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 August 10, 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 59,549,763
"AC" voting 125,000
"AL" voting 125,000
59,799,763
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - AUGUST 10, 1996 AND FEBRUARY 24, 1996
Dollar amounts in thousands
ASSETS
August 10, February 24,
1996 1996
(Unaudited)
Current assets:
Cash and cash equivalents $ 105,379 $ 111,133
Short-term investments (Note 2) 145,793 134,677
Receivables 48,867 47,771
Inventories (Note 3) 210,928 225,801
Prepaid expenses 28,072 26,889
Total current assets 539,039 546,271
Property, plant and equipment 1,438,952 1,405,084
Less accumulated depreciation 638,058 643,693
800,894 761,391
Property under capital leases, net
of accumulated amortization, (8/10/96,
$67,786; 2/24/96, $65,018) 103,071 105,839
Other assets 37,379 33,638
$ 1,480,383 $ 1,447,139
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - AUGUST 10, 1996 AND FEBRUARY 24, 1996
Dollar amounts in thousands
LIABILITIES AND SHAREHOLDERS' EQUITY
August 10, February 24,
1996 1996
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 12,413 $ 12,156
Accounts payable 225,158 219,253
Accrued liabilities 85,562 85,763
Dividends payable 11,343 11,009
Income taxes 6,578 9,061
Total current liabilities 341,054 337,242
Long-term debt, net of current portion:
Notes and mortgages 44,379 45,959
Obligations under capital leases 140,695 142,863
185,074 188,822
Other liabilities 99,122 98,318
Shareholders' equity
Common stock, $1 par, all classes 60,257 60,257
Capital in excess of par value 1,617 388
Net unrealized loss on short-term investments (591) (108)
Retained earnings 805,289 779,000
866,572 839,537
Less class "A" stock held in
treasury, at cost (8/10/96 456,857
2/24/96, 702,782 shares) 11,439 16,780
855,133 822,757
$ 1,480,383 $ 1,447,139
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
TWENTY-FOUR WEEKS ENDED AUGUST 10, 1996 AND AUGUST 12, 1995
(Unaudited)
Dollar amounts in thousands
except for per share data
Twenty-four Weeks Twelve Weeks
1996 1995 1996 1995
Sales $ 1,770,051 $ 1,725,750 $ 874,424 $ 856,515
Cost of goods sold 1,229,100 1,214,067 604,617 602,458
Operating expenses 457,901 442,277 230,579 222,857
Interest:
Notes and mortgages 1,593 2,480 778 1,112
Lease obligations 7,469 7,378 3,723 3,680
Income (6,703) (6,173) (3,467) (2,877)
1,689,360 1,660,029 836,230 827,230
Income before provision
for income taxes 80,691 65,721 38,194 29,285
Provision for income
taxes 31,736 25,850 15,022 11,520
Net income $ 48,955 $ 39,871 $ 23,172 $ 17,765
Net income per share $ .82 .67 $ .39 $ .30
Dividends per share $ .38 .37 $ .19 $ .185
Average number
of shares 59,651,841 59,278,951 59,713,990 59,296,126
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
TWENTY-FOUR WEEKS ENDED AUGUST 10, 1996 AND AUGUST 12, 1995
(Unaudited)
Dollar amounts in thousands
Twenty-four Weeks
1996 1995
Cash flows from operating activities:
Net income $ 48,955 $ 39,871
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 41,437 41,446
Amortization of property under capital leases 2,768 2,667
Other adjustments, net 750 750
Net change in cash from changes in operating
assets and liabilities, detailed below 18,039 4,042
Net cash provided by operating activities 111,949 88,776
Cash flows from investing activities:
Purchase of short-term investments (73,367) (30,586)
Sale of short-term investments 47,866 12,032
Maturity of short-term 13,588 10,000
Capital expenditures (81,084) (63,023)
Other investing activities (4,347) (2,001)
Net cash used in investing activities (97,344) (73,578)
Cash flows from financing activities:
Repayments of notes and mortgages (1,544) (17,513)
Repayments of obligations under capital leases (1,947) (1,758)
Purchases of treasury stock
Issuance of common stock 5,464 1,817
Dividends paid (22,332) (21,649)
Net cash used in financing activities (20,359) (39,103)
Net change in cash and cash equivalents (5,754) (23,905)
Cash and cash equivalents, beginning of year 111,133 157,045
Cash and cash equivalents, end of quarter $ 105,379 $ 133,140
Increase (decrease) in cash from changes in
operating assets and liabilities:
Accounts receivable $ (1,096) $ (1,635)
Inventory 14,873 24,963
Prepaid expenses (1,183) 507
Accounts payable 5,905 (8,119)
Accrued expenses (201) (4,570)
Income taxes payable (1,377) (6,326)
Deferred taxes (1,086)
Other liabilities 1,118 308
$ 18,039 $ 4,042
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWENTY-FOUR WEEKS ENDED AUGUST 10, 1996 AND AUGUST 12, 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 August 10, 1996 and August 12,
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 August 10, 1996:
GROSS
UNREALIZED HOLDING
COST (LOSSES) FAIR VALUE
U.S. Treasury securities $117,214 $ (810) $116,404
Federal agency securities 24,552 (164) 24,388
Corporate bonds or other 5,001 5,001
$146,767 $ (974) $145,793
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 August 10, 1996, were as
follows:
COST FAIR VALUE
Due within one year $ 58,249 $ 58,394
Due after one year through five years 88,518 87,399
$146,767 $145,793
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3. Inventories:
The inventories using the LIFO method were valued at approximately 81%
of the Company's inventories as at August 10, 1996 and 84% as at
February 24, 1996. Under the FIFO method, these inventories would have
been higher by $87,873 and $85,713, respectively. The pre-tax LIFO
charge was $2,160 for the twenty-four week period ended August 10,
1996 and $1,800 for the twenty-four week period ended August 12, 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:
24 weeks ended
August 10, August 12,
1996 1995
Interest paid $10,141 $10,806
Income taxes paid 33,113 17,750
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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:
24 Weeks Ended 12 Weeks Ended
August 10, August 12, August 10, August 12,
1996 1995 1996 1995
% % % %
Gross Profit 30.56 29.65 30.86 29.66
Operating Expenses 25.87 25.63 26.37 26.02
Interest Expense:
Notes & Mortgages .09 .14 .09 .13
Lease Obligations .42 .43 .43 .43
Interest (Income) ( .38) ( .36) ( .40) ( .34)
Income Before Income Taxes 4.56 3.81 4.37 3.42
Provision for Income Taxes 1.79 1.50 1.72 1.35
Net Income 2.77 2.31 2.65 2.07
Below are the differences for the periods ended August 10, 1996
compared with August 12, 1995 in thousands of dollars and percentages:
Increase (Decrease) Increase (Decrease)
Twenty-four Weeks Twelve Weeks
$ % $ %
Sales 44,301 2.6% 17,909 2.1%
Gross Profit 29,268 5.7% 15,750 6.2%
Operating Expenses 15,624 3.5% 7,722 3.5%
Interest Expense:
Notes & Mortgages (887) -35.8% (334) -30.0%
Lease Obligations 91 1.2% 43 1.2%
Interest Income (530) 8.6% (590) 20.5%
Income Before Income Taxes 14,970 22.8% 8,909 30.4%
Provision for Income Taxes 5,886 22.8% 3,502 30.4%
Net Income 9,084 22.8% 5,407 30.4%
- 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 10, 1996 vs. twenty-
four weeks ended August 12, 1995):
Sales increased $44.3 million or 2.6%. The change in sales for stores
in operation both years was a decrease of .1%. Same store sales were
affected by the soft economy and the cannibalization from four food-drug
stores which were opened between November 1995 and January 1996.
Eliminating the cannibalization effect, same store sales would have been up
.7% for the twenty-four weeks.
Gross profit increased $29.2 million. Gross profit as a percent of
sales was 30.56% compared to 29.65% for the prior year. The gross profit %
increase resulted primarily through improved product mix and increases in
buying performance.
Operating expenses increased from 25.63% of sales to 25.87%. The
principal reason are the occupancy costs associated with eight new stores
opened since August 12, 1995, which includes four units in the New Jersey -
Delaware area.
Interest expense - notes and mortgages decreased by $.9 million
because of lower debt. Interest income increased by $.5 million because of
higher balances of investable cash and short term investments.
Pre-tax earnings increased $15.0 million, an increase of 22.8%. The
effective tax rate was 39.3% for both the current and prior year.
Net income was 2.77% of sales for the current period compared with
2.31% for the same period of the prior year.
- 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 10, 1996 vs. twelve weeks
ended August 12, 1995):
Sales increased $17.9 million or 2.1%. The sales for stores in
operation in both years was a decrease of .4%. This same store sales
change was impacted by new units drawing sales away from existing units.
Without cannibalization same store sales would have increased .4%.
Gross profit increased $15.8 million. Gross profit as a percent of
sales was 30.86% compared to 29.66% for the prior year and 30.27% from the
most recent quarter. The gross profit % increase resulted from increases
in buying performance and improved product mix.
Operating expenses were 26.37% of sales in the current year compared
to 26.02% in the prior year. Occupancy costs as discussed previously were
the principal cause of the increase. During this quarter a negotiated
contract was completed with the balance of the retail clerks. This
contract is in effect for the store associates through March, 2000.
Interest expense - notes and mortgages decreased by $334 thousand
because of lower debt. Interest income increased by $590 thousand because
of higher investable cash balances and short term investments.
Pre-tax earnings were up $8.9 million, an increase of 30.4%. The
effective tax rate was 39.3% for both the current and prior year.
Net income was 2.65% of sales for the current quarter compared with
2.07% 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 $11.0 million from February 24, 1996.
At August 10, 1996 working capital ratio was 1.58 to 1, compared to
1.61 to 1 at February 24, 1996. Including LIFO reserves of $87.9 million
at August 10, 1996, the working capital ratio was 1.84 to 1.
At August 10, 1996, cash and cash equivalents were $105.4 million and
short-term investments were $145.8 million totaling $251.2 million compared
with $245.8 million as at February 24, 1996. During the twelve months
ended August 10, 1996 notes and mortgage debt was reduced by $12.3 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 opening of five additional food-drug stores in
the balance of the current fiscal year. 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 81.2%
on August 10, 1996, compared to 80.4% on February 24, 1996 and 79.9% on
August 12, 1995.
- 11 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K:
The Company filed a Form 8-K on August 19, 1996. On August 6, 1996 the
Estate of Israel Cohen sold two million shares of Giant Food Inc. Class A
common stock (non-voting) to J. Sainsbury (USA) Holdings, Inc., a
subsidiary of J. Sainsbury plc. The transaction was undertaken to enable
the Estate to facilitate its tax planning.
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, 1996 By /s/ Pete Manos
Pete Manos
President and Chief Executive Officer
Date September 23, 1996 By /s/ Anthony E. Dahm
Anthony E. Dahm
Controller and Chief Accounting Officer
- 12 -<PAGE>
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