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 29, 1997
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 or organization) (I.R.S. Employer 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 11, 1997 was 7,933,296 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 29, 1997
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
a) Consolidated Balance Sheets
as of June 29, 1997 (unaudited) and December 29, 1996 1
b) Consolidated Statements of Operations for the 13 weeks and 26
weeks ended June 29, 1997 (unaudited) and June 30, 1996
(unaudited) 2
c) Consolidated Statements of Cash Flows for the 13 weeks ended
June 29, 1997 (unaudited) and June 30, 1996 (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>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Carr-Gottstein Foods Co. and Subsidiaries
Consolidated Balance Sheets
- --------------------------------------------------------------------------------------------------------------------------
Amounts In Thousands
- --------------------------------------------------------------------------------------------------------------------------
June 29, December 29,
1997 1996
- ----------------------------------------------------------------------------------- -------------------- ------------------
(unaudited) (unaudited)
<S> <C> <C>
Cash and cash equivalents $ 10,744 $ 8,655
Accounts receivable, net 18,258 16,650
Income taxes receivable 911 -
Inventories 56,509 54,232
Deferred taxes 5,027 1,918
Prepaid expenses and other current assets 2,921 2,809
- ----------------------------------------------------------------------------------- -------------------- ------------------
Total current assets 94,370 84,264
Property, plant and equipment, at cost, net of accumulated depreciation 137,288 142,179
Intangible assets, net of accumulated amortization 90,304 91,731
Deferred taxes 334 334
Other assets 11,232 12,336
- ----------------------------------------------------------------------------------- -------------------- ------------------
$ 333,528 $ 330,844
=================================================================================== ==================== ==================
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable $ 40,962 $ 38,467
Accrued expenses 23,780 15,145
Income taxes payable - 298
Current maturities of long-term debt 8,317 7,281
Revolving line of credit 7,900 7,000
Estimated obligation for self-insurance 1,854 1,958
- ----------------------------------------------------------------------------------- -------------------- ------------------
Total current liabilities 82,813 70,149
Long-term debt, excluding current maturities 223,472 227,640
Estimated obligation for self-insurance 1,536 1,536
Other liabilities 1,894 1,921
- ----------------------------------------------------------------------------------- -------------------- ------------------
Total liabilities 309,715 301,246
- ----------------------------------------------------------------------------------- -------------------- ------------------
Stockholders' equity:
Common stock, $.01 par value, authorized 25,000 shares,
issued 9,680 shares 97 97
Additional paid in capital 52,103 52,513
Deficit (16,638) (10,544)
- ----------------------------------------------------------------------------------- -------------------- ------------------
35,562 42,066
Less treasury stock, 1,747 and 1,835 shares, at cost 11,749 12,468
- ----------------------------------------------------------------------------------- -------------------- ------------------
Total stockholders' equity 23,813 29,598
- ----------------------------------------------------------------------------------- -------------------- ------------------
Commitments and contingencies
=================================================================================== ==================== ==================
$ 333,528 $ 330,844
=================================================================================== ==================== ==================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Carr-Gottstein Foods Co. and Subsidiaries
- -------------------------------------------------------------------------------------------------------------------------------
Consolidated Statements of Operations
- -------------------------------------------------------------------------------------------------------------------------------
Amounts In Thousands (except per share data)
- -------------------------------------------------------------------------------------------------------------------------------
13 Weeks Ended 26 Weeks Ended
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
- -------------------------------------------------------------- -------------- ----------------- --------------- ----------------
(unaudited) (unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 152,029 $ 160,953 $ 293,495 $ 303,762
Cost of merchandise sold, including warehousing
and transportation expenses 108,329 117,117 208,803 219,823
- -------------------------------------------------------------- -------------- ----------------- --------------- ----------------
Gross profit 43,700 43,836 84,692 83,939
Operating and administrative expenses 36,173 37,009 71,687 72,444
Non-recurring charge 8,949 - 8,949 -
- -------------------------------------------------------------- -------------- ----------------- --------------- ----------------
Operating income (loss) (1,422) 6,827 4,056 11,495
Other expenses:
Interest expense, net (6,704) (7,056) (13,415) (14,013)
- -------------------------------------------------------------- -------------- ----------------- --------------- ----------------
Net loss before taxes (8,126) (229) (9,359) (2,518)
Income tax (expense) benefit 3,051 (186) 3,265 470
- -------------------------------------------------------------- -------------- ----------------- --------------- ----------------
Net loss $ (5,075) $ (415) $ (6,094) $ (2,048)
============================================================== ============== ================= =============== ================
Loss per common share:
Net loss per share $ (0.64) $ (0.05) $ (0.77) $ (0.26)
============================================================== ============== ================= =============== ================
Weighted average common shares outstanding 7,932 7,808 7,908 7,807
============================================================== ============== ================= =============== ================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Carr-Gottstein Foods Co. and Subsidiaries
Consolidated Statements of Cash Flows
- ----------------------------------------------------------------------------------------------------------------------------
Amounts in Thousands
- ---------------------------------------------------------------------------------------------------------------------------
26 weeks Ended
June 29, June 30,
1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited)
Operating activities:
<S> <C> <C>
Net loss $ (6,094) $ (2,048)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 6,836 7,242
Amortization of intangibles 1,427 1,431
Amortization of loan fees and discounts 687 730
(Increase) decrease in assets:
Income tax receivable (911) (620)
Receivables (1,608) (2,233)
Inventories (2,277) (5,780)
Prepaid expenses (112) (1,257)
Deferred taxes (3,109) -
Other assets 417 642
(Decrease) increase in liabilities:
Accounts payable 2,495 2,323
Accrued expenses 8,635 8,439
Income taxes payable (298) -
Self insurance reserve (104) (186)
Other liabilities (27) (241)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 5,957 8,442
- ---------------------------------------------------------------------------------------------------------------------------
Investing activities:
Additions to property and equipment (1,945) (2,690)
- -----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (1,945) (2,690)
- ---------------------------------------------------------------------------------------------------------------------------
Financing activities:
Payments on long-term debt (3,132) (3,053)
Short term borrowings (payments), net 900 (200)
Issuance of treasury stock 309 12
Change in stock subscriptions receivable - 44
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (1,923) (3,197)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 2,089 2,555
Cash and cash equivalents at beginning of period 8,655 2,817
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 10,744 $ 5,372
===========================================================================================================================
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $ 12,584 $ 11,851
Income taxes 971 -
===========================================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
<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 29, 1996 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.
(2) Financial Accounting Standards No. 128, Earnings Per Share, supersedes APB
Opinion No. 15, Earnings Per Share, specifies the computation,
presentation, and disclosure requirements for earnings per share (EPS) for
entities with publicly held common stock or potential common stock. The
statement replaces Primary EPS and Fully Diluted EPS with Basic EPS and
Diluted EPS, respectively. Basic EPS, unlike Primary EPS, excludes all
dilution while Diluted EPS, like Fully Diluted EPS, reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock or resulted in the
issuance of common stock that then shared in the earnings of the entity.
Due to an immaterial difference between Primary and Fully Diluted EPS, the
Company has historically presented only a single EPS. The Company in the
future will present both Basic and Diluted EPS for income (loss) from
continuing operations and net income (loss). The statement is effective for
financial statements for both interim and annual periods ending after
December 15, 1997. After adoption, all prior periods EPS data will be
restated. The adoption of the new statement is expected to have minimal
effect on the Company's EPS.
<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 29, 1997 CGF Properties (Combined) Only Elimination Consolidated
- -----------------------------------------------------------------------------------------------------------------------
Assets
<S> <C> <C> <C> <C> <C>
Inventories $ - $ 3,757 $ 52,752 $ - $ 56,509
Other current assets 6,608 70,523 5,125 (44,395) 37,861
- -----------------------------------------------------------------------------------------------------------------------
Total current assets 6,608 74,280 57,877 (44,395) 94,370
Property, plant and equipment, net 63,931 5,318 68,039 - 137,288
Intangible, net - - 90,304 - 90,304
Investments in subsidiaries - - 105,025 (105,025) -
Other assets 32 483 11,051 - 11,566
- -----------------------------------------------------------------------------------------------------------------------
$ 70,571 $ 80,081 $ 332,296 $ (149,420) $ 333,528
=======================================================================================================================
Liabilities and Stockholders' Equity
Current liabilities $ 966 $3,147 $ 123,095 $ (44,395) $ 82,813
Long-term debt, excluding current
maturities 41,514 - 181,958 - 223,472
Other liabilities - - 3,430 - 3,430
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 42,480 3,147 308,483 (44,395) 309,715
Common stock 10 44 97 (54) 97
Additional paid-in capital 28,966 39,381 52,103 (68,347) 52,103
Retained earnings (deficit) (885) 37,509 (16,638) (36,624) (16,638)
- -----------------------------------------------------------------------------------------------------------------------
28,091 76,934 35,562 (105,025) 35,562
Less treasury stock - - 11,749 - 11,749
- ---------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 28,091 76,934 23,813 (105,025) 23,813
- -----------------------------------------------------------------------------------------------------------------------
$ 70,571 $ 80,081 $ 332,296 $ (149,420) $ 333,528
=======================================================================================================================
</TABLE>
<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 29, 1996 CGF Properties (Combined) Only Elimination Consolidated
- -----------------------------------------------------------------------------------------------------------------------
Assets
<S> <C> <C> <C> <C> <C>
Inventories $ - $ 4,690 $ 49,542 $ - $ 54,232
Other current assets 5,526 63,389 6,117 (45,000) 30,032
- -----------------------------------------------------------------------------------------------------------------------
Total current assets 5,526 68,079 55,659 (45,000) 84,264
Property, plant and equipment, net 65,191 5,725 71,263 - 142,179
Intangible, net - - 91,731 - 91,731
Investments in subsidiaries - - 101,920 (101,920) -
Other assets 32 483 12,155 - 12,670
- -----------------------------------------------------------------------------------------------------------------------
$ 70,749 $ 74,287 $ 332,728 $ (146,920) $ 330,844
=======================================================================================================================
Liabilities and Stockholders' Equity
Current liabilities $ 966 $ 279 $ 113,904 $ (45,000) $ 70,149
Long-term debt, excluding current
maturities 41,871 - 185,769 - 227,640
Other liabilities - - 3,457 - 3,457
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 42,837 - 303,130 (45,000) 301,246
Common stock 10 44 97 (54) 97
Additional paid-in capital 28,966 39,381 52,513 (68,347) 52,513
Stock subscription receivable - - - - -
Retained earnings (deficit) (1,064) 34,583 (10,544) (33,519) (10,544)
- -----------------------------------------------------------------------------------------------------------------------
27,912 74,008 42,066 (101,920) 42,066
Less treasury stock - - 12,468 - 12,468
- ---------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 27,912 74,008 29,598 (101,920) 29,598
- -----------------------------------------------------------------------------------------------------------------------
$ 70,749 $ 74,287 $ 332,728 $ (146,920) $ 330,844
=======================================================================================================================
</TABLE>
<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
13 Weeks Ended June 29, 1997 CGF Properties (Combined) Only Elimination Consolidated
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ 20,736 $ 142,395 $ (11,102) $ 152,029
Cost of merchandise sold, including
- -----------------------------------------------------------------------------------------------------------------------
warehousing and transportation
- -----------------------------------------------------------------------------------------------------------------------
expenses - 15,101 104,330 (11,102) 108,329
Gross profit - 5,635 38,065 - 43,700
Operating and administrative
(income) expenses (1,420) 2,712 34,881 - 36,173
- -----------------------------------------------------------------------------------------------------------------------
Non-recurring charge - - 8,949 - 8,949
- -----------------------------------------------------------------------------------------------------------------------
Operating income (loss) 1,420 2,923 (5,765) - (1,422)
Interest expense, net (1,116) - (5,588) - (6,704)
Equity in subsidiary earnings - - 1,904 (1,904) -
- -----------------------------------------------------------------------------------------------------------------------
Earnings before income tax 304 2,923 (9,449) (1,904) (8,126)
Income tax (expense) benefit (125) (1,198) 4,374 - 3,051
- -----------------------------------------------------------------------------------------------------------------------
=======================================================================================================================
Net earnings (loss) $ 179 $ 1,725 $ (5,075) $ (1,904) $ (5,075)
=======================================================================================================================
</TABLE>
<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 29, 1997 CGF Properties (Combined) Only Elimination Consolidated
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ 37,780 $ 275,453 $ (19,737) $ 293,495
Cost of merchandise sold, including
- -----------------------------------------------------------------------------------------------------------------------
warehousing and transportation
- -----------------------------------------------------------------------------------------------------------------------
expenses - 27,292 201,249 (19,737) 208,803
Gross profit - 10,488 74,204 - 84,692
Operating and administrative
(income) expenses (2,669) 5,530 68,826 - 71,687
- -----------------------------------------------------------------------------------------------------------------------
Non-recurring charge - - 8,949 - 8,949
- -----------------------------------------------------------------------------------------------------------------------
Operating income (loss) 2,669 4,958 (3,571) - 4,056
Interest expense, net (2,312) - (11,103) - (13,415)
Equity in subsidiary earnings - - 3,136 (3,136) -
- -----------------------------------------------------------------------------------------------------------------------
Earnings before income tax 357 4,958 (11,538) (3,136) (9,359)
Income tax (expense) benefit (147) (2,032) 5,444 - 3,265
- -----------------------------------------------------------------------------------------------------------------------
=======================================================================================================================
Net earnings (loss) $ 210 $ 2,926 $ (6,094) $ (3,136) $ (6,094)
=======================================================================================================================
</TABLE>
<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
13 Weeks Ended June 30, 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
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) 483 - (186)
- -----------------------------------------------------------------------------------------------------------------------
=======================================================================================================================
Net earnings (loss) $ (516) $ 1,478 $ (415) $ (962) $ (415)
=======================================================================================================================
</TABLE>
<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) 219,823
Gross profit - 10,739 73,169 - 83,939
Operating and administrative
(income) expenses (472) 6,194 66,691 - 72,444
- -----------------------------------------------------------------------------------------------------------------------
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>
<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 29, 1997 CGF Properties (Combined) Only Consolidated
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 324 $ 10 $ 5,623 $ 5,957
- -----------------------------------------------------------------------------------------------------------------------
Investing activities
Addition to property and equipment - (10) (1,935) (1,945)
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities - (10) (1,935) (1,945)
- -----------------------------------------------------------------------------------------------------------------------
Financing activities
Payments on long-term debt (322) - (2,810) (3,132)
Short term borrowings, net - - 900 900
Issuance of treasury stock - - 309 309
- -------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities(322) - (1,601) (1,923)
- -----------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 2 - 2,087 2,089
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 53 106 8,496 8,655
=======================================================================================================================
Cash and cash equivalents at end of period $ 55 $ 106 $ 10,583 $ 10,744
</TABLE>
<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)
Purchase of treasury stock - - 12 12
Change in stock subscription receivable - - 44 44
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in 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>
<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 29, 1997 Compared to 13 Weeks Ended June 30, 1996
Sales. Sales for the 13 weeks ended June 29, 1997 were $152.0 million
compared to $161.0 million for the 13 weeks ended June 30, 1996. The 5.5%
decrease was due in part to decreases at the wholesale and freight divisions as
well as generally softer comparable store sales at the retail division. Sales at
the retail division were impacted by the change in the Easter holiday sales
which fell into the first quarter of 1997 versus the second quarter of the prior
year, increased competitive activity and the strong sales in the prior year
period due to the kick-off of the "Carrs Plus" electronic marketing campaign.
The decrease in sales for the second 13 weeks of 1997 reflects a 3.9% decrease
in comparable store sales at the retail division.
Gross Profit. Gross profit for the 13 weeks ended June 29, 1997 was
$43.7 million compared to $43.8 million for the 13 weeks ended June 30, 1996.
The decrease in gross margin dollars is primarily attributable to the decrease
in sales. As a percentage of sales, gross profit was 28.7% for the 13 weeks 1997
compared to 27.2% for the 13 weeks 1996. Gross profit as a percentage of sales
for the 13 weeks 1997 increased primarily as the result of improved buying
practices during the period coupled with improved margins at the wholesale
division.
Operating and Administrative Expenses. Operating and administrative
expenses for the 13 weeks ended June 29, 1997 were $36.2 million compared to
$37.0 million for the 13 weeks ended June 30, 1996. Operating and administrative
expenses as a percentage of sales were 23.8% for the 13 weeks 1997 compared to
23.0% for the 13 weeks 1996.
Operating Income. Operating income for the 13 weeks ended June 29, 1997
increased $0.7 million from $6.8 million in the second quarter of 1996 to $7.5
million in the second quarter of 1997. This increase in operating income was due
primarily to the improvements in gross profit margin and the effective expense
control in the quarter.
Other Income and Expense. Net interest expense was $6.7 million for the
13 weeks ended June 29, 1997 compared to $7.1 million for the 13 weeks ended
June 30, 1996. The decrease in interest expense was due primarily to lower
average debt balances in the quarter. In June 1997, the Company recognized a
non-recurring pre-tax restructuring charge of $8.9 million, principally
associated with its decision to close its YES Foods institutional food service
business along with the discontinuance of its wholesaling services to a Russian
export business.
Income Taxes. Income tax benefit for the 13 weeks ended June 29, 1997
was $3.1 million compared to a $0.2 million expense for the 13 weeks ended June
30, 1996.
<PAGE>
Net Loss. Net income for the 13 weeks ended June 29, 1997 before the
non-recurring pre-tax restructuring charge of $8.9 million was $0.2 million, or
$0.02 per share, versus a net loss of $0.4 million, or $0.05 per share for the
13 weeks ended June 30, 1996. The net loss for the 13 weeks 1997 including the
non-recurring charge was $5.1 million, or $0.64 per share.
26 Weeks Ended June 29, 1997 Compared to 26 Weeks Ended June 30, 1996
Sales. Sales for the 26 weeks ended June 29, 1997 were $293.5 million
compared to $303.8 million for the 26 weeks ended June 30, 1996. The decrease in
sales for the 26 weeks of 1997 reflects a decrease of 1.6% in total retail
comparable store sales.
Gross Profit. Gross profit for the 26 weeks ended June 29, 1997 was
$84.7 million compared to $83.9 million for the 26 weeks ended June 30, 1996.
The increase in gross margin dollars is partially attributable to improved
buying practices and to improved gross margins at the wholesale division. As a
percentage of sales, gross profit was 28.9% for the 26 weeks 1997 compared to
27.6% for the 26 weeks 1996.
Operating and Administrative Expenses. Operating and administrative
expenses for the 26 weeks ended June 29, 1997 were $71.7 million compared to
$72.4 million for the 26 weeks ended June 30, 1996. Operating and administrative
expenses as a percentage of sales were 24.4% for the 26 weeks 1997 compared to
23.8% for the 26 weeks 1996. The decrease in operating expense dollars is due
partially to the reduction in sales coupled with the effective expense control
during the first half of 1997.
Operating Income. Operating income for the 26 weeks ended June 29, 1997
increased $1.5 million from $11.5 million, or 3.8% of sales, in 1996 to $13.0
million, or 4.4% of sales in 1997 due to improved gross profit margin and
expense control.
Other Income and Expense. Net interest expense was $13.4 million for
the 26 weeks ended June 29, 1997 compared to $14.0 million for the 26 weeks
ended June 30, 1996. The decrease in interest expense is due to lower average
debt balances during the first half of 1997. In June 1997, the Company
recognized a non-recurring pre-tax restructuring charge of $8.9 million,
principally associated with its decision to close its YES Foods institutional
feed service business along with the discontinuance of its wholesaling services
to a Russian export business.
Income Taxes. The Company recognized an income tax benefit for the 26
weeks ended June 29, 1997 of $3.3 million compared to a $0.5 million benefit for
the 26 weeks ended June 30, 1996.
Net Loss. Net loss for the 26 weeks ended June 29, 1997 before its
non-recurring pre-tax restructuring charge of $8.9 million was $0.8 million, or
$0.10 per share, versus a net loss $2.0 million, or $0.26 per share for the 26
weeks ended June 30, 1996. The net loss for the 26 weeks 1997 including the
non-recurring charge was $6.1 million, or $0.77 per share.
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.
Net cash provided by operating activities was $6.0 million for the 26
weeks ended June 29, 1997 compared to net cash provided by operating activities
of $8.4 million for the same period in 1996. The change in the 26 weeks 1997
compared to 1996 was due primarily to the increased net loss recorded during
this period.
<PAGE>
Capital expenditures for the 26 weeks ending June 29, 1997 were $1.9
million. Capital expenditures are expected to range between $6.0 and $8.0
million for fiscal 1997. It is anticipated that the balance of 1997 capital
expenditures will be funded out of cash provided by operations and borrowings
under the working capital revolver.
Net cash used by financing activities for the 26 weeks ending June 29,
1997 was $1.9 million. During this time period, the Company increased its
borrowings under its revolving line of credit by $0.9 million and made payments
against its long-term debt in the amount of $3.1 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 29, 1997 there was $7.9 million outstanding on the revolving
debt. The Company had available unused credit of $27.1 million. Funds borrowed
under the revolving credit portion of the Company's credit facility are
restricted to working capital and general corporate purposes.
Item 2. Quantitative and Qualitative Disclosure about Market Risk
Not applicable
<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 a Vote of Security Holders
The Annual Meeting of Shareholders for Carr-Gottstein Foods Co. was
held in Anchorage, Alaska on May 16, 1997, at the Z.J. Loussac Library.
The only issue presented for a vote of the shareholders was the
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 5,031,137 19,655
Lawrence H. Hayward 5,032,137 18,655
Leonard I. Green 5,030,087 20,705
Jonathan D. Sokoloff 5,031,137 19,655
Gregory J. Annick 5,030,136 20,656
E. Dean Werries 5,029,635 21,157
Donald E. Gallegos 5,030,137 20,655
Item 5. Other Information - None
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 29, 1997.
<PAGE>
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/s Lawrence H. Hayward
Lawrence H. Hayward
President and
Chief Executive Officer
Date: August 11, 1997
By: s/s Donald J. Anderson
Donald J. Anderson
Senior Vice-President and
Chief Financial Officer
Date: August 11, 1997
<PAGE>
CARR-GOTTSTEIN FOODS CO.
Exhibit Index
The following exhibits are attached as indicated:
Exhibit
Number Description of Exhibit
27.1 Financial Data Schedule
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