-----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, NulpV5+zx5ujnTR2iO971WBgWxicrl31eVsdntyAjTPWqW/wEZVAJvpIfzHPG6VE X1ZVFP46GGdJFCkQTtxmKw== 0000912057-97-017536.txt : 19970515 0000912057-97-017536.hdr.sgml : 19970515 ACCESSION NUMBER: 0000912057-97-017536 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970330 FILED AS OF DATE: 19970514 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: 97604291 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 March 30, 1997 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 (I.R.S. Employer Identification No.) incorporation or organization) 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 May 9, 1997 was 7,882,792 shares. EXHIBIT INDEX APPEARS AT PAGE 14 Page 1 of 16 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ CARR GOTTSTEIN FOODS CO. AND SUBSIDIARIES FORM 10-Q For the Quarterly Period Ended March 30, 1997 INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements a) Consolidated Balance Sheets as of March 30, 1997 (unaudited) and December 29, 1996 1 b) Consolidated Statements of Operations for the 13 weeks ended March 30, 1997 (unaudited) and March 31, 1996 (unaudited) 2 c) Consolidated Statements of Cash Flows for the 13 weeks ended March 30, 1997 (unaudited) and March 31, 1996 (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) 11 Item 3. Quantitative and Qualitative Disclosure about Market Risk 12 PART II. OTHER INFORMATION 13 SIGNATURES 14 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - -------------------------------------------------------------------------------- AMOUNTS IN THOUSANDS - -------------------------------------------------------------------------------- MARCH 30, DECEMBER 29, 1997 1996 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ASSETS (unaudited) Current assets: Cash and cash equivalents $ 9,155 $ 8,655 Accounts receivable, net 18,607 16,650 Income taxes receivable 499 - Inventories 53,974 54,232 Deferred taxes 1,918 1,918 Prepaid expenses and other current assets 3,212 2,809 - -------------------------------------------------------------------------------- Total current assets 87,365 84,264 Property, plant and equipment, at cost, net of accumulated depreciation 139,192 142,179 Intangible assets, net of accumulated amortization 91,018 91,731 Deferred taxes 334 334 Other assets 11,636 12,336 - -------------------------------------------------------------------------------- $329,545 $ 330,844 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 40,312 $ 38,467 Accrued expenses 16,743 15,145 Income taxes payable - 298 Current maturities of long-term debt 8,299 7,281 Revolving line of credit 6,500 7,000 Estimated obligation for self-insurance 1,774 1,958 - -------------------------------------------------------------------------------- Total current liabilities 73,628 70,149 Long-term debt, excluding current maturities 223,659 227,640 Estimated obligation for self-insurance 1,536 1,536 Other liabilities 1,839 1,921 - -------------------------------------------------------------------------------- Total liabilities 300,662 301,246 - -------------------------------------------------------------------------------- Stockholders' equity: Common stock, $.01 par value, authorized 25,000 shares, issued 9,680 shares 97 97 Additional paid in capital 52,111 52,513 Deficit (11,563) (10,544) - -------------------------------------------------------------------------------- 40,645 42,066 Less treasury stock, 1,749 and 1,835 shares respectively, at cost 11,762 12,468 - -------------------------------------------------------------------------------- Total stockholders' equity 28,883 29,598 - -------------------------------------------------------------------------------- Commitments and contingencies - -------------------------------------------------------------------------------- $329,545 $ 330,844 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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) - --------------------------------------------------------------------------------------------- MARCH 30, MARCH 31, 1997 1996 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- (unaudited) SALES $ 141,467 $ 142,808 Cost of merchandise sold, including warehousing and transportation expenses 100,475 102,705 - --------------------------------------------------------------------------------------------- Gross profit 40,992 40,103 Operating and administrative expenses 35,514 35,435 - --------------------------------------------------------------------------------------------- OPERATING INCOME 5,478 4,668 - --------------------------------------------------------------------------------------------- Other income (expense): Interest expense, net (6,711) (6,957) - --------------------------------------------------------------------------------------------- Total other expense (6,711) (6,957) - --------------------------------------------------------------------------------------------- Earnings before income tax expense (1,233) (2,289) Income tax benefit 214 656 - --------------------------------------------------------------------------------------------- Net loss $ (1,019) $ (1,633) - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- Loss per common share: Net loss per share $ (0.13) $ (0.21) - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- Weighted average common shares outstanding 7,883 7,805 - --------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 2 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - --------------------------------------------------------------------------------------------- AMOUNTS IN THOUSANDS - --------------------------------------------------------------------------------------------- MARCH 30, MARCH 31, 1997 1996 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- (unaudited) (unaudited) OPERATING ACTIVITIES: Net loss $ (1,019) $ (1,633) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation 3,461 3,630 Amortization of intangibles 713 717 Amortization of loan fees and discounts 344 365 (Increase) decrease in current assets: Income tax receivables (499) - Receivables (1,957) (1,083) Inventories 258 (3,030) Prepaid expenses (403) (476) Other assets 356 496 (Decrease) increase in current liabilities: Accounts payable 1,845 3,866 Accrued expenses 1,598 8,287 Income taxes payable (298) - Other liabilities (266) 223 - --------------------------------------------------------------------------------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 4,133 11,362 - --------------------------------------------------------------------------------------------- INVESTING ACTIVITIES: Additions to property and equipment (474) (1,741) - --------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (474) (1,741) - --------------------------------------------------------------------------------------------- FINANCING ACTIVITIES: Net borrowings (payments) under revolving line of credit (500) (8,000) Payments on long-term debt (2,963) (151) Change in stock subscriptions receivable - (44) Issuance of treasury stock 304 11 - --------------------------------------------------------------------------------------------- NET CASH USED BY FINANCING ACTIVITIES (3,159) (8,095) - --------------------------------------------------------------------------------------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 500 1,526 Cash and cash equivalents at beginning of period 8,655 2,817 - --------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,155 $ 4,343 - --------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 4,016 $ 3,319 Income taxes 501 - - --------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------
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 29, 1996 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. (2) Financial Accounting Standards No. 128, Earnings Per Share, supersedes APB Opinion No. 15, Earnings Per Share, specifies the computation, presentation, and disclosure requirements for earnings per share (EPS) for entities with publicly held common stock or potential common stock. The statement replaces Primary EPS and Fully Diluted EPS with Basic EPS and Diluted EPS, respectively. Basic EPS, unlike Primary EPS, excludes all dilution while Diluted EPS, like Fully Diluted EPS, reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Due to an immaterial difference between Primary and Fully Diluted EPS, the Company has historically presented only a single EPS. The Company in the future will present both Basic and Diluted EPS for income (loss) from continuing operations and net income (loss). The statement is effective for financial statements for both interim and annual periods ending after December 15, 1997. After adoption, all prior periods EPS data will be restated. The adoption of the new statement will have minimal effect on the Company's EPS. 4 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED (2) CONDENSED CONSOLIDATING FINANCIAL INFORMATION The Company issued $100,000 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 MARCH 30, 1997 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- ASSETS Inventories $ - $ 4,476 $ 49,498 $ - $ 53,974 Other current assets 6,159 66,743 4,884 (44,395) 33,391 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 6,159 71,219 54,382 (44,395) 87,365 Property, plant and equipment, net 64,561 5,523 69,108 - 139,192 Intangible, net - - 91,018 - 91,018 Investments in subsidiaries - - 103,152 (103,152) - Other assets 32 483 11,455 - 11,970 - ---------------------------------------------------------------------------------------------------------------------------------- $ 70,752 $ 77,225 $329,115 $ (147,547) $ 329,545 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $ 1,114 $ 2,016 $114,893 $ (44,395) $ 73,628 Long-term debt, excluding current maturities 41,695 - 181,964 - 223,659 Other liabilities - - 3,375 - 3,375 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 42,809 2,016 300,232 (44,395) 300,662 - ---------------------------------------------------------------------------------------------------------------------------------- Common stock 10 44 97 (54) 97 Additional paid-in capital 28,966 39,381 52,111 (68,347) 52,111 Retained earnings (deficit) (1,033) 35,784 (11,563) (34,751) (11,563) - ---------------------------------------------------------------------------------------------------------------------------------- 27,943 75,209 40,645 (103,152) 40,645 Less treasury stock - - (11,762) - (11,762) - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 27,943 75,209 28,883 (103,152) 28,883 - ---------------------------------------------------------------------------------------------------------------------------------- $ 70,752 $ 77,225 $329,115 $ (147,547) $ 329,545 - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
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 29, 1996 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- ASSETS Inventories $ - $ 4,690 $ 49,542 $ - $ 54,232 Other current assets 5,526 63,389 6,117 (45,000) 30,032 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 5,526 68,079 55,659 (45,000) 84,264 Property, plant and equipment, net 65,191 5,725 71,263 - 142,179 Intangible, net - - 91,731 - 91,731 Investments in subsidiaries - - 101,920 (101,920) - Other assets 32 483 12,155 - 12,670 - ---------------------------------------------------------------------------------------------------------------------------------- $ 70,749 $ 74,287 $332,728 $ (146,920) $ 330,844 - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $ 966 $ 279 $113,904 $ (45,000) $ 70,149 Long-term debt, excluding current maturities 41,871 - 185,769 - 227,640 Other liabilities - - 3,457 - 3,457 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES 42,837 - 303,130 (45,000) 301,246 - ---------------------------------------------------------------------------------------------------------------------------------- Common stock 10 44 97 (54) 97 Additional paid-in capital 28,966 39,381 52,513 (68,347) 52,513 Stock subscription receivable - - - - - Retained earnings (deficit) (1,064) 34,583 (10,544) (33,519) (10,544) - ---------------------------------------------------------------------------------------------------------------------------------- 27,912 74,008 42,066 (101,920) 42,066 Less treasury stock - - 12,468 - 12,468 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY 27,912 74,008 29,598 (101,920) 29,598 - ---------------------------------------------------------------------------------------------------------------------------------- $ 70,749 $ 74,287 $332,728 $ (146,920) $ 330,844 - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
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 FIRST QUARTER 1997 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Sales $ - $ 17,044 $133,058 $ (8,635) $ 141,467 Cost of merchandise sold, including warehousing and transportation expenses - 12,191 96,919 (8,635) 100,475 - ---------------------------------------------------------------------------------------------------------------------------------- GROSS PROFIT - 4,853 36,139 - 40,992 Operating and administrative expenses (1,249) 2,818 33,945 - 35,514 - ---------------------------------------------------------------------------------------------------------------------------------- OPERATING INCOME (1,249) 2,035 2,194 - 5,478 Interest expense, net (1,196) - (5,515) - (6,711) Equity in subsidiary earnings - - 1,232 (1,232) - - ---------------------------------------------------------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAX (53) 2,035 (2,089) (1,232) (1,233) Income tax (expense) benefit (22) (834) 1,070 - 214 - ---------------------------------------------------------------------------------------------------------------------------------- NET EARNINGS $ (31) $ 1,201 $ (1,019) $ (1,232) $ (1,019) - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
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 FIRST QUARTER 1996 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Sales $ - $ 17,415 $133,443 $ (8,050) $ 142,808 Cost of merchandise sold - 12,263 98,493 (8,050) 102,705 - ---------------------------------------------------------------------------------------------------------------------------------- GROSS PROFIT - 5,152 34,950 - 40,103 Operating and administrative expenses (215) 3,112 32,537 - 35,435 - ---------------------------------------------------------------------------------------------------------------------------------- OPERATING INCOME 215 2,040 2,413 - 4,668 Interest expense, net (1,135) - (5,822) - (6,957) Equity in subsidiary earnings - - 660 (660) - - ---------------------------------------------------------------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAX (920) 2,040 (2,749) (660) (2,289) Income tax expense 378 (838) 1,116 - 656 - ---------------------------------------------------------------------------------------------------------------------------------- NET EARNINGS $ (542) 1,202 $ (1,633) $ (660) $ (1,633) - ---------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------
8 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 FIRST QUARTER 1997 CGF PROPERTIES (COMBINED) ONLY CONSOLIDATED - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 130 $ (24) $ 4,027 $ 4,133 - --------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Addition to property and equipment - (9) (465) (474) - --------------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES (9) (465) (474) - --------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Short term borrowings, net - - (500) (500) Payments on long-term debt (128) - (2,835) (2,963) (Purchase) issuance of treasury stock - - 304 304 - --------------------------------------------------------------------------------------------------------------------- NET CASH USED BY FINANCING ACTIVITIES (128) - (3,031) (3,159) - --------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2 (33) 531 500 Cash and cash equivalents at beginning of period 53 106 8,496 8,655 - --------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 55 $ 73 $ 9,027 $ 9,155 - --------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------
9 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 FIRST QUARTER 1996 CGF PROPERTIES (COMBINED) ONLY CONSOLIDATED - --------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 87 $ 26 $ 11,250 $ 11,363 - --------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Addition to property and equipment - - (1,741) (1,741) - --------------------------------------------------------------------------------------------------------------------- NET CASH USED IN INVESTING ACTIVITIES - - (1,741) (1,741) - --------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Net borrowings under line of credit - - (8,000) (8,000) Payments on long-term debt (85) - (66) (151) Purchase of treasury stock - - 11 11 Other - - 44 44 - --------------------------------------------------------------------------------------------------------------------- NET CASH USED BY FINANCING ACTIVITIES (85) - (8,011) (8,096) - --------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2 26 1,498 1,526 Cash and cash equivalents at beginning of period 53 57 2,707 2,817 - --------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 55 $ 83 $ 4,205 $ 4,343 - --------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------
10 CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (UNAUDITED) The following discussion should be read in conjunction with the 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 MARCH 30, 1997 COMPARED TO 13 WEEKS ENDED MARCH 31, 1996 SALES. Sales for the 13 weeks ended March 30, 1997 were $141.5 million compared to $142.8 million for the 13 weeks ended March 31, 1996. The 0.9% decrease was due primarily to decreases in sales at the wholesale and freight divisions. Retail comparable store sales for the 13 weeks of 1997 increased 1.1% from the comparable period in 1996. GROSS PROFIT. Gross profit for the 13 weeks ended March 30, 1997 was $41.0 million compared to $40.1 million for the 13 weeks ended March 31, 1996. As a percentage of sales, gross profit was 29.0% for the 13 weeks 1997 compared to 28.1% for the 13 weeks 1996. Gross profit as a percentage of sales for the 13 weeks 1997 increased primarily as a result of improved buying practices achieved during this time frame. OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative expenses for the 13 weeks ended March 30, 1997 were $35.5 million compared to $35.4 million for the 13 weeks ended March 31, 1996. Operating and administrative expenses as a percentage of sales were 25.1% for the 13 weeks 1997 compared to 24.8% for the 13 weeks 1996. Operating expenses for the 1997 quarter remained virtually flat as compared to the 1996 quarter primarily due to effective expense controls. OPERATING INCOME. Operating income for the 13 weeks ended March 30, 1997 increased to $5.5 million from $4.7 million for the 13 weeks ended March 31, 1996. This increase was due to the improved gross margin coupled with effective expense control in the quarter. OTHER INCOME AND EXPENSE. Net interest expense was $6.7 million for the 13 weeks ended March 30, 1997 compared to $7.0 million for the 13 weeks ended March 31, 1996. The decrease in interest expense was due primarily to lower average debt balances in the quarter. INCOME TAXES. The Company recognized an income tax benefit for the 13 weeks ended March 30, 1997 of $0.2 million compared to a $0.7 million benefit for the 13 weeks ended March 31, 1996. NET INCOME. Net loss for the 13 weeks ended March 30, 1997 was $1.0 million, or $0.13 per share, versus a net loss of $1.6 million, or $0.21 per share for the 13 weeks ended March 31, 1996. 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. 11 Net cash provided by operating activities was $4.1 million for the 13 weeks ended March 30, 1997 compared to net cash provided by operating activities of $11.4 million for the same period in 1996. The change in the 13 weeks 1997 compared to 1996 was due primarily to increased receivables offset by larger increases in accounts payable and accrued expenses. Capital expenditures for the 13 weeks ending March 30, 1997 were $0.5 million. Capital expenditures are expected to range between $6.0 and $8.0 million for fiscal 1997. It is anticipated that the balance of 1997 capital expenditures will be funded out of cash provided by operations and borrowings under the working capital revolver. Net cash used by financing activities for the 13 weeks ending March 30, 1997 was $3.2 million. During this time period, the Company reduced its borrowings under its revolving line of credit by $0.5 million and made payments against its long-term debt in the amount of $3.0 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 March 30, 1997 there was $6.5 million outstanding on the revolving debt. The Company had available unused credit of $28.5 million. Funds borrowed under the revolving credit portion of the Company's credit facility are restricted to working capital and general corporate purposes. ITEM 2. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not applicable 12 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 a Vote of Security Holders - None Item 5. Other Information - None Item 6. Exhibits and Reports on Form 8-K (a) The exhibits set forth in the Exhibit Index on page 14 hereof are filed with this quarterly report on Form 10-Q. (b) No reports were filed on Form 8-K during the quarter ended March 30, 1997. 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/s Lawrence H. Hayward ---------------------------------------------- Lawrence H. Hayward President and Chief Executive Officer Date: May 12, 1997 By: s/s Donald J. Anderson ---------------------------------------------- Donald J. Anderson Senior Vice-President and Chief Financial Officer Date: May 12, 1997 13 CARR-GOTTSTEIN FOODS CO. Exhibit Index The following exhibits are attached as indicated: Exhibit NUMBER DESCRIPTION OF EXHIBIT 10.1 Employment Agreement - Donald J. Anderson 27.1 Financial Data Schedule 14 CARR-GOTTSTEIN FOODS CO. DONALD J. ANDERSON This Employment Agreement ("Agreement") is made as of December 2, 1996 by and between CARR-GOTTSTEIN FOODS CO., a Delaware corporation, ("CGF") and Donald J. Anderson. RECITALS A. CGF is a corporation organized under the laws of Delaware. It is engaged in the business of marketing food and drug products. B. CGF desires to employ Mr. Anderson as Senior Vice President and Chief Financial Officer of CGF to manage the business and affairs of CGF. Mr. Anderson desires to be so employed and act in such capacities. Accordingly, the parties agree as follows: 1. EMPLOYMENT - CGF will employ Mr. Anderson, and Mr. Anderson will be employed by CGF, as the Senior Vice President and Chief Financial Officer of CGF. Mr. Anderson Shall serve at the will of the Chief Executive Officer. His duties shall be assigned by, and he shall report to, the Chief Executive Officer. Mr. Anderson shall be accorded the authority commensurate with his position as Chief Financial Officer of CGF. Mr. Anderson shall make a good faith effort to act in the best interests of CGF and shall not accept other employment, including service as a consultant or director of any other business or organization, except volunteer service for local charitable organizations which service does not materially interfere with his work at CGF. 2. LOCATION OF EMPLOYMENT - Mr. Anderson's principal place of employment shall be at the executive offices of CGF in Anchorage, Alaska or at such other location as mutually agreed upon by the parties. 3. COMPENSATION a. SALARY - CGF shall pay Mr. Anderson a salary at the annual rate of $150,000, less normal withholdings, for each calendar year, pro-rated for any portion thereof, payable in substantially equal installments in accordance with CGF's usual payroll practice, but in no event less frequently than monthly. b. BONUS - Mr. Anderson shall participate in the Bonus Plan for the most senior executives of CGF, subject to the following. Mr. Anderson shall be eligible for an annual bonus of up to 50% of his annual salary, depending upon the financial performance of CGF. c. OTHER BENEFITS - Mr. Anderson shall receive other benefits such as vacation, personal and sick leave, insurance and other benefits consistent with the then-current policies of CGF and equal to those benefits extended to the most senior executives of CGF. Mr. Anderson will be provided with office facilities, secretarial support, and business expense reimbursement consistent with the policies of CGF with respect to its most senior executives. d. SEVERANCE - If Mr. Anderson's employment is terminated for any reason other than Just Cause, CGF shall continue to pay him an amount equal to his then-current salary, less normal withholdings, at intervals equal to the salary payments being received by the other most senior executives of the Company. Such payments shall continue for the twelve-month period following the termination, whichever is longer; provided, however, that if Mr. Anderson becomes an employee, consultant, or partner of a company or business entity that directly competes with CGF after the expiration of the waiting period described in 15 section 10 below, any severance payments will end as of the date such relationship between Mr. Anderson and the competing entity effectively commences. For the purpose of this section, a termination for "Just Cause" shall mean a termination of employment for any of the following reasons: (i) an intentional or grossly negligent violation of any reasonable rule or regulation of the Board of Directors of the Company that results in damage to the Company or which, after notice to do so, the actor fails to correct within a reasonable time; (ii) any willful misconduct or gross negligence in the responsibilities assigned to the actor; (iii) any wrongful or illegal conduct of the actor which has an adverse impact on the Company or which constitutes a material misappropriation of Company assets; or (iv) the performance of services for any other company, entity, or person which directly competes with the Company during the time the actor is employed by the Company, without the written approval of the Board of Directors of the Company. e. MOVING EXPENSES - In the event CGF terminates Mr. Anderson's employment for any reason other than Just Cause, as defined above, CGF shall pay the reasonable cost, not to exceed $25,000, of moving Mr. Anderson's household possessions to a destination of Mr. Anderson's choice in or about the Pacific Northwest region of the mainland United States. For the purposes of this agreement, "household possessions" shall include a reasonable and ordinary amount of furniture, clothing, and personal property used in a single family household, including up to two automobiles. CGF shall not be responsible for premiums associated with the shipment of extraordinary items such as fine art or animals. 4. DISPUTE RESOLUTION - This Agreement shall be interpreted according to Alaska law. Any disputes arising out of or relating to this Agreement shall be settled by arbitration held in Anchorage, Alaska in accordance with the Commercial Rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. 5. ENTIRE AGREEMENT / MODIFICATIONS - This document constitutes the entire agreement of the parties with respect to Mr. Anderson's employment with CGF. It supersedes any prior agreement, statement or representation. It may be modified only by written instrument executed by the party against which the modification is asserted. Failure to require performance of any provision shall not affect the right at a later time to enforce the same. No waiver by either party of a breach, whether by conduct or otherwise, shall be construed as a further or continuing waiver of any such breach. 6. SEVERABILITY - Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 7. SURVIVABILITY - The rights and obligations of the parties of the parties to this Agreement under Sections 3(e) and (f), 4, and 9 shall survive the termination of this Agreement. 8. ASSIGNABILITY a) In the event CGF shall merge or consolidate with any other partnership, limited liability company, corporation, or business entity or all or substantially all CGF's business or assets shall be transferred in any manner to any other partnership, limited liability company, corporation or business entity, such successor shall thereupon succeed to, and be subject to, all rights, interests, duties, obligations of, and shall thereafter be deemed for all purposes hereof to be, CGF hereunder. b) This Agreement is personal in nature and none of the parties hereto shall, without the written consent of the other, assign or transfer this Agreement or any rights or obligations hereunder, except by operation of law or pursuant to the terms of section 8(a) above. 16 c) Nothing expressed or implied herein is intended or shall be construed to confer upon or give to any person, other than the parties hereto, any right, remedy or claim under or by reason of this Agreement or of any term, covenant or condition hereof. 9. NON-COMPETITION - The parties recognize that Mr. Anderson will have access to trade secrets and proprietary information of the Company, and they recognize that should such information be revealed to a competitor, the Company would be materially damaged in an amount difficult to calculate. Accordingly, Mr. Anderson agrees that for one (1) year after termination of his employment with the Company, regardless of the reason for such termination, he shall not accept employment with, become a contractor to, or perform any substantially similar role for any person or business entity that directly competes with the Company. The parties hereto execute this Agreement as the day and year first written above. CARR-GOTTSTEIN FOODS CO. DONALD J. ANDERSON ______________________________ _____________________________ By: Lawrence H. Hayward Its: President & Chief Executive Officer 17 EX-27 2 EXHIBIT 27 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-28-1997 DEC-30-1996 MAR-30-1997 9,155 0 19,095 488 53,974 87,365 139,192 0 329,545 73,628 0 0 0 97 28,786 329,545 141,467 141,467 100,475 35,514 0 0 6,711 (1,233) (214) 0 0 0 0 (1,019) (0.13) 0
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