Securities And Exchange Commission
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the 13-Week Period Ended April 1, 1995
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 or organization) identification number)
305 Delchamps Drive, Mobile, AL 36602
------------------------------- ---------------------
(Address of principal executive (Zip code)
offices)
(334) 433-0431
-------------------------------
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes x No
----- -----
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable
date. 7,113,581 shares at May 5, 1995.
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
Index
Page No.
--------
Part 1. Financial Information
Item 1. Financial Statements
Condensed Balance Sheets -
April 1, 1995 and July 2, 1994 1
Condensed Statements of Earnings -
Thirteen Weeks Ended April 1, 1995 and
April 2, 1994 2
Thirty-nine Weeks Ended April 1, 1995 and
April 2, 1994 2
Condensed Statements of Cash Flows -
Thirteen Weeks Ended April 1, 1995 and
April 2, 1994 3
Thirty-nine Weeks Ended April 1, 1995 and
April 2, 1994 3
Notes to Condensed Financial Statements4
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 5
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 7
Signatures 7
<PAGE>
Part I. Financial Information
DELCHAMPS, INC. AND SUBSIDIARY
Condensed Balance Sheets - (In thousands)
(Unaudited)
<TABLE>
<CAPTION>
April 1, 1995 July 2, 1994*
___________________ _____________________
Amount %Assets Amount %Assets
______ _______ ______ _______
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,491 1.70 15,378 5.84
Trade accounts receivable 8,434 3.20 9,475 3.60
Merchandise inventories 99,810 37.83 105,663 40.13
Prepaid expenses 1,813 .69 443 .17
Deferred income taxes 1,529 .58 1,587 .61
________ ________ ________ _________
Total current assets 116,077 44.00 132,546 50.35
Property and equipment:
Land 13,237 5.02 6,312 2.40
Buildings and improvements 54,240 20.56 51,742 19.65
Fixtures and equipment 217,303 82.37 198,746 75.49
Construction in progress 6,011 2.27 4,972 1.89
________ ________ ________ _________
290,791 110.22 261,772 99.43
Less accumulated depreciation and (150,654) (57.10) (138,643) (52.66)
amortization ________ ________ ________ _________
Net property and equipment 140,137 53.12 123,129 46.77
Other assets 2,513 .95 2,384 .91
Goodwill 5,092 1.93 5,210 1.97
________ ________ ________ _________
Total assets $ 263,819 100.00 263,269 100.00
======== ======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 27,584 10.46 11,574 4.40
Current portion of obligations under 591 .22 1,576 .60
capital leases
Current portion of long-term debt 3,760 1.43 3,760 1.43
Current portion of guaranteed ESOP debt 2,000 .76 2,000 .76
Accounts payable 36,235 13.73 43,578 16.55
Accrued expenses 17,786 6.74 15,132 5.74
Income taxes (3,224) (1.22) - -
________ ________ ________ _________
Total current liabilities 84,732 32.12 77,620 29.48
Obligations under capital leases, excluding 11,375 4.31 11,811 4.49
current portion
Long-term debt, excluding current portion 15,537 5.89 18,358 6.97
Guaranteed ESOP debt, excluding current portion 2,000 .76 2,000 .76
Restructure obligation 14,369 5.45 - -
Deferred income taxes 8,866 3.36 14,154 5.38
Other liabilities 2,978 1.12 3,026 1.15
________ ________ ________ _________
Total liabilities 139,857 53.01 126,969 48.23
Stockholders' equity:
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 .03 71 .03
Additional paid-in capital 19,731 7.48 19,731 7.49
Retained earnings 108,894 41.27 121,434 46.13
________ ________ ________ _________
128,696 48.78 141,236 53.65
Less: Guaranteed ESOP debt (4,000) (1.52) (4,000) (1.52)
Unamortized restricted stock awards (734) (.27) (936) (.36)
________ ________ ________ _________
Total stockholders' equity 123,962 46.99 136,300 51.77
Total liabilities and stockholders' equity $ 263,819 100.00 263,269 100.00
======== ======== ======== =========
</TABLE>
See accompanying notes to condensed financial statements.
* Condensed from Balance Sheet included in the 1994 Annual Report.
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
Condensed Statements of Earnings - (In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
____________________ _______________________
April 1, 1995 April 2, 1994 April 1, 1995 April 2, 1994
_____________ _____________ _____________ _____________
Amount % Sales Amount % Sales Amount % Sales Amount % Sales
______ _______ ______ _______ ______ _______ ______ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $255,592 100.00 265,146 100.00 782,249 100.00 806,222 100.00
Cost of sales 194,636 76.15 197,407 74.45 590,579 75.50 602,356 74.71
________ _______ _______ _______ _______ _______ _______ _______
Gross profit 60,956 23.85 67,739 25.55 191,670 24.50 203,866 25.29
Selling, general and
administrative
expenses 79,454 31.09 61,300 23.12 205,329 26.25 186,476 23.13
________ _______ _______ _______ _______ _______ _______ _______
Operating (loss)
income (18,498) (7.24) 6,439 2.43 (13,659) (1.75) 17,390 2.16
Other expenses 1,254 .49 1,019 .38 3,662 .47 3,090 .38
________ _______ _______ _______ _______ _______ _______ _______
(Loss) earnings before
income taxes and
cummulative effect
of changes in
accounting
principles (19,752) (7.73) 5,420 2.04 (17,321) (2.22) 14,300 1.78
Income (benefit)
taxes (8,107) (3.17) 1,858 .70 (7,319) (.94) 5,046 .63
________ _______ _______ _______ _______ _______ _______ _______
(Loss) earnings
before cummulative
effect of changes
in accounting
principles (11,645) (4.56) 3,562 1.34 (10,002) (1.28) 9,254 1.15
Cummulative effect
of change in
accounting for
income taxes - - - - - - 900 .11
Cumulative effect
of change in
accounting for
postemployment
benefits (net of
income tax
benefits of $1,000) - - - - - - (1,600) (.20)
________ _______ _______ _______ _______ _______ _______ _______
Net (loss) earnings $(11,645) (4.56) 3,562 1.34 (10,002) (1.28) 8,554 1.06
======== ======= ======= ======= ======= ======== ======= =======
(Loss) earnings per
common share:
(Loss) earnings
before cummulative
effect of changes
in accounting
principles $ (1.64) .50 (1.41) 1.30
Cumulative effect
of change in
accounting for
income taxes - - - .12
Cummulative effect
of change in
accounting for
postemployment
benefits - - - (.22)
________ _______ _______ _______
Net (loss) earnings
per common share $ (1.64) .50 (1.41) 1.20
======== ======== ======= ========
Weighted average
number of common
shares 7,114 7,114 7,114 7,114
======== ======== ====== ========
Dividends declared
per common share $ .11 .11 .33 .33
======== ======== ====== ========
See accompanying notes to condensed finanical statements.
</TABLE>
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
Condensed Statements of Cash Flows - (In thousands)
Increase (Decrease) In Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
____________________ _______________________
04/01/95 04/02/94 04/01/95 04/02/94
________ ________ ________ ________
<S> <C> <C> <C> <C>
Cash flows from
operating activities:
Net (loss) earnings $(11,645) 3,562 (10,002) 8,554
Adjustments to reconcile
net (loss) earnings to
net cash provided by
operating activities:
Depreciation and
amortization 4,888 4,630 14,610 14,062
Loss reserve on
closed stores 10 (27) (48) (80)
Restricted stock award
compenstion expense 90 54 202 161
Cumulative effect of
change in accounting
for postemployment
benefits - - - 1,600
Cumulative effect of
change in accounting
for income taxes - - - (900)
Restructure obligation 14,369 - 14,369 -
Decrease (income) in
merchandise
inventories 798 1,244 5,853 (2,710)
Income (decrease) in
accounts payable and
accrued exp 3,652 (4,014) (4,881) (2,536)
Decrease in income
taxes, net (3,089) (180) (3,166) (489)
Other, net (4,551) 2,067 (5,744) (1,243)
________ ________ ________ ________
Net cash flows provided by
operating activities 4,522 7,336 11,193 16,419
Cash flows form investing
activities:
Additions to property
and equipment (9,337) (7,352) (32,405) (12,494)
Proceeds from sale of
property and equipment 682 29 903 71
________ ________ ________ ________
Net cash used in investing
activities (8,655) (7,323) (31,502) (12,423)
Cash flows from financing
activities:
Proceeds from (payments
on) notes payable 7,610 (82) 16,010 5,441
Principal payments on
obligations under
capital leases (488) (432) (1,421) (1,259)
Principal payments on
Long-term debt (941) (939) (2,821) (2,819)
Dividends paid (782) (782) (2,346) (2,346)
________ ________ ________ ________
Net cash provided by
(used in) financing
activities 5,399 (2,235) 9,422 (983)
Net increase (decrease)
in cash and cash
equivalents 1,266 (2,222) (10,887) 3,013
Beginning of period cash
and cash equivalents 3,225 17,305 15,378 12,070
________ ________ ________ ________
End of period cash and
cash equivalents $ 4,491 15,083 4,491 15,083
======== ======= ======== ======
Supplemental Disclosures
of Cash Flow Information:
Cash paid for:
Interest expenses $ 1,364 1,005 3,720 3,204
======== ======= ======== ======
Income taxes $ 70 1,630 1,437 4,638
======== ======= ======== ======
See accompanying notes to condensed financial statements.
</TABLE>
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
Notes to Condensed Financial Statements
(Unaudited)
(A) Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements
include the results of operations, account balances and cash
flows of the Company and its wholly-owned subsidiary. All
material intercompany balances have been eliminated.
In the opinion of management, the accompanying unaudited
consolidated financial statements include all adjustments
necessary to present fairly, in all material respects, the
results of operations of the Company for the periods presented.
The statements have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures included in annual
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. It is suggested that
these consolidated financial statements be read in conjunction
with the consolidated financial statements and the accompanying
notes included in the Company's 1994 Annual Report.
The Balance Sheet at July 2, 1994 has been taken from the
audited financial statements at that date.
(B) Restructuring Plan
------------------
For the third quarter ending April 1, 1995, the Company
recorded a pre-tax restructuring charge in the amount of $15
million. The restructuring charge relates primarily to closed
stores that the Company has been unable to sell or sublease in
whole or in part and includes costs for the writedown of store
assets, the unrealizable portion of the present value of
remaining rent payments, and other costs associated with store
closings. The restructuring charge is included in selling,
general and administrative expenses on the Income Statements.
<PAGE>
Management's Discussion And Analysis Of Results
Of Operations And Financial Condition
RESULTS OF OPERATIONS
Sales:
- -----
Sales decreased 3.60% for the thirteen-week period and 2.97%
for the thirty-nine week period, compared with corresponding
periods last year. Sales for stores open during the current and
prior year periods decreased 6.32% for the thirteen-week period
and 5.76% for the thirty-nine week period.
The decrease in sales for both periods was primarily the
result of heavy competitive activity which included competitors
opening new supermarkets and expanding existing supermarkets.
Sales were also negatively impacted by the timing of the Easter
holiday which will occur in the fourth quarter of the current
year and occurred in the third quarter of the prior year.
In an effort to improve sales trends, the Company
implemented a business plan titled "Strategy 2000." This
business plan includes price reductions on thousands of items, an
increase from forty-nine cents to fifty cents in the Company's
double coupon program (under which coupons that have a face value
up to fifty cents are doubled), and a new advertising campaign to
communicate these changes. Implementation of this business plan
began in the later part of the Company's third quarter. For the
plan to be successful, sales volume will have to increase
substantially to offset the reduced margins resulting from the
price reductions. Such volume increases, if achieved at all, are
not likely to be achieved with the fourth quarter of the current
fiscal year. Accordingly, the Company does not expect fourth
quarter results to be profitable.
At April 1, 1995, the Company operated 118 supermarkets and
twelve liquor stores compared with 119 supermarkets and eleven
liquor stores at April 2, 1994. During the thirty-nine week
period, the Company purchased seven supermarkets from the Kroger
Co., opened two supermarkets, closed nine supermarkets, sold two
supermarkets to the Kroger Co., and remodeled and expanded four
supermarkets.
Gross Profit:
- ------------
Gross profit as a percentage of sales decreased from 25.55%
to 23.85% for the thirteen-week period and decreased from 25.29%
to 24.50% for the thirty-nine week period. The decreases for
both periods were the result of inventory markdowns related to
the price reductions for the "Strategy 2000" business plan,
increased inventory markdowns related to the Company's bonus buy
promotional program (under which certain products are featured at
reduced retail prices), and increased levels of inventory
shrinkage.
Selling, General and Administrative Expenses:
- --------------------------------------------
Selling, general and administrative ("S G & A") expenses as
a percentage of sales increased from 23.12% to 31.09% for the
thirteen-week period and increased from 23.13% to 26.25% for the
thirty-nine week period. The increases for both periods were the
result of lower sales in the current periods combined with a
restructuring charge in the amount of $15.0 million in the
current periods. The restructuring charge relates primarily to
closed stores that could not be subleased in whole or in part. S
G & A increased $18.2 million for the thirteen-week period and
increased $18.9 million for the thirty-nine week period,
including the $15.0 million restructuring charge. The remaining
increases for both periods resulted from increases in the
Company's wages, rent expense, and depreciation expense.
Other Expense:
- -------------
Other expense increased $235,000 and $572,000 for the
thirteen and thirty-nine week periods, respectively. The
increases resulted from increased interest expense, which was
higher in the current year because of higher interest rates and
increased levels of short-term indebtedness.
Income Taxes:
- ------------
The effective rate for income taxes decreased from 34.28% to
(41.04%) for the thirteen-week period and decreased from 35.29%
to (42.26%) for the thirty-nine week period. The effective rates
in the current periods represent income tax benefits which
resulted from the loss in earnings before taxes. The effective
rates were below the statutory rate because of targeted jobs tax
credits.
Other:
- -----
On April 14, 1995, Randy Delchamps resigned as Chairman,
Chief Executive Officer, and President of the Company in order to
pursue other business interests. David W. Morrow, a director of
the Company, has been elected Chairman of the Board. Mr. Morrow
has over 40 years of experience in the supermarket industry.
Most recently, he served as Chairman of the Board, President and
Chief Executive Officer of Pueblo International, Inc. Pueblo is
comparable in size to Delchamps and has supermarkets operating in
Puerto Rico, the U.S. Virgin Islands, and Florida. Mr. Morrow's
grocery career includes 28 years of service with Albertson's,
where he rose from stock clerk to President and Chief Executive
Officer . In 1977, Mr. Morrow became President and Chief
Operating Officer of The Great Atlantic and Pacific Tea Company.
Mr. Morrow will serve as President and Chief Executive Officer of
Delchamps on an interim basis while the Board of Directors
searches for a permanent President and Chief Executive Officer.
LIQUIDITY AND CAPITAL RESOURCES
The Company leases its store locations, but makes
substantial expenditures to equip new and expanded supermarkets.
In addition, the Company makes substantial expenditures for
distribution facilities and equipment. The Company plans to
finance its capital expenditures with funds provided by
operations. However, if an insufficient amount of funds are
generated, the Company may draw on short-term credit lines. The
Company has $65.0 million in credit lines from financial
institutions of which $36.2 million is available for future use.
These credit lines expire at various times throughout fiscal
years 1995 and 1996, though the Company expects most to be
renewed.
Working capital decreased form $54,926,000 at July 2, 1994
to $31,345,000 as of April 1, 1995. Additions to property and
equipment were $32,405,000 during the same period and consisted
primarily of purchases of store equipment.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
Reports on Form 8-K
There were no reports on Form 8-K filed during the 13-weeks
ended April 1, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Delchamps, Inc.
_______________
Registrant
Date: May 12, 1995 /s/ David W. Morrow
______________________
David W. Morrow, Chairman,
President, and Chief Executive
Officer
Date: May 12, 1995 /s/ Timothy E. Kullman
_______________________
Timothy E. Kullman, Senior Vice
President and Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM CONSOLIDATED
FINANCIAL STATEMENTS FOR THE PERIOD ENDING DECEMBER 31, 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1995
<CASH> 4,491,000
<SECURITIES> 0
<RECEIVABLES> 8,434,000
<ALLOWANCES> 0
<INVENTORY> 99,810,000
<CURRENT-ASSETS> 116,077,000
<PP&E> 290,791,000
<DEPRECIATION> (150,654,000)
<TOTAL-ASSETS> 263,819,000
<CURRENT-LIABILITIES> 84,732,000
<BONDS> 28,912,000
<COMMON> 71,000
0
0
<OTHER-SE> (4,734,000)
<TOTAL-LIABILITY-AND-EQUITY> 263,819,000
<SALES> 255,592,000
<TOTAL-REVENUES> 255,592,000
<CGS> 194,636,000
<TOTAL-COSTS> 79,454,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,254,000
<INCOME-PRETAX> (19,752,000)
<INCOME-TAX> (8,107,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,645,000)
<EPS-PRIMARY> (1.64)
<EPS-DILUTED> 0
</TABLE>
