1
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-60178
PROSPECTUS SUPPLEMENT
TO PROSPECTUS DATED JULY 13, 2001
[FLEMING COMPANIES, INC. LOGO]
$150,000,000
FLEMING COMPANIES, INC.
5.25% Convertible Senior Subordinated Notes Due 2009
Shares of Common Stock Issuable Upon Conversion of the Notes
This prospectus supplement relates to the resale by the selling
securityholders of 5.25% Convertible Senior Subordinated Notes of Fleming
Companies, Inc. and the shares of common stock, par value $2.50 per share, of
Fleming Companies, Inc. issuable upon conversion of the notes.
This prospectus supplement should be read in conjunction with the prospectus
dated July 13, 2001.
The following table sets forth information concerning beneficial ownership of
the notes of the selling securityholders as listed below. This table supplements
the information provided in the prospectus dated July 13, 2001. All information
concerning beneficial ownership has been furnished by the selling
securityholders.
PRINCIPAL AMOUNT
OF NOTES PERCENTAGE NUMBER OF PERCENTAGE OF
BENEFICIALLY OWNED OF NOTES CONVERSION SHARES COMMON STOCK
NAME AND OFFERED HEREBY OUTSTANDING THAT MAY BE SOLD(1) OUTSTANDING(2)
---- ------------------ ----------- ------------------- --------------
Arkansas Teachers Retirement................. $3,244,000.00 2.16% 107,169 *
BNP Paribas Equity Strategies, SNC (3)....... $31,266,000.00 20.84% 1,032,904 2.30%
Baptist Health of South Florida.............. $444,000.00 * 14,668 *
Bear, Stearns & Co. Inc. (4)................. $1,000,000.00 * 33,036 *
Boston Museum of Fine Art.................... $35,000.00 * 1,156 *
Delta Air Lines Master Trust (5)............. $225,000.00 * 7,433 *
Deutsche Banc Alex. Brown Inc. (6)........... $2,700,000 1.80% 89,197 *
Engineers Joint Pension Fund................. $405,000.00 * 13,380 *
Enterprise Convertible Securities Fund....... $132,000.00 * 4,361 *
Innovest Finanzdienstleistungs............... $450,000.00 * 14,866 *
KD Offshore Fund CV.......................... $1,000,000.00 * 33,036 *
Kellner, Dileo & Co.......................... $1,000,000.00 * 33,036 *
Lumbermens................................... $422,000.00 * 13,941 *
Motion Picture Industry...................... $470,000.00 * 15,527 *
New York Life Insurance Company.............. $4,300,000.00 2.87% 124,055 *
New York Life Insurance and
Annuity Corporation........................ $700,000.00 * 23,125 *
Nicholas Applegate Convertible Fund.......... $1,238,000.00 * 40,899 *
Physicians Life.............................. $320,000.00 * 10,572 *
Quattro Fund, Ltd............................ $2,000,000.00 1.33% 66,072 *
San Diego City Retirement.................... $776,000.00 * 25,636 *
San Diego County Convertible................. $1,562,000.00 1.04% 51,602 *
Screen Actors Guild.......................... $429,000.00 * 14,172 *
Wake Forest University....................... $618,000.00 * 20,416 *
Writers Guild................................ $254,000.00 * 8,391 *
2
PRINCIPAL AMOUNT
OF NOTES PERCENTAGE NUMBER OF PERCENTAGE OF
BENEFICIALLY OWNED OF NOTES CONVERSION SHARES COMMON STOCK
NAME AND OFFERED HEREBY OUTSTANDING THAT MAY BE SOLD(1) OUTSTANDING(2)
---- ------------------ ----------- ------------------- --------------
Wyoming State Treasurer...................... $866,000.00 * 28,609 *
-----------
* Less than one percent of Notes or common stock outstanding, as applicable.
(1) Consists of shares of common stock issuable upon conversion of the notes,
assuming a conversion price of $30.27 and a cash payment in lieu of any
fraction share interest. The conversion price is subject to adjustment as
described in the prospectus under "Description of Notes -- Conversion
Rights."
(2) Calculated based on Rule 13d-3(d)(i) under the Securities Exchange Act of
1934 using 43,817,882 shares of common stock outstanding as of May 18, 2001.
In calculating this amount, we treated as outstanding the number of shares
of common stock issuable upon conversion of all of that particular holder's
notes. However, we did not assume the conversion of any other holder's
notes.
(3) BNP Paribas Equity Strategies, SNC disclosed to us in its selling
securityholder notice and questionnaire that it also beneficially owns
31,483 shares of our common stock in addition to its beneficial ownership of
the shares of common stock issuable upon conversion of its notes.
(4) Bear, Stearns & Co. Inc. disclosed to us in its selling securityholder
notice and questionnaire that it is a broker-dealer and was joint lead
managing underwriter in the private offering of the notes.
(5) Beneficial ownership information concerning Delta Air Lines Master Trust
replaces the beneficial ownership information listed in the prospectus.
(6) Deutsche Banc Alex. Brown Inc. is a broker-dealer and was joint lead
managing underwriter in the private offering of the notes.
The prospectus, together with this prospectus supplement, constitutes the
prospectus required to be delivered by Section 5(b) of the Securities Act of
1933, as amended, with respect to offers and sales of the notes and our common
stock issuable upon conversion of the notes. All references in the prospectus to
"this prospectus" are hereby amended to read "this prospectus (as supplemented
and amended)."
INVESTING IN THE NOTES AND THE COMMON STOCK ISSUABLE UPON THEIR CONVERSION
INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5 OF THE
PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus supplement is September 6, 2001.
S-2
3
PROSPECTUS
[FLEMING COMPANIES, INC. LOGO]
$150,000,000
FLEMING COMPANIES, INC.
5.25% Convertible Senior Subordinated Notes Due 2009
Shares of Common Stock Issuable Upon Conversion of the Notes
In March 2001, we issued and sold $150,000,000 aggregate principal amount of
our 5.25% Convertible Senior Subordinated Notes due 2009 in a private offering.
This prospectus will be used by selling securityholders to resell the Notes and
the common stock issuable upon conversion of the Notes. Interest on the Notes is
payable in arrears on March 15 and September 15 of each year, beginning on
September 15, 2001. The Notes mature on March 15, 2009 unless earlier converted
or redeemed. The Notes are unsecured and rank junior to our existing and future
senior indebtedness.
The holders of the Notes may convert all or any portion of a note in
multiples of $1,000 into our common stock at a conversion price of $30.27 per
share, subject to adjustment in certain events. Our common stock is traded on
the New York Stock Exchange under the symbol "FLM." On July 9, 2001, the last
reported sale price for our common stock on the New York Stock Exchange was
$36.10 per share.
Prior to March 22, 2004, we may not redeem the Notes. Beginning March 22,
2004, we may redeem all or a portion of the Notes if the closing price of our
common stock exceeds 120% of the conversion price then in effect for at least 20
trading days within a period of 30 consecutive trading days ending on the
trading day before the date of mailing of the redemption notice. Holders of the
Notes may also require us to repurchase the Notes upon a change of control, as
defined in the indenture governing the Notes, at 100% of the principal amount
thereof, plus accrued and unpaid interest to the date of repurchase. You can
find a more extensive description of the Notes, as well as a list of the prices
at which the Notes may be redeemed, under the heading "Description of Notes"
beginning on page 15.
We will not receive any proceeds from the sale by the selling
securityholders of the Notes or the common stock issuable upon conversion of the
Notes. Other than selling commissions and fees and stock transfer taxes, we will
pay all expenses of the registration and sale of the Notes and the common stock.
INVESTING IN THE NOTES AND THE COMMON STOCK ISSUABLE UPON THEIR CONVERSION
INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is July 13, 2001.
4
----------------
TABLE OF CONTENTS
PAGE
----
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS.......................... i
PROSPECTUS SUMMARY....................................................... 1
RISK FACTORS............................................................. 5
RATIO OF EARNINGS TO FIXED CHARGES....................................... 12
USE OF PROCEEDS.......................................................... 12
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY.......................... 12
CAPITALIZATION........................................................... 13
DESCRIPTION OF OTHER INDEBTEDNESS........................................ 14
DESCRIPTION OF NOTES..................................................... 15
DESCRIPTION OF CAPITAL STOCK............................................. 26
SELLING SECURITYHOLDERS.................................................. 28
PLAN OF DISTRIBUTION..................................................... 30
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS................. 32
LEGAL MATTERS............................................................ 37
INDEPENDENT AUDITORS..................................................... 37
INCORPORATION BY REFERENCE............................................... 37
WHERE YOU CAN FIND MORE INFORMATION...................................... 38
We have not authorized any dealer, salesperson or other person to give any
information or to make any representations to you other than the information
contained in this prospectus. You must not rely on any information or
representations not contained in this prospectus as if we had authorized it. The
information contained in this prospectus is current only as of the date on the
cover page of this prospectus, and may change after that date. We do not imply
that there has been no change in the information contained in this prospectus or
in our affairs since that date by delivering this prospectus.
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION
ABOUT US THAT IS NOT INCLUDED IN OR DELIVERED WITH THIS PROSPECTUS. THIS
INFORMATION IS AVAILABLE WITHOUT CHARGE TO YOU UPON WRITTEN OR ORAL REQUEST. IF
YOU WOULD LIKE A COPY OF ANY OF THIS INFORMATION, PLEASE SUBMIT YOUR REQUEST TO
1945 LAKEPOINTE DRIVE, BOX 299013, LEWISVILLE, TEXAS 75029, ATTENTION: LEGAL
DEPARTMENT, OR CALL (972) 906-8000 AND ASK TO SPEAK TO SOMEONE IN OUR LEGAL
DEPARTMENT.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
All statements other than statements of historical facts included in this
prospectus, including, without limitation, statements in the section entitled
"Risk Factors" and elsewhere in this prospectus regarding our future financial
position, business strategy and our management's plans and objectives for future
operations, are forward-looking statements. Forward-looking statements generally
can be identified by the use of forward-looking terminology such as "may,"
"will," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or
the negative thereof or variations thereon or similar terminology. Although we
believe that the expectations reflected in these forward-looking statements are
reasonable, these expectations may not prove to be correct. Important factors
that could cause actual results to differ materially from our expectations are
disclosed under the section "Risk Factors" and elsewhere in this prospectus,
including, without limitation, in conjunction with the forward-looking
statements included in this prospectus. All subsequent written and oral
forward-looking statements attributable to us, or persons acting on our behalf,
are expressly qualified in their entirety by the cautionary statements.
ii
5
PROSPECTUS SUMMARY
In this prospectus, the words "Fleming," "the Company," "ours," "us" and
"we" refer to Fleming Companies, Inc., the issuer of the Notes, and its
subsidiaries. The following summary contains basic information about us and this
offering. It likely does not contain all the information that is important to
you. For a more complete understanding of this offering, we encourage you to
read this entire document and the documents we have referred you to.
THE COMPANY
We are an industry leader in the distribution of consumable goods, and also
have a growing presence in operating "price impact" supermarkets. Through our
low-cost, high-volume nationwide network of distribution centers, we distribute
products to customers that operate approximately 3,000 supermarkets, 5,000
convenience stores and nearly 1,000 supercenters, discounts stores, limited
assortment stores, drug stores, specialty stores and other stores across the
United States. We expect to substantially increase our distribution volume in
connection with, among other things, our recently announced ten-year $4.5
billion per year strategic alliance with our largest customer, Kmart
Corporation, under which we will supply to Kmart substantially all of the food
and consumable products in all current and future Kmart and Kmart supercenter
stores in the United States and the Caribbean.
As of April 23, 2001, our retail group owned and operated 103 supermarkets,
comprised of 38 price impact supermarkets that offer deep-discount, everyday low
prices in a warehouse-style format under the Food 4 Less banner, an additional
ten supermarkets that we intend to convert to the price impact format, 44
supermarkets that utilize certain elements of the price impact format under our
Rainbow Foods banner, and 11 limited assortment stores that offer a narrow
selection of low-price, private label food and other consumable goods and
general merchandise under our Yes!Less banner.
On March 22, 2001, an affiliate of The Yucaipa Companies, an investment
group controlled by Ron Burkle, completed a $50 million investment in our common
stock. Through this investment, Yucaipa acquired approximately 3.8 million newly
issued shares, representing approximately 8.7% of our outstanding common stock.
Yucaipa has substantial experience in the retailing and distribution sectors,
including past investments in such food retailers as Food 4 Less Supermarkets,
Inc., Ralph's Grocery Company, Dominick's Finer Foods and Fred Meyer, Inc.
Yucaipa also acquired a 12-month option to invest an additional $50 million in
our common stock at the then-current average market price.
Our principal executive offices are located at 1945 Lakepointe Drive,
Lewisville, Texas, 75057. Our telephone number at that location is (972)
906-8000.
RECENT DEVELOPMENTS
Furrs Asset Purchase
On June 27, 2001, we bid $57 million to purchase certain assets of 66 Furrs
Supermarkets stores in New Mexico and Texas and approximately $43 million for
related inventory. Our bid was accepted by Furrs' board of directors on June 27,
2001 and was approved by a U.S. Bankruptcy Court on June 29, 2001. We anticipate
that the majority of these stores will be purchased directly from Furrs by
independent supermarkets and chain supermarket retailers, most of whom we would
serve as their supplier.
6
THE OFFERING
Securities Offered......... $150 million aggregate principal amount of 5.25% Convertible Senior
Subordinated Notes due 2009.
Issuer..................... Fleming Companies, Inc.
Maturity Date.............. The Notes mature on March 15, 2009.
Interest................... 5.25% per annum on the principal amount, payable semi-annually in arrears in
cash on March 15 and September 15 of each year, commencing September 15, 2001.
Ranking.................... The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all existing and future senior indebtedness of the
Company, including all obligations of the Company under our credit facility
and our 10 1/8% Senior Notes due 2008, equal in right of payment to all
existing and future senior subordinated debt of the Company and senior to all
future subordinated debt of the Company. The guarantees by our subsidiaries
are general unsecured obligations of such subsidiaries, subordinated in right
of payment to all of such subsidiaries' existing and future senior
indebtedness, equal in right of payment to all of such subsidiaries' existing
and future senior subordinated indebtedness and senior to all future
subordinated indebtedness of such subsidiaries. As of April 21, 2001, we and
our subsidiaries had $1.6 billion of debt, of which $987 million was Senior
Indebtedness (excluding $425 million that we had available to borrow under our
credit facility). The indenture under which the Notes have been issued does
not restrict our ability to incur additional debt, nor does it restrict the
ability of our subsidiaries to incur additional debt.
Guarantees................. Our wholly-owned domestic subsidiaries as of March 15, 2001 are
unconditionally guaranteeing the Notes. If we create or acquire a new
wholly-owned subsidiary or if any subsidiary guarantees certain other debt, it
will guarantee the Notes unless we designate the subsidiary as an
"unrestricted subsidiary" under the indenture.
Conversion Rights.......... Holders may convert some or all of their Notes at any time after June 13, 2001
and before the close of business on the business day immediately preceding the
maturity date at a conversion price of $30.27 per share. The initial
conversion price is equivalent to a conversion rate of approximately 33.0360
shares per $1,000 principal amount of Notes. The conversion price is subject
to adjustment in certain circumstances. See "Description of Notes --
Conversion Rights."
Sinking Fund............... None.
Optional Redemption........ We may redeem the Notes at any time on or after March 22, 2004 if the closing
price of our common stock exceeds 120% of the conversion price then in effect
for at least 20 trading days within a period of 30 consecutive trading days
ending on the trading day before the date of mailing of the redemption notice
at specified prices plus accrued and unpaid interest.
Repurchase Right of Holders
Upon a Change of Control... If a Change of Control, as that term is defined in "Description of Notes --
Right to Require Purchase of Notes upon a Change of Control," occurs, you will
have the right to require us to repurchase your Notes at a purchase price
equal to 100% of the principal amount, plus accrued and unpaid interest to the
date of repurchase. The purchase price is payable in cash.
Use of Proceeds............ The selling securityholders will receive all of the proceeds from the sale
under this prospectus of the Notes and the common stock issuable upon
conversion of the Notes. We will not receive any proceeds from these sales.
2
7
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The table below includes summary historical consolidated financial
information for our company. You should read the information set forth below
together with the other financial information contained in and incorporated by
reference into this prospectus.
FISCAL YEAR ENDED(1) 16 WEEKS ENDED
-------------------------------------------- -------------------------
DECEMBER 26, DECEMBER 25, DECEMBER 30, APRIL 15, APRIL 21,
1998(2) 1999(3) 2000(4) 2000(5) 2001(6)
------------ ------------ ------------ --------- ---------
(UNAUDITED)
INCOME STATEMENT DATA:
Net sales(7) ................................... $ 14,678 $ 14,272 $ 14,444 $ 4,331 $ 4,161
Costs and expenses:
Cost of sales(7) ............................. 13,228 12,835 13,097 3,915 3,795
Selling and administrative ................... 1,251 1,262 1,185 372 317
Interest expense ............................. 161 165 175 53 58
Interest income .............................. (37) (40) (33) (10) (9)
Equity investment results .................... 12 10 8 2 --
Litigation charges ........................... 8 -- -- -- --
Impairment/restructuring charge .............. 653 103 213 42 (27)
-------- -------- -------- -------- --------
Total costs and expenses .................. 15,276 14,335 14,645 4,374 4,134
-------- -------- -------- -------- --------
Earnings (loss) before taxes ................... (598) (63) (201) (43) 27
Taxes on income (loss) ......................... (87) (18) (79) (17) 12
-------- -------- -------- -------- --------
Earnings (loss) before extraordinary charge .... (511) (45) (122) (26) 15
Extraordinary charge from early retirement of
debt (net of taxes)............................. -- -- -- -- (3)
-------- -------- -------- -------- --------
Net earnings (loss) ....................... $ (511) $ (45) $ (122) $ (26) $ 12
======== ======== ======== ======== ========
Diluted earnings (loss) per share .............. $ (13.48) $ (1.17) $ (3.15) $ (0.67) $ 0.29
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents .................... $ 6 $ 7 $ 30 $ 21 $ 27
Total assets ................................. 3,491 3,573 3,403 3,313 3,176
Total debt (including current maturities and
capital leases)............................. 1,566 1,694 1,669 1,647 1,636
Shareholders' equity ......................... 570 561 427 535 494
OTHER FINANCIAL DATA:
EBITDA(8) .................................... $ (237) $ 281 $ 154 $ 69 $ 137
Depreciation and amortization(9) ............. 180 158 169 54 51
Capital expenditures ......................... 200 166 151 38 48
------------
(1) Fiscal 2000 is a 53 week year; all other years are 52 weeks.
(2) The results in 1998 reflect an impairment/restructuring charge with related
costs totaling $668 million ($543 million after-tax) related to the
strategic plan.
(3) The results in 1999 reflect an impairment/restructuring charge with related
costs totaling $137 million ($92 million after-tax) related to our strategic
plan. Such period also reflects one-time items ($31 million charge to close
ten conventional retail stores, income of $22 million from extinguishing a
portion of the self-insured workers' compensation liability, interest income
of $9 million related to refunds in federal income taxes from prior years,
and $6 million in gains from the sale of distribution facilities) netting to
$6 million of income ($3 million after-tax).
(4) The results in 2000 reflect an impairment/restructuring charge with related
costs totaling $309 million ($183 million after-tax) relating to our
strategic plan. Such period also reflects one-time items ($10 million charge
related primarily to asset impairment on retail stores, income of $2 million
relating to litigation settlements, and $9 million in gains from the sale of
distribution facilities) netting to less than $1 million of income ($1
million loss after-tax).
3
8
(5) The results for the 16 weeks ended April 15, 2000, reflect an
impairment/restructuring charge with related costs totaling $64 million ($38
million after-tax) relating to our strategic plan. There were no one-time
adjustments for such period.
(6) The results for the 16 weeks ended April 21, 2001, reflect pre-tax income of
$1 million (less than $1 million after-tax) relating to our strategic plan,
primarily resulting from the recovery of previously recorded asset
impairment charges. Such period also reflects one-time items (approximately
$2 million in charges from litigation settlements, net additional interest
expense of approximately $2 million due to early retirement of debt, and
approximately $1 million in income from the sale of retail facilities)
netting to $3 million of expense ($2 million after-tax).
(7) During the fourth quarter of 2000 we adopted EITF 99-19 and restated sales
and cost of sales for all prior periods. The adoption had no effect on gross
margins or earnings.
(8) EBITDA is earnings before extraordinary items, interest expense, income
taxes, depreciation and amortization, equity investment results and LIFO
provision. EBITDA should not be considered as an alternative measure of our
net income, operating performance, cash flow or liquidity. We provide it as
additional information related to our ability to service debt; however,
conditions may require conservation of funds for other uses. Although we
believe EBITDA enhances your understanding of our financial condition, this
measure, when viewed individually, is not necessarily a better indicator of
any trend as compared to conventionally computed measures (e.g., net sales,
net earnings, net cash flows, etc.). Amounts presented may not be comparable
to similar measures disclosed by other companies.
(9) Depreciation and amortization expense includes goodwill amortization and
excludes amortization of debt cost which is reflected in interest expense.
4
9
RISK FACTORS
Purchasing the Notes involves a high degree of risk. You should consider
carefully the risks described below, together with the other information in this
prospectus, before you make a decision to purchase the Notes. If any of the
following risks actually occur, our business, financial condition, operating
results and prospects could be materially adversely affected, which in turn
could adversely affect our ability to repay the Notes.
WE HAVE A SUBSTANTIAL AMOUNT OF DEBT AND DEBT SERVICE OBLIGATIONS, WHICH COULD
ADVERSELY AFFECT OUR FINANCIAL HEALTH AND PREVENT US FROM FULFILLING OUR
OBLIGATIONS UNDER THE NOTES.
We have a substantial amount of debt outstanding. The following chart shows
certain important credit statistics as of April 21, 2001.
AS OF
APRIL 21, 2001
--------------
Total debt (including capital leases).......... $1,636 million
Shareholders' equity........................... $ 494 million
Debt to equity ratio........................... 3.3x
Our substantial amount of debt could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations with respect to
the Notes;
- require us to dedicate a substantial portion of our cash flow to
payments on our debt;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to fund future working capital, capital expenditures
and other general corporate requirements;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate; and
- limit, along with the financial and other restrictive covenants in our
debt, among other things, our ability to borrow additional funds. If we
fail to comply with those covenants, it could result in an event of
default which, if not cured or waived, could have a material adverse
effect on our financial condition.
We and our subsidiaries may be able to incur substantial additional debt in
the future, including secured debt. The terms of our existing indebtedness do
not fully prohibit us or our subsidiaries from doing so. As of April 21, 2001,
our credit facility permitted additional borrowings of up to $425 million and
all of those borrowings would be senior to the Notes. If new debt is added to
our and our subsidiaries' current debt levels, the related risks that we and
they now face could intensify.
Our ability to make payments on and to refinance our debt, including these
Notes, will depend on our financial and operating performance, which may
fluctuate significantly from quarter to quarter and is subject to prevailing
economic conditions and to financial, business and other factors beyond our
control.
We cannot assure you that our business will generate sufficient cash flow
from operations or that future borrowings will be available to us under our
credit facility in an amount sufficient to enable us to pay our debt, including
the Notes, or to fund our other liquidity needs. We may need to refinance all or
a portion of our debt, including the Notes, on or before maturity. We cannot
assure you that we will be able to refinance any of our debt, including our
credit facility and the Notes, on commercially reasonable terms or at all.
THE NOTES ARE SUBORDINATED TO ALL SENIOR INDEBTEDNESS.
The Notes and the guarantees of the Notes by our subsidiaries are
subordinated in right of payment to all of our existing and future Senior
Indebtedness, as defined in the "Description of Notes -- Subordination" section
of this prospectus. As a result, in the event of bankruptcy, liquidation or
reorganization or upon acceleration of the Notes due to an event of default and
in specific other events, our assets will be available to pay obligations on the
Notes only after all Senior Indebtedness has been paid in full in cash or other
payment satisfactory to the holders of Senior Indebtedness. There may not be
sufficient assets remaining to pay amounts due on any or
5
10
all of the Notes then outstanding. The indenture does not prohibit or limit the
incurrence of Senior Indebtedness by us or the incurrence of other indebtedness
and other liabilities by us or our subsidiaries. The incurrence of additional
indebtedness and other liabilities could adversely affect our ability to pay our
obligations on the Notes. As of April 21, 2001, we and our subsidiaries had $1.6
billion of indebtedness of which $987 million was senior to the Notes. We
anticipate that from time to time we may incur additional indebtedness,
including Senior Indebtedness.
WE NOW DEPEND ON KMART FOR A SUBSTANTIAL PORTION OF OUR BUSINESS. IF WE ARE
UNABLE TO REALIZE ANTICIPATED COST SAVINGS RESULTING FROM THE ADDITIONAL VOLUME
REPRESENTED BY OUR AGREEMENT, IT COULD HARM OUR FINANCIAL CONDITION, WHICH COULD
JEOPARDIZE OUR ABILITY TO FULFILL OUR OBLIGATIONS UNDER THE NOTES.
Kmart is our largest customer, accounting for 9.8% of our net sales in 2000.
On February 7, 2001, we announced a ten-year agreement with Kmart Corporation,
pursuant to which we agreed to supply substantially all of the food and
consumable products in all current and future Kmart and Kmart supercenter stores
in the U.S. and the Caribbean. As a result of this agreement, we currently
anticipate that Kmart will account for a significantly greater percentage of our
net sales in 2001. Accordingly, we now depend on Kmart for a substantial portion
of our business.
We will be required to commit substantial capital expenditures and
management resources in order to perform our obligations under the Kmart
agreement. If we or Kmart are unable to successfully fulfill our respective
obligations under the agreement, it will harm our financial condition, which
could jeopardize our ability to fulfill our obligations under the Notes. More
specifically, the bulk of the benefits that we anticipate receiving from the
Kmart agreement depend on Kmart's achievement of certain sales projections. If
Kmart fails to meet these sales projections, the benefits that we will receive
as a result of the agreement will decrease. Kmart can also elect to terminate
the agreement if we materially breach our obligations under the agreement, if we
experience certain types of changes of control or if the volume of Kmart's
purchases under the agreement declines by certain amounts. Finally, if we are
unable to capture anticipated cost savings resulting from our increased
purchasing power due to the Kmart agreement, it could adversely affect our
results of operations and financial condition.
THE INDENTURE FOR OUR 10 1/8% SENIOR NOTES DUE 2008, OUR CREDIT FACILITY AND OUR
OTHER EXISTING INDEBTEDNESS CONTAIN PROVISIONS THAT COULD MATERIALLY RESTRICT
OUR BUSINESS.
The indenture for the 10 1/8% Senior Notes due 2008, our credit facility and
our other existing indebtedness contain a number of significant covenants that,
among other things, restrict our ability to:
- dispose of assets;
- incur additional debt;
- guarantee third-party obligations;
- repay other debt or amend other debt instruments;
- create liens on assets;
- enter into capital leases;
- make investments, loans or advances;
- make acquisitions or engage in mergers or consolidations;
- make capital expenditures; and
- engage in certain transactions with our subsidiaries and affiliates.
In addition, under our credit facility, we are required to meet a number of
financial ratios and tests.
Our ability to comply with these covenants may be affected by events beyond
our control. If we breach any of these covenants or restrictions, it could
result in an event of default under our credit facility, the indenture for the
senior notes, or the indenture or other
6
11
documents governing our other existing indebtedness, which would permit our
lenders to declare all amounts borrowed thereunder to be due and payable,
together with accrued and unpaid interest, and our senior lenders could
terminate their commitments to make further extensions of credit under our
credit facility. Additionally, if we were unable to repay debt to our secured
lenders, they could proceed against the collateral securing the debt.
NOT ALL OF OUR SUBSIDIARIES GUARANTEE THE NOTES, AND YOUR RIGHT TO RECEIVE
PAYMENTS ON THE NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR NON-GUARANTOR
SUBSIDIARIES DECLARE BANKRUPTCY, LIQUIDATE OR REORGANIZE.
Not all of our subsidiaries guarantee the Notes. In the event any of our
non-guarantor subsidiaries becomes insolvent, liquidates, reorganizes, dissolves
or otherwise winds up, holders of their indebtedness and their trade creditors
will generally be entitled to payment on their claims from the assets of those
subsidiaries before any of those assets are made available to us. Consequently,
your claims in respect of the Notes will be effectively subordinated to all of
the liabilities of our non-guarantor subsidiaries.
IF THE CUSTOMERS TO WHOM WE LEND MONEY OR FOR WHOM WE GUARANTEE STORE LEASE
OBLIGATIONS FAIL TO REPAY US, IT COULD HARM OUR FINANCIAL CONDITION.
We provide subleases, extend loans to and make investments in many of our
retail store customers, often in conjunction with the establishment of long-term
supply contracts. Our loans to our customers are generally not investment grade
and, along with our equity investments in our customers, are highly illiquid. We
also make investments in our customers through direct financing leases, lease
guarantees, operating leases, credit extensions for inventory purchases and the
recourse portion of notes sold evidencing such loans. We also invest in real
estate to assure market access or to secure supply points. Although we have
strict credit policies and apply cost/benefit analyses to these investment
decisions, we face the risk that credit losses from existing or future
investments or commitments could adversely affect our financial condition.
VARIOUS CHANGES IN THE DISTRIBUTION AND RETAIL MARKETS IN WHICH WE OPERATE HAVE
LED AND MAY CONTINUE TO LEAD TO REDUCED SALES AND MARGINS AND LOWER
PROFITABILITY FOR OUR CUSTOMERS AND, CONSEQUENTLY, FOR US.
The distribution and retail markets in which we operate are undergoing
accelerated change as distributors and retailers seek to lower costs and provide
additional services in an increasingly competitive environment. An example of
this is the growing trend of large self-distributing chains consolidating to
reduce costs and gain efficiencies. Eating away from home and alternative format
food stores, such as warehouse stores and supercenters, have taken market share
from traditional supermarket operators, including independent grocers, many of
whom are our customers. Vendors, seeking to ensure that more of their
promotional fees and allowances are used by retailers to increase sales volume,
increasingly direct promotional dollars to large self-distributing chains. We
believe that these changes have led to reduced sales, reduced margins and lower
profitability among many of our customers and, consequently, for us. If the
strategies we have developed in response to these changing market conditions are
not successful, it could harm our financial condition and business prospects.
CONSUMABLE GOODS DISTRIBUTION IS A LOW-MARGIN BUSINESS AND IS SENSITIVE TO
ECONOMIC CONDITIONS.
We derive most of our revenues from the consumable goods distribution
industry. This industry is characterized by a high volume of sales with
relatively low profit margins. A significant portion of our sales are at prices
that are based on product cost plus a percentage markup. Consequently, our
results of operations may be negatively impacted when the price of consumable
goods go down, even though our percentage markup may remain constant. The
consumable goods industry is also sensitive to national and regional economic
conditions, and the demand for our consumable goods has been adversely affected
from time to time by economic downturns. Additionally, our distribution business
is sensitive to increases in fuel and other transportation-related costs.
WE FACE INTENSE COMPETITION IN BOTH OUR DISTRIBUTION AND RETAIL MARKETS, AND IF
WE ARE UNABLE TO COMPETE EFFECTIVELY IN THESE MARKETS, IT COULD HARM OUR
BUSINESS.
Our distribution group operates in a highly competitive market. We face
competition from local, regional and national food distributors on the basis of
price, quality and assortment, schedules and reliability of deliveries and the
range and quality of services provided. We also compete with retail supermarket
chains that self-distribute, purchasing directly from vendors and distributing
products to their supermarkets for sale to the consumer. Consolidation of
self-distributing chains may produce even stronger competition for our
distribution group.
7
12
Our retail group competes with other food outlets on the basis of price,
quality and assortment, store location and format, sales promotions,
advertising, availability of parking, hours of operation and store appeal.
Traditional mass merchandisers have gained a growing foothold in food marketing
and distribution with alternative store formats, such as warehouse stores and
supercenters, which depend on concentrated buying power and low-cost
distribution technology. We expect that stores with alternative formats will
continue to increase their market share in the future. Retail consolidations not
only produce stronger competition for our retail group, but may also result in
declining sales in our distribution group if our existing customers are acquired
by self-distributing chains.
Some of our competitors have greater financial and other resources than we
do. In addition, consolidation in the industry, heightened competition among our
vendors, new entrants and trends toward vertical integration could create
additional competitive pressures that reduce our margins and adversely affect
our business. If we fail to successfully respond to these competitive pressures
or to implement our strategies effectively, it could have a material adverse
effect on our financial condition and prospects.
BECAUSE WE OWN AND OPERATE REAL ESTATE, WE FACE THE RISK OF BEING HELD LIABLE
FOR ENVIRONMENTAL DAMAGES THAT MAY OCCUR ON OUR PROPERTIES.
Our facilities and operations are subject to various laws, regulations and
judicial and administrative orders concerning protection of the environment and
human health, including provisions regarding the transportation, storage,
distribution, disposal or discharge of certain materials. In conformity with
these provisions, we have a comprehensive program for testing, removal,
replacement or repair of our underground fuel storage tanks and for site
remediation where necessary. Although we have established reserves that we
believe will be sufficient to satisfy the anticipated costs of all known
remediation requirements, we cannot assure you that these reserves will be
sufficient.
We and others have been designated by the U.S. Environmental Protection
Agency and by similar state agencies as potentially responsible parties under
the Comprehensive Environmental Response, Compensation and Liability Act, or
CERCLA, or similar state laws, as applicable, with respect to EPA-designated
Superfund sites. While liability under CERCLA for remediation at these sites is
generally joint and several with other responsible parties, we believe that, to
the extent we are ultimately determined to be liable for the expense of
remediation at any site, such liability will not result in a material adverse
effect on our consolidated financial position or results of operations. We are
committed to maintaining the environment and protecting natural resources and
human health and to achieving full compliance with all applicable laws,
regulations and orders.
WE ARE CURRENTLY SUBJECT TO A NUMBER OF MATERIAL LITIGATION PROCEEDINGS. IF ANY
OF THESE PROCEEDINGS IS RESOLVED AGAINST US, IT COULD HARM OUR FINANCIAL
CONDITION AND BUSINESS PROSPECTS.
We are currently subject to a number of material litigation proceedings, the
costs and other effects of which are impossible to predict with any certainty.
An unfavorable outcome in any one of these cases could have a material adverse
effect on our financial condition and prospects. From time to time, we are also
party to or threatened with litigation in which claims against us are made, or
are threatened to be made, by present and former customers, sometimes in
situations involving financially troubled or failed customers. We are a party to
various other litigation and contingent loss situations arising in the ordinary
course of our business including:
- disputes with customers and former customers;
- disputes with owners and former owners of financially troubled or failed
customers;
- disputes with employees and former employees regarding labor conditions,
wages, workers' compensation matters and alleged discriminatory
practices;
- disputes with insurance carriers;
- tax assessments; and
- other matters,
some of which are for substantial amounts. The current environment for
litigation involving food distributors may increase the risk of litigation being
commenced against us. We would incur the costs of defending any such litigation
whether or not any claim had merit.
8
13
BECAUSE WE SELL FOOD AND OTHER PRODUCTS, WE ARE SUBJECT TO PRODUCT LIABILITY
CLAIMS.
Like any other seller of food and other products, we face the risk of
exposure to product liability claims in the event that people who purchase
products we sell become injured or experience illness as a result. We believe
that we have sufficient primary and excess umbrella liability insurance to
protect us against any product liability claims that may arise. However, this
insurance may not continue to be available at a reasonable cost, or, even if it
is available, it may not be adequate to cover our liabilities. We generally seek
contractual indemnification and insurance coverage from parties supplying our
products, but this indemnification or insurance coverage is limited, as a
practical matter, to the creditworthiness of the indemnifying party and the
policy limits of any insurance provided by suppliers. If we do not have adequate
insurance or contractual indemnification to cover our liabilities, product
liability claims relating to defective food and other products could materially
reduce our earnings.
WE CANNOT ASSURE YOU THAT WE WILL BE SUCCESSFUL IN INTEGRATING NEWLY-ACQUIRED
STORES AND DISTRIBUTION CENTERS. IF WE DO NOT ACHIEVE THE BENEFITS WE EXPECT
FROM ANY OF THESE ACQUISITIONS, IT COULD HARM OUR BUSINESS AND FINANCIAL
CONDITION.
Part of our growth strategy for our retail group involves selective
strategic acquisitions of stores operated by others. In addition, our
distribution group intends to seek strategic acquisitions of other distribution
centers on a limited basis. Achieving the benefits of these acquisitions will
depend in part on our ability to integrate those businesses with our business in
an efficient manner. We cannot assure you that this will happen or that it will
happen in an efficient manner. Our consolidation of operations following these
acquisitions may require substantial attention from our management. The
diversion of management attention and any difficulties encountered in the
transition and integration process could have a material adverse effect on our
ability to achieve expected net sales, operating expenses and operating results
for the acquired business. We cannot assure you that we will realize any of the
anticipated benefits of any acquisition, and if we fail to realize these
anticipated benefits, our operating performance could suffer.
WE OPERATE IN A COMPETITIVE LABOR MARKET, AND THE MAJORITY OF OUR EMPLOYEES ARE
COVERED BY COLLECTIVE BARGAINING AGREEMENTS.
Our continued success will depend on our ability to attract and retain
qualified personnel in both our distribution and retail groups. We compete with
other businesses in our markets with respect to attracting and retaining
qualified employees. The labor market is currently tight and we expect the tight
labor market to continue. A shortage of qualified employees would require us to
enhance our wage and benefits packages in order to compete effectively in the
hiring and retention of qualified employees or to hire more expensive temporary
employees. In addition, about half of our employees are covered by collective
bargaining agreements, most of which expire at various times over the course of
the next five years. We cannot assure you that we will be able to renew our
collective bargaining agreements, that our labor costs will not increase, that
we will be able to recover any increases through increased prices charged to
customers or that we will not suffer business interruptions as a result of
strikes or other work stoppages. If we fail to attract and retain qualified
employees, to control our labor costs, or to recover any increased labor costs
through increased prices charged to our customers, it could harm our business.
UNDER CERTAIN CIRCUMSTANCES, FEDERAL AND STATE LAWS MAY ALLOW COURTS TO VOID THE
NOTES AND THE GUARANTEES AND REQUIRE NOTEHOLDERS TO RETURN PAYMENTS THEY RECEIVE
FROM US.
Under the federal Bankruptcy Code and comparable provisions of state
fraudulent transfer laws, a court could void the Notes and guarantees or
subordinate claims in respect of the Notes and guarantees to all of our other
debts if, among other things, we or any of the guarantors, at the time we
incurred the indebtedness evidenced by the Notes or guarantees:
- received less than reasonably equivalent value or fair consideration for
the incurrence of such Notes or guarantees; and
- were insolvent or rendered insolvent by reason of the incurrence; or
- were engaged in a business or transaction for which our remaining assets
constituted unreasonably small capital; or
- intended to incur, or believed that we would incur, debts beyond our
ability to pay such debts as they became due.
In addition, a court could void any payment by us or a guarantor or require a
noteholder to return the payment to us or a guarantor, or to a fund for the
benefit of our creditors.
9
14
The measures of insolvency for purposes of these fraudulent transfer laws
vary depending upon the law applied in any proceeding to determine whether a
fraudulent transfer has occurred. Generally, however, we or a guarantor would be
considered insolvent if:
- the sum of our debts, including contingent liabilities, were greater
than the fair saleable value of all of our assets; or
- the present fair saleable value of our assets was less than the amount
that would be required to pay our probable liability on our existing
debts, including contingent liabilities, as they become absolute and
mature; or
- we could not pay our debts as they become due.
On the basis of our historical financial information, recent operating
history and other factors, we believe that after giving effect to the issuance
of the Notes and the guarantees, neither we nor any of the guarantors will be
insolvent, have unreasonably small capital for the respective businesses in
which we are engaged or have incurred debts beyond our respective abilities to
pay debts as they mature. However, we cannot assure you that a court making
these determinations would agree with our conclusions in this regard.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
OF CONTROL OFFER REQUIRED BY THE INDENTURE. IN ADDITION, OUR BYLAWS MAY NOT
PERMIT US TO MAKE THE CHANGE OF CONTROL PAYMENT EVEN IF WE DO HAVE THE FUNDS.
Upon the occurrence of a change of control of Fleming, we will be required
to offer to repurchase all outstanding Notes and other outstanding debt. If a
change of control were to occur, we cannot assure you that we would have
sufficient funds to pay the repurchase price for all the Notes tendered by the
holders. Our existing credit agreement and indentures contain, and any future
other agreements relating to other indebtedness to which we become a party may
contain, restrictions or prohibitions on our ability to repurchase Notes or may
provide that an occurrence of a change of control constitutes an event of
default under, or otherwise requires payment of amounts borrowed under those
agreements. If a change of control occurs at a time when we are prohibited from
repurchasing the Notes, we could seek the consent of our then existing lenders
and note holders to the repurchase of the Notes or could attempt to refinance
the borrowings that contain the prohibition. If we do not obtain such a consent
or repay the borrowings, we would remain prohibited from repurchasing the Notes.
In that case, our failure to repurchase tendered Notes would constitute an event
of default under the indenture and may constitute a default under the terms of
other indebtedness that we may enter into from time to time. In addition, our
bylaws contain a provision that prohibits us from adopting a shareholder rights
plan or any other form of "poison pill" without the prior approval of holders of
at least a majority of the shares of our outstanding capital stock. It is
unclear whether this provision of our bylaws would prohibit us from repurchasing
the Notes in the event of a change of control. If a court concluded that the
change of control provisions of the indenture were inconsistent with or
prohibited by our bylaws, we may not be able to repurchase the Notes. For more
details, see the section "Description of Notes" under the heading "Right to
Require Purchase of Notes upon a Change of Control."
A PUBLIC MARKET MAY NOT DEVELOP FOR THE NOTES.
On March 15, 2001, we issued the Notes to the initial purchasers in a
private placement. The Notes are eligible to trade on the PORTAL market.
However, the Notes resold pursuant to this prospectus will no longer trade on
the PORTAL market. As a result, there may be a limited market for the Notes. We
do not intend to list the Notes on any national securities exchange or on the
Nasdaq National Market.
A public market may not develop for the Notes. Although the initial
purchasers have advised us that they intend to make a market in the Notes, they
are not obligated to do so and may discontinue such market making at any time
without notice. In addition, such market making activity will be subject to the
limits imposed by the Securities Act and the Exchange Act. Accordingly, we
cannot assure you that any market for the Notes will develop or, if one does
develop, that it will be maintained. If an active market for the Notes fails to
develop or be sustained, the trading price of the Notes could be materially
adversely affected.
In addition, the liquidity of the trading market for the Notes, if any, and
the market price quoted for the Notes may be adversely affected by the changes
in interest rates in the market for high yield securities and by changes in our
financial performance or prospects, or in the prospects for companies in the
distribution and retailing industries generally.
VOLATILE TRADING PRICES MAY REQUIRE YOU TO HOLD THE NOTES FOR AN INDEFINITE
PERIOD OF TIME.
If a market develops for the Notes, the Notes might trade at prices higher
or lower than their initial offering price. The trading price would depend on
many factors, such as prevailing interest rates, the market for similar
securities, general economic conditions
10
15
and our financial condition, performance and prospects. Historically, the market
for non-investment grade debt has been subject to disruptions that have caused
substantial fluctuation in the prices of these securities. The market for the
Notes may be subject to such disruptions, which could have an adverse effect on
the price of the Notes. You should be aware that you may be required to bear the
financial risk of an investment in the Notes for an indefinite period of time.
OUR STOCK PRICE HAS BEEN AND IS LIKELY TO CONTINUE TO BE VOLATILE, WHICH MAY
MAKE IT DIFFICULT FOR YOU TO RESELL THE NOTES OR THE COMMON STOCK INTO WHICH THE
NOTES ARE CONVERTIBLE WHEN YOU WANT AT PRICES YOU FIND ATTRACTIVE.
The trading price of our common stock has been and is likely to be highly
volatile. Our stock price could be subject to wide fluctuations in response to a
variety of factors, including the following:
- actual or anticipated variations in quarterly operating results;
- announcements of technological innovations;
- new products or services offered by us or our competitors;
- changes in financial estimates by securities analysts;
- conditions or trends in the distribution and retail industries;
- our announcement of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;
- adverse or unfavorable publicity regarding us or our services;
- additions or departures of key personnel; and
- sales of common stock.
In addition, the stock markets in general have experienced extreme price and
volume volatility and a cumulative decline in recent months. Such volatility and
decline have affected many companies irrespective of or disproportionately to
the operating performance of these companies. These broad market and industry
factors may materially and adversely further affect the market price of our
common stock, regardless of our actual operating performance.
11
16
RATIO OF EARNINGS TO FIXED CHARGES
Our ratio of earnings to fixed charges is as follows:
16 WEEKS ENDED
------------------- YEAR ENDED
APRIL 21, APRIL 15, -------------------------------------
2001 2000 2000 1999 1998 1997 1996
------- ------- ------ ------ ------ ------ -----
Ratio of earnings to fixed charges(1)... 1.43x -- -- -- -- 1.41x 1.27x
------------
(1) For purposes of computing this ratio, earnings consist of earnings before
income taxes and fixed charges. Fixed charges consist primarily of interest
expense, including amortization of deferred debt issuance costs and
one-third of rental expense (the portion considered representative of the
interest factor). Earnings were insufficient to cover fixed charges by $598
million, $62 million, $202 million and $43 million for the fiscal years
ended December 26, 1998, December 25, 1999, December 30, 2000 and the 16
weeks ended April 15, 2000, respectively.
USE OF PROCEEDS
The selling securityholders will receive all of the proceeds from the sale
under this prospectus of the notes and the common stock issuable upon conversion
of the notes. We will not receive any proceeds from these sales.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock is quoted on the New York Stock Exchange under the symbol
"FLM."
The following table sets forth the high and low per share sales prices for
the common stock as quoted on the New York Stock Exchange and dividends paid per
share on the common stock for each period indicated:
CASH
HIGH LOW DIVIDENDS
-------- -------- ---------
Fiscal 1999
First Quarter.............................. $ 11.875 $ 7.188 $ 0.02
Second Quarter............................. 12.000 8.500 0.02
Third Quarter.............................. 12.500 9.813 0.02
Fourth Quarter............................. 13.438 9.250 0.02
Fiscal 2000
First Quarter.............................. $ 16.250 $ 8.688 $ 0.02
Second Quarter............................. 16.563 12.750 0.02
Third Quarter.............................. 17.625 12.375 0.02
Fourth Quarter............................. 15.063 10.313 0.02
Fiscal 2001
First Quarter.............................. $ 29.750 $ 10.060 $ 0.02
Second Quarter (through July 9)............ 36.750 28.200 0.02
On July 9, 2001, the closing price of our common stock on the New York Stock
Exchange was $36.10 per share.
Since 1996, our board of directors has authorized quarterly dividends of
$0.02 per share of common stock, or $0.08 on an annual basis, payable from
earnings. Each quarter our board of directors makes a determination regarding
dividends after considering future earnings expectations, our financial
condition, operating results, financing requirements, debt covenants and other
factors which the board of directors thinks are appropriate.
12
17
CAPITALIZATION
The following table sets forth our consolidated capitalization at April 21,
2001.
AT APRIL 21, 2001
-----------------
(DOLLARS IN
THOUSANDS)
Current maturities of long-term debt and capital
leases..................................................... $ 56,470
----------
Long-term debt:
Revolving Credit Facility(1)............................... 130,000
Term Loan Facility......................................... 110,002
10 1/8% Senior Notes due 2008.............................. 355,000
Long-term obligations under capital leases................. 339,988
10.5% Senior Subordinated Notes due 2004................... 250,000
10.625% Senior Subordinated Notes due 2007................. 250,000
5.25% Convertible Senior Subordinated Notes due 2009....... 150,000
Other long-term debt (including discounts)................. (5,575)
----------
Total long-term debt.................................... 1,579,415
----------
Total shareholders' equity.............................. 493,894
----------
Total capitalization (including current
maturities)........................................... $2,129,779
==========
------------
(1) The Revolving Credit Facility provides for a total commitment of $600
million. As of April 21, 2001, the Company had $45 million of outstanding
letters of credit under the Revolving Credit Facility.
13
18
DESCRIPTION OF OTHER INDEBTEDNESS
SENIOR SECURED CREDIT FACILITY
Our senior secured credit facility consists of a $600 million revolving
credit facility, with a final maturity of July 25, 2003, and an amortizing term
loan with a balance of $154 million at year end 2000, and with a maturity of
July 25, 2004. Up to $300 million of the revolver may be used for issuing
letters of credit. Borrowings and letters of credit issued under this credit
facility may be used for general corporate purposes and are secured by a first
priority security interest in our accounts receivable and inventories and those
of our subsidiaries, and in the capital stock or other equity interests owned by
us or our subsidiaries. In addition, this credit facility is guaranteed by
substantially all of our subsidiaries. The stated interest rate on borrowings
under our credit facility is equal to a referenced index interest rate, normally
the London interbank offered interest rate, or LIBOR, plus a margin. The level
of the margin is dependent upon credit ratings on our senior secured bank debt.
Our credit facility contains customary covenants associated with similar
facilities. Our credit facility currently contains the following more
significant financial covenants:
- maintenance of a fixed charge coverage ratio of at least 1.7 to 1, based
on adjusted earnings (as defined in the credit facility agreement)
before interest, taxes, depreciation and amortization and net rent
expense;
- maintenance of a ratio of inventory-plus-accounts receivable to funded
bank debt (including letters of credit) of at least 1.4 to 1;
- a limitation on restricted payments, including dividends, based on a
formula tied to net earnings and equity issuances; and
- a limitation on incurrence of indebtedness.
We are in compliance with all financial covenants under our credit facility.
Our credit facility may be terminated in the event of a defined change of
control.
At April 21, 2001, borrowings under the credit facility totaled $146 million
in term loans and $130 million of revolver borrowings, and $45 million of
letters of credit had been issued. Letters of credit are needed primarily for
insurance reserves associated with our normal risk management activities. To the
extent that any of these letters of credit would be drawn, payments would be
financed by borrowings under our credit facility.
10 1/8% SENIOR NOTES DUE 2008
The $355 million of our 10 1/8% Senior Notes due 2008 are general unsecured
obligations, equal in right of payment to all of our existing and future senior
indebtedness and are guaranteed on a senior unsecured basis by each guarantor of
the Notes. The indenture governing the senior notes contains various covenants,
including, without limitation, limitations on the incurrence of indebtedness,
the granting of certain liens, the making of certain dividends and investments
and the transfer and sale of certain assets. The indenture governing the senior
notes includes a change of control provision substantially similar to the Notes,
except that the offer price is 101%.
10.5% SENIOR SUBORDINATED NOTES DUE 2004 AND 10.625% SENIOR SUBORDINATED NOTES
DUE 2007
Our senior subordinated notes consist of two issues: $250 million of 10.5%
Senior Subordinated Notes due December 1, 2004 and $250 million of 10.625%
Senior Subordinated Notes due July 31, 2007. These senior subordinated notes are
general unsecured obligations, subordinated in right of payment to all of our
existing and future senior indebtedness and are guaranteed on a senior
subordinated basis by each of the same subsidiaries that guarantees the Notes.
The senior subordinated notes contain negative covenants substantially similar
to those that govern the Notes. The indenture governing the senior subordinated
notes contains a change of control provision substantially similar to the Notes,
except that any such change of control must be accompanied by a decline in
credit ratings.
14
19
DESCRIPTION OF NOTES
We issued the Notes under an indenture among Fleming Companies, Inc., the
Subsidiary Guarantors and Bank One, N.A. as trustee (the "Trustee"). The
following description is only a summary of the material provisions of the
indenture, the Notes and the registration rights agreement. We urge you to read
the indenture, the Notes and the registration rights agreement in their entirety
because they, and not this description, define your rights as holders of the
Notes. You may request copies of these documents at our address shown under the
caption "Where You Can Find More Information." The terms of the Notes include
those stated in the indenture and those made part of the indenture by reference
to the Trust Indenture Act of 1939, as amended. For purposes of this
description, references to "we," "us," "ours" and "Fleming" include only Fleming
Companies, Inc. and not its subsidiaries.
GENERAL
We issued the Notes with a principal amount limited to $150 million. The
Notes are unsecured, senior subordinated obligations of Fleming, rank pari passu
with all of our existing and future senior subordinated indebtedness, and will
mature on March 15, 2009, unless earlier redeemed at our option as described
under "-- Optional Redemption of the Notes" or repurchased by us at a holder's
option upon a change in control of Fleming as described under "-- Right to
Require Purchase of Notes upon a Change of Control." Interest on the Notes
accrues at the rate per annum shown on the cover page of this prospectus and is
payable semiannually in arrears on March 15 and September 15 of each year,
commencing on September 15, 2001. Interest on the Notes accrues from the date of
original issuance or, if interest has already been paid, from the date it was
most recently paid. We will make each interest payment to the holders of record
of the Notes on the immediately preceding March 1 and September 1, whether or
not this day is a business day. Interest on the Notes is computed on the basis
of a 360-day year comprised of twelve 30-day months.
The indenture does not contain any restriction on
o the payment of dividends;
o the issuance of indebtedness; or
o the repurchase of our securities
and does not contain any financial covenants. Other than as described under "--
Right to Require Purchase of Notes upon a Change of Control," the indenture
contains no covenants or other provisions to afford protection to holders of
Notes in the event of a highly leveraged transaction or a change of control of
Fleming.
We will pay the principal of, premium, if any, and interest on the Notes at
the office or agency maintained by us in the Borough of Manhattan in New York
City. Holders may register the transfer of their Notes at the same location. We
reserve the right to pay interest to holders of the Notes by check mailed to the
holders at their registered addresses or by wire transfer to holders of at least
$5 million aggregate principal amount of Notes. Except under the limited
circumstances described below, the Notes have been issued only in
fully-registered book-entry form, without coupons, and are represented by one or
more global Notes. There is no service charge for any registration of transfer
or exchange of Notes. We may, however, require holders to pay a sum sufficient
to cover any tax or other governmental charge payable in connection with any
transfer or exchange.
GUARANTEES
Payment of the principal of, premium, if any, and interest on the Notes, when
and as the same become due and payable has been guaranteed, jointly and
severally, on a senior subordinated basis by all of our wholly-owned domestic
subsidiaries and will be guaranteed by any of our subsidiaries that are in the
future required to guarantee the Notes pursuant to "-- Additional Guarantees"
below (the "Subsidiary Guarantors").
CONVERSION RIGHTS
A holder may, at any time after June 13, 2001 and before the close of
business on the business day immediately preceding the maturity date, convert a
Note or any portion of a Note (if the portions are $1,000 or whole multiples of
$1,000) into shares of common stock initially at the conversion price stated on
the cover page of this prospectus (which is equivalent to a conversion rate of
approximately 33.0360 shares per $1,000 principal amount of Notes), unless the
Note or a portion of the Note has been previously
15
20
redeemed or repurchased. The right to convert a Note called for redemption will
terminate at the close of business on the business day immediately preceding the
date fixed for redemption, unless we default in making the payment due on the
redemption date. For information as to notices of redemption, see "-- Optional
Redemption of the Notes." If a holder of a Note has delivered notice of its
election to have the Note repurchased as a result of a Change of Control, the
Note may be converted only if the notice of election is withdrawn as described
under "-- Right to Require Purchase of Notes upon a Change of Control."
We will adjust the conversion price if (without duplication):
(1) we issue common stock as a dividend or distribution on our common
stock;
(2) we subdivide, combine or reclassify our common stock;
(3) we issue to substantially all holders of our common stock rights,
warrants or options entitling them to subscribe for or purchase common stock
at less than the then current market price;
(4) we distribute to substantially all holders of common stock evidences
of our indebtedness, shares of capital stock, securities, cash or property,
excluding:
o those rights, warrants or options referred to in clause (3) above;
o any dividend or distribution paid exclusively in cash; and
o any dividend or distribution referred to in clause (1) above;
(5) we make a cash distribution to substantially all holders of our common
stock, that together with all other all-cash distributions and consideration
payable in respect of any tender or exchange offer by us or one of our
subsidiaries for our common stock made within the preceding 12 months exceeds
10% of our aggregate market capitalization on the date of the distribution;
or
(6) we complete a tender or exchange offer for our common stock which
involves an aggregate consideration that, together with:
o any cash and other consideration payable in respect of any tender or
exchange offer by us or one of our subsidiaries for our common stock
concluded within the preceding 12 months; and
o the amount of any all-cash distributions to all holders of our common
stock made within the preceding 12 months.
exceeds 10% of our aggregate market capitalization on the expiration of the
tender or exchange offer. The conversion price will not be adjusted until
adjustments amount to 1% or more of the conversion price as last adjusted. We
will carry forward any adjustment we do not make and will include it in any
future adjustment.
If our common stock is converted into the right to receive other securities,
cash or other property as a result of reclassifications, consolidations,
mergers, sales or transfers of assets or other transactions, each Note then
outstanding would, without the consent of any holders of Notes, become
convertible only into the kind and amount of securities, cash and other property
receivable upon the transaction by a holder of the number of shares of common
stock which would have been received by a holder immediately prior to the
transaction if the holder had converted the Note.
We will not issue fractional shares of common stock to a holder who converts
a Note. In lieu of issuing fractional shares, we will pay cash based upon the
market price.
Except as described in this paragraph, no holder of Notes is entitled, upon
conversion of the Notes, to any actual payment or adjustment on account of
accrued and unpaid interest or on account of dividends on shares of common stock
issued in connection with the conversion. If any holder surrenders a Note for
conversion between the close of business on any record date for the payment of
an installment of interest and the opening of business on the related interest
payment date the holder must deliver payment to us of an amount equal to the
interest payable on the interest payment date on the principal amount converted
together with the Note being surrendered. The foregoing sentence shall not apply
to Notes called for redemption on a redemption date within the period between
and including the record date and interest payment date.
16
21
If we make a distribution of property to our shareholders which would be
taxable to them as a dividend for federal income tax purposes and the conversion
price of the Notes is reduced, this reduction may be deemed to be the receipt of
taxable income to holders of the Notes.
In addition, we may make any reductions in the conversion price that our
board of directors deems advisable to avoid or diminish any income tax to
holders of our common stock resulting from any dividend or distribution of
stock, or rights to acquire stock, or from any event treated as such for income
tax purposes or for any other reasons.
SUBORDINATION
The payment of the principal of, premium, if any, and interest on the Notes
is, to the extent described in the indenture, subordinated in right of payment
to the prior payment in full of all our Senior Indebtedness. The holders of all
Senior Indebtedness are first entitled to receive payment in full of all amounts
due or to become due on the Senior Indebtedness, or provision for payment in
money or money's worth, before the holders of the Notes are entitled to receive
any payment in respect of the Notes, when there is a payment or distribution of
assets to creditors upon our:
o liquidation;
o dissolution;
o winding up;
o reorganization;
o assignment for the benefit of creditors;
o marshaling of assets;
o bankruptcy;
o insolvency; or
o similar proceedings.
We will not, nor will any Subsidiary Guarantor make, directly or indirectly
any payment upon or in respect of the Notes or acquire any of the Notes for cash
or property or otherwise or make any other distribution with respect to the
Notes if:
o any default occurs and is continuing in the payment when due, whether at
maturity, upon any redemption, by declaration or otherwise, of any amount
of any Designated Senior Indebtedness; or
o any other default occurs and is continuing with respect to Designated
Senior Indebtedness that permits holders of, or the trustee or agent on
behalf of the holders of, the Designated Senior Indebtedness as to which
such default relates to accelerate its maturity and the Trustee receives a
notice of such default in the form of a payment blockage notice from the
trustee or agent on behalf of holders of any Designated Senior
Indebtedness.
Payments on the Notes may and shall be resumed in the case of a payment
default, upon the date on which such default is cured or waived and in case of a
non-payment default, the earlier of the date on which such non-payment default
is cured or waived or 179 days after the date on which the applicable payment
blockage notice is received, unless a payment default has occurred and is
continuing, including as a result of the acceleration of the maturity of any
Designated Senior Indebtedness. After a payment blockage notice is given for a
non-payment default, no new period of payment blockage for a non-payment default
may be commenced unless and until 360 days have elapsed since the effectiveness
of the immediately prior payment blockage notice and all scheduled payments of
principal, premium, if any, and interest on the Notes that have come due have
been paid in full in cash. Each holder by its acceptance of a Note irrevocably
agrees that if any payment or payments shall be made pursuant to the indenture
by Fleming or a Subsidiary Guarantor and the amount or total amount of such
payment or payments exceeds the amount, if any, that such holder would be
entitled to receive upon the proper application of the subordination provisions
of the indenture, the payment of such excess amount
17
22
shall be deemed null and void, and the holder agrees that it will be obligated
to return the amount of the excess payment to the Trustee, as instructed in a
written notice of such excess payment, within ten days of receiving such notice.
At April 21, 2001, we had approximately $987 million of Senior Indebtedness
(excluding $425 million of available borrowings under the Company's credit
facility). We expect from time to time to incur additional indebtedness. The
indenture does not limit or prohibit us from incurring additional Senior
Indebtedness or other indebtedness. See "Risk Factors -- We may not have the
ability to raise the funds necessary to finance the change of control offer
required by the indenture. In addition, our bylaws may not permit us to make the
change of control payment even if we do have the funds."
"Designated Senior Indebtedness" means
o any Senior Indebtedness outstanding under our credit agreement, senior
notes and medium-term notes; and
o any other Senior Indebtedness, the principal amount of which is $50
million or more and that we have designated "Designated Senior
Indebtedness."
"Senior Indebtedness" of Fleming or any Subsidiary Guarantor means
o all indebtedness of Fleming or such Subsidiary Guarantor under the credit
agreement or any related loan documentation, including, without
limitation, obligations to pay principal and interest (including any
interest accruing subsequent to the filing of a petition of bankruptcy at
the rate provided for in the documentation with respect thereto, whether
or not such interest is an allowed claim under applicable law), premium,
if any, reimbursement obligations under letters of credit, fees, expenses
and indemnities, and all obligations under interest rate agreements or
currency agreements with respect thereto, whether outstanding on the date
of the indenture or thereafter incurred;
o the principal of, premium, if any, and interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) on, and all other
obligations with respect to, any other indebtedness of Fleming or such
Subsidiary Guarantor, whether outstanding on the date of the indenture or
thereafter incurred, unless the instrument under which such indebtedness
is incurred expressly provides that it is on a parity with or subordinated
in right of payment to the Notes; and
o all obligations of Fleming or such Subsidiary Guarantor with respect to
the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
does not include any liability for federal, state, local or other taxes owed or
owing by Fleming or any Subsidiary Guarantor, any indebtedness of Fleming or any
Subsidiary Guarantor to any of its subsidiaries or other affiliates or any trade
payables.
OPTIONAL REDEMPTION OF THE NOTES
At any time on or after March 22, 2004, we may redeem the Notes in whole, or
from time to time, in part, at our option on at least 30 days' notice if the
trading price of our common stock for 20 trading days in a period of 30
consecutive trading days ending on the day prior to the mailing of notice of
redemption exceeds 120% of the prevailing conversion price of the Notes. The
redemption price, expressed as a percentage of the principal amount, will be as
follows:
REDEMPTION
REDEMPTION PERIOD PRICE
----------------- ----------
March 22, 2004 through March 14, 2005..................... 103.0%
March 15, 2005 through March 14, 2006..................... 102.0%
March 15, 2006 through March 14, 2007..................... 101.0%
and 100% of the principal amount on and after March 15, 2007.
SELECTION
If we opt to redeem less than all of the Notes at any time, the Trustee will
select or cause to be selected the Notes to be redeemed by any method that it
deems fair and appropriate. In the event of a partial redemption, the Trustee
may provide for selection for redemption of portions of the principal amount of
any Note of a denomination larger than $1,000.
18
23
MANDATORY REDEMPTION
Except as set forth below under "-- Right to Require Purchase of Notes upon a
Change of Control," we are not required to make mandatory redemption or sinking
fund payments with respect to the Notes.
RIGHT TO REQUIRE PURCHASE OF NOTES UPON A CHANGE OF CONTROL
If a Change of Control (as defined below) occurs, each holder of Notes may
require that we repurchase the holder's Notes on the date fixed by us that is
not less than 30 nor more than 60 days after we give notice of the Change of
Control. We will repurchase the Notes for an amount of cash equal to 100% of the
principal amount of the Notes on the date of purchase, plus accrued and unpaid
interest, if any, to the date of purchase.
"Change of Control" means the occurrence of any of the following events:
(1) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person shall be
deemed to have beneficial ownership of all shares that such person has the
right to acquire, whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of more than 50% of the total
outstanding Voting Stock of Fleming;
(2) during any period of two consecutive years, individuals who at the
beginning of such period constituted the board of directors of Fleming
(together with any new directors whose election to such board of directors,
or whose nomination for election by the stockholders of Fleming, was approved
by a vote of 66 2/3% of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of such board of directors then in office;
(3) Fleming is liquidated or dissolved or adopts a plan of liquidation or
dissolution other than a transaction which complies with the provisions
described under "-- Consolidation, Merger and Sale of Assets;" or
(4) a "Change of Control" shall have occurred under any of the indentures
governing Fleming's 10 1/2% Senior Subordinated Notes due 2004, 10 5/8%
Senior Subordinated Notes due 2007 or 10 1/8% Senior Notes due 2008.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Fleming and its subsidiaries taken as a whole. Although there
is a developing body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a holder of Notes to require Fleming to repurchase
such Notes as a result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of Fleming and its subsidiaries taken
as a whole to another person or group may be uncertain.
"Voting Stock" means stock or securities of the class or classes pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of a person (irrespective of whether or not at the time stock of any
other class or classes shall have or might have voting power by reason of the
happening of any contingency).
On or prior to the date of repurchase, we will deposit with a paying agent an
amount of money sufficient to pay the aggregate repurchase price of the Notes
which is to be paid on the date of repurchase.
On or before the 30th day after the Change of Control, we must mail to the
Trustee and all holders of the Notes a notice of the occurrence of the Change of
Control, stating:
o the repurchase date;
o the date by which the repurchase right must be exercised;
o the repurchase price for the Notes; and
o the procedures which a holder of Notes must follow to exercise the
repurchase right.
19
24
To exercise the repurchase right, the holder of a Note must deliver, on or
before the third business day before the repurchase date, a written notice to us
and the Trustee of the holder's exercise of the repurchase right. This notice
must be accompanied by certificates evidencing the Note or Notes with respect to
which the right is being exercised, duly endorsed for transfer. This notice of
exercise may be withdrawn by the holder at any time on or before the close of
business on the business day preceding the repurchase date.
We will not be required to offer to repurchase the Notes upon a Change of
Control if a third party makes the offer to repurchase in the manner, at the
times and otherwise in compliance with the requirements set forth in the
indenture applicable to the offer to repurchase the Notes and purchases all
Notes properly tendered and not withdrawn under the terms of the offer to
repurchase the Notes.
Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders if an issuer tender offer occurs and may apply
if the repurchase option becomes available to holders of the convertible notes.
We will comply with this rule to the extent applicable at that time.
We may, to the extent permitted by applicable law and our other indentures,
at any time purchase the Notes in the open market or by tender at any price or
by private agreement. Any Note so purchased by us may, to the extent permitted
by applicable law, be reissued or resold or may be surrendered to the Trustee
for cancellation. Any Note surrendered to the Trustee may not be reissued or
resold and will be canceled promptly.
If a Change of Control were to occur, we cannot assure you that we would have
sufficient funds to pay the repurchase price for all the Notes tendered by the
holders. Our existing credit agreement and indentures contain, and any future
other agreements relating to other indebtedness to which we become a party may
contain, restrictions or prohibitions on our ability to repurchase the Notes or
may provide that an occurrence of a Change of Control constitutes an event of
default under, or otherwise requires payment of amounts borrowed under those
agreements. If a Change of Control occurs at a time when we are prohibited from
repurchasing the Notes, we could seek the consent of our then existing lenders
and note holders to the repurchase of the Notes or could attempt to refinance
the borrowings that contain the prohibition. If we do not obtain such a consent
or repay the borrowings, we would remain prohibited from repurchasing the Notes.
In that case, our failure to repurchase tendered Notes would constitute an Event
of Default under the indenture and may constitute a default under the terms of
other indebtedness that we may enter into from time to time.
The repurchase rights of holders of Notes could discourage a potential
acquirer. The Change of Control repurchase feature, however, is not the result
of management's knowledge of any specific effort to obtain control by means of a
merger, tender offer, solicitation or otherwise, or part of a plan by management
to adopt a series of antitakeover provisions.
Our bylaws contain a provision which limits our ability to "adopt or maintain
a poison pill, shareholder rights plan, rights agreement or any other form of
'poison pill' which is designed to or which has the effect of making
acquisitions of large holdings of the Corporation's shares of stock more
difficult or expensive . . . unless such a plan is first approved by a majority
shareholder vote" and prohibits the amendment, alteration, deletion or
modification of such bylaws by the Board of Directors without prior shareholder
approval. This bylaw provision raises a question as to whether the provisions of
the indenture described above (the "Change of Control Provisions") constitute a
'poison pill,' "shareholder rights plan, rights agreement or any other form of
'poison pill'" (collectively, a "Poison Pill") within the meaning of this
provision. See "Risk Factors -- We may not have the ability to raise the funds
necessary to finance the change of control offer required by the indenture. In
addition, our bylaws may not permit us to make the change of control payment
even if we do have the funds." Although the matter is not free from doubt, we
believe that a court, properly presented with the facts, should conclude that
the change of control provisions of the indenture are not inconsistent with our
bylaws. The term Change of Control is limited to specified transactions and may
not include other events that might adversely affect our financial condition,
nor would the requirement that we offer to repurchase the Notes upon a Change of
Control necessarily afford you protection in the event of a highly leveraged
transaction, reorganization, merger or similar transaction involving Fleming.
20
25
ADDITIONAL GUARANTEES
If any of our domestic subsidiaries guarantee any of our indebtedness or the
indebtedness of any Subsidiary Guarantor (other than indebtedness in an
aggregate principal amount among all such subsidiaries not exceeding $10
million), we will cause any such subsidiary, to the extent such subsidiary is
not already a Subsidiary Guarantor, to:
o execute and deliver to the Trustee a supplemental indenture in form and
substance reasonably satisfactory to the Trustee pursuant to which such
subsidiary shall guarantee all of our obligations with respect to the
Notes on a senior subordinated basis; and
o deliver to the Trustee an opinion of counsel reasonably satisfactory to
the Trustee to the effect that a supplemental indenture has been duly
executed and delivered by such subsidiary and is in compliance with the
terms of the indenture.
Upon the occurrence of the sale or disposition (whether by merger, stock
purchase, asset sale or otherwise) of a Subsidiary Guarantor or the sale of all
or substantially all of its assets, in any such case to an entity which is not a
Subsidiary Guarantor such Subsidiary Guarantor will be deemed released from its
obligations under its guarantee of the Notes; provided, however, that any such
termination shall occur only to the extent that all obligations of such
Subsidiary Guarantor under all of its guarantees of, and under all of its
pledges of assets or other security interests which secure, any of our
indebtedness or the indebtedness of any of the Subsidiary Guarantors shall also
terminate upon such release, sale or transfer (other than indebtedness in an
aggregate principal amount among all such subsidiaries not exceeding $10
million).
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may, without the consent of the holders of any of the Notes, consolidate
with or merge into any other person or convey, transfer or lease our properties
and assets substantially as an entirety to, any other person, if:
o we are the resulting or surviving corporation or the successor, transferee
or lessee, if other than us, is a corporation organized under the laws of
any U.S. jurisdiction and expressly assumes our obligations under the
indenture and the Notes by means of a supplemental indenture entered into
with the Trustee; and
o after giving effect to the transaction, no event of default and no event
which, with notice or lapse of time, or both, would constitute an event of
default, shall have occurred and be continuing.
The foregoing shall not prohibit any of our subsidiaries from merging with
and into Fleming or a merger effected solely for the purpose of reincorporating
Fleming in another jurisdiction.
Under any consolidation, merger or any conveyance, transfer or lease of our
properties and assets as described in the preceding paragraph, the successor
company will be our successor and shall succeed to, and be substituted for, and
may exercise every right and power of, Fleming under the indenture. Except in
the case of a lease, if the predecessor is still in existence after the
transaction, it will be released from its obligations and covenants under the
indenture and the Notes.
MODIFICATION AND WAIVER
We and the Trustee may enter into one or more supplemental indentures that
add, change or eliminate provisions of the indenture or modify the rights of the
holders of the Notes with the consent of the holders of at least a majority in
principal amount of the Notes then outstanding. However, without the consent of
each holder of an outstanding Note, no supplemental indenture may, among other
things:
o change the stated maturity of the principal of or any installment of
interest on any Note;
o reduce the principal amount of, or the premium or rate of interest on, any
Note;
o change the currency in which the principal of any Note or any premium or
interest is payable;
o impair the right to institute suit for the enforcement of any payment on
or with respect to any Note when due;
21
26
o adversely affect the right provided in the indenture to convert any Note;
o modify the provision of the indenture relating to our requirement to offer
to repurchase Notes upon a Change of Control in a manner adverse to the
holders of the Notes;
o reduce the percentage in principal amount of the outstanding Notes
necessary to modify or amend the indenture or to consent to any waiver
provided for in the indenture; or
o waive a default in the payment of principal of or any premium or interest
on any Note.
The holders of a majority in principal amount of the outstanding Notes may,
on behalf of the holders of all Notes:
o waive compliance by us with restrictive provisions of the indenture other
than as provided in the preceding paragraph; and
o waive any past default under the indenture and its consequences, except a
default in the payment of the principal of or any premium or interest on
any Note or in respect of a provision which under the indenture cannot be
modified or amended without the consent of the holder of each outstanding
Note affected.
Without the consent of any holders of Notes, we and the Trustee may enter
into one or more supplemental indentures for any of the following purposes:
o to cure any ambiguity, omission, defect or inconsistency in the indenture;
o to evidence a successor to us and the assumption by the successor of our
obligations under the indenture and the Notes;
o to make any change that does not adversely affect the rights of any holder
of the Notes; or
o to comply with any requirement in connection with the qualification of the
indenture under the Trust Indenture Act.
EVENTS OF DEFAULT
Each of the following is an "event of default:"
(1) a default in the payment of any interest upon any of the Notes when
due and payable, continued for 30 days;
(2) a default in the payment of the principal of and premium, if any, on
any of the Notes when due, including on a redemption date;
(3) failure to pay when due the principal of or interest on indebtedness
for money borrowed by us or our subsidiaries in excess of $50 million, or the
acceleration of that indebtedness that is not withdrawn within 15 days after
the date of written notice to us by the Trustee or to us and the Trustee by
the holders of at least 25% in principal amount of the outstanding Notes;
(4) a default by us in the performance, or breach, of any of our other
covenants in the indenture which are not remedied by the end of a period of
60 days after written notice to us by the Trustee or to us and the Trustee by
the holders of at least 25% in principal amount of the outstanding Notes; or
(5) events of bankruptcy, insolvency or reorganization of Fleming or any
Significant Subsidiary of Fleming.
If an event of default described in clauses (1), (2), (3) or (4) occurs and
is continuing, either the Trustee or the holders of at least 25% in principal
amount of the outstanding Notes may declare the principal amount of and accrued
interest on all Notes to be immediately due and payable. This declaration may be
rescinded if the conditions described in the indenture are satisfied. If an
event of default of the type referred to in clause (5) occurs, the principal
amount of and accrued interest on the outstanding Notes will automatically
become immediately due and payable.
"Significant Subsidiary" means a "significant subsidiary" as defined in
Regulation S-X under the Exchange Act.
22
27
Within 90 days after a default, the Trustee must give to the registered
holders of Notes notice of all uncured defaults known to it. The Trustee will be
protected in withholding the notice if it in good faith determines that the
withholding of the notice is in the best interests of the registered holders,
except in the case of a default in the payment of the principal of, or premium,
if any, or interest on, any of the Notes when due or in the payment of any
redemption obligation.
The holders of not less than a majority in principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceedings for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee. Subject to the provisions of the indenture
relating to the duties of the Trustee, if an event of default occurs and is
continuing, the Trustee will be under no obligation to exercise any of the
rights or powers under the indenture at the request or direction of any of the
holders of the Notes unless the holders have offered to the Trustee reasonable
indemnity or security against any loss, liability or expense. Except to enforce
the right to receive payment of principal, premium, if any, or interest when due
or the right to convert a note in accordance with the indenture, no holder may
institute any proceeding or pursue any remedy with respect to the indenture or
the Notes unless it complies with the conditions provided in the indenture,
including:
o holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy; and
o holders have offered the Trustee security or indemnity satisfactory to the
Trustee against any loss, liability or expense.
We are required to deliver to the Trustee annually a certificate indicating
whether the officers signing the certificate know of any default by us in the
performance or observance of any of the terms of the indenture. If the officers
know of a default, the certificate must specify the status and nature of all
defaults.
BOOK-ENTRY; DELIVERY AND FORM
We issued the Notes sold in the United States in the form of a Global Note.
The Global Note was deposited with, or on behalf of, the clearing agency
registered under the Exchange Act that is designated to act as depositary for
the Notes and registered in the name of the depositary or its nominee. DTC is
the initial depositary.
Except as set forth below, a Global Note may be transferred, in whole or in
part, only to another nominee of DTC or to a successor of DTC or its nominee.
DTC has advised us that DTC is:
o a limited-purpose trust company organized under the laws of the State of
New York;
o a member of the Federal Reserve System;
o a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
o a "clearing agency" registered pursuant to the provisions of Section 17A
of the Exchange Act.
DTC was created to hold securities of institutions that have accounts with
DTC and to facilitate the clearance and settlement of securities transactions
among its participants in securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include:
o securities brokers and dealers;
o banks;
o trust companies;
o clearing corporations; and
o certain other organizations.
23
28
Access to DTC's book-entry system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
We expect that pursuant to the procedures established by DTC, (1) DTC will
credit, on its book-entry registration and transfer system, the respective
principal amount of the individual beneficial interests represented by the
Global Note to the accounts of participants and (2) ownership of beneficial
interests in a Global Note will be shown on, and the transfer of those ownership
interests will be effected only through, records maintained by DTC (with respect
to participants' interests) and the participants (with respect to the owners of
beneficial interests in the Global Note other than participants). The accounts
to be credited were designated by the initial purchasers of the beneficial
interests. Ownership of beneficial interests in a Global Note is limited to
participants or persons that may hold interests through participants.
So long as DTC or its nominee is the registered holder and owner of a Global
Note, DTC or its nominee, as the case may be, will be considered the sole legal
owner of the Notes represented by the Global Note for all purposes under the
indenture and the Notes. Except as set forth below, owners of beneficial
interests in a Global Note are not entitled to receive definitive Notes and are
not considered to be the owners or holders of any Notes under the Global Note.
We understand that under existing industry practice, in the event an owner of a
beneficial interest in a Global Note desires to take any action that DTC, as the
holder of the Global Note, is entitled to take, DTC would authorize the
participants to take the action, and that participants would authorize
beneficial owners owning through the participants to take the action or would
otherwise act upon the instructions of beneficial owners owning through them. No
beneficial owner of an interest in a Global Note is able to transfer the
interest except in accordance with DTC's applicable procedures, in addition to
those provided for under the indenture and, if applicable, those of Euroclear
and Clearstream Banking.
We will make payments of the principal of, and interest on, the Notes
represented by a Global Note registered in the name of and held by DTC or its
nominee to DTC or its nominee, as the case may be, as the registered owner and
holder of the Global Note.
We expect that DTC or its nominee, upon receipt of any payment of principal
or interest in respect of a Global Note, will credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of the Global Note as shown on the records of DTC or its
nominee. We also expect that payments by participants and indirect participants
to owners of beneficial interests in a Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for accounts of customers registered in
the names of nominees for these customers. The payments, however, will be the
responsibility of the participants and indirect participants, and neither we,
the Trustee nor any paying agent will have any responsibility or liability for:
o any aspect of the records relating to, or payments made on account of,
beneficial ownership interests in a Global Note;
o maintaining, supervising or reviewing any records relating to the
beneficial ownership interests;
o any other aspect of the relationship between DTC and its participants; or
o the relationship between the participants and indirect participants and
the owners of beneficial interests in a Global Note.
Unless and until it is exchanged in whole or in part for definitive Notes, a
Global Note may not be transferred except as a whole by DTC to a nominee of DTC
or by a nominee of DTC to DTC or another nominee of DTC.
Participants in DTC effect transfers with other participants in the ordinary
way in accordance with DTC rules and will settle transfers in same-day funds.
Participants in Euroclear and Clearstream Banking effect transfers with other
participants in the ordinary way in accordance with the rules and operating
procedures of Euroclear and Clearstream Banking, as applicable. If a holder
requires physical delivery of a definitive Note for any reason, including to
sell Notes to persons in jurisdictions which require physical delivery or to
pledge Notes, the holder must transfer its interest in a Global Note in
accordance with the normal procedures of DTC and the procedures set forth in the
indenture.
Cross-market transfers between DTC, on the one hand, and directly or
indirectly through Euroclear or Clearstream Banking participants, on the other,
are effected in DTC in accordance with DTC rules on behalf of Euroclear or
Clearstream Banking, as the case may be, by its respective depositary; however,
these cross-market transactions require delivery of instructions to Euroclear or
Clearstream Banking, as the case may be, by the counterparty in the system in
accordance with its rules and procedures and within its established deadlines
(Brussels time). Euroclear or Clearstream Banking, as the case may be, will, if
the transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
24
29
delivering or receiving interests in a Global Note in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Clearstream Banking
participants may not deliver instructions directly to the depositories for
Euroclear or Clearstream Banking.
Because of time zone differences, the securities account of a Euroclear or
Clearstream Banking participant purchasing an interest in a Global Note from a
DTC participant is credited during the securities settlement processing day
(which must be a business day for Euroclear or Clearstream Banking, as the case
may be) immediately following the DTC settlement date, and the credit of any
transactions interests in a Global Note settled during the processing day is
reported to the relevant Euroclear or Clearstream Banking participant on that
day. Cash received in Euroclear or Clearstream Banking as a result of sales of
interests in a Global Note by or through a Euroclear or Clearstream Banking
participant to a DTC participant is received with value on the DTC settlement
date, but is available in the relevant Euroclear or Clearstream Banking cash
account only as of the business day following settlement in DTC.
We expect that DTC will take any action permitted to be taken by a holder of
Notes (including the presentation of Notes for exchange as described below) only
at the direction of one or more participants to whose accounts at the DTC
interests in a Global Note are credited and only in respect of the portion of
the aggregate principal amount of the Notes as to which the participant or
participants has or have given direction. However, if there is an event of
default under the Notes, DTC will exchange the Global Notes for definitive
Notes, which it will distribute to its participants. These definitive Notes are
subject to certain restrictions on registration of transfers and will bear
appropriate legends restricting their transfer. Although we expect that DTC,
Euroclear and Clearstream Banking will agree to the foregoing procedures in
order to facilitate transfers of interests in Global Notes among participants of
DTC, Euroclear and Clearstream Banking, DTC, Euroclear and Clearstream Banking
are under no obligation to perform or continue to perform these procedures, and
these procedures may be discontinued at any time. Neither we nor the trustee
have any responsibility for the performance by DTC, Euroclear or Clearstream
Banking or their participants or indirect participants of their obligations
under the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for the
Global Note or ceases to be a clearing agency registered under the Exchange Act
and we do not appoint a successor depositary within 90 days, we will issue
definitive Notes in exchange for the Global Note. The definitive Notes will be
subject to certain restrictions on registration of transfers and will bear
appropriate legends concerning these restrictions.
25
30
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 100,000,000 shares of common stock,
par value $2.50 per share, and 2,000,000 shares of preferred stock, par value
$10.00 per share. As of May 18, 2001, 43,817,882 shares of our common stock were
issued and outstanding and no shares of our preferred stock were issued and
outstanding.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share held with
respect to all matters as to which the common stock is entitled to vote. Except
as otherwise required by law, the holders of our common stock vote together with
the holders of all shares of our preferred stock that are entitled to vote, and
not as a separate class. Voting rights for the election of directors are
noncumulative. Subject to the preferential and other dividend rights of holders
of our preferred stock, holders of our common stock are entitled to receive any
dividends, payable in cash, stock or otherwise, that our board of directors may
declare at any time or from time to time out of legally available funds. In the
event of our liquidation, dissolution or winding up, after distribution in full
of any preferential or other amounts owed to holders of our preferred stock,
holders of our common stock are entitled to receive all of our remaining assets,
ratably in proportion to the number of shares of common stock they hold. Holders
of our common stock have no conversion, preemptive or subscription rights, and
shares of our common stock are not subject to redemption. All outstanding shares
of our common stock are fully paid and nonassessable.
YUCAIPA WARRANT
On March 22, 2001, we completed a $50 million investment in our common stock
by an affiliate of The Yucaipa Companies, an investment group controlled by Ron
Burkle. Yucaipa acquired approximately 3.8 million newly issued shares and a
12-month warrant to purchase an additional $50 million of our common stock at
the then-current average market price. Our board of directors unanimously
approved this transaction before Yucaipa became an "interested shareholder," as
defined in Section 1090.3 of the Oklahoma Business Corporation Act. Therefore,
the Yucaipa transaction was not be subject to the restrictions of Section
1090.3. For more information on the provisions of Section 1090.3 as it applies
to us, see the subsection "Anti-Takeover Provisions in Our Certificate of
Incorporation and Oklahoma Law."
PREFERRED STOCK
Our certificate of incorporation authorizes our board of directors, without
further action by our shareholders, to issue up to 2,000,000 shares of preferred
stock in one or more series. The board is authorized to fix the powers, rights,
preferences and limitations of the shares of each series of preferred stock,
including the designation and number of shares of each series, the dividend rate
payable on each series and whether dividends are cumulative or noncumulative,
voting rights, redemption rights, the creation of a sinking fund with respect to
a series, conversion rights, preference rights upon a liquidation or dissolution
and the relative priority of the shares of each series to shares of other
classes or series, as well as any other rights. The issuance of preferred stock
could dilute the voting power of holders of our common stock, and the likelihood
that holders of preferred stock will receive dividend payments and payments upon
liquidation may have the effect of delaying, deferring or preventing a change in
control of our company, which could depress the market price of our common
stock. We have no present plans to issue any shares of preferred stock.
ANTI-TAKEOVER PROVISIONS IN OUR CERTIFICATE OF INCORPORATION AND OKLAHOMA LAW
Limitation on Shareholder Rights Plan -- Bylaws
Our bylaws contain a provision which limits the Company's ability to "adopt
or maintain a poison pill, shareholder rights plan, rights agreement or any
other form of 'poison pill' which is designed to or which has the effect of
making acquisitions of large holdings of the Corporation's shares of stock more
difficult or expensive . . . unless such a plan is first approved by a majority
shareholder vote" and prohibits the amendment, alteration, deletion or
modification of such bylaw by the Board of Directors without prior shareholder
approval.
Business Combinations -- Certificate of Incorporation
Our certificate of incorporation provides that certain business combinations
and transactions involving us and a holder of 10% or more of our outstanding
common stock, which we refer to in our certificate of incorporation as an
"interested shareholder," must be
26
31
approved by the holders of at least 80% of the outstanding shares of our common
stock that are not held by interested shareholders, unless:
o three-fourths of our directors who are not affiliated with interested
shareholders approve the transaction, or
o certain minimum price criteria and procedural safeguards are satisfied.
If the 80% vote requirement does not apply to a given transaction, then the
vote otherwise required by Oklahoma law would apply. Oklahoma law requires,
except as provided in Section 1090.3 (see below) or the Oklahoma Control Shares
Act (see below), the favorable vote of a majority of the outstanding shares of
voting stock of a corporation to adopt a merger or consolidation, for the sale,
lease or exchange of all or substantially all of the assets of the corporation,
or for a reclassification, recapitalization, reorganization or similar
transaction.
Business Combinations -- Oklahoma Statutes
In addition, we are subject to Section 1090.3 of the Oklahoma General
Corporation Act. In general, this statute prohibits a publicly-held Oklahoma
corporation from engaging in any business combination with any interested
shareholder for a period of three years following the date that the shareholder
became an interested shareholder, unless:
o prior to the date the shareholder became an interested shareholder, the
board of directors of the corporation approved either the business
combination or the transaction that resulted in the shareholder becoming
an interested shareholder;
o upon consummation of the transaction that resulted in the shareholder
becoming an interested shareholder, the interested shareholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who are
directors and also officers, and employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or
o on or subsequent to the date that the shareholder became an interested
shareholder, the business combination is approved by the board of
directors and authorized at an annual or special meeting of shareholders,
and not by written consent, by the affirmative vote of at least two-thirds
of the outstanding voting stock not held by the interested shareholder.
Section 1090.3 defines "business combination" to include:
o any merger or consolidation involving the corporation and the interested
shareholder;
o any sale, pledge, transfer or other disposition of 10% or more of the
assets of the corporation involving the interested shareholder;
o subject to exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the
interested shareholder; or
o the receipt by the interested shareholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 1090.3 defines an "interested shareholder" as any person
that owns 15% or more of the outstanding voting stock of the corporation or any
person affiliated with or controlling or controlled by such person.
Oklahoma Control Shares Act
The Oklahoma Control Shares Act, if applicable, eliminates voting rights with
respect to control shares after a control share acquisition unless the right to
vote is approved by the affirmative vote of a majority of all voting power
excluding interested shares, i.e., shares held by the acquiring person, officers
of the company and any employee of the company who is also a director of the
company. "Control shares" means issued and outstanding shares having 20% or more
of all voting power. Certain acquisitions of control shares are excluded from
the elimination of voting power provisions, e.g., shares acquired pursuant to a
merger to which the company is a party to the agreement of merger.
27
32
Certificate of Incorporation -- Greenmail
Our certificate of incorporation requires a majority of the voting power of
the company to approve the purchase by the company of shares from a shareholder
who owns 5% or more of our outstanding shares within two years after the person
acquired such shares.
Annual Election of Directors
Our bylaws provide that candidates for our board of directors may be
nominated only by our board of directors or by a shareholder who gives written
notice to us not less than 60 nor more than 90 days prior to the meeting of
shareholders at which the directors are to be elected. However, directors may be
elected without a meeting by unanimous written consent of the shareholders.
Our board of directors may consist of not less than three nor more than 20
members to be determined from time to time by our board. We amended our
certificate of incorporation in 1999 to phase out our classified board. The
effect of this is that five of the current seven members will be up for election
at our annual meeting of shareholders in 2001. After our annual meeting of
shareholders in 2002, all of our directors will be of one class and serve for a
term ending at the annual meeting following the annual meeting at which each
director was elected. Between shareholder meetings, our board may appoint new
directors to fill vacancies or newly created directorships.
Shareholder Action by Written Consent
Our shareholders may act by written consent without a meeting if the consent
or consents are signed by the holders of all of the outstanding stock entitled
to vote on the matter.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Oklahoma law permits, and our certificate of incorporation contains, a
provision eliminating our directors' liability to us or our shareholders for
monetary damages for breach of fiduciary duty, except for liability (1) for any
breach of the director's duty of loyalty to us or our shareholders; (2) for acts
or omissions not in good faith or which involve intentional misconduct or which
the director knows to be a violation of law; (3) under Section 1053 of the
Oklahoma General Corporation Act (generally, liability for unlawful dividends or
stock repurchases); or (4) for any transaction from which the director derived
an improper personal benefit. In addition, our bylaws contain provisions
indemnifying our directors and officers to the fullest extent permitted by the
Oklahoma General Corporation Act, but such provisions are not exclusive of other
rights to indemnification pursuant to agreement, vote of shareholders or
disinterested directors or otherwise. We believe that these provisions will
assist us in attracting and retaining qualified individuals to serve as our
directors and officers.
TRANSFER AGENT
The transfer agent and registrar for our common stock is First Chicago Trust
Company, a division of Equiserve. Its telephone number is 800-317-4445.
SELLING SECURITYHOLDERS
The Notes were originally issued by Fleming and sold by the initial
purchasers of the Notes in a transaction exempt from the registration
requirements of the Securities Act (1) to persons reasonably believed by the
initial purchasers to be qualified institutional buyers in reliance on Rule 144A
under the Securities Act and (2) outside the United States pursuant to
Regulation S of the Securities Act. Selling securityholders, including their
transferees, pledgees or donees or their successors, may from time to time offer
and sell pursuant to this prospectus any or all of the Notes and shares of
common stock into which the Notes are convertible.
The following table sets forth information, as of July 13, 2001, with respect
to the selling securityholders and the principal amounts of Notes beneficially
owned by each selling securityholder that may be offered pursuant to this
prospectus. The information is based on information provided by or on behalf of
the selling securityholders. The selling securityholders may offer all, some or
none of the Notes or the common stock into which the Notes are convertible.
Because the selling securityholders may offer all or some portion of the Notes
or the common stock, we cannot estimate the amount of the Notes or the common
stock that will be held by the selling securityholders upon termination of any
of these sales. In addition, the selling securityholders identified below may
have sold, transferred or otherwise disposed of all or a portion of their Notes
since the date on which they provided the information regarding
28
33
their Notes in transactions exempt from the registration requirements of the
Securities Act. The percentage of Notes outstanding beneficially owned by each
selling securityholder is based on $150,000,000 aggregate principal amount of
Notes outstanding. The number of shares of common stock offered hereby is based
on a conversion price of $30.27 per share of common stock and a cash payment in
lieu of any fractional share. The percentage of common stock outstanding
beneficially owned by the selling securityholders or any future transferee from
any such holder assumes that they do not beneficially own any common stock other
than common stock into which the Notes are convertible at a conversion price of
$30.27 per share.
PRINCIPAL AMOUNT
OF NOTES PERCENTAGE NUMBER OF PERCENTAGE OF
BENEFICIALLY OWNED OF NOTES CONVERSION SHARES COMMON STOCK
NAME AND OFFERED HEREBY OUTSTANDING THAT MAY BE SOLD(1) OUTSTANDING(2)
---- ------------------ ----------- ------------------- --------------
AAM/Zazove Institutional Income Fund L.P. ................. $ 1,080,000.00 * 35,679 *
AFTRA Health Fund. ........................................ $ 340,000.00 * 11,232 *
ALPHA U.S. Sub Fund VIII LLC .............................. $ 120,000.00 * 3,964 *
Associated Electric & Gas Insurance Services Limited ...... $ 150,000.00 * 4,955 *
Bancroft Convertible Fund, Inc. ........................... $ 1,000,000.00 * 33,036 *
Bank Austria Cayman Island, Ltd. .......................... $ 6,800,000.00 4.53% 224,645 *
Calamos Market Neutral Fund-- Calamos Investment
Trust ................................................... $ 2,100,000.00 1.40% 69,376 *
Chrysler Corporation Master Retirement Trust .............. $ 2,075,000.00 1.38% 68,550 *
Consulting Group Capital Markets Fund ..................... $ 320,000.00 * 10,572 *
Delta Air Lines Master Trust .............................. $ 480,000.00 * 15,857 *
Delta Pilots D & S Trust .................................. $ 460,000.00 * 15,197 *
Ellsworth Convertible Growth and Income Fund, Inc. ........ $ 1,000,000.00 * 33,036 *
First Union International Capital Markets, Inc. ........... $ 6,500,000.00 4.33% 214,734 *
Global Bermuda Limited Partnership ........................ $ 1,500,000.00 1.00% 49,554 *
HFR Master Fund, Ltd. ..................................... $ 400,000.00 * 13,214 *
Highbridge International LLC .............................. $ 13,350,000.00 8.90% 441,031 *
KBC Financial Products USA ................................ $ 1,000,000.00 * 33,036 *
Lakeshore International Ltd. .............................. $ 3,500,000.00 2.33% 115,626 *
LDG Limited ............................................... $ 300,000.00 * 9,911 *
Leonardo, L.P. ............................................ $ 21,700,000.00 14.47% 716,881 1.61%
Lexington Vantage Fund, Ltd. .............................. $ 200,000.00 * 6,607 *
Lipper Convertibles, L.P. ................................. $ 7,000,000.00 4.67% 231,252 *
Mainstay Convertible Fund ................................. $ 4,950,000.00 3.30% 163,528 *
Mainstay VP Convertible Portfolio ......................... $ 1,240,000.00 * 40,965 *
McMahan Securities Co., L.P. .............................. $ 1,850,000.00 1.23% 61,117 *
Merced Partners Limited Partnership ....................... $ 4,000,000.00 2.66% 132,144 *
Motion Picture Industry Health Plan-- Active Member
Fund .................................................... $ 245,000.00 * 8,094 *
Motion Picture Industry Health Plan-- Retiree Member
Fund .................................................... $ 120,000.00 * 3,964 *
New York Life Separate Account #7 ......................... $ 670,000.00 * 22,134 *
OCM Convertible Trust ..................................... $ 710,000.00 * 23,455 *
Onex Industrial Partners Limited .......................... $ 1,950,000.00 1.30% 64,420 *
Paloma Securities LLC ..................................... $ 1,900,000.00 1.27% 62,768 *
Partner Reinsurance Company Ltd. .......................... $ 405,000.00 * 13,380 *
Pebble Capital Inc. ....................................... $ 750,000.00 * 24,777 *
Ramius Capital Group ...................................... $ 1,000,000.00 * 33,036 *
RCG Latitude Master Fund .................................. $ 1,200,000.00 * 39,643 *
Salomon Smith Barney, Inc. ................................ $ 50,000.00 * 1,652 *
San Diego County Employees Retirement Association ......... $ 1,750,000.00 1.17% 57,813 *
Silver Creek Limited Partnership .......................... $ 1,200,000.00 * 39,643 *
Silver Creek II Limited ................................... $ 4,100,000.00 2.73% 135,448 *
State Employees' Retirement Fund of the State of
Delaware ................................................ $ 1,045,000.00 * 34,523 *
State of Connecticut Combined Investment Funds ............ $ 2,265,000.00 1.51% 74,827 *
The Class IC Company, Ltd. ................................ $ 2,500,000.00 1.67% 82,590 *
TQA Master Fund, Ltd. ..................................... $ 6,600,000.00 4.40% 218,038 *
TQA Master Plus Fund, Ltd. ................................ $ 2,500,000.00 1.67% 82,590 *
29
34
PRINCIPAL AMOUNT
OF NOTES PERCENTAGE NUMBER OF PERCENTAGE OF
BENEFICIALLY OWNED OF NOTES CONVERSION SHARES COMMON STOCK
NAME AND OFFERED HEREBY OUTSTANDING THAT MAY BE SOLD(1) OUTSTANDING(2)
---- ------------------ ----------- ------------------- --------------
Vanguard Convertible Securities Fund, Inc. ................ $ 2,450,000.00 1.63% 80,938 *
Zazove Hedged Convertible Fund, L.P. ...................... $ 1,200,000.00 * 39,643 *
Zurich HFR Calamos Holdings Limited ....................... $ 80,000.00 * 2,643 *
Zurich Institutional Benchmarks Master Fund, Ltd. ......... $ 1,120,000.00 * 37,000 *
Any other holder of notes or future transferee, pledgee,
donee or successor of any holder(3) ..................... $ 30,775,000.00 20.52% 1,016,683 2.32%
TOTAL ................................................ $150,000,000.00 100.00% 4,955,401 10.16%
------------
* Less than one percent of Notes or common stock outstanding, as applicable.
(1) Consists of shares of common stock issuable upon conversion of the Notes,
assuming a conversion price of $30.27 and a cash payment in lieu of any
fraction share interest. The conversion price is subject to adjustment as
described under "Description of Notes -- Conversion Rights."
(2) Calculated based on Rule 13d-3(d)(i) under the Securities Exchange Act of
1934 using 43,817,882 shares of common stock outstanding as of May 18, 2001.
In calculating this amount, we treated as outstanding the number of shares
of common stock issuable upon conversion of all of that particular holder's
Notes. However, we did not assume the conversion of any other holder's
Notes.
(3) Information about other selling securityholders will be set forth in
prospectus supplements, if required.
None of the selling securityholders nor any of their affiliates, officers,
directors or principal equity holders has held any position or office or has had
any material relationship with Fleming or any of its predecessors or affiliates
within the past three years.
The initial purchasers purchased all of the Notes from us in a private
transaction in March 2001. All of the Notes were "restricted securities" under
the Securities Act prior to this registration. The selling securityholders have
represented to us that they purchased the Notes for their own account for
investment only and not with a view toward selling or distributing them, except
pursuant to sales registered under the Securities Act or exempt from such
registration.
Information concerning other selling securityholders will be set forth in
prospectus supplements from time to time, if required. Information concerning
the securityholders may change from time to time and any changed information
will be set forth in supplements to this prospectus if and when necessary. In
addition, the conversion price, and therefore, the number of shares of common
stock issuable upon conversion of the Notes, is subject to adjustment under
certain circumstances. Accordingly, the aggregate principal amount of Notes and
the number of shares of common stock into which the Notes are convertible may
increase or decrease.
PLAN OF DISTRIBUTION
The selling securityholders and their successors, which term includes their
transferees, pledgees or donees or their successors may sell the Notes and/or
the underlying common stock directly to purchasers or through underwriters,
broker-dealers or agents, who may receive compensation in the form of discounts,
concessions or commissions from the selling securityholders or the purchasers.
These discounts, concessions or commissions as to any particular underwriter,
broker-dealer or agent may be in excess of those customary in the types of
transactions involved.
The Notes and the common stock may be sold in one or more transactions at:
o fixed prices,
o prevailing market prices at the time of sale,
o prices related to the prevailing market prices,
30
35
o varying prices determined at the time of sale, or
o negotiated prices.
These sales may be effected in transactions:
o for the common stock, on any national securities exchange or quotation
service on which our common stock may be listed or quoted at the time of
sale, including the New York Stock Exchange,
o in the over-the-counter market,
o otherwise than on such exchanges or services or in the over-the-counter
market,
o through the writing of options, whether the options are listed on an
options exchange or otherwise, or
o through the settlement of short sales.
These transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as agent on both sides of the trade.
In connection with the sale of the Notes and the underlying common stock or
otherwise, the selling securityholders may enter into hedging transactions with
broker-dealers or other financial institutions. These broker-dealers or
financial institutions may in turn engage in short sales of the common stock in
the course of hedging the positions they assume with selling securityholders.
The selling securityholders may also sell the Notes and the underlying common
stock short and deliver these securities to close out such short positions, or
loan or pledge the Notes or the underlying common stock to broker-dealers that
in turn may sell these securities.
The aggregate proceeds to the selling securityholders from the sale of the
Notes or the underlying common stock offered by them hereby will be the purchase
price thereof less discounts and commissions, if any. Each of the selling
securityholders reserves the right to accept and, together with their agents
from time to time, to reject, in whole or in part, any proposed purchase of
common stock to be made directly or through agents. We will not receive any of
the proceeds from this offering.
Our outstanding common stock is listed for trading on the New York Stock
Exchange. We do not intend to list the Notes for trading on any national
securities exchange or on the Nasdaq National Market and we cannot assure you
that any trading market for the Notes will develop.
In order to comply with the securities laws of some states, if applicable,
the Notes and the underlying common stock may be sold in these jurisdictions
only through registered or licensed brokers or dealers. In addition, in some
states the Notes may not be sold unless they have been registered or qualified
for sale or an exemption from registration or qualification requirements is
available and is complied with.
The selling securityholders and any broker-dealers or agents that participate
in the sale of the Notes and the underlying common stock may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act.
Profits on the sale of the Notes and the underlying common stock by selling
securityholders and any discounts, commissions or concessions received by any
broker-dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act. Selling securityholders who are deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act will
be subject to the prospectus delivery requirements of the Securities Act. To the
extent the selling securityholders may be deemed to be "underwriters," they may
be subject to statutory liabilities, including, but not limited to, Sections 11,
12 and 17 of the Securities Act.
The selling securityholders and any other person participating in a
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder. Regulation M of the Exchange Act may limit
the timing of purchases and sales of any of the securities by the selling
securityholders and any other person. In addition, Regulation M may restrict the
ability of any person engaged in the distribution of the securities to engage in
market-making activities with respect to the particular securities being
distributed for a period of up to five business days before the distribution.
The selling securityholders have acknowledged that they understand their
obligations to comply with the provisions of the Exchange Act and the rules
thereunder relating to stock manipulation, particularly Regulation M, and have
agreed that they will not engage in any transaction in violation of such
provisions.
31
36
To our knowledge, there are currently no plans, arrangements or
understandings between any selling securityholder and any underwriter,
broker-dealer or agent regarding the sale of the common stock by the selling
securityholders.
A selling securityholder may decide not to sell any Notes or the underlying
common stock described in this prospectus. We cannot assure you that any selling
securityholder will use this prospectus to sell any or all of the Notes or the
underlying common stock. Any securities covered by this prospectus which qualify
for sale pursuant to Rule 144 or Rule 144A of the Securities Act may be sold
under Rule 144 or Rule 144A rather than pursuant to this prospectus. In
addition, a selling securityholder may transfer, devise or gift the Notes and
the underlying common stock by other means not described in this prospectus.
With respect to a particular offering of the Notes and the underlying common
stock, to the extent required, an accompanying prospectus supplement or, if
appropriate, a post-effective amendment to the registration statement of which
this prospectus is a part will be prepared and will set forth the following
information:
o the specific Notes or common stock to be offered and sold,
o the names of the selling securityholders,
o the respective purchase prices and public offering prices and other
material terms of the offering,
o the names of any participating agents, broker-dealers or underwriters, and
o any applicable commissions, discounts, concessions and other items
constituting, compensation from the selling securityholders.
We entered into the registration rights agreement for the benefit of holders
of the Notes to register their Notes and the underlying common stock under
applicable federal and state securities laws under certain circumstances and at
certain times. The registration rights agreement provides that the selling
securityholders and Fleming will indemnify each other and their respective
directors, officers and controlling persons against specific liabilities in
connection with the offer and sale of the Notes and the underlying common stock,
including liabilities under the Securities Act, or will be entitled to
contribution in connection with those liabilities. We will pay all of our
expenses and specified expenses incurred by the selling securityholders
incidental to the registration, offering and sale of the Notes and the
underlying common stock to the public, but each selling securityholder will be
responsible for payment of commissions, concessions, fees and discounts of
underwriters, broker-dealers and agents.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal income tax
considerations relating to the purchase, ownership and disposition of the notes
and common stock into which notes may be converted, but does not purport to be a
complete analysis of all the potential tax considerations relating thereto. This
summary is based on laws, regulations, rulings and decisions now in effect, all
of which are subject to change or differing interpretation possibly with
retroactive effect. We have not sought any ruling from the Internal Revenue
Service (the "IRS") or an opinion of counsel with respect to the statements made
and the conclusions reached in the following summary, and there can be no
assurance that the IRS will agree with such statements and conclusions.
This discussion applies to you only if you hold the notes and the common
stock into which such notes are convertible as capital assets. This discussion
also does not address the tax considerations arising under the laws of any
foreign, state or local jurisdiction. In addition, this discussion does not
address tax considerations applicable to your particular circumstances or if you
are a taxpayer subject to special tax rules, including, without limitation:
o a bank;
o a holder subject to the alternative minimum tax;
o a tax-exempt organization;
o an insurance company;
o a foreign person or entity (except to the extent specifically set forth
below);
32
37
o a dealer in securities or currencies;
o a person that will hold notes as a position in a hedging transaction,
"straddle" or "conversion transaction" for tax purposes; or
o a person deemed to sell notes or common stock under the constructive sale
provisions of the Internal Revenue Code.
YOU ARE URGED TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE APPLICATION OF
THE UNITED STATES FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION AS WELL
AS ANY TAX CONSEQUENCES ARISING UNDER THE FEDERAL ESTATE OR GIFT TAX RULES OR
UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION OR
UNDER ANY APPLICABLE TAX TREATY.
U.S. HOLDERS
For purposes of this summary, a "U.S. holder" means:
1. an individual citizen or resident of the United States;
2. a corporation (or an entity treated as a corporation) or partnership
created or organized in the United States or under the laws of the United
States, any state thereof, or the District of Columbia;
3. an estate, the income of which is subject to United States federal
income taxation regardless its source; or
4. a trust subject to the primary supervision of a United States court and
the control of one or more United States persons.
In addition, if a holder is an entity treated as a partnership for United
States federal income tax purposes, the tax treatment of each partner of such
partnership will generally depend upon the status of the partner and upon the
activities of the partnership. If you are a partner in a partnership which holds
notes or common stock, you should consult your tax advisor.
TAXATION OF INTEREST.
You must include interest paid on the notes as ordinary income at the time it
is received or accrued, in accordance with your regular method of accounting for
United States federal income tax purposes.
TAXATION OF MARKET DISCOUNT.
The market discount rules discussed below apply to any note purchased after
original issue at a price less than its stated redemption price at maturity.
If you purchase a note at a market discount, you generally will be required
to treat any principal payments on, or any gain on the disposition on maturity
of, such note as ordinary income to the extent of the accrued market discount
(not previously included in income) at the time of such payment or disposition.
In general, subject to a de minimis exception, market discount is the amount by
which the note's stated redemption price at maturity exceeds your basis in the
note immediately after the note is acquired. A note is not treated as purchased
at a market discount, however, if the market discount is less than 0.25 percent
of the stated redemption price at maturity of the note multiplied by the number
of complete years to maturity from the date when you acquired the note. Market
discount on a note will accrue on a straight-line basis, unless you elect to
accrue such discount on a constant yield to maturity basis. This election is
irrevocable and applies only to the note for which it is made. You may also
elect to include market discount in income currently as it accrues. This
election, once made, applies to all market discount obligations acquired on or
after the first day of the first taxable year to which the election applies and
may not be revoked without the consent of the IRS. If you acquire a note at a
market discount and dispose of such note in any non-taxable transaction (other
than a nonrecognition transaction defined in section 1276(c) of the Internal
Revenue Code), accrued market discount will be includable as ordinary income to
you as if you had sold the note at its fair market value. You may be required to
defer until the maturity of the note or, in certain circumstances, its earlier
disposition the deduction of all or a portion of the interest expense
attributable to debt incurred or continued to purchase or carry a note with
market discount, unless an election to include the market discount on a current
basis is made.
33
38
TAXATION OF AMORTIZABLE BOND PREMIUM.
If you purchase a note for an amount in excess of its stated redemption price
at maturity, you will generally be considered to have purchased the note with
"amortizable bond premium." The amount of amortizable bond premium is computed
based on the redemption price on an earlier call date if such computation
results in a smaller amortizable bond premium attributable to the period of such
earlier call date. You generally may elect to amortize such premium using the
constant yield to maturity method. The amount amortized in any year will
generally be treated as a reduction of your interest income on the note. If the
amortizable bond premium allocable to a year exceeds the amount of interest
allocable to that year, the excess would be allowed as a deduction for that year
but only to the extent of your prior interest inclusions on the note. If you do
not make such an election, the premium on a note will decrease the gain or
increase the loss otherwise recognized on the sale, redemption, retirement or
other disposition of the note. The election to amortize the premium on a
constant yield to maturity method, once made, generally applies to all bonds
held or subsequently acquired by you on or after the first day of the first
taxable year to which the election applies. You may not revoke this election
without the consent of the IRS.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES.
Upon the sale, exchange (other than a conversion) or redemption of a note,
you generally will recognize capital gain or loss equal to the difference
between (i) the amount of cash proceeds and the fair market value of any
property received on the sale, exchange or redemption (except to the extent such
amount is attributable to accrued interest income not previously included in
income, which will be taxable as ordinary income, or is attributable to accrued
interest that was previously included in income, which amount may be received
without generating further income) and (ii) your adjusted tax basis in the note.
Your adjusted tax basis in a note generally will equal the cost of the note,
increased by market discount previously included in income, if any, and reduced
by any bond premium previously amortized. Subject to the market discount rules
discussed above, such capital gain or loss will be long-term capital gain or
loss if you have held the note for more than one year at the time of sale,
exchange or redemption. Long-term capital gains recognized by certain
non-corporate U.S. holders, including individuals, will generally be subject to
a maximum tax rate of 20%. The deductibility of capital losses is subject to
limitations.
CONVERSION OF THE NOTES.
You generally will not recognize any income, gain or loss upon conversion of
a note into common stock except with respect to cash received in lieu of a
fractional share of common stock. Your tax basis in the common stock received on
conversion of a note will be the same as your adjusted tax basis in the note at
the time of conversion (reduced by any basis allocable to a fractional share
interest), and the holding period for the common stock received on conversion
will generally include the holding period of the note converted. However, your
tax basis in shares of common stock considered attributable to accrued interest
generally will equal the amount of such accrued interest included in income, and
the holding period for such shares shall begin on the date of conversion.
Cash received in lieu of a fractional share of our common stock upon
conversion will be treated as a payment in exchange for the fractional share of
common stock. Accordingly, you will generally recognize capital gain (measured
by the difference between the cash received for the fractional share and your
adjusted tax basis in the fractional share) upon the receipt of cash in lieu of
a fractional share of common stock.
DIVIDENDS.
Distributions, if any, made on our common stock after a conversion generally
will be included your income as ordinary dividend income to the extent of our
current or accumulated earnings and profits. Distributions in excess of our
current and accumulated earnings and profits will be treated as a return of
capital to the extent of your basis in the common stock and thereafter as
capital gain.
Holders of convertible debt instruments such as the notes may, in certain
circumstances, be deemed to have received distributions of stock if the
conversion price of such instruments is adjusted. However, adjustments to the
conversion price made pursuant to a bona fide reasonable adjustment formula
which has the effect of preventing the dilution of the interest of the holders
of the debt instruments will generally not be to result in a constructive
distribution of stock. Certain of the possible adjustments provided in the notes
(including, without limitation, adjustments in respect of taxable dividends to
our stockholders) will not qualify as being pursuant to a bona fide reasonable
adjustment formula. If such adjustments are made, you will be deemed to have
received constructive distributions taxable as dividends to the extent of our
current and accumulated earnings and profits even though you have not received
any cash or property as a result of such adjustments. In certain circumstances,
the failure to provide for such an adjustment may result in taxable dividend
income to you.
34
39
SALE, EXCHANGE OR REDEMPTION OF COMMON STOCK.
Upon the sale, exchange or redemption of common stock you generally will
recognize capital gain or loss equal to the difference between (i) the amount of
cash and the fair market value of any property received upon the sale or
exchange and (ii) your adjusted tax basis in the common stock. Such capital gain
or loss will be long-term capital gain or loss if your holding period in common
stock is more than one year at the time of the sale, exchange or redemption.
Long-term capital gains recognized by certain non-corporate U.S. holders,
including individuals, will generally be subject to a maximum rate of tax of
20%. Your basis and holding period in common stock received upon conversion of a
note are determined as discussed above under "Conversion of the Notes." The
deductibility of capital losses is subject to limitations.
BACKUP WITHHOLDING AND INFORMATION REPORTING.
Backup withholding of United States federal income tax at a maximum rate of
31% may apply to payments pursuant to the terms of a note or common stock if you
are a U.S. holder and not an "exempt recipient" and if you fail to provide
certain identifying information (such as your TIN) in the manner required.
Generally, individuals are not exempt recipients. Corporations are exempt
recipients, whereas other entities may be exempt recipients. Payments made in
respect of a note or common stock must be reported to the IRS, unless you are an
exempt recipient or otherwise establish an exemption. Any amount withheld from a
payment to you under the backup withholding rules is allowable as a refund or
credit against your United States federal income tax, provided that the required
information is furnished to the IRS in a timely manner.
NON-U.S. HOLDERS
For purposes of this discussion, a "non-U.S. holder" means a holder that
is not a U.S. holder. In general, subject to the discussion below concerning
backup withholding:
TAXATION OF INTEREST.
Payments of principal or interest on the notes by us or any paying agent to a
beneficial owner of a note that is a non-U.S. holder will not be subject to
United States withholding tax, provided that, in the case of interest:
1. you do not own, actually or constructively, 10% or more of the total
combined voting power of all classes of our stock entitled to vote;
2. such non-U.S. holder is not a "controlled foreign corporation" with
respect to which we are a "related person;"
3. you are not a bank receiving interest pursuant to a loan agreement
entered into in the ordinary course of your trade or business; and
4. certain certification requirements are satisfied.
To satisfy the certification requirements referred to in (4) above, either
(i) the beneficial owner of a note must certify, under penalties of perjury, to
us or our paying agent, as the case may be, that such owner is a non-U.S. holder
and must-provide such owner's name and address, and United States taxpayer
identification number, if any, or (ii) a securities clearing organization, bank
or other financial institution that holds customer securities in the ordinary
course of its trade or business (a "Financial Institution") and holds the note
on behalf of the beneficial owner thereof must certify, under penalties of
perjury, to us or our paying agent, as the case may be, that such certificate
has been received from the beneficial owner and must furnish the payor with a
copy thereof. Such requirement will be fulfilled if the beneficial owner of a
note certifies on IRS Form W-8BEN or successor form, under penalties of perjury,
that it is a non-U.S. holder and provides its name and address or any Financial
Institution holding the note on behalf of the beneficial owner files a statement
with the withholding agent to the effect that it has received such a statement
from the beneficial owner (and furnishes the withholding agent with a copy
thereof). The applicable regulations generally also require, in the case of a
note held by a foreign partnership, that:
1. the certification described above be provided by the partners; and
35
40
2. the partnership provide certain information, including, under certain
circumstances, a United States taxpayer identification number.
Further, a look-through rule will apply in the case of tiered partnerships.
Prospective investors should consult their tax advisors regarding the
certification requirements for non-U.S. holders.
Interest on notes not excluded from United States withholding tax as
described above generally will be subject to United States withholding tax at a
30% rate, except where an applicable United States income tax treaty provides
for the reduction or elimination of such withholding tax (and you provide the
appropriate certification) or if interest on the Note is effectively connected
with your conduct of a trade or business in the United States, which is
described more fully below.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES OR COMMON STOCK.
You will not be required to pay United States federal income tax on gains
realized on the sale, exchange or redemption of such note or common stock
(except with respect to accrued and unpaid interest, which would be taxable as
described above) unless:
1. you are an individual who is present in the United States for 183 days
or more in the taxable year of sale, exchange or other disposition, and
certain conditions are met;
2. such gain is effectively connected with your conduct of a trade or
business in the United States and, if certain United States income tax
treaties apply, is attributable to a United States permanent establishment
maintained by you;
3. you are subject to Code provisions applicable to certain United States
expatriates; or
4. in the case of common stock held by you, we are or have been a "United
States real property holding corporation" for United States federal income
tax purposes at any time during the shorter of the five-year period ending on
the date of disposition or period that you held our common stock. We do not
believe that we are currently, and do not anticipate becoming, a United
States real property corporation. Even if we were, or were to become, a
United States real property holding corporation, no adverse tax consequences
would apply to you if you hold, directly and indirectly, at all times during
the applicable period, less than five percent of our common stock, provided
that our common stock was regularly traded on an established securities
market.
CONVERSION OF THE NOTES.
You generally should not be required to pay United States federal income tax
on the conversion of a note into common stock. To the extent you receive cash in
lieu of a fractional share of common stock upon conversion, you may be subject
to the rules described above with respect to the sale, exchange or redemption of
a note or common stock. See "Non-U.S. Holders -- Sale, Exchange or Redemption of
the Notes or Common Stock" above.
DIVIDENDS.
Distributions on common stock after conversion will constitute a dividend for
United States federal income tax purposes to the extent of our current or
accumulated earnings and profits as determined under United States federal
income tax principles. Dividends generally will be subject to United States
withholding tax at a 30% rate, except where an applicable United States income
tax treaty provides for the reduction or elimination of such withholding tax.
The conversion price of the notes is subject to adjustment in certain
circumstances. Any such adjustment could, in certain circumstances, give rise to
a deemed distribution to you. See "U.S. Holders -- Dividends" above. In such
case, the deemed distribution would be subject to the rules described above
regarding United States withholding tax on dividends.
INCOME OR GAINS EFFECTIVELY CONNECTED WITH A UNITED STATES TRADE OR BUSINESS.
If you are engaged in a trade or business in the United States and if
interest on the note, dividends on the common stock, or gain realized on the
sale, exchange or other disposition of the note or common stock is effectively
connected with the conduct of such trade or business (and, if certain tax
treaties apply, is attributable to a United States permanent establishment
maintained by you in the United States), you, although exempt from United States
withholding tax (provided that the certification requirements discussed in the
next sentence are met), will generally be required to pay United States federal
income tax on such interest, dividends or gain on a net
36
41
income basis in the same manner as if you were a U.S. holder. In lieu of the
certificate described above, you would be required, under currently effective
Treasury Regulations, to provide us with a properly executed IRS Form W-8ECI or
successor form in order to claim an exemption from United States withholding
tax. In addition, if you are a foreign corporation, it may be subject to a
branch profits tax equal to 30% (or such lower rate provided by an applicable
United States income tax treaty) of a portion of your effectively connected
earnings and profits for the taxable year.
UNITED STATES FEDERAL ESTATE TAX.
A note held by an individual who at the time of death is not a citizen or
resident of the United States (as specially defined for United States federal
estate tax purposes) will not be subject to United States federal estate tax if
the individual did not actually or constructively own 10% or more of the total
combined voting power of all classes of our stock and, at the time of the
individual's death, payments with respect to such note would not have been
effectively connected with the conduct by such individual of a trade or business
in the United States. Common stock held by an individual who at the time of
death is not a citizen or resident of the United States (as specially defined
for United States federal estate tax purposes) will be included in such
individual's estate for United States federal estate tax purposes, unless an
applicable estate tax treaty otherwise applies.
BACKUP WITHHOLDING AND INFORMATION REPORTING.
You may have to comply with specific certification procedures to establish
that you are not a United States person in order to avoid backup withholding tax
requirements with respect to payments of principal and interest on the notes or
dividends on the common stock. In addition, we may be required to report
annually to the IRS and to you the amount of, and the tax withheld respect to,
any interest or dividends paid to you, regardless of whether any tax was
actually withheld. Copies of these information returns may also be made
available under the provisions of a specific treaty or agreement to the tax
authorities of the country in which the non-U.S. holder resides.
Any amounts withheld under the backup withholding rules from a payment to you
will be allowed as a refund or credit against your United States federal income
tax provided that the required information is furnished to the IRS in a timely
manner.
THE PRECEDING DISCUSSION OF CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE.
ACCORDINGLY, YOU ARE URGED TO CONSULT YOUR TAX ADVISORS AS TO THE PARTICULAR TAX
CONSIDERATIONS TO YOU OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES
AND THE COMMON STOCK INTO WHICH THE NOTES ARE CONVERTIBLE, INCLUDING THE EFFECT
AND APPLICABILITY OF STATE, LOCAL, FOREIGN OR OTHER TAX LAWS, AS WELL AS THE
CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.
LEGAL MATTERS
Certain legal matters in connection with the Notes offered hereby will be
passed upon for us by Latham & Watkins, San Francisco, California and McAfee &
Taft, Oklahoma City, Oklahoma.
INDEPENDENT AUDITORS
The consolidated financial statements incorporated in this prospectus by
reference from Fleming's Annual Report on Form 10-K for the year ended December
30, 2000 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference.
INCORPORATION BY REFERENCE
We have elected to "incorporate by reference" certain information into this
prospectus, which means we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus.
We incorporate by reference:
o Our Annual Report on Form 10-K for the fiscal year ended December 30, 2000
filed with the SEC on March 23, 2001, as amended by our Amended Annual
Report on Form 10-K/A filed with the SEC on March 23, 2001, including the
information
37
42
specifically incorporated by reference into our Form 10-K from our Proxy
Statement for our 2001 Annual Meeting of Shareholders, filed with the SEC
on March 28, 2001;
o Our Quarterly Report on Form 10-Q for the quarter ended April 21, 2001
filed with the SEC on May 29, 2001;
o Our Current Report on Form 8-K filed with the SEC on July 12, 2001;
o Our Current Report on Form 8-K filed with the SEC on March 16, 2001;
o Our Current Report on Form 8-K filed with the SEC on March 13, 2001; and
o The description of our common stock contained in our registration
statement on Form 8-A filed with the SEC on April 19, 1983, including any
amendments or reports filed for the purpose of updating such description.
We are also incorporating by reference all other reports that we file with
the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
between the date of this prospectus and the date of completion of the sale of
securities covered by this prospectus.
You may obtain copies of these documents from us without charge by writing to
us at Fleming Companies, Inc., 1945 Lakepointe Drive, Box 299013, Lewisville,
Texas 75029, or calling us at (972) 906-8000.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the information requirements of the Securities Exchange Act
of 1934, as amended (File No. 001-08140). Accordingly, we file annual, quarterly
and periodic reports, proxy statements and other information with the SEC
relating to our business, financial statements and other matters. You may read
and copy any documents we have filed with the SEC at prescribed rates at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You can obtain copies of these materials at prescribed rates by writing to the
SEC's Public Reference Section at the address above, or by calling (800)
SEC-0330. Our SEC filings are also available to you free of charge at the SEC's
web site at http://www.sec.gov. Information contained in our web site is not
part of this prospectus.
38
43
================================================================================
[FLEMING COMPANIES, INC. LOGO]
$150,000,000
FLEMING COMPANIES, INC.
5.25% Convertible Senior Subordinated Notes Due 2009
Shares of Common Stock Issuable Upon Conversion of the Notes
----------------
PROSPECTUS
----------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER
THAN THE DATE OF THIS PROSPECTUS. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES
IN ANY STATE WHERE THE OFFER IS NOT PERMITTED.
================================================================================