SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Twelve Weeks ended November 2, 1996
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 59,618,231
"AC" voting 125,000
"AL" voting 125,000
59,868,231
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - NOVEMBER 2, 1996 AND FEBRUARY 24, 1996
Dollar amounts in thousands
ASSETS
November 2, February 24,
1996 1996
(Unaudited)
Current assets:
Cash and cash equivalents $ 61,061 $ 111,133
Short-term investments (Note 2) 148,836 134,677
Receivables 52,817 47,771
Inventories (Note 3) 260,112 225,801
Prepaid expenses 30,346 26,889
Total current assets 553,172 546,271
Property, plant and equipment 1,468,100 1,405,084
Less accumulated depreciation 657,720 643,693
810,380 761,391
Property under capital leases, net
of accumulated amortization, (11/02/96,
$69,170; 2/24/96, $65,018) 101,687 105,839
Other assets 38,633 33,638
$ 1,503,872 $ 1,447,139
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - NOVEMBER 2, 1996 AND FEBRUARY 24, 1996
Dollar amounts in thousands
LIABILITIES AND SHAREHOLDERS' EQUITY
November 2, February 24,
1996 1996
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 12,445 $ 12,156
Accounts payable 260,279 219,253
Accrued liabilities 78,668 85,763
Dividends payable 11,346 11,009
Income taxes 3,880 9,061
Total current liabilities 366,618 337,242
Long-term debt, net of current portion:
Notes and mortgages 39,211 45,959
Obligations under capital leases 139,609 142,863
178,820 188,822
Other liabilities 93,769 98,318
Shareholders' equity
Common stock, $1 par, all classes 60,257 60,257
Capital in excess of par value 1,945 388
Net unrealized loss on short-term investments (201) (108)
Retained earnings 812,792 779,000
874,793 839,537
Less class "A" stock held in
treasury, at cost (11/02/96 388,389
2/24/96, 702,782 shares) 10,128 16,780
864,665 822,757
$ 1,503,872 $ 1,447,139
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THIRTY-SIX WEEKS ENDED NOVEMBER 2, 1996 AND NOVEMBER 4, 1995
(Unaudited)
Dollar amounts in thousands
except for per share data
Thirty-six Weeks Twelve Weeks
1996 1995 1996 1995
Sales $ 2,667,028 $ 2,596,416 $ 896,977 $ 870,666
Cost of goods sold 1,857,334 1,825,897 628,234 611,830
Operating expenses 694,309 670,845 236,408 228,568
Interest:
Notes and mortgages 2,202 3,720 608 1,240
Lease obligations 11,170 11,079 3,701 3,701
Income (9,764) (9,551) (3,061) (3,378)
2,555,251 2,501,990 865,890 841,961
Income before provision
for income taxes 111,777 94,426 31,087 28,705
Provision for income
taxes 43,962 37,135 12,227 11,285
Net income $ 67,815 $ 57,291 $ 18,860 $ 17,420
Net income per share $ 1.14 .97 $ .32 $ .30
Dividends per share $ .57 .555 $ .19 $ .185
Average number
of shares 59,711,609 59,307,748 59,831,144 59,365,343
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THIRTY-SIX WEEKS ENDED NOVEMBER 2, 1996 AND NOVEMBER 4, 1995
(Unaudited)
Dollar amounts in thousands
Thirty-six Weeks
1996 1995
Cash flows from operating activities:
Net income $ 67,815 $ 57,291
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 64,322 64,389
Amortization of property under capital leases 4,152 4,022
Other adjustments, net 1,125 1,125
Net change in cash from changes in operating
assets and liabilities, detailed below (17,017) 2,004
Net cash provided by operating activities 120,397 128,831
Cash flows from investing activities:
Purchase of short-term investments (134,925) (50,734)
Sale of short-term investments 97,025 16,966
Maturity of short-term 23,588 10,000
Capital expenditures (112,986) (96,953)
Other investing activities (6,446) (4,321)
Net cash used in investing activities (133,744) (125,042)
Cash flows from financing activities:
Repayments of notes and mortgages (6,791) (27,646)
Repayments of obligations under capital leases (2,921) (2,658)
Purchases of treasury stock
Issuance of common stock 6,673 4,116
Dividends paid (33,686) (32,602)
Net cash used in financing activities (36,725) (58,790)
Net change in cash and cash equivalents (50,072) (55,001)
Cash and cash equivalents, beginning of year 111,133 157,045
Cash and cash equivalents, end of quarter $ 61,061 $ 102,044
Increase (decrease) in cash from changes in
operating assets and liabilities:
Accounts receivable $ (5,046) $ (3,108)
Inventory (34,311) (2,747)
Prepaid expenses (3,457) (1,539)
Accounts payable 41,026 25,510
Accrued expenses (7,095) (7,171)
Income taxes payable (3,645) (8,442)
Deferred taxes (4,000)
Other liabilities (489) (499)
$ (17,017) $ 2,004
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THIRTY-SIX WEEKS ENDED NOVEMBER 2, 1996 AND NOVEMBER 4, 1995
(Unaudited)
Dollar amounts in thousands
1. Consolidated financial statements:
The accompanying unaudited interim financial statements reflect all
adjustments which are, in the opinion of management, necessary for a
fair statement of the results for the interim periods presented.
Such results for the twelve weeks ended November 2, 1996 and
November 4, 1995 are not necessarily indicative of results to be
expected for the full year.
2. Short-term investments:
Short-term investments consisted of:
As of November 2, 1996:
GROSS
UNREALIZED HOLDING
COST (LOSSES) FAIR VALUE
U.S. Treasury securities $122,836 $ (275) $122,561
Federal agency securities 25,302 (56) 25,246
Corporate bonds or other 1,029 1,029
$149,167 $ (331) $148,836
As of February 24, 1996:
GROSS
UNREALIZED HOLDING
COST (LOSSES) FAIR VALUE
U.S. Treasury securities $111,021 $ (168) $110,853
Federal agency securities 22,920 (9) 22,911
Corporate bonds or other 913 913
$134,854 $ (177) $134,677
Maturities of short-term investments at November 2, 1996, were as
follows:
COST FAIR VALUE
Due within one year $ 59,216 $ 59,558
Due after one year through five years 89,951 89,278
$149,167 $148,836
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3. Inventories:
The inventories using the LIFO method were valued at approximately 81%
of the Company's inventories as at November 2, 1996 and 84% as at
February 24, 1996. Under the FIFO method, these inventories would have
been higher by $88,953 and $85,713, respectively. The pre-tax LIFO
charge was $3,240 for the thirty-six week period ended November 2,
1996 and $2,700 for the thirty-six week period ended November 4, 1995.
4. Contingencies:
From time to time, the Company is involved in legal proceedings that
have arisen in the ordinary course of business. Management, after
consulting with legal counsel is of the opinion that the outcome of
such matters will not have a material impact on the consolidated
financial position of the Company.
5. Net cash flows from operating activities reflects cash payments for
interest and income taxes as follows:
36 weeks ended
November 2, November 4,
1996 1995
Interest paid $15,160 $16,340
Income taxes paid 51,607 45,577
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GIANT FOOD INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations:
The following is Management's discussion and analysis of certain
significant factors which have affected the Company's earnings and
financial condition during the periods included in the accompanying
Consolidated Balance Sheets and Consolidated Statements of Income.
Results of Operations:
A summary of the principal income statement percentages are
tabulated below:
36 Weeks Ended 12 Weeks Ended
November 2, November 4, November 2, November 4,
1996 1995 1996 1995
% % % %
Gross Profit 30.36 29.68 29.96 29.73
Operating Expenses 26.03 25.84 26.36 26.25
Interest Expense:
Notes & Mortgages .08 .14 .07 .14
Lease Obligations .42 .43 .41 .43
Interest (Income) ( .36) ( .37) ( .34) ( .39)
Income Before Income Taxes 4.19 3.64 3.46 3.30
Provision for Income Taxes 1.65 1.43 1.36 1.30
Net Income 2.54 2.21 2.10 2.00
Below are the differences for the periods ended November 2, 1996
compared with November 4, 1995 in thousands of dollars and percentages:
Increase (Decrease) Increase (Decrease)
Thirty-six Weeks Twelve Weeks
$ % $ %
Sales 70,612 2.7% 26,311 3.0%
Gross Profit 39,175 5.1% 9,907 3.8%
Operating Expenses 23,464 3.5% 7,840 3.4%
Interest Expense:
Notes & Mortgages (1,518) -40.8% (632) -51.0%
Lease Obligations 91 .8% 0 .0%
Interest Income (213) 2.2% 317 -9.4%
Income Before Income Taxes 17,351 18.4% 2,382 8.3%
Provision for Income Taxes 6,827 18.4% 942 8.3%
Net Income 10,524 18.4% 1,440 8.3%
- 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 2, 1996 vs. thirty-
six weeks ended November 4, 1995):
Sales increased $70.6 million or 2.7%. The change in sales for stores
in operation both years was a decrease of .24%. Same store sales were
affected by the soft economy and the cannibalization from six food-drug
stores which were opened between November 1995 and January 1996.
Eliminating the cannibalization effect, same store sales would have been up
.71% for the thirty-six weeks.
Gross profit increased $39.2 million. Gross profit as a percent of
sales was 30.36% compared to 29.68% for the prior year. The gross profit %
increase resulted primarily through improved product mix and increases in
buying performance.
Operating expenses increased from 25.84% of sales to 26.03%. The
principal reason are the occupancy costs associated with ten new stores
opened since November 4, 1995, which includes five units in the New
Jersey/Delaware/ Pennsylvania area.
Interest expense - notes and mortgages decreased by $1.5 million
because of lower debt. Interest income increased by $.2 million because of
higher balances of investable cash and short term investments.
Pre-tax earnings increased $17.4 million, an increase of 18.4%. The
effective tax rate was 39.3% for both the current and prior year.
Net income was 2.54% of sales for the current period compared with
2.21% for the same period of the prior year.
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GIANT FOOD INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition and Results of
Operations (continued):
Results of Operations (Twelve weeks ended November 2, 1996 vs. twelve weeks
ended November 4, 1995):
Sales increased $26.3 million or 3.0%. The sales for stores in
operation in both years was a decrease of .48%. This same store sales
change was impacted by new units drawing sales away from existing units.
Without cannibalization same store sales would have increased .71%.
Gross profit increased $9.9 million. Gross profit as a percent of
sales was 29.96% compared to 29.73% for the prior year. The current
quarter gross profit of 29.96% was down from the most recent quarter's
30.86%. The decline was caused by increased promotional activities.
Operating expenses were 26.36% of sales in the current year compared
to 26.25% in the prior year. Occupancy costs as discussed previously were
the principal cause of the increase.
Interest expense - notes and mortgages decreased by $632 thousand
because of lower debt. Interest income decreased by $317 thousand because
of lower investable cash balances and short term investments.
Pre-tax earnings were up $2.4 million, an increase of 8.3%. The
effective tax rate was 39.3% for both the current and prior year.
Net income was 2.10% of sales for the current quarter compared with
2.00% 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 $22.5 million from February 24, 1996.
At November 2, 1996 working capital ratio was 1.51 to 1, compared to
1.61 to 1 at February 24, 1996. Including LIFO reserves of $89.0 million
at November 2, 1996, the working capital ratio was 1.75 to 1.
At November 2, 1996, cash and cash equivalents were $61.1 million and
short-term investments were $148.8 million totaling $209.9 million compared
with $245.8 million as at February 24, 1996. During the twelve months
ended November 2, 1996 notes and mortgage debt was reduced by $7.4 million.
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.
Capital expenditures include the opening of one new food-drug store in the
balance of the current fiscal year. The Company is currently planning at
least ten new stores in the next fiscal year of which three are already
under construction. The Company has a $50 million revolving credit
facility, a $10 million credit line and has not had any short-term bank
borrowings for more than seventeen years.
CAPITALIZATION:
Shareholders' equity as a percentage of capitalization was 81.9%
on November 2, 1996, compared to 80.4% on February 24, 1996 and 81.0% on
November 4, 1995.
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GIANT FOOD INC. AND SUBSIDIARIES
OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K:
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 13, 1996 By /s/ Pete Manos
Pete Manos
President and Chief Executive Officer
Date December 13, 1996 By /s/ Anthony E. Dahm
Anthony E. Dahm
Controller and Chief Accounting Officer
- 12 -
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<PERIOD-END> NOV-02-1996
<CASH> 61061000
<SECURITIES> 148836000
<RECEIVABLES> 52817000
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<INVENTORY> 260112000
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<PP&E> 1468100000
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<BONDS> 178820000
0
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<COMMON> 60257000
<OTHER-SE> 804408000
<TOTAL-LIABILITY-AND-EQUITY> 1503872000
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<CGS> 1857334000
<TOTAL-COSTS> 2555251000
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