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 1, 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)
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 59,792,125
"AC" voting 125,000
"AL" voting 125,000
60,042,125
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - NOVEMBER 1, 1997 AND FEBRUARY 22, 1997
Dollar amounts in thousands
ASSETS
November 1, February 22,
1997 1997
(Unaudited)
Current assets:
Cash and cash equivalents $ 331 $ 40,981
Short-term investments (Note 2) 124,708 137,096
Receivables 66,652 53,452
Income taxes receivable 1,060 8,501
Inventories (Note 3) 292,105 291,644
Prepaid expenses 27,471 26,202
Total current assets 512,327 557,876
Property, plant and equipment 1,560,749 1,503,725
Less accumulated depreciation 703,402 688,238
857,347 815,487
Property under capital leases, net
of accumulated amortization, (11/01/97,
$75,562; 2/22/97, $71,192) 107,286 106,565
Other assets 23,469 23,597
$ 1,500,429 $ 1,503,525
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - NOVEMBER 1, 1997 AND FEBRUARY 22, 1997
Dollar amounts in thousands
LIABILITIES AND SHAREHOLDERS' EQUITY
November 1, February 22,
1997 1997
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 8,089 $ 12,660
Accounts payable 273,316 248,368
Accrued liabilities 76,901 86,696
Dividends payable 11,674 11,393
Total current liabilities 369,980 359,117
Long-term debt, net of current portion:
Notes and mortgages 27,369 39,039
Obligations under capital leases 146,350 144,953
173,719 183,992
Other liabilities 82,057 86,763
Shareholders' equity
Common stock, $1 par, all classes 62,689 62,404
Net unrealized loss on short-term investments (309) (449)
Retained earnings 818,725 819,060
881,105 881,015
Less class "A" stock held in
treasury, at cost (11/01/97, 214,495
Shares: 2/22/97, 285,464 shares) 6,432 7,362
874,673 873,653
$ 1,500,429 $ 1,503,525
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THIRTY-SIX WEEKS ENDED NOVEMBER 1, 1997 AND November 2, 1996
(Unaudited)
Dollar amounts in thousands
except for per share data
Thirty-six Weeks Twelve Weeks
1997 1996 1997 1996
Sales $ 2,807,649 $ 2,667,028 $ 943,932 $ 896,977
Cost of goods sold 2,018,546 1,857,334 675,580 628,234
Operating expenses 725,505 694,309 246,092 236,408
Interest:
Notes and mortgages 1,863 2,202 630 608
Lease obligations 11,500 11,170 3,888 3,701
Income (7,108) (9,764) (2,412) (3,061)
2,750,306 2,555,251 923,778 865,890
Income before provision
for income taxes 57,343 111,777 20,154 31,087
Provision for income
taxes 22,563 43,962 7,927 12,227
Net income $ 34,780 $ 67,815 $ 12,227 $ 18,860
Net income per share $ .58 $ 1.14 $ .20 $ .32
Dividends per share $ .585 .57 $ .195 $ .19
Average number
of shares 60,053,799 59,711,609 60,087,458 59,831,144
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 1, 1997 AND NOVEMBER 2, 1996
(Unaudited)
Dollar amounts in thousands
Thirty-six Weeks
1997 1996
Cash flows from operating activities:
Net income $ 34,780 $ 67,815
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 63,863 64,322
Amortization of property under capital leases 4,371 4,152
Other adjustments, net 1,125 1,125
Net change in cash from changes in operating
assets and liabilities, detailed below 2,875 (17,017)
Net cash provided by operating activities 107,014 120,397
Cash flows from investing activities:
Purchase of short-term investments (105,681) (134,925)
Sale of short-term investments 86,492 97,025
Maturity of short-term investments 31,799 23,588
Capital expenditures (106,049) (112,986)
Other investing activities (671) (6,446)
Net cash used in investing activities (94,110) (133,744)
Cash flows from financing activities:
Repayments of notes and mortgages (16,608) (6,792)
Repayments of obligations under capital leases (3,328) (2,921)
Purchases of treasury stock (4,902)
Issuance of common stock 6,117 6,673
Dividends paid (34,833) (33,685)
Net cash used in financing activities (53,554) (36,725)
Net change in cash and cash equivalents (40,650) (50,072)
Cash and cash equivalents, beginning of year 40,981 111,133
Cash and cash equivalents, end of quarter $ 331 $ 61,061
Increase (decrease) in cash from changes in
operating assets and liabilities:
Accounts receivable $ (3,699) $ (5,046)
Inventory (461) (34,311)
Prepaid expenses (3,329) (3,457)
Accounts payable 24,588 41,026
Accrued expenses (10,936) (7,095)
Income taxes payable (3,645)
Deferred taxes 9 (4,000)
Other liabilities (3,297) (489)
$ 2,875 $ (17,017)
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 1, 1997 AND NOVEMBER 2, 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 November 1, 1997 and November
2, 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 November 1, 1997:
GROSS
UNREALIZED HOLDING
COST (LOSSES) FAIR VALUE
U.S. Treasury securities $ 48,617 $ (200) $ 48,417
Federal agency securities 15,733 ( 65) 15,668
Corporate bonds or other 60,867 (244) 60,623
$125,217 $ (509) $124,708
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 November 1, 1997, were as
follows:
COST FAIR VALUE
Due within one year $ 86,130 $ 86,112
Due after one year through five years 39,087 38,596
$125,217 $124,708
- 6 -<PAGE>
3. Inventories:
The inventories using the LIFO method were valued at approximately 79%
of the Company's inventories as at November 1, 1997 and 84% as at
February 22, 1997. Under the FIFO method, these inventories would have
been higher by $92,663 and $90,008, respectively. The pre-tax LIFO
charge was $2,655 for the thirty-six week period ended November 2,
1996 and $3,240 for the thirty-six week period ended November 2, 1996.
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.
- 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
Nov. 1, Nov. 2, Nov. 1, Nov. 2,
1997 1996 1997 1996
% % % %
Gross Profit 28.11 30.36 28.43 29.96
Operating Expenses 25.84 26.03 26.07 26.36
Interest Expense:
Notes & Mortgages .07 .08 .07 .07
Lease Obligations .41 .42 .41 .41
Interest (Income) ( .25) ( .36) ( .26) ( .34)
Income Before Income Taxes 2.04 4.19 2.14 3.46
Provision for Income Taxes .80 1.65 .84 1.36
Net Income 1.24 2.54 1.30 2.10
Below are the differences for the periods ended November 1, 1997
compared with November 2, 1996 in thousands of dollars and percentages:
Increase (Decrease) Increase (Decrease)
Thirty-six Weeks Twelve Weeks
$ % $ %
Sales 140,621 5.3% 46,955 5.2%
Gross Profit (20,591) -2.5% (391) -0.1%
Operating Expenses 31,196 4.5% 9,684 4.1%
Interest Expense:
Notes & Mortgages (339) -15.4% 22 3.6%
Lease Obligations 330 3.0% 187 5.0%
Interest Income 2,656 -27.2% 649 -21.2%
Income Before Income Taxes (54,434) -48.7% (10,933) -35.2%
Provision for Income Taxes (21,399) -48.7% (4,300) -35.2%
Net Income (33,035) -48.7% (6,633) -35.2%
- 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 1, 1997 vs. Thirty-
six weeks ended November 2, 1996):
Sales increased $140.6 million or 5.3%. The change in sales for
stores in operation both years was an increase of 1.7%. The Company
continues to execute a strategy of increasing it's sales volume. During
the thirty-six week period the Company increased the number of items sold
by 7.1% and had an increase of 4.2% in customer transactions.
Gross profit decreased $20.6 million. Gross profit as a percent of
sales was 28.11% compared to 30.36% for the prior year. The gross profit %
decrease resulted primarily from special promotions that the Company used
to increase its growth.
Operating expenses decreased from 26.03% of sales to 25.84%. This is
a result of the Company's continued commitment to the long-term effort of
lowering its overall cost structure while maintaining expected levels of
customer service. The Company's labor situation has increased in
stability. The Company reached an agreement with it's warehouse associates
on November 10, 1997. With this agreement in place the Company has
contracts in place with the major unions relating to store and distribution
activities until the year 2000.
Interest expense - notes and mortgages decreased by $.3 million
because of lower debt. Interest income decreased by $2.7 million because
of lower balances of investable cash and short term investments.
Pre-tax earnings decreased $54.4 million, a decrease of 48.7%. The
effective tax rate was 39.3% for both the current and prior year.
Net income was 1.24% of sales for the current period compared with
2.54% 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 November 1, 1997 vs. twelve weeks
ended November 2, 1996):
Sales increased $47.0 million or 5.2%. The sales for stores in
operation in both years was an increase of 2.1%.
Gross profit decreased slightly by $.4 million. Gross profit as a
percent of sales was 28.43% compared to 29.96% for the prior year and
27.34% from the most recent quarter. The gross profit % decrease resulted
from special promotional programs which coupled with the 5.2% increase in
sales generated approximately the same dollar amount of gross profit.
Operating expenses were 26.07% of sales in the current year compared
to 26.36% in the prior year, the lower percentage is primarily due to the
effect of expenses, in terms of dollars increasing at a lesser percentage
than the 5.2% increase in sales.
Interest expense - notes and mortgages increased by $22 thousand.
Interest income decreased by $649 thousand because of lower investable cash
balances and short term investments.
Pre-tax earnings decreased $10.9 million, a decrease of 35.2%. The
effective tax rate was 39.3% for both the current and prior year.
Net income was 1.30% of sales for the current quarter compared with
2.10% 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 $56.4 million from February 22, 1997.
At November 1, 1997 working capital ratio was 1.38 to 1, compared to
1.55 to 1 at February 22, 1997. Including LIFO reserves of $92.7 million
at November 1, 1997, the working capital ratio was 1.64 to 1.
At November 1, 1997, cash and cash equivalents were $.4 million and
short-term investments were $124.6 million totaling $125.0 million compared
with $178.1 million as at February 22, 1997. During the twelve months
ended November 1, 1997 notes and mortgage debt was reduced by $16.6
million. The lower cash balance is in part the effect of building
merchandise inventory levels for the upcoming holiday period and as a
safeguard to a possible work stoppage in the warehouse operation. The
Company anticipates that the cash balance, will increase, but not return to
historical levels.
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 six additional food-drug stores in
the balance of the current fiscal year.
CAPITALIZATION:
Shareholders' equity as a percentage of capitalization was 83.4%
on November 1, 1997, compared to 82.6% on February 22, 1997 and 82.9% on
November 2, 1996.
- 11 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
OTHER INFORMATION
Item 5. Other Information:
On November 5, 1997, the Company's board of directors authorized the
future repurchase of up to 2,350,000 Class "A" common shares from time to
time on the open market. This authorization superseded an earlier
repurchase authorization under which authority to purchase additional
shares remained.
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 November 15, 1997 By
Pete Manos
President and Chief Executive Officer
Date November 23, 1997 By
Mark Berey
Senior Vice President - Finance
and Chief Financial Officer
- 12 -
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