SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 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 Identification No.)
incorporation or organization)
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
($0.01) per share, outstanding at August 30, 1994 was 11,051,994.
Page 1 of 8 pages
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
<TABLE>
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(unaudited)
<CAPTION>
Quarter Ended Two Quarters
July 30, July 31, July 30, July 31,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Sales. . . . . . . . . . .$ 252,222 $ 265,364 $ 502,319 $ 532,766
Cost of Goods Sold . . . . 189,917 198,161 377,492 398,616
-------- -------- -------- --------
Gross Margin. . . . . . 62,305 67,203 124,827 134,150
Operating Expenses:
Selling, General &
Administrative . . 56,375 57,028 109,962 110,792
Voluntary Severance
Program . . . . . . 6,917 0 6,917 0
Depreciation and
Amortization. . . . 5,847 5,754 11,671 11,339
-------- -------- -------- --------
Operating Income (Loss). . (6,834) 4,421 (3,723) 12,019
Interest Expense . . . . . 3,572 3,519 7,066 7,222
-------- -------- -------- --------
Earnings (Loss) Before Income
Taxes (Benefit) and
Extraordinary Charge. . (10,406) 902 (10,789) 4,797
Income Taxes (Benefit) . . (4,078) 343 (4,100) 1,823
-------- -------- -------- --------
Earnings (Loss) Before
Extraordinary Charge. . (6,328) 559 (6,689) 2,974
Extraordinary Charge . . . 0 0 0 3,969
-------- -------- -------- --------
Net Earnings (Loss). . . .$ (6,328) $ 559 $ (6,689) $ (995)
======== ======== ======== ========
Earnings (Loss) per Share:
Before Extraordinary
Charge . . . . . . . .$ (0.58) $ 0.05 $ (0.61) $ 0.27
Extraordinary Charge. . 0 0 0 (0.36)
------ ------ ------ ------
Net Earnings (Loss) . .$ (0.58) $ 0.05 $ (0.61) $ (0.09)
====== ====== ====== ======
Weighted Average Common
Shares Outstanding 11,051,994 11,128,424 11,051,994 11,146,359
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<PAGE>
EAGLE FOOD CENTERS, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
ASSETS
<CAPTION>
July 30, 1994 January 29, 1994
(unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . $ 6,414 $ 8,056
Accounts receivable . . . . . . . . . . . 15,244 18,195
Inventories . . . . . . . . . . . . . . . 96,424 101,010
Property held for resale. . . . . . . . . 14,630 0
Prepaid expenses and other. . . . . . . . 8,088 2,992
------- -------
Total current assets . . . . . . . . 140,800 130,253
Property and equipment (net) . . . . . . . 177,133 194,777
Other assets:
Deferred debt issuance costs. . . . . . . 3,277 3,409
Excess of cost over fair value of
net assets acquired. . . . . . . . . . 2,690 2,731
Other . . . . . . . . . . . . . . . . . . 2,733 3,995
------- -------
Total other assets . . . . . . . . . 8,700 10,135
------- -------
Total assets . . . . . . . . . . . . $ 326,633 $ 335,165
======= =======
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable. . . . . . . . . . . . . $ 56,274 $ 60,831
Payroll and employee benefits . . . . . . 14,700 13,850
Accrued liabilities . . . . . . . . . . . 17,319 19,272
Accrued taxes . . . . . . . . . . . . . . 8,255 7,762
Bank Revolving Credit Loan. . . . . . . . 8,000 0
Current portion of long-term debt . . . . 3,604 2,799
------- -------
Total current liabilities. . . . . . 108,152 104,514
Long-term debt:
Senior Notes. . . . . . . . . . . . . . . 100,000 100,000
Bank Revolving Credit Loan. . . . . . . . 0 3,000
Capital lease obligations . . . . . . . . 20,079 20,152
Other . . . . . . . . . . . . . . . . . . 142 175
------- -------
Total long-term debt . . . . . . . . 120,221 123,327
Other liabilities:
Reserve for closed stores and warehouse . 28,872 33,669
Other deferred liabilities. . . . . . . . 14,331 11,909
------- -------
Total other liabilities. . . . . . . 43,203 45,578
Shareholders' equity:
Preferred stock, $0.01 par value, 100,000
shares authorized. . . . . . . . . . . 0 0
Common stock, $0.01 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
and 448,006 shares . . . . . . . . . . (2,850) (2,850)
Retained earnings . . . . . . . . . . . . 4,251 10,940
------- -------
Total shareholders' equity . . . . . 55,057 61,746
------- -------
Total liabilities and
shareholders' equity . . . . . . $ 326,633 $ 335,165
======= =======
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<PAGE>
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
<CAPTION>
Two Quarters Ended
July 30, 1994 July 31, 1993
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . $ (6,689) $ (995)
Adjustments to reconcile net earnings (loss) to
cash provided from operating activities:
Depreciation and amortization . . . . . . . . 11,671 11,339
LIFO charge . . . . . . . . . . . . . . . . . 250 400
Deferred charges and credits. . . . . . . . . 2,774 2,992
(Gain) loss on disposal of assets . . . . . . 174 (1,215)
Changes in assets and liabilities:
Receivables and other assets. . . . . . . . . (2,386) 3,425
Inventories . . . . . . . . . . . . . . . . . 4,336 12,160
Accounts payable. . . . . . . . . . . . . . . (4,557) (4,774)
Accrued and other liabilities . . . . . . . . 1,724 (8,315)
Reserve for closed stores and warehouse . . . (3,793) (1,950)
-------- --------
Net cash provided by operating activities . 3,504 13,067
Cash flows from investing activities:
Additions to property and equipment . . . . . (8,378) (14,541)
Property held for sale/leaseback. . . . . . . (864) 0
Cash proceeds from dispositions of
property and equipment. . . . . . . . . . . 648 871
-------- --------
Net cash used in investing activities. . (8,594) (13,670)
Cash flows from financing activities:
Proceeds from new debt . . . . . . . . . . . 0 100,000
Retirement of debt. . . . . . . . . . . . . . (30) (69,074)
Net revolving credit borrowing. . . . . . . . 5,000 (21,000)
Principal payments of capital
lease obligations . . . . . . . . . . . . . (1,347) (1,262)
Purchase of treasury stock. . . . . . . . . . 0 (841)
Deferred financing costs. . . . . . . . . . . (175) (4,204)
-------- --------
Net cash provided by financing
activities . . . . . . . . . . . . . . 3,448 3,619
Increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . (1,642) 3,016
Cash and cash equivalents at
beginning of period. . . . . . . . . . . . 8,056 11,554
-------- --------
Cash and cash equivalents at end of period. . $ 6,414 $ 14,570
======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest. . . . . . . . . . . $ 6,713 $ 8,510
Cash paid for income taxes. . . . . . . . . $ (1,360) $ 2,097
Noncash investing and financing activities
Capital lease obligations retired . . . . . $ 0 $ 1,190
Treasury stock issued for performance
share plan participants . . . . . . . . $ 0 $ 906
Capital lease additions . . . . . . . . . . $ 2,076 $ 0
<FN>
See notes to financial statements.
</TABLE>
<PAGE>
<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 26 weeks ended July 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.
BANK REVOLVING CREDIT LOAN
There was $8.0 million in borrowings outstanding against the Revolving
Credit Agreement as of July 29, 1994, which has been reclassified as a
current liability. The Company was in default of certain financial
ratio requirements on the Revolving Credit Agreement as of the end
of the second quarter and has obtained a waiver of such defaults through
October 29, 1994. The company intends to repay amounts outstanding under
the Revolving Credit Agreement in the third quarter of 1994 with funds to
be generated from an expected sale/leaseback transaction.
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales for the Company's second fiscal quarter ended July 30, 1994 were
$252.2 million, a decrease of $13.1 million or 5.0% from the second
quarter of 1993. Same store sales for the quarter declined 3.8%. For
the two quarters ended July 30, 1994 sales were $502.3 million, a
decrease of $30.4 million or 5.7% from the first two quarters of 1993.
Same store sales for the two quarters decreased 3.8% compared to 1993.
Management believes the sales decline was primarily due to a number of
new competitive store openings in the Company's markets and that the
Company is operating six fewer stores as of the end of the second
quarter of 1994 compared to 1993.
Gross margin was 24.70% of sales for the quarter ended July 30, 1994
compared to 25.32% in the comparable quarter of 1993. The decrease
in gross margin is primarily due to increased promotional expenditures
in an attempt to increase market share. For the two quarters ended July
30, 1994 gross margin was 24.85% compared to 25.18% for the same
time period in 1993.
Selling, general and administrative expenses were 22.35% of sales for
the quarter ended July 30, 1994 compared to 21.49% in the comparable
quarter of 1993. For the two quarters ended July 30, 1994, selling,
general and administrative expenses were 21.89% versus 20.80% for the
same period in 1993. The increase in expense rate was primarily due to
inability to reduce expenses proportionately to sales declines in the two
quarters.
Depreciation and amortization expenses increased slightly to $5.8 million
or 2.32% of sales compared to $5.8 million or 2.17% of sales in the
same quarter in 1993. For the two quarters ended July 30, 1994,
depreciation and amortization expenses increased to $11.7 million or
2.32% of sales compared to $11.3 million or 2.13% of sales for the
same period in 1993. The higher depreciation expenses are primarily
related to four new stores that were opened since the second quarter of
1993.
Net interest expense increased slightly to $3.6 million or 1.42% of sales
compared to $3.5 million or 1.33% of sales in the comparable quarter
of 1993. The increase in interest expense was due to short term
borrowings under the Revolving Credit Agreement. Net interest expense
for the two quarters ended July 30, 1994 was $7.1 million or 1.41% of
sales compared to $7.2 million or 1.36% of sales in the comparable 1993
time period. There were $8.0 million of borrowings outstanding against
the Revolving Credit Agreement as of July 30, 1994.
Operations for the second quarter ended July 30, 1994 resulted in a loss
of $6.3 million or $0.58 per share compared to net earnings of $559,000
or $0.05 per share for the comparable 1993 period. The 1994 loss
includes a $6.9 million pretax, or $4.3 million after tax, charge for a
voluntary severance program for 600 clerks in the Chicago area.
Management expects that such severance costs should be offset in less
than twelve months as a result of lower wage and benefit costs of
replacement employees. Results of operations for the two quarters ended
July 30, 1994 resulted in a net loss of $6.7 million or $0.61 cents per
share compared to a net loss of $1.0 million or $0.09 per share in the
comparable 1993 period which included an extraordinary charge net of
tax of $4.0 million or $0.36 per share. The extraordinary charge in
1993 was related to the early retirement of debt. Excluding the
voluntary separation expense and the extraordinary charge in the
respective years, results of operations for the first two quarters would
have been a loss of $0.22 cents per share in 1994 compared to earnings
of $0.27 per share in 1993.
The Company expects to continue the more aggressive marketing
programs that were initiated during the second quarter to attempt to stop
the erosion of same store sales. These efforts will cause continued
pressure on gross margin rates, expense rates, and operating profit for
the forseeable future.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $3.5 million for the two
quarters ended July 30, 1994 compared to cash provided of $13.1 million
in the comparable two quarters of 1993. The voluntary severance
program accounts for $4.3 million of the decline of cash provided year
to year. Reductions in inventory and accounts receivable provided $4.3
million and $1.7 million, respectively, in cash for the 1994 period.
Capital expenditures for the two quarters ended July 30, 1994 totaled
$8.4 million compared to $14.5 million in the first two quarters of 1993.
Capital expenditures in both years are primarily for new stores. Two
new stores and one Country Market remodel have been completed in the
first six months of 1994. Construction is currently in progress on two
new stores, both of which are replacements of existing stores. The
Company expects to complete a sale/leaseback transaction in the third
quarter for approximately $40 million. The funds made available by the
sale/leaseback are intended to be used to repay short term borrowings
under the Revolving Credit Agreement and fund future capital
expenditures. The Company expects to spend approximately $20 million
for capital expenditures in fiscal 1994.
Working capital at July 30, 1994 was at $32.6 million and the current
ratio was 1.30 to 1, compared to $37.4 million and 1.44 to 1 at July 31,
1993 and $25.7 million or 1.25 to 1 at January 29, 1994. There was
$8.0 million in borrowings outstanding against the Revolving Credit
Agreement as of July 30, 1994, which has been reclassified as a current
liability. The Company was in default of certain financial ratio
requirements on the Revolving Credit Agreement as of the end of the
second quarter and has since obtained waiver of such defaults through
October 29, 1994.
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: September 9, 1994 /s/ Pasquale V. Petitti
Pasquale V. Petitti
President and Chief Executive Officer
Dated: September 9, 1994 /s/ Herbert T. Dotterer
Herbert T. Dotterer
Sr. Vice President - Finance and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000030908
<NAME> EAGLE FOOD CENTERS, INC.
<S> <C>
<PERIOD-TYPE> QTR-2
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-END> JUL-30-1994
<CASH> (877,000)
<SECURITIES> 7,291,000
<RECEIVABLES> 13,259,000
<ALLOWANCES> 266,000
<INVENTORY> 96,424,000
<CURRENT-ASSETS> 140,800,000
<PP&E> 293,435,000
<DEPRECIATION> 116,302,000
<TOTAL-ASSETS> 326,633,000
<CURRENT-LIABILITIES> 108,152,000
<BONDS> 100,000,000
<COMMON> 115,000
0
0
<OTHER-SE> 54,942,000
<TOTAL-LIABILITY-AND-EQUITY> 326,633,000
<SALES> 502,319,000
<TOTAL-REVENUES> 502,319,000
<CGS> 377,492,000
<TOTAL-COSTS> 377,492,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 60,000
<INTEREST-EXPENSE> 7,066,000
<INCOME-PRETAX> (10,789,000)
<INCOME-TAX> (4,100,000)
<INCOME-CONTINUING> (6,689,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,689,000)
<EPS-PRIMARY> (0.61)
<EPS-DILUTED> (0.61)
</TABLE>
