SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 2, 1994
Commission File Number 0-12923
Delchamps, Inc.
______________________________________________
(Exact name of registrant as
specified in its charter)
Alabama 63-0245434
_________________________________ __________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification Number)
305 Delchamps Drive Mobile, AL 36602
__________________________________ _________________
(Address of principal executive (Zip Code)
offices)
(205) 433-0431
_________________________
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12 (g) of the Act: Common
Stock, $.01 par value.
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 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 _____
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held
by non-affilates (affiliates being directors, executive officers
and holders of more than 5% of the Company's common stock) of the
Registrant at August 25, 1994 was at $94,000,000.
The number of shares of Registrant's common stock, par
value one cent ($.01) per share, outstanding at August 25, 1994, was
7,113,581.
Documents incorporated by reference: Parts II and IV
incorporate by reference portions of the Company's 1994 Annual Report
to shareholders. Portions of the Company's definitive Proxy Statement
for its 1994 annual meeting of shareholders (the "Proxy Statement")
is incorporated by reference into Part III.
The Exhibit Index follows the schedules of this document.
PART I
_________
Item 1. Business
_________ __________
(a) The Registrant, Delchamps, Inc. (the "Company") is a
corporation which was organized under the laws of the State of
Alabama in 1946; from the Company's founding in 1921 until it
was incorporated, it operated as a partnership. The Company
operates a chain of supermarkets under the name "Delchamps" in
Alabama, Florida, Louisiana, and Mississippi and has operated
continuously for over 70 years.
The number of supermarkets operated by the Company has
grown from 110 at June 30, 1990 to 115 at June 27, 1992, and
120 at July 2, 1994. In addition to regularly opening new
stores, the Company expands and remodels existing units, and
closes outmoded or unprofitable stores. During the five years
ended July 2, 1994, the Company closed 11 outdated or un-
profitable stores and opened 27 new stores that are all
considerably larger than the stores that were closed. The
Company also remodeled and expanded 22 stores during the same
5 year period.
The Company, in addition to operating supermarkets, operates
twelve liquor stores in the State of Florida. Eleven are
small units located adjacent to the Company's supermarkets, and
the twelfth liquor store, operating under the name of "The
Liquor Place", is a free-standing unit of approximately 26,000
square feet from a converted Delchamps supermarket in Pensacola,
Florida.
The Company's wholly-owned subsidiary, Supermarket Cigarette
Sales, Inc., functions as the purchasing agent and
distributor for cigarettes sold by the Company's supermarkets
in Louisiana, Mississippi, and Florida.
The 120 supermarkets operated by the Company at July 2,
1994 range in size from 12,000 square feet to 57,669 square
feet, and average 40,068 square feet. The average square
footage of selling area per supermarket increased from ap-
proximately 26,291 square feet at June 30, 1990, to approximately
28,950 at July 2, 1994, and the total sales area in all
stores increased from 2,892,000 to 3,474,000 square feet
during the same period. The Company's new stores will range
from approximately 46,000 to 62,000 square feet in size (and
from approximately 34,000 to 47,000 square feet of selling
space) depending upon the size of the store's market area.
The Company plans to continue to expand the supermarket
chain through the addition of new supermarkets in its present
areas of operation, in new market areas and through expansion
of existing stores.
The Company opened three new supermarkets during fiscal year
1994, closed one store, and has opened or has plans to open
four additional supermarket during fiscal year 1995. Four
stores were expanded during the 1994 fiscal year and the Company
plans to remodel and expand nine existing supermarkets in fis-
cal 1995.
The following table sets forth certain statistical information
with respect to the Company's operations for the periods indicated:
<TABLE>
<CAPTION>
DELCHAMPS, INC.
Selected Financial Information
Fiscal Year Ended
___________________________________________________________________________________
July 2, July 3, June 27, June 29, June 30,
1994 1993 1992 1991 1990
(52 Weeks) (53 Weeks) (52 Weeks) (52 Weeks) (52 Weeks)
___________ ____________ ____________ ___________ ___________
<S> <C> <C> <C> <C> <C>
Sales (in thousands) $ 1,067,191 $ 1,034,531 $ 949,849 $ 959,169 $ 948,257
Number of supermarkets:
Opened in period 3 4 6 5 9
Closed in period 1 1 3 3 3
Total <FN1> 120 118 115 112 110
Average sales per supermarket
(in thousands)<FN2> $ 8,968 $ 8,880 $ 8,369 $ 8,641 $ 8,862
Total square feet of selling
space (in thousands):
Opened in period 155 167 241 178 323
Closed in period 22 19 65 53 64
Total<FN1> 3,474 3,341 3,193 3,017 2,892
Total square feet of selling
space per supermarket<FN1> 28,950 28,314 27,765 26,938 26,291
Average sales per square foot
of selling space <FN3> $ 313 $ 317 $ 306 $ 325 $ 343
__________________________
<FN1> At the end of period.
<FN2> Sales for the period divided by the average number of supermarkets for the period.
<FN3> Sales for the period divided by the average square feet of selling space for the period.
</TABLE>
The Company believes that a vital factor in a successful
supermarket expansion program is the careful selection of store
locations. The Company analyzes prospective locations on a continuous
basis, both internally and with assistance of outside
consultants, and locates stores primarily in suburban shopping
centers in areas with stable or growing middle and upper-middle
class populations. The Company enlarges, modernizes, relocates
or closes stores in light of their past performance and the
Company's assessment of their future potential.
(b) Financial information on industry segments and lines of
business is omitted because, apart from its principal business
of operating retail self-service food stores and liquor stores,
the Company had no other lines of business or industry segments.
(c) (i) Merchandising is the responsibility of the Senior Vice
President of Merchandising who supervises the directors of
the five merchandising departments: Grocery; Meat; Produce;
Deli/bakery; and General Merchandise and Health and Beauty
Care. The department directors, in turn, supervise the twelve
category managers responsible for purchasing and merchandising
various lines of products.
The Company's principal merchandising strategies are to
maintain an overall value image and to achieve high sales
volume by offering quality products and services at
competitive prices. Since the Company's stores carry many of the
same products, centralized purchasing and distribution facilities
are essential. All purchases are made by specialized
category managers under central buying procedures, rather than
on a store-by-store basis, which allows the Company to maintain
quality control of its products and to take advantage of
volume discounts. Inventories are adjusted on a frequent
basis to take into account seasonal changes in consumer demand.
Delchamps supermarkets operate on a self-service basis, and
the vast majority are open from 6:00 a.m. until 11:00 p.m. seven
days per week, except Christmas, Easter and Thanksgiving. The
Company's beachfront stores are open 24 hours per day four
months out of the year. The supermarkets are clean, spacious,
air conditioned, well-lighted, colorfully decorated, well-stocked
equipped with modern features and adjacent to offstreet
parking facilities. Except in selected locations, customers
carry their own purchases from the check-out counters to their
automobiles unless they ask for special assistance.
Delchamps supermarkets carry fresh meat and produce,
frozen and other convenience foods, dairy products, specialty
and other gourmet products, and general grocery products, as well as
selected lines of non-grocery merchandise. All stores opened
during the last several years have contained salad bars,
bakeries, delicatessens and service meat departments and offer
prepared ready-to-eat foods. In addition, delicatessens, salad
bars, bakeries and service meat departments have been added
to most of the Company's other larger stores. Seafood
departments, video departments, banking facilities and dining
areas have been added to several stores and nearly all new
stores will offer these departments. The Company operates one
pharmacy and intends to add pharmacies to selected locations.
The Company's supermarkets offer a selection of national
and regional brand-name products, generic products and products
bearing brand names of Topco Associates, Inc. ("Topco"), a
cooperative purchasing organization of which the Company is a
shareholding member.
The Company's affiliation with Topco, the largest cooperative
grocery products purchasing organization in the United
States, enables it to procure quality merchandise on a competitive
basis with larger, national food retailers. Topco's membership
of 32 retail grocery chains and wholesalers located
throughout the United States enables it to employ large volume
buying techniques on behalf of its members. Topco products are
sold under its own brand names, such as "Food Club", "Topco",
"Top Fresh" and "Top Frost", or under generic labels. The
Company's purchases from or through Topco were approximately
20% of total inventory purchases in fiscal year 1994, 23%
in 1993, and 26% in 1992. The Company's president serves as a
director of Topco.
Advertising and promotion are important factors in the
Company's merchandising strategy. In fiscal year 1994, the
Company's advertising expenditures, including television, radio,
newspaper, magazine and circular advertising, were .90% of
sales. The Company's advertising program features a quality
image, emphasizing value with competitive prices and "bonus
buys" (merchandise purchased at reduced prices from vendors and
featured for resale with favorable retail prices). The Company
does not issue trading stamps at any of its stores and does not
expect to do so in the future.
Store operations are the responsibility of the Senior Vice
President, of Retail Operations, who supervises the Company's
Vice President, Retail Operations, who in turn supervises the
Company's six area supervisors. Each area supervisor is
responsible for approximately 15 to 25 supermarkets in his area.
Area supervisors regularly visit the supermarkets under their
jurisdiction, thereby providing continuous, direct supervision
of day-to-day store operations, including such matters as
quality of merchandise, adequacy of staffing levels and
adherence to Company policies. Each supermarket is individually
supervised by a store manager, assistant store managers, a meat
market manager and other department managers. The Company's
management monitors the results of operations of each
supermarket through the close and direct supervision of the
area supervisors.
The Company stresses the importance of customer satisfaction
with its associates and insists that associates provide
courteous and efficient service. Customer satisfaction is also
achieved through rapid response to changing consumer tastes
and well-stocked stores. Additionally, it is the Company's
polity to have a management or supervisory associate respond
personally to customer complaints.
Technology also enables the Company to more efficiently
serve its customers. The use of such technological advances
as computerized scanning check-out equipment, direct store
delivery systems and time and attendance systems are designed
to enhance customer satisfaction and employee productivity.
The Company was among the first grocery chains
operating in the Southeast to install computerized scanning check-out
equipment in its stores and now has such equipment in all of
its stores. A computerized order entry system is used at each
of the Company's supermarkets to record merchandise orders and
transmit them electronically to the Company's central distribution
facilities. Restocking is achieved through frequent deliveries
from the Company's central distribution centers and from
local suppliers, thus minimizing the space required at each
store for warehousing inventory.
A computerized direct store delivery system has been implemented
in all of the Company's stores. This system improves
accounting for and control of the merchandise delivered directly
to the Company's supermarkets by suppliers, which represented
30% of total merchandise inventory purchases in fiscal year 1994.
In addition, an electronic time, attendance and work scheduling system,
utilizing the same hardware as the direct store delivery system, has been
installed in the Company's supermarkets. This latter system assists the
Company in controlling labor costs through more efficient use of manpower.
Advances in technology are important to the Company's
ability to improve productivity and keep costs in line and
emphasis will continue to be placed on innovations in this area.
The Company's supermarket products are purchased from over
1,000 suppliers, of which Topco is by far the most important,
supplying approximately 20% of the Company's total inventory
purchases during fiscal year 1994. No other supplier accounted
for more than 5% of the Company's purchases during the fiscal
year. During fiscal year 1994, approximately 70% of inventories
(valued at cost) were supplied to the Company's stores
through its central distribution facilities in Mobile and Hammond.
The remaining items were furnished directly to the stores
by local distributors. Major product lines supplied in this
manner included beverages, bread and snack foods.
The Company's central distribution facilities are serviced
by rail and truck and are operated 24 hours per day, 7 days per
week. All supermarkets receive deliveries 7 days per week from
the Mobile and Hammond facilities through a transportation
fleet leased by the Company. The Company believes that its
distribution system has an effective range of approximately
350 miles in all directions.
(ii) The Company has not publicly announced or otherwise made
public information about any new product or industry segment
that would require the investment of a material amount of the
assets of the Company or which otherwise is material.
(iii) Sources and availability of raw materials are factors
that do not directly affect the Company's business.
(iv) Patents and trademarks owned by the Company are not of
material importance to its operations.
(v) Seasonality does impact the Company, as sales tend to increase
in the summer season because certain of its stores are
located near Gulf Coast beaches.
(vi) The Company has no unusual working capital requirements.
(vii) The business of the Company is not dependent upon a single
or a few customers. The Company does not sell goods or
services in an amount that equals 10 percent or more of the
Company's consolidated revenue to any single customer or group
of customers under common control or to any affiliated group of
customers.
(viii) Backlog ordering is not a factor in the business of the Company.
(ix) No portion of the business of the Company is subject to
renegotiation of profits or termination of contracts or subcontracts
at the election of any government.
(x) The supermarket business is intensely competitive. The
number of competitors and the amount of competition experienced
by the Company's supermarkets vary by location. Principal competitive
factors include store location, price, service, convenience,
cleanliness and product quality and variety. Because the
supermarket business is characterized by narrow profit margins,
the Company's earnings depend primarily on the efficiency of its
operations and its ability to maintain a large sales volume.
The Company's principal competitors are the supermarket
chains operated by Winn-Dixie Stores, Inc., The Great Atlantic
and Pacific Tea Company, Bruno's, Inc., The Kroger Co. and
Albertson's, Inc., and other large regional and national food
store chains. Both Winn-Dixie and A&P compete with the Company
throughout Alabama, Florida, Louisiana, and Mississippi.
Bruno's Supermarkets compete with the Company's Alabama,
Florida and Mississippi Gulf Coast supermarkets. Albertson's
competes with the Company in the Florida panhandle
and certain locations in Louisiana. Kroger has stores on the
Mississippi Gulf Coast and Central and Southwestern Louisiana.
Delchamps supermarkets also compete with local supermarkets,
specialty and convenience food stores and local chains that
have significant market shares in limited aeas, such as the
Schwegmann Brothers' Giant Supermarket chain in Southeastern
Louisiana. Certain of the Company's major competitors have
financial resources that are substantially greater than those of
the Company.
(xi) The Company did not spend a material amount on Company
sponsored research and development activities or on customer
sponsored research activities relating to the development of
new products, services or techniques, or the improvement of
existing products, services or techniques during fiscal years
1994, 1993, and 1992.
(xii) The Company's compliance with federal, state, and local
provisions that have been enacted or adopted regulating the discharge of
materials into the environment, or otherwise relating to the protection
of the environment has not had, and is not expected to have, a material
effect upon its capital expenditures, earnings or competitive position.
(xiii) At the end of fiscal year 1994, the Company had approximately
4,065 full-time and 4,095 part-time employees, none of
whom is covered by a collective bargaining agreement.
(d) The Company does not engage in any operations in foreign
countries, nor is any portion of its sales or revenue derived
from customers in any foreign country. All sales by the Company
occur at locations in Alabama, Florida, Louisiana and Mississippi.
Item 2. Properties
_________ ______________
The Company leases all of its supermarkets under standard
commercial leases, no one of which is material to the Company.
Most of these leases are for a period of 20 years,
and contain several renewal options. The leases provide for
fixed rentals ranging from $2.00 to $14.15 per square foot, with
an average rental of $7.45 per square foot. Many of its leases,
including most of the leases negotiated in the last five years,
provide for the payment by the Company of taxes, insurance and
certain maintenance expenses, as well as additional rental based
on sales volume. One of the Company's store leases is
scheduled to expire by the end of the 1995 fiscal year, and no
more than five leases will expire in any one year thereafter
until the year 2005.
When a store is closed, the Company attempts to sublease
or assign its lease. The Company is presently paying $70,519
in aggregate monthly rentals on eight leases of closed stores
that have not yet been sublet or assigned.
The Company owns the furnishings and fixtures in all
supermarkets. It is anticipated that the Company will own the
furnishings and fixtures in its stores presently under construction.
The Company owns two warehouses in Mobile containing an
aggregate of 232,000 square feet of storage space formerly used
for dry groceries, dairy products, meats and perishables. Both
buildings are currently being offered for sale or lease; however,
the Mobile facilities are also being used to warehouse
merchandise inventories bought "on deal" under the Company's
forward buying program.
The Company's central distribution center is on a 272-acre
site in Hammond, Louisiana. The distribution facility comprises
approximately 662,000 square feet and has fully automated dry
grocery and frozen food warehouses. The center also contains a
perishables warehouse, an ice manufacturing plant, a remote
storage facility to house flammable items, and a transportation
facility.
The Company owns the 65,000 square foot building in which
its corporate headquarters is situated at 305 Delchamps Drive,
Mobile, Alabama, as well as a 2.7 acre parcel adjacent to the
headquarters which may be used for future office expansion and
parking. The Company also owns an undeveloped 6.8 acre parcel
of real estate and a 3 acre parcel upon which a Company
supermarket is located; both were acquired from Western Supermarkets
in 1987 and are located near Birmingham, Alabama. In
addition, the Company owns a one-half interest in a partnership
which has developed a 22 acre site near Mobile; the site currently has a
Company supermarket, K-Mart, and other shops. Further, the Company
owns a one-half interest in land located in Panama City, Florida.
The Company intends to use this land for development of a supermarket
and other shops.
Item 3. Legal Proceedings
___________ __________________
The Company is the defendant in a number of legal proceedings
involving claims for money damages arising in the ordinary
course of business which are either covered by insurance or are
within the Company's self-insurance program, and in a number of
other proceedings otherwise not deemed material. In the opinion
of management, none of such litigation has resulted or will
result in any materially adverse effect on the financial position
or operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
__________ ____________________________________________________
The Company did not submit any matters to a vote of security
holders during the fourth quarter of its fiscal year ended
July 2, 1994.
Item 4(a). Executive Officers of the Registrant
___________ _____________________________________
All Executive Officers are appointed by the Board of
Directors and, except in certain circumstances following a
change in control, may be removed at any time, with or without
cause by the Board.
NAME POSITIONS HELD WITH COMPANY AGE
_____ ____________________________ ______
Randy Delchamps Chairman of the Board, President
and Chief Executive Officer 51
Patrick J. Curran Senior Vice President,
Merchandising 42
Timothy E. Kullman Senior Vice President, Chief
Financial Officer 39
Hugh Van Hooser Senior Vice President, Retail
Operations 61
George J. Waldron, III Senior Vice President, Marketing
and Corporate Relations 52
V. Lawrence Abreo Vice President, Management
Information Services 41
Heidi E. Finchem Vice President, Benefits and
Corporate Secretary 36
J.D. Foshee, Jr. Vice President, Real Estate 37
Larry S. Griffin Vice President, Planning and
Development 52
Roy W. Henderson Vice President, Finance and
Treasurer 46
William D. Kruse Vice President, Retail Operations 50
Donald A. Mathews Vice President, Distribution 55
James H. McDonald, Jr. Vice President and General Counsel 41
Thomas R. Trebesh Vice President, Personnel 45
Robert E. Whitlock Vice President, Engineering 56
Randy Delchamps has been with the Company since 1966 and
and presently serves as Chairman of the Board, President and Chief
Executive Officer. He was named to those positions in October,
1989. He had served as President and Chief Operations Officer
since June, 1989. He served as Executive Vice President from
June, 1988 to June, 1989. He also served the Company as Vice
President, Real Estate, from 1972 until June, 1987. From June,
1987, until he was named Executive Vice President, Mr. Delchamps
was Vice President, Administration.
Patrick J. Curran began employment with the Company in
April, 1994 and serves as Senior Vice President, Merchandising.
Prior to Delchamps. Mr. Curran was employed by Acme Supermarkets
in Philadelphia, Pennsylvania, Bi-Lo Supermarkets in the
Carolina and Georgia markets, and Jewel Food Stores in Chicago,
Illinois.
Timothy E. Kullman began employment in August, 1994 and
serves as Senior Vice President, Chief Financial Officer. Mr.
Kullman was previously with Farm Fresh, Inc., Norfolk, Virginia
as Senior Vice President and Chief Financial Officer. He was
also associated with Blue Cross/Blue Shield of Michigan as well
as Deloitte, Haskins and Sells of Detroit, Michigan.
Hugh Van Hooser, has been employed with the Company
since 1953. He was named Senior Vice President, Retail Operations
in January, 1992. He was named Vice President,
Marketing , in January, 1990 and served as Director of Marketing
from July, 1989 until then. Prior to that time, he was
Director, Meat Merchandising.
George J. Waldron, III has been employed by the Company
since 1965. In July, 1994, Mr. Waldron was named Senior Vice
President, Marketing and Corporate Relations. He has served as
Vice President, Marketing and Corporate Relations, and was appointed
to that position in June, 1993. Prior to that time, Mr.
Waldron served as Director, Advertising.
V. Lawrence Abreo has been employed by the Company since
1971. He serves as Vice President, Management Information Services,
and was appointed to that position in January, 1992. Prior to that time,
Mr. Abreo was Director of Management Information Services.
Heidi E. Finchem has been employed by the Company since
1982. She serves as Vice President, Benefits and Corporate Secretary,
and was appointed to that position in June, 1993. Prior to that time,
Mrs. Finchem served as Corporate Secretary and Employee Benefits Manager.
J.D. Foshee, Jr. has been employed by the Company since
1982. He serves as Vice President, Real Estate, and was appointed
to that position in June, 1993. Prior to that time, Mr. Foshee
served as Director, Real Estate.
Larry S. Griffin has been employed by the Company since
1964. In April, 1994, Mr. Griffin was named Vice President,
Planning and Development. He was named Senior Vice President,
Merchandising in January, 1992, and Vice President, Merchandising,
in July, 1988. In March, 1987, he was appointed Director,
Merchandising and, prior to that time, served as Director of
Grocery Merchandising.
Roy W. Henderson has been employed by the Company since
1969. He serves as Vice President, Finance and Treasurer, and
was appointed to that position in January, 1992. Prior to that
time, Mr. Henderson served as Director of Accounting.
William D. Kruse has been employed by the Company since
1960. He serves as Vice President, Retail Operations, and was
appointed to that position in June, 1993. Prior to that time,
Mr. Kruse served as Director, Retail Operations.
Donald A. Mathews has been employed by the Company since
1974. He serves as Vice President, Distribution, and was
appointed to that position in April, 1985. Prior to that time
Mr. Mathews was Director of Warehouse and Transportation.
James H. McDonald, Jr., has been employed with the Company
since 1984. He was named Vice President and General Counsel in
June, 1987. In June, 1986, he was appointed Director, Legal
Services. From 1984 to 1986, Mr. McDonald served the Company as
Corporate Counsel. Prior to his employment with Delchamps, Inc.,
Mr. McDonald was a partner in a Mobile law firm.
Thomas R. Trebesh has been employed by the Company since
1978. He serves as Vice President, Personnel, and was appointed
to that position in June, 1993. Prior to that time Mr. Trebesh
served as Director, Personnel.
Robert E. Whitlock has been employed by the Company since
1984. He serves as Vice President, Engineering, and was appointed
to that position in June, 1993. Prior to that time, Mr. Whitlock
served as Director, Construction and Maintenance.
PART II
______________
Item 5. Market for the Registrant's Common Stock and Related Matters
________ _____________________________________________________________
"Management's Report on Dividends and Stock Prices" on
page 6 of the Company's Annual Report to Shareholders for
1994 is incorporated herein by reference.
As of July 28, 1994, there were 1,191 record holders
of the Company's common stock.
The following table sets forth the cash dividends declared
on the Company's common stock for the two most recent fiscal
years. Future dividends will depend on the Company's earnings,
financial requirements and other relevant factors.
1994 1993
______ _______
First Quarter $ .11 $ .11
Second Quarter .11 .11
Third Quarter .11 .11
Fourth Quarter .11 .11
_______ ________
TOTAL $ .44 $ .44
======= ========
Restrictions on the Company's paying of dividends are set
forth in Note 5 of the Company's financial statements on page 11
of the Company's 1994 Annual Report to Shareholders and is incorporated
herein by reference.
Item 6. Selected Financial Data
________ ________________________
The selected financial data of the Company are set forth
under the caption "Five Year Financial Highlights" included in
the Company's 1994 Annual Report to Shareholders and are
incorporated herein by reference. Such financial data should be
read in conjunction with the financial statements and accompanying
notes included under Item 8, below.
Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition
________ ____________________________________________________
"Management's Discussion and Analysis of Results of
Operations and Financial Condition" on pages 14, 15, and 16 of
the Company's 1994 Annual Report to Shareholders is incorporated
herein by reference.
Item 8. Financial Statements and Supplementary Data
________ ____________________________________________________
The Company's financial statements, including the notes
thereto, and the report of KPMG Peat Marwick LLP are contained
on pages 6 through 13 of the Company's 1994 Annual Report to
Shareholders and are incorporated herein by reference.
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure
________ _____________________________________________________
There have been no changes in our disagreement on
accounting principles or practices or financial statement disclosure
between the Company and its independent certified public accountants
within the twenty-four months prior to July 2, 1994.
PART III
______________
Item 10. Directors and Executive Officers of the Registrant
_________ _____________________________________________________
Information about nominees for election as Director and
the Directors of the Company appears in the Company's Proxy Statement
under the caption "Election of Directors" and is incorporated
herein by reference. Certain information concerning the
Company's Executive Officers is included in Item 4 (a) of Part I
of this report.
Item 11. Executive Compensation
__________ ___________________________
Information concerning executive compensation is contained
in the Company's Proxy Statement under the caption "Executive
Compensation", and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
__________ ______________________________________________________________
Information concerning certain beneficial owners of the
Company's stock appears in the Company's Proxy Statement under
the subcaption "Security Holdings of Certain Beneficial Owners";
information as to security ownership of management is contained in
the Company's Proxy Statement under the subcaption "Security Holdings of
Directors and Executive Officers." All such information is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
__________ ________________________________________________
Information concerning certain relationships and related
transactions appears in the Company's Proxy Statement under the caption
"Compensation Committee Interlocks and Insider Participation."
PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports
on Form 8-K
__________ ________________________________________________________
(a) Documents filed as part of this report:
(1) Financial Statements
The financial statements of Delchamps, Inc. listed below
are incorporated by reference from portions of the Company's 1994
Annual Report to Shareholders.
Page In
Annual
Report
_________
Report of KPMG Peat Marwick LLP 6
Consolidated Balance Sheets as of July 2, 1994
and July 3, 1993 7
Consolidated Statements of Earnings for the fiscal
years ended July 2, 1994, July 3, 1993 and
June 27, 1992 8
Consolidated Statements of Stockholders' Equity
for the fiscal years ended July 2, 1994,
July 3, 1993 and June 27, 1992 8
Consolidated Statements of Cash Flows for the fiscal
years ended July 2, 1994, July 3, 1993 and
July 27, 1994 9
Notes to Consolidated Financial Statements 10
(2) Financial Statement Schedules.
Schedule I Marketable Securities -
Other Investments
Schedule V Property and Equipment
Schedule VI Accumulated Depreciation and
Amortization of Property
and Equipment
Schedule X Supplementary Statement of
Earnings Information
All other schedules are omitted as the required information
is inapplicable or the information is presented in the financial
statements or the related notes.
(3) Exhibits.
The exhibits listed below and marked with an asterisk are
filed herewith and are listed in the attached Exhibit Index; the
other exhibits are incorporated herein by reference from the
document indicated:
Exhibit No.
______________
3(a) Articles of Amendment to the Articles of Incorporation
and Restated Articles of Incorporation of the Company,
each dated October 5, 1984. (Exhibit 3 (a) to Form 10-K
for fiscal year ended June 29, 1985).
3(b) The Company's By-Laws, as amended on July 28, 1989
(Exhibit 3 (b) to Form 10-K for fiscal year ended July 1, 1989).
4(a) Specimen of Common Stock Certificate (Exhibit 4(a) to
Form 10-K for fiscal year ended June 30, 1990).
10(a) Membership and Licensing Agreement dated August 1, 1973
between Topco Associates, Inc. and Delchamps, Inc. and
attached copy of Articles of Incorporation and By-Laws of
Topco Associates, Inc. (Exhibit 10(a) to Registration
Statement on Form S-1, No. 2-86926).
10(b) 1987 Restricted Stock Plan, as amended (Exhibit 10 (i) to
Form 10-K for fiscal year ended July 2, 1988).
10(c) Indemnity Agreement dated November 24, 1987 between
Delchamps, Inc. and First Alabama Bank (Exhibit 10 (o) to
Form 10-K for fiscal year ended July 2, 1988).
10(d) Guaranty Agreement dated November 24, 1987 between
Delchamps, Inc. and First Alabama (Exhibit 10(p) to
Form 10-K for fiscal year ended July 2, 1988).
10(e) The Company's Share Purchase Rights Plan (Exhibit 1 to
Report on Form 8-K filed with the Securities and Exchange
Commission October 20, 1988).
10(f) Form of Change of Control Severance Agreement between the
Company and certain of its officers and employees dated
September 11, 1989 (Exhibit 10 (n) to Form 10-K for fiscal
year ended July 1, 1989).
10(g) Loan agreement dated June 30, 1993 between Delchamps,
Inc., and the Great West Life Annuity, Mutual of Omaha Insurance
Company, and United of Omaha Insurance Company (Exhibit 10(g) to
Form 10-K for fiscal year ended July 3, 1993).
13 Portions of the Company's 1994 Annual Report to Shareholders.*
21 Subsidiary of the Registrant.*
27 Financial Data Schedule*
____________________________
(b) Reports on Form 8-K - There were no reports filed on Form
8-K during the quarter ended July 2, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DELCHAMPS, INC.
/s/ Randy Delchamps
By: _______________________________________
Randy Delchamps, Chairman of the
Board, President and Chief
Executive Officer
Dated September 15, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ J. Thomas Arendall, Jr. Director Sept. 15, 1994
_______________________________
J. Thomas Arendall, Jr.
/s/ Carl F. Bailey Director Sept. 15, 1994
_____________________
Carl F. Bailey
/s/ E. Eugene Bishop Director Sept. 15, 1994
_____________________
E. Eugene Bishop
/s/ John A. Caddell Director Sept. 15, 1994
_____________________
John A. Caddell
/s/ James M. Cain Director Sept. 15, 1994
_____________________
James M. Cain
/s/ William W. Crawford Director Sept. 15, 1994
_____________________
William W. Crawford
/s/ Randy Delchamps Chairman of the Board, Sept. 15, 1994
_____________________ President and Chief
Randy Delchamps Executive Officer
/s/ T. W. Mitchell Director Sept. 15, 1994
_____________________
T. W. Mitchell
/s/ Timothy E. Kullman Senior Vice President, Sept. 15, 1994
_____________________ Chief Financial Officer
/s/ Timothy E. Kullman
<PAGE>
KPMG Peat Marwick LLP
303 Peachtree Street, N.E. Telephone 404 222 3000 Telefax 404 222 3050
Suite 2000
Atlanta, GA 30308
Independent Auditors' Report
The Stockholders and Board of Directors
Delchamps, Inc.
Under date of August 5, 1994, we reported on the consolidated balance sheets
of Delchamps, Inc. and subsidiary as of July 2, 1994 and July 3, 1993, and
the related consolidated statements of earnings, stockholders' equity, and
cash flows for each of the years in the three-year period ended July 2, 1994,
as contained in the 1994 annual report to stockholders. These financial
statements and our report thereon are incorporated by reference in the annual
report on Form 10-K for the year 1994. In connection with our audits of the
aforementioned consolidated financial statements, we have also audited the
related supplementary financial statement schedules as listed in the
accompanying index. These supplementary financial statement schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these supplementary financial statement schedules based
on our audits.
In our opinion, such supplementary financial statement schedules, when
considered in relation to the basic consolidated financial statements taken
as a whole, present fairly, in all material respects, the information set
forth therein.
August 5, 1994 /s/ KPMP Peat Marwick LLP
<PAGE>
<TABLE>
<CAPTION>
Schedule I
DELCHAMPS, INC.
Marketable Securities - Other Investments
July 2, 1994
Amount at which
each portfolio of
equity security
Numbers of shares Cost Market Value issues and each
Names of Issuer or units-principal of of each issue other security
and title of amount of bonds each at balance issue carried in
each issue and notes issue sheet date the balance sheet
___________________ ______________________ ____________ ________________ ______________________
<S> <C> <C> <C> <C>
Merrill Lynch Pierce
Fenner & Smith
Corporate Income Fund 933,406 933,406 933,406 $ 933,406
Cash Management
Tax Exempt Refund 170,984 170,984 170,984 170,984
_________________
$ 1,104,390
</TABLE>
<PAGE>
Schedule V
<TABLE>
<CAPTION>
DELCHAMPS, INC.
Property and Equipment
Balance at Balance
beginning Addition at end
Classification of period at cost Retirements Transfers of period
________________ ____________ __________ ___________ _______________ _____________
Year ended June 27, 1992:
__________________________
<S> <C> <C> <C> <C> <C>
Land......................... $ 5,463,953 741,327 4,500 - 6,200,780
Buildings.................... 32,282,562 - - - 32,282,562
Leasehold improvements....... 10,195,822 - 32,982 2,348,000 12,510,840
Fixtures and equipment....... 142,709,121 - 2,650,035 25,880,595 165,939,681
Transportation equipment..... 1,959,187 - 418,070 - 1,541,117
Construction in progress..... 4,343,419 31,146,241 - (28,228,595) 7,261,065
________________ _____________ _____________ _______________ ______________
$ 196,954,064 31,887,568 3,105,587 - 225,736,045
================ ============= ============= =============== ==============
Year ended July 3, 1993:
______________________________
Land......................... $ 6,200,780 294,076 - - 6,494,856
Buildings.................... 32,282,562 937,520 - - 3,220,082
Leasehold improvements....... 12,510,840 - 195 3,761,495 16,272,140
Fixtures and equipment....... 165,939,681 - 1,957,744 19,764,619 183,746,556
Transportation equipment..... 1,541,117 - 77,270 - 1,463,847
Construction in progress..... 7,261,065 19,603,926 - (23,526,114) 3,338,877
_________________ _____________ _____________ ______________ _________________
$ 225,736,045 20,835,522 2,035,209 - 244,536,358
================= ============= ============== ============== =================
Year ended July 2, 1994:
______________________________
Land......................... $ 6,494,856 15,099 19,744 - 6,312,211
Buildings.................... 33,220,082 - - - 33,220,082
Leasehold improvements....... 16,272,140 - - 2,249,494 18,521,634
Fixtures and equipment....... 183,746,556 - 123,376 13,408,630 197,031,810
Transportation equipment..... 1,463,847 - 148,000 397,935 1,713,782
Construction in progress..... 3,338,877 17,689,655 - (16,056,059) 4,972,473
_________________ ______________ ____________ ______________ ________________
$ 244,536,358 17,704,754 469,120 - 261,771,992
================= ============== ============ ============== ================
</TABLE>
Depreciation is computed on the straight-line method for assets acquired
after July 1, 1984; for assets acquired before July 1, 1984, depreciation is
computed primarily on the double-declining balance method, except for
buildings acquired after 1969 on which depreciation is computed on the
150% declining balance method. The Company uses the following period for
depreciating and amortizing property and equipment:
Buildings 10-50 years
Leasehold improvements 10 years
Fixtures and equipment 5-10 years
<PAGE>
Schedule VI
<TABLE>
<CAPTION>
DELCHAMPS, INC.
Accumulated Depreciation and Amortization
of Property and Equipment
Balance at Balance
beginning Additions at end
Classification of period at cost Retirements of period
__________________ __________________ _______________ _______________ ______________
Year ended June 27, 1992:
__________________________
<S> <C> <C> <C> <C>
Buildings.................... $ 9,832,135 1,297,600 - 11,129,735
Leasehold improvements....... 4,409,437 851,132 31,967 5,228,602
Fixtures and equipment....... 74,591,958 13,842,428 2,413,077 86,021,309
Transportation equipment..... 1,622,609 135,161 302,731 1,455,039
__________________ ________________ _____________ ______________
$ 90,456,139 16,126,321 2,747,775 103,834,685
================== ================ ============= =============
Year ended July 3, 1993:
___________________________
Buildings.................... $ 11,129,735 1,298,799 - 12,428,534
Leasehold improvements....... 5,228,602 1,142,752 - 6,371,354
Fixtures and equipment....... 86,021,309 15,433,586 1,430,122 100,024,773
Transportation equipment..... 1,455,039 64,701 73,322 1,446,418
_________________ ________________ ______________ _____________
$ 103,834,685 17,939,838 1,503,444 120,271,079
================= ================ ============== =============
Year ended July 2, 1994:
____________________________ -
Buildings.................... $ 12,428,534 1,302,848 - 13,731,382
Leasehold improvements....... 6,371,354 1,451,897 - 7,823,251
Fixtures and equipment....... 100,024,773 15,756,680 93,807 115,687,646
Transportation equipment..... 1,446,418 101,998 147,551 1,400,865
__________________ ________________ _______________ _____________
$ 120,271,079 18,613,423 241,358 138,643,144
================== ================ =============== =============
</TABLE>
<PAGE>
Schedule X
DELCHAMPS, INC.
Supplementary Statement of Earnings Information*
For The Years Ended July 2, 1994, July 3, 1993 and June 27, 1992
Item Charged to Costs and Expense
_______ ___________________________________
1994 1993 1992
_________ __________ _________
Advertising..................... $ 9,622,354 9,048,191 8,818,816
____________________________
*Maintenance and repairs, amortization of intangible assets, taxes
other than payroll and income taxes, and royalties did not exceed 1% of
revenues in 1994, 1993, or 1992.
<PAGE>
E X H I B I T I N D E X
Number Description
___________ _______________________________________
13 Portions of the Company's 1994 Annual Report
to Shareholders
21 Subsidiary of the Company
27 Financial Data Schedule
EXHIBIT 13
DELCHAMPS, INC. AND SUBSIDIARY
Portion of inside front cover of 1994 Annual Report
<TABLE>
<CAPTION>
FIVE YEAR FINANCIAL HIGHLIGHTS
(In thousands except per share amounts)
FISCAL YEAR ENDED
____________________________________________________________
JULY 2, JULY 3, JUNE 27, JUNE 29, JUNE 30,
STATEMENT OF EARNINGS DATA: 1994 1993 1992 1991 1990
(52 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS)
_________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Sales $1,067,191 $ 1,034,531 $ 949,849 $ 959,169 $ 948,257
Operating Income 22,019 27,907 12,885 28,703 27,854
Earnings before income taxes
and cumulative effect of changes
in accounting principles 17,858 22,738 8,005 23,299 22,122
Net earnings 10,951 14,373 5,799 15,247 14,385
Net earnings per common share 1.54 2.02 0.81 2.14 2.02
Dividends declared per common share 0.44 0.44 0.44 0.43 0.39
Weighted average shares outstanding 7,114 7,114 7,126 7,132 7.132
BALANCE SHEET DATA:
_________________________________________________________________________________________________________________
Working Capital $ 54,926 $ 49,511 $ 38,448 $ 41,793 $ 38,197
Total assets 263,269 252,052 246,725 223,857 220,183
Long term debt and obligations under
capital leases, excluding current
installments 32,169 39,503 42,214 36,062 44,147
Stockholders' equity 136,300 126,262 112,800 107,873 91,180
</TABLE>
<PAGE>
Pages 6 through 13 of 1994 Annual Report
DELCHAMPS, INC. AND SUBSIDIARY
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
DELCHAMPS, INC. AND SUBSIDIARY
Reports of Independent Auditors and Management
______________________________________________________________________________
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Delchamps, Inc.:
We have audited the accompanying consolidated balance sheets of Delchamps,
Inc. and subsidiary as of July 2, 1994 and July 3, 1993, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the years in the three-year period ended July 2, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Delchamps,
Inc. and subsidiary at July 2, 1994 and July 3, 1993, and the results of their
operations and their cash flows for each of the years in the three-year
period ended July 2, 1994, in conformity with generally accepted
accounting principles.
As discussed in note 9 to the consolidated financial statements the Company
changed its method of accounting for postemployment benefits in 1994 to adopt
the provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits". As discussed in note 10 to the consolidated
financial statements, the Company changed its method of accounting for income
taxes in 1994 to adopt the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes".
August 5, 1994
Atlanta, Georgia /s/ KPMG Peat Marwick LLP
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The Management of Delchamps, Inc. and subsidiary (the "Company") is
responsible for the preparation, integrity, and objectivity of the
consolidated financial statements and related information appearing in the
Annual Report. The consolidated financial statements were prepared in
accordance with generally accepted accounting principles and include amounts
and interpretations that are based on Management's best estimates and
judgments.
The Company maintains a system of internal accounting control which
provides reasonable assurance that financial records are reliable for
preparation of financial statements and that assets are properly accounted
for and safeguarded.
The consolidated financial statements were audited by KPMG Peat Marwick
LLP, independent auditors appointed by the Stockholders of the Company upon
the recommendation of the Board of Directors. Their audits provide an
independent review of Management's discharge of its responsibilities for
reporting the Company's financial condition and results of operations.
The Audit and Finance Committee of the Board of Directors, the majority of
whom are outside directors, meets periodically with the internal and
independent auditors to review their accounting, financial and audit reports
and any recommendations they have for improvements in the system of internal
accounting control.
MANAGEMENT'S REPORT ON DIVIDENDS AND STOCK PRICES
The common stock of Delchamps, Inc. is traded on the Nasdaq National Market
under the symbol DLCH. Trading commenced with the Company's initial public
offering on November 23, 1983. The following information represents the high
and low sales prices on the Nasdaq National Market.
Fiscal Year Ended
July 2, 1994 High Low
First Quarter 24 19
Second Quarter 24.5 20.5
Third Quarter 24 20.75
Fourth Quarter 22.5 20.5
Fiscal Year Ended
July 3, 1993 High Low
First Quarter 22.25 16.625
Second Quarter 25 17.25
Third Quarter 27.5 21.5
Fourth Quarter 27.5 20
The Company has paid a regular quarterly dividend of $.07 per share from
November 1, 1983 through August 1988, $.09 per share from September 1988
through August 1989, $.10 per share from September 1989 through August 1990,
and $.11 per share thereafter.
As of July 28, 1994, there were approximately 1,191 shareholders of record.
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
July 2, 1994 and July 3, 1993
(In thousands except share data)
<TABLE>
<CAPTION>
__________________________________________________________________________________
Assets 1994 1993
__________________________________________________________________________________
<S> <C> <C>
Current assets:
Cash and cash equivalents (note 2) $ 15,378 12,070
Trade and other accounts receivable 9,475 7,941
Merchandise inventories (note 3) 105,663 97,083
Prepaid expenses 443 1,242
Income taxes receivable (note 10) 58 -
Deferred income taxes (note 10) 1,529 2,129
_________ _________
Total current assets 132,546 120,465
_________ _________
Property and equipment (notes 4 and 5):
Land 6,312 6,495
Buildings and improvements 51,742 49,492
Fixtures and equipment 198,746 185,211
Construction in progress 4,972 3,339
_________ _________
261,772 244,537
Less accumulated depreciation and amortization 138,643 120,271
_________ _________
Net property and equipment 123,129 124,266
_________ _________
Cost in excess of fair value of assets acquired,
net of accumulated amortization
of $1,062 in 1994 and $905 in 1993 5,210 5,367
Other assets 2,384 1,954
_________ _________
$ 263,269 252,052
__________ ________
_____________________________________________________________________________________
Liabilities and Stockholders' Equity 1994 1993
_____________________________________________________________________________________
Current liabilities:
Current installments of obligations under
capital leases (note 4) $ 1,576 1,705
Current installments of long-term debt (note 5) 3,760 3,759
Notes payable (note 6) 11,574 3,847
Current installments of guaranteed ESOP debt (note 7) 2,000 2,000
Accounts payable 43,578 39,785
Accrued expenses:
Salaries and wages 2,007 4,423
Licenses and other taxes 7,185 8,070
Other 5,940 5,934
_________ ________
Total accrued expenses 15,132 18,427
_________ ________
Income taxes (note 10) - 1,431
_________ ________
Total current liabilities 77,620 70,954
_________ ________
Obligations under capital leases, excluding current
installments (note 4) 11,811 13,387
Long-term debt, excluding current installments (note 5) 18,358 22,116
Guaranteed ESOP debt, excluding current installments (note 7) 2,000 4,000
Deferred income taxes (note 10) 14,154 14,785
Other liabilities 3,026 548
_________ _________
Total liabilities 126,969 125,790
_________ _________
Stockholders' equity (notes 5 and 11):
Junior participating preferred stock of no par value.
Authorized 5,000,000 shares; no shares issued - -
Common stock of $.01 par value. Authorized 25,000,000
shares; issued 7,113,581 shares 71 71
Additional paid-in capital 19,731 19,731
Retained earnings 121,434 113,611
________ _________
141,236 133,413
Less:
Guaranteed ESOP debt (note 7) 4,000 6,000
Unamortized restricted stock award compensation (note 8) 936 1,151
________ _________
Total stockholders' equity 136,300 126,262
________ _________
Commitments and contingencies (notes 4, 8, and 12)
$ 263,269 252,052
======== =========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
Consolidated Statements of Earnings
Years ended July 2, 1994, July 3, 1993 and June 27, 1992
(In thousands except per share amounts)
<TABLE>
<CAPTION>
__________________________________________________________________________________________________________________
1994 1993 1992
__________________________________________________________________________________________________________________
<S> <C> <C> <C>
Sales $ 1,067,191 1,034,531 949,849
Cost of sales (note 3) 796,364 770,457 713,865
_____________ ___________ __________
Gross profit 270,827 264,074 235,984
Selling, general and administrative expenses 248,808 236,167 223,099
_____________ ___________ __________
Operating income 22,019 27,907 12,885
_____________ ___________ __________
Other income (expense):
Interest expense (4,298) (5,389) (5,258)
Interest income 137 220 378
_____________ ___________ __________
(4,161) (5,169) (4,880)
_____________ ___________ __________
Earnings before income taxes and cumulative effect of changes in
accounting principles 17,858 22,738 8,005
Income taxes (note 10) 6,207 8,365 2,206
_____________ ___________ __________
Earnings before cumulative effect of changes in accounting
principles 11,651 14,373 5,799
Cumulative effect of change in accounting for income taxes (note 10) 900 - -
Cumulative effect of change in accounting for postemployment benefits
(net of income tax benefits of $1,000) (note 9) (1,600) - -
Net earnings $ 10,951 14,373 5,799
============== ============ =========
Earnings per common share:
Earnings before cumulative effect of changes in accounting principles $ 1.64 2.02 0.81
Cumulative effect of change in accounting for income taxes 0.12 - -
Cumulative effect of change in accounting for postemployment benefits (0.22) - -
______________ ____________ __________
Net earnings per common shares $ 1.54 2.02 0.81
============== ============ ==========
Weighted average number of common shares 7,114 7,114 7,126
============== ============ ==========
See accompanying notes to consolidated financial statements.
</TABLE>
DELCHAMPS, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended July 2, 1994, July 3, 1993, and June 27, 1992
(In thousands)
<TABLE>
<CAPTION>
___________________________________________________________________________________________________________________________
Common Stock
_____________
Issued Additional Restricted Total
_____________ Paid-in Retained Guaranteed Stock Stockholders'
Shares Amount Capital Earnings ESOP Debt Award Equity
___________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at June 29, 1991 7,132 $ 71 20,212 99,703 (10,000) (2,113) 107,873
Amortization of restricted stock awards - - - - - 262 262
Retirement of restricted stock awards
(note 8) (18) - (481) - - 481 -
Reduction of guaranteed ESOP debt - - - - 2,000 - 2,000
Net earnings - - - 5,799 - - 5,799
Dividends declared of $.44 per share - - - (3,134) - - (3,134)
______ _______ ________ __________ _________ ________ ________
Balances at June 27, 1992 7,114 71 19,731 102,368 (8,000) (1,370) 112,800
Amortization of restricted stock awards - - - - - 219 219
Reduction of guaranteed ESOP debt - - - - 2,000 - 2,000
Net earnings - - - 14,373 - - 14,373
Dividends declared of $.44 per share - - - (3,130) - - (3,130)
______ _______ ________ _________ _________ ________ ________
Balances at July 3, 1993 7,114 71 19,731 113,611 (6,000) (1,151) 126,262
Amortization of restricted stock awards - - - - - 215 215
Reduction of guaranteed ESOP debt - - - - 2,000 - 2,000
Net earnings - - - 10,951 - - 10,951
Dividends declared of $.44 per share - - - (3,128) - - (3,128)
_______ _______ ________ ________ _______ _________ ________
Balances at July 2, 1994 7,114 $ 71 19,731 121,434 (4,000) (936) 136,300
======= ======= ======== ======== ======= ========= ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended July 2, 1994, July 3, 1993, and June 27, 1992
(In thousands)
<TABLE>
<CAPTION>
__________________________________________________________________________________________________________________
1994 1993 1992
__________________________________________________________________________________________________________________
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 10,951 14,373 5,799
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization 18,770 18,099 15,599
(Gain)loss on sale of property and equipment (115) 12 319
Restricted stock award amortization 215 219 262
Deferred income tax (benefit) expense (631) 2,117 1,231
Cumulative effect of change in accounting for income taxes (900) - -
Cumulative effect of change in accounting for postemployment benefits 1,600 - -
Increase in merchandise inventories (8,580) (1,663) (3,256)
Increase (decrease) in accounts payable and accrued expenses 501 (884) 7,330
(Decrease) increase in income taxes, net (889) 1,760 (3,000)
Other, net 700 (1,131) (1,362)
____________ ____________ ___________
Net cash flows provided by operating activities 21,622 32,902 22,922
Cash flows from investing activities:
Additions to property and equipment (17,705) (20,824) (31,530)
Proceeds from sale of property and equipment, net 256 507 365
____________ ____________ ___________
Net cash used in investing activities (17,449) (20,317) (31,165)
Cash flows from financing activities:
Principal payments on obligations under capital leases (1,705) (1,812) (2,260)
Principal payments on long-term debt and notes payable (7,606) (39,118) (22,135)
Proceeds from issuance of long-term debt and notes payable 11,574 32,222 38,475
Dividends paid (3,128) (3,130) (3,134)
____________ _____________ __________
Net cash (used in) provided by financing activities (865) (11,838) 10,946
Net increase in cash and cash equivalents 3,308 747 2,703
Cash and cash equivalents at beginning of year 12,070 11,323 8,620
____________ _____________ __________
Cash and cash equivalents at end of year $ 15,378 12,070 11,323
============ ============= ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
Notes To Consolidated Financial Statements
July 2, 1994, July 3, 1993, and June 27, 1992
(1) Summary of Significant Accounting Policies
(a) Description of Business
Delchamps, Inc. and subsidiary (the "Company") are
engaged in the business of retail food distribution through
the Company's supermarkets located in Alabama, Florida
Louisiana, and Mississippi.
(b) Definition of Fiscal Year
The Company's fiscal year ends on the Saturday
closest to June 30. Fiscal years 1994 and 1992 comprised
52 weeks while fiscal year 1993 comprised 53 weeks.
(c) Principles of Consolidation
The consolidated financial statements include the
accounts of Delchamps, Inc. and its wholly owned
wholesale subsidiary. All significant intercompany balances
and transactions were eliminated in consolidation.
(d) Cash Equivalents
For purposes of the consolidated statements of
cash flows, the Company considers all highly liquid debt
instruments purchased with a maturity of three months or
less to be cash equivalents.
(e) Merchandise Inventories
Inventories are stated at the lower of cost or market.
Cost is determined on the last-in, first-out ("LIFO") basis for
87% of inventories in 1994, 85% in 1993, and 87% in 1992.
With respect to the remaining inventories, primarily produce
and market, cost is determined on the first-in, first-out ("FIFO")
basis. Inventories developed from the retail method
comprised approximately 50% of total inventories in 1994,
52% in 1993, and 58% in 1992.
(f) Property and Equipment
Property and equipment are stated at cost. Buildings
and equipment acquired prior to July 1, 1984 are depreciated
over the estimated useful lives of the respective assets using
primarily the double-declining-balance method. Buildings
and equipment acquired subsequent to July 1, 1984, are
depreciated over the estimated useful lives of the respective
assets using the straight-line method.
Buildings and equipment under capital leases are
stated at the lower of the present value of the minimum
lease payments at the beginning of the lease term or fair
value of the property at the inception of the lease. Assets
leased under capital leases and leasehold improvements
are amortized using the straight-line method over the lesser
of the lease term or the estimated useful lives of the related
assets. The Company uses the following periods for depre-
ciating and amortizing property and equipment:
Buildings............................... 10-50 years
Leasehold improvements......................10 years
Fixtures and equipment....................5-10 years
(g) Cost in Excess of Fair Value of Assets Acquired
Cost in excess of fair value of assets acquired arose
from the purchase of 3 supermarkets and real estate in
August, 1987 and is being amortized over a 40 year period
on a straight-line basis.
(h) Income Taxes
Deferred income taxes are recognized for all
significant temporary differences between the tax basis and
financial statement amount of assets and liabilities. The tax
consequences of those differences expected to occur in
the subsequent year are classified as a current asset
or liability.
Job credits are recorded as a reduction of the pro-
vision for Federal income taxes in the year realized.
In February 1992, the Financial Accounting Standards
Board ("FASB") issued Statement of Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS No. 109")
which supersedes SFAS No. 96. Under the asset and
liability method of SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to tax-
able income in the years in which those temporary differences
are expected to be recovered or settled. Under SFAS No. 109,
the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes
the enactment date.
In fiscal year 1994, the Company adopted SFAS No. 109,
and has reported the cumulative effect of that change in the
method of accounting for income taxes in the 1994 consolidated
statements of earnings.
(i) Earnings Per Share
Earnings per share are computed by dividing net
earnings by the weighted average number of shares of
common stock outstanding.
(2) Cash Equivalents
Cash equivalents are stated at cost which
approximates market value. Cash equivalents at July 2, 1994, and
July 3, 1993 consisted of the following:
(In thousands)
1994 1993
___________ ___________
Marketable Unit Investment Fund $ 993 1,521
Cash Management Tax Exempt Fund 171 9
___________ ___________
$ 1,104 1,530
=========== ===========
(3) Merchandise Inventories
The Company uses the LIFO method of valuing
certain of its merchandise inventories to minimize inflation
induced inventory profits and to achieve a better matching of
current costs with current revenues. Inventories would
increase by approximately $13,012,000 at July 2, 1994 and
$13,050,000 at July 3, 1993 if all of the Company's inventories
were stated at cost determined by the first-in, first-out
method. Further, net earnings would decrease by approxi-
mately $24,000 in fiscal year 1994, increase by $130,000 in
fiscal year 1993, and decrease by $732,000 in fiscal year
1992, after applying the Company's marginal tax rate and
without assuming an investment return on the applicable
income tax savings.
The Company is a member of a cooperative asso-
ciation from which it purchases private label merchandise
for resale and certain store equipment. Merchandise inven-
tories purchased from this cooperative association approxi-
mated 20% of total inventory purchases in 1994, 23% in
1993, and 26% in 1992.
(4) Leases
The Company leases certain store properties and
warehouse equipment under capital leases that expire over
the next 13 years. The Company also leases store proper-
ties, and transportation equipment under noncancelable
operating leases that expire over the next 23 years.
Contingent rentals on store properties are paid as a
percentage of sales in excess of a stipulated minimum. In
the normal course of business, it is expected that most
leases will be renewed or replaced by leases on other
properties and equipment.
Included in property and equipment are the following
amount applicable to capital leases:
(In thousands)
1994 1993
____________ ___________
Buildings $ 13,998 13,998
Fixtures and equipment 19,040 19,040
____________ ____________
33,038 33,038
Less accumulated amortization 24,975 23,487
____________ ____________
$ 8,063 9,551
============ ============
Future minimum lease payments under noncancelable operating
leases and the present value of future minimum capital lease
payments as of July 2,1994 are as follows:
(In thousands)
Capital Operating
Fiscal year Leases Leases
__________ __________
1995 $ 3,126 38,771
1996 2,079 38,380
1997 2,081 37,661
1998 2,081 36,764
1999 2,081 36,045
Later years 13,090 306,655
__________ __________
Total minimum lease payments 24,538 494,276
==========
Less amount representing interest 11,151
__________
Present value of net minimum capital
lease payments 13,387
Less current installment of
obligations under capital leases 1,576
___________
Long-term obligations under capital
leases $ 11,811
===========
Rental expense and contingent rentals for operating
leases are as follows:
(In thousands)
1994 1993 1992
________ ________ _________
Minimum rentals $ 40,979 38,201 34,388
Contingent rentals 110 105 281
________ ________ _________
$ 41,089 38,306 34,669
======== ======== =========
Most of the Company's leases stipulate that the
Company pay taxes, maintenance, insurance, and certain
other operating expenses applicable to the leased property.
As of July 2, 1994, the Company had entered into
additional lease commitments for 10 store properties. The
following table summarizes the approximate rentals which
will be required for the store property leases for the next
20 years.
(In thousands)
Fiscal year Rent
________________ __________________
1995 $ 3,022
1996 3,022
1997 3,022
1998 3,022
1999 3,085
2000-2014 38,760
(5) Long-Term Debt
Long-term debt as of July 2, 1994 and July 3, 1993
consisted of the following:
(In thousands)
1994 1993
___________ ____________
5.51% Note payable, due in 84 monthly
installments of $297,619 in principal
plus interest, with the final installment
due July 1, 2000, unsecured $ 21,430 25,000
Note payable, with interest rates based
on LIBOR + 1.5 % due in 60 monthly
installments of $15,625 in principal plus
interest, with the final installment due
March 1, 1998, secured by deposit accounts
with the lender 688 875
___________ ____________
Total long-term debt 22,118 25,875
Less current installments 3,760 3,759
___________ ____________
Long-term debt, excluding current
installments $ 18,358 22,116
=========== ============
Agreements underlying the notes payable contain
restrictive covenants which limit the payment of dividends,
additional debt, lease rentals, and transactions with affiliates,
and require maintenance of certain working capital and
equity levels. At July 2, 1994, the Company was in compliance
with all covenants. At July 2, 1994, approximately $22,070,000
of the Company's retained earnings was available for the
payment of dividends under such restrictive provisions.
Cash payments for interest were approximately
$4,312,000, $5,383,000, and $5,275,000 in 1994, 1993
and 1992, respectively.
Aggregate annual maturities on long-term debt for
fiscal years after July 2, 1994 are approximately as follows:
(In thousands)
Fiscal year Annual maturities
_______________ ___________________
1995 $ 3,759
1996 3,759
1997 3,759
1998 3,697
1999 3,572
2000 3,572
Based on the borrowing rates currently available
to the Company for long-term debt with similar terms and
maturities, the fair value of the long-term debt outstanding
at July 2, 1994 approximates the carrying value.
(6) Notes Payable
Notes payable as of July 2, 1994 and July 3, 1993
consisted of the following:
(In thousands)
1994 1993
___________ ___________
Unsecured borrowings under
lines of credit, due on
various dates throughout
fiscal 1995, with floating
interest rates that are
currently less than the
prime rate $ 11,574 3,847
At July 2, 1994, the Company had $93,426,000
in available unsecured lines of credit with various financial
institutions which expire throughout fiscal 1995 and provide for
interest at rates of at least 200 basis points below the prime
interest rates.
(7) Leveraged Employee Stock Ownership Plan
In November 1987, the Company leveraged its
existing Employee Stock Ownership Plan ("ESOP"). The
ESOP used the proceeds of the loan to purchase approxi-
mately 1,097,000 shares of the Company's common stock.
The common stock is held by the ESOP trustee in a
"suspense account" and these shares serve as collateral for
the loan. Each year the Company will make a contribution to
the ESOP which the trustee will use to make principal
payments. With each loan payment a portion of the common
stock is released from the "suspense account" and allocated
to participating employees. The Company is required to pay
interest on the loan in excess of any dividends received on
unallocated shares.
The Company guaranteed $20 million of ESOP debt
under the loan agreement. The loan is repayable in 10 equal
annual installments of principal, with the final installment due
in June 1996. Interest is payable quarterly at a rate equal to
80% of the prime rate. The loan obligation of the ESOP
is considered an unearned employee profit sharing trust con-
tribution and is recorded as a reduction of the Company's
stockholders' equity. Both the loan obligation and the unearned
employee profit sharing trust contribution are reduced by the
amount of any loan repayments made by the ESOP.
(8) Employee Benefit and Incentive Plans
The Company has a profit-sharing plan and an
employee stock ownership plan covering substantially all
employees who have completed two years of service. The
total annual contributions to these plans for fiscal years
1994, 1993, and 1992 were as follows:
(In thousands)
1994 1993 1992
_________ _________ ________
Employee stock ownership plan $2,000 2,000 2,000
The Company has an incentive compensation plan for
certain management personnel tied to the Company's overall
performance. There was no charge to operations for this plan
in 1994, $2,274,000 was charged to operations in 1993 and
$725,000 in 1992.
In fiscal 1988, the Company adopted, with stock-
holder approval, a restricted stock award plan. The plan
provides that a maximum of 150,000 shares of common
stock be awarded to key executives. During 1989, 138,000
shares were awarded to key executives at a price of $.01
per share. No shares have been awarded since 1989. Total
compensation expense to be charged to operations over the
term of the plan is approximately $3,209,000. Total
compensation expense associated with the plan was determined
based on the difference between the market value and the
purchase price of the stock at the date of award, and is
being amortized on a straight-line basis over the period
the restrictions lapse. Charges to operations for this plan
were approximately $215,000 in 1994, $219,000 in 1993,
and $262,000 in 1992.
In February 1992, the Company repurchased shares
previously awarded to three key executives. A total of 18,000
shares was repurchased for $.01 per share, the cost to the
key executives at award date. Restricted stock awards totaling
$481,000 and representing the market value of the awarded
shares at grant date, were retired concurrent with the repurchase.
(9) Postemployment Benefits Other Than Pensions
Effective for fiscal year 1994 the Company adopted
Statement of Financial Accounting Standards No. 112,
("SFAS No. 112"), "Employers' Accounting for Postemployment
Benefits." Under SFAS No. 112, the cost of employment
benefits must be recognized on an accrual basis as
employees perform services to earn the benefits.
The Company provides a bonus to associates who
leave employment. The amount of the bonus is based on
longevity.
The Company previously expensed the cost of this
bonus as incurred. The Company has elected to recognize
this change in accounting principle on the immediate recog-
nition basis. The cumulative effect for fiscal year 1994 of
adopting SFAS No. 112 was an increase in accrued postemploy-
ment benefit costs of $2,600,000 ($1,600,000 after the income)
tax benefit of $.22 per share).
(10) Income Taxes
As discussed in note 1, the Company adopted
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109") for fiscal
1994. The cumulative effect of this change in accounting for
income taxes of $900,000 is determined as of July 4, 1993
and is reported separately in the consolidated statements of
earnings for the year ended July 2, 1994. Prior years'
financial statements have not been restated to apply the
provisions of SFAS No. 109.
The components of income tax expense are as follows:
(In thousands)
Current Deferred Total
__________ _________ _________
1994:
Federal $ 5,304 176 5,480
State 706 21 727
__________ __________ _________
$ 6,010 197 6,207
========== ========== =========
1993:
Federal $ 5,519 1,869 7,388
State 729 248 977
__________ __________ _________
$ 6,248 2,117 8,365
========== ========== =========
1992:
Federal $ 809 1,085 1,894
State 166 146 312
__________ __________ _________
$ 975 1,231 2,206
========== ========== =========
The actual income tax expense differs from the
statutory tax rate for all years (computed by applying the
U.S. Federal corporate rate to earnings before income
taxes) as follows:
(In thousands)
1994 1993 1992
__________ _________ _________
Statutory tax rate $ 6,072 7,731 2,722
Increase (reduction) in income taxes
resulting from:
State income taxes, net of
Federal income tax benefit 480 645 206
Targeted jobs tax credits (507) (157) (482)
Cost in excess of fair value
of assets acquired 53 53 53
Other, net 109 93 (293)
__________ __________ _________
Actual tax expenses $ 6,207 8,365 2,206
========== ========== =========
Effective tax rate 34.8% 36.8 27.6
========== ========== =========
The tax effects of temporary differences that give rise
to the deferred tax assets and deferred tax liabilities at July 2,
1994 are as follows (in thousands):
Deferred Tax Assets:
Capital lease obligation $ 2,043
Accrued self-insurance 1,391
Accrued postemployment benefits 998
State tax deduction 730
Other accrued liabilities 1,092
______________
Net deferred tax assets 6,254
______________
Deferred Tax Liabilities:
Accelerated depreciation 18,720
Other 159
______________
Total gross deferred liabilities 18,879
______________
Net deferred tax lability $ 12,625
==============
No valuation allowance was recorded against the
deferred tax assets at July 2, 1994. The Company's manage-
ment believes the existing net deductible temporary differences
comprising the total gross deferred tax assets will reverse
during the periods in which the Company generates net
taxable income.
The sources of deferred income taxes and their tax
effects are as follows:
(In thousands)
1993 1992
_____________ ___________
Excesss tax depreciation over financial
statement depreciation $ 1,658 1,239
Excess financial statement interest and
amortization over tax rent expense on
capitalized leases 203 131
Accrued expenses recognized for
financial statement purposes, but
not for tax purposes 258 (348)
Other (2) 209
____________ ___________
$ 2,117 1,231
============ ===========
Cash payments for income taxes were approximately
$5,741,000, $5,452,000, and $3,896,000 in 1994, 1993,and
1992, respectively.
(11) Share Purchase Rights Plan
In October 1988, the Company adopted a Share
Purchase Rights Plan and declared a dividend distribution
of one Right for each outstanding share of common stock.
Under certain conditions, each Right may be exercised to
purchase one one-hundredth of a share of Junior Participat-
ing Preferred Stock at a purchase price of $70, subject to
adjustment. The Company will be entitled to redeem the
Rights at $.01 per Right at any time prior to the earlier of the
expiration of the Rights in October 1998 or ten days following
the time a person or group acquires or obtains the right to
acquire a 15% position in the Company. The Rights do not
have voting or dividend privileges. Until such time as they
become exercisable, the Rights have no dilutive effect on the
earnings per share of the Company.
(12) Commitments and Contingencies
The Company is a defendant in various claims and legal
actions considered to be in the normal course of business.
Management intends to vigorously default these claims
and believes that the ultimate disposition of these matters
will not have a material adverse effect on the Company's
consolidated financial condition.
In fiscal 1989, and subsequently, the Company has
entered into certain agreements with officers and key man-
agement. The agreements contain provisions entitling each
officer or employee covered by these agreements to receive
from 1 to 3 times his annual compensation (as defined) if
there is a change in control of the Company (as defined) and
a termination of employment. The agreements also pro-
vide for severance benefits under certain other circumstances.
The agreements do not constitute employment contracts and
only apply in circumstances following a change in control of
the Company. In the event of a change in control of the
Company and termination of all persons covered by these
agreements, the cost would be approximately $10,000,000.
(13) Selected Quarterly Financial Data (Unaudited)
Selected quarterly financial data for the years ended
July 2, 1994 and July 3, 1993 is summarized as follows:
(In thousands except per share amounts)
Fiscal Quarters
_________________________________________
1994 Fourth Third Second First
_________ _________ __________ _________
Sales $ 260,969 265,146 274,506 266,570
Gross profit 66,961 67,739 67,367 68,760
Earnings before
income taxes
and cumulative
effect of changes
in accounting
principles 3,558 5,420 3,787 5,093
Earnings before
cumulative effect
of changes in
in accounting
principles 2,397 3,562 2,471 3,221
Cumulative effect
of change
in accounting for
income taxes - - - 900
Cumulative effect
of change
in accounting for
postemployment
benefits - - - (1,600)
Net earnings 2,397 3,562 2,471 2,521
Earnings per common
share:
Earnings before
cumulative effect
of changes in
in accounting
principles $ 0.34 0.50 0.35 0.45
Cumulative effect
of change
in accounting for
income taxes - - - 0.12
Cumulative effect
of change in accounting
for postemployment
benefits - - - (0.22)
Net earnings per
common share 0.34 0.50 0.35 0.35
Dividends declared
per common share $ 0.11 0.11 0.11 0.11
(In thousands except per share amounts)
Fiscal Quarters
_________________________________________
1993 Fourth Third Second First
_________ _________ __________ _________
Sales $ 282,408 246,521 250,228 255,374
Gross profit 70,965 64,096 65,313 63,700
Earnings before
income taxes 6,909 5,507 5,616 4,706
Net earnings 4,313 3,534 3,528 2,998
Net earnings per
common share $ 0.60 0.50 0.50 0.42
Dividends declared
per common share $ 0.11 0.11 0.11 0.11
<PAGE>
Page 14 through 16 of 1994 Annual Report
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction
with the financial statement and notes thereto
contained herein.
RESULTS OF OPERATIONS
At the end of the 1994 fiscal year Delchamps operated
120 supermarkets in Alabama, Florida, Mississippi and
Louisiana, compared with 118 at the end of the 1993 fiscal
year and 115 at the end of fiscal year 1992. The Company
also operated twelve liquor stores in Florida at the end of
fiscal year 1994, compared with ten liquor stores at the end
of fiscal years 1993 and 1992. Results of operations set
forth in the following tables and narrative are for 52-week
periods in fiscal years 1994 and 1992 and for a 53-week
period in fiscal year 1993. The Company's fiscal year ends
on the Saturday closest to June 30.
Sales
(dollars in thousands)
1994 1993 1992
___________ ___________ _________
Sales $ 1,067,191 1,034,531 949,849
Increase/(decrease) from
prior year 32,660 84,682 (9,320)
Percentage increase/(decrease)
from prior year 3.2% 8.9% (1.0%)
Percentage increase/(decrease)
in same store sales 1.2% 3.2% (4.7%)
Sales increased in 1994 because of the addition
of new supermarkets (three were opened in 1994 and four
were opened in 1993), the expansion of supermarkets (four
were expanded in 1994 and seven were expanded in 1993),
and same store sales increased 1.2% based on a compa-
rable 52 week period in fiscal year 1993. Same store
sales increased because of supermarket expansions
and increased sales from promotional activities. Promo-
tional activities include increased "Bonus Buy" promotions
(in which certain products are featured at reduced retail
prices), implementing a continuity program and
introducing a line of soft drink products with Delchamps
as the brand name. In addition, there was significant
growth in the existing Cash Back For Schools program (in
which the Company makes cash donations to schools
equal to 1% of the total cash register receipts collected
by each school over a specified time period).
Sales increased in 1993 because of the addition of
new supermarkets (four were opened in 1993 and six were
opened in 1992), the expansion of supermarkets (seven
were expanded in 1993 and five were expanded in 1992),
the extra week in the 1993 53-week period compared to the
1992 52-week period, and same store sales increased 3.2%
based on a comparable 53-week period for fiscal year 1992.
Same store sales increased in 1993 because of supermarket
expansions and success from promotional activities. Promo-
tional activities included Double Coupons (implemented
during fiscal year 1992 under which the Company doubles
coupons that have a face value of up to sixty cents), Triple
Coupons (implemented in selected markets during fiscal
year 1993 under which the Company triples coupons that
have a face value of up to thirty-four cents), and Cash Back
For Schools (implemented during fiscal year 1992).
Sales decreased in 1992 because same store sales
decreased. Same store sales decreased because of a
sluggish economy, heavy promotional activity by competitors,
food price deflation of approximately 1.5%, and the opening
of a significant number of supermarkets by competitors. As
noted above, the Company implemented the Double Coupon
and Cash Back For Schools programs in an effort to improve
sales trends. In addition, the Company continued its program
of remodeling and expanding existing supermarkets in
order to add service departments and increase the variety
of merchandise sold. These efforts resulted in improved
sales beginning in the fourth quarter of fiscal year 1992.
Gross Profit
(dollars in thousands)
1994 1993 1992
__________ __________ ____________
Gross Profit $ 270,827 264,074 235,984
Gross Profit percentage 25.4% 25.5% 24.8%
(Decrease)/increase in
percentage from
prior year (0.1%) (0.7%) (0.9%)
Gross profit percentage decreased slightly in 1994
because of increased markdowns (retail price reductions)
from the "Bonus Buy" promotional program.
Gross profit percentage increased in 1993 because
of increased buying allowances, increased sales of higher
margin products located in the specialty departments of
the Company's newer and expanded supermarkets, and
increased sales of private label products (which have higher
margins than brand name products).
Gross profit percentage decrease in 1992 because
of increased promotional activity and reductions in retail prices.
Selling, General and Administrative Expenses
(dollars in thousands)
1994 1993 1992
__________ __________ __________
Selling, general and
administrative (SG &A) $ 248,808 236,167 223,099
Increase from prior year 12,641 13,068 5,694
SG & A as a percentage of sales 23.3% 22.8% 23.5%
Increase/(decrease) in percentage
from prior year 0.5% (0.7%) 0.8%
SG & A expense increased in 1994 because of
increased supermarket expenses which occurred primarily
as a result of new and expanded supermarkets. Supermarket
expenses that increased over the 1993 period include the
following: wages and salaries increased $3.5 million, utilities
increased $1.2 million, promotion expenses relating to the
Double Coupon program and continuity program (described
in the sales section) increased $2.2 million, and building rent
increased $2.7 million. Wages and salaries, utilities and rent
increased primarily because of new and expanded supermarkets.
Promotion expenses increased because of the
implementation of the continuity program in 1994. SG & A
increased as a percentage of sales over the 1993 fiscal year
because the 1993 period included 53-weeks; therefore, in
1993 fixed costs such as rent and depreciation were divided
into sales for a 53-week period.
SG & A expense increased in 1993 because of added
costs of new and expanded supermarkets and the extra
week in the 1993 53-week period compared to the 1992
52-week period. SG & A as a percentage of sales decreased
in 1993 as a result of the additional week in 1993. The decline
was also attributable to savings from an ongoing cost con-
trol program which improved labor scheduling, reductions in
advertising and improvements in the utilization of supplies.
SG & A expense in 1992 increased because of added
costs associated with new and expanded supermarkets.
SG & A as a percentage of sales increased in 1992 because
of slow sales growth combined with the increased cost of
operating new locations and service departments.
Other Income and Expense
(In thousands)
1994 1993 1992
___________ _________ __________
Interest expense $ 4,298 5,389 5,258
(Decrease)/increase from
prior year (1,091) 131 (560)
Interest income 137 220 378
Decrease from prior year (83) (158) (36)
Interest expense decreased in 1994 primarily
because the Company refinanced $25 million of long-term
debt at the end of the 1993 fiscal year. The interest rate on
this debt was reduced to 5.51% from 7.70% The decrease
in interest expense was also caused by lower levels of
indebtedness and a general decline in interest rates.
Interest expense increased in 1993 because of
increased levels of short-term indebtedness under the
Company's lines of credit. Interest expense decreased
in 1992 because of an overall decline in interest rates and
because the Company refinanced a large portion of its debt
at lower interest rates.
Interest income decreased in the 1994, 1993, and
1992 periods. These decreases resulted from lower levels
of invested cash and reduction in interest rates.
Income Taxes
(dollars in thousands)
1994 1993 1992
___________ _________ __________
Income tax expenses $ 6,207 8,365 2,206
Income tax effective rate 34.8% 34.8% 27.6%
Increase/(decrease) in rate
from prior year (2.0%) 9.2% (7.0%)
In fiscal year 1994, the Company's effective income
tax rate decreased from the 1993 level because earnings
decreased (in 1994 the majority of earnings were taxed at
a Federal rate of 34% and in 1993 the majority of earnings
were taxed at a Federal rate of 35%) and targeted jobs tax
credits were reinstated by the Revenue Reconciliation
Act of 1993.
In fiscal year 1993, the Company's effective income
tax rate increased because of the expiration of targeted
jobs tax credits. The effective rate in 1993 approximates
the combined Federal and states statutory rates.
In fiscal year 1992, the Company's effective income
tax rate decreased because of decreased earnings combined
with consistent levels of targeted jobs tax credits.
Cumulative Effect of Changes in Accounting Principles
(In thousands)
1994 1993 1992
___________ _________ __________
Cumulative effect of
change in accounting
for income taxes $ 900 - -
Cumulative effect of
change in accounting for
postemployment benefits (1,600) - -
The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes", ("SFAS No. 109") which
supersedes SFAS No. 96. The Company implemented
SFAS No. 109 in fiscal year 1994. The cumulative effect of
implementing SFAS No. 109 was to increase earnings $900,000.
The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits,"
("SFAS No. 112") which the Company implemented in fiscal
year 1994. SFAS No. 112 requires that postemployment
benefits, representing longevity bonus, be recognized on
an accrual basis. The cumulative effect of adopting SFAS
No 112 was to decrease earnings $1,600,000.
Net Earnings
(dollars in thousands)
1994 1993 1992
___________ _________ __________
Net earnings $ 10,951 14,373 5,799
(Decrease)/increase from
prior year (3,422) 8,574 (9,448)
Percentage (decrease)/increase
from prior year (23.8%) 147.9% (62.0%)
Net earnings as a
percentage of sales 1.0% 1.4% 0.6%
Net earnings decreased in 1994 from 1993 because
same store sales growth decreased (to 1.2% in 1994 from
3.2% in 1993) and the Company experienced an increased
rate of growth in SG & A expenses (to 23.3% of sales in
1994 from 22.8% of sales in 1993).
Net earnings for 1993 increased because of improved
sales, an increase in gross profit margin, and a reduction in
SG & A expenses.
Net earnings for 1992 decreased because of weak
sales and a decline in gross profit margin.
Other
(dollars in thousands)
1994 1993 1992
___________ _________ __________
Provision for LIFO
(benefit)/expense ($38) 210 (1,368)
Inflation index 0.99960 1.00222 0.98505
In fiscal years 1994 and 1993, the rate of inflation
was relatively unchanged from the prior year. Fiscal year
1992 had deflation of approximately 1.5%. The effect of
inflation on the Company's operating earnings is considered
to be minimal. Management does not expect the Company
to be adversely affected by future inflation because a large
number of its stores are leased at fixed rents for up to
twenty-five year periods and because increases in the cost
of merchandise can be generally passed on through retail
price increases. While inflation has not had a material impact
on past operating results, there is no assurance that the
Company will not be affected by inflation in the future.
1994 1993 1992
__________ __________ ____________
Inventory turnover (annual) 7.9 times 8.0 times 7.6 times
(Decrease)/increase from
prior year (.1) 0.4 0.4
Inventory turnover decreased slightly in 1994 compared
to 1993 because the 1994 period was a 52-week fiscal year
compared to the 1993 period which was a 53-week fiscal year.
In 1993, inventory turnover increased because the 1993
period was a 53-week period compared to the 1992 period which
was a 52-week fiscal year.
Inventory turnover decreased in 1992 because
of weak sales and higher inventory levels. Inventory levels
increased because of the introduction of the Company's
new and expanded formats, which contain significantly
greater square footage, more inventory and more
service departments.
(dollars in thousands)
1994 1993 1992
___________ _________ __________
Dividends paid $3,128 3,130 3,134
Dividends per share 0.44 0.44 0.44
Dividends as a percentage of
net earnings 28.6% 21.8% 54.0%
In fiscal year 1994, dividends as a percentage of net
earnings increased from 1993 because of decreased earnings
in 1994. Dividends paid per share remained unchanged
for the 1994, 1993 and 1992 periods.
LIQUIDITY AND CAPITAL RESOURCES
Capital Spending
The following table shows capital expenditures
during the last three fiscal years and planned capital
expenditures during the 1995 fiscal year.
Plan Actual
__________ _______________________
Fiscal Year 1995 1994 1993 1992
__________ ________________________
Capital expenditures
(millions) $ 36.1 17.7 20.8 31.5
Supermarkets
opened 4 3 4 6
Supermarkets
closed 1 1 1 3
Remodels/expansions
completed 9 4 7 5
The Company's plans with respect to store construction,
acquisition, remodeling, and expansion are frequently
reviewed and revised in light of changing conditions. In
addition, the Company's ability to proceed with projects, or to
complete projects during a particular period, is subject to
successful negotiation of satisfactory contractual arrangements,
and the timing of projects is subject to normal construction
and other delays. Therefore, it is possible that not all the
projects described above will be commenced or completed
in fiscal year 1995, and it is possible that a portion of the
expenditures with respect to projects commenced during a
fiscal year carry over to the next year.
Financing and Liquidity
Although the Company's supermarket locations are
leased, the Company makes substantial expenditures to
equip new and expanded supermarkets. The cost to equip a
new supermarket is approximately $2.3 million while the
cost to equip an expanded supermarket is approximately
$1.7 million. In addition, the Company makes substantial
expenditures for distribution center facilities and equipment.
The Company plans to finance its capital expenditures
with funds provided by operations. However, if an insufficient
amount of funds is generated, the Company may
obtain long-term financing or draw on short-term credit lines.
The Company has $105.0 million in credit lines from financial
institutions of which $93.4 million is available for future use.
While these credit lines expire throughout fiscal year 1995, the
Company expects the majority of these credit lines to be
extended annually as they are deemed necessary.
Working capital increased $5,415,000 to $54,926,000
to July 4, 1993 to July 2, 1994. Additions to property and
equipment were $17,705,000 during fiscal 1994 and
consisted primarily of purchases of fixtures and equipment
for new and remodeled stores and equipment for distribution
center facilities.
EXHIBIT 21
Percentage
of Voting
Securities
Jurisdiction of Owned By
Name Incorporation Registrant
___________________________ _____________________ ______________
Supermarket Cigarette Sales, Inc. Louisiana 100%
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS FOR THE PERIOD ENDING JULY 2, 1994 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-02-1994
<PERIOD-END> JUL-02-1994
<CASH> 15,378
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<RECEIVABLES> 9,475
<ALLOWANCES> 0
<INVENTORY> 105,663
<CURRENT-ASSETS> 132,546
<PP&E> 261,772
<DEPRECIATION> 138,643
<TOTAL-ASSETS> 263,269
<CURRENT-LIABILITIES> 77,620
<BONDS> 32,169
<COMMON> 71
0
0
<OTHER-SE> 136,229
<TOTAL-LIABILITY-AND-EQUITY> 263,269
<SALES> 1,067,191
<TOTAL-REVENUES> 1,067,191
<CGS> 796,364
<TOTAL-COSTS> 1,045,172
<OTHER-EXPENSES> 4,161
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,298
<INCOME-PRETAX> 17,858
<INCOME-TAX> 6,207
<INCOME-CONTINUING> 11,651
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (700)
<NET-INCOME> 10,951
<EPS-PRIMARY> 1.54
<EPS-DILUTED> 0
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