SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Twelve Weeks ended May 21, 1994
Commission File Number 1-4434
Giant Food Inc.
(Exact name of Registrant as specified in its charter)
Delaware 53-0073545
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6300 Sheriff Road, Landover, Maryland 20785
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 341-4100
NONE
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant
(l) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to
file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
The number of shares outstanding of each of the registrant's
classes of common stock as of this date is as follows:
Title of stock Number of shares
class ($l par) Outstanding
"A" non-voting 59,188,727
"AC" voting 125,000
"AL" voting 125,000
59,438,727
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - MAY 21, 1994 AND FEBRUARY 26, 1994
Dollar amounts in thousands
ASSETS
May 21, February 26,
1994 1994
(Unaudited)
Current assets:
Cash and cash equivalents $ 105,707 $ 111,845
Short-term investments (Note 2) 104,724 116,499
Receivables 40,340 37,504
Inventories (Note 3) 208,030 217,576
Prepaid expenses 24,034 22,114
Total current assets 482,835 505,538
Property, plant and equipment 1,280,779 1,258,653
Less accumulated depreciation 565,529 544,862
715,250 713,791
Property under capital leases, net
of accumulated amortization, (5/21/94,
$56,008; 2/26/94, $54,679) 110,005 107,580
Other assets 40,101 30,904
$ 1,348,191 $ 1,357,813
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - MAY 21, 1994 AND FEBRUARY 26, 1994
Dollar amounts in thousands
LIABILITIES AND SHAREHOLDERS' EQUITY
May 21, February 26,
1994 1994
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 35,286 $ 19,145
Accounts payable 206,766 226,284
Accrued liabilities 73,983 78,476
Dividends payable 10,700 10,394
Income taxes 13,820 7,033
Total current liabilities 340,555 341,332
Long-term debt, net of current portion:
Notes and mortgages 69,844 86,068
Obligations under capital leases 143,881 141,062
213,725 227,130
Other liabilities 75,631 75,922
Shareholders' equity
Common stock, $1 par, all classes 60,257 60,257
Net unrealized loss on short-term investments (1,421)
Retained earnings 679,575 670,034
738,411 730,291
Less class "A" stock held in
treasury, at cost 20,131 16,862
718,280 713,429
$ 1,348,191 $ 1,357,813
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
TWELVE WEEKS ENDED MAY 21, 1994 AND MAY 22, 1993
(Unaudited)
Dollar amounts in thousands
except for per share data
Twelve Weeks
1994 1993
Sales $ 829,697 $ 813,466
Cost of goods sold 583,850 568,892
Operating expenses 210,504 203,084
Interest:
Notes and mortgages 1,941 2,368
Lease obligations 3,757 3,724
Income (2,024) (1,410)
Other income (1,978)
796,050 776,658
Income before provision
for income taxes 33,647 36,808
Provision for income
taxes 13,233 14,134
Income before cumulative effect
of change in accounting 20,414 22,674
Cumulative effect of change in accounting
for deferred taxes (Note 5) 3,934
Net income $ 20,414 $ 26,608
Income per share before cumulative effect
of change in accounting $ .34 $ .38
Cumulative effect per share of change in
accounting for deferred taxes (Note 5) .07
Net income per share $ .34 $ .45
Dividends per share $ .18 $ .175
Average number of shares 59,553,243 59,692,611
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
TWELVE WEEKS ENDED MAY 21, 1994 AND MAY 22, 1993
(Unaudited)
Dollar amounts in thousands
Twelve Weeks
1994 1993
Cash flows from operating activities:
Net income $ 20,414 $ 26,608
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 20,668 19,914
Amortization of property under capital leases 1,329 1,298
Other adjustments, net 380 370
Net change in cash from changes in operating
assets and liabilities, detailed below (11,802) 15,125
Net cash provided by operating activities 30,989 63,315
Cash flows from investing activities:
Purchase of short-term investments (3,798) (2)
Sale of short-term investments 13,230
Capital expenditures (29,616) (17,852)
Other investing activities (2,088) 801
Net cash used in investing activities (22,272) (17,053)
Cash flows from financing activities:
Repayments of notes and mortgages (222) (309)
Repayments of obligations under capital leases (796) (757)
Purchases of treasury stock (3,566)
Issuance of common stock 124 35
Dividends paid (10,395) (10,147)
Net cash used in financing activities (14,855) (11,178)
Net change in cash and cash equivalents (6,138) 35,084
Cash and cash equivalents, beginning of year 111,845 184,969
Cash and cash equivalents, end of quarter $ 105,707 $ 220,053
Increase (decrease) in cash from changes in
operating assets and liabilities:
Accounts receivable $ (2,836) $ (1,008)
Inventory 9,546 20,230
Prepaid expenses (1,920) (2,139)
Accounts payable (19,517) (9,512)
Accrued expenses (4,493) 3,308
Income taxes payable 6,787 1,456
Deferred taxes 1,613
Other liabilities 631 1,177
$ (11,802) $ 15,125
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWELVE WEEKS ENDED MAY 21, 1994 AND MAY 22, 1993
(Unaudited)
Dollar amounts in thousands
1. Consolidated financial statements:
The accompanying unaudited interim financial statements reflect all
adjustments which are, in the opinion of management, necessary for a
fair statement of the results for the interim periods presented.
Such results for the twelve weeks ended May 21, 1994 and May 22, 1993
are not necessarily indicative of results to be expected for the full
year.
2. Short-term investments:
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" as of February 27, 1994. The impact of this change in
accounting principle resulted in a $672 decrease in market value of
short-term investments and a decrease in shareholders' equity of
$408, representing the after-tax impact of the unrealized losses on
short-term investments at the date of adoption. Realized gains and
losses are included in earnings and are derived using the specific
identification method for determining the cost of securities. It is
the Company's intent to maintain a liquid portfolio to take advantage
of investment opportunities; therefore all securities are considered
as available-for-sale and are classified as current assets. Short-term
investments as of May 21, 1994 consisted of:
GROSS
UNREALIZED
COST HOLDING LOSSES FAIR VALUE
U.S. Treasury securities $ 93,053 $ 1,730 $ 91,323
Federal agency securities 14,014 613 13,401
$107,067 $ 2,343 $104,724
Maturities of short-term investments at May 21, 1994, were as follows:
COST FAIR VALUE
Due within one year $ 43,044 $ 42,948
Due after one year through five years 64,023 61,776
$107,067 $104,724
Prior to adopting SFAS No. 115, the Company valued its securities in
accordance with the SFAS No. 12 "Accounting for Certain Marketable
Securities" and related interpretations. Short-term
investments were stated at cost which approximated fair value.
- 6 -<PAGE>3. Inventories:
The inventories valued using the LIFO method were approximately 84% of
the Company's inventories as at May 21, 1994 and 84% as at
February 26, 1994. Under the FIFO method, these inventories would have
been higher by $77,320 and $76,420, respectively. The pre-tax LIFO
charge was $900 for the twelve week period ended May 21, 1994 and
$930 for the twelve week period ended May 22, 1993.
4. Net cash flows from operating activities reflects cash payments for
interest and income taxes as follows:
12 weeks ended
May 21, May 22,
1994 1993
Interest paid $ 7,641 $ 7,144
Income taxes paid 6,168 11,943
Non - cash investing and financing activities excluded from the
Consolidated Statements of Cash Flows consist of $3,754 capital
lease transactions for the current fiscal year and $5,747 for
fiscal 1994.
5. Income taxes: The Company adopted, effective February 28, 1993,
SFAS No. 109 "Accounting for Income Taxes". Upon adoption of SFAS No.
109, the Company adjusted its deferred tax accounts to reflect the
current income tax rates and also adjusted the carrying amounts of
certain assets acquired in a 1992 shopping center acquisition. The net
effect of the adjustments was to increase income by $3,934, increase
the net deferred tax liability by $1,013 and increase the bases of
certain assets by $4,947.
6. The FASB issued SFAS No. 112 "Employers' Accounting for Postemployment
Benefits." This standard became effective February 27, 1994. As the
Company does not provide any significant postemployment benefits to
administrative employees, SFAS No. 112 did not impact the Company.
Union employees are covered under union-sponsored multi-employer plans.
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GIANT FOOD INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations:
The following is Management's discussion and analysis of certain
significant factors which have affected the Company's earnings and
financial condition during the periods included in the accompanying
Consolidated Balance Sheets and Consolidated Statements of Income.
Results of Operations:
A summary of the principal income statement percentages are
tabulated below:
12 Weeks Ended 12 Weeks Ended
May 21, 1994 May 22, 1993
% %
Gross Profit 29.63 30.07
Operating Expenses 25.37 24.97
Interest Expense-Notes & Mortgages .23 .29
Interest Expense-Lease Obligations .45 .46
Interest (Income) ( .24) ( .17)
Other Income ( .24)
Income Before Income Taxes 4.06 4.52
Provision for Income Taxes 1.60 1.73
Income before cumulative
effect of change in accounting
for deferred taxes 2.46 2.79
Below are the differences between the periods ended May 21, 1994
compared with May 22, 1993 in thousands of dollars and percentages:
Increase (Decrease)
Twelve Weeks
$ %
Sales 16,231 2.0%
Gross Profit 1,273 0.5%
Operating Expenses 7,420 3.7%
Interest Expense-Notes & Mortgages (427) -18.0%
Interest Expense-Lease Obligations 33 0.9%
Interest Income 614 43.5%
Other Income 1,978
Income Before Income Taxes (3,161) -8.6%
Provision for Income Taxes (901) -6.4%
Income before cumulative effect of
change in accounting for deferred taxes (2,260) -10.0%
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GIANT FOOD INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued):
Results of Operations (Twelve weeks ended May 21, 1994 vs. twelve weeks
ended May 22, 1993):
Sales increased $16.2 million or 2.0%. The change in sales for stores
in operation in both years was a decrease of .4%. The sales change in
existing units was impacted by new stores drawing sales away from existing
units. Without this phenomenon, cannibalization, the same store sale
change would have been an increase of .3%
Gross profit increased $1.3 million. Gross profit as a percent of
sales was 29.63% compared to 30.07% in the prior year. The current level
of 29.63% is at approximately the same level as the prior fiscal quarter.
The similar gross profit reflects the static economy and the competitive
environment.
Operating expenses increased from 24.97% of sales to 25.37%. This was
caused by increases in union payrolls and welfare benefits. Another factor
was the expense of new units including pre-opening expenses of the first
store opened in the state of Delaware.
Interest expense - notes and mortgages decreased by $427 thousand
because of repayment of mortgages. Interest income increased by $614
thousand because of higher yields.
The Company realized other income of $1.978 million from the sale of
its interest in a partnership that operates the automatic teller machines
in its stores. In addition to the sale the new owner has contracted with
the Company to pay certain fees on future ATM transactions.
Pre-tax earnings before the cumulative effect of the change in
accounting for deferred taxes were down $3.2 million, a decrease of 8.6%.
The effective tax rate was 39.3% for the current period and 38.4% for the
prior year's fiscal period.
Net income was 2.46% of sales for the current quarter compared with
2.79% for the same period of the prior year (before the cumulative effect
of the change in accounting for deferred taxes). The adoption of SFAS No.
109, "Accounting for Income Taxes" on February 28, 1993 resulted in an
adjustment of the carrying value of assets acquired and the recognition of
additional income of $3.9 million, equal to 7 cents per share. This
adjustment increased net income to 3.27% for the prior year's comparable
period.
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GIANT FOOD INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued):
LIQUIDITY:
Working capital decreased $22.0 million from February 26, 1994. The
contributing factor for this decrease is the reclassification of $16.0
million in mortgages from long-term to current. This obligation (is due
April 1995) and was assumed upon the acquisition of a shopping center.
At May 21, 1994 working capital was 1.42 to 1, compared to 1.48 at
February 26, 1994. Including LIFO reserves of $77.3 million at May 21,
1994, the working capital ratio was 1.64 to 1.
At May 21, 1994, cash and cash equivalents was $105.7 million and
short-term investments were $104.7 million compared with $228.3 million as
of February 26, 1994. The Company adopted SFAS No. 115 "Accounting for
Certain Investments in Debt and Equity Securities" as of February 27, 1994.
The impact of this change in accounting principle resulted in a $.672
million decrease in short-term investments. (See note 2)
It is estimated that cash, cash equivalents and short-term investments,
together with cash flow from operations will be adequate to complete
planned capital expenditures, debt reduction and dividend requirements.
The Company has a $50 million revolving credit facility available. It has
had no short-term bank borrowings for more than sixteen years.
CAPITALIZATION:
Shareholders' equity as a percentage of capitalization was 74.3%
on May 21, 1994, compared to 74.3% on February 26, 1994 and 72.8% on May
22, 1993.
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GIANT FOOD INC. AND SUBSIDIARIES
OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K:
The Company did not file any reports on Form 8-K during the twelve weeks
ended May 21, 1994.
SIGNATURE
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.
Giant Food Inc.
(Registrant)
Date July 1, 1994 By /s/ Israel Cohen
Israel Cohen
Chairman of the Board
Chief Executive Officer
Date July 1, 1994 By /s/ David B Sykes
David B Sykes
Senior Vice President Finance,
Treasurer
Chief Financial Officer and
Principal Accounting Officer
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