-----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, VOVngaCholWMWLGbqgmleU+KC8y198BYZP0fM2YUJ4LAMs6bcG4Rqq+TdloKfJZV KkBcEopIXQlW2Y9WUqwNsg== 0000715633-96-000013.txt : 19960724 0000715633-96-000013.hdr.sgml : 19960724 ACCESSION NUMBER: 0000715633-96-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960616 FILED AS OF DATE: 19960723 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VONS COMPANIES INC CENTRAL INDEX KEY: 0000715633 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 381623900 STATE OF INCORPORATION: MI FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08452 FILM NUMBER: 96597632 BUSINESS ADDRESS: STREET 1: 618 MICHILLINDA AVE CITY: ARCADIA STATE: CA ZIP: 91007 BUSINESS PHONE: 8188217000 MAIL ADDRESS: STREET 1: 618 MICHILLINDA AVENUE CITY: ARCADIA STATE: CA ZIP: 91007 FORMER COMPANY: FORMER CONFORMED NAME: ALLIED SUPERMARKETS INC /MI//NEW/ DATE OF NAME CHANGE: 19870805 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 --------------------- FORM 10-Q (Mark one) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 16, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------- ------- Commission File Number 1-8452 ----------------------- THE VONS COMPANIES, INC. (Exact name of registrant as specified in its charter) Michigan 38-1623900 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 618 Michillinda Avenue, Arcadia, California 91007 (Address of principal executive offices and zip code) Registrant's telephone number, Including area code (818) 821-7000 Not Applicable (Former name, former address and former fiscal year, if changed since last report) ------------------------ 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. Yes X No --- --- Shares of common stock outstanding at July 22, 1996 - 43,822,951. PART I. FINANCIAL INFORMATION Item 1: Financial Statements THE VONS COMPANIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS All amounts except share data in millions of dollars and as a percentage of sales (Unaudited)
Twelve Weeks Ended Twenty-Four Weeks Ended --------------------------------------- --------------------------------------- June 16, 1996 June 18, 1995 June 16, 1996 June 18, 1995 ------------------ ------------------ ------------------ ------------------ Sales.............. $ 1,261.0 100.0% $ 1,139.5 100.0% $ 2,466.6 100.0% $ 2,282.0 100.0% ----------- ----- ----------- ----- ----------- ----- ----------- ----- Costs and expenses: Cost of sales, buying and occupancy...... 937.4 74.3 849.9 74.5 1,835.7 74.4 1,700.9 74.6 Selling and administrative expenses....... 267.1 21.2 243.3 21.4 525.6 21.3 489.2 21.4 Amortization of excess cost over net assets acquired....... 3.4 .3 3.5 .3 6.9 .3 6.9 .3 ----------- ----- ----------- ----- ----------- ----- ----------- ----- 1,207.9 95.8 1,096.7 96.2 2,368.2 96.0 2,197.0 96.3 ----------- ----- ----------- ----- ----------- ----- ----------- ----- Operating income... 53.1 4.2 42.8 3.8 98.4 4.0 85.0 3.7 Interest expense, net.............. 13.3 1.0 15.7 1.4 26.8 1.1 31.8 1.4 ----------- ----- ----------- ----- ----------- ----- ----------- ----- Income before income tax provision........ 39.8 3.2 27.1 2.4 71.6 2.9 53.2 2.3 Income tax provision........ 17.1 1.4 12.6 1.1 31.4 1.3 24.7 1.1 ----------- ----- ----------- ----- ----------- ----- ----------- ----- Net income......... 22.7 1.8 14.5 1.3 40.2 1.6 28.5 1.2 ----- ----- ----- ----- ----- ----- ----- ----- Retained earnings - beginning of period........... 293.4 221.8 275.9 207.8 ----------- ----------- ----------- ----------- Retained earnings - end of period.... $ 316.1 $ 236.3 $ 316.1 $ 236.3 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Income per common and common equivalent share: Net income....... $ .51 $ .33 $ .90 $ .65 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average common and common equivalent shares 44,884,000 43,817,000 44,694,000 43,785,000 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- See accompanying notes to these condensed consolidated financial statements.
THE VONS COMPANIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS All amounts in millions of dollars (Unaudited)
June 16, December 31, 1996 1995 ---------- ------------ ASSETS Current assets: Cash...................................... $ 6.8 $ 9.4 Accounts receivable....................... 40.3 31.7 Inventories............................... 313.0 350.7 Other..................................... 57.2 60.5 ---------- ------------ Total current assets.................... 417.3 452.3 Property and equipment, net................. 1,188.7 1,192.5 Excess of cost over net assets acquired..... 475.9 482.8 Other....................................... 60.2 58.9 ---------- ------------ TOTAL ASSETS................................ $ 2,142.1 $ 2,186.5 ---------- ------------ ---------- ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt and capital lease obligations .............. $ 32.6 $ 25.7 Accounts payable.......................... 269.9 304.2 Accrued liabilities....................... 300.6 263.5 ---------- ------------ Total current liabilities............... 603.1 593.4 Accrued self-insurance ..................... 135.0 128.0 Deferred income taxes....................... 119.0 118.9 Other noncurrent liabilities................ 61.4 65.0 Senior debt and capital lease obligations... 270.4 352.2 Subordinated debt, net...................... 283.5 305.7 ---------- ------------ Total liabilities....................... 1,472.4 1,563.2 ---------- ------------ Shareholders' equity: Common stock.............................. 4.4 4.3 Paid-in capital........................... 349.3 343.2 Retained earnings......................... 316.1 275.9 Notes receivable for stock................ (.1) (.1) ---------- ------------ Total shareholders' equity.............. 669.7 623.3 ---------- ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.. $ 2,142.1 $ 2,186.5 ---------- ------------ ---------- ------------ See accompanying notes to these condensed consolidated financial statements.
THE VONS COMPANIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS All amounts in millions of dollars (Unaudited)
Twelve Weeks Ended Twenty-Four Weeks Ended ---------------------- ----------------------- June 16, June 18, June 16, June 18, 1996 1995 1996 1995 --------- --------- --------- --------- Cash flows from operating activities: Net income......................... $ 22.7 $ 14.5 $ 40.2 $ 28.5 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization of property and capital leases....................... 23.1 22.8 46.0 45.9 Amortization of excess cost over net assets acquired and other assets................. 3.7 3.8 7.4 7.4 Amortization of debt discount and deferred financing costs. 1.5 1.6 3.0 3.1 LIFO charge ................... 1.4 .8 3.0 1.6 Deferred income taxes.......... - 6.4 2.3 13.1 Change in assets and liabilities: (Increase) decrease in accounts receivable...... (3.5) (.9) (8.6) 8.5 (Increase) decrease in inventories at FIFO costs 26.8 16.6 34.7 35.4 (Increase) decrease in other current assets..... 1.1 3.8 1.1 (4.3) (Increase) decrease in noncurrent assets........ (1.5) (2.3) (3.0) (4.0) Increase (decrease) in accounts payable......... (10.0) 22.5 (15.5) 6.2 Increase (decrease) in accrued liabilities...... 9.1 (22.3) 37.1 (9.0) Increase (decrease) in noncurrent liabilities... 1.0 1.4 3.4 5.8 --------- --------- --------- --------- Net cash provided by operating activities......................... 75.4 68.7 151.1 138.2 --------- --------- --------- --------- Cash flows from investing activities: Addition of property and equipment. (17.1) (24.3) (44.2) (41.0) Disposal of property and equipment. 2.6 1.4 4.5 3.4 --------- --------- --------- --------- Net cash used for investing activities......................... (14.5) (22.9) (39.7) (37.6) --------- --------- --------- --------- Cash flows from financing activities: Net borrowings (payments) on revolving debt................... (29.1) (19.0) (79.9) (56.9) Decrease in net outstanding drafts. (17.7) (27.3) (18.8) (41.7) Redemptions and repurchases of senior subordinated debentures... (15.6) - (15.6) (1.4) Payments on other debt and capital lease obligations and other...... 1.3 (.2) .3 (3.8) --------- --------- --------- --------- Net cash used by financing activities......................... (61.1) (46.5) (114.0) (103.8) --------- --------- --------- --------- Net cash decrease.................... (.2) (.7) (2.6) (3.2) Cash at beginning of period.......... 7.0 6.5 9.4 9.0 --------- --------- --------- --------- Cash at end of period................ $ 6.8 $ 5.8 $ 6.8 $ 5.8 --------- --------- --------- --------- --------- --------- --------- --------- Supplemental disclosures of cash flow information: Cash paid during the period for: Interest......................... $ 19.7 $ 21.7 $ 26.7 $ 29.9 --------- --------- --------- --------- --------- --------- --------- --------- Income taxes..................... $ 9.1 $ 14.9 $ 11.2 $ 15.6 --------- --------- --------- --------- --------- --------- --------- --------- Supplemental disclosures of non-cash investing and financing activity: Capital leases................... $ 1.9 $ - $ 7.6 $ - --------- --------- --------- --------- --------- --------- --------- --------- See accompanying notes to these condensed consolidated financial statements. /TABLE THE VONS COMPANIES,INC. AND SUBSIDIARIES NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The financial data included herein have been prepared by the Company without audit. In the opinion of management, all adjustments of a normal recurring nature necessary to present fairly the Company's consolidated financial position at June 16, 1996 and January 1, 1996 and the consolidated results of operations and cash flows for the twelve and twenty-four weeks ended June 16, 1996 and June 18, 1995 have been made. This interim information should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's latest annual report filed on Form 10-K. Due to seasonality and other market conditions, the results for the twenty-four week period ended June 16, 1996 should not be considered as indicative of the results to be expected for a full year. At June 16, 1996, the Company operated 325 supermarket and food and drug combination stores, primarily in Southern California, under the names Vons and Pavilions. The Company also operates a fluid milk processing facility, an ice cream plant, a bakery, and distribution facilities for meat, grocery, produce and general merchandise to support the store network. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited) Results of Operations Sales. Second quarter 1996 sales were $1,261.0 million, an increase of $121.5 million, or 10.7%, over second quarter 1995 sales. Same store sales for second quarter 1996 increased 7.1% over second quarter 1995 sales. Sales for the twenty-four weeks ended June 16, 1996 were $2,466.6 million, an increase of $184.6 million, or 8.1%, over the twenty-four weeks ended June 18, 1995. The 1996 year-to-date same store sales increased 5.7% over the 1995 year-to-date sales. The increase in sales reflects favorable response to improved customer service, the "Vons Is Value" marketing campaign, a strengthening economy in Southern California and an unusual number of competitor closings. For the remainder of 1996, management does not expect same store sales comparisons to be of the magnitude experienced in second quarter 1996 due to the strong same store sales performance of the Company during the second half of 1995. Since June 18, 1995, the Company has opened 14 stores, closed 15 stores and completed 34 store remodel projects. Costs and Expenses. Costs and expenses were $1,207.9 million for second quarter 1996, an increase of $111.2 million, or 10.1%, over second quarter 1995. Year-to-date 1996 costs and expenses were $2,368.2 million, an increase of $171.2 million, or 7.8%, over year-to-date 1995. Cost of sales and buying and occupancy expenses as a percentage of sales were 74.3% in second quarter 1996, a decrease of 0.2 percentage point compared with second quarter 1995. For the twenty-four weeks ended June 16, 1996, cost of sales and buying and occupancy expenses as a percentage of sales were 74.4%, a decrease of 0.2 percentage point compared with the comparable 1995 period. The cost of increased promotional activities in 1996 was offset by benefits achieved from category management and increased private brand sales. The improvement in cost of sales and buying and occupancy expenses as a percentage of sales reflects decreased occupancy costs as a percentage of sales. Selling and administrative expenses as a percentage of sales were 21.2% in second quarter 1996 a decrease of 0.2 percentage point compared with second quarter 1995. Year-to-date 1996 selling and administrative expenses as a percentage of sales were 21.3%, a decrease of 0.1 percentage point compared with year-to-date 1995. The cost of maintaining store service levels in 1996 has been more than offset by the utilization of a more efficient mix of store labor and improved sales per labor hour. Operating Income. Second quarter 1996 operating income was $53.1 million, an increase of $10.3 million over second quarter 1995. Operating margin increased to 4.2% in second quarter 1996 versus 3.8% in second quarter 1995. Operating income for the twenty-four weeks ended June 16, 1996 was $98.4 million, an increase of $13.4 million over the twenty-four weeks ended June 18, 1995. Operating margin increased to 4.0% for the twenty-four weeks ended June 16, 1996 versus 3.7% for the twenty-four weeks ended June 18, 1995. Operating income before depreciation and amortization of property, amortization of goodwill and other assets and LIFO charge ("FIFO EBITDA") was $81.3 million, or 6.4% of sales, in second quarter 1996 compared with $70.2 million, or 6.2% of sales, in second quarter 1995. FIFO EBITDA was $154.8 million, or 6.3% of sales, for the twenty-four weeks ended June 16, 1996 compared with $139.9 million, or 6.1% of sales, for the twenty-four weeks ended June 18, 1995. Interest Expense. Second quarter 1996 net interest expense was $13.3 million, a decrease from second quarter 1995 net interest expense of $15.7 million. Year-to-date 1996 net interest expense was $26.8 million, a decrease of $5.0 million from the comparable 1995 period. The decrease in 1996 interest expense primarily reflects lower weighted average revolving debt borrowings. Income Tax Provision. Second quarter 1996 income tax provision was $17.1 million, or a 43.0% effective tax rate. Second quarter 1995 income tax provision was $12.6 million, or a 46.5% effective tax rate. The income tax provision for the twenty-four weeks ended June 16, 1996 was $31.4 million, or a 43.9% effective tax rate. The income tax provision for the twenty-four weeks ended June 18, 1995 was $24.7 million, or a 46.4% effective tax rate. The decrease in the 1996 effective tax rate reflects the increase in income before income tax provision. The effective tax rate is impacted by amortization of excess cost over net assets acquired, the majority of which is not deductible for tax purposes. Income. Second quarter 1996 net income was $22.7 million, or $.51 per share, compared with $14.5 million, or $.33 per share, in second quarter 1995. Net income for the twenty-four weeks ended June 16, 1996 was $40.2 million, or $.90 per share, compared with $28.5 million, or $.65 per share, for the twenty-four weeks ended June 18, 1995. Liquidity and Capital Resources The Company's primary sources of liquidity are cash flows from operations and available credit under its revolving debt. Management believes that these sources adequately provide for its working capital, capital expenditure and debt service needs. Net cash provided by operating activities was $75.4 million in second quarter 1996 compared with $68.7 million in second quarter 1995 and $151.1 million for the twenty-four weeks ended June 16, 1996 compared with $138.2 million for the twenty-four weeks ended June 18, 1995. The ratio of current assets to current liabilities was 0.69 to 1 at June 16, 1996 compared with 0.76 to 1 at December 31, 1995. Net cash used for investing activities was $14.5 million in second quarter 1996 compared with $22.9 million in second quarter 1995 and $39.7 million for the twenty-four weeks ended June 16, 1996 compared with $37.6 million for the twenty-four weeks ended June 18, 1995. The Company opened five stores, closed eight stores and completed 14 store remodel projects during the twenty-four weeks ended June 16, 1996. The Company anticipates that total 1996 capital expenditures will be approximately $200 million of which approximately $145 million will be cash capital expenditures. Capital expenditures in 1996 have been and will continue to be funded out of cash provided by operations, revolving debt and/or through operating leases. The capital expenditure program has substantial flexibility and is subject to revision based on various factors including, but not limited to, business conditions, changing time constraints, cash flow requirements and competitive factors. In the near term, if the Company were to reduce substantially or postpone these programs, there would be no substantial impact on current operations and it is likely that more cash would be available for debt servicing. In the long term, if these programs were substantially reduced, in the Company's opinion, its operating business and ultimately its cash flow would be adversely impacted. Net cash used by financing activities was $61.1 million in second quarter 1996 compared with $46.5 million in second quarter 1995. Net cash used by financing activities was $114.0 million for the twenty-four weeks ended June 16, 1996 compared with $103.8 million for the twenty-four weeks ended June 18, 1995. These changes reflect the mandatory redemption of $15.6 million of the Company's 6-5/8% Senior Subordinated Debentures. The level of borrowings under the Company's revolving debt is dependent primarily upon net cash provided by operating activities, long-term borrowing activity and capital expenditure requirements. At June 16, 1996, the Company's revolving debt borrowings totaled $97.9 million compared with the December 31, 1995 revolving debt borrowings of $177.8 million. This decrease primarily reflects the excess of cash provided from operating activities of $151.1 million over capital expenditures of $44.2 million. At June 16, 1996, the Company had available unused credit of $527.0 million under its Revolving Loan. For the twenty-four weeks ended June 16, 1996, the weighted average interest cost on revolving debt was 7.2%; the corresponding bank prime rate at June 16, 1996 was 8.25%. Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private Securities Litigation Reform Act of 1995 Certain statements contained in this filing are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are thus prospective. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward- looking statements. Potential risks and uncertainties include, but are not limited to, competitive pressures from other major supermarket operators, economic conditions in the Company's primary markets and the other uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings. PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company has been served as a defendant in two actions, Tropin et al. v. Thenen et al. and Walco Investments, Inc. ------------------------------ ----------------------- et al. v. Thenen et al., which have been pending since ----------------------- December 21, 1993 in the United States District Court for The Southern District of Florida. In each case, the plaintiffs seek unspecified damages, alleging that certain defendants, a group of individuals and companies not including the Company, acted together to illegally and fraudulently obtain money through the use of entities in the diverting business, which involves the purchase of goods at a discount for resale to others. The Company and certain other defendants are alleged to be responsible for employees or agents who provided false information to lenders and other persons which induced them to extend credit to or to invest in the fraudulent enterprises. In addition, the Company and other defendants are alleged to have benefited from the enterprises' fraudulent activities because the defendants purchased goods from the enterprises at a price lower than would have been available but for the fraudulent activities. The claims brought against the Company and other defendants include fraud, violation of state and federal anti-racketeering laws, conversion and aiding and abetting fraud and conspiracy. The Company was served as a party to the actions in November 1995. While answers to the actions have not yet been filed because of jurisdictional defenses raised by the Company, extensive discovery involving the Company recently commenced, and the Company is defending the lawsuits vigorously. Trial is set to commence in October, 1996. Item 2. Changes in Securities Not applicable. Item 3. Defaults upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders On May 8, 1996, the Company held its Annual Meeting of Shareholders in Arcadia, California. At that meeting, the shareholders elected all four directors nominated by the Board of Directors. The number of votes cast for, against or withheld for each elected director were as follows:
Number of Votes Cast --------------------------------- For Against Withheld ---------- -------- --------- William S. Davila 40,454,089 - 690,527 James H. Greene, Jr. 40,452,079 - 692,537 John M. Lillie 40,796,006 - 348,610 Charles E. Rickershauser, Jr. 40,453,862 - 690,754
The other directors whose term of office as a director continued after the meeting are as follows: Steven A. Burd Lawrence A. Del Santo Fritz L. Duda Richard E. Goodspeed Robert I. MacDonnell Peter A. Magowan Roger E. Stangeland William Y. Tauscher The shareholders also approved an amendment to The Vons Companies, Inc. 1990 Stock Option and Restricted Stock Plan to increase the authorized number of shares to be issued thereunder from 4,000,000 to 6,000,000 shares and to implement a per employee share limitation of 500,000 shares per year. The number of votes cast for the amendment were 34,467,256, against were 6,597,611 and votes abstained were 79,749. Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. 27 Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended June 16, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE VONS COMPANIES, INC. Date: July 22, 1996 /s/ LAWRENCE A. DEL SANTO ---------------------------------- Lawrence A. Del Santo Chairman and Chief Executive Officer Date: July 22, 1996 /s/ PAMELA K. KNOUS ---------------------------------- Pamela K. Knous Executive Vice President, Chief Financial Officer and Treasurer EX-27 2
5 This schedule contains summary financial information extracted from the Company's Consolidated Statement of Operations for the twenty-four weeks ended June 16,1996, the Consolidated Balance Sheet as of June 16, 1996 and the accompanying notes thereto and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1995 JAN-01-1996 JUN-16-1996 6800 0 40300 0 313000 417300 1740100 551400 2142100 603100 553900 0 0 4400 665300 2142100 2466600 2466600 1835700 1835700 0 0 26800 71600 31400 40200 0 0 0 40200 0.90 0.90
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