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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2013

OR

 

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 001-35422

 

 

Roundy’s, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		27-2337996
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

875 East Wisconsin Avenue

Milwaukee, Wisconsin 53202

(414) 231-5000

(Registrant’s telephone number, including area code)

 

 

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.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		¨		Accelerated filer		¨
Non-accelerated filer		x		Smaller reporting company		¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    ¨  Yes    x  No

As of August 1, 2013, there were 46,797,186 shares of the registrant’s common stock, par value $0.01 per share, issued and outstanding.

 

 

 

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Roundy’s, Inc.

Quarterly Report on Form 10-Q

For the thirteen and twenty-six week periods ended June 29, 2013

Table of Contents

 

 

Part I - Financial Information
Item 1. Financial Statements (Unaudited)			3
Consolidated Statements of Comprehensive Income for the thirteen and twenty-six weeks ended June 30, 2012 and June 29, 2013			3
Consolidated Balance Sheets as of December 29, 2012 and June 29, 2013			4
Consolidated Statements of Cash Flows for the twenty-six weeks ended June 30, 2012 and June 29, 2013			5
Notes to Unaudited Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
Item 3. Quantitative and Qualitative Disclosures About Market Risk			19
Item 4. Controls and Procedures			19
Part II – Other Information
Item 1. Legal Proceedings			20
Item 1A. Risk Factors			20
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			20
Item 3. Defaults Upon Senior Securities			20
Item 4. Mine Safety Disclosures			20
Item 5. Other Information			20
Item 6. Exhibits			20
Signatures			21

 

 

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Part I – Financial Information

 

Item 1.

FINANCIAL STATEMENTS

Roundy’s, Inc.

Consolidated Statements of Comprehensive Income

(In thousands, except per share data)

(Unaudited)

 

		Thirteen Weeks Ended								Twenty-six Weeks Ended
		June 30, 2012				June 29, 2013				June 30, 2012				June 29, 2013
Net Sales		$	996,842			$	980,326			$	1,935,087			$	1,963,831
Costs and Expenses:
Cost of sales			729,150				715,160				1,410,633				1,436,165
Operating and administrative			224,006				231,338				450,115				467,157
Interest:
Interest expense, net			11,594				11,468				25,660				23,052
Amortization of deferred financing costs			574				574				1,266				1,147
Loss on debt extinguishment			—				—				13,304				—
			965,324				958,540				1,900,978				1,927,521
Income before Income Taxes			31,518				21,786				34,109				36,310
Provision for Income Taxes			12,607				8,314				12,927				14,191
Net Income		$	18,911			$	13,472			$	21,182			$	22,119
Net earnings per common share:
Basic		$	0.42			$	0.30			$	0.51			$	0.49
Diluted		$	0.42			$	0.30			$	0.51			$	0.49
Weighted average number of common shares outstanding:
Basic			44,824				44,962				41,271				44,962
Diluted			44,990				45,214				41,813				45,045
Dividends declared per share		$	0.23			$	0.12			$	0.23			$	0.24
Comprehensive Income		$	19,581			$	14,132			$	22,523			$	23,438

See notes to accompanying unaudited consolidated financial statements.

 

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Roundy’s, Inc.

Consolidated Balance Sheets

(In thousands, except per share data)

 

		December 29, 2012				June 29, 2013
						(Unaudited)
Assets
Current Assets:
Cash and cash equivalents		$	72,889			$	75,817
Notes and accounts receivable, less allowance for losses			33,118				38,316
Merchandise inventories			292,673				294,580
Prepaid expenses			9,706				14,609
Deferred income taxes			5,259				5,259
Total current assets			413,645				428,581
Property and Equipment, net			314,044				304,402
Other Assets:
Other assets—net			46,410				44,133
Goodwill			605,986				605,986
Total other assets			652,396				650,119
Total assets		$	1,380,085			$	1,383,102
Liabilities and Shareholders’ Equity
Current Liabilities:
Accounts payable		$	240,392			$	229,670
Accrued wages and benefits			39,540				37,082
Other accrued expenses			40,594				44,232
Current maturities of long-term debt and capital lease obligations			10,918				11,134
Income taxes			2,292				7,467
Total current liabilities			333,736				329,585
Long-term Debt and Capital Lease Obligations			685,644				679,095
Deferred Income Taxes			59,112				54,304
Other Liabilities			108,327				113,626
Total liabilities			1,186,819				1,176,610
Commitments and Contingencies
Shareholders’ Equity:
Preferred Stock (5,000 shares authorized at 12/29/12 and 6/29/13, respectively, $0.01 par value, 0 shares at 12/29/12 and 6/29/13, respectively, issued and outstanding)			—				—
Common stock (150,000 shares authorized, $0.01 par value, 45,654 shares and 46,797 shares at 12/29/12 and 6/29/13, respectively, issued and outstanding)			457				468
Additional paid-in-capital			114,120				115,260
Retained earnings			125,649				136,405
Accumulated other comprehensive loss			(46,960	)			(45,641	)
Total shareholders’ equity			193,266				206,492
Total liabilities and shareholders’ equity		$	1,380,085			$	1,383,102

See notes to accompanying unaudited consolidated financial statements.

 

 

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Roundy’s, Inc.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

		Twenyty-six Weeks Ended
		June 30, 2012				June 29, 2013
Cash Flows From Operating Activities:
Net income		$	21,182			$	22,119
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization, including deferred financing costs			33,477				33,957
(Gain) loss on sale of property and equipment			(97	)			142
LIFO charges			1,250				670
Amortization of debt discount			634				743
Stock-based compensation expense			657				1,151
Loss on debt extinguishment			13,304				—
Deferred income taxes			59				(461	)
Changes in operating assets and liabilities:
Notes and accounts receivable			(2,844	)			(5,198	)
Merchandise inventories			(33,436	)			(2,577	)
Prepaid expenses			778				(313	)
Other assets			35				5
Accounts payable			8,130				(15,312	)
Accrued expenses and other liabilities			(11,945	)			1,658
Income taxes			1,662				6,803
Net cash flows provided by operating activities			32,846				43,387
Cash Flows From Investing Activities:
Capital expenditures			(16,351	)			(22,675	)
Proceeds from sale of property and equipment			102				490
Net cash flows used in investing activities			(16,249	)			(22,185	)
Cash Flows From Financing Activities:
Borrowings on revolving credit facility			9,750				30,000
Payments made on revolving credit facility			(9,750	)			(30,000	)
Proceeds from long-term borrowings			664,875				—
Payments of debt and capital lease obligations			(787,873	)			(7,076	)
Dividends paid to common shareholders			(10,309	)			(10,869	)
Payments of withholding taxes for vesting of restricted stock shares			—				(329	)
Issuance of common stock, net of issuance costs			112,540				—
Debt issuance and refinancing fees and related expenses			(18,153	)			—
Net cash flows used in financing activities			(38,920	)			(18,274	)
Net (decrease) increase in Cash and Cash Equivalents			(22,323	)			2,928
Cash and Cash Equivalents, Beginning of Period			87,068				72,889
Cash and Cash Equivalents, End of Period		$	64,745			$	75,817
Supplemental Cash Flow Information:
Cash paid for interest		$	30,201			$	21,940
Cash paid for income taxes			11,206				7,849

See notes to accompanying unaudited consolidated financial statements.

 

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ROUNDY’S, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

Roundy’s, Inc. (“Roundy’s” or the “Company”) is a corporation formed in 2010 for the purpose of owning and operating Roundy’s Acquisition Corp. and its 100% owned subsidiary, Roundy’s Supermarkets, Inc. (“RSI”).

Roundy’s is a leading food retailer in the state of Wisconsin. As of June 29, 2013, Roundy’s owned and operated 161 retail grocery stores, of which 121 are located in Wisconsin, 29 are located in Minnesota and 11 are located in Illinois. Roundy’s also distributes a full line of food and non-food products from three wholesale distribution centers and provides services to one independent licensee retail grocery store in Wisconsin.

Initial Public Offering – On February 7, 2012, Roundy’s priced its initial public offering (the “IPO”) of its common stock which began trading on the New York Stock Exchange on February 8, 2012. On February 13, 2012, Roundy’s completed the offering of 22,059,091 shares of its common stock at a price of $8.50 per share, which included 14,705,883 shares sold by Roundy’s and 7,353,208 shares sold by existing shareholders. Roundy’s received approximately $125.0 million in gross proceeds from the IPO, or approximately $111.8 million in net proceeds after deducting the underwriting discount and expenses related to the offering. The net proceeds of Roundy’s IPO were used to pay down RSI’s existing debt (see the Long-Term Debt footnote below).

A summary of Roundy’s capitalization upon closing of the IPO is as follows (in thousands):

 

Common stock issued and outstanding at December 31, 2011			27,072
Conversion of preferred stock into common stock prior to IPO			3,050
Rounding of partial shares held prior to stock split			(4	)
Sale of common stock through IPO			14,706
Common stock issued and outstanding at IPO, February 7, 2012			44,824

On January 24, 2012, the Board of Directors approved an amendment to the articles of incorporation to increase the number of shares Roundy’s is authorized to issue to 150,000,000 shares of common stock and 5,000,000 shares of preferred stock, and to convert all of its outstanding preferred stock into shares of common stock on a one-for-one basis. Subsequent to the preferred stock conversion, the Board of Directors approved an approximately 292.2-for-one stock split on all common shares outstanding as of that date. In accordance with applicable accounting rules, the Company has restated all of the historical common share and per share amounts to give retroactive effect to this 292.2-for-one common stock split but have not given retroactive effect to the conversion of preferred stock into common stock. Therefore, the 10,439 shares of outstanding preferred stock outstanding on January 24, 2012 are reflected as having been converted and then subsequently split on that date.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information, and do not include all of the information and footnotes required for complete, audited financial statements. For further information, refer to the consolidated financial statements and footnotes included in the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 29, 2012.

The accompanying unaudited consolidated financial statements as of June 29, 2013, and for the thirteen and twenty-six weeks ended June 30, 2012 and June 29, 2013 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 of Roundy’s, Inc. and its subsidiaries. All material intercompany accounts and transactions have been eliminated in the unaudited consolidated financial statements. The results of operations for the thirteen and twenty-six weeks ended June 29, 2013 may not necessarily be indicative of the results that may be expected for the entire fiscal year ending December 28, 2013.

Unless the context otherwise indicates, all references in these financial statements to the “Company,” or “Roundy’s,” or similar words are to Roundy’s, Inc.

 

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3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2012-02, “Intangibles—Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment.” ASU No. 2012-02 permits an entity to first assess qualitative factors to determine whether certain events and circumstances exist that indicate it is more likely than not that an indefinite-lived intangible asset is impaired. The more likely than not threshold is defined as having a likelihood of more than 50 percent. If as a result of the qualitative assessment it is determined that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the company is not required to take further action and calculate the fair value of the asset. ASU No. 2012-02 was effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company does not anticipate this standard will have an impact on its consolidated financial statements.

In February 2013, the FASB issued ASU No. 2013-02, “Reporting Amounts Reclassified Out of Accumulated Other Comprehensive Income”. ASU No. 2013-02 requires companies to provide additional information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, companies are required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The amendments are effective prospectively for reporting periods beginning after December 15, 2012. This ASU does not change the requirements for reporting net income or other comprehensive income. Because the standard only affects the presentation of comprehensive income and does not affect what is included in comprehensive income, this standard did not have a material effect on the Company’s consolidated financial statements. The Company adopted this at the beginning of fiscal 2013 and has included disclosures in the footnotes.

4. FAIR VALUE

The carrying values of the Company’s cash and cash equivalents, notes and accounts receivable and accounts payable approximated fair value as of June 29, 2013. Based on estimated market rents for those leased properties which are recorded as capital leases, the fair value of capital lease obligations is approximately $21.0 million, as of June 29, 2013. Based on recent open market transactions of the Company’s term loan, the fair value of long-term debt, including current maturities, is approximately $653.8 million as of June 29, 2013. The Company considers the fair value of the capital leases and term loan to be Level 2 within the fair value hierarchy.

5. INVENTORIES

The Company uses the LIFO method for valuation of a portion of inventories. If the FIFO method had been used, inventories would have been approximately $24.1 million higher on June 29, 2013 and $23.5 million higher on December 29, 2012.

An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Accordingly, interim LIFO calculations are based on management’s estimates of expected year-end inventory levels and costs. Because these estimates are subject to many factors beyond management’s control, interim results are subject to the final year-end LIFO inventory valuation.

 

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6. LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

 

		December 29, 2012				June 29, 2013
Term Loan		$	671,625			$	666,563
Capital Lease Obligations, 7.6% to 10%, due 2013 to 2027			32,298				30,371
Other long-term debt			1,445				1,359
			705,368				698,293
Less: Unamortized discount on Term Loan			8,806				8,064
Less: Current maturities			10,918				11,134
Long-term debt, net of current maturities		$	685,644			$	679,095

In connection with the IPO on February 13, 2012, RSI entered into a new senior credit facility (the “Refinancing”), consisting of a $675 million term loan (the ‘‘Term Facility’’) and a $125 million revolving credit facility (the ‘‘Revolving Facility’’ and together with the Term Facility, the ‘‘Credit Facilities”) with the Term Facility maturing in February 2019 and the Revolving Facility maturing in February 2017. The Company used the net proceeds from the IPO, together with borrowings under the Credit Facilities, to refinance RSI’s existing indebtedness and to pay accrued interest thereon and related prepayment premiums.

Borrowings under the Credit Facilities bear interest, at the Company’s option, at (i) adjusted LIBOR (subject to a 1.25% floor) plus 4.5% or (ii) an alternate base rate plus 3.5%. In addition, there is a fee payable quarterly in an amount equal to 0.5% per annum of the undrawn portion of the Revolving Facility. The terms of the Credit Facilities contain customary provisions regarding prepayments and restrictive covenants. The Credit Facilities are secured by substantially all of the Company’s tangible and intangible assets.

In connection with the Refinancing, the Company recognized a loss on debt extinguishment of $13.3 million, which consists primarily of the write-off of $4.5 million of previously capitalized financing costs, the write-off of the remaining unamortized discount of $2.1 million on the old second lien loan that was repaid, prepayment premiums on the old first and second lien loans that were repaid and certain fees and expenses of $2.0 million related to the Credit Facilities.

As of June 29, 2013, there were no outstanding borrowings under the Revolving Facility. Outstanding letters of credit, totaling $27.6 million on June 29, 2013, reduce availability under the Revolving Facility.

Prior to the Refinancing, the Company’s long-term debt included a first lien senior credit facility consisting of a term loan and $95 million revolving credit agreement (together, the “First Lien Credit Agreement) and a second lien credit facility (“Second Lien Credit Agreement”). The Company’s first and second lien loans and the revolving credit facility bore interest based upon LIBOR or base rate options. Under the LIBOR option for the extended first lien loan and extended revolving credit facility, the applicable rate was LIBOR plus 5.00% (subject to a floor of 2.0%) and under the base rate option for the extended first lien loan and extended revolving credit facility, the applicable rate of interest was the base rate plus 4.00%. For the non-extended portion of the first lien loan which matured in November 2011, the applicable rate of interest was LIBOR plus 3.50% and under the base rate option, the applicable interest rate was the base rate plus 2.50%. On April 16, 2010, the Company borrowed $150 million under the Second Lien Credit Agreement to pay dividends to its preferred and common shareholders. This second lien loan was issued at a 2% discount and was to mature in April 2016. This second lien loan bore interest based upon LIBOR or base rate options. Under the LIBOR option of the second lien loan, the applicable rate was LIBOR plus 8.0% (subject to a floor of 2%) and under the base rate option, the applicable rate was the base rate plus 7.0%.

The Company’s credit agreement contains various restrictive covenants which, among other things: (i) prohibit it from prepaying other indebtedness; (ii) require it to maintain specified financial ratios; and (iii) limit its capital expenditures. In addition, the credit agreement limits the Company’s ability to declare or pay dividends.

At June 29, 2013, the Company was in compliance with all financial covenants relating to its indebtedness.

 

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7. EMPLOYEE BENEFIT PLANS

Net pension expense (income) in the thirteen and twenty-six weeks ended June 30, 2012 and June 29, 2013 included the following components (in thousands):

 

		Thirteen Weeks Ended								Twenty-six Weeks Ended
		June 30, 2012				June 29, 2013				June 30, 2012				June 29, 2013
Service cost		$	137			$	—			$	274			$	—
Interest cost on projected benefit obligation			1,956				1,839				3,913				3,678
Expected return on plan assets			(3,067	)			(3,287	)			(6,136	)			(6,574	)
Amortization of net actuarial loss			1,117				1,099				2,234				2,198
Net pension expense (income)		$	143			$	(349	)		$	285			$	(698	)

On April 28, 2010, the Company amended its agreement with the Pension Benefit Guaranty Corporation (“PBGC”) dated November 3, 2005, whereby, among other things, it agreed to contribute $7.5 million in April 2010, $5 million in April 2011 and $2.5 million in April 2012 to its primary pension plan. In addition, in April 2010 the Company increased the amount of the letter of credit it had posted in favor of the PBGC to $12.5 million from $10 million, for the benefit of the pension plan. During 2012, the Company was allowed to reduce the letter of credit, and as of June 29, 2013, the amount was $10 million.

The Company expects its pension plan contributions for the year ending December 28, 2013 to be approximately $1.4 million.

8. INCOME TAXES

The Company’s effective tax rate for the twenty-six weeks ended June 29, 2013 was favorably impacted by the settlement of certain tax matters during 2013. Our estimated tax rate is approximately 40% before discrete items.

9. COMMITMENTS AND CONTINGENCIES

Various lawsuits and claims, arising in the ordinary course of business, are pending or have been asserted against the Company. While the ultimate effect of such actions cannot be predicted with certainty, management believes that their outcome will not result in a material adverse effect on the consolidated financial position, operating results or liquidity of the Company.

The Company contributes to four multi-employer pension plans based on obligations arising from its collective bargaining agreements covering supply chain and certain store union employees. Three of these plans are underfunded as of June 29, 2013. These plans provide retirement benefits to participants based on their service to contributing employers. The benefits are paid from assets held in trust for that purpose. Trustees are appointed by employers and unions. The trustees are responsible for determining the level of benefits to be provided to participants as well as for such matters as the investment of the assets and the administration of the plans.

Because the Company is one of a number of employers contributing to these plans, it is difficult to ascertain what its share of the underfunding would be, although the Company anticipates that its contributions to these plans may increase. If the Company chooses to exit a plan, any adjustment for a withdrawal liability will be recorded when it is probable that a liability exists and can be reasonably determined.

In connection with the exit or sale of its independent distribution business, the Company has assigned leases and subleases for retail stores which expire at various dates through 2021. A remaining potential obligation exists in the event of a default under the assigned leases and subleases by the assignee. The potential obligations include rent, real estate taxes, common area costs and other sundry expenses. The future minimum lease payments are approximately $6.3 million. The Company believes the likelihood of a liability related to these assigned leases and subleases is remote.

 

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10. ACCUMULATED OTHER COMPREHENSIVE LOSS

The Company’s accumulated other comprehensive loss is comprised solely of the adjustments for employee benefit plans. During the thirteen and twenty-six weeks ended June 29, 3013, the entire amount reclassified from accumulated other comprehensive loss was comprised of the net amortization of actuarial losses on employee benefit plans. During the thirteen and twenty-six weeks ended June 29, 2013, pension income is included within operating and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income. The change in accumulated other comprehensive loss consisted of the following:

 

		Thirteen Weeks Ended
		June 29, 2013
Balance at March 30, 2013		$	(46,301	)
Other comprehensive income before reclassifications			—
Amounts reclassified from accumulated comprehensive income, net of $439 of income taxes			660
Net current-period other comprehensive income			660
Balance at June 29, 2013		$	(45,641	)
		Twenty-six Weeks Ended
		June 29, 2013
Balance at December 29, 2012		$	(46,960	)
Other comprehensive income before reclassifications			—
Amounts reclassified from accumulated comprehensive income, net of $879 of income taxes			1,319
Net current-period other comprehensive income			1,319
Balance at June 29, 2013		$	(45,641	)

 

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11. EARNINGS PER SHARE

The Company had one class of common stock as of June 29, 2013. Prior to the conversion of the Company’s preferred stock to common stock in January 2012, the preferred stock was a participating stock security requiring the use of the two-class method for the computation of basic net earnings per share in accordance with the provisions of ASC 260-10, “Earnings per Share”. For the thirteen and twenty-six weeks ended June 30, 2012, basic and diluted earnings per share excludes the effect of common stock equivalents and is computed using the two-class computation method, which excludes earnings attributable to the preferred stock preferential payments from total earnings available to common shareholders.

For the thirteen and twenty-six weeks ended June 29, 2013 there were equity awards outstanding of approximately 17,638 and 98,040 shares, respectively, that were excluded because their inclusion would have had an anti-dilutive effect on earnings per share.

As of June 29, 2013, there were 385,183 contingently issuable shares excluded because their issuance was not considered probable.

The following table reflects the calculation of basic and diluted earnings per share (in thousands, except per share data):

 

		Thirteen Weeks Ended								Twenty-six Weeks Ended
		June 30, 2012				June 29, 2013				June 30, 2012				June 29, 2013
Net earnings per common share—basic:
Net Income		$	18,911			$	13,472			$	21,182			$	22,119
Deduct: undistributed earnings allocable to convertible preferred stock			—				—				35				—
Net income attributable to common shareholders		$	18,911			$	13,472			$	21,147			$	22,119
Basic weighted average common shares outstanding			44,824				44,962				41,271				44,962
Net earnings per common share—basic		$	0.42			$	0.30			$	0.51			$	0.49
Net earnings per common share—diluted:
Weighted-average shares outstanding			44,824				44,962				41,271				44,962
Dilutive impact of convertible preferred stock			—				—				403				—
Effect of dilutive securities—nonvested restricted stock			166				252				139				83
Weighted-average shares and potential dilutive shares outstanding			44,990				45,214				41,813				45,045
Net earnings per common share—diluted		$	0.42			$	0.30			$	0.51			$	0.49

 

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12. SHARE-BASED COMPENSATION

The Company’s 2012 Incentive Compensation Plan (the “Plan”) provides for grants of stock options, stock appreciation rights, restricted stock, other stock-based awards and other cash-based awards. An aggregate of 5,656,563 shares of common stock was registered for issuance under the Plan. As of June 29, 2013 there were 3,683,090 remaining shares available for issuance.

The Company accounts for share-based compensation awards in accordance with the provisions of FASB ASC Topic 718 – Compensation – Stock Compensation which requires companies to estimate the fair value of share-based payment awards on the date of grant. The value of the portion of the awards ultimately expected to vest is recognized as expense over the requisite service period. The Company recognized total stock-based compensation of $0.8 million and $1.2 million for the thirteen and twenty-six weeks ended June 29, 2013, respectively, compared to $0.4 million and $0.7 million for the thirteen and twenty-six weeks ended June 30, 2012, respectively, as operating and administrative expenses in the Company’s Consolidated Statements of Comprehensive Income.

The Company has granted restricted stock to certain employees, as well as to non-employee directors, under the Plan. The service-based restricted stock that was granted to employees in 2012 vests over five years. The service-based restricted stock granted to non-employee directors in 2012 and 2013 vests over one year.

During the second quarter of 2013, the Company granted 770,366 shares of restricted stock that will vest upon certain market performance metrics (the “Market Awards”) and 452,725 shares of time based restricted stock (the “Time Based Awards”) to certain employees under the Plan. The time based restricted stock vests over three years for employees and one year for non-employee directors. The Market Awards will vest after three years if certain specified market conditions are met. The market-based condition is a comparison of the total shareholder return (“TSR”) of the Company’s stock with the TSR of its peer group over the corresponding three year period as determined by the Compensation Committee of the Company’s Board of Directors. These Market Awards also include a modifier based on the performance of the Company’s operating income as compared to its peer group. The number of shares ultimately vested will be determined based on the TSR metric and operating income results at the conclusion of the third year. The fair value of these Market Awards was determined to be $3.02, which was determined using a Monte Carlo simulation model, which utilizes multiple input variables to determine the probability of the Company meeting the market based condition. These inputs include a stock price volatility assumption that is the weighted average between the Company’s volatility since the IPO and the peer group average volatility for the 1.5 year period prior to the Company’s IPO and a 2.7 year risk-free interest rate of 0.33%. The fair value of the Time Based Awards was determined based on the stock price as of the date of the grant.

All of the shares granted generally have the rights of a stockholder with respect to the shares, including the right to receive dividends, the right to vote the shares of restricted stock and, conditioned upon full vesting of restricted stock, the right to tender such shares, subject to the conditions and restrictions generally applicable to restricted stock or specifically set forth in the recipient’s stock agreement. All restricted stock granted becomes fully vested upon certain changes of control of the Company.

 

		Restricted Shares Outstanding (in thousands)				Weighted-average grant-date fair value per share
Outstanding, December 29, 2012			830			$	8.56
Granted			1,231				4.43
Vested			(192	)			8.63
Cancelled or Expired			(37	)			6.96
Outstanding, June 29, 2013			1,832			$	5.81

 

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13. BUSINESS SEGMENTS

The Company has determined that it has one reportable segment. The Company’s revenues are derived predominantly from the sale of food and non-food products at its stores. Non-perishable categories consist of traditional grocery, frozen and dairy products. Perishable food categories include meat, seafood, produce, deli, bakery and floral. Non-food categories include general merchandise, health and beauty supplies, pharmacy, alcohol and tobacco. The following is a summary of the percentage of sales of non-perishable, perishable, and non-food items for the thirteen and twenty-six weeks ended June 30, 2012 and June 29, 2013:

 

		Thirteen Weeks Ended								Twenty-six Weeks Ended
		June 30, 2012				June 29, 2013				June 30, 2012				June 29, 2013
Non-Perishable Food			48.6	%			46.9	%			49.7	%			48.2	%
Perishable Food			34.8	%			36.4	%			33.9	%			35.5	%
Non-Food			16.6	%			16.7	%			16.4	%			16.3	%

 

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

We are a leading Midwest supermarket chain with a 141-year operating history. As of June 29, 2013, we operated 161 grocery stores in Wisconsin, Minnesota and Illinois under the Pick ’n Save, Rainbow, Copps, Metro Market and Mariano’s retail banners, which are served by our three strategically located distribution centers and our food processing and preparation commissary. As of June 29, 2013, these stores included 93 Pick ’n Save stores, 29 Rainbow stores, 25 Copps stores, 3 Metro Market stores and 11 Mariano’s stores.

In this section, we refer to the thirteen weeks ended June 29, 2013 as the “second quarter 2013” and we refer to the thirteen weeks ended June 30, 2012 as the “second quarter 2012.”

For the second quarter 2013, net sales were $980.3 million, compared to net sales of $996.8 million for the second quarter 2012. The decrease in net sales was primarily due to a decrease in same stores sales, partially offset by the impact of new stores.

Earnings per basic and diluted share was $0.30 and $0.42 in the second quarter 2013 and 2012, respectively. For the twenty-six weeks ending June 29, 2013 and June 30, 2012, earnings per basic and diluted share were $0.49 and $0.51, respectively.

Going forward, we plan to continue to maintain our market leadership and focus on growing same-store sales, opening new stores and increasing our cash flow. We intend to pursue same-store sales growth by continuing to focus on price competitiveness, improving our marketing efforts, selectively remodeling and relocating existing stores and enhancing and expanding our own brand, perishable and prepared food offerings. In addition, we intend to continue our expansion into the Chicago market with plans to open two additional stores during the remainder of 2013 in that market. As of June 29, 2013, we had 11 stores open in the Chicago market.

RESULTS OF OPERATIONS

 

(Dollars in thousands)		Thirteen Weeks Ended																Twenty-six Weeks Ended
		June 30, 2012								June 29, 2013								June 30, 2012								June 29, 2013
Net Sales		$	996,842				100.0	%		$	980,326				100.0	%		$	1,935,087				100.0	%		$	1,963,831				100.0	%
Costs and Expenses:
Cost of sales			729,150				73.1				715,160				73.0				1,410,633				72.9				1,436,165				73.1
Operating and administrative			224,006				22.5				231,338				23.6				450,115				23.3				467,157				23.8
Interest expense (including amortization of deferred financing costs)			12,168				1.2				12,042				1.2				26,926				1.4				24,199				1.2
Loss on debt extinguishment			—				0.0				—				0.0				13,304				0.7				—				0.0
			965,324				96.8				958,540				97.8				1,900,978				98.2				1,927,521				98.1
Income before Income Taxes			31,518				3.2				21,786				2.2				34,109				1.8				36,310				1.9
Provision for Income Taxes			12,607				1.3				8,314				0.9				12,927				0.7				14,191				0.7
Net Income		$	18,911				1.9	%		$	13,472				1.4	%		$	21,182				1.1	%		$	22,119				1.1	%

Thirteen Weeks Ended June 29, 2013 Compared With Thirteen Weeks Ended June 30, 2012

Net Sales. Net sales represent product sales less returns and allowances and sales promotions. We derive our net sales primarily from the operation of retail grocery stores and to a much lesser extent from the independent distribution of food and non-food products to an independently-owned grocery store. We recognize retail sales at the point of sale. We do not record sales taxes as a component of retail revenues as we consider ourselves a pass-through conduit for collecting and remitting sales taxes.

Net sales were $980.3 million for the second quarter 2013, a decrease of $16.5 million, or 1.7% from $996.8 million for the second quarter 2012. The decrease was primarily driven by a 5.8% decrease in same-store sales and the effect of three stores closed during 2013, partially offset by the benefit of new stores. The decline in same-store sales was due to a 6.3% decrease in the number of customer transactions, partially offset by a 0.6% increase in average transaction size. Same-store sales comparisons were negatively impacted by the 2013 Easter and 2013 July 4^th holiday shifts and the mix shift to greater generic pharmacy sales. Adjusted for the effect of these calendar shifts and increased generic sales, same-store sales declined 3.9%. In addition, same-store sales were impacted by competitive store openings, wet and cooler weather conditions as well as the soft economic environment that continues to impact customer demand in the Company’s core markets as compared to the prior year period.

 

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Gross Profit. We calculate gross profit as net sales less cost of sales. Cost of sales includes product costs, inbound freight, warehousing costs, receiving and inspection costs, distribution costs, and depreciation and amortization expenses associated with our supply chain operations.

Gross profit was $265.2 million for the second quarter 2013, a decrease of $2.5 million, or 0.9%, from $267.7 million for the second quarter 2012. Gross profit, as a percentage of net sales, was 27.0% and 26.9% for the second quarter 2013 and 2012, respectively. The increase in gross profit as a percentage of net sales primarily reflects reduced promotional and pricing investments and an increased perishable sales mix, partially offset by increased shrink.

Operating and Administrative Expenses. Operating and administrative expenses consist primarily of personnel costs, sales and marketing expenses, depreciation and amortization expenses as well as other expenses associated with facilities unrelated to our supply chain network, internal management expenses and expenses for accounting, information systems, legal, business development, human resources, purchasing and other administrative departments.

Operating and administrative expenses were $231.3 million for the second quarter 2013, an increase of $7.3 million, or 3.3%, from $224.0 million for the second quarter 2012. Operating and administrative expenses, as a percentage of net sales, increased to 23.6% for the second quarter 2013 compared with 22.5% for the second quarter 2012. The increase in the rate as a percentage of net sales was primarily due to increased occupancy and labor costs related to new and replacement stores as well as reduced fixed cost leverage in the Company’s core business resulting from lower sales.

Interest Expense. Interest expense (including the amortization of deferred financing costs) was $12.0 million for the second quarter 2013, compared to $12.2 million for the second quarter 2012. The decrease was due primarily to reduced interest on our term loan.

Income Taxes. Provision for income taxes was $8.3 million for the second quarter 2013, a decrease of $4.3 million from $12.6 million for the second quarter 2012. The effective income tax rate was 38.2% for the second quarter 2013 and 40.0% for the second quarter 2012. The lower effective tax rate in the second quarter 2013 is due to the favorable settlement of certain open tax issues.

Twenty-six Weeks Ended June 29, 2013 Compared With Twenty-six Weeks Ended June 30, 2012

Net Sales. Net sales were $1,963.8 million for the twenty-six weeks ended June 29, 2013, an increase of $28.7 million, or 1.5% from $1,935.1 million for the twenty-six weeks ended June 30, 2012. The increase primarily reflects the benefit of new stores, partially offset by a 2.3% decrease in same-store sales and the effect of three stores closed during 2013. The decline in same-store sales was due to a 5.1% decrease in the number of customer transactions, partially offset by a 2.9% increase in average transaction size. Same-store sales comparisons were negatively impacted by competitive store openings, the mix shift to greater generic pharmacy sales, wet and cooler weather conditions as well as the soft economic environment that continues to impact customer demand in the Company’s core markets versus the same period last year.

Gross Profit. Gross profit was $527.7 million for the twenty-six weeks ended June 29, 2013, an increase of $3.2 million, or 0.6%, from $524.5 million for the twenty-six weeks ended June 30, 2012. Gross profit, as a percentage of net sales, was 26.9% and 27.1% for the twenty-six weeks ended June 29, 2013 and June 30, 2012, respectively. The decrease in gross profit as a percentage of net sales primarily reflects increased shrink, partially offset by an increased perishable sales mix.

Operating and Administrative Expenses. Operating and administrative expenses were $467.2 million for the twenty-six weeks ended June 29, 2013, an increase of $17.0 million, or 3.8%, from $450.1 million for the twenty-six weeks ended June 30, 2012. Operating and administrative expenses, as a percentage of net sales, increased to 23.8% for the twenty-six weeks ended June 29, 2013 compared with 23.3% for the twenty-six weeks ended June 30, 2012. The increase in the rate as a percentage of net sales was primarily due to increased occupancy and labor costs related to new and replacement stores as well as reduced fixed cost leverage in the Company’s core business resulting from lower sales.

Interest Expense. Interest expense (including the amortization of deferred financing costs) was $24.2 million for the twenty-six weeks ended June 29, 2013, a decrease of $2.7 million, or 10.1%, from $26.9 million for the twenty-six weeks ended June 30, 2012. The decrease was primarily due to reduced interest rates on our term loan and decreased levels of indebtedness from our debt refinancing in the first quarter 2012.

Income Taxes. Provision for income taxes was $14.2 million for the twenty-six weeks ended June 29, 2013, an increase of $1.3 million from $12.9 million for the twenty-six weeks ended June 30, 2012. The effective income tax rate was 39.1% for the twenty-six weeks ended June 29, 2013 and 37.9% for the twenty-six weeks ended June 30, 2012. The lower effective tax rate in during the twenty-six weeks ended June 30, 2012 was primarily due to the favorable settlement of certain open tax issues.

 

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Liquidity and Capital Resources

Cash Flows

The following table presents a summary of our net cash provided by (used in) operating, investing and financing activities (in thousands):

 

		Twenty-six Weeks Ended
		June 30, 2012				June 29, 2013
Net cash provided by operating activities		$	32,846			$	43,387
Net cash used in investing activities			(16,249	)			(22,185	)
Net cash used in financing activities			(38,920	)			(18,274	)
Net (decrease) increase in cash and cash equivalents		$	(22,323	)		$	2,928
Cash and cash equivalents at end of period		$	64,745			$	75,817

Net Cash Provided by Operating Activities. Net cash provided by operating activities was $43.4 million for the twenty-six weeks ended June 29, 2013 compared to cash provided by operating activities of $32.8 million for the twenty-six weeks ended June 30, 2012. The increase in cash provided by operating activities was due primarily to decreased inventory levels, partially offset by timing of payments for inventory.

Net Cash Used in Investing Activities. Net cash used in investing activities for the twenty-six weeks ended June 29, 2013 was $22.2 million compared to $16.2 million for the for the twenty-six weeks ended June 30, 2012. The increase is due to the timing of spending of capital expenditures. Total capital expenditures for Fiscal 2013, excluding acquisitions, are estimated to be approximately $63-68 million.

Net Cash Used in Financing Activities. Net cash used in financing activities for the twenty-six weeks ended June 29, 2013 was $18.3 million compared to $38.9 million for the for the twenty-six weeks ended June 30, 2012. Net cash used in the twenty-six weeks ended June 29, 2013 consisted of dividends paid to shareholders in the amount of $10.9 million and payments of debt and capital lease obligations of $7.1 million. Net cash used in the twenty-six weeks ended June 30, 2012 consisted of payments of debt and capital lease obligations of $787.9 million, primarily to refinance our existing indebtedness and related financing costs of $18.2 million, offset somewhat by the net proceeds from our term loan of $664.9 million and net proceeds from our initial public offering. In addition, during the twenty-six weeks ended June 30, 2012, we paid a dividend to shareholders in the amount of $10.3 million.

Initial Public Offering

On February 7, 2012, we priced the initial public offering (“IPO”) of our common stock which began trading on the New York Stock Exchange on February 8, 2012. On February 13, 2012, we completed our offering of 22,059,091 shares of our common stock at a price of $8.50 per share, which included 14,705,883 new shares sold by Roundy’s and the sale of 7,353,208 shares from existing shareholders. Roundy’s received approximately $125.0 million in gross proceeds from the IPO, or approximately $111.8 million in net proceeds after deducting the underwriting discount and expenses related to the offering. The net proceeds of our IPO were used to pay down RSI’s existing debt.

Senior Credit Facility

In connection with the completion of our IPO, Roundy’s Supermarkets, Inc. (“RSI”) entered into a new senior credit facility (the “Refinancing”), consisting of a $675 million term loan (the “Term Facility”) and a $125 million revolving credit facility (the “Revolving Facility” and together with the Term Facility, the “New Credit Facilities”) with the Term Facility maturing in February 2019 and the Revolving Facility maturing in February 2017. We used the net proceeds from the IPO, together with borrowings under the New Credit Facilities, to refinance our existing indebtedness and to pay accrued interest and related prepayment premiums.

Borrowings under the Term Facility and the Revolving Facility bear interest, at our option, at (i) adjusted LIBOR (subject to a 1.25% floor) plus 4.5% or (ii) an alternate base rate plus 3.5%. In addition, there is a fee payable quarterly in an amount equal to 0.5% per annum of the undrawn portion of the Revolving Facility.

All of RSI’s obligations under the Credit Facilities are unconditionally guaranteed (the “Guarantees”) by each of the direct and indirect subsidiaries of the Company (other than any future unrestricted subsidiaries as we may designate, at our discretion, from time to time) (the “Guarantors”).

 

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Additionally, the Credit Facilities and the Guarantees are secured by a first-priority perfected security interest in substantially all present and future assets of RSI and each Guarantor, including accounts receivable, equipment, inventory, general intangibles, intellectual property, investment property and intercompany notes among Guarantors; except that the security interest granted by Roundy’s Acquisition Corp. (the direct parent of RSI) is limited to its right, title and interest in and to the stock and promissory notes of RSI and general intangibles and investment property related thereto, and all proceeds, supporting obligations and products related thereto and all collateral security and guarantees given by any person with respect thereto.

Mandatory prepayments under the Credit Facilities are required with (i) 50% of adjusted excess cash flow (which percentage may be reduced upon achievement and maintenance of certain leverage ratios); (ii) 100% of the net cash proceeds of assets sales or other dispositions of property by RSI and its restricted subsidiaries (subject to certain exceptions and reinvestment provisions); and (iii) 100% of the net cash proceeds of issuances, offerings or placements of debt obligations of RSI or its restricted subsidiaries (subject to certain exceptions).

The Credit Facilities contain a number of customary affirmative covenants. The Credit Facilities also contain customary negative covenants, including restrictions on (i) dividends on, and redemptions of, equity interest and other restricted payments (with a permitted basket for cash dividends on common stock in the sum of (a) 70% of excess cash flow calculated on a quarterly basis and (b) $25,000,000, plus a builder basket based on the Company’s retained portion of adjusted excess cash flow measured cumulatively, in each case, subject to pro forma compliance with financial covenants and no default or event of default being continuing,; (ii) liens and sale-leaseback transactions; (iii) loans and investments; (iv) guarantees and hedging agreements; (v) the sale, transfer or disposition of assets and businesses; (vi) transactions with affiliates; (vii) changes in business conducted by the Borrower and its subsidiaries; (viii) payment or amendment of subordinated debt and organizational documents; and (ix) maximum capital expenditures. Excess cash flow is an amount equal to Adjusted EBITDA minus capital expenditures, cash payments of interest, cash payments of taxes, mandatory loan repayments and amortization of capital leases for that period. RSI is also required to comply with the following financial covenants: (i) a maximum total leverage ratio and (ii) a minimum cash interest coverage ratio.

At June 29, 2013, we were in compliance with our financial covenants for all of our indebtedness.

Old Credit Facilities

Prior to the Refinancing, our long-term debt included a first lien senior credit facility consisting of a term loan and $95 million revolving credit agreement (together, the “First Lien Credit Agreement) and a second lien credit facility (“Second Lien Credit Agreement”).

Our first lien loan and the revolving credit facility bore interest based upon LIBOR or base rate options. Under the LIBOR option for the extended first lien loan and extended revolving credit facility, the applicable rate was LIBOR plus 5.00% (subject to a floor of 2.0%) and under the base rate option for the extended first lien loan and extended revolving credit facility, the applicable rate of interest was the base rate plus 4.00%. For the non-extended portion of our first lien loan which matured in November 2011, the applicable rate of interest was LIBOR plus 3.50% and under the base rate option, the applicable interest rate was the base rate plus 2.50%.

On April 16, 2010, the Company borrowed $150 million under the Second Lien Credit Agreement to pay dividends to our preferred and common shareholders. This second lien loan was issued at a 2% discount and was to mature in April 2016. The second lien loan bore interest based upon LIBOR or base rate options. Under the LIBOR option, the applicable rate was LIBOR plus 8.0% (subject to a floor of 2%) and under the base rate option, the applicable rate was the base rate plus 7.0%.

Non-GAAP Measures

We present Adjusted EBITDA, a non-GAAP measure, to provide investors with a supplemental measure of our operating performance. We define Adjusted EBITDA as earnings before interest expense, provision for income taxes, depreciation and amortization, LIFO charges, amortization of deferred financing costs, non-cash compensation expenses arising from the issuance of stock, costs incurred in connection with our IPO (or subsequent offerings of our Roundy’s common stock), loss on debt extinguishment, certain non-recurring or unusual employee and pension related costs and goodwill impairment charges. Omitting interest, taxes and the other items provides a financial measure that facilitates comparisons of our results of operations with those of companies having different capital structures. Since the levels of indebtedness, tax structures, and methodologies in calculating LIFO expense that other companies have are different from ours, we omit these amounts to facilitate investors’ ability to make these comparisons. Similarly, we omit depreciation and amortization because other companies may employ a greater or lesser amount of owned property, and because in our experience, whether a store is new or one that is fully or mostly depreciated does not necessarily correlate to the contribution that such store makes to operating performance. We believe that investors, analysts and other interested parties consider Adjusted EBITDA an important measure of our operating performance. Adjusted EBITDA should not be considered as an alternative to net income as a measure of our performance. Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

 

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Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. The limitations of Adjusted EBITDA include: (i) it does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; (ii) it does not reflect changes in, or cash requirements for, our working capital needs; (iii) it does not reflect income tax payments we may be required to make; and (iv) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

To properly and prudently evaluate our business, we encourage you to review our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 29, 2012 and the reconciliation to Adjusted EBITDA from net income, the most directly comparable financial measure presented in accordance with GAAP, set forth in the table below. All of the items included in the reconciliation from net income to Adjusted EBITDA are either (i) non-cash items or (ii) items that management does not consider in assessing our on-going operating performance. In the case of the non-cash items, management believes that investors may find it useful to assess our comparative operating performance because the measures without such items are less susceptible to variances in actual performance resulting from depreciation, amortization and other non-cash charges and more reflective of other factors that affect operating performance. In the case of the other items that management does not consider in assessing our on-going operating performance, management believes that investors may find it useful to assess our operating performance if the measures are presented without these items because their financial impact may not reflect on-going operating performance.

The following is a summary of the calculation of Adjusted EBITDA for the thirteen and twenty-six weeks ended June 30, 2012 and June 29, 2013 (in thousands):

 

		Thirteen Weeks Ended								Twenty-six Weeks Ended
		June 30, 2012				June 29, 2013				June 30, 2012				June 29, 2013
Net Income		$	18,911			$	13,472			$	21,182			$	22,119
Interest expense			11,594				11,468				25,660				23,052
Provision for income taxes			12,607				8,314				12,927				14,191
Depreciation and amortization expense			15,676				16,412				32,211				32,810
LIFO charges			500				170				1,250				670
Amortization of deferred financing costs			574				574				1,266				1,147
Non-cash stock compensation expense			419				762				657				1,151
One-time IPO expenses			—				—				519				—
Loss on debt extinguishment			—				—				13,304				—
Adjusted EBITDA		$	60,281			$	51,172			$	108,976			$	95,140

Our principal sources of liquidity are cash flows generated from operations and borrowings under our revolving credit facility. Our principal uses of cash are to meet debt service requirements, finance capital expenditures, make acquisitions and provide for working capital. We expect that current excess cash, cash available from operations and funds available under our revolving credit facility will be sufficient to fund our operations, debt service requirements and capital expenditures for at least the next 12 months.

Our ability to make payments on and to refinance our debt, and to fund planned capital expenditures depends on our 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 our control. We believe that, based upon current levels of operations, we will be able to meet our debt service obligations when due. Significant assumptions underlie this belief, including, among other things, that we will continue to be successful in implementing our business strategy and that there will be no material adverse developments in our business, liquidity or capital requirements. If our future cash flow from operations and other capital resources are insufficient to pay our obligations as they mature or to fund our liquidity needs, we may be forced to reduce or delay our business activities and capital expenditures, sell assets, obtain additional debt or equity capital or restructure or refinance all or a portion of our debt, on or before maturity. There can be no assurance that we 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 our existing and future indebtedness may limit our ability to pursue any of these alternatives.

Critical Accounting Policies and Estimates

The preparation of our financial statements in conformity with U.S. GAAP requires us 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. We believe our estimates and assumptions are reasonable; however, future results could differ from those estimates under different assumptions or conditions.

 

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Critical accounting policies are policies that reflect material judgment and uncertainty and may result in materially different results using different assumptions or conditions. We identified the following critical accounting policies and estimates: inventories, income taxes, discounts and vendor allowances, allowance for losses on receivables, closed facility lease commitments, reserves for self-insurance, employee benefit plans, goodwill, and impairment of long-lived assets. For a detailed discussion of accounting policies, refer to our Annual Report on Form 10-K for the fiscal year ended December 29, 2012.

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes in our exposure to market risk from the information provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk of our Annual Report on Form 10-K for the fiscal year ended December 29, 2012.

 

Item 4.

Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (“Exchange Act”), the Chief Executive Officer and the Chief Financial Officer, together with a disclosure review committee appointed by the Chief Executive Officer, evaluated Roundy’s disclosure controls and procedures as of June 29, 2013, the end of the period covered by this report. Based on that evaluation, Roundy’s Chief Executive Officer and Chief Financial Officer concluded that Roundy’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) were effective as of the end of the period covered by this report to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under 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 our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In connection with the evaluation described above, there were no changes in our internal control over financial reporting during the quarter ended June 29, 2013, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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Part II – Other Information

 

Item 1.

Legal Proceedings

None.

 

Item 1A.

Risk Factors

There were no material changes in risk factors for the Company in the period covered by this report. See the discussion of risk factors in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 29, 2012.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

 

Item 3.

Defaults Upon Senior Securities

None.

 

Item 4.

Mine Safety Disclosures

None.

 

Item 5.

Other Information

None.

 

Item 6.

Exhibits

Reference is made to the separate exhibit index contained on page 22 filed herewith.

 

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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.

 

 

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Exhibit Index

 

Exhibit Number		Description
10.1		Form of 2013 Restricted Stock Agreement (incorporated by reference to Exhibit 99.1 to the registrant’s Current Report on Form 8-K dated April 23,2013 in Commission File No. 001-35422
31.1		Certification Statement of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification Statement of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

 

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