<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 MARCH 29, 1997
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.)
613 BALTIMORE DRIVE
WILKES-BARRE, PENNSYLVANIA 18702
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(717) 831-7500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
1050 WARRENVILLE ROAD, LISLE, ILLINOIS 60532
(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 APRIL 30, 1997
--------------------- ------------------
$.10 PAR VALUE 27,959,676 SHARES
<PAGE>
RYKOFF-SEXTON, INC.
INDEX
Page
No.
-----
Part I. Financial Information
Item l. Financial Statements
Condensed Consolidated Balance Sheets
March 29, 1997 and April 27, 1996 3
Condensed Consolidated Statements of Operations
Thirteen Weeks and Thirty-nine Weeks ended
March 29, 1997 and April 27, 1996 4
Condensed Consolidated Statements of Cash Flows
Thirty-nine Weeks ended March 29, 1997 and
April 27, 1996 5
Notes to Condensed Consolidated Financial
Statements 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-13
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
2
<PAGE>
RYKOFF-SEXTON, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
ASSETS
March 29,1997 April 27,1996
(Unaudited)
------------- -------------
Current assets:
Cash and cash equivalents $ 56,302 $ 10,825
Accounts receivable, net 125,712 182,312
Inventories 219,469 152,805
Prepaid expenses 21,599 19,893
Deferred income taxes 13,758 7,211
--------- ---------
Total current assets 436,840 373,046
--------- ---------
Property, plant and equipment, net 284,395 177,918
Goodwill, net 440,574 41,188
Deferred income taxes, net 33,200 4,881
Other assets, net 25,022 14,823
--------- ---------
Total assets $1,220,031 $ 611,856
============ ==========
- -------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $ --- $ 94,000
Accounts payable 229,595 120,828
Accrued liabilities 99,052 48,203
Current portion of long-term debt 15,635 19,708
------- -------
Total current liabilities 344,282 282,739
-------- -------
Long-term debt, less current portion 491,104 135,081
-------- -------
Other long-term liabilities 38,002 1,536
-------- -------
Shareholders' equity:
Common stock, at stated value 2,819 1,513
Additional paid-in capital 299,396 95,236
Retained earnings 47,619 99,497
------- -------
349,834 196,246
Less: treasury stock, at cost 3,191 3,746
------- -------
Total shareholders' equity 346,643 192,500
------- -------
Total liabilities and shareholders' equity $1,220,031 $ 611,856
========== ==========
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
RYKOFF-SEXTON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
--------------------------------- ---------------------------------
March 29, 1997 April 27, 1996 March 29, 1997 April 27, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 831,272 $ 474,783 $ 2,618,480 $ 1,367,707
Cost of sales 658,981 371,608 2,088,221 1,062,759
---------- ---------- ----------- ---------
Gross profit 172,291 103,175 530,259 304,948
Operating expenses 146,241 106,236 456,420 299,031
Amortization of goodwill and other intangibles 3,019 264 9,337 691
Impairment of long-lived assets --- 29,700 --- 29,700
Reversal of restructuring reserves --- --- --- (6,441)
---------- -------- ----------- ----------
Income (loss) from operations 23,031 (33,025) 64,502 (18,033)
Interest expense, net 12,025 4,888 34,831 14,194
Other expenses 3,164 --- 10,122 ---
---------- ------- ------------ -----------
Income (loss) before income taxes 7,842 (37,913) 19,549 (32,227)
Provision (benefit) for income taxes 3,833 (15,067) 9,577 (12,802)
---------- ------------ ------------ -----------
Net income (loss) $ 4,009 $ (22,846) $ 9,972 $ (19,425)
========== ============ ============ ===========
Weighted average number of
shares and equivalents outstanding 28,573 14,941 28,482 15,106
=========== ============ ============ ============
Earnings (loss) per share $ 0.14 $ (1.53) $ 0.35 $ (1.29)
=========== ============ ============ ============
Cash dividends per share $ 0.03 $ --- $ 0.06 $ 0.03
=========== ============ ============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
RYKOFF-SEXTON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Thirty-nine Weeks Ended
---------------------------------
March 29, 1997 April 27, 1996
----------------- --------------
<S> <C> <C>
Cash flows from operating activities--
Net income (loss) $ 9,972 $ (19,425)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities --
Impairment of long-lived assets ---- 29,700
Deferred gain on sale and leaseback transaction (301) (421)
Depreciation and amortization 31,953 15,645
Gain on sale of property, plant and equipment (2,168) (1,218)
Deferred income taxes 8,340 (4,477)
Changes in assets and liabilities:
(Increase) in receivables (10,672) ( 13,841)
Decrease in inventories 18,125 5,849
Decrease (increase) in prepaid expenses and
other assets 10,943 (14,723)
(Decrease) increase in accounts payable
and accrued and other liabilities (10,706) 15,692
--------- ---------
Net cash provided by operating activities 55,486 12,781
--------- ---------
Cash flows from investing activities --
Capital expenditures (34,216) (27,590)
Proceeds from disposal of property, plant and
equipment 6,936 2,064
Cost of acquisition --- (8,726)
Other --- (6,255)
--------- ---------
Net cash used in investing activities (27,280) (40,507)
--------- ---------
Cash flows from financing activities--
Principal payments of long-term debt and capital
lease obligations (6,094) (3,387)
(Decrease) increase under revolving credit line (15,000) 38,000
Increase in long-term debt and capital lease obligation 26,583 ---
Issuance of common stock 2,232 2,693
Dividends paid (1,670) (446)
Other --- (1,486)
------- --------
Net cash provided by financing activities 6,051 35,374
------- --------
Net increase in cash and cash equivalents 34,257 7,648
Cash and cash equivalents at beginning of period 22,045 3,177
-------- --------
Cash and cash equivalents at end of period $ 56,302 $ 10,825
========= =========
Supplemental disclosures of cash flow information
Cash paid (refunds) during the period for:
Interest $ 31,534 $ 11,510
Income taxes (refunds), net (7,802) 1,377
========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
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. The foregoing financial information, not audited
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 June 28, 1997. 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.
The Condensed Consolidated Statements of Operations include the results
for the thirteen and thirty-nine weeks ended March 29, 1997, compared to
the thirteen and thirty-nine weeks ended April 27, 1996. The Condensed
Statements of Cash Flows present the cash flows for the thirty-nine weeks
ended March 29, 1997, compared to the thirty-nine weeks ended April 27,
1996. The Company believes it was not practicable to prepare financial
statements for the comparable periods in fiscal 1996, nor would such
statements be more meaningful than the reported results for the previously
reported thirteen and thirty-nine weeks ended April 27, 1996, given the
inclusion of the results of US Foodservice Inc. ("US Foodservice") in the
thirteen and thirty-nine weeks ended March 29, 1997.
2. In connection with the acquisition of US Foodservice, the Company changed
its fiscal year to the Saturday closest to June 30 from the Saturday
closest to April 30.
The financial statements for the prior periods reflect certain
reclassifications to conform with classifications adopted in the current
year, including the reclassification of certain items previously included
in operating expenses to cost of sales to conform the accounting treatment
of the Company and US Foodservice.
3. Primary earnings (loss) per share of common stock have been computed
based on the weighted average number of shares of common stock
outstanding and dilutive common stock equivalents.
In February, 1997 Statement of Financial Accounting Standards (SFAS) No.
128, "Earnings per Share" was issued. This Statement is effective for
financial statements issued for periods ending after December 15, 1997,
including interim reporting periods. Earlier application is not
permitted. The change in calculating earnings per share under this
Statement is that basic earnings per share, which replaces primary
earnings per share, will no longer assume potentially dilutive securities.
There would not have been a material change in reported primary earnings
per share if this statement was effective for this fiscal period. Fully
diluted earnings per share would have remained the same had the
Statement been effective.
4. Inventories are summarized as follows (amounts in thousands):
March 29, 1997 April 27, 1996
-------------- --------------
Finished Goods $212,808 $145,899
Raw Materials 6,661 6,906
-------------- --------------
$219,469 $152,805
============== ==============
All inventories are stated at the lower of cost or market, with
approximately 14% at March 29, 1997 determined by the last-in, first-out
("LIFO") cost method and the remainder by the first-in, first-out ("FIFO")
cost method.
6
<PAGE>
5. In October 1994, the Company sold all of the stock of its then wholly-owned
subsidiary, Tone Brothers, Inc. ("Tone") to Burns Philp, Inc. ("Burns
Philp"). The sale agreement provided for arbitration in the case of a
dispute and on April 16, 1995, Burns Philp filed a notice of arbitration in
which it claimed contract and fraud damages in excess of $57 million in
connection with the purchase of Tone.
After extensive investigation and discovery, the matter was presented to
the arbitration tribunal in February 1996 and final argument was presented
in April 1996. The arbitration proceeding concluded in October 1996 and
the arbitration award, which is final and binding, did not have a
material impact on the Company's financial results.
6. On May 17, 1996, the Company consummated a merger with US Foodservice, a
privately held broadline foodservice distribution company. As part of the
merger agreement, US Foodservice stockholders received 1.457 shares of
Rykoff-Sexton common stock for each outstanding share of US Foodservice
common stock. Options and warrants to acquire approximately one million
shares of US Foodservice common stock were converted to options to acquire
Rykoff-Sexton common stock on the same basis. The number of shares issued
in connection with the merger was 12,880,519. For financial reporting
purposes, the shares issued have been recorded at $15.40 per share, which
represents the closing market price as defined in the merger agreement. In
addition to the issuance of common stock, Rykoff-Sexton refinanced
substantially all of the outstanding debt of US Foodservice and purchased
all of the outstanding shares of the US Foodservice cumulative
redeemable exchangeable preferred stock. The merger was treated as a
purchase transaction and, as such, the aggregate purchase price has been
preliminarily allocated to the assets and liabilities of US Foodservice
based upon their respective fair values. The excess of the purchase price
over net assets acquired approximated $408 million and is being amortized
over the expected period of benefit of forty years.
In connection with the merger, Rykoff-Sexton entered into a new bank credit
facility providing for loans and other credit facilities equal to $485
million. Rykoff-Sexton also entered into an accounts receivable
securitization facility with two banks totaling $110 million and assumed an
existing $90 million accounts receivable securitization facility already in
place at US Foodservice. Proceeds under the new credit facility and the
accounts receivable securitization facilities were used to pay off existing
debt, repurchase outstanding US Foodservice preferred stock, provide for
initial and ongoing working capital needs and pay related fees and
expenses. In November, 1996, the company combined its two accounts
receivable securitization facilities into a single program.
7
<PAGE>
The following unaudited pro forma information presents a summary of
consolidated results of operations, assuming the US Foodservice acquisition
had been made on July 1, 1995, and Rykoff-Sexton results of operations had
been reported on a fiscal quarter basis assuming a June fiscal year end (in
thousands, except per share amounts):
Thirteen Weeks Thirty-nine Weeks
Ended Ended
March 30, 1996 March 30, 1996
--------------- -----------------
Net sales $867,177 $2,633,523
Net income (loss) $ (1,311) $ 6,296(1)
Earnings (loss) per
per common share $ (.05) $ .22(1)
(1) Includes the reversal of restructuring reserves of $6.4 million
($3.9 million after tax) equal to $.14 per common share.
These unaudited pro forma results have been prepared for comparative
purposes only and include certain adjustments, such as additional
amortization expense on increased goodwill and other intangible assets and
additional interest expense on acquisition debt. They do not purport to be
indicative of the results of operations which actually would have resulted
had the combination been in effect on July 1, 1995, or of future results of
operations of the consolidated entities.
7. In connection with the US Foodservice merger, the Company recorded a
restructuring charge of $57.6 million ($35.7 million after tax) in the
transition period ended June 29, 1996. Approximately $10.7 million
related to severance and termination benefit costs, $20.2 million
related to lease related costs and $26.7 million related to other exit
costs, including the closure of duplicate facilities and other
integration activities. During the current fiscal quarter and
year-to-date, the Company charged $5.6 million and $17.2 million against
the restructuring liability, respectively, for such costs incurred.
Most of the remaining cash outlays are estimated to be paid in subsequent
years (primarily related to non-cancelable operating lease commitments).
RYKOFF-SEXTON, INC.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BASIS OF PRESENTATION
This report discusses the consolidated results of Rykoff-Sexton, Inc. (the
"Company") for the thirteen and thirty-nine weeks ended March 29, 1997, the
third fiscal quarter and year-to-date in the Company's newly adopted fiscal
year ending June 28, 1997. Due to the change in the Company's fiscal year
and the combination with US Foodservice Inc. on May 17, 1996, there are no
directly comparable prior year results. To aid in the analysis of the
operating results, the discussion will compare the third fiscal quarter and
year-to-date to the thirteen and thirty-nine weeks ended April 27, 1996.
Management believes that it would not be practicable to prepare financial
statements for the comparable thirteen and thirty-nine weeks in fiscal 1996,
nor would such statements be more meaningful than the reported results for
the previously reported thirteen and thirty-nine weeks ended April 27, 1996.
The operating results for the thirteen and thirty-nine weeks ended April 27,
1996 include certain reclassifications to conform with classifications adopted
in the current year.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
In 000's:
Thirteen Weeks Thirteen Weeks
Ended Ended
March 29, 1997 % of Sales April 27, 1996 % of Sales
-------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Net sales $ 831,272 100.0% $ 474,783 100.0%
Cost of sales 658,981 79.3% 371,608 78.3%
---------- ----------
Gross profit 172,291 20.7% 103,175 21.7%
Operating expenses 146,241 17.6% 106,236 22.4%
Amortization of goodwill and other
intangibles 3,019 0.4% 264 0.1%
Impairment of long-lived assets --- --- 29,700 6.3%
---------- ----------
Income (loss) from operations 23,031 2.8% (33,025) (7.0%)
Interest expense, net 12,025 1.4% 4,888 1.0%
Other expenses 3,164 0.4% --- ---
---------- ----------
Income (loss) before income taxes 7,842 0.9% (37,913) (8.0%)
Provision (benefit) for income taxes 3,833 0.5% (15,067) (3.2%)
---------- ----------
Net income (loss) $ 4,009 0.5% $ (22,846) (4.8%)
========== ==========
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
In 000's:
Thirty-nine Weeks Thirty-nine Weeks
Ended Ended
March 29, 1997 % of Sales April 27, 1996 % of Sales
-------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Net sales $ 2,618,480 100.0% $ 1,367,707 100.0%
Cost of sales 2,088,221 79.7% 1,062,759 77.7%
---------- ----------
Gross profit 530,259 20.3% 304,948 22.3%
Operating expenses 456,420 17.4% 299,031 21.9%
Amortization of goodwill and other
intangibles 9,337 0.4% 691 0.1%
Impairment of long-lived assets --- --- 29,700 2.2%
Reversal of restructuring reserves --- --- (6,441) (0.5%)
---------- ----------
Income (loss) from operations 64,502 2.5% (18,033) (1.3%)
Interest expense, net 34,831 1.3% 14,194 1.0%
Other expenses 10,122 0.4% --- ---
---------- ----------
Income (loss) before income taxes 19,549 0.7% (32,227) (2.4%)
Provision (benefit) for income taxes 9,577 0.4% (12,802) (0.9%)
---------- ----------
Net income (loss) $ 9,972 0.4% $ (19,425) (1.4%)
========== ==========
</TABLE>
NET SALES. Net sales for the thirteen and thirty-nine weeks ended March 29,
1997 were $831.3 million and $2,618.5 million, respectively. This represents an
increase of $356.5 million for the thirteen and $1,250.8 million for the thirty-
nine weeks ended March 29, 1997 over the thirteen and thirty-nine weeks ended
April 27, 1996. This increase is primarily the result of the merger with US
Foodservice Inc. ("US Foodservice"), which occurred on May 17, 1996. This
merger essentially doubled the Company's size, in terms of net sales.
The Company is continuing its distribution center consolidation program, with
six consolidations completed, to date, and three other distribution centers
either closed or sold. Also, there have been two sales offices closed.
These consolidations tend to temper overall sales growth, as some customers
elect not to be serviced by the new combined entity. In addition, customers
are reviewed periodically for profitability to the Company and terms are
often renegotiated or, absent successful renegotiation, the Company may
resign from the account. Same distribution center sales is defined as total
distribution center sales less the sales results of distribution centers
affected by consolidations and closings and the Company's resignation from a
significant customer account. Same-distribution center sales (as defined)
for the thirteen weeks ended March 29, 1997, increased by approximately 3%
compared to the thirteen weeks ended April 27, 1996. The same distribution
center sales (as defined) for the thirty-nine weeks ended March 29, 1997,
increased by 7.0% over sales for the thirty-nine weeks ended April 27, 1996.
10
<PAGE>
GROSS PROFIT. Gross profit for the thirteen weeks and thirty-nine weeks
ended March 29, 1997 was $172.3 million and $530.3 million, respectively.
Gross margin (gross profit as a percentage of net sales) for the thirteen
weeks ended March 29, 1997 was 20.7% compared to 21.7% for the thirteen weeks
ended April 27, 1996. Gross margin for the thirty-nine weeks ended March 29,
1997 was 20.3% compared to 22.3% for the thirty-nine weeks ended April 27,
1996. The decline in gross margin is directly attributable to the merger
with US Foodservice, which on a combined basis yields a lower gross margin
than the pre-merger Rykoff-Sexton distribution centers, due to both its mix
of products sold and to its mix of customers. For the third quarter, gross
margin improved from 20.5% in the second quarter, primarily reflecting
purchasing synergies that are developing as vendor programs are evaluated and
negotiated on a consolidated basis.
OPERATING EXPENSES. Operating expenses for the thirteen weeks and thirty-nine
weeks ended March 29, 1997 were $146.2 million and $456.4 million,
respectively. As a percentage of net sales, operating expenses for the
thirteen weeks ended March 29, 1997 were 17.6% compared to 22.4% for the
thirteen weeks ended April 27, 1996 and 17.4% for the thirty-nine weeks ended
March 29, 1997 compared to 21.9% for the thirty-nine weeks ended April 27,
1996. The lower levels of operating expenses reflect the change in product
and customer mixes resulting from the combination with US Foodservice, as
well as the operating expense leverage resulting from US Foodservice's fewer,
higher volume distribution centers. Compared to the prior year, the Company
services a higher percentage of chain account customers, which typically have
higher drop (delivery) sizes and consistent delivery schedules and, thus, a
lower operating expense ratio as a percentage of sales. Included in
operating expenses are gains totaling $2.2 million ($1.3 million after tax)
related to sales of certain assets for the thirty-nine weeks ended March 29,
1997.
AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Amortization of goodwill and
other intangibles was $3.0 million for the thirteen weeks ended March 29, 1997
and $9.3 million for the thirty-nine weeks ended March 29, 1997. This
amortization resulted primarily from the combination with US Foodservice, which
was accounted for as a purchase transaction.
INTEREST EXPENSE, NET. Net interest expense was $12.0 million for the thirteen
weeks ended March 29, 1997 compared to $4.9 million for the thirteen weeks ended
April 27, 1996 and $ 34.8 million for the thirty-nine weeks ended March 29, 1997
compared to $14.2 million for the thirty-nine weeks ended April 27, 1996. The
increase in net interest expense is directly attributable to the combination
with US Foodservice, which increased the overall debt level of the Company.
OTHER EXPENSES. Other expenses were $3.2 million for the thirteen weeks ended
March 29, 1997 and $10.1 million for the thirty-nine weeks ended March 29,
1997. Other expenses consist of the charges generated under the Company's
accounts receivable securitization facilities.
PROVISION (BENEFIT) FOR INCOME TAXES. Provision for income taxes was $3.8
million for the thirteen weeks ended March 29, 1997 and $9.6 million for the
thirty-nine weeks ended March 29, 1997. The effective tax rate for the
thirty-nine week period is 49%, which approximates the expected effective tax
rate for the year. This effective rate is higher than the Federal statutory
income tax rate primarily because of non-deductible goodwill amortization of
$8.0 million.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the thirty-nine weeks ended March 29, 1997, the Company increased its
cash and cash equivalents by $34.3 million from the beginning of the year.
Net cash flows from operations of $55.5 million were provided by net income
of $10.0 million, increased for depreciation and amortization of $32.0
million, deferred taxes of $8.3 million and a decrease in inventories of
$18.1 million, offset by gains on sales of assets of $2.2 million and
increases in accounts receivable of $10.7 million. The other items
cumulatively had no cash flow impact and consisted of a decrease in prepaid
expenses and other assets of $11.0 million, a decrease in accounts payable
and accrued and other liabilities of $10.7 million and other items resulting
in a decrease of $0.3 million. Proceeds on asset sales totaled $6.9 million,
while capital expenditures amounted to $34.2 million. During the second
quarter, the Company issued $25.9 million in Industrial Development Bonds
associated with its Los Angeles distribution facility located in La Mirada,
California. Proceeds from this issuance were used primarily to repay
outstanding borrowings under the Company's revolving credit facility.
In connection with the merger with US Foodservice on May 17, 1996, the Company
entered into a new bank credit facility with a syndicate of financial
institutions providing for loans and other credit facilities equal to $485
million. The Company also entered into an accounts receivable securitization
program with two banks totaling $110 million and assumed the existing US
Foodservice accounts receivable securitization program totaling $90 million. In
November, 1996, these two asset securitization programs were combined into a
single $200 million facility. Term loans outstanding under the bank credit
facility at March 29, 1997 were $331.8 million. Availability under the
Company's revolving credit facility, net of outstanding letters of credit, was
$120.3 million. The Company also had $29.5 million invested in commercial paper
(cash equivalents) at March 29, 1997.
On March 3, 1997, the Company paid a regular dividend of $.03 per share of
common stock, or $837 thousand to shareholders of record at February 14, 1997.
Under certain provisions of the Company's current financing arrangements, the
Company's ability to pay dividends could be limited to a cumulative total of $5
million.
Management believes that the Company will continue to be able to generate
cash flows from operations and have sufficient capital resources to meet its
operating needs, as well as debt obligations and other cash outlays for the
foreseeable future. For the remainder of fiscal 1997, the Company has plans
for the expenditure of approximately $21.5 million of capital in the
construction or expansion of its distribution facilities. The Company may
elect, under certain provisions of the Company's current financing
arrangements, to finance all of these expenditures through industrial bonds or
other mortgage financing. In addition, ongoing maintenance capital
expenditures are expected to be approximately $5.9 million in the last three
months of fiscal 1997.
12
<PAGE>
FORWARD-LOOKING STATEMENTS
From time to time Rykoff-Sexton may publish forward-looking statements about
anticipated results. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the Company notes that such forward-looking
statements are based upon internal estimates which are subject to change because
they reflect preliminary information and management assumptions, and that a
variety of factors could cause the Company's actual results and experience to
differ materially from the anticipated results or other expectations expressed
in the Company's forward-looking statements. The factors which could cause
actual results or outcomes to differ from such expectations include the extent
of the company's success in (i) integrating all operations within the planned
time frame; (ii) achieving increased sales and marketing allowances from its
enhanced purchasing leverage; and (iii) achieving
budgeted cost reductions, as well as gains or losses from sales of the company's
operations, along with the uncertainties and other factors, including unusually
adverse weather conditions, described from time to time in the company's SEC
filings and reports. This report includes "forward-looking statements"
including, without limitation, statements as to liquidity and capital resources.
13
<PAGE>
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
There were no reports on Form 8-K filed during the thirteen weeks
ended March 29, 1997.
14
<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: May 13, 1997 /S/MARK VAN STEKELENBURG
--------------------------------
Mark Van Stekelenburg
Chairman and Chief
Executive Officer
Date: May 13, 1997 /S/DAVID F. MCANALLY
--------------------------------
David F. McAnally
Senior Vice President and
Chief Financial Officer
15
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