-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EL4BYYxkoAItLT0v/thExZXsUwD75V0Vg6sGehHjCsAJjChVgPIIuZIc5wpfuUww 464eWHHVIUtzixzAr/SUOQ== 0000950112-95-003181.txt : 19951213 0000950112-95-003181.hdr.sgml : 19951213 ACCESSION NUMBER: 0000950112-95-003181 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951028 FILED AS OF DATE: 19951212 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUPERMARKETS GENERAL HOLDINGS CORP CENTRAL INDEX KEY: 0000821139 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 133408704 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16404 FILM NUMBER: 95600986 BUSINESS ADDRESS: STREET 1: 301 BLAIR RD STREET 2: P.O. BOX 5301 CITY: WOODBRIDGE STATE: NJ ZIP: 07095-0915 BUSINESS PHONE: 9084993000 MAIL ADDRESS: STREET 1: 301 BLAIR RD STREET 2: P.O. BOX 5301 CITY: WOODBRIDGE STATE: NJ ZIP: 07095-0915 10-Q 1 SUPERMARKETS GENERAL HOLDINGS CORPORATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------- FOR THE QUARTER ENDED COMMISSION FILE NUMBER OCTOBER 28, 1995 0-16404 SUPERMARKETS GENERAL HOLDINGS CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 13-3408704 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 301 BLAIR ROAD, P. O. BOX 5301 07095-0915 WOODBRIDGE, NEW JERSEY (Zip Code) (Address of principal executive office) 908-499-3000 (Registrant's telephone number, including area code) ------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: $3.52 CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK (Title of Class) ------------------- 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 --- --- As of October 28, 1995, there were outstanding 650,675 shares of $0.01 par value Class A Common Stock (voting) and 320,000 shares of $0.01 par value Class B Common Stock (non-voting), all of which are privately owned and not traded on a public market. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. SUPERMARKETS GENERAL HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS)
13 WEEKS ENDED 39 WEEKS ENDED -------------------------- -------------------------- OCTOBER 28, OCTOBER 29, OCTOBER 28, OCTOBER 29, 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Sales....................................... $ 996,013 $ 1,035,079 $ 3,060,058 $ 3,108,815 Cost of sales (exclusive of depreciation and amortization shown separately below)...... 713,471 747,211 2,185,738 2,241,154 ----------- ----------- ----------- ----------- Gross profit................................ 282,542 287,868 874,320 867,661 Selling, general and administrative expenses.................................. 229,469 228,672 696,304 692,746 Depreciation and amortization............... 20,134 18,714 60,230 55,516 ----------- ----------- ----------- ----------- Operating earnings.......................... 32,939 40,482 117,786 119,399 Gain on disposition of freestanding drug stores.................................... -- -- 15,535 -- Interest expense............................ (41,879) (43,169) (128,799) (127,460) Interest charged to discontinued operations................................ -- 3,678 -- 11,035 ----------- ----------- ----------- ----------- Earnings (loss) from continuing operations before income taxes and extraordinary item...................................... (8,940) 991 4,522 2,974 Income tax benefit (provision).............. 4,294 (920) 24,134 (2,412) ----------- ----------- ----------- ----------- Earnings (loss) from continuing operations before extraordinary item................. (4,646) 71 28,656 562 Loss from discontinued operations........... -- (480) -- (2,383) ----------- ----------- ----------- ----------- Earnings (loss) before extraordinary item... (4,646) (409) 28,656 (1,821) Extraordinary item.......................... -- -- (927) -- ----------- ----------- ----------- ----------- Net earnings (loss)......................... (4,646) (409) 27,729 (1,821) Less: non-cash preferred stock accretion and dividend requirements..................... (4,723) (4,709) (14,160) (14,116) ----------- ----------- ----------- ----------- Net earnings (loss) attributable to common stockholder............................... $ (9,369) $ (5,118) $ 13,569 $ (15,937) ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
See notes to consolidated financial statements. 1 SUPERMARKETS GENERAL HOLDINGS CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS EXCEPT SHARE AMOUNTS)
OCTOBER 28, JANUARY 28, 1995 1995 ----------- ----------- ASSETS Current Assets Cash and marketable securities..................................... $ 4,785 $ 23,247 Accounts receivable, net........................................... 11,080 13,380 Merchandise inventories............................................ 240,437 255,631 Income taxes receivable............................................ 427 7,756 Prepaid expenses................................................... 26,343 26,580 Due from suppliers................................................. 16,956 18,256 Other current assets............................................... 21,321 29,541 ----------- ----------- Total Current Assets........................................... 321,349 374,391 Property and Equipment, Net......................................... 604,744 598,801 Deferred Financing Costs, Net....................................... 35,403 40,446 Deferred Income Taxes............................................... 35,171 5,969 Investment in Purity Supreme, Inc. (net of valuation allowance of $24,700 at October 28, 1995 and $24,100 at January 28, 1995)...... -- -- Other Assets........................................................ 26,316 23,951 ----------- ----------- $ 1,022,983 $ 1,043,558 ----------- ----------- ----------- ----------- LIABILITIES AND STOCKHOLDER'S DEFICIT Current Liabilities Accounts payable................................................... $ 238,866 $ 239,752 Current maturities of long-term debt............................... 51,043 46,310 Accrued payroll and payroll taxes.................................. 49,339 53,638 Current portion of obligations under capital leases................ 18,852 18,298 Accrued interest payable........................................... 39,289 19,672 Accrued expenses and other current liabilities..................... 91,242 94,630 ----------- ----------- Total Current Liabilities...................................... 488,631 472,300 ----------- ----------- Long-Term Debt...................................................... 1,273,698 1,365,571 ----------- ----------- Obligations Under Capital Leases, Long-Term......................... 132,429 127,122 ----------- ----------- Other Noncurrent Liabilities........................................ 291,753 256,911 ----------- ----------- Redeemable Securities Exchangeable Preferred Stock, $.01 par value...................... 103,208 101,959 Authorized: 9,000,000 shares Issued and outstanding: 4,890,671 shares at October 28, 1995 and January 28, 1995 Liquidation preference, $25 per share: $122,267 at October 28, 1995 and January 28, 1995 ----------- ----------- Total Redeemable Securities.................................... 103,208 101,959 ----------- ----------- Commitments and Contingencies (Note 13) Stockholder's Deficit Class A Common Stock, $.01 par value.............................. 7 7 Authorized: 1,075,000 shares Issued and outstanding: 650,675 shares at October 28, 1995 and January 28, 1995 Class B Common Stock, $.01 par value.............................. 3 3 Authorized: 1,000,000 shares Issued and outstanding: 320,000 shares at October 28, 1995 and January 28, 1995 Paid-in Capital.................................................... 197,886 199,135 Accumulated Deficit................................................ (1,464,632) (1,479,450) ----------- ----------- Total Stockholder's Deficit.................................... (1,266,736) (1,280,305) ----------- ----------- $ 1,022,983 $ 1,043,558 ----------- ----------- ----------- -----------
See notes to consolidated financial statements. 2 SUPERMARKETS GENERAL HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT (UNAUDITED) (IN THOUSANDS EXCEPT SHARE AMOUNTS)
CLASS A CLASS B TOTAL COMMON COMMON PAID-IN ACCUMULATED STOCKHOLDER'S STOCK STOCK CAPITAL DEFICIT DEFICIT ------- ------- -------- ----------- ------------- Balance at January 28, 1995................. $ 7 $ 3 $199,135 $(1,479,450) $ (1,280,305) Net income................................ -- -- -- 27,729 27,729 Accrued dividends on preferred stock ($.88 per share per quarter).................. -- -- -- (12,911) (12,911) Accretion on preferred stock.............. -- -- (1,249) -- (1,249) ------- ------- -------- ----------- ------------- Balance October 28, 1995.................... $ 7 $ 3 $197,886 $(1,464,632) $ (1,266,736) ------- ------- -------- ----------- ------------- ------- ------- -------- ----------- ------------- Balance, January 29, 1994................... $ 7 $ 3 $200,748 $(1,485,468) $ (1,284,710) Net loss.................................. -- -- -- (1,821) (1,821) Accrued dividends on preferred stock ($.88 per share per quarter).................. -- -- -- (12,911) (12,911) Accretion on preferred stock.............. -- -- (1,205) -- (1,205) ------- ------- -------- ----------- ------------- Balance October 29, 1994.................... $ 7 $ 3 $199,543 $(1,500,200) $ (1,300,647) ------- ------- -------- ----------- ------------- ------- ------- -------- ----------- -------------
See notes to consolidated financial statements. 3 SUPERMARKETS GENERAL HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
39 WEEKS ENDED -------------------------- OCTOBER 28, OCTOBER 29, 1995 1994 ----------- ----------- Operating Activities Net earnings (loss)................................................. $ 27,729 $ (1,821) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities Depreciation and amortization................................... 62,180 57,466 Deferred income tax benefit..................................... (37,274) 556 Interest accrued but not payable................................ 11,123 10,286 Amortization of original issue discount......................... 5,810 10,390 Amortization of debt issuance costs............................. 5,341 5,250 (Gain) loss on disposal of property and equipment............... 38 (435) Gain on disposition of freestanding drug stores................. (15,535) -- Extraordinary item.............................................. 927 -- Loss from discontinued operations............................... -- 2,383 Cash provided by (used for) operating assets and liabilities Accounts receivable, net...................................... 2,300 2,215 Merchandise inventories....................................... 772 (22,185) Income taxes.................................................. 7,795 18,727 Prepaid expenses.............................................. (1,713) (5,952) Due from suppliers............................................ 1,300 2,992 Other current assets.......................................... 3,513 (4,431) Other assets.................................................. (2,588) 11,985 Accounts payable.............................................. (886) (4,190) Accrued payroll and payroll taxes............................. (4,299) (6,894) Accrued interest payable...................................... 19,617 21,021 Accrued expenses and other current liabilities................ (9,822) 23,185 Other noncurrent liabilities.................................. 11,472 (10,756) ----------- ----------- Cash provided by operating activities....................... 87,800 109,792 ----------- ----------- Investing Activities Property and equipment expenditures................................. (52,989) (60,676) Proceeds from disposition of property and equipment................. 831 1,226 Proceeds from disposition of home centers segment................... 4,706 -- Proceeds from disposition of freestanding drug stores............... 59,876 -- ----------- ----------- Cash provided by (used for) investing activities............ 12,424 (59,450) ----------- ----------- Financing Activities Decrease in Working Capital Facilities borrowings................... (31,000) (7,500) Decrease in Pathmark Term Loan...................................... (50,589) (26,250) Increase in other borrowings........................................ 6,559 3,672 Repayment of other long-term borrowings............................. (3,930) (3,744) Reduction in obligations under capital leases....................... (13,221) (13,255) Repayment of PTK DIBs............................................... (25,113) -- Premiums incurred in redemption of PTK DIBs......................... (1,392) -- ----------- ----------- Cash used for financing activities.......................... (118,686) (47,077) ----------- ----------- Increase (decrease) in cash and marketable securities................. (18,462) 3,265 Cash and marketable securities at beginning of period................. 23,247 6,168 ----------- ----------- Cash and marketable securities at end of period....................... $ 4,785 $ 9,433 ----------- ----------- ----------- -----------
See notes to consolidated financial statements. 4 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION On February 4, 1991, Supermarkets General Holdings Corporation (the "Company" or "Holdings"), through the consummation of an exchange offer (the "Exchange Offer") pursuant to which the then existing common stockholders exchanged on a one-for-one basis shares of the Company's common stock for shares of common stock of SMG-II Holdings Corporation ("SMG-II"), became a wholly owned subsidiary of SMG-II. As a result of the Exchange Offer, SMG-II owns all of the Company's common stock and is effectively a holding company for the operations of the Company. The holders of SMG-II's common stock include certain limited partnerships controlled directly or indirectly by Merrill Lynch Capital Partners, Inc., together with certain indirectly wholly owned subsidiaries of Merrill Lynch & Co., Inc., certain members of the Company's management, CBC Capital Partners, Inc. and the Equitable Life Assurance Society of the United States and certain of its affiliates. Pathmark Stores, Inc. ("Pathmark") and Plainbridge, Inc. ("Plainbridge") are wholly owned subsidiaries of PTK Holdings, Inc. ("PTK"), which is a wholly owned subsidiary of the Company. The results from discontinued operations represent the operations of the Company's home centers segment which was sold during Fiscal 1994 (see Note 2). At the time of a recapitalization in Fiscal 1993, Holdings intended to further spin off Plainbridge to Holdings' common stockholder. Such further spin-off would have required the satisfaction of dividend restrictions with respect to Holdings' Exchangeable Preferred Stock, as well as, obtaining consents from various lenders to Plainbridge and PTK. During the fourth quarter of Fiscal 1994, as a result of the aforementioned dividend restrictions, Holdings concluded that a further spin-off of Plainbridge to Holdings' common stockholder is not likely to occur. Accordingly, prior year financial statements which had included the results of Plainbridge's warehouse, transportation and real estate operations as discontinued operations have been reclassified to include such results in continuing operations. The consolidated financial statements included herein reflect all adjustments which, in the opinion of management, are of a normal and recurring nature and are necessary to present fairly the results of operations and financial position of the Company and have been prepared in accordance with the same accounting principles followed in the presentation of the Company's annual financial statements for the year ended January 28, 1995. This report should be read in conjunction with the Company's Form 10-K Annual Report for the year ended January 28, 1995, Notes to Consolidated Financial Statements. The accompanying consolidated financial statements of the Company indicate that at October 28, 1995 current liabilities exceed its current assets by $167.3 million and the Company's stockholder's deficit approximates $1.3 billion. Management believes that cash flows generated from operations supplemented by the unused borrowing capacity under the Pathmark and Plainbridge Working Capital Facilities and the availability of capital lease financing will be sufficient to pay the Company's debts as they come due, provide for its capital expenditure program and meet its seasonal cash requirements. Further, the Company believes it will continue to be in compliance with its various debt covenants. Since the Company is a wholly owned subsidiary, earnings (loss) per share information is not presented. NOTE 2--DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM On November 4, 1994, the Company's Plainbridge subsidiary completed the sale of its home centers segment for approximately $88.7 million in cash, plus the assumption of certain indebtedness. The Company used net cash proceeds of $66.6 million in Fiscal 1994 and $4.7 million in the first quarter 5 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED) NOTE 2--DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM--(CONTINUED) of Fiscal 1995 to pay down the PTK DIBs, including accrued interest and debt premium. The debt premium paid, including original issue discount, resulted in a net loss on early extinguishment of debt of $0.2 million in the first quarter of Fiscal 1995. Through the date of sale, the Company reported the home center segment as discontinued operations. Operating results of such discontinued operations were as follows (dollars in thousands):
13 WEEKS 39 WEEKS ENDED ENDED OCTOBER 29, OCTOBER 29, 1994 1994 ----------- ----------- Sales................................................................. $ 89,411 $ 271,988 ----------- ----------- ----------- ----------- Loss before income taxes(a)........................................... $ (480) $ (2,383) Income tax provision.................................................. -- -- ----------- ----------- Net loss from discontinued operations................................. $ (480) $ (2,383) ----------- ----------- ----------- ----------- - ------------ (a) The Company charged the home centers segment interest expense relating to a proportionate share of certain borrowings. These charges amounted to $3.6 million and $11.0 million for the third quarter and the nine-month period of Fiscal 1994, respectively, and are included in the results of the discontinued operations.
NOTE 3--DISPOSITION OF FREESTANDING DRUG STORES During the second quarter of Fiscal 1995, the Company made a decision to dispose of its 36 freestanding drug stores. On July 28, 1995, the Company, through its Pathmark subsidiary, completed the sale of 30 of its freestanding drug stores, including merchandise inventory, to Rite Aid Corporation for $59.9 million. The Company used $25.0 million of the proceeds to repay a portion of its existing Pathmark Term Loan and $21.8 million of the proceeds to repay a portion of its PTK DIBs. The Company recorded a pretax gain on the disposition of its freestanding drug stores of $15.5 million, net of a $19.0 million charge related to the estimated exit costs of the remaining six freestanding drug stores. Pathmark expects to dispose of the remaining six freestanding drug stores during the year. NOTE 4--MERCHANDISE INVENTORIES Merchandise inventories are comprised of the following (dollars in thousands):
OCTOBER 28, JANUARY 28, 1995 1995 ----------- ----------- Merchandise inventories at FIFO cost.............................. $ 284,596 $ 298,812 Less LIFO reserve................................................. 44,159 43,181 ----------- ----------- Merchandise inventories at LIFO cost.............................. $ 240,437 $ 255,631 ----------- ----------- ----------- -----------
The reduction in merchandise inventory at October 28, 1995 compared to January 28, 1995 is due primarily to the sale of the freestanding drug stores. 6 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED) NOTE 5--OTHER CURRENT ASSETS The reduction in other current assets at October 28, 1995 compared to January 28, 1995 is primarily due to a reduction in assets held for sale in the normal course of business. NOTE 6--PROPERTY AND EQUIPMENT Property and equipment are comprised of the following (dollars in thousands):
OCTOBER 28, JANUARY 28, 1995 1995 ----------- ----------- Land.................................................................. $ 66,513 $ 65,142 Buildings and building improvements................................... 212,404 201,553 Fixtures and equipment................................................ 213,612 200,015 Leasehold costs and improvements...................................... 279,353 268,165 Transportation equipment.............................................. 18,471 19,828 ----------- ----------- Property and equipment, owned......................................... 790,353 754,703 Property and equipment under capital leases........................... 182,428 173,175 ----------- ----------- Property and equipment, at cost....................................... 972,781 927,878 Less accumulated depreciation and amortization........................ 368,037 329,077 ----------- ----------- Property and equipment, net........................................... $ 604,744 $ 598,801 ----------- ----------- ----------- -----------
NOTE 7--LONG-TERM DEBT Long-term debt is comprised of the following (dollars in thousands):
OCTOBER 28, JANUARY 28, 1995 1995 ----------- ----------- Pathmark Term Loan................................................. $ 297,661 $ 348,250 Pathmark Working Capital Facility.................................. 24,000 63,000 Plainbridge Working Capital Facility............................... 8,000 -- 10.25% PTK Exchangeable Guaranteed Debentures due 2003 ("PTK DIBs")..................................................... 59,688 79,257 9.625% Pathmark Senior Subordinated Notes due 2003................. 437,337 437,072 10.75% Pathmark Deferred Coupon Notes due 2003..................... 147,976 136,853 12.625% Pathmark Subordinated Debentures due 2002.................. 95,750 95,750 11.625% Pathmark Subordinated Notes due 2002....................... 199,017 199,017 11.625% Holdings Subordinated Notes due 2002....................... 983 983 Industrial Revenue Bonds........................................... 6,375 6,375 Other Debt (primarily mortgages)................................... 47,954 45,324 ----------- ----------- Total debt......................................................... 1,324,741 1,411,881 Less current maturities............................................ 51,043 46,310 ----------- ----------- Long-term portion.................................................. $ 1,273,698 $ 1,365,571 ----------- ----------- ----------- -----------
7 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED) NOTE 8--INTEREST EXPENSE Interest expense is comprised of the following (dollars in thousands):
13 WEEKS ENDED 39 WEEKS ENDED -------------------------- -------------------------- OCTOBER 28, OCTOBER 29, OCTOBER 28, OCTOBER 29, 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Pathmark Term Loan.............................. $ 6,494 $ 6,919 $ 22,149 $ 19,469 Pathmark Working Capital Facility............... 1,000 1,066 3,938 2,974 Plainbridge Working Capital Facility............ 37 67 79 438 Pathmark Senior Subordinated Notes Amortization of original issue discount....... 88 88 264 264 Currently payable............................. 10,588 10,588 31,764 31,764 Pathmark Deferred Coupon Notes Accrued but not payable....................... 3,805 3,428 11,123 10,022 Pathmark Subordinated Debentures................ 3,022 3,022 9,066 9,066 Pathmark Subordinated Notes..................... 5,813 5,813 17,437 17,437 Amortization of PTK DIBs original issue discount........................................ 1,528 3,579 5,544 10,390 Amortization of debt issuance costs............. 1,783 1,717 5,341 5,151 Obligations under capital leases................ 4,116 3,843 12,200 11,602 Other, net...................................... 3,605 3,039 9,894 8,883 ----------- ----------- ----------- ----------- Interest expense................................ $41,879 $43,169 $ 128,799 $ 127,460 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
The Company made cash interest payments of $14.4 million and $12.0 million during the third quarters of Fiscal 1995 and Fiscal 1994, respectively, and $81.4 million and $76.0 million during the nine-month periods of Fiscal 1995 and 1994, respectively. The majority of the cash interest payments are scheduled in the second and fourth quarters. NOTE 9--LEASES The Company incurred capital lease obligations of $11.0 million and $2.1 million during the third quarters of Fiscal 1995 and 1994, respectively, and $20.7 million and $6.5 million during the nine-month periods of Fiscal 1995 and Fiscal 1994, respectively, in connection with lease agreements to acquire property and equipment. NOTE 10--RELATED PARTY TRANSACTIONS During Fiscal 1993, Pathmark and Plainbridge entered into related party agreements and transactions. Refer to the Company's Form 10-K Annual Report for the year ended January 28, 1995, Notes to the Consolidated Financial Statements, for a more detailed description of such agreements. These related party agreements and transactions are summarized as follows: 1) Spin-Off A) Services Agreements: Pathmark, Plainbridge and the Company are parties to agreements pursuant to which Pathmark continues to provide certain administrative services relating to the warehouse and distribution operations of Plainbridge and certain administrative services to Chefmark, Inc. ("Chefmark"), a wholly owned subsidiary of Holdings. Such services include, among other things, legal, human resources, data processing, insurance, accounting, tax, treasury and property management services. Each of the agreements have an initial term of five years, with renewal options at the end of such term. The cost of 8 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED) NOTE 10--RELATED PARTY TRANSACTIONS--(CONTINUED) the services charged to Plainbridge and Chefmark under these agreements in the aggregate was approximately $2.8 million and $8.8 million during the third quarter and the nine-month period of Fiscal 1995, respectively, and $3.9 million and $10.9 million during the third quarter and the nine-month period of Fiscal 1994, respectively. B) The Logistical Services Agreements: Under the Logistical Services Agreement, Plainbridge supplies Pathmark most of the merchandise sold in Pathmark's stores and for the provision of warehousing, distribution and other logistical services relating to the supply of such merchandise. The cost of fees paid by Pathmark to Plainbridge related to the Logistical Services Agreement in the aggregate was approximately $32.1 million and $97.5 million during the third quarter and nine-month period of Fiscal 1995, respectively, and $34.8 million and $103.9 million during the third quarter and nine-month period of Fiscal 1994, respectively. Pathmark also received an allowance of approximately $5.9 million and $17.9 million during the third quarter and nine-month period of Fiscal 1995, respectively, and $6.5 million and $19.1 million during the third quarter and nine-month period of Fiscal 1994, respectively, based on the amount of merchandise purchased by Plainbridge at Pathmark's direction. Pursuant to the Logistical Services Agreement, Pathmark directs the purchase of the merchandise to be provided to it by Plainbridge. Pathmark negotiates directly with vendors regarding the types of merchandise required, the quantities needed, the delivery schedules, the pricing, and all the other terms and conditions of sale. All merchandise is ordered by Pathmark for the account of Plainbridge, which will pay for and will retain title to such merchandise until it has been delivered to Pathmark. If requested by a vendor, Pathmark in its sole discretion, may guarantee payment of such orders by Plainbridge. Pathmark guaranteed approximately $32.8 million of such merchandise purchases by Plainbridge at October 28, 1995. 2) Other: In conjunction with the Plainbridge Spin-Off, certain real property was transferred to Plainbridge and is being leased to Pathmark at rentals which the Company believes approximate fair value. During each of the third quarters and the nine-month periods of Fiscal 1995 and Fiscal 1994, such rentals amounted to $1.1 million and $3.3 million, respectively. Certain management investors issued recourse notes to the Company related to the purchase of the Company's Class A common stock. These management investors have pledged shares of SMG-II Class A common stock to secure the repayment of the recourse notes. Recourse notes in the amount of $1.7 million were outstanding at October 28, 1995 and January 28, 1995. NOTE 11--CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK Exchangeable Preferred Stock activity during the nine-month period of Fiscal 1995 was as follows (dollars in thousands):
NUMBER OF SHARES AMOUNT --------- -------- Balance, January 28, 1995............................................. 4,890,671 $101,959 Accretion on preferred stock.......................................... -- 1,249 --------- -------- Balance, October 28, 1995............................................. 4,890,671 $103,208 --------- -------- --------- --------
The terms of the Exchangeable Preferred Stock provide for cumulative quarterly dividends at an annual rate of $3.52 per share when, as, and if declared by the Board of Directors of the Company. 9 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED) NOTE 11--CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK--(CONTINUED) Dividends for the first 20 quarterly dividend periods (through October 15, 1992) were paid at the Company's option in additional shares of Exchangeable Preferred Stock since the Company did not meet the conditions permitting cash dividend payments on the Exchangeable Preferred Stock. Holdings does not expect to receive cash flow sufficient to permit payments of dividends on the Exchangeable Preferred Stock in the foreseeable future. All dividends not paid in cash will cumulate at the rate of $3.52 per share per annum, without interest, until declared and paid. As such, at October 28, 1995, the unpaid dividends of $51.6 million were accrued and included in other noncurrent liabilities. Pursuant to the Certificate of Stock Designation for the Exchangeable Preferred Stock (the "Certificate of Designation"), the Company was required to pay cash dividends to the Exchangeable Preferred Stockholders at an annual rate of $3.52 per share beginning on January 15, 1993. The Certificate of Designation provides that the Exchangeable Preferred Stock is non-voting except that if an amount equal to six quarterly dividends is in arrears in whole, or in part, the Exchangeable Preferred Stockholders voting as a class are entitled to elect an additional two members to the Board of Directors of the Company. The Company is currently in arrears on the payment of ten quarterly dividends. Accordingly, the Exchangeable Preferred Stockholders at a stockholders' meeting held on June 8, 1995, elected two members to the Company's Board of Directors. NOTE 12--INCOME TAXES Income taxes for the interim period are based on the estimated effective tax rate expected to be applicable for the full fiscal year. The income tax benefit of $24.1 million for the nine-month period of Fiscal 1995 includes adjustments to the deferred income tax valuation allowance of $25.8 million, comprised of a $20.3 million reversal at the end of the second quarter of Fiscal 1995, as well as an income tax benefit of $5.5 million resulting from taxable income generated prior to the end of the second quarter of Fiscal 1995. The reversal at the end of the previous period was recorded in conjunction with the Company's continuing evaluation of its deferred income tax assets. In the opinion of management, sufficient evidence exists, such as the positive trend in earnings and the income generated from the disposition of the freestanding drug stores, which indicates that it is more likely than not that the Company will be able to realize its deferred income tax assets. At October 28, 1995 net deferred income tax assets of $35.2 million consisted principally of alternative minimum tax credit carryforwards and temporary book/tax basis differences. The income tax provision of $2.4 million for the nine-month period of Fiscal 1994 is net of a reduction in the deferred income tax assets and related valuation allowance of $1.3 million due to the utilization of net operating loss carryforwards. During the nine-month period of Fiscal 1995, the Company made income tax payments of $2.9 million and received income tax refunds of $8.1 million. During the nine-month period of Fiscal 1994, the Company made income tax payments of $4.8 million and received income tax refunds of $23.6 million. NOTE 13--CONTINGENCIES The Company is contingently liable for certain obligations of Rickel Home Centers, Inc. ("Rickel"), a former subsidiary, primarily consisting of 19 leases for real property, in the event of default thereunder by the purchaser of Rickel. As of January 28, 1995, the estimated present value of such lease obligations approximated $27.6 million. The Company is a party to a number of legal proceedings in the ordinary course of business. Management believes that the ultimate resolution of these proceedings will not, in the aggregate, have a material adverse impact on the financial condition, results of operations or business of the Company. 10 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED) NOTE 14--SUBSEQUENT EVENT On November 3, 1995, in connection with the sale of Purity Supreme, Inc. ("Purity") to the Stop & Shop Companies, Inc., the Company sold its investment in Purity for $16.4 million, the proceeds of which were used to repay a portion of its PTK DIBs. As a result of the sale, a capital tax loss of approximately $70.0 million was generated, of which $37.2 million was utilized in conjunction with the gain on the sale of the freestanding drug stores. The benefit of the remaining capital tax loss will only be realized to the extent that the Company can generate additional capital gains. No adjustment has been made to the valuation allowance as of October 28, 1995 related to this investment. 11 SUPERMARKETS GENERAL HOLDINGS CORPORATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion and analysis of the Company's financial condition and results from continuing operations. The results from discontinued operations for all periods presented represent the operations of the Company's home centers segment which was sold during Fiscal 1994. At the time of a recapitalization in Fiscal 1993, Holdings intended to further spin off Plainbridge to Holdings' common stockholder. Such further spin-off would have required the satisfaction of dividend restrictions with respect to Holdings' Exchangeable Preferred Stock, as well as, obtaining consents from various lenders to Plainbridge and PTK. During the fourth quarter of Fiscal 1994, as a result of the aforementioned dividend restrictions, Holdings has concluded that a further spin-off of Plainbridge to Holdings' common stockholder is not likely to occur. Accordingly, prior year financial statements which had included the results of Plainbridge's warehouse, transportation and real estate operations as discontinued operations have been reclassified to include such results in continuing operations. RESULTS OF OPERATIONS Sales: Sales for the third quarter of Fiscal 1995 were $1.0 billion compared to $1.04 billion in the prior-year period. Sales for the nine-month period of Fiscal 1995 were $3.06 billion compared to $3.11 billion in the prior-year period. The decrease in sales in the third quarter and nine-month period of Fiscal 1995 compared to the prior-year periods was primarily due to the sale of the freestanding drug stores on July 28, 1995. Sales from supermarkets opened in both the third quarter and nine-month periods, including replacement stores, decreased 0.2%. At quarter end, the Company operated 142 supermarkets, including 38 Pathmark 2000 format stores compared with the end of Fiscal 1994 when the Company operated 143 supermarkets, including 29 Pathmark 2000 format stores. The Company also operated six freestanding drug stores at quarter end compared to 36 freestanding drug stores at the end of Fiscal 1994 (see "Disposition of Freestanding Drug Stores"). In order to improve sales and profitability, the Company is continuing to focus on its supermarket enlargement and renovation program. Gross Profit: Gross profit for the third quarter of Fiscal 1995 was $282.5 million or 28.4% of sales compared with $287.9 million or 27.8% of sales for the prior-year period and for the nine-month period of Fiscal 1995 was $874.3 million or 28.6% of sales compared with $867.7 million or 27.9% for the prior-year period. The decrease in gross profit in the third quarter of Fiscal 1995 compared to the prior-year period was primarily attributable to the sale of the freestanding drug stores on July 28, 1995. The improvement in gross profit as a percentage of sales for the third quarter of Fiscal 1995 compared to the prior-year period was primarily due to increased focus on merchandising programs as well as to the Company's continuing emphasis on the Pathmark 2000 format stores which allow expanded variety in all departments, particularly higher margin perishables. The improvement in gross profit as a percentage of sales for the nine-month period as compared to the prior-year period was primarily due to the above mentioned items and lower inventory shrink. The cost of goods sold comparisons were affected by a pretax LIFO charge of $0.8 million for the third quarter of Fiscal 1995 compared with a pretax LIFO charge of $0.9 million for the prior-year period and a pretax LIFO charge of $2.1 million for the nine-month period of Fiscal 1995 compared with a pretax LIFO charge of $2.5 million for the prior-year period. Selling, General and Administrative Expenses ("SG&A"): SG&A for the third quarter of Fiscal 1995 increased $0.8 million or 0.3% compared to the prior-year period and increased $3.6 million or 0.5% for the nine-month period of Fiscal 1995 compared with the prior year period. SG&A on a proforma basis eliminating the SG&A impact of the freestanding 12 drug stores in last year's third quarter, increased 4.5% and 1.8% for the third quarter and nine-month period of Fiscal 1995, respectively, compared to the prior-year periods. As a percentage of sales, SG&A were 23.0% for the third quarter of Fiscal 1995, up from 22.1% in the prior-year period and were 22.8% for the nine-month period of Fiscal 1995 up from 22.3% for the prior year period. The increase as a percentage of sales for the third quarter of Fiscal 1995 compared to the prior-year period was due to higher promotional costs, claims expenses, occupancy costs and supplies. The increase as a percentage of sales for the nine-month period compared to the prior-year period was due to higher claims expenses, occupancy costs and supplies partially offset by lower promotional costs and labor and labor related expenses along with weather related expenses that adversely affected last year's first quarter. Depreciation and Amortization: Depreciation and amortization of $20.1 million for the third quarter of Fiscal 1995 was 1.4 million higher than the prior-year period of $18.7 million. For the nine-month period of Fiscal 1995, depreciation and amortization of $60.2 million was $4.7 higher than the prior-year period of $55.5 million. The increase in depreciation and amortization expense for the third quarter and nine-month period of Fiscal 1995 compared to the prior-year periods was primarily due to capital expenditures. Depreciation and amortization excludes video tape amortization, which is recorded in cost of goods sold, of $0.65 million and $1.95 million in each of the third quarters and nine-month periods of Fiscal 1995 and Fiscal 1994, respectively. Operating Earnings: Operating earnings for the third quarter of Fiscal 1995 were $32.9 million compared with the prior-year period of $40.5 million. For the nine-month period of Fiscal 1995, operating earnings were $117.8 million compared with $119.4 million for the prior-year period. The decrease in operating earnings during the third quarter of Fiscal 1995 compared to the prior-year period was primarily due to higher SG&A expense, higher depreciation and amortization expense and the impact from the sale of the 30 freestanding drug stores. The decrease in operating earnings for the nine-month period of Fiscal 1995 compared to the prior-year period was due to higher SG&A, higher depreciation and amortization expense and the impact from the sale of the freestanding drug stores, partially offset by improved gross profit. Disposition of Freestanding Drug Stores: During the second quarter of Fiscal 1995, the Company made a decision to dispose of its 36 freestanding drug stores. On July 28, 1995, the Company, through its Pathmark subsidiary, completed the sale of 30 of its freestanding drug stores to Rite Aid Corporation, including merchandise inventory, for $59.9 million. The Company used $25.0 million of the proceeds to repay a portion of its existing Pathmark Term Loan and $21.8 million of the proceeds to repay a portion of its PTK debt. The Company recorded a pretax gain on the disposition of its freestanding drug stores of $15.5 million, net of a $19.0 million charge related to the estimated exit costs of the remaining six freestanding drug stores. Pathmark expects to dispose of the remaining six freestanding drug stores during the year. Interest Expense: Interest expense of $41.9 million for the third quarter of Fiscal 1995 was $1.3 million less than the prior-year period of $43.2 million due primarily to the reduction in the amortization of PTK DIBs original issue discount as a result of the early paydown of debt. Interest expense of $128.8 million for the nine-month period of Fiscal 1995 was $1.3 million more than the prior-year period of $127.5 million due to the higher interest rates on the Company's floating rate bank debt and higher average borrowings under the Pathmark Working Capital Facility partially offset by the reduction in the amortization of PTK DIBs original issue discount as a result of the early paydown of debt. 13 Income Taxes: Income taxes are based on the estimated effective tax rate expected to be applicable for the full fiscal year. An income tax benefit of $4.3 million was provided for in the third quarter of Fiscal 1995. The income tax benefit of $24.1 million for the nine-month period of Fiscal 1995 includes adjustments to the deferred income tax valuation allowance of $25.8 million, comprised of a $20.3 million reversal at the end of the second quarter of Fiscal 1995, as well as an income tax benefit of $5.5 million resulting from taxable income generated prior to the end of the second quarter of Fiscal 1995. The reversal at the end of the previous period was recorded in conjunction with the Company's continuing evaluation of its deferred income tax assets. In the opinion of management, sufficient evidence exists, such as the positive trend in earnings and the income generated from the disposition of its freestanding drug stores, which indicates that it is more likely than not that the Company will be able to realize its deferred income tax assets. The income tax provision of $0.9 million for the third quarter of Fiscal 1994 is net of an adjustment in the net deferred income tax asset and related valuation allowance of $0.2 million due to increases in the net operating loss carryforwards. The income tax provision was $2.4 million for the nine-month period of Fiscal 1994. During the nine-month period of Fiscal 1995, the Company made income tax payments of $2.9 million and received income tax refunds of $8.1 million. During the nine-month period of Fiscal 1994, the Company made income tax payments of $4.8 million and received income tax refunds of $23.6 million. Summary of Operations: For the third quarter of Fiscal 1995, the Company's loss from continuing operations before extraordinary items were $4.6 million compared to earnings of $0.1 million for the prior-year period. The decrease in earnings for the third quarter of Fiscal 1995 compared to the prior-year period was primarily due to lower operating earnings and interest charged to discontinued operations in Fiscal 1994, partially offset by lower interest expense and an income tax benefit of $4.3 million in Fiscal 1995 compared to an income tax provision of $0.9 million in Fiscal 1994. For the nine-month period of Fiscal 1995, the Company's earnings from continuing operations before extraordinary items were $28.7 million compared to earnings of $0.6 million for the prior-year period. The increase in earnings for the nine-month period compared to the prior-year period was primarily due to the gain on disposition of freestanding drug stores and the tax benefit due to the reversal of the valuation allowance related to the Company's net deferred income tax assets, partially offset by lower operating earnings, higher interest expense and interest charged to discontinued opertions in Fiscal 1994. Extraordinary Item: During the second quarter of Fiscal 1995 in connection with the proceeds received related to the sale of 30 of its freestanding drug stores, the Company was required to paydown $21.8 million of PTK DIBs; the premium paid, including original issue discount, resulted in a net loss on early extinguishment of debt of $0.7 million. During the first quarter of Fiscal 1995, in connection with the proceeds received related to the disposition of the home centers segment, the Company was required to paydown $4.7 million of PTK DIBs; the premium paid, including original issue discount, resulted in a net loss on early extinguishment of debt of $0.2 million. FINANCIAL CONDITION Debt Service: During the nine-month period of Fiscal 1995, total debt decreased $87.1 million from Fiscal 1994 year end primarily due to the scheduled Term Loan repayments and a required Term Loan repayment in conjunction with the sale of the freestanding drug stores, a decrease in borrowings under the Pathmark Working Capital Facility as well as the paydown of the PTK DIB's with the proceeds from 14 the disposition of freestanding drug stores and home centers, partially offset by debt accretion on Pathmark Deferred Coupon Notes and PTK DIBs. Borrowings under the Pathmark Working Capital Facility were $24.0 million at October 28, 1995 and have increased as a result of seasonal borrowing needs to $49.5 million at December 6, 1995. Borrowings under the Plainbridge Working Capital Facility were $8.0 million at October 28, 1995 and have decreased to $6.5 million at December 6, 1995. Under the Pathmark Working Capital Facility, which expires in Fiscal 1998, Pathmark can borrow or obtain letters of credit in an aggregate amount not to exceed $175.0 million (of which the maximum of $100.0 million can be in letters of credit) subject to an annual cleandown provision. Under the terms of the Pathmark cleandown provision, in each fiscal year loans cannot exceed $50.0 million under the Pathmark Working Capital Facility for a period of 30 consecutive days. Pathmark satisfied the terms of the Fiscal 1995 cleandown provision during the first quarter. Under the Plainbridge Working Capital Facility, which expires in Fiscal 1997, Plainbridge can borrow or obtain letters of credit in an aggregate amount not to exceed $40.0 million (of which the maximum of $30.0 million can be in letters of credit). The indebtedness under the Pathmark and Plainbridge Working Capital Facilities and the Pathmark Term Loan bear interest at floating rates. To the extent that certain indebtedness of the Company bears interest at floating rates, cash interest payments on that indebtedness may vary in future years. The Company does not currently maintain any interest rate hedging arrangements due to the reasonable risk that near term interest rates will not rise significantly. The Company is continuously evaluating this risk and will implement interest rate hedging arrangements if deemed appropriate. The majority of the cash interest payments are scheduled in the second and fourth quarters. The amount of principal payments required each year on outstanding long-term debt (excluding the original issue discount with respect to the Pathmark Deferred Coupon Notes and the PTK DIBs) are as follows (dollars in millions): PRINCIPAL FISCAL YEARS PAYMENTS - ---------------------------------------------------------- ------------------ 1995(a)................................................. $ 17.7 1996.................................................... 46.1 1997.................................................... 55.4 1998.................................................... 134.8 1999.................................................... 128.5 2000.................................................... 50.8 2001.................................................... 50.0 2002.................................................... 195.8 2003.................................................... 645.6 - ------------ (a) Subsequent to October 28, 1995 Liquidity: The consolidated financial statements of the Company indicate that at October 28, 1995, current liabilities exceed its current assets by $167.3 million and the Company's stockholder's deficit approximates $1.3 billion. Management believes that cash flows generated from operations, supplemented by the unused borrowing capacity under the Pathmark and Plainbridge Working Capital Facilities and the availability of capital lease financing will be sufficient to pay the Company's debts as they come due, provide for its capital expenditure program and meet its seasonal cash requirements. Further, the Company believes it will continue to be in compliance with its various debt covenants, which include certain levels of operating cash flow (as defined), minimum interest coverage and a maximum leverage ratio. Holdings believes that it will be able to make the scheduled payments or refinance its obligations with respect to its indebtedness through a combination of operating funds and the Company's borrowing facilities. Future refinancing may be necessary if cash flow from operations is not sufficient to meet its debt service requirements related to the maturity of the Plainbridge Working Capital Facility in Fiscal 15 1997, the maturity of the Pathmark Working Capital Facility and certain mortgages in Fiscal 1998, the amortization and subsequent maturity of the Pathmark Term Loan in Fiscal 1999 and the maturity of the Pathmark Subordinated Notes and Pathmark Subordinated Debentures in Fiscal 2002. The Company expects that it will be necessary to refinance all or a portion of the Pathmark Senior Subordinated Notes, the Pathmark Deferred Coupon Notes and the PTK DIBs due in Fiscal 2003. The Company may undertake a refinancing of some or all of such indebtedness sometime prior to its maturity. The Company's ability to make scheduled payments or to refinance its obligations with respect to its indebtedness depends on its financial and operating performance, which, in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond its control. Although the Company's cash flow from its operations and borrowings has been sufficient to meet its debt service obligations, there can be no assurance that the Company's operating results will continue to be sufficient or that future borrowing facilities will be available for payment or refinancing of Pathmark's and PTK's indebtedness or that future borrowing facilities will be available. While it is the Company's intention to enter into refinancings that it considers advantageous, there can be no assurances that the prevailing market conditions will be favorable to the Company. In the event the Company obtains any future refinancing on less than favorable terms, the holders of outstanding indebtedness could experience increased credit risk and could experience a decrease in the market value of their investment, because the Company might be forced to operate under terms that would restrict its operations and might find its cash flow reduced. Preferred Stock Dividends: The terms of the Exchangeable Preferred Stock provide for cumulative quarterly dividends at an annual rate of $3.52 per share when, as, and if declared by the Board of Directors of the Company. Dividends for the first 20 quarterly dividend periods (through October 15, 1992) were paid at the Company's option in additional shares of Exchangeable Preferred Stock. Since January 15, 1993, all dividends not paid in cash will cumulate at the rate of $3.52 per share per annum, without interest, until declared and paid. As such, at October 28, 1995, the unpaid dividends of $51.6 million were accrued and included in other noncurrent liabilities. Capital Expenditures: Capital expenditures for the third quarter of Fiscal 1995, including property acquired under capital leases, were approximately $36.6 million compared to approximately $27.1 million for the prior-year period and for the nine-month period of Fiscal 1995, including property acquired under capital leases, were approximately $73.6 million compared to $58.0 million for the prior year period. During the nine-month period of Fiscal 1995, the Company opened two new Pathmark 2000 format stores which replaced smaller stores and completed thirteen major renovations and enlargements to existing supermarkets. During the remainder of Fiscal 1995, the Company plans to open three new Pathmark 2000 format stores, one of which will replace a smaller store, and plans to complete up to four major renovations and enlargements. Cash Flows: Net cash provided by operating activities amounted to $87.8 million in the nine-month period of Fiscal 1995 compared to $109.8 million in the prior-year period. The increase in net cash provided by operating activities is primarily due to an improvement in cash provided by operating assets and liabilities and an increase in net earnings, partially offset by an increase in the deferred income tax benefit. Cash provided by investing activities in the nine-month period of Fiscal 1995 was $12.4 million, primarily due to the net proceeds from the disposition of the freestanding drug stores and the proceeds of $4.7 million related to the disposition of the home centers segment, partially offset by expenditures of property and equipment, compared to cash used for investing activities of $59.4 million in the nine-month period of Fiscal 1994, primarily reflecting the expenditures for property and equipment. Cash used for financing activities in the nine-month period of Fiscal 1995 was $118.7 million compared to $47.1 million in the prior-year period. The increase in cash used for financing activities is primarily due to a decrease in borrowings under the Working Capital Facilities and a paydown of $25.0 million on the 16 Pathmark Term Loan, as well as a paydown of $25.1 million on the PTK DIBs from the net proceeds related to the sale of the freestanding drug stores and from the net proceeds related to the disposition of the home centers segment in Fiscal 1995. Subsequent Event: On November 3, 1995, in connection with the sale of Purity Supreme, Inc. ("Purity") to the Stop & Shop Companies, Inc., the Company sold its investment in Purity for $16.4 million, the proceeds of which were used to repay a portion of its PTK DIBs. As a result of the sale, a capital tax loss of approximately $70.0 million was generated, of which $37.2 million was utilized in conjunction with the gain on the sale of the freestanding drug stores. The benefit of the remaining capital tax loss will only be realized to the extent that the Company can generate additional capital gains. No adjustment has been made to the valuation allowance as of October 28, 1995 related to this investment. 17 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K No reports on Form 8-K have been filed during the quarter for which this report has been filed. SIGNATURE 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. SUPERMARKETS GENERAL HOLDINGS CORPORATION By /s/ RON MARSHALL ...................................... (Ron Marshall) Executive Vice President and Chief Financial Officer By /s/ JOSEPH ADELHARDT ...................................... (Joseph Adelhardt) Vice President and Controller, Chief Accounting Officer Date: December 12, 1995 18 EX-27 2
5 This schedule contains summary financial information extracted from Supermarkets General Holdings Corporation's Consolidated Statements of Operations for the 39 weeks ended October 28, 1995 and Consolidated Balance Sheets as of October 28, 1995 and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS FEB-3-1996 OCT-28-1995 4,785 0 11,595 (515) 240,437 321,349 972,781 (368,037) 1,022,983 488,631 1,273,698 10 103,208 0 (1,266,746) 1,022,983 3,060,058 3,060,058 2,185,738 2,185,738 756,534 817,853 128,799 4,522 (24,134) 28,656 0 (927) 0 27,729 0 0
-----END PRIVACY-ENHANCED MESSAGE-----