SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Thirty-six Weeks ended November 5, 1994
Commission File Number 1-4434
Giant Food Inc.
(Exact name of Registrant as specified in its charter)
Delaware 53-0073545
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6300 Sheriff Road, Landover, Maryland 20785
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 341-4100
NONE
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant
(l) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to
file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
The number of shares outstanding of each of the registrant's
classes of common stock as of this date is as follows:
Title of stock Number of shares
class ($l par) Outstanding
"A" non-voting 59,025,464
"AC" voting 125,000
"AL" voting 125,000
59,275,464
- 1 - <PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - NOVEMBER 5, 1994 AND FEBRUARY 26, 1994
Dollar amounts in thousands
ASSETS
November 5, February 26,
1994 1994
(Unaudited)
Current assets:
Cash and cash equivalents $ 111,876 $ 111,845
Short-term investments (Note 2) 90,568 116,499
Receivables 41,804 37,504
Inventories (Note 3) 231,296 217,576
Prepaid expenses 21,581 22,114
Total current assets 497,125 505,538
Property, plant and equipment 1,303,878 1,258,653
Less accumulated depreciation 580,609 544,862
723,269 713,791
Property under capital leases, net
of accumulated amortization, (11/05/94,
$58,687; 2/26/94, $54,679) 107,326 107,580
Other assets 33,996 30,904
$ 1,361,716 $ 1,357,813
See notes to consolidated financial statements.
- 2 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - NOVEMBER 5, 1994 AND FEBRUARY 26, 1994
Dollar amounts in thousands
LIABILITIES AND SHAREHOLDERS' EQUITY
November 5, February 26,
1994 1994
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 27,601 $ 19,145
Accounts payable 236,420 226,284
Accrued liabilities 75,590 78,476
Dividends payable 10,633 10,394
Income taxes 7,728 7,033
Total current liabilities 357,972 341,332
Long-term debt, net of current portion:
Notes and mortgages 58,422 86,068
Obligations under capital leases 142,099 141,062
200,521 227,130
Other liabilities 77,082 75,922
Shareholders' equity
Common stock, $1 par, all classes 60,257 60,257
Net unrealized loss on short-term investments (1,926)
Retained earnings 691,343 670,034
749,674 730,291
Less class "A" stock held in
treasury, at cost 23,533 16,862
726,141 713,429
$ 1,361,716 $ 1,357,813
See notes to consolidated financial statements.
- 3 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THIRTY-SIX AND TWELVE WEEKS ENDED NOVEMBER 5, 1994 AND NOVEMBER 6, 1993
(Unaudited)
Dollar amounts in thousands
except for per share data
Thirty-six Weeks Twelve Weeks
1994 1993 1994 1993
Sales $ 2,490,877 $ 2,408,363 $ 834,780 $ 799,056
Cost of goods sold 1,752,322 1,687,875 584,573 560,414
Operating expenses 641,723 614,860 216,201 205,276
Interest:
Notes and mortgages 5,986 7,214 2,208 2,347
Lease obligations 11,260 11,210 3,739 3,734
Income (6,859) (5,066) (2,535) (1,925)
Other income (1,978)
2,402,454 2,316,093 804,186 769,846
Income before provision
for income taxes 88,423 92,270 30,594 29,210
Provision for income
taxes 34,777 37,270 12,033 11,488
Income before cumulative effect
of change in accounting 53,646 55,000 18,561 17,722
Cumulative effect of change
in accounting for deferred
taxes (Note 5) 3,934
Net income $ 53,646 $ 58,934 $ 18,561 $ 17,722
Income per share before
cumulative effect of
change in accounting $ .90 $ .92 $ .31 $ .30
Cumulative effect per share
of change in accounting for
deferred taxes (Note 5) .07
Net income per share $ .90 $ .99 $ .31 $ .30
Dividends per share $ .54 $ .525 $ .18 $ .175
Average number of shares 59,422,994 59,689,523 59,317,176 59,678,285
Diluted number of shares 59,577,491 59,969,921 59,494,558 59,895,762
See notes to consolidated financial statements.
- 4 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THIRTY-SIX WEEKS ENDED NOVEMBER 5, 1994 AND NOVEMBER 6, 1993
(Unaudited)
Dollar amounts in thousands
Thirty-six Weeks
1994 1993
Cash flows from operating activities:
Net income $ 53,646 $ 58,934
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 63,463 61,169
Amortization of property under capital leases 4,008 3,927
Other adjustments, net (357) 1,109
Net change in cash from changes in operating
assets and liabilities, detailed below (7,133) 24,607
Net cash provided by operating activities 113,627 149,746
Cash flows from investing activities:
Purchase of short-term investments (21,298) (79)
Sale of short-term investments 39,054
Maturity of short-term investments 5,000
Capital expenditures (75,050) (64,182)
Other investing activities (626) (288)
Net cash used in investing activities (52,920) (64,549)
Cash flows from financing activities:
Repayments of notes and mortgages (19,497) (7,674)
Repayments of obligations under capital leases (2,410) (2,307)
Purchases of treasury stock (7,237) (1,385)
Issuance of common stock 282 203
Dividends paid (31,814) (31,041)
Net cash used in financing activities (60,676) (42,204)
Net change in cash and cash equivalents 31 42,993
Cash and cash equivalents, beginning of year 111,845 184,969
Cash and cash equivalents, end of quarter $ 111,876 $ 227,962
Increase (decrease) in cash from changes in
operating assets and liabilities:
Accounts receivable $ (4,300) $ (2,897)
Inventory (13,720) 12,536
Prepaid expenses 533 (1,734)
Accounts payable 10,136 8,260
Accrued expenses (2,886) 13,164
Income taxes payable 695 (8,932)
Deferred taxes 3,604
Other liabilities 2,409 606
$ (7,133) $ 24,607
See notes to consolidated financial statements.
- 5 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THIRTY-SIX WEEKS ENDED NOVEMBER 5, 1994 AND NOVEMBER 6, 1993
(Unaudited)
Dollar amounts in thousands
1. Consolidated financial statements:
The accompanying unaudited interim financial statements reflect all
adjustments which are, in the opinion of management, necessary for a
fair statement of the results for the interim periods presented.
Such results for the thirty-six weeks ended November 5, 1994 and
November 6, 1993 are not necessarily indicative of results to be
expected for the full year.
2. Short-term investments:
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" as of February 27, 1994. The impact of this change in
accounting principle resulted in a $672 decrease in market value of
short-term investments and a decrease in shareholders' equity of
$408, representing the after-tax impact of the unrealized losses on
short-term investments at the date of adoption. Realized gains and
losses are included in earnings and are derived using the specific
identification method for determining the cost of securities. It is
the Company's intent to maintain a liquid portfolio to take advantage
of investment opportunities; therefore all securities are considered
as available-for-sale and are classified as current assets. Short-term
investments as of November 5, 1994 consisted of:
GROSS
UNREALIZED
COST HOLDING LOSSES FAIR VALUE
U.S. Treasury securities $ 70,043 $ 2,112 $ 67,931
Federal agency securities 23,700 1,063 22,637
$ 93,743 $ 3,175 $ 90,568
Maturities of short-term investments at November 5, 1994, were as
follows:
COST FAIR VALUE
Due within one year $ 22,114 $ 23,157
Due after one year through five years 70,629 67,411
$ 93,743 $ 90,568
Prior to adopting SFAS No. 115, the Company valued its securities in
accordance with the SFAS No. 12 "Accounting for Certain Marketable
Securities" and related interpretations. Short-term
investments were stated at cost which approximated fair value.
- 6 -<PAGE>
3. Inventories:
The inventories valued using the LIFO method were approximately 84% of
the Company's inventories as at November 5, 1994 and 84% as at
February 26, 1994. Under the FIFO method, these inventories would have
been higher by $79,120 and $76,420, respectively. The pre-tax LIFO
charge was $2,700 for the thirty-six week period ended November 5, 1994
and $2,790 for the thirty-six week period ended November 6, 1993.
4. Net cash flows from operating activities reflects cash payments for
interest and income taxes as follows:
36 weeks ended
November 5, November 6,
1994 1993
Interest paid $18,874 $20,797
Income taxes paid 34,020 33,004
Non - cash investing and financing activities excluded from the
Consolidated Statements of Cash Flows consist of $3,754 capital
lease transactions for the current fiscal year and $5,747 for
fiscal 1994.
5. Income taxes: The Company adopted, effective February 28, 1993,
SFAS No. 109 "Accounting for Income Taxes". Upon adoption of SFAS No.
109, the Company adjusted its deferred tax accounts to reflect the
current income tax rates and also adjusted the carrying amounts of
certain assets acquired in a 1992 shopping center acquisition. The net
effect of the adjustments was to increase income by $3,934, increase
the net deferred tax liability by $1,013 and increase the bases of
certain assets by $4,947.
6. The FASB issued SFAS No. 112 "Employers' Accounting for Postemployment
Benefits." This standard became effective February 27, 1994. As the
Company does not provide any significant postemployment benefits to
administrative employees, SFAS No. 112 did not impact the Company.
Union employees are covered under union-sponsored multi-employer plans.
- 7 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations:
The following is Management's discussion and analysis of certain
significant factors which have affected the Company's earnings and
financial condition during the periods included in the accompanying
Consolidated Balance Sheets and Consolidated Statements of Income.
Results of Operations:
A summary of the principal income statement percentages are
tabulated below:
36 Weeks Ended 12 Weeks Ended
November 5, November 6, November 5, November 6,
1994 1993 1994 1993
% % % %
Gross Profit 29.65 29.92 29.97 29.87
Operating Expenses 25.76 25.53 25.90 25.69
Interest Expense:
Notes & Mortgages .24 .30 .26 .29
Obligations .45 .47 .45 .47
Interest Income ( .28) ( .21) ( .30) ( .24)
Other Income ( .08)
Income Before Income Taxes 3.55 3.83 3.66 3.66
Provision for Income Taxes 1.40 1.55 1.44 1.44
Income before cumulative
effect of change in accounting
for deferred taxes 2.15 2.28 2.22 2.22
Below are the differences between the periods ended November 5,
1994 compared with November 6, 1993 in thousands of dollars and
percentages:
Increase (Decrease) Increase (Decrease)
Thirty-six Weeks Twelve Weeks
$ % $ %
Sales 82,514 3.4% 35,724 4.5%
Gross Profit 18,066 2.5% 11,564 4.8%
Operating Expenses 26,863 4.4% 10,925 5.3%
Interest Expense:
Notes & Mortgages (1,228) -17.0% (139) -5.9%
Lease Obligations 50 0.4% 5 0.1%
Interest Income (1,793) 35.4% (610) 31.7%
Other Income (1,978)
Income Before Income Taxes (3,848) -4.2% 1,383 4.7%
Provision for Income Taxes (2,494) -6.7% 544 4.7%
Income before cumulative
effect of change in
accounting for deferred
taxes (1,354) -2.5% 839 4.7%
- 8 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued):
Results of Operations (Thirty-six weeks ended November 5, 1994 vs. thirty-
six weeks ended November 6, 1993):
Sales increased $82.5 million or 3.4%. The increase in sales for
stores in operation in both years was .6%. This sales change was impacted
by new units drawing sales away from existing units. Without
cannibalization same store sales would have increased 1.5%
Gross profit increased $18.1 million. Gross profit as a percent of
sales was 29.65% compared to 29.92% for the prior year. The gross profit
reflects the static economy and the competitive environment.
Operating expenses increased from 25.53% of sales to 25.76%, caused by
increases in contracted union benefits and payrolls and the expense of the
new units, including the first store in the Delaware.
Interest expense - notes and mortgages decreased by $1.2 million
because of repayment of certain mortgages. Interest income increased by
$1.8 million because of higher yields.
The Company realized other income of $2.0 million from the sale of its
interest in a partnership that operated automatic teller machines in its
stores. The new owner has contracted with the Company to pay fees on
future ATM transactions.
As a result of above comments income before provision for income taxes
and the cumulative effect of the change in accounting for deferred taxes
was down $3.8 million, a decrease of 4.2%. The effective tax rate was
39.3% for the current period and 40.4% for the prior year's fiscal period.
Net income was 2.15% of sales for the current period compared with
2.28% for the same period of the prior year (before the cumulative effect
of the change in accounting for deferred taxes). The adoption of SFAS No.
109, "Accounting for Income Taxes" on February 28, 1993 resulted in an
adjustment of the carrying value of assets acquired and the recognition of
additional income of $3.9 million, equal to 7 cents per share. This
adjustment increased net income to 2.45%, as percent of sales, for the
prior year's comparable period.
- 9 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued):
Results of Operations (Twelve weeks ended November 5, 1994 vs. twelve weeks
ended November 6, 1993):
Sales increased $35.7 million or 3.8%. The increase in sales for
stores in operation in both years was .9%. This sales change was impacted
by new units drawing sales away from existing units. Without
cannibalization, same store sales would have increased 1.5%
Gross profit increased $11.6 million. Gross profit as a percent of
sales was 29.97% compared to 29.87% for the prior year. This was caused by
the same factors cited in the thirty-six week analysis.
Operating expenses increased from 25.69% of sales to 25.90%. This was
caused principally by increases in union benefits. Another factor was the
occupancy costs of new units.
Interest expense - notes and mortgages decreased by $139 thousand
because of repayment of certain mortgages and notes. Interest income
increased by $610 thousand because of higher yields.
Pre-tax earnings were up $1.4 million, an increase of 4.7%. The
effective tax rate was 39.3% for both periods.
Net income was 2.22% of sales for both the current quarter and for the
same quarter of the prior year.
- 10 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued):
LIQUIDITY:
Working capital decreased $25.1 million from February 26, 1994. The
contributing factor for this decrease is the reclassification of $16.0
million in mortgages from long-term to current. This obligation, due April
1995, was assumed with the purchase of a shopping center in 1991.
At November 5, 1994 the working capital ratio was 1.39 to 1, compared
to 1.48 at February 26, 1994. Including LIFO reserves of $79.1 million at
November 5, 1994, the working capital ratio was 1.61 to 1.
At November 5, 1994, cash and cash equivalents was $111.9 million and
short-term investments were $90.6 million compared with $111.8 million and
$116.5 million respectively as of February 26, 1994. Effective February
27, 1994 the Company adopted SFAS No. 115 "Accounting for Certain
Investments in Debt and Equity Securities". The impact of this change in
accounting principle resulted in a $.672 million decrease in short-term
investments. (See note 2)
It is estimated that cash, cash equivalents and short-term investments,
together with cash flow from operations will be adequate to complete
planned capital expenditures, debt reduction and dividend requirements.
The Company has a $50 million revolving credit facility available. It has
had no short-term bank borrowings for more than sixteen years.
CAPITALIZATION:
Shareholders' equity as a percentage of capitalization was 76.1%
on November 5, 1994, compared to 74.3% on February 26, 1994 and 72.9% on
November 6, 1993.
- 11 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K:
The Company filed Form 8-K on October 13, 1994. In a private
transaction, J. Sainsbury, PLC (Sainsbury) purchased from the Lehrman
Trust, 125,000 AL voting shares representing 50% of the Company's total
outstanding voting stock, and in the same transaction, Sainsbury purchased
9,779,931 Class A non voting shares from the Lehrman families, for a total
cash consideration of $336,767,654. The class A purchase represents about
16% of the Company's total non-voting shares. This transaction was
completed on November 14, 1994.
The Lehrman-Sainsbury transaction did not affect the 125,000 shares of
class AC voting stock owned by Israel Cohen, Chairman of the Board and CEO
of Giant, who retains the right to elect four directors of the seven person
board.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Giant Food Inc.
(Registrant)
Date December 16, 1994 By /s/ Israel Cohen
Israel Cohen
Chairman of the Board
Chief Executive Officer
Date December 16, 1994 By /s/ David B Sykes
David B Sykes
Senior Vice President Finance,
Treasurer
Chief Financial Officer and
Principal Accounting Officer
- 12 -<PAGE>
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