FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-7603
HANNAFORD BROS. CO.
(Exact name of Registrant as specified in its charter)
MAINE 01-0085930
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
145 PLEASANT HILL ROAD, SCARBOROUGH, MAINE 04074
(Address of principal executive offices; Zip Code)
Registrant's telephone number, including area code: (207) 883-2911
Indicate by check mark whether the Registrant (1) 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 .
As of May 1, 1995, there were 42,046,226 outstanding shares of Common
Stock, $.75 par value, the only authorized class of common stock of the
Registrant.
<PAGE>
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
Page
No.
Item 1. Financial Statements:
Consolidated Balance Sheets, April 1, 1995 and
December 31, 1994 3-4
Consolidated Statements of Earnings, Three Months
Ended April 1, 1995 and April 2, 1994 5
Consolidated Statements of Cash Flows,
Three Months Ended April 1, 1995
and April 2, 1994 6-7
Notes and Schedules to Consolidated Financial Statements 8-9
Item 2. Management's Discussion and Analysis of
First Quarter 1995 Results 10-13
PART II
Item 5. Other Information and Signatures 14
Item 6. Exhibits and Reports on Form 8-K 14
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
(UNAUDITED)
April 1, December 31,
1995 1994
Current assets:
Cash and cash items $ 57,063 $ 40,955
Accounts receivable, net 11,538 14,240
Inventories 124,137 132,423
Prepaid expenses 4,794 6,210
Deferred income taxes 7,762 7,519
Total current assets 205,294 201,347
Property, plant and equipment, net 508,928 503,941
Leased property under capital leases, net 57,850 58,821
Investment in financing leases 1,744 1,753
Other assets:
Deferred charges, net 102,666 101,548
Computer software costs, net 8,601 8,382
Notes receivable 1,187 1,229
Miscellaneous assets 624 584
Total other assets 113,078 111,743
$886,894 $877,605
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(In thousands except share amounts)
(UNAUDITED)
April 1, December 31,
1995 1994
Current liabilities:
Current maturities of long-term debt $ 14,649 $ 14,409
Obligations under capital leases 1,358 1,382
Accounts payable 87,107 89,927
Accrued payroll 16,707 19,017
Other accrued expenses 27,090 29,738
Income taxes 9,061 4,167
Total current liabilities 155,972 158,640
Deferred income tax liabilities 21,501 21,886
Other liabilities 20,108 19,365
Long-term debt 151,663 153,687
Obligations under capital leases 69,220 69,552
Shareholders' equity:
Class A Serial Preferred stock, no par,
authorized 2,000,000 shares - -
Class B Serial Preferred stock,
par value $.01 per share,
authorized 28,000,000 shares - -
Common stock, par value $.75 per share:
Authorized 110,000,000 shares;
issued and outstanding 41,960,717
shares at April 1, 1995, and
41,779,342 shares at December 31, 1994 31,471 31,335
Additional paid-in capital 114,328 110,669
Preferred stock purchase rights 420 418
Retained earnings 322,211 312,053
Total shareholders' equity 468,430 454,475
$886,894 $877,605
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands except per share data)
(UNAUDITED)
THREE MONTHS ENDED
April 1, April 2,
1995 1994
Sales and other revenues $598,796 $519,078
Cost of sales 452,842 393,333
Gross margin 145,954 125,745
Selling, general and administrative expenses 116,156 102,396
Operating profit 29,798 23,349
Interest expense, net 5,395 4,735
Earnings before income taxes 24,403 18,614
Income taxes 9,839 7,555
Net earnings $ 14,564 $ 11,059
Per share of common stock:
Net earnings $ .35 $ .27
Cash dividends $ .105 $ .095
Weighted average number of common shares
outstanding 41,888 41,316
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(UNAUDITED)
THREE MONTHS ENDED
April 1, April 2,
1995 1994
Cash flows from operating activities:
Net income $ 14,564 $ 11,059
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 16,825 14,443
Decrease in inventories 8,286 10,832
Decrease in receivables and prepayments 4,160 1,553
Decrease in accounts payable
and accrued expenses (7,036) (10,194)
Increase in income taxes payable 4,894 4,963
Decrease in deferred taxes (627) (418)
Other operating activities (31) 314
Net cash provided by operating
activities 41,035 32,552
Cash flows from investing activities:
Acquisition of property, plant and
equipment (18,366) (12,425)
Sale of property, plant and
equipment, net 400 1,361
Increase in deferred charges (3,293) (1,225)
Increase in computer software costs (919) (645)
Decrease in short-term investments -- 4,970
Net cash used in investing activities (22,178) (7,964)
Cash flows from financing activities:
Principal payments under capital
lease obligations (355) (340)
Payments of long-term debt (1,784) (4,166)
Issuance of common stock 3,794 3,506
Dividends paid (4,404) (3,978)
Net cash used in financing activities (2,749) (4,978)
Net increase in cash and cash items 16,108 19,610
Cash and cash items at beginning of period 40,955 77,496
Cash and cash items at end of period $ 57,063 $ 97,106
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Supplemental disclosures of cash flow information
(Dollars in thousands)
(UNAUDITED)
THREE MONTHS ENDED
April 1, April 2,
Cash paid during the first quarter for: 1995 1994
Interest (net of amount capitalized,
$287 in 1995 and $514 in 1994) $4,448 $4,644
Income taxes $5,572 $3,010
Supplemental disclosure of non-cash investing and financing activities
A capital lease obligation of $3,030,000 was incurred during the
three month period ended April 2, 1994.
Disclosure of accounting policy
For the purposes of the Consolidated Statements of Cash Flows, the
Company considers all highly liquid debt instruments purchased with
maturities of three months or less to be cash items.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. In the
opinion of management, the amounts shown reflect all adjustments
necessary to present fairly the financial position and results of
operations for the periods presented. All such adjustments are of a
normal recurring nature.
Earnings per share of common stock have been determined by dividing
net earnings available to common shareholders by the weighted average
number of shares of common stock outstanding. The assumed exercise
of existing employee stock options has been excluded since it does
not result in any material dilution. Net earnings available to
common shareholders is equal to net earnings reduced by preferred
stock dividends of $47,000 for the three months ended April 2, 1994.
All of the remaining outstanding shares of preferred stock were
redeemed in the second quarter of 1994, so there were no preferred
dividends paid in the first quarter of 1995.
It is suggested that the financial statements be read in conjunction
with the financial statements and notes thereto included in the
Company's latest annual report.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
2. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
(In thousands)
(Unaudited)
April 1, December 31,
1995 1994
Land and improvements $ 84,031 $ 81,667
Buildings 205,631 203,645
Furniture, fixtures & equipment 301,549 294,792
Leasehold interests & improvements 170,904 169,178
Construction in progress 10,586 6,193
772,701 755,475
Less accumulated depreciation and
amortization 263,773 251,534
$508,928 $503,941
3. LEASED PROPERTY
Leased property under capital leases consists of the following:
(In thousands)
(Unaudited)
April 1, December 31,
1995 1994
Real property $76,146 $76,552
Less accumulated amortization 18,296 17,731
$57,850 $58,821
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIRST QUARTER 1995
RESULTS
RESULTS OF OPERATIONS
Sales and other revenues rose 15.4% for the first quarter of 1995, to
$598.8 million, an increase of $79.7 million over the first quarter
of 1994. Retail sales increased $80.2 million or 16.1% to $578.5
million, reflecting a decrease of $0.7 million or 0.1% in sales from
supermarkets that were open in both periods presented ("same store
sales") and additional sales of $80.9 million from the net impact of
new, expanded and closed stores as well as the acquisition of
Wilson's Supermarkets in July, 1994. Other sales and revenues, which
include wholesale, trucking, real estate and miscellaneous retail
operations, decreased $0.5 million.
Due to sales and other revenues from the Easter holiday occurring in
the first quarter last year and the second quarter this year, same
store sales were down 0.1% for the quarter. Adjusting for estimated
Easter sales, same store sales increases in the quarter were 1.2%.
This increase sustains a positive trend that started in late 1993.
Since sales have improved during the quarter, it appears that the
trend in same store sales increases in 1995 is somewhat better than
the 1.6% reported for 1994.
Excluding the sales and other revenues from Wilson's Supermarkets,
the Company's sales and other revenues were up 5.2 % for the quarter.
During the first three months of 1995, gross margins increased to
24.4% of sales and other revenues in comparison to 24.2% for the
comparable 1994 period.
Selling, general and administrative expenses decreased to 19.4% of
sales and other revenues in the first quarter of 1995 as compared to
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIRST QUARTER 1995 RESULTS
19.7% in the first quarter of 1994. This continues a downward trend
that began in 1992. Payroll and payroll related expenses, which
exceeded 50% of total selling, general and administrative expenses in
both periods presented, were primarily responsible for this decrease.
This resulted from cost containment efforts coupled with positive
synergies resulting from the acquisition of Wilson's Supermarkets in
July, 1994.
Net earnings increased 31.7% in the first quarter of 1995 to $14.6
million or 2.4% of sales and other revenues, an increase of $3.5
million from 1994 first quarter earnings of $11.1 million or 2.1% of
sales and other revenues. These increases are the result of
increased sales, reduced selling, general and administrative expenses
expressed as a percentage of sales, and a slightly improved gross
margin.
Management does not expect net earnings increases of this magnitude
for the balance of fiscal 1995. The Company's 1995 store opening
schedule is heavily weighted toward the latter part of the year, and
it will be entering new markets in the Southeastern region.
Management expects those factors to reduce the Company's percentage
increases in net earnings during the second half of fiscal 1995.
CAPITAL RESOURCES AND LIQUIDITY
The current ratio (FIFO basis) on April 1, 1995 was 1.41 while
working capital (FIFO basis) was $64.2 million, or 7.2% of total
assets. On December 31, 1994, the current ratio (FIFO basis) was
1.36 while working capital (FIFO basis) was $57.1 million, or 6.5% of
total assets. The Company values the majority of its inventories
using the LIFO method. The current cost of inventories exceeded the
LIFO valuation by approximately $14.8 million on April 1, 1995 and
$14.3 million on December 31, 1994. The Company's liquidity position
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIRST QUARTER 1995 RESULTS
is stronger than indicated by stated working capital and current
ratios because of available unused lines of revolving credit of $50
million and available unused lines of short-term credit of $28
million on April 1, 1995. Cash and cash items increased $16.1
million to $57.1 million at April 1, 1995 from $41.0 million at
December 31, 1994. This increase is primarily the result of cash
provided by operating activities partially reduced by cash used in
investing activities.
Cash provided by operating activities was $41.0 million in the first
quarter of 1995, an increase of $8.5 million over the $32.5 million
provided in the first quarter of 1994. This increase is primarily
attributable to improved results of operations and higher
depreciation and amortization coupled with a decreased investment in
working capital. Inventories decreased $8.3 million in the first
quarter of 1995 as the Company continues to apply buying practices
designed to meet its product distribution needs in a more efficient
and cost effective manner.
Cash used in investing activities increased $14.2 million during the
first quarter of 1995 to $22.2 million from $8.0 million during the
first quarter of 1994. This increase is primarily the result of
increased capital expenditures during the quarter. These first
quarter capital expenditures are primarily composed of costs incurred
in meeting the Company's 1995 capital program. Total capital
expenditures totalled $22.6 million in the first quarter of 1995 and
were composed of $18.4 million in additions to property, plant and
equipment and $4.2 million in deferred charges and computer software
costs. During the next three quarters the Company expects to open 14
supermarkets including 7 stores in four new southeastern markets, and
three new stores, as well as four relocations, in the Northeast.
The Company expects to spend in the range of $170 million in 1995 for
capital expenditures. This program is subject to continuing change
and review as conditions warrant. Net square footage of retail
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIRST QUARTER 1995 RESULTS
selling space is expected to increase by approximately 12% by year-
end 1995. The 1995 capital program is expected to be financed by
cash and cash items, internally generated funds and leases.
Cash used in financing activities was $2.7 million in the first
quarter of 1995 as compared to $5.0 million in the first quarter of
1994. The Company continues to maintain a strong capital structure.
Management believes that maintaining such financial flexibility
provides a significant competitive advantage and allows the Company
to be opportunistic in terms of acquisitions and expansions.
<PAGE>
PART II
Item 5: Other Information
A limited review was made of the results of the three-month period
ended April 1, 1995, by Coopers & Lybrand. No adjustments were proposed
by Coopers & Lybrand during the course of their review.
Item 6: Exhibits and Reports on Form 8-K
(a) There were no reports on Form 8-K filed during the first quarter.
(b) Exhibits required by Item 601 of Regulation S-K
15 Letter from Coopers & Lybrand L.L.P. furnished pursuant to
Regulation S-X.
23 Letter from Coopers & Lybrand L.L.P furnished pursuant to
Rule 436(c) under the Securities Act of 1933.
27 Financial Data Schedule
SIGNATURES
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.
HANNAFORD BROS. CO.
Date May 9, 1995 s/Norman E. Brackett
Norman E. Brackett
Senior Vice President
(Chief Financial Officer)
Date May 9, 1995 s/Charles H. Crockett
Charles H. Crockett
Assistant Secretary
Exhibit 15
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Hannaford Bros. Co.:
We have reviewed the accompanying consolidated balance sheet of Hannaford
Bros. Co. and Subsidiaries as of April 1, 1995, and the related consolidated
statements of earnings and cash flows for the three month periods ended April
1, 1995, and April 2, 1994. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
We previously audited and expressed an unqualified opinion on the Company's
consolidated financial statements for the year ended December 31, 1994 (not
presented herein). In our opinion, the information set forth in the
accompanying balance sheet as of December 31, 1994, is fairly stated in all
material respects, in relation to the statement of financial position from
which it has been derived.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
s/Coopers & Lybrand L.L.P.
Portland, Maine
April 20, 1995
Exhibit 23
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
RE: Hannaford Bros. Co.
Registrations on Form S-8
We are aware that our report dated April 20, 1995, on our review of interim
financial information of Hannaford Bros. Co. and Subsidiaries as of April 1,
1995 and for the three month periods ended April 1, 1995 and April 2, 1994,
and included in this Form 10-Q is incorporated by reference in the Company's
registration statements on Form S-8 (Numbers 2-77902, 2-77903, 2-98387,
33-1281, 33-22666, 33-31624 and 33-45273). Pursuant to Rule 436(c) under the
Securities Act of 1933, this report should not be considered a part of the
Registration Statements prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
s/Coopers & Lybrand L.L.P.
Portland, Maine
May 5, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> APR-01-1995
<CASH> 57,063
<SECURITIES> 0
<RECEIVABLES> 11,775
<ALLOWANCES> 237
<INVENTORY> 124,137
<CURRENT-ASSETS> 205,294
<PP&E> 772,701
<DEPRECIATION> 263,773
<TOTAL-ASSETS> 886,894
<CURRENT-LIABILITIES> 155,972
<BONDS> 220,883
<COMMON> 31,471
0
0
<OTHER-SE> 436,959
<TOTAL-LIABILITY-AND-EQUITY> 886,894
<SALES> 598,796
<TOTAL-REVENUES> 598,796
<CGS> 452,842
<TOTAL-COSTS> 452,842
<OTHER-EXPENSES> 116,156
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,395
<INCOME-PRETAX> 24,403
<INCOME-TAX> 9,839
<INCOME-CONTINUING> 14,564
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,564
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
