<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 ended October 2, 1999
---------------
or
[ ] 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 1-6814
BIG V SUPERMARKETS, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 14-1459448
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
176 NORTH MAIN STREET, FLORIDA, NEW YORK 10921
(Address of principal executive offices) (Zip Code)
(914) 651-4411
(Registrant's telephone number, including area code)
NOT APPLICABLE.
(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
--- ---
Shares of Common Stock outstanding as of November 22, 1999: 1,000 shares
This quarterly report on Form 10-Q is being filed voluntarily and shall not be
deemed to be subject to Section 18 of the Securities Exchange Act of 1934.
<PAGE>
BIG V SUPERMARKETS, INC.
FORM 10-Q FOR THE 16 AND 40-WEEKS ENDED OCTOBER 2, 1999
INDEX
PART I
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Item 1. Financial Statements
Unaudited Consolidated Statements of Income (Loss)................ 3
Unaudited Consolidated Balance Sheets............................. 4
Unaudited Consolidated Statements of Cash Flows................... 5
Notes to Unaudited Consolidated Financial Statements.............. 6 - 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................. 8 - 12
PART II
OTHER INFORMATION
Item 1. Legal Proceedings..................................................... 14
Item 2. Changes in Securities................................................. 14
Item 3. Defaults upon Senior Securities....................................... 14
Item 4. Submission of Matters to a Vote of Security Holders................... 14
Item 5. Other Information..................................................... 14
Item 6. Exhibits and Reports on Form 8-K...................................... 14
SIGNATURES.................................................................... 15
</TABLE>
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<PAGE>
BIG V SUPERMARKETS, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In Thousands)
<TABLE>
<CAPTION>
UNAUDITED
----------------------------------------------------------------------
Sixteen Sixteen Forty Forty
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
October 2, 1999 October 3, 1998 October 2, 1999 October 3, 1998
----------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
SALES $253,435 $251,012 $636,843 $618,015
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of Sales (exclusive of depreciation and
amortization shown separately below) 186,771 184,966 468,329 455,979
Selling, general and administrative 52,623 51,966 135,025 129,337
Depreciation and amortization 4,273 4,195 11,863 11,551
Interest expense, net of interest income of $190 and
$60 for the 16-week periods and $401 and $172
for the 40-week periods ended October 2, 1999
and October 3, 1998, respectively 7,011 6,945 17,376 17,659
Restructuring Charge 8,500 - 8,500 -
-------- -------- -------- --------
Total costs and expenses 259,178 248,072 641,093 614,526
-------- -------- -------- --------
(LOSS) INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY CHARGE (5,743) 2,940 (4,250) 3,489
INCOME TAX (BENEFIT) EXPENSE (2,494) 1,584 (1,292) 1,905
-------- -------- -------- --------
(LOSS) INCOME BEFORE EXTRAORDINARY CHARGE (3,249) 1,356 (2,958) 1,584
EXTRAORDINARY CHARGE, net of tax benefit of $246 - - 547 -
-------- -------- -------- --------
NET (LOSS) INCOME $ (3,249) $ 1,356 $ (3,505) $ 1,584
======== ======== ======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
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<PAGE>
BIG V SUPERMARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
(UNAUDITED)
October 2, 1999 DECEMBER 26, 1998 /1/
---------------- --------------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS:
Cash ($6,349 restricted at October 2, 1999) $ 18,234 $ 15,674
Accounts receivable 15,233 11,941
Inventories 36,284 35,493
Refundable income taxes 384 630
Prepaid expenses and other current assets 3,723 2,282
Asset Held for Sale 4,652 4,482
-------- --------
Total current assets 78,510 70,502
PROPERTY AND EQUIPMENT - At cost, less accumulated
depreciation and amortization of $94,622 at October 2, 1999
and $85,756 at December 26, 1998 53,908 57,521
GOODWILL - Less accumulated amortization of $16,486 at
October 2, 1999 and $14,938 at December 26, 1998 62,823 64,371
INVESTMENT IN WAKEFERN FOOD CORPORATION 13,173 13,173
WAKEFERN WAREHOUSE AGREEMENT - Less accumulated
amortization of $9,069 at October 2, 1999 and $8,273
at December 26, 1998 32,299 33,095
OTHER ASSETS 10,819 9,002
-------- --------
TOTAL ASSETS $251,532 $247,664
======== ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
- -------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 34,740 $ 43,822
Accrued expenses and taxes other than income taxes 19,090 16,825
Deferred income taxes 5,727 6,213
Current portion of long-term debt 12,216 12,499
Current portion of capitalized lease obligations 893 808
-------- --------
Total current liabilities 72,666 80,167
-------- --------
OTHER LONG-TERM LIABILITIES 10,521 10,056
-------- --------
LONG-TERM DEBT - Less current portion 170,383 153,342
-------- --------
CAPITALIZED LEASE OBLIGATIONS - Less current portion 24,522 25,228
-------- --------
DEFERRED INCOME TAXES 4,644 6,070
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S DEFICIT
Common stock, par value, $1.00 per share; authorized, 1,000
shares; issued, 1,000 shares 1 1
Paid-in capital 7,905 8,405
Accumulated deficit (39,110) (35,605)
-------- --------
Total stockholder's deficit (31,204) (27,199)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $251,532 $247,664
======== ========
</TABLE>
/1/ Taken from the audited consolidated financial statements for the year ended
December 26, 1998.
See notes to unaudited consolidated financial statements.
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<PAGE>
BIG V SUPERMARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
UNAUDITED
----------------------------------
Forty Forty
Weeks Ended Weeks Ended
October 2, 1999 October 3, 1998
---------------- ----------------
<S> <C> <C>
CASH BALANCE, BEGINNING OF PERIOD $ 15,674 $14,498
-------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income (3,505) 1,584
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating activities:
Depreciation and amortization 11,863 11,551
Amortization of deferred debt costs 759 906
Write-off of unamortized deferred financing costs 793 -
Amortization of discount on debt 72 92
Noncash rent expense 880 993
Deferred income taxes (1,912) 1,288
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (3,292) 1,671
(Increase) decrease in inventories (791) 2,911
Decrease in refundable income taxes 246 838
Increase in prepaid expenses (1,609) (1,057)
Increase in asset held for sale (170) -
Increase in other assets (862) (1,498)
Decrease in accounts payable (9,082) (4,462)
Increase (decrease) in accrued expenses 2,265 (3,279)
Decrease in other long-term liabilities (415) (1,199)
-------- -------
Net cash (used in) provided by operating activities (4,760) 10,339
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (5,741) (7,958)
Proceeds from the sale of store equipment 3 9
Increase in investment in Wakefern Food Corp. - (40)
-------- -------
Net cash used in investing activities (5,738) (7,989)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 60,000 111
Proceeds from revolver borrowings 8,950 7,500
Principal payments on long-term debt (52,264) (9,538)
Financing fees in connection with new senior debt (2,507) -
Principal payments on capital lease obligations (621) (476)
Return of capital to Holding (500) (75)
-------- -------
Net cash provided by (used in) financing activities 13,058 (2,478)
-------- -------
NET INCREASE (DECREASE) IN CASH 2,560 (128)
-------- -------
CASH BALANCE, END OF PERIOD $ 18,234 $14,370
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 18,698 $18,857
Income taxes $ 77 $ 22
</TABLE>
See notes to unaudited conolidated financial statements.
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<PAGE>
BIG V SUPERMARKETS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. Basis of Presentation
---------------------
The accompanying interim consolidated financial statements as of and for the
period ended October 2, 1999, included herein, have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and rule 10-01 of Regulation S-X
promulgated by the Securities and Exchange Commission. The balance sheet at
December 26, 1998 has been taken from the audited financial statements as of
that date. In the opinion of management, the consolidated financial statements
include all adjustments, which consist only of normal recurring adjustments
necessary for a fair presentation of operating results for the interim periods.
Certain financial information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. Accordingly, reference is made to the
consolidated financial statements and notes thereto included in the Company's
annual report on Form 10-K for the year ended December 26, 1998. Operating
results for the periods presented are not necessarily indicative of the results
for the entire fiscal year.
2. Income Taxes
------------
Income taxes are based on the estimated effective tax rate expected to be
applicable for the full fiscal year in accordance with Accounting Standards
Board Opinion No. 28, "Interim Financial Reporting".
3. Preopening Costs
----------------
Effective December 27, 1998, the Company adopted Statement of Position (SOP)
No. 98-5, Reporting on the Costs of Start-Up Activities, which requires the
costs associated with start-up activities, such as opening a store, be expensed
as incurred. There was no financial statement impact related to the adoption of
this SOP.
4. Extraordinary Charge
--------------------
On January 14, 1999 the Company refinanced its existing Credit Agreement
("Agreement") by entering into a new Bank Credit Agreement ("New Agreement")
with different lenders. The Company repaid amounts due under the Agreement
prior to their scheduled maturity dates and recognized an extraordinary after-
tax charge of $547,000 as a result of writing-off unamortized deferred financing
costs associated with the Agreement.
5. Restructuring Charge
-- --------------------
During the third quarter of fiscal 1999, the Company formalized its plans to
reduce the escalating cost of its union labor force, streamline the functions of
its corporate offices and reduce its overall cost structure ("Restructuring
Plan"). The major initiatives of the Restructuring Plan include the following:
(1) a Board of Director approved Big V Supermarkets, Inc. Early Retirement
Buyout Program which provides eligible store associates various combinations of
cash and health coverage
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<PAGE>
in consideration of the employee severing their employment with the Company; and
(2) the realignment of corporate strategic business functions, internal
processes, and the elimination of functional redundancies between the Company
and Wakefern.
In connection with the implementation of the Restructuring Plan, the Company
recorded a pre-tax restructuring charge of $8.5 million. The major components
of the restructuring charge and the activity through October 2, 1999 were as
follows:
<TABLE>
<CAPTION>
Severance, &
Termination
Benefits
--------
<S> <C>
1999 provision $8,500
1999 activity 368
------
Balance at October 2, 1999 $8,142
======
</TABLE>
Total severance and termination benefits as a result of the Restructuring
Plan relate to approximately 230 employees, 35 of which have been terminated
through October 2, 1999. Total cash outlays related to the Restructuring Plan
are expected to approximate the restructuring charge. The Company expects to
substantially complete the Restructuring Plan's provisions, including payment of
severance and termination benefits, by January 2000.
6. Restricted Cash
---------------
At October 2, 1999, the balance sheet includes $6.3 million of cash held in
escrow to be used for the payment of the Company's $20.0 million Junior
Subordinated Debt due as follows:
Year Amount
---- ------
2000 $ 10.0 million
2001 10.0 million
------------
Total $ 20.0 million
============
7. Subsequent Event
----------------
On November 7, 1999, the Company completed the acquisition of ShopRite of
Pennington, Inc. (SRP), another Wakefern member. The five-store chain, located
in the Trenton area of New Jersey, was purchased for $36.0 million including
$1.6 million of assumed debt. Annual revenues and income before taxes for SRP
approximate $145.9 million and $0.7 million, respectively. The acquisition was
financed with variable rate debt including an initial funding of $36 million and
a $5 million delayed draw facility. The acquisition debt matures as follows:
Year Amount
---- ------
2000 $ 0.4 million
2001 0.4 million
2002 0.4 million
2003 39.8 million
-------------
Total $41.0 million
=============
-7-
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
BASIS OF PRESENTATION
The following discussion of the Company's financial condition and results
of operations should be read in conjunction with the unaudited financial
statements and notes thereto included elsewhere in this Form 10-Q.
<TABLE>
<CAPTION>
16-Weeks Ended 16-Weeks Ended 40-Weeks Ended 40-Weeks Ended
October 2, 1999 October 3, 1998 October 2, 1999 October 3, 1998
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales...................................... 100.0% 100.0% 100.0% 100.0%
Gross margin............................... 26.3 26.3 26.5 26.2
Selling, general and administrative........ 20.8 20.7 21.2 20.9
EBITDA (1)................................. 5.7 5.7 5.4 5.3
Depreciation and amortization.............. 1.7 1.7 1.9 1.9
Interest, net.............................. 2.8 2.8 2.7 2.9
Restructuring charge....................... 3.4 0.0 1.3 0.0
------ ------ ------ ------
Income (Loss) before income taxes
and extraordinary charge................ (2.3) 1.2 (0.7) 0.6
Income tax expense (benefit)............... (1.0) 0.6 (0.2) 0.3
------ ------ ------
(Loss) Income before extraordinary charge.. (1.3) 0.5 (0.5) 0.3
Extraordinary charge....................... 0.0 0.0 0.1 0.0
------ ------ ------ ------
Net income (loss).......................... (1.3)% 0.5% (0.6)% 0.3%
====== ====== ====== ======
OTHER DATA (IN MILLIONS):
EBITDA..................................... $ 14.4 $ 14.2 $ 34.2 $ 33.0
====== ====== ====== ======
Net cash (used in) provided
by operating activities.................. $ (7.4) $ 1.9 $ (4.8) $ 10.3
====== ====== ====== ======
Net cash used in investing activities...... $ (2.4) $ (2.2) $ (5.7) $ (8.0)
====== ====== ====== ======
Net cash provided by (used in)
financing activities...................... $ 9.7 $ (1.0) $ 13.1 $ (2.5)
====== ====== ====== ======
</TABLE>
- -----------------
(1) EBITDA represents earnings before interest expense, depreciation and
amortization, including noncash losses on the sale of property, plant and
equipment, income taxes and LIFO provision/credit. EBITDA is a widely accepted
financial indicator of a company's ability to service and/or incur debt, and
also represents a primary debt covenant of the Company. Noncompliance with this
covenant would represent a default under the Company's debt agreements which
could subject the Company to debt acceleration if not waived or amended. EBITDA
should not be construed as an alternative to, or a better indicator of,
operating income (as determined in accordance with generally accepted accounting
principles) or to 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.
-8-
<PAGE>
RESULTS OF OPERATIONS
16 AND 40-WEEKS ENDED OCTOBER 2, 1999 COMPARED TO 16 AND 40-WEEKS ENDED
OCTOBER 3, 1998
SALES
For the 16 and 40-week periods ended October 2, 1999, total store sales
were $253.4 million and $636.8 million, respectively. Sales for the comparable
periods ended October 3, 1998, totaled $251.0 million and $618.0 million,
respectively.
Total and same store sales increased 1.0% and 2.9%, respectively, for the
16-week period ended October 2, 1999, as compared to the prior year. For the
40-week period ended October 2, 1999 total and same store sales increased 3.0%
and 3.2%, respectively, as compared to the same period of the prior year.
The increase in total and same store sales was attributable to aggressive
marketing initiatives designed to build sales and a significant increase in
nonfood product offerings. The increase was partially offset by competitive
openings and the temporary closing and remodel of the Company's Catskill, NY
store.
GROSS MARGIN
Gross margin, as a percentage of sales, was 26.3% and 26.5% for the 16 and
40-week periods ended October 2, 1999, respectively. Gross margin for the
comparable periods ended October 3, 1998, was 26.3% and 26.2%, respectively.
The margin remained constant for the 16-week period based upon planned margin
reductions to stimulate sales offset by increased sales in the higher margin
nonfoods department. Margin reductions only partially offset the increased
contribution from nonfoods for the 40-week period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were 20.8% and 20.7% of sales
for the 16-week period ended October 2, 1999 and October 3, 1998, respectively.
The increase was the result of higher advertising expense partially offset by
reductions in corporate overhead attributable to the Restructuring Plan and
expense reduction.
Selling, general and administrative expenses, as a percentage of sales,
were .4% higher for the 40-week period ended October 2, 1999, compared to the
same period of the prior year. The year-to-date increase was attributable to
increased advertising expense partially offset by reductions in store supplies,
payroll and payroll related expenses.
EBITDA
EBITDA increased 1.4% to $14.4 million, excluding an $8.5 million store
and corporate overhead restructuring charge for the 16-week period ended October
2, 1999, compared to $14.2 million for the comparable prior year period. The
quarterly EBITDA increase was due to the aforementioned improvements in gross
margin partially offset by increases in selling, general and administrative
expenses. For the 40-week period ended October 2, 1999, EBITDA
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increased 3.6% to $34.2 million, excluding the restructuring charge, compared to
$33.0 million or the comparable prior year period.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization as a percentage of sales, was 1.7% and 1.9%
for the 16 and 40-week periods ended October 2, 1999 and October 3, 1998,
respectively. The consistent rate represented absolute dollar increases
compared to the prior year of $0.1 million and $0.3 million for the 16 and 40-
week periods ended October 2, 1999, respectively. The increase was due to
incremental depreciation from several major remodels completed during 1999.
INTEREST, NET
Interest, net, increased $0.1 million and remained constant as a
percentage of sales for the 16-week period ended October 2, 1999, compared to
the prior year period. The dollar increase represents a higher variable
interest rate on the Company's bank debt partially offset by scheduled principal
payments, lower deferred financing cost amortization and increased interest
income resulting from $6.3 million of cash in escrow for the future payment of
junior subordinated debt. For the 40-week period ended October 2, 1999
interest, net, decreased $0.3 million or .2% of sales. The decrease represents
the same factors noted above with a lower weighted average borrowing rate.
RESTRUCTURING CHARGE
During the third quarter of fiscal 1999, the Company formalized its plans to
reduce the escalating cost of its union labor force, streamline the functions of
its corporate offices and reduce its overall cost structure ("Restructuring
Plan"). The major initiatives of the Restructuring Plan include the following:
(1) a Board of Director approved Big V Supermarkets, Inc. Early Retirement
Buyout Program which provides eligible store associates various combinations of
cash and health coverage in consideration of the employee severing their
employment with the Company; and (2) the realignment of corporate strategic
business functions, internal processes, and the elimination of functional
redundancies between the Company and Wakefern.
Total severance and termination benefits as a result of the Restructuring
Plan relate to approximately 230 employees, 35 of which have been terminated
through October 2, 1999. Total cash outlays related to the Restructuring Plan
are expected to approximate the restructuring charge. The Company expects to
substantially complete the Restructuring Plan's provisions, including payment of
severance and termination benefits, by January 2000.
NET INCOME (LOSS)
Net loss was $3.2 million compared to net income of $1.4 million for the
16-week periods ended October 2, 1999 and October 3, 1998, respectively. The
decrease in net income is attributable to the $8.5 million store and corporate
overhead restructuring charge recorded in the current quarter. Excluding the
restructuring charge, net income would have remained level with the comparable
prior year period.
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<PAGE>
Net loss for the 40-week period ended October 2, 1999 was $3.5 million
compared to net income of $1.6 million for the same period of the prior year.
The decrease in net income for the 40-week period was attributable to the $8.5
million restructuring charge and the extraordinary write-off of unamortized
deferred financing costs from the Company's old senior debt. Excluding the
restructuring charge and the extraordinary item, net income would have increased
approximately $0.3 million from the comparable prior year period.
LIQUIDITY AND CAPITAL RESOURCES
The Company completed a $60 million debt refinancing on January 14, 1999.
This enabled the Company to pay its existing senior debt of $46.7 million and
revolver borrowings of $3.0 million. All other mandatory principal payments
required by the various debt agreements were paid during the 16 and 40-week
periods ended October 2, 1999.
The Company had a working capital ratio of 1.1:1 at October 2, 1999 and
.9:1 at December 26, 1998. Excluding restricted cash, the Company's working
capital ratio was 1.0:1 at October 2, 1999. The Company typically requires
small amounts of working capital since inventory is generally sold prior to the
time payments to Wakefern Food Corp. and other suppliers are due. The Company's
primary source of liquidity during the 16-weeks ended October 2, 1999 was cash
flow generated from operations supplemented by revolver usage.
Net cash used in operating activities was $4.8 million for the 40-week
period ended October 2, 1999. This compares to the net cash provided by
operating activities of $10.3 million for the comparable prior year period. The
decrease in net cash provided by operating activities during the current period
was primarily due to an increase in accounts receivable, inventory levels and
the establishment of an $8.5 million restructuring reserve.
Net cash used in investing activities was $5.7 million and $8.0 million
for the 40-week periods ended October 2, 1999 and October 3, 1998, respectively.
The decrease from the prior year resulted from the opening of the Company's new
store in Mt. Vernon, New York in the first quarter of 1998 and capital spending
in 1999 being concentrated in the second half of the year.
Net cash provided by financing activities was $14.1 million for the 40-
week period ended October 2, 1999 compared to net cash used in financing
activities of $2.5 million in the comparable prior year period. The increase in
cash provided by financing activities was due to the refinancing of the
Company's senior debt and increased revolver borrowings.
For the 52 weeks ending December 25, 1999, the Company projects its major
uses of cash will be as follows: (i) cash interest payments (including
capitalized leases) of $23.1 million; (ii) capital expenditures of $15.0
million; (iii) scheduled debt and capital lease payments of $14.3 million
(including the non-recourse demand note payable solely from the proceeds of the
sale of the Company's Baldwin Place Shopping Center located in Somers, New
York); and approximately $7.0 million of cash payments related to the 1999
restructuring. Management believes operating cash flow combined with additional
bank debt and borrowings under the bank revolving credit facility will be
sufficient to meet the Company's operating needs, scheduled capital expenditures
and will enable the Company to service its debt in accordance with its terms.
The new Bank Credit Agreement ("New Agreement") provides for a $25.0
million revolving credit facility under which there was $12.0 million
outstanding on October 2, 1999. Additionally, $6.4 million was used from this
facility for letters of credit and bonding purposes.
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<PAGE>
The New Agreement requires the Company to meet certain financial covenants,
including maximum amounts of annual capital expenditures, minimum fixed charge
coverage ratios, maximum leverage ratios and minimum amounts of consolidated net
worth. The Company complied with all of its financial covenants as of October 2,
1999 and management believes the Company will remain in compliance for the next
twelve months.
YEAR 2000 ISSUES
Most of the Company's key business processes (such as product procurement,
product delivery, inventory identification, retail sales and financial
information reporting) depend on computer based systems. For this reason and
the information technology (IT) interrelationships between Big V Supermarkets,
Inc. and Wakefern Food Corporation ("Wakefern"), the Company has participated
with Wakefern in a comprehensive assessment of its business exposure relative to
the Year 2000 issue (Y2K). The assessment covered both IT and other environment
(Non-IT) systems to identify the potential areas affected by Y2K.
The Company and Wakefern have assessed all systems for Y2K readiness,
giving the highest priority to those IT systems that are considered critical to
its business operations. Wakefern provides all of the Company's financial,
general ledger and payroll applications and a majority of the Company's
processing services. All in-store IT system are currently Y2K compliant
including point-of-sale, receiving, inventory control and labor management.
The Company has completed an inventory of its Non-IT systems, which
includes those systems containing embedded chip technology commonly found in
buildings and related equipment. Remediation required for the Non-IT systems
has been completed.
The Company and Wakefern are utilizing the necessary internal and external
resources to replace, upgrade or modify all significant systems affected by Y2K.
The total estimated costs to remediate the Y2K issue will not have a significant
adverse effect on income from operations. The Company has established a
Contingency Planning Committee. To date, high level contingency plans have been
developed for all mission critical business processes and the Company is
currently finalizing its detailed, store-by-store contingency plan.
Although the Company does not expect Y2K issues to have a material adverse
impact on the Company's business as a result of the aforementioned comments, the
Company's Y2K compliance is dependent upon key business partners (primarily
Wakefern) also being Y2K compliant on a timely basis. Accordingly, there can be
no guarantee the Company's overall efforts will prevent a material adverse
impact on the Company's future results of operations, financial condition and
cash flows. The possible consequences to the Company of not being fully Y2K
compliant include temporary supermarket closings, delays in the receipt of
merchandise, errors in product ordering or acquisition and other financial
transactions and the inability to efficiently process customer purchases. In
addition, business disruptions could result from the loss of power or the loss
of communication (satellite, phone or other) among supermarkets, Wakefern and
the Company's corporate offices. However, the Company believes established
contingency plans supplemented by Wakefern's available resources will help to
minimize the impact of any isolated disruptions.
-12-
<PAGE>
FORWARD-LOOKING STATEMENTS
Other than statements of historical fact, all statements included in this
Form 10-Q, including the statements under Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", are, or may be
considered forward-looking information, as defined in the Private Securities
Litigation Reform Act of 1995. Examples of such statements in this report
include those concerning the Year 2000 issue, projected cash outlays for
interest, principal payments, and capital expenditures. The Company cautions
the reader there is no assurance actual results or business conditions will not
differ materially from those forward-looking statements whether expressed,
suggested or implied as a result of various factors. Such factors include, but
are not limited to, increased competitive pressures from existing competitors
and new entrants, general or regional economic conditions, interest rate
environment and its affect on the Company's cost of capital, the liquidity of
the Company on a cash flow basis (including the Company's ability to comply with
the financial covenants of all applicable credit agreements), the success of
operating initiatives including the ability to control various expense
categories, and other risk factors detailed herein and in other filings of the
Company.
-13-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
Not applicable.
-14-
<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.
BIG V SUPERMARKETS, INC.
Date: November 22, 1999 /s/ James A. Toopes, Jr.
-------------------------------------
James A. Toopes, Jr.,
Vice Chairman, Chief Financial and
Administrative Officer
Date: November 22, 1999 /s/ Anthony J. Moccio
------------------------------------------
Anthony J. Moccio
Vice President-Controller
-16-
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