-----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, NvHFeKiLi0b+s5hypiM1P07iJNnZuOURHtWagDmZnpYLX2ZK1Wh76KoyVyf+uj9w S65k2iwpIuwV7LcQOfu5pA== 0000910647-97-000203.txt : 19970918 0000910647-97-000203.hdr.sgml : 19970918 ACCESSION NUMBER: 0000910647-97-000203 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970802 FILED AS OF DATE: 19970912 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: SEC FILE NUMBER: 000-25262 FILM NUMBER: 97679260 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 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 August 2, 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 September 3, 1997: 5,000 shares. 1 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 - August 2, 1997 and February 1, 1997 Statements of operations - 13 weeks ended August 2, 1997 and August 3, 1996; 26 weeks ended August 2, 1997 and August 3, 1996 Statements of cash flows - 26 weeks ended August 2, 1997 and August 3, 1996 Notes to financial statements - August 2, 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 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. STAR MARKETS COMPANY, INC. BALANCE SHEETS (Unaudited) (Amounts in thousands, except share data)
August 2, February 1, 1997 1997 --------- ----------- Assets Current assets: Accounts receivable, net of reserve for doubtful accounts of $1,440 in August and $1,589 in February $ 18,605 $ 21,815 Inventory 65,723 65,550 Prepaid expenses 5,106 4,959 ----------------------- Total current assets 89,434 92,324 Property and equipment at cost: Land 20,894 31,015 Building 51,781 66,603 Equipment & fixtures 100,443 88,623 Leasehold improvements 56,153 44,024 ----------------------- Total property & equipment 229,271 230,265 Less accumulated depreciation and amortization 43,330 35,569 ----------------------- Net property and equipment 185,941 194,696 Other assets, net 32,428 33,058 Goodwill, net 131,427 133,192 ----------------------- Total Assets $ 439,230 $ 453,270 ======================= Liabilities and Shareholder's Equity Current liabilities: Accounts payable $ 45,086 $ 46,798 Accrued payroll & benefits 11,367 12,842 Current portion self-insurance 8,914 8,121 Accrued interest 6,066 6,003 Other current liabilities 9,932 13,637 ----------------------- Total current liabilities 81,365 87,401 Other liabilities 23,358 22,732 Long-term debt 269,419 271,827 Redeemable preferred stock, redemption value $11,000 10,278 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 84,522 84,907 Retained earnings (deficit) (29,712) (23,827) ----------------------- Total shareholder's equity 54,810 61,080 ----------------------- Total Liabilities and Shareholder's Equity $ 439,230 $ 453,270 =======================
See accompanying notes. 3 STAR MARKETS COMPANY, INC. STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands)
13 Weeks 13 Weeks 26 Weeks 26 Weeks Ended Ended Ended Ended August 2, August 3, August 2, August 3, 1997 1996 1997 1996 --------- --------- --------- --------- Total revenues $ 259,943 $ 231,024 $ 504,464 $ 448,079 Cost of goods sold 192,179 173,723 372,598 336,055 ------------------------------------------------ Gross profit 67,764 57,301 131,866 112,024 Operating and administrative expenses 56,652 47,932 111,086 93,164 Depreciation and amortization 5,798 5,402 11,564 10,508 ------------------------------------------------ Operating profit 5,314 3,967 9,216 8,352 Interest expense 7,563 7,267 14,751 14,201 Other (expenses) income, net 27 (10) (186) (64) ------------------------------------------------ Loss before income taxes (2,222) (3,310) (5,721) (5,913) Income taxes 83 63 164 131 ------------------------------------------------ Net loss $ (2,305) $ (3,373) $ (5,885) $ (6,044) ================================================
See accompanying notes. 4 STAR MARKETS COMPANY, INC. STATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands)
26 Weeks 26 Weeks Ended Ended August 2, August 3, 1997 1996 ---------- ---------- Operating activities Net loss $ (5,885) $ (6,044) Adjustments to reconcile net loss to net cash provided by operating activities: Amortization of deferred financing costs 807 772 Depreciation and amortization 11,564 10,508 Loss on sale or disposal of property and equipment 185 64 Changes in operating assets and liabilities: Accounts receivable 3,210 (340) Inventories (173) 700 Prepaid expenses (147) (949) Accounts payable (1,712) 5,398 Accrued payroll and benefits (1,475) (1,716) Self-insurance reserves 793 1,249 Accrued interest 63 (900) Other current liabilities (3,041) (2,392) Other 352 203 ------------------------ Net cash provided by operating activities 4,541 6,553 Investing activities Purchases of property and equipment (20,514) (19,011) Proceeds from sale of property and equipment 20,134 4,302 Decrease in restricted cash 6,028 Acquisition of leasehold interests (19,621) ------------------------ Net cash used in investing activities (380) (28,302) Financing Activities Net (repayment) proceeds from revolving credit facility (2,900) 3,400 Proceeds from note payable 4,087 Repayment of long-term debt (1,153) (375) Preferred dividends paid (608) (612) Equity contribution 12,000 Deposits refunded 500 4,000 ------------------------ Net cash (used in) provided by financing activities (4,161) 22,500 Net increase in cash and cash equivalents 0 751 Cash and cash equivalents beginning of period 0 0 ------------------------ Cash and cash equivalents end of period $ 0 $ 751 ======================== Supplemental disclosure of cash flow information: Cash paid for interest $ 13,881 $ 14,580 Cash paid for income taxes 242 226
See accompanying notes. 5 STAR MARKETS COMPANY, INC. Notes to Financial Statements August 2, 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 49 stores as of August 2, 1997. The Company operates three store formats consisting of 22 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 and 26 week periods ended August 2, 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. 6 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 and 26 weeks ended August 2, 1997 are referred to herein as "Quarter 1997" and "Interim 1997," respectively, and the 13 weeks and 26 weeks ended August 3, 1996 are referred to as "Quarter 1996" and "Interim 1996," respectively. During Quarter 1997, the Company opened a new superstore and remodeled three superstores. Subsequent to the Quarter 1997, the Company acquired one conventional store. The Company currently operates 22 superstores, 26 conventional supermarkets, and two Wild Harvest stores (which emphasize natural, healthy foods). The Company also operates a wholesale food business. Quarter 1997 - ------------ Revenues - -------- Total revenues increased 12.5% in Quarter 1997 to $259.9 million from $231.0 million in Quarter 1996. Sales from retail operations in Quarter 1997 increased 14.4% to $241.2 million from $210.8 million in Quarter 1996. The growth in retail sales was primarily attributable to an increase in the number of retail stores operated. Comparable store sales increased by 0.2% in Quarter 1997. Revenues from wholesale operations in Quarter 1997 declined 7.4% to $18.8 million from $20.3 million in Quarter 1996. Gross Profit - ------------ Gross profit increased 18.3% in Quarter 1997 to $67.8 million from $57.3 million in Quarter 1996. Gross profit as a percentage of total revenues increased to 26.1% in Quarter 1997 from 24.8% in Quarter 1996. Gross profit from retail operations increased 18.4% in Quarter 1997 to $66.4 million from $56.1 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 27.5% in Quarter 1997 from 26.6% in Quarter 1996. The increase in gross profit as a percentage of sales was due primarily to improvements in perishable margins and leveraged distribution costs. Gross profit from wholesale operations in Quarter 1997 increased 12.8% to $1.3 million from $1.2 million in Quarter 1996. Gross profit as a percentage of wholesale revenues in Quarter 1997 increased to 7.1% from 5.9% in Quarter 1996, primarily due to improvement in product margin, as well as leveraged distribution costs. 7 STAR MARKETS COMPANY, INC. Operating and Administrative Expenses - ------------------------------------- Operating and administrative expenses increased by 18.1% to $56.6 million in Quarter 1997 from $47.9 million in Quarter 1996. Operating and administrative expenses as a percentage of total revenues increased to 21.8% in Quarter 1997 from 20.7% 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 both rent expense for new locations and rent associated with the February 1997 sale leaseback of one operating location. Interest Expense - ---------------- Net interest expense, primarily related to interest expense on debt incurred to finance the acquisition of the Company, was $7.6 million in Quarter 1997. Net interest expense was $7.3 million in Quarter 1996. Interim 1997 - ------------ Revenues - -------- Total revenues increased 12.6% in Interim 1997 to $504.5 million from $448.1 million in Interim 1996. Sales from retail operations in Interim 1997 increased 14.6% to $469.1 million from $409.2 million in Interim 1996. The growth in retail sales was attributable both to an increase in the number of retail stores operated and a 1.0% increase in comparable store sales. Revenues from wholesale operations in Interim 1997 declined 8.9% to $35.4 million from $38.8 million in Interim 1996. Gross Profit - ------------ Gross profit increased 17.7% in Interim 1997 to $131.9 million from $112.0 million in Interim 1996. Gross profit as a percentage of total revenues increased to 26.1% in Interim 1997 from 25.0% in Interim 1996. Gross profit from retail operations increased 17.9% in Interim 1997 to $129.2 million from $109.6 million in Interim 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 Interim 1997 from 26.8% in Interim 1996. Gross profit from wholesale operations in Interim 1997 increased 9.4% to $2.6 million from $2.4 million in Interim 1996. Gross profit as a percentage of wholesale revenues in Interim 1997 increased to 7.4% from 6.2% in Interim 1996, primarily due to leveraged distribution costs. 8 STAR MARKETS COMPANY, INC. Operating and Administrative Expenses - ------------------------------------- Operating and administrative expenses increased by 19.2% to $111.1 million in Interim 1997 from $93.2 million in Interim 1996. Operating and administrative expenses as a percentage of total revenues increased to 22.0% in Interim 1997 from 20.8% in Interim 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 both rent expense for new locations and rent associated with the February 1997 sale leaseback of one operating location. Interest Expense - ---------------- Net interest expense, primarily related to interest expense on debt incurred to finance the acquisition of the Company, was $14.8 million in Interim 1997. Net interest expense was $14.2 million in Interim 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 August 2, 1997 was $270.3 million, which includes $110.0 million of Subordinated Notes due November 1, 2004, $156.9 million due under the Senior Credit Facility and a $3.4 million note payable. The Senior Credit Facility provides for a $108.0 million term loan facility and a $75.0 million revolving credit facility. As of September 3, 1997, the Company had $47.8 million drawn under the revolving credit portion of the Senior Credit Facility and $7.3 million drawn under the letter of credit portion of the Senior Credit Facility leaving an aggregate of $19.9 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 $14.1 million compared with $33.3 million in Quarter 1996. For Interim 1997, capital expenditures were $20.5 million compared with $38.6 million in Interim 1996. Capital expenditures for fiscal 1997 include opening two new superstores, opening a new superstore to replace an existing conventional store, remodeling six existing stores and opening two new natural food stores. Planned capital expenditures for fiscal 1997 include approximately $7.1 million for maintenance, systems, and distribution. 9 STAR MARKETS COMPANY, INC. Liquidity and Capital Resources (Continued) - ------------------------------------------- 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. 10 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 26 weeks ended August 2, 1997. 11 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: September 12, 1997 By: /s/ Robert R. Spellman ------------------------------------------ Robert R. Spellman Executive Vice President, Chief Financial and Accounting Officer EX-27 2 ARTICLE 5 FDS FOR 2ND QUARTER 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ACCOMPANYING BALANCE SHEETS AS OF AUGUST 2, 1997 AND FEBRUARY 1, 1997; THE ACCOMPANYING STATEMENTS OF OPERATIONS FOR THE 13 WEEK AND 26 WEEK PERIODS ENDED AUGUST 2, 1997 AND AUGUST 3, 1996; AND THE ACCOMPANYING STATEMENTS OF CASH FLOWS FOR THE 26 WEEK PERIODS ENDED AUGUST 2, 1997 AND AUGUST 3, 1996 FOR STAR MARKETS COMPANY, INC., AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JAN-31-1998 AUG-02-1997 0 0 18,605 1,440 65,723 89,434 229,271 43,330 439,230 81,365 269,419 10,278 0 0 84,522 439,230 259,943 259,943 192,179 62,450 (27) 0 7,563 (2,222) 83 (2,305) 0 0 0 (2,305) (461.00) (461.00)
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