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 Twenty-four Weeks ended August 13, 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 59,075,589
"AC" voting 125,000
"AL" voting 125,000
59,325,589
- 1 - <PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - AUGUST 13, 1994 AND FEBRUARY 26, 1994
Dollar amounts in thousands
ASSETS
August 13, February 26,
1994 1994
(Unaudited)
Current assets:
Cash and cash equivalents $ 134,409 $ 111,845
Short-term investments (Note 2) 85,173 116,499
Receivables 40,790 37,504
Inventories (Note 3) 191,845 217,576
Prepaid expenses 21,109 22,114
Total current assets 473,326 505,538
Property, plant and equipment 1,274,179 1,258,653
Less accumulated depreciation 558,954 544,862
715,225 713,791
Property under capital leases, net
of accumulated amortization, (8/13/94,
$57,348; 2/26/94, $54,679) 108,666 107,580
Other assets 39,837 30,904
$ 1,337,054 $ 1,357,813
See notes to consolidated financial statements.
- 2 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - AUGUST 13, 1994 AND FEBRUARY 26, 1994
Dollar amounts in thousands
LIABILITIES AND SHAREHOLDERS' EQUITY
August 13, February 26,
1994 1994
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 35,374 $ 19,145
Accounts payable 197,714 226,284
Accrued liabilities 78,636 78,476
Dividends payable 10,645 10,394
Income taxes 7,216 7,033
Total current liabilities 329,585 341,332
Long-term debt, net of current portion:
Notes and mortgages 68,555 86,068
Obligations under capital leases 142,992 141,062
211,547 227,130
Other liabilities 76,023 75,922
Shareholders' equity
Common stock, $1 par, all classes 60,257 60,257
Net unrealized loss on short-term investments (1,592)
Retained earnings 683,543 670,034
742,208 730,291
Less class "A" stock held in
treasury, at cost 22,309 16,862
719,899 713,429
$ 1,337,054 $ 1,357,813
See notes to consolidated financial statements.
- 3 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
TWENTY-FOUR WEEKS ENDED AUGUST 13, 1994 AND AUGUST 14, 1993
(Unaudited)
Dollar amounts in thousands
except for per share data
Twenty-four Weeks Twelve Weeks
1994 1993 1994 1993
Sales $ 1,656,097 $ 1,609,307 $ 826,400 $ 795,841
Cost of goods sold 1,167,749 1,127,461 583,899 558,569
Operating expenses 425,522 409,584 215,018 206,500
Interest:
Notes and mortgages 3,778 4,867 1,837 2,499
Lease obligations 7,521 7,476 3,764 3,752
Income (4,324) (3,141) (2,300) (1,731)
Other income (1,978)
1,598,268 1,546,247 802,218 769,589
Income before provision
for income taxes 57,829 63,060 24,182 26,252
Provision for income
taxes 22,744 25,782 9,511 11,648
Income before cumulative effect
of change in accounting 35,085 37,278 14,671 14,604
Cumulative effect of change
in accounting for deferred
taxes (Note 5) 3,934
Net income $ 35,085 $ 41,212 $ 14,671 $ 14,604
Income per share before
cumulative effect of
change in accounting $ .59 $ .62 $ .25 $ .24
Cumulative effect per share
of change in accounting for
deferred taxes (Note 5) .07
Net income per share $ .59 $ .69 $ .25 $ .24
Dividends per share $ .36 $ .35 $ .18 $ .175
Average number of shares 59,476,236 59,696,218 59,399,179 59,697,673
Diluted number of shares 59,619,290 60,008,076 59,500,379 60,015,646
See notes to consolidated financial statements.
- 4 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
TWENTY-FOUR WEEKS ENDED AUGUST 13, 1994 AND AUGUST 14, 1993
(Unaudited)
Dollar amounts in thousands
Twenty-four Weeks
1994 1993
Cash flows from operating activities:
Net income $ 35,085 $ 41,212
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 41,792 40,247
Amortization of property under capital leases 2,668 2,613
Other adjustments, net 760 742
Net change in cash from changes in operating
assets and liabilities, detailed below (3,644) 28,725
Net cash provided by operating activities 76,661 113,539
Cash flows from investing activities:
Purchase of short-term investments (10,298) (76)
Sale of short-term investments 39,000
Capital expenditures (50,972) (36,972)
Other investing activities (1,947) 441
Net cash used in investing activities (24,217) (36,607)
Cash flows from financing activities:
Repayments of notes and mortgages (1,505) (2,504)
Repayments of obligations under capital leases (1,603) (1,532)
Purchases of treasury stock (5,779)
Issuance of common stock 135 107
Dividends paid (21,128) (20,594)
Net cash used in financing activities (29,880) (24,523)
Net change in cash and cash equivalents 22,564 52,409
Cash and cash equivalents, beginning of year 111,845 184,969
Cash and cash equivalents, end of quarter $ 134,409 $ 237,378
Increase (decrease) in cash from changes in
operating assets and liabilities:
Accounts receivable $ (3,286) $ 223
Inventory 25,731 35,708
Prepaid expenses 1,005 (58)
Accounts payable (28,570) (14,646)
Accrued expenses 160 8,169
Income taxes payable 183 (4,164)
Deferred taxes 3,004
Other liabilities 1,133 489
$ (3,644) $ 28,725
See notes to consolidated financial statements.
- 5 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWENTY-FOUR WEEKS ENDED AUGUST 13, 1994 AND AUGUST 14, 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 twenty-four weeks ended August 13, 1994 and August
14, 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 August 13, 1994 consisted of:
GROSS
UNREALIZED
COST HOLDING LOSSES FAIR VALUE
U.S. Treasury securities $ 64,374 $ 1,769 $ 62,605
Federal agency securities 23,423 855 22,568
$ 87,797 $ 2,624 $ 85,173
Maturities of short-term investments at August 13, 1994, were as
follows:
COST FAIR VALUE
Due within one year $ 22,797 $ 22,748
Due after one year through five years 65,000 62,425
$ 87,797 $ 85,173
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 August 13, 1994 and 84% as at
February 26, 1994. Under the FIFO method, these inventories would have
been higher by $78,220 and $76,420, respectively. The pre-tax LIFO
charge was $1,092 for the twenty-four week period ended August 13, 1994
and $1,128 for the twenty-four week period ended August 14, 1993.
4. Net cash flows from operating activities reflects cash payments for
interest and income taxes as follows:
24 weeks ended
August 13, August 14,
1994 1993
Interest paid $12,285 $13,342
Income taxes paid 16,399 26,614
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:
24 Weeks Ended 12 Weeks Ended
August 13, August 14, August 13, August 14,
1994 1993 1994 1993
% % % %
Gross Profit 29.49 29.94 29.34 29.81
Operating Expenses 25.70 25.45 26.02 25.95
Interest Expense:
Notes & Mortgages .23 .30 .22 .31
Obligations .45 .47 .45 .47
Interest (Income) ( .26) ( .20) ( .28) ( .22)
Other Income ( .12)
Income Before Income Taxes 3.49 3.92 2.93 3.30
Provision for Income Taxes 1.37 1.60 1.15 1.46
Income before cumulative
effect of change in accounting
for deferred taxes 2.12 2.32 1.78 1.84
Below are the differences between the periods ended August 13,
1994 compared with August 14, 1993 in thousands of dollars and percentages:
Increase (Decrease) Increase (Decrease)
Twenty-four Weeks Twelve Weeks
$ % $ %
Sales 46,790 2.9% 30,559 3.8%
Gross Profit 6,502 1.3% 5,229 2.2%
Operating Expenses 15,938 3.9% 8,518 4.1%
Interest Expense:
Notes & Mortgages (1,089) -22.4% (662) -26.5%
Lease Obligations 45 0.6% 12 0.3%
Interest Income (1,183) 37.7% (569) 32.9%
Other Income 1,978
Income Before Income Taxes (5,231) -8.3% (2,070) -7.9%
Provision for Income Taxes (3,038) -11.8% (2,137) -18.3%
Income before cumulative
effect of change in
accounting for deferred
taxes (2,193) -5.9% 67 0.5%
- 8 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued):
Results of Operations (Twenty-four weeks ended August 13, 1994 vs. twenty-
four weeks ended August 14, 1993):
Sales increased $46.8 million or 2.9%. The increase in sales for
stores in operation in both years was .5%. This sales change was impacted
by new units drawing sales away from existing units. Without this
phenomenon, cannibalization, same store sales would have increased 1.3%
Gross profit increased $6.5 million. Gross profit as a percent of
sales was 29.49% compared to 29.94% for the prior year. The gross profit
reflects the static economy and the competitive environment.
Operating expenses increased from 25.45% of sales to 25.69%, caused by
increases in contracted union benefits and payrolls. Another factor was
the expense of the new units, including the first store in the Delaware.
Interest expense - notes and mortgages decreased by $1.1 million
because of repayment of mortgages. Interest income increased by $1.2
million because of higher yields.
The Company realized other income of $2. 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.
Income before provision for income taxes and the cumulative effect of
the change in accounting for deferred taxes were down $5.2 million, a
decrease of 8.3%. The effective tax rate was 39.3% for the current period
and 40.9% for the prior year's fiscal period.
Net income was 2.12% of sales for the current period compared with
2.32% 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 2.56%, 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 August 13, 1994 vs. twelve weeks
ended August 14, 1993):
Sales increased $30.6 million or 3.8%. The increase in sales for
stores in operation in both years was 1.4%. This sales change was impacted
by new units drawing sales away from existing units. Without this
phenomenon, cannibalization, same store sales would have increased 2.3%
Gross profit increased $5.2 million. Gross profit as a percent of
sales was 29.34% compared to 29.81% for the prior year. The current level
of 29.34% is below the prior quarter of the current year, which was 29.63%,
reflecting the competitive environment, and the entry into a new territory,
Delaware.
Operating expenses increased from 25.95% of sales to 26.02%. 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 $662 thousand
because of repayment of mortgages. Interest income increased by $569
thousand because of higher yields.
Pre-tax earnings were down $2.1 million, a decrease of 7.9%. The
effective tax rate was 39.3% for the current period and 44.4% for the prior
year's fiscal period. The prior year's provision for income taxes included
the effect of the retroactive change in Federal income tax rates.
Net income was 1.78% of sales for the current quarter compared with
1.84% for the same period 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 $20.5 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 August 13, 1994 the working capital ratios was 1.44 to 1, compared
to 1.48 at February 26, 1994. Including LIFO reserves of $78.2 million at
August 13, 1994, the working capital ratio was 1.67 to 1.
At August 13, 1994, cash and cash equivalents was $134.4 million and
short-term investments were $85.2 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 74.5%
on August 13, 1994, compared to 74.3% on February 26, 1994 and 74.3% on
August 14, 1993.
- 11 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K:
The Company did not file any reports on Form 8-K during the twelve weeks
ended August 13, 1994.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Giant Food Inc.
(Registrant)
Date September 23, 1994 By /s/ Israel Cohen
Israel Cohen
Chairman of the Board
Chief Executive Officer
Date September 23, 1994 By /s/ David B Sykes
David B Sykes
Senior Vice President Finance,
Treasurer
Chief Financial Officer and
Principal Accounting Officer
- 12 -<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> QTR-2
<FISCAL-YEAR-END> FEB-25-1995
<PERIOD-END> AUG-13-1994
<CASH> 134409000
<SECURITIES> 85173000
<RECEIVABLES> 40790000
<ALLOWANCES> 0
<INVENTORY> 191845000
<CURRENT-ASSETS> 473326000
<PP&E> 1274179000
<DEPRECIATION> 558954000
<TOTAL-ASSETS> 1337054000
<CURRENT-LIABILITIES> 329585000
<BONDS> 211547000
<COMMON> 60257000
0
0
<OTHER-SE> 659642000
<TOTAL-LIABILITY-AND-EQUITY> 1337054000
<SALES> 1656097000
<TOTAL-REVENUES> 1656097000
<CGS> 1167749000
<TOTAL-COSTS> 1598268000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11299000
<INCOME-PRETAX> 57829000
<INCOME-TAX> 22744000
<INCOME-CONTINUING> 35085000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35085000
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
</TABLE>
