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 29, 1997
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. 7,119,999
shares at April 7, 1997.
<PAGE>
DELCHAMPS, INC. AND SUBSIDIARY
Index
Page No.
--------
Part 1. Financial Information
Item 1. Financial Statements
Condensed Balance Sheets -
March 29, 1997 and June 29, 1996 1
Condensed Statements of Earnings -
Thirteen Weeks Ended March 29, 1997
and March 30, 1996 2
Thirty-nine Weeks Ended March 29, 1997
and March 30, 1996 2
Condensed Statements of Cash Flows -
Thirteen Weeks Ended March 29, 1997
and March 30, 1996 3
Thirty-nine Weeks Ended March 29, 1997
and March 30, 1996 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. Defaults 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 8
Signatures 9
<PAGE>
<TABLE>
<CAPTION>
Part I. Financial Information
DELCHAMPS, INC. AND SUBSIDIARY
Condensed Balance Sheets - (In thousands)
(Unaudited)
March 29, 1997 June 29, 1996*
______________________________________
Amount % Assets Amount % Assets
______ ________ ______ ________
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,106 4.11 10,503 4.12
Trade accounts receivable 6,705 2.73 8,422 3.30
Merchandise inventories 88,481 36.00 90,797 35.58
Prepaid expenses 2,371 0.96 1,376 0.54
Income taxes receivable - - 764 0.30
Deferred income taxes 5,785 2.35 3,878 1.52
_______ ______ _______ ______
Total current assets 113,448 46.16 115,740 45.36
Property and equipment:
Land 13,744 5.59 15,210 5.96
Buildings and improvements 57,383 23.35 58,111 22.77
Fixtures and equipment 228,088 92.81 221,090 86.64
Construction in progress 5,384 2.19 9,771 3.83
_______ ______ _______ ______
304,599 123.94 304,182 119.20
Less accumulated depreciation
and amortization (174,381) (70.95) (166,931) (65.42)
_______ ______ _______ ______
Net property and equipment 130,218 52.98 137,251 53.78
Other assets 2,103 0.86 2,192 0.86
_______ ______ _______ ______
Total assets $ 245,769 100.00 $ 255,183 100.00
========= ======= ========= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 12,000 4.88 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 1.52 3,760 1.47
Current portion of restructure
obligation 3,996 1.63 3,996 1.57
Accounts payable 43,180 17.57 48,308 18.93
Accrued expenses 26,151 10.64 22,860 8.96
_______ ______ _______ ______
Total current liabilities 89,820 36.55 93,673 36.71
Obligations under capital leases,
excluding current portion 9,846 4.01 10,398 4.07
Long-term debt, excluding current
portion 8,036 3.27 10,839 4.25
Restructure obligation, excluding
current portion 12,388 5.04 15,668 6.14
Deferred income taxes 9,490 3.86 9,225 3.62
Other liabilities 2,305 0.94 2,455 0.96
_______ ______ _______ ______
Total liabilities 131,885 53.66 142,258 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 7,119,391 shares at
March 29, 1997 and 7,112,320
shares at June 29, 1996 71 0.03 71 0.03
Additional paid-in capital 19,810 8.06 19,657 7.70
Retained earnings 94,111 38.29 93,359 36.59
_______ ______ _______ ______
113,992 46.38 113,087 44.32
Less: Unamortized restricted
stock awards (108) (0.04) (162) (0.07)
_______ ______ _______ ______
Total stockholders' equity 113,884 46.34 112,925 44.25
Total liabilities and stockholders'
equity $ 245,769 100.00 $ 255,183 100.00
========= ====== ========= ======
See accompanying notes to condensed financial statements.
* Condensed from Balance Sheet included in the 1996 Annual Report.
</TABLE>
1
<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
________________________________________________ __________________________________________
03/29/97 03/30/96 03/29/97 03/30/96
____________________ ____________________ ___________________ ___________________
Amount % Sales Amount % Sales Amount % Sales Amount % Sales
______ _______ ______ _______ ______ _______ ______ _______
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $ 273,753 100.00 280,225 100.00 836,054 100.00 841,967 100.00
Cost of sales 204,571 74.73 214,331 76.49 636,388 76.12 647,991 76.96
_______ _______ ________ _______ ________ _______ ________ _______
Gross profit 69,182 25.27 65,894 23.51 199,666 23.88 193,976 23.04
Selling, general and
Administrative expenses 63,476 23.19 62,302 22.23 190,598 22.80 186,589 22.16
_______ _______ ________ _______ ________ _______ ________ _______
Operating income 5,706 2.08 3,592 1.28 9,068 1.08 7,387 0.88
Interest expense, net 1,278 0.47 1,697 0.61 3,983 0.47 5,327 0.63
_______ _______ ________ _______ ________ _______ ________ _______
Earnings before income tax 4,428 1.62 1,895 0.68 5,085 0.61 2,060 0.24
Income tax expense 1,708 0.62 748 0.27 1,992 0.24 861 0.10
_______ _______ ________ _______ ________ _______ ________ _______
Net earnings $ 2,720 0.99 1,147 0.41 3,093 0.37 1,199 0.14
======= ======= ======== ======= ======== ======= ======== =======
Net earnings per common share $ 0.38 0.16 0.43 0.17
======= ======= ======= =======
Weighted average number of
common shares 7,117 7,110 7,114 7,110
======= ======= ======= =======
Dividends declared
per common share $ 0.11 0.11 0.33 0.33
======= ======= ======= =======
See accompanying notes to condensed financial statements.
</TABLE>
2
<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
____________________ _______________________
03/29/97 03/30/96 03/29/97 03/29/96
________ ________ ________ ________
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings $2,720 1,147 3,093 1,199
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 5,272 4,971 15,439 14,864
(Gain) loss on sale of property and equipment (2,071) 46 (2,059) (244)
Loss reserve on closed stores (68) (95) (219) (351)
Restricted stock award compensation expense 18 20 54 87
Restructure obligation payments (1,114) (893) (2,853) (2,803)
Non cash director compensation expense 153 - 153 -
Decrease (increase) in merchandise inventories 2,371 (5,222) 2,316 (6,163)
Increase (decrease) in accounts payable and
accrued expenses 5,063 5,548 (3,221) 3,026
Decrease in income taxes receivable, net 510 3,625 764 4,297
Other, net 1,577 1,111 622 (306)
_______ ______ ______ ______
Net cash flows provided by operating activities 14,431 10,258 14,089 13,606
Cash flows from investing activities:
Additions to property and equipment (5,382) (3,784) (11,142) (14,108)
Proceeds from sale of property and equipment 4,080 2 4,378 508
_______ ______ ______ ______
Net cash used in investing activities (1,302) (3,782) (6,764) (13,600)
Cash flows from financing activities:
Payments on notes payable (15,000) (2,000) (2,000) -
Principal payments on obligations under
capital leases (189) (168) (552) (491)
Principal payments on long-term debt (939) (939) (2,819) (2,819)
Dividends paid (787) (782) (2,351) (2,346)
_______ ______ ______ ______
Net cash used in financing activities (16,915) (3,889) (7,722) (5,656)
Net (decrease) increase in cash and cash
equivalents (3,786) 2,587 (397) (5,650)
Beginning of period cash and cash equivalents 13,892 7,669 10,503 15,906
_______ ______ ______ ______
End of period cash and cash equivalents $10,106 10,256 10,106 10,256
======= ====== ====== ======
Supplemental Disclosures of Cash Flow Information:
Cash paid for:
Interest expenses $1,367 1,730 4,179 5,482
======= ====== ====== ======
Income taxes $1,336 7 2,443 51
======= ====== ====== ======
See accompanying notes to condensed financial statements.
</TABLE>
3
<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. All such adjustments are of a
normal recurring nature. 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.
4
<PAGE>
Management's Discussion And Analysis Of Financial
Condition and Results of Operations
RESULTS OF OPERATIONS
Sales:
Sales decreased 2.31% for the thirteen-week period
and decreased 0.70% for the thirty-nine week period,
compared with corresponding periods last year. Sales for
stores open during the current and prior year periods
decreased 3.48% for the thirteen-week period and
decreased 2.21% for the thirty-nine week period.
The decreases in sales for both periods resulted
from increased levels of promotional activity by
competitors and an increase in the number of store
openings by competitors. In addition, sales levels from
last year's periods were high because the Company
introduced a promotional program which included
reductions of retail prices on thousands of items (which
resulted in same store sales increases of 10.17% and
7.92% for last year's thirteen and thirty-nine week
periods, respectively, compared with corresponding
periods in the prior year.) The decrease in sales volume
was partially offset by selective retail price increases.
At March 29, 1997, the Company operated 118
supermarkets and ten liquor stores compared with 117
supermarkets and ten liquor stores at March 30, 1996.
During the thirteen-week period, the Company remodeled
one supermarket and closed one supermarket. During the
thirty-nine week period, the Company opened two
supermarkets, remodeled two supermarkets, and closed one
supermarket.
Gross Profit:
Gross profit as a percentage of sales increased from
23.51% to 25.27% for the thirteen-week period and
increased from 23.04% to 23.88% for the thirty-nine week
period. The increases for both periods were primarily
due to increased levels of buying allowances from vendors
which resulted in a lower cost of merchandise
inventories.
Selling, General and Administration Expenses:
Selling, general and administrative ("SG & A")
expenses increased $1.174 million for the thirteen-week
period and increased $4.009 million for the thirty-nine
week period. Both periods include a $4.300 million
charge for the settlement of a lawsuit (which is further
discussed under the caption Legal Proceedings on page 7)
and a $2.080 million gain from the sale of real property
(a former warehouse in Mobile, Alabama and land near
Birmingham, Alabama.) Excluding the legal settlement and
gain on sale of real property, SG & A expenses decreased
$1.046 million for the thirteen-week period and increased
$1.789 million for the thirty-nine week period. The
thirty-nine week period also included 1) acquisition
expenses (for possible acquisitions of supermarkets by
the Company), 2) increased legal fees (which resulted
from defense of lawsuits and a union organization attempt
at the Company's distribution facility), and 3) increased
advertising costs (which resulted from the introduction
of a new beef program and a new advertising program
featuring price comparisons with competitors.) 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.
SG & A as a percentage of sales increased from
22.23% to 23.19% for the thirteen-week period and
increased from 22.16% to 22.80% for the thirty-nine week
period. Excluding the legal settlement and gain from
sale of real property, SG & A as a percentage of sales
increased from 22.23% to 22.38% for the thirteen-week
period and increased from 22.16% to 22.53% for the thirty-
nine week period. The increases for both periods were
the result of decreased sales in the current year's
periods.
5
<PAGE>
Management's Discussion And Analysis Of Financial
Condition and Results of Operations
Interest Expense, Net:
Interest expense, net decreased by $.42 million in
the thirteen-week period and by $1.34 million in the
thirty-nine week period. The decreases for both periods
were the result of lower levels of indebtedness under the
Company's revolving credit line and lower levels of long-
term indebtedness.
Income Taxes:
The effective rate for income taxes decreased from
39.47% to 38.57% for the thirteen-week period and
decreased from 41.80% to 39.17% for the thirty-nine week
period. The effective rates in the current year's
periods approximate the federal and state statutory
rates.
Net Earnings:
Net earnings for the thirteen-week period ended
March 29, 1997 were $2,720,000, or $.38 per share, up
from $1,147,000, or $.16 per share, for the prior year
period. Excluding the effects of the settlement and sale
of real property, net earnings for the thirteen-week
period were approximately $4,090,000, or $.57 per share.
For the thirty-nine week period ended March 29, 1997, net
earnings were $3,093,000, or $.43 per share, up from
$1,199,000, or $.17 per share, for the prior year period.
Excluding the effects of the settlement and sale of real
estate in the third quarter, net earnings for the thirty-
nine week period were approximately $4,463,000, or $.63
per share.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows generated by operating activities were
$14.431 million for the thirteen-week period and $14.089
million for the thirty-nine week period. Last year's
corresponding amounts were $10.258 million and $13.606
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 borrow up to $75
million under the revolving loan of which, as of March
29, 1997, $63 million was available for future use. The
revolving loan expires in June, 1998.
Cash used in investing activities was $1.302 million
and $6.764 million for the current thirteen and thirty-
nine week periods, respectively. Corresponding amounts
from last year's periods were $3.782 million and $13.600
million for the thirteen and thirty-nine week periods,
respectively. Cash used in investing activities
decreased because of proceeds received from the sale of
real property (the Company's former warehouse in Mobile,
Alabama and land near Birmingham, Alabama).
Cash used in financing activities was $16.915
million and $7.722 million for the current thirteen and
thirty-nine week periods, respectively. Corresponding
amounts from last year's periods were $3.889 million and
$5.656 million, respectively. The changes in financing
activities were due to increased debt payments (as
compared to last year's periods) under the Company's
short-term borrowing facilities. At the end of the
quarter ended March 29, 1997, the Company was in
compliance with all financial covenants under the
revolving loan agreement and its long-term debt
agreement.
6
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In March, 1997, the Company settled five related
lawsuits, each of which involved multiple plaintiffs
alleging racially discriminatory practices in promoting
and termination. The lead case styled Amanda Williams
and Kenneth O. McLaughlin, on Behalf of Themselves and
all Other Similarly Situated v. Delchamps was filed in
August 1995 in the United States District Court for the
Southern District of Alabama. The lead case sought
certification of a class, but class certification was
denied by the Federal District Court. The settlement
requires the Company to pay $4.3 million and to continue
reviewing its existing employment practices with the
assistance of independent consultants. The settlement
agreement includes no admission of wrongdoing by the
Company.
The allegations in the cases discussed above are similar
to certain allegations in a case styled Tracie Kennedy v.
Delchamps, Inc., which was filed in January 1996 in the
United States District Court for the Southern District of
Alabama. The case alleges both race and gender
discrimination and also sought certification of a class.
In early May 1997, the Federal District Court denied
certification of the class. The Company believes that it
has meritorious defenses to the claims involved in this
case and plans to defend the case vigorously.
In addition, the Company is a party to various legal and
taxing authority proceedings incidental to its business.
In the opinion of management, the ultimate liability with
respect to these actions will not materially affect the
financial position or results of operations of the
Company.
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 - None
7
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) 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
to the document indicated.
3.1 Composite of the Company's Amended and
Restated Articles of Incorporation, as of
November 11, 1996 (Exhibit 3.1 to the
Company's Form 10-Q for the 13-Week Period
ended September 28, 1996)
3.2 Composite of the Company's By-laws, as of
November 11, 1996 (Exhibit 3.2 to the
Company's Form 10-Q for the 13 Week Period
ended September 28, 1996)
4 Specimen of Common Stock Certificate
(Exhibit 4(a) to the Company's Form 10-K for
the fiscal year ended June 30, 1990)
10 Employment Agreement dated as of January
1, 1997 between the Company and David W.
Morrow*
27 Financial Data Schedule*
(b) No reports on Form 8-K have been filed by
the Company during the quarter for which this
report is being filed.
8
<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 12, 1997 /s/ David W. Morrow
_________________________
David W. Morrow, Chairman
of the Board and Chief
Executive Officer
Date: May 12, 1997 /s/ Richard W. LaTrace
_________________________
Richard W. La Trace,
President
Date: May 12, 1997 /s/ Timothy E. Kullman
_________________________
Timothy E. Kullman,
Senior Vice President,
Chief Financial Officer,
Treasurer and Secretary
9
<PAGE>
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
10 Employment Agreement dated as of January 11
1, 1997 between the Company and David
W. Morrow
27 Financial Data Schedule 15
10
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") dated as of January 1,
1997 is by and between Delchamps, Inc. (the "Company"), and
David W. Morrow ("Mr. Morrow"). The parties hereto agree as
follows:
1. Employment, Capacity and Duties.
(a) The Company hereby employs Mr. Morrow, and
Mr. Morrow agrees to be employed by the Company, upon the
terms and conditions provided herein. During the Employment
Term (as defined in paragraph 2 below) Mr. Morrow shall be
employed as Chairman of the Board and Chief Executive
Officer of the Company. In such capacities, Mr. Morrow's
primary duties and responsibilities shall be those set forth
in the Company's by-laws, those assigned from time to time
by the Company's Board of Directors (the "Board") and those
customarily associated with such positions.
(b) In performing his duties as Chief Executive
Officer of the Company, Mr. Morrow shall devote his full
time, attention, energies and business efforts to the
Company; provided, however, this Section 1(b) shall not
prohibit Mr. Morrow from (i) being a passive investor in
such form or manner as shall not conflict with his
obligations under this Agreement or (ii) serving as a
director or trustee of any civic, cultural, charitable or
religious organization or group, or of any business
organization that does not compete with the Company,
including any supermarket operator that does not operate in
the same geographic area as the Company, provided that such
service does not unduly interfere with his duties under this
Agreement.
2. Employment Term. Mr. Morrow's employment under
this Agreement shall commence on January 1, 1997 and shall
end at the close of business on December 31, 1997 (the
"Employment Term"). This Agreement may be terminated
earlier as provided in Section 5 of this Agreement.
3. Compensation and Other Benefits.
(a) For all services to be rendered by Mr. Morrow
to the Company in any capacity under this Agreement, the
Company shall pay Mr. Morrow the compensation and benefits
described below:
(i) The Company shall pay Mr. Morrow a
weekly amount equal to the quotient of $400,000 divided
by 52 weeks, or $7,692.31.
(ii) Mr. Morrow shall be eligible to receive
a cash bonus for the Company's fiscal year ending June
29, 1997 under the Company's annual incentive award
program. In addition, if the Company pays bonuses
under the Company's annual incentive program for the
Company's fiscal year ending June 29, 1998, Mr. Morrow
shall be entitled to receive the bonus for which he
would be eligible, regardless of whether or not he is
employed by the Company as of the end of such fiscal
year; provided, however, that his bonus shall be
prorated for the whole number of months in the fiscal
year during which he was employed by the Company; and
provided further, that he shall not be entitled to such
bonus if his employment has been terminated due to his
death or by the Company for any of the reasons set
forth in Section 5(b).
11
<PAGE>
(iii) The Company shall provide Mr.
Morrow with benefits under the Company's vacation
policy, longevity bonus plan, dental and medical
benefits programs, group term life insurance plan,
ESOP, incentive compensation plan, Profit Sharing Plan
and any accident or disability plan on the same basis
and subject to the same eligibility and other
requirements and limitations as may be applicable to
other employees of the Company.
(iv) Mr. Morrow shall have the use of an
automobile at the Company's expense.
(b) During the Employment Term, Mr. Morrow shall
not be entitled to receive directors' fees or to participate
in the Company's Director Compensation Plan.
(c) Payment to Mr. Morrow of all compensation
hereunder shall be at such times and in accordance with such
payroll practices as are followed by the Company for its
other executive employees.
(d) Mr. Morrow agrees that the Company has the
right to withhold, from the amounts payable under Section 3
of this Agreement, all amounts required to be withheld under
applicable income and/or employment tax laws, or as
otherwise stated in documents granting rights that are
affected by this Agreement.
(e) To the extent permitted by applicable law,
the Company shall take all reasonable steps to ensure that
Mr. Morrow is not, by reason of a sale of the Company,
deprived of the economic value (including any value
attributable to the sale transaction) of (i) any options to
acquire Common Stock of the Company or (ii) any Common Stock
of the Company beneficially owned by Mr. Morrow.
4. Reimbursement for Expenses. Mr. Morrow shall be
entitled to reimbursement for reasonable expenses incurred
by him in connection with his maintaining a temporary
residence in Mobile, Alabama and for ordinary and necessary
business expenses incurred by him from time to time on
behalf of the Company in the performance of his duties
hereunder. In addition, the Company will reimburse Mr.
Morrow for the reasonable costs of travel between Mobile,
Alabama and San Juan, Puerto Rico and Gooding, Idaho (his
principal residences) incurred by him and his wife.
However, Mr. Morrow shall not be entitled to reimbursement
for any expense unless he has properly accounted for it to
the extent necessary to substantiate the Company's federal
income tax deduction for such expense.
5. Termination.
(a) This Agreement shall terminate upon the
earlier of the expiration of the Employment Term, Mr.
Morrow's death or a Change of Control of the Company as that
term is defined in that certain Change of Control Agreement
dated December 13, 1995 between Mr. Morrow and the Company.
(b) Additionally, the Company may terminate this
Agreement immediately upon the occurrence of any of the
following:
12
<PAGE>
(i) In the good faith opinion of the Board,
Mr. Morrow has engaged in improper or unethical conduct
that would seriously impair Mr. Morrow's ability to
perform his duties hereunder or would impair the
business reputation of the Company;
(ii) In the good faith opinion of the
Board, Mr. Morrow has committed an act, or omitted to
take action, in bad faith and to the material detriment
of the Company; or
(iii) Mr. Morrow has committed any
material breach of any of the provisions of this
Agreement, if such breach is not cured within ten days
after written notice thereof to Mr. Morrow by the
Company.
6. Effect of Termination or Removal from Office. If
this Agreement is terminated for any of the reasons set
forth in Section 5 of this Agreement, then the Company shall
have no further obligations to Mr. Morrow under this
Agreement. Mr. Morrow acknowledges that he holds his office
as Chairman of the Board and Chief Executive Officer at the
pleasure of the Board. If he is removed from office by the
Board prior to the expiration of the Employment Term, other
than pursuant to Section 5, then the only obligation that
the Company shall have to him hereunder shall be to pay to
him the salary described in paragraph 3(a)(i) of this
Agreement until the termination of this Agreement on
December 31, 1997.
7. Representations and Warranties of Mr. Morrow. Mr.
Morrow represents and warrants to the Company that he is
under no contractual or other restriction or obligation
compliance with which is inconsistent with the execution of
this Agreement or the performance of his obligations
hereunder.
8. Notice. All notices hereunder must be in writing
and shall be deemed to have been duly given upon receipt of
hand delivery, delivery by overnight carrier, delivery by
certified or registered mail, return receipt requested, or
telecopy transmission with confirmation of receipt:
(a) If to the Company, to:
Delchamps, Inc.
305 Delchamps Drive
P. O. Box 1668
Mobile, AL 36633-1668
Attention: Timothy E. Kullman
(b) If to Mr. Morrow, to:
David W. Morrow
Olympic Towers Condominiums
Apartment 5A
Rodrigues Serra Number 1
Condado, Puerto Rico 00907
13
<PAGE>
9. Further Assurances. The Company and Mr. Morrow agree
to execute any additional documents or take such other
actions as are necessary and proper to effectuate the terms
of this Agreement.
10. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their
respective heirs, successors, personal representatives and
assigns.
11. Entire Agreement. This Agreement represents the
entire agreement between the parties hereto concerning the
subject matter hereof.
12. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of
Alabama.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
DELCHAMPS, INC.
By: __________________________________
William W. Crawford
Chairman, Compensation Committee
of the Board of Directors
___________________________________
David W. Morrow
14
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> MAR-29-1997
<CASH> 10,106,000
<SECURITIES> 0
<RECEIVABLES> 6,705,000
<ALLOWANCES> 0
<INVENTORY> 88,481,000
<CURRENT-ASSETS> 113,448,000
<PP&E> 304,599,000
<DEPRECIATION> (174,381,000)
<TOTAL-ASSETS> 245,769,000
<CURRENT-LIABILITIES> 89,820,000
<BONDS> 8,036,000
<COMMON> 71,000
0
0
<OTHER-SE> (108,000)
<TOTAL-LIABILITY-AND-EQUITY> 245,769,000
<SALES> 273,753,000
<TOTAL-REVENUES> 0
<CGS> 204,571,000
<TOTAL-COSTS> 63,476,000
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 1,278,000
<INCOME-PRETAX> 4,428,000
<INCOME-TAX> 1,708,000
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,720,000
<EPS-PRIMARY> 0.38
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