<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: July 17, 1994
-------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 33-22998
RALPHS GROCERY COMPANY
(Exact name of registrant as specified in its charter)
Delaware 31-1241926
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1100 West Artesia Boulevard, Compton, California, 90220
(Address of principal executive offices)
(310)884-9000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)
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 ( )
Number of shares of registrant's Common Stock, $1.00 par value,
outstanding as of July 17, 1994-100.
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RALPHS GROCERY COMPANY
INDEX
PART I
FINANCIAL INFORMATION
Page
Item 1. Financial Statements . . . . . . . . . . . . . . . . . 1
Unaudited Consolidated Balance Sheets. . . . . . . . . 1
Unaudited Consolidated Statements of Operations. . . . 2
Unaudited Consolidated Statements of Cash Flows. . . . 4
Notes to Unaudited Consolidated Financial Statements . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 6
PART II
OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . 12
Item 2. Changes in Securities . . . . . . . . . . . . . . . . 12
Item 3. Defaults upon Senior Securities . . . . . . . . . . . 12
Item 4. Submission of Matters to a Vote of Security Holders . 12
Item 5. Other Information . . . . . . . . . . . . . . . . . . 12
Item 6. Exhibits and Reports of Form 8-K. . . . . . . . . . . 12
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
<PAGE> PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RALPHS GROCERY COMPANY
UNAUDITED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
January 30, July 17,
ASSETS 1994 1994
- ------ ----------- --------
Current Assets:
Cash and cash equivalents . . . . . . $55,080 $ 31,136
Accounts receivable . . . . . . . . . 30,420 37,968
Inventories . . . . . . . . . . . . . 202,354 206,490
Prepaid expenses and other current
assets . . . . . . . . . . . . . . . 18,111 16,190
-------- -------
Total current assets . . . . . . . 305,965 291,784
Property, plant and equipment, net. . 601,897 603,217
Excess of cost over net assets
acquired, net. . . . . . . . . . . . 376,414 371,339
Beneficial lease rights, net. . . . . 55,553 51,977
Deferred debt issuance costs, net . 26,583 23,823
Deferred income taxes . . . . . . . 109,125 112,325
Other assets. . . . . . . . . . . . 8,113 8,582
---------- ----------
Total assets. . . . . . . . . $1,483,650 $1,463,047
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
- -------------------------------------
Current Liabilities:
Current maturities of long-term
debt . . . . . . . . . . . . . . . $ 70,975 $ 77,095
Short-term debt . . . . . . . . . . -- 19,000
Bank overdrafts . . . . . . . . . . 37,716 26,160
Accounts payable. . . . . . . . . . 138,554 131,390
Accrued expenses. . . . . . . . . . 101,543 109,560
Current portion of self-insurance
reserves . . . . . . . . . . . . . 30,138 28,961
-------- --------
Total current liabilities. . . . . . . 378,926 392,166
Long-term debt. . . . . . . . . . . 927,909 893,878
Self-insurance reserves . . . . . . 49,872 47,253
Lease valuation reserve . . . . . . 32,575 30,934
Other non-current liabilities . . . 89,299 88,156
--------- ---------
Total liabilities. . . . . . . . . . . 1,478,581 1,452,387
--------- ---------
Stockholder's equity:
Common stock, $1 par value per share
Authorized 1,000 shares; issued and
outstanding, 100 shares at January
30, 1994 and July 17, 1994 . . . . -- --
Additional paid in capital. . . . . 175,548 175,548
Accumulated deficit . . . . . . . . (170,479) (164,888)
---------- ----------
Total stockholder's equity . . . . . . 5,069 10,660
Total liabilities and stockholder's ---------- ----------
equity. . . . . . . . . . . . . . . . $1,483,650 $1,463,047
========== ==========
(See accompanying notes to unaudited consolidated financial
statements)
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<PAGE>
RALPHS GROCERY COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
12 Wks Ended 12 Wks Ended
July 18, 1993 July 17, 1994
$ % $ %
----- ----- ----- -----
Sales. . . . . . . . . . . . . 629,010 100.0 624,959 100.0
Cost of sales. . . . . . . . . 483,826 77.0 482,074 77.1
------- ----- ------- -----
Gross profit. . . . . . . . 145,184 23.0 142,885 22.9
Selling, general and
administrative expense . . 105,173 16.7 106,795 17.1
Amortization of excess of
cost over net assets
acquired . . . . . . . . . 2,538 0.4 2,537 0.4
Provision for postretirement
benefits other than
pension. . . . . . . . . . 693 0.1 607 0.1
------ ---- ------- ----
Operating income . . . . . 36,780 5.8 32,946 5.3
Other expenses:
Interest expense, net . . . . 24,757 3.9 25,725 4.1
(Gain) loss on disposal of
assets . . . . . . . . . . . 102 -- 36 --
------ ----- ------ ----
Earnings before income taxes . 11,921 1.9 7,185 1.2
Income tax expense . . . . . . (979) (0.2) -- --
------ ----- ------ -----
Net earnings . . . . . . . . . 12,900 2.1 7,185 1.2
====== ===== ====== =====
(See accompanying notes to unaudited consolidated financial
statements)
<PAGE>
<PAGE>
RALPHS GROCERY COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
24 Wks Ended 24 Wks Ended
July 18, 1993 July 17, 1994
$ % $ %
----- ----- ----- -----
Sales. . . . . . . . . . . .1,261,436 100.0 1,240,945 100.0
Cost of sales. . . . . . . . 973,845 77.2 956,391 77.1
-------- ----- -------- -----
Gross profit. . . . . . . 287,591 22.8 284,554 22.9
Selling, general and
administrative expense . 212,906 16.9 211,228 17.0
Amortization of excess
of cost over net assets
acquired . . . . . . . . 5,076 0.4 5,075 0.4
Provision for postretire-
ment benefits other than
pension. . . . . . . . . 1,386 0.1 1,214 0.1
------- ---- ------ ----
Operating income . . . . 68,223 5.4 67,037 5.4
Other expenses:
Interest expense, net . . . 51,221 4.1 51,416 4.1
(Gain) loss on disposal of
assets . . . . . . . . . . 188 -- 30 --
------- ----- ------ ----
Earnings before income
taxes . . . . . . . . . . . 16,814 1.3 15,591 1.3
Income tax expense . . . . . -- -- -- --
------- ----- ------ ----
Net earnings . . . . . . . . 16,814 1.3 15,591 1.3
======= ===== ====== ====
(See accompanying notes to unaudited consolidated financial
statements)
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<PAGE>
RALPHS GROCERY COMPANY
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
24 Wks Ended 24 Wks Ended
July 18, 1993 July 17, 1994
-------------- --------------
Cash flows from operating
activities:
Net earnings . . . . . . $ 16,814 $ 15,591
Adjustments to reconcile
net earnings to net cash
provided(used in) by
operating activities:
Depreciation and
amortization . . . . . . 34,671 34,513
Amortization of discounts
& deferred debt issuance
costs. . . . . . . . . . 4,511 4,280
LIFO charge . . . . . . . 1,984 1,279
(Gain) loss on sale of
assets. . . . . . . . . . 188 30
Provision for postretire-
ment benefits . . . . . . 1,386 1,214
Other changes in assets and
liabilities:
Accounts receivable. . . . (667) (7,549)
Inventories at replacement
cost. . . . . . . . . . . 12,751 (5,416)
Prepaid expenses and other
current assets. . . . . . (4,276) 1,921
Other assets . . . . . . . 2,532 (549)
Interest payable . . . . . (6,837) (3,336)
Accounts payable and accrued
liabilities . . . . . . . (3,639) 6,740
Income taxes payable . . . 209 (1,550)
Deferred tax asset . . . . -- (3,200)
Self insurance reserves. . 1,394 (3,796)
Other liabilities. . . . . (1,173) (3,387)
------- -------
Cash provided by operating
activities. . . . . . . . . 59,848 36,785
------- -------
Cash flows from investing
activities:
Capital expenditures . . . (21,524) (24,955)
Proceeds from sale of
property, plant and
equipment. . . . . . . . 45 1,675
------- -------
Cash used in investing
activities. . . . . . . . . (21,479) (23,280)
------- -------
Cash flows from financing
activities:
Capitalized financing and
acquisition costs. . . . (5,219) (134)
Decrease in bank
overdrafts . . . . . . . (13,274) (11,556)
Net borrowings under
lines-of-credit. . . . . (31,100) 19,000
Proceeds from issuance
of long-term debt. . . . 150,000 --
Dividends paid. . . . . . -- (10,000)
Principal payments on
long-term debts. . . . . (154,247) (34,759)
--------- --------
Cash used in financing
activities. . . . . . . . . (53,840) (37,449)
Net decrease in cash and
cash equivalents . . . . (15,471) (23,944)
Cash and cash equivalents
at beginning of period . 46,192 55,080
--------- --------
Cash and cash equivalents at
end of period . . . . . . . $ 30,721 $ 31,136
========= =========
(See accompanying notes to unaudited consolidated financial
statements)
<PAGE>
<PAGE>
RALPHS GROCERY COMPANY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The interim financial statements included herein have been
prepared by Ralphs Grocery Company ("Ralphs" or the "Company")
without audit, pursuant to the rules and regulations promulgated by
the Securities and Exchange Commission (the "Commission"). Certain
information and footnote disclosures, normally included in the
financial statements prepared in accordance with generally accepted
accounting principles, have been omitted pursuant to Commission
rules and regulations; nevertheless, Ralphs believes that the
disclosures are adequate to make the information presented not
misleading. These consolidated financial statements should be read
in conjunction with the audited financial statements and notes
thereto included in the Company's latest annual report filed on
Form 10-K. In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, necessary to
present fairly the financial position of Ralphs with respect to the
interim financial statements, and of the results of Ralphs'
operations for the twenty-four weeks and the twelve weeks ended
July 17, 1994 and cash flows for the twenty-four weeks ended July
17, 1994 and the results of Ralphs' operations for the twenty-four
weeks and the twelve weeks ended July 18, 1993 and cash flows for
the twenty-four weeks ended July 18, 1993, have been included. The
results of operations for the interim periods are not necessarily
indicative of the results for the full year.
(2) Supplemental Cash Flow Information
(dollars in thousands)
24 Wks Ended 24 Wks Ended
July 18, 1993 July 17, 1994
------------- -------------
Supplemental cash flow
disclosure:
Interest paid, net of
amounts capitalized . . . . $47,015 $46,651
Income taxes paid. . . . . . $ 2,196 $ 4,750
Disclosure of accounting policy:
--------------------------------
For purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments with a maturity of
three months or less to be cash equivalents.
Supplemental schedule of noncash investing and financing
---------------------------------------------------------
activities:
------------
Capital lease obligations of approximately $7.2 million and
$0.1 million were incurred for the respective twenty-four weeks
ended July 17, 1994 and the twenty-four weeks ended July 18, 1993
when the Company entered into lease agreements for new equipment.
<PAGE>
(3) Provision for Income Taxes
The provision for income taxes for the twelve weeks and the
twenty-four weeks ended July 17, 1994 and the twelve weeks and the
twenty-four weeks ended July 18, 1993 consists of the following:
24 Wks Ended 12 Wks Ended
July 18, July 17, July 18, July 17,
1993 1994 1993 1994
-------- -------- -------- --------
Federal Income Taxes . $ 2,783 $ 586 $ 2,007 $ 366
State Income Taxes . . 727 2,614 524 1,634
Adjustment to Valuation
Allowance
for Deferred Tax
Assets . . . . . . . (3,510) (3,200) (3,510) (2,000)
-------- ------- ------- -------
Total Income Tax Pro-
vision. . . . . . . . $ -- $ -- $ (979) $ --
======== ======= ======= =======
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Twelve Weeks Ended July 17, 1994 compared with the Twelve Weeks
Ended July 18, 1993.
Sales
For the second quarter 1994 (the twelve weeks ended July 17,
1994), sales were $625.0 million, a decrease of $4.0 million or
0.6% from the second quarter 1993 (the twelve weeks ended July 18,
1993).
During the second quarter 1994, Ralphs opened two new stores
in Los Angeles County and had one store remodel in progress.
Comparable store sales decreased 4.4%, which included an
increase of 0.3% for replacement store sales, from $626.1 million
in the second quarter 1993 to $598.6 million in the second quarter
1994. Ralphs' sales continue to be adversely affected by the
significant recession in Southern California, continuing
competitive new store and remodeling activity and recent pricing
and promotional changes by competitors. The recession, high
unemployment, competitive store openings and pricing and
promotional changes contributed to the declines in both total and
comparable store sales.
Ralphs continued to take steps to mitigate the impact of the
weak retailing environment in its markets. These actions included
continuing the active remodeling program commenced in the fall of
1988. In February, 1994, Ralphs launched the Ralphs Savings Plan,
a new marketing campaign specifically designed to enhance customer
value. The Ralphs Savings Plan is comprised of six major
components: Guaranteed Low Prices (GLPs), Price Breakers, Big
Buys, Multi-Buys, Ralphs Brand Products and Double Coupons. GLPs
guarantee low prices on certain high volume items that are surveyed
and updated every four weeks. Price Breakers are weekly advertised
items that offer significant savings. Big Buys are club size items
at prices competitive to club store prices and Multi-Buys offer
Ralphs' shoppers the opportunity to purchase club store quantities
of regular sized items at prices competitive to club store prices.
In conjunction with this new campaign Ralphs private label offering
of over 2,000 products provides value to the customer. In the
latter part of the second quarter 1994, Ralphs began more
aggressively promoting perishables through weekly ad features and
lower prices. In addition, Ralphs increased the number of
storewide GLP's. Further, a mailer program was intensified to
highlight the perishable pricing and increased GLP's.
<PAGE>
<PAGE>
Cost of Sales
Cost of sales decreased $1.7 million or 0.4% from $483.8
million in the second quarter 1993 to $482.1 million in the second
quarter 1994. As a percentage of sales, cost of sales increased to
77.1% in the second quarter 1994 from 77.0% in the second quarter
1993. The increase in cost of sales as a percentage of sales was
partially offset by savings in warehousing and distribution costs,
the pass-through of increased operating costs, increases in
relative margins where allowed by competitive conditions and a
reduction in self insurance costs.
Over the last several years, the Company has been implementing
modifications in its workers compensation and general liability
insurance programs. The Company believes that these modifications
have resulted in a significant reduction in self insurance costs
for the fiscal year ending January 29, 1995. Based on a review of
the results of these modifications by the Company and its
actuaries, an adjustment to the accruals for self insurance costs
was made during the second quarter 1994 resulting in a reduction of
approximately $7.8 million. Of the $7.8 million reduction in self
insurance costs, $2.9 million is attributable to cost of sales and
$4.9 million to selling, general and administrative expense.
Selling, General and Administrative Expense
Selling, general and administrative expense increased $1.6
million or 1.5% from $105.2 million in the second quarter 1993 to
$106.8 million in the second quarter 1994. As a percentage of
sales, selling, general and administrative expense increased from
16.7% in the second quarter 1993 to 17.1% in the second quarter
1994. The increase in selling, general and administrative expense
was primarily due to increases in union wage rates, increased rent
expense resulting from additional new stores, including fixture and
equipment financing, and an increase in advertising expense. The
increase in selling, general and administrative expense was
partially offset by several factors including a reduction in
contributions to the United Food and Commercial Workers health care
benefit plans, due to an excess reserve in these plans, the
reduction in self insurance costs discussed above and the results
of cost savings programs instituted by Ralphs. The Company is
continuing its expense reduction program.
Operating Income
Operating income in the second quarter 1994 decreased 10.4% to
$32.9 million from $36.8 million in the second quarter 1993.
Operating margin, defined as operating income as a percentage of
sales, decreased in the second quarter 1994 to 5.3% from 5.8% in
the second quarter 1993. EBITDA, defined as earnings before
interest, taxes, depreciation, amortization, provision for
postretirement benefits, gain/loss on disposal of assets and LIFO
charges, decreased to 8.2% of sales or $51.5 million in the second
quarter 1994 from 8.7% of sales or $54.9 million in the second
quarter 1993.
Interest Expense
Net interest expense for the second quarter 1994 was $25.7
million versus $24.8 million for the second quarter 1993. Included
as interest expense during the second quarter 1994 was $22.3
million, representing interest expense for the 10 1/4% Senior
Subordinated Notes due 2002, the 9% Senior Subordinated Notes
due 2003 (the "Initial Notes"), the 9% Series B Senior Subordinated
Notes due 2003 (the "Exchange Notes"), a $470.0 million bank
facility (consisting of a $350.0 million term loan facility (the
"1992 Term Loan Facility") and a $120.0 million working capital
facility (the "1992 Working Capital Facility" ) and, together with
the 1992 Term Loan Facility and amendments, the "1992 Credit
Agreement"), fee related to amendment of the 1992 Credit Agreement
to allow for payment of a dividend, promissory notes to
Metropolitan Life Insurance Company in the aggregate amount of
$175.4 million, interest on capitalized leases and expense
related to a swap agreement. Comparable interest expense for the
second quarter 1993 was $21.0 million. Also included in interest
expense for the second quarter 1994 period was $3.4 million
representing certain other charges relating to amortization of debt
issuance costs, self-insurance discount, lease valuation reserves
and other miscellaneous charges (categorized by Ralphs as non-cash
interest expense) as compared to $3.8 million for the second
quarter 1993. Investment income has been offset against interest
expense.
Net Earnings
For the second quarter 1994, Ralphs reported net earnings of
$7.2 million compared to net earnings of $12.9 million for the
second quarter 1993. The decrease in net earnings is primarily the
result of decreased operating income, higher interest expense due
to increases in interest rates and an adjustment to income taxes in
the second quarter 1993.
<PAGE>
<PAGE>
Twenty-Four Weeks Ended July 17, 1994 compared with the Twenty-Four
Weeks Ended July 18, 1993.
Sales
For the first two quarters 1994 (the twenty-four weeks ended
July 17, 1994), sales were $1,240.9 million, a decrease of $20.5
million or 1.6% from the first two quarters 1993 (the twenty - four
weeks ended July 18, 1993).
During the first two quarters 1994, Ralphs opened three new
stores (two in Los Angeles County and one in Riverside County) and
closed one store in conjunction with a new store opening in the
same area, completed two store remodels and had one store remodel
in progress.
Comparable store sales decreased 4.1%, which included an
increase of 0.3% for replacement store sales, from $1,245.7 million
in the first two quarters 1993 to $1,194.3 million in the first two
quarters 1994. Ralphs' sales continue to be adversely affected by
the significant recession in Southern California, continuing
competitive new store and remodeling activity and recent pricing
and promotional changes by competitors. The recession, high
unemployment, competitive store openings and pricing and
promotional changes contributed to the declines in both total and
comparable store sales.
Ralphs continued to take steps to mitigate the impact of the
weak retailing environment in its markets. These actions included
continuing the active remodeling program commenced in the fall of
1988. In February, 1994, Ralphs launched the Ralphs Savings Plan,
a new marketing campaign specifically designed to enhance customer
value. The Ralphs Savings Plan is comprised of six major
components: Guaranteed Low Prices (GLPs), Price Breakers, Big
Buys, Multi-Buys, Ralphs Brand Products and Double Coupons. GLPs
guarantee low prices on certain high volume items that are surveyed
and updated every four weeks. Price Breakers are weekly advertised
items that offer significant savings. Big Buys are club size items
at prices competitive to club store prices and Multi-Buys offer
Ralphs shoppers the opportunity to purchase club store quantities
of regular sized items at prices competitive to club store prices.
In conjunction with this new campaign Ralphs private label offering
of over 2,000 products provides value to the customer. In the
latter part of the second quarter 1994, Ralphs began more
aggressively promoting perishables through weekly ad features and
lower prices. In addition, Ralphs increased the number of
storewide GLP's. Further, a mailer program was intensified to
highlight the perishable pricing and increased GLP's.
On January 17, 1994 an earthquake in Southern California
caused considerable damage in Los Angeles and surrounding areas.
Several Ralphs supermarkets suffered earthquake damage with 54
stores completely shutdown on the morning of January 17th.
Thirty-four stores reopened within one day and an additional 17
stores reopened within three days. Suffering major structural
damage were three stores in the San Fernando Valley area of Los
Angeles. All three stores have since reopened for business with
the last reopening on April 15, 1994. Management believes that
there was some negative impact on sales resulting from the
temporary disruption of business resulting from the earthquake.
Ralphs is insured for earthquake losses. The pre-tax
financial impact, net of insurance claims, is expected to be
approximately $11.0 million and the Company reserved for this loss
in fiscal year 1993 (the fifty-two weeks ended January 30, 1994).
<PAGE>
<PAGE>
Cost of Sales
Cost of sales decreased $17.4 million or 1.8% from $973.8
million in the first two quarters 1993 to $956.4 million in the
first two quarters 1994. As a percentage of sales, cost of sales
declined to 77.1% in the first two quarters 1994 from 77.2% in the
first two quarters 1993. The decrease in cost of sales as a
percentage of sales was the result of savings in warehousing and
distribution costs, reductions in self insurance costs, the
pass-through of increased operating costs and increases in relative
margins where allowed by competitive conditions.
Selling, General and Administrative Expense
Selling, general and administrative expense decreased $1.7
million or 0.8% from $212.9 million in the first two quarters 1993
to $211.2 million in the first two quarters 1994. As a percentage
of sales, selling, general and administrative expense increased
from 16.9% in the first two quarters 1993 to 17.0% in the first two
quarters 1994. The decrease in selling, general and administrative
expense was primarily due to a reduction in contributions to the
United Food and Commercial Workers health care benefit plans, due
to an excess reserve in these plans, reductions in self insurance
costs and the results of cost savings programs instituted by
Ralphs. The Company is continuing its expense reduction program.
The decrease in selling, general and administrative expense was
partially offset by several factors including increases in union
wage rates, increased rent expense resulting from new stores,
including fixture and equipment financing and increased advertising
expense.
Operating Income
Operating income in the first two quarters 1994 decreased 1.7%
to $67.0 million from $68.2 million in the first two quarters 1993.
Operating margin, defined as operating income as a percentage of
sales, was 5.4% in the first two quarters 1994 and in the first two
quarters 1993. EBITDA, defined as earnings before interest, taxes,
depreciation, amortization, provision for postretirement benefits,
gain/loss on disposal of assets and LIFO charges, was 8.4% of sales
or $104.1 million in the first two quarters 1994 and 8.4% of sales
or $106.3 million in the first two quarters 1993.
Interest Expense
Net interest expense for the first two quarters 1994 was $51.4
million versus $51.2 million for the first two quarters 1993.
Included as interest expense during the first two quarters 1994 was
$44.2 million, representing interest expense for the 10 1/4% Senior
Subordinated Notes due 2002, the Initial Notes, the Exchange Notes,
the 1992 Credit Agreement, fee related to amendment of the 1992
Credit Agreement to allow for payment of a dividend, promissory
notes to Metropolitan Life Insurance Company in the aggregate
amount of $175.4 million, interest on capitalized leases and expense
related to a swap agreement. Comparable interest expense
for the first two quarters 1993 was $43.8 million. Also included
in interest expense for the first two quarters 1994 period was $7.2
million representing certain other charges relating to amortization
of debt issuance costs, self-insurance discount, lease valuation
reserves and other miscellaneous charges (categorized by Ralphs as
non-cash interest expense) as compared to $7.4 million for the
first two quarters 1993. Investment income has been offset against
interest expense.
Net Earnings
For the first two quarters 1994, Ralphs reported net earnings
of $15.6 million compared to net earnings of $16.8 million for the
first two quarters 1993. The decrease in net earnings is
primarily the result of decreased operating income.
<PAGE>
<PAGE>
Liquidity and Capital Resources
Ralphs' total long-term debt (including current maturities) at
July 17, 1994 was $971.0 million. All mandatory principal
reductions required by the various agreements during the
twenty-four weeks ended July 17, 1994 were satisfied. Management
believes that operating cash flow, supplemented by capital and
operating leases, will be sufficient to meet Ralphs' operating
needs and scheduled capital expenditures and will enable Ralphs to
service its debt in accordance with its terms. It is possible,
however, that additional financing may be required and there can be
no assurance that such financing will be available, or, if
available, will be on terms favorable to Ralphs.
Working capital was a deficit of $100.4 million at July 17,
1994. Supermarket operators typically require small amounts of
working capital since inventory is generally sold prior to the time
that payments to suppliers are due. Therefore, cash provided from
operations is frequently used for non-current purposes such as
investing and financing activities. Included in working capital
was $19.0 million in short-term debt and $77.1 million in current
maturities of long-term debt. Ralphs' primary sources of liquidity
during the twenty-four weeks ended July 17, 1994 were cash flow
from operations, and borrowings under the 1992 Credit Agreement.
Cash flow provided from operating activities after payment of
interest expense and before capital expenditures was $36.8 million
for the twenty-four weeks ended July 17, 1994. Capital
expenditures for the twenty-four weeks ended July 17, 1994, was
$25.0 million.
The 1992 Working Capital Facility is a $120.0 million credit
line which is available for working capital requirements and
general corporate purposes. Up to $60.0 million of the 1992
Working Capital Facility may be used to support standby letters of
credit and up to $10.0 million in the aggregate may be borrowed on
same-day notice as swing-line loans. The letters of credit may
be used to cover workers' compensation contingencies and for such
other purposes as are permitted under the 1992 Credit Agreement.
The 1992 Working Capital Facility is a non-amortizing line of
credit available through the earlier of June 30, 1998 or the date
the 1992 Credit Agreement is paid in full. Borrowings under the
1992 Working Capital Facility generally are required to be reduced
to zero for 30 consecutive days in each period of twelve
consecutive months. The amount available under the 1992 Credit
Agreement's working capital facility was $67.6 million at July 17,
1994.
During the twenty-four weeks ended July 17, 1994, cash used in
investing activities was $23.3 million. This amount reflects
increased capital expenditures related to store remodels and new
store openings (including store acquisitions) and, to a lesser
extent, expansion of other warehousing, distribution and
manufacturing facilities and equipment, including data processing
and computer systems.
Cash used in financing activities was approximately $37.4
million for the twenty-four weeks ended July 17, 1994. Reductions
of capital lease obligations of $5.6 million and the payment of a
$10.0 million dividend (discussed below) reduced cash flow.
<PAGE>
During the twenty-four weeks ended July 17, 1994 cash provided
from operating activities of $36.8 million, cash used in investing
activities of $23.3 million and cash used in financing activities
of $37.4 million, resulted in a net decrease in cash and cash
equivalents of $23.9 million at July 17, 1994 as compared to
January 30, 1994.
Dividends
In February 1994, the Board of Directors of the Company
authorized a dividend of $10.0 million to be paid to the Holding
Company and the Board of Directors of the Holding Company
authorized distribution of this dividend to its shareholders
subject to certain restrictive covenants in the instruments
governing certain of Ralphs' indebtedness that impose limitation on
the declarations or payment of dividends. The 1992 Credit
Agreement was amended to allow the payment of the dividend to the
Holding Company for distribution to the Holding Company's
shareholders. The fee for the amendment was approximately
$500,000. The dividend was distributed to the shareholders of the
Holding Company in the second quarter 1994.
Subsequent Events
The Company has entered into negotiations with Food 4 Less
Supermarkets, Inc., an operator of supermarkets located primarily
in Southern California, regarding the possible combination of the
two companies. As of August 30, 1994, the companies have not
entered into any letter of intent or agreement regarding such
possible combination, although the companies have reached
understandings regarding substantial aspects of the transaction.
There can be no assurance that any letter of intent or definitive
agreement will be entered into or, if entered into, that any
combination of the companies will be consummated.
Retirement Plan
During the second quarter 1994, the Company approved and
adopted a new non-qualified retirement plan, the Ralphs Grocery
Company Retirement Supplement Plan ("Retirement Supplement Plan")
effective January 1, 1994 and amended the existing Supplemental
Executive Retirement Plan effective April 9, 1994. These changes
to the retirement plans were made pursuant to the enactment of the
Omnibus Budget Reconciliation Act of 1993.
Under the provisions of the Retirement Supplement Plan,
participants are entitled to receive benefits based on earnings
over the indexed amount of $150,000.
The ultimate impact of these changes in the retirement plans
are not expected to have a material effect on the consolidated
financial statements.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
References throughout this report to "the Company" and
"Ralphs" shall be deemed to refer to the registrant, Ralphs Grocery
Company, and references to "Ralphs Supermarkets" and "the Holding
Company" shall be deemed to refer to Ralphs Supermarkets, Inc., the
sole stockholder of Ralphs.
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Negotiations
The Company has entered into negotiations with Food 4 Less
Supermarkets, Inc., an operator of supermarkets located primarily
in Southern California, regarding the possible combination of the
two companies. As of August 30, 1994, the companies have not
entered into any letter of intent or agreement regarding such
possible combination, although the companies have reached
understandings regarding substantial aspects of the transaction.
There can be no assurance that any letter of intent or definitive
agreement will be entered into or, if entered into, that any
combination of the companies will be consummated.
Retirement Plan
During the second quarter 1994, the Company approved
and adopted a new non-qualified retirement plan, the
Ralphs Grocery Company Retirement Supplement Plan
("Retirement Supplement Plan") effective January 1, 1994
and amended the existing Supplemental Executive
Retirement Plan effective April 9, 1994. These changes
to the retirement plans were made pursuant to the
enactment of the Omnibus Budget Reconciliation Act of
1993.
Under the provisions of the Retirement Supplement
Plan, participants are entitled to receive benefits based
on earnings over the indexed amount of $150,000.
The ultimate impact of these changes in the
retirement plans are not expected to have a material
effect on the consolidated financial statements.
Item 6. Exhibits and Reports on Form 8K
(a) Exhibits
For the exhibits incorporated by reference and
for the exhibits filed as part of this Quarterly
Report on Form 10-Q, see the Exhibit Index appearing
on page 14 hereof.
(b) Reports on Form 8-K.
Not applicable.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
RALPHS GROCERY COMPANY
(Registrant)
Date: August 31, 1994 /s/ Alan J. Reed
---------------- ______________________
Alan J. Reed
Senior Vice President,
Chief Financial Officer
/s/ Jan Charles Gray
_____________________
Jan Charles Gray
Senior Vice President,
General Counsel and Secretary
/s/ Robert W. Gossman
_______________________
Robert W. Gossman
Group Vice President,
Controller
<PAGE>
<PAGE>
RALPHS GROCERY COMPANY
INDEX TO EXHIBITS
The following exhibits are incorporated herein by reference:
Exhibit Incorporated by
No. Description of Exhibit Reference
- ------ ------------------------------- ---------------
4.1 Indenture between Ralphs Grocery Company Exhibit 4.3 to
and United States Trust Company, as Trustee, Registrant's
dated as of July 29, 1992, with respect to Quarterly Rprt
the 10 1/4% Senior Subordinated Notes due on Form 10-Q
2002. dated Sept.
1, 1992 and
filed on
Sept. 2, 1992.
4.2 Indenture between Ralphs Grocery Company Exhibit 4.1 to
and United States Trust Company, as Trustee, Registration
dated as of March 30, 1993 (the "1993 Statement No.
Indenture"), with respect to the Initial 33-61812 on
Notes and Exchange Notes. Form S-4.
4.3 Form of Supplemental Indenture, dated as Exhibit 4.2 to
of June 23, 1993, to the 1993 Indenture. Registration
Statement No.
33-61812 on
Form S-4.
