<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d) of
The Securities and Exchange Act of 1934
Quarter Ended August 03, 1996 Commission File No. 2-72154
BIG B, INC.
STATE OF INCORPORATION Alabama I.R.S. EMPLOYER I.D. NO. 63-0632551
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ADDRESS OF PRINCIPAL EXECUTIVE OFFICE
2600 Morgan Road S.E., Bessemer, Alabama 35023
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REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE
Area Code 205 424-3421
----------------------
OUTSTANDING COMMON STOCK AS OF AUGUST 03, 1996 IS 18,892,181
Indicate by check 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, and (2) has been subject to such filing requirements
for the past 90 days.
YES (X) NO ( )
<PAGE> 2
COMMISSION FILE NO. 2-72154
BIG B, INC.
Index
<TABLE>
<S> <C>
FINANCIAL STATEMENTS: PAGE NO.
---------------------------------------------------------- --------
Condensed Balance Sheets as of
August 03, 1996 and February 03, 1996 2
Condensed Statements of Income and Retained
Earnings for the Twenty-Six and Twelve Week
Periods Ended August 03, 1996 and July 29, 1995 3
Condensed Consolidated Statements of Cash Flows for the
Twenty-Six and Twelve Week Periods Ended August 03, 1996
and July 29, 1995 4
Financial Data Schedule 5
Notes to Condensed Financial Statements 6
Management's Discussion and Analysis of
the Results of Operations and Financial
Condition 7
Other Information and Signatures 8
</TABLE>
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<PAGE> 3
BIG B, INC.
CONDENSED BALANCE SHEETS
AS OF AUGUST 03, 1996 AND FEBRUARY 03, 1996
(Unaudited)
<TABLE>
<CAPTION>
AUG 03 FEB 03
------ ------
1996 1996
(In Thousands)
ASSETS
- ------
<S> <C> <C>
Current Assets -
Cash and Temporary Cash Investments $ 523 $ 491
Receivables 25,571 22,659
Inventories at LIFO 186,838 179,400
Prepaid Expenses 6,136 6,330
Refundable Income Taxes 2,246 3,037
Deferred Income Taxes 2,539 2,539
-------- --------
Total Current Assets $223,853 $214,456
-------- --------
Property, Equipment, and Investments
in Property Under Capital Leases,
Net $ 71,718 $ 76,225
-------- --------
Other Assets 10,948 8,155
-------- --------
$306,519 $298,836
======== ========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
- ----------------------------------------
Current Liabilities -
Current Portion of Long-Term Debt and
Capitalized Lease Obligations $ 1,057 $ 1,057
Accounts Payable 47,522 49,525
Short Term Bank Loan 14,200 4,700
Accrued Income Taxes Payable 0 0
Accrued Expenses 14,472 13,170
-------- --------
Total Current Liabilities $ 77,251 $ 68,452
-------- --------
Non-Current Liabilites -
Long-Term Debt and Capitalized
Lease Obilgations $ 70,381 $ 73,171
Deferred Income Taxes 5,389 5,169
Deferred Compensation 1,912 1,780
Other 3,966 5,016
-------- --------
$ 81,648 $ 85,136
-------- --------
Shareholders' Investment -
Common stock, $.001 par value; 100,000,000 shares
authorized, 18,892,181 shares issued and outstanding
at August 03, 1996 $ 19 $ 19
Paid-in capital 75,520 74,626
Retained earnings 72,081 70,603
-------- --------
$147,620 $145,248
-------- --------
$306,519 $298,836
======== ========
</TABLE>
See notes to condensed financial statements.
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<PAGE> 4
BIG B, INC.
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE TWENTY-SIX AND TWELVE WEEK PERIODS ENDED
AUGUST 03, 1996 AND JULY 29, 1995
(Unaudited)
(Note 2)
<TABLE>
<CAPTION>
TWENTY SIX WEEKS ENDED TWELVE WEEKS ENDED
---------------------- ------------------
8-03-96 7-29-95 8-03-96 7-29-95
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Sales $381,897 $354,742 $173,114 $159,559
-------- -------- -------- --------
Cost and Expenses:
Cost of Products Sold $269,611 $247,115 $122,519 $111,014
Store Operating, Selling and
Administrative Expenses 97,322 86,510 43,499 39,613
Depreciation and Amortization 6,905 5,918 3,482 2,777
Interest Expense 2,747 2,358 1,162 1,003
Interest Income (19) (36) (15) (28)
-------- -------- -------- --------
$376,566 $341,865 $170,647 $154,379
-------- -------- -------- --------
Income (Loss) Before Taxes $ 5,331 $ 12,877 $ 2,467 $ 5,180
Provision for Income Taxes 1,995 4,830 925 1,945
-------- -------- -------- --------
Net Income $ 3,336 $ 8,047 $ 1,542 $ 3,235
Retained Earnings, Beginning of
Period 70,603 71,390 71,463 75,572
Dividend Paid (1,858) (1,553) (924) (923)
-------- -------- -------- --------
Retained Earnings, End of Period $ 72,081 $ 77,884 $ 72,081 $ 77,884
======== ======== ======== ========
Net Income Per Common Share (Note 1)
Primary $ 0.18 $ 0.47 $ 0.08 $ 0.16
======== ======== ======== ========
Fully Diluted $ 0.18 $ 0.44 $ 0.08 $ 0.16
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE> 5
BIG B, INC.
CONDENSED STATEMENTS OF CASH FLOWS FOR THE
TWENTY-SIX WEEK PERIODS ENDED AUGUST 03, 1996 AND JULY 29, 1995
INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS
(Unaudited)
<TABLE>
<CAPTION>
Aug. 03, 1996 July 29, 1995
------------- -------------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 3,336 $ 8,047
---------- --------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 6,905 5,918
Provision for deferred income taxes 220 70
Provision for losses on receivables 2,410 5,180
Provision to value inventories at LIFO cost 950 750
Loss on sale of property 94 38
Provision for deferred compensation 132 99
Provision (Recognition) of other non-current liability 740 (2,124)
Change in assets and liabilities:
(Increase) in accounts receivable (5,322) (6,620)
(Increase) in other assets (2,974) (685)
(Increase) in inventories (8,388) (13,631)
Decrease in refundable income taxes 791 0
(Increase) Decrease in prepaid expenses 2,194 (2,137)
(Decrease) in accounts payable (2,003) (6,601)
(Decrease) in accrued income taxes 0 (1,446)
Increase (Decrease) in accrued expenses 2,074 460
---------- --------
Total adjustments (2,177) $(20,729)
---------- --------
Net cash provided by (used in) operating activities 1,159 $(12,682)
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property 15 19
Capital expenditures (6,117) (11,363)
---------- --------
Net cash used in investing activities $ (6,102) $(11,344)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 2,000 ---
Net borrowings (repayments)under line of credit agreement 9,500 (100)
Principal payments under long-term debt and capital lease obligations (4,790) (16,228)
Proceeds from issuance of common stock 123 38,327
Dividends paid $ (1,858) $ (1,553)
---------- --------
Net cash provided by financing activities $ 4,975 $ 20,446
---------- --------
NET INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS 32 (3,580)
CASH AND TEMPORARY INVESTMENTS AT BEGINNING OF PERIOD 491 4,076
---------- --------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $ 523 $ 496
========== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 2,706 $ 2,408
Income taxes 685 7,990
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE> 6
BIG B, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
AUGUST 03, 1996 AND JULY 29, 1995
1. Net income per common share for all periods was computed by dividing net
income by the average weighted number of shares outstanding during the
periods. Outstanding stock options are common stock equivalents but were
excluded from the primary net income per common share computations as
their effect was not material. Fully diluted net income per common share
was determined on the assumption that all convertible subordinated
debentures were converted and all stock options outstanding were
exercised. Conversion was assumed during the portion of each period that
the debentures and the options were outstanding. For the debentures, net
income was adjusted for interest, net of income tax effects; for the stock
options, outstanding shares were decreased by the number of shares that
could have been purchased with the proceeds from the exercise, using the
end of the period market price.
For the twenty-six and twelve week periods ending August 03, 1996, fully
diluted net income per common share is considered to be the same as
primary net income per common share since the effect of certain
potentially dilutive securities would be anti-dilutive.
2. In the opinion of management, all adjustments have been made which are
necessary to reflect a fair statement of the results of operations of the
interim period.
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<PAGE> 7
BIG B, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OPERATING RESULTS
Net Sales
Sales for the twenty-six week period increased 7.7% to $381.9 million from
$354.7 million in the prior year. Sales for the twelve week period increased
8.5% to $173.1 million from $159.6 million in the prior year. The increase in
net sales for both the twenty-six and twelve week periods were primarily the
result of increased sales in existing stores. The Company operated 389 drug
stores and nine Home Health Care stores at August 03, 1996, compared to 373
drug stores and five Home Health Care stores operated at July 29, 1995.
Store Cost and Expense
Cost of products sold, including warehouse expense, as a percentage of net
sales, increased to 70.6% from 69.7% in the twenty-six week period and
increased to 70.8% from 69.6% in the most recent twelve week period. The
increase in cost of products sold as a percentage of net sales in the period
resulted primarily from the continued increase in third-party prescription
sales with lower gross margins than non third-party prescription sales.
Management anticipates that further declines in pharmacy margins, as a result
of increased third-party sales, will be at a level which will not significantly
impact net income and will be substantially offset by additional sales volume
and gross profit dollars generated from the increased third-party sales,
improved purchasing arrangements for pharmaceutical products, continued
contract negotiations with third-party payors, the marketing of value added
pharmacy services, and the use of point-of-sale data to improve gross margins
for non-pharmacy sales.
Store operating, selling and administrative expenses as a percentage of
net sales increased to 25.5% from 24.4% in the twenty-six week period and
increased to 25.1% from 24.8% in the most recent twelve week period. The
increase in both periods were the result of slower growth of the Company's net
sales and to higher operating expenses of store systems.
Depreciation and amortization as a percentage of net sales increased
slightly in both the twenty-six and twelve week periods. This increase as a
percentage of net sales was the result of the increase in total store count
open during both periods coupled with a new pharmacy computer system.
Interest expense as a percentage of net sales remained steady at 0.7% from
the twenty-six week period and rose slightly to 0.7% from 0.6% in the twelve
week period. This increase was due primarily to higher short term borrowings
during the period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements relate primarily to opening and
stocking new stores, acquiring stores, and refurbishing existing stores.
Capital is also required to support inventory for the Company's existing
stores. Historically, the Company has been able to lease its store locations
and has financed its expansion and operations from internally generated cash
flows, the net proceeds of securities offerings, and borrowed funds. Currently
the Company owns the land and buildings of only three of its drug stores.
The Company plans to open 25 to 30 new stores in both fiscal 1997 and
fiscal 1998 at an anticipated aggregate capital outlay of $10 million to $12
million in each fiscal year. Most of the new stores will be Big B Drugs
stores. The cost of fixtures, equipment and inventory to open a new drug store
is approximately $400,000 for a Big B Drugs store and approximately $1.1
million for a Drugs for Less store. The Company believes that internally
generated funds and borrowings on its line of credit and revolving credit
facility will be adequate to fund the capital requirements noted above.
RECENT DEVELOPMENTS
On September 9, 1996, RDS Acquisition, Inc., a wholly-owned subsidiary of
Revco D.S., Inc., publicly announced an unsolicited cash tender offer to
acquire all of the outstanding shares of Common Stock of the Company at a price
of $15 per share. On September 10, 1996, RDS Acquisition filed a Schedule
14D-1 with the Securities & Exchange Commission describing the terms the cash
tender offer and certain related matters. On September 9, 1996, the Company
issued a press release indicating that the Company's board of directors, with
assistance from its financial advisers and counsel, will carefully consider the
offer. The Company requested that its stockholders defer making a
determination whether to accept or reject such tender offer until they have
been advised of the Company's position. The Company will make an appropriate
filing with the Securities & Exchange Commission and communicate its position to
its shareholders in a timely manner pursuant to Regulation 14D as promulgated
under the Securities Exchange Act of 1934.
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<PAGE> 8
BIG B, INC.
OTHER INFORMATION
The Company was not required to file and did not file any report on Form
8-K during the twelve weeks ended August 03, 1996
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.
BIG B, INC.
-------------------------------
REGISTRANT
09/17/96
-------------------------------
DATE
/s/ Michael J. Tortorice
-------------------------------
Michael J. Tortorice
Vice President of Finance*
*Both duly authorized officer and principal financial officer.
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<PAGE> 9
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27 Financial Data Schedule (for SEC use only)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> AUG-03-1996
<EXCHANGE-RATE> 1
<CASH> 523
<SECURITIES> 0
<RECEIVABLES> 28,341
<ALLOWANCES> 2,770
<INVENTORY> 186,838
<CURRENT-ASSETS> 224,644
<PP&E> 125,141
<DEPRECIATION> 53,423
<TOTAL-ASSETS> 306,519
<CURRENT-LIABILITIES> 77,251
<BONDS> 51,091
0
0
<COMMON> 19
<OTHER-SE> 147,601
<TOTAL-LIABILITY-AND-EQUITY> 306,519
<SALES> 381,897
<TOTAL-REVENUES> 381,897
<CGS> 269,611
<TOTAL-COSTS> 366,933
<OTHER-EXPENSES> 6,905
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,747
<INCOME-PRETAX> 5,331
<INCOME-TAX> 1,995
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,336
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
