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 9, 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 59,867,957
"AC" voting 125,000
"AL" voting 125,000
60,117,957
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - AUGUST 9, 1997 AND FEBRUARY 22, 1997
Dollar amounts in thousands
ASSETS
August 9, February 22,
1997 1997
(Unaudited)
Current assets:
Cash and cash equivalents $ 31,471 $ 40,981
Short-term investments (Note 2) 142,262 137,096
Receivables 59,520 53,452
Income taxes receivable 6,589 8,501
Inventories (Note 3) 247,532 291,644
Prepaid expenses 26,804 26,202
Total current assets 514,178 557,876
Property, plant and equipment 1,528,045 1,503,725
Less accumulated depreciation 690,428 688,238
837,617 815,487
Property under capital leases, net
of accumulated amortization, (8/09/97,
$74,066; 2/22/97, $71,192) 108,784 106,565
Other assets 23,371 23,597
$ 1,483,950 $ 1,503,525
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - AUGUST 9, 1997 AND FEBRUARY 22, 1997
Dollar amounts in thousands
LIABILITIES AND SHAREHOLDERS' EQUITY
August 9, February 24,
1997 1997
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 12,944 $ 12,660
Accounts payable 229,494 248,368
Accrued liabilities 84,678 86,696
Dividends payable 11,687 11,393
Total current liabilities 338,803 359,117
Long-term debt, net of current portion:
Notes and mortgages 37,518 39,039
Obligations under capital leases 147,623 144,953
185,141 183,992
Other liabilities 83,103 86,763
Shareholders' equity
Common stock, $1 par, all classes 62,672 62,404
Net unrealized loss on short-term investments (399) (449)
Retained earnings 818,206 819,060
880,479 881,015
Less class "A" stock held in
treasury, at cost (8/09/97, 138,663
Shares: 2/22/97, 285,464 shares) 3,576 7,362
876,903 873,653
$ 1,483,950 $ 1,503,525
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
TWENTY-FOUR WEEKS ENDED AUGUST 9, 1997 AND AUGUST 10, 1996
(Unaudited)
Dollar amounts in thousands
except for per share data
Twenty-four Weeks Twelve Weeks
1997 1996 1997 1996
Sales $ 1,863,718 $ 1,770,051 $ 934,782 $ 874,424
Cost of goods sold 1,342,967 1,229,100 679,236 604,617
Operating expenses 479,414 457,901 241,005 230,579
Interest:
Notes and mortgages 1,232 1,593 635 778
Lease obligations 7,612 7,469 3,806 3,723
Income (4,696) (6,703) (2,493) (3,467)
1,826,529 1,689,360 922,189 836,230
Income before provision
for income taxes 37,189 80,691 12,593 38,194
Provision for income
taxes 14,636 31,736 4,953 15,022
Net income $ 22,553 $ 48,955 $ 7,640 $ 23,172
Net income per share $ .38 .82 $ .13 $ .39
Dividends per share $ .39 .38 $ .195 $ .19
Average number
of shares 60,036,970 59,651,841 60,081,801 59,713,990
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 9, 1997 AND AUGUST 10, 1996
(Unaudited)
Dollar amounts in thousands
Twenty-four Weeks
1997 1996
Cash flows from operating activities:
Net income $ 22,553 $ 48,955
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 42,833 41,437
Amortization of property under capital leases 2,873 2,768
Other adjustments, net 750 750
Net change in cash from changes in operating
assets and liabilities, detailed below 15,241 18,039
Net cash provided by operating activities 84,250 111,949
Cash flows from investing activities:
Purchase of short-term investments (41,780) (73,367)
Sale of short-term investments 18,703 47,866
Maturity of short-term 17,993 13,588
Capital expenditures (65,216) (81,084)
Other investing activities (271) (4,347)
Net cash used in investing activities (70,571) (97,344)
Cash flows from financing activities:
Repayments of notes and mortgages (1,481) (1,544)
Repayments of obligations under capital leases (2,178) (1,947)
Purchases of treasury stock
Issuance of common stock 3,583 5,464
Dividends paid (23,113) (22,332)
Net cash used in financing activities (23,189) (20,359)
Net change in cash and cash equivalents (9,510) (5,754)
Cash and cash equivalents, beginning of year 40,981 111,133
Cash and cash equivalents, end of quarter $ 31,471 $ 105,379
Increase (decrease) in cash from changes in
operating assets and liabilities:
Accounts receivable $ (6,068) $ (1,096)
Inventory 44,112 14,873
Income Taxes Receivable 2,383
Prepaid expenses (602) (1,183)
Accounts payable (18,874) 5,905
Accrued expenses (2,018) (201)
Income taxes payable (1,377)
Other liabilities (3,692) 1,118
$ 15,241 $ 18,039
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 9, 1997 AND AUGUST 10, 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 August 9, 1997 and August 10,
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 August 9, 1997:
GROSS
UNREALIZED HOLDING
COST (LOSSES) FAIR VALUE
U.S. Treasury securities $104,745 $ (487) $104,258
Federal agency securities 26,757 (124) 26,633
Corporate bonds or other 11,407 (36) 11,371
$142,909 $ (647) $142,262
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 August 9, 1997, were as
follows:
COST FAIR VALUE
Due within one year $ 76,542 $ 76,519
Due after one year through five years 66,367 65,743
$142,909 $142,262
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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 9, 1997 and 83% as at
February 22, 1997. Under the FIFO method, these inventories would have
been higher by $91,778 and $90,008, respectively. The pre-tax LIFO
charge was $1,770 for the twenty-four week period ended August 9,
1997 and $2,160 for the twenty-four week period ended August 10, 1996.
4. New Accounting Standards:
During 1997, the Financial Accounting Standards Board has issued
Statements of Financial Accounting Standards No. 128, "Earnings per
Share"; No. 129, "Disclosure of Information about Capital Structure";
No. 130, "Reporting Comprehensive Income"; and No. 131, "Disclosures
about Segments of an Enterprise and Related Information." These
Statements address presentation and disclosure matters and will have no
impact on the Company's financial position or results of operations.
These statements become effective during the Company's fiscal years
1998 and 1999 and will be adopted as applicable.
5. 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.
6. Cash Flows:
Net cash flows from operating activities reflects cash payments for
interest and income taxes as follows:
24 weeks ended
August 9, August 10,
1997 1996
Interest paid $ 9,939 $10,141
Income taxes paid 12,870 33,113
Non-cash investing and financing activities include capital leases of
$5,100 during the twenty-four weeks ended August 10, 1996.
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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 9, August 10, August 9, August 10,
1997 1996 1997 1996
% % % %
Gross Profit 27.94 30.56 27.34 30.86
Operating Expenses 25.72 25.87 25.78 26.37
Interest Expense:
Notes & Mortgages .07 .09 .07 .09
Lease Obligations .40 .42 .41 .43
Interest (Income) ( .25) ( .38) ( .27) ( .40)
Income Before Income Taxes 2.00 4.56 1.35 4.37
Provision for Income Taxes .79 1.79 .53 1.72
Net Income 1.21 2.77 .82 2.65
Below are the differences for the periods ended August 9, 1997
compared with August 10, 1996 in thousands of dollars and percentages:
Increase (Decrease) Increase (Decrease)
Twenty-four Weeks Twelve Weeks
$ % $ %
Sales 93,667 5.3% 60,358 6.9%
Gross Profit (20,200) -3.7% (14,261) -5.3%
Operating Expenses 21,513 4.7% 10,426 4.5%
Interest Expense:
Notes & Mortgages (361) -22.6% (143) -18.4%
Lease Obligations 143 1.9% 83 2.2%
Interest Income 2,007 -29.9% 974 -28.4%
Income Before Income Taxes (43,502) -53.9% (25,601) -67.0%
Provision for Income Taxes (17,100) -53.9% (10,069) -67.0%
Net Income (26,402) -53.9% (15,532) -67.0%
- 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 9, 1997 vs. twenty-
four weeks ended August 10, 1996):
Sales increased $93.7 million or 5.3%. The change in sales for stores
in operation both years was an increase of 1.6%. The Company continued to
execute a strategy of increasing it's sales volume. During the 24 week
period the Company increased the number of items sold by 8.7% while showing
an increase in customer transactions of 4.6%.
Gross profit decreased $20.2 million. The sales promotions that were
instrumental in increasing customer counts and items sold had the effect of
lowering the gross profit percentage to 27.94% compared to 30.56% for the
prior year.
Operating expenses as a percent of sales, decreased from 25.87% of
sales in the prior year to 25.72%. The current year expense increased
$21.5 million, 4.7%. The increase was primarily in store payroll in order
to provide the additional services needed for the increase in the Company's
business.
Interest expense - notes and mortgages decreased by $.4 million
because of lower debt. Interest income decreased by $2.0 million because
of lower balances of investable cash and short term investments.
Pre-tax earnings decreased $43.5 million, a decrease of 53.9%. The
effective tax rate was 39.4% for the current year and 39.3% for the prior
year.
Net income was 1.21% of sales for the current period compared with
2.77% 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 9, 1997 vs. twelve weeks
ended August 10, 1996):
Sales increased $60.4 million or 6.9%. The sales for stores in
operation in both years was an increase of 2.4%. The twelve week contained
an increase in items sold of 11.8% and customer transactions increased
6.3%.
Gross profit decreased $14.3 million. Gross profit as a percent of
sales was 27.34% compared to 30.86% for the prior year and 28.55% from the
most recent quarter due to the reasons cited in the 24 week analysis.
Operating expenses were 25.78% of sales in the current year compared
to 26.37% in the prior year. The increase in expenses of $10.4 million or
4.5% was well below the 6.9% sales gain.
Interest expense - notes and mortgages decreased by $134 thousand
because of lower debt. Interest income decreased by $974 thousand because
of lower investable cash balances and short term investments.
Pre-tax earnings were down $25.6 million, a decrease of 67.0%. The
effective tax rate was 39.3% for both the current and prior year.
Net income was .82% of sales for the current quarter compared with
2.65% 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 $23.4 million from February 22, 1997.
At August 9, 1997 working capital ratio was 1.52 to 1, compared to
1.55 to 1 at February 22, 1997. Including LIFO reserves of $91.8 million
at August 9, 1997, the working capital ratio was 1.79 to 1.
At August 9, 1997, cash and cash equivalents were $31.5 million and
short-term investments were $142.2 million totaling $173.7 million compared
with $178.1 million as at February 22, 1997. During the twelve months
ended August 9, 1997 notes and mortgage debt was reduced by $1.5 million.
CAPITALIZATION:
Shareholders' equity as a percentage of capitalization was 82.6%
on August 9, 1997, compared to 82.6% on February 22, 1997 and 81.2% on
August 10, 1996.
- 11 -<PAGE>
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 September 22, 1997 By
Pete Manos
President and Chief Executive Officer
Date September 22, 1997 By
Mark H. Berey
Senior Vice President of Finance,
Treasurer and Chief Financial Officer
- 12 -
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