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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
_______________
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<S> <C>
For Fiscal Year Ended Commission File Number
January 28, 1996 33-59212
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FOOD 4 LESS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 33-0642810
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1100 West Artesia Boulevard. 90220
Compton, California (Zip code)
(Address of principal executive offices)
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(310) 884-9000
(Registrant's telephone number, including area code)
Securities registered pursuant to
Section 12(b) of the Act: None
Securities registered pursuant to
Section 12(g) of the Act: None
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 report(s)), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No _____.
At April 29, 1996, there were 17,207,882 shares of Common Stock
outstanding. As of such date, none of the outstanding shares of Common Stock
were held by persons other than affiliates and employees of the registrant, and
there was no public market for the Common Stock.
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PART I
ITEM 1. BUSINESS
Food 4 Less Holdings, Inc. ("Holdings," or together with its
subsidiaries, the "Company") was incorporated in Delaware in June 1995. On
June 14, 1995, Holdings acquired all of the common stock of Ralphs
Supermarkets, Inc. ("RSI") in a transaction accounted for as a purchase by Food
4 Less Supermarkets, Inc. ("F4L Supermarkets"). The consideration for the
acquisition consisted of $388.1 million in cash, $131.5 million principal
amount of 13-5/8% Senior Subordinated Pay-In-Kind Debentures due 2007 of
Holdings (the "Seller Debentures") and $18.5 million initial accreted value of
13-5/8% Senior Discount Debentures due 2005 of Holdings (the "New Discount
Debentures"). F4L Supermarkets, RSI and RSI's wholly-owned subsidiary, Ralphs
Grocery Company ("RGC"), combined through mergers (the "Merger") in which RSI
remained as the surviving entity and changed its name to Ralphs Grocery Company
("Ralphs"). The Company does not have any business operations of its own and
its assets consist solely of all the outstanding capital stock of Ralphs.
The Company is a leading supermarket operator with a total of 408
stores which are located in Southern California (345), Northern California
(27) and certain areas of the Midwest (36). The Company is the largest
supermarket company in Southern California. The Company operates the second
largest conventional supermarket chain in the region under the "Ralphs" name
and the largest warehouse supermarket chain in the region under the "Food 4
Less" name. The Company has achieved strong competitive positions in each of
its marketing areas by successfully tailoring its merchandising strategy to the
particular needs of the individual communities it serves. In addition, the
Company is a vertically integrated supermarket company with major manufacturing
facilities, including a bakery and creamery operations, and full-line
warehouse and distribution facilities servicing its Southern California
operations.
F4L Supermarkets was organized by The Yucaipa Companies ("Yucaipa"), a
private investment group, in connection with the June 1989 acquisition of Breco
Holding Company, Inc. ("BHC"), which owned Boys, Viva, and Cala stores.
Concurrently with the acquisition of BHC (the "BHC Acquisition"), Food 4 Less,
Inc. ("FFL"), a corporation controlled by an affiliate of Yucaipa, contributed
to the Company all of the outstanding capital stock of Falley's, Inc.
("Falley's"), which owned the Company's Midwestern stores and its Food 4 Less
Southern California stores. The Company added six stores to its Northern
California Division by acquiring Bell Markets, Inc. ("Bell") on June 30, 1989,
and added seven stores to its Southern California Division by acquiring certain
operating assets of ABC Market Corp. ("ABC") on January 15, 1990. On June 17,
1991, the Company acquired all of the outstanding capital stock of Alpha Beta
Company ("Alpha Beta"), which operated 142 stores in seven Southern California
counties (the "Alpha Beta Acquisition"). On March 29, 1994, the Company added
ten warehouse format stores (collectively the "Food Barn Stores") to its
Midwestern Division which it acquired from Associated Wholesale Grocers, Inc.
The Company operates both conventional and warehouse format stores
under various names. The following table sets forth by retail format the
number of stores operated by each of the Company's three divisions at January
28, 1996 (unless otherwise indicated, all references to numbers of stores and
other store data in this Annual Report on Form 10-K are as of January 28,
1996):
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<TABLE>
<CAPTION>
Southern Northern
California California Midwestern Total
---------- ---------- ---------- -----
<S> <C> <C> <C> <C>
Ralphs 277 - - 277
Cala - 9 - 9
Bell - 13 - 13
Falley's - - 5 5
------ ------ ----- -----
Total Conventional 277 22 5 304
Food 4 Less 68 - 31 99
FoodsCo - 5 - 5
------- ------ ------ ------
Total Warehouse 68 5 31 104
----- ------ ---- ----
Total Stores 345 27 36 408
==== ===== ==== ====
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RECENT EVENTS
On December 29, 1995, the Company consummated an agreement with
Smith's Food & Drug Centers, Inc. ("Smith's") to sublease its one million
square foot distribution center and creamery facility in Riverside, California
(for approximately 23 years, with renewal options through 2043) and to acquire
certain operating assets and inventory at that facility. The sublease provides
for a subrental of approximately $8.8 million per annum. The aggregate
purchase price of operating assets and inventory acquired was approximately
$8.7 million (net of certain offsetting payments). In addition to the
acquisition of Smith's distribution and creamery facility, the Company also
acquired nine of Smith's Southern California stores which became available when
Smith's withdrew from the California market. The acquisition of the Smith's
distribution center will delay and modify the previously planned integration
for the existing Ralphs and Food 4 Less warehouse facilities; however, the
Company believes the transaction will result in increased operating
efficiencies, cost offsets and reduced capital expenditures.
During fiscal 1995, certain financial covenants and other terms of the
New Credit Facility were amended to, among other things, provide for the
acquisition of the Smith's Food and Drug Centers, Inc. ("Smith's") Riverside
distribution center and creamery facility, the acquisition of certain operating
assets and inventory at that facility, the acquisition of nine of the Smith's
Southern California stores and the closure of up to nine stores in conjunction
with these acquisitions.
SOUTHERN CALIFORNIA DIVISION
The Southern California Division operates 345 supermarkets in eight
counties under the names "Ralphs" and "Food 4 Less." The Company's Southern
California stores accounted for 87% of the Company's sales for the 52 weeks
ended January 28, 1996.
The combination of Ralphs Grocery Company and Food 4 Less
Supermarkets, Inc. has created the largest food retailer in Southern
California. Since the Merger, the Company has consolidated all of its stores
in the region under its two leading complementary formats. The Company
operates the second largest conventional supermarket chain in the region under
the "Ralphs" name and the largest price impact warehouse supermarket chain
under the "Food 4 Less" name. Management believes the consolidation of its
formats in Southern California has improved the Company's ability to adapt its
stores' merchandising strategy to the local markets in which they operate while
achieving cost savings and other efficiencies.
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Ralphs Conventional Format. The Company operates 277 Ralphs stores in
Southern California. All of the Company's conventional stores in the region
use the Ralphs name and are operated under a single format. Each store is
merchandised to appeal to the local community it serves and offers competitive
pricing with emphasis on overall value. Ralphs' substantial supermarket
product selection is a significant aspect of its marketing efforts: Ralphs
stocks between 20,000 and 30,000 merchandise items in its stores, including
approximately 2,800 private label products. Ralphs stores offer name-brand
grocery products; quality and freshness in its produce, meat, seafood,
delicatessen and bakery products; and broad selection in all departments. Most
Ralphs stores offer service delicatessen departments, on-premises bakery
facilities and seafood departments. Ralphs emphasizes store ambiance and
cleanliness, fast and friendly service, the convenience of debit and credit
card payment (including many in-store branch banks) and 24-hour operations in
most stores.
Food 4 Less Warehouse Format. The Company operates 68 stores in
Southern California which target the price-conscious segment of the market in
both urban and suburban areas under the name "Food 4 Less." Food 4 Less is a
warehouse-style, price impact store which is positioned to offer the lowest
overall prices in its marketing areas by passing on to the consumer savings
achieved through labor efficiencies and lower overhead and advertising costs
associated with the warehouse format, while providing the product selection and
variety associated with a conventional format. In-store operations are
designed to allow customers to perform certain labor-intensive services usually
offered in conventional supermarkets; for example, merchandise is presented on
warehouse style racks in full cartons, reducing labor intensive unpacking, and
customers bag their own groceries. Labor costs are also reduced because the
stores generally do not have labor-intensive service departments such as
delicatessens, bakeries and fresh seafood departments, although they do offer a
complete line of fresh meat, fish, produce and baked goods.
The Food 4 Less format generally consists of large facilities
constructed with high ceilings to accommodate warehouse racking with overhead
pallet storage. Wide aisles accommodate forklifts and, compared to
conventional supermarkets, a higher percentage of total store space is devoted
to retail selling because the top of the warehouse-style grocery racks on the
sales floor are used to store inventory, which reduces the need for large
backroom storage. The Food 4 Less warehouse format supermarkets have brightly
painted walls and inexpensive signage in lieu of more expensive graphics. In
addition, a "Wall of Values" located at the entrance of each store presents the
customer with a selection of specially priced merchandise. Management believes
that there is a significant segment of the market, encompassing a wide range of
demographic groups, which prefers to shop in a warehouse format supermarket
because of its lowest overall pricing. The Company plans to continue its rapid
growth of the Food 4 Less format by opening 10 new warehouse format stores in
fiscal 1996, seven of which were acquired from Smith's.
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Advertising and Promotion
As a result of the consolidation of conventional format stores in
Southern California under the "Ralphs" name, the Company eliminated most of the
separate advertising associated with Food 4 Less' existing Alpha Beta, Boys and
Viva formats. Because Ralphs' current advertising program now covers the
Southern California region, the Company will be able to expand the number of
Ralphs stores without significantly increasing advertising costs.
Ralphs' marketing strategy is to provide a combination of wide product
selection, quality and freshness of perishable products, competitive prices and
double coupons supporting Ralphs' advertising theme, "Everything You Need,
Every Time You Shop." The Ralphs Savings Plan, a marketing campaign designed
to enhance customer value, is comprised of six major components: Guaranteed
Low Prices ("GLPs"), Price Breakers, Big Buys, Multi-Buys, Ralphs Brand
Products and Double Coupons. GLPs guarantee low prices on certain high volume
items that are surveyed and updated every four weeks. Price Breakers are
weekly advertised items that offer significant savings. Big Buys are club size
items at prices competitive to club store prices and Multi-Buys offer Ralphs
shoppers the opportunity to purchase club store quantities of regular sized
items at prices competitive to club store prices. In conjunction with this
campaign, Ralphs' private label offering of approximately 2,800 products
provides value to the customer.
Ralphs stores promote sales through the use of product coupons,
consisting of manufacturers' coupons and Ralphs' own promotional coupons.
Ralphs offers a double coupon program in all stores with Ralphs matching the
price reduction offered by the manufacturer. Ralphs also generates store
traffic through weekly advertised specials, special sales promotions such as
discounts on recreational activities, seasonal and holiday promotions,
increased private label selection, club pack items and exclusive product
offerings.
The Food 4 Less warehouse stores utilize print and radio advertising
which emphasizes Food 4 Less' low-price leadership, rather than promoting
special prices on individual items. The Food 4 Less warehouse stores also
utilize weekly advertising circulars, customized to local communities, which
highlight the merchandise offered in each store.
Purchasing, Manufacturing and Distribution
In March 1996, the Company commenced operations in a state-of-the-art
distribution and creamery facility located in Riverside, California which was
acquired from Smith's The technologically-advanced 90-acre complex is expected
to improve the quality, service and productivity of the Company's distribution
and manufacturing operations. The Riverside complex has more than one million
square feet of warehousing and manufacturing space consisting of a 675,000
square foot dry grocery service center, 270,000 square foot refrigerated and
frozen food facility and a 115,000 square foot creamery facility.
The acquisition of the Riverside complex allows the Company to
consolidate distribution into three modern, efficient facilities located in
Compton, Glendale and Riverside, California. This consolidation is being
accomplished by closing the Company's La Habra warehouse, Carson warehouse,
Long Beach Avenue warehouse and the Slauson frozen food warehouse, as well as
several other outside frozen food, deli and general merchandise facilities.
The benefits resulting from the reduction of distribution facilities include
(i) reductions in inventory levels, transportation between facilities and
management overhead, (ii) simplified coordination of inter-facility activities,
(iii) improved service levels for store orders, and (iv) the elimination of
outside storage costs. Other
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benefits include a reduction of future capital expenditures requirements. The
consolidation of the Company's distribution facilities is expected to be
completed by the third quarter of fiscal year 1996.
The Riverside complex also increases distribution capacity of the
Company by increasing storage capacity to 120,000 pallets and increasing the
assortment of items that is internally supported (increasing dry grocery from
10,000 to 14,000 SKUs and perishable and frozen items by 1,500 SKUs).
The Riverside creamery is the production point for all fluid milk
products bound for sale in the Company's Food 4 Less warehouse stores. Bottled
water, fruit juice and ice for the entire Company will also be processed and
packaged at the Riverside creamery. Milk bound for the Company's Ralphs
conventional stores, as well as all ice cream and ice cream products, will
continue to be processed at the Company's existing creamery in Compton,
California.
The Company also operates a 17 million cubic foot high-rise automated
storage and retrieval system ("ASRS") warehouse for non- perishable items, in
Glendale, California. The automated warehouse has a ground floor area of
170,000 square feet and capacity of approximately 50,000 pallets. The ASRS
facility can hold substantially more inventory and requires fewer employees to
operate than a conventional warehouse of equal size.
The Company's third major Southern California distribution center is
its 5.4 million cubic foot facility in Compton, California designed to process
and store all perishable products (the "Perishables Service Center" or "PSC").
This facility was constructed in 1992 and has enabled the Company to have the
ability to deliver perishable products to its stores on a daily basis, thereby
improving the freshness and quality of these products.
In addition to the foregoing facilities, the Company will continue to
operate the 316,000 square foot bakery in La Habra, California to manufacture
a broad line of baked goods.
Combined shipments from the Company's Southern California warehouse
facilities accounted for approximately 75% of the Southern California
Division's total purchases during the 52 weeks ended January 28, 1996.
Additional purchases, consisting of mostly general merchandise, approximating
2% of the division's total during this same period, were made through Certified
Grocers of California, Ltd. ("Certified"), a food distribution cooperative in
which the Company is a member.
Store Operations and Retail Systems
The Southern California Division's store equipment and facilities are
generally in excellent condition and are large enough to serve anticipated
growth. The Ralphs stores range in size from approximately 15,600 square feet
to 69,500 square feet and average approximately 35,300 square feet. The
Southern California Food 4 Less stores are generally larger and range in size
from approximately 27,400 square feet to 84,300 square feet, and average
approximately 49,700 square feet. The Company believes the Southern California
Division's warehouse and distribution system and the design of its stores
permit the Company to decrease in-store stockroom space and thereby increase
available selling area.
The Southern California Division's management information systems and
optical scanning technology reduce the labor costs attributable to product
pricing and customer check-out, and provide the Company's management with
information that facilitates purchasing and receiving,
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inventory management, warehouse reordering and management of accounts payable.
All of the Company's Southern California Division stores currently offer an
electronic funds transfer system which allows customers to make purchases,
obtain cash or check approvals in transactions linked to their bank accounts.
In addition, the Company's stores now offer customers the convenience of making
purchases with major credit cards.
Expansion and Development
As a result of Ralphs' 123-year history and Alpha Beta's 92-year
history in Southern California, the Company has valuable and well- established
store locations, many of which are in densely populated metropolitan areas.
Additionally, the Company has a technologically advanced store base. During
fiscal 1995, the Company acquired 174 stores through the Merger, opened 6 new
Food 4 Less stores and 5 new Ralphs stores in Southern California, converted
124 stores from Alpha Beta, Boys and Viva formats to the Ralphs and Food 4
Less formats, closed 44 stores and remodeled 11 stores.
The Company plans to expand the Southern California Division by
opening new stores as well as replacing older and smaller stores. The Company
intends to continue to focus its new store construction and store conversion
efforts during fiscal 1996 and future years on the Food 4 Less format, which
has proven to have a strong appeal to value conscious consumers across a wide
range of demographic groups. To this end, the Company plans to continue its
store expansion program in Southern California by opening 25 new stores during
fiscal 1996 (including the nine stores acquired from Smith's, seven of which
will be Food 4 Less stores), and additional stores in subsequent years.
During fiscal year 1996, in Southern California, the Company plans to remodel
21 conventional format stores and 4 of the warehouse format stores. The
Company's merger, expansion, remodel and conversion efforts have required, and
will continue to require, the funding of significant capital expenditures. See
Item 7 -- "Management's Discussion and Analysis of Results of Operations and
Financial Condition -- Liquidity and Capital Resources."
Remodelings and openings, among other things, are subject to the
availability of developers' financing, agreements with developers and
landlords, local zoning regulations, construction schedules and other factors,
including costs, often beyond the Company's control. Accordingly, there can be
no assurance that the schedule will be met. Further, there is competition for
new store sites, and it is possible that this competition might adversely
affect the timing of its new store program. From time to time, the Company
also closes or sells marginal stores.
NORTHERN CALIFORNIA AND MIDWESTERN DIVISIONS
The Northern California Division of Food 4 Less operates 22
conventional supermarkets in the greater San Francisco Bay area under the
"Cala" and "Bell" names, and five warehouse format stores under the "FoodsCo"
name. Management believes that the Northern California Division has excellent
store locations in the city of San Francisco that would be very difficult to
replicate. The Midwestern Division of Food 4 Less operates 36 stores, of which
31, including ten former "Food Barn" stores which Food 4 Less acquired in March
1994, are warehouse format stores operated under the "Food 4 Less" name, and
five of which are conventional supermarkets operated under the "Falley's" name.
Of these 36 stores, 32 are located in Kansas and four are located in Missouri.
Management believes the Food 4 Less warehouse format stores are the low-price
leaders in each of the markets in which they compete. The Northern California
Division's conventional store strategy is to attract customers through its
convenient locations, broad product line and emphasis on quality and service,
and its advertising and promotion strategy highlights the reduced price
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specials offered in its stores. In contrast, the Company's warehouse format
stores, operated under the Food 4 Less name in the Midwestern Division and the
FoodsCo name in the Northern California Division, emphasize lowest overall
prices rather than promoting special prices on individual items. The Northern
California Division's conventional stores range in size from approximately
8,500 square feet to 32,500 square feet, and average approximately 19,500
square feet. The Northern California Division's warehouse stores range in size
from approximately 30,000 square feet to 59,600 square feet, and average
approximately 41,800 square feet. The Midwestern Division's warehouse format
stores range in size from approximately 8,800 square feet to 60,200 square feet
and average approximately 37,900 square feet.
The Northern California Division purchases merchandise from a number
of suppliers; however, approximately 36% of its purchases are made through
Certified Grocers of California, Ltd. ("Certified"), a food distribution
cooperative, pursuant to supply contracts. The Northern California Division
does not operate its own warehouse facilities, relying instead on direct
delivery to its stores by Certified and other vendors. Food 4 Less' Southern
California warehouse facilities supply a portion of the merchandise sold in the
Northern California Division stores.
The Midwestern Division's primary supplier is Associated Wholesale
Grocers ("AWG"), a member-owned wholesale grocery cooperative based in Kansas
City. The Midwestern Division does not operate a central warehouse, but
purchases approximately 70% of the merchandise sold in its stores from AWG.
Management believes that, as AWG's largest single customer, the Midwestern
Division has significant buying power, allowing it to provide a broader product
line more economically than it could if it maintained its own full-line
warehouse. The Midwestern Division produces approximately 50 percent of all
case-ready fresh meat items sold in its stores at its central meat plant
located in Topeka, Kansas.
Since the beginning of fiscal 1991, the Northern California Division
has remodeled 13 stores, opened six new stores and, in fiscal 1995, acquired
three stores from Roger Wilco, now operated as Bell stores. The Northern
California Division Food 4 Less warehouse stores were renamed as FoodsCo
warehouse stores in fiscal 1994 following the sale by the Company of the
exclusive rights to use the "Food 4 Less" name in Northern California to
Fleming Companies, Inc., which previously held a non-exclusive license. See
"Licensing Operations" for further discussion of the amendment to the Fleming
license.
The acquisition in March 1994 of ten warehouse stores formerly
operated as "Food Barn" stores increased the Midwestern Division's Food 4 Less
warehouse store count from 28 at June 26, 1993 to 38 at January 28, 1996.
During the last five fiscal years, the Midwestern Division has opened two new
stores, acquired ten stores, closed three stores and remodeled eight stores.
While the Company has no definitive plans to construct or acquire new stores in
the Midwestern Division in fiscal 1996, the Company intends to focus future
expansion there on its Food 4 Less operations.
COMPETITION
The supermarket industry is highly competitive and characterized by
narrow profit margins. The Company's competitors in each of its operating
divisions include national and regional supermarket chains, independent and
specialty grocers, drug and convenience stores, and the newer "alternative
format" food stores, including warehouse club stores, deep discount drug stores
and "super centers." Supermarket chains generally compete on the basis of
location, quality of products, service, price, product variety and store
condition. The Company regularly monitors its
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competitors' prices and adjusts its prices and marketing strategy as management
deems appropriate.
The Southern California Division competes with several large national
and regional chains, principally Alberton's, Hughes, Lucky, Stater Bros., and
Vons, and with smaller independent supermarkets and grocery stores as well as
warehouse clubs and other "alternative format" food stores. The Northern
California Division competes with large national and regional chains,
principally Lucky and Safeway, and with independent supermarket and grocery
store operators and other retailers, including "alternative format" stores.
The Midwestern Division's supermarkets compete with several national and
regional supermarket chains, principally Alberton's and Dillon's, as well as
independent grocery and "alternative format" stores such as Hypermarket USA.
The Company positions its warehouse format supermarkets as the overall
low-price leaders in each marketing area in which they operate.
EMPLOYEES
The Company believes that its relationship with its employees is
excellent. At January 28, 1996, the Company had a total of 30,101 employees,
as shown in the table below.
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<CAPTION>
Southern Northern
California California Midwestern Total
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<S> <C> <C> <C> <C>
Administrative 1,573 64 41 1,678
Warehouse, manufacturing and
transportation 3,318 - 61 3,379
Stores 21,540 2,123 1,381 25,044
------ ----- ----- ------
Total 26,431 2,187 1,483 30,101
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</TABLE>
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Of the Company's 30,101 total employees at January 28, 1996, there
were 26,369 employees covered by union contracts, principally with the United
Food and Commercial Workers Union (the "UFCW"). The table below sets forth
information regarding the Company's union contracts which cover more than 100
employees.
<TABLE>
<CAPTION>
UNION NUMBER OF EMPLOYEES COVERED DATE(S) OF EXPIRATION
----------------------------------------- --------------------------- ----------------------
<S> <C> <C>
UFCW 15,737 Southern California October 3, 1999
Division clerks and
meat cutters
Hospital and Service Employees 606 Southern California January 19, 1997
Division store porters
International Brotherhood of Teamsters 2,802 Southern California September 13, 1998
Division drivers
and warehousemen
UFCW 2,034 Northern California March 7, 1998
Division clerks and
meat cutters
UFCW 3,708 Southern California February 26, 2000
Division clerks and
meat cutters
Bakery and Confectionery Workers 219 Southern California February 9, 1997
Division bakers
</TABLE>
LICENSING OPERATIONS
The Company owns the "Food 4 Less" trademark and service mark and
licenses the "Food 4 Less" name for use by others. In fiscal 1995, earnings
from licensing operations were approximately $328,000. An exclusive license
with the right to sublicense the "Food 4 Less" name in all areas of the United
States except Arkansas, Iowa, Illinois, Minnesota, Nebraska, North Dakota,
South Dakota, Wisconsin, the upper peninsula of Michigan, certain portions of
Kansas, Missouri, and Tennessee has been granted to Fleming Companies, Inc.
("Fleming"), a major food wholesaler and retailer. In August of 1993, the
Company amended its licensing agreement with Fleming to give Fleming exclusive
use of the Food 4 Less name in Northern California and the Company exclusive
use in Southern California (the "Amendment"). With the exception of Northern
California, and subject to the Amendment and certain proximity restrictions,
the Company retains the right to open and operate its own "Food 4 Less"
warehouse supermarkets throughout the United States. As of January 28, 1996,
there were 174 Food 4 Less warehouse supermarkets in 15 states, including the
99 stores owned or leased and operated by the Company. Of the remaining 75
stores, Fleming operates 15 under license, 15 are operated under sublicenses
from Fleming and 45 are operated by other licensees.
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ITEM 2. PROPERTIES
At January 28, 1996 the Company operated 408 supermarkets, as set
forth in the table below:
<TABLE>
<CAPTION>
Number of
Supermarkets Average
------------ Total Square Feet/
Division Owned Leased Square Feet Facility
-------- ----- ------ ----------- ------------
<S> <C> <C> <C> <C>
Southern California 60(a) 285 13,151,000 38,100
Northern California - 27 637,000 23,600
Midwestern 2(b) 34 1,299,000 36,100
</TABLE>
----------------------
(a) Includes fifteen stores located on real property subject to
ground leases.
(b) Includes one store that is partially owned and partially leased.
Most of the Southern California Division's store locations are held
pursuant to long-term leases, many of which, in the opinion of management, have
below-market rental rates or other favorable lease terms. The average
remaining term (including all renewal options) of the Company's supermarket
leases is approximately 30 years.
In addition to the supermarkets, the Company operates three main
warehouse and distribution centers in Southern California. The newly acquired
90 acre Riverside distribution complex has more than one million square feet
of warehousing and manufacturing space consisting of a creamery and several
warehouses for dry grocery, dairy/deli and frozen food storage. The 170,000
square foot high-rise automated storage and retrieval system Glendale warehouse
("ASRS") located in the Atwater district of Los Angeles, opened in 1987, handles
non-perishable items, is ten stories high and has a capacity of approximately
50,000 pallets. The Perishable Service Center ("PSC") in Compton, opened in
1992, is a 5.4 million cubic foot facility designed to process and store all
perishable products.
The Company also has manufacturing operations located in Compton that
produce a variety of dairy and other products, including fluid milk, ice cream,
yogurt and bottled waters and juices, as well as packaged ice, cheese and salad
preparations. The bakery operation is located at the La Habra complex and
measures 316,000 square feet.
Due to the increase in warehouse space, the La Habra distribution
center and a number of smaller warehouses used by the Company have become
obsolete and it is expected that by the third quarter of fiscal year 1996,
the Company will have consolidated its warehousing operations into the
three main centers described above.
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ITEM 3. LEGAL PROCEEDINGS
In December 1992, three California state antitrust class action suits
were commenced in Los Angeles Superior Court against the Company and other
major supermarket chains located in Southern California, alleging that they
conspired to refrain from competing in the retail market for fluid milk and to
fix the retail price of fluid milk above competitive prices. Specifically,
class actions were commenced by Diane Barela and Neila Ross, Ron Moliare and
Paul C. Pfeifle on December 7, December 14 and December 23, 1992, respectively.
To date, the Court has yet to certify any of these classes, while a demurrer to
the complaints was denied. The Company is continuing to actively defend itself
in these class action suits.
Ralphs and Food 4 Less are subject to regulation by a variety of
governmental agencies, including, but not limited to, the California Department
of Alcoholic Beverage Control, the California Department of Agriculture, the
U.S. Food and Drug Administration, the U.S. Department of Agriculture and state
and local health departments.
In addition, the Company or its subsidiaries are defendants in a
number of other cases currently in litigation or are the subject of potential
claims encountered in the normal course of business which are being vigorously
defended. In the opinion of management, the resolutions of these matters will
not have a material effect on the Company's financial position or results of
operations.
ENVIRONMENTAL MATTERS
In January 1991, the California Regional Water Quality Control Board
for the Los Angeles Region (the "Regional Board") requested that RGC conduct a
subsurface characterization of its Glendale warehouse property located in the
Atwater district of Los Angeles. This request was part of an ongoing effort by
the Regional Board, in connection with the U.S. Environmental Protection Agency
(the "EPA"), to identify contributors to groundwater contamination in the San
Fernando Valley. Significant parts of the San Fernando Valley, including the
area where RGC's grocery warehouse is located, have been designated federal
Superfund sites requiring response actions under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, because of
regional groundwater contamination. On June 18, 1991, the EPA made its own
request for information concerning RGC's grocery warehouse. Since that time,
the Regional Board has requested further investigation by RGC. RGC conducted
the requested investigations and reported the results to the Regional Board.
Approximately 25 companies have entered into a Consent Order (EPA Docket No.
94-11) with the EPA to investigate and design a remediation system for
contaminated groundwater beneath an area which includes the Company's grocery
warehouse. The Company is not a party to the Consent Order, but is cooperating
with requests of the subject companies to allow installation of monitoring or
recovery wells on the Company's property. On or about October 12, 1995, the EPA
mailed a Special Notice Letter to 44 parties, including Ralphs as owner and
operator of the Glendale property, naming them as potentially responsible
parties ("PRPs"). Ralphs and other PRPs have agreed to enter into negotiations
over a consent decree with the EPA to implement a remedial design and reimburse
oversight costs. The PRPs have also agreed to an Alternative Dispute Resolution
Process to allocate the costs among themselves. Based upon available
information, management does not believe this matter will have a material
adverse effect on the Company's financial condition or results of operations.
RGC removed underground storage tanks and remediated soil
contamination at the grocery warehouse property. In some instances, the
removals and the contamination were associated with
11
<PAGE> 13
grocery business operations; in others, they were associated with prior
property users. Although the possibility of other contamination from prior
operations or adjacent properties exists at the grocery warehouse property,
management does not believe that the costs of remediating such contamination
will be material to the Company.
Apart from the grocery warehouse property, the Company has had
environmental assessments performed on most of its facilities, including
warehouse and distribution facilities. The Company believes that any responsive
actions required at the examined properties as a result of such assessments will
not have a material adverse effect on its financial condition or results of
operations.
At the time that Food 4 Less acquired Alpha Beta in 1991, it learned
that certain underground storage tanks located on the site of the La Habra
facility may have previously released hydrocarbons. In connection with the
acquisition of Alpha Beta, the seller (who is also the lessor of the La Habra
facility) agreed to retain responsibility, subject to certain limitations, for
remediation of the release.
The Company is subject to a variety of environmental laws, rules,
regulations and investigative or enforcement activities, as are other companies
in the same or similar business. The Company believes it is in substantial
compliance with such laws, rules and regulations. These laws, rules,
regulations and agency activities change from time to time, and such changes
may affect the ongoing business and operations of the Company.
12
<PAGE> 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
13
<PAGE> 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
There is no public trading market for the Company's common stock, $.01
par value per share (the "Common Stock"). As of April 29, 1996, there were 98
holders of record of the Common Stock.
The Company has never paid and does not expect in the foreseeable
future to pay any dividends on its Common Stock. The indentures governing the
Company's outstanding debt securities contain certain restrictions on the
payment of cash dividends with respect to Ralphs' Common Stock, and Ralphs'
bank credit facility also restricts such payments.
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<PAGE> 16
ITEM 6. SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
THE COMPANY
The following table sets forth certain selected consolidated
historical financial data of the Company and its predecessor, Supermarkets.
The operating results of the Company for the 52 weeks ended June 29, 1991
include the results of Alpha Beta from June 17, 1991, the date of its
acquisition by the Company. Because the Company acquired the capital stock of
Supermarkets, in a reorganization, which occurred December 31, 1992, the
historical operating and balance sheet data presented blow for periods ending
prior to such date represent data of Supermarkets. Operating data of the
Company for the 52 weeks ended June 26, 1993 reflects the operating results of
Supermarkets only until December 31, 1992 and reflects the consolidated
operating results of the Company for the remainder of the period. The
operating and balance sheet data for the Company set forth in the table below
as of and for the 52 weeks ended January 28, 1996, the 31 weeks ended January
29, 1995, the 52 weeks ended June 25, 1994, June 26, 1993, June 27, 1992 and
June 29,1991 have been derived from the financial statements of the Company
which have been audited by Arthur Andersen LLP, independent public
accountants. The following information should be read in conjunction with the
historical financial statements of the Company and related notes and "Item 7 --
Management Discussion and Analysis of Results of Operations and Financial
Condition" included elsewhere herein.
15
<PAGE> 17
<TABLE>
<CAPTION>
Supermarkets The Company
--------------------- ------------------------------------------------
52 Weeks 52 Weeks 52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended Ended Ended
June 29, June 27, June 26, June 25, January 29, January 28,
1991(a) 1992 1993 1994(b) 1995(c) 1996(d)
-------- -------- -------- --------- ---------- ------------
(dollars in thousands, except store data)
<S> <C>
Operating Data:
Sales $1,606,559 $2,913,493 $2,742,027 $2,585,160 $1,556,522 $4,335,109
Cost of sales (e) 1,340,841 2,392,655 2,257,835 2,115,842 1,294,147 3,485,993
--------- --------- --------- --------- --------- ---------
Gross profit (e) 265,718 520,838 484,192 469,318 262,375 849,116
Selling, general,
administrative
and other, net 213,083 469,751 434,908 388,836 222,359 785,576
Amortization of goodwill 5,315 7,795 7,571 7,691 4,615 21,847
Restructuring charge - - - - 5,134(f) 123,083(g)
----------- --------- ----------- ----------- ---------- --------
Operating income (loss) (e) 47,320 43,292 41,713 72,791 30,267 (81,390)
Interest expense 50,084 70,211 73,614 77,017 48,361 202,651
Loss (gain) on disposal
of assets 623 (1,364) (2,083) 37 (455) (547)
Provision for earthquake
losses - - - 4,504(h) - -
Provision for income
taxes 2,505 3,441 1,427 2,700 - 500
--------- --------- --------- --------- --------- --------
Loss before
extraordinary charges (5,892) (28,996) (31,245) (11,467) (17,639) (283,994)
Extraordinary charges 3,757 (i) 4,818 (j) - - - 38,424(k)
--------- --------- ---------- ---------- -------- --------
Net loss(l) $ (9,649) $ (33,814) $ (31,245)$ (11,467) $ (17,639) $ (322,418)
========= ========= ========= ========= ========== =========
Non-Cash Charges:
Depreciation and
amortization of
property and
equipment $ 20,399 $ 37,898 $ 37,426 $ 41,380 $25,966 $92,282
Amortization of
goodwill and
other assets 11,453 16,979 20,214 15,703 10,657 33,047
Non-cash interest
expense - - 3,882 8,767 6,139 23,877
Amortization of deferred
financing costs 5,177 6,304 4,901 5,472 3,413 8,193
Store Data:
Stores at end of period 259 249 248 258 267 408
Annual sales per
selling square foot $ 584 $ 538 $ 533 $ 487 $ 452(m) $ 477
Balance Sheet Data
(end of period)(n):
Working capital
(deficit) $ 13,741 $ (66,254) $ (19,222)$ (54,882) $ (74,776) $ (178,456)
Total assets 979,958 998,451 957,840 980,080 1,000,695 3,188,129
Total long-term debt 540,759 509,829 572,670 554,939 571,712 2,276,225
Redeemable stock - - - - - -
Shareholders' equity
(deficit) 84,557 50,771 22,633 10,024 (7,333) (188,798)
</TABLE>
(See footnotes on following page)
16
<PAGE> 18
(a) Operating data for the 52 weeks ended June 29, 1991 include the
results of Alpha Beta from June 17, 1991, the date of its acquisition
only. Alpha Beta's sales for the two weeks ended June 29, 1991 were
$59.2 million.
(b) Operating data for the 52 weeks ended June 25, 1994 include the
results of the Food Barn Stores, which were not material, from March
29, 1994, the date of the acquisition of 10 Food Barn Stores.
(c) The Company changed its fiscal year end from the 52 or 53-week period
which ends on the last Saturday in June to the 52 or 53-week period
which ends on the Sunday closest to January 31, resulting in a 31-week
transition period.
(d) Operating data for the 52 weeks ended January 28, 1996 reflect the
acquisition of RSI on June 14, 1995.
(e) Cost of sales has been principally determined using the last-in,
first-out ("LIFO") method of valuing inventory. If cost of goods sold
had been determined using the first-in, first-out ("FIFO") method,
gross profit and operating income would have been greater by $2.1
million, $3.6 million, $4.4 million, $0.7 million, $2.7 million and
$2.2 million for the 52 weeks ended June 29, 1991, June 27, 1992,
June 26, 1993, and June 25, 1994, the 31 weeks ended January 29, 1995,
and the 52 weeks ended January 28, 1996, respectively.
(f) The Company has converted 11 of its conventional supermarkets to
warehouse stores. During the 31 weeks ended January 29, 1995, the
Company recorded a non-cash restructuring charge for the write-off of
property and equipment at the 11 stores of $5.1 million.
(g) The Company recorded a $75.2 million restructuring charge associated
with the closing of 58 stores and one warehouse facility in the 52
weeks ended January 28, 1996. Pursuant to the settlement agreement
with the State of California, 24 Food 4 Less stores (as well as 3
Ralphs stores) were required to be divested and an additional 34
under-performing stores were closed. The Company also recorded a
$47.9 million restructuring charge associated with the closing of 9
stores and one warehouse facility in the 52 weeks ended January 28,
1996, in conjunction with the agreement with Smith's to lease the
Riverside warehouse facility and 9 stores.
(h) On January 17, 1994, Southern California was struck by a major
earthquake which resulted in the temporary closing of 31 of the
Company's stores. The closures were caused primarily by loss of
electricity, water, inventory, or damage to the affected stores. All
but one of the closed stores reopened within a week of the earthquake.
The final closed store reopened on March 24, 1994. The Company is
insured, subject to deductibles, against earthquake losses (including
business interruption). The pre-tax charge to earnings, net of
insurance recoveries, was approximately $4.5 million.
(i) Represents an extraordinary charge of $3.8 million (net of related
income tax benefit of $2.5 million) relating to the refinancing of
Supermarkets' former bank credit facility (the "Old Credit Agreement")
and Supermarkets' Senior Subordinated Increasing Rate Notes due 1996
(the "IRNs") in connection with the Alpha Beta Acquisition and the
write-off of related debt issuance costs.
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<PAGE> 19
(j) Represents an extraordinary net charge of $4.8 million reflecting the
write-off of $6.7 million (net of related income tax benefit of $2.5
million) of deferred financing costs as a result of the early
redemption of a portion of Supermarkets' bank term loan, partially
offset by a $1.9 million extraordinary gain (net of a related income
tax expense of $0.7 million) on the replacement of partially
depreciated assets following the civil unrest in Los Angeles.
(k) Represents an extraordinary charge of $38.4 million relating to the
refinancing of F4L Supermarkets' old credit facility, 10.45% Senior
Notes due 2000 (the "Old F4L Senior Notes"), 13.75% Senior
Subordinated Notes due 2001 (the "Old F4L Senior Subordinated Notes")
and Holdings' 15.25% Senior Discount Notes due 2004 in connection with
the Merger and the write-off of their related debt issuance costs.
(l) Net loss includes a pre-tax provision for self insurance, which is
classified in cost of sales, selling, general and administrative
expenses, and interest expense, of $15.1 million, $51.1 million,
$43.9 million, $25.7 million, $9.8 million and $32.6 million for the
52 weeks ended June 29, 1991, June 27, 1992, June 26, 1993, and June
25, 1994, the 31 weeks ended January 29, 1995, and the 52 weeks ended
January 28, 1996, respectively. Included in the 52 weeks ended June
25, 1994, the 31 weeks ended January 29, 1995 and the 52 weeks ended
January 28, 1996 are reduced employer contributions of $8.1 million,
$14.3 million, and $26.1 million, respectively, related to union
health and welfare benefit plans.
(m) Amount represents the Company's sales for the 1995 transition period
divided by total selling square feet prorated for the 31 weeks ended
January 29, 1995.
(n) Balance sheet data as of June 29, 1991 reflect the Alpha Beta
Acquisition and the financings and refinancings associated therewith.
Balance sheet data as of June 25, 1994 reflect the acquisition of 10
Food Barn stores. Balance sheet data as of January 28, 1996 reflect
the Merger and the financings and refinancings associated therewith.
18
<PAGE> 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
OVERVIEW
On June 14, 1995, Food 4 Less Supermarkets, Inc. ("F4L Supermarkets")
completed its acquisition of Ralphs Supermarkets, Inc. ("RSI") and its wholly
owned subsidiary, Ralphs Grocery Company ("RGC"). The acquisition was effected
through the merger of F4L Supermarkets with and into RSI (the "RSI Merger"),
followed by the merger of RGC with and into RSI (the "RGC Merger" and, together
with the RSI Merger, the "Merger"). The surviving corporation in the Merger
was renamed Ralphs Grocery Company ("Ralphs"). Concurrently with the
consummation of the Merger, Ralphs received a significant equity investment
from its parent, Food 4 Less Holdings, Inc. ("Holdings") and refinanced a
substantial portion of the existing indebtedness of F4L Supermarkets and RGC.
See "Liquidity and Capital Resources."
The Company's results of operations for the 52 weeks ended January 28,
1996 include 20 weeks of the operations of F4L Supermarkets prior to the
Merger and 32 weeks of operations of the combined Company. Management believes
that the Company's results of operations for periods ending after the
consummation of the Merger are not directly comparable to its results of
operations for periods ending prior to such date. This lack of comparability
as a result of the Merger is attributable to several factors, including the size
of the combined Company (since the Merger approximately doubled F4L
Supermarkets' annual sales volume), the addition of 174 conventional stores to
the Company's overall store mix and the material changes in the Company's
capital structure.
The Merger is being accounted for as a purchase of RGC by F4L
Supermarkets. As a result, all financial statements for periods subsequent to
June 14, 1995, the date the Merger was consummated, reflect RGC's net assets
at their estimated fair market values as of June 14, 1995. The purchase price
in excess of the fair market value of RGC's net assets was recorded as
goodwill and is being amortized over a 40-year period. The purchase price
allocation reflected in the Company's balance sheet at January 28, 1996 is
based on management's preliminary estimates. The actual purchase accounting
adjustments, including adjustments to loss contingency accruals, will be
determined within one year following the Merger and may vary from the
preliminary estimates at January 28, 1996.
At January 28, 1996, the Company operated 277 conventional
supermarkets and 68 Food 4 Less warehouse stores in Southern California. It
also operated 63 stores in Northern California and certain areas of the
Midwest. Following the Merger, the Company converted F4L Supermarkets' Alpha
Beta, Boys and Viva stores to the Ralphs format and converted selected Ralphs
stores to the Food 4 Less warehouse format.
As of January 28, 1996, the Company's bakery, creamery and deli
manufacturing operations and the management of major corporate departments had
been consolidated. The full integration of the Company's administrative
departments is expected to be completed by June 1996. The previously planned
integration and consolidation of the Company's warehousing and distribution
facilities into three primary facilities will be delayed and modified as a
result of the agreement with Smith's Food and Drug Centers, Inc. ("Smith's")
to lease its Riverside, California distribution and creamery facility. See
"Southern California Division-Purchasing, Manufacturing and Distribution."
Following the consummation of the Merger, sales in the Company's
Southern California Division fell short of anticipated levels for the second
half of fiscal 1995. This shortfall was caused
19
<PAGE> 21
primarily by smaller than anticipated benefits from the Company's advertising
program and greater than expected competitive pressures. Though the largest
impact was experienced by the Company's Alpha Beta, Boys and Viva stores
which were converted to the Ralphs format, the base Ralphs stores and the
Ralphs stores being converted to the warehouse format were also affected. The
Company's operating margins following the consummation of the Merger were
further adversely affected by delays in the implementation of certain
promotional buying and other programs, excessive price markdowns in stores
undergoing conversion and a less advantageous than expected product mix in
certain stores. Greater than anticipated transition expenses were also
experienced in integrating store operation and inventory distribution
functions. As a result of these various factors, in February 1996, the
Company further amended its Credit Agreement to conform the financial
covenants contained in the agreement to the Company's actual post-Merger
results. Following the adoption of these amendments, the Company believes
that the covenant levels contained in the agreement are consistent with
anticipated operating results for fiscal 1996.
The Company changed its fiscal year end from the 52 or 53-week period
which ends on the last Saturday in June to the 52 or 53-week period which ends
on the Sunday closest to January 31, resulting in a 31-week transition period
ended January 29, 1995. References to fiscal year 1993, fiscal year 1994, the
1995 transition period and fiscal year 1995 are to the 52-week period ended
June 26, 1993, the 52-week period ended June 25, 1994, the 31-week period
ended January 29, 1995, and the 52-week period ending January 28, 1996,
respectively. The operating results for the 1995 transition period are not
directly comparable to those of fiscal 1993, fiscal 1994 or fiscal 1995, as
these periods include 52 weeks of operations.
RESULTS OF OPERATIONS OF THE COMPANY
The following table sets forth the historical operating results of the
Company for the 52 weeks ended June 26, 1993 and June 25, 1994, the 31 weeks
ended January 29, 1995, and the 52 weeks ended January 28, 1996:
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year 1995 Fiscal Year
1993 1994 Transition Period 1995
------------------------ ---------------- ----------------- --------------------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $2,742.0 100 .0% $2,585.2 100.0% $1,556 .5 100.0% $4,335.1 100.0%
Gross profit 484.2 17.7 469.3 18.1 262 .4 16.9 849.1 19.6
Selling, general,
administrative
and other, net 434.9 15.9 388.8 15.0 222 .4 14.3 785.6 18.1
Amortization of goodwill 7.6 0 .3 7.7 0.3 4 .6 0.3 21.8 0.5
Restructuring charge 0.0 0 .0 0.0 0.0 5 .1 0.3 123.1 2.8
Operating income (loss) 41.7 1 .5 72.8 2.8 30.3 1.9 (81.4) (1.9)
Interest expense 73.6 2 .6 77.0 2.9 48.4 3.1 202.7 4.7
Loss (gain) on disposal
of assets (2.1) (0 .1) 0.0 0.0 (0.5) (0.0) (0.5) (0.0)
Provision for earthquake
losses 0.0 0 .0 4.5 0.2 0 .0 0.0 0.0 0.0
Provision for income taxes 1.4 0 .1 2.7 0.1 0 .0 0.0 0.5 0.0
Loss before extraordinary
charge (31.2) (1.1) (11.5) (0.4) (17.6) (1.1) (284.0) (6.6)
Extraordinary charge 0.0 0 .0 0.0 0.0 0 .0 0.0 38.4 0.9
Net loss (31.2) (1.1) (11.5) (0.4) (17.6) (1.1) (322.4) (7.4)
</TABLE>
20
<PAGE> 22
COMPARISON OF THE COMPANY'S RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED
JANUARY 28, 1996 WITH THE COMPANY'S RESULTS OF OPERATIONS FOR THE 31 WEEKS
ENDED JANUARY 29, 1995.
Sales. Sales per week increased $33.2 million, or 66.1%, from $50.2
million in the 31 weeks ended January 29, 1995 to $83.4 million in the 52 weeks
ended January 28, 1996. The increase in sales was primarily attributable to
the addition of 174 conventional supermarkets acquired through the Merger. The
sales increase was partially offset by a pro-forma comparable store sales
(includes the combined sales of F4L Supermarkets and RGC for the period
prior to the Merger) decline of 1.9% for the 52 weeks ended January 28, 1996 as
compared to the 52 weeks ended January 28, 1995. Excluding stores scheduled
for divestiture or closing, the pro-forma comparable store sales decreased
1.2%. Management believes the decline in comparable store sales was primarily
attributable to additional competitive store openings and remodels in Southern
California, as well as the Company's own new store openings and conversions.
Gross Profit. Gross profit increased as a percentage of sales from
16.9% in the 31 weeks ended January 29, 1995 to 19.6% in the 52 weeks ended
January 28, 1996. The increase in gross profit margin was primarily
attributable to the addition of 174 conventional supermarkets which diluted the
effect of the Company's warehouse stores (which have lower gross margins than
the Company's conventional supermarkets) on its overall gross margin for the
period. Gross profit was also impacted by certain one-time costs associated
with the integration of the Company's operations. See "Operating Income
(Loss)."
Selling, General, Administrative and Other, Net. Selling, general,
administrative and other expenses ("SG&A") were $222.4 million and $785.6
million for the 31 weeks ended January 29, 1995 and the 52 weeks ended January
28, 1996, respectively. SG&A increased as a percentage of sales from 14.3% to
18.1% for the same periods. The increase in SG&A as a percentage of sales was
due primarily to the addition of 174 conventional supermarkets acquired through
the Merger. The additional conventional supermarkets diluted the effect of the
Company's warehouse stores (which have lower SG&A than the Company's
conventional supermarkets) on its SG&A margin for the period. The Company
participates in multi-employer health and welfare plans for its store employees
who are members of the United Food and Commercial Workers Union ("UFCW"). As
part of the renewal of the Southern California UFCW contract in October 1993,
employers contributing to UFCW health and welfare plans received a pro rata
share of the excess reserves in the plans through a reduction of current
employer contributions. The Company's share of the excess reserves recognized
in fiscal 1995 was $26.1 million, which partially offset the increase in SG&A.
SG&A was also impacted by certain one- time costs associated with the
integration of the Company's operations. See "Operating Income (Loss)."
Restructuring Charge. During fiscal 1995, the Company recorded a
$75.2 million charge associated with the closure of 58 former F4L Supermarkets
stores and one former F4L Supermarkets warehouse facility. Twenty-four of
these stores were required to be closed pursuant to a settlement agreement with
the State of California in connection with the Merger. Three RGC stores were
also required to be sold. Thirty-four of the closed stores were
under-performing former F4L Supermarkets stores. The $75.2 million
restructuring charge consisted of write-downs of property and equipment ($52.2
million) less estimated proceeds ($16.0 million); reserve for closed stores and
warehouse facility ($16.1 million); write-off of the Alpha Beta trademark ($8.3
million); write-off of other assets ($8.0 million); lease termination expenses
($4.0 million); and miscellaneous expenses ($2.6 million). During fiscal year
1995, the Company utilized $34.7 million of the reserve for restructuring costs
($50.0 million of costs partially offset by $15.3 million of proceeds from the
divestiture of stores). The charges consisted of write-downs of property and
equipment ($33.2 million); write-off of the Alpha Beta trademark ($8.3 million);
and expenditures associated with the closed stores and the warehouse facility,
write-off of other assets, lease termination expenditures and miscellaneous
expenditures ($8.5 million). Future lease payments of approximately $19.1
million will be offset
21
<PAGE> 23
against the remaining reserve. Management believes that the remaining reserve
is adequate to complete the planned restructuring.
On December 29, 1995, the Company consummated an agreement with
Smith's to sublease its one million square foot distribution center and
creamery facility in Riverside, California for approximately 23 years, with
renewal options through 2043, and to acquire certain operating assets and
inventory at that facility. In addition, the Company also acquired nine of
Smith's Southern California stores which became available when Smith's
withdrew from the California market. As a result of the acquisition of the
Riverside distribution center and creamery, the Company closed its La Habra
distribution center in the first quarter of fiscal year 1996. Also, the
Company closed nine of its stores which were near the acquired former Smith's
stores. During the fourth quarter of fiscal year 1995, the Company recorded a
$47.9 million restructuring charge to recognize the cost of closing these
facilities, consisting of write-downs of property and equipment ($16.1
million), closure costs ($2.2 million), and lease termination expenses ($29.6
million).
Operating Income (Loss). In addition to the factors discussed above,
operating income includes charges of approximately $75 million for costs
associated with the conversion of stores and integration of the Company's
operations. These costs related primarily to (i) markdowns on clearance
inventory at F4L Supermarkets' Alpha Beta, Boys and Viva stores converted to
the Ralphs format, (ii) an advertising campaign announcing the Merger, and
(iii) incremental labor cost associated with the training of Company personnel
following store conversions. In addition, the Company has experienced higher
than anticipated warehousing and distribution costs since the Merger primarily
due to the delay in the planned consolidation of the Company's distribution
facilities resulting from the acquisition of the Smith's Riverside distribution
center. The Company has taken steps to reduce these increased costs in future
periods.
Interest Expense. Interest expense (including amortization of
deferred financing costs) was $48.4 million for the 31 weeks ended January 29,
1995 and $202.7 million for the 52 weeks ended January 28, 1996. The increase
in interest expense was primarily due to the increased indebtedness incurred in
conjunction with the Merger. See "Liquidity and Capital Resources."
Loss Before Extraordinary Charge. Primarily as a result of the
factors discussed above, the Company's loss before extraordinary charge
increased from $17.6 million for the 1995 transition period to $284.0 million
for fiscal year 1995.
Extraordinary Charge. An extraordinary charge of $38.4 million was
recorded during fiscal year 1995 relating to retirement of indebtedness of F4L
Supermarkets in connection with the Merger and the write-off of the related
deferred financing costs.
COMPARISON OF THE COMPANY'S RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED JUNE
25, 1994 WITH THE COMPANY'S RESULTS OF OPERATIONS FOR THE 52 WEEKS ENDED JUNE
26, 1993.
Sales. Sales decreased $156.8 million or 5.7% from $2,742.0 million
in the 52 weeks ended June 26, 1993 to $2,585.2 million in the 52 weeks ended
June 25, 1994. The decrease in sales resulted primarily from a 6.9% decline in
comparable store sales. The decline in comparable store sales primarily
reflected (i) the weak economy in Southern California, (ii) lower levels of
price inflation in certain key food product categories, and (iii) competitive
factors, including new stores, remodeling and promotional activity. This
decrease in sales was partially offset by sales from new and remodeled stores
opened or acquired during fiscal 1994.
22
<PAGE> 24
Gross Profit. Gross profit increased as a percent of sales from 17.7%
in the 52 weeks ended June 26, 1993 to 18.1% in the 52 weeks ended June 25,
1994. The increase in gross profit margin was attributable to improvements in
product procurement and an increase in vendors' participation in the Company's
promotional costs. These improvements were partially offset by an increase in
the number of warehouse format stores (which have lower gross margins) from 45
at June 26, 1993 to 66 at June 25, 1994, and the effect of the fixed cost
component of gross profit as compared to a lower sales base.
Selling, General, Administrative and Other, Net. SG&A expenses were
$434.9 million and $388.8 million for fiscal year 1993 and fiscal year 1994,
respectively. SG&A decreased as a percent of sales from 15.9% to 15.0% for the
same periods. The Company experienced a reduction of workers' compensation and
general liability self-insurance costs of $18.2 million due primarily to cost
control programs implemented by the Company, including awards for stores with
the best loss experience, specific achievable goals for each store, and
increased monitoring of third-party administrators, and, to a lesser extent, a
lower sales base which reduced the Company's exposure. In addition, the
Company maintained tight control of administrative expenses and store level
expenses, including payroll (due primarily to increased productivity),
advertising, and other controllable store expenses. Because the Company's
warehouse stores have lower SG&A than conventional stores, the increase in the
number of warehouse stores, from 45 at June 26, 1993 to 66 at June 25, 1994,
also contributed to decreased SG&A.
The Company recognized $8.1 million in fiscal 1994 for its share of
the excess UFCW health and welfare plan reserves. Offsetting the reduction in
employer contributions was a $5.5 million contract ratification bonus and
contractual wage increases.
The reduction in SG&A as a percentage of sales was partially offset by
the effect of the fixed cost component of SG&A as compared to a lower sales
base.
Interest Expense. Interest expense (including amortization of
deferred financing costs) decreased $3.4 million from $73.6 million to $77.0
million for the 52 weeks ended June 26, 1993 and June 25, 1994, respectively.
The increase in interest expense is due to additional indebtedness related to
the 15.25% Senior Discount Notes due 2004, partially offset by reduced
borrowings under the New Revolving Facility and the Bank Term Loan.
Provision for Earthquake Losses. On January 17, 1994, Southern
California was struck by a major earthquake which resulted in the temporary
closure of 31 of the Company's stores. The closures were caused primarily by
loss of electricity, water, inventory, or structural damage. All but one of
the closed stores reopened within a week of the earthquake. The final closed
store reopened on March 24, 1994. The Company is insured against earthquake
losses (including business interruption), subject to certain deductibles. The
pre-tax financial impact, net of insurance recoveries, was approximately $4.5
million.
Net Loss. Primarily as a result of the factors discussed above, the
Company's net loss decreased from $31.2 million in fiscal 1993 to $11.5 million
in fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
Holdings utilized new financing proceeds of approximately $525
million, which were paid to the former RSI stockholders, to consummate the
Merger. The new financing proceeds included the issuance of preferred stock
to a group of investors for cash proceeds of approximately $140
23
<PAGE> 25
million (the "New Equity Investment"). In addition, the Company entered into a
new credit facility (the "New Credit Facility") pursuant to which, upon the
closing of the Merger, it incurred $600 million under the term loan portion of
the New Credit Facility (the "New Term Loans") and approximately $91.6 million
of standby letters of credit under the $325 million revolving credit facility
(the "New Revolving Facility"). The Company also issued $350 million aggregate
principal amount of new 10.45% Senior Notes due 2004 (the "New F4L Senior
Notes") and $100 million aggregate principal amount of new 11% Senior
Subordinated Notes due 2005 (the "New RGC Notes") pursuant to public offerings
(the "Public Offerings").
The proceeds from the New Credit Facility, Public Offerings and the
New Equity Investment and the issuance of $59.0 million initial accreted value
of 13-5/8% Senior Discount Debentures due 2005 (the "New Discount Debentures")
for cash, $41.0 million in initial accreted value of additional New Discount
Debentures as consideration for the Merger and for associated fees, and $131.5
million aggregate principal amount of 13-5/8% Senior Subordinated Pay-In-Kind
Debentures due 2007 (the "Seller Debentures"), provided the sources of
financing required to consummate the Merger and to repay outstanding bank debt
of approximately $176.5 million at F4L Supermarkets and $228.9 million at
RGC, existing mortgage debt of $174.0 million (excluding prepayment fees) at
RGC and $84.4 million to the holders of the Senior Discount Notes due 2004 (the
"Discount Notes") (excluding related fees). Proceeds from the New Credit
Facility and the Public Offerings also were used (i) to pay the cash portions
of F4L Supermarkets' exchange offers and consent solicitations with respect to
the 10.25% Senior Subordinated Notes due 2002 of RGC (the "Old RGC 10.25%
Notes,") and the 9% Senior Subordinated Notes due 2003 of RGC (the "Old RGC 9%
Notes," and together with the old RGC 10.25% Notes, the "Old RGC Notes")
(collectively, the "RGC Exchange Offers"), and the 10.45% Senior Notes due 2000
of F4L Supermarkets (the "Old F4L Senior Notes") and the 13.75% Senior
Subordinated Notes due 2001 of F4L Supermarkets (the "Old F4L Senior
Subordinated Notes") (collectively, the "F4L Exchange Offers," and together
with the RGC Exchange Offers, the "Exchange Offers"), as well as the Change of
Control Offer (as defined below) and accrued interest on all exchanged debt
securities in the amount of $27.8 million, (ii) to pay $17.8 million to the
holders of the RGC Equity Appreciation Rights, (iii) to loan $5.0 million
to an affiliate for the benefit of such holders, (iv) to pay approximately
$93.3 million of fees and expenses of the Merger and the related financing, and
(v) to pay $3.5 million to purchase shares of common stock of Holdings from
certain dissenting shareholders. In addition, Holdings issued $22.5 million of
its New Discount Debentures in consideration for certain Merger-related
services. The Company assumed certain existing indebtedness of F4L
Supermarkets and RGC in connection with the Exchange Offers, pursuant to which
(i) holders of the Old RGC Notes exchanged approximately $424.0 million
aggregate principal amount of Old RGC Notes for an equal principal amount of
New RGC Notes, (ii) holders of the Old F4L Senior Notes exchanged approximately
$170.3 million aggregate principal amount of Old F4L Senior Notes for an equal
principal amount of New F4L Senior Notes, and (iii) holders of the Old F4L
Senior Subordinated Notes exchanged approximately $140.2 million aggregate
principal amount of Old F4L Senior Subordinated Notes for an equal principal
amount of new 13.75% Senior Subordinated Notes due 2005. In addition, pursuant
to the terms of the indentures governing the Old RGC Notes, the consummation of
the Merger required the Company to make an offer to purchase all of the
outstanding Old RGC Notes that were not exchanged in the RGC Offers (the
"Change of Control Offer"). The Change of Control Offer resulted in the
purchase of an additional $1.1 million of outstanding Old RGC Notes.
At January 28, 1996, there were borrowings of $127.4 million under
the New Revolving Facility and $92.7 million of standby letters of credit
had been issued. Under the terms of the New Credit Facility, the Company was
required to repay $1.6 million of the New Term Loans in fiscal 1995. The New
Term Loans require quarterly amortization payments aggregating $19.3 million in
fiscal year 1996, $46.0 million in fiscal year 1997 and increasing thereafter.
The level of borrowings
24
<PAGE> 26
under the Company's New Revolving Facility is dependent upon cash flows from
operations, the timing of disbursements, seasonal requirements and capital
expenditure activity. The Company is required to reduce loans outstanding
under the New Revolving Facility to $150.0 million for a period of not less
than 30 consecutive days during the period between the first day of the fourth
fiscal quarter of 1996 and the last day of the first fiscal quarter of 1997.
At April 19, 1996, the Company had $110.7 million available for borrowing under
the New Revolving Facility.
On October 11, 1995, the Company entered into an interest rate collar
which effectively set interest rate limits on $300 million of the Company's
bank term debt. This interest rate collar, which was effective as of October
19, 1995, limits the interest rate on $300 million of outstanding debt under
the New Credit Facility to a range of 4.5 percent to 8.0 percent for two
years, thus satisfying the interest rate protection requirements under the New
Credit Facility.
Cash flow from operations, amounts available under the New Revolving
Facility and lease financing are the Company's principal sources of
liquidity. The Company believes that these sources will be adequate to meet
its anticipated capital expenditure, working capital and debt service
requirements during fiscal 1996.
During fiscal year 1995, cash used by operating activities was
approximately $16.8 million as compared to cash provided by operating
activities of approximately $17.6 million for the 1995 transition period. The
decrease in cash from operating activities is due to changes in operating
assets and liabilities in fiscal year 1995 and a decrease in operating income
due primarily to the impact of certain costs associated with the integration
of the Company's operations subsequent to the Merger. The Company's principal
use of cash in its operating activities is inventory purchases. The Company's
high inventory turnover allows it to finance a substantial portion of its
inventory through trade payables, thereby reducing its short-term borrowing
needs. At January 28, 1996, this resulted in a working capital deficit of
$178.5 million.
Cash used for investing activities was $505.4 million for fiscal year
1995. Investing activities consisted primarily of $403.3 million of
acquisition costs associated with the Merger and capital expenditures of $122.4
million, partially offset by $4.1 million of sale/leaseback transactions. The
capital expenditures, net of the proceeds from sale/leaseback transactions,
were financed primarily from cash provided by operating and financing
activities.
The capital expenditures discussed above were made to (i) build 20 new
stores (11 of which have been completed), (ii) remodel 11 stores, (iii)
convert 111 conventional format stores to the Ralphs banner in conjunction with
the Merger, and (iv) convert 13 Ralphs stores to the Food 4 Less warehouse
format. The Company also acquired three stores in Northern California during
fiscal 1995. The Company currently anticipates that its aggregate capital
expenditures for fiscal 1996 will be approximately $105.0 million (or $95.0
million, net of expected capital leases) of which approximately $96.0 million
relate to ongoing expenditures for new stores, equipment and maintenance and
approximately $9.0 million relate to Merger-related and non-recurring items.
Consistent with past practices, the Company intends to finance these capital
expenditures primarily with cash provided by operations and through leasing
transactions. At April 26, 1996, the Company had approximately $18.0 million
of unused equipment leasing facilities. No assurance can be given that sources
of financing for capital expenditures will be available or sufficient to
finance its anticipated capital expenditure requirements; however, management
believes the capital expenditure program has substantial flexibility and is
subject to revision based on various factors, including changes in business
conditions and cash flow requirements. Management believes that if the Company
were to substantially reduce or postpone these programs, there would be no
substantial impact on short-term operating profitability. However, management
also believes that the
25
<PAGE> 27
construction of new stores is an important component of its future operating
strategy. Consequently, management believes, if these programs were
substantially reduced, future operating results, and ultimately its cash flow,
would be adversely affected.
The capital expenditures discussed above do not include potential
acquisitions which the Company could make to expand within its existing markets
or to enter other markets. The Company has grown through acquisitions in the
past and from time to time engages in discussions with potential sellers of
individual stores, groups of stores or other retail supermarket chains.
Cash provided by financing activities was $570.7 million for fiscal
year 1995. Financing activities consisted primarily of proceeds from issuance
of new debt in the amount of $1,105.5 million, including proceeds of $600
million under the New Credit Facility, $350 million from the issuance of New
F4L Senior Notes and $100 million from the issuance of New RGC Notes, net of
issuance costs of $100.0 million. These sources were partially offset by
principal payments on long-term debt of $661.1 million including: $125.7
million to retire borrowings under the old credit agreement, $228.9 million to
extinguish the old RGC term loan; and $174.0 million to repay certain real
estate loans.
Holdings has outstanding $100 million initial accreted value of New
Discount Debentures and $131.5 million principal amount of Seller Debentures
outstanding. Holdings is a holding company which has no assets other than
the capital stock of Ralphs. Holdings will be required to commence semi-annual
cash payments of interest on the New Discount Debentures and the Seller
Debentures commencing December 15, 2000 in the amount of approximately $61
million per annum. Subject to the limitations contained in its debt
instruments, Ralphs intends to make dividend payments to Holdings in amounts
which are sufficient to permit Holdings to service its cash interest
requirements. Ralphs may pay other dividends to Holdings in connection with
certain employee stock repurchases and for routine administrative expenses.
RSI and FFL had significant net operating loss carryforwards for
regular federal income tax purposes. As a result of the Merger, the Company's
ability to utilize such loss carryforwards in future periods is limited to
approximately $15.6 million per year with respect to FFL net operating loss
carryforwards and approximately $15.0 million per year with respect to RSI's
net operating loss carryforwards. Holdings files a consolidated federal income
tax return, under which the federal income tax liability of Holdings and its
subsidiaries is determined on a consolidated basis. Holdings is a party to a
federal income tax sharing agreement with Ralphs and certain of its
subsidiaries (the "Tax Sharing Agreement"). The Tax Sharing Agreement provides
that in any year in which Ralphs is included in any consolidated tax liability
of Holdings and has taxable income, Ralphs will pay to Holdings the amount of
the tax liability that Ralphs would have had on such due date if it had been
filing a separate return. Conversely, if Ralphs generates losses or credits
which actually reduce the consolidated tax liability of Holdings and its other
subsidiaries, Holdings will credit to Ralphs the amount of such reduction in
the consolidated tax liability. These credits are passed between Holdings and
Ralphs in the form of cash payments. In the event any state and local income
taxes are determinable on a combined or consolidated basis, the Tax Sharing
Agreement provides for a similar allocation between Holdings and Ralphs of such
state and local taxes. See "Certain Relationships and Related Transactions."
The Company will continue to be a party to an indemnification agreement with
Federated Department Stores, Inc. and certain other parties. Pursuant to the
terms of such agreement, the Company made an annual tax payment of
$1.0 million in 1995 and will make an annual tax payment of $1.0 million
in 1996, with the final tax payment of $5.0 million in 1997.
26
<PAGE> 28
The Company is highly leveraged. At January 28, 1996, the Company's
total long-term indebtedness (including current maturities) and stockholder's
deficit were $2.3 billion and $188.8 million, respectively. Based upon
current levels of operations and anticipated cost savings and future growth,
the Company believes that its cash flow from operations, together with
available borrowings under the New Revolving Facility and its other sources
of liquidity (including lease financing), will be adequate to meet its
anticipated requirements for working capital, capital expenditures, integration
costs and debt service payments. There can be no assurance, however, that the
Company's business will continue to generate cash flow at or above current
levels or that future cost savings and growth can be achieved.
EFFECTS OF INFLATION AND COMPETITION
The Company's primary costs, inventory and labor, are affected by a
number of factors that are beyond its control, including availability and price
of merchandise, the competitive climate and general and regional economic
conditions. As is typical of the supermarket industry, the Company has
generally been able to maintain margins by adjusting its retail prices, but
competitive conditions may from time to time render it unable to do so while
maintaining its market share.
The supermarket industry is highly competitive and characterized by
narrow profit margins. The Company's competitors in each of its operating
divisions include national and regional supermarket chains, independent and
specialty grocers, drug and convenience stores, and the newer "alternative
format" food stores, including warehouse club stores, deep discount drug stores
and "super centers". Supermarket chains generally compete on the basis of
location, quality of products, service, price, product variety and store
condition. The Company regularly monitors its competitors' prices and adjusts
its prices and marketing strategy as management deems appropriate.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS 121) and
Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). The Company will be required to adopt SFAS 121 and
SFAS 123 in fiscal year 1996. The Company does not expect that the adoption of
SFAS 121 or SFAS 123 will have a material effect on its financial position or
its results of operations in fiscal year 1996.
27
<PAGE> 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements and Schedules on
page 46.
28
<PAGE> 30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
29
<PAGE> 31
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the
executive officers and directors of the Company as of April 29, 1996.
Directors serve until the election and qualification of their successors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Ronald W. Burkle . . . . . . . . 43 Chairman and Director
George G. Golleher . . . . . . . 48 Chief Executive Officer and Director
Alfred A. Marasca . . . . . . . 54 President and Chief Operating Officer
Joe S. Burkle . . . . . . . . . 73 Chief Executive Officer - Falley's and Director
Greg Mays . . . . . . . . . . . 49 Executive Vice President - Finance & Administration and
Chief Financial Officer
Jan Charles Gray . . . . . . . . 48 Senior Vice President, General Counsel and Secretary
Byron E. Allumbaugh . . . . . . 64 Director
Robert Beyer . . . . . . . . . . 36 Director
Peter Copses . . . . . . . . . . 37 Director
Patrick L. Graham . . . . . . . 46 Director
John Kissick . . . . . . . . . . 54 Director
Mark A. Resnik . . . . . . . . . 48 Director
</TABLE>
Ronald W. Burkle has been a Director since June 1995. He was Chairman
of the Board from June 1995 to January 1996. Mr. Burkle was a Director,
Chairman of the Board and Chief Executive Officer of F4L Supermarkets from its
inception in 1989 until the Merger. Mr. Burkle co- founded The Yucaipa
Companies, Inc. in 1986 and served as Director, Chairman of the Board,
President and Chief Executive Officer of FFL from 1987 and of Holdings from
1992 until the Merger, respectively. Mr. Burkle has been Chairman of the Board
of Dominick's Finer Foods, Inc. since March 1995 and served as Chief Executive
Officer from March 1995 until January 1996. Mr. Burkle has also served as
Chairman of the Board of Smitty's Supermarkets, Inc. since June 1994 and as a
Director of Kaufman & Broad Home Corporation, Inc. since March 1995. Mr.
Burkle is the son of Joe S. Burkle.
30
<PAGE> 32
George G. Golleher has been Chief Executive Officer since January 1996
and a Director since June 1995. He was Vice Chairman from June 1995 to January
1996. He was a Director of F4L Supermarkets from its inception in 1989 and
was the President and Chief Operating Officer of F4L Supermarkets from January
1990 until the Merger. From 1986 through 1989, Mr. Golleher served as Senior
Vice President - Finance and Administration of The Boys Markets, Inc. Prior to
joining The Boys Markets, Inc. in 1984, Mr. Golleher served as Vice President
and Chief Financial Officer of Mayfair Markets, Inc. from 1983 to 1984. Mr.
Golleher has served as a Director of Dominick's Finer Foods Inc., an affiliate
of The Yucaipa Companies, since March 1995.
Alfred A. Marasca has been President and Chief Operating Officer
since June 1995. He was President and Chief Operating Officer of RGC from
February 1994 until the Merger. He was President of RGC from 1993 to 1994,
Executive Vice President - Retail from 1991 to 1993, and Executive Vice
President - Marketing from 1985 to 1991.
Joe S. Burkle has been a Director since June 1995 and Chief Executive
Officer of Falley's, Inc. since 1987. He was a Director and Executive Vice
President of F4L Supermarkets from its inception in 1989 until the Merger.
Mr. Burkle began his career in the supermarket industry in 1946, and served as
President and Chief Executive Officer of Stater Bros. Markets, a Southern
California supermarket chain. Prior to 1987, Mr. Burkle was a private investor
in Southern California. Mr. Burkle is the father of Ronald W. Burkle.
Greg Mays has been Executive Vice President - Finance & Administration
and Chief Financial Officer since September 1995. He was Executive Vice
President - Finance & Administration from June 1995 to September 1995. He was
Executive Vice President - Finance & Administration and Chief Financial Officer
of F4L Supermarkets and of Holdings from December 1992 until the Merger. From
1989 to 1991, Mr. Mays was Chief Financial Officer of Almac's, Inc. and, from
1991 to December 1992, he was President and Chief Financial Officer of Almac's.
From April 1988 to June 1989, Mr. Mays was Chief Financial Officer of Food 4
Less of Modesto, Inc. and Cala Foods, Inc.
Jan Charles Gray has been Senior Vice President, General Counsel and
Secretary since June 1995. He was Senior Vice President, General Counsel and
Secretary of RGC from 1988 until the Merger. He was Senior Vice President and
General Counsel of RGC from 1985 to 1988 and Vice President and General Counsel
from 1978 to 1985.
Byron E. Allumbaugh has been a Director since June 1995. He was
Chief Executive Officer from June 1995 to January 1996. He was Chairman of the
Board and Chief Executive Officer of RGC from 1976 until the Merger. He also
is a Director of the Ahmanson Company, El Paso Natural Gas Company, Automobile
Club of Southern California and Ultramar, Inc.
31
<PAGE> 33
Robert Beyer has been a Director since June 1995. He has been a Group
Managing Director of Trust Company of the West ("TCW") since 1995. Mr. Beyer
was Co-Chief Executive Officer of Crescent Capital Corporation, a registered
investment advisor, from 1991 until its acquisition by TCW in 1995. From 1986
to 1991, Mr. Beyer was a member of the investment banking department of Drexel
Burnham Lambert, Incorporated. From 1983 to 1986, Mr. Beyer was a member of
the investment banking department of Bear, Stearns & Co., Inc.
Peter Copses has been a Director since June 1995. He has been a
Principal since 1990 of Apollo Advisors, L.P. which, together with an
affiliate, acts as managing general partner of Apollo Investment Fund, L.P.,
AIF II, L.P. and Apollo Investment Fund III, L.P., private securities
investment funds, and of Lion Advisors, L.P., which acts as financial advisor
to and representative for certain institutional investors with respect to
securities investments. Mr. Copses is a Director of Dominicks Finer Foods,
Inc., Family Restaurants, Inc., Forum Group, Inc. and Zale Corporation.
Patrick L. Graham has been a Director since June 1995. He joined The
Yucaipa Companies as a general partner in January 1993. Prior to that time, he
was a Managing Director in the Corporate Finance Department of Libra
Investments, Inc. from 1992 to 1993 and Paine Webber, Inc. from 1990 to 1992.
From 1982 to 1990, he was a Managing Director of the Corporate Finance
Department of Drexel Burnham Lambert, Inc. and an Associate Director of the
Corporate Finance Department of Bear Stearns & Co., Inc. Mr. Graham has served
as a Director of Smitty's Supermarkets, Inc. since June 1994 and of Dominick's
Finer Foods, Inc. since March 1995.
John Kissick has been a Director since June 1995. He is a principal
of Apollo Advisors, L.P. which, together with an affiliate, acts as managing
general partner of Apollo Investment Fund, L.P., AIF II, L.P. and Apollo
Investment Fund III, L.P., private securities investment funds, and of Lion
Advisors, L.P., which acts as financial advisor to and representative for
certain institutional investors with respect to securities investments. From
1990 to 1991, Mr. Kissick was a consultant with Kissick & Associates, a private
investment advisory firm. He serves as Director of Continental Graphics
Holdings, Inc., Converse, Inc., The Florsheim Shoe Company, Inc., and Furniture
Brands International, Inc.
Mark A. Resnik has been a Director since June 1995. He was a
Director, Vice President and Secretary of F4L Supermarkets from its inception
in 1989 until the Merger. He co-founded The Yucaipa Companies, Inc. in 1986
and served as a Director, Vice President and Secretary of FFL from 1987 until
the Merger. Mr. Resnik has served as a Director of Smitty's Supermarkets,
Inc. since June 1994 and of Dominick's Finer Foods, Inc. since March 1995
The Company does not currently pay any fees or remuneration to its
directors for service on the board or any board committee, but will reimburse
directors for their ordinary out-of-pocket expenses.
Messrs. R. Burkle, Allumbaugh, Golleher, Marasca, J. Burkle, Beyer,
Copses, Graham, Kissick and Resnik are directors of Ralphs.
32
<PAGE> 34
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
of the Chief Executive Officer and the other four most highly compensated
executive officers of the Company (the "Named Executive Officers"), whose total
salary and bonus for the 52 weeks ended January 28, 1996 exceeded $100,000 for
services rendered in all capacities to the Company and its subsidiaries for the
same time period.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Transition No. of Shares
Period/Fiscal Underlying All Other
Name and Principal Position Year Ended Salary Bonus Options(6) Compensation(7)
- --------------------------- ------------- ------ ----- --------- --------------
<S> <C> <C> <C> <C> <C>
Byron E. Allumbaugh(1) January 28, 1996 $883,333 $ 547,692 820,227 $1,848
Chairman January 29, 1995(8) $ - $ - - $ -
June 25, 1994 $ - $ - - $ -
June 26, 1993 $ - $ - - $ -
George G. Golleher(2) January 28, 1996 $503,205 $1,950,000(9) 200,000 $1,783
Chief Executive Officer January 29, 1995(8) $298,100 $ 300,000 - $3,329
June 25, 1994 $500,000 $ 500,000 - $3,937
June 26, 1993 $500,000 $ 500,000 - -
Alfred A. Marasca(3) January 28, 1996 $466,667 $ 333,846 300,000 $3,000
President and January 29, 1995(8) $ - $ - - $ -
Chief Operating Officer June 25, 1994 $ - $ - - $ -
June 26, 1993 $ - $ - - $ -
Greg Mays(4) January 28, 1996 $286,378 $ 355,000(9) - $1,783
Executive Vice President - January 29, 1995(8) $154,300 $ 85,000 - $2,687
Finance / Administration and June 25, 1994 $250,000 $ 150,000 - -
Chief Financial Officer June 26, 1993 $108,000 $ 75,000 - -
Jan Charles Gray(5) January 28, 1996 $221,667 $ 147,901 204,940 $1,198
Senior Vice President,
General January 29, 1995(8) $ - $ - - $ -
Counsel and Secretary June 25, 1994 $ - $ - - $ -
June 26, 1993 $ - $ - - $ -
</TABLE>
- ---------------------------
(1) During fiscal 1995, Byron E. Allumbaugh became Chairman.
(2) During fiscal 1995, George G. Golleher became Chief Executive Officer.
(3) During fiscal 1995, Alfred A. Marasca became President and Chief
Operating Officer.
(4) During fiscal 1995, Greg Mays became Executive Vice President -
Finance & Administration and Chief Financial Officer.
(5) During fiscal 1995, Jan Charles Gray became Senior Vice President,
General Counsel and Secretary.
(6) All options shown were granted in connection with the Ralphs Merger.
Of such options, 220,227, 100,000 and 174,940 were granted to Messrs.
Allumbaugh, Marasca and Gray, respectively, in exchange for the
cancellation of certain payments to such individuals under RGC equity
appreciation rights.
(7) The amounts shown in this column represent annual payments by the
Company to the Employee Profit Sharing and Retirement Program of the
Company.
(8) F4L Supermarkets changed its fiscal year from the 52 or 53-week period
which ends on the last Saturday in June to the 52 to 53-week period
which ends on the Sunday closest to January 31, resulting in a 31-week
transition period.
(9) Includes payment of a special bonus upon change of control, in
connection with the Ralphs Merger, for George Golleher and Greg Mays
in the amount of $1,750,000 and $150,000, respectively.
33
<PAGE> 35
The following table sets forth information concerning options granted
in fiscal 1995 to each of the Named Executive Officers pursuant to Holdings'
1995 Stock Option Plan. All options are exercisable for shares of Holdings'
Common Stock.
OPTION GRANTS IN FISCAL 1995
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
----------------------------------------------------------- -----------------------------
No. of % of Total Options Exercise or
Options Granted to Employees Base Price Expiration
Granted(1)(2) in Fiscal Year ($/Sh) Date 5% ($) 10%($)
------------- -------------- ------ ---- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Byron E. Allumbaugh 820,227 34.1% 7.32 6/14/05 7,356,572 15,270,514
George G. Golleher 200,000 8.3% 10.00 6/14/05 1,257,789 3,187,484
Alfred A. Marasca 300,000 12.5% 6.67 6/14/05 2,885,684 5,780,227
Greg Mays - - - - - -
Jan Charles Gray 189,940 7.9% 0.79 6/14/05 2,943,870 4,776,502
15,000 0.6% 10.00 6/14/05 94,334 239,061
</TABLE>
________________________
(1) All options shown were granted in connection with the Ralphs Merger.
Of such options, 220,227, 100,000 and 174,940 were granted to Messrs.
Allumbaugh, Marasca and Gray, respectively, in exchange for the
cancellation of certain payments of such individuals under RGC equity
appreciation rights.
(2) All options are immediately exercisable except for 15,000 options held
by Mr. Gray, which vest over a five-year period commencing June 14,
1996.
34
<PAGE> 36
The following tables sets forth for each of the Named Executive
Officers, as to outstanding options at January 28, 1996, the number of
unexercised options and the aggregate unrealized appreciation on "in-the-money"
unexercised options held at such date. No options were exercised by any of the
Named Executive Officers during fiscal 1995.
1995 FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Shares Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Year End Fiscal Year End
Exercisable / Exercisable /
Name Unexercisable (#) Unexercisable ($)
- ------------------------------ ----------------- -----------------
<S> <C> <C>
Byron E. Allumbaugh 820,227 / 0 2,198,208 / 0
George G. Golleher 200,000 / 0 0 / 0
Alfred A. Marasca 300,000 / 0 999,000 / 0
Greg Mays - -
Jan Charles Gray 189,940 / 15,000 1,749,347 / 0
</TABLE>
35
<PAGE> 37
CONSULTING AND EMPLOYMENT AGREEMENTS
The employment agreement between Ralphs and Byron Allumbaugh provides
for a salary of $1 million for the first year following the Merger and $1.25
million for subsequent years. Mr. Allumbaugh is entitled to a bonus equal to
his salary in each year if certain prescribed earnings targets (the "Earnings
Targets") for the year are reached.
In connection with the consummation of the Merger, F4L Supermarkets'
board of directors authorized the payment of a special bonus to George Golleher
in a lump sum amount equal to the base salary due him under the remaining term
of his then existing employment agreement. As a condition of the payment of
such bonus, Mr. Golleher's existing employment agreement was cancelled, and he
entered into a new agreement which provides for an annual salary of $500,000
plus a bonus equal to his salary in each year if the Earnings Targets are
reached. Mr. Golleher's new employment agreement continues in effect certain
additional rights, including the right to be elected to the Company's board of
directors and the right to require the Company to repurchase certain of his
shares of New Holdings stock upon his death, disability or termination without
cause.
The employment agreement between Ralphs and Alfred Marasca provides for
a salary of $500,000 per annum and an annual bonus equal to his salary if the
Earnings Targets for the year are reached.
The employment agreement between Ralphs and Greg Mays provides for a
salary of $250,000 per annum and an annual bonus equal to 50 percent of his
salary if the Earnings Targets for the year are reached. Mr. Mays also
received a special bonus of $150,000 in fiscal 1995 upon the change of control
in connection with the Merger.
The employment agreement between Ralphs and Jan Charles Gray provides
for a salary of $225,000 per annum and an annual bonus equal to 50 percent of
his salary if the Earnings Targets for the year are reached.
The new employment agreements above are for a term of three years and
provide generally that the Company may terminate the agreement for cause or
upon the failure of the employee to render services to the Company for a
specified period and the employee may terminate the agreement because of the
employee's disability. In addition, the employee's services may be suspended
upon notice by the Company and in such event the employee will continue to be
compensated by the Company during the remainder of the term of the agreement,
subject to certain offsets if the employee becomes engaged in another business.
Ralphs' consulting agreement with Mr. Joe Burkle provides for
compensation of $3,000 per week. Mr. Burkle provides the management and
consulting services of an executive vice president under the consulting
agreement. The agreement has a five-year term, which is automatically renewed
on January 1 of each year for a five-year term unless sixty days' notice is
given by either party; provided that if Ralphs terminates for reasons other
than for good cause, the payments due under the agreement continue for the
balance of the term.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not have a board committee performing the functions
of a compensation committee. Byron E. Allumbaugh, Chairman, and George G.
Golleher, Chief Executive Officer of
36
<PAGE> 38
the Company, together with Al Marasca, President, and Greg Mays, Executive
Vice President, made decisions with regard to the Company's executive officer
compensation for fiscal 1995.
RETIREMENT PLANS
Retirement Plan. The Ralphs Grocery Company Retirement Plan (the
"Retirement Plan") is a defined benefit pension plan for salaried and hourly
nonunion employees with at least one year of credited service (1,000 hours).
the Company makes annual contributions to the Retirement Plan in such amounts
as are actuarially required to fund the benefits payable to participants in
accordance with the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
Non-Qualified Retirement Plans. To allow the Company's retirement
program to provide benefits based upon a participant's total compensation and
without regard to other ERISA or tax code pension plan limitations, eligible
executive employees of the Company participate in the Ralphs Grocery Company
Supplemental Executive Retirement Plan (the "SERP") and the Ralphs Grocery
Company Retirement Supplement Plan (the "Supplement Plan"). The SERP and the
Supplement Plan also modify the benefit formula under the Retirement Plan in
other respects. The Company has purchased split dollar life insurance
policies for participants under the SERP. Under certain circumstances, the
cash surrender value of certain split dollar life insurance policies will
offset the Company's obligations under the SERP.
The following table sets forth the combined estimated annual benefits
payable in the form of a (single) life annuity under the Retirement Plan, the
SERP and the Retirement Plan (unreduced by the cash surrender value of any
life insurance policies) to a participant in the above plans who is retiring
at a normal retirement date on January 1, 1996 for the specified final average
salaries and years of credited service.
<TABLE>
<CAPTION>
Final Years of Credited Service
Average -----------------------------------------------------
Salary 15 20 25 30 35
---------- -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$100,000 $ 19,348 $ 25,798 $ 32,347 $ 38,697 $ 45,146
200,000 41,848 55,798 69,747 83,697 97,646
300,000 90,000 120,000 150,000 180,000 180,000
400,000 120,000 160,000 200,000 240,000 240,000
600,000 180,000 240,000 300,000 360,000 360,000
800,000 240,000 320,000 400,000 480,000 480,000
1,000,000 300,000 400,000 500,000 600,000 600,000
1,040,000 312,000 416,000 520,000 624,000 624,000
</TABLE>
Messrs. Allumbaugh, Golleher, Marasca, Mays and Gray have completed 37,
10, 39, 7 and 32 years of credited service, respectively. Compensation covered
by the SERP and Supplement Plan includes both salary and bonus. The calculation
of retirement benefits generally is based on average compensation for the
highest three years of the ten years preceding retirement. The benefits earned
by a participant under the SERP and Supplement Plan are reduced by any benefits
which the participant has earned under the Retirement Plan and may be offset
under certain circumstances by the cash surrender value of life insurance
policies maintained by the Company pursuant to the insurance agreements entered
into by the Company and the executive. Benefits are not subject to any
deduction for social security offset.
37
<PAGE> 39
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the ownership of Common Stock and
Series A Preferred Stock and Series B Preferred Stock of the Company by each
person who, to the knowledge of the Company, owns 5% or more of the Company's
outstanding voting stock, by each person who is a director or Named Executive
Officer of the Company, and by all executive officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
Common Series A Series B
Stock (1) (2) Preferred Stock(1) Preferred Stock(1)
------------------ ------------------ ------------------
Percentage Percentage
Number Number Number of Total of all
of of of Voting Outstanding
Beneficial Owner (3) Shares % Shares % Shares % Power Stock
-------------------- ------ ------- ------ ------- ------ ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Yucaipa and affiliates:
The Yucaipa Companies (4)(5) 17,795,939 63.1% - - - - 39.6% 37.1%
Ronald W. Burkle (4)(6) 2,046,392 10.1% - - - - 5.5% 5.1%
George G. Golleher (2)(6) 462,525 2.3% - - - - 1.3% 1.2%
10000 Santa Monica Blvd.
Los Angeles, CA 90067
---------- ----- -------- ----- ------- ---- ---- -----
Total 20,304,856 72.0% - - - - 45.2% 42.3%
Byron E. Allumbaugh (2)(7) 600,000 3.0% - - - - 1.6% 1.5%
Alfred A. Marasca (2)(7) 200,000 1.0% - - - - 0.5% 0.5%
Greg Mays (8) - - - - - - - -
Jan Charles Gray (7) - - - - - - - -
Apollo Advisors, L.P.
Apollo Advisors II, L.P. (9)
2 Manhattanville Road
Purchase, NY 10577 1,285,165 6.4% 10,733,244 64.3% - - 32.7% 30.2%
BT Investment Partners, Inc.(10)
130 Liberty Street
New York, NY 10006 509,812 2.5% 900,000 5.4% 3,100,000 100.0% 3.8% 11.3%
Other 1995 equity investors
as a group (11) 40,172 0.2% 5,000,000 30.0% - - 13.7% 12.6%
All directors and executive
officers as a group
(14 persons) (2)(4)(5)(6)(7) 21,104,856 74.8% - - - - 47.0% 44.0%
</TABLE>
_____________________________
(1) Gives effect to the assumed exercise of outstanding warrants, held by
certain institutional investors, to acquire 2,008,874 shares of
Holdings common stock.
(2) Gives effect to the exercise of options held by Byron E. Allumbaugh,
George G. Golleher and Alfred A. Marasca under a management stock
option plan, covering 600,000, 200,000 and 200,000 shares,
respectively. Does not give effect to the exercise of additional
options to purchase up to 2,000,00 shares of Holdings common stock
which have been or may be granted under such stock option plan.
(3) Except as otherwise indicated, each beneficial owner has the sole
power to vote, as applicable, and to dispose of all shares of Common
Stock or Series A Preferred Stock or Series B Preferred Stock owned by
such beneficial owner.
(4) Represents shares owned by The Yucaipa Companies, F4L Equity Partners,
L.P., FFL Partners, Yucaipa Capital Fund, Yucaipa F4L, LLC and
Yucaipa/F4L Partners. These entities are affiliated partnerships
which are controlled, directly or indirectly, by Ronald W. Burkle.
The foregoing entities are parties to a stockholders agreement with
other Holdings investors which gives to Yucaipa the right to elect a
majority of the directors of Holdings.
(5) Share amount and percentages shown for Yucaipa include a warrant to
purchase 8,000,000 shares of Holdings Common Stock held by Yucaipa.
Such warrant will become exercisable only upon the occurrence of an
initial public offering or certain sale transactions involving
Holdings.
38
<PAGE> 40
(6) Certain management stockholders who own in the aggregate 431,096
shares of Common Stock have entered into a Stockholder Voting
Agreement and Proxy pursuant to which Ronald W. Burkle, George G.
Golleher and Yucaipa Capital Advisors, Inc. have sole voting control
over the shares currently owned by such management stockholders until
June 14, 2005. The 431,096 shares have been included, solely for
purposes of the above table, in the share amounts shown for Mr. Burkle
but not for Mr. Golleher. Neither Messrs. Burkle and Golleher nor
Yucaipa Capital Advisors, Inc. have the power to dispose of, or any
other form of investment power with respect to such shares. Messrs.
Burkle and Golleher have sole voting and investment power with respect
to 1,194,066 and 462,525 shares of Common Stock they respectively own
(including in the case of Mr. Golleher, 200,000 shares issuable upon
the exercise of options).
(7) Does not include additional options to purchase 220,227 shares,
100,000 shares and 174,940 shares of Holdings Common Stock held by
Messrs. Allumbaugh, Marasca and Gray, respectively, which options
were issued at the time of the Ralphs Merger in exchange for the
cancellation of certain payments due to such individuals under RGC
equity appreciation rights.
(8) Mr. Mays owns 8,890 of the 431,096 shares of Common Stock which are
subject to the Stockholder Voting Agreement and Proxy described in
note (6) above.
(9) Represents shares owned by one or more entities managed by or
affiliated with Apollo Advisors, L.P. or Apollo Advisors II, L.P.
(collectively, "Apollo"), together with certain affiliates or
designees of Apollo.
(10) Represents shares owned by BT Investment Partners, Inc. ("BTIP"),
Bankers Trust New York Corporation and BT Securities Corporation.
Bankers Trust New York Corporation and BT Securities Corporation are
affiliated with BTIP. BTIP expressly disclaims beneficial ownership
of all shares owned by Bankers Trust New York Corporation and BT
Securities Corporation.
(11) Includes certain institutional investors, other than Apollo and BTIP,
which purchased Series A Preferred Stock of Holdings in connection
with the Ralphs Merger. Pursuant to the 1995 Stockholders Agreement,
certain corporate actions by Holdings and its subsidiaries require the
consent of the directors whom the 1995 equity investors, including
Apollo and BTIP, are entitled to elect to the Holdings Board of
Directors. Such investors do not affirm the existence of a "group"
within the meaning of Rule 13d-5 under the Exchange Act, and expressly
disclaim beneficial ownership of all Holdings shares except for those
shares held of record by each such investor or its nominees.
39
<PAGE> 41
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is a party to a consulting agreement with Yucaipa which
provides for certain management and financial services to be performed by
Yucaipa for the benefit of the Company and its subsidiaries. The services of
Messrs. R. Burkle, Graham and Resnik, acting in their capacities as directors,
and the services of other Yucaipa personnel are provided to the Company
pursuant to this agreement. See "Item 10 -- Directors and Executive Officers
of the Registrant." Messrs. R. Burkle, Graham and Resnik are partners of
Yucaipa. The consulting agreement provides for an annual management fee
payable by the Company to Yucaipa in the amount of $4 million. In addition,
the Company may retain Yucaipa in an advisory capacity in connection with
acquisition or sale transactions, in which case the Company will pay Yucaipa an
advisory fee, except that the retention of Yucaipa in connection with a sale of
the entire Company would require approval by a majority of the disinterested
directors. The agreement has a five-year term, which is automatically renewed
on each anniversary of the Merger for a five-year term unless ninety days'
notice is given by either party. The agreement may be terminated at any time
by the Company, provided that Yucaipa will be entitled to full monthly payments
under the agreement for the remaining term thereof, unless the Company
terminates for cause pursuant to the terms of the agreement. Yucaipa may
terminate the agreement if the Company fails to make a payment due thereunder,
or if there occurs a change of control (as defined in the agreement) of the
Company, and upon any such termination Yucaipa will be entitled to full monthly
payments for the remaining term of the agreement. Pursuant to the agreement,
Yucaipa earned a total of $3.6 million in management fees for fiscal 1995.
Pursuant to the Yucaipa consulting agreement, upon closing of the RSI
Merger, Yucaipa received an advisory fee from Ralphs in the amount of $21.5
million, which was paid in cash and New Discount Debentures, plus
reimbursement of expenses in connection with the RSI Merger and the related
transactions. Upon closing of the RSI Merger, Yucaipa paid a cash fee of
approximately $3.5 million to Soros Fund Management in consideration for
advisory services which Soros Fund Management has rendered since 1991.
Additionally, upon closing of the RSI Merger, Yucaipa received a warrant to
purchase 8,000,000 shares of Holdings common stock exercisable under certain
conditions. In consideration for its commitment to purchase preferred stock as
part of the New Equity Investment, Apollo received a fee of $5 million from the
Company upon closing of the RSI Merger, which fee was paid in cash and notes.
In connection with the execution of the definitive Agreement and Plan
of Merger (the "Merger Agreement") between F4L Supermarkets, Holdings, FFL and
RSI, Yucaipa entered into the Put Agreement with the majority stockholder of
RSI, pursuant to which such RSI stockholder was entitled to put up to $10
million aggregate principal amount of 13-5/8% Senior Subordinated Pay-in-Kind
Debentures due 2007 (the "Seller Debentures"), issued as part of the
consideration for the RSI Merger, to Yucaipa on the closing date of the Merger.
The Yucaipa consulting agreement provided that the Company reimburse Yucaipa
for any loss and expenses incurred by Yucaipa upon the resale of such Seller
Debentures to any unaffiliated third party. Pursuant to such agreement, the
Company reimbursed an affiliate of Yucaipa the amount of $3.5 million upon the
closing of the Merger.
Holdings files a consolidated federal income tax return, under which
the federal income tax liability of Holdings and its subsidiaries is determined
on a consolidated basis. Holdings is a party to a federal income tax sharing
agreement with Ralphs and certain of its subsidiaries (the "Tax Sharing
Agreement"). The Tax Sharing Agreement provides that in any year in which
Ralphs is included in any consolidated tax liability of Holdings and has
taxable income, Ralphs will pay to Holdings the amount of the tax liability
that the Ralphs would have had on such due date if it had been filing a
separate return. Conversely, if Ralphs generates losses or credits which
actually
40
<PAGE> 42
reduce the consolidated tax liability of Holdings and its other subsidiaries,
Holdings will credit to Ralphs the amount of such reduction in the
consolidated tax liability. These credits are passed between Holdings and
Ralphs in the form of cash payments. In the event any state and local income
taxes are determinable on a combined or consolidated basis, the Tax Sharing
Agreement provides for a similar allocation between Holdings and Ralphs of
such state and local taxes.
As part of the financing for the RSI Merger, New Holdings issued
$100 million initial accreted value of 13-5/8% Senior Discount Debentures due
2005 (the "New Discount Debentures"), which was acquired by a partnership
comprised of an affiliate of Yucaipa and certain other investors. The $17.5
million initial accreted value of New Discount Debentures contributed to the
partnership by the Yucaipa affiliate consists of New Discount Debentures
issued in partial payment of the Yucaipa consulting fee due upon closing of the
RSI Merger, as described above. New Holdings granted to the partnership
certain registration rights with respect to the New Discount Debentures, and
paid substantially all expenses of the partnership in connection with the
resale of the New Discount Debentures, including underwriting discounts and
brokers' commissions (subject to certain limitations).
On October 20, 1995, the holder of the New Senior Discount Debentures
sold all of such New Discount Debentures at a price equal to 77% of the
accreted value thereof. The sale of the New Discount Debentures was effected
by BT Securities Corporation ("BT Securities"). BT Securities received a fee
in the amount of 2% ($2.1 million) of the aggregate accreted value of the New
Discount Debentures. The Company reimbursed the selling holder for such fee
and other expenses of the sale as contemplated by a registration rights
agreement executed concurrently with the consummation of the Merger.
A contribution of $5 million was made to the partnership that
purchased and subsequently sold the New Discount Debentures, by an affiliate
of the Company. This affiliate borrowed the $5 million from the Company to
fund its contribution to the partnership. Holders of RGC equity appreciation
rights ("EARs"), including Messrs. Allumbaugh, Marasca and Gray, agreed to
defer the receipt of $5 million cash otherwise payable by RGC upon settlement
of the EARs at the time of the Merger, pending repayment of the $5 million loan
made by the Company as described above. When the New Discount Debentures were
resold by the partnership, and the proceeds from such resale distributed to the
partners, all of the approximately $2.1 million in total proceeds received by
the affiliate were applied to repayment of the loan, and the portion of the
loan not repaid was forgiven by the Company and the EAR holders.
Management believes that the terms of the transactions described above
are or were fair to the Company and are or were on terms at least as favorable
to the Company as those which could be obtained from unaffiliated parties
(assuming that such transactions could be effected with such parties).
41
<PAGE> 43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules required to be filed hereunder are
indexed on page 46 hereof.
(b) Reports on Form 8-K
None.
(c) Those Exhibits, and the Index thereto, required to be filed by Item
601 of Regulation S-K are attached hereto. Certain management
contracts and other compensation plans or arrangements required to be
filed are identified on the attached Index with an asterisk.
42
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
FOOD 4 LESS HOLDINGS, INC.
By: /s/ Jan Charles Gray
--------------------------------------
Jan Charles Gray
Senior Vice President, General Counsel
and Secretary
Date: April 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Ronald W. Burkle Chairman and Director April 29, 1996
---------------------------------
Ronald W. Burkle
/s/ George G. Golleher Chief Executive Officer and Director April 29, 1996
--------------------------------
George G. Golleher
Chief Executive Officer - Falley's and Director April 29, 1996
----------------------------------
Joe S. Burkle
/s/ Greg Mays Executive Vice President - Finance and April 29, 1996
---------------------------------- Administration and Chief Financial Officer
Greg Mays
/s/ Jan Charles Gray Senior Vice President, General Counsel and April 29, 1996
---------------------------------
Jan Charles Gray Secretary
/s/ Byron E. Allumbaugh Director April 29, 1996
------------------------------
Byron E. Allumbaugh
/s/ Robert Beyer Director April 29, 1996
--------------------------------
Robert Beyer
/s/ Peter Copses Director April 29, 1996
----------------------------------
Peter Copses
</TABLE>
43
<PAGE> 45
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Patrick Graham Director April 29, 1996
---------------------------------
Patrick Graham
/s/ John Kissick Director April 29, 1996
----------------------------------
John Kissick
/s/ Mark A. Resnik Director April 29, 1996
---------------------------------
Mark A. Resnik
</TABLE>
44
<PAGE> 46
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT
TO SECTION 12 OF THE ACT.
No annual report or proxy material has been sent to security holders.
The Registrant will furnish copies of such report or proxy material if and when
such report or proxy material is sent to security holders.
45
<PAGE> 47
FOOD 4 LESS HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Consolidated balance sheets as of June 25, 1994, January 29, 1995 and January 28, 1996 . . .
48
Consolidated statements of operations for the 52 weeks ended June 26, 1993 and
June 25, 1994, the 31 weeks ended January 29, 1995 and the 52 weeks ended January 28, 1996 .
50
Consolidated statements of cash flows for the 52 weeks ended June 26, 1993 and
June 25, 1994, the 31 weeks ended January 29, 1995 and the 52 weeks ended January 28, 1996 .
51
Consolidated statements of stockholders' equity (deficit) for the 52 weeks ended
June 26, 1993 and June 25, 1994, the 31 weeks ended January 29, 1995
and the 52 weeks ended January 28, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Notes to consolidated financial statements . . . . . . . . . . . . . . . . . . . . . . . . . 54
Financial Statement Schedules
- -----------------------------
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . 79
I Condensed financial information of registrant . . . . . . . . . . . . . . . . . . . 80
II Valuation and qualifying accounts . . . . . . . . . . . . . . . . . . . . . . . . . 83
</TABLE>
All other schedules have been omitted since the required information is not
applicable or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the Consolidated
Financial Statements and related notes.
46
<PAGE> 48
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of Food 4 Less Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Food 4
Less Holdings, Inc. (a Delaware corporation) and subsidiaries (the Company) as
of June 25, 1994, January 29, 1995 and January 28, 1996, and the related
consolidated statements of operations, stockholders' equity (deficit) and cash
flows for the 52 weeks ended June 26, 1993 and June 25, 1994, the 31 weeks
ended January 29, 1995, and the 52 weeks ended January 28, 1996. 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Food
4 Less Holdings, Inc. and subsidiaries as of June 25, 1994, January 29, 1995,
and January 28, 1996, and the results of their operations and their cash flows
for the 52 weeks ended June 26, 1993 and June 25, 1994, the 31 weeks ended
January 29, 1995, and the 52 weeks ended January 28, 1996 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
April 19, 1996
47
<PAGE> 49
FOOD 4 LESS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
As of
---------------------------------------------
June 25, January 29, January 28,
1994 1995 1996
---------- ---------- ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 32,996 $ 19,560 $ 67,983
Trade receivables, less allowances of $1,386,
$1,192 and $1,954 at June 25, 1994, January 29, 1995
and January 28, 1996, respectively 25,039 23,377 60,948
Notes and other receivables 1,312 3,985 6,452
Inventories 212,892 224,686 502,669
Patronage receivables from suppliers 2,875 5,173 4,557
Prepaid expenses and other 6,323 13,051 34,855
--------- ---------- ----------
Total current assets 281,437 289,832 677,464
INVESTMENTS IN AND NOTES RECEIVABLE
FROM SUPPLIER COOPERATIVES:
Associated Wholesale Grocers 6,718 6,718 7,288
Certified Grocers of California & Other 5,984 5,686 4,926
PROPERTY AND EQUIPMENT:
Land 23,488 23,488 183,125
Buildings 12,827 24,172 196,551
Leasehold improvements 97,673 110,020 251,856
Equipment and fixtures 180,508 190,016 441,760
Construction in progress 12,641 8,042 61,296
Leased property under capital leases 78,222 82,526 189,061
Leasehold interests 93,464 96,556 114,475
-------- ---------- ---------
498,823 534,820 1,438,124
Less: Accumulated depreciation and amortization 134,089 154,382 226,451
------- --------- ----------
Net property and equipment 364,734 380,438 1,211,673
OTHER ASSETS:
Deferred financing costs, less accumulated amortization of
$17,083, $20,496 and $6,964 at June 25, 1994,
January 29, 1995 and January 28, 1996, respectively 28,536 25,469 94,100
Goodwill, less accumulated amortization of $33,945,
$38,560 and $60,407 at June 25, 1994, January 29, 1995
and January 28, 1996, respectively 267,884 263,112 1,173,445
Other, net 24,787 29,440 19,233
-------- --------- -----------
$980,080 $1,000,695 $3,188,129
======= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
48
<PAGE> 50
FOOD 4 LESS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
As of
---------------------------------------------
June 25, January 29, January 28,
1994 1995 1996
---------- -------- ----------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $180,708 $ 190,455 $ 385,500
Accrued payroll and related liabilities 42,805 42,007 94,011
Accrued interest 5,474 10,730 23,870
Other accrued liabilities 53,910 65,279 276,162
Income taxes payable 2,000 293 596
Current portion of self-insurance liabilities 29,492 28,616 21,785
Current portion of senior debt 18,314 22,263 31,735
Current portion of obligations under capital leases 3,616 4,965 22,261
--------- ---------- -----------
Total current liabilities 336,319 364,608 855,920
SENIOR DEBT, net of current portion 310,944 320,901 1,226,302
OBLIGATIONS UNDER CAPITAL LEASES 39,998 40,675 130,784
SENIOR SUBORDINATED DEBT 145,000 145,000 671,222
HOLDINGS DEBENTURES 58,997 65,136 247,917
DEFERRED INCOME TAXES 14,740 17,534 17,988
SELF-INSURANCE LIABILITIES 52,212 44,123 127,200
LEASE VALUATION RESERVE - - 25,182
OTHER NON-CURRENT LIABILITIES 11,846 10,051 74,412
COMMITMENTS AND CONTINGENCIES - - -
STOCKHOLDERS' EQUITY:
Convertible Series A Preferred Stock, $.01 par value, 25,000,000 shares
authorized; no shares issued at June 25, 1994 and January 29, 1995
and 16,683,244 shares issued at January 28, 1996 (aggregate
liquidation value of $169.0 million) - - 161,831
Convertible Series B Preferred Stock, $.01 par value, 25,000,000 shares
authorized; no shares issued at June 25, 1994 and January 29, 1995
and 3,100,000 shares issued at January 28, 1996 (aggregate
liquidation value of $32.4 million) - - 31,000
Common Stock, $.01 par value, 1,600,000 shares, 1,600,000 shares and
60,000,000 shares authorized at June 25, 1994, January 29, 1995 and
January 28, 1996, respectively; 1,381,782 shares, 1,386,169 shares and
17,207,882 shares issued at June 25, 1994, January 29, 1995 and
January 28, 1996, respectively 14 14 172
Non-Voting Common Stock, $.01 par value, 25,000,000 shares authorized;
no shares issued at June 25, 1994, January 29, 1995 or January 28, 1996 - - -
Additional capital 105,182 105,580 56,991
Notes receivable from stockholders (586) (702) (602)
Retained deficit (94,586) (112,225) (434,643)
--------- --------- -----------
10,024 7,333 (185,251)
Treasury Stock; no shares of common stock at June 25, 1994 and
January 29, 1995 and 421,237 shares at January 28, 1996 - - (3,547)
-------------- --------------- -------------
Total stockholders' equity (deficit) 10,024 7,333 (188,798)
--------- ------------ ----------
$980,080 $1,000,695 $3,188,129
======= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
49
<PAGE> 51
FOOD 4 LESS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the
-------------------------------------------------------------
52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- ------------
<S> <C> <C>
SALES $2,742,027 $2,585,160 $1,556,522 $4,335,109
COST OF SALES (including purchases from
related parties of $204,028, $175,929, $104,407
and $141,432 for the 52 weeks ended
June 26, 1993 and June 25, 1994, the 31 weeks
ended January 29, 1995, and the 52 weeks ended
January 28, 1996, respectively) 2,257,835 2,115,842 1,294,147 3,485,993
---------- ---------- ---------- ----------
GROSS PROFIT 484,192 469,318 262,375 849,116
SELLING, GENERAL, ADMINISTRATIVE AND
OTHER, NET 434,908 388,836 222,359 785,576
AMORTIZATION OF GOODWILL 7,571 7,691 4,615 21,847
RESTRUCTURING CHARGE - - 5,134 123,083
----------------- ---------------- ------------- ----------
OPERATING INCOME (LOSS) 41,713 72,791 30,267 (81,390)
INTEREST EXPENSE:
Interest expense, excluding amortization of
deferred financing costs 68,713 71,545 44,948 194,458
Amortization of deferred financing costs 4,901 5,472 3,413 8,193
------------- ------------ ------------- -------------
73,614 77,017 48,361 202,651
LOSS (GAIN) ON DISPOSAL OF ASSETS (2,083) 37 (455) (547)
PROVISION FOR EARTHQUAKE LOSSES - 4,504 - -
------------------ ------------ ---------------------------------
LOSS BEFORE PROVISION FOR INCOME TAXES
AND EXTRAORDINARY CHARGE (29,818) (8,767) (17,639) (283,494)
PROVISION FOR INCOME TAXES 1,427 2,700 - 500
-------------- ------------ ----------------- -------------
LOSS BEFORE EXTRAORDINARY CHARGE (31,245) (11,467) (17,639) (283,994)
EXTRAORDINARY CHARGE - - - 38,424
----------------------------------- ----------------- -----------
NET LOSS $ (31,245) $ (11,467) $ (17,639) $ (322,418)
============= =========== =========== ==========
LOSS PER COMMON SHARE:
Loss before extraordinary charge $ (1.35) $ (0.50) $ (0.77)$ (9.02)
Extraordinary charge - - - (1.22)
----------------------------------- ----------------- ---------------
Net loss $ (1.35) $ (0.50) $ (0.77) $ (10.24)
=============== ============== ============== ==============
Average Number of Common Shares Outstanding 23,109,219 22,933,754 22,943,656 31,476,632
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
50
<PAGE> 52
FOOD 4 LESS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the
-----------------------------------------------------------
52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- ------------
<S> <C> <C> <C> <C>
CASH PROVIDED (USED) BY
OPERATING ACTIVITIES:
Cash received from customers $2,742,027 $2,585,160 $1,556,522 $4,335,109
Cash paid to suppliers and employees (2,711,779) (2,441,353) (1,507,523) (4,197,875)
Interest paid (58,807) (56,762) (33,553) (157,441)
Income taxes refunded (paid) 2,971 (247) 1,087 256
Interest received 993 903 867 2,562
Other, net 8,093 121 221 547
--------- --------- --------- --------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (16,502) 87,822 17,621 (16,842)
CASH PROVIDED (USED) BY
INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 15,685 11,953 7,199 21,373
Payment for purchase of property and equipment (53,467) (57,471) (49,023) (122,355)
Payment of acquisition costs, net of cash acquired - (11,050) - (403,301)
Other, net (18) 813 (797) (1,120)
--------- --------- ---------- ------------
NET CASH USED BY INVESTING ACTIVITIES (37,800) (55,755) (42,621) (505,403)
CASH PROVIDED (USED) BY
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 26,557 28 - 1,105,500
Net increase (decrease) in revolving loan 4,900 (4,900) 27,300 100,100
Payments of long-term debt (14,319) (14,224) (13,394) (661,119)
Proceeds from issuance of preferred stock, net 46,348 - - 137,500
Proceeds from issuance of common stock, net 3,652 - 269 -
Purchase of treasury stock, net - - - (3,547)
Purchase of common stock, net (545) (1,192) (57) -
Payments of capital lease obligation (2,840) (3,693) (2,278) (15,314)
Deferred financing costs and other, net (8,839) (179) (276) (92,452)
--------- ------------ ---------- ------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES 54,914 (24,160) 11,564 570,668
--------- ----------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 612 7,907 (13,436) 48,423
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 24,477 25,089 32,996 19,560
--------- --------- ---------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 25,089 $ 32,996 $ 19,560 $ 67,983
========= ========== ========== ===========
</TABLE>
51
<PAGE> 53
FOOD 4 LESS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
For the
-----------------------------------------------------------
52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- ------------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net loss $(31,245) $(11,467) $(17,639) $ (322,418)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 62,541 62,555 40,036 133,522
Non-cash interest expense 3,882 8,767 6,139 23,877
Restructuring charge - - 5,134 123,083
Extraordinary charge - - - 38,424
Loss (gain) on sale of assets (4,613) 65 (455) (547)
Change in assets and liabilities,
net of effects from acquisition of businesses:
Accounts and notes receivable 17,145 (3,220) (3,398) (74)
Inventories 17,697 (17,125) (11,794) 762
Prepaid expenses and other (5,956) (5,717) (11,239) (18,291)
Accounts payable and accrued liabilities (83,286) 55,301 18,715 3,327
Self-insurance liabilities 2,935 (3,790) (8,965) 737
Deferred income taxes 4,004 2,506 2,794 454
Income taxes payable 394 (53) (1,707) 302
-------- ------ ------- ------------
Total adjustments 14,743 99,289 35,260 305,576
------ ------ ------ --------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES $(16,502) $87,822 $ 17,621 $ (16,842)
====== ====== ====== ==========
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES:
Purchase of property and equipment
through issuance of capital lease obligation $ - $ 2,575 $ 4,304 $ 24,008
========== ======= ======= ===========
Reduction of goodwill and deferred income taxes $ - $ 9,896 $ -$ -
========== ======= =========== ================
Acquisition of stores in fiscal year 1994 and
RSI in fiscal year 1995
Fair value of assets acquired, including
goodwill, net of cash acquired of
$32,595 in fiscal year 1995 $ - $ 11,241 $ - $2,098,220
Net cash paid in acquisition - (11,050) - (403,301)
Notes issued to seller - - - (150,000)
Notes issued to advisor - - - (12,000)
---------- ----------- ----------- ----------
Liabilities assumed $ - $ 191 $ - $1,532,919
========== ======== =========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
52
<PAGE> 54
FOOD 4 LESS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
Preferred Stock Preferred Stock Non-Voting
Series A Series B Common Stock Common Stock
------------------ --------------- ------------ ------------
Number Number Number Number
of of of of
Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT JUNE 27, 1992 $ - - $ - 1,398,514 $ 14 - $ -
Net loss - - - - - - - -
Issuance of Common Stock
Warrants - - - - - - - -
Purchase of Treasury Stock - - - - - - - -
Elimination of Treasury
Stock - - - - (13,249) - - -
---------- -------- --------- ------ ---------- ----- ------ -------
BALANCES AT JUNE 26, 1993 - - - - 1,385,265 14 - -
Net loss - - - - - - - -
Purchase of Common Stock - - - - (3,483) - - -
Payments of Stockholders'
Notes - - - - - - - -
---------- -------- --------- ------ ---------- ----- ------ -------
BALANCES AT JUNE 25, 1994 - - - - 1,381,782 14 - -
Net loss - - - - - - - -
Issuance of Common Stock - - - - 5,504 - - -
Purchase of Common Stock - - - - (1,117) - - -
Payments of Stockholders'
Notes - - - - - - - -
---------- -------- --------- ------ ---------- ----- ------ -------
BALANCES AT JANUARY 29, 1995 - - - - 1,386,169 14 - -
Net loss - - - - - - - -
Payments of Stockholders'
Notes - - - - - - - -
Stock split of Common Stock
(16.58609143 shares to
1 share) - - - - 21,604,957 216 - -
Purchase of Treasury Stock - - - - - - - -
Issuance of Preferred
Stock 10,900,000 109,000 3,100,000 31,000 - - - -
Conversion of Common Stock
to Preferred Stock 5,783,244 57,831 - - (5,783,244) (58) - -
Preferred Stock Issuance
Costs - (5,000) - - - - - -
Exchange RGC liability for
stock options - - - - - - - -
Repurchase Stock Options - - - - - - - -
---------- -------- --------- ------ ---------- ----- ------ -------
BALANCES AT JANUARY 28, 1996 16,683,244 $161,831 3,100,000 $31,000 17,207,882 $172 - $ -
========== ======== ========= ====== ========== ==== ====== =======
</TABLE>
<TABLE>
<CAPTION>
Treasury Stock
--------------
Stock-
Number Stock- Add'l holders'
of holders' Paid-In Retained Equity
Shares Amount Notes Capital Deficit (Deficit)
------ ------ ----- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JUNE 27, 1992 (3,637) $(429 ) $(939) $103,999 $(51,874) $50,771
Net loss - - - - (31,245) (31,245)
Issuance of Common Stock
Warrants - - - 3,652 - 3,652
Purchase of Treasury Stock (9,612) (770) 225 - - (545)
Elimination of Treasury
Stock 13,249 1,199 - (1,199) - -
------- ------- ----- ------- --------- ---------
BALANCES AT JUNE 26, 1993 - - (714) 106,452 (83,119) 22,633
Net loss - - - - (11,467) (11,467)
Purchase of Common Stock - - 78 (1,270) - (1,192)
Payments of Stockholders'
Notes - - 50 - - 50
------- ------- ----- ------- --------- ---------
BALANCES AT JUNE 25, 1994 - - (586) 105,182 (94,586) $10,024
Net loss - - - - (17,639) (17,639)
Issuance of Common Stock - - (191) 460 - 269
Purchase of Common Stock - - 5 (62) - (57)
Payments of Stockholders'
Notes - - 70 - - 70
------- ------- ----- ------- --------- ---------
BALANCES AT JANUARY 29, 1995 - - (702) 105,580 (112,225) (7,333)
Net loss - - - - (322,418) (322,418)
Payments of Stockholders'
Notes - - 100 - - 100
Stock split of Common Stock
(16.58609143 shares to
1 share) - - - (216) - -
Purchase of Treasury Stock (421,237) (3,547 ) - - - (3,547)
Issuance of Preferred
Stock - - - - - 140,000
Conversion of Common Stock
to Preferred Stock - - - (57,773) - -
Preferred Stock Issuance
Costs - - - - - (5,000)
Exchange RGC liability for
stock options - - - 10,000 - 10,000
Repurchase Stock Options - - - (600) - (600)
------- ------- ----- ------- --------- ---------
BALANCES AT JANUARY 28, 1996 (421,237) $(3,547) $(602) $56,991 $(434,643) $(188,798)
======= ======= ===== ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
53
<PAGE> 55
FOOD 4 LESS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND ACQUISITIONS
Food 4 Less Holdings, Inc. ("Holdings" or together with its
subsidiaries, the "Company"), a Delaware corporation, owns all of the
outstanding capital stock of Ralphs Grocery Company ("Ralphs"), which
is the successor through merger to Food 4 Less Supermarkets, Inc.
("F4L Supermarkets"). See "Ralphs Merger" below. The Company is a
multiple format supermarket operator that tailors its retail strategy
to the particular needs of the individual communities it serves. The
Company operates in three geographic areas: Southern California,
Northern California and certain areas of the Midwest. Ralphs has
four first-tier subsidiaries: Cala Co. ("Cala"), Falley's, Inc.
("Falley's"), Food 4 Less of Southern California, Inc. ("F4L-SoCal"),
formerly known as Breco Holding Company, Inc. ("BHC") and Crawford
Stores, Inc. Cala Foods, Inc. ("Cala Foods") and Bell Markets, Inc.
("Bell") are subsidiaries of Cala, and Alpha Beta Company ("Alpha
Beta") is a subsidiary of F4L-SoCal.
Ralphs Merger
On June 14, 1995, F4L Supermarkets, Food 4 Less Holdings,
Inc., a California corporation ("Old Holdings"), and Food 4 Less, Inc.
("FFL") (which owned a majority of the stock of Old Holdings)
completed a definitive agreement and plan of merger (the "Merger
Agreement") with Ralphs Supermarkets, Inc. ("RSI") and the
stockholders of RSI. Pursuant to the terms of the Merger Agreement,
as amended, F4L Supermarkets was merged with and into RSI (the "RSI
Merger"). Immediately following the RSI Merger, pre-Merger Ralphs
Grocery Company ("RGC"), which was a wholly-owned subsidiary of RSI,
merged with and into RSI (the "RGC Merger," and together with the RSI
Merger, the "Merger"), and RSI changed its name to Ralphs Grocery
Company ("Ralphs"). Prior to the Merger, FFL merged with and into Old
Holdings, which was the surviving corporation (the "FFL Merger").
Immediately following the FFL Merger, Old Holdings changed its
jurisdiction of incorporation by merging into a newly-formed,
wholly-owned subsidiary ("Holdings"), incorporated in Delaware (the
"Reincorporation Merger"). As a result of the Merger, the FFL Merger
and the Reincorporation Merger, Ralphs became a wholly-owned
subsidiary of Holdings.
The purchase price for the outstanding capital stock of RSI
was $538.1 million; the Company paid $388.1 million in cash, issued
$131.5 million principal amount of its 13-5/8% Senior Subordinated
Pay-in-Kind Debentures due 2007 (the "Seller Debentures"), and issued
$18.5 million initial accreted value of its 13-5/8% Senior Discount
Debentures due 2005 (the "New Discount Debentures"). The Company also
paid fees associated with the acquisition of $47.8 million (including
a prepayment premium on outstanding mortgage debt of RGC of $19.7
million), which was offset by RGC's cash on hand at the Merger date of
$32.6 million.
The proceeds from the New Credit Facility, the New F4L Senior
Notes, the New RGC Notes and the New Equity Investment (all as
defined below), and the issuance by the Company of $59.0 million
initial accreted value of New Discount Debentures for cash provided
the sources of financing required to consummate the Merger and to
repay outstanding bank debt of F4L Supermarkets and RGC of $176.5
million and $228.9 million, respectively, to repay existing mortgage
debt of $174.0 million of RGC, and to pay $84.4 million to the holders
of the Senior Discount Notes due 2004 (the "Discount Notes"). In
54
<PAGE> 56
addition, Ralphs exchanged certain of its newly issued senior notes
and senior subordinated notes for outstanding indebtedness of RGC and
F4L Supermarkets. Proceeds from the New Credit Facility also were
used to pay certain exchange and consent solicitation fees associated
with the above transactions, and to pay accrued interest on all
exchanged debt securities in the amount of $27.8 million, to pay $17.8
million to the holders of the RGC Equity Appreciation Rights, to loan
$5.0 million to an affiliate for the benefit of such holders, to pay
approximately $93.3 million of fees and expenses of the Merger and the
related financing, and to pay $3.5 million to purchase shares of
common stock of Old Holdings from certain dissenting shareholders.
In addition, Holdings issued $22.5 million of its New Discount
Debentures in consideration for certain Merger-related services.
In connection with the closure of two former RGC warehouse
facilities and nine former RGC stores (including three stores which
were part of an antitrust settlement agreement with the State of
California), the Company recorded a reserve of $24.9 million in the
purchase price allocation. This reserve includes lease termination
costs, write-off of the property and equipment at these locations and
closure costs. These closures are expected to be completed by June
1996. Also, a reserve of $12.0 million was recorded for
administrative cost reductions mainly associated with duplicative
personnel.
The following unaudited pro forma information presents the
results of the Company's operations, adjusted to reflect interest
expense and depreciation and amortization, as though the Merger had
been completed on January 31, 1994 (dollars in thousands, except per
share amounts):
<TABLE>
<CAPTION>
For the
---------------------------------------
52 Weeks 52 Weeks
Ended Ended
January 29, January 28,
1995 1996
-------------- -------------
<S> <C> <C>
Sales $5,301,411 $5,360,800
Restructuring charge (128,217) -
Loss before extraordinary charge (261,632) (130,924)
Net loss (300,056) (130,924)
Loss per share:
Loss before extraordinary charge (15.20) (7.61)
Net loss (17.44) (7.61)
</TABLE>
Incremental costs of $74.8 million associated with the
integration of RGC into the Company, including advertising the
conversion of F4L Supermarkets stores to the Ralphs format, combining
the F4L Supermarkets and RGC warehousing and distribution functions
and markdowns recorded at converted stores and stores closed, were
recorded in the actual statement of operations for fiscal year 1995
and are recorded in the pro-forma 52 weeks ended January 29, 1995
only. The unaudited pro forma results of operations are not
necessarily indicative of the actual results of operations that would
have occurred had the purchases actually been made on January 31,
1994, or of the results which may occur in the future.
The accompanying consolidated financial statements include the
preliminary allocation of the RGC purchase price. Certain appraisals
and other analyses needed to determine the fair market value of RGC's
net assets as of the Merger date are not yet completed. The final
purchase price allocation will be completed by June 1996.
55
<PAGE> 57
On March 29, 1994, the Company purchased certain operating
assets formerly owned by Food Barn Stores, Inc. (the "Food Barn
Stores") from Associated Wholesale Grocers, Inc. ("AWG") (the "Food
Barn Acquisition") for $11.2 million. The effect of the acquisition
was not material to the Company's financial position and results of
operations. Falley's has agreed to purchase merchandise (as defined)
for the Food Barn Stores from AWG through March 24, 2001. Falley's
has pledged its patronage dividends and notes receivable from AWG as
security under this supply agreement.
On June 17, 1991, the Company acquired all of the common stock
of Alpha Beta for $270.5 million in a transaction accounted for as a
purchase.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Holdings and its wholly-owned subsidiaries. The results
of operations of pre-Merger Ralphs Grocery Company and all previous
acquisitions have been excluded from the consolidated financial
statements for periods prior to their respective acquisition dates.
All intercompany transactions have been eliminated in consolidation.
Fiscal Years
The Company, together with its subsidiaries, changed its
fiscal year end from the 52 or 53-week period which ends on the last
Saturday in June to the 52 or 53-week period which ends on the Sunday
closest to January 31, resulting in a 31-week transition period ended
January 29, 1995. As a result of the fiscal year end change, the
52-week period ended June 26, 1993 is referred to as fiscal year 1993,
the 52-week period ended June 25, 1994 is referred to as fiscal year
1994, the 31-week period ended January 29, 1995 is referred to as the
1995 transition period and the 52-week period ended January 28, 1996
is referred to as fiscal year 1995. In addition, information
presented below concerning subsequent fiscal years starts with fiscal
year 1996, which will cover the 53 weeks ended February 2, 1997 and
will proceed sequentially forward.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company
considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Inventories
Inventories, which consist of grocery products, are stated at
the lower of cost or market. Cost has been principally determined
using the last-in, first-out ("LIFO") method. If inventories had been
valued using the first-in, first-out ("FIFO") method, inventories
would have been higher by $13.8 million, $16.5 million and $18.7
million at June 25, 1994, January 29, 1995 and January 28, 1996,
respectively, and gross profit and operating income would have been
greater by $4.4 million, $0.7 million, $2.7 million and $2.2 million
for fiscal year 1993, fiscal year 1994, the 1995 transition period and
fiscal year 1995, respectively.
56
<PAGE> 58
Pre-opening Costs
The costs associated with opening new stores are deferred and
amortized over one year following the opening of each new store.
Closed Store Reserves
When a store is closed, the Company provides a reserve for the
net book value of its property and equipment, net of salvage value,
and the net present value of the remaining lease obligation, net of
sublease income. For fiscal year 1993, fiscal year 1994, the 1995
transition period and fiscal year 1995 (which includes activity due
to the Merger), utilization of this reserve was $2.4 million, $1.1
million, $0.6 million and $23.0 million, respectively.
Investments in Supplier Cooperatives
The investment in Certified is accounted for on the cost
method. There are certain restrictions on the sale of this
investment.
Property and Equipment
Property and equipment are stated at cost and are depreciated
principally using the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements 5-40 years
Equipment and fixtures 3-10 years
Property under capital leases
and leasehold interests 3-45 years (lease term)
</TABLE>
Deferred Financing Costs
Costs incurred in connection with the issuance of debt are
amortized over the term of the related debt using the effective
interest method.
Goodwill
The excess of the purchase price over the fair value of the
net assets of businesses acquired is amortized on a straight-line
basis over 40 years beginning at the date of acquisition. Current and
undiscounted future operating cash flows are compared to current and
undiscounted future goodwill amortization to determine if an
impairment of goodwill has occurred and is continuing. As of January
28, 1996, no impairment existed.
Income Taxes
On June 27, 1993, the Company prospectively adopted Statement
of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for
Income Taxes". SFAS 109 is an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. In
estimating future tax consequences,
57
<PAGE> 59
SFAS 109 generally considers all expected future events other than
enactments of changes in the tax law or rates.
The implementation of SFAS 109 did not have a material effect
on the accompanying consolidated financial statements.
Notes Receivable from Stockholders
Notes receivable from stockholders represent loans to
employees of the Company for purchases of Holdings' common stock. The
notes are due over various periods, bear interest at the prime rate,
and are secured by each stockholder's shares of Holdings' common
stock.
Self-Insurance
The Company is self-insured for a portion of its workers'
compensation, general liability and automobile accident claims. The
Company establishes reserves based on an independent actuary's
valuation of open claims reported and an estimate of claims incurred
but not yet filed.
Discounts and Promotional Allowances
Promotional allowances and vendor discounts are recorded as a
reduction of cost of sales in the accompanying consolidated statements
of operations. Allowance proceeds received in advance are deferred
and recognized over the period earned.
Provision for Earthquake Losses
On January 17, 1994, Southern California was struck by a major
earthquake which resulted in the temporary closure of 31 of the
Company's stores. The closures were caused primarily by loss of
electricity, water, or inventory, or structural damage. All but one
of the closed stores reopened within a week of the earthquake. The
final closed store reopened on March 24, 1994. The Company is insured
against earthquake losses (including business interruption), subject
to certain deductibles. The pre-tax loss, net of insurance
recoveries, was approximately $4.5 million.
Extraordinary Items
For the 52 weeks ended January 28, 1996, the Company recorded
an extraordinary charge relating to the refinancing of F4L
Supermarkets' Old Credit Facility, 10.45% Senior Notes due 2000 (the
"Old F4L Senior Notes"), 13.75% Senior Subordinated Notes due 2001
(the "Old F4L Senior Subordinated Notes"), the repayment of Holdings'
15.25% Senior Discount Notes due 2004 in connection with the Merger
and the write-off of their related debt issuance costs.
58
<PAGE> 60
Loss Per Common Share
Loss per common share is computed based on the weighted
average number of shares outstanding during the applicable period.
Fully diluted loss per share has been omitted as it is anti-dilutive
for all periods presented.
Use of Estimates in Preparation of Financial Statements
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.
Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement
of Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of" (SFAS 121) and Statement of Financial Accounting Standard
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). The
Company will be required to adopt SFAS 121 and SFAS 123 in fiscal year
1996. The Company does not expect that the adoption of SFAS 121 or
SFAS 123 will have a material effect on its financial position or its
results of operations in fiscal year 1996.
Reclassifications
Certain prior period amounts in the consolidated financial
statements have been reclassified to conform to the fiscal year 1995
presentation.
3. SENIOR DEBT AND SENIOR SUBORDINATED DEBT
The Company's senior debt is summarized as follows:
<TABLE>
<CAPTION>
As of
---------------------------------------------
June 25, January 29, January 28,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
New Term Loans $ - $ - $590,426,000
Old Term Loan 137,064,000 125,732,000 -
10.45% Senior Notes, principal due 2004 with
interest payable semi-annually in arrears - - 520,326,000
10.45% Senior Notes, principal due 2000 with
interest payable semi-annually in arrears 175,000,000 175,000,000 4,674,000
New Revolving Facility - - 127,400,000
Old Revolving Loan - 27,300,000 -
10.0% secured promissory note, collateralized
by the stock of Bell, due June 1996, interest
payable quarterly 8,000,000 8,000,000 8,000,000
Other senior debt 9,194,000 7,132,000 7,211,000
------------ ------------ --------------
329,258,000 343,164,000 1,258,037,000
Less--current portion 18,314,000 22,263,000 31,735,000
------------ ------------ --------------
$310,944,000 $320,901,000 $1,226,302,000
============ ============ ==============
</TABLE>
59
<PAGE> 61
Senior Debt
As part of the Merger financing, the Company entered into a
new bank credit agreement (the "New Credit Facility") comprised of a
$600.0 million term loan facility (the "New Term Loans") and a
revolving credit facility of $325.0 million (the "New Revolving
Facility") under which working capital loans may be made and
commercial or standby letters of credit in the maximum aggregate
amount of up to $150.0 million may be issued.
At January 28, 1996, $590.4 million was outstanding under the
New Term Loans, $127.4 million was outstanding under the New Revolving
Facility, and $92.7 million of standby letters of credit had
been issued on behalf of the Company. A commitment fee of one-half of
one percent per annum is charged on the average daily unused portion
of the New Revolving Facility; such commitment fees are due
quarterly in arrears. Interest on borrowings under the New Term Loans
is due quarterly in arrears and is at the bank's Base Rate (as
defined) plus a margin ranging from 1.50 percent to 2.75 percent or
the Adjusted Eurodollar Rate (as defined) plus a margin ranging from
2.75 percent to 4.00 percent. At January 28, 1996, the weighted
average interest rate on the New Term Loans was 9.19 percent.
Interest on borrowings under the New Revolving Facility is at
the bank's Base Rate (as defined) plus a margin of 1.50 percent or the
Adjusted Eurodollar Rate (as defined) plus a margin of 2.75 percent;
at January 28, 1996, the interest rate on the New Revolving Facility
was 9.05 percent.
On October 11, 1995, the Company entered into an interest rate
collar agreement with the New Credit Facility Administrative Agent
which effectively set interest rate limits on $300.0 million of the
Company's New Term Loans. This interest rate collar, which was
effective as of October 19, 1995, limits the interest rate fluctuation
of the Adjusted Eurodollar Rate (as defined) to a range between 4.5
percent and 8.0 percent for two years. This agreement satisfies the
interest rate protection requirements under the New Credit Facility.
Quarterly principal installments on the New Term Loans
continue to December 2003, with amounts payable in each year as
follows: $19.3 million in fiscal 1996, $46.0 million in fiscal 1997,
$58.5 million in fiscal 1998, $62.0 million in fiscal 1999, $65.6
million in fiscal 2000, and $339.0 million thereafter. The principal
installments can be accelerated if the Company receives proceeds on
the sale of certain of its assets in the future. To the extent that
borrowings under the New Revolving Facility are not paid
earlier, they are due in December 2003. The common stock of Ralphs
and certain of its direct and indirect subsidiaries has been pledged
as security under the New Credit Facility.
F4L Supermarkets issued $350.0 million of 10.45% Senior
Notes due 2004 (the "New F4L Senior Notes") and exchanged $170.3
million principal amount of New F4L Senior Notes for an equal amount
of the 10.45% F4L Senior Notes due 2000 (the "Old F4L Senior Notes")
(together with the New F4L Senior Notes, the "Senior Notes"), leaving
an outstanding balance of $4.7 million of the Old F4L Senior Notes.
The Old F4L Senior Notes are due in two equal sinking fund payments on
April 15, 1999 and 2000. The Senior Notes are senior unsecured
obligations of Ralphs and rank "pari passu" in right of payment with
other senior unsecured indebtedness of Ralphs. However, the Senior
Notes are effectively subordinated to all secured indebtedness of
Ralphs and its subsidiaries, including indebtedness under the New
Credit Facility. Interest on the New F4L Senior Notes is payable
semiannually in arrears on each June 15 and December 15. Interest on
the Old F4L Senior Notes is payable semiannually in arrears on each
April 15 and October 15.
60
<PAGE> 62
The New F4L Senior Notes may be redeemed, at the option of
Ralphs, in whole at any time or in part from time to time, beginning
in fiscal 2000, at a redemption price of 105.225 percent. The
redemption price declines ratably to 100 percent in fiscal 2003. In
addition, on or prior to June 15, 1998, Ralphs may, at its option, use
the net cash proceeds of one or more public equity offerings to redeem
up to an aggregate of 35 percent of the principal amount of the New
F4L Senior Notes originally issued, at a redemption price equal to
110.450 percent, 108.957 percent, and 107.464 percent of the principal
amount thereof if redeemed during the 12 months commencing on June 15,
1995, June 15, 1996, and June 15, 1997, respectively, in each case
plus accrued and unpaid interest, if any, to the redemption date. The
Old F4L Senior Notes may be redeemed beginning in fiscal year 1996 at
104.48 percent, declining ratably to 100 percent in fiscal year 1999.
Scheduled maturities of principal of senior debt at January
28, 1996 are as follows:
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1996 $ 31,735,000
1997 46,246,000
1998 58,739,000
1999 62,280,000
2000 65,805,000
Later years 993,232,000
-------------
$1,258,037,000
=============
</TABLE>
Senior Subordinated Debt
Concurrent with the Merger, Ralphs issued $100.0 million of
11% Senior Subordinated Notes due 2005 (the "New RGC Notes") and (i)
exchanged $142.2 million principal amount of the RGC 9% Senior
Subordinated Notes due 2003 (the "Old RGC 9% Notes") and $281.8
million principal amount of the RGC 10.25% Senior Subordinated Notes
due 2002 (the "Old RGC 10.25% Notes," and together with the Old RGC
9% Notes, the "Old RGC Notes") for an equal amount of New RGC Notes,
(ii) purchased $7.5 million principal amount of Old RGC 9% Notes and
$15.2 million principal amount of Old RGC 10.25% Notes in conjunction
with the offers, and (iii) subsequently purchased $0.1 million
principal amount of Old RGC 9% Notes and $1.0 million principal amount
of Old RGC 10.25% Notes subject to the change of control provision,
leaving an outstanding balance of $0.1 million on the Old RGC 9% Notes
and an outstanding balance of $2.1 million on the Old RGC 10.25%
Notes. The New RGC Notes are senior subordinated unsecured
obligations of Ralphs and are subordinated in right of payment to all
senior indebtedness, including Ralphs' obligations under the New
Credit Facility and the Senior Notes. Interest on the New RGC Notes
is payable semiannually in arrears on each June 15 and December 15.
The New RGC Notes may be redeemed at the option of
Ralphs, in whole at any time or in part from time to time, beginning
in fiscal year 2000, at an initial redemption price of 105.5 percent.
The redemption price declines ratably to 100 percent in fiscal year
2003. In addition, on or prior to June 15, 1998, Ralphs may, at its
option, use the net cash proceeds of one or more public equity
offerings to redeem up to an aggregate of 35 percent of the principal
amount of the New RGC Notes originally issued, at a redemption price
equal to 111 percent, 109.429 percent, and 107.857 percent of the
principal amount thereof if redeemed during the 12 months commencing
on June 15, 1995, June 15, 1996, and
61
<PAGE> 63
June 15, 1997, respectively, in each case plus accrued and unpaid
interest, if any, to the redemption date.
F4L Supermarkets exchanged $140.2 million 13.75% Senior
Subordinated Notes due 2005 (the "New F4L Senior Subordinated Notes")
for an equal amount of F4L 13.75% Senior Subordinated Notes due 2001
(the "Old F4L Senior Subordinated Notes," and together with the New
F4L Senior Subordinated Notes, the "13.75% Senior Subordinated Notes")
of F4L Supermarkets, leaving an outstanding balance of $4.8 million of
the Old F4L Senior Subordinated Notes. The 13.75% Senior Subordinated
Notes are senior subordinated unsecured obligations of Ralphs and are
subordinated in right of payment to all senior indebtedness, including
Ralphs' obligations under the New Credit Facility, the Senior Notes
and the New RGC Notes. Interest on the 13.75% Senior Subordinated
Notes is payable semiannually in arrears on each June 15 and December
15 commencing on December 15, 1995. The New F4L Senior Subordinated
Notes may be redeemed beginning in fiscal year 1996 at a redemption
price of 106.111 percent. The redemption price declines ratably to
100 percent in fiscal year 2000.
At the time of the Merger, Holdings issued $100.0 million of
its New Discount Debentures. At January 28, 1996, the balance of the
New Discount Debentures was $108.6 million. Interest on the New
Discount Debentures accretes at the rate of 13-5/8% until June 15,
2000, when cash interest will accrue and be payable semiannually
commencing December 15, 2000. The New Discount Debentures may be
redeemed, at the option of Holdings, beginning in fiscal year 2000 at
a redemption price of 106.8125 percent, which declines annually until
fiscal year 2004 when they may be redeemed at 100.0 percent. The New
Discount Debentures are senior unsecured obligations of Holdings and
rank senior in right of payment to the Seller Debentures.
Holdings issued $131.5 million of its Seller Debentures as
partial consideration to the sellers of the RSI common stock (the
"Selling Stockholders"). At January 28, 1996, the balance of the
Seller Debentures was $139.4 million. Interest is payable semi-
annually on each June 15 and December 15 commencing on December 15,
1995. Holdings has the option, in its sole discretion, to issue
additional securities ("Secondary Securities") in lieu of a cash
payment of any or all of the interest due on each interest payment
date prior to and including June 15, 2000. Secondary Securities were
issued on December 15, 1995 in lieu of a cash payment.
The Seller Debentures may be redeemed, in whole or in part at
the option of Holdings, at any time after June 15, 2000, at an initial
redemption price of 106.8125 percent. The redemption price declines
ratably to 100 percent in fiscal 2004. The Seller Debentures are
senior subordinated unsecured obligations of Holdings and are
subordinate in right of payment to all senior indebtedness of
Holdings, including the New Discount Debentures.
Up to $10.0 million of the Seller Debentures were subject to
an agreement (the "Put Agreement") between The Yucaipa Companies
("Yucaipa") and the majority Selling Stockholder in which Yucaipa was
required to purchase up to $10.0 million of the Seller Debentures from
the Selling Stockholder upon a put by such Selling Stockholder.
Holdings agreed to reimburse Yucaipa for the loss, if any, to be
incurred when Yucaipa performed under the Put Agreement and
subsequently sold the securities for cash. On June 14, 1995, such
Selling Stockholder put $10.0 million of the Seller Debentures ("Put
Debentures") to Yucaipa. Yucaipa then sold the Put Debentures to
Bankers Trust Company at a price of $6.5 million. Holdings
subsequently reimbursed Yucaipa for its loss and recorded a $3.5
million
62
<PAGE> 64
discount to the Seller Debentures resulting in a beginning balance of
$128.0 million, net of the discount.
Holdings redeemed its Discount Notes in connection with the
Merger. Holdings paid $84.4 million to retire these notes, which
included a prepayment premium of $15.3 million.
Financial Covenants
The New Credit Facility, among other things, requires the
Company to maintain minimum levels of net worth (as defined), to
maintain minimum levels of earnings, to maintain a hedge agreement to
provide interest rate protection, and to comply with certain ratios
related to fixed charges and indebtedness. During fiscal 1995,
certain financial covenants and other terms of the New Credit Facility
were amended to, among other things, provide for the acquisition of
the Smith's Food and Drug Centers, Inc. ("Smith's") Riverside
distribution center and creamery facility, the acquisition of certain
operating assets and inventory at that facility, the acquisition of
nine of the Smith's Southern California stores and the closure of up
to nine stores in conjunction with these acquisitions. In addition,
the New Credit Facility and the indentures governing the New F4L
Notes, the New RGC Notes and the New F4L Senior Subordinated Notes,
the Seller Debentures and the New Discount Debentures limit, among
other things, additional borrowings, dividends on, and redemption of,
capital stock and the acquisition and the disposition of assets. At
January 28, 1996, the Company was in compliance with the financial
covenants of its debt agreements. At January 28, 1996, dividends and
certain other payments are restricted based on terms in the debt
agreements.
4. LEASES
The Company's operations are conducted primarily in leased
properties. Substantially all leases contain renewal options. Rental
expense under operating leases was as follows:
<TABLE>
<CAPTION>
For the
-----------------------------------------------------------------
52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Minimum rents $44,504,000 $49,788,000 $33,458,000 $97,752,000
Rents based on sales 5,917,000 3,806,000 1,999,000 3,439,000
</TABLE>
63
<PAGE> 65
Following is a summary of future minimum lease payments under
operating leases at January 28, 1996:
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1996 $ 123,705,000
1997 116,285,000
1998 105,502,000
1999 102,714,000
2000 98,506,000
Later years 772,372,000
--------------
$1,319,084,000
=============
</TABLE>
The Company has entered into lease agreements for new
supermarket sites and one warehouse facility which were not in
operation at January 28, 1996. Future minimum lease payments under
such operating leases generally begin when such facilities open and at
January 28, 1996 are: 1996 - $19.8 million; 1997 - $35.2 million;
1998 - $35.2 million; 1999 - $35.3 million; 2000 - $35.3 million;
later years - $561.0 million.
Certain leases qualify as capital leases under the criteria
established in Statement of Financial Accounting Standards No. 13,
"Accounting for Leases," and are classified on the consolidated
balance sheets as leased property under capital leases. Future
minimum lease payments for the property under capital leases at
January 28, 1996 are as follows:
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1996 $37,373,000
1997 34,820,000
1998 28,818,000
1999 22,644,000
2000 17,353,000
Later years 123,686,000
-----------
Total minimum lease payments 264,694,000
Less: amounts representing interest 111,649,000
-----------
Present value of minimum lease payments 153,045,000
Less: current portion 22,261,000
-----------
$130,784,000
===========
</TABLE>
Accumulated depreciation related to assets financed under
capital leases was $24.0 million, $27.6 million and $42.7 million at
June 25, 1994, January 29, 1995 and January 28, 1996, respectively.
The Company is leasing a distribution facility and four store
locations from the previous owner of Alpha Beta. The agreement
contains a purchase option for the land, buildings and improvements
and equipment at a price that equals or exceeds the estimated fair
market value throughout the term of the lease.
64
<PAGE> 66
5. INVESTMENT IN A.W.G.
The investment in Associated Wholesale Grocers ("A.W.G.")
consists principally of the cooperative's six percent interest-
bearing seven and eight-year patronage certificates received in
payment of certain rebates. Following is a summary of future
maturities based upon current redemption terms:
<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1996 $ -
1997 1,060,000
1998 1,520,000
1999 1,504,000
2000 1,478,000
Later years 1,726,000
----------
$7,288,000
==========
</TABLE>
6. INCOME TAXES
The provision (benefit) for income taxes consists of the
following:
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Current:
Federal $ - $ 3,251,000 $(2,894,000) $ -
State and other 82,000 712,000 100,000 46,000
---------- ----------- ----------- ---------
82,000 3,963,000 (2,794,000) 46,000
---------- ----------- ----------- ---------
Deferred:
Federal 1,345,000 78,000 2,794,000 -
State and other - (1,341,000) - 454,000
---------- ----------- ---------- ---------
1,345,000 (1,263,000) 2,794,000 454,000
---------- ----------- ---------- ---------
$1,427,000 $ 2,700,000 $ - $ 500,000
========== =========== ========== =========
</TABLE>
65
<PAGE> 67
A reconciliation of the provision (benefit) for income taxes
to amounts computed at the federal statutory rates of 34 percent for
fiscal 1993, 35 percent for fiscal 1994, the 1995 transition period
and fiscal 1995 is as follows:
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Federal income taxes at statutory
rate on loss before provision
for income taxes and
extraordinary charges $(10,138,000) $(3,068,000) $(6,173,000) $(112,670,000)
State and other taxes,
net of federal tax benefit 82,000 (1,000) 65,000 (18,057,000)
Alternative minimum tax - - - -
Effect of permanent differences
resulting primarily from:
Amortization of goodwill 2,850,000 2,820,000 1,701,000 (1,665,000)
Original issue discount 208,000 526,000 387,000 306,000
Tax credits and other - - - 3,769,000
Accounting limitation of
deferred tax benefit 8,425,000 2,423,000 4,020,000 128,817,000
------------ ----------- ----------- -------------
$ 1,427,000 $ 2,700,000 $ - $ 500,000
============ =========== ============ =============
</TABLE>
66
<PAGE> 68
The provision (benefit) for deferred taxes consists of the following:
<TABLE>
<CAPTION>
52 Weeks 52 Weeks 31 Weeks 52 Weeks
Ended Ended Ended Ended
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Depreciation $ 7,756,000 $ 2,536,000 $(1,513,000) $ (460,000)
Difference between book and tax basis
of assets sold 3,198,000 (4,223,000) 2,505,000 -
Deferred revenues and allowances 40,000 (2,349,000) 707,000 -
Inventory - - - (8,479,000)
Original issue discount (1,308,000) (2,981,000) (2,066,000) (1,217,000)
Pre-opening costs (512,000) 174,000 784,000 -
Accounts receivable reserves (270,000) 249,000 80,000 -
Unicap (5,000) (536,000) (755,000) -
Capital lease obligation (1,385,000) 2,792,000 527,000 (502,000)
Self-insurance reserves (4,082,000) (535,000) 5,523,000 2,104,000
Inventory shrink reserve 777,000 (869,000) (569,000) -
LIFO (554,000) (1,010,000) (1,303,000) -
Closed store reserve 1,092,000 440,000 176,000 -
Accrued expense - (582,000) 350,000 (26,304,000)
Accrued payroll and related liabilities 193,000 1,721,000 (3,879,000) (6,206,000)
Damaged inventory reimbursement - - - -
Acquisition costs 2,626,000 1,397,000 (5,444,000) -
Tax intangibles - - - 6,234,000
Sales tax reserves (715,000) (418,000) 433,000 -
State taxes - - - (21,902,000)
Deferred rent subsidy (483,000) (624,000) (29,000) -
Net operating losses - - - (73,406,000)
Net operating loss usage - 5,782,000 (6,963,000) -
Tax credits - - - 3,601,000
Tax credits benefited (1,392,000) (4,477,000) 1,711,000 -
Accounting limitation (recognition)
of deferred tax benefit (3,283,000) 1,896,000 12,563,000 128,817,000
Other, net (348,000) 354,000 (44,000) (1,826,000)
--------- --------- ----------- -------------
$1,345,000 $(1,263,000) $ 2,794,000 $ 454,000
========= ========= ========== =============
</TABLE>
67
<PAGE> 69
The significant components of the Company's deferred tax
assets (liabilities) are as follows:
<TABLE>
<CAPTION>
June 25, January 29, January 28,
1994 1995 1996
-------- ---------- ------------
<S> <C> <C> <C>
Deferred tax assets:
Accrued payroll and related liabilities $ 2,448,000 $ 6,248,000 $27,579,000
Other accrued liabilities 18,271,000 18,467,000 79,559,000
Obligations under capital leases - - 37,584,000
Property and equipment 2,997,000 - -
Self-insurance liabilities 27,744,000 25,204,000 49,773,000
Loss carryforwards 20,675,000 27,638,000 166,390,000
Tax credit carryforwards 5,869,000 4,157,000 913,000
State taxes - - 31,473,000
Other 580,000 570,000 18,024,000
----------- ----------- ------------
Gross deferred tax assets 78,584,000 82,284,000 411,295,000
Valuation allowance (35,467,000) (48,030,000) (306,560,000)
----------- ----------- ------------
Net deferred tax assets $ 43,117,000 $ 34,254,000 $104,735,000
----------- ----------- -----------
Deferred tax liabilities:
Inventories $(16,738,000) $(11,690,000) $ (9,762,000)
Property and equipment (30,516,000) (28,527,000) (106,116,000)
Obligations under capital leases (8,733,000) (9,261,000) -
Other (1,870,000) (2,310,000) (611,000)
Tax intangibles - - (6,234,000)
----------- ----------- ------------
Gross deferred tax liability (57,857,000) (51,788,000) (122,723,000)
----------- ----------- ------------
Net deferred tax liability $(14,740,000) $(17,534,000) $ (17,988,000)
=========== =========== ============
</TABLE>
The Company recorded a valuation allowance to reserve a
portion of its gross deferred tax assets at January 28, 1996 due
primarily to financial and tax losses in recent years. Under SFAS
109, this valuation allowance will be adjusted in future periods as
appropriate. However, the timing and extent of such future
adjustments to the allowance cannot be determined at this time.
At January 28, 1996, approximately $139.0 million of the
valuation allowance for deferred tax assets will reduce goodwill when
the allowance is no longer required.
At January 28, 1996, the Company has net operating loss
carryforwards for federal income tax purposes of $475.4 million, which
expire from 2007 through 2011. The Company has federal Alternative
Minimum Tax ("AMT") credit carryforwards of approximately $0.9 million
which are available to reduce future regular taxes in excess of AMT.
Currently, there is no expiration date for these credits.
A portion of the loss carryforwards described above are
subject to the provisions of the Tax Reform Act of 1986, specifically
Internal Revenue Code Section 382. The law limits the use of net
operating loss carryforwards when changes of ownership of more than 50
percent occur during a three-year testing period. Due to the merger,
the ownership of F4L Supermarkets and RSI changed in excess of 50
percent. As a result, Holdings' utilization of approximately $78.0
million of F4L Supermarkets' and $187.0 million of RSI's federal net
operating losses will be subject to an annual usage limitation.
Holdings' annual limitations under Section 382 for F4L Supermarkets'
and RSI's net operating losses are approximately $15.6 million and
$15.0 million, respectively. Furthermore, all of Holdings' pre-Merger
RSI net operating losses and a portion of Holdings' Ralphs post-Merger
losses will reduce goodwill when utilized in future federal income tax
returns.
68
<PAGE> 70
Holdings files a consolidated federal income tax return,
under which the federal income tax liability of Holdings and its
subsidiaries is determined on a consolidated basis. Holdings is a
party to a federal income tax sharing agreement with Ralphs and
certain of its subsidiaries (the "Tax Sharing Agreement"). The Tax
Sharing Agreement provides that in any year in which Ralphs is
included in any consolidated tax liability of Holdings and has
taxable income, Ralphs will pay to Holdings the amount of the tax
liability that Ralphs would have had on such due date if it had been
filing a separate return. Conversely, if Ralphs generates losses or
credits which actually reduce the consolidated tax liability of
Holdings and its other subsidiaries, Holdings will credit to Ralphs
the amount of such reduction in the consolidated tax liability. These
credits are passed between Holdings and Ralphs in the form of cash
payments. In the event any state and local income taxes are
determinable on a combined or consolidated basis, the Tax Sharing
Agreement provides for a similar allocation between Holdings and
Ralphs of such state and local taxes.
Holdings currently has an Internal Revenue Service examination
in process covering the years 1990 through 1993. Management believes
that any required adjustment to the Company's tax liabilities will not
have a material adverse impact on its financial position or results of
operations.
7. RELATED PARTY TRANSACTIONS
The Company has a five-year consulting agreement with an
affiliated company effective June 14, 1995 for management, financing,
acquisition and other services. The agreement is automatically
renewed on June 14 of each year for the five-year term unless ninety
(90) days' notice is given by either party. The contract provides for
annual management fees equal to $4 million plus advisory fees for
certain acquisition and financing transactions, if the affiliated
company is retained by Ralphs.
Management services expenses were $2.0 million during
fiscal year 1993, $2.3 million during fiscal year 1994, $1.2 million
during the 1995 transition period and $3.6 million during fiscal year
1995. Advisory fees were $1.8 million during fiscal year 1993, $0.2
million during fiscal year 1994 and $21.5 million during fiscal year
1995. There were no such advisory fees for the 1995 transition
period. Advisory fees for financing transactions are capitalized and
amortized over the term of the related financing.
8. COMMITMENTS AND CONTINGENCIES
The Company is contingently liable to former stockholders of
certain predecessors for any prorated gains which may be realized
within ten years of the acquisition of the respective companies
resulting from the sale of certain Certified stock. Such gains are
only payable if Certified is purchased or dissolved, or if the Company
sells such Certified Stock within the period noted above.
In connection with the bankruptcy reorganization of Federated
Department Stores, Inc. ("Federated") and its affiliates, Federated
agreed to pay certain potential tax liabilities relating to RGC as a
member of the affiliated group of companies comprising Federated and
its subsidiaries. In consideration thereof, RSI and RGC agreed to pay
Federated a total of $10 million, payable $1 million on each of
February 3, 1992, 1993, 1994, 1995 and 1996 and $5 million on February
3, 1997. In the event Federated is required to pay certain tax
liabilities, RSI and RGC agreed to reimburse Federated up to an
additional $10 million,
69
<PAGE> 71
subject to certain adjustments. Pursuant to the terms of the Merger,
the $5 million payment and the potential $10 million payment will be
paid in cash.
The Company is a partner in a supplier partnership, in which
it is contingently liable for the partnership's long-term debt. The
Company's portion of such debt is approximately $1,505,000.
The Company has entered into lease agreements with the
developers of several new sites in which the Company has agreed to
provide construction financing. At January 28, 1996, the Company had
capitalized construction costs of $20.4 million on total commitments
of $24.0 million.
In December 1992, three California state antitrust class
action suits were commenced in Los Angeles Superior Court against the
Company and other major supermarket chains located in Southern
California, alleging that they conspired to refrain from competing in
and to fix the price of fluid milk above competitive prices.
Specifically, class actions were commenced by Diane Barela and Neila
Ross, Ron Moliare and Paul C. Pfeifle on December 7, December 14 and
December 23, 1992, respectively. To date, the Court has yet to
certify any of these classes, while a demurrer to the complaints was
denied. The Company will vigorously defend itself in these class
action suits.
In addition, the Company or its subsidiaries are defendants in
a number of other cases currently in litigation or potential claims
encountered in the normal course of business which are being
vigorously defended. In the opinion of management, the resolutions of
these matters will not have a material effect on the Company's
financial position or results of operations.
The Company self-insures its workers' compensation and general
liability. For fiscal year 1993, fiscal year 1994, the 1995
transition period and fiscal year 1995, the self-insurance loss
provisions were $38.0 million, $19.9 million, $6.3 million and $32.6
million, respectively. During fiscal year 1993 and fiscal year 1994,
the Company discounted its self-insurance liability using a 7.0
percent discount rate. In the 1995 transition period, the Company
changed the discount rate to 7.5 percent. In fiscal 1995, the Company
changed the discount rate to 7.0 percent. Management believes that
this rate approximates the time value of money over the anticipated
payout period (approximately 10 years) for essentially risk-free
investments.
The Company's historical self-insurance liability at the end
of the three most recent fiscal years and the 1995 transition period
is as follows:
<TABLE>
<CAPTION>
As of
----------------------------------------------------------------
June 26, June 25, January 29, January 28,
1993 1994 1995 1996
-------- -------- ---------- ------------
<S> <C> <C> <C> <C>
Self-insurance liability $100,773,000 $90,898,000 $ 84,286,000 $161,391,000
Less: Discount (15,279,000) (9,194,000) (11,547,000) (12,406,000)
----------- ---------- ----------- -----------
Net self-insurance liability $85,494,000 $81,704,000 $72,739,000 $148,985,000
========== ========== ========== ===========
</TABLE>
The Company expects that cash payments for claims will
aggregate approximately $21.8 million, $35.4 million, $31.6 million,
$21.5 million and $13.1 million for the fiscal year 1996, the fiscal
year 1997, the fiscal year 1998, the fiscal year 1999 and the fiscal
year 2000, respectively.
70
<PAGE> 72
Environmental Matters
In January 1991, the California Regional Water Quality Control Board
for the Los Angeles Region (the "Regional Board") requested that RGC conduct a
subsurface characterization of its Glendale warehouse property located in the
Atwater district of Los Angeles. This request was part of an ongoing effort by
the Regional Board, in connection with the U.S. Environmental Protection Agency
(the "EPA"), to identify contributors to groundwater contamination in the San
Fernando Valley. Significant parts of the San Fernando Valley, including the
area where RGC's grocery warehouse is located, have been designated federal
Superfund sites requiring response actions under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, because of
regional groundwater contamination. On June 18, 1991, the EPA made its own
request for information concerning RGC's grocery warehouse. Since that time, the
Regional Board has requested further investigation by RGC. RGC conducted the
requested investigations and reported the results to the Regional Board.
Approximately 25 companies have entered into a Consent Order (EPA Docket No.
94-11) with the EPA to investigate and design a remediation system for
contaminated groundwater beneath an area which includes the Company's grocery
warehouse. The Company is not a party to the Consent Order, but is cooperating
with requests of the subject companies to allow installation of monitoring or
recovery wells on the Company's property. On or about October 12, 1995, the EPA
mailed a Special Notice Letter to 44 parties, including Ralphs as owner and
operator of the Glendale property, naming them as potentially responsible
parties ("PRPs"). Ralphs and other PRPs have agreed to enter into negotiations
over a consent decree with the EPA to implement a remedial design and reimburse
oversight costs. The PRPs have also agreed to an Alternative Dispute Resolution
Process to allocate the costs among themselves. Based upon available
information, management does not believe this matter will have a material
adverse effect on the Company's financial condition or results of operations.
RGC removed underground storage tanks and remediated soil
contamination at the grocery warehouse property. In some instances, the
removals and the contamination were associated with grocery business operations;
in others, they were associated with prior property users. Although the
possibility of other contamination from prior operations or adjacent properties
exists at the grocery warehouse property, management does not believe that the
costs of remediating such contamination will be material to the Company.
Apart from the grocery warehouse property, RGC had environmental
assessments performed on most of its facilities, including warehouse and
distribution facilities. The Company believes that any responsive actions
required at the examined properties as a result of such assessments will not
have a material adverse effect on its financial condition or results of
operations.
At the time that Food 4 Less acquired Alpha Beta in 1991, it learned
that certain underground storage tanks located on the site of the La Habra
facility may have previously released hydrocarbons. In connection with the
acquisition of Alpha Beta, the seller (who is also the lessor of the La Habra
facility) agreed to retain responsibility, subject to certain limitations, for
remediation of the release.
The Company is subject to a variety of environmental laws, rules,
regulations and investigative or enforcement activities, as are other companies
in the same or similar business. The Company believes it is in substantial
compliance with such laws, rules and regulations. These laws, rules, regulations
and agency activities change from time to time, and such changes may affect the
ongoing business and operations of the Company.
71
<PAGE> 73
9. EMPLOYEE BENEFIT PLANS
As a result of the Merger, the Company adopted certain
employee benefit plans previously sponsored by RGC. These employee
benefit plans include the Ralphs Grocery Company Retirement Plan (the
"Pension Plan"), the Ralphs Grocery Company Supplemental Executive
Retirement Plan (the "SERP"), and the Ralphs Grocery Company
Retirement Supplement Plan (the "Retirement Supplement Plan").
Pension Plan
The Pension Plan covers substantially all employees not
already covered by collective bargaining agreements with at least one
year of credited service (defined at 1,000 hours). Employees who were
employed by F4L Supermarkets and who are otherwise eligible to
participate in the Pension Plan became eligible to participate in
fiscal year 1995. The Company's policy is to fund pension costs at or
above the minimum annual requirement.
SERP
The SERP covers certain key officers of the Company. The
Company has purchased split dollar life insurance policies for
participants under this plan. Under certain circumstances, the cash
surrender value of certain split dollar life insurance policies will
offset the Company's obligations under the SERP.
Retirement Supplement Plan
The Retirement Supplement Plan is a non-qualified retirement
plan designed to provide eligible participants with benefits based on
earnings over the indexed amount of $150,000.
The following actuarially determined components were included
in the net expense for the above plans for fiscal year 1995 (dollars
in thousands):
<TABLE>
<S> <C>
Service cost $2,841
Interest cost on projected benefit obligation 2,543
Actual return on assets (3,223)
Net amortization and deferral 1,365
-----
Net pension expense $3,526
=====
</TABLE>
72
<PAGE> 74
The funded status of the Pension Plan (based on December 1995
asset values) is as follows:
<TABLE>
<CAPTION>
As of
January 28,
1996
------------
(dollars in thousands)
<S> <C>
Assets Exceed Accumulated Benefits:
Actuarial present value of benefit obligations:
Vested benefit obligation $42,446
Accumulated benefit obligation 43,256
Projected benefit obligation 63,913
Plan assets at fair value 44,552
------
Projected benefit obligation in excess of Plan Assets (19,361)
Unrecognized net loss 4,136
Unrecognized prior service cost 1,100
-------
Accrued pension cost $(14,125)
======
</TABLE>
The funded status of the SERP and Retirement Supplement Plan
(based on December 1995 asset values) is as follows:
<TABLE>
<CAPTION>
As of
January 28,
1996
------------
(dollars in thousands)
<S> <C>
Accumulated Benefits Exceed Assets:
Actuarial present value of benefit obligations:
Vested benefit obligation $(4,863)
Accumulated benefit obligation (4,908)
Projected benefit obligation (11,778)
Plan assets at fair value -
----------
Projected benefit obligation in excess of Plan Assets (11,778)
Unrecognized net loss 544
Unrecognized prior service cost 1,846
------
Accrued pension cost $(9,388)
=======
</TABLE>
The discount rate used for fiscal year 1995 was 7.5 percent.
A long-term rate of return on assets of 9.0 percent was also used in
the actuarial valuation.
The pension plan assets consist primarily of common stocks,
bonds, debt securities, and a money market fund. Plan benefits are
based primarily on years of service and on average compensation during
the last years of employment.
Employee Stock Ownership Plans
The Company implemented Statement of Position No. 93-6 (the
"SOP"), "Employer Accounting for Employee Stock Ownership Plans,"
effective June 26, 1994. The implementation of the SOP did not have a
material effect on the accompanying consolidated financial statements.
73
<PAGE> 75
The Company and its subsidiaries sponsor several defined
contribution benefit plans. The full-time employees of Falley's who
are not members of a collective bargaining agreement are covered under
a 401(k) plan, a portion of which is invested in Holdings stock (the
"Falley's ESOP"). As is required pursuant to IRS and ERISA
requirements, any participant who receives stock from the Falley's
ESOP has the right to put that stock to Falley's or an affiliate of
Falley's. However, as part of the original stock sale agreement
among the then stockholders of Falley's, FFL and the Falley's ESOP,
which has been amended from time to time, a partnership which owns
stock of Holdings entered into an agreement with Falley's and Holdings
to assume the obligation to purchase any Holdings shares as to which
terminated plan participants exercise a put option under the terms of
Falley's ESOP. As a result, neither Falley's nor the Company is
required to make cash payments to redeem the shares. As part of that
agreement, the Company may elect, after providing a right of first
refusal to the partnership, to purchase Holdings shares put under the
provisions of the plan. However, the partnership's obligation to
purchase such Holdings shares is unconditional, and any repurchase of
shares by the Company is at the Company's sole election. During
fiscal year 1995, the Company did not purchase any of the Holdings
shares. As of November 3, 1995, the fair value of the shares
allocated which are subject to repurchase obligation by the
partnership referred to above was approximately $14.6 million.
In addition, the Company also sponsors two ESOPs for employees
of the Company who are members of certain collective bargaining
agreements (the "Union ESOPs"). The Union ESOPs provide for annual
contributions based on hours worked at a rate specified by the terms
of the collective bargaining agreements. The Company contributions
are made in the form of Holdings stock or cash for the purchase of
Holdings stock and are to be allocated to participants based on hours
worked. During fiscal year 1995 and the 1995 transition period, the
Company recorded a charge against operations of approximately $0.8
million and $0.3 million, respectively, for benefits under the Union
ESOPs. There were no shares issued to the Union ESOPs or to the
Company's profit sharing plan at January 28, 1996.
Defined Contribution Plan
The Company sponsors the Ralphs Grocery Company Savings Plan
Plus - Primary, the Ralphs Grocery Savings Plan Plus - Basic and the
Food 4 Less Supermarkets, Inc. Profit Sharing and Retirement Plan
(collectively referred to as the "401(k) Plan") covering substantially
all employees who are not covered by collective bargaining agreements
and who have at least one year of credited service (defined at 1,000
hours). The 401(k) Plan provides for both pre-tax and after-tax
contributions by participating employees. With certain limitations,
participants may elect to contribute on a pre-tax basis to the 401(k)
Plan. The Company has committed to match a minimum of 20 percent of
an employee's contribution to the 401(k) Plan that does not exceed 5
percent of the employee's compensation. Expenses under the 401(k)
Plan for fiscal years 1993, 1994 and 1995 were $0.3 million, $0.7
million and $0.7 million, respectively.
Multi-Employer Benefit Plans
The Company contributes to multi-employer benefit plans
administered by various trustees. Contributions to these plans are
based upon negotiated wage contracts. These plans may be deemed to be
defined benefit plans. Information related to accumulated plan
74
<PAGE> 76
benefits and plan net assets as they may be allocated to the Company
at January 28, 1996 is not available. The Company contributed $69.4
million, $57.2 million, $21.6 million and $102.1 million to these
plans for fiscal year 1993, fiscal year 1994, the 1995 transition
period and fiscal year 1995, respectively. Management is not aware of
any plans to terminate such plans.
The United Food and Commercial Workers health and welfare
plans were over-funded and those employers who contributed to the
plans received a pro rata share of the excess reserves in the plans
through reduction of current contributions. The Company's share of
the excess reserve was $24.2 million, of which $8.1 million, $14.3
million and $1.8 million was recognized in fiscal year 1994, the 1995
transition period, and fiscal year 1995, respectively. Offsetting the
reduction in employer contributions was a $5.5 million union contract
ratification bonus and contractual wage increases in the 1995
transition period.
Post-Retirement Medical Benefit Plan
The Company adopted a postretirement medical benefit plan
("Postretirement Medical Plan"), previously sponsored by RGC, which
covers substantially all employees who are not members of a
collective bargaining agreement and who retire under certain age and
service requirements. The Postretirement Medical Plan provides
outpatient, inpatient and various other covered services. Such
benefits are funded from the Company's general assets. The calendar
1995 year deductible is $1,000 per individual, indexed to the Medical
Consumer Price Index.
The net periodic cost of the Postretirement Medical Plan
include the following components for fiscal year 1995 (dollars in
thousands):
<TABLE>
<S> <C>
Service cost $468
Interest cost 561
Return on plan assets -
Net amortization and deferral (116)
---
Net postretirement benefit cost $913
===
</TABLE>
The funded status of the postretirement benefit plan is as
follows (dollars in thousands):
<TABLE>
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $2,208
Fully eligible plan participants 1,483
Other active plan participants 10,862
Plan assets at fair value -
-----------
Accumulated postretirement obligations in excess
of plan assets (14,553)
Unrecognized loss 562
Unrecognized prior service cost (3,246)
-------
Accrued postretirement benefit obligation $(17,237)
======
</TABLE>
Service cost was calculated using a medical cost trend of 10.5
percent and a decreasing medical cost trend rate of 14 percent and 8
percent for 1993 and 1994, respectively. A medical cost trend rate of
13 percent was used for fiscal year 1995, and a decreasing rate of 12
percent and 6 percent for future years. The discount rate was 7.5
75
<PAGE> 77
percent for the Company expense for the fiscal year. The long-term
rate of return of plan assets is not applicable, as the plan is not
funded.
The effect of a one percent increase in the medical cost trend
would increase the fiscal 1995 service and interest cost to 26
percent. The accumulated postretirement benefit obligation at January
28, 1996 would also increase by 30 percent.
10. CAPITAL STOCK
Preferred Stock
As part of the financing of the Merger, Holdings issued shares
of its newly authorized Series A and Series B Preferred Stock, par
value $0.01. The Series A Preferred Stockholders have voting rights
identical to those of the Common Stockholders. The Series B Preferred
Stockholders have no voting rights. The Series A and Series B
Preferred Stock has a liquidation preference which was initially equal
to $10.00 per share. The liquidation preference increases 7.0 percent
per annum, compounded quarterly until the later of June 2000 or the
date the Company first reports EBDIT (as defined) of at least
$500.0 million for any four consecutive quarters. In addition,
the liquidation preference will increase by 2.0 percent per annum
if the Company fails to reach EBDIT (as defined) of at least
$400.0 million for four consecutive quarters prior to July, 1998;
this EBDIT (as defined) threshold increases to $425.0 million in
July, 1999 and $450.0 million in July, 2000. The Series A and Series
B Preferred Stock ranks pari passu in right of payment upon
liquidation. 5,783,244 shares of Holdings Common Stock were exchanged
for an equal number of Series A Preferred Shares at the Merger date.
Holdings issued 10,900,000 shares of its Series A Preferred
Stock and 3,100,000 shares of its Series B Preferred Stock for $140.0
million in connection with the Merger (the "New Equity Investment").
The Company paid $2.5 million in cash and issued $2.5 million of its
New Discount Debentures to a Series A Preferred Stockholder for
services performed in connection with this preferred stock sale.
Common Stock
Holdings recorded a 16.58609143 for 1 stock split of its
Common Stock on June 9, 1995. The "Average Number of Common Shares
Outstanding" and the "Loss Per Common Share" in the accompanying
Consolidated Statements of Operations for fiscal years 1993 and 1994
and the 1995 transition period have been retroactively adjusted to
reflect this stock split.
In connection with the extinguishment of $10.0 million of RGC's
EAR liability at the Merger date and as an incentive to certain
executives of the Company, Holdings granted options to purchase a total
of 2,415,000 shares of its Common Stock. Options to purchase 2,007,500
shares were fully exercisable at prices ranging from $0.79 to $7.32 per
share. Prior to January 28, 1996, 82,500 of these options were
repurchased. Options to purchase 200,000 shares are fully exercisable
at $10.00 per share. Options to purchase 207,500 shares at $10.00 per
share vest in equal annual installments over five years beginning in
June 1996. Before the end of fiscal year 1995, 62,500 of these options
expired without having been exercised. The remaining above options
expire in June 2005.
On the date of the Merger, Holdings issued a warrant to an
affiliated company covering 8,000,000 shares of Holdings Common Stock
exercisable at a price of $30.50 per share upon a Qualified IPO (as
defined) or a Qualified Sale Event (as defined). The warrant will
expire on June 14, 2000 unless certain performance measures are met,
in which case the warrant will expire on June 14, 2002.
76
<PAGE> 78
Holdings also has outstanding 2,008,874 warrants for the
purchase of an equal number of shares of its Common Stock at a price
of less than $0.01 per share. These warrants may be exercised
beginning December 31, 1997, or earlier upon certain events.
Holdings has reserved an additional 585,000 shares of its
Common Stock for future stock option grants.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments for which it is
practicable to estimate that value:
Cash and Cash Equivalents
The carrying amount approximates fair value as a result of the
short maturity of these instruments.
Short-Term Notes and Other Receivables
The carrying amount approximates fair value as a result of the
short maturity of these instruments.
Investments In and Notes Receivable From Supplier Cooperatives
The Company maintains a non-current deposit with Certified in
the form of Class B shares of Certified. Certified is not obligated
in any fiscal year to redeem more than a prescribed number of the
Class B shares issued. Therefore, it is not practicable to estimate
the fair value of this investment.
The Company maintains a non-current note receivable from
A.W.G. There are no quoted market prices for this investment and a
reasonable estimate could not be made without incurring excessive
costs. Additional information pertinent to the value of this
investment is provided in Note 5.
Long-Term Debt
The fair value of the Senior Notes, the New RGC Notes, the
13.75% Senior Subordinated Notes and the Senior Discount Debentures
is based on quoted market prices. The New Term Loans and the New
Revolving Facility are estimated to be recorded at the fair
value of the debt. Market quotes for the fair value of the remainder
of the Company's debt are not available, and a reasonable estimate of
the fair value could not be made without incurring excessive costs.
Additional information pertinent to the value of the unquoted debt is
provided in Note 3.
77
<PAGE> 79
The estimated fair values of the Company's financial
instruments are as follows:
<TABLE>
<CAPTION>
As of
January 28, 1996
---------------------------------------
Carrying Fair
Amount Value
-------- -----
<S> <C> <C>
Cash and cash equivalents $ 67,983,000 $ 67,983,000
Short-term notes and other receivables 6,452,000 6,452,000
Investments in and notes receivable from
supplier cooperatives (not practicable) 12,214,000 -
Long-term debt for which it is:
o Practicable to estimate fair values 2,010,871,000 1,967,595,000
o Not practicable 166,305,000 -
</TABLE>
12. RESTRUCTURING CHARGE
During fiscal 1995, the Company recorded a $75.2 million
charge associated with the closure of 58 former F4L Supermarkets
stores and one former F4L Supermarkets warehouse facility.
Twenty-four of these stores were required to be closed pursuant to a
settlement agreement with the State of California in connection with
the Merger. Three RGC stores were also required to be sold. Thirty-
four of the closed stores were under-performing former F4L Supermarkets
stores. The $75.2 million restructuring charge consisted of
write-downs of property and equipment ($52.2 million) less estimated
proceeds ($16.0 million); reserve for closed stores and warehouse
facility ($16.1 million); write-off of the Alpha Beta trademark ($8.3
million); write-off of other assets ($8.0 million); lease termination
expenses ($4.0 million); and miscellaneous expenses ($2.6 million).
During fiscal year 1995, the Company utilized $34.7 million of the
reserve for restructuring costs ($50.0 million of costs partially
offset by $15.3 million of proceeds from the divestiture of stores).
The charges consisted of write-downs of property and equipment ($33.2
million); write-off of the Alpha Beta trademark ($8.3 million); and
expenditures associated with the closed stores and the warehouse
facility, write-off of other assets, lease termination expenditures
and miscellaneous expenditures ($8.5 million). Future lease payments
of approximately $19.1 million will be offset against the remaining
reserve. Management believes that the remaining reserve is adequate
to complete the planned restructuring.
On December 29, 1995, the Company consummated an agreement
with Smith's to sublease its one million square foot distribution
center and creamery facility in Riverside, California for
approximately 23 years, with renewal options through 2043, and to
acquire certain operating assets and inventory at that facility. In
addition, the Company also acquired nine of Smith's Southern
California stores which became available when Smith's withdrew from
the California market. As a result of the acquisition of the
Riverside distribution center and creamery, the Company closed its La
Habra distribution center in the first quarter of fiscal year 1996.
Also, the Company closed nine of its stores which were near the
acquired former Smith's stores. During the fourth quarter of fiscal
year 1995, the Company recorded a $47.9 million restructuring charge
to recognize the cost of closing these facilities, consisting of
write-downs of property and equipment ($16.1 million), closure costs
($2.2 million), and lease termination expenses ($29.6 million).
78
<PAGE> 80
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of Food 4 Less Holdings, Inc.:
We have audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets of Food 4 Less Holdings, Inc. and
subsidiaries as of June 25, 1994, January 29, 1995, and January 28, 1996, and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for the 52 weeks ended June 26, 1993 and June 25,
1994, the 31 weeks ended January 29, 1995, and the 52 weeks ended January 28,
1996, and have issued our report thereon dated April 19, 1996. Our audits were
made for the purpose of forming an opinion on the basic financial statements
taken as a whole. The schedules included on pages 80 through 83 are the
responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic consolidated financial statements. These schedules have been
subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
April 19, 1996
79
<PAGE> 81
FOOD 4 LESS HOLDINGS, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
AS OF, AND FOR, THE 52 WEEKS ENDED JANUARY 28, 1996
(DOLLARS IN THOUSANDS)
The following condensed financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and note disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to those rules
and regulations, although the Company believes that the disclosures made are
adequate to make the information presented not misleading.
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
January 28,
1996
------------
<S> <C>
ASSETS
Investment in subsidiary $ 59,119
--------
Total Assets $ 59,119
========
LIABILITIES AND STOCKHOLDERS' EQUITY
New Discount Notes $108,530
Seller Debentures 139,387
Convertible Series A Preferred Stock, $.01 par value,
25,000,000 shares authorized and 16,683,244 outstanding
(aggregate liquidation value of $169.0 million) 144,490
Convertible Series B Preferred Stock, $.01 par value,
25,000,000 shares authorized and 3,100,000 outstanding
(aggregate liquidation value of $32.4 million) 31,000
Common Stock, $.01 par value, 60,000,000 shares authorized
and 17,207,882 outstanding 172
Additional paid-in capital -
Retained deficit (364,460)
-------
$ 59,119
========
</TABLE>
CONDENSED STATEMENT OF LOSS
<TABLE>
<CAPTION>
52 Weeks
Ended
January 28,
1996
------------
<S> <C>
Loss before extraordinary charge of subsidiary $(260,117)
Extraordinary charge of subsidiary (23,128)
---------
Net loss of subsidiary (283,245)
Interest expense (23,877)
Extraordinary charge (15,296)
--------
Net loss $(322,418)
=======
</TABLE>
80
<PAGE> 82
FOOD 4 LESS HOLDINGS, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
AS OF, AND FOR, THE 52 WEEKS ENDED JANUARY 28, 1996
(DOLLARS IN THOUSANDS)
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<S> <C>
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED
(USED) BY OPERATING ACTIVITIES:
Net loss $(322,418)
Adjustments to reconcile net loss to net cash provided (used) by
operating activities:
Net loss of subsidiary 283,245
Non-cash extraordinary charge 15,296
Non-cash interest charge 23,877
--------
NET CASH USED BY OPERATING ACTIVITIES -
NET INCREASE IN CASH AND CASH EQUIVALENTS -
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD -
-------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ -
=============
</TABLE>
81
<PAGE> 83
FOOD 4 LESS HOLDINGS, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Food 4 Less Holdings, Inc. (the "Company") is a non-operating
holding company. The above financial statements have been prepared on
a parent company stand-alone basis. They do not contain all
disclosures necessary to be in conformity with generally accepted
accounting principles. They should be read in conjunction with the
consolidated financial statements of Food 4 Less Holdings, Inc.
contained elsewhere in this report.
2. The debt agreements of the Company's subsidiary, Ralphs
Grocery Company ("Ralphs"), among other things, require Ralphs to
maintain minimum levels of net worth (as defined), to maintain minimum
levels of earnings (as defined) and to comply with certain ratios
related to interest expense (as defined), fixed charges (as defined),
working capital and indebtedness. In addition, the debt agreements
limit, among other things, additional borrowings, dividends on, and
redemption of, capital stock, capital expenditures, incurrence of
lease obligations, and the acquisition and disposition of assets. At
January 28, 1996, dividends and certain other payments are restricted
based on terms of the debt agreements.
82
<PAGE> 84
FOOD 4 LESS HOLDINGS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
52 WEEKS ENDED JANUARY 28, 1996, 31 WEEKS ENDED JANUARY 29,1995,
52 WEEKS ENDED JUNE 25, 1994, AND 52 WEEKS ENDED JUNE 26, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Provisions Charged
Balance at charged to Balance
beginning to interest Other at end
of period expense expense(a) Payments changes(b) of period
---------- -------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Self-insurance liabilities
52 weeks ended January 28, 1996 $72,739 $32,603 $10,287 $42,153 $75,509 $148,985
====== ====== ====== ====== ====== =======
31 weeks ended January 29, 1995 $81,704 $ 6,304 $ 3,453 $18,722 $ - $ 72,739
====== ====== ====== ====== ====== =======
52 weeks ended June 25, 1994 $85,494 $19,880 $ 5,836 $29,506 $ - $ 81,704
====== ====== ====== ====== ====== =======
52 weeks ended June 26, 1993 $82,559 $38,040 $ 5,865 $40,970 $ - $ 85,494
====== ====== ====== ====== ====== =======
</TABLE>
_______________
(a) Amortization of discount on self-insurance reserves charged to interest
expense.
(b) Reflects self-insurance reserve of Ralphs Grocery Company which was
acquired on June 14, 1995.
83
<PAGE> 85
FOOD 4 LESS HOLDINGS, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
<S> <C>
3.1 Restated Certificate of Incorporation of Food 4 Less Holdings, Inc. (incorporated herein by reference to
Exhibit 3.1 of Food 4 Less Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended July 16,
1995).
4.1.1 Credit Agreement dated as of June 14, 1995 by and among Food 4 Less Holdings, Inc., Food 4 Less Supermarkets,
Inc., the Lenders, Co-Agents, and Co-Arrangers named therein and Bankers Trust Company (incorporated herein
by reference to Exhibit 4.1 of Food 4 Less Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended July 16, 1995).
4.1.2 First Amendment to Credit Agreement dated as of August 18, 1995 among Food 4 Less Holdings, Inc., Ralphs
Grocery Company and the financial institutions listed on the signature pages thereto (incorporated herein by
reference to Exhibit 4.1.2 of Ralphs Grocery Company's Annual Report on Form 10-K for the year ended January
28, 1996).
4.1.3 Second Amendment to Credit Agreement dated as of December 11, 1995 among Food 4 Less Holdings, Inc., Ralphs
Grocery Company and the financial institutions listed on the signature pages thereto (incorporated herein by
reference to Exhibit 4.1.3 of Ralphs Grocery Company's Annual Report on Form 10-K for the year ended January
28, 1996).
4.1.4 Third Amendment, Consent and Waiver to Credit Agreement dated as of March 8, 1996 among Food 4 Less Holdings,
Inc., Ralphs Grocery Company and the financial institutions listed on the signature pages thereto
(incorporated herein by reference to Exhibit 4.1.4 of Ralphs Grocery Company's Annual Report on Form 10-K for
the year ended January 28, 1996).
4.2 Indenture for the 13-5/8% Senior Discount Debentures due 2005, dated as of June 1, 1995, by and among Food 4
Less Holdings, Inc. and United States Trust Company of New York, as trustee (incorporated herein by reference
to Exhibit 4.2 of Food 4 Less Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended July 16,
1995).
4.3 Indenture for the 13-5/8% Senior Subordinated Pay-in-Kind Debentures due 2007, dated as of June 1, 1995, by
and among Food 4 Less Holdings, Inc. and Norwest Bank Minnesota, National Association, as trustee
(incorporated herein by reference to Exhibit 4.3 of Food 4 Less Holdings, Inc.'s Quarterly Report on Form 10-
Q for the quarter ended July 16, 1995).
4.4.1 Indenture for the 10.45% Senior Notes due 2004, dated as of June 1, 1995, by and among Food 4 Less
Supermarkets, Inc., the subsidiary guarantors identified therein and Norwest Bank Minnesota, National
Association, as trustee (incorporated herein by reference to Exhibit 4.4.1 of Food 4 Less Holdings, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended July 16, 1995).
4.4.2 First Supplemental Indenture for the 10.45% Senior Notes due 2004, dated as of June 14,
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
<S> <C>
1995, by and among Ralphs Grocery Company (as successor by merger to Food 4 Less Supermarkets, Inc.), the
subsidiary guarantors identified therein, Crawford Stores, Inc. and Norwest Bank Minnesota, National
Association, trustee (incorporated herein by reference to Exhibit 4.4.2 of Food 4 Less Holdings, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended July 16, 1995).
4.5.1 Indenture for the 13.75% Senior Subordinated Notes due 2005, dated as of June 1, 1995, by and among Food 4
Less Supermarkets, Inc., the subsidiary guarantors identified therein and United States Trust Company of New
York, as trustee (incorporated herein by reference to Exhibit 4.5.1 of Food 4 Less Holdings, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended July 16, 1995).
4.5.2 First Supplemental Indenture for the 13.75% Senior Subordinated Notes due 2005, dated as of June 14, 1995, by
and among Ralphs Grocery Company (as successor by merger to Food 4 Less Supermarkets, Inc.), the subsidiary
guarantors identified therein, Crawford Stores, Inc. and United States Trust Company of New York, as trustee
(incorporated herein by reference to Exhibit 4.5.2 of Food 4 Less Holdings, Inc.'s Quarterly Report on Form
10-Q for the quarter ended July 16, 1995).
4.6.1 Indenture for the 11% Senior Subordinated Notes due 2005, dated as of June 1, 1995, by and among Food 4 Less
Supermarkets, Inc., the subsidiary guarantors identified therein and United States Trust Company of New York,
as trustee (incorporated herein by reference to Exhibit 4.6.1 of Food 4 Less Holdings, Inc.'s Quarterly
Report on Form 10-Q for the quarter ended July 16, 1995).
4.6.2 First Supplemental Indenture for the 11% Senior Subordinated Notes due 2005, dated as of June 14, 1995, by
and among Ralphs Grocery Company (as successor by merger to Food 4 Less Supermarkets, Inc.), the subsidiary
guarantors identified therein, Crawford Stores, Inc. and United States Trust Company of New York, as trustee
(incorporated herein by reference to Exhibit 4.6.2 of Food 4 Less Holdings, Inc.'s Quarterly Report on Form
10-Q for the quarter ended July 16, 1995).
4.7.1 Indenture for the 10 1/4% Senior Subordinated Notes due 2002, dated as of July 29, 1992, by and between
Ralphs Grocery Company and United States Trust Company of New York, as trustee (incorporated herein by
reference to Exhibit 4.3 of Ralphs Grocery Company's Quarterly Report on Form 10-Q for the quarter ended July
19, 1992).
4.7.2 First Supplemental Indenture for the 10 1/4% Senior Subordinated Notes due 2002, dated as of May 30, 1995, by
and between Ralphs Grocery Company and United States Trust Company of New York, as trustee (incorporated
herein by reference to Exhibit 4.1 of Ralphs Grocery Company's Quarterly Report on Form 10-Q for the quarter
ended April 23, 1995).
4.7.3 Second Supplemental Indenture for the 10 1/4% Senior Subordinated Notes due 2002, dated as of June 14, 1995,
by and between Ralphs Grocery Company (as successor) and United States Trust Company of New York, as Trustee
(incorporated herein by reference to Exhibit 4.7.3 of Food 4 Less Holdings, Inc.'s Quarterly Report on Form
10-Q for the quarter ended July 16, 1995).
</TABLE>
E-2
<PAGE> 87
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
<S> <C>
4.8.1 Indenture for the 9% Senior Subordinated Notes due 2003, dated as of March 30, 1993, by and between Ralphs
Grocery Company and United States Trust Company of New York, as trustee (incorporated herein by reference to
Exhibit 4.1 of Ralphs Grocery Company's Registration Statement on Form S-4, No. 33-61812).
4.8.2 First Supplemental Indenture for the 9% Senior Subordinated Notes due 2003, dated as of June 23, 1993, by and
between Ralphs Grocery Company and United States Trust Company of New York, as trustee (incorporated herein
by reference to Exhibit 4.2 of Ralphs Grocery Company's Registration Statement on Form S-4, No. 33-61812).
4.8.3 Second Supplemental Indenture for the 9% Senior Subordinated Notes due 2003, dated as of May 30, 1995, by and
between Ralphs Grocery Company and United States Trust Company of New York, as trustee (incorporated herein
by reference to Exhibit 4.2 of Ralphs Grocery Company's Quarterly Report on Form 10-Q for the quarter ended
April 23, 1995).
4.8.4 Third Supplemental Indenture for the 9% Senior Subordinated Notes due 2003, dated as of June 14, 1995, by and
between Ralphs Grocery Company (as successor) and United States Trust Company of New York, as trustee
(incorporated herein by reference to Exhibit 4.8.4 of Food 4 Less Holdings, Inc.'s Quarterly Report on Form
10-Q for the quarter ended July 16, 1995).
4.9.1 Senior Note Indenture, dated as of April 15, 1992, by and among Food 4 Less Supermarkets, Inc., the
subsidiary guarantors identified therein and Norwest Bank Minnesota, National Association, as trustee
(incorporated herein by reference to Exhibit 4.1 to Food 4 Less Supermarkets, Inc.'s Registration Statement
on Form S-1, No. 33-46750).
4.9.2 First Supplemental Indenture, dated as of July 24, 1992, by and among Food 4 Less Supermarkets, Inc., the
subsidiary guarantors identified therein and Norwest Bank Minnesota, National Association, as trustee
(incorporated herein by reference to Exhibit 4.1.1 to Food 4 Less Supermarkets, Inc.'s Annual Report on Form
10-K for the fiscal year ended June 27, 1992).
4.9.3 Second Supplemental Indenture for the 10.45% Senior Notes due 2000, dated as of May 30, 1995, by and among
Food 4 Less Supermarkets, Inc., the subsidiary guarantors identified therein and Norwest Bank Minnesota,
National Association, as trustee (incorporated herein by reference to Exhibit 4.9.3 of Food 4 Less Holdings,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended July 16, 1995).
4.9.4 Third Supplemental Indenture for the 10.45% Senior Notes due 2000, dated as of June 14, 1995, by and among
Ralphs Grocery Company (as successor by merger to Food 4 Less Supermarkets, Inc.), the subsidiary guarantors
identified therein and Norwest Bank Minnesota, National Association, as trustee (incorporated herein by
reference to Exhibit 4.9.4 of Food 4 Less Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended July 16, 1995).
</TABLE>
E-3
<PAGE> 88
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
<S> <C>
4.10.1 Senior Subordinated Note Indenture dated as of June 15, 1991 by and among Food 4 Less Supermarkets, Inc., the
subsidiary guarantors identified therein and United States Trust Company of New York, as trustee
(incorporated herein by reference to Exhibit 4.1 to Food 4 Less Supermarkets, Inc.'s Annual Report on Form
10-K for the fiscal year ended June 29, 1991).
4.10.2 First Supplemental Indenture dated as of April 8, 1992 by and among Food 4 Less Supermarkets, Inc., the
subsidiary guarantors identified therein and United States Trust Company of New York, as trustee
(incorporated herein by reference to Exhibit 4.2.1 to Food 4 Less Supermarkets, Inc.'s Annual Report on Form
10-K for the fiscal year ended June 27, 1992).
4.10.3 Second Supplemental Indenture dated as of May 18, 1992 by and among Food 4 Less Supermarkets, Inc., the
subsidiary guarantors identified therein and United States Trust Company of New York, as trustee
(incorporated herein by reference to Exhibit 4.2.2 to Food 4 Less Supermarkets, Inc.'s Annual Report on Form
10-K for the fiscal year ended June 27, 1992).
4.10.4 Third Supplemental Indenture dated as of July 24, 1992 by and among Food 4 Less Supermarkets, Inc., the
subsidiary guarantors identified therein and United States Trust Company of New York, as trustee
(incorporated herein by reference to Exhibit 4.2.3 to Food 4 Less Supermarkets, Inc.'s Annual Report on Form
10-K for the fiscal year ended June 27, 1992).
4.10.5 Fourth Supplemental Indenture for the 13.75% Senior Subordinated Notes due 2001, dated as of May 30, 1995 by
and among Food 4 Less Supermarkets, Inc., the subsidiary guarantors identified therein and United States
Trust Company of New York, as trustee (incorporated herein by reference to Exhibit 4.10.5 of Food 4 Less
Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended July 16, 1995).
4.10.6 Fifth Supplemental Indenture for the 13.75% Senior Subordinated Notes due 2001, dated as of June 14, 1995 by
and among Ralphs Grocery Company (as successor by merger to Food 4 Less Supermarkets, Inc.), the subsidiary
guarantors identified therein and United States Trust Company of New York, as trustee (incorporated herein by
reference to Exhibit 4.10.6 of Food 4 Less Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended July 16, 1995).
10.1 Second Amended and Restated Tax Sharing Agreement dated as of June 14, 1995 by and among Food 4 Less
Holdings, Inc., Ralphs Grocery Company and the subsidiaries of Ralphs Grocery Company (incorporated herein by
reference to Exhibit 10.1 of Food 4 Less Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
July 16, 1995).
10.2 Stockholders Agreement of Food 4 Less Holdings, Inc. dated as of June 14, 1995 by and among Food 4 Less
Holdings, Inc., Ralphs Grocery Company and the investors listed on the signature pages thereto (incorporated
herein by reference to Exhibit 10.2 of Food 4 Less Holdings, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended July 16, 1995).
10.3 Consulting Agreement dated as of June 14, 1995 by and among The Yucaipa Companies,
</TABLE>
E-4
<PAGE> 89
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
<S> <C>
Food 4 Less Holdings, Inc. and Ralphs Grocery Company (incorporated herein by reference to Exhibit 10.4 of
Food 4 Less Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended July 16, 1995).
10.4 Common Stock Purchase Warrant of Food 4 Less Holdings, Inc. dated June 14, 1995 issued to The Yucaipa
Companies (incorporated herein by reference to Exhibit 10.5 of Food 4 Less Holdings, Inc.'s Quarterly Report
on Form 10-Q for the quarter ended July 16, 1995).
10.5* Food 4 Less Holdings, Inc. 1995 Stock Option Plan (incorporated herein by reference to Exhibit 10.6 of Food 4
Less Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended July 16, 1995).
10.6* Employment Agreement dated as of June 14, 1995 between Food 4 Less Holdings, Inc., Ralphs Grocery Company and
George G. Golleher (incorporated herein by reference to Exhibit 10.11 of Food 4 Less Holdings, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended July 16, 1995).
10.7* Employment Agreement dated as of June 14, 1995 between Ralphs Grocery Company and Byron E. Allumbaugh
(incorporated herein by reference to Exhibit 10.8 of Ralphs Grocery Company's Quarterly Report on Form 10-Q
for the quarter ended July 16, 1995).
10.8* Employment Agreement dated as of June 14, 1995 between Ralphs Grocery Company and Alfred A. Marasca
(incorporated herein by reference to Exhibit 10.9 of Ralphs Grocery Company's Quarterly Report on Form 10-Q
for the quarter ended July 16, 1995).
10.9* Employment Agreement dated as of June 14, 1995 between Ralphs Grocery Company and Greg Mays (incorporated
herein by reference to Exhibit 10.10 of Ralphs Grocery Company's Quarterly Report on Form 10-Q for the
quarter ended July 16, 1995).
10.10* Employment Agreement dated as of June 14, 1995 between Ralphs Grocery Company and Jan Charles Gray
(incorporated herein by reference to Exhibit 10.12 of Ralphs Grocery Company's Quarterly Report on Form 10-Q
for the quarter ended July 16, 1995).
10.11* Management Stockholders Agreement dated as of June 14, 1995 by and between Food 4 Less Holdings, Inc. and the
management employees listed on the signature pages thereto (incorporated herein by reference to Exhibit 10.12
of Food 4 Less Holdings, Inc.'s Quarterly Report on Form 10-Q for the quarter ended July 16, 1995).
10.12* Consulting Agreement dated as of June 27, 1988 by and between Falley's, Inc. and Joe S. Burkle (incorporated
herein by reference to Exhibit 10.38 to Food 4 Less Supermarkets, Inc.'s Registration Statement on Form S-1,
No. 33-31152).
10.13* Letter Agreement dated as of December 10, 1990 amending Consulting Agreement by and between Falley's, Inc.
and Joe S. Burkle (incorporated herein by reference to Exhibit 10.17.1 to Food 4 Less Supermarkets, Inc.'s
Annual Report on Form 10-K for the fiscal year ended June 29, 1991).
10.14 Distribution Center Transfer Agreement, dated as of November 1, 1995, by and between
</TABLE>
E-5
<PAGE> 90
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------ -----------------------
<S> <C>
Smith's Food & Drug Centers, Inc., a Delaware corporation, and Ralphs Grocery Company, relating to the
Riverside, California property (incorporated herein by reference to Exhibit 10.1 to Ralphs Grocery Company's
Quarterly Report on Form 10-Q for the quarter ended October 8, 1995).
10.15.1* Ralphs Grocery Company Retirement Supplement Plan, effective as of January 1, 1994.
10.15.2* Amendment to the Retirement Supplement Plan, effective as of January 1, 1995.
10.15.3* Second Amendment to the Retirement Supplement Plan, effective as of June 14, 1995, by and between Ralphs
Grocery Company Retirement Supplement Plan.
10.16.1* Ralphs Grocery Company Supplemental Executive Retirement Plan, amended and restated as of April 9, 1994.
10.16.2* Amendment to the Amended and Restated Supplemental Executive Retirement Plan, effective as of January 1,
1995.
10.16.3* Second Amendment to the Supplement Executive Retirement Plan, effective as of June 14, 1995, by and between
Ralphs Grocery Company and Ralphs Grocery Company Supplemental Executive Retirement Plan.
10.16.4* Third Amendment to Ralphs Grocery Company Supplemental Executive Retirement Plan, effective as of July 1,
1995.
21 Subsidiaries
27 Financial Data Schedule
</TABLE>
E-6
<PAGE> 1
EXHIBIT 10.15.1
RALPHS GROCERY COMPANY
____________________________
RETIREMENT SUPPLEMENT PLAN
EFFECTIVE AS OF JANUARY 1, 1994
<PAGE> 2
SUMMARY OF THE RALPHS GROCERY COMPANY
RETIREMENT SUPPLEMENT PLAN
1. The RSP provides additional benefits to a Participant which,
when added to his benefits under the Ralphs Grocery Company
Retirement Plan, provides a total benefit equal to what he
would have received if the Retirement Plan were changed so
that:
(a) The Compensation of a Participant in excess of the
limits imposed by Code Section 401(a)(17) is counted,
but not over $235,840, as indexed (except in certain
specific situations described in the Plan); and
(b) The Participant's Normal Retirement Date is the first
day of the month coincident with or next following
the Participant's 65th birthday.
2. Any individual who is employed by Ralphs for one year and
earns W-2 compensation higher than the limits on compensation
which can be taken into account under section 401(a)(17) will
automatically become a Participant in the RSP. In addition,
Store Directors, District Mangers and Assistant District
Managers of the Company who participate in the Ralphs Grocery
Company Retirement Plan will automatically become participants
in the RSP. The Administrator may include other employees as
Participants.
3. Unless the Board otherwise specifies, the Ralphs Grocery
Company Benefits Committee shall be the Administrator of the
RSP.
4. Benefits otherwise payable under the RSP will be forfeited if
a Participant is discharged for Cause (as defined in the RSP).
5. If Ralphs institutes a program of split-dollar life insurance
policies for certain executives, any benefits otherwise
payable under the RSP to these executives will be reduced by
the cash value of any interest in the split-dollar policies
that the Participants become entitled to. The remaining RSP
benefit will be paid in a cash lump sum when the employee
terminates employment.
1
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 ELIGIBILITY TO PARTICIPATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 3 RETIREMENT DATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 4 AMOUNT OF SUPPLEMENTAL RETIREMENT BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 5 SUPPLEMENTAL, PRE-RETIREMENT DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 6 ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 7 AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 8 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
i
<PAGE> 4
PREAMBLE
PURPOSE
The purpose of this Plan is to provide a select group of management or
highly compensated eligible employees of Ralphs Grocery Company (hereinafter
referred to as the Company) with supplemental retirement income and survivor
benefits in addition to the benefits from the Company qualified plans and
Social Security. This instrument states the terms and conditions of the Ralphs
Grocery Company Retirement Supplement Plan (hereinafter referred to as the
Plan), which is effective as of January 1, 1994 (hereinafter referred to as the
Effective Date).
The Plan is intended to attract and retain as employees those
executives covered under the Plan and to provide benefits which are unavailable
under the Company qualified retirement plan because of limitations imposed by,
or shortfalls resulting from Section 401(a)(17) of the Internal Revenue Code,
and to allow a normal retirement age under the Plan that is the first day of
the month coincident with or next following the Participant's 65th birthday.
1
<PAGE> 5
ARTICLE 1
DEFINITIONS
The following words and phrases as used herein shall have the
following meanings:
1.1 "Accrued Benefit" shall mean a Participant's benefit accrued for
purposes of this Plan, which shall be the amount which the Participant
would have accrued under the terms of the Basic Plan if the following
changes were made to the Basic Plan:
(a) first, a Participant's Accrued Benefit under the Basic Plan
was determined without regard to the limitations imposed under
the Basic Plan to comply with Sections 401(a)(17) of the Code.
However, Compensation taken into account in any year shall be
limited to $235,840, as indexed, in the case of individuals
whose Compensation exceeds such indexed amount and who are
participants in the Ralphs Grocery Company Supplemental
Executive Retirement Plan;
(c) second, a Participant's "Normal Retirement Age" is the first
day of the month coincident with or next following the
Participant's 65th birthday.
2
<PAGE> 6
1.2 "Actuarial Equivalent" shall have the same meaning as under the Basic
Plan.
1.3 "Administrator" shall mean the person or committee, appointed by the
Board of Directors, with authority and responsibility to manage and
direct the operation and administration of the Plan. Unless otherwise
specified by the Board of Directors of the Company, the Ralphs Grocery
Company Benefits Committee shall be the Administrator. The Company
shall be the "plan administrator" as defined in ERISA.
1.4 "Basic Plan" shall mean the Ralphs Grocery Company Retirement Plan as
in effect on January 1, 1985, and as it may hereafter be amended from
time to time.
1.5 "Beneficiary" shall mean anyone entitled to receive a death benefit
under the Plan on the death of a Participant. A Participant's
Beneficiary or Beneficiaries shall be the same as under the Basic
Plan.
1.6 "Board of Directors" shall mean the Board of Directors of the Company,
as constituted from time to time.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations relating thereto.
3
<PAGE> 7
1.8 "Company" shall mean Ralphs Grocery Company, or any successor entity
thereto.
1.9 "Compensation" shall mean compensation as that term is defined in the
Basic Plan; except that compensation in excess of the limits imposed
by Code Section 401(a)(17) shall be considered "Compensation;"
provided, however, that for individuals who are participants in the
Ralphs Grocery Company Supplemental Executive Retirement Plan,
"Compensation" shall be limited to $235,840, as indexed.
1.10 "Deferred Retirement Date" shall have the same meaning as described in
the Basic Plan.
1.11 "Disability Retirement Date" shall have the same meaning as described
in the Basic Plan.
1.12 "Disabled" shall have the same meaning as in the Basic Plan.
1.13 "Early Retirement Date" shall have the same meaning as described in
the Basic Plan.
1.14 "Effective Date" shall mean January 1, 1994.
1.15 "Employee" shall mean a person who is an employee of an Employer.
4
<PAGE> 8
1.16 "Employer" shall mean the Company and any corporation which is a
member of a controlled group of corporations (as defined in Section
414(b) of the Code) which includes the Company; any trade or business
(whether or not incorporated) with the Company; any organization
(whether or not incorporated) which is a member of an affiliated
service group (as defined in Section 414(m) of the Code) and which
includes the Company; and any other entity required to be aggregated
with the Company pursuant to regulations under Section 414(o) of the
Code.
1.17 "Normal Retirement Age" shall mean age 65.
1.18 "Normal Retirement Date" shall mean the first day of the month
coincident with or next following the Participant's Normal Retirement
Age.
1.19 "Participant" shall mean an Employee of the Company who has become a
participant in the Plan pursuant to Article 2 and whose participation
therein has not ceased, pursuant to any provision of the Plan.
1.20 "Plan" shall mean the Ralphs Grocery Company Retirement Supplement
Plan, as herein set forth and as it may hereafter be amended from time
to time.
1.21 "Plan Year" shall mean the calendar year.
5
<PAGE> 9
1.22 "Pre-Retirement Death Benefit" shall mean any qualified pre-retirement
survivor annuity (within the meaning of Section 417(c) of the Code),
which is provided under the Basic Plan pursuant to Section 401(a)(11)
of the Code.
1.23 "Qualified Plan Benefit" shall mean the benefit paid to a Participant
pursuant to provisions of the Basic Plan and shall include retirement
benefits payable on account of retirement on a Normal Retirement Date,
Early Retirement Date, Deferred Retirement Date, Disability Retirement
Date or the retirement of a Terminated Vested Participant with a
terminated vested benefit. For the purpose of the computations in
Sections 4.1 through 4.5 of this Plan, it shall be assumed that the
Qualified Plan Benefit is payable in the standard form of benefit,
i.e., a single life annuity for an unmarried Participant and a reduced
50% joint and survivor annuity for a married Participant.
1.24 "Supplemental Deferred Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.3.
1.25 "Supplemental Deferred Vested Benefit" shall mean the benefit provided
under this Plan as described in Section 4.5.
6
<PAGE> 10
1.26 "Supplemental Disability Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.4.
1.27 "Supplemental Early Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.2.
1.28 "Supplemental Normal Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.1.
1.29 "Supplemental Pre-Retirement Death Benefit" shall mean the benefit
provided under this Plan as described in Article 5.
1.30 "Supplemental Retirement Benefit" shall mean the benefit payable under
this Plan pursuant to the appropriate section of Article 4.
1.31 "Terminated Vested Participant" shall mean a Participant who is
eligible for a benefit under the Basic Plan pursuant to Article 6 of
the Basic Plan.
1.32 "Year of Credited Service" shall have the same meaning as described in
the Basic Plan.
7
<PAGE> 11
1.33 "Year of Vesting Service" shall have the same meaning as described in
the Basic Plan.
8
<PAGE> 12
ARTICLE 2
ELIGIBILITY TO PARTICIPATE
2.1 Participation Criteria
Effective as of January 1, 1994, an Employee shall automatically
become a Participant in this Plan if he is employed by the Company
throughout a Plan Year and his compensation during that year exceeds
the limit under Section 401(a)(17) of the Code on the amount of wages
which may be taken into account in computing benefits under the Basic
Plan. In addition, effective as of January 1, 1994, an Employee shall
automatically become a Participant in the Plan if he is a Store
Director, District Manager or Assistant District Manager of the
Company; provided that such Employee commences receipt of benefits
from the Basic Plan upon termination of his employment with the
Company. Any Employee not named in the preceding two sentences shall
also become a Participant in the Plan if he is named as a Participant
by the Administrator.
2.2 Loss of Participant Status
An Employee who becomes a Participant shall remain a Participant as
long as he is entitled to any benefits under the Plan.
9
<PAGE> 13
2.3 Inactive Participant Status
An Employee may be designated as an inactive Participant by the
Administrator at any time. The Accrued Benefit of an inactive
Participant shall be frozen (i.e., not increased over the amount that
would then be payable on behalf of the Participant if he permanently
terminated employment as an Employee) from the date he is designated
as such by the Administrator provided he is given timely notification
of such change in status. Notification shall be deemed timely if it
is provided to the Participant within 30 days of the change in status.
10
<PAGE> 14
ARTICLE 3
RETIREMENT DATES
3.1 Retirement Dates
A Participant's Retirement Date shall be his date of actual retirement
which may be his Normal, Early, Disability, or Deferred Retirement
Date as hereinafter defined, whichever is applicable to him pursuant
to the following Sections of this Article 3.
3.2 Normal Retirement
A Participant may retire under this Plan on his Normal Retirement Date
provided he retires under and commences receiving his benefit under
the Basic Plan.
3.3 Early Retirement
A Participant may retire under this Plan on an Early Retirement Date
(which may be the first day of any month coincident with or subsequent
to his 55th birthday and his completion of at least 10 Years of
Vesting Service) provided he retires under and commences receiving his
benefit under the Basic Plan.
3.4 Deferred Retirement
If a participant continues in the employment of an Employer beyond his
Normal Retirement Date, the first day of any month coincident with or
subsequent to his termination of
11
<PAGE> 15
employment after his Normal Retirement Date and commencement of
receipt of benefits under the Basic Plan shall be known as his
Deferred Retirement Date. Such a Participant may retire under this
Plan on such Deferred Retirement Date provided he retires under and
commences receiving his benefit under the Basic Plan.
3.5 Disability Retirement
A participant who is Disabled shall be entitled to a Supplemental
Disability Benefit under this Plan on a Disability Retirement Date
(which will be the first day of any month coincident with or
subsequent to his 55th birthday and his completion of at least 10
years of Vesting Service) provided he retires under and commences
receiving his benefit under the Basic Plan.
12
<PAGE> 16
ARTICLE 4
AMOUNT OF SUPPLEMENTAL RETIREMENT BENEFIT
4.1 Supplemental Normal Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan on his Normal Retirement Date shall receive in the form of
a life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a Supplemental Normal Retirement Benefit equal to
(A) minus (B) where:
(A) equals his Accrued Benefit determined pursuant to this Plan;
and
(B) equals the amount of the Qualified Plan Benefit actually
payable to the Participant at his Normal Retirement Date as
determined under the Basic Plan.
4.2 Supplemental Early Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic plan on his Early Retirement Date shall receive in the form of a
life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a Supplemental Early Retirement Benefit equal to
(A) minus (B) where:
13
<PAGE> 17
(A) equals his Accrued Benefit determined pursuant to this Plan
reduced by 4/10 of one percent (4/10%) for each month by which
the commencement of his Supplemental Early Retirement Benefit
precedes his Normal Retirement Date; and
(B) equals the amount of the Qualified Plan Benefit actually
payable to the Participant at his Early Retirement Date as
determined under the Basic Plan.
4.3 Supplemental Deferred Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan on a Deferred Retirement Date shall receive in the form of
a life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a Supplemental Deferred Retirement Benefit equal
to (A) minus (B) where:
(A) equals his Accrued Benefit determined pursuant to this Plan;
and
(B) equals the amount of the Qualified Plan Benefit actually
payable to the Participant at his Deferred Retirement Date as
determined under the Basic Plan.
14
<PAGE> 18
4.4 Supplemental Disability Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan on a Disability Retirement Date shall receive in the form
of a life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a Supplemental Disability Retirement Benefit
equal to (A) minus (B) where:
(A) equals his Accrued Benefit determined pursuant to this Plan
reduced by 4/10 of one percent (4/10%) for each month by which
the commencement of this Supplemental Disability Retirement
Benefit precedes his Normal Retirement Date; and
(B) equals the amount of the Qualified Plan Benefit actually
payable to the Participant at his Disability Retirement Date
as determined under the Basic Plan.
4.5 Supplemental Deferred Vested Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan and receives a benefit under the Basic Plan as a Terminated
Participant shall receive in the form of a life annuity (if unmarried)
or a reduced 50% joint and survivor annuity (if married) a
Supplemental Deferred Vested Retirement Benefit equal to (A) minus (B)
where:
15
<PAGE> 19
(A) equals his Accrued Benefit determined pursuant to this Plan
reduced by 4/10 of one percent (4/10%) for each month by which
the commencement of his Supplemental Deferred Vested
Retirement Benefit precedes his Normal Retirement Date; and
(B) equals the amount of the Qualified Plan Benefit actually
payable to the Participant at his actual retirement date under
the Basic Plan.
The benefit described under this Section 4.5 shall not be payable to
any Employee (or to such Employee's Beneficiary) who is a Participant
solely by reason of his status as a Store Director, District Manager
or Assistant District Manager of the Company.
4.6 Form of Benefit
The Supplemental Retirement Benefit payable pursuant to this article
shall be paid to the Participant in the normal form described in
Section 4.1 through 4.5 or, if an optional form is elected under the
Basic Plan, in the same form as elected under the Basic Plan. A
retirement benefit payable from the Plan in a form other than the
normal form (i.e., a life annuity for an unmarried Participant or a
reduced joint and survivor annuity in the case of a married
participant) shall be the Actuarial Equivalent of the normal form.
16
<PAGE> 20
The election as to any optional benefit under the Basic Plan shall be
deemed an election of that optional benefit under this Plan and any
consent of the spouse required and given under the Basic Plan shall be
deemed consent to that optional benefit under this Plan.
4.7 Commencement of Benefits
Payment of the Supplemental Retirement Benefit to the Participant
shall commence on the same date as payment of the Basic Plan
retirement benefit payable to the Participant and shall terminate on
the date of the last payment of the Basic Plan retirement benefit.
17
<PAGE> 21
ARTICLE 5
SUPPLEMENTAL, PRE-RETIREMENT DEATH BENEFITS
5.1 Supplemental Pre-Retirement Death Benefits
If a Participant dies prior to the commencement of payment of his
Qualified Plan Benefit and if a Pre-Retirement Death Benefit would be
payable to his surviving spouse under the Basic Plan, then a
Supplemental Pre-Retirement Death Benefit will be payable to the
Participant's surviving spouse under this Plan.
The amount of the Supplemental Pre-Retirement Death Benefit payable
under this Plan shall be either (A) or (B) as described below:
(A) In the case of a Participant who has at least five years of
Vesting Service, the surviving spouse of the Participant shall
receive from this Plan, as of the date a Pre-Retirement Death
Benefit becomes payable from the Basic Plan:
(1) an amount equal to the Pre-Retirement Death Benefit
that would have been payable under the Basic Plan if
the Basic Plan had calculated this benefit using the
definition of Accrued Benefit in this Plan; less
18
<PAGE> 22
(2) the amount of the Qualified Plan Benefit actually
payable to the surviving spouse of the Participant as
determined under the Basic Plan.
(B) If a Participant has five or more years of Vesting Service and
the benefit under this subsection is greater than the amount
described in (A), the designated Beneficiary shall receive a
lump sum benefit equal to the Actuarial Equivalent of the
Participant's Accrued Benefit less the Actuarial Equivalent of
the Qualified Plan Benefit actually payable under the Basic
Plan.
5.2 Form and Commencement of Benefits
The Supplemental Pre-Retirement Death Benefit payable pursuant to
Section 5.1(A) shall be payable over the lifetime of the surviving
spouse in monthly installments commencing on the same date as payment
of the Qualified Plan Benefit payable to such surviving spouse on
account of the death of the Participant and shall terminate on the
date of the last payment of the Pre-Retirement Death Benefit payable
from the Basic Plan. Notwithstanding the preceding sentence, the
benefit payable under Section 5.1(A) shall be paid in a lump sum if
the surviving spouse elects to receive the Pre-Retirement Death
Benefit under the Basic Plan in a lump sum.
19
<PAGE> 23
The Supplemental Pre-Retirement Death Benefit payable pursuant to
Section 5.1(B) shall be payable as a single lump sum as soon as
administratively possible after the death of the Participant.
20
<PAGE> 24
ARTICLE 6
ADMINISTRATION OF THE PLAN
6.1 Administration
Except for the functions reserved within the Plan to the Company or
the Board of Directors, the administration of the Plan shall be the
responsibility of the Administrator appointed by the Board of
Directors.
6.2 Powers of the Administrator
The Administrator shall have the power and the duty to make all
decisions necessary or proper to carry out the Plan. The
determination of the administrator as to any question involving the
general administration and interpretation of the Plan shall be final,
conclusive and binding. Any discretionary actions to be taken under
the Plan by the Administrator with respect to the classification of
Employees, Participants, joint or contingent annuitants, beneficiaries
or benefits shall be uniform in their nature and applicable to all
persons similarly situated. Without limiting the generality of the
foregoing, the Administrator shall have the following powers and
duties:
(A) To furnish to all Participants, upon request, copies of the
Plan, and to require any person to furnish such information as
it may request for the purpose of the
21
<PAGE> 25
proper administration of the Plan as a condition to receiving any
benefits under the Plan;
(B) To make and enforce such rules and regulations and prescribe
the use of such forms as it shall deem necessary for the
efficient administration of the Plan;
(C) To interpret the Plan, and to resolve ambiguities,
inconsistencies and omissions, which findings shall be
binding, final and conclusive;
(D) To decide on questions concerning the Plan in accordance with
the provisions of the Plan;
(E) To determine the amount of benefits which shall be payable to
any person in accordance with the provisions of the Plan; to
instruct the Company as to payments to be made under this Plan
and to provide a full and fair review to any Participant whose
claim for benefits has been denied in whole or in part;
(F) To allocate any such powers and duties to or among individual
members of any administrative committee appointed as the
Administrator; and
(G) To designate persons other than Administrator or members of
any administrative committee to carry out
22
<PAGE> 26
any duty or power which would otherwise be a responsibility of the
Administrator.
6.3 Reliance on Professional Counselors
To the extent permitted by law, the Administrator and any person to
whom it may delegate any duty or power in connection with
administering the Plan, the Company, and the officers and directors of
the Company, shall be entitled to rely conclusively upon, and shall be
fully protected in any action taken or suffered by them in good faith
in the reliance upon, any actuary, counsel, accountant, other
specialist, or other person selected by the Administrator, or in
reliance upon any tables, valuations, certificates, opinions or
reports which shall be furnished by any of them. Further, to the
extent permitted by law, the Administrator, the Company, and the
officers and directors of the Company, shall not be liable for any
neglect, omission or wrongdoing of any other members of any
administrative committee, agent, officer or Employee of the Company.
Any person claiming benefits under the Plan shall look solely to the
company for redress.
6.4 Expenses of the Plan
All expenses incurred prior to the termination of the plan that shall
arise in connection with the administration of the Plan, including,
but not limited to administrative expenses, proper charges and
disbursements, compensation and
23
<PAGE> 27
other expenses and charges of any actuary, counsel, accountant,
specialist, or other person who shall be employed by the Administrator
in connection with the administration thereof, shall be paid by the
Company.
6.5 Claims Procedure
A claim for benefits under the Plan must be made to the Administrator
in writing. The Administrator shall provide adequate notice in
writing to any participant, joint annuitant or Beneficiary whose claim
for benefits under the Plan has been denied, setting forth the
specific reasons for such denial, written in a manner calculated to be
understood by the Participant, joint annuitant or Beneficiary. If a
claim is denied, the Participant or his authorized representative may
request a review of the denial, but such a request must be in writing,
and must be submitted to the Administrator within 60 days after the
claimant's claim has been denied. A decision upon review shall be
made by the Administrator within 60 days of the receipt of the request
for review, unless the Administrator determines that special
circumstances require additional time, in which case a decision shall
be rendered not later than 120 days after receipt of the request for
review. The decision on the review shall be in writing and shall
include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, and specific reference to
the pertinent Plan provisions on which the decision is based.
24
<PAGE> 28
6.6 Indemnification of Administrator
The Employer shall indemnify and hold harmless the Administrator
against any and all claims, loss, damage, expense or liability arising
from any action or failure to act with respect to this Plan, except in
the case of gross negligence or willful misconduct.
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<PAGE> 29
ARTICLE 7
AMENDMENT AND TERMINATION
7.1 Amendment
The Company, although it intends the Plan to be permanent, reserves
the power and the right to amend the Plan at any time. However, no
amendment shall reduce the amount of the Supplemental Retirement
Benefit which has been accrued by a Participant under the Plan as of
the amendment date. Any such amendment shall be made pursuant to a
resolution of the Board of Directors.
7.2 Termination
The Company reserves the power and the right to terminate the Plan at
any time; provided, however, that any such termination will not be
retroactive. Any termination of the Plan shall be pursuant to a
resolution of the Board of Directors. If the Plan is terminated, the
Actuarial Equivalent present value of any remaining benefits payable
to a Participant or spouse who is receiving Plan benefits, and the
accrued Supplemental Retirement Benefit for an active Participant
payable as a life annuity beginning at Normal Retirement Date, may be
paid, in the discretion of the Administrator, in a lump sum 30 days
after the termination of the Plan.
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<PAGE> 30
ARTICLE 8
GENERAL PROVISIONS
8.1 Unsecured Creditor
Participants and their spouses, Beneficiaries, heirs and successors
under this Plan shall have solely those rights of an unsecured
creditor of the Employer. Any and all assets of the Employer shall
not be deemed to be held in trust for any Participant, their
Beneficiaries, heirs and successors, nor shall any assets be
considered security for the performance of obligations of the Employer
and said assets shall at all times remain unpledged, unrestricted
general assets of the Employer. The Employer's obligation under the
Plan shall be an unsecured and unfunded promise to pay benefits at a
future date.
8.2 Unfunded Plan
This Plan is an unfunded plan maintained to provide supplemental
retirement benefits for a select group of management and highly
compensated employees. Any Participant's accounts under the Plan are
maintained for record keeping purposes only and are not to be
construed as funded.
27
<PAGE> 31
8.3 No Contract
This Plan shall not be deemed to constitute a contract between the
Employer and any Employee or other person whether or not in the employ
of the Employer, nor shall anything herein contained be deemed to give
any Employee or other person whether or not in the employ of the
Employer any right to be retained in the employ of the Employer, or to
interfere with the right of the Employer to discharge any Employee at
any time and to treat him without any regard to the effect which such
treatment might have upon him as a Participant of the Plan.
8.4 Nonassignability
Except as may otherwise be required by law, no distribution or payment
under the Plan to any Participant, spouse or Beneficiary shall be
subject in any manner to anticipation, alienation, sale transfer,
assignment, pledge, encumbrance or charge, whether voluntary or
involuntary, and any attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be void.
No distribution or payment shall be in any way liable for, or subject
to, the debts, contracts, liabilities, engagements or torts of any
person entitled to such distribution or payment. If any Participant,
beneficiary, or joint or contingent annuitant is adjudicated bankrupt
or purports to anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge any such distribution or payment, voluntarily or
involuntarily, the
28
<PAGE> 32
Administrator, in this discretion, may cancel such distribution or
payment (or any part thereof) to or for the benefit of such
Participant, spouse or Beneficiary in such manner as the Administrator
shall direct.
8.5 Incapacity
If the Administrator determines that any person entitled to payments
under the Plan is an infant or incompetent by reason of physical or
mental disability, it may cause all payments thereafter becoming due
to such person to be made to any other person for his benefit, without
responsibility to follow application of the amounts so paid. Payments
made pursuant to this provision shall completely discharge the Plan,
the Company, the Employer and the Administrator.
8.6 Permissible Purchase of Annuity Contracts
At the request of the Participant, the Administrator may, in lieu of
paying the benefit to which the Participant is entitled directly from
the Plan, purchase an annuity contract which will provide benefits in
an amount equal to that which the retired Participant is entitled
under this Plan. The ownership of any such annuity contract shall be
retained by the Employer.
29
<PAGE> 33
8.7 Masculine, Feminine, Singular and Plural
The masculine shall include the feminine and the singular shall
include the plural and the plural the singular wherever the person or
entity or context shall plainly so require.
8.8 Withholding Taxes
The Administrator may make any appropriate arrangements to deduct from
all amounts paid under the Plan any taxes required to be withheld by
any government or governmental agency.
8.9 Number of Counterparts
This Plan may be executed in any number of counterparts, each of which
when duly executed by the Employer shall be deemed to be an original,
but all of which shall together constitute but one instrument, which
may be evidenced by any counterpart.
8.10 Governing Law
The provisions of the Plan shall be construed, administered and
interpreted under the applicable Federal law and, to the extent not
preempted, the laws of the State of California.
30
<PAGE> 34
8.11 Binding Agreement
This Plan shall be binding on the parties hereto, their heirs,
executors, administrators, and successors in interest.
8.12 Invalidity of Certain Provisions
If any provision of this Plan is invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provision
hereof and this Plan shall be construed and enforced as if such
provision had not been included.
8.13 Successor Organizations
The Employer agrees that it will not merge or consolidate with any
other corporation or organization, or permit its business activities
to be taken over by any other organization, unless and until the
succeeding or continuing organization or corporation assumes the
rights and obligations under this Plan. If the successor organization
refuses to accept the rights and obligations of this Plan, the Plan
shall terminate prior to the consolidation or merger and benefits
shall be calculated and distributed to Participants.
8.14 Forfeiture
Notwithstanding anything in this Plan to the contrary, the entire
amount credited to a Participant as his Accrued
31
<PAGE> 35
Benefit shall be forfeited if the Company discharges the Participant
for:
(A) theft, embezzlement, or obtaining funds or property under
false pretenses, if such transgressions are demonstrably
material in amount both in relation to the Participant and the
Company;
(B) engaging in an act of dishonesty or moral turpitude (including
convictions of felonies) if such act materially and
demonstrably injures the Company (provided that, traffic or
moving violations shall not constitute acts of dishonesty or
moral turpitude for the purpose of this paragraph); or
(C) willfully failing to substantially perform his duties as an
Employee of the Company (other than as a result of incapacity
due to physical illness), where the Participant has either
acted in bad faith or without a reasonable belief that such
breach was in the best interests of the Company and such
failure has resulted in material and demonstrable injury of
the Company.
32
<PAGE> 36
8.15 Offset for Certain Benefits Payable under Split-Dollar Life Insurance
Agreements
(a) Some of the Participants under this Plan may own life
insurance policies (the "Policies"). The ownership of these Policies by the
Participant is, however, subject to certain conditions (set forth in a
"Split-Dollar Life Insurance Agreement" between the Participant and the
Company) and, if the Participant fails to meet the conditions set forth in the
Split-Dollar Life Insurance Agreement, the Participant may lose certain rights
under the Policy. In the event that a Participant satisfies the conditions
specified in Sections 5 or 6 of the Split-Dollar Life Insurance Agreement, so
that the Participant or his beneficiary becomes entitled to benefits under
those sections, the value of those benefits shall constitute an offset to any
benefits otherwise payable under this Plan. As the case may be, this offset
(the "Offset Value") shall be calculated by determining the value of benefits
payable under the Split-Dollar Life Insurance Agreement, the cash surrender
value of the Policy, or in the case of the Participant's death, the death
benefits payable to the beneficiary under the Policy. The Offset Value shall
then be compared to the Actuarial Equivalent of the benefits payable under the
Plan (the "Plan Value"), and the Plan Value shall be reduced by the Offset
Value.
(b) At the time when the Participant terminates employment, if the
Plan Value exceeds the present value of the Offset Value, the excess of the
Plan Value over the Offset Value shall be paid
33
<PAGE> 37
to the Participant or beneficiary at that time in a lump sum. Such payment
shall completely discharge all obligations owed under this Plan on account of
Participant's participation in this Plan. In the case of a Participant who
terminates employment for a reason other than death, the calculation of the
Plan Value shall be based on the pension under the RSP to which the Employee
would be entitled if he then retired or, if the Participant is not yet eligible
to retire, the pension under the RSP to which the Participant would be entitled
if he retired on the first day on which he is eligible to retire.
(c) If the Policy described in subsection (a) is not on the life
of the Participant, the insured dies prior to the Participant's becoming
eligible for benefits under the Plan, and the Participant subsequently becomes
eligible for benefits hereunder, the actuarial value of the benefits payable
hereunder shall be offset by the actuarial value of the payments previously
paid to the Participant under the Split-Dollar Life Insurance Agreement.
Calculations shall be done on an after-tax basis. Any remaining amount due the
Participant shall thereupon be paid in a cash lump sum.
34
<PAGE> 38
IN WITNESS WHEREOF, this Plan has been executed effective as
of ______, 1994.
RALPHS GROCERY COMPANY
By /s/ Jan Charles Gray
-----------------------
Its ______________________
By _______________________
Its ______________________
35
<PAGE> 1
EXHIBIT 10.15.2
AMENDMENT TO THE
RETIREMENT SUPPLEMENT PLAN
This Amendment to the Retirement Supplement Plan ("RSP") is effective
as of January 1, 1995.
1. Capitalized terms that are not defined herein shall
have the same meaning as contained in the RSP.
2. Section 1.2 is hereby amended by adding the following
at the end of such section:
"For the purpose of determining lump sum amounts payable under
Sections 5, 7.2 and 8.15 under the Plan, Actuarial Equivalent
shall be based on the 1983 Group Annuity Mortality Table for
males and a discount rate of 5% per annum."
This Amendment is effective as of January 1, 1995.
Ralphs Grocery Company
By:____________________________________
Title
<PAGE> 1
EXHIBIT 10.15.3
SECOND AMENDMENT TO
THE RALPHS GROCERY COMPANY
RETIREMENT SUPPLEMENT PLAN
Ralphs Grocery Company (the "Company") maintains the Ralphs
Grocery Company Retirement Supplement Plan (the "Plan") for the benefit of its
eligible Employees, effective as of January 1, 1994. The Plan was amended
effective January 1, 1995.
Effective as of June 14, 1995, the Food 4 Less Supermarkets,
Inc. shall merge with and into Ralphs Supermarkets, Inc. ("RSI"). Immediately
following said merger, the Company, a wholly owned operating subsidiary of RSI,
will merge with and into RSI and RSI will change its name to Ralphs Grocery
Company which shall be the sponsor and the Company under the Plan effective
immediately following said mergers.
In order to amend the Plan to provide for said mergers and to
clarify the eligibility provisions under the Plan following said mergers, this
Second Amendment to the Plan was adopted by a resolution of the Board of
Directors of the Company, effective as of June 14, 1995. This Second
Amendment, together with the First Amendment and the original Plan, constitute
the entire Plan as amended to date.
1. Section 1.23A is hereby added to the Plan to read in
its entirety as follows:
1.22A "Prior Employer" shall mean a prior employer of Participants
which employer is designated by the Board as a Prior Employer.
Such designation shall also include the terms and extent for
credit to be provided for service with such Prior Employer and
the extent to which compensation paid by such Prior Employer
shall be included as Compensation under the Plan.
2. Section 2.1 of the Plan is hereby amended to read in
its entirety as follows:
2.1 Participation Criteria
Except as otherwise provided herein, an Employee shall
automatically become a Participant in this Plan if he is
employed by the Company throughout a Plan Year and his
compensation during that year exceeds the limit under Section
401(a)(17) of the Code on the amount of wages which may be
taken into account in computing benefits under the Basic Plan.
In addition, except as otherwise provided herein, an Employee
shall automatically become a Participant in the Plan if he is
a Store Director, District Manager or Assistant District
Manager of the Company; provided that such Employee commences
receipt of benefits from the Basic Plan upon termination of
his employment with the Company. Any Employee not named in
the preceding two sentences shall also become a Participant in
the Plan if he is named as a Participant by the Administrator.
<PAGE> 2
Each former employee of Food 4 Less Supermarkets, Inc.
immediately prior to June 14, 1995 who becomes an Employee on
June 14, 1995 shall be eligible to become a Participant in
this Plan on the date designated by the Board of Directors
which is not later than January 1, 1997; provided, however,
that he satisfies the other requirements described in this
paragraph.
Executed as of the _____ day of June, 1995.
RALPHS GROCERY COMPANY
By: /s/ Jan Charles Gray
--------------------------
Officer
By: /s/ Alan J. Reed
--------------------------
Officer
2
<PAGE> 1
EXHIBIT 10.16.1
RALPHS GROCERY COMPANY
____________________________
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AMENDED AND RESTATED AS OF APRIL 9, 1994
<PAGE> 2
SUMMARY OF THE RALPHS GROCERY COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
1. The SERP provides additional benefits to a Participant which,
when added to his benefits under the Ralphs Grocery Company
Retirement Plan and the Ralphs Grocery Company Retirement
Supplement Plan, provides a total benefit equal to what he
would have received if the Retirement Plan were changed in
seven respects.
(a) The basic formula changed from being based on 3/4% of
Final Average Monthly Compensation below the Social
Security Bendpoint and 1-1/2% above to a formula
based on 2% of Final Average Monthly Compensation.
(b) Up to only 30 years of Credited Service could be
taken into account.
(c) The limits under section 415 of the Code were
inapplicable. [In 1989 section 415 limited pension
payments to $98,064 a year in the case of someone
retiring at age 65 (the limit is lower for earlier
retirement ages). The limit is adjusted for CPI
increases each year.]
(d) For purposes of computing benefits, the compensation
of a Participant includes amounts deferred under the
Company Savings Plan Plus, any cafeteria plan, or any
other deferred compensation plan.
(e) All compensation of a Participant is counted,
including compensation in excess of the limits
imposed by Code Section 401(a)(17).
(f) The Retirement Plan bases a Participant's benefit on
average compensation during the five consecutive
years in which average compensation is the highest.
The SERP will look at the highest three years,
whether or not consecutive.
(g) In the event of retirement before Social Security
Retirement Age, the Retirement Plan reduces benefits
by 4.8% a year from Social Security Retirement Age.
The SERP will reduce benefits by 2% from age 65. For
example, if a Participant retires at age 55, he will
receive 80% of the benefit payable at age 65.
However, in the case of a Participant who terminates
before his Early Retirement Date (an Early Retirement
Date occurs
<PAGE> 3
when a Participant terminates who has at least 10
years of service and is age 55 or older), the
actuarial reduction for early retirement will still
be 4.8% a year. There is one exception; if a
Participant terminates when he is entitled to a
benefit under his split-dollar life insurance policy,
the actuarial reduction is only 2%.
2. Prior to April 9, 1994, any individual who is employed by
Ralphs for one year and earns W-2 compensation higher than the
limits on compensation which can be taken into account under
section 401(a)(17) will automatically become a Participant in
the SERP. On or after April 9, 1994, an individual who is
employed by Ralphs and whose average Gross Compensation over
the three years that produces the highest average equals or
exceeds $235,840 will automatically become a Participant in
the SERP. The Administrator may include other employees as
Participants.
3. Unless the Board otherwise specifies, the Ralphs Grocery
Company Benefits Committee shall be the Administrator of the
SERP.
4. Benefits otherwise payable under the SERP will be forfeited if
a Participant is discharged for Cause (as defined in the
SERP).
5. If Ralphs institutes a program of split-dollar life insurance
policies for certain executives, any benefits otherwise
payable under the SERP to these executives will be reduced by
the cash value of any interest in the split-dollar policies
that the Participants become entitled to. The remaining SERP
benefit will be paid in a cash lump sum when the employee
terminates employment.
6. The SERP recites that it is a replacement of the Federated
Department Stores, Inc. Supplementary Retirement Plan and that
no current employees of Ralphs have any rights to benefits
under the Federated Plan. To the extent any such rights
exist, however, the SERP provides that any benefits otherwise
payable under the SERP are accordingly reduced.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 ELIGIBILITY TO PARTICIPATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 3 RETIREMENT DATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 4 AMOUNT OF SUPPLEMENTAL RETIREMENT BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 5 SUPPLEMENTAL, PRE-RETIREMENT DEATH BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 6 ADMINISTRATION OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 7 AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 8 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
i
<PAGE> 5
PREAMBLE
PURPOSE
The purpose of this Plan is to provide a select group of management or
highly compensated eligible employees of Ralphs Grocery Company (hereinafter
referred to as the Company) with supplemental retirement income and survivor
benefits in addition to the benefits from the Company qualified plans and
Social Security. This instrument states the terms and conditions of the Ralphs
Grocery Company Supplemental Executive Retirement Plan (hereinafter referred to
as the Plan), which was effective as of January 29, 1990 (hereinafter referred
to as the Effective Date). This amendment and restatement of the Plan is
effective as of April 9, 1994. This amendment and restatement shall not affect
the benefits of Participants who terminated employment with the Company prior
to April 9, 1994.
The Plan is intended to attract and retain as employees those
executives covered under the Plan and to provide benefits which are unavailable
under the Company qualified retirement plan because of limitations imposed by,
or shortfalls resulting from, (a) Section 415 of the Internal Revenue Code, (b)
Section 401(a)(17) of the Internal Revenue Code, and (c) amounts deferred by
eligible participants pursuant by provisions of any unfunded deferred
compensation plan maintained by the Company.
1
<PAGE> 6
ARTICLE 1
DEFINITIONS
The following words and phrases as used herein shall have the
following meanings:
1.1 "Accrued Benefit" shall mean a Participant's benefit accrued for
purposes of this Plan, which shall be the amount which the Participant
would have accrued under the terms of the Basic Plan if the following
changes were made to the Basic Plan:
(a) first, the term "Accrued Benefit" (as defined in the Basic
Plan) considered and used "Gross Compensation" rather than
"Compensation" in determining a Participant's benefit;
(b) second, a Participant's Accrued Benefit under the Basic Plan
were determined without regard to the limitations imposed
under the Basic Plan to comply with Sections 401(a)(17) and
415 of the Code;
(c) third, the determination of a Participant's "Final Average
Monthly Compensation" (FAMC) under the Basic Plan were based
on the highest monthly average of the Participant's Gross
Compensation for three, instead of
2
<PAGE> 7
five, calendar years of employment, whether or not such years
are consecutive; and
(d) fourth, instead of calculating a Participant's Accrued Benefit
based on a formula of 3/4% of Final Average Monthly
Compensation below the "Social Security Bendpoint" (as defined
in the Basic Plan) and 1-1/2% of Final Average Monthly
Compensation above the Social Security Bendpoint, the Accrued
Benefit is calculated as 2% of FAMC multiplied by Years of
Credited Service up to 30.
1.2 "Actuarial Equivalent" shall have the same meaning as under the Basic
Plan.
1.3 "Administrator" shall mean the person or committee, appointed by the
Board of Directors, with authority and responsibility to manage and
direct the operation and administration of the Plan. Unless otherwise
specified by the Board of Directors of the Company, the Ralphs Grocery
Company Benefits Committee shall be the Administrator. The Company
shall be the "plan administrator" as defined in ERISA.
3
<PAGE> 8
1.4 "Basic Plan" shall mean the Ralphs Grocery Company Retirement Plan as
in effect on January 1, 1985, and as it may hereafter be amended from
time to time.
1.5 "Beneficiary" shall mean anyone entitled to receive a death benefit
under the Plan on the death of a Participant. A Participant's
Beneficiary or Beneficiaries shall be the same as under the Basic
Plan.
1.6 "Board of Directors" shall mean the Board of Directors of the Company,
as constituted from time to time.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations relating thereto.
1.8 "Company" shall mean Ralphs Grocery Company, or any successor entity
thereto.
1.9 "Compensation" shall mean compensation as that term is defined in the
Basic Plan.
1.10 "Deferred Retirement Date" shall have the same meaning as described in
the Basic Plan.
1.11 "Disability Retirement Date" shall have the same meaning as described
in the Basic Plan.
4
<PAGE> 9
1.12 "Disabled" shall have the same meaning as in the Basic Plan.
1.13 "Early Retirement Date" shall have the same meaning as described in
the Basic Plan.
1.14 "Effective Date" shall mean January 29, 1990.
1.15 "Employee" shall mean a person who is an employee of an Employer.
1.16 "Employer" shall mean the Company and any corporation which is a
member of a controlled group of corporations (as defined in Section
414(b) of the Code) which includes the Company; any trade or business
(whether or not incorporated) with the Company; any organization
(whether or not incorporated) which is a member of an affiliated
service group (as defined in Section 414(m) of the Code) and which
includes the Company; and any other entity required to be aggregated
with the Company pursuant to regulations under Section 414(o) of the
Code.
1.17 "Gross Compensation" shall mean the Participant's compensation
reported for Federal Income Tax purposes for service rendered as an
Employee of an Employer, plus any amounts deferred under the Savings
Plus Plan or any unfunded deferred compensation plan maintained by the
Company or any salary reductions under Section 125 of the Code;
provided,
5
<PAGE> 10
however, that Gross Compensation shall not include moving expenses,
educational reimbursements, car allowances, income from exercising
stock options, imputed income from employee benefit programs
maintained by the Company, living allowances and payments to
Participants under the Executive Deferred Compensation Plan maintained
by the Company.
1.18 "Normal Retirement Age" shall mean age 65.
1.19 "Normal Retirement Date" shall mean the first day of the month
coincident with or next following the Participant's Normal Retirement
Age.
1.20 "Participant" shall mean an Employee of the Company who has become a
participant in the Plan pursuant to Article 2 and whose participation
therein has not ceased, pursuant to any provision of the Plan.
1.21 "Plan" shall mean the Ralphs Grocery Company Supplemental Executive
Retirement Plan, as herein set forth and as it may hereafter be
amended from time to time.
1.22 "Plan Year" shall mean the calendar year.
1.23 "Pre-Retirement Death Benefit" shall mean any qualified pre-retirement
survivor annuity (within the meaning of Section
6
<PAGE> 11
417(c) of the Code), which is provided under the Basic Plan pursuant
to Section 401(a)(11) of the Code.
1.24 "Qualified Plan Benefit" shall mean the benefit paid to a Participant
pursuant to provisions of the Basic Plan and shall include retirement
benefits payable on account of retirement on a Normal Retirement Date,
Early Retirement Date, Deferred Retirement Date, Disability Retirement
Date or the retirement of a Terminated Vested Participant with a
terminated vested benefit. For the purpose of the computations in
Sections 4.1 through 4.5 of this Plan, it shall be assumed that the
Qualified Plan Benefit is payable in the standard form of benefit,
i.e., a single life annuity for an unmarried Participant and a reduced
50% joint and survivor annuity for a married Participant.
1.25 "Retirement Supplement Plan" shall mean the Ralphs Grocery Company
Retirement Supplement Plan as in effect on January 1, 1994, and as it
may hereafter be amended from time to time.
1.26 "Supplemental Deferred Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.3.
7
<PAGE> 12
1.27 "Supplemental Deferred Vested Benefit" shall mean the benefit provided
under this Plan as described in Section 4.5.
1.28 "Supplemental Disability Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.4.
1.29 "Supplemental Early Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.2.
1.30 "Supplemental Normal Retirement Benefit" shall mean the benefit
provided under this Plan as described in Section 4.1.
1.31 "Supplemental Pre-Retirement Death Benefit" shall mean the benefit
provided under this Plan as described in Article 5.
1.32 "Supplemental Retirement Benefit" shall mean the benefit payable under
this Plan pursuant to the appropriate section of Article 4.
1.33 "Terminated Vested Participant" shall mean a Participant who is
eligible for a benefit under the Basic Plan pursuant to Article 6 of
the Basic Plan.
8
<PAGE> 13
1.34 "Year of Credited Service" shall have the same meaning as described in
the Basic Plan; except that for purposes of this Plan a Participant
shall be credited with a maximum of 30 Years of Credited Service.
Notwithstanding the preceding sentence, with respect to Participants
who terminated employment with the Company prior to April 9, 1994, for
purposes of this Plan a Participant shall be credited with a maximum
of 20 Years of Credited Service.
1.35 "Year of Vesting Service" shall have the same meaning as described in
the Basic Plan.
9
<PAGE> 14
ARTICLE 2
ELIGIBILITY TO PARTICIPATE
2.1 Participation Criteria
Prior to April 9, 1994, an Employee shall automatically become a
Participant in this Plan if he is employed by the Company throughout a
Plan Year and his compensation during that year exceeds the limit
under Section 401(a)(17) of the Code on the amount of wages which may
be taken into account in computing benefits under the Basic Plan. On
or after April 9, 1994, an Employee shall automatically become a
Participant in this Plan if the average of his Gross Compensation that
is taken into account under Section 1.1(c) to determine his Final
Average Monthly Compensation equals or exceeds $235,840. Any Employee
not named in the preceding sentence shall also become a Participant in
the Plan if he is named as a Participant by the Administrator.
2.2 Loss of Participant Status
An Employee who becomes a Participant shall remain a Participant as
long as he is entitled to any benefits under the Plan.
2.3 Inactive Participant Status
An Employee may be designated as an inactive Participant by the
Administrator at any time. The Accrued Benefit of an inactive
Participant shall be frozen (i.e., not increased
10
<PAGE> 15
over the amount that would then be payable on behalf of the
Participant if he permanently terminated employment as an Employee)
from the date he is designated as such by the Administrator provided
he is given timely notification of such change in status.
Notification shall be deemed timely if it is provided to the
Participant within 30 days of the change in status.
11
<PAGE> 16
ARTICLE 3
RETIREMENT DATES
3.1 Retirement Dates
A Participant's Retirement Date shall be his date of actual retirement
which may be his Normal, Early, Disability, or Deferred Retirement
Date as hereinafter defined, whichever is applicable to him pursuant
to the following Sections of this Article 3.
3.2 Normal Retirement
A Participant may retire under this Plan on his Normal Retirement Date
provided he retires under and commences receiving his benefit under
the Basic Plan.
3.3 Early Retirement
A Participant may retire under this Plan on an Early Retirement Date
(which may be the first day of any month coincident with or subsequent
to his 55th birthday and his completion of at least 10 Years of
Vesting Service) provided he retires under and commences receiving his
benefit under the Basic Plan.
3.4 Deferred Retirement
If a participant continues in the employment of an Employer beyond his
Normal Retirement Date, the first day of any month coincident with or
subsequent to his termination of
12
<PAGE> 17
employment after his Normal Retirement Date and commencement of
receipt of benefits under the Basic Plan shall be known as his
Deferred Retirement Date. Such a Participant may retire under this
Plan on such Deferred Retirement Date provided he retires under and
commences receiving his benefit under the Basic Plan.
3.5 Disability Retirement
A participant who is Disabled shall be entitled to a Supplemental
Disability Benefit under this Plan on a Disability Retirement Date
(which will be the first day of any month coincident with or
subsequent to his 55th birthday and his completion of at least 10
years of Vesting Service) provided he retires under and commences
receiving his benefit under the Basic Plan.
13
<PAGE> 18
ARTICLE 4
AMOUNT OF SUPPLEMENTAL RETIREMENT BENEFIT
4.1 Supplemental Normal Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan on his Normal Retirement Date shall receive in the form of
a life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a Supplemental Normal Retirement Benefit equal to
(A) minus (B) where:
(A) equals his Accrued Benefit determined pursuant to this Plan;
and
(B) equals (i) the amount of the Qualified Plan Benefit actually
payable to the Participant at his Normal Retirement Date as
determined under the Basic Plan, plus (ii) the amount of the
benefit actually payable to the Participant at his Normal
Retirement Date as determined under the Retirement Supplement
Plan.
4.2 Supplemental Early Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic plan on his Early Retirement Date shall receive in the form of a
life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a
14
<PAGE> 19
Supplemental Early Retirement Benefit equal to (A) minus (B) where:
(A) equals his Accrued Benefit determined pursuant to this Plan
reduced by 1/6 of one percent (1/6%) for each month by which
the commencement of his Supplemental Early Retirement Benefit
precedes his Normal Retirement Date; and
(B) equals (i) the amount of the Qualified Plan Benefit actually
payable to the Participant at his Early Retirement Date as
determined under the Basic Plan, plus (ii) the amount of the
benefit actually payable to the Participant at his Early
Retirement Date as determined under the Retirement Supplement
Plan.
4.3 Supplemental Deferred Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan on a Deferred Retirement Date shall receive in the form of
a life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a Supplemental Deferred Retirement Benefit equal
to (A) minus (B) where:
(A) equals his Accrued Benefit determined pursuant to this Plan;
and
15
<PAGE> 20
(B) equals (i) the amount of the Qualified Plan Benefit actually
payable to the Participant at his Deferred Retirement Date as
determined under the Basic Plan, plus (ii) the amount of the
benefit actually payable to the Participant at his Deferred
Retirement Date as determined under the Retirement Supplement
Plan.
4.4 Supplemental Disability Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan on a Disability Retirement Date shall receive in the form
of a life annuity (if unmarried) or a reduced 50% joint and survivor
annuity (if married) a Supplemental Disability Retirement Benefit
equal to (A) minus (B) where:
(A) equals his Accrued Benefit determined pursuant to this Plan
reduced by 1/6 of one percent (1/6%) for each month by which
the commencement of this Supplemental Disability Retirement
Benefit precedes his Normal Retirement Date; and
(B) equals (i) the amount of the Qualified Plan Benefit actually
payable to the Participant at his Disability Retirement Date
as determined under the Basic Plan, plus (ii) the amount of
the benefit actually payable to the Participant at his
Disability Retirement Date as determined under the Retirement
Supplement Plan.
16
<PAGE> 21
4.5 Supplemental Deferred Vested Retirement Benefit
A Participant who retires on or after the Effective Date under the
Basic Plan and receives a benefit under the Basic Plan as a Terminated
Participant shall receive in the form of a life annuity (if unmarried)
or a reduced 50% joint and survivor annuity (if married) a
Supplemental Deferred Vested Retirement Benefit equal to (A) minus (B)
where:
(A) equals his Accrued Benefit determined pursuant to this Plan
reduced by 4/10 of one percent (4/10%) for each month by which
the commencement of his Supplemental Deferred Vested
Retirement Benefit precedes his Normal Retirement Date; and
(B) equals (i) the amount of the Qualified Plan Benefit actually
payable to the Participant at his actual retirement date under
the Basic Plan, plus (ii) the amount of the benefit actually
payable to the Participant at his actual retirement date under
the Retirement Supplement Plan.
Notwithstanding the preceding sentence, in the case of a Participant
described in Section 8.15 who terminates employment when he is
entitled to a benefit under his Policy, the phrase "4/10 of one
percent (4/10%)" shall be replaced by the phrase "1/6 of one percent
(1/6%)."
17
<PAGE> 22
4.6 Form of Benefit
The Supplemental Retirement Benefit payable pursuant to this article
shall be paid to the Participant in the normal form described in
Section 4.1 through 4.5 or, if an optional form is elected under the
Basic Plan, in the same form as elected under the Basic Plan. A
retirement benefit payable from the Plan in a form other than the
normal form (i.e., a life annuity for an unmarried Participant or a
reduced joint and survivor annuity in the case of a married
participant) shall be the Actuarial Equivalent of the normal form.
The election as to any optional benefit under the Basic Plan shall be
deemed an election of that optional benefit under this Plan and any
consent of the spouse required and given under the Basic Plan shall be
deemed consent to that optional benefit under this Plan.
4.7 Commencement of Benefits
Payment of the Supplemental Retirement Benefit to the Participant
shall commence on the same date as payment of the Basic Plan
retirement benefit payable to the Participant and shall terminate on
the date of the last payment of the Basic Plan retirement benefit.
18
<PAGE> 23
ARTICLE 5
SUPPLEMENTAL, PRE-RETIREMENT DEATH BENEFITS
5.1 Supplemental Pre-Retirement Death Benefits
If a Participant dies prior to the commencement of payment of his
Qualified Plan Benefit and if a Pre-Retirement Death Benefit would be
payable to his surviving spouse under the Basic Plan, then a
Supplemental Pre-Retirement Death Benefit will be payable to the
Participant's surviving spouse under this Plan.
The amount of the Supplemental Pre-Retirement Death Benefit payable
under this Plan shall be either (A) or (B) as described below:
(A) In the case of a Participant who has at least five years of
Vesting Service, the surviving spouse of the Participant shall
receive from this Plan, as of the date a Pre-Retirement Death
Benefit becomes payable from the Basic Plan:
(1) an amount equal to the Pre-Retirement Death Benefit
that would have been payable under the Basic Plan if
the Basic Plan had calculated this benefit using the
definition of Accrued Benefit in this Plan; less
19
<PAGE> 24
(2) (i) the amount of the Qualified Plan Benefit actually
payable to the surviving spouse of the Participant as
determined under the Basic Plan, plus (ii) the amount
of the benefit actually payable to the surviving
spouse of the Participant as determined under the
Retirement Supplement Plan.
(B) If a Participant has five or more years of Vesting Service and
the benefit under this subsection is greater than the amount
described in (A), the designated Beneficiary shall receive a
lump sum benefit equal to the Actuarial Equivalent of the
Participant's Accrued Benefit less the Actuarial Equivalent of
(i) the Qualified Plan Benefit actually payable under the
Basic Plan and (ii) the benefit payable under the Retirement
Supplement Plan; provided that, for this purpose the
Participant's Accrued Benefit shall be computed by multiplying
the Participant's Final Average Monthly Compensation times
3/4% times Years of Credited Service.
5.2 Form and Commencement of Benefits
The Supplemental Pre-Retirement Death Benefit payable pursuant to
Section 5.1(A) shall be payable over the lifetime of the surviving
spouse in monthly installments commencing on the same date as payment
of the Qualified Plan
20
<PAGE> 25
Benefit payable to such surviving spouse on account of the death of
the Participant and shall terminate on the date of the last payment of
the Pre-Retirement Death Benefit payable from the Basic Plan.
Notwithstanding the preceding sentence, the benefit payable under
Section 5.1(A) shall be paid in a lump sum if the surviving spouse
elects to receive the Pre-Retirement Death Benefit under the Basic
Plan in a lump sum.
The Supplemental Pre-Retirement Death Benefit payable pursuant to
Section 5.1(B) shall be payable as a single lump sum as soon as
administratively possible after the death of the Participant.
21
<PAGE> 26
ARTICLE 6
ADMINISTRATION OF THE PLAN
6.1 Administration
Except for the functions reserved within the Plan to the Company or
the Board of Directors, the administration of the Plan shall be the
responsibility of the Administrator appointed by the Board of
Directors.
6.2 Powers of the Administrator
The Administrator shall have the power and the duty to make all
decisions necessary or proper to carry out the Plan. The
determination of the administrator as to any question involving the
general administration and interpretation of the Plan shall be final,
conclusive and binding. Any discretionary actions to be taken under
the Plan by the Administrator with respect to the classification of
Employees, Participants, joint or contingent annuitants, beneficiaries
or benefits shall be uniform in their nature and applicable to all
persons similarly situated. Without limiting the generality of the
foregoing, the Administrator shall have the following powers and
duties:
(A) To furnish to all Participants, upon request, copies of the
Plan, and to require any person to furnish such information as
it may request for the purpose of the
22
<PAGE> 27
proper administration of the Plan as a condition to receiving
any benefits under the Plan;
(B) To make and enforce such rules and regulations and prescribe
the use of such forms as it shall deem necessary for the
efficient administration of the Plan;
(C) To interpret the Plan, and to resolve ambiguities,
inconsistencies and omissions, which findings shall be
binding, final and conclusive;
(D) To decide on questions concerning the Plan in accordance with
the provisions of the Plan;
(E) To determine the amount of benefits which shall be payable to
any person in accordance with the provisions of the Plan; to
instruct the Company as to payments to be made under this Plan
and to provide a full and fair review to any Participant whose
claim for benefits has been denied in whole or in part;
(F) To allocate any such powers and duties to or among individual
members of any administrative committee appointed as the
Administrator; and
(G) To designate persons other than Administrator or members of
any administrative committee to carry out
23
<PAGE> 28
any duty or power which would otherwise be a responsibility of
the Administrator.
6.3 Reliance on Professional Counselors
To the extent permitted by law, the Administrator and any person to
whom it may delegate any duty or power in connection with
administering the Plan, the Company, and the officers and directors of
the Company, shall be entitled to rely conclusively upon, and shall be
fully protected in any action taken or suffered by them in good faith
in the reliance upon, any actuary, counsel, accountant, other
specialist, or other person selected by the Administrator, or in
reliance upon any tables, valuations, certificates, opinions or
reports which shall be furnished by any of them. Further, to the
extent permitted by law, the Administrator, the Company, and the
officers and directors of the Company, shall not be liable for any
neglect, omission or wrongdoing of any other members of any
administrative committee, agent, officer or Employee of the Company.
Any person claiming benefits under the Plan shall look solely to the
company for redress.
6.4 Expenses of the Plan
All expenses incurred prior to the termination of the plan that shall
arise in connection with the administration of the Plan, including,
but not limited to administrative expenses, proper charges and
disbursements, compensation and
24
<PAGE> 29
other expenses and charges of any actuary, counsel, accountant,
specialist, or other person who shall be employed by the Administrator
in connection with the administration thereof, shall be paid by the
Company.
6.5 Claims Procedure
A claim for benefits under the Plan must be made to the Administrator
in writing. The Administrator shall provide adequate notice in
writing to any participant, joint annuitant or Beneficiary whose claim
for benefits under the Plan has been denied, setting forth the
specific reasons for such denial, written in a manner calculated to be
understood by the Participant, joint annuitant or Beneficiary. If a
claim is denied, the Participant or his authorized representative may
request a review of the denial, but such a request must be in writing,
and must be submitted to the Administrator within 60 days after the
claimant's claim has been denied. A decision upon review shall be
made by the Administrator within 60 days of the receipt of the request
for review, unless the Administrator determines that special
circumstances require additional time, in which case a decision shall
be rendered not later than 120 days after receipt of the request for
review. The decision on the review shall be in writing and shall
include specific reasons for the decision, written in a manner
calculated to be understood by the claimant, and specific reference to
the pertinent Plan provisions on which the decision is based.
25
<PAGE> 30
6.6 Indemnification of Administrator
The Employer shall indemnify and hold harmless the Administrator
against any and all claims, loss, damage, expense or liability arising
from any action or failure to act with respect to this Plan, except in
the case of gross negligence or willful misconduct.
26
<PAGE> 31
ARTICLE 7
AMENDMENT AND TERMINATION
7.1 Amendment
The Company, although it intends the Plan to be permanent, reserves
the power and the right to amend the Plan at any time. However, no
amendment shall reduce the amount of the Supplemental Retirement
Benefit which has been accrued by a Participant under the Plan as of
the amendment date. Any such amendment shall be made pursuant to a
resolution of the Board of Directors.
7.2 Termination
The Company reserves the power and the right to terminate the Plan at
any time; provided, however, that any such termination will not be
retroactive. Any termination of the Plan shall be pursuant to a
resolution of the Board of Directors. If the Plan is terminated, the
Actuarial Equivalent present value of any remaining benefits payable
to a Participant or spouse who is receiving Plan benefits, and the
accrued Supplemental Retirement Benefit for an active Participant
payable as a life annuity beginning at Normal Retirement Date, shall
be paid in a lump sum 30 days after the termination of the Plan.
27
<PAGE> 32
ARTICLE 8
GENERAL PROVISIONS
8.1 Unsecured Creditor
Participants and their spouses, Beneficiaries, heirs and successors
under this Plan shall have solely those rights of an unsecured
creditor of the Employer. Any and all assets of the Employer shall
not be deemed to be held in trust for any Participant, their
Beneficiaries, heirs and successors, nor shall any assets be
considered security for the performance of obligations of the Employer
and said assets shall at all times remain unpledged, unrestricted
general assets of the Employer. The Employer's obligation under the
Plan shall be an unsecured and unfunded promise to pay benefits at a
future date.
8.2 Unfunded Plan
This Plan is an unfunded plan maintained to provide supplemental
retirement benefits for a select group of management and highly
compensated employees. Any Participant's accounts under the Plan are
maintained for record keeping purposes only and are not to be
construed as funded.
28
<PAGE> 33
8.3 No Contract
This Plan shall not be deemed to constitute a contract between the
Employer and any Employee or other person whether or not in the employ
of the Employer, nor shall anything herein contained be deemed to give
any Employee or other person whether or not in the employ of the
Employer any right to be retained in the employ of the Employer, or to
interfere with the right of the Employer to discharge any Employee at
any time and to treat him without any regard to the effect which such
treatment might have upon him as a Participant of the Plan.
8.4 Nonassignability
Except as may otherwise be required by law, no distribution or payment
under the Plan to any Participant, spouse or Beneficiary shall be
subject in any manner to anticipation, alienation, sale transfer,
assignment, pledge, encumbrance or charge, whether voluntary or
involuntary, and any attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be void.
No distribution or payment shall be in any way liable for, or subject
to, the debts, contracts, liabilities, engagements or torts of any
person entitled to such distribution or payment. If any Participant,
beneficiary, or joint or contingent annuitant is adjudicated bankrupt
or purports to anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge any such distribution or payment, voluntarily or
involuntarily, the
29
<PAGE> 34
Administrator, in this discretion, may cancel such distribution or
payment (or any part thereof) to or for the benefit of such
Participant, spouse or Beneficiary in such manner as the Administrator
shall direct.
8.5 Incapacity
If the Administrator determines that any person entitled to payments
under the Plan is an infant or incompetent by reason of physical or
mental disability, it may cause all payments thereafter becoming due
to such person to be made to any other person for his benefit, without
responsibility to follow application of the amounts so paid. Payments
made pursuant to this provision shall completely discharge the Plan,
the Company, the Employer and the Administrator.
8.6 Permissible Purchase of Annuity Contracts
At the request of the Participant, the Administrator may, in lieu of
paying the benefit to which the Participant is entitled directly from
the Plan, purchase an annuity contract which will provide benefits in
an amount equal to that which the retired Participant is entitled
under this Plan. The ownership of any such annuity contract shall be
retained by the Employer.
30
<PAGE> 35
8.7 Masculine, Feminine, Singular and Plural
The masculine shall include the feminine and the singular shall
include the plural and the plural the singular wherever the person or
entity or context shall plainly so require.
8.8 Withholding Taxes
The Administrator may make any appropriate arrangements to deduct from
all amounts paid under the Plan any taxes required to be withheld by
any government or governmental agency.
8.9 Number of Counterparts
This Plan may be executed in any number of counterparts, each of which
when duly executed by the Employer shall be deemed to be an original,
but all of which shall together constitute but one instrument, which
may be evidenced by any counterpart.
8.10 Governing Law
The provisions of the Plan shall be construed, administered and
interpreted under the applicable Federal law and, to the extent not
preempted, the laws of the State of California.
31
<PAGE> 36
8.11 Binding Agreement
This Plan shall be binding on the parties hereto, their heirs,
executors, administrators, and successors in interest.
8.12 Invalidity of Certain Provisions
If any provision of this Plan is invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provision
hereof and this Plan shall be construed and enforced as if such
provision had not been included.
8.13 Successor Organizations
The Employer agrees that it will not merge or consolidate with any
other corporation or organization, or permit its business activities
to be taken over by any other organization, unless and until the
succeeding or continuing organization or corporation assumes the
rights and obligations under this Plan. If the successor organization
refuses to accept the rights and obligations of this Plan, the Plan
shall terminate prior to the consolidation or merger and benefits
shall be calculated and distributed to Participants.
8.14 Forfeiture
Notwithstanding anything in this Plan to the contrary, the entire
amount credited to a Participant as his Accrued
32
<PAGE> 37
Benefit shall be forfeited if the Company discharges the Participant
for:
(A) theft, embezzlement, or obtaining funds or property under
false pretenses, if such transgressions are demonstrably
material in amount both in relation to the Participant and the
Company;
(B) engaging in an act of dishonesty or moral turpitude (including
convictions of felonies) if such act materially and
demonstrably injures the Company (provided that, traffic or
moving violations shall not constitute acts of dishonesty or
moral turpitude for the purpose of this paragraph); or
(C) willfully failing to substantially perform his duties as an
Employee of the Company (other than as a result of incapacity
due to physical illness), where the Participant has either
acted in bad faith or without a reasonable belief that such
breach was in the best interests of the Company and such
failure has resulted in material and demonstrable injury of
the Company.
33
<PAGE> 38
8.15 Offset for Certain Benefits Payable under Split-Dollar Life Insurance
Agreements
(a) Some of the Participants under this Plan may own life
insurance policies (the "Policies"). The ownership of these Policies by the
Participant is, however, subject to certain conditions (set forth in a
"Split-Dollar Life Insurance Agreement" between the Participant and the
Company) and, if the Participant fails to meet the conditions set forth in the
Split-Dollar Life Insurance Agreement, the Participant may lose certain rights
under the Policy. In the event that a Participant satisfies the conditions
specified in Sections 5 or 6 of the Split- Dollar Life Insurance Agreement, so
that the Participant or his beneficiary becomes entitled to benefits under
those sections, the value of those benefits shall constitute an offset to any
benefits otherwise payable under this Plan. As the case may be, this offset
(the "Offset Value") shall be calculated by determining the value of benefits
payable under the Split-Dollar Life Insurance Agreement, the cash surrender
value of the Policy, or in the case of the Participant's death, the death
benefits payable to the beneficiary under the Policy. The Offset Value shall
then be compared to the Actuarial Equivalent of the benefits payable under the
Plan (the "Plan Value"), and the Plan Value shall be reduced by the Offset
Value.
(b) At the time when the Participant terminates employment, if the
Plan Value exceeds the present value of the Offset Value, the excess of the
Plan Value over the Offset Value shall be paid
34
<PAGE> 39
to the Participant or beneficiary at that time in a lump sum. Such payment
shall completely discharge all obligations owed under this Plan on account of
Participant's participation in this Plan. In the case of a Participant who
terminates employment for a reason other than death, the calculation of the
Plan Value shall be based on the pension under the SERP to which the Employee
would be entitled if he then retired or, if the Participant is not yet eligible
to retire, the pension under the SERP to which the Participant would be
entitled if he retired on the first day on which he is eligible to retire.
(c) If the Policy described in subsection (a) is not on the life
of the Participant, the insured dies prior to the Participant's becoming
eligible for benefits under the Plan, and the Participant subsequently becomes
eligible for benefits hereunder, the actuarial value of the benefits payable
hereunder shall be offset by the actuarial value of the payments previously
paid to the Participant under the Split-Dollar Life Insurance Agreement.
Calculations shall be done on an after-tax basis. Any remaining amount due the
Participant shall thereupon be paid in a cash lump sum.
8.16 Special Rules Applicable to the Federated Department Stores, Inc.
Supplementary Retirement Plan
In 1988 the Federated Department Stores, Inc. Supplementary
Retirement Plan (the "Federated Plan") was completely terminated with respect
to its application to current Employees of the
35
<PAGE> 40
Company. Such termination provided that, except in the case of Employees who
had previously retired under the Federated Plan, no Employee of the Company
would ever receive a benefit under the Federated Plan on account of the prior
existence of the Federated Plan. Participants who receive benefits under this
Plan thus receive such benefits in lieu of any benefits that would have been
due to them under the Federated Plan if it had continued in existence. It is
intended that no benefits be payable to any Employee of the Company (whether or
not a Participant in this Plan) on account of the prior maintenance of the
Federal Plan. Accordingly, in the event it is ever judicially determined that
any benefits are payable to any Employee of the Company on account of the prior
existence of the Federated Plan (whether the benefits are payable by Federated
Department Stores, Inc., affiliates of Federated Department Stores, Inc., or by
any other company), the amount of such benefits shall reduce any benefits
otherwise payable under this Plan. The amount of such reductions shall be
computed by calculating the Actuarial Equivalent of any benefits found to be
payable under the Federated Plan and then reducing the benefits payable under
this Plan by such Actuarial Equivalent. The determinations of the
Administrator with respect to the amount of such reductions shall be binding
upon all Participants under this Plan.
36
<PAGE> 41
8.17 Rules Applicable to Retirees Before January 29, 1990
After termination of the Federated Plan and prior to January 29, 1990,
certain employees of the Company retired (the "Interim Retirees") and began to
receive unfunded supplemental retirement benefits pursuant to a formula
established by the Administrator. Such retirees shall continue to receive
their benefits and, as of January 29, 1990, those benefits shall be considered
to be provided under this Plan. The amount of benefits payable to each Interim
Retiree shall not, however, be computed under the formula established under
this Plan but shall continue to be payable under the formula in effect at the
time of his retirement.
8.18 Certain Employees who formerly participated in the Federated
Department Stores, Inc. Executive Deferred Compensation Plan
(a) This section shall only apply to an Employee if (1) the
Employee retires on or after January 29, 1990, (2) the Employee would not be
(except for the existence of this section) otherwise entitled to benefits under
this Plan, and (3) the Employee previously participated in the Federated
Department Stores, Inc. Executive Deferred Compensation Plan (the "Federated
Deferred Compensation Plan"). An Employee described in the preceding sentence
shall receive no benefits under the Plan except for those provided by this
section.
(b) The amount payable to an Employee described in this section
shall be computed by calculating the benefit payable to
37
<PAGE> 42
such Employee under the Basic Plan as if the definition of "Compensation"
thereunder included amounts deferred by such Employee under the Federated
Executive Deferred Compensation Plan. The difference between the amount
actually payable to the Employee or his beneficiary under the Basic Plan and
the amount that would been payable if Compensation had included such deferred
amounts, shall be payable as a supplementary benefit under this Plan.
(c) The timing and form of payments under this section shall be
based on the timing and form of payments under the Basic Plan with respect to
the benefit that is being supplemented.
IN WITNESS WHEREOF, this amended and restated Plan has been
executed on this ____ day of ______, 1994.
RALPHS GROCERY COMPANY
By
-----------------------
Its
-----------------------
By
-----------------------
Its
-----------------------
38
<PAGE> 1
Exhibit 10.16.2
AMENDMENT TO THE AMENDED AND RESTATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
This Amendment to the Amended and Restated Supplement Executive
retirement Plan ("SERP") is effective as of January 1, 1995.
1. Capitalized terms that are not defined herein shall
have the same meaning as contained in the SERP.
2. Section 1.2 is hereby amended by adding the following
at the end of such section:
"For the purpose of determining lump sum amounts payable under
Sections 5, 7.2 and 8.15 under the Plan, Actuarial Equivalent
shall be based on the 1983 Group Annuity Mortality Table for
males and a discount rate of 5% per annum."
This Amendment is effective as of January 1, 1995.
Ralphs Grocery Company
By:___________________
Title
<PAGE> 1
Exhibit 10.16.3
SECOND AMENDMENT TO
THE RALPHS GROCERY COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AMENDED AND RESTATED AS OF APRIL 9, 1994
Ralphs Grocery Company (the "Company") maintains the Ralphs
Grocery Company Supplemental Executive Retirement Plan (the "Plan") for the
benefit of its eligible Employees. The Plan has been amended from time to
time.
Effective as of June 14, 1995, the Food 4 Less Supermarkets,
Inc. shall merge with and into Ralphs Supermarkets, Inc. ("RSI"). Immediately
following said merger, the Company, a wholly owned operating subsidiary of RSI,
will merge with and into RSI and RSI will change its name to Ralphs Grocery
Company which shall be the sponsor and the Company under the Plan effective
immediately following said mergers.
In order to amend the Plan to provide for said mergers and to
clarify the eligibility provisions under the Plan following said mergers, this
Second Amendment to the Plan was adopted by a resolution of the Board of
Directors of the Company, effective as of June 14, 1995. This Second
Amendment, together with the First Amendment and the April 9, 1994 Amendment
and Restatement of the Plan, constitute the entire Plan as amended to date.
1. Section 1.23A is hereby added to the Plan to read in
its entirety as follows:
1.23A "Prior Employer" shall mean a prior employer of Participants
which employer is designated by the Board as a Prior Employer.
Such designation shall also include the terms and extent for
credit to be provided for service with such Prior Employer and
the extent to which compensation paid by such Prior Employer
shall be included as Compensation under the Plan.
2. Section 2.1 of the Plan is hereby amended to read in
its entirety as follows:
2.1 Participation Criteria
Except as otherwise provided herein, an Employee shall
automatically become a Participant in this Plan if the average
of his Gross Compensation that is taken into account under
Section 1.1(c) to determine his Final Average Monthly
Compensation equals or exceeds $235,840. Any Employee not
named in the preceding sentence shall also become a
Participant in the Plan if he is named as a Participant by the
Administrator. Each former employee of Food 4 Less
Supermarkets, Inc. immediately prior to June 14, 1995 who
becomes an Employee on June 14, 1995 shall be eligible to
become a Participant in this Plan on the date designated by
the Board of Directors which is not later than January 1,
<PAGE> 2
1997; provided, however, that he satisfies the other
requirements described in this paragraph.
Executed as of the _____ day of June, 1995.
RALPHS GROCERY COMPANY
By: /s/ Jan Charles Gray
---------------------------------
Officer
By: /s/ Alan J. Reed
--------------------------------
Officer
2
<PAGE> 1
Exhibit 10.16.4
THIRD AMENDMENT
TO THE
RALPHS GROCERY COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As Amended and Restated as of April 9, 1994)
This Amendment to the Ralphs Grocery Company Supplemental
Executive Retirement Plan (as amended and restated as of April 9, 1994) (the
"SERP") is effective as of July 1, 1995.
1. Section 1.1 of the SERP is amended by deleting the word "and"
from the end of clause (c), changing the period at the end of clause (d) to a
semicolon, adding the word "and" after the new semicolon at the end of clause
(d) and adding a new clause (e) to read as follows:
"(e) fifth, in the case of a Participant who was an employee
of Food 4 Less Supermarkets, Inc. or any of its subsidiaries
prior to June 14, 1995 and who became an employee of the
Company on June 14, 1995, such Participant became a
participant in the Basic Plan on July 1, 1995, but with Years
of Credited Service from 1985 through 1994 up to a maximum of
ten (10) years based upon the individual's date of hire by
Food 4 Less Supermarkets, Inc. or any of its predecessors.
2. Section 1.17 of the SERP is amended by adding the following
sentence to the end thereof:
"In the case of a Employee who was an employee of Food 4 Less
Supermarkets, Inc. or any of its subsidiaries immediately
prior to June 14, 1995, "Gross Compensation" shall also
include such individual's compensation reported for Federal
Income Tax purposes for services rendered as an employee of
Food 4 Less Supermarkets, Inc. or any of its subsidiaries,
plus any amounts deferred under any plan qualified under
Section 401(k) of the Code or any unfunded deferred
compensation plan maintained by Food 4 Less Supermarkets, Inc.
or any of its subsidiaries or any salary reductions under
Section 125 of the Code; provided, however, that Gross
Compensation shall not include moving expenses, educational
reimbursements, car allowances, income from exercising stock
options, imputed income from employee benefit programs
maintained by Food 4 Less Supermarkets, Inc. or any of its
subsidiaries, living allowances and payments under any
deferred compensation plan
<PAGE> 2
maintained by Food 4 Less Supermarkets, Inc. or any of its
subsidiaries."
3. Section 2.1 is amended in its entirety to read as it read
prior to the Second Amendment to the SERP.
IN WITNESS WHEREOF, the Ralphs Grocery Company has executed this
Amendment this ______ day of _______________, 1995.
RALPHS GROCERY COMPANY
BENEFITS COMMITTEE
By_______________________________
2
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF FOOD 4 LESS HOLDINGS, INC.
Bay Area Warehouse Stores, Inc.Alpha Beta Company
Bell Markets, Inc.
Cala Co.
Cala Foods, Inc.
Crawford Stores, Inc.
Falley's Inc.
Food 4 Less GM, Inc.
Food 4 Less Merchandising, Inc.
Food 4 Less of California, Inc.
Food 4 Less of Southern California, Inc.
Ralphs Grocery Company
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCAL INFORMATION EXTRACTED FROM AUDITED
CONSOLIDATED BALANCE SHEETS AND AUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 52 WEEKS ENDED JANUARY
28, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-28-1996
<PERIOD-START> JAN-30-1995
<PERIOD-END> JAN-28-1996
<CASH> 67,983
<SECURITIES> 0
<RECEIVABLES> 69,354
<ALLOWANCES> (1,954)
<INVENTORY> 502,669
<CURRENT-ASSETS> 677,464
<PP&E> 1,438,124
<DEPRECIATION> (226,451)
<TOTAL-ASSETS> 3,188,129
<CURRENT-LIABILITIES> 855,920
<BONDS> 2,276,225
0
192,831
<COMMON> 57,163
<OTHER-SE> (438,792)
<TOTAL-LIABILITY-AND-EQUITY> 3,188,129
<SALES> 4,335,109
<TOTAL-REVENUES> 4,335,109
<CGS> 3,485,993
<TOTAL-COSTS> 3,485,993
<OTHER-EXPENSES> 929,959
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 202,651
<INCOME-PRETAX> (283,494)
<INCOME-TAX> 500
<INCOME-CONTINUING> (283,994)
<DISCONTINUED> 0
<EXTRAORDINARY> 38,424
<CHANGES> 0
<NET-INCOME> (322,418)
<EPS-PRIMARY> (9.02)
<EPS-DILUTED> 0
</TABLE>
