-----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, Qpuo3Jhm/Q3TawZ5D1BDVYtQDetkEGweau1aGo9MgS3pty2iWSZtrJe+dYHs3nn4 sG+OV3AO3dMJ119FCCZeUg== 0000037912-96-000007.txt : 19960502 0000037912-96-000007.hdr.sgml : 19960502 ACCESSION NUMBER: 0000037912-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960323 FILED AS OF DATE: 19960501 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOOD LION INC CENTRAL INDEX KEY: 0000037912 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [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: 96554287 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 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 23, 1996 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 26, 1996. Class A Common Stock 235,720,875 Class B Common Stock 235,079,364 Page 1 of 16 The Exhibit index is located on page 13. FOOD LION, INC. INDEX TO FORM 10-Q MARCH 23, 1996 PAGE NUMBER Part I. FINANCIAL INFORMATION Item 1. Financial Statements Statements of Income for the 12 weeks ended March 23, 1996 and March 25, 1995 3 Balance sheets as of March 23, 1996, December 30, 1995 and March 25, 1995 4 Statements of Cash Flows for the 12 weeks ended March 23, 1996 and March 25, 1995 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 11 Item 3. Defaults Upon Senior Securities 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12 Exhibit Index 13 -2- PART I. FINANCIAL INFORMATION Item 1. Financial Statements FOOD LION, INC. STATEMENTS OF INCOME (Unaudited) For the 12 Weeks ended March 23, 1996 and March 25, 1995 (Dollars in thousands except per share data) March 23, 1996 March 25, 1995 12 WEEKS (A) (B) (A) (B) % % Net sales $2,024,453 $1,866,262 100.00 100.00 Cost of goods sold 1,612,830 1,483,189 79.67 79.47 Gross profit 411,623 383,073 20.33 20.53 Selling and administrative expenses 278,988 268,833 13.78 14.40 Interest expense 19,004 18,874 0.94 1.01 Depreciation 37,019 33,110 1.83 1.78 SFAS No. 121 charge 9,640 0.47 344,651 320,817 17.02 17.19 Income before income taxes 66,972 62,256 3.31 3.34 Provision for income taxes 26,119 24,591 1.29 1.32 Net income $ 40,853(1) $ 37,665 2.02(1) 2.02 Earnings per share $ .09(1) $ 0.08 Dividends per share $ .03 $ 0.02 Weighted average number of shares outstanding Class A 237,202,480 244,141,614 Class B 235,935,114 239,571,114 Total 473,137,594 483,712,728 (1) Net income before the SFAS No. 121 charge is $46.7 million, or 2.31% sales, resulting in an earnings per share of $0.10.
-3- FOOD LION, INC. BALANCE SHEETS (Dollars in thousands) (Unaudited) March 23, 1996 December 30, 1995 March 25, 1995 Assets Current assets: Cash and cash equivalents $ 135,119 $ 70,035 $ 152,062 Receivables 130,483 127,995 123,761 Inventories 875,719 881,021 818,812 Prepaid expenses and other 70,513 73,362 72,008 Total current assets 1,211,834 1,152,413 1,166,643 Property, at cost, less accumulated depreciation 1,513,011 1,492,852 1,355,272 Total assets $2,724,845 $2,645,265 $2,521,915 Liabilities and Shareholders' Equity Current Liabilities: Accounts payable, trade $ 363,520 $ 363,571 $ 324,986 Accrued expenses 358,977 316,569 334,882 Long-term debt - current 40,000 Capital lease obligations - current 16,220 15,032 9,351 Other liabilities - current 3,682 3,523 3,310 Income taxes payable 14,200 26,295 Total current liabilities 796,599 698,695 698,824 Long-term debt 315,300 355,300 355,300 Capital lease obligations 385,035 372,645 308,541 Deferred income taxes 44,120 44,120 46,190 Deferred compensation 734 726 667 Other liabilities 73,777 71,269 58,986 Total liabilities 1,615,565 1,542,755 1,468,508 Shareholders' Equity: Class A non-voting common stock, $.50 par value 117,966 119,255 122,071 Class B voting common stock, $.50 par value 117,738 118,313 119,786 Additional capital 337 Retained earnings 873,576 864,942 811,213 Total shareholders' equity 1,109,280 1,102,510 1,053,407 Total liabilities and shareholders' equity $2,724,845 $2,645,265 $2,521,915
-4- FOOD LION, INC. STATEMENTS OF CASH FLOWS (Unaudited) For the 12 Weeks ended March 23, 1996 and March 25, 1995 (Dollars in thousands) 12 Weeks March 23, 1996 March 25, 1995 Cash flows from operating activities Net income $ 40,853 $ 37,665 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 37,019 33,110 Loss on disposals of property 401 309 SFAS No. 121 charge 9,640 Changes in operating assets and liabilities: Receivables ( 2,488) 16,867 Inventories 5,302 34,472 Prepaid expenses and other 2,849 ( 4,103) Accounts payable and accrued expenses 42,357 24,415 Income taxes payable 14,200 4,126 Deferred compensation 8 ( 1) Other liabilities 2,667 1,598 Total adjustments 111,955 110,793 Net cash provided by operating activities 152,808 148,458 Cash flows from investing activities Proceeds from disposal of property 1,251 3,068 Capital expenditures ( 50,992) ( 32,358) Net cash used in investing activities ( 49,741) ( 29,290) Cash flows from financing activities Net payments under short-term borrowings ( 20,000) Principal payments under capital lease obligations( 3,900) ( 2,339) Principal payments on long-term debt ( 25) Proceeds from issuance of common stock 2 Repurchase of common stock ( 20,944) Dividends paid ( 13,141) ( 11,611) Net cash used in financing activities ( 37,983) ( 33,975) Net increase in cash and cash equivalents 65,084 85,193 Cash and cash equivalents at beginning of period 70,035 66,869 Cash and cash equivalents at end of period $135,119 $152,062 -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 December 30, 1995 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 23, 1996 March 25,1995 Interest (net of amounts capitalized)* $16,189 $16,376 Income taxes 11,522 20,576 *Interest capitalized 373 436 Capital lease obligations for stores of $20,488 and $6,571 were incurred in the first quarter of 1996 and 1995, respectively. Capital lease retirements of $3,010 and $425 were recorded in the first quarter of 1996 and 1995, respectively. 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 23, 1996 and March 25, 1995) Net sales increased 8.5% for the 12 weeks ended March 23, 1996 compared with the same period last year. Same store sales increased 5.2% for first quarter. Contributing to the sales increase this year was an expansion of many stores to 24-hour service, the renovation and expansion of older stores, and the effect of winter storms. The 1996 business plan includes opening 50 new stores (up to 22 of these replacing older stores) and renovating 120 existing stores. During the first quarter, Food Lion completed its acquisition to purchase the assets of Food Fair of North Carolina, Inc., operating nine of the 11 stores purchased. In addition, three new Food Lion stores were opened and seven stores renovated during the 12 weeks ended March 23, 1996. Gross profit was 20.33% of sales for the first quarter this year compared to 20.53% of sales for the same period last year. The Company is experiencing gross margin strength due to (1) its private label program (currently representing approximately 12% of total sales) and (2) improvement in the fresh departments highlighted by a 28.2% increase in the number of stores with deli-bakeries. These gross margin strengths were offset by the continued lowering of retail prices as part of the Company's commitment to remain the low price leader. For the quarter, selling and administrative expenses decreased 0.62% of sales. During the first quarter Food Lion experienced a level of selling and administrative expense dollars that was consistent with previous quarters. The Company demonstrated the ability to stabilize costs during a period of strong sales performance, using increasing sales to leverage expense spending thereby decreasing the selling and administrative ratio.(1) Interest expense decreased 0.07% of sales during the quarter primarily due to interest on store capital leases.(1) Depreciation increased 0.05% of sales during first quarter primarily due to depreciation recorded on late 1995 store openings and renovations, and the store openings and renovations completed in the first quarter of 1996.(1) -7- During the first quarter of 1996, Food Lion implemented Financial Accounting Standards Board Statement No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of" (SFAS No. 121). The implementation of SFAS No. 121 created a non-operating, non-cash charge against first quarter earnings of $9.6 million to properly reflect the carrying value of the Company's assets. Excluding the SFAS No. 121 charge, earnings per share were $0.10 for the first quarter. At year end 1993, the Company established a pre-tax charge of $170.5 million (approximately $104 million after tax) to cover management's best estimate of the costs associated with closing 88 underperforming stores in 1994. During the first six months of 1994, the Company closed 84 of these stores (a decision was made in early 1994 to keep four stores open). As of the end of the first quarter 1996, the Company has charged $48.2 million against the provision, primarily as a result of the payment of remaining rent obligations on leased stores, and the disposition of store inventory and property. As of March 23, 1996, the Company had made no additional adjustments to the realizable value of the properties. The Company believes the provision is adequate at this time and will continue to monitor and evaluate the provision to make necessary adjustments. (1)Last year included 0.09%, 0.08% and 0.03% of sales for selling and administrative expenses, interest expense and depreciation, respectively, for certain leases misclassified in first quarter as capital rather than operating which were later adjusted in the third quarter of 1995. -8- Liquidity and Capital Resources Cash provided by operating activities totaled $152.8 million for the 12 weeks ended March 23, 1995 compared with $148.5 million for the same period last year. The increase in 1996 was primarily a factor of increases due to trade payables and income taxes payable, offset by changes in the comparable levels of inventory and an increase in receivables. Capital expenditures totaled $51.0 million for the 12 weeks ended March 23, 1996 compared with $32.4 million for the same period in 1995. The increase is primarily due to costs associated with the Food Fair acquisition and equipment costs for renovations and new stores. During the first quarter of 1996, Food Lion completed its acquisition to purchase the assets of Food Fair of North Carolina, Inc. and began operating nine new locations in the Winston-Salem, NC area. The Company also opened three new stores and plans to open a total of 50 new stores during the year. In addition, approximately 120 existing stores will be renovated. The majority of the new stores will be opened under conventional leasing arrangements and, as a result, the impact on liquidity of owning stores will be insignificant in 1996. Significant cash capital expenditures currently estimated for the remainder of 1996 are as follows: Store expansion and new store construction $ 68 million Equip new and renovated stores $100 million Land costs $ 6 million Capital expenditures for 1996 will be financed through funds generated from operations, existing bank and credit lines, and other debt, if necessary. 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 under which no borrowings were outstanding during the first quarter or as of March 23, 1996 and March 25, 1995. -9- A revolving credit facility with a syndicate of commercial banks providing $350 million in committed lines of credit. This facility will expire in November, 1999. There were no borrowings against these lines as of March 23, 1996 and March 25, 1995. Additional short-term lines of credit totaling $30.5 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 as of March 23, 1996 and March 25, 1995. Periodic short-term borrowings under informal credit arrangements, which are available to the Company at the discretion of the lender. As of March 23, 1996 and March 25, 1995, there were no outstanding borrowings under these informal credit arrangements. During the first quarter of 1996, the Company expended $20.9 million for the purchase of Class A and Class B shares, as part of the Company's stock repurchase plan which began during the second quarter of 1995. The Company purchased 2,577,000 shares of Class A stock during the quarter at an average price of $5.57 per share, and 1,147,500 shares of Class B stock at an average price of $5.58 per share. Additional purchases may be made in the open market under the current program as deemed in the best interest of shareholders. To date, 8,217,615 Class A shares and 4,094,000 Class B shares have been repurchased at a total cost of $71.9 million. Part II OTHER INFORMATION Item 1. Legal Proceedings Rickey B. Bryant et. al. v. Food Lion, Inc. et. al., Civil No. 2-90-0505-1 (D.S.C.) (complaint filed March 12, 1990 and amended September 20, 1990 and January 24, 1991). On April 3, 1996, the Court denied the Plaintiffs'motion for class certification. The Defendants intend to vigorously defend the 16 remaining claims of 11 employees and their dependents. Based on currently available information, the Company believes that any resulting liability will not have a material adverse effect on the financial condition or results of operations of the Company. -10- 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 27-Financial Data Schedule (b). The Company did not file a report on Form 8-K for the period ended March 23, 1996. -11- 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 May 1, 1996 BY:Dan A. Boone Dan A. Boone Vice President-Finance Chief Financial Officer and Secretary Principal Financial Officer (Duly Authorized Officer) -12- EXHIBIT INDEX SEQ. PAGE EXHIBIT # DESCRIPTION NO. 11 Computation of Earnings per Share 14 27 Financial Data Schedule 15-16 -13- EX-11 2 EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE (Amounts in thousands except Years Ended per share amounts) March 23, 1996 March 25,1995 PRIMARY NET INCOME $ 40,853 $ 37,665 WEIGHTED AVERAGE COMMON SHARES AND OTHER COMMON STOCK EQUIVALENTS: COMMON STOCK OUTSTANDING 473,138 483,713 STOCK OPTIONS 0 0 473,138 483,713 PRIMARY EARNINGS PER SHARE (*) $ .0863 $ .0779 FULLY DILUTED NET INCOME $ 40,853 $ 37,665 ELIMINATION OF INTEREST EXPENSE, NET OF RELATED TAX EFFECT, APPLICABLE TO 5% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2003 807 807 ADJUSTED INCOME APPLICABLE TO COMMON STOCK $ 41,660 $ 38,472 WEIGHTED AVERAGE COMMON SHARES AND OTHER COMMON STOCK EQUIVALENTS: COMMON STOCK OUTSTANDING 473,138 483,713 STOCK OPTIONS 0 SHARES ISSUABLE UPON CONVERSION OF 5% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2003 (AS OF DATE OF ISSUE JUNE 14, 1993) 14,557 14,557 487,695 498,270 FULLY DILUTED EARNINGS PER SHARE (*) $ .0854 $ .0772 (*) NOTE: Dilution is less than 3%. Therefore, common stock equivalents have been excluded from the total weighted average common shares. EX-27 3
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheets, the Consolidated Statements of Income and the Consolidated Statement of Cash Flows and is qualified in its entirety by reference to such financial statements 1,000 3-MOS DEC-28-1996 DEC-31-1995 MAR-23-1996 135119 0 130483 0 875719 1211834 2377796 864785 2724845 796599 315300 0 0 235704 873576 2724845 2024453 2024453 1612830 1612830 0 0 19004 66972 26119 40853 0 0 0 40853 .09 0
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