<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 22, 1995
-------------
Commission File Number 33-48282-01
-----------
THE GRAND UNION COMPANY
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 22 - 1518276
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
201 WILLOWBROOK BOULEVARD, WAYNE, NEW JERSEY 07470 - 0966
(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 .
------- -------
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes X . No .
------- -------
As of September 5, 1995, there were issued and outstanding 10,000,000
shares, par value $1.00 per share, of the Registrant's common stock.
1
<PAGE>
THE GRAND UNION COMPANY
INDEX
PART I - FINANCIAL INFORMATION (UNAUDITED) PAGE NO.
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Statement of Operations - 5 weeks ended July 22,
1995 (Successor Company), 11 weeks ended June 17, 1995 and 16
weeks ended July 23, 1994 (Predecessor Company) 3
Consolidated Balance Sheet - July 22, 1995 (Successor Company)
and April 1, 1995 (Predecessor Company) 4
Consolidated Statement of Cash Flows - 5 weeks ended July 22, 1995
(Successor Company), 11 weeks ended June 17, 1995 and 16 weeks
ended July 23, 1994 (Predecessor Company) 5
Notes to Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. 9
PART II - OTHER INFORMATION
Item 6 - Exhibit; Report on Form 8-K 13
All items which are not applicable or to which the answer is negative have
been omitted from this report.
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
------------- --------------------------------
5 Weeks Ended 11 Weeks Ended 16 Weeks Ended
July 22, June 17, July 23,
1995 1995 1994
------------- -------------- --------------
<S> <C> <C> <C>
Sales $232,663 $487,882 $747,692
Cost of sales (159,583) (344,041) (516,876)
------------- -------------- --------------
Gross profit 73,080 143,841 230,816
Operating and administrative expenses (55,492) (117,544) (170,969)
Depreciation and amortization (6,955) (17,215) (25,262)
Amortization of excess reorganization value (10,110) - -
Reorganization items - (18,627) -
Interest expense (9,546) (19,791) (59,567)
------------- -------------- --------------
Loss before income taxes and extraordinary
gain on debt discharge (9,023) (29,336) (24,982)
Income tax provision (500) - -
------------- -------------- --------------
Loss before extraordinary gain on debt discharge (9,523) (29,336) (24,982)
Extraordinary gain on debt discharge - 854,785 -
------------- -------------- --------------
Net income (loss) (9,523) 825,449 (24,982)
Accrued dividends on old preferred stock - - (5,293)
------------- -------------- --------------
Net income (loss) applicable to common stock ($9,523) $825,449 ($30,275)
------------- -------------- --------------
------------- -------------- --------------
Net loss per common share ($0.95)
-------------
-------------
Other Data:
Earnings before LIFO provision, depreciation and
amortization, amortization of excess reorganization value,
reorganization items, interest expense, income taxes and
extraordinary gain on debt discharge (EBITDA) $17,688 $26,597 $60,147
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
3
<PAGE>
THE GRAND UNION COMPANY
CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
Successor Predecessor
Company Company
---------- -----------
July 22, April 1,
1995 1995
---------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and temporary investments $ 68,831 $ 89,423
Receivables 16,777 18,592
Inventories 168,085 189,467
Other current assets 14,778 16,787
---------- -----------
Total current assets 268,471 314,269
Property, net 483,123 454,180
Goodwill, net - 545,451
Excess reorganization value, net 515,449 -
Deferred financing fees, net 3,078 44,069
Deferred tax asset 26,940 -
Other assets 12,493 36,787
---------- -----------
$1,309,554 $1,394,756
---------- -----------
---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt $ 888 $ -
Current portion of obligations under capital leases 6,688 -
Accounts payable and accrued liabilities 213,793 174,126
---------- -----------
Total current liabilities 221,369 174,126
---------- -----------
Long-term debt 699,345 -
---------- -----------
Obligations under capital leases 125,657 -
---------- -----------
Other noncurrent liabilities 118,706 53,072
---------- -----------
Liabilities subject to compromise - 1,817,698
---------- -----------
Commitments and contingencies
Redeemable stock subject to compromise:
Old common stock - 9,407
Old preferred stock - 164,792
---------- -----------
- 174,199
---------- -----------
Stockholders' equity (deficit):
New Common Stock, $1.00 par value, 30,000,000 shares authorized, 10,000,000
shares issued and outstanding 10,000 -
New Preferred Stock, $1.00 par value, 10,000,000 shares authorized, no shares
issued and outstanding - -
Old common stock - 1
Old treasury stock - (156)
Capital in excess of par value 144,000 -
Deficit (9,523) (824,184)
---------- -----------
Total stockholders' equity (deficit) 144,477 (824,339)
---------- -----------
$1,309,554 $1,394,756
---------- -----------
---------- -----------
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
4
<PAGE>
THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Successor
Company Predecessor Company
--------- -------------------------
5 Weeks 11 Weeks 16 Weeks
Ended Ended Ended
July 22, June 17, July 23,
1995 1995 1994
-------- --------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (9,523) $ 825,449 $(24,982)
Adjustments to reconcile net income (loss) to
net cash provided by (used for) operating
activities before reorganization items paid:
Depreciation and amortization 6,955 17,215 25,262
Amortization of excess reorganization value 10,110 - -
Noncash interest 6,961 1,126 13,584
Extraordinary gain on debt discharge - (854,785) -
Net changes in assets and liabilities:
Receivables (8,481) 1,769 11,975
Inventories 15,793 12,946 5,992
Accounts payable and accrued liabilities (15,726) (34,928) (17,826)
Other current assets (946) 2,776 580
Other (1,568) 4,493 (2,222)
-------- --------- --------
Net cash provided by (used for) operating
activities before reorganization items paid 3,575 (23,939) 12,363
Reorganization items paid (250) (4,913) -
-------- --------- --------
Net cash provided by (used for) operating
activities 3,325 (28,852) 12,363
-------- --------- --------
INVESTMENT ACTIVITIES:
Capital expenditures (2,414) (3,301) (24,949)
Disposals of property - 5,452 1,643
-------- --------- --------
Net cash provided by (used for) investment
activities (2,414) 2,151 (23,306)
-------- --------- --------
FINANCING ACTIVITIES:
Proceeds from New Bank agreement - 104,144 -
Net proceeds from long-term debt - - 8,000
Payment of Old Bank debt - (93,144) -
Obligations under capital leases discharged (647) (1,707) (2,185)
Loan placement fees - (3,125) -
Retirement of long-term debt (84) (239) (239)
-------- --------- --------
Net cash provided by (used for) financing
activities (731) 5,929 5,576
-------- --------- --------
Increase (decrease) in cash and temporary
investments 180 (20,772) (5,367)
Cash and temporary investments at
beginning of period 68,651 89,423 44,294
-------- --------- --------
Cash and temporary investments at end
of period $ 68,831 $ 68,651 $ 38,927
-------- --------- --------
-------- --------- --------
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,973 $ 9,515 $ 59,666
Capital lease obligations incurred 201 20,072 11,441
Accrued dividends on old preferred stock - - 5,293
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
5
<PAGE>
THE GRAND UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF ACCOUNTING
The accompanying interim consolidated financial statements of The Grand
Union Company ("Grand Union" or the "Company") include the accounts of
the Company and its subsidiaries, all of which are wholly-owned. In the
opinion of management, the consolidated financial statements include all
adjustments, which, except for fresh-start adjustments (see Note 3), consist
only of normal recurring adjustments, necessary for a fair presentation of
operating results for the interim period.
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 52 weeks ended April 1, 1995.
Operating results for the periods presented are not necessarily indicative of
the results for the full fiscal year.
Certain amounts have been reclassified in the prior period financial
statements to conform to current year presentation.
NOTE 2 - REORGANIZATION
On January 25, 1995 (the "Filing Date"), as part of the implementation of
an agreement with the Company's bank lenders and with members of informal
committees of certain holders of Grand Union's long-term debt on the terms of
a restructuring of Grand Union's capital structure, Grand Union filed a
voluntary petition for relief under chapter 11 ("Chapter 11") of Title 11
of the United States Code (the "Code") in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court"). From the
Filing Date through June 15, 1995 (the "Effective Date"), Grand Union
operated as a debtor-in-possession under Chapter 11 of the Code and was
subject to the supervision of the Bankruptcy Court in accordance with the
Code.
On May 31, 1995, the Bankruptcy Court confirmed the Second Amended
Chapter 11 Plan, dated April 19, 1995 (as confirmed, the "Plan"), and the
Company emerged from Chapter 11 on the Effective Date. One proceeding
challenging the order confirming the Plan is pending. The Company does not
believe that this proceeding will result in any modification or revocation of
the order.
On the Effective Date, Grand Union adopted a restated certificate of
incorporation, the principal effects of which were to authorize 30,000,000
shares of new common stock (the "New Common Stock") (of which 10,000,000
shares were issued under the Plan) and to prohibit the issuance of non-voting
equity securities. The Plan provided for full payment of all allowed
administrative expenses and all allowed general unsecured and priority
claims. On the Effective Date, obligations relating to the Company's existing
bank credit agreement were paid in full and the Company entered into an
Amended and Restated Credit Agreement (the "New Bank Facility") with its
bank lending group which provides for a five-year revolving credit facility
of $100,000,000 and a seven-year term loan facility of $104,144,371. The New
Bank Facility is secured by a lien on substantially all of the assets of
Grand Union and its subsidiaries.
As of the Effective Date, two series of long-term debt having an
aggregate principal amount of $525,000,000 plus accrued interest (the "Senior
Notes") were deemed cancelled and each holder of Senior Notes became entitled
to receive its pro rata share of Grand Union's new 12% Senior Notes due 2004
(the "New Senior Notes") having an aggregate principal amount of $595,475,922
issued pursuant to the Plan. Subsequent to the Effective Date, the Company
issued $595,421,000 aggregate principal amount of New Senior Notes and made
cash payments of $54,922 for fractional shares to the holders of the Senior
Notes. The New Senior Notes accrue interest beginning on September 1, 1995.
Accordingly the New Senior Notes have been discounted at 12% for the period
from June 15, 1995 to September 1, 1995 and imputed interest will be charged
at 12% during that period. In addition, the difference between such
discounted value and the fair value of the New Senior Notes at the Effective
Date has been recorded as a debt premium totaling $5,779,000 which amount
will be amortized over the life of the New Senior Notes.
As of the Effective Date, three other series of long-term debt having an
aggregate principal amount of $566,150,000 (the "Subordinated Notes") and the
old capital stock of Grand Union were deemed cancelled and each holder of
Subordinated Notes became entitled to receive its pro rata share of an
aggregate of 10,000,000 shares of New Common Stock issued pursuant to the
Plan.
6
<PAGE>
The Plan also provided for the issuance of warrants to purchase an
aggregate of 900,000 shares of New Common Stock to holders of several other
series of long-term debt of its then parent company (the "Capital Notes")
pursuant to the terms of a settlement reached among the Company, its then
direct and indirect parent companies, the Official Committee of Unsecured
Creditors of its then parent company and certain holders of the Capital
Notes. Such warrants are comprised of 300,000 Series 1 Warrants to purchase
shares of New Common Stock at a purchase price of $30 per share and of
600,000 Series 2 Warrants to purchase shares of New Common Stock at a
purchase price of $42 per share. The warrants expire on June 15, 2000.
The Plan made no provision for the holders of the remaining long-term
debt, Redeemable Preferred Stock, common shares or warrants to purchase
common shares of the Company's then indirect parent.
NOTE 3 - FRESH-START REPORTING
As of the Effective Date, the Company adopted fresh-start reporting in
accordance with American Institute of Certified Public Accountants Statement
of Position 90-7, "Financial Reporting By Entities in Reorganization Under
The Bankruptcy Code" ("Fresh-Start Reporting"). In connection with the
adoption of Fresh-Start Reporting, a new entity has been deemed created for
financial reporting purposes. The periods presented prior to the Effective
Date have been designated "Predecessor Company" and the period subsequent to
the Effective Date has been designated "Successor Company". For financial
reporting purposes, the Company accounted for the consummation of the Plan
effective June 17, 1995. In accordance with Fresh-Start Reporting, the
Company valued its assets and liabilities at fair values and eliminated its
retained earnings at the Effective Date. The reorganization value of the
Company was determined on the basis of the trading value of the Company's New
Common Stock for a representative number of days subsequent to the Effective
Date and the fair value of the Company's obligations as of the Effective
Date. The total reorganization value as of the Effective Date was
$1,327,000,000 which was $525,559,000 in excess of the aggregate fair value
of the Company's tangible and identified intangible assets. Such excess is
classified as "Excess reorganization value, net" in the accompanying
consolidated balance sheet and is being amortized on a straight-line basis
over a five-year period.
The components of reorganization items included in the consolidated
statement of operations are as follows (in thousands):
<TABLE>
<S> <C>
Fresh-Start Reporting
Establish excess reorganization value $ 525,559
Eliminate existing goodwill (540,434)
Revalue property, net 40,633
Establish deferred tax asset 24,497
Revalue pension assets and liabilities and postretirement obligations (23,653)
Record lease rejection liability (19,734)
Provide for warehouse closing (8,835)
Eliminate LIFO inventory reserve 7,757
Record liability for fair value of interest rate protection agreement (3,500)
Other (1,905)
---------
Total Fresh-Start 385
Professional fees incurred in connection with the reorganization (20,000)
Interest earned on accumulated cash resulting from the Chapter 11 proceedings 988
---------
Total reorganization items $ (18,627)
---------
---------
</TABLE>
As a result of the debt restructuring, the Company recognized a gain on debt
discharge as follows (in thousands):
<TABLE>
<S> <C>
Elimination of Old Debt, deferred financing fees and accrued interest discharged $1,589,506
Issuance of New Senior Notes (580,721)
Issuance of New Common Stock (154,000)
----------
Gain on debt discharge $854,785
----------
----------
</TABLE>
NOTE 4 - INCOME TAXES
The Company made a provision for income taxes of $500,000, representing
federal and state income taxes. Operating loss carryforwards of the Company
have been offset by the cancellation of indebtedness income received in
connection with the Plan. There are no remaining operating loss carryforwards
and there has been no change in
7
<PAGE>
the tax basis of the Company's assets as of the Effective Date.
NOTE 5 - EARNINGS PER SHARE
Earnings per share for the 5 weeks ended July 22, 1995 has been
calculated on the basis of 10,000,000 shares outstanding. Warrants are
excluded from the calculation because their inclusion would be anti-dilutive.
Earnings (loss) per common share data is not meaningful for periods prior to
June 17, 1995 due to the significant change in the capital structure of the
Company.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL:
As discussed in Note 2 to the accompanying Consolidated Financial
Statements of Grand Union, the Company emerged from its Chapter 11
proceedings effective June 15, 1995. For financial reporting purposes, the
Company accounted for the consummation of the Plan effective June 17, 1995.
In accordance with the American Institute of Certified Public Accountants
Statement of Position 90-7, "Financial Reporting By Entities In
Reorganization Under The Bankruptcy Code", the Company has applied
Fresh-Start Reporting as of the Effective Date which has resulted in
significant changes to the valuation of certain of the Company's assets and
liabilities, and to its stockholders' equity. In connection with the adoption
of Fresh-Start Reporting, a new entity has been deemed created for financial
reporting purposes. The periods prior to the Effective Date have been
designated "Predecessor Company" and the period subsequent to the Effective
Date has been designated "Successor Company". For purposes of the discussion
of Results of Operations for the 16 weeks ended July 22, 1995 (the "1996 First
Quarter"), the results of the Predecessor Company and Successor Company have
been combined.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data
reflecting the combination discussed above (in millions):
<TABLE>
<CAPTION>
16 Weeks Ended
---------------------
July 22, July 23,
1995 1994
-------- --------
<S> <C> <C>
Sales $720.5 $747.7
Gross profit 216.9 230.8
Operating and administrative expenses 173.0 171.0
Depreciation and amortization 24.2 25.3
Amortization of excess reorganization value 10.1 -
Reorganization items 18.6 -
Interest expense 29.3 59.6
Income taxes 0.5 -
Extraordinary gain on debt discharge 854.8 -
Net income (loss) 815.9 (25.0)
EBITDA 44.3 60.1
LIFO provision 0.4 0.3
Sales percentage decrease 3.6% 1.8%
Gross profit as a percentage of sales 30.1 30.9
Operating and administrative
expenses as a percentage of sales 24.0 22.9
EBITDA as a percentage of sales 6.1 8.0
</TABLE>
Sales for the 1996 First Quarter decreased $27.2 million, or 3.6%, as
compared to the 16 weeks ended July 23, 1994 (the "1995 First Quarter").
Sales declined as a result of the sale or closure of 24 stores last year
which were not replaced, partially offset by sales of incremental new stores
and a .1% same store sales increase. The same store sales increase was
favorably influenced by (a) the timing of the pre-Easter holiday shopping
period which was included in the 1996 First Quarter but not in the 1995
First Quarter, (b) the closure or sale of underperforming stores as
mentioned above and (c) the full implementation on May 1, 1995 of a
marketing program in the Company's Northern Region, begun on a limited
basis last year, which includes both lower everyday prices and stronger
sales promotion programs.
Gross profit, as a percentage of sales, was 30.1% for the 1996 First
Quarter, a decrease of .8% from the 30.9% rate in the 1995 First Quarter. The
decrease in gross profit was primarily affected by (a) the effect of the
Company's inability to be fully invested in forward buy inventory for most of
the fourth quarter of Fiscal 1995 which negatively impacted gross profit in
the 1996 First Quarter, (b) lower vendor promotional allowances in the early
part of the 1996 First Quarter and (c) the previously mentioned Northern
Region marketing program.
9
<PAGE>
Operating and administrative expenses, as a percentage of sales, was 24.0%
in the 1996 First Quarter, an increase of 1.1% from the 22.9% rate in the
1995 First Quarter. The increase, as a percentage of sales, primarily
resulted from (a) store labor and fringe costs resulting from store closures
and (b) advertising expense, principally to support the Northern Region
lower every day price reduction program, partially offset by higher gains
from sales of stores in the 1996 First Quarter ($3.6 million) as compared to
the 1995 First Quarter ($1.8 million).
Depreciation and amortization totaled $24.2 million for the 1996 First
Quarter compared to $25.3 million for the 1995 First Quarter. The decrease
results from less than a full quarter's amortization of goodwill in the
current year.
The excess reorganization value is being amortized over a 5-year life.
During the 1996 First Quarter, the Company recorded $18.6 million of
reorganization items which includes professional fees incurred prior to the
Effective Date, Fresh-Start Reporting adjustments and interest income on
accumulated cash resulting from the Chapter 11 proceedings. The Company
expects to incur additional reorganization expenses, principally professional
fees, subsequent to the Effective Date, pursuant to certain limited elements
of the Company's Chapter 11 proceeding which will remain under the
supervision of the Bankruptcy Court until final resolution. In accordance
with Fresh-Start Reporting, the Company valued its assets and liabilities at
fair values and eliminated its retained earnings as of the Effective Date.
Interest expense totaled $29.3 million for the 1996 First Quarter
compared to $59.6 million for the 1995 First Quarter. The decline in interest
is principally related to the cessation of interest accruals on a significant
portion of the Company's debt during the bankruptcy proceedings and to the
decreased level of debt of the Successor Company.
The Company made a provision for income taxes in the 1996 First Quarter
of $.5 million, representing federal and state income taxes. Operating loss
carryforwards of the Company have been offset by the cancellation of
indebtedness income received in connection with the Plan. There are no
remaining operating loss carryforwards and no change in the tax basis of the
Company's assets as of the Effective Date.
In connection with the Company's emergence from Chapter 11, the Company
recognized an extraordinary gain of approximately $854.8 million related to
the discharge of debt.
Because of certain factors discussed above, EBITDA (earnings before LIFO
provision, depreciation and amortization, amortization of excess
reorganization value, reorganization items, interest expense, income taxes
and extraordinary gain on debt discharge) for the 1996 First Quarter totaled
$44.3 million, or 6.1% of sales, compared to $60.1 million, or 8.0% of sales,
for the 1995 First Quarter.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Resources used to finance significant expenditures for the 1996 First
Quarter, which is presented by combining the cash flows of the Predecessor
Company and the Successor Company, and the 1995 First Quarter are reflected
in the following table:
<TABLE>
<CAPTION>
16 Weeks Ended
-------------------
July 22, July 23,
1995 1994
-------- --------
(in millions)
<S> <C> <C>
Resources used for:
Debt and capital lease repayments $ 95.8 $ 2.4
Capital expenditures 5.7 24.9
Operating activities, including cash and temporary investments 5.0 -
Loan placement fees 3.1 -
-------- --------
$109.6 $27.3
-------- --------
-------- --------
Financed by:
Proceeds from New Bank agreement $104.1 $ -
Property disposals 5.5 1.6
Operating activities, including cash and temporary investments - 17.7
Net proceeds from long-term debt - 8.0
-------- --------
$109.6 $27.3
-------- --------
-------- --------
</TABLE>
During the 16 weeks ended July 22, 1995, funds for debt and capital lease
repayments (primarily the repayment of obligations outstanding under the Old
Bank agreement), capital expenditures, operating activities and loan
placement fees were principally obtained from cash provided by the New Bank
Facility (see Note 2). During the 16 weeks ended July 23, 1994, funds for
capital expenditures and debt and capital lease repayments were principally
obtained from cash provided by operating activities and from $8 million
borrowed on the revolving credit facility.
Capital expenditures for the 52 weeks ending March 30, 1996 ("Fiscal
1996"), including capitalized leases other than real estate leases, are
expected to be approximately $50 million. Capital expenditures will be
related to new, enlarged or remodeled stores, store systems and maintenance
capital. The Company plans to finance its capital expenditures from cash
provided by operations and, to a limited extent, from equipment leases or
purchase money mortgages. The Company's ability to complete its capital
expenditure program is dependent upon its operating performance.
On the Filing Date, as part of the implementation of an agreement with
the Company's bank lenders and with members of informal committees of certain
holders of Grand Union's long-term debt on the terms of a restructuring of
Grand Union's capital structure, Grand Union filed a voluntary petition for
relief under Chapter 11 of the Code in the Bankruptcy Court. From the Filing
Date through the Effective Date, Grand Union operated as a
debtor-in-possession under Chapter 11 of the Code and was subject to the
supervision of the Bankruptcy Court in accordance with the Code.
On May 31, 1995, the Bankruptcy Court confirmed the Plan, and the Company
emerged from Chapter 11 on the Effective Date. One proceeding challenging the
order confirming the Plan is pending. The Company does not believe that this
proceeding will result in any modification or revocation of the order.
On the Effective Date, Grand Union adopted a restated certificate of
incorporation, the principal effects of which were to authorize 30,000,000
shares of New Common Stock (of which 10,000,000 shares were issued under the
Plan) and to prohibit the issuance of non-voting equity securities. The Plan
provided for full payment of all allowed administrative expenses and all
allowed general unsecured and priority claims. On the Effective Date,
obligations relating to the Company's existing bank credit agreement were
paid in full and the Company entered into the New Bank Facility with its bank
lending group which provides for a five-year revolving credit facility of
$100,000,000 and a seven-year term loan facility of $104,144,371. The New
Bank Facility is secured by a lien on substantially all of the assets of
Grand Union and its subsidiaries.
As of the Effective Date, the Senior Notes were deemed cancelled and each
holder of Senior Notes became entitled to receive its pro rata share of the
New Senior Notes having an aggregate principal amount of $595,475,922
11
<PAGE>
issued pursuant to the Plan. Subsequent to the Effective Date, the Company
issued $595,421,000 aggregate principal amount of New Senior Notes and made
cash payments of $54,922 for fractional shares to the holders of the Senior
Notes. The New Senior Notes accrue interest beginning on September 1, 1995.
Accordingly the New Senior Notes have been discounted at 12% for the period
from June 15, 1995 to September 1, 1995 and imputed interest will be charged
at 12% during that period. In addition, the difference between such
discounted value and the fair value of the New Senior Notes at the Effective
Date has been recorded as a debt premium totaling $5,779,000 which amount
will be amortized over the life of the New Senior Notes.
As of the Effective Date, the Subordinated Notes and the old capital
stock of Grand Union were deemed cancelled and each holder of Subordinated
Notes became entitled to receive its pro rata share of an aggregate of
10,000,000 shares of New Common Stock issued pursuant to the Plan.
The Plan also provided for the issuance of warrants to purchase an
aggregate of 900,000 shares of New Common Stock to holders of the Capital
Notes pursuant to the terms of a settlement reached among the Company, its
then direct and indirect parent companies, the Official Committee of
Unsecured Creditors of its then parent company and certain holders of the
Capital Notes. Such warrants are comprised of 300,000 Series 1 Warrants to
purchase shares of New Common Stock at a purchase price of $30 per share and
of 600,000 Series 2 Warrants to purchase shares of New Common Stock at a
purchase price of $42 per share. The warrants expire on June 15, 2000.
The Plan made no provision for the holders of the remaining long-term
debt, Redeemable Preferred Stock, common shares or warrants to purchase
common shares of the Company's then indirect parent.
As of July 22, 1995, the Company had no borrowings and approximately
$41.6 million of letters of credit outstanding under the $100.0 million
revolving credit facility.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 6.
(a) Exhibits
EXHIBIT NUMBER
27.1 Financial Data Schedule.
(b) Report on Form 8-K dated June 15, 1995 as filed with the Commission on
June 29, 1995.
13
<PAGE>
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 5, 1995 /s/ Kenneth R. Baum
----------------------------------------
Kenneth R. Baum
Senior Vice President, Chief Financial
Officer and Secretary (Principal
Financial Officer and Principal
Accounting Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S INTERIM CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-START> APR-02-1995
<PERIOD-END> JUL-22-1995
<CASH> 68,831
<SECURITIES> 0
<RECEIVABLES> 16,777
<ALLOWANCES> 0
<INVENTORY> 168,085
<CURRENT-ASSETS> 14,778
<PP&E> 817,763
<DEPRECIATION> 334,640
<TOTAL-ASSETS> 1,309,554
<CURRENT-LIABILITIES> 221,369
<BONDS> 825,002
<COMMON> 10,000
0
0
<OTHER-SE> 134,477
<TOTAL-LIABILITY-AND-EQUITY> 1,309,554
<SALES> 720,545
<TOTAL-REVENUES> 720,545
<CGS> 503,624
<TOTAL-COSTS> 503,624
<OTHER-EXPENSES> 225,943
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,337
<INCOME-PRETAX> (38,359)
<INCOME-TAX> 500
<INCOME-CONTINUING> (38,859)
<DISCONTINUED> 0
<EXTRAORDINARY> 854,785
<CHANGES> 0
<NET-INCOME> 815,926
<EPS-PRIMARY> (0.95)
<EPS-DILUTED> 0
</TABLE>
