-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HthGCSwFAtSrLzBpbcPN/LhW53PXKL4QoK3tNaJdtxdtWfrQ/jyAYHt5GygQQfu6 r2kg7IyjCyvp4asWw4f71A== 0000948688-97-000007.txt : 19970514 0000948688-97-000007.hdr.sgml : 19970514 ACCESSION NUMBER: 0000948688-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELCHAMPS INC CENTRAL INDEX KEY: 0000729970 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 630245434 STATE OF INCORPORATION: AL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12923 FILM NUMBER: 97602386 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-Q 1 Securities And Exchange Commission Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the 13-Week Period Ended March 29, 1997 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 or organization) identification number) 305 Delchamps Drive, Mobile, AL 36602 - ------------------------------- --------------------- (Address of principal executive (Zip code) offices) (334) 433-0431 - ------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. 7,119,999 shares at April 7, 1997. DELCHAMPS, INC. AND SUBSIDIARY Index Page No. -------- Part 1. Financial Information Item 1. Financial Statements Condensed Balance Sheets - March 29, 1997 and June 29, 1996 1 Condensed Statements of Earnings - Thirteen Weeks Ended March 29, 1997 and March 30, 1996 2 Thirty-nine Weeks Ended March 29, 1997 and March 30, 1996 2 Condensed Statements of Cash Flows - Thirteen Weeks Ended March 29, 1997 and March 30, 1996 3 Thirty-nine Weeks Ended March 29, 1997 and March 30, 1996 3 Notes to Condensed Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Part II. Other Information Item 1. Legal Proceedings 7 Item 2. Changes in Securities 7 Item 3. Defaults upon Senior Securities 7 Item 4. Submission of Matters to a Vote of Security Holders 7 Item 5. Other Information 7 Item 6. Exhibits and Reports on Form 8-K 8 Signatures 9
Part I. Financial Information DELCHAMPS, INC. AND SUBSIDIARY Condensed Balance Sheets - (In thousands) (Unaudited) March 29, 1997 June 29, 1996* ______________________________________ Amount % Assets Amount % Assets ______ ________ ______ ________ ASSETS Current assets: Cash and cash equivalents $ 10,106 4.11 10,503 4.12 Trade accounts receivable 6,705 2.73 8,422 3.30 Merchandise inventories 88,481 36.00 90,797 35.58 Prepaid expenses 2,371 0.96 1,376 0.54 Income taxes receivable - - 764 0.30 Deferred income taxes 5,785 2.35 3,878 1.52 _______ ______ _______ ______ Total current assets 113,448 46.16 115,740 45.36 Property and equipment: Land 13,744 5.59 15,210 5.96 Buildings and improvements 57,383 23.35 58,111 22.77 Fixtures and equipment 228,088 92.81 221,090 86.64 Construction in progress 5,384 2.19 9,771 3.83 _______ ______ _______ ______ 304,599 123.94 304,182 119.20 Less accumulated depreciation and amortization (174,381) (70.95) (166,931) (65.42) _______ ______ _______ ______ Net property and equipment 130,218 52.98 137,251 53.78 Other assets 2,103 0.86 2,192 0.86 _______ ______ _______ ______ Total assets $ 245,769 100.00 $ 255,183 100.00 ========= ======= ========= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 12,000 4.88 14,000 5.49 Current portion of obligations under capital leases 749 0.30 749 0.29 Current portion of long-term debt 3,744 1.52 3,760 1.47 Current portion of restructure obligation 3,996 1.63 3,996 1.57 Accounts payable 43,180 17.57 48,308 18.93 Accrued expenses 26,151 10.64 22,860 8.96 _______ ______ _______ ______ Total current liabilities 89,820 36.55 93,673 36.71 Obligations under capital leases, excluding current portion 9,846 4.01 10,398 4.07 Long-term debt, excluding current portion 8,036 3.27 10,839 4.25 Restructure obligation, excluding current portion 12,388 5.04 15,668 6.14 Deferred income taxes 9,490 3.86 9,225 3.62 Other liabilities 2,305 0.94 2,455 0.96 _______ ______ _______ ______ Total liabilities 131,885 53.66 142,258 55.75 Stockholders' equity: 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 7,119,391 shares at March 29, 1997 and 7,112,320 shares at June 29, 1996 71 0.03 71 0.03 Additional paid-in capital 19,810 8.06 19,657 7.70 Retained earnings 94,111 38.29 93,359 36.59 _______ ______ _______ ______ 113,992 46.38 113,087 44.32 Less: Unamortized restricted stock awards (108) (0.04) (162) (0.07) _______ ______ _______ ______ Total stockholders' equity 113,884 46.34 112,925 44.25 Total liabilities and stockholders' equity $ 245,769 100.00 $ 255,183 100.00 ========= ====== ========= ====== See accompanying notes to condensed financial statements. * Condensed from Balance Sheet included in the 1996 Annual Report.
1
DELCHAMPS, INC. AND SUBSIDIARY Condensed Statements of Earnings - (In thousands except per share amounts) (Unaudited) Thirteen Weeks Ended Thirty-nine Weeks Ended ________________________________________________ __________________________________________ 03/29/97 03/30/96 03/29/97 03/30/96 ____________________ ____________________ ___________________ ___________________ Amount % Sales Amount % Sales Amount % Sales Amount % Sales ______ _______ ______ _______ ______ _______ ______ _______ Sales $ 273,753 100.00 280,225 100.00 836,054 100.00 841,967 100.00 Cost of sales 204,571 74.73 214,331 76.49 636,388 76.12 647,991 76.96 _______ _______ ________ _______ ________ _______ ________ _______ Gross profit 69,182 25.27 65,894 23.51 199,666 23.88 193,976 23.04 Selling, general and Administrative expenses 63,476 23.19 62,302 22.23 190,598 22.80 186,589 22.16 _______ _______ ________ _______ ________ _______ ________ _______ Operating income 5,706 2.08 3,592 1.28 9,068 1.08 7,387 0.88 Interest expense, net 1,278 0.47 1,697 0.61 3,983 0.47 5,327 0.63 _______ _______ ________ _______ ________ _______ ________ _______ Earnings before income tax 4,428 1.62 1,895 0.68 5,085 0.61 2,060 0.24 Income tax expense 1,708 0.62 748 0.27 1,992 0.24 861 0.10 _______ _______ ________ _______ ________ _______ ________ _______ Net earnings $ 2,720 0.99 1,147 0.41 3,093 0.37 1,199 0.14 ======= ======= ======== ======= ======== ======= ======== ======= Net earnings per common share $ 0.38 0.16 0.43 0.17 ======= ======= ======= ======= Weighted average number of common shares 7,117 7,110 7,114 7,110 ======= ======= ======= ======= Dividends declared per common share $ 0.11 0.11 0.33 0.33 ======= ======= ======= ======= See accompanying notes to condensed financial statements.
2
DELCHAMPS, INC. AND SUBSIDIARY Condensed Statements of Cash Flows - (In thousands) Increase (Decrease) In Cash and Cash Equivalents (Unaudited) Thirteen Weeks Ended Thirty-nine Weeks Ended ____________________ _______________________ 03/29/97 03/30/96 03/29/97 03/29/96 ________ ________ ________ ________ Cash flows from operating activities: Net earnings $2,720 1,147 3,093 1,199 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 5,272 4,971 15,439 14,864 (Gain) loss on sale of property and equipment (2,071) 46 (2,059) (244) Loss reserve on closed stores (68) (95) (219) (351) Restricted stock award compensation expense 18 20 54 87 Restructure obligation payments (1,114) (893) (2,853) (2,803) Non cash director compensation expense 153 - 153 - Decrease (increase) in merchandise inventories 2,371 (5,222) 2,316 (6,163) Increase (decrease) in accounts payable and accrued expenses 5,063 5,548 (3,221) 3,026 Decrease in income taxes receivable, net 510 3,625 764 4,297 Other, net 1,577 1,111 622 (306) _______ ______ ______ ______ Net cash flows provided by operating activities 14,431 10,258 14,089 13,606 Cash flows from investing activities: Additions to property and equipment (5,382) (3,784) (11,142) (14,108) Proceeds from sale of property and equipment 4,080 2 4,378 508 _______ ______ ______ ______ Net cash used in investing activities (1,302) (3,782) (6,764) (13,600) Cash flows from financing activities: Payments on notes payable (15,000) (2,000) (2,000) - Principal payments on obligations under capital leases (189) (168) (552) (491) Principal payments on long-term debt (939) (939) (2,819) (2,819) Dividends paid (787) (782) (2,351) (2,346) _______ ______ ______ ______ Net cash used in financing activities (16,915) (3,889) (7,722) (5,656) Net (decrease) increase in cash and cash equivalents (3,786) 2,587 (397) (5,650) Beginning of period cash and cash equivalents 13,892 7,669 10,503 15,906 _______ ______ ______ ______ End of period cash and cash equivalents $10,106 10,256 10,106 10,256 ======= ====== ====== ====== Supplemental Disclosures of Cash Flow Information: Cash paid for: Interest expenses $1,367 1,730 4,179 5,482 ======= ====== ====== ====== Income taxes $1,336 7 2,443 51 ======= ====== ====== ====== See accompanying notes to condensed financial statements.
3 DELCHAMPS, INC. AND SUBSIDIARY Notes to Condensed Financial Statements (Unaudited) (A) Basis of Presentation The accompanying unaudited consolidated financial statements include the results of operations, account balances and cash flows of the Company and its wholly-owned subsidiary. All material intercompany balances have been eliminated. In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary to present fairly, in all material respects, the results of operations of the Company for the periods presented. All such adjustments are of a normal recurring nature. The statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the accompanying notes included in the Company's 1996 Annual Report. The balance sheet at June 29, 1996 has been taken from the audited financial statements at that date. (B) Reclassifications Certain reclassifications have been made in the prior year's financial statements to conform to classifications used in the current year. 4 Management's Discussion And Analysis Of Financial Condition and Results of Operations RESULTS OF OPERATIONS Sales: Sales decreased 2.31% for the thirteen-week period and decreased 0.70% for the thirty-nine week period, compared with corresponding periods last year. Sales for stores open during the current and prior year periods decreased 3.48% for the thirteen-week period and decreased 2.21% for the thirty-nine week period. The decreases in sales for both periods resulted from increased levels of promotional activity by competitors and an increase in the number of store openings by competitors. In addition, sales levels from last year's periods were high because the Company introduced a promotional program which included reductions of retail prices on thousands of items (which resulted in same store sales increases of 10.17% and 7.92% for last year's thirteen and thirty-nine week periods, respectively, compared with corresponding periods in the prior year.) The decrease in sales volume was partially offset by selective retail price increases. At March 29, 1997, the Company operated 118 supermarkets and ten liquor stores compared with 117 supermarkets and ten liquor stores at March 30, 1996. During the thirteen-week period, the Company remodeled one supermarket and closed one supermarket. During the thirty-nine week period, the Company opened two supermarkets, remodeled two supermarkets, and closed one supermarket. Gross Profit: Gross profit as a percentage of sales increased from 23.51% to 25.27% for the thirteen-week period and increased from 23.04% to 23.88% for the thirty-nine week period. The increases for both periods were primarily due to increased levels of buying allowances from vendors which resulted in a lower cost of merchandise inventories. Selling, General and Administration Expenses: Selling, general and administrative ("SG & A") expenses increased $1.174 million for the thirteen-week period and increased $4.009 million for the thirty-nine week period. Both periods include a $4.300 million charge for the settlement of a lawsuit (which is further discussed under the caption Legal Proceedings on page 7) and a $2.080 million gain from the sale of real property (a former warehouse in Mobile, Alabama and land near Birmingham, Alabama.) Excluding the legal settlement and gain on sale of real property, SG & A expenses decreased $1.046 million for the thirteen-week period and increased $1.789 million for the thirty-nine week period. The thirty-nine week period also included 1) acquisition expenses (for possible acquisitions of supermarkets by the Company), 2) increased legal fees (which resulted from defense of lawsuits and a union organization attempt at the Company's distribution facility), and 3) increased advertising costs (which resulted from the introduction of a new beef program and a new advertising program featuring price comparisons with competitors.) The Company has continued implementing cost reductions in all other areas of the business. Specifically, labor costs, bag costs, and store supply costs all decreased as compared to last year's periods. SG & A as a percentage of sales increased from 22.23% to 23.19% for the thirteen-week period and increased from 22.16% to 22.80% for the thirty-nine week period. Excluding the legal settlement and gain from sale of real property, SG & A as a percentage of sales increased from 22.23% to 22.38% for the thirteen-week period and increased from 22.16% to 22.53% for the thirty- nine week period. The increases for both periods were the result of decreased sales in the current year's periods. 5 Management's Discussion And Analysis Of Financial Condition and Results of Operations Interest Expense, Net: Interest expense, net decreased by $.42 million in the thirteen-week period and by $1.34 million in the thirty-nine week period. The decreases for both periods were the result of lower levels of indebtedness under the Company's revolving credit line and lower levels of long- term indebtedness. Income Taxes: The effective rate for income taxes decreased from 39.47% to 38.57% for the thirteen-week period and decreased from 41.80% to 39.17% for the thirty-nine week period. The effective rates in the current year's periods approximate the federal and state statutory rates. Net Earnings: Net earnings for the thirteen-week period ended March 29, 1997 were $2,720,000, or $.38 per share, up from $1,147,000, or $.16 per share, for the prior year period. Excluding the effects of the settlement and sale of real property, net earnings for the thirteen-week period were approximately $4,090,000, or $.57 per share. For the thirty-nine week period ended March 29, 1997, net earnings were $3,093,000, or $.43 per share, up from $1,199,000, or $.17 per share, for the prior year period. Excluding the effects of the settlement and sale of real estate in the third quarter, net earnings for the thirty- nine week period were approximately $4,463,000, or $.63 per share. LIQUIDITY AND CAPITAL RESOURCES Cash flows generated by operating activities were $14.431 million for the thirteen-week period and $14.089 million for the thirty-nine week period. Last year's corresponding amounts were $10.258 million and $13.606 million for the thirteen and thirty-nine week periods, respectively. Historically, the Company has funded working capital requirements, capital requirements, and other cash requirements primarily through cash flows from operations. However, if an insufficient amount of cash flows are generated, the Company may borrow up to $75 million under the revolving loan of which, as of March 29, 1997, $63 million was available for future use. The revolving loan expires in June, 1998. Cash used in investing activities was $1.302 million and $6.764 million for the current thirteen and thirty- nine week periods, respectively. Corresponding amounts from last year's periods were $3.782 million and $13.600 million for the thirteen and thirty-nine week periods, respectively. Cash used in investing activities decreased because of proceeds received from the sale of real property (the Company's former warehouse in Mobile, Alabama and land near Birmingham, Alabama). Cash used in financing activities was $16.915 million and $7.722 million for the current thirteen and thirty-nine week periods, respectively. Corresponding amounts from last year's periods were $3.889 million and $5.656 million, respectively. The changes in financing activities were due to increased debt payments (as compared to last year's periods) under the Company's short-term borrowing facilities. At the end of the quarter ended March 29, 1997, the Company was in compliance with all financial covenants under the revolving loan agreement and its long-term debt agreement. 6 PART II. OTHER INFORMATION Item 1. Legal Proceedings In March, 1997, the Company settled five related lawsuits, each of which involved multiple plaintiffs alleging racially discriminatory practices in promoting and termination. The lead case styled Amanda Williams and Kenneth O. McLaughlin, on Behalf of Themselves and all Other Similarly Situated v. Delchamps was filed in August 1995 in the United States District Court for the Southern District of Alabama. The lead case sought certification of a class, but class certification was denied by the Federal District Court. The settlement requires the Company to pay $4.3 million and to continue reviewing its existing employment practices with the assistance of independent consultants. The settlement agreement includes no admission of wrongdoing by the Company. The allegations in the cases discussed above are similar to certain allegations in a case styled Tracie Kennedy v. Delchamps, Inc., which was filed in January 1996 in the United States District Court for the Southern District of Alabama. The case alleges both race and gender discrimination and also sought certification of a class. In early May 1997, the Federal District Court denied certification of the class. The Company believes that it has meritorious defenses to the claims involved in this case and plans to defend the case vigorously. In addition, the Company is a party to various legal and taxing authority proceedings incidental to its business. In the opinion of management, the ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the Company. Item 2. Changes in Securities - None Item 3. Defaults upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders - None Item 5. Other Information - None 7 Item 6. Exhibits and Reports on Form 8-K (a) 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 to the document indicated. 3.1 Composite of the Company's Amended and Restated Articles of Incorporation, as of November 11, 1996 (Exhibit 3.1 to the Company's Form 10-Q for the 13-Week Period ended September 28, 1996) 3.2 Composite of the Company's By-laws, as of November 11, 1996 (Exhibit 3.2 to the Company's Form 10-Q for the 13 Week Period ended September 28, 1996) 4 Specimen of Common Stock Certificate (Exhibit 4(a) to the Company's Form 10-K for the fiscal year ended June 30, 1990) 10 Employment Agreement dated as of January 1, 1997 between the Company and David W. Morrow* 27 Financial Data Schedule* (b) No reports on Form 8-K have been filed by the Company during the quarter for which this report is being filed. 8 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DELCHAMPS, INC. Registrant Date: May 12, 1997 /s/ David W. Morrow _________________________ David W. Morrow, Chairman of the Board and Chief Executive Officer Date: May 12, 1997 /s/ Richard W. LaTrace _________________________ Richard W. La Trace, President Date: May 12, 1997 /s/ Timothy E. Kullman _________________________ Timothy E. Kullman, Senior Vice President, Chief Financial Officer, Treasurer and Secretary 9 EXHIBIT INDEX Sequentially Exhibit Numbered Number Description Page 10 Employment Agreement dated as of January 11 1, 1997 between the Company and David W. Morrow 27 Financial Data Schedule 15 10 EMPLOYMENT AGREEMENT THIS AGREEMENT (the "Agreement") dated as of January 1, 1997 is by and between Delchamps, Inc. (the "Company"), and David W. Morrow ("Mr. Morrow"). The parties hereto agree as follows: 1. Employment, Capacity and Duties. (a) The Company hereby employs Mr. Morrow, and Mr. Morrow agrees to be employed by the Company, upon the terms and conditions provided herein. During the Employment Term (as defined in paragraph 2 below) Mr. Morrow shall be employed as Chairman of the Board and Chief Executive Officer of the Company. In such capacities, Mr. Morrow's primary duties and responsibilities shall be those set forth in the Company's by-laws, those assigned from time to time by the Company's Board of Directors (the "Board") and those customarily associated with such positions. (b) In performing his duties as Chief Executive Officer of the Company, Mr. Morrow shall devote his full time, attention, energies and business efforts to the Company; provided, however, this Section 1(b) shall not prohibit Mr. Morrow from (i) being a passive investor in such form or manner as shall not conflict with his obligations under this Agreement or (ii) serving as a director or trustee of any civic, cultural, charitable or religious organization or group, or of any business organization that does not compete with the Company, including any supermarket operator that does not operate in the same geographic area as the Company, provided that such service does not unduly interfere with his duties under this Agreement. 2. Employment Term. Mr. Morrow's employment under this Agreement shall commence on January 1, 1997 and shall end at the close of business on December 31, 1997 (the "Employment Term"). This Agreement may be terminated earlier as provided in Section 5 of this Agreement. 3. Compensation and Other Benefits. (a) For all services to be rendered by Mr. Morrow to the Company in any capacity under this Agreement, the Company shall pay Mr. Morrow the compensation and benefits described below: (i) The Company shall pay Mr. Morrow a weekly amount equal to the quotient of $400,000 divided by 52 weeks, or $7,692.31. (ii) Mr. Morrow shall be eligible to receive a cash bonus for the Company's fiscal year ending June 29, 1997 under the Company's annual incentive award program. In addition, if the Company pays bonuses under the Company's annual incentive program for the Company's fiscal year ending June 29, 1998, Mr. Morrow shall be entitled to receive the bonus for which he would be eligible, regardless of whether or not he is employed by the Company as of the end of such fiscal year; provided, however, that his bonus shall be prorated for the whole number of months in the fiscal year during which he was employed by the Company; and provided further, that he shall not be entitled to such bonus if his employment has been terminated due to his death or by the Company for any of the reasons set forth in Section 5(b). 11 (iii) The Company shall provide Mr. Morrow with benefits under the Company's vacation policy, longevity bonus plan, dental and medical benefits programs, group term life insurance plan, ESOP, incentive compensation plan, Profit Sharing Plan and any accident or disability plan on the same basis and subject to the same eligibility and other requirements and limitations as may be applicable to other employees of the Company. (iv) Mr. Morrow shall have the use of an automobile at the Company's expense. (b) During the Employment Term, Mr. Morrow shall not be entitled to receive directors' fees or to participate in the Company's Director Compensation Plan. (c) Payment to Mr. Morrow of all compensation hereunder shall be at such times and in accordance with such payroll practices as are followed by the Company for its other executive employees. (d) Mr. Morrow agrees that the Company has the right to withhold, from the amounts payable under Section 3 of this Agreement, all amounts required to be withheld under applicable income and/or employment tax laws, or as otherwise stated in documents granting rights that are affected by this Agreement. (e) To the extent permitted by applicable law, the Company shall take all reasonable steps to ensure that Mr. Morrow is not, by reason of a sale of the Company, deprived of the economic value (including any value attributable to the sale transaction) of (i) any options to acquire Common Stock of the Company or (ii) any Common Stock of the Company beneficially owned by Mr. Morrow. 4. Reimbursement for Expenses. Mr. Morrow shall be entitled to reimbursement for reasonable expenses incurred by him in connection with his maintaining a temporary residence in Mobile, Alabama and for ordinary and necessary business expenses incurred by him from time to time on behalf of the Company in the performance of his duties hereunder. In addition, the Company will reimburse Mr. Morrow for the reasonable costs of travel between Mobile, Alabama and San Juan, Puerto Rico and Gooding, Idaho (his principal residences) incurred by him and his wife. However, Mr. Morrow shall not be entitled to reimbursement for any expense unless he has properly accounted for it to the extent necessary to substantiate the Company's federal income tax deduction for such expense. 5. Termination. (a) This Agreement shall terminate upon the earlier of the expiration of the Employment Term, Mr. Morrow's death or a Change of Control of the Company as that term is defined in that certain Change of Control Agreement dated December 13, 1995 between Mr. Morrow and the Company. (b) Additionally, the Company may terminate this Agreement immediately upon the occurrence of any of the following: 12 (i) In the good faith opinion of the Board, Mr. Morrow has engaged in improper or unethical conduct that would seriously impair Mr. Morrow's ability to perform his duties hereunder or would impair the business reputation of the Company; (ii) In the good faith opinion of the Board, Mr. Morrow has committed an act, or omitted to take action, in bad faith and to the material detriment of the Company; or (iii) Mr. Morrow has committed any material breach of any of the provisions of this Agreement, if such breach is not cured within ten days after written notice thereof to Mr. Morrow by the Company. 6. Effect of Termination or Removal from Office. If this Agreement is terminated for any of the reasons set forth in Section 5 of this Agreement, then the Company shall have no further obligations to Mr. Morrow under this Agreement. Mr. Morrow acknowledges that he holds his office as Chairman of the Board and Chief Executive Officer at the pleasure of the Board. If he is removed from office by the Board prior to the expiration of the Employment Term, other than pursuant to Section 5, then the only obligation that the Company shall have to him hereunder shall be to pay to him the salary described in paragraph 3(a)(i) of this Agreement until the termination of this Agreement on December 31, 1997. 7. Representations and Warranties of Mr. Morrow. Mr. Morrow represents and warrants to the Company that he is under no contractual or other restriction or obligation compliance with which is inconsistent with the execution of this Agreement or the performance of his obligations hereunder. 8. Notice. All notices hereunder must be in writing and shall be deemed to have been duly given upon receipt of hand delivery, delivery by overnight carrier, delivery by certified or registered mail, return receipt requested, or telecopy transmission with confirmation of receipt: (a) If to the Company, to: Delchamps, Inc. 305 Delchamps Drive P. O. Box 1668 Mobile, AL 36633-1668 Attention: Timothy E. Kullman (b) If to Mr. Morrow, to: David W. Morrow Olympic Towers Condominiums Apartment 5A Rodrigues Serra Number 1 Condado, Puerto Rico 00907 13 9. Further Assurances. The Company and Mr. Morrow agree to execute any additional documents or take such other actions as are necessary and proper to effectuate the terms of this Agreement. 10. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors, personal representatives and assigns. 11. Entire Agreement. This Agreement represents the entire agreement between the parties hereto concerning the subject matter hereof. 12. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Alabama. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. DELCHAMPS, INC. By: __________________________________ William W. Crawford Chairman, Compensation Committee of the Board of Directors ___________________________________ David W. Morrow 14 EX-27 2
5 3-MOS JUN-29-1996 MAR-29-1997 10,106,000 0 6,705,000 0 88,481,000 113,448,000 304,599,000 (174,381,000) 245,769,000 89,820,000 8,036,000 71,000 0 0 (108,000) 245,769,000 273,753,000 0 204,571,000 63,476,000 0 0 1,278,000 4,428,000 1,708,000 0 0 0 0 2,720,000 0.38 0
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