SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File Number
February 26, 1994 1-4434
GIANT FOOD INC.
(Exact Name of Registrant as specified in its Charter)
Delaware 53-0073545
(State of Incorporation) (IRS Employer Identification No.)
6300 Sheriff Road
Landover, Maryland 20785
(Address of Principal Executive Office)
(301) 341-4100
(Registrant's Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
Class A Common Stock American Stock Exchange
(Non-Voting) Philadelphia Stock Exchange, Inc.
Par Value $1.00 Pacific Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
None
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.
X<PAGE>
Yes No<PAGE>
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of Registrant's knowledge, on definitive
proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
X
As of May 2, 1994, 250,000 Voting Common Shares were
outstanding, all of which are held by affiliates. Non-Voting Common
Shares outstanding were 59,304,327 and the aggregate market value of the
Non-Voting Common Shares (based upon the closing price of these shares
on the American Stock Exchange) of Giant Food Inc. held by
non-affiliates was approximately $1.3 billion.
The number of shares outstanding of each of the
Registrant's classes of Common Stock, as of May 2, 1994 is as follows:
Class A Non-Voting Common Stock ($1.00 par value) 59,304,327
Class AL Voting Common Stock ($1.00 par value) 125,000
Class AC Voting Common Stock ($1.00 par value) 125,000
DOCUMENTS INCORPORATED BY REFERENCE
* * * * * * *
Index to Exhibits Page 57
<PAGE>
PART I
ITEM 1. BUSINESS
(a) General Development of Business
Giant Food Inc. (sometimes herein called "Giant" or the
"Company") was incorporated in Delaware in 1935. The Company, together
with its subsidiaries (Giant of Maryland, Inc.; Giant of Salisbury,
Inc.; Cole Engineering, Inc.; Warex-Jessup, Inc.; Landover Wholesale
Tobacco Corp.; Giant Construction Company, Inc.; LECO, Inc.; Bursil,
Inc.; GFS Realty, Inc.; GF McLean Shopping Center, Inc.; Giant Automatic
Money Systems, Inc.; Super G, Inc.; Montrose Crossing, Inc.; Friendship
Macomb SC, Inc.; Bayside Traffic Services of Maryland, Inc. Giant of
Talbot Co., Inc. and Shaw Community Supermarket, Inc. [85% owned]),
operates a chain of 157* supermarkets selling, at retail, food, pharmacy
and general merchandise in Washington, D.C., Maryland, Virginia and
Delaware. Of the Company's 157* supermarkets, 107 are in the
Washington, D.C. Metropolitan Area, including surrounding counties of
Maryland and Virginia, 42 are in or near Baltimore, Maryland, and others
are in Fredericksburg, Charlottesville and Warrenton, Virginia and
Salisbury, Frederick, Prince Frederick, and Westminster, Maryland. The
Company also operates three freestanding drug stores.
(b) Financial Information About Industry Segments
There is no financial information reported on industry
segments and lines of business apart from Giant's principal business of
operating supermarkets to sell, at retail, food, pharmacy and general
merchandise. Inasmuch as Giant did not engage in any line of business
which during either of its last three fiscal years accounted for 10% or
more of total sales and revenues, or 10% or more of income before taxes
and extraordinary items computed without deduction of loss resulting
from operations of any line of business, or a loss which equaled or
exceeded 10% of such income, no segment reporting is required. During
each of the last three fiscal years, Giant's retail sales provided in
excess of 90% of its total sales and earnings.
(c) Narrative Description of Business
The majority of the Company's stores are located in
shopping centers, with the average food and food/pharmacy combination
unit generating an annual sales volume of approximately $22,893,000. In
certain of its retail stores the Company has pharmacy units and flower
departments. The Company also operates freestanding drug stores in
Bethesda, Maryland, Salisbury, Maryland and Arlington, Virginia. During
the next fiscal year, the Company has planned or will have begun
construction of five supermarkets. Additionally, six supermarkets will
be extensively remodeled during the upcoming fiscal year.
*A store in Bear, Delaware was opened in April, 1994, increasing the
number to 158.<PAGE>
Giant supermarkets are all self-service and offer a full
line of nationally advertised groceries, meat, produce, dairy products,
seafood, tobacco, flowers, prepared foods and household and non-food
items. In addition, Giant sells groceries, frozen foods, bakery
products and dairy products under its own private labels. Unbranded
items such as meats and produce are also sold in Giant's supermarkets.
For the fiscal years ended in February 1994, 1993 and 1992,
respectively, the Company's sales were divided, as follows: meat,
delicatessen, dairy and seafood, 23%, 23% and 24%; grocery and
non-food, 68%, 68% and 67%; fresh produce, 9%, 9% and 9%.
Giant operates a full line service delicatessen in 150
stores. Most of the bakery items such as bread, rolls, cakes, pies and
pastries, marketed under the names of "Heidi," "Super G" and "Giant,"
are made in a 250,000 square-foot Company bakery located in Silver
Spring, Maryland. The Company operates three distribution centers of
approximately 1.2 million combined square feet in Landover, Maryland,
one mile from the District of Columbia line. The main center also
houses the Company's executive offices, dairy processing plant, flower
warehouse and ice cube production plant. The Company owns an executive
office building of about 180,000 square feet together with a 750 car
parking garage. Giant also owns a 760,000 square-foot dry grocery
warehouse located in Jessup, Maryland (including a 20,408 square-foot
soft drink bottling plant within that warehouse). Giant also leases a
138,000 square foot frozen food distribution center and a 60,000 square
foot ice cream manufacturing facility at the Jessup location.
(i) Giant produces for sale in its supermarkets bakery
goods and dairy products, ice cream, soft drinks and ice cubes. These
items are manufactured by its Bakery, Dairy, Ice Cream Plant, Soft Drink
Bottling Plant and Ice Plant. Giant also provides services such as
check-cashing, issuance of money orders, photographic film developing,
rental of home-care appliances, some catering, and cooperates in such
community-related projects as the sponsoring of "It's Academic," "Apples
for the Students" and other projects and activities related to community
improvement.
Additionally, the Company warehouses and distributes to
its own stores flowers and gifts, snacks and magazines and
pharmaceuticals. The Company also has an in-house advertising agency, a
trucking brokerage operation, vending-machine business, an import-export
division and also owns fifteen shopping centers and three freestanding
stores. Revenue from the Company's construction division from outside
construction is de minimis. Transfer sales from the above activities
and from its manufacturing and processing operations in support of its
retail operations were about $423 million. Pre-tax profits on these
transfer sales were approximately $49 million, representing about 32% of
total income before income taxes.
(ii) Giant has made no public announcement of any new
product or industry segment which is material or would require the
investment of a material amount of its assets.
<PAGE>
(iii) Raw materials for Giant's manufacturing and
processing operations are readily available.
(iv) Giant owns approximately 32 trademarks and service
marks registered by it in the U.S. Patent and Trademark Office. Those
which were issued before November 16, 1989 have a term of twenty years
and those registered after November 16, 1989 have a term of ten years.
Each of Giant's registrations may be renewed for successive terms of ten
years so long as each mark is in use. Giant does not own any patents
which are of material importance to its operations.
(v) Giant's sales volume is not materially affected by
seasonality.
(vi) Giant does not have any unusual working capital
requirements.
(vii) Giant's business is not dependent upon a single or
a few customers. Giant does not sell to any single customer or
affiliated group of customers goods or services in an amount which
equals 10% or more of its consolidated sales.
(viii) Giant's business is such that backlog ordering is
not done.
(ix) None of Giant's business is subject to
renegotiation of profits or termination of contracts or subcontracts at
the election of the Government.
(x) The retail food business is highly competitive,
and in the area in which Giant operates, some of the country's leading
chains are represented and compete vigorously with the Company, both in
price and in service. On the basis of figures published in trade
journals, the Company considers itself at least among the first thirteen
in gross sales among retail grocery chains in the United States.
Competition from the other chains, as well as from independent store
operators, may adversely affect the Company's profit margins in ensuing
years.
(xi) Giant did not spend any material amount on
company-sponsored research and development activities. In addition,
Giant did not spend during any of the last five fiscal years any
material amount on customer-sponsored research activities relating to
the development of new products, services or techniques or the
improvement of existing products, services or techniques.
(xii) Giant's compliance with federal, state and local
laws which have been enacted or adopted regulating the discharge of
materials into the environment or otherwise relating to the protection
of the environment has not had and is not expected to have any material
effect upon its capital expenditures, its earnings or its competitive
position.
<PAGE>
(xiii) At the end of fiscal 1994, Giant had approximately
24,700 full-time and part-time employees.
(d) Financial Information About Foreign and
Domestic Operations and Export Sales
The amount of foreign sales and export sales done by Giant
is de minimis and is therefore not reported.
ITEM 2. PROPERTIES
The Company operates 157* supermarkets (including 112
combination food/pharmacy stores), 107 in the Washington, D.C.
Metropolitan Area, 42 in or near Baltimore, Maryland, and others in
Fredericksburg, Charlottesville and Warrenton, Virginia, and Frederick,
Westminster, Prince Frederick, and Salisbury, Maryland.
Eleven of the Company's stores are fifteen to twenty
thousand square feet; twenty-nine are between twenty and thirty thousand
square feet; seventeen are thirty to forty thousand square feet; fifty-
six stores are between forty to fifty thousand square feet; thirty-nine
stores are between fifty and sixty thousand square feet, and five are
over sixty thousand square feet.
The Company also operates three freestanding drug stores.
The Company owns and operates three distribution centers
of approximately 1.2 million combined square feet in Landover, Maryland.
The main center also houses the Company's executive offices (including
an executive office building of approximately 180,000 square feet), its
dairy processing plant, a flower warehouse and an ice cube production
plant. A dry grocery warehouse, containing approximately 760,000 square
feet, is located in Jessup, Maryland. Also located at the Jessup
complex is a 138,000 square foot frozen food distribution center and a
60,000 square foot ice cream manufacturing facility. The Landover
complex and the Jessup complex each contain approximately 85 acres. The
Company's bakery is located in Silver Spring, Maryland, in a
Company-owned building containing 250,000 square feet.
*Does not include the 64,900 square foot Bear, Delaware store opened in
April, 1994<PAGE>
The Company, through its wholly-owned subsidiary, GFS
Realty, Inc., also owns or is the controlling general partner of fifteen
shopping centers and three freestanding stores. The shopping centers are
located at:
8320 Old Keene Mill Road, Springfield, Virginia
6223 Baltimore National Pike, Baltimore, Maryland
7137 Columbia Pike, Annandale, Virginia
1228 Elden Street, Herndon, Virginia
46 Bureau Drive, Gaithersburg, Maryland
7546 Annapolis Road, Lanham, Maryland
12445 Hedges Run Road, Lakeridge, Virginia
3501 Plank Road, Fredericksburg, Virginia
15791 Columbia Pike, Burtonsville, Maryland
20044 Goshen Road, Gaithersburg, Maryland
7501 Huntsman Blvd., Springfield, Virginia
1454 Chain Bridge Road, McLean, Virginia
12051 Rockville Pike, Rockville, Maryland
Newark and Macomb Streets, N.W., Washington, D.C.
5700 South-East Crain Highway, Upper Marlboro, Maryland
The freestanding combination food/drug stores are located
at:
3757 Old Court Road, Pikesville, Maryland
1925 East Joppa Road, Joppa Heights, Maryland
1734 York Road, Lutherville, Maryland
In each shopping center, the Company is the major tenant
occupying approximately 25% to 90% of the space.
The table below sets forth certain information with
respect to changes in the number of the Company's supermarkets
(including combination food/pharmacy stores) during the past five years:
Number at Number at
Fiscal Year Beginning of Year Opened Closed End of Year
February 24, 1990 145 4 0 149
February 23, 1991 149 4 1 152
February 29, 1992 152 3 1 154
February 27, 1993 154 3 2 155
February 26, 1994 155 4 2 157
With the exception of the bakery, the fifteen shopping
centers and three freestanding stores noted above, the distribution
centers at Landover and the dry grocery warehouse at Jessup, all the
properties occupied by the Company are held under leases which provide
for various minimum rentals and, in some cases, additional rentals based
on percentages of sales.
<PAGE>
At February 26, 1994, the Company had entered into leases
covering stores, warehouses and equipment on which the minimum annual
rentals for the succeeding years are as follows:
Minimum Annual Rentals (In Thousands)
Year Capital Leases Operating Leases
1995 $19,639 $19,390
1996 19,554 18,115
1997 19,479 17,730
1998 19,479 17,058
1999 19,467 16,223
Later Years 291,539 221,445
ITEM 3. LEGAL PROCEEDINGS
To the best knowledge of the Company and counsel, there is
no litigation pending or threatened which would materially affect the
Company's business or operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
(a) Market Information
Principal markets on which Giant's Class A Common Stock is
traded: American, Philadelphia and Pacific Stock Exchanges.
The table below presents the high and low market prices
for Giant's Class A Common shares.
Common Stock Price Range
Fiscal 1994 Fiscal 1993
Quarter Ended High Low Quarter Ended High Low
May 22 $27.50 $21.00 May 23 $25.13 $19.75
Aug.14 27.38 24.25 Aug. 15 21.38 19.38
Nov. 6 25.63 22.00 Nov. 7 20.63 16.88
Feb. 26 26.13 22.38 Feb. 27 23.38 18.75
The last sale price of Giant's Class A Common (Non-Voting)
shares on the American Stock Exchange on May 2, 1994 (the latest most
practicable date) was $22.00.
<PAGE>
(b) Holders
The approximate number of holders of record for Giant's
Class A Non-Voting Stock as of May 2, 1994: 38,000 (includes street
name shareholders).
The number of holders of record for Giant's Class AL
Voting Stock as of May 2, 1994: 1.
The number of holders of record for Giant's Class AC
Voting Stock as of May 2, 1994: 1.
(c) Dividends
The table below presents dividend information for Giant's
Common shares.
Dividends Declared Per Share of Common Stock
Fiscal 1994 Fiscal 1993
April $.175 April $.17
July .175 July .17
October .175 October .17
January .175 January .17
$.70 $.68
The Promissory Note Purchase Agreement with The Prudential
Insurance Company of America (see Note 3, page 23) includes certain
restrictive covenants which, among other things, prohibit the Company
from paying dividends after February 22, 1986, aggregating more than 50
percent of its cumulative "consolidated net earnings" (as defined in the
Agreement), less the aggregate of dividends paid and less the net amount
expended to repurchase or redeem any of its capital stock after February
22, 1986. At February 26, 1994, the specified levels were $83,500,000
in excess of such aggregate amounts of dividends and distributions. The
Company anticipates the continuation of its current policies of paying
dividends.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Year Ended (1), (2)
1994 1993 1992 (3) 1991 1990
Sales $3,567,468 $3,472,581 $3,489,762 $3,349,546 $3,248,942
Net Income 95,231(*) 81,506 87,180 118,891 108,399
Earnings per
share 1.60(*) 1.37 1.47 2.01 1.80
Total assets 1,357,813 1,296,600 1,251,339 1,174,978 1,080,838
Long-term debt,
net of current
portion:
Notes and
mortgages 86,068 105,525 113,410 98,417 100,366
Obligations
under capital
leases 141,062 142,831 142,892 147,012 141,168
Total
long-term debt 227,130 248,356 256,302 245,429 241,534
Cash dividends
declared per
Common share 0 .70 0.68 0.66 0.60 0.50
(1) Year ends last Saturday in February.
(2) Thousands of dollars except per share figures.
(3) 53 Week Year.
(*) Reflects impact of change in accounting for income taxes. Change
equaled $3.9 million of income, equal to 7 cents per share.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SALES AND EARNINGS
OVERVIEW
Sales for the 1994 fiscal year, a 52 week year, were $3.57 billion
compared to sales of $3.47 billion in the prior year, also a 52 week
year. Sales for the 53 weeks of the 1992 fiscal year were $3.49 billion.
Sales increased by 2.7%, of which same store sales increased by 1.4%. For
1993 and 1992 fiscal years, same store sales increased .05% and .2%,
respectively. The positive change in same store sales during the past
year is partially attributable to a slight improvement in the general
economic conditions. The gains are tempered by increased competition and
the recession continues to have an effect on the buying habits of our
customers. Competition remains intense.
Four food-drug combination stores were opened during the 1994 fiscal
year, one of which replaced a smaller older unit. Additionally, the
lease expired on a small food store, located in an area in which we have
larger food-drug units. At the end of the fiscal year, the Company
operated 160 stores, of which 112 are food-drug combination units, one is
a gourmet specialty store and three are free-standing drug stores. At
year end the Company operated approximately 6.5 million square feet of
food and food-drug total retail space, an increase of 3.3% over the prior
year.
EARNINGS
Pre-tax earnings before the cumulative effect of the change in accounting
for deferred taxes were $151.8 million, 4.25% of sales, compared to
$132.3 million, 3.81% of sales, in the prior year, an increase of 14.7%.
Pre-tax earnings for the 1992 fiscal year were $142.1 million, 4.07% of
sales. Cost of goods sold decreased to 70.16% of sales, from 70.57% in
the prior year and 70.35% for fiscal 1992. Gross profit dollars
increased $43 million over the prior year, a 4.2% gain; this compares
with a 2.7% increase in sales. The improvement in gross profit is
principally the result of a change in product mix, together with minimal
retail price increases, and a lesser LIFO charge of $600 thousand.
This year's LIFO charge of $3.3 million compares with charges of $3.9
million and $5.5 million for the two prior fiscal years. As a percentage
of sales, the ratios were .09%, .11%, and .16%. The Company maintains its
non-perishable inventory on LIFO which showed moderate inflation.
Transfer sales to support its retail operations by the Company's
manufacturing, processing, wholesaling and support activities were about
$423 million. Of the $152 million corporate pre-tax earnings,
approximately 32% or $49 million were generated from operations which
include a bakery, dairy, ice cream and soft drink plants, and such
wholesaling activities as produce, pharmaceutical, snacks and magazines,
as well as machine vending, shopping center leasing operations, and
automatic money teller machines. The wholesale tobacco operation was
discontinued in March, 1993.<PAGE>
Selling, general and administrative expenses increased at the same rate
as sales, and as a percent of sales were 25.05% compared to 25.03% and
25.08% in the prior two fiscal years. The maintaining of a level ratio
of expenses is the result, net, of ongoing cost savings programs offset
by increases in union contract payroll and benefits. On September 16,
1992 a four-year contract was ratified by the union store associates.
Most store associates received a lump sum payment for the first and
second years of the new contract, totaling $1 million in year one and
$1.8 million in year two. Both payments are being amortized over the
respective contract year. The third and fourth years of the contract
require hourly wage increases in lieu of the lump sum payment, as well as
requiring the Company to maintain the present level of benefits. The
current year's operation included higher payments, increasing by
approximately $1 million per month, beginning January 1994.
The current year included costs associated with electronic payments via a
debit or credit card. All stores offered on-line service by September
1993. The Company believes that any new cost will be offset by
additional sales or the retention of current sales.
This was Giant's fifth year of its "Apples for the Students" program.
This program, in addition to awards of computers, peripheral equipment
and computer software, continued to make available to schools such items
as athletic equipment, science and laboratory equipment, and library
books. The Company has distributed over 72,000 computers, plus
peripheral equipment, related computer software and non-computer
equipment during the five years of this program. The program has been
favorably accepted by more than 2,700 schools along with teachers,
parents and students. While it is impossible to calculate sales
increases caused by this program, the Company believes that the program
has had a long-term customer retention effect.
A contributing factor to the improved earnings in the current year was
the increase in interest income earned on investment of cash and cash
equivalents. The increase was the result of somewhat flat yields with
higher average investments. This year's interest income was $7.4 million
vs. $5.8 million and $7.3 million in the 1993 and 1992 fiscal years.
Effective February 28, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". The
adoption resulted in a recognition $3.9 million of income, equal to 7
cents per share, recorded in the first fiscal quarter of the fiscal year.
Note 4 of the Notes to the Consolidated Financial Statements provides
further information.
The provision for taxes includes a 1% increase in the federal tax rate
enacted in August 1993, retroactive to January 1, 1993, thus affecting
two months of the prior fiscal year. The cost for the two months of the
prior year was $195 thousand. The tax rate increase also required a
recalculation of the deferred tax liability, resulting in an additional
tax expense of $741 thousand in the current year. The effective tax rate
was 39.8%; without these non-recurring adjustments the effective rate
would have been 39.2%, and 39.3% is the anticipated effective tax rate
for the fiscal year ending February, 1995.
<PAGE>
Earnings were $95.2 million or $1.60 per share, compared with earnings of
$81.5 million or $1.37 per share, and $87.2 million or $1.47 per share
for the two prior fiscal years. As a percentage of sales, earnings were
2.67% for the current year, 2.35% for the prior year and 2.50% for fiscal
1992.
ACCOUNTING STANDARDS
The FASB issued SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities". This Standard is effective for the Company's
1995 fiscal year. The implementation of SFAS No. 115 is expected to have
deminimis effect on the Company's financial position and results of
operations. Also, the FASB issued SFAS No. 112, "Employers' Accounting
for Postemployment Benefits". This Standard is effective for the next
fiscal year. The implementation of SFAS No. 112 is expected to have an
immaterial effect on the Company's financial position.
FINANCIAL CONDITION
CASH, CASH EQUIVALENTS, INVESTMENTS AND WORKING CAPITAL
At February 26, 1994 the Company's cash, cash equivalents and short-term
investments totalled $228 million, compared with $185 million and $151
million at the close of each of the two prior years. Cash and cash
equivalents include highly liquid investments with an original maturity
of three months or less. Short-term investments consist of United States
government and agency securities purchased with an original maturity of
more than three months which are actively traded.
Net cash provided by operations amounted to $218 million for the current
fiscal year, $167 million for the preceding fiscal year and $175 million
for the 1992 fiscal year. (See Consolidated Statements of Cash Flows for
further details.)
Cash outlays for property, plant and equipment were $112 million for the
current year, and $79 million and $148 million for the prior two years.
In addition to its cash outlay for property, the Company, in the 1992
fiscal year, booked $40 million of non-cash outlays in connection with
the acquisition of three shopping centers. Note 8 of the Notes to the
Consolidated Financial Statements provides further information.
Working capital at the fiscal year end was $164 million compared to $155
million and $108 million at the close of the two prior years. The working
capital ratio is 1.48 to 1, compared with 1.50 to 1 and 1.37 to 1 at the
end of the two prior years, respectively. Including the LIFO reserve,
working capital would be $241 million currently, a 1.70 to 1 ratio,
compared with $228 million, a 1.74 to 1 ratio and $177 million, a 1.60 to
1 ratio at the end of the two prior years, respectively.
The Company has had no short-term bank borrowings for more than seventeen
years. On July 9, 1993, the Company renewed a $50 million revolving
credit facility which terminates May 1, 1996. This facility should
enable the Company to handle contingencies that may arise. Note 3 of the
Consolidated Financial Statements provides additional details.
<PAGE>
CAPITAL EXPENDITURES
The Company is authorized to spend approximately $160 million for
property, plant and equipment during fiscal 1995, including expenditures
for five new units either under construction or whose construction will
commence later this year. Also, six existing stores will be enlarged and
extensively remodeled. The Company believes that cash on hand plus its
cash flow will be sufficient to support ongoing business levels,
including the fixed asset program, debt service, and dividends.
CAPITALIZATION
During the year, the Company continued to improve its capital structure,
which contributes to financial flexibility. Notes and mortgages
decreased $12.7 million due to scheduled principal payments and the
prepayment of three obligations. The Company is not planning any new
financing during the upcoming fiscal year.
At the close of the 1994 fiscal year, shareholders' equity as a
percentage of capitalization (long-term debt plus shareholders' equity)
was 76% compared with 73% and 71% for the prior two fiscal years.
Shareholders' equity at the year end was $713 million, compared with $663
million, a year earlier. Long-term debt consists of $86 million of notes
and mortgages at an average interest cost of 9.9%, and $141 million of
obligations under capital leases. At the close of the prior year, the
comparable balances were $106 million and $143 million, respectively.
Return on shareholders' equity (ROE), (average of beginning and ending)
for the current year was 14% compared with 13% and 15% for the two prior
years.
DIVIDENDS
For the current year, cash dividends of $42 million, or 70 cents per
share, were declared. This compares with $41 million, or 68 cents per
share in the prior fiscal year, and $39 million, or 66 cents per share,
for fiscal 1992. Fiscal year 1994 marks the 35th consecutive year of
dividend payments, beginning in 1959 when the Company went public.
INFLATION AND CHANGING PRICES
Inflation continues to moderately increase costs to the Company including
the cost of merchandise, labor, utilities and the cost of acquiring
property, plant and equipment. The Company uses the LIFO method of
accounting for 84% of its inventories. Under this method, the cost of
merchandise sold approximates current costs and thus reduces the
distortion, if any, in reported income due to increasing costs. The
historical costs of property, plant and equipment recorded by the Company
were incurred over a period of many years. The cost of replacement of
property, plant and equipment is generally greater than the cost on the
books of the Company as a result of the inflation that has occurred over
the years since the property, plant and equipment were placed in service.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Giant Food Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of changes in shareholders'
equity and of cash flows present fairly, in all material respects, the
financial position of Giant Food Inc. and its subsidiaries at February
26, 1994, February 27, 1993 and February 29, 1992, and the results of
their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements
based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 4 to the financial statements, the Company adopted
the provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" effective February 28, 1993.
PRICE WATERHOUSE
/s/
Washington, D.C.
March 28, 1994 <PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Fifty-two weeks ended February 26, 1994, fifty-two weeks ended February 27,
1993 and fifty-three weeks ended February 29, 1992
Dollar amounts in thousands except per share
1994 1993 1992
SALES $3,567,468 $3,472,581 $3,489,762
COSTS AND EXPENSES
Cost of sales 2,503,072 2,450,757 2,455,058
Selling, general and administrative 893,720 869,032 875,352
Interest
Notes and mortgages, net of
interest capitalized (1994, $809;
1993, $1,393; 1992, $2,478) 9,973 10,255 8,418
Lease obligations 16,372 16,037 16,189
Income (7,424) (5,760) (7,331)
3,415,713 3,340,321 3,347,686
INCOME BEFORE INCOME TAXES 151,755 132,260 142,076
PROVISION FOR INCOME TAXES 60,458 50,754 54,896
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING 91,297 81,506 87,180
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING (NOTE 4) 3,934 - -
NET INCOME $ 95,231 $ 81,506 $ 87,180
EARNINGS PER SHARE BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING $1.53 $1.37 $1.47
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING $ .07 - -
EARNINGS PER SHARE $1.60 $1.37 $1.47
The accompanying notes are an integral part of the consolidated financial
statements.<PAGE>
CONSOLIDATED BALANCE SHEETS
February 26, 1994, February 27, 1993 and February 29, 1992
Dollar amounts in thousands
ASSETS
1994 1993 1992
CURRENT ASSETS
Cash and cash equivalents $111,845 $184,969 $151,181
Short-term investments 116,499 228 204
Receivables 37,504 32,720 28,141
Inventories (Note 2) 217,576 223,912 207,313
Prepaid income taxes (Note 4) 19,001 17,567 15,975
Other current assets 3,113 2,232 1,747
Total current assets 505,538 461,628 404,561
PROPERTY, PLANT AND EQUIPMENT (Note 3)
Land 58,820 46,958 46,958
Buildings and improvements 268,640 231,947 200,125
Leasehold improvements 153,399 158,393 152,471
Fixtures and equipment 745,288 699,701 681,127
1,226,147 1,136,999 1,080,681
Less accumulated depreciation 544,862 479,128 414,028
681,285 657,871 666,653
Equipment deposits and construction
in progress 32,506 30,400 39,647
713,791 688,271 706,300
PROPERTY UNDER CAPITAL LEASES, net of
accumulated amortization
(1994, $54,679; 1993, $52,044;
1992, $48,341) (Note 5) 107,580 110,439 112,755
REAL ESTATE HELD FOR FUTURE DEVELOPMENT 21,367 26,130 18,232
OTHER ASSETS 9,537 10,132 9,491
$1,357,813 $1,296,600 $1,251,339
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993 1992
CURRENT LIABILITIES
Current portion of long-term debt
Notes and mortgages (Note 3) $14,618 $7,894 $9,010
Obligations under capital leases (Note 5) 4,527 4,412 4,227
Accounts payable 226,284 206,388 197,099
Accrued expenses
Compensation related 75,886 62,983 67,273
Other 2,590 2,570 2,786
Dividends payable 10,394 10,147 9,835
Income taxes payable 7,033 12,690 5,977
Total current liabilities 341,332 307,084 296,207
LONG-TERM DEBT
Notes and mortgages (Note 3) 86,068 105,525 113,410
Obligations under capital leases (Note 5) 141,062 142,831 142,892
227,130 248,356 256,302
OTHER LIABILITIES
Deferred income taxes (Note 4) 41,192 46,731 51,743
Accrued insurance claims 25,417 20,986 19,126
Other 9,313 10,490 6,999
75,922 78,207 77,868
COMMITMENTS (Notes 5 and 7)
SHAREHOLDERS' EQUITY (Notes 3 and 6)
Common stock, $1 par, all classes 60,257 60,257 60,257
Capital in excess of par value 392 1,151
Retained earnings 670,034 616,938 575,997
730,291 677,587 637,405
Less Class "A" stock held in treasury,
at cost (1994, 669,781 shares; 1993,
566,180 shares; 1992, 636,145 shares) 16,862 14,634 16,443
713,429 662,953 620,962
$1,357,813 $1,296,600 $1,251,339
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Fifty-two weeks ended February 26, 1994, fifty-two weeks ended February 27,
1993 and fifty-three weeks ended February 29, 1992
Dollar amounts in thousands except per share
Capital in Treasury stock
excess of (Class "A") Retained Total
Par value Shares Cost earnings Share-
holders'
equity
Balance, February 23, 1991 $ - 1,277,659 $32,638 $528,110 $555,729
Net income 87,180 87,180
Issuance of shares for
acquisition (Note 8) 2,197 (533,675) (13,413) 15,610
Stock options exercised (990) (71,676) (1,849) 859
Awards under union contract 21 (4,204) (107) 128
Awards under stock bonus plan (77) (31,959) (826) 749
Dividends ($.66 per share) (39,293) (39,293)
Balance, February 29, 1992 1,151 636,145 16,443 575,997 620,962
Net income 81,506 81,506
Stock options exercised (621) (35,047) (906) 285
Awards under union contract (24) (5,373) (139) 115
Awards under stock bonus plan (114) (29,545) (764) 650
Dividends ($.68 per share) (40,565) (40,565)
Balance, February 27, 1993 392 566,180 14,634 616,938 662,953
Net income 95,231 95,231
Purchase of treasury shares 173,000 3,993 (3,993)
Stock options exercised (392) (42,456) (1,089) (345) 352
Awards under stock bonus plan (26,943) (676) (29) 647
Dividends ($.70 per share) (41,761) (41,761)
Balance, February 26, 1994 $ - 669,781 $16,862 $670,034 $713,429
Common stock, all classes
Shares Par value
Balance, February 23, 1991 60,256,620 $60,257
Balance, February 29, 1992 60,256,620 $60,257
Balance, February 27, 1993 60,256,620 $60,257
Balance, February 26, 1994 60,256,620 $60,257
The accompanying notes are an integral part of the consolidated financial
statements.<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fifty-two weeks ended February 26, 1994, fifty-two weeks ended February 27,
1993 and fifty-three weeks ended February 29, 1992
Dollar amounts in thousands
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 95,231 $ 81,506 $ 87,180
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 90,002 89,202 86,439
Amortization of property under capital leases 5,731 5,656 5,595
Compensation expense arising from stock awards 647 765 877
Other adjustments, net 1,889 1,707 2,574
Net increase (decrease) in cash from changes
in operating assets and liabilities,
detailed below 24,114 (11,420) (7,351)
Net cash provided by operating activities 217,614 167,416 175,314
CASH FLOWS FROM INVESTING ACTIVITIES
(Inc) dec in short-term investments, net (116,271) (24) 253
Capital expenditures (111,924) (79,071) (148,245)
Additions to other assets (1,294) (2,346) (1,605)
Net cash used in investing activities (229,489) (81,441) (149,597)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on notes and mortgages (12,733) (9,001) (1,958)
Reduction of obligations under capital leases (3,361) (3,216) (2,976)
Issuance of common stock 352 283 813
Purchase of treasury stock (3,993)
Dividends paid (41,514) (40,253) (38,303)
Net cash used in financing activities (61,249) (52,187) (42,424)
Net (dec) inc in cash and cash equivalents (73,124) 33,788 (16,707)
Cash and cash equivalents at beginning of year 184,969 151,181 167,888
Cash and cash equivalents at end of year $111,845 $184,969 $151,181
CASH FLOWS FROM CHANGES IN OPERATING ASSETS AND LIABILITIES
(Increase) decrease in assets
Receivables $(4,784) $(4,579) $(1,421)
Inventories 6,336 (16,599) 4,059
Prepaid income taxes (1,434) (1,592) (2,323)
Other current assets (881) (485) (132)
Increase (decrease) in liabilities
Accounts payable 19,896 9,289 10
Accrued expenses 12,923 (4,506) (1,031)
Income taxes payable (5,657) 6,713 (6,565)
Deferred income taxes (5,539) (5,012) (2,979)
Accrued insurance claims 4,431 1,860 1,522
Other liabilities (1,177) 3,491 1,509
Net cash provided by (used in) changes in
operating assets and liabilities $24,114 $(11,420) $(7,351)
The accompanying notes are an integral part of the consolidated financial
statements.
20 <PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fifty-two weeks ended February 26, 1994, fifty-two weeks ended February 27,
1993 and fifty-three weeks ended February 29, 1992
Dollar amounts in thousands except per share
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation: The consolidated financial statements include the accounts
of Giant Food Inc. (the Company) and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Cash equivalents: For financial reporting purposes, cash equivalents
consist of all highly liquid investments purchased with original maturities
of three months or less. At February 26, 1994, such cash equivalents
consist principally of bank repurchase agreements which are secured fully
by United States government securities.
Short-term investments: Short-term investments are stated at cost which
approximates fair value. At February 26, 1994, such investments consist
principally of United States government and agency securities which are
actively traded.
During 1993, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," which is required to be
adopted by the Company in 1995. Upon implementation of SFAS No. 115, the
effect on the Company's financial position and results of operations is
expected to be immaterial.
Inventories: Inventories are valued at the lower of cost or market. The
last-in, first-out (LIFO) method is used for determining the cost of
grocery, drug, cosmetic and non-food inventories, while the first-in,
first-out (FIFO) method is used for determining the cost of other
inventories, primarily perishable items. Approximately 84% of the
Company's inventories are valued using the LIFO method.
Property, plant and equipment: Property, plant and equipment are stated at
cost. Depreciation for financial reporting purposes is provided on the
straight-line method over the estimated useful lives of the assets which
results in average depreciation rates of 5%, 6% and 10% for buildings and
improvements, leasehold improvements and furniture and equipment,
respectively. Accelerated methods and lives are used for income tax
reporting purposes.
Property under capital leases: Property under capital leases, which
consists principally of real property used in the Company's operations, is
recorded at the lower of the present value of the minimum lease payments or
the fair market value of the leased property at the inception of the lease.
Amortization of the leased property is computed using the straight-line
method over the term of the lease.
Real estate held for future development: Real estate held for future
development is stated at cost.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Accrued insurance claims: The Company maintains insurance coverage with
respect to general liability and workers' compensation risks under
contractual arrangements which retroactively adjust insurance premiums for
claims paid subject to specified limitations. Accordingly, the expense
arising from such risks is accrued as amounts required to cover incurred
incidents become subject to estimation.
Income taxes: The provision for income taxes includes deferred income taxes
resulting from differences between income for financial reporting and
income tax purposes. The Company adopted SFAS No. 109, "Accounting for
Income Taxes" effective February 28, 1993 (see Note 4), which requires the
use of the liability method for computing income taxes rather than the
deferred method which was previously used by the Company.
Pre-opening costs: Costs associated with the opening of new stores are
expensed as incurred.
Buying and promotional allowances: Allowances and credits received from
vendors in connection with the Company's buying and merchandising
activities are credited to income as earned.
Earnings per share: Earnings per share is computed based on the weighted
average number of common shares outstanding during each year (59,659,352
shares in 1994, 59,648,084 shares in 1993 and 59,447,297 shares in 1992).
The exercise of outstanding stock options would not result in a material
dilution of earnings per share.
Business segments: Substantially all of the Company's assets, sales and
operating income are employed in or derived from a combination of retail
food and drug business in the United States.
Fair value of financial instruments: The carrying amount of the Company's
cash and cash equivalents approximates fair value because of the short
maturity of those instruments. The Company derives the fair value of its
short-term investments based on quoted market prices which are generally
readily available. The Company estimates the fair value of its notes and
mortgages by discounting the required future cash flows under such notes
and mortgages using borrowing rates at which similar types of borrowing
arrangements could be currently obtained by the Company.
2. INVENTORIES
If the FIFO method had been used, inventories would have been $76,420,
$73,090 and $69,172 higher at the end of 1994, 1993 and 1992, respectively.
Net income would have been higher by $2,003 ($.03 per share) in 1994,
$2,413 ($.04 per share) in 1993 and $3,375 ($.06 per share) in 1992. The
replacement cost of inventories valued at LIFO approximates FIFO cost.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. NOTES AND MORTGAGES
Notes and mortgages outstanding at year end were as follows:
1994 1993 1992
Notes payable to insurance
company $62,040 $68,200 $74,360
Mortgage notes payable 38,646 45,219 48,060
100,686 113,419 122,420
Less current portion 14,618 7,894 9,010
$ 86,068 $ 105,525 $113,410
The insurance company notes are subject to covenants, the more significant
of which restrict the payment of dividends, the creation of long-term debt
and the purchase of Company common stock. At February 26, 1994,
approximately $83,500 of consolidated retained earnings were free of
dividend and stock purchase restrictions. The average interest rate on the
insurance company notes is 9.7%.
Mortgage notes are collateralized by real estate which cost $56,745. The
average interest rate on such notes is 10.2%.
Annual maturities of notes and mortgages for the next five years are as
follows: 1995, $14,618; 1996, $23,263; 1997, $6,845; 1998, $6,921; and
1999, $6,904.
The estimated fair value of notes and mortgages is approximately $108,000
and $123,000 at February 26, 1994 and February 27, 1993, respectively.
The Company has available credit facilities of approximately $50,000,
including a revolving credit line and a term loan facility. Such credit
facilities were not used in fiscal year 1994.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. INCOME TAXES
The Company adopted, effective February 28, 1993, SFAS No. 109, which
requires the use of the liability method of accounting for income taxes and
the adjustment of deferred income taxes to reflect changes in tax rates at
the time they are enacted. In addition, SFAS No. 109 requires that assets
and liabilities acquired in purchase business combinations be assigned
their fair value assuming equal tax bases, and that deferred income taxes
be provided for lower or higher tax bases. Upon adoption of SFAS No. 109,
the Company adjusted its deferred income tax accounts to reflect the then
current income tax rates and also adjusted the carrying amounts of certain
assets acquired in a 1992 shopping center acquisition. The cumulative
effect of the adjustments was to increase net income by $3,934, increase
the net deferred income tax liability by $1,013 and increase the bases of
certain assets by $4,947. The effect of adopting SFAS No. 109 on the
Company's effective income tax rate is not material. Financial statements
for years prior to 1994 were not restated.
The provision for income taxes consists of:
1994 1993 1992
Current
Federal $56,800 $47,085 $49,826
State 11,644 10,273 10,372
68,444 57,358 60,198
Deferred
Federal (6,906) (5,458) (4,561)
State (1,080) (1,146) (741)
(7,986) (6,604) (5,302)
$60,458 $50,754 $54,896
Deferred income tax assets (liabilities) at February 26, 1994 are comprised
of the following:
Current deferred income tax asset: Assets Liabilities Total
Employee benefits $ 12,384 $ 12,384
Promotional allowances 2,136 2,136
Capitalization of inventory 3,113 3,113
Other 1,368 1,368
$ 19,001 19,001
Noncurrent deferred income tax asset
(liability):
Depreciation $(74,148) $(74,148)
Acquisition of shopping center for stock (5,191) (5,191)
Capital leases $ 14,949 14,949
Provision for insurance claims 13,523 13,523
Pension payments 2,762 2,762
Capitalization of overhead 2,916 2,916
Promotional allowances 862 862
Other 3,135 3,135
38,147 (79,339) (41,192)
$ 57,148 $(79,339) $(22,191)
24<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. INCOME TAXES (continued)
Deferred income taxes in 1993 and 1992 resulted from the following timing
differences:
1993 1992
Depreciation $( 107) $( 232)
Employee benefits (1,717) (3,491)
Capital leases (937) ( 810)
Promotional allowances (1,515) 110
Provision for insurance claims (2,037) ( 586)
Other items, net (291) ( 293)
$(6,604) $(5,302)
The following table reconciles the statutory federal income tax rate to the
Company's effective income tax rate.
1994 1993 1992
Statutory federal income tax rate 35.0% 34.0% 34.0%
State income taxes, net of
federal tax benefit 4.5 4.5 4.5
Retroactive tax increase to
January 1, 1993 0.1
Other 0.2 (0.1) 0.1
Effective income tax rate 39.8% 38.4% 38.6%
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. COMMITMENTS
Leases: The Company leases certain of its warehouse facilities and a
substantial number of its retail store properties under noncancelable lease
agreements for periods ranging from 20 to 30 years. These leases generally
contain optional renewal provisions for one or more periods of five years
each. Substantially all leases covering retail store properties provide
for additional rentals based on sales. Most leases also require the
payment of taxes, insurance and maintenance costs. Data processing and
certain other equipment leases are for terms of two to five years.
Future minimum lease payments under capital leases and noncancelable
operating leases as of February 26, 1994 are as follows:
Capital Operating
leases leases
1995 $19,639 $19,390
1996 19,554 18,115
1997 19,479 17,730
1998 19,479 17,058
1999 19,467 16,223
Later years 291,539 221,445
Total minimum lease payments 389,157 $309,961
Less executory costs 328
Net minimum lease payments 388,829
Less imputed interest 243,240
Present value of net
minimum lease payments 145,589
Less current portion 4,527
Long-term obligations under
capital leases $141,062
Minimum lease payments for capital leases have not been reduced by minimum
sublease rentals of $10,900 receivable in the future under noncancelable
subleases.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. COMMITMENTS (continued)
Net rental expense associated with leases consists of the
following:
1994 1993 1992
Operating leases
Minimum $18,011 $16,809 $17,341
Contingent 8,610 7,564 8,735
Contingent rentals under
capital leases 3,414 4,079 4,162
Gross rental expenses 30,035 28,452 30,238
Sublease income (2,348) (2,417) (2,397)
Net rental expense $27,687 $26,035 $27,841
The Company also leases certain retail space to others under noncancelable
operating lease agreements. Rental income from owned properties was $8,287
in 1994, $8,270 in 1993 and $6,912 in 1992. Total future minimum rentals
as of February 26, 1994 are approximately $25,100.
Property, Plant and Equipment: During the next year the Company plans to
expend approximately $160,000 for property, plant and equipment.
6. COMMON STOCK AND EMPLOYEE INCENTIVE PLANS
Shares Authorized: Common stock, $1 par value, authorized and outstanding
at year end is as follows:
Outstanding
Class Authorized 1994 1993 1992
"A" non-voting 75,000,000 59,336,839 59,440,440 59,370,475
"AC" voting 125,000 125,000 125,000 125,000
"AL" voting 125,000 125,000 125,000 125,000
75,250,000 59,586,839 59,690,440 59,620,475
Class "A" common stock has all of the rights and privileges pertaining to
other classes of common stock except the right to vote. No dividends may be
declared on any class of common stock without declaring at least an equal
dividend on Class "A" stock. However, dividends may be declared on Class
"A" stock without declaring dividends on any other class of common stock.
At February 26, 1994, the Company had reserved 2,995,681 shares of its
Class "A" common stock for issuance under its stock option and executive
stock bonus plans. In December 1993, the Company's Board of Directors
approved a plan to purchase up to 200,000 shares of its Class "A" common
stock in the open market. As of February 26, 1994, the Company has not
purchased any shares under this plan. The Company has purchased and
accumulated treasury stock in order to accommodate the needs for registered
common stock which may arise in connection with the exercise of stock
options and the award of shares under executive stock bonus plans.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. COMMON STOCK AND EMPLOYEE INCENTIVE PLANS (continued)
Stock options: The Company has established incentive compensation plans
under which it is authorized to grant both incentive stock options and non-
qualified stock options to approximately 1,300 employees. Options to
purchase the Company's Class "A" common stock are exercisable at a price
equal to the market value of the stock at the date of grant and become
exercisable over two to six years following the grant. All options expire
ten years after date of grant.
The Company had historically granted stock appreciation rights (SAR's) in
tandem with options. During the year ended February 24, 1990, the Company
began to grant non-qualified options without tandem SAR's. No options have
been granted with tandem SAR's since July 1989.
Upon exercise of a SAR the holder is entitled to receive cash (or
equivalent value in stock) equal to the amount by which the market value of
the Company's Class "A" common stock on the exercise date exceeds the
exercise price of the related stock options. As SAR's are exercised the
corresponding options are canceled and as options are exercised the
corresponding SAR's are canceled.
Option and SAR activity is as follows:
Average
Number of Shares Option
Options SAR's Price
February 23, 1991
Outstanding 1,774,960 922,420 $18.90
1992 Activity
Granted 370,600 - 28.73
Options exercised (70,701) (59,211) 10.29
SAR's exercised (85,597) (85,597) 9.95
Canceled (30,280) (8,280) 23.39
February 29, 1992
Outstanding 1,958,982 769,332 21.39
1993 Activity
Granted 432,700 - 23.43
Options exercised (35,047) (35,047) 7.55
SAR's exercised (81,677) (81,677) 7.84
Canceled (26,400) (5,800) 24.88
February 27, 1993
Outstanding 2,248,558 646,808 22.45
1994 Activity
Granted 581,500 - 23.39
Options exercised (42,456) (41,236) 7.36
SAR's exercised (87,686) (87,686) 12.63
Canceled (41,994) (7,244) 24.07
February 26, 1994
Outstanding 2,657,922 510,642 23.19
Exercisable 1,257,002 458,841 21.80
Available for future grants 2,837,760 NONE<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. COMMON STOCK AND EMPLOYEE INCENTIVE PLANS (continued)
Stock Awards: The Company has also established executive stock bonus plans
under which certain officers and managerial employees may be awarded shares
of Class "A" common stock. Charges to income arising from stock awards
were $1,000 in 1994 and 1993 and $1,184 in 1992.
7. EMPLOYEE RETIREMENT PLANS
Pension and Savings Plans: The Company maintains a qualified defined
benefit pension plan which covers substantially all non-union employees.
Plan benefits are based on the participant's years of service and average
annual earnings. The Company's policy is to fund the amount expensed for
accounting purposes subject to it being deductible for income tax purposes.
Supplementary defined benefit pension plans covering certain officers are
also maintained. These plans are unfunded and non-qualified. The pension
liability associated with the plans is accrued using the same actuarial
methods and assumptions as those used for the Company's qualified plan.
The net periodic pension cost (credit) for these plans includes the
following components:
1994 1993 1992
Service cost
Qualified plan $4,329 $3,877 $3,374
Supplemental plans 71 67 47
Interest cost
Qualified plan 6,760 6,252 5,562
Supplemental plans 179 187 169
Actual return on assets (9,552) (9,887) (6,409)
Net amortization and deferral
Qualified plan 1,941 2,360 (817)
Supplemental plans 71 69 46
Net pension cost $3,799 $2,925 $1,972
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. EMPLOYEE RETIREMENT PLANS (continued)
The funded status and amounts recognized in the consolidated balance sheets
as of February 26, 1994, February 27, 1993 and February 29, 1992 are as
follows:
Qualified plan
1994 1993 1992
Actuarial present value of benefit obligations
Vested benefit obligation $58,008 $52,130 $45,726
Accumulated benefit obligation $65,229 $58,837 $46,141
Projected benefit obligation $90,230 $80,780 $68,708
Plan assets at fair value (85,508) (75,271) (67,574)
Projected benefit obligation in excess of
plan assets 4,722 5,509 1,134
Unrecognized net loss (6,375) (9,180) (8,418)
Unrecognized prior service cost (3,282) (2,906) (3,146)
Unrecognized transition asset 9,855 11,107 12,358
Pension liability recognized in the consolidated
balance sheets $4,920 $4,530 $1,928
Supplemental plans
1994 1993 1992
Actuarial present value of benefit obligations
Vested benefit obligation $ 1,752 $ 1,931 $ 1,559
Accumulated benefit obligation $ 1,752 $ 1,931 $ 1,559
Projected benefit obligation $ 2,354 $ 2,528 $ 2,111
Plan assets at fair value - - -
Projected benefit obligation in excess of
plan assets 2,354 2,528 2,111
Unrecognized net gain 840 616 988
Unrecognized prior service cost (265) (287) (310)
Unrecognized transition obligation (819) (921) (1,023)
Pension liability recognized in the consolidated
balance sheets $ 2,110 $1,936 $1,766
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. EMPLOYEE RETIREMENT PLANS (continued)
Actuarial assumptions used were as follows:
1994 1993 1992
Discount rate 8.00% 8.00% 8.75%
Rate of increase in
compensation levels 5% 5% 6%
Expected rate of return
on plan assets 9% 10% 10%
Payments are made to union-sponsored multi-employer pension plans in
accordance with negotiated labor contracts. Charges to income arising from
contributions required under the labor contracts aggregated $18,732,
$19,418 and $20,185 in 1994, 1993 and 1992, respectively.
The Company sponsors a tax deferred savings plan whereby eligible employees
may elect annually to contribute up to 20% of their compensation, subject
to statutory limitations. The Company matches a portion of employee
contributions. Charges to income representing the Company's contributions
to the plan were $3,740, $3,403 and $3,348 in 1994, 1993 and 1992,
respectively.
Other Benefits:
The Company does not provide any significant postretirement benefits to
administrative employees, and postretirement benefits for union employees
are covered by union-sponsored multi-employer pension plans. Therefore,
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" did not affect the Company.
The FASB has issued SFAS No. 112, "Employers' Accounting for Postemployment
Benefits" which is required to be implemented by the Company in 1995. Upon
implementation of SFAS No. 112, the effect on the Company's financial
position and results of operations is expected to be immaterial.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. CASH FLOWS
Net cash flows from operating activities include cash payments for interest
and income taxes as follows:
1994 1993 1992
Interest $27,662 $27,850 $27,113
Income taxes 72,893 51,624 69,407
Non-cash investing and financing activities include the following:
1994 1993 1992
Property under capital leases
Additions $10,379 $ 3,340 -
Terminations (7,570) - $ (515)
Obligations under capital leases
Additions 10,379 3,340 -
Terminations (8,735) - (1,038)
Acquisition of shopping center
for stock (533,675 shares) - - 15,610
Assumption of mortgages in
connection with acquisition
of shopping centers - - 23,993
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
Title of All Positions Year First
Name Age Held with the Company Elected Director
Israel Cohen 81 Chairman of the Board, 1949
Chief Executive Officer
and Director
Samuel Lehrman 44 Director 1986
David B Sykes 75 Director, Secretary, 1981
Treasurer, and Senior
Vice President-Finance
Max N. Berry 58 Director 1990
Scott B. Laurans 46 Director 1992
Constance M. Unseld 46 Director 1993
Peter F. O'Malley 55 Director 1993
The present term of each of the above Directors will expire at the
Annual Meeting of Shareholders currently scheduled for September 8,
1994.
Millard F. West, Jr. and Morton H. Wilner retired as active directors on
September 6, 1990, on which date they were elected Directors Emeritus.
Messrs. West and Wilner served as Board members 26 and 24 years,
respectively.
General Roscoe Robinson, Jr., who served as a Director of the Company
since 1990, died on July 22, 1993. Richard Waxenberg, who served as a
Director of the Company since 1967, retired as a Director on December
20, 1993.
<PAGE>
(b) Identification of Executive Officers
Year First Elected to
Name and Position Age Officer Present Office
Israel Cohen 81 1936 1978 (Chairman of Board)
Chairman of the Board 1977 (Chief Executive Officer)
and Chief Executive Officer
Pete L. Manos 57 1977 1992
President
David B Sykes 75 1955 1977 (Senior Vice President
Senior Vice President- -Finance)
Finance, Secretary 1978 (Secretary)
and Treasurer 1984 (Treasurer)
Alvin Dobbin 62 1970 1977
Senior Vice President-
Operations
David W. Rutstein 49 1978 1981
Senior Vice President-
General Counsel
David N. Freedman 64 1982 1985
Senior Vice President-
Corporate Facilities
Roger D. Olson 49 1978 1988
Senior Vice President-
Labor Relations and
Personnel
Robert W. Schoening 47 1985 1988
Senior Vice President-
Data Processing
Samuel E. Thurston 50 1977 1988
Senior Vice President-
Distribution
The present term of each of the above Executive Officers will expire at
the first meeting of the Board of Directors subsequent to the Annual
Meeting of Shareholders currently scheduled for September 8, 1994.<PAGE>
(c) Identification of Certain Significant Employees
Not applicable.
(d) Family Relationships
Directors Samuel Lehrman and Max N. Berry are
brothers-in-law.
(e) Business Experience
Each of the above named Executive Officers of the Company
has been employed by the Company for a period of time in excess of five
years. Their positions with the Company are set forth above in
subsection (b), and the duties of each have been encompassed within the
framework of his or her respective title since first becoming an officer
of the Company.
The principal occupation, employment, and business
experience during the past five years of each of the Directors and
Directors Emeritus of the Company is set forth below:
Israel Cohen - see subsection (b) above.
David B Sykes - see subsection (b) above.
Samuel Lehrman is President of Lehrco Corporation, a real
estate development firm in the District of Columbia. He is
Vice-President of Vista Management Co., Inc., a residential real estate
management company. Mr. Lehrman is the son of Mr. Jacob Lehrman and
Mrs. Charlotte F. Lehrman, former officer and directors of the Company.
Max N. Berry is an attorney in Washington, D.C.
specializing in international trade.
Scott B. Laurans was formerly President, Roger Williams
Foods, Providence, Rhode Island; formerly President, Rhode Island
Division, Wetterau, Inc., St. Louis, Missouri; and is currently a
partner in The Providence Group Investment Advisory Company, Providence,
Rhode Island.
Constance M. Unseld is the founder and operator of the
Unselds' School, a state accredited, independent school in Baltimore,
Maryland. She also serves as a member of the Board of Regents of the
University of Maryland system.
Peter F. O'Malley is the founder and current counsel to
the law firm of O'Malley & Miles of Prince George's County, Maryland.
He currently serves on the Boards of Directors of Potomac Electric Power
Company, Potomac Capital Investments and Legg Mason, Inc. The firm of
O'Malley & Miles is one of a number of firms which provides legal
services to the Company.
<PAGE>
Millard F. West, Jr., a Director Emeritus of the Company,
is a Vice-President of the firm of Prudential Securities, Inc. (Members
New York Stock Exchange) and is a Director of Dewey Electronics
Corporation.
Morton H. Wilner, a Director Emeritus of the Company, is
General Counsel Emeritus of the Armed Forces Benefit Association and
Vice Chairman of A.F.B.A. Industrial Bank. He is also a Trustee
Emeritus, for life, of the University of Pennsylvania.
(f) Involvement in Certain Legal Proceedings
No Director, Director Emeritus or Executive Officer was
involved in any event during the past five years which would be
responsive to this question.
(g) Promoters and Control Persons
Not applicable.
(h) Compliance with Insider Reporting Requirements
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors and executive officers, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission ("SEC")
and the American Stock Exchange initial reports of ownership and reports
of changes in ownership of common stock and other equity securities of
the Company. Officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of
the copies of such reports furnished to the Company and written
representations that no other reports were required, during the fiscal
year ended February 26, 1994 (with the exception noted below), the
Company complied with all Section 16(a) filing requirements applicable
to officers, directors and greater than ten-percent beneficial owners.
On April 13, 1993, Odonna Mathews exercised stock
appreciation rights under an employee stock option for 1,500 shares.
Ms. Mathews inadvertently did not timely file the required report for
this transaction, but did so promptly after the oversight was
discovered.<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following tables and narrative text discuss the compensation
paid in Fiscal Year 1994 and the two prior fiscal years to the Company's
Chief Executive Officer and the Company's four other most highly
compensated executive officers.
Summary Compensation Table
Annual Compensation (1)
Other
Name and Annual
Principal Fiscal Compen-
Position Year Salary Bonus sation(2)
Israel Cohen 1994 $831,428 $434,346 --
Chairman of the 1993 $556,600 $690,500 --
Board & CEO 1992(1) $567,304 $690,500 --
David B Sykes 1994 $375,232 $196,015 --
Secretary, Treas. 1993 $256,520 $306,300 --
Sr. V.P. Finance 1992(1) $261,453 $306,300 --
Pete Manos 1994 $255,736 $133,608 --
President and 1993 $134,608 $233,600 --
Sr. V.P. Food 1992(1) $123,327 $233,600 --
Operations
Alvin Dobbin 1994 $238,004 $124,363 --
Sr. V.P. 1993 $123,420 $233,600 --
Operations 1992(1) $125,793 $233,600 --
David N. Freedman 1994 $236,444 $123,464 --
Sr. V.P. 1993 $121,000 $233,600 --
Corp. Facilities 1992(1) $123,327 $233,600 --
(1) Includes 53 weeks of salary payments.
(2) Aggregate value does not exceed the lesser of $50,000 or 10
percent of the total amount of annual salary and bonus.
<PAGE>
Long Term Compensation
Options/ All Other
Name and Restricted SAR Compensa-
Principal Fiscal Stock Awards(#) LTIP tion
Position Year Awards(3) (4) Payouts (5)(6)
Israel Cohen 1994 $15,284 32,500 0 $34,352
Chairman of the 1993 $15,625 2,500 0 $32,098
Board & CEO 1992(1) $17,460 2,500 0 $32,649
David B Sykes 1994 $15,284 17,500 0 $29,688
Secretary, Treas. 1993 $15,625 2,500 0 $28,553
Sr. V.P. Finance 1992(1) $17,460 2,500 0 $28,684
Pete Manos 1994 $15,284 22,500 0 $16,635
President and 1993 $15,625 2,500 0 $15,685
Sr. V.P. Food 1992(1) $17,460 2,500 0 $12,512
Operations
Alvin Dobbin 1994 $15,284 9,500 0 $17,806
Sr. V.P. 1993 $15,625 2,500 0 $17,519
Operations 1992(1) $17,460 2,500 0 $14,441
David N. Freedman 1994 $15,284 2,500 0 $18,227
Sr. V.P. 1993 $15,625 2,500 0 $18,001
Corp. Facilities 1992(1) $17,460 2,500 0 $14,828
(1) Includes 53 weeks of salary payments.
(2) Aggregate value does not exceed the lesser of $50,000 or 10
percent of the total amount of annual salary and bonus.
(3) Includes cash payments for income taxes to each named officer
on the value of the restricted shares and the tax payment itself
pursuant to the Non-Qualified Executive Stock Bonus Plan II. The
aggregate stock holdings of this group were 8,950 shares and the share
value was $25.75 as of February 26, 1994. Dividends are paid on the
stock held under this plan.
Under this plan, the Company makes an annual contribution not
exceeding the greater of (i) $1,000,000 or (ii) six-tenths of one
percent (0.60%) of the pre-tax earnings of the company. The Company's
cash contributions are used to purchase shares of Class A non-voting
common stock.
Distributions of those shares will be made to those participants
who meet any of the following conditions: (1) ten years' participation
in the Plan; (2) retirement after attainment of age 62; (3) abolition of
the participant's job; (4) total and complete disability or (5)
death.<PAGE>
(4) All options granted to participants pursuant to these stock
option plans are issued at 100% of fair market value on the date issued
and may be exercised, on a graduated basis, after the later of one year
from the date of grant or two years' continued employment. All options
terminate 10 years from their date of issuance.
The Company receives no cash consideration for granting options.
In order to acquire shares, the optionee must pay the full purchase
price of the shares being exercised, plus appropriate withholding taxes.
Optionees are not permitted to receive cash for any excess of market
value over option price.
(5) Includes Company matching contributions under Company's tax-
deferred saving plan ("Plan").
Participants in the Plan are permitted to contribute portions of
their compensation, subject to legal limitations, for which the Company
contributes an amount in cash equal to the participant's initial 3% pre-
tax contribution. In addition, the Company provides supplemental
contributions (in the form of Giant Food Inc. Class A common stock) to
match participants' contributions (partially or totally) in excess of 3%
of salary up to 6% of salary. Such Company contributions are limited to
.4% of its pre-tax earnings.
In Fiscal Year 1994 the Company made matching contributions under
the plan as follows: Mr. Cohen $10,580, Mr. Sykes $9,678, Mr. Manos
$9,590, Mr. Dobbin $8,925 and Mr. Freedman $8,867.
(6) Includes premium payments under the Company's Split Dollar
Insurance Program in which participants are provided with permanent life
insurance owned by the Company. The Company pays for premiums and will
recover amounts equal to its investment in the insurance policies at the
deaths of the participants.
During Fiscal Year 1994 the Company made insurance premium
payments as follows: Mr. Cohen $23,772, Mr. Sykes $20,010, Mr. Manos
$7,045, Mr. Dobbin $8,881 and Mr. Freedman $9,360.<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR (1)
Individual Grants
Number of
Securities
Underlying % of Total
Options/ Options Exercise
SAR's Granted to of Base
Granted Employees Price Expiration
Name (#)(2) in FY ($/Sh) Date
Israel Cohen 2,500 $21.13 03/01/03
30,000 $26.25 06/03/03
32,500 5.59
David B Sykes 2,500 $21.13 03/01/03
15,000 $26.25 06/02/03
17,500 3.01
Pete Manos 2,500 $21.13 03/01/03
20,000 $26.25 06/02/03
22,500 3.87
Alvin Dobbin 2,500 $21.13 03/01/03
7,000 $26.25 06/02/03
9,500 1.63
David Freedman 2,500 $21.13 03/01/03
7,000 $26.25 06/02/03
9,500 1.63
(1) No SAR's were awarded in the 1994 Fiscal Year.
(2) These options may be exercised on a graduated basis beginning
one year following the date of grant.
<PAGE>
Potential Realizable Value at Assumed
Rates of Stock Price Appreciation for
Option Term (10 Years)
5% 10%
Stock Stock
Price Price
Per Share Per Share
Name (3) Gain(4) (3) Gain(4)
Israel Cohen $34.42 $ 33,221 $54.81 $ 84,189
$42.76 $495,255 $68.09 $1,255,072
$528,476 $1,339,262
David B Sykes $34.42 $ 33,221 $54.81 $ 84,189
$42.76 $247,627 $68.09 $ 657,536
$280,849 $ 711,726
Pete Manos $34.42 $ 33,221 $54.81 $ 84,189
$42.76 $330,170 $68.09 $ 836,715
$363,391 $ 920,904
Alvin Dobbin $34.42 $ 33,221 $54.81 $ 84,189
$42.76 $115,559 $68.09 $ 292,850
$148,781 $ 377,040
David Freedman $34.42 $ 33,221 $54.81 $ 84,189
$42.76 $115,559 $68.09 $ 292,850
$148,781 $ 377,040
(3) The price of GFSA Common Stock at the end of the ten year term
of the option grant at a 5% annual appreciation would be $34.42 and
$42.76, and at a 10% annual appreciation would be $54.81 and $68.09.
(4) The gain is calculated from the exercise price of the options
listed above, $21.13 and $26.25 based on the grant date of the options.
Option grants are at 100% of market value on the date of grant.<PAGE>
Aggregated Options/SAR Exercises in Last Fiscal Year
and Fiscal Year End Option SAR/Values
Shares SARs Value
Acquired on Exerc'd Realized
Name Exercise(#) (#) ($)
Israel Cohen -0- -0- -0-
David B Sykes -0- -0- -0-
Pete Manos -0- -0- -0-
Alvin Dobbin -0- -0- -0-
David Freedman 10,000 -0- 184,225(2)
Value of Value of
Number of Number of Unexerc'd Unexerc'd
Unexerc'd Unexerc'd In-the-Money In-the-Money
Options/SARs Options/SARs Options/SARs Options/SARs
at FY-End at FY-End at FY-End($) at FY-End($)
Name Exercisable Unexercisable Exercisable(1) Unexercisable
Israel Cohen 5,440 37,500 $ 15,051 $14,980
David B Sykes 5,000 22,500 6,870 14,980
Pete Manos 5,000 27,500 6,870 14,980
Alvin Dobbin 5,000 14,500 6,870 14,980
David Freedman 10,000 14,500 84,220 14,980
(1) Value is before taxes. The dollar values are computed by
determining the difference between the fair market value of the
underlying Common Stock and the exercise price at fiscal year end.
(2) Mr. Freedman exercised an option to purchase shares, the value
of which was determined by the difference between the market price and
the option price on the date of exercise.
<PAGE>
PENSION TABLE
Pension Plan:
The Company maintains a tax-qualified defined benefit pension plan for
approximately 2,400 salaried employees. The following table provides an
example of benefits at the normal retirement age of 65 payable as a life
annuity:
Estimated Annual Benefits
Pension from Retirement Plan
Highest Five for Following Number of Years
Year Average of Credited Service
Earnings 10 20 30
$ 40,000 $ 4,184 $ 8,769 $ 13,753
70,000 8,234 17,169 26,803
100,000 12,284 25,569 39,853
150,000 19,034 39,569 61,603
200,000 25,784 53,569 83,353
250,000 32,534 67,569 105,103
300,000 39,284 81,569 126,853
350,000 46,034 95,569 148,603
400,000 52,784 109,569 170,353
A participant's annual pension payable to him as of his normal
retirement date will be equal to:
(i) .85% of "final average earnings" plus .50% of that portion of
final average earnings in excess of "covered compensation" times number
of years of credited service not to exceed 15, plus
(ii) 1.05% of final average earnings plus .50% of that portion of
final average earnings in excess of "covered compensation" times number
of years of credited service over 15, not to exceed 15, plus
(iii) .50% of final average earnings times years of credited service
over 30.
For purposes of determining plan benefits, earnings are the gross cash
compensation provided to a participant, including overtime, bonuses and
commissions.
Early retirement benefits are payable under the plan. Generally, the
payment will be in the form of a straight life annuity for participants
who are not married and a joint and survivor annuity for those who are
married.
<PAGE>
The number of years of credited service of the Executive Officers listed
in the remuneration table under the Retirement Plan, determined as of
February 26, 1994 are: Mr. Cohen, 23 years; Mr. Sykes, 23 years; Mr.
Dobbin, 23 years; Mr. Manos, 23 years; and Mr. Freedman, 16 years. Two
of the officers (Messrs. Cohen and Sykes) are currently receiving
retirement payments from the plan, as required by law for participants
over age 70 1/2.
Supplemental Retirement Arrangements:
Two unfunded nonqualified pension plans are currently in effect. For
three of the officers listed in the remuneration table (Messrs. Cohen,
Sykes and Dobbin), the Supplemental Plan provides that in the event that
annual benefits from the Company's Retirement Plan, profit sharing and
thrift plans, and from Social Security do not equal sixty percent (60%)
of the earnings averaged over the five years prior to retirement, a
supplemental pension would be paid so that the total of all benefits,
including Social Security, equals sixty percent (60%). For less than
fifteen years of service, the total benefit is proportionately reduced.
The Supplemental Plan also provides a make-up benefit for those who will
be impacted by the $150,000 compensation limit in the Retirement Plan.
The Excess Benefit Plan was adopted in 1988 to restore benefits not
payable from the Retirement Plan solely due to the maximum benefit
limitations of IRC 415.
Compensation of Directors
During Fiscal Year 1994, Directors and Directors Emeritus who were not
employees received an annual fee of $35,000 and a fee of $250 for
committee meetings attended. Richard Waxenberg, who retired as a
Director on December 20, 1993, received $20,000 as a consulting fee.
Samuel Lehrman (as Chairman of the Audit Committee) and Max N. Berry,
Esquire (as Chairman of the Officers' Executive Compensation Committee)
each receive an additional fee of $1,000 annually.
Termination of Employment
Not applicable.
Employment Contracts and Termination of Employment and Change-in Control
Arrangements
On April 13, 1989, the Company entered into an Employment Agreement with
Israel Cohen for a five year term. The agreement provides for a salary
of $556,600 per year and additional compensation as awarded by the
Company's Board of Directors. The agreement also provides for a two-
year covenant not to compete upon termination of employment.
Additional Information with Respect to Compensation Committee Interlocks
and Insider Participation in Compensation Decisions
Mrs. Unseld and Messrs. Berry and O'Malley comprise the Company's
Officers' Executive Compensation Committee. Mr. O'Malley is of counsel
to the law firm of O'Malley & Miles which represents the Company with
respect to certain legal matters.<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
(as of May 2, 1994)
The following table sets forth information with respect
to the ownership of the voting securities of the Company as of May 2,
1994.
Number Nature
Title of of Shares of Percent
Name and Address Class of Stock Owned Ownership of Class
Israel Cohen Common AC 125,000 Record and 100.0%
6300 Sheriff Road Beneficial
Landover, Maryland 20785
Heidi J. Berry,
Bernhardt R. Ferson
Lehrman and Samuel
Lehrman, Trustees
under Article Fourth
of the Will of
Charlotte Ferson Lehrman,
deceased Common AL 125,000 Record and 100.0%
5301 Wisconsin Avenue, N.W. Beneficial
Suite 650
Washington, D.C. 20015
(b) Security Ownership of Management (as of May 2, 1994)
Number Nature
Title of of Shares of Percent
Name and Title Class of Stock Owned Ownership of Class
Israel Cohen Common Stock A 2,738,962 Record and 4.618%
Chairman of the (Non-Voting) Beneficial
Board and CEO, Common Stock AC 125,000 Record and 100.00%
Director (Voting) Beneficial
Samuel Lehrman Common Stock A 1,654,096 Record and 2.789%
Director (Non-Voting) Beneficial
Common Stock AL 125,000 Record and 100.00%
(Voting)(1) Beneficial
Max N. Berry Common Stock A 3,478,938 Record and 5.866%
Director (Non-Voting) Beneficial
Common Stock AL 125,000 Record and 100.00%
(Voting)(2) Beneficial<PAGE>
Scott B. Laurans Common Stock A 2,500 Record and .004%
Director (Non-Voting) Beneficial
David B Sykes Common Stock A 212,633 Record and .359%
Sr. Vice President- (Non-Voting) Beneficial
Finance, Sec'y,
Treasurer,
Director
Constance M. Unseld Common Stock A 1,000 Record and .002%
Director (Non-Voting) Beneficial
Peter F. O'Malley Common Stock A 2,000 Record and
Director (Non-Voting) Beneficial .003%
Millard F. West, Jr. Common Stock A 23,800 Record and .040%
Director Emeritus (Non-Voting) Beneficial
Morton H. Wilner Common Stock A 10,576 Record and .018%
Director Emeritus (Non-Voting) Beneficial
All Directors and Common Stock A 8,890,195 Beneficial 14.991%
Officers as a (Non-Voting)(3)
Group (30 persons)
Common Stock AC 125,000 100.00%
(Voting)(1)
Common Stock AL 125,000 100.00%
(Voting)(1)
(c) Changes in Control
Not applicable.
NOTES:
(1) As noted in Item 12(a) above.
(2) Mr. Berry's wife, Heidi J. Berry, is a co-trustee of the Trust
reported in Item 12(a) above.
(3) Includes indirect ownership as well as direct ownership by
Directors and Officers. Excludes 42,900 shares of Common Stock A
held in the Lehrman Testamentary Trust under the Will of Jacob
Lehrman, deceased, for the benefit of Samuel Lehrman.<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transactions with Management and Others
The Company operates a store in Hyattsville, Maryland under
a lease (originally executed in 1954) from a partnership in which
certain affiliates of the Company have a 25% interest. The affiliates
are members of the Cohen and Lehrman families and, during certain years,
certain affiliates were executive officers of the Company. The
affiliates' shares of gross rentals (minimum and percentage where
applicable) for the last three fiscal years were as follows: $119,094
(FY 1994), $130,219 (FY 1993) and $122,964 (FY 1992).
The foregoing lease is not on less advantageous terms to
the Company than those involving similar type stores executed at the
same time by the Company with landlords where no affiliation existed.
All other Company leases have been entered into with non-affiliated
entities or with wholly-owned subsidiaries.
(b) Certain Business Relationships
During the Company's most recent fiscal year, the
law firm of O'Malley & Miles, to which Mr. O'Malley is of counsel,
provided certain legal services to the Company.
(c) Indebtedness of Management
Not applicable.
(d) Transactions with Promoters
Not applicable.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
Page in
Form 10-K
(a) The following documents are filed as part
of this report:
(1) Financial Statements and
supplementary data:
Report of Independent Accountants 15
Consolidated Statements of Income
for the years ended February 26,
1994, February 27, 1993 and
February 29, 1992 16
Consolidated Balance Sheets at
February 26, 1994, February 27, 1993
and February 29, 1992 17-18
Consolidated Statements of Changes
in Shareholders' Equity for the years
ended February 26, 1994, February 27,
1993 and February 29, 1992 19
Consolidated Statements of Cash Flows
for the years ended February 26, 1994,
February 27, 1993 and February 29, 1992 20
Notes to Consolidated Financial
Statements 21-32
(2) Financial Statement Schedules:
Report of Independent Accountants
on Financial Statement Schedules 52
Schedule
V. Property, plant and equipment 53-54
VI. Accumulated depreciation
and amortization of property,
plant and equipment 55
VIII. Valuation and qualifying accounts 56
<PAGE>
All other schedules are omitted because they are
not applicable or the required information is shown in the consolidated
financial statements or notes thereto.
(3) Exhibits:
The Index to Exhibits is on page 57.
(b) Reports on Form 8-K
On January 5, 1994, a report on Form 8-K under Item 5
was filed by the Registrant.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BY: /s/ Israel Cohen
Israel Cohen,
Chairman of the Board and
Chief Executive Officer
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
GIANT FOOD INC.
May 13, 1994 By: /s/ Israel Cohen
Israel Cohen
Chairman of the Board and Principal Executive
Officer
May 13, 1994 By: /s/ David B Sykes
David B Sykes, Senior Vice
President-Finance, Chief
Financial Officer and
Principal Accounting Officer
May 13, 1994 By: /s/ Israel Cohen
Israel Cohen, Director
May 13, 1994 By: /s/ Samuel Lehrman
Samuel Lehrman, Director
May 13, 1994 By: /s/ Max N. Berry
Max N. Berry, Director
May 13, 1994 By: /s/ Scott B. Laurans
Scott B. Laurans, Director
May 13, 1994 By: /s/ Constance M. Unseld
Constance M. Unseld, Director
May 13, 1994 By: /s/ Peter F. O'Malley
Peter F. O'Malley, Director<PAGE>
Report of Independent Accountants
on Financial Statement Schedules
To the Board of Directors
Giant Food Inc.
Our audits of the consolidated financial statements referred to in our
report dated March 28, 1994 appearing on page 15 of the 1994 Form 10-K
of Giant Food Inc. also included an audit of the Financial Statement
Schedules listed in Item 14(a)(2) of this Form 10-K. In our opinion,
these Financial Statement Schedules present fairly, in all material
respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PRICE WATERHOUSE
/s/
Washington, D.C.
March 28, 1994<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES SCHEDULE V
(THOUSANDS OF DOLLARS)
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
Balance Addit- Balance
beginning ions Retire- end of
Classification of period at cost ments period
Year ended February 26, 1994
Land $ 46,958 $ 11,862 $ 0 $ 58,820
Buildings & Improvements 231,947 36,724 31 268,640
Leasehold Improvements 158,393 8,358 13,352 153,399
Fixtures & Equipment 634,882 66,261 23,443 677,700
Transportation Equipment 64,819 3,629 860 67,588
1,136,999 126,834 37,686 1,226,147
Equipment & construction
in progress 30,400 2,106 32,506
Property under capital
leases 162,483 10,379 10,603 162,259
Totals $1,329,882 $139,319 $ 48,289 $1,420,912
Year ended February 27, 1993
Land $ 46,958 $ 0 $ 0 $ 46,958
Buildings & Improvements 200,125 31,996 174 231,947
Leasehold Improvements 152,471 6,985 1,063 158,393
Fixtures & Equipment 621,435 36,823 23,376 634,882
Transportation Equipment 59,692 5,456 329 64,819
1,080,681 81,260 24,942 1,136,999
Equipment & construction
in progress 39,647 (9,247)(a) 30,400
Property under capital
leases 161,096 3,340 1,953 162,483
Totals $1,281,424 $ 75,353 $ 26,895 $1,329,882
Year ended February 29, 1992
Land $ 16,581 $ 30,496 $ 119 $ 46,958
Buildings & Improvements 143,811 57,246 932 200,125
Leasehold Improvements 133,512 20,737 1,778 152,471
Fixtures & Equipment 568,976 71,147 18,688 621,435
Transportation Equipment 56,450 5,050 1,808 59,692
919,330 184,676 23,325 1,080,681
Equipment & construction
in progress 42,886 (3,239)(a) 39,647
Property under capital
leases 163,966 0 2,870 161,096
Totals $1,126,182 $181,437 $ 26,195 $1,281,424
<PAGE>
(a) Net transfers to buildings and improvements, leasehold improvements and
fixtures and equipment.
Depreciation is provided for by the straight-line method over the estimated
useful lives of the related assets. The useful life of buildings and
improvements is considered to be 25 to 40 years; leasehold improvements, 5
to 25 years; fixtures and equipment, 5 to 12 years; and transportation
equipment, 4 to 10 years.<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES SCHEDULE VI
(THOUSANDS OF DOLLARS)
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
Balance Addit- Balance
beginning ions Retire- end of
Classification of period at cost ments period
Year ended February 26, 1994
Buildings & Improvements $ 60,112 $ 15,686 $ 31 $ 75,767
Leasehold Improvements 50,423 8,688 4,169 54,942
Fixtures & Equipment 324,348 64,873 23,335 365,886
Transportation Equipment 44,245 4,874 852 48,267
479,128 94,121 28,387 544,862
Property under capital
leases 52,044 5,731 3,096 54,679
Totals $ 531,172 $ 99,852 $ 31,483 $ 599,541
Year ended February 27, 1993
Buildings & Improvements $ 49,962 $ 10,171 $ 21 $ 60,112
Leasehold Improvements 41,292 9,715 584 50,423
Fixtures & Equipment 283,720 63,801 23,173 324,348
Transportation Equipment 39,054 5,515 324 44,245
414,028 89,202 24,102 479,128
Property under capital
leases 48,341 5,656 1,953 52,044
Totals $ 462,369 $ 94,858 $ 26,055 $ 531,172
Year ended February 29, 1992
Buildings & Improvements $ 40,074 $ 10,809 $ 921 $ 49,962
Leasehold Improvements 35,932 6,964 1,604 41,292
Fixtures & Equipment 239,208 62,846 18,334 283,720
Transportation Equipment 35,143 5,697 1,786 39,054
350,357 86,316 22,645 414,028
Property under capital
leases 45,101 5,595 2,355 48,341
Totals $ 395,458 $ 91,911 $ 25,000 $ 462,369
55<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES SCHEDULE VIII
(THOUSANDS OF DOLLARS)
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Additions
Balance Charged Balance
beginning to costs end of
Description of period & expenses Deductions period
Year ended February 26, 1994
Provision for
insurance claims $20,986 $32,419 $27,988 (a) $25,417
Year ended February 27, 1993
Provision for
insurance claims $19,126 $30,780 $28,920 (a) $20,986
Year ended February 29, 1992
Provision for
insurance claims $17,604 $30,416 $28,894 (a) $19,126
(a) Deductions consist of:
1994 1993 1992
Payments $29,553 $30,439 $27,967
Change in current portion (1,565) (1,519) 927
$27,988 $28,920 $28,894
<PAGE>
INDEX TO EXHIBITS
Exhibit Page
1989 Non-Qualified Incorporated by reference
Stock Option Plan to the Company's Form 10-K
filed with the SEC in
May, 1993 for the Fiscal
Year Ended February 27, 1993 --
Non-Qualified Executive Incorporated by reference
Stock Bonus Plan to the Company's Form 10-K
filed with the SEC in
May, 1993 for the Fiscal
Year Ended February 27, 1993 --
Split Dollar Insurance Incorporated by reference
Program to the Company's Form 10-K
filed with the SEC in
May, 1993 for the Fiscal
Year Ended February 27, 1993 --
Supplemental Retirement Incorporated by reference
Plan to the Company's Form 10-K
filed with the SEC in
May, 1993 for the Fiscal
Year Ended February 27, 1993 --
Excess Benefit Plan Incorporated by reference
to the Company's Form 10-K
filed with the SEC in
May, 1993 for the Fiscal
Year Ended February 27, 1993 --
Computation of Earnings Exhibit 11 58
Per Common Share
Subsidiaries Exhibit 21 59
Consent of Independent Exhibit 23 60
Accountants
<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
FIFTY-TWO WEEKS ENDED FEBRUARY 26, 1994, FIFTY-TWO WEEKS ENDED
FEBRUARY 27, 1993 AND FIFTY-THREE WEEKS ENDED FEBRUARY 29, 1992
1994 1993 1992
Primary:
Earnings:
Net income $ 95,231,000 $ 81,506,000 $ 87,180,000
Shares:
Weighted average number of
common shares outstanding 59,659,352 59,648,084 59,447,297
Assuming exercise of options,
using average market price,
reduced by the number of shares
which could have been purchased
with the proceeds from
exercise of such options 245,425 213,351 420,952
Weighted average number of common
shares outstanding, as adjusted 59,904,777 59,861,435 59,868,249
Primary earnings per common share $1.59 $1.36 $1.46
Assuming full dilution:
Earnings:
Net income $ 95,231,000 $ 81,506,000 $ 87,180,000
Shares:
Weighted average number of
common shares outstanding 59,659,352 59,648,084 59,447,297
Assuming exercise of options,
using higher of ending or
average market price, reduced
by the number of shares which
could have been purchased with
the proceeds from exercise
of such options 303,323 216,096 434,254
Weighted average number of common
shares outstanding, as adjusted 59,962,675 59,864,180 59,881,551
Fully diluted earnings
per common share $1.59 $1.36 $1.46
Note: This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of
APB Opinion No. 15 because it results in dilution of less than 3%.
58<PAGE>
EXHIBIT 21
GIANT FOOD INC. AND SUBSIDIARIES
Subsidiaries
State of
Subsidiary Incorporation
Giant of Maryland, Inc. Maryland
Giant of Salisbury, Inc. Maryland
Giant Construction Company, Inc. District of Columbia
GF McLean Shopping Center, Inc. Virginia
GFS Realty, Inc. Delaware
Landover Wholesale Tobacco Corp. Maryland
Warex-Jessup, Inc. Maryland
Bursil, Inc. Delaware
Cole Engineering, Inc. (formerly Cole Carpets, Inc.)Maryland
LECO, Inc. (formerly Viva Pharmaceuticals, Inc.) Delaware
Giant Automatic Money Systems, Inc. Maryland
Shaw Community Supermarket, Inc.(1) District of Columbia
Bayside Traffic Services of Maryland, Inc. Maryland
Super G, Inc. Maryland
Montrose Crossing, Inc. Maryland
Friendship Macomb SC, Inc. District of Columbia
Giant of Talbot Co., Inc. Maryland
(1) Giant Food Inc. owns 85% of the voting
securities of Shaw Community Supermarket, Inc.,
and 100% of the voting securities of all other
subsidiaries.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-21992) and in the Prospectuses
constituting part of the Registration Statements on Forms S-3 (Nos. 33-
33049, 33-40851 and 33-45261) of Giant Food Inc. of our report dated
March 28, 1994 appearing on page 15 of this Form 10-K. We also consent
to the incorporation by reference of our report on the Financial
Statement Schedules, which appears on page 52 of this Form 10-K.
/s/
PRICE WATERHOUSE
Washington, D.C.
May 19, 1994
