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 December 31, 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 or 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)
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 January
31, 1995.
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
Index
Page No.
--------
Part 1. Financial Information
Item 1. Financial Statements
Condensed Balance Sheets -
December 31, 1994 and July 2, 1994 1
Condensed Statements of Earnings -
Thirteen Weeks Ended December 31, 1994 and
January 1, 1994 2
Twenty-six Weeks Ended December 31, 1994 and
January 1, 1994 2
Condensed Statements of Cash Flows -
Thirteen Weeks Ended December 31, 1994 and
January 1, 1994 3
Twenty-six Weeks Ended December 31, 1994 and
January 1, 1994 3
Notes to Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 5
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security
Holders 7
Item 6. Exhibits and Reports on Form 8-K 7
Signatures 8
<PAGE>
Part I. Financial Information
DELCHAMPS, INC. AND SUBSIDIARY
Condensed Balance Sheets - (In thousands)
(Unaudited)
<TABLE>
<CAPTION>
December 31, 1994 July 2, 1994*
_____________________ ___________________
Amount %Assets Amount %Assets
__________ _________ _________ ________
<S> <C> <C> <C> <C>
ASSETS
______
Current assets:
Cash and cash equivalents $ 3,225 1.24 15,378 5.84
Trade accounts receivable 9,243 3.54 9,475 3.60
Merchandise inventories 100,608 38.55 105,663 40.13
Prepaid expenses 2,063 .79 443 .17
Deferred income taxes 1,993 .76 1,587 .61
________ _______ ________ _______
Total current assets 117,132 44.88 132,546 50.35
Property and equipment:
Land 13,237 5.07 6,312 2.40
Buildings and improvements 53,080 20.34 51,742 19.65
Fixtures and equipment 211,594 81.08 198,746 75.49
Construction in progress 5,940 2.28 4,972 1.89
________ _______ ________ _______
283,851 108.77 261,772 99.43
Less accumulated depreciation and amortization -147,519 -56.53 -138,643 -52.66
________ _______ ________ _______
Net property and equipment 136,332 52.24 123,129 46.77
Other assets 2,366 .91 2,384 .91
Goodwill 5,131 1.97 5,210 1.97
________ _______ ________ _______
Total assets $ 260,961 100.00 263,269 100.00
======== ======= ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
____________________________________
Current liabilities:
Notes payable $ 19,974 7.65 11,574 4.40
Current portion of obligations under capital leases 929 .36 1,576 .60
Current portion of long-term debt 3,760 1.44 3,760 1.43
Current portion of guaranteed ESOP debt 2,000 .77 2,000 .76
Accounts payable 34,053 13.05 43,578 16.55
Accrued expenses 16,316 6.25 15,132 5.74
Income taxes -135 -.05 - -
________ _______ ________ _______
Total current liabilities 76,897 29.47 77,620 29.48
Obligations under capital leases, excluding current
poriton 11,525 4.42 11,811 4.49
Long-term debt, excluding current portion 16,478 6.31 18,358 6.97
Guaranteed ESOP debt, excluding current portion 2,000 .77 2,000 .76
Deferred income taxes 14,794 5.67 14,154 5.38
Other liabilities 2,968 1.13 3,026 1.15
________ _______ ________ _______
Total liabilities 124,662 47.77 126,969 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 7.56 19,731 7.49
Retained earnings 121,321 46.49 121,434 46.13
________ _______ ________ _______
141,123 54.08 141,236 53.65
Less: Guaranteed ESOP debt -4,000 -1.53 -4,000 -1.52
Unamortized restricted stock awards -824 -.32 -936 -.36
________ _______ ________ _______
Total stockholders' equity 136,299 52.23 136,300 51.77
Total liabilities and stockholders' equity $ 260,961 100.00 263,269 100.00
======== ======= ======== =======
See accompanying notes to condensed financial statements.
* Condensed from Balance Sheet included in the 1994 Annual Report.
</TABLE>
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
Condensed Statements of Earnings - (In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
____________________ ______________________
December 31, 1994 January 1, 1994 December 31, 1994 January 1, 1994
_________________ _________________ _________________ _________________
Amount % Sales Amount % Sales Amount % Sales Amount % Sales
______ _______ ______ _______ ______ _______ ______ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $260,452 100.00 274,506 100.00 526,657 100.00 541,076 100.00
Cost of sales 195,540 75.08 207,139 75.46 395,943 75.18 404,949 74.84
_______ ______ _______ ______ _______ ______ _______ ______
Goss profit 64,912 24.92 67,367 24.54 130,714 24.82 136,127 25.16
Selling, general and
administrative expenses 63,421 24.35 62,557 22.79 125,875 23.90 125,176 23.14
_______ ______ _______ ______ _______ ______ _______ ______
Operating income 1,491 .57 4,810 1.75 4,839 .92 10,951 2.02
Other expenses 1,289 .49 1,023 .37 2,408 .46 2,071 .38
_______ ______ _______ ______ _______ ______ _______ ______
Earnings before income
taxes and cumulative
effect of changes in
accounting principles 202 .08 3,787 1.38 2,431 .46 8,880 1.64
Income taxes 34 .02 1,316 .48 788 .15 3,188 .59
_______ ______ _______ ______ _______ ______ _______ ______
Earnings before cumulative
effect of changes in
accounting principles 168 .06 2,471 .90 1,643 .31 5,692 1.05
Cumulative effect of changes
in accounting for income
taxes - - - - - - 900 .17
Cumulative effect of
change in accounting for
postemployment benefits
(net of income tax
benefits of $1,000) - - - - - - -1,600 -.30
_______ ______ _______ ______ _______ ______ _______ ______
Net earnings $ 168 .06 2,471 .90 1,643 .31 4,992 .92
======= ====== ======= ====== ======= ====== ======= ======
Earnings per common share:
Earnings before cumulative
effect of changes in
accounting principles $ .02 .35 .23 .80
Cumulative effect of
change in accounting
for income taxes - - - .13
Cumulative effect of
change in accouning for
postemployment benefits - - - -.23
_______ _______ _______ _______
Net earnings per common
share $ .02 .35 .23 .70
======= ======= ======= =======
Weighted average number of
common shares 7,114 7,114 7,114 7,114
======= ======= ======= =======
Dividends declared per
common share $ .11 .11 .22 .22
======= ======= ======= =======
See accompanying notes to condensed financial 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 Twenty-six Weeks Ended
__________________________________ __________________________________
December 31, 1994 January 1, 1994 December 31, 1994 January 1, 1994
_________________ _______________ _________________ _______________
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 168 2,471 1,643 4,992
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 4,896 4,655 9,722 9,430
Loss reserve on closed stores -30 -27 -58 -53
Restricted stock award compensation expense 56 53 112 107
Cumulative effect of change in accounting
for postemployment benefits - - - 1,600
Cumulative effect of change in accounting
for income taxes - - - -900
Decrease (increase) in merchandise
inventories 5,093 -373 5,055 -3,954
(Decrease) increase in accounts payable
and accrued expenses -6,671 -1,014 -8,533 1,478
Decrease in income taxes, net -2,046 -1,144 -77 -309
Other, net 678 -931 -1,193 -3,308
________ ________ ________ ________
Net cash flows provided by operating activities 2,144 3,690 6,671 9,083
Cash flows from investing activities:
Additions to property and equipment -11,749 -2,402 -23,068 -5,142
Porceeds from sale of property and equipment 41 10 221 42
________ ________ ________ ________
Net cash used in investing activities -11,708 -2,392 -22,847 -5,100
Cash flows from financing activities:
Proceeds from notes payable 370 4,640 8,400 5,523
Principal payments on obligations
under capital leases -474 -420 -933 -827
Principal payments on long-term debt -939 -941 -1,880 -1,880
Dividends paid -782 -782 -1,564 -1,564
________ ________ ________ ________
Net cash (used in) provided by financing
activities -1,825 2,497 4,023 1,252
Net (decrease) increase in cash and
cash equivalents -11,389 3,795 -12,153 5,235
Beginning of period cash and cash
equivalents 14,614 13,510 15,378 12,070
________ ________ ________ ________
End of period cash and cash equivalents $ 3,225 17,305 3,225 17,305
======== ======== ========= ========
Supplemental Disclosures of Cash Flow Information:
_________________________________________________
Cash paid for:
Interest expenses $ 1,410 1,032 2,554 2,149
======== ======== ========= ========
Income taxes $ 1,361 2,571 1,367 3,008
======== ======== ========= ========
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
__________________
Effective for the third quarter ending April 1, 1995, the
Company will implement a new business plan titled "Delchamps
Strategy 2000." This business plan includes recording a pre-tax
restructuring charge in the amount of $15.0 million in the
Company's third quarter. The restructuring charge relates
primarily to four stores scheduled to be closed and ten existing
closed stores and includes costs for the write-down for store
assets, the unrealizable portion of the present value of
remaining rent payments, and other costs associated with store
closings such as costs to store and transfer reusable equipment.
<PAGE>
Management's Discussion And Analysis Of Results
Of Operations And Financial Condition
RESULTS OF OPERATIONS
Sales:
_____
Sales decreased 5.12% for the thirteen-week period and
2.66% for the twenty-six week period, compared with corresponding
periods last year. Sales for stores open during the current and
prior year periods decreased 7.84% for the thirteen-week period
and 5.49% for the twenty-six week period. The decrease in sales
was because of heavy competitive activity which included
competitors opening new supermarkets and expanding existing
supermarkets.
At December 31, 1994, the Company operated 122 supermarkets
and twelve liquor stores compared with 119 supermarkets and
eleven liquor stores at January 1, 1994. During the thirteen-
week period, the Company purchased seven supermarkets from The
Kroger Co., opened one supermarket, closed four supermarkets,
sold two supermarkets to The Kroger Co., and remodeled and
expanded one supermarket.
Gross Profit:
____________
Gross profit as a percentage of sales increased from 24.54%
to 24.92% for the thirteen-week period and decreased from 25.16%
to 24.82% for the twenty-six week period. The increase in the
thirteen-week period was the result of an increase in the market
department gross profit percentage due to greater retail price
reductions during last year's holiday seasons. The decrease in
the twenty-six week period was the result of an increase in
inventory shrinkage, primarily in the perishable inventory
departments, resulting from increased promotional activity.
Selling, General and Administration Expenses:
____________________________________________
Selling, general and administrative expenses as a
percentage of sales increased from 22.79% to 24.35% for the
thirteen-week period and increased from 23.14% to 23.90% for the
twenty-six week period. The increases for both periods were the
result of lower sales in the current periods as noted above.
Selling, general and administrative expense dollars increased
slightly, even though the Company operated additional new
supermarkets and additional service departments from expanded
supermarkets in the current periods. The Company has continued
to realize savings in selling, general and administrative expense
dollars as a result of an ongoing cost control program.
Other Expense:
_____________
Other expense increased $266,000 and $337,000 for the
thirteen and twenty-six 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 34.75%
to 16.83% for the thirteen-week period and decreased from 35.90%
to 32.41% for the twenty-six week period. The effective rates
decreased for both periods because of lower pretax earnings
combined with greater levels of targeted jobs tax credits. The
effective rates were below the statutory rate because of targeted
jobs tax credits.
<PAGE>
Management's Discussion And Analysis of Results
of Operations And Financial Condition
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 $85.0 million in credit lines from financial
institutions of which $59.0 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 $40,235,000 as of December 31, 1994. Additions to property
and equipment were $23,068,000 during the same period and
consisted primarily of purchases of store equipment.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders.
The Company held its annual meeting of shareholders on
November 10, 1994. At the meeting, J. Thomas Arendall, Jr., E.
E. Bishop, and David W. Morrow were elected as directors for
three-year terms expiring at the 1997 annual meeting. Other
board members continuing to serve are James M. Cain, William W.
Crawford, and T. W. Mitchell whose terms expire at the 1995
annual meeting, and Carl F. Bailey, John A. Caddell, and Randy
Delchamps whose terms expire at the 1996 annual meeting. The
shareholders also ratified the Director Compensation Plan and the
appointment of KPMG Peat Marwick LLP as the Company's independent
auditors for the fiscal year ending July 1, 1995.
A summary of voting results follows (in thousands):
<TABLE>
<CAPTION>
For Against Abstain Total Votes
______________ _____________ ______________ _________________
Amount % Amount % Amount % Amount %
______ ____ ______ ____ ______ ____ ______ _____
<S> <C> <C> <C> <C> <C> <C>
Directors:
J. Thomas Arendall, Jr. 5,558 97.6 139 2.4 5,697 100.0
E. E. Bishop 5,638 98.7 73 1.3 5,711 100.0
David W. Morrow 5,637 98.7 73 1.3 5,710 100.0
Director Compensation Plan 5,058 87.8 584 10.1 120 2.1 5,762 100.0
Appointment of KPMG Peat
Marwick LLP 5,682 98.6 54 .9 26 .5 5,762 100.0
</TABLE>
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
December 31, 1994.
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.
Date: February 10, 1995 /s/ Randy Delchamps
___________________
Randy Delchamps, Chairman,
President, and Chief
Executive Officer
Date: February 10, 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 EXTRACTED FROM CONDENSED
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> 6-MOS
<FISCAL-YEAR-END> JUL-01-1995
<PERIOD-END> DEC-31-1994
<CASH> 3,225,000
<SECURITIES> 0
<RECEIVABLES> 9,243,000
<ALLOWANCES> 0
<INVENTORY> 100,608,000
<CURRENT-ASSETS> 117,132,000
<PP&E> 283,851,000
<DEPRECIATION> 147,519,000
<TOTAL-ASSETS> 260,961,000
<CURRENT-LIABILITIES> 76,897,000
<BONDS> 30,003,000
<COMMON> 71,000
0
0
<OTHER-SE> 136,228,000
<TOTAL-LIABILITY-AND-EQUITY> 260,961,000
<SALES> 260,452,000
<TOTAL-REVENUES> 260,452,000
<CGS> 195,540,000
<TOTAL-COSTS> 63,421,000
<OTHER-EXPENSES> 1,289,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 202,000
<INCOME-TAX> 34,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 168,000
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
