-----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, H7vW/DuB9d9aHk8rmbCFmn5FBVuaa9d3V9lIxL40UDp9MmfN9Ni6SMH1TV9m3dfD 28NUzYfNRUb8auPkDVREWw== 0000041289-94-000003.txt : 19940719 0000041289-94-000003.hdr.sgml : 19940719 ACCESSION NUMBER: 0000041289-94-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940521 FILED AS OF DATE: 19940701 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GIANT FOOD INC CENTRAL INDEX KEY: 0000041289 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94537540 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 MAY 21, 1994 10Q 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 Twelve Weeks ended May 21, 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 59,188,727 "AC" voting 125,000 "AL" voting 125,000 59,438,727 - 1 - GIANT FOOD INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - MAY 21, 1994 AND FEBRUARY 26, 1994 Dollar amounts in thousands ASSETS May 21, February 26, 1994 1994 (Unaudited) Current assets: Cash and cash equivalents $ 105,707 $ 111,845 Short-term investments (Note 2) 104,724 116,499 Receivables 40,340 37,504 Inventories (Note 3) 208,030 217,576 Prepaid expenses 24,034 22,114 Total current assets 482,835 505,538 Property, plant and equipment 1,280,779 1,258,653 Less accumulated depreciation 565,529 544,862 715,250 713,791 Property under capital leases, net of accumulated amortization, (5/21/94, $56,008; 2/26/94, $54,679) 110,005 107,580 Other assets 40,101 30,904 $ 1,348,191 $ 1,357,813 See notes to consolidated financial statements. - 2 - GIANT FOOD INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - MAY 21, 1994 AND FEBRUARY 26, 1994 Dollar amounts in thousands LIABILITIES AND SHAREHOLDERS' EQUITY May 21, February 26, 1994 1994 (Unaudited) Current liabilities: Current portion of long-term debt $ 35,286 $ 19,145 Accounts payable 206,766 226,284 Accrued liabilities 73,983 78,476 Dividends payable 10,700 10,394 Income taxes 13,820 7,033 Total current liabilities 340,555 341,332 Long-term debt, net of current portion: Notes and mortgages 69,844 86,068 Obligations under capital leases 143,881 141,062 213,725 227,130 Other liabilities 75,631 75,922 Shareholders' equity Common stock, $1 par, all classes 60,257 60,257 Net unrealized loss on short-term investments (1,421) Retained earnings 679,575 670,034 738,411 730,291 Less class "A" stock held in treasury, at cost 20,131 16,862 718,280 713,429 $ 1,348,191 $ 1,357,813 See notes to consolidated financial statements. - 3 - GIANT FOOD INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME TWELVE WEEKS ENDED MAY 21, 1994 AND MAY 22, 1993 (Unaudited) Dollar amounts in thousands except for per share data Twelve Weeks 1994 1993 Sales $ 829,697 $ 813,466 Cost of goods sold 583,850 568,892 Operating expenses 210,504 203,084 Interest: Notes and mortgages 1,941 2,368 Lease obligations 3,757 3,724 Income (2,024) (1,410) Other income (1,978) 796,050 776,658 Income before provision for income taxes 33,647 36,808 Provision for income taxes 13,233 14,134 Income before cumulative effect of change in accounting 20,414 22,674 Cumulative effect of change in accounting for deferred taxes (Note 5) 3,934 Net income $ 20,414 $ 26,608 Income per share before cumulative effect of change in accounting $ .34 $ .38 Cumulative effect per share of change in accounting for deferred taxes (Note 5) .07 Net income per share $ .34 $ .45 Dividends per share $ .18 $ .175 Average number of shares 59,553,243 59,692,611 See notes to consolidated financial statements. - 4 - GIANT FOOD INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS TWELVE WEEKS ENDED MAY 21, 1994 AND MAY 22, 1993 (Unaudited) Dollar amounts in thousands Twelve Weeks 1994 1993 Cash flows from operating activities: Net income $ 20,414 $ 26,608 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 20,668 19,914 Amortization of property under capital leases 1,329 1,298 Other adjustments, net 380 370 Net change in cash from changes in operating assets and liabilities, detailed below (11,802) 15,125 Net cash provided by operating activities 30,989 63,315 Cash flows from investing activities: Purchase of short-term investments (3,798) (2) Sale of short-term investments 13,230 Capital expenditures (29,616) (17,852) Other investing activities (2,088) 801 Net cash used in investing activities (22,272) (17,053) Cash flows from financing activities: Repayments of notes and mortgages (222) (309) Repayments of obligations under capital leases (796) (757) Purchases of treasury stock (3,566) Issuance of common stock 124 35 Dividends paid (10,395) (10,147) Net cash used in financing activities (14,855) (11,178) Net change in cash and cash equivalents (6,138) 35,084 Cash and cash equivalents, beginning of year 111,845 184,969 Cash and cash equivalents, end of quarter $ 105,707 $ 220,053 Increase (decrease) in cash from changes in operating assets and liabilities: Accounts receivable $ (2,836) $ (1,008) Inventory 9,546 20,230 Prepaid expenses (1,920) (2,139) Accounts payable (19,517) (9,512) Accrued expenses (4,493) 3,308 Income taxes payable 6,787 1,456 Deferred taxes 1,613 Other liabilities 631 1,177 $ (11,802) $ 15,125 See notes to consolidated financial statements. - 5 - GIANT FOOD INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TWELVE WEEKS ENDED MAY 21, 1994 AND MAY 22, 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 twelve weeks ended May 21, 1994 and May 22, 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 May 21, 1994 consisted of: GROSS UNREALIZED COST HOLDING LOSSES FAIR VALUE U.S. Treasury securities $ 93,053 $ 1,730 $ 91,323 Federal agency securities 14,014 613 13,401 $107,067 $ 2,343 $104,724 Maturities of short-term investments at May 21, 1994, were as follows: COST FAIR VALUE Due within one year $ 43,044 $ 42,948 Due after one year through five years 64,023 61,776 $107,067 $104,724 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 May 21, 1994 and 84% as at February 26, 1994. Under the FIFO method, these inventories would have been higher by $77,320 and $76,420, respectively. The pre-tax LIFO charge was $900 for the twelve week period ended May 21, 1994 and $930 for the twelve week period ended May 22, 1993. 4. Net cash flows from operating activities reflects cash payments for interest and income taxes as follows: 12 weeks ended May 21, May 22, 1994 1993 Interest paid $ 7,641 $ 7,144 Income taxes paid 6,168 11,943 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: 12 Weeks Ended 12 Weeks Ended May 21, 1994 May 22, 1993 % % Gross Profit 29.63 30.07 Operating Expenses 25.37 24.97 Interest Expense-Notes & Mortgages .23 .29 Interest Expense-Lease Obligations .45 .46 Interest (Income) ( .24) ( .17) Other Income ( .24) Income Before Income Taxes 4.06 4.52 Provision for Income Taxes 1.60 1.73 Income before cumulative effect of change in accounting for deferred taxes 2.46 2.79 Below are the differences between the periods ended May 21, 1994 compared with May 22, 1993 in thousands of dollars and percentages: Increase (Decrease) Twelve Weeks $ % Sales 16,231 2.0% Gross Profit 1,273 0.5% Operating Expenses 7,420 3.7% Interest Expense-Notes & Mortgages (427) -18.0% Interest Expense-Lease Obligations 33 0.9% Interest Income 614 43.5% Other Income 1,978 Income Before Income Taxes (3,161) -8.6% Provision for Income Taxes (901) -6.4% Income before cumulative effect of change in accounting for deferred taxes (2,260) -10.0% - 8 - GIANT FOOD INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (continued): Results of Operations (Twelve weeks ended May 21, 1994 vs. twelve weeks ended May 22, 1993): Sales increased $16.2 million or 2.0%. The change in sales for stores in operation in both years was a decrease of .4%. The sales change in existing units was impacted by new stores drawing sales away from existing units. Without this phenomenon, cannibalization, the same store sale change would have been an increase of .3% Gross profit increased $1.3 million. Gross profit as a percent of sales was 29.63% compared to 30.07% in the prior year. The current level of 29.63% is at approximately the same level as the prior fiscal quarter. The similar gross profit reflects the static economy and the competitive environment. Operating expenses increased from 24.97% of sales to 25.37%. This was caused by increases in union payrolls and welfare benefits. Another factor was the expense of new units including pre-opening expenses of the first store opened in the state of Delaware. Interest expense - notes and mortgages decreased by $427 thousand because of repayment of mortgages. Interest income increased by $614 thousand because of higher yields. The Company realized other income of $1.978 million from the sale of its interest in a partnership that operates the automatic teller machines in its stores. In addition to the sale the new owner has contracted with the Company to pay certain fees on future ATM transactions. Pre-tax earnings before the cumulative effect of the change in accounting for deferred taxes were down $3.2 million, a decrease of 8.6%. The effective tax rate was 39.3% for the current period and 38.4% for the prior year's fiscal period. Net income was 2.46% of sales for the current quarter compared with 2.79% 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 3.27% 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): LIQUIDITY: Working capital decreased $22.0 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 (is due April 1995) and was assumed upon the acquisition of a shopping center. At May 21, 1994 working capital was 1.42 to 1, compared to 1.48 at February 26, 1994. Including LIFO reserves of $77.3 million at May 21, 1994, the working capital ratio was 1.64 to 1. At May 21, 1994, cash and cash equivalents was $105.7 million and short-term investments were $104.7 million compared with $228.3 million as of February 26, 1994. The Company adopted 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 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 74.3% on May 21, 1994, compared to 74.3% on February 26, 1994 and 72.8% on May 22, 1993. - 10 - GIANT FOOD INC. AND SUBSIDIARIES OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K: The Company did not file any reports on Form 8-K during the twelve weeks ended May 21, 1994. 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 July 1, 1994 By /s/ Israel Cohen Israel Cohen Chairman of the Board Chief Executive Officer Date July 1, 1994 By /s/ David B Sykes David B Sykes Senior Vice President Finance, Treasurer Chief Financial Officer and Principal Accounting Officer - 11 - -----END PRIVACY-ENHANCED MESSAGE-----