<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File Number
August 16,1998 33-46750
RALPHS GROCERY COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 95-4356030
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification Number)
1100 West Artesia Boulevard
Compton, California 90220
(Address of principal executive offices) (Zip code)
(310) 884-9000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Ralphs Grocery Company meets the conditions set forth in General
Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this Form
10-Q with the reduced disclosure format specified in General Instruction (H)(2)
to such Form 10-Q.
At September 30, 1998, there were 1,513,938 shares of Common Stock
outstanding.
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<PAGE> 2
RALPHS GROCERY COMPANY
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets as of
February 1, 1998 and August 16, 1998 ......................... 2
Consolidated statements of operations for the 12 weeks ended
August 17, 1997 and August 16, 1998........................... 4
Consolidated statements of operations for the 28 weeks ended
August 17, 1997 and August 16, 1998........................... 5
Consolidated statements of cash flows for the 28 weeks ended
August 17, 1997 and August 16, 1998........................... 6
Consolidated statements of stockholder's equity (deficit) as of
February 1, 1998 and August 16, 1998.......................... 8
Notes to consolidated financial statements....................... 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................. 13
Signatures....................................................... 14
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
1
<PAGE> 4
RALPHS GROCERY COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
February 1, August 16,
ASSETS 1998 1998
---------- ----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 75,601 $ 77,551
Trade receivables, less allowances of
$3,023 and $4,132 at February 1, 1998 and
August 16, 1998, respectively 37,629 38,034
Inventories 514,387 544,708
Patronage receivables from suppliers 4,197 2,719
Prepaid expenses and other 20,325 17,967
---------- ----------
Total current assets 652,139 680,979
INVESTMENTS IN AND NOTES RECEIVABLE FROM
SUPPLIER COOPERATIVES:
Associated Wholesale Grocers 6,797 6,697
Certified Grocers of California 445 3,549
PROPERTY AND EQUIPMENT:
Land 171,651 169,315
Buildings 190,437 164,280
Leasehold improvements 261,047 234,072
Fixtures and equipment 472,158 390,846
Construction in progress 27,706 27,990
Leased property under capital leases 231,413 173,457
Leasehold interests 110,606 133,010
---------- ----------
1,465,018 1,292,970
Less: Accumulated depreciation and amortization 396,013 85,151
---------- ----------
Net property and equipment 1,069,005 1,207,819
OTHER ASSETS:
Deferred financing costs, net 49,863 212
Goodwill, net 1,275,718 2,429,183
Deferred tax assets, net -- 462,411
Other, net 22,106 20,870
---------- ----------
$3,076,073 $4,811,720
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
2
<PAGE> 5
RALPHS GROCERY COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
February 1, August 16,
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) 1998 1998
----------- -----------
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 349,585 $ 365,730
Accrued payroll and related liabilities 105,728 122,569
Accrued interest 29,628 1,170
Other accrued liabilities 224,546 457,972
Income taxes payable 1,361 2,164
Current portion of self-insurance liabilities 48,251 48,251
Current portion of senior debt 6,274 3,743
Current portion of obligations under capital leases 35,691 37,434
----------- -----------
Total current liabilities 801,064 1,039,033
SENIOR DEBT, net of current portion 1,307,510 29,940
OBLIGATIONS UNDER CAPITAL LEASES, net of current portion 120,329 131,313
SENIOR SUBORDINATED DEBT 689,168 35,854
PAYABLE TO PARENT -- 2,599,436
DEFERRED INCOME TAXES 21,074 --
SELF-INSURANCE LIABILITIES, net of current portion 90,325 105,080
LEASE VALUATION RESERVE 53,690 49,397
OTHER NON-CURRENT LIABILITIES 109,757 152,307
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY (DEFICIT):
Common stock, $.01 par value, 5,000,000 shares
authorized; 1,513,938 shares issued at
February 1, 1998 and August 16, 1998 15 15
Additional capital 468,895 980,229
Notes receivable from stockholders of parent (584) (71)
Retained deficit (585,170) (310,813)
----------- -----------
Total stockholder's equity (deficit) (116,844) 669,360
----------- -----------
$ 3,076,073 $ 4,811,720
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE> 6
RALPHS GROCERY COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
12 Weeks 12 Weeks
Ended Ended
August 17, August 16,
1997 1998
----------- -----------
<S> <C> <C>
SALES $ 1,256,862 $ 1,474,426
COST OF SALES (including purchases from related
parties of $15,614 and $13,540 for the 12 weeks
ended August 17, 1997 and August 16, 1998, respectively) 996,961 1,155,829
----------- -----------
GROSS PROFIT 259,901 318,597
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 202,878 245,036
AMORTIZATION OF GOODWILL 8,132 14,524
MERGER-RELATED EXPENSES -- 30,676
----------- -----------
OPERATING INCOME 48,891 28,361
INTEREST EXPENSE 52,493 30,857
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES
AND EXTRAORDINARY CHARGE (3,602) (2,496)
PROVISION FOR INCOME TAXES -- 10,886
----------- -----------
LOSS BEFORE EXTRAORDINARY CHARGE (3,602) (13,382)
EXTRAORDINARY CHARGE, net of tax effect -- 923
----------- -----------
NET LOSS $ (3,602) $ (14,305)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE> 7
RALPHS GROCERY COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
28 Weeks 28 Weeks
Ended Ended
August 17, August 16,
1997 1998
----------- -----------
<S> <C> <C>
SALES $ 2,956,704 $ 3,346,570
COST OF SALES (including purchases from related parties
of $37,935 and $32,239 for the 28 weeks
ended August 17, 1997 and August 16, 1998, respectively) 2,347,752 2,654,166
----------- -----------
GROSS PROFIT 608,952 692,404
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 480,539 563,619
AMORTIZATION OF GOODWILL 18,974 31,033
MERGER-RELATED EXPENSES -- 187,941
----------- -----------
OPERATING INCOME (LOSS) 109,439 (90,189)
INTEREST EXPENSE 127,919 105,540
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES
AND EXTRAORDINARY CHARGE (18,480) (195,729)
PROVISION (BENEFIT) FOR INCOME TAXES -- (37,499)
----------- -----------
LOSS BEFORE EXTRAORDINARY CHARGE (18,480) (158,230)
EXTRAORDINARY CHARGE, net of tax effect 47,983 197,597
----------- -----------
NET LOSS $ (66,463) $ (355,827)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE> 8
RALPHS GROCERY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
28 Weeks 28 Weeks
Ended Ended
August 17, August 16,
1997 1998
----------- -----------
<S> <C> <C>
CASH (USED) PROVIDED BY OPERATING ACTIVITIES:
Cash received from customers $ 2,956,704 $ 3,346,570
Cash paid to suppliers and employees (2,788,606) (3,122,880)
Interest paid (125,429) (133,524)
Other, net (39) (593)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 42,630 89,573
CASH (USED) PROVIDED BY INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 11,686 5,227
Payment for purchase of property and equipment (80,608) (69,104)
Other, net (1,376) (5,304)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (70,298) (69,181)
CASH (USED) PROVIDED BY FINANCING ACTIVITIES:
Proceeds from the issuance of long-term debt 712,813 2,450
Payments of long-term debt (687,496) (2,132,641)
Payments of capital lease obligations (15,327) (18,478)
Increase (decrease) in revolving loan 15,600 (131,400)
Payment of acquisition costs, net of cash acquired (5,982) (338,322)
Proceeds received from parent 150 2,599,436
Proceeds from stockholder's notes -- 513
----------- -----------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES 19,758 (18,442)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,910) 1,950
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 67,589 75,601
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 59,679 $ 77,551
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
6
<PAGE> 9
RALPHS GROCERY COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
28 Weeks 28 Weeks
Ended Ended
August 17, August 16,
1997 1998
--------- ----------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
(USED) PROVIDED BY OPERATING ACTIVITIES:
Net loss $ (66,463) $(355,827)
Adjustments to reconcile net loss to net cash
(used) provided by operating activities:
Depreciation and amortization 93,016 110,632
Merger-related expense -- 187,941
Extraordinary charge 39,122 197,597
Amortization of debt discount 250 50
Amortization of debt premium (263) (73)
Change in assets and liabilities, net of effects
from acquisition of business:
Accounts and notes receivable 10,464 4,369
Inventories 16,652 60,127
Prepaid expenses and other (7,137) 4,231
Accounts payable and accrued liabilities (40,712) (82,423)
Self-insurance liabilities (2,270) 1,041
Deferred income taxes -- (37,699)
Income taxes payable (29) (393)
--------- ---------
Total adjustments 109,093 445,400
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 42,630 $ 89,573
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH
FINANCING ACTIVITIES:
Purchase of property and equipment through the
issuance of capital leases $ 20,723 $ --
========= =========
Retirement of capital leases $ 4,893 $ 211
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
7
<PAGE> 10
RALPHS GROCERY COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
Common Stock
-------------------------
Number Total
of Stockholder's Additional Retained Stockholder's
Shares Amount Notes Capital Deficit Equity (Deficit)
----------- ----------- ------------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES AT FEBRUARY 1, 1998 1,513,938 $ 15 $ (584) $ 468,895 $ (585,170) $ (116,844)
Net effect of Fred Meyer Merger -- -- -- 511,334 630,184 1,141,518
Proceeds from Stockholders' Notes -- -- 513 -- -- 513
Net loss (unaudited) -- -- -- -- (355,827) (355,827)
----------- ----------- ----------- ----------- ----------- -----------
BALANCES AT AUGUST 16, 1998
(unaudited) 1,513,938 $ 15 $ (71) $ 980,229 $ (310,813) $ 669,360
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
8
<PAGE> 11
RALPHS GROCERY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 16, 1998
(UNAUDITED)
1. ORGANIZATION AND ACQUISITION
Ralphs Grocery Company (the "Company") is a wholly-owned
subsidiary of Food 4 Less Holdings, Inc. ("Holdings"). On March 10,
1998, Holdings was acquired by Fred Meyer, Inc., a Delaware corporation
("Fred Meyer"), and the Company became an indirect, wholly-owned
subsidiary of Fred Meyer (the "Fred Meyer Merger"). On March 9, 1998,
Fred Meyer consummated a merger with Quality Food Centers, Inc. ("QFC")
which owned 57 Hughes Family Markets stores ("Hughes") on that date. As
part of the acquisition of Holdings by Fred Meyer, Hughes' operations
were consolidated with the Company's operations. The Company is a retail
supermarket company with a total of 458 stores which are located in
Southern California (395), Northern California (25) and certain areas of
the Midwest (38). The Company is the largest supermarket operator in
Southern California. The Company operates the second largest
conventional supermarket chain in the region under the "Ralphs" name and
the largest warehouse supermarket chain in the region under the "Food 4
Less" name.
In conjunction with the Fred Meyer Merger, Fred Meyer, QFC and
Holdings entered into a settlement agreement (the "Settlement
Agreement") with the State of California to settle potential antitrust
and unfair competition claims that the State of California asserted
against Fred Meyer, QFC and Holdings relating to the effects of the
proposed Fred Meyer and QFC Mergers on supermarket competition in
Southern California (the "State Claims"). Without admitting any
liability in connection with the State Claims, Fred Meyer, QFC and
Holdings agreed in the Settlement Agreement to divest 19 specific stores
in Southern California, including 16 Ralphs stores. Under the Settlement
Agreement, Fred Meyer must submit bids by September 10, 1998 to divest
13 stores and the balance of six stores by December 10, 1998. Fred Meyer
also agreed not to acquire new stores from third parties in the Southern
California areas specified in the Settlement Agreement (covering
substantially all of the Los Angeles metropolitan area) for five years
following the date of the Settlement Agreement without providing prior
notice to the State of California. If Fred Meyer fails to meet the date
requirements set forth in the Settlement Agreement, Fred Meyer has
agreed not to object to the appointment of a trustee to effect the
required sales. Fred Meyer has met the September 10, 1998 deadline by
submitting bids on 14 stores and expects to meet the December 10, 1998
deadline.
On March 11, 1998, Fred Meyer completed certain refinancing
transactions related to the Fred Meyer Merger. As part of the
refinancing, Holdings and the Company made offers to purchase and
consent solicitations with respect to the following debt securities: (i)
Food 4 Less Holdings 13-5/8% Senior Discount Debentures due 2005, (ii)
Food 4 Less Holdings 13-5/8% Senior Subordinated Pay-In-Kind Debentures
due 2007, (iii) Ralphs Grocery Company 10.45% Senior Notes due 2004
(issued in June 1995), (iv) Ralphs Grocery Company 10.45% Senior Notes
due 2004 (issued in June 1996), (v) Ralphs Grocery Company 11% Senior
Subordinated Notes due 2005 (issued in June 1995) and (vi) Ralphs
Grocery Company 11% Senior Subordinated Notes due 2005 (issued in March
1997). Payment to the note holders included tendered amounts, interest
and consent fees, which were $1,612.7 million, $37.7 million and $209.9
million, respectively.
The Ralphs Grocery Company 10.45% Senior Notes due 2004 (issued
in June 1995) and the Ralphs Grocery Company 11% Senior Subordinated
Notes due 2005 (issued in June 1995) were not fully tendered and
$13,497,000 and $33,637,000 principal amount of each issue are still
outstanding, respectively.
9
<PAGE> 12
In connection with the Fred Meyer Merger, the stockholders and
warrantholders of Holdings received an aggregate of 21,670,503 shares of
Fred Meyer Common Stock in exchange for their Holdings shares and
warrants, and cash payment of $26.3 million to terminate and satisfy
Holdings' obligations under existing stock options.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated balance sheet and statement of
stockholder's equity (deficit) of the Company as of August 16, 1998 and
the consolidated statements of operations and cash flows for the interim
periods ended August 17, 1997 and August 16, 1998 are unaudited, but
include all adjustments (consisting of only normal recurring accruals)
which the Company considers necessary for a fair presentation of its
consolidated financial position, results of operations and cash flows
for these periods. These interim financial statements do not include all
disclosures required by generally accepted accounting principles and,
therefore, should be read in conjunction with the audited financial
statements and notes thereto included in the Company's Annual Report on
Form 10-K for the fiscal year ended February 1, 1998. The results of
operations for the interim periods are not necessarily indicative of the
results for a full fiscal year.
On March 10, 1998, Holdings was acquired by Fred Meyer. The
transaction was accounted for under the purchase method of accounting.
The consolidated financial statements for the 28 weeks ended August 16,
1998 reflect the preliminary allocation of the purchase price. The
purchase price allocation is expected to be finalized by the end of the
first quarter of fiscal year 1999. In conjunction with the transaction,
Fred Meyer refinanced substantially all of the existing indebtedness of
the Company. In addition, the accompanying consolidated financial
statements include the results of Fred Meyer's indirectly wholly-owned
subsidiary, Hughes, from the date of Fred Meyer's acquisition of
Holdings.
Inventories
Inventories, which consist mainly of grocery products, are stated
at the lower of cost or market. Cost has been principally determined
using the last-in, first-out ("LIFO") method. If inventories had been
valued using the first-in, first-out ("FIFO") method, inventories would
have been higher by $28.5 million and $4.0 million at February 1, 1998
and August 16, 1998, respectively, and gross profit and operating income
would have been greater by $2.3 million and $4.4 million for the 28
weeks ended August 17, 1997 and the 28 weeks ended August 16, 1998,
respectively.
Income Taxes
The Company provides for income taxes in interim periods based on
the estimated effective income tax rate for the complete fiscal year.
The deferred tax assets on the consolidated balance sheet are a result
of recognizing the benefit of the Company's past net operating losses
and other tax assets. In addition, the Company has given benefit to
merger related charges, extraordinary items and the current year
operating loss. Based upon a review of the Company's tax position,
management believes that these assets will be fully utilized within the
next 15 years.
Reclassifications
Certain prior period amounts in the consolidated financial
statements have been reclassified to conform to the August 16, 1998
presentation.
10
<PAGE> 13
3. MERGER-RELATED EXPENSES
Merger-related expenses of $187.9 million were recorded in the 28
weeks ended August 16, 1998. The expenses were incurred as a result of
the Fred Meyer Merger and consist primarily of a $26.3 million charge
for the settlement of outstanding stock options; $99.8 million in asset
impairment charges related to the Hughes dairy facility, the closure of
the Hughes main office and distribution facility, Hughes goodwill and
three stores required to be divested pursuant to the Settlement
Agreement; and $61.8 million in transition and integration costs related
to the Fred Meyer Merger.
4. DEBT
On March 11, 1998, Fred Meyer completed certain refinancing
transactions related to the Fred Meyer Merger. As part of the
refinancing, Holdings and the Company made offers to purchase and
consent solicitations with respect to the following debt securities: (i)
Food 4 Less Holdings 13-5/8% Senior Discount Debentures due 2005, (ii)
Food 4 Less Holdings 13-5/8% Senior Subordinated Pay-In-Kind Debentures
due 2007, (iii) Ralphs Grocery Company 10.45% Senior Notes due 2004
(issued in June 1995), (iv) Ralphs Grocery Company 10.45% Senior Notes
due 2004 (issued in June 1996), (v) Ralphs Grocery Company 11% Senior
Subordinated Notes due 2005 (issued in June 1995) and (vi) Ralphs
Grocery Company 11% Senior Subordinated Notes due 2005 (issued in March
1997). Payment to the note holders included tendered amounts, interest
and consent fees, which were $1,612.7 million, $37.7 million and $209.9
million, respectively.
In conjunction with the refinancing transactions discussed above,
the Company has unconditionally guaranteed certain indebtedness of Fred
Meyer, including a $1.625 billion five-year term note, a $1.875 billion
five-year revolving credit agreement and $1.750 billion in senior
unsecured notes. The $2.6 billion payable to parent in the accompanying
consolidated balance sheet represents funds advanced from Fred Meyer to
extinguish the Company's pre-merger debt. In addition, included in the
results of operations for the 28 weeks ended August 16, 1998 is $61.6
million of intercompany interest expense related to the payable to
parent.
The Ralphs Grocery Company 10.45% Senior Notes due 2004 (issued
in June 1995) and the Ralphs Grocery Company 11% Senior Subordinated
Notes due 2005 (issued in June 1995) were not fully tendered and
$13,497,000 and $33,637,000 principal amount of each issue are still
outstanding, respectively.
5. RELATED PARTY TRANSACTIONS
During the 28 weeks ended August 16, 1998 and the 28 weeks ended
August 17, 1997, the Company purchased $32.2 million and $37.9 million,
respectively, in inventory from Certified Grocers.
11
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS(1)
RECENT EVENTS
See Note 1 to the Notes to Consolidated Financial Statements for a
discussion of recent events.
RESULTS OF OPERATIONS (UNAUDITED)
Sales for the 28 weeks ended August 16, 1998 increased $389.9 million to
$3,346.6 million from $2,956.7 million for the 28 weeks ended August 17, 1997.
The increase in sales was primarily attributable to the addition of 55 Hughes
Family Market stores and the continued success of new store openings, partially
offset by store closings. Since the beginning of fiscal 1997, 17 stores have
been opened, 20 stores have been closed and a total of 67 stores have been
remodeled.
Gross profit was $609.0 million and $692.4 million for the 28 weeks
ended August 17, 1997 and August 16, 1998, respectively. Gross profit increased
as a percentage of sales from 20.6 percent to 20.7 percent in the 28 weeks ended
August 17, 1997 and August 16, 1998, respectively. Selling, general and
administrative expenses ("SG&A") were $480.5 million and $563.6 million for the
28 weeks ended August 17, 1997 and August 16, 1998, respectively. SG&A increased
as a percentage of sales from 16.3 percent to 16.8 percent for the 28 weeks
ended August 17, 1997 and August 16, 1998, respectively. The changes in gross
profit and SG&A were primarily attributable to the addition of 55 Hughes stores,
offset by operating efficiencies and expense controls.
Merger-related expenses of $187.9 million were recorded in the 28 weeks
ended August 16, 1998. The expenses were incurred as a result of the Fred Meyer
Merger and consist primarily of a $26.3 million charge for the settlement of
outstanding stock options; $99.8 million in asset impairment charges related to
the Hughes dairy facility, the closure of the Hughes main office and
distribution facility, Hughes goodwill and three stores required to be divested
pursuant to the Settlement Agreement; and $61.8 million in transition and
integration costs related to the Fred Meyer Merger.
Primarily as a result of the factors discussed above, the Company's
operating income decreased from $109.4 million in the 28 weeks ended August 17,
1997 to an operating loss of $90.2 million in the 28 weeks ended August 16, 1998
and the Company's loss before extraordinary charge increased from $18.5 million
in the 28 weeks ended August 17, 1997 to $158.2 million in the 28 weeks ended
August 16, 1998.
An extraordinary charge of $197.6 million, net of taxes, was recorded
during the 28 weeks ended August 16, 1998. This charge related to the premiums
paid, deferred financing costs and fees associated with early extinguishment of
debt.
- --------
(1) Pursuant to General Instruction (H)(2)(a) of Form 10-Q, the Company is
substituting a management's narrative analysis of the results of operations for
Item 2.
12
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a report on Form 8-K/A dated July 7, 1998 to
report under Item 5 a change in the Company's fiscal quarter end
dates previously adopted on the Company's Form 8-K dated May 23,
1998.
13
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Quarterly Report to be signed on its behalf by
the undersigned, thereunto duly authorized, in the County of Los Angeles, State
of California.
Dated: September 30, 1998 RALPHS GROCERY COMPANY
By: /s/ Terrence J. Wallock
-----------------------------
Terrence J. Wallock
Senior Vice President,
General Counsel and Secretary
By: /s/ Christopher S. Hall
-----------------------------
Christopher S. Hall
Senior Vice President, Finance
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONSOLIDATED BALANCE SHEETS AND UNAUDITED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 28 WEEKS ENDED AUGUST 16, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-02-1998
<PERIOD-END> AUG-16-1998
<CASH> 77,551
<SECURITIES> 0
<RECEIVABLES> 42,166
<ALLOWANCES> (4,132)
<INVENTORY> 544,708
<CURRENT-ASSETS> 680,979
<PP&E> 1,292,970
<DEPRECIATION> (85,151)
<TOTAL-ASSETS> 4,811,720
<CURRENT-LIABILITIES> 1,039,033
<BONDS> 2,796,543
0
0
<COMMON> 15
<OTHER-SE> 669,345
<TOTAL-LIABILITY-AND-EQUITY> 4,811,720
<SALES> 3,346,570
<TOTAL-REVENUES> 3,346,570
<CGS> 2,654,166
<TOTAL-COSTS> 2,654,166
<OTHER-EXPENSES> 782,593
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 105,540
<INCOME-PRETAX> (195,729)
<INCOME-TAX> (37,499)
<INCOME-CONTINUING> (158,230)
<DISCONTINUED> 0
<EXTRAORDINARY> 197,597
<CHANGES> 0
<NET-INCOME> (355,827)
<EPS-PRIMARY> 0
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</TABLE>
