<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)........November 1, 1995
RYKOFF-SEXTON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-8105 95-2134693
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
1050 Warrenville Road
Lisle, Illinois 60532-5201
(Address of principal executive offices)
Registrant's telephone number, including area code.......(708) 964-1414
Not Applicable
(Former name or former address, if changed since last report)
1
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 1, 1995 (the "Closing Date"), the Registrant,
Rykoff-Sexton, Inc., a Delaware corporation ("Rykoff"), acquired
substantially all of the assets of H&O Foods, Inc., a privately
owned Nevada corporation, ("H&O"). H&O is a regional, full-line
institutional foodservice distributor serving Nevada, California
and Arizona. Rykoff intends to continue the business of H&O within
such states.
Rykoff paid approximately $30,700,000 in payment of the purchase price
for the assets acquired, subject to certain post-closing purchase price
adjustments. The aggregate consideration consisted of approximately
$5,500,000 in cash, Rykoff's issuance of unsecured promissory notes in
the amounts of $5,305,000 and $21,350,000 and its assumption of certain
H&O liabilities. The terms of the sale are more fully described in the
asset purchase agreement by and among the parties which is filed as an
exhibit herewith. The Registrant agrees to furnish supplementally to
the Commission a copy of any omitted schedule or exhibit upon its
request.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
1. H&O Foods, Inc. Financial Statements as of October 31,
1995 and December 31, 1994 together with report of
independent public accountants.
(b) PRO FORMA FINANCIAL INFORMATION
INTRODUCTION
The pro forma condensed financial statements present the
historical financial statements of Rykoff, adjusted to give
effect to the purchase of H&O along with the pro forma adjustments
necessary to arrive at the pro forma condensed financial statements
of Rykoff.
The pro forma condensed balance sheet is presented as of
October 28, 1995. The pro forma adjustments reflect the
preliminary allocation of the purchase price to the assets and
liabilities acquired along with the related goodwill and step-ups
to fair market value and borrowings used to finance the purchase.
The pro forma statements of income are presented for the
year ended April 29, 1995 and the six months ended October 28,
1995. The pro forma adjustments reflect the net effect of
interest expense, the elimination of certain expenses, increased
depreciation and amortization and the tax effect of these
adjustments.
2
<PAGE>
The pro forma data is based upon various other assumptions
and includes adjustments as explained therein and in the notes
thereto. Pro forma information presented is for informational
purposes only and is not necessarily indicative of future earnings
and financial position or of what past earnings and financial
position would have been if the purchase of H&O had been
consummated at the beginning of the respective periods or as of
any date for which such pro forma information is presented.
(c) EXHIBITS.
The following documents are filed as exhibits to this Form 8-K
and are incorporated herein by reference:
Exhibit No. Description
----------- -----------
2 Asset Purchase Agreement, dated as
of October 26, 1995, by and among
H&O Foods, Inc., certain
shareholders set forth on Schedule
1 thereto and Rykoff-Sexton, Inc.
23 Consent of Independent Public
Accountants
3
<PAGE>
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: January 15, 1996 /S/MARK VAN STEKELENBURG
------------------------------
Mark Van Stekelenburg
President and Chief
Executive Officer
Date: January 15, 1996 /S/RICHARD J. MARTIN
------------------------------
Richard J. Martin
Senior Vice President and
Chief Financial Officer
Date: January 15, 1996 /S/JAMES C. WONG
------------------------------
James C. Wong
Treasurer
4
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
7(a) Financial Statements of Business Acquired
H&O Foods, Inc.
Report of Independent Public Accountants 6
Balance Sheets as of October 31, 1995
and December 31, 1994 7
Statements of Income for the ten months ended
October 31, 1995 and the year ended December 31, 1994 8
Statements of Stockholders' Equity for the ten months
ended October 31, 1995 and the year ended
December 31, 1994 9
Statements of Cash Flows for the ten months ended
October 31, 1995 and the year ended December 31, 1994 10
Notes to Financial Statements 11
7(b) Unaudited Pro Forma Financial Statements
Pro Forma Balance Sheet as of October 28, 1995
together with related notes 16
Pro Forma Statement of Income for the six months
ended October 28, 1995 17
Pro Forma Statement of Income for the twelve months
ended April 29, 1995 18
Notes to Pro Forma Statements of Income 19
</TABLE>
5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of H & O Foods, Inc.:
We have audited the accompanying balance sheets of H & O Foods, Inc. (a
Nevada corporation) as of October 31, 1995 and December 31, 1994, and the
related statements of income, stockholders' equity and cash flows for the ten
month period then ended October 31, 1995 and the year ended December 31,
1994. 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 H & O Foods, Inc. as of
October 31, 1995 and December 31, 1994, and the results of its operations and
its cash flows for the ten month period then ended October 31, 1995 and the
year ended December 31, 1994, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
November 29, 1995
6
<PAGE>
H & O FOODS, INC.
BALANCE SHEETS AS OF
OCTOBER 31, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,060,060 $ 744,251
Trade accounts and notes receivable,
less allowance for doubtful accounts of
$380,248 and $29,617, respectively 10,010,534 8,828,112
Inventories 6,638,522 6,417,840
Prepaid expenses 163,885 237,199
----------- -----------
Total current assets 17,873,001 16,227,402
----------- -----------
PROPERTY AND EQUIPMENT:
Land, buildings and improvements 6,372,576 6,372,576
Warehouse, beverage and office equipment 5,990,433 5,411,438
Transportation equipment 64,160 64,160
----------- -----------
12,427,169 11,848,174
Less accumulated depreciation (6,752,508) (5,946,648)
----------- -----------
5,674,661 5,901,526
Construction in progress 92,950 --
----------- -----------
Property and equipment, net 5,767,611 5,901,526
----------- -----------
OTHER ASSETS 53,899 55,273
----------- -----------
TOTAL ASSETS $23,694,511 $22,184,201
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit $ -- $ 1,926,767
Accounts payable 9,417,970 6,798,275
Accrued payroll 489,891 393,325
Accrued liabilities 440,006 905,407
Current portion of long-term debt 170,871 242,199
Current portion of related party notes payable 282,563 269,460
----------- -----------
Total current liabilities 10,801,301 10,535,433
----------- -----------
LONG-TERM LIABILITIES:
Long-term debt, net of current portion 2,629,552 2,709,941
Related party notes payable, net of current portion 1,700,000 1,717,000
Deferred officer compensation 32,500 48,750
----------- -----------
Total long-term liabilities 4,362,052 4,475,691
----------- -----------
Total liabilities 15,163,353 15,011,124
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY:
Common stock 39,654 40,121
Retained earnings 8,491,504 7,132,956
----------- -----------
Total stockholders' equity 8,531,158 7,173,077
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $23,694,511 $22,184,201
----------- -----------
----------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part of
these balance sheets.
7
<PAGE>
H & O FOODS, INC.
STATEMENTS OF INCOME
FOR THE TEN MONTHS ENDED OCTOBER 31, 1995
AND THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
NET SALES $108,630,670 $116,641,505
COST OF SALES 93,270,790 99,810,383
------------ ------------
Gross profit 15,359,880 16,831,122
WAREHOUSE, SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES 12,476,890 13,682,072
------------ ------------
Operating income 2,882,990 3,149,050
OTHER INCOME (EXPENSE):
Interest expense (423,448) (529,608)
Interest income 37,544 90,075
Other, net 13,945 151,321
------------ ------------
Total other income (expense) (371,959) (288,212)
------------ ------------
NET INCOME $ 2,511,031 $ 2,860,838
------------ ------------
------------ ------------
NET INCOME PER SHARE
OF COMMON STOCK $ 14.14 $ 15.52
------------ ------------
------------ ------------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 177,606 184,325
------------ ------------
------------ ------------
</TABLE>
The accompanying notes to financial statements are an integral part of
these statements.
8
<PAGE>
H & O FOODS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE 10 MONTHS ENDED OCTOBER 31, 1995
AND THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Common Stock
--------------------------------
Class A Class B
-------------- --------------- Retained Treasury
Shares Amount Shares Amount Earnings Shares Total
------ ------ ------ ------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 2,900 $ 323 189,709 $41,079 $ 5,771,093 $ - $ 5,812,495
Purchase of treasury shares - - (11,520) - - (355,921) (355,921)
Retirement of treasury shares (1,281) (354,640) 355,921 -
Net income for the year - - - - 2,860,838 - 2,860,838
Dividend ($6.20 per share) - - - - (1,144,335) - (1,144,335)
----- ----- ------- ------- ----------- -------- -----------
BALANCE, December 31, 1994 2,900 323 178,189 39,798 7,132,956 - 7,173,077
Purchase of treasury shares - - (4,250) - - (148,537) (148,537)
Retirement of treasury shares (467) (148,070) 148,537 -
Net income for the period - - - - 2,511,031 - 2,511,031
Dividend ($5.65 per share) - - - - (1,004,413) - (1,004,413)
----- ----- ------- ------- ----------- -------- -----------
BALANCE, October 31, 1995 2,900 $ 323 173,939 $39,331 $ 8,491,504 $ - $ 8,531,158
----- ----- ------- ------- ----------- -------- -----------
----- ----- ------- ------- ----------- -------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part of
these statements.
9
<PAGE>
H & O FOODS, INC.
STATEMENTS OF CASH FLOWS
FOR THE 10 MONTHS ENDED
OCTOBER 31, 1995
AND THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,511,031 $ 2,860,838
Adjustments to reconcile net income to net
cash provided by operating activities -
Depreciation and amortization 805,860 1,183,349
(Gain) on sale of equipment - (155,395)
(Increase) decrease in -
Accounts and notes receivable (1,182,422) (1,081,674)
Inventories (220,682) (686,717)
Prepaid expenses 73,314 (130,148)
Increase (decrease) in -
Accounts payable 2,619,695 1,069,570
Accrued payroll and accrued liabilities (368,835) 488,720
Deferred officer compensation (16,250) (19,500)
----------- -----------
Net cash provided by operating activities 4,221,711 3,529,043
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment - 623,308
Capital expenditures (671,945) (922,220)
Decrease in other assets 1,374 6,737
----------- -----------
Net cash used in investing activities (670,571) (292,175)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving line of credit 1,546,200 4,023,412
Repayment of revolving line of credit (3,472,967) (4,131,147)
Proceeds from related party notes payable 98,563 434,000
Repayment of related party notes payable (102,460) (120,000)
Repayment of long-term debt (151,717) (1,173,940)
Dividends paid (1,004,413) (1,373,074)
Purchase of treasury stock (148,537) (355,921)
----------- -----------
Net cash used in financing activities (3,235,331) (2,696,670)
----------- -----------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 315,809 540,198
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD YEAR 744,251 204,053
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,060,060 $ 744,251
----------- -----------
----------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part of
these statements.
10
<PAGE>
H & O FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
(1) THE COMPANY
H & O Foods, Inc. (the "Company"), was incorporated in 1962 in Nevada. The
Company is a full-service food distributor serving southern Nevada and parts
of Arizona.
The Company has authorized 522,000 shares of no par value common stock and
has designated two classes of common stock: Class A and Class B. The Class
A no par voting stock has certain transfer restrictions. The Class B no par
non-voting stock has the same dividend rights per share as the Class A voting
stock and can be traded subject to the limitations of the buy/sell agreements
established in the Company by-laws.
On October 26 1995 the Company entered into an asset purchase agreement (the
"Agreement") with Rykoff-Sexton, Inc. ("Rykoff") pursuant to which Rykoff
agreed to purchase substantially all assets of the Company, all sales
contracts, the Company name, all intellectual property, all other leases,
rights and claims owned by the Company at October 31, 1995 for a total
purchase price of approximately $30,770,000 subject to certain adjustments.
The aggregate consideration consists of approximately $5,500,000 in cash,
Rykoff's issuance of an unsecured promissory note in the amount of $5,305,000
to be held in escrow for a two year period, an unsecured promissory note
totaling $21,350,000 and assumption of certain Company liabilities.
The Agreement provides that the Company will repurchase all trade accounts
and notes receivable existing at October 31, 1995 which have not been
collected within 150 days (March 29, 1996). The agreement also provides that
Rykoff will not purchase any damaged, outdated, discontinued or other
inventory which is deemed unsalable by Rykoff.
Effective November 1, 1995, the name of the Company was changed to the
Howlett Family Corporation.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
INVENTORIES
Inventories consist primarily of fresh produce, frozen and canned goods,
fresh and frozen meats, and dairy products, which are stated at the lower of
cost or market using the weighted average cost method of inventory valuation.
Effective January 1, 1995, the Company changed its method of accounting for
inventory from the last-in, first-out method ("LIFO") to the weighted average
cost method. The effect of the change on net income for the ten month period
ended October 31, 1995 and for the year ended December 31, 1994 was
immaterial.
11
<PAGE>
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Costs of replacements, renewals
and improvements are capitalized and costs of repairs and maintenance are
expensed as incurred. Gains or losses on disposal of assets are recognized
at the time of disposal. Depreciation and amortization is computed using both
straight-line and accelerated methods over the following useful lives:
<TABLE>
<CAPTION>
Life in
Category Years
-------- --------
<S> <C>
Buildings 30 - 40
Improvements 5 - 15
Warehouse, beverage and office equipment 5 - 7
Transportation equipment 5
</TABLE>
REVENUE RECOGNITION
Revenues from sales are recognized at the time the product is shipped.
INCOME TAXES
The Company has elected to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Accordingly, the Company does not pay federal
corporate income taxes on its taxable income and the stockholders include the
Company's taxable income in their individual income tax returns.
NET INCOME PER SHARE OF COMMON STOCK
Net income per share of common stock is based on the weighted average number
of shares of common stock outstanding for the period.
CASH AND CASH EQUIVALENTS/ SUPPLEMENTAL CASH FLOW INFORMATION
For purposes of the statement of cash flows, the Company considers all highly
liquid investments with original maturities of 90 days or less as cash
equivalents.
The Company made cash interest payments of $397,985 and $529,608 for the ten
month period ended October 31, 1995 and the year ended December 31, 1994,
respectively.
(3) TRADE ACCOUNTS AND NOTES RECEIVABLE
The Company has recorded an allowance for doubtful accounts at October 31,
1995 and December 31, 1994, of approximately $380,000 and $29,000,
respectively, reflecting management's estimate of those trade accounts and
notes receivable outstanding at October 31, 1995 and December 31, 1994,
which ultimately will not be collected. Pursuant to the terms of the
Purchase Agreement (Note 1), all trade accounts and notes receivable existing
at October 31, 1995 which are not collected within 150 days (March 29, 1996)
are required to be repurchased by the Company. Any amounts not collected by
the Company by March 29, 1996 will be charged against and reduce the amount
due from the $5,305,000 escrow note receivable (see Note 1).
12
<PAGE>
(4) LINE OF CREDIT
At October 31, 1995 and December 31, 1994, the Company had $0 and $1,926,767
outstanding under a revolving line of credit with a bank. Under the terms of
a revolving credit agreement, the Company can borrow up to $8,000,000 limited
to a maximum borrowing base, as defined. At October 31, 1995, the credit
line had no amounts outstanding and the total available funds were
$7,459,386. Amounts borrowed under the line of credit bear interest at the
bank's prime lending rate (8.75% at October 31, 1995 and 8.5% at December 31,
1994) and are secured by accounts receivable and inventory. In connection
with the sale of the assets (see Note 1), the line of credit was retired.
The revolving line of credit contains various restrictive covenants,
including maintenance of certain financial ratios and limitations on
dividends, stock repurchases, mergers and similar transactions.
(5) LONG-TERM DEBT
At October 31, 1995 and December 31, 1994, long-term debt consisted of the
following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Note payable to a bank; monthly payments of principal and
interest of $20,339, interest at 2.5 % above "The Monthly
Weighted Average Cost of Funds Index for the Eleventh
District Saving Institutions" published by the Federal
Home Loan Bank's San Francisco office adjusted every six
months (5.144% and 6.539% at October 31, 1995 and
December 31, 1994, respectively); collateralized by a
trust deed on land and building; repaid on November 1,
1995. $2,526,631 $2,573,910
Note payable to a bank; monthly payments of principal and
interest of $7,265, interest at bank's prime rate plus
3/8% (8.75% and 8.875% at October 31, 1995 and December
31, 1994, respectively); collateralized by equipment;
repaid on November 1, 1995. 146,252 204,913
Note payable to a bank; monthly payments of principal of
$3,543 plus interest at 3% above federal funds rate
(8.71% and 8.375% at October 31, 1995 and December 31,
1994, respectively); collateralized by warehouse,
beverage, and office equipment; repaid on November 1,
1995. 127,540 162,967
Note payable to a bank; monthly payments of principal and
interest of $3,048, interest at bank's
prime rate plus 3/8% (8.875% at December 31, 1994); repaid
September 1995. - 10,350
---------- ----------
2,800,423 2,952,140
Less current maturities (170,871) (242,199)
---------- ----------
$2,629,552 $2,709,941
---------- ----------
---------- ----------
</TABLE>
13
<PAGE>
(6) RELATED PARTY NOTES PAYABLE
The Company has borrowed amounts from certain former and
current shareholders in the form of short-term demand
notes and notes payable. Individual related party notes
payable at October 31, 1995 and December 31, 1994, were
as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Note payable to the Howlett Family Trust; quarterly
payments of interest at First Interstate Bank of Nevada's
prime rate less 1% (8.75% and 7.5% at October 31, 1995
and December 31, 1994, respectively); unsecured; repaid
on November 1, 1995. $1,700,000 $1,650,000
Demand note payable to the Howlett Family Trust;
quarterly payments of interest at First Interstate Bank
of Nevada's prime rate less 1% (8.75% and 7.5% at
October 31, 1995 and December 31, 1994, respectively);
unsecured; repaid on November 1, 1995. 190,000 150,000
Note payable to a former shareholder and current officer;
annual payments of $67,000 plus accrued interest at 6%;
unsecured; repaid on November 1, 1995. 67,000 134,000
Demand note payable to Scott and Carol
Howlett; quarterly payments of interest at First
Interstate Bank of Nevada's prime rate less 1% (8.75% and
7.5% at October 31, 1995 and December 31, 1994,
respectively); repaid on November 1, 1995. 25,563 50,000
Demand note payable to the Scott Howlett Children's
Trust; quarterly payments of interest at First Interstate
Bank of Nevada prime rate (8.5% at December 31, 1994);
repaid on January 3, 1995. - 2,460
---------- ----------
1,982,563 1,986,460
Less current maturities (282,563) (269,460)
---------- ----------
$ 1,700,000 $1,717,000
---------- ----------
---------- ----------
</TABLE>
(7) COMPENSATION PLANS
The Company pays bonuses based on a percentage of "pre-bonus income" adjusted
for a return on investment to certain key employees. The Company had bonus
expenses totaling $348,135 and $365,024 for the ten month period ended
October 31, 1995 and the year ended December 31, 1994, respectively.
(8) PROFIT SHARING PLAN
The Company has a Profit Sharing and Qualified Employee Savings Plan 401(k)
(the "Plan"). The Plan covers all full-time employees who are at least 21
years of age and who have been employed for twelve months. The employees can
contribute up to 17% of their gross compensation within tax limitations.
The Company makes a contribution equal to 2% of gross income for any employee
who contributes at least 2% of their gross income to the Plan on an annual
basis.
14
<PAGE>
The contributions are to be invested with an insurance company and placed in
a managed fund. The employee contributions are 100% vested as funds are
placed in the investment account. Employer contributions vest at the rate of
20% per year after the third year until fully vested after seven years.
There is no unfunded employer liability with the Plan. The Company makes
annual contributions at the end of each calendar year. The Company made
contributions of $0 and $76,463 for the ten month period ended October 31,
1995 and the year ended December 31, 1994, respectively.
(9) COMMITMENTS AND CONTINGENCIES
The Company is involved in litigation arising in the ordinary course of
business. In the opinion of management, no material liability exists with
respect to such litigation.
The Company has entered into various operating lease agreements for vehicles
and warehouse space. The Company incurred rental expense of $941,807 and
$42,566 for the ten month period ended October 31, 1995 and the year ended
December 31, 1994, respectively. Future minimum lease payments for each of
the years ending October 31, under the non-cancelable leases are as follows:
<TABLE>
<S> <C>
1996 $ 853,944
1997 741,840
1998 634,548
1999 607,404
2000 604,770
Thereafter 971,172
-----------
$ 4,413,678
-----------
-----------
</TABLE>
15
<PAGE>
RYKOFF-SEXTON, INC.
UNAUDITED PROFORMA COMBINED BALANCE SHEET
OCTOBER 28, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
RYKOFF- H & O
SEXTON FOODS
(Historical) (Historical) PRO-
(Unaudited) (Audited) COMBINED FORMA PRO-
10/28/95 10/31/95 TOTAL ADJ FORMA
------------ ------------ ---------- ---------- ----------
ASSETS
<S> <C> <C> <C> <C> <C>
CASH AND CASH EQUIVALENTS 16,928 1,060 17,988 (5,521) (A) 12,467
ACCOUNTS RECEIVABLE, NET 172,391 10,011 182,402 182,402
INVENTORIES 157,889 6,638 164,527 164,527
PREPAID EXPENSES 23,187 164 23,351 23,351
------------ ------------ ---------- ---------- ----------
TOTAL CURRENT ASSETS 370,395 17,873 388,268 (5,521) 382,747
------------ ------------ ---------- ---------- ----------
PROPERTY, PLANT AND EQUIPMENT, NET 203,578 5,768 209,346 209,346
GOODWILL 23,884 23,884 17,328 (B) 41,212
OTHER ASSETS, NET 6,232 54 6,286 (4) (B) 6,282
------------ ------------ ---------- ---------- ----------
TOTAL ASSETS 604,089 23,695 627,784 11,803 639,587
------------ ------------ ---------- ---------- ----------
------------ ------------ ---------- ---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
SHORT-TERM DEBT 73,000 453 73,453 2,500 (C) 75,500
(453) (D)
ACCOUNTS PAYABLE 116,811 9,418 126,229 126,229
ACCRUED LIABILITIES 53,212 930 54,142 100 (B) 54,242
INCOME TAXES PAYABLE 886 886 886
------------ ------------ ---------- ---------- ----------
TOTAL CURRENT LIABILITIES 243,909 10,801 254,710 2,147 256,857
LONG-TERM DEBT, LESS CURRENT PORTION 132,568 4,330 136,898 22,517 (C) 155,085
(4,330) (D)
DEFERRED INCOME TAXES 11,073 11,073 11,073
OTHER LONG-TERM LIABILITIES 1,816 33 1,849 1,849
------------ ------------ ---------- ---------- ----------
TOTAL LIABILITIES 389,366 15,164 404,530 20,334 424,864
SHAREHOLDERS' EQUITY
COMMON STOCK, AT STATED VALUE 1,513 40 1,553 (40) (E) 1,513
ADDITIONAL PAID-IN CAPITAL 95,004 95,004 95,004
RETAINED EARNINGS 122,245 8,491 130,736 (8,491) (E) 122,245
------------ ------------ ---------- ---------- ----------
218,762 8,531 227,293 (8,531) 218,762
LESS: TREASURY STOCK, AT COST 4,039 4,039 4,039
------------ ------------ ---------- ---------- ----------
TOTAL SHAREHOLDERS' EQUITY 214,723 8,531 223,254 (8,531) 214,723
------------ ------------ ---------- ---------- ----------
TOTAL LIABILITIES AND EQUITY 604,089 23,695 627,784 11,803 639,587
------------ ------------ ---------- ---------- ----------
------------ ------------ ---------- ---------- ----------
</TABLE>
(A) Represents cash used to acquire H&O Foods.
(B) Represents the allocation of purchase price to the estimated fair value of
the net assets acquired.
(C) Represents new borrowings required to finance the acquisition.
(D) Represents historical debt of H&O Foods not assumed.
(E) Reflects elimination of historical equity of H&O Foods.
16
<PAGE>
RYKOFF-SEXTON, INC.
UNAUDITED PROFORMA COMBINED INCOME STATEMENT
SIX MONTHS ENDED 10/28/95
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
Six Months Ended
----------------
RYKOFF- H & O
SEXTON FOODS
(Historical) (Historical) PRO-
(unaudited) (unaudited) COMBINED FORMA
10/28/95 10/28/95 TOTAL ADJ SUBTOTAL
------------- ------------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
SALES 862,316 66,875 929,191 929,191
COST OF SALES 688,030 58,411 746,441 746,441
------------- ------------- ---------- ------- ----------
GROSS PROFIT 174,286 8,464 182,750 182,750
WAREHOUSE, SELLING, G&A 164,165 6,682 170,847 217 (D) 171,064
REVERSAL OF RESTRUCTURING RESERVES (6,441) (6,441) (6,441)
------------- ------------- ---------- ------- ----------
NET OPERATING EXPENSES 157,724 6,682 164,406 217 164,623
------------- ------------- ---------- ------- ----------
OPERATING PROFIT 16,562 1,782 18,344 (217) 18,127
INTEREST EXPENSE 7,359 259 7,618 1,262 (E) 8,619
(261)(H)
------------- ------------- ---------- ------- ----------
INCOME BEFORE INCOME TAXES 9,203 1,523 10,726 (1,218) 9,508
PROVISION FOR INCOME TAXES 3,681 3,681 122 (G) 3,803
------------- ------------- ---------- ------- ----------
NET INCOME 5,522 1,523 7,045 (1,340) 5,705
------------- ------------- ---------- ------- ----------
------------- ------------- ---------- ------- ----------
Weighted Average Shares Outstanding 14,991 14,991
------------- ----------
------------- ----------
Earnings per Share Data:
Net Income $ 0.37 $ 0.38
------- -------
------- -------
</TABLE>
17
<PAGE>
RYKOFF-SEXTON, INC.
UNAUDITED PROFORMA COMBINED INCOME STATEMENT
FOR THE TWELVE MONTHS ENDED 4/29/95
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CONTI- H & O
RYKOFF- NENTAL FOODS
SEXTON (HISTORICAL) PRO- (HISTORICAL) PRO-
(HISTORICAL) (UNAUDITED) FORMA (UNAUDITED) FORMA PRO-
(AUDITED) (5/1/94-2/19/95) ADJ SUBTOTAL (5/1/94-4/29/95) ADJ FORMA
------------ ---------------- ---------- ---------- ---------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SALES 1,569,019 83,841 1,652,860 119,565 1,772,425
COST OF SALES 1,241,291 69,808 1,311,099 104,480 1,415,579
---------- ---------- ---------- ---------- ---------- ----------- ----------
GROSS PROFIT 327,728 14,033 341,761 15,085 356,846
WAREHOUSE, SELLING, G&A 301,235 11,492 90 (A) 311,913 11,927 323,840
(991)(B)
87 (C)
AMORTIZATION OF GOODWILL 440 (D) 440 433 (D) 873
---------- ---------- ---------- ---------- ---------- ----------- ----------
NET OPERATING EXPENSES 301,235 11,492 (374) 312,353 11,927 433 324,713
---------- ---------- ---------- ---------- ---------- ----------- ----------
OPERATING PROFIT 26,493 2,541 374 29,408 3,158 (433) 32,133
INTEREST EXPENSE 10,867 (78) 1,757 (E) 12,624 421 2,524 (E) 15,055
78 (F) (514)(H)
---------- ---------- ---------- ---------- ---------- ----------- ----------
INCOME FROM CONT.
OPERATIONS BEFORE
INCOME TAXES 15,626 2,619 (1,461) 16,784 2,737 (2,443) 17,078
PROVISION FOR INCOME
TAXES 6,250 464 (G) 6,714 117 (G) 6,831
---------- ---------- ---------- ---------- ---------- ----------- ----------
INCOME FROM CONTINUING
OPERATIONS 9,376 2,619 (1,925) 10,070 2,737 (2,560) 10,247
DISCONTINUED OPERATIONS:
INCOME FROM
DISCONTINUED OPERATIONS,
NET OF INCOME TAXES 137 137 137
GAIN ON DISPOSAL OF
DISCONTINUED OPERATIONS,
NET OF INCOME TAXES 23,359 23,359 23,359
---------- ---------- ---------- ---------- ---------- ----------- ----------
NET INCOME 32,872 2,619 (1,925) 33,566 2,737 (2,560) 33,743
---------- ---------- ---------- ---------- ---------- ----------- ----------
---------- ---------- ---------- ---------- ---------- ----------- ----------
Weighted Average
Shares Outstanding 14,730 14,730 14,730
---------- ---------- ----------
---------- ---------- ----------
Earnings per Share Data:
Income from continuing
operations $ 0.64 $ 0.68 $ 0.69
Income from discontinued
operations 0.01 0.01 0.01
Gain on disposal of
discontinued operations 1.59 1.59 1.59
---------- ---------- ----------
Net Income $ 2.24 $ 2.28 $ 2.29
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
18
<PAGE>
RYKOFF-SEXTON, INC.
NOTES TO UNAUDITED PROFORMA COMBINED INCOME STATEMENTS
FOR THE TWELVE MONTHS ENDED 4/29/95 AND THE SIX MONTHS ENDED 10/28/95
(A) Represents depreciation for the period on the building acquired as part of
the Continental acquisition using a 30 year useful life.
(B) Represents the elimination of Continental's historical lease expense and
owner salaries.
(C) Represents the elimination of Continental's rental income.
(D) Represents amortization expense of the allocation of the excess purchase
price over the estimated fair value of the net assets acquired using a 40
year amortization period.
(E) Represents interest expense on borrowings for the applicable acquisition.
(F) Represents the elimination of Continental's net interest (income)/expense.
(G) Represents the additional tax provision required based on income from
continuing operations before income taxes at the consolidated corporate tax
rate.
(H) Represents elimination of interest expense on acquired entities borrowings
not assumed or refinanced as part of the acquisition.
19
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- ----------------------------------------------------------------------------------
<S> <C>
2 *Asset Purchase Agreement, dated as of October 26, 1995, by and among H&O Foods,
Inc., certain shareholders set forth on Schedule 1 thereto and Rykoff-Sexton, Inc.
23 **Consent of Independent Public Accountants
</TABLE>
* Previously filed
** Filed herewith
20
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated November 29, 1995 covering the financial statements of H&O
Foods, Inc. as of October 31, 1995 and December 31, 1994, included in this
Form 8-K. It should be noted that we have not audited any financial
statements of H&O Foods, Inc. subsequent to October 31, 1995, or performed
any audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada,
January 11, 1996
