<PAGE> UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------------------
FORM 10-Q
(Mark one)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 24, 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 1-8452
-----------------------
THE VONS COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Michigan 38-1623900
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
618 Michillinda Avenue, Arcadia, California 91007
(Address of principal executive offices and zip code)
Registrant's Telephone Number, Including Area Code (818)821-7000
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
-----------------------
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
---- ----
Shares of common stock outstanding at April 24, 1996 - 43,694,395<PAGE>
<PAGE>
<TABLE>
PART 1. FINANCIAL INFORMATION
Item 1: Financial Statements
THE VONS COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
All amounts except share data in millions of dollars
and as a percentage of sales
(Unaudited)
<CAPTION>
Twelve Weeks Ended
-----------------------------------------------
March 24, 1996 March 26, 1995
-------------------- --------------------
<S> <C> <C> <C> <C>
Sales................................. $ 1,205.6 100.0% $ 1,142.5 100.0%
----------- ------ ----------- ------
Costs and expenses:
Cost of sales, buying and occupancy. 898.3 74.5 851.0 74.5
Selling and administrative expenses. 258.5 21.4 245.9 21.5
Amortization of excess cost over
net assets acquired............... 3.5 .3 3.4 .3
----------- ------ ----------- ------
1,160.3 96.2 1,100.3 96.3
----------- ------ ----------- ------
Operating income...................... 45.3 3.8 42.2 3.7
Interest expense, net................. 13.5 1.2 16.1 1.4
----------- ------ ----------- ------
Income before income tax provision.... 31.8 2.6 26.1 2.3
Income tax provision.................. 14.3 1.1 12.1 1.1
----------- ------ ----------- ------
Net income............................ 17.5 1.5 14.0 1.2
------ ------
------ ------
Retained earnings - beginning of
period.............................. 275.9 207.8
----------- -----------
Retained earnings - end of period..... $ 293.4 $ 221.8
----------- -----------
----------- -----------
Income per common and common
equivalent share:
Net income.......................... $ .39 $ .32
----------- -----------
----------- -----------
Weighted average common and common
equivalent shares................... 44,503,000 43,753,000
----------- -----------
----------- -----------
<FN>
See accompanying notes to these condensed consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE VONS COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
All amounts in millions of dollars
(Unaudited)
ASSETS
<CAPTION>
March 24, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Current assets:
Cash...................................... $ 7.0 $ 9.4
Accounts receivable....................... 36.8 31.7
Inventories............................... 341.2 350.7
Other..................................... 60.5 60.5
--------- ------------
Total current assets.................... 445.5 452.3
Property and equipment, net................. 1,195.4 1,192.5
Excess of cost over net assets acquired..... 479.3 482.8
Other....................................... 58.8 58.9
--------- ------------
TOTAL ASSETS................................ $ 2,179.0 $ 2,186.5
--------- ------------
--------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long term debt and
capital lease obligations............... $ 24.5 $ 25.7
Accounts payable.......................... 297.6 304.2
Accrued liabilities....................... 291.5 263.5
--------- ------------
Total current liabilities............... 613.6 593.4
Accrued self-insurance...................... 131.8 128.0
Deferred income taxes....................... 121.2 118.9
Other noncurrent liabilities................ 63.6 65.0
Senior debt and capital lease obligations... 298.7 352.2
Subordinated debt, net...................... 306.4 305.7
--------- ------------
Total liabilities......................... 1,535.3 1,563.2
--------- ------------
Shareholders' equity:
Common stock.............................. 4.4 4.3
Paid-in capital........................... 346.0 343.2
Retained earnings......................... 293.4 275.9
Notes receivable for stock................ (.1) (.1)
--------- ------------
Total shareholders' equity.............. 643.7 623.3
--------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.. $ 2,179.0 $ 2,186.5
--------- ------------
--------- ------------
<FN>
See accompanying notes to these condensed consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
THE VONS COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
All amounts in millions of dollars
(Unaudited)
<CAPTION>
Twelve Weeks Ended
-----------------------
March 24, March 26,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................. $ 17.5 $ 14.0
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization of property and capital
leases................................................ 22.9 23.1
Amortization of excess cost over net assets acquired
and other assets...................................... 3.7 3.6
Amortization of debt discount and deferred financing
costs................................................. 1.5 1.5
LIFO charge............................................. 1.6 .8
Deferred income taxes................................... 2.3 6.7
Change in assets and liabilities:
(Increase) decrease in accounts receivable.......... (5.1) 9.4
(Increase) decrease in inventories at FIFO costs.... 7.9 18.8
(Increase) decrease in other current assets......... - (8.1)
(Increase) decrease in noncurrent assets............ (1.5) (1.7)
Increase (decrease) in accounts payable............. (5.5) (16.3)
Increase (decrease) in accrued liabilities.......... 28.0 13.3
Increase (decrease) in noncurrent liabilities....... 2.4 4.4
--------- ---------
Net cash provided by operating activities..................... 75.7 69.5
--------- ---------
Cash flows from investing activities:
Addition of property and equipment.......................... (27.1) (16.7)
Disposal of property and equipment.......................... 1.9 2.0
--------- ---------
Net cash used by investing activities......................... (25.2) (14.7)
--------- ---------
Cash flows from financing activities:
Net payments on revolving debt.............................. (50.8) (37.9)
Decrease in net outstanding drafts.......................... (1.1) (14.4)
Repurchases of senior subordinated debentures............... - (1.4)
Payments on other debt, capital lease obligations and other. (1.0) (3.6)
--------- ---------
Net cash used by financing activities......................... (52.9) (57.3)
--------- ---------
Net cash decrease............................................. (2.4) (2.5)
Cash at beginning of period................................... 9.4 9.0
--------- ---------
Cash at end of period......................................... $ 7.0 $ 6.5
--------- ---------
--------- ---------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest................................................ $ 7.0 $ 8.2
--------- ---------
--------- ---------
Income taxes............................................ $ 2.1 $ .7
--------- ---------
--------- ---------
Supplemental disclosures of non-cash investing and
financing activity:
Capital leases.......................................... $ 5.7 $ -
--------- ---------
--------- ---------
<FN>
See accompanying notes to these condensed consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
THE VONS COMPANIES,INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The financial data included herein have been prepared
by the Company without audit. In the opinion of management,
all adjustments of a normal recurring nature necessary to
present fairly the Company's consolidated financial position
at March 24, 1996 and December 31, 1995 and the consolidated
results of operations and cash flows for the twelve weeks
ended March 24, 1996 and March 26, 1995 have been made.
This interim information should be read in conjunction with
the consolidated financial statements and notes thereto
included in the Company's latest annual report filed on Form
10-K. Due to seasonality and other market conditions,
the results for the twelve weeks ended March 24, 1996 should
not be considered as indicative of the results to be expected
for a full year.
At March 24, 1996, the Company operated 329
supermarket and food and drug combination retail stores,
under the names Vons and Pavilions. The Company's
marketing territory includes Southern and Central California
and Clark County, Nevada. The Company also operates a fluid
milk processing facility, an ice cream plant, a bakery,
and distribution facilities for meat, grocery, produce and
general merchandise to support the store network.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations (Unaudited)
Results of Operations
Twelve Weeks Ended March 24, 1996 Compared with the Twelve Weeks
Ended March 26, 1995
Sales. First quarter 1996 sales were $1,205.6
million, an increase of $63.1 million, or 5.5%, over first
quarter 1995 sales. Same store sales increased 4.2% over
first quarter 1995 sales. The increase in sales reflects
the favorable consumer response to improved customer service,
the "Vons Is Value" marketing campaign and the improving
economic environment in Southern California. Since
March 26, 1995, the Company has opened 16 stores,
closed 12 stores and completed 34 store remodel projects.
Costs and Expenses. Cost of sales and buying and
occupancy expenses as a percentage of sales in first quarter
1996 of 74.5% were flat compared with first quarter 1995.
The cost of increased promotional activities in first quarter
1996 was offset by benefits achieved from category management
and increased private brand sales. Selling and administrative
expenses as a percentage of sales decreased by 0.1 percentage
point to 21.4% in first quarter 1996. The cost of higher store
service levels was fully offset by a more efficient mix of store
labor.
Operating Income. First quarter 1996 operating income
was $45.3 million, or 3.8% of sales, versus $42.2 million,
or 3.7% of sales. Operating income before depreciation
and amortization of property, amortization of goodwill and
other assets and LIFO charge ("FIFO EBITDA") was $73.5
million, or 6.1% of sales, in first quarter 1996 compared
with $69.7 million, or 6.1% of sales, in first quarter 1995.
Interest Expense. First quarter 1996 net interest
expense was $13.5 million, a decrease of $2.6 million, or
16.1%, from first quarter 1995. This decrease was due
primarily to lower average debt borrowings.
Income Tax Provision. First quarter 1996 income tax
provision was $14.3 million, or a 45.0% effective tax rate.
First quarter 1995 income tax provision was $12.1 million,
or a 46.3% effective tax rate. The decrease in the first
quarter 1996 effective tax rate reflects the increase in
income before income tax provision. The effective tax rate
is impacted by amortization of excess cost over net assets
acquired, the majority of which is not deductible for tax
purposes.
Income. First quarter 1996 net income was $17.5 million,
or $.39 per share, compared with $14.0 million, or $.32 per
share, in first quarter 1995.
Liquidity and Capital Resources
The Company's primary sources of liquidity are cash
flows from operations and available credit under its Revolving
Loan. Management believes that these sources adequately
provide for its working capital, capital expenditure and
debt service needs.
Net cash provided by operating activities was $75.7
million in first quarter 1996 compared with $69.5 million
in first quarter 1995. The ratio of current assets to
current liabilities was 0.73 to 1 at March 24, 1996 compared
with 0.76 to 1 at December 31, 1995.
Net cash used by investing activities was $25.2 million
in first quarter 1996 compared with $14.7 million in first
quarter 1995. The Company opened four stores, closed
three stores and completed seven store remodel projects
during the twelve weeks ended March 24, 1996. Capital
expenditures in 1996 have been and will continue to be
funded out of cash provided by operations, the Revolving
Loan and/or through operating leases. The capital
expenditure program has substantial flexibility and is
subject to revision based on various factors including,
but not limited to, business conditions, changing time
constraints, cash flow requirements and competitive factors.
In the near term, if the Company were to reduce substantially
or postpone these programs, there would be no substantial
impact on current operations and it is likely that more
cash would be available for debt servicing. In the long term,
if these programs were substantially reduced, in the
Company's opinion, its operating business and ultimately
its cash flow would be adversely impacted.
Net cash used for financing activities was $52.9 million
in first quarter 1996 compared with $57.3 million in first
quarter 1995. The level of borrowings under the Company's
revolving debt is dependent primarily upon net cash provided
by operating activities and capital expenditure requirements.
At March 24, 1996, the Company's revolving debt borrowings
totaled $127.0 million compared with the December 31, 1995
revolving debt borrowings of $177.8 million. This decrease
primarily reflects the excess of cash provided from operating
activities of $75.7 million over capital expenditures of
$27.1 million. At March 24, 1996, the Company had available
unused credit of $497.9 million under its Revolving Loan.
For the twelve weeks ended March 24, 1996, the weighted
average interest cost on revolving debt was 7.2%; the
corresponding bank prime rate at March 24, 1996 was 8.25%.
Cautionary Statement for Purposes of "Safe Harbor Provisions"
of the Private Securities Litigation Reform Act of 1995
Except for historical facts, all matters discussed in
this report which are forward looking involve risks and
uncertainties. Potential risks and uncertainties include,
but are not limited to, competitive pressures from other
major supermarket operators, economic conditions in the
Company's primary markets and the other uncertainties
detailed from time to time in the Company's Securities
and Exchange Commission filings.<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10.11.2 Amendment 1996-1 dated
February 20, 1996 to The
Vons Companies, Inc, 401(k)
Wraparound Plan effective
January 1, 1996.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the
quarter ended March 24, 1996.
<PAGE>
<PAGE>
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.
THE VONS COMPANIES, INC.
Date: April 26, 1996 /s/ LAWRENCE A. DEL SANTO
-- -----------------------------------
Lawrence A. Del Santo
Chairman and Chief
Executive Officer
Date: April 26, 1996 /s/ PAMELA K. KNOUS
-- -----------------------------------
Pamela K. Knous
Executive Vice President,
Chief Financial Officer and
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Consolidated Statement of Operations for the twelve weeks
ended March 24, 1996, the Consolidated Balance Sheet as of March 24, 1996
and the accopanying notes thereto and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-24-1996
<CASH> 7,000
<SECURITIES> 0
<RECEIVABLES> 36,800
<ALLOWANCES> 0
<INVENTORY> 341,200
<CURRENT-ASSETS> 445,500
<PP&E> 1,732,500
<DEPRECIATION> 537,100
<TOTAL-ASSETS> 2,179,000
<CURRENT-LIABILITIES> 613,600
<BONDS> 605,100
0
0
<COMMON> 4,400
<OTHER-SE> 639,300
<TOTAL-LIABILITY-AND-EQUITY> 2,179,000
<SALES> 1,205,600
<TOTAL-REVENUES> 1,205,600
<CGS> 898,300
<TOTAL-COSTS> 1,160,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,500
<INCOME-PRETAX> 31,800
<INCOME-TAX> 14,300
<INCOME-CONTINUING> 17,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,500
<EPS-PRIMARY> 0.39
<EPS-DILUTED> 0.39
</TABLE>
EXHIBIT 10.11.2
AMENDMENT 1996-1
THE VONS COMPANIES,INC.
401(k) WRAPAROUND PLAN
WHEREAS, The Vons Companies, Inc. ("Company") maintains
The Vons Companies, Inc, 401(k) Wraparound Plan ("Plan");
WHEREAS, the Compensation Committee has the right to
amend the Plan; and
WHEREAS, the Compensation Committee now desires to
amend the Plan to provide that newly-hired officers may
participate in the Plan in their initial year of employment,
without regard to whether their compensation will exceed the
limit under Section 401(a)(17) of the Internal Revenue Code,
and to conform with certain changes made to Vons Personal
Choice Profit Sharing Plan;
NOW, THEREFORE, this Amendment 1996-1 is hereby adopted
effective January 1, 1996, except as specified below:
1. The definition of Account contained in Section 2.1
is amended to read as follows:
"Account shall mean the account maintained for each
-------
Participant to reflect (i) the Compensation (and, prior to
1995, the Profit-related Flexdollar Contributions) deferred
by the Participant, (ii) the Company Match, (iii) the
Discretionary Company Match, (iv) the Make-up Company
Contribution, and (v) Investment Equivalents."
2. The definition of Company Match is amended to read
as follows:
"Company Match shall mean the additional amount credited
-------------
to a Participant's Account as described in Section 5.2."
3. The definition of Compensation contained in
Section 2.1 is amended by adding the following to the end of
the definition:
"Effective January 1, 1995, Compensation means Compensation
as defined in the Profit Sharing Plan, but including amounts
deferred under this Plan, and without regard to the
limitation under Code Section 401(a)(17)."
4. The following new definition of Make-up Company
Contribution is hereby added to Section 2.1:
"Make-up Company Contribution shall mean the amount credited
----------------------------
to a Participant's Account as described in Section 5.6."
2
5. The following is hereby added to the end of the
definition of "Profit-related Flexdollar Contribution" contained
in Section 1.2:
"Effective January 1, 1995, there shall be no further
Profit-related Flexdollar Contributions to this Plan. Any
reference to Profit-related Flexdollar Contributions shall
apply only to such contributions made prior to January 1,
1995."
6. The following is hereby added to the end of
Article III:
"The Compensation Committee may designate any officer of the
Company who is a management or highly compensated employee
as being eligible for participation in the Plan for the Plan
Year during which such officer was initially employed by the
Company, notwithstanding the fact that such officer's
Compensation for such Plan Year does not exceed the limit
under Section 401(a)(17) of the Code. Such an officer shall
be considered eligible to participate in the Plan as of the
date specified by the Compensation Committee, and may make
the mid-year deferral election described in Section 4.2.
For 1995 only, the Compensation Committee may also designate
any officer as a Participant for purposes of the
contribution described in Section 5.7; provided that
officers so designated shall no be entitled to make other
3
deferral or receive allocation of other contributions for
1995."
7. Section 4.1(d) is deleted.
8. Section 5.1 is amended by adding the following to
the end of the section:
"Effective for Plan Years commencing on or after January 1,
1995, the Account for each Participant shall be credited
with the Make-up Company Contribution calculated pursuant to
Section 5.6."
9. Section 5.2 is amended by adding the following to
the end of the section:
"Effective January 1, 1996, the Company Match shall be
equal to 1% of the Participant's Contribution in excess of
the limitation under Code Section 401(a)(17) applicable for
the Plan Year. The Company Match shall only be allocated to
Participants who contribute, for the entire Plan Year, at
least 1% of their Compensation in excess of the limitation
under Code Section 401(a)(17). Effective January 1, 1996,
the Company Match shall be credited to the Participant's
Account as of the December 31 of the Plan Year in which such
amount is earned; provided, however, that the Investment
Equivalents on such amounts shall commence to be credited as
4
of the following January 1. No Company Match shall be
credited for 1995."
10. The following is hereby added at the end of the
first paragraph of Section 5.4:
"The new rate of return established by the Compensation
Committee as a Investment Equivalent shall apply to the
Make-up Company Contribution for the Plan Year for which the
new rate of return is established, as well as the Make-up
Company Contribution previously credited for previous Plan
Years."
11. The following new Section 5.6 is hereby added to
the Plan:
"5.6 Make-up Company Contribution. The Plan Committee shall
----------------------------
credit the Account of each Participant described below with
a Make-up Company Contribution equal to 5% (6% for 1995
only) of the Participant's Compensation in excess of the
limitation under Code Section 401(a)(17) applicable to the
Plan Year. A Participant is eligible for the Make-up
Company Contribution in a Plan Year only if he is eligible
to receive the Company contribution under the Profit Sharing
Plan for such year. The Make-up Company Contribution shall
be credited to the Participant's Account as of December 31
of the relevant Plan Year; provided, however, that the
5
Investment Equivalents on such amounts shall commence to be
credited as of the following January 1."
12. The following new Section 5.7 is hereby added to
the Plan:
"5.7 Company Contribution for Newly Hired Officers. The
---------------------------------------------
Plan Committee shall credit to the Account of those newly-
hired officers who were designated by the Compensation
Committee (pursuant to Article III) for participation in the
Plan for the Plan Year during which they were initially
employed, with an amount equal to 5% of all of the
Participant's Compensation, plus an additional 1% of the
Participant's Compensation, but the additional 1% shall only
be credited if the Participant contributes at least 1% of
Compensation to the Plan for the entire Plan Year. The
contributions credited under this Section 5.7 shall be in
lieu of the Company Match under Section 5.2 and the Make-up
Company Contribution under Section 5.6. For 1995 only, an
officer designated by the Compensation Committee as being
eligible for the contribution described in this Section
shall have 6% of his 1995 Compensation allocated to his
Account."
13. Article VI is hereby amended by adding the
following to the end of the section:
6
"The Discretionary Company Match, and the Investment
Equivalents attributed thereto, if any, credited to a
Participant's Account shall vest at such times as provided
under the vesting schedule contained in the Profit Sharing
Plan as of January 1, 1994, without respect to any
subsequent amendments to the Profit Sharing Plan."
IN WITNESS WHEREOF, this Amendment 1996-1 is hereby
adopted this 20th day of February, 1996.
----
THE VONS COMPANIES, INC.
By /s/ TERRENCE J. WALLOCK
--------------------------------------
Terrence J. Wallock
Its Executive Vice President,
-------------------------------------
General Counsel and Secretary
4
