<PAGE>
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 (13 weeks) ended July 29, 2000.
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 333-32825
SHOPPERS FOOD WAREHOUSE CORP.
(Exact name of registrant as specified in its charter)
Delaware 53-0231809
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4600 Forbes Blvd., Lanham, Maryland, 20706
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(Address of principal executive office) (Zip Code)
(301) 306-9600
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(Registrant's telephone number, including area code)
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
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At September 5, 2000, 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.
The registrant meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is therefore filing this form with the reduced disclosure
format.
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Part I - Financial Information
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 29, 2000, 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 because they are not applicable or not required.
It is suggested that these consolidated financial statements are 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 29, 2000.
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SHOPPERS FOOD WAREHOUSE CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
July 29, January 29,
2000 2000
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(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,679 $ 3,390
Accounts receivable, net 11,229 10,275
Merchandise inventories 33,843 31,324
Deferred income taxes 4,185 4,185
Other current assets 1,538 2,761
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Total current assets 52,474 51,935
Property and equipment, net 72,565 64,017
Goodwill, net of accumulated amortization 301,858 305,431
Leasehold rights, net of accumulated amortization 27,373 27,945
Note receivable 44,563 42,491
Other assets 676 751
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Total assets $499,509 $492,570
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Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable $ 8,751 $ 6,245
Accrued interest 2,014 2,058
Accrued insurance 7,082 7,740
Accrued expenses 12,578 13,908
Due to affiliates 42,896 51,992
Accrued income taxes 11,689 9,315
Other current liabilities 618 618
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Total current liabilities 85,628 91,876
Senior notes due 2004 180,045 181,748
Capital lease obligations 22,378 12,034
Deferred income taxes 14,218 14,218
Other liabilities 678 803
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Total liabilities 302,947 300,679
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Stockholder's equity:
Class A common stock, nonvoting, par value $5 per share, 25,000
shares authorized; 23,333 1/3 shares issued and outstanding 117 117
Class B common stock, voting, par value $5 per share, 25,000
shares authorized; 10,000 shares issued and outstanding 50 50
Additional paid-in capital 189,241 189,241
Retained earnings 7,154 2,483
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Total stockholder's equity 196,562 191,891
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Total liabilities and stockholder's equity $499,509 $492,570
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</TABLE>
The accompanying notes are an integral part of these statements.
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SHOPPERS FOOD WAREHOUSE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Second quarter (13 weeks) ended Year-to-date (26 weeks) ended
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July 29, July 31, July 29, July 31,
2000 1999 2000 1999
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(Post-SUPERVALU (Pre-SUPERVALU (Post-SUPERVALU (Pre-SUPERVALU
acquisition) acquisition) acquisition) acquisition)
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<S> <C> <C> <C> <C>
Sales $ 224,955 $ 219,784 $ 439,591 $ 439,853
Cost of sales 168,701 164,283 329,924 329,268
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Gross profit 56,254 55,501 109,667 110,585
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Selling and administrative expenses 47,279 47,856 94,930 95,623
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Operating income 8,975 7,645 14,737 14,962
Interest income 1,190 853 2,211 1,727
Interest expense 3,707 4,329 7,261 8,658
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Net interest expense 2,517 3,476 5,050 6,931
Earnings before income taxes 6,458 4,169 9,687 8,031
Provision for income taxes 3,194 2,253 5,016 4,415
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Net earnings $ 3,264 $ 1,916 $ 4,671 $ 3,616
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</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
SHOPPERS FOOD WAREHOUSE CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Year-to-date (26 weeks) ended
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July 29, July 31,
2000 1999
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(Post-SUPERVALU (Pre-SUPERVALU
acquisition) acquisition)
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<S> <C> <C>
Net cash provided by operating activities $ 9,324 $ 7,621
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Cash flows from investing activities:
Capital expenditures (3,343) (4,053)
Reimbursement of renovation costs from landlord 4,371 --
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Net cash provided by (used in) investing activities 1,028 (4,053)
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Cash flows from financing activities:
Cash provided to affiliated companies (9,096) (7,857)
Principal payments under capital lease obligations (2,967) (300)
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Net cash used in financing activities (12,063) (8,157)
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Net decrease in cash and cash equivalents (1,711) (4,589)
Cash and cash equivalents at beginning of period 3,390 6,602
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Cash and cash equivalents at end of period $ 1,679 $ 2,013
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Supplemental Cash Flow Information:
Disclosure of noncash investing activity
Assets acquired under capital lease $ 13,311 $ --
================= ===============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
SHOPPERS FOOD WAREHOUSE CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (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 of the Company as of July 29,
2000, and for the 13 weeks and 26 weeks ended July 29, 2000, and July 31, 1999,
have not been audited. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or 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 July 29,
2000, and the results of its operations for the 13-week and 26-week periods
ended July 29, 2000, and July 31, 1999.
NOTE 2 - ACQUISITION
On August 31, 1999, Richfood Holdings, Inc. ("Richfood") was acquired in a
merger by a wholly-owned subsidiary of SUPERVALU INC., a Delaware corporation
("SUPERVALU"), and the Company became an indirect, wholly-owned subsidiary of
SUPERVALU at that time ("the SUPERVALU acquisition"). Prior to August 31, 1999,
the Company was an indirect, wholly-owned subsidiary of Richfood. SUPERVALU has
accounted for the acquisition of Richfood using the purchase method of
accounting and, accordingly, a new accounting basis was established as of August
31, 1999 and was used for the remaining twenty-two weeks of fiscal 2000. The
assets and liabilities of Shoppers were restated to reflect their estimated fair
market values as of that date. The excess of the purchase price paid for the
Company over its net assets acquired (goodwill) of $310,076 has been pushed down
to the Company. The goodwill is being amortized on a straight-line basis over 40
years. Certain financial statements and related footnote amounts for periods
prior to the SUPERVALU acquisition may not be comparable to corresponding
amounts subsequent to the acquisition.
NOTE 3 - TRANSACTIONS WITH AFFILIATES
The July 29, 2000 consolidated balance sheet includes $42.9 million due to
affiliates compared to $52.0 million at January 29, 2000. The $42.9 million
consists primarily of amounts due to SUPERVALU for the purchase of bonds and
amounts due for inventory purchases and general and administrative expenses.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Cautionary Statements for Purposes of the Safe Harbor Provisions of the Private
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Securities Litigation Reform Act of 1995
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The information in this Quarterly Report includes forward-looking statements.
Important risks and uncertainties that could cause actual results to differ
materially from those discussed in such forward looking statements are: the
impact of changing economic or business conditions, the impact of competition,
the nature and extent of the consolidation of the retail food and food
distribution industries, the ability to attract and retain customers for the
company's businesses, the ability to control food distribution costs, the
ability of the Company to grow through acquisition and assimilate acquired
entities, the availability of favorable credit and trade terms, food price
changes and other risk factors inherent in the food wholesaling and retail
businesses. Other risks or uncertainties may be detailed from time to time in
the Company's future Securities and Exchange Commission filings.
<PAGE>
Results of Operations
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RESULTS FOR THE QUARTER:
Sales increased by $5.2 million to $225.0 million during the 13 weeks ended July
29, 2000, compared to $219.8 million during the 13 weeks ended July 31, 1999, an
increase of 2.4%. This increase was due primarily to two new stores and two
store remodels which have occurred since last year second quarter, offset, in
part, by the closing of one store last year. Comparable store sales increased
0.7% for the 13 weeks ended July 29, 2000, compared to the corresponding period
of the prior year. The increase in comparable store sales was due primarily to
the completion of the two remodels during the current year.
Gross profit, as a percentage of sales, was 25.0% during the 13 weeks ended July
29, 2000, compared to 25.3% during the 13 weeks ended July 31, 1999. The
decrease was primarily due to higher promotional activities.
Selling and administrative expenses, as a percentage of sales, were 21.0% for
the 13 weeks ended July 29, 2000, compared to 21.8% for the 13 weeks ended July
31, 1999. The decrease was due primarily to decreased wages as a result of
improved labor management and lower administrative and advertising costs.
Operating income was $9.0 million for the 13 weeks ended July 29, 2000, compared
to $7.6 million for the 13 weeks ended July 31, 1999. The increase was primarily
due to the decrease in selling and administrative expenses during the current
year.
Interest income increased to approximately $1.2 million for the 13 weeks ended
July 29, 2000, compared to $0.9 million for the 13 weeks ended July 31, 1999 due
to an increase in the outstanding balance of the note receivable.
Interest expense decreased approximately $0.6 million, to $3.7 million for the
13 weeks ended July 29, 2000, compared to $4.3 million for the 13 weeks ended
July 31, 1999, a 14.4% decrease. The reduction in interest expense was due to
the retirement of $24.6 million of the Senior Notes in October 1999.
The effective income tax rate for the 13 weeks ended July 29, 2000, was 49.5%
compared to 54.0% for the 13 weeks ended July 31, 1999. The decrease is
primarily attributable to increased taxable earnings in relation to the fixed
amount of acquisition non-deductible goodwill associated with the SUPERVALU
acquisition.
Net income was $3.3 million for the 13 weeks ended July 29, 2000 compared to
$1.9 million for the 13 weeks ended July 31, 1999.
YEAR TO DATE RESULTS:
Sales remained relatively flat at $439.6 million for the 26 weeks ended July 29,
2000 compared to $439.9 million for the 26 weeks ended July 31, 1999. Comparable
store sales decreased by 0.6% for the 26 weeks ended July 29, 2000, compared to
the corresponding period of the prior year. The decrease in comparable store
sales was due primarily to increased competition, offset, in part, by the two
new remodels completed since the end of the prior year.
Gross profit, as a percentage of sales, was relatively flat at 24.9% for the 26
weeks ended July 29, 2000 and 25.1% for the 26 weeks ended July 31, 1999.
Selling and administrative expenses, as a percentage of sales, were 21.6% for
the 26 weeks ended July 29, 2000, compared to 21.7% for the 26 weeks ended July
31, 1999.
Operating income was $14.7 million for the 26 weeks ended July 29, 2000,
compared to $15.0 million for the 26 weeks ended July 31, 1999, a decrease of
1.5%.
Interest income increased to approximately $2.2 million for the 26 weeks ended
July 29, 2000, compared to $1.7 million for the 26 weeks ended July 31, 1999,
due to an increase in the outstanding balance of the note receivable.
<PAGE>
Interest expense decreased approximately $1.4 million, to $7.3 million for the
26 weeks ended July 29, 2000, compared to $8.7 million for the 26 weeks ended
July 31, 1999, a 16.1% decrease. The reduction in interest expense was due to
the retirement of $24.6 million of the Senior Notes in October 1999.
The effective income tax rate for the 26 weeks ended July 29, 2000, was 51.8%
compared to 55.0% for the 26 weeks ended July 31, 1999. The decrease is
primarily attributable to increased taxable earnings in relation to the fixed
amount of acquisition non-deductible goodwill associated with the SUPERVALU
acquisition.
Net income was $4.7 million for the 26 weeks ended July 29, 2000 compared to
$3.6 million for the 26 weeks ended July 31, 1999, an increase of 29.2%.
Liquidity and Capital Resources
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During the 26 weeks ended July 29, 2000, operating activities generated net cash
of $9.3 million, compared to $7.6 million provided during the 26 weeks ended
July 31, 1999. The increase was due primarily to higher operating earnings in
the current year.
Investing activities generated net cash of $1.0 million during the 26 weeks
ended July 29, 2000 compared to using $4.1 million for the 26 weeks ended July
31, 1999. The increase in net cash provided was due to the reimbursement of $4.4
million of renovation costs by a landlord. The Company estimates that it will
make total capital expenditures of approximately $44.0 million during the 52
weeks ending February 3, 2001, of which $23.0 million relates to capital leases
for new stores. Management expects that these capital expenditures will be
financed primarily through cash flows from operations, cash provided by
affiliated companies and capital leases.
Financing activities used $12.1 million during the 26 weeks ended July 29, 2000,
compared to using $8.2 million during the 13 weeks ended July 31, 1999. The
increase was due to the change in cash provided to affiliated companies and an
increase in payments on capital leases.
The Company believes that cash flows from Shoppers' operations as well as cash
provided by affiliated companies will be adequate to meet its anticipated
requirements for working capital, debt service, and capital expenditures.
<PAGE>
PART II - Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
N/A
Item 3. Defaults Upon Senior Securities
N/A
Item 4. Submission of Matters to a Vote of Security Holders
N/A
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
27.1 Financial Data Schedule
(B) Reports on Form 8-K
None
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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: September 12, 2000 By: /s/ Pamela K. Knous
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Pamela K. Knous
Executive Vice President, Chief
Financial Officer (authorized officer
of the registrant and principal
financial officer)
