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Previous: CENTENNIAL MONEY MARKET TRUST, N-30D, 1994-09-02 |
Next: SMITH BARNEY SHEARSON FUNDAMENTAL VALUE FUND INC, N14EL24, 1994-09-02 |
<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended July 23, 1994
Commission File Number 33-59438
THE GRAND UNION COMPANY
(Exact name of registrant as specified in its charter)
Delaware 22-1518276
-------- ----------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
201 Willowbrook Boulevard, Wayne, New Jersey 07470-09660
---------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
201-890-6000
------------
(Registrant's telephone number, including area code)
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 .
------- ------
As of September 2, 1994, there were issued and outstanding 801.5 shares
of the registrant's common stock.
<PAGE>
THE GRAND UNION COMPANY
INDEX
PART I - FINANCIAL INFORMATION (UNAUDITED) PAGE NO.
ITEM 1. FINANCIAL STATEMENTS. 6
Consolidated Statement of Operations - 16 weeks ended 3
July 24, 1993 and July 23, 1994
Consolidated Balance Sheet - April 2, 1994 and July 4
23, 1994
Consolidated Statement of Cash Flows - 16 weeks ended 5
July 24, 1993 and July 23, 1994
Note to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 7 - 8
PART II - OTHER INFORMATION
No item in PART II - OTHER INFORMATION is applicable.
All items which are not applicable or to which the answer is negative have
been omitted from this report.
The financial statements and related notes of Grand Union have not
been separately presented herein since such financial statements reflect the
accounts of Capital pushed down to the accounts of Grand Union.
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
GRAND UNION CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
16 Weeks Ended
-------------------------
July 24, July 23,
1993 1994
---------- ---------
(in thousands)
<S> <C> <C>
Sales $761,098 $747,692
Cost of sales (545,996) (523,279)
----------- ----------
Gross profit 215,102 224,413
Operating and administrative expense (164,978) (164,566)
Depreciation and amortization (23,304) (25,262)
Interest expense:
Debt:
Obligations requiring current cash interest (39,117) (40,966)
Obligations requiring no current cash interest (10,220) (12,031)
Capital lease obligations (4,482) (5,017)
Amortization of deferred financing fees (1,458) (1,553)
----------- ----------
Loss before income taxes and cumulative effect of accounting change (28,457) (24,982)
Income tax provision - -
----------- ----------
Loss before cumulative effect of accounting change (28,457) (24,982)
Cumulative effect of accounting change (30,308) -
----------- ----------
Net loss (58,765) (24,982)
Accrued preferred stock dividends of Grand Union Holdings Corporation (4,743) (5,293)
----------- ----------
Net loss applicable to common stock $(63,508) $(30,275)
----------- ----------
----------- ----------
Other Data:
Earnings before LIFO provision, depreciation and amortization, interest
expense, income taxes and cumulative effect of accounting change (EBITDA) $51,048 $60,147
----------- ----------
----------- ----------
</TABLE>
See accompanying note to consolidated financial statements (unaudited).
3
<PAGE>
GRAND UNION CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
April 2, July 23,
1994 1994
-------------- -------------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary cash investments $44,294 $38,927
Receivables 37,072 25,097
Inventories 206,063 200,071
Other current assets 17,444 16,864
-------------- -------------
Total current assets 304,873 280,959
Property, net 400,554 418,113
Goodwill, net 563,276 558,281
Beneficial leases, net 33,074 31,273
Deferred financing fees, net 48,721 47,288
Other assets 43,726 42,208
-------------- -------------
$1,394,224 $1,378,122
-------------- -------------
-------------- -------------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Current maturities of long-term debt $914 $917
Current portion of obligations under capital leases 7,099 7,118
Accounts payable and accrued liabilities 238,225 220,399
-------------- -------------
Total current liabilities 246,238 228,434
-------------- -------------
Long-term debt 1,404,089 1,423,878
-------------- -------------
Obligations under capital leases 120,140 129,377
-------------- -------------
Other noncurrent liabilities 113,810 111,725
-------------- -------------
Commitments and contingencies
Redeemable stock of Grand Union Holdings Corporation (liquidation preference
$150,605,000 in aggregate) 154,719 160,012
-------------- -------------
Stockholder's deficit:
Common stock, $.01 par value; authorized, issued and
outstanding 1,000 shares 1 1
Treasury stock of Grand Union Holdings Corporation (156) (156)
Accumulated deficit (644,617) (675,149)
-------------- -------------
Total stockholder's deficit (644,772) (675,304)
-------------- -------------
$1,394,224 $1,378,122
-------------- -------------
-------------- -------------
</TABLE>
See accompanying note to consolidated financial statements (unaudited).
4
<PAGE>
GRAND UNION CAPITAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
16 Weeks Ended
--------------------------------
July 24, July 23,
1993 1994
-------------- -------------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(58,765) $(24,982)
Adjustments to reconcile net loss to net cash provided by
(used for) operating activities:
Cumulative effect of accounting change 30,308 -
Depreciation and amortization 23,304 25,262
Noncash interest 10,220 12,031
Amortization of deferred financing fees 1,458 1,553
Net changes in assets and liabilities:
Receivables 3,455 11,975
Inventories 19,125 5,992
Accounts payable and accrued liabilities (61,244) (17,826)
Other current assets 2,044 580
Other (7,735) (2,222)
-------------- ------------
Net cash provided by (used for) operating activities (37,830) 12,363
-------------- ------------
INVESTMENT ACTIVITIES:
Capital expenditures (11,184) (24,949)
Disposals of property 35 1,643
-------------- ------------
Net cash used for investment activities (11,149) (23,306)
-------------- ------------
FINANCING ACTIVITIES:
Proceeds from the issuance of long-term debt 21,011 8,000
Obligations under capital leases discharged (2,210) (2,185)
Retirement of long-term debt (169) (239)
Purchase of Grand Union Holdings Corporation common stock (95) -
-------------- ------------
Net cash provided by financing activities 18,537 5,576
-------------- ------------
Decrease in cash and temporary cash investments (30,442) (5,367)
Cash and temporary cash investments at beginning of period 69,651 44,294
-------------- ------------
Cash and temporary cash investments at end of period $39,209 $38,927
-------------- ------------
-------------- ------------
Supplemental disclosure of cash flow information:
Cash paid for interest $55,735 $59,666
Capital lease obligations incurred 4,684 11,441
Accrued dividends on preferred stock of Grand Union Holdings Corporation 4,743 5,293
</TABLE>
See accompanying note to consolidated financial statements (unaudited).
5
<PAGE>
GRAND UNION CAPITAL CORPORATION
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF ACCOUNTING
The accompanying interim consolidated financial statements of Grand Union
Capital Corporation ("Capital" or the "Company") have not been audited by
independent accountants. However, in the opinion of management the results of
operations include all adjustments, which consist only of normal recurring
adjustments, necessary for a fair presentation of operating results for the
interim periods. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
April 2, 1994. Operating results for the periods presented are not necessarily
indicative of the results for the full fiscal year.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data:
<TABLE>
<CAPTION>
16 Weeks Ended
-----------------------------
July 24, July 23,
1993 1994
------------ -----------
<S> <C> <C>
(dollars in millions)
Sales $761.1 $747.7
Gross profit 215.1 224.4
Operating and administrative expense 165.0 164.6
Depreciation and amortization 23.3 25.3
Interest expense 55.3 59.6
Cumulative effect of accounting change 30.3 -
Net loss 58.8 25.0
EBITDA 51.0 60.1
LIFO provision .9 .3
Sales percentage decrease 4.5% 1.8%
Gross profit as a percentage of sales 28.3 30.0
Operating and administrative expense as a percentage of sales's 21.7 22.0
EBITDA as a percentage of sales 6.7 8.0
</TABLE>
Sales for the 16 weeks ended July 23, 1994 decreased $13.4 million or 1.8%
as compared to the 16 weeks ended July 24, 1993. The sales decrease for the 16
weeks ended July 23, 1994 resulted from the continuing effect of workforce
reductions by several major employers in the Company s Northern Region,
competitive store openings in the Mid-Hudson Valley and Albany metropolitan area
of New York State, the Company's increased emphasis on value-oriented products
in the Northern Region and the timing of Easter (the first quarter of the
current year did not include the holiday shopping period preceding Easter; the
previous year's first quarter included the pre-holiday week). These factors
were partially offset by the effect of the work stoppage last year and sales
increases from the Company's capital expenditure program. Existing store sales,
influenced by the same factors mentioned above, decreased 5.6% for the 16 weeks
ended July 23, 1994
The increase in gross profit, as a percentage of sales, for the 16 weeks
ended July 23, 1994 resulted from increased sales of higher margin general
merchandise and private label products, reduced product procurement costs and a
reduction of the LIFO provision.
The increase in operating and administrative expense, as a percentage of
sales, for the 16 weeks ended July 23, 1994 resulted primarily from an increase,
as a percentage of sales, in store labor and fringe benefits, utilities expense
and occupancy costs.
Depreciation and amortization was $25.3 and $23.3 million for the 16 weeks
ended July 23, 1994 and July 24, 1993, respectively. The $2.0 million increase
is attributable to the Company's capital expenditure program.
Interest expense was $59.6 and $55.3 million for the 16 weeks ended July
23, 1994 and July 24, 1993, respectively. The increase is primarily due to the
increased level of debt outstanding.
During the 16 weeks ended July 24, 1993, the Company recorded a $30.3
million charge as the cumulative effect of an accounting change relating to the
adoption of Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". This charge
represents the portion of future retiree benefit costs related to service
already rendered by both active and retired employees up to the date of
adoption.
7
<PAGE>
EBITDA (earnings before LIFO provision, depreciation and amortization,
interest expense, income taxes and cumulative effect of accounting change) was
$60.1 million or 8.0% of sales for the 16 weeks ended July 23, 1994, compared to
$51.0 million or 6.7% of sales for the 16 weeks ended July 24, 1993. The
Company estimates that the 22 day work stoppage during the 16 weeks ended July
24, 1993 had the effect of reducing EBITDA by approximately $8.0 million as a
result of lost sales, product losses and other costs associated with the work
stoppage.
On July 26, 1994, the Company announced a corporate reorganization and
overhead reduction program to consolidate several key functions and reduce
overhead expense by approximately $5 million annually. The Company estimates
that the cost of this program, principally consisting of severance costs, will
be approximately $1 million, of which $.4 million was recorded in the 16 weeks
ended July 23, 1994. Cost savings from this program will be reinvested in store
operations beginning in the second quarter.
LIQUIDITY AND CAPITAL RESOURCES
Resources used to finance significant expenditures for the 16 weeks ended
July 24, 1993 and July 23, 1994 are reflected in the following table:
<TABLE>
<CAPTION>
16 Weeks Ended
-----------------------------
July 24, July 23,
1993 1994
------------ -----------
<S> <C> <C>
(in millions)
Resources used:
Capital expenditures $11.2 $24.9
Debt repayment 2.4 2.4
Purchase of redeemable Class A common stock 0.1 --
----- -----
$13.7 $27.3
----- -----
----- -----
Financed by:
Operating activities, including cash and temporary cash investments $(7.3) $17.7
Debt incurred 21.0 8.0
Property disposals - 1.6
----- -----
$13.7 $27.3
----- -----
----- -----
</TABLE>
During the 16 weeks ended July 23, 1994, funds for capital expenditures and
debt repayment were principally obtained from cash provided by operating
activities and from $8 million borrowed on the revolving credit facility.
During the 16 weeks ended July 24, 1993, funds for capital expenditures, debt
repayment and the purchase of redeemable Class A common stock from former
management investors of the Southern Region were principally obtained from
additional borrowings. Debt repayment for the 16 weeks ended July 23, 1994 and
for the 16 weeks ended July 24, 1993 consisted of scheduled repayments of
capital leases and various mortgages.
At July 23, 1994, there was $33.0 million of borrowings outstanding under
the Company's $100 million revolving credit facility and $24.4 million was
available for additional borrowings or letters of credit.
The Company was in compliance with the terms and restrictive covenants of
its debt obligations for the 16 weeks ended July 23, 1994.
During the 16 weeks ended July 23, 1994, the Company opened two replacement
stores and completed the remodeling of two stores. Capital expenditures for the
year ending April 1, 1995, including capitalized leases other than real estate
capitalized leases, are expected to be approximately $70 million. Capital
expenditures will be principally for new stores, replacement stores, remodeled
stores and expansions. The Company plans to finance capital expenditures and
scheduled debt repayments primarily through cash provided by operations. The
Company will finance a limited amount of capital expenditures through purchase
money mortgages and equipment leases.
8
<PAGE>
PART II - OTHER INFORMATION
No item in PART II - OTHER INFORMATION is applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE GRAND UNION COMPANY
(Registrant)
Date: September 2, 1994 /s/ Kenneth R. Baum
--------------------------------------
Kenneth R. Baum
Senior Vice President, Chief Financial
Officer and Secretary (Principal
Financial Officer and Principal
Accounting Officer)
9
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