FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d) of
The Securities and Exchange Act of 1934
QUARTER ENDED December 31, 1994 COMMISSION FILE NO. 0-6544
BRUNO'S, INC.
STATE OF INCORPORATION ALABAMA I.R.S. EMPLOYER I.D. NO. 63-0411801
ADDRESS OF PRINCIPAL EXECUTIVE OFFICE (INCLUDING ZIP CODE)
800 Lakeshore Parkway, Birmingham, Alabama 35211
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE
Area Code 205 - 940-9400
OUTSTANDING COMMON STOCK AS OF December 31, 1994, IS 78,097,741
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past 90
days.
YES (X) NO ( )
<PAGE>
Commission File No. 0-6544
BRUNO'S, INC.
Index
Page No.
Financial Statements:
Condensed Consolidated Balance Sheets
as of December 31, 1994, July 2, 1994. 2
Condensed Consolidated Statements of Income
and Retained Earnings for the Twenty-Six (26)
and Fourteen (14) Week Periodsriods Ended December 31,
1994, and January 1, 1994. 3
Condensed Consolidated Statements of Cash
Flows for the Twenty-Six (26) Week Periods
Ended December 31, 1994, and January 1,
1994. 4
Notes to Condensed Consolidated Financial
Statements. 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations. 7
Submission of Matters to Vote of Security Holders 11
Other Information 12
<PAGE>
<TABLE>
Commission File No. 0-6544
BRUNO'S, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1994
AND JULY 2, 1994
(In Thousands Except Share And Per Share Amounts)
(Unaudited)
<CAPTION>
12-31-94 7-2-94
----------- -----------
<S> <C> <C>
ASSETS
- - - ------
Current Assets -
Cash and Cash Equivalents $ 5,486 $ 30,259
Receivables 45,692 34,770
Inventories at LIFO 266,969 255,047
Prepaid Expenses and Other 12,892 10,665
---------- ----------
Total Current Assets 331,039 330,741
Property, Equipment, Leasehold Improvements,
Leasehold Interests and Investment in
Property under Capital Leases, Net 517,293 540,139
Intangibles and Other Assets 56,144 56,328
---------- ----------
Total Assets $ 904,476 $ 927,208
========== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
- - - ----------------------------------------
Current Liabilities -
Current Portion of Long-Term Debt and
Capitalized Lease Obligations and
Short-Term Borrowings $ 42,052 $ 4,092
Accounts Payable 110,506 108,712
Other Accrued Expenses 41,519 43,545
Accrued Income Taxes 4,433 --
---------- ----------
Total Current Liabilities 198,510 156,349
---------- ----------
Long-Term Debt and Capitalized
Lease Obligations 220,541 296,460
---------- ----------
Deferred Income Taxes 51,136 51,136
---------- ----------
Deferred Compensation 2,159 1,909
---------- ----------
Shareholders' Investment -
Common Stock ($.01 par value, 200,000,000
shares authorized, 78,097,741 and
78,090,441 shares issued respectively) 781 781
Paid-In Capital 42,004 41,999
Retained Earnings 394,024 378,574
---------- ----------
436,809 421,354
Treasury Stock (595,000 shares) (4,679) --
---------- ----------
Total Shareholders' Investment 432,130 421,354
---------- ----------
Total Liabilities and Shareholders'
Investment $ 904,476 $ 927,208
========== ==========
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
Commission File No. 0-6544
BRUNO'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE TWENTY-SIX AND FOURTEEN WEEK PERIODS ENDED
DECEMBER 31, 1994 AND JANUARY 1, 1994
(In Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Twenty-Six Weeks Ended Fourteen Weeks Ended
___________________________ _________________________
<S> <C> <C> <C> <C>
12-31-94 1-1-94 12-31-94 1-1-94
-------------- ------------- ------------ ------------
Net Sales $ 1,437,741 $ 1,409,155 $ 784,120 $ 768,244
-------------- ------------- ------------ ------------
Cost and Expenses:
Cost of Products Sold $ 1,096,570 $ 1,088,446 $ 598,994 $ 595,366
Store Operating, Selling and
Administrative Expenses 262,072 252,545 141,732 138,742
Depreciation and Amortization 27,994 26,306 15,308 14,695
Interest Expense 12,726 10,177 6,768 5,765
Interest Income (2,914) (1,778) (1,376) (1,357)
------------- ------------- ------------ ------------
$ 1,396,448 $ 1,375,696 $ 761,426 $ 753,211
------------- ------------- ------------ ------------
Income Before Provision For Income
Taxes and Extraordinary Item $ 41,293 $ 33,459 $ 22,694 $ 15,033
Provison For Income Taxes 15,691 14,938 8,624 5,712
------------- ------------- ------------- ------------
Income Before Extraordinary Item $ 25,602 $ 18,521 $ 14,070 $ 9,321
Extraordinary Item, Net -- (3,288) -- --
------------- ------------- ------------- ------------
Net Income $ 25,602 $ 15,233 $ 14,070 $ 9,321
Cash Dividends (10,152) (9,370) (5,076) (4,686)
Retained Earnings, Beginning Of Period 378,574 360,022 385,030 361,250
------------- ------------- ------------- ------------
Retained Earnings, End Of Period $ 394,024 $ 365,885 $ 394,024 $ 365,885
============= ============= ============= ============
Earnings Per Common Share:
Income Before Extraordinary Item $ 0.33 $ 0.24 $ 0.18 $ 0.12
Extraordinary Item, Net -- (0.04) -- --
------------- -------------- ------------ ------------
Net Income $ 0.33 $ 0.20 $ 0.18 $ 0.12
============= ============= ============ ============
Cash Dividends Per Common Share $ 0.13 $ 0.12 $ 0.065 $ 0.06
============= ============= ============ ============
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
Commission File No. 0-6544
BRUNO'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEK PERIODS ENDED
DECEMBER 31, 1994, AND JANUARY 1,1994
(In Thousands)
(Unaudited)
<CAPTION>
12-31-94 1-1-94
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 25,602 $ 15,233
------------ ------------
Adjustments to reconcile net income
to net cash provided by operating activities-
Depreciation & amortization $ 27,994 $ 26,306
LIFO provision (credit) 771 (905)
Change in operating assets and liabilities (21,391) (32,477)
------------ ------------
Total adjustments $ 7,374 $ (7,076)
Net cash provided by operating ------------ ------------
activities $ 32,976 $ 8,157
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property $ 22,358 $ 8,899
Capital expenditures (27,322) (38,886)
------------ ------------
Net cash used in investing activities $ (4,964) $ (29,987)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments) line of credit, net $ -- $ (35,000)
Purchase of treasury stock (4,679) --
Proceeds from issuance of stock 5 223
Dividends paid (10,152) (9,370)
Reduction of long-term debt (37,959) (144,300)
Proceeds form issuance of long-term debt -- 200,000
------------ ------------
Net cash provided by (used in)
financing activities $ (52,785) $ 11,553
------------ ------------
Net decrease in cash $ (24,773) $ (10,277)
Cash beginning of period 30,259 20,093
------------ ------------
Cash end of period $ 5,486 $ 9,816
============ ============
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<PAGE>
Commission File No. 0-6544
BRUNO'S, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND JANUARY 1, 1994
(Dollar Amounts in Thousands)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements
include the accounts of Bruno's, Inc. and its wholly owned
subsidiaries. Significant intercompany balances and
transactions have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the consolidated
financial position and results of operations of the Company
for the interim periods. The results of operations for the
twenty-six (26) weeks ended December 31, 1994, are not
necessarily indicative of the results which may be expected
for the entire year.
2. Earnings Per Share
Earnings per share was computed on the weighted average number
of common shares outstanding during the respective periods
(77,639,000 and 78,057,000 for the twenty-six week periods,
respectively and 77,503,000 and 78,065,000 for the fourteen
week periods, respectively). Outstanding stock options are
common stock equivalents but were excluded from earnings per
common share computations as their effect was either not
material or antidilutive.
3. Income Taxes
On August 10, 1993, the Omnibus Budget Reconciliation Act of
1993, was signed into law which increased Federal income tax
rates from 34% to 35% for the Company retroactively effective
to January 1, 1993. The new law changes the Company's
effective income tax rate to approximately 38% and required a
charge to income in the first quarter of fiscal 1994 of
approximately $2,200 to retroactively restate the current and
deferred income tax liabilities. This adjustment combined
with the increased tax rate, resulted in an effective income
tax rate for the twenty-six week period ended January 1, 1994
of 45%.
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Commission File No. 06544
4. Contingencies
The Company is a party to various legal and taxing authority
proceedings incidental to its business. In the opinion of
management, the ultimate liability with respect to these actions
will not materially affect the financial position or results of
operations of the Company.
The Company has received a notice from the Pension Benefit Guaranty
Corporation ("PBGC") contending that inappropriate actuarial
assumptions were used in connection with final distributions of a
previously terminated plan. As such, the PBGC has taken a position
that additional distributions must be made to former participants.
The amount of the Company's liability, if any, and the ultimate
outcome is unknown at the present time, but is not expected to
exceed $2,700; accordingly, no provision for any liability that may
result has been made in the accompanying condensed consolidated
financial statements.
5. Debt Restructure
On September 1, 1993, the Company redeemed the $142,750 of 6.5%
Convertible Subordinated Debentures at 103.9% of face value in
accordance with the terms of the related indenture. The redemption
was financed with the proceeds of a $200,000 term loan which will
amortize over 10 to 15 years at rates ranging from 6.6% to 7.1%.
This redemption resulted in a loss of $3,288 (net of the applicable
income tax benefit of $2,015) which is classified as an
extraordinary item in the accompanying statement of income for the
twenty-six week period ended January 1, 1994.
-6-
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<TABLE>
Commission File No. 0-6544
BRUNO'S, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of
significant factors affecting the Company's earnings during
the periods included in the accompanying condensed consolidated
statements of income.
A table showing the percentage of net sales represented by
certain items in the Company's condensed consolidated state-
ments of income is as follows:
<CAPTION>
TWENTY-SIX WEEKS ENDED FOURTEEN WEEKS ENDED
_______________________ _________________________
12-31-94 1-1-94 12-31-94 1-1-94
________ ________ ________ ________
<S> <C> <C> <C> <C>
Net Sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost Of Products Sold 76.3 % 77.2 % 76.4 % 77.5 %
-------- -------- -------- --------
Gross Profit 23.7 % 22.8 % 23.6 % 22.5 %
Store Operating, Selling, and
Administrative Expenses 18.2 % 17.9 % 18.1 % 18.1 %
Depreciation and Amortization 1.9 % 1.9 % 1.9 % 1.9 %
Net Interest Expense 0.7 % 0.6 % 0.7 % 0.6 %
-------- -------- -------- --------
Income Before Provision For Income
Taxes and Extraordinary Item 2.9 % 2.4 % 2.9 % 1.9 %
Provision for Income Taxes 1.1 % 1.1 % 1.1 % 0.7 %
-------- -------- -------- --------
Net Income Before
Extraordinary Item 1.8 % 1.3 % 1.8 % 1.2 %
Extraordinary Item, Net 0.0 % 0.2 % 0.0 % 0.0 %
-------- -------- -------- --------
Net Income 1.8 % 1.1 % 1.8 % 1.2 %
======== ======== ======== ========
</TABLE>
<TABLE>
A summary of the period to period changes in certain items
included in the condensed statements of income is as follows:
<CAPTION>
COMPARISON OF
_______________________ __________________________________
TWENTY-SIX WEEKS ENDED FOURTEEN WEEKS ENDED
12-31-94 and 1-1-94 12-31-94 and 1-1-94
_______________________ __________________________________
Increase (Decrease)
(Dollars in Thousands Except Per Share Amounts)
<C> <C> <C> <C>
Net Sales $28,586 2.0 % $15,876 2.1 %
Cost Of Products Sold 8,124 0.7 % 3,628 0.6 %
Store Operating, Selling, and
Administrative Expenses 9,527 3.8 % 2,990 2.2 %
Depreciation and Amortization 1,688 6.4 % 613 4.2 %
Net Interest Expense 1,413 16.8 % 984 22.3 %
Net Income Before
Extraordinary Item 7,081 38.2 % 4,749 50.9 %
Extraordinary Item, Net 3,288 100.0 % 0 0.0 %
Net Income $10,369 68.1 % $4,749 50.9 %
Income Per Common Share Before
Extraordinary Item $0.09 37.5 % $0.06 50.0 %
Net Income Per Common Share $0.13 65.0 % $0.06 50.0 %
</TABLE>
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<PAGE>
Commission File No. 0-6544
BRUNO'S, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollar Amounts In Thousands)
RESULTS OF OPERATIONS
Net sales increased 2.0% ($28,586) and 2.1% ($15,876), respectively, in
the twenty-six and fourteen week periods ended December 31, 1994, as
compared to the applicable periods in the prior year. The net sales
increase was primarily attributed to the Company's recent focus on
existing stores and stressing the importance of customer service.
During the twenty-six week period ended December 31, 1994, the Company
opened five new stores and remodeled over 15 stores to a more customer
service oriented format. This strategy has resulted in positive same
store sales growth despite competitive pressures. Same stores sales
improved for the third consecutive quarter, increasing 1.6%.
Gross profit as a percentage of net sales was 23.7% and 23.6%,
respectively, in the twenty-six and fourteen week periods ended December
31, 1994, as compared to a gross profit percentage of 22.8% and 22.5%
for the applicable periods in the prior fiscal year. The increase in
gross profit is due to effective merchandising and the Company's
continued emphasis on its larger format stores. These larger stores
carry a greater percentage of perishable and other higher margin items
such as health and beauty care and general merchandise products.
Store operating, selling and administrative expenses as a percentage of
net sales increased from 17.9% for the twenty-six weeks ended January 1,
1994, to 18.2% for the twenty-six weeks ended December 31, 1994. This
increase as a percentage of net sales is primarily due to increased
costs associated with new stores, and the Company's concerted efforts at
improving customer service.
The $1,688 increase in depreciation and amortization expense for the
twenty-six week period ended December 31, 1994, compared to the
applicable period in the prior year is due to an increase in the
Company's depreciable asset base due to new store openings and store
renovations.
The $1,413 increase in net interest expense for the twenty-six week
period ended December 31, 1994, compared to the applicable period in the
prior year is due to an increase in interest rates which effected the
Company's net interest position on its $80,000 notional interest rate
swap.
-8-
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Commission File No. 0-6544
The Company's effective income tax rate decreased from 45% for the
twenty-six week period ended January 1, 1994, to 38% for the twenty-six
week period ended December 31, 1994. See Note 3 to Condensed
Consolidated Financial Statements for a complete discussion of income
taxes.
As completely discussed in Note 5 of Notes to Condensed Consolidated
Financial Statements, the Company redeemed its 6.5% Convertible
Debentures at 103.9% of face value during the first quarter of the prior
fiscal year. This redemption resulted in an extraordinary loss of
$3,288 (net of the applicable income tax benefit of $2,015) as reflected
in the accompanying condensed consolidated statement of income for the
twenty-six week period ended January 1, 1994.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded working capital requirements,
capital expenditures and other cash requirements primarily through cash
flow from operations. Operating activities have generated cash of
$32,976 and $8,157, respectively, in each of the twenty-six week periods
ended December 31, 1994, and January 1, 1994. In addition, the Company
has at its disposal a $75,000 unsecured line of credit (no amounts
outstanding at December 31, 1994) to meet any short-term cash
requirements.
Cash flows used in investing activities were $4,964 and $29,987 for the
twenty-six week periods ended December 31, 1994, and January 1, 1994,
respectively. Proceeds from the sale of certain property totaled
$22,358 during the twenty-six week period ended December 31, 1994
compared to $8,899 during the applicable period in the prior year.
There were no material gains or losses generated from these sales. The
Company has continued its expansion and remodeling of stores program
during fiscal 1995. Capital expenditures were $27,322 for the twenty-
six week period ended December 31, 1994, compared to $38,886 for the
applicable period in the prior year. Capital expenditures were
primarily financed with internally generated funds and the proceeds from
the sales of other property.
The Company plans to continue to expand through the opening of new
stores and may acquire existing stores or one or more supermarket
chains, if attractive acquisition opportunities become available. The
Company anticipates that funds necessary for the expansion of its
business during the foreseeable future will be financed through
available cash reserves, internally generated funds and short-term
borrowings. However, the Company may use for such purposes additional
sources of financing, which may include long-term borrowings and the
issuance of additional debt or equity securities.
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Commission File No. 0-6544
The Company estimates capital expenditures for the remainder of fiscal
1995 to be approximately $30,000 and plans to finance these expenditures
through internally generated funds or other available resources. These
estimated capital expenditures are primarily related to the opening of
new stores and the remodeling of existing stores. Management
continuously evaluates all stores based upon volume, profitability,
location, age, demographics, etc. and makes closure decisions based upon
these evaluations.
The primary uses of cash in financing activities during the twenty-six
week period ended December 31, 1994, were $37,959 in long-term debt
principal payments, $10,152 in cash dividends paid, and a $4,679
purchase of 595,000 shares of treasury stock, As fully discussed in
Note 5 of Notes to Condensed Consolidated Financial Statements, during
the first quarter of fiscal 1994, the Company redeemed its 6.5%
Convertible Subordinated Debentures with the proceeds of a $200,000 term
loan. In addition, during the twenty-six week period ended January 1,
1994, the Company paid off its line of credit borrowings of $35,000 and
paid cash dividends of $9,370.
OTHER
On July 22, 1994, the Company's Board of Directors approved the
repurchase on the open market of up to $25,000 of the Company's common
stock. As noted above, during the twenty-six weeks ended December 31,
1994, the Company purchased 595,000 shares at a total price of $4,679.
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<TABLE>
Commission File No. 0-6544
BRUNO'S, INC.
SUBMISSION OF MATTER TO VOTE OF SECURITY HOLDERS
1994 PROXY TABULATION REPORT
<CAPTION>
WITHHOLD
ELECTION OF DIRECTORS FOR AUTHORITY ABSTAIN
____________________________ ____________ ____________ _____________
<S> <C> <C> <C>
Joseph S. Bruno 60,884,580 543,081
Ronald G. Bruno 60,900,630 527,031
Paul F. Garrison 60,900,224 527,437
Glenn J. Griffin 60,900,233 527,428
Kenneth J. Bruno 60,900,183 527,478
Judy M. Merritt 60,850,088 577,573
Benny M. LaRussa, Jr. 60,926,185 501,476
Richard Cohn 60,898,324 529,337
J. Mason Davis, Jr. 60,852,924 574,737
Bart Starr 60,115,154 1,312,507
ACCOUNTING FIRM OF
ARTHUR ANDERSEN LLP 61,172,482 121,443 133,736
CUMULATIVE TOTALS THROUGH THIS DATE:
TOTAL SHARES VOTED: 61,427,661
PERCENT OF OUTSTANDING 78.6%
</TABLE>
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<PAGE>
Commisssion File No. 0-6544
BRUNO'S, INC.
OTHER INFORMATION
The Company was not required to report material unusual
charges or credits to income pursuant to Item 10 (a) or a change
in independent accountants pursuant to Item 12 of Form 8-K for
any of the twenty-six (26) weeks ended December 31, 1994.
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.
BRUNO'S,INC.
REGISTRANT
February 13, 1995 Glenn J. Griffin
Glenn J. Griffin
Executive Vice President, and
Chief Financial Officer *
*Both duly authorized officer and principal financial officer.
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-02-1994
<PERIOD-START> JUL-03-1994
<PERIOD-END> DEC-31-1994
<CASH> 5,486
<SECURITIES> 0
<RECEIVABLES> 45,692
<ALLOWANCES> 0
<INVENTORY> 266,969
<CURRENT-ASSETS> 331,039
<PP&E> 816,752
<DEPRECIATION> 299,459
<TOTAL-ASSETS> 904,476
<CURRENT-LIABILITIES> 198,510
<BONDS> 220,541
<COMMON> 781
0
0
<OTHER-SE> 431,349
<TOTAL-LIABILITY-AND-EQUITY> 904,476
<SALES> 1,437,741
<TOTAL-REVENUES> 1,437,741
<CGS> 1,096,570
<TOTAL-COSTS> 1,096,570
<OTHER-EXPENSES> 299,878
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,726
<INCOME-PRETAX> 41,293
<INCOME-TAX> 15,691
<INCOME-CONTINUING> 25,602
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,602
<EPS-PRIMARY> .33
<EPS-DILUTED> .33
</TABLE>
