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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
-------------------
FOR THE QUARTER ENDED COMMISSION FILE NUMBER
OCTOBER 28, 1995 0-16404
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3408704
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 BLAIR ROAD, P. O. BOX 5301 07095-0915
WOODBRIDGE, NEW JERSEY (Zip Code)
(Address of principal executive office)
908-499-3000
(Registrant's telephone number, including area code)
-------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
$3.52 CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK
(Title of Class)
-------------------
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
--- ---
As of October 28, 1995, there were outstanding 650,675 shares of $0.01 par
value Class A Common Stock (voting) and 320,000 shares of $0.01 par value Class
B Common Stock (non-voting), all of which are privately owned and not traded on
a public market.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS)
<CAPTION>
13 WEEKS ENDED 39 WEEKS ENDED
-------------------------- --------------------------
OCTOBER 28, OCTOBER 29, OCTOBER 28, OCTOBER 29,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales....................................... $ 996,013 $ 1,035,079 $ 3,060,058 $ 3,108,815
Cost of sales (exclusive of depreciation and
amortization shown separately below)...... 713,471 747,211 2,185,738 2,241,154
----------- ----------- ----------- -----------
Gross profit................................ 282,542 287,868 874,320 867,661
Selling, general and administrative
expenses.................................. 229,469 228,672 696,304 692,746
Depreciation and amortization............... 20,134 18,714 60,230 55,516
----------- ----------- ----------- -----------
Operating earnings.......................... 32,939 40,482 117,786 119,399
Gain on disposition of freestanding drug
stores.................................... -- -- 15,535 --
Interest expense............................ (41,879) (43,169) (128,799) (127,460)
Interest charged to discontinued
operations................................ -- 3,678 -- 11,035
----------- ----------- ----------- -----------
Earnings (loss) from continuing operations
before income taxes and extraordinary
item...................................... (8,940) 991 4,522 2,974
Income tax benefit (provision).............. 4,294 (920) 24,134 (2,412)
----------- ----------- ----------- -----------
Earnings (loss) from continuing operations
before extraordinary item................. (4,646) 71 28,656 562
Loss from discontinued operations........... -- (480) -- (2,383)
----------- ----------- ----------- -----------
Earnings (loss) before extraordinary item... (4,646) (409) 28,656 (1,821)
Extraordinary item.......................... -- -- (927) --
----------- ----------- ----------- -----------
Net earnings (loss)......................... (4,646) (409) 27,729 (1,821)
Less: non-cash preferred stock accretion and
dividend requirements..................... (4,723) (4,709) (14,160) (14,116)
----------- ----------- ----------- -----------
Net earnings (loss) attributable to common
stockholder............................... $ (9,369) $ (5,118) $ 13,569 $ (15,937)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
<TABLE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<CAPTION>
OCTOBER 28, JANUARY 28,
1995 1995
----------- -----------
<S> <C> <C>
ASSETS
Current Assets
Cash and marketable securities..................................... $ 4,785 $ 23,247
Accounts receivable, net........................................... 11,080 13,380
Merchandise inventories............................................ 240,437 255,631
Income taxes receivable............................................ 427 7,756
Prepaid expenses................................................... 26,343 26,580
Due from suppliers................................................. 16,956 18,256
Other current assets............................................... 21,321 29,541
----------- -----------
Total Current Assets........................................... 321,349 374,391
Property and Equipment, Net......................................... 604,744 598,801
Deferred Financing Costs, Net....................................... 35,403 40,446
Deferred Income Taxes............................................... 35,171 5,969
Investment in Purity Supreme, Inc. (net of valuation allowance of
$24,700 at October 28, 1995 and $24,100 at January 28, 1995)...... -- --
Other Assets........................................................ 26,316 23,951
----------- -----------
$ 1,022,983 $ 1,043,558
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities
Accounts payable................................................... $ 238,866 $ 239,752
Current maturities of long-term debt............................... 51,043 46,310
Accrued payroll and payroll taxes.................................. 49,339 53,638
Current portion of obligations under capital leases................ 18,852 18,298
Accrued interest payable........................................... 39,289 19,672
Accrued expenses and other current liabilities..................... 91,242 94,630
----------- -----------
Total Current Liabilities...................................... 488,631 472,300
----------- -----------
Long-Term Debt...................................................... 1,273,698 1,365,571
----------- -----------
Obligations Under Capital Leases, Long-Term......................... 132,429 127,122
----------- -----------
Other Noncurrent Liabilities........................................ 291,753 256,911
----------- -----------
Redeemable Securities
Exchangeable Preferred Stock, $.01 par value...................... 103,208 101,959
Authorized: 9,000,000 shares
Issued and outstanding: 4,890,671 shares at October 28, 1995 and
January 28, 1995
Liquidation preference, $25 per share: $122,267 at October 28,
1995 and January 28, 1995
----------- -----------
Total Redeemable Securities.................................... 103,208 101,959
----------- -----------
Commitments and Contingencies (Note 13)
Stockholder's Deficit
Class A Common Stock, $.01 par value.............................. 7 7
Authorized: 1,075,000 shares
Issued and outstanding: 650,675 shares at October 28, 1995 and
January 28, 1995
Class B Common Stock, $.01 par value.............................. 3 3
Authorized: 1,000,000 shares
Issued and outstanding: 320,000 shares at October 28, 1995 and
January 28, 1995
Paid-in Capital.................................................... 197,886 199,135
Accumulated Deficit................................................ (1,464,632) (1,479,450)
----------- -----------
Total Stockholder's Deficit.................................... (1,266,736) (1,280,305)
----------- -----------
$ 1,022,983 $ 1,043,558
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
<TABLE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT (UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<CAPTION>
CLASS A CLASS B TOTAL
COMMON COMMON PAID-IN ACCUMULATED STOCKHOLDER'S
STOCK STOCK CAPITAL DEFICIT DEFICIT
------- ------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 28, 1995................. $ 7 $ 3 $199,135 $(1,479,450) $ (1,280,305)
Net income................................ -- -- -- 27,729 27,729
Accrued dividends on preferred stock ($.88
per share per quarter).................. -- -- -- (12,911) (12,911)
Accretion on preferred stock.............. -- -- (1,249) -- (1,249)
------- ------- -------- ----------- -------------
Balance October 28, 1995.................... $ 7 $ 3 $197,886 $(1,464,632) $ (1,266,736)
------- ------- -------- ----------- -------------
------- ------- -------- ----------- -------------
Balance, January 29, 1994................... $ 7 $ 3 $200,748 $(1,485,468) $ (1,284,710)
Net loss.................................. -- -- -- (1,821) (1,821)
Accrued dividends on preferred stock ($.88
per share per quarter).................. -- -- -- (12,911) (12,911)
Accretion on preferred stock.............. -- -- (1,205) -- (1,205)
------- ------- -------- ----------- -------------
Balance October 29, 1994.................... $ 7 $ 3 $199,543 $(1,500,200) $ (1,300,647)
------- ------- -------- ----------- -------------
------- ------- -------- ----------- -------------
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
<TABLE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<CAPTION>
39 WEEKS ENDED
--------------------------
OCTOBER 28, OCTOBER 29,
1995 1994
----------- -----------
<S> <C> <C>
Operating Activities
Net earnings (loss)................................................. $ 27,729 $ (1,821)
Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities
Depreciation and amortization................................... 62,180 57,466
Deferred income tax benefit..................................... (37,274) 556
Interest accrued but not payable................................ 11,123 10,286
Amortization of original issue discount......................... 5,810 10,390
Amortization of debt issuance costs............................. 5,341 5,250
(Gain) loss on disposal of property and equipment............... 38 (435)
Gain on disposition of freestanding drug stores................. (15,535) --
Extraordinary item.............................................. 927 --
Loss from discontinued operations............................... -- 2,383
Cash provided by (used for) operating assets and liabilities
Accounts receivable, net...................................... 2,300 2,215
Merchandise inventories....................................... 772 (22,185)
Income taxes.................................................. 7,795 18,727
Prepaid expenses.............................................. (1,713) (5,952)
Due from suppliers............................................ 1,300 2,992
Other current assets.......................................... 3,513 (4,431)
Other assets.................................................. (2,588) 11,985
Accounts payable.............................................. (886) (4,190)
Accrued payroll and payroll taxes............................. (4,299) (6,894)
Accrued interest payable...................................... 19,617 21,021
Accrued expenses and other current liabilities................ (9,822) 23,185
Other noncurrent liabilities.................................. 11,472 (10,756)
----------- -----------
Cash provided by operating activities....................... 87,800 109,792
----------- -----------
Investing Activities
Property and equipment expenditures................................. (52,989) (60,676)
Proceeds from disposition of property and equipment................. 831 1,226
Proceeds from disposition of home centers segment................... 4,706 --
Proceeds from disposition of freestanding drug stores............... 59,876 --
----------- -----------
Cash provided by (used for) investing activities............ 12,424 (59,450)
----------- -----------
Financing Activities
Decrease in Working Capital Facilities borrowings................... (31,000) (7,500)
Decrease in Pathmark Term Loan...................................... (50,589) (26,250)
Increase in other borrowings........................................ 6,559 3,672
Repayment of other long-term borrowings............................. (3,930) (3,744)
Reduction in obligations under capital leases....................... (13,221) (13,255)
Repayment of PTK DIBs............................................... (25,113) --
Premiums incurred in redemption of PTK DIBs......................... (1,392) --
----------- -----------
Cash used for financing activities.......................... (118,686) (47,077)
----------- -----------
Increase (decrease) in cash and marketable securities................. (18,462) 3,265
Cash and marketable securities at beginning of period................. 23,247 6,168
----------- -----------
Cash and marketable securities at end of period....................... $ 4,785 $ 9,433
----------- -----------
----------- -----------
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION
On February 4, 1991, Supermarkets General Holdings Corporation (the
"Company" or "Holdings"), through the consummation of an exchange offer (the
"Exchange Offer") pursuant to which the then existing common stockholders
exchanged on a one-for-one basis shares of the Company's common stock for shares
of common stock of SMG-II Holdings Corporation ("SMG-II"), became a wholly owned
subsidiary of SMG-II. As a result of the Exchange Offer, SMG-II owns all of the
Company's common stock and is effectively a holding company for the operations
of the Company. The holders of SMG-II's common stock include certain limited
partnerships controlled directly or indirectly by Merrill Lynch Capital
Partners, Inc., together with certain indirectly wholly owned subsidiaries of
Merrill Lynch & Co., Inc., certain members of the Company's management, CBC
Capital Partners, Inc. and the Equitable Life Assurance Society of the United
States and certain of its affiliates.
Pathmark Stores, Inc. ("Pathmark") and Plainbridge, Inc. ("Plainbridge") are
wholly owned subsidiaries of PTK Holdings, Inc. ("PTK"), which is a wholly owned
subsidiary of the Company.
The results from discontinued operations represent the operations of the
Company's home centers segment which was sold during Fiscal 1994 (see Note 2).
At the time of a recapitalization in Fiscal 1993, Holdings intended to further
spin off Plainbridge to Holdings' common stockholder. Such further spin-off
would have required the satisfaction of dividend restrictions with respect to
Holdings' Exchangeable Preferred Stock, as well as, obtaining consents from
various lenders to Plainbridge and PTK. During the fourth quarter of Fiscal
1994, as a result of the aforementioned dividend restrictions, Holdings
concluded that a further spin-off of Plainbridge to Holdings' common stockholder
is not likely to occur. Accordingly, prior year financial statements which had
included the results of Plainbridge's warehouse, transportation and real estate
operations as discontinued operations have been reclassified to include such
results in continuing operations.
The consolidated financial statements included herein reflect all
adjustments which, in the opinion of management, are of a normal and recurring
nature and are necessary to present fairly the results of operations and
financial position of the Company and have been prepared in accordance with the
same accounting principles followed in the presentation of the Company's annual
financial statements for the year ended January 28, 1995. This report should be
read in conjunction with the Company's Form 10-K Annual Report for the year
ended January 28, 1995, Notes to Consolidated Financial Statements.
The accompanying consolidated financial statements of the Company indicate
that at October 28, 1995 current liabilities exceed its current assets by $167.3
million and the Company's stockholder's deficit approximates $1.3 billion.
Management believes that cash flows generated from operations supplemented by
the unused borrowing capacity under the Pathmark and Plainbridge Working Capital
Facilities and the availability of capital lease financing will be sufficient to
pay the Company's debts as they come due, provide for its capital expenditure
program and meet its seasonal cash requirements. Further, the Company believes
it will continue to be in compliance with its various debt covenants.
Since the Company is a wholly owned subsidiary, earnings (loss) per share
information is not presented.
NOTE 2--DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM
On November 4, 1994, the Company's Plainbridge subsidiary completed the sale
of its home centers segment for approximately $88.7 million in cash, plus the
assumption of certain indebtedness. The Company used net cash proceeds of $66.6
million in Fiscal 1994 and $4.7 million in the first quarter
5
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
NOTE 2--DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEM--(CONTINUED)
of Fiscal 1995 to pay down the PTK DIBs, including accrued interest and debt
premium. The debt premium paid, including original issue discount, resulted in a
net loss on early extinguishment of debt of $0.2 million in the first quarter of
Fiscal 1995.
Through the date of sale, the Company reported the home center segment as
discontinued operations. Operating results of such discontinued operations were
as follows (dollars in thousands):
<TABLE><CAPTION>
13 WEEKS 39 WEEKS
ENDED ENDED
OCTOBER 29, OCTOBER 29,
1994 1994
----------- -----------
<S> <C> <C>
Sales................................................................. $ 89,411 $ 271,988
----------- -----------
----------- -----------
Loss before income taxes(a)........................................... $ (480) $ (2,383)
Income tax provision.................................................. -- --
----------- -----------
Net loss from discontinued operations................................. $ (480) $ (2,383)
----------- -----------
----------- -----------
<FN>
- ------------
(a) The Company charged the home centers segment interest expense relating to a
proportionate share of certain borrowings. These charges amounted to $3.6 million and
$11.0 million for the third quarter and the nine-month period of Fiscal 1994,
respectively, and are included in the results of the discontinued operations.
</TABLE>
NOTE 3--DISPOSITION OF FREESTANDING DRUG STORES
During the second quarter of Fiscal 1995, the Company made a decision to
dispose of its 36 freestanding drug stores. On July 28, 1995, the Company,
through its Pathmark subsidiary, completed the sale of 30 of its freestanding
drug stores, including merchandise inventory, to Rite Aid Corporation for $59.9
million. The Company used $25.0 million of the proceeds to repay a portion of
its existing Pathmark Term Loan and $21.8 million of the proceeds to repay a
portion of its PTK DIBs.
The Company recorded a pretax gain on the disposition of its freestanding
drug stores of $15.5 million, net of a $19.0 million charge related to the
estimated exit costs of the remaining six freestanding drug stores. Pathmark
expects to dispose of the remaining six freestanding drug stores during the
year.
NOTE 4--MERCHANDISE INVENTORIES
Merchandise inventories are comprised of the following (dollars in
thousands):
<TABLE><CAPTION>
OCTOBER 28, JANUARY 28,
1995 1995
----------- -----------
<S> <C> <C>
Merchandise inventories at FIFO cost.............................. $ 284,596 $ 298,812
Less LIFO reserve................................................. 44,159 43,181
----------- -----------
Merchandise inventories at LIFO cost.............................. $ 240,437 $ 255,631
----------- -----------
----------- -----------
</TABLE>
The reduction in merchandise inventory at October 28, 1995 compared to
January 28, 1995 is due primarily to the sale of the freestanding drug stores.
6
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
NOTE 5--OTHER CURRENT ASSETS
The reduction in other current assets at October 28, 1995 compared to
January 28, 1995 is primarily due to a reduction in assets held for sale in the
normal course of business.
NOTE 6--PROPERTY AND EQUIPMENT
Property and equipment are comprised of the following (dollars in
thousands):
<TABLE><CAPTION>
OCTOBER 28, JANUARY 28,
1995 1995
----------- -----------
<S> <C> <C>
Land.................................................................. $ 66,513 $ 65,142
Buildings and building improvements................................... 212,404 201,553
Fixtures and equipment................................................ 213,612 200,015
Leasehold costs and improvements...................................... 279,353 268,165
Transportation equipment.............................................. 18,471 19,828
----------- -----------
Property and equipment, owned......................................... 790,353 754,703
Property and equipment under capital leases........................... 182,428 173,175
----------- -----------
Property and equipment, at cost....................................... 972,781 927,878
Less accumulated depreciation and amortization........................ 368,037 329,077
----------- -----------
Property and equipment, net........................................... $ 604,744 $ 598,801
----------- -----------
----------- -----------
</TABLE>
NOTE 7--LONG-TERM DEBT
Long-term debt is comprised of the following (dollars in thousands):
<TABLE><CAPTION>
OCTOBER 28, JANUARY 28,
1995 1995
----------- -----------
<S> <C> <C>
Pathmark Term Loan................................................. $ 297,661 $ 348,250
Pathmark Working Capital Facility.................................. 24,000 63,000
Plainbridge Working Capital Facility............................... 8,000 --
10.25% PTK Exchangeable Guaranteed Debentures due 2003
("PTK DIBs")..................................................... 59,688 79,257
9.625% Pathmark Senior Subordinated Notes due 2003................. 437,337 437,072
10.75% Pathmark Deferred Coupon Notes due 2003..................... 147,976 136,853
12.625% Pathmark Subordinated Debentures due 2002.................. 95,750 95,750
11.625% Pathmark Subordinated Notes due 2002....................... 199,017 199,017
11.625% Holdings Subordinated Notes due 2002....................... 983 983
Industrial Revenue Bonds........................................... 6,375 6,375
Other Debt (primarily mortgages)................................... 47,954 45,324
----------- -----------
Total debt......................................................... 1,324,741 1,411,881
Less current maturities............................................ 51,043 46,310
----------- -----------
Long-term portion.................................................. $ 1,273,698 $ 1,365,571
----------- -----------
----------- -----------
</TABLE>
7
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
NOTE 8--INTEREST EXPENSE
Interest expense is comprised of the following (dollars in thousands):
<TABLE><CAPTION>
13 WEEKS ENDED 39 WEEKS ENDED
-------------------------- --------------------------
OCTOBER 28, OCTOBER 29, OCTOBER 28, OCTOBER 29,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Pathmark Term Loan.............................. $ 6,494 $ 6,919 $ 22,149 $ 19,469
Pathmark Working Capital Facility............... 1,000 1,066 3,938 2,974
Plainbridge Working Capital Facility............ 37 67 79 438
Pathmark Senior Subordinated Notes
Amortization of original issue discount....... 88 88 264 264
Currently payable............................. 10,588 10,588 31,764 31,764
Pathmark Deferred Coupon Notes
Accrued but not payable....................... 3,805 3,428 11,123 10,022
Pathmark Subordinated Debentures................ 3,022 3,022 9,066 9,066
Pathmark Subordinated Notes..................... 5,813 5,813 17,437 17,437
Amortization of PTK DIBs original issue
discount........................................ 1,528 3,579 5,544 10,390
Amortization of debt issuance costs............. 1,783 1,717 5,341 5,151
Obligations under capital leases................ 4,116 3,843 12,200 11,602
Other, net...................................... 3,605 3,039 9,894 8,883
----------- ----------- ----------- -----------
Interest expense................................ $41,879 $43,169 $ 128,799 $ 127,460
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The Company made cash interest payments of $14.4 million and $12.0 million
during the third quarters of Fiscal 1995 and Fiscal 1994, respectively, and
$81.4 million and $76.0 million during the nine-month periods of Fiscal 1995 and
1994, respectively. The majority of the cash interest payments are scheduled in
the second and fourth quarters.
NOTE 9--LEASES
The Company incurred capital lease obligations of $11.0 million and $2.1
million during the third quarters of Fiscal 1995 and 1994, respectively, and
$20.7 million and $6.5 million during the nine-month periods of Fiscal 1995 and
Fiscal 1994, respectively, in connection with lease agreements to acquire
property and equipment.
NOTE 10--RELATED PARTY TRANSACTIONS
During Fiscal 1993, Pathmark and Plainbridge entered into related party
agreements and transactions. Refer to the Company's Form 10-K Annual Report for
the year ended January 28, 1995, Notes to the Consolidated Financial Statements,
for a more detailed description of such agreements. These related party
agreements and transactions are summarized as follows:
1) Spin-Off
A) Services Agreements:
Pathmark, Plainbridge and the Company are parties to agreements pursuant to
which Pathmark continues to provide certain administrative services relating to
the warehouse and distribution operations of Plainbridge and certain
administrative services to Chefmark, Inc. ("Chefmark"), a wholly owned
subsidiary of Holdings. Such services include, among other things, legal, human
resources, data processing, insurance, accounting, tax, treasury and property
management services. Each of the agreements have an initial term of five years,
with renewal options at the end of such term. The cost of
8
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
NOTE 10--RELATED PARTY TRANSACTIONS--(CONTINUED)
the services charged to Plainbridge and Chefmark under these agreements in the
aggregate was approximately $2.8 million and $8.8 million during the third
quarter and the nine-month period of Fiscal 1995, respectively, and $3.9 million
and $10.9 million during the third quarter and the nine-month period of Fiscal
1994, respectively.
B) The Logistical Services Agreements:
Under the Logistical Services Agreement, Plainbridge supplies Pathmark most
of the merchandise sold in Pathmark's stores and for the provision of
warehousing, distribution and other logistical services relating to the supply
of such merchandise. The cost of fees paid by Pathmark to Plainbridge related to
the Logistical Services Agreement in the aggregate was approximately $32.1
million and $97.5 million during the third quarter and nine-month period of
Fiscal 1995, respectively, and $34.8 million and $103.9 million during the third
quarter and nine-month period of Fiscal 1994, respectively. Pathmark also
received an allowance of approximately $5.9 million and $17.9 million during the
third quarter and nine-month period of Fiscal 1995, respectively, and $6.5
million and $19.1 million during the third quarter and nine-month period of
Fiscal 1994, respectively, based on the amount of merchandise purchased by
Plainbridge at Pathmark's direction. Pursuant to the Logistical Services
Agreement, Pathmark directs the purchase of the merchandise to be provided to it
by Plainbridge. Pathmark negotiates directly with vendors regarding the types of
merchandise required, the quantities needed, the delivery schedules, the
pricing, and all the other terms and conditions of sale. All merchandise is
ordered by Pathmark for the account of Plainbridge, which will pay for and will
retain title to such merchandise until it has been delivered to Pathmark. If
requested by a vendor, Pathmark in its sole discretion, may guarantee payment of
such orders by Plainbridge. Pathmark guaranteed approximately $32.8 million of
such merchandise purchases by Plainbridge at October 28, 1995.
2) Other:
In conjunction with the Plainbridge Spin-Off, certain real property was
transferred to Plainbridge and is being leased to Pathmark at rentals which the
Company believes approximate fair value. During each of the third quarters and
the nine-month periods of Fiscal 1995 and Fiscal 1994, such rentals amounted to
$1.1 million and $3.3 million, respectively.
Certain management investors issued recourse notes to the Company related to
the purchase of the Company's Class A common stock. These management investors
have pledged shares of SMG-II Class A common stock to secure the repayment of
the recourse notes. Recourse notes in the amount of $1.7 million were
outstanding at October 28, 1995 and January 28, 1995.
NOTE 11--CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK
Exchangeable Preferred Stock activity during the nine-month period of Fiscal
1995 was as follows (dollars in thousands):
<TABLE><CAPTION>
NUMBER OF
SHARES AMOUNT
--------- --------
<S> <C> <C>
Balance, January 28, 1995............................................. 4,890,671 $101,959
Accretion on preferred stock.......................................... -- 1,249
--------- --------
Balance, October 28, 1995............................................. 4,890,671 $103,208
--------- --------
--------- --------
</TABLE>
The terms of the Exchangeable Preferred Stock provide for cumulative
quarterly dividends at an annual rate of $3.52 per share when, as, and if
declared by the Board of Directors of the Company.
9
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
NOTE 11--CUMULATIVE EXCHANGEABLE REDEEMABLE PREFERRED STOCK--(CONTINUED)
Dividends for the first 20 quarterly dividend periods (through October 15, 1992)
were paid at the Company's option in additional shares of Exchangeable Preferred
Stock since the Company did not meet the conditions permitting cash dividend
payments on the Exchangeable Preferred Stock. Holdings does not expect to
receive cash flow sufficient to permit payments of dividends on the Exchangeable
Preferred Stock in the foreseeable future. All dividends not paid in cash will
cumulate at the rate of $3.52 per share per annum, without interest, until
declared and paid. As such, at October 28, 1995, the unpaid dividends of $51.6
million were accrued and included in other noncurrent liabilities.
Pursuant to the Certificate of Stock Designation for the Exchangeable
Preferred Stock (the "Certificate of Designation"), the Company was required to
pay cash dividends to the Exchangeable Preferred Stockholders at an annual rate
of $3.52 per share beginning on January 15, 1993. The Certificate of Designation
provides that the Exchangeable Preferred Stock is non-voting except that if an
amount equal to six quarterly dividends is in arrears in whole, or in part, the
Exchangeable Preferred Stockholders voting as a class are entitled to elect an
additional two members to the Board of Directors of the Company. The Company is
currently in arrears on the payment of ten quarterly dividends. Accordingly, the
Exchangeable Preferred Stockholders at a stockholders' meeting held on June 8,
1995, elected two members to the Company's Board of Directors.
NOTE 12--INCOME TAXES
Income taxes for the interim period are based on the estimated effective tax
rate expected to be applicable for the full fiscal year. The income tax benefit
of $24.1 million for the nine-month period of Fiscal 1995 includes adjustments
to the deferred income tax valuation allowance of $25.8 million, comprised of a
$20.3 million reversal at the end of the second quarter of Fiscal 1995, as well
as an income tax benefit of $5.5 million resulting from taxable income generated
prior to the end of the second quarter of Fiscal 1995. The reversal at the end
of the previous period was recorded in conjunction with the Company's continuing
evaluation of its deferred income tax assets. In the opinion of management,
sufficient evidence exists, such as the positive trend in earnings and the
income generated from the disposition of the freestanding drug stores, which
indicates that it is more likely than not that the Company will be able to
realize its deferred income tax assets. At October 28, 1995 net deferred income
tax assets of $35.2 million consisted principally of alternative minimum tax
credit carryforwards and temporary book/tax basis differences. The income tax
provision of $2.4 million for the nine-month period of Fiscal 1994 is net of a
reduction in the deferred income tax assets and related valuation allowance of
$1.3 million due to the utilization of net operating loss carryforwards. During
the nine-month period of Fiscal 1995, the Company made income tax payments of
$2.9 million and received income tax refunds of $8.1 million. During the
nine-month period of Fiscal 1994, the Company made income tax payments of $4.8
million and received income tax refunds of $23.6 million.
NOTE 13--CONTINGENCIES
The Company is contingently liable for certain obligations of Rickel Home
Centers, Inc. ("Rickel"), a former subsidiary, primarily consisting of 19 leases
for real property, in the event of default thereunder by the purchaser of
Rickel. As of January 28, 1995, the estimated present value of such lease
obligations approximated $27.6 million.
The Company is a party to a number of legal proceedings in the ordinary
course of business. Management believes that the ultimate resolution of these
proceedings will not, in the aggregate, have a material adverse impact on the
financial condition, results of operations or business of the Company.
10
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
NOTE 14--SUBSEQUENT EVENT
On November 3, 1995, in connection with the sale of Purity Supreme, Inc.
("Purity") to the Stop & Shop Companies, Inc., the Company sold its investment
in Purity for $16.4 million, the proceeds of which were used to repay a portion
of its PTK DIBs. As a result of the sale, a capital tax loss of approximately
$70.0 million was generated, of which $37.2 million was utilized in conjunction
with the gain on the sale of the freestanding drug stores. The benefit of the
remaining capital tax loss will only be realized to the extent that the Company
can generate additional capital gains. No adjustment has been made to the
valuation allowance as of October 28, 1995 related to this investment.
11
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion and analysis of the Company's financial
condition and results from continuing operations. The results from discontinued
operations for all periods presented represent the operations of the Company's
home centers segment which was sold during Fiscal 1994. At the time of a
recapitalization in Fiscal 1993, Holdings intended to further spin off
Plainbridge to Holdings' common stockholder. Such further spin-off would have
required the satisfaction of dividend restrictions with respect to Holdings'
Exchangeable Preferred Stock, as well as, obtaining consents from various
lenders to Plainbridge and PTK. During the fourth quarter of Fiscal 1994, as a
result of the aforementioned dividend restrictions, Holdings has concluded that
a further spin-off of Plainbridge to Holdings' common stockholder is not likely
to occur. Accordingly, prior year financial statements which had included the
results of Plainbridge's warehouse, transportation and real estate operations as
discontinued operations have been reclassified to include such results in
continuing operations.
RESULTS OF OPERATIONS
Sales:
Sales for the third quarter of Fiscal 1995 were $1.0 billion compared to
$1.04 billion in the prior-year period. Sales for the nine-month period of
Fiscal 1995 were $3.06 billion compared to $3.11 billion in the prior-year
period. The decrease in sales in the third quarter and nine-month period of
Fiscal 1995 compared to the prior-year periods was primarily due to the sale of
the freestanding drug stores on July 28, 1995. Sales from supermarkets opened in
both the third quarter and nine-month periods, including replacement stores,
decreased 0.2%. At quarter end, the Company operated 142 supermarkets, including
38 Pathmark 2000 format stores compared with the end of Fiscal 1994 when the
Company operated 143 supermarkets, including 29 Pathmark 2000 format stores. The
Company also operated six freestanding drug stores at quarter end compared to 36
freestanding drug stores at the end of Fiscal 1994 (see "Disposition of
Freestanding Drug Stores"). In order to improve sales and profitability, the
Company is continuing to focus on its supermarket enlargement and renovation
program.
Gross Profit:
Gross profit for the third quarter of Fiscal 1995 was $282.5 million or
28.4% of sales compared with $287.9 million or 27.8% of sales for the prior-year
period and for the nine-month period of Fiscal 1995 was $874.3 million or 28.6%
of sales compared with $867.7 million or 27.9% for the prior-year period. The
decrease in gross profit in the third quarter of Fiscal 1995 compared to the
prior-year period was primarily attributable to the sale of the freestanding
drug stores on July 28, 1995. The improvement in gross profit as a percentage of
sales for the third quarter of Fiscal 1995 compared to the prior-year period was
primarily due to increased focus on merchandising programs as well as to the
Company's continuing emphasis on the Pathmark 2000 format stores which allow
expanded variety in all departments, particularly higher margin perishables. The
improvement in gross profit as a percentage of sales for the nine-month period
as compared to the prior-year period was primarily due to the above mentioned
items and lower inventory shrink. The cost of goods sold comparisons were
affected by a pretax LIFO charge of $0.8 million for the third quarter of Fiscal
1995 compared with a pretax LIFO charge of $0.9 million for the prior-year
period and a pretax LIFO charge of $2.1 million for the nine-month period of
Fiscal 1995 compared with a pretax LIFO charge of $2.5 million for the
prior-year period.
Selling, General and Administrative Expenses ("SG&A"):
SG&A for the third quarter of Fiscal 1995 increased $0.8 million or 0.3%
compared to the prior-year period and increased $3.6 million or 0.5% for the
nine-month period of Fiscal 1995 compared with the prior year period. SG&A on a
proforma basis eliminating the SG&A impact of the freestanding
12
<PAGE>
drug stores in last year's third quarter, increased 4.5% and 1.8% for the third
quarter and nine-month period of Fiscal 1995, respectively, compared to the
prior-year periods. As a percentage of sales, SG&A were 23.0% for the third
quarter of Fiscal 1995, up from 22.1% in the prior-year period and were 22.8%
for the nine-month period of Fiscal 1995 up from 22.3% for the prior year
period. The increase as a percentage of sales for the third quarter of Fiscal
1995 compared to the prior-year period was due to higher promotional costs,
claims expenses, occupancy costs and supplies. The increase as a percentage of
sales for the nine-month period compared to the prior-year period was due to
higher claims expenses, occupancy costs and supplies partially offset by lower
promotional costs and labor and labor related expenses along with weather
related expenses that adversely affected last year's first quarter.
Depreciation and Amortization:
Depreciation and amortization of $20.1 million for the third quarter of
Fiscal 1995 was 1.4 million higher than the prior-year period of $18.7 million.
For the nine-month period of Fiscal 1995, depreciation and amortization of $60.2
million was $4.7 higher than the prior-year period of $55.5 million. The
increase in depreciation and amortization expense for the third quarter and
nine-month period of Fiscal 1995 compared to the prior-year periods was
primarily due to capital expenditures. Depreciation and amortization excludes
video tape amortization, which is recorded in cost of goods sold, of $0.65
million and $1.95 million in each of the third quarters and nine-month periods
of Fiscal 1995 and Fiscal 1994, respectively.
Operating Earnings:
Operating earnings for the third quarter of Fiscal 1995 were $32.9 million
compared with the prior-year period of $40.5 million. For the nine-month period
of Fiscal 1995, operating earnings were $117.8 million compared with $119.4
million for the prior-year period. The decrease in operating earnings during the
third quarter of Fiscal 1995 compared to the prior-year period was primarily due
to higher SG&A expense, higher depreciation and amortization expense and the
impact from the sale of the 30 freestanding drug stores. The decrease in
operating earnings for the nine-month period of Fiscal 1995 compared to the
prior-year period was due to higher SG&A, higher depreciation and amortization
expense and the impact from the sale of the freestanding drug stores, partially
offset by improved gross profit.
Disposition of Freestanding Drug Stores:
During the second quarter of Fiscal 1995, the Company made a decision to
dispose of its 36 freestanding drug stores. On July 28, 1995, the Company,
through its Pathmark subsidiary, completed the sale of 30 of its freestanding
drug stores to Rite Aid Corporation, including merchandise inventory, for $59.9
million. The Company used $25.0 million of the proceeds to repay a portion of
its existing Pathmark Term Loan and $21.8 million of the proceeds to repay a
portion of its PTK debt.
The Company recorded a pretax gain on the disposition of its freestanding
drug stores of $15.5 million, net of a $19.0 million charge related to the
estimated exit costs of the remaining six freestanding drug stores. Pathmark
expects to dispose of the remaining six freestanding drug stores during the
year.
Interest Expense:
Interest expense of $41.9 million for the third quarter of Fiscal 1995 was
$1.3 million less than the prior-year period of $43.2 million due primarily to
the reduction in the amortization of PTK DIBs original issue discount as a
result of the early paydown of debt. Interest expense of $128.8 million for the
nine-month period of Fiscal 1995 was $1.3 million more than the prior-year
period of $127.5 million due to the higher interest rates on the Company's
floating rate bank debt and higher average borrowings under the Pathmark Working
Capital Facility partially offset by the reduction in the amortization of PTK
DIBs original issue discount as a result of the early paydown of debt.
13
<PAGE>
Income Taxes:
Income taxes are based on the estimated effective tax rate expected to be
applicable for the full fiscal year. An income tax benefit of $4.3 million was
provided for in the third quarter of Fiscal 1995. The income tax benefit of
$24.1 million for the nine-month period of Fiscal 1995 includes adjustments to
the deferred income tax valuation allowance of $25.8 million, comprised of a
$20.3 million reversal at the end of the second quarter of Fiscal 1995, as well
as an income tax benefit of $5.5 million resulting from taxable income generated
prior to the end of the second quarter of Fiscal 1995. The reversal at the end
of the previous period was recorded in conjunction with the Company's continuing
evaluation of its deferred income tax assets. In the opinion of management,
sufficient evidence exists, such as the positive trend in earnings and the
income generated from the disposition of its freestanding drug stores, which
indicates that it is more likely than not that the Company will be able to
realize its deferred income tax assets. The income tax provision of $0.9 million
for the third quarter of Fiscal 1994 is net of an adjustment in the net deferred
income tax asset and related valuation allowance of $0.2 million due to
increases in the net operating loss carryforwards. The income tax provision was
$2.4 million for the nine-month period of Fiscal 1994.
During the nine-month period of Fiscal 1995, the Company made income tax
payments of $2.9 million and received income tax refunds of $8.1 million. During
the nine-month period of Fiscal 1994, the Company made income tax payments of
$4.8 million and received income tax refunds of $23.6 million.
Summary of Operations:
For the third quarter of Fiscal 1995, the Company's loss from continuing
operations before extraordinary items were $4.6 million compared to earnings of
$0.1 million for the prior-year period. The decrease in earnings for the third
quarter of Fiscal 1995 compared to the prior-year period was primarily due to
lower operating earnings and interest charged to discontinued operations in
Fiscal 1994, partially offset by lower interest expense and an income tax
benefit of $4.3 million in Fiscal 1995 compared to an income tax provision of
$0.9 million in Fiscal 1994. For the nine-month period of Fiscal 1995, the
Company's earnings from continuing operations before extraordinary items were
$28.7 million compared to earnings of $0.6 million for the prior-year period.
The increase in earnings for the nine-month period compared to the prior-year
period was primarily due to the gain on disposition of freestanding drug stores
and the tax benefit due to the reversal of the valuation allowance related to
the Company's net deferred income tax assets, partially offset by lower
operating earnings, higher interest expense and interest charged to discontinued
opertions in Fiscal 1994.
Extraordinary Item:
During the second quarter of Fiscal 1995 in connection with the proceeds
received related to the sale of 30 of its freestanding drug stores, the Company
was required to paydown $21.8 million of PTK DIBs; the premium paid, including
original issue discount, resulted in a net loss on early extinguishment of debt
of $0.7 million.
During the first quarter of Fiscal 1995, in connection with the proceeds
received related to the disposition of the home centers segment, the Company was
required to paydown $4.7 million of PTK DIBs; the premium paid, including
original issue discount, resulted in a net loss on early extinguishment of debt
of $0.2 million.
FINANCIAL CONDITION
Debt Service:
During the nine-month period of Fiscal 1995, total debt decreased $87.1
million from Fiscal 1994 year end primarily due to the scheduled Term Loan
repayments and a required Term Loan repayment in conjunction with the sale of
the freestanding drug stores, a decrease in borrowings under the Pathmark
Working Capital Facility as well as the paydown of the PTK DIB's with the
proceeds from
14
<PAGE>
the disposition of freestanding drug stores and home centers, partially offset
by debt accretion on Pathmark Deferred Coupon Notes and PTK DIBs. Borrowings
under the Pathmark Working Capital Facility were $24.0 million at October 28,
1995 and have increased as a result of seasonal borrowing needs to $49.5 million
at December 6, 1995. Borrowings under the Plainbridge Working Capital Facility
were $8.0 million at October 28, 1995 and have decreased to $6.5 million at
December 6, 1995.
Under the Pathmark Working Capital Facility, which expires in Fiscal 1998,
Pathmark can borrow or obtain letters of credit in an aggregate amount not to
exceed $175.0 million (of which the maximum of $100.0 million can be in letters
of credit) subject to an annual cleandown provision. Under the terms of the
Pathmark cleandown provision, in each fiscal year loans cannot exceed $50.0
million under the Pathmark Working Capital Facility for a period of 30
consecutive days. Pathmark satisfied the terms of the Fiscal 1995 cleandown
provision during the first quarter. Under the Plainbridge Working Capital
Facility, which expires in Fiscal 1997, Plainbridge can borrow or obtain letters
of credit in an aggregate amount not to exceed $40.0 million (of which the
maximum of $30.0 million can be in letters of credit).
The indebtedness under the Pathmark and Plainbridge Working Capital
Facilities and the Pathmark Term Loan bear interest at floating rates. To the
extent that certain indebtedness of the Company bears interest at floating
rates, cash interest payments on that indebtedness may vary in future years. The
Company does not currently maintain any interest rate hedging arrangements due
to the reasonable risk that near term interest rates will not rise
significantly. The Company is continuously evaluating this risk and will
implement interest rate hedging arrangements if deemed appropriate.
The majority of the cash interest payments are scheduled in the second and
fourth quarters.
The amount of principal payments required each year on outstanding long-term
debt (excluding the original issue discount with respect to the Pathmark
Deferred Coupon Notes and the PTK DIBs) are as follows (dollars in millions):
PRINCIPAL
FISCAL YEARS PAYMENTS
- ---------------------------------------------------------- ------------------
1995(a)................................................. $ 17.7
1996.................................................... 46.1
1997.................................................... 55.4
1998.................................................... 134.8
1999.................................................... 128.5
2000.................................................... 50.8
2001.................................................... 50.0
2002.................................................... 195.8
2003.................................................... 645.6
- ------------
(a) Subsequent to October 28, 1995
Liquidity:
The consolidated financial statements of the Company indicate that at
October 28, 1995, current liabilities exceed its current assets by $167.3
million and the Company's stockholder's deficit approximates $1.3 billion.
Management believes that cash flows generated from operations, supplemented by
the unused borrowing capacity under the Pathmark and Plainbridge Working Capital
Facilities and the availability of capital lease financing will be sufficient to
pay the Company's debts as they come due, provide for its capital expenditure
program and meet its seasonal cash requirements. Further, the Company believes
it will continue to be in compliance with its various debt covenants, which
include certain levels of operating cash flow (as defined), minimum interest
coverage and a maximum leverage ratio.
Holdings believes that it will be able to make the scheduled payments or
refinance its obligations with respect to its indebtedness through a combination
of operating funds and the Company's borrowing facilities. Future refinancing
may be necessary if cash flow from operations is not sufficient to meet its debt
service requirements related to the maturity of the Plainbridge Working Capital
Facility in Fiscal
15
<PAGE>
1997, the maturity of the Pathmark Working Capital Facility and certain
mortgages in Fiscal 1998, the amortization and subsequent maturity of the
Pathmark Term Loan in Fiscal 1999 and the maturity of the Pathmark Subordinated
Notes and Pathmark Subordinated Debentures in Fiscal 2002. The Company expects
that it will be necessary to refinance all or a portion of the Pathmark Senior
Subordinated Notes, the Pathmark Deferred Coupon Notes and the PTK DIBs due in
Fiscal 2003. The Company may undertake a refinancing of some or all of such
indebtedness sometime prior to its maturity. The Company's ability to make
scheduled payments or to refinance its obligations with respect to its
indebtedness depends on its financial and operating performance, which, in turn,
is subject to prevailing economic conditions and to financial, business and
other factors beyond its control. Although the Company's cash flow from its
operations and borrowings has been sufficient to meet its debt service
obligations, there can be no assurance that the Company's operating results will
continue to be sufficient or that future borrowing facilities will be available
for payment or refinancing of Pathmark's and PTK's indebtedness or that future
borrowing facilities will be available. While it is the Company's intention to
enter into refinancings that it considers advantageous, there can be no
assurances that the prevailing market conditions will be favorable to the
Company. In the event the Company obtains any future refinancing on less than
favorable terms, the holders of outstanding indebtedness could experience
increased credit risk and could experience a decrease in the market value of
their investment, because the Company might be forced to operate under terms
that would restrict its operations and might find its cash flow reduced.
Preferred Stock Dividends:
The terms of the Exchangeable Preferred Stock provide for cumulative
quarterly dividends at an annual rate of $3.52 per share when, as, and if
declared by the Board of Directors of the Company. Dividends for the first 20
quarterly dividend periods (through October 15, 1992) were paid at the Company's
option in additional shares of Exchangeable Preferred Stock. Since January 15,
1993, all dividends not paid in cash will cumulate at the rate of $3.52 per
share per annum, without interest, until declared and paid. As such, at October
28, 1995, the unpaid dividends of $51.6 million were accrued and included in
other noncurrent liabilities.
Capital Expenditures:
Capital expenditures for the third quarter of Fiscal 1995, including
property acquired under capital leases, were approximately $36.6 million
compared to approximately $27.1 million for the prior-year period and for the
nine-month period of Fiscal 1995, including property acquired under capital
leases, were approximately $73.6 million compared to $58.0 million for the prior
year period. During the nine-month period of Fiscal 1995, the Company opened two
new Pathmark 2000 format stores which replaced smaller stores and completed
thirteen major renovations and enlargements to existing supermarkets. During the
remainder of Fiscal 1995, the Company plans to open three new Pathmark 2000
format stores, one of which will replace a smaller store, and plans to complete
up to four major renovations and enlargements.
Cash Flows:
Net cash provided by operating activities amounted to $87.8 million in the
nine-month period of Fiscal 1995 compared to $109.8 million in the prior-year
period. The increase in net cash provided by operating activities is primarily
due to an improvement in cash provided by operating assets and liabilities and
an increase in net earnings, partially offset by an increase in the deferred
income tax benefit. Cash provided by investing activities in the nine-month
period of Fiscal 1995 was $12.4 million, primarily due to the net proceeds from
the disposition of the freestanding drug stores and the proceeds of $4.7 million
related to the disposition of the home centers segment, partially offset by
expenditures of property and equipment, compared to cash used for investing
activities of $59.4 million in the nine-month period of Fiscal 1994, primarily
reflecting the expenditures for property and equipment. Cash used for financing
activities in the nine-month period of Fiscal 1995 was $118.7 million compared
to $47.1 million in the prior-year period. The increase in cash used for
financing activities is primarily due to a decrease in borrowings under the
Working Capital Facilities and a paydown of $25.0 million on the
16
<PAGE>
Pathmark Term Loan, as well as a paydown of $25.1 million on the PTK DIBs from
the net proceeds related to the sale of the freestanding drug stores and from
the net proceeds related to the disposition of the home centers segment in
Fiscal 1995.
Subsequent Event:
On November 3, 1995, in connection with the sale of Purity Supreme, Inc.
("Purity") to the Stop & Shop Companies, Inc., the Company sold its investment
in Purity for $16.4 million, the proceeds of which were used to repay a portion
of its PTK DIBs. As a result of the sale, a capital tax loss of approximately
$70.0 million was generated, of which $37.2 million was utilized in conjunction
with the gain on the sale of the freestanding drug stores. The benefit of the
remaining capital tax loss will only be realized to the extent that the Company
can generate additional capital gains. No adjustment has been made to the
valuation allowance as of October 28, 1995 related to this investment.
17
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter for which this
report has been filed.
SIGNATURE
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.
SUPERMARKETS GENERAL HOLDINGS CORPORATION
By /s/ RON MARSHALL
......................................
(Ron Marshall)
Executive Vice President
and Chief Financial Officer
By /s/ JOSEPH ADELHARDT
......................................
(Joseph Adelhardt)
Vice President and Controller,
Chief Accounting Officer
Date: December 12, 1995
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Supermarkets
General Holdings Corporation's Consolidated Statements of Operations for the 39
weeks ended October 28, 1995 and Consolidated Balance Sheets as of October 28,
1995 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-3-1996
<PERIOD-END> OCT-28-1995
<CASH> 4,785
<SECURITIES> 0
<RECEIVABLES> 11,595
<ALLOWANCES> (515)
<INVENTORY> 240,437
<CURRENT-ASSETS> 321,349
<PP&E> 972,781
<DEPRECIATION> (368,037)
<TOTAL-ASSETS> 1,022,983
<CURRENT-LIABILITIES> 488,631
<BONDS> 1,273,698
<COMMON> 10
103,208
0
<OTHER-SE> (1,266,746)
<TOTAL-LIABILITY-AND-EQUITY> 1,022,983
<SALES> 3,060,058
<TOTAL-REVENUES> 3,060,058
<CGS> 2,185,738
<TOTAL-COSTS> 2,185,738
<OTHER-EXPENSES> 756,534
<LOSS-PROVISION> 817,853
<INTEREST-EXPENSE> 128,799
<INCOME-PRETAX> 4,522
<INCOME-TAX> (24,134)
<INCOME-CONTINUING> 28,656
<DISCONTINUED> 0
<EXTRAORDINARY> (927)
<CHANGES> 0
<NET-INCOME> 27,729
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
