<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED May 2, 1998
-----------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from to
-------- ---------
Commission file number 333-32825
---------
SHOPPERS FOOD WAREHOUSE CORP.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 53-0231809
- --------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
4600 Forbes Blvd., Lanham, Maryland, 20706
------------------------------------------
(Address of principal executive office)
(Zip Code)
(301) 306-9600
----------------------------------------------------
(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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
--- ---
At June 15, 1998, the registrant had 23,333 shares of Class A Common Stock,
non-voting, $5.00 par value per share, outstanding and 10,000 shares of Class B
Common Stock, voting, $5.00 par value per share, outstanding. The common stock
of Shoppers Food Warehouse Corp. is not publicly traded.
1
<PAGE> 2
Item 1. Financial Statements
The consolidated financial statements included herein have been prepared by
Shoppers Food Warehouse Corp. ("Shoppers" or the "Company") without audit
(except for the consolidated balance sheet as of January 31, 1998, which has
been derived from the audited consolidated balance sheet as of that date)
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted, although Shoppers believes that the disclosures
are adequate to make the information presented not misleading.
It is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in Shoppers' Annual Report on Form 10-K for the fiscal year ended
January 31, 1998.
2
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SHOPPERS FOOD WAREHOUSE CORP.
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(dollars and shares in thousands, except per share data)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
May 2, May 3,
1998 1997
-------- --------
<S> <C> <C>
Sales $213,998 $209,981
Cost of sales 164,508 159,535
-------- --------
Gross profit 49,490 50,446
Selling and administrative expenses 40,192 37,545
Depreciation and amortization 2,864 2,495
-------- --------
Operating income 6,434 10,406
Interest income 1,314 499
Interest expense 5,470 5,250
-------- --------
Income before income taxes 2,278 5,655
Provision for income taxes 1,071 2,478
-------- --------
Income before cumulative effect of accounting
change 1,207 3,177
Cumulative effect of accounting change, net of
income taxes of $1,344 - 1,729
-------- --------
Net Income $ 1,207 $ 4,906
======== ========
Earnings per common share data (Basic and Dilutive):
Earnings before cumulative effect of accounting
change $ 36.21 $ 95.31
Cumulative effect of accounting change, net - 51.87
-------- --------
Earnings per common share $ 36.21 $ 147.18
======== ========
Weighted average common shares outstanding 33 33
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
SHOPPERS FOOD WAREHOUSE CORP.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
May 2, January 31,
ASSETS 1998 1998
---------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 10,501 $ 4,027
Marketable debt securities 2,646 522
Accounts receivable 8,479 7,950
Merchandise inventories 28,622 30,795
Prepaid income taxes 512 1,217
Deferred income taxes 4,435 4,254
Prepaid expenses 1,862 2,173
Due from affiliate 1,174 522
-------- --------
Total current assets 58,231 51,460
-------- --------
Property and Equipment, at cost:
Land and buildings 7,503 7,503
Store and warehouse equipment 63,061 62,496
Office and automotive equipment 2,149 2,019
Leasehold improvements 3,842 3,842
Construction in progress 1,950 -
-------- --------
78,505 75,860
Accumulated depreciation and amortization 38,748 36,973
-------- --------
Net property and equipment 39,757 38,887
-------- --------
Deferred Financing Costs 6,589 6,543
Goodwill 144,188 145,118
Lease Rights 11,535 11,689
Note Receivable from Dart Group 36,206 35,374
Other Assets 764 861
-------- --------
Total assets $297,270 $289,932
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
<PAGE> 5
SHOPPERS FOOD WAREHOUSE CORP.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
May 2, January 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1998
---------- -----------
<S> <C> <C>
Current Liabilities:
Accounts payable $ 41,015 $ 40,006
Accrued expenses
Salaries and benefits 4,348 4,490
Taxes other than income 2,617 2,687
Interest 7,529 2,654
Other 7,190 6,654
------- --------
Total current liabilities 62,699 56,491
------- --------
Senior Notes Due 2004 200,000 200,000
Capital Lease Obligations 11,289 11,315
Deferred Income Taxes 9,530 9,625
Other Liabilities 6,597 6,549
------- --------
Total Liabilities 290,115 283,980
------- --------
Commitments and Contingencies
Stockholders' Equity:
Class A common stock, nonvoting, par value
$5.00 per share, 25,000 shares authorized;
23,333 1/3 shares issued 117 117
Class B common stock, voting, par value $5.00 per
share, 25,000 shares authorized;
10,000 shares issued 50 50
Unrealized gain on investments - 4
Retained earnings 6,988 5,781
-------- --------
Total stockholders' equity 7,155 5,952
-------- --------
Total liabilities and stockholders' equity $297,270 $289,932
======== ========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
5
<PAGE> 6
SHOPPERS FOOD WAREHOUSE CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS, (Unaudited)
(dollars in thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
May 2, May 3,
1998 1997
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 1,207 $ 4,906
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,864 2,495
Cumulative effect of accounting change, net - (1,729)
Amortization of deferred financing costs 248 510
Interest in excess of capital lease payments - 102
Increase in deferred rent liability 252 235
Change in assets and liabilities:
Accounts receivable (529) 3,043
Merchandise inventories 2,173 1,043
Due from affiliate (652) -
Prepaid expenses 311 487
Other assets 97 (80)
Prepaid income taxes 705 -
Deferred income taxes (276) -
Accounts payable 1,009 270
Accrued expenses 229 (1,307)
Accrued interest 4,005 3,344
Income taxes payable - 871
Deferred income (109) (390)
-------- --------
Net cash provided by operating activities $ 11,534 $ 13,800
-------- --------
Cash Flows from Investing Activities:
Capital expenditures $ (2,650) $ (1,522)
Purchase of short-term investments (2,090) (13,417)
Sale/maturities of short-term investments - 80,549
-------- --------
Net cash provided by(used in)investing activities $ (4,740) $ 65,610
-------- --------
Cash Flows from Financing Activities:
Payments for acquisition and deferred financing
costs $ (294) $ (6,936)
Principal payments under capital lease obligations (26) -
Payment of acquisition debt - (72,800)
-------- --------
Net cash used in financing activities $ (320) $(79,736)
-------- --------
Net decrease in cash and equivalents 6,474 (326)
Cash and equivalents, beginning of period 4,027 13,739
-------- --------
Cash and equivalents, end of period $ 10,501 $ 13,413
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid for
Interest $ 282 $ 3,730
Income taxes 1,242 750
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
SHOPPERS FOOD WAREHOUSE CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS, (Unaudited), Continued
(dollars in thousands)
Supplemental disclosure of noncash activities:
In conjunction with the acquisition of a 50% interest in the Company, $210
million of debt was pushed down into the Company's financial statements, (see
Note 5).
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
SHOPPERS FOOD WAREHOUSE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 2, 1998 and May 3, 1997
(Unaudited)
NOTE 1 - GENERAL
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Accordingly, actual results could differ from those
estimates.
The accompanying consolidated financial statements as of May 2, 1998 and for the
13 weeks ended May 2, 1998 and May 3, 1997 of the Company has been prepared by
the Company without an audit. Certain information and footnote disclosures
normally included in the financial statements prepared in accordance with
generally accepted accounting principles ("GAAP") have been omitted from the
accompanying consolidated financial statements.
In the opinion of the Company, the accompanying consolidated financial
statements reflect all adjustments (which include normal recurring adjustments)
necessary to present fairly the financial position of the Company as of May 2,
1998, and the results of its operations for the 13 weeks ended May 2, 1998 and
May 3, 1997. The results of operations for the 13 weeks ended May 2, 1998 are
not necessarily indicative of the results that may be achieved for the fiscal
year ended January 30, 1999.
NOTE 2 - EARNINGS PER SHARE
Earnings per common share is based on the weighted average number of common
shares and common share equivalents outstanding during the periods presented.
The Company adopted SFAS No. 128, Earnings Per Share, in the fourth quarter of
fiscal 1998 and has restated all previously presented earnings per common share
data. The Company has no dilutive securities, therefore, earnings per common
share represents both basic and diluted earnings per common share.
NOTE 3 - INTERIM INVENTORY ESTIMATES
The Company's inventories are priced at the lower of last-in, first-out ("LIFO")
cost or market. At May 2, 1998 and May 3, 1997, inventories determined on a
first-in, first-out basis would have been greater by approximately $4,919,000
and $4,601,000, respectively.
The Company takes a physical inventory on a store by store basis of its grocery,
frozen food, dairy and health and beauty care departments quarterly and the
Company uses a gross profit method to determine inventories for those
departments for quarters when complete physical counts are not taken. The
Company took a physical inventory for these departments for the 13 weeks ended
May 2, 1998. All perishable departments are inventoried monthly.
8
<PAGE> 9
SHOPPERS FOOD WAREHOUSE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
May 2, 1998 and May 3, 1997
(Unaudited)
NOTE 4 - ACQUISITION
On February 6, 1997, Dart Group Corporation ("Dart"), acquired the 50% interest
in Shoppers that it did not already own at a cost of $210 million (the
"Acquisition") and Shoppers became a wholly owned subsidiary of Dart. Dart
financed the Acquisition through the application of $137.2 million in net
proceeds raised from an offering of Increasing Rate Senior Notes due 2000 (the
"Increasing Rate Notes") of SFW Acquisition Corp., a newly created wholly-owned
indirect subsidiary of Dart, and $72.8 million of bridge financing (the "Bridge
Loan") provided by a bank. Immediately after the Acquisition, SFW Acquisition
Corp. merged into Shoppers (with Shoppers becoming the obligor on the Increasing
Rate Notes) and Shoppers repaid the Bridge Loan from its existing cash and the
liquidation of certain short-term investments.
The Acquisition was recorded using the purchase method of accounting and Dart's
interest in Shoppers has been pushed down into the accompanying financial
statements. The purchase price has been allocated to the assets and liabilities
of Shoppers and the remaining excess purchase price over the net assets acquired
of $148.8 million represents goodwill which will be amortized over 40 years. In
conjunction with the Acquisition, the Company adopted Dart's method of
depreciating property and equipment on a straight-line basis. Prior to the
Acquisition, the Company used accelerated depreciation methods.
NOTE 5 - LONG-TERM DEBT
Senior Notes
In June 1997, Shoppers refinanced the Increasing Rate Notes with $200.0 million
aggregate principal amount of 9 3/4% Senior Notes due 2004 (the "Senior Notes").
The net proceeds from the Senior Notes was $193.5 million (after fees and
expenses of approximately $6.5 million) of which $143.5 million was used to
repay the Increasing Rate Notes (including interest) and $50.0 million (the
"Restricted Proceeds") was paid to Dart in the form of a $40 million dividend
and a $10 million loan for settlements with certain Dart shareholders (Haft
family members). Interest on the Senior Notes accrued from the date of issuance
and is payable semi-annually in arrears on each June 15 and December 15. The
Senior Notes are effectively subordinated in right of payment to all secured
indebtedness of the Company and contain certain restrictive covenants including,
(i) limitation on restricted payments, (ii) limitation on indebtedness, (iii)
limitation on investments, loans and advances, (iv) limitation on liens, (v)
limitation on transactions with affiliates, (vi) restriction on mergers,
consolidations and transfers of assets, (vii) limitation on lines of business,
(viii) limitations on asset sales and (ix) limitation on issuance and sale of
capital stock of subsidiaries. The amount of distributions that the Company can
make to its shareholder is also subject to certain restrictions.
The Senior Notes are fully and unconditionally guaranteed by SFW Holding Corp.
("Holdings"), the immediate parent of the Company. Holdings holds 100% of the
common stock of Shoppers and is wholly-owned subsidiary of Dart. The guarantee
9
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SHOPPERS FOOD WAREHOUSE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
May 2, 1998 and May 3, 1997
(Unaudited)
is secured by a first priority security interest in the capital stock of the
Company owned by Holdings.
Revolving Credit Facility
On December 22, 1997, the Company entered into a revolving loan and security
agreement (the "Credit Facility") to borrow up to $25 million. The Company
intends to use proceeds of borrowings under the Credit Facility for working
capital and other corporate purposes. The Credit Facility has an original term
of five years and may be renewed for up to two additional one year periods.
Borrowings under the Credit Facility shall bear interest at rates ranging from
prime rate minus 0.25% to prime rate plus 0.25%, for prime rate loans, or LIBOR
plus 1.5% to LIBOR plus 2.0%, for LIBOR loans. The Company may elect prime rate
loans or LIBOR loans. Interest rates are based upon the Company's net income,
determined in accordance with GAAP; plus income taxes, interest expense (net of
interest income), amortization and depreciation expenses, LIFO expense, other
non-cash charges (excluding accruals for cash expenses made in the ordinary
course of business) and losses from sales or other dispositions of assets, less
gains from sales or other dispositions and extraordinary or non-recurring gains,
but including extraordinary or non-recurring cash losses ("EBITDA"). Borrowings
are limited to eligible accounts, as defined, less any letters of credit
outstanding, and are secured by the Company's inventory and certain accounts
receivable. Interest on prime rate loans is payable monthly and interest on
LIBOR loans is payable between one and three months. The Credit Facility
includes a fee on the unused principal balance of 0.375% per annum until January
31, 1999 and a variable rate from .25% to .50% based on the Company's EBITDA.
Letters of credit issued under the Credit Facility cannot exceed $10.0 million
and Shoppers must pay a fee of 1.25% to 1.75%, based on the level of EBITDA, of
the daily outstanding balance of any outstanding letters of credit. The Credit
Facility has certain restrictive covenants, including the maintenance of
specified EBITDA levels. As of May 2, 1998, the Company had not borrowed under
the Credit Facility.
NOTE 6 - MERGER
Merger of Dart
On April 9, 1998, Dart entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Richfood Holdings, Inc. ("Richfood Holdings") and a subsidiary
of Richfood Holdings ("Acquisition Subsidiary"). Pursuant to the terms of the
Merger Agreement, Richfood Holdings (i) made a cash tender offer (the "Offer")
for all of the issued and outstanding shares of common stock of Dart at a price
of $160.00 per share (ii) caused Acquisition Subsidiary to merge with and into
Dart (the "Merger") in a transaction in which Dart became a wholly owned
subsidiary of Richfood Holdings. The tender offer closed on May 13, 1998 and the
Merger was effective on May 18, 1998. As a result of the Offer and the Merger,
Richfood Holdings indirectly owns 100% of the outstanding Common Stock of the
Company. Richfood Holdings intends to operate Shoppers as a distinct unit
separate from its other retail and wholesale operations and does not
10
<PAGE> 11
SHOPPERS FOOD WAREHOUSE CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
May 2, 1998 and May 3, 1997
(Unaudited)
presently plan to make any material changes to Shoppers' strategic focus or
operational format.
NOTE 7 - NOTES RECEIVABLE
On September 26, 1997, Shoppers loaned Dart $10.0 million from the Restricted
Proceeds that Dart used for a settlement with certain Haft family members. The
loan is in the form of a promissory note that bears interest at 9 3/4% per annum
compounded annually. Interest and principal are payable on June 15, 2004,
however, Dart may make interest payments prior to that time.
On January 28, 1998, Shoppers loaned Dart $25.0 million that Dart used for a
settlement with Herbert H. Haft. The loan is in the form of a promissory note
that bears interest at 9 3/4% per annum compounded annually. Interest and
principal are payable on June 15, 2004, however Dart may make interest payments
prior to that time.
During the 13 weeks ended May 2, 1998, Shoppers recorded interest income of
approximately $288,000 and decreased the reserve for the collectability of a
note receivable from an affiliate by approximately $365,000 to adjust the
carrying value of the note receivable. Subsequent to May 2, 1998, Shoppers
collected approximately $1,174,000 from an affiliate of Dart to pay-off the note
receivable in full.
11
<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Outlook
Except for historical information, statements in this Management's Discussion
and Analysis of Financial Condition and Results of Operations are forward-
looking. Actual results may differ materially due to a variety of factors,
including the Company's ability to open new stores and the effect of regional
economic conditions. Shoppers undertakes no obligation and does not intend to
update, revise or otherwise publicly release the result of any revisions to
these forward-looking statements that may be made to reflect future events or
circumstances.
Richfood Holdings intends to operate Shoppers as a distinct unit separate from
its other retail and wholesale operations and does not presently plan to make
any material changes to Shoppers' strategic focus or operational format.
Results of Operations
13 Weeks Ended May 2, 1998 Compared with the 13 Weeks Ended May 3, 1997
(unaudited)
Sales increased by $4.0 million, from $210.0 million during the 13 weeks ended
May 3, 1997 to $214.0 million during the 13 weeks ended May 2, 1998. The sales
increases were primarily due to the three new stores opened since July 1997.
Comparable store sales decreased 9.1% during the 13 weeks ended May 2, 1998. The
decrease in comparable store sales was primarily due to the new stores drawing
customers from existing stores and competitive market conditions.
Gross profit decreased by $1.0 million (1.9%), from $50.4 million during the 13
weeks ended May 3, 1997 to $49.5 million during the 13 weeks ended May 2, 1998.
Gross profit, as a percentage of sales, decreased to 23.1% during the 13 weeks
ended May 2, 1998 from 24.0% during the 13 weeks ended May 3, 1997. The
decreases were primarily due to a more aggressive pricing strategy implemented
by the Company that is intended to reestablish the Company as a price leader.
Selling and administrative expenses increased by approximately $2.6 million
(7.1%), from $37.5 million during the 13 weeks ended May 3, 1997 to $40.2
million during the 13 weeks ended May 2, 1998. Selling and administrative
expenses, as a percentage of sales, increased from 17.9% during the 13 weeks
ended May 3, 1997 to 18.8% during the 13 weeks ended May 2, 1998. The increases
were primarily attributable to increased payroll costs associated with
negotiated union rates and to expenses associated with the new stores opened
since July 1997.
Depreciation and amortization increased by $0.4 million from $2.5 million during
the 13 weeks ended May 3, 1997 to $2.9 million during the 13 weeks ended May 2,
1998. The increases were primarily due to additional depreciation and
amortization associated with fixed assets purchased for the new stores opened
since July 1997.
Operating income was $6.4 million for the 13 weeks ended May 2, 1998 compared to
$10.4 million during the same period in the prior year. The decrease was
primarily due to higher selling and administrative expenses, the decrease in
12
<PAGE> 13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
gross profit and increased depreciation and amortization.
Interest income increased $0.8 million during the 13 weeks ended May 2, 1998
compared to the 13 weeks ended May 3, 1997 due to interest accrued on the loans
to Dart and the interest recorded on the note receivable from affiliate (see
Note 8 to the Consolidated Financial Statements).
Interest expense increased approximately $0.2 million from $5.3 million during
the 13 weeks ended May 3, 1997 to $5.5 million during the 13 weeks ended May 3,
1998 as a result of interest paid and accrued on the Senior Notes and the
amortization of financing costs.
The effective income tax rate for the 13 weeks ended May 2, 1998 was 47.0%
compared to 43.8% for the 13 weeks ended May 3, 1997. The increase was primarily
attributable to nondeductible amortization of acquisition related goodwill.
Net income decreased by $3.7 million, from $4.9 million during the 13 weeks
ended May 3, 1997 to $1.2 million during the 13 weeks ended May 2, 1998. The
decrease was primarily attributable to income from the cumulative effect of
accounting change last year resulting from the Company adopting Dart's method of
depreciating fixed assets and to the reduction in operating income this year.
Year 2000 Compliance (unaudited)
The Company is currently in the process of conducting a review of the impact of
Year 2000 on its information systems, as well as reviewing its impact on
relationships with key customers and vendors. Based on this review, the Company
is upgrading its store POS systems, General Ledger, Accounts Payable and Payroll
systems. The Company believes that all other systems are currently Year 2000
compliant. The upgrades are scheduled to be completed by January 1999. There can
be no certainty that the upgrades will be completed by the year 2000. Currently,
the aggregate cost associated with this program has not been estimated.
Liquidity and Capital Resources
The Company's principal sources of liquidity are expected to be cash flow from
operations and, if necessary, borrowings under its $25 million credit facility
("the Credit Facility"). It is anticipated that Shoppers' principal uses of
liquidity will be to provide working capital, finance capital expenditures and
meet debt service requirements.
Letters of credit have been issued in connection with Shoppers' workers'
compensation insurance in the amount of approximately $5.0 million as of May 2,
1998. These letters of credit will mature at various dates through May 1, 1999.
During the 13 weeks ended May 2, 1998, operating activities generated $11.5
million. One of the principal uses of cash in the Company's operating activities
is inventory purchases. However, Shoppers' relatively high inventory turnover
enables the Company to finance a substantial portion of its inventory
13
<PAGE> 14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
through trade payables, thereby allowing the Company to use cash from operations
for non-current purposes, such as financing capital expenditures and other
investing activities.
For the 13 weeks ended May 2, 1998, investing activities used approximately $2.7
million of Shoppers' funds for capital expenditures and approximately $2.1
million for the purchase of short-term investments.
Financing activities used $0.3 million of the Company's funds during the 13
weeks ended May 2, 1998 compared to $79.7 million during the 13 weeks ended May
3, 1997. The change is due to payments for the bridge loan, financing costs, and
acquisition costs associated with the Acquisition last year (see Note 4 to the
Consolidated Financial Statements).
Shoppers estimates that it will make capital expenditures of approximately $9.4
million during the 52 weeks ended January 30, 1999. Such expenditures relate to
one new store opening as well as routine expenditures for equipment and
maintenance. Management expects that these capital expenditures will be financed
primarily through cash flow from operations and, if necessary, the Credit
Facility.
Shoppers' current interest expense consists primarily of interest on the Senior
Notes and capital lease obligations. Interest expense increased approximately
$0.2 million from approximately $5.3 million during the 13 weeks ended May 3,
1997 to $5.5 million during the 13 weeks ended May 2, 1998 due to interest paid
and accrued on the Senior Notes and amortization of deferred financing costs.
The Company believes that cash flows from Shoppers' operations and, if
necessary, borrowings under the Credit Facility will be adequate to meet its
anticipated requirements for working capital, debt service and capital
expenditures over the next few years. However, there can be no assurance that
Shoppers will generate sufficient cash flow from operations or that it will be
able to borrow under the Credit Facility.
14
<PAGE> 15
PART II
Item 1. Legal Proceedings
Material legal proceedings pending against Shoppers are described in its Annual
Report on Form 10-K for the year ended January 31, 1998 (the "Annual Report").
There have been no material developments in any legal proceedings reported in
the Annual Report.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
27 Financial Data Schedule
(B) Reports on Form 8-K
None
15
<PAGE> 16
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.
SHOPPERS FOOD WAREHOUSE CORP.
Date: June 16, 1998 By: WILLIAM J. WHITE
---------------------- ------------------------------------
WILLIAM J. WHITE
President
Date: June 16, 1998 By: EDWARD KLIG
---------------------- ------------------------------------
EDWARD KLIG
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> MAY-02-1998
<CASH> 10,501
<SECURITIES> 2,646
<RECEIVABLES> 8,479
<ALLOWANCES> 0
<INVENTORY> 28,622
<CURRENT-ASSETS> 58,231
<PP&E> 78,505
<DEPRECIATION> 38,748
<TOTAL-ASSETS> 297,270
<CURRENT-LIABILITIES> 62,699
<BONDS> 211,289
0
0
<COMMON> 167
<OTHER-SE> 6,988
<TOTAL-LIABILITY-AND-EQUITY> 297,270
<SALES> 213,998
<TOTAL-REVENUES> 215,312
<CGS> 164,508
<TOTAL-COSTS> 164,508
<OTHER-EXPENSES> 43,056
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,470
<INCOME-PRETAX> 2,278
<INCOME-TAX> 1,071
<INCOME-CONTINUING> 1,207
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,207
<EPS-PRIMARY> 36.21
<EPS-DILUTED> 36.21
</TABLE>
