<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 July 22, 2000
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-26602
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THE GRAND UNION COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 22-1518276
--------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
201 Willowbrook Boulevard, Wayne, New Jersey 07470-0966
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(Address of principal executive offices) (Zip Code)
973-890-6000
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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 requirements
for the past 90 days.
Yes X No
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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
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As of September 1, 2000, there were issued and outstanding 29,992,098 shares,
par value $0.01 per share, of the Registrant's common stock.
<PAGE>
THE GRAND UNION COMPANY
Form 10-Q
For the 16 Weeks Ended July 22, 2000
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION (Unaudited)
Item 1. Financial Statements. Page No.
<S> <C>
Consolidated Statement of Operations - 16 weeks ended July 22, 2000 and July 24, 1999 3
Consolidated Balance Sheet - July 22, 2000 and April 1, 2000 4
Consolidated Statement of Cash Flows - 16 weeks ended July 22, 2000 and July 24, 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations. 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 10
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. 11
Item 5. Other Information. 11
Item 6. Exhibits and Reports on Form 8-K. 11
All items which are not applicable or to which the answer is negative have been
omitted from this report.
</TABLE>
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(numbers in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
16 Weeks 16 Weeks
Ended Ended
July 22, July 24,
2000 1999
----------------- ------------------
<S> <C> <C>
Sales $ 657,987 $ 687,268
Cost of sales 475,153 483,512
----------------- ------------------
Gross profit 182,834 203,756
Operating and administrative expenses 167,070 173,781
Depreciation and amortization 11,367 16,229
Amortization of excess reorganization value 40,571 40,566
Unusual items 491 -
Interest expense, net 15,024 12,801
----------------- ------------------
(Loss) before income taxes and cumulative effect of accounting change (51,689) (39,621)
Income tax provision - 1,671
----------------- ------------------
Net (loss) before cumulative effect of accounting change (51,689) (41,292)
Cumulative effect of accounting change, net - 3,525
----------------- ------------------
Net (loss) applicable to common stock $ (51,689) $ (44,817)
================= ==================
Net (loss) before cumulative effect of accounting change per common
share $ (1.72) $ (1.37)
Cumulative effect of accounting change per common share - (0.12)
----------------- ------------------
Basic and diluted net (loss) per common share $ (1.72) $ (1.49)
================= ==================
Weighted average number of shares outstanding 29,992,098 30,000,000
================= ==================
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
-3-
<PAGE>
THE GRAND UNION COMPANY
CONSOLIDATED BALANCE SHEET
(numbers in thousands, except par value)
(unaudited)
<TABLE>
<CAPTION>
July 22, April 1,
2000 2000
----------------- ------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 18,630 $ 19,895
Receivables, net 40,607 43,865
Inventories 127,934 145,293
Other current assets 6,540 12,907
----------------- ------------------
Total current assets 193,711 221,960
Property, plant and equipment, net 352,252 324,719
Excess reorganization value, net 141,998 182,569
Beneficial leases, net 49,879 52,779
Other assets 11,693 11,407
----------------- ------------------
Total assets $ 749,533 $ 793,434
================= ==================
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities:
Current portion of obligations under capital leases $ 4,748 $ 4,544
Accounts payable and accrued liabilities 159,013 195,261
----------------- ------------------
Total current liabilities 163,761 199,805
Long-term debt 269,000 234,000
Obligations under capital leases 159,244 143,229
Adverse leases, net 61,989 69,155
Other noncurrent liabilities 150,001 150,018
----------------- ------------------
Total liabilities 803,995 796,207
----------------- ------------------
Commitments and contingencies
Stockholders' (deficit):
Common stock, $0.01 par value; 60,000,000 shares authorized, 29,992,098 shares
issued and outstanding at July 22, 2000 and
April 1, 2000 300 300
Preferred stock, $1.00 par value; 10,000,000 shares authorized,
no shares issued and outstanding at July 22, 2000 and
April 1, 2000 - -
Capital in excess of par value 384,800 384,800
Accumulated deficit (439,562) (387,873)
----------------- ------------------
Total stockholders' (deficit) (54,462) (2,773)
----------------- ------------------
Total liabilities and stockholders' (deficit) $ 749,533 $ 793,434
================= ==================
</TABLE>
See accompanying notes to consolidated financial statements (unaudited).
-4-
<PAGE>
THE GRAND UNION COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(numbers in thousands)
(unaudited)
<TABLE>
<CAPTION>
16 Weeks 16 Weeks
Ended Ended
July 22, July 24,
2000 1999
----------------- ------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) $ (51,689) $ (44,817)
Adjustments to reconcile net (loss) to net cash provided by
(used for) operating activities:
Depreciation and amortization 51,938 56,795
Unusual items 491 -
Net deferred income tax - 1,671
Cumulative effect of accounting change, net - 3,525
Pension and other non-cash items 1,943 2,529
Non-cash interest 503 486
Gain on sale of property (6,244) -
Net changes in assets and liabilities:
Receivables 3,258 (4,581)
Inventories 16,859 (8,721)
Other current assets 6,326 (31)
Other assets (1,156) (193)
Accounts payable and accrued liabilities (36,729) (3,815)
Other noncurrent liabilities (1,460) 609
----------------- ------------------
Net cash provided by (used for) operating activities (15,960) 3,457
----------------- ------------------
INVESTMENT ACTIVITIES:
Capital expenditures (23,287) (14,925)
Proceeds from sale of property 4,341 -
Disposals of property 127 6
----------------- ------------------
Net cash (used for) investment activities (18,819) (14,919)
----------------- ------------------
FINANCING ACTIVITIES:
Proceeds from Revolving Credit Facility 131,000 -
Repayment of Revolving Credit Facility (96,000) -
Obligations under capital leases discharged (1,486) (2,342)
----------------- ------------------
Net cash provided by (used for) financing activities 33,514 (2,342)
----------------- ------------------
Net (decrease) in cash and temporary investments (1,265) (13,804)
Cash and temporary investments at beginning of period 19,895 57,414
----------------- ------------------
Cash and temporary investments at end of period $ 18,630 $ 43,610
================= ==================
Supplemental disclosure of cash flow information:
Interest payments $ 16,517 $ 12,730
Capital lease obligations incurred 17,705 -
Taxes paid 17 -
</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 Presentation
The accompanying interim consolidated financial statements of The Grand
Union Company (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 consist only of
normal recurring items, 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 52 weeks ended April 1, 2000.
Operating results for the periods presented are not necessarily indicative of
results for the full fiscal year.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 provides guidance on the recognition, presentation and disclosure
of revenue in financial statements. The Company adopted SAB 101 effective April
4, 1999.
Certain reclassifications have been made to prior year amounts to conform
to current period presentation.
NOTE 2 - Subsequent Events
On August 11, 2000, the Company received a partial payment of $1.9 million
from its insurance carrier in connection with an alleged embezzlement by a
former corporate vice president.
On August 14, 2000, the Company announced and implemented a
reduction-in-force of approximately 170 positions primarily at its Wayne, New
Jersey corporate headquarters and an administrative office in Clifton Park, New
York. This reduction-in-force will result in estimated annualized savings
between $8 million - $12 million and the Company will experience certain
one-time charges in connection with the termination of employees effected by the
reduction-in-force. Accordingly, a charge of approximately $2 million will be
recorded as an unusual item for the twelve weeks ended October 14, 2000 (the
"Fiscal 2001 Second Quarter").
On August 17, 2000, the Company announced that it will sell its leasehold
interest in two stores (Glenbrook, Connecticut and the Bronx, New York) and that
it has sold the Little Neck store in Queens, New York, which the company owned
in fee. The total proceeds from these transactions will be approximately $9.3
million, and the net proceeds to the Company will be approximately $7.4 million.
On August 17, 2000, the Company's stockholders elected Michael J. Embler,
Jeffrey P. Freimark, David M. Green, Charles M. Masson, Stephen M. Peck, Gary M.
Philbin and Scott M. Tepper as directors of the Company.
Effective August 17, 2000 and as authorized by the Compensation Committee
of the Board of Directors, the Company has entered into sale bonus agreements
("Sale Bonus Agreements") with each of its nine (9) executive officers providing
for the payment of a sale bonus to each person, under specified conditions, in
the event of a sale of the Company. For more information about the Sale Bonus
Agreements, reference is made to Exhibits 10.10-10.18 hereto.
NOTE 3 - Retention Agreements
Effective July 12, 2000 and as authorized by the Compensation Committee of
the Board of Directors, the Company has entered into retention agreements
("Retention Agreements") with certain of its key associates, including each of
its nine (9) executive officers, providing for the payment of a retention bonus
to each person under specified conditions. For more information about the
Retention Agreements, reference is made to Exhibits 10.1-10.9 hereto.
-6-
<PAGE>
NOTE 4 - Credit Agreement Amendment
Effective June 30, 2000, the Company executed the third amendment to the
Credit Agreement (the "Third Amendment"), which, among other things, adjusted
certain of the financial covenants and permits the Company to retain a greater
portion of the proceeds of asset sales to a specified level. The Third Amendment
also provides that the financial covenants, which have an EBITDA component, will
be computed and measured based upon each of the Company's 13 fiscal reporting
periods, whereas before they were computed and measured quarterly. This new
requirement subjects the Company to increased risk that a short-term decline in
operating performance could potentially trigger an event of default under the
Credit Agreement resulting in the entire loan balance becoming due and payable,
subject to the lenders' discretion and proper notification. The Company believes
that the revised financial covenants are achievable for each period throughout
the remainder of the year, although there can be no assurance that unanticipated
adverse events will not occur. The Third Amendment also requires the Company to
retain an investment banker for purposes of exploring all strategic alternatives
and to retain a consulting company to assist in the preparation of a business
plan. The Company has retained Merrill Lynch & Co., Alvarez & Marsal, Inc. and
Nightingale & Associates, LLC for these purposes. For more information
concerning the Third Amendment to the Credit Facility, reference is made to
Exhibit 10.7 to Grand Union's report on Form 10-K dated June 30, 2000.
NOTE 5 - Restructuring Reserves
The following table is a summary of the changes in reserves relating to
senior management restructuring, staff reductions and store closure costs.
<TABLE>
<CAPTION>
Recognition of
Severance Store Closure
Benefits Costs Total
------------------ --------------------------------------
<S> <C> <C> <C>
Restructuring reserves at April 1, 2000 $ 5,529 $ 15,430 $ 20,959
Cash expenditures (1,718) (309) (2,027)
------------------ --------------------------------------
Restructuring reserves at July 22, 2000 $ 3,811 $ 15,121 $ 18,932
================== ======================================
</TABLE>
Severance costs consist of obligations to employees who were terminated or
were notified of termination under The Grand Union Company Severance Plan For
Exempt Personnel and The Grand Union Company Discretionary Severance Plan for
Non-Union Associates, both of which were adopted by the Board of Directors on
April 14, 1998. The restructuring reserves also include amounts to be paid under
separation agreements for two former senior executives.
Store closure costs relate to the cost of closing 19 stores. During the 12
weeks ended April 1, 2000 (the "Fiscal 2000 Fourth Quarter"), the Company made a
decision to close twelve poor performing stores and not to renew an agreement
with the Penn Traffic Company for the continued leasing of seven other stores
that had operated under the Grand Union name for the previous ten years.
NOTE 6 - Unusual Items
The Company recorded a charge to operations in the 16 weeks ended July 22,
2000 of $491,000 in connection with legal and advisory fees associated with the
Third Amendment.
NOTE 7 - Income Taxes
Income taxes for the interim period are based on the estimated effective
tax rate expected to be applicable for the full fiscal year. The Company
recorded no income tax benefit during the Fiscal 2001 First Quarter compared to
a $1.7 million provision during the Fiscal 2000 First Quarter. A tax benefit
that would have been recorded due to the potential use of operating loss
carryforwards was fully offset by a valuation allowance during the Fiscal 2001
First Quarter.
NOTE 8 - Net Loss Per Share
The net loss per share is computed in accordance with SFAS No. 128,
"Earnings Per Share." This statement requires that entities present, on the face
of the income statement for all periods reflected, basic and diluted per share
amounts. Basic earnings per share is computed using the weighted average number
of common shares outstanding for the period. Diluted earnings per share is
computed using the weighted average number of common shares outstanding for the
period adjusted for dilutive potential common shares. There were 29,992,098 and
30,000,000 weighted average shares outstanding for both basic and diluted
earnings per share for the 16 weeks ended July 22, 2000 and July 24, 1999,
respectively. All potential common shares were excluded from the computation of
the Company's diluted earnings per share because the effect would have been
anti-dilutive.
-7-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
-------------------------------------------------------------------------
Results of Operations
The following table sets forth certain statements of operations and other
data (all dollars in millions).
<TABLE>
<CAPTION>
16 Weeks 16 Weeks
Ended Ended
July 22, July 24,
2000 1999
----------------- ------------------
<S> <C> <C>
Sales $ 658.0 $ 687.3
Gross profit 182.8 203.8
Operating and administrative expenses 167.1 173.8
Depreciation and amortization 11.3 16.2
Amortization of excess reorganization value 40.6 40.6
Unusual items 0.5 -
Interest expense, net 15.0 12.8
(Loss) before income taxes and cumulative effect
of accounting change (51.7) (39.6)
Income tax provision - 1.7
Net (loss) before cumulative effect of accounting change (51.7) (41.3)
Cumulative effect of accounting change, net - 3.5
Net (loss) applicable to common stock (51.7) (44.8)
Sales percentage (decrease) (4.3%) (0.7%)
Gross profit as a percentage of sales 27.8% 29.6%
Operating and administrative expenses as a percentage of sales 25.4% 25.3%
</TABLE>
Sales for the 16 weeks ended July 22, 2000 (the "Fiscal 2001 First
Quarter") decreased $29.3 million, or 4.3%, compared to the 16 week period ended
July 24, 1999 (the "Fiscal 2000 First Quarter"). Same store sales, including
replacement stores, decreased 2.67% during the Fiscal 2001 First Quarter as
compared to the Fiscal 2000 First Quarter. This decrease in same store sales is
primarily due to intensely competitive markets. The Company continues to invest
in marketing and promotional programs to drive sales as competitors continue to
open new locations and remodel stores at a more aggressive rate than the
Company. During the Fiscal 2001 First Quarter, the Company opened two new and
three replacement stores and closed twenty-one stores. During the Fiscal 2000
First Quarter, the Company opened four replacement stores and closed two stores.
Gross profit, as a percentage of sales, decreased to 27.8% for the Fiscal
2001 First Quarter from 29.6% for the Fiscal 2000 First Quarter. This is the
result of decreased advertising and promotional income and the continued
competitive marketplace in which the Company operates. Operating and
administrative expenses, as a percentage of sales, increased to 25.4% from 25.3%
for the Fiscal 2001 First Quarter as compared to the Fiscal 2000 First Quarter.
The Company continues to aggressively identify and implement actions designed to
reduce expenses in all areas of the business without affecting customer service.
In this regard, on August 14, 2000, the Company implemented the reduction of 170
administrative positions. In addition, the Fiscal 2001 First Quarter operating
and administrative expenses include a $6.2 million gain on the sale of the
Company's Little Neck property.
Depreciation and amortization decreased in the Fiscal 2001 First Quarter to
$11.3 million compared to $16.2 million in the Fiscal 2000 First Quarter due
primarily to assets which have fully depreciated and impairment losses of $16.0
million recorded during the second half of Fiscal 2000.
Interest expense for the Fiscal 2001 First Quarter increased to $15.0
million from $12.8 million compared to the Fiscal 2000 First Quarter. This
increase was mainly due to additional borrowings under the Credit Facility, a
rise in interest rates and an increase in the spread as provided under the Third
Amendment to the Credit Facility.
Income taxes for the interim period are based on the estimated effective
tax rate expected to be applicable for the full fiscal year. The Company
recorded no income tax benefit during the Fiscal 2001 First Quarter compared to
a $1.7 million provision during the Fiscal 2000 First Quarter. A tax benefit
that would have been recorded due to the potential use of operating loss
carryforwards was fully offset by a valuation allowance during the Fiscal 2001
First Quarter.
-8-
<PAGE>
Liquidity and Capital Resources
On August 17, 1998 and in connection with the consummation of the Plan of
Reorganization, the Company entered into the Credit Agreement. The Credit
Agreement is comprised of: (i) a $230 million Term Loan and (ii) a $70 million
Revolving Credit Facility. The Term Loan and Revolving Credit Facility will
mature on August 17, 2003. The proceeds of the Credit Agreement were used to
refinance the obligations under the debtor-in-possession credit agreement (the
"DIP Facility") and supplemental term loan claims under the credit agreement
that was in existence before the Chapter 11 case. The excess is available to be
used for working capital and capital expenditures. Up to $50 million of the
Revolving Credit Facility is available for the issuance of letters of credit. As
of July 22, 2000, the Company had net borrowings of $39 million and an aggregate
of $29.9 million of letters of credit issued and outstanding under the Revolving
Credit Facility. The fair value of the long-term debt is based on the quoted
market prices. At July 22, 2000 and April 1, 2000, the approximate fair value of
the long-term debt was $165.0 million and $198.9 million, respectively.
Cash interest payments totaled approximately $16.5 million for the Fiscal
2001 First Quarter and are expected to be approximately $48 million for the
fiscal year ending March 31, 2001 ("Fiscal 2001"). Capital expenditures totaled
$23.3 million for the Fiscal 2001 First Quarter and are expected to be
approximately $35 million for Fiscal 2001.
Credit Agreement Amendment
Effective June 30, 2000, the Company executed the Third Amendment to the
Credit Agreement, which among other things, adjusted certain of the financial
covenants and permits the Company to retain a greater portion of the proceeds of
asset sales to a specified level. The Third Amendment also provides that the
financial covenants, which have an EBITDA component, will be computed and
measured based upon each of the Company's 13 fiscal reporting periods, whereas
before they were computed and measured quarterly. This new requirement subjects
the Company to increased risk that a short-term decline in operating performance
could potentially trigger an event of default under the Credit Agreement
resulting in the entire loan balance becoming due and payable, subject to the
lenders' discretion and proper notification. The Company believes that the
revised financial covenants are achievable for each period throughout the
remainder of the year, although there can be no assurance that unanticipated
adverse events will not occur. The Third Amendment also requires the Company to
retain an investment banker for purposes of exploring all strategic alternatives
and to retain a consulting firm to assist in the preparation of a business plan.
The Company has retained Merrill Lynch & Co., Alvarez & Marsal, Inc. and
Nightingale & Associates, LLC for these purposes. For more information
concerning the Third Amendment to the Credit Facility, reference is made to
Exhibit 10.7 to Grand Union's report on Form 10-K dated June 30, 2000.
Future Outlook
Fiscal 2000 was a transitional year for the Company. The results for the
Fiscal 2001 First Quarter continue to reflect similar issues to those presented
in Fiscal 2000. Management is working diligently to address the fundamental
business issues required to improve operating performance. These include
aggressively addressing sales, margin, expenses and asset management. The
objective is to allow the Company to better serve its business strategy and
drive costs out of the system. The management changes made in the Fiscal 2000
Fourth Quarter signaled this change of direction. The Company closed eleven
underperforming stores in June, and one in July, eliminating the negative impact
these stores had on results. Additionally, the decision was made not to renew
the leases on seven additional stores based on the unfavorable economies of the
lease renewal. It is possible that the Company will close additional stores in
the future. The Company is focusing its merchandising, advertising and operating
efforts primarily on the Grand Union banner. As such, the Hot Dot and Fresh
Market store concepts that previously had separate advertising are now supported
by a common Grand Union program. Additionally, the Company implemented its new
"Get More" advertising and promotional program in an effort to clearly
communicate value to all of its customers.
The Company has invested significant capital in new stores and remodels
since August 1998. These locations have been merchandised to reinforce the
strengths of what Grand Union customers indicate they like most about its stores
- outstanding perishables, improved variety and specialty items throughout all
departments. New features, such as expanded dairy and frozen food sections,
enhanced meals-to-go for easy meal solutions and more health and natural foods
are examples of the Company's continued efforts to meet the needs of today's
consumer.
The Company continues its efforts to convert working capital to cash.
Aggressive, but realistic, programs are in place to reduce inventories and
receivables. Total capital expenditures for Fiscal 2001 are expected to be
approximately $35 million. The Company expects to finance such capital
expenditures through cash generated from operations, selective asset sales and
amounts available under the Credit Agreement. The execution of the Third
Amendment to the Credit Agreement provides the Company with the potential for
additional liquidity throughout Fiscal 2001. In addition, the Company is
aggressively managing its cash position.
-9-
<PAGE>
Based on the Third Amendment, the Company has completed the bulk of asset sales
for which it will be able to retain the proceeds. Unanticipated variances
to projected operating and working capital performance levels could negatively
impact the Company's liquidity.
The Company, with the assistance of its retained financial advisors, is
nearing completion of a strategic business plan that will be delivered to the
lenders under the Credit Agreement on September 1, 2000. The business plan may
require the rationalization of assets and the Company's current marketing areas
going forward. All available strategic alternatives are being analyzed,
including asset sales, store closures and/or the sale of the entire Company.
Impact of New Accounting Standards
The FASB Emerging Issues Task Force (the "EITF"), issued a new accounting
pronouncement EITF Issue Number 00-14, "Accounting for Certain Sales
Incentives," which addresses the recognition, measurement and income statement
classification for certain sales incentives offered by companies in the form of
discounts, coupons or rebates. The implementation of this new accounting
pronouncement may require the Company to make certain reclassifications between
sales and cost of sales in the Company's Consolidated Statement of Operations.
The Company will implement EITF 00-14 in the fourth quarter of the Company's
current fiscal year. In accordance with such implementation, the Company will
also reclassify certain prior period financial statement amounts for
comparability purposes.
The Company is currently reviewing this pronouncement and has not yet
determined the impact on sales, cost of sales and same store sales results.
However, the Company believes that the implementation of EITF 00-14 will not
have an effect on the Company's reported EBITDA or net income (loss).
Special Note Concerning Forward-Looking Statements
Except for historical information, some matters discussed herein may be
considered "forward-looking statements" within the meaning of federal securities
law. Such forward-looking statements are subject to risks, uncertainties and
other factors that could cause actual results to differ materially from future
results expressed or implied by such forward-looking statements. Potential risks
and uncertainties include, but are not limited to, the competitive environment
in which the Company operates, the ability of the Company to maintain and
improve its gross sales and margins, the liquidity of the Company on a cash flow
basis (including the Company's ability to comply with the financial covenants of
its Credit Agreement and to fund the Company's capital expenditure program), the
Company's ability to complete its capital expenditures on a timely basis, the
success of operating initiatives, the viability of the Company's strategic plan,
regional weather conditions, and the general economic conditions in the
geographic areas in which the Company operates. For additional information about
the Company and its operating and financial condition, please see the Company's
most recent Annual Report on Form 10-K for the year ended April 1, 2000, as
filed with the Securities and Exchange Commission on June 30, 2000.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Quantitative and Qualitative Disclosures about Market Risk represents the
risk of loss that may impact the consolidated financial position, results of
operations or cash flows of the Company due to adverse changes in financial
rates. The Company is exposed to market risk in the area of interest rates. This
exposure is directly related to its Term Loan and Revolving Credit borrowings
under the Credit Agreement due to their variable interest rate pricing. There
have been no material changes regarding the Company's market risk position from
the information provided in Item 7A. Quantitative and Qualitative Disclosures
About Market Risk in our Form 10-K filed with the SEC on June 30, 2000.
-10-
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
-------------------------------------------------------------
The Company's Annual Meeting of Stockholders was held on August 17, 2000.
(a) Michael J. Embler, Jeffrey P. Freimark, David M. Green, Charles M.
Masson, Stephen M. Peck, Gary M. Philbin and Scott M. Tepper were
elected directors of the Company at the meeting.
Votes cast in favor of and withheld from voting with respect to
the election of each nominee for director were as follows:
Director Votes For Votes Withheld
-------- --------- --------------
Michael J. Embler 22,975,238 446,940
Jeffrey P. Freimark 22,975,238 446,940
David M. Green 22,975,238 446,940
Charles M. Masson 22,975,238 446,940
Stephen M. Peck 22,975,238 446,940
Gary M. Philbin 22,975,238 446,940
Scott M. Tepper 22,975,238 446,940
There were no abstentions or broker non-votes with respect to any
of the directors.
(b) The amendments to the Non-Employee Directors' Stock Option Plan
("NEDSOP") to increase the number of shares issuable under the
NEDSOP to an aggregate of 250,000 and to increase the number of
initial and annual option grants issuable under the NEDSOP to
10,000 and 5,000, respectively, were approved, with 22,149,422
votes in favor, 1,229,908 votes against, 42,798 votes abstaining
and no broker non-votes.
(c) The appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company for the fiscal year ending March 31,
2001 was ratified, with 23,330,603 votes in favor, 66,877 votes
against, 24,698 votes abstaining and no broker non-votes.
Reference is made to the Company's Proxy Statement dated July 7, 2000 for
its 2000 Annual Meeting of Stockholders for additional information concerning
the matters voted on at the meeting.
Item 5. Other Information
On July 26, 2000, the NASDAQ Listing Qualifications Panel advised the
Company that its Common Stock no longer qualified for trading on the NASDAQ
National Market and would be delisted, effective immediately. The Company's
application to list its Common Stock on the NASDAQ SmallCap Market was also
rejected. Effective July 27, 2000, the Company's Common Stock commenced
quotation on the over-the-counter bulletin board ("OTC-BB") under the ticker
symbol "GUCO".
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit Number
10.1 Retention Bonus Agreement (effective July 12, 2000 and
dated as of August 3, 2000) between Grand Union and Gary
M. Philbin.
10.2 Retention Bonus Agreement (effective July 12, 2000 and
dated as of August 3, 2000) between Grand Union and
Jeffrey P. Freimark.
10.3 Retention Bonus Agreement (effective July 12, 2000 and
dated as of August 3, 2000) between Grand Union and
Manouchehr Moslemi.
10.4 Retention Bonus Agreement (effective July 12, 2000 and
dated as of August 3, 2000) between Grand Union and Glenn
J. Smith.
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<PAGE>
10.5 Retention Bonus Agreement (effective July 12, 2000 and
dated as of August 3, 2000) between Grand Union and
Timothy J. Carnahan.
10.6 Retention Bonus Agreement (effective July 12, 2000 and
dated as of August 3, 2000) between Grand Union and Gary
B. Duncan.
10.7 Retention Bonus Agreement (effective July 12, 2000 and
dated as of August 3, 2000) between Grand Union and James
Santamarina.
10.8 Retention Bonus Agreement (effective July 12, 2000 and
dated as of August 3, 2000) between Grand Union and
Richard D. Skelly.
10.9 Retention Bonus Agreement (effective July 12, 2000 and
dated as of August 3, 2000) between Grand Union and Robert
F. Smith.
10.10 Sale Bonus Agreement (effective August 17, 2000 and dated
as of August 31, 2000) between Grand Union and Gary M.
Philbin.
10.11 Sale Bonus Agreement (effective August 17, 2000 and dated
as of August 31, 2000) between Grand Union and Jeffrey P.
Freimark.
10.12 Sale Bonus Agreement (effective August 17, 2000 and dated
as of August 31, 2000) between Grand Union and Manouchehr
Moslemi.
10.13 Sale Bonus Agreement (effective August 17, 2000 and dated
as of August 31, 2000) between Grand Union and Glenn J.
Smith.
10.14 Sale Bonus Agreement (effective August 17, 2000 and dated
as of August 31, 2000) between Grand Union and Timothy J.
Carnahan.
10.15 Sale Bonus Agreement (effective August 17, 2000 and dated
as of August 31, 2000) between Grand Union and Gary B.
Duncan.
10.16 Sale Bonus Agreement (effective August 17, 2000 and dated
as of August 31, 2000) between Grand Union and James
Santamarina.
10.17 Sale Bonus Agreement (effective August 17, 2000 and dated
as of August 31, 2000) between Grand Union and Richard D.
Skelly.
10.18 Sale Bonus Agreement (effective August 17, 2000 and dated
as of August 31, 2000) between Grand Union and Robert F.
Smith.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the 16 weeks ended July 22, 2000.
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<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)
/s/ Jeffrey P. Freimark
---------------------------------
Jeffrey P. Freimark,
Executive Vice President
Chief Financial and Administrative
Officer and Treasurer
Date: September 5, 2000
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