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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 April 29, 2000.
( ) 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
SFW HOLDING CORP.
(Exact name of registrant as specified in its charter)
Delaware 53-2014682
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
3300 75th Ave. Landover, Maryland, 20785
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(Address of principal executive office) (Zip Code)
(301) 226-1200
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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
--- ---
At June 13, 2000, the registrant had 1,000 shares of common stock. The
common stock of SFW Holding 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 SFW
Holding Corp. ("SFW" 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 SFW Holding's annual report on Form 10-K for the fiscal year ended
January 29, 2000.
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SFW HOLDING CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
April 29, January 29,
2000 2000
--------------- ----------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,081 $ 3,390
Accounts receivable, net 10,254 10,275
Merchandise inventories 34,493 31,324
Deferred income taxes 4,185 4,185
Other current assets 3,083 2,761
--------------- ----------------
Total current assets 53,096 51,935
Property and equipment, net 76,866 64,017
Goodwill, net of accumulated amortization 303,644 305,431
Leasehold rights, net of accumulated amortization 27,659 27,945
Note receivable 43,447 42,491
Other assets 699 751
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Total assets $ 505,411 $ 492,570
=============== ================
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable $ 8,175 $ 6,245
Accrued interest 6,088 2,058
Accrued insurance 7,197 7,740
Accrued expenses 12,846 13,908
Due to affiliates 49,254 51,992
Accrued income taxes 9,546 9,315
Other current liabilities 618 618
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Total current liabilities 93,724 91,876
Senior notes due 2004 180,901 181,748
Capital lease obligations 22,542 12,034
Deferred income taxes 14,218 14,218
Other liabilities 728 803
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Total liabilities 312,113 300,679
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Stockholder's equity:
Class A common stock, voting, par value $0.01 per share, 1,000
shares authorized, issued and outstanding
Additional paid-in capital 189,358 189,358
Retained earnings 3,890 2,483
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Total stockholder's equity 193,298 191,891
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Total liabilities and stockholder's equity $ 505,411 $ 492,570
=============== ================
</TABLE>
The accompanying notes are an integral part of these statements.
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SFW HOLDING CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
First quarter (13 weeks) ended
--------------------------------------
April 29, May 1,
2000 1999
----------------- ------------------
(Post-SUPERVALU (Pre-SUPERVALU
acquisition) acquisition)
----------------- ------------------
<S> <C> <C>
Sales $ 214,636 $ 220,069
Cost of sales 161,223 164,985
----------------- ------------------
Gross profit 53,413 55,084
Selling and administrative expenses 47,651 47,767
----------------- ------------------
Operating income 5,762 7,317
Interest income 1,021 874
Interest expense 3,554 4,329
----------------- ------------------
Net interest expense 2,533 3,455
Earnings before income taxes 3,229 3,862
Provision for income taxes 1,822 2,162
----------------- ------------------
Net earnings $ 1,407 $ 1,700
================= ==================
</TABLE>
The accompanying notes are an integral part of these statements.
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SFW HOLDING CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
First quarter (13 weeks) ended
-------------------------------------------
April 29, May 1,
2000 1999
-------------------- -------------------
(Post-SUPERVALU (Pre-SUPERVALU
acquisition) acquisition)
-------------------- -------------------
<S> <C> <C>
Net cash provided by operating activities $ 4,730 $ 8,668
-------------------- -------------------
Cash flows from investing activities:
Capital expenditures (3,899) (786)
Purchase of short-term investments - (45)
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Net cash used in investing activities (3,899) (831)
-------------------- -------------------
Cash flows from financing activities:
Cash provided to affiliated companies (2,738) (12,819)
Principal payments under capital lease obligations (402) (172)
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Net cash used in financing activities (3,140) (12,991)
-------------------- -------------------
Net decrease in cash and cash equivalents (2,309) (5,154)
Cash and cash equivalents at beginning of period 3,390 6,602
-------------------- -------------------
Cash and cash equivalents at end of period $ 1,081 $ 1,448
==================== ===================
Supplemental Cash Flow Information:
Disclosure of noncash investing activity
Assets acquired under capital lease $ 10,910 $ -
==================== ===================
</TABLE>
The accompanying notes are an integral part of these statements.
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SFW HOLDING CORP. AND SUBSIDIARY
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 April
29, 2000, and for the 13 weeks ended April 29, 2000, and May 1, 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 April
29, 2000, and the results of its operations for the 13-week periods ended April
29, 2000, and May 1, 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
30, 1999 and was used for the remaining twenty-two weeks of fiscal 2000. The
assets and liabilities of SFW 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 April 29, 2000 consolidated balance sheet includes $49.3 million due to
affiliates compared to $52.0 million at January 29, 2000. The $49.3 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
--------------------------------------------------------------------------------
Securities Litigation Reform Act of 1995
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Any statements in this report regarding the Company's outlook for its businesses
and their respective markets, such as projections of future performance,
statements of management's plans and objectives, forecasts of market trends and
other matters, are forward-looking statements based on management's assumptions
and beliefs. Such statements may be identified by such words or phrases as "will
likely result," "are expected to," "will continue," "outlook," "is anticipated,"
"estimate," "project," "management believes" or similar expressions. Such
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those discussed in such
forward-looking statements and no assurance can be given that the results in any
forward-looking statement
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will be achieved. For these statements, the Company claims the protection of the
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
Results of Operations
---------------------
Sales decreased by $5.5 million to $214.6 million during the 13 weeks ended
April 29, 2000, compared to $220.1 million during the 13 weeks ended May 1,
1999, a decrease of 2.5%. This decrease was due primarily to a decrease in
comparable store sales of 2.7% for the 13 weeks ended April 29, 2000, compared
to the corresponding period of the prior year. The decrease in comparable store
sales was due primarily to increased competition.
Gross profit, as a percentage of sales, remained essentially flat at
approximately 25.0% during both the 13 weeks ended April 29, 2000 and the 13
weeks ended May 1, 1999.
Selling and administrative expenses, as a percentage of sales, were 22.2% for
the 13 weeks ended April 29, 2000, compared to 21.7% for the 13 weeks ended May
1, 1999, reflecting flat expense levels year over year on a reduced sales basis.
Operating income was $5.8 million for the 13 weeks ended April 29, 2000,
compared to $7.3 million for the 13 weeks ended May 1, 1999. The decrease was
primarily due to the decrease in sales.
Interest income increased to approximately $1.0 million for the 13 weeks ended
April 29, 2000, compared to $0.9 million for the 13 weeks ended May 1, 1999, due
to an increase in the interest on the note receivable.
Interest expense decreased approximately $0.7 million, to $3.6 million for the
13 weeks ended April 29, 2000, compared to $4.3 million for the 13 weeks ended
May 1, 1999, an 18.6% 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 April 29, 2000, was 56.4%
compared to 56.0% for the 13 weeks ended May 1, 1999. The increase is primarily
attributable to decreased taxable earnings in relation to the fixed amount of
acquisition non-deductible goodwill associated with the SUPERVALU acquisition.
Net income was $1.4 million for the 13 weeks ended April 29, 2000 compared to
$1.7 million for the 13 weeks ended May 1, 1999, a decrease of 17.6%.
Liquidity and Capital Resources
-------------------------------
During the 13 weeks ended April 29, 2000, operating activities provided net cash
of $4.7 million, compared to $8.7 million provided during the 13 weeks ended May
1, 1999. The decrease was due primarily to higher inventory levels, partially
offset by an increase in accounts payable, and the decrease in deferred taxes.
Investing activities used net cash of $3.9 million during the 13 weeks ended
April 29, 2000, compared to $0.8 million for the 13 weeks ended May 1, 1999. The
increase was due mainly to $14.8 million of capital expenditures occurring
during the first quarter of fiscal 2001, of which $10.9 million were funded
through capital leases. The Company estimates that it will make total capital
expenditures of approximately $44.3 million during the 52 weeks ending January
27, 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 $3.1 million during the 13 weeks ended April 29, 2000,
compared to using $13.0 million during the 13 weeks ended May 1, 1999. The
decrease was primarily due to the change in cash provided to affiliated
companies.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Omitted
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PART II - Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
Omitted
Item 3. Defaults Upon Senior Securities
Omitted
Item 4. Submission of Matters to a Vote of Security Holders
Omitted
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.
SFW HOLDING CORP.
Date: June 13, 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)
