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 23, 1998
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 60,193,826
"AC" voting 125,000
"AL" voting 125,000
60,443,826
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - MAY 23, 1998 AND FEBRUARY 28, 1998
Dollar amounts in thousands
ASSETS
May 23, February 28,
1998 1998
(Unaudited)
Current assets:
Cash and cash equivalents $ 93,509 $ 28,857
Short-term investments (Note 2) 123,387 120,278
Receivables 66,277 63,560
Income taxes receivable 8,723
Inventories (Note 3) 268,625 274,137
Other current assets 27,993 26,518
Total current assets 579,791 522,073
Property, plant and equipment 1,598,453 1,589,938
Less accumulated depreciation 746,154 725,190
852,299 864,748
Property under capital leases, net
of accumulated amortization, (5/23/98,
$79,344; 2/28/98, $77,770) 115,137 116,711
Other assets 18,278 18,350
$ 1,565,505 $ 1,521,882
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - MAY 23, 1998 AND FEBRUARY 28, 1998
Dollar amounts in thousands
LIABILITIES AND SHAREHOLDERS' EQUITY
May 23, February 28,
1998 1998
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 8,825 $ 8,523
Accounts payable 273,306 259,020
Accrued liabilities 81,626 69,440
Dividends payable 12,100 11,710
Total current liabilities 375,857 348,693
Long-term debt, net of current portion:
Notes and mortgages 26,933 27,134
Obligations under capital leases 154,515 156,041
181,448 183,175
Other liabilities 88,844 87,401
Shareholders' equity
Common stock, $1 par, all classes 60,504 60,257
Capital in excess of par value 9,598 2,299
Accumulated other comprehensive income (128) (243)
Retained earnings 851,231 843,402
921,205 905,715
Less class "A" stock held in
treasury, at cost (5/23/98, 60,000
Shares: 2/28/98, 100,627 shares) 1,849 3,102
919,356 902,613
$ 1,565,505 $ 1,521,882
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
TWELVE WEEKS ENDED MAY 23, 1998 AND MAY 17, 1997
(Unaudited)
Dollar amounts in thousands
except for per share data
Twelve Weeks
1998 1997
Sales $ 983,665 $ 928,936
Cost of sales 697,883 663,731
Selling, general and administrative
expenses 251,711 238,409
Interest:
Notes and mortgages 547 598
Lease obligations 3,969 3,806
Income (2,465) (2,204)
951,645 904,340
Income before provision
for income taxes 32,020 24,596
Provision for income
taxes 12,092 9,684
Net income $ 19,928 $ 14,912
Earnings per share:
Basic $ .33 $ .25
Diluted $ .33 $ .25
Dividends per share $ .20 $ .195
Weighted average number of shares:
Basic 60,307,866 59,992,139
Diluted 60,813,702 60,329,931
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
TWELVE WEEKS ENDED MAY 23, 1998 AND MAY 17, 1997
(Unaudited)
Dollar amounts in thousands
Twelve Weeks
1998 1997
Cash flows from operating activities:
Net income $ 19,928 $ 14,912
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 21,456 21,237
Amortization of property under capital leases 1,574 1,437
Other adjustments, net 375 375
Net change in cash from changes in operating
assets and liabilities, detailed below 37,887 8,811
Net cash provided by operating activities 81,220 46,772
Cash flows from investing activities:
Purchase of short-term investments ( 25,010) (11,714)
Sale of short-term investments 17,158 4,220
Maturity of short-term investments 4,932 9,986
Capital expenditures (9,026) (27,029)
Other investing activities (284) (221)
Net cash used in investing activities (12,230) (24,758)
Cash flows from financing activities:
Repayments of notes and mortgages (178) (158)
Repayments of obligations under capital leases (1,250) (1,089)
Issuance of common stock 8,800 1,212
Dividends paid (11,710) (11,393)
Net cash used in financing activities (4,338) (11,428)
Net increase in cash and cash equivalents 64,652 10,586
Cash and cash equivalents, beginning of year 28,857 40,981
Cash and cash equivalents, end of quarter $ 93,509 $ 51,567
Increase (decrease) in cash from changes in
operating assets and liabilities:
Accounts receivable $ 6,006 $ (5,650)
Inventory 5,512 20,955
Prepaid expenses (1,475) 8,151
Accounts payable 14,286 (1,681)
Accrued expenses 12,191 (9,755)
Income taxes payable (1,288)
Other liabilities 1,367 (1,921)
$ 37,887 $ 8,811
See notes to consolidated financial statements.
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GIANT FOOD INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TWELVE WEEKS ENDED MAY 23, 1998 AND MAY 17, 1997
(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. The
unaudited interim financial information should be read in conjunction
with the consolidated financial statements contained in the 1998 Annual
Report to Shareholders.
Such results for the twelve weeks ended May 23, 1998 and May 17, 1997
are not necessarily indicative of results to be expected for the full
year.
2. Short-term investments and comprehensive income:
Maturities of short-term investments at May 23, 1998, were as follows:
COST FAIR VALUE
Due within one year $101,158 $102,097
Due after one year through five years 22,440 21,290
$123,598 $123,387
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The Company's comprehensive income includes net income and unrealized
security holding gains and losses, net of taxes. A summary of
comprehensive income for the periods presented is as follows:
Twelve weeks Twelve weeks
1998 1997
Net income $ 19,928 $ 14,912
Unrealized security
holding gains (losses) 115 (227)
Total comprehensive income $ 20,043 $ 14,685
3. Inventories:
The inventories using the LIFO method were valued at approximately 79%
of the Company's total inventories at May 23, 1998 and 84% at
February 28, 1998. Under the FIFO method, these inventories would have
been higher by $94,088 and $93,233, respectively. The pre-tax LIFO
charge was $855 for the twelve week period ended May 23,1998 and
$885 for the twelve week period ended May 17, 1997.
4. Stock purchase agreements:
On May 19, 1998, a tender offer was begun by Koninklijke Ahold N.V.
(Ahold) to purchase all of the outstanding Class A Non-voting Common
Stock of the Company for a cash price of $43.50 per share without
interest thereon. The expiration date of the offer is July 15, 1998,
unless the offer is extended. This offer is being made pursuant to the
terms of a Stock Purchase Agreement between Ahold and The 1224
Corporation, holder of all of the 125,000 outstanding shares of the
Company's Class AC Voting Common Stock. Under the Stock Purchase
Agreement, Ahold will also purchase all of the Class AC stock for
$43.50 per share. Also on May 19, 1998, Ahold reached agreement with
J Sainsbury plc (Sainsbury) to acquire its 125,000 shares of Class AL
Voting Common Stock for a total price of $100,000,000. A formal
purchase agreement was entered into between Ahold and Sainsbury on
May 28, 1998. On May 29, 1998, the Board of Directors of the Company
voted unanimously to recommend that the Class A stockholders accept the
offer from Ahold and tender all of their Class A shares pursuant to the
offer.
The consummation of this transaction is subject to certain regulatory
considerations which are currently pending. The Company has charged to
expense all costs incurred except contingent fees equal to .5% of the
aggregate consideration paid for the Company, which would be recognized
at such time when consummation of the transaction would be a
perfunctory matter.
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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
May 23, May 17,
1997 1996
% %
Gross Profit 29.05 28.55
Operating Expenses 25.59 25.66
Interest Expense:
Notes & Mortgages .05 .06
Lease Obligations .40 .41
Interest (Income) ( .25) ( .24)
Income Before Income Taxes 3.26 2.65
Provision for Income Taxes 1.22 1.04
Net Income 2.03 1.61
Below are the differences for the periods ended May 23, 1998
compared with May 17, 1997 in thousands of dollars and percentages:
Increase (Decrease)
Twelve Weeks
$ %
Sales 54,729 5.9%
Gross Profit 20,577 7.8%
Operating Expenses 13,302 5.6%
Interest Expense:
Notes & Mortgages (51) -8.5%
Lease Obligations 163 4.3%
Interest Income (149) -6.8%
Income Before Income Taxes 7,424 30.2%
Provision for Income Taxes 2,408 24.9%
Net Income 5,016 33.6%
- 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 23, 1998 vs. Twelve weeks
ended May 17, 1997):
Sales increased $54.7 million or 5.9%. The change in sales for stores
in operation both years was an increase of 2.2%.
Gross profit increased $20.6 million. Gross profit as a percent of
sales was 29.05% compared to 28.55% for the prior year. The increase was
the result of beneficial changes in product mix in the current year.
Operating expenses decreased from 25.66% of sales to 25.59%. 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.
Interest expense - notes and mortgages decreased by $51 thousand
because of lower debt. Interest income increased by $.3 million because of
higher balances of investable cash and short term investments.
Pre-tax earnings increased $7.4 million, an increase of 30.2%. The
effective tax rate was 37.8% for the current year compared to 39.3% for the
prior year.
Net income was 2.03% of sales for the current period compared with
1.61% 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:
Working capital increased $30.6 million from February 28, 1998.
At May 23, 1998 the working capital ratio was 1.54 to 1, compared to
1.50 to 1 at February 28, 1998. Including LIFO reserves of $94.1 million
at May 23, 1998, the working capital ratio was 1.79 to 1.
At May 23, 1998, cash and cash equivalents were $93.5 million and
short-term investments were $123.4 million totaling $216.9 million compared
with $149.1 million as at February 28, 1998. The higher balances are the
result of higher earnings and lower capital expenditures than the prior
year.
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 two additional food-drug stores in
the balance of the current fiscal year.
CAPITALIZATION:
Shareholders' equity as a percentage of capitalization was 83.5%
on May 23, 1998, compared to 83.1% as of February 28, 1998 and 82.8% on May
17, 1997.
- 10 -<PAGE>
GIANT FOOD INC. AND SUBSIDIARIES
OTHER INFORMATION
Item 5. Other Information:
Item 6. Exhibits and reports on Form 8-K:
The Company filed a Form 8-k on May 19, 1998. Koninklijke Ahold N.V.,
entered into a Stock Purchase Agreement with the 1224 Corporation to
purchase all of its Class AC Shares and a tender offer was made for all the
issued and outstanding Class A Shares.
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 July 6, 1998 By /s/ Pete Manos
Pete Manos
President and Chief Executive Officer
Date July 6, 1998 By /s/ Mark Berey
Mark Berey
Senior Vice President - Finance
and Chief Financial Officer
- 11 -
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