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 May 4, 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) 787-7730
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 June 1, 1996 was 10,853,894.
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
May 4, 1996 April 29, 1995
<S> <C> <C>
Sales. . . . . . . . . . . . . . . . . . $ 248,139 $ 245,530
Cost of goods sold . . . . . . . . . . . 185,313 184,105
Gross margin . . . . . . . . . . . 62,826 61,425
Operating expenses:
Selling, general & administrative . . 53,103 55,939
Depreciation and amortization . . . . 5,199 6,240
Operating income (loss). . . . . . 4,524 ( 754)
Interest expense . . . . . . . . . . . . 3,497 3,966
Earnings (loss) before income taxes. . . 1,027 (4,720)
Income taxes (benefit) . . . . . . . . . 0 (237)
Net earnings (loss). . . . . . . . . . . $ 1,027 $ (4,483)
Earnings (loss) per primary
and fully diluted share. . . . $ 0.09 $ (0.41)
Weighted average common shares
outstanding . . . . . . . . . . . . . . 10,866,584 11,051,994
</TABLE>
See notes to consolidated financial statements.
<PAGE>
EAGLE FOOD CENTERS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
May 4, February 3,
1996 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . $ 2,177 $ 1,481
Restricted assets - marketable
securities, at fair value . . . . 8,934 8,855
Accounts receivable. . . . . . . . . . 10,041 13,129
Income taxes receivable. . . . . . . . 4,015 4,015
Inventories. . . . . . . . . . . . . . 77,969 80,892
Prepaid expenses and other . . . . . . 3,246 3,745
Total current assets. . . . . . . . 106,382 112,117
Property and equipment (net) . . . . . . 127,019 136,453
Other assets:
Deferred debt issuance costs . . . . . 2,272 2,444
Excess of cost over fair value
of net assets acquired. . . . . . 2,548 2,569
Property held for resale . . . . . . . 10,108 9,253
Other. . . . . . . . . . . . . . . . . 2,212 2,442
Total other assets. . . . . . . . . 17,140 16,708
Total assets. . . . . . . . . . . $250,541 $265,278
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable . . . . . . . . . . . $ 40,952 $ 42,025
Payroll and associate benefits . . . . 15,905 15,385
Accrued liabilities. . . . . . . . . . 15,999 18,434
Reserve for closed stores
and warehouse. . . . . . 4,026 17,754
Accrued taxes. . . . . . . . . . . . . 9,674 9,752
Bank revolving credit facility . . . . 6,103 1,992
Current portion of long-term debt. . . 5,027 5,205
Total current liabilities . . . . . 97,686 110,547
Long-term debt:
Senior Notes . . . . . . . . . . . . . 100,000 100,000
Capital lease obligations. . . . . . . 14,491 15,594
Total long-term debt. . . . . . . . 114,491 115,594
Other liabilities:
Reserve for closed stores
and warehouse. . . . . . 4,346 4,337
Other deferred liabilities . . . . . . 9,588 10,879
Total other liabilities . . . . . . 13,934 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,
646,106 shares and 554,906 shares . . (2,642) (2,471)
Other. . . . . . . . . . . . . . . . . (471) (124)
Accumulated (deficit) . . . . . . . . (25,908) (26,935)
Total shareholders' equity. . . . . 24,430 23,921
Total liabilities and
shareholders' equity . . . . . . $250,541 $265,278
</TABLE>
See notes to consolidated financial statements.
<PAGE>
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended
May 4, 1996 April 29, 1995
<S> <C> <C>
Cash flows from operating activities:
Net (loss). . . . . . . . . . . . . . . . $ 1,027 $ (4,483)
Adjustments to reconcile net (loss) to
cash provided from operating activities:
Depreciation and amortization . . . . . . 5,199 6,240
LIFO charge . . . . . . . . . . . . . . . 250 250
Deferred charges and credits. . . . . . . 630 824
Loss on disposal of assets. . . . . . . . 0 152
Changes in assets and liabilities:
Receivables and other assets. . . . . . . 3,568 (1,550)
Inventories . . . . . . . . . . . . . . . 2,673 6,577
Accounts payable. . . . . . . . . . . . . (1,073) (2,215)
Accrued and other liabilities . . . . . . (3,384) (891)
Reserve for closed stores and warehouse . (9,350) (832)
Net cash flows from operating
activities . . . . . . . . . . . . (460) 4,072
Cash flows from investing activities:
Additions to property and equipment . . . (221) (366)
Additions to property held for resale . . (855) (190)
Purchases of marketable securities. . . . (427) (794)
Cash proceeds from dispositions of
property and equipment . . . . . . . . 0 351
Net cash flows from investing
activities . . . . . . . . . . . . (1,503) (999)
Cash flows from financing activities:
Retirement of debt. . . . . . . . . . . . 0 0
Net revolving credit borrowing
(repayment). . . . . . . . . . . . . . . 4,111 (1,000)
Principal payments of capital lease
obligations. . . . . . . . . . . . . . . (1,281) (902)
Purchase of treasury stock. . . . . . . (171) 0
Deferred financing costs. . . . . . . . . 0 (131)
Net cash flows from financing
activities . . . . . . . . . . . . 2,659 (2,033)
Increase in cash and cash equivalents . . 696 1,040
Cash and cash equivalents at beginning
of period. . . . . . . . . . . . . . . . 1,481 4,096
Cash and cash equivalents at end of
period . . . . . . . . . . . . . . . . . $ 2,177 $ 5,136
Supplemental disclosures of cash flow information:
Cash paid for interest . . . . . . . . $ 5,702 $ 5,962
Cash paid for income taxes . . . . . . $ 0 $ (68)
Noncash investing and financing activities:
Unrealized (loss) gain on securities . $ (348) $ 144
</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
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 thirteen weeks
ended May 4, 1996 are not necessarily indicative of the results that may
be expected for the fiscal year ending February 1, 1997.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Sales for the Company's first fiscal quarter ended May 4, 1996 were
$248.1 million, an increase of $2.6 million or 1.1% from the first quarter
of 1995. Same store sales for the quarter increased 3.3%. There were
92 stores operating at the end of first quarter of fiscal 1996 compared to
96 at the end of first quarter of fiscal 1995.
Gross margin was 25.3% of sales for the quarter ended May 4, 1996
compared to 25.0% in the comparable quarter of 1995. The increase in
gross margin in fiscal 1996 is primarily related to better buying practices,
improved product mix and a return to more historical pricing levels.
Gross margin improvements have coincided with positive same store sales
trends for the last four quarters.
Selling, general and administrative expenses declined to 21.4% of sales for
the quarter ended May 4, 1996 compared to 22.8% in the comparable
quarter of fiscal 1995. The decrease in expense rate was primarily due to
lower administrative, advertising and consulting expenses.
Depreciation and amortization expenses decreased to $5.2 million or 2.1%
of sales compared to $6.2 million or 2.5% of sales in the same quarter in
1995. The lower depreciation expense resulted from fully depreciated
assets and the write down of assets required by the adoption of FAS 121
"Accounting for the Impairment of Long-Lived Assets and for Long Lived
Assets to be Disposed Of" in 1995.
Interest expense decreased to 1.4% of sales for the quarter ended May 4,
1996 compared to 1.6% in the comparable quarter of fiscal 1995. The
decreased expense is due to decreased borrowing levels under the
Revolving Credit Agreement.
The first quarter of fiscal 1996 ended May 4, 1996 resulted in net earnings
of $1.0 million or $0.09 per share compared to a net loss of $4.5 million
or $0.41 per share in the same quarter of fiscal 1995, an improvement of
$5.5 million or $0.50 per share. The earnings increase is a result of
increased sales, higher gross margin, and lower expense levels as
compared to the previous comparable period.
There was no tax provision against the pretax earnings as tax
carryforwards are being applied.
Liquidity and Capital Resources
The previously announced 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 credit facility.
Cash used by operating activities totaled $460,000 for the quarter ended
May 4, 1996 compared to cash provided of $4.1 million in the comparable
quarter of 1995. The primary use of cash related to a $9.1 million
payment related to the termination of the Westville warehouse lease. Cash
was provided by a decrease in inventory levels of $2.7 million, and
decreased accounts receivable and other assets of $3.6 million.
Additions to property and equipment for the quarter ended May 4, 1996
were $221,000 compared to additions of $366,000 in the first quarter of
1995. An additional $855,000 was invested in property held for resale
during the first quarter of fiscal 1996, primarily related to new store
construction. No stores were opened or closed during the first quarter of
fiscal 1996. Two new stores and one major remodel are currently under
construction.
There was $6.1 million outstanding under the Revolving Credit Agreement
on May 4, 1996 and an additional $3.2 million of letters of credit were
outstanding.
Working capital at May 4, 1996 was $8.7 million and the current ratio
was 1.09 to 1 compared to $1.6 million and 1.01 to 1 at February 3, 1996
and $25,000 and 1.00 to 1 at April 29, 1995.
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, 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: June 14, 1996 /s/ Robert J. Kelly
Robert J. Kelly
President and Chief Executive Officer
Dated: June 14, 1996 /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> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> MAY-04-1996
<CASH> 2,177,000
<SECURITIES> 8,934,000
<RECEIVABLES> 15,113,000
<ALLOWANCES> 1,057,000
<INVENTORY> 77,969,000
<CURRENT-ASSETS> 106,382,000
<PP&E> 265,746,000
<DEPRECIATION> 138,727,000
<TOTAL-ASSETS> 250,541,000
<CURRENT-LIABILITIES> 97,686,000
<BONDS> 100,000,000
<COMMON> 115,000
0
0
<OTHER-SE> 24,315,000
<TOTAL-LIABILITY-AND-EQUITY> 250,541,000
<SALES> 248,139,000
<TOTAL-REVENUES> 248,139,000
<CGS> 185,313,000
<TOTAL-COSTS> 185,313,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 18,800
<INTEREST-EXPENSE> 3,497,000
<INCOME-PRETAX> 1,027,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,027,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,027,000
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
