<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(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 1, 2000
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: 0-24954
U.S. Foodservice
(Exact name of registrant as specified in its charter)
Delaware 52-1634568
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9755 Patuxent Woods Drive 21046
Columbia, Maryland (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (410) 312-7100
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No _____
------
The number of shares of the registrant's common stock, par value $.01 per
share, outstanding at February 11, 2000 was 101,873,236 shares.
1
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U.S. FOODSERVICE
INDEX
-----
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
--------
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
July 3, 1999 and January 1, 2000 3
Condensed Consolidated Statements of Income
and Comprehensive Income
Three and six months ended December 26, 1998
and January 1, 2000 4
Condensed Consolidated Statements of Cash Flows
Three and six months ended December 26, 1998
and January 1, 2000 5
Notes to Condensed Consolidated Financial Statements 6
Signature 10
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
U.S. FOODSERVICE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS July 3, January 1,
1999* 2000
---------- ----------
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 79,660 $ 66,255
Receivables, net 234,107 408,256
Residual interest on accounts
receivable sold 102,369 102,103
Inventories 428,193 467,978
Other current assets 31,949 44,739
Deferred income taxes 18,853 19,086
---------- ----------
Total current assets 895,131 1,108,417
Property and equipment, net 454,033 468,492
Goodwill and other noncurrent assets 663,710 712,414
---------- ----------
Total assets $2,012,874 $2,289,323
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 698 $ 625
Current obligations under capital leases 6,206 6,202
Accounts payable 393,597 370,047
Accrued expenses 114,690 117,747
---------- ----------
Total current liabilities 515,191 494,621
Noncurrent liabilities
Long-term debt 533,869 793,204
Obligations under capital leases 24,671 22,310
Deferred income taxes 13,051 18,855
Other noncurrent liabilities 96,713 74,168
---------- ----------
Total liabilities 1,183,495 1,403,158
Commitments and contingent liabilities
Stockholders' equity 829,379 886,165
---------- ----------
Total liabilities and stockholders' equity $2,012,874 $2,289,323
========== ==========
</TABLE>
* Amounts were derived from the Company's audited consolidated balance
sheet.
SEE ACCOMPANYING NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
3
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U.S. FOODSERVICE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- ---------------------------
December 26, January 1, December 26, January 1,
1998 2000 1998 2000
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 1,533,089 $ 1,674,952 $ 3,011,459 $ 3,357,835
Cost of sales 1,251,007 1,360,852 2,459,400 2,731,986
----------- ------------ ----------- ------------
Gross profit 282,082 314,100 552,059 625,849
Operating expenses 226,686 246,901 447,694 500,965
Amortization of intangible assets 4,147 4,732 8,077 9,236
----------- ------------ ----------- ------------
Income from operations 51,249 62,467 96,288 115,648
Interest expense and other financing
costs, net 16,476 17,208 32,672 31,849
----------- ------------ ----------- ------------
Income before income taxes
and extraordinary charge 34,773 45,259 63,616 83,799
Provision for income taxes 14,165 17,982 26,096 33,409
----------- ------------ ----------- ------------
Income before extraordinary charge 20,608 27,277 37,520 50,390
Extraordinary charge, net of
income tax benefit 2,748 2,748
----------- ------------ ----------- ------------
Net income and comprehensive income $ 17,860 $ 27,277 $ 34,772 $ 50,390
=========== ============ =========== ============
Basic earnings per common share:
Before extraordinary charge $ 0.22 $ 0.27 $ 0.40 $ 0.50
Extraordinary charge (0.02) - (0.02) -
----------- ------------ ----------- ------------
Basic earnings per common share $ 0.20 $ 0.27 $ 0.38 $ 0.50
=========== ============ =========== ============
Basic weighted average number of shares
of common stock outstanding 95,072,000 101,557,000 94,078,000 101,499,000
Diluted earnings per common share:
Before extraordinary charge $ 0.21 $ 0.27 $ 0.39 $ 0.49
Extraordinary charge (0.02) - (0.02) -
----------- ------------ ----------- ------------
Diluted earnings per common share $ 0.19 $ 0.27 $ 0.37 $ 0.49
=========== ============ =========== ============
Diluted weighted average number of shares
Of common stock outstanding 96,454,000 102,102,000 95,398,000 102,176,000
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
4
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U.S. FOODSERVICE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------------------
December 26, January 1,
1998 2000
------------ -----------
<S> <C> <C>
Cash flows from operating activities
Net income $ 34,772 $ 50,390
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 29,984 30,067
Write-off deferred financing costs 1,247
Other adjustments (1,107) 1,527
Changes in working capital, net of effects
from acquisitions (110,530) (258,385)
--------- --------
Net cash used in operating activities (45,634) (176,401)
--------- --------
Cash flows from investing activities
Additions to property and equipment (35,216) (24,234)
Cost of businesses acquired, net of cash acquired (8,438) (73,409)
Proceeds from disposal of property 7,322 7,685
Proceeds from sale of manufacturing division assets 20,755
Other (535) 1,130
--------- --------
Net cash used in investing activities (16,112) (88,828)
--------- --------
Cash flows from financing activities
Increase under revolving credit line, net 153,300 255,346
Decrease in long-term debt, net (93,515) (2,658)
Principal payments under capital lease obligations (3,116) (2,365)
Proceeds from employee stock purchases 6,796 2,003
Other 4,950 (502)
--------- --------
Net cash provided by financing activities 68,415 251,824
--------- --------
Net increase (decrease) in cash and cash equivalents 6,669 (13,405)
Cash and cash equivalents:
Beginning of period 57,817 79,660
--------- --------
End of period $ 64,486 $ 66,255
========= ========
</TABLE>
5
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U.S. FOODSERVICE AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements of U.S. Foodservice and its
consolidated subsidiaries (the "Company") at January 1, 2000 and for the three-
month and six-month periods ended December 26, 1998 and January 1, 2000 included
herein are unaudited, but include all adjustments (consisting only of normal
recurring entries) which the Company's management believes to be necessary for
the fair presentation of the financial position, results of operations and cash
flows of the Company as of and for the periods presented. Interim results are
not necessarily indicative of results that may be expected for the full year.
In June 1999, the Company's Board of Directors approved a two-for-one stock
split in the form of a stock dividend paid on August 4, 1999 to stockholders of
record on July 20, 1999. Earnings per share, weighted average shares outstanding
and stock option information included in the accompanying condensed consolidated
financial statements and related notes have been adjusted to reflect this stock
split.
NOTE 2 - ACQUISITIONS
PARKWAY ACQUISITION- Effective December 21, 1999, the Company completed the
acquisition of three companies doing business as Parkway Food Service
("Parkway"), a broadline foodservice distributor located in Greensburg,
Pennsylvania. Under the terms of the acquisition agreement, the Company acquired
certain assets and assumed certain liabilities for 204,894 shares of the
Company's common stock and approximately $3.1 million in cash, payable in
specified increments, the last of which is due June 30, 2001. In addition, the
agreement includes a provision for future cash payments to the selling
shareholders contingent upon achievement of future gross profit and operating
expense performance targets. The transaction was accounted for as a purchase.
Results of Parkway for the period from December 21, 1999 to January 1, 2000 are
included in the Company's condensed consolidated statement of operations.
SUPERIOR ACQUISITION- Effective October 30, 1999, the Company completed the
acquisition of Superior Projects Mfg. Co. Limited Partnership and Christianson
Sales Co. Limited Partnership (collectively, "Superior"), a foodservice
equipment and supplies distributor located in New Brighton, Minnesota. Under the
terms of the acquisition agreement, the Company acquired all of the partnership
interests in Superior in exchange for approximately $59.1 million in cash. The
transaction was accounted for as a purchase. Results of Superior for the period
from October 30, 1999 through January 1, 2000 are included in the Company's
condensed consolidated statement of operations.
SOFCO ACQUISITION- On July 1, 1999, the Company completed the acquisition of
Sofco, Inc. ("Sofco"), a paper product distributor located in Scotia, New York.
The transaction was accounted for as a purchase.
WEBB ACQUISITION- Effective November 1, 1998, the Company completed the
acquisition of Joseph Webb Foods, Inc. ("Webb"), a broadline foodservice
distributor located in Vista, California. The transaction was accounted for as a
purchase.
HAAR ACQUISITION- Effective September 27, 1998, the Company completed the
acquisition of J.H. Haar & Sons, L.L.C. ("Haar"), a broadline foodservice
distributor serving the New York City metropolitan market. The transaction was
accounted for as a pooling of interests. Because Haar's total assets, net assets
and the results of operations were not material to the Company for any of the
fiscal years presented, the transaction was recorded as of September 27, 1998.
The tables below set forth pro forma information, in thousands, for the three-
month and six-month periods ended December 26, 1998 and January 1, 2000 giving
effect to the acquisitions of Parkway, Superior, Sofco, Webb and Haar as if such
acquisitions had been consummated as of June 27, 1998:
6
<PAGE>
<TABLE>
<CAPTION>
(in thousands)
Three Months Ended Six Months Ended
----------------------------------- ----------------------------------
December 26, 1998 January 1, 2000 December 26, 1998 January 1, 2000
------------------ --------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Net sales $1,646,307 $1,708,636 $3,288,156 $3,456,377
Income before
extraordinary charge $ 20,414 $ 26,699 $ 36,880 $ 50,159
Net income $ 17,666 $ 26,699 $ 34,132 $ 50,159
Income per common share
before extraordinary charge
Basic $ 0.21 $ 0.26 $ 0.38 $ 0.49
Diluted $ 0.21 $ 0.26 $ 0.37 $ 0.49
Net income per common share
Basic $ 0.18 $ 0.26 $ 0.35 $ 0.49
Diluted $ 0.18 $ 0.26 $ 0.35 $ 0.49
</TABLE>
NOTE 3 - EARNINGS PER SHARE
The following table reconciles the Company's basic and diluted weighted average
share amounts used in computations of earnings per share ("EPS") (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------------- ----------------------------------
December 26, 1998 January 1, 2000 December 26, 1998 January 1, 2000
------------------ --------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Basic EPS-
Weighted average
shares outstanding 95,072 101,557 94,078 101,499
Effective of Dilutive Securities:
Warrants 100 90 130 94
Common stock options 1,262 365 1,150 483
Other stock-based compensation
arrangements 20 90 40 100
Diluted EPS-
Weighted average
shares outstanding 96,454 102,102 95,398 102,176
</TABLE>
7
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NOTE 4 - RESTRUCTURING AND RELATED COSTS
On December 23, 1997, Rykoff-Sexton, Inc., the nation's third-largest broadline
foodservice distributor based on net sales, was merged into a wholly owned
subsidiary of U.S. Foodservice (the "acquisition"). In connection with the
acquisition, the Company recorded a $56.7 million restructuring charge during
the year ended June 27, 1998. The restructuring costs consisted primarily of
$26.8 million for change in control payments to former executives of Rykoff-
Sexton, $12.2 million for severance and benefits, $10.8 million for future lease
commitments and $6.9 million for idle facility and facility closure costs
related to the Company's plan to consolidate and realign certain operating units
and consolidate various overhead functions. As of January 1, 2000, execution of
the plan is substantially complete. To date, the Company has experienced no
significant changes to the restructuring plan. As of January 1, 2000, the
Company has completed the closure of all facilities included in the
restructuring plan.
In connection with Rykoff-Sexton's acquisition of US Foodservice, Inc. in May
1996, Rykoff-Sexton recorded a restructuring charge of $57.6 million ($35.7
million after tax) in the nine-week fiscal transition period ended June 29,
1996. The restructuring charge consisted of severance and employee benefits of
$10.7 million, lease related costs of $20.2 million and other closure and
integration costs of $26.7 million.
The following table summarizes the status of the Company's restructuring
reserves:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Severence Lease Idle Facility
and Benefits Commitments Cost Totals
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance July 3, 1999 $ 2,200 $ 19,000 $ 3,500 $ 24,700
Fiscal six-month period utilization (500) (2,900) (2,800) (6,200)
------- -------- ------- --------
Balance January 1, 2000 $ 1,700 $ 16,100 $ 700 $ 18,500
------- -------- ------- --------
- ---------------------------------------------------------------------------------------------------
</TABLE>
The Company expects to expend $2.3 million during the remainder of fiscal 2000.
The balance relates primarily to remaining lease commitments that are being paid
in various amounts through fiscal 2008.
NOTE 5 - RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS
During 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activity. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities and
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
In accordance with the pronouncement, the Company will adopt SFAS No. 133, as
amended, in fiscal 2001. The Company is currently evaluating the impact, if any,
that SFAS No. 133 will have on its consolidated financial statements.
NOTE 6 - CONTINGENCIES
From time to time, the Company is involved in litigation and proceedings arising
out of the ordinary course of business. There are no pending material legal
proceedings or environmental investigations to which the Company is a party or
to which the property of the Company is subject as of the date of this report.
NOTE 7 - INDUSTRY SEGMENT INFORMATION
The Company has two reportable segments: broadline foodservice distribution
("Broadline") and other services ("Other Services"). Broadline, consisting of
approximately 40 operating locations, distributes over 43,000 food and non-food
related products to over 130,000 foodservice customers, including restaurants,
hotels, casinos, healthcare institutions and schools. Other Services represent
manufacturing operations, including the manufacturing operations purchased as
part of the acquisition of Sofco in the fourth quarter of fiscal 1999, and
contract and design services. In August 1998, the Company outsourced its Rykoff-
Sexton manufacturing division by selling the assets to a third party. Contract
and design services primarily involve the design of restaurants and eating
establishments.
8
<PAGE>
<TABLE>
<CAPTION>
Corporate
Other and
Broadline Services Eliminations Consolidated
-------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Three Months Ended January 1, 2000
Net sales $1,653,377 $21,575 $ 0 $1,674,952
Depreciation and amortization 15,017 214 0 15,231
Income (loss) from operations 74,439 1,110 (13,082) 62,467
Interest expense and other
financing costs, net 17,207 1 0 17,208
Income (loss) before income
taxes and extraordinary charge 57,186 1,155 (13,082) 45,259
Capital expenditures 10,421 218 0 10,639
Three Months Ended December 26, 1998
Net sales $1,517,104 $15,985 $ 0 $1,533,089
Depreciation and amortization 14,883 48 0 14,931
Income (loss) from operations 61,922 788 (11,461) 51,249
Interest expense and other
financing 16,476 0 0 16,476
costs, net
Income (loss) before income
taxes and extraordinary charge 45,406 788 (11,461) 34,733
Capital expenditures 17,552 52 0 17,604
Six Months Ended January 1, 2000
Net sales $3,316,919 $40,916 $ 0 $3,357,835
Depreciation and amortization 29,715 352 0 30,067
Income (loss) from operations 141,532 1,776 (27,660) 115,648
Interest expense and other
financing costs, net 31,855 (6) 0 31,849
Income (loss) before income
taxes and extraordinary charge 109,631 1,828 (27,660) 83,799
Total assets 2,255,863 33,460 0 2,289,323
Capital expenditures 24,016 218 0 24,234
Six Months Ended December 26, 1998
Net sales $2,976,089 $51,829 ($16,459) $3,011,459
Depreciation and amortization 29,453 531 0 29,984
Income (loss) from operations 116,326 3,412 (23,450) 96,288
Interest expense and other
financing costs, net 32,672 0 0 32,672
Income (loss) before income
taxes and extraordinary charge 83,654 3,412 (23,450) 63,616
Total assets 1,996,243 24,948 0 2,021,191
Capital expenditures 35,145 71 0 35,216
</TABLE>
Corporate and eliminations consist of inter-segment sales and inter-company
accounts.
NOTE 8 - SUBSEQUENT EVENTS
On February 8, 2000, the Company announced its decision to close its San
Fransisco operation and to reduce the number of employees throughout the
Company. The one-time costs related to the closure of the San Fransisco
location are estimated to be $20 million and include restructuring costs, asset
impairment charges, facility disposition costs, severance costs and expected
operating losses of the San Fransisco operation in the third quarter of fiscal
2000. Approximately $10 million of this total will be recorded as
restructuring and asset impairment costs in the third quarter of fiscal 2000.
In addition, the Company estimates that it will record a $2 million pre-tax
restructuring charge in the third quarter of fiscal 2000 related to the
employee reductions.
9
<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.
U.S. FOODSERVICE
(Registrant)
Date: February 18, 2000 /s/ George T. Megas
-----------------------------------------
George T. Megas, Executive Vice President
and Chief Financial Officer
(Duly Authorized and Principal
Financial Officer)
10
