-----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, JNet17Rur61QZbYGXr940iI5IF2ORYcKGPa5mk6F15q1X6WG9KaBgnNkRS4heykV Kks+ll5ieRZ5k3YNIdtFqQ== 0000912057-94-002043.txt : 19940617 0000912057-94-002043.hdr.sgml : 19940617 ACCESSION NUMBER: 0000912057-94-002043 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940430 FILED AS OF DATE: 19940614 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: 94534138 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 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 April 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 Boulevard, 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: 10,846,251 shares outstanding as of June 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 THIRTEEN WEEKS ENDED APRIL 30, MAY 1, 1994 1993 ---------- --------- TOTAL REVENUES $ 809,961 $ 762,040 COST AND OPERATING EXPENSES: Cost of sales (including buying and occupancy cost) 631,458 593,757 Selling and administrative expenses 145,112 136,724 ---------- ---------- OPERATING INCOME 33,391 31,559 Interest expense 29,024 30,759 ---------- ---------- INCOME BEFORE INCOME TAXES, EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 4,367 800 Provision for income taxes 2,111 381 ---------- ---------- INCOME BEFORE EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 2,256 419 Extraordinary item (net of tax benefit) (Note 4) (2,276) (17,602) ---------- ---------- LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (20) (17,183) Cumulative effect of change in accounting principle (net of tax benefit) (Note 6) (5,790) ---------- ---------- NET LOSS (5,810) (17,183) Preferred dividends (159) ---------- ---------- NET LOSS APPLICABLE TO COMMON STOCK $ (5,810) $ (17,342) ---------- ---------- ---------- ---------- PER SHARE DATA: Income before extraordinary item and cumulative effect of change in accounting principle (after preferred dividends) $ .20 $ .03 Extraordinary item (.20) (2.03) Cumulative effect of change in accounting principle (.52) ---------- ---------- Net loss $ (.52) $ (2.00) ---------- ---------- ---------- ---------- Average number of common shares outstanding 11,171,258 8,691,177 ---------- ---------- ---------- ----------
See Notes to Interim Consolidated Financial Statements. - 2 - THE PENN TRAFFIC COMPANY CONSOLIDATED BALANCE SHEET
(All dollar amounts in thousands) UNAUDITED ASSETS APRIL 30, 1994 JANUARY 29, 1994 -------------- ---------------- CURRENT ASSETS: Cash and short-term investments $ 43,840 $ 82,467 Accounts and notes receivable (less allowance for doubtful accounts of $915 and $740, respectively) 60,952 60,020 Inventories (Note 3) 350,699 348,455 Prepaid expenses and other current assets 10,335 9,939 --------- --------- Total Current Assets 465,826 500,881 NONCURRENT ASSETS: Capital leases - net 131,703 134,101 Property, plant and equipment - net 536,348 535,728 Intangible assets - net 374,963 377,450 Other assets and deferred charges - net 88,362 84,741 ---------- ---------- Total Assets $1,597,202 $1,632,901 ---------- ---------- ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 3,794 $ 4,208 Current portion of obligations under capital leases 8,941 8,773 Trade accounts and drafts payable 182,782 183,967 Payroll and other accrued liabilities 66,797 73,579 Accrued interest expense 14,676 28,690 Accrued employee benefit costs 1,421 449 Payroll taxes and other taxes payable 20,214 18,901 Deferred income taxes 20,559 24,669 ---------- ---------- Total Current Liabilities 319,184 343,236 NONCURRENT LIABILITIES: Long-term debt 1,021,818 1,021,896 Obligations under capital leases 129,571 131,148 Deferred income taxes 72,355 72,411 Other noncurrent liabilities 44,987 49,228 ---------- ---------- Total Liabilities 1,587,915 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; 10,845,951 shares and 10,840,151 shares issued and outstanding, respectively 13,559 13,550 Capital in excess of par value 179,193 179,087 Retained deficit (167,952) (162,924) Minimum pension liability adjustment (4,963) (4,963) Unearned compensation (10,550) (9,768) ---------- ---------- Total Shareholders' Equity 9,287 14,982 ---------- ---------- Total Liabilities and Shareholders' Equity $1,597,202 $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) THIRTEEN THIRTEEN WEEKS ENDED WEEKS ENDED April 30, 1994 May 1, 1993 OPERATING ACTIVITIES: -------------- ----------- Net loss $ (5,810) $ (17,183) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Cumulative effect of change in accounting principle 5,790 Depreciation and amortization 17,983 16,942 Amortization of intangibles 3,723 2,929 Other - net (3,954) (12,461) Net change in assets and liabilities: Accounts receivable and prepaid expenses (2,015) 829 Inventories (2,244) (17,958) Accounts payable and accrued expenses (35,820) (17,279) Deferred charges and other assets 1,915 1,281 --------- --------- NET CASH (USED IN) OPERATING ACTIVITIES (20,432) (42,900) --------- --------- INVESTING ACTIVITIES: Capital expenditures (15,424) (23,394) Proceeds from sale of assets 74 832 Other - net (300) (55) --------- --------- NET CASH (USED IN) INVESTING ACTIVITIES (15,650) (22,617) --------- --------- FINANCING ACTIVITIES: Issuance of Penn Traffic common stock - net 74,800 Purchase of subsidiary securities (10,814) Increase in long-term debt 400,000 Payments to settle long-term debt (39,392) (279,612) Borrowing of revolver debt 107,400 136,977 Repayment of revolver debt (68,500) (149,777) Reduction of capital lease obligations (1,904) (2,041) Payment of debt issuance costs (263) (12,568) Preferred dividends and other - net 114 (159) --------- --------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (2,545) 156,806 --------- --------- (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (38,627) 91,289 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 82,467 54,840 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 43,840 $ 146,129 --------- --------- --------- ---------
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. 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 fiscal quarter ended April 30, 1994, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS 112") (Note 6). - 5 - NOTE 2 - SUPPLEMENTAL FINANCIAL INFORMATION (in thousands of dollars)
FIRST QUARTER, FISCAL 1995 Operating Income $ 33,391 Depreciation and Amortization 21,706 LIFO Provision 25 Cash Interest Expense 28,013 FIRST QUARTER, FISCAL 1994 Operating Income $ 31,559 Depreciation and Amortization 19,871 LIFO Provision 560 Cash Interest Expense 30,266
NOTE 3 - INVENTORIES If the first-in, first-out (FIFO) method had been used by the Company, inventories would have been $14,378,000 and $14,353,000 higher than reported at April 30, 1994 and January 29, 1994, respectively. NOTE 4 - EXTRAORDINARY ITEM During the first quarter of fiscal 1995, the Company had an extraordinary charge of $2.3 million (net of $1.6 million income tax benefit) and during the first quarter of fiscal 1994, had an extraordinary charge of $17.6 million (net of $11.5 million income tax benefit). Both of these extraordinary charges related to the early retirement of debt. - 6 - NOTE 5 - 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 6 - 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 reduced 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 ENDED APRIL 30, 1994 ("FIRST QUARTER FISCAL 1995") COMPARED TO THIRTEEN WEEKS ENDED MAY 1, 1993 ("FIRST QUARTER FISCAL 1994") Net loss was $5.8 million for First Quarter Fiscal 1995 compared to $17.2 million in First Quarter Fiscal 1994. The improvement was primarily due to a $15.3 million decrease in extraordinary charges related to debt retirement and a $1.8 million increase in income before extraordinary item and the cumulative effect of a change in accounting principle, partially offset by a $5.8 million charge recorded to reflect the adoption of Statement of Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS 112"). The following table sets forth statement of operations components expressed as a percentage of total revenues for First Quarter Fiscal 1995 and First Quarter Fiscal 1994:
First Quarter Ended ------------------- April 30, May 1, 1994 1993 --------- -------- Total revenues 100.0% 100.0% Gross profit (1) 22.0 22.0 Selling and administrative expenses 17.9 17.9 Operating income 4.1 4.1 Interest expense 3.6 4.0 Income before income taxes, extraordinary item and cumulative effect of change in accounting principles 0.5 0.1 Net loss (0.7) (2.3) (1) Total revenues less cost of goods sold.
Total revenues for First Quarter Fiscal 1995 increased to $810.0 million from $762.0 million in First Quarter Fiscal 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. Retail operations, wholesale operations and the food processing businesses contributed 82.6%, 13.7% and 3.7%, respectively, to First Quarter Fiscal 1995 total revenues. Wholesale supermarket sales decreased in First Quarter Fiscal 1995 to $109.2 million from First Quarter Fiscal 1994 results of $114.9 million. Sales from retail supermarkets existing in both periods, "same store sales," increased .9% in First Quarter Fiscal 1995. In First Quarter Fiscal 1995, gross profit was $178.5 million compared to First Quarter Fiscal 1994 gross profit of $168.3 million, representing 22.0% of total revenues in both periods. Selling and administrative expenses for First Quarter Fiscal 1995 were $145.1 million compared with $136.7 million in First Quarter Fiscal 1994. Selling and administrative expenses as a percentage of total revenues were 17.9% in both periods. - 8 - RESULTS OF OPERATIONS (CONTINUED) Depreciation and amortization of $21.7 million in First Quarter Fiscal 1995 and $19.9 million in First Quarter Fiscal 1994 represented 2.7% and 2.6% of total revenues, respectively. This increase is primarily the result of the Company's capital expenditure program. Operating income for First Quarter Fiscal 1995 increased by $1.8 million to $33.4 million from $31.6 million in First Quarter Fiscal 1994. Operating income as a percentage of total revenues was 4.1% in both periods. Interest expense for First Quarter Fiscal 1995 and First Quarter Fiscal 1994 was $29.0 million and $30.8 million, respectively. The decrease in interest expense is attributed to 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 in Fiscal 1994. Income before income taxes, extraordinary item, and the cumulative effect of a change in accounting principle was $4.4 million for First Quarter Fiscal 1995, compared to $0.8 million for First Quarter Fiscal 1994. The income tax provision was $2.1 million for First Quarter Fiscal 1995 compared to $0.4 million in First Quarter Fiscal 1994 in both periods. The effective tax rates vary from the statutory rate due to differences between income for financial reporting and tax reporting purposes, primarily related to goodwill amortization resulting from prior acquisitions. The $2.3 million extraordinary item (net of $1.6 million income tax benefit) in First Quarter Fiscal 1995 and the $17.6 million extraordinary item (net of $11.5 million income tax benefit) in First Quarter Fiscal 1994 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 6). - 9 - LIQUIDITY AND CAPITAL RESOURCES During First Quarter Fiscal 1995, operating income increased to $33.4 million from $31.6 million for First Quarter Fiscal 1994. Interest expense for First Quarter Fiscal 1995 was $29.0 million as compared to $30.8 million during First Quarter Fiscal 1994. Income before extraordinary item and the cumulative effect of a change in accounting principle for First Quarter Fiscal 1995 was $2.3 million as compared to $.4 million for First Quarter Fiscal 1994. Payments of principal and interest on the Company's $1,025.6 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 $3.3 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 $130.3 million at April 30, 1994. During First 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 First Quarter Fiscal 1995, the Company repurchased $32.8 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 First Quarter Fiscal 1995 are reported in the Consolidated Statement of Cash Flows. For the 13-week period ended April 30, 1994, the Company experienced a negative cash flow from operating activities of $20.4 million. Working capital decreased by $11.0 million from January 29, 1994 to April 30, 1994. - 10 - 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 April 30, 1994, no dividend payments to its shareholders could have been made under the most restrictive of these limitations. 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. Eleven new or replacement stores and five remodels were under construction as of April 30, 1994. Capital expenditures, including capital leases, were approximately $15.9 million for First Quarter 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Stockholders was held on June 7, 1994. At the Annual Meeting, three directors were elected to serve for three-year terms on the Company's Board of Directors, by the following votes:
FOR WITHHELD --- -------- Eugene A. DePalma 9,466,766 101,469 Susan E. Engel 9,466,901 101,334 Claude J. Incaudo 9,466,671 101,563
At the Annual Meeting, the selection of Price Waterhouse as auditors for the Company for Fiscal 1995 was ratified by a vote of 9,476,395 shares in favor and 10,862 shares opposed. A total of 80,977 shares abstained from voting. - 11 - ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None. (b) Reports on Form 8-K No reports on Form 8-K were filed during the fiscal quarter ended April 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 June 13, 1994 /s/- Claude J. Incaudo --------------------------- By: Claude J. Incaudo (President and Chief Executive Officer - Director) June 13, 1994 /s/- Eugene R. Sunderhaft ---------------------------- By: Eugene R. Sunderhaft (Vice President, Secretary and Treasurer - Chief Financial Officer) - 13 - -----END PRIVACY-ENHANCED MESSAGE-----