<PAGE>
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 2, 1998
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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 ___________________
Commission File Number 0-17871
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EAGLE FOOD CENTERS, INC.
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(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
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(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, 1998 was 10,948,036.
Page 1 of 9 pages
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PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
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EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended
May 2, 1998 May 3, 1998
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<S> <C> <C>
Sales............................................ $ 231,568 $ 239,937
Cost of goods sold............................... 173,844 177,950
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Gross margin................................... 57,724 61,987
Operating expenses:
Selling, general and administrative............ 50,301 52,346
Depreciation and amortization.................. 4,377 4,889
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Operating income.............................. 3,046 4,752
Interest expense................................. 2,922 2,964
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Earnings before income tax ...................... 124 1,788
Income taxes..................................... --- ---
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Net earnings..................................... $ 124 $ 1,788
========== ==========
Earnings per share:
Basic net earnings............................. $ 0.01 $ 0.16
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Diluted net earnings........................... $ 0.01 $ 0.16
========== ==========
Weighted average shares and potential common
shares outstanding............................... 11,205,000 11,260,000
</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)
<TABLE>
<CAPTION>
ASSETS May 2, January 31,
1998 1998
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,977 $ 5,113
Restricted assets - marketable securities, at fair value 10,364 10,349
Accounts receivable 14,460 11,819
Inventories 73,538 83,841
Prepaid expenses and other 3,312 1,595
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Total current assets 111,651 112,717
Property and equipment (net) 121,539 113,124
Other assets:
Deferred debt issuance costs 947 1,070
Excess of cost over fair value of net assets acquired 2,386 2,406
Property held for resale 10,043 18,769
Other 12,992 13,538
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Total other assets 26,368 35,783
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Total assets $259,558 $261,624
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 43,462 $ 43,078
Payroll and associate benefits 15,405 16,982
Accrued liabilities 14,813 19,258
Reserved for closed stores 3,271 3,271
Accrued taxes 8,887 9,131
Bank revolving credit facility 27 7,208
Current portion of long-term debt 1,863 841
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Total current liabilities 87,728 99,769
Long-term debt:
Senior Notes 100,000 100,000
Capital lease obligations 23,555 13,959
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Total long-term debt 123,555 113,959
Other liabilities:
Reserve for closed stores and warehouse 6,313 6,397
Other deferred liabilities 9,574 9,262
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Total other liabilities 15,887 15,659
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, 551,227 shares and 553,127 shares (2,251) (2,259)
Other (179) (199)
Retained earnings (deficit) (18,633) (18,756)
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Total shareholders' equity 32,388 32,237
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Total liabilities and shareholders' equity $259,558 $261,624
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</TABLE>
See notes to consolidated financial statements.
3
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EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended
May 2, 1998 May 3, 1997
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<S> <C> <C>
Cash flows from operating activities:
Net earnings.......................................................... $ 124 $ 1,788
Adjustments to reconcile net earnings to
net cash flows from operating activities:
Depreciation and amortization......................................... 4,377 4,889
LIFO charge........................................................... 250 250
Deferred charges and credits.......................................... 474 419
Gain on disposal of assets............................................ (1,111) (31)
Changes in assets and liabilities:
Receivable and other assets........................................... (2,830) (3,318)
Inventories........................................................... 10,053 7,222
Accounts payable...................................................... 384 (643)
Accrued and other liabilities......................................... (5,954) (1,934)
Reserve for closed stores............................................. (241) (618)
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Net cash flows from operating activities......................... 5,526 8,024
Cash flows from investing activities:
Additions to property and equipment................................... (1,950) (3,334)
Changes in property held for resale................................... 8,473 1,108
Purchases (maturities) of marketable securities....................... 5 (515)
Cash proceeds from dispositions of property and equipment............. 159 442
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Net cash flows from investing activities......................... 6,687 (2,299)
Cash flows from financing activities:
Net bank revolving credit............................................. (7,181) --
Deferred financing costs.............................................. (50) --
Principal payments on capital lease obligations....................... (126) (737)
Purchase of treasury stock............................................ 8 --
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Net cash flows from financing activities......................... (7,349) (737)
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Increase in cash and cash equivalents................................. 4,864 4,988
Cash and cash equivalents at beginning of period...................... 5,113 9,134
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Cash and cash equivalents at end of period............................ $ 9,977 $ 14,122
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Supplemental disclosures of cash flow information:
Cash paid for interest.............................................. $ 5,130 $ 4,901
Cash paid for income taxes.......................................... $50 $ --
Noncash investing and financing activities:
Unrealized (loss) gain on marketable securities..................... $ 20 $ (45)
Additions to property and the equipment & capital
lease liability in connection with sale/leaseback transactions..... $ 10,744 $ --
Accounts receivable for the sale of company assets.................. $ 1,557 $ --
</TABLE>
See notes to consolidated financial statements.
4
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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 1, 1998.
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 2, 1998
are not necessarily indicative of the results that may be expected for the
fiscal year ending January 30, 1999.
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. Subsequently, 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
Earnings per share ("EPS") are computed in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." Basic EPS
is computed by dividing consolidated net earnings by the weighted average number
of common shares outstanding. Diluted EPS is computed by dividing consolidated
net earnings by the sum of the weighted average number of common shares
outstanding and the weighted average number of potential common shares
outstanding. Potential common shares consist solely of outstanding options under
the Company's stock option plans. The computation of basic and diluted EPS are
as follows:
(in thousands except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended
May 2, 1998 May 3, 1997
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<S> <C> <C>
Net Earnings: $ 124 $ 1,788
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Basic EPS:
Weighted average common shares outstanding 10,948 10,877
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$ 0.01 $ 0.16
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Diluted EPS:
Weighted average common shares outstanding 10,948 10,877
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Effect of dilutive securities - stock options 257 383
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Shares applicable to diluted earnings 11,205 11,260
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$ 0.01 $ 0.16
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</TABLE>
5
<PAGE>
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 2, 1998 were $231.6
million, a decrease of $8.4 million or 3.5% from the first quarter of 1997. Same
store sales for the quarter decreased 3.1%. There were 90 stores operating
during the first quarter of 1998 compared to 92 stores operating in the first
quarter of 1997. The decline in total sales was caused primarily by competitive
activity during the quarter and the decrease in store count. This decrease
reflects the impact of competitive store openings including five during the
first quarter of 1998 and 17 during fiscal year 1997.
The gross margin rate was 24.9% of sales for the quarter ended May 2, 1998
compared to 25.8% in the comparable quarter of 1997. The decrease in the gross
margin rate is primarily related to increased promotional activity during the
quarter.
Selling, general and administrative expenses declined by $2.0 million from the
first quarter of 1997 and decreased as a percentage of sales from 21.8% in the
first quarter of 1997 to 21.7% during the same period of 1998. The decrease in
dollars is primarily due to a gain of $1.0 million on the sale of the Company's
bakery, increased associate productivity and lower associate benefit costs.
Depreciation and amortization expenses decreased to $4.4 million or 1.9% of
sales compared to $4.9 million or 2.0% of sales in the prior year. This
decrease was due to lower levels of new asset acquisitions during the past few
years and to certain other assets being fully depreciated. Interest expense
decreased to $2.9 million or 1.3% of sales from $3.0 million or 1.2% of sales in
the prior year.
Earnings for the first quarter of fiscal 1998 were $124,000 or $0.01 per share
on a diluted basis compared to $1.8 million or $0.16 per share in the same
quarter of fiscal 1997. 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 $5.5 million for the quarter ended May
2, 1998 compared to $8.0 million in the comparable quarter of 1997. Earnings
and non-cash charges generated $4.1 million of cash and working capital changes
provided $1.4 million, primarily in decreased inventory, partially offset by a
reduction in liabilities and an increase in receivables.
Additions to property and equipment for the quarter were $1.9 million compared
to $3.3 million in the first quarter of 1997. Two of the properties held for
resale were sold for $10.8 million and leased back during the quarter. In
addition, the Company's bakery was sold with a gain of $1.0 million. No stores
were opened or closed during the first quarter of fiscal 1998.
Working capital at May 2, 1998 was $23.9 million and the current ratio was 1.27
to 1 compared to $12.9 million and 1.13 to 1 at January 31, 1998 and $13.7
million and 1.14 to 1 at May 3, 1997.
There was $27,000 borrowed against the Revolving Credit Agreement at May 2,1998
with no Letters of Credit issued.
6
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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:
Item 1: Legal Proceedings Not Applicable
Item 2: Change in Securities and Use of Proceeds Not Applicable
Item 3: Defaults Upon Senior Securities Not Applicable
Item 4: Submitted Matters to a Vote of Security Holders Not Applicable
Item 5: Other Not Applicable
Item 6: Exhibits and Reports on Form 8K
Exhibit 27 : Financial Data Schedule (see page 9)
7
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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, 1998 /s/ Robert J. Kelly
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Robert J. Kelly
Chairman and Chief Executive Officer
Dated: June 10, 1998 /s/ S. Patric Plumley
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S. Patric Plumley
Vice President - Chief Financial Officer
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-END> MAY-02-1998
<CASH> 9,977,000
<SECURITIES> 10,364,000
<RECEIVABLES> 14,460,000
<ALLOWANCES> 1,076,621
<INVENTORY> 73,538,000
<CURRENT-ASSETS> 111,651,000
<PP&E> 282,515,000
<DEPRECIATION> 160,976,000
<TOTAL-ASSETS> 259,558,000
<CURRENT-LIABILITIES> 87,728,000
<BONDS> 100,000,000
0
0
<COMMON> 115,000
<OTHER-SE> 32,273,000
<TOTAL-LIABILITY-AND-EQUITY> 259,558,000
<SALES> 231,568,000
<TOTAL-REVENUES> 231,568,000
<CGS> 173,844,000
<TOTAL-COSTS> 173,844,000
<OTHER-EXPENSES> 54,678,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,922,000
<INCOME-PRETAX> 124,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 124,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 124,000
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
