-----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, NRte0dXG1JmodGidxFkdMMxvWUsLM+HqSN7vnNid3BCwQr6atsn8WdxY4n9h2Wgf 1sNgLAdql4LAlIeJMd2K/Q== 0000948688-99-000011.txt : 19990420 0000948688-99-000011.hdr.sgml : 19990420 ACCESSION NUMBER: 0000948688-99-000011 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980912 FILED AS OF DATE: 19990419 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JITNEY JUNGLE STORES OF AMERICA INC /MI/ CENTRAL INDEX KEY: 0001005408 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 640280539 STATE OF INCORPORATION: MI FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 033-80833 FILM NUMBER: 99596967 BUSINESS ADDRESS: STREET 1: 3800 I 55 NORTH STREET 2: STE 200 CITY: JACKSON STATE: MS ZIP: 39211 BUSINESS PHONE: 6019658625 MAIL ADDRESS: STREET 1: JITNEY JUNGLE STORES OF AMERICA INC STREET 2: 3800 I 55 NORTH CITY: JACKSON STATE: MS ZIP: 39211 FORMER COMPANY: FORMER CONFORMED NAME: JJ ACQUISITIONS CORP DATE OF NAME CHANGE: 19951227 10-Q/A 1 FORM 10-Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Pursuant To Section 13 or 15 (d) of The Securities and Exchange Act of 1934 QUARTER ENDED September 12, 1998 COMMISSION FILE NO. 33-80833 JITNEY-JUNGLE STORES OF AMERICA,INC. (Exact name of registrant as specified in its charter) STATE OF INCORPORATION I.R.S. EMPLOYER I.D. NO. Mississippi 64-0280539 ADDRESS OF PRINCIPAL EXECUTIVE OFFICE 1770 Ellis Avenue, Suite 200, Jackson, MS 39204 REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE 601-965-8600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES (X) NO The number of shares of Registrant's Common Stock, par value one cent ($.01) per share, outstanding at October 15, 1998, was 425,000 shares.
JITNEY-JUNGLE STORES OF AMERICA, INC. TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Page Item 1.Financial Statements: Condensed Consolidated Balance Sheets September 12, 1998 (restated) (Unaudited) and January 3, 1998 2 Condensed Consolidated Statements of Operations Thirty-six (36) and Twelve (12) Week Periods Ended September 12, 1998 (restated) (Unaudited) and Thirty-seven (37) and Twelve (12) Week Periods Ended September 20, 1997 (Unaudited) 3 Condensed Consolidated Statements of Changes in Stockholders' Deficit for theThirty-six (36) Week Period Ended September 12, 1998 (restated) (Unaudited) and Thirty-seven (37) Week Period Ended September 20, 1997 (Unaudited) 4 Condensed Consolidated Statements of Cash Flows Thirty-six (36) Week Period Ended September 12, 1998 (restated) (Unaudited) and Thirty-seven (37) Week Period Ended September 20, 1997 (Unaudited) 5 Notes to Condensed Consolidated Financial Statements September 12, 1998 (restated) (Unaudited) and September 20, 1997 (Unaudited) 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-16 PART II.OTHER INFORMATION Item 1. Legal Proceedings 17 Item 2. Change in Securities 17 Item 3. Defaults Upon Senior Securities 17 Item 4. Submission of Matters to a Vote of Security Holders 17 Item 5. Other Information 17-18 Item 6. Exhibits and Reports on Form 8-K 18
PART I. ITEM 1. FINANCIAL STATEMENTS
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) September 12, January 3, 1998 1998 (Unaudited) (as restated ASSETS see note 8) ------------- ------------ Current assets: Cash and cash equivalents $ 8,494 $ 11,98 Receivables 19,652 13,833 Merchandise inventories 159,849 162,786 Prepaid expenses and other 24,688 11,570 Deferred income taxes 14,658 15,681 -------------- ----------- Total current assets 227,341 215,854 -------------- ----------- PROPERTY AND EQUIPMENT - net 286,578 303,774 -------------- ----------- Other assets Goodwill, net of amortization of $3,283 at September 12, 1998 and $1,105 at January 3, 1998 124,227 142,415 Other assets - net 27,209 32,237 Deferred income taxes 7,744 ---------------- ----------- Total other assets 159,180 174,652 ---------------- ----------- TOTAL ASSETS $ 673,099 $ 694,280 ================ =========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $ 113,522 $ 112,641 Accrued expenses 70,010 75,558 Current portion of capitalized leases 6,772 6,760 Payable to former shareholders of Delchamps, Inc. 7,702 26,637 Restructuring obligations 8,793 14,927 ----------------- ----------- Total current liabilities 206,799 236,523 Noncurrent liabilities: Long-term debt 503,317 449,831 Obligations under capitalized leases, excluding cur 64,717 68,321 Restructuring obligations, excluding current instal 25,233 40,588 Deferred income taxes 3,875 ------------------ ------------ Total liabilities 800,066 799,138 Commitments and contingencies Redeemable Preferred stock (aggregate liquidation preference value of $70,756 at September 12, 1998 and $65,077 at January 3, 1998) 68,865 63,042 Stockholders' deficit: Class C Preferred stock - Series 1(at liquidation v 9,695 9,071 Common stock ($.01 par value, authorized 5,000,000 4 4 shares, issued 425,000 shares Additional paid-in capital (302,326) (302,326) Retained earnings 96,795 125,351 ------------------- ------------ Total stockholders' deficit (195,832) (167,900) ------------------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 673,099 $ 694,280 =================== ============ See notes to condensed consolidated financial statements.
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in Thousands Except Per Share Amounts) 36 Weeks 37 Week 12 Weeks 12 Weeks Ended Ended Ended Ended Sept 12, Sept 20 Sept 12 Sept 20, 1998 1997 1998 1997 (Unaudited) (Unaudited) (Unaudited) (Unaudited) (as restated (as restated see note 8) see note 8) ----------- ----------- ----------- ------------ NET SALES $1,432,963 $ 873,590 $ 474,371 $ 286,651 ----------- ----------- ----------- ------------ COSTS AND EXPENSES: Cost of goods sold 1,060,153 652,927 343,371 214,343 Direct store expenses 284,952 147,766 94,920 50,358 Warehouse, administrative and general expenses 53,698 39,597 17,230 10,926 Interest expense - net 49,947 26,066 17,178 9,414 Acquisition integration costs 17,921 5,479 1,083 2,742 and other special charges ------------ ---------- ----------- ----------- Total costs and expenses 1,466,671 871,835 474,200 287,783 ------------ ---------- ----------- ----------- Earnings (loss) before taxes on income (33,708) 1,755 171 (1,132) Income tax expense (benefit) (11,599) 589 40 (460) ------------ ---------- ----------- ----------- Earnings (loss) before extraordinary item (22,109) 1,166 131 (672) EXTRAORDINARY ITEM, net of income tax benefit of $518 (870) (870) ------------ ---------- ----------- ----------- NET EARNINGS (LOSS) $ (22,109) $ 296 $ 131 $ (1,542) ============ ========== =========== =========== EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM $ (67.32) $ (10.58) $ (4.76) $ (6.29) EXTRAORDINARY ITEM $ (2.05) $ (2.05) ------------ ---------- ----------- ----------- EARNINGS (LOSS) PER COMMON SHARE-BASIC $ (67.32) $ (12.63) $ (4.76) $ (8.34) ------------ ---------- ----------- ----------- EARNINGS (LOSS) PER COMMON SHARE - DILUTED $ (67.32) $ (12.63) $ (4.76) $ (8.34) ============ ========== =========== =========== See notes to condensed consolidated financial statements.
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE THIRTY-SIX (36) WEEK PERIOD ENDED SEPTEMBER 12, 1998 (Unaudited) AND THE THIRTY-SEVEN (37) WEEK PERIOD ENDED SEPTEMBER 20, 1997 (Unaudited) (Dollars in thousands) Additional Treasury No. of No. of Paid-In Retained Stock at Shares Amount Shares Amount Capital Earnings Cost ------ ------ ------- ------ ----------- -------- --------- Balance January 4, 1997 76,042 $ 8,240 425,000 $ 4 $ (302,326) $ 144,027 Net earnings 296 Accretion of discount on Class A Preferred stock (144) Cumulation of dividends on Preferred stock 583 (5,662) ------ ------ ------- ------ ----------- -------- --------- Balance September 20, 1997 76,042 $ 8,823 425,000 $ 4 $ (302,326) $ 138,517 $ - ======= ======= ======= ====== =========== ======== ========= Balance January 3, 1998 76,042 $ 9,071 425,000 $ 4 $ (302,326) $ 125,351 Net loss (as restated, see note 8) (22,109) Purchase of 1700 shares of treasury stock $ (20) Sale of 1700 shares of treasury stock $ 20 Accretion of discount on Class A Preferred stock (144) Cumulation of dividends on Preferred stock 624 (6,303) Balance ------ ------ ------- ------ ----------- -------- --------- September 12, 1998 (as 76,042 $ 9,695 425,000 $ 4 $ (302,326) $ 96,795 $ - restated, see note 8) ======= ======= ======= ====== =========== ======== ========= See notes to condensed consolidated financial statements.
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) 36 Weeks 37 Weeks (Unaudited) Ended Ended September 12, September 20, 1998 1997 (as restated see note 8) OPERATING ACTIVITIES: ----------- ----------- Net earnings (loss) $ (22,109) $ 296 Adjustment to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Depreciation 39,620 20,575 Amortization of deferred loan costs 2,358 838 Loss (gain) on disposition of proper (39) 1,918 Deferred income tax benefit (15,893) (17,707) Increase (decrease) in restructuring (14,094) 50,748 Changes in curent assets and liabilities, net of effects of acquisition: Notes and accounts receivable (5,481) (8,718) Store and warehouse inventories 427 6,633 Prepaid expenses (13,118) (5,879) Accounts payable 881 12,277 Accrued expenses 14,886 13,585 ---------- ---------- Net cash provided by (used in) operating activities (12,562) 74,566 ---------- ---------- INVESTING ACTIVITIES: Capital expenditures (30,012) (17,881) Proceeds from sale of property and other assets 11,054 7,186 Direct acquistion costs (4,465) Payment to former shareholders of Delchamps, Inc. (18,935) Decrease (increase) in other assets 2,523 (250,576) ---------- ---------- Net cash used in investing activities (39,835) (261,271) ---------- ---------- FINANCING ACTIVITIES: Proceeds (payments) on long-term debt 53,498 192,314 Payments on capitalized lease obligations (3,604) (3,356) Other liabilities (987) Merger cost - (14) Purchase of treasury stock (20) Sale of treasury stock 20 ---------- ---------- Net cash provided by financing activities 48,907 188,944 ---------- ---------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,490) 2,239 CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 11,984 7,642 ---------- ---------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 8,494 $ 9,881 ========== ========== SUPPLEMENTAL DISCLOSURES: Cash paid for interest $ 47,735 $ 25,306 ========== ========== Cash paid for income taxes, net of refunds $ 38 $ 5,750 ========== ========== See notes to condensed consolidated financial statements.
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 12, 1998 (Unaudited) AND SEPTEMBER 20, 1997 (Unaudited) (Dollars in thousands) 1. BASIS OF PRESENTATION The unaudited condensed consolidated financial statements include those of Jitney-Jungle Stores of America, Inc. and its wholly-owned subsidiaries, Southern Jitney Jungle Company, Interstate Jitney- Jungle Stores, Inc., McCarty-Holman Co., Inc. and subsidiary, Jitney-Jungle Bakery, Inc., Delchamps Inc. and subsidiary and JJ Construction Corp. All material intercompany profits, transactions and balances have been eliminated. These interim financial statements have been prepared on the basis of accounting principles used in the annual financial statements for the 35 weeks ended January 3, 1998. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (all of which were of a normal recurring nature) necessary for a fair statement of consolidated financial position and results of operations of the Company for the interim periods. The results of operations of the Company for the thirty-six weeks ended September 12, 1998, are not necessarily indicative of the results which may be expected for the entire year. The Company changed its fiscal year end on January 3, 1998 to the closest Saturday to December 31. Previously, the Company reported its fiscal year end results as of the Saturday nearest to April 30. Data included herein for the third quarter of fiscal 1997 reflects the unaudited results of operations for the thirty-seven weeks ended September 20, 1997. 2. ACQUISITION In September 1997, the Company acquired the majority of the common stock of Delchamps, Inc. Certain shareholders dissented from the merger and are pursuing their appraisal remedy under Alabama law. Management does not expect this matter to have a material affect on operations or the price of the acquisition. The acquisition was accounted for as a purchase and, accordingly, Delchamps' results of operations were included in the Company's consolidated financial statements subsequent to the acquisition date. The purchase price, net of cash acquired of $84, has been allocated to the assets acquired and liabilities assumed based upon the estimated fair values at the date of acquisition, as set forth below. The only variation between such amounts and the final allocation will be a final determination of amounts to be paid to former shareholders of Delchamps who dissented from the merger (and related professional fees). Management believes, however that when the final valuation of the net assets acquired is complete, the allocation of the purchase price will not differ materially from the amounts shown herein.
Receivables and other current assets $ 12,569 Inventory 101,199 Property, equipment and leasehold improvements 116,431 Deferred income tax asset 10,428 Other assets 2,106 Goodwill 135,454 Accounts payable and accrued expenses (74,643) Notes payable and long-term debt, immediately repaid (14,463) Capital lease obligations (10,794) Restructuring obligations (41,967) ___________ Net purchase price $ 236,320 ===========
3. RESTRUCTURING OBLIGATIONS In connection with the Delchamps acquisition, the Company recorded a restructuring obligation of $42,860 relating to (i) stores closed by Delchamps prior to the acquisition; (ii) Delchamps stores to be closed after the acquisition because of unprofitability; (iii) Company and Delchamps stores required to be divested under a consent decree with the Federal Trade Commission; (iv) closure of the Delchamps headquarters in Mobile, Alabama; and (v) closure of the Delchamps warehouse facility in Hammond, Louisiana. The $42,860 consists of future rental payments, severance costs, loss on divestiture of fixed assets, and miscellaneous expenses related mainly to the shutdown of the Mobile and Hammond facilities. Of the total restructuring costs, $41,967 was recorded as goodwill as part of the purchase price allocation in the Delchamps acquisition and $893 was included as a special charge in the statement of operations ($599 in the 35 weeks ended January 3, 1998 and $294 in the first quarter of fiscal 1998). 4. ACQUISITION INTEGRATION COSTS AND OTHER SPECIAL CHARGES Acquisition integration costs and other special charges recorded during the thirty-six week period ended September 12, 1998 consisted of $17,377 of business integration costs related to Delchamps, severance benefits of $250 and loss on stores sold under the consent decree with the Federal Trade Commission in the Delchamps acquisition of $294. Acquisition integration costs and other special charges recorded during the thirty-seven week period ended September 20, 1997 were $5,479 including $958 of severance benefits, $1,779 due to an employment agreement relating to the Company's former chief executive officer, $2,008 for bridge loan fees and $734 for stores that have been or will be closed or sold. 5. EXTRAORDINARY ITEM In connection with the Delchamps acquisition and the recapitalization in March 1996 ("Recapitalization"), the Company retired certain long-term debt prior to its scheduled maturity. Early retirement of such debt resulted in extraordinary losses of $870 (net of income tax benefit of $518) during the twelve week and thirty- seven week periods ended September 20, 1997. 6. LONG-TERM DEBT Long-term debt consisted of the following:
September 12, January 3, 1998 1998 --------- --------- Senior notes at 12%, maturing in 2006 $ 200,000 $ 200,000 Senior subordinated notes at 10.375% 200,000 200,000 maturing in 2007 Senior Credit Facility 103,317 49,831 --------- --------- Long-term debt $ 503,317 $ 449,831 ========= =========
The Company has available a Senior Credit Facility of $150 million under which letters of credit aggregating $11,661 were outstanding at September 12, 1998. In addition, due to the interruption of business and the recent damage caused to the assets of the Company related to Hurricane Georges, the availability under the Senior Credit Facility has been increased by $25 million until January 15, 1999. 7. EARNINGS (LOSS) PER COMMON SHARE Earnings (loss) per common share is based on net income (loss) after preferred stock dividend requirements and the weighted average number of shares outstanding during each interim period. Cumulative dividends not declared or paid on preferred shares amounted to $2,101 and $6,303 for the twelve weeks and thirty-six weeks ended September 12, 1998, respectively. Cumulative dividends not declared or paid on preferred shares amounted to $2,001 and $5,662 for the twelve weeks and thirty-seven weeks ended September 20, 1997. The number of shares used in computing basic and diluted earnings (loss) per share was 425,000 for the twelve weeks and 424,400 for the thirty-six weeks ended September 12, 1998 and 425,000 for the twelve weeks and thirty-seven weeks ended September 20, 1997. Potential common shares attributed to outstanding warrants were not included in the computation of diluted earnings per share as their effect on earnings (loss) per share would be antidilutive. 8. COMMITMENTS AND CONTINGENCIES The Company is a party to certain litigation incurred in the normal course of business. In the opinion of management, the ultimate liability, if any, which may result from this litigation will not have a material adverse effect on the Company's financial position or results of operations. 9. RESTATEMENT Subsequent to the issuance of the Company's Quarterly Report on Form 10-Q for the 12 weeks ended September 12, 1998, the Company determined that certain amounts recorded in connection with the Delchamps acquisition, during the quarter ended March 28, 1998, should have been charged to expense as incurred. During the 12 weeks ended September 12, 1998, the Company recorded additional goodwill and restructuring obligations related primarily to consolidating warehouse and office facilities, remerchandising of Delchamps stores, training of Declchamps' employees, and other related items. Such amounts should have been recognized as cost of goods sold and expenses as incurred. A summary of the significant effects of the restatement are as follows:
As Previously As Reported Restated At September 12, 1998 Goodwill $ 152,077 $ 124,227 Restructuring obligations, current 9,238 8,793 Restructuring obligations, excluding current por 37,240 25,233 Retained earnings 111,020 96,795 For the twelve weeks ended September 12, 1998 Aquisition integration costs and other special charges $ 1,083 Total costs and expenses $ 473,301 474,200 Earnings before taxes on income 1,070 171 Income tax benefit 430 40 Net earnings 667 131 Net loss per share - basic and diluted $ (3.37) $ (4.64) For the thirty-six weeks ended September 12, 1998 Cost of goods sold $ 1,058,083 $ 1,060,153 Aquisition integration costs and other special charges 17,921 Total costs and expenses 1,444,737 1,466,671 Loss before taxes on income (11,764) (33,708) Income tax benefit (3,880) (11,599) Net loss (7,884) (22,109) Net loss per share - basic and diluted $ (33.43) $ (67.32)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands) The following is management's discussion and analysis of significant factors affecting the Company's financial condition and results of operations during the periods included in the accompanying condensed consolidated statements of operations. Subsequent to the issuance of the Company's Quarterly Report on Form 10-Q for the 12 weeks ended September 12, 1998, the Company determined that certain amounts recorded in connection with the Delchamps acquisition, during the quarter ended September 12, 1998, should have been charged to expense as incurred. During the 12 weeks ended September 12, 1998, the Company recorded additional goodwill and certain of these cost (princpally related to store closures) have not been restated while other cost attributable to the Delchamps acquitions, including cost incurred in consolidating warehouse operations, remerchandising of Delchamps stores, and training of Delchamps employees have been expensed as acquisition integration cost and accordance with the guidlelines set forth in Emerging Issues Task Force (EITF) Releases 94-3 ("reconigation of liabilities in connection with a Purchase Businssess Combination"). The effects of the restatement are presented in Note 8 of Notes to Condensed Consolidated Financial Statements and have been reflected herein. A table showing the percentage of net sales represented by certain items in the Company's condensed consolidated statements of operations is as follows:
36 Weeks 37 Weeks 12 Weeks 12 Weeks Ended Ended Ended Ended Sept 12, Sept 20, Sept 12, Sept 20, 1998 1997 1998 1997 --------- -------- -------- -------- Net sales 100.0% 100.0% 100.0% 100.0% Gross profit 26.0 25.3 27.5 25.2 Direct store expenses 19.9 16.9 20.0 17.6 Warehouse, administrative and general expenses 3.7 4.6 3.6 3.8 Acquisition integration costs 1.3 0.6 0.2 1.0 and other special charges Operating income 1.1 3.2 3.7 2.9 Interest expense, net 3.5 3.0 3.6 3.4 Earnings (loss) before income (2.4) 0.2 0.0 (0.5) Provision for income taxes (0.8) 0.1 0.0 (0.2) Extraordinary item 0.0 0.1 0.0 0.1 Net earnings (loss) (1.5) 0.0 (0.0) (0.6) EBITDA 5.2 6.1 6.7 6.0
A summary of the period to period changes in certain items included in the condensed consolidated statements of operations for the thirty-six and thirty-seven week periods and twelve week periods ended September 12, 1998 and September 20, 1997, respectively is as follows:
Thirty-six Weeks Ended Twelve Weeks Ended September 12,1998 September 12,1998 $ % $ % ----------- -------- --------- ------ Net sales $ 559,373 64.0 % $ 187,720 65.5 % Gross profit 152,147 n/m 58,274 n/m Direct store expenses 137,186 n/m 44,562 n/m Warehouse, administrative and general expenses 14,101 n/m 6,304 n/m Acquisition integration costs and other special charges 12,442 n/m (1,659) n/m Operating income 9,067 109.5 (11,582) n/m Interest expense, net 23,881 91.6 7,764 82.5 Earnings (loss) before income taxes (35,463) n/m 1,303 n/m Provision for income taxes (12,188) n/m 500 n/m Extraordinary item 870 n/m 870 n/m Net earnings (loss) (22,405) n/m 1,673 n/m EBITDA 21,233 40.1 14,695 85.1 (n/m - not meaningful comparison)
RESULTS OF OPERATIONS GENERAL The results of operations of Delchamps have been included in the Company's consolidated financial statements since September 12, 1997. Accordingly, the thirty-seven weeks ended September 20, 1997 only includes the effects of the Delchamps acquisition from September 12, 1997 through September 20, 1997 whereas the thirty-six weeks ended September 12, 1998 reflects the acquisition for the entire period. The percentage change in same store sales has been calculated by comparing supermarkets open throughout both periods, including, for the thirty-seven weeks ended September 20, 1997, supermarkets acquired in the Delchamps acquisition. During the thirty-six weeks ended September 12, 1998, the Company focused, among other things, on integrating the operations of Delchamps. Specifically, the Company replaced Delchamp' shelf tags with the Company's shelf tags and changed the mix of products offered at Delchamps' stores to conform to the Company's mix and, in certain cases, local preferences. The integration of Delchamps into the Company's information systems and retraining of Delchamps' store employees was also completed. In addition, the Company closed Delchamp' Hammond warehouse in February 1998, closed Delchamps' Mobile headquarters in April 1998, and began to use the Company's in-house printing facilities to print a majority of the print advertising for Delchamps' stores, which was previously outsourced by Delchamps. PROPERTIES The following table recaps store data for fiscal year 1998:
Q1 FY98 Q2 FY98 Q3 FY98 Ended Ended Ended Mar 28, 98 Jun 20, 98 Sep 12, 98 __________ __________ __________ Stores Beginning 217 200 198 Acquired Opened 2 Closed/sold (17) (2) (1) __________ __________ __________ Ending 200 198 199 ========== ========== ========== Format Convention 172 168 167 Combination 11 14 16 Discount 17 16 16 __________ __________ __________ Total 200 198 199 ========== ========== ========== Locations Mississippi 81 81 82 Alabama 49 48 49 Arkansas 5 5 5 Florida 15 15 15 Tennessee 7 6 6 Lousiana 43 43 42 __________ __________ __________ Total 200 198 199 ========== ========== ========== Gasoline Beginning 54 53 53 Acquired Opened 1 1 Closed/sold (1) (1) __________ __________ __________ Ending 53 53 54 ========== ========== ========== Locations Mississippi 45 44 45 Alabama 2 2 2 Arkansas 2 2 2 Florida Tennessee 4 5 5 Lousiana __________ __________ __________ Total 53 53 54 ========== ========== ==========
NET SALES Net sales increased $187,720 or 65.5% in the twelve week period and $559,373 or 64.0% in the thirty-six week period ended September 12, 1998 as compared to the twelve and thirty-seven week periods ended September 20, 1997. The net sales increase was primarily attributable to the Delchamps acquisition. Same store sales decreased approximately 6.2% for the twelve week period and 4.4% for the thirty-six week period ended September 12, 1998. Sales throughout the thirty-seven weeks ended September 20, 1997 were positively impacted by the introduction of the Company's Gold Card, its customer loyalty program, in approximately 79 Jitney-Jungle and Jitney Premier supermarkets in January 1997. Sales for the thirty-six weeks ended September 12, 1998 were positively impacted by the introduction of the Gold Card in 52 Delchamps supermarkets in March 1998 and in the remaining Delchamps supermarkets during the second quarter ended June 20, 1998. The decline in same store sales is attributable primarily to competitive pressures [23 competitive openings (of which 6 were replacement stores) during the thirty-six week period ended September 12, 1998], distribution problems which are being corrected, a decline in sales at Delchamps supermarkets due to disruptions caused by the transition process which has been completed, and the fact that the Gold Card introduction positively impacted sales for most of the thirty-seven weeks ended September 20, 1997 but only the latter part of the thirty-six weeks ended September 12, 1998. During the third quarter ended September 12, 1998, the Company opened 2 new stores (in Hattiesburg, MS and in Jackson, AL) in its newest prototype combination store format and opened 1 gasoline station. In addition, 1 store was closed. During the thirty-six weeks ended September 12, 1998 the Company opened 2 new stores in its combination store format and opened 2 gasoline stations. In addition, 2 gasoline stations and 20 stores were sold or closed including 10 stores that were required to be sold by the Federal Trade Commission in connection with the Delchamps acquisition. The Company's store count at the end of the quarter was 199 supermarkets (16 discount stores, 167 conventional stores and 16 combination stores) and 54 gasoline stations as compared to 221 supermarkets (18 discount stores, 192 conventional stores and 11 combination stores) and 53 gasoline stations at September 20, 1997. GROSS PROFIT Gross profit for the third quarter of fiscal 1998 increased $58,274 to $130,582 or 27.5% of net sales, compared to $72,308, or 25.2% of net sales, for the third quarter of fiscal 1997. Gross profit as a percentage of sales was 26.0% for the thirty-six week period ended September 12, 1998 as compared to 25.3% for the thirty-seven week period ended September 20, 1997. Gross profit increased primarily due to the increase in net sales due to the Delchamps acquisition. In addition, during the thirty-six weeks ended September 12, 1998, $2070 was charged to excess shrink associated with Delchamps acquisition in the consolidated statements of operations. During the second quarter of fiscal 1998 the Company began to benefit from increased purchasing leverage resulting from the Delchamps acquisition and this trend continued during the third quarter ended September 12, 1998. The realized and expected benefits of such increased purchasing leverage are difficult to quantify precisely. Other benefits of increased purchasing leverage include reduced costs from volume incentives. The Company expects to continue to benefit from such purchasing leverage. The increase in gross profit as a percentage of net sales is principally due to such increased purchasing leverage and the improvement in product mix in the combination stores. In addition during the second and third quarters of fiscal 1998 the Company made significant progress to reduce store shrink. DIRECT STORE EXPENSES Direct store expenses were $94,920 or 20.0% of net sales and $50,358 or 17.6% of net sales for the twelve week periods and $284,952 or 19.9% of net sales and $147,766 or 16.9% of net sales for the thirty-six week and thirty-seven week periods ended September 12, 1998 and September 20, 1997, respectively. Direct store expenses increased primarily due to an increase in net sales (due to the Delchamps acquisition). The increase in direct store expenses as a percentage of net sales was primarily in the areas of rent, labor and utilities. Rent expense as a percentage of net sales in the Delchamps stores is more than twice that of the other Company stores. The increase in store labor as a percentage of net sales was principally due to a temporary increase in the number of employees, which was necessary in order to complete retraining required at the Delchamps supermarkets. The increase in utility costs was principally due to the heat wave across the Southeast. WAREHOUSE, ADMINISTRATIVE AND GENERAL EXPENSES Warehouse, administrative and general expenses were $17,230 or 3.6% of net sales and $10,926 or 3.8% of net sales for the twelve week periods and $53,698 or 3.7% of net sales and $39,597 or 4.6% of net sales for the thirty-six week and thirty-seven week periods ended September 12, 1998 and September 20, 1997 respectively. Warehouse, administrative and general expenses increased primarily due to an increase in net sales and increased warehousing expenses resulting from the Delchamps transaction. The decrease in warehouse, administrative and general expenses as a percent of sales for the thirty- six weeks ended September 12, 1998 was primarily due to additional sales and a decrease in administrative expenses as a result of the closing of the Delchamps' Mobile headquarters in April 1998. The Company has closed Delchamps' Hammond warehouse, which the Company expects will lead to substantial cost savings. The resulting increase in volume at the Company's Jackson warehouse facilities has created operating inefficiencies that are currently being addressed by the Company's management and are expected to be resolved by the end of fiscal 1998. As a result of these inefficiencies, the Company experienced higher warehouse expenses during the thirty-six weeks ended September 12, 1998 than it expects to experience in the remainder of fiscal 1998. ACQUISITION INTEGRATION COSTS AND OTHER SPECIAL CHARGES Acquisition integration costs and other special charges were $17,921 for the thirty-six week period ended September 12, 1998. The Company incurred significant costs as a result of combining the Delchamps and Jitney-Jungle operations. In accordance with EITF Releases 94-3 and 95-3 the Company has allocated certain of these costs to goodwill. However, certain other costs attributable to the Delchamps acquisition, including costs incurred in consolidating warehouse operations, remerchandising of the Delchamps stores, and training of Delchamps employees have been written off as acquisition sots in accordance with the EITF guidelines. Other special charges included severance benefits of $250 and loss of $294 on stores sold under the consent decree with the Federal Trade Commission in the Delchamps acquisition. Acquisition integration costs and other special charges consisting of $958 of severance benefits, $1,779 relating to future payments to be made under an agreement with the Company's former chief executive officer, $2,008 for bridge loan fees and $734 for stores that have been or will be closed or sold were recorded during the thirty-seven week period ended September 20, 1997. EXTRAORDINARY ITEM In connection with the Delchamps acquisition and the Recapitalization, the Company retired certain long-term debt prior to its scheduled maturity. Early retirement of such debt resulted in extraordinary losses of $870 (net of income tax benefit of $518) during the twelve week and thirty-seven week periods ended September 20, 1997. There were no extraordinary items during the thirty-six week period ended September 12, 1998. OPERATING INCOME Operating income was $17,349 or 3.7% of net sales and $8,282 or 2.9% of net sales for the twelve week periods and was $16,239 or 1.1% of net sales and $27,821 or 3.2% of net sales for the thirty-six week and thirty-seven week periods ended September 12, 1998 and September 20, 1997, respectively. The increase in operating income was due to the factors discussed above. EBITDA EBITDA represents net income before interest income, interest expense, income taxes, depreciation and amortization and LIFO charges/credits and is calculated before any deduction for nonrecurring charges. EBITDA increased $14,695 or 85.1% to $31,966 or 6.7% of net sales in the third quarter of fiscal 1998 as compared to $17,271 or 6.0% of net sales in the third quarter of fiscal 1997. EBITDA increased $21,233 or 40.1% to $74,245 or 5.2% of net sales for the thirty-six week period ended September 12, 1998 as compared to $53,012 or 6.1% of net sales for the thirty-seven week period ended September 20, 1997. EBITDA increased primarily due to an increase in sales due to the Delchamps acquisition. The decrease in EBITDA as a percentage of net sales was due primarily to the increase in direct store expenses and warehouse expenses discussed above. EBITDA as presented is consistent with the definition used for covenant purposes contained in the Indenture governing the Company's Senior Notes and Senior Subordinated Notes. 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. EBITDA as defined by the Company may not be comparable to similarly titled measures reported by other companies. NET INTEREST EXPENSE Net interest expense was $17,178 in the third quarter of fiscal 1998 as compared to $9,414 in the third quarter of fiscal 1997 and was $49,947 and $26,066 for the thirty-six week and thirty-seven week periods ended September 12, 1998 and September 20, 1997, respectively. The increase in interest expense was primarily due to interest expense on the $200 million Senior subordinated notes issued in September 1997 in connection with the Delchamps acquisition. INCOME TAX EXPENSE (BENEFIT) Income tax expense for the twelve weeks and thirty-seven weeks ended September 20, 1997 was 40.6% and 33.6%, respectively, of pre-tax income compared to the federal and state statutory rate of 37.3%. The income tax benefit for the twelve weeks and thirty-six weeks ended September 12, 1998 was 23.4% and 34.4%, respectively, of pre-tax loss compared to the federal and state statutory rate of 37.3%; the difference in rates for the twelve weeks and thirty-six weeks ended September 12, 1998 occurred primarily because goodwill relating to the Delchamps acquisition is deductible for financial reporting purposes but not for income tax purposes. NET INCOME (LOSS) Net income (loss) for the twelve weeks ended September 12, 1998 was $131 compared to ($1,542) for the twelve weeks ended September 20, 1997. Net income (loss) for the thirty-six weeks ended September 12, 1998 was ($22,109) compared to $296 for the thirty-seven weeks ended September 20, 1997. The decrease in net income resulted primarily from the increase in interest expense discussed above. Net income (loss) attributable to common shareholders decreased to ($28,412) for the thirty-six weeks ended September 12, 1998 compared to ($5,366) for the thirty-seven weeks ended September 20, 1997 and reflects the cumulation of dividends on preferred stock issued in the Recapitalization. LIQUIDITY AND CAPITAL RESOURCES Due to the Recapitalization and acquisition of Delchamps in September 1997 the Company has become highly leveraged and has certain restrictions on its operations. At September 12, 1998, Jitney-Jungle had $574,806 of total long-term debt (including capitalized leases and current installments) and a shareholders deficit of $195,832. The Company's principal uses of liquidity have been to fund working capital, meet debt service requirements and finance Jitney-Jungle's strategic plans. The Company's principal sources of liquidity have been cash flow from operations and borrowings under the Senior Credit Facility. Outstanding borrowings at September 12, 1998 were $103,317 under the Senior Credit Facility. Cash used in operating activities during the thirty-six week period ended September 12, 1998 was $12,562. Cash provided by operating activities during the thirty-seven week period ended September 20, 1997 was $74,566. Restructuring obligations decreased due to the payment of restructuring obligations. Notes and accounts receivable increased primarily due to an increase in receivables from vendors. Accrued expenses decreased primarily due to the payment of interest on Senior Notes, Senior Subordinated Notes and the Senior Credit Facility. Net cash used in investing activities was $39,835 and $261,271 for the thirty-six week and thirty-seven week periods ended September 12, 1998 and September 20, 1997, respectively. The Company paid approximately $5,137 in cash to former Delchamps shareholders and deposited $13,798 in cash with the clerk of court of Mobile County Alabama as required by law in connection with the appraisal proceeding described below. The Company realized proceeds from the sale of 10 stores which were required to be sold by the Federal Trade Commission due to the Delchamps acquisition and also sold land for $4,483. Net cash provided by financing activities was $48,907 and $188,944 for the thirty-six week and thirty-seven week periods ended September 12, 1998 and September 20, 1997, respectively. The principal sources of funds in financing activities for the thirty-six week period ended September 12, 1998 were the borrowings under the Senior Credit Facility. The principal uses of funds in financing activities for the thirty-six week period ended September 12, 1998 were the payment of capital lease obligations. Management believes that the Company will be able to finance capital expenditures and other cash requirements for the remainder of fiscal 1998 through cash flows from operations and borrowings under its Senior Credit Facility. Capital expenditure plans are continuously evaluated and modified from time to time depending on cash availability and other economic factors. The Company considers acquisition opportunities from time to time. Any such future acquisitions may require the Company to seek additional debt or equity financing. ENVIRONMENTAL MATTERS The Company's expenditures to comply with environmental laws and regulations at its gas stations and supermarkets primarily consist of those related to closing or upgrading underground storage tanks and retrofitting chloroflurocarbon ("CFC") chiller units. The Company's unreimbursed costs for remediation at the 16 locations which have had leaks or spills have not been material. The Company is in the process of complying with the requirements of the Resource Conservation and Recovery Act of 1980, as amended (the "RCRA") regarding underground storage tanks which must be met by the end of calendar 1998. In order to comply with the RCRA, the Company spent $30,000 to close non-compliant tanks during the thirty-six weeks ended September 12, 1998 and $500,000 to upgrade non-compliant tanks during fiscal 1997 and the 35 weeks ended January 3, 1998. The Company estimates that it will cost between $120,000 to $210,000 to upgrade the remaining non-compliant tanks during the remainder of fiscal 1998. The Company is in the process of retrofitting all of its chillers to use non-chloroflurocarbon based refrigerants in anticipation of the phase out of the manufacture of chloroflurocarbon pursuant to the Clean Air Act. The Company has budgeted $145,000 for the fourth quarter of fiscal 1998 and $183,000 for fiscal 1999 to retrofit all of its remaining CFC chiller units. YEAR 2000 During calendar years 1996 and 1997, the Company's Information Systems Department conducted an extensive information systems 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 department recommended, and the Company is implementing, the replacement or upgrading all of the Company's primary and secondary systems, most of which were 10 to 15 years old. From March 1997 to September 12, 1998, the Company spent approximately $3.3 million 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, and various operating systems) are either being upgraded for Year 2000 compliance through regular maintenance updates or are scheduled to be replaced by May 31, 1999, at an estimated cost of $3.0 million, 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 $250,000 as of September 12, 1998 upgrading these systems and anticipates spending approximately an additional $1 million in order to complete that project by the end of June 1999, at which time all potential Year 2000 problems in the Company's secondary systems should be resolved. All of the funds reported or estimated in this report have been or will be reported as capital expenditures. The normal annual software support which includes Year 2000 upgrades are included in the normal Information Systems Department operating expense budget. All funds for Year 2000 projects are derived from operating proceeds. No primary information systems projects have been deferred as a result of the Year 2000 efforts. The Company has engaged an independent contractor to verify compliance on the primary systems modules. 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 significant 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. SEASONALITY No material portion of the Company's business is affected by seasonal fluctuations, except that sales are generally stronger in the fourth quarter as a result of Thanksgiving, Christmas and New Year's Day. CAUTIONARY STATEMENTS This quarterly report on Form 10-Q may contain forward-looking statements regarding future expectations about the Company's business, management's plans for future operations or similar matters. The Company's actual results could differ materially from those anticipated in such forward-looking statements due to several important factors including the following: deterioration in economic conditions generally or in the Company's markets, unusual or unanticipated costs or consequences relating to, or changes in, the Company's acquisition plans, demands placed on management by the substantial increase in the Company's size due to the acquisition of Delchamps, unanticipated or unusual distribution problems, breakdown of quality control, competitive pressures, labor disturbances and customer dissatisfaction. Forward-looking statements speak only as of the date made, and the Company undertakes no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they may occur. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In May 1998, the Company's wholly-owned subsidiary Delchamps, Inc. instituted a proceeding in the Circuit Court of Mobile County, Alabama petitioning the court to determine the fair value (as defined in the Alabama Business Corporation Act) of 689,884 shares of former Delchamps, Inc. common stock held by persons purporting to exercise dissenters' rights in connection with the Delchamps acquisition. Delchamps, Inc. estimates such fair value to be $20 per share; the dissenting shareholders have demanded payment of $68 per share. The Company has deposited $20 per share in cash with the clerk of the court, as required by law. In its financial statements, the Company has accounted for the acquisition of these shares at a price of $30 per share, which was the price paid by the Company to other former Delchamps, Inc. shareholders. Any final determination that the shares formerly held by dissenting shareholders have a fair value of less or more than $30 per share would be reflected as a decrease or increase in the Company's goodwill, which is being amortized over a 40 year period. The Company does not expect the outcome of this matter to have a material effect on the Company's results of operations or the price of the acquisition, although no assurances can be given. The Company is a party to certain litigation incurred in the normal course of business. In the opinion of management, the ultimate liability, if any, which may result from this litigation will not have a material adverse effect on the Company's financial position or results of operations. ITEM 2. CHANGE IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION In late September of 1998, the Company's operations were temporarily affected by Hurricane Georges. As a result of the storm approximately 85 stores were temporarily closed primarily along the Gulf Coast in the states of Florida, Alabama, Mississippi and Louisiana. Most stores were closed for only a few hours with the worst affected store being closed for less than five days. The Company experienced lost product, limited physical damage to certain of its stores and equipment, interruptions to its normal business operations and extra expenses incurred as a result of the storm. The Company is fully insured for all of the aforementioned adverse consequences resulting from the storm and is working with its insurance carrier's representatives to document its losses and recover the insurance proceeds. The amount of such loss is still being assessed by the Company. On October 5, 1998, the Company secured an amendment to its Revolving Credit Agreement to add an additional $25 million of supplemental availability to its existing line of credit to provide for additional cash flow needs, if necessary, as a result of the interruption of business caused by the storm. The additional $25 million of supplemental availability to the Revolving Credit Agreement expires on January 15, 1999. No funds under the additional $25 million of supplemental availability have been drawn to date. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit No. -------------- * 4.1 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. *4.2 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. *4.3 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. * 27.1 Financial Data Schedule * Filed herewith. (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. JITNEY-JUNGLE STORES OF AMERICA, INC. (Registrant) /s/ Richard D. Coleman ------------------- Richard D. Coleman (Executive Vice President, Chief Financial Officer) (Principal Financial and Accounting Officer) Dated: October 27 , 1998 EX-27 2
5 OTHER JAN-02-1999 JUN-21-1998 SEP-12-1998 8,494 0 19,652 0 159,849 227,341 647,558 360,980 673,099 206,799 0 68,865 9,695 4 (205,531) 673,099 474,371 474,371 343,789 474,200 1,083 0 17,178 171 40 131 0 0 0 131 (4.76) (4.76)
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