-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, dbrtXfFuU0qtXLg9zZ2jwUV1e1Z+p5Rx+r1bIcDCP/Y7S1lR+KPeWM+EZ3sXqkaY 8WPCFI2pTPWrGC1lheuPVA== 0000906280-94-000044.txt : 19941007 0000906280-94-000044.hdr.sgml : 19941007 ACCESSION NUMBER: 0000906280-94-000044 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940702 FILED AS OF DATE: 19940929 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELCHAMPS INC CENTRAL INDEX KEY: 0000729970 STANDARD INDUSTRIAL CLASSIFICATION: 5411 IRS NUMBER: 630245434 STATE OF INCORPORATION: AL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12923 FILM NUMBER: 94550996 BUSINESS ADDRESS: STREET 1: 305 DELCHAMPS DR STREET 2: P O BOX 1668 CITY: MOBILE STATE: AL ZIP: 36602 BUSINESS PHONE: 2054330431 MAIL ADDRESS: STREET 1: 305 DELCHAMPS DR STREET 2: PO BOX 1668 CITY: MOBILE STATE: AL ZIP: 36602 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 July 2, 1994 Commission File Number 0-12923 Delchamps, Inc. ______________________________________________ (Exact name of registrant as specified in its charter) Alabama 63-0245434 _________________________________ __________________________ (State or other jurisdiction of (I.R.S. Employer incorporation of organization) Identification Number) 305 Delchamps Drive Mobile, AL 36602 __________________________________ _________________ (Address of principal executive (Zip Code) offices) (205) 433-0431 _________________________ (Registrant's telephone number, including area code) Securities registered pursuant to Section 12 (g) of the Act: Common Stock, $.01 par value. 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 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 _____ 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, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affilates (affiliates being directors, executive officers and holders of more than 5% of the Company's common stock) of the Registrant at August 25, 1994 was at $94,000,000. The number of shares of Registrant's common stock, par value one cent ($.01) per share, outstanding at August 25, 1994, was 7,113,581. Documents incorporated by reference: Parts II and IV incorporate by reference portions of the Company's 1994 Annual Report to shareholders. Portions of the Company's definitive Proxy Statement for its 1994 annual meeting of shareholders (the "Proxy Statement") is incorporated by reference into Part III. The Exhibit Index follows the schedules of this document. PART I _________ Item 1. Business _________ __________ (a) The Registrant, Delchamps, Inc. (the "Company") is a corporation which was organized under the laws of the State of Alabama in 1946; from the Company's founding in 1921 until it was incorporated, it operated as a partnership. The Company operates a chain of supermarkets under the name "Delchamps" in Alabama, Florida, Louisiana, and Mississippi and has operated continuously for over 70 years. The number of supermarkets operated by the Company has grown from 110 at June 30, 1990 to 115 at June 27, 1992, and 120 at July 2, 1994. In addition to regularly opening new stores, the Company expands and remodels existing units, and closes outmoded or unprofitable stores. During the five years ended July 2, 1994, the Company closed 11 outdated or un- profitable stores and opened 27 new stores that are all considerably larger than the stores that were closed. The Company also remodeled and expanded 22 stores during the same 5 year period. The Company, in addition to operating supermarkets, operates twelve liquor stores in the State of Florida. Eleven are small units located adjacent to the Company's supermarkets, and the twelfth liquor store, operating under the name of "The Liquor Place", is a free-standing unit of approximately 26,000 square feet from a converted Delchamps supermarket in Pensacola, Florida. The Company's wholly-owned subsidiary, Supermarket Cigarette Sales, Inc., functions as the purchasing agent and distributor for cigarettes sold by the Company's supermarkets in Louisiana, Mississippi, and Florida. The 120 supermarkets operated by the Company at July 2, 1994 range in size from 12,000 square feet to 57,669 square feet, and average 40,068 square feet. The average square footage of selling area per supermarket increased from ap- proximately 26,291 square feet at June 30, 1990, to approximately 28,950 at July 2, 1994, and the total sales area in all stores increased from 2,892,000 to 3,474,000 square feet during the same period. The Company's new stores will range from approximately 46,000 to 62,000 square feet in size (and from approximately 34,000 to 47,000 square feet of selling space) depending upon the size of the store's market area. The Company plans to continue to expand the supermarket chain through the addition of new supermarkets in its present areas of operation, in new market areas and through expansion of existing stores. The Company opened three new supermarkets during fiscal year 1994, closed one store, and has opened or has plans to open four additional supermarket during fiscal year 1995. Four stores were expanded during the 1994 fiscal year and the Company plans to remodel and expand nine existing supermarkets in fis- cal 1995. The following table sets forth certain statistical information with respect to the Company's operations for the periods indicated:
DELCHAMPS, INC. Selected Financial Information Fiscal Year Ended ___________________________________________________________________________________ July 2, July 3, June 27, June 29, June 30, 1994 1993 1992 1991 1990 (52 Weeks) (53 Weeks) (52 Weeks) (52 Weeks) (52 Weeks) ___________ ____________ ____________ ___________ ___________ Sales (in thousands) $ 1,067,191 $ 1,034,531 $ 949,849 $ 959,169 $ 948,257 Number of supermarkets: Opened in period 3 4 6 5 9 Closed in period 1 1 3 3 3 Total 120 118 115 112 110 Average sales per supermarket (in thousands) $ 8,968 $ 8,880 $ 8,369 $ 8,641 $ 8,862 Total square feet of selling space (in thousands): Opened in period 155 167 241 178 323 Closed in period 22 19 65 53 64 Total 3,474 3,341 3,193 3,017 2,892 Total square feet of selling space per supermarket 28,950 28,314 27,765 26,938 26,291 Average sales per square foot of selling space $ 313 $ 317 $ 306 $ 325 $ 343 __________________________ At the end of period. Sales for the period divided by the average number of supermarkets for the period. Sales for the period divided by the average square feet of selling space for the period.
The Company believes that a vital factor in a successful supermarket expansion program is the careful selection of store locations. The Company analyzes prospective locations on a continuous basis, both internally and with assistance of outside consultants, and locates stores primarily in suburban shopping centers in areas with stable or growing middle and upper-middle class populations. The Company enlarges, modernizes, relocates or closes stores in light of their past performance and the Company's assessment of their future potential. (b) Financial information on industry segments and lines of business is omitted because, apart from its principal business of operating retail self-service food stores and liquor stores, the Company had no other lines of business or industry segments. (c) (i) Merchandising is the responsibility of the Senior Vice President of Merchandising who supervises the directors of the five merchandising departments: Grocery; Meat; Produce; Deli/bakery; and General Merchandise and Health and Beauty Care. The department directors, in turn, supervise the twelve category managers responsible for purchasing and merchandising various lines of products. The Company's principal merchandising strategies are to maintain an overall value image and to achieve high sales volume by offering quality products and services at competitive prices. Since the Company's stores carry many of the same products, centralized purchasing and distribution facilities are essential. All purchases are made by specialized category managers under central buying procedures, rather than on a store-by-store basis, which allows the Company to maintain quality control of its products and to take advantage of volume discounts. Inventories are adjusted on a frequent basis to take into account seasonal changes in consumer demand. Delchamps supermarkets operate on a self-service basis, and the vast majority are open from 6:00 a.m. until 11:00 p.m. seven days per week, except Christmas, Easter and Thanksgiving. The Company's beachfront stores are open 24 hours per day four months out of the year. The supermarkets are clean, spacious, air conditioned, well-lighted, colorfully decorated, well-stocked equipped with modern features and adjacent to offstreet parking facilities. Except in selected locations, customers carry their own purchases from the check-out counters to their automobiles unless they ask for special assistance. Delchamps supermarkets carry fresh meat and produce, frozen and other convenience foods, dairy products, specialty and other gourmet products, and general grocery products, as well as selected lines of non-grocery merchandise. All stores opened during the last several years have contained salad bars, bakeries, delicatessens and service meat departments and offer prepared ready-to-eat foods. In addition, delicatessens, salad bars, bakeries and service meat departments have been added to most of the Company's other larger stores. Seafood departments, video departments, banking facilities and dining areas have been added to several stores and nearly all new stores will offer these departments. The Company operates one pharmacy and intends to add pharmacies to selected locations. The Company's supermarkets offer a selection of national and regional brand-name products, generic products and products bearing brand names of Topco Associates, Inc. ("Topco"), a cooperative purchasing organization of which the Company is a shareholding member. The Company's affiliation with Topco, the largest cooperative grocery products purchasing organization in the United States, enables it to procure quality merchandise on a competitive basis with larger, national food retailers. Topco's membership of 32 retail grocery chains and wholesalers located throughout the United States enables it to employ large volume buying techniques on behalf of its members. Topco products are sold under its own brand names, such as "Food Club", "Topco", "Top Fresh" and "Top Frost", or under generic labels. The Company's purchases from or through Topco were approximately 20% of total inventory purchases in fiscal year 1994, 23% in 1993, and 26% in 1992. The Company's president serves as a director of Topco. Advertising and promotion are important factors in the Company's merchandising strategy. In fiscal year 1994, the Company's advertising expenditures, including television, radio, newspaper, magazine and circular advertising, were .90% of sales. The Company's advertising program features a quality image, emphasizing value with competitive prices and "bonus buys" (merchandise purchased at reduced prices from vendors and featured for resale with favorable retail prices). The Company does not issue trading stamps at any of its stores and does not expect to do so in the future. Store operations are the responsibility of the Senior Vice President, of Retail Operations, who supervises the Company's Vice President, Retail Operations, who in turn supervises the Company's six area supervisors. Each area supervisor is responsible for approximately 15 to 25 supermarkets in his area. Area supervisors regularly visit the supermarkets under their jurisdiction, thereby providing continuous, direct supervision of day-to-day store operations, including such matters as quality of merchandise, adequacy of staffing levels and adherence to Company policies. Each supermarket is individually supervised by a store manager, assistant store managers, a meat market manager and other department managers. The Company's management monitors the results of operations of each supermarket through the close and direct supervision of the area supervisors. The Company stresses the importance of customer satisfaction with its associates and insists that associates provide courteous and efficient service. Customer satisfaction is also achieved through rapid response to changing consumer tastes and well-stocked stores. Additionally, it is the Company's polity to have a management or supervisory associate respond personally to customer complaints. Technology also enables the Company to more efficiently serve its customers. The use of such technological advances as computerized scanning check-out equipment, direct store delivery systems and time and attendance systems are designed to enhance customer satisfaction and employee productivity. The Company was among the first grocery chains operating in the Southeast to install computerized scanning check-out equipment in its stores and now has such equipment in all of its stores. A computerized order entry system is used at each of the Company's supermarkets to record merchandise orders and transmit them electronically to the Company's central distribution facilities. Restocking is achieved through frequent deliveries from the Company's central distribution centers and from local suppliers, thus minimizing the space required at each store for warehousing inventory. A computerized direct store delivery system has been implemented in all of the Company's stores. This system improves accounting for and control of the merchandise delivered directly to the Company's supermarkets by suppliers, which represented 30% of total merchandise inventory purchases in fiscal year 1994. In addition, an electronic time, attendance and work scheduling system, utilizing the same hardware as the direct store delivery system, has been installed in the Company's supermarkets. This latter system assists the Company in controlling labor costs through more efficient use of manpower. Advances in technology are important to the Company's ability to improve productivity and keep costs in line and emphasis will continue to be placed on innovations in this area. The Company's supermarket products are purchased from over 1,000 suppliers, of which Topco is by far the most important, supplying approximately 20% of the Company's total inventory purchases during fiscal year 1994. No other supplier accounted for more than 5% of the Company's purchases during the fiscal year. During fiscal year 1994, approximately 70% of inventories (valued at cost) were supplied to the Company's stores through its central distribution facilities in Mobile and Hammond. The remaining items were furnished directly to the stores by local distributors. Major product lines supplied in this manner included beverages, bread and snack foods. The Company's central distribution facilities are serviced by rail and truck and are operated 24 hours per day, 7 days per week. All supermarkets receive deliveries 7 days per week from the Mobile and Hammond facilities through a transportation fleet leased by the Company. The Company believes that its distribution system has an effective range of approximately 350 miles in all directions. (ii) The Company has not publicly announced or otherwise made public information about any new product or industry segment that would require the investment of a material amount of the assets of the Company or which otherwise is material. (iii) Sources and availability of raw materials are factors that do not directly affect the Company's business. (iv) Patents and trademarks owned by the Company are not of material importance to its operations. (v) Seasonality does impact the Company, as sales tend to increase in the summer season because certain of its stores are located near Gulf Coast beaches. (vi) The Company has no unusual working capital requirements. (vii) The business of the Company is not dependent upon a single or a few customers. The Company does not sell goods or services in an amount that equals 10 percent or more of the Company's consolidated revenue to any single customer or group of customers under common control or to any affiliated group of customers. (viii) Backlog ordering is not a factor in the business of the Company. (ix) No portion of the business of the Company is subject to renegotiation of profits or termination of contracts or subcontracts at the election of any government. (x) The supermarket business is intensely competitive. The number of competitors and the amount of competition experienced by the Company's supermarkets vary by location. Principal competitive factors include store location, price, service, convenience, cleanliness and product quality and variety. Because the supermarket business is characterized by narrow profit margins, the Company's earnings depend primarily on the efficiency of its operations and its ability to maintain a large sales volume. The Company's principal competitors are the supermarket chains operated by Winn-Dixie Stores, Inc., The Great Atlantic and Pacific Tea Company, Bruno's, Inc., The Kroger Co. and Albertson's, Inc., and other large regional and national food store chains. Both Winn-Dixie and A&P compete with the Company throughout Alabama, Florida, Louisiana, and Mississippi. Bruno's Supermarkets compete with the Company's Alabama, Florida and Mississippi Gulf Coast supermarkets. Albertson's competes with the Company in the Florida panhandle and certain locations in Louisiana. Kroger has stores on the Mississippi Gulf Coast and Central and Southwestern Louisiana. Delchamps supermarkets also compete with local supermarkets, specialty and convenience food stores and local chains that have significant market shares in limited aeas, such as the Schwegmann Brothers' Giant Supermarket chain in Southeastern Louisiana. Certain of the Company's major competitors have financial resources that are substantially greater than those of the Company. (xi) The Company did not spend a material amount on Company sponsored research and development activities or on customer sponsored research activities relating to the development of new products, services or techniques, or the improvement of existing products, services or techniques during fiscal years 1994, 1993, and 1992. (xii) The Company's compliance with federal, state, and local provisions that 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, a material effect upon its capital expenditures, earnings or competitive position. (xiii) At the end of fiscal year 1994, the Company had approximately 4,065 full-time and 4,095 part-time employees, none of whom is covered by a collective bargaining agreement. (d) The Company does not engage in any operations in foreign countries, nor is any portion of its sales or revenue derived from customers in any foreign country. All sales by the Company occur at locations in Alabama, Florida, Louisiana and Mississippi. Item 2. Properties _________ ______________ The Company leases all of its supermarkets under standard commercial leases, no one of which is material to the Company. Most of these leases are for a period of 20 years, and contain several renewal options. The leases provide for fixed rentals ranging from $2.00 to $14.15 per square foot, with an average rental of $7.45 per square foot. Many of its leases, including most of the leases negotiated in the last five years, provide for the payment by the Company of taxes, insurance and certain maintenance expenses, as well as additional rental based on sales volume. One of the Company's store leases is scheduled to expire by the end of the 1995 fiscal year, and no more than five leases will expire in any one year thereafter until the year 2005. When a store is closed, the Company attempts to sublease or assign its lease. The Company is presently paying $70,519 in aggregate monthly rentals on eight leases of closed stores that have not yet been sublet or assigned. The Company owns the furnishings and fixtures in all supermarkets. It is anticipated that the Company will own the furnishings and fixtures in its stores presently under construction. The Company owns two warehouses in Mobile containing an aggregate of 232,000 square feet of storage space formerly used for dry groceries, dairy products, meats and perishables. Both buildings are currently being offered for sale or lease; however, the Mobile facilities are also being used to warehouse merchandise inventories bought "on deal" under the Company's forward buying program. The Company's central distribution center is on a 272-acre site in Hammond, Louisiana. The distribution facility comprises approximately 662,000 square feet and has fully automated dry grocery and frozen food warehouses. The center also contains a perishables warehouse, an ice manufacturing plant, a remote storage facility to house flammable items, and a transportation facility. The Company owns the 65,000 square foot building in which its corporate headquarters is situated at 305 Delchamps Drive, Mobile, Alabama, as well as a 2.7 acre parcel adjacent to the headquarters which may be used for future office expansion and parking. The Company also owns an undeveloped 6.8 acre parcel of real estate and a 3 acre parcel upon which a Company supermarket is located; both were acquired from Western Supermarkets in 1987 and are located near Birmingham, Alabama. In addition, the Company owns a one-half interest in a partnership which has developed a 22 acre site near Mobile; the site currently has a Company supermarket, K-Mart, and other shops. Further, the Company owns a one-half interest in land located in Panama City, Florida. The Company intends to use this land for development of a supermarket and other shops. Item 3. Legal Proceedings ___________ __________________ The Company is the defendant in a number of legal proceedings involving claims for money damages arising in the ordinary course of business which are either covered by insurance or are within the Company's self-insurance program, and in a number of other proceedings otherwise not deemed material. In the opinion of management, none of such litigation has resulted or will result in any materially adverse effect on the financial position or operations of the Company. Item 4. Submission of Matters to a Vote of Security Holders __________ ____________________________________________________ The Company did not submit any matters to a vote of security holders during the fourth quarter of its fiscal year ended July 2, 1994. Item 4(a). Executive Officers of the Registrant ___________ _____________________________________ All Executive Officers are appointed by the Board of Directors and, except in certain circumstances following a change in control, may be removed at any time, with or without cause by the Board. NAME POSITIONS HELD WITH COMPANY AGE _____ ____________________________ ______ Randy Delchamps Chairman of the Board, President and Chief Executive Officer 51 Patrick J. Curran Senior Vice President, Merchandising 42 Timothy E. Kullman Senior Vice President, Chief Financial Officer 39 Hugh Van Hooser Senior Vice President, Retail Operations 61 George J. Waldron, III Senior Vice President, Marketing and Corporate Relations 52 V. Lawrence Abreo Vice President, Management Information Services 41 Heidi E. Finchem Vice President, Benefits and Corporate Secretary 36 J.D. Foshee, Jr. Vice President, Real Estate 37 Larry S. Griffin Vice President, Planning and Development 52 Roy W. Henderson Vice President, Finance and Treasurer 46 William D. Kruse Vice President, Retail Operations 50 Donald A. Mathews Vice President, Distribution 55 James H. McDonald, Jr. Vice President and General Counsel 41 Thomas R. Trebesh Vice President, Personnel 45 Robert E. Whitlock Vice President, Engineering 56 Randy Delchamps has been with the Company since 1966 and and presently serves as Chairman of the Board, President and Chief Executive Officer. He was named to those positions in October, 1989. He had served as President and Chief Operations Officer since June, 1989. He served as Executive Vice President from June, 1988 to June, 1989. He also served the Company as Vice President, Real Estate, from 1972 until June, 1987. From June, 1987, until he was named Executive Vice President, Mr. Delchamps was Vice President, Administration. Patrick J. Curran began employment with the Company in April, 1994 and serves as Senior Vice President, Merchandising. Prior to Delchamps. Mr. Curran was employed by Acme Supermarkets in Philadelphia, Pennsylvania, Bi-Lo Supermarkets in the Carolina and Georgia markets, and Jewel Food Stores in Chicago, Illinois. Timothy E. Kullman began employment in August, 1994 and serves as Senior Vice President, Chief Financial Officer. Mr. Kullman was previously with Farm Fresh, Inc., Norfolk, Virginia as Senior Vice President and Chief Financial Officer. He was also associated with Blue Cross/Blue Shield of Michigan as well as Deloitte, Haskins and Sells of Detroit, Michigan. Hugh Van Hooser, has been employed with the Company since 1953. He was named Senior Vice President, Retail Operations in January, 1992. He was named Vice President, Marketing , in January, 1990 and served as Director of Marketing from July, 1989 until then. Prior to that time, he was Director, Meat Merchandising. George J. Waldron, III has been employed by the Company since 1965. In July, 1994, Mr. Waldron was named Senior Vice President, Marketing and Corporate Relations. He has served as Vice President, Marketing and Corporate Relations, and was appointed to that position in June, 1993. Prior to that time, Mr. Waldron served as Director, Advertising. V. Lawrence Abreo has been employed by the Company since 1971. He serves as Vice President, Management Information Services, and was appointed to that position in January, 1992. Prior to that time, Mr. Abreo was Director of Management Information Services. Heidi E. Finchem has been employed by the Company since 1982. She serves as Vice President, Benefits and Corporate Secretary, and was appointed to that position in June, 1993. Prior to that time, Mrs. Finchem served as Corporate Secretary and Employee Benefits Manager. J.D. Foshee, Jr. has been employed by the Company since 1982. He serves as Vice President, Real Estate, and was appointed to that position in June, 1993. Prior to that time, Mr. Foshee served as Director, Real Estate. Larry S. Griffin has been employed by the Company since 1964. In April, 1994, Mr. Griffin was named Vice President, Planning and Development. He was named Senior Vice President, Merchandising in January, 1992, and Vice President, Merchandising, in July, 1988. In March, 1987, he was appointed Director, Merchandising and, prior to that time, served as Director of Grocery Merchandising. Roy W. Henderson has been employed by the Company since 1969. He serves as Vice President, Finance and Treasurer, and was appointed to that position in January, 1992. Prior to that time, Mr. Henderson served as Director of Accounting. William D. Kruse has been employed by the Company since 1960. He serves as Vice President, Retail Operations, and was appointed to that position in June, 1993. Prior to that time, Mr. Kruse served as Director, Retail Operations. Donald A. Mathews has been employed by the Company since 1974. He serves as Vice President, Distribution, and was appointed to that position in April, 1985. Prior to that time Mr. Mathews was Director of Warehouse and Transportation. James H. McDonald, Jr., has been employed with the Company since 1984. He was named Vice President and General Counsel in June, 1987. In June, 1986, he was appointed Director, Legal Services. From 1984 to 1986, Mr. McDonald served the Company as Corporate Counsel. Prior to his employment with Delchamps, Inc., Mr. McDonald was a partner in a Mobile law firm. Thomas R. Trebesh has been employed by the Company since 1978. He serves as Vice President, Personnel, and was appointed to that position in June, 1993. Prior to that time Mr. Trebesh served as Director, Personnel. Robert E. Whitlock has been employed by the Company since 1984. He serves as Vice President, Engineering, and was appointed to that position in June, 1993. Prior to that time, Mr. Whitlock served as Director, Construction and Maintenance. PART II ______________ Item 5. Market for the Registrant's Common Stock and Related Matters ________ _____________________________________________________________ "Management's Report on Dividends and Stock Prices" on page 6 of the Company's Annual Report to Shareholders for 1994 is incorporated herein by reference. As of July 28, 1994, there were 1,191 record holders of the Company's common stock. The following table sets forth the cash dividends declared on the Company's common stock for the two most recent fiscal years. Future dividends will depend on the Company's earnings, financial requirements and other relevant factors. 1994 1993 ______ _______ First Quarter $ .11 $ .11 Second Quarter .11 .11 Third Quarter .11 .11 Fourth Quarter .11 .11 _______ ________ TOTAL $ .44 $ .44 ======= ======== Restrictions on the Company's paying of dividends are set forth in Note 5 of the Company's financial statements on page 11 of the Company's 1994 Annual Report to Shareholders and is incorporated herein by reference. Item 6. Selected Financial Data ________ ________________________ The selected financial data of the Company are set forth under the caption "Five Year Financial Highlights" included in the Company's 1994 Annual Report to Shareholders and are incorporated herein by reference. Such financial data should be read in conjunction with the financial statements and accompanying notes included under Item 8, below. Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition ________ ____________________________________________________ "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 14, 15, and 16 of the Company's 1994 Annual Report to Shareholders is incorporated herein by reference. Item 8. Financial Statements and Supplementary Data ________ ____________________________________________________ The Company's financial statements, including the notes thereto, and the report of KPMG Peat Marwick LLP are contained on pages 6 through 13 of the Company's 1994 Annual Report to Shareholders and are incorporated herein by reference. Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure ________ _____________________________________________________ There have been no changes in our disagreement on accounting principles or practices or financial statement disclosure between the Company and its independent certified public accountants within the twenty-four months prior to July 2, 1994. PART III ______________ Item 10. Directors and Executive Officers of the Registrant _________ _____________________________________________________ Information about nominees for election as Director and the Directors of the Company appears in the Company's Proxy Statement under the caption "Election of Directors" and is incorporated herein by reference. Certain information concerning the Company's Executive Officers is included in Item 4 (a) of Part I of this report. Item 11. Executive Compensation __________ ___________________________ Information concerning executive compensation is contained in the Company's Proxy Statement under the caption "Executive Compensation", and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management __________ ______________________________________________________________ Information concerning certain beneficial owners of the Company's stock appears in the Company's Proxy Statement under the subcaption "Security Holdings of Certain Beneficial Owners"; information as to security ownership of management is contained in the Company's Proxy Statement under the subcaption "Security Holdings of Directors and Executive Officers." All such information is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions __________ ________________________________________________ Information concerning certain relationships and related transactions appears in the Company's Proxy Statement under the caption "Compensation Committee Interlocks and Insider Participation." PART IV Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K __________ ________________________________________________________ (a) Documents filed as part of this report: (1) Financial Statements The financial statements of Delchamps, Inc. listed below are incorporated by reference from portions of the Company's 1994 Annual Report to Shareholders. Page In Annual Report _________ Report of KPMG Peat Marwick LLP 6 Consolidated Balance Sheets as of July 2, 1994 and July 3, 1993 7 Consolidated Statements of Earnings for the fiscal years ended July 2, 1994, July 3, 1993 and June 27, 1992 8 Consolidated Statements of Stockholders' Equity for the fiscal years ended July 2, 1994, July 3, 1993 and June 27, 1992 8 Consolidated Statements of Cash Flows for the fiscal years ended July 2, 1994, July 3, 1993 and July 27, 1994 9 Notes to Consolidated Financial Statements 10 (2) Financial Statement Schedules. Schedule I Marketable Securities - Other Investments Schedule V Property and Equipment Schedule VI Accumulated Depreciation and Amortization of Property and Equipment Schedule X Supplementary Statement of Earnings Information All other schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or the related notes. (3) Exhibits. The exhibits listed below and marked with an asterisk are filed herewith and are listed in the attached Exhibit Index; the other exhibits are incorporated herein by reference from the document indicated: Exhibit No. ______________ 3(a) Articles of Amendment to the Articles of Incorporation and Restated Articles of Incorporation of the Company, each dated October 5, 1984. (Exhibit 3 (a) to Form 10-K for fiscal year ended June 29, 1985). 3(b) The Company's By-Laws, as amended on July 28, 1989 (Exhibit 3 (b) to Form 10-K for fiscal year ended July 1, 1989). 4(a) Specimen of Common Stock Certificate (Exhibit 4(a) to Form 10-K for fiscal year ended June 30, 1990). 10(a) Membership and Licensing Agreement dated August 1, 1973 between Topco Associates, Inc. and Delchamps, Inc. and attached copy of Articles of Incorporation and By-Laws of Topco Associates, Inc. (Exhibit 10(a) to Registration Statement on Form S-1, No. 2-86926). 10(b) 1987 Restricted Stock Plan, as amended (Exhibit 10 (i) to Form 10-K for fiscal year ended July 2, 1988). 10(c) Indemnity Agreement dated November 24, 1987 between Delchamps, Inc. and First Alabama Bank (Exhibit 10 (o) to Form 10-K for fiscal year ended July 2, 1988). 10(d) Guaranty Agreement dated November 24, 1987 between Delchamps, Inc. and First Alabama (Exhibit 10(p) to Form 10-K for fiscal year ended July 2, 1988). 10(e) The Company's Share Purchase Rights Plan (Exhibit 1 to Report on Form 8-K filed with the Securities and Exchange Commission October 20, 1988). 10(f) Form of Change of Control Severance Agreement between the Company and certain of its officers and employees dated September 11, 1989 (Exhibit 10 (n) to Form 10-K for fiscal year ended July 1, 1989). 10(g) Loan agreement dated June 30, 1993 between Delchamps, Inc., and the Great West Life Annuity, Mutual of Omaha Insurance Company, and United of Omaha Insurance Company (Exhibit 10(g) to Form 10-K for fiscal year ended July 3, 1993). 13 Portions of the Company's 1994 Annual Report to Shareholders.* 21 Subsidiary of the Registrant.* 27 Financial Data Schedule* ____________________________ (b) Reports on Form 8-K - There were no reports filed on Form 8-K during the quarter ended July 2, 1994. 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. DELCHAMPS, INC. /s/ Randy Delchamps By: _______________________________________ Randy Delchamps, Chairman of the Board, President and Chief Executive Officer Dated September 15, 1994 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. Signature Title Date /s/ J. Thomas Arendall, Jr. Director Sept. 15, 1994 _______________________________ J. Thomas Arendall, Jr. /s/ Carl F. Bailey Director Sept. 15, 1994 _____________________ Carl F. Bailey /s/ E. Eugene Bishop Director Sept. 15, 1994 _____________________ E. Eugene Bishop /s/ John A. Caddell Director Sept. 15, 1994 _____________________ John A. Caddell /s/ James M. Cain Director Sept. 15, 1994 _____________________ James M. Cain /s/ William W. Crawford Director Sept. 15, 1994 _____________________ William W. Crawford /s/ Randy Delchamps Chairman of the Board, Sept. 15, 1994 _____________________ President and Chief Randy Delchamps Executive Officer /s/ T. W. Mitchell Director Sept. 15, 1994 _____________________ T. W. Mitchell /s/ Timothy E. Kullman Senior Vice President, Sept. 15, 1994 _____________________ Chief Financial Officer /s/ Timothy E. Kullman KPMG Peat Marwick LLP 303 Peachtree Street, N.E. Telephone 404 222 3000 Telefax 404 222 3050 Suite 2000 Atlanta, GA 30308 Independent Auditors' Report The Stockholders and Board of Directors Delchamps, Inc. Under date of August 5, 1994, we reported on the consolidated balance sheets of Delchamps, Inc. and subsidiary as of July 2, 1994 and July 3, 1993, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the years in the three-year period ended July 2, 1994, as contained in the 1994 annual report to stockholders. These financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year 1994. In connection with our audits of the aforementioned consolidated financial statements, we have also audited the related supplementary financial statement schedules as listed in the accompanying index. These supplementary financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these supplementary financial statement schedules based on our audits. In our opinion, such supplementary financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. August 5, 1994 /s/ KPMP Peat Marwick LLP
Schedule I DELCHAMPS, INC. Marketable Securities - Other Investments July 2, 1994 Amount at which each portfolio of equity security Numbers of shares Cost Market Value issues and each Names of Issuer or units-principal of of each issue other security and title of amount of bonds each at balance issue carried in each issue and notes issue sheet date the balance sheet ___________________ ______________________ ____________ ________________ ______________________ Merrill Lynch Pierce Fenner & Smith Corporate Income Fund 933,406 933,406 933,406 $ 933,406 Cash Management Tax Exempt Refund 170,984 170,984 170,984 170,984 _________________ $ 1,104,390
Schedule V
DELCHAMPS, INC. Property and Equipment Balance at Balance beginning Addition at end Classification of period at cost Retirements Transfers of period ________________ ____________ __________ ___________ _______________ _____________ Year ended June 27, 1992: __________________________ Land......................... $ 5,463,953 741,327 4,500 - 6,200,780 Buildings.................... 32,282,562 - - - 32,282,562 Leasehold improvements....... 10,195,822 - 32,982 2,348,000 12,510,840 Fixtures and equipment....... 142,709,121 - 2,650,035 25,880,595 165,939,681 Transportation equipment..... 1,959,187 - 418,070 - 1,541,117 Construction in progress..... 4,343,419 31,146,241 - (28,228,595) 7,261,065 ________________ _____________ _____________ _______________ ______________ $ 196,954,064 31,887,568 3,105,587 - 225,736,045 ================ ============= ============= =============== ============== Year ended July 3, 1993: ______________________________ Land......................... $ 6,200,780 294,076 - - 6,494,856 Buildings.................... 32,282,562 937,520 - - 3,220,082 Leasehold improvements....... 12,510,840 - 195 3,761,495 16,272,140 Fixtures and equipment....... 165,939,681 - 1,957,744 19,764,619 183,746,556 Transportation equipment..... 1,541,117 - 77,270 - 1,463,847 Construction in progress..... 7,261,065 19,603,926 - (23,526,114) 3,338,877 _________________ _____________ _____________ ______________ _________________ $ 225,736,045 20,835,522 2,035,209 - 244,536,358 ================= ============= ============== ============== ================= Year ended July 2, 1994: ______________________________ Land......................... $ 6,494,856 15,099 19,744 - 6,312,211 Buildings.................... 33,220,082 - - - 33,220,082 Leasehold improvements....... 16,272,140 - - 2,249,494 18,521,634 Fixtures and equipment....... 183,746,556 - 123,376 13,408,630 197,031,810 Transportation equipment..... 1,463,847 - 148,000 397,935 1,713,782 Construction in progress..... 3,338,877 17,689,655 - (16,056,059) 4,972,473 _________________ ______________ ____________ ______________ ________________ $ 244,536,358 17,704,754 469,120 - 261,771,992 ================= ============== ============ ============== ================
Depreciation is computed on the straight-line method for assets acquired after July 1, 1984; for assets acquired before July 1, 1984, depreciation is computed primarily on the double-declining balance method, except for buildings acquired after 1969 on which depreciation is computed on the 150% declining balance method. The Company uses the following period for depreciating and amortizing property and equipment: Buildings 10-50 years Leasehold improvements 10 years Fixtures and equipment 5-10 years Schedule VI
DELCHAMPS, INC. Accumulated Depreciation and Amortization of Property and Equipment Balance at Balance beginning Additions at end Classification of period at cost Retirements of period __________________ __________________ _______________ _______________ ______________ Year ended June 27, 1992: __________________________ Buildings.................... $ 9,832,135 1,297,600 - 11,129,735 Leasehold improvements....... 4,409,437 851,132 31,967 5,228,602 Fixtures and equipment....... 74,591,958 13,842,428 2,413,077 86,021,309 Transportation equipment..... 1,622,609 135,161 302,731 1,455,039 __________________ ________________ _____________ ______________ $ 90,456,139 16,126,321 2,747,775 103,834,685 ================== ================ ============= ============= Year ended July 3, 1993: ___________________________ Buildings.................... $ 11,129,735 1,298,799 - 12,428,534 Leasehold improvements....... 5,228,602 1,142,752 - 6,371,354 Fixtures and equipment....... 86,021,309 15,433,586 1,430,122 100,024,773 Transportation equipment..... 1,455,039 64,701 73,322 1,446,418 _________________ ________________ ______________ _____________ $ 103,834,685 17,939,838 1,503,444 120,271,079 ================= ================ ============== ============= Year ended July 2, 1994: ____________________________ - Buildings.................... $ 12,428,534 1,302,848 - 13,731,382 Leasehold improvements....... 6,371,354 1,451,897 - 7,823,251 Fixtures and equipment....... 100,024,773 15,756,680 93,807 115,687,646 Transportation equipment..... 1,446,418 101,998 147,551 1,400,865 __________________ ________________ _______________ _____________ $ 120,271,079 18,613,423 241,358 138,643,144 ================== ================ =============== =============
Schedule X DELCHAMPS, INC. Supplementary Statement of Earnings Information* For The Years Ended July 2, 1994, July 3, 1993 and June 27, 1992 Item Charged to Costs and Expense _______ ___________________________________ 1994 1993 1992 _________ __________ _________ Advertising..................... $ 9,622,354 9,048,191 8,818,816 ____________________________ *Maintenance and repairs, amortization of intangible assets, taxes other than payroll and income taxes, and royalties did not exceed 1% of revenues in 1994, 1993, or 1992. E X H I B I T I N D E X Number Description ___________ _______________________________________ 13 Portions of the Company's 1994 Annual Report to Shareholders 21 Subsidiary of the Company 27 Financial Data Schedule EX-13 2 EXHIBIT 13 DELCHAMPS, INC. AND SUBSIDIARY Portion of inside front cover of 1994 Annual Report
FIVE YEAR FINANCIAL HIGHLIGHTS (In thousands except per share amounts) FISCAL YEAR ENDED ____________________________________________________________ JULY 2, JULY 3, JUNE 27, JUNE 29, JUNE 30, STATEMENT OF EARNINGS DATA: 1994 1993 1992 1991 1990 (52 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) _________________________________________________________________________________________________________________ Sales $1,067,191 $ 1,034,531 $ 949,849 $ 959,169 $ 948,257 Operating Income 22,019 27,907 12,885 28,703 27,854 Earnings before income taxes and cumulative effect of changes in accounting principles 17,858 22,738 8,005 23,299 22,122 Net earnings 10,951 14,373 5,799 15,247 14,385 Net earnings per common share 1.54 2.02 0.81 2.14 2.02 Dividends declared per common share 0.44 0.44 0.44 0.43 0.39 Weighted average shares outstanding 7,114 7,114 7,126 7,132 7.132 BALANCE SHEET DATA: _________________________________________________________________________________________________________________ Working Capital $ 54,926 $ 49,511 $ 38,448 $ 41,793 $ 38,197 Total assets 263,269 252,052 246,725 223,857 220,183 Long term debt and obligations under capital leases, excluding current installments 32,169 39,503 42,214 36,062 44,147 Stockholders' equity 136,300 126,262 112,800 107,873 91,180
Pages 6 through 13 of 1994 Annual Report DELCHAMPS, INC. AND SUBSIDIARY FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA DELCHAMPS, INC. AND SUBSIDIARY Reports of Independent Auditors and Management ______________________________________________________________________________ INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Delchamps, Inc.: We have audited the accompanying consolidated balance sheets of Delchamps, Inc. and subsidiary as of July 2, 1994 and July 3, 1993, and the related consolidated statements of earnings, stockholders' equity, and cash flows for each of the years in the three-year period ended July 2, 1994. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Delchamps, Inc. and subsidiary at July 2, 1994 and July 3, 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended July 2, 1994, in conformity with generally accepted accounting principles. As discussed in note 9 to the consolidated financial statements the Company changed its method of accounting for postemployment benefits in 1994 to adopt the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits". As discussed in note 10 to the consolidated financial statements, the Company changed its method of accounting for income taxes in 1994 to adopt the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". August 5, 1994 Atlanta, Georgia /s/ KPMG Peat Marwick LLP MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS The Management of Delchamps, Inc. and subsidiary (the "Company") is responsible for the preparation, integrity, and objectivity of the consolidated financial statements and related information appearing in the Annual Report. The consolidated financial statements were prepared in accordance with generally accepted accounting principles and include amounts and interpretations that are based on Management's best estimates and judgments. The Company maintains a system of internal accounting control which provides reasonable assurance that financial records are reliable for preparation of financial statements and that assets are properly accounted for and safeguarded. The consolidated financial statements were audited by KPMG Peat Marwick LLP, independent auditors appointed by the Stockholders of the Company upon the recommendation of the Board of Directors. Their audits provide an independent review of Management's discharge of its responsibilities for reporting the Company's financial condition and results of operations. The Audit and Finance Committee of the Board of Directors, the majority of whom are outside directors, meets periodically with the internal and independent auditors to review their accounting, financial and audit reports and any recommendations they have for improvements in the system of internal accounting control. MANAGEMENT'S REPORT ON DIVIDENDS AND STOCK PRICES The common stock of Delchamps, Inc. is traded on the Nasdaq National Market under the symbol DLCH. Trading commenced with the Company's initial public offering on November 23, 1983. The following information represents the high and low sales prices on the Nasdaq National Market. Fiscal Year Ended July 2, 1994 High Low First Quarter 24 19 Second Quarter 24.5 20.5 Third Quarter 24 20.75 Fourth Quarter 22.5 20.5 Fiscal Year Ended July 3, 1993 High Low First Quarter 22.25 16.625 Second Quarter 25 17.25 Third Quarter 27.5 21.5 Fourth Quarter 27.5 20 The Company has paid a regular quarterly dividend of $.07 per share from November 1, 1983 through August 1988, $.09 per share from September 1988 through August 1989, $.10 per share from September 1989 through August 1990, and $.11 per share thereafter. As of July 28, 1994, there were approximately 1,191 shareholders of record. DELCHAMPS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS July 2, 1994 and July 3, 1993 (In thousands except share data)
__________________________________________________________________________________ Assets 1994 1993 __________________________________________________________________________________ Current assets: Cash and cash equivalents (note 2) $ 15,378 12,070 Trade and other accounts receivable 9,475 7,941 Merchandise inventories (note 3) 105,663 97,083 Prepaid expenses 443 1,242 Income taxes receivable (note 10) 58 - Deferred income taxes (note 10) 1,529 2,129 _________ _________ Total current assets 132,546 120,465 _________ _________ Property and equipment (notes 4 and 5): Land 6,312 6,495 Buildings and improvements 51,742 49,492 Fixtures and equipment 198,746 185,211 Construction in progress 4,972 3,339 _________ _________ 261,772 244,537 Less accumulated depreciation and amortization 138,643 120,271 _________ _________ Net property and equipment 123,129 124,266 _________ _________ Cost in excess of fair value of assets acquired, net of accumulated amortization of $1,062 in 1994 and $905 in 1993 5,210 5,367 Other assets 2,384 1,954 _________ _________ $ 263,269 252,052 __________ ________ _____________________________________________________________________________________ Liabilities and Stockholders' Equity 1994 1993 _____________________________________________________________________________________ Current liabilities: Current installments of obligations under capital leases (note 4) $ 1,576 1,705 Current installments of long-term debt (note 5) 3,760 3,759 Notes payable (note 6) 11,574 3,847 Current installments of guaranteed ESOP debt (note 7) 2,000 2,000 Accounts payable 43,578 39,785 Accrued expenses: Salaries and wages 2,007 4,423 Licenses and other taxes 7,185 8,070 Other 5,940 5,934 _________ ________ Total accrued expenses 15,132 18,427 _________ ________ Income taxes (note 10) - 1,431 _________ ________ Total current liabilities 77,620 70,954 _________ ________ Obligations under capital leases, excluding current installments (note 4) 11,811 13,387 Long-term debt, excluding current installments (note 5) 18,358 22,116 Guaranteed ESOP debt, excluding current installments (note 7) 2,000 4,000 Deferred income taxes (note 10) 14,154 14,785 Other liabilities 3,026 548 _________ _________ Total liabilities 126,969 125,790 _________ _________ Stockholders' equity (notes 5 and 11): Junior participating preferred stock of no par value. Authorized 5,000,000 shares; no shares issued - - Common stock of $.01 par value. Authorized 25,000,000 shares; issued 7,113,581 shares 71 71 Additional paid-in capital 19,731 19,731 Retained earnings 121,434 113,611 ________ _________ 141,236 133,413 Less: Guaranteed ESOP debt (note 7) 4,000 6,000 Unamortized restricted stock award compensation (note 8) 936 1,151 ________ _________ Total stockholders' equity 136,300 126,262 ________ _________ Commitments and contingencies (notes 4, 8, and 12) $ 263,269 252,052 ======== ========= See accompanying notes to consolidated financial statements.
DELCHAMPS, INC. AND SUBSIDIARY Consolidated Statements of Earnings Years ended July 2, 1994, July 3, 1993 and June 27, 1992 (In thousands except per share amounts)
__________________________________________________________________________________________________________________ 1994 1993 1992 __________________________________________________________________________________________________________________ Sales $ 1,067,191 1,034,531 949,849 Cost of sales (note 3) 796,364 770,457 713,865 _____________ ___________ __________ Gross profit 270,827 264,074 235,984 Selling, general and administrative expenses 248,808 236,167 223,099 _____________ ___________ __________ Operating income 22,019 27,907 12,885 _____________ ___________ __________ Other income (expense): Interest expense (4,298) (5,389) (5,258) Interest income 137 220 378 _____________ ___________ __________ (4,161) (5,169) (4,880) _____________ ___________ __________ Earnings before income taxes and cumulative effect of changes in accounting principles 17,858 22,738 8,005 Income taxes (note 10) 6,207 8,365 2,206 _____________ ___________ __________ Earnings before cumulative effect of changes in accounting principles 11,651 14,373 5,799 Cumulative effect of change in accounting for income taxes (note 10) 900 - - Cumulative effect of change in accounting for postemployment benefits (net of income tax benefits of $1,000) (note 9) (1,600) - - Net earnings $ 10,951 14,373 5,799 ============== ============ ========= Earnings per common share: Earnings before cumulative effect of changes in accounting principles $ 1.64 2.02 0.81 Cumulative effect of change in accounting for income taxes 0.12 - - Cumulative effect of change in accounting for postemployment benefits (0.22) - - ______________ ____________ __________ Net earnings per common shares $ 1.54 2.02 0.81 ============== ============ ========== Weighted average number of common shares 7,114 7,114 7,126 ============== ============ ========== See accompanying notes to consolidated financial statements.
DELCHAMPS, INC. AND SUBSIDIARY Consolidated Statements of Stockholders' Equity Years ended July 2, 1994, July 3, 1993, and June 27, 1992 (In thousands)
___________________________________________________________________________________________________________________________ Common Stock _____________ Issued Additional Restricted Total _____________ Paid-in Retained Guaranteed Stock Stockholders' Shares Amount Capital Earnings ESOP Debt Award Equity ___________________________________________________________________________________________________________________________ Balances at June 29, 1991 7,132 $ 71 20,212 99,703 (10,000) (2,113) 107,873 Amortization of restricted stock awards - - - - - 262 262 Retirement of restricted stock awards (note 8) (18) - (481) - - 481 - Reduction of guaranteed ESOP debt - - - - 2,000 - 2,000 Net earnings - - - 5,799 - - 5,799 Dividends declared of $.44 per share - - - (3,134) - - (3,134) ______ _______ ________ __________ _________ ________ ________ Balances at June 27, 1992 7,114 71 19,731 102,368 (8,000) (1,370) 112,800 Amortization of restricted stock awards - - - - - 219 219 Reduction of guaranteed ESOP debt - - - - 2,000 - 2,000 Net earnings - - - 14,373 - - 14,373 Dividends declared of $.44 per share - - - (3,130) - - (3,130) ______ _______ ________ _________ _________ ________ ________ Balances at July 3, 1993 7,114 71 19,731 113,611 (6,000) (1,151) 126,262 Amortization of restricted stock awards - - - - - 215 215 Reduction of guaranteed ESOP debt - - - - 2,000 - 2,000 Net earnings - - - 10,951 - - 10,951 Dividends declared of $.44 per share - - - (3,128) - - (3,128) _______ _______ ________ ________ _______ _________ ________ Balances at July 2, 1994 7,114 $ 71 19,731 121,434 (4,000) (936) 136,300 ======= ======= ======== ======== ======= ========= ======== See accompanying notes to consolidated financial statements.
DELCHAMPS, INC. AND SUBSIDIARY Consolidated Statements of Cash Flows Years ended July 2, 1994, July 3, 1993, and June 27, 1992 (In thousands)
__________________________________________________________________________________________________________________ 1994 1993 1992 __________________________________________________________________________________________________________________ Cash flows from operating activities: Net earnings $ 10,951 14,373 5,799 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 18,770 18,099 15,599 (Gain)loss on sale of property and equipment (115) 12 319 Restricted stock award amortization 215 219 262 Deferred income tax (benefit) expense (631) 2,117 1,231 Cumulative effect of change in accounting for income taxes (900) - - Cumulative effect of change in accounting for postemployment benefits 1,600 - - Increase in merchandise inventories (8,580) (1,663) (3,256) Increase (decrease) in accounts payable and accrued expenses 501 (884) 7,330 (Decrease) increase in income taxes, net (889) 1,760 (3,000) Other, net 700 (1,131) (1,362) ____________ ____________ ___________ Net cash flows provided by operating activities 21,622 32,902 22,922 Cash flows from investing activities: Additions to property and equipment (17,705) (20,824) (31,530) Proceeds from sale of property and equipment, net 256 507 365 ____________ ____________ ___________ Net cash used in investing activities (17,449) (20,317) (31,165) Cash flows from financing activities: Principal payments on obligations under capital leases (1,705) (1,812) (2,260) Principal payments on long-term debt and notes payable (7,606) (39,118) (22,135) Proceeds from issuance of long-term debt and notes payable 11,574 32,222 38,475 Dividends paid (3,128) (3,130) (3,134) ____________ _____________ __________ Net cash (used in) provided by financing activities (865) (11,838) 10,946 Net increase in cash and cash equivalents 3,308 747 2,703 Cash and cash equivalents at beginning of year 12,070 11,323 8,620 ____________ _____________ __________ Cash and cash equivalents at end of year $ 15,378 12,070 11,323 ============ ============= ========== See accompanying notes to consolidated financial statements.
DELCHAMPS, INC. AND SUBSIDIARY Notes To Consolidated Financial Statements July 2, 1994, July 3, 1993, and June 27, 1992 (1) Summary of Significant Accounting Policies (a) Description of Business Delchamps, Inc. and subsidiary (the "Company") are engaged in the business of retail food distribution through the Company's supermarkets located in Alabama, Florida Louisiana, and Mississippi. (b) Definition of Fiscal Year The Company's fiscal year ends on the Saturday closest to June 30. Fiscal years 1994 and 1992 comprised 52 weeks while fiscal year 1993 comprised 53 weeks. (c) Principles of Consolidation The consolidated financial statements include the accounts of Delchamps, Inc. and its wholly owned wholesale subsidiary. All significant intercompany balances and transactions were eliminated in consolidation. (d) Cash Equivalents For purposes of the consolidated statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. (e) Merchandise Inventories Inventories are stated at the lower of cost or market. Cost is determined on the last-in, first-out ("LIFO") basis for 87% of inventories in 1994, 85% in 1993, and 87% in 1992. With respect to the remaining inventories, primarily produce and market, cost is determined on the first-in, first-out ("FIFO") basis. Inventories developed from the retail method comprised approximately 50% of total inventories in 1994, 52% in 1993, and 58% in 1992. (f) Property and Equipment Property and equipment are stated at cost. Buildings and equipment acquired prior to July 1, 1984 are depreciated over the estimated useful lives of the respective assets using primarily the double-declining-balance method. Buildings and equipment acquired subsequent to July 1, 1984, are depreciated over the estimated useful lives of the respective assets using the straight-line method. Buildings and equipment under capital leases are stated at the lower of the present value of the minimum lease payments at the beginning of the lease term or fair value of the property at the inception of the lease. Assets leased under capital leases and leasehold improvements are amortized using the straight-line method over the lesser of the lease term or the estimated useful lives of the related assets. The Company uses the following periods for depre- ciating and amortizing property and equipment: Buildings............................... 10-50 years Leasehold improvements......................10 years Fixtures and equipment....................5-10 years (g) Cost in Excess of Fair Value of Assets Acquired Cost in excess of fair value of assets acquired arose from the purchase of 3 supermarkets and real estate in August, 1987 and is being amortized over a 40 year period on a straight-line basis. (h) Income Taxes Deferred income taxes are recognized for all significant temporary differences between the tax basis and financial statement amount of assets and liabilities. The tax consequences of those differences expected to occur in the subsequent year are classified as a current asset or liability. Job credits are recorded as a reduction of the pro- vision for Federal income taxes in the year realized. In February 1992, the Financial Accounting Standards Board ("FASB") issued Statement of Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109") which supersedes SFAS No. 96. Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to tax- able income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS No. 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In fiscal year 1994, the Company adopted SFAS No. 109, and has reported the cumulative effect of that change in the method of accounting for income taxes in the 1994 consolidated statements of earnings. (i) Earnings Per Share Earnings per share are computed by dividing net earnings by the weighted average number of shares of common stock outstanding. (2) Cash Equivalents Cash equivalents are stated at cost which approximates market value. Cash equivalents at July 2, 1994, and July 3, 1993 consisted of the following: (In thousands) 1994 1993 ___________ ___________ Marketable Unit Investment Fund $ 993 1,521 Cash Management Tax Exempt Fund 171 9 ___________ ___________ $ 1,104 1,530 =========== =========== (3) Merchandise Inventories The Company uses the LIFO method of valuing certain of its merchandise inventories to minimize inflation induced inventory profits and to achieve a better matching of current costs with current revenues. Inventories would increase by approximately $13,012,000 at July 2, 1994 and $13,050,000 at July 3, 1993 if all of the Company's inventories were stated at cost determined by the first-in, first-out method. Further, net earnings would decrease by approxi- mately $24,000 in fiscal year 1994, increase by $130,000 in fiscal year 1993, and decrease by $732,000 in fiscal year 1992, after applying the Company's marginal tax rate and without assuming an investment return on the applicable income tax savings. The Company is a member of a cooperative asso- ciation from which it purchases private label merchandise for resale and certain store equipment. Merchandise inven- tories purchased from this cooperative association approxi- mated 20% of total inventory purchases in 1994, 23% in 1993, and 26% in 1992. (4) Leases The Company leases certain store properties and warehouse equipment under capital leases that expire over the next 13 years. The Company also leases store proper- ties, and transportation equipment under noncancelable operating leases that expire over the next 23 years. Contingent rentals on store properties are paid as a percentage of sales in excess of a stipulated minimum. In the normal course of business, it is expected that most leases will be renewed or replaced by leases on other properties and equipment. Included in property and equipment are the following amount applicable to capital leases: (In thousands) 1994 1993 ____________ ___________ Buildings $ 13,998 13,998 Fixtures and equipment 19,040 19,040 ____________ ____________ 33,038 33,038 Less accumulated amortization 24,975 23,487 ____________ ____________ $ 8,063 9,551 ============ ============ Future minimum lease payments under noncancelable operating leases and the present value of future minimum capital lease payments as of July 2,1994 are as follows: (In thousands) Capital Operating Fiscal year Leases Leases __________ __________ 1995 $ 3,126 38,771 1996 2,079 38,380 1997 2,081 37,661 1998 2,081 36,764 1999 2,081 36,045 Later years 13,090 306,655 __________ __________ Total minimum lease payments 24,538 494,276 ========== Less amount representing interest 11,151 __________ Present value of net minimum capital lease payments 13,387 Less current installment of obligations under capital leases 1,576 ___________ Long-term obligations under capital leases $ 11,811 =========== Rental expense and contingent rentals for operating leases are as follows: (In thousands) 1994 1993 1992 ________ ________ _________ Minimum rentals $ 40,979 38,201 34,388 Contingent rentals 110 105 281 ________ ________ _________ $ 41,089 38,306 34,669 ======== ======== ========= Most of the Company's leases stipulate that the Company pay taxes, maintenance, insurance, and certain other operating expenses applicable to the leased property. As of July 2, 1994, the Company had entered into additional lease commitments for 10 store properties. The following table summarizes the approximate rentals which will be required for the store property leases for the next 20 years. (In thousands) Fiscal year Rent ________________ __________________ 1995 $ 3,022 1996 3,022 1997 3,022 1998 3,022 1999 3,085 2000-2014 38,760 (5) Long-Term Debt Long-term debt as of July 2, 1994 and July 3, 1993 consisted of the following: (In thousands) 1994 1993 ___________ ____________ 5.51% Note payable, due in 84 monthly installments of $297,619 in principal plus interest, with the final installment due July 1, 2000, unsecured $ 21,430 25,000 Note payable, with interest rates based on LIBOR + 1.5 % due in 60 monthly installments of $15,625 in principal plus interest, with the final installment due March 1, 1998, secured by deposit accounts with the lender 688 875 ___________ ____________ Total long-term debt 22,118 25,875 Less current installments 3,760 3,759 ___________ ____________ Long-term debt, excluding current installments $ 18,358 22,116 =========== ============ Agreements underlying the notes payable contain restrictive covenants which limit the payment of dividends, additional debt, lease rentals, and transactions with affiliates, and require maintenance of certain working capital and equity levels. At July 2, 1994, the Company was in compliance with all covenants. At July 2, 1994, approximately $22,070,000 of the Company's retained earnings was available for the payment of dividends under such restrictive provisions. Cash payments for interest were approximately $4,312,000, $5,383,000, and $5,275,000 in 1994, 1993 and 1992, respectively. Aggregate annual maturities on long-term debt for fiscal years after July 2, 1994 are approximately as follows: (In thousands) Fiscal year Annual maturities _______________ ___________________ 1995 $ 3,759 1996 3,759 1997 3,759 1998 3,697 1999 3,572 2000 3,572 Based on the borrowing rates currently available to the Company for long-term debt with similar terms and maturities, the fair value of the long-term debt outstanding at July 2, 1994 approximates the carrying value. (6) Notes Payable Notes payable as of July 2, 1994 and July 3, 1993 consisted of the following: (In thousands) 1994 1993 ___________ ___________ Unsecured borrowings under lines of credit, due on various dates throughout fiscal 1995, with floating interest rates that are currently less than the prime rate $ 11,574 3,847 At July 2, 1994, the Company had $93,426,000 in available unsecured lines of credit with various financial institutions which expire throughout fiscal 1995 and provide for interest at rates of at least 200 basis points below the prime interest rates. (7) Leveraged Employee Stock Ownership Plan In November 1987, the Company leveraged its existing Employee Stock Ownership Plan ("ESOP"). The ESOP used the proceeds of the loan to purchase approxi- mately 1,097,000 shares of the Company's common stock. The common stock is held by the ESOP trustee in a "suspense account" and these shares serve as collateral for the loan. Each year the Company will make a contribution to the ESOP which the trustee will use to make principal payments. With each loan payment a portion of the common stock is released from the "suspense account" and allocated to participating employees. The Company is required to pay interest on the loan in excess of any dividends received on unallocated shares. The Company guaranteed $20 million of ESOP debt under the loan agreement. The loan is repayable in 10 equal annual installments of principal, with the final installment due in June 1996. Interest is payable quarterly at a rate equal to 80% of the prime rate. The loan obligation of the ESOP is considered an unearned employee profit sharing trust con- tribution and is recorded as a reduction of the Company's stockholders' equity. Both the loan obligation and the unearned employee profit sharing trust contribution are reduced by the amount of any loan repayments made by the ESOP. (8) Employee Benefit and Incentive Plans The Company has a profit-sharing plan and an employee stock ownership plan covering substantially all employees who have completed two years of service. The total annual contributions to these plans for fiscal years 1994, 1993, and 1992 were as follows: (In thousands) 1994 1993 1992 _________ _________ ________ Employee stock ownership plan $2,000 2,000 2,000 The Company has an incentive compensation plan for certain management personnel tied to the Company's overall performance. There was no charge to operations for this plan in 1994, $2,274,000 was charged to operations in 1993 and $725,000 in 1992. In fiscal 1988, the Company adopted, with stock- holder approval, a restricted stock award plan. The plan provides that a maximum of 150,000 shares of common stock be awarded to key executives. During 1989, 138,000 shares were awarded to key executives at a price of $.01 per share. No shares have been awarded since 1989. Total compensation expense to be charged to operations over the term of the plan is approximately $3,209,000. Total compensation expense associated with the plan was determined based on the difference between the market value and the purchase price of the stock at the date of award, and is being amortized on a straight-line basis over the period the restrictions lapse. Charges to operations for this plan were approximately $215,000 in 1994, $219,000 in 1993, and $262,000 in 1992. In February 1992, the Company repurchased shares previously awarded to three key executives. A total of 18,000 shares was repurchased for $.01 per share, the cost to the key executives at award date. Restricted stock awards totaling $481,000 and representing the market value of the awarded shares at grant date, were retired concurrent with the repurchase. (9) Postemployment Benefits Other Than Pensions Effective for fiscal year 1994 the Company adopted Statement of Financial Accounting Standards No. 112, ("SFAS No. 112"), "Employers' Accounting for Postemployment Benefits." Under SFAS No. 112, the cost of employment benefits must be recognized on an accrual basis as employees perform services to earn the benefits. The Company provides a bonus to associates who leave employment. The amount of the bonus is based on longevity. The Company previously expensed the cost of this bonus as incurred. The Company has elected to recognize this change in accounting principle on the immediate recog- nition basis. The cumulative effect for fiscal year 1994 of adopting SFAS No. 112 was an increase in accrued postemploy- ment benefit costs of $2,600,000 ($1,600,000 after the income) tax benefit of $.22 per share). (10) Income Taxes As discussed in note 1, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109") for fiscal 1994. The cumulative effect of this change in accounting for income taxes of $900,000 is determined as of July 4, 1993 and is reported separately in the consolidated statements of earnings for the year ended July 2, 1994. Prior years' financial statements have not been restated to apply the provisions of SFAS No. 109. The components of income tax expense are as follows: (In thousands) Current Deferred Total __________ _________ _________ 1994: Federal $ 5,304 176 5,480 State 706 21 727 __________ __________ _________ $ 6,010 197 6,207 ========== ========== ========= 1993: Federal $ 5,519 1,869 7,388 State 729 248 977 __________ __________ _________ $ 6,248 2,117 8,365 ========== ========== ========= 1992: Federal $ 809 1,085 1,894 State 166 146 312 __________ __________ _________ $ 975 1,231 2,206 ========== ========== ========= The actual income tax expense differs from the statutory tax rate for all years (computed by applying the U.S. Federal corporate rate to earnings before income taxes) as follows: (In thousands) 1994 1993 1992 __________ _________ _________ Statutory tax rate $ 6,072 7,731 2,722 Increase (reduction) in income taxes resulting from: State income taxes, net of Federal income tax benefit 480 645 206 Targeted jobs tax credits (507) (157) (482) Cost in excess of fair value of assets acquired 53 53 53 Other, net 109 93 (293) __________ __________ _________ Actual tax expenses $ 6,207 8,365 2,206 ========== ========== ========= Effective tax rate 34.8% 36.8 27.6 ========== ========== ========= The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities at July 2, 1994 are as follows (in thousands): Deferred Tax Assets: Capital lease obligation $ 2,043 Accrued self-insurance 1,391 Accrued postemployment benefits 998 State tax deduction 730 Other accrued liabilities 1,092 ______________ Net deferred tax assets 6,254 ______________ Deferred Tax Liabilities: Accelerated depreciation 18,720 Other 159 ______________ Total gross deferred liabilities 18,879 ______________ Net deferred tax lability $ 12,625 ============== No valuation allowance was recorded against the deferred tax assets at July 2, 1994. The Company's manage- ment believes the existing net deductible temporary differences comprising the total gross deferred tax assets will reverse during the periods in which the Company generates net taxable income. The sources of deferred income taxes and their tax effects are as follows: (In thousands) 1993 1992 _____________ ___________ Excesss tax depreciation over financial statement depreciation $ 1,658 1,239 Excess financial statement interest and amortization over tax rent expense on capitalized leases 203 131 Accrued expenses recognized for financial statement purposes, but not for tax purposes 258 (348) Other (2) 209 ____________ ___________ $ 2,117 1,231 ============ =========== Cash payments for income taxes were approximately $5,741,000, $5,452,000, and $3,896,000 in 1994, 1993,and 1992, respectively. (11) Share Purchase Rights Plan In October 1988, the Company adopted a Share Purchase Rights Plan and declared a dividend distribution of one Right for each outstanding share of common stock. Under certain conditions, each Right may be exercised to purchase one one-hundredth of a share of Junior Participat- ing Preferred Stock at a purchase price of $70, subject to adjustment. The Company will be entitled to redeem the Rights at $.01 per Right at any time prior to the earlier of the expiration of the Rights in October 1998 or ten days following the time a person or group acquires or obtains the right to acquire a 15% position in the Company. The Rights do not have voting or dividend privileges. Until such time as they become exercisable, the Rights have no dilutive effect on the earnings per share of the Company. (12) Commitments and Contingencies The Company is a defendant in various claims and legal actions considered to be in the normal course of business. Management intends to vigorously default these claims and believes that the ultimate disposition of these matters will not have a material adverse effect on the Company's consolidated financial condition. In fiscal 1989, and subsequently, the Company has entered into certain agreements with officers and key man- agement. The agreements contain provisions entitling each officer or employee covered by these agreements to receive from 1 to 3 times his annual compensation (as defined) if there is a change in control of the Company (as defined) and a termination of employment. The agreements also pro- vide for severance benefits under certain other circumstances. The agreements do not constitute employment contracts and only apply in circumstances following a change in control of the Company. In the event of a change in control of the Company and termination of all persons covered by these agreements, the cost would be approximately $10,000,000. (13) Selected Quarterly Financial Data (Unaudited) Selected quarterly financial data for the years ended July 2, 1994 and July 3, 1993 is summarized as follows: (In thousands except per share amounts) Fiscal Quarters _________________________________________ 1994 Fourth Third Second First _________ _________ __________ _________ Sales $ 260,969 265,146 274,506 266,570 Gross profit 66,961 67,739 67,367 68,760 Earnings before income taxes and cumulative effect of changes in accounting principles 3,558 5,420 3,787 5,093 Earnings before cumulative effect of changes in in accounting principles 2,397 3,562 2,471 3,221 Cumulative effect of change in accounting for income taxes - - - 900 Cumulative effect of change in accounting for postemployment benefits - - - (1,600) Net earnings 2,397 3,562 2,471 2,521 Earnings per common share: Earnings before cumulative effect of changes in in accounting principles $ 0.34 0.50 0.35 0.45 Cumulative effect of change in accounting for income taxes - - - 0.12 Cumulative effect of change in accounting for postemployment benefits - - - (0.22) Net earnings per common share 0.34 0.50 0.35 0.35 Dividends declared per common share $ 0.11 0.11 0.11 0.11 (In thousands except per share amounts) Fiscal Quarters _________________________________________ 1993 Fourth Third Second First _________ _________ __________ _________ Sales $ 282,408 246,521 250,228 255,374 Gross profit 70,965 64,096 65,313 63,700 Earnings before income taxes 6,909 5,507 5,616 4,706 Net earnings 4,313 3,534 3,528 2,998 Net earnings per common share $ 0.60 0.50 0.50 0.42 Dividends declared per common share $ 0.11 0.11 0.11 0.11 Page 14 through 16 of 1994 Annual Report MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion should be read in conjunction with the financial statement and notes thereto contained herein. RESULTS OF OPERATIONS At the end of the 1994 fiscal year Delchamps operated 120 supermarkets in Alabama, Florida, Mississippi and Louisiana, compared with 118 at the end of the 1993 fiscal year and 115 at the end of fiscal year 1992. The Company also operated twelve liquor stores in Florida at the end of fiscal year 1994, compared with ten liquor stores at the end of fiscal years 1993 and 1992. Results of operations set forth in the following tables and narrative are for 52-week periods in fiscal years 1994 and 1992 and for a 53-week period in fiscal year 1993. The Company's fiscal year ends on the Saturday closest to June 30. Sales (dollars in thousands) 1994 1993 1992 ___________ ___________ _________ Sales $ 1,067,191 1,034,531 949,849 Increase/(decrease) from prior year 32,660 84,682 (9,320) Percentage increase/(decrease) from prior year 3.2% 8.9% (1.0%) Percentage increase/(decrease) in same store sales 1.2% 3.2% (4.7%) Sales increased in 1994 because of the addition of new supermarkets (three were opened in 1994 and four were opened in 1993), the expansion of supermarkets (four were expanded in 1994 and seven were expanded in 1993), and same store sales increased 1.2% based on a compa- rable 52 week period in fiscal year 1993. Same store sales increased because of supermarket expansions and increased sales from promotional activities. Promo- tional activities include increased "Bonus Buy" promotions (in which certain products are featured at reduced retail prices), implementing a continuity program and introducing a line of soft drink products with Delchamps as the brand name. In addition, there was significant growth in the existing Cash Back For Schools program (in which the Company makes cash donations to schools equal to 1% of the total cash register receipts collected by each school over a specified time period). Sales increased in 1993 because of the addition of new supermarkets (four were opened in 1993 and six were opened in 1992), the expansion of supermarkets (seven were expanded in 1993 and five were expanded in 1992), the extra week in the 1993 53-week period compared to the 1992 52-week period, and same store sales increased 3.2% based on a comparable 53-week period for fiscal year 1992. Same store sales increased in 1993 because of supermarket expansions and success from promotional activities. Promo- tional activities included Double Coupons (implemented during fiscal year 1992 under which the Company doubles coupons that have a face value of up to sixty cents), Triple Coupons (implemented in selected markets during fiscal year 1993 under which the Company triples coupons that have a face value of up to thirty-four cents), and Cash Back For Schools (implemented during fiscal year 1992). Sales decreased in 1992 because same store sales decreased. Same store sales decreased because of a sluggish economy, heavy promotional activity by competitors, food price deflation of approximately 1.5%, and the opening of a significant number of supermarkets by competitors. As noted above, the Company implemented the Double Coupon and Cash Back For Schools programs in an effort to improve sales trends. In addition, the Company continued its program of remodeling and expanding existing supermarkets in order to add service departments and increase the variety of merchandise sold. These efforts resulted in improved sales beginning in the fourth quarter of fiscal year 1992. Gross Profit (dollars in thousands) 1994 1993 1992 __________ __________ ____________ Gross Profit $ 270,827 264,074 235,984 Gross Profit percentage 25.4% 25.5% 24.8% (Decrease)/increase in percentage from prior year (0.1%) (0.7%) (0.9%) Gross profit percentage decreased slightly in 1994 because of increased markdowns (retail price reductions) from the "Bonus Buy" promotional program. Gross profit percentage increased in 1993 because of increased buying allowances, increased sales of higher margin products located in the specialty departments of the Company's newer and expanded supermarkets, and increased sales of private label products (which have higher margins than brand name products). Gross profit percentage decrease in 1992 because of increased promotional activity and reductions in retail prices. Selling, General and Administrative Expenses (dollars in thousands) 1994 1993 1992 __________ __________ __________ Selling, general and administrative (SG &A) $ 248,808 236,167 223,099 Increase from prior year 12,641 13,068 5,694 SG & A as a percentage of sales 23.3% 22.8% 23.5% Increase/(decrease) in percentage from prior year 0.5% (0.7%) 0.8% SG & A expense increased in 1994 because of increased supermarket expenses which occurred primarily as a result of new and expanded supermarkets. Supermarket expenses that increased over the 1993 period include the following: wages and salaries increased $3.5 million, utilities increased $1.2 million, promotion expenses relating to the Double Coupon program and continuity program (described in the sales section) increased $2.2 million, and building rent increased $2.7 million. Wages and salaries, utilities and rent increased primarily because of new and expanded supermarkets. Promotion expenses increased because of the implementation of the continuity program in 1994. SG & A increased as a percentage of sales over the 1993 fiscal year because the 1993 period included 53-weeks; therefore, in 1993 fixed costs such as rent and depreciation were divided into sales for a 53-week period. SG & A expense increased in 1993 because of added costs of new and expanded supermarkets and the extra week in the 1993 53-week period compared to the 1992 52-week period. SG & A as a percentage of sales decreased in 1993 as a result of the additional week in 1993. The decline was also attributable to savings from an ongoing cost con- trol program which improved labor scheduling, reductions in advertising and improvements in the utilization of supplies. SG & A expense in 1992 increased because of added costs associated with new and expanded supermarkets. SG & A as a percentage of sales increased in 1992 because of slow sales growth combined with the increased cost of operating new locations and service departments. Other Income and Expense (In thousands) 1994 1993 1992 ___________ _________ __________ Interest expense $ 4,298 5,389 5,258 (Decrease)/increase from prior year (1,091) 131 (560) Interest income 137 220 378 Decrease from prior year (83) (158) (36) Interest expense decreased in 1994 primarily because the Company refinanced $25 million of long-term debt at the end of the 1993 fiscal year. The interest rate on this debt was reduced to 5.51% from 7.70% The decrease in interest expense was also caused by lower levels of indebtedness and a general decline in interest rates. Interest expense increased in 1993 because of increased levels of short-term indebtedness under the Company's lines of credit. Interest expense decreased in 1992 because of an overall decline in interest rates and because the Company refinanced a large portion of its debt at lower interest rates. Interest income decreased in the 1994, 1993, and 1992 periods. These decreases resulted from lower levels of invested cash and reduction in interest rates. Income Taxes (dollars in thousands) 1994 1993 1992 ___________ _________ __________ Income tax expenses $ 6,207 8,365 2,206 Income tax effective rate 34.8% 34.8% 27.6% Increase/(decrease) in rate from prior year (2.0%) 9.2% (7.0%) In fiscal year 1994, the Company's effective income tax rate decreased from the 1993 level because earnings decreased (in 1994 the majority of earnings were taxed at a Federal rate of 34% and in 1993 the majority of earnings were taxed at a Federal rate of 35%) and targeted jobs tax credits were reinstated by the Revenue Reconciliation Act of 1993. In fiscal year 1993, the Company's effective income tax rate increased because of the expiration of targeted jobs tax credits. The effective rate in 1993 approximates the combined Federal and states statutory rates. In fiscal year 1992, the Company's effective income tax rate decreased because of decreased earnings combined with consistent levels of targeted jobs tax credits. Cumulative Effect of Changes in Accounting Principles (In thousands) 1994 1993 1992 ___________ _________ __________ Cumulative effect of change in accounting for income taxes $ 900 - - Cumulative effect of change in accounting for postemployment benefits (1,600) - - The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", ("SFAS No. 109") which supersedes SFAS No. 96. The Company implemented SFAS No. 109 in fiscal year 1994. The cumulative effect of implementing SFAS No. 109 was to increase earnings $900,000. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," ("SFAS No. 112") which the Company implemented in fiscal year 1994. SFAS No. 112 requires that postemployment benefits, representing longevity bonus, be recognized on an accrual basis. The cumulative effect of adopting SFAS No 112 was to decrease earnings $1,600,000. Net Earnings (dollars in thousands) 1994 1993 1992 ___________ _________ __________ Net earnings $ 10,951 14,373 5,799 (Decrease)/increase from prior year (3,422) 8,574 (9,448) Percentage (decrease)/increase from prior year (23.8%) 147.9% (62.0%) Net earnings as a percentage of sales 1.0% 1.4% 0.6% Net earnings decreased in 1994 from 1993 because same store sales growth decreased (to 1.2% in 1994 from 3.2% in 1993) and the Company experienced an increased rate of growth in SG & A expenses (to 23.3% of sales in 1994 from 22.8% of sales in 1993). Net earnings for 1993 increased because of improved sales, an increase in gross profit margin, and a reduction in SG & A expenses. Net earnings for 1992 decreased because of weak sales and a decline in gross profit margin. Other (dollars in thousands) 1994 1993 1992 ___________ _________ __________ Provision for LIFO (benefit)/expense ($38) 210 (1,368) Inflation index 0.99960 1.00222 0.98505 In fiscal years 1994 and 1993, the rate of inflation was relatively unchanged from the prior year. Fiscal year 1992 had deflation of approximately 1.5%. The effect of inflation on the Company's operating earnings is considered to be minimal. Management does not expect the Company to be adversely affected by future inflation because a large number of its stores are leased at fixed rents for up to twenty-five year periods and because increases in the cost of merchandise can be generally passed on through retail price increases. While inflation has not had a material impact on past operating results, there is no assurance that the Company will not be affected by inflation in the future. 1994 1993 1992 __________ __________ ____________ Inventory turnover (annual) 7.9 times 8.0 times 7.6 times (Decrease)/increase from prior year (.1) 0.4 0.4 Inventory turnover decreased slightly in 1994 compared to 1993 because the 1994 period was a 52-week fiscal year compared to the 1993 period which was a 53-week fiscal year. In 1993, inventory turnover increased because the 1993 period was a 53-week period compared to the 1992 period which was a 52-week fiscal year. Inventory turnover decreased in 1992 because of weak sales and higher inventory levels. Inventory levels increased because of the introduction of the Company's new and expanded formats, which contain significantly greater square footage, more inventory and more service departments. (dollars in thousands) 1994 1993 1992 ___________ _________ __________ Dividends paid $3,128 3,130 3,134 Dividends per share 0.44 0.44 0.44 Dividends as a percentage of net earnings 28.6% 21.8% 54.0% In fiscal year 1994, dividends as a percentage of net earnings increased from 1993 because of decreased earnings in 1994. Dividends paid per share remained unchanged for the 1994, 1993 and 1992 periods. LIQUIDITY AND CAPITAL RESOURCES Capital Spending The following table shows capital expenditures during the last three fiscal years and planned capital expenditures during the 1995 fiscal year. Plan Actual __________ _______________________ Fiscal Year 1995 1994 1993 1992 __________ ________________________ Capital expenditures (millions) $ 36.1 17.7 20.8 31.5 Supermarkets opened 4 3 4 6 Supermarkets closed 1 1 1 3 Remodels/expansions completed 9 4 7 5 The Company's plans with respect to store construction, acquisition, remodeling, and expansion are frequently reviewed and revised in light of changing conditions. In addition, the Company's ability to proceed with projects, or to complete projects during a particular period, is subject to successful negotiation of satisfactory contractual arrangements, and the timing of projects is subject to normal construction and other delays. Therefore, it is possible that not all the projects described above will be commenced or completed in fiscal year 1995, and it is possible that a portion of the expenditures with respect to projects commenced during a fiscal year carry over to the next year. Financing and Liquidity Although the Company's supermarket locations are leased, the Company makes substantial expenditures to equip new and expanded supermarkets. The cost to equip a new supermarket is approximately $2.3 million while the cost to equip an expanded supermarket is approximately $1.7 million. In addition, the Company makes substantial expenditures for distribution center facilities and equipment. The Company plans to finance its capital expenditures with funds provided by operations. However, if an insufficient amount of funds is generated, the Company may obtain long-term financing or draw on short-term credit lines. The Company has $105.0 million in credit lines from financial institutions of which $93.4 million is available for future use. While these credit lines expire throughout fiscal year 1995, the Company expects the majority of these credit lines to be extended annually as they are deemed necessary. Working capital increased $5,415,000 to $54,926,000 to July 4, 1993 to July 2, 1994. Additions to property and equipment were $17,705,000 during fiscal 1994 and consisted primarily of purchases of fixtures and equipment for new and remodeled stores and equipment for distribution center facilities. EX-21 3 EXHIBIT 21 Percentage of Voting Securities Jurisdiction of Owned By Name Incorporation Registrant ___________________________ _____________________ ______________ Supermarket Cigarette Sales, Inc. Louisiana 100% EX-27 4
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDING JULY 2, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR JUL-02-1994 JUL-02-1994 15,378 0 9,475 0 105,663 132,546 261,772 138,643 263,269 77,620 32,169 71 0 0 136,229 263,269 1,067,191 1,067,191 796,364 1,045,172 4,161 0 4,298 17,858 6,207 11,651 0 0 (700) 10,951 1.54 0
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