-----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, CI+kXHRrEkiyCKalsQL92aMvZmRUWKqZNf9TCEYhx/OwusuCc4KwQJPoCE4Z+J1B 2WQ3vh17NGun6ZlkrwQjcQ== 0000912057-94-003020.txt : 19940914 0000912057-94-003020.hdr.sgml : 19940914 ACCESSION NUMBER: 0000912057-94-003020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19940730 FILED AS OF DATE: 19940912 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENN TRAFFIC CO CENTRAL INDEX KEY: 0000077155 STANDARD INDUSTRIAL CLASSIFICATION: 5411 IRS NUMBER: 250716800 STATE OF INCORPORATION: PA FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09930 FILM NUMBER: 94548721 BUSINESS ADDRESS: STREET 1: 319 WASHINGTON STREET CITY: JOHNSTOWN STATE: PA ZIP: 15901 BUSINESS PHONE: 8145369900 MAIL ADDRESS: STREET 1: 1200 STATE FAIR BLVD CITY: SYRACUSE STATE: NY ZIP: 13221-4737 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended July 30, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission file number 1-9930 THE PENN TRAFFIC COMPANY (Exact name of registrant as specified in its charter) Delaware 25-0716800 (State of incorporation) (IRS Employer Identification No.) 1200 State Fair Blvd., Syracuse, NY 13209 (Address of principal executive offices) (Zip Code) (315) 453-7284 (Telephone number) 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 . Common stock, par value $1.25 per share: 10,846,701 shares outstanding as of September 1, 1994 1 of 13 PART I. FINANCIAL INFORMATION Item 1. Financial Statements THE PENN TRAFFIC COMPANY CONSOLIDATED STATEMENT OF OPERATIONS UNAUDITED
(All dollar amounts in thousands, except per share data) THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED JULY 30, JULY 31, JULY 30, JULY 31, 1994 1993 1994 1993 ---------- ---------- ---------- ----------- TOTAL REVENUES $ 835,767 $ 780,996 $1,645,728 $1,543,036 COST AND OPERATING EXPENSES: Cost of sales (including buying and occupancy costs) 642,930 608,894 1,274,388 1,202,651 Selling and administrative expenses 150,440 135,225 295,552 271,949 Unusual item (Note 3) 6,400 6,400 ---------- ---------- ---------- ---------- OPERATING INCOME 42,397 30,477 75,788 62,036 Interest expense 28,767 28,897 57,791 59,656 ---------- ---------- ---------- ---------- INCOME BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 13,630 1,580 17,997 2,380 Provision for income taxes 6,762 946 8,873 1,327 ---------- ---------- ---------- ---------- INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 6,868 634 9,124 1,053 Extraordinary item (net of tax benefit) (Note 5) (691) (4,477) (2,967) (22,079) ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 6,177 (3,843) 6,157 (21,026) Cumulative effect of change in accounting principle (net of tax benefit) (Note 7) (5,790) ---------- ---------- ---------- ---------- NET INCOME (LOSS) 6,177 (3,843) 367 (21,026) Preferred dividends (159) ---------- ---------- ---------- ---------- NET INCOME (LOSS) APPLICABLE TO COMMON STOCK $ 6,177 $ (3,843) $ 367 $ (21,185) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- PER SHARE DATA: Income before extraordinary item and cumulative effect of change in accounting principle (after preferred dividends) $ .62 $ .06 $ .82 $ .09 Extraordinary item (.07) (.41) (.27) (2.22) Cumulative effect of change in accounting principle (.52) ---------- ---------- ---------- ---------- Net income (loss) $ .55 $ (.35) $ .03 $ (2.13) ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Average number of common shares outstanding 11,167,258 10,918,988 11,165,057 9,956,722 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
See Notes to Interim Consolidated Financial Statements. - 2 - THE PENN TRAFFIC COMPANY CONSOLIDATED BALANCE SHEET
(All dollar amounts in thousands) UNAUDITED JULY 30, 1994 JANUARY 29, 1994 ------------- ----------------- ASSETS CURRENT ASSETS: Cash and short-term investments $ 41,304 $ 82,467 Accounts and notes receivable (less allowance for doubtful accounts of $1,136 and $740, respectively) 66,368 60,020 Inventories (Note 4) 348,854 348,455 Prepaid expenses and other current assets 10,428 9,939 ---------- ---------- Total Current Assets 466,954 500,881 NONCURRENT ASSETS: Capital leases - net 131,145 134,101 Property, plant and equipment - net 543,698 535,728 Intangible assets - net 372,530 377,450 Other assets and deferred charges - net 86,479 84,741 ---------- ---------- Total Assets $1,600,806 $1,632,901 ---------- ---------- ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 4,128 $ 4,208 Current portion of obligations under capital leases 9,302 8,773 Trade accounts and drafts payable 199,339 183,967 Payroll and other accrued liabilities 67,471 74,028 Accrued interest expense 27,701 28,690 Payroll taxes and other taxes payable 26,713 18,901 Deferred income taxes 20,570 24,669 ---------- ---------- Total Current Liabilities 355,224 343,236 NONCURRENT LIABILITIES: Long-term debt 984,445 1,021,896 Obligations under capital leases 129,616 131,148 Deferred income taxes 72,328 72,411 Other noncurrent liabilities 43,717 49,228 ---------- ---------- Total Liabilities 1,585,330 1,617,919 ---------- ---------- SHAREHOLDERS' EQUITY: Preferred Stock - authorized 10,000,000 shares at $1.00 par value; none issued Common Stock - authorized 30,000,000 shares at $1.25 par value; 10,846,701 shares and 10,840,151 shares issued and outstanding, respectively 13,560 13,550 Capital in excess of par value 179,205 179,087 Retained deficit (162,989) (162,924) Minimum pension liability adjustment (4,963) (4,963) Unearned compensation (9,337) (9,768) ---------- ---------- Total Shareholders' Equity 15,476 14,982 ---------- ---------- Total Liabilities and Shareholders' Equity $1,600,806 $1,632,901 ---------- ---------- ---------- ----------
See Notes to Interim Consolidated Financial Statements. - 3 - THE PENN TRAFFIC COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS UNAUDITED
(All dollar amounts in thousands) TWENTY-SIX TWENTY-SIX WEEKS ENDED WEEKS ENDED JULY 30, 1994 JULY 31, 1993 ------------- ------------- OPERATING ACTIVITIES: Net income (loss) $ 367 $ (21,026) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Cumulative effect of change in accounting principle 5,790 Depreciation and amortization 35,894 34,788 Amortization of intangibles 7,350 5,449 Other - net (4,491) 3,871 Net change in assets and liabilities: Accounts receivable and prepaid expenses (7,248) (2,136) Inventories (399) (10,406) Accounts payable and accrued expenses (617) (24,575) Deferred charges and other assets 2,939 2,369 ---------- ---------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 39,585 (11,666) ---------- ---------- INVESTING ACTIVITIES: Capital expenditures (40,312) (68,964) Proceeds from sale of assets 1,634 2,312 Other - net (415) (593) ---------- ---------- NET CASH (USED IN) INVESTING ACTIVITIES (39,093) (67,245) ---------- ---------- FINANCING ACTIVITIES: Net proceeds from equity offering 74,800 Purchase of preferred stock - Big Bear (9,424) Purchase of common stock - Big Bear (1,390) Increase in long-term debt 400,000 Payments to settle long-term debt (60,131) (364,073) Borrowings of revolver debt 229,100 190,977 Payment of revolver debt (206,500) (193,777) Reduction of capital lease obligations (3,914) (3,672) Payment of debt issuance costs (338) (14,698) Preferred dividends and other - net 128 (159) ---------- ---------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (41,655) 78,584 ---------- ---------- DECREASE IN CASH AND CASH EQUIVALENTS (41,163) (327) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 82,467 54,840 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 41,304 $ 54,513 ---------- ---------- ---------- ----------
See Notes to Interim Consolidated Financial Statements. - 4 - THE PENN TRAFFIC COMPANY NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The results of operations for the interim periods are not necessarily an indication of results to be expected for the year. In the opinion of management, all adjustments necessary for a fair presentation of the results are included for the interim periods, and all such adjustments are normal and recurring. These unaudited interim financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Annual Report on Form 10-K for the fiscal year ended January 29, 1994 ("Fiscal 1994"). Net income (loss) per share of common stock is based on the average number of shares of common stock outstanding during each period, after giving effect to preferred stock dividends. Fully diluted income per share is not presented for each of the periods since the reduction from primary income per share is less than three percent. During the first quarter of the fiscal year ending January 28, 1995 ("Fiscal 1995"), the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" (Note 7). - 5 - NOTE 2 - SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands of dollars) Second Quarter Twenty-six Weeks -------------- ---------------- FISCAL 1995 Operating Income $ 42,397 $ 75,788 Depreciation and Amortization 21,539 43,245 LIFO Provision 425 450 Cash Interest Expense 27,796 55,809 FISCAL 1994 Operating Income $ 30,477 $ 62,036 Unusual Item 6,400 6,400 Depreciation and Amortization 20,366 40,237 LIFO Provision 430 990 Cash Interest Expense 28,608 58,874
NOTE 3 - UNUSUAL ITEM During the second quarter of Fiscal 1994, the Company recorded certain expenses totalling $6.4 million classified as an unusual item. This unusual item is comprised of $4.0 million related to a voluntary employee separation program at the Company's P & C division and $2.4 million related to the realignment of certain operations. NOTE 4 - INVENTORIES If the first-in, first-out (FIFO) method had been used by the Company, inventories would have been $14,803,000 and $14,353,000 higher than reported at July 30, 1994 and January 29, 1994, respectively. NOTE 5 - EXTRAORDINARY ITEM During the second quarter of Fiscal 1995 and the second quarter of Fiscal 1994, the Company had extraordinary charges of $0.7 million (net of $0.5 million income tax benefit) and $4.5 million (net of $2.9 million income tax benefit), respectively. Extraordinary charges for the twenty-six weeks ended July 30, 1994 and July 31, 1993 were $3.0 million (net of $2.1 million income tax benefit) and $22.1 million (net of $14.4 million income tax benefit), respectively. These extraordinary charges relate to the early retirement of debt. - 6 - NOTE 6 - INVESTMENT EQUITY INTEREST IN THE GRAND UNION COMPANY Penn Traffic holds an indirect ownership interest representing approximately 17.8% of the common stock of Grand Union Holdings Corporation ("GU Holdings"), the indirect corporate parent of The Grand Union Company ("Grand Union"), on a fully diluted basis. Penn Traffic's ownership interest in GU Holdings was acquired in July 1989 (Fiscal 1990) and is held through GAC Holdings, whose other investors include Miller Tabak Hirsch + Co. ("MTH") and individuals affiliated with MTH, certain management employees of Penn Traffic and other investors. The Company is accounting for its investment in Grand Union under the equity method. The investment was recorded originally at cost of $18,250,000. The carrying value of the investment was totally written off as of February 2, 1991. NOTE 7 - CHANGE IN ACCOUNTING PRINCIPLE Effective January 30, 1994, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS 112"). SFAS 112 requires employers to recognize the obligation to provide postemployment benefits on an accrual basis if certain conditions are met. The Company's postemployment benefits covered by SFAS 112 are primarily disability related claims covering indemnity and medical payments. The obligation for these claims is measured using actuarial techniques and assumptions including appropriate discount rates. The cumulative effect of the change in accounting principle determined as of January 30, 1994 was recorded in the first quarter of Fiscal 1995, reducing net income by $5.8 million (net of $4.1 million income tax benefit). - 7 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THIRTEEN WEEKS ("SECOND QUARTER FISCAL 1995") AND TWENTY-SIX WEEKS ENDED JULY 30, 1994 COMPARED TO THIRTEEN WEEKS ("SECOND QUARTER FISCAL 1994") AND TWENTY- SIX WEEKS ENDED JULY 31, 1993 Income before cumulative effect of change in accounting principle was $6.2 million for both Second Quarter Fiscal 1995 and for the twenty-six weeks ended July 30, 1994, compared to a loss of $3.8 million for Second Quarter Fiscal 1994 and a loss of $21.0 million for the twenty-six weeks ended July 31, 1993. The improvement in Second Quarter Fiscal 1995 was primarily due to an $11.9 million increase in operating income combined with a $3.8 million decrease in extraordinary charges related to debt retirement, partially offset by a $5.8 million increase in the provision for income taxes. The improvement for the twenty-six week period was primarily due to a $13.8 million increase in operating income combined with a $19.1 million decrease in extraordinary charges related to debt retirement, partially offset by a $7.5 million increase in the provision for income taxes. The following table sets forth statement of operations components expressed as a percentage of total revenues for Second Quarter Fiscal 1995 and Second Quarter Fiscal 1994 and for the twenty-six weeks ended July 30, 1994 and July 31, 1993, respectively:
Second Quarter Ended Twenty-six Weeks Ended JULY 30, July 31, JULY 30, July 31, 1994 1993 1994 1993 -------- ------- -------- -------- Total revenues 100.0% 100.0% 100.0% 100.0% Gross profit (1) 23.1 22.0 22.6 22.1 Selling and administrative expenses 18.0 17.3 18.0 17.6 Unusual item .8 .4 Operating income 5.1 3.9 4.6 4.1 Interest expense 3.5 3.7 3.5 3.9 Income before income taxes, extraordinary item and cumulative effect of change in accounting principle 1.6 .2 1.1 .2 Net income (loss) .7 (.5) --- (1.4) (1) Total revenues less cost of goods sold.
- 8 - RESULTS OF OPERATIONS (CONTINUED) Total revenues for Second Quarter Fiscal 1995 increased to $835.8 million from $781.0 million in Second Quarter Fiscal 1994. Total revenues for the twenty-six week period ended July 30, 1994 increased to $1.65 billion from $1.54 billion for the twenty-six week period ended July 31, 1993. Sales from retail supermarkets existing in both periods, "same store sales," increased 1.6% in Second Quarter Fiscal 1995, and 1.3% for the twenty-six weeks ended July 30, 1994. The increase in total revenues is primarily the result of the increase in retail supermarket sales resulting from the acquisition of the Insalaco stores in September 1993, the increase in same store sales, and revenues from new and enlarged stores resulting from the Company's capital expenditure program. Wholesale supermarket sales decreased in Second Quarter Fiscal 1995 to $111.1 million from Second Quarter Fiscal 1994 sales of $113.5 million and decreased to $220.3 million for the twenty-six weeks ended July 30, 1994 from $228.4 million for the twenty-six weeks ended July 31, 1993. In Second Quarter Fiscal 1995, gross profit was $192.8 million compared to Second Quarter Fiscal 1994 gross profit of $172.1 million, representing 23.1% and 22.0% of total revenues, respectively. Gross profit as a percentage of total revenues increased to 22.6% for the twenty-six week period ended July 30, 1994 from 22.1% for the twenty-six weeks ended July 31, 1993. The increase in gross profit as a percentage of total revenues for Second Quarter Fiscal 1995 primarily resulted from a combination of reduced product procurement costs and the relative increase in retail revenues compared to wholesale revenues. Selling and administrative expenses for Second Quarter Fiscal 1995 were $150.4 million compared with $135.2 million in Second Quarter Fiscal 1994. Selling and administrative expenses as a percentage of total revenues increased to 18.0% for Second Quarter Fiscal 1995 from 17.3% in Second Quarter Fiscal 1994. Selling and administrative expenses for the twenty-six week period ended July 30, 1994 were $295.6 million compared to $271.9 million for the twenty-six week period ended July 31, 1993. Selling and administrative expenses as a percentage of total revenues increased to 18.0% for the twenty-six week period ended July 30, 1994 from 17.6% for the twenty-six week period ended July 31, 1993. The increase in selling and administrative expenses as a percentage of total revenues for Second Quarter Fiscal 1995 primarily resulted from the relative increase in retail revenues compared to wholesale revenues combined with an increase in fixed and semi-variable expenses as a percentage of total revenues during a period without food price inflation and continued consumer preferences towards lower-priced products. Depreciation and amortization of $21.5 million in Second Quarter Fiscal 1995 and $20.4 million in Second Quarter Fiscal 1994 represented 2.6% of total revenues for both periods. Depreciation and amortization of $43.2 million for the twenty-six weeks ended July 30, 1994 and $40.2 million for the twenty-six weeks ended July 31, 1993 represented 2.6% of total revenues in both periods. - 9 - RESULTS OF OPERATIONS (CONTINUED) Operating income for Second Quarter Fiscal 1995 was $42.4 million or 5.1% of total revenues compared to $30.5 million or 3.9% of total revenues in Second Quarter Fiscal 1994. Operating income for the twenty-six week period ended July 30, 1994 was $75.8 million or 4.6% of total revenues compared to $62.0 million or 4.1% of total revenues for the twenty-six weeks ended July 31, 1993. Second Quarter Fiscal 1994 operating income excluding the effect of the unusual item was $36.9 million or 4.7% of total revenues. Operating income excluding the effect of the unusual item for the twenty-six week period ended July 31, 1993 was $68.4 million or 4.4% of total revenues. Operating income for Second Quarter Fiscal 1995 increased primarily as a result of an increase in gross profit combined with the absence of an unusual item (Note 3), partially offset by an increase in selling and administrative expenses. Interest expense for Second Quarter Fiscal 1995 and Second Quarter Fiscal 1994 was $28.8 million and $28.9 million, respectively. Interest expense for the twenty-six weeks ended July 30, 1994 and July 31, 1993 was $57.8 million and $59.7 million, respectively. The decrease in interest expense was the result of a decline in the average interest rate on the Company's outstanding debt. This rate decline is the direct result of the Company's debt refinancing activities. Income before income taxes, extraordinary item, and the cumulative effect of a change in accounting principle was $13.6 million for Second Quarter Fiscal 1995, compared to $1.6 million for Second Quarter Fiscal 1994. Income before income taxes and extraordinary item for the twenty-six weeks ended July 30, 1994 was $18.0 million compared to $2.4 million for the twenty-six weeks ended July 31, 1993. Results for Second Quarter Fiscal 1994 and for the twenty-six week period ended July 31, 1993 were significantly impacted by the unusual item (Note 3). The income tax provision was $6.8 million for Second Quarter Fiscal 1995 compared to $0.9 million in Second Quarter Fiscal 1994. The income tax provision was $8.9 million for the twenty-six week period ended July 30, 1994 compared to $1.3 million in the prior year. The effective tax rates vary from the statutory rates due to differences between income for financial reporting and tax reporting purposes, primarily related to goodwill amortization resulting from prior acquisitions. The $0.7 million extraordinary item (net of $0.5 million income tax benefit) and $4.5 million (net of $2.9 million income tax benefit) for Second Quarter Fiscal 1995 and Second Quarter Fiscal 1994, respectively, and the extraordinary items of $3.0 million (net of $2.1 million income tax benefit) and $22.1 million (net of $14.4 million income tax benefit) for the twenty-six week period ended July 30, 1994 and the twenty-six week period ended July 31, 1993, respectively, all relate to the early retirement of debt. The Company adopted SFAS 112 in First Quarter Fiscal 1995. The cumulative effect of this change in accounting principle was a charge of $5.8 million (net of $4.1 million income tax benefit) (Note 7). - 10 - LIQUIDITY AND CAPITAL RESOURCES During Second Quarter Fiscal 1995, operating income increased to $42.4 million from $30.5 million for Second Quarter Fiscal 1994. Interest expense for Second Quarter Fiscal 1995 was $28.8 million as compared to $28.9 million during Second Quarter Fiscal 1994. Income before extraordinary item and the cumulative effect of a change in accounting principle for Second Quarter Fiscal 1995 was $6.9 million as compared to $0.6 million for Second Quarter Fiscal 1994. Payments of principal and interest on the Company's $988.6 million long- term debt (excluding capital leases) will materially restrict Company funds available to finance capital expenditures and working capital. Principal payments of long-term debt of $2.3 million, $4.1 million and $2.7 million are due during the remainder of Fiscal 1995, Fiscal 1996 and Fiscal 1997, respectively. The Company has a revolving credit facility (the "Revolving Credit Facility") which provides for borrowings of up to $200 million, subject to a borrowing base limitation measured by eligible inventory and accounts receivable of the Company. The Revolving Credit Facility matures in April 2000 and is secured by a pledge of the Company's inventory, accounts receivable and related assets. Total availability under the Revolving Credit Facility was $146.7 million at July 30, 1994. Effective August 24, 1994, the Revolving Credit Facility was amended to provide for certain interest rate reductions on borrowings made thereunder. Pursuant to the terms of the amendment, based on the interest coverage ratio which the Company has attained, the interest rate on borrowings as to which the Company elects a LIBOR-based rate option is reduced from LIBOR plus 2.25% to LIBOR plus 1.75%, and the interest rate on borrowings as to which the Company elects a prime-based rate option is reduced from prime plus .75% to prime plus .50%. During Second Quarter Fiscal 1995, the Company's internally generated funds from operations and amounts available under the Revolving Credit Facility provided sufficient liquidity to meet the Company's operating, capital expenditure and debt service needs. During Second Quarter Fiscal 1995, the Company redeemed $19.7 million of 13 3/4% Senior Subordinated Notes due 1999. During the twenty-six week period ended July 30, 1994, the Company redeemed or repurchased $52.4 million of 13 3/4% Senior Subordinated Notes due 1999 and $5.8 million of 11 1/2% Senior Notes due 2001. The Company has entered into four interest rate swap agreements, each of which expires within the next four years, that effectively convert $155 million of its fixed rate borrowings into variable rate obligations. Under the terms of these agreements, the Company makes payments at variable rates which are based on LIBOR and receives payments at fixed interest rates. The net amount paid or received is included in interest expense. Cash flows to meet the Company's requirements for operating, investing and financing activities in Second Quarter Fiscal 1995 are reported in the Consolidated Statement of Cash Flows. For the 26-week period ended July 30, 1994, the Company experienced a positive cash flow from operating activities of $39.6 million. Working capital decreased by $45.9 million from January 29, 1994 to July 30, 1994. - 11 - LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) The Company is in compliance with all terms and restrictive covenants of its long-term debt agreements. The Company's debt agreements provide restrictive covenants on the payment of dividends to its shareholders. As of July 30, 1994, no dividend payments to its shareholders could have been made under the most restrictive of these covenants. The Company expects to spend approximately $130 million on capital expenditures, including capital leases, during Fiscal 1995. The Company expects to finance such capital expenditures through internally generated cash flow, borrowings under the Revolving Credit Facility and new capital leases. Capital expenditures will be principally for new stores, replacement stores and remodels. In Second Quarter Fiscal 1995, two new stores, three replacement stores and two remodels were completed. In addition, eight new or replacement stores are under construction and four remodels are in process, all of which will be completed by the end of Fiscal 1995. PART II. OTHER INFORMATION All items which are not applicable or to which the answer is negative have been omitted from this report. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Number Description -------------- ----------- 10.9F Amendment No. 5, dated as of August 24, 1994, to the Loan and Security Agreement among Penn Traffic, Dairy Dell, Big M Supermarkets, Inc., Penny Curtiss Baking Company, Inc., the lenders party thereto and NatWest USA Credit Corp., as Agent (the "Loan and Security Agreement"). 10.9G Amendment No. 6, dated as of August 24, 1994, to the Loan and Security Agreement. 27.1 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the fiscal quarter ended July 30, 1994. - 12 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE PENN TRAFFIC COMPANY September 12, 1994 /s/ Claude J. Incaudo --------------------------- By: Claude J. Incaudo (President and Chief Executive Officer - Director) September 12, 1994 /s/ Eugene R. Sunderhaft --------------------------- By: Eugene R. Sunderhaft (Vice President, Secretary and Treasurer - Chief Financial Officer) - 13 - EX-10.9F 2 EXHIBIT 10.9F AMENDMENT #5 AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT AMENDMENT NO. 5, dated as of August , 1994 (this "AMENDMENT") to that certain Loan and Security Agreement dated as of March 5, 1993, as amended by Amendment Nos. 1, 2, 3, and 4 (collectively the "LOAN AGREEMENT") among THE PENN TRAFFIC COMPANY ("PENN TRAFFIC"), DAIRY DELL, BIG M SUPERMARKETS, INC., and PENNY CURTISS BAKING COMPANY, INC. (individually "BORROWER" and collectively the "BORROWERS"), the Lenders listed therein (collectively the "LENDERS") and NATWEST USA CREDIT CORP., as Agent for the Lenders (in such capacity, the "AGENT"), is made by, between and among the Borrowers, the Agent, and the Lenders. Capitalized terms used herein, except as otherwise defined herein, shall have the meanings given to such terms in the Loan Agreement. - - - - - - - - - WHEREAS, the Borrowers have requested that the Agent and the Lenders (1) increase Cash Capital Expenditures limits and Total Capital Expenditures limits and (2) make certain other amendments to the Loan Agreement. WHEREAS, the Borrowers, the Agent and the Lenders have agreed to amend the Loan Agreement pursuant to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements hereinafter set forth, the parties hereto agree as follows: 1. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby amended as of the effective date hereof as follows: 1(a) Sections 7.8(b), (c) and (d) are amended as follows: (i) There shall be added to Section 7.8(b) the words "if requested by the Agent" after "(b)" and before the word "within"; (ii) There shall be added to Section 7.8(c) the words "if requested by the Agent" after "(c)" and before the word "with"; (iii) There shall be added to Section 7.8(d) the words "if requested by the Agent after "(d)" and before the word "monthly". 1(b) Section 8.2(c) shall be amended by inserting the words "If requested by the Agent after "(c)" and before the words "As" and the word "As" shall begin with a lowercase "a". 1(c) Capital Expenditures. The table set forth in Section 10.17(a) is further amended by deleting under the column headings set forth therein the figures with respect to the Fiscal Years 1995, 1996, 1997, 1998, 1999 and 2000 and substituting the following:
TOTAL PERMITTED CASH CAPITAL FINANCED CAPITAL CAPITAL FISCAL YEAR EXPENDITURES EXPENDITURES EXPENDITURES - - ----------- ------------ ---------------- ------------ 1995 $100,000,000 $15,000,000 Total of plus the Permitted lesser of: (i) Cash Capital $40,000,000 or Expenditures (ii) the and amount by Permitted which Financed Consolidated Capital EBDAIT exceeds Expenditures $200,000,000 for the Fiscal Year 1996 $105,000,000 $20,000,000 Total of plus the Permitted lesser of: (i) Cash Capital $40,000,000 or Expenditures (ii) the and amount by Permitted which Financed Consolidated Capital EBDAIT exceeds Expenditures $200,000,000 for the Fiscal Year - 2 - TOTAL PERMITTED CASH CAPITAL FINANCED CAPITAL CAPITAL FISCAL YEAR EXPENDITURES EXPENDITURES EXPENDITURES - - ----------- ------------ ---------------- ------------ 1997 $110,000,000 $20,000,000 Total of plus the Permitted lesser of: (i) Cash Capital $40,000,000 or Expenditures (ii) the and amount by Permitted which Financed Consolidated Capital EBDAIT exceeds Expenditures $200,000,000 for the Fiscal Year 1998 $115,000,000 $20,000,000 Total of plus the Permitted lesser of: (i) Cash Capital $40,000,000 or Expenditures (ii) the and amount by Permitted which Financed Consolidated Capital EBDAIT exceeds Expenditures $200,000,000 for the Fiscal Year 1999 $120,000,000 $20,000,000 Total of plus the Permitted lesser of: (i) Cash Capital $40,000,000 or Expenditures (ii) the and amount by Permitted which Financed Consolidated Capital EBDAIT exceeds Expenditures $200,000,000 for the Fiscal Year - 3 - TOTAL PERMITTED CASH CAPITAL FINANCED CAPITAL CAPITAL FISCAL YEAR EXPENDITURES EXPENDITURES EXPENDITURES - - ----------- ------------ ---------------- ------------ 2000 $125,000,000 $20,000,000 Total of plus the Permitted lesser of: (i) Cash Capital $40,000,000 or Expenditures (ii) the and amount by Permitted which Financed Consolidated Capital EBDAIT exceeds Expenditures $200,000,000 for the Fiscal Year
2. REPRESENTATIONS AND WARRANTIES. As an inducement to the Agent and the Lenders to enter into this Amendment, each of the Borrowers hereby represents and warrants to the Agent and the Lenders and agrees with the Agent and the Lenders as follows: (a) It has the power and authority to enter into this Amendment, has taken all corporate action required to authorize its execution, delivery, and performance of this Amendment. This Amendment has been duly executed and delivered by it and constitutes its valid and binding obligation, enforceable against it in accordance with its terms. The execution, delivery, and performance of this Amendment will not violate any of the Borrowers' certificate of incorporation or bylaws of any binding agreement or legal requirements. (b) As of the date hereof and after giving effect to the terms of this Amendment: (i) the Loan Agreement is in full force and effect and constitutes a binding obligation of the Borrowers enforceable against the Borrowers and owing in accordance with its terms; (ii) the Obligations are due and owing by the Borrowers in accordance with their terms; and (iii) The Borrowers have no defense to or setoff, counterclaim, or claim against payment of the Obligations and enforcement of the Loan Documents based upon a fact or circumstance existing or occurring on or prior to the date hereof. - 4 - 3. NO IMPLIED AMENDMENTS. Except as expressly provided herein, the Loan Agreement and the other Loan Documents are not amended or otherwise affected in any way by this Amendment. 4. ENTIRE AGREEMENT; MODIFICATIONS; BINDING EFFECT. This Amendment constitutes the entire agreement of the parties with respect to its subject matter and supersedes all prior oral or written understandings about such matter. Each of the Borrowers confirms that, in entering into this Amendment, it did not rely upon any agreement, representation, or warranty by the Agent or any Lender except those expressly set forth herein. No modification, rescission, waiver, release, or amendment of any provision of this Amendment may be made except by a written agreement signed by the parties hereto. The provisions of this Amendment are binding upon and inure to the benefit of the representatives, successors, and assigns of the parties hereto; provided, however, that no interest herein or obligation hereunder may be assigned by any Borrower without the prior written consent of the Required Lenders. 5. EFFECTIVE DATE. This Agreement shall become effective when executed by the Borrowers and that number of Lenders as shall constitute the amount of Required Lenders. 6. SEVERABILITY. If any provision of this Amendment is prohibited or invalid, under applicable law, it is ineffective only to such extent, without invalidating the remainder of this Amendment. 7. COUNTERPARTS. This Amendment may be executed in any number of counterparts, and by each party in separate counterparts, each of which is an original, but all of which shall together constitute one and the same agreement. 8. GOVERNING LAW. This Amendment is deemed to have been made in the State of New York and is governed by and interpreted in accordance with the laws of such state, provided that no doctrine of choice of law (except as may be applicable under the UCC with respect to the Security Interest) shall be used to apply the laws of any other state or jurisdiction. - 5 - IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written. BORROWERS: THE PENN TRAFFIC COMPANY By: ------------------------------------ Title: DAIRY DELL By: ------------------------------------ Title: BIG M SUPERMARKETS, INC. By: ------------------------------------- Title: PENNY CURTISS BAKING COMPANY, INC. By: ------------------------------------- Title: - 6 - LENDERS: Commitment: $35,000,000 NATWEST USA CREDIT CORP. Pro-Rata Share: 17.5% Lending Office: 175 Water Street New York, New York 10038 By: ------------------------------------ Title: Commitment: $20,000,000 NATIONAL BANK OF CANADA Pro-Rata Share: 10% Lending Office: Empire Tower, Suite 1540 350 Main Street By: Buffalo, New York 14202 ------------------------------------ Title: Commitment: $20,000,000 FUJI BANK, LTD. Pro-Rata Share: 10% Lending Office: Two World Trade Center 79th Fl. By: New York, New York 10048 ------------------------------------ Title: Commitment: $20,000,000 SANWA BUSINESS CREDIT Pro-Rata Share: 10% CORPORATION Lending Office: One South Wacker Drive Suite 2800 Chicago, IL. 60606 By: ------------------------------------ Title: Commitment: $25,000,000 BANKAMERICA Pro-Rata Share: 12.5% BUSINESS CREDIT, INC. Lending Office: 40 East 52nd Street Second Fl. New York, NY 10022 By: ------------------------------------ Title: (Signatures continued on next page) - 7 - Commitment: $25,000,000 HELLER FINANCIAL, INC. Pro-Rata Share: 12.5% Lending Office: 101 Park Avenue, 12th Fl. New York, NY 10178 By: ------------------------------------ Title: Commitment: $10,000,000 IBJ SCHRODER Pro-Rata Share: 5% Lending Office: One State Street 9th Fl. By: New York, NY 10004 ------------------------------------ Title: Commitment: $10,000,000 MIDLANTIC NATIONAL BANK Pro-Rata Share: 5% Lending Office: 499 Thornalle Street 9th Fl. By: Edison, NJ 08837 ------------------------------------ Title: Commitment: $20,000,000 MITSUBISHI TRUST AND Pro-Rata Share: 10% BANKING CORPORATION Lending Office: 520 Madison Avenue 25th Fl. By: New York, NY 10022 ------------------------------------ Title: Commitment: $15,000,000 CONTINENTAL BANK, N.A. Pro-Rata Share: 7.5% Lending Office: 231 South La Salle St. 12th Fl. C By: Chicago, IL. 60697 ------------------------------------ Title: (Signatures continued on next page) - 8 - AGENT NATWEST USA CREDIT CORP., As Agent By: ------------------------------------ Title: - 9 - EX-10.9G 3 EXHIBIT 10.9G AMENDMENT #6 AMENDMENT NO. 6 TO LOAN AND SECURITY AGREEMENT AMENDMENT NO. 6, dated as of August , 1994 (this "AMENDMENT") to that certain Loan and Security Agreement dated as of March 5, 1993, as amended by Amendment Nos. 1, 2, 3, 4, and 5 (collectively the "LOAN AGREEMENT") among THE PENN TRAFFIC COMPANY ("PENN TRAFFIC"), DAIRY DELL, BIG M SUPERMARKETS, INC., and PENNY CURTISS BAKING COMPANY, INC. (individually "BORROWER" and collectively the "BORROWERS"), the Lenders listed therein (collectively the "LENDERS") and NATWEST USA CREDIT CORP., as Agent for the Lenders (in such capacity, the "AGENT"), is made by, between and among the Borrowers, the Agent, and the Lenders. Capitalized terms used herein, except as otherwise defined herein, shall have the meanings given to such terms in the Loan Agreement. - - - - - - - - - WHEREAS, the Borrowers have requested that the Agent and the Lenders: (1) increase the Maximum Credit Line; (2) change the rate of interest and (3) make certain other amendments to the Loan Agreement. WHEREAS, the Borrowers, the Agent and the Lenders have agreed to amend the Loan Agreement pursuant to the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements hereinafter set forth, the parties hereto agree as follows: 1. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement is hereby amended as of the effective date hereof as follows: 1(a) AMENDED DEFINITIONS. Section 1 of the Loan Agreement is hereby amended as follows: (i) The definition of "EURODOLLAR RATE" is hereby amended by deleting in (a) thereof the words and figures "two and one-half percent (2 1/2%)" and substituting in lieu thereof the words and figures "two and one-quarter percent (2 1/4%)" and is further amended by deleting the last three lines thereof and substituting therefore the following: "provided, however, that during a Reduction Period the Eurodollar Rate shall mean a rate per annum of - 1 - (a) one-quarter of one percent (1/4%) lower than such rate if the Interest Coverage Ratio was 2.0 to 1 or more, but less than 2.1 to 1 or (b) one half of one percent (1/2%) lower than such rate if the Interest Coverage Ratio was 2.1 to 1 or more." (ii) The definitions of "MAXIMUM REVOLVING CREDIT LINE" hall be further amended, upon the satisfaction of the terms and conditions set forth in this subsection (ii), to read as follows: "MAXIMUM REVOLVING CREDIT LINE: means $225,000,000, or the lesser amount to which the Borrowers have reduced the Maximum Revolving Credit Line in accordance with Section 2.2(b)" (iii) "TOTAL FACILITY". The definition of Total Facility contained in Section 2.1 shall be amended as follows: The first sentence of Section 2.1 is further amended by replacing the figure $200,000,000 appearing in the first sentence thereof with the figure "225,000,000". The amendments provided for in Section 1(a)(ii) and (iii) do not become effective until all of the following conditions precedent shall have been met: 1. On or before January 31, 1995 the Borrowers shall have requested of the Agent in writing that the Maximum Revolving Line be increased from $200,000,000 to $225,000,000. 2. The Agent has been able to obtain commitments in writing from a Lender or New Lender (the "New Lender"), aggregating $25,000,000. 3. At the time of the Borrowers' request no Event or Event of Default shall have occurred and there shall have been no material adverse change in the business or financial condition of any of the Borrowers. 4. The Borrowers shall deliver to the Agent for the benefit of the Lenders, if requested by the Agent an opinion of Borrowers' counsel in form and substance satisfactory to the Agent and its counsel. - 2 - 5. The Borrowers shall deliver to the Agent a certificate of the Borrowers' Chief Executive or Chief Operating Officer with respect to Section 3 above and such other instruments and documents as the Agent or any Lender shall reasonably request. 6. The execution and delivery of additional Revolving Credit Notes in the form of Exhibit C to the Loan Agreement to the committing Lenders or New Lender in the aggregate amount of $25,000,000. 7. The Borrowers and the committing Lenders or New Lender shall agree to an Increased Line fee as proposed in Section 3 below. (iv) The definition of "PRIME-BASED RATE" is hereby amended by adding to the end thereof the following: "if during a Reduction Period the Interest Coverage Ratio was 2.0 to 1 or more but less than 2.1 to 1 or one half of one percent (1/2%) if the Interest Coverage Ratio was 2.1 to 1 or more as the case may be" 2. AMENDMENT FEE. The Borrowers, jointly and severally, agree to pay to the Agent, for the account of the Lenders in proportion to their Pro Rata Shares immediately prior to this Amendment: an amendment fee of $350,000 upon the execution and delivery of this Amendment. 3. INCREASED LINE FEE. In the event that Section 1(ii) becomes effective the Borrowers jointly and severally agree to pay an Increased Line Fee to the New Lender in such amount as the New Lender and the Borrowers shall agree. 4. REPRESENTATIONS AND WARRANTIES. As an inducement to the Agent and the Lenders to enter into this Amendment, each of the Borrowers hereby represents and warrants to the Agent and the Lenders and agrees with the Agent and the Lenders as follows: (a) It has the power and authority to enter into this Amendment, has taken all corporate action required to authorize its execution, delivery, and performance of this Amendment. This Amendment has been duly executed and delivered by it and - 3 - constitutes its valid and binding obligation, enforceable against it in accordance with its terms. The execution, delivery, and performance of this Amendment will not violate its certificate of incorporation or by-laws or any agreement or legal requirements binding upon it. (b) As of the date hereof and after giving effect to the terms of this Amendment: (i) the Loan Agreement is in full force and effect and constitutes a binding obligation of the Borrowers, enforceable against the Borrowers and owing in accordance with its terms; (ii) the Obligations are due and owing by the Borrowers in accordance with their terms; and (iii) Borrowers have no defense to or setoff, counterclaim, or claim against payment of the Obligations and enforcement of the Loan Documents based upon a fact or circumstance existing or occurring on or prior to the date hereof. 5. NO IMPLIED AMENDMENTS. Except as expressly provided herein, the Loan Agreement and the other Loan Documents are not amended or otherwise affected in any way by this Amendment. 6. ENTIRE AQREEMENT; MODIFICATIONS; BINDING EFFECT. This Amendment constitutes the entire agreement of the parties with respect to its subject matter and supersedes all prior oral or written understandings about such matter. Each of the Borrowers confirms that, in entering into this Amendment, it did not rely upon any agreement, representation, or warranty by the Agent or any Lender except those expressly set forth herein. No modification, recision, waiver, release, or amendment of any provision of this Amendment may be made except by a written agreement signed by the parties hereto. The provisions of this Amendment are binding upon and inure to the benefit of the representatives, successors, and assigns of the parties hereto; provided, however, that no interest herein or obligation hereunder may be assigned by any Borrower without the prior written consent of the Required Lenders. 7. EFFECTIVE DATE. This Agreement shall become effective when executed by the Borrowers and such number of Lenders as shall constitute the amount of Required Lenders provided however that with respect to Section 1(a)(ii) and - 4 - (iii) such Section shall not become effective until compliance with the conditions set forth immediately below Section 1(a)(iii) hereof. 8. SEVERABILITY. If any provision of this Amendment is prohibited or invalid, under applicable law, it is ineffective only to such extent, without invalidating the remainder of this Amendment. 9. COUNTERPARTS. This Amendment may be executed in any number of counterparts, and by each party in separate counterparts, each of which is an original, but all of which shall together constitute one and the same agreement. 10. GOVERNING LAW. This Amendment is deemed to have been made in the State of New York and is governed by and interpreted in accordance with the laws of such state, provided that no doctrine of choice of law (except as may be applicable under the UCC with respect to the Security Interest) shall be used to apply the laws of any other state or jurisdiction. IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date first above written. BORROWERS: THE PENN TRAFFIC COMPANY By: ------------------------------------ Title: DAIRY DELL By: ------------------------------------ Title: - 5 - BIG M SUPERMARKETS, INC. By: ------------------------------------ Title: PENNY CURTISS BAKING COMPANY, INC. By: ------------------------------------ Title: LENDERS: Commitment: $35,000,000 NATWEST USA CREDIT CORP. Pro-Rata Share: 17.5% Lending Office: 175 Water Street New York, New York 10038 By: ------------------------------------ Title: Commitment: $20,000,000 NATIONAL BANK OF CANADA Pro-Rata Share: 10% Lending Office: Empire Tower-Suite 1540 350 Main Street By: Buffalo, New York 14202 ------------------------------------ Title: Commitment: $20,000,000 FUJI BANK, LTD. Pro-Rata Share: 10% Lending Office: Two World Trade Center 79th Fl New York, New York 10048 By: ------------------------------------- Title: (Signatures continued on next page) - 6 - Commitment: $20,000,000 SANWA BUSINESS CREDIT Pro-Rata Share: 10% CORPORATION Lending Office: One South Wacker Drive Suite 2800 Chicago, IL. 60606 By: ------------------------------------ Title: Commitment: $25,000,000 BANKAMERICA Pro-Rata Share: 12.5% BUSINESS CREDIT, INC. Lending Office: 40 East 52nd Street Second Fl. New York, NY 10022 By: ------------------------------------ Title: Commitment: $25,000,000 HELLER FINANCIAL, INC. Pro-Rata Share: 12.5% Lending Office: 101 Park Avenue, 12th Fl. New York, NY 10178 By: ------------------------------------ Title: Commitment: $10,000,000 IBJ SCHRODER Pro-Rata Share: 5% Lending Office: One State Street 9th Fl. By: New York, NY 10004 ------------------------------------ Title: Commitment: $10,000,000 MIDLANTIC NATIONAL BANK Pro-Rata Share: 5% Lending Office: 499 Thornalle Street 9th Fl. By: Edison, NJ 08837 ------------------------------------ Title: (Signatures continued on next page) -7- Commitment: $20,000,000 MITSUBISHI TRUST AND Pro-Rata Share: 10% BANKING CORPORATION Lending Office: 520 Madison Avenue 25th Fl. New York, NY 10022 By: ------------------------------------ Title Commitment: $15,000,000 CONTINENTAL BANK, N.A. Pro-Rata Share: 7.5% Lending Office: 231 South La Salle St. 12th Fl. C By: Chicago, IL. 60697 ------------------------------------ Title AGENT NATWEST USA CREDIT CORP., As Agent By: ------------------------------------ Title: - 8 - EX-27.1 4 EXHIBIT 27.1 (FDS)
5 The schedule contains summary financial information extracted from the Company's interim Consolidated Financial Statements and is qualified in its entirety by reference to such Financial Statements. 1,000 6-MOS JAN-28-1995 JAN-30-1994 JUL-30-1994 41,304 0 67,504 1,136 348,854 466,954 789,230 245,532 1,600,806 355,224 1,127,491 13,560 0 0 1,916 1,600,806 1,620,300 1,645,728 1,274,388 1,274,388 295,552 396 57,791 17,997 8,873 9,124 0 (2,967) (5,790) 367 .03 .03
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