<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 March 30, 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 (I.R.S. Employer Identification No.)
incorporation or organization)
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 May
9, 1997 was 7,882,792 shares.
EXHIBIT INDEX
APPEARS AT PAGE 14
Page 1 of 16
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
CARR GOTTSTEIN FOODS CO.
AND SUBSIDIARIES
FORM 10-Q
For the Quarterly Period Ended March 30, 1997
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
a) Consolidated Balance Sheets as of March 30, 1997
(unaudited) and December 29, 1996 1
b) Consolidated Statements of Operations for the 13 weeks
ended March 30, 1997 (unaudited) and March 31, 1996
(unaudited) 2
c) Consolidated Statements of Cash Flows for the 13 weeks
ended March 30, 1997 (unaudited) and March 31, 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) 11
Item 3. Quantitative and Qualitative Disclosure about Market Risk 12
PART II. OTHER INFORMATION 13
SIGNATURES 14
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
AMOUNTS IN THOUSANDS
- --------------------------------------------------------------------------------
MARCH 30, DECEMBER 29,
1997 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 9,155 $ 8,655
Accounts receivable, net 18,607 16,650
Income taxes receivable 499 -
Inventories 53,974 54,232
Deferred taxes 1,918 1,918
Prepaid expenses and other current assets 3,212 2,809
- --------------------------------------------------------------------------------
Total current assets 87,365 84,264
Property, plant and equipment, at cost, net of
accumulated depreciation 139,192 142,179
Intangible assets, net of accumulated amortization 91,018 91,731
Deferred taxes 334 334
Other assets 11,636 12,336
- --------------------------------------------------------------------------------
$329,545 $ 330,844
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 40,312 $ 38,467
Accrued expenses 16,743 15,145
Income taxes payable - 298
Current maturities of long-term debt 8,299 7,281
Revolving line of credit 6,500 7,000
Estimated obligation for self-insurance 1,774 1,958
- --------------------------------------------------------------------------------
Total current liabilities 73,628 70,149
Long-term debt, excluding current maturities 223,659 227,640
Estimated obligation for self-insurance 1,536 1,536
Other liabilities 1,839 1,921
- --------------------------------------------------------------------------------
Total liabilities 300,662 301,246
- --------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $.01 par value, authorized
25,000 shares, issued 9,680 shares 97 97
Additional paid in capital 52,111 52,513
Deficit (11,563) (10,544)
- --------------------------------------------------------------------------------
40,645 42,066
Less treasury stock, 1,749 and 1,835
shares respectively, at cost 11,762 12,468
- --------------------------------------------------------------------------------
Total stockholders' equity 28,883 29,598
- --------------------------------------------------------------------------------
Commitments and contingencies
- --------------------------------------------------------------------------------
$329,545 $ 330,844
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
1
<PAGE>
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
- ---------------------------------------------------------------------------------------------
AMOUNTS IN THOUSANDS (EXCEPT PER SHARE DATA)
- ---------------------------------------------------------------------------------------------
MARCH 30, MARCH 31,
1997 1996
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
SALES $ 141,467 $ 142,808
Cost of merchandise sold, including warehousing
and transportation expenses 100,475 102,705
- ---------------------------------------------------------------------------------------------
Gross profit 40,992 40,103
Operating and administrative expenses 35,514 35,435
- ---------------------------------------------------------------------------------------------
OPERATING INCOME 5,478 4,668
- ---------------------------------------------------------------------------------------------
Other income (expense):
Interest expense, net (6,711) (6,957)
- ---------------------------------------------------------------------------------------------
Total other expense (6,711) (6,957)
- ---------------------------------------------------------------------------------------------
Earnings before income tax expense (1,233) (2,289)
Income tax benefit 214 656
- ---------------------------------------------------------------------------------------------
Net loss $ (1,019) $ (1,633)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Loss per common share:
Net loss per share $ (0.13) $ (0.21)
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Weighted average common shares outstanding 7,883 7,805
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- ---------------------------------------------------------------------------------------------
AMOUNTS IN THOUSANDS
- ---------------------------------------------------------------------------------------------
MARCH 30, MARCH 31,
1997 1996
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (1,019) $ (1,633)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 3,461 3,630
Amortization of intangibles 713 717
Amortization of loan fees and discounts 344 365
(Increase) decrease in current assets:
Income tax receivables (499) -
Receivables (1,957) (1,083)
Inventories 258 (3,030)
Prepaid expenses (403) (476)
Other assets 356 496
(Decrease) increase in current liabilities:
Accounts payable 1,845 3,866
Accrued expenses 1,598 8,287
Income taxes payable (298) -
Other liabilities (266) 223
- ---------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,133 11,362
- ---------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Additions to property and equipment (474) (1,741)
- ---------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (474) (1,741)
- ---------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net borrowings (payments) under revolving line of credit (500) (8,000)
Payments on long-term debt (2,963) (151)
Change in stock subscriptions receivable - (44)
Issuance of treasury stock 304 11
- ---------------------------------------------------------------------------------------------
NET CASH USED BY FINANCING ACTIVITIES (3,159) (8,095)
- ---------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 500 1,526
Cash and cash equivalents at beginning of period 8,655 2,817
- ---------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,155 $ 4,343
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 4,016 $ 3,319
Income taxes 501 -
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</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 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 will have minimal effect on
the Company's EPS.
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 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
MARCH 30, 1997 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Inventories $ - $ 4,476 $ 49,498 $ - $ 53,974
Other current assets 6,159 66,743 4,884 (44,395) 33,391
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 6,159 71,219 54,382 (44,395) 87,365
Property, plant and equipment, net 64,561 5,523 69,108 - 139,192
Intangible, net - - 91,018 - 91,018
Investments in subsidiaries - - 103,152 (103,152) -
Other assets 32 483 11,455 - 11,970
- ----------------------------------------------------------------------------------------------------------------------------------
$ 70,752 $ 77,225 $329,115 $ (147,547) $ 329,545
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 1,114 $ 2,016 $114,893 $ (44,395) $ 73,628
Long-term debt, excluding current maturities 41,695 - 181,964 - 223,659
Other liabilities - - 3,375 - 3,375
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 42,809 2,016 300,232 (44,395) 300,662
- ----------------------------------------------------------------------------------------------------------------------------------
Common stock 10 44 97 (54) 97
Additional paid-in capital 28,966 39,381 52,111 (68,347) 52,111
Retained earnings (deficit) (1,033) 35,784 (11,563) (34,751) (11,563)
- ----------------------------------------------------------------------------------------------------------------------------------
27,943 75,209 40,645 (103,152) 40,645
Less treasury stock - - (11,762) - (11,762)
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 27,943 75,209 28,883 (103,152) 28,883
- ----------------------------------------------------------------------------------------------------------------------------------
$ 70,752 $ 77,225 $329,115 $ (147,547) $ 329,545
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</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 29, 1996 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
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>
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
FIRST QUARTER 1997 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ 17,044 $133,058 $ (8,635) $ 141,467
Cost of merchandise sold, including
warehousing and transportation expenses - 12,191 96,919 (8,635) 100,475
- ----------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT - 4,853 36,139 - 40,992
Operating and administrative expenses (1,249) 2,818 33,945 - 35,514
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (1,249) 2,035 2,194 - 5,478
Interest expense, net (1,196) - (5,515) - (6,711)
Equity in subsidiary earnings - - 1,232 (1,232) -
- ----------------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAX (53) 2,035 (2,089) (1,232) (1,233)
Income tax (expense) benefit (22) (834) 1,070 - 214
- ----------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS $ (31) $ 1,201 $ (1,019) $ (1,232) $ (1,019)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</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
FIRST QUARTER 1996 CGF PROPERTIES (COMBINED) ONLY ELIMINATION CONSOLIDATED
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ 17,415 $133,443 $ (8,050) $ 142,808
Cost of merchandise sold - 12,263 98,493 (8,050) 102,705
- ----------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT - 5,152 34,950 - 40,103
Operating and administrative expenses (215) 3,112 32,537 - 35,435
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 215 2,040 2,413 - 4,668
Interest expense, net (1,135) - (5,822) - (6,957)
Equity in subsidiary earnings - - 660 (660) -
- ----------------------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAX (920) 2,040 (2,749) (660) (2,289)
Income tax expense 378 (838) 1,116 - 656
- ----------------------------------------------------------------------------------------------------------------------------------
NET EARNINGS $ (542) 1,202 $ (1,633) $ (660) $ (1,633)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<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
FIRST QUARTER 1997 CGF PROPERTIES (COMBINED) ONLY CONSOLIDATED
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES $ 130 $ (24) $ 4,027 $ 4,133
- ---------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Addition to property and equipment - (9) (465) (474)
- ---------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (9) (465) (474)
- ---------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Short term borrowings, net - - (500) (500)
Payments on long-term debt (128) - (2,835) (2,963)
(Purchase) issuance of treasury stock - - 304 304
- ---------------------------------------------------------------------------------------------------------------------
NET CASH USED BY FINANCING ACTIVITIES (128) - (3,031) (3,159)
- ---------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2 (33) 531 500
Cash and cash equivalents at beginning of period 53 106 8,496 8,655
- ---------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 55 $ 73 $ 9,027 $ 9,155
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<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
FIRST QUARTER 1996 CGF PROPERTIES (COMBINED) ONLY CONSOLIDATED
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ 87 $ 26 $ 11,250 $ 11,363
- ---------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Addition to property and equipment - - (1,741) (1,741)
- ---------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES - - (1,741) (1,741)
- ---------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net borrowings under line of credit - - (8,000) (8,000)
Payments on long-term debt (85) - (66) (151)
Purchase of treasury stock - - 11 11
Other - - 44 44
- ---------------------------------------------------------------------------------------------------------------------
NET CASH USED BY FINANCING ACTIVITIES (85) - (8,011) (8,096)
- ---------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2 26 1,498 1,526
Cash and cash equivalents at beginning of period 53 57 2,707 2,817
- ---------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 55 $ 83 $ 4,205 $ 4,343
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
CARR-GOTTSTEIN FOODS CO. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (UNAUDITED)
The following discussion should be read in conjunction with the 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 MARCH 30, 1997 COMPARED TO 13 WEEKS ENDED MARCH 31, 1996
SALES. Sales for the 13 weeks ended March 30, 1997 were $141.5 million
compared to $142.8 million for the 13 weeks ended March 31, 1996. The 0.9%
decrease was due primarily to decreases in sales at the wholesale and freight
divisions. Retail comparable store sales for the 13 weeks of 1997 increased
1.1% from the comparable period in 1996.
GROSS PROFIT. Gross profit for the 13 weeks ended March 30, 1997 was
$41.0 million compared to $40.1 million for the 13 weeks ended March 31,
1996. As a percentage of sales, gross profit was 29.0% for the 13 weeks
1997 compared to 28.1% for the 13 weeks 1996. Gross profit as a percentage
of sales for the 13 weeks 1997 increased primarily as a result of improved
buying practices achieved during this time frame.
OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative
expenses for the 13 weeks ended March 30, 1997 were $35.5 million compared to
$35.4 million for the 13 weeks ended March 31, 1996. Operating and
administrative expenses as a percentage of sales were 25.1% for the 13 weeks
1997 compared to 24.8% for the 13 weeks 1996. Operating expenses for the
1997 quarter remained virtually flat as compared to the 1996 quarter
primarily due to effective expense controls.
OPERATING INCOME. Operating income for the 13 weeks ended March 30,
1997 increased to $5.5 million from $4.7 million for the 13 weeks ended March
31, 1996. This increase was due to the improved gross margin coupled with
effective expense control in the quarter.
OTHER INCOME AND EXPENSE. Net interest expense was $6.7 million for the
13 weeks ended March 30, 1997 compared to $7.0 million for the 13 weeks ended
March 31, 1996. The decrease in interest expense was due primarily to lower
average debt balances in the quarter.
INCOME TAXES. The Company recognized an income tax benefit for the 13
weeks ended March 30, 1997 of $0.2 million compared to a $0.7 million benefit
for the 13 weeks ended March 31, 1996.
NET INCOME. Net loss for the 13 weeks ended March 30, 1997 was $1.0
million, or $0.13 per share, versus a net loss of $1.6 million, or $0.21 per
share for the 13 weeks ended March 31, 1996.
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.
11
<PAGE>
Net cash provided by operating activities was $4.1 million for the 13
weeks ended March 30, 1997 compared to net cash provided by operating
activities of $11.4 million for the same period in 1996. The change in the 13
weeks 1997 compared to 1996 was due primarily to increased receivables offset
by larger increases in accounts payable and accrued expenses.
Capital expenditures for the 13 weeks ending March 30, 1997 were $0.5
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 13 weeks ending March 30,
1997 was $3.2 million. During this time period, the Company reduced its
borrowings under its revolving line of credit by $0.5 million and made
payments against its long-term debt in the amount of $3.0 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 March 30, 1997 there was $6.5 million outstanding on the revolving
debt. The Company had available unused credit of $28.5 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
12
<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 - None
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 14 hereof are
filed with this quarterly report on Form 10-Q.
(b) No reports were filed on Form 8-K during the quarter ended March
30, 1997.
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: May 12, 1997
By: s/s Donald J. Anderson
----------------------------------------------
Donald J. Anderson
Senior Vice-President and
Chief Financial Officer
Date: May 12, 1997
13
<PAGE>
CARR-GOTTSTEIN FOODS CO.
Exhibit Index
The following exhibits are attached as indicated:
Exhibit
NUMBER DESCRIPTION OF EXHIBIT
10.1 Employment Agreement - Donald J. Anderson
27.1 Financial Data Schedule
14
<PAGE>
CARR-GOTTSTEIN FOODS CO.
DONALD J. ANDERSON
This Employment Agreement ("Agreement") is made as of December 2, 1996
by and between CARR-GOTTSTEIN FOODS CO., a Delaware corporation, ("CGF") and
Donald J. Anderson.
RECITALS
A. CGF is a corporation organized under the laws of Delaware. It is
engaged in the business of marketing food and drug products.
B. CGF desires to employ Mr. Anderson as Senior Vice President and
Chief Financial Officer of CGF to manage the business and affairs of CGF.
Mr. Anderson desires to be so employed and act in such capacities.
Accordingly, the parties agree as follows:
1. EMPLOYMENT - CGF will employ Mr. Anderson, and Mr. Anderson will be
employed by CGF, as the Senior Vice President and Chief Financial Officer of
CGF. Mr. Anderson Shall serve at the will of the Chief Executive Officer.
His duties shall be assigned by, and he shall report to, the Chief Executive
Officer. Mr. Anderson shall be accorded the authority commensurate with his
position as Chief Financial Officer of CGF. Mr. Anderson shall make a good
faith effort to act in the best interests of CGF and shall not accept other
employment, including service as a consultant or director of any other
business or organization, except volunteer service for local charitable
organizations which service does not materially interfere with his work at
CGF.
2. LOCATION OF EMPLOYMENT - Mr. Anderson's principal place of employment
shall be at the executive offices of CGF in Anchorage, Alaska or at such
other location as mutually agreed upon by the parties.
3. COMPENSATION
a. SALARY - CGF shall pay Mr. Anderson a salary at the annual rate of
$150,000, less normal withholdings, for each calendar year, pro-rated for any
portion thereof, payable in substantially equal installments in accordance
with CGF's usual payroll practice, but in no event less frequently than
monthly.
b. BONUS - Mr. Anderson shall participate in the Bonus Plan for the
most senior executives of CGF, subject to the following. Mr. Anderson shall
be eligible for an annual bonus of up to 50% of his annual salary, depending
upon the financial performance of CGF.
c. OTHER BENEFITS - Mr. Anderson shall receive other benefits such as
vacation, personal and sick leave, insurance and other benefits consistent
with the then-current policies of CGF and equal to those benefits extended to
the most senior executives of CGF. Mr. Anderson will be provided with office
facilities, secretarial support, and business expense reimbursement
consistent with the policies of CGF with respect to its most senior
executives.
d. SEVERANCE - If Mr. Anderson's employment is terminated for any
reason other than Just Cause, CGF shall continue to pay him an amount equal
to his then-current salary, less normal withholdings, at intervals equal to
the salary payments being received by the other most senior executives of the
Company. Such payments shall continue for the twelve-month period following
the termination, whichever is longer; provided, however, that if Mr. Anderson
becomes an employee, consultant, or partner of a company or business entity
that directly competes with CGF after the expiration of the waiting period
described in
15
<PAGE>
section 10 below, any severance payments will end as of the date such
relationship between Mr. Anderson and the competing entity effectively
commences. For the purpose of this section, a termination for "Just Cause"
shall mean a termination of employment for any of the following reasons: (i)
an intentional or grossly negligent violation of any reasonable rule or
regulation of the Board of Directors of the Company that results in damage to
the Company or which, after notice to do so, the actor fails to correct
within a reasonable time; (ii) any willful misconduct or gross negligence in
the responsibilities assigned to the actor; (iii) any wrongful or illegal
conduct of the actor which has an adverse impact on the Company or which
constitutes a material misappropriation of Company assets; or (iv) the
performance of services for any other company, entity, or person which
directly competes with the Company during the time the actor is employed by
the Company, without the written approval of the Board of Directors of the
Company.
e. MOVING EXPENSES - In the event CGF terminates Mr. Anderson's
employment for any reason other than Just Cause, as defined above, CGF shall
pay the reasonable cost, not to exceed $25,000, of moving Mr. Anderson's
household possessions to a destination of Mr. Anderson's choice in or about
the Pacific Northwest region of the mainland United States. For the purposes
of this agreement, "household possessions" shall include a reasonable and
ordinary amount of furniture, clothing, and personal property used in a
single family household, including up to two automobiles. CGF shall not be
responsible for premiums associated with the shipment of extraordinary items
such as fine art or animals.
4. DISPUTE RESOLUTION - This Agreement shall be interpreted according to
Alaska law. Any disputes arising out of or relating to this Agreement shall
be settled by arbitration held in Anchorage, Alaska in accordance with the
Commercial Rules of the American Arbitration Association and judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof.
5. ENTIRE AGREEMENT / MODIFICATIONS - This document constitutes the entire
agreement of the parties with respect to Mr. Anderson's employment with CGF.
It supersedes any prior agreement, statement or representation. It may be
modified only by written instrument executed by the party against which the
modification is asserted. Failure to require performance of any provision
shall not affect the right at a later time to enforce the same. No waiver by
either party of a breach, whether by conduct or otherwise, shall be
construed as a further or continuing waiver of any such breach.
6. SEVERABILITY - Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
7. SURVIVABILITY - The rights and obligations of the parties of the parties
to this Agreement under Sections 3(e) and (f), 4, and 9 shall survive the
termination of this Agreement.
8. ASSIGNABILITY
a) In the event CGF shall merge or consolidate with any other
partnership, limited liability company, corporation, or business entity or
all or substantially all CGF's business or assets shall be transferred in any
manner to any other partnership, limited liability company, corporation or
business entity, such successor shall thereupon succeed to, and be subject
to, all rights, interests, duties, obligations of, and shall thereafter be
deemed for all purposes hereof to be, CGF hereunder.
b) This Agreement is personal in nature and none of the parties hereto
shall, without the written consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder, except by operation of law
or pursuant to the terms of section 8(a) above.
16
<PAGE>
c) Nothing expressed or implied herein is intended or shall be
construed to confer upon or give to any person, other than the parties
hereto, any right, remedy or claim under or by reason of this Agreement or of
any term, covenant or condition hereof.
9. NON-COMPETITION - The parties recognize that Mr. Anderson will have
access to trade secrets and proprietary information of the Company, and they
recognize that should such information be revealed to a competitor, the
Company would be materially damaged in an amount difficult to calculate.
Accordingly, Mr. Anderson agrees that for one (1) year after termination of
his employment with the Company, regardless of the reason for such
termination, he shall not accept employment with, become a contractor to, or
perform any substantially similar role for any person or business entity that
directly competes with the Company.
The parties hereto execute this Agreement as the day and year first written
above.
CARR-GOTTSTEIN FOODS CO. DONALD J. ANDERSON
______________________________ _____________________________
By: Lawrence H. Hayward
Its: President & Chief Executive Officer
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> MAR-30-1997
<CASH> 9,155
<SECURITIES> 0
<RECEIVABLES> 19,095
<ALLOWANCES> 488
<INVENTORY> 53,974
<CURRENT-ASSETS> 87,365
<PP&E> 139,192
<DEPRECIATION> 0
<TOTAL-ASSETS> 329,545
<CURRENT-LIABILITIES> 73,628
<BONDS> 0
0
0
<COMMON> 97
<OTHER-SE> 28,786
<TOTAL-LIABILITY-AND-EQUITY> 329,545
<SALES> 141,467
<TOTAL-REVENUES> 141,467
<CGS> 100,475
<TOTAL-COSTS> 35,514
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,711
<INCOME-PRETAX> (1,233)
<INCOME-TAX> (214)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,019)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> 0
</TABLE>
