-----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, Mn75+amHSwTvtEADDvIha2FCNZJM60av4J5uzpvDx31iXkSwY7/2Gycz3PccJgVs por+yCmjE6F9AS7i1SkTvg== 0000912057-97-005910.txt : 19970222 0000912057-97-005910.hdr.sgml : 19970222 ACCESSION NUMBER: 0000912057-97-005910 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970104 FILED AS OF DATE: 19970218 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRAND UNION CO /DE/ CENTRAL INDEX KEY: 0000316236 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 251518276 STATE OF INCORPORATION: DE FISCAL YEAR END: 0325 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07824 FILM NUMBER: 97537192 BUSINESS ADDRESS: STREET 1: 201 WILLOWBROOK BLVD CITY: WAYNE STATE: NJ ZIP: 07470-0966 BUSINESS PHONE: 2018906000 MAIL ADDRESS: STREET 1: 201 WILLOWBROOK BLVD CITY: WAYNE STATE: NJ ZIP: 07470 FORMER COMPANY: FORMER CONFORMED NAME: SUCCESSOR TO GRAND UNION CO/VA/ DATE OF NAME CHANGE: 19600201 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 4, 1997 Commission File Number 0-26602 THE GRAND UNION COMPANY (Exact name of registrant as specified in its charter) Delaware 22 - 1518276 -------- ------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 201 Willowbrook Boulevard, Wayne, New Jersey 07470 - 0966 --------------------------------- ------------ (Address of principal executive offices) (Zip Code) 201-890-6000 ------------ (Registrant's telephone number, including area code) 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 whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X . No . --- --- As of February 18, 1997, there were issued and outstanding 10,000,000 shares of the Registrant's common stock. 1 THE GRAND UNION COMPANY INDEX PART I - FINANCIAL INFORMATION (Unaudited) Item 1. Financial Statements.
Page No. Consolidated Statement of Operations - 12 weeks ended January 4, 1997 and January 6, 1996 3 Consolidated Statement of Operations - 40 weeks ended January 4, 1997, 29 weeks ended January 6, 1996 (Successor Company) and 11 weeks ended June 17, 1995 (Predecessor Company) 4 Consolidated Balance Sheet - January 4, 1997 and March 30, 1996 5 Consolidated Statement of Cash Flows - 40 weeks ended January 4, 1997, 29 weeks ended January 6, 1996 (Successor Company) and 11 weeks ended June 17, 1995 (Predecessor Company) 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 9 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. 12 Item 6. Exhibits. 13
All items which are not applicable or to which the answer is negative have been omitted from this report. 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. THE GRAND UNION COMPANY CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share data) (unaudited) 12 Weeks Ended ------------------------- January 4, January 6, 1997 1996 ---------- ---------- Sales $ 537,151 $ 543,617 Cost of sales (372,816) (376,754) ----------- ---------- Gross profit 164,335 166,863 Operating and administrative expenses (138,373) (136,035) Depreciation and amortization (16,257) (16,547) Amortization of excess reorganization value (23,678) (24,578) Unusual item - (15,000) Interest expense, net (24,391) (23,537) ----------- ---------- Loss before income tax benefit (38,364) (48,834) Income tax benefit 6,687 7,840 ----------- ---------- Net loss (31,677) (40,994) Accrued dividends on preferred stock (788) - ----------- ---------- Net loss applicable to common stock $ (32,465) $ (40,994) ----------- ---------- ----------- ---------- Net loss per common share $ (3.25) $ (4.10) ----------- ---------- ----------- ---------- See accompanying notes to consolidated financial statements (unaudited). 3 THE GRAND UNION COMPANY CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share data) (unaudited)
Predecessor Successor Company Company --------------------------- ----------- 40 Weeks 29 Weeks 11 Weeks Ended Ended Ended January 4, January 6, June 17, 1997 1996 1995 ----------- ---------- --------- Sales $ 1,797,386 $1,299,991 $ 487,882 Cost of sales (1,248,994) (897,411) (344,041) ---------- ---------- --------- Gross profit 548,392 402,580 143,841 Operating and administrative expenses (451,060) (321,459) (117,544) Depreciation and amortization (61,402) (40,504) (17,215) Amortization of excess reorganization value (78,928) (59,405) -- Unusual items -- (19,500) (18,627) Interest expense, net (contractual interest of $43,360 for the 11 weeks ended June 17, 1995) (81,252) (55,516) (19,791) ----------- ---------- --------- Loss before income tax benefit and extraordinary gain on debt discharge (124,250) (93,804) (29,336) Income tax benefit 18,108 13,212 -- ----------- ---------- --------- Loss before extraordinary gain on debt discharge (106,142) (80,592) (29,336) Extraordinary gain on debt discharge -- -- 854,785 ----------- ---------- --------- Net (loss) income (106,142) (80,592) 825,449 Accrued dividends on preferred stock (1,031) -- -- ----------- ---------- --------- Net (loss) income applicable to common stock $(107,173) $(80,592) $825,449 ----------- ---------- --------- ----------- ---------- --------- Net loss per common share $ (10.72) $ (8.06) ----------- ---------- ----------- ----------
See accompanying notes to consolidated financial statements (unaudited). 4 THE GRAND UNION COMPANY CONSOLIDATED BALANCE SHEET (dollars in thousands, except par value) (unaudited)
January 4, March 30, 1997 1996 ---------- --------- ASSETS Current assets: Cash and temporary investments $ 36,091 $ 39,425 Receivables 33,189 20,948 Inventories 139,104 133,506 Other current assets 13,988 13,709 ---------- --------- Total current assets 222,372 207,588 Property, net 456,643 473,726 Excess reorganization value, net 358,744 437,672 Deferred tax asset 72,024 53,916 Other assets 12,692 12,304 ---------- --------- $1,122,475 $1,185,206 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Current liabilities: Current maturities of long-term debt $ 212 $ 1,813 Current portion of obligations under capital leases 7,747 7,080 Accounts payable and accrued liabilities 178,598 170,010 ---------- --------- Total current liabilities 186,557 178,903 ---------- --------- Long-term debt 740,485 738,067 ---------- --------- Obligations under capital leases 135,771 128,114 ---------- --------- Other noncurrent liabilities 93,660 95,978 ---------- --------- Redeemable Class A preferred stock, $1.00 par value, 3,500,000 shares authorized, 819,700 shares issued and outstanding, liquidation preference $41,031 41,031 - ---------- --------- Stockholders' (deficit) equity: Common stock, $.01 and $1.00 par value at January 4, 1997 and March 30, 1996, respectively, 60,000,000 shares authorized, 10,000,000 shares issued and outstanding 100 10,000 Preferred stock, $1.00 par value, 10,000,000 shares authorized less amount authorized as Class A preferred stock, no shares issued and outstanding - - Capital in excess of par value 140,869 144,000 Accumulated deficit (215,998) (109,856) ---------- --------- Total stockholders' (deficit) equity (75,029) 44,144 ---------- --------- $ 1,122,475 $ 1,185,206 ---------- --------- ---------- ---------
See accompanying notes to consolidated financial statements (unaudited). 5 THE GRAND UNION COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands) (unaudited)
Predecessor Successor Company Company ------------------------- ----------- 40 Weeks 29 Weeks 11 Weeks Ended Ended Ended January 4, January 6, June 17, 1997 1996 1995 ---------- ---------- --------- OPERATING ACTIVITIES: Net (loss) income $(106,142) $(80,592) $825,449 Adjustments to reconcile net (loss) income to net cash provided by (used for) operating activities before reorganization items paid: Depreciation and amortization 61,402 40,504 17,215 Amortization of excess reorganization value 78,928 59,405 - Deferred taxes (18,108) (12,787) - LIFO charge 1,000 1,000 300 Noncash interest (145) 14,595 1,126 Extraordinary gain on debt discharge - - (854,785) Net changes in assets and liabilities: Receivables (12,241) (10,865) 1,769 Inventories (6,598) 10,489 12,646 Accounts payable and accrued liabilities 10,357 (17,720) (34,928) Other current assets (279) (1,102) 2,776 Other (4,399) (3,176) 4,493 ---------- ---------- --------- Net cash provided by (used for) operating activities before reorganization items paid 3,775 (249) (23,939) Reorganization items paid (4,492) (19,609) (4,913) ---------- ---------- --------- Net cash used for operating activities (717) (19,858) (28,852) ---------- ---------- --------- INVESTMENT ACTIVITIES: Capital expenditures (31,430) (27,304) (3,301) Disposals of property 7,942 - 5,452 ---------- ---------- --------- Net cash (used for) provided by investment activities (23,488) (27,304) 2,151 ---------- ---------- --------- FINANCING ACTIVITIES: Net proceeds from sale of preferred stock 28,000 - - Obligations under capital leases discharged (8,434) (4,155) (1,707) Retirement of long-term debt (7,695) (585) (239) Net proceeds from long-term debt 9,000 18,089 - Proceeds from New Bank agreement - - 104,144 Payment of Old Bank debt - - (93,144) Loan placement fees - - (3,125) ---------- ---------- --------- Net cash provided by financing activities 20,871 13,349 5,929 ---------- ---------- --------- Decrease in cash and temporary investments (3,334) (33,813) (20,772) Cash and temporary investments at beginning of period 39,425 68,651 89,423 ---------- ---------- --------- Cash and temporary investments at end of period $ 36,091 $ 34,838 $ 68,651 ---------- ---------- --------- ---------- ---------- --------- Supplemental disclosure of cash flow information: Interest payments $ 62,705 $ 15,169 $ 9,515 Capital lease obligations incurred 16,758 1,168 20,072 Accrued dividends on preferred stock 1,031 - - Decrease in common stock par value 9,900 - -
See accompanying notes to consolidated financial statements (unaudited). 6 THE GRAND UNION COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1 - Basis of Accounting The accompanying interim consolidated financial statements of The Grand Union Company (the "Company") include the accounts of the Company and its subsidiaries, all of which are wholly-owned. These consolidated financial statements as of and for the periods subsequent to June 17, 1995 were prepared in accordance with the principles of fresh-start reporting contained within the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting By Entities In Reorganization Under The Bankruptcy Code" ("Fresh-Start Reporting"). Therefore, in connection with the implementation of Fresh-Start Reporting, a new entity was deemed created for financial reporting purposes and, where applicable, the consolidated financial statements for the "Successor Company" have been separately identified from those of the "Predecessor Company". In the opinion of management, the consolidated financial statements include all adjustments, which, except for fresh-start adjustments, consist only of normal recurring adjustments necessary for a fair presentation of operating results for the interim periods. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company's Annual Report on Form 10-K for the 52 weeks ended March 30, 1996. Operating results for the periods presented are not necessarily indicative of the results for the full fiscal year. NOTE 2 - Issuance of Preferred Stock On July 30, 1996, the Company entered into an agreement (the "Stock Purchase Agreement") to sell $100 million of 8.5% convertible preferred stock, $1.00 par value per share, (the "Class A Preferred Stock") to an investment group composed of Trefoil Capital Investors II, L. P., a Delaware limited partnership, and GE Investment Private Placement Partners II, A Limited Partnership, a Delaware limited partnership (collectively, the "Purchasers"). On September 17, 1996, the Company sold 800,000 shares of Class A Preferred Stock to the Purchasers for aggregate proceeds of $40,000,000 (the "Principal Closing"). Under the terms of the Stock Purchase Agreement, the Company will sell to the Purchasers an additional 400,000 shares of Class A Preferred Stock at a purchase price of $50 per share (the "Stated Value") on each of February 25, 1997, August 25, 1997 and February 25, 1998. Any or all of the additional purchases may be accelerated by the Purchasers at their option. Each of the additional purchases is subject to the satisfaction or waiver of certain closing conditions as specified in the Stock Purchase Agreement. Dividends are cumulative and payable quarterly at 8.5% of the Stated Value per annum. Dividends are payable, at the option of the Company, in additional shares of Class A Preferred Stock or common stock through the third anniversary of the Principal Closing. From the third anniversary through the fifth anniversary of the Principal Closing, dividends are payable in cash, unless the terms of the Company's bank credit agreement or 12% senior note indenture prohibit cash dividends, in which case dividends may be paid in Class A Preferred Stock or common stock. After the fifth anniversary of the Principal Closing, dividends are payable in cash. To the extent that any dividends on the Class A Preferred Stock are paid in shares of common stock, the Company is required to pay a premium in additional shares of common stock equal to 33 1/3% of the number of shares of common stock that would otherwise be paid as the dividend. On December 31, 1996 and September 30, 1996, the Company paid dividends on the Class A Preferred Stock through the issuance of 17,056 and 2,644 shares, respectively, of Class A Preferred Stock. The aggregate Stated Value of the dividends at December 31, 1996 and September 30, 1996 was $852,800 and $132,200, respectively. Each share of Class A Preferred Stock is convertible at the option of the holder, at any time, into 6.8966 shares of common stock. At January 4, 1997, the 819,700 outstanding shares of Class A Preferred Stock were convertible into an aggregate 5,653,143 shares of common stock. The Company is required to redeem the Class A Preferred Stock no later than June 1, 2005. Additionally, the Class A Preferred Stock may be redeemed at the Company's option at $50 per share plus all accrued and unpaid dividends if the volume-weighted average price of the Company's common stock over a 60-day period exceeds $13.05 per share after September 17, 1998, or $14.50 per share after September 17, 1999. After September 17, 2001, the Company's right to redeem is not contingent on the 7 price of the common stock and the redemption price is approximately $51.60 per share plus all accrued and unpaid dividends, declining ratably to $50 per share plus all accrued and unpaid dividends after September 17, 2004. The Stock Purchase Agreement and the Certificate of Designation of Preferred Stock, setting forth the powers, preferences, rights, qualifications, limitations and restrictions of such class of preferred stock (the "Certificate of Designation"), also contain provisions with respect to the rights of the Purchasers to elect a specified number of directors, the number of disinterested directors, voting rights and pre-emptive rights with respect to any sale by the Company of shares of common stock or securities convertible into, or exchangeable for, common stock. The liquidation preference of the Class A Preferred Stock is equal to its Stated Value plus any accrued and unpaid dividends. The Class A Preferred Stock has been classified as Redeemable Class A Preferred Stock in the accompanying Consolidated Balance Sheet. The dividends on the Class A Preferred Stock and the accrued and unpaid dividends through January 4, 1997 have been accounted for by a charge against Capital in Excess of Par Value and a corresponding increase in the value of the Class A Preferred Stock. The Company has recorded, as a charge to Capital in Excess of Par Value, costs directly related to the sale of the Class A Preferred Stock totaling $12,000,000. The costs include transaction fees paid to Shamrock Capital Advisors, Inc. and GE Investment Management Corporation of $2,000,000 each, fees paid to Donaldson, Lufkin and Jenrette, the Company's financial advisor and a related party, of approximately $5,200,000 and legal and other professional fees and expenses of $2,800,000. NOTE 3 - Net Loss Per Share The Company's outstanding warrants to purchase common stock and options to purchase common stock under the Company's 1995 Non-Employee Director's Stock Option Plan and 1995 Equity Incentive Plan are considered common stock equivalents. The inclusion of these common stock equivalents in the Company's primary earnings per share calculation would have been anti-dilutive for the periods presented. Accordingly, only the weighted average number of common shares outstanding, totaling 10,000,000, were included in the calculation. The Company's Class A Preferred Stock is not deemed to be a common stock equivalent. A fully diluted earnings per share calculation is not presented because inclusion of the Class A Preferred Stock in the calculation would have been anti-dilutive for the periods presented. Earnings (loss) per common share data is not meaningful for periods prior to June 17, 1995 due to the significant change in the capital structure of the Company. NOTE 4 - Annual Meeting of Stockholders On November 7, 1996, the Company held its annual meeting of stockholders and the shareholders approved the 1995 Non-Employee Directors' Stock Option Plan and the 1995 Equity Incentive Plan. Additionally, approval was given to an increase in the number of authorized shares of common stock to 60,000,000 and a decrease in the par value to $.01. Also approved were two amendments to the Company's certificate of incorporation, a fair price amendment and an amendment to permit stockholder action by written consents. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. General: As discussed in Note 1, as of June 17, 1995, in accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting By Entities In Reorganization Under The Bankruptcy Code", the Company applied Fresh-Start Reporting. In connection with the adoption of Fresh-Start Reporting, a new entity was deemed created for financial reporting purposes. For purposes of the discussion of Results of Operations for the 40 weeks ended January 6, 1996, the results of the Predecessor Company and Successor Company have been combined. Results of Operations The following table sets forth certain statement of operations data reflecting the combination discussed above (all dollars in millions):
12 Weeks Ended 40 Weeks Ended --------------------- ---------------------- January 4, January 6, January 4, January 6, 1997 1996 1997 1996 --------- --------- ---------- ---------- Sales $ 537.2 $ 543.6 $1,797.4 $1,787.9 Gross profit 164.3 166.9 548.4 546.4 Operating and administrative expenses (138.4) (136.0) (451.1) (439.0) Depreciation and amortization (16.3) (16.5) (61.4) (57.7) Amortization of excess reorganization value (23.7) (24.6) (78.9) (59.4) Unusual items -- (15.0) -- (38.1) Interest expense, net (24.4) (23.5) (81.3) (75.3) Income tax benefit 6.7 7.8 18.1 13.2 Extraordinary gain on debt discharge -- -- -- 854.8 Net (loss) income (31.7) (41.0) (106.1) 744.9 LIFO provision (0.3) (0.3) (1.0) (1.0) Sales percentage (decrease) increase (1.2%) (3.5%) 0.5% (4.3%) Same store sales percentage (decrease) increase (0.8) (1.3) 0.8 (1.2) Gross profit as a percentage of sales 30.6 30.7 30.5 30.6 Operating and administrative expenses as a percentage of sales 25.8 25.0 25.1 24.6
Sales for the 12 (the "third quarter") weeks ended January 4, 1997 decreased $6.5 million, or 1.2%, as compared to the 12 weeks ended January 6, 1996. Same store sales (sales of stores which were operated during the comparable periods of both fiscal years) decreased 0.8% during the third quarter as compared to the prior year's third quarter. Same store sales decreases for the third quarter were largely attributable to a shorter than normal holiday season this year coupled with no snow this year versus the sales benefit of four snow storms last year. Sales for the 40 weeks ended January 4, 1997 increased $9.5 million, or 0.5%, as compared to the 40 weeks ended January 6, 1996. Same store sales increased 0.8% during the year to date as compared to last year's 40 week period. Same store sales increases for the year to date resulted primarily from the continued maturation of the Company's marketing and customer service programs and the effect of the Company's capital expenditure program offset by those factors affecting the third quarter comparison. Gross profit, as a percentage of sales, decreased 0.1% for both the third quarter and year to date compared to the prior year's comparable periods. Factors negatively affecting third quarter gross profit, compared to the prior year, include the "More Lower Prices" marketing program implemented at the beginning of the fiscal year in the majority of the Company's metropolitan New York area stores and higher levels of promotional spending partially offset by the positive benefits from outsourcing warehousing and distribution. In addition to the factors affecting the third quarter comparison, the year to date comparison reflects 9 the positive benefit of the restoration of vendor promotional allowances and other vendor support to normal levels compared to bankruptcy - impacted levels experienced in last year's first quarter. Operating and administrative expenses, as a percentage of sales, increased 0.8% to 25.8% and 0.5% to 25.1% for the third quarter and year to date, respectively. The increase in operating expenses, as a percentage of sales, in both the third quarter and year to date periods primarily resulted from increased store advertising and promotional activity and store labor levels to properly launch and support the key elements of the Company's strategic plan. In addition, gains on sales of stores in the first half of this year were lower than the comparable period of the prior year. Depreciation and amortization decreased $0.2 million to $16.3 million for the third quarter and increased $3.7 million to $61.4 million for the year to date. The year to date increase is principally from increases in capital spending and capitalized leases. Interest expense increased $0.9 million to $24.4 million and $6.0 million to $81.3 million for the third quarter and year to date periods, respectively, compared with the same periods of the prior year. The third quarter increase is principally a result of higher levels of capitalized leases in the current year. The year to date increase was impacted by the finalization of debt levels upon emergence from bankruptcy. The Company recorded federal and state income tax benefits of $6.7 and $18.1 million during the third quarter and year to date periods, respectively, compared to $7.8 million and $13.2 million for the same periods last year. The Company frequently utilizes a financial measure, EBITDA, in discussing its operating results to normalize comparisons with companies of varying capital structures. The Company arbitrarily defines EBITDA as earnings before accrued preferred stock dividends, extraordinary gains or losses, income tax benefits, interest expense, unusual items, depreciation and amortization and LIFO provision. The Company believes that EBITDA comparisons are useful for investors but are not a substitute for operating data required by generally accepted accounting principles. EBITDA, as defined by the Company, totaled $26.3 million, 4.9% of sales, and $98.3 million, 5.5% of sales, for the third quarter and year to date, respectively, compared to $31.1 million, 5.7% of sales, and $108.4 million, 6.1% of sales, for the same periods last year. The decreases are a result of the sales, gross profit and operating expense variances discussed previously. During Fiscal 1996 and Fiscal 1997, the Company has reduced costs through the outsourcing of distribution, store voluntary resignation incentive programs and reorganization of the Company's organizational structure. These savings have been reinvested in price repositioning and customer service programs which adversely affect gross margin and operating expenses in periods in which they are made. Liquidity and Capital Resources On July 30, 1996, the Company entered into an agreement (the "Stock Purchase Agreement") to sell $100 million of 8.5% convertible preferred stock, $1.00 par value per share (the "Class A Preferred Stock") to an investment group composed of Trefoil Capital Investors II, L. P., a Delaware limited partnership, and GE Investment Private Placement Partners II, A Limited Partnership, a Delaware limited partnership (collectively, the "Purchasers"). On September 17, 1996, the Company sold 800,000 shares of Class A Preferred Stock to the Purchasers for an aggregate price of $40 million. The Company incurred $12 million of costs directly related to the sale of Class A Preferred Stock, including one-time fees totaling approximately $9.2 million. Under the terms of the Stock Purchase Agreement, the Company will sell to the Purchasers an additional 400,000 shares of Class A Preferred Stock at a purchase price of $50 per share (the "Stated Value") on each of February 25, 1997, August 25, 1997 and February 25, 1998. Any or all of the purchases referred to in the preceding sentence may be accelerated by the Purchasers, with or without the approval of the Company. The Company is and will continue to be highly leveraged. Interest payments totaled approximately $63 million for the 40 weeks ended January 4, 1997 and will be approximately $110 million for the full year. Capital expenditures, including capitalized leases other than real estate leases, totaled approximately $34 million for the 40 weeks ended January 4, 1997 and are expected to total between $55 and $60 million for the full year. Fiscal 1997 capital expenditures will principally be dedicated to remodels, new and replacement stores, store systems and maintenance capital. Through January 4, 1997, the Company had opened one new 10 and two replacement stores. By the end of April, the Company expects to have completed ten M.A.S.T.E.R.S. ("Maximize All Space, Totally Expand the Right Stuff") renovations since the beginning of the second half of the fiscal year. There are no significant scheduled debt principal repayments prior to June 2000. The Company plans to finance its working capital, interest expense and capital expenditure requirements from proceeds received from the sale of Class A Preferred Stock, operations, its Amended and Restated Credit Agreement (the "New Bank Facility") and, to a limited extent, equipment leases or purchase money mortgages. The Company's ability to fund the payment of interest and other obligations when due is primarily dependent on cash generated from its operations, net of cash capital expenditures. The Company's ability to complete its expanded capital expenditure program is dependent on its operating performance. Resources used to finance significant expenditures are as follows (in millions):
40 Weeks Ended ----------------------- January 4, January 6, 1997 1996 --------- ---------- Resources used for: Capital expenditures $ 31.4 $ 30.6 Debt and capital lease repayments 16.1 99.8 Loan placement fees -- 3.1 ------ ------ $ 47.5 $133.5 ------ ------ ------ ------ Financed by: Net proceeds from sale of Class A Preferred Stock $ 28.0 $ -- Net proceeds from long-term debt 9.0 -- Property disposals 7.9 5.5 Operating activities, including cash and temporary investments 2.6 5.8 Proceeds from New Bank Facility -- 122.2 ------ ------ $ 47.5 $133.5 ------ ------ ------ ------
During the 40 weeks ended January 4, 1997, funds for capital expenditures and debt and capital lease repayments were obtained from net proceeds from the sale of Class A Preferred Stock, borrowings under the Company's bank agreement, property disposals and operating activities. During the 40 weeks ended January 6, 1996, funds for debt and capital lease repayments and capital expenditures and loan placement fees were principally obtained from cash provided by the New Bank Facility. As of January 4, 1997, the Company had $36.0 million of borrowings and approximately $44.4 million of letters of credit outstanding under its $100 million revolving credit facility. The Company and its bank lenders amended the term loan and revolving credit agreements effective at the end of the third quarter. The amendment reduces the minimum levels of EBITDA required for both the third quarter and the fiscal year and correspondingly reduces the EBITDA to cash interest coverage requirement over the same time frame. The Company's ability to meet its future debt covenants is dependent on the results of future operations. The Company is currently in compliance with these amended debt agreements. Accounts receivable increased $12.2 million since the end of the prior fiscal year primarily due to increased landlord construction receivables in support of the Company's capital program. Certain statements by the Company may be considered "forward-looking statements" within the meaning of federal securities law. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, the competitive environment in which the Company operates, the Company's ability to complete its capital expenditures on a timely basis, the success of operating initiatives, regional weather conditions and the general economic conditions in the geographic areas in which the Company operates. 11 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. The Company's first regular annual meeting of stockholders since emergence from bankruptcy was held on November 7, 1996. (a) Votes cast in favor of and withheld from voting with respect to the election of each nominee for director were as follows: Director Votes For Votes Withheld -------- --------- -------------- Roger E. Stangeland 13,824,047 42,207 Joseph J. McCaig 13,824,401 41,853 James J. Costello 13,823,947 42,307 Daniel E. Josephs 13,824,047 42,207 William G. Kagler 13,824,047 42,207 Clifford A. Miller 13,824,047 42,207 Geoffrey T. Moore 13,824,401 41,853 J. Richard Stonesifer 13,824,301 41,953 David Y. Ying 13,824,401 41,853 (b) The 1995 Non-Employee Directors' Stock Option Plan and the issuance of up to one hundred thousand (100,000) shares of Common Stock pursuant to that plan was approved, with 11,865,827 votes in favor, 158,285 votes against, 36,403 in abstention and 1,805,739 broker non-votes. (c) The 1995 Equity Incentive Plan and the issuance of up to nine hundred thousand (900,000) shares of Common Stock pursuant to that plan was approved, with 10,703,529 votes in favor, 1,296,111 votes against, 38,595 votes in abstention and 1,828,019 broker non-votes. (d) The amendment of the Company's Certificate of Incorporation to increase the number of shares of authorized Common Stock to sixty million (60,000,000) and to reduce the par value to $.01 per share was approved, with 13,582,864 votes in favor, 126,858 votes against, 46,493 votes in abstention and 110,039 broker non-votes. Common shares were voted 8,065,584 in favor, 126,858 against, 46,493 in abstention and 110,039 broker non-votes. (e) The amendment of the Company's Certificate of Incorporation to provide holders of the Company's Common Stock with price protection in connection with certain business combination transactions (the "Fair Price" amendment) was approved, with 11,629,493 votes in favor, 384,065 votes against, 35,051 votes in abstention and 1,817,645 broker non-votes. Common shares were voted 6,112,213 in favor, 384,065 against, 35,051 in abstention and 1,817,645 broker non-votes. (f) The amendment of the Company's Certificate of Incorporation to permit stockholder action by written consent was approved, with 11,896,093 votes in favor, 101,789 votes against, 40,348 votes in abstention and 1,828,024 broker non-votes. Common shares were voted 6,378,813 in favor, 101,789 against, 40,348 in abstention and 1,828,024 broker non-votes. (g) The appointment of Price Waterhouse LLP as independent accountants of the Company for the fiscal year ending March 29, 1997 was ratified, with 13,792,665 votes in favor, 47,480 votes against and 26,109 votes in abstention. 12 Item 6. Exhibits Exhibit Number -------------- 10.1 Fourth Amendment to the Amended and Restated Credit Agreement dated January 13, 1997. 27.1 Financial Data Schedule. 13 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. THE GRAND UNION COMPANY ----------------------- (Registrant) Date: February 18, 1997 /s/ Joseph J. McCaig -------------------- Joseph J. McCaig Director, President, and Chief Executive Officer Date: February 18, 1997 /s/ John M. Needham ------------------- John M. Needham Vice President and Controller (Chief Accounting Officer) 14 EX-10.1 2 AMENDED AND RESTATED CREDIT AGREEMENT FOURTH AMENDMENT TO THE AMENDED AND RESTATED CREDIT AGREEMENT FOURTH AMENDMENT dated as of January 13, 1997 (this "Amendment") to the AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 15, 1995 (as modified by the Waiver and First Amendment thereto dated as of February 16, 1996, the Second Amendment thereto dated as of May 10, 1996 and the Third Amendment thereto dated as of September 11, 1996, the "Credit Agreement"), each among THE GRAND UNION COMPANY, a Delaware corporation (the "Borrower"), the institutions from time to time party thereto as lenders (the "Banks") and BANKERS TRUST COMPANY, as agent (the "Agent"). Capitalized terms used herein and not defined herein shall have the respective meanings set forth for such terms in the Credit Agreement. W I T N E S S E T H : WHEREAS, the Borrower has requested that the EBITDA and interest coverage covenants in the Credit Agreement for the respective fiscal quarters of the Borrower ending January 1997 and March 1997 be amended; and WHEREAS, subject to and upon the terms and conditions hereinafter set forth and in the Credit Agreement as amended hereby, the Banks party hereto are agreeable to the foregoing; NOW, THEREFORE, the parties hereto hereby agree as follows: 1. AMENDMENTS. The Credit Agreement is hereby amended effective as of January 3, 1997 as follows: (a) Section 8.9 of the Credit Agreement is amended by (i) replacing the amount "135,000,000" set forth opposite "January 1997" in the table contained in such Section with the amount "130,000,000"; and (ii) replacing the amount "140,000,000" set forth opposite "March 1997" in the table contained in such Section with the amount "130,000,000". (b) Section 8.11 of the Credit Agreement is amended by (i) replacing the month "January 1997" in the first row of the table contained in such Section with the month "October 1996"; (ii) replacing the month "March 1997" in the second row of the table contained in such Section with the month "July 1997"; and (iii) inserting the following as a new second row of the table contained in such Section: "Fiscal Quarter ending in January 1997 and Fiscal Quarter ending in March 1997 1.22:1". 2. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents and warrants to the Agent and each Bank that: (a) after giving effect this Amendment, no Default or Event of Default has occurred and is continuing on and as of the date hereof; and (b) the representations and warranties of the Borrower and the other Credit Parties contained in the Credit Agreement and the other Credit Documents are true and correct on and as of the date hereof as if made on and as of the date hereof after giving effect to the amendments contemplated hereby, except to the extent such representations and warranties expressly relate to a different specific date. 2 3. EFFECTIVENESS. This Amendment shall become effective as of the date specified in Section 1 hereof when: (a) the Agent shall have executed and delivered a counterpart of this Amendment and received duly executed counterparts of this Amendment from the Borrower, each Subsidiary of the Borrower that is a party to any Credit Document and as many of the Banks as shall be necessary to comprise the "Required Banks" or the "Required Class Creditors", as the case may be; and (b) the Borrower shall have paid to the Agent for the account of the applicable Lenders the fee described in Section 4 hereof. 4. AMENDMENT FEE. The Borrower shall pay to the Agent, in immediately available funds, for the account of each Bank that executes and delivers a signature page to this Amendment on or prior to January 13, 1997, an amendment fee equal to 12.5 basis points on the sum of (a) such Bank's Revolving Loan Commitment, and (b) the aggregate outstanding principal amount of Term Loans held by such Bank. 5. STATUS OF CREDIT DOCUMENTS. (a) This Amendment is limited solely for the purposes and to the extent expressly set forth herein, and, except as expressly modified hereby, (i) the terms, provisions and conditions of the Credit Documents, (ii) the terms and provisions of the Further Assurances Agreement dated as of June 15, 1995, as modified in writing prior to the date hereof, between the Borrower and the Agent, and (iii) the Liens granted under the Credit Documents shall continue in full force and effect and are hereby ratified and confirmed in all respects. 3 (a) No amendment made to the Credit Agreement pursuant to this Amendment shall relieve the Borrower from complying with any other term or provision of the Credit Agreement as amended hereby. 6. COUNTERPARTS. This Amendment may be executed and delivered in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Borrower and the Agent. 7. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK. 4 IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized officers to execute and deliver this Fourth Amendment to the Amended and Restated Credit Agreement as of the date first above written. THE GRAND UNION COMPANY By: /s/ Francis E. Nicastro ----------------------- Name: Francis E. Nicastro Title: Vice President and Treasurer BANKERS TRUST COMPANY, Individually and as Agent By: /s/ Mary Kay Coyle ------------------ Name: Mary Kay Coyle Title: Managing Director BANKAMERICA BUSINESS CREDIT, INC. By: /s/ Richard Levenson -------------------- Name: Richard Levenson Title: VP BANK POLSKA KASA OPIEKI, SA By: /s/ William A. Shea ------------------- Name: William A. Shea Title: Vice President Senior Lending Officer 5 COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By: /s/ Sean Mounier ---------------- Name: Sean Mounier Title: First Vice President By: /s/ Brian O'Leary ----------------- Name: Brian O'Leary Title: Vice President THE FIRST NATIONAL BANK OF BOSTON By: /s/ Timothy M. Barns --------------------- Name: Timothy M. Barns Title: Division Executive FLEET CAPITAL CORPORATION By: /s/ Eric Rubin -------------- Name: Eric Rubin Title: Vice President HELLER FINANCIAL, INC. By: /s/ Salvatore Salzilla ---------------------- Name: Salvatore Salzilla Title: AVP 6 LEHMAN COMMERCIAL PAPER INC. By: /s/ Michele Swansen ------------------- Name: Michele Swansen Title: Authorized Signatory SWISS BANKING CORPORATION, LONDON BRANCH By: /s/ J. Cullinane ---------------- Name: J. Cullinane Title: Director Attorney-in-fact By: /s/ James Duplessie ------------------- Name: James Duplessie Title: Executive Director Distressed Debt Attorney-in-fact PROTECTIVE LIFE INSURANCE CO. By: /s/ James Dondero ----------------- Name: James Dondero Title: Authorized Signatory QUANTUM PARTNERS LDC By: /s/ Mark Sonnino ---------------- Name: Mark Sonnino Title: Attorney-in-fact SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisor By: /s/ James L. O'Connor --------------------- Name: James L. O'Connor Title: Treasurer 7 TRANSAMERICA BUSINESS CREDIT CORPORATION By: /s/ Perry Vavoules ------------------ Name: Perry Vavoules Title: Senior Vice President VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By: /s/ Kathleen A. Zarn -------------------- Name: Kathleen A. Zarn Title: Vice President The foregoing Fourth Amendment to the Amended and Restated Credit Agreement is hereby consented and agreed to, and the Liens and guaranties under the Credit Documents are hereby confirmed, by: MERCHANDISING SERVICES, INC. GRAND UNION STORES, INC. OF VERMONT GRAND UNION STORES OF NEW HAMPSHIRE, INC. SPECIALTY MERCHANDISING SERVICES, INC. By: /s/ Francis E. Nicastro ----------------------- Name: Francis E. Nicastro Title: Vice President and Treasurer of each of the above listed entities 8 EX-27.1 3 FDS
5 The schedule contains summary financial information extracted from the Company's interim consolidated financial statements and is qualified in its entirety by reference to such financial statements. 1,000 OTHER MAR-29-1997 MAR-31-1996 JAN-04-1997 36,091 0 33,189 0 139,104 222,372 885,215 428,572 1,122,475 186,557 600,209 41,031 0 100 (75,029) 1,122,475 1,797,386 1,797,386 1,248,994 1,248,994 591,390 0 81,252 (124,250) (18,108) (106,142) 0 0 0 (107,173) (10.72) 0
-----END PRIVACY-ENHANCED MESSAGE-----