10-Q 1 q032003form10q.txt 3Q 2003 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 27, 2003 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from _____________ to _______________ Commission file number: 002-94984 Roundy's, Inc. ------------------------------------------------------- (Exact name of registrant as specified in its charter) Wisconsin 39-0854535 ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 875 E. Wisconsin Avenue Milwaukee, Wisconsin 53202 -------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 23000 Roundy Drive Pewaukee, Wisconsin 53072 -------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Registrant's telephone number, including area code: (414)231-5000 --------------- Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2) Yes No X As of November 7, 2003 there were 1,000 shares of the Registrant's common stock outstanding, all of which were held by Roundy's Acquisition Corp. ("RAC"). RAC is controlled by the Willis Stein Funds (as defined in Note 2 to the financial statements contained in this report) and certain associated investors, and approximately 100% of RAC's common stock may be deemed to be beneficially owned by certain officers and directors of the Registrant, all of whom are or may be deemed to be affiliates of the Registrant. There is no established public trading market for such stock. ROUNDY'S, INC. FORM 10-Q For the period ended September 27, 2003 INDEX Page No. PART I. - Financial Information Item 1. Financial Statements (unaudited) Consolidated Statements of Income 1 Consolidated Balance Sheets 2 Consolidated Statements of Cash Flows 3 Notes to Unaudited Consolidated Financial 4 Statements Item 2. Management's Discussion and Analysis of 13 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Discussion about 21 Market Risk Item 4. Controls and Procedures 21 PART II. - Other Information Item 1. Legal Proceedings 22 Item 2. Changes in Securities and Use of Proceeds 22 Item 3. Defaults Upon Senior Securities 22 Item 4. Submission of Matters to a Vote of Security 22 Holders Item 5. Other Information 22 Item 6. Exhibits and Reports on Form 8-K 22 SIGNATURES 23 EXHIBIT INDEX 24 PART I. Item 1. FINANCIAL STATEMENTS ROUNDY'S, INC. CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands) (Unaudited)

See notes to unaudited consolidated financial statements. ROUNDY'S, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data) Successor --------------------------- September 27, December 28 Assets 2003 2002 ------------- ----------- (Unaudited) Current Assets: Cash and cash equivalents $ 70,165 $ 139,778 Notes and accounts receivable, less allowance for losses of $5,109 and $5,577, respectively 78,255 87,344 Merchandise inventories 271,499 236,465 Prepaid expenses 5,995 9,756 Deferred income tax benefits 16,169 15,871 ------- ------- Total current assets 442,083 489,214 Property and Equipment - Net 315,058 214,548 Other Assets: Deferred income tax benefits 25,640 25,231 Notes receivable, less allowance for losses of $233 and $1,475, respectively 3,023 3,523 Other assets - net 90,730 91,344 Goodwill 624,561 556,894 ------- ------- Total other assets 743,954 676,992 ------- ------- Total assets $1,501,095 $1,380,754 ========== ========== Liabilities and Shareholder's Equity Current Liabilities: Accounts payable $ 265,578 $ 240,845 Accrued expenses 153,385 137,416 Current maturities of long-term debt 3,627 2,961 Income taxes 13,084 13,370 ------- ------- Total current liabilities 435,674 394,592 ------- ------- Long-Term Debt 592,868 559,824 Other Liabilities 94,755 91,380 --------- --------- Total liabilities 1,123,297 1,045,796 --------- --------- Shareholder's Equity: Common stock (1,000 shares issued and outstanding at $0.01 par value) Additional paid-in capital 314,500 314,500 Retained earnings 63,298 20,458 --------- --------- Total shareholder's equity 377,798 334,958 ---------- --------- Total liabilities and shareholder's equity $1,501,095 $1,380,754 ========== ========== See notes to unaudited consolidated financial statements. ROUNDY'S, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Successor Predecessor ---------------------- ----------- Thirty-nine June 7, December 30, Weeks Ended 2002 to 2001 to September 27, September June 6, 2003 28, 2002 2002 ----------- ----------- ---------- Cash Flows From Operating Activities: Net income $ 42,840 $ 12,526 $ 10,928 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation and amortization, including deferred financing costs 35,180 16,206 18,670 (Gain) loss on sale of property and equipment (240) (161) 41 Deferred income taxes 3,247 1,635 (2,268) Changes in operating assets and liabilities, net of the effect of business acquisitions: Notes and accounts receivable 10,493 620 (7,079) Merchandise inventories (4,099) (4,338) 13,767 Prepaid expenses 5,089 2,078 1,743 Other assets (8,672) (2,324) (1,371) Accounts payable 15,931 (953) (27,541) Accrued expenses 11,109 10,510 18,062 Income taxes (286) 3,162 19,731 Other liabilities (6,511) (1,898) 161 -------- --------- -------- Net cash flows provided by operating activities 104,081 37,063 44,844 -------- --------- -------- Cash Flows From Investing Activities: Capital expenditures (38,953) (12,936) (10,642) Proceeds from sale of property and equipment and other assets 301 337 478 Acquisition consideration (539,996) Payment for business acquisitions net of cash acquired (132,577) Decrease in notes receivable, net 500 334 879 --------- ---------- -------- Net cash flows used in investing activities (170,729) (552,261) (9,285) ---------- ---------- -------- Cash Flows From Financing Activities: Proceeds from long-term borrowings 475,000 Settlement of interest rate swap liability (6,652) Debt issuance costs (506) (23,022) Contributed capital 314,500 Payments of debt (2,459) (166,043) (48,618) Common stock purchased (56) -------- --------- -------- Net cash flows (used in) provided by financing activities (2,965) 593,783 (48,674) -------- -------- -------- Net (Decrease) Increase in Cash and Cash Equivalents (69,613) 78,585 (13,115) Cash and Cash Equivalents, Beginning of Period 139,778 45,516 -------- -------- -------- Cash and Cash Equivalents, End of Period $ 70,165 $ 78,585 $ 32,401 ========== ========= ========== Supplemental Cash Flow Information: Cash paid during the period: Interest $ 24,758 $ 4,642 $ 6,351 Income taxes 25,609 573 1,872 See notes to unaudited consolidated financial statements. ROUNDY'S, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS AND BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Roundy's, Inc. ("Roundy's" or the "Company") as of September 27, 2003, for the three- month and nine-month periods ended September 27, 2003 (successor), the period from June 30, 2002 to September 28, 2002 (successor), and the period from December 30, 2001 to June 6, 2002 (predecessor) reflect all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information, in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and footnotes required for complete, audited financial statements. The unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto, together with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Item 2 of this report. The results of operations for the three-month and nine- month periods ended September 27, 2003 may not necessarily be indicative of the results that may be expected for the entire fiscal year ending January 3, 2004. For purposes of comparison, the results of operations for the period June 7, 2002 to September 28, 2002 have been combined with the results of operations of Roundy's for the period December 30, 2001 to June 6, 2002 and then compared with the results of operations of Roundy's for the thirty-nine weeks ended September 27, 2003. 2. TRANSACTIONS Transactions - On June 6, 2002, all of the issued and outstanding capital stock of Roundy's was purchased by Roundy's Acquisition Corp. ("RAC") from its former owners. This purchase is referred to throughout these financial statements as the "Transactions." RAC is a corporation formed at the direction of Willis Stein & Partners, III, L.P. ("Willis Stein") for the purposes of acquiring Roundy's. Approximately 90% of RAC's common and preferred stock is owned by investment funds controlled by Willis Stein (the "Willis Stein Funds") and certain associated equity investors. Purchase Accounting - The acquisition of Roundy's by RAC was accounted for as a purchase. As a result, all financial statements for periods subsequent to June 6, 2002, the date the Transactions were consummated, reflect the new reporting entity after adjustment of the carrying value of assets and liabilities to their fair values as of June 7, 2002. Predecessor/Successor - For purposes of the financial statement presentation set forth herein, the Predecessor Company refers to the Company prior to the consummation of the Transactions and Successor Company refers to the Company after the consummation of the Transactions. 3. ACQUISITIONS In November 2002, the Company entered into a definitive agreement to acquire the capital stock of Prescott's Supermarkets, Inc. ("Prescott's") for approximately $47.8 million (the "Prescott's Acquisition"). Prescott's primarily owned and operated seven licensed Pick 'n Save stores located in the Wisconsin cities of Fond du Lac (three stores), Oshkosh (two stores) and West Bend (two stores). Goodwill of approximately $44.0 million resulted from the acquisition, which was accounted for as a purchase. The transaction closed on January 21, 2003 and the operating results of Prescott's are included in the consolidated statements of income after this date. The consolidated financial statements reflect the preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values. In April 2003, the Company acquired seven Kohl's grocery stores in the Madison, Wisconsin area from The Great Atlantic & Pacific Tea Company, Inc. ("A&P") for approximately $19.0 million in cash for the equipment, fixtures and leasehold interests plus net payments of approximately $1.1 million for acquired inventory (the "Copps Madison Acquisition"). Goodwill of approximately $15.0 million resulted from the acquisition, which was accounted for as a purchase. In May 2003, the Company converted six stores to Copps stores and consolidated the volume of the seventh store into an existing Company-owned Copps store. These six new Copps stores opened in late May and early June 2003. The consolidated financial statements reflect the preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values. In June 2003, the Company acquired 32 Rainbow Foods Stores ("Rainbow") from Fleming Companies, Inc. ("Fleming"). The Company paid approximately $103.3 million consisting of (i) $67.1 million in cash ($44.3 million for the equipment, fixtures and leasehold interests plus $22.8 million for usable store level inventory) and (ii) the assumption of $36.2 million of capitalized leases. The Company sold the one store located outside the Minneapolis-St. Paul metropolitan area (located near Wausau, Wisconsin) to an independent licensed Pick 'n Save operator in the area. Collectively these transactions are referred to throughout these financial statements as the "Rainbow Minneapolis Acquisition." Goodwill of approximately $8.7 million resulted from the acquisition, which was accounted for as a purchase. The Rainbow Minneapolis Acquisition closed on a rolling schedule from June 7 to June 27, 2003 and the operating results of each acquired store are included in the consolidated statements of income after each store's respective opening date. The consolidated financial statements reflect the preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on their fair values. On October 17, 2003, the Company completed the acquisition of the equipment, fixtures and leasehold interests of seven former Kohl's grocery stores from A&P for approximately $9.0 million in cash (the "Kohl's Acquisition"). Six of these stores are located in the Milwaukee area while the seventh store is located in the Racine, Wisconsin area. The Company plans to reopen these stores under the Pick `n Save banner before the end of the first quarter of 2004. The pro forma effect of the 2003 acquisitions was not material. 4. RECENTLY ISSUED ACCOUNTING STANDARDS The Company adopted Emerging Issues Task Force Issue No. 02-16 (EITF 02- 16), "Accounting by a Customer (including a Reseller) for Certain Consideration Received from a Vendor," effective December 29, 2002. Pursuant to EITF 02-16, vendor consideration related to vendor-funded coupons and certain advertising and other programs have been reclassified in the consolidated statements of income and prior periods have also been consistently reclassified. Specifically, vendor-funded coupon reimbursements, previously considered part of net sales at the point of sale, are now reflected as a reduction to net sales and cost of sales. Accordingly, $10.9 million and $7.4 million of such reimbursements in the third quarter of 2003 and the third quarter of 2002, respectively, and $31.3 million and $23.2 million for the nine months ended September 27, 2003 and September 28, 2002, respectively, have been classified as a reduction in cost of sales with a corresponding decrease in net sales. Vendor reimbursements previously classified as offsets to advertising and other expenses have now also been reflected as reductions in cost of sales pursuant to EITF 02-16. Accordingly, $11.8 million and $7.5 million of such reimbursements in third quarter 2003 and third quarter 2002, respectively, and $31.1 million and $22.9 million for the nine months ended September 27, 2003 and September 28, 2002, respectively, have been classified as a reduction in cost of sales with a corresponding increase in operating and administrative expenses. 5. SEGMENT REPORTING The Company and its subsidiaries sell and distribute food and nonfood products that are typically found in supermarkets. The Company's stores and those of its wholesale customers are located primarily in the Midwest. The Company has two reportable segments - wholesale and retail. The Company's retail segment sells directly to the consumer while the wholesale distribution segment sells to both Company-owned and independent retail food stores. Eliminations represent the activity between wholesale and Company-owned retail stores. Inter-segment revenues are recorded at amounts consistent with those charged to independent retail stores. Identifiable assets are those used exclusively by that reportable segment. Corporate assets are principally cash and cash equivalents, notes receivable, transportation equipment, corporate office facilities and equipment. Reportable segments, as defined by SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information," are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding resource allocation and assessing performance. Successor Predecessor ------------------------------------------------------ ----------- (In thousands) Thirteen Thirteen Thirty-nine June 7, 2002 December Weeks Ended Weeks Ended Weeks Ended to 30, 2001 September September September September to June 27, 2003 28, 2002 27, 2003 28, 2002 6, 2002 ------------ ---------- ------------ ----------- -------- NET SALES AND SERVICE FEES Retail $ 668,286 $ 384,732 $1,639,772 $ 510,515 $ 632,586 Wholesale 844,314 740,533 2,328,958 916,581 1,303,749 Eliminations (369,908) (228,652) (953,898) (304,663) (390,688) ---------- ---------- ----------- ---------- --------- Consolidated $1,142,692 $ 896,613 $3,014,832 $1,122,433 $1,545,647 ========== ========== =========== ========== ========== INCOME BEFORE INCOME TAXES Retail $ 23,919 $ 15,039 $ 62,148 $ 25,588 $ 16,113 Wholesale 25,484 17,423 72,613 23,635 28,959 Corporate (23,309) (17,288) (63,361) (27,991) (26,731) -------- -------- -------- ------- --------- Consolidated $ 26,095 $ 15,174 $ 71,400 $ 21,232 $ 18,341 ======== ======== ========= ======= ========= DEPRECIATION AND AMORTIZATION Retail $ 6,552 $ 5,378 $ 16,209 $ 7,094 $ 9,105 Wholesale 1,539 2,364 4,619 3,153 4,405 Corporate 3,987 4,716 11,872 5,399 4,191 ----- ------ ------- ------- ------ Consolidated $ 12,077 $ 12,458 $ 32,699 $ 15,646 $ 17,701 ====== ====== ====== ======= ====== CAPITAL EXPENDITURES Retail $ 11,277 $ 4,747 $ 27,235 $ 6,915 $ 5,273 Wholesale 910 1,396 3,898 2,183 1,426 Corporate 4,101 2,062 7,820 3,838 3,943 ------ ----- ------ ------ ------ Consolidated $ 16,288 $ 8,205 $ 38,953 $ 12,936 $ 10,642 ====== ===== ====== ====== ====== IDENTIFIABLE ASSETS (AT PERIOD END) Retail $ 273,098 $ 351,452 Wholesale 750,526 399,705 Corporate 477,471 502,024 ---------- --------- Consolidated $1,501,095 $1,253,181 ========== ==========

6. CONDENSED CONSOLIDATING INFORMATION The following presents condensed consolidating financial statements of Roundy's and its subsidiaries. All subsidiaries are 100% owned by Roundy's. All of the domestic subsidiaries are guarantors of the Company's $300 million 8 7/8% senior subordinated notes due 2012 (the "Notes"). CONDENSED CONSOLIDATING STATEMENTS OF INCOME Thirteen Weeks Ended September 27, 2003 (Successor) (In thousands) Combined Roundy's Subsidiaries Eliminations Total --------- ------------ ------------ --------- Revenues: Net sales and service fees $421,737 $946,496 $(225,541) $1,142,692 Other-net 28 448 476 ------- ------- --------- --------- 421,765 946,944 (225,541) 1,143,168 ------- ------- --------- --------- Costs and Expenses: Cost of sales 379,801 743,010 (220,112) 902,699 Operating and administrative 34,093 174,184 (5,429) 202,848 Interest 5,499 6,027 11,526 ------- ------- --------- -------- 419,393 923,221 (225,541) 1,117,073 ------- ------- --------- --------- Income Before Income Taxes 2,372 23,723 26,095 Provision for Income Taxes 949 9,489 10,438 Equity in earnings of subsidiaries 14,234 (14,234) -------- -------- --------- --------- Net Income $15,657 $ 14,234 $ (14,234) $ 15,657 ======== ======== ========= =========

CONDENSED CONSOLIDATING STATEMENTS OF INCOME Thirty-nine Weeks Ended September 27, 2003 (Successor) (In thousands) Combined Roundy's Subsidiaries Eliminations Total ----------- ------------ ------------ ----- Revenues: Net sales and service fees $1,179,336 $2,480,157 $(644,661) $3,014,832 Other-net 513 1,261 1,774 ---------- ---------- ---------- ---------- 1,179,849 2,481,418 (644,661) 3,016,606 ---------- ---------- ---------- ---------- Costs and Expenses: Cost of sales 1,059,585 1,969,015 (630,566) 2,398,034 Operating and administrative 94,114 434,483 (14,095) 514,502 Interest 15,916 16,754 32,670 -------- ---------- ----------- --------- 1,169,615 2,420,252 (644,661) 2,945,206 --------- ---------- ----------- --------- Income Before Income Taxes 10,234 61,166 71,400 Provision for Income Taxes 4,094 24,466 28,560 Equity in earnings of subsidiaries 36,700 (36,700) -------- --------- --------- ------- Net Income $ 42,840 $ 36,700 $ (36,700) $ 42,840 ======== ========= ========= ======== CONDENSED CONSOLIDATING STATEMENTS OF INCOME Thirteen Weeks Ended September 28, 2002 (Successor) (In thousands) Combined Roundy's Subsidiaries Eliminations Total --------- ------------ ------------ ------- Revenues: Net sales and service fees $377,950 $674,988 $(156,325) $ 896,613 Other-net 80 604 684 ------ ------- --------- -------- 378,030 675,592 (156,325) 897,297 ------- -------- --------- --------- Costs and Expenses: Cost of sales 344,451 547,726 (153,265) 738,912 Operating and administrative 25,519 111,865 (3,060) 134,324 Interest 4,820 4,067 8,887 ------- -------- ---------- ------- 374,790 663,658 (156,325) 882,123 ------- ------- ---------- ------- Income Before Income Taxes 3,249 11,925 15,174 Provision for Income Taxes 1,332 4,889 6,221 Equity in earnings of subsidiaries 7,036 (7,036) ------- -------- ---------- ------- Net Income $ 8,953 $ 7,036 $ (7,036) $ 8,953 ======== ========= ========== ======= CONDENSED CONSOLIDATING STATEMENTS OF INCOME Period from June 7, 2002 to September 28, 2002 (Successor) (In thousands) Combined Roundy's Subsidiaries Eliminations Total -------- ------------ ------------- -------- Revenues: Net sales and service fees $472,395 $846,462 $(196,424) $1,122,433 Other-net 68 777 845 -------- -------- --------- ---------- 472,463 847,239 (196,424) 1,123,278 -------- -------- --------- ---------- Costs and Expenses: Cost of sales 430,411 685,946 (192,574) 923,783 Operating and administrative 31,607 139,233 (3,850) 166,990 Interest 5,891 5,382 11,273 -------- -------- -------- --------- 467,909 830,561 (196,424) 1,102,046 -------- --------- --------- --------- Income (Loss) Before Income Taxes 4,554 16,678 21,232 Provision for Income Taxes 1,867 6,838 8,705 Equity in earnings of subsidiaries 9,840 (9,840) ------- -------- --------- -------- Net Income (Loss) $ 12,527 $ 9,840 $ (9,840) $ 12,527 ======== ========= ========== ======== CONDENSED CONSOLIDATING STATEMENTS OF INCOME December 30, 2001 to June 6, 2002 (Predecessor) (In thousands) Combined Roundy's Subsidiaries Eliminations Total ---------- ------------ ------------ --------- Revenues: Net sales and service fees $642,969 $1,179,623 $(276,945) $1,545,647 Other-net (51) 745 694 --------- --------- ---------- ---------- 642,918 1,180,368 (276,945) 1,546,341 --------- --------- ---------- ---------- Costs and Expenses: Cost of sales 584,157 958,648 (271,577) 1,271,228 Operating and administrative 49,276 191,699 (5,368) 235,607 SARs and other termination costs 7,400 7,400 Interest 6,498 7,267 13,765 -------- --------- --------- --------- 647,331 1,157,614 (276,945) 1,528,000 -------- ---------- ---------- --------- Income (Loss) Before Income Taxes (4,413) 22,754 18,341 (Benefit) Provision for Income Taxes (1,783) 9,196 7,413 Equity in earnings of subsidiaries 13,558 (13,558) -------- --------- ---------- -------- Net Income $ 10,928 $ 13,558 $ (13,558) $ 10,928 ========== =========== =========== ======== CONDENSED CONSOLIDATING BALANCE SHEETS As of September 27, 2003 (Successor) (In thousands) Combined Assets Roundy's Subsidiaries Eliminations Total --------- ------------ ------------ ----- Current Assets: Cash and cash equivalents $ 39,722 $ 30,443 $ 70,165 Notes and accounts receivable-net 26,048 64,952 $ (12,745) 78,255 Merchandise inventories 66,559 204,940 271,499 Prepaid expenses and other 1,032 4,963 5,995 Deferred income tax benefits (8,167) 24,336 16,169 ------- ------- -------- ------- Total current assets 125,194 329,634 (12,745) 442,083 -------- ------- -------- ------- Property and Equipment-Net 13,861 36,840 315,058 Other Assets: Investment in subsidiaries 229,535 (229,535) Intercompany receivables 488,015 (488,015) Deferred income tax benefits 25,640 25,640 Notes receivable 500 2,523 3,023 Goodwill and other assets 250,842 464,449 715,291 ------- -------- -------- ------- Total other assets 994,532 466,972 (717,550) 743,954 ------- -------- -------- ------- Total assets $1,133,587 $1,097,803 $ (730,295)$1,501,095 ========= ========= ======== ========= Liabilities and Shareholder's Equity Current Liabilities: Accounts payable $ 123,774 $ 148,704 $ (6,900) $ 265,578 Accrued expenses and other 89,202 70,028 (5,845) 153,385 Current maturities of long- term debt 2,500 1,127 3,627 Intercompany payable 488,015 (488,015) Income taxes (18,837) 31,921 13,084 -------- ------- -------- -------- Total current liabilities 196,639 739,795 (500,760) 435,674 -------- ------- --------- -------- Long-Term Debt 544,657 48,211 592,868 Other Liabilities 14,493 80,262 94,755 ------- ------- --------- ---------- Total liabilities 755,789 868,268 (500,760) 1,123,297 ------- ------- --------- ---------- Shareholder's Equity 377,798 229,535 (229,535) 377,798 ------- ------- -------- -------- Total liabilities and Shareholder's equity $1,133,587 $1,097,803 $ (730,295)$1,501,095 ========== ========= ========== =========

CONDENSED CONSOLIDATING BALANCE SHEETS As of December 28, 2002 (Successor) (In thousands) Combined Assets Roundy's Subsidiaries Eliminations Total -------- ------------- ------------ --------- Current Assets: Cash and cash equivalents $117,307 $ 22,471 $139,778 Notes and accounts receivable- net 35,543 56,317 $ (4,516) 87,344 Merchandise inventories 63,386 173,079 236,465 Prepaid expenses and other (4,649) 30,276 25,627 ------- ------- ------- ------- Total current assets 211,587 282,143 (4,516) 489,214 ------- ------- ------- ------- Property and Equipment-Net 10,873 203,675 214,548 Other Assets: Investment in subsidiaries 190,732 (190,732) Intercompany receivables 409,761 (409,761) Deferred income tax benefits 25,231 25,231 Notes receivable 640 2,883 3,523 Goodwill and other assets 258,896 389,342 648,238 ------- ------- -------- ------- Total other assets 885,260 392,225 (600,493) 676,992 ------- ------- --------- ------- Total assets $1,107,720 $ 878,043 $ (605,009) $1,380,754 ========== ========= ========== ========= Liabilities and Shareholder's Equity Current Liabilities: Accounts payable $ 127,742 $ 116,146 $ (3,043) $ 240,845 Accrued expenses and other 81,314 70,945 (1,473) 150,786 Current maturities of long- term debt 2,500 461 2,961 Intercompany payable 409,761 (409,761) -------- ------- --------- ------- Total current liabilities 211,556 597,313 (414,277) 394,592 -------- ------- --------- ------- Long-Term Debt 546,502 13,322 559,824 Other Liabilities 14,704 76,676 91,380 -------- ------- ---------- -------- Total liabilities 772,762 687,311 (414,277) 1,045,796 -------- ------- ---------- --------- Shareholder's Equity 334,958 190,732 (190,732) 334,958 ----------- -------- ---------- --------- Total liabilities and shareholder's equity $ 1,107,720 $878,043 $(605,009) $1,380,754 =========== ======== ========== ==========

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS For the thirty-nine weeks ended September 27, 2003 (Successor) In thousands Combined Roundy's Subsidiaries Total --------- ------------ ------- Net Cash Flows From Operating Activities: $ (15,934) $120,015 $ 104,081 ------- ------- ------- Cash Flows From Investing Activities: Capital expenditures-net of proceeds (5,732) (32,920) (38,652) Payment for business acquisitions net of cash acquired (132,577) (132,577) Notes receivable 140 360 500 -------- -------- --------- Net cash flows used in investing activities (138,169) (32,560) (170,729) -------- -------- ---------- Cash Flows From Financing Activities: Proceeds from long-term borrowings Settlement of interest rate swap liability Debt issuance cost (506) (506) Contributed capital Payments of debt (1,230) (1,229) (2,459) Intercompany receivables-net 78,254 (78,254) ------- -------- ------- Net cash flows (used in) provided by financing activities 76,518 (79,483) (2,965) ------ -------- ------- Net (Decrease) Increase in Cash and Cash Equivalents (77,585) 7,972 (69,613) Cash And Cash Equivalents, Beginning Of Period 117,307 22,471 139,778 ------- ------- -------- Cash And Cash Equivalents, End Of Period $ 39,722 $ 30,443 $ 70,165 ======= ======= ========

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS For the period from June 7, 2002 to September 28, 2002 (Successor) In thousands Combined Roundy's Subsidiaries Total -------- ------------ -------- Net Cash Flows From Operating Activities: $(29,527) $ 66,590 $ 37,063 --------- -------- ------- Cash Flows From Investing Activities: Capital expenditures-net of proceeds (934) (11,665) (12,599) Acquisition consideration (539,996) (539,996) Notes receivable (44) 378 334 --------- ------- --------- Net cash flows used in investing activities (540,974) (11,287) (552,261) --------- ------- --------- Cash Flows From Financing Activities: Proceeds from long-term borrowings 475,000 475,000 Settlement of interest rate swap liability (6,652) (6,652) Debt issuance cost (23,022) (23,022) Contributed capital 314,500 314,500 Payments of debt (165,900) (143) (166,043) Intercompany receivables-net 32,054 (32,654) ------- -------- -------- Net cash flows (used in) provided by financing activities 626,580 (32,797) 593,783 ------- -------- -------- Net Increase in Cash and Cash Equivalents 56,079 22,506 78,585 Cash And Cash Equivalents, Beginning Of Period -------- ------- -------- Cash And Cash Equivalents, End Of Period $ 56,079 $ 22,506 $ 78,585 ========= ======= ======== CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS For the period from December 30, 2001 to June 6, 2002 (Predecessor) (In thousands) Combined Roundy's Subsidiaries Total ---------- ----------- ------- Net Cash Flows From Operating Activities: $ (5,620) $ 50,464 $ 44,844 ------- ------- ------ Cash Flows From Investing Activities: Capital expenditures-net of proceeds (4,007) (6,157) (10,164) Notes receivable 443 436 879 ------ ------ ------- Net cash flows used in investing activities (3,564) (5,721) (9,285) ------- ------- ------- Cash Flows From Financing Activities: Payments of debt (48,450) (168) (48,618) Common stock purchased (56) (56) Intercompany receivables-net 39,915 (39,915) ------- -------- -------- Net cash flows (used in) financing activities (8,591) (40,083) (48,674) ------- -------- -------- Net Increase (Decrease) in Cash and Cash Equivalents (17,775) 4,660 (13,115) Cash And Cash Equivalents, Beginning Of Period 23,137 22,379 45,516 -------- -------- -------- Cash And Cash Equivalents, End Of Period $ 5,362 $ 27,039 $ 32,401 ======== ======== ======== ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview On April 8, 2002, Roundy's and RAC entered into a share exchange agreement pursuant to which, among other things and subject to the terms and conditions contained therein, RAC consummated the Transactions by acquiring all of the issued and outstanding capital stock of Roundy's on June 6, 2002. Results of Operations The following table sets forth each category of statement of income data as a percentage of net sales and service fees. The results of operations for the thirty-nine weeks ended September 28, 2002 includes the results of the Company for the period from December 30, 2001 to June 6, 2002 (predecessor) and the period from June 7, 2002 through September 28, 2002 (successor). As part of the Transactions, the Company entered into various financing arrangements and as a result, the Company now has a different capital structure. In addition, as a result of the Transactions, the Company's assets and liabilities were adjusted to reflect their estimated fair market values, and the purchase price in excess of fair market value was recorded as goodwill. Accordingly, the results of operations for periods subsequent to the consummation of the Transactions and related financing transactions will not necessarily be comparable to prior periods. Statements of Income Data

Net Sales and Service Fees Net sales and service fees represent product sales less returns and allowances and sales promotions. The Company derives its net sales and service fees from the operation of retail grocery stores and the wholesale distribution of food and non-food products. In addition, the Company provides specialized support services for retail grocers, which include promotional merchandising and advertising programs, accounting and inventory control, store development and financing and assistance with other aspects of store management. The table below indicates the portion of the Company's net sales and service fees attributable to retail sales and wholesale distribution for the periods indicated. The results of operations for the thirty-nine weeks ended September 28, 2002 include the results of the Company for the period from December 30, 2001 through June 6, 2002 (predecessor) and the period from June 7, 2002 through September 28, 2002 (successor). Eliminations represent the intercompany activity between the Company's wholesale operations and its retail operations (in thousands): Period Ended ----------------------------------------------------- Thirteen Weeks Ended Thirty-nine Weeks Ended ------------------------- -------------------------- September 27, September 28, September 27, September 28, 2003 2002 2003 2002 ------------- ------------- ------------ ----------- Net Sales and Service Fees Retail $668,286 $384,732 $1,639,772 $1,143,100 Wholesale 844,314 740,533 2,328,958 2,220,330 Eliminations (369,908) (228,652) (953,898) (695,350) --------- --------- ---------- ---------- Total $1,142,692 $896,613 $3,014,832 $2,668,080 ========== ========= =========== ========== Costs and Expenses Costs and expenses consist of cost of sales, operating and administrative expenses, SARs and other termination costs and interest expense. * Cost of sales includes product costs and freight. * Operating and administrative expenses consist primarily of personnel costs, sales and marketing expenses, depreciation and amortization expenses, expenses associated with the Company's facilities, internal management expenses, business development expenses and expenses for finance, legal, human resources and other administrative departments. * SARs and other termination costs include the costs associated with the termination of the predecessor company's stock appreciation rights program and the termination of employment agreements associated with certain former officers of the predecessor company, all of which was incurred in connection with the Transactions. These SARs and other termination costs aggregate $7.4 million for the nine months ended September 28, 2002. * Interest expense includes interest on the Company's outstanding indebtedness and amortization of deferred financing costs. In the predecessor company, interest expense also includes $6.7 million interest rate swap termination costs and $0.9 million for the write off of deferred financing costs for the nine months ended September 28, 2002. Three Months Ended September 27, 2003 Compared With Three Months Ended September 28, 2002 Net Sales and Service Fees Net sales and service fees totaled $1,142.7 million in the third quarter of 2003, a $246.1 million, or 27.4%, increase from $896.6 million in the third quarter of 2002. Retail sales were $668.3 million for the third quarter of 2003, a $283.6 million, or 73.7%, increase from $384.7 million for the third quarter of 2002. This increase in retail sales was primarily due to the effect of five acquired store groups, consisting of 51 stores in total, that now operate under the Company's ownership (collectively, the "Acquired Stores"). These Acquired Stores now operate as: (i) 31 Rainbow retail grocery stores in the Minneapolis-St. Paul area acquired from Fleming in June 2003 and reopened immediately by the Company; (ii) 14 Pick 'n Save retail grocery stores acquired in three separate transactions (as discussed in the Company's first quarter 2003 press release and Form 10-Q); and (iii) six Copps Food Stores in the Madison, Wisconsin area acquired from A & P in April 2003 and reopened in late May and early June 2003. None of the Acquired Stores were owned or operated by the Company in the third quarter of 2002. The Acquired Stores contributed approximately $271.2 million to the third quarter retail sales increase. As of September 27, 2003, the Company operated 111 retail grocery stores including 49 Pick 'n Save stores, 31 Copps stores and 31 Rainbow stores. Third quarter 2003 same store sales at the Company's retail stores (including acquired Pick 'n Save licensed stores operated in 2002 by their prior owners) improved 2.6% from the third quarter of 2002. Wholesale sales were $844.3 million for the third quarter of 2003, a $103.8 million, or 14.0%, increase from $740.5 million for the third quarter of 2002. This improvement was due to increased sales to Company-owned stores and new independent customers supplied by the Company's Wisconsin wholesale divisions, as well as new independent customers supplied by the Company's non-Wisconsin wholesale divisions. Gross Profit Gross profit was $240.0 million for the third quarter of 2003, an $82.3 million, or 52.2%, increase from $157.7 million for the third quarter of 2002. The increase in the Company's gross profit for the quarter was primarily due to the Acquired Stores. The gross profit percentage for the third quarters of 2003 and 2002 was 21.0% and 17.6%, respectively. The increase in the gross profit percentage for the quarter was primarily due to the increase in sales mix attributable to Company-owned retail stores, which have higher gross profit percentages than the Company's wholesale segment. Retail sales for the third quarter of 2003 represented 58.5% of net sales and service fees compared with 42.9% for the third quarter of 2002. The increase in retail sales concentration was primarily due to the Acquired Stores. The retail gross profit percentage was 25.9% and 24.9% for the third quarter of 2003 and 2002, respectively. The increase in retail gross profit percentage was primarily due to certain of the Company's Acquired Stores which have a higher gross profit percentage than the Company's other stores. Wholesale gross profit percentage was 8.8% in both the third quarters of 2003 and 2002. Operating and Administrative Expenses Operating and administrative expenses were $202.8 million for the third quarter of 2003, a $68.5 million, or 51.0%, increase from $134.3 million for the third quarter of 2002. Operating and administrative expenses, as a percentage of net sales and service fees, increased to 17.8% for the third quarter of 2003 compared with 15.0% in the third quarter of 2002. The percentage increase was attributable to the Acquired Stores and the resulting increased concentration of sales in the Company's retail operating segment for the third quarter of 2003, which has a significantly higher ratio of operating costs to sales than the Company's wholesale operations. Retail operating and administrative expenses increased to 22.3% of retail sales for the third quarter of 2003 compared with 21.0% for the third quarter of 2002 primarily due to a higher ratio of operating costs to sales for certain of the Company's Acquired Stores in comparison to the Company's other stores. In addition, the higher ratio is, in part, attributable to continuing investments in store-level service in these stores consistent with levels experienced during a typical new store ramp- up period. Wholesale operating and administrative expenses decreased to 5.8% of wholesale sales for the third quarter of 2003 compared with 6.5% for the same period in 2002. This decrease was due to operational and productivity improvements in the Company's wholesale operations as well as increased wholesale sales. Interest Expense Interest expense (excluding amortization of deferred financing costs) was $10.7 million for the third quarter of 2003, a $2.4 million increase from $8.3 million for the third quarter of 2002. The increase in interest expense was primarily due to increased levels of indebtedness compared with the third quarter of 2002. Income Taxes Provision for income taxes was $10.4 million for the third quarter of 2003, an increase of $4.2 million from $6.2 million for the third quarter of 2002. The effective income tax rates for the third quarters of 2003 and 2002 were 40.0% and 41.0%, respectively. Net Income Net income was $15.7 million for the third quarter of 2003, a $6.7 million increase from $9.0 million in the third quarter of 2002. The net income margin was 1.4% and 1.0% for the third quarters of 2003 and 2002, respectively. Nine Months Ended September 27, 2003 Compared With Nine Months Ended September 28, 2002 Net Sales and Service Fees Net sales and service fees totaled $3,014.8 million for the nine months ended September 27, 2003, a $346.8 million, or 13.0%, increase from $2,668.1 million for the nine months ended September 28, 2002. Retail sales were $1,639.8 million for 2003, a $496.7 million, or 43.4%, increase from $1,143.1 million in 2002. This increase in retail sales was primarily due to the effect of the Acquired Stores, which contributed approximately $472.0 million of the increase. As of September 27, 2003, the Company operated 111 retail grocery stores including 49 Pick 'n Save stores, 31 Copps stores and 31 Rainbow stores. Year-to-date 2003 same store sales at Company-owned retail stores (including acquired Pick 'n Save licensed stores operated in 2002 by their prior owners)improved 2.1% from 2002. Wholesale sales were $2,329.0 million for 2003, a $108.6 million, or 4.9%, increase from $2,220.3 million in 2002. This increase was primarily due to increased sales to Company-owned stores in the Wisconsin wholesale divisions partially offset by lower sales to customers served by the Company's non-Wisconsin divisions due to heightened retail competition. Gross Profit Gross profit was $616.8 million for 2003, a $143.7 million, or 30.4%, increase from $473.1 million in 2002. The increase in the Company's gross profit was due to the Acquired Stores, an increase in sales mix attributable to higher profits derived by Company-owned retail stores and increased wholesale sales. The gross profit percentage for the same periods of 2003 and 2002 was 20.5% and 17.7%, respectively. The increase in gross profit percentage for 2003 was primarily due to the increase in sales mix attributable to Company-owned retail stores which have higher gross profit percentages than the Company's wholesale segment. Retail sales for 2003 represented 54.4% of net sales and service fees compared with 42.8% for the same period in 2002. The retail gross profit percentage was 25.6% and 24.9% for 2003 and 2002, respectively. The increase in retail gross profit percentage was primarily due to certain of the Company's Acquired Stores which have a higher gross profit percentage than the Company's other stores. Year-to-date 2003 wholesale gross profit percentage was 9.2% as compared with 9.0% in 2002. Operating and Administrative Expenses Operating and administrative expenses were $514.5 million for 2003, a $111.9 million, or 27.8%, increase from $402.6 million in 2002. Operating and administrative expenses, as a percentage of net sales and service fees, increased to 17.1% for 2003 compared with 15.1% in 2002. The percentage increase was attributable to the Acquired Stores and the resulting increased concentration of sales in the Company's retail operating segment in 2003, which has a significantly higher ratio of operating costs to sales than its wholesale operations. Retail operating and administrative expenses increased to 21.8% of retail sales for 2003 compared with 21.3% for 2002. This increase was due to pre-opening expenses associated with the certain Acquired Stores as well as continuing store-level service investments in these stores. Wholesale operating and administrative expenses decreased to 6.1% of wholesale sales for 2003 as compared with 6.6% for 2002. This decrease was due to operational and productivity improvements in the Company's wholesale operations as well as increased wholesale sales. Interest Expense Interest expense (excluding amortization of deferred financing costs and interest rate swap termination costs) was $30.2 million for 2003, a $13.3 million increase from $16.9 million for 2002. The increase was primarily due to increased borrowings associated with the purchase of the Company's stock by RAC in June 2002. Income Taxes Provision for income taxes was $28.6 million for 2003, an increase of $12.4 million from $16.1 million for 2002. The effective income tax rates for the first nine months of 2003 and 2002 were 40.0% and 40.7%, respectively. Net Income Net income was $42.8 million for 2003, a $19.4 million increase from $23.5 million for the prior year. In 2002, the Company recorded pre-tax one-time charges of $6.7 million relating to the termination of an interest rate swap and $7.4 million relating to the termination of the predecessor Company's SARs program and termination of employment agreements associated with certain former officers of the predecessor Company. The net income margin was 1.4% and 0.9%, respectively, for 2003 and 2002. Liquidity and Capital Resources The Company's cash and cash equivalents totaled $70.2 million at September 27, 2003, compared with $139.8 million at December 28, 2002. Cash flows provided by operating activities were $104.1 million for the nine months ended September 27, 2003. Net cash used in investing activities totaled $170.7 million primarily due to the Prescott's Acquisition of $47.8 million, the cash portion of the Rainbow Minneapolis Acquisition of $67.1 million, the Copps Madison Acquisition of $21.1 million and capital expenditures. Net cash used in financing activities for the nine months ended September 27, 2003 totaled $3.0 million. Capital expenditures totaled $39.0 million for the nine months ended September 27, 2003. Capital expenditures consisted primarily of remodeling and maintenance of newly acquired and existing retail stores as well as maintenance of the wholesale distribution network. Total capital expenditures for fiscal 2003, excluding any acquisitions, are estimated to be approximately $60 million. The Company's senior credit facility was amended to approve the Rainbow Minneapolis Acquisition and increase capital expenditure limits in 2003 and later years primarily to allow for (i) the remodeling of the Company's expanded store base and (ii) the upgrade of the Wisconsin distribution facilities that service these stores. Working capital amounted to $6.4 million at September 27, 2003, compared with $94.6 million at December 28, 2002. The decrease was primarily related to a reduction in cash and cash equivalents resulting from the use of cash for the Prescott's Acquisition, the Copps Madison Acquisition, the Rainbow Minneapolis Acquisition and capital expenditures. As a result of the Transactions, the Company has significant debt service obligations, including interest, in future years. On June 6, 2002, in connection with the Transactions, the Company entered into a credit agreement with various lenders, (the "Credit Agreement"), allowing it to borrow $250.0 million under a term loan, and up to $125.0 million under a revolving line of credit. There are no outstanding borrowings under the revolving line of credit. The Credit Agreement requires 28 consecutive quarterly payments, the first 24 of which are $625,000 each and the last four are $58.8 million each. In addition, the Company issued $300.0 million in aggregate principal amount of the Notes of which $225.0 million was issued as of the date of the Transactions and $75.0 million was issued in December 2002. The Credit Agreement contains various restrictive covenants which: (i) prohibit the Company from prepaying other indebtedness, (ii) require the Company to maintain specified financial ratios, such as (a) a minimum fixed charge coverage ratio, (b) a maximum ratio of senior debt to Consolidated EBITDA (as defined in the Credit Agreement) and (c) a maximum ratio of total debt to Consolidated EBITDA; and (iii) require the Company to satisfy financial condition tests including annual limitations on capital expenditures. In addition, the Credit Agreement prohibits the Company from declaring or paying any dividends and prohibits it from making any payments with respect to the Notes if the Company fails to perform its obligations under or fails to meet the conditions of, the Credit Agreement or if payment creates a default under the Credit Agreement. Failure to comply with these covenants could have a material adverse impact upon the Company's financial condition. The Company was in compliance with its quarterly covenants at September 27, 2003. The indenture governing the Notes, (the "Indenture") among other things, (i) restricts the Company's ability and the ability of its subsidiaries to incur additional indebtedness, issue shares of preferred stock, incur liens, pay dividends or make certain other restricted payments and enter into certain transactions with affiliates; (ii) prohibits certain restrictions on the ability of certain of its subsidiaries to pay dividends or make certain payments to it; and (iii) places restrictions on the Company's ability and the ability of its subsidiaries to merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets. Concurrent with the Rainbow Minneapolis Acquisition, the Company incurred $36.2 million of additional capitalized lease obligations associated with seven stores. Under the Company's senior credit facility, capitalized lease obligations are included in senior indebtedness for the purpose of calculating the Company's credit statistics. The Company's senior credit facility was amended to allow this additional indebtedness to be incurred in connection with the Rainbow Minneapolis Acquisition. The Company's principal source of liquidity is cash flow generated from operations and borrowings under its revolving credit facility. The Company's principal use of cash is to meet debt service requirements, finance its capital expenditures, make acquisitions and provide for working capital. The Company expects that current excess cash and cash available from operations, combined with funds available under its $125.0 million revolving line of credit, will be sufficient to fund its operations, debt service and capital expenditures for at least the next 12 months. The Company's ability to make payments on and to refinance its debt, and to fund planned capital expenditures will depend on its ability to generate sufficient cash in the future. This, to some extent, is subject to general economic, financial, competitive and other factors that are beyond the Company's control. The Company believes that, based upon current levels of operations, it will be able to meet its debt service obligations when due. Significant assumptions underlie this belief, including, among other things, that the Company will continue to be successful in implementing its business strategy and that there will be no material adverse developments in its business, liquidity or capital requirements. If the Company's future cash flow from operations and other capital resources are insufficient to pay its obligations as they mature or to fund its liquidity needs, it may be forced to reduce or delay its business activities and capital expenditures, sell assets, obtain additional debt or equity capital or restructure or refinance all or a portion of its debt, on or before maturity. There can be no assurance that the Company would be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. In addition, the terms of the Company's existing and future indebtedness may limit its ability to pursue any of these alternatives. Also see "Forward-Looking Statements," below. Critical Accounting Policies and Estimates The preparation of the Company's financial statements in conformity with accounting principles generally accepted in the United States require the Company to make estimates, assumptions and judgments that affect amounts of assets and liabilities reported in the consolidated financial statements, the disclosure of contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the year. The Company believes its estimates and assumptions are reasonable; however, future results could differ from those estimates under different assumptions or conditions. Critical accounting policies are policies that reflect material judgment and uncertainty and may result in materially different results using different assumptions or conditions. The Company identified the following critical accounting policies and estimates: discounts and vendor allowances, allowance for losses on receivables, closed facility lease commitments, reserves for self-insurance and pension costs. For a detailed discussion of accounting policies, refer to the notes to the consolidated financial statements and management's discussion and analysis contained in the Company's Annual Report on Form 10-K for the year ended December 28, 2002. The following policy reflects certain updates relating to the Company's adoption of EITF 02-16. Discounts and Vendor Allowances Purchases of product at discounted pricing are recorded in inventory at the discounted price until sold. Volume and other program allowances are accrued as a receivable when it is reasonably assured they will be earned and reduce the cost of the related inventory for product on hand or cost of sales for product already sold. Vendor monies received for slotting are initially deferred and recognized as a reduction to cost of sales after completion of an estimated slotting cycle of approximately nine months. Vendor allowances received to fund specific, identifiable, incremental advertising and certain other expenses are recorded as a reduction of the Company's related advertising or other expense. Any excess reimbursement above the Company's cost reduces cost of sales. Forward-Looking Statements This Form 10-Q filing contains forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included herein or therein are forward-looking statements. In particular, without limitation, terms such as "anticipate," "believe," "estimate," "expect," "goal," "indicate," "may be," "objective," "plan," "predict," "should," "will" or similar words are intended to identify forward-looking statements. Forward- looking statements are subject to certain risks, uncertainties and assumptions which could cause actual results to differ materially from those predicted. Important factors that could cause actual results to differ materially from such expectations ("Risk Factors") are disclosed in the Company's Annual Report on Form 10-K for the year ended December 28, 2002 filed on March 27, 2003 (SEC File No. 002-94984) under the caption "Item 1. Business - Risk Factors." Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. All subsequent written or oral forward-looking statements attributable to the Company or persons acting on behalf of the Company are expressly qualified in their entirety by the Risk Factors. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company's SEC filings, including, but not limited to information under the caption "Risk Factors" contained in the prospectus filed on February 6, 2003 forming a part of the Company's Registration Statement on Form S-4 under the Securities Act of 1933 (Registration No. 333-102779). Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes in the Company's market risk since December 28, 2002. See the discussion under Part II Item 7A in the Company's Annual Report on Form 10-K for the year ended December 28, 2002. Item 4. Controls and Procedures (a) Evaluation of disclosure controls and procedures. The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The Company carried out an evaluation as of September 27, 2003 (the "Evaluation Date"), under the supervision and with the participation of the Company's management, including the Company's chief executive officer and its chief financial officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rule 15d- 14 of the Securities and Exchange Act of 1934 (the "Exchange Act"). Based upon that evaluation, the chief executive officer and chief financial officer concluded that as of the Evaluation Date, the Company's disclosure controls and procedures (as defined in Rule 15d-14 under the Exchange Act) are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. (b) Changes in internal controls. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their most recent evaluation nor were there any significant deficiencies or material weaknesses in the Company's internal controls. PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is a party to routine litigation incidental to its business. Management believes that none of this litigation is likely to have a material adverse effect on the Company's consolidated financial position and results of operations. There have been no material changes to the information contained in Item 3. Legal Proceedings in the Company's Annual Report filed on Form 10-K for the year ended December 28, 2002. Item 2. Changes in Securities and Use of Proceeds Not applicable Item 3. Defaults upon Senior Securities Not applicable Item 4. Submission of Matters to a Vote of Security Holders Not applicable Item 5. Other Information Not applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The Exhibit Index contained in this report immediately following the signature pages to this report is incorporated herein by this reference. (b) Reports on Form 8-K The following reports on Form 8-K were filed during the quarter ended September 27, 2003: Date of Date Filed Report Item -------------- --------- ------ August 7, 2003 August 7, The Company reported (and filed as 2003 an Exhibit a press release announcing) financial results for the six months ended June 28, 2003. August 21, 2003 August 21, The Company filed a report on Form 2003 8-K/A relating to its June 2003 acquisition of certain of the assets of Fleming Companies, Inc. and Rainbow Food Group, Inc. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ROUNDY'S, INC. ---------------- (Registrant) Date: November 10, 2003 /s/ROBERT A. MARIANO ---------------- ---------------------------------- Robert A. Mariano, Chairman of the Board, Chief Executive Officer and President(Principal Executive Officer) Date: November 10, 2003 /s/DARREN W. KARST ---------------- ---------------------------------- Darren W. Karst, Executive Vice President and Chief Financial Officer (Principal Financial Officer) Roundy's, Inc. Quarterly Report on Form 10-Q under the Securities Exchange Act of 1934 for the quarter ended September 27, 2003 EXHIBIT INDEX The following exhibits to the Quarterly Report are filed herewith or, where noted, are incorporated by reference herein: Exhibit No. Description ------- ------------- 2.1 Stock Purchase Agreement by and among Roundy's, Inc. and the Shareholders of Prescott's Supermarkets, Inc. dated as of December 10, 2002 (1) 2.2 Asset Purchase Agreement dated October 18, 2002, by and among B&H Gold Corporation, Gold's, Inc., Gold's Market, Inc., Gold's of Mequon, LLC, Mega Marts, Inc. and Roundy's, Inc. (2) 2.3 Share Exchange Agreement dated April 8, 2002 by and between Roundy's Acquisition Corp. and Roundy's, Inc.(3) 2.4 Share Exchange Agreement dated May 18, 2001, by and between Roundy's, Inc. and The Copps Corporation(4) 2.5 Asset Purchase Agreement dated February 21, 2003 among Roundy's, Inc., The Copps Corporation, Kohl's Food Stores, Inc. and The Great Atlantic & Pacific Tea Company, Inc. (5) 2.6 Asset Purchase Agreement dated May 2, 2003, by and between Fleming Companies, Inc., Rainbow Foods Group, Inc., RBF Corp., and Roundy's, Inc. (6) 2.7 First Amendment dated June 4, 2003 to Asset Purchase Agreement dated May 2, 2003 by and between Fleming Companies, Inc., Rainbow Foods Group, Inc., RBF Corp., and Roundy's, Inc. (7) 3.1 Roundy's, Inc. Amended and Restated Articles of Incorporation(8) 3.2 Amended and Restated By-Laws of Roundy's, Inc.(9) 4.1 Indenture of Trust dated June 6, 2002 between Roundy's, Inc. and BNY Midwest Trust Company, as Trustee(10) 4.2 Form of $225,000,000 Roundy's, Inc. 8 7/8% Senior Subordinated Notes due 2012(11) 4.3 Form of $75,000,000 Roundy's, Inc. 8 7/8% Senior Subordinated Notes due 2012(11) 4.4 Form of Guaranty issued by Cardinal Foods, Inc., Holt Public Storage, Inc., Insurance Planners, Inc., I.T.A., Inc., Jondex Corp., Kee Trans, Inc., Mega Marts, Inc., Midland Grocery of Michigan, Inc., Pick 'n Save Warehouse Foods, Inc., Ropak, Inc., Rindt Enterprises, Inc., Scot Lad Foods, Inc., Scot Lad-Lima, Inc., Shop- Rite, Inc., Spring Lake Merchandise, Inc., The Copps Corporation, The Midland Grocery Company, Ultra Mart Foods, Inc., and Village Market, LLC as Guarantors of the Registrant's $225,000,000 Roundy's, Inc. 8 7/8% Senior Subordinated Notes due 2012 and $75,000,000 Roundy's, Inc. 8 7/8% Senior Subordinated Notes due 2012(12) 10.1 A/B Exchange Registration Rights Agreement dated as of June 6, 2002 by and among Roundy's, Inc. as Issuer, the subsidiary guarantors of Roundy's, Inc. listed on Schedule A thereto, and Bear, Stearns & Co. Inc., CIBC World Markets Corp. as Initial Purchasers(13) 10.2 A/B Exchange Registration Rights Agreement dated as of December 17, 2002 by and among Roundy's, Inc. as Issuer, the subsidiary guarantors of Roundy's, Inc. listed on Schedule A thereto, and Bear, Stearns & Co. Inc., CIBC World Markets Corp. as Initial Purchasers(14) 10.3 $375,000,000 Credit Agreement among Roundy's Acquisition Corp., Roundy's, Inc., as Borrower, The Several Lenders from Time to Time Parties Hereto, Bear Stearns Corporate Lending Inc., as Administrative Agent, Canadian Imperial Bank of Commerce, as Syndication Agent Bank One, Wisconsin, Cooperatieve Centrale Raiffeisen- Boerenleenbank B.A., "Rabobank Nederland", New York Branch, LaSalle Bank National Association, Associated Bank, N.A., Harris Trust and Savings Bank, M&I Marshall & Ilsley Bank, U.S. Bank, National Association, as Documentation Agents Dated as of June 6, 2002(15)(16) 10.4 First Amendment to the Credit Agreement, dated as of December 10, 2002, among Roundy's Acquisition Corp., Roundy's Inc., as Borrower, the several banks, financial institutions and other entities from time to time parties thereto, Bear Stearns & Co. Inc., as sole lead arranger and sole bookrunner, Bear Stearns Corporate Lending Inc., as administrative agent, Canadian Imperial Bank of Commerce, as syndication agent, and the institutions listed in the Credit Agreement as documentation agents (17) 10.5 Guarantee and Collateral Agreement made by Roundy's Acquisition Corp., Roundy's, Inc. and certain of its Subsidiaries in favor of Bear Stearns Corporate Lending Inc., as Administrative Agent Dated as of June 6, 2002(18) 10.6 Consulting Agreement dated July 1, 2002 between the Registrant and Gerald F. Lestina(19) 10.7 Roundy's, Inc. Supplemental Employee Retirement Plan for certain executive officers including Mr. Lestina(20) 10.8 Board of Directors Resolution dated March 19, 2002 adopting Amendment to Supplemental Employee Retirement Plan(21) 10.9 Excerpts from Board of Directors Consent Resolution adopting Amendment to Supplemental Employee Retirement Plan effective June 7, 2002(22) 10.10 Form of Deferred Compensation Agreement between the Registrant and certain executive officers including Messrs. Schmitt and Kitz(23) 10.11 Amendment dated March 31, 1998 to Form of Deferred Compensation Agreement between the Registrant and certain executive officers including Messrs. Schmitt and Kitz(24) 10.12 Second Amendment dated June 3, 1998 to Form of Deferred Compensation Agreement for certain executive officers including Messrs. Kitz and Schmitt(25) 10.13 Directors and Officers Liability and Corporation Reimbursement Policy issued by American Casualty Company of Reading, Pennsylvania (CNA Insurance Companies) as of June 13, 1986(26) 10.14 Declarations page for renewal through November 1, 2003 of Directors and Officers Liability and Corporation Reimbursement Policy(27) 10.15 Employment Agreement dated June 6, 2002 between Registrant and Robert F. Mariano(28) 10.16 Employment Agreement dated June 6, 2002 between Registrant and Darren W. Karst(29) 10.17 Employment Contract between the Registrant and Gary L. Fryda dated March 31, 2000(30) 10.18 Excerpts from Roundy's, Inc. Board of Directors resolution adopted March 19, 2002 relating to group term carve-out, executive extension on COBRA continuation rights and professional outplacement services for Company Officers, including Messrs. Lestina, Fryda, Schmitt and Kitz(31) 10.19 Confidentiality and Noncompete Agreement dated June 6, 2002 between the Registrant and Gerald F. Lestina(32) 10.20 Roundy's, Inc. Deferred Compensation Plan Amended and Restated August 13, 2002(33) 10.21 Employment Agreement dated December 27, 2002 between Registrant and Donald S. Rosanova (34) 10.22 Investor Rights Agreement dated June 6, 2002 by and among Roundy's Acquisition Corp., Willis Stein & Partners III, L.P., Willis Stein & Partners III-C, L.P., Willis Stein & Partners Dutch III-A, L.P., and Willis Stein & Partners Dutch III-B, L.P., the investors listed on the Schedule of Coinvestors, and certain executive employees of Roundy's, Inc. (35) 10.23 First Amendment dated October 28, 2002 to Investor Rights Agreement dated June 6, 2002, including form of Transfer Notice and Joinder Agreement (36) 10.24 Second Amendment dated May 12, 2003 to $375,000,000 Credit Agreement dated as of June 6, 2002 among Roundy's Acquisition Corp., Roundy's Inc., as Borrower, The Several Lenders from Time to Time Parties Hereto, Bear Stearns Corporate Lending Inc., as Administrative Agent, Canadian Imperial Bank of Commerce, as Syndication Agent, Bank One, Wisconsin, Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland", New York Branch, LaSalle Bank National Association, Associated Bank, N.A., Harris Trust and Savings Bank, M&I Marshall & Ilsley Bank, U.S. Bank, National Association, as Documentation Agents dated as of June 6, 2002. (37) 31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH) 31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH) 32.1 Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH) 32.2 Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (FILED HEREWITH) ------ (1) Incorporated by reference to Exhibit 2.1 to Registrant's Registration Statement on Form S-4 filed on January 28, 2003 (Commission File No. 333- 102779) (2) Incorporated by reference to Exhibit 2.2 to Registrant's Registration Statement on Form S-4 filed on January 28, 2003 (Commission File No. 333- 102779) (3) Incorporated by reference to Exhibit 2.1 to Registrant's Registration Statement on Form S-4 filed on August 2, 2002 (Commission File No. 333- 97623) (4) Incorporated by reference to Exhibit 2.4 to Registrant's Current Report on Form 8-K filed with the Commission on June 1, 2001 (Commission File No. 002-94984) (5) Incorporated by reference to Exhibit 2.5 to Registrant's Quarterly Report on Form 10-Q for the period ended March 29, 2003 filed with the Commission on May 9, 2003 (Commission File No. 002-94984) (6) Incorporated by reference to Exhibit 2.9 to Registrant's Current Report on Form 8-K filed with the Commission on June 23, 2003 (File No. 002- 94984) (7) Incorporated by reference to Exhibit 2.10 to Registrant's Current Report on Form 8-K filed with the Commission on June 23, 2003 (File No. 002- 94984) (8) Incorporated by reference to Exhibit 3.1 to Registrant's Registration Statement on Form S-4 filed with the Commission on August 2, 2002 (File No. 333-97623) (9) Incorporated by reference to Exhibit 3.2 to Registrant's Registration Statement on Form S-4 filed with the Commission on August 2, 2002 (File No. 333-97623) (10) Incorporated by reference to Exhibit 4.1 to Registrant's Registration Statement on Form S-4 filed with the Commission on August 2, 2002 (File No. 333-97623) (11) Incorporated by reference to Exhibits A-1 and A-2 to the Indenture of Trust, Exhibit 4.1 to Registrant's Registration Statement on Form S-4 filed with the Commission on August 2, 2002 (File No. 333-97623) (12) Incorporated by reference to Exhibit E to the Indenture of Trust, Exhibit 4.1 to Registrant's Registration Statement on Form S-4 filed with the Commission on August 2, 2002 (File No. 333-97623) (13) Incorporated by reference to Exhibit 10.1 to Registrant's Registration Statement on Form S-4 filed with the Commission on August 2, 2002 (File No. 333-97623) (14) Incorporated by reference to Exhibit 10.1 to Registrant's Registration Statement on Form S-4 filed with the Commission on January 28, 2003 (Commission File No. 333-102779) (15) Incorporated by reference to Exhibit 10.2 to Registrant's Registration Statement on Form S-4 filed with the Commission on August 2, 2002 (File No. 333-97623) (16) The Exhibits listed on page v of the Credit Agreement, Exhibit 10.2, consist of the form of Guarantee and Collateral Agreement and the exhibits thereto which are included as part of Exhibit 10.5. (17) Incorporated by reference to Exhibit 10.3 to Registrant's Registration Statement on Form S-4 filed with the Commission on January 28, 2003 (File No. 333-102779) (18) Incorporated by reference to Exhibit 10.3 to Registrant's Registration Statement on Form S-4 filed with the Commission on August 2, 2002 (File No. 333-97623) (19) Incorporated by reference to Exhibit 10.6 to Registrant's Registration Statement on Form S-4 filed with the Commission on August 2, 2002 (File No. 333-97623) (20) Incorporated by reference to Exhibit 10.9 to Registrant's Form 10-Q for the quarterly period ended July 3, 1999, filed with the Commission on August 9, 1999 (Commission File No. 002-94984) (21) Incorporated by reference to Exhibit 10.8 to Registrant's Registration Statement on Form S-4 filed with the Commission on August 2, 2002 (File No. 333-97623) (22) Incorporated by reference to Exhibit 10.9 to Registrant's Registration Statement on Form S-4 filed with the Commission on August 2, 2002 (File No. 333-97623) (23) Incorporated by reference to Exhibit 10.1 of Registrant's Registration Statement on Form S-2 (File No. 33-57505) dated April 24, 1997 (24) Incorporated by reference to Exhibit 10.1(a) to Registrant's Registration Statement on Form S-2 filed with the Commission on April 28, 1998 (Commission File No. 33-57505) (25) Incorporated by reference to Exhibit 10.9 to Registrant's Quarterly Report on Form 10-Q for the period ended October 3, 1998, filed with the Commission on November 10, 1998 (Commission File No. 002-94984) (26) Incorporated by reference to Exhibit 10.3 to Registrant's Annual Report on Form 10-K for the fiscal year ended January 3, 1987, filed with the Commission on April 3, 1987 (Commission File Nos. 002-66296 and 002- 94984) (27) Incorporated by reference to Exhibit 10.16 to Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 2002 filed with the Commission on March 27, 2003 (Commission File No. 002-94984) (28) Incorporated by reference to Exhibit 10.18 to Registrant's Registration Statement on Form S-4 filed with the Commission on August 2, 2002 (File No. 333-97623) (29) Incorporated by reference to Exhibit 10.19 to Registrant's Registration Statement on Form S-4 filed with the Commission on August 2, 2002 (File No. 333-97623) (30) Incorporated by reference to Exhibit 10.11 to Registrant's Form 8-K dated April 14, 2000, filed with the Commission on April 14, 2000 (Commission File No. 002-94984) (31) Incorporated by reference to Exhibit 10.23 to Registrant's Registration Statement on Form S-4 filed with the Commission on August 2, 2002 (File No. 333-97623) (32) Incorporated by reference to Exhibit 10.25 to Registrant's Registration Statement on Form S-4 filed with the Commission on August 2, 2002 (File No. 333-97623) (33) Incorporated by reference to Exhibit 10.27 to Amendment No. 1 to Registrant's Registration Statement on Form S-4 filed with the Commission on October 18, 2002 (File No. 333-97623) (34) Incorporated by reference to Exhibit 10.30 to Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 2002 filed with the Commission on March 27, 2003 (Commission File No. 002-94984) (35) Incorporated by reference to Exhibit 10.31 to Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 2002 filed with the Commission on March 27, 2003 (Commission File No. 002-94984) (36) Incorporated by reference to Exhibit 10.32 to Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 2002 filed with the Commission on March 27, 2003 (Commission File No. 002-94984) (37) Incorporated by reference to Exhibit 10.24 to Registrant's Current Report on Form 8-K filed with the Commission on June 23, 2003 (File No. 002-94984)

ROUNDYS INC 10-Q