SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________
FORM 10-K
____
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
X
____ OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 27, 1994 Commission File No. 2-14466
OR
____
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
____ OF THE SECURITIES EXCHANGE ACT OF 1934
__________________________________________
SUPER FOOD SERVICES, INC.
3233 Newmark Drive, Dayton, Ohio 45342
Telephone (513) 439-7500
IRS Employer Identification No. 36-2407235
State of Incorporation: Delaware
__________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- - ---------------------------------------- ---------------------
Common Shares, par value $1.00 per share New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
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 reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ___
(Cover page 1 of 2 pages)
There were 10,948,814 Common Shares outstanding as of
October 27, 1994. The aggregate market value of the Common Shares
held by nonaffiliates of the Registrant as of October 27, 1994 was
approximately $114,963,000 (based on closing price of Registrant's
Common Shares on New York Stock Exchange Composite Tape on such
date).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for
the fiscal year ended August 27, 1994 are incorporated herein by
reference to Parts I, II and IV of this report. Portions of the
Registrant's definitive Proxy Statement dated November 4, 1994 for
the Annual Meeting of Shareholders to be held December 13, 1994 are
incorporated herein by reference into Part III of this report.
_______________
See pages 10-13 for Exhibit Index.
(Cover page 2 of 2 pages)
<PAGE>
TABLE OF CONTENTS
Part I
Item Page
1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Submission of Matters to a Vote of Security Holders . . . . . . . . 6
Part II
5. Market for the Registrant's Common Shares and
Related Shareholder Matters . . . . . . . . . . . . . . . . . . . . 8
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . 8
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . 8
8. Financial Statements and Supplementary Data . . . . . . . . . . . . 8
9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . 8
Part III
10. Directors and Executive Officers of the Registrant. . . . . . . . . 9
11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . 9
12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . . . . . . . . . . . 9
13. Certain Relationships and Related Transactions. . . . . . . . . . . 9
Part IV
14. Exhibits, Consolidated Financial Statement
Schedules, and Reports on Form 8-K. . . . . . . . . . . . . . . . .10
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
<PAGE>
PART I
ITEM 1. BUSINESS.
General Development of Business
-------------------------------
Super Food Services, Inc., was incorporated on April 29,
1957, under the laws of the State of Delaware. Super Food
Services, Inc., and its principal subsidiary, Kentucky
Food Stores, Inc., d/b/a Affiliated Foods, a Kentucky
corporation, (hereinafter sometimes collectively referred
to as the "Company" or the "Registrant") are engaged in
the wholesale grocery distribution business. The Company
holds IGA (Independent Grocers' Alliance Distributing
Company) franchises for each of its warehouse locations
except for Lexington, Kentucky. IGA is an alliance of 21
wholesale grocers whose almost 4,000 associated IGA retail
food stores located principally in the United States did
an annual retail volume of approximately $16.5 billion in
the year ended December 31, 1993.
Financial Information About Industry Segments
---------------------------------------------
The Company is engaged in a single line of business, the
wholesale grocery distribution business.
Description of Business
-----------------------
The Company distributes a wide variety of food products,
health and beauty aids, general merchandise and related
non-food items to approximately 270 independently owned
IGA retail food stores and to approximately 605 other
retail food stores, including independently owned stores
not licensed as IGA stores, several major chains and
convenience stores, located primarily in the states of
Michigan, Ohio, Indiana, Kentucky, Tennessee and West
Virginia. In addition, the Company also provides merchan-
dising, advertising, sales promotion and administrative
programs and supervision for the retail stores that desire
to utilize these services.
The Company does not engage in the retail food store
business to any significant extent. Incidental to its
primary wholesale grocery function, the Company may from
time to time own and operate retail food stores which
provide training for the Company's personnel in retail
grocery operations or the Company may take over
supermarkets formerly operated by its affiliated
retailers.
<PAGE>
The Company also operates a print shop which prints some
of the advertising materials, catalogs and other material
used by the Company and its independent retail food store
customers.
The business of the Company is not seasonal to any
significant extent.
1
<PAGE>
Distribution and Cost of Services
---------------------------------
The Company distributes and sells goods and merchandise to
retail food stores principally from the five distribution
centers consisting of three in Ohio, one in Michigan and
one in Kentucky. All of the Company's warehouses are
equipped with modern inventory handling equipment for
receiving, storing and shipping goods and merchandise.
Each warehouse serves as a central source of supply for
affiliated retailers within its operating area by handling
a full line of products ranging from 10,000 to 15,000
items. Complete inventories are maintained consisting of
national brand grocery products along with a number of
private label items. In addition, most centers provide
full lines of perishables including fresh meats and
poultry, dairy and delicatessen products, and frozen
foods. Retailers order their inventory requirements at
regular intervals through direct linkage with the
distribution center computer. Immediate product
availability and efficient warehousing methods often make
it possible for orders to be selected, loaded and shipped
within 24 hours of receipt of the order. In addition,
some products are delivered by suppliers directly to the
retail stores through drop-ship programs established
between suppliers and the Company. Deliveries are made by
the Company's delivery fleet on a daily, semi-weekly or
weekly basis as orders are received. The Company operates
approximately 140 tractors, 195 refrigerated trailers and
190 dry trailers. Most of this equipment is owned by the
Company.
The Company sells goods and merchandise to retail stores
on a cost-plus-fee basis, with a weekly fee based on the
type of commodity and quantity purchased. Selling prices
are changed daily based on the latest cost information.
In some geographic areas, delivery costs are also charged
based on mileage and the quantity of goods purchased.
Credit is extended generally on a weekly basis.
Service to Retailers
--------------------
In general, the operations of the Company include (1) the
procurement and arrangement for the procurement of food
products and other allied items generally sold in retail
food stores, (2) the development and administration of
promotional, advertising and merchandising programs,
(3) the establishment and supervision of retail accounting
and payroll systems, (4) the installation of computerized
inventory control and ordering systems, (5) store develop-
ment services, (6) personnel management assistance and
employee training and (7) insurance programs. The Company
has a staff of retail management specialists who counsel
with each store periodically with regard to store opera-
tions. The cost of many of these services is included in
the fees charged by the Company in connection with the
sale of goods and merchandise to the retail stores served.
Separate charges are made for certain services such as
retail accounting, insurance, employee training and
certain store development services.
2
<PAGE>
The activities of the store development departments in
each operating division provide a means of continued
growth for the Company through the development of new
retail store locations and the enlargement and remodeling
of existing retail stores. The services provided include
site selection, market studies, building design, store
layout and equipment planning and procurement.
The Company also may provide financial assistance to its
affiliated independent retailers. Secured loans,
generally repayable over a period not exceeding five
years, are made for inventories and store fixtures,
equipment, and leasehold improvements. Loans are secured
by liens on inventory and/or equipment, by personal
guarantees and by other types of security. The Company
lends its credit strength by guaranteeing leases for its
retail customers or by entering into leases for retail
store locations and subleasing the same to affiliated
independent retailers at rentals which generally are five
to ten percent higher than the rent paid by the Company.
As of August 27, 1994, the Company was obligated on a
total of 90 leases which are subleased to affiliated
independent retailers. As of August 27, 1994, Kentucky
Food Stores, Inc., has guaranteed the payment of leases
for certain retail customers with future minimum rentals
aggregating approximately $5,101,000.
Products Supplied
-----------------
The Company primarily distributes and sells nationally
advertised brand products purchased directly from various
manufacturers, processors and suppliers or through
manufacturers' representatives and brokers. Many of the
major suppliers of the Company are large publicly-held
companies. Adequate alternative sources of supply are
available in most cases. The Company also distributes and
sells IGA, BETTER VALU and SAVER'S CHOICE brand products
and various products using the Company's own registered
trademarks FAME, TABLE TREAT, TABLE KING, KINGSAVER and
GARD. A wide variety of canned fruits and vegetables,
frozen foods, paper products and other packaged products
are sold under these labels. Private brand products are
purchased from selected canners, packers and processors
who apply the Company's private brand labels. The FAME
line of private label products now includes approximately
1,360 items. Approximately 12% of the total sales of the
Company for the fiscal year ended August 27, 1994 were
from the Company's own private label brand products and
IGA and BETTER VALU brand products.
<PAGE>
Retail Stores Served
--------------------
The retail food stores served by the Company are mostly
conventional self-service supermarkets which carry a wide
variety of grocery products, health and beauty aids,
general merchandise and other non-food items. Many stores
also have one or more specialty departments such as
delicatessens, in-store bakeries, lunch counters and
flower shops. The stores served by the Company range in
size from the small convenience stores to large supermar-
kets containing 35,000 or more square feet.
3
<PAGE>
Franchises
----------
Under the IGA franchises held by the Company, independ-
ently owned retail food stores are licensed by the Company
to operate under the IGA merchandising, advertising and
promotional programs, to use the name IGA in connection
with the retail food stores, and to sell IGA merchandise.
For these franchises and the merchandising, advertising,
sales promotion programs, systems and consultation, the
Company pays IGA a monthly membership fee based on the
number of affiliated IGA retail stores. The Company in
turn receives a fee for similar services from each affi-
liated IGA retail store it licenses. The IGA stores are
privately owned and are otherwise operated independently
of IGA and the Company. The franchises which the Company
holds from IGA may be terminated by the Company at any
time but may be terminated by IGA only if the Company
(a) ceases to operate a wholesale grocery business, (b)
fails to fulfill its obligations under the franchise, or
(c) becomes bankrupt, insolvent or goes into receivership.
The licenses granted by the Company to affiliated IGA
retail stores may be terminated by either party at any
time upon thirty days prior written notice.
The Company also licenses independent retailers to do
business under the trade names SUPERAMA, SHOPWISE,
KING$AVER and $UPER $AVER($).
Competition
-----------
The wholesale food distribution business is highly
competitive. The Company is in competition with
independent, voluntary and cooperative wholesale grocery
businesses in all of the areas in which it operates. In
addition, the retail food stores serviced by the Company
are in competition with national, regional and local
corporate food chains, voluntary cooperative food stores
and independent food stores. On the basis of current
sales volume, the Company is one of the largest wholesale
grocery companies in the United States.
Employee Relations and Benefits
-------------------------------
The Company and its subsidiaries currently employ about
1,700 full time employees. Of these, approximately 1,025
are warehouse employees, drivers, and certain other
personnel who are members of various labor unions, prin-
cipally various locals of the International Brotherhood of
Teamsters, Chauffeurs, Warehousemen and Helpers of
America, under collective bargaining contracts expiring on
various dates. During the fiscal year ended August 27,
1994, two contracts covering 165 employees expired which
are still being negotiated. During the current fiscal
year ending August 26, 1995, three contracts covering
approximately 390 employees will expire. The labor
relations of the Company are currently considered
satisfactory and the Company has experienced no work
stoppages since the beginning of last fiscal year.
4
<PAGE>
Miscellaneous
-------------
The Company is a substantial user of fuel and energy in
its operations. In the last fiscal year, fuel and energy
costs generally increased resulting in higher operating
costs; however, the supply of fuel and energy was
adequate. The Company is unable to predict what effect
future cost increases or shortages of fuel and energy
would have on its operations.
The Company is not involved in any type of business which
may be subject to renegotiation of profits or termination
of contracts or subcontracts at the election of the
government.
During the fiscal year ended August 27, 1994, the Company
did not engage in material research and development
activities relating to the development of new products or
services or the improvement of existing products or
services in connection with its business.
The Company does not engage in any foreign operations and
export sales are not significant.
Compliance by the Company with Federal, State and local
environmental protection laws during the fiscal year ended
August 27, 1994, had no material effect upon capital
expenditures, earnings or competitive position of the
Company.
Recent Developments
-------------------
On December 10, 1994, the Company is going to prepay the
entire unpaid principal balance of the 9.65% Senior Notes
to Teachers Insurance Annuity Association of America in
the original principal amount of $13,000,000. The
principal amount of the Notes to be prepaid on such date
is $5,571,428 together with accrued interest and a premium
of $119,473 applicable to such prepayment.
ITEM 2. PROPERTIES.
The Company's executive offices are located in a 27,800
square foot building located in Miamisburg, Ohio, a
southern suburb of Dayton, Ohio, on an 8-acre site owned
by the Company.
The following table lists the locations, approximate size,
lease expiration dates and renewal options available with
regard to the principal warehouse properties operated by
the Company as of August 27, 1994:
5
<PAGE>
Approximate
Size Lease Renewal
Location (Square Feet) Expiration Options
Bellefontaine, Ohio (1) 580,995 - -
Cincinnati, Ohio (1) 370,732 - -
Cincinnati, Ohio (1) 42,358 - -
Bridgeport, Michigan (2)(3) 590,749 2010 4/5 year
Vassar, Michigan (4) 151,587 1995 -
Lexington, Kentucky 298,750 1999 -
(1) This property is owned in fee by the Company.
(2) The lease for this property has been capitalized for
financial statement purposes.
(3) A 186,000 square foot dry grocery addition and a
56,000 square foot perishable addition were
completed in early Fiscal 1995.
(4) The Company will close this facility. The lease
expires on June 30, 1995.
The Company also leases one warehouse in Orlando, Florida
which contains 185,750 square feet and the lease expires
in 1999. The Company has discontinued the operations of
its Florida Division and is actively seeking other tenants
for this warehouse facility.
The Company also leases 99 retail store locations, the
majority of which are subleased to affiliated independent
retailers. The leases for these locations expire on
various dates, the latest being in 2013. Further
information regarding lease commitments is contained in
Note 8 on pages 20 and 21 of the 1994 Annual Report.
The Company also owns two supermarket buildings which it
leases to affiliated independent retailers.
ITEM 3. LEGAL PROCEEDINGS.
The Company has no material legal proceedings pending
other than ordinary routine litigation incidental to its
business. Management is of the opinion that any
liability, to the extent not provided for through
insurance or otherwise, would not be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of the security
holders, through the solicitation of proxies or otherwise,
during the fourth quarter of the fiscal year ended
August 27, 1994.
6
<PAGE>
<TABLE>
Executive Officers of the Registrant
------------------------------------
The following table sets forth certain information
concerning the executive officers of the Registrant as of
November 19, 1994:
Executive
<CAPTION> Officer
Name Age Present Position with the Company Since
<S> <C> <C> <C> <C>
Jack Twyman (1)(2) 60 Chairman of the Board and Chief
Executive Officer 1972
John Demos (2) 63 Vice Chairman of the Board, Secretary
and General Counsel 1969
Samuel L. Robinson (2) 55 President and Chief Operating Officer 1982
Robert F. Koogler 61 Senior Vice President-Finance,
Treasurer and Assistant Secretary 1970
Stan Lamping 66 Senior Vice President-Merchandising 1992
Richard Metzgar 58 Senior Vice President-Human Resources 1986
John Batista 60 Senior Vice President-Distribution 1986
Robert McCarthy 49 Senior Vice President-Management
Information Systems 1992
</TABLE>
(1) Member of the Executive Committee of the Board of
Directors
(2) Director of the Registrant
There is no family relationship between any of the
executive officers listed above. All executive officers
hold office from one annual meeting of the Board of
Directors until the next annual meeting of the Board of
Directors or until their successors are elected.
There are no arrangements or understandings between any of
the executive officers of the Registrant and any other
person (not an officer or director of the Registrant
acting as such) pursuant to which any of the executive
officers were selected as an executive officer of the
Registrant.
Each of the executive officers of the Company listed above
has been employed by the Registrant for more than five
years.
7
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON SHARES AND RELATED
SHAREHOLDER MATTERS.
The Registrant's Common Shares have been listed on the New
York Stock Exchange since December 14, 1989 and trade
under the symbol "SFS." Prior to that time, the Company's
Common Shares were traded on the American Stock Exchange.
On October 27, 1994, there were approximately 2,015
holders of record of the Registrant's Common Shares.
The information called for by Item 5 as to the
Registrant's stock price ranges and quarterly dividends
for the last two fiscal years is contained on page 24 of
the 1994 Annual Report and is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information called for by Item 6 is incorporated
herein by reference to page 25 of the 1994 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information called for by Item 7 is incorporated
herein by reference to pages 5 through 7 of the 1994
Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information called for by Item 8 is incorporated
herein by reference to pages 8 through 23 of the 1994
Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNT-
ING AND FINANCIAL DISCLOSURE.
None
8
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by Item 10 as to the Directors
of the Registrant and compliance with Section 16(a) of the
Securities Exchange Act of 1934 is incorporated by
reference to pages 4 through 6 and page 13 of the
Registrant's definitive Proxy Statement dated November 4,
1994 in connection with the Registrant's 1994 Annual
Meeting of Shareholders. Certain information regarding
executive officers of the Registrant is included in Part I
above.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by Item 11 is incorporated by
reference to pages 7 through 9 of the Registrant's
definitive Proxy Statement dated November 4, 1994 in
connection with the Registrant's 1994 Annual Meeting of
Shareholders; provided, however, that the information
contained in said Proxy Statement under the headings
"Report on Executive Compensation" is not incorporated
herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information called for by Item 12 with respect to
security ownership of certain beneficial owners and by
each director of the Registrant and all executive officers
and directors of the Registrant as a group is incorporated
by reference to Registrant's definitive Proxy Statement
dated November 4, 1994 in connection with Registrant's
1994 Annual Meeting of Shareholders on pages 2 through 4.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by Item 13 is incorporated by
reference to page 6 of Registrant's definitive Proxy
Statement dated November 4, 1994 in connection with the
Registrant's 1994 Annual Meeting of Shareholders.
9
<PAGE>
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K.
1994
Annual
Report
Page(s)
-------
(a) 1. Financial Statements
The following are contained in
the 1994 Annual Report and are
incorporated herein by refer-
ence:
Consolidated Balance Sheets as of
August 27, 1994 and August 28,
1993 8-9
Consolidated Statements of
Operations for the Fiscal Years
Ended August 27, 1994, August 28,
1993 and August 29, 1992 10
Consolidated Statements of Cash
Flows for the Fiscal Years
Ended August 27, 1994, August 28,
1993 and August 29, 1992 11
Consolidated Statements of Share-
holders' Equity for the Fiscal
Years Ended August 27, 1994,
August 28, 1993 and August 29,
1992 12
Notes to Consolidated Financial
Statements 13-23
Report of Independent Public
Accountants 23
(a) 2. Consolidated Financial Statement
Schedules 10-K Page
---------
For Fiscal Years Ended August 27,
1994, August 28, 1993 and
August 29, 1992
Schedule V - Property and Equipment 18
Schedule VI - Accumulated Deprecia-
tion and Amortization
of Property and
Equipment 19
Schedule VIII - Valuation and Qualify-
ing Accounts 20
Schedule IX - Short-Term Borrowings 21
All other schedules are omitted because they are not
applicable or not required, or because the required
information is included in the consolidated financial
statements or notes thereto.
10
<PAGE>
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K (Continued).
(a) 3. The following exhibits are filed herewith or
incorporated by reference as indicated.
Exhibits are listed by numbers corresponding to
Item 601 in Regulation S-K:
Exhibit No. Reference
----------- ---------
3(a) Restated Certificate Filed as Exhibit
Incorporation. 4(a) to Regis-
tration Statement
No. 2-84640
3(b) Certificate of Incorporated by
Amendment of Restated reference to
Certificate of definitive Proxy
Incorporation. Statement dated
November 1, 1983
3(c) Certificate of Incorporated by
Amendment of Restated reference to
Certificate of definitive Proxy
Incorporation. Statement dated
October 31, 1986
3(d) By-Laws, as amended. Filed as Exhibit
1 to Form 10-K
for the year
ended August 30,
1986
4(a) $10,000,000 Revolving Filed as Exhibit
Credit Loan Agreement 1 to Form 8-K
dated as of Sep- dated
tember 17, 1987 September 17,
between Registrant 1987
and PNC Bank, Ohio.
4(b) Amendment to Loan Filed as Exhibit
Agreement dated 1 to Form 8-K
April 11, 1991 dated April 9,
between Registrant and 1991
PNC Bank, Ohio.
4(c) $10,000,000 Revolving Filed as Exhibit
Credit Loan Agreement 1 to Form 8-K
dated April 9, 1991 dated April 9,
between Registrant 1991
and Society Bank, N.A.
<PAGE>
4(d) $13,000,000 Note Filed as Exhibit
Purchase Agreement 1 to Form 8-K
dated as of October 1, dated Novem-
1987 between Registrant ber 24, 1987
and Teachers Insurance
Annuity Association
of America.
4(e) $25,000,000 Note Filed as Exhibit
Agreement dated as of 1 to Form 8-K
November 1, 1989 dated February 5,
between Registrant and 1990
Nationwide Life
Insurance Company.
4(f) $10,000,000 Revolving Filed as Exhibit
Credit Agreement dated 1 to Form 8-K
as of August 30, 1991 dated August 30,
between Registrant and 1991
The First National
Bank of Chicago.
11
<PAGE>
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K (Continued).
4(g) Rights Agreement Filed as Exhibit
dated as of January 27, 4(f) to Form 8-K
1989 between dated January 27,
Registrant and Chase 1989 and as
Manhattan Bank, N.A. Exhibits 1 and 2
as Rights Agent. to Form 8-A dated
January 27, 1989
4(h) Agreement to Pursuant to Item
furnish copies 601(b)(4)(iii) of
of long-term debt Regulation S-K,
instruments. copies of certain
instruments de-
fining the rights
of holders of
certain long-term
debt of the
Registrant and
its subsidiaries
are not filed
and, in lieu
thereof, the
Registrant agrees
to furnish copies
thereof to the
Securities and
Exchange
Commission upon
request
10 Material Contracts
(a) Employment Agreement Filed as Exhibit
dated December 8, 1976 4 to Form 10-K
between Registrant and for the year
Jack Twyman, as amended ended August 29,
March 3, 1981. 1981
(b) Employment Agreement Filed as Exhibit
dated March 3, 1981 5 to Form 10-K
between Registrant for the year
and John Demos. ended August 29,
1981
(c) 1986 Stock Option Filed as Appendix
Plan. C to definitive
Proxy Statement
dated October 31,
1986
(d) Incentive Compensation Filed as Exhibit
Plan. 7 to Form 10-K
for the year
ended August 29,
1981
(e) 1989 Restricted Filed as Exhibit
Stock Plan. 4(g) to Form 8-K
dated January 27,
1989
(f) 401(k) Plan. Description in
Form 8-K dated
January 27, 1989
(g) Excess Benefit Plan, Filed as Exhibit
as amended. 1 to Form 10-K
for the year
ended August 26,
1989
12
<PAGE>
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K (Continued).
(h) Supplemental Executive Filed as Exhibit
Retirement Plan, as 1 herewith
amended and restated
as of May 18, 1994
(formerly known as the
Excess Benefit Plan).
(i) Supplemental Executive Filed as Exhibit
Retirement Trust 2 herewith
Agreement between
the Registrant and
Society National Bank.
13 Annual Report to Share- Filed as Exhibit
holders for the fiscal 3 herewith
year ended August 27,
1994. (Only those
portions of the Annual
Report which are
specifically designated
in this Form 10-K
as being incorporated
by reference are being
electronically filed
pursuant to the
Securities Exchange
Act of 1934.)
18(a) Letter dated Filed as Exhibit
November 23, 1981 9 to Form 10-K
from Registrant's for the year
independent public ended August 29,
accountants re change 1981
in accounting
principles.
18(b) Letter dated Filed as Exhibit
November 22, 1985 2 to Form 10-K
from Registrant's for the year
independent public ended August 31,
accountants re change 1985
in accounting
principles.
21 Subsidiaries of the Filed as Exhibit
Registrant. 4 herewith
23 Consent of Arthur Filed as Exhibit
Andersen LLP 5 herewith
<PAGE>
24 Power of Attorney Filed as Exhibit
authorizing John 6 hereto
Demos, Vice Chairman,
Secretary and General
Counsel to sign the
Annual Report on
Form 10-K on behalf
of said Directors.
27 Financial Data
Schedule.
(b) Reports on Form 8-K:
No report on Form 8-K was filed during the fourth
quarter of the fiscal year ended August 27, 1994.
13
<PAGE>
FORM S-8 UNDERTAKING
Pursuant to the requirements of Item 512(h) of Regulation S-K and
Part II of Form S-8 under the Securities act of 1933, the
undersigned registrant hereby undertakes as follows, which
undertaking shall be incorporated by reference into the following
Registration Statements of the registrant on Form S-8:
Registration Statement Nos. 2-66358, 2-60616, 2-88433, 33-20892 and
33-21069.
Insofar as indemnification for liabilities arising under the
Securities act of 1993 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized on the 22nd day of November, 1994.
SUPER FOOD SERVICES, INC.
(Registrant)
By____________________________
Jack Twyman
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities indicated on the
22nd day of November, 1994.
______________________________ ______________________________
Jack Twyman Robert F. Koogler
Director and Chairman of the Senior Vice President-
Board Finance, Treasurer and
(Principal Executive Officer) Assistant Secretary
(Principal Accounting and
Financial Officer)
______________________________ ______________________________
John Demos Samuel L. Robinson
Director and Vice Chairman Director and President
of the Board, Secretary and and Chief Operating Officer
General Counsel
______________________________ _____________________________
*/s/ John W. Berry */s/ J. Harriss Covington
John W. Berry J. Harriss Covington
Director Director
______________________________ _____________________________
*/s/ Dr. Thomas S. Haggai */s/ Dr. Edward H. Jennings
Dr. Thomas S. Haggai Dr. Edward H. Jennings
Director Director
______________________________
*/s/ C. E. Shaffer
C.E. Shaffer
Director
* The undersigned, by signing his name hereto, does hereby sign
this report on behalf of each of the above-indicated directors
of the Registrant pursuant to powers of attorney executed on
behalf of each such director.
*By______________________
John Demos
Attorney-In-Fact
November 22, 1994
15
<PAGE>
SUPER FOOD SERVICES, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
The following items included in the 1994 Annual Report of the
Registrant to its shareholders are incorporated herein by
reference:
Consolidated Balance Sheets as of August 27, 1994 and
August 28, 1993.
Consolidated Statements of Operations for the Fiscal Years
Ended August 27, 1994, August 28, 1993 and August 29, 1992.
Consolidated Statements of Cash Flows for the Fiscal Years
Ended August 27, 1994, August 28, 1993 and August 29, 1992.
Consolidated Statements of Shareholders' Equity for the Fiscal
Years Ended August 27, 1994, August 28, 1993 and August 29,
1992.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants on the Consolidated
Financial Statements as of August 27, 1994 and August 28, 1993
and for each of the three fiscal years in the period ended
August 27, 1994.
With the exception of the aforementioned information and the
information incorporated in Items 5, 6, 7 and 8, the 1994 Annual
Report to Shareholders is not to be deemed filed as part of this
report.
The following information for the fiscal years 1994, 1993 and 1992
is submitted herewith:
Consent of Independent Public Accountants.
Report of Independent Public Accountants on Consolidated
Schedules.
Consolidated Financial Statement Schedules -
Schedule
Property and Equipment V
Accumulated Depreciation and Amortization
of Property and Equipment VI
Valuation and Qualifying Accounts VIII
Short-Term Borrowings IX
The following schedules are omitted as not applicable or not
required under rules of Regulation S-X:
I, II, III, IV, VII, X, XI, XII and XIII
<PAGE>
Separate financial statements of the Registrant have been omitted
since it is primarily an operating company and the minority
interest in subsidiaries and long-term debt of the subsidiaries
held by other than the Registrant is less than 5% of consolidated
total assets.
16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
of Super Food Services, Inc.:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in Super
Food Services, Inc., and subsidiaries Annual Report to Shareholders
incorporated by reference in this Form 10-K, and have issued our
report thereon dated October 18, 1994. Our audit was made for the
purpose of forming an opinion on the basic consolidated financial
statements taken as a whole. The schedules listed in Part IV,
Item 14(a)2 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 audit 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
Dayton, Ohio,
October 18, 1994.
17
<PAGE>
<TABLE>
SUPER FOOD SERVICES, INC. AND SUBSIDIARIES
SCHEDULE V--PROPERTY AND EQUIPMENT
FOR FISCAL YEARS ENDED AUGUST 27, 1994, AUGUST 28, 1993 AND AUGUST 29, 1992
<CAPTION>
Balance at Begin- Additions Retirements Balance at
Classification ning of Period at Cost or Sales Transfers Close of Period
<S> <C> <C> <C> <C> <C>
1994
- - ----
Land $ 1,998,184 $ -0- $ -0- $ -0- $ 1,998,184
Building 39,682,085 221,866 -0- -0- 39,903,951
Warehouse Equipment 19,178,277 1,922,948 (1,122,072) -0- 19,979,153
Delivery Equipment 20,554,495 1,454,498 (875,582) -0- 21,133,411
Office Furniture and Equipment 14,235,729 1,480,722 (743,888) -0- 14,972,563
Leasehold Improvements 8,646,190 297,927 -0- 4,060,000 13,004,117
Construction in Progress 1,801,260 12,916,566 -0- (4,060,000) 10,657,826
------------ ----------- ------------ ------------ ------------
$106,096,220 $18,294,527 $ (2,741,542) $ -0- $121,649,205
============ =========== ============ ============ ============
1993
- - ----
Land $ 1,998,184 $ -0- $ -0- $ -0- $ 1,998,184
Building 39,465,399 216,686 -0- -0- 39,682,085
Warehouse Equipment 25,343,164 821,775 (6,986,662) -0- 19,178,277
Delivery Equipment 24,166,749 666,597 (4,278,851) -0- 20,554,495
Office Furniture and Equipment 14,565,502 1,912,413 (2,242,186) -0- 14,235,729
Leasehold Improvements 11,255,274 402,472 (3,011,556) -0- 8,646,190
Construction in Progress -0- 1,801,260 -0- -0- 1,801,260
------------ ----------- ------------ ------------ ------------
$116,794,272 $ 5,821,203 $(16,519,255) $ -0- $106,096,220
============ =========== ============ ============ ============
1992
- - ----
Land $ 1,998,184 $ -0- $ -0- $ -0- $ 1,998,184
Building 43,249,651 3,843,245 (34,563) (7,592,934) 39,465,399
Warehouse Equipment 23,424,946 2,956,516 (326,625) (711,673) 25,343,164
Delivery Equipment 22,313,745 2,688,422 (835,418) -0- 24,166,749
Office Furniture and Equipment 12,958,720 1,824,534 (217,752) -0- 14,565,502
Leasehold Improvements 12,136,226 507,913 (429) (1,388,436) 11,255,274
Construction in Progress 3,904,119 -0- -0- (3,904,119)
------------ ----------- ------------ ------------ ------------
$119,985,591 $11,820,630 $ (1,414,787) $(13,597,162)(A) $116,794,272
============ =========== ============ ============ ============
</TABLE>
(A) Such amount represents the cost of the Florida Divisions's Property
and Equipment that was considered in the Company's "Florida Closing
Liabilities" caption. Additional information on the Florida Division
Closing is contained in Note 4 on page 16 of the 1994 Annual Report.
-18-
<PAGE>
<TABLE>
SUPER FOOD SERVICES, INC. AND SUBSIDIARIES
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT
FOR FISCAL YEARS ENDED AUGUST 27, 1994, AUGUST 28, 1993 AND AUGUST 29, 1992
<CAPTION>
Additions Retirements,
Balance at begin- Charged Renewals and Balance at
Description ning of Period to Expense Replacements Close of Period
<S> <C> <C> <C> <C>
1994
- - ----
Building $14,247,866 $1,416,851 $ 102 $15,664,819
Warehouse Equipment 13,855,863 1,748,057 (914,452) 14,689,468
Delivery Equipment 12,974,289 2,057,727 (852,819) 14,179,197
Office Furniture and Equipment 9,577,213 1,429,980 (737,568) 10,269,625
Leasehold Improvements 3,882,992 539,176 -0- 4,422,168
----------- ---------- ------------ -----------
$54,538,223 $7,191,791 $ (2,504,737) $59,225,277
=========== ========== ============ ===========
1993
- - ----
Building $12,831,591 $1,416,275 $ -0- $14,247,866
Warehouse Equipment 18,263,423 1,816,264 (6,223,824) 13,855,863
Delivery Equipment 13,835,587 2,073,288 (2,934,586) 12,974,289
Office Furniture and Equipment 10,231,721 1,387,360 (2,041,868) 9,577,213
Leasehold Improvements 5,225,951 438,769 (1,781,728) 3,882,992
----------- ---------- ------------ -----------
$60,388,273 $7,131,956 $(12,982,006) $54,538,223
=========== ========== ============ ===========
1992
- - ----
Building $16,834,758 $1,561,502 $ (5,564,669) $12,831,591
Warehouse Equipment 16,255,197 2,355,292 (347,066) 18,263,423
Delivery Equipment 12,024,486 2,559,948 (748,847) 13,835,587
Office Furniture and Equipment 8,797,979 1,537,309 (103,567) 10,231,721
Leasehold Improvements 4,490,905 735,475 (429) 5,225,951
----------- ---------- ------------ -----------
$58,403,325 $8,749,526 $ (6,764,578)(A) $60,388,273
=========== ========== ============ ===========
</TABLE>
(A) $5,541,119 of this amount represents the accumulated depreciation
and amortization on the Florida Division's Property and Equipment
that was considered in the Company's "Florida Closing Liabilities"
caption. Additional information on the Florida Division Closing is
contained in Note 4 on page 16 of the 1994 Annual Report.
19
<PAGE>
<TABLE>
SUPER FOOD SERVICES, INC. AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED AUGUST 27, 1994, AUGUST 28, 1993 AUGUST 29, 1992
<CAPTION>
Reductions
Additions Charged to
Balance at Charged Acquisition Allowances for Balance
Beginning to Income of Kentucky Writeoffs (net at Close
Description of Period and Expense Food Stores, Inc. of Recoveries) of Period
<S> <C> <C> <C> <C> <C>
ALLOWANCES DEDUCTED FROM
ASSETS TO WHICH THEY APPLY:
1994
Allowance for doubtful accounts $ 9,026,920 $ 4,250,000 $ -0- $(2,278,318) $10,998,602
1993
Allowance for doubtful accounts $ 7,117,330 $ 3,208,000 $ -0- $(1,298,410) $ 9,026,920
1992
Allowance for doubtful accounts $ 4,427,463 $ 3,208,591 $ 449,244 $ (967,968) $ 7,117,330
<CAPTION>
Amounts
Reclassified Payments
Balance at Additions Against Various Charged Balance
Beginning Charged Balance Against at Close
of Period to Expense Sheet Accounts the Reserve of Period
<S> <C> <C> <C> <C> <C>
ANALYSIS OF BALANCE SHEET
RESERVE:
1994
Florida Closing Liabilities $ 7,424,022 $ -0- $ (847,000) $(2,923,022) $ 3,654,000
1993
Florida Closing Liabilities $17,642,282 $ -0- $ (520,300) (9,697,960) 7,424,022
1992
Florida Closing Liabilities $ -0- $22,986,492 $(2,100,000) (3,244,210) 17,642,282
</TABLE>
20
<PAGE>
<TABLE>
SUPER FOOD SERVICES, INC. AND SUBSIDIARIES
SCHEDULE IX--SHORT-TERM BORROWINGS
FOR THE FISCAL YEARS ENDED AUGUST 27, 1994, AUGUST 28, 1993 AUGUST 29, 1992
<CAPTION>
Maximum Amount Average Amount Weighted Average
Category Weighted Outstanding Outstanding Interest Rate
Aggregate Short Balance at Average During the During the During the
Term Borrowings End of Period Interest Rate Period (1) Period Period (2)
<S> <C> <C> <C> <C> <C>
1994
Bank notes $9,000,000 5.15% $21,500,000 $13,601,648 4.54%
1993
Bank notes $ -0- -0- $19,143,000 $11,363,000 4.23%
1992
Bank notes $5,000,000 3.71% $41,000,000 $18,698,000 4.75%
</TABLE>
(1) Based on balance at end of each four-week period.
(2) Percent of annual interest expense to average amount outstanding.
21
<PAGE>
Exhibit 1
SUPER FOOD SERVICES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As Amended and Restated Effective as of May 18, 1994)
A. Super Food Services, Inc., a Delaware corporation, (the
"Company") has adopted the Retirement Plan For Employees of Super
Food Services, Inc., a defined benefit plan qualified under Sec-
tion 401(a) of the Internal Revenue Code which provides retirement
benefits to employees in specified remuneration and years of
service classifications.
B. By resolution adopted March 8, 1988, the Board of
Directors of the Company adopted the Super Food Services, Inc.,
Excess Benefit Plan (the "Excess Benefit Plan") which is an
unfunded, non-qualified plan which restores to certain designated
participating employees and their beneficiaries any retirement
benefits lost under the Retirement Plan For Employees of Super Food
Services, Inc., by reason of the application of Section 415 of the
Internal Revenue Code.
C. By resolution adopted on August 30, 1989, the Board of
Directors amended the Excess Benefit Plan to provide that benefits
under the Excess Benefit Plan shall be payable to a participant in
the event of a participant's death prior to retirement in addition
to when a participant continues in the employ of the Company until
attaining his or her retirement.
D. The benefits payable to certain designated participants
in the Retirement Plan For Employees of Super Food Services, Inc.,
are also subject to reduction by reason of the application of
Section 401(a)(17) of the Internal Revenue Code effective for years
commencing on and after January 1, 1989.
E. The Board of Directors deemed it desirable to restore any
benefits lost under the Retirement Plan For Employees of Super Food
Services, Inc., because of the limitations imposed by Sec-
tion 401(a)(17) of the Internal Revenue Code and to accomplish this
purpose, the Board of Directors by resolutions adopted on May 18,
1994, further amended the Excess Benefit Plan to restore any
benefits lost under the Retirement Plan For Employees of Super Food
Services, Inc., by reason of the application of Section 401(a)(17)
of the Internal Revenue Code.
F. By resolutions adopted May 18, 1994, the Board of
Directors also changed the name of the Excess Benefit Plan to the
Supplemental Executive Retirement Plan and adopted certain other
amendments to the Supplemental Executive Retirement Plan and
authorized that the Supplemental Executive Retirement Plan as
originally adopted and as subsequently amended be recorded and
restated in a plan document to read as follows:
G. Contemporaneously herewith, the Company has established
a grantor trust known as the Supplemental Executive Retirement
Trust (the "Trust") to hold assets of the Company as a reserve for
the complete discharge of its financial obligations under the
Supplemental Executive Retirement Plan.
<PAGE>
H. A copy of the agreement establishing the Trust is
attached hereto and incorporated by this reference as part of the
Supplemental Executive Retirement Plan.
1. Definitions. Where the following words and phrases
appear in this Supplemental Executive Retirement Plan, they shall
have the respective meanings set forth below, unless the context
clearly indicate to the contrary:
(a) Beneficiary. The Participant's surviving
spouse or such other person or persons either designated by the
Participant or the Pension Plan to receive any death benefits
payable under the Pension Plan, in accordance with its procedures.
(b) Board. The persons from time to time elected
or appointed and acting as the Board of Directors of the Company.
(c) Change of Control. The purchase or other
acquisition by any person, entity or group of persons, within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act of
1934 ("Act"), or any comparable successor provisions, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Act) of 20% or more of either the outstanding Common Shares or the
combined voting power of Company's then outstanding voting
securities entitled to vote generally, or the approval by the
stockholders of Company of a reorganization, merger, or consoli-
dation, in each case, with respect to which persons who were
stockholders of Company immediately prior to such reorganization,
merger or consolidation do not, immediately thereafter, own more
than 50 percent of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged
or consolidated Company's then outstanding securities, or a
liquidation or dissolution of Company or of the sale of all or
substantially all of Company's assets.
(d) Code. The Internal Revenue Code of 1986, as
amended from time to time, as construed, interpreted and modified
by regulations or rulings promulgated thereunder.
(e) Company. Super Food Services, Inc., a Delaware
corporation, or its successor or successors.
(f) Effective Date. March 8, 1988
(g) Participant. Any employee of the Company or
its subsidiaries who has been designated as a participant in the
Supplemental Executive Retirement Plan at any time on or after the
effective date by the Board.
(h) Pension Plan. The Retirement Plan For Employ-
ees of Super Food Services, Inc., as from time to time amended.
(i) Retirement. Termination of employment for any
reason (including death) after a Participant has fulfilled all
requirements for a Normal, Late or Early Retirement Pension under
the terms of the Pension Plan. Retirement shall be considered as
commencing on the date as of which the first Normal, Late or Early
Retirement Pension payment is made to the Participant.
(j) Supplemental Plan. Super Food Services, Inc.,
Supplemental Executive Retirement Plan, the Supplemental Plan set
forth herein as amended from time to time. The Supplemental Plan
is intended to be an unfunded, non-qualified plan primarily for the
purpose of providing deferred compensation to a select group of
Participants who are management or highly compensated employees of
the Company.
<PAGE>
2. Purpose of Supplemental Plan. It is the express
purpose of the Supplemental Plan to provide Participants and their
Beneficiaries with deferred compensation on an unfunded basis, in
addition to any benefits provided under the Pension Plan and
without regard to the limitations imposed upon qualified plans
under Section 415 and Section 401(a)(17) of the Code. The Supple-
mental Plan is intended to be completely separate from the Pension
Plan and shall not be funded or secured in any way or qualified for
tax treatment under the Code.
3. Benefits Payable. (a) The Company shall pay to
each Participant or to such Participant's Beneficiary a monthly
benefit, the amount of which shall be equal to the difference, if
any, between:
(i) The monthly benefit payable to such
Participant or to his or her Beneficiary in
accordance with optional form of benefit
selected by Participant or otherwise provided
under the Pension Plan; and
(ii) The monthly benefit that would have
been payable to such Participant or to his
or her Beneficiary under the Pension Plan,
were it not for the limitations imposed on
benefits under the Pension Plan in order to
meet the requirements of Section 415 and Sec-
tion 401(a)(17) of the Code. Such monthly
benefit shall be determined by applying the
same actuarial assumptions to a benefit
payable in the same optional form commencing
on the same payment starting date as the
Pension Plan benefit described in Subpara-
graph 3(a)(i) above.
(b) The first benefit payment under the Supplemen-
tal Plan shall be made as of the date of the Participant's
Retirement under the Pension Plan or as of the date of the Partici-
pant's death prior to Retirement while in the employment of the
Company, and the last benefit payment shall be made as of the date
on which the last payment of a Normal, Late or Early Retirement
Pension or other death benefit is made to the Participant or to
such Participant's Beneficiary under the Pension Plan. If a
Participant's employment should terminate prior to his or her Early
Retirement for any reason other than death, no benefits shall be
paid under the Supplemental Plan. The payments under the Supple-
mental Plan shall be determined actuarially and shall be payable in
the same manner, and at the same time and shall be subject to all
of the same options, conditions, privileges and restrictions as are
applicable to the benefits payable to a Participant or to such
Participant's Beneficiary under the Pension Plan.
4. Accelerated Payment. Upon a Change of Control, as
defined herein, the Company shall, as soon as possible, but in no
event longer than thirty (30) days following the Change of Control,
make an irrevocable contribution to the Supplemental Plan and fund
any trust established pursuant to the provisions of Section 7
hereof in an amount (if any) which will cause the total assets held
in the trust to equal the present value of benefits payable from
the Supplemental Plan to each Participant or his or her Benefic-
iary. For purposes of this Section 4 only, the benefit payable
from the Supplemental Plan shall be determined as if the Partici-
pant terminated employment on the date of Change of Control,
retired immediately and commenced receiving benefit payments from
the Pension Plan. The present value of the Supplemental Plan
benefits shall be determined using the following actuarial assump-
tions:
Interest: The interest rate published by the Pension
Benefit Guaranty Corporation for purposes of valuing a benefit
payable from a terminating single employer qualified defined
benefit plan in the form of an immediate annuity. Such interest
rate shall be determined on the first day of the month during which
a Change in Control occurs.
Mortality: UP 1984
5. Rights to Benefits. Benefits payable to any
Participant under the Supplemental Plan shall not be subject to
attachment, garnishment or other legal process by any creditor of
any such Participant or his or her Beneficiary, nor shall any such
Participant have any right to alienate, anticipate, commute,
pledge, encumber or assign any of the benefit payments he or she
may expect to receive, contingently or otherwise, under the
Supplemental Plan.
6. Participation. (a) The following named individuals
are hereby designated as initial Participants in the Supplemental
Plan by the Board: Jack Twyman, John Demos, Samuel L. Robinson,
Robert F. Koogler, Al Burshtan, Jim Donnelly and Dave Meadows.
(b) Individual Participants in the Supplemental
Plan (other than those individuals specified in paragraph (a) of
this Section 6, shall be selected by the Board from key management
employees and executives of the Company. The term "employee" shall
mean any person (including any officer) employed by the Company who
is a member of a select group of management employees or is a
highly compensated employee for purposes of Title 2 of the Employee
Retirement Income Security Act of 1974, and no employee shall be
excluded because he or she is also a director of the Company.
After selection by the Board, each employee who participates in the
Supplemental Plan shall be required, as a condition of participa-
tion, to execute a copy of a written agreement on a form to be
provided by the Board agreeing to be bound by all of the terms and
provisions hereof.
7. Trust. (a) The officers of the Company are autho-
rized for and on behalf of and in the name of the Company to
establish a trust with a bank or trust company as trustee and to
transfer to the trust so established assets which shall be held
therein, subject to the claims of the Company's creditors in the
event of the Company's bankruptcy or insolvency until paid to the
designated participants and their Beneficiaries as trust beneficia-
ries under the Supplemental Plan, in such manner and at such times
as specified in the Supplemental Plan and in accordance with the
terms of the trust.
(b) The Company may, in its discretion, make
contributions to such trust from time to time to fund either
projected or actual accrued benefits for the Participants under the
Supplemental Plan as trust beneficiaries.
8. Facility of Payment. Whenever, in the Board's
opinion, a Participant entitled to receive any payment of a benefit
or installment thereof hereunder is under a legal disability, or is
incapacitated in any way so as to be unable to manage his or her
financial affairs, the Board may make payments to such person, or
to his or her legal representative for his or her benefit, or the
Board may apply the payment for the benefit of such person in such
manner as the Board considers advisable. Any payment of a benefit
or installment thereof in accordance with the provisions of this
paragraph shall be a complete discharge of any liability for the
making of such payment under the provisions of the Supplemental
Plan.
9. Small Pensions. If a benefit payable hereunder is
less than Seventy Five Dollars ($75.00) per month, the Board may,
in its discretion, direct that in lieu of such benefit, the actuar-
ial equivalent thereof be paid to the Participant in a lump sum, or
in a series of uniform monthly, quarterly or annual amounts for
life or for a designated period of time.
10. Administration. The Supplemental Plan shall be
administered by the Board, or by such person or persons as the
Board shall from time to time appoint. The Board may make such
rules and decisions as it deems necessary or desirable for the
administration of the Supplemental Plan, and any rule or decision
of the Board which is not inconsistent with the provisions of the
Supplemental Plan shall be conclusive and binding upon all persons
affected by it and there shall be no appeal from any ruling by the
Board which is within its authority. The Board shall be reimbursed
by the Company for any costs incurred by it in administering the
Supplemental Plan.
11. Funding. All benefits payable hereunder, and all
costs of administering the Supplemental Plan, shall be paid solely
as required out of the general assets of the Company. The Company
may, at its discretion, acquire an insurance policy or policies
insuring the life of any Participant in the Supplemental Plan from
which it may satisfy its obligations to make benefit payments
pursuant to the Supplemental Plan.
12. Limitation of Liability. It is expressly understood
and agreed by each Participant in the Supplemental Plan that
neither the Board, nor any member thereof, nor any person appointed
by the Board to administer the Supplemental Plan, shall be subject
to any legal liability to any Participant hereunder for any cause,
reason or thing whatsoever in connection with this Supplemental
Plan, and each Participant hereby releases the Board, its members
and agents, from any and all liability or obligation hereunder.
13. Amendment and Termination. The Board may, in its
discretion, amend the Supplemental Plan from time to time, and may
by resolution terminate the Supplemental Plan at any time, in whole
or in part; provided that no amendment shall reduce any Partici-
pant's accrued benefit at the time of such amendment or change the
terms and conditions of the payment thereof.
14. Miscellaneous. (a) Nothing contained in the
Supplemental Plan shall be construed as a contract of employment
between the Company and any Participants, or as a right of any
Participant to be continued in the employment of the Company, or as
a limitation of the rights of the Company to discharge any
Participant, with or without cause, except such limitations or
restrictions that may be contained in any other agreement between
any Participant and the Company, including without limitation, any
employment agreement between any Participant and the Company.
(b) The Supplemental Plan shall be construed
according to the laws of the State of Ohio provided, that nothing
in this paragraph shall be construed as placing any restriction
upon the Company, acting pursuant to the Supplemental Plan, to take
any action, or to incur any liability which it is authorized to
take or incur under its certificate of incorporation or by-laws or
under the laws of the state in which it is incorporated.
<PAGE>
(c) The Participants and their Beneficiaries shall
be entitled to receive attorneys' fees, costs and expenses incurred
in enforcing their rights under the Supplemental Plan (which fees,
costs and expenses shall be paid on a current basis if the enforce-
ment action is due to the Company's nonpayment or nonprovision of
benefits under the Supplemental Plan).
(d) The Supplemental Plan shall be binding upon and
inure to the benefit of the Participants, their respective
Beneficiaries, heirs, personal representatives, successors and
assigns and the Company and any successor corporation or other
entity which may acquire all or substantially all of the Company's
assets and business, whether by reason of merger, consolidation,
purchase or otherwise.
(e) Nothing in the Supplemental Plan shall be
construed to alter, abridge, or in any manner affect the rights and
privileges of the Participant to participate in any pension,
profit-sharing or other employee benefit plan the Company may now
or hereafter provide.
To record the Amended and Restated Supplemental Executive
Retirement Plan as set forth above, the Company has caused the
Amended and Restated Supplemental Executive Retirement Plan to be
signed and attested on its behalf by its duly authorized represen-
tatives this 18th day of May, 1994.
SUPER FOOD SERVICES, INC., a
Delaware corporation
By______________________________
Chairman of the Board
Attest:
Secretary
<PAGE>
Exhibit 2
SUPPLEMENTAL EXECUTIVE RETIREMENT TRUST AGREEMENT
THIS TRUST AGREEMENT ("Trust Agreement") made this 22nd day of
July, 1994, by and between SUPER FOOD SERVICES, INC., a Delaware
corporation, (the "Company") and SOCIETY NATIONAL BANK, (the
"Trustee").
WHEREAS, the Company has adopted a nonqualified Supplemental
Executive Retirement Plan (the "Plan") for the purpose of paying
certain designated participating employees retirement benefits in
excess of the limitations imposed by Section 415 and 401(a)(17) of
the Internal Revenue Code on the retirement benefits that may be
paid under the Retirement Plan For Employees of Super Food
Services, Inc., (the "Pension Plan"); and
WHEREAS, the Company has incurred or expects to incur liabil-
ity under the terms of the Plan with respect to the individuals
participating in the Plan; and
WHEREAS, the Company wishes to establish a trust (hereinafter
called "Trust") and to contribute to the Trust assets that shall be
held therein, subject to the claims of the Company's creditors in
the event of the Company's Insolvency, as herein defined, until
paid to Plan participants and their beneficiaries in such manner
and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect the
status of the Plan as an unfunded plan maintained for the purpose
of providing deferred compensation for a select group of management
or highly compensated employees for purposes of Title I of the
Employee Retirement Income Security Act of 1974; and
WHEREAS, it is the intention of the Company to make contribu-
tions to the Trust to provide itself with a source of funds to
assist it in the meeting of its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and
agree that the Trust shall be comprised, held and disposed of as
follows:
Article 1. Establishment of Trust
1.1 The Company hereby deposits with Trustee in trust
the sum of $100.00, to be held, administered and disposed of by
Trustee as provided in this Trust Agreement. As soon as practica-
ble after the date hereof, the Company shall deliver to the Trustee
to be held in trust hereunder an amount of cash and life insurance
policies which will be sufficient to fund the Company's obligations
to pay (i) to the Plan participants and their beneficiaries bene-
fits accrued to them under the Plan, and (ii) to the appropriate
insurers premiums due and payable on such life insurance policies.
1.2 The Trust hereby established shall be irrevocable.
The Company shall have no right or power to direct Trustee to
return to the Company or to divert to others any assets of the
Trust before all payment of benefits have been made to Plan partic-
ipants and their beneficiaries pursuant to the terms of the Plan.
1.3 The Trust is intended to be a grantor trust, of
which the Company is the grantor, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Internal Revenue
Code of 1986, as amended, and shall be construed accordingly.
1.4 The Trust Fund, as defined in Article 2 hereof,
shall be held separate and apart from other funds of the Company
and shall be used exclusively for the uses and purposes of Plan
participants and general creditors as herein set forth. Plan
participants and their beneficiaries shall have no preferred claim
on, or any beneficial ownership interest in, any assets of the
Trust. Any rights created under the Plan and this Trust Agreement
shall be mere unsecured contractual rights of Plan participants and
their beneficiaries against the Company. All assets held by the
Trust will be subject to the claims of the Company's general
creditors under federal and state law in the event of Insolvency,
as defined in Section 4.1 herein.
1.5 At each December 31, the Company shall recalculate
the amount of assets which would be required to be delivered
pursuant to Section 1.1 as of such anniversary date. If the amount
so calculated exceeds the fair market value of the assets then held
in the Trust, the Company shall promptly (and in no event later
than sixty (60) days from such anniversary date) pay to the Trustee
(i) an amount in cash, marketable securities (valued at their fair
market value) or life insurance policies or any combination thereof
equal to such excess less (ii) the amount, if any, of interest and
other income earned in the Trust and received by the Trustee during
the year then ended at December 31. Contemporaneously with such
payment, the Company shall deliver to the Trustee (i) a modified
Payment Schedule indicating the amounts payable in respect of each
Plan participant, or providing a formula or instructions acceptable
to the Trustee for determining the amounts so payable, and the time
of commencement for, and the form of, payment of such amounts and
(ii) the amounts payable in respect of any premiums on any life
insurance policies held in Trust.
1.6 The Company, in its sole discretion, may at any
time, or from time to time, make deposits of cash or other property
in trust with Trustee in addition to deposits referenced in
Sections 1.1 and 1.5 herein to augment the principal to be held,
administered and disposed of by Trustee as provided in this Trust
Agreement. Neither Trustee nor any Plan participant or beneficiary
shall have any right to compel such additional deposits.
1.7 The Company shall have the duty to inform the
Trustee promptly in writing whenever a Change of Control has
occurred. If any two Plan participants notify Trustee in writing
that a Change of Control has occurred, then unless, in the opinion
of nationally recognized legal counsel to the Company such a Change
of Control has not occurred, a Change of Control will be deemed to
have occurred for purposes of this Trust Agreement.
1.8 Upon a Change of Control, the Company shall, as soon
as possible, but in no event longer than thirty (30) days following
the Change of Control, as defined in Section 11.5 hereof, make an
irrevocable contribution to the Trust in an amount (if any) which
will cause the total assets held in the Trust to equal the present
value of benefits payable from the Plan to each participant or his
or her beneficiary. For purposes of this Section only, the benefit
payable from the Plan shall be determined as if the participant
terminated employment on the date of Change of Control, retired
immediately and commenced receiving benefit payments from the
Pension Plan. The present value of the Plan benefits shall be
determined using the following actuarial assumptions:
Interest: The interest rate published by the
Pension Benefit Guaranty Corporation for
purposes of valuing a benefit payable from a
terminating single employee qualified defined
benefit plan in the form of an immediate annu-
ity. Such interest rate shall be determined
on the first day of the month during which a
Change in Control occurs.
Article 2. Trust Fund.
2.1 As used herein, the term "Trust Fund" shall mean the
amounts and assets delivered to the Trustee as described in Sec-
tion 1.1 hereof plus all amounts and assets delivered thereafter
pursuant to Sections 1.5 and 1.6 hereof, including all income,
gains and losses, whether realized or unrealized thereon in what-
ever form held or invested as provided herein. The Trust Fund
shall be held, invested and reinvested by the Trustee in accordance
with the duties of the Trustee and the powers granted to it under
the terms of this Trust. Provided, further, that the Trustee shall
not be liable for any failure to maximize the income earned on that
portion of the Trust as is from time to time invested or reinvested
as set forth above, nor for any loss of income due to liquidation
of any investment which the Trustee, in its sole discretion,
believes necessary to make payments or to reimburse expenses under
the terms of this Trust.
Article 3. Payments to Plan Participants and Their Benefi-
ciaries.
3.1 The Company shall deliver to Trustee a schedule (the
"Payment Schedule") that indicates the amounts payable in respect
of each Plan participant (and his or her beneficiaries), that
provides a formula or other instructions acceptable to Trustee for
determining the amounts so payable, the form in which such amount
is to be paid (as provided for or available under the Plan), the
time of commencement for payment of such amounts, and the amount
payable in respect of any premiums on any life insurance policies
held in Trust. Except as otherwise provided herein, Trustee shall
make payments to the Plan participants and their beneficiaries in
accordance with such Payment Schedule. The Company may modify such
Payment Schedule at any time by providing a new Payment Schedule to
the Trustee at least thirty (30) days prior to the effective date
of such modification.
3.2 The Trustee shall make provision for the reporting
and withholding of any federal, state or local taxes that may be
required to be withheld with respect to the payment of benefits
pursuant to the terms of the Plan and shall pay amounts withheld to
the appropriate taxing authorities or determine that such amounts
have been reported, withheld and paid by the Company.
3.3 The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plan shall be determined by the
Company or such party as it shall designate under the Plan, and any
claim for such benefits shall be considered and reviewed under the
procedures set out in the Plan.
3.4 The Company may make payment of benefits directly to
Plan participants or their beneficiaries as they become due under
the terms of the Plan. The Company shall notify Trustee of its
decision to make payment of benefits directly prior to the time
amounts are payable to participants or their beneficiaries. In
addition, if the Trust Fund is not sufficient to make payments of
benefits in accordance with the terms of the Plan, the Company
shall make the balance of each such payment as it falls due.
Trustee shall notify the Company when the Trust Fund is not suffi-
cient.
Article 4. Trustee Responsibility Regarding Payments to
Trust Beneficiary When the Company is Insolvent.
4.1 Trustee shall cease payment of benefits to Plan
participants and their beneficiaries if the Company is Insolvent.
The Company shall be considered "Insolvent" for purposes of this
Trust Agreement if (i) the Company is unable to pay its debts as
they become due, or (ii) the Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
4.2 At all times during the continuance of this Trust,
as provided in Section 1.4 hereof, the Trust Fund shall be subject
to claims of general creditors of the Company under federal and
state law as set forth below:
a. The Board of Directors and the Chief Executive
Officer of the Company shall have the duty to inform Trustee
promptly in writing of the Company's Insolvency.
b. Unless Trustee has actual knowledge of the
Company's Insolvency, or has received notice from the Company or a
person claiming to be a creditor alleging that the Company is
Insolvent, Trustee shall have no duty to inquire whether the
Company is Insolvent. Trustee may in all events rely on such
evidence concerning the Company's solvency as may be furnished to
Trustee and that provides Trustee with a reasonable basis for
making a determination concerning the Company's solvency.
c. If at any time Trustee has been notified by the
Company that the Company is Insolvent, Trustee shall discontinue
payments to Plan participants or their beneficiaries and shall hold
the Trust Fund for the benefit of the Company's general creditors.
The Trustee shall disburse assets of the Trust to creditors of the
Company only pursuant to an order of a court of competent jurisdic-
tion. Nothing in this Trust Agreement shall in any way diminish
any rights of Plan participants or their beneficiaries to pursue
their rights as general creditors of the Company with respect to
benefits due under the Plan or otherwise.
d. Trustee shall resume the payment of benefits to
Plan participants or their beneficiaries in accordance with Arti-
cle 3 of this Trust Agreement only after either (i) Trustee has
determined that the Company is not Insolvent (or is no longer
Insolvent); or (ii) a court of competent jurisdiction determines
the Company is not Insolvent (or is no longer Insolvent), whichever
is first to occur.
4.3 Provided that the Trust Fund is sufficient, if
Trustee discontinues the payment of benefits from the Trust pursu-
ant to Section 4.2 hereof and subsequently resumes such payments,
the first payment following such discontinuance shall include the
aggregate amount of all payments due to Plan participants or their
beneficiaries under the terms of the Plan for the period of such
discontinuance, less the aggregate amount of any payments made to
Plan participants or their beneficiaries by the Company in lieu of
the payments provided for hereunder during any such period of
discontinuance.
<PAGE>
Article 5. Accounting by Trustee.
Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between the Company and Trustee. Within
sixty (60) days following the close of each calendar year and
within ninety (90) days after the removal or resignation of
Trustee, Trustee shall deliver to the Company a written account of
its administration of the Trust during such year or during the
period from the close of the last preceding year to the date of
such removal or resignation, setting forth all investments,
receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased
and sold with the cost or net proceeds of such purchases or sales
(accrued interest paid or receivable being shown separately), and
showing all cash, securities and other property held in the Trust
at the end of such year or as of the date of such removal or
resignation, as the case may be.
Article 6. Responsibility of Trustee.
6.1 Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with
like aims, provided, however, that Trustee shall incur no liability
to any person for any action taken pursuant to a direction, request
or approval given by the Company which is contemplated by, and in
conformity with, the terms of the Plan or this Trust and is given
in writing by the Company. In the event of a dispute between the
Company and a party, Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
6.2 If Trustee undertakes or defends any litigation
arising in connection with this Trust, the Company agrees to
indemnify Trustee against Trustee's costs, expenses and liabilities
(including, without limitation, reasonable attorneys' fees and
expenses) relating thereto and to be primarily liable for such
payments. If the Company does not pay such costs, expenses and
liabilities in a reasonably timely manner, Trustee may obtain
payment from the Trust.
6.3 Trustee may consult with legal counsel (who may also
be counsel for the Company generally) with respect to any of its
duties or obligations hereunder.
6.4 Notwithstanding any powers granted to Trustee
pursuant to this Trust Agreement or to applicable law, Trustee
shall not have any power that could give this Trust the objective
of carrying on a business and dividing the gains therefrom, within
the meaning of Section 301.7701-2 of the Procedure and Administra-
tive Regulations promulgated pursuant to the Internal Revenue Code.
Article 7. Powers of Trustee.
7.1 Subject to the Company's express directions and the
investment guidelines which are attached hereto as Schedule "A",
the Trustee shall have the following powers and duties, in addition
to any implied powers and duties which may be necessary to carry
out the provisions of the Trust:
a. To sell, exchange, hypothecate, convey and
otherwise transfer any securities or other property held in the
Trust, at public or private sale, for such prices and on such terms
as the Trustee deems suitable, without the approval of any court
and without any obligation upon any person dealing with the Trustee
to see to the application of any money or other property delivered
to it;
b. To invest and reinvest all or any part of the
principal of the Trust Fund in such stocks, bonds, mortgages,
shares or interests in common trust funds, or other securities or
property, real, personal or mixed, and of such kind and nature
whatsoever, as it may deem advisable, and without diversification
if it deems it advisable, irrespective of whether or not such
securities or property are eligible for trust investment under the
laws of Ohio or any other law, and may change any investment
received or made by the Trustee; provided, however, in no event may
Trustee invest in securities (including stock or rights to acquire
stock) or obligations issued by the Company;
c. To hold uninvested or to deposit in any bank or
savings and loan association such sums of cash as it deems reason-
able and in the best interests of the Trust;
d. To exercise any right, including the right to
vote, personally or by general or special proxies or powers of
attorney, appurtenant to any securities or other property held in
the Trust;
e. To exercise or sell any conversion privileges,
subscription rights or other rights or options and to make any
payments incidental thereto;
f. To oppose, consent to, or otherwise participate
in, any reorganization, recapitalization or other changes affecting
securities held in the Trust, to delegate discretionary powers to
the extent permitted by law, and to pay expenses, assessments or
charges in connection therewith; to retain any securities or other
property allotted to the Trust in connection with any such reorga-
nization, recapitalization or other changes; and to generally
execute any of the powers of an owner with respect to any securi-
ties or other property held in the Trust;
g. To hold securities or other property in its
name as Trustee or in the name of one or more nominees or in bearer
form; provided, the Trust records shall at all times show that such
securities or property are part of the Trust;
h. To make, execute, acknowledge and deliver any
instruments that may be necessary or appropriate to carry out the
powers herein granted;
i. To consult and employ suitable agents, enrolled
actuaries, auditors, legal counsel or other advisers as deemed
necessary to assist in the performance of the Trustee's duties, and
to pay reasonable expenses and compensation in connection there-
with;
j. To enforce, abstain from enforcing, settle,
modify, compromise, submit to arbitration or abandon any rights,
obligations, claims, debts or damages due or owing to or from the
Trust; to commence, defend and represent the Trust in all suits and
legal and administrative proceedings;
k. To accept and retain any securities or other
property received or acquired by the Trust, whether or not such
property would normally be purchased or would then be authorized as
investments hereunder;
l. To collect and receive any money or property
due to the Trust and to give full discharge and acquittance there-
for;
m. To prepare such periodic written reports or
other accountings as required hereunder, and to furnish the Company
and the Plan participants with such information which either may
require for tax or other purposes.
n. To borrow money from any lender in such amounts
and upon such terms and conditions as shall be deemed advisable or
proper to carry out the purposes of the Trust and to pledge any
securities or other property for the repayment of any such loan,
provided that the Company may direct but not prohibit borrowing by
the Trustee on any life insurance policies held in the Trust;
o. To transfer assets of the Trust Fund to a
successor Trustee as provided in Article 10;
p. To adopt uniform rules of procedure and regula-
tions necessary for the proper and efficient administration of the
Trust, provided such rules are not inconsistent with the terms
hereof, and to enforce such rules and regulations;
q. To determine any question which may arise as to
what constitutes income and principal, without regard to Sec-
tions 2109.66 through 2109.68 of Chapter 1340 of the Ohio Revised
Code as the same may be amended from time to time;
r. To consent to the addition of any real property
to the Trust;
s. To acquire and hold life insurance policies of
any type on the lives of any Plan participants;
t. To do all acts though not specifically named
herein, which the Trustee deems advisable to carry out the purposes
of this Trust; and
u. To have, without exclusion, all powers con-
ferred on Trustees by applicable law, unless expressly provided
otherwise herein, provided, however, that if an insurance policy is
held as an asset of the Trust, Trustee shall have no power to name
a beneficiary of the policy other than the Trust, to assign the
policy (as distinct from conversion of the policy to a different
form) other than to a successor Trustee, or to loan to any person
the proceeds of any borrowing against such policy.
Article 8. Compensation and Expenses of Trustee.
The Company shall pay all administrative and Trustee's
fees and expenses.
Article 9. Resignation and Removal of Trustee.
9.1 Trustee may resign at any time by written notice to
the Company, which shall be effective sixty (60) days after receipt
of such notice unless the Company and Trustee agree otherwise.
9.2 At any time prior to a Change of Control, Trustee
may be removed by the Company with or without cause, upon thirty
(30) days prior notice or upon shorter notice accepted by Trustee.
9.3 At any time after a Change of Control, as defined in
Section 12.5 hereof, the Company may remove the Trustee and appoint
a successor Trustee only with the written consent (in a form
acceptable to the Trustee) of a majority of participants and
beneficiaries of then-deceased participants who were, in each case,
covered by the Plan on the date of the Change of Control, and who
are covered by the Plan on the effective date of removal. Any
notice sent to such participants and beneficiaries seeking their
consent to removal of the Trustee and appointment of a successor
Trustee shall include the name and address of the proposed succes-
sor Trustee and a written statement by such proposed successor that
the successor has read the Agreement and understands its obliga-
tions thereunder.
9.4 If Trustee resigns or is removed, a successor shall
be appointed, in accordance with Sections 10.1, 10.2 and 10.3 by
the effective date of resignation or removal under Sections 9.1,
9.2 or 9.3. If no such appointment has been made, Trustee may
apply to a court of competent jurisdiction for appointment of a
successor or for instructions. In any event, the Trustee shall
continue to be custodian of the Trust Fund until the successor
Trustee is in place, and the Trustee shall be entitled to expenses
and fees through the later of the effective date of its resignation
as Trustee and the end of its custodianship of the Trust Fund. All
expenses of Trustee in connection with the proceeding shall be
allowed as administrative expenses of the Trust.
9.5 Upon resignation or removal of Trustee and appoint-
ment of a successor Trustee, the Trust Fund shall subsequently be
transferred to the successor Trustee. The transfer shall be
completed on the effective date of such resignation or removal,
unless the Company and the Trustee mutually agree to extend the
time limit.
Article 10. Appointment of Successor.
10.1 If Trustee resigns or is removed in accordance with
Section 9.1, 9.2 or 9.3 hereof, the Company may appoint any bank or
other party that has been granted corporate trustee powers under
state law, as a successor to replace Trustee upon resignation or
removal.
10.2 If Trustee resigns at any time after a Change of
Control, as defined in Section 12.5 hereof, the Company shall
proceed to appoint a successor Trustee, subject to the written
consent of a majority of participants and beneficiaries of then-
deceased participants who were, in each case, covered by the Plan
on the date of Change of Control, and who are covered by the Plan
on the effective date of resignation. Any notice sent to such
participants and beneficiaries seeking their consent to removal of
the Trustee and appointment of a successor Trustee shall include
the name and address of the proposed successor Trustee and a
written statement by such proposed successor that the successor has
read the Agreement and understands its obligations thereunder.
10.3 The appointment of a successor Trustee shall be
effective when accepted in writing by the new Trustee, who shall
have all of the rights and powers of the former Trustee, including
ownership rights in the Trust Fund. The former Trustee shall
execute any instrument necessary or reasonably requested by the
Company or the successor Trustee to evidence the transfer. Any
successor corporate Trustee appointed as provided in this Section,
shall be a bank or trust company with a capital and surplus of not
less than Five Hundred Million Dollars ($500,000,000.00), assets in
excess of Two Billion Dollars ($2,000,000,000.00) and which has
been in existence and carrying on a trust business for not less
than ten (10) years at the time of such appointment in the United
States of America.
10.4 If any financial institution or trust company
serving as a trustee hereunder, by sale, merger, consolidation,
reorganization or otherwise, is merged or consolidated with any
other financial institution or trust company authorized to do a
trust business in any state in the United States, the merged or
consolidated financial institution or trust company resulting
therefrom shall succeed to and be vested with all of the title,
powers, discretions, privileges, duties and immunities of such
trustee hereunder.
Article 11. Amendment or Termination.
11.1 This Trust Agreement may be amended by a written
instrument executed by Trustee and the Company. Notwithstanding
the foregoing, no such amendment shall conflict with the terms of
the Plan or shall make the Trust revocable after it has become
irrevocable in accordance with Section 1.2 hereof.
11.2 The Trust shall not terminate until the date on
which the Plan participants and their beneficiaries are no longer
entitled to benefits pursuant to the terms of the Plan. Upon
termination of the Trust any assets remaining in the Trust shall be
returned to the Company.
11.3 Sections 1.1, 1.2, 1.3, 1.4, 1.5, 1.7, 1.8, 3.4,
12.4, 12.5 and Articles 4, 9, 10 and 11 of this Trust Agreement may
not be amended by the Company without the express written consent
of all then-living participants and the beneficiaries of any
deceased participant for twenty-five (25) years following a Change
of Control, as defined herein.
Article 12. Miscellaneous.
12.1 This Trust sets forth the entire understanding of
the parties with respect to the subject matter hereof and super-
sedes any and all prior agreements, arrangements and understandings
relating thereto. This Trust shall be binding upon and inure to
the benefit of the parties and their respective successors and
legal representatives.
12.2 In the event that any provision of this Trust or the
application thereof to any person or circumstances shall be
determined by a court of proper jurisdiction to be invalid or
unenforceable to any extent, the remainder of this Trust, or the
application of such provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall
not be affected thereby, and each provision of this Trust shall be
valid and enforced to the fullest extent permitted by law.
12.3 Benefits payable to Plan participants and their
beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged, encum-
bered or subjected to attachment, garnishment, levy, execution or
other legal or equitable process.
12.4 This Trust shall be governed by and construed in
accordance with the laws of Ohio, other than and without reference
to any provisions of such laws regarding choice of laws or con-
flicts of laws.
12.5 For purposes of this Trust, Change of Control shall
mean: the purchase or other acquisition by any person, entity or
group of persons, within the meaning of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934 ("Act"), or any comparable
successor provisions, of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Act) of twenty percent (20%) or
more of either the outstanding Common Shares of the Company or the
combined voting power of the Company's then outstanding voting
securities entitled to vote generally, or the approval by the
stockholders of the Company of a reorganization, merger, or consol-
idation, in each case, with respect to which persons who were
stockholders of the Company immediately prior to such reorganiza-
tion, merger or consolidation do not, immediately thereafter, own
more than fifty percent (50%) of the combined voting power entitled
to vote generally in the election of directors of the reorganized,
merged or consolidated Company's then outstanding securities, or a
liquidation or dissolution of the Company or of the sale of all or
substantially all of the Company's assets.
Article 13. Effective Date.
The effective date of this Trust Agreement shall be
May 18, 1994.
Article 14. Notices.
Any notice, report demand or waiver required or permitted
hereunder shall be in writing and shall be given personally or by
prepaid registered or certified mail, return receipt requested,
addressed as follows:
If to the Company: Super Food Services, Inc.
3233 Newmark Drive
Dayton, Ohio 45342
Attention: Secretary
If to the Trustee: Society National Bank
34 North Main Street
Dayton, Ohio 45402
Attention: Assistant Vice President
Article 15. Trust Beneficiaries.
The Plan participants are third party beneficiaries of
this Trust Agreement and shall be entitled to enforce all of the
terms and provisions hereof with the same force and effect as if
such persons had been a party hereto.
IN WITNESS WHEREOF, Super Food Services, Inc., and Society
National Bank, as Trustee, have signed this Agreement on the day
and year first above written.
Company:
SUPER FOOD SERVICES, INC.
By______________________________
Chairman of the Board
Attest:
Secretary
Trustee:
SOCIETY NATIONAL BANK,
Trustee as aforesaid
By______________________________
Assistant Vice President &
Trust Officer
<PAGE>
Super Food Services, Inc.
Supplemental Executive Retirement Trust Agreement
Schedule A
The trust shall be invested in fixed income investments or their
equivalent. This includes, but is not limited to, fixed income
mutual funds, cash equivalent money market instruments, Treasury
securities, Agency securities, Mortgage and Asset backed securi-
ties, and corporate obligations. This schedule may be modified at
any time in the Company's discretion.
<PAGE>
Exhibit 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consoli-
dated financial statements and notes thereto. All dollar information is
in thousands, except per share amounts.
1994 versus 1993
- - ----------------
1994 1993 % Change
Sales and other income $1,130,095 $1,165,520 (3.0%)
This decrease in sales resulted primarily from economic and competitive
pressures.
1994 1993 % Change
Cost of sales $1,079,057 $1,113,224 (3.1%)
Cost of sales includes cost of the products distributed as well as
warehouse, delivery and building expenses. The Company experienced
lower cost of sales due to lower sales volume and slightly higher
margins as a result of a favorable shift in product mix. The Company
experienced higher warehouse and delivery expenses ($518) primarily due
to higher cost of labor and higher building costs ($883) resulting from
higher payroll costs, storage costs, real estate taxes and repairs. The
Company also reduced certain operating reserves between years. In addi-
tion, the Company experienced inflation during Fiscal 1994 versus
deflation during Fiscal 1993. This caused a $1,580 reduction of income
in Fiscal 1994 as a result of applying the LIFO inventory methodology.
1994 1993 % Change
Selling, general and
administrative expenses $ 34,013 $ 33,832 .5%
Expenses increased by $181 due primarily to higher provision for doubt-
ful accounts ($1,042) and an increase in the provision for early retiree
health care benefits of $202 due to compliance with SFAS No. 106. These
increases were offset by reductions in payroll and employee benefits
between years.
1994 1993 % Change
Interest expense $ 6,314 $ 6,957 (9.2%)
Interest income $ (3,540) $ (3,651) 3.0%
Interest expense decreased due to lower interest rates on short-term
borrowings, lower average borrowing levels of long-term debt, and the
capitalization of interest costs ($289) related to the warehouse expan-
sion in Bridgeport. Interest income declined due to a reduction in
outstanding direct financing leases.
1994 1993 Change
Effective tax rate 38.1% 39.2% (1.1%)
The Company's effective tax rate decreased due to the receipt of income
tax refunds from certain states. Without the refunds, the Company's
effective state tax rate would have been comparable with the prior year.
1993 versus 1992
- - ----------------
1993 1992 % Change
Sales and other income $1,165,520 $1,573,321 (25.9%)
This decrease in sales resulted primarily from the closing of the
Florida Division ($415,055). This reduction was offset somewhat by
sales increases at the Company's current operating divisions of $7,255.
Fiscal 1993 sales were still hampered by the weak economy and continuing
competitive pressures.
1993 1992 % Change
Cost of sales $1,113,224 $1,515,657 (26.6%)
Cost of sales includes cost of the products distributed as well as
warehouse, delivery and building expenses. The decrease resulted
primarily from the closing of the Florida Division ($406,843). This
reduction was offset by a net increase in costs at the Company's current
operating divisions of $4,411. At these divisions, the Company experi-
enced higher warehouse expenses ($1,337) primarily due to higher cost of
labor and workers' compensation; higher delivery expense ($296) due
primarily to higher cost of labor and workers' compensation, offset by
lower fuel costs; and higher building costs ($2,483) resulting primarily
from the expansion of the warehouse at the Cincinnati Division. In
addition, the Company experienced more deflation in Fiscal 1993 versus
Fiscal 1992, which resulted in an additional $1,274 credit to income in
Fiscal 1993 from applying the LIFO inventory methodology.
5
<PAGE>
1993 1992 % Change
Selling, general
and administrative
expenses $ 33,832 $ 38,391 (11.9%)
The closing of the Florida Division resulted in the elimination of
$4,020 in expenses. Expenses at current operating divisions decreased
by $539 due to lower wages and benefits.
1993 1992 % Change
Interest expense $ 6,957 $ 7,954 (12.5%)
Interest income $ (3,651) $ 2,784 (31.1%)
Interest expense decreased due to lower interest rates on short-term
borrowings as well as lower borrowing levels of both long-term and
short-term debt due to the cash generated from the close-down of the
Florida Division, offset by higher interest expense resulting from new
capitalized lease obligations. Interest income increased due to more
notes receivable and direct-financing leases being outstanding.
1993 1992 % Change
Provision for closing
Florida Division $ -0- $ 22,986 N.M.
In the third quarter of Fiscal 1992, the Company recorded a special
pretax charge of $22,986 in connection with the closing of the Florida
Division. No additional provision was required for Fiscal 1993.
1993 1992 Change
Effective tax rate 39.2% 38.6% .6%
The Company experienced a lower effective tax rate in 1992 because a
portion of the Florida charge did not receive full tax benefit in
certain states.
Inflation and Changing Prices
- - -----------------------------
The Company's business is characterized by large purchases and high
sales volumes, rapid inventory turns and low profit margins. In this
environment, vendor price increases and decreases are typically passed
on immediately to the customers. The Company does not believe inflation
or deflation has significantly affected its competitive position in the
industry.
However, since price changes do cause sales dollars to fluctuate more
than sales quantities, the use of the LIFO method of accounting for
inventories has reduced the impact of price changes on earnings by
matching current costs with current revenues.
Capital Resources and Liquidity
- - -------------------------------
1994 1993
Cash $ 15,834 $ 14,402
Working capital $ 93,432 $102,870
Long-term obligations,
including capitalized
leases $ 55,994 $ 60,285
Cash provided by operations $ 16,468 $ 19,474
Cash used for investments $(16,141) $ (7,343)
Cash provided by (used for)
financing $ 1,105 $(13,321)
The Company's financial condition remained strong as of August 27, 1994.
The current ratio was 2.39 to 1 at August 27, 1994 as compared to 2.87
to 1 at August 28, 1993.
Trade receivables increased by $1,968 as the Company's customers
continue to be adversely affected by current economic and competitive
conditions. Company management expects that such conditions will
continue into Fiscal 1995. Inventories decreased by $1,819 as the
Company made a concerted effort to reduce its investment in non-cash
working capital. The Company experienced minimal price changes on
products distributed. In addition, the Company paid $1.5 million (net
of taxes) related to the Florida closing during Fiscal 1994.
Net cash used for investment activities during the 52 weeks ended
August 27, 1994, aggregated $16,141, of which $18,030 was invested in
property, plant and equipment. The increase over the prior year
resulted primarily from the Bridgeport warehouse addition ($10,831).
The remaining balance was spent on delivery and other miscellaneous
equipment. The Company anticipates that its capital spending level in
Fiscal 1995 will decrease primarily due to the completion of the
6
<PAGE>
Bridgeport expansion. The Company issued $5,510 of long-term notes
receivable to existing or new customers, while collecting $6,360 on
notes previously issued to current customers. The Company believes that
its outstanding notes receivable balances may continue to grow as the
Company continues to invest in its customers.
Net cash provided by financing activities during the 52 weeks ended
August 27, 1994, aggregated $1,105. The Company paid $3,942 of divi-
dends during Fiscal 1994. The Company was able to reduce long-term debt
by $4,400 but did increase average short-term borrowings to $13,602 from
$11,363 the previous year. There was $9,000 in short-term borrowings at
year end. The Company expects that it will continue to incur short-term
borrowings from time to time to finance working capital needs; however,
the Company anticipates that its short-term borrowings will continue at
lower than historical levels.
Depreciation and amortization of property, equipment and capital leases
for the three years in the period ended August 27, 1994 are as follows:
Year Property and Equipment Capital Leases
1994 $6,787 $ 405
1993 6,727 405
1992 7,692 1,021
During the first quarter of Fiscal 1994, the Company adopted Statement
of Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting
for Income Taxes." The cumulative effect of adopting SFAS No. 109 as of
August 29, 1993 was immaterial. Additionally, the impact of SFAS
No. 109 on the provision for income taxes for the year ended August 27,
1994 was immaterial.
The Company adopted Financial Accounting Standards No. 106 (SFAS
No. 106), "Accounting for Post-Retirement Benefits," on August 29, 1993.
The Company decided to record the Accumulated Post-Retirement Benefit
Obligation of $2.5 million over 20 years. SFAS No. 106 will have no
effect on the Company's current cash outlays for retiree benefits.
In addition, the Company offers former or inactive employees other
benefits before retirement. Management does not believe that such
benefits are material to the Company's financial position, results of
operations or cash flows.
During the year, the Company paid cash dividends on its Common Shares of
$.36 per share. Fiscal year 1994 represents the twenty-eighth year of
consecutive cash dividends.
7
<PAGE>
CONSOLIDATED BALANCE SHEETS
Super Food Services, Inc., and Subsidiaries
August 27, 1994 and August 28, 1993
(amounts in thousands)
_______________________________________________________________________________
ASSETS 1994 1993
CURRENT ASSETS:
Cash $ 15,834 $ 14,402
-------- --------
Receivables
Retailers--trade 60,680 58,712
notes (current portion) 4,543 4,733
Suppliers and miscellaneous 8,210 8,303
-------- --------
73,433 71,748
Less--Allowance for doubtful accounts (7,733) (7,312)
-------- --------
65,700 64,436
-------- --------
Merchandise inventory 63,343 65,162
-------- --------
Future tax benefits (Note 2) 6,768 7,020
Prepaid expenses and other 8,835 6,838
-------- --------
Total current assets 160,480 157,858
-------- --------
NOTES RECEIVABLE FROM RETAILERS
(long-term portion), net of allowance
for doubtful accounts of $3,265 in
1994 and $1,714 in 1993 16,179 17,969
-------- --------
PROPERTY AND EQUIPMENT (Note 8)
Land 1,998 1,998
Buildings 28,267 29,846
Equipment, vehicles and other 91,384 74,252
-------- --------
121,649 106,096
Accumulated depreciation and
amortization (59,225) (54,538)
-------- --------
Net property and equipment 62,424 51,558
-------- --------
OTHER ASSETS:
Investment in direct financing leases
(Note 8) 15,278 15,758
Excess of purchase price over net
tangible assets (Note 1) 4,405 4,471
Future tax benefits (payable) (Note 2) (925) 399
Other 578 225
-------- --------
Total other assets 19,336 20,853
-------- --------
$258,419 $248,238
======== ========
The accompanying notes are an integral part of these consolidated balance
sheets.
8
<PAGE>
Super Food Services, Inc., and Subsidiaries
August 27, 1994 and August 28, 1993
(amounts in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993
CURRENT LIABILITIES:
Accounts payable $ 38,302 $ 34,742
Note payable to bank (Note 3) 9,000 -
Current maturities of long-term
obligations 2,657 2,657
Current maturities of obligations
under capitalized leases 904 1,013
Current portion of Florida
closing liabilities 1,250 2,100
Accrued payroll and vacation 2,857 2,773
Taxes other than income 2,423 2,644
Other current liabilities 9,655 9,059
-------- --------
Total current liabilities 67,048 54,988
LONG-TERM OBLIGATIONS (Note 3) 31,602 34,867
-------- --------
OBLIGATIONS UNDER CAPITALIZED LEASES
(Note 8) 24,392 25,418
-------- --------
LONG-TERM FLORIDA CLOSING LIABILITIES
(Note 4) 2,404 5,324
-------- --------
COMMITMENTS AND CONTINGENT LIABILITIES
(Note 10) - -
SHAREHOLDERS' EQUITY (Notes 3, 5 and 6):
Common Shares, $1.00 par value,
35,000 sharesauthorized, 10,949 and
10,906 shares issued and outstanding
in 1994 and 1993, respectively 10,949 10,906
Paid-in capital 29,408 29,004
Retained earnings 92,616 87,731
-------- --------
Total shareholders' equity 132,973 127,641
-------- --------
$258,419 $248,238
======== ========
The accompanying notes are an integral part of these consolidated balance
sheets.
9
<PAGE>
<TABLE>
Super Food Services, Inc., and Subsidiaries
For the Fiscal Years Ended August 27, 1994, August 28, 1993 and August 29, 1992
(amounts in thousands except per share amounts)
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
SALES AND OTHER INCOME (Note 4) $1,130,095 $1,165,520 $1,573,321
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales, including ware-
house and delivery expenses 1,079,057 1,113,224 1,515,657
Selling, general and
administrative expenses 34,013 33,832 38,391
Interest expense 6,314 6,957 7,954
Interest income (3,540) (3,651) (2,784)
Provision for closing Florida
Division (Note 4) - - 22,986
---------- ----------- ----------
Total Cost and Expenses 1,115,844 1,150,362 1,582,204
---------- ----------- ----------
INCOME (LOSS) BEFORE INCOME
TAXES 14,251 15,158 (8,883)
PROVISION (BENEFIT) FOR INCOME
TAXES (Note 2) 5,424 5,942 (3,430)
---------- ---------- ----------
NET INCOME (LOSS) 8,827 9,216 (5,453)
DIVIDENDS ON PREFERRED SHARES - - 88
---------- ---------- ----------
NET INCOME (LOSS) APPLICABLE TO
COMMON SHARES $ 8,827 $ 9,216 $ (5,541)
---------- ---------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 10,943 10,893 10,885
EARNINGS (LOSS) PER COMMON SHARE $ .81 $ .85 $ (.51)
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
10
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Super Food Services, Inc., and Subsidiaries
For the Fiscal Years Ended August 27, 1994, August 28, 1993 and August 29, 1992
(amounts in thousands)
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Net income $ 8,827 $ 9,216 $ (5,453)
Items not affecting cash--
Depreciation and amortization 7,258 7,198 8,783
Future income tax benefits 1,576 3,473 (7,272)
Provision for closing Florida
Division - - 22,986
Current items--
Receivables (1,454) 5,222 17,611
Merchandise inventory 1,819 756 38,773
Prepaid expenses and other (1,997) 1,828 (2,351)
Accounts payable and other 4,209 400 (28,162)
Florida Closing Liabilities (3,770) (8,619) (3,244)
-------- -------- --------
Net cash provided by
operating activities 16,468 19,474 41,671
-------- -------- --------
CASH PROVIDED BY (USED FOR)
INVESTING ACTIVITIES:
Additions of property and equipment (18,030) (5,174) (12,764)
Increase in long-term notes
receivable (5,510) (9,970) (4,659)
Reduction of long-term
notes receivable 7,300 5,952 5,107
Sales and retirement of property
and equipment, net 99 1,849 216
-------- -------- --------
Net cash used for investing
activities (16,141) (7,343) (12,100)
-------- -------- --------
CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES:
Notes payable to bank 9,000 (5,000) -
Retirements of long-term debt
and lease obligations (4,400) (4,167) (23,983)
Proceeds from stock plans 447 - 956
Stock options exercised - 116 (46)
Purchase of preferred shares - (567) (9)
Cash dividends (3,942) (3,703) (3,793)
-------- -------- --------
Net cash provided by (used for)
financing activities 1,105 (13,321) (26,875)
-------- -------- --------
INCREASE (DECREASE) IN CASH 1,432 (1,190) 2,696
CASH, BEGINNING OF YEAR 14,402 15,592 12,896
-------- -------- --------
CASH, END OF YEAR $ 15,834 $ 14,402 $ 15,592
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
11
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Super Food Services, Inc., and Subsidiaries
For the Fiscal Years Ended August 27, 1994, August 28, 1993 and August 29, 1992
(amounts in thousands except per share amounts)
<CAPTION>
Common Shares Total
Paid-in Retained Shareholders
Shares Amount Capital Earnings Equity
<S> <C> <C> <C> <C> <C>
BALANCE AT AUGUST 31, 1991 10,832 10,832 $28,052 $91,464 $130,348
Net loss - - - (5,453) (5,453)
Cash dividends
Preferred Stock, $1.20 per share - - - (32) (32)
Common Stock, $.34 per share - - - (3,705) (3,705)
Common Shares issued in connection
with incentive plans, net 59 59 851 - 910
Preferred Shares-First Series
redemption premium - - - (56) (56)
-----------------------------------------------------------
BALANCE AT AUGUST 29, 1992 10,891 10,891 28,903 82,218 122,012
Net income - - - 9,216 9,216
Cash dividends
Common Stock, $.34 per share - - - (3,703) (3,703)
Common Shares issued in connection
with incentive plans, net 15 15 101 - 116
-------------------------------------------------------
BALANCE AT AUGUST 28, 1993 10,906 10,906 29,004 87,731 127,641
Net income - - - 8,827 8,827
Cash dividends
Common Stock, $.36 per share - - - (3,942) (3,942)
Common Shares issued in connection
with incentive plans, net 43 43 404 - 447
-------------------------------------------------------
BALANCE AT AUGUST 27, 1994 10,949 $10,949 $29,408 $92,616 $132,973
=======================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
12
<PAGE>
Note #1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(Amounts in thousands except per share amounts)
Principles of Consolidation
The accompanying consolidated financial statements include Super
Food Services, Inc., and subsidiaries (the "Company"). All signif-
icant intercompany balances and transactions have been eliminated.
Fiscal Year
The Company maintains its accounts on a fifty-two/fifty-three week
year. The fiscal years ended August 27, 1994, August 28, 1993 and
August 29, 1992 all consisted of fifty-two weeks.
Revenue Recognition
Sales are recorded as products are shipped and services are
rendered.
Merchandise Inventory
The Company uses the last-in, first-out (LIFO) method of determin-
ing cost for most (76% in 1994 and 78% in 1993) of its merchandise
inventories. Remaining inventories are valued at the lower of cost
or market using the first-in, first-out (FIFO) method. The Company
believes that the LIFO method more fairly presents results of
operations by eliminating the inflationary cost increases from
inventory and thereby more appropriately matching current costs
with current revenues. The effect of using LIFO was to reduce
inventories at August 27, 1994 and August 28, 1993 by $11,120 and
$10,975, respectively, and to increase cost of sales by $144 for
1994 and to decrease cost of sales by $1,436 and $162 for 1993 and
1992, respectively. During Fiscal 1994 and 1993, the Company
liquidated certain LIFO inventories that were carried at lower
costs prevailing in prior years. The effect of these liquidations
was to increase earnings before income taxes by $144 or $.01 per
share after tax for 1994 and $726 or $.04 per share after tax for
1993. In 1992, the closing of the Florida Division resulted in a
reduction of inventories valued on the LIFO method. This liquida-
tion of inventories generated a credit to income of $3,366 which
was reflected as a reduction to the "provision for closing Florida
Division."
Property and Equipment
Depreciation and amortization are provided over the estimated
useful lives of the assets or the remaining terms of leases using
the straight-line method. The rates used are as follows:
Buildings 2% to 5% per annum
Equipment, vehicles and other 10% to 33 1/3% per annum
Leasehold improvements lesser of estimated useful
life or lease term
Capitalized leases lease term
Excess of Purchase Price
For acquisitions subsequent to November 1, 1970, the excess of
purchase price of acquired companies over amounts assigned to net
tangible assets (approximately $2,850) is being amortized over 40
years. For acquisitions prior to November 1, 1970, the excess
(approximately $1,757) is not being amortized since, in manage-
ment's opinion, the value of net assets acquired has not
diminished.
Earnings Per Common Share
Earnings per common share is computed after deducting dividends on
preferred shares and is based on the weighted average number of
common and common equivalent shares outstanding during the year.
Options granted under the stock option and employee stock purchase
plans (Note 6) are considered common share equivalents. Fully
diluted earnings per common share would not be materially different
from earnings per share as reported.
Notes Receivable
The Company has notes receivable from certain of its retailers.
Generally, these notes require periodic payments of principal and
interest and are secured by certain property, equipment, inventory
and personal guarantees of the retailers. These notes bear
interest based upon the prime rate. At August 27, 1994, the
interest rates ranged from 6% to 11%. The Company recognizes
interest income on these notes as the interest is collected. The
effective rate of interest collected was 7% and 8% for 1994 and
1993, respectively. These notes mature as follows:
1995 $ 4,543
1996 4,400
1997 3,641
1998 2,592
1999 1,494
Thereafter 4,052
_______
$20,722
Segment Information
The Company is engaged in a single line of business, the wholesale
distribution of groceries. The Company supplies more than 875
allied retail stores in cities of varying sizes in six predomi-
nantly midwestern states. Although the Company monitors the
creditworthiness of its customers, adjusting credit policies and
limits as needed, a substantial portion of its customers' ability
13
<PAGE>
to discharge amounts owed is dependent upon the retail grocery
economic environment. The Company does not believe that it is
currently dependent upon any single customer.
Sales to Albertson's, Inc. (Albertsons), the Company's former
largest customer, accounted for 22% of consolidated sales and other
income during 1992. On or about June 15, 1992, Albertsons ceased
purchasing goods and merchandise from the Company (see Note 4).
Reclassifications
Certain reclassifications have been made to prior years' amounts to
make them comparable with the classification of such amounts for
fiscal year 1994.
Note #2
INCOME TAXES:
(Amounts in thousands)
During the first quarter of fiscal 1994, the Company adopted
Statement of Financial Accounting Standards No.109 (SFAS No. 109),
"Accounting for Income Taxes". This statement requires deferred
tax recognition for all temporary differences in accordance with
the liability method and requires adjustment of deferred tax assets
and liabilities for enacted changes in tax laws and rates. Prior
to the implementation of SFAS No. 109, the Company accounted for
income taxes using Accounting Principles Board Opinion No. 11. As
permitted under the SFAS No. 109, prior years' financial statements
have not been restated to reflect the change in accounting method.
The cumulative effect of adopting SFAS No. 109 as of August 29,
1993 was immaterial. Additionally, the impact of the new standard
on the provision for income taxes for the year ended August 27,
1994 was immaterial.
The Company provides deferred taxes on transactions which are
reported for financial statement and income tax purposes in
different years. The provision (benefit) for income taxes consists
of the following:
1994 1993 1992
Currently Payable--
Federal $ 5,239 $ 3,279 $4,261
State 926 612 (647)
Benefit of non-qualified stock
options exercised - - 51
Deferred--
Allowance for doubtful
accounts (1,353) (849) (288)
Excess of tax over book
depreciation 75 136 170
Expenses (provided) paid for
Florida closing 1,436 3,366 (6,437)
Labor and benefits expenses (637) (595) (775)
Other, net (262) (7) 235
_______ _______ ________
$ 5,424 $ 5,942 $( 3,430)
The effective income tax rate differs from the statutory federal
income tax rate for the following reasons:
1994 1993 1992
Statutory Income Tax Rate 35.0% 34.67% 34.0%
State Income Taxes (net of
federal tax benefit 4.2 4.2 4.9
Surtax effect (0.7) (0.67) -
Other, net (0.4) 1.0 (0.3)
____ _____ ____
38.1% 39.2% 38.6%
Following are the temporary differences which gave rise to the
significant deferred tax assets and liabilities as of August 27,
1994 and August 28, 1993, respectively:
Current Future Tax Benefits: 1994 1993
Insurance accruals $ 1,414 $ 911
Employee benefits accruals 749 1,533
Bad debts 2,245 1,726
Inventory activities 1,115 1,013
Florida closing liabilities 632 1,337
Other 613 500
Valuation allowance - -
_______ _______
$ 6,768 $ 7,020
Long-Term Future Tax Benefits:
Accumulated depreciation (3,767) (4,127)
Leasing activities 1,895 2,521
Florida closing liabilities 947 2,005
Valuation allowance - -
_______ _______
(925) 399
_______ _______
$ 5,843 $ 7,419
14
<PAGE>
Note #3
DEBT OBLIGATIONS:
(Amounts in thousands)
Short-Term Credit Facilities
Notes payable to a bank of $9,000 at August 27, 1994 consist of a
3-day renewal note bearing interest of 5.15%.
The Company had unused commitments at August 27, 1994 for short-
term borrowings of $46,000 at interest rates up to prime and on
other terms upon which the Company and the banks may agree.
Average short-term borrowings outstanding during 1994 were $13,602,
with an average interest rate of 4.54%. The maximum amount
outstanding at any period end was $21,500. No significant compen-
sating balances were maintained at August 27, 1994.
Long-Term Obligations
Long-term obligations consist of the following:
1994 1993
Unsecured Senior Notes $25,000 $25,000
Unsecured Senior Notes 7,429 9,286
Industrial Revenue Bonds 1,600 2,400
Term loan agreements and other notes 230 838
Less amounts payable within one year (2,657) (2,657)
_______ _______
$31,602 $34,867
Payments on the long-term obligations required during the next five
Fiscal years are approximately: 1995, $2,657; 1996, $2,888; 1997,
$1,857; 1998, $1,857; 1999, $0; and thereafter $25,000.
Unsecured Senior Notes
The Company has $25,000 of 9.20% unsecured senior notes with three
insurance companies due January, 2000. In 1993, the Company
entered into an interest rate swap agreement with a bank a $15,000
notional amount that expires in October, 1995, which is accounted
for as a hedge. The purpose for the agreement is to modify the
interest rate mix and to reduce the amount of fixed rate interest
the Company is now paying on its long-term debt. The effect of
this swap was to reduce the Company's effective interest rate on
$15,000 of borrowings from 9.20% to 8.86% in Fiscal 1994.
The Company has $7,429 of 9.65% unsecured senior notes with an
insurance company. The notes are payable in equal annual principal
amounts through October, 1997.
Notes Payable to Banks
The Company has $30,000 available under revolving credit agreements
with three banks providing for a revolving credit facility of up to
$10,000 each through December, 1994. At the end of each year, the
agreements may be extended for an additional year if mutually
agreed upon by the Company and the banks. At the end of the
revolving period, the Company may convert the outstanding amount
into a term loan to be paid in sixteen quarterly installments. The
Company, at its option, may borrow at prime plus, a spread over
"LIBOR" or "CD" based interest rates, or at negotiated interest
rates. At August 27, 1994, there were no borrowings under the
revolving credit agreements. The Company pays a fee on the unused
portion of this credit facility.
Industrial Revenue Bonds
The Industrial Revenue Bonds are secured by an irrevocable letter
of credit, bear interest at a variable rate equal to 50% of a base
lending rate (5.76% at August 27, 1994) and are subject to a
remarketing agreement under which the marketing agent may adjust
the interest rate within stated limits to facilitate remarketing.
If the bonds are not remarketed, payment for the bonds redeemed
will be made by drawing upon the letter of credit. In such event,
the Company has agreed to reimburse the letter of credit bank for
such draw in amounts similar in proportion to the amortization of
the then remaining outstanding principal amount of the bonds.
Accordingly, the bonds have been classified as long-term debt. In
July, 1986, the Company entered into a ten-year interest rate
exchange agreement with a bank pursuant to which it pays a 7.21%
fixed rate. These bonds are being repaid in annual installments of
$800 through 1996.
Loan Covenants
Certain loan agreements contain various financial restrictions.
The most restrictive of these require that funded debt may not
exceed 60% of capitalization of the Company. The agreements also
contain certain other restrictions with respect to additional
borrowings, commitments and guaranties.
15
<PAGE>
Note #4
FLORIDA DIVISION CLOSING:
(Amounts in thousands except per share amounts)
In the third quarter of Fiscal 1992, the Company recorded a special
pretax charge of $22,986 in connection with the closing of the
Company's Florida Division and the disposition of its assets. The
closing was required as a result of the loss by the Florida
Division of its single largest customer, Albertson's, which
accounted for approximately 85% of its sales.
This charge included provisions primarily for losses
incurred on the disposition of the inventory and fixed assets, the
estimated portion of the remaining lease obligations and the
related operating costs necessary to maintain the Florida warehouse
facilities until tenants can be found, litigation costs in connec-
tion with the Company's lawsuit against Albertson's and other costs
relating to the closing. This provision was based on management's
best estimate and judgment under the prevailing circumstances and
management believes such provision will adequately provide for the
costs associated with disposition of the Florida assets and opera-
tions.
Florida had no profit and loss impact in the Fiscal years ended
August 27, 1994 and August 28, 1993. During Fiscal 1992, the
Florida operations represented $415,055 of consolidated
sales, $2,128 of consolidated income before income taxes, and
$1,306 of consolidated net income. The Florida operations
contributed $.12 per share for Fiscal 1992 earnings.
The Company's lawsuit against Albertson's was filed on March 30,
1992, in the Ninth Judicial Circuit Court of Orange County,
Florida. Initially, the Company sought to enjoin Albertson's
temporarily from proceeding with its plans to self-distribute in
Florida and to obtain specific performance of Albertson's agreement
to purchase the assets of the Florida Division in settlement of the
Company's claims against Albertson's. The Court declined to issue
an injunction, holding that the Company had an adequate remedy at
law for damages if it proved that Albertson's had violated its
obligations to the Company, and this decision was affirmed on
appeal. The Company filed an amended complaint seeking monetary
damages for Albertson's breach of the requirements contract between
the parties or, in the alternative, damages for Albertson's failure
to honor the settlement agreement between the parties relating to
the purchase by Albertson's of the assets of the Company's Florida
Division. On March 29, 1994, the Company and Albertson's entered
into a joint stipulation to the entry of a final judgment on the
Company's claim for the breach of the requirements contract after
the Court ruled that if a requirements contract existed between the
parties, it was terminable by either party upon reasonable notice
and that the issue to be tried would be limited as to whether
Albertson's notice of termination was reasonable, which the Company
did not allege as an issue in the lawsuit. On March 31, 1994, the
Court granted Albertson's motion for a summary judgment on the
Company's claim that Albertson's failed to honor the settlement
agreement between the parties. The Company is appealing the
Court's rulings. The appeal has been briefed and is scheduled for
oral argument on December 13, 1994.
Note #5
PREFERRED SHARE PURCHASE RIGHTS PLAN:
On January 27, 1989, the Company's Board of Directors declared a
dividend of one Preferred Share Purchase Right (Right) on each
outstanding Common Share of the Company. A Right will be issued
with each Common Share of the Company that becomes outstanding
prior to the time the Rights become exercisable or expire. Under
certain conditions, each Right may be exercised to purchase one
one-hundredth share of a new series of Junior Participating
Preferred Stock at an exercise price of $100. The Rights may not
be exercised until ten days after (i) a public announcement that a
person or group acquired or obtained the right to acquire 20% or
more of the Company's Common Shares or (ii) commencement or public
announcement of an offer for 20% or more of the Company's Common
Shares. These Rights may cause substantial ownership dilution to
a person or group who attempts to acquire the Company without
approval of the Company's Board of Directors.
The Rights, which do not have any voting privileges, expire on
January 26, 1999, and may be redeemed by the Company at a price of
$0.02 per Right at any time prior to a person's or group's acquisi-
tion of 20% or more of the Company's Common Shares. The preferred
stock that may be purchased upon exercise of the Rights may not be
redeemed and may be subordinate to other series of the Company's
preferred stock designated in the future.
In the event that the Company is acquired in a merger or other
business combination transaction, provision will be made so that
each holder of a Right will be entitled to buy the number of Common
Shares of the surviving company, which at the time of such transac-
tion would have a market value of two times the exercise price of
the Right. In the event that any person or group owning 20% or
more of the Common Shares of the Company (except pursuant to an
offer for all outstanding Common Shares that the independent
directors determine to be fair to and in the best interests of the
Company and its shareholders) combines the Company in a merger in
which the Company survives and its Common Shares are not changed,
each holder of a Right (except rights held by the 20% owner) will
be entitled to buy the number of Common Shares of the Company which
at the time of the transaction have a value equal to two times the
exercise price of the Right.
16
<PAGE>
Note #6
INCENTIVE PLANS:
The Company's 1986 Stock Option Plan (the "1986 Plan") permits the
granting of incentive options, non-qualified options and/or stock
appreciation rights to executive and key employees of the Company.
The option price of the incentive options may not be less than 100%
of the fair market value of the stock on the date of grant. The
option price of the non-qualified options may not be less than 85%
of the fair market value of the stock on the date of grant. The
number of Common Shares which may be granted under the 1986 Plan
may not exceed 300,000 after adjustment for the anti-dilution
provisions of the Plan. At August 27, 1994, incentive options for
197,277 Common Shares have been granted under the 1986 Plan and
67,672 Common Shares were available for grant. The options
outstanding are for a term of ten years and are exercisable in
installments ranging from 10% to 25% per year on a cumulative basis
beginning one year from the date of grant.
Following is a summary of activity for the last three Fiscal years.
Prices and number of shares for all years presented are adjusted to
reflect stock dividends and splits.
Number
of Shares Price Range
Outstanding at
August 31, 1991 209,277 $9.92 - $18.13
Exercised (5,328) 9.92
_______
Outstanding at
August 29, 1992 203,949 9.92 - 18.13
Cancelled or forfeited (6,672) 9.92
_______
Outstanding at
August 28, 1993 197,277 9.92 - 18.13
_______
Outstanding at
August 27, 1994 197,277 9.92 - 18.13
Exercisable at
August 27, 1994 128,712 $9.92 - $18.13
Restricted Stock Plan
Under the terms of the Company's 1989 Restricted Stock Plan, the
Company may award up to 150,000 Common Shares to a limited number
of officers and key employees of the Company. Under the terms of
the Plan, the restricted stock may not be sold, transferred or
assigned by the recipient until the end of the restricted period.
The restricted shares are subject to forfeiture if the recipient's
employment is terminated prior to the end of the restricted period,
except in the event of the death or disability of a recipient when
a prorated number of shares will be issued based on the number of
full months of employment. A recipient who retires during the
restricted period will receive the full number of shares allocated
under the Plan. During the restricted period, the recipient has
the right to vote such shares and receive all dividends payable
thereon. At August 27, 1994, there were no awards of restricted
stock outstanding.
Employee Stock Purchase Plan
At August 27, 1994, 471,928 Common Shares are reserved under the
Employee Stock Purchase Plan. Options are granted at the lower of
85% of the fair market value of the shares on the date of grant, or
100% of the fair market value on the date of exercise. Following
is a summary of activity during the last three Fiscal years.
Prices and numbers of shares for all years presented are adjusted
to reflect stock dividends and splits.
Number
of Shares Price Range
Outstanding at August 31, 1991 46,938 $17.71
Exercised (59,975) 15.94
Granted 116,994 13.49 - 15.94
Withdrawals (41,900) 13.49 - 15.94
_______
Outstanding at August 29, 1992 62,057 13.49
Withdrawals (23,685) 13.49
_______
Outstanding at August 28, 1993 38,372 13.49
Exercised (42,503) 10.50
Granted 71,197 9.62
Withdrawals (9,379) 9.62 - 13.49
______
Outstanding at August 27, 1994 57,687 $ 9.62
Incentive Compensation Plan
The Company has an Incentive Compensation Plan under which
incentive compensation awards based on performance may be granted
to officers and key employees of the Company by the Compensation
Committee of the Board of Directors. Awards in the amount (in thousands)
of $475, $494 and $463 were made in Fiscal years 1994, 1993, 1992,
respectively.
17
<PAGE>
Note #7
PENSION AND RETIREMENT PLANS:
(Amounts in thousands)
Defined Benefit Plan
The Company has qualified non-contributory retirement plans to
provide retirement income for eligible full-time employees who are
not covered by union retirement plans. Pension benefits under the
plans are based on length of service and compensation. The Company
contributes amounts necessary to meet minimum funding requirements.
The plans' funded status at August 27, 1994 and August 28, 1993
were as follows:
1994 1993
Actuarial present value of benefit
obligation:
Vested benefits $ 24,930 $ 22,147
Nonvested benefits 432 76
________ ________
Accumulated benefit
obligation 25,362 22,223
Additional benefits based on
future salary levels 3,020 3,652
________ ________
Projected benefit obligation 28,382 25,875
Plan assets at fair value,
principally listed securities (27,261) (26,378)
________ ________
Plan assets (over) under
projected benefit obligation 1,121 (503)
Unrecognized net liability 626 803
Unrecognized prior service costs (790) (892)
Unrecognized net actuarial costs (1,703) 757
________ ________
Net Accrued (Prepaid) Pension Cost $ (746) $ 165
======== ========
Assumptions used in the determination of the above amounts include
the following:
1994 1993
Discount rate for determining
estimated obligations and
interest cost 8.5% 8.5%
Expected aggregate average long-
term change in compensation 4.5% 4.5%
Expected long-term return on assets 8.5% 8.5%
Multi-Employer Plans
Approximately 31% of the Company's employees are covered by collec-
tively-bargained, multi-employer pension plans. Contributions are
determined in accordance with the provisions of negotiated union
contracts and generally are based on the number of hours worked.
The Company does not have the information available to determine
its share of the accumulated plan benefits or net assets available
for benefits under the multi-employer plans.
Other Retirement Plans
The Company has adopted a non-qualified supplemental executive
retirement plan which is available to certain officers designated
as participants by the Board of Directors and provides for retire-
ment benefits that participants would be entitled to receive under
the qualified retirement plan were it not for limitations imposed
by the Employment Retirement Income Security Act and federal tax
law. Benefits under the non-qualified plan are payable to the
participants and their spouses in the same manner and at the same
time as benefits are payable under the Company's qualified retire-
ment plan. These benefits aggregated approximately $1.3 million at
August 27, 1994. The Company has established a grantor trust to
provide funding for the benefits payable under the non-qualified
plan. The trust is irrevocable and, with certain exceptions, the
assets contributed to the trust can only be used to pay such
benefits.
The Company sponsors a 401(k) savings plan for eligible employees.
This 401(k) plan is designed to encourage eligible employees to
save and invest regularly. All employee contributions are volun-
tary and no contributions are made by the Company.
18
<PAGE>
Pension and Retirement Plans Expense
Aggregate cost for the Company's retirement plans includes the
following components:
1994 1993 1992
Defined Benefit Plan:
Service cost-benefits
earned during the year $ 782 $ 726 $ 977
Interest cost on
projected benefit
obligation 2,153 2,099 1,531
Return on assets (916) (3,173) (1,378)
Net amortization and
deferral (1,396) 1,027 48
_______ ______ _______
Net pension expense 623 679 1,178
Multi-Employer Plans 2,339 2,347 2,075
Other Retirement Plans 294 135 210
_______ _______ _______
Total Pension and
Retirement Plans Expense $ 3,256 $ 3,161 $ 3,463
Early Retiree Health Care Benefits
The Company provides early retiree health care benefits to certain
employees who retire from the Company after January 1, 1989. These
early retirees generally must have attained age 55 with 15 years of
continuous service to be eligible for health care benefits. These
benefits are subject to deductibles, copayment provisions and other
limitations. Generally, company-provided health care benefits
terminate when covered individuals become eligible for Medicare
benefits or reach age 65, whichever comes first. The Company
reserves the right to change or terminate the benefits at any time.
In addition, certain union employees of the Company will continue
to be covered by collectively bargained multi-employer plans.
Costs under these union plans are recognized as expense when paid.
The Company adopted the new method of accounting for post-retire-
ment benefits (Financial Accounting Standards No. 106) effective
August 29, 1993. This new standard requires that the expected cost
of these benefits be charged to expense during the years that the
employees render service. Prior to fiscal 1994, all early retiree
health care benefit costs were recognized as expense when paid and
amounted to $202 and $135 in 1993 and 1992, respectively. The
Company has chosen to amortize the Accumulated Post-retirement
Benefit Obligation (APBO) over 20 years on a straight-line basis,
which approximates the average remaining service life of the
participants. The Company has determined its SFAS No.
106 liability utilizing an outside actuary and the current provi-
sions of such plans. These plans are unfunded. The Company's APBO
at August 29, 1993 was approximately $2.5 million (pre-tax) and was
based upon the following key assumptions:
Weighted average discount rate: 7.5%
Retirement rates: Varies from 2% to 5% per year
between Ages 55 through 61.
Increases up to 10% to 25%
per year between Ages 62
through 64.
Health care costs trend
rates: 12% for Fiscal 1994 and
decreasing ratably to 4.5% by
Fiscal 2001.
A one percentage point change in the assumed health care costs
trend rate would change the APBO by approximately $300.
The Company's net periodic post-retirement benefit cost during 1994
includes the following:
Service cost (benefits earned during the period) $ 89
Interest cost on APBO 188
Amortization of APBO 127
____
Net periodic post-retirement benefit cost $404
In addition, the Company offers inactive employees other benefits
prior to retirement. Management does not believe that such
benefits are material to the Company's financial position, results
of operations or cash flows.
19
<PAGE>
Note #8
LEASES:
(Amounts in thousands)
The Company leases the majority of its operating facilities and a
portion of its computers and warehouse equipment under leases
varying in terms of up to 30 years. The Company also leases retail
store locations which it in turn subleases to certain of its retail
customers. Most of the subleases contain provisions calling for
additional percentage rentals based on sales.
In addition, the Company leases a portion of the delivery
equipment used in its operations. Some of the leases may be
cancelled on any anniversary date of the delivery of the equipment
upon 120 days prior notice; however, the Company may be required to
acquire the vehicle at its initial cost less accumulated deprecia-
tion, as defined. The annual rents are generally based on a flat
charge plus a fixed fee per mile for operating and maintenance
costs.
Following is a summary of property and equipment under leases
that have been capitalized and included in the accompanying balance
sheets:
1994 1993
Land $ - $ 68
Buildings 11,536 16,460
Equipment 327 949
_______ _______
Total Property Under Capitalized Leases 11,863 17,477
Accumulated Amortization (5,478) (9,295)
_______ _______
Net Property Under Capitalized
Leases $ 6,385 $ 8,182
<PAGE>
The following represents the minimum lease payments remaining at
August 27, 1994 under the capitalized leases and the minimum
sublease rentals to be received under direct financing leases
(covering certain retail store facilities which are sublet to
retail customers):
Total Direct
Capitalized Financing
Leases Leases Net
1995 $ 3,667 $ 2,267 $1,400
1996 3,571 2,278 1,293
1997 3,510 2,263 1,247
1998 3,471 2,221 1,250
1999 3,418 2,166 1,252
2000 and thereafter 37,692 23,728 13,964
________ ________ _______
Total minimum lease payments 55,329 34,923 $20,406
Less-executory costs (1,742) (1,717)
Less-imputed interest
(6.47% to 15.99%) (28,291) (17,448)
________ ________
Present value of minimum
lease payments 25,296 15,758
Less-current maturities (904) (480)
________ ________
Long-term obligations and
investments $ 24,392 $ 15,278
20
<PAGE>
Total rental expense for all operating (noncapitalized) leases
aggregated:
Minimum Contingent Total
1994
Expense $ 9,849 $ 678 $10,527
Sublease Income (4,547) (701) (5,248)
________ ________ _______
$ 5,302 $ (23) $ 5,279
1993
Expense $ 9,801 $ 647 $10,448
Sublease Income (4,532) (640) (5,172)
________ ________ _______
$ 5,269 $ 7 $ 5,276
1992
Expense $ 13,292 $ 920 $14,212
Sublease Income (5,612) (926) (6,538)
________ ________ _______
$ 7,680 $ (6) $ 7,674
The future minimum lease commitments as of August 27, 1994 for all
noncancellable operating leases are as follows:
Sublease
Expense Income Net
1995 $ 7,338 $ (4,774) $ 2,564
1996 6,086 (4,403) 1,683
1997 5,456 (3,964) 1,492
1998 4,866 (3,587) 1,279
1999 3,739 (2,616) 1,123
2000 and thereafter 12,389 (12,286) 103
________ ________ _______
$ 39,874 $(31,630) $ 8,244
Note #9
TRANSACTIONS WITH RELATED PARTIES:
(Amounts in thousands)
During the fiscal years 1994, 1993 and 1992, the Company paid
$2,284, $2,999 and $3,252, respectively, to an insurance firm for
insurance premiums on various forms of coverage. The Chairman of
the Board of the Company is a shareholder of said firm. The above
transactions were made in the ordinary course of business and, in
the opinion of the Company's management, were at rates as favorable
to the Company as could be obtained from unrelated parties for
comparable coverage.
21
<PAGE>
Note #10
COMMITMENTS AND CONTINGENT LIABILITIES:
(Amounts in thousands)
The Company is a defendant in various legal proceedings arising out
of the conduct of its business. While the ultimate outcome of
these lawsuits cannot be determined at this time, management is of
the opinion that any liability, to the extent not provided for
through insurance or otherwise, would not have a material adverse
effect on the Company's financial position, results of operations, and
cash flows.
The Company has guaranteed the payment of building leases for
certain customers. The future minimum rentals aggregate approxi-
mately $5,101, with expiration dates beginning in 1995 through
2009. Certain of these leases also contain provisions for contin-
gent rentals and options to extend, which the Company has also
guaranteed.
The Company has also guaranteed the payment of principal and
interest on customers' notes payable to banks. The principal
amount guaranteed is approximately $1,527 as of August 27, 1994.
The guarantee agreements expire beginning in Fiscal 1996 through
2000.
Note #11
SUPPLEMENTAL CASH FLOWS INFORMATION:
(Amounts in thousands)
Cash paid for interest and income taxes for the last three Fiscal
years are as follows:
1994 1993 1992
Interest* $ 3,276 $ 4,070 $5,650
Income Taxes $ 3,793 $ 1,481 $6,960
*Excludes interest capitalized and imputed interest on leases.
Capital lease transactions are considered non-cash items and
accordingly, are not reflected in the consolidated statements of
cash flows. Capital lease transactions for the last three fiscal
years are as follows:
1994 1993 1992
Capital lease obligations
incurred $ - $10,471 $ 31
Capital lease obligations
retired $ - $ - $9,847
<PAGE>
A summary of the Affiliated Foods acquisition, which was recorded
as a purchase transaction in the 1991 consolidated financial
statements and adjusted for changes in estimates in the 1992
consolidated financial statements, is as follows:
1992 Changes
in Estimates 1991
Fair value of assets acquired $(2,700) $16,628
Goodwill recognized 2,700 150
Less-liabilities assumed - (7,078)
_______ _______
$ - $ 9,700
22
<PAGE>
Note #12
FAIR VALUES OF FINANCIAL INSTRUMENTS:
(Amounts in thousands)
The following methods and assumptions were used to estimate the
fair value disclosures for financial instruments:
Cash, trade and supplier receivables and accounts payable: The
carrying amount of these items approximates fair value due to their
short-term nature.
Notes receivable from retailers: The carrying amount approximates
fair value as the receivables bear interest at a variable market
rate which adjusts quarterly.
Long-term obligations: The fair value of long-term obligations
(excluding capital leases) is estimated using discounted cash flow
analyses based on the current incremental borrowing rates for
similar types of borrowing arrangements.
The carrying amount and estimated fair value of the Company's long-
term obligations at August 27, 1994 are as follows:
Carrying Fair
Amount Value
Long-term obligations $34,259 $36,109
Interest Rate Swap Agreement: The estimated fair value of the
interest rate swap with a $15,000 notional value, based on a
financial institution's valuation model, at August 27, 1994 was a
payable of approximately $145.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS:
To the Shareholders and Board of Directors of Super Food Services,
Inc.:
We have audited the accompanying consolidated balance sheets of
Super Food Services, Inc. (a Delaware corporation) and subsidiaries
as of August 27, 1994 and August 28, 1993, and the related consoli-
dated statements of operations, cash flows and shareholders' equity
for each of the three fiscal years in the period ended August 27,
1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Super
Food Services, Inc. and subsidiaries as of August 27, 1994 and
August 28, 1993, and the results of their operations and their cash
flows for each of the three fiscal years in the period ended
August 27, 1994, in conformity with generally accepted accounting
principles.
As discussed in Notes 2 and 7 to the Consolidated Financial
Statement, effective August 29, 1993, the Company changed its
method of accounting for income taxes and changed its method of
accounting for post-retirement benefits other than pensions.
Arthur Andersen LLP
Dayton, Ohio,
October 18, 1994.
23
<PAGE>
QUARTERLY DATA
Super Food Services, Inc., and Subsidiaries
(amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended August 27, 1994
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
(12 Weeks) (12 Weeks) (12 Weeks) (16 Weeks) (52 Weeks)
<S> <C> <C> <C> <C> <C>
Sales and other income $ 271,132 $ 257,425 $ 253,234 $ 348,304 $ 1,130,095
Cost of sales 259,034 245,699 241,477 332,847 1,079,057
Net income 2,261 1,985 1,823 2,758 8,827
Earnings per common share .21 .18 .17 .25 .81
Cash dividends declared per share .09 .09 .09 .09 .36
Market price range per share 10 1/4-13 12 5/8-13 7/8 11 3/4-14 3/8 10 1/2-14 10 1/4-14 3/8
</TABLE>
<TABLE>
<CAPTION>
Year Ended August 28, 1993
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
(12 Weeks) (12 Weeks) (12 Weeks) (16 Weeks) (52 Weeks)
<S> <C> <C> <C> <C> <C>
Sales and other income $ 282,603 $ 262,480 $ 265,130 $ 355,307 $ 1,165,520
Cost of sales 270,978 251,003 253,681 337,562 1,113,224
Net income 2,061 1,816 1,723 3,616 9,216
Earnings per common share .19 .17 .16 .33 .85
Cash dividends declared per share .085 .085 .085 .085 .34
Market price range per share 8 5/8-10 5/8 8 3/4-10 7/8 9 3/8-10 3/4 9 1/4-10 1/4 8 5/8-10 7/8
Due to rounding, the sum of the quarterly amounts may not equal the total for the year.
</TABLE>
24
<PAGE>
<TABLE>
Super Food Services, Inc., and Subsidiaries
(amounts in thousands except per share amounts)
- - -------------------------------------------------------------------------------------------------------
<CAPTION>
Income Statement Data 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Sales and other income $1,130,095 $1,165,520 $1,573,321 $1,825,951 $1,772,125
Cost of Sales 1,079,057 1,113,224 1,515,657 1,759,153 1,701,277
Selling, general and
administrative 34,013 33,832 38,391 39,393 35,465
Interest, net 2,774 3,306 5,170 7,290 7,275
Provision for closing
Florida Division - - 22,986 - -
Net income (loss) 8,827 9,216 (5,453) 12,198 17,182
Net income on shareholders'
equity at beginning of year 7% 8% N.M. 10% 16%
- - -------------------------------------------------------------------------------------------------------
Balance Sheet Data
Total current assets at
year end $ 160,480 $ 157,858 $ 162,554 $ 217,443 $ 196,162
Total assets at year end 258,419 248,238 251,519 304,183 271,006
Working capital 93,432 102,870 97,013 131,588 125,634
Current ratio 2.39 2.87 2.48 2.53 2.78
Long-term obligations,
including capitalized leases $ 55,994 $ 60,285 $ 53,980 $ 87,404 $ 78,346
Redeemable preferred stock - - 567 576 638
Shareholders' equity 132,973 127,641 122,012 130,348 121,494
- - -------------------------------------------------------------------------------------------------------
Per Share Data
Weighted average number of
common and common
equivalent shares
outstanding 10,943 10,893 10,885 10,807 10,741
Earnings (loss) per common
share $ .81 $ .85 $ (.51) $ 1.13 $ 1.60
Cash dividends per common
share .36 .34 .34 .34 .32
Book value per common share 12.14 11.70 11.20 12.03 11.27
- - -------------------------------------------------------------------------------------------------------
N.M. equals not meaningful
</TABLE>
25
<PAGE>
Exhibit 4
SUBSIDIARIES OF THE REGISTRANT
The following table sets forth the only significant subsidiary of the
Registrant which is wholly-owned by Registrant:
Name State of Incorporation
Kentucky Food Stores, Inc. Kentucky
The Registrant has several small or inactive subsidiaries which are
omitted from the above list. Such omitted subsidiaries, considered in the
aggregate as a single subsidiary, would not constitute a "significant
subsidiary."
Exhibit 5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated October 18, 1994, included and incorporated by reference in
this Form 10-K, into the Company's previously filed Registration Statements on
Form S-8 (Nos. 2-66358, 2-60616, 2-88433, 33-20892 and 33-21069).
Arthur Andersen LLP
Dayton, Ohio,
November 21, 1994.
<PAGE>
Exhibit 6
SUPER FOOD SERVICES, INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and officers of Super Food Services, Inc., a Delaware corporation, hereby
constitute and appoint Jack Twyman, Sam Robinson, John Demos and
Robert F. Koogler, and each of them,severally, with full power of substitution,
attorneys-in-fact for the undersigned, to execute in his name, place and
stead (whether in his capacity as a director or officer of Super Food
Services, Inc.), and file with the Securities and Exchange Commission the
Form 10-K Report for the fiscal year ended August 27, 1994, and any and all
amendments (including pre-effective and post-effective amendments) thereto,
and any and all other documents necessary or advisable to be signed and
filed with the Securities and Exchange Commission in connection therewith;
and each of the undersigned does hereby grant to the said appointees and each
of them, full power and authority to do and perform each and every act and
thing whatsoever requisite and necessary to be done in the premises as fully,
to all intents and purposes, as each of the undersigned could do if personally
present; each of the undersigned does hereby ratify and confirm in all
respects all that the said appointees, or any of them, as said
attorneys-in-fact may or shall lawfully do, or cause to be done, by virtue
hereof.
IN WITNESS WHEREOF, each of the undersigned has executed this instrument
this 20th day of October, 1994.
____________________________________ ____________________________________
Jack Twyman Robert F. Koogler
Chairman of the Board and Director Senior Vice President-Finance
(Principal Executive Officer) and Treasurer (Principal Financial
and Accounting Officer)
____________________________________ ____________________________________
John Demos Samuel L. Robinson
Vice Chairman of the Board President and Director
and Director
____________________________________ ____________________________________
John W. Berry Dr. Edward H. Jennings
Director Director
____________________________________ ____________________________________
J. Harriss Covington C. E. Shaffer
Director Director
____________________________________
Dr. Thomas S. Haggai
Director
<PAGE>
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