SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended January 28, 1995 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _____________ to _____________ .
Commission File No. 0-17871
EAGLE FOOD CENTERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 36-3548019
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
ROUTE. 67 & KNOXVILLE ROAD, MILAN, ILLINOIS 61264
(Address of principal executive offices)
Registrant's telephone number including area code (309) 787-7730
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form K. _X_
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $10,496,390 as of April 12, 1995.
The number of shares of the Registrant's Common Stock, par value one cent
$(0.01) per share, outstanding on April 1, 1995 was 11,051,994.
Documents incorporated by reference include:
1) Portions of the definitive Proxy Statement expected to be
filed with the Commission on or before May 12, 1995 with
respect to the annual meeting of shareholders are incorporated
by reference into Part III.
1 of 60 Pages
Exhibit Index appears on page 44
FISCAL YEAR ENDED JANUARY 28, 1995
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
<TABLE>
<S> <C> <C>
Item 1 Business................................................................................. 3
Item 2 Properties............................................................................... 10
Item 3 Legal Proceedings........................................................................ 11
Item 4 Submission of Matters to a Vote of Security Holders...................................... 12
Executive Officers of the Registrant..................................................... 12
PART II
Item 5 Market for the Registrant's Common Equity and Related Shareholder
Matters......................................................................... 14
Item 6 Selected Financial Data.................................................................. 15
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................ 16
Item 8 Financial Statements and Supplementary Data.............................................. 22
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................................ 39
PART III
Item 10 Directors and Executive Officers of the Registrant....................................... 41
Item 11 Executive Compensation................................................................... 41
Item 12 Security Ownership of Certain Beneficial Owners and Management........................... 41
Item 13 Certain Relationships and Related Transactions........................................... 41
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................... 42
</TABLE>
PART I
ITEM 1: BUSINESS
GENERAL
Eagle Food Centers, Inc. (the "Company" or "Eagle"), is a Delaware
Corporation. It is a leading regional supermarket chain which owns and operates
96 supermarkets in the Quad Cities area of Illinois and Iowa, north, central and
eastern Illinois, eastern Iowa, and the Chicago/Fox Valley and northwestern
Indiana area under the trade names "Eagle Food Centers", "Eagle Country
Markets", "Eagle Country Warehouse", and "BOGO's." Eagle supermarkets offer a
full line of groceries, meats, fresh produce, dairy products, delicatessen and
bakery products, health and beauty aids and other general merchandise, as well
as video rental and floral service.
The Company's fiscal year ends on the Saturday closest to January 31st.
Fiscal 1994, fiscal 1993 and fiscal 1992 were 52-week years ended January 28,
1995, January 29, 1994, and January 30, 1993, respectively.
In fiscal 1994 the Company formed a captive insurance company, Talon
Insurance Company, in the state of Vermont to insure its workers compensation
and general liability claims. Talon is a wholly-owned subsidiary of Eagle Food
Centers, Inc. Prior to the formation of Talon, Eagle used paid loss and retro
programs through external insurance companies.
STORE DEVELOPMENT AND EXPANSION
Eagle currently operates stores in the four general formats discussed
below.
EAGLE COUNTRY MARKETS use a unique format introduced by management in
1991. Since that time, eight new Eagle Country Market stores have been opened
and 59 Eagle Food Centers have been remodeled, for a total of 67 stores in the
Eagle Country Market format. Management initiated this repositioning program to
distinguish its retail presentation from that of its competitors. The first
Eagle Country Market store was selected by Chain Store Age Executive as its
"1991 Retail Store of the Year." The Eagle Country Market format includes
flooring designed to resemble wooden slats, old-fashioned street lamps, country
artifacts and wood display tables. Displays and department presentations give
the impression of having entered a turn-of-the-century main street in a
midwestern country town. A small sign beneath the Eagle Country Market banner
says "since 1893," a reference to how long Eagle, through its predecessors, has
been in business and a further reinforcement of the store's "country image."
Extra space has been devoted to expanded perishable departments, tying together
produce, full-service delicatessen, service bakery, service seafood and meat
departments, and, in certain stores, floral and video rental departments and an
Eagle Country Cafe offering high quality products that are ready to eat, heat or
cook. All newly-built Eagle Country Markets are designed to encourage shoppers
to walk through the higher margin "Power Aisle," which includes extensive
perishable offerings in the Eagle Country Harvest, Eagle Country Oven and Eagle
Country Smokehouse departments, and ready-to-eat prepared foods in the Eagle
Country Cafe. Eagle Country Markets tend to be larger stores ranging from 38,000
square feet to 56,000 square feet for new stores. The pricing strategy in the
Eagle Country Markets is the same as in Eagle Food Centers--namely, to offer
overall lower prices than comparable supermarket competition.
EAGLE COUNTRY WAREHOUSE, an extension of the Eagle Country Market
concept, was introduced in 1992 to capitalize on an expanding high volume, lower
price market niche. The Company currently has seven such warehouse-type stores
in operation. These 53,000 square foot or larger stores contain the full
complement of perishable and specialty departments and are currently located in
metropolitan areas where the Company believes it can capitalize on popular
demand for the warehouse shopping experience while providing a greater variety
of perishables and more customer services than the traditional warehouse club.
The pricing strategy at the Eagle Country Warehouses is to price products at a
discount to conventional supermarkets but at a premium to traditional warehouse
clubs.
EAGLE FOOD CENTERS use a traditional supermarket format ranging in size
from 16,500 square feet to 42,000 square feet. The Company currently has 21
stores operating under this format. These stores offer a full range of
groceries, meats, fresh produce, dairy products, delicatessen and bakery
products, health and beauty aids and other general merchandise and many stores
offer video rental and floral departments as well. Eagle Food Centers offer
overall low prices while providing high quality products and a service-oriented
shopping experience.
BOGO'S FOOD AND DEALS uses an experimental, limited assortment format
covering approximately 2,000 stock-keeping units of groceries, produce, meat,
health and beauty aids, and general merchandise. The purpose of this store is to
take advantage of consumer demand for deep discount stores in less densely
populated markets. The Company currently operates one BOGO's store opened in a
previous Eagle Food Center location. BOGO's operates on three pricing themes:
BOGO (buy one-get one free), buy one-get the second at half price, and BOGO
everyday low price.
Management intends to build its future store development strategy
around the Eagle Country Market/Eagle Country Warehouse formats. As part of its
store development program, management continuously reviews the performance of
all its stores and expects to implement a variety of strategies, including
converting or modifying certain store formats as well as selling, subleasing or
closing underperforming stores, to decrease losses.
The Company has undertaken a more aggressive store development program
to identify markets for new stores and obtain the best potential new store
locations available in any target market. In this effort, it has contracted with
Oakridge Properties, Ltd. to manage and direct its real estate activities,
including the identification and acquisition of new store sites and disposal of
closed or underproductive facilities. Management intends to focus the Company's
new store development within existing markets or new markets within 200 miles of
its central distribution facility in Milan, Illinois where the utilization of
existing distribution, marketing and support systems is advantageous to its cost
structure. Within these markets, the Company expects to select sites for its
stores based upon factors such as existing competition, demographic composition
and available locations. Traditionally, the Company has preferred to lease
stores from local developers and it has continued this strategy wherever
appropriate and cost-effective. Developers have encountered difficulty in
obtaining financing in the recent past, and it has been necessary for the
Company to purchase land and build stores itself, which the Company will attempt
to finance by sale/leasebacks or mortgage financing. The Company's engineering
department establishes specifications and prepares plans for all Company
construction projects as well as supervises all work performed on those
projects.
STORE OPERATIONS
The Company's geographic market is divided into four areas, each having
an Area Vice President of Operations who is responsible for approximately
twenty-four stores. Areas and stores operate with a certain degree of autonomy
to take advantage of local market and consumer needs. Areas and stores are
responsible for store operations, employee recruitment and development,
community affairs and other functions relating to local operations.
Store managers are given relatively broad discretion in tailoring
merchandise and services to the needs of customers in the particular community.
Employee involvement and participation has been encouraged through town hall
meetings with senior management, district advisory boards and store management
team incentive bonus programs for sales and earnings improvement.
COMPUTER AND INFORMATION SYSTEMS
Management uses technology as a means of enhancing productivity,
controlling costs, providing an easier shopping experience for customers and
learning more about shoppers' buying habits. The Company owns a royalty-free
license from its former parent, Lucky Stores, Inc. to use or modify all computer
software programs used for information processing, including the merchandising
information system which links the Company's head office, its central
distribution facility and individual stores. This system facilitates purchasing
and receiving, inventory management, warehouse reordering, accounts payable and
store point-of-sale processing and also evaluates sales and purchasing trends,
economical order size, delivery lead times and other factors.
In order to perform time and attendance reporting, labor scheduling,
store order entry, and shelf label printing applications, the Company has
installed IBM AS-400 computers in each store. The AS-400 systems were upgraded
in 1994 to provide increased capacity to add additional applications such as
direct store delivery receiving and scale management. The Company utilizes IBM
4680 generation equipment for its point-of-sale systems. The systems provide the
ability to offer electronic couponing and a platform for the Eagle Savers' Card,
a customer-specific identification card designed to facilitate targeted
marketing and frequent shopper programs. In April 1994, the Company installed an
AT&T Unix processor together with data base marketing software to store and
analyze customer-specific shopping data. This system greatly enhances the value
of the Eagle Savers' Card.
The Company has implemented several programs providing various banking
and funds transfer services in certain of its stores. All of its Quad Cities and
Iowa stores have electronic funds transfer machines ("EFT") at the checkout
counters. This program allows customers to use bank debit cards (automated
teller machine cards) to pay for their purchases. Implementation of EFT at the
Company's stores has reduced costs by eliminating the delay between receipt of
cash or checks at store locations and the depositing of useable funds in the
Company's bank accounts. Eighteen of the Company's stores have installed
Automated Teller Machines ("ATMs"), providing customers with access to the full
range of banking services associated with ATMs. Also, the Company leases space
to branch banks in eleven of its stores. Management anticipates expanding these
programs into additional stores. During fiscal 1993, the Company installed the
equipment to accept credit cards in all stores.
The Company introduced the Eagle Savers' Card program in late January,
1994. The Eagle Savers' Card program is a frequent shopper program that offers
customers discounts on specific products and participation in programs offering
free products based upon the level of spending during a specified period.
Customer-specific spending data is stored in a central data base that is used to
target market to customers to reward loyalty and increase spending. Currently
over 70% of customer sales volume is captured by this system.
MERCHANDISING STRATEGY
Eagle's strategy is to strengthen its perception as a price leader
compared to other supermarket competitors and to strengthen its image as a high
quality, service-oriented supermarket chain and a provider of high quality
perishables. The Company strives to offer its customers one-stop shopping
convenience and price value for all of their food shopping needs.
CUSTOMER SERVICE
Eagle delivers a wide variety of customer services. Most
stores provide customer services such as video rental, check cashing,
film processing, lottery ticket and money order sales, and UPS
shipping. All stores provide quick, friendly checkout service.
Management intends as part of its current strategy to further enhance
customer service through training of in-store employees.
SELECTION
A typical Eagle store carries over 23,000 items, including
food and general merchandise. The Company carries nationally advertised
brands, an extensive selection of top quality private label products
and a variety of generic products. All stores carry a full line of
dairy, frozen food, health and beauty aids and selected general
merchandise. In addition, most stores have service delicatessens and
bakeries and some stores provide additional specialty departments such
as ethnic food items, floral service, seafood service, salad bars and
in-store banking facilities. The Company has developed a range of
premium quality Eagle Country Market products such as cookies, ice
cream, chocolate milk, carrot cake, bacon and ham.
PROMOTION
The Company's promotion and merchandising strategy focuses on
its image as a high-quality, service-oriented supermarket chain while
reinforcing its reputation for price leadership and high quality
perishables. Eagle has utilized the new Eagle Savers Card for several
continuity promotions and for electronic coupon discounts. Through its
store personnel, the Company takes an active interest in the
communities in which it operates. The Company also contributes funds,
products and services to local charities and civic groups.
CONSUMER RESEARCH
The Company utilizes consumer research to track customer
attitudes and the market shares of the Company and its competitors. The
Company also has a continuous program of soliciting customer opinions
in all of its market areas through the use of in-store customer comment
cards. This data enables management to respond to changing consumer
needs, direct advertising to specific customer perceptions and evaluate
store services and product offerings.
ADVERTISING STRATEGY
The Company utilizes a broad range of print and broadcast advertising
in the markets it serves. In addition, the Company seeks co-op advertising
reimbursements from major vendors. The additional co-op advertising has allowed
the Company to broaden its exposure in various media.
The Company eliminated its in-house advertising department in December
of 1993. These services are now being purchased from third party providers. This
allowed the Company to take advantage of technological advances in layout,
desktop publishing and production more quickly than if the Company had attempted
to develop such technology internally.
PURCHASING AND DISTRIBUTION
The Company's stores are located an average of approximately 120 miles
from the Company's central distribution facility in Milan, Illinois. This
complex includes the Company's executive offices, warehouse, areas used for
receiving, shipping and trailer storage and a truck repair facility. The complex
is located adjacent to the interstate highway system and is also served by a
rail spur which runs into an enclosed rail dock.
The Company supplies approximately 70% of its stores' inventory
requirements from its 935,332 square foot central distribution facility (which
contains approximately 189,072 square feet of refrigerated and freezer space).
The remaining 30% of the stores' inventory requirements are supplied through
orders placed with outside suppliers by individual stores. The Company's
purchasing and distribution functions are managed through its central
merchandising system.
The Company's purchasing and distribution operations permit rapid
turnover at its central distribution facility, allowing its stores to offer
consistently fresh, high-quality dairy products, meats, produce, bakery items
and frozen foods. Also, centralized purchasing and distribution reduces the
Company's cost of merchandise and related transportation costs by allowing the
Company to take advantage of volume buying opportunities and manufacturers'
promotional discounts and allowances and by minimizing vendor distribution
costs. The Company engages in forward buying programs to take advantage of
temporary price discounts. Due to its proximity to Chicago and other major
markets, the Company is able to reduce cost of goods sold by "backhauling"
merchandise to its Milan central distribution facility.
COMPETITION
The food retailing business is highly competitive. The Company is in
direct competition with national, regional and local chains as well as
independent supermarkets, warehouse stores, membership warehouse clubs,
hypermarkets, limited assortment stores, discount drug stores and convenience
stores. A new format appeared in the Company's trade area in 1994 as five Super
KMart supercenters opened. Additional supercenter openings by KMart, Wal-Mart,
and Meijer are expected in the next several years. The Company also competes
with local food stores, specialty food stores (including bakeries, fish markets
and butcher shops), restaurants and fast food chains. The principal competitive
factors include store location, price, service, convenience, product quality and
variety. The number and type of competitors vary by location, and the Company's
competitive position varies according to the individual markets in which the
Company does business. The Company's principal competitors operate under the
trade names of Jewel, Hy-Vee, Dominicks, Kroger, Cub and Sam's. Management
believes that the Company's principal competitive advantages are its value
perception, the attractive Eagle Country Market store format, concentration in
certain markets and expansion of service and product offerings. The Company is
at a competitive disadvantage to some of its competitors due to having unionized
clerks.
TRADEMARKS, TRADE NAMES AND LICENSES
The Company uses various trademarks and service marks in its business,
the most important of which are the "Eagle Country Market(TM)", "5-Star
Meats(R)", "Lady Lee(R)", "Eagle Savers Card(TM)", and "Harvest Day(R)"
trademarks and the "Eagle(R)" and "Eagle Country Market(R)" service marks. Each
such trademark is federally registered or has an application for registration
pending. Pursuant to a trademark license agreement (the "Trademark License
Agreement") entered into with the Company's former parent, Lucky Stores, Inc.,
the Company has been granted the royalty-free use of the "5-Star Meats(R)",
"Lady Lee(R)" and "Harvest Day(R)" trademarks until November 30, 2007. The
Trademark License Agreement permits the Company to use the licensed trademarks
only in the states of Illinois, Indiana, Iowa, Michigan, Ohio, Wisconsin,
Kentucky and Minnesota. Lucky Stores, Inc. has agreed not to grant to any other
person the right to use such trademarks in the states of Illinois, Indiana and
Iowa during the period of the license to the Company.
EMPLOYEES AND LABOR RELATIONS
At the end of fiscal 1994, the Company had 8,341 employees, 527 of whom
were management and administrative employees and 7,814 of whom were hourly
employees. Of the Company's hourly employees, 7,783 are represented by 19
separate locals which are associated with four international unions. Store
employees are represented by several locals of the United Food and Commercial
Workers; warehouse employees, warehouse and bakery drivers and office and
clerical workers are represented by Teamsters Local 371; bakery plant workers
are represented by Bakery and Confectionery Workers Union Local 36; and bakery
plant operating engineers are represented by Operating Engineers Local 150.
The Company's four largest labor contracts were ratified in 1994 and
have three year terms. One collective bargaining contract is currently in
negotiations and an additional seven contracts will expire in 1995 covering
employees in twelve of the Company's stores and the executive office clerical
personnel.
The Company values its employees and believes that its relationship
with them is good. Several employee relations programs have been introduced,
including measures that allow employees to participate in store level decisions,
safety incentive programs, store and area level advisory boards and store
management team incentive bonus programs. In addition, the Company continued its
employee stock purchase program and its scholarship program established for
employees' children.
ITEM 2: PROPERTIES
STORES
The Company currently operates 96 stores, ranging in size from 16,500
to 67,500 square feet, with an average size of 36,770 square feet. Nineteen of
the Company's stores are owned in fee by the Company. The Company is the lessee
or sublessee for the remaining 77 stores. The Company is currently attempting to
sell up to fourteen of the owned stores in a sale/leaseback transaction.
Selected statistics on Eagle retail food stores are presented below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JANUARY 28, JANUARY 29, JANUARY 30,
1995 1994 1993
<S> <C> <C> <C>
Average total sq. ft. per store............................... 36,770 35,520 34,023
Average total sq. ft. selling space
per store................................................... 27,117 26,245 25,187
Stores beginning of year...................................... 102 108 109
Opened during year............................................ 4 3 5
Major remodels(1)............................................. 2 13 18
Closed during year............................................ 10 9 6
Stores end of year............................................ 96 102 108
Size of stores at end of year:
Less than 25,000 sq. ft....................................... 5 5 6
25,000--29,999 sq. ft......................................... 31 37 43
30,000--34,999 sq. ft......................................... 5 7 9
35,000--44,999 sq. ft......................................... 42 43 44
45,000 sq. ft. or greater..................................... 13 10 6
Types of Stores:
Eagle Country Markets......................................... 67 70 52
Eagle Country Warehouses...................................... 7 4 1
Eagle Food Centers........................................... 21 27 53
BOGO's Food and Deals......................................... 1 1 2
</TABLE>
(1) A remodeling project which costs $100,000 or more.
Eagle stores contain various specialty departments such as full service
delicatessen (93 stores), bakery (91 stores), floral (65 stores), video rentals
(56 stores), pharmacy (16 stores), seafood (28 stores), alcoholic beverages (76
stores) and Eagle Country Cafe (25 stores).
Most of the leases and subleases for the stores contain renewal options
for periods ranging from five to thirty years. The Company is required to pay
fixed rent and a percentage (ranging from 0.75% to 1.5%) of its gross sales in
excess of stated minimum gross sales amounts under 85 of the leases and
subleases. The Company also has subleases on approximately 18 former store
locations and has twelve vacant former store properties with continuing rent
obligations which the Company is attempting to sublease. For additional
information on leased premises, see Note H in the notes to the Company's
consolidated financial statements included elsewhere in this document.
CENTRAL DISTRIBUTION AND BAKERY FACILITIES
The Company leases its central distribution facility under a lease
expiring in 1997 with a 10-year renewal option. The Company's central
distribution facility contains a total of 935,332 square feet of space.
The Company's central bakery is a 49,000 square foot facility located
in Rock Island, Illinois, three miles from the central distribution facility.
The Company's lease for the bakery facility expires in 1996 and has three
five-year renewal options.
The Company is the sublessee of a distribution facility located in
Westville, Indiana which was closed in 1985. In 1988, the Company entered into
an agreement with a sub-sublessee under which the Company is recovering a
portion of its rent obligations for this facility. For more information, see
"Reserve for Closed Stores and Warehouse" in Notes B and D of the notes to the
Company's consolidated financial statements included elsewhere in this document.
For the most part, store fixtures and equipment, leasehold improvements
and transportation and office equipment are owned by the Company. The total cost
of the Company's ownership of property and equipment is shown in Note E of the
notes to the Company's consolidated financial statements.
ITEM 3: LEGAL PROCEEDINGS
The Company is the plaintiff in a lawsuit filed on March 31, 1995, in
the United States District Court for the Central District of Illinois. The
defendant in the case is National NLP, Inc. ("National"). The case arises from
discussions between the Company and National concerning the possible sale and
lease back of certain of the Company's stores. After the termination of those
discussions, National filed suit against the Company in Florida alleging that a
contract existed between the Company and National. That case was voluntarily
dismissed by National when the Company contested the jurisdiction of the Florida
court. In the case instituted by the Company, the Company is seeking a
declaratory judgment that no contract exists between the Company and National.
National has counterclaimed against the Company in three counts: i) seeks
declaratory judgement that a contract exists; ii) seeks specific performance;
iii) seeks damages in excess of $10,000,000 for breach of contract. The Company
is contesting the counterclaim and is vigorously pursuing its action. The
Company is not a party to any other material pending legal proceedings other
than routine litigation incidental to the Company's business. Although it is not
possible to predict the outcome of these unresolved legal actions and the
amounts of claimed damages are large, the Company believes that these unresolved
legal actions will not have a material adverse effect on its consolidated
financial position or results of operations.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
persons who are executive officers of the Company.
<TABLE>
NAME AGE POSITION(S) HELD
<S> <C> <C>
Pasquale V. Petitti 65 Chief Executive Officer, President and Director
Herbert T. Dotterer 50 Senior Vice President--Finance and Administration,
Chief Financial Officer, Secretary and Director
Kenneth L. Martin (1) 56 Senior Vice President--Operations
</TABLE>
(1) Mr. Martin succeeded Robert L. Jaynes as Senior Vice President - Operations
as of June 13, 1994.
The business experience of each of the executive officers during the
past five years is as follows:
Mr. Petitti served as Director from June 1989 until April 1993 and
President and Chief Executive Officer from September 1989 through April 1992
when he retired as an officer of the Company. Mr. Petitti resumed the positions
of Director, President and Chief Executive Officer in April 1994. Previously,
Mr. Petitti had been with the Company or its predecessor since 1957.
Mr. Dotterer, who was named Secretary and a Director of the Company in
February 1992, served as Controller from August 1988 until June 1990 when he
became Vice President--Finance, Chief Financial Officer. He became Senior Vice
President, Finance and Administration in January, 1994. Prior to August 1988,
Mr. Dotterer held various positions with The Kroger Co. and Jewel Companies,
Inc. Mr. Dotterer has 33 years of experience in the supermarket industry.
Mr. Martin served as Senior Vice President--Marketing of Eagle Food
Centers, Inc. from September 1987 until June 1991 when he retired. From August
1991 to January 1992, Mr. Martin performed some consulting for Market Media
Consulting related to food services. Mr. Martin assumed the position of Senior
Vice President--Operations in June 1994. Prior to September 1987 Mr. Martin had
been with the Company or its predecessor since 1961. Mr. Martin has 34 years of
experience in the supermarket industry.
The Company's directors are elected annually to serve until the next
annual meeting of shareholders and until their successors have been elected and
qualified. None of the directors or executive officers listed herein is related
to any other director or executive officer.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the two fiscal years ended January 28, 1995 all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with.
PART II
ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The Company's common stock trades on the NASDAQ National Market System
under the symbol "EGLE". The stock began trading on July 27, 1989. The following
table sets forth, by fiscal quarter, the high and low sale prices reported by
the NASDAQ National Market System for the periods indicated. As of April 1,
1995, there were approximately 1,800 beneficial holders of shares.
YEAR ENDED
JANUARY 28, 1995
HIGH LOW
First Quarter $ 8 1/2 $ 4 3/4
Second Quarter 5 3/4 2 1/4
Third Quarter 3 3/4 2 1/4
Fourth Quarter 2 3/4 1 1/8
YEAR ENDED
JANUARY 29, 1994
HIGH LOW
First Quarter $ 8 1/4 $ 6 1/4
Second Quarter 8 6
Third Quarter 6 3/4 5 1/2
Fourth Quarter 6 1/2 5
There were no dividends paid in fiscal 1994 or 1993. The Indenture
underlying the Company's Senior Notes and the Revolving Credit Agreement contain
restrictions on the payment of dividends. (See Note F of the notes to the
Company's consolidated financial statements). The Company does not intend to pay
dividends in the foreseeable future.
ITEM 6: SELECTED FINANCIAL DATA
The following table represents selected financial data of the Company on
a consolidated basis for the five fiscal years ended January 28, 1995.
The selected historical financial data for the five fiscal years ended
January 28, 1995 are derived from the consolidated financial statements of the
Company which have been audited by Deloitte & Touche LLP, independent auditors.
The selected financial data set forth below should be read in conjunction
with the Company's consolidated financial statements and related notes included
elsewhere in this document.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 28, JANUARY 29, JANUARY 30, FEBRUARY 1, FEBRUARY 2,
1995 1994 1993 1992 1991
(53 WEEKS)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATING DATA:
Sales ........................... $1,015,063 $1,062,348 $1,081,538 $1,112,203 $1,124,930
Gross margin........................ 242,452 269,188 269,967 278,636 283,062
Selling, general and administrative
expenses.......................... 221,212 225,123 218,874 231,090 234,178
Voluntary severance program(1)...... 6,917 -- -- -- --
Store closing and asset
revaluation(2).................... -- 17,015 -- -- 19,674
Depreciation and amortization....... 23,774 22,748 21,381 18,450 18,382
Operating income (loss)............. (9,451) 4,302 29,712 29,096 10,828
Interest expense................... 14,780 14,244 16,451 13,743 13,925
Earnings (loss) before income
taxes & extraordinary charge...... (24,231) (9,942) 13,261 15,353 (3,097)
Income taxes
(benefit)......................... (5,357) (3,779) 5,039 6,126 (1,237)
Extraordinary charge(3)............. -- 3,969 -- -- --
Net earnings (loss)................. $ (18,874) $ (10,132) $ 8,222 $ 9,227 $ (1,860)
Earnings (loss) per common
share ........................... $ (1.71) $ (.91) $ .74 $ .82 $ (.16)
CONSOLIDATED BALANCE
SHEET DATA
(AT PERIOD END):
Total assets........................ $ 311,484 $ 335,165 $ 331,809 $ 307,351 $ 283,413
Total debt (including
capital leases)................... 143,883 126,126 116,990 99,368 90,357
Total shareholders'
equity ........................... 42,484 61,746 71,389 64,696 55,469
</TABLE>
(1) Represents a charge of $6.9 million in fiscal 1994 for a voluntary
severance program for approximately 600 clerks in the Chicago area.
(2) Represents a charge of $17.0 million in fiscal 1993 and $19.7 million in
fiscal 1990 to provide for costs of closing certain stores and asset
revaluations in connection therewith. See Notes B and D of the notes to the
Company's consolidated financial statements included elsewhere in this
document.
(3) Represents a charge of $4.0 million related to the early retirement of
debt.
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table sets forth certain key operating statistics as a
percentage of sales for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 28, JANUARY 29, JANUARY 30, FEBRUARY 1, FEBRUARY 2,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Operations Statement Data:
Sales................................... 100.00% 100.00% 100.00% 100.00% 100.00%
Gross margin............................ 23.89 25.34 24.96 25.05 25.16
Selling, general and
administrative expenses.......... 21.79 21.20 20.24 20.77 20.82
Depreciation and amortization
expenses......................... 2.35 2.14 1.98 1.66 1.63
Voluntary severance program............. .68 - - -
Provision for store closing and
asset revaluation................. -- 1.60 -- -- 1.75
Operating income (loss)................. (.93) .40 2.75 2.62 .96
Interest expense........................ 1.46 1.34 1.52 1.24 1.24
Earnings (loss) before income
taxes & extraordinary charge......... (2.39) (.94) 1.23 1.38 (.28)
Income taxes (benefit).................. (.53) (.36) 0.47 0.55 (0.11)
Extraordinary charge.................... -- 0.37 -- -- --
Net earnings (loss)..................... (1.86)% (0.95)% 0.76% 0.83% (0.17)%
RESULTS OF OPERATIONS
SALES
YEAR ENDED YEAR ENDED YEAR ENDED
1/28/95 1/29/94 1/30/93
SALES $1,015,063 $1,062,348 $1,081,538
PERCENT CHANGE (4.5)% (1.8)% (2.8)%
SAME STORE CHANGE (2.6)% (3.4)% (5.3)%
</TABLE>
Sales for fiscal 1994 were $1.015 billion, a decrease of $47.3 million
or 4.5% from fiscal 1993. Same store sales declined 2.6% from fiscal 1993 to
fiscal 1994. For fiscal 1994, same store sales were -3.7% in the first quarter,
- -3.8% in the second quarter, -2.2% in the third quarter and -0.5% in the fourth
quarter with the improvement due to an aggressive pricing strategy initiated in
July 1994. Management believes the sales decline was primarily due to 14 new
competitive store openings, including five supercenters, in the Company's
markets and that the Company was operating six fewer stores as of the end of the
fourth quarter of 1994 compared to 1993.
Sales for fiscal 1993 were $1.062 billion, a decrease of $19.2 million
or 1.8% from fiscal 1992. Same store sales declined 3.4% from fiscal 1992 to
fiscal 1993. The sales decline was primarily attributable to increased
competition, including new store openings and expansions by competitors, and
adverse weather conditions in the midwest during the summer.
GROSS MARGIN
Gross margin as a percentage of sales decreased to 23.89% in fiscal
1994 from 25.34% in fiscal 1993 and 24.96% in fiscal 1992. The decrease in gross
margin in fiscal 1994 is primarily due to increased promotional expenditures in
an attempt to stop continued sales erosion. Margin rates increased in fiscal
1993 due to improved product mix and margin, and a reduction in warehousing and
distribution costs. Margin rates were adversely affected in fiscal 1992 by
competitive conditions that required increased promotional discount activity,
partially offset by improved sales in higher-margin perishable departments,
reductions in inventory shrinkage and improved buying practices. Gross margin
included a charge for LIFO in fiscal 1994 of 0.18% of sales, a slight charge for
LIFO in fiscal 1993 and a LIFO credit of 0.03% of sales in fiscal 1992.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses as a percentage of sales
were 21.79% in fiscal 1994 compared to 21.20% in fiscal 1993 and 20.24% in
fiscal 1992. Selling, general and administrative expenses were $3.9 million or
1.7% lower in fiscal 1994 than fiscal 1993 primarily due to a lower store count.
The Company added more service hours for its stores to supplement the pricing
strategy discussed above during fiscal 1994. Total selling, general and
administrative expenses were $6.3 million higher in fiscal 1993 than fiscal
1992, primarily due to increases in employee benefits and service related hours.
EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND AMORTIZATION ("EBITDA")
EBITDA for fiscal 1994 declined to $14.3 million or 1.41% of sales
from fiscal 1993 of $44.1 million or 4.15% of sales (before the store closing
charge) and from fiscal 1992 of $51.1 million or 4.72% of sales. Due to
decreased sales and margins, EBITDA decreased by 67% in fiscal 1994 compared to
fiscal 1993. EBITDA decreased 14% in fiscal 1993 compared to fiscal 1992.
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense as a percentage of sales was
2.35% in fiscal 1994 as compared to 2.14% in fiscal 1993 and 1.98% in fiscal
1992. Both the fiscal 1994 and fiscal 1993 increases reflected higher investment
in new stores, Eagle Country Market conversions and investment in technology.
PROVISION FOR STORE CLOSING AND ASSET REVALUATION
The Company provided a $17.0 million charge in the fourth quarter of
fiscal 1993. The store closing charge provided for the closing costs, writedown
of assets to estimated net realizable values and estimated occupancy costs until
disposition for 13 stores intended to be closed in fiscal 1994 and additional
amounts for continuing expenses for 13 stores closed prior to January 29, 1994.
The annualized losses on the five stores closed at the end of fiscal 1993 and
the 13 to be closed in fiscal 1994 were approximately $2.9 million before
overhead charges. Approximately one-half of the charge was to write down book
values of property and equipment to estimated realizable values. This plan was
designed to increase the overall profitability of the Company by closing those
locations that had not met profitability expectations or which were to be
replaced by a new store. See Notes B and D of the notes to the Company's
consolidated financial statements.
During fiscal 1994 the Company did not record an additional provision
for closed stores or anticipated closings. The Company closed seven of the 13
stores scheduled for closure in fiscal 1994, closed an additional three stores
and plans to close the remaining six stores in fiscal 1995. The negotiation of
sublease arrangements on the remaining six stores has taken longer than
originally expected. The costs associated with the closure of the three
additional stores in 1994 were offset by a change in estimate for prior store
closings. It is management's opinion that the previously reserved amount will be
adequate to cover these costs plus the other anticipated closings. Eight of
these ten stores had a combined loss of approximately $1.4 million before
overhead charges in 1993, the other two stores were profitable and were replaced
by a new store.
VOLUNTARY SEVERANCE PROGRAM
The fiscal 1994 loss includes a $6.9 million pre-tax charge in the
second quarter for a voluntary severance program for approximately 600 clerks in
the Chicago area. Management expects that such severance costs should be offset
in the future as a result of lower wage and benefit costs of replacement
employees.
OPERATING INCOME (LOSS)
An operating loss of $9.5 million or 0.93% of sales was incurred in
fiscal 1994 compared to operating income for fiscal 1993 of $4.3 million or .40%
of sales. The decline in sales and gross margin discussed above were the primary
reasons for the 1994 operating loss. The 1994 loss also includes a $6.9 million
pre-tax charge in the second quarter for a voluntary severance program for
approximately 600 clerks in the Chicago area. Before the store closing charge
that was taken in fiscal 1993, operating income would have been $21.3 million or
2.00% of sales in fiscal 1993. Operating income was $29.7 million or 2.75% of
sales in fiscal 1992. Improved margins were not enough to offset lower sales and
increased selling, general and administrative expenses in fiscal 1993. Store
wages and related benefits and taxes increased $4.4 million from fiscal 1992 to
1993.
INTEREST EXPENSE
Interest expense increased to 1.46% of sales in fiscal 1994 compared
to 1.34% of sales in fiscal 1993 and 1.52% of sales in fiscal 1992. In fiscal
1994 interest expense increased due to higher short term borrowings than the
prior year. In fiscal 1993 interest expense declined due to the refinancing of
long term debt. The 13 1/2% Senior Subordinated Notes were retired and replaced
with 8 5/8% Senior Notes during fiscal 1993. In fiscal 1992, there was a one
time, non-recurring charge of $960,000, or 0.09% of sales, in interest expense
for an incentive payment to the holders of the 13 1/2% Senior Subordinated Notes
to waive a restrictive covenant to allow the Company to repurchase up to $20
million of its Common Stock.
EXTRAORDINARY CHARGE
In the first quarter of fiscal 1993 an extraordinary charge of
approximately $4.0 million or $.36 per share was related to the early retirement
of the 13 1/2% Senior Subordinated Notes. See Note L.
NET EARNINGS (LOSS)
The Company incurred net losses for fiscal 1994 and fiscal 1993 of
$18.9 million or $1.71 per share and $10.1 million or $.91 per share,
respectively. The 1994 loss includes a $6.9 million pretax charge in the second
quarter for a voluntary severance program for approximately 600 clerks in the
Chicago area. Before the store closing charge and extraordinary charge net
earnings would have been $4.4 million or $.40 per share for fiscal 1993. Net
earnings for fiscal 1992 were $8.2 million, or $0.74 per share ($9.0 million, or
$0.80 per share before non-recurring charges related to the solicitation of the
holders of the 13 1/2% Subordinated Notes to waive a restrictive covenant to
allow the Company to repurchase up to $20 million of its Common Stock). No
shares were repurchased in fiscal 1994. The average shares outstanding were
reduced to 11,051,994 in fiscal 1994 from 11,103,276 shares in fiscal 1993 and
11,175,129 shares in fiscal 1992 resulting from the Company's stock repurchase
program, which occurred during fiscal 1993 and fiscal 1992. The effective tax
rate of 22.1% for 1994 compared to 38.0% for fiscal 1993 and fiscal 1992 was
lower primarily due to limiting the income tax benefits recognized in fiscal
1994 for operating losses to carryback amounts available due to the uncertainty
of future recoverability of operating loss carryforwards.
The Company expects to continue the more aggressive marketing programs
and use of additional customer service hours that were initiated during the
second quarter of fiscal 1994 to attempt to stop the erosion of same store
sales. Approximately 300 additional basis points of gross margin were invested
in product markdowns in the third quarter and approximately 200 basis points of
gross margin were invested in the fourth quarter. Although management does not
anticipate as large of a reduction of gross margin in the future, these efforts
will cause continued pressure on gross margin rates, expense rates, and
operating profit for the foreseeable future. Management, however, is in the
process of implementing plans to improve margin and expense rates in the last
half of fiscal 1995. The Company expects operations to continue to improve in
fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities decreased to $4.1 million in
fiscal 1994 from $24.5 million in fiscal 1993 and $12.9 million in fiscal 1992
primarily due to the decline in sales and gross margins in fiscal 1994. Working
capital changes used $9.0 million of cash in fiscal 1994 compared to a use of
$10.5 million in fiscal 1993 and a use of $23.8 million in fiscal 1992 when
inventories and accounts receivable increased. Capital expenditures totaled
$19.3 million in fiscal 1994, $32.0 million in fiscal 1993 and $33.0 million in
fiscal 1992, including $7.0 million and $13.8 million invested in property held
for resale in fiscal 1994 and fiscal 1993, respectively.
The following table summarizes store development and planned reductions:
<TABLE>
<CAPTION>
PLANNED
FISCAL FISCAL FISCAL
1995 1994 1993
<S> <C> <C> <C>
New Eagle Country Markets............... 0 1 0
New Eagle Country Warehouses............ 0 3 3
New BOGO's Food and Deals............... 0 0 0
Store Closings.......................... 6 10 9
Expansions and Major Remodels........... 0 2 13
Store Count, end of year................ 90 96 102
</TABLE>
The Company expects capital expenditures in fiscal 1995 to total
approximately $6.0 million, which is expected to be funded primarily from
internally generated cash flow and reductions in inventory and accounts
receivable levels.
Developer financing for real estate projects has been difficult to
obtain over the past several years. As a result, certain projects have been
delayed, certain others have been cancelled, and the Company has elected to
develop several store locations itself. The Company owned 19 of its 96 stores as
of January 28, 1995 and leased or subleased the remainder.
The Company has a $35 million Revolving Credit Agreement, which is
secured by inventories located at the Company's central distribution facility
and stores to provide for the Company's short-term liquidity needs. The Company
had $22.0 million borrowed against this facility at January 28, 1995, at a
weighted average interest rate of 8.9%. The maximum amount outstanding during
fiscal 1994 was $31.0 million. The average amount outstanding during fiscal 1994
was $11.9 million. The Company had $3.0 million borrowed at January 29, 1994, at
a weighted average interest rate of 7.5%. The maximum amount outstanding during
fiscal 1993 was $21.0 million, which was prior to the debt refinancing. The
average amount outstanding during fiscal 1993 was $5.5 million. The Company had
$21.0 million borrowed at January 30, 1993 with a maximum amount outstanding of
$33.0 million and average amount outstanding of $13.4 million during fiscal
1992. Four amendments to the Revolving Credit Agreement were executed during
fiscal 1994 to address financial and other covenants, which enabled the Company
to be in compliance with such covenants. The Company was in compliance with all
covenants at January 28, 1995.
The Company has addressed issues affecting liquidity in fiscal 1994 and
1995 including: 1) amending its existing credit agreement and investigating the
feasibility of obtaining alternative lenders, 2) meeting with trade creditors
and 3) developing a cash contingency plan to assure adequate liquidity as the
Company implements its strategies to reverse recent sales and earnings trends.
The Company's existing Revolving Credit Agreement has been amended for
fiscal 1995. The primary elements of the amendment include i) setting financial
covenant requirements at levels which management believes reasonable in relation
to its financial projections, ii) modifying the Company's borrowing base to
exclude certain types of inventory as eligible collateral which is expected to
reduce the borrowing base by approximately $5.0 million effective June 1, 1995
and iii) providing for increasing interest rates initially and in future
quarters. The Company expects to be in compliance with all covenants for fiscal
1995 based on management's estimates of fiscal 1995 operating results and cash
flows. Such estimates include certain improvements in operations primarily in
the second half of fiscal 1995. The Company may be required to obtain additional
amendments or seek other financing sources should operating results fall
significantly below management's projections. The Company has sought to obtain a
new credit facility with less restrictive covenants.
The Company's cash contingency plan has identified assets that could be
converted to cash and has assigned responsibilities and time lines for
converting assets to cash. Plans include working capital reductions and sales or
sale/leaseback transactions of owned stores, land held for future development,
closed stores and other selected asset dispositions.
As part of its plans to enhance its liquidity through asset
dispositions, the Company signed a contract on March 1, 1995, for a
sale/leaseback financing for fourteen of its stores for approximately $43.0
million. Under the terms of the agreement, these stores would be sold, and
subsequently leased back, generating substantial new capital to support the
future business strategy. The purchaser is currently seeking financing sources.
Accordingly, closing of the transaction is uncertain. The sale is subject to
normal and customary conditions for transactions of this type. Management does
not consider the sale/leaseback to be essential to the Company's liquidity and
capital resource needs for fiscal 1995, but the transaction would provide the
Company with improved financial flexibility.
Working capital (current assets minus current liabilities) and the
current ratio (current assets divided by current liabilities) were as follows:
WORKING CURRENT
CAPITAL RATIO
January 28, 1995 $ 0.8 million 1.01 to 1
January 29, 1994 $25.7 million 1.25 to 1
January 30, 1993 $35.8 million 1.36 to 1
Management believes that working capital is adequate for the Company's
reasonably foreseeable needs.
During fiscal 1992, the holders of the 13 1/2% Subordinated Notes
waived to the extent of up to $20 million a covenant that restricted the Company
from repurchasing its Common Stock. During fiscal 1993 the Company purchased
120,500 shares at a total cost of $841,000 for an average price of $6.98 per
share. Additionally, during fiscal 1993, 183,442 shares of treasury stock were
used to satisfy awards to the participants of the Performance Equity Plan. These
shares were taken out of treasury stock at the average cost of $6.14 per share.
The difference between $7.25 issue price and $6.14 treasury stock cost was
recorded as Capital in excess of par value. During fiscal 1992, the Company
commenced a stock repurchase program, pursuant to which it repurchased 238,600
shares at a total cost of $1.5 million, for an average price of $6.41 per share.
From November 21, 1990 to February 2, 1991, the Company also repurchased 272,400
shares at a total cost of $1.6 million, for an average price of $5.89 per share.
Total treasury shares at January 29, 1994 were 448,006 at an average cost of
$6.36 per share.
On April 26, 1993 the Company completed a public offering and sale of
$100 million principal amount of 8 5/8% Senior Notes due April 15, 2000. In
addition, the Company entered into a new $35 million credit facility to replace
its then existing $85 million facility. The net proceeds of the offering were
approximately $96.5 million, of which approximately $92.5 million was used to
defease and retire the Senior Subordinated Notes and the Bank Revolving Credit
Facility. The balance was used for general corporate purposes.
INFLATION
Inflation has had only a minor effect on the operations of the Company
and its internal and external sources of liquidity and working capital.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Eagle Food Centers, Inc.:
We have audited the accompanying consolidated balance sheets of Eagle
Food Centers, Inc. as of January 28, 1995 and January 29, 1994, and the related
consolidated statements of operations, equity and cash flows for each of the
three years in the period ended January 28, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Eagle Food Centers, Inc. as
of January 28, 1995 and January 29, 1994, and the results of its operations and
its cash flows for each of the three years in the period ended January 28, 1995
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Davenport, Iowa
April 26, 1995
EAGLE FOOD CENTERS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
JANUARY 28, JANUARY 29,
1995 1994
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................. $ 4,096 $ 8,056
Restricted assets - marketable securities,
at market ............................................... 5,239 --
Accounts receivable........................................ 11,035 14,512
Income taxes receivable.................................... 7,213 3,683
Inventories................................................ 83,939 101,010
Prepaid expenses and other................................. 2,663 2,992
Total current assets.................................. 114,185 130,253
Property and equipment (net)................................. 167,749 181,011
Other assets:
Deferred debt issuance costs............................... 2,960 3,409
Excess of cost over fair value of net assets acquired...... 2,650 2,731
Property held for sale/leaseback........................... 20,710 13,766
Other...................................................... 3,230 3,995
Total other assets.................................... 29,550 23,901
Total assets.......................................... $311,484 $335,165
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 44,738 $ 60,831
Payroll and employee benefits.............................. 14,678 13,850
Accrued liabilities........................................ 20,185 19,272
Accrued taxes.............................................. 8,117 7,762
Bank revolving credit loan................................. 22,000 --
Current portion of long-term debt ......................... 3,667 2,799
Total current liabilities............................. 113,385 104,514
Long-term debt:
Senior Notes............................................... 100,000 100,000
Bank revolving credit loan................................. -- 3,000
Capital lease obligations.................................. 18,216 20,152
Other...................................................... -- 175
Total long-term debt.................................. 118,216 123,327
Other liabilities:
Reserve for closed stores and warehouse.................... 27,082 33,669
Other deferred liabilities................................. 10,316 11,909
Total other liabilities............................... 37,398 45,578
Shareholders' equity:
Preferred stock, $.01 par value, 100,000 shares
authorized............................................... -- --
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)
Other...................................................... (387) --
Retained earnings (deficit) ............................... (7,934) 10,940
Total shareholders' equity............................ 42,485 61,746
Total liabilities and shareholders' equity............ $311,484 $335,165
</TABLE>
See notes to consolidated financial statements.
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 28, JANUARY 29, JANUARY 30,
1995 1994 1993
<S> <C> <C> <C>
Sales ............................................ $ 1,015,063 $ 1,062,348 $ 1,081,538
Cost of goods sold................................... 772,611 793,160 811,571
Gross margin................................ 242,452 269,188 269,967
Operating expenses:
Selling, general and administrative............... 221,212 225,123 218,874
Voluntary Severance Program........................ 6,917 -- --
Store closing and asset revaluation................ -- 17,015 --
Depreciation and amortization...................... 23,774 22,748 21,381
Operating income (loss)..................... (9,451) 4,302 29,712
Interest expense..................................... 14,780 14,244 16,451
Earnings (loss) before income taxes and
extraordinary charge............................... (24,231) (9,942) 13,261
Income taxes (benefit)............................... (5,357) (3,779) 5,039
Earnings (loss) before extraordinary charge.......... (18,874) (6,163) 8,222
Extraordinary charge................................. -- 3,969 --
Net earnings (loss).................................. $ (18,874) $ (10,132) $ 8,222
Weighted average common shares
outstanding........................................ 11,051,994 11,103,276 11,175,129
Earnings (loss) per share:
Earnings (loss) before extraordinary charge........ $ (1.71) $ (0.55) $ 0.74
Extraordinary charge............................... -- (0.36) --
Net earnings (loss)................................ $ (1.71) $ (0.91) $ 0.74
</TABLE>
See notes to the consolidated financial statements.
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
CAPITAL IN RETAINED
PAR EXCESS OF TREASURY EARNINGS
SHARES VALUE PAR VALUE SHARES DOLLARS OTHER (DEFICIT)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, February 1, 1992...................... 11,500,000 $115 $53,336 272,348 $(1,605) $ -- $12,850
Net earnings.............................. 8,222
Purchase of treasury shares............... 238,600 (1,529)
Balance, January 30, 1993...................... 11,500,000 115 53,336 510,948 (3,134) -- 21,072
Net loss.................................. (10,132)
Distribution of treasury shares
to performance share plan.............. 205 (183,442) 1,126
Purchase of treasury shares.............. 120,500 (842)
Balance, January 29, 1994...................... 11,500,000 115 53,541 448,006 (2,850) -- 10,940
Net loss................................... (18,874)
Pension liability adjustment............... (179)
Net unrealized loss on marketable
securities............................... (208)
Balance, January 28, 1995...................... 11,500,000 $115 $53,541 448,006 $(2,850) $(387) $(7,934)
</TABLE>
See notes to the consolidated financial statements.
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
JANUARY 28, JANUARY 29, JANUARY 30,
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)....................................... $ (18,874) $ (10,132) $ 8,222
Adjustments to reconcile net earnings
(loss) to net cash provided by operating
activities:
Extraordinary charge before income tax effect............ -- 6,402 --
Depreciation and amortization............................ 23,774 22,748 21,353
Store closing and asset revaluation...................... -- 17,015 --
Deferred income taxes.................................... 844 (4,637) 415
LIFO (credit) charge..................................... 1,810 42 (339)
Stock compensation expense............................... -- -- 1,066
Deferred charges and credits............................. 4,614 3,997 5,299
Loss (gain) on disposal of assets........................ 967 (451) 608
Changes in assets and liabilities:
Accounts receivable and other assets..................... (1,377) (4,191) (6,951)
Inventories.............................................. 15,261 5,999 (13,344)
Accounts payable......................................... (16,093) (1,481) 2,521
Accrued and other liabilities............................ 1,986 (2,643) 644
Payments on reserve for closed stores and warehouse ..... (8,785) (8,177) (6,635)
Net cash provided by operating
activities....................................... 4,127 24,491 12,859
Cash flows from investing activities:
Additions to property and equipment....................... (12,391) (18,242) (33,027)
Purchase of marketable securities......................... (5,447) -- --
Additions to property held for sale/leaseback ............ (6,944) (13,766) --
Cash proceeds from dispositions of
property and equipment.................................. 1,208 2,634 188
Net cash used in investing activities.............. (23,574) (29,374) (32,839)
Cash flows from financing activities:
Proceeds from borrowings.................................. -- 100,000 --
Deferred financing costs.................................. (175) (3,861) --
Debt prepayment costs..................................... -- (4,239) --
Principal payments on capital lease obligations........... (3,101) (2,558) (2,426)
Retirement of debt........................................ (237) (69,116) (952)
Net bank revolving credit borrowing (repayment)........... 19,000 (18,000) 21,000
Purchase of treasury stock................................ -- (841) (1,529)
Net cash provided by financing activities.......... 15,487 1,385 16,093
Decrease in cash and cash equivalents....................... (3,960) (3,498) (3,887)
Cash and cash equivalents at beginning
of year................................................... 8,056 11,554 15,441
Cash and cash equivalents at end of year.................... $ 4,096 $ 8,056 $ 11,554
</TABLE>
See notes to the consolidated financial statements.
EAGLE FOOD CENTERS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994, AND JANUARY 30, 1993
NOTE A--ORGANIZATION
Eagle Food Centers, Inc. (the "Company"), a Delaware corporation, was
the General Partner of Eagle Food Centers, L.P. ("EFC"), a Delaware limited
partnership, which previously conducted the Eagle Food Centers business. On July
27, 1989, the owners of all of the outstanding common limited partnership
interests in EFC exchanged their partnership interests for 8.3 million shares of
Common Stock of the Company. As a result, and following the consummation of the
offering by the Company of 3.2 million shares of Common Stock and the redemption
by EFC of the preferred limited partnership interests in EFC held by Lucky
Stores, Inc. ("Lucky") on August 3, 1989, the Company succeeded to the business
and assets and assumed the liabilities of EFC. The Company is engaged in the
operation of retail food stores.
NOTE B--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to January 31st.
Fiscal 1994, fiscal 1993 and fiscal 1992 were 52 week years ended January 28,
1995, January 29, 1994, and January 30, 1993, respectively.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Eagle
Food Centers, Inc. and all subsidiaries. All significant intercompany
transactions have been eliminated.
RESTRICTED ASSETS - MARKETABLE SECURITIES
Marketable securities are restricted to satisfy state insurance reserve
requirements related to claim liabilities recorded, classified as current, for
workers' compensation, automobile and general liability costs.
The Company has classified its entire holdings of marketable securities
as available for sale reflecting management's intention to hold such securities
for indefinite periods of time. Such securities are reported at market value and
the difference between cost and market value is reported as a separate component
of shareholders' equity until gains and losses are realized.
INVENTORIES
Inventories are valued at the lower of cost or market; cost is
determined by the last-in, first-out (LIFO) method for substantially all
inventories. The current cost of the inventories was greater than the LIFO value
by $7.5 million at January 28, 1995 and $5.7 million at January 29, 1994.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation is computed by using the straight-line method
over the estimated useful lives of buildings, fixtures and equipment. Leasehold
costs and improvements are amortized over their estimated useful lives or the
remaining lease term, whichever is shorter. Leasehold interests are amortized
over the lease term plus expected renewal periods or 25 years, whichever is
shorter.
Property acquired under capital lease is amortized on a straight-line
basis over the shorter of the life of the property or the lease term.
DEBT ISSUANCE COSTS
Debt issuance costs are amortized over the terms of the related debt
agreements.
ORGANIZATION COSTS
Organization costs were fully amortized by the end of fiscal 1992.
Organization costs, which were included in other assets, were amortized over a
five-year period.
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED ("GOODWILL")
The Company amortizes goodwill using the straight-line method over 40
years. The Company continually reviews goodwill to assess recoverability from
future operations using undiscounted cash flows. Impairments would be recognized
in operating results if an other than temporary diminution in value occurred.
PROPERTY HELD FOR SALE/LEASEBACK
Property held for sale/leaseback is reported at lower of cost or
estimated market value.
SELF-INSURANCE
The Company is primarily self-insured, through its captive insurance
subsidiary, for workers' compensation, automobile and general liability costs.
The self-insurance claim liability is determined actuarially based on claims
filed and an estimate of claims incurred but not yet reported.
RESERVE FOR CLOSED STORES AND WAREHOUSE
The Company continually monitors underperforming stores and
under-utilized facilities and in the event their performance or utilization
cannot be improved, management may decide to close, sell or otherwise dispose of
such stores or facilities. The reserve for closed stores and a warehouse arises
primarily from the discounted value of future lease commitments in excess of the
discounted value of estimated sublease revenue on stores and a warehouse which
management has reached the decision to close, sell or otherwise dispose of
within one year. Reserves are established in the year such decisions are made by
management and the costs can be reasonably estimated. The discount rates used
for these reserves is 10% for reserves established prior to fiscal 1993, 6% for
reserves established in fiscal 1993 and 9% for reserves established in fiscal
1994. The discount rate used was a risk-free rate of return for a duration equal
to the average remaining lease term (generally eight years) at the time the
reserve was established.
RECLASSIFICATIONS
Certain reclassifications were made to prior years' balances for
comparative purposes.
EARNINGS(LOSS) PER SHARE
Net earnings(loss) per share of Common Stock, throughout the periods
presented, is based on the weighted average shares outstanding. Equivalent
shares in the form of contingent stock rights, stock appreciation rights and
stock options are excluded from the calculation since they are not materially
dilutive or were anti-dilutive.
NOTE C--CONSOLIDATED STATEMENTS OF CASH FLOWS
For purposes of the Consolidated Statements of Cash Flows, the Company
considers all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents. Cash paid for interest totaled $13.7
million for fiscal 1994, $15.1 million for fiscal 1993, and $16.8 million for
fiscal 1992. Cash received for income taxes was $2.7 million for fiscal 1994.
Cash paid for income taxes totaled $1.2 million for fiscal 1993 and $6.2 million
for fiscal 1992. Non-cash additions to property and equipment were $2.1 million
for capital leases in fiscal 1994. Non-cash transactions in fiscal 1993 include
a capital lease retirement of $1.2 million and treasury stock issued for
Performance Share Plan participants of $1.3 million.
NOTE D--RESERVE FOR CLOSED STORES AND WAREHOUSE
During fiscal 1994 the Company did not record an additional provision
for closed stores or anticipated closings. The Company closed seven of the 13
stores scheduled for closure in fiscal 1994, closed an additional three stores
and plans to close the remaining six stores in fiscal 1995. The negotiation of
sublease arrangements on the remaining six stores has taken longer than
originally expected. The costs associated with the closure of the three
additional stores in 1994 were offset by a change in estimate for prior store
closings.
In fiscal 1993 the Company incurred a charge of $17.0 million to
provide for closing costs and continuing rental obligations, less anticipated
sublease rentals, and to revalue certain related fixed assets to estimated
realizable values. The store closing and asset revaluation charge included
additional amounts for continuing expenses for thirteen stores closed prior to
January 29, 1994 and included a provision for another thirteen stores scheduled
to be closed in fiscal 1994. The components of the charge are summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 29, 1994
(IN THOUSANDS)
<S> <C>
Revalue related fixed assets to estimated realizable values.............. $7,521
Present value of continuing rental obligations less
anticipated sublease rentals.......................................... 6,783
Closing costs............................................................ 1,180
Change in estimate for prior store closings.............................. 1,221
Other.................................................................... 310
Total................................................................ $17,015
</TABLE>
Approximately one half of the charge represents estimated future cash
outflows.
An analysis of activity in the reserve for closed stores and a
warehouse for the years ended January 28, 1995, and January 29, 1994, is as
follows:
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 29,
1995 1994
(IN THOUSANDS)
<S> <C> <C>
Balance at beginning of year................................... $43,916 $32,858
Payments, primarily rental payments net of
sublease rentals............................................. (8,785) (8,177)
Revaluation reserve associated with fixed
assets disposed of during the year........................... (1,879) --
Interest cost.................................................. 2,033 2,220
Provision for store closing and asset revaluation.............. -- 17,015
Balance at end of year (including $8.2 million
and $10.2 million, respectively, classified as current)...... $35,285 $43,916
</TABLE>
Approximately $26.1 million of the reserve at January 28, 1995,
represents estimated future cash outflows primarily related to the present value
of net future rental payments and $9.2 million represents fixed asset
revaluations. It is management's opinion that the reserve will be adequate to
cover continuing costs and fixed asset revaluations for the existing closed
stores and a warehouse and the six stores scheduled to be closed in fiscal 1995.
NOTE E--PROPERTY AND EQUIPMENT
The investment in property and equipment is as follows:
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 29,
1995 1994
(IN THOUSANDS)
<S> <C> <C>
Land ............................................................... $ 9,823 $ 9,834
Buildings............................................................... 35,792 35,736
Leasehold costs and improvements........................................ 41,152 43,628
Fixtures and equipment.................................................. 131,172 127,843
Leasehold interests..................................................... 39,871 44,931
Property under capital lease............................................ 30,656 28,561
Total ............................................................... 288,466 290,533
Less accumulated depreciation and amortization.......................... 120,717 109,522
Property and equipment (net)............................................ $167,749 $181,011
</TABLE>
Depreciation and amortization are computed using the straight-line
method over the estimated useful lives of the assets. The useful lives of the
various classes of assets are as follows:
Buildings 10-25 years Leasehold Interests 3-25 years
Fixtures and
Equipment 3-12 years Property under Capital Lease Shorter of economic
life or lease term
Leasehold Costs &
Improvements 5-23 years
NOTE F--DEBT
<TABLE>
<CAPTION>
Long-term debt consists of the following:
JANUARY 28, JANUARY 29,
1995 1994
(IN THOUSANDS)
<S> <C> <C>
Bank Revolving Credit Loan.............................................. $ -- $ 3,000
8 5/8% Senior Notes..................................................... 100,000 100,000
Capital leases (Note H)................................................. 21,883 22,890
Mortgage................................................................ -- 236
121,883 126,126
Less current maturities................................................. 3,667 2,799
$118,216 $123,327
</TABLE>
The Company's 13 1/2% Senior Subordinated Notes due June 1, 1998 (the
"13 1/2% Subordinated Notes") were retired on June 1, 1993 and were replaced
with $100 million of Senior Notes at 8 5/8%. The 13 1/2% Subordinated Notes were
the joint and several obligation of the Company and Eagle Capital Corporation II
("Capital"). Capital was a wholly-owned subsidiary of the Company which was
formed for the sole purpose of acting as co-obligor under the 13 1/2% Senior
Subordinated Notes. Capital was dissolved during fiscal 1993.
The indenture relating to the 8 5/8% Senior Notes contains provisions
as well as certain restrictions relating to certain asset dispositions, sale and
leaseback transactions, payment of dividends, repurchase of equity interests,
incurrence of additional indebtedness and liens, and certain other restricted
payments. The Company's 8 5/8% Senior Notes are due April 15, 2000.
The Company had a Credit Agreement with Caisse Nationale De Credit
Agricole, Chicago branch ("CNCA") which provided for a syndicate of banks, with
CNCA as agent for such banks, to make available to the Company an aggregate
amount of $85 million for revolving credit loans, working capital loans and
letters of credit. This $85 million facility was replaced on April 26, 1993 with
a new Credit Agreement with Caisse Nationale De Credit Agricole and The First
National Bank of Chicago as Co-Agents. The new agreement is a $35 million
facility which provides for revolving credit loans and letters of credit. No
more than an aggregate of $20.0 million of the total commitment may be drawn by
the Company as letters of credit. The Credit Agreement terminates on April 26,
1998 and is secured by a first priority security interest in all inventories of
the Company located in its stores and distribution center in Milan, Illinois.
Loans made pursuant to the Credit Agreement bear interest at a fluctuating
interest rate based, at the Company's option, on a margin over the CNCA's base
interest rate or a margin over the London Interbank offered rate multiplied by
the applicable reserve requirement (the adjusted LIBOR Rate), which margins will
decrease as the Company's "leverage ratio" (as defined in the Credit Agreement)
decreases.
The Credit Agreement contains certain financial and other restrictive
covenants with respect to the Company relating to, among other things, minimum
financial ratios, minimum equity levels, the incurrence of indebtedness, the
creation of liens, sales of assets, capital expenditures, and the payment of
dividends on or the redemption, repurchase, acquisition or retirement of the
equity interests of the Company.
At January 28, 1995, the Company had $22.0 million in revolving credit
loans outstanding and had no outstanding letters of credit and thus had $13.0
million available under the Credit Agreement. At January 29, 1994, the Company
had $3.0 million in revolving credit loans outstanding. The interest rates on
the outstanding amounts were 8.9% at January 28, 1995 and 7.5% at January 29,
1994.
The Company was in compliance with all the covenants in its debt
agreements at January 28, 1995. Four amendments to the Credit Agreement were
executed during fiscal 1994 to address financial and other covenants which
enabled the Company to be in compliance.
The Company's Revolving Credit Agreement has been amended for fiscal
1995. The primary elements of the amendment include i) setting financial
covenant requirements at levels which management believes reasonable in relation
to its financial projections, ii) modifying the Company's borrowing base to
exclude certain types of inventory as eligible collateral which is expected to
reduce the borrowing base by approximately $5.0 million effective June 1, 1995
and iii) providing for increasing interest rates initially and in future
quarters. The Company expects to be in compliance with all covenants for fiscal
1995 based on management's estimates of fiscal 1995 operating results and cash
flows. Such estimates include certain improvements in operations primarily in
the second half of fiscal 1995. The Company may be required to obtain additional
amendments or seek other financing sources should operating results fall
significantly below management's projections. The Company is seeking to obtain a
new credit facility with less restrictive covenants.
NOTE G--TREASURY STOCK
The Company did not acquire or distribute any shares of its Common
Stock during fiscal 1994. Total treasury shares at January 28, 1995 were 448,006
at an average cost of $6.36 per share or a total of $2.85 million.
In the second quarter of fiscal 1993, the Company acquired 120,500
shares of its Common Stock at a total cost of $0.8 million or an average price
of $6.98 per share. During the year the Company distributed 183,442 treasury
shares to the performance share plan participants.
The Company acquired 238,600 shares of its Common Stock during the
third and fourth quarters of fiscal 1992 at a total cost of $1.5 million or an
average price of $6.41 per share.
NOTE H--LEASES
Most of the retail stores are leased. Many of the leases have renewal
options for periods ranging from five to thirty years. Some provide the option
to acquire the property at certain times during the initial lease term for
approximately its estimated fair market value at that time, and some require the
Company to pay taxes and insurance on the leased property. The Company also
leases its central distribution facility under a lease expiring in 1997 with a
10-year option. Rent expense consists of:
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 28, JANUARY 29, JANUARY 30,
1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C>
Minimum rent under operating leases.......................... $21,403 $21,526 $20,680
Additional rent based on sales............................... 197 213 399
Less rentals received on non-cancelable
subleases................................................... (1,796) (1,749) (2,171)
$19,804 $19,990 $18,908
</TABLE>
Future minimum lease payments under operating and capital leases as of
January 28, 1995 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
(IN THOUSANDS)
<C> <C> <C>
1995 .............................................................. $ 17,891 $ 5,753
1996 .............................................................. 17,426 5,739
1997 .............................................................. 14,938 2,812
1998 .............................................................. 14,245 2,488
1999 .............................................................. 13,480 2,487
Thereafter............................................................. 135,870 17,077
Total minimum lease payments........................................... $213,850 36,356
Less amount representing interest...................................... 14,473
Present value of minimum capital lease payments, including $3.7
million classified as current portion of long-term debt............. $21,883
</TABLE>
The above future minimum lease payments do not include minimum
commitments of $61.0 million (exclusive of sublease income) the present value of
which is included in the consolidated balance sheet caption "Reserve for closed
stores and warehouse".
NOTE I--INCOME TAXES
Prior to fiscal 1993, the Company recognized income taxes based on
Accounting Principles Board Opinion No. 11, Accounting For Income Taxes.
Effective January 31, 1993 the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by
Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes
(SFAS 109).
The Company adopted the requirements of SFAS No. 109 via a cumulative
effect adjustment for prior years at the beginning of fiscal 1993 and,
therefore, has not restated prior years' financial statements. This adjustment
was not material to the consolidated financial statements at January 31, 1993
nor was there a material effect to income for the year ended January 29, 1994.
The following summarizes significant components of the provision for
income taxes:
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 28, JANUARY 29, JANUARY 30,
1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes (benefit):
Federal..................................................... $( 4,287) $( 3,084) $ 3,990
State ...................................................... ( 1,070) ( 695) 1,049
$( 5,357) $( 3,779) $ 5,039
Income taxes (benefit) consists of the following:
Current:
Federal ................................................ $( 4,648) $( 676) $ 3,690
State ................................................ ( 1,598) ( 282) 934
$( 6,246) $( 958) $ 4,624
Deferred:
Federal ................................................ $ 361 $( 2,408) $ 300
State ................................................ 528 (413) 115
$ 889 $( 2,821) $ 415
</TABLE>
The differences between income taxes (benefit) at the statutory Federal
income tax rate and income taxes (benefit) reported in the consolidated
statements of operations are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 28, JANUARY 29, JANUARY 30,
1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C>
Income taxes (benefit) at statutory Federal
tax rate of 35% for fiscal 1994 and 1993 and
34% for fiscal 1992...................................... $( 8,481) $( 3,480) $ 4,509
Surtax exemption............................................... 241 99 --
State income taxes, net of Federal benefit..................... (706) (459) 692
Tax credits.................................................... (85) (83) (245)
Valuation allowance............................................ 3,483 -- --
Other ...................................................... 191 144 83
Total................................................. $( 5,357) $( 3,779) $ 5,039
</TABLE>
Deferred tax assets and liabilities arise because of differences
between the financial accounting bases for assets and liabilities and their
respective tax bases. Deferred income tax assets and liabilities are comprised
of the following significant temporary differences:
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 29,
1995 1994
(IN THOUSANDS)
<S> <C> <C>
Deferred Tax Assets:
Store closing and asset revaluation.................................. $ 8,660 $11,485
Accrued reserves..................................................... 7,255 7,296
Deferred revenues.................................................... 2,582 2,319
Employee benefits.................................................... 2,729 1,067
Tax credit carryforwards............................................. 5,970 2,593
Valuation allowance.................................................. ( 3,483) --
Total........................................................ $23,713 $24,760
Deferred Tax Liabilities:
Depreciation......................................................... $19,379 $18,667
Other, net........................................................... 2,987 3,902
Total........................................................ $22,366 $22,569
Net deferred tax asset, included in other current assets.............. $ 1,347 $ 2,191
</TABLE>
Deferred tax assets were recognized as of January 28, 1995, to the
extent of the tax carryback benefit associated with the expected reversal of
temporary differences in fiscal 1995 which will not be offset by temporary
differences originating in 1995. A valuation allowance has been established for
the remainder of the net deferred tax assets due to the uncertainty of future
recoverability.
The amount of tax credit carryforwards available, in thousands of
dollars primarily related to the alternative minimum tax, and expiration dates
are as follows: 1997 - $333, 1998 - $60, 1999 - $43, and unlimited - $5,534.
NOTE J--EMPLOYEE BENEFIT PLANS
RETIREMENT PLANS
Substantially all employees of the Company are covered by trusteed,
non-contributory retirement plans of the Company or by various multi-employer
retirement plans under collective bargaining agreements. The Company's defined
benefit plans covering salaried and hourly employees provide benefits that are
based on the employees' compensation during years of service. The Company's
policy is to fund no less than the minimum required under the Employee
Retirement Income Security Act of 1974. During the years ended January 28, 1995,
January 29, 1994, and January 30, 1993, pension costs under the plans totaled
$844,000, $885,000, and $620,000, respectively.
Net periodic pension cost under the Milan office and non-foods
warehouse retirement plan (Milan Plan) and the Eagle Food Centers, Inc. Employee
Pension Plan (Eagle Plan) includes the following benefit and cost components for
the years ended January 28, 1995, January 29, 1994, and January 30, 1993:
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 28, JANUARY 29, JANUARY 30,
1995 1994 1993
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost................................................... $ 626 $ 671 $ 548
Interest cost.................................................. 561 512 410
Actual return on plan assets................................... 139 (282) (242)
Net amortization and deferral.................................. (482) (16) (96)
Net periodic pension cost...................................... $ 844 $ 885 $ 620
</TABLE>
The funded status and amounts recognized in the Company's consolidated
balance sheets for the Milan Plan and Eagle Plan, as of the measurement dates of
December 31, 1994 and 1993, are as follows:
<TABLE>
<CAPTION>
DEC. 31, DEC. 31,
1994 1993
(IN THOUSANDS)
<S> <C> <C>
Plan assets at market value...................................................... $ 5,385 $ 5,196
Actuarial present value of projected benefit obligation.......................... (7,650) (7,669)
Funded status.................................................................... (2,265) (2,473)
Unrecognized net loss............................................................ 765 1,226
Minimum pension liability recognized............................................. (562) --
Accrued pension cost............................................................. $(2,062) $(1,247)
</TABLE>
The actuarial present value of the Company's vested benefit obligation
for the Milan Plan and Eagle Plan was $6.4 million and $6.5 million and the
accumulated benefit obligation was $7.0 million and $6.8 million at December 31,
1994 and 1993, respectively. Plan assets are held in a trust and include
corporate and U.S. government debt securities and common stocks.
Actuarial assumptions used to develop net periodic pension cost for the
fiscal years 1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Discount rate............................................................. 8.25% 7.5% 7.5%
Expected long-term rate of return on assets............................... 8.0 % 8.0% 8.0%
Rate of increase in compensation levels................................... 4.0 % 4.0% 5.0%
</TABLE>
The Company also participates in various multi-employer plans. The
plans provide for defined benefits to substantially all unionized workers.
Amounts charged to pension cost and contributed to the plans for the years ended
January 28, 1995, January 29, 1994, and January 30, 1993, totaled $6.7 million,
$7.0 million, and $7.1 million, respectively. Under the provisions of the
Multi-employer Pension Plan Amendments Act of 1980, the Company would be
required to continue contributions to a multi-employer pension fund to the
extent of its portion of the plan's unfunded vested liability if it
substantially or totally withdraws from such plans. Management does not intend
to terminate operations that would subject the Company to such liability.
INCENTIVE COMPENSATION PLANS
The Company has incentive compensation plans for store management,
department heads and certain other management personnel. Incentive plans
included approximately 1,000 employees. Provisions for payments to be made under
the plans are based upon achievement of sales and earnings in excess of specific
performance targets. The aggregate provision under these plans was $0.3 million,
$0.8 million, and $1.3 million for the years ended January 28, 1995, January 29,
1994, and January 30, 1993, respectively.
The Company had a performance share plan under which members of the
Company's senior management, selected by a committee of disinterested members of
the Board of Directors, were awarded contingent rights to receive up to an
aggregate of 415,000 shares of the Common Stock of the Company. The Company
awarded rights equivalent to 412,664 shares for the total five fiscal years of
the program. The actual financial results achieved over the life of the Plan
which terminated January 30, 1993 met the objective for an 80% payout or 330,135
shares of which 183,442 actual shares were issued and a cash payout of
$1,063,524 was distributed for the remaining 146,693 shares. There was no
provision under this plan for fiscal 1994 and 1993. The aggregate provision
under this plan was $1.1 million for the year ended January 30, 1993.
A non-qualified stock option plan was ratified by stockholders and
implemented in 1990 for key management employees. As of January 28, 1995 options
for 28,550, and 29,325 shares were outstanding and exercisable with option
prices of $10.00 and $8.50 per share, respectively. Additionally, as of January
28, 1995, options were outstanding for 2,000 and 285,475 shares with option
prices of $4.75 and $3.375. These shares will be exercisable in June and
September of 1995, respectively. As of January 28, 1995, there are no options
available for future grants. As of January 29, 1994, options for 31,250 and
31,900 shares were outstanding and exercisable with option prices of $10.00 and
$8.50 per share respectively. As of January 30, 1993, options for 35,600 and
37,775 shares were outstanding and exercisable with option prices of $10 and
$8.50 per share, respectively.
NOTE K--QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
NET
NET EARNINGS
GROSS EARNINGS (LOSS)
SALES MARGIN (LOSS) PER SHARE
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1994
<S> <C> <C> <C> <C>
Quarter --First $ 250,097 $ 62,522 $ ( 361) $ (.03)
--Second 252,222 62,305 (6,328)(1) (.58)(1)
--Third 252,183 57,376 (7,423) (.67)
--Fourth 260,561 60,249 (4,762)(2) (.43)(2)
Total $ 1,015,063 $ 242,452 $(18,874) $(1.71)
1993
Quarter --First $ 267,402 $ 66,947 $( 1,554)(3) $ (.14)(3)
--Second 265,364 67,203 559 .05
--Third 260,085 66,872 1,363 .12
--Fourth 269,497 68,166 (10,500)(4) (.94)(4)
Total $ 1,062,348 $ 269,188 $(10,132) $ (.91)
1992
Quarter --First $ 265,601 $ 66,796 $ 2,380 $ .21
--Second 271,835 67,246 1,291(5) .12(5)
--Third 268,416 66,938 1,997 .18
--Fourth 275,686 68,987 2,554(6) .23(6)
Total $ 1,081,538 $ 269,967 $ 8,222 $ .74
</TABLE>
(1) Net loss was increased by a voluntary severance program after-tax charge of
$4.2 million or $.38 per share.
(2) Net loss was increased by an after-tax charge of $1.2 million or $.11 per
share resulting from a LIFO charge.
(3) Net earnings were reduced by an after-tax extraordinary charge of $4.0
million or $.36 per share related to the early retirement of debt. Earnings
before the extraordinary charge were $2.4 million or $.22 per share.
(4) Net earnings were reduced by a after-tax store closing charge of $10.6
million or $.95 per share. Net earnings were increased by $0.3 million or
$.03 per share resulting from a LIFO credit.
(5) Net earnings were reduced by a one time after-tax charge of $0.7 million or
$.07 per share for an incentive payment to the bondholders to waive a
restrictive covenant, which waiver would permit the Company to repurchase
up to $20 million of its Common Stock.
(6) Net earnings were increased by $0.8 million or $.07 per share resulting
from a LIFO credit.
NOTE L--EXTRAORDINARY CHARGE
The extraordinary charge in fiscal 1993 relates to the premium paid to
retire the Senior Subordinated Notes early of $4.2 million and the write-off of
related deferred financing costs of $2.2 million (net of applicable income taxes
of $2.4 million).
NOTE M--VOLUNTARY SEVERANCE PROGRAM
The fiscal 1994 loss includes a $6.9 million pretax charge in the
second quarter for a voluntary severance program for approximately 600 clerks in
the Chicago area. Management expects that such severance costs should be offset
in the future as a result of lower wage and benefit costs of replacement
employees.
NOTE N -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of the Company's financial
instruments as of January 28, 1995, and January 29, 1994, are as follows:
<TABLE>
<CAPTION>
JANUARY 28, 1995 JANUARY 29, 1994
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and cash equivalents......................... $ 4,096 $ 4,096 $ 8,056 $ 8,056
Marketable securities............................. 5,239 5,239 -- --
Bank revolving credit loan........................ 22,000 22,000 3,000 3,000
Senior Notes...................................... 100,000 40,000 100,000 99,500
</TABLE>
The fair value of cash and cash equivalents approximated its carrying
value due to the short-term nature of these instruments. The fair value of
marketable securities are based on quoted market prices. The fair value of the
Bank revolving credit loan approximated its carrying value due to its floating
interest rate. The fair value of the Senior Notes are based on quoted market
prices.
The amortized cost, gross unrealized gains and losses, estimated fair
values and maturities of the Company's marketable securities at January 28,
1995, are summarized as follows:
<TABLE>
<CAPTION>
JANUARY 28, 1995
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
Money market mutual fund, due
within one year................................... $ 1,921 -- -- $ 1,921
Municipal bonds, due from 5 to 10
years............................................ 3,526 -- 208 3,318
Total marketable securities......................... $ 5,447 -- $ 208 $ 5,239
NOTE O -- LITIGATION
</TABLE>
The Company is the plaintiff in a lawsuit filed on March 31, 1995, in
the United States District Court for the Central District of Illinois. The
defendant in the case is National NLP, Inc. ("National"). The case arises from
discussions between the Company and National concerning the possible sale and
lease back of certain of the Company's stores. After the termination of those
discussions, National filed suit against the Company in Florida alleging that a
contract existed between the Company and National. That case was voluntarily
dismissed by National when the Company contested the jurisdiction of the Florida
court. In the case instituted by the Company, the Company is seeking a
declaratory judgment that no contract exists between the Company and National.
National has counterclaimed against the Company in three counts: i) seeks
declaratory judgement that a contract exists; ii) seeks specific performance;
iii) seeks damages in excess of $10,000,000 for breach of contract. The Company
is contesting the counterclaim and is vigorously pursuing its action. The
Company is not a party to any other material pending legal proceedings other
than routine litigation incidental to the Company's business. Although it is not
possible to predict the outcome of these unresolved legal actions and the
amounts of claimed damages are large, the Company believes that these unresolved
legal actions will not have a material adverse effect on its consolidated
financial position or results of operations.
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no disagreements on accounting principles or practices
or financial statement disclosure between the Company and its independent
certified public accountants during the two fiscal years ended January 28, 1995.
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item concerning directors is set forth
under "Election of Directors" in the definitive proxy statement filed by the
Company with the Securities and Exchange Commission and is hereby incorporated
by reference into this 10-K. Certain information concerning the Company's
executive officers is included in Item 4(a) of Part I of this report.
ITEM 11: EXECUTIVE COMPENSATION
The information required by this item is set forth in the section
entitled "Executive Compensation" in the definitive proxy statement filed by the
Company with the Securities and Exchange Commission and is hereby incorporated
by reference into this Form 10-K.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is set forth in the tabulation of
the amount and nature of beneficial ownership of the Company's Common Stock
under the heading "Principal Shareholders and Election of Directors" in the
definitive proxy statement filed by the Company with the Securities and Exchange
Commission and is hereby incorporated by reference into this Form 10-K.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth in the section
entitled "Compensation of Directors" in the definitive proxy statement filed by
the Company with the Securities and Exchange Commission and is hereby
incorporated by reference into this Form 10-K.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
(a) The following documents are filed as a part of this report:
<S> <C>
1. Financial Statements:
- Independent Auditors' Report 22
- Consolidated Balance Sheets as of January 28, 1995 and January 29, 1994 23
- Consolidated Statements of Operations for the years ended January 28, 24
1995, January 29, 1994, and January 30, 1993
- Consolidated Statements of Equity for the years ended January 28, 1995, 25
January 29, 1994, and January 30, 1993
- Consolidated Statements of Cash Flows for the years ended 26
January 28, 1995, January 29, 1994, and January 30, 1993
- Notes to the Consolidated Financial Statements 27
2. Financial Statement Schedules:
All schedules are omitted because they are not applicable or not
required, or because the information required therein is included in
the consolidated financial statements or the notes thereto.
</TABLE>
3. Exhibits - see Exhibit Index on page 44.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of fiscal
1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
EAGLE FOOD CENTERS, INC.
By: /s/ Pasquale V. Petitti
Pasquale V. Petitti
President, Chief Executive Officer
DATED: April 28, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Martin J. Rabinowitz Chairman, and Director April 24, 1995
Martin J. Rabinowitz
/s/ Pasquale V. Petitti President and Director April 24, 1995
Pasquale V. Petitti (Principal Executive Officer)
/s/ Herbert T. Dotterer Senior Vice President - Finance and April 24, 1995
Herbert T. Dotterer Administration, Chief Financial Officer,
Secretary and Director
(Principal Financial Officer)
/s/ Peter B. Foreman Director April 24, 1995
Peter B. Foreman
/s/ Steven M. Friedman Director April 24, 1995
Steven M. Friedman
/s/ Michael J. Knilans Director April 24, 1995
Michael J. Knilans
/s/ William J. Snyder Director April 24, 1995
William J. Snyder
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<C> <C>
3.1-- Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the
Registration Statement on Form S-1 No. 33-29404 and incorporated herein by
reference).
3.2-- By-laws of the Company (filed as Exhibit 3.2 to the Registration Statement on
Form S-1 No. 33-29404 and incorporated herein by reference).
4.1-- Form of Note (filed as Exhibit 4.3 to the Registration Statement on Form S-1 No.
33-59454 and incorporated herein by reference).
4.2-- Form of Indenture, dated as of April 26, 1993, between the
Company and First Trust National Association, as trustee
(filed as Exhibit 4.4 to the Registration Statement on Form
S-1 No. 33-59454 and incorporated herein by reference).
10.1-- Transaction Agreement, dated as of October 9, 1987, between EFC and Lucky
Stores, Inc. (filed as Exhibit 10.8 to the Registration Statement on Form S-1 No.
33-20450 and incorporated herein by reference).
10.2-- Assignment and Assumption Agreement, dated November 10,
1987, among EFC, Lucky Stores, Inc. and Pasquale V. Petitti
regarding the Deferred Compensation Agreement (filed as
Exhibit 10.11 of the Registration Statement on Form S-1 No.
33-20450 and incorporated herein by reference).
10.3-- Trademark License Agreement, dated November 10, 1987, between Lucky Stores,
Inc. and EFC (filed as Exhibit 10.19 to the Registration Statement on Form S-1
No. 33-20450 and incorporated herein by reference).
10.4-- Letter Agreement, dated June 10, 1988, between the Company's
predecessor and Lucky Stores, Inc. amending the Trademark
License Agreement (filed as Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the year ended January 28,
1989 (the "1988 10-K") and incorporated herein by
reference).
10.5-- Management Information Services Agreement, dated November 10, 1987,
between Lucky Stores, Inc. and the Company's predecessor (filed as
Exhibit 10.20 to the Registration Statement on Form S-1 No. 33-20450 and
incorporated herein by reference).
10.6-- Letter Agreement, dated June 10, 1988, between the Company's predecessor and
Lucky Stores, Inc. Stores, Inc. amending the Management Information Services
Agreement (filed as Exhibit 10.22 to the Company's Annual Report on Form
10-K for the year ended January 28, 1989 and incorporated herein by reference).
10.7-- Non-Competition Agreement, dated November 10, 1987, between the Company's
predecessor and Lucky Stores, Inc. (filed as Exhibit 10.21 to the Registration
Statement on Form S-1 No. 33-20450 and incorporated herein by reference).
10.8-- Credit Agreement, dated as of April 26, 1993, among the
Company, as borrower, the lenders party thereto and Caisse
Nationale de Credit Agricole, Chicago Branch, and the First
National Bank of Chicago as co-agents; as amended by First
Amendment to Credit Agreement dated as of October 15, 1993,
a Second Amendment to Credit Agreement and Waiver dated as
of January 28, 1994, and a Third Amendment to Credit
Agreement dated April 29, 1994.
10.9-- Letter Agreement, dated April 28, 1988, among American
Stores Company, the Company's predecessor and Odyssey
Partners (filed as Exhibit 10.29 to the Registration
Statement on Form S-1 No. 33-20450 and incorporated herein
by reference).
10.10-- Eagle Food Centers, Inc. Stock Incentive Plan, adopted in June 1990 (filed as
Exhibit 19 to the Company's Annual Report on Form 10-K for the year ended
February 1, 1992 and incorporated herein by reference).
10.11-- Agreement, dated as of February 8, 1993, by and between the Company and
Oakridge Properties, Ltd. (filed as Exhibit 10.17 to the Registration Statement on
Form S-1 No. 33-59454 and incorporated herein by reference).
10.12-- Form of Irrevocable Trust Agreement, to be dated as of April
26, 1993, among the Company, Eagle Capital Corporation II
and Shawmut Bank Connecticut, National Association, as
trustee (filed as Exhibit 10.18 to the Registration
Statement on Form S-1 No. 33-59454 and incorporated herein
by reference).
10.13-- Performance Equity Plan of the Company as amended March 12,
1992. (Filed as Exhibit 10.18 to the Company's Annual Report
on Form 10-K for the year ended January 30, 1993 and
incorporated herein by reference.)
10.14*-- Fourth Amendment to the Credit Agreement and waiver dated
September 7, 1994. Fifth Amendment to the Credit Agreement
and waiver dated December 9, 1994. Sixth Amendment to the
Credit Agreement dated January 27, 1995.
12.1-- Computation of Ratio of Earnings to Fixed Charges (filed as Exhibit 12.1 to the
Registration Statement on Form S-1 No. 33-59454 and incorporated herein by
reference).
22.*-- Subsidiaries of the Registrant.
27.*-- Financial Data Schedule. (For SEC use only.)
</TABLE>
*Filed herewith.
EXHIBIT 22
EAGLE FOOD CENTERS, INC.
SUBSIDIARIES
Eagle Pharmacy Co.
Milan Distributing Co.
Eagle Country Markets, Inc.
BOGO'S, Inc.
Talon Insurance Company, Inc.
EXHIBIT 10.14
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of
this 7th day of September, 1994, is entered into among EAGLE FOOD CENTERS, INC.,
a Delaware corporation (the "Borrower"), CAISSE NATIONALE DE CREDIT AGRICOLE
("CNCA") and THE FIRST NATIONAL BANK OF CHICAGO ("FNBC"), as co-agents (the
"Co-Agents"), the Banks (as hereafter defined), and CNCA, acting through its
Chicago Branch, as agent for the Banks (the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, certain lenders (the "Banks"), the Agent and the
Co-Agents are parties to a Credit Agreement dated as of April 26, 1993, as
amended by a First Amendment to Credit Agreement dated as of October 15, 1993, a
Second Amendment to Credit Agreement and Waiver dated as of January 28, 1994 and
a Third Amendment to Credit Agreement dated as of April 29, 1994 (the "Credit
Agreement"), pursuant to which the Banks established various credit facilities
for the benefit of the Borrower; and
WHEREAS, the parties hereto desire to amend the Credit Agreement with
respect to certain matters as hereafter specifically provided;
NOW, THEREFORE, the parties hereto agree as follows:
1. Unless otherwise specified herein, all capitalized terms used herein
shall have the meanings specified in the Credit Agreement.
2. Section 5.12 of the Credit Agreement is hereby amended and restated to
read as follows:
SECTION 5.12. Tangible Net Worth. Maintain a Tangible Net Worth
at the end of each fiscal quarter of not less than (a) $55,000,000, at
all times to and including the end of the first fiscal quarter of the
1994 fiscal year; (b) $53,380,000, at the end of the second fiscal
quarter of the 1994 fiscal year; (c) $55,000,000, at the end of the third
fiscal quarter of the 1994 fiscal year; (d) $57,000,000, thereafter to
and including the end of the third fiscal quarter of the 1995 fiscal
year; (e) $61,000,000, thereafter to and including the end of the third
fiscal quarter of the 1996 fiscal year; (f) $65,000,000, thereafter to
and including the end of the third fiscal quarter of the 1997 fiscal
year; and (g) $69,000,000, at all times thereafter. For the purposes
hereof, the 1994 fiscal year shall mean the fiscal year ending on January
28, 1995.
3. Section 6.08 of the Credit Agreement is hereby amended by amending and
restating clause (b) thereof to read in its entirety as follows:
(b) sale and leaseback transactions (other than those referred
to in clause (a) above) where the aggregate fair market value of
all property subject to such transactions occurring on or after
April 26, 1993 would not exceed Thirty-Two Million
Dollars ($32,000,000).
4. Section 6.15 of the Credit Agreement is hereby amended and restated to
read as follows:
SECTION 6.15. Leverage Ratio. Permit the Leverage Ratio to equal
or exceed (a) 3.15 at the end of any fiscal quarter ending before July
30, 1994; (b) 3.43 at the end of the fiscal quarter ending July 30, 1994;
(c) 3.15 at the end of the fiscal quarters ending October 29, 1994 and
January 28, 1995; (d) 3.00 at the end of any fiscal quarter during the
fiscal year ending February 3, 1996; and (e) 2.75 at the end of any
fiscal quarter thereafter.
5. In order to induce the Banks and the Agent to enter into this
Amendment, the Borrower represents and warrants that:
(a) The execution and delivery of this Amendment by the Borrower and the
performance of the Credit Agreement as amended by this Amendment (the "Amended
Agreement") (i) have been duly authorized by all requisite corporate action and
(ii) will not (A) violate (1) any provision of the certificate of incorporation
or by-laws of the Borrower or any of its Subsidiaries or any provision of any
applicable law, statute, rule or regulation (including, without limitation,
Regulations G, T, U or X), (2) any order of any court, or any rule, regulation
or order of any other agency of government binding upon the Borrower or any of
its Subsidiaries or (3) any provisions of any indenture, agreement or other
instrument to which the Borrower or any of its Subsidiaries is a party, or by
which the Borrower or any of its Subsidiaries, or any of their respective
properties or assets is or may be bound, (B) be in conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default under any indenture, agreement or other instrument referred to in clause
(ii)(A)(3) above or (C) result in the creation or imposition of any Lien (other
than in favor of the Agent for the benefit of the Banks as contemplated by the
Amended Agreement) upon any property or assets of the Borrower or any of its
Subsidiaries.
(b) No registration with or consent or approval of, or other action by,
any Federal, state or other governmental agency, authority or regulatory body is
or will be required in connection with the execution and delivery by the
Borrower of this Amendment or the performance by the Borrower of the Amended
Agreement.
(c) This Amendment and the Amended Agreement constitute legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms (subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting creditors' rights generally).
(d) The representations and warranties set forth in Article III of the
Credit Agreement are true and correct in all material respects with the same
effect as though made on and as of the date hereof, except to the extent that
any such representation or warranty relates to an earlier date.
(e) The Borrower is in compliance with all the terms and provisions
contained in the Credit Agreement and in the other Loan Documents and the Senior
Note Indenture on its part to be observed or performed and no Event of Default
or Potential Default has occurred and is continuing.
6. Except as amended and modified by this Amendment, the Credit Agreement
shall continue in full force and effect.
7. This Amendment may be executed in one or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute but one agreement.
8. This Amendment shall become effective when (a) copies hereof which,
when taken together, bear the signature of the Borrower and the Required Banks
shall be delivered or mailed to the Agent and (b) the Agent has received such
other information, approvals, documents or instruments as the Agent may
reasonably request.
9. This Amendment shall be construed in accordance with and governed by
the laws of the State of Illinois without giving effect to choice of law
doctrine.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their duly authorized officers, all as of the day and year
first written above.
EAGLE FOOD CENTERS, INC.
By:
Title:
CAISSE NATIONALE DE CREDIT
AGRICOLE, as Agent
By:
Title:
CAISSE NATIONALE DE CREDIT
AGRICOLE, as Co-Agent and a Bank
By:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO, as Co-Agent and a Bank
By:
Title:
NATIONAL BANK OF CANADA
By:
Title:
BERLINER HANDELS-UND
FRANKFURTER BANK
By:
Title:
NORWEST BANK IOWA, NATIONAL
ASSOCIATION, f/k/a
DAVENPORT BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION
By:
Title:
FIFTH AMENDMENT TO CREDIT AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as
of this 9th day of December, 1994, is entered into among EAGLE FOOD CENTERS,
INC., a Delaware corporation (the "Borrower"), CAISSE NATIONALE DE CREDIT
AGRICOLE ("CNCA") and THE FIRST NATIONAL BANK OF CHICAGO ("FNBC"), as co-agents
(the "Co-Agents"), the Banks (as hereafter defined), and CNCA, acting through
its Chicago Branch, as agent for the Banks (the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, certain lenders (the "Banks"), the Agent and the
Co-Agents are parties to a Credit Agreement dated as of April 26, 1993, as
amended by a First Amendment to Credit Agreement dated as of October 15, 1993, a
Second Amendment to Credit Agreement and Waiver dated as of January 28, 1994, a
Third Amendment to Credit Agreement dated as of April 29, 1994 and a Fourth
Amendment to Credit Agreement dated as of September 7, 1994 (the "Credit
Agreement"), pursuant to which the Banks established various credit facilities
for the benefit of the Borrower; and
WHEREAS, the parties hereto desire to amend the Credit Agreement with
respect to certain matters as hereafter specifically provided;
NOW, THEREFORE, the parties hereto agree as follows:
1. Unless otherwise specified herein, all capitalized terms used herein
shall have the meanings specified in the Credit Agreement.
2. Section 5.12 of the Credit Agreement is hereby amended and restated to
read as follows:
SECTION 5.12. Tangible Net Worth. Maintain a Tangible Net
Worth at the end of each fiscal quarter of not less than (a)
$55,000,000, at all times to and including the end of the first fiscal
quarter of the 1994 fiscal year; (b) $53,380,000, at the end of the
second fiscal quarter of the 1994 fiscal year; (c) $46,135,000, at the
end of the third fiscal quarter of the 1994 fiscal year; (d)
$57,000,000, thereafter to and including the end of the third fiscal
quarter of the 1995 fiscal year; (e) $61,000,000, thereafter to and
including the end of the third fiscal quarter of the 1996 fiscal year;
(f) $65,000,000, thereafter to and including the end of the third
fiscal quarter of the 1997 fiscal year; and (g) $69,000,000, at all
times thereafter. For the purposes hereof, the 1994 fiscal year shall
mean the fiscal year ending on January 28, 1995.
3. Section 5.14 of the Credit Agreement is hereby amended and restated to
read as follows:
SECTION 5.14. Fixed Charge Coverage Ratio. Maintain a Fixed
Charge Coverage Ratio at the end of each fiscal quarter of at least (a)
1.80:1 for all fiscal quarters ending on or before January 29, 1994;
(b) 1.70:1 for the fiscal quarter ending July 30, 1994; (c) 1.53:1 for
the fiscal quarter ending October 29, 1994; and (d) 1.70:1 for all
fiscal quarters ending thereafter.
4. Section 6.15 of the Credit Agreement is hereby amended and restated to
read as follows:
SECTION 6.15. Leverage Ratio. Permit the Leverage Ratio to
equal or exceed (a) 3.15:1 at the end of any fiscal quarter ending
before July 30, 1994; (b) 3.43:1 at the end of the fiscal quarter
ending July 30, 1994; (c) 4.36:1 at the end of the fiscal quarter
ending October 29, 1994; (d) 3.15:1 at the end of the fiscal quarter
ending January 28, 1995; (e) 3.00:1 at the end of any fiscal quarter
during the fiscal year ending February 3, 1996; and (f) 2.75:1 at the
end of any fiscal quarter thereafter.
5. In order to induce the Banks and the Agent to enter into this
Amendment, the Borrower represents and warrants that:
(a) The execution and delivery of this Amendment by the
Borrower and the performance of the Credit Agreement as amended by this
Amendment (the "Amended Agreement") (i) have been duly authorized by all
requisite corporate action and (ii) will not (A) violate (1) any provision of
the certificate of incorporation or by-laws of the Borrower or any of its
Subsidiaries or any provision of any applicable law, statute, rule or regulation
(including, without limitation, Regulations G, T, U or X), (2) any order of any
court, or any rule, regulation or order of any other agency of government
binding upon the Borrower or any of its Subsidiaries or (3) any provisions of
any indenture, agreement or other instrument to which the Borrower or any of its
Subsidiaries is a party, or by which the Borrower or any of its Subsidiaries, or
any of their respective properties or assets is or may be bound, (B) be in
conflict with, result in a breach of or constitute (alone or with notice or
lapse of time or both) a default under any indenture, agreement or other
instrument referred to in clause (ii)(A)(3) above or (C) result in the creation
or imposition of any Lien (other than in favor of the Agent for the benefit of
the Banks as contemplated by the Amended Agreement) upon any property or assets
of the Borrower or any of its Subsidiaries.
(b) No registration with or consent or approval of, or other
action by, any Federal, state or other governmental agency, authority or
regulatory body is or will be required in connection with the execution and
delivery by the Borrower of this Amendment or the performance by the Borrower of
the Amended Agreement.
(c) This Amendment and the Amended Agreement constitute legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms (subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting creditors' rights generally).
(d) The representations and warranties set forth in Article
III of the Credit Agreement are true and correct in all material respects with
the same effect as though made on and as of the date hereof, except to the
extent that any such representation or warranty relates to an earlier date.
(e) The Borrower is in compliance with all the terms and
provisions contained in the Credit Agreement and in the other Loan Documents and
the Senior Note Indenture on its part to be observed or performed and no Event
of Default or Potential Default has occurred and is continuing.
6. Except as amended and modified by this Amendment, the Credit Agreement
shall continue in full force and effect.
7. This Amendment may be executed in one or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute but one agreement.
8. This Amendment shall become effective when (a) copies hereof which,
when taken together, bear the signature of the Borrower and the Required Banks
shall be delivered or mailed to the Agent and (b) the Agent has received such
other information, approvals, documents or instruments as the Agent may
reasonably request.
9. This Amendment shall be construed in accordance with and governed by
the laws of the State of Illinois without giving effect to choice of law
doctrine.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their duly authorized officers, all as of the day and year
first written above.
EAGLE FOOD CENTERS, INC.
By:
Title:
CAISSE NATIONALE DE CREDIT
AGRICOLE, as Agent
By:
Title:
CAISSE NATIONALE DE CREDIT
AGRICOLE, as Co-Agent and a Bank
By:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO, as Co-Agent and a Bank
By:
Title:
NATIONAL BANK OF CANADA
By:
Title:
BERLINER HANDELS-UND
FRANKFURTER BANK
By:
Title:
NORWEST BANK IOWA, NATIONAL
ASSOCIATION, f/k/a
DAVENPORT BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION
By:
Title:
SIXTH AMENDMENT TO CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as
of this 27th day of January, 1995, is entered into among EAGLE FOOD CENTERS,
INC., a Delaware corporation (the "Borrower"), CAISSE NATIONALE DE CREDIT
AGRICOLE ("CNCA") and THE FIRST NATIONAL BANK OF CHICAGO ("FNBC"), as co-agents
(the "Co-Agents"), the Banks (as hereafter defined), and CNCA, acting through
its Chicago Branch, as agent for the Banks (the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, certain lenders (the "Banks"), the Agent and the
Co-Agents are parties to a Credit Agreement dated as of April 26, 1993, as
amended by a First Amendment to Credit Agreement dated as of October 15, 1993, a
Second Amendment to Credit Agreement and Waiver dated as of January 28, 1994, a
Third Amendment to Credit Agreement dated as of April 29, 1994, a Fourth
Amendment to Credit Agreement dated as of September 7, 1994 and a Fifth
Amendment dated as of December 9, 1994 (the "Credit Agreement"), pursuant to
which the Banks established various credit facilities for the benefit of the
Borrower; and
WHEREAS, the parties hereto desire to amend the Credit Agreement with
respect to certain matters as hereafter specifically provided;
NOW, THEREFORE, the parties hereto agree as follows:
1. Unless otherwise specified herein, all capitalized terms used herein
shall have the meanings specified in the Credit Agreement.
2. Section 1.01 of the Credit Agreement is hereby amended by adding the
following sentence to the end of the "Tangible Net Worth" definition contained
therein:
Notwithstanding the foregoing, Tangible Net Worth shall not be reduced
by up to $12,000,000 of charges for store closings that were deducted
in computing Net Income for the fiscal quarter ending January 28,
1995.
3. Section 2.04 of the Credit Agreement is hereby amended by adding the
following sentence to the end of such Section:
If any sale or other transaction referred to in Sections 6.03(b),
6.03(c) or 6.08 occurs, the Loans shall be repaid in an amount equal
to all net cash proceeds of such transactions within one Business Day
after the receipt of each such payment.
4. Section 4.01(e) of the Credit Agreement is hereby amended and
restated to read as follows:
(e) The Agent shall have received a certificate in a form
acceptable to it certifying as to the amount of the Borrowing Base as
of such date.
5. Section 5.12 of the Credit Agreement is hereby amended and restated
to read as follows:
SECTION 5.12. Tangible Net Worth. Maintain a Tangible Net Worth
at the end of each fiscal quarter of not less than (a) $55,000,000, at
all times to and including the end of the first fiscal quarter of the
1994 fiscal year; (b) $53,380,000, at the end of the second fiscal
quarter of the 1994 fiscal year; (c) $46,135,000, at the end of the
third fiscal quarter of the 1994 fiscal year; (d) $39,720,000, at the
end of the fourth fiscal quarter of the 1994 fiscal year; (e)
$57,000,000, thereafter to and including the end of the third fiscal
quarter of the 1995 fiscal year; (f) $61,000,000, thereafter to and
including the end of the third fiscal quarter of the 1996 fiscal year;
(g) $65,000,000, thereafter to and including the end of the third
fiscal quarter of the 1997 fiscal year; and (h) $69,000,000, at all
times thereafter. For the purposes hereof, the 1994 fiscal year shall
mean the fiscal year ending on January 28, 1995.
6. Section 5.14 of the Credit Agreement is hereby amended and restated
to read as follows:
SECTION 5.14. Fixed Charge Coverage Ratio. Maintain a Fixed
Charge Coverage Ratio at the end of each fiscal quarter of at least
(a) 1.80:1 for all fiscal quarters ending on or before January 29,
1994; (b) 1.70:1 for the fiscal quarter ending July 30, 1994; (c)
1.53:1 for the fiscal quarter ending October 29, 1994; (d) 1.27:1 for
the fiscal quarter ending January 28, 1995; and (e) 1.70:1 for all
fiscal quarters ending thereafter.
7. Section 6.06(a) of the Credit Agreement is hereby amended and
restated to read in its entirety as follows:
Declare or pay, directly or indirectly, any Restricted Payment or set
apart any sum for such purpose.
8. Section 6.14 of the Credit Agreement is hereby amended and restated
to read in its entirety as follows:
SECTION 6.14. Capital Expenditures. Permit the aggregate Capital
Expenditures for the four most recent fiscal quarters to exceed
$16,000,000.
9. Section 6.15 of the Credit Agreement is hereby amended and restated
to read as follows:
SECTION 6.15. Leverage Ratio. Permit the Leverage Ratio to equal
or exceed (a) 3.15:1 at the end of any fiscal quarter ending before
July 30, 1994; (b) 3.43:1 at the end of the fiscal quarter ending July
30, 1994; (c) 4.36:1 at the end of the fiscal quarter ending October
29, 1994; (d) 5.75:1 at the end of the fiscal quarter ending January
28, 1995; (e) 3.00:1 at the end of any fiscal quarter during the
fiscal year ending February 3, 1996; and (f) 2.75:1 at the end of any
fiscal quarter thereafter.
10. From and after the effective date of this Amendment, the Borrower
shall not have any right to request any Eurodollar Loan or the right to convert
any Loan into, or continue any Loan as, a Eurodollar Loan.
11. The undersigned Banks hereby waive compliance with the provisions
of Section 5.15 of the Credit Agreement for the fiscal year ending January 28,
1995.
12. In order to induce the Banks and the Agent to enter into this
Amendment, the Borrower represents and warrants that:
(a) The execution and delivery of this Amendment by the
Borrower and the performance of the Credit Agreement as amended by this
Amendment (the "Amended Agreement") (i) have been duly authorized by all
requisite corporate action and (ii) will not (A) violate (1) any provision of
the certificate of incorporation or by-laws of the Borrower or any of its
Subsidiaries or any provision of any applicable law, statute, rule or regulation
(including, without limitation, Regulations G, T, U or X), (2) any order of any
court, or any rule, regulation or order of any other agency of government
binding upon the Borrower or any of its Subsidiaries or (3) any provisions of
any indenture, agreement or other instrument to which the Borrower or any of its
Subsidiaries is a party, or by which the Borrower or any of its Subsidiaries, or
any of their respective properties or assets is or may be bound, (B) be in
conflict with, result in a breach of or constitute (alone or with notice or
lapse of time or both) a default under any indenture, agreement or other
instrument referred to in clause (ii)(A)(3) above or (C) result in the creation
or imposition of any Lien (other than in favor of the Agent for the benefit of
the Banks as contemplated by the Amended Agreement) upon any property or assets
of the Borrower or any of its Subsidiaries.
(b) No registration with or consent or approval of, or other
action by, any Federal, state or other governmental agency, authority or
regulatory body is or will be required in connection with the execution and
delivery by the Borrower of this Amendment or the performance by the Borrower of
the Amended Agreement.
(c) This Amendment and the Amended Agreement constitute legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms (subject, as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting creditors' rights generally).
(d) The representations and warranties set forth in Article
III of the Credit Agreement are true and correct in all material respects with
the same effect as though made on and as of the date hereof, except to the
extent that any such representation or warranty relates to an earlier date.
(e) The Borrower is in compliance with all the terms and
provisions contained in the Amended Agreement and in the other Loan Documents
and the Senior Note Indenture on its part to be observed or performed and no
Event of Default or Potential Default has occurred and is continuing.
13. Except as amended, modified or waived by this Amendment, the Credit
Agreement shall continue in full force and effect.
14. This Amendment may be executed in one or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute but one agreement.
15. This Amendment shall become effective when (a) copies hereof which,
when taken together, bear the signature of the Borrower and the Required Banks
shall be delivered or mailed to the Agent, (b) the Borrower shall have paid to
the Agent an amendment fee payable to each Bank in an amount equal to one-eighth
of one percent (0.125%) of such Bank's Percentage of the Commitment and (c) the
Agent has received such other information, approvals, documents or instruments
as the Agent may reasonably request.
16. This Amendment shall be construed in accordance with and governed
by the laws of the State of Illinois without giving effect to choice of law
doctrine.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their duly authorized officers, all as of the day and year
first written above.
EAGLE FOOD CENTERS, INC.
By:
Title:
CAISSE NATIONALE DE CREDIT
AGRICOLE, as Agent
By:
Title:
CAISSE NATIONALE DE CREDIT
AGRICOLE, as Co-Agent and a Bank
By:
Title:
THE FIRST NATIONAL BANK OF
CHICAGO, as Co-Agent and a Bank
By:
Title:
NATIONAL BANK OF CANADA
By:
Title:
BERLINER HANDELS-UND
FRANKFURTER BANK
By:
Title:
NORWEST BANK IOWA, NATIONAL
ASSOCIATION, f/k/a
DAVENPORT BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION
By:
Title:
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<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-END> JAN-28-1995
<CASH> 4,096,000
<SECURITIES> 5,239,000
<RECEIVABLES> 18,766,000
<ALLOWANCES> 518,000
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<CURRENT-LIABILITIES> 113,385,000
<BONDS> 100,000,000
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0
0
<OTHER-SE> 42,370,000
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