-----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, UMUaXLQnMVqYprcNZzZInUB16B2GHX/dXWi8DKVgYApYvPSE0x0UDEHaTRbIqp4k qUjJo959wy00evXNz4yTfA== 0000948688-99-000013.txt : 19990420 0000948688-99-000013.hdr.sgml : 19990420 ACCESSION NUMBER: 0000948688-99-000013 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990102 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-K/A SEC ACT: SEC FILE NUMBER: 033-80833 FILM NUMBER: 99597053 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-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 2, 1999 Commission file number 33-80833 JITNEY-JUNGLE STORES OF AMERICA, INC. (Exact name of registrant as specified in its charter) Mississippi 64-0280539 (State or other jurisdiction (I.R.S. Employer Identification Number) of incorporation or organization) 1770 Ellis Avenue, Suite 200, Jackson, MS 39204 (Address of principal executive offices) (Zip Code) (601) 965-8600 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K. (X ) The Company is closely-held and is not actively traded; therefore, the aggregate market value of voting stock held by nonaffiliates is not applicable. The number of shares of registrant's Common Stock, par value one cent ($.01) per share, outstanding at April 2, 1999, was 425,280. CAUTIONARY NOTICE This Annual Report on Form 10-K 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 any acquisition and/or divestiture 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, restrictions and costs associated with the Company's leveraged capital structure and limitations imposed by its debt agreements, 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. JITNEY-JUNGLE STORES OF AMERICA, INC. TABLE OF CONTENTS ITEM PAGE PART I 1. Business 3 2. Properties 8 3. Legal Proceedings 11 4. Submission of Matters to a Vote of Security Holders 11 PART II 5. Market for the Registrant's Common Equity and Related Stockholder Matters 12 6. Selected Financial Data 14 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 15 8. Financial Statements and Supplementary Data 29 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 27 PART III 10. Directors and Executive Officers of the Registrant 28 11. Executive Compensation 33 12. Security Ownership of Certain Beneficial Owners and Management 38 13. Certain Relationships and Related Transactions 41 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 42 Item 1. Business General Jitney-Jungle Stores of America, Inc. and subsidiaries (the "Company") is a leading operator of supermarkets in the Southeast. As of January 2, 1999 the Company operated 198 stores located throughout Mississippi, Alabama and Louisiana and in selected markets in Tennessee, Arkansas and Florida. The Company is the largest supermarket operator in Mississippi, with 82 stores. On July 8, 1997, the Company entered into a definitive merger agreement with Delchamps, Inc. ("Delchamps"), an Alabama corporation. On September 12, 1997, Delta Acquisition Corporation ("DAC") a wholly owned subsidiary of the Company, completed an all cash tender offer for shares of Delchamps and accepted for payment approximately 75% of such shares. On November 4, 1997, DAC was merged with and into Delchamps. Delchamps was the surviving corporation and became a wholly-owned subsidiary of the Company. In connection with the acquisition, the Company, among other things, (i) issued and sold $200 million of unsecured senior subordinated notes due 2007 (the "Senior Subordinated Notes") and (ii) entered into a $150 million revolving credit agreement (the "Senior Credit Facility") with Fleet Bank, N.A., which replaced the then existing $100 million revolving credit agreement ("Credit Facility") with Fleet Bank, N.A. The proceeds from the sale of the Senior Subordinated Notes and the borrowing under the Senior Credit Facility and the use of existing cash balances of the Company were used to repay certain outstanding Delchamps indebtedness, purchase Common Stock from Delchamps shareholders and pay fees and expenses related to the acquisition of Delchamps. Through a public offering, the Company issued and sold the Senior Subordinated Notes which bear interest at a rate of 10 3/8% per annum, payable semi-annually on March 15 and September 15 of each year. In addition, the Company entered into a revolving credit agreement on March 5, 1996 which provided a $100 million Credit Facility and subsequently, on September 15, 1997 the Company amended and restated the agreement to provide a $150 million Senior Credit Facility. The Senior Credit Facility was further amended and restated on March 1, 1999 to provide a $162.3 million facility. The borrowings outstanding under the Senior Credit Facility at January 2, 1999 were $112.9 million. The commitments under the Senior Credit Facility will terminate, and all loans outstanding thereunder will be required to be repaid in full on March 15, 2004. Both the Senior Subordinated Notes and the Senior Credit Facility restrict future payment of dividends. On November 16, 1995, the Company and JJ Acquisitions Corp. ("JJAC") entered into an Agreement and Plan of Exchange and of Merger (the "Merger"). In connection with the Merger on March 5, 1996, JJAC among other things, (i) issued and sold $200 million of unsecured senior notes due 2006 (the "Senior Notes"), (ii) entered into a $100 million revolving credit agreement ("the Credit Facility") with Fleet Bank, N.A. (formerly NatWest Bank, N.A.), (iii) issued and sold Common Stock and a warrant in the aggregate amount of $7.4 million, and (iv) issued and sold three classes of Preferred Stock in the aggregate amount of $57.6 million. The proceeds from the sale of the notes, the Common Stock, warrants and Preferred Stock, together with borrowing under the Credit Facility and the use of existing cash balances of the Company were used to repay certain outstanding indebtedness, purchase Common Stock from existing shareholders and pay fees and expenses related to the Merger. JJAC was merged with and into the Company, with the Company continuing as the surviving corporation. Upon the completion of the Merger, Bruckmann, Rosser, Sherrill & Co., L.P., owned 356,250 shares or approximately 83.82% of the Company's outstanding Common Stock on an undiluted basis. Through a public offering, JJAC issued and sold the Senior Notes which bear interest at a rate of 12% per annum, payable semiannually on March 1 and September 1 of each year. In addition, on March 5, 1996, the Company entered into the Credit Facility (which has been replaced by the Senior Credit Facility). The Senior Notes restrict future payment of dividends. Store Formats Through its 80 years of operations in the Southeast, the Company has developed a strong consumer franchise, with many of its stores located in prime, high-traffic sites that provide significant competitive advantages. The Company currently operates supermarkets under three formats, each targeting specific market segments: (i) conventional supermarkets operating under the "Jitney- Jungle" and "Delchamps" name, (ii) combination food and drug supermarkets operating primarily under the "Jitney Premier" and "Delchamps Premier" name and (iii) discount supermarkets operating primarily under the "Sack and Save" name. The Company currently operates 198 supermarkets (161 conventional stores averaging approximately 35,000 square feet, 21 Premier combination stores averaging approximately 52,000 square feet and 16 discount stores averaging approximately 61,500 square feet), 54 gasoline stations and 10 liquor stores including recent changes made subsequent to fiscal year end. Of the 161 conventional stores, 54 have departments sufficient to be combination stores but have not been converted to the Premier format. All of the Company's conventional and combination supermarkets utilize a "Hi-Lo" pricing strategy (featuring competitive prices on all product offerings as well as a selection of items that are promoted at lower prices to generate increased customer traffic), offer a wide range of specialty departments and deliver high levels of service to customers. The Company has developed its "Gold Card" frequent shopper program (which gives customers discounts and promotions not available to non-participating customers). This program has been in effect in the Jitney stores since January 1997 and was introduced in the Delchamps stores during the first half of 1998. Also, the 21 combination supermarkets offer expanded general and specialty merchandise, a wider range of full-service departments, expanded beauty care and pharmacy departments, and superior customer service. The Company's 16 discount supermarkets utilize an everyday low price strategy (featuring consistently low prices aimed at the value conscious shopper). The discount supermarkets have lower operating costs than the conventional and combination supermarkets due to fewer service departments, lower customer service levels and enhanced productivity methods. The Company also operates 54 gasoline stations and 10 liquor stores at selected supermarket sites. The Company features nationally advertised and distributed merchandise, and also markets food products under a private label program. Competition The Company's business is highly competitive. Competition is based primarily on supermarket location, price, service, convenience, cleanliness and product quality and variety. The Company competes with several national, regional and local supermarket chains. The Company is also in competition with convenience stores, stores owned and operated or otherwise affiliated with large food wholesalers, unaffiliated independent food stores, merchandise clubs, discount drugstore chains and discount general merchandise chains. The Company's principal competitors have greater financial resources than the Company and could use those resources to take steps which could adversely affect the Company's competitive position and financial performance, and the Company's ability to compete may be adversely affected by its high leverage and the limitations imposed by its debt agreements. Employees As of March 31, 1999, the Company employed approximately 17,000 people, of whom approximately 44% were full-time and 56% were part-time employees. None of the employees of the Company are covered by a collective bargaining agreement. The Company has an incentive compensation plan covering its key management staff under which incentive compensation for store operations is based upon the results of profitability of the operations within the scope of their management responsibility. Also, the Company has established a Stock Option Plan pursuant to which certain key management have been granted options to acquire shares of common stock of the Company (subject to certain restrictions) at a price determined at the time of issuance to be an estimate of fair market value. Trade Names, Service Marks, Trademarks and Franchises The Company uses a variety of trade names, service marks and trademarks. Except for "Jitney-Jungle", "Sack and Save", and "Pump and Save", the Company does not believe any of such trade names, service marks or trademarks are material to its business. "Jitney-Jungle" is registered with the U.S. Patent and Trademark Office and "Sack and Save", and "Pump and Save" are registered in the various states where the company operates. The Company is in the process of registering "Delchamps" with the U.S. Patent and Trademark Office. Environmental Matters The Company is subject to federal, state and local laws and regulations including those relating to environmental protection, workplace safety, public health and community right-to-know. The Company's supermarkets are not highly regulated under environmental laws since the Company does not engage in any industrial activities at these locations. The principal environmental requirements applicable to the Company's operations relate to the ownership or use of tanks for the storage of petroleum products, such as gasoline and diesel fuel, the operation of on-site paper trash incinerators, and the operation of an on-site printing facility. The Company operates 56 locations (including all 54 of the Pump and Save locations), and has retained responsibility for three former facilities, at which petroleum products were stored in underground tanks. The Company has instituted an environmental compliance program designed to insure that these tanks are in compliance with applicable technical, operational and regulatory requirements, including periodic inventory reconciliation and integrity testing. The Company also operates small incinerators at 18 locations which burn paper trash and has air permits for these facilities. In addition, the Company's printing facility is subject to air and hazardous waste regulations. The Company's locations may have asbestos-containing materials which must be managed in accordance with environmental laws and regulations. However, the Company does not believe that the cost of such management will be material. The Company believes that the locations where it currently operates are in substantial compliance with regulatory requirements. The Company has undertaken programs to comply with all current regulatory obligations. First, at five locations, the Company had to comply with petroleum tank upgrade or closure requirements under the Resource Conservation and Recovery Act of 1980, as amended, ("RCRA") (including all applicable requirements of state regulatory agencies) which were met by the end of 1998. Second, during 1999, the Company is planning to complete retrofitting of its chlorofluorocarbons ("CFC") chiller units to utilize non-CFC based refrigerants pursuant to the phase- out of CFCs under the Clean Air Act. Future events, such as changes in existing laws and regulations or their interpretation and the approach of other compliance deadlines may or will give rise to additional compliance costs or liabilities. Compliance with more stringent laws or regulations, as well as different interpretations of existing laws, may require additional expenditures by the Company which may be material. The Company may also be subject to requirements related to the remediation of, or the liability for remediation of, substances that have been released to the environment at properties owned or operated by the Company or at properties to which the Company sends substances for treatment or disposal. Such remediation requirements may be imposed without regard to fault and liability for environmental remediation can be substantial. Other than one previously owned property for which the Company retained responsibility for a clean-up in progress at the time of the sale, the Company has not been notified of any such releases relating to off-site treatment or disposal or to previously owned properties. However, 16 of the Company's locations have been or currently are the subject of environmental investigations or remediation, 12 as a consequence of known or suspected petroleum-related leaks or spills from storage tanks and four for minor spills or releases unrelated to tank usage. The Company may be eligible for reimbursement or payment for remediation costs associated with future releases from its regulated underground storage tanks and has obtained such reimbursement in the past. The states in which the Company operates each maintain a fund to assist in the payment of remediation costs and injury or damage to third parties from releases from certain registered underground tanks. Subject to certain deductibles, the availability of funds, compliance status of the tanks and the nature of the release, these funds have been and may be available to the Company for use in remediating releases from its tank systems. Due to the availability of such funds, the Company's unreimbursed cost for remediation at all of the facilities which have had leaks or spills from underground storage tanks has not been material. All significant required expenditures in connection with the clean up of such leaks and spills have been made at such locations, except at two locations which are undergoing remediation investigation and three other locations which are currently being monitored. Remediation expenses at all the locations which are currently the subject of environmental investigation or remediation are anticipated to cost up to $240,000 in fiscal 1999 and approximately $125,000 per year thereafter, substantially all of which is subject to reimbursement as described above. In addition, the Company has obtained insurance coverage for bodily injury, property damage and corrective action expenses resulting from releases of petroleum products from underground storage tanks during the covered period at all 55 underground storage tank locations (54 Pump and Save locations plus a transportation fuel island located in Jackson, MS). Other than expenditures relating to the remediation of tank leaks and spills described above, the Company's expenditures to comply with environmental laws and regulations have primarily consisted of those related to tank upgrading and retrofitting CFC chiller units. The Company spent $170,000, $130,000, $914,000 and $468,000 for such activities during fiscal 1998, 1997 stub, fiscal 1997 and 1996, respectively. Between approximately $175,000 and $200,000 in expenditures are contemplated for retrofitting the CFC units in fiscal 1999. All expenditures necessary to upgrade all Pump and Save tanks to comply with 1998 tank standards were completed in fiscal 1998. These regulatory compliance costs are not covered by insurance. Governmental Regulation The Company is subject to regulation by a variety of governmental agencies, including but not limited to the United States Food and Drug Administration, the United States Department of Agriculture and other federal, state and local agencies. Fiscal Year Change The Company reports results of operations on a 52 or 53 week fiscal year. For fiscal years 1996 and 1997 the fiscal year ended on the Saturday nearest to April 30 of each year. The Company changed its fiscal year end on January 3, 1998 to the closest Saturday to December 31 of each year. This change created a "stub" year of 35 weeks for fiscal year ended January 3, 1998. Item 2. Properties The following table recaps store data for fiscal 1998, 1997stub, 1997 and 1996: :
Fiscal _______________________________________________________ 1998 1997 stub 1997 1996 _______ _________ ________ _______ Stores Beginning of Year 217 105 103 106 Acquired 118 Opened 3 2 4 Closed 22 6 7 _______ _________ ________ _______ End of Year 198 217 105 103 ======= ========= ======== ======= Store Composition Conventional 165 185 76 72 at Year End Combination 17 11 2 2 Discount 16 21 27 29 _______ _________ ________ _______ Total 198 217 105 103 ======= ========= ======== ======= Average Square Feet Conventional 35,300 35,000 26,500 26,000 Combination 52,000 56,000 56,900 56,100 Discount 61,500 60,000 57,800 57,100 Store Locations Mississippi 82 89 73 71 at Year End Alabama 49 53 11 11 Arkansas 5 5 5 5 Florida 15 17 2 2 Tennessee 6 7 7 7 Louisiana 41 46 7 7 _______ _________ ________ _______ Total 198 217 105 103 ======= ========= ======== ======= Gasoline Stations Beginning of Year 54 53 46 37 Opened 2 2 7 11 Closed 2 1 0 2 _______ _________ ________ _______ End of Year 54 54 53 46 ======= ========= ======== ======= Gasoline Station Mississippi 45 45 43 38 Locations Alabama 2 2 2 2 at Year End Arkansas 2 2 2 1 Florida 0 1 1 1 Tennessee 5 4 4 3 Louisiana 0 0 1 1 _______ _________ ________ _______ Total 54 54 53 46 ======= ========= ======== =======
All of the Company's store properties are leased, with the exception of one store. These leases generally obligate the Company to pay its proportionate share of real estate taxes, common area maintenance charges and insurance costs. In addition, such leases generally provide for percentage of sales rent when sales from the store exceed a certain dollar amount. These leases are usually long-term, with one or more renewal options. With the exception of three leases which will expire in 1999 (two of which are in negotiations for new leases) and with the exception of four leases, one of which will expire in each of the years 2001 through 2004, all leases will expire between 2005 and 2043 if the Company exercises all of its renewal options. The Company owns all of its furnishing and fixtures in all supermarkets except for approximately $3.2 million of supermarket point-of-sale equipment which is leased, and has made various leasehold improvements to these supermarket sites. It is anticipated that the Company will own the furnishings and fixtures in all supermarkets under construction. At the beginning of the year, certain parties affiliated with the Company held 20 leases, representing approximately 23% of the dollar amount of the Company's capital leases. Through disposition by these parties and/or the Company, this number was reduced to 8 leases by the end of the year and now represents approximately 6% of the dollar amount of the Company's capital leases. Management believes that each of these leases was contracted for on an arm's length basis and contains terms that are no less favorable to the Company than could have been obtained with non-affiliated parties at the time each was entered into. The Company owns all of its warehouse and distribution facilities except for a 120,000 square-foot dry grocery and health and beauty care facility and a 177,000 square foot dry grocery warehouse which the Company occupied in July 1998. The leases on these facilities expire on July 31, 2004 and September 30, 2006, respectively (including all renewal options). The table below details Jitney-Jungle's warehousing and distribution facilities by function. These warehouses and distribution facilities are located in Jackson, Mississippi.
Function Square Feet Dry Grocery .............................. 415,000 Dry Grocery (new) ........................ 177,000 Meat and Dairy ........................... 90,000 Dry Grocery and Health and Beauty Care.... 120,000 Transportation and Damage Reclaim ........ 73,000 Produce, Eggs and Floral.................. 67,000 Frozen Foods.............................. 79,000 _________ Total Warehouse.................. 1,021,000 =========
During the year, management consolidated the corporate headquarters of the Company's combined operations into the existing corporate headquarters of Jitney-Jungle in Jackson, Mississippi. A divisional office was opened in Mobile and the Delchamps' Mobile headquarters which occupied a 65,000 square-foot building was closed and is presently being offered for sale. A 2.7 acre parcel adjacent to the headquarters was sold in December 1998. In addition, the 665,900 square-foot Hammond warehouse was closed and is also being offered for sale (including a 175-acre parcel adjacent to the warehouse). Likewise, ten undeveloped parcels of land owned by the Company are presently being offered for sale. Item 3. Legal Proceedings and Legal Matters 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. Pursuant to a Federal Trade Commission Consent Order dated January 28, 1998, approving the Agreement Containing Consent Order entered into in September 1997 by the Company in connection with the Delchamps Acquisition, the Company may not acquire or lease any supermarket for a 10-year period in Hancock, Harrison, Jackson, Lamar, Forrest and Warren Counties in Mississippi and Escambia County in Florida without complying with notice and waiting period requirements similar to those imposed under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Such counties, generally, are those where stores were located which were required to be divested by the Federal Trade Commission in connection with the Delchamps Acquisition. Metropolitan areas located in such counties include Vicksburg, Hattiesburg, Gulfport, Biloxi, Pascagoula and Waveland, Mississippi and Pensacola, Florida. The Company is permitted to construct supermarkets in such counties without prior notice to the Federal Trade Commission. In addition, the Company is prohibited from attempting to restrict the ability of any other person to operate a supermarket that the Company (including Delchamps) formerly owned in those counties. Other than with respect to the foregoing matters, the Company is not a party to any material pending legal proceedings except ordinary litigation incidental to the conduct of its business and the ownership of its properties. Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders during the fourth quarter of its fiscal period ended January 2, 1999. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters The Company is closely held and is not actively traded at this time; therefore, there is not a current market. As of January 2, 1999, there were thirty-five (35) holders of record of Common Stock. There were no dividends paid by Jitney-Jungle to its shareholders during fiscal 1998, fiscal 1997 stub, fiscal 1997 or fiscal 1996. The Senior Subordinated Notes and the Senior Credit Facility entered into by the Company restrict future payment of dividends. Item 6. Selected Financial Data The following table sets forth selected historical financial information of Jitney-Jungle for the four fiscal years ended May 3, 1997, for the 35-week transition period ended January 3, 1998 and for the fiscal year ended January 2, 1999. The selected financial information for the year ended January 2, 1999, for the 35-week transition period ended January 3, 1998 and each of the two years in the period ended May 3, 1997 was derived from the audited consolidated financial statements of Jitney-Jungle included elsewhere in this document. The selected financial information for the two years ended April 29, 1995 was derived from audited consolidated financial statements of Jitney-Jungle. The following table should be read in conjunction with " Management's Discussion and Analysis of Financial Condition and Results of Operations of Jitney-Jungle" and the historical consolidated financial statements of Jitney-Jungle included elsewhere in this document.
(52 weeks) (35 weeks) (53 weeks) (52 weeks) (52 weeks) (52 weeks) (Dollars in Thousands January 2, January 3, May 3, April 27, April 29, April 30, Except Per Share Amounts) 1999 1998 1997 1996 1995 1994 ____________________________________________________________________________________________________________________________ Operating Results: Net sales $2,054,126 $1,145,129 $1,228,533 $1,179,318 $1,173,927 $1,152,333 Gross profit 542,141 285,669 303,087 292,063 288,188 276,546 Interest expense (net) 72,343 31,608 36,215 13,000 10,823 11,626 Earnings (loss) before income taxes and extraordinary item (35,870) (13,131) 1,085 24,977 30,220 27,135 Income taxes (benefit) (5,689) (3,224) 339 9,062 11,417 9,956 Earnings (loss) before extraordinary item (30,181) (9,907) 746 15,915 18,803 17,179 Extraordinary item (net of tax) - (870) - (1,456) - - Net earnings (loss) ($30,181) ($10,777) $746 $14,459 $ 18,803 $ 17,179 Net earnings (loss) as a percent of sales (1.47%) (0.94%) 0.06% 1.23% 1.60% 1.49% ______________________________________________________________________________________ Common Stock Data: Earnings (loss) per common share-assuming dilution: Earnings (loss) before extraordinary item ($92.92) ($36.39) ($16.26) $162.88 $ 923.15 $ 843.42 Extraordinary item - (2.05) - (15.96) - - Net earnings (loss) ($92.92) ($38.44) ($16.26) $146.92 $ 923.15 $ 843.42 ______________________________________________________________________________________ Financial Position: Total assets $691,146 $694,280 $267,845 $279,003 $ 312,415 $ 296,803 Working capital 10,778 (20,669) (92) 26,449 71,929 60,385 Long-term debt, including current portion 517,071 449,831 208,000 239,059 38,727 40,628 Capitalized lease obligations (including current) 68,724 75,081 62,260 62,165 60,471 62,186 Restructuring obligation (including current) 32,287 55,515 2,202 1,237 Redeemable preferred stock 71,452 63,042 57,921 49,988 Stockholders' equity (deficit) (206,470) (167,900) (152,002) (144,815) 140,216 124,857 ______________________________________________________________________________________
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion of the Company's results of operations and of its liquidity and capital resources should be read in conjunction with the Consolidated Financial Statements and the notes thereto contained elsewhere in this report. Results of Operations General As of January 2, 1999 the Company operated a chain of 198 supermarkets and 54 gasoline stations. Net sales from gasoline stations during fiscal 1998, 1997 stub, 1997, and 1996 were 3.9%, 7.1%, 6.9%, and 5.2%, respectively, of the Company's net sales for such periods. The Company reports results of operations on a 52 or 53 week fiscal year. For fiscal years 1995, 1996 and 1997 the fiscal year ended on the Saturday nearest to April 30 of each year. The Company changed its fiscal year end on January 3, 1998 to the closest Saturday to December 31 of each year. This change created a "stub" year of 35 weeks for fiscal year ended January 3, 1998. The Company's first three fiscal quarters are 12 weeks, and the last quarter is 16 or 17 weeks. The consolidated statements of operations include 35 weeks for a short year ended January 3, 1998, 53 weeks of operations for fiscal 1997 and 52 weeks for fiscal 1998 and 1996. The Company acquired Delchamps on September 12, 1997 and the results of operations for those stores are included subsequent to that date. Except as indicated below, management believes that the results of operations for the 35 weeks ended January 3, 1998, as a percentage of sales, are indicative of the results for a 52 week period. The following sets forth, for the periods indicated, selected financial information expressed as a percentage of net sales.
FY98 FY97-stub FY97 FY96 (52 Wks) (35 Wks) (53 Wks) (52 Wks) Ended Ended Ended Ended 1/2/99 1/3/98 5/3/97 4/27/96 ______ ______ ______ _______ Net sales 100.00% 100.00% 100.00% 100.00% Gross profit 26.39 24.95 24.67 24.77 Direct store, warehouse and administrative expense 20.65 20.33 18.86 19.23 Depreciation and amortization 2.81 2.57 2.43 2.27 Acquistion integration costs and other special charges 1.16 0.27 0.22 0.00 _______ ________ _______ _______ Operating income 1.77 1.78 3.16 3.27 Interest expense, net 3.52 2.92 3.07 1.15 _______ ________ _______ _______ Earnings (loss) before income taxes and extraordinary item (1.75) (1.14) 0.09 2.12 Benefit (provision) for income taxes 0.28 0.28 (0.03) (0.77) Extraordinary loss (net of income tax benefit) 0.00 (0.08) 0.00 (0.12) _______ ________ _______ _______ Net earnings (loss) (1.47%) (0.94%) 0.06% 1.23% ======= ======== ======= =======
Approximately 19% of the Company's non- perishable sales result from its private label program. Private label products generally have a lower unit sales price than national brands, but provide a higher gross margin to the Company due to lower unit costs. During the past three years, an overall lack of inflation in food prices and increasingly competitive markets have made it difficult for the Company and other supermarket operators to achieve comparable store sales gains. Because sales growth has been difficult to attain, many operators, including the Company, have attempted to maintain market share through increased levels of promotional activities and discount pricing, creating a more difficult environment in which to increase year-over-year sales gains consistently. In addition, because of the growth in the Southeast market, many supermarket operators, including the Company, have opened new stores, which may result in an increase in market share, but a decline in same store sales for the other stores in those areas. Net Sales The following sets forth, for the periods indicated, net sales of the Company.
(dollars in millions) FY98 FY97-stub FY97 FY96 (52 Wks) (35 Wks) (53 Wks) (52 Wks) Ended Ended Ended Ended 1/2/99 1/3/98 5/3/97 4/27/96 ________ ________ ________ _________ Net sales $ 2,054.1 $ 1,145.1 $ 1,228.5 $ 1,179.3 Percentage increase (decrease) in same store sales (4.04%) 0.34% (0.20%) (0.01%) Number of stores at period end 198 217 105 103
The 1996 and 1997 fiscal years included sales only from the Jitney-Jungle Stores, the 1997 stub year included 35 weeks of sales from the Jitney-Jungle stores and 16 weeks of sales from the Delchamps stores; and the 1998 fiscal year included 52 weeks of sales for both Jitney- Jungle and Delchamps stores. The net sales increase of $909.0 million in fiscal 1998 over fiscal 1997 stub was primarily attributable to the Delchamps acquisition. Same store sales declined 4.04% in fiscal 1998. Sales throughout fiscal 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 most of fiscal 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 April 1998. The decline in same store sales is attributable primarily to competitive pressures (38 competitive openings, of which 9 were replacement stores), distribution problems which have been corrected, a decline in sales at Delchamps supermarkets due to disruptions caused by the transition process which was completed during the first half of the year and the fact that the Gold Card introduction positively impacted sales for most of fiscal 1997 but only for only the last three quarters of fiscal 1998. During fiscal 1998, twenty-two supermarkets were sold or closed (including 10 supermarkets which were required to be sold by the Federal Trade Commission due to the Delchamps acquisition). The Company opened three new supermarkets (two of which were replacement stores), opened 2 gasoline stations and closed 2 gasoline stations. In fiscal 1997 stub, net sales decreased $83.4 million from fiscal 1997 due to the "stub" year having only 35 weeks. Same store sales increased 0.34% during fiscal 1997 stub. During fiscal 1997 stub, the Company acquired 118 Delchamps supermarkets and 10 liquor stores and closed 6 supermarkets. In addition, the Company opened 2 gasoline stations and closed one. The net sales increase of 4.2% in 1997 was primarily due to the opening of two supermarkets, the opening of seven new gasoline stations and the extra "53rd" week. Without this extra "53rd" week, sales would have increased approximately 2.2%. Same store sales declined 0.01% during fiscal 1997. The Company launched the Gold Card (the Company's customer loyalty program) at the beginning of the 4th quarter in approximately 79 Jitney- Jungle and Jitney Premier supermarkets and, as a result, sales and customer count increased. Gross Profit The following sets forth, for the periods indicated, gross profit of the Company.
(dollars in millions) __________________________________________________________ FY98 FY97-stub FY97 FY96 (52 Wks) (35 Wks) (53 Wks) (52 Wks) Ended Ended Ended Ended 1/2/99 1/3/98 5/3/97 4/27/96 ______ ______ ______ _______ Gross profit $ 542.1 $ 285.7 $ 303.1 $ 292.1 Gross profit as of percentage of net sales 26.39% 24.95% 24.67% 24.77%
The increase in gross profit, as a percentage of net sales, for fiscal 1998 over the fiscal 1997 stub was primarily attributable to increased purchasing leverage resulting from the Delchamps acquisition and increased promotional allowances. In addition, gross margin improvements have been achieved as the Company remodels stores and expands the offering of higher margin perishable departments. The Company also initiated additional shrink control programs which have resulted in improved gross margins. Cost of sales for fiscal 1998 also includes $2,070 of excess shrink associated with the Delchamps acquisition. Gross profit, as a percentage of net sales, was relatively constant during the 1996 and 1997 fiscal years and the 1997 stub year primarily as a result of improvements in product acquisition cost (net of allowances) offset by low overall retail price inflation (which was primarily the result of pricing and promotional changes by certain competitors) and discounts associated with the Jitney-Jungle Gold Card (frequent shopper card). Direct Store, Warehouse and Administrative Expenses The following sets forth, for the periods indicated, direct store, warehouse and administrative expenses (excluding acquisition and other nonrecurring costs and depreciation and amortization expense) for the Company.
(dollars in millions) ____________________________________________________________ FY98 FY97-stub FY97 FY96 (52 Wks) (35 Wks) (53 Wks) (52 Wks) Ended Ended Ended Ended 1/2/99 1/3/98 5/3/97 4/27/96 ______ ______ ______ _______ Direct store, warehouse and administrative expenses $ 424.2 $ 232.8 $ 231.7 $ 226.8 Expenses as a percentage of net sales 20.65% 20.33% 18.86% 19.23%
In fiscal 1998, direct store, warehouse and administrative expenses increased 0.3%, as a percentage of net sales, over the fiscal 1997 stub and was primarily attributable to rent expense, store labor costs and warehouse expenses. 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, dedicated to complete retraining at the Delchamps supermarkets. The increase in warehouse expenses, as a percentage of net sales, was principally due to distribution problems resulting from the Delchamps transaction. The Company closed the Delchamps' Hammond warehouse in early 1998, which the Company expected would lead to substantial cost savings. However, the resulting increase in volume at the Company's Jackson warehouse facilities created operating inefficiencies which adversely impacted fiscal 1998 operations but which have subsequently been resolved. The Company has experienced a reduction in administrative expenses, as a percentage of net sales, due to additional sales attributable to the Delchamps transaction combined with a decrease in administrative expenses as a result of the closing of the Delchamps' Mobile headquarters in April 1998. In fiscal 1997 stub, direct store, warehouse and administrative expenses increased, as a percentage of net sales, principally due to the higher cost of operations of the Delchamps stores as a percentage of net sales (primarily rent expense). For fiscal 1997, the improvement in direct store, warehouse and administrative expenses, as a percentage of net sales, over fiscal 1996 was primarily the result of reductions in supplies and advertising expense combined with an increase in backhaul income offset by increased group insurance and closed store expenses. Depreciation and Amortization The following sets forth, for the periods indicated, depreciation and amortization for the Company.
(dollars in millions) ____________________________________________________________ FY98 FY97-stub FY97 FY96 (52 Wks) (35 Wks) (53 Wks) (52 Wks) Ended Ended Ended Ended 1/2/99 1/3/98 5/3/97 4/27/96 ______ ______ ______ _______ Depreciation and amortization $ 57.7 $ 29.4 $ 29.9 $ 26.7 Depreciation and amortization as a percentage of net sales 2.81% 2.57% 2.43% 2.27%
In fiscal 1998, depreciation and amortization, as a percentage of net sales, increased 0.2 % over the fiscal 1997 stub principally due to acquisitions of property and equipment (including capital leases) associated with the Company's new and remodeled stores and gasoline stations, and the Delchamps acquisition. In fiscal 1997 stub, the increase in depreciation and amortization, as a percentage of net sales, was primarily attributable to the Delchamps acquisition. The increase in depreciation and amortization, as a percentage of net sales, in fiscal 1997 was principally due to acquisitions of property and equipment (including capital leases) associated with the Company's remodeling program and acquisition of new stores and gasoline stations. Acquisition Integration Costs and Other Special Charges The following sets forth, for the periods indicated, acquisition integration costs and other special charges for the Company.
(dollars in millions) ________________________________________________________________ FY98 FY97-stub FY97 FY96 (52 Wks) (35 Wks) (53 Wks) (52 Wks) Ended Ended Ended Ended 1/2/99 1/3/98 5/3/97 4/27/96 ______ ______ ______ _______ Acquisition integration costs and other special charges $ 23.8 $ 3.1 $ 2.7 $ - Acquisition integration costs and other special charges as a percentage of sales 1.16% 0.27% 0.22% 0.00%
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 long-lived asset impairment charges ($3.2 million); loss on stores sold under the consent decree with the Federal Trade Commission in connection with the Delchamps acquisition ($0.3 million); pre-acquisition contingencies from the Delchamps acquisition ($1.2 million); severance benefits ($0.7 million); and other abandoned transaction costs ($1.0 million). In fiscal 1997 stub, special charges consisted of severance benefits ($0.5 million), fees related to bridge financing in the Delchamps acquisition ($2.0 million) and loss on stores sold under the consent decree with the Federal Trade Commission in the Delchamps acquisition ($0.6 million). In fiscal 1997, special charges consisted of costs ($1.8 million) associated with the employment contract of the Company's former Chief Executive Officer and the severance benefits ($.9 million) of various associates (a) who retired early or (b) whose positions were eliminated. Operating Income The following sets forth, for the periods indicated, operating income for the Company.
(dollars in millions) FY98 FY97-stub FY97 FY96 (52 Wks) (35 Wks) (53 Wks) (52 Wks) Ended Ended Ended Ended 1/2/99 1/3/98 5/3/97 4/27/96 ______ ______ ______ _______ Operating income $ 36.5 $ 20.3 $ 38.7 $ 38.6 Operating income as a percentage of net sales 1.77% 1.78% 3.16% 3.27%
Changes in operating income are due to the factors reflected above. EBITDA The following sets forth, for the periods indicated, EBITDA of the Company.
FY98 FY97-stub FY97 FY96 (52 Wks) (35 Wks) (53 Wks) (52 Wks) Ended Ended Ended Ended 1/2/99 1/3/98 5/3/97 4/27/96 ______ ______ ______ _______ $ 117.4 $ 51.9 $ 70.3 $ 64.9 5.71% 4.53% 5.72% 5.50%
EBITDA represents income before interest, income taxes, depreciation, amortization, acquisition and other nonrecurring costs and LIFO charges (credits). 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. However, management believes it to be a useful measure and therefore it has been presented. Net Interest Expense The following sets forth, for the periods indicated, net interest expense of the Company.
(dollars in millions) FY98 FY97-stub FY97 FY96 (52 Wks) (35 Wks) (53 Wks) (52 Wks) Ended Ended Ended Ended 1/2/99 1/3/98 5/3/97 4/27/96 ______ ______ ______ _______ Net interest expense $ 72.3 $ 33.4 $ 37.6 $ 13.6 Net interest expense as a percentage of net sales 3.52% 2.92% 3.06% 1.15%
The increase in net interest expense, as a percentage of net sales, for fiscal 1998 was primarily attributable to interest expense on the $200 million senior subordinated notes issued in September 1997 and the associated increase in debt issue cost related to the Delchamps acquisition. The decrease in net interest expense, as a percentage of net sales, for fiscal 1997 stub was primarily attributable to the increase in sales due to the Delchamps acquisition. The increase in net interest expense as a percentage of net sales of 1.9% for fiscal 1997 was primarily due to interest expense on the Senior Notes and the Credit facility, which were in place all of fiscal 1997 and only two months of fiscal 1996; and increased debt issue costs related to the Merger. Income Taxes The following sets forth, for the periods indicated, income taxes of the Company.
(dollars in millions) FY98 FY97-stub FY97 FY96 (52 Wks) (35 Wks) (53 Wks) (52 Wks) Ended Ended Ended Ended 1/2/99 1/3/98 5/3/97 4/27/96 ______ ______ ______ _______ Income tax expense (benefit) $ (5.7) $ (3.2) $ 0.3 $ 9.1 Income tax (benefit) effective rate (16.30%) (24.55%) 31.24% 36.28%
The increase in income tax benefit for fiscal 1998 was principally due to an increase in pretax loss. The income tax benefit was 16.3% of pretax loss compared to the federal and state statutory rate of 37.3%; the difference in rates occurred primarily because goodwill relating to the Delchamps acquisition is deductible for financial reporting purposes but not for income tax purposes and the impact of recording a valuation allowance for the company's net deferred tax asset. The decrease in income taxes for fiscal 1997 stub was due to a loss in pretax earnings. The income tax benefit was 24.6% of pretax loss compared to the federal and state statutory rate of 37.3%; the difference in rates occurred primarily because goodwill relating to the Delchamps acquisition is deductible for financial reporting purposes but not for income tax purposes. The decrease in income taxes for fiscal 1997 principally resulted from lower pretax earnings. The income tax expense was 31.2% of pretax income compared to the federal and state statutory rate of 37.3%; the difference in rates occurred primarily due to credits applicable to state income taxes. Extraordinary Item In the second quarter of fiscal 1997 stub, in connection with the acquisition of Delchamps, the Company incurred cost of $1.4 million for the early retirement of debt, net of an income tax benefit of $0.5 million. In the fourth quarter of 1996 in connection with the Merger, the Company retired $35.7 million in long-term debt prior to its scheduled maturity. Prepayment penalties associated with early retirement of this debt resulted in an extraordinary loss of $1.5 million, net of an income tax benefit of $0.9 million. Net Earnings (Loss) The following sets forth, for the periods indicated, net operations of the Company.
(dollars in millions) _____________________________________________________________ FY98 FY97-stub FY97 FY96 (52 Wks) (35 Wks) (53 Wks) (52 Wks) Ended Ended Ended Ended 1/2/99 1/3/98 5/3/97 4/27/96 ______ ______ ______ _______ Net earnings (loss) $ (30.2) $ (10.8) $ 0.7 $ 14.5 Net earnings (loss) percentage of net sales (1.47%) (0.94%) (0.06%) 1.23%
Changes in net earnings are due to the factors reflected above. 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 Merger and acquisition of Delchamps, however, the Company has become highly leveraged and has certain restrictions on its operations imposed pursuant to the Senior Credit Facility and indentures governing the Senior Notes and Senior Subordinated Notes. At January 2, 1999, the Company had $618.1 million of total long-term commitments (including long-term debt, capitalized leases and restructuring obligations) and a shareholders' deficit of $206.5 million. The Company's principal uses of liquidity have been to fund working capital, meet debt service requirements and finance the Company's strategic plans. The Company's principal sources of liquidity are expected to be cash flow from operations and borrowings under the Senior Credit Facility. Borrowings outstanding at January 2, 1999 under the Senior Credit Facility were $112,950 million. The Company had outstanding at January 2, 1999 $11,331 million in letters of credit issued under the Senior Credit Facility. The commitments under the Senior Credit Facility will terminate, and all loans outstanding thereunder will be required to be repaid in full on March 15, 2004. Prior to March 1999, borrowings under the Senior Credit Facility, including revolving loans and up to $30 million in letters of credit, could not exceed the lesser of (i) the "Total Commitment", which initially was $150.0 million, and (ii) an amount equal to the sum of (A) up to 65% of eligible inventory (valued at the lesser of FIFO cost or market value, the "Borrowing Base") of the Company and (B) the "Supplemental Availability", which initially was $53.0 million. Each of the Total Commitment and the Supplemental Availability began reducing on a quarterly basis commencing in September 1998. Effective March 1999 the Senior Credit Facility was amended to provide that, among other things (i) the Total Commitment be increased to $162.3 million and no longer be reduced by the amortized amount of the Supplemental Availability and (ii) the Borrowing Base be increased from 65% to 70% of eligible inventory for the periods March 1, 1999 through April 30, 1999 and September 1, 1999 through October 31, 1999. In April 1999, certain financial covenants relating to various periods in 1998 were amended and restated. The Company makes significant capital expenditures to remodel and construct supermarkets and, in recent periods, to convert supermarkets to its combination format. New stores, remodels, and conversions will continue to be the most significant portion of planned capital expenditures. Capital expenditure plans are frequently modified from time to time depending on cash availability and other economic factors, and are limited by covenants under its Senior Credit Facility. Cash provided by operating activities during fiscal 1998 was $18.4 million compared to $37.2 million in fiscal stub 1997, $66.5 million for fiscal 1997 and $55.5 million for fiscal 1996. In fiscal 1998, the decrease in cash provided by operating activities was primarily due to improved gross margins offset by increased interest expense associated with the $200 million senior subordinated notes issued in September 1997, increased labor due to a temporary increase in number of employees required in order to complete retraining at Delchamps supermarkets, increased costs incurred in converting the Delchamps retail stores to Company store formats, increased rent associated with Delchamps stores, and increased warehousing costs associated with the Delchamps acquisition and an increase in working capital. In fiscal 1997 stub, cash provided by operating activities decreased primarily due to an increase in overall interest expense associated with the Delchamps acquisition. In fiscal year 1997, inventories decreased due to an inventory reduction plan implemented by management and accounts payable increased by improving vendor terms to industry standards. These working capital improvements were partially offset by the reduction in net earnings due principally to the increase in cash interest expense as a result of additional borrowing activities resulting from the Recapitalization in March 1996. Net cash used in investing activities was $74.0 in fiscal 1998, $239.2 million in fiscal 1997 stub and $22.3 million for fiscal 1997 and $4.2 million for fiscal 1996. During fiscal 1998, the Company paid $5.0 million in cash to former Delchamps shareholders and deposited $13.8 million in cash with the clerk of court of Mobile County Alabama as required by law in connection with the dissenters' rights proceeding (see Item 3-Legal Proceedings). The Company's capital expenditures for 1998 of $71.8 million were higher than prior years as a result of the Delchamps acquisition, and were offset by proceeds from the sale of 10 stores required to be sold by the Federal Trade Commission in connection with the acquisition and the sale of two parcels of land for $5.4 million. Net cash used in investing activities for the 1997 stub was primarily the cash used to acquire Delchamps. Net cash provided by financing activities was $61.6 in fiscal 1998. Net cash provided by financing activities was $199.6 million in fiscal 1997 stub. Net cash used in financing activities was $35.4 million for fiscal 1997 and $65.8 million for fiscal 1996. Net cash provided by financing activities during fiscal 1998 was primarily due to a net increase in the borrowings under the Senior Credit Facility which were used to fund costs associated with the Delchamps acquisition. The net cash provided by financing activities during the 1997 stub was primarily attributable to the issuance of the Senior Subordinated Notes. The primary financing activities in fiscal year 1996 were the proceeds from the issuance of new Common Stock and Senior Notes which were used to redeem the old Common Stock and primary related merger costs. The Company's expenditures to comply with environmental laws and regulations at its grocery stores primarily consist of those related to remediation of underground storage tank leaks and spills and retrofitting chlorofluorocarbon ("CFC") chiller units. The Company's unreimbursed cost for remediation at the 16 facilities which have had leaks or spills has not been material. All significant required expenditures in connection with the cleanup of such leaks and spills have been made at such locations except at three recently discovered locations which are still undergoing investigation and one location awaiting state approval of its remediation plan. In addition, the Company has obtained insurance coverage for bodily injury, property damage and corrective action expenses resulting from releases of petroleum products from underground storage tanks during the covered period at all 58 locations. The Company spent $170,000, $130,000, $914,000 and $468,000 for retrofitting CFC- containing chiller units during fiscal 1998, 1997 stub, fiscal 1997 and fiscal 1996, respectively. Between approximately $175,000 and $200,000 in expenditures are contemplated for retrofitting the CFC units in fiscal 1999. All expenditures necessary to upgrade all Pump and Save tanks to comply with 1998 tank standards were completed in fiscal 1998. These regulatory compliance costs are not covered by insurance. The Company believes that cash flow from operations as well as additional borrowing available under its credit line are adequate to sustain its operations through fiscal 1999. Inflation The Company's primary costs, inventory and labor, are affected by a number of factors that are beyond its control, including availability and price of merchandise, the competitive climate and general and regional economic conditions. As is typical of the supermarket industry, the Company has generally been able to maintain margins by adjusting its retail prices, but competitive conditions may from time to time render it unable to do so while maintaining its market share. Year 2000 During calendar years 1996, 1997 and 1998, the Company's Information Services Department conducted an extensive information services system review of all primary systems, such as financial, payroll, human resources, employee benefits, purchasing, merchandising, retail/pricing, warehousing and store management as well as secondary systems such as catering, damage reclamation and loss prevention. This review evaluated these systems in terms of their Year 2000 compliance, flexibility to absorb Delchamps' operations, capacity, general efficiency, compatibility and competitive advantage. The Information Services Department recommended, and the Company is implementing, the replacement or upgrading of all the Company's primary and secondary systems, most of which were 10 to 15 years old. From March 1997 to January 2, 1999, the Company spent, excluding license fees, approximately $2,600,000 to replace its financial, payroll, human resources and employee benefits systems. The Company's other primary systems (purchasing, merchandising, retail/pricing, warehousing and store management) are scheduled to be replaced and/or remediated by October 1, 1999, at an estimated cost of $2,850,000, at which time all potential Year 2000 problems in the Company's primary systems should be resolved. Although the Company's operations are not dependent on its secondary systems, the Company has spent approximately $300,000 as of January 2, 1999 upgrading these systems and anticipates spending approximately an additional $600,000 in order to complete that project by the end of September 1999, at which time all potential Year 2000 problems in the Company's secondary systems should be resolved. No assurances can be given, however, that all Year 2000 problems will be effectively resolved on schedule or before the Year 2000. Any such problems, if not resolved, could have a material adverse effect on the Company's business, financial condition and results of operations. The Company has sent a survey to its third party suppliers, financial institutions and insurance companies (i) inquiring into their Year 2000 compliance status, (ii) seeking commitments of their intention to become Year 2000 compliant and (iii) gathering information to assess the effect of any non- compliance on the Company's operations. No assurances can be given that these third parties will become Year 2000 compliant. Any such non- compliance could have a material adverse effect on the Company's business, financial condition and results of operations. The most reasonably likely worst case Year 2000 scenario would result in the failure to order or acquire new products for warehouse or store replenishment. The Company has established a disaster recovery plan that is available as a reasonable contingency plan. Through this disaster recovery plan, manual processes are outlined that will enable the Company to order and obtain available products for delivery to the stores without reliance on existing primary technology normally used by the Company. Item 8. Financial Statements and Supplementary Data
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands Except Per Share Amounts) ______________________________________________________________________________________ January 2, January 3, ASSETS 1999 1998 CURRENT ASSETS: Cash and cash equivalents $ 18,041 $ 11,984 Receivables 28,197 13,833 Refundable income taxes 16,862 5,663 Merchandise inventories 166,774 162,786 Prepaid expenses and other 5,655 5,907 Deferred income taxes 15,681 ________ _________ Total current assets 235,529 215,854 PROPERTY AND EQUIPMENT, at cost: Land 4,723 14,442 Buildings 31,666 34,776 Fixtures and equipment 272,321 264,192 Property under capitalized leases 83,676 88,995 Leasehold improvements 80,723 67,414 ________ _________ Total 473,109 469,819 Less accumulated depreciation and amortization 175,655 166,045 ________ _________ Net property and equipment 297,454 303,774 ________ _________ GOODWILL, net of amortization of $4,250 and and $1,105, respectively 131,206 142,415 OTHER ASSETS 26,957 32,237 ________ _________ TOTAL ASSETS $ 691,146 $ 694,280 ======== ========= See notes to consolidated financial statements.
______________________________________________________________________________________ January 2, January 3, LIABILITIES AND STOCKHOLDERS' DEFICIT 1999 1998 CURRENT LIABILITIES: Accounts payable $ 138,087 $ 112,641 Accrued expenses: Personnel costs 3,053 13,823 Payable to dissenting Delchamps, Inc. shareholders 7,624 26,637 Taxes, other than income taxes 19,380 17,956 Insurance and self-insurance claims 15,408 19,886 Interest 17,159 15,017 Other 7,371 8,876 Current portion of capital leases 5,789 6,760 Current portion of restructuring obligation 10,880 14,927 ________ ________ Total current liabilities 224,751 236,523 Long-term debt 517,071 449,831 Obligations under capital leases, excluding current installments 62,935 68,321 Restructuring obligation, excluding current installments 21,407 40,588 Deferred income taxes 3,875 ________ ________ Total liabilities 826,164 799,138 COMMITMENTS AND CONTINGENCIES (Notes 7, 8, 11 and 18) REDEEMABLE PREFERRED STOCK, aggregate liquidation preference value of $73,279 and $65,077, respectively 71,452 63,042 STOCKHOLDERS' DEFICIT: Class C Preferred Stock - Series 1 (at liquidation preference value) 9,973 9,071 Common stock ($.01 par value, authorized 5,000,000 shares, issued and outstanding 425,280 and 425,000 shares, respectively) 4 4 Additional paid-in capital (302,305) (302,326) Retained earnings 85,858 125,351 ________ ________ Total stockholders' deficit (206,470) (167,900) ________ ________ TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 691,146 $ 694,280 ======= ========
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars In Thousands Except Per Share Amounts) __________________________________________________________________________________________________________ Year Ended Year 35 Weeks ________________________ Ended Jan- Ended Jan- May 3, April 27, uary 2, 1999 uary 3, 1998 1997 1996 NET SALES $ 2,054,126 $ 1,145,129 $ 1,228,533 $ 1,179,318 COSTS AND EXPENSES: Cost of sales (including $2,070 in the year ended in 1999 of excess shrink associated with Delchamps acquisition) 1,511,985 859,460 925,446 887,255 Direct store expenses 413,623 206,945 205,250 198,579 Warehouse, administrative and general 68,287 55,293 56,379 54,912 Interest expense, net 72,343 33,445 37,636 13,595 Acquisition integration costs and other special charges (Note 14) 23,758 3,117 2,737 --------- --------- ---------- --------- Total costs and expenses 2,089,996 1,158,260 1,227,448 1,154,341 --------- --------- ---------- --------- Earnings (loss) before income taxes and extraordinary items (35,870) (13,131) 1,085 24,977 INCOME TAX EXPENSE (BENEFIT) (5,689) (3,224) 339 9,062 ---------- ---------- --------- -------- Earnings (loss) before extraordinary items (30,181) (9,907) 746 15,915 ========== ========== ========= ======== EXTRAORDINARY ITEMS, net of income tax benefit of $518 and $866, respectively (870) (1,456) ---------- ----------- --------- --------- NET EARNINGS (LOSS) $ (30,181) $ (10,777) $ 746 $ 14,459 EARNINGS (LOSS) PER COMMON SHARE: Before extraordinary items $ (92.92) $ (36.39) $ (16.26) $ 185.85 Extraordinary items (2.05) (18.13) Net earnings (loss) per common share $ (92.92) $ (38.44) $ (16.26) $ 167.72 EARNINGS (LOSS) PER COMMON SHARE - ASSUMING DILUTION: Before extraordinary items $ (92.92) $ (36.39) $ (16.26) $ 162.88 Extraordinary items (2.05) (15.96) Net earnings (loss) per common share - assuming dilution $ (92.92) $ (38.44) $ (16.26) $ 146.92 =========== ============ ========== ========== See notes to consolidated financial statements.
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (Dollars In Thousands Except Per Share Amount) Class C Preferred Stock, Series 1 Common Stock ----------------- ------------------- Additional Number Number Paid-in Retained of Shares Amount of Shares Amount Capital Earnings BALANCE, APRIL 30, 1995 20,368 $ 1,061 $ 1,807 $ 137,348 Issuance of shares and warrants 76,042 $ 7,604 425,000 4 7,377 Redemption of common stock (20,368) (1,061) (311,510) Cash dividends ($92.15 per share) (1,877) Net earnings 14,459 Accretion of discount on Class A Preferred Stock (27) -------- -------- -------- -------- --------- -------- BALANCE, APRIL 27, 1996 76,042 7,604 425,000 4 (302,326) 149,903 Net earnings 746 Accretion of discount on Class A Preferred Stock (189) Cumulation of dividends on preferred stock 898 (8,642) -------- -------- -------- -------- --------- -------- BALANCE, MAY 3, 1997 76,042 8,502 425,000 4 (302,326) 141,818 Net loss (10,777) Accretion of discount on Class A Preferred Stock (130) Cumulation of dividends on Preferred stock 569 (5,560) -------- -------- -------- -------- --------- -------- BALANCE, JANUARY 3, 1998 76,042 9,071 425,000 4 (302,326) 125,351 Net loss (30,181) Stock options exercised 280 21 Accretion of discount on Class A Preferred Stock (208) Cumulation of dividends on preferred stock 902 (9,104) -------- -------- -------- -------- --------- -------- BALANCE, JANUARY 2, 1999 76,042 $ 9,973 425,280 $ 4 $(302,305) $ 85,858 ======== ======== ======== ======== ========= ========= See notes to consolidated financial statements.
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) Year 35 Weeks Year Ended Ended Jan- Ended Jan- May 3, April 27, uary 2, 1999 uary 3, 1999 1997 1996 OPERATING ACTIVITIES: Net earnings (loss) $ (30,181) $ (10,777) $ 746 $ 14,459 Adjustment to reconcile net earnings (loss) to net cash provided by operating activities: Extraordinary items 870 1,456 Depreciation and amortization 57,693 29,406 29,898 26,728 Amortization of deferred loan costs 3,683 1,837 1,421 595 Loss (gain) on disposition and write-down of property and other assets 1,806 (250) 1,899 817 Deferred income tax expense (benefit) 6,766 (585) (3,574) 2,577 Decrease in restructuring obligation (5,313) (453) Changes in current assets and liabilities, net of effects of acquisition: Receivables (25,447) (7,596) (571) 5,866 Inventories 6,593 (3,520) 12,826 5,826 Prepaid expenses and other (1,140) (936) 3,941 (2,011) Accounts payable 17,134 18,861 9,970 1,562 Accrued expenses (13,187) 10,304 9,923 (2,356) ----------- ---------- ---------- ---------- Net cash provided by operating activities 18,407 37,161 66,479 55,519 ----------- ---------- ---------- ---------- INVESTING ACTIVITIES: Capital expenditures (71,808) (36,951) (24,099) (30,011) Proceeds from sale of property and other assets 16,773 1,069 1,477 2,617 Purchase of Delchamps, Inc., net of cash acquired (204,036) Cash paid for dissenting former shareholders of Delchamps, Inc. (18,956) Purchase of investments in debt securities (23,026) Maturities of investments in debt securities 738 337 46,301 ----------- ---------- ---------- ---------- Net cash used in investing activities (73,991) (239,180) (22,285) (4,219) ----------- ---------- ---------- ---------- FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 172,613 249,831 239,059 Proceeds from issuance of stock and warrants 21 35,840 Redemption of common stock (286,824) Payments on long-term debt (105,373) (22,463) (31,059) (38,412) Debt issue costs (24,852) (8,214) Payments on capital lease obligations (5,620) (2,939) (4,385) (5,355) Dividends paid (1,877) ----------- ---------- ---------- ---------- Net cash provided by (used in) financing activities 61,641 199,577 (35,444) (65,783) ----------- ---------- ---------- ---------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 6,057 (2,442) 8,750 (14,483) CASH AND CASH EQUIVALENTS: Beginning of period 11,984 14,426 5,676 20,159 ----------- ---------- ---------- ---------- End of period $ 18,041 $ 11,984 $ 14,426 $ 5,676 =========== ========== ========== ========== (Continued)
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands)
Year Ended Year 35 Weeks ___________________ Ended Jan- Ended Jan- May 3, April 27, uary 2, 1999 uary 3, 1998 1997 1996 NON-CASH INVESTING AND FINANCING ACTIVITIES: Purchase of Delchamps, Inc. - portion unpaid and payable to dissenting shareholders $ 26,637 ========== Accrued direct acquisition costs of Delchamps, Inc. $ 5,704 Capital lease obligations incurred $ 6,181 $ 3,538 $ 7,971 Preferred stock issued during Recapitalization: ========== ========= ========= in exchange for receivables and common stock $ 184 settlement of deferred compensation obligation 712 in redemption of common stock 27,446 Common stock issued during Recapitalization: in exchange for notes receivable 176 in redemption of common stock 588 ========== $29,106 ========== SUPPLEMENTAL DISCLOSURES: Cash paid for interest $ 66,782 $ 21,021 $ 35,902 $12,915 ========= ========= ========= ========= Cash paid (received) for income taxes, net $ (2,397) $ 4,799 $ (1,521) $ 7,700 ========= ========= ========= ========= See notes to consolidated financial statements. (Concluded)
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED JANUARY 2, 1999, THIRTY-FIVE WEEKS ENDED JANUARY 3, 1998, AND THE YEARS ENDED MAY 3, 1997 AND APRIL 27, 1996 (Dollars in Thousands Except Per Share Amounts) ____________________________________________________________________ 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Nature of Operations and Basis of Presentation - The Company operates retail supermarkets in six southeastern states primarily using distribution centers located in Jackson, Mississippi. Supermarkets are operated in various formats and sizes (conventional, combination food and drugs and discount) and in certain locations include retail gasoline stations. Accordingly, the Company operates in one business segment. The consolidated financial statements include those of Jitney-Jungle Stores of America, Inc. and its wholly-owned subsidiaries, Delchamps, Inc., Southern Jitney Jungle Company, Interstate Jitney Jungle Stores, Inc., McCarty-Holman Co., Inc. and subsidiary, and Jitney Jungle Bakery, Inc. All material intercompany profits, transactions and balances have been eliminated. b. Use of Estimates - The consolidated financial statements are prepared in conformity with generally accepted accounting principles which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. c. Inventories - Substantially all inventories are stated at the lower of cost (using the last-in, first-out method) or market. d. Capitalization, Depreciation and Amortization - The cost of property, fixtures, equipment and improvements is depreciated and amortized by the straight-line method over the estimated useful lives of the assets. The estimated useful lives of buildings range up to forty years and the estimated useful life of fixtures and equipment is eight years. Assets under capital leases are recorded at the lower of fair value or the present value of future minimum lease payments. Assets under capital lease and leasehold improvements are amortized by the straight-line method over their primary lease term. License and franchise rights are amortized by the straight-line method over twenty years. Debt issue costs are amortized over the life of the related debt by the interest method. At each balance sheet date the Company evaluates the recoverability of property, equipment and other long-term assets based upon expectations of nondiscounted cash flows and operating income. e. Goodwill - Goodwill relates primarily to the excess of purchase price over fair value of net assets acquired in the acquisition of Delchamps, Inc. and is being amortized over 40 years by the straight-line method. f. Store Opening/Closing Costs - Non-capital expenditures incurred for new or remodeled retail stores are expensed as incurred. When a store is closed, the remaining investment in fixtures and leasehold improvements, net of expected salvage, is charged against operations; the present value of any remaining lease liability, net of expected sublease recovery, is also expensed. g. Advertising - The Company expenses all advertising expenditures as incurred. Advertising expenses for the fiscal year ended January 2, 1999, the thirty five weeks ended January 3, 1998 and the fiscal years ended in 1997 and 1996 were $5,974, $9,340, $4,952 and $6,180, respectively. h. Income Taxes - Deferred tax liabilities and assets are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. i. Cash Equivalents - For purposes of reporting cash flows, cash equivalents include investments with maturities of three months or less when purchased. j. Per Share Amounts - Earnings (loss) per common share and earnings (loss) per common share - assuming dilution are based on net income (loss) after preferred stock dividend requirements and the weighted average number of shares outstanding during each period. Earnings (loss) per common share - assuming dilution includes shares attributed to outstanding warrants and options granted to purchase common stock unless inclusion results in antidilution of per share amounts. k. Accounting Standard to be Adopted in the Future - In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," effective for fiscal years beginning after June 15, 1999. SFAS 133 requires, among other things, that derivatives be recorded on the balance sheets at fair value. Changes in the fair value of derivatives may, depending on circumstances, be recognized in operations or deferred as a component of shareholders' deficit until a hedged transaction occurs. The Company has not determined what impact, if any, the adoption of SFAS 133 will have on its financial position or results of operations. l. Reclassifications - Certain reclassifications have been made in the consolidated financial statements of prior periods to conform to the method of presentation used in the current year. 2. TRANSITIONAL PERIOD FINANCIAL DATA In September 1997, the Company elected to change its fiscal year end from the Saturday nearest April 30 to the Saturday nearest December 31. The change of fiscal year resulted in a transition period of thirty-five weeks beginning May 4, 1997 and ending January 3, 1998. The fiscal years ended January 2, 1999 (fiscal 1998) and April 27, 1996 include the operations of fifty-two weeks and the fiscal year ended May 3, 1997 includes the operations of fifty-three weeks. Unless otherwise indicated, reference to a fiscal year or period of the Company refers to the calendar year in which such fiscal year or period commences. Presented below are the unaudited consolidated results of operations for the comparable thirty-six week period ended January 4, 1997.
Net sales $ 832,905 Cost of sales 637,296 Direct store expense 128,908 Warehouse, administrative and general expense 39,953 Interest expense, net 26,185 ---------- Earnings before income taxes 563 Income taxes 210 ---------- Net Earnings $ 353 Loss per common share $ (11.26)
3. DELCHAMPS ACQUISITION On September 12, 1997, Delta Acquisition Corporation ("DAC"), a wholly-owned subsidiary of the Company, completed an all cash tender offer for shares of Delchamps, Inc. ("Delchamps"), an Alabama corporation, and accepted for payment approximately 75% of such shares. On November 4, 1997, DAC was merged with and into Delchamps. Delchamps was the surviving corporation and became a wholly-owned subsidiary of the Company. Delchamps is engaged in the business of retail food distribution through supermarkets located in Alabama, Florida, Louisiana, and Mississippi. The acquisition was accounted for by the purchase method of accounting. An affiliate of the Company's majority shareholder was paid fees of approximately $4,000 for services rendered in connection with the acquisition, including the arranging of financing. Holders of certain Delchamps shares dissented from the merger and indicated their intent to pursue their legal remedy under Alabama law. At January 3, 1998, the Company had recorded a liability of $26,637, representing approximately 888,000 shares at a purchase price of $30 per share. At January 2, 1999, the liability had been reduced to $7,624 as a result of payments in 1998 to former shareholders upon surrender of their shares and $13,800 deposited in 1998 with the clerk of court of the Circuit Court of Mobile County, Alabama, for 689,884 shares at $20 per share held by former shareholders purporting to exercise dissenters' rights under Alabama law. Any final determination of a fair value of more or less than $30 per share will result in an adjustment of the purchase price of Delchamps and be reflected as an increase or decrease to goodwill. Management of 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. The ultimate purchase price, net of cash acquired of $84 and including direct acquisition costs, has been allocated to the assets acquired and liabilities assumed based upon the fair values at the date of acquisition, as follows:
Receivables and other current assets $ 12,569 Inventories 101,199 Property, equipment and leasehold improvement 116,431 Deferred income tax assets 10,428 Other assets 2,106 Goodwill 135,454 Accounts payable and accrued expenses (74,643) Notes payable and long-term debt, immediately (14,463) Capital lease obligations (10,794) Restructuring obligation (41,967) ----------- Purchase price $ 236,320 ===========
Certain long-term lease obligations for closed Delchamps stores (included in restructuring obligation) were initially recorded on an undiscounted basis at date of acquisition in 1997 and were adjusted in 1998 to their net present value. This 1998 adjustment resulted in a decrease in the restructuring obligation, deferred income tax assets and goodwill of $13,439, $5,040 and $8,399, respectively. The impact of recording these lease obligations at net present value was not material to the 35 weeks ended January 3, 1998, therefore, no change was made to the net loss for that 35-week period. Cost of sales for fiscal 1998 also includes $2,070 of excess shrink associated with the Delchamps acquisition. The results of operations of Delchamps have only been included in the Company's consolidated financial statements subsequent to September 12, 1997. The following unaudited pro forma information presents a summary of consolidated results of operations of the Company and Delchamps as if the acquisition had occurred at the beginning of the periods presented.
35 Weeks Year Ended Ended Jan- May 3, uary 3, 1998 1997 Net sales $ 1,434,059 $ 2,159,542 Cost of sales 1,071,595 1,596,277 Expenses, net of interest 324,792 492,250 Interest expense, net 42,945 67,816 Income tax benefit (130) 2,994 ------------- ------------ Net earnings (loss) $ (5,143) $ 205 ============= ============ Loss per common share $ (25.18) $ (17.53) ============= ============
These unaudited pro forma results have been prepared for comparative purposes only and include certain adjustments, such as additional depreciation expense as a result of the step-up in the basis of fixed assets, additional amortization of goodwill, increased interest expense on acquisition debt and certain synergies expected to result from the integration of Delchamps' operations with those of the Company. They do not purport to be indicative of the results of operations that would have occurred if the acquisition had been made as of those dates. In addition, the pro forma information is not intended to be a projection of future results. In connection with the Delchamps acquisition, the Company recorded a restructuring obligation 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. This obligation consisted principally of the present value of future rental payments for closed locations, severance costs, anticipated loss on divestiture of fixed assets, and other miscellaneous items. Of the total restructuring costs, $41,967 was recorded as goodwill as part of the purchase price allocation in the Delchamps acquisition and $599 was included as acquisition integration costs and other special charges in the statement of operations for the 35 weeks ended January 3, 1998. A rollforward of the restructuring obligation is as follows:
Activity During 35 Weeks Activity During Year Ended January 3, 1998 Ended January 2, 1999 __________________________ _______________________ Net Balance at Adjustment Balance at 1997 January 3, Against Payments January 2, Initial Payments 1998 Goodwill and Other 1999 Stores to be closed $ 47,812 $ (771) $ 47,041 $ (10,848) $ (4,156) a $ 32,037 Severance 1,591 1,591 (204) (1,387) Fixed assets losses 474 474 (474) Other 7,008 (599) 6,409 (746) (5,413) 250 _________ _________ _________ _________ __________ _________ $ 56,885 $ (1,370) $ 55,515 $ (11,798) $ (11,430) $ 32,287 ========= ========= ========= ========= ========== ========= a Net of accretion of interest of $2,181. b Includes $2,521 of lease obligations relating to Jitney-Jungle Stores.
4. RECAPITALIZATION On March 5, 1996, JJ Acquisitions Corp. (JJAC) merged with and into the Company with the Company continuing as the surviving corporation (the "Recapitalization"). JJAC was a wholly-owned subsidiary of Bruckmann, Rosser, Sherrill & Co., L.P. (the "Fund"). Upon consummation of the Recapitalization, the Fund and related investors received 83.82% of the Company's common stock and 11.76% was retained by the shareholders at the time of the Recapitalization. The Recapitalization was accounted for by a charge to equity of $312,571 to reflect the redemption of common stock of the Company outstanding immediately prior to the Recapitalization. A closing fee of $4,000 was paid to the Fund Manager in connection with the Recapitalization. Prior to the Recapitalization JJAC issued 425,000 shares of common stock for an aggregate of $6,500, issued an aggregate of $22,500 in liquidation preference of Class A Preferred Stock, issued $10,000 in liquidation preference of Class C Preferred Stock, and issued warrants to purchase 75,000 shares of common stock to the then holder (along with related investors) of 100% of the Class A Preferred Stock and 15% of the Class C Preferred Stock. The Company issued $27,446 in liquidation preference of Class B Preferred Stock as part of the consideration to shareholders at the time of the Recapitalization. In the Recapitalization the common stock, Class A Preferred Stock, and Class C Preferred Stock issued by JJAC were converted into like shares of the Company and the Company assumed the obligations of JJAC under the warrants. 5. INVENTORIES Had the cost for all inventories been determined on the first-in, first-out method, inventories would have been higher by approximately $15,950 at January 2, 1999 and $16,497 at January 3, 1998 (resulting in a LIFO credit of 547 for the year ended January 2, 1999). LIFO liquidations resulted in an increase in net earnings of $708 and $148 in the 35 weeks ended January 3, 1998 and the fiscal year ended May 3, 1997, respectively. The effect on net earnings of LIFO liquidations in fiscal years ended January 2, 1999 and April 27, 1996 was not material. 6. OTHER ASSETS Other assets, net of accumulated amortization of $6,383 (1998) and $6,862 (1997), consisted of the following:
January 2, January 3, 1999 1998 Debt issue costs $ 24,317 $ 27,770 License and franchise rights 923 1,749 Other 1,717 2,718 ---------- ---------- Total $ 26,957 $ 32,237 ========== ==========
7. PROPERTY UNDER CAPITAL LEASES AND LEASE COMMITMENTS
January 2, January 3, 1999 1998 Store property $ 78,598 $ 85,826 Equipment 5,078 3,169 Less accumulated depreciation (35,114) (34,925) ----------- ----------- $ 48,562 $ 54,070 =========== ===========
Most store leases provide for contingent rentals based on percentages of sales in excess of stipulated amounts. The leases have primary terms ranging from five to twenty years and generally contain renewal options. Portions of store space are sublet under leases. The present value of future minimum lease payments relative to capital leases is included in the financial statements as obligations under capital leases. Lease liabilities are amortized over the lease term using the interest method. The future minimum rental commitments for capital leases and noncancellable operating leases as of January 2, 1999, were as follows:
Capital Operating Leases Leases 1999 $ 15,819 $ 53,928 2000 15,393 49,754 2001 13,917 46,882 2002 13,051 46,094 2003 11,937 44,199 Remaining balance 67,337 234,458 ---------- -------- Total minimum lease commitments $137,454 $475,315 less amount representing estimated executory costs ========= (taxes, maintenance and insurance) 2,869 ---------- Net minimum lease commitments 134,454 Less amount representing imputed interest 65,860 ---------- Present value of minimum lease commitments 68,724 Current portion of obligations under capital 5,789 ---------- Obligations under capitalized leases, less current installments $ 62,935 ==========
Minimum rental commitments have not been reduced by minimum sublease rentals of $702 applicable to capital leases and $585 applicable to operating leases due in the future under noncancellable subleases. The following schedule shows the composition of total rental expense for all operating leases:
Year Ended Year 35 Weeks _____________________ Ended Jan -Ended Jan- May 3, April 27, uary 2, 1999 uary 3, 19 1997 1996 Minimum rentals $ 60,339 $ 17,612 $ 10,717 $ 10,211 Contingent rentals 329 230 325 346 Sublease rentals (974) (262) (288) (219) ---------- ----------- ---------- -------- $ 59,694 $ 17,580 $ 10,754 $ 10,338 ========== =========== ========== ========
Rents, paid to entities partially owned by certain directors and stockholders of the Company under long-term lease commitments were as follows:
Year Ended Year 35 Weeks ______________________ Ended Jan- Ended Jan- May 3, April 27, uary 2, 1999 uary 3, 1998 1997 1996 Capital leases $ 1,295 $ 1,999 $ 3,062 $ 3,017 Operating leases 338 369 331 334 --------- --------- --------- --------- $ 1,633 $ 2,368 $ 3,393 $ 3,351 ========= ========= ========= =========
Obligations under capital leases to such affiliated entities were $1,902 at January 2, 1999 and $11,639 at January 3, 1998. Management believes that these leases were entered into on an arm's length basis on terms that are no less favorable to the Company than could have been obtained with non-affiliated parties. 8. LONG-TERM DEBT Long-term debt consisted of the following:
January 2, January 3, 1999 1998 Senior Notes $200,000 $200,000 Senior Subordinated Notes 200,000 200,000 Senior Credit Facility 112,950 49,831 Other 4,121 --------- -------- Long-term debt $517,071 $449,831 ========= ========
Aggregate maturities of long-term debt for the fiscal years following January 2, 1999 are as follows:
2003 $ 4,121 2004 112,950 2006 200,000 2007 200,000 ----------- 517,071 ===========
In September 1997 the Company issued $200,000 of unsecured Senior Subordinated Notes which mature in September 2007 and accrue interest at the rate of 10 3/8% per annum payable semi-annually. The proceeds from issuance of the Senior Subordinated Notes were used to fund a portion of the Delchamps acquisition consideration (see Note 3). The Senior Subordinated Notes are subordinated in right of payment to the Senior Notes and the Senior Credit Facility. Except under certain conditions, the Senior Subordinated Notes are not redeemable at the Company's option prior to September 15, 2002. Thereafter, the Senior Subordinated Notes are subject to redemption at the option of the Company at 105.188% of principal amount if redeemed during the twelve-month period beginning September 15, 2002 decreasing to 100% of the principal amount if redeemed during the twelve-month period beginning September 15, 2005 and thereafter plus accrued and unpaid interest thereon. In March 1996 the Company issued $200,000 of unsecured Senior Notes which mature on March 1, 2006 and accrue interest at the rate of 12% per annum payable semi- annually. The proceeds from issuance of the Senior Notes were used to fund a portion of the Recapitalization consideration (see Note 4). Except under certain conditions, the Senior Notes are not redeemable at the Company's option prior to March 1, 2001. Thereafter, the Senior Notes are subject to redemption at the option of the Company at 106% of principal amount if redeemed during the twelve-month period beginning March 1, 2001 decreasing to 100% of the principal amount if redeemed during the twelve-month period beginning March 1, 2004 and thereafter plus accrued and unpaid interest thereon. In the event of a change of control as defined in the Indenture, holders of Senior Notes and the Senior Subordinated Notes have the right to require the Company to repurchase all or any part of such holder's notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest thereon. The Company entered into a revolving credit agreement in March 1996 with several banks which provided a $100,000 Credit Facility and subsequently, in September 1997 and March 1999, the Company amended and restated the agreement to provide, respectively, a $150,000 and $162,300 Senior Credit Facility. The Credit Facility and the Senior Credit Facility were used to finance a portion of the Delchamps acquisition and the Recapitalization consideration, to refinance certain indebtedness, and to provide for working capital requirements. The commitments under the Senior Credit Facility will terminate and all loans outstanding thereunder will be required to be repaid in full in March 2004. Prior to March 1999 borrowings under the Senior Credit Facility, including revolving loans and up to $30,000 in letters of credit, could not exceed to the lesser of (i) the "total commitment" which initially was $150,000 and (ii) an amount equal to the sum of (a) up to 65% of eligible inventory of the Company (valued at the lesser of FIFO cost or market value) and (b) the "supplemental availability" which initially was $53,000 and had been reduced to $50,500 at January 2, 1999. The total commitment and the supplemental availability began reducing on a quarterly basis in September 1998. The interest rates on borrowings under the Senior Credit Facility are, at the Company's option, a function of the bank's prime rate or LIBOR. The weighted average interest rate of loans under the Senior Credit Facility was 8.05% at January 2, 1999 and 8.89% at January 3, 1998. The agreement requires the Company to pay a facility fee at an annual rate of .50% of the unused amount available under the Senior Credit Facility. Letters of credit aggregating $11,331 at January 2, 1999 and $7,461 at January 3, 1998 were outstanding under the Senior Credit Facility. Effective March 1999 the Senior Credit Facility was amended to provide that, among other things (i) the total commitment be increased to $162.3 million and no longer be reduced by the amortized amount of the supplemental availability and (ii) the "borrowing base" be increased from 65% to 70% of eligible inventory for the periods March 1, 1999 through April 30, 1999 and September 1, 1999 through October 31, 1999. In April, 1999, certain financial covenants were amended. The Senior Notes and Senior Subordinated Notes are guaranteed on a full, unconditional and joint and several basis by each of the Company's subsidiaries. The Senior Credit Facility is guaranteed by each of the Company's subsidiaries. In addition, obligations under the Senior Credit Facility are secured by a first lien on all of the Company's and its subsidiaries' assets. The Senior Credit Facility and the Indenture pursuant to which the Senior Notes and Senior Subordinated Notes were issued contain numerous covenants which, among other things, restrict or limit the incurrence of indebtedness, payments of dividends and distributions, and capital expenditures. The Senior Credit Facility also contains numerous financial covenants, the more significant of which relate to leverage ratio, interest coverage ratio and cash flows. As of January 2, 1999 the Company was in compliance with the covenants under its debt agreements. 10. INCOME TAXES Income taxes were composed of the following:
Year Ended Year 35 Weeks _____________________ Ended Jan- Ended Jan- May 3, April 27, uary 2, 1999 uary 3, 1998 1997 1996 Current provision (benefit) $ (12,455) $ (3,157) $ 3,913 $ 5,619 Deferred provision (benefit) 6,766 (585) (3,574) 2,577 ----------- ---------- --------- -------- Total $ (5,689) $ (3,742) $ 339 $ 8,196 =========== ========== ========= ========
The income tax provision (benefit) varied from the federal statutory rate of 35% as follows:
Year Ended Year 35 Weeks ___________________ Ended Jan- Ended Jan- May 3, April 27, uary 2, 1999 uary 3, 1998 1997 1996 Federal tax (benefit) at statutory rate $(11,800) $(5,081) $ 3,913 $ 7,929 State income taxes, net of federal tax effect (789) (291) (25) 400 Non-deductible amortization 1,112 574 IRS assessments 428 Valuation allowance and other items 5,059 Other 729 628 (16) (133) ---------- --------- --------- --------- Income tax provision (benefit) $ (5,689) $(3,742) $ 339 $ 8,196 ========== ========= ========= =========
The sources of temporary differences and the related deferred income tax effects were as follows:
January 2, January 3, 1999 1998 Current Deferred Tax Assets (Liabilities): Inventories (7,835) (4,445) Restructuring obligation 3,449 5,433 Accrued compensation and benefits 1,264 1,697 Deferred income 3,068 1,303 Accrued insurance claims 1,038 6,766 Other 356 4,927 Valuation allowance (1,340) ------- ------ Total 0 15,681 ======= ====== Noncurrent Deferred Tax (Assets) Liabilities: Property and equipment 26,764 25,310 Net operating loss carryover (11,410) Restructuring obligation (8,098) (15,447) Capital leases (8,106) (6,069) Other (905) 81 Valuation allowance 1,755 ------- ------- Total 0 3,875 ======= =======
Operating losses for the year ended January 2, 1999 resulted in a net operating loss carryover for income tax purposes of $32,390 which expires in 2013. Refundable income taxes of $16,862 at January 2, 1999 represent the carryback of net operating losses. Refundable income taxes of $5,663 at January 3, 1998 represent an overpayment of estimated taxes. The Company has been notified by the Internal Revenue Service of the intent to examine the Company's income tax return for each of its three fiscal tax years in the period ended May 2, 1998. 11. CAPITAL STOCK Preferred Stock Preferred stock consisted of the following:
January 2, 1999 January 3, 1998 Dividend Outstanding Liquidation Carrying Liquidation Carrying Class Rate Shares Preference Amount Preference Amount A 15% 225,000 34,141 32,314 29,479 27,444 B 10% 274,460 35,996 35,996 32,740 32,740 C - Series 2 10% 23,958 3,142 3,142 2,858 2,858 0 ------- ------- ------- ------- Total Mandatorily Redeemable 73,279 71,452 65,077 63,042 ======= ======= ======= ======= C - Series 1 10% 76,042 9,973 9,973 9,071 9,071
The excess of liquidation preference over the carrying amount of the Class A Preferred Stock is being accreted by periodic charges to retained earnings to the mandatory redemption date. Dividends on Class A Preferred Stock are payable quarterly. Through March 2001, such dividends are payable, at the Company's option, either by cumulation to liquidation preference or in cash and thereafter are payable in cash. Dividends on Class B Preferred Stock and Class C Preferred Stock cumulate on a compounding basis until paid. Cumulative dividends not declared or paid on preferred shares aggregated $23,306 at January 2, 1999. The Class A Preferred Stock is redeemable at the Company's option, (i) at any time after March 1, 2001 at a price equal to the then applicable liquidation preference, which would include accrued and unpaid dividends and a prepayment premium or (ii) on or prior to March 1, 1999 with the proceeds of a public offering of common stock at a price per share equal to 114% of the then applicable liquidation preference, which would include accrued and unpaid dividends thereon. All of the Class A Preferred Stock is required to be redeemed on or before March, 2008 at a price per share equal to the then applicable liquidation preference, which would include accrued and unpaid dividends thereon. The Class B Preferred Stock and Class C Preferred Stock, Series 2, are redeemable at the Company's option at any time, in whole or in part, at a price per share equal to the then applicable liquidation preference, which would include accrued and unpaid dividends. All of the Class B Preferred Stock and all of the Class C Preferred Stock, Series 2, are required to be redeemed in March, 2010 and March, 2011, respectively, at a price per share equal to the then applicable liquidation preference, which would include accrued and unpaid dividends. The Class C Preferred Stock, Series 1, is not redeemable by the Company at any time. Upon a change in control, the Company is required to offer to repurchase all shares of the Class A Preferred Stock at 101% of the then applicable liquidation preference, which would include accrued and unpaid dividends and all shares of Class B Preferred Stock and all shares of Class C Preferred Stock, Series 1 and Series 2, at 100% of the liquidation preference thereof, which would include accrued and unpaid dividends thereon. In addition, the Company is required to offer to apply, subject to certain limitations, net proceeds raised through a primary issuance of securities junior to Class B Preferred Stock to repurchase shares of Class B Preferred Stock. Except as required by law and with respect to certain specified matters, Class A Preferred Stock has no voting rights. Neither the Class B Preferred Stock nor the Class C Preferred Stock has any voting rights, except as required by law. The Class A Preferred Stock is exchangeable (with cumulated dividends) at the Company's option, in whole but not in part, for subordinated exchange debentures of the Company. The exchange debentures will pay interest from the date of the exchange at the rate of 15% per annum, consisting of, at the Company's option, additional exchange debentures or cash on or prior to March 2001 and cash thereafter. The exchange debentures will mature in March 2008. Class A Preferred Stock ranks senior to Class B Preferred Stock and Class C Preferred Stock in right of payment of cash dividends, liquidation preference and redemption (both mandatory and optional). The Class C Preferred Stock ranks junior to the Class B Preferred Stock in right of such cash payments. The Senior Credit Facility and the Indenture (See Note 8) restrict the Company's ability to pay cash dividends, exchange Class A Preferred Stock for exchange debentures and redeem or repurchase Class A Preferred Stock, Class B Preferred Stock, Class C Preferred Stock and exchange debentures. Warrants Warrants to purchase 75,000 shares of common stock were issued in conjunction with the Recapitalization (See Note 4) and were outstanding as of January 2, 1999 and January 3, 1998. The warrants were recorded at fair value of $881 at date of issue. The warrants have an exercise price of $.01 per share and will expire in 2008. 12. STOCK OPTION PLAN During the 35 weeks ended January 3, 1998, the Company adopted the Jitney-Jungle Stores of America, Inc. 1997 Stock Plan (the "1997 Plan"). The 1997 Plan authorizes grants of stock options covering 50,000 shares of the Company's common stock. Grants under the 1997 Plan may take the form of incentive or non-qualified stock options and vest one-third each year. With certain exceptions, the options are granted for a term of ten years. Grants under the 1997 Plan are made at a price that is not less than the fair market value as determined by the Board of Directors or a Committee of the Board at the effective date of grant. The following is a summary of the stock option activity:
Options Weighted Average Outstanding Exercise Price Balance at May 3, 1997 Granted 37,660 $ 98.57 ---------- Balance at January 3, 1998 37,660 98.57 Exercised (280) 74.80 Cancelled (1,845) 74.80 ---------- Balance at January 2, 1999 35,535 $ 99.99 ==========
The following table summarizes information about stock options outstanding at January 2, 1999:
Options Weighted Average Weighted Average Exercise Range Outstanding Remaining Contractual Life Exercise Price $62.50 - $72.50 16,000 8.09 $ 71.69 $124.00 19,535 8.91 $ 124.00 -------- 35,535 ========
At January 2, 1999, and January 3, 1998, options covering 12,812 shares and 1,533 were exercisable at a weighted average price of $97.17 per share and $62.50 per share, respectively. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123") encourages, but does not require, companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to adopt the disclosure-only provisions of SFAS No. 123 and to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and its related interpretations. Accordingly, no compensation cost has been recognized for the stock options granted under the various stock option plans to associates and directors. Had compensation cost for the Company's stock option plans been determined based on the fair value on the date of grant consistent with the provisions of SFAS No. 123, the Company's net loss and loss per share would have been reduced to the pro forma amounts indicated below for loss in the periods ended January 2, 1999 and January 3, 1998, as follows:
1998 1997 Net loss, as reported (30,181) (10,777) Pro forma net loss (30,397) (10,870) Loss per share, as reported (92.92) (38.44) Pro forma per share (93.42) (38.66)
The Company estimated the fair value of stock options granted in 1997 using the Black-Scholes method and the following assumptions:
Expected dividend yield None Expected option life 6 years Risk-free interest rate 6.14%
Based on the results of the computations, the weighted- average fair value per option on the date of grant was $30.48 in 1997. 13. EMPLOYEE BENEFIT AND COMPENSATION PLANS The Company has a profit-sharing plan covering substantially all employees with one or more years' service. Contributions are made at the discretion of the Board of Directors of the Company. Contribution expense totaled $1,046 in the fiscal year ended January 2, 1999, $1,013 in the 35 weeks ended January 3, 1998 and $1,200 in fiscal years ended in 1998 and 1997. Prior to March 1996, the Company had a Phantom Stock Plan for certain key officers whereby deferred compensation units (expressed in shares of common stock) were earned to the extent that performance targets (expressed in terms of growth in stockholders' equity) were met. The amounts payable in accordance with the provisions of the Phantom Stock Plan became fully vested and immediately payable at the time of the Recapitalization (see Note 4). Effective with the Recapitalization $4,252 was paid to the participants and $712 was applied against the purchase price for shares of Class C Preferred Stock acquired by them in connection with the Recapitalization. The Company has entered into employment contracts with three executive officers that provide for stipulated amounts of annual salary, annual bonus and payments to be made by the Company upon termination of employment. The agreements are cancelable by either party upon 30 days notice and include one year non-compete agreements. The three officers have also entered into change of control agreements with the Company that provide for certain lump-sum payments upon a change of control, as defined in the agreements. 14. ACQUISITION INTEGRATION COSTS AND OTHER SPECIAL CHARGES The Company incurred significant costs during the year ended January 2, 1999 as a result of integrating the Delchamps and Jitney-Jungle operations. As discussed in footnote 3, certain of these costs (principally related to store closures) were allocated to goodwill. However, other costs attributable to the Delchamps acquisition, including costs incurred in consolidating warehouse operations, remerchandising of Delchamps stores, and training of Delchamps employees have been expensed as acquisition integration costs in accordance with the guidelines set forth in Emercing Issues Task Force (EITF) Releases 94-3 and 95-3 ("Recognition of Liabilities in Connection with a Purchase Business Combination"). Acquisition integration costs and other special charges include the following:
35 Weeks Year Ended Ended Year Ended January 2, January 3, May 3, 1999 1998 1997 Acquisition integration costs $ 17,377 Long-lived asset impairment charges 3,196 Bridge financing fees in the Delchamps acquisition $ 2,008 Loss on stores to be sold under consent decree with the Federal Trade Commission in the Delachamps acquisition 294 599 Delchamps pre-acquisition litigation accruals 1,150 Abandoned transaction costs 1,030 Severance benefits 711 510 $ 958 Amounts due former chief executive officer 1,779 __________ _________ _________ $ 23,758 $ 3,117 $ 2,737 ========== ========= =========
15. EXTRAORDINARY ITEMS In connection with the Delchamps purchase in the 35 week period ended January 3, 1998 and the Recapitalization in the fiscal year ended April 27, 1996, the Company retired certain long-term debt prior to its scheduled maturity. Early retirement of such debt resulted in extraordinary losses of $870 during the 35 weeks ended January 3, 1998 and $1,456 for the year ended April 27, 1996, net of income tax benefits of $518 and $866, respectively. 16. EARNINGS (LOSS) PER COMMON SHARE The following is a reconciliation of earnings (loss) before extraordinary item as reported in the accompanying statements of operations to earnings (loss) attributable to common stockholders used in computing earnings (loss) per common share and in computing earnings (loss) per common share - assuming dilution. Also presented is a reconciliation of weighted average common shares outstanding used in computing earnings (loss) per common share to weighted average common shares used in computing earnings (loss) per common share - assuming dilution.
Year 35 Weeks Year Ended Ended Jan- Ended Jan- May 3, April 27, uary 2, 1999 uary 3, 1998 1997 1996 Earnings (loss) before extraordinary item (30,181) (9,907) 746 15,915 Preferred stock dividends (9,312) (5,560) (7,655) (987) --------- -------- --------- --------- Earnings (loss) attributable to common stockholders (39,493) (15,467) (6,909) 14,928 ========= ======== ======== ========= Weighted average common shares outstanding 425,035 425,000 425,000 80,321 Warrants 0 0 0 10,920 --------- -------- -------- --------- Weighted average common shares outstanding - assuming dilution 425,035 425,000 425,000 91,241 ========= ======== ======== =========
Warrants issued in 1995 to purchase 75,000 shares of common stock have not been included in calculations for the year ended January 2, 1999, the 35 weeks ended January 3, 1998, and the year ended May 3, 1997 and, for the year ended January 2, 1999 and the 35 weeks ended January 3, 1998, unexercised options granted to certain executives and key officers to purchase 35,535 shares of common stock have not been included to calculate the weighted average common shares used in computing earnings (loss) per common share - assuming dilution because to do so would have been antidilutive for those periods. 17. FAIR VALUES OF FINANCIAL INSTRUMENTS In accordance with Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures About Fair Value of Financial Instruments", information is provided about the fair value of certain financial instruments for which it is practicable to estimate that value. The fair value amounts disclosed represent management's best estimate of fair value. Certain financial instruments and all nonfinancial instruments are excluded, in accordance with SFAS No. 107. The aggregate fair value amounts presented are not intended to represent the underlying aggregate fair value of the Company. The estimated fair values are significantly affected by assumptions used, principally the timing of future cash flows, the discount rate, judgments regarding current economic conditions, risk characteristics of various financial instruments and other factors. Because assumptions are inherently subjective in nature, the estimated fair values cannot be substantiated by comparison to independent quotes and, in many cases, the estimated fair values could not necessarily be realized in an immediate sale or settlement of the instrument. The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments: Cash and cash equivalents: The carrying amount reported in the balance sheets approximates fair value. Receivables, accounts payable and accrued expenses: The carrying amount reported in the balance sheets approximates fair value. Long-term debt: The fair value of the Company's Senior Notes and Subordinated Notes is based on quoted market prices. The interest rates on borrowings under the Senior Credit Facility reset periodically. Consequently, the carrying value of borrowings under the Senior Credit Facility approximates fair value. Redeemable preferred stock: The fair value of redeemable preferred stock is estimated at carrying value as such stock is not traded in the open market and a market price is not readily available. The carrying amounts and fair values of the Company's financial instruments were as follows:
January 2, 1999 January 3, 1998 Carrying Fair Carrying Fair Amount Value Amount Value Cash and cash equivalents 18,041 18,041 11,984 11,984 Receivables 45,059 45,059 19,496 19,496 Accounts payable 138,087 138,087 112,641 112,641 Accrued expenses 69,995 69,995 102,195 102,195 Long-term debt: Senior Notes 200,000 236,900 200,000 237,182 Subordinated Notes 200,000 203,792 200,000 210,867 Senior Credit Facility 112,950 112,950 49,831 49,831 Other 4,121 3,973 Redeemable preferred stock 71,452 71,452 63,042 63,042
18. COMMITMENTS AND CONTINGENCIES The Company is defendant in certain litigation incurred in the normal course of business. Management, after consulting legal counsel, is of the opinion that the 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. During 1998, certain of the Company's stores incurred damage as a result of Hurricane Georges. The Company's property and business interruption loss is covered by insurance. At January 2, 1999, the Company has accrued remaining amounts due for its property loss but has not yet recognized the business interruption portion of its insurance claim as the ultimate amount of recovery is not presently determinable. In 1996, the Company entered into a five-year supply agreement, which replaced a previously existing agreement, relating to merchandise purchases for stores located in Memphis, Tennessee and Little Rock and Pine Bluff, Arkansas. In April 1997, the Company sold the operating assets of its bakery subsidiary for $750 and received $5,250 as consideration for entering into a five-year supply agreement with the purchaser of such operating assets. The $5,250 is being amortized over the term of the supply agreement. In connection with the Delchamps acquisition, the Company amended a pre-existing agreement whereby the Fund Manager is entitled to receive $1,000 per year from the Company as a management fee for the performance of strategic and financial planning services. The amount of the annual management fee may be increased up to one percent of the Company's earnings before interest, income taxes, depreciation, amortization and certain special charges, computed on a quarterly basis. Management fees for the fiscal year ended January 2, 1999, the 35 weeks ended January 3, 1998 and the fiscal year ended May 3, 1997 approximated $1,210, $515 and $1,000, respectively. INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Jitney-Jungle Stores of America, Inc.: We have audited the accompanying consolidated balance sheets of Jitney-Jungle Stores of America, Inc. and subsidiaries ("the Company") as of January 2, 1999 and January 3, 1998 and the related consolidated statements of operations, changes in stockholders' deficit, and cash flows for the year ended January 2, 1999, the thirty-five weeks ended January 3, 1998 and for each of the two years in the period ended May 3, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Jitney- Jungle Stores of America, Inc. and subsidiaries as of January 2, 1999 and January 3, 1998, and the results of their operations and their cash flows for the year ended January 2, 1999, the thirty- five weeks ended January 3, 1998 and for each of the two years in the period ended May 3, 1997, in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP April 19, 1999 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There has been no change of accountants or reporting disagreements on any matters of accounting principle, practice, financial statement disclosure or auditing scope or procedure during fiscal 1998, fiscal 1997 stub, fiscal 1997 and fiscal 1996. PART III Item 10. Directors and Executive Officers of the Registrant The Company's Board of Directors currently has ten directors, each serving a one-year term of office (or until a successor is duly elected and qualified). Executive officers of the Company serve at the discretion of the Board of Directors. For information concerning certain arrangements with respect to the election of directors, see Certain Relationships and Related Transactions' Shareholders Agreement.
Directors and Executive Officers ________________________________ Name Age Position ____________________ ___ ____________________________ W. H. Holman, Jr. 68 Chairman Emeritus, Director Michael E. Julian 48 Chairman and Chief Executive Officer Ronald E. Johnson 48 Director, President and Chief Operating Officer R. Barry Cannada 43 Chief Administrative Officer, Executive Vice President, General Counsel, and Assistant Secretary Richard D. Coleman 44 Executive Vice President, Chief Financial Officer Directors and Executive Officers (Continued) _____________________________________________ Stephen R. Harmon 46 Executive Vice President - Marketing and Merchandising David R. Black 46 Senior Vice President, Finance - Assistant Secretary Jerry L. Jones 47 Senior Vice President - Human Resources Dane C. Truhett 41 Senior Vice President - Information Services W. H . Holman, III 35 Secretary Donald D. Bennett 62 Director Bruce C. Bruckmann 45 Director Joseph H. Fernandez 46 Director Roger P. Friou 64 Director John M. Moriarty, Jr. 42 Director Harold O. Rosser, II 50 Director Stephen C. Sherrill 45 Director
W. H. Holman, Jr., has been Chairman Emeritus since August, 1998 and previously served as Chairman from 1967 to 1998 and as Chief Executive Officer from 1967 until February 1997. Mr. Holman is the father of W. H. Holman, III. Michael E. Julian has been Chairman of the Board since August, 1998 and Chief Executive Officer since February 1997 and served as President from May 1997 to December 1997. He has also served as a director since April 1996. From September 1988 to May 1997, Mr. Julian was Chairman, President and Chief Executive Officer of Farm Fresh, Inc. ("Farm Fresh"). * Directors and Executive Officers (Continued) _____________________________________________ Ronald E. Johnson has been a director since May 1996 and President and Chief Operating Officer since December 1997. He served as Chairman and Chief Executive Officer of Farm Fresh from February 1997 to March 1998. From January 1995 to January 1997, Mr. Johnson served as Chairman, President and Chief Executive Officer of Kash n' Karry Food Stores, Inc. ("Kash n' Karry") and prior to January 1995 as Executive Vice President and Chief Operating Officer of Farm Fresh.* R. Barry Cannada has been Chief Administrative Officer since July of 1998 and Executive Vice President, General Counsel, and Assistant Secretary since January 1998. Mr. Cannada previously was as a partner with the law firm of Butler, Snow, O'Mara, Stevens & Cannada, PLLC from 1981 to 1997. Richard D. Coleman was appointed as Executive Vice President and Chief Financial Officer of the Company effective January 4, 1999. Prior to joining the Company, he served as Executive Vice President - Administration and Chief Financial Officer of Farm Fresh from March 1997 through March 1998. Mr. Coleman was employed by Kash n' Karry as Vice President and Controller from 1988 through 1995 and as Senior Vice President of Administration and Chief Financial Officer from 1996 until January 1997.* Stephen R. Harmon has been Executive Vice President-Marketing and Merchandising since June, 1997. Mr. Harmon served as Retail Grocery-Senior Vice President-Merchandising of Farm Fresh from 1982 to June 1997.* David R. Black has been the Senior Vice President - Finance and Assistant Secretary since 1996. From 1996 until January of 1999, he also served as Chief Financial Officer. Mr. Black joined the Company in 1976 and has held various other positions with the Company including Treasurer, Controller and Assistant Controller. Directors and Executive Officers (Continued) ____________________________________________ Jerry L. Jones has been the Senior Vice President of Human Resources since January of 1999. In the latter half of 1998 he served as Senior Vice President of Risk Management. Prior to that he served as Senior Vice President of Special Projects. From April 1997 to January 1998 he served as Senior Vice President of Administration. He was the Senior Vice President - Retail Operations from March 1996 to April 1997. He previously served as Senior Vice President - Human Resources since 1991. Prior to that, he served as Vice President, Human Resources from 1989. Dane C. Truhett has been the Senior Vice President of Information Services since January 1999, Vice President of Information Services since November 1997, and Director of Application Development since 1994. Prior to that time, Mr. Truhett was employed by IBM as a consultant. W. H. Holman, III has been Secretary since 1996. He is also President of Pump And Save, Inc., the Company's gasoline station subsidiary. He has 13 years of supermarket industry experience, and previously served as the Company's Senior Vice President-Sales and Marketing. Mr. Holman is the son of W. H. Holman, Jr. Donald D. Bennett has been a director since September 1997. Mr. Bennett has been Chairman of the Board of Richfood Holdings, Inc. since 1980. Bruce C. Bruckmann has been a director since 1996 and a principal of the BRS Fund since its formation in 1995. Mr. Bruckmann was an officer and subsequently a Managing Director of Citicorp Venture Capital from 1983 through 1995. Previously, Mr. Bruckmann was an associate at the New York law firm of Patterson, Belknap, Webb & Tyler. Mr. Bruckmann is a director of Mediq, Incorporated, Penhall International, Inc. and Town Sports International, Inc. Directors and Executive Officers (Continued) ____________________________________________ Joseph H. Fernandez has been a director since December 1998. He is currently an independent investor. Previously he was the Chairman of the Board, President and CEO of Buttrey Food and Drug Stores Company from September 1996 to October 1998. From September 1993 to September of 1996, Mr. Fernandez served as President, CEO and director of the same company. Roger P. Friou has been a director since 1984 and a private investor since May 1997. Between March 1996 and May 1997 he served as President of the Company, and between 1991 and 1996 he served as Vice Chairman, Chief Financial Officer and Secretary. Other positions previously held by Mr. Friou at the Company include Executive Vice President and Vice President--Finance and Controller. Mr. Friou is a director of Parkway Properties, Inc. John M. Moriarty, Jr. has been a director since 1996. He has been a Managing Director of Donaldson, Lufkin & Jenrette Securities Corporation since 1989 and a Managing Director of DLJ Merchant Banking, Inc. since 1996. Harold O. Rosser II has been a director since 1996 and a principal of the BRS Fund since its formation in 1995. Mr. Rosser was an officer and subsequently a Managing Director of Citicorp Venture Capital from 1987 through 1995. Previously, he spent 12 years with Citicorp/Citibank in various management and corporate finance positions. Mr. Rosser is a director of B&G Foods, Inc. and Penhall International, Inc. Stephen C. Sherrill has been a director since 1996 and a principal of the BRS Fund since its formation in 1995. Mr. Sherrill was an officer and subsequently a Managing Director of Citicorp Venture Capital from 1983 through 1995. Previously, he was an associate at the New York law firm of Paul, Weiss, Rifkind, Wharton & Garrison. Mr. Sherrill is a director of Alliance Laundry Systems, LLC, Galey & Lord, Inc., B&G Foods, Inc., Mediq Incorporated. Directors and Executive Officers (Continued) ____________________________________________ *Farm Fresh filed a voluntary petition under federal bankruptcy laws in connection with a "pre- packaged" bankruptcy in January 1998, and the plan of reorganization was confirmed by the Bankruptcy Court in February 1998 and became effective in March 1998. Kash n' Karry filed a voluntary petition under federal bankruptcy laws in connection with a "pre-packaged" bankruptcy in November 1994. The plan of reorganization was confirmed by the Bankruptcy Court and became effective in December 1994. Item 11. Executive Compensation The following table summarizes the compensation paid or accrued by the Company during fiscal 1998, 1997 stub, 1997 and 1996 for the Chief Executive Officer and for each of the four most highly compensated executive officers of the Company during fiscal 1998. The table also includes one other individual who was not an executive officer during fiscal 1998 but whose compensation would have placed him among the most highly compensated officers.
Summary Compensation Table - ---------------------------------------------------------------------------------------------------------------------- Annual Compensation Long-Term Compensation -------------------- Other Annual Securities All Other Compen- Underlying LTIP Compen- Name and Principal Position Year Salary Bonus sation(FN1) Options(FN2) Payouts(FN2) sation - ---------------------------------- ----- ------ ----- ---------- ------------ ---------- ---------- Michael E. Julian, Chairman 1998 $450,000 $450,000 $ 7,089 $ 49,692 (FN5) and Chief Executive Officer (4) 97stub 253,846 24,8077 1,353 13,100 263 1997 57,692 75,000 170,000 (FN6) Ronald E. Johnson, President 1998 400,000 400,000 56,350 2,030 (FN7) and Chief Operating Officer 97stub 30,769 30,769 10,400 W.H. Holman, Jr., Former Chairman, 1998 350,000 2,778 18,556 (FN8) Current Chairman Emeritus (4) 97stub 235,577 117,788 1 988 10,583 1997 331,182 162,920 2,633 15,795 1996 315,100 121,193 2,216 1,894,039 15,840 R. Barry Cannada, Chief 1998 264,904 231,250 2,237 2,237 (FN9) Administrative Officer, Executive 97 stub 5,385 Vice President, General Counsel and Assistant Secretary Stephen R. Harmon, Executive Vice 1998 175,000 87,503 11,888 8,687 (FN10) President Merchandising and 97stub 114,231 67,115 1,200 Marketing David R. Black, Senior Vice 1998 150,000 75,000 1,507 6,136 (FN11) President- Finance 97 stub 94,330 76,775 1,112 850 2,024 1997 125,000 9,865 1,513 2,835 1996 120,768 13,846 1,327 2,820
Other annual compensation includes the annual estimated value of an automobile furnished by the Company. Additionally, for Messrs. Julian, Johnson and Harmon annual compensation also includes $3,571, $52,795 and $9,425, respectively, for amounts paid in connection with relocation. Represents number of shares of securities granted by stock option in applicable periods. Includes distributions from the Company's deferred compensation plan. During fiscal 1996, the Company recognized a special charge of approximately $1.8 million attributable to an employment agreement which allows future payments to be received by Mr. Holman, of which $493,768 was received by Mr. Holman in fiscal 1998. Effective August 14, 1998, Mr. Holman resigned his position as Chairman of the Board and assumed the position of Chairman Emeritus. Simultaneously, Mr. Julian was named Chairman of the Board. Consists of $42,855 paid in premiums for a whole life insurance policy for the benefit of Mr. Julian, $2,030 in premiums for group term life insurance and $4,807 in Company contributions under the 401(k) Plan. Consists of fees for consulting services provided to the Company by Mr. Julian prior to his employment with the Company as Chief Executive Officer. Consists of premiums for group term life insurance. Consists of $14,700 in premiums for group term life insurance and $3,856 in Company contributions under the 401(k) Plan. Consists of premiums for group term life insurance. Consists of $1,045 in premiums for group term life insurance and $1,683 in Company contributions under the 401(k) Plan. Consists of $871 in premiums for group term life insurance and $5,265 in Company contributions under the 401(k) Plan. STOCK OPTION PLAN The Company has in effect an employee stock option plan pursuant to which options to purchase Common Stock of the Company are granted to certain executives and key officers of the Company. There were no option grants during the 1998 fiscal year. Aggregated Exercised Options and Fiscal Year-End Option Values The following table summarizes the number and value of all unexercised options held by the aforementioned executive officers at January 2, 1999. There were no options granted in Fiscal 1998.
Value of Name Shares Unexcercised - ---- Acquired on Options In-the-Money Exercised Value Excercisable at Fiscal Year Options Realized Fiscal Year End ($)(FN1) --------- --------- --------------- ------------- Michael E. Julian -- -- 4366.67/8733.34 224,883.50/ (FN2),(FN3) 449,767.01 Ronald E. Johnson -- -- 3466.67/6933.34 0/0 (FN2),(FN3) R. Barry Cannada -- -- 1795/3590 0/0 (FN2),(FN3) Stephen R. Harmon -- -- 400/800 (FN2) 0/0 David R. Black -- -- 566.67/283.33(FN2) 34,850.20/17,424.79 W. H. Holman, Jr. -- -- ----/---- 0/0 - ---------------------
(1) Assumes the value of the Common Stock as of January 2, 1999 was equal to $ 124.00 per share, as set by the Compensation Committee in December of 1998 for tax reporting purposes. The value is based, as of January 1, 1998, upon the same formula used to acquire the stock of the Company in the recapitalization of the Company in March of 1996. In the opinion of the Compensation Committee, the business of the Company and the market factors since January of 1998 do not merit any change in that assessment of value. (2) Shares vest in 1/3 portions, the first third beginning on the first anniversary of the Vesting Commencement Date, and the second and third portions respectively on the second and third anniversaries of the Vesting Commencement Dates. (3) Shares fully vest (a) upon the initial public offering, or (b) change of control, subject to shareholder approval. Compensation of Directors Each non-employee director of the Company is paid an annual retainer of $12,000 plus fees of $1,000 for each board meeting attended and $500 for each committee meeting attended. Directors are also eligible to receive grants of stock options, stock purchase rights and other stock-based awards under the Company's 1997 Stock Plan. Directors who are employees of the Company do not receive additional compensation as directors. Employment Agreements W. H. Holman, Jr. has an employment contract with the Company providing for a term of employment through February 28, 2001. The agreement provides that Mr. Holman, Jr. will serve as Chairman of the Board and as Chief Executive Officer, at the discretion of the Board of Directors. The Board of Directors appointed Michael E. Julian as Chief Executive Officer in January 1997 and Chairman in August 1998. Pursuant to his employment contract, Mr. Holman will continue to serve on the Board of Directors as Chairman Emeritus until February 28, 2001, with a salary equal to his current salary until February 28, 1999, and no less than $152,848 salary thereafter. Effective February 23, 1997, December 8, 1997, January 1, 1998, respectively, the Company entered into employment agreements with Messrs. Julian, Johnson and Cannada. The agreements provide for an annual salary of $450,000, $400,000 and $250,000 ($275,000 after July 1, 1998), and an annual bonus of up to 100%, 100% and 75% (100% after July 1, 1998) of such annual salary for Messrs. Julian, Johnson and Cannada, respectively. Either the Company or the officer may terminate the agreement upon thirty days notice. If the Company terminates the employment of Messrs. Julian, Johnson or Cannada, without cause or the officer terminates for good reason, the Company must pay such officer a sum equal to his prorata bonus and severance equal to one year salary plus estimated bonus. In addition, the officer will be entitled to exercise any vested options within three months of the termination of his employment. Each executive has agreed not to compete for a period of one year after the termination of his employment. Messrs. Julian, Johnson, Cannada, each have entered into change of control agreements with the Company. These agreements provide that if the officer's employment terminated within two years following a change in control by the Company other than for cause or by the officer for good reason, or if the officer is terminated by the Company in anticipation of the change of control, (i) the officer will be entitled to receive a lump sum severance amount equal to two times such officer's annual salary and bonus and, (ii) if any payment to the officer pursuant to the change of control Agreement would be subject to the 20% excise tax on excess parachute payments, the officer's payment shall be reduced to the greater of (i) the greatest amount that would not be subject to such an excise tax, or (ii) the amount that would result in the greatest after-tax benefit to the executive. A change of control is generally defined to occur upon (i) an acquisition of 20% or more of the total voting power of the outstanding securities of the Company (provided that as long as Bruckmann, Rosser, Sherrill & Co., L.P., beneficially own either (a) more common stock than the acquiring party, or (b) 20% or more of the common stock of the Company, a change of control shall not have occurred), (ii) a change in a majority of the members of the Company's Board of Directors, (iii) the consummation of certain mergers or reorganizations, or (iv) approval by the stockholders of dissolution or liquidation of the Company. Committees and Meetings of the Board The Board of Directors held four regular meetings during Fiscal 1998. All directors attended at least 75% of the total meetings of the Board of Directors and the committees of which they were members. The Company has a Compensation Committee of the Board of Directors that is responsible for determining annual salaries and bonuses paid to the Company's senior management and administering the Company's stock option and benefit programs. The current members of the Compensation Committee are Messrs. Friou and Rosser. There was one meeting of the Compensation Committee during Fiscal 1998. The Company has an Audit Committee that reviews external and internal auditing matters and recommends the selection of the Company's auditors for approval by the Board of Directors. The members of the Audit Committee are Messrs. Bruckmann, Friou and Moriarty. There were three meetings of the Audit Committee during Fiscal 1998. 401(k) Plan The Company maintains the Jitney-Jungle Stores of America, Inc. and Affiliates Profit Sharing Plan and Trust (the 401(k) Plan) for the benefit of its employees who have satisfied the plan's eligibility requirements. Participants are permitted to make pretax salary reduction contributions, up to the amount permitted under applicable tax law. The Company makes a matching contribution equal to 50% of each participant's salary reduction contribution, up to a maximum of 2% of the participant's compensation. In addition, the Company may make additional profit sharing contributions at its discretion. Although in prior years the Company has made discretionary profit sharing contributions, it has no obligation to do so in the future. Company contributions become vested when the participant has been credited with five years of service. Item 12. Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information regarding the beneficial ownership of Common and Preferred Stock as of January 2, 1999, by (i) each director, (ii) the named executive officers set forth in Item 11; and (iii) all executive officers and directors as a group and (iv) the Company's principal stockholders. Other than as set forth in the table below, there are no persons known to the Company to beneficially own more than 5% of the Common Stock. No Company securities are owned by John M. Moriarty, Jr., Donald D. Bennett or Joseph H. Fernandez, each of whom is a director of the Company.
Number and Number and Number and Number and Name and Address Percentage of Percentage of Percentage of Percentage of for Beneficial Shares of Shares of Class A Shares of Class B Shares of Class C Owners over 5% Common Stock Preferred Stock Preferred Stock Preferred Stock - ----------------- -------------- ----------------- ----------------- --------------- Bruckmann, Rosser, Sherrill & Co., L.P. 353,750/83.18% ---- ---- 75,508/75.60%(FN1) 126 East 56th Street (FN1) New York, NY 10022 W. H. Holman, Jr. 29,699/6.98%(FN2) ---- 21,516/7.84% (FN3) 4,742/4.75% Jitney-Jungle Stores of America, Inc. P. O. Box 3409 Jackson, MS 39207 DLJ Merchant (FN4) ---- ---- 15,000/15.02% Banking Partners, L.P. and related investors 277 Park Avenue New York, NY 10172 Michael E. Julian 2,500/* ---- ---- 579/* Roger P. Friou 12,510/2.94% ---- 14/ * (FN3) 1,252/1.25%(FN3) Bruce C. Bruckmann 353,750/83.18% ---- ---- 75,508/75.60%(FN1) (FN1) (FN5) Harold O. Rosser, II 353,750/83.18% ---- ---- 75,508/75.60%(FN1) (FN1) (FN6) Stephen C. Sherrill 353,750/83.18% ---- ---- 75,508/75.60%(FN1) (FN1) (FN7) Ronald E. Johnson ---- ---- ---- 20/* R. Barry Cannada ---- ---- ---- 20* Stephen R. Harmon 1,800/* David R. Black 850/* ---- ---- 85/* All directors and executive officers as a group (FN12) 406,108/95.49% ---- 21,530/7.84% 97,705/97.82% (FN3) *Owns less than 1% of the total outstanding Common Stock, Class B Preferred Stock and Class C Preferred Stock.
1) The 353,750 shares of Common Stock include 331,732 shares of common stock owned directly by Bruckmann, Rosser, Sherrill & Co., Inc., L.P. ("BRS") and 22,018 shares to which BRS possesses sole voting power. The 75,508 shares of Class C Preferred Stock include 70,808 shares owned directly by BRS and 4,700 shares in which it has a beneficial interest. BRS is a limited partnership, the sole general partner of which is BRS Partners and the manager of which is BRS. The sole general partner of BRS Partners is BRSE Associates. Bruce C. Bruckmann, Harold O. Rosser, II, Stephen C. Sherrill and Stephen F. Edwards are the only stockholders of BRS and BRSE Associates and may be deemed to share beneficial ownership of the shares shown as beneficially owned by the Fund. Such individuals disclaim beneficial ownership of any such shares. 2) Includes 10,000 shares of common stock owned directly and 19,699 shares to which Mr. Holman possesses sole voting power. 3) All shares of Class B Preferred Stock, and 7,119 shares of Class C Preferred Stock, are owned by Trustmark National Bank ("Trustmark") pursuant to an escrow agreement by and among Trustmark, the Company and former Common Stock shareholders of the Company. Certain of the officers of the Company own an interest in the escrow account through which they have a beneficial interest in the number of shares of Class B Preferred Stock and Class C Preferred Stock listed in this table. 4) DLJ Merchant Banking Partners, L.P. ("DLJ") and related investors have received outstanding warrants to purchase 15.0%, on a fully diluted basis, of the outstanding Common Stock of the Company as outlined in the Shareholders Agreement referred to under Item 13. 5) Includes 6,605 shares of common stock owned directly and 347,145 shares to which BRS possesses sole voting power. 6) Includes 1,327 shares of common stock owned directly and 352,383 shares to which BRS possesses sole voting power. 7) Includes 6,812 shares of common stock owned directly and 349,327 shares to which BRS possesses sole voting power. Item 13. Certain Relationships and Related Transactions. BRS is entitled to receive 1% of earnings before interest, income taxes, depreciation, amortization and certain special charges annually, with a minimum of $1.0 million per year, computed on a quarterly basis from the Company as a management fee for the performance of strategic and financial planning services in the future. BRS received $1.2 million during the fiscal year ended 1998. Messrs. Bruckmann, Rosser, Sherrill and Edwards (not a director of the Company) are the only stockholders of BRS and BRSE Associates. BRSE Associates is the sole general partner of BRS Partners, which is the sole general partner of BRS. BRS is the majority stockholder of the Company. At the beginning of the year, W. H. Holman, Jr., W. H. Holman, III, Roger P. Friou and another officer (Clyde Staley) owned in the aggregate noncontrolling interests in certain partnerships that were landlords under twenty (20) leases (involvement is Holman, Jr., 18 leases; Holman, III, 6 leases; Staley, 5 leases; and Friou, 9 leases) for stores or other facilities where the Company and its subsidiaries are the tenants. Through disposition by these parties and/or the Company, the number was reduced to 8 leases by the end of the year (Holman, Jr., 6 leases, Holman III, 2 leases, Friou, 6 leases and Staley, 3 leases). During fiscal year 1998, the Company paid a combined total rent under these twenty (20) leases of approximately $2.7 million. Management believes that each of these leases was on an arm's length basis and were on terms that are no less favorable to the Company than could have been obtained with non- affiliated parties at the time each lease was entered into. Certain shareholders of the Company, entered into a Shareholders Agreement which contains certain agreements among such shareholders with respect to the capital stock and corporate governance of the Company. The shareholders involved are the Fund, DLJ, and Messrs. W. H. Holman, Jr., Roger P. Friou, and W. H. Holman, III. Agreements regarding corporate governance and the capital stock of the Company were also entered into by the Company, the Fund, Messrs. W.H. Holman, Jr., Roger Friou, W.H. Holman, III, Jerry Jones, Stephen R. Harmon, David R. Black and various other current or former employees in the Securities Purchase and Holders Agreement. Among other matters, the various shareholder agreements bind the parties to vote for a majority of the directors to be designated by BRS, one director to be designated by DLJ and one director to be W. H. Holman, Jr. During fiscal 1998, the Company loaned Ronald E. Johnson, President and Chief Operating Officer, $300,000 in connection with his relocation to Jackson, MS. This loan was subsequently repaid with interest at the rate of 8.25% prior to the end of the fiscal year. During fiscal 1998, the Company reacquired 1,700 shares of the Company's common stock from a former employee. The Company reissued those shares at the same price at which they were acquired to certain employees including Stephen R. Harmon who acquired 600 shares. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K The following is an index of the financial statements, schedules and exhibits included in this Report or Incorporated herein by reference: (a) 1. Financial Statements: Consolidated Balance Sheets as of January 2, 1999 and January 3, 1998. Consolidated Statements of Operations for the fiscal year ended January 2, 1999,for the thirty-five weeks ended January 3, 1998 and for each of the two fiscal years ended May 3, 1997 and April 27, 1996, respectively Consolidated Statements of Changes in Stockholders' Equity for the fiscal year ended January 2, 1999, for the thirty-five weeks ended January 3, 1998 and for each of the two fiscal years ended May 3, 1997 and April 27, 1996, respectively. Consolidated Statements of Cash Flows for the fiscal year ended January 2, 1999,for the thirty-five weeks ended January 3, 1998 and for each of the two fiscal years ended May 3, 1997 and April 27, 1996, respectively. Notes to Consolidated Financial Statements Independent Auditors' Report 2. Financial Statement Schedules: There are no Financial Statement Schedules included with this filing for the reason that they are not applicable, are not required, or the information is included in the financial statements or notes thereto. 3. Exhibits The following is an index of the exhibits included in this Annual Report on Form 10-K or incorporated herein by reference: Exhibit No. *2.1 Agreement and Plan of Exchange and of Merger, dated as of November 16, 1995 by and among JJ Acquisitions Corp. and Jitney-Jungle Stores of America, Inc., Southern Jitney Jungle Company, McCarty-Holman Co., Inc. and Jitney-Jungle Bakery, Inc. (incorporated by reference to Exhibit No. 2.1 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *2.2 Agreement and Plan of Merger dated July 8, 1997 by and among the Company, Delchamps, Inc. and Delta Acquisition Corporation (incorporated by reference to Exhibit 2 to Form 8-K [No. 33-80833] of the Company dated July 14, 1997). *3.1 Amended and Restated Articles of Incorporation of Jitney-Jungle Stores of America, Inc. (including designation of Class B Preferred Stock) (incorporated by reference to Exhibit No. 3.3 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *3.2 Restated by-laws of Jitney-Jungle Stores of America, Inc. (incorporated by reference to Exhibit No. 3.6 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *3.3 Composite Amended and Restated Articles of Incorporation of Delchamps, Inc. (incorporated by reference to Exhibit 3.1 to Form 10-Q of Delchamps, Inc. for the quarter ended September 28, 1996). *3.4 Composite of By-Laws of Delchamps, Inc. (incorporated by reference to Exhibit 3.2 to Form 10-Q of Delchamps, Inc. for the quarter ended September 28, 1996. *3.5 Amended and Restated Articles of Incorporation of Interstate Jitney-Jungle Stores Inc. (incorporated by reference to Exhibit 3.5 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *3.6 Restated By-Laws of Interstate Jitney- Jungle Stores, Inc. (incorporated by reference to Exhibit 3.6 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *3.7 Amended and Restated Articles of Incorporation of McCarty-Holman Co., Inc. (incorporated by reference to Exhibit 3.7 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *3.8 Restated By-Laws of McCarty-Holman Co., Inc. (incorporated by reference to Exhibit 3.8 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *3.9 Amended and Restated Articles of Incorporation of Southern Jitney Jungle Company (incorporated by reference to Exhibit 3.9 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *3.10 Restated By-Laws of Southern Jitney Jungle Company (incorporated by reference to Exhibit 3.10 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *3.11 Amended and Restated Articles of Incorporation of Pump and Save, Inc. (incorporated by reference to Exhibit 3.11 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *3.12 Restated By-Laws of Pump and Save, Inc. (incorporated by reference to Exhibit 3.12 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *3.13 Amended and Restated Articles of Incorporation of Supermarket Cigarettes Sales, Inc. (incorporated by reference to Exhibit 3.13 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *3.14 By-Laws of Supermarket Cigarettes Sales, Inc. (incorporated by reference to Exhibit 3.14 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *3.15 Amended and Restated Articles of Incorporation of Jitney-Jungle Bakery, Inc. (incorporated by reference to Exhibit 3.15 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *3.16 Restated By-Laws of Jitney-Jungle Bakery, Inc. (incorporated by reference to Exhibit 3.16 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *4.1 Indenture dated as of September 15, 1997 among the Company, the Subsidiary Guarantors from Marine Midland Bank as Trustee, Donaldson Lufkin & Jenrette Securities Corporation and Credit Suisse First Boston (incorporated by reference to Exhibit 4.1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on October 29, 1997). *4.2 Registration Rights Agreement dated as of September 15, 1997 among the Company, the Subsidiary Grantors, Donaldson, Lufkin & Jenrette Securities Corporation and Credit Suisse First Boston (incorporated by reference to Exhibit 4.2 to Form S-4 [No. 333-38957] of Jitney- Jungle Stores of America, Inc. filed with the Commission on October 29, 1997). *4.3 Form of the Company's 10 3/8% Senior Subordinated Notes due 2007 (included in Exhibit 4.1) (incorporated by reference to Exhibit 4.3 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on October 29, 1997). *4.4 Revolving Credit Agreement dated September 15, 1997 by and among Fleet Capital Corporation and the Company (incorporated by reference to Exhibit 4.4 to Form S-4 [No. 333-38957] of Jitney- Jungle Stores of America, Inc. filed with the Commission on October 29, 1997). *4.5 Indenture dated March 5, 1996 between the Company and Marine Midland Bank, as Trustee, relating to the issuance and sale of $200,000,000 aggregate principal amount of 12% Senior Notes due 2006 (incorporated by reference to Exhibit No. 4.2 Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisition Corp. filed with the Commission on February 27, 1996). *4.6 Warrant dated March 4, 1996 to purchase 75,000 shares of Common Stock of the Company by DLJ Merchant Banking Partners, L.P. and related investors (incorporated by reference to Exhibit 4.3 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *4.7 Memorandum of Agreement dated October 15, 1985 by and among the City of Jackson, Mississippi and McCarty-Holman Co., Inc. ($3,650,000) (incorporated by reference to Exhibit 4.8 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *4.8 Amendment and Waiver Agreement No.1 dated April 10, 1998 to Amended and Restated Revolving Credit Agreement dated September 15, 1997 by and among Fleet Capital Corporation and the Company. *4.9 Amendment and Waiver Agreement No. 2 dated June 19, 1998 to Amended and Restated Revolving Credit Agreement dated September 15, 1997 by and among Fleet Capital Corporation and the Company. *4.10 Amendment and Waiver Agreement No. 3 dated October 5, 1998 to the Amended and Restated Revolving Credit Agreement dated September 15, 1997 by and among Fleet Capital Corporation and the Company. 4.11 Amended and Restated Revolving Credit Agreement No.4 dated March 4, 1999 to the Amended and Restated Revolving Credit Agreement dated September 15, 1997 by and among Fleet Capital Corporation and the Company. 4.12 Amended and Restated Revolving Credit Agreement No.5 dated March 26, 1999 to the Amended and Restated Revolving Credit Agreement dated September 15, 1997 by and among Fleet Capital Corporation and the Company. 4.13 Amended and Restated Revolving Credit Agreement No.6 dated April 16, 1999 to the Amended and Restated Revolving Credit Agreement dated September 15, 1997 by and among Fleet Capital Corporation and the Company. *5.1 Opinion of Dechert Price & Rhoads (incorporated by reference to Exhibit 5.1 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *9.1 Voting Trust Agreement dated November 1, 1990 by and among Carolyn Holman Kroeze, as Executrix and the parties named therein (incorporated by reference to Exhibit 9.1 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *10.1 Purchase Agreement dated September 10, 1997 among the Company, Donaldson, Lufkin & Jenrette Securities Corporation and Credit Suisse First Boston with respect to the 10 3/8% Senior Subordinated Notes due 2007 (incorporated by reference to Exhibit 10.1 to Form S-4 [No. 333-38957] of Jitney- Jungle Stores of America, Inc. filed with the Commission on October 29, 1997). *10.2 Supply Agreement dated March 19, 1989 as amended, by and among Fleming Companies Inc. (successor in interest to Malone & Hyde, Inc.), the Company and Interstate Jitney-Jungle Stores, Inc. (incorporated by reference to Exhibit 10.2 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *10.3 Membership in Topco Associates, Inc. (Cooperative) by ownership of six hundred (600) shares of Common Stock, such stock certificate being dated July 1, 1991 (incorporated by reference to Exhibit 10.3 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *10.4 Flour Sale Confirmation and Contract dated July 19, 1995 by and among Cargill, Incorporated and Jitney- Jungle Bakery, Inc. (incorporated by reference to Exhibit 10.4 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *10.5 Employment Agreement dated as of February 15, 1995 by and among the Company Roger P. Friou (incorporated by reference to Exhibit 10.6 to Amendment No. 2 to Form S- 1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *10.6 Employment Agreement dated as of February 24, 1995 by and among the Company and David K. Essary (incorporated by reference to Exhibit 10.7 to Amendment No. 2 to Form S- 1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *10.7 Employment Agreement dated as of March 5, 1996 by and among the Company and W. H. Holman, Jr. (incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K, dated July 24, 1996). *10.8 Employment Agreement dated as of March 5, 1996 by and among the Company and W. H. Holman, III. (incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K, dated July 24, 1996). *10.9 Restatement and Amendment by the Entirety of the Jitney-Jungle Stores of America, Inc. and Affiliates Profit Sharing Plan and Trust (incorporated by reference to Exhibit 10.8 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *10.10 Deferred Compensation Plan for the Company dated as of November 16, 1995 by and among Jitney-Jungle Stores of America, Inc., Southern Jitney Jungle Company, Jitney-Jungle Bakery, Inc., McCarty-Holman Co., Inc. and W. H. Holman, Jr., Roger P. Friou and David K. Essary (incorporated by reference to Exhibit 10.9 to Amendment No. 2 to Form S- 1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *10.11 Shareholders Agreement dated as of March 5, 1996 by and among DLJ Merchant Banking Partners, L.P. JJ Acquisitions Corp., and certain other signatories party thereto (incorporated by reference to Exhibit 10.10 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *10.12 Securities Purchase and Holders Agreement dated as of March 5, 1996 by and among JJ Acquisitions Corp., Bruckmann, Rosser, Sherrill & Co., L.P. and other parties thereto (incorporated by reference to Exhibit 10.12 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *10.13 Registration Rights Agreement dated as of March 5, 1996 by and among the Company and other parties named therein (incorporated by reference to Exhibit 10.13 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996). *10.14 Membership and Licensing Agreement dated August 1, 1973 between Topco Associates, Inc. and Delchamps, Inc. and attached copy of Articles of Incorporation and By- Laws of Topco Associates, Inc. (incorporated by reference to Exhibit 10(a) to the Registration Statement on Form S-1 [No. 2-86926] of Delchamps, Inc.) *10.15 Agreement for Termination of Employment dated as of September 19, 1997 between Delchamps, Inc. and David W. Morrow (incorporated by reference to Exhibit 10(j) to Form 10- K of Delchamps, Inc. for fiscal year ended June 28, 1997). *10.16 Form of Director Indemnity Agreement of Delchamps, Inc. (incorporated by reference to Exhibit 10 to Form 10-Q of Delchamps, Inc. for the quarter ended September 28, 1996). 10.17 Employment Agreements dated effective February 23, 1997, December 8, 1997 and January 1, 1998 by and among the Company and Michael E. Julian, Ronald E. Johnson and R. Barry Cannada, respectively. 10.18 Change of Control Agreements dated effective February 18, 1999 by and among the Company and Michael E. Julian, Ronald E. Johnson and R. Barry Cannada, respectively. *12.1 Statement of Ratio of Earnings to Fixed Charges (incorporated by reference to Exhibit 12.1 to Form S-4 [No. 333- 38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on October 29, 1997). 21.1 Subsidiaries of the Company. *23.1 Consent of Dechert Price & Rhoads (included in Exhibit 5.1) (incorporated by reference to Exhibit 23.1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on October 29, 1997). *23.2 Consent of Deloitte & Touche LLP (incorporated by reference to Exhibit 23.2 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *23.3 Consent of KPMG Peat Marwick (incorporated by reference to Exhibit 23.3 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on October 29, 1997). *24 Power of Attorney (incorporated by reference to Exhibit 24 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on October 29, 1997). *25 Statement of Eligibility and Qualifications, Form T-1, of Marine Midland Bank (incorporated by reference to Exhibit 25 to Form S-4 [No. 333- 38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on October 29, 1997). 27.1 Financial Data Schedule. *99.1 Form of Letter of Transmittal (incorporated by reference to Exhibit 23.2 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *99.2 Form of Notice of Guaranteed Delivery (incorporated by reference to Exhibit 23.2 to Amendment No. 1 to Form S-4 [No. 333-38957] of Jitney-Jungle Stores of America, Inc. filed with the Commission on November 7, 1997). *Previously filed as indicated. (b) Reports on Form 8-K. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Jitney-Jungle Stores of America, Inc. (Registrant) By /s/ Michael E. Julian ---------------------------- (Michael E. Julian Chairman of the Board and Chief Executive Officer) (Principal Executive Officer) Date April 2, 1999 ---------------------------- By /s/ Richard D. Coleman ---------------------------- (Richard D. Coleman Executive Vice President, Chief Financial Officer) (Principal Financial and Accounting Officer) Date April 2, 1999 ---------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated. Signatures Position Date - -------------------------- -------------------- ------------- /s/ Michael E. Julian Chairman of the Board and April 2, 1999 - -------------------------- Chief Executive Officer ------------- (Michael E. Julian) /s/ Roger P. Friou Director April 2, 1999 - -------------------------- ------------- (Roger P. Friou) /s/ Bruce C. Bruckmann Director April 2, 1999 - -------------------------- ------------- (Bruce C. Bruckmann) /s/ Harold O. Rosser, II Director April 2, 1999 - -------------------------- ------------- (Harold O. Rosser, II) /s/ Stephen C. Sherrill Director April 2, 1999 (Stephen C. Sherrill) ------------- /s/ John M. Moriarty, Jr. Director April 2, 1999 - -------------------------- ------------- (John M. Moriarty, Jr.) /s/ Joseph H. Fernandez Director April 2, 1999 - -------------------------- ------------- (Joseph H. Fernandez) /s/ Ronald E. Johnson Director April 2, 1999 - -------------------------- ------------- (Ronald E. Johnson) /s/ Donald D. Bennett Director April 2, 1999 - -------------------------- ------------- (Donald D. Bennett) Exhibit 21.1 SUBSIDIARIES OF JITNEY-JUNGLE STORES OF AMERICA, INC. Percentage of Voting Securities Jurisdiction of Owned by Name Incorporation Registrant - ------------------------------------- --------------- ---------- Interstate Jitney-Jungle Stores, Inc. Alabama 100% Southern Jitney Jungle Company Mississippi 100% McCarty-Holman Co., Inc. Mississippi 100% Jitney-Jungle Bakery, Inc. Mississippi 100% Delchamps, Inc. Alabama 100% JJ Construction Corp. Mississippi 100% Exhibit 21.1 SUBSIDIARIES OF JITNEY-JUNGLE STORES OF AMERICA, INC. ----------------------------------------------------- SUBSIDIARIES OF MCCARTY-HOLMAN CO., INC. ---------------------------------------- Jurisdiction of Name Incorporation - -------------------------- ---------------- Pump and Save, Inc. Mississippi SUBSIDIARIES OF JITNEY-JUNGLE STORES OF AMERICA, INC. ----------------------------------------------------- SUBSIDIARIES OF DELCHAMPS, INC. ------------------------------- Jurisdiction of Name Incorporation - -------------------------- ---------------- Supermarket Cigarette Sales, Inc. Louisiana EX-4.12 2 AMENDMENT NO. 5 TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT AMENDMENT NO. 5 dated March 26, 1999 to the Amended and Restated Revolving Credit Agreement dated as of September 15, 1997 (as heretofore amended, and as may be further amended, restated, modified or supplemented from time to time, the "Credit Agreement") among Jitney-Jungle Stores of America, Inc., Southern Jitney Jungle Company, McCarty-Holman Co., Inc., Jitney-Jungle Bakery, Inc., Pump and Save, Inc., Interstate Jitney Jungle Stores, Inc., and Delchamps, Inc. (each a "Borrower" and collectively, the "Borrowers"), the Guarantors named therein, the Lenders named therein and Fleet Capital Corporation, as Agent. WHEREAS, the Lenders desire to amend Schedule 2.01 to the Credit Agreement (as in effect prior to this Amendment, the "Existing Schedule 2.01", and thereafter, the "New Schedule 2.01"); WHEREAS, the parties hereto willing to amend the Existing Schedule 2.01 of the Credit Agreement, on the terms and conditions hereof. NOW, THEREFORE, the Borrowers, the Guarantors, the Lenders and the Agent hereby agree as follows: 1 SECTION CAPITALIZED TERMS. Capitalized terms used herein and not defined shall have the respective meanings assigned to such terms in the Credit Agreement. 1 SECTION AMENDMENTS TO THE CREDIT AGREEMENT. The Credit Agreement shall be, and upon the fulfillment of the conditions set forth in Section 4 hereof is, hereby amended by deleting the Existing Schedule 2.01 in its entirety and substituting the New Schedule 2.01 attached hereto therefore. 1 SECTION ADDITIONAL AGREEMENTS 2 2.1 SECTION The Lenders agree that all accrued and unpaid interest and fees payable to the Lenders pursuant to the Credit Agreement for the period beginning on March 4, 1999 and ending on the date hereof shall be paid to the Lenders in accordance with the Existing Schedule 2.01 and thereafter in accordance with the New Schedule 2.01. 1 SECTION CONDITIONS PRECEDENT 2 This Amendment shall become effective on such date as the following conditions have been satisfied in full or waived by the Agent in writing: 1.1 SECTION The Agent shall have received in form and substance satisfactory to the Agent and its counsel: 1.2 (a) Counterparts of this Amendment executed by each Borrower, each Guarantor, each Grantor and each Lender shall have been delivered to the Agent. (b) Each Lender shall have received Notes reflecting their respective Commitments duly executed by the Borrowers. (c) Such other approvals, opinions or documents as the Agent may reasonably request. 1.1 SECTION All representations and warranties contained in this Amendment or otherwise made in writing to the Agent in connection herewith shall be true and correct in all material respects. 1.2 1.3 SECTION No unwaived Default or Event of Default has occurred and is continuing. 1.4 1.5 SECTION Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel to the Agent, shall have received payment in full for all legal fees charged, and all costs and expenses incurred, by such counsel in connection with the transactions contemplated under this Amendment and the other Loan Documents and instruments in connection herewith and therewith. 1 SECTION MISCELLANEOUS 2 2.1 SECTION Each of the Borrowers and each Guarantor reaffirms and restates the representations and warranties set forth in Article IV of the Credit Agreement, as amended by this Amendment, and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date (except insofar as such representation and warranties relate expressly to an earlier date). Each of the Borrowers and each Guarantor represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Agent that: (a) It has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Amendment and has taken or caused to be taken all necessary corporate action to authorize the execution, delivery and performance of this Amendment; (a) No consent of any other person (including, without limitation, shareholders or creditors of any Borrower or a Guarantor), and no action of, or filing with any governmental or public body or authority is required to authorize, or is otherwise required in connection with the execution, delivery and performance of this Amendment; (b) This Amendment and the other instruments and documents contemplated hereby have been duly executed and delivered by a duly authorized officer on behalf of such party, and constitutes a legal, valid and binding obligation of such party enforceable against such party in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally and the exercise of judicial discretion in accordance with general principles of equity; and (a) The execution, delivery and performance of this Amendment and the other instruments and documents contemplated hereby will not violate any law, statute or regulation, or any order or decree of any court or governmental instrumentality, or conflict with, or result in the breach of, or constitute a default under any contractual obligation of such party. 1.1 SECTION Nothing herein shall be deemed to be a waiver of any covenant or agreement contained in the Credit Agreement, and each Borrower and each Guarantor hereby agrees that all of the covenants and agreements contained in the Credit Agreement and the other Loan Documents are hereby ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms. 1.2 1.3 SECTION All references to the Credit Agreement in the Credit Agreement or any other Loan Document and the other documents and instruments delivered pursuant to or in connection therewith shall mean such Agreement as amended hereby and as each may in the future be amended, restated, supplemented or modified from time to time. 1.4 1.5 SECTION This Amendment may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement. 1.6 1.7 SECTION Delivery of an executed counterpart of a signature page by telecopier shall be effective as delivery of a manually executed counterpart. 1.1 SECTION This Amendment shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. 1.2 1.3 SECTION The parties hereto shall, at any time and from time to time following the execution of this Amendment, execute and deliver all such further instruments and take all such further action as may be reasonably necessary or appropriate in order to carry out the provisions of this Amendment. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as to the date first above written. JITNEY-JUNGLE STORES OF AMERICA, INC., as Borrower and as Guarantor By__________________________________ Name: Title: SOUTHERN JITNEY JUNGLE COMPANY, as Borrower and as Guarantor By__________________________________ Name: Title: McCARTY-HOLMAN CO., INC., as Borrower and as Guarantor By__________________________________ Name: Title: JITNEY-JUNGLE BAKERY, INC., as Borrower and as Guarantor By__________________________________ Name: Title: PUMP AND SAVE, INC., as Borrower and as Guarantor By__________________________________ Name: Title: INTERSTATE JITNEY JUNGLE STORES, INC., as Borrower and as Guarantor By__________________________________ Name: Title: DELCHAMPS, INC., as Borrower and as Guarantor By__________________________________ Name: Title: JJ CONSTRUCTION CORP., as Guarantor By__________________________________ Name: Title: SUPERMARKET CIGARETTE SALES, INC., as Guarantor By__________________________________ Name: Title: FLEET CAPITAL CORPORATION, as Agent By__________________________________ Name: Title: FLEET CAPITAL CORPORATION, as Lender By__________________________________ Name: Title: PNC BANK, NATIONAL ASSOCIATION, as Lender By__________________________________ Name: Title: HELLER FINANCIAL INC., as Lender By__________________________________ Name: Title: IBJ WHITEHALL BUSINESS CREDIT CORP., as Lender By__________________________________ Name: Title: NATIONAL BANK OF CANADA, a Canadian Chartered Bank, as Lender By__________________________________ Name: Title: NATIONAL CITY BANK, as Lender By__________________________________ Name: Title: DEUTSCHE FINANCIAL SERVICES CORPORATION, as Lender By__________________________________ Name: Title: FLEET BANK, N.A., as a Letter of Credit Issuer By__________________________________ Name: Title: SCHEDULE 2.01 Commitments Lender Commitment Fleet Capital Corporation $50,000,000.00 60 East 42nd Street New York, New York 10017 Attention: Mr. Thomas Maiale Tel #: (212) 885-8826 Fax #: (212) 885-8829 Heller Financial, Inc. $35,000,000.00 101 Park Avenue New York, New York 10178 Attention: Mr. Tom Bukowski Tel #: (212) 880-7169 Fax #: (212) 880-7002 PNC Bank, National Association $17,600,000.00 2 PNC Plaza 18th Floor 620 Liberty Avenue Pittsburgh, PA 15222 Attention: Mr. Richard Muse Tel #: (412) 762-4471 Fax #: (412) 762-4069 IBJ Whitehall Business Credit Corp. $15,400,000.00 One State Street New York, New York 10004 Attention: Mr. Jim Steffy Tel #: (212) 858-2094 Fax #: (212) 858-2151 National Bank of Canada, $14,300,000.00 a Canadian Chartered Bank 125 West 55th Street New York, New York 10019 Attention: Mr. Jim Norvell Tel #: (212) 632-8560 Fax #: (212) 632-8564 Deutsche Financial Services $20,000,000.00 Corporation 3225 Cumberland Boulevard Suite 700 Atlanta, GA 30339 Attention: Mr. Stephan Metts Fax #: (770) 933-8571 National City Bank $10,000,000.00 1900 East Ninth Street Cleveland, Ohio 44114 Attention: Mr. Joseph D. Robison Tel #: (216) 575-9254 Fax #: (216) 575-9396 Total Commitment $162,300,000.00 EX-4.13 3 Execution Copy AMENDMENT NO. 6 TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT AMENDMENT NO. 6 dated April __, 1999 to the Amended and Restated Revolving Credit Agreement dated as of September 15, 1997 (as heretofore amended, and as may be further amended, restated, modified or supplemented from time to time, the "Credit Agreement") among Jitney-Jungle Stores of America, Inc., Southern Jitney Jungle Company, McCarty-Holman Co., Inc., Jitney-Jungle Bakery, Inc., Pump and Save, Inc., Interstate Jitney Jungle Stores, Inc., and Delchamps, Inc. (each a "Borrower" and collectively, the "Borrowers"), the Guarantors named therein, the Lenders named therein and Fleet Capital Corporation, as Agent. WHEREAS, the Borrowers have made certain accounting adjustments for the fiscal quarters ended March 28, 1998, June 20, 1998 and September 12, 1998 and have requested that the Required Lenders amend the Credit Agreement as set forth herein; WHEREAS, the parties hereto are willing to amend Credit Agreement, on the terms and conditions hereof. NOW, THEREFORE, the Borrowers, the Guarantors, the Required Lenders and the Agent hereby agree as follows: 1 SECTION CAPITALIZED TERMS. Capitalized terms used herein and not defined shall have the respective meanings assigned to such terms in the Credit Agreement. 1 SECTION AMENDMENTS TO THE CREDIT AGREEMENT. The Credit Agreement shall be, and upon the fulfillment of the conditions set forth in Section 3 hereof is, hereby amended by adding the following as a new Section 7.24.: SECTION 7.24. Special Accounting Adjustment. For the purposes of calculating the Interest Coverage Ratio and the Leverage Ratio, in each case, solely for the fiscal quarters ended March 28, 1998, June 20, 1998 and September 12, 1998 the Borrowers may increase EBITDA by $5,300,000. 1 SECTION CONDITIONS PRECEDENT 2 This Amendment shall become effective on such date as the following conditions have been satisfied in full or waived by the Agent in writing: 1.1 SECTION The Agent shall have received in form and substance satisfactory to the Agent and its counsel: 1.2 (a) Counterparts of this Amendment executed by each Borrower, each Guarantor, each Grantor and the Required Lenders shall have been delivered to the Agent. (b) Such other approvals, opinions or documents as the Agent may reasonably request. 1.1 SECTION All representations and warranties contained in this Amendment or otherwise made in writing to the Agent in connection herewith shall be true and correct in all material respects. 1.2 1.3 SECTION No unwaived Default or Event of Default has occurred and is continuing. 1.4 1.5 SECTION Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel to the Agent, shall have received payment in full for all legal fees charged, and all costs and expenses incurred, by such counsel in connection with the transactions contemplated under this Amendment and the other Loan Documents and instruments in connection herewith and therewith. 1 SECTION MISCELLANEOUS 2 2.1 SECTION Each of the Borrowers and each Guarantor reaffirms and restates the representations and warranties set forth in Article IV of the Credit Agreement, as amended by this Amendment, and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on such date (except insofar as such representation and warranties relate expressly to an earlier date). Each of the Borrowers and each Guarantor represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Agent that: (a) It has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Amendment and has taken or caused to be taken all necessary corporate action to authorize the execution, delivery and performance of this Amendment; (a) No consent of any other person (including, without limitation, shareholders or creditors of any Borrower or a Guarantor), and no action of, or filing with any governmental or public body or authority is required to authorize, or is otherwise required in connection with the execution, delivery and performance of this Amendment; (a) This Amendment and the other instruments and documents contemplated hereby have been duly executed and delivered by a duly authorized officer on behalf of such party, and constitutes a legal, valid and binding obligation of such party enforceable against such party in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally and the exercise of judicial discretion in accordance with general principles of equity; and (a) The execution, delivery and performance of this Amendment and the other instruments and documents contemplated hereby will not violate any law, statute or regulation, or any order or decree of any court or governmental instrumentality, or conflict with, or result in the breach of, or constitute a default under any contractual obligation of such party. 1.1 SECTION Nothing herein shall be deemed to be a waiver of any covenant or agreement contained in the Credit Agreement, and each Borrower and each Guarantor hereby agrees that all of the covenants and agreements contained in the Credit Agreement and the other Loan Documents are hereby ratified and confirmed in all respects and shall remain in full force and effect in accordance with their respective terms. 1.2 1.3 SECTION All references to the Credit Agreement in the Credit Agreement or any other Loan Document and the other documents and instruments delivered pursuant to or in connection therewith shall mean such Agreement as amended hereby and as each may in the future be amended, restated, supplemented or modified from time to time. 1.4 1.5 SECTION This Amendment may be executed by the parties hereto individually or in combination, in one or more counterparts, each of which shall be an original and all of which shall constitute one and the same agreement. 1.6 1.7 SECTION Delivery of an executed counterpart of a signature page by telecopier shall be effective as delivery of a manually executed counterpart. 1.1 SECTION This Amendment shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. 1.2 1.3 SECTION The parties hereto shall, at any time and from time to time following the execution of this Amendment, execute and deliver all such further instruments and take all such further action as may be reasonably necessary or appropriate in order to carry out the provisions of this Amendment. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as to the date first above written. JITNEY-JUNGLE STORES OF AMERICA, INC., as Borrower and as Guarantor By__________________________________ Name: Title: SOUTHERN JITNEY JUNGLE COMPANY, as Borrower and as Guarantor By__________________________________ Name: Title: McCARTY-HOLMAN CO., INC., as Borrower and as Guarantor By__________________________________ Name: Title: JITNEY-JUNGLE BAKERY, INC., as Borrower and as Guarantor By__________________________________ Name: Title: PUMP AND SAVE, INC., as Borrower and as Guarantor By__________________________________ Name: Title: INTERSTATE JITNEY JUNGLE STORES, INC., as Borrower and as Guarantor By__________________________________ Name: Title: DELCHAMPS, INC., as Borrower and as Guarantor By_________________________________ Name: Title: JJ CONSTRUCTION CORP., as Guarantor By_________________________________ Name: Title: SUPERMARKET CIGARETTE SALES, INC., as Guarantor By_________________________________ Name: Title: FLEET CAPITAL CORPORATION, as Agent By_________________________________ Name: Title: FLEET CAPITAL CORPORATION, as Lender By_________________________________ Name: Title: PNC BANK, NATIONAL ASSOCIATION, as Lender By_________________________________ Name: Title: HELLER FINANCIAL INC., as Lender By__________________________________ Name: Title: IBJ WHITEHALL BUSINESS CREDIT CORP., as Lender By_________________________________ Name: Title: NATIONAL BANK OF CANADA, a Canadian Chartered Bank, as Lender By_________________________________ Name: Title: NATIONAL BANK OF CANADA, a Canadian Chartered Bank, as Lender By_________________________________ Name: Title: NATIONAL CITY BANK, as Lender By_________________________________ Name: Title: DEUTSCHE FINANCIAL SERVICES CORPORATION, as Lender By__________________________________ Name: Title: FLEET BANK, N.A., as a Letter of Credit Issuer By__________________________________ Name: Title: EX-27 4
5 OTHER JAN-02-1999 JAN-04-1998 18,041 0 45,059 0 166,774 235,529 473,109 175,655 691,146 224,751 0 71,452 9,973 4 (216,447) 691,146 2,054,126 2,054,126 1,511,985 2,089,996 23,758 0 72,343 (35,870) (5,689) (30,181) 0 0 0 (30,181) (92.92) (92.92)
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