-----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, auBYNkk5eiwXoBOgZSYJvyX7P1ooZHyq8KkyuGWFAGswASHnvYQj38LUtcrIIERr e9MkzHQfJjOP4RkW4h1DuA== 0000041289-94-000007.txt : 19941219 0000041289-94-000007.hdr.sgml : 19941219 ACCESSION NUMBER: 0000041289-94-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941105 FILED AS OF DATE: 19941216 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: GIANT FOOD INC CENTRAL INDEX KEY: 0000041289 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 530073545 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04434 FILM NUMBER: 94565035 BUSINESS ADDRESS: STREET 1: 6400 SHERIFF RD STREET 2: DEPT 593 CITY: LANDOVER STATE: MD ZIP: 20785 BUSINESS PHONE: 3013414100 MAIL ADDRESS: STREET 1: P.O. BOX 1804 , DEPT 593 STREET 2: 6400 SHERIFF ROAD CITY: LANDOVER STATE: MD ZIP: 20785 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Thirty-six Weeks ended November 5, 1994 Commission File Number 1-4434 Giant Food Inc. (Exact name of Registrant as specified in its charter) Delaware 53-0073545 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 6300 Sheriff Road, Landover, Maryland 20785 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (301) 341-4100 NONE (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (l) 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 The number of shares outstanding of each of the registrant's classes of common stock as of this date is as follows: Title of stock Number of shares class ($l par) Outstanding "A" non-voting 59,025,464 "AC" voting 125,000 "AL" voting 125,000 59,275,464 - 1 - GIANT FOOD INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - NOVEMBER 5, 1994 AND FEBRUARY 26, 1994 Dollar amounts in thousands ASSETS November 5, February 26, 1994 1994 (Unaudited) Current assets: Cash and cash equivalents $ 111,876 $ 111,845 Short-term investments (Note 2) 90,568 116,499 Receivables 41,804 37,504 Inventories (Note 3) 231,296 217,576 Prepaid expenses 21,581 22,114 Total current assets 497,125 505,538 Property, plant and equipment 1,303,878 1,258,653 Less accumulated depreciation 580,609 544,862 723,269 713,791 Property under capital leases, net of accumulated amortization, (11/05/94, $58,687; 2/26/94, $54,679) 107,326 107,580 Other assets 33,996 30,904 $ 1,361,716 $ 1,357,813 See notes to consolidated financial statements. - 2 - GIANT FOOD INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - NOVEMBER 5, 1994 AND FEBRUARY 26, 1994 Dollar amounts in thousands LIABILITIES AND SHAREHOLDERS' EQUITY November 5, February 26, 1994 1994 (Unaudited) Current liabilities: Current portion of long-term debt $ 27,601 $ 19,145 Accounts payable 236,420 226,284 Accrued liabilities 75,590 78,476 Dividends payable 10,633 10,394 Income taxes 7,728 7,033 Total current liabilities 357,972 341,332 Long-term debt, net of current portion: Notes and mortgages 58,422 86,068 Obligations under capital leases 142,099 141,062 200,521 227,130 Other liabilities 77,082 75,922 Shareholders' equity Common stock, $1 par, all classes 60,257 60,257 Net unrealized loss on short-term investments (1,926) Retained earnings 691,343 670,034 749,674 730,291 Less class "A" stock held in treasury, at cost 23,533 16,862 726,141 713,429 $ 1,361,716 $ 1,357,813 See notes to consolidated financial statements. - 3 - GIANT FOOD INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME THIRTY-SIX AND TWELVE WEEKS ENDED NOVEMBER 5, 1994 AND NOVEMBER 6, 1993 (Unaudited) Dollar amounts in thousands except for per share data Thirty-six Weeks Twelve Weeks 1994 1993 1994 1993 Sales $ 2,490,877 $ 2,408,363 $ 834,780 $ 799,056 Cost of goods sold 1,752,322 1,687,875 584,573 560,414 Operating expenses 641,723 614,860 216,201 205,276 Interest: Notes and mortgages 5,986 7,214 2,208 2,347 Lease obligations 11,260 11,210 3,739 3,734 Income (6,859) (5,066) (2,535) (1,925) Other income (1,978) 2,402,454 2,316,093 804,186 769,846 Income before provision for income taxes 88,423 92,270 30,594 29,210 Provision for income taxes 34,777 37,270 12,033 11,488 Income before cumulative effect of change in accounting 53,646 55,000 18,561 17,722 Cumulative effect of change in accounting for deferred taxes (Note 5) 3,934 Net income $ 53,646 $ 58,934 $ 18,561 $ 17,722 Income per share before cumulative effect of change in accounting $ .90 $ .92 $ .31 $ .30 Cumulative effect per share of change in accounting for deferred taxes (Note 5) .07 Net income per share $ .90 $ .99 $ .31 $ .30 Dividends per share $ .54 $ .525 $ .18 $ .175 Average number of shares 59,422,994 59,689,523 59,317,176 59,678,285 Diluted number of shares 59,577,491 59,969,921 59,494,558 59,895,762 See notes to consolidated financial statements. - 4 - GIANT FOOD INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS THIRTY-SIX WEEKS ENDED NOVEMBER 5, 1994 AND NOVEMBER 6, 1993 (Unaudited) Dollar amounts in thousands Thirty-six Weeks 1994 1993 Cash flows from operating activities: Net income $ 53,646 $ 58,934 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 63,463 61,169 Amortization of property under capital leases 4,008 3,927 Other adjustments, net (357) 1,109 Net change in cash from changes in operating assets and liabilities, detailed below (7,133) 24,607 Net cash provided by operating activities 113,627 149,746 Cash flows from investing activities: Purchase of short-term investments (21,298) (79) Sale of short-term investments 39,054 Maturity of short-term investments 5,000 Capital expenditures (75,050) (64,182) Other investing activities (626) (288) Net cash used in investing activities (52,920) (64,549) Cash flows from financing activities: Repayments of notes and mortgages (19,497) (7,674) Repayments of obligations under capital leases (2,410) (2,307) Purchases of treasury stock (7,237) (1,385) Issuance of common stock 282 203 Dividends paid (31,814) (31,041) Net cash used in financing activities (60,676) (42,204) Net change in cash and cash equivalents 31 42,993 Cash and cash equivalents, beginning of year 111,845 184,969 Cash and cash equivalents, end of quarter $ 111,876 $ 227,962 Increase (decrease) in cash from changes in operating assets and liabilities: Accounts receivable $ (4,300) $ (2,897) Inventory (13,720) 12,536 Prepaid expenses 533 (1,734) Accounts payable 10,136 8,260 Accrued expenses (2,886) 13,164 Income taxes payable 695 (8,932) Deferred taxes 3,604 Other liabilities 2,409 606 $ (7,133) $ 24,607 See notes to consolidated financial statements. - 5 - GIANT FOOD INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THIRTY-SIX WEEKS ENDED NOVEMBER 5, 1994 AND NOVEMBER 6, 1993 (Unaudited) Dollar amounts in thousands 1. Consolidated financial statements: The accompanying unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Such results for the thirty-six weeks ended November 5, 1994 and November 6, 1993 are not necessarily indicative of results to be expected for the full year. 2. Short-term investments: The Company adopted Statement of Financial Accounting Standards (SFAS) No. 115 "Accounting for Certain Investments in Debt and Equity Securities" as of February 27, 1994. The impact of this change in accounting principle resulted in a $672 decrease in market value of short-term investments and a decrease in shareholders' equity of $408, representing the after-tax impact of the unrealized losses on short-term investments at the date of adoption. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of securities. It is the Company's intent to maintain a liquid portfolio to take advantage of investment opportunities; therefore all securities are considered as available-for-sale and are classified as current assets. Short-term investments as of November 5, 1994 consisted of: GROSS UNREALIZED COST HOLDING LOSSES FAIR VALUE U.S. Treasury securities $ 70,043 $ 2,112 $ 67,931 Federal agency securities 23,700 1,063 22,637 $ 93,743 $ 3,175 $ 90,568 Maturities of short-term investments at November 5, 1994, were as follows: COST FAIR VALUE Due within one year $ 22,114 $ 23,157 Due after one year through five years 70,629 67,411 $ 93,743 $ 90,568 Prior to adopting SFAS No. 115, the Company valued its securities in accordance with the SFAS No. 12 "Accounting for Certain Marketable Securities" and related interpretations. Short-term investments were stated at cost which approximated fair value. - 6 - 3. Inventories: The inventories valued using the LIFO method were approximately 84% of the Company's inventories as at November 5, 1994 and 84% as at February 26, 1994. Under the FIFO method, these inventories would have been higher by $79,120 and $76,420, respectively. The pre-tax LIFO charge was $2,700 for the thirty-six week period ended November 5, 1994 and $2,790 for the thirty-six week period ended November 6, 1993. 4. Net cash flows from operating activities reflects cash payments for interest and income taxes as follows: 36 weeks ended November 5, November 6, 1994 1993 Interest paid $18,874 $20,797 Income taxes paid 34,020 33,004 Non - cash investing and financing activities excluded from the Consolidated Statements of Cash Flows consist of $3,754 capital lease transactions for the current fiscal year and $5,747 for fiscal 1994. 5. Income taxes: The Company adopted, effective February 28, 1993, SFAS No. 109 "Accounting for Income Taxes". Upon adoption of SFAS No. 109, the Company adjusted its deferred tax accounts to reflect the current income tax rates and also adjusted the carrying amounts of certain assets acquired in a 1992 shopping center acquisition. The net effect of the adjustments was to increase income by $3,934, increase the net deferred tax liability by $1,013 and increase the bases of certain assets by $4,947. 6. The FASB issued SFAS No. 112 "Employers' Accounting for Postemployment Benefits." This standard became effective February 27, 1994. As the Company does not provide any significant postemployment benefits to administrative employees, SFAS No. 112 did not impact the Company. Union employees are covered under union-sponsored multi-employer plans. - 7 - GIANT FOOD INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations: The following is Management's discussion and analysis of certain significant factors which have affected the Company's earnings and financial condition during the periods included in the accompanying Consolidated Balance Sheets and Consolidated Statements of Income. Results of Operations: A summary of the principal income statement percentages are tabulated below: 36 Weeks Ended 12 Weeks Ended November 5, November 6, November 5, November 6, 1994 1993 1994 1993 % % % % Gross Profit 29.65 29.92 29.97 29.87 Operating Expenses 25.76 25.53 25.90 25.69 Interest Expense: Notes & Mortgages .24 .30 .26 .29 Obligations .45 .47 .45 .47 Interest Income ( .28) ( .21) ( .30) ( .24) Other Income ( .08) Income Before Income Taxes 3.55 3.83 3.66 3.66 Provision for Income Taxes 1.40 1.55 1.44 1.44 Income before cumulative effect of change in accounting for deferred taxes 2.15 2.28 2.22 2.22 Below are the differences between the periods ended November 5, 1994 compared with November 6, 1993 in thousands of dollars and percentages: Increase (Decrease) Increase (Decrease) Thirty-six Weeks Twelve Weeks $ % $ % Sales 82,514 3.4% 35,724 4.5% Gross Profit 18,066 2.5% 11,564 4.8% Operating Expenses 26,863 4.4% 10,925 5.3% Interest Expense: Notes & Mortgages (1,228) -17.0% (139) -5.9% Lease Obligations 50 0.4% 5 0.1% Interest Income (1,793) 35.4% (610) 31.7% Other Income (1,978) Income Before Income Taxes (3,848) -4.2% 1,383 4.7% Provision for Income Taxes (2,494) -6.7% 544 4.7% Income before cumulative effect of change in accounting for deferred taxes (1,354) -2.5% 839 4.7% - 8 - GIANT FOOD INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (continued): Results of Operations (Thirty-six weeks ended November 5, 1994 vs. thirty- six weeks ended November 6, 1993): Sales increased $82.5 million or 3.4%. The increase in sales for stores in operation in both years was .6%. This sales change was impacted by new units drawing sales away from existing units. Without cannibalization same store sales would have increased 1.5% Gross profit increased $18.1 million. Gross profit as a percent of sales was 29.65% compared to 29.92% for the prior year. The gross profit reflects the static economy and the competitive environment. Operating expenses increased from 25.53% of sales to 25.76%, caused by increases in contracted union benefits and payrolls and the expense of the new units, including the first store in the Delaware. Interest expense - notes and mortgages decreased by $1.2 million because of repayment of certain mortgages. Interest income increased by $1.8 million because of higher yields. The Company realized other income of $2.0 million from the sale of its interest in a partnership that operated automatic teller machines in its stores. The new owner has contracted with the Company to pay fees on future ATM transactions. As a result of above comments income before provision for income taxes and the cumulative effect of the change in accounting for deferred taxes was down $3.8 million, a decrease of 4.2%. The effective tax rate was 39.3% for the current period and 40.4% for the prior year's fiscal period. Net income was 2.15% of sales for the current period compared with 2.28% for the same period of the prior year (before the cumulative effect of the change in accounting for deferred taxes). The adoption of SFAS No. 109, "Accounting for Income Taxes" on February 28, 1993 resulted in an adjustment of the carrying value of assets acquired and the recognition of additional income of $3.9 million, equal to 7 cents per share. This adjustment increased net income to 2.45%, as percent of sales, for the prior year's comparable period. - 9 - GIANT FOOD INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (continued): Results of Operations (Twelve weeks ended November 5, 1994 vs. twelve weeks ended November 6, 1993): Sales increased $35.7 million or 3.8%. The increase in sales for stores in operation in both years was .9%. This sales change was impacted by new units drawing sales away from existing units. Without cannibalization, same store sales would have increased 1.5% Gross profit increased $11.6 million. Gross profit as a percent of sales was 29.97% compared to 29.87% for the prior year. This was caused by the same factors cited in the thirty-six week analysis. Operating expenses increased from 25.69% of sales to 25.90%. This was caused principally by increases in union benefits. Another factor was the occupancy costs of new units. Interest expense - notes and mortgages decreased by $139 thousand because of repayment of certain mortgages and notes. Interest income increased by $610 thousand because of higher yields. Pre-tax earnings were up $1.4 million, an increase of 4.7%. The effective tax rate was 39.3% for both periods. Net income was 2.22% of sales for both the current quarter and for the same quarter of the prior year. - 10 - GIANT FOOD INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (continued): LIQUIDITY: Working capital decreased $25.1 million from February 26, 1994. The contributing factor for this decrease is the reclassification of $16.0 million in mortgages from long-term to current. This obligation, due April 1995, was assumed with the purchase of a shopping center in 1991. At November 5, 1994 the working capital ratio was 1.39 to 1, compared to 1.48 at February 26, 1994. Including LIFO reserves of $79.1 million at November 5, 1994, the working capital ratio was 1.61 to 1. At November 5, 1994, cash and cash equivalents was $111.9 million and short-term investments were $90.6 million compared with $111.8 million and $116.5 million respectively as of February 26, 1994. Effective February 27, 1994 the Company adopted SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities". The impact of this change in accounting principle resulted in a $.672 million decrease in short-term investments. (See note 2) It is estimated that cash, cash equivalents and short-term investments, together with cash flow from operations will be adequate to complete planned capital expenditures, debt reduction and dividend requirements. The Company has a $50 million revolving credit facility available. It has had no short-term bank borrowings for more than sixteen years. CAPITALIZATION: Shareholders' equity as a percentage of capitalization was 76.1% on November 5, 1994, compared to 74.3% on February 26, 1994 and 72.9% on November 6, 1993. - 11 - GIANT FOOD INC. AND SUBSIDIARIES OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K: The Company filed Form 8-K on October 13, 1994. In a private transaction, J. Sainsbury, PLC (Sainsbury) purchased from the Lehrman Trust, 125,000 AL voting shares representing 50% of the Company's total outstanding voting stock, and in the same transaction, Sainsbury purchased 9,779,931 Class A non voting shares from the Lehrman families, for a total cash consideration of $336,767,654. The class A purchase represents about 16% of the Company's total non-voting shares. This transaction was completed on November 14, 1994. The Lehrman-Sainsbury transaction did not affect the 125,000 shares of class AC voting stock owned by Israel Cohen, Chairman of the Board and CEO of Giant, who retains the right to elect four directors of the seven person board. SIGNATURE 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. Giant Food Inc. (Registrant) Date December 16, 1994 By /s/ Israel Cohen Israel Cohen Chairman of the Board Chief Executive Officer Date December 16, 1994 By /s/ David B Sykes David B Sykes Senior Vice President Finance, Treasurer Chief Financial Officer and Principal Accounting Officer - 12 - EX-27 2
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