<PAGE>
================================================================================
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
JULY 29, 2000 0-16404
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION AS OF JULY 12, 2000)
(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.)
200 MILIK STREET 07008
CARTERET, NEW JERSEY (Zip Code)
(Address of principal executive offices)
(732) 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 September 1, 2000, 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.
================================================================================
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
---------------------------- ----------------------------
JULY 29, JULY 31, JULY 29, JULY 31,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales .............................. $ 929,597 $ 922,728 $ 1,848,793 $ 1,817,185
Cost of sales (exclusive of
depreciation and amortization
shown separately below) .......... 667,228 657,887 1,328,772 1,297,397
----------- ----------- ----------- -----------
Gross profit ....................... 262,369 264,841 520,021 519,788
Selling, general and administrative
expenses ........................... 215,621 212,243 428,336 418,762
Reorganization items ............... 4,753 -- 9,887 --
Depreciation and amortization ...... 19,626 18,382 38,554 36,609
----------- ----------- ----------- -----------
Operating earnings ................. 22,369 34,216 43,244 64,417
Interest expense ................... (45,700) (40,367) (87,836) (79,842)
----------- ----------- ----------- -----------
Loss before income taxes ........... (23,331) (6,151) (44,592) (15,425)
Income tax provision ............... (24) (26) (48) (51)
----------- ----------- ----------- -----------
Net loss ........................... (23,355) (6,177) (44,640) (15,476)
Less: non-cash preferred stock
accretion and dividend requirements (511) (4,793) (5,321) (9,581)
----------- ----------- ----------- -----------
Net loss attributable to common
stockholder ........................ $ (23,866) $ (10,970) $ (49,961) $ (25,057)
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements (unaudited).
1
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands except per share amounts)
<TABLE>
<CAPTION>
JULY 29, JANUARY 29,
2000 2000
----------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash ........................................... $ 15,569 $ 16,034
Accounts receivable, net ....................... 16,341 15,787
Income taxes receivable ........................ 418 709
Merchandise inventories ........................ 138,670 141,559
Deferred income taxes, net ..................... 2,336 2,598
Prepaid expenses ............................... 20,942 21,183
Due from suppliers ............................. 46,334 53,975
Other current assets ........................... 21,301 18,134
----------- -----------
Total current assets ......................... 261,911 269,979
Property and equipment, net ...................... 461,609 472,157
Deferred financing costs, net .................... 13,008 11,805
Deferred income taxes, net ....................... 45,452 45,190
Other noncurrent assets .......................... 58,573 45,436
----------- -----------
$ 840,553 $ 844,567
=========== ===========
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
Current liabilities
Accounts payable and book overdrafts ........... $ 76,997 $ 89,434
Current maturities of long-term debt ........... 382,939 78,982
Accrued payroll and payroll taxes .............. 45,197 50,766
Current portion of lease obligations ........... 22,900 25,192
Accrued interest payable ....................... 6,111 26,850
Accrued expenses and other current liabilities . 89,148 80,058
----------- -----------
Total current liabilities .................... 623,292 351,282
----------- -----------
Long-term debt ................................... -- 1,264,103
----------- -----------
Long-term lease obligations ...................... 185,060 173,289
----------- -----------
Other noncurrent liabilities ..................... 200,908 377,852
----------- -----------
Liabilities subject to discharge and exchange .... 1,314,024 --
----------- -----------
Redeemable securities
Exchangeable preferred stock, $0.01 par value .. -- 111,041
----------- -----------
Authorized: 9,000,000 shares
Issued and outstanding: 4,890,671 shares
Liquidation preference, $25 per share: $122,267
Commitments and contingencies
Stockholder's deficiency
Class A common stock, $0.01 par value .......... 7 7
Authorized: 1,075,000 shares
Issued and outstanding: 650,675 shares
Class B common stock, $0.01 par value .......... 3 3
Authorized: 1,000,000 shares
Issued and outstanding: 320,000 shares
Paid-in capital ................................ 193,890 194,677
Accumulated deficit ............................ (1,676,631) (1,627,687)
----------- -----------
Total stockholder's deficiency ............... (1,482,731) (1,433,000)
----------- -----------
$ 840,553 $ 844,567
=========== ===========
</TABLE>
See notes to consolidated financial statements (unaudited).
2
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIENCY (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 DEFICIENCY
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, January 30, 1999 .......... $ 7 $ 3 $ 196,357 $(1,578,601) $(1,382,234)
Net loss ........................... -- -- -- (31,871) (31,871)
Accrued dividends on preferred stock
($3.52 per share) ............. -- -- -- (17,215) (17,215)
Accretion on preferred stock ....... -- -- (1,969) -- (1,969)
Capital contribution from SMG-II
Holdings Corporation .......... -- -- 289 -- 289
----------- ----------- ----------- ----------- -----------
Balance, January 29, 2000 .......... 7 3 194,677 (1,627,687) (1,433,000)
Net loss ........................... -- -- -- (44,640) (44,640)
Accrued dividends on preferred stock
($0.88 per share) ............. -- -- -- (4,304) (4,304)
Accretion on preferred stock ....... -- -- (1,017) -- (1,017)
Capital contribution from SMG-II
Holdings Corporation .......... -- -- 230 -- 230
----------- ----------- ----------- ----------- -----------
Balance, July 29, 2000 ............. $ 7 $ 3 $ 193,890 $(1,676,631) $(1,482,731)
=========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements (unaudited).
3
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
26 WEEKS ENDED
-----------------------
JULY 29, JULY 31,
2000 1999
--------- ---------
<S> <C> <C>
Operating Activities
Net loss ........................................................... $(44,640) $(15,476)
Adjustments to reconcile net loss to net cash provided by (used for)
operating activities:
Depreciation and amortization .................................... 41,026 38,376
Amortization of original issue discount .......................... 89 178
Amortization of deferred financing costs ......................... 2,566 2,186
Gain on sale or disposal of property and equipment ............... (1,883) (369)
Cash provided by (used for) operating assets and liabilities:
Accounts receivable, net ....................................... (554) 1,013
Income taxes receivable ........................................ 291 (321)
Merchandise inventories ........................................ 2,889 (4,128)
Due from suppliers ............................................. 7,641 3,454
Other current assets ........................................... (5,372) (4,828)
Noncurrent assets .............................................. (12,638) (2,406)
Accounts payable ............................................... (3,255) 1,870
Accrued interest payable ....................................... 54,140 11,250
Accrued expenses and other current liabilities ................. 3,521 (8,786)
Noncurrent liabilities ......................................... (12,610) (16,005)
-------- --------
Cash provided by operating activities ........................ 31,211 6,008
-------- --------
Investing Activities
Property and equipment expenditures ............................... (18,660) (24,476)
Proceeds from sale or disposal of property and equipment .......... 9,799 886
-------- --------
Cash used for investing activities ........................... (8,861) (23,590)
-------- --------
Financing Activities
(Decrease) increase in Pathmark working capital facility borrowings (4,800) 27,600
Repayments of the Pathmark term loan .............................. (5,229) (3,783)
Repayment of other long-term debt ................................. (689) (620)
(Decrease) increase in book overdrafts ............................ (9,182) 5,055
Reduction in lease obligations .................................... (9,446) (9,631)
Deferred financing costs .......................................... (3,769) (431)
Increase in Pathmark DIP financing facility borrowings ............ 10,300 --
-------- --------
Cash provided by (used for) financing activities ............. (22,815) 18,190
-------- --------
Increase (decrease) in cash ......................................... (465) 608
Cash at beginning of period ......................................... 16,034 7,726
-------- --------
Cash at end of period ............................................... $ 15,569 $ 8,334
======== ========
Supplemental Disclosures of Cash Flow Information
Interest paid ..................................................... $ 31,220 $ 66,417
======== ========
Income taxes paid ................................................. $ 34 $ 427
======== ========
Noncash Investing and Financing Activities
Capital lease obligations ......................................... $ 24,436 $ 23,217
======== ========
</TABLE>
See notes to consolidated financial statements (unaudited).
4
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. RESTRUCTURING PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
Historically, the cash flows that Pathmark Stores, Inc. ("Pathmark")
generated from operations, supplemented by the unused borrowing capacity
under the Pathmark working capital facility (the "Pathmark Working Capital
Facility") and the availability of capital lease financing were sufficient to
pay Pathmark's debts as they came due, provide for its capital expenditure
program and meet its other cash requirements. Management evaluated its Fiscal
2000 cash flow projections and debt service requirements and based upon this
evaluation, Pathmark elected not to make all of its scheduled debt payments.
Pathmark's Fiscal 2000 debt requirements increase substantially over the
prior year due primarily to the semi-annual interest payments of $12.1
million on the 10.75% Pathmark Junior Subordinated Deferred Coupon Notes (the
"Pathmark Junior Subordinated Notes") which, for the first time, was required
to be paid in cash on May 1, 2000 and the sinking fund payment of $50.0
million on the 11.625% Pathmark Subordinated Notes due 2002 (the "Pathmark
Subordinated Notes") on June 15, 2000.
On May 1, 2000, Pathmark elected not to make interest payments of $21.2
million on its $440 million of 9.625% Pathmark Senior Subordinated Notes due
2003 (the "Pathmark Senior Subordinated Notes") and $12.1 million on its
Pathmark Junior Subordinated Notes. On June 15, 2000, Pathmark elected not to
make interest payments of $6.0 million on its $95.6 million of 12.625%
Pathmark Subordinated Debentures due 2002 (the "Pathmark Subordinated
Debentures") and $11.6 million on its Pathmark Subordinated Notes. Also, on
June 15, 2000, Pathmark elected not to make a sinking fund payment of $50.0
million on its Pathmark Subordinated Notes. The grace period under each of
the Indentures governing the various notes has expired constituting an Event
of Default under each such Indenture.
On July 12, 2000 (the "Petition Date"), Supermarkets General Holdings
Corporation (the "Company"), along with its parent company and certain of its
subsidiaries, filed a voluntary petition (the "Petition") under Chapter 11 of
Title 11 of the United States Code (the "Bankruptcy Code"). The Petition was
filed in the United States Bankruptcy Court for the District of Delaware (the
"Court") under case number 00-2963 through 00-2968 (the "Bankruptcy Case").
As of the Petition Date, the Company was in arrears with respect to interest
on the Pathmark Senior Subordinated Notes in the amount of $37.6 million, on
the Pathmark Subordinated Notes in the amount of $13.4 million, on the
Pathmark Subordinated Debentures in the amount of $6.9 million, and on the
Pathmark Junior Subordinated Notes in the amount of $16.9 million. The
Company continues to manage its affairs and operate its business as a
debtor-in-possession ("DIP") while the Bankruptcy Case is pending. The
Bankruptcy Case was commenced to implement a prepackaged plan of
reorganization (the "Prepackaged Plan") developed jointly with an ad hoc
committee of the Company's bondholders (the "Bondholders Committee"). Members
of the Bondholders Committee hold or control $445.7 million principal amount,
or approximately 46% of the Company's total bond indebtedness outstanding.
Over 99% of the principal amount of bond indebtedness voted agreed to accept
the Prepackaged Plan.
The Prepackaged Plan provides that, upon consummation of the
reorganization, current holders of the Company's bond indebtedness will
receive 100% of the opening common stock of the reorganized Pathmark (the
"New Common Stock"). In addition to New Common Stock, holders of the Pathmark
Subordinated Notes, the Pathmark Subordinated Debentures and the Pathmark
Junior Subordinated Notes will receive ten-year warrants to purchase 15% of
the diluted New Common Stock of the reorganized Pathmark (the "New
Warrants"). The New Warrants will be exercisable at the opening
reorganization equity value established in connection with the Prepackaged
Plan. Such ownership is subject to dilution from (1) the exercise of the New
Warrants, (2) the exercise of any options to purchase New Common Stock issued
pursuant to the Company's long-term management incentive plan, and (3) the
grant to the Chief Executive Officer of restricted New Common Stock.
5
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. RESTRUCTURING PROCEEDINGS UNDER CHAPTER 11 OF THE BANKRUPTCY
CODE--(CONTINUED)
Pursuant to the Prepackaged Plan and in full satisfaction of their claims,
(1) holders of the Pathmark Senior Subordinated Notes will receive 78.24% of the
New Common Stock, (2) holders of the Pathmark Subordinated Notes and the
Pathmark Subordinated Debentures will receive their ratable share of 18.71% of
the New Common Stock and 75% of the New Warrants, (3) holders of the Pathmark
Junior Subordinated Notes will receive 2.88% of the New Common Stock and 25% of
the New Warrants, and (4) holders of approximately $0.98 million of the 11.625%
Supermarkets General Holdings Corporation ("Holdings") Subordinated Notes due
2002, which Subordinated Notes are guaranteed by the Company, will receive 0.17%
of the New Common Stock, subject to dilution as described in the preceding
paragraph.
The Prepackaged Plan provides that holders of the Company's Cumulative
Exchangeable Redeemable Preferred Stock ("Exchangeable Preferred Stock") are to
receive their ratable portions of $0.5 million in cash payable upon the
effective date of the Prepackaged Plan.
In connection with its financial restructuring plan, Pathmark received a
commitment from The Chase Manhattan Bank for a $75 million revolving credit
agreement (the "Pathmark DIP Financing Facility") in support of the Prepackaged
Plan and a $600 million senior secured credit facility (the "Exit Financing").
The Pathmark DIP Financing Facility, which was approved by the Court on July 28,
2000, will enable the Company to continue normal business operations during the
restructuring proceedings. The Exit Financing will be used to repay in full the
existing Credit Agreement and the Pathmark DIP Financing Facility, pay expenses
of the Prepackaged Plan and provide approximately $200 million of liquidity for
post-reorganization operations.
On July 13, 2000, the Court approved various "first day" requests
including, among other things, the payment of prepetition claims of
employees, utilities, critical trade vendors and other key constituents. The
Court also granted the Company's motion to reject 16 unexpired real estate
leases, related to closed stores. Under Bankruptcy Law, the Company's
liability to the landlord on claims resulting from such rejections is capped
at the greater of 15% of the remaining lease payments (limited to three
years' lease payments) or one year's lease payments. Rejection of these
leases, however, does not limit the Company's obligation with respect to
damages arising from the rejection of any corresponding subleases.
Outstanding claims related to these 16 rejected leases approximate $10.6
million.
On September 7, 2000, the Court entered an order confirming the Prepackaged
Plan, which is expected to become effective on or about September 19, 2000, at
which point the Company will formally exit Chapter 11.
NOTE 2. ORGANIZATION AND BASIS OF PRESENTATION
The Company, through its indirect wholly-owned subsidiary, Pathmark,
operated 137 supermarkets as of July 29, 2000, primarily in the New York, New
Jersey and Philadelphia metropolitan areas, and is a wholly-owned subsidiary
of SMG-II Holdings Corporation ("SMG-II").
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 January 29, 2000, pursuant to the rules and regulations of the
Securities and Exchange Commission. Since the Petition Date, the Company has
operated its business as a debtor-in-possession under the Bankruptcy Code. The
American Institute of Certified Public Accountant's Statement of Position 90-7
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
("SOP 90-7") provides guidance for financial reporting by entities that have
filed petitions with a bankruptcy court and expect to reorganize under Chapter
11 of the Bankruptcy Code. 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 January 29, 2000.
6
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
NOTE 2. ORGANIZATION AND BASIS OF PRESENTATION
CONSOLIDATED STATEMENT OF OPERATIONS:
Expenses directly attributable to the Prepackaged Plan, including employee
retention bonuses and professional fees related to legal, accounting and
consulting services, are expensed as incurred and reported in the consolidated
statement of operations separately as reorganization items. Interest expense on
bond indebtedness, as of July 29, 2000, has been accrued through the Petition
Date, except for the Pathmark Senior Subordinated Notes, which has been accrued
through September 19, 2000; such interest accrual is in accordance with the
Prepackaged Plan, presuming the Company exits from Chapter 11 on or before
September 19, 2000. Income taxes are based on the estimated effective tax rate
expected to be applicable for the full fiscal year. The Company has recorded a
valuation allowance related to the income tax benefit for the second quarters
and six-month periods of Fiscal 2000 and Fiscal 1999; therefore, no income tax
benefit has been recognized.
CONSOLIDATED BALANCE SHEET:
The consolidated balance sheet separately classifies liabilities subject
to discharge and exchange, which refer to those impaired liabilities incurred
prior to the Petition Date. The liabilities subject to discharge and exchange
represent management's best estimate in connection with the Bankruptcy Case
and may be subject to future adjustment depending on Court action, further
developments with respect to disputed claims or other events. The liabilities
subject to discharge and exchange consist of the following (dollars in
thousands):
Bond indebtedness, including accrued interest $1,034,629 (a)
Preferred stock, including accrued dividends 241,169 (a)
Rejected leases on closed stores 38,226 (b)
----------
Liabilities subject to discharge and exchange $1,314,024
==========
-------
(a) See Note 4.
(b) Represents the liability for closed stores related to the 16 rejected
leases.
NOTE 3. LONG-TERM DEBT
Long-term debt, excluding liabilities subject to discharge and exchange, is
comprised of the following (dollars in thousands):
JULY 29, JANUARY 29,
2000 2000
---------- ----------
Pathmark Term Loan ............... $ 236,213 $ 241,442
Pathmark Working Capital Facility 105,000 109,800
Pathmark DIP Financing Facility .. 10,300 --
Industrial revenue bonds ......... 8,173 8,217
Other debt (primarily mortgages) . 23,253 23,899
---------- ----------
Subtotal ....................... 382,939 383,358
Pathmark Senior Subordinated Notes -- 438,844
Pathmark Subordinated Notes ...... -- 199,017
Holdings Subordinated Notes ...... -- 983
Pathmark Subordinated Debentures . -- 95,750
Pathmark Junior Subordinated Notes -- 225,133
---------- ----------
Total debt ....................... 382,939(a) 1,343,085
Less: current maturities ......... 382,939 78,982
---------- ----------
Long-term portion ................ $ -- $1,264,103
========== ==========
----------
(a) As a result of the filing of the Petition, all debt has been classified as
current (see Note 1).
7
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
NOTE 4. BOND INDEBTEDNESS AND PREFERRED STOCK SUBJECT TO DISCHARGE AND EXCHANGE
Bond indebtedness subject to discharge and exchange, including accrued
interest, is comprised of the following (dollars in thousands):
BOND ACCRUED
INDEBTEDNESS INTEREST TOTAL
------------ ---------- ----------
Pathmark Senior Subordinated Notes $ 438,933 $ 37,616 $ 476,549
Pathmark Subordinated Notes ...... 199,017 13,311 212,328
Holdings Subordinated Notes ...... 983 66 1,049
Pathmark Subordinated Debentures . 95,750 6,955 102,705
Pathmark Junior Subordinated Notes 225,141 16,857 241,998
---------- ---------- ----------
Bond indebtedness subject
to discharge and exchange........ $ 959,824 $ 74,805 $1,034,629
========== ========== ==========
Preferred stock subject to discharge and exchange, including accrued
dividends, is comprised of the following (dollars in thousands):
PREFERRED ACCRUED
STOCK DIVIDENDS TOTAL
-------- --------- --------
Preferred stock subject
to discharge and exchange................... $112,055 $129,114 $241,169
======== ======== ========
NOTE 5. INTEREST EXPENSE
Interest expense is comprised of the following (dollars in thousands):
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
------------------- -------------------
JULY 29, JULY 31, JULY 29, JULY 31,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Pathmark Term Loan ................. $ 5,518 $ 4,769 $10,698 $ 9,606
Pathmark Working Capital Facility .. 2,594 1,688 4,863 2,789
Pathmark DIP Financing Facility .... 44 -- 44 --
Pathmark Senior Subordinated Notes . 16,441 10,676 27,117 21,352
Pathmark Subordinated Notes ........ 4,658 5,812 10,471 11,625
Pathmark Subordinated Debentures ... 2,422 3,022 5,444 6,044
Pathmark Junior Subordinated Notes . 4,750 5,748 10,811 11,344
Amortization of debt issuance costs 1,458 1,102 2,566 2,186
Lease obligations .................. 5,462 5,260 10,829 10,367
Other, net ......................... 2,353 2,290 4,993 4,529
------- ------- ------- -------
Interest expense ................... $45,700 $40,367 $87,836 $79,842
======= ======= ======= =======
</TABLE>
NOTE 6. COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS:
See Note 1, "Restructuring Proceedings under Chapter 11 of the Bankruptcy
Code".
RICKEL:
In connection with the sale of its home centers segment in Fiscal 1994, the
Company, as lessor, entered into ten leases for certain of the Company's owned
real estate properties, including a distribution center, with Rickel as tenant.
In addition, the Company assigned 25 third-party leases to Rickel. In 1996,
Rickel filed for bankruptcy protection under Chapter 11 of the United States
Bankruptcy Code. Subsequent to the bankruptcy filing, of the 35 locations leased
to Rickel, 16 leases were assigned by Rickel in 1998 to Staples, Inc., 13 leases
8
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
NOTE 6. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
have either been terminated, sold or assigned to third parties, including
Rickel's distribution center which was sold by the Company during Fiscal
1998, and two leases have been rejected by the Company as part of its
Prepackaged Plan. The remaining four Rickel leases, representing three sites
owned by the Company and one site jointly leased with the Company, are
actively being marketed by the Company.
INFORMATION SERVICES OUTSOURCING:
In August 1991, the Company entered into a ten-year agreement with IBM to
provide a wide range of information systems services. Under the agreement, IBM
has taken over the Company's data center operations and mainframe processing and
information system functions and is providing business applications and systems
designed to enhance the Company's customer service and efficiency. The charges
under this agreement are based upon the services requested at predetermined
rates. The Company may terminate the agreement upon 90 days notice with payment
of a specified termination charge. The Company is in discussions with IBM for an
extension of the agreement.
OTHER:
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, cash flows or business of the
Company.
9
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
SALES:
Sales in the second quarter of Fiscal 2000 were $929.6 million compared to
$922.7 million in the prior year, an increase of 0.7%. For the six-month period
of Fiscal 2000, sales were $1,848.8 million compared to $1,817.2 million in the
prior year, an increase of 1.7%. The sales increase was primarily due to new
stores opened in Fiscal 2000. In addition, same store sales decreased 0.2% for
the second quarter of Fiscal 2000 and increased 0.2% for the six-month period of
Fiscal 2000. The Company operated 137 and 134 supermarkets at the end of the
second quarters of Fiscal 2000 and Fiscal 1999, respectively.
GROSS PROFIT:
Gross profit in the second quarter of Fiscal 2000 was $262.4 million or
28.2% of sales compared with $264.8 million or 28.7% of sales in the prior year.
For the six-month period of Fiscal 2000, gross profit was $520.0 million or
28.1% of sales compared to $519.8 million or 28.6% for the prior year. The
decrease in gross profit of $2.4 million for the second quarter of Fiscal 2000
compared to the prior year was primarily due to higher shrink. The increase in
gross profit of $0.2 million for the six-month period of Fiscal 2000 compared to
the prior year was primarily due to higher sales, offset by higher shrink and
promotional expenses. The cost of goods sold comparisons were affected by a
pretax LIFO charge of $0.4 million in each of the second quarters of Fiscal 2000
and Fiscal 1999 and a pretax LIFO charge of $0.8 million in each of the
six-month periods of Fiscal 2000 and Fiscal 1999, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"):
SG&A in the second quarter of Fiscal 2000 increased $3.4 million or 1.6%
compared to the prior year and $9.6 million or 2.3% in the six-month period of
Fiscal 2000 compared to the prior year. The increase in SG&A for the second
quarter and six-month period of Fiscal 2000 compared to the prior year was
primarily due to higher store labor and labor-related expenses. Included in the
six-month periods were gains on the sale of certain real estate of $1.8 million
and $0.4 million in Fiscal 2000 and Fiscal 1999, respectively. As a percentage
of sales, SG&A was 23.2% in the second quarter and the six-month period of
Fiscal 2000, compared to 23.0% in the second quarter and the six-month period of
Fiscal 1999.
REORGANIZATION ITEMS:
Reorganization items in the second quarter and the six-month period of
Fiscal 2000 were $4.8 million and $9.9 million, respectively. Such items, which
are expensed as incurred, primarily consist of employee retention bonuses and
professional fees related to legal, accounting and consulting services directly
attributable to the Prepackaged Plan.
DEPRECIATION AND AMORTIZATION:
Depreciation and amortization of $19.6 million in the second quarter of
Fiscal 2000 was $1.2 million higher than the $18.4 million in the prior year
primarily due to property and equipment additions. For the six-month period of
Fiscal 2000, depreciation and amortization of $38.6 million was $2.0 million
higher than the $36.6 million in the prior year primarily due to property and
equipment additions. Depreciation and amortization excludes video tape
amortization, which is recorded in cost of goods sold, of $0.2 million and $0.8
million in the second quarters of Fiscal 2000 and Fiscal 1999, respectively, and
$2.2 million and $1.6 million in the six-month periods of Fiscal 2000 and Fiscal
1999, respectively.
10
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
OPERATING EARNINGS:
Operating earnings in the second quarter of Fiscal 2000 were $22.4 million
compared with the prior year of $34.2 million. For the six-month period of
Fiscal 2000, operating earnings were $43.2 million compared with $64.4 million
in the prior year. The decrease in operating earnings in the second quarter of
Fiscal 2000 compared to the prior year was due to lower gross margin, higher
SG&A, reorganization items and higher depreciation and amortization expense. The
decrease in operating earnings in the six-month period of Fiscal 2000 compared
to the prior year was due to higher SG&A, reorganization items and higher
depreciation and amortization expense, partially offset by higher gross profit.
INTEREST EXPENSE:
Interest expense was $45.7 million in the second quarter of Fiscal 2000
compared to $40.4 million in the prior year and $87.8 million for the
six-month period of Fiscal 2000 compared to $79.8 million in the prior year.
The increase in interest expense in the second quarter and the six-month
period of Fiscal 2000 compared to the prior year was primarily due to higher
rates on borrowings under the Parthmark Term Loan and higher levels of
borrowings and higher rates under the Pathmark Working Capital Facility.
Interest expense on bond indebtedness, as of July 29, 2000, has been accrued
through the Petition Date, except for the Pathmark Senior Subordinated Notes,
which has been accrued through September 19, 2000; such interest accrual is
in accordance with the allocations set forth in the Prepackaged Plan,
presuming the Company exits Chapter 11 on or about September 19, 2000.
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 Company has
recorded a valuation allowance related to the income tax benefit for the first
and second quarters of Fiscal 2000 and Fiscal 1999; therefore, no income tax
benefit has been recognized. The Company believes that it is more likely than
not that the net deferred income tax asset of $47.8 million at July 29, 2000
will be realized through the implementation of tax strategies which could
generate taxable income. During the six-month period of Fiscal 2000, the Company
made income tax payments of $0.03 million and received income tax refunds of
$0.4 million. During the six-month period of Fiscal 1999, the Company made
income tax payments of $0.4 million and received income tax refunds of $0.03
million.
SUMMARY OF OPERATIONS:
The Company's net loss in the second quarter of Fiscal 2000 was $23.3
million compared to a net loss of $6.2 million for the prior year. For the
six-month period of Fiscal 2000, the Company's net loss was $44.6 million
compared to a net loss of $15.4 million in the prior year. The increase in net
loss in the second quarter and six-month period of Fiscal 2000 compared to the
prior year was primarily due to lower operating earnings and higher interest
expense.
COMPREHENSIVE INCOME:
The Company has no items of comprehensive income other than net income and,
accordingly, the total comprehensive loss is the same as the reported net loss
for all periods presented.
EBITDA-FIFO:
EBITDA-FIFO was $47.5 million and $53.9 million in the second quarters of
Fiscal 2000 and Fiscal 1999, respectively and $93.2 million and $103.2 million
for the six-month period of Fiscal 2000 and Fiscal 1999, respectively.
EBITDA-FIFO represents net earnings before interest expense, income taxes,
depreciation and amortization, reorganization items, the gain on sale of certain
real estate and the LIFO charge. EBITDA-FIFO is a widely accepted financial
indicator of a company's ability to service and/or incur debt. EBITDA-FIFO
should not be construed as an alternative to, or a better indicator of,
operating earnings or to cash flows from operating activities, as determined in
accordance with generally accepted accounting principles.
11
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
FINANCIAL CONDITION
DEBT SERVICE:
During the second quarter of Fiscal 2000, total debt, excluding bond
indebtedness subject to discharge and exchange, decreased $0.4 million from
Fiscal 1999 year end due to reductions in the Pathmark Term Loan and the
Pathmark Working Capital Facility, partially offset by the Pathmark DIP
Financing Facility. Borrowings under the Pathmark Working Capital Facility
and the Pathmark DIP Financing Facility were $105.0 million and $10.3
million, respectively at July 29, 2000 and $105.0 million and $6.2 million,
respectively at September 6, 2000. In addition, during the six-month period
of Fiscal 2000, total lease obligations increased $9.5 million from Fiscal
1999 year end.
The indebtedness under the Pathmark Term Loan, the Pathmark Working Capital
Facility and the Pathmark DIP Financing Facility bear interest at floating rates
and, therefore, cash interest payments on that indebtedness may vary. 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.
LIQUIDITY:
Historically, the cash flows that Pathmark generated from operations,
supplemented by the unused borrowing capacity under the Pathmark Working
Capital Facility and the availability of capital lease financing were
sufficient to pay Pathmark's debts as they came due, provide for its capital
expenditure program and meet its other cash requirements. Management
evaluated its Fiscal 2000 cash flow projections and debt service requirements
and based upon this evaluation, Pathmark elected not to make all of its
scheduled debt payments. Pathmark's Fiscal 2000 debt requirements increase
substantially over the prior year due primarily to the semi-annual interest
payments of $12.1 million on the Pathmark Junior Subordinated Notes which,
for the first time, was required to be paid in cash on May 1, 2000 and the
sinking fund payment of $50.0 million on the Pathmark Subordinated Notes on
June 15, 2000.
On May 1, 2000, Pathmark elected not to make interest payments of $21.2
million on its $440 million of Pathmark Senior Subordinated Notes and $12.1
million on its Pathmark Junior Subordinated Notes. On June 15, 2000, Pathmark
elected not to make interest payments of $6.0 million on its $95.6 million of
Pathmark Subordinated Debentures and $11.6 million on its Pathmark
Subordinated Notes. Also, on June 15, 2000, Pathmark elected not to make a
sinking fund payment of $50.0 million on its Pathmark Subordinated Notes. The
grace period under each of the Indentures governing the various notes has
expired constituting an Event of Default under each such Indenture.
On the Petition Date, the Company, along with its parent company and
certain of its subsidiaries, filed a Petition under the Bankruptcy Code. The
Petition was filed in the Court under the Bankruptcy Case. As of the Petition
Date, the Company was in arrears with respect to interest on the Pathmark
Senior Subordinated Notes in the amount of $37.6 million, on the Pathmark
Subordinated Notes in the amount of $13.4 million, on the Pathmark
Subordinated Debentures in the amount of $6.9 million, and on the Pathmark
Junior Subordinated Notes in the amount of $16.9 million. The Company
continues to manage its affairs and operate its business as a DIP while the
Bankruptcy Case is pending. The Bankruptcy Case was commenced to implement
the Prepackaged Plan developed jointly with the Bondholders Committee.
Members of the Bondholders Committee hold or control $445.7 million principal
amount, or approximately 46% of the Company's total bond indebtedness
outstanding. Over 99% of the principal amount of bond indebtedness voted
agreed to accept the Prepackaged Plan.
The Prepackaged Plan provides that, upon consummation of the reorganization,
current holders of the Company's bond indebtedness will receive 100% of the New
Common Stock. In addition to New Common Stock, holders of the Pathmark
Subordinated Notes, the Pathmark Subordinated Debentures and the Pathmark Junior
Subordinated Notes will receive the New Warrants. The New Warrants will be
exercisable at the opening reorganization equity value established in
12
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
connection with the Prepackaged Plan. Such ownership is subject to dilution
from (1) the exercise of the New Warrants, (2) the exercise of any options to
purchase New Common Stock issued pursuant to the Company's long-term
management incentive plan, and (3) the grant to the Chief Executive Officer
of restricted New Common Stock.
Pursuant to the Prepackaged Plan and in full satisfaction of their claims,
(1) holders of the Pathmark Senior Subordinated Notes will receive 78.24% of the
New Common Stock, (2) holders of the Pathmark Subordinated Notes and the
Pathmark Subordinated Debentures will receive their ratable share of 18.71% of
the New Common Stock and 75% of the New Warrants, (3) holders of the Pathmark
Junior Subordinated Notes will receive 2.88% of the New Common Stock and 25% of
the New Warrants, and (4) holders of approximately $0.98 million of the Holdings
Subordinated Notes due 2002, which Subordinated Notes are guaranteed by the
Company, will receive 0.17% of the New Common Stock, subject to dilution as
described in the preceding paragraph.
The Prepackaged Plan provides that holders of the Exchangeable Preferred
Stock are to receive their ratable portions of $0.5 million in cash payable upon
the effective date of the Prepackaged Plan.
In connection with its financial restructuring plan, Pathmark received a
commitment from The Chase Manhattan Bank for the Pathmark DIP Financing Facility
in support of the Prepackaged Plan and the Exit Financing. The Pathmark DIP
Financing Facility, which was approved by the Court on July 28, 2000, will
enable the Company to continue normal business operations during the
restructuring proceedings. The Exit Financing will be used to repay in full the
existing Credit Agreement and the Pathmark DIP Financing Facility, pay expenses
of the Prepackaged Plan and provide approximately $200 million of liquidity for
post-reorganization operations.
On July 13, 2000, the Court approved various "first day" requests
including, among other things, the payment of prepetition claims of
employees, utilities, critical trade vendors and other key constituents. The
Court also granted the Company's motion to reject 16 unexpired real estate
leases, related to closed stores. Under Bankruptcy Law, the Company's
liability to the landlord on claims resulting from such rejections is capped
at the greater of 15% of the remaining lease payments (limited to three
years' lease payments) or one year's lease payments. Rejection of these
leases, however, does not limit the Company's obligation with respect to
damages arising from the rejection of any corresponding subleases.
Outstanding claims related to these 16 rejected lease approximate $10.6
million.
On September 7, 2000, the Court entered an order confirming the Prepackaged
Plan, which is expected to become effective on or about September 19, 2000, at
which point the Company will formally exit Chapter 11.
PREFERRED STOCK DIVIDENDS:
The terms of the Company's 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 of the Petition Date, the unpaid dividends of $129.1 million were accrued
and included in liabilities subject to discharge and exchange.
CAPITAL EXPENDITURES:
Capital expenditures for the second quarter of Fiscal 2000, including
property acquired under capital leases, were $21.3 million compared to $21.7
million for the prior year and for the six-month period of Fiscal 2000 were
$43.1 million compared to $47.7 million for the prior year. During the six-month
period of Fiscal 2000, the Company opened three new stores, closed one store and
completed one store enlargement. During the remainder of Fiscal 2000, the
Company expects to open one additional store and complete up to an aggregate of
25 renovations and enlargements. Capital expenditures for Fiscal 2000, including
property to be acquired under capital leases are estimated to be $100 million.
13
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
Management believes that cash flows generated from operations, supplemented
by the unused borrowing capacity under the DIP Financing Facility and Exit
Financing and the availability of capital lease financing, will be sufficient
to provide for the Company's capital expenditure program, subject to the
successful completion of its financial restructuring plan.
CASH FLOWS:
Cash provided by operating activities was $31.2 million in the second
quarter of Fiscal 2000 compared to $6.0 million in the prior year. The change in
cash flow from operating activities was primarily due to the increase in the net
loss, the reduction in cash interest paid due to the Prepackaged Plan, partially
offset by the decrease in cash used for other operating assets and liabilities.
Cash used for investing activities was $8.9 million in the six-month period of
Fiscal 2000 compared to $23.6 million in the prior year. The change in cash flow
from investing activities was primarily due to a decrease in expenditures for
property and equipment and an increase in proceeds from property sales or
disposals. Cash used for financing activities was $22.8 million in the six-month
period of Fiscal 2000 compared to cash provided by financing activities of $18.2
million in the prior year. The change in cash flow from financing activities was
primarily due to the impact of the Prepackaged Plan.
NEW ACCOUNTING STANDARDS NOT YET ADOPTED
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 represents a
comprehensive framework of accounting rules that standardizes the accounting for
all derivatives. SFAS No. 133 applies to all entities and to all types of
derivatives. In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133", which delayed the effective date of SFAS No. 133 for
all fiscal quarters of fiscal years beginning after June 15, 2000. In June 2000,
the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities", an amendment of SFAS No. 133. The Company has not
determined the impact, if any, that the adoption of SFAS No. 133 and SFAS No.
138 will have on its financial position or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB No. 101"). SAB No. 101 provides guidance on the recognition,
presentation and disclosure of revenue, and is effective for the Company in
the quarter ending February 3, 2001. The Company continues to study SAB No.
101, however it is anticipated that its adoption will not affect the
Company's financial position or results of operations.
FORWARD-LOOKING INFORMATION
The matters discussed herein, with the exception of historical information,
are "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks, uncertainties and other factors that could cause actual results to differ
materially from future results expressed or implied by such forward-looking
statements. For additional information about the Company and its various risk
factors, see the Company's Form 10-K dated January 29, 2000, as filed with the
Securities and Exchange Commission on April 28, 2000 and its Form 10-Q dated
April 29, 2000, as filed on June 13, 2000 and other documents as filed with the
Securities and Exchange Commission.
14
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact the consolidated
financial position, results of operations or cash flows of the Company due to
adverse changes in financial rates. The Company is exposed to market risk in the
area of interest rates. This exposure is directly related to its Pathmark Term
Loan and borrowing activities under the Pathmark Working Capital Facility and
the Pathmark DIP Financing Facility. 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 when
deemed appropriate.
15
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Part 1, Note 1, "Restructuring Proceedings under Chapter 11 of the
Bankruptcy Code", incorporated by reference.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The terms of the Company's 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 of the Petition Date, unpaid dividends were $129.1 million.
On May 1, 2000, the Company elected not to make interest payments of $21.2
million on its $440 million of 9.625% Pathmark Senior Subordinated Notes due
2003 ("Pathmark Senior Subordinated Notes") and $12.1 million on its $225
million of 10.75% Pathmark Junior Subordinated Deferred Coupon Notes due 2003
("Pathmark Junior Subordinated Notes"). On June 15, 2000, the Company elected
not to make interest payments of $6.0 million on its $95.6 million of 12.625%
Pathmark Subordinated Debentures due 2002 (the "Pathmark Subordinated
Debentures") and $11.6 million on its $199.0 million of 11.625% Pathmark
Subordinated Notes due 2002 (the "Pathmark Subordinated Notes"). Also, on June
15, 2000, the Company elected not to make a sinking fund payment of $50.0
million with respect to the Pathmark Subordinated Notes. The grace period
under each of the Indentures governing the various notes has expired
constituting an Event of Default under each such Indenture. Additionally, on
July 12, 2000, the Company filed a voluntary petition under Chapter 11 of the
Bankruptcy Code which also constitutes an Event of Default under each of the
abovementioned securities. On the date hereof, the Company was in arrears
with respect to interest on the Pathmark Senior Subordinated Notes in the
amount of $37.6 million, on the Pathmark Subordinated Notes in the amount of
$13.4 million, on the Pathmark Subordinated Debentures in the amount of $6.9
million, and on the Pathmark Junior Subordinated Notes in the amount of $16.9
million.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBIT:
Exhibit 27 -- Financial Data Schedule
(b) REPORTS ON FORM 8-K: A current report on Form 8-K was filed on July 21,
2000, reporting that the Company had filed a voluntary petition under
Chapter 11 of the Bankruptcy Code.
16
<PAGE>
SUPERMARKETS GENERAL HOLDINGS CORPORATION
(DEBTOR-IN-POSSESSION)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUPERMARKETS GENERAL HOLDINGS CORPORATION
BY /S/ FRANK VITRANO
----------------------------------------
(FRANK VITRANO)
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
BY /S/ JOSEPH ADELHARDT
----------------------------------------
(JOSEPH ADELHARDT)
SENIOR VICE PRESIDENT AND CONTROLLER,
CHIEF ACCOUNTING OFFICER
DATE: September 12, 2000
17
