10-K
1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File Number
February 25, 1995 1-4434
GIANT FOOD INC.
(Exact Name of Registrant as specified in its Charter)
Delaware 53-0073545
(State of Incorporation) (IRS Employer Identification No.)
6300 Sheriff Road
Landover, Maryland 20785
(Address of Principal Executive Office)
(301) 341-4100
(Registrant's Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
Class A Common Stock American Stock Exchange
(Non-Voting) Philadelphia Stock Exchange, Inc.
Par Value $1.00 Pacific Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
None
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.
X Yes No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of Registrant's knowledge, on definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
X
As of May 1, 1995, 250,000 Voting Common Shares were
outstanding, all of which are held by affiliates. Non-Voting Common
Shares outstanding were 59,012,266 and the aggregate market value of the
Non-Voting Common Shares (based upon the closing price of these shares
on the American Stock Exchange) of Giant Food Inc. held by
non-affiliates was approximately $1.6 billion.
The number of shares outstanding of each of the
Registrant's classes of Common Stock, as of May 1, 1995 is as follows:
Class A Non-Voting Common Stock ($1.00 par value) 59,012,266
Class AL Voting Common Stock ($1.00 par value) 125,000
Class AC Voting Common Stock ($1.00 par value) 125,000
DOCUMENTS INCORPORATED BY REFERENCE
* * * * * * *
Index to Exhibits Page 60
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Giant Food Inc. (sometimes herein called "Giant" or the
"Company") was incorporated in Delaware in 1935. The Company, together
with its subsidiaries (Giant of Maryland, Inc.; Giant of Salisbury,
Inc.; Cole Engineering, Inc.; Warex-Jessup, Inc.; Landover Wholesale
Tobacco Corp.; Giant Construction Company, Inc.; LECO, Inc.; Bursil,
Inc.; GFS Realty, Inc.; GF McLean Shopping Center, Inc.; Giant Automatic
Money Systems, Inc.; Super G, Inc.; Montrose Crossing, Inc.; Friendship
Macomb SC, Inc.; Bayside Traffic Services of Maryland, Inc. Giant of
Talbot Co., Inc. and Shaw Community Supermarket, Inc. [85% owned]),
operates a chain of 161 supermarkets selling, at retail, food, pharmacy
and general merchandise in Washington, D.C., Maryland, Virginia and
Delaware. Of the Company's 161 supermarkets, 109 are in the Washington,
D.C. Metropolitan Area, including surrounding counties of Maryland and
Virginia, 42 are in or near Baltimore, Maryland, and others are in
Fredericksburg, Charlottesville and Warrenton, Virginia and Easton,
Salisbury, Frederick, Prince Frederick, Westminster, Maryland and
Delaware. The Company also operates three freestanding drug stores.
(b) Financial Information About Industry Segments
There is no financial information reported on industry
segments and lines of business apart from Giant's principal business of
operating supermarkets to sell, at retail, food, pharmacy and general
merchandise. Inasmuch as Giant did not engage in any line of business
which during either of its last three fiscal years accounted for 10% or
more of total sales and revenues, or 10% or more of income before taxes
and extraordinary items computed without deduction of loss resulting
from operations of any line of business, or a loss which equaled or
exceeded 10% of such income, no segment reporting is required. During
each of the last three fiscal years, Giant's retail sales provided in
excess of 90% of its total sales and earnings.
(c) Narrative Description of Business
The majority of the Company's stores are located in
shopping centers, with the average food and food/pharmacy combination
unit generating an annual sales volume of approximately $23,800,000. In
certain of its retail stores the Company has pharmacy units and flower
departments. The Company also operates freestanding drug stores in
Bethesda, Maryland, Salisbury, Maryland and Arlington, Virginia. During
the next fiscal year, the Company has planned or will have begun
construction of 10 supermarkets. Additionally, 4 supermarkets will be
extensively remodeled during the upcoming fiscal year.
Giant supermarkets are all self-service and offer a full
line of nationally advertised groceries, meat, produce, dairy products,
seafood, tobacco, flowers, prepared foods and household and non-food
items. In addition, Giant sells groceries, frozen foods, bakery
products and dairy products under its own private labels. Unbranded
items such as meats and produce are also sold in Giant's supermarkets.
For the fiscal years ended in February 1995, 1994 and 1993,
respectively, the Company's sales were divided, as follows: meat,
delicatessen, dairy and seafood, 22%, 23% and 24%; grocery and
non-food, 69%, 68% and 67%; fresh produce, 9%, 9% and 9%.
Giant operates a full line service delicatessen in 154
stores. Most of the bakery items such as bread, rolls, cakes, pies and
pastries, marketed under the names of "Heidi," "Super G" and "Giant,"
are made in a 250,000 square-foot Company bakery located in Silver
Spring, Maryland. The Company operates three distribution centers of
approximately 1.2 million combined square feet in Landover, Maryland,
one mile from the District of Columbia line. The main center also
houses the Company's executive offices, dairy processing plant, flower
warehouse and ice cube production plant. The Company owns an executive
office building of about 180,000 square feet together with a 750 car
parking garage. Giant also owns a 760,000 square-foot dry grocery
warehouse located in Jessup, Maryland (including a 20,408 square-foot
soft drink bottling plant within that warehouse). Giant also leases a
138,000 square foot frozen food distribution center and a 60,000 square
foot ice cream manufacturing facility at the Jessup location.
(i) Giant produces for sale in its supermarkets bakery
goods and dairy products, ice cream, soft drinks and ice cubes. These
items are manufactured by its Bakery, Dairy, Ice Cream Plant, Soft Drink
Bottling Plant and Ice Plant. Giant also provides services such as
check-cashing, issuance of money orders, photographic film developing,
rental of home-care appliances, some catering, and cooperates in such
community-related projects as the sponsoring of "It's Academic," "Apples
for the Students" and other projects and activities related to community
improvement.
Additionally, the Company warehouses and distributes to
its own stores flowers and gifts, snacks and magazines and
pharmaceuticals. The Company also has an in-house advertising agency, a
trucking brokerage operation, vending-machine business, an import-export
division and also owns sixteen shopping centers and three freestanding
stores. Revenue from the Company's construction division from outside
construction is de minimis. Transfer sales from the above activities
and from its manufacturing and processing operations in support of its
retail operations were about $429 million. Pre-tax profits on these
transfer sales were approximately $51 million, representing about 33% of
total income before income taxes.
(ii) Giant has made no public announcement of any new
product or industry segment which is material or would require the
investment of a material amount of its assets.
(iii) Raw materials for Giant's manufacturing and
processing operations are readily available.
(iv) Giant owns approximately 32 trademarks and service
marks registered by it in the U.S. Patent and Trademark Office. Those
which were issued before November 16, 1989 have a term of twenty years
and those registered after November 16, 1989 have a term of ten years.
Each of Giant's registrations may be renewed for successive terms of ten
years so long as each mark is in use. Giant does not own any patents
which are of material importance to its operations.
(v) Giant's sales volume is not materially affected by
seasonality.
(vi) The Company generates sufficient cash from
operations to meet its working capital requirements. The Company does
not anticipate any changes in its working capital requirements during
the next fiscal year.
(vii) Giant's business is not dependent upon a single or
a few customers. Giant does not sell to any single customer or
affiliated group of customers goods or services in an amount which
equals 10% or more of its consolidated sales.
(viii) Giant's business is such that backlog ordering is
not done.
(ix) None of Giant's business is subject to
renegotiation of profits or termination of contracts or subcontracts at
the election of the Government.
(x) The retail food business is highly competitive,
and in the area in which Giant operates, some of the country's leading
chains are represented and compete vigorously with the Company, both in
price and in service. On the basis of figures published in trade
journals, the Company considers itself at least among the first thirteen
in gross sales among retail grocery chains in the United States.
Competition from the other chains, as well as from independent store
operators, may adversely affect the Company's profit margins in ensuing
years.
(xi) Giant did not spend any material amount on
Company-sponsored research and development activities. In addition,
Giant did not spend during any of the last five fiscal years any
material amount on customer-sponsored research activities relating to
the development of new products, services or techniques or the
improvement of existing products, services or techniques.
(xii) Giant's compliance with federal, state and local
laws which have been enacted or adopted regulating the discharge of
materials into the environment or otherwise relating to the protection
of the environment has not had and is not expected to have any material
effect upon its capital expenditures, its earnings or its competitive
position.
(xiii) At the end of fiscal 1995, Giant had approximately
25,000 full-time and part-time employees.
(d) Financial Information About Foreign and
Domestic Operations and Export Sales
The amount of foreign sales and export sales done by Giant
is de minimis and is therefore not reported.
ITEM 2. PROPERTIES
The Company operates 161 supermarkets (including 116
combination food/pharmacy stores), 109 in the Washington, D.C.
Metropolitan Area, 42 in or near Baltimore, Maryland, and others in
Fredericksburg, Charlottesville and Warrenton, Virginia, and Frederick,
Westminster, Prince Frederick, Easton and Salisbury, Maryland and Bear,
Delaware.
Eleven of the Company's stores are fifteen to twenty
thousand square feet; thirty-nine are between twenty and thirty thousand
square feet; seventeen are thirty to forty thousand square feet; fifty-
six stores are between forty to fifty thousand square feet; thirty-nine
stores are between fifty and sixty thousand square feet, and nine are
over sixty thousand square feet.
The Company also operates three freestanding drug stores.
The Company owns and operates three distribution centers
of approximately 1.2 million combined square feet in Landover, Maryland.
The main center also houses the Company's executive offices (including
an executive office building of approximately 180,000 square feet), its
dairy processing plant, a flower warehouse and an ice cube production
plant. A dry grocery warehouse, containing approximately 760,000 square
feet, is located in Jessup, Maryland. Also located at the Jessup
complex is a 138,000 square foot frozen food distribution center and a
60,000 square foot ice cream manufacturing facility. The Landover
complex and the Jessup complex each contain approximately 85 acres. The
Company's bakery is located in Silver Spring, Maryland, in a
Company-owned building containing 250,000 square feet.
The Company, through its wholly-owned subsidiary, GFS
Realty, Inc., also owns or is the controlling general partner of sixteen
shopping centers and three freestanding stores. The shopping centers are
located at:
8320 Old Keene Mill Road, Springfield, Virginia
6223 Baltimore National Pike, Baltimore, Maryland
7137 Columbia Pike, Annandale, Virginia
1228 Elden Street, Herndon, Virginia
46 Bureau Drive, Gaithersburg, Maryland
7546 Annapolis Road, Lanham, Maryland
12445 Hedges Run Road, Lakeridge, Virginia
3501 Plank Road, Fredericksburg, Virginia
15791 Columbia Pike, Burtonsville, Maryland
20044 Goshen Road, Gaithersburg, Maryland
7501 Huntsman Blvd., Springfield, Virginia
1454 Chain Bridge Road, McLean, Virginia
12051 Rockville Pike, Rockville, Maryland
Newark and Macomb Streets, N.W., Washington, D.C.
5700 South-East Crain Highway, Upper Marlboro, Maryland
20961 Southbank Street, Sterling, Virginia
The freestanding combination food/drug stores are located
at:
3757 Old Court Road, Pikesville, Maryland
1925 East Joppa Road, Joppa Heights, Maryland
1734 York Road, Lutherville, Maryland
In each shopping center, the Company is the major tenant
occupying approximately 25% to 90% of the space.
The table below sets forth certain information with
respect to changes in the number of the Company's supermarkets
(including combination food/pharmacy stores) during the past five years:
Number at Number at
Fiscal Year Beginning of Year Opened Closed End of Year
February 23, 1991 149 4 1 152
February 29, 1992 152 3 1 154
February 27, 1993 154 3 2 155
February 26, 1994 155 4 2 157
February 27, 1995 157 4 0 161
With the exception of the bakery, the sixteen shopping
centers and three freestanding stores noted above, the distribution
centers at Landover and the dry grocery warehouse at Jessup, all the
properties occupied by the Company are held under leases which provide
for various minimum rentals and, in some cases, additional rentals based
on percentages of sales.
At February 25, 1995, the Company had entered into leases
covering stores, warehouses and equipment on which the minimum annual
rentals for the succeeding years are as follows:
Minimum Annual Rentals (In Thousands)
Year Capital Leases Operating Leases
1996 $ 19,876 $ 21,613
1997 19,801 20,536
1998 19,801 19,704
1999 19,789 18,880
2000 19,614 18,933
Later Years 280,002 267,988
ITEM 3. LEGAL PROCEEDINGS
To the best knowledge of the Company and counsel, there is
no litigation pending or threatened which would materially affect the
Company's business or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON
STOCK AND RELATED STOCK HOLDER MATTERS
(a) Market Information
Principal markets on which Giant's Class A Common Stock is
traded: American, Philadelphia and Pacific Stock Exchanges.
The table below presents the high and low market prices
for Giant's Class A Common shares.
Common Stock Price Range
Fiscal 1995 Fiscal 1994
Quarter Ended High Low Quarter Ended High Low
May 21 $26.00 $20.63 May 22 $27.50 $21.00
Aug. 13 21.50 19.88 Aug. 14 27.38 24.25
Nov. 5 22.75 20.63 Nov. 6 25.63 22.00
Feb. 25 24.50 21.88 Feb. 26 26.13 22.38
The last sale price of Giant's Class A Common (Non-Voting)
shares on the American Stock Exchange on May 1, 1995 (the latest most
practicable date) was $26.75.
(b) Holders
The approximate number of holders of record for Giant's
Class A Non-Voting Stock as of May 1, 1995: 40,000 (includes street
name shareholders).
The number of holders of record for Giant's Class AL
Voting Stock as of May 1, 1995: 1.
The number of holders of record for Giant's Class AC
Voting Stock as of May 1, 1995: 1.
(c) Dividends
The table below presents dividend information for Giant's
Common shares.
Dividends Declared Per Share of Common Stock
Fiscal 1995 Fiscal 1994
April $.18 April $.175
July .18 July .175
October .18 October .175
January .18 January .175
$.72 $.70
The Promissory Note Purchase Agreement with The Prudential
Insurance Company of America (see Note 4 to the Consolidated Financial
Statements, page 27) includes certain restrictive covenants which, among
other things, prohibit the Company from paying dividends after February
22, 1986, aggregating more than 50 percent of its cumulative
"consolidated net earnings" (as defined in the Agreement), less the
aggregate of dividends paid and less the net amount expended to
repurchase or redeem any of its capital stock after February 22, 1986.
At February 25, 1995, the specified levels were $80,100,000 in excess of
such aggregate amounts of dividends and distributions. The Company
anticipates the continuation of its current policies of paying
dividends.
ITEM 6. SELECTED FINANCIAL DATA
Year Ended (1), (2)
1995 1994 1993 1992 (3) 1991
Sales $3,695,627 $3,567,468 $3,472,581 $3,489,762 $3,349,546
Net Income 94,161 95,231(*) 81,506 87,180 118,891
Earnings per
share $1.59 1.60(*) 1.37 1.47 2.01
Total assets 1,416,710 1,357,813 1,296,600 1,251,339 1,174,978
Long-term debt,
net of current
portion:
Notes and
mortgages 57,805 86,068 105,525 113,410 98,417
Obligations
under capital
leases 140,946 141,062 142,831 142,892 147,012
Total
long-term debt 198,751 227,130 248,356 256,302 245,429
Cash dividends
declared per
Common share .72 0.70 0.68 0.66 0.60
(1) Year ends last Saturday in February.
(2) Thousands of dollars except per share figures.
(3) 53 Week Year.
(*) Reflects impact of change in accounting for income taxes. Change
equaled $3.9 million of income, equal to 7 cents per share.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SALES AND EARNINGS
OVERVIEW
Sales for the 1995 fiscal year were $3.70 billion compared to sales of
$3.57 billion in the prior year. Sales for the 1993 fiscal year were
$3.47 billion. Sales for the current year increased 3.6%, of which same
store sales increased .9%. For 1994 and 1993 fiscal years, same store
sales increased 1.4% and .05%, respectively. The opening of a new unit
may adversely impact our own stores. Excluding this effect, same store
sales for the 1995 fiscal year would have increased 1.5%.
The Company opened four food-drug combination stores during the 1995
fiscal year, including it's first store in Delaware. The four stores
added 255,000 square feet, and expansion of two stores bringing the total
retail footage to 6.8 million, an increase of 4% over last year. At the
end of the fiscal year, the Company operated 164 stores, of which 116 are
food-drug combination units, one is a gourmet specialty store and three
are free-standing drug stores.
EARNINGS
Pre-tax earnings were $155.3 million, 4.20% of sales, compared to $151.8
million, 4.25% of sales in the prior year, an increase of 2.3%. Pre-tax
earnings for the 1993 fiscal year were $132.3 million, 3.81% of sales.
Cost of goods sold increased slightly to 70.21% of sales, from 70.16% for
the prior year but below the 70.57% for fiscal 1993. Gross profit
dollars increased $36.6 million over the prior year, a 3.4% gain, in line
with our 3.6% sales gain. Competition in the Company's market area
continues to be intense.
This year's LIFO charge of $4.5 million compares with charges of $3.3
million and $3.9 million for the two prior fiscal years. As a percentage
of sales, the ratios were .12%, .09%, and .11%, a minimal change. The
Company maintains its non-perishable inventory on LIFO which continued to
show moderate inflation.
Transfer sales to support its retail operations by the Company's
manufacturing, processing, wholesaling and support activities were about
$429 million. Of the $155 million corporate pre-tax earnings,
approximately 33% or $51 million were generated from operations which
include a bakery, dairy, ice cream and soft drink plants, and such
wholesaling activities as produce, pharmaceutical, snacks and magazines,
as well as machine vending and shopping center leasing operations. The
Company had operated a system of automatic money teller machines as a
partner with a financial institution since 1984. The sale this year of
the Company's interest to EDS resulted in income of nearly $2 million.
The new owner has contracted with the Company to pay certain fees on
future ATM transactions.
Selling, general and administrative expenses increased to 25.27% of sales
compared to 25.05% and 25.03% in the prior two fiscal years. This year's
increase was principally caused by increases in union benefit costs as
contracted. Other factors were the increases in occupancy costs related
to new units, and the cost of electronic payments (via a debit or credit
card) which continued to grow in fiscal 1995.
This was Giant's sixth consecutive year of its "Apples for the Students"
program. This program, in addition to awards of computers, peripheral
equipment and computer software, continued to make available to schools
such items as athletic equipment, science and laboratory equipment, and
library books. The Company has distributed more than 86,000 computers,
plus peripheral equipment, related computer software and non-computer
equipment during the six years of this program. The program has been
favorably accepted by more than 2,700 schools along with teachers,
parents and students. While it is impossible to calculate sales
increases caused by this program, the Company believes that the program
has had and continues to have a long-term customer retention effect.
A contributing factor to the improved earnings (before the accounting
change) was the $5.0 million reduction of the net interest expense. This
was the result of higher yields on higher average investments, and the
decrease in interest expense resulting from lower outstanding debt, due
to scheduled and permissible advance repayments.
Effective February 27, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 112, "Employers' Accounting for Post
Employment Benefits". The Company does not provide any significant post
employment benefits to administrative employees and SFAS No. 112 did not
impact the Company. Union employees are covered under union-sponsored
multi-employer plans.
The provision for taxes yielded an effective tax rate of 39.4% for the
current year compared to 39.8% in the prior year. The higher prior
year's rate was caused by the effect of the 1993 federal tax increase
being made retroactive to January 1, 1993, thus affecting two months of
the preceding year.
The prior year also included the effect of the adoption of Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes". This resulted in the recognition of $3.9 million of income,
equal to 7 cents per share.
Earnings were $94.2 million or $1.59 per share, compared with earnings
(before the cumulative effect of accounting change for income taxes as
discussed above) of $91.3 million or $1.53 per share. The earnings for
fiscal 1993 were $81.5 million or $1.37 per share. As a percentage of
sales earnings were 2.55% for the current year, 2.56% for the prior year
and 2.35% for fiscal 1993.
FINANCIAL CONDITION
CASH, CASH EQUIVALENTS, INVESTMENTS AND WORKING CAPITAL
At February 25, 1995 the Company's cash, cash equivalents and short-term
investments totalled $250 million, compared with $228 million and $185
million at the close of each of the two prior years. 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 thousand decrease in short-term
investments. Cash and cash equivalents include highly liquid
investments with an original maturity of three months or less. Short-
term investments consist primarily of United States government and agency
securities purchased with an original maturity of more than three months.
Net cash provided by operations amounted to $203 million for the current
fiscal year, $218 million for the preceding fiscal year and $167 million
for the 1993 fiscal year. (See Consolidated Statements of Cash Flows for
further details.)
Cash outlays for property, plant and equipment were $102 million for the
current year, and $112 million and $79 million for the prior two years.
Note 9 of the Notes to the Consolidated Financial Statements provides
further information.
Working capital at the fiscal year end was $190 million compared with
$164 million and $155 million at the close of the two prior years. The
working capital ratio is 1.52 to 1, compared with 1.48 to 1 and 1.50 to 1
at the end of the two prior years, respectively. Including the LIFO
reserve, working capital would be $271 million currently, a 1.74 to 1
ratio, compared with $241 million, a 1.70 to 1 ratio and $228 million, a
1.74 to 1 ratio at the end of the two prior years, respectively.
The Company has had no short-term bank borrowings for more than eighteen
years. On July 9, 1993, the Company renewed a $50 million revolving
credit facility which terminates May 1, 1996. This facility should
enable the Company to handle contingencies that may arise. Note 4 of the
Consolidated Financial Statements provides additional details.
CAPITAL EXPENDITURES
The Company is authorized to spend approximately $209 million for
property, plant and equipment during fiscal 1996. These expenditures are
in part related to the seven new units that will open during the coming
year and the construction of several of the eleven units that are planned
to open within 18 months. Five of these units will be in shopping
centers developed by GFS Realty, the Company's real estate subsidiary.
Also, planned for fiscal 1996 is the enlargement or extensive remodel of
four existing stores. The Company believes that cash on hand plus its
cash flow from operations will be sufficient to support ongoing business
levels, including the planned fixed asset program, debt service, and
dividends.
CAPITALIZATION
During the year, the Company continued to improve its capital structure,
which contributes to financial flexibility. Notes and mortgages
decreased $19.6 million due to scheduled principal payments and the
partial prepayment of an obligation. The Company is not planning any new
financing during the upcoming fiscal year.
At the close of the 1995 fiscal year, shareholders' equity as a
percentage of capitalization (long-term debt plus shareholders' equity)
was 79% compared with 76% and 73% for the prior two fiscal years.
Shareholders' equity at the year end was $755 million, compared with $713
million, a year earlier. Long-term debt consists of $58 million of notes
and mortgages at an average interest cost of 10.1%, and $141 million of
obligations under capital leases. At the close of the prior year, the
comparable balances were $86 million and $141 million, respectively.
Return on shareholders' equity (ROE), (average of beginning and ending)
for the current year was 13% compared with 14% and 13% for the two prior
years.
DIVIDENDS
For the current year, cash dividends of $42.4 million were paid at the
rate of 72 cents per share. The Company repurchased 402 thousand shares
of its own stock during fiscal 1995 which is held as treasury stock. For
the prior two years dividend payments were $41.5 million and $40.3
million, at the rate of 70 cents and 68 cents per share. Fiscal year
1995 marks the 36th consecutive year of dividend payments, beginning in
1959 when the Company went public.
INFLATION AND CHANGING PRICES
Inflation continues to moderately increase costs to the Company including
the cost of merchandise, labor, utilities and the cost of acquiring
property, plant and equipment. The Company uses the LIFO method of
accounting for 83% of its inventories. Under this method, the cost of
merchandise sold approximates current costs and thus reduces the
distortion, if any, in reported income due to increasing costs. The
historical costs of property, plant and equipment recorded by the Company
were incurred over a period of many years. The cost of replacement of
property, plant and equipment is generally greater than the cost on the
books of the Company as a result of the inflation that has occurred over
the years since the property, plant and equipment were placed in service.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Giant Food Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of cash flows and of changes
in shareholders' equity present fairly, in all material respects, the
financial position of Giant Food Inc. and its subsidiaries at February
25, 1995, February 26, 1994 and February 27, 1993, and the results of
their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Notes 1 and 5 to the consolidated financial statements,
the Company changed its method of accounting for income taxes effective
February 28, 1993.
/s/
PRICE WATERHOUSE LLP
Washington, D.C.
March 27, 1995
CONSOLIDATED STATEMENTS OF INCOME
Fifty-two weeks ended February 25, 1995, February 26, 1994 and
February 27, 1993
Dollar amounts in thousands except per share
1995 1994 1993
SALES $3,695,627 $3,567,468 $3,472,581
COSTS AND EXPENSES
Cost of sales 2,594,647 2,503,072 2,450,757
Selling, general and administrative 933,786 893,720 869,032
Interest
Notes and mortgages, net of
interest capitalized (1995, $900;
1994, $809; 1993, $1,393) 8,311 9,973 10,255
Lease obligations 16,349 16,372 16,037
Income (10,745) (7,424) (5,760)
Other income (1,978)
3,540,370 3,415,713 3,340,321
INCOME BEFORE INCOME TAXES 155,257 151,755 132,260
PROVISION FOR INCOME TAXES 61,096 60,458 50,754
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING 94,161 91,297 81,506
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING (Note 5) - 3,934 -
NET INCOME $ 94,161 $ 95,231 $ 81,506
EARNINGS PER SHARE BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING $1.59 $1.53 $1.37
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING - $ .07 -
EARNINGS PER SHARE $1.59 $1.60 $1.37
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED BALANCE SHEETS
February 25, 1995, February 26, 1994 and February 27, 1993
Dollar amounts in thousands
ASSETS
1995 1994 1993
CURRENT ASSETS
Cash and cash equivalents $157,045 $111,845 $184,969
Short-term investments (Note 2) 92,757 116,499 228
Receivables 43,867 37,504 32,720
Inventories (Note 3) 237,978 217,576 223,912
Prepaid income taxes (Note 5) 22,548 19,001 17,567
Other current assets 2,144 3,113 2,232
Total current assets 556,339 505,538 461,628
PROPERTY, PLANT AND EQUIPMENT (Note 4)
Land 66,842 58,820 46,958
Buildings and improvements 295,245 268,640 231,947
Leasehold improvements 157,663 153,399 158,393
Fixtures and equipment 782,394 745,288 699,701
1,302,144 1,226,147 1,136,999
Less accumulated depreciation 609,214 544,862 479,128
692,930 681,285 657,871
Equipment deposits and construction
in progress 27,255 32,506 30,400
720,185 713,791 688,271
PROPERTY UNDER CAPITAL LEASES, net of
accumulated amortization
(1995, $59,876; 1994, $54,679;
1993, $52,044) (Note 6) 105,502 107,580 110,439
REAL ESTATE HELD FOR FUTURE DEVELOPMENT 23,933 21,367 26,130
OTHER ASSETS 10,751 9,537 10,132
$1,416,710 $1,357,813 $1,296,600
The accompanying notes are an integral part of the consolidated financial
statements.
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994 1993
CURRENT LIABILITIES
Current portion of long-term debt
Notes and mortgages (Note 4) $23,263 $14,618 $7,894
Obligations under capital leases (Note 6) 4,873 4,527 4,412
Accounts payable 225,829 226,284 206,388
Accrued expenses
Compensation related 82,831 75,886 62,983
Other 2,478 2,590 2,570
Dividends payable 10,663 10,394 10,147
Income taxes payable 16,808 7,033 12,690
Total current liabilities 366,745 341,332 307,084
LONG-TERM DEBT
Notes and mortgages (Note 4) 57,805 86,068 105,525
Obligations under capital leases (Note 6) 140,946 141,062 142,831
198,751 227,130 248,356
OTHER LIABILITIES
Deferred income taxes (Note 5) 21,868 41,192 46,731
Accrued insurance claims 35,471 25,417 20,986
Other 38,419 9,313 10,490
95,758 75,922 78,207
COMMITMENTS (Notes 6 and 8)
SHAREHOLDERS' EQUITY (Notes 4 and 7)
Common stock, $1 par, all classes 60,257 60,257 60,257
Capital in excess of par value 392
Retained earnings 720,784 670,034 616,938
Net unrealized loss on
short-term investments (Note 2) (1,648)
779,393 730,291 677,587
Less Class "A" stock held in treasury,
at cost (1995, 1,002,464 shares; 1994,
669,781 shares; 1993, 566,180 shares) 23,937 16,862 14,634
755,456 713,429 662,953
$1,416,710 $1,357,813 $1,296,600
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Fifty-two weeks ended February 25, 1995, February 26, 1994 and
February 27, 1993
Dollar amounts in thousands except per share
Capital in Treasury stock Net unrealized
excess of (Class "A") loss on Retained Total
par value Shares Cost short-term earnings Share-
investments holders'
equity
Balance,
2-29-92 $ 1,151 636,145 $16,443 $575,997 $620,962
Net income 81,506 81,506
Stock options
exercised (621) (35,047) (906) 285
Awards under
union contract (24) (5,373) (139) 115
Awards under stock
bonus plan (114) (29,545) (764) 650
Dividends
($.68 per share) (40,565) (40,565)
Balance,
2-27-93 392 566,180 14,634 616,938 662,953
Net income 95,231 95,231
Purchase of
treasury shares 173,000 3,993 (3,993)
Stock options
exercised (392) (42,456) (1,089) (345) 352
Awards under stock
bonus plan (26,943) (676) (29) 647
Dividends
($.70 per share) (41,761) (41,761)
Balance,
2-26-94 669,781 16,862 670,034 713,429
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - CONTINUED
Fifty-two weeks ended February 25, 1995, February 26, 1994 and
February 27, 1993
Dollar amounts in thousands except per share
Capital in Treasury stock Net unrealized
excess of (Class "A") loss on Retained Total
par value Shares Cost short-term earnings Share-
investments holders'
equity
Net income 94,161 94,161
Change in accounting
for short-term
investments (Note 2) $(408) (408)
Change in market value
of short-term
investments (Note 2) (1,240) (1,240)
Purchase of
treasury shares 402,700 8,764 (8,764)
Stock options
exercised (42,052) (1,021) (636) 385
Awards under stock
bonus plan (27,965) (668) (58) 610
Dividends
($.72 per share) (42,717) (42,717)
Balance,
2-25-95 $ 1,002,464 $23,937 $(1,648) $720,784 $755,456
Common stock, all classes
Shares Par value
Balance, February 29, 1992 60,256,620 $60,257
Balance, February 27, 1993 60,256,620 $60,257
Balance, February 26, 1994 60,256,620 $60,257
Balance, February 25, 1995 60,256,620 $60,257
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fifty-two weeks ended February 25, 1995, February 26, 1994 and
February 27, 1993
Dollar amounts in thousands
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 94,161 $ 95,231 $ 81,506
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 92,704 90,002 89,202
Amortization of property under capital leases 5,833 5,731 5,656
Compensation expense arising from stock awards 610 647 765
Other adjustments, net 1,724 1,889 1,707
Net increase (decrease) in cash from changes
in operating assets and liabilities,
detailed below 7,734 24,114 (11,420)
Net cash provided by operating activities 202,766 217,614 167,416
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of short-term investments (40,663) (237,165) (244)
Proceeds from sales of short-term inv. 48,805 120,694 -
Proceeds from maturity of short-term inv. 12,864 200 220
Capital expenditures (101,664) (111,924) (79,071)
Additions to other assets (2,938) (1,294) (2,346)
Net cash used in investing activities (83,596) (229,489) (81,441)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes and mortgages (19,618) (12,733) (9,001)
Reduction of obligations under capital leases (3,525) (3,361) (3,216)
Issuance of common stock 385 352 283
Purchases of treasury stock (8,764) (3,993)
Dividends paid (42,448) (41,514) (40,253)
Net cash used in financing activities (73,970) (61,249) (52,187)
Net inc (dec) in cash and cash equivalents 45,200 (73,124) 33,788
Cash and cash equivalents at beginning of year 111,845 184,969 151,181
Cash and cash equivalents at end of year $157,045 $111,845 $184,969
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Fifty-two weeks ended February 25, 1995, February 26, 1994 and
February 27, 1993
Dollar amounts in thousands
CASH FLOWS FROM CHANGES IN OPERATING ASSETS AND LIABILITIES
1995 1994 1993
(Increase) decrease in assets
Receivables $(6,363) $ (4,784) $ (4,579)
Inventories (20,402) 6,336 (16,599)
Prepaid income taxes (2,459) (1,434) (1,592)
Other current assets 969 (881) (485)
Increase (decrease) in liabilities
Accounts payable (455) 19,896 9,289
Accrued expenses 6,833 12,923 (4,506)
Income taxes payable 9,775 (5,657) 6,713
Deferred income taxes (19,324) (5,539) (5,012)
Accrued insurance claims 10,054 4,431 1,860
Other liabilities 29,106 (1,177) 3,491
Net cash provided by (used in) changes in
operating assets and liabilities $ 7,734 $ 24,114 $(11,420)
The accompanying notes are an integral part of the consolidated financial
statements.
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fifty-two weeks ended February 25, 1995, February 26, 1994 and
February 27, 1993
Dollar amounts in thousands except per share
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation: The consolidated financial statements include the accounts
of Giant Food Inc. (the Company) and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Cash equivalents: For financial reporting purposes, cash equivalents
consist of all highly liquid investments purchased with original maturities
of three months or less. At February 25, 1995, such cash equivalents
consist principally of bank repurchase agreements which are secured fully
by United States government securities.
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. At February 25, 1995,
the Company's short-term investments, all of which are classified as
available-for-sale as defined by SFAS No. 115, consist primarily of United
States government and Federal agency securities. Pursuant to SFAS No.115,
such investments are stated at market value, and unrealized gains and
losses on such securities are reflected, net of tax, in shareholders'
equity.
Inventories: Inventories are valued at the lower of cost or market. The
last-in, first-out (LIFO) method is used for determining the cost of
grocery, drug, cosmetic and non-food inventories, while the first-in,
first-out (FIFO) method is used for determining the cost of other
inventories, primarily perishable items. Approximately 83% of the
Company's inventories are valued using the LIFO method.
Property, plant and equipment: Property, plant and equipment are stated at
cost. Depreciation for financial reporting purposes is provided on the
straight-line method over the estimated useful lives of the assets which
results in average depreciation rates of 3%, 6% and 9% for buildings and
improvements, leasehold improvements and furniture and equipment,
respectively. Accelerated methods and lives are used for income tax
reporting purposes.
Property under capital leases: Property under capital leases, which
consists principally of real property used in the Company's operations, is
recorded at the lower of the present value of the minimum lease payments or
the fair market value of the leased property at the inception of the lease.
Amortization of the leased property is computed using the straight-line
method over the term of the lease.
Real estate held for future development: Real estate held for future
development is stated at cost.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Accrued insurance claims: The Company maintains insurance coverage with
respect to general liability, automobile and workers' compensation risks
under contractual arrangements which retroactively adjust insurance
premiums for claims paid subject to specified limitations. Accordingly,
the expense arising from such risks is accrued as amounts required to cover
incurred incidents become subject to estimation.
Income taxes: The provision for income taxes includes deferred income taxes
resulting from differences between income for financial reporting and
income tax purposes. The Company adopted SFAS No. 109, "Accounting for
Income Taxes" effective February 28, 1993 (see Note 5), which requires the
use of the liability method for computing income taxes rather than the
deferred method which was previously used by the Company.
Pre-opening costs: Costs associated with the opening of new stores are
expensed as incurred.
Other income: Other income represents the realized gain from the sale of
the Company's interest in a partnership that operates automatic teller
machines in the Company's stores.
Buying and promotional allowances: Allowances and credits received from
vendors in connection with the Company's buying and merchandising
activities are recognized as earned.
Earnings per share: Earnings per share is computed based on the weighted
average number of common shares outstanding during each year (59,368,068
shares in 1995, 59,659,352 shares in 1994 and 59,648,084 shares in 1993).
The exercise of outstanding stock options would not result in a material
dilution of earnings per share.
Business segments: Substantially all of the Company's assets, sales and
operating income are employed in or derived from a combination of retail
food and drug business in the United States.
Fair value of financial instruments: The carrying amount of the Company's
cash and cash equivalents approximates fair value because of the short
maturity of those instruments. The Company derives the fair value of its
short-term investments based on quoted market prices which are generally
readily available. The Company estimates the fair value of its notes and
mortgages by discounting the required future cash flows under such notes
and mortgages using borrowing rates at which similar types of borrowing
arrangements could be currently obtained by the Company.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. SHORT-TERM INVESTMENTS
The Company adopted SFAS No. 115 as of February 27, 1994. The impact of
this change in accounting principle resulted in a decrease in short-term
investments of $672 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 to be available-
for-sale and are classified as current assets. Short-term investments as
of February 25, 1995 consist of:
Gross
Unrealized Holding
Cost (Losses) Gains Fair Value
U.S. Treasury securities $ 71,052 $ (1,767) $ 69,285
Federal agency securities 18,788 (984) 17,804
Corporate bonds and other 5,653 15 5,668
$ 95,493 $ (2,736) $ 92,757
Maturities of short-term investments at February 25, 1995 were as follows:
Cost Fair Value
Due within one year $ 25,163 $ 25,162
Due after one year through five years 70,330 67,595
$ 95,493 $ 92,757
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.
3. INVENTORIES
If the FIFO method had been used, inventories would have been $80,967,
$76,420 and $73,090 higher at the end of 1995, 1994 and 1993, respectively.
Net income would have been higher by $2,755 ($.05 per share) in 1995,
$2,003 ($.03 per share) in 1994 and $2,413 ($.04 per share) in 1993. The
replacement cost of inventories valued at LIFO approximates FIFO cost.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. NOTES AND MORTGAGES
Notes and mortgages outstanding at year-end were as follows:
1995 1994 1993
Notes payable to insurance
company $ 50,880 $ 62,040 $ 68,200
Mortgage notes payable 30,188 38,646 45,219
81,068 100,686 113,419
Less current portion 23,263 14,618 7,894
$ 57,805 $ 86,068 $105,525
The insurance company notes are subject to covenants, the more significant
of which restrict the payment of dividends, the creation of long-term debt
and the purchase of Company common stock. At February 25, 1995,
approximately $80,100 of consolidated retained earnings were free of
dividend and stock purchase restrictions. The average interest rate on the
insurance company notes is 9.6%.
Mortgage notes are collateralized by real estate which cost $46,252. The
average interest rate on such notes is 10.5%.
Annual maturities of notes and mortgages for the next five years are as
follows: 1996, $23,263; 1997, $8,846; 1998, $6,921; 1999, $6,905; and
2000, $7,000.
The estimated fair value of notes and mortgages is approximately $84,000,
$108,000 and $123,000 at February 25, 1995, February 26, 1994, and February
27, 1993, respectively.
The Company has available credit facilities of approximately $50,000,
including a revolving credit line and a term loan facility. Such credit
facilities were not used in fiscal year 1995.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. INCOME TAXES
The Company adopted, effective February 28, 1993, SFAS No. 109, which
requires the use of the liability method of accounting for income taxes and
the adjustment of deferred income taxes to reflect changes in tax rates at
the time they are enacted. In addition, SFAS No. 109 requires that assets
and liabilities acquired in purchase business combinations be assigned
their fair value assuming equal tax bases, and that deferred income taxes
be provided for lower or higher tax bases. Upon adoption of SFAS No. 109,
the Company adjusted its deferred income tax accounts to reflect the then
current income tax rates and also adjusted the carrying amounts of certain
assets acquired in a 1992 shopping center acquisition. The cumulative
effect of the adjustments was to increase fiscal year 1994 net income by
$3,934, increase the net deferred income tax liability by $1,013 and
increase the bases of certain assets by $4,947. The effect of adopting
SFAS No. 109 on the Company's effective income tax rate in fiscal 1994 was
not material. Financial statements for years prior to fiscal year 1994 were
not restated.
The provision for income taxes consists of:
1995 1994 1993
Current
Federal $68,767 $56,800 $47,085
State 14,112 11,644 10,273
82,879 68,444 57,358
Deferred
Federal (18,622) (6,906) (5,458)
State (3,161) (1,080) (1,146)
(21,783) (7,986) (6,604)
$61,096 $60,458 $50,754
Deferred income tax assets (liabilities) are comprised of the following:
February 25, February 26,
Current deferred income tax asset: 1995 1994
Employee benefits $13,030 $12,384
Promotional allowances 4,217 2,136
Capitalization of inventory 3,521 3,113
Other 1,780 1,368
$22,548 $19,001
Noncurrent deferred income tax asset
(liability):
Depreciation $(68,629) $(74,148)
Acquisition of shopping center for stock (5,191) (5,191)
Capital leases 15,861 14,949
Provision for insurance claims 17,688 13,523
Pension payments 4,191 2,762
Capitalization of overhead 3,463 2,916
Promotional allowances 10,590 862
Other 159 3,135
(21,868) (41,192)
$ 680 $(22,191)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. INCOME TAXES (continued)
Deferred income taxes in 1993 resulted from the following timing
differences:
Depreciation $( 107)
Employee benefits (1,717)
Capital leases (937)
Promotional allowances (1,515)
Provision for insurance claims (2,037)
Other items, net (291)
$(6,604)
The following table reconciles the statutory federal income tax rate to the
Company's effective income tax rate.
1995 1994 1993
Statutory federal income tax rate 35.0% 35.0% 34.0%
State income taxes, net of
federal tax benefit 4.5 4.5 4.5
Retroactive tax increase to
January 1, 1993 0.1
Other (.1) 0.2 (0.1)
Effective income tax rate 39.4% 39.8% 38.4%
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. COMMITMENTS
Leases: The Company leases certain of its warehouse facilities and a
substantial number of its retail store properties under noncancelable lease
agreements for periods ranging from 20 to 30 years. These leases generally
contain optional renewal provisions for one or more periods of five years
each. Substantially all leases covering retail store properties provide
for additional rentals based on sales. Most leases also require the
payment of taxes, insurance and maintenance costs. Data processing and
certain other equipment leases are for terms of two to five years.
Future minimum lease payments under capital leases and noncancelable
operating leases as of February 25, 1995 are as follows:
Capital Operating
leases leases
1996 $ 19,876 $ 21,613
1997 19,801 20,536
1998 19,801 19,704
1999 19,789 18,880
2000 19,614 18,933
Later years 280,002 267,988
Total minimum lease payments 378,883 $367,654
Less executory costs 263
Net minimum lease payments 378,620
Less imputed interest 232,801
Present value of net
minimum lease payments 145,819
Less current portion 4,873
Long-term obligations under
capital leases $ 140,946
Minimum lease payments for capital leases have not been reduced by minimum
sublease rentals of $10,448 receivable in the future under noncancelable
subleases.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. COMMITMENTS (continued)
Net rental expense associated with leases consists of the
following:
1995 1994 1993
Operating leases
Minimum $19,254 $18,011 $16,809
Contingent 8,477 8,610 7,564
Contingent rentals under
capital leases 3,418 3,414 4,079
Gross rental expense 31,149 30,035 28,452
Sublease income (2,361) (2,348) (2,417)
Net rental expense $28,788 $27,687 $26,035
The Company also leases certain retail space to others under noncancelable
operating lease agreements. Rental income from owned properties was $8,351
in 1995, $8,287 in 1994 and $8,270 in 1993. Total future minimum rentals
as of February 25, 1995 are approximately $45,000.
Property, Plant and Equipment: During the next year the Company plans to
expend approximately $209,000 for property, plant and equipment.
7. COMMON STOCK AND EMPLOYEE INCENTIVE PLANS
Shares Authorized: Common stock, $1 par value, authorized and outstanding
at year end is as follows:
Outstanding
Class Authorized 1995 1994 1993
"A" non-voting 75,000,000 59,004,156 59,336,839 59,440,440
"AC" voting 125,000 125,000 125,000 125,000
"AL" voting 125,000 125,000 125,000 125,000
75,250,000 59,254,156 59,586,839 59,690,440
Class "A" common stock has all of the rights and privileges pertaining to
other classes of common stock except the right to vote. No dividends may be
declared on any class of common stock without declaring at least an equal
dividend on Class "A" stock. However, dividends may be declared on Class
"A" stock without declaring dividends on any other class of common stock.
At February 25, 1995, the Company had reserved 5,400,945 shares of its
Class "A" common stock for issuance under its stock option and executive
stock bonus plans. In June 1994, the Company's Board of Directors approved
a plan to purchase up to 400,000 shares of its Class "A" common stock in
the open market. As of February 25, 1995, the Company has purchased
239,300 shares under this plan. The Company has purchased and accumulated
treasury stock in order to accommodate the needs for registered common
stock which may arise in connection with the exercise of stock options and
the award of shares under executive stock bonus plans.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. COMMON STOCK AND EMPLOYEE INCENTIVE PLANS (continued)
Stock options: The Company has established incentive compensation plans
under which it is authorized to grant both incentive stock options and non-
qualified stock options to approximately 1,300 employees. Options to
purchase the Company's Class "A" common stock are exercisable at a price
equal to the market value of the stock at the date of grant and become
exercisable over two to six years following the grant. All options expire
ten years after date of grant.
The Company had historically granted stock appreciation rights (SAR's) in
tandem with options. During the year ended February 24, 1990, the Company
began to grant non-qualified options without tandem SAR's. No options have
been granted with tandem SAR's since July 1989.
Upon exercise of a SAR the holder is entitled to receive cash (or
equivalent value in stock) equal to the amount by which the market value of
the Company's Class "A" common stock on the exercise date exceeds the
exercise price of the related stock options. As SAR's are exercised the
corresponding options are canceled and as options are exercised the
corresponding SAR's are canceled.
Option and SAR activity is as follows:
Number of Shares Average Option
Options SAR's Price
February 29, 1992
Outstanding 1,958,982 769,332 $21.39
1993 Activity
Granted 432,700 - 23.43
Options exercised (35,047) (35,047) 7.55
SAR's exercised (81,677) (81,677) 7.84
Canceled (26,400) (5,800) 24.88
February 27, 1993
Outstanding 2,248,558 646,808 22.45
1994 Activity
Granted 581,500 - 23.39
Options exercised (42,456) (41,236) 7.36
SAR's exercised (87,686) (87,686) 12.63
Canceled (41,994) (7,244) 24.07
February 26, 1994
Outstanding 2,657,922 510,642 23.19
1995 Activity
Granted 646,000 - 23.51
Options exercised (41,984) (38,864) 8.91
SAR's exercised (44,013) (44,013) 12.60
Canceled (93,890) (8,740) 24.60
February 25, 1995
Outstanding 3,124,035 419,025 23.56
Exercisable 1,565,035 408,614 23.08
Available for future grants 2,276,910 NONE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. COMMON STOCK AND EMPLOYEE INCENTIVE PLANS (continued)
Stock Awards: The Company has also established executive stock bonus plans
under which certain officers and managerial employees may be awarded shares
of Class "A" common stock. Charges to income arising from stock awards
were $1,000 in 1995, 1994 and 1993.
8. EMPLOYEE BENEFIT PLANS
Pension and Savings Plans: The Company maintains a qualified defined
benefit pension plan which covers substantially all non-union employees.
Plan benefits are based on the participants' years of service and average
annual earnings. The Company's policy is to fund the amount expensed for
accounting purposes subject to it being deductible for income tax purposes.
Supplementary defined benefit pension plans covering certain officers are
also maintained. These plans are unfunded and non-qualified. The pension
liability associated with the plans is accrued using the same actuarial
methods and assumptions as those used for the Company's qualified plan.
The net periodic pension cost for these plans includes the following
components:
1995 1994 1993
Service cost
Qualified plan $4,512 $4,329 $3,877
Supplemental plans 185 71 67
Interest cost
Qualified plan 7,254 6,760 6,252
Supplemental plans 300 179 187
Actual return on assets (4,873) (9,552) (9,887)
Net amortization and deferral
Qualified plan (3,783) 1,941 2,360
Supplemental plans 190 71 69
Net pension cost $3,785 $3,799 $2,925
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. EMPLOYEE BENEFIT PLANS (continued)
The funded status and amounts recognized in the consolidated balance sheets
as of February 25, 1995, February 26, 1994 and February 27, 1993 are as
follows:
Qualified plan
1995 1994 1993
Actuarial present value of benefit obligations
Vested benefit obligation $58,801 $58,008 $52,130
Accumulated benefit obligation $66,202 $65,229 $58,837
Projected benefit obligation $89,806 $90,230 $80,780
Plan assets at fair value (87,826) (85,508) (75,271)
Projected benefit obligation in excess of
plan assets 1,980 4,722 5,509
Unrecognized net loss (746) (6,375) (9,180)
Unrecognized prior service cost (1,801) (3,282) (2,906)
Unrecognized transition asset 8,603 9,855 11,107
Pension liability recognized in the consolidated
balance sheets $ 8,036 $ 4,920 $ 4,530
Supplemental plans
1995 1994 1993
Actuarial present value of benefit obligations
Vested benefit obligation $ 2,297 $ 1,752 $ 1,931
Accumulated benefit obligation $ 2,297 $ 1,752 $ 1,931
Projected benefit obligation $ 3,811 $ 2,354 $ 2,528
Plan assets at fair value - - -
Projected benefit obligation in excess of
plan assets 3,811 2,354 2,528
Unrecognized net gain 982 840 616
Unrecognized prior service cost (1,459) (265) (287)
Unrecognized transition obligation (716) (819) (921)
Pension liability recognized in the consolidated
balance sheets $ 2,618 $ 2,110 $ 1,936
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. EMPLOYEE BENEFIT PLANS (continued)
Actuarial assumptions used were as follows:
1995 1994 1993
Discount rate 8% 8% 8%
Rate of increase in
compensation levels 5% 5% 5%
Expected rate of return
on plan assets 9% 9% 10%
Payments are made to union-sponsored, multi-employer pension plans in
accordance with negotiated labor contracts. Charges to income arising from
contributions required under the labor contracts aggregated $18,577,
$18,732 and $19,418 in 1995, 1994 and 1993, respectively.
The Company sponsors a tax deferred savings plan whereby eligible employees
may elect annually to contribute up to 20% of their compensation, subject
to statutory limitations. The Company matches a portion of employee
contributions. Charges to income representing the Company's contributions
to the plan were $4,033, $3,740 and $3,403 in 1995, 1994 and 1993,
respectively.
Other Benefits:
The Company does not provide any significant postretirement or
postemployment benefits to administrative employees, and postretirement and
postemployment benefits for union employees are covered by union-sponsored
multi-employer plans. Therefore, SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" and SFAS No. 112, "Employers'
Accounting for Postemployment Benefits" did not affect the Company.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. CASH FLOWS
Net cash flows from operating activities include cash payments for interest
and income taxes as follows:
1995 1994 1993
Interest $25,953 $27,662 $27,850
Income taxes 73,104 72,893 51,624
Non-cash investing and financing activities include the following:
1995 1994 1993
Property under capital leases
Additions $ 3,755 $10,379 $ 3,340
Terminations - (7,570) -
Obligations under capital leases
Additions 3,755 10,379 3,340
Terminations - (8,735) -
SUPPLEMENTARY FINANCIAL INFORMATION
(a) Selected Quarterly Financial Data (unaudited)
Thousands of Dollars, Except Per Share
Earnings
Fiscal Year Sales Gross Profit Net Income Per Share
1995
1st 12 weeks $ 829,697 $ 245,847 $ 20,414 $ .34
2nd 12 weeks 826,400 242,501 14,671 .25
3rd 12 weeks 834,780 250,207 18,561 .31
Last 16 weeks 1,204,750 362,425 40,515 .69
Total $ 3,695,627 $1,100,980 $ 94,161 $ 1.59
1994
1st 12 weeks $ 813,466 $ 244,574 $ 26,608* $ .45*
2nd 12 weeks 795,841 237,272 14,604 .24
3rd 12 weeks 799,056 238,642 17,722 .30
Last 16 weeks 1,159,105 343,908 36,297 .61
Total $ 3,567,468 $1,064,396 $ 95,231 $ 1.60
1993
1st 12 weeks $ 803,020 $ 233,861 $ 19,102 $ .32
2nd 12 weeks 778,586 225,803 11,959 .20
3rd 12 weeks 778,547 228,805 13,758 .23
Last 16 weeks 1,112,428 333,355 36,687 .62
Total $ 3,472,581 $1,021,824 $ 81,506 $ 1.37
* Includes impact of change in accounting in accounting for income taxes.
Change equaled $3.9 million of income, $.07 per share.
(b) Information about oil and gas producing activities - not applicable.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
Title of All Positions Year First
Name Age Held with the Company Elected Director
Israel Cohen 82 Chairman of the Board, 1949
Chief Executive Officer
and Director
David B Sykes 76 Director, Secretary, 1981
Treasurer, and Senior
Vice President-Finance
Constance M. Unseld 47 Director 1993
Peter F. O'Malley 56 Director 1993
David J. Sainsbury 54 Director 1994
Dino B. Adriano 52 Director 1994
Harry Beckner 66 Director 1994
The present term of each of the above Directors will expire at the
Annual Meeting of Shareholders currently scheduled for September 7,
1995.
Millard F. West, Jr. and Morton H. Wilner retired as active directors on
September 6, 1990, on which date they were elected Directors Emeritus.
Messrs. West and Wilner served as Board members 26 and 24 years,
respectively.
(b) Identification of Executive Officers
Year First Elected to
Name and Position Age Officer Present Office
Israel Cohen 82 1936 1978 (Chairman of Board)
Chairman of the Board 1977 (Chief Executive Officer)
and Chief Executive Officer
Pete L. Manos 58 1977 1992
President
David B Sykes 76 1955 1977 (Senior Vice President
Senior Vice President- -Finance)
Finance, Secretary 1978 (Secretary)
and Treasurer 1984 (Treasurer)
Alvin Dobbin 63 1970 1977
Senior Vice President-
Operations
David W. Rutstein 50 1978 1981
Senior Vice President-
General Counsel
David N. Freedman 65 1982 1985
Senior Vice President-
Corporate Facilities
Roger D. Olson 50 1978 1988
Senior Vice President-
Labor Relations and
Personnel
Robert W. Schoening 48 1985 1988
Senior Vice President-
Data Processing
Samuel E. Thurston 51 1977 1988
Senior Vice President-
Distribution
The present term of each of the above Executive Officers will expire at
the first meeting of the Board of Directors subsequent to the Annual
Meeting of Shareholders currently scheduled for September 7, 1995.
(c) Identification of Certain Significant Employees
Not applicable.
(d) Family Relationships
Not applicable.
(e) Business Experience
Each of the above named Executive Officers of the Company
has been employed by the Company for a period of time in excess of five
years. Their positions with the Company are set forth above in
subsection (b), and the duties of each have been encompassed within the
framework of his or her respective title since first becoming an officer
of the Company.
The principal occupation, employment, and business
experience during the past five years of each of the Directors and
Directors Emeritus of the Company is set forth below:
Israel Cohen - see subsection (b) above.
David B Sykes - see subsection (b) above.
Constance M. Unseld is the founder and operator of the
Unselds' School, a state accredited, independent school in Baltimore,
Maryland. She also serves as a member of the Board of Regents of the
University of Maryland system.
Peter F. O'Malley is the founder and current counsel to
the law firm of O'Malley & Miles of Prince George's County, Maryland.
He currently serves on the Boards of Directors of Potomac Electric Power
Company, Potomac Capital Investments and Legg Mason, Inc. The firm of
O'Malley & Miles is one of a number of firms which provides legal
services to the Company.
David J. Sainsbury is Chairman and Chief Executive of J
Sainsbury plc where he has worked since 1963. Mr. Sainsbury is a great-
grandson of the founder of J Sainsbury plc.
Dino B. Adriano is Chairman and Managing Director of
Homebase (Sainsbury's chain of home improvement and garden centers) and
Deputy Chairman of Shaw's Supermarkets Inc.
Harry G. Beckner was formerly President of Jewel Food
Stores of Chicago, Illinois and Chief Operating Officer of the H.E.Butt
(H.E.B.) grocery company of San Antonio, Texas. He serves on the Boards
of Directors of H.E.B. and Shaw's Supermarkets Inc.
Millard F. West, Jr., a Director Emeritus of the Company,
is a Vice-President of the firm of Prudential Securities, Inc. (Members
New York Stock Exchange) and is a Director of Dewey Electronics
Corporation.
Morton H. Wilner, a Director Emeritus of the Company, is
General Counsel Emeritus of the Armed Forces Benefit Association and
Vice Chairman of A.F.B.A. Industrial Bank. He is also a Trustee
Emeritus, for life, of the University of Pennsylvania.
(f) Involvement in Certain Legal Proceedings
No Director, Director Emeritus or Executive Officer was
involved in any event during the past five years which would be
responsive to this question.
(g) Promoters and Control Persons
Not applicable.
(h) Compliance with Insider Reporting Requirements
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors and executive officers, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission ("SEC")
and the American Stock Exchange initial reports of ownership and reports
of changes in ownership of common stock and other equity securities of
the Company within prescribed time periods. Officers, directors and
greater than ten-percent shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of
the copies of such reports furnished to the Company and written
representations that no other reports were required, during the fiscal
year ended February 25, 1995, all Section 16(a) filing requirements
applicable to officers, directors and greater than ten-percent
beneficial owners were met on a timely basis.
Morton Wilner inadvertently did not timely report gifts of
576 shares on Form 5. Mr. Wilner is preparing the necessary amendments
to correct these deficiencies.
ITEM 11. EXECUTIVE COMPENSATION
The following tables and narrative text discuss the compensation
paid in Fiscal Year 1995 and the two prior fiscal years to the Company's
Chief Executive Officer and the Company's four other most highly
compensated executive officers.
Summary Compensation Table
Annual Compensation (1)
Other
Name and Annual
Principal Fiscal Compen-
Position Year Salary Bonus sation(1)
Israel Cohen (1) 1995 $858,948 $434,346 --
Chairman of the 1994 $831,428 $434,346 --
Board & CEO 1993 $556,600 $690,500 --
David B Sykes 1995 $387,659 $196,015 --
Secretary, Treas. 1994 $375,232 $196,015 --
Sr. V.P. Finance 1993 $256,520 $306,300 --
Pete Manos 1995 $264,207 $133,608 --
President 1994 $255,736 $133,608 --
1993 $134,608 $233,600 --
Alvin Dobbin 1995 $245,916 $124,363 --
Sr. V.P. 1994 $238,004 $124,363 --
Operations 1993 $123,420 $233,600 --
David W. Rutstein 1995 $244,270 $123,464 --
Sr. V.P. 1994 $236,444 $123,464 --
General Counsel 1993 $121,000 $233,600 --
(1) Aggregate value of perquisites does not exceed the lesser of
$50,000 or 10% of the total amount of annual salary and bonus.
Long Term Compensation
Options/ All Other
Name and Restricted SAR Compensa-
Principal Fiscal Stock Awards(#) LTIP tion
Position Year Awards(3) (4) Payouts (5)(6)
Israel Cohen 1995 $15,021 32,500 0 $29,730
Chairman of the 1994 $15,284 32,500 0 $34,352
Board & CEO 1993 $15,625 2,500 0 $32,098
David B Sykes 1995 $15,021 17,500 0 $27,800
Secretary, Treas. 1994 $15,284 17,500 0 $29,688
Sr. V.P. Finance 1993 $15,625 2,500 0 $28,553
Pete Manos 1995 $15,021 22,500 0 $14,145
President 1994 $15,284 22,500 0 $16,635
1993 $15,625 2,500 0 $15,685
Alvin Dobbin 1995 $15,021 9,500 0 $15,879
Sr. V.P. 1994 $15,284 9,500 0 $17,806
Operations 1993 $15,625 2,500 0 $17,519
David W. Rutstein 1995 $15,021 9,500 0 $11,737
Sr. V.P. 1994 $15,284 9,500 0 $13,615
General Counsel 1993 $15,625 2,500 0 $13,389
(3) Includes cash payments for income taxes to each named officer
on the value of the restricted shares and the tax payment itself
pursuant to the Non-Qualified Executive Stock Bonus Plan II. The
aggregate stock holdings of this group were 11,410 shares and the share
value was $23.63 as of February 25, 1995. Dividends are paid on the
stock held under this plan.
Under this plan, the Company makes an annual contribution not
exceeding the greater of (i) $1,000,000 or (ii) six-tenths of one
percent (0.60%) of the pre-tax earnings of the Company. The Company's
cash contributions are used to purchase shares of Class A non-voting
common stock.
Distributions of those shares will be made to those participants
who meet any of the following conditions: (1) ten years' participation
in the Plan; (2) retirement after attainment of age 62; (3) abolition of
the participant's job; (4) total and complete disability or (5)
death.
(4) All options granted to participants pursuant to these stock
option plans are issued at 100% of fair market value on the date issued
and may be exercised, on a graduated basis, after the later of one year
from the date of grant or two years' continued employment. All options
terminate 10 years from their date of issuance.
The Company receives no cash consideration for granting options.
In order to acquire shares, the optionee must pay the full purchase
price of the shares being exercised, plus appropriate withholding taxes.
Optionees are not permitted to receive cash for any excess of market
value over option price.
(5) Includes Company matching contributions under Company's tax-
deferred saving plan ("Plan").
Participants in the Plan are permitted to contribute portions of
their compensation, subject to legal limitations, for which the Company
contributes an amount in cash equal to the participant's initial 3% pre-
tax contribution. In addition, the Company provides supplemental
contributions (in the form of Giant Food Inc. Class A common stock) to
match participants' contributions (partially or totally) in excess of 3%
of salary up to 6% of salary. Such Company contributions are limited to
.4% of its pre-tax earnings.
In Fiscal Year 1995 the Company made matching contributions under
the plan as follows: Mr. Cohen $5,958, Mr. Sykes $7,790, Mr. Manos
$7,100, Mr. Dobbin $6,998 and Mr. Rutstein $6,989.
(6) Includes premium payments under the Company's Split Dollar
Insurance Program in which participants are provided with permanent life
insurance owned by the Company. The Company pays for premiums and will
recover amounts equal to its investment in the insurance policies at the
deaths of the participants.
During Fiscal Year 1995 the Company made insurance premium payments
as follows: Mr. Cohen $23,772, Mr. Sykes $20,010, Mr. Manos $7,044, Mr.
Dobbin $8,880 and Mr. Rutstein $4,748.
OPTION GRANTS IN LAST FISCAL YEAR (1)
Individual Grants
Number of
Securities
Underlying % of Total
Options/ Options Exercise
SAR's Granted to of Base
Granted Employees Price Expiration
Name (#)(2) in FY ($/Sh) Date
Israel Cohen 2,500 $25.88 03/01/04
30,000 $20.81 06/02/04
32,500 5.03%
David B Sykes 2,500 $25.88 03/01/04
15,000 $20.81 06/02/94
17,500 2.71%
Pete Manos 2,500 $25.88 03/01/04
20,000 $20.81 06/02/04
22,500 3.48%
Alvin Dobbin 2,500 $25.88 03/01/04
7,000 20.81 06/02/04
9,500 1.47%
David Rutstein 2,500 $25.88 03/01/04
7,000 $20.81 06/02/04
9,500 1.47%
(1) No SAR's were awarded in the 1995 Fiscal Year.
(2) Options granted under the 1989 Non-Qualified Stock Option Plan
have a term of up to ten years as determined by the Stock Option Plan
Committee (the "Committee"). Options become exercisable after the later
of one year from date of grant or the completion of two years of
continued employment. After such date, optioned shares are exercisable
only to the extent of one-fifth of the total number of optioned shares
per year. After the fourth year, option grants are exercisable in full.
The Committee may prescribe longer time periods and additional
requirements with respect to the exercise of an option and may terminate
unexercised options based on the performance of the employee. No option
may be exercised unless the employee is in the employ of the Company.
The Company is required to withhold income taxes from income realized by
an employee on the exercise of an option. The Company will (i) reduce
the amount of stock issued to reflect the necessary withholding, (ii)
withhold the appropriate tax from other compensation due to the
optionee, or (iii) condition transfer of any stock to the employee on
the payment to the Company of the required taxes.
Potential Realizable Value of Assumed
Rates of Stock Price Appreciation for
Option Term (10 Years)
0% 5% 10%
Gain (3) Gain (4) (5) Gain (4) (5)
Name
Israel Cohen $0 $40,689 $103,115
0 392,619 994,973
$0 $433,308 $1,098,088
David B Sykes $0 $40,689 $103,115
0 196,309 497,487
$0 $236,998 $600,602
Pete Manos $0 $ 40,689 $103,115
0 261,746 663,316
$0 $302,435 $766,431
Alvin Dobbin $0 $40,689 $103,115
0 91,611 232,160
$0 $132,300 $335,275
David Rutstein $0 $40,689 $103,115
0 91,611 232,160
$0 $132,300 $335,275
(3) As shown in this column, no gain to the named officers or all
optionees is possible without appreciation in the price of the Company's
stock, which will benefit all shareholders.
(4) The price of GFSA Common Stock at the end of the ten year term
of the option grant at a 5% annual appreciation would be $42.16 and
$33.90, and at a 10% annual appreciation would be $67.13 and $53.98.
These appreciation rates are the result of calculations required by the
Securities and Exchange Commission's rules and therefore are not
intended to forecast future appreciation, if any, in the stock price of
the Company.
(5) The gain is calculated from the exercise price of the options
listed above, $25.88 and $20.81 based on the grant date of the options.
Option grants are at 100% of market value on the date of grant.
Aggregated Options/SAR Exercises in Last Fiscal Year
and Fiscal Year End Option SAR/Values (1)
Shares SARs Value
Acquired on Exerc'd Realized
Name Exercise(#) (#) ($)
Israel Cohen 440 -0- 7,081 (2)
David B Sykes -0- -0- -0-
Pete Manos -0- -0- -0-
Alvin Dobbin -0- -0- -0-
David Rutstein 6,700 -0 - 126,737 (2)
Value of Value of
Number of Number of Unexerc'd Unexerc'd
Unexerc'd Unexerc'd In-the-Money In-the-Money
Options/SARs Options/SARs Options/SARs Options/SARs
at FY-End at FY-End at FY-End($) at FY-End($)
Name Exercisable Unexercisable Exercisable(2) Unexercisable
Israel Cohen 13,500 61,500 $3,436 $89,440
David B Sykes 10,500 34,500 $3,436 $47,215
Pete Manos 11,500 43,500 $3,436 $61,290
Alvin Dobbin 890 20,100 $3,436 $24,695
David Rutstein 8,900 20,100 $3,436 $24,695
(1) Value is before taxes. The dollar values are computed by
determining the difference between the fair market value of the
underlying Common Stock and the exercise price at fiscal year end.
(2) Mr. Cohen and Mr. Rutstein exercised options to purchase
shares, the value of which was determined by the difference between the
market price and the option price on the date of exercise.
PENSION TABLE
Pension Plan:
The Company maintains a tax-qualified defined benefit pension plan for
approximately 2,450 salaried employees. The following table provides an
example of benefits at the normal retirement age of 65 payable as a life
annuity:
Estimated Annual Benefits
Pension from Retirement Plan
Highest Five for Following Number of Years
Year Average of Credited Service*
Earnings 10 20 30
$ 40,000 $ 4,104 $ 8,608 $ 13,512
70,000 8,154 17,008 26,562
100,000 12,204 25,408 39,612
150,000 18,954 39,408 61,362
200,000 25,704 53,408 83,112
250,000 32,454 67,408 104,862
300,000 39,204 81,408 126,612
350,000 45,954 95,408 148,362
400,000 52,704 109,408 170,112
A participant's annual pension payable to him as of his normal
retirement date will be equal to:
(i) .85% of "final average earnings" plus .50% of that portion of
final average earnings in excess of "covered compensation" times number
of years of credited service not to exceed 15, plus
(ii) 1.05% of final average earnings plus .50% of that portion of
final average earnings in excess of "covered compensation" times number
of years of credited service over 15, not to exceed 15, plus
(iii) .50% of final average earnings times years of credited service
over 30.
For purposes of determining plan benefits, earnings are the gross cash
compensation provided to a participant, including overtime, bonuses and
commissions.
Early retirement benefits are payable under the plan. Generally, the
payment will be in the form of a straight life annuity for participants
who are not married and a joint and survivor annuity for those who are
married.
*The amounts shown above include benefits payable from the Supplemental
Retirement Arrangements.
The number of years of credited service of the Executive Officers listed
in the remuneration table under the Retirement Plan, determined as of
February 25, 1995 are: Mr. Cohen, 24 years; Mr. Sykes, 24 years; Mr.
Dobbin, 24 years; Mr. Manos, 24 years; and Mr. Rutstein, 17 years. Two
of the officers (Messrs. Cohen and Sykes) are currently receiving
retirement payments from the plan, as required by law for participants
over age 70 1/2.
Supplemental Retirement Arrangements:
Two unfunded nonqualified pension plans are currently in effect. For
three of the officers listed in the remuneration table (Messrs. Cohen,
Sykes and Dobbin), the Supplemental Plan provides that in the event that
annual benefits from the Company's Retirement Plan, profit sharing and
thrift plans, and from Social Security do not equal sixty percent (60%)
of the earnings averaged over the five years prior to retirement, a
supplemental pension would be paid so that the total of all benefits,
including Social Security, equals sixty percent (60%). For less than
fifteen years of service, the total benefit is proportionately reduced.
The Supplemental Plan also provides a make-up benefit for those who will
be impacted by the $150,000 compensation limit in the Retirement Plan.
The Excess Benefit Plan was adopted in 1988 to restore benefits not
payable from the Retirement Plan solely due to the maximum benefit
limitations of IRC Section 415.
Compensation of Directors
During Fiscal Year 1995, Directors and Directors Emeritus who were not
employees received an annual fee of $35,000 and a fee of $250 for
committee meetings attended.
Termination of Employment
Not applicable.
Employment Contracts and Termination of Employment and Change-in Control
Arrangements
Not applicable.
Compensation Committee Interlocks and Insider Participation
Mrs. Unseld and Messrs. Beckner and O'Malley comprise the Company's
Officers' Executive Compensation Committee. Mr. O'Malley is of counsel
to the law firm of O'Malley & Miles which represents the Company with
respect to certain legal matters.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
(as of May 1, 1995)
The following table sets forth information with respect
to the ownership of the voting securities of the Company as of May 1,
1995.
Nature
Number of
Title of Shares Beneficial Percent
Name and Address Class of Stock Owned Ownership of Class
Israel Cohen Common AC 125,000 Direct 100.0%
6300 Sheriff Road
Landover, Maryland 20785
J Sainsbury (USA)
Holdings Inc.* Common AL 125,000 Direct 100.0%
(b) Security Ownership of Management (as of May 1, 1995)
The following table sets forth the number of each class
of equity securities of the Company beneficially owned by each Director,
named executive Officers and Directors and Executive Officers of the
Company as a group as of May 1, 1995.
Nature
Number of
Title of Shares Beneficial Percent
Name and Title Class of Stock Owned Ownership of Class
Israel Cohen Common Stock A 2,806,769(1) Direct and 4.615%
Chairman of the (Non-Voting) Indirect
Board and CEO, Common Stock AC 125,000 Direct 100.000%
Director (Voting)
David J. Sainsbury Common Stock A 0 (2) Direct and 0%
Director (Non-Voting) Indirect
Dino B. Adriano Common Stock A 0 Direct and 0%
Director (Non-Voting) Indirect
Harry Beckner Common Stock A 1,000 Direct .002%
Director (Non-Voting)
* These shares were acquired on November 14, 1994 from the Lehrman
family in a private transaction.David B Sykes
Common Stock A 234,156 Direct and .385%
Sr. Vice President- (Non-Voting) Indirect
Finance, Sec'y,
Treasurer, Director
Constance M. Unseld Common Stock A 1,000 Direct .002%
Director (Non-Voting)
Peter F. O'Malley Common Stock A 2,000 Indirect
Director (Non-Voting) .003%
Millard F. West, Jr. Common Stock A 23,800(4) Indirect .039%
Director Emeritus (Non-Voting)
Morton H. Wilner Common Stock A 10,000 Indirect .016%
Director Emeritus (Non-Voting)
Pete Manos Common Stock A 101,559(5) Direct and .167%
President (Non-Voting) Indirect
Alvin Dobbin Common Stock A 132,669(6) Direct and .218%
Sr. Vice President- (Non-Voting) Indirect
Operations
David Rutstein Common Stock A 117,037(6) Direct and .192%
Sr. Vice President- (Non-Voting) Indirect
General Counsel
All Directors and Common Stock A 3,841,775 Direct and 6.316%
Officers as a (Non-Voting) Indirect
Group (29 persons)
Common Stock AC 125,000(7) 100.000%
(Voting)
Common Stock AL 125,000(7) 100.000%
(Voting)
(c) Changes in Control
Not applicable.
NOTES:
(1) Includes 75,000 shares acquirable under stock option plans within
sixty days.
(2) Mr. Sainsbury disclaims beneficial ownership of the Common Stock
of the Company beneficially owned by J Sainsbury (USA) Holdings
Inc. Mr. Sainsbury is a director of J Sainsbury plc, the
ultimate parent company of J Sainsbury (USA) Holdings Inc. In
addition to the 125,000 Class AL voting shares listed above, J
Sainsbury (USA) Holdings Inc. owns 9,779,931 Class A non-voting
shares.
(3) Includes 45,000 shares acquirable under stock option plans within
sixty days.
(4) Includes 14,000 shares owned by wife for which Mr. West disclaims
beneficial ownership.
(5) Includes 55,000 shares acquirable under stock option plans within
sixty days.
(6) Includes 29,000 shares acquirable under stock option plans within
sixty days.
(7) As noted in Item 12(a) above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transactions with Management and Others
The Company operates a store in Hyattsville, Maryland under
a lease (originally executed in 1954) from a partnership in which Israel
Cohen has a 25% interest. Mr. Cohen's shares of gross rentals (minimum
and percentage where applicable) for the last three fiscal years were as
follows: $123,605 (FY 1995) $119,094 (FY 1994) and $130,219 (FY 1993).
The foregoing lease is not on less advantageous terms to the
Company than those involving similar type stores executed at the same
time by the Company with landlords where no affiliation existed. All
other Company leases have been entered into with non-affiliated entities
or with wholly-owned subsidiaries.
(b) Certain Business Relationships
During the Company's most recent fiscal year, the law firm
of O'Malley & Miles, to which Mr. O'Malley is of counsel, provided
certain legal services to the Company.
(c) Indebtedness of Management
Not applicable.
(d) Transactions with Promoters
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
Page in
Form 10-K
(a) The following documents are filed as part
of this report:
(1) Financial Statements and
supplementary data:
Report of Independent Accountants 16
Consolidated Statements of Income
for the years ended February 25,
1995, February 26, 1994 and
February 27, 1993 17
Consolidated Balance Sheets at
February 25, 1995, February 26, 1994
and February 27, 1993 18-19
Consolidated Statements of Changes
in Shareholders' Equity for the years
ended February 25, 1995, February 26,
1994 and February 27, 1993 20-21
Consolidated Statements of Cash Flows
for the years ended February 25, 1995,
February 26, 1994 and February 27, 1993 22-23
Notes to Consolidated Financial
Statements 24-36
Supplementary Financial Information
(unaudited) 37
(2) Financial Statement Schedule:
Report of Independent Accountants
on Financial Statement Schedule 58
Schedule
VIII. Valuation and qualifying accounts 59
All other schedules are omitted because they are
not applicable or the required information is shown in the consolidated
financial statements or notes thereto.
(3) Exhibits:
The Index to Exhibits is on page 60.
(b) Reports on Form 8-K
On October 13, 1994, a report on Form 8-K under Item 5
as filed by the Registrant.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BY: /s/ Israel Cohen
Israel Cohen,
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
GIANT FOOD INC.
May 19, 1995 By: /s/ Israel Cohen
Israel Cohen
Chairman of the Board and Principal Executive
Officer
May 19, 1995 By: /s/ David B Sykes
David B Sykes, Senior Vice
President-Finance, Chief
Financial Officer and
Principal Accounting Officer
May 19, 1995 By: /s/ Israel Cohen
Israel Cohen, Director
May 19, 1995 By: /s/ David B Sykes
David Sainsbury, Director
May 19, 1995 By: /s/ Dino Adriano
Dino Adriano, Director
May 19, 1995 By: /s/ Harry Beckner
Harry Beckner, Director
May 19, 1995 By: /s/ Constance M. Unseld
Constance M. Unseld, Director
May 19, 1995 By: /s/ Peter F. O'Malley
Peter F. O'Malley, Director
Report of Independent Accountants
on Financial Statement Schedule
To the Board of Directors
Giant Food Inc.
Our audits of the consolidated financial statements referred to in our
report dated March 27, 1995 also included an audit of the Financial
Statement Schedule listed in Item 14(a)(2) of this Form 10-K. In our
opinion, this Financial Statement Schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with
the related consolidated financial statements.
/s/
PRICE WATERHOUSE LLP
Washington, D.C.
March 27, 1995
GIANT FOOD INC. AND SUBSIDIARIES SCHEDULE VIII
(THOUSANDS OF DOLLARS)
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Additions
Balance Charged Balance
beginning to costs end of
Description of period & expenses Deductions period
Year ended February 25, 1995
Provision for
insurance claims $25,417 $32,781 $22,727 (a) $35,471
Year ended February 26, 1994
Provision for
insurance claims $20,986 $32,419 $27,988 (a) $25,417
Year ended February 27, 1993
Provision for
insurance claims $19,126 $30,780 $28,920 (a) $20,986
(a) Deductions consist of:
1995 1994 1993
Payments $22,203 $29,553 $30,439
Change in current portion 524 (1,565) (1,519)
$22,727 $27,988 $28,920
INDEX TO EXHIBITS
Exhibit Page
1989 Non-Qualified Incorporated by reference
Stock Option Plan to the Company's Form 10-K
filed with the SEC in
May, 1993 for the Fiscal
Year Ended February 27, 1993 --
Non-Qualified Executive Incorporated by reference
Stock Bonus Plan to the Company's Form 10-K
filed with the SEC in
May, 1993 for the Fiscal
Year Ended February 27, 1993 --
Split Dollar Insurance Incorporated by reference
Program to the Company's Form 10-K
filed with the SEC in
May, 1993 for the Fiscal
Year Ended February 27, 1993 --
Supplemental Retirement Incorporated by reference
Plan to the Company's Form 10-K
filed with the SEC in
May, 1993 for the Fiscal
Year Ended February 27, 1993 --
Excess Benefit Plan Incorporated by reference
to the Company's Form 10-K
filed with the SEC in
May, 1993 for the Fiscal
Year Ended February 27, 1993 --
Computation of Earnings Exhibit 11 61
Per Common Share
Subsidiaries Exhibit 21 62
Consent of Independent Exhibit 23 63
Accountants
Financial Data Schedule Exhibit 27 --
GIANT FOOD INC. AND SUBSIDIARIES EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
FIFTY-TWO WEEKS ENDED FEBRUARY 25, 1995, FEBRUARY 26, 1994 AND
FEBRUARY 27, 1993
1995 1994 1993
Primary:
Earnings:
Net income $ 94,161,000 $ 95,231,000 $ 81,506,000
Shares:
Weighted average number of
common shares outstanding 59,368,068 59,659,352 59,648,084
Assuming exercise of options,
using average market price,
reduced by the number of shares
which could have been purchased
with the proceeds from
exercise of such options 143,665 245,425 213,351
Weighted average number of common
shares outstanding, as adjusted 59,511,733 59,904,777 59,861,435
Primary earnings per common share $1.58 $1.59 $1.36
Assuming full dilution:
Earnings:
Net income $ 94,161,000 $ 95,231,000 $ 81,506,000
Shares:
Weighted average number of
common shares outstanding 59,368,068 59,659,352 59,648,084
Assuming exercise of options,
using higher of ending or
average market price, reduced
by the number of shares which
could have been purchased with
the proceeds from exercise
of such options 168,075 303,323 216,096
Weighted average number of common
shares outstanding, as adjusted 59,536,143 59,962,675 59,864,180
Fully diluted earnings
per common share $1.58 $1.59 $1.36
Note: This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of
APB Opinion No. 15 because it results in dilution of less than
3%.
EXHIBIT 21
GIANT FOOD INC. AND SUBSIDIARIES
Subsidiaries
State of
Subsidiary Incorporation
Giant of Maryland, Inc. Maryland
Giant of Salisbury, Inc. Maryland
Giant Construction Company, Inc. District of Columbia
GF McLean Shopping Center, Inc. Virginia
GFS Realty, Inc. Delaware
Landover Wholesale Tobacco Corp. Maryland
Warex-Jessup, Inc. Maryland
Bursil, Inc. Delaware
Cole Engineering, Inc. (formerly Cole Carpets, Inc.)Maryland
LECO, Inc. (formerly Viva Pharmaceuticals, Inc.) Delaware
Giant Automatic Money Systems, Inc. Maryland
Shaw Community Supermarket, Inc.(1) District of Columbia
Bayside Traffic Services of Maryland, Inc. Maryland
Super G, Inc. Maryland
Montrose Crossing, Inc. Maryland
Friendship Macomb SC, Inc. District of Columbia
Giant of Talbot Co., Inc. Maryland
(1) Giant Food Inc. owns 85% of the voting
securities of Shaw Community Supermarket, Inc.,
and 100% of the voting securities of all other
subsidiaries.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-21992) and in the Prospectuses
constituting part of the Registration Statements on Forms S-3 (Nos. 33-
33049, 33-40851 and 33-45261) of Giant Food Inc. of our report dated
March 27, 1995 appearing on page 16 of this Form 10-K. We also consent
to the incorporation by reference of our report on the Financial
Statement Schedule, which appears on page 58 of this Form 10-K.
/s/
PRICE WATERHOUSE LLP
Washington, D.C.
May 24, 1995
EX-27
2
5
YEAR
FEB-25-1995
FEB-25-1995
157045000
92757000
43867000
0
237978000
556339000
1329399000
609214000
1416710000
366745000
198751000
60257000
0
0
695199000
1416710000
3695627000
3965627000
2594647000
3540370000
0
0
24660000
155257000
61096000
94161000
0
0
0
94161000
1.58
1.58