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 November 2, 1996
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) 787-7700
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
($0.01) per share, outstanding at November 30, 1996 was 10,865,389.
Page 1 of 7 pages
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended Three Quarters Ended
Nov 2, Oct 28, Nov 2, Oct 28,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales . . . . . . . . . . .$ 248,293 $ 246,201 $ 754,077 $ 740,776
Cost of Goods Sold . . . . 185,523 184,365 563,616 555,415
Gross Margin . . . . . . 62,770 61,836 190,461 185,361
Operating Expenses:
Selling, General
& Administrative. . . . 54,037 54,798 162,524 167,683
Depreciation and
Amortization. . . . . . 5,014 6,012 15,374 18,377
Operating Income (Loss) . . 3,719 1,026 12,563 (699)
Interest Expense . . . . . 3,189 3,808 9,846 11,714
Earnings (Loss) Before
Income Tax (Benefit) and
Extraordinary Charge . . . 530 (2,782) 2,717 (12,413)
Income Tax (Benefit). . . . 0 (139) 0 (621)
Earnings (Loss) Before
Extraordinary Charge . . . 530 (2,643) 2,717 (11,792)
Extraordinary Charge . . . 0 0 0 625
Net Earnings (Loss) . . . .$ 530 $ (2,643) $ 2,717 $ (12,417)
Earnings (Loss) per Share:
Primary:
Before Extraordinary
Charge. . . . . . . . . .$ 0.05 $ (0.24) $ 0.24 $ (1.06)
Extraordinary Charge . . . 0.00 0.00 0.00 (0.06)
Net Earnings (Loss). . . .$ 0.05 $ (0.24) $ 0.24 $ (1.12)
Fully Diluted Net
Earnings (Loss). . . . . .$ 0.05 $ (0.24) $ 0.24 $ (1.12)
Weighted Average Shares . .11,341,000 11,176,994 11,208,000 11,125,254
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
EAGLE FOOD CENTERS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
(unaudited)
ASSETS
<TABLE>
<CAPTION>
November 2, February 3,
1996 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . $ 3,450 $ 1,481
Restricted assets - marketable
securities, at fair value . . . . . . 8,897 8,855
Accounts receivable. . . . . . . . . . 12,841 13,129
Income taxes receivable. . . . . . . . 2,596 4,015
Inventories. . . . . . . . . . . . . . 84,703 80,892
Prepaid expenses and other . . . . . . 2,851 3,745
Total current assets. . . . . . . . 115,338 112,117
Property and equipment (net) . . . . . . 118,711 136,453
Other assets:
Deferred debt issuance costs . . . . . 1,934 2,444
Excess of cost over fair value
of net assets acquired. . . . . . . . 2,508 2,569
Property held for resale . . . . . . . 14,059 9,253
Other. . . . . . . . . . . . . . . . . 4,710 2,442
Total other assets. . . . . . . . . 23,211 16,708
Total assets. . . . . . . . . . . $ 257,260 $ 265,278
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable . . . . . . . . . . . $ 47,512 $ 42,025
Payroll and associate benefits . . . . 16,713 15,385
Accrued liabilities. . . . . . . . . . 16,236 18,434
Reserve for closed stores
and warehouse . . . . . . . . . . . . 3,035 17,754
Accrued taxes. . . . . . . . . . . . . 8,560 9,752
Bank revolving credit facility . . . . 7,486 1,992
Current portion of long-term debt. . . 3,406 5,205
Total current liabilities . . . . . 102,948 110,547
Long-term debt:
Senior Notes . . . . . . . . . . . . . 100,000 100,000
Capital lease obligations. . . . . . . 13,467 15,594
Total long-term debt. . . . . . . . 113,467 115,594
Other liabilities:
Reserve for closed stores
and warehouse . . . . . . . . . . . . 4,102 4,337
Other deferred liabilities . . . . . . 10,547 10,879
Total other liabilities . . . . . . 14,649 15,216
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 . . . . 53,336 53,336
Common stock in treasury, at cost,
638,411 shares and 554,906 shares . . (2,594) (2,471)
Other. . . . . . . . . . . . . . . . . (408) (124)
Retained earnings (deficit). . . . . . (24,253) (26,935)
Total shareholders' equity. . . . . 26,196 23,921
Total liabilities and
shareholders' equity . . . . . . $ 257,260 265,278
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Quarters Ended
Nov 2, 1996 Oct 28, 1995
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . $ 2,717 $ (12,417)
Adjustments to reconcile net earnings (loss)
to net cash flows from operating activities:
Depreciation and amortization . . . . . . . 15,374 18,377
Extraordinary loss on retirement of debt. . 0 658
LIFO charge . . . . . . . . . . . . . . . . 850 850
Deferred charges and credits. . . . . . . . 1,773 2,333
Loss on disposal of assets. . . . . . . . . 488 458
Changes in assets and liabilities:
Receivables and other assets. . . . . . . . (67) 2,222
Inventories . . . . . . . . . . . . . . . . (4,661) (1,943)
Accounts payable. . . . . . . . . . . . . . 5,487 1,861
Accrued and other liabilities . . . . . . . (3,027) (1,680)
Reserve for closed stores and warehouse . . (11,335) (8,053)
Net cash flows from operating activities. 7,599 2,666
Cash flows from investing activities:
Additions to property and equipment . . . . (5,431) (2,633)
Additions to property held for resale . . . (4,806) (56)
Purchases of marketable securities. . . . . (326) (2,324)
Cash proceeds from dispositions of
property and equipment . . . . . . . . . . 3,536 3,966
Net cash flows from investing activities. (7,027) (1,047)
Cash flows from financing activities:
Net revolving credit borrowing (repayment). 5,494 (214)
Principal payments of capital lease
obligations. . . . . . . . . . . . . . . . (3,926) (2,749)
Deferred financing costs. . . . . . . . . . 0 (684)
Purchase of treasury stock. . . . . . . . . (171) 0
Net cash flows from financing activities. 1,397 (3,647)
Increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . 1,969 (2,028)
Cash and cash equivalents at
beginning of period. . . . . . . . . . . . 1,481 4,096
Cash and cash equivalents at end of period. $ 3,450 $ 2,068
Supplemental disclosures of cash flow information:
Cash paid for interest . . . . . . . . . . $ 11,411 $ 13,542
Cash paid (received) for income taxes. . . $ (1,373) $ (5,685)
Noncash investing and financing activities
Unrealized gain (loss) on securities . . . $ (284) $ 348
</TABLE>
See notes to the 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 consolidated financial statements contained in the Company's
Form 10-K filed with the Securities and Exchange Commission on April 26,
1996.
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 interim periods
presented are not necessarily indicative of the results that may be expected
for the fiscal year ending February 1, 1997.
Weighted Average Shares
Primary and fully diluted net earnings (loss) per share is calculated by
dividing net earnings (loss) by the total of the weighted average shares,
assuming the dilutive effect of exercise of outstanding stock options
computed in accordance with the treasury stock method.
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Sales for the Company's third quarter ended November 2, 1996 were
$248.3 million, an increase of $2.1 million or 0.8% from the third quarter
of fiscal 1995. Same store sales for the quarter increased 0.5%. This is
the sixth consecutive quarter in which the Company has experienced increased
same store sales. For the three quarters ended November 2, 1996 sales
were $754.1 million, an increase of $13.3 million or 1.8% from the first
three quarters of fiscal 1995. Same store sales for the three quarters
increased 2.9%. There were 92 stores operating at the end of the third
quarter in fiscal year 1996 and fiscal year 1995.
Gross margin was 25.3% of sales for the quarter ended November 2, 1996
compared to 25.1% of sales in the comparable quarter of 1995. For the
three quarters ended November 2, 1996 gross margin was 25.3% of sales
compared to 25.0% of sales for the comparable period in 1995. Gross
margin improvement resulted from better buying practices and improved
product mix.
Selling, general and administrative expenses were 21.8% of sales for the
quarter ended November 2, 1996 compared to 22.3% of sales in the
comparable quarter of 1995. For the three quarters ended November 2,
1996, selling, general and administrative expenses were 21.6% of sales
versus 22.6% of sales for the comparable period in 1995. The decrease
primarily reflects lower administrative and advertising expenses. The 1995
three quarters included $1.6 million of non-recurring charges related to a
lease termination and severance payments.
Depreciation and amortization expenses decreased to $5.0 million or 2.0%
of sales for the quarter ended November 2, 1996 compared to $6.0 million
or 2.4% of sales in the same quarter in 1995. For the three quarters ended
November 2, 1996, depreciation and amortization expenses decreased to
$15.4 million or 2.0% of sales compared to $18.4 million or 2.5% of sales
for the comparable period in 1995. The lower depreciation expense resulted
from assets becoming fully depreciated, sale/leaseback transactions on six
stores, and the write down of assets required by the adoption of SFAS No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of" in 1995.
Net interest expense in the quarter ended November 2, 1996 decreased to
$3.2 million or 1.3% of sales compared to $3.8 million or 1.5% of sales in
the comparable quarter of 1995. Net interest expense for the three quarters
ended November 2, 1996 was $9.8 million or 1.3% of sales compared to
$11.7 million or 1.6% of sales in the comparable 1995 time period. The
reduction in interest expense was due to decreased short term borrowings
under the Revolving Credit Agreement. There was $7.5 million outstanding
against the Revolving Credit Agreement as of November 2, 1996. The
Company has been able to decrease its borrowings from the October 28,
1995 balance of $21.8 million under the Revolving Credit Agreement
primarily due to its improved results from operations and from improved
asset management.
The third quarter of fiscal 1996 ended November 2, 1996 resulted in net
earnings of $530,000 or $0.05 per share on a fully diluted basis compared to
a net loss of $2.6 million or $0.24 per share in the same quarter of fiscal
1995, an improvement of $3.2 million. This is the third consecutive quarter
in which the Company has had net earnings. The three quarters ended
November 2, 1996 resulted in net earnings of $2.7 million or $0.24 per
share on a fully diluted basis compared to a net loss of $12.4 million or
$1.12 per share for the same period of fiscal 1995, an improvement of $15.1
million. The second quarter of fiscal 1995 included an extraordinary charge
of $625,000 related to the refinancing of the Revolving Credit Agreement.
The earnings improvement is a result of increased sales, higher gross
margin, and lower expense levels as compared to the same period in the
previous year.
Liquidity and Capital Resources
Cash provided by operating activities totaled $7.6 million for the three
quarters ended November 2, 1996 compared to cash provided of $2.7
million in the comparable three quarters of 1995. Cash used to meet
seasonal inventory requirements of $4.7 million was offset by an increase in
accounts payable of $5.5 million for the period ending November 2, 1996.
Capital expenditures for the three quarters ended November 2, 1996 totaled
$5.4 million compared to $2.6 million in the first three quarters of 1995.
Expenditures for property held for resale for the three quarters ended
November 2, 1996 totaled $4.8 million compared to $56,000 in the first
three quarters of 1995, The Company opened one new replacement store
during the quarter, two during the three quarters, and currently has one new
store under construction and one major remodeling project in progress. The
Company completed a one-store sale/leaseback transaction during the second
quarter with net proceeds of $3.5 million. The Company estimates capital
expenditures and expenditures for property held for resale to be $13.0
million in fiscal 1996.
The termination of the Westville, Indiana warehouse lease was completed
during the first quarter. The Company incurred a net cash outflow of $9.1
million for the transaction. The transaction had no impact on earnings, as
the cost was previously reserved, and was financed through the Company's
Revolving Credit Agreement.
Working capital at November 2, 1996 was $12.4 million and the current
ratio was 1.12 to 1, compared to negative $9.8 million and .92 to 1 at
October 28, 1995 and $1.6 million or 1.01 to 1 at February 3, 1996. There
was $7.5 million outstanding against the Revolving Credit Agreement as of
November 2, 1996.
Safe Harbor Statements Under the Private Securities Litigation Reform
Act of 1995
The statements under Management's Discussion and Analysis of Financial
Condition and Results of Operations and the other statements in this Form
10-Q which are not historical facts are forward looking statements. These
forward looking statements involve risks and uncertainties that could render
them materially different, including, but not limited to, the effect of
economic conditions, the impact of competitive stores and pricing,
availability and costs of inventory, labor costs, the rate of technology
change, the availability of capital, supply constraints or difficulties, the
effect of the Company's accounting policies, the effect of regulatory and
legal developments, and other risks detailed in the Company's Securities and
Exchange Commission filings.
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 6, 1996 /s/ Robert J. Kelly
Robert J. Kelly
President and Chief Executive Officer
Dated: December 6, 1996 /s/ Herbert T. Dotterer
Herbert T. Dotterer
Sr. Vice President - Finance and
Chief Financial Officer
<PAGE>
EXHIBIT 11
Computation of Net Income (Loss) Per Share
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended Three Quarters Ended
11/2/96 10/28/95 11/2/96 10/28/95
<S> <C> <C> <C> <C>
Weighted average of shares outstanding
during period......................... 10,865 11,177 10,863 11,125
Weighted average common equivalent
shares attributable to stock options
granted, computed using the treasury
stock method on a fully diluted
basis................................. 476 0 345 0
Weighted average common and common
equivalent shares..................... 11,341 11,177 11,208 11,125
Net income (loss) applicable to
common stock.......................... 530 (2,643) 2,717 (12,417)
Net income (loss) per common
and common equivalent share........... $0.05 $(0.24) $0.24 $(1.12)
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> NOV-02-1996
<CASH> 3,450,000
<SECURITIES> 8,897,000
<RECEIVABLES> 16,438,000
<ALLOWANCES> 1,001,000
<INVENTORY> 84,703,000
<CURRENT-ASSETS> 115,338,000
<PP&E> 269,175,000
<DEPRECIATION> 150,464,000
<TOTAL-ASSETS> 257,260,000
<CURRENT-LIABILITIES> 102,948,000
<BONDS> 100,000,000
<COMMON> 115,000
0
0
<OTHER-SE> 26,081,000
<TOTAL-LIABILITY-AND-EQUITY> 257,260,000
<SALES> 754,077,000
<TOTAL-REVENUES> 754,077,000
<CGS> 563,616,000
<TOTAL-COSTS> 563,616,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 80,400
<INTEREST-EXPENSE> 9,846,000
<INCOME-PRETAX> 2,717,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,717,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,717,000
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
