-----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, QoqnkZvrp8xBIjMqU8KzAPu2w2Ol6eqTv5X1uAa/0Plk/xyaHmwqFaemaEEGJ2LS SRWSMrM46Qs+S5d/b8AcfQ== 0000910647-97-000153.txt : 19970616 0000910647-97-000153.hdr.sgml : 19970616 ACCESSION NUMBER: 0000910647-97-000153 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970503 FILED AS OF DATE: 19970613 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STAR MARKETS CO INC CENTRAL INDEX KEY: 0000933160 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [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: 97623476 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 FORM 10-Q FOR THE QUARTER ENDED MAY 3, 1997 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended May 3, 1997 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 incorporation or organization) Identification Number) 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 2, 1997: 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 3, 1997 and February 1, 1997 Statements of operations - 13 weeks ended May 3, 1997 and May 4, 1996 Statements of cash flows - 13 weeks ended May 3, 1997 and May 4, 1996 Notes to financial statements - May 3, 1997. 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. Signature PART I - FINANCIAL INFORMATION Item 1. Financial Statements. STAR MARKETS COMPANY, INC. BALANCE SHEETS (Unaudited) (Amounts in thousands, except share data)
May 3, February 1, 1997 1997 --------------------------- Assets Current assets: Accounts receivable, net of reserve for doubtful accounts of $1,679 in May and $1,589 in February $ 22,647 $ 21,815 Inventory 66,473 65,550 Prepaid expenses 5,148 4,959 ------------------------ Total current assets 94,268 92,324 Property and equipment at cost: Land 20,894 31,015 Building 51,517 66,603 Equipment & fixtures 93,296 88,623 Leasehold improvements 49,574 44,024 ------------------------ Total property & equipment 215,281 230,265 Less accumulated depreciation and amortization 38,899 35,569 ------------------------ Net property and equipment 176,382 194,696 Other assets, net 32,643 33,058 Goodwill, net 132,311 133,192 ------------------------ Total Assets $435,604 $453,270 ======================== Liabilities and Shareholder's Equity Current liabilities: Accounts payable $ 41,487 $ 46,798 Accrued payroll & benefits 10,983 12,842 Current portion self-insurance 8,443 8,121 Accrued interest 1,765 6,003 Other current liabilities 9,634 13,637 ------------------------ Total current liabilities 72,312 87,401 Other liabilities 23,111 22,732 Long-term debt 272,619 271,827 Redeemable preferred stock, redemption value $11,000 10,254 10,230 Shareholder's equity: Common stock, $.01 par value, 10,000 shares authorized and 5,000 shares outstanding 0 0 Additional paid-in-capital 84,715 84,907 Retained earnings (deficit) (27,407) (23,827) ------------------------ Total shareholder's equity 57,308 61,080 ------------------------ Total Liabilities and Shareholder's Equity $435,604 $453,270 ========================
See accompanying notes. STAR MARKETS COMPANY, INC. STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands)
13 Weeks 13 Weeks Ended Ended May 3, May 4, 1997 1996 ------------------------ Total revenues $244,521 $217,055 Cost of goods sold 180,419 162,332 ------------------------ Gross profit 64,102 54,723 Operating and administrative expenses 54,434 45,232 Depreciation and amortization 5,766 5,106 ------------------------ Operating profit 3,902 4,385 Interest expense 7,188 6,934 Other (expenses) income, net (213) (54) ------------------------ Loss before income taxes (3,499) (2,603) Income taxes 81 68 ------------------------ Net loss $ (3,580) $ (2,671) ========================
See accompanying notes. STAR MARKETS COMPANY, INC. STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands)
13 Weeks 13 Weeks Ended Ended May 3, May 4, 1997 1996 ------------------------- Operating activities Net loss $ (3,580) $ (2,671) Adjustments to reconcile net loss to net cash used in operating activities: Amortization of deferred financing costs 395 386 Depreciation and amortization 5,766 5,106 Loss on sale or disposal of property and equipment 213 54 Changes in operating assets and liabilities: Accounts receivable (832) 2,551 Inventories (923) 7,204 Prepaid expenses (189) (598) Accounts payable (5,311) (4,849) Accrued payroll and benefits (1,859) (3,128) Self-insurance reserves 322 (104) Accrued interest (4,238) (4,383) Other current liabilities (3,033) (2,522) Other 360 602 ------------------------- Net cash used in operating activities (12,909) (2,352) Investing activities Purchases of property and equipment (6,468) (5,321) Proceeds from sale of property and equipment 20,097 4,260 Increase in restricted cash (4,175) ------------------------- Net cash provided by (used in) investing activities 13,629 (5,236) Financing Activities Net proceeds from revolving credit facility 300 4,200 Repayment of long-term debt (175) Preferred dividends paid (608) (612) Deferred financing costs (737) Deposits refunded 500 4,000 ------------------------- Net cash provided by (used in) financing activities (720) 7,588 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 $ 11,031 $ 10,895 Cash paid for income taxes 142 0
See accompanying notes. STAR MARKETS COMPANY, INC. Notes to Financial Statements May 3, 1997 (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 48 stores as of May 3, 1997. The Company operates three store formats consisting of 21 Superstores, 25 Conventional supermarkets, and two Wild Harvest stores, which emphasize natural, healthy foods. 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. 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 3, 1997 are not necessarily indicative of the results to be expected for the entire year ending January 31, 1998. 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 1, 1997. 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 3, 1997 are referred to herein as "Quarter 1997" and the 13 weeks ended May 4, 1996 are referred to as "Quarter 1996". During Quarter 1997, the Company remodeled and expanded one conventional store and opened a superstore which replaced a conventional store. As of May 3, 1997, the Company operated 21 superstores, 25 conventional stores, and two natural food stores. The Company also operates a wholesale food business. Revenues Total revenues increased 12.7% in Quarter 1997 to $244.5 million from $217.1 million in Quarter 1996. Sales from retail operations in Quarter 1997 increased 14.8% to $227.9 million from $198.5 million in Quarter 1996. The growth in retail sales was attributable both to an increase in the number of retail stores operated and a 1.8% increase in comparable store sales. Revenues from wholesale operations in Quarter 1997 declined 10.6% to $16.6 million from $18.6 million in Quarter 1996. Gross Profit Gross profit increased 17.1% in Quarter 1997 to $64.1 million from $54.7 million in Quarter 1996. Gross profit as a percentage of total revenues increased to 26.2% in Quarter 1997 from 25.2% in Quarter 1996. Gross profit from retail operations increased 17.4% in Quarter 1997 to $62.8 million from $53.5 million in Quarter 1996 primarily due to the increase in retail revenues. Gross profit as a percentage of sales for the retail operations increased to 27.6% in Quarter 1997 from 27.0% in Quarter 1996. Gross profit from wholesale operations in Quarter 1997 increased 6.2% to $1.3 million from $1.2 million in Quarter 1996. Gross profit as a percentage of wholesale revenues in Quarter 1997 increased to 7.7% from 6.5% in Quarter 1996, primarily due to an increase in promotional income. Operating and Administrative Expenses Operating and administrative expenses increased by 20.3% to $54.4 million in Quarter 1997 from $45.2 million in Quarter 1996. Operating and administrative expenses as a percentage of total revenues increased to 22.3% in Quarter 1997 from 20.8% in Quarter 1996. The increase in operating and administrative expenses as a percentage of total revenues was primarily due to an increase in retail operations which incur a higher rate of operating and administrative expenses than wholesale operations, and an increase in rent expense, including rent associated with the sale leaseback of one operating location in Quarter 1997. Interest Expense Net interest expense, primarily related to interest expense on debt incurred to finance the acquisition of the Company, was $7.2 million in Quarter 1997. Net interest expense was $6.9 million in Quarter 1996. 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. The Company's total indebtedness as of June 2, 1997 was $267.1 million, which includes $110.0 million of Subordinated Notes due November 1, 2004, $153.5 million due under the Senior Credit Facility and a $3.6 million note payable. The Senior Credit Facility provides for a $108.0 million term loan facility and a $75.0 million revolving credit facility. On April 21, 1997, the Company completed an amendment to its Senior Credit Facility in order to accommodate continued investment in new store growth. The amendment extends the revolving credit facility by two years to December 31, 2001, amends certain covenants, and replaces a term loan that was due in 1999 with a new term loan due in 2003. As of June 2, 1997, the Company had $45.5 million drawn under the revolving credit portion of the Senior Credit Facility and $8.9 million drawn under the letter of credit portion of the Senior Credit Facility leaving an aggregate of $20.6 million of unused revolving credit availability under the Senior Credit Facility. The Company currently plans to make total capital expenditures of approximately $43.2 million in fiscal 1997. Capital expenditures for Quarter 1997 were $6.4 million compared with $5.3 million in Quarter 1996. Capital expenditures include opening two new superstores, opening a new superstore to replace an existing conventional store, remodeling six existing stores, converting one conventional store to a superstore, and opening two new natural food stores. Planned capital expenditures for fiscal 1997 include approximately $7.0 million for maintenance, systems, and distribution. During Quarter 1997, the Company realized net proceeds of $20.1 million from the sale leaseback of one of its stores. 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 1997 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. (a) The following exhibit is included herein: Exhibit (27) - Financial Data Schedule (b) The Company did not file any reports on Form 8-K for the 13 weeks ended May 3, 1997. STAR MARKETS COMPANY, INC. Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Star Markets Company, Inc. (Registrant) Date:June 13, 1997 By: /s/ Robert R. Spellman Robert R. Spellman Executive Vice President, Chief Financial and Accounting Officer EX-27 2 ART. 5 FDS FOR 1ST QUARTER 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ACCOMPANYING BALANCE SHEETS AS OF MAY 3, 1997 AND THE ACCOMPANYING STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE 13 WEEK PERIOD ENDED MAY 3, 1997 FOR STAR MARKETS COMPANY, INC., AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-31-1998 MAY-03-1997 0 0 24,326 1,679 66,473 94,268 215,281 38,899 435,604 72,312 272,619 10,254 0 0 84,715 435,604 244,521 244,521 180,419 60,200 213 0 7,188 (3,499) 81 (3,580) 0 0 0 (3,580) (716.00) (716.00)
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