-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EFoRfB2KQqEcbPMVmuoK4iTZYQ3lA6yr1QKu/j6XPsCPpehECt4XZ1mTNLXssbvo p4AfUpm7mCfE70/3cThRqg== 0000041289-98-000004.txt : 19980929 0000041289-98-000004.hdr.sgml : 19980929 ACCESSION NUMBER: 0000041289-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980815 FILED AS OF DATE: 19980928 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: GIANT FOOD INC CENTRAL INDEX KEY: 0000041289 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 530073545 STATE OF INCORPORATION: DE FISCAL YEAR END: 0222 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04434 FILM NUMBER: 98715956 BUSINESS ADDRESS: STREET 1: 6300 SHERIFF RD STREET 2: DEPT 593 CITY: LANDOVER STATE: MD ZIP: 20785 BUSINESS PHONE: 3013414100 MAIL ADDRESS: STREET 1: P O BOX 1804 DEPT 593 STREET 2: 6400 SHERIFF ROAD CITY: LANDOVER STATE: MD ZIP: 20785 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Twelve Weeks ended August 15, 1998 Commission File Number 1-4434 Giant Food Inc. (Exact name of Registrant as specified in its charter) Delaware 53-0073545 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 6300 Sheriff Road, Landover, Maryland 20785 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (301) 341-4100 NONE (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of each of the registrant's classes of common stock as of this date is as follows: Title of stock Number of shares class ($l par) Outstanding "A" non-voting 60,196,389 "AC" voting 125,000 "AL" voting 125,000 60,446,389 - 1 - GIANT FOOD INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - AUGUST 15, 1998 AND FEBRUARY 28, 1998 Dollar amounts in thousands ASSETS August 15, February 28, 1998 1998 (Unaudited) Current assets: Cash and cash equivalents $ 47,480 $ 28,857 Short-term investments (Note 2) 192,975 120,278 Receivables 64,856 63,560 Income taxes receivable 8,723 Inventories (Note 3) 252,789 274,137 Other current assets 25,856 26,518 Total current assets 583,956 522,073 Property, plant and equipment 1,558,037 1,589,938 Less accumulated depreciation 718,811 725,190 839,226 864,748 Property under capital leases, net of accumulated amortization, (8/15/98, $80,918; 2/28/98, $77,770) 113,563 116,711 Other assets 17,601 18,350 $ 1,554,346 $ 1,521,882 See notes to consolidated financial statements. - 2 - GIANT FOOD INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - AUGUST 15, 1998 AND FEBRUARY 28, 1998 Dollar amounts in thousands LIABILITIES AND SHAREHOLDERS' EQUITY August 15, February 28, 1998 1998 (Unaudited) Current liabilities: Current portion of long-term debt $ 9,124 $ 8,523 Accounts payable 255,842 259,020 Accrued liabilities 86,785 69,440 Dividends payable 12,122 11,710 Total current liabilities 363,873 348,693 Long-term debt, net of current portion: Notes and mortgages 25,566 27,134 Obligations under capital leases 152,989 156,041 178,555 183,175 Other liabilities 87,825 87,401 Shareholders' equity Common stock, $1 par, all classes 60,506 60,257 Capital in excess of par value 7,606 2,299 Accumulated other comprehensive income (128) (243) Retained earnings 857,958 843,402 925,942 905,715 Less class "A" stock held in treasury, at cost (8/15/98, 60,000 Shares: 2/28/98, 100,627 shares) 1,849 3,102 924,093 902,613 $ 1,554,346 $ 1,521,882 See notes to consolidated financial statements. - 3 - GIANT FOOD INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME TWENTY-FOUR WEEKS ENDED AUGUST 15, 1998 AND AUGUST 9, 1997 (Unaudited) Dollar amounts in thousands except for per share data Twenty-four Weeks Twelve Weeks 1998 1997 1998 1997 Sales $ 1,947,304 $ 1,863,718 $ 963,639 $ 934,782 Cost of sales 1,373,086 1,342,967 675,203 679,236 Selling, general and administrative expenses 508,076 479,414 256,365 241,005 Interest: Notes and mortgages 1,257 1,232 710 635 Lease obligations 7,937 7,612 3,968 3,806 Income (5,272) (4,696) (2,807) (2,493) 1,885,084 1,826,529 933,439 922,189 Income before provision for income taxes 62,220 37,189 30,200 12,593 Provision for income taxes 23,475 14,636 11,383 4,953 Net income $ 38,745 $ 22,553 $18,817 $ 7,640 Earnings per share: Basic $ .64 $ .38 $ .31 $ .13 Diluted $ .64 $ .38 $ .31 $ .13 Dividends per share $ .40 $ .38 $ .20 $ .195 Weighted average number of shares: Basic 60,388,000 60,037,000 60,469,000 60,082,000 Diluted 60,843,000 60,375,000 60,873,000 60,426,000 See notes to consolidated financial statements. - 4 - GIANT FOOD INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS TWENTY-FOUR WEEKS ENDED AUGUST 15, 1998 AND AUGUST 9, 1997 (Unaudited) Dollar amounts in thousands Twenty-four Weeks 1998 1997 Cash flows from operating activities: Net income $ 38,745 $ 22,553 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 42,128 42,833 Amortization of property under capital leases 3,148 2,873 Other adjustments, net 1,800 750 Net change in cash from changes in operating assets and liabilities, detailed below 43,958 15,241 Net cash provided by operating activities 129,779 84,250 Cash flows from investing activities: Purchase of short-term investments (125,813) (41,780) Sale of short-term investments 18,156 18,703 Maturity of short-term investments 35,149 17,993 Capital expenditures (16,058) (65,216) Other investing activities (1,600) (271) Net cash used in investing activities (90,166) (70,571) Cash flows from financing activities: Repayments of notes and mortgages (1,522) (1,481) Repayments of obligations under capital leases (2,500) (2,178) Issuance of common stock 6,820 3,583 Dividends paid (23,788) (23,113) Net cash used in financing activities (20,990) (23,189) Net increase in cash and cash equivalents 18,623 (9,510) Cash and cash equivalents, beginning of year 28,857 40,981 Cash and cash equivalents, end of quarter $ 47,480 $ 31,471 Increase (decrease) in cash from changes in operating assets and liabilities: Accounts receivable $ 7,427 $ (6,068) Inventory 21,348 44,112 Income taxes Receivable 2,383 Prepaid expenses 663 (602) Accounts payable (3,178) (18,874) Accrued expenses 11,184 (2,018) Income taxes payable 6,164 Other liabilities 350 (3,692) $ 43,958 $ 15,241 See notes to consolidated financial statements. - 5 - GIANT FOOD INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TWENTY-FOUR WEEKS ENDED AUGUST 15, 1998 AND AUGUST 9, 1997 (Unaudited) Dollar amounts in thousands 1. Consolidated financial statements: The accompanying unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The unaudited interim financial information should be read in conjunction with the consolidated financial statements contained in the 1998 Annual Report to Shareholders. Such results for the twenty-four weeks ended August 15, 1998 and August 9, 1997 are not necessarily indicative of results to be expected for the full year. 2. Short-term investments and comprehensive income: Maturities of short-term investments at August 15, 1998, were as follows: COST FAIR VALUE Due within one year $176,721 $176,962 Due after one year through five years 16,465 16,013 $196,186 $192,975 - 6 - The Company's comprehensive income includes net income and unrealized security holding gains and losses, net of taxes. A summary of comprehensive income for the periods presented is as follows: Twenty-four weeks Twenty-four weeks 1998 1997 Net income $ 38,745 $ 22,553 Unrealized security holding gains (losses) 115 84 Total comprehensive income $ 38,860 $ 22,637 3. Inventories: The inventories using the LIFO method were valued at approximately 83% of the Company's total inventories at August 15, 1998 and 84% at February 28, 1998. Under the FIFO method, these inventories would have been higher by $94,943 and $93,233, respectively. The pre-tax LIFO charge was $1,710 for the twenty-four week period ended August 15, 1998 and $1,770 for the twenty-four week period ended August 9, 1997. 4. Stock purchase agreements: On May 19, 1998, a tender offer was begun by Koninklijke Ahold N.V. (Ahold) to purchase all of the outstanding Class A Non-voting Common Stock of the Company for a cash price of $43.50 per share without interest thereon. The expiration date of the offer is July 15, 1998, unless the offer is extended. This offer is being made pursuant to the terms of a Stock Purchase Agreement between Ahold and The 1224 Corporation, holder of all of the 125,000 outstanding shares of the Company's Class AC Voting Common Stock. Under the Stock Purchase Agreement, Ahold will also purchase all of the Class AC stock for $43.50 per share. Also on May 19, 1998, Ahold reached agreement with J Sainsbury plc (Sainsbury) to acquire its 125,000 shares of Class AL Voting Common Stock for a total price of $100,000,000. A formal purchase agreement was entered into between Ahold and Sainsbury on May 28, 1998. On May 29, 1998, the Board of Directors of the Company voted unanimously to recommend that the Class A stockholders accept the offer from Ahold and tender all of their Class A shares pursuant to the offer. The consummation of this transaction is subject to certain regulatory considerations which are currently pending. The Company has charged to expense all costs incurred except contingent fees equal to .5% of the aggregate consideration paid for the Company or $13,500,000, which would be recognized at such time when consummation of the transaction would be a perfunctory matter. - 7 - GIANT FOOD INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations: The following is Management's discussion and analysis of certain significant factors which have affected the Company's earnings and financial condition during the periods included in the accompanying Consolidated Balance Sheets and Consolidated Statements of Income. Results of Operations: A summary of the principal income statement percentages are tabulated below: 24 Weeks Ended 12 Weeks Ended August 15, August 9, August 15, August 9, 1998 1997 1998 1997 % % % % Gross Profit 29.49 27.94 29.93 27.34 Operating Expenses 26.09 25.72 26.60 25.78 Interest Expense: Notes & Mortgages .06 .07 .07 .07 Lease Obligations .41 .40 .41 .41 Interest (Income) ( .27) ( .25) ( .29) ( .27) Income Before Income Taxes 3.20 2.00 3.13 1.35 Provision for Income Taxes 1.21 0.79 1.18 0.53 Net Income 1.99 1.21 1.95 0.82 Below are the differences for the periods ended August 15, 1998 compared with August 9, 1997 in thousands of dollars and percentages: Increase (Decrease) Increase (Decrease) Twenty-four Weeks Twelve Weeks $ % $ % Sales 83,586 4.5% 28,857 3.1% Gross Profit 53,467 10.3% 32,890 12.9% Operating Expenses 28,662 6.0% 15,360 6.4% Interest Expense: Notes & Mortgages 25 2.0% 75 11.8% Lease Obligations 325 4.3% 162 4.3% Interest Income 576 12.3% 314 12.6% Income Before Income Taxes 25,031 67.3% 17,607 139.8% Provision for Income Taxes 8,839 60.4% 6,430 129.8% Net Income 16,192 71.8% 11,177 146.3% - 8 - GIANT FOOD INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (continued): Results of Operations (Twenty-four weeks ended August 15, 1998 vs. Twenty- four weeks ended August 9, 1997): Sales increased $83.6 million or 4.5%. The change in sales for stores in operation both years was an increase of 1.0%. Gross profit increased $53.5 million. Gross profit as a percent of sales was 29.49% compared to 27.94% for the prior year. The increase was the result of beneficial changes in product mix in the current year. The prior year's gross profit margin was impacted by promotional activity to regain market share after a work stoppage in December 1996. Operating expenses increased from 25.72% of sales to 26.09%. Interest expense - notes and mortgages increased by $25 thousand. Interest income increased by $.6 million because of higher balances of investable cash and short term investments. Pre-tax earnings increased $62.2 million, an increase of 67.3%. The effective tax rate was 37.7% for the current year compared to 39.4% for the prior year. Net income was 1.99% of sales for the current period compared with 1.21% for the same period of the prior year. - 9 - GIANT FOOD INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (continued): Results of Operations (Twelve weeks ended August 15, 1998 vs. Twelve weeks ended August 9, 1997): Sales increased $28.96 million or 3.1%. The change in sales for stores in operation both years was an decrease of 0.2%. Gross profit increased $32.9 million. Gross profit as a percent of sales was 29.93% compared to 27.34% for the prior year. The increase was the result of beneficial changes in product mix in the current year. Along with the prior year being affected by the promotional activity discussed on the prior page. Operating expenses increased from 25.78% of sales to 26.60%. Interest expense - notes and mortgages increased by $75 thousand. Interest income increased by $.2 million because of higher balances of investable cash and short term investments. Pre-tax earnings increased $17.6 million, an increase of 139.8%. The effective tax rate was 37.7% for the current year compared to 39.3% for the prior year. Net income was 1.95% of sales for the current period compared with .82% for the same period of the prior year. - 10 - GIANT FOOD INC. AND SUBSIDIARIES Management's Discussion and Analysis of Financial Condition and Results of Operations (continued): LIQUIDITY: Working capital increased $46.7 million from February 28, 1998. At August 15, 1998 the working capital ratio was 1.60 to 1, compared to 1.50 to 1 at February 28, 1998. Including LIFO reserves of $94.9 million at August 15, 1998, the working capital ratio was 1.87 to 1. At August 15, 1998, cash and cash equivalents were $47.5 million and short-term investments were $193.0 million totaling $240.5 million compared with $149.1 million as at February 28, 1998. The higher balances are the result of higher earnings and lower capital expenditures than the prior year. It is estimated that cash, cash equivalents and short-term investments, together with cash flow from operations will be adequate to complete planned capital expenditures, debt reduction and dividend requirements. Capital expenditures include opening of one additional food-drug stores in the balance of the current fiscal year. CAPITALIZATION: Shareholders' equity as a percentage of capitalization was 83.8% on August 15, 1998, compared to 83.1% as of February 28, 1998 and 82.6% on August 9, 1997. - 11 - GIANT FOOD INC. AND SUBSIDIARIES OTHER INFORMATION Item 5. Other Information: Item 6. Exhibits and reports on Form 8-K: The Company filed a Form 8-k on September 4, 1998. Koninklijke Ahold N.V., ("Royal Ahold") requested a more detailed breakdown of registrant's unaudited financial information for the 24-week periods ended August 15, 1998 and August 9, 1997 than appeared in registrant's press release dated September 1, 1998. Registrant understands that Royal Ahold intends to use the information in connection with its preparation of an amendment to Royal Ahold's Form F-3 registration statement relating to a financing in connection with its acquisition of registrant. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Giant Food Inc. (Registrant) Date September 28, 1998 By /s/ Pete Manos Pete Manos President and Chief Executive Officer Date September 28, 1998 By /s/ Mark Berey Mark Berey Senior Vice President - Finance and Chief Financial Officer - 12 - EX-27 2
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