-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OTdbWLew3orUifjasLpTYVifOGeEaD/HLg97GXJEC8r1c11136d74XkjJ2IT8lfQ iUptgpnQLbo/bTBu0/Q/4w== 0000948688-99-000010.txt : 19990420 0000948688-99-000010.hdr.sgml : 19990420 ACCESSION NUMBER: 0000948688-99-000010 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980620 FILED AS OF DATE: 19990419 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JITNEY JUNGLE STORES OF AMERICA INC /MI/ CENTRAL INDEX KEY: 0001005408 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 640280539 STATE OF INCORPORATION: MI FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 033-80833 FILM NUMBER: 99596950 BUSINESS ADDRESS: STREET 1: 3800 I 55 NORTH STREET 2: STE 200 CITY: JACKSON STATE: MS ZIP: 39211 BUSINESS PHONE: 6019658625 MAIL ADDRESS: STREET 1: JITNEY JUNGLE STORES OF AMERICA INC STREET 2: 3800 I 55 NORTH CITY: JACKSON STATE: MS ZIP: 39211 FORMER COMPANY: FORMER CONFORMED NAME: JJ ACQUISITIONS CORP DATE OF NAME CHANGE: 19951227 10-Q/A 1 FORM 10-Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Pursuant To Section 13 or 15 (d) of The Securities and Exchange Act of 1934 QUARTER ENDED June 20, 1998 COMMISSION FILE NO. 33-80833 JITNEY-JUNGLE STORES OF AMERICA,INC. (Exact name of registrant as specified in its charter) STATE OF INCORPORATION I.R.S. EMPLOYER I.D. NO. Mississippi 64-0280539 ADDRESS OF PRINCIPAL EXECUTIVE OFFICE 1770 Ellis Avenue, Suite 200, Jackson, MS 39204 REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE 601-965-8600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES (X) NO The number of shares of Registrant's Common Stock, par value one cent ($.01) per share, outstanding at July 31, 1998, was 423,300 shares.
JITNEY-JUNGLE STORES OF AMERICA, INC. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements: Condensed Consolidated Balance Sheets June 20, 1998 (Restated) (Unaudited) and January 3, 1998 2 Condensed Consolidated Statements of Operations Twenty-four (24) and Twelve (12) Week Periods Ended June 20, 1998 (Restated) (Unaudited) and Twenty-five (25) and Thirteen (13) Week Periods Ended June 28, 1997 (Unaudited) 3 Condensed Consolidated Statements of Changes in Stockholders' Deficit for theTwenty-four (24) Week Period Ended June 20, 1998 (Restated) (Unaudited) and Twenty-five (25) Week Period Ended June 28, 1997 (Unaudited) 4 Condensed Consolidated Statements of Cash Flows Twenty-four (24) Week Period Ended June 20, 1998 (Restated) (Unaudited) and Twenty-five (25) Week Period Ended June 28, 1997 (Unaudited) 5 Notes to Condensed Consolidated Financial Statements June 20, 1998 (Restated) (Unaudited) and June 28, 1997 (Unaudited) 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12 PART II.OTHER INFORMATION Item 1. Legal Proceedings 12 Item 2. Change in Securities 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12-13
PART I. ITEM 1. FINANCIAL STATEMENTS JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) June 20, January 3, 1998 1998 (Unaudited) (as restated, see Note 8) ASSETS ----------- ----------- Current assets: Cash and cash equivalents $ 9,999 $ 11,984 Receivables 10,913 13,833 Merchandise inventories 149,974 162,786 Prepaid expenses and other 17,739 11,570 Deferred income taxes 14,319 15,681 ---------- ---------- Total current assets 202,944 215,854 ---------- ---------- PROPERTY AND EQUIPMENT - net 288,171 303,774 ---------- ---------- Other assets Goodwill, net of amortization of $2,557 at June 20, 1998 and $1,105 at January 3, 1998 124,110 142,415 Other assets - net 28,168 32,237 Deferred income taxes 6,464 ---------- ---------- Total other assets 158,742 174,652 ---------- ---------- TOTAL ASSETS $649,857 $694,280 ========= ========= LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $112,630 $112,641 Accrued expenses 56,718 75,558 Current portion of capitalized leases 6,772 6,760 Payable to former shareholders of Delchamps, Inc. 7,832 26,637 Restructuring obligations 13,224 14,927 ---------- ---------- Total current liabilities 197,176 236,523 Noncurrent liabilities: Long-term debt 488,517 449,831 Obligations under capitalized leases, excluding current installments 65,860 68,321 Restructuring obligations, excluding current installments 25,422 40,588 Deferred income taxes 3,875 ---------- ---------- Total liabilities 776,975 799,138 Commitments and contingencies Redeemable Preferred stock (aggregate liquidation preference value of $68,863 at June 20, 1998 and $65,077 at January 3, 1998) 66,924 63,042 Stockholders' deficit: Class C Preferred stock - Series 1(at liquidation value) 9,487 9,071 Common stock ($.01 par value, authorized 5,000,000 4 4 shares, issued 425,000 shares, of which 1,700 shares are held as treasury stock at June 20, 1998) Additional paid-in capital (302,326) (302,326) Retained earnings 98,813 125,351 ---------- ---------- Total (194,022) (167,900) Less - 1,700 shares at June 20, 1998 held in treasury at cost (20) ---------- ---------- Total stockholder's deficit (194,042) (167,900) TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $649,857 $694,280 ========= ========= See notes to condensed consolidated financial statements.
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands Except Per Share Amounts) 24 Weeks 25 Weeks 12 Weeks 13 Weeks Ended Ended Ended Ended June 20, June 28, June 20, June 28, 1998 1997 1998 1997 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (as restated (as restated see note 8) see note 8) ---------- ---------- ----------- ------------- NET SALES $ 958,592 $ 586,939 $ 484,383 $ 305,316 COSTS AND EXPENSES: Cost of goods sold 716,364 438,584 358,242 227,647 Direct store expenses 190,032 97,408 95,809 52,605 Warehouse, administrative and general expenses 36,468 28,671 18,437 12,425 Interest expense - net 32,769 16,652 17,546 8,297 Acquisition integration 16,838 2,737 2,842 2,737 costs and special charges ---------- ---------- ---------- ----------- Total costs and expenses 992,471 584,052 492,786 303,711 ---------- ---------- ---------- ----------- Earnings (loss) before taxes on income (33,879) 2,887 (8,403) 1,605 Income tax expense (benefit) (11,639) 1,049 (2,488) 572 ---------- ---------- ---------- ----------- $ (22,240) $ 1,838 $ (5,915) $ 1,033 NET EARNINGS (LOSS) ========== ========== ========== =========== EARNINGS (LOSS) PER COMMON SHARE - BASIC $ (62.72) $ (4.29) $ (19.06) $ (1.66) ========== ========== ========== =========== EARNINGS (LOSS) PER COMMON SHARE - DILUTED $ (62.72) $ (4.29) $ (19.06) $ (1.66) ========== ========== ========== =========== See notes to condensed consolidated financial statements.
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE TWENTY-FOUR (24) WEEK PERIOD ENDED JUNE 20, 1998 (Unaudited) AND THE TWENTY-FIVE (25) WEEK PERIOD ENDED JUNE 28, 1997 (Unaudited) (Dollars in thousands) Class C Preferred Stock, Series 1 Common Stock Additional Treasury No. of No. of Paid-In Retained Stock at Shares Amount Shares Amount Capital Earnings Cost --------- ------- ------ ------- ----------- -------- -------- Balance January 4, 1997 76,042 $ 8,240 425,000 $ 4 $ (302,326) $144,027 Net earnings 1,838 Accretion of discount on Class A Preferred stock (96) Cumulation of dividends on Preferred stock 369 (3,661) Balance --------- ------- ------- -------- ----------- --------- -------- June 28, 1997 76,042 $ 8,609 425,000 $ 4 $ (302,326) $142,108 $ - ========= ======= ======= ======== =========== ========= ======== Balance January 3, 1998 76,042 $ 9,071 425,000 $ 4 $ (302,326) $125,351 Net loss (as restated see note 8) (22,240) Purchase of 1700 shares of treasury stock $ (20) Accretion of discount on Class A Preferred stock (96) Cumulation of dividends on Preferred stock 416 (4,202) Balance -------- ------- -------- ------- ---------- ---------- --------- June 20, 1998 (as restated 76,042 $ 9,487 425,000 $ 4 $ (302,326) $ 98,813 $ (20) see note 8) ======== ======= ======== ======= ========== ========== ========== See notes to condensed consolidated financial statements.
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) 24 Weeks 25 Weeks (Unaudited) Ended Ended June 20, June 28, 1998 1997 (as restated see note 8) OPERATING ACTIVITIES: ----------- ----------- Net earnings (loss) $ (22,240) $ 1,838 Adjustment to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Depreciation 26,196 14,279 Amortization of deferred loan costs 1,292 192 Loss (gain) on disposition of property (39) 1,986 Deferred income tax benefit (8,188) (3,579) Decrease in restructuring obligation (3,811) Changes in current assets and liabilities, net effects of acquisition: Notes and accounts receivable 3,258 (390) Store and warehouse inventories 11,856 4,036 Prepaid expenses (8,356) (3,817) Accounts payable (9,757) 18,137 Accrued expenses 2,355 3,376 ---------- ---------- Net cash provided by (used in) operating activities (7,434) 36,058 ---------- ---------- INVESTING ACTIVITIES: Capital expenditures (16,453) (6,863) Proceeds from sale of property and other assets 7,573 399 Direct acquistion costs (4,487) Payment to former shareholders of Delchamps, Inc. (18,805) Decrease (increase) in other assets 2,391 (8,073) ---------- ---------- Net cash used in investing activities (29,781) (14,537) ---------- ---------- FINANCING ACTIVITIES: Proceeds (payments) on long-term debt - net 38,686 (21,389) Payments on capitalized lease obligations (2,449) (2,609) Other liabilities (987) Merger cost (14) Purchase of treasury stock (20) ---------- ---------- Net cash provided by (used in) financing activities 35,230 (24,012) ---------- ---------- DECREASE IN CASH AND CASH EQUIVALENTS (1,985) (2,491) CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 11,984 7,642 ---------- ---------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 9,999 $ 5,151 ========== ========== SUPPLEMENTAL DISCLOSURES: Cash paid for interest $ 30,886 $ 12,847 ========== ========== Cash paid for income taxes, net of refund $ 38 $ 3,263 ========== ========== See notes to condensed consolidated financial statements.
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 20, 1998 (Unaudited) AND JUNE 28, 1997 (Unaudited) (Dollars in thousands) 1. BASIS OF PRESENTATION The unaudited condensed consolidated financial statements include those of Jitney-Jungle Stores of America, Inc. and its wholly-owned subsidiaries, Southern Jitney Jungle Company, Interstate Jitney-Jungle Stores, Inc., McCarty-Holman Co., Inc. and subsidiary, Jitney-Jungle Bakery, Inc., Delchamps Inc. and subsidiary and JJ Construction Corp. All material intercompany profits, transactions and balances have been eliminated. These interim financial statements have been prepared on the basis of accounting principles used in the annual financial statements for the 35 weeks ended January 3, 1998. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (all of which were of a normal recurring nature) necessary for a fair statement of consolidated financial position and results of operations of the Company for the interim periods. The results of operations of the Company for the twenty-four weeks ended June 20, 1998, are not necessarily indicative of the results which may be expected for the entire year. The Company changed its fiscal year end on January 3, 1998 to the closest Saturday to December 31. Previously, the Company reported its fiscal year end results as of the Saturday nearest to April 30. Data included herein for the second quarter of fiscal 1997 reflects the unaudited results of operations for the twenty- five weeks ended June 28, 1997. 2. ACQUISITION In September 1997, the Company acquired the majority of the common stock of Delchamps, Inc. Certain shareholders dissented from the merger and are pursuing their appraisal remedy under Alabama law. Management does not expect this matter to have a material affect on operations or the price of the acquisition. The acquisition was accounted for as a purchase and, accordingly, Delchamps' results of operations were included in the Company's consolidated financial statements subsequent to the acquisition date. The purchase price, net of cash acquired of $84, has been allocated to the assets acquired and liabilities assumed based upon the estimated fair values at the date of acquisition, as set forth below. Any variation between such amounts and the final allocation will change the amount of goodwill recognized in connection with the Delchamps acquisition and the related amortization expense. The allocation could be affected by, among other things, a final determination of amounts to be paid to former shareholders of Delchamps who dissented from the merger (and related professional fees) and of costs to be incurred related to Delchamps facilities that have been closed. Management believes, however that when the final valuation of the net assets acquired is complete, the allocation of the purchase price will not differ materially from the amounts shown herein.
Receivables and other current assets $ 12,569 Inventory 101,199 Property, equipment and leasehold improvements 116,431 Deferred income tax asset 10,428 Other assets 2,106 Goodwill 135,454 Accounts payable and accrued expenses (74,643) Notes payable and long-term debt, immediately repaid (14,463) Capital lease obligations (10,794) Restructuring obligation (41,967) ----------- Net purchase price $ 236,320 ===========
3. RESTRUCTURING OBLIGATIONS In connection with the Delchamps acquisition, the Company recorded a restructuring obligation of $42,860 relating to (i) stores closed by Delchamps prior to the acquisition; (ii) Delchamps stores to be closed after the acquisition because of unprofitability; (iii) Company and Delchamps stores required to be divested under a consent decree with the Federal Trade Commission; (iv) closure of the Delchamps headquarters in Mobile, Alabama; and (v) closure of the Delchamps warehouse facility in Hammond, Louisiana. The $42,860 consists of future rental payments, severance costs, loss on divestiture of fixed assets, miscellaneous expenses related mainly to the shutdown of the Mobile and Hammond facilities. Of the total restructuring costs, $41,967 was recorded as goodwill as part of the purchase price allocation in the Delchamps acquisition and $893 was included as a nonrecurring charge in the statement of operations, $599 in the 35 weeks ended 1-3-98 and $294 in the first quarter of fiscal 1998. 4. ACQUISITON INTEGRATION COSTS AND OTHER SPECIAL CHARGES Acquisition integration costs and other special charges recorded during the twenty-four week period ended June 20, 1998 consisted of severance benefits of $250 and loss of $294 on stores sold under the consent decree with the Federal Trade Commission in the Delchamps acquisition and $16,294 of business integration costs related to Delchamps. Acquisition integration charges and other special charges consisting of $958 of severance benefits and $1,779 due to an employment agreement relating to the Company's former chief executive officer were recorded during the thirteen and twenty-five week period ended June 28, 1997. 5. LONG-TERM DEBT Long-term debt consisted of the following:
June 20, January 3, 1998 1998 ---------- --------- Senior notes at 12%, maturing in 2006 $ 200,000 $ 200,000 Senior subordinated notes at 10.375%, 200,000 200,000 maturing in 2007 Senior Credit Facility 88,517 49,831 ---------- --------- Long-term debt $ 488,517 $ 449,831 ========== =========
The Company has available a Senior Credit Facility of $150 million under which letters of credit aggregating $12,110 were outstanding at June 20, 1998. 6. EARNINGS (LOSS) PER COMMON SHARE Earnings (loss) per common share is based on net income (loss) after preferred stock dividend requirements and the weighted average number of shares outstanding during each interim period. Cumulative dividends not declared or paid on preferred shares amounted to $2,101 and $4,202 for the twelve weeks and twenty-four weeks ended June 20, 1998, respectively. Cumulative dividends not declared or paid on preferred shares amounted to $1,740 and $3,661 for the thirteen weeks and twenty-five weeks ended June 28, 1997. The number of shares used in computing basic and diluted earnings (loss) per share was 423,300 for the twelve weeks and twenty-four weeks ended June 20, 1998 and 425,000 for the thirteen weeks and twenty-five weeks ended June 28, 1997. The 1,700 shares held in treasury were purchased pursuant to certain option agreements from former executives whose employment terminated during the relevant period and have been committed to be reissued to other members of existing management. Potential common shares attributed to outstanding warrants were not included in the computation of diluted earnings per share as their effect on earnings (loss) per share would be antidilutive. 7. COMMITMENTS AND CONTINGENCIES The Company is a party to certain litigation incurred in the course of business. In the opinion of management, the ultimate liability, if any, which may result from this litigation will not have a material adverse effect on the Company's financial position or results of operations. 8. RESTATEMENT Subsequent to the issuance of the Company's Quarterly Report on Form 10-Q for the 12 weeks ended June 20, 1998, the Company determined that certain amounts recorded in connection with the Delchamps acquisition, during the quarter ended June 20, 1998, should have been charged to expense as incurred. During the 12 weeks ended June 20, 1998, the Company recorded additional goodwill and restructuring obligations related primarily to consolidating warehouse and office facilities, remerchandising of Delchamps stores, training of Declchamps' employees, and other related items. Such amounts should have been recognized as cost of goods sold and expenses as incurred. A summary of the significant effects of the restatement are as follows:
As Previously As Reported Restated At June 20, 1998 Goodwill $ 151,019 $ 124,110 Restructuring obligations, current 14,222 13,224 Restructuring obligations, excluding current portion 37,429 25,422 Retained earnings 112,502 98,913 For the twelve weeks ended June 20, 1998 Business integration costs and special charges $ 2,842 Total costs and expenses $ 488,535 492,786 Loss before taxes on income (4,152) (8,403) Income tax benefit (1,023) (2,488) Net loss (3,129) (5,915) Net loss per share - basic and diluted $ (12.36) $ (18.94) For the twenty-four weeks ended June 20, 1998 Cost of goods sold $ 714,294 $ 716,364 Acquisition integration costs and other special charges 16,838 Total costs and expenses 971,426 992,471 Loss before taxes on income (12,834) (33,879) Income tax benefit (4,283) (11,639) Net loss (8,551) (22,240) Net loss per share - basic and diluted $ (30.13) $ (62.72)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands) The following is management's discussion and analysis of significant factors affecting the Company's financial condition and results of operations during the periods included in the accompanying condensed consolidated statements of operations. Subsequent to the issuance of the Company's Quarterly Report on Form 10-Q for the 12 weeks ended June 20, 1998, the Company determined that certain amounts recorded in connection with the Delchamps acquisition, during the quarter ended June 20, 1998, should have been charged to expense as incurred. During the 12 weeks ended June 20, 1998, the Company recorded additional goodwill and certain of these cost (princpally related to store closures) have not been restated while other cost attributable to the Delchamps acquitions, including cost incurred in consolidating warehouse operations, remerchandising of Delchamps stores, and training of Delchamps employees have been expensed as acquisition integration cost and accordance with the guidlelines set forth in Emerging Issues Task Force (EITF) Releases 94-3 ("reconigation of liabilities in connection with a Purchase Businssess Combination"). The effects of the restatement are presented in Note 8 of Notes to Condensed Consolidated Financial Statements and have been reflected herein. A table showing the percentage of net sales represented by certain items in the Company's condensed consolidated statements of operations is as follows:
24 Weeks 25 Weeks 12 Weeks 13 Weeks Ended Ended Ended Ended June 20, June 28, June 20, June 28, 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Net sales 100.0% 100.0% 100.0% 100.0% Gross profit 25.3 25.3 26.0 25.4 Direct store expenses 19.8 16.6 19.8 17.2 Warehouse, administrative and general expenses 3.8 4.9 3.8 4.1 Acquisition integration costs 1.8 0.5 0.6 0.9 other special charges Operating income (0.1) 3.3 1.9 3.2 Interest expense, net 3.4 2.8 3.6 2.7 Earnings (loss) before income taxes (3.5) 0.5 (1.7) 0.5 Provision for income taxes (1.2) 0.2 0.5 0.2 Net earnings (loss) (2.3) 0.3 (1.2) 0.3 EBITDA 4.4 6.1 5.3 6.1
A summary of the period to period changes in certain items included in the condensed consolidated statements of operations for the twenty-four and twenty-five week periods and twelve and thirteen week periods ended June 20, 1998 and June 28, 1997, respectively is as follows:
Period-to-Period Period-to-Period Changes Twenty-four Weeks Ended Twelve Weeks Ended June 20,1998 June 20,1998 $ % $ % -------- ------- -------- -------- Net sales $ 371,653 63.3 % $ 179,067 58.7 % Gross profit 93,873 n/m 48,472 n/m Direct store expenses 92,624 n/m 43,204 n/m Warehouse, administrative and general expenses 7,797 n/m 5,922 n/m Acquisition integration costs and other special charges 14,101 n/m 105 n/m Operating income (20,105) (102.9) (759) (7.7) Interest expense, net 16,117 96.8 9,249 111.5 Earnings (loss) before income taxes (36,766) n/m (10,008) n/m Provision for income tax (12,688) n/m (3,060) n/m Net earnings (loss) (24,078) n/m (6,948) n/m EBITDA 6,537 4.4 6,963 5.3 (n/m - not meaningful comparison)
RESULTS OF OPERATIONS NET SALES Net sales increased $179,067 or 58.7% in the twelve week period and $371,653 or 63.3% in the twenty-four week period ended June 20, 1998 as compared to the thirteen and twenty-five week periods ended June 28, 1997. The net sales increase was primarily attributable to the Delchamps acquisition. Same store sales decreased approximately .6% for the twelve week period and 3.5% for the twenty-four week period ended June 20, 1998. Sales throughout the twenty-five weeks ended June 28, 1997 were positively impacted by the introduction of the Company's Gold Card, its customer loyalty program, in approximately 79 Jitney- Jungle and Jitney Premier supermarkets in January 1997. Sales for the twenty-four weeks ended June 20, 1998 were positively impacted by the introduction of the Gold Card in 52 Delchamps supermarkets in March 1998 and in the remaining Delchamps supermarkets during the second quarter ended June 20, 1998. The decline in same store sales is attributable primarily to competitive pressures, a decline in sales at Delchamps supermarkets due to disruptions caused by the transition process which has been completed and the fact that the Gold Card introduction positively impacted sales for most of the twenty-five weeks ended June 28, 1997 but only the latter part of the twenty-four weeks ended June 20, 1998. During the second quarter ended June 20,1998, the Company remodeled 3 discount or conventional stores, converted 6 discount or conventional stores to the combination store format and opened 1 gasoline station. In addition, 2 stores and 1 gasoline station were closed. During the twenty-four weeks ended June 20, 1998 the Company remodeled 3 discount or conventional stores, converted 6 discount or conventional stores to the combination store format and opened 2 gasoline stations. In addition, 2 gasoline stations and 19 stores were sold or closed including 10 stores that were required to be sold by the Federal Trade Commission in connection with the Delchamps acquisition. The Company's store count at the end of the quarter was 198 supermarkets (16 discount stores, 168 conventional stores and 14 combination stores) and 53 gasoline stations as compared to 105 supermarkets (21 discount stores, 81 conventional stores and 3 combination stores) and 53 gasoline stations at June 28, 1997. GROSS PROFIT Gross profit for the second quarter of fiscal 1998 increased $48,472 to $126,141 or 26.0% of net sales, compared to $77,669, or 25.4% of net sales, for the second quarter of fiscal 1997. Gross profit as a percentage of sales was 25.3% for the twenty-four week period ended June 20, 1998 as compared to 25.3% for the twenty-five week period ended June 27, 1997. During the twenty-four week period ended June 20, 1998, $2,070 was charged to excess shrink associated with Delchamps acquisition in the consolidated statements of operations. During the quarter ended June 20, 1998 the Company began to benefit from increased purchasing leverage resulting from the Delchamps acquisition. The realized and expected benefits of such increased purchasing leverage are difficult to quantify precisely. The Company has renegotiated several supply contracts and expects the resulting annualized cost savings to be approximately $7.1 million. Other benefits of increased purchasing leverage include reduced costs from volume incentives. The Company expects to continue to benefit from such purchasing leverage. The increase in gross profit as a percentage of net sales is principally due to such increased purchasing leverage and the improvement in product mix in the combination stores. This improvement in gross profit as a percentage of sales was partially offset by an increase in store shrink. During the second quarter ended June 20, 1998, the Company made significant progress to reduce store shrink. DIRECT STORE EXPENSES Direct store expenses were $95,809 or 19.8% of net sales and $52,605 or 17.2% of net sales for the twelve week and thirteen week period and $190,032 or 19.8% of net sales and $97,408 or 16.6% of net sales for the twenty-four week and twenty-five week period ended June 20, 1998 and June 28, 1997, respectively. Direct store expenses increased primarily due to an increase in net sales (due to the Delchamps acquisition). The increase in direct store expenses as a percentage of net sales was primarily in the areas of rent, labor and utilities. Rent expense as a percentage of net sales in the Delchamps stores is more than twice that of the other Company stores. The increase in store labor as a percentage of net sales was principally due to a temporary increase in the number of employees, which was necessary in order to complete retraining required at the Delchamps supermarkets. The increase in utility costs was principally due to the heat wave across the Southeast. WAREHOUSE, ADMINISTRATIVE AND GENERAL EXPENSES Warehouse, administrative and general expenses were $18,347 or 3.8% of net sales and $12,425 or 4.1% of net sales for the twelve week and thirteen week period and $36,468 or 3.8% of net sales and $28,671 or 4.9% of net sales for the twenty-four week and twenty- five week period ended June 20, 1998 and June 28, 1997 respectively. Warehouse, administrative and general expenses increased primarily due to an increase in net sales and increased warehousing expenses resulting from the Delchamps transaction. The decrease in warehouse, administrative and general expenses as a percent of sales was primarily due to additional sales and a decrease in administrative expenses as a result of the closing of the Delchamps' Mobile headquarters in April 1998. The Company has closed Delchamps' Hammond warehouse, which the Company expects will lead to substantial cost savings. The resulting increase in volume at the Company's Jackson warehouse facilities has created operating inefficiencies that are currently being addressed by the Company's management and are expected to be resolved by the end of fiscal 1998. As a result of these inefficiencies, the Company experienced higher warehouse expenses during the twenty-four weeks ended June 20, 1998 than it expects to experience in the remainder of fiscal 1998. ACQUISITION INTEGRATION COSTS AND OTHER SPECIAL CHARGES Acquisition integration costs and other special charges were $16,838 for the twenty-four week period ended June 20, 1998. The Company incurred significant costs as a result of combining the Delchamps and Jitney-Jungle operations. In accordance with EITF Releases 94-3 and 95-3 the Company has allocated certain of these costs to goodwill. However, certain other costs attributable to the Delchamps acquisition, including costs incurred in consolidating warehouse operations, remerchandising of the Delchamps stores, and training of Delchamps employees have been written off as acquisition sots in accordance with the EITF guidelines. Other special charges included severance benefits of $250 and loss of $294 on stores sold under the consent decree with the Federal Trade Commission in the Delchamps acquisition and $16,294 of integration costs related to Delchamps. Acquisition integration costs and other special charges consisting of $958 of severance benefits and $1,779 relating to future payments to be made under an agreement with the Company's former chief executive officer were recorded during the thirteen week and twenty-five week period ended June 28, 1997. OPERATING INCOME Operating income was $9,143 or 1.9% of net sales for the twelve week period and ($1,110) or (.1 %) of net sales for the twenty-four week period ended June 20, 1998 as compared to $9,902 or 3.2% of net sales for the thirteen week period and $19,539 or 3.3% of net sales for the twenty-five week period ended June 28, 1997. The decrease in operating income was due to the factors discussed above. EBITDA EBITDA (net income before interest income, special charges, interest expense, income taxes, depreciation and amortization and LIFO charges/credits) increased $7,063 or 38.0% to $25,635 or 5.3% of net sales in the second quarter of fiscal 1998 as compared to $18,572 or 6.1% of net sales in the second quarter of fiscal 1997. EBITDA increased $6,537 or 18.3% to $45,054 or 4.4% of net sales for the twenty-four week period ended June 20, 1998 as compared to $35,742 or 6.1% of net sales for the twenty-five week period ended June 28, 1997. EBITDA increased primarily due to an increase in sales. EBITDA as presented is consistent with the definition used for covenant purposes contained in the Indenture. EBITDA is a widely accepted financial indicator of a company's ability to service debt. However, EBITDA should not be construed as an alternative to operating income, net income or cash flows from operating activities (as determined in accordance with generally accepted accounting principles) and should not be construed as an indication of the Company's operating performance or as a measure of liquidity. NET INTEREST EXPENSE Net interest expense was $17,546 in the second quarter of fiscal 1998 as compared to $8,297 in the second quarter of fiscal 1997 and was $32,769 and $16,652 for the twenty-four week and twenty- five week period ended June 20,1998 and June 28,1997, respectively. The increase in interest expense was primarily due to interest expense on the $200 million Senior subordinated notes issued in September 1997. INCOME TAX EXPENSE (BENEFIT) Income tax expense for the thirteen weeks and twenty-five weeks ended June 28, 1997 was 35.6% and 36.3%, respectively, of pre-tax income compared to the federal and state statutory rate of 37.3%. The income tax benefit for the twelve weeks and twenty-four weeks ended June 20, 1998 was 29.6% and 34.4%, respectively, of pre-tax loss compared to the federal and state statutory rate of 37.3%; the difference in rates for the twelve weeks and twenty-four weeks ended June 20, 1998 occurred primarily because goodwill relating to the Delchamps acquisition is deductible for financial reporting purposes but not for income tax purposes. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has funded its working capital requirements, capital expenditures and other needs principally from operating cash flows. Due to the recapitalization in March 1996 and acquisition of Delchamps in September 1997 the Company has become highly leveraged and has certain restrictions on its operations. At June 20, 1998, Jitney-Jungle had $561,149 of total long-term debt (including capitalized leases and current installments) and a shareholders deficit of $194,022. The Company's principal uses of liquidity have been to fund working capital, meet debt service requirements and finance Jitney- Jungle's strategic plans. The Company's principal sources of liquidity have been cash flow from operations and borrowings under the Senior Credit Facility. Outstanding borrowings at June 20, 1998 were $88,517 under the Senior Credit Facility. Cash used in operating activities during the twenty-four week period ended June 20, 1998 was $7,434. Cash provided by operating activities during the twenty-five week period ended June 28, 1997 was $36,058. Accrued expenses decreased primarily due to the payment of interest on Senior Notes, Senior Subordinated Notes and the Senior Credit Facility. Inventories decreased due to the consolidation of the warehouses and the closure or sale of certain stores during the first and second quarters of fiscal 1998. Net cash used in investing activities was $29,781 and $14,537 for the twenty-four week and twenty-five week period ended June 20, 1998 and June 28, 1997, respectively. The Company paid approximately $5,007 in cash to former Delchamps shareholders and deposited $13,798 in cash with the clerk of court of Mobile County Alabama as required by law in connection with the appraisal proceeding described below. The Company realized proceeds from the sale of 10 stores which were required to be sold by the Federal Trade Commission due to the Delchamps acquisition. Also, the Company sold land for $4,483 during the second quarter of fiscal 1998. Net cash provided by financing activities was $35,230 for the twenty-four week period ended June 20, 1998 and net cash used was $24,012 for the twenty-five week period ended June 28, 1997. The principal sources of funds in financing activities for the twenty- four week period ended June 20, 1998 were the proceeds of principal on long-term debt. The principal uses of funds in financing activities for the twenty-four week period ended June 20, 1998 were the payment of capital lease obligations and restructuring obligations. Management believes that the Company will be able to finance capital expenditures and other cash requirements for the remainder of fiscal 1998 through cash flows from operations and borrowings under its Senior Credit Facility. Capital expenditure plans are continuously evaluated and modified from time to time depending on cash availability and other economic factors. The Company considers acquisition opportunities from time to time. Any such future acquisitions may require the Company to seek additional debt or equity financing. CAUTIONARY STATEMENTS This quarterly report on Form 10-Q may contain forward-looking statements regarding future expectations about the Company's business, management's plans for future operations or similar matters. The Company's actual results could differ materially from those anticipated in such forward-looking statements due to several important factors including the following: deterioration in economic conditions generally or in the Company's markets, unusual or unanticipated costs or consequences relating to, or changes in, the Company's acquisition plans, demands placed on management by the substantial increase in the Company's size due to the acquisition of Delchamps, unanticipated or unusual distribution problems, breakdown of quality control, competitive pressures, labor disturbances and customer dissatisfaction. Forward-looking statements speak only as of the date made, and the Company undertakes no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they may occur. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In May 1998, the Company's wholly-owned subsidiary Delchamps, Inc. instituted a proceeding in the Circuit Court of Mobile County, Alabama petitioning the court to determine the fair value (as defined in the Alabama Business Corporation Act) of 689,884 shares of former Delchamps, Inc. common stock held by persons purporting to exercise dissenters' rights in connection with the Delchamps Acquisition. Delchamps, Inc. estimates such fair value to be $20 per share; the dissenting shareholders have demanded payment of $68 per share. The Company has deposited $20 per share in cash with the clerk of the court, as required by law. In its financial statements, the Company has accounted for the acquisition of these shares at a price of $30 per share, which was the price paid by the Company to other former Delchamps, Inc. shareholders. Any final determination that the shares formerly held by dissenting shareholders have a fair value of less or more than $30 per share would be reflected as a decrease or increase in the Company's goodwill, which is being amortized over a 40 year period. The Company does not expect the outcome of this matter to have a material effect on the Company's results of operations or the price of the acquisition, although no assurances can be given. The Company is a party to certain litigation incurred in the course of business. In the opinion of management, the ultimate liability, if any, which may result from this litigation will not have a material adverse effect on the Company's financial position or results of operations. ITEM 2. CHANGE IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. -------------- * 27.1 Financial Data Schedule * Filed herewith. (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JITNEY-JUNGLE STORES OF AMERICA, INC. (Registrant) /s/ Richard D. Coleman ----------------------------- Richard D. Coleman (Executive Vice President, Chief Financial Officer) (Principal Financial and Accounting Officer) Dated: August 4 , 1998 EX-27 2
5 OTHER JAN-02-1999 MAR-29-1998 JUN-20-1998 9,999 0 10,913 0 149,974 202,944 640,405 352,234 649,857 197,176 0 66,924 9,487 4 (203,533) 649,857 484,383 484,383 358,242 492,786 2,842 0 17,546 (8,403) (2,488) (5,915) 0 0 0 (5,915) (19.06) (19.06)
-----END PRIVACY-ENHANCED MESSAGE-----