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 March 30, 1996
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. 7,111,950
shares at May 10, 1996.
DELCHAMPS, INC. AND SUBSIDIARY
Index
Page No.
--------
Part 1. Financial Information
Item 1. Financial Statements
Condensed Balance Sheets -
March 30, 1996 and July 1, 1995 1
Condensed Statements of Earnings -
Thirteen Weeks Ended March 30, 1996
and April 1, 1995 2
Thirty-nine Weeks Ended March 30,
1996 and April 1, 1995 2
Condensed Statements of Cash Flows -
Thirteen Weeks Ended March 30, 1996
and April 1, 1995 3
Thirty-nine Weeks Ended March 30,
1996 and April 1, 1995 3
Notes to Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 5
Part II. Other Information
Item 1. Legal Proceedings 8
Item 2. Changes in Securities 8
Item 3. Defaults upon Senior Securities 8
Item 4. Submission of Matters to a Vote of
Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
<TABLE>
<CAPTION>
Part I. Financial Information
DELCHAMPS, INC. AND SUBSIDIARY
Condensed Balance Sheets - (In thousands)
(Unaudited)
March 30, 1996 July 1, 1995*
_________________ _________________
Amount %Assets Amount %Assets
______ _______ ______ _______
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,256 3.88 15,906 5.90
Trade accounts receivable 11,030 4.17 9,214 3.42
Merchandise inventories 99,971 37.80 93,808 34.82
Prepaid expenses 2,029 0.77 1,420 0.53
Income taxes receivable 2,252 0.85 6,549 2.43
Deferred income taxes 2,045 0.77 2,045 0.76
_______ _______ _______ _______
Total current assets 127,583 48.24 128,942 47.86
Property and equipment:
Land 15,207 5.75 13,312 4.94
Buildings and improvements 57,627 21.79 56,632 21.02
Fixtures and equipment 219,050 82.84 220,903 81.99
Construction in progress 5,540 2.09 2,649 0.99
_______ _______ _______ _______
297,424 112.47 293,496 108.94
Less accumulated depreciation
and amortization (162,736) (61.54) (155,411) (57.69)
_______ _______ _______ _______
Net property and equipment 134,688 50.93 138,085 51.25
Other assets 2,187 0.83 2,385 0.89
_______ _______ _______ _______
Total assets $ 264,458 100.00 269,412 100.00
======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 30,000 11.34 30,000 11.14
Current portion of obligations
under capital leases 665 0.25 665 0.25
Current portion of long-term debt 3,760 1.42 3,760 1.40
Current portion of guaranteed ESOP
debt 2,000 0.76 2,000 0.74
Current portion of restructure
obligation 6,364 2.41 6,364 2.36
Accounts payable 44,681 16.90 45,063 16.73
Accrued expenses 21,577 8.15 18,170 6.73
_______ _______ _______ _______
Total current liabilities 109,047 41.23 106,022 39.35
Obligations under capital leases,
excluding current portion 10,656 4.03 11,147 4.14
Long-term debt, excluding current portion 11,780 4.45 14,598 5.42
Restructure obligation, excluding current 14,046 5.31 19,219 7.13
Deferred income taxes 7,341 2.78 5,464 2.03
Other liabilities 2,569 0.98 2,920 1.08
_______ _______ _______ _______
Total liabilities 155,439 58.78 159,370 59.15
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 7,111,502 shares at
March 30, 1996 and 7,108,781
shares at July 1, 1995 71 0.03 71 0.03
Additional paid-in capital 19,639 7.43 19,603 7.28
Retained earnings 91,491 34.59 92,637 34.38
_______ _______ _______ _______
111,201 42.05 112,311 41.69
Less: Guaranteed ESOP debt (2,000) (0.76) (2,000) (0.74)
Unamortized restricted
stock awards (182) (0.07) (269) (0.10)
_______ _______ _______ _______
Total stockholders' equity 109,019 41.22 110,042 40.85
Total liabilities and stockholders'
equity $ 264,458 100.00 269,412 100.00
======= ======= ======= =======
</TABLE>
See accompanying notes to condensed financial statements.
* Condensed from Balance Sheet included in the 1995 Annual Report.
<PAGE>
<TABLE>
<CAPTION>
DELCHAMPS, INC. AND SUBSIDIARY
Condensed Statements of Earnings - (In thousands except per share amounts)
(Unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
___________________________________ ___________________________________
03/30/96 04/01/95 03/30/96 04/01/95
________________ ________________ ________________ ________________
Amount % Sales Amount % Sales Amount % Sales Amount % Sales
______ _______ ______ _______ ______ _______ ______ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $280,225 100.00 255,592 100.00 841,967 100.00 782,249 100.00
Cost of sales 213,902 76.33 194,636 76.15 645,480 76.66 590,579 75.50
_______ _______ _______ _______ _______ _______ _______ _______
Gross profit 66,323 23.67 60,956 23.85 196,487 23.34 191,670 24.50
Selling, general and
administrative expenses
(S G & A):
Other S G & A 62,722 22.38 64,454 25.22 189,096 22.47 190,329 24.33
Restructuring charge 15,000 5.87 15,000 1.92
_______ _______ _______ _______ _______ _______ _______ _______
Total S G & A 62,722 22.38 79,454 31.09 189,096 22.47 205,329 26.25
_______ _______ _______ _______ _______ _______ _______ _______
Operating income (loss) 3,601 1.29 (18,498) -7.24 7,391 0.87 (13,659) -1.75
Interest expense, net 1,704 0.61 1,254 0.49 5,328 0.63 3,662 0.47
_______ _______ _______ _______ _______ _______ _______ _______
Earnings (loss) before
income tax 1,897 0.68 (19,752) -7.73 2,063 0.24 (17,321) -2.22
Income tax expense (benefit) 750 0.27 (8,107) -3.17 864 0.10 (7,319) -0.94
_______ _______ _______ _______ _______ _______ _______ _______
Net earnings (loss) $ 1,147 0.41 (11,645) -4.56 1,199 0.14 (10,002) -1.28
======= ======= ======= ======= ======= ======= ======= =======
Net earnings (loss) per
common share $ 0.16 -1.64 0.17 -1.41
======= ======= ======= =======
Weighted average number of
common shares 7,110 7,114 7,110 7,114
======= ======= ======= =======
Dividends declared $ 0.11 0.11 0.33 0.33
per common share ======= ======= ======= =======
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
DELCHAMPS, INC. AND SUBSIDIARY
Condensed Statements of Cash Flows - (In thousands)
Increase (Decrease) In Cash and Cash Equivalents
(Unaudited)
Thirteen Weeks Ended Thirty-nine Weeks Ended
____________________ _______________________
3/30/96 4/1/95 3/30/96 4/1/95
_______ ______ _______ ______
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 1,147 (11,645) 1,199 (10,002)
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Depreciation and amortization 5,610 4,888 16,910 14,610
Loss (gain) on sale of property and
equipment 6 335 (284) 298
Loss reserve on closed stores (95) 10 (351) (48)
Restricted stock award compensation
expense 20 90 87 202
Restructure obligation (860) 14,679 (2,762) 14,677
(Increase) decrease in merchandise
inventories (5,222) 798 (6,163) 5,853
Increase (decrease) in accounts
payable and accrued exp 5,548 3,652 3,026 (4,881)
Decrease (increase) in income taxes
receivable, net 3,625 (3,089) 4,297 (3,166)
Other, net 472 (4,551) (2,353) (5,744)
_______ ______ ______ ______
Net cash flows provided by operating
activities 10,251 5,167 13,606 11,799
Cash flows from investing activities:
Additions to property and equipment (3,784) (9,337) (14,108) (32,405)
Proceeds from sale of property and
equipment 9 37 508 297
_______ ______ ______ ______
Net cash used in investing activities (3,775) (9,300) (13,600) (32,108)
Cash flows from financing activities:
(Payments on) proceeds from notes
payable (2,000) 7,610 16,010
Principal payments on obligations
under capital leases (168) (488) (491) (1,421)
Principal payments on long-term debt (939) (941) (2,819) (2,821)
Dividends paid (782) (782) (2,346) (2,346)
_______ ______ ______ ______
Net cash (used in) provided by
financing activities (3,889) 5,399 (5,656) 9,422
Net increase (decrease) in cash and
cash equivalents 2,587 1,266 (5,650) (10,887)
Beginning of period cash and cash
equivalents 7,669 3,225 15,906 15,378
_______ ______ ______ ______
End of period cash and cash equivalents $ 10,256 4,491 10,256 4,491
======= ====== ====== ======
Supplemental Disclosures of Cash Flow Information:
Cash paid for:
Interest expenses $ 1,730 1,364 5,482 3,720
======= ====== ====== ======
Income taxes $ 7 70 51 1,437
======= ====== ====== ======
</TABLE>
See accompanying notes to condensed financial statements.
<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 1995 Annual Report.
The balance sheet at July 1, 1995 has been taken
from the audited financial statements at that date.
<PAGE>
Management's Discussion And Analysis Of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Sales:
Sales increased 9.64% for the thirteen-week period and 7.63% for
the thirty-nine week period, compared with corresponding periods last
year. Sales for stores open during the current and prior year periods
increased 10.17% for the thirteen-week period and 7.92% for the thirty-
nine week period.
The increase in sales for both periods was primarily the result of
positive customer response to the Company's sales and merchandise program
which was implemented in April, 1995. This program included reduced
retail prices on thousands of items, an increase in the amount of which
coupons are doubled (from $.49 to $.50), and a new advertising campaign
to promote these changes.
At March 30, 1996, the Company operated 117 supermarkets and ten
liquor stores compared with 120 supermarkets and twelve liquor stores
at April 1, 1995. During the thirty-nine week period, the Company
opened one supermarket, opened one liquor store, renovated forty-two
supermarkets, remodeled and expanded one supermarket, closed two
supermarkets, and closed three liquor stores.
Gross Profit:
Gross profit as a percentage of sales decreased from 23.85% to
23.76% for the thirteen-week period and decreased from 24.50% to 23.34%
for the thirty-nine week period. The decreases for both periods were
the result of reduced retail prices related to the sales and merchandise
program noted above.
Selling, General and Administration Expenses:
Selling, general and administrative ("S G & A") expenses decreased
$16.73 million and $16.23 million for the thirteen and thirty-nine week
periods, respectively. The thirteen and thirty-nine week periods for
last year included a $15.00 million restructuring charge which was
primarily related to closed stores that could not be subleased in whole
or in part. Excluding the restructuring charge from last year's
periods, S G & A decreased $1.73 million and $1.23 million for the
thirteen and thirty-nine week periods, respectively. The decreases for
both periods were due to reductions in store wages (which resulted from
improved scheduling) and reductions in store supply costs (which
resulted from new training programs).
S G & A as a percentage of sales decreased from 31.09% to 22.38%
for the thirteen week period and decreased from 26.25% to 22.47% for the
thirty-nine week period. Excluding the restructuring charge from last
year's periods, S G & A decreased from 25.22% to 22.38% for the
thirteen week period and decreased from 24.33% to 22.47% for the thirty-
nine week period. The decreases for both periods were the result of
higher sales in the current periods combined with reduced expenses as
noted above.
<PAGE>
Management's Discussion And Analysis Of Financial
Condition and Results of Operations
Interest Expense, Net
Interest expense, net increased by $.45 million in the thirteen
week period and by $1.67 million in the thirty-nine week period. The
increases for both periods result from interest expense related to
restructuring charges (which the Company did not incur during last
year's periods) and from increased levels of short-term indebtedness.
Income Taxes:
The effective rate for income taxes was 39.54% and 41.88% for the
current thirteen and thirty-nine week periods, respectively. Last
year's periods had pretax losses, and therefore had income tax benefits
at effective rates of 41.04% and 42.26% for the thirteen and thirty-
nine week periods, respectively. Last year's periods included tax
savings from targeted jobs tax credits. The current year's periods did
not include savings from targeted jobs tax credits since the credit
expired.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows generated by operating activities were $10.251 million
for the thirteen week period and $13.606 million for the thirty-nine
week period. Last year's corresponding amounts were $5.167 million and
$11.799 million for the thirteen and thirty-nine week periods,
respectively. Historically, the Company has funded working capital
requirements, capital requirements, and other cash requirements primarily
through cash flows from operations. However, if an insufficient amount
of cash flows are generated, the Company may draw on a short-term
revolving loan. The Company may borrow up to $75 million under the
revolving loan of which $45 million is available for future use. The
revolving loan expires June, 1998.
Cash used in investing activities was $3.775 million and $13.600
million for the current thirteen and thirty-nine week periods,
respectively. Corresponding amounts from last year's periods were
$9.300 million and $32.108 million for the thirteen and thirty-nine week
periods, respectively. The decrease in investing activities was because
of reductions in purchases of equipment for new supermarkets,
reductions in purchases of equipment for expanded supermarkets, and
reductions in purchases of equipment for the Company's distribution
facility. In addition, last year's thirty-nine week period included the
purchase of seven supermarkets (with equipment) from the Kroger Co. The
Company's investing activities include purchases of store equipment,
distribution center equipment, and investments in new technology.
Historically, store buildings are leased and are not included in
investing activities.
Cash (used in) provided by financing activities was ($3.889)
million and ($5.656) million for the current thirteen and thirty-nine
week periods, respectively. Corresponding amounts from last year's
periods were $5.399 million and $9.422 million, respectively. The
decreases in cash provided by financing activities was because of
decreased borrowing (as compared to last year's periods) under the
Company's short-term borrowing facilities. At the end of the quarter
ended March 30, 1996, the Company was in compliance with all financial
covenants under the revolving loan agreement and its note payable
agreement.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For the thirteen week period ended March 30, 1996, the Company had no
significant developments related to legal matters. The Company is
involved in various claims, administrative proceedings, and other legal
proceedings which arise from time to time in connection with the
ordinary conduct of the Company's business.
Item 2. Changes in Securities - None
Item 3. Defaults in Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K - None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Delchamps, Inc.
_____________
Registrant
Date: May 10, 1996 /s/ David W. Morrow
David W. Morrow,
Chairman of the
Board and Chief
Executive Officer
Date: May 10, 1996 /s/ Richard W. La Trace
Richard W. La Trace,
President
Date: May 10, 1996 /s/ Timothy E. Kullman
Timothy E. Kullman,
Senior Vice President,
Chief Financial Officer,
Treasurer and Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-01-1995
<PERIOD-END> MAR-30-1996
<CASH> 10,256,000
<SECURITIES> 0
<RECEIVABLES> 11,030,000
<ALLOWANCES> 0
<INVENTORY> 99,971,000
<CURRENT-ASSETS> 127,583,000
<PP&E> 297,424,000
<DEPRECIATION> (162,736,000)
<TOTAL-ASSETS> 264,458,000
<CURRENT-LIABILITIES> 109,047,000
<BONDS> 22,436,000
<COMMON> 71,000
0
0
<OTHER-SE> (2,182,000)
<TOTAL-LIABILITY-AND-EQUITY> 264,458,000
<SALES> 280,225,000
<TOTAL-REVENUES> 0
<CGS> 213,902,000
<TOTAL-COSTS> 62,722,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,704,000
<INCOME-PRETAX> 1,897,000
<INCOME-TAX> 750,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,147,000
<EPS-PRIMARY> .16
<EPS-DILUTED> 0
</TABLE>
