-----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, NgTlOiyNKm+NnrHMGEKvEX1mbaMWKG+8YR7OyKnV8kdgJaCcAT20QKBl3Y9kNw1r d1D1nLcXbdFfs2sKdy9nyQ== 0000912057-94-004185.txt : 19941214 0000912057-94-004185.hdr.sgml : 19941214 ACCESSION NUMBER: 0000912057-94-004185 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19941029 FILED AS OF DATE: 19941213 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENN TRAFFIC CO CENTRAL INDEX KEY: 0000077155 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [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: 94564594 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 October 29, 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 December 1, 1994 1 of 14 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 THIRTY-NINE WEEKS ENDED OCTOBER 29, OCTOBER 30, OCTOBER 29, OCTOBER 30, 1994 1993 1994 1993 ----------- ----------- ----------- ----------- Total Revenues $ 828,064 $ 783,253 $ 2,473,792 $ 2,326,289 Cost and Operating Expenses: Cost of sales (including buying and occupancy costs) 639,939 610,245 1,914,327 1,812,896 Selling and administrative expenses 151,854 140,233 447,406 412,182 Unusual item (Note 3) 6,400 ----------- ----------- ----------- ----------- Operating Income 36,271 32,775 112,059 94,811 Interest expense 28,626 28,516 86,417 88,172 ----------- ----------- ----------- ----------- Income Before Income Taxes, Extraordinary Item and Cumulative Effect of Change in Accounting Principle 7,645 4,259 25,642 6,639 Provision for income taxes 2,868 4,762 11,741 6,089 ----------- ----------- ----------- ----------- Income (Loss) Before Extraordinary Item and Cumulative Effect of Change in Accounting Principle 4,777 (503) 13,901 550 Extraordinary item (net of tax benefit) (Note 5) (58) (1,091) (3,025) (23,170) ----------- ----------- ----------- ----------- Income (Loss) Before Cumulative Effect of Change in Accounting Principle 4,719 (1,594) 10,876 (22,620) Cumulative effect of change in accounting principle (net of tax benefit) (Note 6) (5,790) ----------- ----------- ----------- ----------- Net Income (Loss) 4,719 (1,594) 5,086 (22,620) Preferred dividends (159) ----------- ----------- ----------- ----------- Net Income (Loss) Applicable to Common Stock $ 4,719 $ (1,594) $ 5,086 $ (22,779) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Per Share Data: Income (loss) before extraordinary item and cumulative effect of change in accounting principle (after preferred dividends) $ .43 $ (.04) $ 1.25 $ .04 Extraordinary item (.01) (.10) (.27) (2.24) Cumulative effect of change in accounting principle (.52) ----------- ----------- ----------- ----------- Net income (loss) $ .42 $ (.14) $ .46 $ (2.20) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Average Number of Common Shares Outstanding 11,178,910 11,177,993 11,169,814 10,363,887 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
See Notes to Interim Consolidated Financial Statements. -2- THE PENN TRAFFIC COMPANY CONSOLIDATED BALANCE SHEET
(All dollar amounts in thousands) UNAUDITED OCTOBER 29, 1994 JANUARY 29, 1994 ASSETS ---------------- ---------------- Current Assets: Cash and short-term investments $ 56,077 $ 82,467 Accounts and notes receivable (less allowance for doubtful accounts of $1,418 and $740, respectively) 72,650 60,020 Inventories (Note 4) 386,191 348,455 Prepaid expenses and other current assets 10,064 9,939 ---------- ---------- Total Current Assets 524,982 500,881 Noncurrent Assets: Capital leases - net 128,144 134,101 Property, plant and equipment - net 559,165 535,728 Intangible assets - net 370,796 377,450 Other assets and deferred charges - net 87,387 84,741 ---------- ---------- Total Assets $1,670,474 $1,632,901 ---------- ---------- ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 4,071 $ 4,208 Current portion of obligations under capital leases 9,006 8,773 Trade accounts and drafts payable 210,806 183,967 Payroll and other accrued liabilities 68,204 74,028 Accrued interest expense 14,060 28,690 Payroll taxes and other taxes payable 23,420 18,901 Deferred income taxes 20,570 24,669 ---------- ---------- Total Current Liabilities 350,137 343,236 Noncurrent Liabilities: Long-term debt 1,061,190 1,021,896 Obligations under capital leases 127,426 131,148 Deferred income taxes 71,298 72,411 Other noncurrent liabilities 40,227 49,228 ---------- ---------- Total Liabilities 1,650,278 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 (156,794) (162,924) Minimum pension liability adjustment (4,963) (4,963) Unearned compensation (10,812) (9,768) ---------- ---------- Total Shareholders' Equity 20,196 14,982 ---------- ---------- Total Liabilities and Shareholders' Equity $1,670,474 $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) THIRTY-NINE THIRTY-NINE WEEKS ENDED WEEKS ENDED OCTOBER 29, 1994 OCTOBER 30, 1993 ---------------- ---------------- Operating Activities: Net income (loss) $ 5,086 $ (22,620) 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 54,133 53,952 Amortization of intangibles 10,999 7,179 Other - net (9,071) 7,525 Net change in assets and liabilities: Accounts receivable and prepaid expenses (13,449) (6,979) Inventories (37,736) (78,196) Accounts payable and accrued expenses (5,468) (3,529) Deferred charges and other assets 3,233 3,873 ---------- ---------- Net Cash Provided By (Used In) Operating Activities 13,517 (38,795) ---------- ---------- Investing Activities: Capital expenditures (71,342) (99,437) Proceeds from sale of assets 1,832 2,312 Purchase of Insalaco Markets (45,539) Other - net (800) (336) ---------- ---------- Net Cash (Used In) Investing Activities (70,310) (143,000) ---------- ---------- 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 100,000 415,500 Payments to settle long-term debt (60,843) (390,064) Increase in revolver debt 381,400 443,336 Payments to settle revolver debt (381,400) (331,277) Reduction of capital lease obligations (6,400) (5,781) Payment of debt issuance costs (2,482) (14,698) Preferred dividends and other - net 128 (159) ---------- ---------- Net Cash Provided By Financing Activities 30,403 180,843 ---------- ---------- (Decrease) in Cash and Cash Equivalents (26,390) (952) Cash and Cash Equivalents at Beginning of Period 82,467 54,840 ---------- ---------- Cash and Cash Equivalents at End of Period $ 56,077 $ 53,888 ---------- ---------- ---------- ----------
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 of 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)
Third Quarter Thirty-nine Weeks ------------- ----------------- Fiscal 1995 Operating Income $ 36,271 $ 112,059 Depreciation and Amortization 21,887 65,132 LIFO Adjustment 450 Cash Interest Expense 27,554 83,363 Fiscal 1994 Operating Income $ 32,775 $ 94,811 Unusual Item 6,400 Depreciation and Amortization 20,894 61,131 LIFO Adjustment 100 1,090 Cash Interest Expense 27,757 85,415
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 October 29, 1994 and January 29, 1994, respectively. NOTE 5 - EXTRAORDINARY ITEM During the third quarter of Fiscal 1995 and the third quarter of Fiscal 1994, the Company had extraordinary charges of $0.1 million and $1.1 million (net of $0.7 million income tax benefit), respectively. During the thirty-nine week periods ended October 29, 1994 and October 30, 1993, the Company had extraordinary charges of $3.0 million (net of $2.1 million income tax benefit) and $23.2 million (net of $15.1 million income tax benefit), respectively. All of these extraordinary charges related to the early retirement of debt. - 6 - 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 was recorded in the first quarter of Fiscal 1995, reducing net income by $5.8 million (net of $4.1 million income tax benefit). NOTE 7 - ACQUISITION AND DEBT OFFERING In September 1994, the Company reached an agreement with American Stores Company to acquire 45 supermarkets currently operating under the Acme trade name. Forty-one of these stores are located in north central and northeastern Pennsylvania and four are located in south central New York State. The purchase price for the 45 stores is approximately $75 million plus inventory (estimated to be approximately $19 million). The Company is currently awaiting regulatory approval of the acquisition and expects to finalize the transaction by the end of the current fiscal year. In October 1994, the Company issued $100,000,000 of 10.65% Senior Notes due November 1, 2004 (the "10.65% Senior Notes") in an underwritten public offering. Proceeds of the issuance of the 10.65% Senior Notes will be used to fund the purchase price for the acquisition. Pending completion of the acquisition, the net proceeds of the issuance of the 10.65% Senior Notes have been used to repay indebtedness outstanding under the Company's revolving credit facility and invested in short-term securities. NOTE 8 - 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. Penn Traffic accounts for its investment in Grand Union under the equity method. The investment was recorded initially at a cost of $18,250,000. The carrying value of the investment was totally written off as of February 2, 1991. On November 29, 1994, Grand Union announced that it expects to propose a capital restructuring early in calendar year 1995. Penn Traffic has certain ongoing relationships with Grand Union (see Note 10 to Penn Traffic's consolidated financial statements for the fiscal year ended January 29, 1994). Penn Traffic does not expect that the proposed capital restructuring of Grand Union will have any material impact on Penn Traffic. - 7 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THIRTEEN WEEKS ("THIRD QUARTER FISCAL 1995") AND THIRTY-NINE WEEKS ENDED OCTOBER 29, 1994 COMPARED TO THIRTEEN WEEKS ("THIRD QUARTER FISCAL 1994") AND THIRTY- NINE WEEKS ENDED OCTOBER 30, 1993 Income before cumulative effect of change in accounting principle was $4.7 million for Third Quarter Fiscal 1995 and $10.9 million for the thirty-nine weeks ended October 29, 1994, compared to a loss of $1.6 million for Third Quarter Fiscal 1994 and a loss of $22.6 million for the thirty-nine weeks ended October 30, 1993. The improvement in Third Quarter Fiscal 1995 was primarily due to a $3.5 million increase in operating income combined with a $1.0 million decrease in extraordinary charges related to debt retirement and a $1.9 million decrease in the provision for income taxes. The improvement for the thirty-nine week period was primarily due to a $17.2 million increase in operating income combined with a $20.1 million decrease in extraordinary charges related to debt retirement, partially offset by a $5.7 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 Third Quarter Fiscal 1995 and Third Quarter Fiscal 1994 and for the thirty-nine weeks ended October 29, 1994 and October 30, 1993, respectively:
Third Quarter Ended Thirty-nine Weeks Ended OCTOBER 29, October 30, OCTOBER 29, October 30, 1994 1993 1994 1993 --------- --------- --------- --------- Total revenues 100.0% 100.0% 100.0% 100.0% Gross profit (1) 22.7 22.1 22.6 22.1 Selling and administrative expenses 18.3 17.9 18.1 17.7 Unusual item .3 Operating income 4.4 4.2 4.5 4.1 Interest expense 3.5 3.7 3.5 3.8 Income before income taxes, extraordinary item and cumulative effect of change in accounting principle .9 .5 1.0 .3 Net income (loss) .6 (.2) .2 (1.0) (1) Total revenues less cost of goods sold.
- 8 - RESULTS OF OPERATIONS (CONTINUED) Total revenues for Third Quarter Fiscal 1995 increased to $828.1 million from $783.3 million in Third Quarter Fiscal 1994. Total revenues for the thirty-nine week period ended October 29, 1994 increased to $2.47 billion from $2.33 billion for the thirty-nine week period ended October 30, 1993. Sales from retail supermarkets existing in both periods, "same store sales," increased 1.7% in Third Quarter Fiscal 1995, and 1.4% for the thirty-nine weeks ended October 29, 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 Third Quarter Fiscal 1995 to $109.0 million from Third Quarter Fiscal 1994 sales of $114.2 million and decreased to $329.2 million for the thirty-nine weeks ended October 29, 1994 from $372.9 million for the thirty-nine weeks ended October 30, 1993. In Third Quarter Fiscal 1995, gross profit as a percentage of total revenues increased to 22.7% from 22.1% for Third Quarter Fiscal 1994. Gross profit as a percentage of total revenues increased to 22.6% for the thirty-nine week period ended October 29, 1994 from 22.1% for the thirty-nine weeks ended October 30, 1993. The increase in gross profit as a percentage of total revenues 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 as a percentage of total revenues increased to 18.3% for Third Quarter Fiscal 1995 from 17.9% in Third Quarter Fiscal 1994. Selling and administrative expenses as a percentage of total revenues increased to 18.1% for the thirty-nine week period ended October 29, 1994 from 17.7% for the thirty-nine week period ended October 30, 1993. The increase in selling and administrative expenses as a percentage of total revenues primarily resulted from the relative increase in retail revenues compared to wholesale revenues and 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 $21.9 million in Third Quarter Fiscal 1995 and $20.9 million in Third Quarter Fiscal 1994 represented 2.6% and 2.7% of total revenues, respectively. Depreciation and amortization of $65.1 million for the thirty-nine weeks ended October 29, 1994 and $61.1 million for the thirty-nine weeks ended October 30, 1993, represented 2.6% of total revenues in both periods. Operating income for Third Quarter Fiscal 1995 was $36.3 million or 4.4% of total revenues compared to $32.8 million or 4.2% of total revenues in Third Quarter Fiscal 1994. Operating income for the thirty-nine week period ended October 29, 1994 was $112.1 million or 4.5% of total revenues compared to $94.8 million or 4.1% of total revenues for the thirty-nine weeks ended October 30, 1993. Operating income excluding the effect of the unusual item for the thirty- nine week period ended October 30, 1993 was $101.2 million or 4.4% of total revenues. Operating income increased primarily as a result of an increase in gross profit partially offset by an increase in selling and administrative expenses. - 9 - RESULTS OF OPERATIONS (CONTINUED) Interest expense for Third Quarter Fiscal 1995 and Third Quarter Fiscal 1994 was $28.6 million and $28.5 million, respectively. Interest expense for the thirty-nine weeks ended October 29, 1994 and October 30, 1993 was $86.4 million and $88.2 million, respectively. Income before income taxes, extraordinary item, and the cumulative effect of a change in accounting principle was $7.6 million for Third Quarter Fiscal 1995, compared to $4.3 million for Third Quarter Fiscal 1994. Income before income taxes, extraordinary item, and the cumulative effect of a change in accounting principle for the thirty-nine weeks ended October 29, 1994 was $25.6 million compared to $6.6 million for the thirty-nine weeks ended October 30, 1993. Results for the thirty-nine week period ended October 30, 1993 were significantly impacted by the $6.4 million unusual item (Note 3). The income tax provision was $2.9 million for Third Quarter Fiscal 1995 compared to $4.8 million in Third Quarter Fiscal 1994. The income tax provision was $11.7 million for the thirty-nine week period ended October 29, 1994 compared to $6.1 million in the prior year. The Third Quarter Fiscal 1995 tax provision includes a reduction of income tax expense of $1.0 million, Third Quarter Fiscal 1994 tax provision includes a $2.4 million charge to income tax expense. These adjustments are the result of statutory state and federal tax rate changes, respectively, and have been recorded in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." In addition to these adjustments, 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 $0.1 million extraordinary item and $1.1 million (net of $0.7 million income tax benefit) for Third Quarter Fiscal 1995 and Third Quarter Fiscal 1994, respectively, and the extraordinary items of $3.0 million (net of $2.1 million income tax benefit) and $23.2 million (net of $15.1 million income tax benefit) for the thirty-nine week period ended October 29, 1994 and the thirty-nine week period ended October 30, 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 6). - 10 - LIQUIDITY AND CAPITAL RESOURCES During Third Quarter Fiscal 1995, operating income increased to $36.3 million from $32.8 million for Third Quarter Fiscal 1994. Interest expense for Third Quarter Fiscal 1995 was $28.6 million as compared to $28.5 million during Third Quarter Fiscal 1994. Income before extraordinary item and the cumulative effect of a change in accounting principle for Third Quarter Fiscal 1995 was $4.8 million as compared to a loss of $0.5 million for Third Quarter Fiscal 1994. Payments of principal and interest on the Company's $1,065.3 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 $1.6 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 $225 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 $194.6 million at October 29, 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%. In September 1994, the Company reached an agreement with American Stores Company to acquire 45 supermarkets currently operating under the Acme trade name. Forty-one of these stores are located in north central and northeastern Pennsylvania and four are located in south central New York State. The purchase price for the 45 stores is approximately $75 million plus inventory (estimated to be approximately $19 million). The Company is currently awaiting regulatory approval of the acquisition and expects to finalize the transaction by the end of the current fiscal year. In October 1994, the Company issued $100 million of 10.65% Senior Notes due November 1, 2004 (the "10.65% Senior Notes") in an underwritten public offering. Proceeds of the issuance of the 10.65% Senior Notes will be used to fund the purchase of 45 supermarkets currently operating under the Acme trade name described above. Pending completion of the acquisition, the net proceeds of the issuance of the 10.65% Senior Notes have been used to repay indebtedness outstanding under the Revolving Credit Facility and invested in short-term securities. During Third 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. - 11 - LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) During the thirty-nine week period ended October 29, 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 Third Quarter Fiscal 1995 are reported in the Consolidated Statement of Cash Flows. For the thirty-nine week period ended October 29, 1994, the Company experienced a positive cash flow from operating activities of $13.5 million. Working capital increased by $17.2 million from January 29, 1994 to October 29, 1994. 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 October 29, 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. During Third Quarter Fiscal 1995, three new stores were opened and three remodels were completed. Additionally, as of October 29, 1994, one new store and four replacement stores were under construction and nine remodels were in process. The majority of these projects will be completed by the end of Fiscal 1995. - 12 - PART II. OTHER INFORMATION All items which are not applicable or to which the answer is negative have been omitted from this report. ITEM 5. OTHER INFORMATION On December 12, 1994, the Company announced that Claude J. Incaudo will retire as President and Chief Executive Officer of the Company at the end of the Company's current fiscal year and that the Board of Directors had elected John T. Dixon, currently President of the Company's P&C Foods division, to succeed Mr. Incaudo. Mr. Dixon has also been elected to the Board of Directors of the Company. Mr. Incaudo will continue as a director of the Company and also will serve as consultant to the Company during the two-year period following his retirement. The Company also announced the appointment of Roy Flood, currently Executive Vice President - Merchandising of the Company's Big Bear Stores division, to succeed Mr. Dixon as President of the Company's P&C Foods division and as Senior Vice President of the Company. In addition, Raymond J. Heath, currently President of the Riverside Division; John E. Josephson, currently President of the Big Bear division; and Eugene R. Sunderhaft, currently Vice President - Finance and Chief Financial Officer, have been appointed Senior Vice Presidents of the Company, effective January 29, 1995. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Number Description -------------- ----------- 10.9I Consent and Amendment, dated as of September 29, 1994, to the Loan and Security Agreement among The Penn Traffic Company, Dairy Deli, Big M Supermarkets, Inc., Penny Curtiss Baking Company, Inc., the lenders party thereto and NatWest USA Credit Corp., as Agent. 27.1 Financial Data Schedule (b) Reports on Form 8-K On October 13, 1994, the Company filed a report on Form 8-K relating to the pending acquisition of 45 stores owned by American Stores Company. - 13 - 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 December 12, 1994 /s/- Claude J. Incaudo --------------------------- By: Claude J. Incaudo (President and Chief Executive Officer - Director) December 12, 1994 /s/- Eugene R. Sunderhaft --------------------------- By: Eugene R. Sunderhaft (Vice President, Secretary and Treasurer - Chief Financial Officer) - 14 - EX-10.9I 2 EXHIBIT 10.9I CONSENT AND AMENDMENT TO LOAN AND SECURITY AGREEMENT Agreement, dated as of September 29, 1994, (this "Agreement") by and among The Penn Traffic Company ("Penn Traffic"), Diary Dell, Big M Supermarkets, Inc., and Penny Curtiss Baking Company, Inc. (individually a "BORROWER" and collectively the "BORROWERS"), the financial institutions listed on the signatures pages hereof (collectively the "LENDERS") and NatWest USA Credit Corp., as Agent for the Lenders (in such capacity, the "Agent"). ------------------- The Borrowers, the Lenders, and the Agent are parties to a Loan and Security Agreement dated March 5, 1993, as amended by Amendment No. 1 dated March 12, 1993, Amendment No. 2 dated March 24, 1993, Amendment No. 3 dated April 15, 1993 and Amendment No. 4 dated August 20, 1993 (as amended by Amendments Nos. 1, 2, 3 and 4, the "Loan Agreement"). Capitalized terms used herein, except as otherwise defined herein, shall have the meanings given to such terms in the Loan Agreement. Penn Traffic has requested that the Agent obtain the consent of the Required Lenders to: (i) the issuance prior to December 31, 1995 by Penn Traffic of up to $125,000,000 of not less than seven year senior notes (the "Senior Notes") (ii) the use of the net proceeds from the issuance of the Senior Notes (iii) the acquisition by Penn Traffic of up to 45 supermarket stores presently owned by the American Stores Company operated under the name "Acme" supermarkets and located in eastern Pennsylvania and south central New York, (the "Acme Stores") possibly together with a warehouse used in connection therewith and located in the Scranton Pennsylvania area (the "Acme Warehouse") and the acquisition by Penn Traffic of up to an additional 10 supermarket stores presently owned by the American Stores Company also operated under the name "Acme" supermarkets and located in the Allentown/Bethlehem Pennsylvania market and in 5 small towns in eastern Pennsylvania (the "Additional Acme Stores") for an aggregate purchase price not to exceed $150,000,000. The Acme Stores, the Acme Warehouse and the Additional Acme Stores are listed and described in Exhibit A hereto. The transactions relating to the issuance of the Senior Notes and the use of the proceeds thereof, and the acquisition of the properties as described above (the "Acme Acquisition") require the consent of the Required Lenders pursuant to the Loan Agreement. The Required Lenders are prepared to provide such consent but only on the terms and conditions of this Agreement. Now Therefore, the Borrowers, the Lenders and the Agent agree as follows: -2- 1. CONSENT TO THE INSSUANCE OF THE SENIOR NOTES AND TO THE USE OF THE PROCEEDS THEREOF. To the extent such consent is required under the Loan Documents (including, without limitation, Section 10.8 and 10.9 of the Loan Agreement) and provided the Senior Notes are issued on or prior to December 31, 1995, the Required lenders do hereby: (i) consent to the issuance of up to $125,000,000 of Senior Notes as described in the preamble to this Agreement and (ii) further approve the use of the net proceeds from the issuance of the Senior Notes upon issuance thereof, notwithstanding the limitation contained in Section 10.8 and 10.9 of the Loan Agreement, and do further consent to the use of the net proceeds of the issuance of the Senior Notes for general corporate purposes. 2. CONSENT TO THE ACME ACQUISITION. To the extent that such consent in required under the Loan Documents (including, without limitation, Section 10.5 of the Loan Agreement) and provided the Acme Acquisition is consummated on or before December 31, 1995, the Required Lenders do hereby consent to the Acme Acquisition for the maximum purchase price set forth in the preamble to this Agreement. 3. AMENDMENTS TO LOAN AGREEMENT. Upon Penn Traffic's consummation of the Acme Acquisition on or before -3- December 31, 1995, the following amendments to the Loan Agreement shall become effective: a. ADDITIONAL DEFINITION. There shall be added to Section 1 of the Loan Agreement the following definition in the appropriate alphabetical order. i. "DEFINITION OF "ACME ACQUISITION" "ACME ACQUISITION" means the purchase by Penn Traffic of up to 55 supermarket stores and the contents thereof owned by American Stores Company, each operated under the name "Acme" and located in eastern Pennsylvania, south central New York, and the Allentown/Bethlehem area of Pennsylvania, together with the possible acquisition of the warehouse located in the Scranton Pennsylvania area"; ii. the definition of "Capital Expenditures" is amended by adding the following at the end of the proviso in subsection (a) thereof: "and shall not include any expenditures in connection with the Acme Acquisition." b. the table set forth in Section 10.17(a) of the Loan Agreement is amended by deleting under column headings set forth therein the figures with respect to the -4- Fiscal Years 1996, 1997, 1998, 1999 and 2000 and substituting the following:
Total Permitted Cash Capital Financed Capital Capital Fiscal Year Expenditures Expenditures Expenditures ----------- ------------ ---------------- --------------- 1996 $140,000,000 $20,000,000 Total of plus the lesser Permitted Cash of: (i) Capital $40,000,000 or Expenditures and (ii) the amount Permitted by which Financed Capital Consolidated Expenditures for EBDAIT exceeds the Fiscal Year $210,000,000 1997 $110,000,000 $20,000,000 Total of plus the lesser Permitted Cash of: (i) Capital $40,000,000 or Expenditures and (ii) the amount Permitted by which Financed Capital Consolidated Expenditures for EBDAIT exceeds the Fiscal Year $210,000,000 1998 $115,000,000 $20,000,000 Total of plus the lesser Permitted Cash of: (i) Capital $40,000,000 or Expenditures and (ii) the amount Permitted by which Financed Capital Consolidated Expenditures for EBDAIT exceeds the Fiscal Year $210,000,000 1999 $120,000,000 $20,000,000 Total of plus the lesser Permitted Cash of: (i) Capital $40,000,000 or Expenditures and (ii) the amount Permitted by which Financed Capital Consolidated Expenditures for EBDAIT exceeds the Fiscal Year $210,000,000 -5- 2000 $125,000,000 $20,000,000 Total of plus the lesser Permitted Cash of: (i) Capital $40,000,000 or Expenditures and (ii) the amount Permitted by which Financed Capital Consolidated Expenditures for EBDAIT exceeds the Fiscal Year $210,000,000
4. CONDITIONS TO THE REQUIRED LENDERS' CONSENT. The Required Lenders' Consent given in Section 2 hereof shall not be effective until the following conditions precedent are satisfied: (a) The Borrowers shall have delivered to the Agent, for distribution to the lenders, definitive versions of the instruments, documents and agreements with respect: (i) to the issuance of the Senior Notes prior to issuance thereof and (ii) to the Acme Acquisition prior to the consummation of the Acme Acquisition. (b) An Event of Default shall not have occurred either prior to the issuance of the Senior Notes or prior to the consummation of the Acme Acquisition. (c) Penn Traffic shall have issued at least $75,000,000 of Senior Notes as described in the preamble to this Agreement, and shall have received the net proceeds thereof. -6- The Required Lenders' consent given in Section 2 hereof in respect to the Acme Acquisition shall not be effective until Penn Traffic shall deliver a certificate by an officer thereof that the Acme Acquisition is about to be consummated in accordance with the definitive version of the Acme Acquisition instruments, documents and agreements delivered pursuant to Section 4(a)(ii). 5. SCOPE OF CONSENT. The Borrowers acknowledge that the Required Lenders' consent hereunder is being given only as to those matters set forth in Sections 1 and 2 above that require such consent under the provisions of the Loan Documents and should not be construed as the Lenders' consent to any other aspect thereof, nor as the Lenders' endorsement of the issuance by Pen Traffic of the Senior Notes or the Acme Acquisition described in Sections 1 and 2 above. Such consent shall not be construed as a consent to any similar or other transaction or as a waiver of any unrelated Default or Event of Default. 6. REPRESENTATIONS AND WARRANTIES; WAIVER OF DEFENSES. As a further inducement to the Lenders to enter into this Agreement, the Borrowers hereby represent and warrant to the Agent and the Lenders and agree with the Agent and the Lenders as follows: -7- (a) The Borrowers have the power and authority to enter into this Agreement and each other agreement or instrument to be delivered by them pursuant hereto. This Agreement has been duly executed and delivered by and constitutes the Borrowers' valid and binding obligation, enforceable against the Borrowers in accordance with its terms. The execution, delivery, and performance of this Agreement will not violate any of the certificates of incorporation or by-laws or any agreement or legal requirements binding on any of the Borrowers. (b) On the date hereof: (i) the Loan Agreement and the other Loan Documents are in full force and effect and constitute the Borrowers' binding obligation, enforceable against them in accordance with their respective terms; (ii) the Obligations are due and owning by them in accordance with the terms of the Loan Documents to which the Borrowers are a party; (iii) no Event or Event of Default has occurred and is continuing; and (iv) the Borrowers hereby waive and release all defenses to and setoffs, counterclaims, and claims against payment of the Obligations and enforcement of the Loan Documents that are now existing or occurring on or prior to the date hereof. 7. NO IMPLIED AMENDMENTS. Except as expressly provided herein, the Loan Agreements and the other Loan -8- Documents are not amended or otherwise affected in any way by this Agreement. 8. ENTIRE AGREEMENT; MODIFICATIONS; BINDING EFFECT. This Agreement constitutes the entire agreement of the parties with respect to its subject matter and supersedes all prior oral or written understandings about such matters. The Borrowers confirm that, in entering into this Agreement, they 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 Agreement may be made except by a written agreement signed by the parties hereto. The provisions of this Agreement shall be 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 the Borrowers without the Required lenders' prior written consent. 9. SEVERABILITY. If any provision of this Agreement shall be prohibited or invalid, under applicable law, it shall be ineffective only to such extent, without invalidating the remainder of this Agreement. 10. COUNTERPARTS. This Agreement may be executed in any number of counterparts, and by each party in separate -9- counterparts, each of which is an original but all of which shall together constitute one and the same agreement. 11. GOVERNING LAW. This Agreement is deemed to have been made in the State of New York and is governed by and shall be interpreted in accordance with the laws of such state. 12. EFFECTIVE DATE. This Agreement shall become effective when executed by the Borrowers and those of the Lenders as shall constitute the number of Required Lenders. -10- IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the day and year 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: -11- 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: Main Place Tower, Suite 2450 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 By:____________________ Chicago, IL 60606 Title: Commitment: $25,000,000 BANKAMERICA Pro-Rata Share: 12.5% BUSINESS CREDIT, INC. Lending Office: 40 East 52nd Street Second Fl. By:____________________ New York, New York 10022 Title: Commitment: $25,000,000 HELLER FINANCIAL, INC. Pro-Rata Share: 12.5% Lending Office: 101 Park Avenue 12th Fl. By:____________________ New York, New York 10178 Title: (Signatures continued on next page) -12- Commitment: $10,000,000 IBJ SCHRODER Pro-Rata Share: 5% Lending Office: One State Street 9th Fl. By:____________________ New York, New York 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, New York 10022 Title: Commitment: $15,000,000 CONTINENTAL BANK, N.B. 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: -13- EX-27.1 3 EXHIBIT 27.1
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 9-MOS JAN-28-1995 JAN-30-1994 OCT-29-1994 56,077 0 74,068 1,418 386,191 524,982 818,748 259,583 1,670,474 350,137 1,201,693 13,560 0 0 6,636 1,670,474 2,433,798 2,473,792 1,914,327 1,914,327 447,406 678 86,417 25,642 11,741 13,901 0 (3,025) (5,790) 5,086 .46 .45
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