-----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, ITcPshCjO0YaLx0EIT2AYjaaQk9QAkVSxRQqRgXlKOZhEy8adaUAYz2i7Qc5UVIh 07wY1yqJX6AyHRvXBbNO4g== 0001047469-98-024305.txt : 19980617 0001047469-98-024305.hdr.sgml : 19980617 ACCESSION NUMBER: 0001047469-98-024305 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980502 FILED AS OF DATE: 19980616 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: SEC FILE NUMBER: 000-16404 FILM NUMBER: 98649088 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 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 May 2, 1998 0-16404 Supermarkets General Holdings Corporation (Exact name of registrant as specified in its charter) Delaware 13-3408704 (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 200 Milik Street 07008 Carteret, New Jersey (Zip Code) (Address of principal executive offices) (732) 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 ------------------- 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 May 2, 1998, 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 1. FINANCIAL INFORMATION ITEM 1. Consolidated Financial Statements SUPERMARKETS GENERAL HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands)
13 Weeks Ended ---------------------------- May 2, May 3, 1998 1997 ---------- ---------- Sales ...................................... $ 916,015 $ 922,398 Cost of sales (exclusive of depreciation and amortization shown separately below) ...... 651,984 662,918 --------- --------- Gross profit ............................... 264,031 259,480 Selling, general and administrative expenses 211,073 212,348 Depreciation and amortization .............. 19,686 20,216 --------- --------- Operating earnings ......................... 33,272 26,916 Interest expense ........................... (41,569) (41,885) --------- --------- Loss before income tax (provision) benefit . (8,297) (14,969) Income tax (provision) benefit ............. (30) 5,866 --------- --------- Net loss ................................... (8,327) (9,103) Less: non-cash preferred stock accretion and dividend requirements ..................... (4,768) (4,750) --------- --------- Net loss attributable to common stockholder $ (13,095) $ (13,853) --------- --------- --------- ---------
See notes to consolidated financial statements (unaudited). 1 SUPERMARKETS GENERAL HOLDINGS CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands except share amounts)
May 2, January 31, 1998 1998 ----------- ------------ ASSETS Current Assets Cash and cash equivalents ...................... $ 10,236 $ 62,914 Accounts receivable, net ....................... 13,056 11,519 Merchandise inventories ........................ 156,436 148,983 Deferred income taxes, net ..................... 8,354 8,492 Prepaid expenses ............................... 22,396 21,455 Due from suppliers ............................. 41,227 13,027 Other current assets ........................... 15,072 11,480 ----------- ----------- Total Current Assets .......................... 266,777 277,870 Property and Equipment, Net ..................... 522,163 530,716 Deferred Financing Costs, Net ................... 17,537 18,547 Deferred Income Taxes, Net ...................... 47,053 46,279 Other Assets .................................... 33,691 34,342 ----------- ----------- $ 887,221 $ 907,754 ----------- ----------- ----------- ----------- LIABILITIES AND STOCKHOLDER'S DEFICIENCY Current Liabilities Accounts payable and book overdrafts ........... $ 98,094 $ 155,702 Current maturities of long-term debt ........... 39,538 43,478 Income taxes payable ........................... 1,353 372 Accrued payroll and payroll taxes .............. 46,424 49,599 Current portion of lease obligations ........... 24,486 24,417 Accrued interest payable ....................... 18,942 18,300 Accrued expense and other current liabilities .. 91,111 93,336 ----------- ----------- Total Current Liabilities ..................... 319,948 385,204 ----------- ----------- Long-Term Debt .................................. 1,259,061 1,208,327 ----------- ----------- Lease Obligations, Long-Term .................... 174,611 170,471 ----------- ----------- Other Noncurrent Liabilities .................... 373,177 370,697 ----------- ----------- Redeemable Securities Exchangeable Preferred Stock, $.01 par value ... 107,647 107,183 ----------- ----------- Authorized: 9,000,000 shares Issued and outstanding: 4,890,671 Liquidation preference, $25 per share: $122,267 Commitments and Contingencies (Note 4) Stockholder's Deficiency Class A Common Stock, $.01 par value ........... 7 7 Authorized: 1,075,000 shares Issued and outstanding: 650,675 Class B Common Stock, $.01 par value ........... 3 3 Authorized: 1,000,000 shares Issued and outstanding: 320,000 Paid-in Capital ................................. 197,057 197,521 Accumulated Deficit ............................. (1,544,290) (1,531,659) ----------- ----------- Total Stockholder's Deficiency ................. (1,347,223) (1,334,128) ----------- ----------- $ 887,221 $ 907,754 ----------- ----------- ----------- -----------
See notes to consolidated financial statements (unaudited). 2 SUPERMARKETS GENERAL HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIENCY (Unaudited) (in thousands)
Class A Class B Total Common Common Paid-in Accumulated Stockholder's Stock Stock Capital Deficit Deficiency ----- --- -------- ------------ ------------ Balance, January 31, 1998.......................... $ 7 $ 3 $ 197,521 $ (1,531,659) $ (1,334,128) Net loss........................................... -- -- -- (8,327) (8,327) Accrued dividends on preferred stock ($.88 per share)............................. -- -- -- (4,304) (4,304) Accretion on preferred stock....................... -- -- (464) -- (464) ----- --- ---------- -------------- ------------- Balance, May 2, 1998............................... $ 7 $ 3 $ 197,057 $ (1,544,290) $ (1,347,223) ----- --- ---------- -------------- -------------- ----- --- ---------- -------------- -------------- Balance, February 1, 1997.......................... $ 7 $ 3 $ 199,332 $ (1,457,497) $ (1,258,155) Net loss........................................... -- -- -- (9,103) (9,103) Accrued dividends on preferred stock ($.88 per share).................................. -- -- -- (4,304) (4,304) Accretion on preferred stock....................... -- -- (446) -- (446) ----- --- ---------- -------------- ------------- Balance, May 3, 1997............................... $ 7 $ 3 $ 198,886 $ (1,470,904) $ (1,272,008) ----- --- ---------- -------------- ------------- ----- --- ---------- -------------- -------------
See notes to consolidated financial statements (unaudited). 3 SUPERMARKETS GENERAL HOLDINGS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
13 Weeks Ended ------------------------- May 2, May 3, 1998 1997 ---------- --------- Operating Activities Net loss ............................................................ $ (8,327) $ (9,103) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation and amortization ...................................... 20,590 21,172 Deferred income tax benefit ........................................ (636) (5,388) Interest accruable but not payable ................................. 4,937 4,448 Amortization of original issue discount ............................ 894 814 Amortization of debt issuance costs ................................ 1,031 1,901 Loss on disposal of property and equipment ......................... 533 33 Cash provided by (used for) operating assets and liabilities: Accounts receivable, net .......................................... (1,537) (61) Merchandise inventories ........................................... (7,453) 1,275 Income taxes ...................................................... 981 (1,692) Other current assets .............................................. (33,302) 565 Other assets ...................................................... 2,820 (1,809) Accounts payable .................................................. (33,853) 5,549 Accrued interest payable .......................................... 674 (1,798) Accrued expenses and other current liabilities .................... (5,400) (2,678) Other noncurrent liabilities ...................................... (6,144) (8,078) -------- -------- Cash provided by (used for) operating activities ................. (64,192) 5,150 -------- -------- Investing Activities Property and equipment expenditures ................................ (9,076) (5,037) Proceeds from disposition of property and equipment ................ 8,926 1,243 -------- -------- Cash used for investing activities ............................... (150) (3,794) -------- -------- Financing Activities Increase in Pathmark working capital facilities borrowings ......... 45,200 33,000 Repayment of Pathmark term loans ................................... (1,891) (12,627) Decrease in book overdrafts ........................................ (23,755) (11,799) Increase in other borrowings ....................................... 2,000 214 Repayment of other long-term borrowings ............................ (4,346) (642) Reduction in lease obligations ..................................... (5,523) (5,186) Deferred financing fees ............................................ (21) (268) -------- -------- Cash provided by financing activities ............................ 11,664 2,692 -------- -------- Increase (decrease) in cash and cash equivalents .................... (52,678) 4,048 Cash and cash equivalents at beginning of period .................... 62,914 10,967 -------- -------- Cash and cash equivalents at end of period .......................... $ 10,236 $ 15,015 -------- -------- -------- -------- Supplemental Disclosures of Cash Flow Information Interest paid ...................................................... $ 33,987 $ 36,370 -------- -------- -------- -------- Income taxes paid .................................................. $ 83 $ 1,671 -------- -------- -------- -------- Noncash Investing and Financing Activities Capital lease obligations .......................................... $ 10,425 $ 6,807 -------- -------- -------- --------
See notes to consolidated financial statements (unaudited). 4 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1--Organization and Basis of Presentation Supermarkets General Holdings Corporation (the "Company" or "Holdings"), through its indirect wholly owned subsidiary Pathmark Stores, Inc. ("Pathmark"), operated 135 supermarkets as of May 2, 1998, primarily in the New York-New Jersey and Philadelphia metropolitan areas, and is a wholly owned subsidiary of SMG-II Holdings Corporation ("SMG-II"). The unaudited consolidated financial statements included herein have been prepared by the Company in accordance with the same accounting principles followed in the presentation of the Company's annual financial statements for the year ended January 31, 1998, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the consolidated financial statements included herein reflect all adjustments which are of a normal and recurring nature and are necessary to present fairly the results of operations and financial position of the Company. This report should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K Annual Report for the year ended January 31, 1998. Income taxes for the interim period are based on the estimated effective tax rate expected to be applicable for the full fiscal year. The Company has recorded a valuation allowance related to the income tax benefit for the first quarter of Fiscal 1998; therefore, no income tax benefit has been recognized. Note 2--Long-Term Debt Long-term debt is comprised of the following (dollars in thousands):
May 2, January 31, 1998 1998 ------------ ----------- Pathmark term loan ("Term Loan") ............................. $ 261,359 $ 263,250 Pathmark working capital facility ("Working Capital Facility") 45,200 -- 9.625% Pathmark Senior Subordinated Notes due 2003 ("Pathmark Senior Subordinated Notes") ...................... 438,223 438,134 11.625% Pathmark Subordinated Notes due 2002 ("Pathmark Subordinated Notes") ............................. 199,017 199,017 11.625% Holdings Subordinated Notes due 2002 ("Holdings Subordinated Notes") ............................. 983 983 12.625% Pathmark Subordinated Debentures due 2002 ("Pathmark Subordinated Debentures") ........................ 95,750 95,750 10.75% Pathmark Deferred Coupon Notes due 2003 ("Pathmark Deferred Coupon Notes") .......................... 192,005 187,068 10.25% PTK Exchangeable Guaranteed Debentures due 2003 ("PTK Exchangeable Guaranteed Debentures") .................. 31,234 30,429 Industrial revenue bonds ..................................... 8,362 6,375 Other debt (primarily mortgages) ............................. 26,466 30,799 ---------- ---------- Total debt ................................................... 1,298,599 1,251,805 Less: current maturities ..................................... 39,538 43,478 ---------- ---------- Long-term portion ............................................ $1,259,061 $1,208,327 ---------- ---------- ---------- ----------
5 SUPERMARKETS GENERAL HOLDINGS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)--(Continued) Note 3--Interest Expense Interest expense is comprised of the following (dollars in thousands):
13 Weeks Ended ---------------------- May 2, May 3, 1998 1997 ------- -------- Pathmark term loans .................... $ 5,304 $ 5,130 Pathmark working capital facilities .... 540 1,767 Pathmark Senior Subordinated Notes Amortization of original issue discount 89 88 Currently payable ..................... 10,588 10,588 Pathmark Subordinated Notes ............ 5,813 5,813 Pathmark Subordinated Debentures ....... 3,022 3,022 Pathmark Deferred Coupon Notes Accrued but not payable ............... 4,937 4,448 PTK Exchangeable Guaranteed Debentures Amortization of original issue discount 805 726 Amortization of debt issuance costs .... 1,031 1,901 Obligations under capital leases ....... 5,497 5,491 Other, net ............................. 3,943 2,911 ------- ------- Interest expense ....................... $41,569 $41,885 ------- ------- ------- -------
The majority of the cash interest payments are scheduled in the second and fourth quarters. However, the May 1 semi-annual interest payment of $21.2 million on the Pathmark Senior Subordinated Notes was paid in the first quarters of Fiscal 1998 and Fiscal 1997 due to the timing of the quarter end dates. Note 4--Contingencies Rickel: In connection with the sale of its home centers segment in Fiscal 1994, the Company, as lessor, entered into nine leases for certain of the Company's owned real estate properties with Rickel Home Centers, Inc. ("Rickel"), as tenant. In addition, the Company assigned to Rickel 26 third party leases. In 1996, Rickel filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. Subsequent to the filing, of the 35 locations leased to Rickel, Rickel entered into an agreement in 1998 to assign the leases of 16 locations to Staples, Inc., nine leases have either been terminated or assigned to third parties, and ten rejected leases are being actively marketed by the Company to other prospective tenants. Management has assessed its exposure with respect to this matter and has concluded that it has sufficient reserves to cover any resulting liability which may occur, including the future rent and real estate taxes, net of expected sublease recoveries. Other: The Company is also 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. Note 5--Subsequent Event On May 12, 1998, the Company's wholly owned subsidiary PTK Holdings, Inc. repaid in full the PTK Exchangeable Guaranteed Debentures, totalling $31.2 million. 6 SUPERMARKETS GENERAL HOLDINGS CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The matters discussed herein, with the exception of historical information, are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, the competitive environment in which the Company operates and the general economic conditions in the Company's trading areas. Results of Operations Sales: Sales in the first quarter of Fiscal 1998 were $916.0 million compared to $922.4 million in the prior year, a decrease of 0.7%. However, same store sales increased 1.7% for the quarter. Sales in the first quarter of Fiscal 1998 compared to the prior year were impacted by sold and closed stores, partially offset by new store openings and same store sales increases. The Company operated 135 and 144 supermarkets at the end of the first quarters of Fiscal 1998 and Fiscal 1997, respectively. Gross Profit: Gross profit in the first quarter of Fiscal 1998 was $264.0 million or 28.8% of sales compared with $259.5 million or 28.1% of sales in the prior year. The increase in gross profit in both dollars and as a percentage of sales for the first quarter of Fiscal 1998 compared to the prior year was primarily due to improvements in the perishables mix and the savings realized from the Company's outsourcing at the end of Fiscal 1997 of certain of its distribution center operations to C&S Wholesale Grocers, Inc. ("C&S"). The cost of goods sold amounts were affected by a pretax LIFO charge of $0.4 million in each of the first quarters of Fiscal 1998 and Fiscal 1997, respectively. Selling, General and Administrative Expenses ("SG&A"): SG&A in the first quarter of Fiscal 1998 decreased $1.3 million or 0.6% compared to the prior year. The decrease in SG&A in the first quarter of Fiscal 1998 compared to the prior year was primarily due to sold and closed stores. As a percentage of sales, SG&A were 23.0% in the first quarter of Fiscal 1998 and Fiscal 1997, respectively. Depreciation and Amortization: Depreciation and amortization of $19.7 million in the first quarter of Fiscal 1998 was $0.5 million lower than the prior year of $20.2 million. The decrease in depreciation and amortization expense in the first quarter of Fiscal 1998 compared to the prior year was primarily due to the sale of certain of the Company's distribution center facilities at the end of Fiscal 1997 as part of its transaction with C&S, partially offset by capital expenditures. Depreciation and amortization excludes video tape amortization, which is recorded in cost of goods sold, of $0.8 million in each of the first quarters of Fiscal 1998 and Fiscal 1997, respectively. Operating Earnings: Operating earnings in the first quarter of Fiscal 1998 were $33.3 million compared with the prior year of $26.9 million. The increase in operating earnings in the first quarter of Fiscal 1998 compared to the prior year was due to higher gross profit and lower SG&A. 7 SUPERMARKETS GENERAL HOLDINGS CORPORATION Interest Expense: Interest expense was $41.6 million in the first quarter of Fiscal 1998 compared to $41.9 million in the prior year. The decrease in interest expense in the first quarter of Fiscal 1998 compared to the prior year was primarily due to lower levels of borrowings under the working capital facilities and lower amortization of debt issuance costs, partially offset by the debt accretion on the Deferred Coupon Notes. 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 Company has recorded a valuation allowance related to the income tax benefit for the first quarter of Fiscal 1998; therefore, no income tax benefit has been recognized. The income tax benefit in Fiscal 1997 was $5.9 million. During the first quarter of Fiscal 1998, the Company made income tax payments of $0.1 million and received income tax refunds of $0.5 million. During the first quarter of Fiscal 1997, the Company made income tax payments of $1.7 million and received income tax refunds of $0.5 million. Summary of Operations: The Company's net loss in the first quarter of Fiscal 1998 was $8.3 million compared to a net loss of $9.1 million for the prior year. The decrease in net loss in the first quarter of Fiscal 1998 compared to the prior year was primarily due to higher operating earnings and lower interest expense, partially offset by a reduction in the income tax benefit. EBITDA-FIFO: EBITDA-FIFO was $54.2 million and $48.5 million in the first quarters of Fiscal 1998 and Fiscal 1997, respectively. EBITDA-FIFO represents net earnings before interest expense, income taxes, depreciation, amortization and the LIFO charge. EBITDA-FIFO is a widely accepted financial indicator of a company's ability to service and/or incur debt. EBITDA-FIFO should not be construed as an alternative to, or a better indicator of operating income or to cash flows from operating activities, as determined in accordance with generally accepted accounting principles. Financial Condition Debt Service: During the first quarter of Fiscal 1998, total debt increased $46.8 million from Fiscal 1997 year end due to borrowings under the Working Capital Facility and debt accretion on the Pathmark Deferred Coupon Notes and PTK Exchangeable Guaranteed Debentures, partially offset by a decrease in certain mortgages. Borrowings under the Working Capital Facility were $45.2 million at May 2, 1998 and have increased to $57.3 million at June 11, 1998. In addition, during the first quarter of Fiscal 1998, total lease obligations increased $4.2 million from Fiscal 1997 year end. During the first quarter of Fiscal 1998, the Company sold a former supermarket property for $7.6 million. There was no gain or loss recognized on this transaction. The proceeds were used to pay down the related mortgage and a portion of the Working Capital Facility. 8 SUPERMARKETS GENERAL HOLDINGS CORPORATION The indebtedness under the Working Capital Facility and the Term Loan bear interest at floating rates and, therefore, 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. However, the May 1 semi-annual interest payment of $21.2 million on the Senior Subordinated Notes was paid in the first quarters of Fiscal 1998 and Fiscal 1997 due to the timing of the quarter end dates. The amount of principal payments required each year on outstanding long-term debt (excluding the original issue discount with respect to the Deferred Coupon Notes) are as follows (dollars in millions):
Principal Fiscal Years Payments ------------ --------- 1998(a)............................................. $ 39.5 1999................................................ 19.8 2000................................................ 125.9 2001................................................ 256.2 2002................................................ 195.8 2003................................................ 661.4
- ---------- (a) Subsequent to May 2, 1998. Liquidity: The consolidated financial statements of the Company indicate that, at May 2, 1998, current liabilities exceeded current assets by $53.2 million and stockholder's deficiency was $1.3 billion. Management believes that cash flows generated from operations, supplemented by the unused borrowing capacity under the Working Capital Facility 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 meets its other cash requirements. The Company 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 borrowing facilities. Future refinancing will be necessary if the Company's cash flow from operations is not sufficient to meet its debt service requirements related to the maturity of the Term Loan and Working Capital Facility in Fiscal 2001, and the maturity of the Subordinated Notes and Subordinated Debentures in Fiscal 2002. The Company expects that it will be necessary to refinance all or a portion of the Senior Subordinated Notes and the Deferred Coupon Notes due in Fiscal 2003. The Company may undertake a refinancing of some or all of such indebtedness sometime prior to its maturity. The Company was in compliance with its various debt covenants at May 2, 1998 and, based on management's operating projections for Fiscal 1998, the Company believes that it will continue to be in compliance with its various debt covenants. The Company's ability to make scheduled payments or to refinance or otherwise meet 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 the Company's indebtedness. 9 SUPERMARKETS GENERAL HOLDINGS CORPORATION While it is the Company's intention to enter into other 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, 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 May 2, 1998, the unpaid dividends of $94.7 million were accrued and included in other noncurrent liabilities. Capital Expenditures: Capital expenditures for the first quarter of Fiscal 1998, including property acquired under capital leases, were $19.5 million compared to $11.8 million for the prior year. During the first quarter of Fiscal 1998, the Company completed six renovations to existing supermarkets. During the remainder of Fiscal 1998, the Company plans to open two new Pathmark stores, close one store and to complete up to an aggregate of 13 major renovations and enlargements. Capital expenditures for Fiscal 1998, including property to be acquired under capital leases, are estimated to be $70.0 million. Management believes that cash flows generated from operations, supplemented by the unused borrowing capacity under the Working Capital Facility and the availability of capital lease financing will be sufficient to provide for the Company's capital expenditure program. Cash Flows: Cash used for operating activities was $64.2 million in the first quarter of Fiscal 1998 compared to cash provided by operating activities of $5.2 million in the prior year. The change in cash flow from operating activities was primarily due to cash used for operating assets and liabilities in the first quarter of Fiscal 1998, resulting from the paydown of trade accounts payable, utilizing the proceeds received at the end of Fiscal 1997 related to the C&S transaction, and an increase in due from suppliers related to the C&S transition. Cash used for investing activities was $0.2 million in the first quarter of Fiscal 1998 compared to $3.8 million in the prior year. The decrease in cash used for investing activities was primarily due to proceeds from property dispositions, partially offset by an increase in expenditures of property and equipment. Cash provided by financing activities was $11.7 million in the first quarter of Fiscal 1998 compared to $2.7 million in the prior year. The increase in cash provided by financing activities was primarily due to an increase in borrowings under the working capital facilities and a decrease in repayments of the term loans, partially offset by a decrease in book overdrafts related to the C&S transition. 10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: none (b) Reports on Form 8-K: The registrant filed one Form 8-K during the quarter for which this report is filed. Date of Report Item -------------- ---- February 13, 1998 Sale of Pathmark's distribution assets 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/ Joseph Adelhardt --------------------------------------- (Joseph Adelhardt) Senior Vice President and Controller, Chief Accounting Officer Date: June 16, 1998 11 EX-27 2 EX-27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SUPERMARKETS GENERAL HOLDINGS CORPORATION'S CONSOLIDATED STATEMENT OF OPERATIONS FOR THE 13 WEEKS ENDED MAY 2, 1998 AND CONSOLIDATED BALANCE SHEET AS OF MAY 2, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS JAN-30-1999 MAY-02-1998 10,236 0 14,307 (1,251) 156,436 266,777 912,045 (389,882) 887,221 319,948 1,259,061 107,647 0 10 (1,347,223) 887,221 916,015 916,015 651,984 651,984 0 15 (41,569) (8,297) (30) (8,327) 0 0 0 (8,327) 0 0
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