SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1994
Commission File Number 0-17871
EAGLE FOOD CENTERS, INC.
(Exact name of registrant as specified in the charter)
Delaware 36-3548019
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Rt. 67 & Knoxville Rd., Milan, Illinois 61264
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 309-787-7730
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares of the Registrant's Common Stock, par value one cent ($.01)
per share, outstanding at June 1, 1994 was 11,051,994.
Page 1 of 8 pages
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PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
<TABLE>
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(unaudited)
<CAPTION>
Quarter Ended
April 30, 1994 May 1, 1993
<S> <C> <C>
Sales.......................................... $ 250,097 $ 267,402
Cost of goods sold............................. 187,575 200,455
--------- ---------
Gross margin.............................. 62,522 66,947
Operating expenses:
Selling, general and administrative....... 53,587 53,764
Depreciation and amortization............. 5,824 5,585
--------- ---------
Operating income..................... 3,111 7,598
Interest expense............................... 3,494 3,703
--------- ---------
Earnings (loss) before income taxes &
extraordinary charge...................... (383) 3,895
Income taxes (benefit)......................... (22) 1,480
--------- ---------
Earnings (loss) before extraordinary
charge.................................... (361) 2,415
--------- ---------
Extraordinary charge........................... 0 3,969
--------- ---------
Net (loss)..................................... $ (361) $ (1,554)
========= =========
Earnings (loss) per share
Before extraordinary charge................. $ (0.03) $ 0.22
Extraordinary charge........................ 0 (0.36)
--------- ---------
Net (loss).................................. $ (0.03) $ (0.14)
Weighted average common shares outstanding..... 11,051,994 11,200,000
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
EAGLE FOOD CENTERS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
<CAPTION>
April 30, January 29,
1994 1994
(unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents.................. $ 8,108 $ 8,056
Accounts receivable........................ 17,166 18,195
Inventories................................ 94,816 101,010
Prepaid expenses and other................. 4,139 2,992
------- -------
Total current assets................... 124,229 130,253
Property and equipment (net)................. 192,768 194,777
Other assets:
Deferred debt issuance costs............... 3,305 3,409
Excess of cost over fair value of
net assets acquired...................... 2,711 2,731
Other...................................... 2,889 3,995
------- -------
Total other assets..................... 8,905 10,135
------- -------
Total assets........................... $325,902 $335,165
======= =======
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable........................... $ 57,193 $ 60,831
Payroll and employee benefits.............. 14,370 13,850
Accrued liabilities........................ 14,558 19,272
Accrued taxes.............................. 8,136 7,762
Current portion of long-term debt.......... 2,854 2,799
------- -------
Total current liabilities.............. 97,111 104,514
Long-term debt:
Senior Notes............................... 100,000 100,000
Bank Revolving Credit Loan................. 5,000 3,000
Capital lease obligations.................. 19,428 20,152
Other...................................... 159 175
------- -------
Total long-term debt................... 124,587 123,327
Other liabilities:
Reserve for closed stores and warehouse.... 28,776 33,669
Other deferred liabilities................. 14,043 11,909
------- -------
Total other liabilities................ 42,819 45,578
Stockholders' equity:
Preferred stock, $.01 par value, 100,000
shares authorized........................ 0 0
Common stock, $.01 par value, 18,000,000
shares authorized, 11,500,000 shares issued 115 115
Capital in excess of par value............. 53,541 53,541
Common Stock in treasury, at cost, 448,006
shares................................... (2,850) (2,850)
Retained earnings.......................... 10,579 10,940
------- -------
Total stockholders' equity............. 61,385 61,746
------- -------
Total liabilities and stockholders' equity. $325,902 $335,165
======= =======
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
<CAPTION>
Quarter Ended
April 30, 1994 May 1, 1993
<S> <C> <C>
Cash flows from operating activities:
Net (loss)................................... $ (361) $ (1,554)
Adjustments to reconcile net (loss) to
cash provided from operating activities:
Extraordinary charge before income
tax effect................................ 0 6,402
Depreciation and amortization............... 5,824 5,585
LIFO charge................................. 100 200
Stock compensation expense.................. 0 50
Deferred charges and credits................ 1,913 397
Loss (gain) on disposal of assets........... (50) 202
Changes in assets and liabilities:
Receivables and other assets................ (279) 3,083
Inventories................................. 6,094 3,867
Accounts payable............................ (3,638) (4,454)
Accrued and other liabilities............... (1,729) (2,246)
Reserve for closed stores & warehouse....... (3,468) (2,187)
--------- ---------
Net cash provided by operating activities. 4,406 9,345
Cash flows from investing activities:
Additions to property and equipment........... (4,571) (6,819)
Property held for sale/leaseback.............. (1,645) 0
Cash proceeds from dispositions of
property and equipment...................... 591 23
--------- ---------
Net cash used in investing activities. (5,625) (6,796)
Cash flows from financing activities:
Proceeds from new debt........................ 0 100,000
Retirement of debt............................ (15) (69,074)
Principal payments of capital lease
obligations................................. (670) (636)
Debt prepayment costs......................... 0 (4,239)
Net revolving credit borrowing(repayment)..... 2,000 (21,000)
Deferred financing costs...................... (44) (4,200)
--------- ---------
Net cash provided by
financing activities................. 1,271 851
--------- ---------
Increase in cash and cash equivalents........... 52 3,400
Cash and cash equivalents at beginning of
period..................................... 8,056 11,554
--------- ---------
Cash and cash equivalents at end of period...... $ 8,108 $ 14,954
========= =========
Supplemental disclosures of cash flow information:
Cash paid for interest..................... $ 5,987 $ 3,130
Cash paid for income taxes................. $ (75) $ 674
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
ACCOUNTING POLICIES
The accompanying unaudited financial statements have been prepared in
accordance with the summary of significant accounting policies set forth in
the notes to the audited financial statements contained in the Company's
Form 10-K filed with the Securities and Exchange Commission on April 29,
1994.
In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments necessary for a fair statement of the
results of operations and financial position for the interim periods
presented. Operating results for the thirteen weeks ended April 30, 1994
are not necessarily indicative of the results that may be expected for the
fiscal year ending January 28, 1995.
POST EMPLOYMENT BENEFITS
The Company currently provides certain health care benefits for disabled
employees.
On January 30, 1994, the Company adopted Statement of Financial Accounting
Standards No. 112, Employer's Accounting for Postemployment Benefits (SFAS
112). SFAS 112 requires the accrual of the expected cost of providing
postemployment benefits for former or inactive employees after employment
but before retirement.
The adoption of SFAS 112 did not have a material impact to the financial
statements.
EXTRAORDINARY CHARGE
During the first quarter of fiscal 1993 the Company completed a Senior Note
offering of $100 million at 8 5/8%. The proceeds were used to defease the
$69.1 million of 13 1/2% Senior Subordinated Notes callable June 1, 1993.
Related to the early retirement of the 13 1/2% Notes is an extraordinary
charge of $4.0 million (net of tax). This charge represents the premium to
call the 13 1/2% Notes, unamortized issuance costs and net interest during
the overlap of Notes.
SUBSEQUENT EVENT
The Company has offered a voluntary severance program to approximately 1800
clerks in the Chicago area. During the second quarter, approximately 600
employees are expected to accept the offer for an estimated pretax cost to
the Company of $6.8 million ($4.2 million after tax). Management expects
these costs should be offset in less than twelve months as a result of lower
wage and employee benefit costs of new employees.
ITEM 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
Sales for the Company's first fiscal quarter ended April 30, 1994 were
$250.1 million, a decrease of $17.3 million or 6.5% from the first quarter
of 1993. Same store sales declined 3.7% for the quarter. Seven new
competitive openings occured between January 1, 1994 and March 1, 1994
affecting same store sales by more than 2.0%. There were 102 stores
operating in the first quarter of fiscal 1994 compared to 109 in the first
quarter of fiscal 1993.
Gross margin was 25.00% of sales for the quarter ended April 30, 1994,
compared to 25.04% in the comparable quarter of 1993. Sales mix improved in
the higher margin in perishable departments but promotional rebates,
slotting allowances and other allowances received by the company were lower
than the prior year due to lower receipts.
Selling, general and administrative expenses rose to 21.43% of sales for the
quarter ended April 30, 1994 compared to 20.11% in the comparable quarter of
1993. The increase in expense rate was primarily due to inability to reduce
expenses proportionately to sales declines in the quarter. In addition,
over $1.1 million of non-recurring expense affected the 1994 quarter. Most
of this expense was related to development and start up of a targeted
marketing program.
Depreciation and amortization increased to $5.8 million or 2.33% of sales
compared to $5.6 million or 2.09% of sales in the 1993 quarter. The higher
depreciation expenses are primarily due to three new stores opened in the
past year.
Including the non-recurring expenses, earnings for the first quarter ended
April 30, 1994, resulted in a net loss of $361,000 or $0.03 per share,
compared to 1993 net earnings of $2.4 million or $0.22 per share before an
extraordinary charge of $4.0 million or $0.36 per share. Lower sales were
primarily responsible for the earnings decline in fiscal 1994. The
extraordinary charge of $4.0 million in 1993 was related to the early
retirement of debt. Net earnings including the extraordinary charge
resulted in a net loss of $1.6 million or $0.14 per share for the 1993
quarter. The effective tax rate was 5.5% for the 1994 quarter compared to
38% for the 1993 quarter, which is due to the reversal of certain reserves
for taxes that are no longer required.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $4.4 million for the quarter
ended April 30, 1994, compared to $9.3 million in the comparable quarter of
1993. Cash was provided by a decrease in inventory levels of $6.1 million,
and partially offset by a decrease in accounts payable of $3.6 million in
the 1994 quarter.
During the first quarter of fiscal 1993 the Company completed a Senior Note
offering of $100 million at 8 5/8%. The proceeds were used to defease the
$69.1 million of 13 1/2% Senior Subordinated Notes, which were callable on
June 1, 1993. Additionally, the $21.0 million borrowed against the
Revolving Credit line at the prior year end was retired during the quarter.
The Company entered into a new $35 million, five year Revolving Credit
Facility in conjunction with refinancing its long term debt in the first
quarter of fiscal 1993. There was $5.0 million borrowed under the revolving
credit agreement on April 30, 1994.
Capital expenditures for the quarter ended April 30, 1994, were $4.6 million
compared to total capital expenditures of $6.8 million in the first quarter
of 1993. An additional $1.6 million was invested in property held for
resale during the first quarter of fiscal 1994. The Company intends to
complete a sale/leaseback financing transaction in the third quarter of
1994. One store was closed during the first quarter of fiscal 1994. Costs
associated with that closing were taken from reserves previously allocated
for store closing expenses. The Company opened one new Eagle Country
Warehouse store during the first quarter of fiscal 1994. Construction is
currently in progress on two Eagle Country Warehouse stores and one Eagle
Country Market.
The Company has offered a voluntary severance program to approximately 1800
clerks in the Chicago area. During the second quarter, approximately 600
employees are expected to accept the offer for an estimated pretax cost to
the Company of $6.8 million ($4.2 million after tax). Management expects
these costs should be offset in less than twelve months as a result of lower
wage and employee benefit costs of new employees.
Working capital at April 30, 1994 was $27.1 million and the current ratio
was 1.28 to 1 compared to $25.7 and 1.25 to 1 at January 29, 1994 and $39.9
million and 1.44 to 1 at May 1, 1993.
PART II - OTHER INFORMATION
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized:
EAGLE FOOD CENTERS, INC.
Dated: June 10, 1994 /s/ Pasquale V. Petitti
--------------------------
Pasquale V. Petitti
President and Chief Executive Officer
Dated: June 10, 1994 /s/ Herbert T. Dotterer
---------------------------
Herbert T. Dotterer
Sr. Vice President-Finance and
Chief Financial Officer
