SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________
FORM 10-K
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
August 26, 1995 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)
<PAGE>
There were 10,997,448 Common Shares outstanding as of October 26,
1995. The aggregate market value of the Common Shares held by
nonaffiliates of the Registrant as of October 26, 1995 was
approximately $145,716,000 (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 26, 1995 are incorporated herein by reference
to Parts II and IV of this report. Portions of the Registrant's
definitive Proxy Statement dated November 6, 1995 for the Annual
Meeting of Shareholders to be held December 12, 1995 are incorporated
herein by reference into Part III of this report.
_______________
See pages 10-14 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 . . . . . . . . . . . . . . . . . . . . . . . . . .16
<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 20 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, 1994.
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 580 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 merchandising, 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.
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
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 205 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 development
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 operations. 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
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 26, 1995, the Company was
obligated on a total of 77 leases which are subleased to
affiliated independent retailers. As of August 26, 1995,
Kentucky Food Stores, Inc., has guaranteed the payment of
leases for certain retail customers with future minimum
rentals aggregating approximately $4,636,000.
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 label brands. The FAME line of private
label products now includes approximately 1,640 items.
Approximately 12% of the total sales of the Company for the
fiscal year ended August 26, 1995 were from the Company's own
private label brand products and IGA and BETTER VALU brand
products.
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 supermarkets containing 35,000 or
more square feet.
3
Franchises
__________
Under the IGA franchises held by the Company, independently
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 affiliated 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 1,670
full time employees. Of these, approximately 1,015 are
warehouse employees, drivers, and certain other personnel who
are members of various labor unions, principally 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 26, 1995, four contracts
covering 465 employees were settled. One contract expired in
1993 which is still being negotiated. During the current
fiscal year ending August 31, 1996, two contracts covering
approximately 320 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
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 26, 1995, 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 connec-
tion 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 26, 1995, had no material effect upon capital
expenditures, earnings or competitive position of the
Company.
During the last fiscal year, the Company prepaid the 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 prepaid was
$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 26, 1995.
5
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
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 fiscal
1995.
The Company also leases 91 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 regard-
ing lease commitments is contained in Note 8 on pages 20 and
21 of the 1995 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 26,
1995.
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 20,
1995:
<CAPTION> Executive
Present Position Officer
Name Age with the Company Since
<S> <C> <C> <C> <C>
Jack Twyman (1)(2) 61 Chairman of the Board and
Chief Executive Officer 1972
John Demos (2) 64 Vice Chairman of the Board,
Secretary and General Counsel 1969
Samuel L. Robinson (2) 56 President and Chief Operating
Officer 1982
Robert F. Koogler 62 Senior Vice President-Finance,
Treasurer and Assistant
Secretary 1970
Stan Lamping 67 Senior Vice President-
Merchandising 1992
Richard Metzgar 59 Senior Vice President-Human
Resources 1986
John Batista 61 Senior Vice President-
Distribution 1986
Robert McCarthy 50 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
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 26, 1995, there were approximately 1,813 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 1995 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 1995 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 6 through 8 of the 1995 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information called for by Item 8 is incorporated herein
by reference to pages 9 through 23 of the 1995 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None
8
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 7 of the Registrant's definitive Proxy
Statement dated November 6, 1995 in connection with the
Registrant's 1995 Annual Meeting of Shareholders. Certain
information regarding executive officers of the Registrant is
included in Part 1 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 6, 1995 in connection with the
Registrant's 1995 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 MANAGE-
MENT.
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 6, 1995 in connection with Registrant's 1995 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 6, 1995 in connection with the
Registrant's 1995 Annual Meeting of Shareholders.
9
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.
1995 Annual
(a) 1. Financial Statements Report Page(s)
The following are contained in
the 1995 Annual Report and are
incorporated herein by reference:
Consolidated Statements of Income
for the Fiscal Years Ended
August 26, 1995, August 27,
1994 and August 28, 1993 9
Consolidated Balance Sheets as
of August 26, 1995 and August 27,
1994 10-11
Consolidated Statements of Cash
Flows for the Fiscal Years Ended
August 26, 1995, August 27,
1994 and August 28, 1993 12
Consolidated Statements of
Shareholders' Equity for the
Fiscal Years Ended August 26,
1995, August 27, 1994 and
August 28, 1993 13
Notes to Consolidated Financial
Statements 14-22
Report of Independent Public
Accountants 23
(a) 2. Consolidated Financial Statement
Schedule 10-K page
For Fiscal Years Ended August 26,
1995, August 27, 1994 and
August 28, 1993
Report of Independent Public
Accountants on Consolidated
Schedule 18
Schedule II - Valuation and
Qualifying Accounts 19
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
(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 of Filed as Exhibit 4(a)
of Incorporation. to Registration
Statement No. 2-84640
3(b) Certificate of Amendment Incorporated by
of Restated Certificate reference to
of Incorporation. definitive Proxy
Statement dated
November 1, 1983
3(c) Certificate of Amendment Incorporated by
of Restated Certificate reference to
of Incorporation. definitive Proxy
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 1
Credit Loan Agreement to Form 8-K dated
dated as of September 17, September 17, 1987
1987 between Registrant
and PNC Bank, Ohio.
4(b) Amendment to Loan Filed as Exhibit 1
Agreement dated April 11, to Form 8-K dated
1991 between Registrant April 9, 1991
and PNC Bank, Ohio.
4(c) $10,000,000 Revolving Filed as Exhibit 1
Credit Loan Agreement to Form 8-K dated
dated April 9, 1991 April 9, 1991
between Registrant and
Society Bank, N.A.
4(d) $25,000,000 Note Filed as Exhibit 1
Agreement dated as of to Form 8-K dated
November 1, 1989 February 5, 1990
between Registrant and
Nationwide Life Insurance
Company.
11
4(e) $10,000,000 Revolving Filed as Exhibit 1
Credit Agreement dated to Form 8-K dated
as of August 30, 1991 August 30, 1991
between Registrant and
The First National Bank
of Chicago.
4(f) Rights Agreement dated Filed as Exhibit 4(f)
as of January 27, 1989 to Form 8-K dated
between Registrant and January 27, 1989 and
Chase Manhattan Bank, as Exhibits 1 and 2
N.A. as Rights Agent. to Form 8-A dated
January 27, 1989
4(g) Agreement to furnish Pursuant to Item
copies of long-term 601(b)(4)(iii) of
debt instruments. Regulation S-K,
copies of certain
instruments defining
the rights of holders
of certain long-term
debt of the Registrant
and its subsidaries
are not filed and, in
lieu thereof, the
Registrant agrees to
furnish copies thereof
to the Securities and
Exchange Commission
upon request
<PAGE>
10 Material Contracts
(a) Employment Agreement Filed as Exhibit 4 to
dated December 8, 1976 Form 10-K for the year
between Registrant and ended August 29, 1981
Jack Twyman, as amended
March 3, 1981.
(b) Employment Agreement Filed as Exhibit 5 to
dated March 3, 1981 Form 10-K for the year
between Registrant and ended August 29, 1981
John Demos.
(c) First Amendment to Filed as Exhibit 10 to
Employment Agreement Form 8-K dated
dated October 26, 1995 October 26, 1995
between Registrant and
John Demos.
12
(d) 1986 Stock Option Plan. Filed as Appendix C
to definitive Proxy
Statement dated
October 31, 1986
(e) Incentive Compensation Filed as Exhibit 7 to
Plan. Form 10-K for the year
ended August 29, 1981
(f) 1989 Restricted Stock Filed as Exhibit 4(g)
Plan. to Form 8-K dated
January 27, 1989
(g) 401(k) Plan. Description in
Form 8-K dated
January 27, 1989
(h) Excess Benefit Plan, Filed as Exhibit 1 to
as amended. Form 10-K for the year
ended August 26, 1989
(i) Supplemental Executive Filed as Exhibit 1 to
Retirement Plan, as Form 10-K for fiscal
amended and restated year ended August 27,
as of May 18, 1994 1994
(formerly known as the
Excess Benefit Plan).
(j) Supplemental Executive Filed as Exhibit 2 to
Retirement Trust Form 10-K for fiscal
Agreement between the year ended August 27,
Registrant and Society 1994
National Bank.
<PAGE>
11 Statement Re: Filed as Exhibit 11
Computation of Net herewith
Income Per Share.
13 Annual Report to Filed as Exhibit 1
Shareholders for the herewith
fiscal year ended
August 26, 1995. (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.)
13
18(a) Letter dated November 23, Filed as Exhibit 9 to
1981 from Registrant's Form 10-K for the year
independent public ended August 29, 1981
accountants re change in
accounting principles.
18(b) Letter dated November 22, Filed as Exhibit 2 to
1985 from Registrant's to Form 10-K for the
independent public year ended August 31,
accountants re change in 1985
accounting principles.
21 Subsidiaries of the Filed as Exhibit 2
Registrant. herewith
23 Consent of Arthur Filed as Exhibit 3
Andersen LLP. herewith
24 Power of Attorney Filed as Exhibit 4
authorizing John Demos, herewith
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:
The Registrant filed a Form 8-K with the Securities and
Exchange Commission dated October 26, 1995 reporting the
extension of the term of the Employment Agreement between the
Registrant and John Demos to March 2, 1998.
14
<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.
15
<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, 1995.
SUPER FOOD SERVICES, INC.
(Registrant)
By/s/ Jack Twyman
__________________________________
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, 1995.
/s/ Jack Twyman /s/ Robert F. Koogler
_________________________________ _________________________________
Jack Twyman Robert F. Koogler
Director and Senior Vice President-Finance,
Chairman of the Board Treasurer and Assistant Secretary
(Principal Executive Officer) (Principal Accounting and
Financial Officer)
/s/ John Demos /s/ Samuel L. Robinson
_________________________________ _________________________________
John Demos Samuel L. Robinson
Director and Vice Chairman of the Director and President and
Board, Secretary and General Chief Operating Officer
Counsel
*/s/ John W. Berry */s/ Dr. Thomas S. Haggai
________________________________ ________________________________
John W. Berry Dr. Thomas S. Haggai
Director Director
*/s/ Dr. Edward H. Jennings */s/ C. E. Shaffer
________________________________ ________________________________
Dr. Edward H. Jennings C. E. Shaffer
Director Director
<PAGE>
* 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/s/ John Demos
_________________________________
John Demos
Attorney-in-Fact
November 22, 1995
16
<PAGE>
SUPER FOOD SERVICES, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
The following items included in the 1995 Annual Report of the
Registrant to its shareholders are incorporated herein by
reference:
Consolidated Statements of Income for the Fiscal Years
Ended August 26, 1995, August 27, 1994 and August 28,
1993.
Consolidated Balance Sheets as of August 26, 1995 and
August 27, 1994.
Consolidated Statements of Cash Flows for the Fiscal
Years Ended August 26, 1995, August 27, 1994 and August
28, 1993.
Consolidated Statements of Shareholders' Equity for the
Fiscal Years Ended August 26, 1995, August 27, 1994 and
August 28, 1993.
Notes to Consolidated Financial Statements.
Report of Independent Public Accountants on the
Consolidated Financial Statements as of August 26, 1995
and August 27, 1994 and for each of the three fiscal
years in the period ended August 26, 1995.
With the exception of the aforementioned information and the
information incorporated in Items 5, 6, 7 and 8, the 1995 Annual
Report to Shareholders is not to be deemed filed as part of this
report.
The following information for the fiscal years 1995, 1994 and
1993 is submitted herewith:
Consent of Independent Public Accountants.
Report of Independent Public Accountants on Consolidated
Schedule.
Consolidated Financial Statement Schedule -
Schedule
Valuation and Qualifying Accounts II
All schedules except that listed above are
omitted as not applicable or not required, or the
required information is included in the consoli-
dated financial statements or in the notes
thereto.
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.
17
<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 19, 1995.
Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed in Part IV,
Item 14(a)2 is the responsibility of the Company's management and
is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the
basic consolidated financial statements and, in our opinion,
fairly states 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 19, 1995
18
<PAGE>
<TABLE>
SUPER FOOD SERVICES, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED AUGUST 26, 1995, AUGUST 27, 1994 AND AUGUST 28, 1993
<CAPTION>
Reductions
Charged to
Additions Allowance
Balance at Charged to for Writeoffs Balance at
Beginning Income and (Net of Close
of Period Expense Recoveries) of Period
ALLOWANCES DEDUCTED FROM
ASSETS TO WHICH THEY APPLY:
<S> <C> <C> <C> <C>
1995
Allowance for doubtful
accounts $10,998,602 $ 4,235,000 $(3,136,643) $12,096,959
1994
Allowance for doubtful
accounts $ 9,026,920 $ 4,250,000 $(2,278,318) $10,998,602
1993
Allowance for doubtful
accounts $ 7,117,330 $ 3,208,000 $(1,298,410) $ 9,026,920
<CAPTION>
Amounts
Reclassified
Against
Additions Various Payments
Balance at (Reversals) Balance Charged Balance at
Beginning Charged to Sheet Against the Close
of Period Expense Accounts Reserve of Period
ANALYSIS OF BALANCE
SHEET RESERVE:
<S> <C> <C> <C> <C> <C>
1995
Florida Closing
Liabilities $ 3,654,000 $(1,500,000) $(112,926) $(1,069,238) $ 971,836
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
</TABLE>
19
<PAGE>
EXHIBIT 11
SUPER FOOD SERVICES, INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
Weighted
Average
Number of
Shares Per
Outstanding Net Income Share
August 28, 1993:
Net income $9,216,000
Common stock
outstanding as
of August 30, 1992 10,891,000
Exercise of stock
options (15,000
shares issued) 2,000
__________ __________ _____
10,893,000 $9,216,000 $0.85
__________ __________ _____
__________ __________ _____
Effect of outstanding
stock options which
is less than 3% and
not required to be
disclosed in the
financial statement
(197,000 shares) 6,000
__________ __________ _____
10,899,000 $9,216,000 $0.85
__________ __________ _____
__________ __________ _____
August 27, 1994:
Net income $8,827,000
Common Stock
outstanding as
of August 29, 1991 10,906,000
Exercise of incentive
plan (43,000 shares
issued) 37,000
__________ __________ _____
10,943,000 $8,827,000 $0.81
__________ __________ _____
__________ __________ _____
<PAGE>
Effect of outstanding
stock options which
is less than 3% and
not required to be
disclosed in the
financial statement
(255,000 shares) 41,000
__________ __________ _____
10,984,000 $8,827,000 $0.80
__________ __________ _____
__________ __________ _____
August 26, 1995:
Net income
Common stock
outstanding as
of August 28, 1994
and August 26, 1995 10,949,000 $9,065,00 $0.83
__________ _________ _____
__________ _________ _____
Effect of outstanding
stock options which
is less than 3% and
not required to be
disclosed in the
financial statements
(248,000 shares) 72,000
__________ __________ _____
11,021,000 $9,065,000 $0.82
__________ __________ _____
__________ __________ _____
<PAGE>
EXHIBIT 1
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto. All dollar
information is in thousands, except per share amounts.
1995 versus 1994
__________________________________________________________________
1995 1994 % Change
_________________________________________________________________
Sales and other income $1,154,955 $1,130,095 2.2%
_________________________________________________________________
The increase in sales resulted primarily from increased business
with existing customers; we continue to have competitive pressure
in sales.
_________________________________________________________________
1995 1994 % Change
_________________________________________________________________
Cost of sales $1,103,110 $1,079,057 2.2%
_________________________________________________________________
Cost of sales includes cost of the products distributed as well as
warehouse, delivery and building expenses. The Company experienced
higher cost of sales due to higher sales volume and slightly higher
margins as a result of a favorable shift in product mix. Improved
product margins were offset by higher warehouse and delivery
expenses ($1,810) primarily due to higher cost of labor ($1,095),
medical costs ($565), and pension cost ($110) offset by lower
leasing cost of equipment. Building costs were higher ($200)
because of higher payroll cost, electricity, and amortization
offset by lower storage costs and real estate taxes. In addition,
the Company experienced higher inflation for LIFO purposes during
Fiscal 1995 versus Fiscal 1994. This caused a reduction of income
($750) in Fiscal 1995 as compared to the prior year ($144).
_________________________________________________________________
1995 1994 % Change
_________________________________________________________________
Selling, general and
administrative expenses $ 33,904 $ 34,013 (.3%)
_________________________________________________________________
Increases in salaries, wages and benefits ($1,000), other
administrative expenses ($200) and losses on company owned retail
stores ($350) were offset by reductions in promotional expenses
($300) and Florida closing liabilities ($1,500). Offsetting the
reduction in Florida closing liabilities was an additional
provision for allowance for doubtful accounts which resulted in bad
debt expense being comparable between years.
_________________________________________________________________
1995 1994 % Change
_________________________________________________________________
Interest expense $ 7,269 $ 6,314 15.1%
Interest income $ (4,139) $ (3,540) 16.9%
_________________________________________________________________
Interest expense increased due to higher interest rates and higher
average borrowing levels on both short-term and long-term
borrowings. Interest income increased due to higher interest rates
and higher borrowing levels by retail customers.
_________________________________________________________________
1995 1994 % Change
_________________________________________________________________
Effective tax rate 38.8% 38.1% .7%
_________________________________________________________________
The Company's effective tax rate would be substantially the same
except for the receipt of income tax refunds from certain states in
the prior year.
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 com-
petitive 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 opera-
ting reserves between years. In addition, 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.
6
<PAGE>
_________________________________________________________________
1994 1993 % Change
_________________________________________________________________
Selling, general and
administrative expenses $ 34,013 $ 33,832 .5%
_________________________________________________________________
Expenses increased by $181 due primarily to a higher provision for
doubtful 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 expansion 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 years.
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 typi-
cally 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 accoun-
ting for inventories has reduced the impact of price changes on
earnings by matching current costs with current revenues.
<PAGE>
Capital Resources and Liquidity
_________________________________________________________________
1995 1994
_________________________________________________________________
Cash $ 12,423 $ 15,834
Working capital $ 99,992 $ 93,432
Long-term obligations,
including capitalized
leases $ 60,420 $ 55,994
Cash provided by
operations $ 8,767 $ 16,468
Cash used for
investing $ (6,603) $(16,141)
Cash provided by (used
for) financing $ (5,575) $ 1,105
_________________________________________________________________
The Company's financial condition remained strong as of August 26,
1995. The current ratio was 2.74 to 1 as of August 26, 1995 as
compared to 2.39 to 1 at August 27, 1994.
Net cash provided by operations aggregated $8,767 during the
fifty-two weeks ended August 26, 1995, a decrease of $7,701 from
the prior year. Trade receivables decreased by $848. The
Company's customers continue to be adversely affected by current
competitive conditions. Company management expects that such
conditions will continue into Fiscal 1996. Inventories increased
by $3,838 as the Company had to satisfy the needs of existing
customers. Accounts Payable decreased due to available cash as a
result of an increase in borrowing on long-term debt. The Company
experienced minimal price changes on products distributed.
Net cash used for investing activities during the 52 weeks ended
August 26, 1995, aggregated $6,603, of which $5,615 was invested in
property, plant and equipment. The decreased investment in
property, plant and equipment from the prior year resulted
primarily from the Bridgeport warehouse addition ($10,831) which
was completed early in Fiscal 1995. The Company anticipates that
its capital spending level in Fiscal 1996 will remain approximately
the same as Fiscal 1995. The Company issued $9,673 of long-term
notes receivable to existing or new customers, while collecting
$8,199 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 used for financing activities during the 52 weeks ended
August 26, 1995, aggregated $5,575. The Company paid $4,160 of
dividends during Fiscal 1995. The Company increased net long-term
debt by $2,585, and increased average short-term borrowings to
$19,299 from $13,602 the previous year. There was, however, $5,000
7
<PAGE>
in short-term borrowings at year end, a decrease of $4,000 from the
prior 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.
The Company has $59,000 of unused short-term borrowing commitments
from banks and an additional $20,000 from two other banks under its
long-term revolving credit agreements.
Depreciation and amortization of property, equipment and capital
leases for the three years in the period ended August 26, 1995 are
as follows:
_________________________________________________________________
Year Property and Equipment Capital Leases
_________________________________________________________________
1995 $7,331 $ 405
1994 6,787 405
1993 6,727 405
_________________________________________________________________
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 and
cash flows 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 $.38 per share. Fiscal year 1995 represents the
twenty-ninth year of consecutive cash dividends.
8
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Super Food Services, Inc., and Subsidiaries
For the Fiscal Years Ended August 26, 1995, August 27, 1994 and
August 28, 1993
(amounts in thousands except per share amounts)
___________________________________________________________________
1995 1994 1993
_________________________________________________________________
Sales and Other Income $1,154,955 $1,130,095 $1,165,520
_________________________________________________________________
Costs and Expenses:
Cost of sales, including
warehouse and delivery
expenses 1,103,110 1,079,057 1,113,224
Selling, general and
administrative
expenses 33,904 34,013 33,832
Interest expense 7,269 6,314 6,957
Interest income (4,139) (3,540) (3,651)
__________________________________________________________________
Total costs and
expenses 1,140,144 1,115,844 1,150,362
___________________________________________________________________
Income before Income
Taxes 14,811 14,251 15,158
___________________________________________________________________
Provision for Income
Taxes (Note 2) 5,746 5,424 5,942
__________________________________________________________________
Net Income $ 9,065 $ 8,827 $ 9,216
___________________________________________________________________
Weighted Average Number
of Common Shares
Outstanding 10,949 10,943 10,893
Earnings per
Common Share $ .83 $ .81 $ .85
___________________________________________________________________
The accompanying notes are an integral part of these consolidated
statements.
9
<PAGE>
CONSOLIDATED BALANCE SHEETS
Super Food Services, Inc., and Subsidiaries
August 26, 1995 and August 27, 1994
(amounts in thousands)
_________________________________________________________________
Assets 1995 1994
_________________________________________________________________
Current Assets:
Cash $ 12,423 $ 15,834
_________________________________________________________________
Receivables
Retailers--trade 59,832 60,680
--notes (current portion) 5,511 4,543
Suppliers and miscellaneous 8,620 8,210
_________________________________________________________________
73,963 73,433
Less--Allowance for doubtful
accounts (9,293) (7,733)
_________________________________________________________________
64,670 65,700
_________________________________________________________________
Merchandise inventory 67,181 63,343
_________________________________________________________________
Future tax benefits (Note 2) 4,569 6,768
Prepaid expenses and other 8,482 8,835
_________________________________________________________________
Total current assets 157,325 160,480
_________________________________________________________________
Notes Receivable from Retailers
(long-term portion), net of
allowance for doubtful accounts
of $2,804 in 1995 and $3,265
in 1994) 17,653 16,179
_________________________________________________________________
Property and Equipment (Note 8):
Land 1,998 1,998
Buildings 29,139 28,267
Equipment, vehicles and other 94,020 91,384
_________________________________________________________________
125,157 121,649
Accumulated depreciation and
amortization (64,612) (59,225)
_________________________________________________________________
Net property and equipment 60,545 62,424
_________________________________________________________________
Other Assets:
Investment in direct financing
leases (Note 8) 16,556 15,278
Excess of purchase price over net
tangible assets, net (Note 1) 4,339 4,405
Other 481 578
_________________________________________________________________
Total other assets 21,376 20,261
_________________________________________________________________
$256,899 $259,344
_________________________________________________________________
The accompanying notes are an integral part of these consolidated
statements.
10
<PAGE>
CONSOLIDATED BALANCE SHEETS
Super Food Services, Inc., and Subsidiaries
August 26, 1995 and August 27, 1994
(amounts in thousands)
__________________________________________________________________
Liabilities and
Shareholders' Equity 1995 1994
__________________________________________________________________
Current Liabilities:
Accounts payable $ 36,650 $ 38,302
Notes payable to bank (Note 3) 5,000 9,000
Current maturities of
long-term obligations 800 2,657
Current maturities of
obligations under capitalized
leases 864 904
Current portion of Florida
closing liabilities - 1,250
Accrued payroll and vacation 3,143 2,857
Taxes other than income 2,252 2,423
Other current liabilities 8,624 9,655
__________________________________________________________________
Total current liabilities 57,333 67,048
__________________________________________________________________
Long-Term Debt Obligations
(Note 3) 35,000 31,602
__________________________________________________________________
Obligations under Capitalized
Leases (Note 8) 25,420 24,392
__________________________________________________________________
Long-Term Florida Closing
Liabilities (Note 4) 972 2,404
__________________________________________________________________
Deferred Tax Liabilities (Note 2) 296 925
__________________________________________________________________
Commitments and Contingent
Liabilities (Note 10)
__________________________________________________________________
Shareholders' Equity (Notes 3, 5,
and 6):
Common Shares, par value $1.00,
35,000 shares authorized,
10,949 shares issued and
outstanding in 1995 and 1994,
respectively 10,949 10,949
Paid-in capital 29,408 29,408
Retained earnings 97,521 92,616
__________________________________________________________________
Total shareholders' equity 137,878 132,973
_________________________________________________________________
$256,899 $259,344
__________________________________________________________________
The accompanying notes are an integral part of these consolidated
statements.
11
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Super Food Services, Inc., and Subsidiaries
For the Fiscal Years Ended August 26, 1995, August 27, 1994 and
August 28, 1993
amounts in thousands)
___________________________________________________________________
1995 1994 1993
___________________________________________________________________
Cash Provided by (Used for)
Operating Activities:
Net income $ 9,065 $ 8,827 $ 9,216
Items not affecting cash-
Depreciation and
amortization 7,736 7,258 7,198
Future income tax
benefits 1,570 1,576 3,473
Current items -
Receivables 1,030 (1,454) 5,222
Merchandise inventory (3,838) 1,819 756
Prepaid expenses
and other 353 (1,997) 1,828
Accounts payable and
other (4,467) 4,209 400
Florida closing
liabilities (2,682) (3,770) (8,619)
___________________________________________________________________
Net cash provided
by operating
activities 8,767 16,468 19,474
___________________________________________________________________
Cash Provided by (Used for)
Investing Activities:
Additions of property
and equipment (5,615) (18,030) (5,174)
Increase in long-term
notes receivable (9,673) (5,510) (9,970)
Reduction of long-term
notes receivable 8,199 7,300 5,952
Sales and retirement
of property and
equipment, net 486 99 1,849
___________________________________________________________________
Net cash used
for investing
activities (6,603) (16,141) (7,343)
___________________________________________________________________
Cash Provided by (Used for)
Financing Activities:
Notes payable to bank (4,000) 9,000 (5,000)
Long-term debt borrowing 10,000 - -
Retirements of long-term
debt and lease
obligations (7,415) (4,400) (4,167)
Proceeds from stock plans - 447 -
Stock options exercised - - 116
Purchase of preferred
shares - - (567)
Cash dividends (4,160) (3,942) (3,703)
___________________________________________________________________
Net cash provided
by (used for)
financing
activities (5,575) 1,105 (13,321)
___________________________________________________________________
Increase (Decrease) in Cash (3,411) 1,432 (1,190)
Cash, Beginning of Year 15,834 14,402 15,592
___________________________________________________________________
Cash, End of Year $12,423 $15,834 $ 14,402
___________________________________________________________________
The accompanying notes are an integral part of these consolidated statements.
12
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
Super Food Services, Inc., and Subsidiaries
For the Fiscal Years Ended August 26, 1995, August 27, 1994 and August 28, 1993
(amounts in thousands except per share data)
<CAPTION>
__________________________________________________________________________________________
Common Shares
_____________
Total
Paid-in Retained Shareholders'
Shares Amount Capital Earnings Equity
__________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Balance at August 29, 1992 10,891 $10,891 $28,903 $82,218 $122,012
Net income - - - 9,216 9,216
Cash dividends on
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 on
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
Net income - - - 9,065 9,065
Cash dividends on
common stock, $.38
per share - - - (4,160) (4,160)
__________________________________________________________________________________________
Balance at August 26, 1995 10,949 $10,949 $29,408 $97,521 $137,878
__________________________________________________________________________________________
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
13
<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
significant 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 26, 1995, August 27, 1994 and
August 28, 1993 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
determining cost for most (75% in 1995 and 76% in 1994) 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 26, 1995 and August 27, 1994 by
$11,869 and $11,120, respectively, and to increase cost of sales by
$750 for 1995 and $144 for 1994 and decrease cost of sales by
$1,436 for 1993. During Fiscal 1994, 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.
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:
Building . . . . . . . . . . . . . . . . . . . 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 $2,600) is being amortized over 40
years. For acquisitions prior to November 1, 1970, the excess
(approximately $1,757) is not being amortized because, in
management'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.
The dilutive effects of unexercised stock options are not material
and, therefore, are not included in earnings per share.
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 26, 1995, the
interest rates ranged from 6.00% to 11.00%. The Company generally
recognizes interest income on these notes as the interest is
collected. The effective rate of interest collected was 10% and 7%
for 1995 and 1994, respectively. These notes mature as follows:
_________________________________________________________________
1996 $ 5,511
1997 4,021
1998 3,535
1999 2,385
2000 2,220
Thereafter 5,492
_________________________________________________________________
$23,164
_________________________________________________________________
14
<PAGE>
Segment Information
The Company is engaged in a single line of business, the wholesale
distribution of groceries. The Company supplies more than 850
allied retail stores in cities of varying sizes in six
predominantly 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
to discharge amounts owed is dependent upon the retail grocery
economic environment. Sales to one customer accounted for
approximately 13% of consolidated sales and other income of the
Company during 1995. The Company does not believe that it is
currently dependent upon any single customer.
Reclassifications
Certain reclassifications have been made to prior years' amounts to
make them comparable with the classification of such amounts for
Fiscal 1995.
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 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.
<PAGE>
The provision for income taxes consists of the following:
_________________________________________________________________
1995 1994 1993
_________________________________________________________________
Currently Payable -
Federal $ 4,234 $ 5,239 $ 3,279
State 925 926 612
Deferred -
Allowance for doubtful
accounts (425) (1,353) (849)
Tax depreciation over
(under) book
depreciation (233) 75 136
Expenses paid for
Florida closing 1,620 1,436 3,366
Labor and benefits
expenses (168) (637) (595)
Other, net (207) (262) (7)
_________________________________________________________________
$ 5,746 $ 5,424 $ 5,942
_________________________________________________________________
The effective income tax rate differs from the statutory federal
income tax rate for the following reasons:
_________________________________________________________________
1995 1994 1993
_________________________________________________________________
Statutory Rate 35.0% 35.0% 34.67%
State Income Taxes (net
of federal tax benefit) 4.0 4.2 4.2
Surtax effect (0.7) (0.7) (0.67)
Other, net 0.5 (0.4) 1.0
________________________________________________________________
38.8% 38.1% 39.2%
_________________________________________________________________
Following are the temporary differences which gave rise to the
significant deferred tax assets and liabilities as of August 26,
1995 and August 27, 1994, respectively:
_________________________________________________________________
1995 1994
_________________________
Current Future Tax Benefits:
Insurance accruals $ 958 $ 1,414
Employee benefits accruals 500 749
Bad debts 1,823 2,245
Inventory activities 997 1,115
Florida closing liabilities - 632
Other 291 613
Valuation allowance - -
_________________________
4,569 6,768
_________________________
<PAGE>
Long-Term Future Tax Benefits
(Liabilities):
Accumulated depreciation (1,955) (3,767)
Leasing activities 1,884 1,895
Florida closing liabilities (328) 947
Other 103 -
Valuation allowance - -
_________________________
(296) (925)
_________________________________________________________________
Totals $4,273 $ 5,843
_________________________________________________________________
15
<PAGE>
NOTE 3
______
DEBT OBLIGATIONS
(amounts in thousands)
Short-Term Credit Facilities
Notes payable to banks of $5,000 at August 26, 1995 consist of two
renewal notes bearing interest of 5.8125% and 6.0875%.
The Company had unused commitments at August 26, 1995 for
short-term borrowings of $59,000 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 1995 were $19,299,
with an average interest rate of 6.33%. The maximum amount
outstanding at any period end was $31,000. No significant
compensating balances were maintained at August 26, 1995.
Long-Term Debt Obligations
Long-term debt obligations consist of the following:
_________________________________________________________________
1995 1994
_________________________________________________________________
Unsecured Senior Notes $25,000 $25,000
Unsecured Senior Notes - 7,429
Note Payable to Bank 10,000 -
Industrial Revenue Bonds 800 1,600
Term loan agreements and
other notes - 230
Less amounts payable within one year (800) (2,657)
_________________________________________________________________
$35,000 $31,602
_________________________________________________________________
Payments on the long-term debt obligations required during the
next five Fiscal years are approximately: 1996, $800; 1997, $-0-;
1998, $-0-; 1999, $-0-; 2000, $25,000; and thereafter, $10,000.
<PAGE>
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 with a
$15,000 notional amount that expires in October, 1995, which is
accounted for as a hedge, and, accordingly, income or expense
related to the swap is recognized on an accrual basis. The purpose
of 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 increase the
Company's effective interest rate on $15,000 of borrowings from
9.20% to 9.96% in Fiscal 1995.
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, 1995. 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 26, 1995, there was $10,000 borrowed
under the revolving credit agreements with interest rate of 6.75%.
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 (4.50% at August 26, 1995) 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 guarantees.
<PAGE>
NOTE 4
______
FLORIDA DIVISION CLOSING
(amounts in thousands except per share amounts)
In the third quarter of 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 could be found,
16
litigation costs in connection with the Company's lawsuit against
Albertson's and other costs relating to the closing. The Company's
contract claims against Albertson's were dismissed by the Circuit
Court of Orange County, Florida in March, 1994 and the 5th District
Court of Appeals of the State of Florida on January 3, 1995
affirmed the decision of the Circuit Court. The Company's motion
for a rehearing and/or clarification or certification was denied.
The remaining Florida closing liabilities at August 26, 1995
relates primarily to employee benefit costs.
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
acquisition 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.
<PAGE>
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
transaction 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.
NOTE 6
______
INCENTIVE PLANS
Stock Option Plan
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 26, 1995, 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.
<PAGE>
Following is a summary of activity for the last three Fiscal years.
_________________________________________________________________
Number of Shares Price Range
_________________________________________________________________
Outstanding at August 29, 1992 203,949 $9.92-$18.13
Canceled 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
_________________________________________________________________
Outstanding at August 26, 1995 197,277 9.92- 18.13
_________________________________________________________________
Exercisable at August 26, 1995 151,563 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
17
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 26, 1995, there were no
awards of restricted stock outstanding.
Employee Stock Purchase Plan
At August 26, 1995, 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.
_________________________________________________________________
Number of Shares Price Range
_________________________________________________________________
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
Withdrawals (6,796) 9.62
_________________________________________________________________
Outstanding at August 26, 1995 50,891 $ 9.62
_________________________________________________________________
<PAGE>
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 $472, $475 and $494 were made in Fiscal years 1995,
1994 and 1993, respectively.
NOTE 7
______
PENSION AND RETIREMENT PLANS:
(amounts in thousands except per share amounts)
Defined Benefit Plans
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 26, 1995 and August 27, 1994
were as follows:
_________________________________________________________________
1995 1994
_________________________________________________________________
Actuarial present value of
benefit obligation:
Vested benefits $ 26,994 $ 24,930
Nonvested benefits 362 432
_________________________________________________________________
Accumulated benefit
obligation 27,356 25,362
Additional benefits based on
future salary levels 3,084 3,020
_________________________________________________________________
Projected benefit obligation 30,440 28,382
Plan assets at fair value,
principally listed
securities (29,647) (27,261)
_________________________________________________________________
Plan assets under
projected benefit
obligation 793 1,121
Unrecognized net asset 449 626
Unrecognized prior service costs (935) (790)
Unrecognized net actuarial costs (1,377) (1,703)
_________________________________________________________________
Net Prepaid Pension Cost $(1,070) $ (746)
_________________________________________________________________
18
<PAGE>
Assumptions used in the determination of the above amounts include
the following:
_________________________________________________________________
1995 1994
_________________________________________________________________
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 61% of the Company's employees are covered by
collectively-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
retirement 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
retirement plan. These benefits aggregated approximately $2
million and $1.3 million at August 26, 1995 and August 27, 1994,
respectively. 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
voluntary and no contributions are made by the Company.
Pension and Retirement Plan Expense
Aggregate cost for the Company's retirement plans includes the
following components:
<PAGE>
_________________________________________________________________
1995 1994 1993
_________________________________________________________________
Defined Benefit Plan:
Service cost benefits
earned during the year $ 665 $ 782 $ 726
Interest cost on projected
benefit obligation 2,366 2,153 2,099
Return on assets (2,982) (916) (3,173)
Net amortization and
deferral 592 (1,396) 1,027
_________________________________________________________________
Net pension expense 641 623 679
Multi-Employer Plans 2,395 2,339 2,347
Other Retirement Plans 643 294 135
_________________________________________________________________
Total Pension and
Retirement Plan Expense $ 3,679 $ 3,256 $ 3,161
_________________________________________________________________
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-retirement 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 in 1993. 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 provisions of such plans. These plans are
unfunded. The Company's APBO at August 29, 1995 and August 27,
1994 was approximately $2.1 million and $2.5 million (pre-tax),
respectively, and was based upon the following key assumptions.
19
<PAGE>
_________________________________________________________________
Weighted average
discount rate: 8%
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: 8.5% for Fiscal 1995 and decreasing
ratably to 4.5% by Fiscal 2003.
_________________________________________________________________
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 1995
includes the following:
_________________________________________________________________
1995 1994
_________________________________________________________________
Service cost (benefits earned
during the period) $ 70 $ 89
Interest cost on APBO 163 188
Amortization of APBO 97 127
_________________________________________________________________
Net periodic post-retirement
benefit cost $330 $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.
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 depreciation, 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:
_________________________________________________________________
1995 1994
_________________________________________________________________
Buildings $11,536 $11,536
Equipment - 327
_________________________________________________________________
Total Property under Capitalized
Leases 11,536 11,863
Accumulated Amortization (5,649) (5,478)
_________________________________________________________________
Net Property under Capitalized
Leases $ 5,887 $ 6,385
_________________________________________________________________
The following represents the minimum lease payments remaining at
August 26, 1995 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
_________________________________________________________________
1996 $ 3,811 $ 2,518 $ 1,293
1997 3,750 2,503 1,247
1998 3,711 2,461 1,250
1999 3,658 2,406 1,252
2000 3,666 2,414 1,252
2001 and thereafter 38,172 25,454 12,718
_________________________________________________________________
Total minimum lease
payments 56,768 37,756 $19,012
_______
Less executory costs (1,905) (1,892)
Less imputed interest
(8.50% to 15.99%) (28,579) (18,745)
______________________________________________________
Present value of minimum
lease payments 26,284 17,119
Less current maturities (864) (563)
______________________________________________________
Long-term obligations
and investments $25,420 $ 16,556
______________________________________________________
20
<PAGE>
Total rental expense for all operating (noncapitalized) leases
aggregated:
_________________________________________________________________
Minimum Contingent Total
_________________________________________________________________
1995
Expense $ 9,662 $ 403 $10,065
Sublease Income (4,178) (370) (4,548)
_________________________________________________________________
$ 5,484 $ 33 $ 5,517
_________________________________________________________________
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
_________________________________________________________________
The future minimum lease commitments as of August 26, 1995 for all
noncancellable operating leases are as follows:
_________________________________________________________________
Sublease
Expense Income Net
_________________________________________________________________
1996 $ 7,811 $ (5,208) $ 2,603
1997 6,911 (4,823) 2,088
1998 5,866 (4,398) 1,468
1999 4,616 (3,539) 1,077
2000 3,155 (3,137) 18
2001 and thereafter 13,853 (13,796) 57
_________________________________________________________________
$42,212 $(34,901) $ 7,311
_________________________________________________________________
NOTE 9
______
TRANSACTIONS WITH RELATED PARTIES:
(amounts in thousands)
During the Fiscal years 1995, 1994 and 1993, the Company paid
$2,347, $2,284 and $2,999, respectively, to an insurance firm for
insurance premiums on various forms of coverage. The Chairman of
the Board of the Company was a shareholder of said firm. In Fiscal
1995, the Chairman sold his stock interest and he no longer 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.
<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 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 or cash
flows.
The Company has guaranteed the payment of building leases for
certain customers. The future minimum rentals aggregate
approximately $4,636, with expiration dates beginning in 1995
through 2009. Certain of these leases also contain provisions for
contingent rentals and options to extend, which the Company has
also guaranteed.
The Company has also guaranteed the payment of principal and
interest on notes of certain customers payable to banks. The
principal amount guaranteed is approximately $2,159 as of August
26, 1995. The guarantee agreements expire beginning in Fiscal 1996
through 2000. The Company has determined that it is not practical
to estimate the fair value of either of the above guarantees.
21
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:
_________________________________________________________________
1995 1994 1993
_________________________________________________________________
Interest* $ 4,410 $ 3,276 $ 4,070
Income Taxes 3,737 3,793 1,481
_________________________________________________________________
* 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:
<PAGE>
_________________________________________________________________
1995 1994 1993
_________________________________________________________________
Capital lease obligations
incurred $1,841 $ - $10,471
Capital lease obligations
retired 107 - -
_________________________________________________________________
NOTE 12
_______
FAIR VALUE 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, accounts payable and
notes payable to bank: 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 debt obligations: The fair value of long-term debt
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 26, 1995 and August 27, 1994 are as
follows:
_________________________________________________________________
1995 1994
_________________________________________________________________
Carrying amount $35,800 $34,529
Fair value $38,087 $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 26, 1995 was a
payable of approximately $161, which is accrued at August 26, 1995.
22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTS:
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 26, 1995 and August 27, 1994, and the related
consolidated statements of income, cash flows and shareholders'
equity for each of the three fiscal years in the period ended
August 26, 1995. 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 26, 1995 and
August 27, 1994, and the results of their operations and their cash
flows for each of the three fiscal years in the period ended August
26, 1995, in conformity with generally accepted accounting
principles.
As discussed in Notes 2 and 7 to the Consolidated Financial
Statements, 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 19, 1995
23
<PAGE>
<TABLE>
QUARTERLY DATA
Super Food Services, Inc., and Subsidiaries
(amounts in thousands except per share amounts)
<CAPTION>
Year Ended August 26, 1995
____________________________________________________________________________________________
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 $271,241 $257,526 $260,208 $365,980 $1,154,955
Cost of sales 258,467 244,835 248,844 350,964 1,103,110
Net income 2,381 2,058 1,731 2,896 9,065
Earnings per
common share .22 .19 .16 .26 .83
Cash dividends
declared per
share .095 .095 .095 .095 .38
Market price
range per share 10 3/8-12 1/4 10 1/4-12 1/4 10 1/4-11 5/8 10 1/2-13 7/8 10 1/4-13 7/8
______________________________________________________________________________________________
<CAPTION>
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
______________________________________________________________________________________________
Due to rounding, the sum of the quarterly amounts may not equal the total for the year.
</TABLE>
24
<PAGE>
<TABLE>
FIVE-YEAR SUMMARY OF FINANCIAL OPERATIONS
AND FINANCIAL REVIEW
Super Food Services, Inc., and Subsidiaries
(amounts in thousands except per share amounts)
___________________________________________________________________________________
<CAPTION>
Income Statement Data 1995 1994 1993 1992 1991
___________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Sales and other
income $1,154,955 $1,130,095 $1,165,520 $1,573,321 $1,825,951
Cost of Sales 1,103,110 1,079,057 1,113,224 1,515,657 1,759,153
Selling, general and
administrative 33,904 34,013 33,832 38,391 39,393
Interest, net 3,130 2,774 3,306 5,170 7,290
Provision for
closing Florida
Division - - - 22,986 -
Net income (loss) 9,065 8,827 9,216 (5,453) 12,198
Net income on share-
holders' equity at
beginning of year 7% 7% 8% N.M. 10%
___________________________________________________________________________________
___________________________________________________________________________________
<CAPTION>
Balance Sheet Data
___________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Total current assets
at year end $ 157,325 $ 160,480 $ 157,858 $ 162,554 $ 217,443
Total assets at
year end 256,899 258,419 248,238 251,519 304,183
Working capital 99,992 93,432 102,870 97,013 131,588
Current ratio 2.74 2.39 2.87 2.48 2.53
Long-term debt
obligations
including
capitalized
leases $ 60,420 $ 55,994 $ 60,285 $ 53,980 $ 87,404
Redeemable
preferred
stock - - - 567 576
Shareholders'
equity 137,878 132,973 127,641 122,012 130,348
___________________________________________________________________________________
<PAGE>
___________________________________________________________________________________
<CAPTION>
Per Share Data
___________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Weighted average
number of common
shares outstanding 10,949 10,943 10,893 10,885 10,807
Earnings (loss) per
common share $ .83 $ .81 $ .85 $ (.51) $ 1.13
Book value per
common share 12.59 12.14 11.70 11.20 12.03
___________________________________________________________________________________
</TABLE>
N.M. equals not meaningful.
25
<PAGE>
EXHIBIT 2
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 3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports dated October 19, 1995, 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 22, 1995
<PAGE>
EXHIBIT 4
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 26, 1995, 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 26th day of October, 1995.
/s/ Jack Twyman /s/ Robert F. Koogler
______________________________ ______________________________
Jack Twyman Robert F. Koogler
Chairman of the Board Senior Vice President-Finance
and Director and Treasurer (Principal
Financial and Accounting
Officer)
/s/ John Demos /s/ Samuel L. Robinson
_______________________________ ______________________________
John Demos Samuel L. Robinson
Vice Chairman of the Board President and Director
and Director
<PAGE>
/s/ John W. Berry /s/ Dr. Edward H. Jennings
______________________________ ______________________________
John W. Berry Dr. Edward H. Jennings
Director Director
/s/ Dr. Thomas S. Haggai /s/ C. E. Shaffer
______________________________ ______________________________
Dr. Thomas S. Haggai C. E. Shaffer
Director Director
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED SUMMARY BALANCE SHEETS AS OF AUGUST 26, 1995 AND THE CONSOLIDATED
SUMMARY STATEMENTS OF INCOME FOR THE 52 WEEKS ENDED AUGUST 26, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-26-1995
<PERIOD-END> AUG-26-1995
<CASH> 12,423
<SECURITIES> 0
<RECEIVABLES> 65,343
<ALLOWANCES> 9,293
<INVENTORY> 67,181
<CURRENT-ASSETS> 157,325
<PP&E> 125,157
<DEPRECIATION> 64,612
<TOTAL-ASSETS> 256,899
<CURRENT-LIABILITIES> 57,333
<BONDS> 60,420
<COMMON> 10,949
0
0
<OTHER-SE> 126,929
<TOTAL-LIABILITY-AND-EQUITY> 256,899
<SALES> 1,150,647
<TOTAL-REVENUES> 1,154,955
<CGS> 1,103,110
<TOTAL-COSTS> 1,103,110
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,235
<INTEREST-EXPENSE> 7,269
<INCOME-PRETAX> 14,811
<INCOME-TAX> 5,746
<INCOME-CONTINUING> 9,065
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,065
<EPS-PRIMARY> .83
<EPS-DILUTED> .83
</TABLE>
