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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
May 4, 1996 0-16404
Supermarkets General Holdings Corporation
(Exact name of registrant as specified in its charter)
Delaware 13-3408704
(State of 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 offices)
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
___________________
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 May 4, 1996, 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 1. FINANCIAL INFORMATION
Item 1. Financial Statements
SUPERMARKETS GENERAL HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands)
<TABLE><CAPTION>
13 Weeks Ended
-----------------------------
May 4, April 29,
1996 1995
---------- -----------
<S> <C> <C>
Sales..................................................................... $ 961,230 $ 1,033,185
Cost of sales (exclusive of depreciation and amortization shown
separately below)..................................................... 676,616 735,862
----------- -------------
Gross profit.............................................................. 284,614 $ 297,323
Selling, general and administrative expenses.............................. 232,301 233,493
Depreciation and amortization............................................. 20,674 19,979
----------- -------------
Operating earnings........................................................ 31,639 43,851
Interest expense.......................................................... (40,589) (43,170)
----------- -------------
Earnings (loss) from operations before income tax benefit (provision)
and extraordinary items .............................................. (8,950) 681
Income tax benefit (provision) ........................................... 3,625 (101)
----------- -------------
Earnings (loss) from operations before extraordinary items ............... (5,325) 580
Extraordinary items, net of an income tax benefit ........................ (793) (252)
----------- -------------
Net earnings (loss)....................................................... (6,118) 328
Less: non-cash preferred stock accretion and dividend requirements....... (4,733) (4,716)
----------- -------------
Net loss attributable to common stockholder............................... $ (10,851) $ (4,388)
=========== =============
</TABLE>
See notes to consolidated financial statements
1
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands except share amounts)
<TABLE><CAPTION>
May 4, February 3,
1996 1996
------------ -------------
<S> <C> <C>
ASSETS
Currents Assets
Cash and cash equivalents .................................................... $ 11,674 $ 12,526
Accounts receivable, net...................................................... 11,017 10,840
Merchandise inventories....................................................... 224,160 225,780
Income taxes receivable....................................................... 4,628 1,163
Deferred income taxes ........................................................ 7,847 8,254
Prepaid expenses.............................................................. 25,596 25,211
Due from suppliers............................................................ 11,182 13,178
Other current assets.......................................................... 5,227 5,868
------------ -------------
Total Current Assets ..................................................... 301,331 302,820
Property and Equipment, Net..................................................... 597,692 603,832
Deferred Financing Costs, Net................................................... 32,272 33,685
Deferred Income Taxes........................................................... 27,509 26,805
Other Assets.................................................................... 41,246 41,628
------------ -------------
$ 1,000,050 $ 1,008,770
============ =============
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities
Accounts payable.............................................................. $ 183,985 $ 185,328
Book overdrafts .............................................................. 35,004 43,989
Current maturities of long-term debt.......................................... 57,860 51,753
Accrued payroll and payroll taxes............................................. 50,498 54,427
Current portion of obligations under capital leases........................... 20,950 20,684
Accrued interest payable...................................................... 17,914 19,309
Accrued expense and other liabilities......................................... 95,169 96,084
-------------- ---------------
Total Current Liabilities............................................ 461,380 471,574
-------------- ---------------
Long-Term Debt.................................................................. 1,244,917 1,242,324
-------------- ---------------
Obligations Under Capital Leases, Long-Term..................................... 139,755 140,166
-------------- ---------------
Other Noncurrent Liabilities.................................................... 283,244 273,530
-------------- ---------------
Redeemable Securities
Exchangeable Preferred Stock, $.01 par value................................... 104,062 103,633
Authorized: 9,000,000 shares
Issued and outstanding: 4,890,671 at May 4, 1996 and
February 3, 1996
Liquidation preference, $25 per share: $122,267 at May 4, 1996 and
February 3, 1996
-------------- ---------------
Total Redeemable Securities............................................... 104,062 103,633
-------------- ---------------
Commitments and Contingencies (Note 6)
Stockholder's Deficit
Class A Common Stock, $.01 par value......................................... 7 7
Authorized: 1,075,000 shares
Issued and outstanding: 650,675 shares at May 4, 1996 and
February 3, 1996
Class B Common Stock, $.01 par value......................................... 3 3
Authorized: 1,000,000 shares
Issued and outstanding: 320,000 shares at May 4, 1996 and
February 3, 1996
Paid-in Capital............................................................. 197,242 197,671
Accumulated Deficit......................................................... (1,430,560) (1,420,138)
-------------- ---------------
Total Stockholder's Deficit........................................... (1,233,308) (1,222,457)
-------------- ---------------
$ 1,000,050 $ 1,008,770
============== ===============
</TABLE>
See notes to consolidated financial statements
2
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT (Unaudited)
(in thousands except per share amounts)
<TABLE><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, February 3, 1996....................... $ 7 $ 3 $ 197,671 $ (1,420,138) $ (1,222,457)
Net loss ..................................... - - - (6,118) (6,118)
Accrued dividends on preferred stock
($.88 per share).......................... - - - (4,304) (4,304)
Accretion on preferred stock.................. - - (429) - (429)
-------- -------- ----------- --------------- ---------------
Balance, May 4, 1996............................ $ 7 $ 3 $ 197,242 $ (1,430,560) $ (1,233,308)
======== ======== =========== =============== ===============
Balance at January 28, 1995..................... $ 7 $ 3 $ 199,135 $ (1,479,450) $ (1,280,305)
Net earnings................................ - - - 328 328
Accrued dividends on preferred stock
($.88 per share)...................... - - - (4,304) (4,304)
Accretion on preferred stock................ - - (412) - (412)
======== ======== ============= ================= =================
Balance, April 29, 1995........................ $ 7 $ 3 $ 198,723 $ (1,483,426) $(1,284,693)
======== ======== ============= ================= =================
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
<TABLE><CAPTION>
13 Weeks Ended
--------------------------
May 4, April 29,
1996 1995
--------- ---------
<S> <C> <C>
Operating Activities
Net earnings (loss)............................................ (6,118) $ 328
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Extraordinary loss on early extinguishment of debt ........ 793 252
Depreciation and amortization.............................. 21,516 20,629
Deferred income tax benefit................................ (1,550) (2,942)
Interest accrued but not payable........................... 4,008 3,611
Amortization of original issue discount.................... 819 2,164
Amortization of debt issuance costs ....................... 1,816 1,779
Gain on disposal of property and equipment................. (5,542) (93)
Cash provided by (used for) operating assets and liabilities:
Accounts receivable, net................................. (177) 715
Merchandise inventories.................................. 1,620 1,009
Income taxes receivable.................................. (2,918) 8,799
Prepaid expenses......................................... (1,156) (389)
Due from suppliers....................................... 1,995 3,420
Other current assets..................................... 1,048 8,885
Other assets............................................. 1,119 (905)
Accounts payable......................................... (1,343) (15,526)
Accrued payroll and payroll taxes........................ (3,929) (2,546)
Accrued interest payable................................. (1,395) 19,736
Accrued expenses and other current liabilities .......... (943) (4,634)
Other noncurrent liabilities............................. 5,410 2,774
---------- --------
Cash provided by operating activities............... 15,073 47,066
---------- --------
Investing Activities
Property and equipment expenditures............................ (10,796) (10,034)
Proceeds from disposition of property and equipment............ 6,589 559
Proceeds from disposal of home centers segment ................ - 4,706
---------- --------
Cash used for investing activities.................. (4,207) (4,769)
---------- --------
Financing Activities
Increase (decrease) in Working Capital Facilities borrowings... 18,500 (28,500)
Decrease in Pathmark Term Loan................................. (10,400) (8,750)
Increase (decrease) book overdrafts ........................... (8,985) 3,968
Repayment of other long-term borrowings ....................... (1,220) (1,651)
Reduction in obligations under capital leases.................. (4,901) (4,437)
Repayment of PTK Exchangeable Guaranteed Debentures .......... (3,007) (4,454)
Premiums incurred in redemption of PTK Exchangeable Guaranteed
Debentures ............................................... (202) (252)
Deferred financing fees ....................................... (1,503) -
---------- ---------
Cash used for financing activities.................. (11,718) (44,076)
---------- ---------
Decrease in cash and cash equivalents............................ (852) (1,779)
Cash and cash equivalents at beginning of period................. 12,526 23,247
---------- ---------
Cash and cash equivalents at end of period....................... $ 11,674 $ 21,468
========== =========
Supplemental Disclosures of Cash Flow Information:
Interest paid ................................................ $ 33,768 $ 13,978
========== =========
Income taxes paid ............................................ $ 1,412 $ 225
========== =========
Noncash Investing and Financing Activities:
Capital lease obligations ..................................... $ 4,904 $ 6,116
========== =========
</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
Supermarkets General Holdings Corporation (the "Company" or "Holdings"),
through its indirect wholly owned subsidiary Pathmark Stores, Inc. ("Pathmark"),
operates 144 supermarkets in the Middle Atlantic States, primarily in the New
York-New Jersey and Philadelphia metropolitan areas, and is a wholly owned
subsidiary of SMG-II Holdings Corporation ("SMG-II").
On March 1, 1996, Pathmark reacquired all of the outstanding capital stock of
Plainbridge, Inc. ("Plainbridge") by means of a capital contribution from its
parent, PTK, Inc. ("PTK").
The unaudited consolidated financial statements included herein have been
prepared by the Company in accordance with the same accounting principles
followed in the presentation of the Company's annual financial statements for
the year ended February 3, 1996, except for the new accounting standard adopted
effective February 4, 1996 (see Note 2), pursuant to the rules and regulations
of the Securities and Exchange Commission. In the opinion of management, the
consolidated financial statements included herein reflect all adjustments which
are of a normal and recurring nature and are necessary to present fairly the
results of operations and financial position of the Company. This report should
be read in conjunction with the financial statements and notes thereto included
in the Company's Form 10-K Annual Report for the year ended February 3, 1996.
The accompanying consolidated financial statements of the Company indicate
that at May 4, 1996 current liabilities exceed its current assets by $160.0
million and the Company's stockholder's deficit approximates $1.2 billion.
Management believes that cash flows generated from operations supplemented by
the unused borrowing capacity under the Working Capital Facility 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.
Income taxes for the interim period are based on the estimated effective tax
rate expected to be applicable for the full fiscal year.
Since the Company is a wholly owned subsidiary, earnings (loss) per share
information is not presented.
Note 2-New Accounting Standard
Effective February 4, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS No. 121"). SFAS No.
121 establishes accounting standards for the measurement of the impairment of
long-lived assets, certain identifiable intangibles and goodwill related to
those assets. SFAS No. 121 requires that an asset to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
The Company has performed its review based upon groups of assets and the
undiscounted estimated future cash flows from such assets and determined that
the carrying value of such assets were recoverable from the respective cash
flows. The adoption of SFAS No. 121 did not have an effect on the financial
position or results of operations of the Company.
5
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Unaudited)
Note 2-New Accounting Standard-(Continued)
Selling, general and administrative expenses for the 13 weeks ended
May 4, 1996 are net of a gain of $5.6 million related to the sale of certain
real estate.
Note 3-Long-Term Debt
Long-term debt is comprised of the following (dollars in thousands):
<TABLE><CAPTION>
May 4, February 3,
1996 1996
---------- ----------
<S> <C> <C>
Pathmark Term Loan . . . . . . . . . . $ 277,555 $ 287,955
Working Capital Facilities . . . . . . 64,500 46,000
10.25% PTK Exchangeable Guaranteed Debentures due 2003 25,403 27,679
9.625% Pathmark Senior Subordinated Notes due 2003 437,514 437,426
10.75% Pathmark Deferred Coupon Notes due 2003 155,889 151,881
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) . . . 39,791 41,011
---------- ----------
Total debt . . . . . . . . . . . . . . 1,302,777 1,294,077
Less: current maturities . . . . . . . 57,860 51,753
---------- ----------
Long-term portion . . . . . . . . . . $1,244,917 $1,242,324
========== ==========
Note 4-Interest Expense
Interest expense is comprised of the following (dollars in thousands):
<CAPTION>
13 Weeks Ended
---------------------------
May 4, April 29,
1996 1995
--------- ---------
<S> <C> <C>
Pathmark Term Loan $ 5,901 $ 7,925
Working Capital Facilities 1,210 1,290
9.625% Pathmark Senior Subordinated Notes due 2003
Amortization of original issue discount . . . . . 88 88
Currently payable . . . . . . . . . . . . . . . . 10,588 10,588
10.75% Pathmark Deferred Coupon Notes due 2003
Accrued but not payable . . . . . . . . . . . . . 4,008 3,611
12.625% Pathmark Subordinated Debentures due 2002 3,022 3,022
11.625% Pathmark Subordinated Notes due 2002 5,813 5,813
10.25% PTK Exchangeable Guaranteed Debentures due 2003
Amortization of original issue discount . . . . . 731 2,076
Amortization of debt issuance costs 1,816 1,779
Obligations under capital leases 4,342 4,048
Other, net 3,070 2,930
------- -----
Interest expense $40,589 $43,170
======= =======
</TABLE>
The majority of the cash interest payments are scheduled in the second and
fourth quarters. The $21.2 million semi-annual interest payment on the 9.625%
Senior Subordinated Notes, due May 1, was paid in the first quarter of Fiscal
1996 and in the second quarter of Fiscal 1995.
6
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Unaudited)
Note 5-Extraordinary Items
The extraordinary items, representing the loss on early extinguishment of
indebtedness, consist of the following (dollars in thousands):
13 Weeks Ended
--------------------------
May 4, April 29,
1996 1995
---------- ----------
Loss before income taxes . . . . . . $(1,340) $(252)
Income tax benefit . . . . . . . . . 547 --
-------- ------
Extraordinary items, net of a tax benefit $ (793) $(252)
======== ======
During the first quarter of Fiscal 1996, in connection with the termination
of the Plainbridge credit agreement due to the reacquisiton of Plainbridge by
Pathmark, the Company wrote off deferred financing fees resulting in a net loss
on early extingusihment of debt of $0.7 million, net of an income tax benefit of
$0.5 million.
During the first quarter of Fiscal 1996, the Company also made a paydown of
$3.2 million of PTK Exchangeable Guaranteed Debentures, 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 $0.1
million, net of an income tax benefit of $0.1 million.
During the first quarter of Fiscal 1995, in connection with the proceeds from
the sale of its home centers segment, the Company made a paydown of $4.7
million of PTK Exchangeable Guaranteed Debentures, 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 $0.3 million.
Note 6-Contingencies
In connection with the sale of its home centers segment the Company has, as
lessor, entered into leases for certain real property with Rickel Home Centers
Inc. ("Rickel"), as tenant (the "Leases"), pursuant to which the Company is
entitled to receive annual aggregate rentals of approximately $7.2 million. In
addition, as part of the sale, the company assigned to Rickel, and Rickel
assumed, various liabilities of the home centers segment, primarily third party
leases (the "Assumed Liabilities"). As of February 3, 1996, the estimated
present value of obligations under the Assumed Liabilities is approximately
$33.0 million. In January 1996, Rickel filed for bankruptcy protection under
Chapter 11 of the United States Bankruptcy Code. The bankruptcy is in its early
stages and it is too early to determine whether Rickel will reject any of the
Leases or the extent to which the Company may become liable with respect to the
Assumed Liabilities in the event of Rickel's nonpayment thereof. On April 29,
1996, the Company filed its proofs of claim in connection with the bankruptcy
proceedings.
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.
7
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Sales:
Sales for the first quarter of Fiscal 1996 were $961.2 million compared to
$1,033.2 million in the prior-year period. Fiscal 1996 total sales were
impacted by the disposition of the freestanding drug stores during Fiscal 1995.
The freestanding drug stores generated sales of $0.4 million and $45.5 million
for the first quarter of Fiscal 1996 and Fiscal 1995, respectively. Sales from
supermarkets opened in both years decreased 3.5%. Same store sales were
negatively impacted by a significant increase in competitive new store openings
and remodels, as well as the inclement weather during the quarter compared to
the unusually mild weather in the same period last year. The Company operated
144 supermarkets at both the end of the first quarter of Fiscal 1996 and the end
of Fiscal 1995, including 46 and 44 Pathmark 2000 format stores, respectively.
The Company operated one freestanding drug store, which was closed in the second
quarter of Fiscal 1996, at both quarter end and Fiscal 1995 year end compared to
36 freestanding drug stores at the end of the first quarter of Fiscal 1995.
Gross Profit:
Gross profit for the first quarter of Fiscal 1996 was $284.6 million or
29.6% of sales compared with $297.3 million or 28.8% of sales for the prior-year
period. The decrease in gross profit in the first quarter of Fiscal 1996
compared to the prior-year period was primarily attributable to lower sales.
The improvement in gross profit as a percentage of sales for the quarter
compared to the prior-year period was primarily due to increased focus on
merchandising programs as well as the Company's continuing emphasis on the
Pathmark 2000 format stores which allow expanded variety in all departments,
particularly higher margin perishables. The cost of goods sold comparisons were
affected by a pretax LIFO charge of $0.9 million and $0.8 million for the first
quarters of Fiscal 1996 and Fiscal 1995, respectively.
Selling, General and Administrative Expenses ("SG&A"):
SG&A for the first quarter of Fiscal 1996 decreased $1.2 million or 0.5%
compared to the prior-year period. SG&A on a proforma basis eliminating the
SG&A impact of the freestanding drug stores in last year's quarter, increased
4.5% compared to the prior-year period. As a percentage of sales, SG&A were
24.2% for the first quarter of Fiscal 1996, up from 22.6% in the prior-year
period. The increase as a percentage of sales for the first quarter of Fiscal
1996 compared to the prior-year period was due to higher labor and labor related
expenses and occupancy costs, partially offset by lower promotional costs.
SG&A for the first quarter of Fiscal 1996 included a provision of $5.8 million
representing the termination costs for two former executives of the Company and
a gain of $5.6 million recognized on the sale of certain real estate.
8
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
Depreciation and Amortization:
Depreciation and amortization of $20.7 million for the first quarter of
Fiscal 1996 was $0.7 million higher than the prior-year period of $20.0 million.
The increase in depreciation and amortization expense for the quarter compared
to the prior-year period was primarily due to capital expenditures.
Depreciation and amortization excludes video tape amortization, which is
recorded in cost of goods sold, of $0.75 million and $0.65 million in the first
quarter of Fiscal 1996 and Fiscal 1995, respectively.
Operating Earnings:
Operating earnings for the first quarter of Fiscal 1996 were $31.6 million
compared with the prior-year period of $43.9 million. The decrease in operating
earnings during the quarter compared to the prior-year period was primarily due
to lower sales.
Interest Expense:
Interest expense of $40.6 million for the first quarter of Fiscal 1996 was
$2.6 million less than the prior-year period of $43.2 million primarily due to
reductions in the Term Loan and the reduction in the amortization of PTK
Exchangeable Guaranteed Debentures original issue discount as a result of their
early paydown.
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. Although the Company
generated a $3.6 million income tax benefit in the first quarter of Fiscal 1996,
management expects an annual tax provision as a result of taxable income for the
full fiscal year. The income tax provision of $0.1 million for the first
quarter of Fiscal 1995 is net of a reduction in the deferred income tax assets
and related valuation allowance of $0.3 million due to the utilization of net
operating loss carryforwards.
During the first quarter of Fiscal 1996, the Company made income tax
payments of $1.4 million and received income tax refunds of $2.3 million.
During the first quarter of Fiscal 1995, the Company made income tax payments of
$0.2 million and received income tax refunds of $8.0 million.
Extraordinary Items:
During the first quarter of Fiscal 1996, in connection with the termination
of the Plainbridge credit agreement due to the reacquisition of Plainbridge by
Pathmark, the Company wrote off deferred financing fees resulting in a net loss
on early extinguishment of debt of $0.7 million.
During the first quarter of Fiscal 1996, the Company also made a paydown of
$3.2 million of PTK Exchangeable Guaranteed Debentures. The premium paid,
including original issue discount, resulted in a net loss on early
extinguishment of debt of $0.1 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
made a paydown of $4.7 million of PTK Exchangeable Guaranteed Debentures. The
premium paid, including original issue discount, resulted in a net loss on early
extinguishment of debt of $0.3 million.
9
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
Summary of Operations:
For the first quarter of Fiscal 1996, the Company's net loss was $6.1
million compared to earnings of $0.3 million for the prior-year period. The
decrease in earnings for the quarter compared to the prior-year period was
primarily due to lower operating earnings and an extraordinary loss on early
extinguishment of debt, partially offset by lower interest expense and an income
tax benefit of $3.6 million in Fiscal 1996 compared to an income tax provision
of $0.1 million in Fiscal 1995.
Financial Condition
Debt Service:
During the first quarter of Fiscal 1996, total debt increased $8.7 million
from Fiscal 1995 year end primarily due to borrowings under the Pathmark Working
Capital Facility and debt accretion on Pathmark Deferred Coupon Notes and PTK
Exchangeable Guaranteed Debentures, partially offset by the scheduled Pathmark
Term Loan repayments as well as the paydown of the PTK Exchangeable Guaranteed
Debentures. Borrowings under the Pathmark Working Capital Facility were $64.5
million at May 4, 1996 and have decreased as a result of seasonal borrowing
needs to $50.5 million at June 12, 1996.
In conjunction with the Pathmark reacquisition of the Plainbridge capital
stock, the outstanding obligations of Plainbridge under its credit agreement
were satisfied by Pathmark and the Plainbridge credit agreement was terminated.
The Company, through its Pathmark subsidiary, simultaneously entered into an
amendment to its credit agreement with its existing lenders increasing the
Company's Working Capital Facility from $175 million to $200 million (of which
the maximum of $125.0 million can be in letters of credit) to satisfy any
additional liquidity needs and prospectively modifying certain of its financial
covenants to take into account the operations of Plainbridge. The Pathmark
Working Capital Facility is subject to an annual cleandown provision. Under the
terms of the cleandown provision, in each fiscal year loans cannot exceed $60.0
million (formerly $50.0 million) under the Pathmark Working Capital Facility for
a period of 30 consecutive days. Pathmark satisfied the terms of the Fiscal
1996 cleandown provision during the quarter ended May 4, 1996.
The indebtedness under the Pathmark Working Capital Facility 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 very 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.
10
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
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 Exchangeable Guaranteed Debentures) are as
follows (dollars in million):
Principal
Fiscal Years Payments
------------ --------
1996(a) . . . . . . . . . . . . . . . . . . $ 40.4
1997 . . . . . . . . . . . . . . . . . . . . 58.0
1998 . . . . . . . . . . . . . . . . . . . . 161.1
1999 . . . . . . . . . . . . . . . . . . . . 128.1
2000 . . . . . . . . . . . . . . . . . . . . 50.2
2001 . . . . . . . . . . . . . . . . . . . . 50.0
2002 . . . . . . . . . . . . . . . . . . . . 194.8
2003 . . . . . . . . . . . . . . . . . . . . 620.2
__________
(a) Subsequent to May 4, 1996
Liquidity:
The consolidated financial statements of the Company indicate that at May 4,
1996, current liabilities exceed its current assets by $160.0 million and the
stockholder's deficit approximates $1.2 billion. Management believes that cash
flows generated from operations, supplemented by the unused borrowing capacity
under the Pathmark Working Capital Facility 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.
The Company 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
will be necessary if the Company's cash flow from operations is not sufficient
to meet its debt service requirements related to the maturity of a portion of
the Pathmark Term Loan, the Pathmark Working Capital Facility and certain
mortgages in Fiscal 1998, the amortization and subsequent maturity of the
balance 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 Exchangeable Guaranteed Debentures 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 refinancing 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
11
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
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, 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 May 4, 1996, the
unpaid dividends of $60.3 million were accrued and included in other noncurrent
liabilities.
Capital Expenditures:
Capital expenditures for the first quarter of Fiscal 1996, including
property acquired under capital leases, were approximately $15.7 million
compared to approximately $16.2 million for the prior-year period. In June,
through the date of this report, the Company opened three new Pathmark 2000
format stores, two of which replaced former stores. During the first quarter of
Fiscal 1996, the Company completed two enlargements to existing supermarkets.
During the remainder of Fiscal 1996, the Company plans to open three new
Pathmark 2000 format stores and plans to complete up to 18 major renovations
and enlargements.
Cash Flows:
Net cash provided by operating activities amounted to $15.1 million in the
first quarter of Fiscal 1996 compared to $47.1 million in the prior-year period.
The decrease in net cash provided by operating activities is primarily due to a
decline in cash provided by operating assets and liabilities and a decrease in
net earnings. Cash used for investing activities in the first quarter of Fiscal
1996 was $4.2 million, primarily due to expenditures of property and equipment,
partially offset by proceeds from property dispositions. During the first
quarter of Fiscal 1995, cash used for investing activities was $4.8 million
primarily reflecting the expenditures for property and equipment, partially
offset by proceeds from the disposal of the home centers segment. Cash used for
financing activities in the first quarter of Fiscal 1996 was $11.7 million
compared to $44.1 million in the prior-year period. The decrease in cash used
for financing activities is primarily due to an increase in borrowings under the
Working Capital Facility, partially offset by a decrease in book overdrafts.
12
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
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)
Senior Vice President and Controller,
Chief Accounting Officer
Date: June 17, 1996
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Supermarkets General Holdings Corporation
301 Blair Road Woodbridge, New Jersey 07095
This schedule contains summary financial information extracted from Supermarkets
General Holdings Corporations Consolidated Statement of Operations for the 13
weeks ended May 4, 1996 and Consolidated Balance Sheet as of May 4, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> MAY-04-1996
<CASH> 11,674
<SECURITIES> 0
<RECEIVABLES> 12,067
<ALLOWANCES> (1,050)
<INVENTORY> 224,160
<CURRENT-ASSETS> 301,331
<PP&E> 964,596
<DEPRECIATION> (366,904)
<TOTAL-ASSETS> 1,000,050
<CURRENT-LIABILITIES> 461,380
<BONDS> 1,244,917
104,062
0
<COMMON> 10
<OTHER-SE> (1,233,318)
<TOTAL-LIABILITY-AND-EQUITY> 1,000,050
<SALES> 961,230
<TOTAL-REVENUES> 961,230
<CGS> 676,616
<TOTAL-COSTS> 676,616
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 55
<INTEREST-EXPENSE> (40,589)
<INCOME-PRETAX> (8,950)
<INCOME-TAX> 3,625
<INCOME-CONTINUING> (5,325)
<DISCONTINUED> 0
<EXTRAORDINARY> (793)
<CHANGES> 0
<NET-INCOME> (6,118)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
