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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 3, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
For the transition period from
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Commission File Number 0-17871
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EAGLE FOOD CENTERS, INC.
------------------------
(Exact name of registrant as specified in the charter)
Delaware 36-3548019
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(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
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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 3, 1997 was 10,911,261.
Page 1 of 8 pages
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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 3, 1997 MAY 4, 1996
----------- -----------
<S> <C> <C>
Sales............................... $ 239,937 $ 248,139
Cost of goods sold.................. 177,950 185,313
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Gross margin.................... 61,987 62,826
Operating expenses:
Selling, general & administrative. 52,346 53,103
Depreciation and amortization..... 4,889 5,199
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Operating income................ 4,752 4,524
Interest expense.................... 2,964 3,497
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Earnings before income taxes........ 1,788 1,027
Income taxes........................ 0 0
----------- -----------
Net earnings........................ $ 1,788 $ 1,027
=========== ===========
Earnings per share:
Primary net earnings.............. $ 0.16 $ 0.09
=========== ===========
Fully diluted net earnings........ $ 0.16 $ 0.09
=========== ===========
Weighted average common shares and
common equivalent shares
outstanding......................... 11,366,480 10,866,584
</TABLE>
See notes to consolidated financial statements.
2
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EAGLE FOOD CENTERS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
MAY 3, FEBRUARY 1,
1997 1997
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<S> <C> <C>
Current assets:
Cash and cash equivalents ................................. $ 14,122 $ 9,134
Restricted assets - marketable securities, at fair value .. 9,250 8,780
Accounts receivable ....................................... 12,632 13,388
Inventories ............................................... 68,923 76,395
Prepaid expenses and other ................................ 3,379 1,225
-------- --------
Total current assets ..................................... 108,306 108,922
Property and equipment (net) ............................... 116,701 118,473
Other assets:
Deferred debt issuance costs .............................. 1,588 1,761
Excess of cost over fair value of net assets acquired ..... 2,467 2,487
Property held for resale .................................. 12,567 13,748
Other ..................................................... 11,132 9,357
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Total other assets ....................................... 27,754 27,353
-------- --------
Total assets ............................................ $252,761 $254,748
======== ========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Current liabilities:
Accounts payable .................................... $ 43,181 $ 43,824
Payroll and associate benefits ...................... 16,657 18,185
Accrued liabilities ................................. 21,803 23,048
Accrued taxes ....................................... 9,873 9,633
Bank revolving credit facility ...................... 0 0
Current portion of long-term debt ................... 1,975 2,502
-------- --------
Total current liabilities .......................... 93,489 97,192
Long-term debt:
Senior Notes ........................................ 100,000 100,000
Capital lease obligations ........................... 11,874 12,083
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Total long-term debt ............................... 111,874 112,083
Other liabilities:
Reserve for closed stores and warehouse ............. 8,379 8,839
Other deferred liabilities .......................... 10,545 9,946
-------- --------
Total other liabilities ............................ 18,924 18,785
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 53,337
Common stock in treasury, at cost, 612,527 shares and
633,361 shares ..................................... (2,505) (2,590)
Other ............................................... (493) (448)
Retained earnings (deficit) ......................... (21,980) (23,726)
-------- --------
Total shareholders' equity ......................... 28,474 26,688
-------- --------
Total liabilities and shareholders' equity ........ $252,761 $254,748
======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
MAY 3, 1997 MAY 4, 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings ...................................... $ 1,788 $ 1,027
Adjustments to reconcile net earnings to
net cash flows from operating activities:
Depreciation and amortization ..................... 4,889 5,199
LIFO charge ....................................... 250 250
Deferred charges and credits ...................... 419 630
Loss on disposal of assets ........................ (31) 0
Changes in assets and liabilities:
Receivables and other assets ...................... (3,318) 3,568
Inventories ....................................... 7,222 2,673
Accounts payable .................................. (643) (1,073)
Accrued and other liabilities ..................... (1,934) (3,384)
Reserve for closed stores and warehouse ........... (618) (9,350)
-------- --------
Net cash flows from operating activities ...... 8,024 (460)
Cash flows from investing activities:
Additions to property and equipment ............... (3,334) (221)
Changes in property held for resale ............... 1,108 (855)
Purchases of marketable securities ................ (515) (427)
Cash proceeds from dispositions of
property and equipment ......................... 442 0
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Net cash flows from investing activities ...... (2,299) (1,503)
Cash flows from financing activities:
Net revolving credit borrowing (repayment) ........ 0 4,111
Principal payments of capital lease obligations ... (737) (1,281)
Purchase of treasury stock ........................ 0 (171)
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Net cash flows from financing activities ...... (737) 2,659
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Increase in cash and cash equivalents ............. 4,988 696
Cash and cash equivalents at beginning of period .. 9,134 1,481
-------- --------
Cash and cash equivalents at end of period ........ $ 14,122 $ 2,177
======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest ......................... $ 4,901 $ 5,702
Cash paid for income taxes ..................... $ 0 $ 0
Noncash investing and financing activities:
Unrealized (loss) gain on securities ........... $ (45) $ (348)
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
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 May 2, 1997.
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 3, 1997 are not necessarily indicative of the results that may be
expected for the fiscal year ending January 31, 1998.
LITIGATION
A complaint alleging discrimination in employment was filed against the
Company in 1994 in the United States District Court for the Central District
of Illinois by two current and one former associates individually and as
representative of a class of all individuals who are similarly situated.
The Plaintiffs moved for class certification and their motion was granted.
Recently the court granted the Company's motion to narrow the scope of the
class. The Company denies all substantive allegations of the Plaintiffs
and of the class. The Company is subject to various other unresolved legal
actions which arise in the normal course of its business. It is not
possible to predict with certainty the outcome of these unresolved legal
actions or the range of the possible loss.
EARNINGS PER SHARE
Primary and fully diluted net earnings per share of Common Stock, throughout
the periods presented, is calculated by dividing net earnings 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 first fiscal quarter ended May 3, 1997 were $239.9
million, a decrease of $8.2 million or 3.3% from the first quarter of 1996.
Same store sales for the quarter decreased 4.1%. There were 92 stores
operating during the first quarter in both years. Sales declines were
caused by an increase in new competitive square footage and an overall
softness in most of the Company's markets.
Gross margin was 25.8% of sales for the quarter ended May 3, 1997 compared
to 25.3% in the comparable quarter of 1996. The increase in gross margin in
fiscal 1997 is primarily related to better buying practices.
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Selling, general and administrative expenses declined by $757,000 from the
first quarter of 1996 but increased as a percentage of sales from 21.4% in
1996 to 21.8% in 1997. The decrease in dollars is primarily due to lower
store payroll and other store operating costs offset partially by an
increase in overhead costs related to system transitions. Expense dollars
did not fall proportionately with the rate of decline in sales thereby
causing the increase in expense rate.
Depreciation and amortization expenses decreased to $4.9 million or 2.0% of
sales compared to $5.2 million or 2.1% of sales in the prior year. Interest
expense decreased to $3.0 million or 1.2% of sales from $3.5 million or 1.4% of
sales in the prior year due primarily to the absence of short term borrowing as
a result of the Company's improved cash position.
Earnings for the first quarter of fiscal 1997 were $1.8 million or $0.16 per
share on a fully diluted basis compared to $1.0 million or $0.09 per share
in the same quarter of fiscal 1996. There was no tax provision in either
year as tax loss carryforwards are being utilized.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $8.0 million for the quarter ended
May 3, 1997 compared to a cash use of $0.5 million in the comparable quarter
of 1996. The primary sources of cash in 1997 were earnings and reductions
of inventory while payables remained relatively constant.
Additions to property and equipment for the quarter were $3.3 million
compared to $0.2 million in the first quarter of 1996. One of the
properties held for resale was sold during the quarter for $2.4 million. No
stores were opened or closed during the first quarter of fiscal 1997 but six
minor remodels were completed. One major remodel and one new store project
were under construction at May 3, 1997.
Working capital at May 3, 1997 was $14.8 million and the current ratio was
1.16 to 1 compared to $11.7 million and 1.12 to 1 at February 1, 1997 and
$8.7 million and 1.09 to 1 at May 4, 1996.
There were no borrowings outstanding under the Revolving Credit Agreement at
May 3, 1997 except for Letters of Credit in the amount of $1.8 million.
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
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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 10, 1997 /s/ Robert J. Kelly
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Robert J. Kelly
President and Chief Executive Officer
Dated: June 10, 1997 /s/ Herbert T. Dotterer
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Herbert T. Dotterer
Sr. Vice President - Finance and
Chief Financial Officer
7
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EXHIBIT 11
COMPUTATION OF NET INCOME PER SHARE
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
QUARTER ENDED
5/03/97 5/04/96
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<S> <C> <C>
Weighted average of shares outstanding
during quarter ............................... 10,877 10,867
Weighted average common equivalent
shares attributable to stock options
granted, computed using the treasury
stock method on a fully diluted basis ........ 489 0
Weighted average common and common
equivalent shares ............................ 11,366 10,867
Net income applicable to common stock ............ $ 1,788 $ 1,027
Net income per common and common
equivalent share ............................. $ 0.16 $ 0.09
</TABLE>
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> MAY-03-1997
<CASH> 14,122,000
<SECURITIES> 9,250,000
<RECEIVABLES> 13,499,000
<ALLOWANCES> 867,000
<INVENTORY> 68,923,000
<CURRENT-ASSETS> 108,306,000
<PP&E> 270,385,000
<DEPRECIATION> 153,684,000
<TOTAL-ASSETS> 252,761,000
<CURRENT-LIABILITIES> 93,489,000
<BONDS> 100,000,000
0
0
<COMMON> 115,000
<OTHER-SE> 28,359,000
<TOTAL-LIABILITY-AND-EQUITY> 252,761,000
<SALES> 239,937,000
<TOTAL-REVENUES> 239,937,000
<CGS> 177,950,000
<TOTAL-COSTS> 177,950,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,964,000
<INCOME-PRETAX> 1,788,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,788,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,788,000
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
