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 April 27, 1996 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
(205) 940-9400
OUTSTANDING COMMON STOCK AS OF April 27, 1996 is 25,147,639
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.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at
April 27, 1996 and January 27, 1996 2
Condensed Consolidated Statements of Operations for the
Thirteen (13) Week Period Ended April 27, 1996
and the Fourteen (14) Week Period Ended April 8, 1995 3
Condensed Consolidated Statements of Cash Flows for the
Thirteen (13) Week Period Ended April 27, 1996
and the Fourteen (14) Week Period Ended April 8, 1995 4
Notes to Condensed Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Change in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Other Information 11
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<TABLE>
Commission File No. 0-6544
BRUNO'S, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF APRIL 27, 1996 AND JANUARY 27, 1996
(In Thousands Except Share and Per Share Amounts)
- - -------------------------------------------------------------------------------------------
<CAPTION>
April 27, January 27,
1996 1996
(unaudited)
------------- -------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 65,517 $ 57,387
Receivables 28,149 25,294
Inventories, net of LIFO reserve of $9,655 and
and $8,905, respectively 207,492 215,589
Prepaid expenses 10,490 11,225
Deferred income taxes 7,544 6,733
------------- -------------
Total current assets 319,192 316,228
------------- -------------
Property and equipment, net 493,420 491,664
------------- -------------
Intangibles and other assets, net 64,580 65,254
------------- -------------
Total $ 877,192 $ 873,146
============= =============
LIABILITIES AND DEFICIENCY IN NET ASSETS:
Current liabilities:
Current maturities of long-term debt and
capitalized lease obligations $ 1,936 $ 1,938
Accounts payable 159,745 167,283
Accrued income taxes 495 583
Accrued payroll and related expenses 16,555 17,975
Other accrued expenses 58,480 62,736
------------- -------------
Total current liabilities 237,211 250,515
------------- -------------
Noncurrent liabilities:
Long-term debt 834,147 834,223
Capitalized lease obligations 17,559 17,963
Deferred income taxes 24,461 21,082
Other noncurrent liabilities 38,521 29,947
Deferred compensation 759 759
------------- -------------
Total noncurrent liabilities 915,447 903,974
------------- -------------
Deficiency in net assets:
Common Stock, $.01 par value, 60,000,000 251 250
shares authorized; 25,147,639 and 25,007,015
issued and outstanding, respectively
Paid-in capital (590,410) (592,096)
Retained earnings 314,693 310,503
------------- -------------
Total deficiency in net assets (275,466) (281,343)
------------- -------------
Total $ 877,192 $ 873,146
============= =============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
2
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Commission File No. 0-6544
BRUNO'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEK PERIOD ENDED APRIL 27, 1996
AND THE FOURTEEN WEEK PERIOD ENDED APRIL 8, 1995
(In Thousands Except Share and Per Share Amounts)
- - -------------------------------------------------------------------------------------------
<CAPTION>
April 27, April 8,
1996 1995
(13 Weeks) (14 Weeks)
(unaudited) (unaudited)
-------------- --------------
<S> <C> <C>
NET SALES $ 732,721 $ 763,274
-------------- --------------
COST AND EXPENSES:
Cost of products sold 554,124 588,246
Store operating, selling and administrative expenses 136,993 162,717
Depreciation and amortization 13,706 13,491
Interest expense, net 21,140 6,199
-------------- --------------
Total cost and expenses 725,963 770,653
-------------- --------------
Income (loss) before provision for income taxes 6,758 (7,379)
INCOME TAXES (BENEFIT) 2,568 (2,804)
-------------- --------------
Net income (loss) $ 4,190 $ (4,575)
============== ==============
NET INCOME (LOSS) PER COMMON SHARE $ 0.17 $ (0.06)
============== ==============
CASH DIVIDENDS PER COMMON SHARE $ - $ 0.065
============== ==============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
3
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Commission File No. 0-6544
BRUNO'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEK PERIOD ENDED APRIL 27, 1996
AND THE FOURTEEN WEEK PERIOD ENDED APRIL 8, 1995
(Amounts In Thousands)
- - -------------------------------------------------------------------------------------------
<CAPTION>
April 27, April 8,
1996 1995
(13 Weeks) (14 Weeks)
(unaudited) (unaudited)
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 4,190 $ (4,575)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 13,706 13,491
LIFO provision 750 398
Change in assets and liabilities 3,571 37,968
------------ ------------
Total adjustments 18,027 51,857
------------ ------------
Net cash provided by operating activities 22,217 47,282
------------ ------------
INVESTING ACTIVITIES:
Proceeds from sale of property -- 1,062
Capital expenditures (15,292) (12,247)
------------ ------------
Net cash used in investing activities (15,292) (11,185)
------------ ------------
FINANCING ACTIVITIES:
Reductions of long-term debt (482) (15,676)
Sale of common stock 1,687 --
Dividends paid -- (5,077)
------------ ------------
Net cash provided by (used in) financing activities 1,205 (20,753)
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 8,130 15,344
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 57,387 5,486
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 65,517 $ 20,830
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
4
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Commission File No. 0-6544
BRUNO'S, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTEEN WEEK PERIOD ENDED APRIL 27, 1996
AND THE FOURTEEN WEEK PERIOD ENDED APRIL 8, 1995
(In Thousands Except Share and Per Share Amounts)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial state-
ments 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
consolidated financial statements contain all adjustments
necessary for a fair statement of the consolidated financial
position and results of operations of the Company for the
interim periods. The Company changed its fiscal year to a 52
or 53 week year ending on the Saturday closest to January 31
from the Saturday closest to June 30. As a result of the change
in year end, a Transition Report on Form 10-K was filed for the
thirty week period ended January 27, 1996 which included
comparative unaudited results of operations for the thirty week
period ended January 28, 1995. The unaudited condensed statement
of cash flows with respect to the same period is presented in
Note 4 of this Form 10-Q.
Due to the change in year end described above, the
consolidated statements of operations compare the thirteen
(13) week period ended April 27, 1996 to the fourteen (14)
week period ended April 8, 1995. The results of operations
of the Company for the thirteen weeks ended April 27, 1996,
are not necessarily indicative of the results which
may be expected for the entire year.
2. INCOME (LOSS) PER SHARE
Income (loss) per share was computed based on the weighted
average number of common shares outstanding during the respective
periods (25,110,952 and 77,503,000, respectively). As a result of the
merger of Crimson Acquisition Corp. with and into the Company on August,
18, 1995, 25,147,639 shares are outstanding at April 27, 1996.
Stock options outstanding during the period ended April 8, 1995 are
common stock equivalents but were excluded from income (loss) per
common share computations as their effect was either not material or
would be antidilutive to the calculation of net income (loss) per share.
3. CONTINGENCIES
In 1991, the Company received a favorable termination
letter with respect to the termination of the employee pension
plan of a supermarket chain acquired by the Company in 1989.
Pursuant to that termination, distributions were made to all
participants of that employee pension plan. After all of the
benefit liabilities were paid, remaining plan assets of approximately
$2,700 were transferred to the Company as a reversion of excess
pension assets. On June 15, 1992, the Company received a letter
from the Pension Benefit Guaranty Corporation ("PBGC")
contending that inappropriate actuarial assumptions were
used to determine the value of the employees' benefits
5
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Commission File No. 0-6544
distributed and that additional distributions must be made
to numerous former participants of said plan. In August 1994,
the Company filed suit in the U.S. District Court for the Northern
District of Alabama challenging the PBGC's determination. In
April 1995, the District Court entered summary judgment
against the Company and in favor of the PBGC. The Company appealed
the District Court's ruling to the U.S. Court of Appeals for the
Eleventh Circuit which ruled against the Company. At April 27, 1996,
the Company had provided a $2,700 liability for this matter in its
consolidated financial statements.
In addition, 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.
6
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Commission File No. 0-6544
4.ADDITIONAL FINANCIAL INFORMATION
BRUNO'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THRITY WEEK PERIODS ENDED JANUARY 27, 1996 AND JANUARY 28, 1995
(Amounts In Thousands)
- - -------------------------------------------------------------------------------------------
<CAPTION>
January 27, January 28,
1996 1995
(30 Weeks) (30 Weeks)
(unaudited)
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (81,201) $ 27,978
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 35,453 32,156
LIFO provision 1,641 883
Increase in self-insurance 15,000 148
Impairment of long-lived assets 35,411 -
Change in inventories 32,536 2,184
Change in accounts payable 52,622 (10,526)
Change in assets and liabilities 6,470 1,806
----------- -----------
Total adjustments 179,133 26,651
----------- -----------
Net cash provided by operating activities 97,932 54,629
----------- -----------
INVESTING ACTIVITIES:
Proceeds from sale of property 911 22,911
Capital Expenditures (26,437) (30,821)
----------- -----------
Net cash used in investing activities (25,526) (7,910)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 875,000
Debt issuance costs (39,900)
Reductions of long-term debt (246,079) (48,101)
Redemption of common stock (879,956)
Sale of common stock 250,000 5
Purchase of treasury stock (4,679)
Dividends paid (10,152)
----------- -----------
Net cash used in financing activities (40,935) (62,927)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 31,471 (16,208)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 25,916 30,259
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 57,387 $ 14,051
=========== ===========
</TABLE>
7
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Commission File No. 0-6544
ITEM II
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 operations.
The period ended April 27,1996 is a thirteen week period and the period ended April 8, 1995 is a fourteen
week period and accordingly, certain of the period-to-period changes are a consequence of such difference.
A table showing the percentage of net sales represented by certain items in the Company's condensed
consolidated statements of operations is as follows:
<CAPTION>
April 27, April 8,
1996 1995
(13 Weeks) (14 Weeks)
<S> <C> <C>
Net sales 100.00% 100.00%
Cost of products sold 75.63% 77.07%
Store operations, selling, and administrative expenses 18.70% 21.32%
---------- ----------
EBITDA 5.67% 1.61%
Depreciation and amortization 1.86% 1.77%
Interest expense, net 2.89% 0.81%
---------- ----------
Income (loss) before provision for income taxes 0.92% -0.97%
Income taxes (benefit) 0.35% -0.37%
---------- ----------
Net income (loss) 0.57% -0.60%
========== ==========
</TABLE>
<TABLE>
A summary of the period to period changes in certain items included in the condensed statements of
operations is as follows:
<CAPTION>
Increase (Decrease)
Dollars in Thousands Percentage
Except Per Share Change
Amounts
-------------------- ----------
<S> <C> <C>
Net sales $ (30,553) -4.00%
Cost of products sold (34,122) -5.80%
Store operating, selling, and administrative expense (25,724) -15.81%
------------
EBITDA 29,293 237.94%
Depreciation and amortization 215 1.59%
Interest expense, net 14,941 241.02%
------------
Income (loss) before provision for income taxes 14,137 N/A
Income taxes (benefit) 5,372 N/A
------------
Net income (loss) $ 8,765 N/A
============
Net income (loss) per common share $ 0.23 N/A
============
</TABLE>
8
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Commission File No. 0-6544
BRUNO'S, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Dollars in Thousands)
RESULTS OF OPERATIONS
Net Sales
The period ended April 8,1995 included fourteen weeks,
whereas the quarter ended April 27, 1996 included thirteen
weeks. Excluding the impact of the fourteenth week in the
period ended April 8, 1995, sales increased by $23,966 or
3.4%. The increase was due to increased promotional
activities and the inclusion of Easter in the quarter ended
April 27, 1996, whereas Easter fell in the quarter ended
July 1, 1995 during the prior year. The Company does not
report results of operations for the thirteen weeks ended April
29, 1995, however, same store sales increased 1.5% for the
thirteen weeks ended April 27, 1996 compared to the thirteen
weeks ended April 29, 1995.
Gross Profit
Gross profit (net sales less cost of products sold) as a
percentage of net sales for the quarter ended April 27, 1996
was 24.4% as compared to 22.9% for the quarter ended April
8, 1995. The increase in gross profit was primarily due to
an increased sales mix of higher margin perishable products.
Gross profit was also positively impacted by the implementation
of a new distribution center ordering system. Gross profit
in the prior year was adversely impacted by the Company
recognizing a lower level of vendor allowances in the
quarter ended April 8, 1995 as compared to the 1996 period.
Store Operating, Selling and Administrative Expenses
Store operating, selling and administrative expenses as a
percentage of net sales was 18.7% for the first quarter of
fiscal 1996 compared to 21.3% for the quarter ended April 8,
1995. The decline was primarily the result of an unusual
adjustment recorded in the quarter ended April 8, 1995 to
increase the self-insurance reserve by $22,178.
Excluding the self-insurance adjustment, store operating,
selling and administrative expenses as a percentage of net
sales increased to 18.7% for the thirteen (13) weeks ended
April 27, 1996 from 18.4% for the fourteen (14) weeks ended
April 8, 1995 due to costs associated with increased
promotional activities.
Earnings Before Interest, Taxes, Depreciation, and
Amortization (EBITDA)
EBITDA increased $29,293 or 237.94% in the thirteen week
period ended April 27, 1996 compared to the fourteen week
period ended April 8, 1995. The quarter ended April 8, 1995
included the adjustment to increase the Company's self-
insurance reserve and a lower level of vendor allowances as
compared to the 1996 period.
9
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Commission File No. 0-6544
Interest Expense, Net
The $14,941 increase in net interest expense in the quarter
ended April 27, 1996, as compared to the quarter ended April
8, 1995, resulted from the Company's increase in long-term
debt from $246,917 at April 8, 1995 to $853,642 at April 27,
1996. The increase in long-term debt is attributable to
financing incurred in connection with the Company's merger
with Crimson Acquisition Corp. on August 18, 1995 (the
"Merger").
Income Taxes
The Company's effective income tax rate remained at 38% during
the thirteen week period ended April 27, 1996 and the
fourteen week period ended April 8, 1995.
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 generated $22,217 and $47,282,
respectively, in cash in each of the periods ended April 27,
1996 and April 8, 1995. The Company believes that operating
cash flows will be sufficient to fund store expansion and
working capital needs; however, should the Company need
additional cash, it has a $125 million undrawn revolving credit
facility available. There were no borrowings outstanding
under this facility during the thirteen week period ended
April 27, 1996.
Cash flows used in investing activities were $15,292 and
$11,185 for the comparable periods ended April 27, 1996 and
April 8, 1995, respectively. Capital expenditures were
$15,292 in the quarter ended April 27, 1996 compared to
$12,247 in the quarter ended April 8, 1995. The Company's
capital expenditures are primarily related to the opening of
new stores, the remodeling of existing stores and
investments in purchasing and warehousing systems
technology. The Company believes that capital expenditures
for the remainder of fiscal 1996 will be financed through
cash flows from operations, existing cash balances, and if
necessary, borrowings under its revolving credit facility.
The Company generated $1,205 in cash from financing
activities which was attributable to a $1,687 management
equity contribution that was partially offset by $482 in long
term debt repayments.
The Company's financing arrangements contain certain
restrictions which limit its ability to make future
borrowings beyond the amounts currently available.
10
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Commission File No. 0-6544
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In 1991, the Company received a favorable termination
letter with respect to the termination of the employee
pension plan of a supermarket chain acquired by the
Company in 1989. Pursuant to that termination,
distributions were made to all participants of that employee
pension plan. After all of the benefit liabilities were
paid, remaining plan assets of approximately $2,700 were
transferred to the Company as a reversion of excess pension
assets. On June 15, 1992, the Company received a letter
from the Pension Benefit Guaranty Corporation ("PBGC")
contending that inappropriate actuarial assumptions were
used to determine the value of the employees' benefits
distributed and that additional distributions must be made
to numerous former participants of said plan. In August
1994, the Company filed suit in the U.S. District Court
for the Northern District of Alabama challenging the PBGC's
determination. In April 1995, the District Court entered
summary judgment against the Company and in favor of the PBGC.
The company appealed the District Court's ruling to the U.S.
Court of Appeals for the Eleventh Circuit which ruled against
the Company. At April 27, 1996, the Company has
provided a $2,700 liability for this matter in its consolidated
financial statements.
In addition, 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.
Item 2. Change In Securities
In connection with the Merger, the shareholders of the
Company approved and the Company adopted Amended and Restated
Articles of Incorporation, which among other things reduced
the authorized shares of the Company's common stock from
200,000,000 to 60,000,000. The rights of the holders of the
Company's common stock have not been materially modified.
Item 3. Defaults Upon Senior Securities
None
Item 4. Other Information
None
11
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Commission File No. 0-6544
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned
thereunto duly authorized.
BRUNO'S, INC.
James J. Hagan
James J. Hagan,
Senior Vice President-Finance and
Chief Financial Officer
Dated: June 10, 1996
12
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Jan-27-1996
<PERIOD-START> Jan-28-1996
<PERIOD-END> Apr-27-1996
<CASH> 65,517
<SECURITIES> 0
<RECEIVABLES> 28,149
<ALLOWANCES> 0
<INVENTORY> 207,492
<CURRENT-ASSETS> 319,192
<PP&E> 493,420
<DEPRECIATION> 13,706
<TOTAL-ASSETS> 877,192
<CURRENT-LIABILITIES> 237,211
<BONDS> 400,000
<COMMON> 251
0
0
<OTHER-SE> (275,466)
<TOTAL-LIABILITY-AND-EQUITY> 877,192
<SALES> 732,721
<TOTAL-REVENUES> 732,721
<CGS> 554,124
<TOTAL-COSTS> 554,124
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,140
<INCOME-PRETAX> 6,758
<INCOME-TAX> 2,568
<INCOME-CONTINUING> 4,190
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,190
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
