-----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, S549JUe76XwTzDzvNcAqBiFBIxzOp21WqP+WRF18TGmPfqQOs3ZPyVnPoJwM0lI6 1VeGk96IJGdnAWiplK0D3w== 0000910647-96-000081.txt : 19960724 0000910647-96-000081.hdr.sgml : 19960724 ACCESSION NUMBER: 0000910647-96-000081 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960504 FILED AS OF DATE: 19960614 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STAR MARKETS CO INC CENTRAL INDEX KEY: 0000933160 STANDARD INDUSTRIAL CLASSIFICATION: 5411 IRS NUMBER: 043243710 STATE OF INCORPORATION: MA FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25262 FILM NUMBER: 96580877 BUSINESS ADDRESS: STREET 1: 625 MT ALBURN ST CITY: CAMBRIDGE STATE: MA ZIP: 02138 BUSINESS PHONE: 6176612200 MAIL ADDRESS: STREET 1: 625 MOUNT AUBURN STREET CITY: CAMBRIDGE STATE: MA ZIP: 02138 10-Q 1 BODY OF 10-Q FOR STAR UNITED STATES 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 May 4, 1996 Commission File Number: 33-86690 -------- STAR MARKETS COMPANY, INC. -------------------------- (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-3243710 ------------- ---------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 625 MT. AUBURN STREET, CAMBRIDGE, MA 02138 ------------------------------------ ----- (Address of principal executive offices) (Zip Code) (617) 528-2550 -------------- (Registrant's telephone number, including area code) NONE ---- (Former name, former address and former fiscal year, if changed since last report) 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 and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___. Number of shares of the issuer's common stock, outstanding as of June 1, 1996: 5,000 shares. STAR MARKETS COMPANY, INC. INDEX PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited). The following statements of Star Markets Company, Inc. are included herein: Balance sheets - May 4, 1996 and February 3, 1996 Statements of operations - 13 weeks ended May 4, 1996 and April 29, 1995 Statements of cash flows - 13 weeks ended May 4, 1996 and April 29, 1995 Notes to financial statements - May 4, 1996 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. Signatures PART I - FINANCIAL INFORMATION Item 1. Financial Statements. STAR MARKETS COMPANY, INC. BALANCE SHEETS (Unaudited) (Amounts in thousands, except share data)
May 4, February 3, 1996 1996 ------ ----------- Assets Current assets: Accounts receivable, net of reserve for doubtful accounts of $2,032 in May and $1,779 in February $ 10,993 $ 13,544 Inventory 55,711 62,915 Prepaid expenses 5,642 5,044 Deferred taxes 12,680 9,946 -------- -------- Total current assets 85,026 91,449 Property and equipment at cost: Land 31,082 32,402 Building 66,179 68,876 Equipment & fixtures 73,364 71,148 Leasehold improvements 31,263 28,670 -------- -------- Total property & equipment 201,888 201,096 Less accumulated depreciation and amortization 23,225 19,423 -------- -------- Net property and equipment 178,663 181,673 Other assets, net 25,272 25,885 Goodwill, net 135,567 136,442 -------- -------- Total Assets $424,528 $435,449 ======== ======== Liabilities and Shareholder's Equity Current liabilities: Accounts payable $ 34,921 $ 39,770 Accrued payroll & benefits 9,381 12,509 Current portion self-insurance 7,863 7,967 Accrued interest 750 5,133 Other current liabilities 7,344 10,170 -------- -------- Total current liabilities 60,259 75,549 Deferred taxes 12,680 9,946 Self-insurance and other liabilities 23,497 23,219 Long-term debt 261,600 257,400 Redeemable preferred stock, redemption value $11,000 10,158 10,134 Shareholder's equity: Common stock, $.01 par value, 10,000 shares authorized and 5,000 shares outstanding 0 0 Additional paid-in-capital 73,499 73,692 Retained earnings (deficit) (17,165) (14,491) -------- -------- Total shareholder's equity 56,334 59,201 -------- -------- Total Liabilities and Shareholder's Equity $424,528 $435,449 ======== ========
See accompanying notes. STAR MARKETS COMPANY, INC. STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands)
13 Weeks 13 Weeks Ended Ended May 4, April 29, 1996 1995 -------- --------- Total revenues $217,055 $198,190 Cost of goods sold 162,332 155,086 -------- -------- Gross profit 54,723 43,104 Operating and administrative expenses 45,232 35,853 Depreciation and amortization 5,106 4,698 -------- -------- Operating profit 4,385 2,553 Interest expense 6,934 6,696 Other (expenses) income, net (54) 12 -------- -------- Loss before income taxes (2,603) (4,131) Income taxes 68 62 -------- -------- Net loss $ (2,671) $ (4,193) ======== ========
See accompanying notes. STAR MARKETS COMPANY, INC. STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands)
13 Weeks 13 Weeks Ended Ended May 4, April 29, 1996 1995 -------- --------- Operating activities Net loss $ (2,671) $ (4,193) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Amortization of deferred financing costs 386 382 Depreciation and amortization 5,106 4,698 Loss (gain) on sale or disposal of property and equipment 54 (8) Changes in operating assets and liabilities: Accounts receivable 2,551 1,280 Inventories 7,204 1,819 Prepaid expenses (598) (49) Accounts payable (4,849) 2,681 Accrued payroll and benefits (3,128) (2,643) Self-insurance reserves (104) (915) Accrued interest (4,383) 3,604 Income taxes payable and other current liabilities (2,522) (5,123) Other 602 (281) -------- -------- Net cash (used in) provided by operating activities (2,352) 1,252 Investing activities Purchases of property and equipment (5,321) (6,218) Proceeds from sale of property and equipment 4,260 3,930 Increase in restricted cash (4,175) -------- -------- Net cash used in investing activities (5,236) (2,288) Financing Activities Net proceeds from revolving credit facility 4,200 1,200 Preferred dividends paid (612) Deferred financing costs (164) Deposits refunded 4,000 -------- -------- Net cash provided by financing activities 7,588 1,036 Net increase (decrease) in cash and cash equivalents 0 0 Cash and cash equivalents beginning of period 0 0 -------- -------- Cash and cash equivalents end of period $ 0 $ 0 -------- -------- Supplemental disclosure of cash flow information: Cash paid for interest $ 10,895 $ 2,643 Cash paid for income taxes 0 106
See accompanying notes. STAR MARKETS COMPANY, INC. Notes to Financial Statements May 4, 1996 (Unaudited) Note 1 - Background - - ------------------- Star Markets Company, Inc., a Massachusetts corporation ("Star" or the "Company"), is a leading food retailer in the metropolitan Boston area, operating 38 stores as of May 4, 1996. Additionally, the Company operates a wholesale business which provides warehousing, distribution and certain administrative services to independent store locations throughout the New England area. The Company is a wholly-owned subsidiary of Star Markets Holdings, Inc., a Massachusetts corporation ("Holdings"). Both Holdings and the Company were formed for purposes of acquiring the business and assets of the Star Market operating division of Jewel Food Stores, Inc. in September 1994. Companies affiliated with INVESTCORP S.A. ("Investcorp") own all of the currently outstanding voting stock of Holdings. Note 2 - Basis of Presentation - - ------------------------------ The unaudited financial information furnished herein reflects all adjustments, which in the opinion of management are of a normal recurring nature, to fairly state the Company's financial position and results of operations for the periods presented. The results of operations for the 13 week period ended May 4, 1996 are not necessarily indicative of the results to be expected for the entire year ending February 1, 1997. For further information, refer to the financial statements and footnotes thereto included in the Registrant Company's annual report on Form 10-K for the year ended February 3, 1996. Note 3 - Accounting Policy - - -------------------------- Effective February 4, 1996, the Company adopted the provisions of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. There was no effect on the financial statements due to the adoption of the provisions of this statement in the current fiscal quarter. STAR MARKETS COMPANY, INC. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. Results of Operations - - --------------------- Results of operations for the 13 weeks ended May 4, 1996 are referred to herein as "Quarter 1996" and the 13 weeks ended April 29, 1995 are referred to as "Quarter 1995". Revenues - - -------- Total revenues for the Company increased 9.5% in Quarter 1996 to $217.1 million from $198.2 million in Quarter 1995. Sales from retail operations for Quarter 1996 increased 12.9% to $198.5 million from $175.8 for Quarter 1995. The growth in retail sales was attributable both to an increase in the number of retail stores operated and a 0.7% increase in comparable store sales in Quarter 1996. Revenues from the wholesale operations for Quarter 1996 declined 17.0% to $18.6 million from $22.4 million in Quarter 1995. The decrease in wholesale sales was primarily due to the loss of three wholesale accounts which ceased operations due to increased competition in their respective trading areas. Gross Profit - - ------------ Gross profit for the Company increased 27.0% in Quarter 1996 to $54.7 million from $43.1 million in Quarter 1995. Gross profit as a percentage of total revenues increased to 25.2% in Quarter 1996 from 21.8% in Quarter 1995. Gross profit from retail operations increased 28.3% in Quarter 1996 to $53.5 million from $41.7 million in Quarter 1995 primarily due to the increase in retail revenues. Gross profit as a percentage of sales for the retail operations increased to 27.0% in Quarter 1996 from 23.8% in Quarter 1995. The increase in gross profit as a percentage of sales was primarily due to improvements in merchandising margin, particularly in the perishable categories. Gross profit from the wholesale operations for Quarter 1996 decreased 14.3% to $1.2 million from $1.4 million in Quarter 1995. Gross profit as a percentage of wholesale revenues for Quarter 1996 increased to 6.5% from 6.1% in Quarter 1995. Operating and Administrative Expenses - - ------------------------------------- Operating and administrative expenses increased by 26.2% to $45.2 million in Quarter 1996 from $35.9 million in Quarter 1995. Operating and administrative expenses as a percentage of total revenues increased to 20.8% in Quarter 1996 from 18.1% in Quarter 1995. The increase in operating and administrative expenses as a percentage of total revenues was the result of a number of factors, including an increase in retail operations which incur a higher rate of operating and administrative expenses than wholesale operations, an increase in rent expense during Quarter 1996 as a result of sale-leaseback transactions, and additional administrative costs as the Company continues to grow. Interest Expense - - ---------------- Net interest expense, primarily related to interest expense on debt incurred to finance the acquisition of the Company, was $6.9 million in Quarter 1996. Net interest expense was $6.7 million in Quarter 1995. Liquidity and Capital Resources - - ------------------------------- The Company's liquidity needs arise primarily from debt service on the indebtedness incurred in connection with the acquisition of the Company, and funding of the Company's capital expenditure and working capital requirements. As of May 24, 1996 the Company's debt included (i) $109.0 million in borrowings under the term loan portion of the Senior Credit Facility, (ii) $40.4 million in borrowings under the revolving credit portion of the Senior Credit Facility, and (iii) $110.0 million in Senior Subordinated Notes due 2004. At May 24, 1996, the Company had $10.2 million drawn under the letter of credit facilities of the Senior Credit Facility and $40.4 million drawn under the revolving credit portion of the Senior Credit Facility, leaving an aggregate of $24.4 million of unused revolving credit available under the Senior Credit Facility. In January 1996, the Company entered into an agreement to acquire four stores from The Stop & Shop Companies, Inc. ("Stop & Shop"), subject to Federal Trade Commission ("FTC") approval, for an aggregate purchase price of $24.1 million excluding related fees and inventory. The Company's lenders have agreed to an amendment to the Senior Credit Facility which will allow the Company to utilize $12.0 million in proceeds from the sale of assets to fund a portion of this acquisition. The Company is currently holding $10.3 million from the sale of assets for the purposes of acquiring the four stores. If not used for this purpose, the funds will be used to pay down long-term debt. The Company will receive an equity contribution of $12.0 million from certain of its existing shareholders to fund the balance of the purchase price. In May 1996, the Company entered into an additional agreement, subject to FTC approval, to purchase seven stores located on Cape Cod, Massachusetts, from Stop & Shop, bringing the total number of stores under agreement to 11. The Company realized net proceeds of $4.3 million from the sale of one non- operating property during Quarter 1996. The net proceeds from this transaction, plus approximately $6.0 million from a prior sale-leaseback transaction, are included in the amount being held as restricted cash for the purpose of acquiring four of the stores under agreement. In addition to the four store acquisition, the Company currently plans to make total capital expenditures of approximately $26.0 million in fiscal 1996. Capital expenditures for Quarter 1996 were $5.3 million compared with $6.2 million in Quarter 1995. Capital expenditures will include expanding and remodeling one conventional store and remodeling two superstores, the acquisition of the seven Cape Cod stores, as well as costs to convert the 11 stores under agreement to Star stores. The Company's fiscal 1996 capital expenditure plan also anticipates spending for maintenance, systems, and distribution. The Company believes that funds generated from operations, proceeds from sale- leaseback transactions of currently owned properties, and borrowings under the Senior Credit Facility will provide sufficient resources through fiscal 1996 to permit it to meet its working capital requirements, to make all interest and principal payments due and payable on the Subordinated Notes and its existing indebtedness and planned capital expenditures. However, if the Company's cash flow and capital resources are insufficient to fund its debt service obligations, the Company may be required to reduce or delay planned capital expenditures, sell assets, obtain additional equity capital or restructure debt. STAR MARKETS COMPANY, INC. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. The following exhibits are included herein: (27) Financial Data Schedule The Company did not file any reports on Form 8-K for the 13 weeks ended May 4, 1996. STAR MARKETS COMPANY, INC. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Star Markets Company, Inc. (Registrant) Date:June 14, 1996 By: /s/ Robert R. Spellman Robert R. Spellman Executive Vice President, Chief Financial and Accounting Officer EX-27 2 ARTICLE 5 FDS FOR 1ST QUARTER 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ACCOMPANYING BALANCE SHEETS AS OF MAY 4, 1996 AND FEBRUARY 3, 1996 AND THE ACCOMPANYING STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE 13 WEEK PERIODS ENDED MAY 4, 1996 AND APRIL 29, 1995 FOR STAR MARKETS COMPANY, INC., AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS FEB-01-1997 MAY-04-1996 0 0 13,025 2,032 55,711 85,026 201,888 23,225 424,528 60,259 261,600 10,158 0 0 73,499 424,528 217,055 217,055 162,332 50,338 54 0 6,934 (2,603) 68 (2,671) 0 0 0 (2,671) (534.20) (534.20)
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