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Fleming Reports Highest EBITDA Ever in Fourth Quarter 2001

DALLAS - Fleming Companies Inc. today announced that adjusted net income for the 2001 fourth quarter grew 59.1 percent to $31.1 million, or $0.64 per share on a fully diluted basis. The fourth quarter 2001 total is adjusted to exclude strategic plan charges and a charge related to the Kmart bankruptcy reorganization.

"Fiscal 2001 was a defining year for Fleming," said Mark Hansen, chairman of the board and CEO of Fleming. "We emerged as the nation's leading distributor of consumables to the retail industry and generated total adjusted EBITDA of $475.8 million, the highest in the company's history. This strong operating cash flow facilitated our $101 million fourth quarter debt reduction. More importantly, we bring considerable momentum into 2002 with a strong base of business and substantial growth prospects."

Strong sales gains were an important part of the fourth quarter results. Compared to the prior year's fourth quarter calculated on a 12-week basis, 2001 fourth quarter adjusted net sales increased 19.1 percent to $3.99 billion from $3.35 billion and adjusted EBITDA rose 11.7 percent to $122.1 million.

For 2001, adjusted net income was $93.5 million, the highest level posted since 1993, on sales of $15.6 billion.

Total debt at the end of the fourth quarter was $1.81 billion, a reduction of $101 million in total borrowings compared to the end of the third quarter.

"Our programs to improve working capital, originally expected to show results in the first half of 2002, produced an early benefit, allowing us to make a significant reduction in debt in the fourth quarter," said Hansen. "We anticipate continued important strides in this high-opportunity area of our business in 2002. Our operating plan is to continue to reduce debt by at least another $100 million through the generation of free cash flow in 2002."

The 2001 adjusted results exclude a $19.8 million pre-tax fourth quarter charge related to the Kmart bankruptcy reorganization. The charge represents reserves against Fleming's total $37.8 million in pre-petition receivables from Kmart and against certain slow-moving Kmart-related inventory. While Fleming intends to pursue collection of all amounts it is owed through the Bankruptcy Court, the company believes this addition to reserves is appropriate. "We believe Kmart's reorganization process will offer them an opportunity to shed unproductive assets and focus on the most productive aspects of the business, including supercenters," said Hansen.

Fleming said it is not able to update its guidance for 2002 and 2003 earnings until further information is learned about the Kmart store-operating plan. The company will issue earnings guidance as soon as possible following the Kmart announcement, which is anticipated to be on or around March 20, 2002. Fleming earlier announced that the least productive 10 percent of the Kmart store base likely constitutes no more than two percent of total Fleming sales and approximately $.05 per share in earnings.
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