<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 1996
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 1-12116
CARR-GOTTSTEIN FOODS CO.
(Exact name of registrant as specified in its charter)
Delaware 920135158
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
6411 A Street
Anchorage, Alaska 99518
(Address of principal executive offices)
Registrant's telephone number, including area code: (907) 561-1944
Indicate by check mark whether the registrant (1) has filed all documents
and reports required to be filed by Sections 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for 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 [ ]
The number of shares of the registrant's Common Stock outstanding at August
9, 1996 was 7,810,196 shares.
EXHIBIT INDEX
APPEARS AT PAGE 18
Page 1 of 20
<PAGE>
CARR-GOTTSTEIN FOODS CO.
AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
a) Consolidated Balance Sheets
as of June 30, 1996 (unaudited) and December 31, 1995 1
b) Consolidated Statements of Operations for the 13 weeks
and 26 weeks ended June 30, 1996 (unaudited) and
July 2, 1995 (unaudited) 2
c) Consolidated Statements of Cash Flows for the 13 and
26 weeks ended June 30, 1996 (unaudited) and
July 2, 1995 (unaudited) 3
d) Notes to Consolidated Financial Statements
(unaudited) 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (unaudited) 13
PART II. OTHER INFORMATION 16
SIGNATURES 17
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- ---------------------------------------------------------------------------------------------------------
AMOUNTS IN THOUSANDS
- ---------------------------------------------------------------------------------------------------------
June 30, December 31,
1996 1995
- ---------------------------------------------------------------------------------------------------------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,372 $ 2,817
Accounts receivable, net 20,086 17,853
Income taxes receivable 784 164
Inventories 56,285 50,505
Deferred taxes 1,756 1,756
Prepaid expenses and other current assets 4,138 2,881
- ---------------------------------------------------------------------------------------------------------
Total current assets 88,421 75,976
Property, plant and equipment, at cost, net of accumulated depreciation 148,284 152,836
Intangible assets, net of accumulated amortization 93,158 94,589
Other assets 11,847 13,219
- ---------------------------------------------------------------------------------------------------------
$ 341,710 $ 336,620
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 38,309 $ 35,986
Accrued expenses 15,791 7,352
Current maturities of long-term debt 7,248 3,551
Revolving line of credit 15,800 16,000
Estimated obligation for self-insurance 2,608 2,794
- ---------------------------------------------------------------------------------------------------------
Total current liabilities 79,756 65,683
Long-term debt, excluding current maturities 227,990 234,740
Estimated obligation for self-insurance 1,536 1,536
Deferred tax liability 488 488
Other liabilities 1,630 1,871
- ---------------------------------------------------------------------------------------------------------
Total liabilities 311,400 304,318
- ---------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $.01 par value, authorized 25,000 shares,
issued 9,736 shares 97 97
Additional paid in capital 52,580 52,595
Stock subscriptions receivable - (44)
Deficit (9,782) (7,734)
- ---------------------------------------------------------------------------------------------------------
42,895 44,914
Less treasury stock, 1,872 and 1,876 shares, at cost 12,585 12,612
- ---------------------------------------------------------------------------------------------------------
Total stockholders' equity 30,310 32,302
- ---------------------------------------------------------------------------------------------------------
Commitments and contingencies
- ---------------------------------------------------------------------------------------------------------
$ 341,710 $ 336,620
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
1
<PAGE>
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
AMOUNTS IN THOUSANDS (EXCEPT PER SHARE DATA)
- -----------------------------------------------------------------------------------------------------------
13 Weeks Ended 26 Weeks Ended
-------------- --------------
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------
(unaudited) (unaudited)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SALES $ 160,953 $ 154,648 $ 303,762 $ 293,718
Cost of merchandise sold, including warehousing
and transportation expenses (a) 117,117 106,096 219,854 201,594
- -----------------------------------------------------------------------------------------------------------
GROSS PROFIT (a) 43,836 48,552 83,908 92,124
Operating and administrative expenses (a) 37,009 39,775 72,413 77,372
- -----------------------------------------------------------------------------------------------------------
OPERATING INCOME 6,827 8,777 11,495 14,752
- -----------------------------------------------------------------------------------------------------------
Other expenses:
Interest expense, net (7,056) (3,659) (14,013) (7,099)
- -----------------------------------------------------------------------------------------------------------
Net earnings (loss) before taxes (229) 5,118 (2,518) 7,653
Income tax (expense) benefit (186) (2,392) 470 (3,722)
Net earnings (loss) $ (415) $ 2,726 $ (2,048) $ 3,931
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Earnings (loss) per common share:
Net earnings (loss) per share $ (0.05) $ 0.18 $ (0.26) $ 0.25
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 7,810 15,414 7,808 15,557
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Note (a) Due to changes in allocation methods comparisons between 1996 and 1995
gross margin and expenses rates will be non-comparable.
2
<PAGE>
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
AMOUNTS IN THOUSANDS
- -----------------------------------------------------------------------------------------------
June 30, July 2,
1996 1995
- -----------------------------------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (2,048) $ 3,931
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 7,242 6,737
Amortization of intangibles 1,431 1,771
Amortization of loan fees and discounts 730 264
Loss on disposal of property and equipment - 44
(Increase) decrease in current assets:
Income tax receivable (620) 257
Receivables (2,233) (2,687)
Inventories (5,780) (969)
Prepaid expenses (1,257) 1,549
Other assets 642 (2,603)
(Decrease) increase in current liabilities:
Accounts payable 2,323 2,364
Accrued expenses 8,439 677
Income taxes payable - 2,861
Self insurance reserve (186) (421)
Other liabilities (241) (898)
- -----------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,442 12,877
- -----------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Additions to property and equipment (2,690) (10,850)
Proceeds from sale of property and equipment - 23
Proceeds from sale of subsidiary - 983
- -----------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (2,690) (9,844)
- -----------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Payments on long-term debt (3,053) (5,573)
Issuance of bank debt - 2,498
Short term borrowings (payments), net (200) 2,502
Issuance of treasury stock 12 -
Purchase of treasury stock - (2,499)
Change in stock subscriptions receivable 44 (2)
Sale of treasury stock -
- -----------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (3,197) (3,074)
- -----------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,555 (41)
Cash and cash equivalents at beginning of period 2,817 321
- -----------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,372 $ 280
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 11,851 $ 7,305
Income taxes - 600
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) During interim periods, Carr-Gottstein Foods Co. and subsidiaries (the
"Company") follows the accounting policies set forth in its audited financial
statements included in its Annual Report for the fiscal year ended December 31,
1995 filed with the Securities Exchange Commission. These consolidated interim
financial statements should be read in conjunction with such audited
consolidated financial statements and notes thereto. Management believes that
the accompanying interim financial statements reflect all adjustments which are
necessary for a fair statement of the results of the interim period presented.
All adjustments made in the accompanying interim financial statements are of a
normal recurring nature.
4
<PAGE>
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
(2) CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The Company issued $100,000,000 of senior subordinated unsecured notes on
November 15, 1995. CGF Properties, Inc. Has not guaranteed the unsecured notes
and financial information for this wholly-owned subsidiary is presented
separately. All of the Company's other direct and indirect subsidiaries, AOL
Express, Inc., APR Forwarders, Inc., Oaken Keg Spirit Shops, Inc. And Alaska
Advertisers, Inc. Are wholly-owned and have fully and unconditionally guaranteed
the unsecured notes on a joint and several basis and, accordingly, are presented
on a combined basis. Parent company only information is presented for
Carr-Gottstein Foods Co., which reflects only its business activity and its
wholly-owned subsidiaries accounted for using the equity method. Separate
financial statements and other disclosures for the guarantor subsidiaries are
not presented because in the opinion of management such information is not
material.
The following are condensed consolidating balance sheets:
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
- ----------------------------------------------------------------------------------------------------------------------
BALANCE SHEET NON-GUARANTOR GUARANTOR PARENT
SUBSIDIARY SUBSIDIARIES COMPANY
JUNE 30, 1996 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Inventories $ - $ 4,737 $ 51,548 $ - $ 56,285
Other current assets 3,498 59,449 23,873 (54,684) 32,136
- ----------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 3,498 64,186 75,421 (54,684) 88,421
Property, plant and equipment, net 66,524 5,717 76,043 - 148,284
Intangible, net - - 93,158 - 93,158
Investments in subsidiaries - - 97,191 (97,191) -
Other assets - 1,129 10,718 - 11,847
- ----------------------------------------------------------------------------------------------------------------------
$ 70,022 $ 71,032 $ 352,531 $(151,875) $ 341,710
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 789 $ 864 $ 132,787 $ (54,684) $ 79,756
Long-term debt, excluding current
Maturities 42,210 - 185,780 - 227,990
Other liabilities - - 3,654 - 3,654
- ----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 42,999 864 322,221 (54,684) 311,400
Common stock 10 44 97 (54) 97
Additional paid-in capital 28,966 39,381 52,580 (68,347) 52,580
Retained earnings (deficit) (1,953) 30,743 (9,782) (28,790) (9,782)
- ----------------------------------------------------------------------------------------------------------------------
27,023 70,168 42,895 (97,191) 42,895
Less treasury stock - - (12,585) - (12,585)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 27,023 70,168 30,310 (97,191) 30,310
- ----------------------------------------------------------------------------------------------------------------------
$ 70,022 $ 71,032 $ 352,531 $(151,875) $ 341,710
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
- -----------------------------------------------------------------------------------------------------------------
BALANCE SHEET NON-GUARANTOR GUARANTOR PARENT
SUBSIDIARY SUBSIDIARIES COMPANY
DECEMBER 31, 1995 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Inventories $ - $ 3,986 $ 46,519 $ - $ 50,505
Other current assets 5,397 57,859 7,261 (45,046) 25,471
- -----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 5,397 61,845 53,780 (45,046) 75,976
Property, plant and equipment, net 67,921 6,336 78,579 - 152,836
Intangible, net - - 94,589 - 94,589
Investments in subsidiaries - - 96,229 (96,229) -
Other assets 33 509 12,677 - 13,219
- -----------------------------------------------------------------------------------------------------------------
$ 73,351 $ 68,690 $ 335,854 $(141,275) $ 336,620
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 3,332 $ - $ 107,397 $ (45,046) $ 65,683
Long-term debt, excluding current
maturities 42,480 - 192,260 - 234,740
Other liabilities - - 3,895 - 3,895
- -----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 45,812 - 303,552 (45,046) 304,318
Common stock 10 44 97 (54) 97
Additional paid-in capital 28,966 39,381 52,595 (68,347) 52,595
Stock subscription receivable - - (44) - (44)
Retained earnings (deficit) (1,437) 29,265 (7,734) (27,828) (7,734)
- -----------------------------------------------------------------------------------------------------------------
27,539 68,690 44,914 (96,229) 44,914
Less treasury stock - - 12,612 - 12,612
- -----------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 27,539 68,690 32,302 (96,229) 32,302
- -----------------------------------------------------------------------------------------------------------------
$ 73,351 $ 68,690 $ 335,854 $(141,275) $ 336,620
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
The following are condensed consolidating statements of operations:
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
- ------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS NON-GUARANTOR GUARANTOR PARENT
SUBSIDIARY SUBSIDIARIES COMPANY
SECOND QUARTER 1996 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ 20,213 $ 150,766 $ (10,026) $ 160,953
Cost of merchandise sold, including
warehousing and transportation
expenses - 14,626 112,517 (10,026) 117,117
- ------------------------------------------------------------------------------------------------------------------
GROSS PROFIT - 5,587 38,249 - 43,836
Operating and administrative
(income) expenses (257) 3,082 34,184 - 37,009
- ------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 257 2,505 4,065 - 6,827
Interest expense, net (1,131) - (5,925) - (7,056)
Equity in subsidiary earnings - - 962 (962) -
- ------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAX (874) 2,505 (898) (962) (229)
Income tax (expense) benefit 358 (1,027) 855 - 186
- ------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ (516) $ 1,478 $ (415) $ (962) $ (415)
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
The following are condensed consolidating statements of operations:
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
- ------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS NON-GUARANTOR GUARANTOR PARENT
SUBSIDIARY SUBSIDIARIES COMPANY
26 WEEKS ENDED JUNE 30, 1996 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ 37,628 $ 284,210 $ (18,076) $ 303,762
Cost of merchandise sold, including
warehousing and transportation
expenses - 26,889 211,041 (18,076) 219,854
- ------------------------------------------------------------------------------------------------------------------
GROSS PROFIT - 10,739 73,169 - 83,908
Operating and administrative
(income)expenses (472) 6,194 66,691 - 72,413
- ------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 472 4,545 6,478 - 11,495
Interest expense, net (2,266) - (11,747) - (14,013)
Equity in subsidiary earnings - - 1,622 (1,622) -
- ------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAX (1,794) 4,545 (3,647) (1,622) (2,518)
Income tax (expense) benefit 736 (1,865) 1,599 - 470
- ------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ (1,058) $ 2,680 $ (2,048) $ (1,622) $ (2,048)
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
The following are condensed consolidating statements of operations:
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
- ------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS NON-GUARANTOR GUARANTOR PARENT
SUBSIDIARY SUBSIDIARIES COMPANY
SECOND QUARTER 1995 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ 18,956 $ 144,802 $ (9,110) $ 154,648
Cost of merchandise sold, including
warehousing and transportation
expenses - 13,093 102,113 (9,110) 106,096
- -------------------------------------------------------------------------------------------------------------------
GROSS PROFIT - 5,863 42,689 - 48,552
Operating and administrative
expenses (132) 2,626 37,281 - 39,775
- -------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 132 3,237 5,408 - 8,777
Interest expense, net (1,146) (1,327) (1,186) - (3,659)
Equity in subsidiary earnings - - 529 (529) -
- -------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAX (1,014) 1,910 4,751 (529) 5,118
Income tax (expense) benefit 416 (783) (2,025) - (2,392)
- -------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ (598) $ 1,127 $ 2,726 $ (529) $ 2,726
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
The following are condensed consolidating statements of operations:
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
- -------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS NON-GUARANTOR GUARANTOR PARENT
SUBSIDIARY SUBSIDIARIES COMPANY
26 WEEKS ENDED JULY 2, 1995 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ 34,985 $ 275,872 $ (17,139) $ 293,718
Cost of merchandise sold, including
warehousing and transportation
expenses - 24,091 194,642 (17,139) 201,594
- -------------------------------------------------------------------------------------------------------------------
GROSS PROFIT - 10,894 81,230 - 92,124
Operating and administrative
(income) expenses (258) 5,156 72,474 - 77,372
- -------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 258 5,738 8,756 - 14,752
Interest expense, net (2,295) - (4,084) - (7,099)
Equity in subsidiary earnings - - 2,184 (2,184) -
- -------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAX (2,037) 5,738 6,136 (2,184) 7,653
Income tax (expense) benefit 835 (2,353) (2,205) - (3,722)
- -------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ (1,202) $ 3,385 $ 3,931 $ (2,184) $ 3,931
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
The following is condensed consolidating cash flow information. The consolidated
Company's cash and cash equivalents is positive at each balance sheet date so
negative balances for individual subsidiaries are not classified as liabilities.
The net cash provided by operating activities fluctuates due to changes in
intercompany receivables and payables from the transfer of cash to and from the
parent company.
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
- -------------------------------------------------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS NON-GUARANTOR GUARANTOR PARENT
SUBSIDIARY SUBSIDIARIES COMPANY
26 WEEKS ENDED JUNE 30, 1996 CGF PROPERTIES (COMBINED) ONLY CONSOLIDATED
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 148 $ 4 $ 8,290 $ 8,442
- -------------------------------------------------------------------------------------------------------------------------
Investing activities
Addition to property and equipment - (4) (2,686) (2,690)
- -------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES - (4) (2,686) (2,690)
- -------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Payments on long-term debt (148) - (2,905) (3,053)
Short term borrowings, net - - (200) (200)
Issuance of treasury stock - - 12 12
Change in stock subscription receivable - - 44 44
- -------------------------------------------------------------------------------------------------------------------------
NET CASH USED BY FINANCING ACTIVITIES (148) - (3,049) (3,197)
- -------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS - - 2,555 2,555
Cash and cash equivalents at beginning of period 55 83 2,679 2,817
- ------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 55 $ 83 $ 5,234 $ 5,372
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - CONTINUED
The following is condensed consolidating cash flow information. The consolidated
Company's cash and cash equivalents is positive at each balance sheet date so
negative balances for individual subsidiaries are not classified as liabilities.
The net cash provided by operating activities fluctuates due to changes in
intercompany receivables and payables from the transfer of cash to and from the
parent company.
AMOUNTS IN THOUSANDS
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS NON-GUARANTOR GUARANTOR PARENT
26 WEEKS ENDED SUBSIDIARY SUBSIDIARIES COMPANY
JULY 2, 1995 CGF PROPERTIES (COMBINED) ONLY CONSOLIDATED
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY
(USED IN) OPERATING
ACTIVITIES $(1,750) $671 $13,956 $12,877
- ------------------------------------------------------------------------------
INVESTING ACTIVITIES
Addition to property
and equipment - (691) (10,159) (10,850)
Proceeds from sale
of property and
equipment - - 23 23
Proceeds from sale
of subsidiary - - 983 983
- ------------------------------------------------------------------------------
NET CASH USED IN
INVESTING
ACTIVITIES - (691) (9,153) (9,844)
- ------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance
of debt - - 2,498 2,498
Payments on long-term
debt (263) - (5,310) (5,573)
Short term borrowings,
net - - 2,502 2,502
Purchase of treasury
stock - - (2,499) (2,499)
Change in Stock
Subscription
receivable - - (2) (2)
- ------------------------------------------------------------------------------
NET CASH USED IN
FINANCING
ACTIVITIES (263) - (2,811) (3,074)
- ------------------------------------------------------------------------------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS (2,013) (20) 1,992 (41)
Cash and cash equivalents
at beginning of period 2,066 77 (1,822) 321
- ------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 53 $ 57 $ 170 $ 280
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
12
<PAGE>
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the unaudited
financial statements and related notes included elsewhere in this Form 10-Q.
GENERAL
Carr-Gottstein Foods Co. is the leading retail and wholesale food company
in Alaska operating full-service supermarkets and wine and liquor stores as well
as the only full-line food warehouse and distribution center (under the J.B.
Gottstein name) in the state.
RESULTS OF OPERATIONS
13 WEEKS ENDED JUNE 30, 1996 COMPARED TO 13 WEEKS ENDED JULY 2, 1995
SALES. Sales for the 13 weeks ended June 30, 1996 were $161.0 million
compared to $154.6 million for the 13 weeks ended July 2, 1995. The 4.1%
increase was due in part to increases at the Carrs Quality Centers (the "Carrs
Stores") and increases attributable to Wholesale operations. The increase in
sales for the second 13 weeks of 1996 reflects a 2.8% increase and 0.1% decrease
in comparable store sales for the Carrs Stores and Eagle Quality Centers (the
"Eagle Stores"), respectively.
GROSS PROFIT. Gross profit for the 13 weeks ended June 30, 1996 was $43.8
million compared to $48.6 million for the 13 weeks ended July 2, 1995. The
decrease in gross margin dollars is primarily attributable to the allocation of
warehousing and distribution expenses to cost of goods sold. In previous
quarters, these expenses were not charged to the cost of goods sold but were
classified as operating expenses. Gross profit was also negatively impacted by
the kick-off of the Carrs Plus "Swipe the Gold, Save the Green" electronic
marketing campaign. As a percentage of sales, gross profit was 27.2% for the 13
weeks 1996 compared to 31.4% for the 13 weeks 1995. Gross profit as a
percentage of sales for the 13 weeks 1996 decreased primarily as a result of the
allocation of warehousing and distribution expenses and partially as the result
of increased promotional expenses during the quarter.
OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative
expenses for the 13 weeks ended June 30, 1996 were $37.0 million compared to
$39.8 million for the 13 weeks ended July 2, 1995. Operating and
administrative expenses as a percentage of sales were 23.0% for the 13 weeks
1996 compared to 25.7% for the 13 weeks 1995. The decrease in operating
expenses is primarily attributable to the allocation of warehousing and
transportation expenses to the cost of goods sold coupled with some
additional expenses related to the "Fusion" corporate re-engineering project
that was brought to a conclusion at the end of the first quarter.
OPERATING INCOME. Operating income for the 13 weeks ended June 30, 1996
decreased $2.0 million from $8.8 million in the second quarter of 1995 to
$6.8 million in the second quarter of 1996. This decrease in operating
income was due primarily to the reduction in gross profit which was impacted
by the Carrs Plus electronic marketing campaign and to some increased
expenses associated with the "Fusion" project as discussed above.
OTHER INCOME AND EXPENSE. Net interest expense was $7.1 million for the
13 weeks ended June 30, 1996 compared to $3.7 million for the 13 weeks ended
July 2, 1995. The increase in interest expense is primarily attributable to
the full quarter impact of increased interest costs related to the borrowings
associated with the self stock tender completed by the Company in November of
1995.
13
<PAGE>
INCOME TAXES. Income tax expense for the 13 weeks ended June 30, 1996
was $0.2 million compared to a $2.4 million expense (a 46.7% effective tax
rate) for the 13 weeks ended July 2, 1995. The high effective tax rate in
1995 resulted from the amortization of intangible assets for which no tax
benefit was available.
NET INCOME (LOSS) Net loss for the 13 weeks ended June 30, 1996 was
$0.4 million, or $0.05 per share, versus net income of $2.7 million, or $0.18
per share for the 13 weeks ended July 2, 1995.
26 WEEKS ENDED JUNE 30, 1996 COMPARED TO 26 WEEKS ENDED JULY 2, 1995
SALES. Sales for the 26 weeks ended June 30, 1996 were $303.8 million
compared to $293.7 million for the 26 weeks ended July 2, 1995. The increase
in sales for the 26 weeks of 1996 reflects a 0.5% and 1.5% increase in
comparable store sales for the Carrs Stores and Eagle Stores, respectively.
GROSS PROFIT. Gross profit for the 26 weeks ended June 30, 1996 was
$83.9 million compared to $92.1 million for the 26 weeks ended July 2, 1995.
The decrease in gross margin dollars is primarily attributable to the
allocation of warehousing and distribution expenses to cost of goods sold as
discussed above as well as extra promotional expenses that were incurred in
the second quarter. As a percentage of sales, gross profit was 27.6% for the
26 weeks 1996 compared to 31.4% for the 26 weeks 1995. Gross profit as a
percentage of sales for the 26 weeks 1996 decreased primarily as a result of
the allocation of warehousing and distribution expenses and partially as the
result of the increased promotional expenses during the second quarter.
OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative
expenses for the 26 weeks ended June 30, 1996 were $72.4 million compared to
$77.4 million for the 26 weeks ended July 2, 1995. Operating and
administrative expenses as a percentage of sales were 23.8% for the 26 weeks
1996 compared to 26.3% for the 26 weeks 1995. The decrease in operating
expenses is primarily attributable to the allocation of warehousing and
transportation expenses to the cost of goods sold coupled with expenses
related to the "Fusion" corporate re-engineering project that was brought to
a conclusion at the end of the first quarter.
OPERATING INCOME. Operating income for the 26 weeks ended June 30, 1996
decreased $3.3 million from $14.8 million, or 5.0 percent of sales, in 1995
to $11.5 million, or 3.8 percent of sales in 1996.
OTHER INCOME AND EXPENSE. Net interest expense was $14.0 million for
the 26 weeks ended June 30, 1996 compared to $7.1 million for the 26 weeks
ended July 2, 1995. The increase in interest expense is primarily
attributable to the impact of increased interest costs related to the
borrowings associated with the self stock tender completed by the Company in
November of 1995.
INCOME TAXES. The Company recognized an income tax benefit for the 26
weeks ended June 30, 1996 of $0.5 million compared to a $3.7 million expense
(a 48.6% effective tax rate) for the 26 weeks ended July 2, 1995. The high
effective tax rate in 1995 resulted from the amortization of intangible
assets for which no tax benefit was available.
NET INCOME (LOSS) Net loss for the 26 weeks ended June 30, 1996 was
$2.0 million, or $0.26 per share, versus net income of $3.9 million, or $0.25
per share for the 26 weeks ended July 2, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flows from
operations and its working capital revolving credit facility, which are
considered to be adequate for anticipated cash needs. Primary uses are
capital expenditures, debt service, and lease payments.
14
<PAGE>
Net cash provided by operating activities was $8.4 million for the 26
weeks ended June 30, 1996 compared to net cash provided by operating
activities of $12.9 million for the same period in 1995. The change in the 26
weeks 1996 compared to 1995 was due primarily to increased inventories and
receivables offset by larger increases in accounts payable and accrued
expenses.
Capital expenditures for the 26 weeks ended June 30, 1996 were $2.7
million. The majority of these expenditures were related to the "Fusion"
project and other projects started in the previous year. Although the
Company will consider opportunities for new store construction or
acquisition, should they arise, capital expenditures are currently expected
to be approximately $6.0 million for fiscal 1996. It is anticipated that the
balance of 1996 capital expenditures will be funded out of cash provided by
operations and borrowings under the working capital revolver.
Net cash used for financing activities during the 26 weeks ended June
30, 1996 was $3.2 million. The level of borrowings under the Company's
revolving debt is dependent primarily upon cash flows from operations, the
timing of disbursements, long-term borrowing activity and capital
expenditures.
At June 30, 1996 there was $15.8 million outstanding on the revolving
debt borrowings. The Company had available unused credit of $19.2 million.
Funds borrowed under the revolving credit portion of the Company's credit
facility are restricted to working capital and general corporate purposes.
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None.
Item 2. Changes in Securities - None.
Item 3. Defaults Upon Senior Securities - None.
Item 4. Submission of Matters to Vote of Security Holders
The Annual Meeting of Shareholders for Carr-Gottstein Foods Co. was
held in Anchorage, Alaska on May 15, 1996, at the Z.J. Loussac
Library.
The sole issue submitted to a vote of the shareholders was the annual
election of Directors. The following individuals were elected to
the Board of Directors with the vote tabulation indicated opposite
their respective names:
FOR WITHHELD
John J. Cairns 7,129,278 33,512
Mark R. Williams 7,131,079 31,711
Leonard I. Green 7,133,488 29,302
Jonathan D. Sokoloff 7,129,571 33,219
Gregory J. Annick 7,131,122 31,668
E. Dean Werries 7,130,987 31,803
Donald E. Gallegos 7,133,789 29,001
Item 5. Other Information
Effective August 9, 1996, Lawrence H. Hayward was appointed
President and Chief Executive Officer of the Company. Mr. Hayward
formerly served as Senior Vice President and Chief Operating
Officer of the Company.
Effective August 9, 1996, Mark R. Williams resigned from his
position as Chief Executive Officer and President of the Company.
Mr. Williams will continue to serve as a Director and was appointed
Vice Chairman of the Board of Directors. He will continue to be
employed by the Company to assist Mr. Hayward during the transition.
Effective August 9, 1996, John J. Cairns retired from his role as
Special Assistant to the President. Mr. Cairns will
continue to serve as a member and Chairman of the Board
of Directors of the Company. He will continue to be
employed by the Company on a part-time basis to work on
special projects relating to long-term strategic planning.
On July 25, 1996, the membership of the United Food and Commercial
Workers Union, Local 1496 ratified a new three-year labor agreement
covering approximately 1,800 employees of the Company's
supermarkets located in the Anchorage area. The document is
currently in preparation, and the Company expects to formally
execute it shortly.
16
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits set forth in the Exhibit Index on page 18
hereof are filed with this quarterly report on Form 10-Q.
(b) No reports were filed on Form 8-K during the quarter ended
June 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARR GOTTSTEIN FOODS CO.
By: /s/ Lawrence H. Hayward
-----------------------------
Lawrence H. Hayward
President and
Chief Executive Officer
Date: August 12, 1995
By: /s/ Donald J. Anderson
-----------------------------
Donald J. Anderson
Senior Vice President and
Chief Financial Officer
Date: August 12, 1996
17
<PAGE>
CARR-GOTTSTEIN FOODS CO.
EXHIBIT INDEX
The following exhibits are attached as indicated:
Exhibit
Number Description of Exhibit
27.1 Financial Data Schedule
18
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,372
<SECURITIES> 0
<RECEIVABLES> 21,211
<ALLOWANCES> 341
<INVENTORY> 56,285
<CURRENT-ASSETS> 88,421
<PP&E> 148,284
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<TOTAL-ASSETS> 341,710
<CURRENT-LIABILITIES> 79,756
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<COMMON> 97
<OTHER-SE> 39,995
<TOTAL-LIABILITY-AND-EQUITY> 341,710
<SALES> 303,762
<TOTAL-REVENUES> 303,762
<CGS> 219,854
<TOTAL-COSTS> 72,413
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<INCOME-PRETAX> (2,518)
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<NET-INCOME> (2,048)
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