<PAGE> 1
================================================================================
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 AUGUST 2, 1997
[ ] 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 0-6544
---------------------
BRUNO'S, INC.
(Exact name of registrant as specified in its charter)
---------------------
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
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 ( )
OUTSTANDING COMMON STOCK AS OF SEPTEMBER 8, 1997 is 25,307,982
<PAGE> 2
BRUNO'S, INC.
Index
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at
August 2, 1997 and February 1,1997 2
Condensed Consolidated Statements of Operations for the
Thirteen (13) and Twenty-Six (26) Week Periods Ended
August 2, 1997 and July 27, 1996 3
Condensed Consolidated Statements of Cash Flows for the
Twenty-Six (26) Week Periods Ended
August 2, 1997 and July 27, 1996 4
Notes to Condensed Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Change in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
SIGNATURE PAGE 18
INDEX OF EXHIBITS 19
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRUNO'S, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF AUGUST 2, 1997 AND FEBRUARY 1,1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AUGUST 2, FEBRUARY 1,
1997 1997
(unaudited)
----------- -----------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 3,220 $ 4,908
Receivables 21,770 20,480
Inventories, net of LIFO reserve of $9,660
and $8,940, respectively 169,975 181,786
Prepaid expenses 9,808 10,468
Refundable income taxes 525 1,373
Deferred income taxes, net of valuation allowance of $18,915
and $8,345, respectively 21,288 14,534
--------- ---------
Total current assets 226,586 233,549
Property and equipment, net of accumulated depreciation of $334,845
and $313,369 at August 2,1997 and February 1,1997,respectively 460,242 466,997
--------- ---------
Goodwill, net 49,504 50,824
Intangibles and other assets, net 37,928 40,061
--------- ---------
Total non-current assets 87,432 90,885
--------- ---------
Total $ 774,260 $ 791,431
========= =========
LIABILITIES AND DEFICIENCY IN NET ASSETS:
Current liabilities:
Current maturities of long-term debt and capitalized lease obligations $ 3,814 $ 2,491
Accounts payable 173,876 149,614
Accrued payroll and related expenses 14,346 20,360
Accrued interest 6,205 22,630
Other accrued expenses 36,603 39,270
--------- ---------
Total current liabilities 234,844 234,365
--------- ---------
Noncurrent liabilities:
Long-term debt 830,696 813,722
Capitalized lease obligations 10,341 12,415
Deferred income taxes 13,496 6,742
Other noncurrent liabilities 42,976 54,336
--------- ---------
Total noncurrent liabilities 897,509 887,215
--------- ---------
Deficiency in net assets:
Common Stock, $.01 par value, 60,000,000 253 253
shares authorized; 25,307,982 and 25,333,607
issued and outstanding, respectively
Paid-in capital (587,942) (587,624)
Retained earnings 231,499 259,314
Shareholder's notes receivable (1,903) (2,092)
--------- ---------
Total deficiency in net assets (358,093) (330,149)
--------- ---------
Total $ 774,260 $ 791,431
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
BRUNO'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE TWENTY-SIX AND THIRTEEN WEEK PERIODS ENDED AUGUST 2, 1997
AND JULY 27, 1996
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AUGUST 2, JULY 27, AUGUST 2, JULY 27,
1997 1996 1997 1996
(26 WEEKS) (26 WEEKS) (13 WEEKS) (13 WEEKS)
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 1,330,652 $ 1,452,497 $ 645,392 $ 719,775
------------ ------------ ------------ ------------
COST AND EXPENSES:
Cost of products sold 1,028,702 1,100,842 499,341 546,718
Store operating, selling and administrative expenses 256,902 272,029 128,131 135,035
Depreciation and amortization 30,161 28,108 15,904 14,402
Interest expense, net 42,702 42,513 21,583 21,373
------------ ------------ ------------ ------------
Total cost and expenses 1,358,467 1,443,492 664,959 717,528
------------ ------------ ------------ ------------
Income (loss) before provision for income taxes and (27,815) 9,005 (19,567) 2,247
extraordinary item
INCOME TAXES (BENEFIT) -- 3,422 3,135 854
------------ ------------ ------------ ------------
Income (loss) before extraordinary item (27,815) 5,583 (22,702) 1,393
EXTRAORDINARY ITEM, NET -- 662 -- 662
------------ ------------ ------------ ------------
Net income (loss) $ (27,815) $ 4,921 $ (22,702) $ 731
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE:
Income before extraordinary item $ (1.10) $ 0.22 $ (0.90) $ 0.06
Extraordinary item,net -- (0.03) -- (0.03)
------------ ------------ ------------ ------------
Net income (loss) $ (1.10) $ 0.19 $ (0.90) $ 0.03
============ ============ ============ ============
CASH DIVIDENDS PER COMMON SHARE $ -- $ -- $ -- $ --
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 25,328,392 25,129,296 25,335,564 25,147,639
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
BRUNO'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEK PERIODS ENDED AUGUST 2, 1997 AND
JULY 27, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
AUGUST 2, JULY 27,
1997 1996
(26 WEEKS) (26 WEEKS)
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $(27,815) $ 4,921
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 32,215 28,108
LIFO provision 720 1,500
Change in assets and liabilities (2,906) 20,906
-------- --------
Total adjustments 30,029 50,514
-------- --------
Net cash provided by operating activities 2,214 55,435
-------- --------
INVESTING ACTIVITIES:
Proceeds from sale of property 21,421 1,400
Capital expenditures (41,735) (28,348)
-------- --------
Net cash used in investing activities (20,314) (26,948)
-------- --------
FINANCING ACTIVITIES:
Reductions of long-term debt and capitalized lease obligations (1,777) (25,966)
Net borrowings under long-term credit facilities 18,000 --
Sale of common stock, net 189 1,687
-------- --------
Net cash provided by (used in) financing activities 16,412 (24,279)
-------- --------
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (1,688) 4,208
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,908 57,387
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,220 $ 61,595
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 6
BRUNO'S, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED AUGUST 2, 1997, AND
JULY 27, 1996
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Bruno's, Inc. and its wholly owned subsidiaries. Significant
inter-company balances and transactions have been eliminated in consolidation.
Operating results for the twenty-six weeks ended August 2, 1997, are not
necessarily indicative of the results that may be expected for the entire fiscal
year. The unaudited condensed financial statements should be read in conjunction
with the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended February 1, 1997.
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.
2. NET INCOME (LOSS) PER SHARE
Net income (loss) per share was computed based on the weighted average number of
common shares outstanding during the respective periods. Stock options and
warrants outstanding are common stock equivalents but were excluded from net
income (loss) per common share computations because their effect either was not
material or would be antidilutive to the calculation of net income (loss) per
share.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard No. 128, Earnings per Share, which supersedes APB Opinion
No. 15, Earnings per Share, for periods ending after December 15, 1997 including
interim periods. Because of the antidilutive effect of common stock equivalents,
"basic" and "diluted" earnings per share under FAS No. 128 would be identical to
net income (loss) per share presented in the financial statements.
3. CONTINGENCIES
On June 6, 1997, a lawsuit was filed against the Company in the Circuit Court
for Jefferson County, Alabama by SNA, Inc. ("SNA") and A.B. Real Estate, Inc.
("A.B. Real Estate"). The lawsuit is styled A.B. Real Estate, Inc. et. al. v.
Bruno's, Inc., et al., Civil Action No. CV-97-3538. The complaint alleges that
SNA and A. B. Real Estate are engaged in the business of developing and managing
commercial real estate, that the Company had a contractual obligation to offer
for sale and to sell grocery store sites to SNA and A.B. Real Estate and to
lease such sites back from such entities, and that the Company's failure to
perform its obligations constitutes fraud within the meaning of Alabama law. The
complaint seeks to recover compensatory and punitive damages from the Company in
an unspecified amount. The Company believes that it has meritorious defenses to
the allegations contained in the complaint and intends to defend this lawsuit
vigorously.
5
<PAGE> 7
The Company is also 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.
4. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
The Company and several lending institutions are parties to a Credit Agreement
dated as of August 18, 1995, as amended and restated as of June 2, 1997 (the
"Credit Agreement"). The Credit Agreement provides for a revolving credit
facility of $225 million (the "Revolving Credit Facility") and a term loan
facility of $350 million (the "Term Loan Facility"). On September 5, 1997, the
Company and requisite lending institutions under the Credit Agreement entered
into an Amendment, Waiver and Agreement relating to the Credit Agreement (the
"Amendment and Waiver"). In addition to amending certain financial covenants
contained in the Credit Agreement, the Amendment and Waiver reduces the amount
that the Company may borrow under the Revolving Credit Facility to $200 million.
As of August 2, 1997, the Company had $81.5 million outstanding under the
Revolving Credit Facility and $350 million outstanding under the Term Loan
Facility.
The Company's long-term debt as of August 2, 1997 is summarized as follows:
<TABLE>
<CAPTION>
(000's omitted)
---------------
<S> <C>
Term Loan $350,000
Senior Subordinated Notes 400,000
Revolving Credit Facility 81,500
Other Borrowings 379
--------
831,879
Less current maturities 1,183
--------
$830,696
========
</TABLE>
The Revolving Credit Facility and Tranche A of the Term Loan Facility currently
bear interest at either the prime rate plus 1.25%, or the eurodollar rate plus
2.25%. Tranche B of the Term Loan Facility bears interest at either the prime
rate plus 1.75%, or the eurodollar rate plus 2.75%. The Company elects whether
interest on its loans will be based on the prime rate or the eurodollar rate at
the beginning of each interest rate period (as defined in the Credit Agreement)
applicable to such loans. The interest rates may vary based on the Company's
financial performance as defined in the Credit Agreement. Scheduled amortization
of the loans made under the Term Loan Facility commences in June 1998 and
continues through April 2005.
The Company incurs commitment fees of 0.5% on the unused portion of the credit
available under the Credit Agreement.
Prior to the Amendment and Waiver, the Credit Agreement contained certain
restrictive covenants which, among other things, required the Company to
maintain (i) a ratio of consolidated total debt to earnings before interest,
taxes, depreciation and amortization ("EBITDA") of 6.95 to 1.00 or less (with
such ratio decreasing over the term of the Credit Agreement), (ii) a ratio of
consolidated EBITDA to consolidated interest expense of 1.50 to 1.00 or greater
(with such ratio increasing over the term of the Credit Agreement), and (iii) a
consolidated fixed charge coverage ratio of 1.15 to 1.00 or greater (with
6
<PAGE> 8
such ratio increasing over the term of the Credit Agreement). In calculating
compliance with these covenants, EBITDA is adjusted by the amount of certain
non-cash and non-recurring gains and charges. The covenants in the Credit
Agreement also limit, among other things, capital expenditures, dividends and
certain other debt payments by the Company.
The Amendment and Waiver amended the Credit Agreement by (i) deleting the
consolidated total debt to EBITDA ratio applicable to the periods ending August
2, 1997 and November 1, 1997, (ii) changing the consolidated EBITDA to
consolidated interest expense ratio to 1:25 to 1:00 for the period ending August
2, 1997 and to 1:10 to 1:00 for the period ending November 1, 1997, and (iii)
changing the consolidated fixed charge coverage ratio to 1:00 to 1:00 for the
periods ending August 2, 1997 and November 1, 1997. In addition, the requisite
lending institutions under the Amendment and Waiver agreed to waive any defaults
and events of default that have occurred under the Credit Agreement with respect
to the Company's failure to comply with the foregoing financial covenants
(before giving effect to the Amendment and Waiver) for the period ending on
August 2, 1997. The Company and its lending institutions have agreed to
negotiate in good faith to enter into a further amendment to the Credit
Agreement on or before November 30, 1997 in order to address the Company's
long-term financial arrangements.
Future scheduled principal payments for the Company's long-term debt are as
follows:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1997 $ 184
1998 $ 2,065
1999 $ 18,065
2000 $ 22,065
2001 $ 26,000
Thereafter $763,500
</TABLE>
5. DEFERRED TAX ASSET AND VALUATION RESERVE
During the second quarter, the Company evaluated its deferred tax asset to
determine the need for any valuation allowance which may be appropriate in light
of the Company's projections for taxable income and the expiration dates of the
Company's net operating loss carryforwards. Based on the results of this
evaluation, the Company has recorded an additional $10.6 million valuation
allowance to reflect the determination that some portion of the deferred tax
asset may not be realized. The Company will continue to review this valuation
allowance on a quarterly basis and make adjustments as appropriate.
In the prior year, the Company recorded a valuation allowance of $8.3 million
relating to net operating loss carryforwards at Seessel's which, in the opinion
of management, are not likely to be realized.
7
<PAGE> 9
Item 2. 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.
A table showing the percentage of net sales represented by certain items in the
Company's condensed consolidated statements of operations is as follows:
<TABLE>
<CAPTION>
AUGUST 2, JULY 27 AUGUST 2, JULY 27
1997 1996 1997 1996
(26 WEEKS) (26 WEEKS) (13 WEEKS) (13 WEEKS)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales 100.00% 100.00% 100.00% 100.00%
Cost of products sold 77.31% 75.79% 77.37% 75.96%
Store operating, selling, and administrative expenses 19.31% 18.73% 19.85% 18.76%
-------- -------- -------- --------
EBITDA 3.39% 5.48% 2.78% 5.28%
Depreciation and amortization 2.27% 1.94% 2.46% 2.00%
Interest expense, net 3.21% 2.93% 3.34% 2.97%
-------- -------- -------- --------
Income (loss) before provision for income taxes
and extraordinary item (2.09)% 0.62% (3.03)% 0.31%
Income taxes (benefit) 0.00% 0.24% 0.49% 0.12%
Extraordinary item, net 0.00% 0.05% 0.00% 0.09%
-------- -------- -------- --------
Net income (loss) (2.09)% 0.34% (3.52)% 0.10%
======== ======== ======== ========
</TABLE>
A summary of the changes in certain items included in the condensed statements
of operations for the twenty-six and thirteen week periods ended August 2, 1997
as compared to the twenty-six and thirteen week periods ended July 27, 1996 is
as follows (dollars in thousands except per share amounts):
<TABLE>
<CAPTION>
Twenty Six Weeks Thirteen Weeks
Ended August 2, 1997 Ended August 2, 1997
Amounts % Change Amounts % Change
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Net sales (121,845) (8.39)% (74,383) (10.33)%
Cost of products sold (72,140) (6.55)% (47,377) (8.67)%
Store operating, selling, and administrative expenses (15,127) (5.56)% (6,904) (5.11)%
-------- ------ ------- ------
EBITDA (34,578) (43.43)% (20,102) (52.87)%
Depreciation and amortization 2,053 7.30% 1,502 10.43%
Interest expense, net 189 0.44% 210 0.98%
-------- ------ ------- ------
Income (loss) before provision for income taxes
and extraordinary item (36,820) N/A (21,814) N/A
Income taxes (benefit) (3,422) N/A 2,281 N/A
Extraordinary item, net (662) N/A (662) N/A
-------- -------- ------- --------
Net income (loss) (32,736) N/A (23,433) N/A
-------- -------- ------- --------
</TABLE>
8
<PAGE> 10
The following table contains a pro forma income statement for the twenty-six
week period ended July 27, 1996 reflecting the acquisition of Seessel Holdings,
Inc. and the sale or closing of 47 stores during the fiscal year ended February
1, 1997 as if such events had occurred at the beginning of such period.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWENTY-SIX WEEK PERIOD ENDED JULY 27, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
TWENTY-SIX (26) WEEK PERIOD
ENDED JULY 27,1996 (UNAUDITED)
-------------------------------------
TOTAL
BRUNO'S COMPANY
(PRO FORMA) SEESSEL'S* (PRO FORMA)
----------- ---------- -----------
<S> <C> <C> <C>
Net sales $1,312,776 $ 89,864 $1,402,640
Cost of products sold 994,948 63,276 1,058,224
Store operating, selling, and administrative expenses 237,513 21,914 259,427
---------- ---------- ----------
EBITDA 80,315 4,674 84,989
Depreciation and amortization 24,350 3,036 27,386
---------- ---------- ----------
Operating income $ 55,965 $ 1,638 $ 57,603
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
TWENTY-SIX (26) WEEK PERIOD
ENDED JULY 27,1996 (UNAUDITED)
---------------------------------------
TOTAL
BRUNO'S COMPANY
(PRO FORMA) SEESSEL'S* (PRO FORMA)
----------- ---------- -----------
<S> <C> <C> <C>
Net sales 100.00% 100.00% 100.00%
Cost of products sold 75.79% 70.41% 75.45%
Store operating, selling, and administrative expenses 18.09% 24.39% 18.50%
------ ------ ------
EBITDA 6.12% 5.20% 6.06%
Depreciation and amortization 1.85% 3.38% 1.95%
------ ------ ------
Operating income 4.26% 1.82% 4.11%
====== ====== ======
</TABLE>
* The results of Seessel's represent, in all material respects, the internally
reported results of Seessel's for the twenty-six week period ended July 27,
1996 except for depreciation and amortization which has been adjusted to
reflect the post-acquisition annualized expense.
9
<PAGE> 11
The following table contains a pro forma income statement for the thirteen week
period ended July 27, 1996 reflecting the acquisition of Seessel Holdings, Inc.
and the sale or closing of 47 stores during the fiscal year ended February 1,
1997 as if such events had occurred at the beginning of such period.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THIRTEEN WEEK PERIOD ENDED JULY 27, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN (13) WEEK PERIOD
ENDED JULY 27,1996 (UNAUDITED)
-------------------------------------------
TOTAL
BRUNO'S COMPANY
(PRO FORMA) SEESSEL'S* (PRO FORMA)
----------- ---------- -----------
<S> <C> <C> <C>
Net sales $650,583 $ 45,197 $695,780
Cost of products sold 494,570 31,907 526,477
Store operating, selling, and administrative expenses 118,053 10,941 128,994
-------- -------- --------
EBITDA 37,960 2,349 40,309
Depreciation and amortization 12,486 1,448 13,934
-------- -------- --------
Operating income $ 25,474 $ 901 $ 26,375
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
THIRTEEN (13) WEEK PERIOD
ENDED JULY 27,1996 (UNAUDITED)
-----------------------------------------
TOTAL
BRUNO'S COMPANY
(PRO FORMA) SEESSEL'S* (PRO FORMA)
----------- ---------- -----------
<S> <C> <C> <C>
Net sales 100.00% 100.00% 100.00%
Cost of products sold 76.02% 70.60% 75.67%
Store operating, selling, and administrative expenses 18.15% 24.21% 18.54%
------ ------ ------
EBITDA 5.83% 5.20% 5.79%
Depreciation and amortization 1.92% 3.20% 2.00%
------ ------ ------
Operating Income 3.92% 1.99% 3.79%
====== ====== ======
</TABLE>
* The results of Seessel's represent, in all material respects, the internally
reported results of Seessel's for the thirteen week period ended July 27, 1996
except for depreciation and amortization which has been adjusted to reflect
the post-acquisition annualized expense.
10
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
GENERAL
As of August 2, 1997, the Company operated a chain of 220 supermarkets and
combination food and drug stores. The Company also operated nine retail liquor
stores. As of July 27, 1996, the Company operated 255 supermarkets and
combination food and drug stores as well as nine retail liquor stores.
ACQUISITONS AND DIVESTITURES
The Company, in December 1996, acquired all of the outstanding stock of Seessel
Holdings, Inc. (Seessel's), which owns and operates eight supermarkets in
Memphis, Tennessee and two supermarkets in Northern Mississippi, for $50.4
million in cash including direct acquisition costs. This acquisition was
accounted for using the purchase method.
During the fiscal year ended February 1, 1997, management evaluated the
Company's market strategy, geographic positioning and store level return on
assets. As a result of this evaluation, the Company during such fiscal year
developed and completed a divestiture program (the "Divestiture Program") under
which the Company closed its distribution center located in Vidalia, Georgia
and sold or closed 47 stores. The 47 stores included 33 Piggly Wiggly stores in
Georgia, nine FoodMax stores in Georgia and South Carolina, two Food World
stores in Florida, one Food World store in Mississippi, one Food World store in
Alabama, and one Food Fair store in Alabama.
RESULTS OF OPERATIONS
COMPARISON OF OPERATIONS FOR THE TWENTY-SIX WEEK PERIOD ENDED AUGUST 2, 1997 TO
THE TWENTY-SIX WEEK PERIOD ENDED JULY 27, 1996 (UNAUDITED)
NET SALES
Net sales decreased $121.8 million in the twenty-six week period ended August 2,
1997 as compared to the twenty-six week period ended July 27, 1996.
Approximately $49.7 million of this decrease was due to the reduction in the
number of stores operated by the Company as a result of the Divestiture Program
offset by the increase in net sales resulting from the acquisition of Seessel's.
Comparable store sales decreased 5.6% from the prior year due primarily to
increased competition in the Company's trade areas and the Company's decision to
be less promotional than in prior periods. The Company believes that other
factors contributing to the decrease in comparable store sales may be pricing
strategies adopted by the Company which resulted in the loss of customers
because prices on certain products became non-competitive, product shortages in
the Company's stores resulting from distribution problems and efforts to control
inventory, and reduced levels of customer service
11
<PAGE> 13
due to the Company's efforts to control payroll costs. The Company is in the
process of adopting strategies designed to address the factors within the
Company's control that have contributed to the decline in sales. There can be no
assurance that such strategies will increase sales or will not otherwise have an
adverse effect on the Company's business.
GROSS PROFIT
Gross profit (net sales less cost of products sold) as a percentage of net
sales for the twenty-six week period ended August 2, 1997 was 22.69% compared
to 24.21% for the comparable period of the prior year. The decrease in gross
profit percentage was primarily the result of the Company's frequent shopper
program. This program, which was initiated during the third quarter of the
prior year, grants special discounts to customers with frequent shopper cards
in an effort to increase customer loyalty and increase the amount of the
Company's average transaction. As of August 2, 1997, there were 88 stores
offering the frequent shopper program.
STORE OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Store operating, selling and administrative expenses as a percentage of net
sales increased to 19.31% for the twenty-six week period ended August 2, 1997
compared to 18.73% for the comparable period of the prior year. The increase is
largely associated with the impact of fixed costs on lower total sales.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION (EBITDA)
EBITDA decreased by $34.6 million for the year-to-date period compared to the
comparable period of the prior year. The decrease resulted from the factors
discussed above.
INCOME TAXES
During the twenty-six week period ended August 2, 1997, the Company conducted an
evaluation of the realizability of its net deferred tax asset. Based on the
results of this evaluation, the Company recorded an additional valuation
allowance of $10.6 million (included in income tax expense) to reflect the
determination that some portion of this asset may not be realized prior to the
expiration of the Company's net operating loss carryforwards. SEE "DEFERRED TAX
ASSET AND VALUATION RESERVE" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Without giving effect to the valuation reserve, the Company's effective tax rate
remained at 38% for the twenty-six week period.
EXTRAORDINARY ITEM, NET
In July 1996, the Company prepaid $25 million in principal amount of its prior
term loan facility. As a result of this prepayment, the related debt issuance
costs of $662,000 (net of tax of $405,000) were written off in the period ended
July 27, 1996.
COMPARISON OF OPERATIONS FOR THE THIRTEEN WEEK PERIOD ENDED AUGUST 2, 1997 TO
THE THIRTEEN WEEK PERIOD ENDED JULY 27, 1996 (UNAUDITED)
NET SALES
Net sales decreased $74.4 million in the thirteen week period ended August 2,
1997 as compared to the thirteen week period ended July 27, 1996. Approximately
$23.7 million of this decrease was due to
12
<PAGE> 14
the reduction in the number of stores operated by the Company as a result of the
Divestiture Program offset by the increase in net sales resulting from the
acquisition of Seessel's. Comparable store sales decreased by 8.7% from the
prior quarter due primarily to increased competition in the Company's trade
areas and the Company's decision to be less promotional than in prior periods.
The Company believes that other factors contributing to the decrease in
comparable store sales may be pricing strategies adopted by the Company which
resulted in the loss of customers because prices on certain products became
non-competitive, product shortages in the Company's stores resulting from
distribution problems and efforts to control inventory, and reduced levels of
customer service due to the Company's efforts to control payroll costs. The
Company is in the process of adopting strategies designed to address the factors
within the Company's control that have contributed to the decline in sales.
There can be no assurance that such strategies will increase sales or will not
otherwise have an adverse effect on the Company's business.
GROSS PROFIT
Gross profit (net sales less cost of products sold) as a percentage of net
sales for the thirteen week period ended August 2, 1997 was 22.63% compared to
24.04% in the comparable period of the prior year. The decrease in gross profit
was primarily the result of the Company's frequent shopper program discussed
above.
STORE OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Store operating, selling and administrative expenses as a percentage of net
sales were 19.85% for the period ended August 2, 1997 compared to 18.76% in the
comparable period of the prior year. The increase is largely associated with the
impact of fixed costs on lower total sales.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AND AMORTIZATION (EBITDA)
EBITDA decreased by $20.1 million for the quarter ended August 2, 1997 compared
to the comparable quarter of the prior year. The decrease resulted from the
factors discussed above.
INCOME TAXES
During the thirteen week period ended August 2, 1997, the Company conducted an
evaluation of the realizability of its net deferred tax asset. Based on the
results of this evaluation, the Company recorded an additional valuation
allowance of $10.6 million (included in income tax expense) to reflect the
determination that some portion of this asset may not be realized prior to the
expiration of the Company's net operating loss carryforwards. SEE "DEFERRED TAX
ASSET AND VALUATION RESERVE" IN NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Without giving effect to the valuation reserve, the Company's effective tax rate
remained at 38% for the thirteen week period.
EXTRAORDINARY ITEM, NET
In July 1996, the Company prepaid $25 million in principal amount of its prior
term loan facility. As a result of this prepayment, the related debt issuance
costs of $662,000 (net of tax of $405,000) were written off in the period ended
July 27, 1996.
SUBSEQUENT EVENTS
Since August 2, 1997, the Company has taken several steps which the Company
expects will result in a non-recurring charge against earnings during the third
quarter of the current fiscal year, which will end on November 1, 1997. These
steps are (i) the Company's decision to eliminate approximately 162 store
management and administrative support positions, (ii) the Company's decision to
terminate its
13
<PAGE> 15
franchise agreement with the Piggly Wiggly Company and to change the names of 21
stores from "Piggly Wiggly" to "FoodMax," and (iii) a retail markdown of store
level inventory to reflect the Company's decision to reduce prices on selected
items in most of its stores. The amount of the non-recurring charge to be taken
during the third quarter has not been determined. Without giving effect to the
non-recurring charge, the Company does not expect its results of operations
during the third quarter to improve from the Company's results during the
thirteen week period ended August 2, 1997.
Forward-looking statements, such as those included in this section, are
inherently uncertain and events could turn out differently from senior
management's expectations. Certain important factors which could affect the
Company's future performance and results are identified in Exhibit 99.1 to this
report.
LIQUIDITY AND CAPITAL RESOURCES
The Company and several lending institutions are parties to a Credit Agreement
dated as of August 18, 1995, as amended and restated as of June 2, 1997 (the
"Credit Agreement"). The Credit Agreement provides for a revolving credit
facility of $225 million (the "Revolving Credit Facility") and a term loan
facility of $350 million (the "Term Loan Facility"). On September 5, 1997, the
Company and the requisite lending institutions under the Credit Agreement
entered into an Amendment, Waiver and Agreement relating to the Credit Agreement
(the "Amendment and Waiver"). In addition to amending certain financial
covenants contained in the Credit Agreement, the Amendment and Waiver reduces
the amount that the Company may borrow under the Revolving Credit Facility to
$200 million. As of August 2, 1997, the Company had $81.5 million outstanding
under the Revolving Credit Facility and $350 million outstanding under the Term
Loan Facility. SEE "SHORT-TERM BORROWINGS AND LONG-TERM DEBT" IN NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
The Credit Agreement contains financial covenants with which the Company must
comply in order to prevent a default. A default under the Credit Agreement could
have serious adverse consequences, including the loss of funding for the
operations of the Company. Due to declines in the Company's operating
performance, the Company sought and obtained amendments to certain financial
covenants contained in the Credit Agreement and a waiver of any defaults that
had occurred or may have occurred as a result of the Company's failure to comply
with such financial covenants. SEE "SHORT-TERM BORROWINGS AND LONG-TERM DEBT" IN
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS." The Agreement and Waiver executed
by the Company and its requisite lending institutions had the effect of allowing
the Company to remain in compliance with the financial covenants contained in
the Credit Agreement as of August 2, 1997, and management believes that the
Company will remain in compliance with these covenants, as amended, until
January 31, 1998. The Company and its lending institutions have agreed to
negotiate in good faith with the goal of entering into a further amendment to
the Credit Agreement on or before November 30, 1997 in order to address the
Company's long-term financial needs. Such an amendment is likely to be necessary
to prevent the Company from being in default under the Credit Agreement as of
January 31, 1998.
Historically, the Company has funded working capital requirements, capital
expenditures, and other cash requirements primarily through cash flow from
operations and borrowings under the Credit Agreement. The Company believes that
operating cash flows combined with borrowings under the Credit Agreement will be
sufficient to fund the Company's capital expenditures and working capital needs
during the remainder of the current fiscal year. As discussed above, an
amendment to the Credit Agreement is likely to be necessary to prevent the
Company from being in default under the Credit Agreement as of January 31, 1998.
14
<PAGE> 16
Operating activities generated $2.2 million and $55.4 million, respectively, in
the periods ended August 2, 1997, and July 27, 1996. The items most
significantly influencing this change were the reduction in EBITDA discussed
above and payments of accrued interest.
Cash flows used in investing activities were $20.3 million in the period ended
August 2, 1997 compared to $26.9 million in the comparable period of the prior
year. Capital expenditures were $41.7 million for the current year compared to
$28.3 million in the prior year. The Company's capital expenditures were
primarily related to the remodeling of 15 stores and investments in systems
technology, including new point-of-sale cash registers which have been installed
in 159 of the Company's stores. The Company believes that capital expenditures
for the remainder of the current fiscal year will be financed through cash flows
from operations, existing cash balances and, if necessary, borrowings under the
Credit Agreement. Cash flows from investing activities for the period ended
August 2, 1997 include $21.4 million in proceeds related to the sale of certain
properties and assets.
Cash flows provided by financing activities were $16.4 million for the period
ended August 2, 1997 compared to cash flows used in financing activities of
$24.3 million for the comparable period of the prior year. Current year
financing activities include $18.0 million in net borrowings under the Credit
Agreement. Prior year investing activities primarily consisted of a $25.0
million prepayment under the Company's previous term loan facility.
RECENT PRONOUNCEMENTS OF THE FASB
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 128, Earnings per Share,
which supersedes APB Opinion No. 15, Earnings per Share, for periods ending
after December 15, 1997 including interim periods. Because of the antidilutive
effect of common stock equivalents, "basic" and "diluted" earnings per share
under FAS No. 128 would be identical to net income (loss) per share presented in
the financial statements. Also in February 1997, the FASB issued SFAS No. 129,
Disclosures of Information About Capital Structure, which establishes standards
for disclosing information about an entity's capital structure. The Company is
required to adopt this statement in its current fiscal year. In June 1997, the
FASB issued SFAS No. 130, Reporting Comprehensive Income, which requires the
reporting and display of comprehensive income and its components in an entity's
financial statements, and SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, which specifies revised guidelines for
determining an entity's operating segments and the type and level of financial
information to be required. Because the Company operates primarily in the retail
grocery industry, management believes that the implementation of SFAS No. 131
will have no significant impact on future financial reporting. Companies are
required to adopt these statements in fiscal years beginning after December 15,
1997.
15
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 6, 1997, a lawsuit was filed against the Company in the Circuit Court
for Jefferson County, Alabama by SNA, Inc. ("SNA") and A.B. Real Estate, Inc.
("A.B. Real Estate"). The lawsuit is styled A.B. Real Estate, Inc. et. al. v.
Bruno's, Inc., et al., Civil Action No. CV-97-3538. The complaint alleges that
SNA and A. B. Real Estate are engaged in the business of developing and managing
commercial real estate, that the Company had a contractual obligation to offer
for sale and to sell grocery store sites to SNA and A.B. Real Estate and to
lease such sites back from such entities, and that the Company's failure to
perform its obligations constitutes fraud within the meaning of Alabama law. The
complaint seeks to recover compensatory and punitive damages from the Company in
an unspecified amount. The Company believes that it has meritorious defenses to
the allegations contained in the complaint and intends to defend this lawsuit
vigorously.
The Company is also 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
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on July 10, 1997 for
the purpose of electing seven directors of the Company. The persons who were
elected as directors of the Company and the vote for each such person are set
forth below:
<TABLE>
<CAPTION>
Director For Authority Withheld
-------- --- ------------------
<S> <C> <C>
William J. Bolton 23,938,096 44,280
Henry R. Kravis 23,872,127 110,249
George R. Roberts 23,872,225 110,151
Paul E. Raether 23,938,524 43,852
James H. Greene, Jr. 23,938,508 43,868
Nils P. Brous 23,935,810 46,566
Ronald G. Bruno 23,933,965 48,411
</TABLE>
No other matters were submitted to a vote of the Company's stockholders, through
the solicitation of proxies or otherwise, during the period covered by this
report.
16
<PAGE> 18
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
4.7 Amendment, Waiver and Agreement dated as of September 5, 1997,
among the Company, the lending institutions that are parties
thereto, and The Chase Manhattan Bank, as Administrative
Agent.
27 Financial Data Schedule
99.1 Cautionary Statement for purposes of the "Safe Harbor"
provisions of the Private Litigation Reform Act of 1995.
(b) Reports on Form 8-K
None.
17
<PAGE> 19
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.
/s/ James J. Hagan
---------------------
James J. Hagan,
Executive Vice President and
Chief Financial Officer
Dated: September 12, 1997
18
<PAGE> 20
BRUNO'S, INC.
FORM 10-Q REPORT
(For Quarter ended August 2, 1997)
INDEX OF EXHIBITS
Exhibit
Number Description
4.7 Amendment, Waiver and Agreement dated as of September 5, 1997,
among the Company, the lending institutions that are parties
thereto, and The Chase Manhattan Bank, as Administrative
Agent.
27 Financial Data Schedule
99.1 Cautionary Statement for purposes of the "Safe Harbor"
provisions of the Private Litigation Reform Act of 1995.
19
<PAGE> 1
EXHIBIT 4.7
AMENDMENT, WAIVER AND AGREEMENT dated as of
September 5, 1997 (this "Amendment and Waiver"), to
the Credit Agreement dated as of August 18, 1995, as
amended and restated as of June 2, 1997 (the "Credit
Agreement"), among BRUNO'S, INC., an Alabama
corporation (the "Borrower"), the lending
institutions from time to time parties thereto (the
"Lenders") and THE CHASE MANHATTAN BANK, a New York
banking corporation, as administrative agent (in such
capacity, the "Administrative Agent").
A. The Borrower has requested that the Lenders (a) agree to amend
certain provisions of the Credit Agreement, (b) grant certain waivers of
compliance by the Borrower with certain provisions of the Credit Agreement and
(c) enter into certain other agreements with respect to the Credit Agreement.
B. The Required Lenders are willing to agree to such amendments, grant
such waivers and enter into such agreements, in each case on the terms and
subject to the conditions set forth herein.
C. Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Credit Agreement.
Accordingly, in consideration of the mutual agreements herein contained
and other good and valuable consideration, the sufficiency and receipt of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendment. (a) Effective as of the date of this Amendment
and Waiver (the "Effective Date"), the Borrower and the Lenders hereby amend
Section 10.9 of the Credit Agreement by deleting in its entirety the first line
of the table set forth in such Section.
(b) Effective as of the Effective Date, the Borrower and the
Lenders hereby amend Section 10.10 of the Credit Agreement by deleting in its
entirety the first line of the table set forth in such Section and substituting
the following text therefor:
August 2, 1997 1.25:1.00
November 1, 1997 1.10:1.00
January 31, 1998 through October 31, 1998 1.50:1.00
<PAGE> 2
2
(c) Effective as of the Effective Date, the Borrower and the
Lenders hereby amend Section 10.11 of the Credit Agreement by deleting in its
entirety the first line of the table set forth in such Section and substituting
the following text therefor:
August 2, 1997 1.00:1.00
November 1, 1997 1.00:1.00
(d) For the purposes of the foregoing amendments, Section
10.10 and Section 10.11 of the Credit Agreement are hereby amended by inserting
the words "or on any date" after the words "during any period" and inserting the
words "or date" after the words "such period" immediately prior to the proviso
therein.
SECTION 2. Waiver. (a) The Lenders hereby waive any Defaults and Events
of Default under the Credit Agreement that have occurred on or prior to the
Effective Date as a result of the Borrower's failure to comply on or prior to
the Effective Date with the covenants set forth in Sections 10.9, 10.10 and
10.11 of the Credit Agreement with respect to the Test Period ending on August
2, 1997.
(b) The Lenders hereby waive any Default that may occur prior
to January 31, 1998 (but not any Default that may occur or otherwise be in
effect on or after January 31, 1998), with respect to the Borrower's failure to
comply with the covenants set forth in Sections 10.9, 10.10 and 10.11 of the
Credit Agreement with respect to the Test Period ending on January 31, 1998.
SECTION 3. Agreement. (a) The Borrower hereby agrees that it will work
diligently and in good faith with the Administrative Agent and the Lenders to
agree upon and enter into, by November 30, 1997, an amendment to the Credit
Agreement that will (i) address the long-term financial arrangements of the
Borrower and (ii) be satisfactory to the Borrower, the Administrative Agent and
the Required Lenders.
(b) Notwithstanding any of the provisions of the Credit
Agreement, the Lenders shall not be obligated to make or issue, and the Borrower
shall not request the making or issuance of, any Revolving Credit Loans,
Swingline Loans or Letters of Credit that would, at any time, have the effect of
causing the sum of (i) the aggregate principal amount of Revolving Credit Loans
outstanding at such time, (ii) the aggregate principal amount of Swingline Loans
outstanding at such time and (iii) the Letter of Credit Outstandings at such
time to exceed $200,000,000.
(c) Notwithstanding any of the provisions of the Credit
Agreement, the Borrower and the Lenders agree that, from and including August
25, 1997, to but excluding the date on which the amendment referred to in
Section 3(a) above is approved by the
<PAGE> 3
3
Borrower and the Required Lenders, Level VIII Status shall be deemed to be in
effect for purposes of determining the Applicable ABR Margin and the Applicable
Eurodollar Margin.
SECTION 4. Representations and Warranties. To induce the other parties
hereto to enter into this Amendment and Waiver, the Borrower represents and
warrants to each of the Lenders and the Administrative Agent that, after giving
effect to this Amendment and Waiver, (a) the representations and warranties set
forth in Section 8 of the Credit Agreement are true and correct in all material
respects on and as of the date hereof with the same effect as though made on and
as of the date hereof, except to the extent such representations and warranties
expressly relate to an earlier date, and (b) no Default or Event of Default has
occurred and is continuing.
SECTION 5. Conditions to Effectiveness. This Amendment and Waiver shall
become effective as of the Effective Date on the date that the Administrative
Agent shall have received counterparts of this Amendment and Waiver that, when
taken together, bear the signatures of the Borrower and the Required Lenders.
SECTION 6. Effect of Amendment and Waiver. Except as expressly set
forth herein, this Amendment and Waiver shall not by implication or otherwise
limit, impair, constitute a waiver of, or otherwise affect the rights and
remedies of the Lenders, the Administrative Agent, the Collateral Agent, the
Letter of Credit Issuer or the Borrower under the Credit Agreement or any other
Credit Document, and shall not alter, modify, amend or in any way affect any of
the terms, conditions, obligations, covenants or agreements contained in the
Credit Agreement or any other Credit Document, all of which are ratified and
affirmed in all respects and shall continue in full force and effect. Nothing
herein shall be deemed to entitle the Borrower to a waiver, amendment,
modification or other change of any of the terms, conditions, obligations,
covenants or agreements contained in the Credit Agreement or any other Credit
Document in similar or different circumstances. This Amendment and Waiver shall
apply and be effective only with respect to the provisions of the Credit
Agreement specifically referred to herein.
SECTION 7. Expenses. The Borrower agrees to pay the reasonable
out-of-pocket expenses of the Administrative Agent, including the reasonable
fees, charges and disbursements of Cravath, Swaine & Moore, counsel for the
Administrative Agent, incurred in connection with the preparation, execution and
delivery of this Amendment and Waiver or any subsequent waiver, amendment or
modification of the Credit Agreement or any other Credit Document.
SECTION 8. Counterparts. This Amendment and Waiver may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of
<PAGE> 4
4
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Delivery
of any executed counterpart of a signature page of this Amendment and Waiver by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart hereof.
SECTION 9. Applicable Law. THIS AMENDMENT AND WAIVER SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 10. Headings. The headings of this Amendment and Waiver are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Waiver to be duly executed by their duly authorized officers, all as of the date
and year first above written.
BRUNO'S, INC.,
by \s\ James J. Hagan
------------------
Name: James J. Hagan
Title: Executive Vice President and
Chief Financial Officer
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Lender,
by \s\ William P. Rindfuss
-----------------------
Name: William P. Rindfuss
Title: Vice President
AMSOUTH BANK OF ALABAMA,
by \s\ David A. Simmons
--------------------
Name: David A. Simmons
Title: Senior Vice President
<PAGE> 5
5
BANK OF AMERICA ILLINOIS,
by \s\ Linda A. Carper
-------------------
Name: Linda A. Carper
Title: Managing Director
THE BANK OF NOVA SCOTIA,
by \s\ M. D. Smith
---------------
Name: M. D. Smith
Title: Agent Operations
BANKERS TRUST COMPANY,
by \s\ Mary Jo Jolly
-----------------
Name: Mary Jo Jolly
Title: Assistant Vice President
BANK OF TOKYO - MITSUBISHI TRUST
COMPANY,
by
---------------------------
Name:
Title:
CIBC INC,
by \s\ Elizabeth O. Fischer
------------------------
Name: Elizabeth O. Fischer
Title: Director
<PAGE> 6
6
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", New York Branch,
by
---------------------
Name:
Title:
by
---------------------
Name:
Title:
THE DAI-ICHI KANGYO BANK, LTD.,
by \s\ Ronald Wolinsky
-------------------
Name: Ronald Wolinsky
Title: Vice President
FLEET NATIONAL BANK,
by
--------------------
Name:
Title:
by
--------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
by \s\ Takuya Honjo
----------------
Name: Takuya Honjo
Title: Senior Vice President
<PAGE> 7
7
KEYPORT LIFE INSURANCE COMPANY, by
Chancellor LLT Senior Secured Management, I
as Portfolio Advisor
by \s\Gregory L. Smith
-------------------
Name: Gregory L. Smith
Title: Vice President
KZH-SOLEIL CORPORATION (formerly
known as KZH Holding Corporation),
by
------------------------
Name:
Title:
KZH-ING-1 CORPORATION (formerly
known as KZH Holding Corporation II),
by
------------------------
Name:
Title:
MITSUI LEASING (U.S.A.) INC.,
by
------------------------
Name:
Title:
NATIONSBANK, N.A.,
by \s\ Nancy S. Goldman
--------------------
Name: Nancy S. Goldman
Title: Vice President
<PAGE> 8
8
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO
(a unit of The Chase Manhattan Bank),
by
------------------------
Name:
Title:
THE SAKURA BANK, LIMITED,
by
------------------------
Name:
Title:
THE SUMITOMO BANK, LIMITED,
by
------------------------
Name:
Title:
SOUTHTRUST BANK OF ALABAMA, N.A.,
by \s\ T. Knudsen
--------------
Name: T. Knuesen
Title: Senior Vice President
THE TRAVELERS INSURANCE COMPANY,
by \s\ Robert M. Mills
-------------------
Name: Robert M. Mills
Title: Investment Officer
<PAGE> 9
9
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST,
by \s\ Jeffrey W. Maillet
----------------------
Name: Jeffrey W. Maillet
Title: Senior vice President & Director
DLJ CAPITAL FUNDING, INC.,
by
------------------------
Name:
Title:
GOLDMAN SACHS CREDIT PARTNERS,
by
------------------------
Name:
Title:
AERIES FINANCE LTD.,
by \s\ Ian David Moore
-------------------
Name: Ian David Moore
Title: Director
AMARA-2 FINANCE LTD.,
by
------------------------
Name:
Title:
<PAGE> 10
10
CAPTIVA FINANCE LTD.,
by \s\ John H. Cullimane
---------------------
Name: John H. Cullimane
Title: Director
CAPTIVA II FINANCE LTD.,
by \s\ John H. Cullimane
---------------------
Name: John H. Cullimane
Title: Director
COMMERCIAL LOAN FUNDING TRUST I,
by
------------------------
Name:
Title:
INDOSUEZ CAPITAL FUNDING III, LIMITED,
by Indosuez Capital Luxembourg,
as Collateral Manager,
by
------------------------
Name:
Title:
LEHMAN COMMERCIAL PAPER INC.,
by
------------------------
Name:
Title:
<PAGE> 11
11
MERRILL LYNCH PRIME RATE PORTFOLIO,
by
------------------------
Name:
Title:
PAMCO CAYMAN LTD.,
by
------------------------
Name:
Title:
STRATA FUNDING LTD.,
by \s\ John H. Cullinane
---------------------
Name: John H. Cullinane
Title: Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF BRUNO'S, INC. FOR THE QUARTER ENDED AUGUST 2, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> AUG-02-1997
<CASH> 3,220
<SECURITIES> 0
<RECEIVABLES> 21,770
<ALLOWANCES> 0
<INVENTORY> 169,975
<CURRENT-ASSETS> 226,586
<PP&E> 795,087
<DEPRECIATION> 334,845
<TOTAL-ASSETS> 774,260
<CURRENT-LIABILITIES> 234,844
<BONDS> 400,000
0
0
<COMMON> 253
<OTHER-SE> (358,346)
<TOTAL-LIABILITY-AND-EQUITY> 774,260
<SALES> 1,330,652
<TOTAL-REVENUES> 1,330,652
<CGS> 1,028,702
<TOTAL-COSTS> 1,028,702
<OTHER-EXPENSES> 287,063
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,702
<INCOME-PRETAX> (27,815)
<INCOME-TAX> 0
<INCOME-CONTINUING> (27,815)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,815)
<EPS-PRIMARY> (1.10)
<EPS-DILUTED> (1.10)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements to encourage companies to provide prospective
information about their companies without fear of litigation so long as those
statements are identified as forward-looking and are accompanied by meaningful
cautionary statements identifying important factors that could cause actual
results to differ materially from those projected in the statement. The Company
desires to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 in connection with forward-looking
statements contained in this report. Accordingly, the Company hereby
identifies the following important factors which could cause the Company's
financial results to differ materially from any such results which might be
projected, forecast, estimated or budgeted by the Company in forward-looking
statements.
(a) Heightened competition, including specifically the
intensification of price competition; the entry of new competitors; and
the expansion, renovation and opening of new stores by new and existing
competitors.
(b) Failure to obtain new customers or retain existing
customers.
(c) Inability to carry out marketing, sales and capital plans.
(d) Insufficiency of financial resources to renovate and
expand store base.
(e) Prolonged dispute with labor.
(f) Economic downturn in the Southeast region.
(g) Loss or retirement of key executives.
(h) Higher selling, general and administrative expenses
occasioned by the need for additional advertising, marketing,
administrative, or management information systems expenditures.
(i) Adverse publicity and news coverage.
The foregoing review of factors pursuant to the Private Litigation Securities
Reform Act of 1995 should not be construed as exhaustive or as any admission
regarding the adequacy of disclosures made by the Company prior to this filing.
