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 March 30, 1996
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, 1996, there were 42,309,842 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, March 30, 1996 and
December 30, 1995 3-4
Consolidated Statements of Earnings, Three Months
Ended March 30, 1995 and April 1, 1995 5
Consolidated Statements of Cash Flows,
Three Months Ended March 30, 1996
and April 1, 1995 6-7
Notes and Schedules to Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of
First Quarter 1996 Results 11-15
PART II
Item 5. Other Information and Signatures 16
Item 6. Exhibits and Reports on Form 8-K 16
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
(UNAUDITED)
March 30, December 30,
1996 1995
Current assets:
Cash and cash items $ 34,078 $ 7,017
Accounts receivable, net 14,514 15,556
Inventories 151,399 157,968
Prepaid expenses 7,679 7,217
Deferred income taxes 6,425 6,584
Total current assets 214,095 194,342
Property, plant and equipment, net 595,381 577,126
Leased property under capital leases, net 55,725 56,691
Other assets:
Goodwill, net 92,276 93,348
Deferred charges, net 28,117 27,484
Computer software costs, net 10,931 10,063
Miscellaneous assets 2,550 2,776
Total other assets 133,874 133,671
$999,075 $961,830
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)
March 30, December 30,
1996 1995
Current liabilities:
Current maturities of long-term debt $ 10,720 $ 11,246
Obligations under capital leases 1,547 1,467
Accounts payable 106,111 113,846
Accrued payroll 18,565 20,652
Other accrued expenses 23,464 23,619
Income taxes 7,742 -
Total current liabilities 168,149 170,830
Deferred income tax liabilities 23,391 23,229
Other liabilities 37,627 28,699
Long-term debt 173,844 150,648
Obligations under capital leases 69,332 69,747
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;
March 30, 1996: Issued, 42,338,316
shares, outstanding 42,303,119 shares.
December 30, 1995: Issued and
outstanding 42,298,230 shares. 31,754 31,724
Additional paid-in capital 121,402 121,974
Preferred stock purchase rights 423 423
Retained earnings 374,153 364,556
527,732 518,677
Less common stock in treasury
(35,197 shares at cost) 1,000 -
Total shareholders' equity 526,732 518,677
$999,075 $961,830
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
March 30, April 1,
1996 1995
Sales and other revenues $690,525 $598,796
Cost of sales 522,689 452,842
Gross margin 167,836 145,954
Selling, general and administrative expenses 138,063 116,156
Operating profit 29,773 29,798
Interest expense, net 5,468 5,395
Earnings before income taxes 24,305 24,403
Income taxes 9,631 9,839
Net earnings $ 14,674 $ 14,564
Per share of common stock:
Net earnings $ .35 $ .35
Cash dividends $ .120 $ .105
Weighted average number of common shares
outstanding 42,305 41,888
See accompanying notes to consolidated financial statements.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(UNAUDITED)
THREE MONTHS ENDED
March 30, April 1,
1996 1995
Cash flows from operating activities:
Net income $ 14,674 $ 14,564
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 17,785 16,825
Decrease in inventories 6,569 8,286
Decrease in receivables and
prepayments 768 4,160
Decrease in accounts payable
and accrued expenses (1,049) (7,036)
Increase in income taxes payable 7,742 4,894
Increase (decrease) in deferred taxes 320 (627)
Other operating activities 193 (31)
Net cash provided by operating
activities 47,002 41,035
Cash flows from investing activities:
Acquisition of property, plant and
equipment (34,182) (18,366)
Sale of property, plant and
equipment, net 1,465 400
Increase in deferred charges (1,521) (3,293)
Increase in computer software costs (1,420) (919)
Net cash used in investing activities (35,658) (22,178)
Cash flows from financing activities:
Principal payments under capital
lease obligations (335) (355)
Proceeds from issuance of long-term debt 36,000 --
Payments of long-term debt (13,330) (1,784)
Issuance of common stock 4,100 3,794
Purchase of treasury stock (5,642) --
Dividends paid (5,076) (4,404)
Net cash provided by (used in)
financing activities 15,717 (2,749)
Net increase in cash and cash items 27,061 16,108
Cash and cash items at beginning of period 7,017 40,955
Cash and cash items at end of period $ 34,078 $ 57,063
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
March 30, April 1,
Cash paid during the first quarter for: 1996 1995
Interest (net of amount capitalized,
$516 in 1996 and $287 in 1995) $4,040 $4,448
Income taxes $ 327 $5,572
Disclosure of accounting policy
For the purposes of the Consolidated Statements of Cash Flows, the
Company considers all highly liquid debt instruments with
maturities of three months or less when purchased, 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. The year-end consolidated balance sheet was
derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
Earnings per share of common stock have been determined by dividing
net earnings 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.
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)
March 30, December 30,
1996 1995
Land and improvements $ 90,001 $ 90,430
Buildings 229,939 228,858
Furniture, fixtures & equipment 348,040 333,492
Leasehold interests & improvements 201,960 188,730
Construction in progress 20,101 16,179
890,041 857,689
Less accumulated depreciation and
amortization 294,660 280,563
$595,381 $577,126
3. LEASED PROPERTY
Leased property under capital leases consists of the following:
(In thousands)
(Unaudited)
March 30, December 30,
1996 1995
Real property $76,457 $76,457
Less accumulated amortization 20,732 19,766
$55,725 $56,691
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
4. LONG-TERM DEBT
In February 1996, the Company received $36 million of proceeds of a
$75 million senior uncollateralized debt financing, with the balance
to be received in May 1996. The terms of these notes range from 7 to
20 years with a weighted average life of 9 years. Interest rates on
the notes vary from 6.2% to 7.1% with a weighted average rate of
6.6%. The amounts of annual principal payments vary over the terms
of the loans.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIRST QUARTER 1996
RESULTS
RESULTS OF OPERATIONS
SALES
Sales and other revenues rose 15.3% for the first quarter of 1996,
to $690.5 million, an increase of $91.7 million over the first
quarter of 1995. Retail sales increased $89.0 million or 15.4% to
$667.5 million, reflecting an increase of $22.0 million or 3.8% in
sales from supermarkets that were open in both periods presented
("same store sales") and additional sales of $67.0 million from
the net impact of new, expanded and closed stores. Other sales
and revenues, which include wholesale, trucking, real estate and
miscellaneous retail operations, increased $2.7 million.
Same store sales were up 3.8% this year as compared to 1.2% in the
first quarter of 1995 and 2.5% for the full year 1995. The
Company attributes a portion of this increase to the conversion of
its private brand product from Shop n Save to Hannaford. The
1996 increase sustains a positive trend that started in late 1993.
GROSS MARGIN
During the first three months of 1996, gross margins decreased to
24.3% of sales and other revenues in comparison to 24.4% for the
comparable 1995 period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to 20.0% of
sales and other revenues in the first quarter of 1996 as compared
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIRST QUARTER 1996 RESULTS
to 19.4% in the first quarter of 1995. This increase is
principally the result of additional costs of establishing the
Company's position in its southeastern markets.
INCOME TAXES
The effective income tax rate decreased in the first quarter of
1996 to 39.6% from 40.3% in the first quarter of 1995. This lower
rate is the result of a reduction in the Company's overall
state income tax rate. The Company expects the effective tax
rate to be in the 39% to 40% range for fiscal 1996.
NET EARNINGS
Net earnings increased 0.8% in the first quarter of 1996 to $14.7
million or 2.1% of sales and other revenues, an increase of $0.1
million from 1995 first quarter earnings of $14.6 million or 2.4%
of sales and other revenues. Expressed as a percentage of sales,
net earnings decreased in the first quarter of 1996 as increased
selling, general and administrative expenses were only partially
offset by a reduction in the Company's income tax provision. In
1995, the Company stated that its store opening schedule was
heavily weighted toward the end of the year and would change the
quarterly mix of earnings in 1995 from that of prior years. The
Company reported strong percentage increases in net earnings in
the first half of 1995 and lower percentage increases in net
earnings in the second half of 1995 than it would have under a
more normal opening schedule. Due to increased costs that
continue to be incurred in the establishment of supermarkets in
its new southeastern markets, the Company anticipates 1996 first
half net earnings comparisons to 1995 to be relatively flat. The
Company anticipates stronger comparative performance in the second
half of the year.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIRST QUARTER 1996 RESULTS
CAPITAL RESOURCES AND LIQUIDITY
GENERAL
The current ratio (FIFO basis) on March 30, 1996 was 1.37 while
working capital (FIFO basis) was $61.7 million, or 6.2% of total
assets. On December 30, 1995, the current ratio (FIFO basis) was
1.23 while working capital (FIFO basis) was $39.1 million, or 4.1%
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 $15.8
million on March 30, 1996 and $15.6 million on December 30, 1995.
The Company's liquidity position is stronger than indicated by
stated working capital and current ratios because of available
unused lines of revolving credit of $75.0 million and available
unused lines of short-term credit of $43.9 million on March 30,
1996. In addition, the Company will be receiving the remaining
proceeds of $39.0 million in May 1996 on its $75.0 million debt
offering of senior uncollateralized notes. Cash and cash items
increased $27.1 million to $34.1 million at March 30, 1996 from
$7.0 million at December 30, 1995. This increase is primarily the
result of cash provided by operating and financing activities
partially offset by cash used in investing activities.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash provided by operating activities was $47.0 million in the
first quarter of 1996, an increase of $6.0 million over the $41.0
million provided in the first quarter of 1995. This increase is
primarily attributable to higher depreciation and amortization
coupled with a decreased investment in working capital.
Inventories decreased $6.6 million in the first quarter of 1996
due primarily to seasonal buying patterns.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIRST QUARTER 1996 RESULTS
CASH FLOWS FROM INVESTING ACTIVITIES
Cash used in investing activities increased $13.5 million during
the first quarter of 1996 to $35.7 million from $22.2 million
during the first quarter of 1995. This increase is primarily the
result of increased capital expenditures during the quarter.
Total capital expenditures totaled $37.1 million in the first
quarter of 1996 and were composed of $34.2 million in additions to
property, plant and equipment and $2.9 million in deferred charges
and computer software costs. These first quarter capital
expenditures are primarily composed of costs incurred in meeting
the Company's 1996 capital program. The Company expects to spend
approximately $200 million on new, relocated and expanded stores
to open in 1996 and 1997, a new distribution facility currently
under construction in Butner, North Carolina, and improvements
necessary to maintain current facilities and systems.
In January 1996, the Company opened a new supermarket in South
Burlington, Vermont, with approximately 33,000 square feet of
retail selling space which replaced a smaller, outdated facility.
In March 1996 the Company opened a new supermarket in Norfolk,
Virginia with approximately 34,000 square feet of retail selling
space. During the next three quarters, the Company expects to
open 17 supermarkets including 7 new stores, 2 relocations
and 3 expansions in the Southeast as well as 3 new stores, 1
relocation and 1 expansion in the Northeast. This program is
subject to continuing change and review as conditions warrant.
Net square footage of retail selling space is expected to increase
by over 10% in 1996. Also, construction will commence on a number
of stores to open in 1997 with emphasis on additional stores
in several southeastern markets. The 1996 capital program is
being financed by internally generated funds, long-term debt and
leases.
<PAGE>
HANNAFORD BROS. CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FIRST QUARTER 1996 RESULTS
CASH FLOWS FROM FINANCING ACTIVITIES
Cash provided by financing activities was $15.7 million in the
first quarter of 1996 as compared to $(2.7) million in the first
quarter of 1995. This increase of $18.4 million is the result of
proceeds from the issuance of long-term debt (Note 4) partially
offset by payments of long-term debt and purchases of treasury
stock. During the first quarter of 1996 the Company utilized a
portion of its debt proceeds to repay $11.4 million on its
revolving lines of credit. On March 30, 1996, there were no
borrowings on these lines of credit. The Company repurchased
198,422 shares of common stock during the first quarter at a cost
of $5.6 million. This repurchased stock is being held in treasury
and used in funding the Company's stock based benefit plans.
Previously, the Company used new shares to fund certain benefit
plans.
<PAGE>
PART II
Item 5: Other Information
A limited review was made of the results of the three-month
period ended March 30, 1996, by Coopers & Lybrand L.L.P.
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 6, 1996 /s/Blythe J. McGarvie
Blythe J. McGarvie
Senior Vice President
(Chief Financial Officer)
Date May 6, 1996 /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 March 30, 1996, and the related consolidated
statements of earnings and cash flows for the three month periods ended March
30, 1996, and April 1, 1995. 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 30, 1995 (not
presented herein). In our opinion, the information set forth in the
accompanying balance sheet as of December 30, 1995, 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 17, 1996
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 17, 1996 on our review of interim
financial information of Hannaford Bros. Co. and Subsidiaries as of March 30,
1996, and for the three month periods ended March 30, 1996 and April 1, 1995,
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, 33-45273, 33-60119, 33-60655 and 33-60691).
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 3, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 34,078
<SECURITIES> 0
<RECEIVABLES> 14,727
<ALLOWANCES> 213
<INVENTORY> 151,399
<CURRENT-ASSETS> 214,095
<PP&E> 890,041
<DEPRECIATION> 294,660
<TOTAL-ASSETS> 999,075
<CURRENT-LIABILITIES> 168,149
<BONDS> 243,176
0
0
<COMMON> 31,754
<OTHER-SE> 494,978
<TOTAL-LIABILITY-AND-EQUITY> 999,075
<SALES> 690,525
<TOTAL-REVENUES> 690,525
<CGS> 522,689
<TOTAL-COSTS> 522,689
<OTHER-EXPENSES> 138,063
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,468
<INCOME-PRETAX> 24,305
<INCOME-TAX> 9,631
<INCOME-CONTINUING> 14,674
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,674
<EPS-PRIMARY> .35
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