changes- at end
Description of Period Additions Retirements add(deduct) of Period
- - -------------------- ---------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
52 Weeks ended
January 30, 1994:
Buildings & improvements $ 33,598 $10,117 $(2,640) $ (630) $40,445
Leasehold improvements. 49,549 6,691 (86) 9,082 65,236
Fixtures & equipment. . 182,980 40,301 (14,392) (1,824) 207,065
Capitalized leases. . . 28,362 8,434 (294) 2,869 39,371
-------- -------- -------- -------- --------
Total. . . . . . . . $294,489 $65,543 $(17,412) $9,497 $352,117
======= ======= ======= ===== ====
52 Weeks ended
January 31, 1993:
Buildings & improvements $24,514 $ 9,092 $ (8) $ -- $ 33,598
Leasehold improvements. 38,138 11,775 (364) -- 49,549
Fixtures & equipment. . 148,407 43,256 (8,683) -- 182,980
Capitalized leases. . . 21,271 7,759 (668) -- 28,362
-------- -------- -------- ------- --------
Total. . . . . . . . $232,330 $71,882 $(9,723) $ -- $294,489
======== ======== ========
======= ========
52 Weeks ended
February 2, 1992:
Buildings & improvements $ 17,161 $ 7,366 $ (11) $ (2) $ 24,514
Leasehold improvements. 26,483 11,678 (23) -- 38,138
Fixtures & equipment. . 113,431 40,003 (5,029) 2 148,407
Capitalized leases. . . 13,009 8,271 (9) -- 21,271
-------- -------- -------- ------- -------
Total. . . . . . . . $170,084 $67,318 $(5,072) $ -- $232,330
======== ======== ======== ====== ======
</TABLE>
S-2
<PAGE>
<PAGE> RALPHS GROCERY COMPANY
<TABLE>
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<CAPTION>
Charged
Balance Charged to to other Balance
beginning costs and accounts- Deductions at end
Description of Period Expenses describe(2) (payments) of Period
- - -------------------- ---------- --------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
January 30, 1994:
Self-Insurance
Reserves (1). . . . . . $72,979 $30,323 $ 5,953 $(29,245) $80,010
Store Closure Reserves. $10,277 $ -- $ -- $ (763) $ 9,514
January 31, 1993:
Self-Insurance
Reserves (1). . . . . . $64,523 $25,950 $10,902 $(28,396) $72,979
Store Closure Reserves. $14,244 $ 1,838 $ -- $ (5,805) $10,277
February 2, 1992:
Self-Insurance
Reserves (1). . . . . . $57,948 $25,549 $ 5,620 $(24,594) $64,523
Store Closure Reserves. $ 2,000 $12,244 $ -- $ -- $14,244
<FN>
- - -----------
(1) Includes short term portion.
(2) Amortization of discount on self-insurance reserves to interest expense.
</TABLE>
S-3
<PAGE>
<PAGE>
RALPHS GROCERY COMPANY
<TABLE>
SCHEDULE IX--SHORT-TERM BORROWINGS
(in thousands, except interest rate data)
<CAPTION>
Maximum Average
amount amount Weighted
Weighted out- out- average
Balance average standing standing interest
at end interest during rate during
Description of Period rate period (A) the period
- - ---------------------- --------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
January 30, 1994:
Working capital credit
line. . . . . . . . . $ -- --% $51,900 $ 8,006 7.75%
January 31, 1993:
Working capital credit
line. . . . . . . . . $31,100 7.75% $41,800 $13,851 7.82%
February 2, 1992:
Working capital credit
line. . . . . . . . . $16,500 7.75% $34,900 $ 6,706 9.56%
<FN>
- - -----------
(A) Average interest rate for the year is computed by dividing the actual
short-term expense by the average short-term debt outstanding.
</TABLE>
S-4
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), made and entered into
as ofthe first day of May, 1990, between RALPHS GROCERY
COMPANY, a Delaware corporation, having its executive offices
and a principal place of business in the City of Compton,
California (hereinafter called the "Employer"), and JAN
CHARLES GRAY (hereinafter called the "Employee").
It is agreed by and between the parties hereto as
follows:
ARTICLE I
COMPENSATION
1.1 The Employer agrees to and does employ the Employee
to perform his duties as Senior Vice President, General
Counsel and Secretary or as determined by the Board of
Directors of Employer for the period beginning May 1, 1990,
and ending April 30, 1993. During said period the Employer
agrees to pay the Employee total compensation in the annual
amount of One Hundred Seventy Thousand Dollars ($170,000).
The agreement as to said amount shall not preclude or in any
way affect the grant by the Employer or the receipt by the
Employee of increases in his total compensation, or of bonuses
or other forms of additional compensation (including insurance
and other employee plan benefits), such increases, bonuses and
additional compensation, contingent or otherwise, to
be determined solely in the discretion of the Board of
Directors of the Employer or persons to whom such authority is
delegated by the Board of Directors.
1.2 The total compensation provided in Section 1.1
hereof, shall be payable as current salary, in
monthly installments, and at the same monthly rate as adjusted
for any fraction of a month unexpired at the termination of
the period of contract employment hereunder.
1.3 The term "period of contract employment", as used
herein, means the period beginning May 1, 1990 and ending
April 30, 1993, or on the last day of any renewal period, as
hereinafter provided, or at the time of the previous death or
termination of contract employment of the Employee.
The term "termination of contract employment", as
used herein, means either:
(a) The failure of the parties before the close of
business on May 1, 1993, to enter into a contract for the
Employer's employment of the Employee and the cessation of the
Employee's contract employment by the Employer as a result
thereof;
or
(b) The failure of the Employee, during the period
of contract employment, to render services to the Employer for
a continuous period of twelve (12) months, because of the
Employee's physical or mental disability during said period,
and action by the Board of Directors of the Employer or
persons to whom such authority is delegated by the Board of
Directors to end the Employee's contract employment by reason
thereof. If there should be any dispute between the parties
as to the Employee's physical or mental disability at any
time, such question shall be settled by the opinion of an
impartial reputable physician agreed upon for the purpose by
the parties or their representatives, or failing agreement
within ten (10) days of a written request therefor by either
party to the other, then one designated by the then president
of the Los Angeles Medical Society. The certificate of such
physician as to the matter in dispute shall be final
and binding on the parties; or
(c) Exercise by the Employee, at the time and in
the manner provided in Section 2.4 hereof, of the option
granted to the Employee by such Section 2.4; or
(d) The voluntary resignation or retirement of the
Employee; or
(e) The termination of the Employee's employment by
the Employer based upon the Employee's gross misconduct,
felony conviction (other than a traffic or moving violation,
such as driving while intoxicated), serious breach of Employer
policy, as determined by the Board of Directors of the
Employer; or
(f) The material breach of the Agreement by the
Employee.
The term "renewal period", as used herein, means a
period of renewal occurring at the end of the original term of
the agreement as provided for by a written agreement of the
parties extending the time for employment.
ARTICLE II
OTHER PROVISIONS
2.1 The Employee agrees that during the period of
contract employment (a) he will faithfully and in conformity
with the directions of the Board of Directors of the Employer,
or of an officer of the Employer duly authorized by said
Board, perform the duties of his employment hereunder, and
that he will devote to the performance of said duties all such
time and attention as they shall reasonably require, taking,
however, from time to time (as the Employer agrees that he
may) reasonable vacations; and (b) he will not, without the
express consent of the Board of Directors of the Employer or
persons to whom such authority is delegated by the Board of
Directors, become actively associated with or engaged in any
business during the period of contract employment other
than that of the Employer, or a division, or subsidiary of the
Employer that would detract from the performance of his duties
to the Employer, and he will do nothing inconsistent with such
duties. In the event that the Employee is in breach of the
provisions of Clause (b) of the preceding sentence hereof,
Employee shall promptly reimburse Employer for any monies paid
by Employer in connection with the relocation of Employee
during the period of the Agreement or contemplated by the
signing of this Agreement, including, without limitation, any
bonus or relocation expenses paid for or incurred by Employer
including carrying costs for property purchased from or on
behalf of Employee.
In the event that the Employee is advised by the
Employer in writing that his services will no longer be
required during the remainder of the period of contract
employment, this shall be treated as a suspension of services
and Employee shall continue to be treated as an employee for
all purposes, including eligibility for all employee benefits
of Employee, and shall continue to be compensated by Employer
(subject to the possible offset set forth below) during the
remainder of the period of contract employment at the rate of
"total compensation" to which Employee was entitled at time of
suspension of services. For this purpose, "total compensa-
tion" shall include any bonus earned by the Employee in the
year of suspension of services of Employee. Employee shall be
free to become actively engaged with another business but in
such event, fifty percent (50%) of the compensation of any
kind received from such other business (except from businesses
or investments owned by Employee before the date of
termination for which there will be no deduction) and one
hundred percent (100%) of the compensation of any kind
received from a "competing business" (as defined below), in
each case attributable to the period of contract employment,
shall be subtracted from any amounts otherwise due Employee
from Employer.
Employee agrees that he will not disclose to
anyone outside of the Employer, or use in other than the
Employer's business, confidential information relating to the
Employer's business, in any way obtained by him while employed
by the Employer, unless authorized by the Employer in writing.
It is understood that violation of this provision would cause
irreparable harm to the Employer and that Employer may seek to
enjoin any such violation or to take any other applicable
action. The Employee
also agrees that he will not engage in any activity which
would violate the Conflict of Interest or Business Ethics
Statement signed from time to time by the Employee.
2.2 It is recognized by Employee and Employer that
Employee's duties during the period of contract employment
will entail thereceipt of confidential information concerning
not only Employer's current operations and procedures but also
its short-range and long-range plans. Employee agrees that,
during the period of contract employment, Employee will not
have an investment of $100,000 or more in a competing business
(as hereinafter defined) and will not render personal services
to such competing business in any manner, including, without
limitation, as owner, partner, director, trustee, officer,
employee, consultant or advisor thereof.
If Employee shall breach the agreement contained in
this Section 2.2, such breach may render Employee liable to
Employer for damages therefor and entitle Employer to enjoin
Employee from making such investment or from rendering such
personal services. In addition, Employer shall have the right
in such event to enjoin Employee from disclosing any
confidential information concerning Employer to any such
competing business, to enjoin any such competing business from
receiving from Employee or using any such confidential
information and/or to enjoin any such competing business from
retaining or seeking to retain any other employees of
Employer.
As used in Section 2.1 and 2.2, a "competing
business" shall be any business which:
(a) at the time of determination, is
substantially similar to the whole or a substantial part of
the business at the end of the period of active employment,
conducted by Employer, or any of its subsidiaries, or
subsidiaries of subsidiaries, or divisions, or substantially
similar to some substantial part ofsaid business; and
(b) at the time of determination, is operating a
store or stores which, during its or their fiscal year
preceding the determination, in the aggregate had aggregate
net sales, including sales in leased and licensed departments,
in excess of $10,000,000, which store or stores is or are
located in a city or within a radius of twenty-five (25) miles
from the outer limits of a city where Employer, or any of its
subsidiaries, or subsidiaries of subsidiaries, or divisions is
operating a store or stores which, during its or their fiscal
year preceding the determination, in the aggregate had
aggregate net sales, including sales in leased and licensed
departments, in excess of $10,000,000; and
(c) had aggregate net sales at all its
locations,including sales in leased and licensed departments
and sales by its divisions and subsidiaries, during its fiscal
year preceding that in which the Employee made such investment
herein, or first rendered personal services thereto, following
his termination of service, in excess of $25,000,000.
2.3 The Employer agrees that during the period of
active employment the Employee shall be allowed reasonable
traveling expenses and shall be furnished office space,
assistance and accommodations suitable to the character of his
position with the Employer and adequate for the performance of
his duties hereunder.
2.4 This Agreement shall not be assignable by the
Employer without the written consent of the Employee,
except that, if the Employer shall merge or consolidate with
or into, or transfer substantially all of its assets,
including goodwill, to another corporation or other form of
business organization, this Agreement shall bind and run to
the benefit of the successor of the Employer resulting from
such merger, consolidation, or transfer; provided, however,
that if any such merger, consolidation, or transfer shall be
with, into, or to any corporation or other form of
business organization other than a subsidiary of the
Employer or a corporation having substantially the same common
stockholders as the Employer, the Employee at any time
thereafter shall have the right, at his option, on not less
than thirty (30) days' written notice to the Employer or its
successors, to terminate the period of contract employment.
The Employee may not assign, pledge, or encumber his interest
in this Agreement, or any part thereof, without the written
consent of the Employer.
2.5 The Employer agrees that in the event of war or
a national emergency, the Employee will, at his request, be
granted a leave of absence for military or governmental
service, and during said period of leave of absence shall be
paid such compensation as may be fixed by, or with the
authority of, the Board of Directors of the Employer. During
any such leave of absence, the Employee shall, except in
respect to his rights to the compensation herein provided and
his obligation to perform active duties of the Employer be
deemed, for the purposes of this Agreement, to be in the
active employment of the Employer.
2.6 This Agreement and all questions arising in
connection therewith shall be governed by the laws of the
State of California.
2.7 This Agreement comprises the entire agreement
between the parties hereto and as of May 1, 1990, supersedes,
cancels and annuls the Agreement dated August 1, 1988, between
Employer and Employee and any rights of employee thereunder,
including provisions from prior employment agreements which
were continued by, or incorporated in, said Agreement dated
August 1, 1988. This Agreement may not be modified orally.
2.8 Words in the masculine herein may be interpreted as
feminine or neuter, and words in the singular as plural, and
vice versa, where the sense requires.
IN WITNESS WHEREOF, the parties hereto have hereunto and
to a duplicate hereof, set their signatures as of the day,
month and year first above written, the Employer by a Director
thereunto duly authorized by its Board of Directors.
RALPHS GROCERY COMPANY
By_________________________________
EMPLOYEE SIGNATURE
By_________________________________
<PAGE>
<PAGE>
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
The Employment Agreement dated May 1, 1990, by and
between RALPHS GROCERY COMPANY, a Delaware corporation, and
JAN CHARLES GRAY is hereby amended as set forth herein.
1. Articles 1.1 and 1.3 are hereby amended as follows:
"The ending date for the period of contract
employment is extended three (3) years; the new
ending date for 'the period of contract employment'
being April 30, 1996."
2. Article 1.3(a) is hereby amended as follows:
The date April 30, 1993 is changed to April 30,
1996.
3. All other terms and conditions of the Employment
Agreement dated May 1, 1990 by and between RALPHS GROCERY
COMPANY, a Delaware corporation, and JAN CHARLES GRAY, and any
subsequent amendments or modifications relating thereto, shall
remain the same.
4. The effective date of this First Amendment to
Employment Agreement is January 20, 1992.
ALL OF THE TERMS OF THIS FIRST AMENDMENT TO EMPLOYMENT
AGREEMENT ARE HEREBY FULLY AGREED TO BY THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have hereunto, and
to a duplicate hereof, set their signatures as of the
effective date of this First Amendment to Employment
Agreement, the Employer by a Director thereunto duly
authorized by its Board of Directors.
RALPHS GROCERY COMPANY
By
EMPLOYEE SIGNATURE
<PAGE>
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
The Employment Agreement dated May 1, 1990, by and
between RALPHS GROCERY COMPANY, a Delaware corporation, and
JAN CHARLES GRAY is hereby amended as set forth herein.
1. Article 1.1 is hereby amended as follows:
"The annual 'total compensation' shall be Two
Hundred Ten Thousand Dollars ($210,000)."
2. All other terms and conditions of the Employment
Agreement dated May 1, 1990, by and between RALPHS GROCERY
COMPANY, a Delaware corporation, and JAN CHARLES GRAY, and any
subsequent amendments or modifications relating thereto, shall
remain the same.
4. The effective date of this Second Amendment to
Employment Agreement is May 1, 1993.
ALL OF THE TERMS OF THIS SECOND AMENDMENT TO EMPLOYMENT
AGREEMENT ARE HEREBY FULLY AGREED TO BY THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have hereunto, and
to a duplicate hereof, set their signatures as of the
effective date of this Second Amendment to Employment
Agreement, the Employer by a Director thereunto duly
authorized by its Board of Directors.
RALPHS GROCERY COMPANY
By
EMPLOYEE SIGNATURE
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement"), made and entered into
as of the first day of May, 1990, between RALPHS GROCERY
COMPANY, a Delaware corporation, having its executive offices
and a principal place of business in the City of Compton,
California (hereinafter called the "Employer"), and TERRY
PEETS (hereinafter called the "Employee").
It is agreed by and between the parties hereto as
follows:
ARTICLE I
COMPENSATION
1.1 The Employer agrees to and does employ the Employee
to perform his duties as Senior Vice President, Merchandising
or as determined by the Board of Directors of Employer for the
period beginning May 1, 1990, and ending April 30, 1993.
During said period the Employer agrees to pay the Employee
total compensation in the annual amount of One Hundred Sixty
Thousand Dollars ($160,000). The agreement as to said amount
shall not preclude or in any way affect the grant by the
Employer or the receipt by the Employee of increases in his
total compensation, or of bonuses or other forms of additional
compensation (including insurance and other employee plan
benefits), such increases, bonuses and additional
compensation, contingent or otherwise, to be determined
solely in the discretion of the Board of Directors of the
Employer or persons to whom such authority is delegated by the
Board of Directors.
1.2 The total compensation provided in Section 1.1
hereof, shall be payable as current salary, in monthly
installments, and at the same monthly rate as adjusted for any
fraction of a month unexpired at the termination of the period
of contract employment hereunder.
1.3 The term "period of contract employment", as used
herein, means the period beginning May 1, 1990 and ending
April 30, 1993, or on the last day of any renewal period, as
hereinafter provided, or at the time of the previous death or
termination of contract employment of the Employee.
The term "termination of contract employment", as
used herein, means either:
(a) The failure of the parties before the close of
business on May 1, 1993, to enter into a contract for the
Employer's employment of the Employee and the cessation of the
Employee's contract employment by the Employer as a result
thereof;
or
(b) The failure of the Employee, during the period
of contract employment, to render services to the Employer for
a continuous period of twelve (12) months, because of the
Employee's physical or mental disability during said period,
and action by the Board of Directors of the Employer or
persons to whom such authority is delegated by the Board of
Directors to end the Employee's contract employment by reason
thereof. If there should be any dispute between the parties
as to the Employee's physical or mental disability at any
time, such question shall be settled by the opinion of an
impartial reputable physician agreed upon for thepurpose by
the parties or their representatives, or failing agreement
within ten (10) days of a written request therefore by either
party to the other, then one designated by the then president
of the Los Angeles Medical Society. The certificate of such
physician as to the matter in dispute shall be final and
binding on the parties; or
(c) Exercise by the Employee, at the time and in
the manner provided in Section 2.4 hereof, of the option
granted to the Employee by such Section 2.4; or
(d) The voluntary resignation or retirement of the
Employee; or
(e) The termination of the Employee's employment by
the Employer based upon the Employee's gross misconduct,
felony conviction (other than a traffic or moving violation,
such as driving while intoxicated), serious breach of Employer
policy, as determined by the Board of Directors of the
Employer; or
(f) The material breach of the Agreement by the
Employee.
The term "renewal period", as used herein, means a
period of renewal occurring at the end of the original term of
the agreement as provided for by a written agreement of the
parties extending the time for employment.
ARTICLE II
OTHER PROVISIONS
2.1 The Employee agrees that during the period of
contract employment (a) he will faithfully and in conformity
with the directions of the Board of Directors of the Employer,
or of an officer of the Employer duly authorized by said
Board, perform the duties of his employment hereunder, and
that he will devote to the performance of said duties all such
time and attention as they shall reasonably require, taking,
however, from time to time (as the Employer agrees that he
may) reasonable vacations; and (b) he will not, without the
express consent of the Board of Directors of the Employer or
persons to whom such authority is delegated by the Board of
Directors, become actively associated with or engaged in
any business during the period of contract employment other
than that of the Employer, or a division, or subsidiary of the
Employer that would detract from the performance of his duties
to the Employer, and he will do nothing inconsistent with such
duties. In the event that the Employee is in breach of the
provisions of Clause (b) of the preceding sentence hereof,
Employee shall promptly reimburse Employer for any monies paid
by Employer in connection with the relocation of Employee
during the period of the Agreement or contemplated by the
signing of this Agreement, including, without limitation, any
bonus or relocation expenses paid for or incurred by Employer
including carrying costs for property purchased from or on
behalf of Employee.
In the event that the Employee is advised by the
Employer in writing that his services will no longer be
required during the remainder of the period of contract
employment, this shall be treated as a suspension of services
and Employee shall continue to be treated as an employee for
all purposes, including eligibility for all employee benefits
of Employee, and shall continue to be compensated by Employer
(subject to the possible offset set forth below) during the
remainder of the period of contract employment at the rate of
"total compensation" to which Employee was entitled at time of
suspension of services. For this purpose, "total
compensation" shall include any bonus earned by the Employee
in the year of suspension of services of Employee. Employee
shall be free to become actively engaged with another business
but in such event, fifty percent (50%) of the compensation of
any kind received from such other business (except from
businesses or investments owned by Employee before the date of
termination for which there will be no deduction) and one
hundred percent (100%) of the compensation of any kind
received from a "competing business" (as defined below), in
each case attributable to the period of contract
employment, shall be subtracted from any amounts otherwise due
Employee from Employer.
Employee agrees that he will not disclose to
anyone outside of the Employer, or use in other than the
Employer's business, confidential information relating to the
Employer's business, in any way obtained by him while employed
by the Employer, unless authorized by the Employer in writing.
It is understood that violation of this provision would cause
irreparable harm to the Employer and that Employer may seek to
enjoin any such violation or to take any other applicable
action. The Employee also agrees that he will not engage in
any activity which would violate the Conflict of Interest or
Business Ethics Statement signed from time to time by the
Employee.
2.2 It is recognized by Employee and Employer that
Employee's duties during the period of contract employment
will entail the receipt of confidential information concerning
not only Employer's current operations and procedures but also
its short-range and long-range plans. Employee agrees that,
during the period of contract employment, Employee will not
have an investment of $100,000 or more in a competing business
(as hereinafter defined) and will not render personal services
to such competing business in any manner, including, without
limitation, as owner, partner, director, trustee, officer,
employee, consultant or advisor thereof.
If Employee shall breach the agreement contained in
this Section 2.2, such breach may render Employee liable to
Employer for damages therefor and entitle Employer to enjoin
Employee from making such investment or from rendering such
personal services. In addition, Employer shall have the right
in such event to enjoin Employee from disclosing any
confidential information concerning Employer to any such
competing business, to enjoin any such competing business from
receiving from Employee or using any such confidential
information and/or to enjoin any such competing business from
retaining or seeking to retain any other employees of
Employer.
As used in Section 2.1 and 2.2, a "competing
business" shall be any business which:
(a) at the time of determination, is substantially
similar to the whole or a substantial part of the business at
the end of the period of active employment, conducted by
Employer, or any of its subsidiaries, or subsidiaries of
subsidiaries, or divisions, or substantially similar to some
substantial part of said business; and
(b) at the time of determination, is operating a
store or stores which, during its or their fiscal year
preceding the determination, in the aggregate had aggregate
net sales, including sales in leased and licensed departments,
in excess of $10,000,000, which store or stores is or are
located in a city or within a radius of twenty-five (25) miles
from the outer limits of a city where Employer, or any of its
subsidiaries, or subsidiaries of subsidiaries, or divisions is
operating a store or stores which, during its or their fiscal
year preceding the determination, in the aggregate had
aggregate net sales, including sales in leased and licensed
departments, in excess of $10,000,000; and
(c) had aggregate net sales at all its locations,
including sales in leased and licensed departments and sales
by its divisions and subsidiaries, during its fiscal year
preceding that in which the Employee made such investment
herein, or first rendered personal services thereto, following
his termination of service, in excess of $25,000,000.
2.3 The Employer agrees that during the period of active
employment the Employee shall be allowed reasonable traveling
expenses and shall be furnished office space, assistance and
accommodations suitable to the character of his position with
the Employer and adequate for the performance of his duties
hereunder.
2.4 This Agreement shall not be assignable by the
Employer without the written consent of the Employee, except
that, if the Employer shall merge or consolidate with or into,
or transfersubstantially all of its assets, including
goodwill, to another corporation or other form of business
organization, this Agreement shall bind and run to the benefit
of the successor of the Employer resulting from such merger,
consolidation, or transfer; provided, however, that if any
such merger, consolidation, or transfer shall be with, into,
or to any corporation or other form of business organization
other than a subsidiary of the Employer or a corporation
having substantially the same common stockholders as the
Employer, the Employee at any time thereafter shall have the
right, at his option, on not less than thirty (30) days'
written notice to the Employer or its successors, to terminate
the period of contract employment. The Employee may not
assign, pledge, or encumber his interest in this Agreement, or
any part thereof, without the written consent of the Employer.
2.5 The Employer agrees that in the event of war or a
national emergency, the Employee will, at his request, be
granted a leave of absence for military or governmental
service, and during said period of leave of absence shall be
paid such compensation as may be fixed by, or with the
authority of, the Board of Directors of the Employer. During
any such leave of absence, the Employee shall, except in
respect to his rights to the compensation herein provided and
his obligation to perform active duties of the Employer be
deemed, for the purposes of this Agreement, to be in the
active employment of the Employer.
2.6 This Agreement and all questions arising in
connection therewith shall be governed by the laws of the
State of California.
2.7 This Agreement comprises the entire agreement
between the parties hereto and as of May 1, 1990, supersedes,
cancels and annuls the Agreement dated August 1, 1988, between
Employer and Employee and any rights of employee thereunder,
including provisions from prior employment agreements which
were continued by, or incorporated in, said Agreement dated
August 1, 1988. This Agreement may not be modified orally.
2.8 Words in the masculine herein may be interpreted as
feminine or neuter, and words in the singular as plural, and
vice versa, where the sense requires.
IN WITNESS WHEREOF, the parties hereto have hereunto and
to a duplicate hereof, set their signatures as of the day,
month and year first above written, the Employer by a Director
thereunto duly authorized by its Board of Directors.
RALPHS GROCERY COMPANY
By_________________________________
EMPLOYEE SIGNATURE
By_________________________________
<PAGE>
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
The Employment Agreement dated May 1, 1990, by and
between RALPHS GROCERY COMPANY, a Delaware corporation, and
TERRY PEETS is hereby amended as set forth herein.
1. Articles 1.1 and 1.3 are hereby amended as follows:
"The ending date for the period of contract
employment is extended three (3) years; the new
ending date for 'the period of contract employment'
being April 30, 1996."
2. Article 1.3(a) is hereby amended as follows:
The date April 30, 1993 is changed to April 30,
1996.
3. All other terms and conditions of the Employment
Agreement dated May 1, 1990 by and between RALPHS GROCERY
COMPANY, a Delaware corporation, and TERRY PEETS, and any
subsequent amendments or modifications relating thereto, shall
remain the same.
4. The effective date of this First Amendment to
Employment Agreement is January 20, 1992.
ALL OF THE TERMS OF THIS FIRST AMENDMENT TO EMPLOYMENT
AGREEMENT ARE HEREBY FULLY AGREED TO BY THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have hereunto, and
to a duplicate hereof, set their signatures as of the
effective date of this First Amendment to Employment
Agreement, the Employer by a Director thereunto duly
authorized by its Board of Directors.
RALPHS GROCERY COMPANY
By
EMPLOYEE SIGNATURE
<PAGE>
SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
The Employment Agreement dated May 1, 1990, by and
between RALPHS GROCERY COMPANY, a Delaware corporation, and
TERRY PEETS is hereby amended as set forth herein.
1. Article 1.1 is hereby amended as follows:
"The annual 'total compensation' shall be One
Hundred Ninety-Five Thousand Dollars ($195,000)."
2. All other terms and conditions of the Employment
Agreement dated May 1, 1990, by and between RALPHS GROCERY
COMPANY, a Delaware corporation, and TERRY PEETS, and any
subsequent amendments or modifications relating thereto, shall
remain the same.
4. The effective date of this Second Amendment to
Employment Agreement is May 1, 1993.
ALL OF THE TERMS OF THIS SECOND AMENDMENT TO EMPLOYMENT
AGREEMENT ARE HEREBY FULLY AGREED TO BY THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have hereunto, and
to a duplicate hereof, set their signatures as of the
effective date of this Second Amendment to Employment
Agreement, the Employer by a Director thereunto duly
authorized by its Board of Directors.
RALPHS GROCERY COMPANY
By
EMPLOYEE SIGNATURE
