JITNEY JUNGLE STORES OF AMERICA INC /MI/, 10-K405, 1997-07-25

JITNEY JUNGLE STORES OF AMERICA INC /MI/
10-K405, 1997-07-25
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended MAY 3, 1997 Commission file number 33-80833
----------- ---------

JITNEY-JUNGLE STORES OF AMERICA, INC.
--------------------------------------------
(Exact name of registrant as specified in its charter)

MISSISSIPPI 64-0280539
- ----------------------- ---------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)

1770 ELLIS AVENUE, SUITE 200, JACKSON, MS 39204
----------------------------------------- ------------
(Address of principal executive offices) (Zip Code)

(601) 965-8600
--------------------------------------------------------
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
----

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
----

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 (or for such 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
------- -------

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (17 CFR Section 405) is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this form 10-K. (X )

The Company is closely-held and is not actively traded; therefore, the aggregate
market value of voting stock held by nonaffiliates is not applicable.

The number of shares of Registrant's Common Stock, par value one cent ($.01) per
share, outstanding at June 30, 1997, was 425,000.

<PAGE>

CAUTIONARY NOTICE

This Annual Report of Jitney-Jungle Stores of America, Inc. on Form 10-K
contains forward-looking statements in which the Company's management shares its
knowledge and judgment about factors that it believes may materially affect
Company performance in the future. Terms expressing future expectations,
including expectations concerning future sales, revenues and earnings, and like
expressions typically identify such statements.

All forward-looking statements, although made in good faith, are subject to
the uncertainties inherent in predicting the future. They are necessarily
speculative, and factors such as unusual distribution problems, breakdown of
quality control, competitive pressures, customer dissatisfaction, and general
deterioration in economic conditions may cause results to differ materially from
any that are projected.

Forward-looking statements speak only as of the date they are made, and
readers are warned that the Company undertakes no obligation to update or revise
such statements to reflect new circumstances or unanticipated events as they
occur.

Readers are urged to carefully review and consider disclosures made by the
Company in this and other reports that discuss factors germane to the Company's
business. See particularly the Company's reports on Forms 10-K, 10-Q and 8-K
filed with the Securities and Exchange Commission.

<PAGE>

JITNEY-JUNGLE STORES OF AMERICA, INC.

TABLE OF CONTENTS

ITEM PAGE
PART I

1. Business.............................................................3

2. Properties...........................................................7

3. Legal Proceedings....................................................9

4. Submission of Matters to a Vote of Security Holders..................9

PART II

5. Market for the Registrant's Common Equity and
Related Stockholder Matters.....................................9

6. Selected Financial Data.............................................10

7. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................11

8. Financial Statements and Supplementary Data.........................20

9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.......................................40

PART III

10. Directors and Executive Officers of the Registrant..................40

11. Executive Compensation..............................................43

12. Security Ownership of Certain Beneficial Owners and
Management..........................................................47

13. Certain Relationships and Related Transactions......................49

PART IV

14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.........................................................51

<PAGE>

PART I

ITEM 1. BUSINESS

GENERAL

Jitney-Jungle Stores of America, Inc. and subsidiaries (the "Company") is a
leading operator of supermarkets in the Southeast. As of May 3, 1997 the
Company operated 105 stores located throughout Mississippi and in selected
markets in Tennessee, Arkansas, Alabama, Louisiana and Florida. The Company is
the largest supermarket operator in Mississippi, with 73 stores.

On November 16, 1995, the Company and JJ Acquisitions Corp. ("JJAC")
entered into an Agreement and Plan of Exchange and of Merger (the "Merger"). In
connection with the Merger on March 5, 1996, JJAC among other things, (i) issued
and sold $200 million of unsecured senior notes due 2006 (the "Senior Notes"),
(ii) entered into a $100 million revolving credit agreement ("the Credit
Facility") with Fleet Bank, N.A. (formerly NatWest Bank, N.A.), (iii) issued and
sold Common Stock and a warrant in the aggregate amount of $7.4 million, and
(iv) issued and sold three classes of Preferred Stock in the aggregate amount of
$57.6 million. The proceeds from the sale of the notes, the Common Stock,
warrants and Preferred Stock, together with borrowing under the Credit Facility
and the use of existing cash balances of the Company were used to repay certain
outstanding indebtedness, purchase Common Stock from existing shareholders and
pay fees and expenses related to the Merger. JJAC was merged with and into the
Company, with the Company continuing as the surviving corporation. Upon the
completion of the Merger, Bruckmann, Rosser, Sherrill & Co., L.P., owned 356,250
shares or approximately 83.82% of the Company's outstanding Common Stock on an
undiluted basis.

Through a public offering, JJAC issued and sold the Senior Notes which bear
interest at a rate of 12% per annum, payable semiannually on March 1 and
September 1 of each year. In addition, on March 5, 1996, the Company entered
into the Credit Facility, and borrowings outstanding under the Credit Facility
at May 3, 1997 were $8 million. The commitments under the Credit Facility will
terminate, and all loans outstanding thereunder will be required to be repaid in
full on March 5, 2001. Both the Senior Notes and the Credit Facility restrict
future payment of dividends.

On July 8, 1997, the Company entered into a definitive merger agreement
with Delchamps, Inc. ("Delchamps"). Pursuant to the agreement, a wholly-owned
subsidiary of the Company has commenced an all-cash tender offer (the "Offer")
for all of Delchamps' outstanding common stock at a price of $30 per share. The
Offer is conditioned upon, among other things, there being tendered and not
withdrawn prior to the expiration date of the Offer at least two-thirds of the
outstanding shares of Delchamps' common stock. In addition, regulatory approval
and the consent of the holders of the Company's Senior Notes is required. For
additional information concerning the Delchamps acquisition, see Item
7-Management's Discussion and Analysis of Financial Condition and Results of
Operations.

<PAGE>

STORE FORMATS

Through its 78 years of operations in the Southeast, the Company has
developed a strong consumer franchise, with many of its stores located in
prime, high-traffic sites that provide significant competitive advantages.
The Company currently operates supermarkets under three formats, each
targeting specific market segments: (i) conventional supermarkets operating
under the "Jitney-Jungle" name, (ii) combination food and drug supermarkets
operating primarily under the "Jitney- Premier" name and (iii) discount
supermarkets operating primarily under the "Sack and Save" name. The Company
currently operates 104 supermarkets (77 conventional stores averaging
approximately 27,000 square feet, 5 combination stores averaging
approximately 57,000 square feet and 22 discount stores averaging
approximately 60,000 square feet) and 53 gasoline stations including recent
changes made subsequent to fiscal year end. All of the Company's
conventional and combination supermarkets utilize a "Hi-Lo" pricing strategy
(featuring competitive prices on all product offerings as well as a selection
of items that are promoted at lower prices to generate increased customer
traffic), offer a wide range of specialty departments, deliver high levels of
service to customers and utilize the Jitney-Jungle Gold Card (a frequent
shopper card) which was launched in January, 1997. Also, the 5 combination
supermarkets offer expanded general and specialty merchandise, a wider range
of full-service departments, expanded beauty care and pharmacy departments,
superior customer service and are open 24-hours a day, seven days a week.
The Company's 22 discount supermarkets utilize an everyday low price strategy
(featuring consistently low prices aimed at the value conscious shopper).
The discount supermarkets have lower operating costs than the conventional
and combination supermarkets due to fewer service departments, lower customer
service levels and enhanced productivity methods. The Company also operates
53 gasoline stations at selected supermarket sites. The Company features
nationally advertised and distributed merchandise, and also markets food
products under a private label program. The Company advertises through
various media including circulars, newspapers, radio and television. Print
media is the primary form of advertising and is used extensively on a weekly
basis to advertise featured items; however, in July 1997 the Company began
shifting a significant portion of its total advertising expenditures to
television and radio media, focusing on a quality and service image, in order
to reach a wider target audience.

In addition to its strategically located store base, the Company believes
that it benefits from the following: (i) a strong consumer franchise; (ii)
prime, high-traffic supermarket sites; (iii) a store base, approximately 90% of
which has been remodeled or built within the last five years; (iv) a successful
private label program; (v) centralized and efficient distribution facilities;
and (vi) some of the fastest growing markets in the United States in terms of
per capita income and employment.

COMPETITION

The Company's business is highly competitive. Competition is based
primarily on supermarket location, price, service, convenience, cleanliness and
product quality and variety. There is direct competition from many supermarkets,
including independent stores and local

<PAGE>

outlets of regional and national chains. Competition also exists with respect to
particular products from such retailers as convenience stores, warehouse stores,
drugstores and nonfood superstores.

EMPLOYEES

As of May 3, 1997, the Company employed approximately 10,600 people, of
whom approximately 41% were full-time and 59% were part time employees.
Approximately 9,700 were employed in supermarkets and gasoline stations, 600
were employed in the warehousing operations and 300 were employed in the
Company's business office. The Company currently employs, on average,
approximately 93 employees in each store.

The Company has an incentive compensation plan covering its key management
staff. Incentive compensation for store operations is based upon the
profitability of the operations within the scope of their management
responsibility.

TRADE NAMES, SERVICE MARKS, TRADEMARKS AND FRANCHISES

The Company uses a variety of trade names, service marks and trademarks.
Except for "Jitney-Jungle", "Sack and Save" and "Pump And Save", the Company
does not believe any of such trade names, service marks or trademarks are
material to its business.

ENVIRONMENTAL MATTERS

The Company is subject to federal, state and local laws and regulations
including those relating to environmental protection, work place safety,
public health and community right-to-know. The Company's grocery stores are
not highly regulated under environmental laws since the Company does not
engage in any industrial activities at those locations. The Company's
expenditures to comply with such laws and regulations at its grocery stores
primarily consist of those related to retrofitting chlorofluorocarbon ("CFC")
chiller units. In addition, 54 of the Company's facilities (including all 53
of the Pump and Save facilities) contain underground tanks for the storage of
petroleum products, such as gasoline and diesel fuel. The Company maintains
an environmental compliance program that includes the implementation of
required technical and operational activities designed to minimize the
potential for leaks and spills, maintenance of records and the regular
testing and monitoring of tank systems for tightness. There can be no
assurance, however, that these tank systems will at all times remain free
from leaks or that the use of these tanks will not result in spills. Nine of
the facilities have had leaks or spills, all of which have been or are being
responded to in conjunction with the appropriate regulatory agencies.
Historically, none of the nine locations which have had leaks or spills have
required expenditures that would have had a material effect on the results of
operations, liquidity or financial condition of the Company. All significant
required expenditures in connection with the cleanup of such leaks and spills
have been made at these nine sites. Any future leak or spill, depending on
such factors as the material involved, quantity, environmental setting and
availability of state cleanup funds, could result in response activities that
could interrupt the Company's operations and could result in costs to the
Company that could have a material

<PAGE>

adverse effect on the Company. In addition, there can be no assurance that
future environmental legislation and regulation will not require material
expenditures by the Company or otherwise have a material adverse effect on the
Company's operations.

The Company has incurred expenditures related to the above matters of
approximately $800,000, $246,000, and $480,000 for fiscal years ended 1997, 1996
and 1995, respectively. Approximately $277,000 in expenditures are contemplated
for retrofitting the CFC units and approximately $825,000 in expenditures are
contemplated for tank upgrading to comply with the 1998 tank standards or
closure in fiscal 1998. These regulation compliance costs are not covered by
insurance.

GOVERNMENTAL REGULATION

The Company is subject to regulation by a variety of governmental agencies,
including but not limited to the United States Food and Drug Administration, the
United States Department of Agriculture and other federal, state and local
agencies.

<PAGE>

ITEM 2. PROPERTIES

The following table recaps store data for fiscal 1997, 1996 and 1995:

Fiscal
------------------------
1997 (a) 1996 1995
------------------------
<S> <C> <C> <C> <C>

STORES Beginning of Year 103 106 106
Opened 2 4 2
Closed 0 7 2
----------------------
End of Year 105 103 106
======================

STORE COMPOSITION Conventional 76 72 71
AT YEAR END Combination 2 2 1
Discount 27 29 34
----------------------
Total 105 103 106
======================

AVERAGE SQUARE FEET Conventional 26,500 26,000 25,000
Combination 56,900 56,100 57,300
Discount 57,800 57,100 55,200

STORE LOCATIONS Mississippi 73 71 72
AT YEAR END Alabama 11 11 13
Arkansas 5 5 6
Florida 2 2 1
Tennessee 7 7 7
Louisiana 7 7 7
----------------------
Total 105 103 106
======================

GASOLINE STATIONS Beginning of Year 46 37 31
Opened 7 11 6
Closed 0 2
----------------------
End of Year 53 46 37
======================

GASOLINE STATION Mississippi 43 38 28
LOCATIONS AT YEAR END Louisiana 1 1 1
Tennessee 4 3 2
Alabama 2 2 4
Florida 1 1 1
Arkansas 2 1 1
----------------------
Total 53 46 37
======================

(a) Changes subsequent to fiscal year end not included above are one
conventional supermarket and one gasoline station closed, one gasoline
station opened and 5 discount supermarkets converted (2 to conventional
supermarkets and 3 to combination supermarkets).

</TABLE>

<PAGE>

All of the Company's store properties are leased, with the exception of one
store. Thesae leases generally obligate the Company to pay its proportionate
share of real estate taxes, common area maintenance charges and insurance costs.
In addition, such leases generally provide for percentage of sales rent when
sales from the store exceed a certain dollar amount. These leases are usually
long-term, with one or more renewal options. With the exception of one lease,
which will expire in 2001, all leases will expire between 2005 and 2036 if the
company exercises all its options to renew. The Company owns the fixtures and
equipment in each leased location and has made various leasehold improvements to
these store sites.

Certain parties affiliated with the Company hold 18 leases, representing
approximately 23% of the dollar amount of the Company's capital leases.
Management believes that each of these leases is on an arm's length basis and is
on terms that are no less favorable to the Company than could have been obtained
with non-affiliated parties at the time each was entered into.

The Company owns all of its warehouse and distribution facilities except
for its 120,000 square foot dry grocery and health and beauty care facility.
This lease expires July 31, 2004 (including all renewal options). The table
below details Jitney-Jungle's warehouse and distribution facilities according to
their function; all of such facilities are located in Jackson, Mississippi.

FUNCTION SQUARE FEET

Dry Grocery..........................................415,000
Meat and Dairy....................................... 90,000
Dry Grocery and Health and Beauty Care...............120,000
Transportation and Damage Reclaim.................... 43,000
Produce, Eggs and Floral............................. 67,000
Frozen Foods......................................... 79,000
------
Total Warehouse .....................................814,000
-------
-------

In the first quarter of fiscal 1997, the Company sold the operating assets
of its 24,000 square foot bakery for $750,000 and received $5.25 million as
consideration for entering into a five-year supply agreement with the purchaser
of such operating assets. The $5.25 million is being amortized over the term of
the supply agreement.

The Company began construction on a new produce warehouse facility in
fiscal year 1996. The new produce warehouse was completed in fiscal year 1997
and has been operational since September 28, 1996.

<PAGE>

ITEM 3. LEGAL PROCEEDINGS

The Company is not a party to any material pending legal proceedings, other
than ordinary litigation incidental to the conduct of its business and the
ownership of its properties.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the
fourth quarter of its fiscal year ended May 3, 1997.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company is closely held and is not actively traded at this time;
therefore, there is not a current market.

As of June 30, 1997, there were thirty-two (32) holders of record of Common
Stock.

The following table sets forth the dividends paid by Jitney-Jungle to its
shareholders during the last two fiscal years. After the Merger, the payment of
regular biannual cash dividends on Common Stock was discontinued, and the
Company does not contemplate the declaration of dividends on Common Stock. In
addition, the Senior Notes and the Credit Facility entered into by the Company
in connection with the Merger restrict future payment of dividends.

FOR FISCAL YEAR ENDED
--------------------------------
MAY 3, 1997 APRIL 27, 1996
------------ ----------------
<S> <C> <C>

Semiannual NONE $1,877
Semiannual NONE NONE

</TABLE>
9

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

JITNEY JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES

FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA

(53 weeks) (52 weeks) (52 weeks) (52 weeks) (52 weeks)
(DOLLARS IN THOUSANDS) May 3, April 27, April 29, April 30, May 1,
EXCEPT PER SHARE AMOUNT) 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------

OPERATING RESULTS:

<S> <C> <C> <C> <C> <C>
Net Sales $1,228,533 $1,179,318 $1,173,927 $1,152,333 $1,070,693
Gross Profit 303,087 292,063 288,188 276,546 250,999
Interest expense (net):
Debt 27,117 4,232 1,606 2,916 1,723
Capitalized lease
obligations 9,098 8,768 9,217 8,710 8,194
Earnings before income
taxes
and extraordinary item 1,085 24,977 30,220 27,135 26,471

Income taxes 339 9,062 11,417 9,956 9,354
Earnings before
extraordinary item 746 15,915 18,803 17,179 17,117
Extaordinary item (net) (1,456)
Net Earnings 746 14,459 18,803 17,179 17,117
Net Earnings as a
percent of sales 0.06% 1.23% 1.60% 1.49% 1.60%
-----------------------------------------------------------

COMMON STOCK DATA:

Earnings (loss) per
common and
common equivalent share:
Earnings (loss) before
extraordinary item $ (16.26) $ 162.88 $ 923.15 $ 843.42 $ 840.37
Extaordinary item (15.96)
Net Earnings (Loss) (16.26) 146.92 923.15 843.42 840.37
------------------------------------------------------------

FINANCIAL POSITION:
Total assets $267,845 $ 279,003 $ 312,415 $296,803 $ 269,798
Working Capital (92) 26,449 71,929 60,385 60,108
Long-term debt 208,000 239,059 38,727 40,628 42,476
Capitalized lease
obligations
(including current) 64,462 63,402 60,471 62,186 56,189
Redeemable preferred
stock 57,921 49,988
Stockholders' Equity
(Deficit) (152,002) (144,815) 140,216 124,857 111,099
------------------------------------------------------------

</TABLE>

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion of the Company's results of operations and of its
liquidity and capital resources should be read in conjunction with the
Consolidated Financial Statements and the notes thereto contained elsewhere in
this report.

RESULTS OF OPERATIONS

GENERAL

As of May 3, 1997 the Company operated a chain of 105 supermarkets and 53
gasoline stations. Net sales from gasoline stations during fiscal 1997, 1996,
and 1995 were 6.9%, 5.2%, and 4.0%, respectively, of the Company's net sales
for such periods. The Company reports results of operations on a 52 or 53 week
fiscal year ending on the saturday nearest to April 30 of each year. The
Company's first three fiscal quarters are 12 weeks, and the last quarter is 16
or 17 weeks. The consolidated statements of earnings for the fiscal years ended
May 3, 1997, April 27, 1996, and April 29, 1995 include 53 weeks for fiscal 1997
and 52 weeks of operations for fiscal 1996 and 1995.

The following sets forth, for the periods indicated, selected financial
information expressed as a percentage of net sales.

FISCAL YEAR
-----------------------------------
1997 1996 1995
(53 WEEKS) (52 WEEKS) (52 WEEKS)
----------- ---------- ----------
<S> <C> <C> <C>

Net sales................................. 100.00% 100.00% 100.00%
Gross profit.............................. 24.67 24.77 24.55
Direct store, warehouse and
administrative expenses and special
charges.............................. 21.63 21.55 21.05
------- ------ ------
Operating income.......................... 3.04 3.22 3.50
Interest expense, net..................... 2.95 1.10 0.92
------- ------- -------
Earnings before income taxes and
extraordinary item..................... 0.09 2.12 2.58
Provision for income taxes................ 0.03 0.77 0.98
Extraordinary item (net of income tax
benefit)............................... 0.00 0.13 0.00
-------- ------- --------
Net income................................ 0.06% 1.22% 1.60%
======== ======= =======
</TABLE>

Approximately 20% of the Company's sales result from its private label
program. Private label products generally have a lower unit sales price than
national brands, but provide a higher gross margin to the Company due to lower
unit costs.

<PAGE>

During the past three years, an overall lack of inflation in food prices
and increasingly competitive markets have made it difficult for the Company and
other supermarket operators to achieve comparable store sales gains. Because
sales growth has been difficult to attain, many operators, including the
Company, have attempted to maintain market share through increased levels of
promotional activities and discount pricing, creating a more difficult
environment in which to increase year-over-year sales gains consistently. In
addition, because of the growth in the Southeast market, any supermarket
operators, including the Company, have opened new stores in existing markets
which has resulted in declines in same store sales for the (comparable) store
base of these same supermarket chains.

SUBSEQUENT EVENT

Following consummation of the offer, the company's wholly-owned subsidiary
will be merged (the "Merger") with and into Delchamps, with Delchamps continuing
as the surviving corporation. The aggregate consideration expected to be paid
to current stockholders of Delchamps will be approximately $221 million.
Delchamps operates 118 retail supermarkets in Alabama, Florida, Louisiana and
Mississippi as well as 10 liquor stores in the state of Florida. Delchamps' net
sales, net income and EBITDA was $1,120.7 million, $5.7 million and $40.6
million, respectively for the latest twelve months ended March 29, 1997.

In connection with the Offer, the Company expects to issue and sell
approximately $200 million of senior subordinated notes and to amend and restate
its Credit Facility to increase the commitments thereunder from $100 million to
$150 million. The Company intends to use the $200 million of gross proceeds
from the sale of such notes, together with approximately $72 million of
borrowings under the Credit Facility and approximately $6 million of excess
cash, to pay the $221 million of consideration for Delchamps, repay
approximately $24 million of Delchamps' outstanding indebtedness, pay
approximately $12 million of change of control payments to certain Delchamps
executives and pay approximately $21 million of transaction fees and expenses.

The Company will continue to evaluate the business and operations of
Delchamps during the pendency of the offer and after the consummation of the
Offer and the Merger. The Company intends to seek additional information about
Delchamps during this period. Thereafter, the Company intends to review such
information as part of a comprehensive review of Delchamps' business, assets,
operations, corporate structure, dividend policy, capitalization,

<PAGE>

policies, management and personnel with a view to optimizing Delchamps'
potential contribution to the Company's business. Although the Company is still
developing its business plan with respect to Delchamps after the consummation of
the Offer, the Company generally intends to integrate the operations of
Delchamps with the operations of the company as soon as practicable to achieve
operating synergies. At this time, the Company has not specifically determined
how this integration will be structured. The combining of Delchamps' business
with the Company's business could, among other things, involve consolidating and
streamlining certain operations and reorganizing other businesses and
operations.

NET SALES

THE FOLLOWING SETS FORTH, FOR THE PERIODS INDICATED, NET SALES OF THE
COMPANY.

(DOLLARS IN MILLIONS)
----------------------------------
1997 1996 1995
(53 WKS) (52 WKS) (52 WKS)
---------- -------- ----------
<S> <C> <C> <C>

Net sales................................. $1,228.5 $1,179.3 $1,173.9
Increase from prior year.................. $49.2 $5.4 $21.6
Percentage increase over prior year....... 4.2% 0.5% 1.9%
Percentage (decrease) increase in same
store sales............................. 0.20% 0.01% (0.56%)

</TABLE>

The net sales increase of 4.2% in 1997 was primarily due to the opening of
two supermarkets, the opening of seven new gasoline stations and the extra
"53rd" week. Without this extra "53rd" week, sales would have increased
approximately 2.2%. In addition, the Jitney-Jungle Gold Card (a frequent
shopper card program) was launched at the beginning of the 4th quarter in
January 1997 and, as a result, sales and customer count have increased.

The net sales increase of 0.5% in 1996 was primarily due to the opening of
four grocery supermarkets and the opening of eleven new gasoline stations,
partially offset by the effect of closing seven supermarkets and two gasoline
stations in fiscal 1996.

GROSS PROFIT

The following sets forth, for the periods indicated, gross profit of
the Company.

(DOLLARS IN MILLIONS)
----------------------------------
1997 1996 1995
(53 WKS) (52 WKS) (52 WKS)
---------- --------- ---------
<S> <C> <C> <C>

Gross profit............................. $303.1 $292.1 $288.2
Increase from prior year................. $11.0 $3.9 $11.6
Gross profit percentage.................. 24.7% 24.8% 24.5%
Increase (decrease) from prior year...... (0.1%) 0.3% 0.5%

</TABLE>

The decrease in gross profit as a percentage of net sales of 0.1% for
fiscal 1997 was

<PAGE>

principally due to the effect of the new Jitney-Jungle Gold Card (frequent
shopper card) which was launched in January 1997.

The increase in gross profit as a percentage of net sales of 0.3% for
fiscal 1996 was due to (i) improved procurement results due to continued
enhancements and improved utilization of the Company's information systems,
which resulted in better buying decisions at better prices and (ii) the
re-negotiation of a supply contract with Fleming Companies, Inc. in January
1996.

DIRECT STORE, WAREHOUSE AND ADMINISTRATIVE EXPENSES

The following sets forth, for the periods indicated, direct store,
warehouse and administrative expenses for the Company.

(DOLLARS IN MILLIONS)
---------------------------------------
1997 1996 1995
(53 WKS) (52 WKS) (52 WKS)
---------------------------------------
<S> <C> <C> <C>

Direct store, warehouse and administrative
expenses (including special charges) .. $265.8 $254.1 $247.1
Increase from prior year.................. $11.7 $7.0 $9.4
Percentage increase from prior year....... 4.6% 2.8% 4.0%
Expenses as a percentage of sales......... 21.6% 21.6% 21.1%

</TABLE>

In fiscal 1997, direct store, warehouse and administrative expenses
increased $11.7 million principally due to the "53rd" week while such expenses
as a percentage of net sales remained the same at 21.6%. In fiscal 1997,
personnel costs, the largest single component of store operating, selling and
administrative expenses, were $152.9 million, or 12.4% of net sales, compared to
$146.6 million or 12.4% of net sales for fiscal 1996. Depreciation and
amortization increased $4.0 million principally due to acquisitions of property
and equipment (including capital leases) associated with the Company's
remodeling program, acquisition of new stores and gasoline stations and
increased debt issue costs related to the Merger. Group insurance expense
increased $.5 million principally due to an increase in medical claims paid
during the year by the self-insured plan. Closed Operations expense increased
$.7 million and included a provision for the closing of one conventional
supermarket and one gasoline station in July 1997. The increases in SG&A were
offset by reductions in store supplies and advertising costs and by an increase
in backhaul income. In addition SG&A included the charge to expense of $2.7
million for costs associated with the employment contract of the Company's
former Chief Executive Officer and the severance pay of various associates (a)
who retired early or (b) whose positions were eliminated.

In fiscal 1996, personnel costs, the largest single component of store
operating, selling and administrative expenses, were $146.6 million, or 12.4% of
net sales, compared to $143.5 million, or 12.2% of net sales for fiscal 1995.
In addition to personnel costs, other increases in operating expenses for fiscal
1996 were principally due to increases in insurance expense ($0.8 million) as a
result of a larger provision for workers compensation and general liability

<PAGE>

insurance, repairs and maintenance ($0.4 million), certain non-recurring legal
and professional fees, and also depreciation and amortization expense which
amounted to $27.3 million in fiscal 1996, or 2.3% of net sales, compared to
$25.4 million for fiscal 1995, or 2.2% of net sales. The increase in
depreciation and amortization in fiscal 1996 was primarily a result of
increased capital expenditures relating to the remodeling of stores in fiscal
1995 and increased debt issue costs related to the merger.

OPERATING INCOME
As a percentage of net sales, operating income remained relatively constant
for 1997, 1996 and 1995 at 3.0%, 3.2% and 3.5%, respectively.

EBITDA
The following sets forth, for the periods indicated, EBITDA of the company.

(DOLLARS IN MILLIONS)
--------------------------------------
1997 1996 1995
(53 WKS) (52 WKS) (52 WKS)
---------- ---------- ----------
<S> <C> <C> <C>

EBITDA.................................... $70.3 $64.9 $65.2
Increase (decrease) from prior year....... $5.4 ($0.3) $1.8
EBITDA percentage of net sales............ 5.7% 5.5% 5.6%

</TABLE>

As a percentage of net sales, EBITDA remained relatively constant for 1997,
1996 and 1995 at 5.7%, 5.5% and 5.6% respectively. EBITDA represents income
before interest, income taxes, depreciation, amortization and LIFO charges.
Fiscal 1997 is calculated before any deduction for certain non-recurring charges
totaling $2.7 million. EBITDA, as disclosed herein, is neither a measurement
pursuant to generally accepted accounting principals nor a measurement of
operating results.

NET INTEREST EXPENSE

The following sets forth, for the periods indicated, net interest expense
of the Company.

(DOLLARS IN MILLIONS)
------------------------------------
1997 1996 1995
(53 WKS) (52 WKS) (52 WKS)
---------- ---------- ----------
<S> <C> <C> <C>

Net interest expense...................... $36.2 $13.0 $10.8
Increase from prior year.................. $23.2 $2.2 ($0.9)
Percentage increase over prior year....... 178.5% 2.0% (7.7%)

</TABLE>

The increase in net interest expense for fiscal 1997 was primarily due to
interest expense on the Senior Notes and the credit facility, which were in
place all of fiscal 1997 and only two months of fiscal 1996.

<PAGE>

The increase in net interest expense for fiscal 1996 was primarily due to
interest expense of $3.6 million on the senior notes and $0.5 million on the
Credit Facility which was partially offset by the decrease in interest expense
as a result of repayment of historical debt prior to maturity and increase in
interest income to $2.4 million for fiscal 1996 from $1.7 million for fiscal
1995.

INCOME TAXES

The following sets forth, for the periods indicated, income taxes of the
Company.

(DOLLARS IN MILLIONS)
------------------------------------
1997 1996 1995
(53 WKS) (52 WKS) (52 WKS)
---------- --------- ----------
<S> <C> <C> <C>

Income tax expense........................ $.3 $9.1 $11.4
Income tax effective rate................. 31.2% 36.3% 37.8%
Increase (decrease) in rate from prior
year.................................... (5.1%) (1.5%) 1.1%

</TABLE>

The decrease in income taxes for fiscal 1997 principally resulted from
lower pretax earnings and a decrease in the effective tax rate which was
primarily due to credits applicable to state income taxes.

The decrease in income taxes for fiscal 1996 principally resulted from
lower pretax earnings and a decrease in the effective tax rate which was
principally due to the elimination of inter-company profit of a wholly owned
subsidiary which previously was not included in the consolidated tax return.

EXTRAORDINARY ITEM

In the fourth quarter of 1996 in connection with the Merger, the Company
retired $35.7 million in long-term debt prior to its scheduled maturity.
Prepayment penalties associated with early retirement of this debt resulted in
an extraordinary loss of $1.5 million, net of an income tax benefit of $0.9
million.

NET INCOME

The following sets forth, for the periods indicated, net income of the Company.

(DOLLARS IN MILLIONS)
------------------------------------
1997 1996 1995
(53 WKS) (52 WKS) (52 WKS)
---------- ---------- ----------
<S> <C> <C> <C>

Net income................................. $.7 $14.5 $18.8
Increase (decrease) from prior year........($13.8) ($4.3) $1.6
Net income percentage of net sales......... .06% 1.2% 1.6%

</TABLE>

Changes in net income are due to the factors reflected above.

<PAGE>

Liquidity and capital resources

Historically, the Company has funded its working capital requirements,
capital expenditures and other needs principally from operating cash flows. Due
to the Merger, however, the Company has become highly leveraged and has certain
restrictions on its operations. At fiscal year end, the Company had $272.4
million of total long-term debt (including capitalized leases and current
installments) and a shareholders deficit of $152.0 million. The Company intends
to issue up approximately $278 million of new debt to finance the Delchamps
acquisition and to repay indebtedness of Delchamps in connection with the
acquisition. The Company's principal uses of liquidity are to fund working
capital, meet debt service requirements and finance the company's supermarket
expansions.

The Company's principal sources of liquidity are expected to be cash flow
from operations and borrowings under the $97.5 million Credit Facility (the
original total commitment of $100 million reduced by $1.25 million on December
31, 1996 and by $1.25 million on March 31, 1997 as per terms of the revolving
credit agreement). The Company has outstanding $10.5 million in letters of
credit issued under the Credit Facility principally to secure obligations
pursuant to a capitalized lease and to secure obligations under an existing
supply contract with Topco Associates, inc. ("Topco"). Borrowings outstanding
at May 3, 1997 under the Credit Facility were $8.0 million. The commitments
under the Credit Facility will terminate, and all loans outstanding thereunder
will be required to be repaid in full on March 5, 2001. Borrowings under the
Credit Facility, including revolving loans and up to $20.0 million in letters of
credit, will not exceed the lesser of (i) the "Total Commitment", which
initially will be $100.0 million, and (ii) an amount equal to the sum of (A) up
to 60% of eligible inventory (valued at the lesser of FIFO cost or market value)
of the Company and (B) the "Supplemental Availability", which initially is $45.0
million. Each of the Total Commitment and the Supplemental Availability will be
reduced on a quarterly basis by $1.25 million per quarter. The Company expects
to amend and restate the Credit Facility in connection with the Delchamps
acquisition to increase the commitments thereunder from $100 million to $150
million.

Cash provided by operating activities during fiscal 1997 was $66.4 million
compared to $55.5 million for fiscal 1996 and $45.7 million for fiscal 1995. In
fiscal year 1997, inventories decreased due to an inventory reduction plan
implemented by management and accounts payable increased by improving customer
terms to industry standards. These working capital improvements were partially
offset by the reduction in net income due principally to the increase in cash
interest expense this year as a result of additional borrowing activities
discussed above. The principal reason for the increase of cash provided by
operating activities for fiscal 1996 was a decrease in inventories due, in part,
to store closings and a decrease in receivables which reflects a reduction in
the uncollected billbacks due from vendors.

Net cash used in investing activities was $22.3 million during fiscal 1997,
$12.4 million for fiscal 1996 and $46.0 million for fiscal 1995. Cash was
primarily used for Capital expenditures. capital expenditures were $24.1 million
for fiscal 1997, $30.1 million for fiscal 1996, and $23.9 million for fiscal
1995. In addition to capital expenditures related to new stores opened in
fiscal years 1997, 1996 and 1995, the company had several significant expansion
and

<PAGE>

conversion projects.

Net cash used in financing activities was $35.4 million for fiscal 1997,
$57.6 million for fiscal 1996 and $10.2 million for fiscal 1995. The principal
uses of funds in financing activities for fiscal 1997 and fiscal 1995 were the
payment of long-term debt and capital lease obligations. The main uses of funds
in financing activities in fiscal year 1996 were the redemption of Common Stock
and related merger costs, the principal payments on debt and capital lease
obligations and payments of dividends to stockholders.

New stores, remodels, and conversions will continue to be the most
significant portion of planned capital expenditures. Capital expenditures for
fiscal 1998 are expected to be approximately $35.0 million. Capital expenditure
plans of the company are frequently reviewed and are modified from time to time
depending on cash availability and other economic factors.

The Company's expenditures to comply with environmental laws and
regulations at its grocery stores primarily consist of those related to
remediation of underground storage tank leaks and spills and retrofitting
chlorofluorocarbon ("CFC") chiller units. The Company's unreimbursed cost for
remediation at the nine facilities which have had leaks or spills has not been
material. All significant required expenditures in connection with the cleanup
of such leaks and spills have been made at the nine locations. In addition, the
Company has obtained insurance coverage for bodily injury, property damage and
corrective action expenses resulting from releases of petroleum products from
underground storage tanks during the covered period at 53 of the 54 locations
and an application for such coverage is pending at one additional location. The
Company spent $800,000, $246,000 and $480,000 for retrofitting CFC-containing
chiller units during fiscal 1997, fiscal 1996 and fiscal 1995, respectively.
Approximately $.3 million in expenditures are contemplated for retrofitting the
CFC units and approximately $0.8 million in expenditures are contemplated for
tank upgrading to comply with 1998 tank standards or closure in fiscal 1998.
These regulation driven compliance costs are not covered by insurance.

<PAGE>

COST REDUCTION OPPORTUNITIES

As part of its ongoing process of reviewing and controlling operating
costs, management has begun to implement initiatives designed to result in cost
savings. Areas which the Company believes offer the greatest potential for such
savings include, but are not necessarily limited to, improved labor scheduling,
which the Company is currently implementing across its stores, inventory
category management programs, which the Company began implementing during fiscal
year 1997 and will continue to implement over the next 12 months, reductions in
inventories held primarily at store level and improved terms with various
merchandise suppliers, which was implemented successfully in fiscal 1997 and a
reduction in annual overhead spending related to headcount reductions that the
Company began implementing in May, 1997. There can be no assurance that any
cost savings will be achieved by the Company as a result of such initiatives.

INFLATION

As is typical of the supermarket industry, the Company has adjusted its
retail prices in response to price trends. During the past three years, there
has been an overall lack of inflation in food prices.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
MAY 3, 1997 AND APRIL 27, 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>

ASSETS 1997 1996
<S> <C> <C>

CURRENT ASSETS:

Cash and cash equivalents $ 14,426 $ 5,676
Investments in debt securities 337
Receivables 5,463 4,892
Inventories:
Stores 43,462 48,907
Warehouses 21,157 28,538

Prepaid expenses and other 1,213 5,155
Deferred income taxes 2,152 376
-------- --------

Total current assets 87,873 93,881

PROPERTY AND EQUIPMENT, at cost:
Land 2,648 2,782
Buildings 26,370 22,537
Fixtures and equipment 167,241 165,202
Property under capitalized leases 74,089 76,371
Leasehold improvements 41,518 39,003
-------- --------
Total 311,866 305,895
Less accumulated depreciation and amortization 140,378 130,480
-------- --------

Net property and equipment 171,488 175,415
-------- --------

OTHER ASSETS 8,484 9,707

-------- --------

TOTAL ASSETS $ 267,845 $ 279,003
========= =========

</TABLE>

See notes to consolidated financial statements.

<PAGE>

- ----------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1997 1996

CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 49,978 $ 40,008
Accrued expenses:
Personnel costs 9,350 6,042
Taxes, other than income taxes 8,436 6,738
Insurance claims 5,972 4,110
Interest 4,298 3,742
Other 5,032 2,533
Current portion of capitalized leases 4,899 4,259
--------- --------

Total current liabilities 87,965 67,432

LONG-TERM DEBT 208,000 239,059

OBLIGATIONS UNDER CAPITALIZED LEASES,
less current installments 59,563 59,143

DEFERRED INCOME TAXES 6,398 8,196
--------- --------

Total liabilities 361,926 373,830

COMMITMENTS AND CONTINGENCIES (Notes 6, 7, 9 and 14)

REDEEMABLE PREFERRED STOCK (aggregate liquidation
preference value of $60,086 at May 3, 1997 and $52,342
at April 27, 1996) 57,921 49,988

STOCKHOLDERS' EQUITY (DEFICIT):
Class C Preferred Stock - Series 1 (at liquidation
preference value) 8,502 7,604
Common stock ($.01 par value, authorized 5,000,000
shares, issued and outstanding 425,000 shares) 4 4
Additional paid-in capital (302,326) (302,326)

Retained earnings 141,818 149,903
--------- --------

Total stockholders' equity (deficit) (152,002) (144,815)
--------- --------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 267,845 $ 279,003
========= =========

</TABLE>

21
<PAGE>

JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED MAY 3, 1997, APRIL 27, 1996 AND APRIL 29, 1995
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

1997 1996 1995

<S> <C> <C> <C>
NET SALES $ 1,228,533 $ 1,179,318 $ 1,173,927

COSTS AND EXPENSES:
Cost of sales 925,446 887,255 885,739
Direct store expenses 199,956 193,483 189,422
Warehouse, administrative and general 63,094 60,603 57,723
Interest expense, net 36,215 13,000 10,823
Special charges 2,737
----------- ----------- -----------
Total cost and expenses

1,227,448 1,154,341 1,143,707
----------- ----------- -----------

Earnings before taxes on income and
extraordinary item 1,085 24,977 30,220

TAXES ON INCOME 339 9,062 11,417
----------- ----------- -----------

Earnings before extraordinary item 746 15,915 18,803

EXTRAORDINARY ITEM, NET OF
INCOME TAX BENEFIT OF $866 (1,456)
----------- ----------- -----------

NET EARNINGS $ 746 $ 14,459 $ 18,803
=========== =========== ===========

EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Earnings (loss) before extraordinary
item $ (16.26) $ 162.88 $ 923.15
Extraordinary item (15.96)
----------- ----------- -----------

Net earnings (loss) $ (16.26) $ 146.92 $ 923.15
=========== =========== ===========

</TABLE>

See notes to consolidated financial statements.

<PAGE>

JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED MAY 3,
1997, APRIL 27, 1996 AND APRIL 29, 1995 (DOLLARS IN THOUSANDS EXCEPT PER SHARE
AMOUNTS)

- ----------------------------------------------------------------------------------------------------

CLASS C PREFERRED
STOCK,
SERIES 1 COMMON STOCK ADDITIONAL
------------------------------------------
NUMBER NUMBER PAID-IN RETAINED
OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL EARNINGS

<S> <C> <C> <C> <C> <C> <C>
BALANCE, APRIL 30, 1994 20,368 $1,061 $ 1,807 $121,989

Cash dividends ($169.09 per share) (3,444)
Net earnings 18,803

BALANCE, APRIL 29, 1995 20,368 1,061 1,807 137,348

Cash dividends ($92.15 per share) (1,877)
Net earnings 14,459
Issuance of shares and warrants 76,041 $7,604 425,000 4 7,377
Redemption of common stock
and related merger costs (20,368) (1,061) (311,510)
Accretion of discount on Class A
Preferred Stock (27)
------- ------- -------- ------- -------- -------

BALANCE, APRIL 27, 1996 76,041 7,604 425,000 4 (302,326) 149,903

Net earnings 746
Accretion of discount on Class A
Preferred Stock (189)
Cumulation of dividends on
Preferred Stock 898 (8,642)
------- ------- -------- ------- -------- --------

BALANCE, MAY 3, 1997 76,041 8,502 425,000 $ 4 (302,326) $141,818
======= ======= ======== ======= ======== ========

</TABLE>

See notes to consolidated financial statements.

<PAGE>

JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 3, 1997, APRIL 27, 1996 AND APRIL 29, 1995
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>

1997 1996 1995

OPERATING ACTIVITIES:
<S> <C> <C> <C>

Net earnings $ 746 $ 14,459 $ 18,803
Adjustment to reconcile net earnings to net
cash provided by operating activities:
Extraordinary item 1,456
Depreciation and amortization 31,319 27,323 25,444
Loss on disposition of property and
other assets 1,899 817 1,037
Deferred income tax expense (benefit) (3,574) 2,577 2,260
Changes in assets and liabilities:
Receivables (571) 5,866 43
Store and warehouse inventories 12,826 5,826 (3,621)
Prepaid expenses and other 3,941 (2,011) (1,630)
Accounts payable 9,970 1,562 2,690
Accrued expenses 9,923 (2,356) 644
------- ------- --------

Net cash provided by operating
activities 66,479 55,519 45,670
------- ------- --------
INVESTING ACTIVITIES:
Capital expenditures (24,099) (30,111) (23,921)
Debt issue costs (8,214)
Proceeds from sale of property and other
assets 1,477 2,617 1,210
Purchase of investments in debt securities (23,026) (65,416)
Maturities of investments in debt securities 337 46,301 42,096
------- ------- --------

Net cash used in investing activities (22,285) (12,433) (46,031)
------- ------- --------

FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 239,059
Proceeds from issuance of stock and warrants 35,840
Redemption of common stock and related merger
costs (286,824)
Payments on long-term debt (31,059) (38,412) (2,431)
Payments on capitalized lease obligations (4,385) (5,355) (4,342)
Dividends paid (1,877) (3,444)
------- ------- --------
Net cash used in financing activities (35,444) (57,569) (10,217)
------- ------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 8,750 (14,483) (10,578)

CASH AND CASH EQUIVALENTS, Beginning of Year 5,676 20,159 30,737
------- ------- --------

CASH AND CASH EQUIVALENTS, End of Year $ 14,426 $ 5,676 $ 20,159
======== ======== ========
</TABLE>
(Continued)

<PAGE>

JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capitalized lease obligations incurred $ 3,538 $ 7,971 $ 3,158
======= ======= =======
Recapitalization transactions:
Preferred stock issued in exchange for notes
receivable and common stock $ 184

Preferred stock issued in settlement of
deferred compensation obligation 712
Preferred stock issued in redemption of
common stock 27,446
Common stock issued in exchange for notes
receivable 176
Common stock issued in redemption of common
stock 588
-------

$29,106
=======

SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $35,902 $12,915 $12,534
======= ======= =======

Cash paid for income taxes, net of refunds $(1,521) $ 7,700 $10,283
======= ======= =======
</TABLE>

See notes to consolidated financial statements. (Concluded)

<PAGE>

JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MAY 3, 1997, APRIL 27, 1996 AND APRIL 29, 1995
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
- -------------------------------------------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. NATURE OF OPERATIONS AND BASIS OF PRESENTATION - The Company operates
supermarkets and gasoline stations located in six southeastern states
primarily using distribution centers located in Jackson, Mississippi.

The consolidated financial statements include those of Jitney-Jungle
Stores of America, Inc. and its wholly-owned subsidiaries, Southern
Jitney Jungle Company, Interstate Jitney Jungle, Inc., McCarty-Holman
Co., Inc. and subsidiary, and Jitney Jungle Bakery, Inc. All material
intercompany profits, transactions and balances have been eliminated.

B. USE OF ESTIMATES - The consolidated financial statements are prepared in
conformity with generally accepted accounting principles which require
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

C. FISCAL YEAR - The Company's fiscal year ends on the Saturday nearest
April 30. Fiscal year 1997 includes the operations of fifty-three weeks
and fiscal years 1996 and 1995 include the operations of fifty-two
weeks.

D. INVESTMENTS IN DEBT SECURITIES - Debt securities have been categorized
as available for sale and as a result are stated at fair value. The cost
of debt securities is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization and interest are
included in interest income. Realized gains and losses are included in
other income or expense. Unrealized holding gains and losses are
included as a component of stockholders' equity until realized. The cost
of securities sold is based on the specific identification method.

E. INVENTORIES - Store inventories are stated at cost (last-in, first-out
method), as determined principally by the retail inventory method.
Warehouse inventories are stated at cost (last-in, first-out method).

F. CAPITALIZATION, DEPRECIATION AND AMORTIZATION - The cost of property,
fixtures, equipment and improvements is depreciated and amortized by the
straight-line method over the estimated useful lives of the assets. The
estimated useful lives of buildings range from four to forty years and
the estimated useful life of fixtures and equipment is eight years.
Capitalized lease assets are recorded at the lower of fair market value
or the present value of future minimum lease payments. These assets and
leasehold improvements are amortized by the straight-line method over
their

<PAGE>

primary lease term. License and franchise rights are amortized by the
straight-line method over twenty years. Debt issue costs are amortized
over the life of the related debt by the interest method. At each
balance sheet date the Company evaluates the recoverability of property,
equipment and other long-term assets based upon expectations of
nondiscounted cash flows and operating income.

G. STORE OPENING/CLOSING COSTS - Non-capital expenditures incurred for new
or remodeled retail stores are expensed as incurred. When a store is
closed, the remaining investment in fixtures and leasehold improvements,
net of expected salvage, is charged against earnings; the present value
of any remaining lease liability, net of expected sublease recovery, is
also expensed.

H. INCOME TAXES - Deferred tax liabilities and assets are determined based
on the differences between the financial statement and tax bases of
assets and liabilities using enacted tax rates in effect in the years in
which the differences are expected to reverse.

I. CASH EQUIVALENTS - For purposes of reporting cash flows, cash
equivalents include investments with maturities of three months or less
when purchased.

J. PER SHARE AMOUNTS - Earnings per common and common equivalent share is
based on net income (loss) after preferred stock dividend requirements
($7,655 in fiscal year 1997, $987 in fiscal year 1996) and the weighted
average number of shares outstanding during each year including shares
attributed to outstanding warrants to purchase common stock. For fiscal
year 1997 warrants have not been included as their effect is
antidilutive. The number of shares used in computing the earnings (loss)
per share was 425,000 in fiscal year 1997, 91,241 in fiscal year 1996
and 20,368 in fiscal year 1995.

Dividends per common share are presented on the basis of total dividends
paid, including dividends paid by the entities acquired in the business
acquisitions accounted for in a manner similar to that followed for
poolings of interest (see Note 2), divided by common shares outstanding
after giving retroactive effect to common shares issued in such business
acquisitions.

K. RECLASSIFICATIONS - Certain reclassifications have been made in the
1996 and 1995 consolidated financial statements to conform to the 1997
method of presentation.

2. MERGER ACTIVITIES

In a series of transactions that were consummated on March 5, 1996, the
Company acquired all of the issued and outstanding stock of Southern Jitney
Jungle Company, McCarty-Holman Company, Inc. and Jitney Jungle Bakery (each
of which was under common control with the Company) in exchange for 7,495
shares of common stock. These acquisitions have been accounted for at
historical cost in a manner similar to that followed for poolings of
interest. Prior to the acquisition the operating results of the acquired
entities had been included in the Company's financial statements on a
combined basis. Accordingly, the acquisitions had no effect on the
previously reported results of operations of the Company; however, for
purposes of computing earnings per share the issuance of the additional
shares of common stock has been given retroactive effect.

<PAGE>

On March 5, 1996, JJ Acquisitions Corp. (JJAC) merged with and into the
Company with the Company continuing as the surviving corporation (the
"Merger"). JJAC was a wholly-owned subsidiary of Bruckmann, Rosser, Sherrill
& Co., L.P. (the "Fund"). Upon consummation of the Merger, the Fund and
related investors received 83.82% of the Company's common stock and 11.76%
was retained by the shareholders at the time of the Merger.

The Merger was accounted for as a recapitalization which resulted in a
charge to equity of $312,571 to reflect the redemption of common stock of
the Company outstanding immediately prior to the Merger and related merger
costs, including a closing fee of $4,000 paid to the Fund Manager, an
affiliate of the Fund's sole General Partner.

Prior to the Merger JJAC issued 425,000 shares of common stock for an
aggregate of $6,500, issued an aggregate of $22,500 in liquidation
preference of Class A Preferred Stock, issued $10,000 in liquidation
preference of Class C Preferred Stock, and issued warrants to purchase
75,000 shares of common stock to the then holder (along with related
investors) of 100% of the Class A Preferred Stock and 15% of the Class C
Preferred Stock. The Company issued $27,446 in liquidation preference of
Class B Preferred Stock as part of the consideration to shareholders at the
time of the Merger. In the Merger the common stock, Class A Preferred Stock,
and Class C Preferred Stock issued by JJAC were converted into like shares
of the Company and the Company assumed the obligations of JJAC under the
warrants.

In connection with the Merger, the Company retired $35,700 of long-term debt
prior to its scheduled maturity. Early retirement of this debt resulted in
an extraordinary loss of $1,456, net of an income tax benefit of $866.

3. INVENTORIES

Had the cost for all inventories been determined on the first-in, first-out
method, inventories would have been higher by approximately $17,245 at May
3, 1997 and $18,227 at April 27, 1996. LIFO liquidations resulted in an
increase in fiscal year 1997 net earnings of approximately $148. The effect
on net earnings of LIFO liquidations in fiscal years 1996 and 1995 was not
material.

4. INVESTMENTS IN DEBT SECURITIES

Investments in debt securities consisted of U.S. Treasury securities which
matured in fiscal year 1997. Such investments, classified as available for
sale, had no unrealized gains or losses at April 27, 1996. Proceeds from
sale of investments in debt securities were approximately $13,000 in fiscal
year 1996 and $6,100 in fiscal year 1995. Losses of $43 (1996) and gains of
$14 (1995) were realized on those sales.

<PAGE>

5. OTHER ASSETS

Other assets, net of accumulated amortization of $3,916 (1997) and $3,059
(1996), consisted of the following:

MAY 3, APRIL 27,
1997 1996
<S> <C> <C>

Debt issue costs $ 6,913 $ 7,917
License and franchise rights 746 838
Other, primarily covenant not to compete 825 952
------- -------

Total $ 8,484 $ 9,707
======= =======
</TABLE>

6. PROPERTY UNDER CAPITAL LEASES AND LEASE COMMITMENTS

Leased property capitalized in the financial statements is summarized as
follows:

MAY 3, APRIL 27,
1997 1996
<S> <C> <C>

Store property $70,920 $76,371
Computer equipment 3,169
Less accumulated depreciation (32,112) (32,993)
------- -------

$41,977 $ 43,378
======= =======
</TABLE>

Most store leases provide for contingent rentals based on percentages of
sales in excess of stipulated amounts. The leases have primary terms ranging
from five to twenty years and generally contain renewal options. Portions of
store space are sublet under leases. The present value of future minimum
lease payments relative to capitalized leases is included in the financial
statements as obligations under capitalized leases. Lease liabilities are
amortized over the lease term using the interest method.

The future minimum rental commitments for capital leases and noncancelable
operating leases as of May 3, 1997, were as follows:

CAPITAL OPERATING
LEASES LEASES
<S> <C> <C>

1998 $ 13,840 $ 6,056
1999 13,693 5,176
2000 13,261 4,401
2001 12,114 2,557
2002 10,796 1,777
Remaining balance 70,024 4,895

Total minimum lease commitments 133,728 $ 24,862
========
</TABLE>

<PAGE>

CAPITAL
LEASES
<S> <C>

Less amount representing estimated executory costs
(taxes, maintenance and insurance) $ 1,917
--------

Net minimum lease commitments 131,811

Less amount representing imputed interest 67,349
--------

Present value of minimum lease commitments 64,462

Current portion of obligations under capitalized
leases 4,899
--------

Obligations under capitalized leases, less current
installments $ 59,563
--------
--------

</TABLE>

Minimum rental commitments have not been reduced by minimum sublease rentals of
$1,306 applicable to capital leases and $841 applicable to operating leases due
in the future under noncancelable subleases.

The following schedule shows the composition of total rental expense for all
operating leases:

YEAR ENDED
-------------------------------------
MAY 3, APRIL 27, APRIL 29,
1997 1996 1995
<S> <C> <C> <C>

Minimum rentals $ 10,717 $ 10,211 $ 10,075
Contingent rentals 325 346 328
Less: Sublease rentals (288) (219) (323)
-------- -------- --------

$ 10,754 $ 10,338 $ 10,080
======== ======== ========

</TABLE>

Rents, net of sublease income, paid to affiliated partnerships under long-term
lease commitments were as follows:

YEAR ENDED
-------------------------------
MAY 3, APRIL 27, APRIL 29,
1997 1996 1995
<S> <C> <C> <C>

Capitalized leases $ 3,062 $ 3,017 $ 3,001
Operating leases 331 334 321
------- ------- -------

$ 3,393 $ 3,351 $ 3,322
======= ======= =======
</TABLE>

Obligations to affiliated partnerships under capitalized leases were $8,602
at May 3, 1997 and $9,150 at April 27, 1996.

7. LONG-TERM DEBT
Long-term debt consisted of the following:

MAY 3, APRIL 27,
1997 1996
<S> <C> <C>

Senior notes $ 200,000 $ 200,000

Revolving credit loans 8,000 39,059

Long-term debt $ 208,000 $ 239,059
========= =========

</TABLE>

Aggregate maturities of long-term debt for the fiscal years following May 3,
1997 are as follows:

2001 $ 8,000
2006 200,000
---------

$ 208,000
=========
</TABLE>

In March, 1996 the Company issued $200,000 of unsecured Senior Notes which
mature on March 1, 2006 and accrue interest at the rate of 12% per annum
payable semi-annually. The proceeds from issuance of the Senior Notes were
used to fund a portion of the Merger consideration (See Note 2). Except
under certain conditions, the Senior Notes are not redeemable at the
Company's option prior to March 1, 2001. Thereafter, the Senior Notes are
subject to redemption at the option of the Company at 106% of principal
amount if redeemed during the twelve-month period beginning March 1, 2001
decreasing to 100% of principal amount if redeemed during the twelve-month
period beginning March 1, 2004 and thereafter plus accrued and unpaid
interest thereon.

In the event of a change of control as defined in the Indenture, holders of
Senior Notes have the right to require the Company to repurchase all or any
part of such holder's notes at a price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest thereon.

In March, 1996 the Company entered into a revolving credit agreement with a
bank which provides a $100,000 Credit Facility. The Credit Facility was used
to finance a portion of the Merger consideration, refinance certain
indebtedness, and provide for working capital requirements. The commitments
under the Credit Facility will terminate and all loans outstanding
thereunder will be required to be repaid in full in March, 2001. Borrowings
under the Credit Facility, including revolving loans and up to $20,000 in
letters of credit, are limited to the lesser of (i) the "total commitment"
which initially was $100,000 and (ii) an amount equal to the sum of (a) up
to 60% of eligible inventory (valued at the lesser of FIFO cost or current
market) and (b) the "supplemental availability" which initially was $45,000.
Each of the total commitment and the supplemental availability will be
reduced by $1,250 per quarter, commencing December 31, 1996. The interest
rates on borrowings under the Credit Facility are, at the Company's option,
a function of the bank's prime rate or LIBOR. The weighted average interest
rate of loans under the Credit Facility was 8.44% at May 3, 1997 and 8.62%
at April 27, 1996. The agreement requires the Company to pay a facility fee
at an annual rate of .50% (.25% subsequent to March 31, 1997) of the unused
amount available under the Credit Facility. Letters of credit aggregating
$10,481 were outstanding as of May 3, 1997 and April 27, 1996 under the
Credit Facility.

<PAGE>

The Senior Notes are guaranteed on a full, unconditional and joint and
several basis by each of the Company's subsidiaries. The Credit Facility is
guaranteed by each of the Company's subsidiaries. In addition, obligations
under the Credit Facility are secured by a first lien on all of the
Company's and its subsidiaries' assets.

The Credit Facility and the Indenture pursuant to which the Senior Notes
were issued contain numerous covenants which, among other things, restrict
or limit the incurrence of indebtedness, payments of dividends and
distributions, and capital expenditures. The Credit Facility also contains
numerous financial covenants, the more significant of which relate to
leverage ratio, interest coverage ratio and cash flows. As of May 3, 1997
the Company was in compliance with the covenants under its debt agreements.

8. INCOME TAXES

Income taxes were composed of the following:

YEAR ENDED
-----------------------------
MAY 3, APRIL 27, APRIL 29,
1997 1996 1995
<S> <C> <C> <C>

Current provision $ 3,913 $ 6,485 $ 9,157
Deferred provision (benefit) (3,574) 2,577 2,260
-------- ------- -------

Total $ 339 $ 9,062 $11,417
======== ======= =======
</TABLE>

The effective tax rate varied from the federal statutory rate of 35% as
follows:

<TABLE>
<CAPTION>
YEAR ENDED

----------------------------
MAY 3, APRIL 27, APRIL 29,
1997 1996 1995
<S> <C> <C> <C>

Federal tax at statutory rate $ 380 $ 8,742 $ 10,577
State income taxes, net of federal tax benefit (25) 400 665
Other (16) (80) 175
----- ------- --------

Income tax provision $ 339 $ 9,062 $ 11,417
===== ======= ========
</TABLE>

Deferred income tax expense relates to the following:

<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------
MAY 3, APRIL 27, APRIL 29,
1997 1996 1995
<S> <C> <C> <C>

LIFO inventory $ 773 $ 669 $ 1,499
Deferred compensation 9 2,290 (24)
Accrued estimated insurance claims (690) (285) (166)
Deferred income (1,567)
Property and equipment (676) 158 1,345
Capital leases (1,004) (147) (448)
Other (419) (108) 54
-------- ------- --------

Total $ (3,574) $ 2,577 $ 2,260
======== ======= ========

</TABLE>

<PAGE>

The sources of temporary differences and the related deferred income tax effects
were as follows:

MAY 3, APRIL 27,

1997 1996
<S> <C> <C>

CURRENT DEFERRED TAX ASSETS (LIABILITIES):

LIFO inventory $ (2,512) $ (1,739)
Deferred compensation and compensated absences 562 571
Deferred income 1,567
Accrual of estimated insurance claims 2,228 1,538
Other 307 436
-------- --------

Total net current deferred tax asset $ 2,152 $ 376
======== ========

NONCURRENT DEFERRED TAX (ASSETS) LIABILITIES:

Property and equipment $ 12,975 $ 13,651
Capital and closed store leases (6,710) (5,706)
Other 133 251
-------- --------

Total net noncurrent deferred tax liability $ 6,398 $ 8,196
======== ========

</TABLE>

Currently payable income taxes of $1,835 at May 3, 1997 are included in accrued
expenses.

Refundable income taxes of $3,890 at April 27, 1996 represent an overpayment of
estimated taxes and are included in prepaid expenses and other in the balance
sheet.

The Company's income tax returns through fiscal year 1994 have been examined by
the Internal Revenue Service.

9. CAPITAL STOCK

PREFERRED STOCK

Preferred stock consisted of the following:

MAY 3, 1997 APRIL 27, 1996
------------------------- --------------------------
DIVIDEND OUTSTANDING LIQUIDATION CARRYING LIQUIDATION CARRYING
CLASS RATE SHARES PREFERENCE AMOUNT PREFERENCE AMOUNT

<S> <C> <C> <C> <C> <C> <C>
A 15% 225,000 $ 26,722 $ 24,557 $ 22,500 $20,146

B 10% 274,460 30,685 30,685 27,446 27,446

C - Series 2 10% 23,958 2,679 2,679 2,396 2,396
------- ------- ------- -------

Total Mandatorily Redeemable $ 60,086 $ 57,921 $ 52,342 $49,988
======== ======== ======== =======

C - Series 1 10% 76,042 8,502 8,502 7,604 7,604
======== ======== ======== =======

</TABLE>

<PAGE>

The excess of liquidation preference over the carrying amount of the Class A
Preferred Stock is being accreted by periodic charges to retained earnings
to the mandatory redemption date.

Dividends on Class A Preferred Stock are payable quarterly. Through March,
2001, such dividends are payable, at the Company's option, either by
cumulation to liquidation preference or in cash and thereafter are payable
in cash. Dividends on Class B Preferred Stock and Class C Preferred Stock
cumulate on a compounding basis until paid. Cumulative dividends not
declared or paid on preferred shares aggregated $8,642 at May 3, 1997.

The Class A Preferred Stock is redeemable at the Company's option, (i) at
any time after March 1, 2001 at a price equal to the then applicable
liquidation preference plus accrued and unpaid dividends and a prepayment
premium or (ii) on or prior to March 1, 1999 with the proceeds of a public
offering of common stock at a price per share equal to 114% of the then
applicable liquidation preference plus accrued and unpaid dividends thereon.
All of the Class A Preferred Stock is required to be redeemed on or before
March, 2008 at a price per share equal to the then applicable liquidation
preference, plus accrued and unpaid dividends thereon.

The Class B Preferred Stock and Class C Preferred Stock, Series 2, are
redeemable at the Company's option at any time, in whole or in part, at a
price per share equal to the then applicable liquidation preference, plus
accrued and unpaid dividends. All of the Class B Preferred Stock and all of
the Class C Preferred Stock, Series 2, are required to be redeemed in March,
2010 and March, 2011, respectively, at a price per share equal to the then
applicable liquidation preference plus accrued and unpaid dividends
(including cumulated dividends). The Class C Preferred Stock, Series 1, is
not redeemable by the Company at any time.

Under certain conditions, as defined, the Company is required to offer to
repurchase all shares of preferred stock. Upon a change in control, the
Company is required to offer to repurchase all shares of the Class A
Preferred Stock at 101% of the then applicable liquidation preference plus
accrued and unpaid dividends and all shares of Class B Preferred Stock and
all shares of Class C Preferred Stock, Series 1 and Series 2, at 100% of the
liquidation preference thereof plus accrued and unpaid dividends. In
addition, the Company is required to offer to apply, subject to certain
limitations, net proceeds raised through a primary issuance of securities
junior to Class B Preferred Stock to repurchase shares of Class B Preferred
Stock.

Except as required by law and with respect to certain specified matters,
Class A Preferred Stock has no voting rights. Neither the Class B Preferred
Stock nor the Class C Preferred Stock has any voting rights, except as
required by law.

The Class A Preferred Stock is exchangeable (with cumulated dividends) at
the Company's option, in whole but not in part, for subordinated exchange
debentures of the Company. The exchange debentures will pay interest from
the date of the exchange at the rate of 15% per annum, consisting of, at the
Company's option, additional exchange debentures or cash on or prior to
March, 2001 and cash thereafter. The exchange debentures will mature in
March, 2008.

<PAGE>

Class A Preferred Stock ranks senior to Class B Preferred Stock and Class C
Preferred Stock in right of payment of cash dividends, liquidation
preference and redemption (both mandatory and optional). The Class C
Preferred Stock ranks junior to the Class B Preferred Stock in right of such
cash payments.

The Credit Facility and the Indenture (See Note 7) restrict the Company's
ability to pay cash dividends, exchange Class A Preferred Stock for exchange
debentures and redeem or repurchase Class A Preferred Stock, Class B
Preferred Stock, Class C Preferred Stock and exchange debentures.

WARRANTS

Warrants to purchase 75,000 shares of common stock were issued in
conjunction with the Merger (See Note 2) and were outstanding as of May 3,
1997 and April 27, 1996. The warrants were recorded at fair value of $881 at
date of issue. The warrants have an exercise price of $.01 per share and
will expire in 2008.

10. EMPLOYEE BENEFIT AND COMPENSATION PLANS

The Company has a profit-sharing plan covering substantially all employees
with one or more years' service. Contributions are made at the discretion of
the Board of Directors of the Company and totaled $1,200 in fiscal years
1997,1996, and 1995.

Prior to March 1996, the Company had a Phantom Stock Plan for certain key
officers whereby deferred compensation units (expressed in shares of common
stock) were earned to the extent that performance targets (expressed in
terms of growth in stockholders' equity) were met. The amounts payable in
accordance with the provisions of the Phantom Stock Plan became fully vested
and immediately payable at the time of the Merger and Recapitalization (see
Note 2). Effective with the Merger $4,252 was paid to the participants and
$712 was applied against the purchase price for shares of Class C Preferred
Stock acquired by them in connection with the Recapitalization.

Effective with the Recapitalization the Phantom Stock Plan was amended and
restated and renamed the Deferred Compensation Plan for Jitney-Jungle Stores
of America, Inc. Under the amended plan no further awards may be made and no
other individuals will become participants. Units credited to the
participants consist of a cash amount payable in accordance with the terms
of the Phantom Stock Plan before its amendment and an amount that will
continue to be credited under the terms of the plan to an account, the value
of which will be equal to the value of the number of shares of Class C
Preferred Stock of the Company that could be acquired with that amount.

With respect to the amounts that continue to be credited under the plan as
amended, an amount equal to the amount of any cash dividends that would have
been paid on the number of shares of preferred stock credited to each
participant's account will be paid to the participant at the same time as
any cash dividends actually are paid on the preferred stock. Payment
otherwise will be made under the amended plan at the same time as the
preferred stock is redeemed, in an amount equal to the redemption price
times the number (or proportionate number, in the event of a partial
redemption) of shares of preferred stock credited to the participant's
account.

<PAGE>

11. SPECIAL CHARGES

Included in special charges is approximately $1,779 attributable to the
employment agreement with the Company's then Chairman and Chief Executive
Officer who, in January 1997, relinquished his position and duties as Chief
Executive Officer. Payments to be made under the employment agreement were
deemed to not relate to future services to be provided by the Chairman and,
accordingly, such amounts were charged to expense in fiscal year 1997.

Special charges also include termination and retirement benefits payable to
employees whose positions were eliminated.

12. FAIR VALUES OF FINANCIAL INSTRUMENTS

In accordance with Statement of Financial Accounting Standards (SFAS) No.
107, "Disclosures About Fair Value of Financial Instruments", information is
provided about the fair value of certain financial instruments for which it
is practicable to estimate that value. The fair value amounts disclosed
represent management's best estimate of fair value. In accordance with SFAS
No. 107, this disclosure excludes certain financial instruments and all
nonfinancial instruments. The aggregate fair value amounts presented are not
intended to represent the underlying aggregate fair value of the Company.

The estimated fair values are significantly affected by assumptions used,
principally the timing of future cash flows, the discount rate, judgments
regarding current economic conditions, risk characteristics of various
financial instruments and other factors. Because assumptions are inherently
subjective in nature, the estimated fair values cannot be substantiated by
comparison to independent quotes and, in many cases, the estimated fair
values could not necessarily be realized in an immediate sale or settlement
of the instrument. The following methods and assumptions were used by the
Company in estimating fair value disclosures for financial instruments:

CASH AND CASH EQUIVALENTS: The carrying amount reported in the balance
sheet approximates fair value.

INVESTMENTS IN DEBT SECURITIES: The securities are carried at fair value
and are based on quoted market prices.

RECEIVABLES, ACCOUNTS PAYABLE AND ACCRUED EXPENSES: The carrying amount
reported in the balance sheet approximates fair value.

LONG-TERM DEBT: The fair value of the Company's Senior Notes is based on
quoted market prices. The interest rates on borrowings under the Credit
Facility reset periodically. Consequently, the carrying value of
borrowings under the Credit Facility approximates fair value.

REDEEMABLE PREFERRED STOCK: The fair value of redeemable preferred stock
is estimated at carrying value as such stock is not traded in the open
market and a market price is not readily available.

<PAGE>

The carrying amounts and fair values of the Company's financial instruments were
as follows:

MAY 3, 1997 APRIL 27, 1996
-------------------- ----------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C>

Cash and cash equivalents 14,426 14,426 5,676 5,676

Investments in debt securities 337 337

Receivables 5,463 5,463 4,892 4,892
Accounts payable 49,978 49,978 40,008 40,008
Accrued expenses 33,088 33,088 23,165 23,165

Long-term debt:
Senior Notes 200,000 217,000 200,000 204,700
Credit Facility 8,000 8,000 39,059 39,059

Redeemable preferred stock 57,921 57,921 49,988 49,988
</TABLE>

13. ACCOUNTING STANDARD TO BE ADOPTED IN THE FUTURE

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." The new
standard changes the presentation and method in which earnings per share are
computed and is effective for the Company's year ending May 2, 1998. The new
standard will be applied on a "retroactive restatement of all prior periods"
basis. The Company is currently in the process of ascertaining the impact
the new standard will have on its earnings per share amounts for fiscal year
1997 and prior periods.

14. COMMITMENTS AND CONTINGENCIES

The Company is defendant in certain litigation incurred in the normal course
of business. Management, after consulting legal counsel, is of the opinion
that the liability, if any, which may result from this litigation will not
have a material adverse effect on the Company's financial position or
results of operations.

In 1996, the Company entered into a five-year supply agreement, which
replaced a previously existing agreement, relating to merchandise purchases
for stores located in Memphis, Tennessee and Little Rock and Pine Bluff,
Arkansas.

In fiscal year 1997, the Company sold the operating assets of its bakery
subsidiary for $750 and received $5,250 as consideration for entering into a
five-year supply agreement with the purchaser of such operating assets. The
$5,250 is being amortized over the term of the supply agreement.

In connection with the Merger and Recapitalization, the Company entered into
an agreement whereby the Fund Manager is entitled to receive $250 per year
from the Company as a management fee for the performance of strategic and
financial planning services. The amount of the annual management fee may be
increased by up to an additional $750 per year based upon certain
performance criteria. Management fees for fiscal year 1997 approximated
$250.

<PAGE>

15. SUBSEQUENT EVENTS

On June 3, 1997, the Company entered into a $12,996 insurance premium
finance agreement payable in monthly installments of $473, including
interest at 6.75% per annum.

On July 8, 1997, the Company entered into a merger agreement with Delchamps,
Inc. ("Delchamps") which operates retail supermarkets in Alabama, Florida,
Louisiana and Mississippi. Pursuant to the agreement, the Company has
commenced an all-cash tender offer for all of Delchamps' outstanding common
stock at a price of $30 per share. The offer is conditioned upon, among
other things, there being tendered and not withdrawn prior to the expiration
date of the offer at least two-thirds of the outstanding shares of
Delchamps' common stock. In addition, regulatory approval and consent of the
holders of the Company's senior notes are required. The Company intends to
issue up to $280 million of debt to finance the acquisition and to repay
indebtedness of Delchamps in connection with the acquisition.

* * * * * *

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Jitney-Jungle Stores of America, Inc.:

We have audited the accompanying consolidated balance sheets of Jitney-Jungle
Stores of America, Inc. and subsidiaries ("the Company") as of May 3, 1997 and
April 27, 1996, and the related consolidated statements of earnings, changes in
stockholders' equity, and cash flows for each of the three fiscal years in the
period ended May 3, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Jitney-Jungle Stores of
America, Inc. and subsidiaries as of May 3, 1997 and April 27, 1996, and the
results of their operations and their cash flows for each of the three fiscal
years in the period ended May 3, 1997, in conformity with generally accepted
accounting principles.

/s/ Deloitte & Touche LLP

July 10, 1997

<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There has been no change of accountants or reporting disagreements on any
matters of accounting principle, practice, financial statement disclosure or
auditing scope or procedure during the two most recent fiscal years.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

NAME AGE POSITION

W. H. Holman, Jr. 67 Chairman of the Board since 1967. Chief Executive
Officer of the Company from 1967 until January
1997. Member of the Board of Directors of two
private companies.

Michael E. Julian 46 President of the Company since May 1997 and Chief
Executive Officer since January 1997. Director of
the Company since April 1996. Prior to January
1997 served as Chairman, President and Chief
Executive Officer of Farm Fresh, Inc. since 1988.
Member of the Board of Directors of Jackson
Hewitt Inc.

Roger P. Friou 62 Director of the Company since June 1984. President
of the Company from March 1996 to May 1997. Prior
to 1996 served as Vice Chairman, Chief Financial
Officer, and Secretary of the Company since 1991.
Prior to that time he served as Executive Vice
President from 1984. Member of the Board of
Directors of Parkway Properties Inc. Resigned
May 1997 as President but remains as a Director
of the Company.

Bruce C. Bruckmann 43 Director of the Company since March 1996 and a
principal in BRS. He was an officer and
subsequently a Managing Director of Citicorp
Venture Capital, Ltd. ("CVC") from 1983 through
1994. Member of the Board of Directors or Chairman
of the Board of AmeriSource Distribution Corp.,
CORT Business Services Corp., Chromcraft
Revington, Inc. and Mohawk Industries, Inc., Town
Sport Inc., Anvil Knitwear Inc. as well as several
private companies.

<PAGE>

DIRECTORS AND EXECUTIVE OFFICERS (CONTINUED)

NAME AGE POSITION

Harold O. Rosser, II 48 Director of the Company since March 1996 and a
principal in BRS. He was an officer and
subsequently a Managing Director of Citicorp
Venture Capital, Ltd. ("CVC") from 1987 through
1994. Member of the Board of Directors of Davco
Restaurants, Inc., as well as a private company.

Stephen C. Sherrill 44 Director of the Company since March 1996 and a
principal in BRS. He was an officer and
subsequently a Managing Director of Citicorp
Venture Capital, Ltd. ("CVC") from 1983 through
1994. Member of the Board of Directors of Galey &
Lord, Inc., and of several private companies.

John M. Moriarty, Jr. 40 Director of the Company since April 1996. A
Managing Director of Donaldson, Lufkin & Jenrette
Securities Corporation since 1989 and a Managing
Director of DLJ Merchant Banking, Inc. since
January 1996. Member of the Board of Directors of
a private company.

Ronald E. Johnson 47 Director of the Company since May 1996. Retail
Grocery - President and Chief Executive Officer of
Farm Fresh, Inc. in January 1997. Prior to
that served as Retail Grocery - Chairman,
President and Chief Executive Officer of Kash n'
Karry from 1995 to 1997 and Retail Grocery -
Executive Vice President and Chief Operating
Officer of Farm Fresh, Inc. from 1988 to 1995.

Bernard J. Ebbers 55 Director of the Company since August 1996.
President and Chief Executive Officer of
WorldCom, Inc. since 1983. Member of the Board
of Directors of WorldCom, Inc.

David K. Essary 47 Executive Vice President since March 1996.
Previously served as Executive Vice President -
Retail Operations since 1991. From 1985 to 1991
served as Senior Vice President - Marketing.

David R. Black 44 Senior Vice President - Finance/Chief Financial
Officer since 1996. Previously served as
Treasurer and Controller from 1986.

<PAGE>

DIRECTORS AND EXECUTIVE OFFICERS (CONTINUED)

NAME AGE POSITION

Jerry L. Jones 45 Senior Vice President - Administrative Operations
since April 1997. Senior Vice President
Retail Operations March 1996 to April 1997.
Previously served as Senior Vice President - Human
Resources since 1991. Prior to that, served as
Vice President, Human Resources from 1989.

Harold D. Evans 52 Senior Vice President - Store Operations since
1993. Previously served as Vice President - Store
Operations from 1986.

J. R. Hansbrough 41 Senior Vice President - Information Services
since 1996. Previously served as Vice President -
Information Services from 1994. Prior to that,
Consultant and Marketing Representative with IBM
Corporation from 1982.

James P. Riley 47 Senior Vice President - Engineering since 1996.
Previously served as Vice President - Engineering
from 1991 and Director of Engineering Services
from 1985.

Clyde D. Staley 60 Senior Vice President - Real Estate since 1996.
Previously served as Vice President - Real Estate
from 1985.

A.Q. Winstead, Jr. 58 Senior Vice President - Merchandising/Advertising/
Sales Promotion since 1996. Previously served as
Vice President - Grocery from 1992, Director of
Grocery Merchandising from 1985. Resigned
May 1997.

W. H. Holman, III 33 Secretary of the Company since 1996 and also
serves as President of Pump And Save, Inc.
Previously served as Senior Vice President -
Sales and Marketing from 1992 and Vice President
- Sales and Marketing from 1991 and is the son
of W. H. Holman, Jr. Member of the Board of
Directors of one private company.

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

The following table summarizes the compensation paid to or accrued by the
Company for the chief executive officer and the other four most highly
compensated executive officers of the Company during fiscal 1997.

SUMMARY COMPENSATION TABLE

LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------- ------------

OTHER
ANNUAL ALL OTHER
COMPEN- LTIP COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS SATION(2) PAYOUTS(3) SATION(4)

<S> <C> <C> <C> <C> <C> <C>
W.H. Holman, Jr., Chairman (5) 1997 $ 331,182 $ 162,920 $ 2,633 $ 15,795

1996 315,100 121,193 2,216 $ 1,894,039 15,840

Michael E. Julian, President and CEO 1997 57,692 75,000 0 0 0
(Appointed CEO January 1997 and 1996 0 0 0 0 0
President May 1997)

Roger P. Friou, President 1997 223,637 96,537 2,356 106,737 (6)
(Resigned May 1997) 1996 182,600 68,461 1,807 2,247,911 106,578 (6)

David K. Essary, Executive 1997 192,463 89,653 2,251 103,485 (6)
Vice President 1996 176,700 67,307 1,745 110,229 103,425 (6)

Jerry L. Jones, Senior Vice 1997 133,000 33,250 1,790 3,149
President-Retail Operations 1996 125,200 23,654 1,727 3,141

Harold D.Evans, Senior Vice 1997 121,500 30,376 1,978 3,444
President Store Operations 1996 114,000 21,923 1,863 3,394

</TABLE>

1) The amounts shown in this column include amounts contributed as salary
deferral contributions under the Jitney-Jungle Stores of America, Inc. and
Affiliates Profit Sharing Plan and Trust (the "401 (k) Plan").

2) Other annual compensation includes the annual estimated value of an
automobile furnished by the Company.

3) Includes distributions from the Phantom Stock Plan.

4) Includes Company matching contributions under the 401(k) Plan, Company profit
sharing contributions under the 401(k) Plan and premiums for group term life
insurance.

5) During fiscal 1997, the Company recognized a special charge of approximately
$1.8 million attributable to an employment agreement which allows future
payments to be received by Mr. Holman, however, none of which were received
by Mr. Holman in fiscal 1997.

6) Includes $100,000 as the first and second of three annual installments per an
employment agreement with Mr. Essary and Mr. Friou. Subsequent to fiscal 1997
Mr. Friou retired, forfeiting the third payment.

<PAGE>

DIRECTOR COMPENSATION AND COMMITTEE INTERLOCKS

Each non-employee director is currently paid an annual retainer of $12,000
plus fees of $1,000 for each board meeting attended and $500 for each committee
meeting attended. Directors who are employees of the Company do not receive
additional compensation as directors.

The Board of Directors held four regular meetings during fiscal 1997 and
all directors attended at least 75 percent of the total meetings of the Board of
Directors and the committees of which they were members. The members of the
Audit Committee are Steven C. Sherrill, Chairman, John M. Moriarty, Jr., and
Ronald E. Johnson. The Audit Committee reviews external and internal auditing
matters and recommends the selection of the Company's independent auditors for
approval by the Board. There was one meeting of the Audit Committee held during
fiscal 1997. The members of the Compensation Committee are Harold O. Rosser,
II, Chairman and Michael E. Julian. Robert R. Onstead who resigned from the
Board in March 1997 was also a member of the Compensation Committee until March
1997. The Compensation Committee is responsible for reviewing annual salaries
and bonuses paid to senior management and administers its stock option programs.
There was one meeting of the Compensation Committee held during fiscal 1997.

EMPLOYMENT AGREEMENTS

W. H. Holman, Jr. has an employment contract with the Company covering the
period through February 28, 2001. The agreement provides that Mr. Holman, Jr.
will serve as Chairman of the Board and as Chief Executive Officer, at the
discretion of the Board of Directors. The Board of Directors elected Michael E.
Julian as Chief Executive Officer in January 1997. If Mr. Holman, Jr. ceases to
be Chairman of the Board prior to February 28, 2001, he will continue to serve
on the Board of Directors as Chairman Emeritus until February 28, 2001, with a
salary equal to his base salary then in effect until February 28, 1999, and 50%
of such base salary thereafter. Mr. Holman, Jr. is also eligible for a bonus
through February 28, 1999.

Roger P. Friou and David K. Essary have employment contracts with the
Company providing for a base salary of approximately $201,000 per year and
$186,000 per year, respectively, for the period from March 1, 1995 through
February 28, 1998. Each is also eligible for a bonus. For Mr. Friou, the bonus
may be up to 50% of his base salary less $23,000. For Mr. Essary, the bonus may
be up to 50% of his base salary less $11,000. A provision in each employment
contract states that upon a change of control of the Company, Mr. Friou and Mr.
Essary will each be awarded a payment of up to $300,000 to be paid in three
annual installments of $100,000 beginning February 28, 1996. Because the Merger
constituted a change of control under such employment agreements, Mr. Friou and
Mr. Essary became entitled to receive such payments, with the first $100,000
installment thereof paid in March 1996 after the consummation of the Merger and
the second installment was paid in March 1997. For the next succeeding year,
provided he is still employed by the Company when the yearly payment is due or
his employment has been terminated by the Company without cause or terminated by
the employee for good reason, the Company will pay to each of Messrs. Friou and
Essary the above-mentioned

<PAGE>

annual installment of $100,000. No further payments are required under the
employment agreements upon any subsequent change of control. In addition, each
of Messrs. Friou and Essary is entitled to his base salary plus anticipated
bonus for the remainder of the term of the agreement if the employee's
employment with the Company is terminated by the Company without cause, the
employee resigns his employment at the Company's request without cause, or the
employee terminates his employment for good reason. Roger P. Friou resigned in
May 1997, therefore the third installment of $100,000 due in March 1998 has been
forfeited by Mr. Friou.

W. H. Holman, III has an employment contract with the Company covering the
period through February 28, 1998 and will serve, at the discretion of the Board
of Directors, as Secretary of the Company and as President of Pump and Save,
Inc. Mr. Holman, III will receive a base salary of no less than $110,000 per
year through February 28, 1998, subject to periodic increases as determined by
the Board of Directors. Mr. Holman, III is also entitled to a bonus of up to
50% of his base salary less $11,000.

PHANTOM STOCK PLAN

On April 17, 1991, the Board of Directors of the Company adopted, and the
shareholders approved, the Amended and Restated Consolidated Phantom Stock Plan
of Jitney-Jungle (the "Phantom Stock Plan"). The Phantom Stock Plan provided
that phantom stock units could be awarded if combined net earnings exceed 15% of
stockholders' equity (as defined in the plan) at the beginning of the applicable
fiscal year; if earnings exceeded 15% of this base amount, awards could be made
equal to 10% of that excess to each participant. W. H. Holman, Jr., Roger P.
Friou and David K. Essary are the only three participants who currently have
units credited to them under this plan. Effective with the Merger, the Phantom
Stock Plan has been amended and restated, and renamed the Deferred Compensation
Plan for Jitney-Jungle Stores of America, Inc. Under this amended plan, no
further awards may be made and no other individuals may become participants.
The units credited to each of the three participants effectively have been
divided into two component amounts: a cash amount that was paid in accordance
with the terms of the Phantom Stock Plan as in effect before its amendment, and
an amount that will continue to be credited under the terms of the plan to an
account, the value of which will be equal to the value of the number of shares
of Class C Preferred Stock of the Company that could be acquired with that
amount.

The accrued amounts payable in accordance with the preamendment provisions
of the Phantom Stock Plan became fully vested and payable in a single lump sum
upon the Merger on March 5, 1996. The amounts paid Messrs. Holman, Jr., Friou
and Essary on March 7, 1996, were approximately $1,894,000, $2,248,000 and
$110,000, respectively, and Messrs. Holman, Jr., Friou and Essary applied an
additional $474,000, $125,000 and $112,500, respectively, toward the purchase
price for shares of Class C Preferred Stock of the Issuer in connection with
the Merger.

The Phantom Stock Plan is an unfunded deferred compensation arrangement
with an associated rabbi trust. The rabbi trust provides that the initial
contributions to the trust will be invested in shares of Class C Preferred
Stock. The initial contributions to the rabbi trust should

<PAGE>

equal the amounts that will continue to be credited under the plan described
above.

With respect to the amounts that continue to be credited under the plan as
amended, an amount equal to the amount of any cash dividends that would have
been paid on the number of shares of Preferred Stock credited to each
participant's account will be paid to the participant at the same time as any
cash dividends actually are paid on the Preferred Stock. Payment otherwise will
be made under the amended plan at the same time as the Preferred Stock is
redeemed, in an amount equal to the redemption price times the number (or
proportionate number, in the event of a partial redemption) of shares of
Preferred Stock credited to the participant's account.

401(K) PLAN

The Company maintains the Jitney-Jungle Stores of America, Inc. and
Affiliates Profit Sharing Plan and Trust (the "401(k) Plan") for the benefit of
its employees who have satisfied the plan's eligibility requirements.
Participants are permitted to make pretax salary reduction contributions, up to
the amount permitted under applicable tax law. The Company makes a matching
contribution equal to 50% of each participant's salary reduction contribution,
up to a maximum of 2% of the participant's compensation. In addition, the
Company may make additional profit sharing contributions in its discretion.
Although in prior years the Company has made discretionary profit sharing
contributions, it has no obligation to do so in the future. Company
contributions become vested when the participant has been credited with five
years of service. In March 1996, shares of Common Stock of the Company held
under the 401(k) Plan were surrendered in connection with the Merger, and
exchanged for cash and Class B Preferred Stock as provided in the Merger
Agreement. In addition, the plan acquired Common Stock and Class C Preferred
Stock for cash consideration.

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of Common and Preferred Stocks as of June 30, 1997, by (i) each
director, (ii) the chief executive officer and each of other most highly
compensated executive officers of the Company, (iii) all executive officers and
directors as a group and (iv) the Company's principal stockholders. Other than
as set forth in the table below, there are no persons known to the Company to
beneficially own more than 5% of the Common Stock. No Company securities are
owned by John M. Moriarty, Jr., Bernard J. Ebbers, or Ronald E. Johnson, each of
whom is a director of the Company.

NUMBER AND NUMBER AND NUMBER AND NUMBER AND
NAME AND ADDRESS PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
FOR BENEFICIAL SHARES OF SHARES OF CLASS A SHARES OF CLASS B SHARES OF CLASS C
OWNERS OVER 5% COMMON STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK

<S> <C> <C> <C> <C>
Bruckmann, Rosser,
Sherrill & Co., L.P. 353,750/83.24%(1) ---- ---- 75,508/75.51%
126 East 56th Street
New York, NY 10022

W. H. Holman, Jr. 29,699/6.99% ---- 21,516/7.84% (2) 4,742/4.72%
Jitney Jungle Stores
of America, Inc.
P. O. Box 3409
Jackson, MS 39207

DLJ Merchant (3) ---- ---- 15,000/15.00%
Banking Partners,
L.P. and related
investors
277 Park Avenue
New York, NY 10172

Michael E. Julian 2,500/* ---- ---- 534/*

Roger P. Friou 12,510/2.94% ---- 14/ * (2) 1,252/1.25%

Bruce C. Bruckmann 353,7250/83.24%(1)(4) ---- ---- 75,508/75.51%

Harold O. Rosser, II 353,750/83.24%(1)(5) ---- ---- 75,508/75.51%

Stephen C. Sherrill 353,750/83.24%(1)(6) ---- ---- 75,508/75.51%

David K. Essary 11,250/2.65% ---- ---- 1,125/1.13%

Jerry L. Jones 1,200/* ---- ---- 120/ *

Harold D. Evans 850/ * ---- ---- 85/ *
All directors and
executive officers
as a group (18) 421,359/99.14% ---- 26,729/9.74%(2) 92,207/92.21%

</TABLE>

*Owns less than 1% of the total outstanding Common Stock, Class B Preferred
Stock and Class C Preferred Stock.

<PAGE>

1) Includes 331,732 shares of common stock owned directly by Bruckmann,
Rosser, Sherrill & Co., Inc., L.P. ("BRS") and 22,018 shares to which BRS
possesses sole voting power. BRS is a limited partnership, the sole
general partner of which is BRS Partners and the manager of which is BRS.
The sole general partner of BRS Partners is BRSE Associates. Bruce C.
Bruckmann, Harold O. Rosser, II, Stephen C. Sherrill and Stephen F. Edwards
are the only stockholders of BRS and BRSE Associates and may be deemed to
share beneficial ownership of the shares shown as beneficially owned by the
Fund. Such individuals disclaim beneficial ownership of any such shares.

2) All shares of Class B Preferred Stock are owned by Trustmark National Bank
("Trustmark") pursuant to an escrow agreement by and among Trustmark, the
Company and former Common Stock shareholders of the Company. Certain of
the officers of the Company own an interest in the escrow account through
which they have a beneficial interest in the number of shares of Class B
Preferred Stock listed in this table.

3) DLJ Merchant Banking Partners, L.P. ("DLJ") and related investors have
received outstanding warrants to purchase 15.0%, on a fully diluted basis,
of the outstanding Common Stock of the Company as outlined in the
Shareholders Agreement referred to under Item 13.

4) Includes 6,605 owned directly and 347,145 shares to which BRS possesses
sole voting power.

5) Includes 1,367 owned directly and 352,383 shares to which BRS possesses
sole voting power.

6) Includes 4,423 owned directly and 349,327 shares to which BRS
possesses sole voting power.

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

BRS received a closing fee of $4.0 million at the consummation of the
Merger in fiscal year 1996. In addition, BRS is entitled to receive $0.25
million per year from the Company as a management fee for the performance of
strategic and financial planning services in the future. The amount of the
annual management fee may be increased by up to an additional $0.75 million per
year based upon certain performance criteria. In fiscal year 1997 BRS received
$.25 million. Messrs. Bruckmann, Rosser, Sherrill and Edwards (not a director
of the Company) are the only stockholders of BRS and BRSE Associates. BRSE
Associates is the sole general partner of BRS Partners, which is the sole
general partner of Bruckmann, Rosser, Sherrill & Co., L.P. (the "Fund"). The
Fund is the majority stockholder of the Company.

DLJ Merchant Banking Partners, L.P. ("DLJ") and related investors received
$6.0 million underwriting discount and commission from the Merger transaction
and public offering of Senior Notes. Mr. Moriarty, a director in the Company,
is an officers with DLJ.

Pursuant to an agreement with the Company, McCarty-Holman Co., L.P. (the
"Partnership") is the exclusive agent for the Company to rent, lease, operate
and manage all locations where the Company has sublet space to various tenants
and where it has space vacant and available for subleasing. W. H. Holman, Jr.
owns a noncontrolling interest in the Partnership. Under the agreement, the
Partnership is entitled to fees as follows: (i) for management: 4% of all
rental/lease collections; (ii) fees for leasing: 6% of the annual rent (for a
month-to-month tenancy; one-half of the first month's rent); and (iii) fees for
services other than as delineated above are negotiated. In fiscal 1997 and
1996, the Partnership received approximately $41,000 respectively, in fees
pursuant to this agreement. Management believes that the agreement is on an
arm's length basis and is on terms that are no less favorable to the Company
than could have been obtained with non-affiliated parties at the time the
agreement was entered into.

W. H. Holman, Jr., W. H. Holman, III and Roger P. Friou own in the
aggregate noncontrolling interests in certain partnerships that are landlords
under eighteen (18) leases (involvement is Holman, Jr., 15 leases; Holman, III,
8 leases; and Friou, 8 leases) for stores or other facilities where the Company
and its subsidiaries are the tenants. In fiscal 1997 and 1996, the Company paid
a combined total rent under these eighteen (18) leases of approximately $3.6
million and $3.6 million, respectively. Management believes that each of these
leases is on an arm's length basis and is on terms that are no less favorable to
the Company than could have been obtained with non-affiliated parties at the
time each lease was entered into.

David K. Essary, Executive Vice President, has an outstanding loan for the
purchase of Common Stock from the Company in the amount of $79,906 as of May 3,
1997. This is an unsecured note, due in three annual installments starting in
March 1997. Interest is payable at a rate of 8.25%, annually. The eight (8)
other executive officers have combined loans outstanding of $69,824 which were
used for the purchase of the Company's Common Stock and Class C Preferred Stock.

<PAGE>

Certain shareholders of the Company, entered into a Shareholders Agreement
which contains certain agreements among such shareholders with respect to the
capital stock and corporate governance of the Company. The shareholders
involved are Bruckmann, Rosser, Sherrill & Co., L.P., DLJ Merchant Banking
Partners, L.P., and Messrs. W. H. Holman, Jr., Roger P. Friou, and W. H. Holman,
III.

Pursuant to an agreement with the Company, Michael E. Julian received a fee
of $170,000 in fiscal 1997 for certain consulting services provided to the
Company.

<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

The following is an index of the financial statements, schedules and
exhibits included in this Report or Incorporated herein by reference:

(a) 1. Financial Statements:

Consolidated Balance Sheets as of May 3, 1997 and April 27, 1996.

Consolidated Statements of Earnings for Fiscal Years Ended May 3,
1997, April 27, 1996 and April 29, 1995.

Consolidated Statements of Changes in Stockholders' Equity for the
Fiscal Years Ended May 3, 1997, April 27, 1996, and April 29, 1995.

Consolidated Statements of Cash Flows for the Fiscal Years Ended May
3, 1997, April 27, 1996, and April 29, 1995.

Notes to Consolidated Financial Statements

Independent Auditors' Report

2. Financial Statement Schedules:

There are no Financial Statement Schedules included with this filing
for the reason that they are not applicable, are not required, or the
information is included in the financial statements or notes thereto.

3. Exhibits

The following is an index of the exhibits included in this Annual
Report on Form 10-K or incorporated herein by reference:

EXHIBIT NO.

*2.1 Agreement and Plan of Exchange and of Merger, dated as of
November 16, 1995 by and among JJ Acquisitions Corp. and
Jitney-Jungle Stores of America, Inc., Southern Jitney Jungle
Company, McCarty-Holman Co., Inc. and Jitney-Jungle Bakery,
Inc. (incorporated by reference to Exhibit No. 2.1 to
Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions
Corp. filed with the Commission on February 27, 1996).

*3.1 Amended and Restated Articles of Incorporation of
Jitney-Jungle Stores of America, Inc. (including designation
of Class B Preferred Stock) (incorporated

<PAGE>

by reference to Exhibit No.3.3 to Amendment No. 2 to [No.
33-80833] of JJ Acquisitions Corp. filed with the Commission
on February 27, 1996).

*3.2 Restated by-laws of Jitney-Jungle Stores of America, Inc.
(incorporated by reference to Exhibit No. 3.6 to Amendment No.
2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed
with the Commission on February 27, 1996).

*4.1 Indenture dated March 5, 1996 between Jitney-Jungle Stores of
America, Inc. and Marine Midland Bank, as Trustee, relating
to the issuance and sale of $200,000,000 aggregate principal
amount of 12% Senior Notes due 2006 (incorporated by reference
to Exhibit No.4.2 to Amendment No. 2 to Form S-1 [No.
33-80833] of JJ Acquisitions Corp. filed with the Commission
on February 27, 1996).

*4.2 Warrant dated March 4, 1996 to purchase 75,000 shares of
Common Stock of Jitney-Jungle Stores of America, Inc. by DLJ
Merchant Banking Partners, L.P. and related investors
(incorporated by reference to Exhibit No.4.3 to Amendment No.
2 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ
Acquisitions Corp. filed with the Commission on February 27,
1996).

*4.3 Revolving Credit Agreement dated March 5, 1996 by and among
NatWest Bank, N.A. and Jitney-Jungle Stores of America, Inc.
(incorporated by reference to Exhibit No.4.4 to Amendment No.
2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed
with the Commission on February 27, 1996).

*4.4 Memorandum of Agreement dated October 15, 1985 by and among
the City of Jackson, Mississippi and McCarty-Holman Co., Inc.
($3,650,000) (incorporated by reference to Exhibit No.4.8 to
Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions
Corp. filed with the Commission on February 27, 1996).

*9.1 Voting Trust Agreement dated November 1, 1990 by and among
Carolyn Holman Kroeze, as Executrix and the parties named
therein (incorporated by reference to Exhibit No. 9.1 to
Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions
Corp. filed with the Commission on February 27, 1996).

*10.1 Supply Agreement dated March 19, 1989 as amended, by and
among Fleming Companies Inc. (successor in interest to Malone
& Hyde, Inc.), Jitney-Jungle Stores of America, Inc. and
Interstate Jitney-Jungle Stores, Inc. (incorporated by
reference to Exhibit No. 10.2 to Amendment No. 2 to Form S-1
[No. 33-80833] of JJ Acquisitions Corp. filed with the
Commission on February 27, 1996).

*10.2 Membership in Topco Associates, Inc. (Cooperative) by
ownership of six hundred (600) shares of Common Stock, such
stock certificate being dated July 1, 1991 (incorporated by
reference to Exhibit No. 10.3 to Amendment No. 2 to Form S-1
[No. 33-80833] of JJ Acquisitions Corp. filed with the
Commission

<PAGE>

on February 27, 1996).

*10.3 Flour Sale Confirmation and Contract dated July 19, 1995 by
and among Cargill, Incorporated and Jitney-Jungle Bakery, Inc.
(incorporated by reference to Exhibit No. 10.4 to Amendment
No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp.
filed with the Commission on February 27, 1996).

*10.4 Employment Agreement dated as of February 15, 1995 by and
among Jitney-Jungle Stores of America, Inc. and Roger P.
Friou (incorporated by reference to Exhibit 10.6 to Amendment
No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp.
filed with the Commission on February 27, 1996).

*10.5 Employment Agreement dated as of February 24, 1995 by and
among Jitney-Jungle Stores of America, Inc. and David K.
Essary (incorporated by reference to Exhibit 10.7 to Amendment
No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp.
filed with the Commission on February 27, 1996).

*10.6 Employment Agreement dated as of March 5, 1996 by and among
Jitney-Jungle Stores of America, Inc. and W. H. Holman, Jr.
(incorporated by reference to Exhibit 10.6 to the Company's
Annual Report on Form 10-K, dated July 24, 1996).

*10.7 Employment Agreement dated as of March 5, 1996 by and among
Jitney-Jungle Stores of America, Inc. and W. H. Holman, III.
(incorporated by reference to Exhibit 10.7 to the Company's
Annual Report on Form 10-K, dated July 24, 1996).

*10.8 Restatement and Amendment by the Entirety of the Jitney-Jungle
Stores of America, Inc. and Affiliates Profit Sharing Plan and
Trust (incorporated by reference to Exhibit No. 10.8 to
Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions
Corp. filed with the Commission on February 27, 1996).

*10.9 Deferred Compensation Plan for Jitney-Jungle Stores of
America, Inc. dated as of November 16, 1995 by and among
Jitney-Jungle Stores of America, Inc., Southern Jitney Jungle
Company, Jitney-Jungle Bakery, Inc., McCarty-Holman Co., Inc.
and W. H. Holman, Jr., Roger P. Friou and David K. Essary
(incorporated by reference to Exhibit No. 10.9 to Amendment
No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp.
filed with the Commission on February 27, 1996).

*10.10 Shareholders Agreement dated as of March 5, 1996 by and among
DLJ Merchant Banking Partners, L.P. JJ Acquisitions Corp., and
certain other signatories party thereto (incorporated by
reference to Exhibit No. 10.10 to

<PAGE>

Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions
Corp. filed with the Commission on February 27, 1996).

*10.11 Securities Purchase and Holders Agreement dated as of March 5,
1996 by and among JJ Acquisitions Corp., Bruckmann, Rosser,
Sherrill & Co., L.P. and other parties thereto (incorporated
by reference to Exhibit No. 10.12 to Amendment No. 2 to Form
S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the
Commission on February 27, 1996).

*10.12 Registration Rights Agreement dated as of March 5, 1996 by and
among Jitney-Jungle Stores of America, Inc. and other parties
named therein (incorporated by reference to Exhibit No. 10.13
to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ
Acquisitions Corp. filed with the Commission on February 27,
1996).

*10.13 Consulting Agreement dated as of October 16, 1996 by and among
Jitney-Jungle Stores of America, Inc. and Michael E. Julian
(incorporated by reference to Exhibit No. 10.1 to Form 10-Q
for the Quarter Ended October 12, 1996 filed with the
Commission on November 20, 1996).

*10.14 Agreement and Plan of Merger, dated as of July 8, 1997 by and
among Jitney-Jungle Stores of America, Inc., Delta Acquisition
Corporation and Delchamps, Inc. (incorporated by reference to
Exhibit No. 2 to Form 8-K filed with the Commission on July
14, 1997).

21.1 Subsidiaries of the Registrant.

27.1 Financial Data Schedule.

*Previously filed as indicated.

(b) Reports on Form 8-K.

There were no reports filed on Form 8-K during the quarter ended May
3, 1997.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Jitney-Jungle Stores of America, Inc.
(Registrant)

By /s/ Michael E. Julian
----------------------------
(Michael E. Julian
President and
Chief Executive Officer)
(Principal Executive Officer)

Date July 24, 1997
----------------------------

By /s/ David R. Black
----------------------------
(David R. Black
Senior Vice President - Finance,
Chief Financial Officer)
(Principal Financial and Accounting
Officer)

Date July 24, 1997
----------------------------

<PAGE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated.

SIGNATURES POSITION DATE
- --------------------- ---------------------- -------------

/s/ W. H. Holman, Jr. Chairman of the Board July 24, 1997
- --------------------- -------------
(W. H. Holman, Jr.)

/s/ Michael E. Julian Director, President and July 24, 1997
- --------------------- Chief Executive Officer -------------
(Michael E. Julian)

/s/ Roger P. Friou Director July 24, 1997
- --------------------- -------------
(Roger P. Friou)

/s/ Bruce C. Bruckmann Director July 24, 1997
- ---------------------- -------------
(Bruce C. Bruckmann)

/s/ Harold O. Rosser, II Director July 24, 1997
- ------------------------ -------------
(Harold O. Rosser, II)

/s/ Stephen C. Sherrill Director July 24, 1997
- ------------------------ -------------
(Stephen C. Sherrill)

/s/ John M. Moriarty, Jr. Director July 24, 1997
- ------------------------ -------------
(John M. Moriarty, Jr.)

/s/ Bernard J. Ebbers Director July 24, 1997
- ------------------------ -------------
(Bernard J. Ebbers)

/s/ Ronald E. Johnson Director July 24, 1997
- ------------------------ -------------
(Ronald E. Johnson)

<PAGE>

Exhibit 21.1

SUBSIDIARIES OF JITNEY-JUNGLE STORES OF AMERICA, INC.

PERCENTAGE
OF VOTING
SECURITIES
JURISDICTION OF OWNED BY
NAME INCORPORATION REGISTRANT
- ---- -------------- ----------

Interstate Jitney-Jungle Stores, Inc. Alabama 100%

Southern Jitney Jungle Company Mississippi 100%

McCarty-Holman Co., Inc. Mississippi 100%

Jitney-Jungle Bakery, Inc. Mississippi 100%

Delta Acquisition Corporation Alabama 100%

<PAGE>

SUBSIDIARIES OF JITNEY-JUNGLE STORES OF AMERICA, INC.

SUBSIDIARIES OF MCCARTY-HOLMAN CO., INC.

JURISDICTION OF
NAME INCORPORATION
- ---- ---------------
Pump and Save, Inc. Mississippi

<PAGE>
<ARTICLE> 5
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