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 September 12, 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 October 15, 1998, was 425,000
shares.
<PAGE>
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<CAPTION>
JITNEY-JUNGLE STORES OF AMERICA, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
<S> <C>
Item 1.Financial Statements:
Condensed Consolidated Balance Sheets
September 12, 1998 (restated) (Unaudited) and January 3, 1998 2
Condensed Consolidated Statements of Operations
Thirty-six (36) and Twelve (12) Week Periods Ended
September 12, 1998 (restated) (Unaudited) and Thirty-seven
(37) and Twelve (12) Week Periods Ended
September 20, 1997 (Unaudited) 3
Condensed Consolidated Statements of Changes in
Stockholders' Deficit for theThirty-six (36) Week
Period Ended September 12, 1998 (restated) (Unaudited) and
Thirty-seven (37) Week Period Ended
September 20, 1997 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows
Thirty-six (36) Week Period Ended
September 12, 1998 (restated) (Unaudited) and
Thirty-seven (37) Week Period Ended
September 20, 1997 (Unaudited) 5
Notes to Condensed Consolidated Financial Statements
September 12, 1998 (restated) (Unaudited) and
September 20, 1997 (Unaudited) 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-16
PART II.OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Change in Securities 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17-18
Item 6. Exhibits and Reports on Form 8-K 18
</TABLE>
PART I. ITEM 1. FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands) September 12, January 3,
1998 1998
(Unaudited)
(as restated
ASSETS see note 8)
------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,494 $ 11,98
Receivables 19,652 13,833
Merchandise inventories 159,849 162,786
Prepaid expenses and other 24,688 11,570
Deferred income taxes 14,658 15,681
-------------- -----------
Total current assets 227,341 215,854
-------------- -----------
PROPERTY AND EQUIPMENT - net 286,578 303,774
-------------- -----------
Other assets
Goodwill, net of amortization of $3,283 at
September 12, 1998 and $1,105 at January 3, 1998 124,227 142,415
Other assets - net 27,209 32,237
Deferred income taxes 7,744
---------------- -----------
Total other assets 159,180 174,652
---------------- -----------
TOTAL ASSETS $ 673,099 $ 694,280
================ ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 113,522 $ 112,641
Accrued expenses 70,010 75,558
Current portion of capitalized leases 6,772 6,760
Payable to former shareholders of Delchamps, Inc. 7,702 26,637
Restructuring obligations 8,793 14,927
----------------- -----------
Total current liabilities 206,799 236,523
Noncurrent liabilities:
Long-term debt 503,317 449,831
Obligations under capitalized leases, excluding cur 64,717 68,321
Restructuring obligations, excluding current instal 25,233 40,588
Deferred income taxes 3,875
------------------ ------------
Total liabilities 800,066 799,138
Commitments and contingencies
Redeemable Preferred stock (aggregate liquidation
preference value of $70,756 at September 12, 1998 and
$65,077 at January 3, 1998) 68,865 63,042
Stockholders' deficit:
Class C Preferred stock - Series 1(at liquidation v 9,695 9,071
Common stock ($.01 par value, authorized 5,000,000 4 4
shares, issued 425,000 shares
Additional paid-in capital (302,326) (302,326)
Retained earnings 96,795 125,351
------------------- ------------
Total stockholders' deficit (195,832) (167,900)
------------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 673,099 $ 694,280
=================== ============
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands Except Per Share Amounts)
36 Weeks 37 Week 12 Weeks 12 Weeks
Ended Ended Ended Ended
Sept 12, Sept 20 Sept 12 Sept 20,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(as restated (as restated
see note 8) see note 8)
----------- ----------- ----------- ------------
NET SALES $1,432,963 $ 873,590 $ 474,371 $ 286,651
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
COSTS AND EXPENSES:
Cost of goods sold 1,060,153 652,927 343,371 214,343
Direct store expenses 284,952 147,766 94,920 50,358
Warehouse, administrative
and general expenses 53,698 39,597 17,230 10,926
Interest expense - net 49,947 26,066 17,178 9,414
Acquisition integration costs 17,921 5,479 1,083 2,742
and other special charges
------------ ---------- ----------- -----------
Total costs and expenses 1,466,671 871,835 474,200 287,783
------------ ---------- ----------- -----------
Earnings (loss) before taxes
on income (33,708) 1,755 171 (1,132)
Income tax expense (benefit) (11,599) 589 40 (460)
------------ ---------- ----------- -----------
Earnings (loss) before
extraordinary item (22,109) 1,166 131 (672)
EXTRAORDINARY ITEM, net of
income tax benefit of $518 (870) (870)
------------ ---------- ----------- -----------
NET EARNINGS (LOSS) $ (22,109) $ 296 $ 131 $ (1,542)
============ ========== =========== ===========
EARNINGS (LOSS) BEFORE
EXTRAORDINARY ITEM $ (67.32) $ (10.58) $ (4.76) $ (6.29)
EXTRAORDINARY ITEM $ (2.05) $ (2.05)
------------ ---------- ----------- -----------
EARNINGS (LOSS) PER COMMON
SHARE-BASIC $ (67.32) $ (12.63) $ (4.76) $ (8.34)
------------ ---------- ----------- -----------
EARNINGS (LOSS) PER COMMON
SHARE - DILUTED $ (67.32) $ (12.63) $ (4.76) $ (8.34)
============ ========== =========== ===========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE THIRTY-SIX (36) WEEK PERIOD ENDED SEPTEMBER 12, 1998 (Unaudited)
AND THE THIRTY-SEVEN (37) WEEK PERIOD ENDED SEPTEMBER 20, 1997 (Unaudited)
(Dollars in thousands)
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 296
Accretion of discount on Class A
Preferred stock (144)
Cumulation of dividends on
Preferred stock 583 (5,662)
------ ------ ------- ------ ----------- -------- ---------
Balance
September 20, 1997 76,042 $ 8,823 425,000 $ 4 $ (302,326) $ 138,517 $ -
======= ======= ======= ====== =========== ======== =========
Balance
January 3, 1998 76,042 $ 9,071 425,000 $ 4 $ (302,326) $ 125,351
Net loss (as restated, see
note 8) (22,109)
Purchase of 1700 shares of
treasury stock $ (20)
Sale of 1700 shares of
treasury stock $ 20
Accretion of discount on Class A
Preferred stock (144)
Cumulation of dividends on
Preferred stock 624 (6,303)
Balance ------ ------ ------- ------ ----------- -------- ---------
September 12, 1998 (as 76,042 $ 9,695 425,000 $ 4 $ (302,326) $ 96,795 $ -
restated, see note 8) ======= ======= ======= ====== =========== ======== =========
See notes to condensed consolidated financial statements.
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</TABLE>
<TABLE>
<CAPTION>
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands) 36 Weeks 37 Weeks
(Unaudited) Ended Ended
September 12, September 20,
1998 1997
(as restated
see note 8)
OPERATING ACTIVITIES: ----------- -----------
<S> <C> <C>
Net earnings (loss) $ (22,109) $ 296
Adjustment to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation 39,620 20,575
Amortization of deferred loan costs 2,358 838
Loss (gain) on disposition of proper (39) 1,918
Deferred income tax benefit (15,893) (17,707)
Increase (decrease) in restructuring (14,094) 50,748
Changes in curent assets and liabilities, net of
effects of acquisition:
Notes and accounts receivable (5,481) (8,718)
Store and warehouse inventories 427 6,633
Prepaid expenses (13,118) (5,879)
Accounts payable 881 12,277
Accrued expenses 14,886 13,585
---------- ----------
Net cash provided by (used in) operating
activities (12,562) 74,566
---------- ----------
INVESTING ACTIVITIES:
Capital expenditures (30,012) (17,881)
Proceeds from sale of property and other assets 11,054 7,186
Direct acquistion costs (4,465)
Payment to former shareholders of Delchamps, Inc. (18,935)
Decrease (increase) in other assets 2,523 (250,576)
---------- ----------
Net cash used in investing activities (39,835) (261,271)
---------- ----------
FINANCING ACTIVITIES:
Proceeds (payments) on long-term debt 53,498 192,314
Payments on capitalized lease obligations (3,604) (3,356)
Other liabilities (987)
Merger cost - (14)
Purchase of treasury stock (20)
Sale of treasury stock 20
---------- ----------
Net cash provided by financing activities 48,907 188,944
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,490) 2,239
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 11,984 7,642
---------- ----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 8,494 $ 9,881
========== ==========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 47,735 $ 25,306
========== ==========
Cash paid for income taxes, net of refunds $ 38 $ 5,750
========== ==========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 12, 1998 (Unaudited) AND SEPTEMBER 20, 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 thirty-six weeks ended September 12, 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 third quarter of fiscal 1997 reflects
the unaudited results of operations for the thirty-seven weeks ended
September 20, 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.
The only variation between such amounts and the final allocation
will be a final determination of amounts to be paid to former
shareholders of Delchamps who dissented from the merger (and
related professional fees). 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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<TABLE>
<CAPTION>
<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 obligations (41,967)
___________
Net purchase price $ 236,320
===========
</TABLE>
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, and 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 special charge in the
statement of operations ($599 in the 35 weeks ended January 3,
1998 and $294 in the first quarter of fiscal 1998).
4. ACQUISITION INTEGRATION COSTS AND OTHER SPECIAL CHARGES
Acquisition integration costs and other special charges recorded
during the thirty-six week period ended September 12, 1998
consisted of $17,377 of business integration costs related to
Delchamps, severance benefits of $250 and loss on stores
sold under the consent decree with the Federal Trade Commission
in the Delchamps acquisition of $294. Acquisition integration
costs and other special charges recorded during the thirty-seven
week period ended September 20, 1997 were $5,479 including
$958 of severance benefits, $1,779 due to an employment
agreement relating to the Company's former chief executive
officer, $2,008 for bridge loan fees and $734 for stores that have
been or will be closed or sold.
5. EXTRAORDINARY ITEM
In connection with the Delchamps acquisition and the
recapitalization in March 1996 ("Recapitalization"), the Company
retired certain long-term debt prior to its scheduled maturity. Early
retirement of such debt resulted in extraordinary losses of $870 (net
of income tax benefit of $518) during the twelve week and thirty-
seven week periods ended September 20, 1997.
<PAGE>
6. LONG-TERM DEBT
Long-term debt consisted of the following:
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<CAPTION>
September 12, January 3,
1998 1998
--------- ---------
<S> <C> <C>
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 103,317 49,831
--------- ---------
Long-term debt $ 503,317 $ 449,831
========= =========
</TABLE>
The Company has available a Senior Credit Facility of $150 million
under which letters of credit aggregating $11,661 were outstanding
at September 12, 1998. In addition, due to the interruption of
business and the recent damage caused to the assets of the
Company related to Hurricane Georges, the availability under the
Senior Credit Facility has been increased by $25 million until
January 15, 1999.
7. 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 $6,303 for the twelve
weeks and thirty-six weeks ended September 12, 1998,
respectively. Cumulative dividends not declared or paid on
preferred shares amounted to $2,001 and $5,662 for the twelve
weeks and thirty-seven weeks ended September 20, 1997. The
number of shares used in computing basic and diluted earnings
(loss) per share was 425,000 for the twelve weeks and 424,400
for the thirty-six weeks ended September 12, 1998 and 425,000
for the twelve weeks and thirty-seven weeks ended
September 20, 1997. 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.
8. COMMITMENTS AND CONTINGENCIES
The Company is a party to certain litigation incurred in the normal
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.
9. RESTATEMENT
Subsequent to the issuance of the Company's Quarterly
Report on Form 10-Q for the 12 weeks ended September
12, 1998, the Company determined that certain amounts
recorded in connection with the Delchamps acquisition,
during the quarter ended March 28, 1998, should have been
charged to expense as incurred.
During the 12 weeks ended September 12, 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:
<TABLE>
<CAPTION>
As
Previously As
Reported Restated
<S> <C> <C>
At September 12, 1998
Goodwill $ 152,077 $ 124,227
Restructuring obligations, current 9,238 8,793
Restructuring obligations, excluding current por 37,240 25,233
Retained earnings 111,020 96,795
For the twelve weeks ended September 12, 1998
Aquisition integration costs and other
special charges $ 1,083
Total costs and expenses $ 473,301 474,200
Earnings before taxes on income 1,070 171
Income tax benefit 430 40
Net earnings 667 131
Net loss per share - basic and diluted $ (3.37) $ (4.64)
For the thirty-six weeks ended September 12, 1998
Cost of goods sold $ 1,058,083 $ 1,060,153
Aquisition integration costs and
other special charges 17,921
Total costs and expenses 1,444,737 1,466,671
Loss before taxes on income (11,764) (33,708)
Income tax benefit (3,880) (11,599)
Net loss (7,884) (22,109)
Net loss per share - basic and diluted $ (33.43) $ (67.32)
</TABLE>
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 September
12, 1998, the Company determined that certain amounts
recorded in connection with the Delchamps acquisition,
during the quarter ended September 12, 1998, should have
been charged to expense as incurred.
During the 12 weeks ended September 12, 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:
<TABLE>
<CAPTION>
36 Weeks 37 Weeks 12 Weeks 12 Weeks
Ended Ended Ended Ended
Sept 12, Sept 20, Sept 12, Sept 20,
1998 1997 1998 1997
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Gross profit 26.0 25.3 27.5 25.2
Direct store expenses 19.9 16.9 20.0 17.6
Warehouse, administrative
and general expenses 3.7 4.6 3.6 3.8
Acquisition integration costs 1.3 0.6 0.2 1.0
and other special charges
Operating income 1.1 3.2 3.7 2.9
Interest expense, net 3.5 3.0 3.6 3.4
Earnings (loss) before income (2.4) 0.2 0.0 (0.5)
Provision for income taxes (0.8) 0.1 0.0 (0.2)
Extraordinary item 0.0 0.1 0.0 0.1
Net earnings (loss) (1.5) 0.0 (0.0) (0.6)
EBITDA 5.2 6.1 6.7 6.0
</TABLE>
A summary of the period to period changes in certain items included in
the condensed consolidated statements of operations for the thirty-six
and thirty-seven week periods and twelve week periods ended
September 12, 1998 and September 20, 1997, respectively is as
follows:
<TABLE>
<CAPTION>
Thirty-six Weeks Ended Twelve Weeks Ended
September 12,1998 September 12,1998
$ % $ %
----------- -------- --------- ------
<S> <C> <C> <C> <C>
Net sales $ 559,373 64.0 % $ 187,720 65.5 %
Gross profit 152,147 n/m 58,274 n/m
Direct store expenses 137,186 n/m 44,562 n/m
Warehouse, administrative
and general expenses 14,101 n/m 6,304 n/m
Acquisition integration costs
and other special charges 12,442 n/m (1,659) n/m
Operating income 9,067 109.5 (11,582) n/m
Interest expense, net 23,881 91.6 7,764 82.5
Earnings (loss) before
income taxes (35,463) n/m 1,303 n/m
Provision for income taxes (12,188) n/m 500 n/m
Extraordinary item 870 n/m 870 n/m
Net earnings (loss) (22,405) n/m 1,673 n/m
EBITDA 21,233 40.1 14,695 85.1
(n/m - not meaningful comparison)
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
GENERAL
The results of operations of Delchamps have been included in the
Company's consolidated financial statements since September 12,
1997. Accordingly, the thirty-seven weeks ended September 20, 1997
only includes the effects of the Delchamps acquisition from September
12, 1997 through September 20, 1997 whereas the thirty-six weeks
ended September 12, 1998 reflects the acquisition for the entire period.
The percentage change in same store sales has been calculated by
comparing supermarkets open throughout both periods, including, for
the thirty-seven weeks ended September 20, 1997, supermarkets
acquired in the Delchamps acquisition.
During the thirty-six weeks ended September 12, 1998, the Company
focused, among other things, on integrating the operations of
Delchamps. Specifically, the Company replaced Delchamp' shelf tags
with the Company's shelf tags and changed the mix of products offered
at Delchamps' stores to conform to the Company's mix and, in certain
cases, local preferences. The integration of Delchamps into the
Company's information systems and retraining of Delchamps' store
employees was also completed. In addition, the Company closed
Delchamp' Hammond warehouse in February 1998, closed
Delchamps' Mobile headquarters in April 1998, and began to use the
Company's in-house printing facilities to print a majority of the print
advertising for Delchamps' stores, which was previously outsourced by
Delchamps.
PROPERTIES
The following table recaps store data for fiscal year 1998:
<PAGE>
<TABLE>
<CAPTION>
Q1 FY98 Q2 FY98 Q3 FY98
Ended Ended Ended
Mar 28, 98 Jun 20, 98 Sep 12, 98
__________ __________ __________
<S> <C> <C> <C> <C>
Stores Beginning 217 200 198
Acquired
Opened 2
Closed/sold (17) (2) (1)
__________ __________ __________
Ending 200 198 199
========== ========== ==========
Format Convention 172 168 167
Combination 11 14 16
Discount 17 16 16
__________ __________ __________
Total 200 198 199
========== ========== ==========
Locations Mississippi 81 81 82
Alabama 49 48 49
Arkansas 5 5 5
Florida 15 15 15
Tennessee 7 6 6
Lousiana 43 43 42
__________ __________ __________
Total 200 198 199
========== ========== ==========
Gasoline Beginning 54 53 53
Acquired
Opened 1 1
Closed/sold (1) (1)
__________ __________ __________
Ending 53 53 54
========== ========== ==========
Locations Mississippi 45 44 45
Alabama 2 2 2
Arkansas 2 2 2
Florida
Tennessee 4 5 5
Lousiana
__________ __________ __________
Total 53 53 54
========== ========== ==========
</TABLE>
NET SALES
Net sales increased $187,720 or 65.5% in the twelve week period and
$559,373 or 64.0% in the thirty-six week period ended September 12,
1998 as compared to the twelve and thirty-seven week periods ended
September 20, 1997. The net sales increase was primarily attributable
to the Delchamps acquisition. Same store sales decreased
approximately 6.2% for the twelve week period and 4.4% for the
thirty-six week period ended September 12, 1998. Sales throughout
<PAGE>
the thirty-seven weeks ended September 20, 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 thirty-six
weeks ended September 12, 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 [23 competitive
openings (of which 6 were replacement stores) during the thirty-six
week period ended September 12, 1998], distribution problems which
are being corrected, 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 thirty-seven weeks ended September 20,
1997 but only the latter part of the thirty-six weeks ended September
12, 1998. During the third quarter ended September 12, 1998, the
Company opened 2 new stores (in Hattiesburg, MS and in Jackson,
AL) in its newest prototype combination store format and opened 1
gasoline station. In addition, 1 store was closed. During the thirty-six
weeks ended September 12, 1998 the Company opened 2 new stores in
its combination store format and opened 2 gasoline stations. In
addition, 2 gasoline stations and 20 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 199 supermarkets
(16 discount stores, 167 conventional stores and 16 combination stores)
and 54 gasoline stations as compared to 221 supermarkets (18 discount
stores, 192 conventional stores and 11 combination stores) and 53
gasoline stations at September 20, 1997.
GROSS PROFIT
Gross profit for the third quarter of fiscal 1998 increased $58,274 to
$130,582 or 27.5% of net sales, compared to $72,308, or 25.2% of net
sales, for the third quarter of fiscal 1997. Gross profit as a percentage
of sales was 26.0% for the thirty-six week period ended September 12,
1998 as compared to 25.3% for the thirty-seven week period ended
September 20, 1997. Gross profit increased primarily due to the
increase in net sales due to the Delchamps acquisition. In addition,
during the thirty-six weeks ended September 12, 1998, $2070 was charged
to excess shrink associated with Delchamps acquisition in the
consolidated statements of operations. During the second quarter
of fiscal 1998 the Company began to benefit from increased purchasing
leverage resulting from the Delchamps acquisition and this trend
continued during the third quarter ended September 12, 1998. The
realized and expected benefits of such increased purchasing leverage
are difficult to quantify precisely. 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. In addition
during the second and third quarters of fiscal 1998 the Company made
significant progress to reduce store shrink.
DIRECT STORE EXPENSES
Direct store expenses were $94,920 or 20.0% of net sales and $50,358
or 17.6% of net sales for the twelve week periods and $284,952 or
19.9% of net sales and $147,766 or 16.9% of net sales for the thirty-six
week and thirty-seven week periods ended September 12, 1998 and
September 20, 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 $17,230 or 3.6%
of net sales and $10,926 or 3.8% of net sales for the twelve week
periods and $53,698 or 3.7% of net sales and $39,597 or 4.6% of net
sales for the thirty-six week and thirty-seven week periods ended
September 12, 1998 and September 20, 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 for the thirty-
six weeks ended September 12, 1998 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 thirty-six weeks
ended September 12, 1998 than it expects to experience in the
remainder of fiscal 1998.
<PAGE>
ACQUISITION INTEGRATION COSTS AND OTHER SPECIAL CHARGES
Acquisition integration costs and other special charges were
$17,921 for the thirty-six week period ended September 12, 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. Acquisition integration
costs and other special charges consisting of $958 of severance
benefits, $1,779 relating to future payments to be made under an
agreement with the Company's former chief executive officer, $2,008
for bridge loan fees and $734 for stores that have been or will be
closed or sold were recorded during the thirty-seven week period
ended September 20, 1997.
EXTRAORDINARY ITEM
In connection with the Delchamps acquisition and the Recapitalization,
the Company retired certain long-term debt prior to its scheduled
maturity. Early retirement of such debt resulted in extraordinary losses
of $870 (net of income tax benefit of $518) during the twelve week and
thirty-seven week periods ended September 20, 1997. There were no
extraordinary items during the thirty-six week period ended September
12, 1998.
OPERATING INCOME
Operating income was $17,349 or 3.7% of net sales and $8,282 or
2.9% of net sales for the twelve week periods and was $16,239 or 1.1%
of net sales and $27,821 or 3.2% of net sales for the thirty-six week
and thirty-seven week periods ended September 12, 1998 and
September 20, 1997, respectively. The increase in operating income
was due to the factors discussed above.
EBITDA
EBITDA represents net income before interest income, interest
expense, income taxes, depreciation and amortization and LIFO
charges/credits and is calculated before any deduction for nonrecurring
charges. EBITDA increased $14,695 or 85.1% to $31,966 or 6.7% of
net sales in the third quarter of fiscal 1998 as compared to $17,271 or
6.0% of net sales in the third quarter of fiscal 1997. EBITDA
increased $21,233 or 40.1% to $74,245 or 5.2% of net sales for the
thirty-six week period ended September 12, 1998 as compared to
$53,012 or 6.1% of net sales for the thirty-seven week period ended
September 20, 1997. EBITDA increased primarily due to an increase
in sales due to the Delchamps acquisition. The decrease in EBITDA as
a percentage of net sales was due primarily to the increase in direct
store expenses and warehouse expenses discussed above. EBITDA as
presented is consistent with the definition used for covenant purposes
contained in the Indenture governing the Company's Senior Notes and
Senior Subordinated Notes. 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. EBITDA as defined by the
Company may not be comparable to similarly titled measures reported
by other companies.
NET INTEREST EXPENSE
Net interest expense was $17,178 in the third quarter of fiscal 1998 as
compared to $9,414 in the third quarter of fiscal 1997 and was $49,947
and $26,066 for the thirty-six week and thirty-seven week periods
ended September 12, 1998 and September 20, 1997, respectively. The
increase in interest expense was primarily due to interest expense on
the $200 million Senior subordinated notes issued in September 1997
in connection with the Delchamps acquisition.
INCOME TAX EXPENSE (BENEFIT)
Income tax expense for the twelve weeks and thirty-seven weeks ended
September 20, 1997 was 40.6% and 33.6%, 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 thirty-six weeks ended
September 12, 1998 was 23.4% 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 thirty-six weeks ended
<PAGE>
September 12, 1998 occurred primarily because goodwill relating to
the Delchamps acquisition is deductible for financial reporting
purposes but not for income tax purposes.
NET INCOME (LOSS)
Net income (loss) for the twelve weeks ended September 12, 1998 was
$131 compared to ($1,542) for the twelve weeks ended September 20,
1997. Net income (loss) for the thirty-six weeks ended September 12,
1998 was ($22,109) compared to $296 for the thirty-seven weeks
ended September 20, 1997. The decrease in net income resulted
primarily from the increase in interest expense discussed above. Net
income (loss) attributable to common shareholders decreased to
($28,412) for the thirty-six weeks ended September 12, 1998 compared
to ($5,366) for the thirty-seven weeks ended September 20, 1997 and
reflects the cumulation of dividends on preferred stock issued in the
Recapitalization.
LIQUIDITY AND CAPITAL RESOURCES
Due to the Recapitalization and acquisition of Delchamps in September
1997 the Company has become highly leveraged and has certain
restrictions on its operations. At September 12, 1998, Jitney-Jungle
had $574,806 of total long-term debt (including capitalized leases and
current installments) and a shareholders deficit of $195,832.
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 September 12, 1998 were
$103,317 under the Senior Credit Facility.
Cash used in operating activities during the thirty-six week period
ended September 12, 1998 was $12,562. Cash provided by operating
activities during the thirty-seven week period ended September 20,
1997 was $74,566. Restructuring obligations decreased due to the
payment of restructuring obligations. Notes and accounts receivable
increased primarily due to an increase in receivables from vendors.
Accrued expenses decreased primarily due to the payment of interest
on Senior Notes, Senior Subordinated Notes and the Senior Credit
Facility.
Net cash used in investing activities was $39,835 and $261,271 for the
thirty-six week and thirty-seven week periods ended September 12,
1998 and September 20, 1997, respectively. The Company paid
approximately $5,137 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 and also sold land for
$4,483.
Net cash provided by financing activities was $48,907 and $188,944
for the thirty-six week and thirty-seven week periods ended September
12, 1998 and September 20, 1997, respectively. The principal sources
of funds in financing activities for the thirty-six week period ended
September 12, 1998 were the borrowings under the Senior Credit
Facility. The principal uses of funds in financing activities for the
thirty-six week period ended September 12, 1998 were the payment of
capital lease 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.
ENVIRONMENTAL MATTERS
The Company's expenditures to comply with environmental laws and
regulations at its gas stations and supermarkets primarily consist of
those related to closing or upgrading underground storage tanks and
retrofitting chloroflurocarbon ("CFC") chiller units. The Company's
unreimbursed costs for remediation at the 16 locations which have had
<PAGE>
leaks or spills have not been material. The Company is in the process
of complying with the requirements of the Resource Conservation and
Recovery Act of 1980, as amended (the "RCRA") regarding
underground storage tanks which must be met by the end of calendar
1998. In order to comply with the RCRA, the Company spent $30,000
to close non-compliant tanks during the thirty-six weeks ended
September 12, 1998 and $500,000 to upgrade non-compliant tanks
during fiscal 1997 and the 35 weeks ended January 3, 1998. The
Company estimates that it will cost between $120,000 to $210,000 to
upgrade the remaining non-compliant tanks during the remainder of
fiscal 1998. The Company is in the process of retrofitting all of its
chillers to use non-chloroflurocarbon based refrigerants in anticipation
of the phase out of the manufacture of chloroflurocarbon pursuant to
the Clean Air Act. The Company has budgeted $145,000 for the fourth
quarter of fiscal 1998 and $183,000 for fiscal 1999 to retrofit all of its
remaining CFC chiller units.
YEAR 2000
During calendar years 1996 and 1997, the Company's Information
Systems Department conducted an extensive information systems
review of all primary systems, such as financial, payroll, human
resources, employee benefits, purchasing, merchandising,
retail/pricing, warehousing and store management as well as secondary
systems such as catering, damage reclamation and loss prevention.
This review evaluated these systems in terms of their Year 2000
compliance, flexibility to absorb Delchamps' operations, capacity,
general efficiency, compatibility and competitive advantage. The
department recommended, and the Company is implementing, the
replacement or upgrading all of the Company's primary and secondary
systems, most of which were 10 to 15 years old. From March 1997 to
September 12, 1998, the Company spent approximately $3.3 million to
replace its financial, payroll, human resources and employee benefits
systems. The Company's other primary systems (purchasing,
merchandising, retail/pricing, warehousing and store management, and
various operating systems) are either being upgraded for Year 2000
compliance through regular maintenance updates or are scheduled to be
replaced by May 31, 1999, at an estimated cost of $3.0 million, at
which time all potential Year 2000 problems in the Company's primary
systems should be resolved. Although the Company's operations are
not dependent on its secondary systems, the Company has spent
$250,000 as of September 12, 1998 upgrading these systems and
anticipates spending approximately an additional $1 million in order to
complete that project by the end of June 1999, at which time all
potential Year 2000 problems in the Company's secondary systems
should be resolved. All of the funds reported or estimated in this report
have been or will be reported as capital expenditures. The normal
annual software support which includes Year 2000 upgrades are
included in the normal Information Systems Department operating
expense budget. All funds for Year 2000 projects are derived from
operating proceeds. No primary information systems projects have
been deferred as a result of the Year 2000 efforts. The Company has
engaged an independent contractor to verify compliance on the primary
systems modules. No assurances can be given, however, that all Year
2000 problems will be effectively resolved on schedule or before the
Year 2000. Any such problems, if not resolved, could have a material
adverse effect on the Company's business, financial condition and
results of operations.
The Company has sent a survey to its significant third party suppliers,
financial institutions and insurance companies (i) inquiring into their
Year 2000 compliance status, (ii) seeking commitments of their
intention to become Year 2000 compliant and (iii) gathering
information to assess the effect of any non-compliance on the
Company's operations. No assurances can be given that these third
parties will become Year 2000 compliant. Any such non-compliance
could have a material adverse effect on the Company's business,
financial condition and results of operations.
The most reasonably likely worst case Year 2000 scenario would result
in the failure to order or acquire new products for warehouse or store
replenishment. The Company has established a disaster recovery plan
that is available as a reasonable contingency plan. Through this
disaster recovery plan, manual processes are outlined that will enable
the Company to order and obtain available products for delivery to the
stores without reliance on existing primary technology normally used
by the Company.
<PAGE>
SEASONALITY
No material portion of the Company's business is affected by seasonal
fluctuations, except that sales are generally stronger in the fourth
quarter as a result of Thanksgiving, Christmas and New Year's Day.
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 normal
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.
<PAGE>
ITEM 5. OTHER INFORMATION
In late September of 1998, the Company's operations were temporarily
affected by Hurricane Georges. As a result of the storm approximately
85 stores were temporarily closed primarily along the Gulf Coast in the
states of Florida, Alabama, Mississippi and Louisiana. Most stores
were closed for only a few hours with the worst affected store being
closed for less than five days. The Company experienced lost product,
limited physical damage to certain of its stores and equipment,
interruptions to its normal business operations and extra expenses
incurred as a result of the storm. The Company is fully insured for all
of the aforementioned adverse consequences resulting from the storm
and is working with its insurance carrier's representatives to document
its losses and recover the insurance proceeds. The amount of such loss
is still being assessed by the Company. On October 5, 1998, the
Company secured an amendment to its Revolving Credit Agreement to
add an additional $25 million of supplemental availability to its
existing line of credit to provide for additional cash flow needs, if
necessary, as a result of the interruption of business caused by the
storm. The additional $25 million of supplemental availability to the
Revolving Credit Agreement expires on January 15, 1999. No funds
under the additional $25 million of supplemental availability have been
drawn to date.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No.
--------------
* 4.1 Amendment and Waiver Agreement No.1 dated April 10,
1998 to Amended and Restated Revolving Credit Agreement
dated September 15, 1997 by and among Fleet Capital
Corporation and the Company.
*4.2 Amendment and Waiver Agreement No.2 dated June 19,
1998 to Amended and Restated Revolving Credit Agreement
dated September 15, 1997 by and among Fleet Capital
Corporation and the Company.
*4.3 Amendment and Waiver Agreement No.3 dated October 5,
1998 to the Amended and Restated Revolving Credit Agreement
dated September 15, 1997 by and among Fleet Capital
Corporation and the Company.
* 27.1 Financial Data Schedule
* Filed herewith.
(b) Reports on Form 8-K
None
<PAGE>
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: October 27 , 1998
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<PERIOD-START> JUN-21-1998
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