SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended July 30, 1995 Commission File No.
34-025260
KASH N' KARRY FOOD STORES, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 95-4161591
(State of Incorporation) (IRS Employer Identification Number)
6422 Harney Road, Tampa, Florida 33610
(Address of Registrant's Principal Executive Offices)
(813) 621-0200
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.01 Per Share
Preferred Share Purchase Rights
-------------------------------
(Title of Class)
Indicate by check mark whether the registrant has (1) 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. [x] Yes [ ] 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. [ ]
(continues on following page)<PAGE>
(continuation of cover page)
The aggregate market value of the voting stock held by non-
affiliates of the registrant based on the average low bid and high
ask prices of such stock as of October 13, 1995 was $27,614,149.
For purposes of this report and as used herein, the term "non-
affiliate" includes all shareholders of the registrant other than
Directors, executive officers, and persons holding more than five
percent of the outstanding voting stock of the registrant.
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court. [x]
Yes [ ] No
As of October 13, 1995, there were 4,649,943 shares
outstanding of the registrant's common stock, $0.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1995 Annual Meeting of
Stockholders of the Company to be filed not more than 120 days
after the fiscal year ended July 30, 1995 are incorporated by
reference in Part III of this Form 10-K.
<PAGE>
TABLE OF CONTENTS
Page
Number
PART I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . 6
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . 7
Item 4. Submission of Matters to a Vote
of Security Holders. . . . . . . . . . . . . . . . . 7
Executive Officers of the Registrant . . . . . . . . 7
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters. . . . . . . . . . . . . 9
Item 6. Selected Financial Data. . . . . . . . . . . . . . . 10
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . 15
Item 8. Financial Statements and Supplementary Data. . . . . 24
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . 49
PART III
Item 10. Directors of the Registrant. . . . . . . . . . . . . *
Compliance with Section 16(a)
of the Exchange Act. . . . . . . . . . . . . . . . . 50
Item 11. Executive Compensation . . . . . . . . . . . . . . . **
Item 12. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . . . . . **
Item 13. Certain Relationships and Related Transactions . . . **
* Certain information required by Item 10 of Part III is hereby
incorporated by reference to the registrant's definitive proxy
statement to be filed not more than 120 days after the fiscal
year ended July 30, 1995.
** The information required by Items 11, 12 and 13 of Part III is
hereby incorporated by reference to the registrant's
definitive proxy statement to be filed not more than 120 days
after the fiscal year ended July 30, 1995.
PART IV
Item 14. Exhibits and Reports on Form 8-K . . . . . . . . . . 51
Signatures . . . . . . . . . . . . . . . . . . . . . 58
<PAGE>
PART I
ITEM 1. BUSINESS.
General
The Company is among the three largest food retailers in west
central Florida, operating 92 multi-department supermarkets, five
conventional supermarkets and 33 liquor stores under the "Kash n'
Karry" name and two super warehouse stores under the "Save 'n Pack"
name, all supported by a centrally-located warehouse and
distribution facility. More than one-half of the Company's stores
are located in the Tampa-St. Petersburg area, which is Florida's
largest retail food sales market, with the balance located between
Gainesville, approximately 130 miles to the north, and Bonita
Springs, approximately 150 miles to the south. The west central
Florida area has a diverse and growing economy, which includes high
technology and financial centers, an insurance industry presence,
retirement communities, coastal resorts and commercial agricultural
activity. The region's population is estimated to be increasing at
an annual rate of approximately 2%.
Company Store Profile
The following table presents a profile of the Company's
stores:
Number of Stores
at Fiscal Year End
Total Square ------------------------
Store Type Footage(1) 1995 1994 1993 1992 1991
- -------------------- -------------- ---- ---- ---- ---- ----
Kash n' Karry Food 40,000--57,000 50 50 48 42 42
Stores 25,000--39,999 42 43 55 57 57
less than 25,000 5 5 9 12 14
Save 'n Pack Super 76,000--88,000 2 2 3 -- --
Warehouse Stores
Kash n' Karry Liquor 1,800--2,700 33 33 35 30 31
Stores
- --------------------
(1) Includes selling and backroom areas.
Supermarket stores
The Company currently operates 92 multi-department supermar-
kets, with an average size of approximately 40,000 total square
feet. The Company also operates five conventional supermarkets,
which average approximately 18,000 total square feet. All of the
<PAGE>
Company's supermarket stores offer a wide selection of items
typically sold in grocery stores, including staple groceries, fresh
fruits and vegetables, bakery and dairy products, delicatessen
items, frozen foods and fresh meats. Each of the Company's
supermarket stores also sells certain non-food items such as health
and beauty care items, paper and tobacco products, soaps and
detergents, drugs, sundries and housewares. The Company's multi-
department stores offer, in addition, a wider variety of non-food
items, including cosmetics and toiletries, small hardware and a
limited selection of soft goods. Most of the Company's multi-
department stores also feature expanded perishable goods
departments, delicatessens and in-store bakeries, and many contain
pharmacies and full-service seafood, full-service floral and video
rental departments. All of the Company's stores feature national
brands and also carry a selection of corporate brand merchandise.
Most of the Company's food stores are located in shopping centers.
The Company's food stores are open seven days a week, and most
operate 24 hours a day.
Super warehouse stores
In October 1992, the Company acquired three super warehouse
stores (one of which was subsequently closed) operating under the
"Save 'n Pack" name. The two existing super warehouse stores,
which are 76,000 and 88,000 square feet in size, respectively,
feature among the lowest prices on basic items carried by
supermarkets and are designed to cater to the needs of the low-
income household. In its super warehouse store promotions, the
Company encourages consumers to verify the stores' tag line, "No
One Has Lower Prices." The assortment of packaged goods carried by
the super warehouse stores is more limited than that of a
supermarket and is frequently augmented by one-time purchases of
specially priced products that may not be available on a regular
basis. Store decor is austere compared to that of a traditional
supermarket, and product is displayed on warehouse racking and on
floor pallets to enhance productivity and promote a low-price
impression. The stores provide a full complement of perishable
departments, including meat, produce, bakery, deli and fresh
seafood, which also feature low prices and are frequently self-
service. The super warehouse stores do not have certain specialty
departments such as pharmacies, video rental departments or full-
service floral departments and do not provide supermarket services
such as grocery bagging, carry-out service, check cashing services
and electronic funds transfer. Because of reduced display, labor
and advertising costs and the more limited services, the Company is
able to operate its super warehouse stores successfully with lower
gross margins than the Kash n' Karry supermarket stores. The super
warehouse stores operate 24 hours a day, seven days a week.
2<PAGE>
Liquor stores
Each of the Company's 33 liquor stores is located on property
adjacent to one of the Company's supermarket stores and is operated
as a department of such store, although, in accordance with Florida
law, each liquor store must maintain a separate entrance. Liquor
stores complement the Company's core business, as they can be
advertised through existing media without incremental expense, pay
supermarket (as compared to shopping center) rents and benefit from
operating and marketing synergies with the adjacent supermarkets.
The liquor stores offer a wide variety of wines, beers and hard
liquors, as well as mixers, soft drinks, snacks, ice and other
party accessories and a limited number of traditional grocery
items. Sales from the Company's liquor stores represent
approximately 2% of the Company's total sales. The Company's
liquor stores range in size from 1,800 to 2,700 square feet, and
most are open seven days a week.
Operations Strategy
The Company believes that up-to-date, strategically located
facilities, well-trained associates and information management
systems are key elements to the Company's future success. The
Company operates a modern, 687,000 square foot warehouse,
distribution and office facility in Tampa with sufficient capacity
to service anticipated store expansion for the foreseeable future.
The warehouse enables the Company to reduce costs by purchasing in
large quantities, taking advantage of special promotional prices
offered by vendors and purchasing prior to impending price
increases, and reducing delivery costs through cross docking and
backhauls. The central location of the warehouse facility to its
stores also provides the Company with operating efficiencies.
The Company recently announced that it will begin supplying
grocery products through its warehouse to Goodings Supermarkets of
Orlando, Florida. Management estimates that this will increase the
volume through its warehouse by approximately $75.0 million, and as
a result expects an improvement in its procurement costs and
warehousing expenses as a percentage of sales.
The Company relies on information technology to enhance
operating efficiency. The Company recently entered into an
agreement to outsource its information systems development in order
to minimize costs, accelerate the implementation period for systems
improvements, facilitate future software upgrades, reduce personnel
issues and eliminate equipment lease costs. Specifically, the
agreement provides for the acquisition of new procurement, billing,
labor scheduling and accounts payable systems and new point-of-sale
equipment in the stores within the next 12 months.
3<PAGE>
Marketing Strategy
The Company emphasizes competitive prices on everyday items,
strong weekly features, high quality perishables and a broad
assortment of both national and corporate brands. The Company's
food stores are open seven days a week, with most operating 24
hours a day. The Company seeks to be either first or second among
its competitors in assortment of branded merchandise, stocking over
29,000 SKU's (stock keeping units) of national brand and corporate
brand items. In addition to a full range of grocery and general
merchandise items, most of the Company's multi-department
supermarkets also feature expanded perishable goods departments,
delicatessens and in-store bakeries, and many contain pharmacies
and full-service seafood, full-service floral and video rental
departments.
In 1992, the Company introduced its own corporate brand
merchandise. The Company's corporate brand strategy is to offer a
product comparable in quality to the best-selling national brand at
a lower price. The Kash n' Karry brand item generally sells for
approximately 10% less than the competing best-selling national
brand but generates a higher per unit gross profit contribution to
the Company. Over 1,100 SKU's in a wide variety of product
categories carry the Kash n' Karry brand name.
The Company recently began a new marketing program to
emphasize its perishable products. The first wave of advertising
focuses on Kash n' Karry as "Your Destination for Fresh,"
highlighted by a "Double Your Money Back" guaranty on produce.
Additionally, the Company is remodelling its stores to emphasize
the perishable departments, including improved lighting, additional
space and a new decor package that supports the perishable
emphasis.
The Restructuring
The Company was formed in connection with a leveraged
acquisition in 1988. Although the Company consistently generated
stable operating cash flows through its 1993 fiscal year, it
experienced net losses for each of the five fiscal years ending
July 31, 1994 and the 22-week period ended January 1, 1995 due
primarily to its highly leveraged position. During the 1995 fiscal
year, the Company completed a comprehensive financial restructuring
(the "Restructuring") pursuant to a "prepackaged" plan of
reorganization pursuant to Chapter 11 of the U.S. Bankruptcy Code.
As a result of the Restructuring, the Company restructured its
senior debt, converted its subordinated debt into an 85% equity
interest in the Company, and received $10.0 million in cash from
Green Equity Investors, L.P. for the remaining 15% equity interest
of the Company. The Company emerged from bankruptcy on December
29, 1994. The provisions of the Restructuring had an immediate
4<PAGE>
beneficial impact on the Company's financial condition by reducing
its long-term debt in excess of $100.0 million. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
Competition
The food retailing business is highly competitive. The
Company operates in an environment where more than 90% of sales are
by chains. The principal competitive factors include store
locations, product selection and quality, price, cleanliness of
stores, customer service and overall store image. Based on its
marketing research, the Company believes that consumers perceive
the Company as having a favorable value image in the markets that
it serves and offering a wide variety of quality products and
services in a pleasant environment. The Company believes that its
competitive strengths include desirable store locations combined
with a strong consumer franchise and efficient warehousing and
distribution facilities.
The Company competes with several national, regional and local
supermarket chains, particularly Publix, Winn-Dixie, Albertson's
and Food Lion. The Company is also in competition with convenience
stores, stores owned and operated or otherwise affiliated with
large food wholesalers, unaffiliated independent food stores,
merchandise clubs, discount drugstore chains and discount general
merchandise chains. The Company's principal competitors have
greater financial resources than the Company and could use those
resources to take steps which could adversely affect the Company's
competitive position and financial performance. For example,
operating results generally and sales growth in particular were
adversely affected by approximately twelve, eight and 21 store
openings by principal grocery competitors during the 1995, 1994 and
1993 fiscal years, respectively, and it is anticipated that
competitive store openings will continue. Another example of the
highly competitive nature of the food retailing business is the
practice of competitors to re-position their pricing structure.
Over the past several years, each of the Company's major
competitors has changed its pricing practices in a manner that has
adversely affected general retail pricing in the market. Winn-
Dixie discontinued double coupons and introduced its everyday low-
price program in the spring of 1991. In the spring of 1993, Publix
began a campaign focused on "surprisingly low prices," and Food
Lion began a double coupon program which has since been discon-
tinued. The Company has had to deal with each of these changes in
a manner that has, in some instances, adversely affected its
operating results and may continue to do so in the future. In
addition, the Company's ability to compete may be adversely
affected by its high leverage and the limitations imposed by its
credit agreement and other debt agreements.
5<PAGE>
Seasonality
The Company's sales and related inventory levels tend to
increase during the winter months due to the holidays, increased
tourism and the influx of winter residents, and to decrease during
the summer months. Typically, approximately 60% of the Company's
operating cash flow is generated during the second and third
quarters of its fiscal year.
Employees
The Company currently employs approximately 3,400 full-time
and 6,400 part-time associates, none of whom is covered by a
collective bargaining agreement. The Company believes that it has
good relations with its associates.
Trademarks and Licenses
The Company employs various trademarks, trade names and
service marks in its business, including the "Kash n' Karry" logo
and trade name, "Your Destination for Fresh," "So Much More to Pay
Less For!," "Kash $aver," "$mart Buy," "Five Star Meat," "Nature
Friendly" and "Save 'n Pack." Except as a means of identifying the
source of the Company's products and services, the Company does not
believe that any of such trademarks or service marks are material
to the operations of the Company.
Certain governmental licenses and permits, including alcoholic
beverage licenses, health permits and various business licenses,
are necessary in the Company's operations. The Company believes it
has all material licenses and permits necessary to enable it to
conduct its business.
ITEM 2. PROPERTIES.
The Company's 92 multi-department supermarkets and five
conventional supermarkets have an aggregate selling area of
approximately 3.0 million square feet. The Company owns nine of
the supermarkets (comprising approximately 279,000 square feet) and
leases the remaining 88 supermarkets. Three of the leased
supermarkets are owned by affiliates of the Company. Six of the
leased supermarkets are operated under long-term ground leases with
the Company owning the improvements at such locations. Nineteen
leases expire during the next five years, with the Company having
options to renew all but two. Most of the Company's supermarket
leases have minimum rentals with additional rentals based on a
percentage of sales.
The Company's two Save 'n Pack super warehouse stores have an
aggregate selling area of approximately 119,000 square feet. The
Company leases both super warehouses, one pursuant to a long-term
6<PAGE>
ground lease, and owns the improvements at the ground-leased
location. One of those leases expires within the next five years,
with the Company having an option to renew.
The Company's liquor stores have an aggregate selling area of
approximately 53,000 square feet. The Company owns one of the
liquor stores and leases the remaining 32 liquor stores. Two of
the leases expire during the next five years, with the Company
having an option to renew.
The Company's warehouse, distribution and office facility is
located on 53.6 acres of land, which the Company owns.
ITEM 3. LEGAL PROCEEDINGS.
For information regarding the Company's reorganization
proceedings under Chapter 11 of the U.S. Bankruptcy Code, see
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The Company is engaged in various legal actions and claims
arising in the ordinary course of business. Management believes,
after discussions with legal counsel, that the ultimate outcome of
such litigations and claims will not have a material adverse effect
on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders
during the quarter ended July 30, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT.
Set forth below is certain information regarding each of the
executive officers of the Company as of October 13, 1995.
Name Age Position
- -------------------- --- ----------------------------------
Ronald E. Johnson 45 Chairman of the Board, President,
Chief Executive Officer, and Chief
Operating Officer
Raymond P. Springer 45 Senior Vice President, Chief
Financial Officer, Treasurer and
Secretary
Gary M. Shell 48 Senior Vice President,
Nonperishables Marketing
7<PAGE>
Clifford C. Smith Jr. 36 Senior Vice President, Perishables
Marketing
BJ Mehaffey 46 Senior Vice President, Operations
Richard D. Coleman 41 Vice President, Controller
During the fiscal year ended July 30, 1995 the Company
restructured its executive management. On August 1, 1994, the
Company terminated the employment of Ronald J. Floto, who had been
the Chief Executive Officer of the Company since October 1988. The
Company hired Anthony R. Petrillo as acting Chief Executive Officer
on an interim basis pending completion of the Restructuring. In
January 1995, the Company implemented its post-Restructuring
management succession plan by hiring Ronald E. Johnson as Chief
Executive Officer. Other recent changes to the executive
management team include the replacement of Dennis V. Carter (a
former Executive Vice President, Operations), Thomas A. Whipple (a
former Executive Vice President, Marketing), and Edward Kolodzieski
(a former Senior Vice President, Operations) with Gary M. Shell,
Clifford C. Smith Jr., and BJ Mehaffey.
Biographical Information
Ronald E. Johnson has been Chairman of the Board of the
Company since March 1995 and has been its President and Chief
Executive Officer since January 1995. Mr. Johnson served as Chief
Operating Officer of Farm Fresh from December 1993 to January 1995
and as its Senior Vice President of Store Operations from 1990 to
1993.
Raymond P. Springer has been Senior Vice President, Chief
Financial Officer, and Treasurer of the Company since March 1995,
and Secretary of the Company since January 1995. Mr. Springer
served as Executive Vice President, Administration, and Chief
Financial Officer of the Company from October 1988 to March 1995.
Mr. Springer also served as a Director of the Company from October
1988 to July 1991, and from November 1991 to December 1994.
Gary M. Shell has been Senior Vice President of Nonperishables
Marketing of the Company since March 1995. Mr. Shell served as
Vice President of Marketing and Merchandising of B. Green &
Company, a food wholesaler and retailer, from May 1991 to February
1995, and as Vice President of Purchasing and Promotions of Rich
Foods, Inc. from 1987 to 1991.
Clifford C. Smith Jr. has been Senior Vice President of
Perishables Marketing of the Company since March 1995. Mr. Smith
served as the Director of Deli, Bakery and Food Service for Harris-
Teeter from 1992 to March 1995, and as the Vice President of Deli,
Bakery and Food Service for Mayfair Supermarkets, Inc. from 1981 to
1992.
8<PAGE>
BJ Mehaffey has been Senior Vice President, Operations, of the
Company since July 1995. Mr. Mehaffey served as District Manager
of the Grocery Stores Division of Farm Fresh from 1992 to 1995, and
in various capacities with Bi-Lo Incorporated from 1972 to 1992.
Richard D. Coleman has been Vice President and Controller of
the Company since October 1988, and Director of Risk Management of
the Company since January 1995. From October 1988 to January 1995,
Mr. Coleman also served as Secretary of the Company.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
On March 2, 1995 the Common Stock was listed for trading on
the Nasdaq Small Cap Market under the symbol "KASH." Prior to such
date, there was no established public trading market for the Common
Stock. For the period of March 2, 1995 through October 13, 1995,
the range of high and low bids for a single share of Common Stock
was $29.25 - $12.17, as quoted in the Nasdaq Small Cap Market. The
average of the low bid and high ask prices on October 13, 1995 as
quoted on the Nasdaq Small Cap Market was $23.75. Such over-the-
market quotations reflect inter-dealer prices, without retail mark-
up, mark-down or commission, and may not necessarily represent
actual transactions. In addition, these quotations have been
adjusted to reflect the 3-for-2 stock split effected in the form of
a stock dividend paid on July 17, 1995.
As of October 13, 1995, there were approximately 21 holders of
record of shares of Common Stock.
The Company has not in the past paid cash dividends to its
stockholders and does not intend to pay any cash dividends in the
foreseeable future. The Company's ability to declare cash
dividends on its Common Stock is materially limited by restrictions
in the Company's credit agreement and debt indentures.
9<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following table presents selected financial information of
the Company as of and for each of the fiscal years ended on the
Sunday nearest to July 31, 1995, 1994, 1993, 1992 and 1991, and is
derived from the audited financial statements of the Company. Such
financial statements, and the reports thereon, for the 1995, 1994
and 1993 fiscal years are included elsewhere in this document, and
should be read in conjunction with this selected financial data and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
As discussed herein, the Restructuring was consummated on
December 29, 1994 (the "Effective Date"). The financial statements
as of and for the 30 weeks ended July 30, 1995 and for the 22 weeks
ended January 1, 1995, respectively, reflect the Company's
emergence from Chapter 11 and were prepared utilizing the princi-
ples of fresh-start reporting contained in the American Institute
of Certified Public Accountants' Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code." Operations during the period from the Effective
Date through January 1, 1995 had no significant impact on the
emergence transactions and as a result have not been separately
identified. As a result of the implementation of fresh-start
accounting, certain of the selected financial data as of and for
the 30 weeks ended July 30, 1995 and for the 22 weeks ended January
1, 1995 is not comparable to the selected financial data of prior
periods due to the change in reporting entity resulting from the
application of fresh-start accounting. Therefore, selected
financial data for the "Reorganized Company" has been separately
identified from that of the "Predecessor Company."
The selected store data have been derived from the Company's
management reporting records.
10<PAGE>
Reorganized Predecessor
Company Company
-------- --------
30 Weeks 22 Weeks
Ended Ended
July 30, January 1,
1995 1995
------- --------
(In Thousands, Except
Per Share Amounts)
Statement of Operations Data:
Sales . . . . . . . . . . . . . . . . . $599,320 $426,681
Cost of sales . . . . . . . . . . . . . 471,401 340,802
------- --------
Gross profit. . . . . . . . . . . . . . 127,919 85,879
Selling, general and
administrative expenses . . . . . . . 90,482 68,819
Depreciation and amortization. . . . . . 14,802 10,234
------- --------
Operating income . . . . . . . . . . . . 22,635 6,826
Interest expense (1) . . . . . . . . . . 15,810 13,719
------- --------
Income (loss) from operations before
reorganization items, income taxes,
extraordinary items and change in
accounting principle . . . . . . . . 6,825 (6,893)
Reorganization items . . . . . . . . . -- (4,869)
Provision for income taxes . . . . . . (3,682) --
Extraordinary item - gain on debt
discharge . . . . . . . . . . . . -- 70,166
Cumulative effect of change in
accounting principle - post-
retirement medical benefits . . . . . -- (2,000)
------- --------
Net income. . . . . . . . . . . . . . . $ 3,143 $56,404
======= ========
Income per common share (2), (3) . . . $0.67 --
======= ========
11<PAGE>
Predecessor Company
---------------------------------------------
Fiscal Year Ended Sunday Nearest July 31, (4)
---------------------------------------------
1994 1993 1992 1991
---------- ---------- ---------- ----------
(In Thousands)
Statement of Operations Data:
Sales . . . . . . . . . . . $1,065,165 $1,086,125 $1,071,038 $1,059,636
Cost of sales . . . . . . . 845,597 856,156 848,441 842,687
---------- ---------- ---------- ----------
Gross profit. . . . . . . . 219,568 229,969 222,597 216,949
Selling, general and
administrative expenses . . 176,945 175,177 164,897 159,359
Depreciation and
amortization . . . . . . . 24,112 23,455 20,132 54,435
Store closing and other
costs . . . . . . . . . . . 11,016 -- -- --
---------- ---------- ---------- ----------
Operating income. . . . . . . 7,495 31,337 37,568 3,155
Interest expense (1) . . . . 45,390 43,257 44,869 45,610
---------- ---------- ---------- ----------
Loss from operations before
extraordinary items . . . (37,895) (11,920) (7,301) (42,455)
Extraordinary item - gain
on debt repurchase . . . . . -- -- -- 3,427
---------- ---------- ---------- ----------
Net loss . . . . . . . . . . $(37,895) $(11,920) $(7,301) $(39,028)
========== ========== ========== ==========
12<PAGE>
Reorganized Predecessor
Company Company
---------- ----------------------------------
Fiscal Year Ended Sunday Nearest July 31, (4)
----------------------------------------------
1995 1994 1993 1992 1991
--------- -------- -------- -------- --------
(Dollar Amounts in Thousands)
Balance Sheet Data:
Total assets . . . . . . . . $373,572 $389,893 $423,208 $399,419 $401,860
Inventories . . . . . . . . . 86,840 76,094 95,385 91,226 92,451
Property and equipment, net . 139,967 160,491 164,937 145,372 146,513
Working capital . . . . . . . 13,164 (12,747) 19,137 26,031 15,684
Total long-term debt and
capital leases (including
current maturities) (5) . . 223,694 360,121 351,890 316,220 342,826
Preferred stock . . . . . . . -- 4,650 4,650 4,650 45,991
Total stockholders' equity
(deficit) . . . . . . . . . 49,638 (61,054) (23,159) (11,239) (72,640)
Other Data:
Operating cash flow
(adjusted EBITDA) (6) . . . $54,497 $42,623 $54,792 $57,700 $57,590
Capital expenditures (7). . . 6,247 15,471 37,703 15,385 15,672
Store Data:
Food stores open at end of
period (8). . . . . . . . . 99 100 115 111 113
Avg. selling sq. ft. during
period (in thousands) (9) . 2,913 3,084 3,100 2,970 2,949
Avg. sales per store week (10) $199 $196 $183 $181 $180
13<PAGE>
Notes to Selected Financial Information
(Dollar Amounts in Thousands)
(1) Includes amortization of deferred financing costs of $809 and $1,152 for
the 30 weeks ended July 30, 1995 and the 22 weeks ended January 1, 1995,
respectively, and $2,950, $2,850, $2,932 and $3,017 for the 1994, 1993,
1992 and 1991 fiscal years, respectively.
(2) Reflects the 3-for-2 stock split effected in the form of a
stock dividend paid on July 17, 1995. Based on 4,649,943 shares (the
weighted average number of shares of Common Stock outstanding).
(3) Net income per share of Common Stock is not meaningful prior to January
1, 1995 due to the significant change in the capital structure in
connection with the Restructuring.
(4) The Company's fiscal year is based on a 52/53 week fiscal year ending on
the Sunday nearest to July 31. Therefore, the 1992 fiscal year included
53 weeks of operations. The 1995, 1994, 1993 and 1991 fiscal years each
had 52 weeks of operations.
(5) Total long-term debt includes long-term debt, current maturities of
long-term debt, capital lease obligations and certain other debt.
(6) Represents earnings before interest expense (which includes amortization
of deferred financing costs), provision for income taxes, depreciation
and amortization, store closing and other costs, reorganization items,
extraordinary items, and cumulative effect of change in accounting
principle. Operating cash flow (adjusted EBITDA) is presented here as
a measure of the Company's debt service ability, and should not be
construed as an alternative to operating income (as determined in
accordance with generally accepted accounting principles) or to cash
flows from operating activities (as determined on the Statements of Cash
Flows in the Company's financial statements).
(7) Capital expenditures consist of cash expenditures, additions to capital
leases and, for the 1994, 1993 and 1992 fiscal years, amounts funded
under the capital improvements revolving credit facility under the Old
Credit Agreement (as defined in "Management's Discussion and Analysis of
Financial Condition and Results of Operations").
(8) Data relating to the number of stores is expressed in actual numbers.
(9) Represents the average of the selling square footage of the Company's
stores on the first and last day of the respective periods. Selling
square footage includes adjacent liquor stores where applicable but does
not include backroom and receiving areas.
(10) Represents, for each of the respective periods, sales for such period
divided by the sum of the number of weeks for which each of the
Company's stores was open during such period.
14<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
This analysis should be read in conjunction with the financial
statements and related notes thereto included elsewhere in this
document. The Company follows a 52/53 week fiscal year ending on
the Sunday nearest to July 31. Historical results of operations
are given for the Company's 52 week periods of operations ended
July 30, 1995, July 31, 1994 and August 1, 1993 (respectively, the
"1995, 1994 and 1993 Fiscal Years"). The financial statements as
of and for the 30 weeks ended July 30, 1995 reflect the Company's
emergence from Chapter 11 proceedings on December 29, 1994 and were
prepared utilizing the principles of fresh-start reporting
contained in the American Institute of Certified Public
Accountants' Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" (the "SOP 90-
7").
The Restructuring
During the 1995 Fiscal Year, the Company completed a
comprehensive financial restructuring pursuant to a "prepackaged"
plan of reorganization (the "Restructuring") pursuant to Chapter 11
of the U.S. Bankruptcy Code. The Company filed its prepackaged
plan with the U.S. Bankruptcy Court for the District of Delaware
(the "Bankruptcy Court") on November 9, 1994 (the "Petition Date").
During the pendency of the bankruptcy case, the Company, with the
approval of the Bankruptcy Court, operated its business in the
ordinary course, and paid all pre-petition and post-petition claims
of its general unsecured creditors, trade creditors and employees
in full. The Restructuring was confirmed by the Bankruptcy Court
on December 12, 1994, and the Company emerged from bankruptcy on
December 29, 1994 (the "Effective Date").
Pursuant to the provisions of the Restructuring, on the
Effective Date:
(1) Each $1,000 principal amount of the Company's $85.0
million Senior Floating Rate Notes due August 2, 1996 (the "Old
Senior Floating Rate Notes") was exchanged for (a) new Senior
Floating Rate Notes due February 1, 2003 (the "New Senior Floating
Rate Notes") in an original principal amount equal to $1,000 plus
100% of the accrued interest under the Old Senior Floating Rate
Notes from and including February 3, 1994, through but not
including the Petition Date, or, at such holder's election, (b) new
11.5% Senior Fixed Rate Notes due February 1, 2003 (the "New Senior
Fixed Rate Notes") in the same original principal amount, or, at
such holder's election, (c) an amount of New Senior Floating Rate
Notes and an amount of New Senior Fixed Rate Notes equal, in the
aggregate, to 100% of such claim;
15<PAGE>
(2) Each $1,000 principal amount of the Company's $50.0
million 12 3/8% Senior Fixed Rate Notes due February 1, 1999 (the
"Old Senior Fixed Rate Notes") was exchanged for (a) New Senior
Floating Rate Notes in an original principal amount equal to $1,000
plus 100% of the accrued interest under the Old Senior Fixed Rate
Notes from and including February 2, 1994, through but not
including the Petition Date, or, at such holder's election, (b) New
Senior Fixed Rate Notes in the same original principal amount, or,
at such holder's election, (c) an amount of New Senior Floating
Rate Notes and an amount of New Senior Fixed Rate Notes equal, in
the aggregate, to 100% of such claim;
(3) the Company's $105.0 million 14% Subordinated Debentures
due February 1, 2001 (the "Old Subordinated Debentures") were
exchanged for the aggregate amount of 2,634,973 (3,952,443 after
giving effect to the 3-for-2 stock split in July 1995) shares of
newly-issued Common Stock, representing 85 percent of the Common
Stock outstanding on the Effective Date;
(4) Green Equity Investors, L.P. ("GEI") invested $10.0
million cash in exchange for 465,000 (697,500 after giving effect
to the 3-for-2 stock split in July 1995) shares of newly-issued
Common Stock, representing 15 percent of the Common Stock
outstanding on the Effective Date; and
(5) all of the existing preferred stock, common stock, and
options and warrants to purchase common stock of the Company were
extinguished.
Also pursuant to the Restructuring, the Company refinanced its
principal bank indebtedness on the Effective Date by entering into
a new credit agreement with The CIT Group/Business Credit, Inc., as
administrative agent for itself and certain other lenders (the "New
Credit Agreement"). The New Credit Agreement provides the Company
with a 3-year $35.0 million term loan facility and a 3-year $50.0
million revolving credit facility, and is secured by liens upon
substantially all of the Company's real and personal property. As
a result of such refinancing, the obligations of the Company under
the Credit Agreement dated October 12, 1988, as restated on
September 14, 1989, and thereafter amended, with Bank of America
National Trust and Savings Association (as successor by merger to
Security Pacific National Bank), as administrative agent, and
certain other senior lenders (the "Old Credit Agreement"), were
satisfied, and the Old Credit Agreement was terminated. See "--
Financial Condition."
16<PAGE>
Results of Operations
The discussion below compares the results of operations for
the 1995, 1994 and 1993 Fiscal Years. Except as specifically
acknowledged below, management believes that the impact of the
Restructuring and the implementation of fresh-start reporting did
not significantly affect the results of operations for the 1995
Fiscal Year, and that the combined operating results of the
individual 30-week period and 22-week period ended July 30, 1995
and January 1, 1995, respectively, are indicative of the results of
operations for the 52-week period ended July 30, 1995.
The following table sets forth certain items from the
Company's Statements of Operations as a percentage of sales for the
periods indicated:
Reorganized Predecessor
Company Company
-------- ------------------
1995 1994 1993
Fiscal Fiscal Fiscal
Year Year Year
------- ------- -------
Sales 100.0% 100.0% 100.0%
Gross profit 20.8% 20.6% 21.2%
Selling, general and
administrative expenses 15.5% 16.6% 16.1%
Depreciation and amortization 2.4% 2.3% 2.2%
Operating income 2.9% 0.7% 2.9%
Interest expense 2.9% 4.3% 4.0%
Net income (loss) 5.8%(1) -3.6%(2) -1.1%
(1) Net income for the 1995 Fiscal Year includes a non-recurring
gain on debt discharge (6.8% of sales) offset by other
reorganization items (-0.5% of sales) and cumulative effect of change in
accounting principle (-0.2% of sales) recorded for the 22-week period ended
January 1, 1995. Net income, as a percentage of sales, for the 30 weeks
ended July 30, 1995 (post-Restructuring) was 0.5%.
(2) Net income for the 1994 Fiscal Year included expenses of
$11,016, or 1.0% of sales, applicable to store closing and other
costs.
17<PAGE>
Sales
Reorganized Predecessor
Company Company
-------- ------------------
1995 1994 1993
Fiscal Fiscal Fiscal
Year Year Year
-------- -------- --------
Sales (in millions) $1,026 $1,065 $1,086
Number of stores:
Food stores opened or acquired -- 2 8
Food stores closed 1 17 4
Expansion remodels -- 1 2
Total food stores at period end 99 100 115
Average selling square feet
during year (in thousands) 2,913 3,084 3,100
Average sales per store week
(in thousands) $199 $196 $183
Total sales have decreased slightly over the last three years
as a result of operating twelve fewer stores, low overall retail
price increases, and the impact of 41 additional competitive
supermarket openings during this period.
Gross Profit
The improvement in gross profit, as a percentage of sales, for
the 1995 Fiscal Year was primarily due to restoring investment in
forward buy inventory, improved perishable margins, and increased
efficiencies in store-level product preparation and handling costs.
Partially offsetting these improvements was the receipt of
substantially less promotional funds due in part to the credit
restrictions placed on the Company by its vendors during the period
preceding the Company's emergence from bankruptcy.
The decrease in gross profit as a percentage of sales from the
1993 Fiscal Year to the 1994 Fiscal Year was attributable to the
impact of eliminating investment in forward buy inventory
(estimated to be approximately 57 basis points), receipt of fewer
promotional funds, and generally lower retail prices, partially
offset by improved perishable margins and efficiencies in product
preparation and handling.
Selling, General and Administrative Expenses
The reductions of selling, general and administrative
expenses for the 1995 Fiscal Year compared with the 1994 Fiscal
Year were due to lower store labor costs (approximately 0.3% of
sales), reduced corporate overhead expenses (approximately 0.3% of
sales), and lower advertising expenditures (approximately 0.4% of
sales) associated with a comprehensive operational restructuring of
the Company initiated during the year; and the elimination of
18<PAGE>
operating costs associated with stores that were closed during the
1994 Fiscal Year. These improvements were partially offset by an
increase in workers' compensation insurance reserves.
The increase of $1.8 million from the 1993 Fiscal Year to the
1994 Fiscal Year was primarily the result of increased occupancy
costs and other expenses related to stores opened, acquired or
remodeled, and an increase in insurance reserves and advertising
expenses, offset by reduced operating costs due to store closings.
The increase as a percentage of sales was attributable to operating
costs of comparable stores in the aggregate declining at a lesser
rate than the rate of sales decline in those stores.
Depreciation and Amortization
The increase in depreciation and amortization expenses for the
1995 Fiscal Year was primarily attributable to increased
amortization of intangible assets.
The increase in depreciation and amortization expenses from
the 1993 Fiscal Year to the 1994 Fiscal Year was primarily
attributable to the new stores and major remodels.
Store Closing and Other Costs
During the first quarter of the 1994 Fiscal Year, the Company
recorded a non-recurring charge of $11.0 million. This charge
included $1.9 million of costs associated with a proposed public
offering of debt securities and a proposed real estate-based
revolving credit facility, neither of which was consummated, $4.2
million of favorable lease interests written off in connection with
the closing of 12 underperforming stores, $4.0 million representing
an adjustment to the expected lease liability on closed stores, net
of sublease income, and $.9 million of other store closing and
related expenses.
Interest Expense
Reorganized Predecessor
Company Company
------- -------------------
1995 1994 1993
Fiscal Fiscal Fiscal
Year Year Year
-------- -------- -------
(In Thousands)
Interest expense $27,638 $42,917 $41,211
Amortization of
deferred financing costs 1,961 2,950 2,850
Capitalized interest (70) (477) (804)
-------- -------- --------
Total interest expense $29,529 $45,390 $43,257
======== ======== ========
19<PAGE>
Interest expense for the 1994 and 1993 Fiscal Years was
primarily comprised of interest under the Old Credit Agreement, the
Old Senior Floating Rate Notes, the Old Senior Fixed Rate Notes,
the Old Subordinated Debentures, and various mortgages and capital
leases. For the 1995 Fiscal Year, interest expense was incurred on
the Old Senior Floating Rate Notes, the Old Senior Fixed Rate
Notes, and the Old Subordinated Debentures through the Petition
Date; and interest expense was incurred on the New Senior Floating
Rate Notes and the New Senior Fixed Rate Notes from the Effective
Date through July 30, 1995. In accordance with the provisions of
the Restructuring, no interest was due to the holders of the Old
Senior Floating Rate Notes, Old Senior Fixed Rate Notes, or Old
Subordinated Debentures for the period between the Petition Date
and the Effective Date, and therefore no interest expense was
recorded for this period. As provided in the Restructuring,
interest accrued from and including February 2, 1994, in the case
of the Old Senior Fixed Rate Notes, and from and including February
3, 1994, in the case of the Old Senior Floating Rate Notes, through
the Petition Date, was paid by issuing additional New Senior
Floating Rate Notes and New Senior Fixed Rate Notes. Interest on
the Old Subordinated Debentures accrued from and including February
2, 1994 through the Petition Date was converted into newly issued
Common Stock.
Reorganization Costs
In accordance with SOP 90-7, income and costs directly related
to the reorganization have been segregated and are separately
disclosed. The major components consist of adjustments to fair
value, provision for store closing costs, provision for severance benefits,
provision for other restructuring activities, and professional fees.
Gain on Debt Discharge
The gain on debt discharge reflects the conversion of $105.0
million of Old Subordinated Debentures, plus accrued interest from
and including February 2, 1994 through the Petition Date, into
$39.5 million of stockholders' equity, resulting in a $70.2 million
gain. The gain is presented net of write-offs and costs associated
with the debt discharged.
Financial Condition
Prior to the Petition Date, the Company's Old Credit Agreement
provided for a revolving credit facility with individual sublimits
of $30.0 million for working capital loans and $25.0 million for
letters of credit, with a maximum of $50.0 million outstanding
under the total facility at any one time. During the weeks
immediately preceding the bankruptcy filing, the Company, with the
approval of its bank lenders, increased its cash position by fully
20<PAGE>
drawing the remaining availability under its working capital line.
On the Petition Date, the Bankruptcy Court approved the use of cash
collateral and a letter of credit facility of $17.7 million under
the Old Credit Agreement, and additional debtor-in-possession
financing provided by BankAmerica Business Credit, Inc. of $11.2
million, subject to certain terms and conditions. The outstanding
borrowings under those facilities were refinanced on the Effective
Date, when the Company entered into the New Credit Agreement with
The CIT Group/Business Credit Inc. ("CIT") and certain bank lenders
to provide a 3-year $35.0 million term loan facility and a 3-year
$50.0 million revolving credit facility.
Beginning August 1, 1994, the Company implemented a new short-
term business strategy to improve the Company's financial
performance. The focus of this strategy was to conserve capital,
reduce administrative and operating expenses, and direct management
attention toward the operation of existing stores. During the 1995
Fiscal Year the Company significantly improved its liquidity as a
result of the payment moratorium on interest due on the Old Senior
Fixed Rate Notes, Old Senior Floating Rate Notes, and Old
Subordinated Debentures; managing working capital; reducing
operating expenses by approximately $12.0 million on an annualized
basis; and limiting capital expenditures. During the pendency of
its bankruptcy case, the Company operated its business in the
ordinary course, and paid all pre-petition and post-petition claims
of the Company's general unsecured creditors, trade creditors, and
employees in full. The provisions of the Restructuring, which are
discussed in footnote 1 to the accompanying financial statements,
had an immediate beneficial impact on the Company's financial
condition, primarily as a result of significantly deleveraging the
Company's balance sheet, as indicated below:
Reorganized Predecessor
Company Company
--------- ---------
July 30, July 31,
1995 1994
--------- ---------
(Dollar Amounts in Thousands)
Current portion of
long-term debt $ 5,563 $ 42,740
Total long-term debt 223,694 360,121
Operating cash flow
(adjusted EBITDA)(1) 54,497 42,623
Total interest expense 26,814(2) 45,390
Cash interest expense 11,340(2) 42,440
Capital expenditures 6,247 15,471
Long-term debt/operating
cash flow 4.25(3) 8.45
Operating cash flow/
total interest expense 2.03 0.94
Operating cash flow/
cash interest expense 4.81 1.00
21<PAGE>
(1) Represents twelve month trailing earnings before interest
expense (which includes amortization of deferred financing
costs), provision for income taxes, depreciation and
amortization, store closing and other costs, reorganization
items, extraordinary items, and cumulative effect of change in
accounting principle. Operating cash flow (adjusted EBITDA)
is presented here as a measure of the Company's debt service
ability and should not be construed as an alternative to
operating income (as determined in accordance with generally
accepted accounting principles) or to cash flows from
operating activities (as determined on the Statements of Cash
Flows in the Company's financial statements).
(2) Interest expense for the trailing twelve-month period is not
meaningful due to the payment moratorium on the Old Senior
Notes and Old Subordinated Debentures. Therefore, total
interest expense and cash interest expense as shown here
represent annualized proforma amounts based on reported
interest expense for the third and fourth quarters of the 1995
Fiscal Year.
(3) Assumes long-term debt is increased by the non-cash interest
accrued as of July 30, 1995.
The Company recently completed a financing of three of its
fee-owned store properties and applied the net proceeds of $9.1
million to the outstanding balance of the term loan under the New
Credit Agreement. The Company is still actively pursuing an
additional refinancing transaction on eight other mortgaged store
properties, the sale-leaseback of an additional store facility that
is operating as a ground lease, the sale of an unencumbered real
estate site, and the sale of its beneficial interest in three real
estate trusts, the total of which could provide up to an additional
$10.0 million of net cash proceeds. In addition, in August the
Company exercised its option of paying interest in kind on the New
Senior Floating Rate Notes and the New Senior Fixed Rate Notes, and
has the option of paying in kind the next subsequent semi-annual
interest payment on the New Senior Fixed Rate Notes.
As a result of its increased liquidity and the application of
the proceeds of the financing discussed above, the Company has
prepaid a total of $24.9 million on its term loan. As of October
13, 1995, the outstanding principal balance under the term loan
facility was $4.8 million, and the Company had $21.9 million in
borrowings and $12.5 million in letters of credit outstanding under
the revolving loan facility under the New Credit Agreement. The
Company intends to repay the remaining balance of its term loan
facility with the net cash proceeds from the transactions described
above. Additionally, the Company has received a commitment from
CIT to amend the New Credit Agreement by extending the term through
December 1998 and providing more favorable terms.
22<PAGE>
Consistent with its short-term business strategy for the 1995
fiscal year, the Company did not open or acquire any new stores
during the year, but spent $6.2 million to upgrade its existing
stores. For the 1996 fiscal year, the Company expects that capital
expenditures of approximately $28.0 million will be used to open
two new stores and complete major and minor remodels of
approximately ten stores and 24 stores.
In March 1995, the Company entered into a ten year agreement
to outsource its information systems. As a result of the
outsourcing agreement, the Company anticipates that its total
annual information systems expenditures through 2000 will range
from approximately $8.6 million to $9.9 million, as compared with
total information systems expenditures of $9.5 million and $9.1
million, respectively, for the 1993 and 1994 Fiscal Years, and
approximately $8.9 million for the 1995 Fiscal Year. The
outsourcing agreement provides for new application software in the
areas of merchandise procurement, store billings, warehouse
control, accounts payable, and labor tracking/scheduling, as well
as new point-of-sale equipment for each store. Absent the
outsourcing agreement, the Company estimates that these system
enhancements would have required approximately $10.0 million in
additional capital outlays during the 1995 and 1996 Fiscal Years.
Based upon the Company's ability to generate working capital
through its operations and its $50.0 million revolving credit
facility, the Company believes that it has the financial resources
necessary to pay its capital obligations and implement its business
plan.
Effects of Inflation
The Company's primary costs, inventory and labor, are affected
by a number of factors that are beyond its control, including
availability and price of merchandise, the competitive climate and
general and regional economic conditions. As is typical of the
supermarket industry, the Company 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 SUPPLEMENTARY DATA.
The financial statements and supplementary data for the
Company begin on page 24.
23<PAGE>
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Kash n' Karry Food Stores, Inc.:
We have audited the accompanying balance sheet of Kash n' Karry Food Stores,
Inc. (the Company) as of July 30, 1995 and the related statements of
operations, stockholders' equity and cash flows for the thirty weeks ended
July 30, 1995 and the twenty-two weeks ended January 1, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kash n' Karry Food Stores,
Inc. as of July 30, 1995, and the results of its operations and its cash
flows for the thirty weeks ended July 30, 1995 and the twenty-two weeks ended
January 1, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Bankruptcy Court
confirmed the Company's prepackaged Plan of Reorganization dated December 12,
1994, and the Company emerged from bankruptcy on December 29, 1994. On
January 1, 1995 the Company accounted for the reorganization and adopted
"fresh start accounting." As a result, the Company's July 30, 1995 balance
sheet is not comparable to the July 31, 1994 balance sheet, since it presents
the financial position of the reorganized entity.
As discussed in Note 12 to the financial statements, the Company adopted the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits other
than Pensions," as of January 1, 1995.
/s/ Coopers & Lybrand, L.L.P.
- -----------------------------------
Tampa, Florida
September 15, 1995
24<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Kash n' Karry Food Stores, Inc.:
We have audited the accompanying balance sheet of Kash n' Karry Food Stores,
Inc. as of July 31, 1994 and the related statements of operations,
stockholders' deficit, and cash flows for the fifty-two weeks ended July 31,
1994 and August 1, 1993. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kash n' Karry Food Stores,
Inc. at July 31, 1994, and the results of its operations and its cash flows
for the fifty-two weeks ended July 31, 1994 and August 1, 1993, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Kash
n' Karry Food Stores, Inc. will continue as a going concern. However, Kash
n' Karry Food Stores, Inc. has suffered recurring losses from operations and
has a net capital deficiency. As discussed in Note 1 to the financial
statements, Kash n' Karry Food Stores, Inc. filed a pre-packaged petition
under Chapter 11 of the United States Bankruptcy Code on November 9, 1994 and
these matters raise substantial doubt about its ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ KPMG Peat Marwick LLP
- -----------------------------------
Tampa, Florida
September 16, 1994, except with respect to
Note 1, which is as of November 9, 1994
25<PAGE>
KASH N' KARRY FOOD STORES, INC.
BALANCE SHEETS
(Dollar Amounts in Thousands, Except Per Share Amounts)
ASSETS
Reorganized Predecessor
Company Company
------------ -----------
July 30, July 31,
1995 1994
------------ -----------
(Note 1)
Current assets:
Cash and cash equivalents $ 4,803 $ 6,852
Accounts receivable 6,504 8,084
Inventories 86,840 76,094
Prepaid expenses and other current assets 4,310 12,805
--------- ---------
Total current assets 102,457 103,835
Property and equipment, at cost, less
accumulated depreciation 139,967 160,491
Favorable lease interests, less accumulated
amortization of $1,152 and $13,543 28,802 12,312
Deferred financing costs, less accumulated
amortization of $809 and $22,572 3,684 12,630
Reorganization value in excess of amount allocable
to identifiable assets, less accumulated
amortization of $6,627 94,692 --
Excess of cost over net assets acquired, less
accumulated amortization of $16,288 -- 96,758
Deferred tax asset 1,200 --
Other assets 2,770 3,867
--------- ---------
Total assets $373,572 $389,893
========= =========
See accompanying notes to financial statements.
26<PAGE>
KASH N' KARRY FOOD STORES, INC.
BALANCE SHEETS
(Dollar Amounts in Thousands, Except Per Share Amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Reorganized Predecessor
Company Company
------------ -----------
July 30, July 31,
1995 1994
------------ -----------
(Note 1)
Current liabilities:
Current portion of long-term debt $ 5,563 $ 42,740
Accounts payable 39,231 34,908
Accrued expenses 44,499 38,934
--------- ---------
Total current liabilities 89,293 116,582
Long-term debt, less current obligations 218,131 317,381
Other long-term liabilities 16,510 12,334
Old Series B Cumulative Preferred Stock of $.01 par
value and a stated value of $100 a share.
Authorized 50,000 shares; 38,750 shares
outstanding. -- 3,875
Old Series C Convertible Preferred Stock of
$.01 par value. Authorized 100,000 shares;
77,500 shares outstanding. -- 775
Stockholders' equity (deficit):
New Common Stock of $.01 par value.
Authorized 5,500,000 shares; 4,649,943
shares outstanding. 46 --
Old Common Stock of $.01 par value.
Authorized 4,000,000 shares; 2,819,589
shares outstanding. -- 28
New Preferred Stock of $0.01 par
value. Authorized 1,000,000 shares;
no shares outstanding. -- --
Capital in excess of par value 46,449 77,695
Retained earnings (deficit) 3,143 (138,740)
Less cost of treasury stock - 2,437 shares
at July 31, 1994 -- (37)
--------- ---------
Total stockholders' equity (deficit) 49,638 (61,054)
--------- ---------
Total liabilities & stockholders' equity $373,572 $389,893
========= =========
See accompanying notes to financial statements.
27<PAGE>
KASH N' KARRY FOOD STORES, INC.
STATEMENTS OF OPERATIONS
(Dollar Amounts in Thousands, Except Per Share Amounts)
Reorganized
Company Predecessor Company
---------- ----------------------------------
30 Weeks 22 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended
July 30, January 1, July 31, August 1,
1995 1995 1994 1993
---------- ---------- ---------- ------------
Sales $599,320 $426,681 $1,065,165 $1,086,125
Cost of sales 471,401 340,802 845,597 856,156
---------- ---------- ---------- ----------
Gross profit 127,919 85,879 219,568 229,969
Selling, general and
administrative expenses 90,482 68,819 176,945 175,177
Depreciation and amortization 14,802 10,234 24,112 23,455
Store closing and other costs -- -- 11,016 --
---------- ---------- ---------- ----------
Operating income 22,635 6,826 7,495 31,337
Interest expense 15,810 13,719 45,390 43,257
Income (loss) before ---------- ---------- ---------- ----------
reorganization items,
income taxes, extra-
ordinary item, and change
in accounting principle 6,825 (6,893) (37,895) (11,920)
Reorganization items -- (4,869) -- --
Income (loss) before ---------- ---------- ---------- ----------
income taxes, extraordinary
item and change in
accounting principle 6,825 (11,762) (37,895) (11,920)
Provision for income taxes (3,682) -- -- --
Income (loss) before ---------- ---------- ---------- ----------
extraordinary item and change
in accounting principle 3,143 (11,762) (37,895) (11,920)
Extraordinary item- gain
on debt discharge -- 70,166 -- --
Cumulative effect of change in
accounting principle - post-
retirement medical benefits -- (2,000) -- --
---------- ---------- ---------- ----------
Net income (loss) $ 3,143 $ 56,404 $ (37,895)$ (11,920)
========== ========== ========== ==========
Net income per common
share (A)(B) $ 0.67
==========
(A) Based on a weighted average number of shares of common stock of
4,649,943 outstanding.
(B) Net income per common share is not meaningful prior to January 1,
1995 due to the significant change in the capital structure in
connection with the Restructuring.
See accompanying notes to financial statements.
28<PAGE>
KASH N' KARRY FOOD STORES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Fiscal Years Ended July 30, 1995,
July 31, 1994, and August 1, 1993
(Dollar Amounts In Thousands)
Capital
in Excess Retained
Common of Par Earnings Treasury
Stock Value (Deficit) Stock Total
------ --------- ----------- -------- ---------
PREDECESSOR COMPANY:
Balance at August 2, 1992 $ 28 $ 77,691 $ (88,925) $(33) $(11,239)
(2,819,866 shares
outstanding)
Purchase of 2,713 shares
for Treasury -- -- -- (40) (40)
Sale of 2,436 shares
of Treasury Stock -- 4 -- 36 40
Loss for period -- -- (11,920) -- (11,920)
----- ---------- ---------- ----- ---------
Balance at August 1, 1993 28 77,695 (100,845) (37) (23,159)
(2,819,589 shares
outstanding)
Loss for period -- -- (37,895) -- (37,895)
----- ---------- ---------- ----- ---------
Balance at July 31, 1994 28 77,695 (138,740) (37) (61,054)
(2,819,589 shares
outstanding)
Income for period -- -- 56,404 -- 56,404
Extinguishment of
preferred stock in
connection with
bankruptcy -- 4,650 -- -- 4,650
Extinguishment of
stockholders' equity
in connection with
bankruptcy (28) (82,345) 82,336 37 --
----- ---------- ---------- ----- ---------
Balance at January 1, 1995 $ -- $ -- $ -- $ -- $ --
===== ========== ========== ===== =========
REORGANIZED COMPANY:
Issuance of 4,649,943
shares of common stock $ 46 $ 46,449 $ -- $ -- $ 46,495
at reorganization value
Income for period -- -- 3,143 -- 3,143
----- ---------- ---------- ----- ---------
Balance at July 30, 1995 $ 46 $ 46,449 $ 3,143 $ -- $ 49,638
(4,649,943 shares ===== ========== ========== ===== =========
outstanding)
See accompanying notes to financial statements.
29<PAGE>
KASH N' KARRY FOOD STORES, INC.
STATEMENTS OF CASH FLOWS
(In Thousands)
Reorganized Predecessor
Company Company
---------- ----------------------------------
30 Weeks 22 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended
July 30, January 1, July 31, August 1,
1995 1995 1994 1993
--------- --------- --------- ---------
Net cash flows from
operating activities:
Net income (loss) $ 3,143 $ 56,404 $ (37,895) $ (11,920)
Adjustments to reconcile
net income (loss) to net
cash provided by
operating activities:
Depreciation and
amortization, excluding
deferred financing costs 14,802 10,234 24,112 23,455
Store closing and other
costs -- -- 11,016 --
Amortization of deferred
financing costs 809 1,152 2,950 2,850
Provision for income taxes 3,682 -- -- --
Reorganization items -- 4,869 -- --
Change in accounting
principle -- 2,000 -- --
Gain on debt discharge -- (70,166) -- --
(Increase) decrease in assets:
Accounts receivable (743) 2,322 2,804 (3,778)
Inventories 273 (5,917) 19,291 (4,159)
Prepaid expenses and
other assets (1,241) (194) (278) (5,426)
Increase (decrease) in
liabilities:
Accounts payable 2,522 1,800 (7,653) 3,722
Accrued expenses and
other liabilities 5,359 9,083 (1,565) (3,684)
--------- --------- --------- ---------
Net cash provided by
operating activities 28,606 11,587 12,782 1,060
--------- --------- --------- ---------
Cash provided (used) by investing
activities:
Additions to property and
equipment (5,582) (665) (10,942) (13,103)
Leased asset additions -- -- (4,529) (24,600)
Sale of property and equipment -- -- 504 91
--------- --------- --------- ---------
Net cash used by
investing activities (5,582) (665) (14,967) (37,612)
--------- --------- --------- ---------
See accompanying notes to financial statements.
30<PAGE>
KASH N' KARRY FOOD STORES, INC.
STATEMENTS OF CASH FLOWS
(CONTINUED)
(In Thousands)
Reorganized Predecessor
Company Company
---------- ----------------------------------
30 Weeks 22 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended
July 30, January 1, July 31, August 1,
1995 1995 1994 1993
--------- --------- --------- ---------
Cash provided (used) by financing
activities:
Borrowings under term and
revolving loan facilities 9,992 50,800 17,700 38,100
Additions to obligations
under capital leases and
notes payable -- -- 5,230 14,867
Sale of Common Stock -- 10,000 -- --
Repayments of term and
revolving loan facilities (26,349) (60,928) (5,488) (12,881)
Repayments of other long-term
liabilities (2,588) (7,363) (9,212) (4,415)
Financing costs (265) (9,294) (1,338) (1,453)
--------- --------- --------- ---------
Net cash provided (used)
by financing activities (19,210) (16,785) 6,892 34,218
--------- --------- --------- ---------
Net increase (decrease) in cash
and cash equivalents 3,814 (5,863) 4,707 (2,334)
Cash and cash equivalents at
beginning of period 989 6,852 2,145 4,479
--------- --------- --------- ---------
Cash and cash equivalents at
the end of period $ 4,803 $ 989 $ 6,852 $ 2,145
========= ========= ========= =========
See accompanying notes to financial statements.
31<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
(1) Reorganization and Basis of Reporting.
During the 1995 fiscal year, the Company completed a comprehensive
financial restructuring pursuant to a "prepackaged" plan of reorganization
(the "Restructuring") pursuant to Chapter 11 of the U.S. Bankruptcy Code.
The Company filed its prepackaged plan with the U.S. Bankruptcy Court for
the District of Delaware (the "Bankruptcy Court") on November 9, 1994 (the
"Petition Date"). During the pendency of the bankruptcy case, the Company,
with the approval of the Bankruptcy Court, operated its business in the
ordinary course, and paid all pre-petition and post-petition claims of its
general unsecured creditors, trade creditors and employees in full. The
Restructuring was confirmed by the Bankruptcy Court on December 12, 1994,
and the Company emerged from bankruptcy on December 29, 1994 (the
"Effective Date"). Pursuant to the provisions of the Restructuring, on the
Effective Date:
(i) Each $1 principal amount of the Company's Old Senior Floating
Rate Notes was exchanged for (a) new Senior Floating Rate Notes due
February 1, 2003 (the "New Senior Floating Rate Notes") in an original
principal amount equal to $1 plus 100% of the accrued interest under the
Old Senior Floating Rate Notes from and including February 3, 1994, through
but not including the Petition Date, or, at such holder's election, (b) new
11.5% Senior Fixed Rate Notes due February 1, 2003 (the "New Senior Fixed
Rate Notes") in the same original principal amount, or, at such holder's
election, (c) an amount of New Senior Floating Rate Notes and an amount of
New Senior Fixed Rate Notes equal, in the aggregate, to 100% of such claim;
(ii) Each $1 principal amount of the Company's Old Senior Fixed Rate
Notes was exchanged for (a) New Senior Floating Rate Notes in an original
principal amount equal to $1 plus 100% of the accrued interest under the
Old Senior Fixed Rate Notes from and including February 2, 1994, through
but not including the Petition Date, or, at such holder's election, (b) New
Senior Fixed Rate Notes in the same original principal amount, or, at such
holder's election, (c) an amount of New Senior Floating Rate Notes and an
amount of New Senior Fixed Rate Notes equal, in the aggregate, to 100% of
such claim;
(iii) the Old Subordinated Debentures were exchanged for newly-issued
common stock of the Company representing 85 percent of the common stock
outstanding on the Effective Date;
(iv) Green Equity Investors, L.P. invested $10,000 cash in exchange
for newly-issued common stock of the Company representing 15 percent of the
common stock outstanding on the Effective Date;
(v) the Company entered into a new credit agreement with The CIT
Group/Business Credit, Inc. as Administrative Agent, and the lenders under
its old bank credit agreement; and
(vi) all of the existing preferred stock, common stock, and options
and warrants to purchase common stock of the Company was extinguished.
32<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
Given the automatic stay provisions of the bankruptcy filing, certain
portions of these debt obligations were classified as long-term on the July
31, 1994 balance sheet.
The financial statements as of and for the period ended July 30, 1995
reflect the Company's emergence from Chapter 11 and were prepared according
to the principles of fresh start reporting contained in American Institute
of Certified Public Accountants' Statement of Position 90-7 "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code" (the
"SOP 90-7"). Operations during the period from the Effective Date through
January 1, 1995 had no significant impact on the emergence transactions and
as a result have not been separately identified. As a result of the
implementation of fresh start reporting, the Company's financial statements
as of and for the period ended July 30, 1995 are not comparable to the
Company's financial statements of prior periods. Therefore, financial
statements for the "Reorganized Company" have been separately identified
from those of the "Predecessor Company."
The total reorganization value assigned to the Company's assets was
estimated based on a ten-year projection of cash flow before debt service
requirements discounted back to present value using a discount rate of
13.3% (representing the estimated weighted cost of capital), as well as by
analyzing market cash flow multiples and applying a cash flow multiple of
six to the Company's adjusted 12-month trailing cash flows. After
extensive negotiations between independent investment banking firms
representing the Company and an ad hoc committee of bondholders, the
reorganization value was agreed to by the parties and confirmed by the
Bankruptcy Court. The excess of the reorganization value over the value of
the identifiable assets is reported as "Reorganization Value in Excess of
Amount Allocable to Identifiable Assets" and is being amortized over
twenty years. Under the principles of fresh start accounting, the
Company's total assets were recorded at this assumed reorganization value,
with the reorganization value allocated to identifiable tangible and
intangible assets on the basis of their estimated fair value. In addition,
the Company's accumulated deficit was eliminated.
The effect of the Restructuring and the implementation of fresh start
accounting on the Company's balance sheet as of January 1, 1995 was as
follows:
33<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(In Thousands)
Fresh
Start
Pre-Fresh Balance
Start Balance Adjustments Sheet
Sheet January of Fair Value January
1, 1995 Restructuring Adjustment 1, 1995
(A) (B)
------------- ------------- ---------- --------
Cash and cash equivalents $ 9,166 $ (8,177) $ -- $ 989
Accounts receivable 5,762 -- -- 5,762
Inventories 82,011 -- 5,104 87,115
Prepaid expenses and other
current assets 3,088 -- -- 3,088
--------- ---------- --------- --------
Total current assets 100,027 (8,177) 5,104 96,954
Property and equipment, net 162,754 -- (17,775) 144,979
Favorable lease interests,
net 11,673 -- 18,280 29,953
Deferred financing costs 17,769 (7,456) (6,088) 4,225
Reorganization value in
excess of amount alloc-
able to identifiable
assets -- -- 102,519 102,519
Excess of cost over net
assets acquired 95,560 -- (95,560) --
Other assets 4,360 -- (1,498) 2,862
--------- ---------- --------- --------
Total assets $392,143 $ (15,633) $ 4,982 $381,492
========= ========== ========= ========
Current liabilities, excluding
current portion of long-
term debt $ 82,983 $ (12,617) $ 6,779 $ 77,145
Long-term debt, including
current obligations 366,231 (119,486) (3,959) 242,786
Other long-term liabilities 6,226 -- 8,840 15,066
Redeemable preferred stock 4,650 (4,650) -- --
Common stock 28 18 -- 46
Treasury stock (37) 37 -- --
Capital in excess of par
value 77,695 (31,246) -- 46,449
Accumulated deficit (145,633) 152,311 (6,678) --
--------- ---------- --------- --------
Total liabilities
and stockholders'
equity $392,143 $ (15,633) $ 4,982 $381,492
========= ========== ========= ========
(A) To record the transactions applicable to the Restructuring as outlined
in footnote 1 and eliminate the deficit in accumulated deficit.
(B) To record the adjustments to state assets and liabilities at fair
value, and to record the cumulative effect of $2,000 of adopting SFAS No.
106 as of the Effective Date in accordance with SOP 90-7.
34<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
(2) Summary of Significant Accounting Policies.
Fiscal Year End. The Company follows a 52/53 week fiscal year ending
on the Sunday nearest July 31.
Inventories. Inventories consist of merchandise held for resale and
are stated at the lower of cost or market; cost is determined using average
cost, which approximates the first-in, first-out (FIFO) method.
Prepaid Expenses and Other Current Assets. Prior to 1995, the Company
classified capital expenditures to be refinanced within one year as prepaid
expenses and other current assets. These amounts are classified as
property and equipment at July 30, 1995. At July 31, 1994, prepaid
expenses and other current assets included $9,987 of expenditures for
construction in progress expected to be financed within one year.
Depreciation, Amortization, and Maintenance and Repairs. Depreciation
is provided principally using the composite method based on the estimated
useful lives of the respective asset groups. Amortization of leasehold
improvements is based on the estimated useful lives or the remaining lease
terms, whichever is shorter. Property under capital leases consists of
buildings and fixtures and equipment. Interest costs of property under
development are capitalized during the development period. Capitalized
amounts were $70, $477 and $804 for the fiscal years ended July 30, 1995,
July 31, 1994 and August 1, 1993, respectively. The approximate annual
rates used to compute depreciation and amortization are:
Reorganized Predecessor
Company Company
----------- -----------
Buildings and improvements 3% 5%
Fixtures and equipment 10% 10%
Transportation equipment 12% 25%
Leasehold improvements -- 8%
Maintenance and repairs are charged to expense as incurred. The
Company capitalizes expenditures for renewals and betterments.
Favorable Lease Interests. Prior to January 1, 1995, favorable lease
interests represented the present value of the excess of current market
rental rates over rents that existed under the Company's operating leases
of store locations as of October 12, 1988. Such costs were being amortized
on the straight-line method over the average life of the favorable leases.
On January 1, 1995, the Company's favorable lease interests were adjusted
to reflect the present value of the excess of current market rental rates
over rents that existed under the operating leases of store properties at
that date. Favorable lease interests are amortized on the straight-line
method over the average life of the favorable leases, which is
approximately twenty years.
Deferred Financing Costs. Deferred financing costs represent fees and
expenses related to various financing activities and are amortized on a
straight-line basis over the life of the related debt and classified as
interest expense.
35<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
Reorganization Value in Excess of Amount Allocable to Identifiable
Assets. As discussed in footnote 1, under the principles of fresh-start
reporting, the Company allocated total reorganization value to identifiable
tangible and intangible assets on the basis of their estimated fair values.
The remaining amount is classified as reorganization value in excess of
amount allocable to identifiable assets and is being amortized over twenty
years.
Excess of Cost Over Net Assets Acquired. Prior to January 1, 1995,
excess of cost over net assets acquired represented the excess of amounts
paid over the fair value of net assets acquired, and was being amortized
over forty years. The unamortized balance of $95,560 was written off in
connection with the Restructuring.
Advertising Costs. Advertising costs are expensed as incurred.
Costs of Opening and Closing Stores. Preopening costs of new stores
are charged to expense in the year the store opens. These costs are
primarily labor to stock the store, preopening advertising, store supplies
and other expendable items. When operations are discontinued and a store
is closed, the remaining investment, net of realizable value, is charged
against earnings, and, for leased stores, a provision is made for the
remaining lease liability, net of expected sublease income.
Store Closing and Other Costs. During the first quarter of fiscal
1994 the Company recorded a non-recurring charge of $11,016. This charge
included $1,900 of costs associated with unsuccessful financing activities,
$4,159 of favorable lease interests written off in connection with the
closing of twelve underperforming stores, $4,000 representing an adjustment
to the expected lease liability on closed stores, net of sublease income,
and $957 of other store closing and related expenses.
Income Taxes. Prior to January 1, 1995, the Company was in a loss
position for income tax purposes, and, consequently, no income taxes were
provided. The Company adopted Statement of Financial Accounting Standards
No. 109 as of August 2, 1993. Under SFAS 109, the liability method is used
in accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based upon differences between the financial
statement and income tax bases of assets and liabilities, and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
Interest Rate Hedge Agreements. The Company enters into interest rate
hedging agreements which involve the exchange of fixed and floating rate
interest payments periodically over the life of such agreements without the
exchange of the underlying principal amounts. The differential to be paid
or received is accrued as interest rates change and is recognized over the
life of the agreements as an adjustment to interest expense.
36<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
Cash and Cash Equivalents. The Company considers all highly liquid
investment instruments with a maturity of three months or less when
purchased to be cash equivalents. There were no cash equivalents at July
30, 1995 or July 31, 1994.
Cash interest paid (excluding financing costs) was $12,198, $41,545
and $41,675 for the fiscal years ended July 30, 1995, July 31, 1994 and
August 1, 1993, respectively.
(3) Property and Equipment.
Property and equipment is summarized as follows:
Reorganized Predecessor
Company Company
--------- ---------
July 30, July 31,
1995 1994
--------- ---------
Land $ 13,504 $ 19,543
Buildings and improvements 55,896 63,517
Fixtures and equipment 66,631 100,717
Transportation equipment 902 2,593
Leasehold improvements -- 28,402
Construction in progress 6,193 4,115
--------- ---------
143,126 218,887
Less accumulated depreciation (8,869) (70,196)
--------- ---------
134,257 148,691
Property under capital leases
(less accumulated amortization
of $1,723 and $11,154) 5,710 11,800
--------- ---------
$139,967 $160,491
========= =========
(4) Accrued Expenses.
Accrued expenses consist of the following:
Reorganized Predecessor
Company Company
--------- ---------
July 30, July 31,
1995 1994
--------- ---------
Accrued payroll and benefits $ 9,217 $ 5,579
Accrued interest 10,673 15,849
Taxes, other than income 5,789 6,056
Accrued insurance reserves 6,064 4,886
Other accrued expenses 12,756 6,564
--------- ---------
$ 44,499 $ 38,934
========= =========
37<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
(5) Long-Term Debt.
Long-term debt consists of the following:
Reorganized Predecessor
Company Company
--------- ---------
July 30, July 31,
1995 1994
--------- ---------
New term loan and revolving
credit facilities (A) $ 33,143 $ --
Old bank term and revolving
credit facilities (A) -- 59,629
New Senior Floating
Rate Notes (B) 22,953 --
New Senior Fixed Rate
Notes (C) 121,162 --
Old Senior Floating
Rate Notes (B) -- 85,000
Old Senior Fixed
Rate Notes (C) -- 50,000
Subordinated Debentures -- 105,000
Mortgages payable, bearing interest at
rates from 7.5% to 10.35%, in equal
monthly installments of $355, with
maturities from 1999 through 2003 (D) 33,108 34,368
Capital lease obligations and other 13,328 26,124
--------- ---------
Long-term debt including
current portion 223,694 360,121
Less current portion (E) (5,563) (42,740)
--------- ---------
Long-term debt $218,131 $317,381
========= =========
Carrying value is considered a reasonable estimate of the fair value of
the Company's financial instruments.
(A) In connection with the Restructuring, the Company entered into a
new term loan and revolving credit agreement (the "New Credit
Agreement") on December 29, 1994. At July 30, 1995, the
Company's New Credit Agreement provides for borrowings of up to
$15,750 under a term loan facility (with quarterly principal
repayments of $1,750 and a $14,000 repayment due when the
facility terminates on December 29, 1997) and a $50,000 revolving
credit facility with a $25,000 sublimit for letters of credit.
At July 30, 1995, the Company had $17,393 in borrowings under the
working capital line, and had $12,770 of letters of credit issued
against the revolving credit facility. Amounts outstanding under
the term facility bear interest (11.5% at July 30, 1995) equal to
the prime rate (as defined) plus 250 basis points. Amounts
outstanding under the revolving credit facility bear interest
(10.0% at July 30, 1995) equal to the prime rate plus 100 basis
points.
38<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
(B) The New Senior Floating Rate Notes mature on February 1, 2003,
and bear interest (7.31% at July 30, 1995) payable August 1,
1995, and semiannually thereafter, at a rate equal to six-month
LIBOR (as defined in the New Senior Floating Rate Note Indenture)
plus 200 basis points. The New Senior Floating Rate Notes are
redeemable in whole or in part, at the option of the Company, on
not less than 30 nor more than 60 days' prior notice in amounts
of $1,000 or an integral multiple thereof, at 100% of the
principal amount and unpaid interest, if any, to the redemption
date. Through August 1, 1995, all interest on the New Senior
Floating Rate Notes may, at the option of the Company, be paid by
issuing in lieu of cash additional New Senior Floating Rate Notes
in an aggregate principal amount equal to the amount of interest
due. The Old Senior Floating Rate Notes bore interest (5.88% at
July 31, 1994) payable semiannually, at a rate equal to six-month
LIBOR plus 250 basis points.
(C) The New Senior Fixed Rate Notes mature on February 1, 2003, and
bear interest at 11.5% per annum, payable semiannually. The New
Senior Fixed Rate Notes are redeemable in whole or in part, at
the option of the Company, on not less than 30 nor more than 60
days' prior notice in amounts of $1,000 or an integral multiple
thereof, at 100% of the principal amount and unpaid interest, if
any, to the redemption date. Through February 1, 1996, all
interest on the New Senior Fixed Rate Notes may, at the option of
the Company, be paid by issuing in lieu of cash additional New
Senior Fixed Rate Notes in an aggregate principal amount equal to
the amount of interest due. The Old Senior Fixed Rate Notes bore
interest, payable semiannually, at an annual rate of 12.375%.
(D) In September 1989, the Company completed a $17,000 mortgage
financing of its warehouse, distribution and office facility; in
November 1989, seven fee-owned store properties were mortgaged
for $13,200; and in January 1990, an additional fee-owned store
property was mortgaged for $2,000. The net proceeds of these
transactions were used to reduce bank debt. Final payments of
$12,529 and $13,895 are due October 1999 and November 1999,
respectively, on these mortgages.
(E) The Company has prepaid the term loan through July 28, 1997.
Therefore, there is no current portion of the term loan.
(F) Approximate principal payments for the next five fiscal years
are:
Year Term Senior Capital
Ending Loans Notes Mortgages Leases Other Total
------ ------- ------ --------- ------- ----- -------
1996 $ -- $ -- $ 960 $3,654 $ 949 $ 5,563
1997 -- -- 1,057 2,100 752 3,909
1998 15,750 -- 1,163 645 640 18,198
1999 -- -- 1,282 203 540 2,025
2000 -- -- 27,058 140 521 27,719
39<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
The New Credit Agreement, which is secured by a pledge of substantially
all assets of the Company, requires the Company to maintain a minimum net
worth and to satisfy certain other financial ratios, and provides for
certain restrictions on nonstock distributions and certain other
restrictions. The New Senior Floating Rate Notes, the New Senior Fixed
Rate Notes, and certain other of the Company's indebtedness also contain
incurrence covenants that are less restrictive than the covenants under the
New Credit Agreement. At July 30, 1995, the Company was in compliance with
all covenants.
(6) Capital Stock.
The authorized capital stock of the Company consists of 5,500,000
shares of Common Stock, par value $.01 per share, and 1,000,000 shares of
Preferred Stock, par value $.01 per share. The authorized Preferred Stock
includes 35,000 shares of Series A Junior Participating Preferred Stock
(the "Series A Preferred").
In April 1995, the Company declared, pursuant to its rights plan, a
dividend of one preferred share purchase right ("Right") for each
outstanding share of Common Stock. Each Right initially entitled the
holder thereof to purchase from the Company one one-hundredth of a share of
Series A Preferred for a purchase price of $76 per one one-hundredth of a
preferred share, subject to certain adjustments. As a result of the 3-for-
2 stock split discussed below, the number of one one-hundredths of a
preferred share issuable upon exercise of each Right was adjusted from one
to 0.6667.
The Rights are not currently exercisable, and would become exercisable
only if a person or group of persons (an "Acquiring Person") acquires 25%
or more of the Common Stock (29% or more in the case of Leonard Green &
Associates, L.P., formerly known as Leonard Green & Partners, L.P. ("LGA")
or any other person or entity which at any time purchases all of the shares
owned by LGA), or certain actions are taken in respect of any such
acquisition. In the event any person or group becomes an Acquiring Person,
each holder of a Right would thereafter have the right to receive upon
exercise thereof that number of shares of Common Stock having a market
value of two times the exercise price of the Right. In addition, if there
is a merger or other business combination between the Company and an
Acquiring Person, each Right would entitle the holder to purchase that
number of shares of common stock of the Acquiring Person which at the time
of such transaction will have a market value of two times the exercise
price of the Right. The Rights, which expire on April 13, 2000, are
redeemable by the Company for a price of $.01 per Right.
The payment of cash dividends and the repurchase or redemption of
capital stock by the Company is restricted by the terms of the New Credit
Agreement and the indentures relating to the Company's New Senior Fixed
Rate Notes and New Senior Floating Rate Notes.
40<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
On June 14, 1995 the Company declared a 3-for-2 stock split effected in
the form of a stock dividend on its Common Stock, paid on July 17, 1995 to
stockholders of record on June 26, 1995. All of the share and per share
data in the accompanying financial statements have been adjusted to reflect
the stock split.
(7) Reorganization Items.
Reorganization items included in the accompanying statements of
operations consist of the following items:
Adjustments to fair value $ 5,551
Provision for store closing costs (2,500)
Provision for severance benefits (3,220)
Provision for other restructuring
activities (3,180)
Professional fees (1,520)
--------
$(4,869)
========
In the Company's previous interim reporting, reorganization items
included a gain on extinguishment of preferred stock of $4,650. This amount
has been reclassified as of January 1, 1995 as a direct credit to capital in
excess of par value and resulted in a reduction of $4,650 in net income for
the 22 weeks ended January 1, 1995.
(8) Stock Option Plans.
Certain key employees, including all executive officers, were eligible
to receive nonqualified stock options to purchase Common Stock under the
Restated 1988 Management Stock Option Plan (the "1988 Option Plan") and/or
the 1991 Management Stock Option Plan (the "1991 Option Plan" and, together
with the 1988 Option Plan, the "Old Option Plans"). Options granted under
the 1988 Option Plan had an exercise price of the greater of 85% of fair
market value at the date of grant or $10 per share and options granted
under the 1991 Option Plan had an exercise price of (a) $16.13 per share
for options granted within 30 days of the approval of the 1991 Option Plan
by the stockholders of the Company and (b) thereafter at 100% of the fair
market value at the date of grant. As discussed in footnote 1, in
connection with the Restructuring, all of the outstanding options under the
Old Option Plans were extinguished on December 29, 1994, and the Old Option
Plans were effectively terminated as of that date.
In March 1995, the Company adopted the 1995 Key Employee Stock Option
Plan (the "New Option Plan"), which authorizes the issuance to eligible
participants of options to purchase up to 355,419 shares of Common Stock of
the Company. Options vest in serial increments in the amount of 20% per
year, on the last day of each of the 1995, 1996, 1997, 1998 and 1999 fiscal
years of the Company. However, upon the occurrence of a Merger Event or a
Change of Control (as defined in the New Option Plan), the options become
41<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
100% vested. The options expire, to the extent not exercised, on the tenth
anniversary of the date of grant. However, upon termination of an
optionee's employment with the Company, all unvested options lapse, and all
vested options expire 180 days after the termination of employment, if such
termination is due to the death, disability or retirement of the optionee,
or 45 days after the termination of employment, if such termination is due
to any other reason, other than a termination for cause. If a termination
for cause occurs, all vested and unvested options expire immediately.
Also in March 1995, the Company adopted the 1995 Non-Employee Director
Stock Option Plan (the "Director Plan"). Options to purchase 27,000 shares
at $10.00 per share, vesting on July 30, 1995 and options to purchase 27,000
shares at $13.33 per share, vesting on July 28, 1996, were granted under the
Director Plan. At the same time, the Company granted to Green Equity
Investors, L.P. ("GEI") (in lieu of granting options under the Director Plan
to the representatives of GEI serving as Directors) options to purchase 9,000
shares at $10.00 per share, vesting on July 30, 1995 and options to purchase
9,000 shares at $13.33 per share, vesting on July 28, 1996 (such grants to
GEI, together with the Director Plan and the New Option Plan, the "1995
Option Plans"). All options granted to GEI and to the non-employee Directors
expire on March 8, 2005 or earlier upon the occurrence of certain events.
A summary of changes in the 1995 Option Plans for the fiscal year ended
July 30, 1995 is presented below:
Stock options outstanding at
beginning of year --
Granted 351,250
Exercised --
Forfeited 30,464
Outstanding at end of year 320,786
Exercisable at end of year 64,157
Average option price per share $ 11.70
Reserved for future grant 34,633
(9) Leases.
The Company leases certain stores, other facilities and equipment
under leases that are not cancelable. Such leases generally contain
renewal options exercisable at the Company's option. In addition to
minimum rental payments, certain leases provide for payments of taxes,
maintenance and percentage rentals based upon sales in excess of stipulated
amounts. The future minimum payments under leases that are not cancelable,
as of July 30, 1995, are:
42<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
Operating Capital
Year Ending in leases leases
-------------- --------- --------
1996 $ 23,179 $ 4,114
1997 22,150 2,429
1998 21,369 706
1999 21,597 223
2000 21,472 140
Thereafter 229,418 --
-------- --------
Total minimum lease payments $339,185 $ 7,612
========
Less portion representing interest ( 870)
Present value of net minimum lease payments at --------
July 30, 1995 $ 6,742
========
Total rent expense was $25,738, $26,883, and $25,921 for the fiscal
years ended July 30, 1995, July 31, 1994 and August 1, 1993, respectively.
Included in total rent expense are percentage rents totaling $295, $241 and
$446 for 1995, 1994 and 1993, respectively.
(10) Income Taxes.
Income taxes are provided based on the liability method of accounting
pursuant to Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
The components of the provision for income taxes for the 30 weeks ended
July 30, 1995 are as follows:
Current
Federal $ 0
State 0
-------
Total current 0
-------
Deferred
Federal $ 3,142
State 540
-------
Total deferred 3,682
-------
Total tax provision $ 3,682
=======
43<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
Deferred tax assets are comprised of the following:
Reorganized
Company Predecessor Company
----------- ---------------------
July 30, January 1, July 31,
1995 1995 1994
----------- --------- --------
Deferred tax assets:
Net operating loss $18,600 $18,700 $35,000
Charitable contribution
carryforward 3,200 3,100 3,200
Insurance and other reserves 9,000 8,800 8,100
General business carryforward 1,400 1,400 1,600
Other, net 1,200 1,500 2,700
------- ------- -------
Total gross deferred tax assets 33,400 33,500 50,600
Less valuation allowance 32,200 33,500 50,600
------- ------- -------
Net deferred tax assets $ 1,200 $ -- $ --
======= ======= =======
The valuation allowance as of July 30, 1995 has been determined to be
$32,200, resulting in a change in the valuation allowance in the amount of
$18,400 from July 31, 1994. Such change resulted in an increase in net
deferred tax assets (and a corresponding decrease in "Reorganization Value
in Excess of Amount Allocable to Identifiable Assets") of $1,200, with the
balance of the change attributable to the elimination of certain tax
assets and corresponding allowance amounts due to change in ownership
requirements of Section 382 of the Internal Revenue Code (the "IRC").
The provision for income taxes differs from the amount computed by
applying the U.S. federal income tax rate (34%) because of the effects of
the following items:
Tax at U.S. federal income
tax rate $2,320 34.0%
State income taxes, net
of federal tax benefit 248 3.6%
Amortization of goodwill 1,114 16.3%
------ -----
Provision for income taxes $3,682 53.9%
====== =====
The Company reported pretax losses for the 22 weeks ended January 1, 1995
and for its 1994 and 1993 fiscal years and, consequently, no income tax
expense was reported. There was no income tax expense attributable to the
extraordinary gain on debt discharge recognized during the 22-week period
ended January 1, 1995 due to certain provisions of the IRC involving exchange
of stock for debt.
44<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
As of July 30, 1995, the Company had net operating loss carryforwards
for tax purposes of approximately $50,000. Due to certain change of
ownership requirements of Section 382 of the IRC, utilization of the
Company's operating losses is expected to be limited to approximately
$3,300 per year. If the full amount of that limitation in not used in any
year, the amount not used increases the allowable limit in the subsequent
year. Loss carryforwards will expire during the years 2004 through 2010.
If the Company's net operating loss carryforwards and other fresh start
deferred tax asset balances are realized, the tax benefits will reduce
"Reorganization Value in Excess of Amount Allocable to Identifiable
Assets." The existing valuation allowance, if realized, would reduce this
reorganization value. The recognized deferred tax assets are attributable
to temporary differences originating in the short period ending July 30,
1995.
The Company also has general business credit carryforwards of
approximately $1,400, which expire between the years 2004 and 2010. These
credits are also subject to the Section 382 annual limitation. Due to the
ordering rules of IRC Section 382 with respect to net operating losses and
business credits, a valuation allowance has been recognized against the
entire amount of the general business credit carryover.
(11) Supplementary Statements of Operations Information.
Supplementary Statements of Operations information is as follows:
Reorganized Predecessor
Company Company
---------- -----------------------------------
30 Weeks 22 Weeks 52 Weeks 52 Weeks
Ended Ended Ended Ended
July 30, January 1, July 31, August 1,
1995 1995 1994 1993
---------- ---------- ---------- ----------
Amortization of:
Lease interests $ 1,152 $ 639 $ 6,037 $ 2,576
Deferred financing
costs 809 1,152 2,950 2,850
Goodwill 6,627 1,198 2,831 2,832
--------- --------- --------- ---------
Total amortization
of intangible
assets $ 8,588 $ 2,989 $ 11,818 $ 8,258
========= ========= ========= =========
Advertising costs $ 4,896 $ 4,970 $ 14,099 $ 13,530
========= ========= ========= =========
45<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
(12) Employee Benefit Plans.
Kash n' Karry Retirement Estates ("KKRE"), a trusteed defined
contribution retirement plan, was authorized by the Company's Board of
Directors in 1988. KKRE is a tax savings/profit sharing plan maintained
primarily for the purpose of providing retirement income for eligible
employees of the Company. KKRE is qualified under Section 401(a) and
Section 401(k) of the Internal Revenue Code of 1986. Generally, all
employees who have attained the age of 21 years and complete one year of
participation service (as defined under KKRE) are eligible to participate
in KKRE. Participants may, subject to certain federal limitations, elect
to defer an amount not to exceed 15% of their base compensation and have
such amount contributed to KKRE. The Company may match all or a portion of
the participant's deferred compensation, but the amount of the matching
contribution may not exceed 3% of such participant's compensation.
Additional non-matching contributions may be made to KKRE by the Company in
such amount as determined by the Company's Board of Directors based on the
Company's operating performance. Funds that participants elect to defer
are invested, at the participant's option, into various investment
accounts. The vested percentage of the amounts allocated to a
participant's account will be payable to the participant upon such
participant's death, disability, retirement, or other separation of service
from the Company. The Company's contributions to KKRE were $505, $573 and
$573 for the fiscal years ended July 30, 1995, July 31, 1994 and August 1,
1993, respectively.
Kash n' Karry Executive Supplemental Retirement Plan ("KESP"), a non-
qualified, unfunded salary deferral plan, was authorized by the Company's
Board of Directors in November 1989. Certain Key Employees (as defined
under KESP) of the Company as selected by its Board of Directors
participate in KESP. Currently, seventeen Key Employees participate in
KESP. Prior to the beginning of each plan year, a participant may elect to
defer an amount not to exceed 15% of such participant's annual base
compensation (as defined under KESP). The Company will match a certain
portion of the amount deferred by the participant, but the amount of the
match may not exceed 6% of such participant's annual base compensation.
The Company will record income to the participant's account at an annual
rate (11% for the 1995, 1994 and 1993 plan years) as determined by the
Company's Board of Directors, but the rate of such income shall not be less
than 8% per annum.
The vested percentage of the amounts recorded in the participant's
account will be paid to the participant upon the earlier of: (i) such
participant's death, disability, retirement, or other separation of service
from the Company; (ii) the date the plan is terminated; or (iii) the date
that a change in control occurs (as defined under KESP). Expense for this
plan was $84, $135 and $149 for the fiscal years ended July 30, 1995, July
31, 1994 and August 1, 1993, respectively.
46<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
The Company has a retiree medical plan under which medical coverage is
available to current retirees and those active employees who, on August 1,
1993, had attained age 65 with at least 15 years of service. In accordance
with SOP 90-7, which the Company adopted on the Effective Date of the
Restructuring, the provisions of Financial Accounting Standards Board
Statement 106 "Employers' Accounting for Postretirement Benefits Other Than
Pensions" were also adopted as of that date. The following table sets
forth the projected actuarial present value of unfunded postretirement
benefit obligations for the plan at July 30, 1995:
Accumulated postretirement
Benefit obligation:
Retirees $1,908
Fully eligible active
plan participants 85
------
Accrued postretirement
benefit obligation $1,993
======
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8.0%.
(13) Commitments and Contingencies.
The Company had letters of credit outstanding totaling $12,770 and
$16,358 at July 30, 1995 and July 31, 1994, respectively, which amounts
have been reflected as reductions of the available revolving loan facility
as of those dates. These letters of credit primarily guarantee various
insurance and financing activities.
(14) Related Party Transactions.
During the 1994 and 1993 fiscal years, as consideration for the
provision of financial advisory services, the Company agreed to pay an
annual fee of $554, plus related out-of-pocket expenses, to Leonard Green &
Associates, L.P. ("LGA"), and an annual fee of $232, plus related out-of-
pocket expenses, to Gibbons, Goodwin, van Amerongen, L.P. ("GGvA"). From
September 1993 through December 1994, the Company did not pay the annual
fees to LGA or GGvA, but reimbursed them for out-of-pocket expenses billed
to the Company. Pursuant to the provisions of the Restructuring, on
December 29, 1994 the Company entered into a Management Services Agreement
with LGA, pursuant to which LGA agreed to provide management, consulting,
financial planning and financial advisory services for a two year term, in
consideration for an annual fee of $200. LGA is not required to spend a
fixed number of hours of service to the Company pursuant to the Management
Services Agreement. The amount of the annual fee payable to LGA was
determined in the course of negotiations among LGA, the Company and an
unofficial bondholders committee during the Restructuring. The Company
47<PAGE>
KASH N' KARRY FOOD STORES, INC.
NOTES TO FINANCIAL STATEMENTS
(Dollar Amounts In Thousands, Except Per Share Amounts)
believes that the fee is not in excess of the fee that would be charged by
an unrelated third party in an arms-length transaction for similar
services. Total amounts paid to LGA and GGvA were $117, $143, and $598 for
the fiscal years ended July 30, 1995, July 31, 1994 and August 1, 1993,
respectively.
LGA is the sole general partner of Green Equity Investors, L.P., which
owned approximately 60.9% of the Company's outstanding common stock
immediately prior to the consummation of the Restructuring, and which owned
approximately 27.7% of the Company's outstanding New Common Stock as of
July 30, 1995. GGvA is the general partner of The Fulcrum III Limited
Partnership and The Second Fulcrum III Limited Partnership, which
collectively owned 33.8% of the Company's outstanding common stock
immediately prior to the consummation of the Restructuring. One director
of the Company is the controlling shareholder of a general partner of LGA,
and another director of the Company is a general partner of LGA.
48<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
On February 17, 1995, KPMG Peat Marwick LLP ("KPMG"), the
Company's independent accountants who were previously engaged as
the principal accountants to audit the Company's financial
statements, were dismissed. KPMG's report on the financial
statements of the Company for the past two years contained no
adverse opinion or disclaimer of opinion, and was not qualified or
modified as to uncertainty, audit scope, or accounting principles,
except that KPMG's report on the 1994 financial statements of the
Company contained a separate paragraph stating that "Kash n' Karry
Food Stores, Inc. has suffered recurring losses from operations and
has a net capital deficiency. As discussed in note 1 to the
financial statements, Kash n' Karry Food Stores, Inc. filed a pre-
packaged petition under Chapter 11 of the United States Bankruptcy
Code on November 9, 1994 and these matters raise substantial doubt
about its ability to continue as a going concern. The financial
statements do not include any adjustments that might result from
the outcome of this uncertainty." The Company's plan of
reorganization was approved by the bankruptcy court on December 12,
1994 and became effective on December 29, 1994.
The decision to change accountants was approved by the Board
of Directors of the Company. During the Company's two most recent
fiscal years and any subsequent interim period preceding the
dismissal, there were no disagreements between the Company and KPMG
on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if not
resolved to the satisfaction of KPMG, would have caused KPMG to
make reference to the subject matter of the disagreement in
connection with its report. Also, during the aforementioned
period, there occurred no "reportable event" within the meaning of
Item 304(a)(1)(v) of Regulation S-K of the Commission.
On February 17, 1995, the Company engaged Coopers & Lybrand,
L.L.P. as the principal accountants to audit the Company's
financial statements for the fiscal year ended July 30, 1995. The
Company did not consult with Coopers & Lybrand, L.L.P. regarding
accounting advice prior to its engagement.
49<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Except for the following discussion of compliance with Section
16(a) of the Exchange Act, and the discussion of Executive Officers
set forth in Part I hereof, the disclosures required by Item 10 are
incorporated herein by reference to the Company's definitive proxy
statement to be filed not more than 120 days after the fiscal year
ended July 30, 1995.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The Company's common stock first became registered under
Section 12(g) of the Securities Exchange Act of 1934 in December
1994, and its confirmed Plan of Reorganization was consummated on
December 29, 1994. Pursuant to the confirmed Plan of
Reorganization, on December 29, 1994, the Board of Directors of the
Company was reconstituted, the then outstanding common stock was
cancelled, and new common stock was issued to the former holders of
the Company's $105.0 million 14% Subordinated Debentures due 2001
and to Green Equity Investors, L.P. The then officers and
directors of the Company, Green Equity Investors, L.P. and
PaineWebber Incorporated each filed a Form 3 during the fiscal year
ended July 30, 1995, but after the due date thereof. To the
knowledge of the Company, The Prudential Insurance Company of
America and IDS Extra Income Fund, Inc. each beneficially own 10%
or more of the Company's common stock, but did not file a Form 3
during the fiscal year ended July 30, 1995.
Except as set forth above, the Company is not aware of any
failure by any person who, at any time during the fiscal year ended
July 30, 1995, was a director or officer of the Company, or the
beneficial owner of 10% or more of its common stock, to file on a
timely basis reports required by Section 16(a) of the Exchange Act
during such fiscal year.
ITEM 11. EXECUTIVE COMPENSATION.
The disclosures required by Item 11 are incorporated herein by
reference to the Company's definitive proxy statement to be filed
not more than 120 days after the fiscal year ended July 30, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The disclosures required by Item 12 are incorporated herein by
reference to the Company's definitive proxy statement to be filed
not more than 120 days after the fiscal year ended July 30, 1995.
50<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The disclosures required by Item 13 are incorporated herein by
reference to the Company's definitive proxy statement to be filed
not more than 120 days after the fiscal year ended July 30, 1995.
PART IV
ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
Page No.
--------
(1) Financial Statements:
Independent Auditors' Reports. . . . . . . . . . . . . . . . . . . 24
Balance Sheets as of July 30, 1995 and July 31, 1994 . . . . . . . 26
Statements of Operations for the 30 weeks ended July 30,
1995, the 22 weeks ended January 1, 1995, and the
fiscal years ended July 31, 1994 and
August 1, 1993. . . . . . . . . . . . . . . . . . . . . . . . 28
Statement of Stockholders' Equity for the fiscal
years ended July 30, 1995, July 31, 1994,
and August 1, 1993. . . . . . . . . . . . . . . . . . . . . . 29
Statements of Cash Flows for the 30 weeks ended July 30,
1995, the 22 weeks ended January 1, 1995, and the
fiscal years ended July 31, 1994 and
August 1, 1993. . . . . . . . . . . . . . . . . . . . . . . . 30
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . 32
(2) Financial Statement Schedules:
None
(3) Exhibits:
The following exhibits are filed as part of this report.
Certain of such exhibits, which have heretofore been filed with the
Securities and Exchange Commission under the Securities Act of 1933
or the Securities Exchange Act of 1934 and which are designated in
prior filings as noted below, are hereby incorporated by reference
and made a part hereof:
51<PAGE>
Exhibit
No. Description
- ------- ------------------------------------------------------
2 First Amended Plan of Reorganization filed by the Company
with the United States Bankruptcy Court of the District
of Delaware on November 9, 1994, as amended by notices of
technical modifications thereto filed on November 9,
1994, and December 12, 1994 (previously filed as Exhibit
2 to the Company's Quarterly Report on Form 10-Q for the
period ended October 30, 1994, which exhibit is hereby
incorporated by reference).
3(i)(a) Restated Certificate of Incorporation filed with the
Delaware Secretary of State on December 29, 1994
(previously filed as Exhibit 3(i) to the Company's
Quarterly Report on Form 10-Q for the period ended
January 29, 1995, which exhibit is hereby incorporated by
reference).
3(i)(b) Certificate of Designations of Series A Junior
Participating Preferred Stock filed with the Secretary of
State of the State of Delaware on April 26, 1995
(previously filed as Exhibit 3(i)(b) to the Company's
Registration Statement on Form S-1, Registration No. 33-
58999, which exhibit is hereby incorporated by
reference).
3(ii)(a) Bylaws adopted October 12, 1988 (previously filed as
Exhibit 3(ii)(a) to the Company's Quarterly Report on
Form 10-Q for the period ended January 29, 1995, which
exhibit is hereby incorporated by reference).
3(ii)(b) First Amendment to Bylaws adopted July 30, 1991
(previously filed as Exhibit 3(ii)(b) to the Company's
Quarterly Report on Form 10-Q for the period ended
January 29, 1995, which exhibit is hereby incorporated by
reference).
3(ii)(c) Second Amendment to Bylaws adopted December 29, 1994
(previously filed as Exhibit 3(ii)(c) to the Company's
Quarterly Report on Form 10-Q for the period ended
January 29, 1995, which exhibit is hereby incorporated by
reference).
3(ii)(d) Third Amendment to Bylaws adopted April 13, 1995
(previously filed as Exhibit 3(ii)(d) to the Company's
Quarterly Report on Form 10-Q for the period ended April
30, 1995, which exhibit is hereby incorporated by
reference).
52<PAGE>
4.1 Indenture dated as of December 29, 1994, between the
Company and Shawmut Bank Connecticut, N.A., as Trustee,
relating to 11.5% Senior Fixed Rate Notes due 2003
(previously filed as Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the period ended
January 29, 1995, which exhibit is hereby incorporated by
reference).
4.2 Indenture dated as of December 29, 1994, between the
Company and IBJ Schroder Bank & Trust Company, as
Trustee, relating to Senior Floating Rate Notes due 2003
(previously filed as Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the period ended
January 29, 1995, which exhibit is hereby incorporated by
reference).
4.3(a) Rights Agreement dated as of April 13, 1995 between the
Company and Shawmut Bank Connecticut, N.A., as Rights
Agent (previously filed as Exhibit 1 to the Company's
Current Report on Form 8-K dated April 13, 1995, which
exhibit is hereby incorporated by reference).
4.3(b) First Amendment to Rights Agreement dated as of June 13,
1995 (previously filed as Exhibit 4.3(b) to the Company's
Quarterly Report on Form 10-Q for the period ended April
30, 1995, which exhibit is hereby incorporated by
reference).
4.4 Specimen form of Common Stock certificate (previously
filed as Exhibit 4.4 to the Company's Registration
Statement on Form S-1, Registration No. 33-58999, which
exhibit is hereby incorporated by reference).
10.1 Credit Agreement dated as of December 29, 1994, among the
Company, certain lenders, The CIT Group/Business Credit,
Inc., as administrative agent, and Bank of America
National Trust and Savings Association, as co-agent
(previously filed as Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the period ended
January 29, 1995, which exhibit is hereby incorporated by
reference).
10.2 Mortgage, Fixture Filing, Security Agreement and
Assignment of Rents between the Company, as mortgagor,
and Sun Life Insurance Co. of America, as mortgagee,
dated as of September 7, 1989 (previously filed as
Exhibit 28.1(a) to the Company's Quarterly Report on Form
10-Q for the period ended October 29, 1989, which exhibit
is hereby incorporated by reference).
10.3 Mortgage between the Company, as mortgagor, and Ausa Life
Insurance Company, as mortgagee, dated as of November 21,
1989 (previously filed as Exhibit 28.2(a) to the
Company's Quarterly Report on Form 10-Q for the
53<PAGE>
period ended October 29, 1989, which exhibit is hereby
incorporated by reference).
10.4 Trademark License Agreement dated as of October 12, 1988
between the Company and Lucky Stores, Inc. (previously
filed as Exhibit 10.11 to the Company's Registration
Statement on Form S-1, Registration No. 33-25621, which
exhibit is hereby incorporated by reference).
10.5(a) Services Agreement dated as of March 1, 1995 between the
Company and GSI Outsourcing Corporation (previously filed
as Exhibit 10.5(a) to the Company's Registration
Statement on Form S-1, Registration No. 33-58999, which
exhibit is hereby incorporated by reference).
10.5(b) First Amendment to Services Agreement between the Company
and GSI Outsourcing Corporation (previously filed as
Exhibit 10.5(b) to the Company's Registration Statement
on Form S-1, Registration No. 33-58999, which exhibit is
hereby incorporated by reference).
10.5(c) Guaranty of Payment, Nondisturbance and Attornment
Agreement dated as of June 1995 among the Company, GSI
Outsourcing Corporation and IBM Credit Corporation (filed
herewith).
10.5(d) Addendum to Services Agreement between the Company and
GSI Outsourcing Corporation dated as of July 1995 (filed
herewith).
10.6 Form of Indemnity Agreement between the Company and its
directors and certain of its officers (previously filed
as Exhibit 10.3 to the Company's Registration Statement
on Form S-1, Registration No. 33-25621, which exhibit is
hereby incorporated by reference).
10.7(a) 1995 Non-Employee Director Stock Option Plan adopted on
March 9, 1995 (previously filed as Exhibit 10.7(a) to the
Company's Registration Statement on Form S-1,
Registration No. 33-58999, which exhibit is hereby
incorporated by reference).
10.7(b) Form of Non-Qualified Stock Option Agreement entered into
between the Company and certain directors, as optionees,
pursuant to the 1995 Non-Employee Director Stock Option
Plan (previously filed as Exhibit 10.7(b) to the
Company's Registration Statement on Form S-1,
Registration No. 33-58999, which exhibit is hereby
incorporated by reference).
10.8 Non-Qualified Stock Option Agreement dated as of January
17, 1995, between the Company and Green Equity Investors,
L.P. (previously filed as Exhibit 10.8 to the Company's
Registration Statement on Form S-1, Registration No. 33-
54<PAGE>
58999, which exhibit is hereby incorporated by
reference).
10.9 Management Services Agreement dated as of December 29,
1994, by and between the Company and Leonard Green &
Partners (previously filed as Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the period
ended January 29, 1995, which exhibit is hereby
incorporated by reference).
10.10 Employment Agreement dated as of January 24, 1995,
between the Company and Ronald Johnson (previously filed
as Exhibit 10.10 to the Company's Registration Statement
on Form S-1, Registration No. 33-58999, which exhibit is
hereby incorporated by reference).
10.11 Employment Agreement dated as of March 6, 1995, between
the Company and Gary M. Shell (previously filed as
Exhibit 10.11 to the Company's Registration Statement on
Form S-1, Registration No. 33-58999, which exhibit is
hereby incorporated by reference).
10.12 Employment Agreement dated as of March 16, 1995, between
the Company and Clifford C. Smith, Jr. (previously filed
as Exhibit 10.12 to the Company's Registration Statement
on Form S-1, Registration No. 33-58999, which exhibit is
hereby incorporated by reference).
10.13 Employment Agreement dated as of July 8, 1995, between
the Company and BJ Mehaffey (filed herewith).
10.14 Incentive Compensation Plan adopted on October 26, 1994
(previously filed as Exhibit 10.13 to the Company's
Registration Statement on Form S-1, Registration No. 33-
58999, which exhibit is hereby incorporated by
reference).
10.15 Amended and Restated Kash n' Karry Retirement Estates and
Trust (401(k) Plan) dated October 14, 1993, effective as
of January 1, 1992 (previously filed as Exhibit 10.5 to
the Company's Annual Report on Form 10-K for the period
ended August 1, 1993, which exhibit is hereby
incorporated by reference).
10.16(a) Form of Deferred Compensation Agreement dated as of
December 21, 1989 between the Company and key employees
and a select group of management (KESP) (previously filed
as Exhibit 28.3(a) to the Company's Quarterly Report on
Form 10-Q for the period ended January 28, 1990, which
exhibit is hereby incorporated by reference).
55<PAGE>
10.16(b) Master First Amendment to Deferred Compensation
Agreements, dated as of November 11, 1991 between the
Company and the key employees party thereto (previously
filed as Exhibit 28.3 to the Company's Quarterly Report
on Form 10-Q for the period ended November 3, 1991, which
exhibit is hereby incorporated by reference).
10.16(c) Master Second Amendment to Deferred Compensation
Agreements, dated as of December 30, 1993 between the
Company and the key employees party thereto (previously
filed as Exhibit 10.13(d) to the Company's Quarterly
Report on Form 10-Q for the period ended January 30,
1994, which exhibit is hereby incorporated by reference).
10.16(d) Master Third Amendment to Deferred Compensation
Agreements, dated as of September 2, 1994, between the
Company and the key employees party thereto (previously
filed as Exhibit 10.2 to the Company's Quarterly Report
on Form 10-Q for the period ended January 29, 1995, which
exhibit is hereby incorporated by reference).
10.17(a) 1995 Key Employee Stock Option Plan (previously filed as
Exhibit 10.16(a) to the Company's Registration Statement
on Form S-1, Registration No. 33-58999, which exhibit is
hereby incorporated by reference).
10.17(b) Non-Qualified Stock Option Agreement dated March 9, 1995
between the Company and Ronald E. Johnson (previously
filed as Exhibit 10.16(b) to the Company's Registration
Statement on Form S-1, Registration No. 33-58999, which
exhibit is hereby incorporated by reference).
10.17(c) Form of Non-Qualified Stock Option Agreement entered into
between the Company and certain key employees, as
optionees, pursuant to the 1995 Key Employee Stock Option
Plan (previously filed as Exhibit 10.16(b) to the
Company's Registration Statement on Form S-1,
Registration No. 33-58999, which exhibit is hereby
incorporated by reference).
10.18 Employment and Consulting Agreement dated July 1, 1994
between the Company and Anthony R. Petrillo (filed
herewith).
10.19 Form of Bonus Deferred Compensation Agreement dated as of
July 28, 1995 between the Company and certain key
employees (filed herewith).
11 Statement re computation of per share earnings (filed
herewith).
56<PAGE>
16 Letter re change in certifying accountant (previously
filed as Exhibit 16 to the Company's Current Report on
Form 8-K dated February 17, 1995, which exhibit is hereby
incorporated by reference).
21 Subsidiaries of the Company (filed herewith).
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K:
None
57<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant has duly caused this Annual Report on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Tampa, State of Florida, on October
27, 1995.
KASH N' KARRY FOOD STORES, INC.
By: /s/ Ronald E. Johnson
------------------------------
Ronald E. Johnson
Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Annual Report on Form 10-K has been signed by the following
persons in the capacities and on the dates indicated.
Signature/Capacity Date
- ----------------------------------- -----------------
/s/ Ronald E. Johnson
- ------------------------------ October 20, 1995
RONALD E. JOHNSON
Chairman of the Board,
President and Chief
Executive Officer
(principal executive officer)
/s/ Raymond P. Springer
- ------------------------------ October 20, 1995
RAYMOND P. SPRINGER
Senior Vice President,
Chief Financial Officer
(principal financial officer)
/s/ Richard D. Coleman
- ------------------------------ October 20, 1995
RICHARD D. COLEMAN
Vice President, Controller
(principal accounting officer)
<PAGE>
/s/ Everett L. Buckardt
- ------------------------------ October 20, 1995
EVERETT L. BUCKARDT
Director
/s/ John G. Danhakl
- ------------------------------ October 22, 1995
JOHN G. DANHAKL
Director
/s/ John J. Delucca
- ------------------------------ October 20, 1995
JOHN J. DELUCCA
Director
/s/ Jennifer Holden Dunbar
- ------------------------------ October 25, 1995
JENNIFER HOLDEN DUNBAR
Director
/s/ Ben Evans
- ------------------------------ October 20, 1995
BEN EVANS
Director
/s/ Thomas W. Harberts
- ------------------------------ October 25, 1995
THOMAS W. HARBERTS
Director
/s/ Robert Spiegel
- ------------------------------ October 24, 1995
ROBERT SPIEGEL
Director
/s/ Peter Zurkow
- ------------------------------ October 23, 1995
PETER ZURKOW
Director
Supplemental information to be furnished with reports filed
pursuant to Section 15(d) of the Act by registrants which have not
registered securities pursuant to Section 12 of the Act:
Not applicable
TLMA No. FMC0211
GUARANTY OF PAYMENT, NONDISTURBANCE
AND ATTORNMENT AGREEMENT
This Guaranty of Payment, Nondisturbance and Attornment
Agreement, dated as of June ___, 1995 ("the Agreement"), is between
and among IBM Credit Corporation ("Lessor"), GSI Outsourcing
Corporation ("Lessee"), and Kash n' Karry Food Stores, Inc.
("Guarantor"). Lessor, Lessee and Guarantor may sometimes be
referred to in this Agreement collectively as the Parties.
1. In consideration of and to induce Lessor to enter into,
and act as lessor under, the Term Lease Master Agreement referenced
above, as now in effect, including any Supplements thereto (the
"TLMA"), and to extend credit to Lessee, and subject to the
conditions set forth below, the undersigned Guarantor, who will
directly and indirectly benefit from the TLMA and such credit
arrangement and from the credit extended as a result of this
Guaranty, for itself, its successors and assigns, agrees as
follows:
1.1 Guarantor hereby guarantees the full, prompt, and
complete payment of all sums, obligations, liabilities and
indebtedness not to exceed in principal amount Seven Million
Dollars ($7,000,000.00) for the Point of Sale equipment to be
acquired by Lessee and used in Guarantor's stores, as described on
Exhibit A to this Agreement (the "Guaranteed Obligations"), that
are, as of the date of this Agreement, due from Lessee under the
TLMA.
1.2 This Guaranty is a continuing and irrevocable guaranty
and shall (i) remain in full force and effect until the payment in
full of the Guaranteed Obligations and (ii) be binding upon the
Guarantor, its successors and assigns.
1.3 Subject to the consent of Guarantor, which consent may
not be unreasonably withheld, Lessor may renew, compromise or
extend the Guaranteed Obligations without waiving, limiting or
otherwise affecting Guarantor's liability hereunder and Guarantor
expressly waives and releases any defenses or claims it may have
arising from or on account of any such renewal, compromise or
extension.
1.4 This Guaranty shall survive any and all bankruptcy or
insolvency proceedings of Guarantor.
1.5 Lessor shall not be obligated to elect remedies first
which are available to Lessor in the TLMA and may secure payment
first from Guarantor, provided Lessor performs its obligations
under this Agreement.
<PAGE>
2. In consideration of and to induce Guarantor to enter
into, and act as Guarantor hereunder, and pursuant to Lessee's
obligations under Section 18.12 of the Services Agreement between
Lessee and Guarantor dated March 1, 1995, as amended (the "Services
Agreement"), the undersigned Lessor and Lessee agree as follows:
2.1 Notwithstanding any provision in the TLMA to the
contrary, and prior to the exercise of Lessor's rights and remedies
under the TLMA, Lessor shall provide to Guarantor written notice of
the occurrence of any nonpayment by Lessee, or any other event
which, with the giving of notice or the passage of time, would
become an event of default by Lessee under the TLMA.
2.2 If, within 15 days after receipt of such written
notice, Lessee or Guarantor cures any such event or Guarantor
assumes the obligations of Lessee under the TLMA, Lessor agrees not
to declare the occurrence of an event of default under the TLMA, or
to exercise any of its remedies under the TLMA by reason of the
occurrence of such event.
2.3 If Guarantor cures any nonpayment or other event on
behalf of Lessee, and, in any event, upon the termination of the
Services Agreement, and in the event Lessee shall assign under the
Services Agreement to Guarantor all of Lessee's rights, title, and
interest in the TLMA, including the exclusive use, possession and
quiet enjoyment of the equipment, software, service agreements and
property subject to the TLMA, Guarantor shall assume all of the
obligations of Lessee under the TLMA.
2.4 Lessor hereby consents to any such assignment and
assumption of the TLMA by Guarantor, and agrees that, upon the
execution and delivery by Guarantor of an assumption instrument,
and for so long thereafter as no event of default shall have
occurred and be continuing under the TLMA, Lessor agrees not to
disturb Guarantor's use, possession or quiet enjoyment of the
equipment, software, service agreements and other property subject
to the TLMA.
2.5 Lessor and Lessee agree that upon Guarantor making
any payment with respect to Guaranteed Obligations, the Guarantor
shall be subrogated to the rights of Lessor against the Lessee with
respect to such payment.
2.6 The obligations of Guarantor to Lessee under the
Services Agreement will be reduced dollar for dollar for any sums
actually paid to Lessor with respect to the Guaranteed Obligations,
and for any other obligations of Lessee under the TLMA expressly
assumed by Guarantor pursuant to this Agreement.
3. If any Party undergoes any change in its ownership or
organizational structure or otherwise assigns, transfers or
delegates its obligations to any assignee or transferee resulting
2<PAGE>
from the operation of any assignment or transfer permitted pursuant
to the TLMA, this Guaranty shall continue to extend to all sums due
from or for the account of Lessee or the new or substituted legal
entity.
4. This Agreement has been duly authorized, executed and
delivered by the Parties and constitutes a legal, valid and binding
obligation of each Party, enforceable in accordance with its terms.
The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not conflict with or
constitute a breach of, or default under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property
or assets of any party to this Agreement pursuant to any contract,
indenture, mortgage, loan agreement, note, lease, or other
instrument to which Lessor, Lessee or Guarantor is a party or by
which any one of them may be bound, or to which any of the property
or assets of any party is subject, nor will such action result in
any violation of the provisions of the certificate or articles of
incorporation or organizing documents or by-laws of any party, or
any applicable law, administrative regulation or administrative or
court decree known to it after reasonable investigation.
5. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA WITHOUT GIVING
EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS. THE EXCLUSIVE AND
SOLE VENUE FOR ANY LEGAL ACTION ARISING OUT OF THIS AGREEMENT SHALL
BE HILLSBOROUGH COUNTY, FLORIDA.
6. This Agreement constitutes the entire agreement between
the Parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, this agreement has been signed by an
authorized officer of the parties.
LESSOR: IBM Credit Corporation
By: /s/ Daniel H. Ransdell
--------------------------------
Name: Daniel H. Ransdell
Title: Director, Customer Financing
Marketing, Southern Area 7
Address: 4111 Northside Parkway
Lakeside - L08J16
Atlanta, GA 30327
Telephone: 404-238-6901
Date: July 12, 1995
3<PAGE>
LESSEE: GSI Outsourcing Corporation
By: /s/ Philippe Guionnet
--------------------------------
Name: Philippe Guionnet
Title: Vice President
Address: 6401 Harney Road
Tampa, FL 33610
Telephone: 813-621-0402
Date: June 29, 1995
GUARANTOR: Kash n' Karry Food Stores, Inc.
By: /s/ R. P. Springer
--------------------------------
Name: Raymond P. Springer
Title: S. V. P.\Administration-CFO
Address: 6422 Harney Road
Tampa, FL 33610
Telephone: 813-621-0200
Date: June 28, 1995
4<PAGE>
Appendix A to Guaranty of Payment, Nondisturbance and Attornment
Agreement.
Device Configurations for Installation Management Services
PC Workstation - 9577 ANG Personal Computer
8504-021 Display
2380-002 Printer
IBM Keyboard
(1) Token-Ring 16/4 Adapt
(1) POS Expansion Adapt
(2) MPCA
(1) Comm. Adapt Cable
(1) TR Adapt. Cable
PC Workstation - 9556 DBA Personal Computer
8504-021 Display
2380-002 Printer
IBM Keyboard
(1) Token-Ring 16/4 Adapt
(1) POS Expansion Adapt
(1) TR Adapt. Cable
4693-3S1 Point of Sale Terminal (Lane Master)
4693-3S1
0149 Token-Ring Adapt 16/4 MBpS
3315 Retail POS Keyboard
3326 Distributed Keyboard Cable
3330 Keybutton Kit Retail Format
3345 Distributed Cable Assembly
3348 40 Character VFD Post Extension
3360 Cash Drawer Asmno Till
3365 Distributed Cash Drawer Cable
3390 Token-Ring Cable
3501 40 Character Vac Fluo Disp II
3879 Fixed Till
4635 Battery, Standard Duration
4654 4MB Memory (Plant Only)
4800 Model 4 Printer
4922 Model 4 Printer Distrib Cable
4923 Model 4 Printer Ribbon/Paper
9200 Plug, Non Operating Loc
9204 Lock
9206 Lock
9300 Flat Top for Distrib Sys
9316 Token Ring Speed 16MBP
9450 Keyboard Legend Sheet (English)
9510 Line Cord 4.3M Non-Lock
9534 Software Usage 4690 OS
9605 Non POS Display
1<PAGE>
4693-3S1 Point of Sale Terminal (Area Master)
4693-3S1
0149 Token-Ring Adapt 16/4 MBpS
3315 Retail POS Keyboard
3325 Integrated Keyboard Cable
3330 Keybutton Kit Retail Format
3344 Integrated Cable Assembly
3348 40 Character VFD Post Extension
3360 Cash Drawer Asmno Till
3364 Integrated Cash Drawer Cable
3390 Token-Ring Cable
3502 2 Sided Vac Fluo Disp II
3879 Fixed Till
4635 Battery, Standard Duration
4654 4MB Memory (Plant only)
4800 Model 4 Printer
4920 Model 4 Printer Integrated Cable
4923 Model 4 Printer Ribbon/Paper
9200 Plug, Non Operating Loc
9204 Lock
9206 Lock
9305 System Unit IO Integrated Kit
9316 Token Ring Speed 16MBP
9450 Keyboard Legend Sheet (English)
9510 Line Cord 4.3M Non-Lock
9534 Software Usage 4690 OS
9605 Non POS Display
4693-2S2 Point of Sale Terminal (Lane Slave)
4693-2S2
3315 Retail POS Keyboard
3326 Distributed Keyboard Cable
3330 Keybutton Kit Retail Format
3345 Distributed Cable Assembly
3348 40 Character VFD Post Extension
3360 Cash Drawer Asmno Till
3365 Distributed Cash Drawer Cable
3501 40 Char Vac Fluo Disp II
3879 Fixed Till
4034 Mod 2X2 Base Unit Cable 4M
4800 Model 4 Printer
4922 Model 4 Printer Distributed Cable
4923 Model 4 Printer Ribbon/Paper
9200 Plug, Non Operating Loc
9204 Lock
9206 Lock
9300 Flat Top for Distributed System
9450 Keyboard Legend Sheet (Sheet)
9510 Line Cord 4.3M Non-Lock
9534 Software Usage 4690 OS
4693-2S2 Point of Sale Terminal (Area Slave)
2<PAGE>
4693-2S2
3315 Retail POS Keyboard
3325 Integrated Keyboard Cable
3330 Keybutton Kit Retail Format
3344 Integrated Cable Assembly
3348 40 Character VFD Post Extension
3360 Cash Drawer Asmno Till
3364 Integrated Cash Drawer Cable
3502 2 Sided Vac Fluo Disp II
3879 Fixed Till
4034 Mod 2X2 Base Unit Cable 4M
4800 Model 4 Printer
4920 Model 4 Printer Integrated Cable
4923 Model 4 Printer Ribbon/Paper
9200 Plug, Non Operating Loc
9204 Lock
9206 Lock
9305 System Unit IO Integr Kit
9450 Keyboard Legend Sheet (English)
9510 Line Cord 4.3M Non-Lock
9534 Software Usage 4690 OS
Software
Datachecker Store Conversion (73 Stores)
IBM 4680-4690 Supermarket Application V2.0
IBM 4690 Operating System
IBM 4690 Remote Operator
Upgrade Store (26 Stores)
IBM 4680-4690 Supermarket Application V2.0
IBM 4690 Operating System Upgrade
IBM 4690 Remote Operator
3
ADDENDUM TO SERVICES AGREEMENT
This is an Addendum to that certain Services Agreement dated
as of March 1, 1995 (the "Services Agreement"), by and between Kash
n' Karry Food Stores, Inc., a Delaware corporation ("Kash n'
Karry), and GSI Outsourcing Corporation, a Delaware corporation
("GSI"). The purpose of this Addendum is to set forth certain
modifications to the Services Agreement pertaining to the
Procurement and Billing System Project (Merchandising Systems) as
set forth in Schedule K-3 attached to the Services Agreement.
In consideration of the mutual covenants and promises
hereinafter set forth, and other valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Additional Charges Related to Procurement and Billing System
Project (Merchandise System).
In addition to the other charges set forth in Article 6 of the
Services Agreement, Kash n' Karry agrees to pay GSI the following
amounts for the Warehouse module, software maintenance and support
services related to the implementation of the Worldwide Chain
Stores System:
(a) $220,000 due as follows: $70,000 on July 15, 1995
as an advance payment and $150,000 on January 1,
1996;
(b) maintenance charge of $18,000 on January 1, 1996
and $18,000 on the first day of each subsequent
year during which the Worldwide Chain Store System
is installed; and
(c) annual support services charge of $70,000 due in
equal monthly installments beginning January 1,
1996 and continuing in subsequent years for each
month during which the Worldwide Chain Store System
is installed.
Overall WCS installation (Purchasing and Billing) is to be
completed in January, 1996.
2. Incorporation.
This Addendum is hereby incorporated into and made a part of
the Services Agreement as if fully set forth therein as provided by
sections 18.4 and 18.20 of the Services Agreement. In the event of
any conflict between the provisions of the Services Agreement and
the provisions of this Addendum, the provisions of this Addendum
shall govern.
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto executed this
Addendum by and through their duly authorized officers this ____
day of July, 1995.
KASH N' KARRY FOOD STORES, INC. GSI OUTSOURCING CORPORATION
BY: /s/ R. P. Springer BY: /s/ Philippe Guionnet
----------------------- ------------------------
Name: Raymond P. Springer Name: Philippe Guionnet
Title: Sr. Vice President/ Title: Vice President
Administration
2<PAGE>
AMENDMENT
SCHEDULE K-6
WAREHOUSE SYSTEM
GSI has committed to provide a Warehousing System which:
- Will be acquired from Worldwide Chain Systems (WCSS).
- Will be implemented by the end of the 4th calendar
quarter of 1995.
- Will include WCSS Warehouse System.
- Will be a "vanilla" installation of these products.
"Vanilla" in this context means only standard parameters
and that no program modifications will be made to the
software that is acquired from the supplier of the
software.
- Will be a version of the software release provided by the
supplier to the general marketplace, under DB2, and
includes a Kash n' Karry commitment to a complete
"freeze" on all modifications to the existing Kash n'
Karry Warehousing System during the implementation of the
new systems except for those "fixes" that are required to
continue normal computer operations.
- Will be reviewed by GSI to make its best effort to
establish an interface between it and any "existing
functions" that the CEO of Kash n' Karry requests GSI to
review from the current Warehousing System.
- Will be installed with the collaboration and involvement
of the Kash n' Karry "champions" as relates to this
project.
- Will require GSI to provide Training for the designated
Kash n' Karry trainers and the subsequent review of the
training results. These Kash n' Karry trainers will be
responsible for training results, with GSI assistance,
such as trainee willingness to learn, training
assimilation measures, and timing.
- Will be kept on a maintenance agreement between GSI and
the provider of the software system, under its standard
maintenance contract.
<PAGE>
SCHEDULE A
GSI INVOICE - BUILD-UP FROM BASE CHARGE
11-Aug-95
DOLLARS ROUNDED OOO NOTES CY 1995 CY 1996 CY 1997 CY 1998
- ------------------- ----- ------- ------- ------- -------
CORE OR BASE CHARGE 8,030 8,726 8,795 8,248
MAINT CHARGE WAREHOUSING
DUE JAN 1 EACH YEAR 0 18 18 18
WAREHOUSE SUPPORT SERVICES 70 70 70
WAREHOUSE ONE TIME CHARGE 70 150 0 0
ADJUSTED GSI BILL 8,100 8,964 8,883 8,336
- ------------------
FISCAL YEAR TOTALS 8,216 8,604 8,917 8,564
CY 1999 CY 2000 CY 2001 CY 2002 CY 2003 CY 2004 10 Years
- ------- ------- ------- ------- ------- ------- --------
7,950 7,453 7,256 7,058 6,861 6,466 76,843
18 18 18 18 18 18 162
70 70 70 70 70 70 630
0 0 0 0 0 0 0
8,038 7,541 7,344 7,146 6,949 6,554 77,635
8,162 7,748 7,426 7,229 7,031 6,719 78,616
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of July 8, 1995, between KASH N' KARRY FOOD STORES,
INC., a Delaware corporation (the "Company"), and BJ Mehaffey (the
"Employee").
WHEREAS, the Company and the Employee desire to enter into
this Agreement to assure the Company of the services of the
Employee for the benefit of the Company and to set forth the
respective rights and duties of the parties hereto;
WHEREAS, the Company is in the business of owning, operating
and managing supermarkets and retail liquor, food, grocery and
warehouse format stores in Florida and may, in the future, own,
operate and manage additional supermarkets or retail liquor, food,
grocery or warehouse format stores in or outside of Florida (such
business, present and future, being hereinafter referred to as the
"Business");
NOW, THEREFORE, in consideration of the premises and the
mutual covenants, terms and conditions set forth herein, the
Company and the Employee agree as follows:
ARTICLE 1
Employment
1.1 Employment and Title. The Company hereby employs the
Employee, and the Employee hereby accepts such employment as the
Senior Vice President - Operations of the Company, upon the terms
and conditions set forth herein.
<PAGE>
1.2 Services.
(a) During the Term (as hereinafter defined) hereof, the
Employee agrees to perform diligently and in good faith such duties
and services for the Company under the direction of the Chief
Executive Officer as are consistent with the position of Senior
Vice President - Operations. The Employee agrees to devote his
best efforts and all of his full business time, energies and
abilities to the services to be performed hereunder and for the
exclusive benefit of the Company; provided, that this clause shall
not be construed to prevent the Employee from personally, and for
his own account, trading in stocks, bonds, securities, real estate,
or other forms of investment for his own benefit, so long as any
such activity does not materially interfere with the performance of
his duties hereunder. The Employee shall be vested with such
authority as is generally concomitant with the position to which he
is appointed.
1.3 Location. The principal place of employment and the
location of the Employee's principal office and ordinary place of
work shall be in Tampa, Florida; provided, however, the Employee
shall, when requested by his superiors, or may, if he determines it
to be reasonably necessary, temporarily perform services outside
said area as are reasonably required for the proper performance of
his duties under this Agreement.
1.4 Exclusivity. The Employee shall not, without the prior
written consent of the Company, directly or indirectly, during the
2<PAGE>
term of this Agreement render services of a business, professional
or commercial nature to any other person or entity, whether for
compensation or otherwise.
1.5 Representations. Each party represents and warrants to
the other that he/it has full power and authority to enter into and
perform this Agreement and that his/its execution of and
performance of this Agreement shall not constitute a default under
or breach of any of the terms of any agreement to which he/it is a
party or under which he/it is bound. Each party represents that no
consent or approval of any third party is required for his or its
execution, delivery and performance of this Agreement. The
Employee further represents and warrants to the Company that he is
free to accept this employment, and that he has no other
obligations or commitments of any kind to any one which would in
any way hinder or interfere with his acceptance of, full
performance of his obligations under, or exercise of his best
efforts with respect to, this Agreement.
ARTICLE 2
Term
2.1 Term. The term of the Employee's employment hereunder
(the "Term") shall commence on July 8, 1995, (the "Commencement
Date") and shall continue until (but not including) January 24,
1998 (the "Scheduled Termination Date"), unless earlier terminated
pursuant to the provisions of this Agreement.
3<PAGE>
ARTICLE 3
Compensation
3.1 Salary. As compensation for the services to be rendered
by the Employee, the Company shall pay the Employee, during the
Term of this Agreement, an annual salary in the amount of One
Hundred Fifteen Thousand Dollars ($115,000), which salary shall
accrue weekly (prorated for periods less than a week) and shall be
payable in equal weekly installments, in arrears.
3.2 Other Compensation. During the Term hereof, the Employee
shall be entitled to participate, on a basis proportionate to the
participation of the other executive officers of the Company, in
any compensatory plan, contract or arrangement that is available to
the Company's most senior executive officers from time to time
during the Term hereof, including, but not limited to the Company's
current (a) bonus plan, generally referred to as the Incentive
Compensation Plan, and (b) management stock option plan (the "Stock
Option Plan"), both as in effect on the Commencement Date. Subject
to approval by the Company's Board of Directors and at a strike
price to be determined by the Board, the Company will grant to the
Employee thereunder options to purchase Six-tenths of One Percent
(.6%) of the then outstanding common stock of the Company on a
fully-diluted basis, on the terms set forth therein. Also, for
purposes of determining the Employee's Target Bonus under the
Incentive Compensation Plan, for the fiscal year ending in 1995,
the parties agree that the Employee's Target Percentage will be not
less than Fifty Percent (50%), and that the Employee's base salary
4<PAGE>
under the plan will be the Employee's annual salary under this
Agreement, prorated on a weekly basis over the remaining period of
that fiscal year.
3.3 Benefits and Perquisites. The Employee shall be
entitled, during the Term hereof, to the same retirement (Kash n'
Karry Retirement Estates), deferred compensation (Key Employee
Savings Plan), medical, hospital, dental and life insurance
coverage and benefits, vacations, car allowance, and other
perquisites, as are available to the Company's most senior
executive officers on the Commencement Date, or benefits that are
substantially comparable. The Company will pay the Employee's
reimbursable relocation expenses pursuant to the Company's
Relocation Policy, a copy of which is attached to this Agreement as
Exhibit "A", and, in addition, the Company will pay: (a) all
reasonable expenses incurred in connection with selling the
Employee's current residence; (b) $5000 to cover incidental
expenses connected with the Employee's new residence; (c) the
Employee's temporary housing expenses for up to 90 days from the
Commencement Date (the "transition period"), (d) additional tax
withholding on Employee's wages for amounts reimbursed that are not
deductible under the Internal Revenue Code; (e) for two trips per
month for either the Employee or his spouse during the transition
period; (f) two additional trips for house hunting; and (g) the
travel costs of the Employee's children to visit Tampa on one
occasion.
5<PAGE>
3.4 Withholding. Any and all amounts payable under this
Agreement, including, without limitation, amounts payable in the
event of the termination hereof under Sections 7.3 and 7.4 hereof,
are subject to withholding for such federal, state and local taxes
as the Company in its reasonable judgment determines to be required
pursuant to any applicable law, rule or regulation.
3.5 Annual Review. No less frequently than annually, the
Chief Executive Officer of the Company shall review the Employee's
performance of his duties and services under this Agreement, and
may, commensurate with the Employee's and the Company's performance
and subject to the approval of the Board of Directors of the
Company, increase, but not decrease, the salary, stock options,
other compensation and benefits payable to the Employee under this
Agreement during the remaining Term.
ARTICLE 4
Working Facilities, Expenses and Insurance
4.1 Working Facilities and Expenses. The Employee shall be
furnished with an office at the principal office of the Company, or
at such other location as may be agreed to by the Employee and the
Chief Executive Officer of the Company, and other working
facilities and secretarial and other assistance suitable to his
position and adequate for the performance of his duties hereunder.
The Company shall reimburse the Employee for all the Employee's
reasonable expenses incurred while employed and performing his
duties under and in connection with the terms and conditions of the
6<PAGE>
Agreement, subject to the Employee's full appropriate
documentation, including, without limitation, receipts for all such
expenses in the manner required pursuant to Company's policies and
procedures and the Internal Revenue Code.
4.2 Insurance. The Company may secure in its own name or
otherwise, and at its own expense, life, disability and other
insurance covering the Employee or the Employee and others, and the
Employee shall not have any right, title or interest in or to such
insurance other than as expressly provided herein. The Employee
agrees to assist the Company in procuring such insurance by
submitting to the usual and customary medical and other
examinations to be conducted by such physician(s) as the Employee,
the Company or such insurance company may agree to and designate
and by signing such applications and other written instruments as
may be required by the insurance companies to which application is
made for such insurance.
ARTICLE 5
Illness or Incapacity
5.1 Right to Terminate. If, during the Term of this
Agreement, the Employee shall be unable to perform in all material
respects his duties hereunder for a period exceeding one hundred
twenty (120) consecutive calendar days, or a total of one hundred
eighty-six (186) non-consecutive calendar days, by reason of
illness or incapacity, this Agreement may be terminated by the
Company at its election pursuant to Section 7.2(b) hereof.
7<PAGE>
5.2 Right to Replace. If the Employee's illness or
incapacity, whether by physical or mental cause, renders him unable
for a minimum period of 30 consecutive calendar days to carry out
his duties and responsibilities as set forth herein, the Company
shall have the right to designate a person to temporarily succeed
the Employee in the capacity described in Article 1 hereof.
5.3 Rights Prior to Termination. The Employee shall be
entitled to his full remuneration and benefits hereunder during
such illness or incapacity unless and until an election is made by
the Company to terminate this Agreement in accordance with the
provisions of this Article.
ARTICLE 6
Confidentiality
6.1 Confidentiality. During the Term of this Agreement and
at all times thereafter, the Employee agrees to maintain the
confidential nature of all trade secrets, including, without
limitation, development ideas, acquisition strategies and plans,
financial information, records, "know-how", methods of doing
business, customer, supplier and distributor lists and all other
confidential information of the Company. The Employee shall not be
obligated to maintain the confidential nature of information the
disclosure of which is required by law or which already is in the
public domain. The Employee shall not use (other than in
connection with his employment), in any way whatsoever, such trade
secrets except as authorized in writing by the Company. The
9<PAGE>
Employee shall, upon terminating his employment, deliver to the
Company any and all records, books, documents or any other
materials whatsoever (including all copies thereof) containing such
trade secrets, which shall be and remain the property of the
Company.
6.2 Ownership of Records. All documents, papers,
materials, notes, books, correspondence, drawings and other written
and graphical records relating to the Business of the Company which
the Employee shall prepare or use, or come into contact with, shall
be and remain the sole property of the Company. The Employee shall
not be allowed to remove any of the above listed materials from the
Company's premises for other than a business purpose, unless
specifically authorized in writing by the Company.
ARTICLE 7
Termination
7.1 Termination For Cause. This Agreement and the employment
of the Employee may be terminated by the Company "For Cause" in any
of the following circumstances:
(a) The Employee has committed any act or acts of fraud
or misappropriation that result in or are intended to result in his
personal enrichment at the expense of the Company;
(b) The Employee is in default in a material respect in
the performance of his obligations, services or duties hereunder,
which shall include, without limitation, the Employee's
disregarding the instructions from the Company's Chief Executive
10<PAGE>
Officer concerning the conduct of his duties hereunder, the
Employee's failure to achieve agreed upon performance objectives,
the Employee's acting in a manner materially inconsistent with the
policies of the Company or its affiliates, as promulgated from time
to time in writing and which are generally applicable to all
employees and/or senior executives of the Company, the Employee's
acting in a manner materially inconsistent with the customary
standards of performance applicable to persons in similar positions
in the supermarket industry in the United States, or if the
Employee has breached any other material provision of this
Agreement; provided that if, and only if, such default or breach is
curable, the Employee shall not be in default hereunder unless he
shall have failed to cure such default or breach within a
reasonable period of time (depending upon the type of default or
breach) after receipt of written notice thereof by the Company to
the Employee;
(c) The Employee is grossly negligent, which causes
substantial damage or loss to the Company, or engages in willful
misconduct in the performance of his duties hereunder; or
(d) The Employee has engaged in illegal activities
which, individually, or in the aggregate, reflect substantially and
materially adversely upon, or have a substantially and materially
adverse impact on, the Company.
A termination For Cause under this Section 7.1 shall be
effective upon the date set forth in a written notice of
termination delivered to the Employee.
11<PAGE>
7.2 Termination Without Cause. This Agreement and the
employment of the Employee may be terminated "Without Cause" as
follows:
(a) by mutual agreement of the parties hereto;
(b) at the election of the Company at any time by its
giving at least thirty (30) days advance written notice to the
Employee;
(c) at the election of the Employee by his giving
written notice to the Company in the event that the Company shall
default in or breach the performance of any of its obligations
under this Agreement, or in the event that the Company shall effect
a material diminution or material adverse change in the Employee's
title, responsibilities or duties; provided, that if, and only if,
such default, breach, diminution or change is curable, the Employee
may not elect to give notice under this Section 7.2 (c), unless the
Company shall have failed to cure such default, breach, diminution
or change within fifteen (15) days of written notice thereof
provided by the Employee to the Company; or
(d) upon the Employee's death.
A termination Without Cause under this Section 7.2 shall be
effective upon the date set forth in a written notice of
termination delivered hereunder, which shall be not less than
thirty (30) days nor more than forty-five (45) days after the
giving of such notice, except for a termination pursuant to Section
7.2(d) hereof, which shall be automatically effective upon the
Employee's death.
12<PAGE>
7.3 Effect of Termination For Cause. If the Employee's
employment is terminated For Cause:
(a) The Employee shall be entitled to accrued salary
through the date of termination;
(b) The Employee shall be entitled to reimbursement for
expenses accrued through the date of termination in accordance with
the provisions of Section 4.1 hereof; and
(c) Except as provided in Article 11, this Agreement
shall thereupon be of no further force and effect.
7.4 Effect of Termination Without Cause. If the Employee's
employment is terminated Without Cause:
(a) The Employee shall be entitled to accrued salary
through the date of termination;
(b) The Employee shall be entitled to reimbursement for
expenses accrued through the date of termination in accordance with
the provisions of Section 4.1 hereof; and
(c) Subject to Section 7.5 and except in the case of a
termination Without Cause under Section 7.2(d), the Employee shall
be entitled to receive all amounts of salary as would have been
payable under Section 3.1 hereof through the Scheduled Termination
Date, which amounts shall be paid as and when the same would have
been payable under the Agreement had it not been terminated;
(d) Subject to Section 7.5 and except in the case of a
termination Without Cause under Section 7.2(d), the Employee shall
be entitled to receive all medical, hospital and dental coverage
and benefits as would have been payable under Section 3.3 hereof
13<PAGE>
through the Scheduled Termination Date, which amounts shall be paid
as and when the same would have been payable under the Agreement
had it not been terminated, and if the Employee is not entitled to
participate in any such benefit plan under the terms thereof
following the termination, then the Company shall provide the
Employee with substantially identical coverage and benefits;
(e) Subject to Section 7.5, if the Employee is
participating in a Company bonus plan as of the date of
termination, he shall be entitled to an accrued bonus through the
date of termination, computed on a per diem basis based upon the
bonus which would have otherwise been payable to the Employee for
the fiscal year during which the date of termination falls had the
Agreement not been terminated, computed on the same basis as in
effect immediately prior to the date of termination, which bonus
shall be paid as and when the same would have otherwise been
payable under the bonus plan had the Agreement not been terminated;
and
(f) Except as provided in Article 11, this Agreement
shall be of no further force or effect.
7.5 Mitigation and Offset. In the event of a termination of
employment hereunder, the Employee shall be under no obligation to
seek alternative employment or other gainful occupation during the
period from the termination of this Agreement through the Scheduled
Termination Date (the "Unexpired Term") by way of mitigation of
amounts payable to the Employee under this Article 7; provided,
however, that if the Employee provides, directly or indirectly
14<PAGE>
(including through any personal service entity), any services
(whether as employee, consultant, independent contractor or
otherwise) to any person engaged in a business similar to the
business of the Company as then conducted (a "Third Party") during
the Unexpired Term, all amounts paid or payable to or for the
benefit of the Employee by or on behalf of such Third Party in
respect thereof ("Offset Amounts") shall reduce any amounts payable
thereafter by the Company to the Employee under Sections 7.4(c),
(d) and (e) hereof on a dollar-for-dollar basis. Upon the request
of the Company, from time to time, the Employee shall certify in
writing to the Company all Offset Amounts received or receivable by
him and shall provide the Company with true copies of all written
agreements and a summary of the terms of all oral agreements
pursuant to which such Offset Amounts are paid or payable to or for
the benefit of the Employee.
7.6 Full Settlement. The payments provided for in Article 7
of this Agreement are in full settlement of any claims the Employee
may have against the Company arising out of his termination,
including, but not limited to, any claims for wrongful discharge;
provided, however, that nothing herein shall limit any rights or
obligations of the parties under any other agreement with the
Company or any pension, severance, retirement, stock option,
deferred compensation or other benefit plans of the Company which
are applicable to the Employee and which provide for specified
rights and obligations in the event of a termination of the
Employee's employment with the Company.
15<PAGE>
ARTICLE 8
Non-Competition And Non-Interference
8.1 Non-Competition. The Employee agrees that during the
Term hereof and for a period of one year thereafter, except in the
case of a Termination Without Cause, the Employee will not,
directly, indirectly or as an agent on behalf of or in conjunction
with any person, firm, partnership, corporation or other entity,
own, manage, control, join, or participate in the ownership,
management, operation, or control of, or be financially interested
in or advise, lend money to, or be employed by or provide
consulting services to, or be connected in any manner with (a) any
supermarket, retail food store, grocery store, liquor store,
warehouse store or any similar business located in market areas
where the Company operates; or (b) any company, entity or business
with which Company was in active negotiation for the purchase of a
supermarket, retail food store, grocery store, liquor store or
warehouse store at the time of termination of the Employee's
employment, or with any other company which shall acquire such
supermarket, retail food store, grocery store, liquor store or
warehouse store. The Employee acknowledges that the business of
the Company is presently conducted throughout the counties in
Florida listed on Exhibit B attached hereto and any county
contiguous thereto and that such counties constitute the present
market area of the Company.
Ownership of less than 1% of the stock in a publicly-held
company shall not be deemed a violation of this Section 8.1.
16<PAGE>
8.2 Non-Interference. The Employee agrees that during the
Term hereof and for a period of one year thereafter, the Employee
will not, directly, indirectly or as an agent on behalf of or in
conjunction with any person, firm, partnership, corporation or
other entity, induce or entice any employee of the Company to leave
such employment or cause anyone else to do so.
8.3 Severability. If any covenant or provision contained in
Section 8.1 is determined to be void or unenforceable in whole or
in part, it shall not be deemed to affect or impair the validity of
any other covenant or provision. The parties intend that the
covenants contained in Section 8.1 shall be deemed to be a series
of separate covenants, one for each county referenced therein.
Except for geographic coverage, each such separate covenant shall
be deemed identical in terms to the covenant contained in such
Section. If, in any arbitral or judicial proceeding, a court shall
refuse to enforce all of the separate covenants deemed included in
such Section, then such unenforceable covenants shall be deemed
eliminated from the provisions hereof for the purpose of such
proceedings to the extent necessary to permit the remaining
separate covenants to be enforced in such proceedings.
ARTICLE 9
Remedies
9.1 Equitable Remedies. The Employee and the Company agree
that the services to be rendered by the Employee pursuant to this
Agreement, and the rights and interests granted and the obligations
17<PAGE>
to be performed by the Employee to the Company pursuant to this
Agreement, are of a special, unique, extraordinary and intellectual
character, which gives them a peculiar value, the loss of which
cannot be reasonably or adequately compensated in damages in any
action at law, and that a breach by the Employee of any of the
terms of the Agreement will cause the Company great and irreparable
injury and damage. In the event of a breach or threatened breach
of Article 6, Section 8.1 or Section 8.2, the Employee hereby
expressly agrees that the Company shall be entitled to the remedies
of injunction, specific performance and other equitable relief to
prevent a breach of the Agreement, both pendente lite and
permanently, against the Employee, as such breach would cause
irreparable injury to the Company and a remedy at law would be
inadequate and insufficient. Therefore, the Company may, in
addition to pursuing its other remedies, obtain an injunction from
any court having jurisdiction in the matter restraining any further
violation. The Employee agrees that a bond in the amount of $5,000
shall be adequate security for issuance of any temporary
injunction. The Company shall also be entitled to such damages as
it can show it has sustained, directly or indirectly, by reason of
said breach.
9.2 Rights and Remedies Preserved. Nothing in this Agreement
except Sections 7.6 and 10.11 shall limit any right or remedy the
Company or the Employee may have under this Agreement or pursuant
to law for any breach of this Agreement by the other party. Except
as set forth in Sections 7.6 and 10.11, the rights granted to the
18<PAGE>
Company and the Employee herein are cumulative and the election of
one shall not constitute a waiver of such party's right to assert
all other legal remedies available under the circumstances.
ARTICLE 10
Miscellaneous
10.1 No Waivers. The failure of either party to enforce any
provision of this Agreement shall not be construed as a waiver of
any such provision, nor prevent such party thereafter from
enforcing such provision or any other provision of this Agreement.
10.2 Notices. Any notice to be given to the Company and the
Employee under the terms of this Agreement may be delivered
personally, by telecopy, telex or other form of written electronic
transmission, or by registered or certified mail, postage prepaid,
and shall be addressed as follows:
If to the Company: Attention: Raymond P. Springer,
Senior Vice President, Administration
Kash n' Karry Food Stores, Inc.
6422 Harney Road
Tampa, Florida 33610
Telephone: 813-621-0274
Telecopier: (813) 626-9550
With a copy to: Robert S. Bolt, Esq.
Barnett, Bolt, Kirkwood & Long
601 Bayshore Boulevard
Suite 700
Tampa, Florida 33606
Telephone: 813-253-2020
Telecopier: (813) 251-6711
If to the Employee: BJ Mehaffey
15002 Hickory Grove Place
Midlothian, Virginia 23112
Telephone: 804-240-6301
19<PAGE>
With a copy to: Don Ford, Esq.
2727 Buford Rd.
Richmond, VA 23235
Telephone: 804-320-2061
Facsimile: 804-323-0719
Either party may hereafter notify the other in writing of any
change in address. Any notice shall be deemed duly given (i) when
personally delivered, or (ii) on the third day after it is mailed
by registered or certified mail, postage prepaid, as provided
herein.
10.3 Severability. The provisions of this Agreement are
severable and if any provision of this Agreement shall be held to
be invalid or otherwise unenforceable, in whole or in part, the
remainder of the provisions, or enforceable parts thereof, shall
not be affected thereby.
10.4 Successors and Assigns. The rights and obligations of
the Company under this Agreement shall inure to the benefit of and
be binding upon the successors and assigns of the Company,
including the survivor upon any merger, consolidation or
combination of the Company with any other entity. The Employee
shall not have the right to assign, delegate or otherwise transfer
any duty or obligation to be performed by him hereunder to any
person or entity, nor to assign or transfer any rights hereunder.
10.5 Entire Agreement. With respect to the terms of
Employee's employment, this Agreement supersedes all prior
agreements and understandings between the parties hereto, oral or
written, and may not be modified or terminated orally. No
20<PAGE>
modification, termination or attempted waiver shall be valid unless
in writing, signed by the party against whom such modification,
termination or waiver is sought to be enforced. This Agreement was
the subject of negotiation by the parties hereto and their counsel.
The parties agree that no prior drafts of this Agreement shall be
admissible as evidence (whether in any arbitration or court of law)
in any proceeding which involves the interpretation of any
provisions of this Agreement.
10.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
Florida without reference to the conflict of law principles
thereof.
10.7 Section Headings. The section headings contained herein
are for the purposes of convenience only and are not intended to
define or limit the contents of said sections.
10.8 Further Assurances. Each party hereto shall cooperate
and shall take such further action and shall execute and deliver
such further documents as may be reasonably requested by any other
party in order to carry out the provisions and purposes of this
Agreement.
10.9 Gender. Whenever the pronouns "he" or "his" are used
herein they shall also be deemed to mean "she" or "hers" or "it" or
"its" whenever applicable. Words in the singular shall be read and
construed as though in the plural and words in the plural shall be
read and construed as though in the singular in all cases where
they would so apply.
21<PAGE>
10.10 Counterparts. This Agreement may be executed in
counterparts, all of which taken together shall be deemed one
original.
10.11 Arbitration. The parties hereto agree that any dispute
concerning or arising out of the provisions of the Agreement shall
be resolved by arbitration in accordance with the rules of the
American Arbitration Association. Such arbitration shall be held
in Tampa, Florida and the decision of the arbitrator(s) shall be
conclusive and binding on the parties and shall be enforceable by
either party in any court of competent jurisdiction. The
arbitrator may, in his or her discretion, award attorneys' fees and
costs to such party as he or she sees fit in rendering his or her
decision. Notwithstanding the foregoing, if any dispute arises
hereunder as to which the Company desires to exercise any rights or
remedies under Section 9.1 hereof, the Company may, in its
discretion, in lieu of submitting the matter to arbitration, bring
an action thereon in any court of competent jurisdiction in
Hillsborough County, Florida, which court may grant any and all
relief available in equity or at law. In any such action, the
prevailing party shall be entitled to reasonable attorneys' fees
and costs as may be awarded by the court.
22<PAGE>
ARTICLE 11
Survival
11.1 Survival. The provisions of Article 6, 8, 9 and 10, and
Sections 7.3, 7.4, 7.5 and 7.6 of this Agreement shall survive the
termination of this Agreement whether upon, or prior to, the
Scheduled Termination Date hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Employment Agreement as of the date first above written.
KASH N' KARRY FOOD STORES, INC.,
a Delaware corporation
Julie Hicks By: /s/ Ronald E. Johnson
- ---------------------- -------------------------------
Name: Ronald E. Johnson
Robert S. Bolt Title: Chairman, President & CEO
- ----------------------
As to the Company
Robert S. Bolt /s/ BJ Mehaffey
- ---------------------- -------------------------------
BJ Mehaffey
R.P. Springer
- ----------------------
As to the Employee
23<PAGE>
KASH N' KARRY FOOD STORES, INC.
RELOCATION GUIDELINES
KEY MANAGEMENT POSITIONS
(STORE MANAGERS AND ABOVE)
The following guidelines are intended to clarify, for the
individuals involved, the basic relocation program provided by Kash
n' Karry Food Stores, Inc. when relocating key management personnel
at the store manager and above levels.
INCOME TAX CONSIDERATIONS
In all cases, it is understood that any payments made to or on
behalf of employees who are relocating, may be treated as taxable
income under the then current IRS regulations. Individuals
relocating need to take into consideration in planning their move
the income tax ramifications of these expenses and the effect they
have on their tax liability during the total time it takes for the
relocation to be completed.
SALE/PURCHASE OF RESIDENCE
Expenses will be covered up to a maximum of $10,000.00 for items
related to the sale of the current residence such a realtor fees,
title search and attorney fees. On the new home purchase, attorney
fees are covered; points and discount fees, which are generally
treated as interest and deductible expenses under current IRS
regulations, are excluded.
MOVING COSTS
Expenses related to moving household goods from the current (old)
residence to the new residence, are covered, excluding such unusual
items as rock collections, boats, second automobiles. Storage of
household goods is not covered.
MORTGAGE ASSISTANCE
For a period not to exceed 12 months, the company will pay the
lesser of the two (2) mortgage payments (New residence or Old
residence). To qualify and be eligible for continuing payments,
you must: 1) Be actively marketing the property for Sale by a
licensed Real Estate Firm, 2) The Real Estate Firm must have
written authority to discuss the sale of the property with
representatives of the Company, 3) The property must be maintained
in good, clean selling appearance, inside and out, 4) Any damage by
storm, vandals or other acts must be immediately repaired at your
expense.
Any reduction in the mortgage principal balance during the time the
company is making mortgage payments on your behalf shall be used to
offset the total expense incurred during the relocation and be
treated as part of the direct payments by Kash n' Karry Food
Stores, Inc. to you for covered expenses.
<PAGE>
TEMPORARY BRIDGE LOAN
To expedite your relocation, the company will provide an interest
free bridge loan, payable immediately on the sale of the old
residence. The bridge loan shall be for up to 75% of the equity
value in the "old" residence, not to exceed $50,000.00. The equity
value shall be determined by the average of at least two (2) Market
Analysis reports submitted by independent, licensed Real Estate
Brokers, minus the current mortgage principal balance as certified
in writing by your mortgage company. A promissory note must be
signed and a Deed of Trust against the new property may be
required. Repayment of the bridge loan is required immediately at
the time of Closing/Settlement on the old residence.
RELOCATION OF SPOUSE/FAMILY
Generally one (1) round trip airfare will be provided for your
spouse to "house hunt" in the area. This expense is evaluated on
an individual basis. We assume that the employee, spouse and
family will drive to the area for the relocation. During this
travel, expenses for motel(s), meal(s) and gasoline are covered
based on submission of receipts for actual expense incurred. Meals
are covered at the rate of $12.00 per day per family member.
TRANSITION EXPENSE/TEMPORARY HOUSING
We will cover temporary housing during relocation for you for up to
sixty (60) days. Should you be housed in a location that does not
offer kitchen facilities, we provide $60.00 per week allowance for
meals. No receipts are necessary should this arrangement be
necessary. If kitchen facilities are available no food allowance
is provided.
LAUNDRY EXPENSE
Laundry expenses are covered, when your temporary residence does
not include laundry. Receipts are required for reimbursement of
this expense.
<PAGE>
EXHIBIT "B" TO THE EMPLOYMENT AGREEMENT
BETWEEN KASH N' KARRY FOOD STORES, INC. AND BJ MEHAFFEY
Alachua
Charlotte
Citrus
Hardee
Hernando
Highlands
Hillsborough
Lee
Manatee
Marion
Osceola
Pasco
Pinellas
Polk
Sarasota
Volusia
[KASH N' KARRY FOOD STORES, INC. LETTERHEAD]
September 1, 1994
Mr. Anthony R. Petrillo
Acting Chief Executive Officer
and Chairman of the Board
Kash n' Karry Food Stores, Inc.
6422 Harney Road
Tampa, Florida 33610
Re: Employment and consulting agreement between Kash n' Karry
Food Stores, Inc., and Anthony R. Petrillo
Dear Mr. Petrillo:
This letter agreement will memorialize all of the material
terms of your employment and consulting agreement with Kash n'
Karry Food Stores, Inc. (the "Company"), and hereby supersedes all
prior agreements and understandings between you and the Company:
1. Beginning on August 1, 1994, and continuing thereafter
until January 29, 1995 (the "Initial Term"), the Company employs
you to work full-time as its acting Chairman of the Board and Chief
Executive Officer for a cash compensation of $13,462 for each
calendar week actually worked, subject to withholding for
applicable payroll taxes. During the Initial Term, the principal
place of your employment for not less than three full days each
week will be Tampa, Florida; provided, however, that if you are
absent from work for not more than 1 week due to your illness or
incapacity or the illness or death of an immediate family member,
then you will be deemed not to have breached this obligation.
2. Beginning on January 30, 1995, and continuing thereafter
until July 31, 1995 (the "Second Term"), the Company engages you to
work as an independent consultant for $200 per hour of service
actually rendered in response to requests from the Board of
Directors of the Company; provided, however, that the Company
guarantees that it will engage you to work not less than 500 hours
during the Second Term.
<PAGE>
Mr. Anthony R. Petrillo
September 1, 1994
Page 2
3. During the Initial Term and the Second Term, you agree to
perform diligently and in good faith such duties and services for
the Company as may be directed to you from time to time by the
Board of Directors, and you will not, without first disclosing the
matter and obtaining the prior written consent of the Board of
Directors, directly or indirectly render services for compensation
to any other person.
4. Beginning on August 1, 1995, and continuing until July
31, 1997 (the "Third Term"), the Company engages you to work as an
independent consultant for $25,000 for each 3-month period of
services rendered, payable in arrears. During the Third Term, you
will use your best efforts to complete the work requested of you by
the Board; provided, however, that in performing such services you
will not be required to devote more than 48 hours of service in any
one calendar month, and if you actually work more than 125 hours
during any 3-month period during the Third Term you will
additionally be compensated at the rate of $200 per hour of service
actually worked in excess of 125.
5. Beginning on August 1, 1994, and continuing until July
31, 1996, the Company will pay you, for as long as you are actually
working or serving in the foregoing capacities, a monthly Ohio home
office subsidy of $1,250 per month. Also, the Company will
reimburse you for your reasonable out-of-pocket business expenses
directly related to your performance of services on behalf of the
Company pursuant to this agreement.
6. The Company may, at its election, terminate this agreement
and your employment by the Company if you are unable or unwilling
to perform the duties reasonably requested of you under this
agreement, if you commit an act of fraud, misappropriation or a
felony, or if you engage in willful misconduct that has a
materially adverse effect on the Company. If this agreement is
terminated for any reason, you are entitled to the compensation
provided herein, prorated to the date of termination.
7. You agree to maintain the confidentiality of all trade
secrets, financial information, marketing strategies and other
proprietary information concerning the Company. Upon termination
of your employment, you agree to return to the Company all
documents, including computer records, containing the foregoing
confidential information, which, at all times and whether used on
or off the Company's premises, remain the exclusive property of the
Company. You also agree that during the term of this agreement,
and for six months following its termination or expiration for any
reason, you will not, directly or indirectly, be employed by or
render services to any person that competes with the Company within
<PAGE>
Mr. Anthony R. Petrillo
September 1, 1994
Page 3
the counties of Florida in which the Company does business during
the course of your employment under this agreement. The provisions
of this paragraph 7 shall survive any termination or expiration of
this agreement.
8. This agreement shall be governed by the laws of Florida,
and each party consents and agrees that Hillsborough County,
Florida shall be the exclusive, proper and convenient venue for any
legal proceeding arising out of this agreement.
9. The Company's obligations under this agreement are
contingent upon the approval of this agreement by the Company's
Board of Directors.
If you agree to the foregoing terms, please signify your
agreement by signing the enclosed duplicate original letter
agreement in the space provided below, and returning it to me in
the enclosed, postage pre-paid envelope.
Very truly yours,
/s/ Raymond P. Springer
---------------------------
Raymond P. Springer
Executive Vice President -
Administration
RPS/jh
cc: Mr. Leonard Green
ACKNOWLEDGEMENT
The undersigned hereby agrees to be employed by the Company
upon the terms and conditions set forth above.
Date: September 7, 1994.
/s/ Anthony R. Petrillo
-------------------------------------
ANTHONY R. PETRILLO
BONUS DEFERRAL COMPENSATION AGREEMENT
This Bonus Deferral Compensation Agreement (the "Agreement")
is entered into this ____ day of July, 1995, by and between KASH N'
KARRY FOOD STORES, INC., a Delaware corporation (the "Company"),
and the person executing this Agreement as key employee (the "Key
Employee"). To induce the Key Employee to remain in the employ of
the Company, and in consideration of their mutual covenants, and
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Key Employee
agree as follows:
1. Definitions.
As used in this Agreement and unless the context
otherwise plainly requires, the terms defined in this paragraph
shall have the meanings ascribed to them and shall include the
plural as well as the singular number.
1.1 "Account" means the separate memorandum account
maintained by the Company in the name of the Key Employee, which
records the aggregate amount of the Key Employee's Elective Bonus
Deferral Compensation, and the aggregate amount of the Income
allocable to such amount.
1.2 "Agreement" means this Bonus Deferral Compensation
Agreement, as originally executed and as from time to time amended
or supplemented.
1.3 "Beneficiary" means the Person or Persons
designated by the Key Employee in Schedule A to this Agreement to
receive the Benefit, if any, payable by reason of the Key
Employee's death. The Key Employee may change the designated
Beneficiary at any time and from time to time, without the consent
of any previous Beneficiary, by executing a new Schedule A and
delivering it to the Plan Administrator prior to the Key Employee's
death. The last Beneficiary designated by the Key Employee in a
Schedule A duly executed by the Key Employee and timely delivered
to the Plan Administrator shall receive the Benefit. If no
Beneficiary is properly designated by the Key Employee in
accordance with the provisions of this subparagraph 1.3, then the
Key Employee's estate shall be deemed the Beneficiary.
1.4 "Benefit" means the amounts set forth in the
Account, which shall be paid to the Key Employee by the Company
upon the occurrence of a Distribution Event; provided, however, if
the triggering Distribution Event is an Unforeseeable Emergency,
then the amount of the Benefit that shall be paid to the Key
Employee shall be limited to the amount of the Unforeseeable
Emergency (as determined in accordance with subparagraph 1.23 of
this Agreement).
<PAGE>
1.5 "Bonus Compensation" means the total amount, if any,
as determined by the Company's Board of Directors after the end of
the applicable fiscal year of the Company to be payable by the
Company to the Key Employee as a bonus. The Board of Directors has
the sole discretion, but no obligation, to award any bonus subject
to this Agreement and the Key Employee has no right to receive any
such award.
1.6 "Company" means Kash n' Karry Food Stores, Inc., a
Delaware corporation.
1.7 "Deferral Percentage" means the percentage (which
percentage must be an integer) of the Excess Bonus Compensation
that the Key Employee elects to defer for a particular Plan Year in
accordance with the terms of this Agreement.
1.8 "Disability" means the Key Employee's inability to
engage in any substantially gainful activity by reason of any
medically determinable physical or mental impairment that can be
expected to last for a continuous period of not less than twelve
(12) months. The determination of whether the Key Employee is
Disabled shall be made by a licensed medical doctor selected by the
Key Employee; provided, however, if the Company disagrees with such
determination, then the Company shall select a doctor and the
mutual agreement of the two doctors so selected shall be conclusive
and bind all affected persons; provided, further, if the two
doctors so selected shall be unable to mutually agree as to whether
the Key Employee is Disabled, then those two doctors shall mutually
select a third doctor and the determination of such third doctor
shall be conclusive and bind all affected persons. Each doctor so
selected shall determine whether the Key Employee is Disabled
within thirty (30) days from the date such doctor is selected.
1.9 "Disabled" means, when referring to the Key
Employee, the Disability of the Key Employee as determined in
accordance with this Agreement.
1.10 "Distribution Event" means the first to occur of any
of the following events:
(a) the date of the Key Employee's Termination of
Employment with the Company for any reason, including, but not
limited to, the Key Employee's death, Disability, retirement, or
voluntary or involuntary termination of employment, with or without
cause;
(b) the date the Plan is terminated under
subparagraph 6.1 of this Agreement; or
(c) the date that an Unforeseeable Emergency occurs
with respect to the Key Employee.
2<PAGE>
1.11 "Election Form" means that written form (attached
hereto as Schedule A), pursuant to which the Key Employee will
select the minimum Bonus Compensation amount, the Deferral
Percentage, and the maximum Elective Bonus Deferral Compensation
amount.
1.12 "Elective Bonus Deferral Compensation" means the
amount of Excess Bonus Compensation that the Key Employee elects to
defer for any particular Plan Year under the terms of this
Agreement, as determined in accordance with the Key Employee's
Election Form, and shall equal the product of the Key Employee's
Excess Bonus Compensation for such Plan Year multiplied by the
Deferral Percentage in effect for such Plan Year as selected by the
Key Employee on a signed and delivered Election Form, but subject
to the maximum Elective Bonus Deferral Compensation amount selected
by the Key Employee for such Plan Year set forth in the Election
Form.
1.13 "Excess Bonus Compensation" means the amount of the
Bonus Compensation for the applicable Plan Year in excess of that
certain amount of the Bonus Compensation that the Key Employee
elects to have paid to such Key Employee, which election shall be
made on the Election Form.
1.14 "Income" means the interest rate, as set forth on
Schedule B, attached hereto and incorporated herein by this
reference, and as amended from time to time in accordance with the
provisions of paragraph 4 of this Agreement, that will be credited
by the Company to:
(a) the Key Employee's Account on the last day of
each week (or such other period as determined in accordance with
the Company's normal payroll and accounting practices) upon (i) the
then aggregate amount of the Key Employee's Elective Bonus Deferral
Compensation; and (ii) the then aggregate amount of the Income
previously allocated to the Account;
and (b) the amount of the Key Employee's Account to the
extent required under subparagraph 5.1 of this Agreement.
1.15 "Internal Revenue Code" means the Internal Revenue
Code of 1986, as in effect on the date this Agreement is executed
by the parties.
1.16 "Key Employee" means the individual who signs this
Agreement, who is a highly compensated employee or a member of a
select management group of the Company.
1.17 "Person" means one or more of the individuals or
entities set forth in section 7701(a)(1) of the Internal Revenue
Code.
3<PAGE>
1.18 "Plan" means this Bonus Deferral Compensation Agree-
ment.
1.19 "Plan Administrator" means the Company, unless the
Company designates a different person as Plan Administrator.
1.20 "Plan Year" means the 52/53 week fiscal year period
ending on the Sunday nearest July 31 of each year.
1.21 "Subsidiary" means any corporation or other entity
a majority or more of whose outstanding voting stock or voting
power is beneficially owned directly or indirectly by the Company.
1.22 "Termination of Employment" means the cessation of
the Key Employee's employment with the Company for any reason
including, but not limited to, the Key Employee's death,
Disability, retirement, or voluntary or involuntary termination of
employment, with or without cause. Unless attributable to death or
Disability, Termination of Employment shall be effective on the
last day that the Key Employee performed any service for the
Company and may be evidenced by written notice delivered in
accordance with subparagraph 14.5 of this Agreement by either party
to the other party.
1.23 "Unforeseeable Emergency" means an unanticipated
emergency that is caused by an event beyond the control of the Key
Employee or Beneficiary and that would result in severe financial
hardship to such individual if early withdrawal were not permitted
and that results from a sudden and unexpected illness or accident
of the Key Employee or a dependent (as defined in section 152(a) of
the Code) of the Key Employee, loss of the Key Employee's property
due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of
the Key Employee or the Beneficiary. The occurrence of an
Unforeseeable Emergency shall be determined by the Company and the
amount of any distribution by reason of the occurrence of an
Unforeseeable Emergency shall be limited to the amount necessary to
meet the emergency. The circumstances that will constitute an
Unforeseeable Emergency will depend upon the facts of each case,
but in any case, payment may not be made to the extent such
hardship is or may be relieved: (i) through reimbursement or
compensation by insurance or otherwise; (ii) by liquidation of the
Key Employee's assets, to the extent the liquidation of such assets
would not itself cause severe financial hardship; or (iii) by
cessation of deferrals under the Plan. The term Unforeseeable
Emergency does not include the need to send a Key Employee's child
to college or the desire to purchase a home.
2. Employment. Unless otherwise agreed by the Company,
the Key Employee agrees to devote his full time and attention to
the business and affairs of the Company and to use his best efforts
to provide satisfactory services to the Company.
4<PAGE>
3. Elective Deferral Compensation.
3.1 Election Procedure. Prior to the end of each Plan
Year, and at least 30 days prior to the actual date of the
ascertainment and grant of the Employee's Bonus Compensation (if
any) for such Plan Year, the Key Employee may determine to elect to
defer the receipt of any percentage of such Key Employee's Excess
Bonus Compensation for the Plan Year, which will constitute the
tentative Elective Bonus Deferral Compensation for such Plan Year,
and such election shall be deemed effective as of the first day of
such Plan Year; provided, however, the Elective Bonus Deferral
Compensation amount for such Plan Year shall not exceed that
certain maximum amount elected by the Key Employee on the Election
Form, and the amount of the tentative Elective Bonus Deferral
Compensation amount in excess of such maximum amount, if any, shall
be paid to the Key Employee. The above provisions may be
illustrated by the following example: Assume that the Key
Employee's Bonus Compensation for the Plan Year is $25,000; the
minimum Bonus Compensation selected to be paid to the Key Employee
is $5,000; the Key Employee elects a Deferral Percentage of fifty
percent (50%); and the maximum Elective Bonus Deferral Compensation
amount selected by the Key Employee is $9,000. The first $5,000 of
the Bonus Compensation shall be paid by the Company to the Key
Employee. The remaining Bonus Compensation or $20,000 shall be the
amount of the Excess Bonus Compensation for that Plan Year. 50% of
the Excess Bonus Compensation of $20,000 equals $10,000. Thus,
$10,000 is the amount of the tentative Elective Bonus Deferral
Compensation amount. However, the Key Employee has elected that
the maximum Elective Bonus Deferral Compensation amount shall be
$9,000 for such Plan Year. Thus, of the $25,000 Bonus
Compensation, $9,000 is the Elective Bonus Deferral Compensation
amount, and the balance, or $16,000, is paid currently to the Key
Employee.
Each year the Key Employee may make the above described
elections on a properly executed and delivered Election Form. An
Election Form shall not be valid unless properly signed and dated
by the Key Employee, witnessed, and delivered to the Plan
Administrator prior to the end of the Plan Year. The elections
made on the Election Form shall be irrevocable with respect to the
Bonus Compensation for the Plan Year to which the election relates.
If the Key Employee has not delivered a timely and properly
executed Election Form to the Plan Administrator for any Plan Year,
then the Key Employee shall be deemed not to have elected any Bonus
Compensation for that Plan Year.
3.2 Allocation to Account. The amount of the Excess
Bonus Compensation, if any, that the Key Employee elects to defer
in accordance with subparagraph 3.1 of this Agreement shall be
recorded in the Account corresponding to the date that the Company
would otherwise have paid the Bonus Compensation to the Key
5<PAGE>
Employee in accordance with its normal payroll and accounting
practices. Income shall accrue on any such allocation of the
Elective Bonus Deferral Compensation commencing on the date that
such allocation is allocated to the Account as described above.
4. Change in the Income Rate. Prior to the beginning of
each Plan Year, the Board of Directors of the Company shall
establish the Income rate that shall be effective and irrevocable
for the immediately ensuing Plan Year, and shall be effective for
each subsequent Plan Year, unless the Company's Board of Directors
changes the Income rate; provided, however, any such change shall
not be effective earlier than the Plan Year immediately following
the Plan Year during which the change is adopted by the Company's
Board of Directors; provided, further, notwithstanding the
foregoing, the Company's Board of Directors may increase the Income
rate at any time and such increase shall be effective as of the
date that the increase is adopted by the Board of Directors.
Notwithstanding any contrary provision of this Agreement, the
amount of the Income rate shall not be less than eight percent (8%)
interest per annum, and unless the Board of Directors of the
Company shall specifically provide otherwise, the Income rate under
this Plan shall be the same as the Income rate established by the
Board of Directors under the Deferred Compensation Plan applicable
to the Annual Compensation of Key Employees of the Company. Any
decrease in the Income rate shall be communicated to the Key
Employee not less than ten (10) days prior to the effective date of
such change.
5. Benefit.
5.1 Eligibility for Benefit. Upon the occurrence of a
Distribution Event, the Company shall pay to the Key Employee or
the Key Employee's Beneficiary, as applicable, the Benefit. The
amount of the Benefit shall be increased by its share of Income
(allocated on a daily basis) for the period that commences on the
date such Distribution Event occurs and terminates on the date that
the Benefit (and this additional Income) is distributed to the Key
Employee in accordance with subparagraph 5.2 of this Agreement.
5.2 Amount of Benefit. The Benefit, together with the
additional Income, if any, accrued under subparagraph 5.1 of this
Agreement, less all deductions required by law, shall be paid by
the Company to the Key Employee or Beneficiary, as applicable, in
a single lump sum payment not later than thirty (30) days after the
date that the Distribution Event occurs, and payment shall, in the
discretion of the Company, either be made to the Key Employee or
Beneficiary, as applicable, by hand delivery at the office of the
Company or delivery in accordance with the provisions of
subparagraph 14.5 of this Agreement.
6<PAGE>
6. Termination or Amendment of Agreement.
6.1 Termination of Agreement. This Agreement shall
terminate upon the date that any of the following events first
occurs:
(a) cessation of the Company's business;
(b) approval by the Company's shareholders to
dissolve or liquidate the Company;
(c) the decision of the Company to demote the Key
Employee to a position with the Company that results in the Key
Employee no longer constituting a highly compensated employee or a
member of a select management group of the Company;
(d) upon the date that the Company breaches any
obligation imposed on it under any other deferred compensation
agreement that the Company may enter into from time to time,
including, but not limited to, failing to pay all or any portion of
any benefits required to be paid to any other employee of the
Company under any such deferred compensation agreement, but only if
such employee delivers written notice of such breach to the
Company, the Company fails to cure such breach during the period
that terminates ten (10) days after the date such notice is
delivered to the Company, and a board of arbitration (which shall
be selected and administered in accordance with a procedure
substantially similar to the procedure described in subparagraph
11.4 of this Agreement) determines that the Company breached any
such obligation. The board of arbitration shall be selected and
make its determination within 30 days after the date that such
employee delivers the written notice to the Company; or
(e) the decision of the Company to terminate the
Plan at any time, with or without cause.
Notwithstanding the foregoing, this Agreement shall survive
any termination until the Key Employee's entire Benefit, together
with the additional Income, if any, accrued under subparagraph 5.1
of this Agreement, less all deductions required by law, is
distributed to the Key Employee in accordance with the provisions
of subparagraphs 5.1 and 5.2 of this Agreement.
6.2 Amendment of Agreement. Except as otherwise
provided under this Agreement, the Company may amend or supplement
this Agreement, including, but not limited to, increasing the
amount of the Income rate, at any time and from time to time with
or without the consent of the Key Employee. The Company shall
deliver a copy of the amendment to the Key Employee. Provided,
however, notwithstanding the foregoing, no amendment shall be
effective to: (a) reduce the amount of, or alter the time, method,
7<PAGE>
or form of distributing, the Benefit payable pursuant to this
Agreement determined as of the date immediately prior to the date
of such amendment; (b) decrease the amount of the Income rate for
a current Plan Year; or (c) decrease the amount of the Income rate
below eight percent (8%) compounded quarterly.
7. Funding. The Plan shall be "unfunded" for purposes of
federal income taxation and for purposes of the Employee Retirement
Income Security Act of 1974, as amended, as that term is inter-
preted, from time to time, for such purposes; provided, however,
the Company may obtain life insurance, disability insurance, or
both, to informally fund its obligations hereunder, and the Company
shall be the owner and beneficiary of the policy or policies. The
Key Employee shall submit to medical examinations, supply
information, and execute documents as may be required by the
insurance company or companies. Neither the Key Employee, nor the
Plan, shall be deemed to have any right, title, or interest in or
to any specific assets of the Company, including any insurance
policies or the proceeds therefrom, and any such policies shall not
in any way be considered to be security for the performance of the
obligations under this Agreement. Nothing contained in this
Agreement and no action taken pursuant to its provisions shall
create or be construed to create a trust of any kind or a fiduciary
relationship between the Company and the Key Employee or the
Beneficiary. Any funds that may be invested to meet the provisions
of this Agreement shall continue for all purposes to be a part of
the general funds of the Company. To the extent any person
acquires a right to receive payments from the Company under this
Agreement, that right will be no more secure than the right of an
general unsecured creditor of the Company. The Benefit payable
under this Agreement constitutes a mere promise by the Company to
make payments in the future.
8. Non-Assignability. The Key Employee or Beneficiary shall
not have any right to commute, encumber, transfer, convey, or
dispose of the right to the Benefit payable under this Agreement.
The Benefit and the right to it are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of the Key
Employee or Beneficiary. Except to the extent contrary to
applicable law, the Benefit under this Agreement is not
transferable by operation of law if the Key Employee or Beneficiary
becomes insolvent or bankrupt. Any attempt by the Key Employee or
Beneficiary to commute, encumber, transfer, convey, or dispose of
the right to the Benefit payable under this Agreement, shall be
void and ineffectual.
9. Participation in Other Plans. Nothing contained in this
Agreement shall be construed to alter, abridge, or affect the
rights and privileges of the Key Employee to participate in and be
covered by any employee plans that the Company now has or may here-
after adopt. Any payment under this Plan shall be independent of,
8<PAGE>
and in addition to, those payable under any other plan or agreement
that may be in effect with respect to the Key Employee.
10. Employment Rights. This Agreement shall not be deemed to
constitute a contract of employment between the Company and the Key
Employee and shall create no right of the Key Employee to continue
in the Company's employ, nor shall this Agreement restrict the
right of the Company to discharge the Key Employee or to terminate
the Key Employee's employment.
11. Plan Administration.
11.1 Plan Administrator. This Agreement and the Plan
shall be administered by the Plan Administrator. The Plan
Administrator shall make all determinations as to the right of the
Key Employee or the Beneficiary, as applicable, to receive the
Benefit provided by this Agreement.
11.2 Claims Procedure. If a Benefit under this Agreement
is not paid to the Key Employee or the Beneficiary, as applicable,
and such person feels entitled to it, such person shall make a
claim in writing to the Plan Administrator. If the claim is
denied, in whole or in part, the Plan Administrator shall inform
the claimant in writing within 45 days setting forth the reasons
for denial in layman's terms, with specific reference to the
provisions of this Agreement upon which the denial is based, and
with a description of the review procedures set forth in subpara-
graph 11.3.
11.3 Review Procedure. If a claim for the Benefit under
this Agreement is denied, the claimant may, within 60 days after
the denial, submit to the Plan Administrator, in writing, such
information that will, in the claimant's opinion, support the
claimant's right to the Benefit. If the Plan Administrator, after
reviewing the information submitted by the claimant, determines
that the claimant is not entitled to the Benefit claimed, the Plan
Administrator shall afford the claimant or his representative a
reasonable opportunity to appear personally before the Plan
Administrator, to submit oral or written comments, and to review
any documents pertinent to the Plan Administrator's decision. The
Plan Administrator shall render its final decision, in writing,
within 60 days after the appearance, with the specific reasons
therefor.
11.4 Arbitration. If the Key Employee or Beneficiary,
as applicable, disagrees with the Plan Administrator's final
decision and such claimant delivers notice to the Company (in
accordance with the provisions of subparagraph 14.5) within ten
(10) days from the date of the Plan Administrator's final decision,
then the determination of whether the claimant is entitled to the
Benefit shall be submitted to binding arbitration. In that event,
the determination shall be made by a board of arbitration to
9<PAGE>
consist of one representative selected by the claimant, one
representative selected by the Company, and a third representative
to be appointed by the two representatives so selected. The board
of arbitration shall be bound by and adhere to the rules and
regulations of the American Arbitration Association applying the
laws of the State of Florida. The majority decision of the board
of arbitration shall be binding and conclusive upon all affected
parties. Except as otherwise provided under subparagraph 14.7 of
this Agreement, the costs and expenses of the arbitration shall be
borne equally by the claimant and the Company.
12. Expenses. All costs and expenses of administering the
Plan shall be paid by the Company.
13. Account Statement. Within sixty (60) days after the
termination of each Plan Year, the Company shall deliver to the Key
Employee a statement that sets forth the amounts recorded in the
Key Employee's Account.
14. Miscellaneous.
14.1 Binding Effect. This Agreement shall be binding on
the legal representatives, successors, heirs, and assignees of the
Company and the Key Employee.
14.2 Governing Law. This Agreement has been negotiated
and prepared in the State of Florida, and the validity,
construction, and enforcement of this Agreement shall be governed
by, and construed in accordance with, the laws of Florida
(excluding its choice of law provisions if such laws would result
in the application of laws of a jurisdiction other than Florida).
Each party consents and agrees that Tampa, Hillsborough County,
Florida, shall be the proper, exclusive, and convenient venue for
any legal proceeding in federal or state court relating to this
Agreement, and each party to this Agreement waives any defense,
whether asserted by motion or by pleading, that Tampa, Hillsborough
County, Florida, is an improper or inconvenient venue.
14.3 Entire Agreement. This instrument contains the
final, complete, and exclusive expression of the parties' under-
standing and agreement concerning the transactions contemplated by
this Agreement and supersedes any prior or contemporaneous
agreement or representation, oral or written, by either of them.
14.4 Descriptive Headings. The titles preceding the text
of the paragraphs and subparagraphs of this Agreement are inserted
solely for convenience of reference and shall neither constitute a
part of this Agreement nor affect its meaning, interpretation, or
effect.
14.5 Notices. Any notice, communication, or payment of
Benefit re
10<PAGE>
quired or permitted to be sent by either party under this Agreement
shall be made in writing and shall be deemed delivered when
presented by hand delivery or when deposited in a United States
postal service office or letter box for mailing by first class mail
or certified mail, return receipt requested (whether or not the
return receipt is subsequently received), postage prepaid and
addressed to the appropriate party as follows:
If to the Company:
Kash n' Karry Food Stores, Inc.
P.O. Box 11675
Tampa, Florida 33680
If to the Key Employee:
The address set forth in Schedule A
or at such other addresses as either party may designate in writing
to the other party.
14.6 Gender. Throughout this Agreement, except where the
context otherwise requires, the masculine gender shall be deemed to
include the feminine and the neuter and the singular number shall
be deemed to include the plural and vice-versa.
14.7 Attorneys' Fees. If any suit or action shall be
instituted to enforce or to interpret this Agreement, or to enforce
any other claim or counterclaim arising out of the employment
relationship between the parties, the prevailing party shall be
entitled to recover from the non-prevailing party all costs, or
arbitration fees, and reasonable attorneys' fees, expended as part
of such suit, action, or appeal thereof.
15. Limited Withdrawal Right Subject to Substantial
Limitation. Notwithstanding any contrary provision of this
Agreement, prior to the occurrence of a Distribution Event the Key
Employee shall have the right to make an election to receive a
distribution equal to ninety percent (90%) of the Key Employee's
Benefit. The election shall be effective, and the amount of such
Benefit shall be determined, on the date that the election is
received by the Plan Administrator (the "Withdrawal Election
Date"). The other ten percent (10%) of the Key Employee's Benefit
shall be forfeited and lost by the Key Employee. If the Key
Employee elects to receive a distribution under this paragraph 15,
then the Key Employee shall not be eligible to again participate in
the Plan until the beginning of the first Plan Year that follows
the one year anniversary of the Withdrawal Election Date. The Key
Employee shall make an election to receive a distribution under
this paragraph 15 by delivering a written statement signed and
dated by the Key Employee to the Plan Administrator. The Company
shall pay the ninety percent (90%) amount of the Key Employee's
Benefit, less all deductions required by law, to the Key Employee
11<PAGE>
not more than ten (10) days after the Withdrawal Election Date by
either hand delivery to the Key Employee at the Company's office or
delivery in accordance with paragraph 14.5 of this Agreement.
IN WITNESS WHEREOF, the Company and the Key Employee have
executed this Agreement this ____ day of July, 1995.
ATTEST: KASH N' KARRY FOOD STORES, INC.
_________________________ By:___________________________
Secretary
Its:_______________________
(Corporate Seal)
"COMPANY"
WITNESSES:
_________________________ ______________________________
_________________________
"Key Employee"
12<PAGE>
SCHEDULE A
Election and Beneficiary Designation Form
1. For the Plan Year terminating on July ___, 199___, I
hereby make the following elections:
(a) The minimum amount of the Bonus Compensation that shall be
paid to me for the applicable Plan Year shall be $__________.
The amount of Bonus Compensation for such Plan Year in excess
of this minimum amount shall be the Excess Bonus Compensation
for that Plan Year.
(b) The Deferral Percentage for the applicable Plan Year that will
be multiplied by the Excess Bonus Compensation amount to yield
the tentative Elective Bonus Deferral Compensation amount for
such Plan Year shall be ___ percent (__%).
(c) Notwithstanding my selection in (b) above, the amount of the
Elective Bonus Deferral Compensation amount for such Plan Year
shall not exceed $___________.
2. I hereby designate ___________________________________
as my Beneficiary to receive the Benefit on the event of my death,
and if ____________________________ is not then living, then I
designate ______________________ to be my secondary Beneficiary.
3. My address and telephone number for purposes of giving
notice under subparagraph 14.5 of the Agreement is:
_________________________
Street or P.O. Address
_________________________
City, State, and Zip Code
_________________________
Telephone Number
Dated this _____ day of July, 199___.
WITNESSES:
__________________________ _________________________
__________________________
"Key Employee"
13<PAGE>
SCHEDULE B
1. For the Plan Year commencing on the ___ day of July 1995,
and each subsequent Plan Year (unless amended in accordance with
paragraph 4 of the Agreement), the annual Income rate shall be 11%.
I hereby certify that the percentage set forth above was duly
adopted by the Company's Board of Directors.
Kash n' Karry Food Stores, Inc.
By:____________________________
Its: Secretary
14
EXHIBIT 11
KASH N' KARRY FOOD STORES, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
PRIMARY FULLY DILUTED
EARNINGS EARNINGS
--------- -------------
Thirty Weeks
Ended July 30, 1995:
Net income (loss) $3,144,000 $3,144,000
=========== ===========
Common shares
outstanding at
beginning of period 4,649,943 4,649,943
Stock option plans:
Shares under option 198,811 198,811
at end of period
Treasury shares which
could be purchased (136,733) (91,957)
----------- -----------
Average number of
shares outstanding 4,712,021 4,756,797
=========== ===========
Earnings per share $ 0.67 $ 0.66
=========== ===========
EXHIBIT 21
KASH N' KARRY FOOD STORES, INC.
SUBSIDIARIES
SUBSIDIARY STATE OF ORGANIZATION
- ------------------------------ ---------------------
KNK 720 DELAWARE BUSINESS TRUST DELAWARE
KNK 725 DELAWARE BUSINESS TRUST DELAWARE
KNK 733 DELAWARE BUSINESS TRUST DELAWARE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF KASH N' KARRY FOOD STORES, INC. AS OF AND FOR THE PERIOD ENDED
JULY 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-30-1995
<PERIOD-END> JUL-30-1995
<EXCHANGE-RATE> 1
<CASH> 4,803
<SECURITIES> 0
<RECEIVABLES> 6,504
<ALLOWANCES> 0
<INVENTORY> 86,840
<CURRENT-ASSETS> 102,457
<PP&E> 150,559
<DEPRECIATION> 10,592
<TOTAL-ASSETS> 373,572
<CURRENT-LIABILITIES> 89,293
<BONDS> 218,131
<COMMON> 46
0
0
<OTHER-SE> 49,592
<TOTAL-LIABILITY-AND-EQUITY> 373,572
<SALES> 1,026,001
<TOTAL-REVENUES> 1,026,001
<CGS> 812,203
<TOTAL-COSTS> 996,540
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,529
<INCOME-PRETAX> (68)<F1>
<INCOME-TAX> (3,682)
<INCOME-CONTINUING> (3,750)<F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 63,297<F2>
<CHANGES> 0
<NET-INCOME> 59,547
<EPS-PRIMARY> $ 0.67
<EPS-DILUTED> $ 0.66<F3>
<FN>
<F1>Before reorganization item, extraordinary item, and change in accounting
principle.
<F2>Includes reorganization items and change in accounting principle.
<F3>Earnings per share is for the 30-week period ended July 30, 1995, the period
subsequent to the Company's emergence from bankruptcy.
</FN>
</TABLE>
