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 May 17, 1997
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)
6400 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 59,771,600
"AC" voting 125,000
"AL" voting 125,000
60,021,600
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - MAY 17, 1997 AND FEBRUARY 22, 1997
Dollar amounts in thousands
ASSETS
May 17, February 22,
1997 1997
(Unaudited)
Current assets:
Cash and cash equivalents $ 51,567 $ 40,981
Short-term investments (Note 2) 134,230 137,096
Receivables 59,102 53,452
Income taxes receivable 506 8,501
Inventories (Note 3) 270,689 291,644
Prepaid expenses 27,883 26,202
Total current assets 543,977 557,876
Property, plant and equipment 1,530,516 1,503,725
Less accumulated depreciation 709,358 688,238
821,158 815,487
Property under capital leases, net
of accumulated amortization, (5/17/97,
$72,629; 2/22/97, $71,192) 105,128 106,565
Other assets 23,564 23,597
$ 1,493,827 $ 1,503,525
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - MAY 17, 1997 AND FEBRUARY 22, 1997
Dollar amounts in thousands
LIABILITIES AND SHAREHOLDERS' EQUITY
May 17, February 22,
1997 1997
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 12,802 $ 12,660
Accounts payable 238,613 248,368
Accrued liabilities 85,408 86,696
Dividends payable 11,700 11,393
Total current liabilities 348,523 359,117
Long-term debt, net of current portion:
Notes and mortgages 38,861 39,039
Obligations under capital leases 143,742 144,953
182,603 183,992
Other liabilities 84,695 86,763
Shareholders' equity
Common stock, $1 par, all classes 62,486 62,404
Net unrealized loss on short-term investments (676) (449)
Retained earnings 822,272 819,060
884,082 881,015
Less class "A" stock held in
treasury, at cost (5/17/97, 235,020
Shares: 2/22/97, 285,464 shares) 6,076 7,362
878,006 873,653
$ 1,493,827 $ 1,503,525
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
TWELVE WEEKS ENDED MAY 17, 1997 AND MAY 18, 1996
(Unaudited)
Dollar amounts in thousands
except for per share data
Twelve Weeks
1997 1996
Sales $ 928,936 $ 895,627
Cost of goods sold 663,731 624,483
Operating expenses 238,409 227,322
Interest:
Notes and mortgages 598 815
Lease obligations 3,806 3,746
Income (2,204) (3,236)
904,340 853,130
Income before provision
for income taxes 24,596 42,497
Provision for income
taxes 9,684 16,714
Net income $ 14,912 $ 25,783
Net income per share $ .25 $ .43
Dividends per share $ .195 $ .19
Average number of shares 59,992,139 59,589,692
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
TWELVE WEEKS ENDED MAY 17, 1997 AND MAY 18, 1996
(Unaudited)
Dollar amounts in thousands
Twelve Weeks
1997 1996
Cash flows from operating activities:
Net income $ 14,912 $ 25,783
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 21,237 20,623
Amortization of property under capital leases 1,437 1,384
Other adjustments, net 375 375
Net change in cash from changes in operating
assets and liabilities, detailed below 8,811 23,426
Net cash provided by operating activities 46,772 71,591
Cash flows from investing activities:
Purchase of short-term investments (11,714) (34,168)
Maturity of short-term investments 4,220 13,588
Sale of short-term investments 9,986 24,734
Capital expenditures (27,029) (31,133)
Other investing activities (221) (2,316)
Net cash used in investing activities (24,758) (29,295)
Cash flows from financing activities:
Repayments of notes and mortgages (158) (139)
Repayments of obligations under capital leases (1,089) (974)
Issuance of common stock 1,212 1,930
Dividends paid (11,393) (11,009)
Net cash used in financing activities (11,428) (10,192)
Net change in cash and cash equivalents 10,586 32,104
Cash and cash equivalents, beginning of year 40,981 111,133
Cash and cash equivalents, end of quarter $ 51,567 $ 143,237
Increase (decrease) in cash from changes in
operating assets and liabilities:
Accounts receivable $ (5,650) $ (2,034)
Inventory 20,955 6,660
Income taxes receivable 8,151
Prepaid expenses (1,681) (617)
Accounts payable (9,755) 8,186
Accrued expenses (1,289) (1,282)
Income taxes payable 7,281
Other liabilities (1,921) 5,232
$ 8,811 $ 23,426
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWELVE WEEKS ENDED MAY 17, 1997 AND MAY 18, 1996
(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 May 17, 1997 and May 18, 1996
are not necessarily indicative of results to be expected for the full
year.
2. Short-term investments:
Short-term investments consisted of:
As of May 17, 1997:
GROSS
UNREALIZED HOLDING
COST (LOSSES) FAIR VALUE
U.S. Treasury securities $107,282 $ (889) $106,393
Federal agency securities 26,775 (223) 26,552
Corporate bonds & other 1,287 ( 2) 1,285
$135,344 $(1,114) $134,230
As of February 22, 1997:
GROSS
UNREALIZED HOLDING
COST (LOSSES) FAIR VALUE
U.S. Treasury securities $109,775 $ (567) $109,208
Federal agency securities 26,815 (175) 26,640
Corporate bonds or other 1,248 1,248
$137,838 $ (742) $137,096
Maturities of short-term investments at May 17, 1997, were as follows:
COST FAIR VALUE
Due within one year $ 67,966 $ 67,878
Due after one year through five years 67,378 66,352
$135,344 $134,230
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3. Inventories:
The inventories valued using the LIFO method were approximately 81% of
the Company's inventories as at May 17, 1997 and 83% as at
February 22, 1997. Under the FIFO method, these inventories would have
been higher by $90,893 and $90,008, respectively. The pre-tax LIFO
charge was $885 for the twelve week period ended May 17, 1997 and
$1,080 for the twelve week period ended May 18, 1996.
4. In February 1997, the Finanacial Accounting Standers Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share", which is effective for periods ending after December 15, 1997,
including interim periods. The new standard requires disclosure of
basis and diluted earnings per share for income from continuing
operations and net income. The Company intends to adopt this standard
in the fourth quarter of its fiscal year ending February 28, 1998.
Adoption of this new standard will not have a material impact on the
Company's computation of earnings per share.
5. Contingencies:
From time to time, the Comapny is involved in legal proceedings that
have arisen in the ordinary course of business. Management, after
consulting with legal counsel, is of the option that the outcome of
such matters will not have a material impact on the consolidated
financial position of the Company.
6. Net cash flows from operating activities reflects cash payments for
interest and income taxes as follows:
12 weeks ended
May 17, May 18,
1997 1996
Interest paid $ 4,875 $ 5,074
Income taxes paid 1,836 9,433
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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:
12 Weeks Ended 12 Weeks Ended
May 17, 1997 May 18, 1996
% %
Gross Profit 28.55 30.27
Operating Expenses 25.66 25.38
Interest Expense-Notes & Mortgages .06 .09
Interest Expense-Lease Obligations .41 .41
Interest (Income) ( .23) ( .36)
Income Before Income Taxes 2.65 4.75
Provision for Income Taxes 1.04 1.87
Net Income 1.61 2.88
Below are the differences for the periods ended May 17, 1997
compared with May 18, 1996 in thousands of dollars and percentages:
Increase (Decrease)
Twelve Weeks
$ %
Sales 33,309 3.7%
Gross Profit (5,939) -2.2%
Operating Expenses 11,087 4.9%
Interest Expense-Notes & Mortgages (217) -26.7%
Interest Expense-Lease Obligations 60 1.6%
Interest Income 1,032 -31.9%
Income Before Income Taxes (17,901) -42.1%
Provision for Income Taxes (7,030) -42.1%
Net Income (10,871) -42.2%
- 8 -<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 May 17, 1997 vs. twelve weeks
ended May 18, 1996):
Sales increased $33.3 million or 3.7%, from $895.6 million for the
twelve weeks ended May 18, 1996 to $928.9 million for the twelve weeks
ended May 17, 1997. Stores in operation both years showed an increase of
.7%, which is the greatest increase in same store sales over the last five
fiscal quarters.
Gross profit decreased as a percentage of sales from 30.27% in the
twelve weeks ended May 18, 1996 to 28.55% in the twelve weeks ended May 17,
1997. The decrease in gross margin reflects promotional activity to
recover market share after the five week truck drivers" strike in the prior
quarter. The promotional activity generated an increase in customers
transactions of 2.9% over the same quarter last year. The number of items
sold in the 12 weeks ended May 17, 1997 increased by 5.7% over the same
quarter in the prior year.
Operating expenses were $227.3 million and $238.4 million for the
twelve weeks ended May 18, 1996 and May 17,1997, respectively. The
operating expenses increased as a percentage of sales from 25.38% to 25.66%
for the same periods. The increase in operating expenses as a percentage
of sales reflects the cost of payroll to maintain service levels during the
quarter with added item volume. Another factor is the higher occupancy
cost, as a percentage of sales, relating to the nine new stores opened in
the latest 52 week period.
Interest income decreased by $1.0 million. The decrease was the
result of lower cash and short-term investments. Interest expense on notes
and mortgages decreased by $217 thousand because of a reduction of debt due
to scheduled payments.
Pre-tax earnings decreased $17.9 million, a decrease of 42.1%. The
effective tax rate was 39.4% for the current period and 39.3% for prior
period.
Net income decreased from $25.8 million for the twelve weeks ended May
18, 1996 to $14.9 million for the twelve weeks ended May 17, 1997. Net
Income was 1.61% of sales for the current quarter compared with 2.88% 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):
LIQUIDITY:
Cash flow from operations and the amounts held in cash, cash
equivalents and short-term investments are the Company's principal source
of liquidity. The Company believes that these sources will be adequate to
meet its anticipated capital expenditures, dividends and debt service
requirements for the balance of fiscal 1998. Planned capital expenditures
include the announced plans for opening ten more stores in the current
fiscal year, of which six are in the Washington/Baltimore area and four are
in Pennsylvania.
The lower cash and short-term investment amount is the result of high
inventory levels caused by the establishment of alternative channels of
distribution to supply the Company's stores during the five week truck
drivers" strike. The inventory has decreased by $21.0 million in the last
twelve weeks. The company anticipates further decreases in the coming
quarter.
Working capital decreased $3.3 million from February 22, 1997. As of
May 17, 1997 working capital ratio was 1.56 to 1, compared to 1.55 to 1 on
February 22, 1997. Including LIFO reserves of $90.9 million as of May 17,
1997, the working capital ratio was 1.82 to 1.
As of May 17, 1997, cash and cash equivalents were $51.6 million and
short-term investments were $134.2 million totaling $185.8 million compared
with $178.1 million on February 22, 1997.
CAPITALIZATION:
Shareholders' equity as a percentage of capitalization was 82.8%
on May 17, 1997, compared to 82.6% on February 22, 1997 and 80.8% on May
18, 1996.
- 10 -<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 May 17, 1997.
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 June 26, 1997 By /s/ Pete Manos
Pete L. Manos
President and
Chief Executive Officer
Date June 26, 1997 By /s/ Anthony Dahm
Anthony Dahm
Controller and Chief Accounting Officer
- 11 -<PAGE>
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