UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 27, 2000.
|_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 1-7013
------
GRISTEDE'S FOODS, INC.
----------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-1829183
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
823 Eleventh Avenue, New York, New York 10019
---------------------------------------------
(Address of Principal Executive Offices)
(212) 956-5803
--------------
(Registrant's Telephone Number, Including Area Code)
N/A
---
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15 (d) of the Securities Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes |X| No |_|
At October 6, 2000, registrant had issued and outstanding 19,636,574 shares of
common stock.
<PAGE>
GRISTEDE'S FOODS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
August 27, 2000 and November 28, 1999 Page 3
Consolidated Statements of Operations for
the quarters and nine months ended
August 27, 2000 and August 29,1999 Page 4
Consolidated Statements of Stockholders'
Equity for the year ended
November 28, 1999 and the nine
months ended August 27, 2000 Page 5
Consolidated Statements of Cash Flows for
the nine months ended
August 27, 2000 and August 29, 1999 Page 6
Notes to Consolidated Financial Statements Page 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations Page 10
PART II - OTHER INFORMATION Page 14
2
<PAGE>
Item 1
Financial Statements
GRISTEDE'S FOODS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 27, November 28,
ASSETS 2000 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 199,481 $ 298,582
Accounts receivable - net of allowance for doubtful accounts
of $500,000 at August 27, 2000 and November 28, 1999 7,639,348 6,797,401
Inventory 28,281,882 25,241,677
Prepaid expenses and other current assets 5,637,447 4,761,378
Notes receivable - current portion 0 306,337
------------ ------------
Total current assets 41,758,158 37,405,375
------------ ------------
PROPERTY AND EQUIPMENT:
Furniture, fixtures and equipment 16,206,271 15,334,522
Capitalized equipment leases 16,134,657 13,072,200
Leaseholds and leasehold improvements 45,973,573 40,773,458
------------ ------------
78,314,501 69,180,180
Less accumulated depreciation and amortization 33,308,921 29,576,085
------------ ------------
Net property and equipment 45,005,580 39,604,095
Deposits and other assets 906,596 769,221
Deferred costs 2,714,177 2,994,991
Notes receivable - noncurrent portion 0 256,489
------------ ------------
TOTAL $ 90,384,511 $ 81,030,171
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $ 19,741,009 $ 17,800,350
Accrued payroll, vacation and withholdings 612,535 1,052,150
Accrued expenses and other current liabilities 1,594,243 1,510,690
Capitalized lease obligation - current portion 1,898,282 1,570,553
Current portion of long term debt 3,666,665 1,797,619
------------ ------------
Total current liabilities 27,512,734 23,731,362
Long-term debt - noncurrent portion 25,066,079 27,035,125
Due to Affiliate 15,023,441 9,113,500
Deferred advertising 1,031,154 1,597,654
Capitalized lease obligation - noncurrent portion 6,911,369 5,651,425
Deferred rents 2,871,564 2,392,753
------------ ------------
Total liabilities 78,416,341 69,521,819
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred Stock, $50 Par, -share authorized 500,000; none issued
Common stock, $0.02 par value - shares authorized 25,000,000; outstanding
19,636,574 shares at August 27, 2000 and November 28, 1999 392,732 392,732
Additional paid-in capital 14,136,674 14,136,674
Retained earnings/ (deficit) (2,561,236) (3,021,054)
------------ ------------
Total stockholders' equity 11,968,170 11,508,352
------------ ------------
TOTAL $ 90,384,511 $ 81,030,171
============ ============
</TABLE>
See accompanying notes.
3
<PAGE>
GRISTEDE'S FOODS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE 39 WEEKS AND 13 WEEKS ENDED AUGUST 27, 2000 AND AUGUST 29, 1999
<TABLE>
<CAPTION>
39 weeks 13 weeks 39 weeks 13 weeks
ended ended ended ended
August 27, August 27, August 29, August 29,
2000 2000 1999 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales $ 157,351,974 $ 51,334,157 $ 132,321,470 $ 43,778,204
Cost of sales 95,423,649 31,542,007 80,855,046 27,171,491
------------- ------------- ------------- -------------
Gross profit 61,928,325 19,792,150 51,466,424 16,606,713
Store operating, general and administrative expense 49,061,828 16,545,457 41,014,347 13,873,299
Pre-store opening start-up costs 452,981 30,758 918,342 268,999
Depreciation and amortization 4,176,651 1,500,895 3,366,818 1,058,839
Non-store operating expenses:
Administrative payroll and fringes 3,263,384 1,077,434 2,818,819 957,643
General office expense 1,322,205 551,435 905,259 299,888
Professional fees 373,275 89,141 398,069 104,661
Corporate expense 148,815 61,301 151,338 36,255
------------- ------------- ------------- -------------
Total non-store operating expense 5,107,679 1,779,311 4,273,485 1,398,447
------------- ------------- ------------- -------------
Operating profit/ (loss) 3,129,186 (64,271) 1,893,432 7,129
------------- ------------- ------------- -------------
Other income (expense):
Interest expense (2,669,186) (865,884) (1,738,785) (676,284)
Interest income 25,868 593 69,337 21,775
Other income 0 0 307,098 307,098
------------- ------------- ------------- -------------
Total other expense - net (2,643,318) (865,291) (1,362,349) (347,411)
------------- ------------- ------------- -------------
Income/ (loss) before income taxes 485,868 (929,562) 531,083 (340,282)
Provision for income taxes 26,050 13,000 47,457 19,120
------------- ------------- ------------- -------------
Net income/ (loss) $ 459,818 $ (942,562) $ 483,626 $ (359,401)
============= ============= ============= =============
Income/ (loss) per share, basic and diluted $0.02 ($0.05) $0.02 ($0.02)
============= ============= ============= =============
Weighted average number of shares and
equivalents outstanding 19,636,574 19,636,574 19,636,574 19,636,574
============= ============= ============= =============
</TABLE>
See accompanying notes
4
<PAGE>
GRISTEDE'S FOODS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED AUGUST 27, 2000
<TABLE>
<CAPTION>
Additional Retained Total
Common stock Paid-In earnings Stockholders'
Shares Amount Capital (Deficit) Equity
---------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at November 29, 1998 19,636,574 $ 392,732 14,136,674 $ (147,723) $14,381,683
Net loss for the year ended
November 28, 1999 (2,873,331) (2,873,331)
---------- ----------- ---------- ----------- -----------
Balance at November 28, 1999 19,636,574 $ 392,732 14,136,674 $(3,021,054) $11,508,352
Net income for the thirty nine weeks
ended August 27, 2000 459,818 459,818
---------- ----------- ---------- ----------- -----------
Balance at August 27, 2000 19,636,574 $ 392,732 14,136,674 $(2,561,236) $11,968,170
========== =========== ========== =========== ===========
</TABLE>
See accompanying notes.
5
<PAGE>
GRISTEDE'S FOODS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED AUGUST 27, 2000 AND AUGUST 29, 1999
<TABLE>
<CAPTION>
39 weeks 39 weeks
ended ended
August 27, August 29,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 459,818 $ 483,626
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 4,176,651 3,366,818
Changes in operating assets and liabilities:
Accounts receivable - net (841,947) (1,446,495)
Inventory (3,040,205) (5,713,891)
Prepaid expenses and other current assets (876,069) (607,767)
Notes receivable 562,826 935,543
Other assets (300,376) (1,075,841)
Accounts payable, trade 1,940,659 2,470,852
Accrued payroll, vacation and withholdings (439,615) (1,020,691)
Accrued expenses and other current liabilities 83,553 307,611
Deferred rents 478,811 543,867
Other credits (566,500) 1,506,500
----------- -----------
Net cash provided by / (used) in operating activities 1,637,606 (249,868)
----------- -----------
Cash flows from investing activities:
Capital expenditures - net (6,100,617) (9,369,676)
----------- -----------
Net cash used in investing activities (6,100,617) (9,369,676)
----------- -----------
Cash flows from financing activities:
Repayments of bank loan (900,000) (2,264,611)
Proceeds from bank loans 800,000 7,550,000
Repayment capitalized lease obligations (1,446,031) (732,471)
Advances from affiliate 5,909,941 5,082,106
----------- -----------
Net cash provided by financing activities 4,363,910 9,635,024
----------- -----------
NET (DECREASE) / INCREASE IN CASH (99,101) 15,480
CASH, begining of period 298,582 53,794
----------- -----------
CASH, end of period $ 199,481 $ 69,274
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 2,280,972 $ 1,464,021
Cash paid for taxes $ 93,850 $ 55,808
Supplemental schedule of non cash financing activity:
Assets acquired under capital lease obligations $ 3,033,704 $ 3,868,758
</TABLE>
See accompanying notes.
6
<PAGE>
GRISTEDE'S FOODS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - On November 4, 1997, Sloan's Supermarkets, Inc. ("Sloan's") changed
its name to Gristede's Sloan's, Inc. ("GRI" or the "Company"). On November 10,
1997, GRI acquired certain assets, net of liabilities, of 29 selected
supermarkets and a wholesale distribution business ("The Food Group") controlled
by Mr. John Catsimatidis, Chairman and 37% stockholder of Sloan's. The
transaction was accounted for as the acquisition of Sloan's by The Food Group
pursuant to Emerging Issues Task Force 90-13 as a result of The Food Group
obtaining control of Sloan's after the transaction. The assets and liabilities
of The Food Group were recorded at their historical cost. Sloan's assets and
liabilities were recorded at their fair value to the extent acquired.
Consideration for the transaction was based on an aggregate of $36,000,000 in
market value of the Company's common stock and the assumption of $4,000,000 of
liabilities. 16,504,298 shares of common stock were issued on the date of the
acquisition based on a market price of $2.18 per share. On August 16, 1999 the
Company changed its name to Gristede's Foods, Inc.
The Company operates 43 supermarkets (the "Supermarkets") and two pharmacy
stores. 38 Supermarkets and two pharmacy stores are located in Manhattan, New
York, three Supermarkets are located in Westchester County, New York, one
Supermarket is located in Brooklyn, New York and one Supermarket is located in
Long Island, New York. 6 of the Supermarkets are operated under the "Sloan's"
name and 37 are operated under the "Gristede's" name. The Company leases all of
its store locations.
The Company also owns City Produce Operating Corp., a corporation which operates
a warehouse and distribution center primarily for fresh produce on leased
premises in the Bronx, New York.
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated in consolidation.
Quarter End - The Company operates using the conventional retail 52/53 week
fiscal year. The fiscal quarter ends on the Sunday closest to the end of the
quarter. The Company's fiscal year ends on the Sunday closest to November 30.
Inventory - Store inventories are valued principally at the lower of cost or
market with cost determined under the retail first in, first out (FIFO) method.
Property and Equipment - Depreciation of furniture, fixtures and equipment is
computed by the straight-line method over the estimated useful lives of the
assets.
Leases - The Company charges the cost of noncancelable operating lease payments
and beneficial leaseholds to operations on a straight-line basis over the lives
of the leases.
7
<PAGE>
GRISTEDE'S FOODS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Provision for income taxes - Income taxes reflect Federal and State alternative
minimum tax only, as all regular income taxes have been offset by utilization of
the Company's net operating loss carry forward.
Income per share - Per share data are based on the weighted average number of
shares of common stock and equivalents outstanding during each quarter. Income
per share is computed by the treasury stock method; basic and diluted income per
share are the same.
Reclassification - Certain amounts in the November 28, 1999 financial statements
have been reclassified to conform with the August 27, 2000 presentation.
In the opinion of management, the information furnished reflects all adjustments
(consisting of normal recurring adjustments), which are necessary for a fair
statement of the results of operations for the interim period. The interim
figures are not necessarily indicative of the results to be expected for the
fiscal year.
The Company's Annual Report on Form 10-K for the 12 month period ended November
28, 1999 contains information which should be read in conjunction herewith.
2. RELATED PARTY TRANSACTIONS
Under a management agreement dated November 10, 1997, Namdor Inc., a subsidiary
of the Company, performs consulting and managerial services for three
supermarkets owned by corporations controlled by John Catsimatidis. In
consideration of such services, Namdor Inc. is entitled to receive on a
quarterly basis a management fee of 1.25% of all sales of merchandise made at
the managed supermarkets. During the quarter and nine months ended August 27,
2000, the management fee income was $12,069 and $55,336, respectively. For the
quarter and nine months ended August 29, 1999 the management fee income was
$23,250 and $76,231, respectively.
C&S Acquisition Corp. (formerly Red Apple Leasing, Inc.) a corporation wholly
owned by John Catsimatidis, leases equipment to the Company. Such leases are
primarily for store operating equipment. Obligations under capital leases at
August 27, 2000 were $165,433 and require monthly payments of $35,114 through
March 1, 2001. Obligations under operating leases were $41,676 per month during
the quarter ended August 27, 2000.
Advertising services are provided to the Company by an affiliated company, MCV
Advertising Associates Inc. a company owned by John Catsimatidis. For the
quarter and nine months ended
8
<PAGE>
August 27, 2000 the costs incurred were $289,932 and $1,053,899, respectively.
For the quarter and nine months ended August 29, 1999 the costs incurred were
$211,179 and $830,428, respectively.
In November, 1997, the Company acquired 29 stores from affiliates controlled by
the majority shareholder of the Company. As part of the post closing adjustments
for the period following the acquisition, an affiliate sold one store to the
Company valued at approximately $2,778,000. As disclosed in our Form 10-K for
the year ended November 28, 1999, the transaction was restructured as an
operating agreement between the Company and the affiliate giving the Company
full operating control of all aspects of the store. The above amount is included
in "Other current assets" on the accompanying balance sheet.
The Company has entered into operating agreements with two affiliates solely
owned by John Catsimatidis regarding the management of two stores owned by such
affiliates. The agreements, which automatically renew for one year periods
unless either party gives at least 90 days notice of termination, give the
Company full operating control of all aspects of the stores. The store's assets
and liabilities at their net book values, and sales and results of operations
have been consolidated with the financial statements of the Company. Under the
agreements, the Company shall pay to the affiliates $1 per annum, plus such
other consideration as may be approved by the Company's directors (excluding
John Catsimatidis).
The Company leases five locations from Red Apple Real Estate, Inc., a company
solely owned by John Catsimatidis. During the quarter and nine months ended
August 27, 2000 the Company paid to Red Apple Real Estate, Inc. $247,217 and
$827,075, respectively. During the quarter and nine months ended August 29, 1999
the Company paid $158,361 and $788,227, respectively.
Amount due to affiliate, United Acquisition Corp., a corporation wholly owned by
John Catsimatidis, represent liabilities in connection with the acquisition of
The Food Group and subsequent advances made by such affiliate. The affiliate has
agreed not to demand payment of these liabilities in the next fiscal year.
Accordingly, the liability has been classified as noncurrent. Amounts due to
affiliate at August 27, 2000 and November 28, 1999 was $15,023,441 and
$9,113,500, respectively; of these amounts $9,000,000 was subordinated to the
Company's banks. The liability does not bear interest. The $5,909,941 increase
in due to affiliate represents advances made during the nine months ended August
27, 2000 by such affiliate, the proceeds of which were primarily used to
partially fund the Company's store renovation and expansion program.
Wolf, Block, Schorr and Solis-Cohen LLP, a law firm of which Martin Bring, a
director of the Company is a partner, received fees of $60,244 and $205,663
during the quarter and nine months ended August 27, 2000, respectively. During
the quarter and nine months ended August 29, 1999, they received fees of $89,574
and $183,738, respectively.
9
<PAGE>
GRISTEDE'S FOODS, INC. AND SUBSIDIARIES
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE QUARTERS AND NINE MONTHS ENDED AUGUST 27, 2000 AND
AUGUST 29, 1999
RESULTS OF OPERATIONS
The following table sets forth items from the Company's Consolidated Statements
of Operations as a percentage on sales.
39 weeks 13 weeks 39 weeks 13 weeks
ended ended ended ended
8/27/00 8/27/00 8/29/99 8/29/99
-------- -------- -------- --------
Sales 100.0 100.0 100.0 100.0
Cost of sales 60.6 61.4 61.1 62.1
----- ----- ----- -----
Gross profit 39.4 38.6 38.9 37.9
Store operating, general and
administrative expense 31.2 32.2 31.0 31.7
Pre-store opening startup costs 0.3 0.1 0.7 0.6
Depreciation and amortization 2.7 2.9 2.6 2.4
Non-store operating expense 3.2 3.5 3.2 3.2
----- ----- ----- -----
Operating profit/(loss) 2.0 (0.1) 1.4 0.0
Other income (expense) (1.7) (1.7) (1.0) (0.8)
----- ----- ----- -----
Income/(loss) from operations before
income taxes 0.3 (1.8) 0.4 (0.8)
Provisions for income taxes 0.0 0.0 0.0 0.0
----- ----- ----- -----
Net income/(loss) 0.3 (1.8) 0.4 (0.8)
===== ===== ===== =====
Sales for the quarter and nine months ended August 27, 2000 were $ 51,334,157
and $157,351,974, respectively as compared to sales for the quarter and nine
months ended August 29, 1999 of $43,778,204 and $132,321,470, respectively. The
increase in sales during the 2000 period was primarily the result of the
Company's remodeling program, which is continuing and three new stores which
opened subsequent to the 1999 period.
10
<PAGE>
Gross profit was $19,792,150 or 38.56 % of sales and $61,928,325 or 39.36 % of
sales for the quarter and nine months ended August 27, 2000, respectively as
compared with $16,606,713 or 37.93 % of sales and $51,466,424 or 38.89 % of
sales for the quarter and nine months ended August 29, 1999, respectively. The
increase in gross profit as a percentage of sales, during the 2000 periods, was
primarily due to reduced promotional price reductions in connection with the
grand reopening periods of the new and newly remodeled stores as well as the
recovery of certain stores from unusually low gross margins during the fourth
quarter of fiscal 1999.
Store operating, general and administrative expenses were $16,545,457 or 32.23 %
of sales and $49,061,828 or 31.18 % of sales for the quarter and nine months
ended August 27, 2000, respectively as compared to $13,873,299 or 31.69 % of
sales and $41,014,347 or 31.00 % of sales for the quarter and nine months ended
August 29, 1999, respectively. The increase in store operating, general and
administrative expenses as a percentage of sales in the 2000 period was mainly
due to increases in occupancy cost, labor costs associated with the new stores
and substantially greater electric costs in our trading area.
Pre-store opening startup costs were $30,758 or 0.06 % of sales and $452,981 or
0.29 % of sales for the quarter and nine months ended August 27, 2000,
respectively as compared to $268,999 or 0.61 % of sales and $918,342 or 0.69 %
of sales for the quarter and nine months ended August 29, 1999, respectively.
The decrease in pre-store opening startup costs in the quarter ended August 27,
2000 was due to the fact that fewer stores were remodeled or new stores opened
as compared to the same quarter in 1999. The stores remodeled required less
pre-opening advertising and store set-up labor costs.
Non-store operating expenses were $1,779,311 or 3.47 % of sales and $5,107,679
or 3.25 % of sales for the quarter and nine months ended August 27, 2000,
respectively as compared to $1,398,447 or 3.19 % of sales and $4,273,485 or 3.23
% of sales for the quarter and nine months ended August 29, 1999, respectively.
Administrative payroll and fringes were 2.10 % of sales and 2.07 % of sales for
the quarter and nine months ended August 27, 2000, respectively as compared with
2.19 % of sales and 2.13 % of sales for the quarter and nine months ended August
29,1999, respectively. The decrease in the 2000 period reflects the containment
of costs associated with the supervisory personnel required as a result of the
additional business generated by the store remodeling program. General office
expenses as a percentage of sales were 1.07 % and 0.84 % for the quarter and
nine months ended August 27, 2000, respectively as compared to 0.68 % and 0.68 %
for the quarter and nine months ended August 29, 1999, respectively. The
increase during the 2000 period was primarily due to additional back office
costs in relation to the increased sales. Professional fees were 0.18 % and 0.24
% of sales for the quarter and nine months ended August 27, 2000, respectively
as compared to 0.24 % and 0.30 % of sales for the quarter and nine months ended
August 29, 1999, respectively. The decrease in the 2000 period was due to the
reduced need for outside legal and consulting services. Corporate expenses as a
percentage of sales were 0.12 % and 0.10 % for the quarter and nine months ended
August 27, 2000, respectively as compared to 0.08 % and 0.12 % for the quarter
and nine months ended August 29, 1999, respectively. The increase was primarily
due to higher shareholder expenses.
11
<PAGE>
Interest expense for the quarter and nine months ended August 27, 2000 was
$865,884 and $2,669,186, respectively as compared to $676,284 and $1,738,785 for
the quarter and nine months ended August 29,1999, respectively. The increase in
the 2000 period was primarily attributable to increased borrowings under the
Company's bank credit facility, higher interest rates and increased capitalized
equipment leasing.
Interest income for the quarter and nine months ended August 27, 2000 was $593
and $25,868, respectively as compared with $21,775 and $69,337 for the quarter
and nine months ended August 29, 1999, respectively. The decrease in the 2000
period was due to the reduction in outstanding notes receivable as compared to
the 1999 period.
As a result of the items reviewed above the net income/(loss) before provision
for income taxes for the quarter and nine months ended August 27, 2000 was a
loss of $929,562 and a profit of $485,868, respectively as compared to a loss
and profit of $340,281 and $531,083 for the quarter and nine months ended August
29, 1999, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash are as follows: net cash flow from
operating activities, bank financing (as described more fully below), third
party equipment lease financing, vendor financing, and amounts advanced from an
affiliate. Approximately $5.9 million has been advanced to the Company by the
affiliate during the nine months ended August 27, 2000. Such advances are on a
non-interest bearing basis.
On November 10, 1997, the Company completed its financial arrangements with a
group of banks for a credit facility in the aggregate amount of $25,000.000.
Under the credit agreement the Company obtained a term loan in the amount of
$12,000,000 to refinance prior bank debt, an improvement term loan line of
credit in the amount of $8,000,000 to finance capital improvements to its
Supermarkets and a revolving line of credit in the amount of $5,000,000 to
provide working capital. The revolving line of credit was increased to
14,000,000 effective as of May 29, 1999. The credit facility, as amended,
provided for (i) a maturity date of November 30, 2003, at which time all amounts
outstanding thereunder are due, (ii) certain financial covenants, (iii)
amortization of the term loan by $100,000 per month through and including June
1, 2000, and thereafter $147,857 per month; (iv) amortization of the improvement
term loan by $50,000 per month commencing July 1, 2000 through and including
June 1, 2001 and $133,333 per month thereafter and (v) a reduction in the
revolving credit commitment by $466,667 per month commencing July 1, 2001.
Presently, the bank facilities are fully utilized and the Company is negotiating
an increase in the credit facilities with its banks. There is no assurance that
the Company will be able to negotiate such an increase on terms satisfactory to
the Company. If the Company is unable to obtain its desired financing from its
banks, the Company will seek increased financing from third party leasing
companies and/or additional financing from the Company's principal shareholder
and other sources.
12
<PAGE>
The Company has not incurred any material commitments for capital expenditures,
although it anticipates spending approximately $10,000,000 to $12,000,000 on its
store remodeling and expansion program in fiscal 2000. Such amount is subject to
adjustment based on the availability of funds.
Borrowings under the facility bear interest at a spread over either the prime
rate of the bank acting as agent for the group of banks or a LIBOR rate, with
the spread dependent on the ratio of the Company's funded debt to EBITDA ratio,
as defined in the credit agreement. The average interest rate on amounts
outstanding under the facility during the 13 weeks ended August 27, 2000 was
9.7% per annum.
The credit facility contains covenants, representations and events of default
typical of credit facility agreements, including financial covenants which
require the Company to meet, among other things, a minimum tangible net worth,
debt service coverage ratios and fixed charge coverage ratios, and which limit
transactions with affiliates. The facility is secured by equipment, inventories
and accounts receivable.
The Company has available approximately $1.5 million in third party leasing
lines of credit to lease finance equipment for its store remodeling and
expansion program.
13
<PAGE>
GRISTEDE'S FOODS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Change in Securities And Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) No Current Reports on Form 8-K were filed for the quarter for which
this report is being filed.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Gristede's Foods, Inc.
By: /s/ John A. Catsimatidis
------------------------
John A. Catsimatidis
Chairman of the Board and
Chief Executive Officer
Dated: October 11, 2000
By: /s/ Gary Pokrassa
------------------------
Gary Pokrassa
Chief Financial Officer
Dated: October 11, 2000
