-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, rgqdbR/tXcwZhotdCVMFGtB5ntKInP/U8VwUWoHOViyrmwM5hb3xYz3+qgnQT7VH gPi61rc3KuvVnggpBg2fDA== 0000037912-94-000012.txt : 19940510 0000037912-94-000012.hdr.sgml : 19940510 ACCESSION NUMBER: 0000037912-94-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940326 FILED AS OF DATE: 19940504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOOD LION INC CENTRAL INDEX KEY: 0000037912 STANDARD INDUSTRIAL CLASSIFICATION: 5411 IRS NUMBER: 560660192 STATE OF INCORPORATION: NC FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06080 FILM NUMBER: 94526012 BUSINESS ADDRESS: STREET 1: P O BOX 1330 STREET 2: 2110 EXECUTIVE DR CITY: SALISBURY STATE: NC ZIP: 28145 BUSINESS PHONE: 7046338250 MAIL ADDRESS: STREET 1: P O BOX 1330 STREET 2: 2110 EXECUTIVE DR CITY: SALISBURY STATE: NC ZIP: 28145 FORMER COMPANY: FORMER CONFORMED NAME: FOOD TOWN STORES INC DATE OF NAME CHANGE: 19830510 10-Q 1 BODY SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 26, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ........to........... Commission File number 0-6080 FOOD LION, INC. (Exact name of registrant as specified in its charter) NORTH CAROLINA 56-0660192 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P.O. Box 1330, 2110 Executive Drive Salisbury, NC 28145-1330 (Address of principal executive office) (Zip Code) (704) 633-8250 (Registrant's telephone number) 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 Outstanding shares of common stock of the Registrant as of April 29, 1994. Class A Common Stock 244,135,824 Class B Common Stock 239,571,114 Page 1 of 13 The Exhibit index is located on page 12. FOOD LION, INC. INDEX TO FORM 10-Q MARCH 26, 1994 PAGE NUMBER Part I. FINANCIAL INFORMATION Item 1. Financial Statements Statements of Income for the 12 weeks ended March 26, 1994 and March 27, 1993 3 Balance sheets as of March 26, 1994, January 1, 1994 and March 27, 1993 4 Statements of Cash Flows for the 12 weeks ended March 26, 1994 and March 27, 1993 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-10 Part II. OTHER INFORMATION Item 1. Legal Proceedings 10 Item 2. Changes in Securities 10 Item 3. Defaults Upon Senior Securities 10 Item 4. Submission of Matters to a Vote of Security Holders 10 Item 5. Other Information 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11 Exhibit Index 12 -2- PART I. FINANCIAL INFORMATION Item I. Financial Statements FOOD LION, INC. STATEMENTS OF INCOME (Unaudited) For the 12 Weeks ended March 26, 1994 and March 27, 1993 (Dollars in thousands except per share data)
March 26, 1994 March 27, 1993 12 WEEKS (A) (B) (A) (B) % % Net sales $1,804,022 $1,656,825 100.00 100.00 Cost of goods sold 1,440,812 1,340,750 79.87 80.92 Gross profit 363,210 316,075 20.13 19.08 Selling and administrative expenses 257,523 232,098 14.28 14.01 Interest expense 20,552 16,271 1.14 0.98 Depreciation 33,644 31,950 1.86 1.93 311,719 280,319 17.28 16.92 Income before income taxes 51,491 35,756 2.85 2.16 Provision for income taxes 20,335 13,838 1.12 0.84 Net income $ 31,156 $ 21,918 1.73 1.32 Earnings per share $ .06 $ .05 Dividends per share $ .02 $ .02 Weighted average number of shares outstanding Class A 244,135,749 244,124,924 Class B 239,571,114 239,571,114 Total 483,706,863 483,696,038
-3- FOOD LION, INC. BALANCE SHEETS (Dollars in thousands) (Unaudited)
March 26, 1994 January 1, 1994 March 27, 1993 Assets Current assets: cash and cash equivalents $ 156,584 $ 46,066 $ 77,590 Receivables 93,970 109,952 94,995 Inventories 831,014 929,138 861,083 Prepaid expenses and other 54,148 54,316 45,793 Total current assets 1,135,716 1,139,472 1,079,461 Property, at cost, less accumulated depreciation 1,335,790 1,364,211 1,390,279 Total assets $2,471,506 $2,503,683 $2,469,740 Liabilities and Shareholders' Equity Current Liabilities: Notes payable $ 10,007 $ 332,500 Accounts payable, trade $ 325,861 346,799 324,160 Accrued expenses 214,334 241,187 234,452 Long-term debt - current 152 183 327 Capital lease obligations - current 7,040 7,108 5,279 Other liabilities - current 3,379 3,880 302 Income taxes payable 29,193 10,107 15,252 Total current liabilities 579,959 619,271 912,272 Long-term debt 569,325 569,350 240,798 Capital lease obligations 288,854 301,541 253,726 Deferred income taxes 36,587 36,587 86,543 Deferred compensation 562 571 1,732 Other liabilities 58,009 58,809 7,503 Total liabilities 1,533,296 1,586,129 1,502,574 Shareholders' Equity: Class A non-voting common stock, $.50 par value 122,068 122,066 122,064 Class B voting common stock, $.50 par value 119,786 119,786 119,786 Additional capital 309 289 272 Retained earnings 696,047 675,413 725,044 Total shareholders' equity 938,210 917,554 967,166 Total liabilities and shareholders' equity $2,471,506 $2,503,683 $2,469,740
-4- FOOD LION, INC. STATEMENTS OF CASH FLOWS (Unaudited) For the 12 Weeks ended March 26, 1994 and March 7, 1993 (Dollars in thousands)
12 Weeks March 26, 1994 March 27, 1993 Cash flows from operating activities Net income $ 31,156 $ 21,918 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 33,644 31,950 Gain on disposals of property ( 142) ( 19) Changes in operating assets and liabilities: Receivables 15,982 992 Inventories 98,124 35,302 Prepaid expenses and other 168 4,561 Accounts payable and accrued expenses ( 49,223) 37,768 Income taxes payable 19,086 15,252 Deferred income taxes --- 2,475 Deferred compensation ( 9) 8 Other liabilities ( 1,301) 62 Total adjustments 116,329 128,351 Net cash provided by operating activities 147,485 150,269 Cash flows from investing activities Proceeds from disposal of property 823 108 Capital expenditures ( 15,510) ( 38,645) Net cash used in investing activities ( 14,687) ( 38,537) Cash flows from financing activities Net payments under short-term borrowings ( 10,007) ( 127,250) Principal payments under capital lease obligations( 1,717) ( 1,344) Principal payments on long-term debt ( 56) ( 200) Proceeds from issuance of common stock 22 50 Dividends paid ( 10,522) ( 10,521) Net cash used in financing activities ( 22,280) ( 139,265) Net increase (decrease) in cash and cash equivalents 110,518 ( 27,533) Cash and cash equivalents at beginning of period 46,066 105,123 Cash and cash equivalents at end of period $156,584 $ 77,590
-5- Notes to Financial Statements (Dollars in thousands) 1) Basis of Presentation: The accompanying financial statements are presented in accordance with the requirements of Form 10-Q and, consequently, do not include all the disclosures normally required by generally accepted accounting principles or those normally made in the Annual Report on Form 10-K of Food Lion, Inc. (the "Company"). Accordingly, the reader of this Form 10-Q should refer to the Company's Form 10-K for the year ended January 1, 1994 for further information. The financial information has been prepared in accordance with the Company's customary accounting practices and has not been audited. In the opinion of management, the financial information includes all adjustments consisting of normal recurring accruals necessary for a fair presentation of interim results. 2) Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: March 26, 1994 March 27, 1993 Interest (net of amounts $13,374 $14,844 capitalized)* Income taxes 1,296 1,136 *Interest capitalized 227 1,017 Capital lease obligations of $5,282 and $9,605 were incurred in the first quarter of 1994 and 1993, respectively. Capital lease retirements of $16,320 and $0 were recorded in the first quarter of 1994 and 1993, respectively. The Company acquired new equipment totaling $449 which was financed with capital leases. The Company considers all highly liquid investment instruments purchased with an original maturity of three months or less to be cash equivalents. -6- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. RESULTS OF OPERATIONS (12 weeks ended March 26, 1994 compared to 12 weeks ended March 27, 1993) Net sales increased 8.9% for the 12 weeks ended March 26, 1994 compared with the same period last year. Same store sales (including all comparable stores) increased 3.0% during the first quarter of 1994. Same store sales, excluding sales for the 88 stores scheduled to close during 1994, increased 3.5% during the first quarter of 1994. On January 7, 1994 Food Lion announced its 1994 business plan, which included opening 40-50 new stores, renovating 60-70 existing stores and closing 88 unprofitable store locations. In the fourth quarter of 1993, the Company recorded a $170.5 million reserve against 1993's earnings to cover management's best estimate of the costs to close these 88 stores. During the first quarter of 1994, Food Lion opened six new stores, replaced two older stores with new Food Lion locations, completed nine renovations to existing stores and closed 54 unprofitable store locations. Gross Profit was 20.13% of sales for the first quarter of 1993 compared with 19.08% of sales for the same period last year. The improvement over last year is primarily due to an increase in customer traffic in the market department which generates a higher profit margin. Last year, during the first quarter of 1993, the Company experienced declines in gross profits, due primarily to the cost of heavy promotional activity designed to increase customer traffic and sales. Although the level of promotional activity has decreased as compared to a year ago, the Company continues promotional activity that is greater than historical levels. Currently promotional activity is designed to specifically target certain geographic areas in an effort to increase sales and profits in these areas. Selling and administrative expenses as a percentage of sales were 14.28% for the first quarter of 1994 compared to 14.01% for the same period last year. This is due primarily to increases in store salaries, benefits and other store operating expenses such as general repairs and maintenance. Interest expense increased 0.16% of sales during the first quarter of 1994 primarily due to interest recognized on the amortization of rent payments on 1994 store closings, and lower capitalized interest due to a decrease in construction. In addition, interest expense for the quarter was affected by a higher interest rate on long-term financing that replaced short-term borrowings outstanding during the second quarter of 1993. -7- For the quarter, depreciation decreased 0.07% of sales primarily due to a higher sales base available this year over last year to absorb fixed costs as well as, fewer store openings and additional store closings, during the first quarter of 1994. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities totaled $147.5 million for the 12 weeks ended March 26, 1994 compared with $150.3 million for the same period last year. This decrease is primarily due to the funding of the Company's 1993 profit sharing plan contribution during the quarter. Historically, the Company's profit sharing plan contribution has been funded in September of each year. Capital expenditures totaled $15.5 million for the 12 weeks ended March 26, 1994 compared with $38.6 million for the same period in 1993. This decrease is primarily due to slower new store opening plans coupled with an increased focus on less costly renovations to existing stores. During the first quarter of 1994, the Company opened six new stores, replaced two older stores with new Food Lion locations and completed renovations to nine existing stores. The Company plans to open between 30-40 new stores in the remaining months of 1994, located primarily in the southeast. The majority of these new stores will be opened under conventional leasing arrangements and, as a result, the impact on liquidity of owning stores will be insignificant. The Company also plans to renovate 50-60 existing stores in the remaining three quarters of 1994. Significant cash capital expenditures currently estimated for the remainder of 1994 are as follows: Store renovations and new store openings $60 million Distribution center expansion $10 million Land costs $ 8 million For the foreseeable future, the Company's cash capital expenditures will be financed through funds generated from operations and with existing bank and credit lines, along with other debt, if necessary. Also, during the first quarter, Food Lion closed 54 of the 88 unprofitable stores scheduled to close during 1994. The remaining 34 stores are expected to be closed in the second quarter of 1994. The Company established a $170.5 million reserve in the fourth quarter of 1993 to cover the costs to close these 88 stores. Of this $170.5 million, only $28.3 million represents cash outlays to cover legal expenses, relocation expenses and costs to store and transfer reusable equipment. As a result, Food Lion does not expect a significant impact on liquidity in 1994 resulting from the store closings. -8- The Company will consider the possibility of sale-leaseback transactions on certain free-standing, company owned stores in the future if advantageous opportunities are presented by potential lessors. The Company maintains the following bank and credit lines: $250 million commercial paper program which is outlined in the table below: Commercial Paper Program (Dollars in millions) 1994 1993 Outstanding borrowings at end of first quarter $ 0 $ 60.0 Average borrowings 0 137.4 Maximum amount outstanding 0 183.3 Daily weighted average interest rate 0 3.48% A renewable 364-day credit facility with a syndicate of commercial banks providing $300 million in formal lines of credit. There were no borrowings against these lines during the first quarter or as of March 26, 1994. This facility will expire on June 3, 1994, however the Company plans to renew the facility. Additional short-term lines of credit totaling $43 million. These lines of credit are available when needed. The Company is not required to maintain compensating balances and borrowings may occur periodically. The Company had no borrowings under these lines during the first quarter or as of March 26, 1994. Periodic short-term borrowings under informal credit arrangements, which are available to the Company at the discretion of the lender (see table below): -9- Informal Credit Arrangements (Dollars in millions) 1994 1993 Outstanding borrowings at end of first quarter $ 0 $ 87.0 Average borrowings .1 128.7 Maximum amount outstanding 10.0 171.0 Daily weighted average interest rate 3.50% 3.73% Part II OTHER INFORMATION Item 1. Legal Proceedings The Company has had no significant developments related to legal matters since the Item 3. disclosure previously included in the Company's Form 10-K filed on March 31, 1994. Item 2. Change in Securities This item is not applicable. Item 3. Defaults Upon Senior Securities This item is not applicable. Item 4. Submission of Matters to a Vote of Security Holders This item is not applicable. Item 5. Other Information This item is not applicable. Item 6. Exhibits and Reports on Form 8-K (a). Exhibits 11-Computation of Earnings per Share. (b). The Company filed a report on Form 8-K pursuant to Item 5 on January 7, 1994 listing a) a new director and b) discussing various financial matters. -10- 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. FOOD LION, INC. Registrant DATE BY: Dan A. Boone Dan A. Boone Vice President-Finance, Chief Financial Officer and Secretary Principal Financial Officer (Duly Authorized Officer) -11- EXHIBIT INDEX SEQ. PAGE EXHIBIT # DESCRIPTION NO. 11 Computation of Earnings per Share 13 -12- EX-11 2 EARNINGS PER SHARE Exhibit 11 COMPUTATION OF EARNINGS PER SHARE (Amounts in thousands except per share amounts) March 26, 1994 March 27, 1993 PRIMARY NET INCOME $ 31,156 $21,918 WEIGHTED AVERAGE COMMON SHARES AND OTHER COMMON STOCK EQUIVALENTS: COMMON STOCK OUTSTANDING 483,707 483,696 STOCK OPTIONS 0 0 483,707 483,696 (*) SHARES USED IN COMPUTATION 483,707 483,696 PRIMARY EARNINGS PER SHARE $ .0644 $ .0453 FULLY DILUTED NET INCOME $ 31,156 $ 21,918 ELIMINATION OF INTEREST EXPENSE, NET OF RELATED TAX EFFECT, APPLICABLE TO 5% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2003 807 ADJUSTED INCOME APPLICABLE TO COMMON STOCK $ 31,963 WEIGHTED AVERAGE COMMON SHARES AND OTHER COMMON STOCK EQUIVALENTS: COMMON STOCK OUTSTANDING 483,707 483,696 STOCK OPTIONS 0 0 SHARES ISSUABLE UPON CONVERSION OF 5% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2003 (AS OF DATE OF ISSUE 14,557 0 JUNE 14, 1993) 498,264 483,696 (*) SHARES USED IN COMPUTATION 498,264 483,696 FULLY DILUTED EARNINGS PER SHARE $ .0641 $ .0453 (*)Note: Dilution is less than 3%. Therefore, common stock equivalents have been excluded from the total weighted average common shares. -13- -----END PRIVACY-ENHANCED MESSAGE-----