FORM 10-Q/A
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Pursuant To Section 13 or 15 (d) of
The Securities and Exchange Act of 1934
QUARTER ENDED June 20, 1998 COMMISSION FILE NO. 33-80833
JITNEY-JUNGLE STORES OF AMERICA,INC.
(Exact name of registrant as specified in its charter)
STATE OF INCORPORATION I.R.S. EMPLOYER I.D. NO.
Mississippi 64-0280539
ADDRESS OF PRINCIPAL EXECUTIVE OFFICE
1770 Ellis Avenue, Suite 200, Jackson, MS 39204
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE
601-965-8600
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has
been subject to such filing requirements for the past 90 days.
YES (X) NO
The number of shares of Registrant's Common Stock, par value one
cent ($.01) per share, outstanding at July 31, 1998, was 423,300
shares.
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JITNEY-JUNGLE STORES OF AMERICA, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
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Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
June 20, 1998 (Restated) (Unaudited) and
January 3, 1998 2
Condensed Consolidated Statements of Operations
Twenty-four (24) and Twelve (12) Week Periods
Ended June 20, 1998 (Restated) (Unaudited) and
Twenty-five (25) and Thirteen (13) Week Periods
Ended June 28, 1997 (Unaudited) 3
Condensed Consolidated Statements of Changes in
Stockholders' Deficit for theTwenty-four (24)
Week Period Ended June 20, 1998 (Restated)
(Unaudited) and Twenty-five (25) Week Period
Ended June 28, 1997 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows
Twenty-four (24) Week Period Ended
June 20, 1998 (Restated) (Unaudited) and
Twenty-five (25) Week Period Ended
June 28, 1997 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements
June 20, 1998 (Restated) (Unaudited) and
June 28, 1997 (Unaudited) 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
PART II.OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Change in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12-13
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PART I. ITEM 1. FINANCIAL STATEMENTS
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) June 20, January 3,
1998 1998
(Unaudited)
(as restated,
see Note 8)
ASSETS ----------- -----------
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Current assets: <C> <C>
Cash and cash equivalents $ 9,999 $ 11,984
Receivables 10,913 13,833
Merchandise inventories 149,974 162,786
Prepaid expenses and other 17,739 11,570
Deferred income taxes 14,319 15,681
---------- ----------
Total current assets 202,944 215,854
---------- ----------
PROPERTY AND EQUIPMENT - net 288,171 303,774
---------- ----------
Other assets
Goodwill, net of amortization of $2,557 at June 20, 1998
and $1,105 at January 3, 1998 124,110 142,415
Other assets - net 28,168 32,237
Deferred income taxes 6,464
---------- ----------
Total other assets 158,742 174,652
---------- ----------
TOTAL ASSETS $649,857 $694,280
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $112,630 $112,641
Accrued expenses 56,718 75,558
Current portion of capitalized leases 6,772 6,760
Payable to former shareholders of Delchamps, Inc. 7,832 26,637
Restructuring obligations 13,224 14,927
---------- ----------
Total current liabilities 197,176 236,523
Noncurrent liabilities:
Long-term debt 488,517 449,831
Obligations under capitalized leases, excluding
current installments 65,860 68,321
Restructuring obligations, excluding current
installments 25,422 40,588
Deferred income taxes 3,875
---------- ----------
Total liabilities 776,975 799,138
Commitments and contingencies
Redeemable Preferred stock (aggregate liquidation
preference value of $68,863 at June 20, 1998 and
$65,077 at January 3, 1998) 66,924 63,042
Stockholders' deficit:
Class C Preferred stock - Series 1(at liquidation
value) 9,487 9,071
Common stock ($.01 par value, authorized 5,000,000 4 4
shares, issued 425,000 shares, of which 1,700 shares
are held as treasury stock at June 20, 1998)
Additional paid-in capital (302,326) (302,326)
Retained earnings 98,813 125,351
---------- ----------
Total (194,022) (167,900)
Less - 1,700 shares at June 20, 1998 held
in treasury at cost (20)
---------- ----------
Total stockholder's deficit (194,042) (167,900)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $649,857 $694,280
========= =========
See notes to condensed consolidated financial statements.
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JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)
24 Weeks 25 Weeks 12 Weeks 13 Weeks
Ended Ended Ended Ended
June 20, June 28, June 20, June 28,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(as restated (as restated
see note 8) see note 8)
---------- ---------- ----------- -------------
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NET SALES $ 958,592 $ 586,939 $ 484,383 $ 305,316<S>
COSTS AND EXPENSES:
Cost of goods sold 716,364 438,584 358,242 227,647
Direct store expenses 190,032 97,408 95,809 52,605
Warehouse, administrative
and general expenses 36,468 28,671 18,437 12,425
Interest expense - net 32,769 16,652 17,546 8,297
Acquisition integration 16,838 2,737 2,842 2,737
costs and special charges
---------- ---------- ---------- -----------
Total costs and expenses 992,471 584,052 492,786 303,711
---------- ---------- ---------- -----------
Earnings (loss) before taxes
on income (33,879) 2,887 (8,403) 1,605
Income tax expense (benefit) (11,639) 1,049 (2,488) 572
---------- ---------- ---------- -----------
$ (22,240) $ 1,838 $ (5,915) $ 1,033
NET EARNINGS (LOSS) ========== ========== ========== ===========
EARNINGS (LOSS) PER COMMON
SHARE - BASIC $ (62.72) $ (4.29) $ (19.06) $ (1.66)
========== ========== ========== ===========
EARNINGS (LOSS) PER COMMON
SHARE - DILUTED $ (62.72) $ (4.29) $ (19.06) $ (1.66)
========== ========== ========== ===========
See notes to condensed consolidated financial statements.
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JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE TWENTY-FOUR (24) WEEK PERIOD ENDED JUNE 20, 1998 (Unaudited)
AND THE TWENTY-FIVE (25) WEEK PERIOD ENDED JUNE 28, 1997 (Unaudited)
(Dollars in thousands)
Class C
Preferred Stock,
Series 1 Common Stock Additional Treasury
No. of No. of Paid-In Retained Stock at
Shares Amount Shares Amount Capital Earnings Cost
--------- ------- ------ ------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance
January 4, 1997 76,042 $ 8,240 425,000 $ 4 $ (302,326) $144,027
Net earnings 1,838
Accretion of discount on Class A
Preferred stock (96)
Cumulation of dividends on
Preferred stock 369 (3,661)
Balance --------- ------- ------- -------- ----------- --------- --------
June 28, 1997 76,042 $ 8,609 425,000 $ 4 $ (302,326) $142,108 $ -
========= ======= ======= ======== =========== ========= ========
Balance
January 3, 1998 76,042 $ 9,071 425,000 $ 4 $ (302,326) $125,351
Net loss (as restated see note 8) (22,240)
Purchase of 1700 shares of
treasury stock $ (20)
Accretion of discount on Class A
Preferred stock (96)
Cumulation of dividends on
Preferred stock 416 (4,202)
Balance -------- ------- -------- ------- ---------- ---------- ---------
June 20, 1998 (as restated 76,042 $ 9,487 425,000 $ 4 $ (302,326) $ 98,813 $ (20)
see note 8) ======== ======= ======== ======= ========== ========== ==========
See notes to condensed consolidated financial statements.
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JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) 24 Weeks 25 Weeks
(Unaudited) Ended Ended
June 20, June 28,
1998 1997
(as restated
see note 8)
OPERATING ACTIVITIES: ----------- -----------
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Net earnings (loss) $ (22,240) $ 1,838
Adjustment to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation 26,196 14,279
Amortization of deferred loan costs 1,292 192
Loss (gain) on disposition of property (39) 1,986
Deferred income tax benefit (8,188) (3,579)
Decrease in restructuring obligation (3,811)
Changes in current assets and liabilities, net
effects of acquisition:
Notes and accounts receivable 3,258 (390)
Store and warehouse inventories 11,856 4,036
Prepaid expenses (8,356) (3,817)
Accounts payable (9,757) 18,137
Accrued expenses 2,355 3,376
---------- ----------
Net cash provided by (used in)
operating activities (7,434) 36,058
---------- ----------
INVESTING ACTIVITIES:
Capital expenditures (16,453) (6,863)
Proceeds from sale of property and other assets 7,573 399
Direct acquistion costs (4,487)
Payment to former shareholders of Delchamps, Inc. (18,805)
Decrease (increase) in other assets 2,391 (8,073)
---------- ----------
Net cash used in investing activities (29,781) (14,537)
---------- ----------
FINANCING ACTIVITIES:
Proceeds (payments) on long-term debt - net 38,686 (21,389)
Payments on capitalized lease obligations (2,449) (2,609)
Other liabilities (987)
Merger cost (14)
Purchase of treasury stock (20)
---------- ----------
Net cash provided by (used in)
financing activities 35,230 (24,012)
---------- ----------
DECREASE IN CASH AND CASH EQUIVALENTS (1,985) (2,491)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 11,984 7,642
---------- ----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 9,999 $ 5,151
========== ==========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 30,886 $ 12,847
========== ==========
Cash paid for income taxes, net of refund $ 38 $ 3,263
========== ==========
See notes to condensed consolidated financial statements.
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JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 20, 1998 (Unaudited) AND JUNE 28, 1997 (Unaudited)
(Dollars in thousands)
1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements
include those of Jitney-Jungle Stores of America, Inc. and its
wholly-owned subsidiaries, Southern Jitney Jungle Company,
Interstate Jitney-Jungle Stores, Inc., McCarty-Holman Co., Inc.
and subsidiary, Jitney-Jungle Bakery, Inc., Delchamps Inc. and
subsidiary and JJ Construction Corp. All material intercompany
profits, transactions and balances have been eliminated.
These interim financial statements have been prepared on the
basis of accounting principles used in the annual financial
statements for the 35 weeks ended January 3, 1998. In the
opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (all of
which were of a normal recurring nature) necessary for a fair
statement of consolidated financial position and results of
operations of the Company for the interim periods. The results
of operations of the Company for the twenty-four weeks ended
June 20, 1998, are not necessarily indicative of the results which
may be expected for the entire year.
The Company changed its fiscal year end on January 3, 1998 to
the closest Saturday to December 31. Previously, the Company
reported its fiscal year end results as of the Saturday nearest to
April 30. Data included herein for the second quarter of fiscal
1997 reflects the unaudited results of operations for the twenty-
five weeks ended June 28, 1997.
2. ACQUISITION
In September 1997, the Company acquired the majority of the
common stock of Delchamps, Inc. Certain shareholders
dissented from the merger and are pursuing their appraisal
remedy under Alabama law. Management does not expect this
matter to have a material affect on operations or the price of the
acquisition. The acquisition was accounted for as a purchase
and, accordingly, Delchamps' results of operations were
included in the Company's consolidated financial statements
subsequent to the acquisition date.
The purchase price, net of cash acquired of $84, has been
allocated to the assets acquired and liabilities assumed based
upon the estimated fair values at the date of acquisition, as set
forth below. Any variation between such amounts and the final
allocation will change the amount of goodwill recognized in
connection with the Delchamps acquisition and the related
amortization expense. The allocation could be affected by,
among other things, a final determination of amounts to be paid
to former shareholders of Delchamps who dissented from the
merger (and related professional fees) and of costs to be
incurred related to Delchamps facilities that have been closed.
Management believes, however that when the final valuation of
the net assets acquired is complete, the allocation of the
purchase price will not differ materially from the amounts
shown herein.
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<S> <C>
Receivables and other current assets $ 12,569
Inventory 101,199
Property, equipment and leasehold improvements 116,431
Deferred income tax asset 10,428
Other assets 2,106
Goodwill 135,454
Accounts payable and accrued expenses (74,643)
Notes payable and long-term debt, immediately repaid (14,463)
Capital lease obligations (10,794)
Restructuring obligation (41,967)
-----------
Net purchase price $ 236,320
===========
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3. RESTRUCTURING OBLIGATIONS
In connection with the Delchamps acquisition, the Company
recorded a restructuring obligation of $42,860 relating to (i)
stores closed by Delchamps prior to the acquisition; (ii)
Delchamps stores to be closed after the acquisition because of
unprofitability; (iii) Company and Delchamps stores required to
be divested under a consent decree with the Federal Trade
Commission; (iv) closure of the Delchamps headquarters in
Mobile, Alabama; and (v) closure of the Delchamps warehouse
facility in Hammond, Louisiana. The $42,860 consists of
future rental payments, severance costs, loss on divestiture of
fixed assets, miscellaneous expenses related mainly to the
shutdown of the Mobile and Hammond facilities.
Of the total restructuring costs, $41,967 was recorded as
goodwill as part of the purchase price allocation in the
Delchamps acquisition and $893 was included as a
nonrecurring charge in the statement of operations, $599 in the
35 weeks ended 1-3-98 and $294 in the first quarter of fiscal
1998.
4. ACQUISITON INTEGRATION COSTS AND OTHER SPECIAL CHARGES
Acquisition integration costs and other special charges
recorded during the twenty-four week period ended June 20,
1998 consisted of severance benefits of $250 and loss of $294
on stores sold under the consent decree with the Federal Trade
Commission in the Delchamps acquisition and $16,294 of
business integration costs related to Delchamps. Acquisition
integration charges and other special charges consisting of $958
of severance benefits and $1,779 due to an employment
agreement relating to the Company's former chief executive
officer were recorded during the thirteen and twenty-five week
period ended June 28, 1997.
5. LONG-TERM DEBT
Long-term debt consisted of the following:
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June 20, January 3,
1998 1998
---------- ---------
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Senior notes at 12%, maturing in 2006 $ 200,000 $ 200,000
Senior subordinated notes at 10.375%, 200,000 200,000
maturing in 2007
Senior Credit Facility 88,517 49,831
---------- ---------
Long-term debt $ 488,517 $ 449,831
========== =========
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The Company has available a Senior Credit Facility of $150
million under which letters of credit aggregating $12,110 were
outstanding at June 20, 1998.
6. EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share is based on net
income (loss) after preferred stock dividend requirements
and the weighted average number of shares outstanding
during each interim period. Cumulative dividends not
declared or paid on preferred shares amounted to $2,101 and
$4,202 for the twelve weeks and twenty-four weeks ended June
20, 1998, respectively. Cumulative dividends not declared or
paid on preferred shares amounted to $1,740 and $3,661 for the
thirteen weeks and twenty-five weeks ended June 28, 1997. The
number of shares used in computing basic and diluted earnings
(loss) per share was 423,300 for the twelve weeks and
twenty-four weeks ended June 20, 1998 and 425,000 for the
thirteen weeks and twenty-five weeks ended June 28, 1997.
The 1,700 shares held in treasury were purchased pursuant to
certain option agreements from former executives whose employment
terminated during the relevant period and have been committed to
be reissued to other members of existing management. Potential
common shares attributed to outstanding warrants were not included
in the computation of diluted earnings per share as their effect on earnings
(loss) per share would be antidilutive.
7. COMMITMENTS AND CONTINGENCIES
The Company is a party to certain litigation incurred in the
course of business. In the opinion of management, the ultimate
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.
8. RESTATEMENT
Subsequent to the issuance of the Company's Quarterly
Report on Form 10-Q for the 12 weeks ended June 20,
1998, the Company determined that certain amounts
recorded in connection with the Delchamps acquisition,
during the quarter ended June 20, 1998, should have been
charged to expense as incurred.
During the 12 weeks ended June 20, 1998, the Company
recorded additional goodwill and restructuring obligations
related primarily to consolidating warehouse and office facilities,
remerchandising of Delchamps stores, training of Declchamps'
employees, and other related items. Such amounts
should have been recognized as cost of goods sold and
expenses as incurred.
A summary of the significant effects of the restatement are
as follows:
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As
Previously As
Reported Restated
<S> <C> <C>
At June 20, 1998
Goodwill $ 151,019 $ 124,110
Restructuring obligations, current 14,222 13,224
Restructuring obligations, excluding
current portion 37,429 25,422
Retained earnings 112,502 98,913
For the twelve weeks ended June 20, 1998
Business integration costs and special
charges $ 2,842
Total costs and expenses $ 488,535 492,786
Loss before taxes on income (4,152) (8,403)
Income tax benefit (1,023) (2,488)
Net loss (3,129) (5,915)
Net loss per share - basic and diluted $ (12.36) $ (18.94)
For the twenty-four weeks ended June 20, 1998
Cost of goods sold $ 714,294 $ 716,364
Acquisition integration costs and
other special charges 16,838
Total costs and expenses 971,426 992,471
Loss before taxes on income (12,834) (33,879)
Income tax benefit (4,283) (11,639)
Net loss (8,551) (22,240)
Net loss per share - basic and diluted $ (30.13) $ (62.72)
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Dollars in thousands)
The following is management's discussion and analysis of
significant factors affecting the Company's financial condition and
results of operations during the periods included in the
accompanying condensed consolidated statements of operations.
Subsequent to the issuance of the Company's Quarterly
Report on Form 10-Q for the 12 weeks ended June 20,
1998, the Company determined that certain amounts
recorded in connection with the Delchamps acquisition,
during the quarter ended June 20, 1998, should have been
charged to expense as incurred.
During the 12 weeks ended June 20, 1998, the Company
recorded additional goodwill and certain of these cost
(princpally related to store closures) have not been restated
while other cost attributable to the Delchamps acquitions,
including cost incurred in consolidating warehouse operations,
remerchandising of Delchamps stores, and training of Delchamps
employees have been expensed as acquisition integration cost
and accordance with the guidlelines set forth in Emerging
Issues Task Force (EITF) Releases 94-3 ("reconigation of
liabilities in connection with a Purchase Businssess Combination").
The effects of the restatement are presented in Note 8 of Notes to
Condensed Consolidated Financial Statements and have been reflected
herein.
A table showing the percentage of net sales represented by certain
items in the Company's condensed consolidated statements of
operations is as follows:
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24 Weeks 25 Weeks 12 Weeks 13 Weeks
Ended Ended Ended Ended
June 20, June 28, June 20, June 28,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 25.3 25.3 26.0 25.4
Direct store expenses 19.8 16.6 19.8 17.2
Warehouse, administrative
and general expenses 3.8 4.9 3.8 4.1
Acquisition integration costs 1.8 0.5 0.6 0.9
other special charges
Operating income (0.1) 3.3 1.9 3.2
Interest expense, net 3.4 2.8 3.6 2.7
Earnings (loss) before income taxes (3.5) 0.5 (1.7) 0.5
Provision for income taxes (1.2) 0.2 0.5 0.2
Net earnings (loss) (2.3) 0.3 (1.2) 0.3
EBITDA 4.4 6.1 5.3 6.1
</TABLE>
A summary of the period to period changes in certain items
included in the condensed consolidated statements of operations for
the twenty-four and twenty-five week periods and twelve and
thirteen week periods ended June 20, 1998 and June 28, 1997,
respectively is as follows:
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Period-to-Period Period-to-Period Changes
Twenty-four Weeks Ended Twelve Weeks Ended
June 20,1998 June 20,1998
$ % $ %
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 371,653 63.3 % $ 179,067 58.7 %
Gross profit 93,873 n/m 48,472 n/m
Direct store expenses 92,624 n/m 43,204 n/m
Warehouse, administrative
and general expenses 7,797 n/m 5,922 n/m
Acquisition integration costs and
other special charges 14,101 n/m 105 n/m
Operating income (20,105) (102.9) (759) (7.7)
Interest expense, net 16,117 96.8 9,249 111.5
Earnings (loss) before income taxes (36,766) n/m (10,008) n/m
Provision for income tax (12,688) n/m (3,060) n/m
Net earnings (loss) (24,078) n/m (6,948) n/m
EBITDA 6,537 4.4 6,963 5.3
(n/m - not meaningful comparison)
</TABLE>
RESULTS OF OPERATIONS
NET SALES
Net sales increased $179,067 or 58.7% in the twelve week period
and $371,653 or 63.3% in the twenty-four week period ended June
20, 1998 as compared to the thirteen and twenty-five week periods
ended June 28, 1997. The net sales increase was primarily
attributable to the Delchamps acquisition. Same store sales
decreased approximately .6% for the twelve week period and 3.5%
for the twenty-four week period ended June 20, 1998. Sales
throughout the twenty-five weeks ended June 28, 1997 were
positively impacted by the introduction of the Company's Gold
Card, its customer loyalty program, in approximately 79 Jitney-
Jungle and Jitney Premier supermarkets in January 1997. Sales for
the twenty-four weeks ended June 20, 1998 were positively
impacted by the introduction of the Gold Card in 52 Delchamps
supermarkets in March 1998 and in the remaining Delchamps
supermarkets during the second quarter ended June 20, 1998. The
decline in same store sales is attributable primarily to competitive
pressures, a decline in sales at Delchamps supermarkets due to
disruptions caused by the transition process which has been
completed and the fact that the Gold Card introduction positively
impacted sales for most of the twenty-five weeks ended June 28,
1997 but only the latter part of the twenty-four weeks ended June
20, 1998. During the second quarter ended June 20,1998, the
Company remodeled 3 discount or conventional stores, converted 6
discount or conventional stores to the combination store format and
opened 1 gasoline station. In addition, 2 stores and 1 gasoline
station were closed. During the twenty-four weeks ended June 20,
1998 the Company remodeled 3 discount or conventional stores,
converted 6 discount or conventional stores to the combination store
format and opened 2 gasoline stations. In addition, 2 gasoline
stations and 19 stores were sold or closed including 10 stores that
were required to be sold by the Federal Trade Commission in
connection with the Delchamps acquisition. The Company's store
count at the end of the quarter was 198 supermarkets (16 discount
stores, 168 conventional stores and 14 combination stores) and 53
gasoline stations as compared to 105 supermarkets (21 discount
stores, 81 conventional stores and 3 combination stores) and 53
gasoline stations at June 28, 1997.
GROSS PROFIT
Gross profit for the second quarter of fiscal 1998 increased $48,472
to $126,141 or 26.0% of net sales, compared to $77,669, or 25.4%
of net sales, for the second quarter of fiscal 1997. Gross profit as a
percentage of sales was 25.3% for the twenty-four week period
ended June 20, 1998 as compared to 25.3% for the twenty-five
week period ended June 27, 1997. During the twenty-four week
period ended June 20, 1998, $2,070 was charged to excess
shrink associated with Delchamps acquisition in the
consolidated statements of operations. During the quarter ended
June 20, 1998 the Company began to benefit from increased
purchasing leverage resulting from the Delchamps acquisition. The
realized and expected benefits of such increased purchasing
leverage are difficult to quantify precisely. The Company has
renegotiated several supply contracts and expects the resulting
annualized cost savings to be approximately $7.1 million. Other
benefits of increased purchasing leverage include reduced costs
from volume incentives. The Company expects to continue to
benefit from such purchasing leverage. The increase in gross profit
as a percentage of net sales is principally due to such increased
purchasing leverage and the improvement in product mix in the
combination stores. This improvement in gross profit as a
percentage of sales was partially offset by an increase in store
shrink. During the second quarter ended June 20, 1998, the
Company made significant progress to reduce store shrink.
DIRECT STORE EXPENSES
Direct store expenses were $95,809 or 19.8% of net sales and
$52,605 or 17.2% of net sales for the twelve week and thirteen
week period and $190,032 or 19.8% of net sales and $97,408 or
16.6% of net sales for the twenty-four week and twenty-five week
period ended June 20, 1998 and June 28, 1997, respectively. Direct
store expenses increased primarily due to an increase in net sales
(due to the Delchamps acquisition). The increase in direct store
expenses as a percentage of net sales was primarily in the areas of
rent, labor and utilities. Rent expense as a percentage of net sales in
the Delchamps stores is more than twice that of the other Company
stores. The increase in store labor as a percentage of net sales was
principally due to a temporary increase in the number of employees,
which was necessary in order to complete retraining required at the
Delchamps supermarkets. The increase in utility costs was
principally due to the heat wave across the Southeast.
WAREHOUSE, ADMINISTRATIVE AND GENERAL EXPENSES
Warehouse, administrative and general expenses were $18,347 or
3.8% of net sales and $12,425 or 4.1% of net sales for the twelve
week and thirteen week period and $36,468 or 3.8% of net sales and
$28,671 or 4.9% of net sales for the twenty-four week and twenty-
five week period ended June 20, 1998 and June 28, 1997
respectively. Warehouse, administrative and general expenses
increased primarily due to an increase in net sales and increased
warehousing expenses resulting from the Delchamps transaction.
The decrease in warehouse, administrative and general expenses as
a percent of sales was primarily due to additional sales and a
decrease in administrative expenses as a result of the closing of the
Delchamps' Mobile headquarters in April 1998. The Company has
closed Delchamps' Hammond warehouse, which the Company
expects will lead to substantial cost savings. The resulting increase
in volume at the Company's Jackson warehouse facilities has
created operating inefficiencies that are currently being addressed
by the Company's management and are expected to be resolved by
the end of fiscal 1998. As a result of these inefficiencies, the
Company experienced higher warehouse expenses during the
twenty-four weeks ended June 20, 1998 than it expects to
experience in the remainder of fiscal 1998.
ACQUISITION INTEGRATION COSTS AND OTHER SPECIAL CHARGES
Acquisition integration costs and other special charges were
$16,838 for the twenty-four week period ended June 20, 1998.
The Company incurred significant costs as a result of
combining the Delchamps and Jitney-Jungle
operations. In accordance with EITF Releases 94-3 and 95-3
the Company has allocated certain of these costs to goodwill.
However, certain other costs attributable to the Delchamps
acquisition, including costs incurred in consolidating
warehouse operations,
<PAGE>
remerchandising of the Delchamps stores, and training of
Delchamps employees have been written off as acquisition
sots in accordance with the EITF guidelines. Other special
charges included severance benefits of $250 and loss of $294
on stores sold under the consent decree with the Federal Trade
Commission in the Delchamps acquisition and $16,294 of integration
costs related to Delchamps. Acquisition integration costs and other
special charges consisting of $958 of severance benefits and $1,779
relating to future payments to be made under an agreement with the
Company's former chief executive officer were recorded during the
thirteen week and twenty-five week period ended June 28, 1997.
OPERATING INCOME
Operating income was $9,143 or 1.9% of net sales for the twelve
week period and ($1,110) or (.1 %) of net sales for the twenty-four
week period ended June 20, 1998 as compared to $9,902 or 3.2% of
net sales for the thirteen week period and $19,539 or 3.3% of net
sales for the twenty-five week period ended June 28, 1997. The
decrease in operating income was due to the factors discussed
above.
EBITDA
EBITDA (net income before interest income, special charges,
interest expense, income taxes, depreciation and amortization and
LIFO charges/credits) increased $7,063 or 38.0% to $25,635 or
5.3% of net sales in the second quarter of fiscal 1998 as compared
to $18,572 or 6.1% of net sales in the second quarter of fiscal 1997.
EBITDA increased $6,537 or 18.3% to $45,054 or 4.4% of net
sales for the twenty-four week period ended June 20, 1998 as
compared to $35,742 or 6.1% of net sales for the twenty-five week
period ended June 28, 1997. EBITDA increased primarily due to an
increase in sales. EBITDA as presented is consistent with the
definition used for covenant purposes contained in the Indenture.
EBITDA is a widely accepted financial indicator of a company's
ability to service debt. However, EBITDA should not be construed
as an alternative to operating income, net income or cash flows
from operating activities (as determined in accordance with
generally accepted accounting principles) and should not be
construed as an indication of the Company's operating performance
or as a measure of liquidity.
NET INTEREST EXPENSE
Net interest expense was $17,546 in the second quarter of fiscal
1998 as compared to $8,297 in the second quarter of fiscal 1997
and was $32,769 and $16,652 for the twenty-four week and twenty-
five week period ended June 20,1998 and June 28,1997,
respectively. The increase in interest expense was primarily due to
interest expense on the $200 million Senior subordinated notes
issued in September 1997.
INCOME TAX EXPENSE (BENEFIT)
Income tax expense for the thirteen weeks and twenty-five weeks
ended June 28, 1997 was 35.6% and 36.3%, respectively, of pre-tax
income compared to the federal and state statutory rate of 37.3%.
The income tax benefit for the twelve weeks and twenty-four weeks
ended June 20, 1998 was 29.6% and 34.4%, respectively, of pre-tax
loss compared to the federal and state statutory rate of 37.3%; the
difference in rates for the twelve weeks and twenty-four weeks
ended June 20, 1998 occurred primarily because goodwill relating
to the Delchamps acquisition is deductible for financial reporting
purposes but not for income tax purposes.
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 recapitalization in March 1996
and acquisition of Delchamps in September 1997 the Company has
become highly leveraged and has certain restrictions on its
operations. At June 20, 1998, Jitney-Jungle had $561,149 of total
long-term debt (including capitalized leases and current
installments) and a shareholders deficit of $194,022.
The Company's principal uses of liquidity have been to fund
working capital, meet debt service requirements and finance Jitney-
Jungle's strategic plans. The Company's principal sources of
liquidity have been cash flow from operations and borrowings
under the Senior Credit Facility. Outstanding borrowings at June
20, 1998 were $88,517 under the Senior Credit Facility.
Cash used in operating activities during the twenty-four week
period ended June 20, 1998 was $7,434. Cash provided by
operating activities during the twenty-five week period ended June
28, 1997 was $36,058. Accrued expenses decreased primarily due
to the payment of interest on Senior Notes, Senior Subordinated
Notes and the Senior Credit Facility. Inventories decreased due to
the consolidation of the warehouses and the closure or sale of
certain stores during the first and second quarters of fiscal 1998.
Net cash used in investing activities was $29,781 and $14,537 for
the twenty-four week and twenty-five week period ended June 20,
1998 and June 28, 1997, respectively. The Company paid
approximately $5,007 in cash to former Delchamps shareholders
and deposited $13,798 in cash with the clerk of court of Mobile
County Alabama as required by law in connection with the
appraisal proceeding described below. The Company realized
proceeds from the sale of 10 stores which were required to be sold
by the Federal Trade Commission due to the Delchamps
acquisition. Also, the Company sold land for $4,483 during the
second quarter of fiscal 1998.
Net cash provided by financing activities was $35,230 for the
twenty-four week period ended June 20, 1998 and net cash used
was $24,012 for the twenty-five week period ended June 28, 1997.
The principal sources of funds in financing activities for the twenty-
four week period ended June 20, 1998 were the proceeds of
principal on long-term debt. The principal uses of funds in
financing activities for the twenty-four week period ended June 20,
1998 were the payment of capital lease obligations and restructuring
obligations.
Management believes that the Company will be able to finance
capital expenditures and other cash requirements for the remainder
of fiscal 1998 through cash flows from operations and borrowings
under its Senior Credit Facility. Capital expenditure plans are
continuously evaluated and modified from time to time depending
on cash availability and other economic factors. The Company
considers acquisition opportunities from time to time. Any such
future acquisitions may require the Company to seek additional debt
or equity financing.
CAUTIONARY STATEMENTS
This quarterly report on Form 10-Q may contain forward-looking
statements regarding future expectations about the Company's
business, management's plans for future operations or similar
matters. The Company's actual results could differ materially from
those anticipated in such forward-looking statements due to several
important factors including the following: deterioration in economic
conditions generally or in the Company's markets, unusual or
unanticipated costs or consequences relating to, or changes in, the
Company's acquisition plans, demands placed on management by
the substantial increase in the Company's size due to the acquisition
of Delchamps, unanticipated or unusual distribution problems,
breakdown of quality control, competitive pressures, labor
disturbances and customer dissatisfaction. Forward-looking
statements speak only as of the date made, and the Company
undertakes no obligation to update or revise such statements to
reflect new circumstances or unanticipated events as they may
occur.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In May 1998, the Company's wholly-owned subsidiary
Delchamps, Inc. instituted a proceeding in the Circuit Court of
Mobile County, Alabama petitioning the court to determine the
fair value (as defined in the Alabama Business Corporation Act)
of 689,884 shares of former Delchamps, Inc. common stock held
by persons purporting to exercise dissenters' rights in connection
with the Delchamps Acquisition. Delchamps, Inc. estimates
such fair value to be $20 per share; the dissenting shareholders
have demanded payment of $68 per share. The Company has
deposited $20 per share in cash with the clerk of the court, as
required by law. In its financial statements, the Company has
accounted for the acquisition of these shares at a price of $30 per
share, which was the price paid by the Company to other former
Delchamps, Inc. shareholders. Any final determination that the
shares formerly held by dissenting shareholders have a fair value
of less or more than $30 per share would be reflected as a
decrease or increase in the Company's goodwill, which is being
amortized over a 40 year period. The Company does not expect
the outcome of this matter to have a material effect on the
Company's results of operations or the price of the acquisition,
although no assurances can be given.
The Company is a party to certain litigation incurred in the course
of business. In the opinion of management, the ultimate 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.
ITEM 2. CHANGE IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No.
--------------
* 27.1 Financial Data Schedule
* Filed herewith.
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
JITNEY-JUNGLE STORES OF AMERICA, INC.
(Registrant)
/s/ Richard D. Coleman
-----------------------------
Richard D. Coleman
(Executive Vice President,
Chief Financial Officer)
(Principal Financial and
Accounting Officer)
Dated: August 4 , 1998
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