<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 JANUARY 28, 1995
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 0-8105
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>
<S> <C>
OUTSTANDING AT
CLASS OF COMMON STOCK MARCH 3, 1995
--------------------- --------------
$.10 PAR VALUE 14,589,551 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
January 28, 1995 and April 30, 1994 2
Condensed Consolidated Statements of Income
Three Months and Nine Months ended
January 28, 1995 and January 29, 1994 3
Condensed Consolidated Statements of Cash Flows
Nine Months ended January 28, 1995 and
January 29, 1994 4
Notes to Condensed Consolidated Financial
Statements 5-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
Part II. Other Information 10
Signatures 11
</TABLE>
1
<PAGE> 3
RYKOFF-SEXTON, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
ASSETS
<TABLE>
<CAPTION>
April 30,
January 28, 1994
1995 (Restated)
----------- ----------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 12,366 $ 9,830
Accounts receivable, net 139,994 138,675
Inventories 137,988 119,554
Prepaid expenses 15,661 16,008
-------- --------
Total current assets 306,009 284,067
Net assets of discontinued operations --- 42,502
Property, plant and equipment, net 165,789 135,227
Other assets, net 7,555 8,222
-------- --------
Total assets $479,353 $470,018
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 77,974 $ 82,540
Accrued liabilities 53,883 46,886
Income taxes payable 507 ---
-------- --------
Total current liabilities 132,364 129,426
-------- --------
Long-term debt, less current portion 130,089 151,227
-------- --------
Deferred income taxes 6,324 6,324
-------- --------
Other long-term liabilities 6,187 9,734
-------- --------
Shareholders' equity
Common stock, at stated value 1,497 1,194
Additional paid-in capital 92,289 92,008
Retained earnings 115,228 84,726
-------- --------
209,014 177,928
Less: treasury stock, at cost (4,625) (4,621)
-------- --------
Total shareholders' equity 204,389 173,307
-------- --------
Total liabilities and shareholders' equity $479,353 $470,018
======== ========
</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 Nine Months Ended
----------------------------- -------------------------------
January 29, January 29,
January 28, 1994 January 28, 1994
1995 (Restated) 1995 (Restated)
----------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Net sales $379,601 $352,892 $1,152,727 $1,069,057
Cost of sales 300,685 276,310 908,300 830,101
-------- -------- ---------- ----------
Gross profit 78,916 76,582 244,427 238,956
Warehouse, selling, general
and administrative expenses 75,163 74,065 224,367 225,717
-------- -------- ---------- ----------
Income from operations 3,753 2,517 20,060 13,239
Interest expense 2,234 3,167 8,185 8,814
-------- -------- ---------- ----------
Income(loss) from continuing operations
before income taxes 1,519 (650) 11,875 4,425
Provision(benefit) for income taxes 623 (267) 4,869 1,813
-------- -------- ---------- ----------
Income(loss) from continuing operations 896 (383) 7,006 2,612
Discontinued operations:
Income from discontinued operations,
net of income taxes --- 744 137 2,668
Gain on disposal of discontinued
operations, net of income taxes --- --- 23,359 ---
-------- -------- ---------- ----------
Income before extraordinary item 896 361 30,502 5,280
Extraordinary item, net of tax benefit --- --- --- (1,444)
-------- -------- ---------- ----------
Net income $ 896 $ 361 $ 30,502 $ 3,836
======== ======== ========== ==========
Weighted average number of
shares outstanding 14,668 14,688 14,663 14,679
======== ======== ========== ==========
Earnings per share (See Note 3):
Income(loss) from continuing operations $0.06 $(0.03) $0.48 $0.18
Income from discontinued operations --- 0.05 0.01 0.18
Gain on disposal of discontinued
operations --- --- 1.59 ---
Extraordinary item --- --- --- (0.10)
-------- -------- ---------- ----------
$0.06 $ 0.02 $2.08 $0.26
======== ======== ========== ==========
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>
Nine Months Ended
--------------------------
January 29,
January 28, 1994
1995 (Restated)
----------- -----------
<S> <C> <C>
Cash flows from operating activities --
Net income $30,502 3,836
Adjustments to reconcile net income to net
cash provided by operating activities --
Depreciation and amortization 12,720 14,607
Extraordinary item --- 1,444
Gain on disposal of discontinued operations (23,359) ---
Gain on sale of property, plant and equipment (329) ---
Net income from discontinued operations (137) (2,671)
Other (342) ---
Changes in assets and liabilities:
(Increase) in accounts receivable (1,319) (14,665)
(Increase) in inventories (18,434) (8,592)
Decrease in prepaid expenses 347 553
(Decrease) in accounts payable
and accrued liabilities (193) (10,469)
------- --------
Net cash (used in) operating activities (544) (15,957)
------- --------
Cash flows from investing activities --
Capital expenditures (44,257) (11,263)
Proceeds from disposal of property, plant and equipment 2,105 ---
Proceeds from sale of discontinued operations 96,000 ---
Net cash (used in) discontinued operations (30,002) (6,007)
------- --------
Net cash provided by (used in) investing activities 23,846 (17,270)
------- --------
Cash flows from financing activities--
Issuance of 8.875% senior subordinated notes --- 128,960
Principal payments of long-term debt (182) (137,718)
Increase (decrease) under credit line (21,000) 43,000
Payment of finance costs (164) (5,680)
Issuance of common stock 580 566
------- --------
Net cash provided by (used in) financing activities (20,766) 29,128
------- --------
Net increase (decrease) in cash and cash equivalents 2,536 (4,099)
Cash and cash equivalents at beginning of period 9,830 8,245
------- --------
Cash and cash equivalents at end of period $12,366 $4,146
======= ========
Supplemental disclosures of cash flow information --
Cash paid during the period for:
Interest $13,593 $8,659
Income taxes 20,416 1,585
======= ========
</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.
The weighted average number of shares outstanding and earnings per
share included in the financial statements have been adjusted for a
5-for-4 stock split effected in the form of a 25 percent stock
dividend. The stock dividend was distributed on January 24, 1995 to
shareholders of record on December 21, 1994.
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>
April 30,
January 28, 1994
1994 (Restated)
-------- ----------
<S> <C> <C>
Finished Goods $131,558 $113,750
Raw Materials 6,430 5,804
-------- --------
$137,988 $119,554
-------- --------
</TABLE>
5
<PAGE> 7
5. On October 27, 1994, the Company sold all of the outstanding capital
stock of Tone Brothers, Inc. ("Tone") to Burns Philp & Company
Limited. The Company received $96 million in cash in payment of the
purchase price. As a result of the sale, the Company recognized an
estimated gain of $23,359,000, net of income taxes of $14,878,000.
The accompanying prior year financial statements have been restated to
exclude Tone's net assets and operating results from the Company's
continuing operations. Tone's net sales and the related provision for
income taxes for the three and nine months ended January 28, 1995 and
January 29, 1994, respectively, are listed below (amounts in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ ------------------------
January 28, January 29, January 28, January 29,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales N/A $21,568 $47,343 $66,276
=========== =========== =========== ===========
Provision for
income taxes N/A $517 $95 $1,856
=========== =========== =========== ===========
</TABLE>
6. On February 21, 1995, the Company, together with John Sexton & Co., a
wholly owned subsidiary of the Company, acquired substantially all of
the assets of Continental Foods, Inc., a privately owned Maryland
corporation ("Continental"). The Company and John Sexton
simultaneously acquired all of the partnership interests of Duke
Associates, a Maryland general partnership and an affiliate of
Continental. Continental is a regional, full-line institutional
foodservice distributor serving Maryland, Delaware, the District of
Columbia, northern Virginia, southern Pennsylvania and eastern West
Virginia.
On the Closing Date, the Company and John Sexton together paid
approximately $27,000,000 (the "Closing Payment") and John Sexton
assumed certain liabilities of Continental, in payment of the purchase
price for the assets and partnership interests acquired. The Closing
Payment is subject to certain purchase price adjustments. The Closing
Payment consisted of approximately $24,575,000 in cash, and the
Company's issuance of an unsecured promissory note in the amount of
$2,425,000.
Continental's net sales for the nine months ended January 31, 1995 and
the fiscal year ended April 30, 1994 were $78.9 million and $91.0
million, respectively.
6
<PAGE> 8
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 Nine Months Ended
January 28, 1995 January 28, 1995
and January 29, 1994 and January 29, 1994
-------------------- --------------------
Increases (Decreases)
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Net sales $26,709 7.57% $83,670 7.83%
Cost of sales 24,375 8.82 78,199 9.42
Warehouse, selling, general
and administrative expenses 1,098 1.48 (1,350) (0.60)
Interest expense (933) (29.46) (629) (7.14)
Income from continuing operations before
income taxes 2,169 N.M. 7,450 N.M.
Provision for income taxes 890 N.M. 3,056 N.M.
Income from continuing operations 1,279 N.M. 4,394 N.M.
Discontinued operations:
Income from discontinued operations, net
of income taxes (744) (100.00) (2,531) (94.87)
Gain on disposal of discontinued
operations, net of income taxes --- --- 23,359 ---
Income before extraordinary item 535 N.M. 25,222 N.M.
Extraordinary item, net of tax benefit --- --- 1,444 100.00
Net income 535 N.M. 26,666 N.M.
</TABLE>
7
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the quarter ended January 28, 1995, sales from continuing
operations increased $26.7 million or 7.6% over the comparable prior year
quarter. For the nine month period, sales increased $83.7 million or 7.8% to
$1.15 billion from $1.07 billion in the prior year period. The sales increases
for these periods were attributable to the Company's sales and marketing
strategies combined with new product lines, and were achieved despite the
impact of severe weather in January 1995 throughout the west coast region.
Cost of sales for the three month period ended January 28, 1995
increased $24.4 million or 8.8% to $300.7 million and, on a year to date basis,
increased $78.2 million or 9.4% to $908.3 million. This resulted in a decrease
in the gross profit margin to 20.8% from 21.7% in the comparable prior year
quarter and, on a year to date basis, to 21.2% from 22.4% last year. These
declines were primarily due to the new product lines, changes in customer mix,
the implementation of new sales promotion programs and cost increases in
certain product categories. Warehouse, selling, general and administrative
expenses as a percentage of sales for the quarter ended January 28, 1995
decreased to 19.8% from 21.0% a year earlier and for the nine month period,
decreased to 19.5% from 21.1% in the comparable prior year. These decreases
resulted from increased vendor support programs and improved operating
efficiencies.
Interest expense for the three month and nine month periods ended
January 28, 1995 decreased by $0.9 million and $0.6 million, respectively,
primarily reflecting lower bank borrowings. The effective tax rates for the
three month and nine month periods ended January 28, 1995 were 41.0% which were
the same for the comparable periods ended January 29, 1994.
Income from continuing operations for the three month period ended
January 28, 1995 increased by $1.3 million to $0.9 million. For the nine
months ended January 28, 1995, income from continuing operations increased by
$4.4 million to $7.0 million. The primary reasons for these improvements were
increased sales, reduced operating expenses as a percentage of sales and
reduced interest expense.
On October 27, 1994, the Company sold its Tone Brothers, Inc.
subsidiary. The Company received $96 million in cash in payment of the
purchase price. As a result of the sale, the Company recognized an estimated
gain of $23.4 million.
The extraordinary item reported in the prior year nine month period of
$1.4 million, net of tax benefit, resulted from the write-off of deferred
finance costs associated with early retirement of 8.60% senior notes and
outstanding senior indebtedness under a prior bank credit facility.
8
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended January 28, 1995, cash used for operations
was $0.5 million compared to $16.0 million for the comparable period in fiscal
1994. The decrease in cash used for operations was primarily due to accounts
receivable increasing by $1.3 million in the current year compared to $14.7
million last year and accounts payable and accrued liabilities increasing by
$0.2 million in the current year compared to $10.5 million last year. This was
offset by inventories increasing by $18.4 million in the current year compared
to $8.6 million last year. Cash flows provided by investing activities for the
nine months ended January 28, 1995 were $23.8 million compared to cash used in
investing activities of $17.3 million in the comparable period ended January
29, 1994. The improvement in cash provided by investing activities resulted
primarily from the proceeds of $96.0 million on the sale of Tone. Offsetting
the cash provided upon the sale of Tone were capital expenditures of $44.3
million which increased from $11.3 million last year and cash used in
discontinued operations of $30.0 million compared to $6.0 million last year.
The increase in capital expenditures is mainly attributable to the construction
of the new Los Angeles distribution center. Cash used in financing activities
was $20.8 million for the nine months ended January 28, 1995, compared to cash
provided by financing activities of $29.1 million for the comparable period in
fiscal 1994. This was primarily due to the payment of amounts outstanding
under the Company's bank credit line.
Working capital at January 28, 1995 was $173.6 million compared to
$154.6 million at April 30, 1994. The current ratio was 2.3:1 at January 28,
1995 compared with 2.2:1 at April 30, 1994. As of January 28, 1995, total
current assets represented 63.8% of the total assets of the Company.
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 $13.7 million remained to be spent as of
February 28, 1995.
9
<PAGE> 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None filed for the quarter for which this report is filed.
10
<PAGE> 12
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: March 13, 1995 /s/ Mark Van Stekelenburg
-----------------------------------------
Mark Van Stekelenburg
President and Chief
Executive Officer
Date: March 13, 1995 /s/ Richard J. Martin
-----------------------------------------
Richard J. Martin
Senior Vice President and
Chief Financial Officer
Date: March 13, 1995 /s/ Victor B. Chavez
-----------------------------------------
Victor B. Chavez
Vice President and Chief
Accounting Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-29-1995
<PERIOD-START> OCT-30-1994
<PERIOD-END> JAN-28-1995
<CASH> 12,366
<SECURITIES> 0
<RECEIVABLES> 143,599
<ALLOWANCES> 3,605
<INVENTORY> 137,988
<CURRENT-ASSETS> 306,009
<PP&E> 302,349
<DEPRECIATION> 136,560
<TOTAL-ASSETS> 479,353
<CURRENT-LIABILITIES> 132,364
<BONDS> 130,089
<COMMON> 1,497
0
0
<OTHER-SE> 202,892
<TOTAL-LIABILITY-AND-EQUITY> 479,353
<SALES> 379,601
<TOTAL-REVENUES> 379,601
<CGS> 300,685
<TOTAL-COSTS> 75,163
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,234
<INCOME-PRETAX> 1,519
<INCOME-TAX> 623
<INCOME-CONTINUING> 896
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 896
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
