<PAGE>
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 29, 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)
Delaware 95-2134693
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1050 Warrenville Rd.
Lisle, Illinois 60532
(Address of principal executive offices) (Zip Code)
(708) 964-1414
(Registrant's telephone number, including area code)
Former Address: 761 Terminal Street, Los Angeles, California 90021
(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.
Outstanding at
Class of Common Stock Stock August 31, 1995
--------------------------- ---------------
$.10 par value 14,656,165 shares
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RYKOFF-SEXTON, INC.
INDEX
Page
No.
----
Part I. Financial Information
Item l. Financial Statements
Condensed Consolidated Balance Sheets
July 29, 1995 and April 29, 1995 2
Condensed Consolidated Statements of Income
Three Months ended July 29, 1995 and
July 30, 1994 3
Condensed Consolidated Statements of Cash Flows
Three Months ended July 29, 1995 and
July 30, 1994 4
Notes to Condensed Consolidated Financial
Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6-7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
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RYKOFF-SEXTON, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
ASSETS
<TABLE>
<CAPTION>
July 29, April 29,
1995 1995
<S> <C> <C>
Current assets
Cash $3,177 $4,959
Accounts receivable, net 159,539 151,379
Inventories 150,445 138,122
Prepaid expenses 23,545 24,979
-------- --------
Total current assets 336,706 319,439
Property, plant and equipment, net 188,136 176,109
Other assets, net 28,213 28,520
-------- --------
Total assets $553,055 $524,068
-------- --------
-------- --------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $88,090 $97,623
Accrued liabilities 53,757 60,200
-------- --------
Total current liabilities 141,847 157,823
-------- --------
Long-term debt, less current portion 188,546 146,536
-------- --------
Deferred income taxes 11,073 11,073
-------- --------
Other long-term liabilities 1,907 2,096
-------- --------
Shareholders' equity
Common stock, at stated value 1,504 1,498
Additional paid-in capital 93,403 92,507
Retained earnings 119,368 117,161
-------- --------
214,275 211,166
Less: treasury stock, at cost (4,593) (4,626)
-------- --------
Total shareholders' equity 209,682 206,540
-------- --------
Total liabilities and
shareholders' equity $553,055 $524,068
-------- --------
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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RYKOFF-SEXTON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
------------------
July 30,
July 29, 1994
1995 (Restated)
-------- --------
<S> <C> <C>
Net sales $421,771 $380,378
Cost of sales 335,579 298,912
-------- --------
Gross profit 86,192 81,466
Warehouse, selling, general
and administrative expenses 78,638 74,779
-------- --------
Income from operations 7,554 6,687
Interest expense 3,146 3,089
-------- --------
Income from continuing operations
before income taxes 4,408 3,598
Provision for income taxes 1,763 1,475
-------- ---------
Income from continuing operations 2,645 2,123
Loss from discontinued operations,
net of tax benefits --- (173)
-------- --------
Net income $2,645 $1,950
-------- --------
-------- --------
Weighted average number of
shares outstanding 14,898 14,696
-------- --------
-------- --------
Earnings per share:
Income from continuing operations $ 0.18 $ 0.15
Loss from discontinued operations --- (0.01)
-------- --------
$ 0.18 $ 0.14
-------- --------
-------- --------
Cash dividends per share $ 0.03 $---
-------- --------
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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RYKOFF-SEXTON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------------
July 30,
July 29, 1994
1995 (Restated)
---------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income $2,645 $1,950
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 4,444 4,351
Gain on sale of property, plant and equipment (86) ---
Net loss from discontinued operations --- 173
Other (140) (114)
Changes in assets and liabilities:
(Increase) in accounts receivable (8,160) (4,156)
(Increase) in inventories (12,323) (8,306)
Decrease in prepaid expenses 1,434 1,104
Decrease in accounts payable
and accrued liabilities (15,875) (15,488)
-------- --------
Net cash (used in) operating activities (28,061) (20,486)
-------- --------
Cash flows from investing activities
Capital expenditures (16,337) (15,524)
Proceeds from disposal of property,
plant and equipment 183 ---
Net cash used in discontinued operations --- (6,041)
-------- --------
Net cash (used in) investing activities (16,154) (21,565)
-------- --------
Cash flows from financing activities
Principal payments of long-term debt (46) (63)
Increase under credit line 42,000 35,000
Issuance of common stock 936 85
Dividends Paid (438) ---
Other (19) (79)
-------- --------
Net cash provided by financing activities 42,433 34,943
-------- --------
Net (decrease) in cash and cash equivalents (1,782) (7,108)
Cash and cash equivalents at beginning of period 4,959 9,830
-------- --------
Cash and cash equivalents at end of period $3,177 $2,722
-------- --------
-------- --------
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $6,795 $6,525
Income taxes 206 1,821
-------- --------
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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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 27, 1996.
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 in the 1995 third fiscal quarter.
The cash dividends of $0.03 per share represent the second semi-annual
payment in the 1996 first fiscal quarter. No payments were made in the
comparable fiscal year quarter since the payment of semi-annual cash
dividends was reinstated in the 1995 third fiscal quarter.
4. Inventories are carried at the lower of cost (first-in, first-out) or
market and are summarized as follows (amounts in thousands):
July 29, April 29,
1995 1995
-------- ----------
Finished Goods $143,735 $132,109
Raw Materials $ 6,710 $ 6,013
-------- --------
$150,445 $138,122
-------- --------
-------- --------
5. The Company disposed of its Tone Brothers, Inc. (Tone) subsidiary in
October 1994. The accompanying prior year financial statements have been
restated to exclude Tone's operating results from the Company's continuing
operations.
5
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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 29, 1995 & July 30, 1994
-----------------------------
<S> <C> <C>
Net sales $41,393 10.88%
Cost of sales 36,667 12.27
Warehouse, selling, general
and administrative expenses 3,859 5.16
Interest expense 57 1.85
Income from continuing operations before
income taxes 810 22.51
Provision for income taxes 288 19.53
Income from continuing operations 522 24.59
Loss from discontinued operations, net
of tax benefit 173 (100.00)
Net income 695 35.64
</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the quarter ended July 29, 1995, sales increased $41.4 million
or 10.9% from the comparable prior year quarter. This sales increase resulted
from the introduction of new product lines and new sales and marketing
strategies. Same branch sales increased 4.3% for the quarter.
Cost of sales for the quarter ended July 29, 1995 increased $36.7
million or 12.3% to $335.6 million as compared with $298.9 million for the
first quarter of fiscal 1995. This resulted in a decrease in the gross profit
margin to 20.4% from 21.4%, due to the Company's fundamental shift toward
becoming a full-line distributor and offering additional product categories,
such as fresh meats and produce. Warehouse, selling, general and
administrative expenses as a percentage of sales decreased to 18.6% from 19.7%
last year due to the Company's progress in containing costs and improving
operating efficiencies under its Project Results program.
Interest expense for the quarter ended July 29, 1995 was comparable
to the same period in the prior year quarter. The effective tax rates for the
three month period ended July 29, 1995 and July 30, 1994 were comparable at
40% and 41%, respectively.
Net income for the quarter ended July 29, 1995 increased by $0.7
million to $2.6 million from $1.9 million in the comparable prior last year.
The primary reasons accounting for this improvement were increased sales and
reduced operating expenses as a percentage of sales.
LIQUIDITY AND CAPITAL RESOURCES
For the first quarter of fiscal 1996, cash used for operations was
$28.1 million compared to $20.5 million for the comparable period in fiscal
1995. This increase was primarily due to the increase in accounts receivable
and inventories. Cash flows used in investing activities for the first
quarter of fiscal 1996 consisted of capital expenditures of $16.3 million
compared to $15.5 million for the comparable period in fiscal 1995. This
increase is attributable to the construction of the new Cincinnati and Los
Angeles distribution centers. Net cash used in investing activities for the
three months ended July 29, 1995 decreased by $5.4 million compared to the
same period in fiscal 1995. This resulted primarily from the absence of net
cash used in discontinued operations. Cash provided by financing activities
was $42.4 million for the three months ended July 29, 1995 compared to $34.9
million for the comparable period in fiscal 1995. This increase was primarily
due to increased borrowings under the Company's bank credit line. Cash
utilization of the restructuring reserve during the first quarter of fiscal
1996 approximated $4.4 million.
Working capital at July 29, 1995 was $194.9 million compared to
$161.6 million at April 29, 1995. The current ratio was 2.4:1 at July 29,
1995 compared with 2.0:1 at April 29, 1995. As of July 29, 1995, total
current assets represented approximately 61% of the total assets of the
Company.
7
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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.
8
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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 11, 1995 /s/MARK VAN STEKELENBURG
-------------------------
Mark Van Stekelenburg
President and Chief
Executive Officer
Date: September 11, 1995 /s/RICHARD J. MARTIN
------------------------
Richard J. Martin
Senior Vice President and
Chief Financial Officer
Date: September 11, 1995 /s/JAMES C. WONG
------------------------
James C. Wong
Corporate Controller
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-27-1996
<PERIOD-END> JUL-29-1995
<CASH> 3,177
<SECURITIES> 0
<RECEIVABLES> 159,539
<ALLOWANCES> 4,825
<INVENTORY> 150,445
<CURRENT-ASSETS> 336,706
<PP&E> 328,482
<DEPRECIATION> 140,346
<TOTAL-ASSETS> 553,055
<CURRENT-LIABILITIES> 141,847
<BONDS> 0
<COMMON> 1,504
0
0
<OTHER-SE> 209,682
<TOTAL-LIABILITY-AND-EQUITY> 553,055
<SALES> 421,771
<TOTAL-REVENUES> 421,771
<CGS> 335,579
<TOTAL-COSTS> 78,638
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,146
<INCOME-PRETAX> 4,408
<INCOME-TAX> 1,763
<INCOME-CONTINUING> 2,645
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,645
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
