SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 28, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission File Number 0-17871
EAGLE FOOD CENTERS, INC.
(Exact name of registrant as specified in the charter)
Delaware 36-3548019
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Rt. 67 & Knoxville Rd., Milan, Illinois 61264
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (309) 787-7730
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
The number of shares of the Registrant's Common Stock, par value
one cent ($0.01) per share, outstanding at November 30, 1995 was 11,176,994.
Page 1 of 7 pages
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended Three Quarters Ended
Oct 28, Oct 29, Oct 28, Oct 29,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Sales. . . . . . . . . . . . . . . . . $ 246,201 $ 252,183 $ 740,776 $ 754,502
Cost of Goods Sold . . . . . . . . . . 184,365 194,807 555,415 572,299
Gross Margin. . . . . . . . . . . . 61,836 57,376 185,361 182,203
Operating Expenses:
Selling, General & Administrative . 54,798 55,307 167,683 165,269
Voluntary Severance Program . . . . 0 0 0 6,917
Depreciation and Amortization . . . 6,012 5,866 18,377 17,537
Operating Income (Loss). . . . . 1,026 (3,797) (699) (7,520)
Interest Expense . . . . . . . . . . . 3,808 3,692 11,714 10,758
Earnings (Loss) Before Income Taxes
(Benefit) and Extraordinary Charge. (2,782) (7,489) (12,413) (18,278)
Income Taxes (Benefit) . . . . . . . . (139) (66) (621) (4,166)
Earnings (Loss) Before Extraordinary
Charge. . . . . . . . . . . . . . . (2,643) (7,423) (11,792) (14,112)
Extraordinary Charge . . . . . . . . . 0 0 625 0
Net Earnings (Loss). . . . . . . . . . $ (2,643) $ (7,423) $ (12,417) $ (14,112)
Earnings (Loss) per Share:
Before Extraordinary Charge . . . . $ (0.24) $ (0.67) $ (1.06) $ (1.28)
Extraordinary Charge. . . . . . . . 0 0 (0.06) 0
Net Earnings (Loss) . . . . . . . . $ (0.24) $ (0.67) $ (1.12) $ (1.28)
Weighted Average Common Shares
Outstanding . . . . . . . . . . . . . 11,176,994 11,051,994 11,125,254 11,051,994
</TABLE>
See notes to consolidated financial statements.
<PAGE>
EAGLE FOOD CENTERS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
October 28, January 28,
1995 1995
(Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . $ 2,068 $ 4,096
Restricted assets - marketable
securities, at market . . . . . . . 7,911 5,239
Accounts receivable. . . . . . . . . . 13,064 11,035
Income taxes receivable. . . . . . . . 2,186 7,213
Inventories. . . . . . . . . . . . . . 85,032 83,939
Prepaid expenses and other . . . . . . 3,269 2,663
Total current assets. . . . . . . . 113,530 114,185
Property and equipment (net) . . . . . . 147,643 167,749
Other assets:
Deferred debt issuance costs . . . . . 2,626 2,960
Excess of cost over fair value
of net assets acquired. . . . . . . 2,589 2,650
Property held for sale/leaseback . . . 20,767 20,710
Other. . . . . . . . . . . . . . . . . 2,930 3,230
Total other assets. . . . . . . . . 28,912 29,550
Total assets. . . . . . . . . . . . $ 290,085 $ 311,484
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable . . . . . . . . . . . $ 46,599 $ 44,738
Payroll and employee benefits. . . . . 14,408 14,678
Accrued liabilities. . . . . . . . . . 11,877 11,982
Closed facilities liability. . . . . . 17,774 8,203
Accrued taxes. . . . . . . . . . . . . 7,085 8,117
Bank revolving credit loan . . . . . . 21,786 22,000
Current portion of long-term debt. . . 3,782 3,667
Total current liabilities . . . . . 123,311 113,385
Long-term debt:
Senior Notes . . . . . . . . . . . . . 100,000 100,000
Capital lease obligations. . . . . . . 15,354 18,216
Total long-term debt. . . . . . . . 115,354 118,216
Other liabilities:
Reserve for closed facilities. . . . . 10,961 27,082
Other deferred liabilities . . . . . . 10,043 10,316
Total other liabilities . . . . . . 21,004 37,398
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 . . . . 53,337 53,541
Common stock in treasury, at cost,
323,006 and 448,006 shares. . . . . (2,055) (2,850)
Other. . . . . . . . . . . . . . . . . (320) (387)
Accumulated (deficit) . . . . . . . . (20,661) (7,934)
Total shareholders' equity. . . . . 30,416 42,485
Total liabilities and
shareholders' equity . . . . . . $ 290,085 $ 311,484
</TABLE>
See notes to consolidated financial statements.<PAGE>
<PAGE>
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Quarters Ended
Oct 28, 1995 Oct 29, 1994
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . .$ (12,417) $ (14,112)
Adjustments to reconcile net earnings (loss)
to net cash flows from operating activities:
Depreciation and amortization . . . . . . . . . 18,377 17,537
Extraordinary loss on retirement of debt. . . . 658 0
LIFO charge . . . . . . . . . . . . . . . . . . 850 350
Deferred charges and credits. . . . . . . . . . 2,333 3,688
Loss on disposal of assets. . . . . . . . . . . 458 652
Changes in assets and liabilities:
Receivables and other assets. . . . . . . . . . 2,222 618
Inventories . . . . . . . . . . . . . . . . . . (1,943) (802)
Accounts payable. . . . . . . . . . . . . . . . 1,861 5,615
Accrued and other liabilities . . . . . . . . . (1,680) (1,373)
Reserve for closed stores and warehouse . . . . (8,053) (7,257)
Net cash flows from operating activities . . 2,666 4,916
Cash flows from investing activities:
Additions to property and equipment . . . . . . (2,633) (7,931)
Additions to property held for sale/leaseback . (56) (9,021)
Purchase of marketable securities . . . . . . . (2,324) (4,745)
Cash proceeds from dispositions of
property and equipment. . . . . . . . . . . . 3,966 772
Net cash flows from investing activities . . (1,047) (20,925)
Cash flows from financing activities:
Retirement of debt. . . . . . . . . . . . . . . 0 (237)
Net revolving credit borrowing (repayment). . . (214) 16,000
Principal payments of capital
lease obligations. . . . . . . . . . . . . . (2,749) (2,029)
Deferred financing costs. . . . . . . . . . . . (684) (175)
Net cash flows from financing activities . . (3,647) 13,559
Increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . . . (2,028) (2,450)
Cash and cash equivalents at beginning
of period . . . . . . . . . . . . . . . . . . 4,096 8,056
Cash and cash equivalents at end of period . . . $ 2,068 $ 5,606
Supplemental disclosures of cash flow information:
Cash paid for interest . . . . . . . . . . . $ 13,542 $ 12,662
Cash paid (received) for income taxes. . . . $ (5,685) $ (1,482)
Noncash investing and financing activities
Capital lease additions. . . . . . . . . . . $ 0 $ 2,076
Unrealized gain on securities. . . . . . . . 348 0
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Accounting Policies
The accompanying unaudited financial statements have been prepared in
accordance with the summary of significant accounting policies set forth
in the notes to the audited financial statements contained in the
Company's Form 10-K filed with the Securities and Exchange
Commission on April 28, 1995.
In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments of a normal recurring nature necessary
for a fair statement of the results of operations and financial position for
the interim periods presented. Operating results for the 39 weeks ended
October 28, 1995 are not necessarily indicative of the results that may be
expected for the fiscal year ending February 3, 1996.
Legal Proceedings
The legal actions between the Company and National NLP, Inc. have
been terminated. The court granted judgement in favor of the Company
on all issues. The countersuit filed by NLP claiming there was a contract
was dismissed.
Bank Revolving Credit Facility and Extraordinary Charge
The Company completed an agreement in May of 1995 with Congress
Financial Corporation (Central) for a $40.0 million Revolving Credit
Facility (subsequently expanded to $50.0 million). The early termination
of the prior Revolving Credit Agreement resulted in an extraordinary
charge of $625,000 (net of tax) in the second quarter. This charge
represents the unamortized deferred charges related to the replaced
Revolving Credit Agreement. There were also $13.4 million of letters of
credit outstanding against the Revolving Credit Agreement as of October
28, 1995.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Sales for the Company's third fiscal quarter ended October 28, 1995 were
$246.2 million, a decrease of $6.0 million or 2.4% from the third quarter
of 1994. Same store sales for the quarter increased 1.0%, the second
consecutive quarterly increase. For the three quarters ended October 28,
1995 sales were $740.8 million, a decrease of $13.7 million or 1.8%
from the first three quarters of 1994. Same store sales for the three
quarters increased 0.7% compared to 1994. The Company operated six
fewer stores at the end of the third quarter of 1995 compared to the end
of the third quarter of 1994.
Gross margin was 25.12% of sales for the quarter ended October 28,
1995 compared to 22.75% in the comparable quarter of 1994. Gross
margin improvement from prior quarters this fiscal year resulted from
more effective promotions, better buying practices and distribution
expense reductions. The year to year increase was significant because the
1994 year was unusually low due to aggressive product markdowns. For
the three quarters ended October 28, 1995 gross margin was 25.02%
compared to 24.15% for the same time period in 1994.
Selling, general and administrative expenses were 22.26% of sales for the
quarter ended October 28, 1995 compared to 21.93% in the comparable
quarter of 1994. For the three quarters ended October 28, 1995 selling,
general and administrative expenses were 22.64% versus 21.90% for the
same period in 1994. The increase in expense rate primarily reflects
increases in store employee costs due to union wage and benefit increases,
increases in supply costs and $1.6 million of non-recurring charges
related to a lease termination and severance payments.
Depreciation and amortization expenses increased to $6.0 million or
2.44% of sales compared to $5.9 million or 2.33% of sales in the same
quarter in 1994. For the three quarters ended October 28, 1995,
depreciation and amortization expenses increased to $18.4 million or
2.48% of sales compared to $17.5 million or 2.32% of sales for the same
period in 1994. The higher depreciation expenses are primarily related
to two new stores that were opened since the third quarter of last year and
a new capital lease for store computer equipment.
Interest expense increased to $3.8 million or 1.55% of sales compared to
$3.7 million or 1.46% of sales in the comparable quarter of 1994. The
increase in interest expense was due to an increase in short-term
borrowings and higher interest rates year to year under the Revolving
Credit Agreement. Net interest expense for the three quarters ended
October 28, 1995 was $11.7 million or 1.58% of sales compared to $10.8
million or 1.43% of sales in the comparable 1994 time period.
Operations for the third quarter ended October 28, 1995 resulted in a net
loss of $2.6 million or $0.24 per share compared to a net loss of $7.4
million or $0.67 per share for the comparable 1994 period. Results of
operations for the three quarters ended October 28, 1995 resulted in a net
loss of $12.4 million or $1.12 cents per share compared to a net loss of
$14.1 million or $1.28 per share in the same three quarters of 1994. The
1995 year-to-date net loss includes an extraordinary charge of $625,000
related to the refinancing of the Revolving Credit Facility. The 1994
year-to-date loss includes a $6.9 million pretax charge for a voluntary
severance program for 600 clerks in the Chicago area.
Earnings before interest, taxes, depreciation, amortization and extraordinary
charge (EBITDA) increased significantly in the third quarter, $7.1 million in
1995 compared to $2.1 million in 1994. EBITDA for the three quarters
ended October 28, 1995 improved to $17.7 million compared to $10.0
million in the comparable 1994 period.
The Company has closed four stores this fiscal year. The Company had
previously established a store closing reserve to cover costs related to
these closings.
Liquidity and Capital Resources
Cash flows from operating activities provided $2.7 million for the three
quarters ended October 28, 1995 compared to cash provided of $4.9
million in the comparable three quarters of 1994.
Capital expenditures for the three quarters ended October 28, 1995 totaled
$2.6 million, compared to total capital expenditures of $16.9 million in
the first three quarters of 1994. No new stores have been opened in fiscal
1995 while four stores were closed. Proceeds of $2.4 million were
received from a one-store sale/leaseback transaction this quarter.
Working capital at October 28, 1995 was a negative $9.8 million and the
current ratio was .92 to 1, compared to $22.3 million and 1.18 to 1 at
October 29, 1994 and $800,000 or 1.01 to 1 at January 28, 1995. There
was $21.8 million in borrowings outstanding against the Revolving Credit
Agreement as of October 28, 1995. There were also $13.4 million of
letters of credit outstanding against the Revolving Credit Agreement as of
October 28, 1995, leaving a total availability under the Revolving Credit
Agreement of approximately $11.8 million. The Company has
reclassified $11.0 million to current liabilities in connection with its
intention to buy out of a closed warehouse lease obligation within the next
twelve months. Before this reclassification, working capital at October
28, 1995 was $1.2 million and the current ratio would have been 1.01 to
1.
PART II - OTHER INFORMATION
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
EAGLE FOOD CENTERS, INC.
Dated: December 8, 1995 /s/ Robert J. Kelly
Robert J. Kelly
President and Chief Executive Officer
Dated: December 8, 1995 /s/ Herbert T. Dotterer
Herbert T. Dotterer
Sr. Vice President - Finance and
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> OCT-28-1995
<CASH> 2,068,000
<SECURITIES> 7,911,000
<RECEIVABLES> 15,250,000
<ALLOWANCES> 683,000
<INVENTORY> 85,032,000
<CURRENT-ASSETS> 113,530,000
<PP&E> 281,197,000
<DEPRECIATION> 133,554,000
<TOTAL-ASSETS> 290,085,000
<CURRENT-LIABILITIES> 123,311,000
<BONDS> 100,000,000
<COMMON> 115,000
0
0
<OTHER-SE> 30,301,000
<TOTAL-LIABILITY-AND-EQUITY> 290,085,000
<SALES> 740,776,000
<TOTAL-REVENUES> 740,776,000
<CGS> 555,415,000
<TOTAL-COSTS> 555,415,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 102,000
<INTEREST-EXPENSE> 11,714,000
<INCOME-PRETAX> (12,413,000)
<INCOME-TAX> (621,000)
<INCOME-CONTINUING> (11,792,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 625,000
<CHANGES> 0
<NET-INCOME> (12,417,000)
<EPS-PRIMARY> (1.06)
<EPS-DILUTED> (1.06)
</TABLE>
