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 28, 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. 7,118,879 shares at February 4, 1997.
DELCHAMPS, INC. AND SUBSIDIARY
INDEX
Page No.
--------
Part 1. Financial Information
Item 1. Financial Statements
Condensed Balance Sheets -
December 28, 1996 and June 29, 1996 1
Condensed Statements of Earnings -
Thirteen Weeks Ended December 28, 1996
and December 30, 1995 2
Twenty-six Weeks Ended December 28, 1996
and December 30, 1995 2
Condensed Statements of Cash Flows -
Thirteen Weeks Ended December 28, 1996
and December 30, 1995 3
Twenty-six Weeks Ended December 28, 1996
and December 30, 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 7
Item 2. Changes in Securities 7
Item 3. Default upon Senior Securities 7
Item 4. Submission of Matters to a Vote of
Security Holders 7
Item 5. Other Information 7
Item 6. Exhibits and Reports on Form 8-K 7
Signatures 8
<PAGE>
<TABLE>
<CAPTION>
Part I. Financial Information
DELCHAMPS, INC. AND SUBSIDIARY
Condensed Balance Sheets - (In thousands)
(Unaudited)
December 28, 1996 June 29, 1996*
_________________ ________________
Amount % Assets Amount % Assets
______ ________ ______ ________
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $13,892 5.47 10,503 4.12
Trade accounts receivable 10,791 4.25 8,422 3.30
Merchandise inventories 90,852 35.80 90,797 35.58
Prepaid expenses 2,393 0.94 1,376 0.54
Income taxes receivable 510 0.20 764 0.30
Deferred income taxes 3,878 1.54 3,878 1.52
_______ _____ _______ _____
Total current assets 122,316 48.20 115,740 45.36
Property and equipment:
Land 15,017 5.92 15,210 5.96
Buildings and improvements 58,627 23.10 58,111 22.77
Fixtures and equipment 230,692 90.91 221,090 86.64
Construction in progress 941 0.37 9,771 3.83
_______ _____ _______ _____
305,277 120.30 304,182 119.20
Less accumulated depreciation
and amortization (175,958) (69.34) (166,931) (65.42)
_______ _____ _______ _____
Net property and equipment 129,319 50.96 137,251 53.78
Other assets 2,135 0.84 2,192 0.86
_______ _____ _______ _____
Total assets $253,770 100.00 $255,183 100.00
======== ====== ======== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $27,000 10.64 14,000 5.49
Current portion of obligations
under capital leases 749 0.30 749 0.29
Current portion of long-term debt 3,744 1.48 3,760 1.47
Current portion of restructure
obligation 3,996 1.57 3,996 1.57
Accounts payable 39,371 15.50 48,308 18.93
Accrued expenses 23,513 9.27 22,860 8.96
_______ _____ _______ _____
Total current liabilities 98,373 38.76 93,673 36.71
Obligations under capital leases,
excluding current portion 10,035 3.95 10,398 4.07
Long-term debt, excluding current portion 8,975 3.54 10,839 4.25
Restructure obligation, excluding
current portion 13,929 5.49 15,668 6.14
Deferred income taxes 8,352 3.29 9,225 3.62
Other liabilities 2,304 0.91 2,455 0.96
_______ _____ _______ _____
Total liabilities 141,968 55.94 142,258 55.75
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 7,113,536 shares at
December 28, 1996 and 7,112,320
shares at June 29, 1996 71 0.03 71 0.03
Additional paid-in capital 19,683 7.76 19,657 7.70
Retained earnings 92,174 36.32 93,359 36.59
_______ _____ _______ _____
111,928 44.11 113,087 44.32
Less: Unamortized restricted stock
awards (126) (0.05) (162) (0.07)
_______ _____ _______ _____
Total stockholders' equity 111,802 44.06 112,925 44.25
Total liabilities and stockholders'
equity $253,770 100.00 $255,183 100.00
======== ====== ======== ======
See accompanying notes to condensed financial statements.
* Condensed from Balance Sheet included in the 1996 Annual Report.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DELCHAMPS, INC. AND SUBSIDIARY
Condensed Statements of Earnings - (In thousands except per share amounts)
(Unaudited)
Thirteen Weeks Ended Twenty-six Weeks Ended
__________________________________ _________________________________
12/28/96 12/30/95 12/28/96 12/30/95
_________________ ________________ ________________ ________________
Amount % Sales Amount % Sales Amount % Sales Amount % Sales
______ _______ ______ _______ ______ _______ ______ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $272,601 100.00 277,053 100.00 562,300 100.00 561,742 100.00
Cost of sales 207,484 76.11 212,379 76.66 431,816 76.79 433,375 77.15
________ ______ _______ ______ _______ ______ _______ ______
Gross profit 65,117 23.89 64,674 23.34 130,484 23.21 128,367 22.85
Selling, general and
administrative expenses 63,394 23.26 61,544 22.21 127,115 22.61 124,577 22.18
________ ______ _______ ______ _______ ______ _______ ______
Operating income 1,723 0.63 3,130 1.13 3,369 0.60 3,790 0.67
Interest expense, net 1,402 0.51 1,841 0.66 2,705 0.48 3,625 0.65
________ ______ _______ ______ _______ ______ _______ ______
Earnings before income tax 321 0.12 1,289 0.47 664 0.12 165 0.02
Income tax expense 145 0.06 481 0.18 284 0.05 113 0.01
________ ______ _______ ______ _______ ______ _______ ______
Net earnings $176 0.06 808 0.29 380 0.07 52 0.01
======== ====== ======= ====== ======= ====== ======= ======
Net earnings per common share $0.02 0.11 0.05 0.01
======== ======== ======= ========
Weighted average number of
common shares 7,114 7,109 7,113 7,109
======== ======== ======= ========
Dividends declared
per common share $0.11 0.11 0.22 0.22
======== ======== ======= ========
See accompanying notes to condensed financial statements.
</TABLE>
<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 Twenty-six Weeks Ended
____________________ _____________________
12/29/96 12/30/95 12/28/96 12/30/95
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings $176 808 380 52
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 5,134 5,590 10,160 10,523
(Gain) loss on sale of property and equipment (7) (205) 12 (289)
Loss reserve on closed stores (57) (92) (151) (256)
Restricted stock award compensation expense 18 47 36 67
Restructure obligation payments (994) (2,160) (1,739) (3,322)
Decrease (increase) in merchandise inventories 88 (3,010) (55) (941)
(Decrease) increase in accounts payable and
accrued expenses (3,800) 3,041 (8,284) (2,522)
(Increase) decrease in income taxes
receivable, net (942) (279) 254 672
Other, net 1,229 352 (955) (2,048)
______ ______ _______ ______
Net cash flows provided by (used in) operating
activities 845 4,092 (342) 1,936
Cash flows from investing activities:
Additions to property and equipment (3,531) (4,336) (5,760) (8,905)
Proceeds from sale of property and equipment 12 312 298 499
______ ______ _______ ______
Net cash used in investing activities (3,519) (4,024) (5,462) (8,406)
Cash flows from financing activities:
Proceeds from notes payable 12,000 2,000 13,000 2,000
Principal payments on obligations under
capital leases (184) (164) (363) (323)
Principal payments on long-term debt (939) (940) (1,880) (1,880)
Dividends paid (782) (782) (1,564) (1,564)
______ ______ _______ ______
Net cash provided by (used in) financing
activities 10,095 114 9,193 (1,767)
Net increase (decrease) in cash and cash
equivalents 7,421 182 3,389 (8,237)
Beginning of period cash and cash equivalents 6,471 7,487 10,503 15,906
______ ______ _______ ______
End of period cash and cash equivalents $13,892 7,669 13,892 7,669
====== ====== ======= ======
Supplemental Disclosures of Cash Flow Information:
Cash paid for:
Interest expenses $1,400 1,872 2,812 3,752
====== ====== ======= ======
Income taxes $542 44 1,107 44
====== ====== ======= ======
See accompanying notes to condensed financial statements.
</TABLE>
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 1996 Annual Report.
The balance sheet at June 29, 1996 has been taken
from the audited financial statements at that date.
(B) Reclassifications
Certain reclassifications have been made in the
prior year's financial statements to conform to
classifications used in the current year.
<PAGE>
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations
RESULTS OF OPERATIONS
Sales:
Sales decreased 1.61% for the thirteen-week period and
increased 0.10% for the twenty-six week period, compared
with corresponding periods last year. Sales for stores open
during the current and prior year periods ("same store
sales") decreased 3.32% for the thirteen-week period and
decreased 1.58% for the twenty-six week period. The
decreases in same store sales resulted from increased levels
of promotional activity by competitors, new supermarket
openings by competitors, and last year's periods included a
promotion by the Company in which retail prices were lowered
on thousands of items. Last year's same store sales
increased 6.97% and 6.87% for the thirteen and twenty-six
week periods, respectively.
At December 28, 1996, the Company operated 119
supermarkets and ten liquor stores compared with 117
supermarkets and ten liquor stores at December 30, 1995.
During the current thirteen-week period, the Company
expanded one supermarket. During the current twenty-six
week period, the Company opened one new supermarket,
acquired one supermarket, and expanded one supermarket.
Gross Profit:
Gross profit as a percentage of sales increased from
23.34% to 23.89% for the thirteen-week period and increased
from 22.85% to 23.21% for the twenty-six week period. The
increases for both periods were the result of increased
levels of purchase allowances from vendors (which resulted
in a lower cost of merchandise inventories) and selective
retail price adjustments.
Selling, General and Administrative ("SG & A") Expenses:
Selling, general and administrative expenses in dollars
increased $1.850 million for the thirteen-week period and
increased $2.538 million for the twenty-six week period, as
compared to last year's corresponding periods. The
increases in SG & A dollars for both periods were the result
of higher costs for advertising (which increased because of
costs from the introduction of a new beef program and a new
advertising program featuring price comparisons with
competitors), legal fees (which increased because of costs
associated with defense of law suits and a union
organization attempt at the Company's distribution
facility), and acquisition expenses (which included costs
for possible acquisitions of supermarkets by the Company.)
The Company has continued implementing cost reductions in
all other areas of the business. Specifically, labor costs,
bag costs, and store supply costs all decreased as compared
to last year's periods (even though the Company operated
additional supermarkets in the current periods.)
Selling, general and administrative expenses as a
percentage of sales increased from 22.21% to 23.26% for
the thirteen-week period and increased from 22.18% to 22.61%
for the twenty-six week period. SG & A as a percentage of
sales increased in the thirteen-week period because of lower
sales combined with increased levels of expenses. The
increase in the twenty-six week period was because of
increased levels of expenses.
Interest Expense, Net:
Interest expense, net decreased $439,000 for the
thirteen-week period and decreased $920,000 for the twenty-
six week period, as compared to corresponding periods from
last year. Interest expense decreased for both periods
because of lower levels of long-term indebtedness.
Income Taxes:
The effective rate for income taxes increased from
37.32% to 45.17% for the thirteen-week period and decreased
from 68.48% to 42.77% for the twenty-six week period. The
effective rates in the current year's periods exceed the
statutory tax rate because of the low levels of earnings
combined with certain expenses which were not deductible for
tax purposes.
<PAGE>
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations
LIQUIDITY AND CAPITAL RESOURCES
Cash flows generated by (used in) operating activities
were $.845 million for the thirteen week period and ($.342)
million for the twenty-six week period. Last year's
corresponding amounts were $4.092 million and $1.936 million
for the thirteen and twenty-six 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 $48 million is available for future
use. The revolving loan expires June, 1998.
Cash used in investing activities was $3.519 million
and $5.462 million for the current thirteen and twenty-six
week periods, respectively. Corresponding amounts from last
year's periods were $4.024 million and $8.406 million for
the thirteen and twenty-six week periods, respectively. The
decreases in investing activities for both periods were
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.
Cash provided by (used in) financing activities was
$10.095 million and $9.193 million for the current thirteen
and twenty-six week periods, respectively. Corresponding
amounts from last year's periods were $.114 million and
($1.767) million, respectively. The increases in cash
provided by financing activities were because of increased
borrowing (as compared to last year's periods) under the
Company's short-term borrowing facilities. At the end of
the quarter ended December 28, 1996, the Company was in
compliance with all financial covenants under the revolving
loan agreement and its long-term debt agreement.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For the thirteen week period ended December 28, 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 upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security
Holders - None
Item 5. Other Information
On December 20, 1996, the employees at the Company's
distribution center voted to become organized through the
United Commercial Food Workers Union. It is uncertain as to
when negotiations of the contract will be completed and a
union contract in effect. Approximately 350 employees will
be affected by this new union contract.
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: February 10, 1997 /s/ David W. Morrow
David W. Morrow,
Chairman of the
Board and Chief
Executive Officer
Date: February 10, 1997 /s/ Richard W. LaTrace
Richard W. La Trace,
President
Date: February 10, 1997 /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> 6-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> DEC-28-1996
<CASH> 13,892,000
<SECURITIES> 0
<RECEIVABLES> 10,791,000
<ALLOWANCES> 0
<INVENTORY> 90,852,000
<CURRENT-ASSETS> 122,316,000
<PP&E> 305,277,000
<DEPRECIATION> (175,958,000)
<TOTAL-ASSETS> 253,770,000
<CURRENT-LIABILITIES> 98,373,000
<BONDS> 8,975,000
<COMMON> 71,000
0
0
<OTHER-SE> (126,000)
<TOTAL-LIABILITY-AND-EQUITY> 253,770,000
<SALES> 272,601,000
<TOTAL-REVENUES> 0
<CGS> 207,484,000
<TOTAL-COSTS> 63,394,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,402,000
<INCOME-PRETAX> 321,000
<INCOME-TAX> 145,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 176,000
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
