<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-8105
RYKOFF-SEXTON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-2134693
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
761 TERMINAL STREET
LOS ANGELES, CALIFORNIA 90021
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(213) 622-4131
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NOT APPLICABLE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES ( X ) NO ( )
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
<TABLE>
<CAPTION>
OUTSTANDING AT
CLASS OF COMMON STOCK AUGUST 31, 1994
--------------------- -----------------
<S> <C>
$.10 PAR VALUE 11,640,193 SHARES
</TABLE>
<PAGE> 2
RYKOFF-SEXTON, INC.
INDEX
<TABLE>
<CAPTION>
Page
No.
----
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
July 30, 1994 and April 30, 1994 2
Condensed Consolidated Statements of Income
Three Months ended July 30, 1994 and
July 31, 1993 3
Condensed Consolidated Statements of Cash Flows
Three Months ended July 30, 1994 and
July 31, 1993 4
Notes to Condensed Consolidated Financial
Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-8
Part II. Other Information
Item 5. Other information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
1
<PAGE> 3
RYKOFF-SEXTON, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
<TABLE>
<CAPTION>
July 30, April 30,
1994 1994
-------- ---------
<S> <C> <C>
ASSETS
Current assets
Cash $ 2,555 $ 9,261
Accounts receivable, net 153,069 146,132
Inventories 140,252 131,009
Prepaid expenses 17,696 18,620
-------- -------
Total current assets 313,572 305,022
Property, plant and equipment, net 172,647 158,937
Other assets, net 22,429 22,720
-------- --------
Total assets $508,648 $486,679
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $130,652 $145,091
-------- --------
Long-term debt, less current portion 186,171 151,227
-------- --------
Deferred income taxes 7,320 7,320
-------- --------
Other long-term liabilities 9,164 9,734
-------- --------
Shareholders' equity
Common stock, at stated value 1,194 1,194
Additional paid-in capital 92,093 92,008
Retained earnings 86,676 84,726
-------- --------
179,963 177,928
Less: treasury stock, at cost 4,622 4,621
-------- --------
Total shareholders' equity 175,341 173,307
-------- --------
Total liabilities and shareholders' equity $508,648 $486,679
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 4
RYKOFF-SEXTON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
------------------
July 30 July 31
1994 1993
------- -------
<S> <C> <C>
Net sales $399,727 $366,391
Cost of sales 312,063 280,423
-------- --------
Gross Profit 87,664 85,968
Warehouse, selling, general
and administrative expenses 80,927 81,005
-------- --------
Income from operations 6,737 4,963
Interest expense 3,433 3,036
-------- --------
Income before provision for income taxes 3,304 1,927
Provision for income taxes 1,355 790
-------- --------
Net income $ 1,949 $ 1,137
======== ========
Weighted average number of shares outstanding 11,756,715 11,623,464
========== ==========
Earnings Per Share $0.17 $0.10
===== =====
Cash dividends per share $---- $----
===== =====
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 5
RYKOFF-SEXTON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------------
July 30 July 31
1994 1993
------- -------
<S> <C> <C>
Cash flows from operating activities--
Net income $ 1,949 $ 1,137
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization 5,077 5,752
Changes in assets and liabilities:
(Increase) in accounts receivable (6,937) (6,838)
(Increase) in inventories (9,243) (3,453)
Decrease in prepaid expenses 924 212
(Decrease) in accounts
payable & accrued liabilities (14,909) (1,035)
-------- -------
Net cash used in operating activities (23,139) (4,225)
-------- -------
Cash flows used in investing activities--
Capital expenditures (18,510) (9,132)
-------- -----
Cash flows from financing activities--
Increase under credit line 35,000 8,000
Principal payments of long-term debt (63) (83)
Issuance of common stock 85 556
Other (79) --
-------- -------
Net cash provided from financing activities 34,943 8,473
-------- -------
Net (decrease) in cash (6,706) (4,884)
Cash at beginning of period 9,261 7,605
-------- -------
Cash at end of period $ 2,555 $ 2,721
======== =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 6,609 $ 241
Income taxes 1,805 109
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 6
RYKOFF-SEXTON, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's latest annual report
on Form 10-K.
2. The foregoing financial information, not examined by independent public
accountants, reflects, in the opinion of the Company, all adjustments
(which included only normal recurring adjustments) necessary to present
fairly the information purported to be shown and is not necessarily
indicative of the results of the operations for the entire year ending
April 29, 1995.
3. Primary earnings per share of common stock have been computed on the
weighted average number of shares of common stock outstanding and dilutive
common stock equivalents.
4. Inventories are carried at the lower of cost (first-in, first-out) or
market and are summarized as follows (amounts in thousands):
<TABLE>
<CAPTION>
July 30, April 30,
1994 1994
-------- ---------
<S> <C> <C>
Finished Goods $128,638 $119,711
Raw Materials 11,614 11,298
-------- --------
$140,252 $131,009
======== ========
</TABLE>
5. In September 1994, the Company entered into a definitive agreement to sell
Tone Brothers, Inc. (Tone Brothers), its spice subsidiary, to Burns, Philp
& Company Limited. Terms have not been disclosed. The transaction is
subject to regulatory and other customary closing conditions and is
expected to be completed in 1994. Tone Brothers has annual sales of
approximately $90 million.
5
<PAGE> 7
RYKOFF-SEXTON, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is Management's discussion and analysis of certain significant
factors which have affected the Company's earnings during the periods included
in the accompanying condensed consolidated statements of income.
A summary of the period to period changes in principal items included in the
condensed consolidated statements of income is shown below:
<TABLE>
<CAPTION>
Comparison of
Three Months Ended
July 30, 1994 and July 31, 1993
-------------------------------
Increase (Decrease)
(Dollars in Thousands)
<S> <C> <C>
Net sales $33,336 9.10%
Cost of sales 31,640 11.28%
Warehouse, selling, general and
administrative expenses (78) (0.10%)
Interest expense 397 13.08%
Income before provision for income taxes 1,377 71.46%
Provision for income taxes 565 71.52%
Net income 812 71.42%
</TABLE>
6
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales for the quarter ended July 30, 1994 increased $33.3 million or
9.1% from the comparable prior year quarter. This sales increase resulted from
the introduction of new product lines and marketing programs.
Cost of sales for the quarter ended July 30, 1994 increased $31.6
million or 11.3% to $312.1 million as compared with $280.4 million for the
first quarter of fiscal 1994. This resulted in a decrease in the gross profit
margin to 21.9% from 23.5%, due to the emphasis on certain newer product lines,
changes in customer mix and aggressive programs to increase sales. Warehouse,
selling, general and administrative expenses were comparable between years.
However, as a percentage of sales, the Company's operating expenses decreased
to 20.2% from 22.1% last year due to the progress made under the Company's
restructuring program.
Interest expense for the quarter ended July 30, 1994 increased by $0.4
million to $3.4 million as compared to $3.0 million for the quarter ended July
31, 1993. The increase in the first quarter of fiscal 1995 was due to
increased borrowing levels and higher interest rates. The effective tax rates
for both periods were the same at 41%.
Net income for the quarter ended July 30, 1994 increased by $0.8
million to $1.9 million from $1.1 million in the comparable prior last year.
The primary reasons accounting for this improvement were increased sales and
reduced operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
For the first quarter of fiscal 1995, cash used for operations was
$23.1 million as compared to $4.2 million for the comparable period in fiscal
1994. This increase was primarily due to the reduction in accounts payable and
the increase in inventories. Cash flows used in investing activities for the
first quarter of fiscal 1995 consisted of capital expenditures of $18.5 million
as compared to $9.1 million for the comparable period in fiscal 1994. This
increase is attributable to the expenditures for the construction of the new
Los Angeles distribution center. Cash provided by financing activities was
$34.9 million for the three months ended July 30, 1994 as compared to $8.5
million for the comparable period in fiscal 1993. This increase was due to
increased borrowings under the Company's bank credit line.
Working capital at July 30, 1994 was $182.9 million compared to
$159.9 million at April 30, 1994. The current ratio was 2.4:1 at July 30, 1994
compared with 2.1:1 at April 30, 1994. As of July 30, 1994, total current
assets represented approximately 62% of the total assets of the Company.
7
<PAGE> 9
In fiscal 1995, the Company plans to spend a total of approximately
$45.0 million to complete the construction of its new Los Angeles distribution
center, of which approximately $27.1 million remained to be spent as of August
31, 1994.
In September 1994, the Company entered into a definitive agreement to
sell Tone Brothers, Inc. (Tone Brothers), its spice subsidiary, to Burns, Philp
& Company Limited. Terms have not been disclosed. The transaction is subject
to regulatory and other customary closing conditions and is expected to be
completed in 1994. Tone Brothers has annual sales of approximately $90 million
8
<PAGE> 10
PART II. OTHER INFORMATION
Item 5. Other information
In September 1994, the Company entered into a definitive agreement to
sell Tone Brothers, Inc. (Tone Brothers), its spice subsidiary, to Burns, Philp
& Company Limited. Terms have not been disclosed. The transaction is subject
to regulatory and other customary closing conditions and is expected to be
completed in 1994. Tone Brothers has annual sales of approximately $90
million.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1.3 Fifth Amendment to Credit Agreement between
Rykoff-Sexton, Inc. and Bank of America National
Trust and Savings Association, dated as of August 29,
1994.
27 Financial Data Schedule
(b) Reports on Form 8-K
None filed for the quarter for which this report is filed.
9
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RYKOFF-SEXTON, INC.
Date: September 12, 1994 /s/ Mark Van Stekelenburg
---------------------------
Mark Van Stekelenburg
President and Chief
Executive Officer
Date: September 12, 1994 /s/ Richard J. Martin
---------------------------
Richard J. Martin
Senior Vice President and
Chief Financial Officer
Date: September 12, 1994 /s/ Victor B. Chavez
---------------------------
Victor B. Chavez
Vice President and Chief
Accounting Officer
10
<PAGE> 1
EXHIBIT 10.1.3
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (the "Amendment") is made as
of August 29, 1994, between RYKOFF-SEXTON, INC., a Delaware corporation,
("Borrower") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association ("Bank").
WHEREAS, Borrower and Bank entered into that certain Credit Agreement
dated as of October 25, 1993, as amended by a First Amendment dated as of
December 29, 1993, a Second Amendment dated as of March 18, 1993, a Third
Amendment dated as of April 15, 1994, and a Fourth Amendment dated as of April
30, 1994 (the "Agreement");
WHEREAS, Borrower and Bank desire to modify and amend certain of the
terms and provisions of the Agreement;
NOW, THEREFORE, in consideration of the premises herein contained and
for other good and valuable consideration, Borrower and Bank do hereby mutually
agree as follows:
1. In Section 1, in the definition "Availability Period", the
date August 31, 1994, is deleted and the date September 30, 1994,
substituted in its stead.
2. In Section 1, in the definition "LC Availability Period", the
date August 31, 1994, is deleted and the date September 30, 1994,
substituted in its stead.
Borrower hereby represents and warrants to Bank that: (i) no default
specified in the Agreement and no event which with notice or lapse of time or
both would become such a default has occurred and is continuing, (ii) the
representations and warranties of Borrower pursuant to the Agreement are true
on and as of the date hereof as if made on and as of said date, (iii) the
making and performance by Borrower of this Amendment have been duly authorized
by all necessary action, and (iv) no consent, approval, authorization, permit
or license is required in connection with the making or performance of the
Agreement as amended hereby.
In all other respects, the Agreement shall remain in full force and
effect and shall be performed by the parties hereto according to its terms and
provisions.
All capitalized terms used herein are defined as in the Agreement.
- 1 -
<PAGE> 2
IN WITNESS WHEREOF, this Amendment has been executed by the parties
hereto as of the date first above written.
RYKOFF-SEXTON, INC.
By: /s/ VICTOR B. CHAVEZ
-----------------------------
Victor B. Chavez
Title: Vice President and
Chief Accounting Officer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ MARK J. GLASKY
-----------------------------
Mark J. Glasky
Vice President
- 2 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-29-1995
<PERIOD-START> MAY-1-1994
<PERIOD-END> JUL-30-1994
<CASH> 2,555
<SECURITIES> 0
<RECEIVABLES> 156,426
<ALLOWANCES> 3,357
<INVENTORY> 140,252
<CURRENT-ASSETS> 313,572
<PP&E> 312,225
<DEPRECIATION> 139,578
<TOTAL-ASSETS> 508,648
<CURRENT-LIABILITIES> 130,652
<BONDS> 186,171
<COMMON> 1,194
0
0
<OTHER-SE> 178,769
<TOTAL-LIABILITY-AND-EQUITY> 508,648
<SALES> 399,727
<TOTAL-REVENUES> 399,727
<CGS> 312,063
<TOTAL-COSTS> 312,063
<OTHER-EXPENSES> 80,927
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,433
<INCOME-PRETAX> 3,304
<INCOME-TAX> 1,355
<INCOME-CONTINUING> 1,949
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,949
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
