-----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, Sv2iVWCv6HAQDNBZliEeJ72QWGxJY3z/nA6sPZJ2UJ62YW8aw/ijd/U3W67AXTyB zW6mq3KtlLRrAjI9cq79nw== 0000912057-96-017825.txt : 19960816 0000912057-96-017825.hdr.sgml : 19960816 ACCESSION NUMBER: 0000912057-96-017825 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARR GOTTSTEIN FOODS CO CENTRAL INDEX KEY: 0000871891 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 920135158 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12116 FILM NUMBER: 96613622 BUSINESS ADDRESS: STREET 1: 6411 A ST CITY: ANCHORAGE STATE: AK ZIP: 99518 BUSINESS PHONE: 9075611944 MAIL ADDRESS: STREET 1: 6411 A ST CITY: ANCHORAGE STATE: AK ZIP: 99518 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30, 1996 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number 1-12116 CARR-GOTTSTEIN FOODS CO. (Exact name of registrant as specified in its charter) Delaware 920135158 (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 6411 A Street Anchorage, Alaska 99518 (Address of principal executive offices) Registrant's telephone number, including area code: (907) 561-1944 Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 [ ] The number of shares of the registrant's Common Stock outstanding at August 9, 1996 was 7,810,196 shares. EXHIBIT INDEX APPEARS AT PAGE 18 Page 1 of 20 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements a) Consolidated Balance Sheets as of June 30, 1996 (unaudited) and December 31, 1995 1 b) Consolidated Statements of Operations for the 13 weeks and 26 weeks ended June 30, 1996 (unaudited) and July 2, 1995 (unaudited) 2 c) Consolidated Statements of Cash Flows for the 13 and 26 weeks ended June 30, 1996 (unaudited) and July 2, 1995 (unaudited) 3 d) Notes to Consolidated Financial Statements (unaudited) 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (unaudited) 13 PART II. OTHER INFORMATION 16 SIGNATURES 17 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - --------------------------------------------------------------------------------------------------------- AMOUNTS IN THOUSANDS - --------------------------------------------------------------------------------------------------------- June 30, December 31, 1996 1995 - --------------------------------------------------------------------------------------------------------- ASSETS (UNAUDITED) Current assets: Cash and cash equivalents $ 5,372 $ 2,817 Accounts receivable, net 20,086 17,853 Income taxes receivable 784 164 Inventories 56,285 50,505 Deferred taxes 1,756 1,756 Prepaid expenses and other current assets 4,138 2,881 - --------------------------------------------------------------------------------------------------------- Total current assets 88,421 75,976 Property, plant and equipment, at cost, net of accumulated depreciation 148,284 152,836 Intangible assets, net of accumulated amortization 93,158 94,589 Other assets 11,847 13,219 - --------------------------------------------------------------------------------------------------------- $ 341,710 $ 336,620 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 38,309 $ 35,986 Accrued expenses 15,791 7,352 Current maturities of long-term debt 7,248 3,551 Revolving line of credit 15,800 16,000 Estimated obligation for self-insurance 2,608 2,794 - --------------------------------------------------------------------------------------------------------- Total current liabilities 79,756 65,683 Long-term debt, excluding current maturities 227,990 234,740 Estimated obligation for self-insurance 1,536 1,536 Deferred tax liability 488 488 Other liabilities 1,630 1,871 - --------------------------------------------------------------------------------------------------------- Total liabilities 311,400 304,318 - --------------------------------------------------------------------------------------------------------- Stockholders' equity: Common stock, $.01 par value, authorized 25,000 shares, issued 9,736 shares 97 97 Additional paid in capital 52,580 52,595 Stock subscriptions receivable - (44) Deficit (9,782) (7,734) - --------------------------------------------------------------------------------------------------------- 42,895 44,914 Less treasury stock, 1,872 and 1,876 shares, at cost 12,585 12,612 - --------------------------------------------------------------------------------------------------------- Total stockholders' equity 30,310 32,302 - --------------------------------------------------------------------------------------------------------- Commitments and contingencies - --------------------------------------------------------------------------------------------------------- $ 341,710 $ 336,620 - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 1 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------- AMOUNTS IN THOUSANDS (EXCEPT PER SHARE DATA) - ----------------------------------------------------------------------------------------------------------- 13 Weeks Ended 26 Weeks Ended -------------- -------------- June 30, July 2, June 30, July 2, 1996 1995 1996 1995 - ----------------------------------------------------------------------------------------------------------- (unaudited) (unaudited) - ----------------------------------------------------------------------------------------------------------- SALES $ 160,953 $ 154,648 $ 303,762 $ 293,718 Cost of merchandise sold, including warehousing and transportation expenses (a) 117,117 106,096 219,854 201,594 - ----------------------------------------------------------------------------------------------------------- GROSS PROFIT (a) 43,836 48,552 83,908 92,124 Operating and administrative expenses (a) 37,009 39,775 72,413 77,372 - ----------------------------------------------------------------------------------------------------------- OPERATING INCOME 6,827 8,777 11,495 14,752 - ----------------------------------------------------------------------------------------------------------- Other expenses: Interest expense, net (7,056) (3,659) (14,013) (7,099) - ----------------------------------------------------------------------------------------------------------- Net earnings (loss) before taxes (229) 5,118 (2,518) 7,653 Income tax (expense) benefit (186) (2,392) 470 (3,722) Net earnings (loss) $ (415) $ 2,726 $ (2,048) $ 3,931 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Earnings (loss) per common share: Net earnings (loss) per share $ (0.05) $ 0.18 $ (0.26) $ 0.25 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 7,810 15,414 7,808 15,557 - ----------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. Note (a) Due to changes in allocation methods comparisons between 1996 and 1995 gross margin and expenses rates will be non-comparable. 2 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
- ----------------------------------------------------------------------------------------------- AMOUNTS IN THOUSANDS - ----------------------------------------------------------------------------------------------- June 30, July 2, 1996 1995 - ----------------------------------------------------------------------------------------------- (unaudited) (unaudited) OPERATING ACTIVITIES: Net income (loss) $ (2,048) $ 3,931 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 7,242 6,737 Amortization of intangibles 1,431 1,771 Amortization of loan fees and discounts 730 264 Loss on disposal of property and equipment - 44 (Increase) decrease in current assets: Income tax receivable (620) 257 Receivables (2,233) (2,687) Inventories (5,780) (969) Prepaid expenses (1,257) 1,549 Other assets 642 (2,603) (Decrease) increase in current liabilities: Accounts payable 2,323 2,364 Accrued expenses 8,439 677 Income taxes payable - 2,861 Self insurance reserve (186) (421) Other liabilities (241) (898) - ----------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 8,442 12,877 - ----------------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Additions to property and equipment (2,690) (10,850) Proceeds from sale of property and equipment - 23 Proceeds from sale of subsidiary - 983 - ----------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (2,690) (9,844) - ----------------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Payments on long-term debt (3,053) (5,573) Issuance of bank debt - 2,498 Short term borrowings (payments), net (200) 2,502 Issuance of treasury stock 12 - Purchase of treasury stock - (2,499) Change in stock subscriptions receivable 44 (2) Sale of treasury stock - - ----------------------------------------------------------------------------------------------- NET CASH USED IN FINANCING ACTIVITIES (3,197) (3,074) - ----------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,555 (41) Cash and cash equivalents at beginning of period 2,817 321 - ----------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,372 $ 280 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 11,851 $ 7,305 Income taxes - 600 - ----------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 3 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) During interim periods, Carr-Gottstein Foods Co. and subsidiaries (the "Company") follows the accounting policies set forth in its audited financial statements included in its Annual Report for the fiscal year ended December 31, 1995 filed with the Securities Exchange Commission. These consolidated interim financial statements should be read in conjunction with such audited consolidated financial statements and notes thereto. Management believes that the accompanying interim financial statements reflect all adjustments which are necessary for a fair statement of the results of the interim period presented. All adjustments made in the accompanying interim financial statements are of a normal recurring nature. 4 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED (2) CONDENSED CONSOLIDATING FINANCIAL INFORMATION The Company issued $100,000,000 of senior subordinated unsecured notes on November 15, 1995. CGF Properties, Inc. Has not guaranteed the unsecured notes and financial information for this wholly-owned subsidiary is presented separately. All of the Company's other direct and indirect subsidiaries, AOL Express, Inc., APR Forwarders, Inc., Oaken Keg Spirit Shops, Inc. And Alaska Advertisers, Inc. Are wholly-owned and have fully and unconditionally guaranteed the unsecured notes on a joint and several basis and, accordingly, are presented on a combined basis. Parent company only information is presented for Carr-Gottstein Foods Co., which reflects only its business activity and its wholly-owned subsidiaries accounted for using the equity method. Separate financial statements and other disclosures for the guarantor subsidiaries are not presented because in the opinion of management such information is not material. The following are condensed consolidating balance sheets:
AMOUNTS IN THOUSANDS - ---------------------------------------------------------------------------------------------------------------------- BALANCE SHEET NON-GUARANTOR GUARANTOR PARENT SUBSIDIARY SUBSIDIARIES COMPANY JUNE 30, 1996 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED - ---------------------------------------------------------------------------------------------------------------------- ASSETS Inventories $ - $ 4,737 $ 51,548 $ - $ 56,285 Other current assets 3,498 59,449 23,873 (54,684) 32,136 - ---------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 3,498 64,186 75,421 (54,684) 88,421 Property, plant and equipment, net 66,524 5,717 76,043 - 148,284 Intangible, net - - 93,158 - 93,158 Investments in subsidiaries - - 97,191 (97,191) - Other assets - 1,129 10,718 - 11,847 - ---------------------------------------------------------------------------------------------------------------------- $ 70,022 $ 71,032 $ 352,531 $(151,875) $ 341,710 - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $ 789 $ 864 $ 132,787 $ (54,684) $ 79,756 Long-term debt, excluding current Maturities 42,210 - 185,780 - 227,990 Other liabilities - - 3,654 - 3,654 - ---------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 42,999 864 322,221 (54,684) 311,400 Common stock 10 44 97 (54) 97 Additional paid-in capital 28,966 39,381 52,580 (68,347) 52,580 Retained earnings (deficit) (1,953) 30,743 (9,782) (28,790) (9,782) - ---------------------------------------------------------------------------------------------------------------------- 27,023 70,168 42,895 (97,191) 42,895 Less treasury stock - - (12,585) - (12,585) - ---------------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 27,023 70,168 30,310 (97,191) 30,310 - ---------------------------------------------------------------------------------------------------------------------- $ 70,022 $ 71,032 $ 352,531 $(151,875) $ 341,710 - ---------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------
5 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
AMOUNTS IN THOUSANDS - ----------------------------------------------------------------------------------------------------------------- BALANCE SHEET NON-GUARANTOR GUARANTOR PARENT SUBSIDIARY SUBSIDIARIES COMPANY DECEMBER 31, 1995 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED - ----------------------------------------------------------------------------------------------------------------- ASSETS Inventories $ - $ 3,986 $ 46,519 $ - $ 50,505 Other current assets 5,397 57,859 7,261 (45,046) 25,471 - ----------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 5,397 61,845 53,780 (45,046) 75,976 Property, plant and equipment, net 67,921 6,336 78,579 - 152,836 Intangible, net - - 94,589 - 94,589 Investments in subsidiaries - - 96,229 (96,229) - Other assets 33 509 12,677 - 13,219 - ----------------------------------------------------------------------------------------------------------------- $ 73,351 $ 68,690 $ 335,854 $(141,275) $ 336,620 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $ 3,332 $ - $ 107,397 $ (45,046) $ 65,683 Long-term debt, excluding current maturities 42,480 - 192,260 - 234,740 Other liabilities - - 3,895 - 3,895 - ----------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 45,812 - 303,552 (45,046) 304,318 Common stock 10 44 97 (54) 97 Additional paid-in capital 28,966 39,381 52,595 (68,347) 52,595 Stock subscription receivable - - (44) - (44) Retained earnings (deficit) (1,437) 29,265 (7,734) (27,828) (7,734) - ----------------------------------------------------------------------------------------------------------------- 27,539 68,690 44,914 (96,229) 44,914 Less treasury stock - - 12,612 - 12,612 - ----------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 27,539 68,690 32,302 (96,229) 32,302 - ----------------------------------------------------------------------------------------------------------------- $ 73,351 $ 68,690 $ 335,854 $(141,275) $ 336,620 - ----------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------
6 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED The following are condensed consolidating statements of operations:
AMOUNTS IN THOUSANDS - ------------------------------------------------------------------------------------------------------------------ STATEMENT OF OPERATIONS NON-GUARANTOR GUARANTOR PARENT SUBSIDIARY SUBSIDIARIES COMPANY SECOND QUARTER 1996 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------ Sales $ - $ 20,213 $ 150,766 $ (10,026) $ 160,953 Cost of merchandise sold, including warehousing and transportation expenses - 14,626 112,517 (10,026) 117,117 - ------------------------------------------------------------------------------------------------------------------ GROSS PROFIT - 5,587 38,249 - 43,836 Operating and administrative (income) expenses (257) 3,082 34,184 - 37,009 - ------------------------------------------------------------------------------------------------------------------ OPERATING INCOME 257 2,505 4,065 - 6,827 Interest expense, net (1,131) - (5,925) - (7,056) Equity in subsidiary earnings - - 962 (962) - - ------------------------------------------------------------------------------------------------------------------ EARNINGS BEFORE INCOME TAX (874) 2,505 (898) (962) (229) Income tax (expense) benefit 358 (1,027) 855 - 186 - ------------------------------------------------------------------------------------------------------------------ NET EARNINGS (LOSS) $ (516) $ 1,478 $ (415) $ (962) $ (415) - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------
7 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED The following are condensed consolidating statements of operations:
AMOUNTS IN THOUSANDS - ------------------------------------------------------------------------------------------------------------------ STATEMENT OF OPERATIONS NON-GUARANTOR GUARANTOR PARENT SUBSIDIARY SUBSIDIARIES COMPANY 26 WEEKS ENDED JUNE 30, 1996 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------ Sales $ - $ 37,628 $ 284,210 $ (18,076) $ 303,762 Cost of merchandise sold, including warehousing and transportation expenses - 26,889 211,041 (18,076) 219,854 - ------------------------------------------------------------------------------------------------------------------ GROSS PROFIT - 10,739 73,169 - 83,908 Operating and administrative (income)expenses (472) 6,194 66,691 - 72,413 - ------------------------------------------------------------------------------------------------------------------ OPERATING INCOME 472 4,545 6,478 - 11,495 Interest expense, net (2,266) - (11,747) - (14,013) Equity in subsidiary earnings - - 1,622 (1,622) - - ------------------------------------------------------------------------------------------------------------------ EARNINGS BEFORE INCOME TAX (1,794) 4,545 (3,647) (1,622) (2,518) Income tax (expense) benefit 736 (1,865) 1,599 - 470 - ------------------------------------------------------------------------------------------------------------------ NET EARNINGS (LOSS) $ (1,058) $ 2,680 $ (2,048) $ (1,622) $ (2,048) - ------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------
8 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED The following are condensed consolidating statements of operations:
AMOUNTS IN THOUSANDS - ------------------------------------------------------------------------------------------------------------------ STATEMENT OF OPERATIONS NON-GUARANTOR GUARANTOR PARENT SUBSIDIARY SUBSIDIARIES COMPANY SECOND QUARTER 1995 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------ Sales $ - $ 18,956 $ 144,802 $ (9,110) $ 154,648 Cost of merchandise sold, including warehousing and transportation expenses - 13,093 102,113 (9,110) 106,096 - ------------------------------------------------------------------------------------------------------------------- GROSS PROFIT - 5,863 42,689 - 48,552 Operating and administrative expenses (132) 2,626 37,281 - 39,775 - ------------------------------------------------------------------------------------------------------------------- OPERATING INCOME 132 3,237 5,408 - 8,777 Interest expense, net (1,146) (1,327) (1,186) - (3,659) Equity in subsidiary earnings - - 529 (529) - - ------------------------------------------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAX (1,014) 1,910 4,751 (529) 5,118 Income tax (expense) benefit 416 (783) (2,025) - (2,392) - ------------------------------------------------------------------------------------------------------------------- NET EARNINGS (LOSS) $ (598) $ 1,127 $ 2,726 $ (529) $ 2,726 - ------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
9 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED The following are condensed consolidating statements of operations:
AMOUNTS IN THOUSANDS - ------------------------------------------------------------------------------------------------------------------- STATEMENT OF OPERATIONS NON-GUARANTOR GUARANTOR PARENT SUBSIDIARY SUBSIDIARIES COMPANY 26 WEEKS ENDED JULY 2, 1995 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------- Sales $ - $ 34,985 $ 275,872 $ (17,139) $ 293,718 Cost of merchandise sold, including warehousing and transportation expenses - 24,091 194,642 (17,139) 201,594 - ------------------------------------------------------------------------------------------------------------------- GROSS PROFIT - 10,894 81,230 - 92,124 Operating and administrative (income) expenses (258) 5,156 72,474 - 77,372 - ------------------------------------------------------------------------------------------------------------------- OPERATING INCOME 258 5,738 8,756 - 14,752 Interest expense, net (2,295) - (4,084) - (7,099) Equity in subsidiary earnings - - 2,184 (2,184) - - ------------------------------------------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAX (2,037) 5,738 6,136 (2,184) 7,653 Income tax (expense) benefit 835 (2,353) (2,205) - (3,722) - ------------------------------------------------------------------------------------------------------------------- NET EARNINGS (LOSS) $ (1,202) $ 3,385 $ 3,931 $ (2,184) $ 3,931 - ------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------
10 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED The following is condensed consolidating cash flow information. The consolidated Company's cash and cash equivalents is positive at each balance sheet date so negative balances for individual subsidiaries are not classified as liabilities. The net cash provided by operating activities fluctuates due to changes in intercompany receivables and payables from the transfer of cash to and from the parent company.
AMOUNTS IN THOUSANDS - ------------------------------------------------------------------------------------------------------------------------- STATEMENT OF CASH FLOWS NON-GUARANTOR GUARANTOR PARENT SUBSIDIARY SUBSIDIARIES COMPANY 26 WEEKS ENDED JUNE 30, 1996 CGF PROPERTIES (COMBINED) ONLY CONSOLIDATED - ------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities $ 148 $ 4 $ 8,290 $ 8,442 - ------------------------------------------------------------------------------------------------------------------------- Investing activities Addition to property and equipment - (4) (2,686) (2,690) - ------------------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES - (4) (2,686) (2,690) - ------------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Payments on long-term debt (148) - (2,905) (3,053) Short term borrowings, net - - (200) (200) Issuance of treasury stock - - 12 12 Change in stock subscription receivable - - 44 44 - ------------------------------------------------------------------------------------------------------------------------- NET CASH USED BY FINANCING ACTIVITIES (148) - (3,049) (3,197) - ------------------------------------------------------------------------------------------------------------------------- NET INCREASE IN CASH AND CASH EQUIVALENTS - - 2,555 2,555 Cash and cash equivalents at beginning of period 55 83 2,679 2,817 - ------------------------------------------------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 55 $ 83 $ 5,234 $ 5,372 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
11 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED The following is condensed consolidating cash flow information. The consolidated Company's cash and cash equivalents is positive at each balance sheet date so negative balances for individual subsidiaries are not classified as liabilities. The net cash provided by operating activities fluctuates due to changes in intercompany receivables and payables from the transfer of cash to and from the parent company. AMOUNTS IN THOUSANDS - -------------------------------------------------------------------------------- STATEMENT OF CASH FLOWS NON-GUARANTOR GUARANTOR PARENT 26 WEEKS ENDED SUBSIDIARY SUBSIDIARIES COMPANY JULY 2, 1995 CGF PROPERTIES (COMBINED) ONLY CONSOLIDATED - -------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $(1,750) $671 $13,956 $12,877 - ------------------------------------------------------------------------------ INVESTING ACTIVITIES Addition to property and equipment - (691) (10,159) (10,850) Proceeds from sale of property and equipment - - 23 23 Proceeds from sale of subsidiary - - 983 983 - ------------------------------------------------------------------------------ NET CASH USED IN INVESTING ACTIVITIES - (691) (9,153) (9,844) - ------------------------------------------------------------------------------ FINANCING ACTIVITIES Proceeds from issuance of debt - - 2,498 2,498 Payments on long-term debt (263) - (5,310) (5,573) Short term borrowings, net - - 2,502 2,502 Purchase of treasury stock - - (2,499) (2,499) Change in Stock Subscription receivable - - (2) (2) - ------------------------------------------------------------------------------ NET CASH USED IN FINANCING ACTIVITIES (263) - (2,811) (3,074) - ------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,013) (20) 1,992 (41) Cash and cash equivalents at beginning of period 2,066 77 (1,822) 321 - ------------------------------------------------------------------------------ CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 53 $ 57 $ 170 $ 280 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ 12 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion should be read in conjunction with the unaudited financial statements and related notes included elsewhere in this Form 10-Q. GENERAL Carr-Gottstein Foods Co. is the leading retail and wholesale food company in Alaska operating full-service supermarkets and wine and liquor stores as well as the only full-line food warehouse and distribution center (under the J.B. Gottstein name) in the state. RESULTS OF OPERATIONS 13 WEEKS ENDED JUNE 30, 1996 COMPARED TO 13 WEEKS ENDED JULY 2, 1995 SALES. Sales for the 13 weeks ended June 30, 1996 were $161.0 million compared to $154.6 million for the 13 weeks ended July 2, 1995. The 4.1% increase was due in part to increases at the Carrs Quality Centers (the "Carrs Stores") and increases attributable to Wholesale operations. The increase in sales for the second 13 weeks of 1996 reflects a 2.8% increase and 0.1% decrease in comparable store sales for the Carrs Stores and Eagle Quality Centers (the "Eagle Stores"), respectively. GROSS PROFIT. Gross profit for the 13 weeks ended June 30, 1996 was $43.8 million compared to $48.6 million for the 13 weeks ended July 2, 1995. The decrease in gross margin dollars is primarily attributable to the allocation of warehousing and distribution expenses to cost of goods sold. In previous quarters, these expenses were not charged to the cost of goods sold but were classified as operating expenses. Gross profit was also negatively impacted by the kick-off of the Carrs Plus "Swipe the Gold, Save the Green" electronic marketing campaign. As a percentage of sales, gross profit was 27.2% for the 13 weeks 1996 compared to 31.4% for the 13 weeks 1995. Gross profit as a percentage of sales for the 13 weeks 1996 decreased primarily as a result of the allocation of warehousing and distribution expenses and partially as the result of increased promotional expenses during the quarter. OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative expenses for the 13 weeks ended June 30, 1996 were $37.0 million compared to $39.8 million for the 13 weeks ended July 2, 1995. Operating and administrative expenses as a percentage of sales were 23.0% for the 13 weeks 1996 compared to 25.7% for the 13 weeks 1995. The decrease in operating expenses is primarily attributable to the allocation of warehousing and transportation expenses to the cost of goods sold coupled with some additional expenses related to the "Fusion" corporate re-engineering project that was brought to a conclusion at the end of the first quarter. OPERATING INCOME. Operating income for the 13 weeks ended June 30, 1996 decreased $2.0 million from $8.8 million in the second quarter of 1995 to $6.8 million in the second quarter of 1996. This decrease in operating income was due primarily to the reduction in gross profit which was impacted by the Carrs Plus electronic marketing campaign and to some increased expenses associated with the "Fusion" project as discussed above. OTHER INCOME AND EXPENSE. Net interest expense was $7.1 million for the 13 weeks ended June 30, 1996 compared to $3.7 million for the 13 weeks ended July 2, 1995. The increase in interest expense is primarily attributable to the full quarter impact of increased interest costs related to the borrowings associated with the self stock tender completed by the Company in November of 1995. 13 INCOME TAXES. Income tax expense for the 13 weeks ended June 30, 1996 was $0.2 million compared to a $2.4 million expense (a 46.7% effective tax rate) for the 13 weeks ended July 2, 1995. The high effective tax rate in 1995 resulted from the amortization of intangible assets for which no tax benefit was available. NET INCOME (LOSS) Net loss for the 13 weeks ended June 30, 1996 was $0.4 million, or $0.05 per share, versus net income of $2.7 million, or $0.18 per share for the 13 weeks ended July 2, 1995. 26 WEEKS ENDED JUNE 30, 1996 COMPARED TO 26 WEEKS ENDED JULY 2, 1995 SALES. Sales for the 26 weeks ended June 30, 1996 were $303.8 million compared to $293.7 million for the 26 weeks ended July 2, 1995. The increase in sales for the 26 weeks of 1996 reflects a 0.5% and 1.5% increase in comparable store sales for the Carrs Stores and Eagle Stores, respectively. GROSS PROFIT. Gross profit for the 26 weeks ended June 30, 1996 was $83.9 million compared to $92.1 million for the 26 weeks ended July 2, 1995. The decrease in gross margin dollars is primarily attributable to the allocation of warehousing and distribution expenses to cost of goods sold as discussed above as well as extra promotional expenses that were incurred in the second quarter. As a percentage of sales, gross profit was 27.6% for the 26 weeks 1996 compared to 31.4% for the 26 weeks 1995. Gross profit as a percentage of sales for the 26 weeks 1996 decreased primarily as a result of the allocation of warehousing and distribution expenses and partially as the result of the increased promotional expenses during the second quarter. OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative expenses for the 26 weeks ended June 30, 1996 were $72.4 million compared to $77.4 million for the 26 weeks ended July 2, 1995. Operating and administrative expenses as a percentage of sales were 23.8% for the 26 weeks 1996 compared to 26.3% for the 26 weeks 1995. The decrease in operating expenses is primarily attributable to the allocation of warehousing and transportation expenses to the cost of goods sold coupled with expenses related to the "Fusion" corporate re-engineering project that was brought to a conclusion at the end of the first quarter. OPERATING INCOME. Operating income for the 26 weeks ended June 30, 1996 decreased $3.3 million from $14.8 million, or 5.0 percent of sales, in 1995 to $11.5 million, or 3.8 percent of sales in 1996. OTHER INCOME AND EXPENSE. Net interest expense was $14.0 million for the 26 weeks ended June 30, 1996 compared to $7.1 million for the 26 weeks ended July 2, 1995. The increase in interest expense is primarily attributable to the impact of increased interest costs related to the borrowings associated with the self stock tender completed by the Company in November of 1995. INCOME TAXES. The Company recognized an income tax benefit for the 26 weeks ended June 30, 1996 of $0.5 million compared to a $3.7 million expense (a 48.6% effective tax rate) for the 26 weeks ended July 2, 1995. The high effective tax rate in 1995 resulted from the amortization of intangible assets for which no tax benefit was available. NET INCOME (LOSS) Net loss for the 26 weeks ended June 30, 1996 was $2.0 million, or $0.26 per share, versus net income of $3.9 million, or $0.25 per share for the 26 weeks ended July 2, 1995. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of liquidity are cash flows from operations and its working capital revolving credit facility, which are considered to be adequate for anticipated cash needs. Primary uses are capital expenditures, debt service, and lease payments. 14 Net cash provided by operating activities was $8.4 million for the 26 weeks ended June 30, 1996 compared to net cash provided by operating activities of $12.9 million for the same period in 1995. The change in the 26 weeks 1996 compared to 1995 was due primarily to increased inventories and receivables offset by larger increases in accounts payable and accrued expenses. Capital expenditures for the 26 weeks ended June 30, 1996 were $2.7 million. The majority of these expenditures were related to the "Fusion" project and other projects started in the previous year. Although the Company will consider opportunities for new store construction or acquisition, should they arise, capital expenditures are currently expected to be approximately $6.0 million for fiscal 1996. It is anticipated that the balance of 1996 capital expenditures will be funded out of cash provided by operations and borrowings under the working capital revolver. Net cash used for financing activities during the 26 weeks ended June 30, 1996 was $3.2 million. The level of borrowings under the Company's revolving debt is dependent primarily upon cash flows from operations, the timing of disbursements, long-term borrowing activity and capital expenditures. At June 30, 1996 there was $15.8 million outstanding on the revolving debt borrowings. The Company had available unused credit of $19.2 million. Funds borrowed under the revolving credit portion of the Company's credit facility are restricted to working capital and general corporate purposes. 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings - None. Item 2. Changes in Securities - None. Item 3. Defaults Upon Senior Securities - None. Item 4. Submission of Matters to Vote of Security Holders The Annual Meeting of Shareholders for Carr-Gottstein Foods Co. was held in Anchorage, Alaska on May 15, 1996, at the Z.J. Loussac Library. The sole issue submitted to a vote of the shareholders was the annual election of Directors. The following individuals were elected to the Board of Directors with the vote tabulation indicated opposite their respective names: FOR WITHHELD John J. Cairns 7,129,278 33,512 Mark R. Williams 7,131,079 31,711 Leonard I. Green 7,133,488 29,302 Jonathan D. Sokoloff 7,129,571 33,219 Gregory J. Annick 7,131,122 31,668 E. Dean Werries 7,130,987 31,803 Donald E. Gallegos 7,133,789 29,001 Item 5. Other Information Effective August 9, 1996, Lawrence H. Hayward was appointed President and Chief Executive Officer of the Company. Mr. Hayward formerly served as Senior Vice President and Chief Operating Officer of the Company. Effective August 9, 1996, Mark R. Williams resigned from his position as Chief Executive Officer and President of the Company. Mr. Williams will continue to serve as a Director and was appointed Vice Chairman of the Board of Directors. He will continue to be employed by the Company to assist Mr. Hayward during the transition. Effective August 9, 1996, John J. Cairns retired from his role as Special Assistant to the President. Mr. Cairns will continue to serve as a member and Chairman of the Board of Directors of the Company. He will continue to be employed by the Company on a part-time basis to work on special projects relating to long-term strategic planning. On July 25, 1996, the membership of the United Food and Commercial Workers Union, Local 1496 ratified a new three-year labor agreement covering approximately 1,800 employees of the Company's supermarkets located in the Anchorage area. The document is currently in preparation, and the Company expects to formally execute it shortly. 16 Item 6. Exhibits and Reports on Form 8-K (a) The exhibits set forth in the Exhibit Index on page 18 hereof are filed with this quarterly report on Form 10-Q. (b) No reports were filed on Form 8-K during the quarter ended June 30, 1996. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CARR GOTTSTEIN FOODS CO. By: /s/ Lawrence H. Hayward ----------------------------- Lawrence H. Hayward President and Chief Executive Officer Date: August 12, 1995 By: /s/ Donald J. Anderson ----------------------------- Donald J. Anderson Senior Vice President and Chief Financial Officer Date: August 12, 1996 17 CARR-GOTTSTEIN FOODS CO. EXHIBIT INDEX The following exhibits are attached as indicated: Exhibit Number Description of Exhibit 27.1 Financial Data Schedule 18 EX-27 2 FDS EXH.27
5 1,000 6-MOS DEC-31-1996 JUN-30-1996 5,372 0 21,211 341 56,285 88,421 148,284 0 341,710 79,756 0 0 0 97 39,995 341,710 303,762 303,762 219,854 72,413 0 0 14,013 (2,518) 470 0 0 0 0 (2,048) (.26) 0.00
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