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 September 28, 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
November 10, 1997 was 7,937,296 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 September 28, 1997
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
a) Consolidated Balance Sheets
as of September 28, 1997 (unaudited) and December 29, 1996 1
b) Consolidated Statements of Operations for the 13 weeks and 39
weeks ended September 28, 1997 (unaudited) and September 29,
1996 (unaudited) 2
c) Consolidated Statements of Cash Flows for the 39 weeks ended
September 28, 1997 (unaudited) and September 29, 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>
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Carr-Gottstein Foods Co. and Subsidiaries
Consolidated Balance Sheets
- --------------------------------------------------------------------------------------------------------------------------
Amounts In Thousands
- --------------------------------------------------------------------------------------------------------------------------
September 28, December 29,
1997 1996
- ----------------------------------------------------------------------------------- -------------------- ------------------
Assets (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,841 $ 8,655
Accounts receivable, net 16,763 16,650
Income taxes receivable 911 -
Inventories 55,240 54,232
Deferred taxes 4,292 1,918
Prepaid expenses and other current assets 2,843 2,809
- ----------------------------------------------------------------------------------- -------------------- ------------------
Total current assets 87,890 84,264
Property, plant and equipment, at cost, net of accumulated depreciation 134,488 142,179
Intangible assets, net of accumulated amortization 89,688 91,731
Deferred taxes 334 334
Other assets 11,405 12,336
- ----------------------------------------------------------------------------------- -------------------- ------------------
$ 323,805 $ 330,844
=================================================================================== ==================== ==================
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable $ 39,816 $ 38,467
Accrued expenses 24,340 15,145
Income taxes payable - 298
Current maturities of long-term debt 8,336 7,281
Revolving line of credit 2,000 7,000
Estimated obligation for self-insurance 2,188 1,958
- ----------------------------------------------------------------------------------- -------------------- ------------------
Total current liabilities 76,680 70,149
Long-term debt, excluding current maturities 219,481 227,640
Estimated obligation for self-insurance 1,536 1,536
Other liabilities 1,944 1,921
- ----------------------------------------------------------------------------------- -------------------- ------------------
Total liabilities 299,641 301,246
- ----------------------------------------------------------------------------------- -------------------- ------------------
Stockholders' equity:
Common stock, $.01 par value, authorized 25,000 shares,
issued 9,680 shares 97 97
Additional paid in capital 52,088 52,513
Deficit (16,299) (10,544)
- ----------------------------------------------------------------------------------- -------------------- ------------------
35,886 42,066
Less treasury stock, 1,743 and 1,855 shares, at cost 11,722 12,468
- ----------------------------------------------------------------------------------- -------------------- ------------------
Total stockholders' equity 24,164 29,598
- ----------------------------------------------------------------------------------- -------------------- ------------------
Commitments and contingencies
=================================================================================== ==================== ==================
$ 323,805 $ 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 39 Weeks Ended
Sept. 28, Sept. 29, Sept. 28, Sept. 29,
1997 1996 1997 1996
- -------------------------------------------------------------- -------------- ----------------- --------------- ----------------
(unaudited) (unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 152,007 $ 158,506 $ 445,503 $ 462,268
Cost of merchandise sold, including warehousing
and transportation expenses 108,576 114,233 317,380 334,056
- ------------------------------------------------------------- --------------- ---------------- ---------------- ----------------
Gross profit 43,431 44,273 128,123 128,212
Operating and administrative expenses 35,467 37,101 107,154 109,545
Non-recurring charge - - 8,949 -
- ------------------------------------------------------------- --------------- ---------------- ---------------- ----------------
Operating income 7,964 7,172 12,020 18,667
Other expenses:
Interest expense, net (6,687) (6,805) (20,102) (20,820)
Other income (expense) (218) 73 (218) 75
- ------------------------------------------------------------- --------------- ---------------- ---------------- ----------------
Net income (loss) before taxes 1,059 440 (8,300) (2,078)
Income tax (expense) benefit (720) (504) 2,545 (34)
- ------------------------------------------------------------- --------------- ---------------- ---------------- ----------------
Net income (loss) $ 339 $ (64) $ (5,755) $ (2,112)
============================================================= =============== ================ ================ ================
Income (loss) per common share:
Net income (loss) per share $ 0.04 $ (0.01) $ (0.73) $ (0.27)
============================================================= =============== ================ ================ ================
Weighted average common shares outstanding 7,934 7,815 7,916 7,810
============================================================= =============== ================ ================ ================
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
- ---------------------------------------------------------------------------------------------------------------------------
39 weeks Ended
Sept. 28, Sept. 29,
1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C>
Operating activities:
Net loss $ (5,755) $ (2,112)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 10,235 10,889
Amortization of intangibles 2,143 2,144
Amortization of loan fees and discounts 1,016 1,084
Gain on disposal of property and equipment (40) (72)
(Increase) decrease in assets:
Income tax receivable (911) (48)
Accounts receivable (113) (3,565)
Inventories (1,008) (6,676)
Prepaid expenses (34) 199
Deferred taxes (2,374) -
Other assets (85) 681
(Decrease) increase in liabilities:
Accounts payable 1,349 2,138
Accrued expenses 9,195 9,277
Income taxes payable (298) -
Self insurance reserve 230 (317)
Other liabilities 23 (142)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 13,573 13,480
- ---------------------------------------------------------------------------------------------------------------------------
Investing activities:
Additions to property and equipment (3,192) (3,216)
Proceeds from sale of property and equipment 588 232
- -----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (2,604) (2,984)
- ---------------------------------------------------------------------------------------------------------------------------
Financing activities:
Payments on long-term debt (7,104) (3,210)
Short term payments, net (5,000) (5,900)
Issuance of treasury stock 321 62
Change in stock subscriptions receivable - 44
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (11,783) (9,004)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (814) 1,492
Cash and cash equivalents at beginning of period 8,655 2,817
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 7,841 $ 4,309
===========================================================================================================================
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $ 16,083 $ 15,298
Income taxes 956 -
===========================================================================================================================
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 and 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
September 28, 1997 CGF Properties (Combined) Only Elimination Consolidated
- -----------------------------------------------------------------------------------------------------------------------
Assets
<S> <C> <C> <C> <C> <C>
Inventories $ - $ 3,514 $ 51,726 $ - $ 55,240
Other current assets 7,303 72,942 3,200 (50,795) 32,650
- -----------------------------------------------------------------------------------------------------------------------
Total current assets 7,303 76,456 54,926 (50,795) 87,890
Property, plant and equipment, net 63,301 5,127 66,060 - 134,488
Intangible, net - - 89,688 - 89,688
Investments in subsidiaries - - 106,664 (106,664) -
Other assets 32 573 11,134 - 11,739
- -----------------------------------------------------------------------------------------------------------------------
$ 70,636 $ 82,156 $ 328,472 $ (157,459) $ 323,805
=======================================================================================================================
Liabilities and Stockholders' Equity
Current liabilities $ 1,071 $3,729 $ 122,675 $ (50,795) $ 76,680
Long-term debt, excluding current
maturities 41,328 - 178,153 - 219,481
Other liabilities - - 3,480 - 3,480
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 42,399 3,729 304,308 (50,795) 299,641
Common stock 10 44 97 (54) 97
Additional paid-in capital 28,966 39,381 52,088 (68,347) 52,088
Retained earnings (deficit) (739) 39,002 (16,299) (38,263) (16,299)
- -----------------------------------------------------------------------------------------------------------------------
28,237 78,427 35,886 (106,664) 35,886
Less treasury stock - - 11,722 - 11,722
- ---------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 28,237 78,427 24,164 (106,664) 24,164
- -----------------------------------------------------------------------------------------------------------------------
$ 70,636 $ 82,156 $ 328,472 $ (157,459) $ 323,805
=======================================================================================================================
</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 Sept. 28, 1997 CGF Properties (Combined) Only Elimination Consolidated
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ 20,447 $ 142,662 $ (11,102) $ 152,007
Cost of merchandise sold, including
warehousing and transportation
expenses - 15,132 104,546 (11,102) 108,576
- -----------------------------------------------------------------------------------------------------------------------
Gross profit - 5,315 38,116 - 43,431
Operating and administrative
(income) expenses (1,360) 2,785 34,042 - 35,467
- -----------------------------------------------------------------------------------------------------------------------
Operating income (loss) 1,360 2,530 4,074 - 7,964
Interest expense, net (1,112) - (5,575) - (6,687)
Other income (expense) - - (218) - (218)
Equity in subsidiary earnings - - 1,639 (1,639) -
- -----------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income tax 248 2,530 (80) (1,639) 1,059
Income tax (expense) benefit (102) (1,037) 419 - (720)
- -----------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 146 $ 1,493 $ 339 $ (1,639) $ 339
=======================================================================================================================
</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
39 Weeks Ended Sept. 28, 1997 CGF Properties (Combined) Only Elimination Consolidated
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ 58,227 $ 418,115 $ (30,839) $ 445,503
Cost of merchandise sold, including
warehousing and transportation
expenses - 42,424 305,795 (30,839) 317,380
- -----------------------------------------------------------------------------------------------------------------------
Gross profit - 15,803 112,320 - 128,123
Operating and administrative
(income) expenses (4,029) 8,315 102,868 - 107,154
Non-recurring charge - - 8,949 - 8,949
- -----------------------------------------------------------------------------------------------------------------------
Operating income 4,029 7,488 503 - 12,020
Interest expense, net (3,424) - (16,678) - (20,102)
Other income (expense) - - (218) - (218)
Equity in subsidiary earnings - - 4,775 (4,775) -
- -----------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income tax 605 7,488 (11,618) (4,775) (8,300)
Income tax (expense) benefit (249) (3,069) 5,863 - 2,545
- -----------------------------------------------------------------------------------------------------------------------
=======================================================================================================================
Net earnings (loss) $ 356 $ 4,419 $ (5,755) $ (4,775) $ (5,755)
=======================================================================================================================
</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 Sept. 29, 1996 CGF Properties (Combined) Only Elimination Consolidated
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ 19,022 $ 148,472 $ (8,988) $ 158,506
Cost of merchandise sold, including
warehousing and transportation
expenses - 13,844 109,377 (8,988) 114,233
- -----------------------------------------------------------------------------------------------------------------------
Gross profit - 5,178 39,095 - 44,273
Operating and administrative
expenses (242) 3,104 34,239 - 37,101
- -----------------------------------------------------------------------------------------------------------------------
Operating income 242 2,074 4,856 - 7,172
Interest expense, net (1,127) - (5,678) - (6,805)
Other income - - 73 - 73
Equity in subsidiary earnings - - 702 (702) -
- -----------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income tax (885) 2,074 (47) (702) 440
Income tax (expense) benefit 363 (850) (17) - (504)
- -----------------------------------------------------------------------------------------------------------------------
=======================================================================================================================
Net earnings (loss) $ (522) $ 1,224 $ (65) $ (702) $ (64)
=======================================================================================================================
</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
39 Weeks Ended Sept. 29, 1996 CGF Properties (Combined) Only Elimination Consolidated
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ 56,650 $ 432,682 $ (27,064) $ 462,268
Cost of merchandise sold, including
warehousing and transportation
expenses - 40,733 320,387 (27,064) 334,056
- -----------------------------------------------------------------------------------------------------------------------
Gross profit - 15,917 112,295 - 128,012
Operating and administrative
(income) expenses (714) 9,298 100,961 - 109,545
- -----------------------------------------------------------------------------------------------------------------------
Operating income 714 6,619 11,334 - 18,667
Interest expense, net (3,393) - (17,427) - (20,820)
Other income - - 75 - 75
Equity in subsidiary earnings - - 2,324 (2,324) -
- -----------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income tax (2,679) 6,619 (3,694) (2,324) (2,078)
Income tax (expense) benefit 1,099 (2,715) 1,582 - (34)
- -----------------------------------------------------------------------------------------------------------------------
=======================================================================================================================
Net earnings (loss) $ (1,580) $ 3,904 $ (2,112) $ (2,324) $ (2,112)
=======================================================================================================================
</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
39 Weeks Ended September 28, 1997 CGF Properties (Combined) Only Consolidated
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 490 $ 12 $ 13,071 $ 13,573
- -----------------------------------------------------------------------------------------------------------------------
Investing activities
Addition to property and equipment - (12) (3,080) (3,092)
Proceeds from sale of property and equipment - - 588 588
Additions to intangible assets - - (100) (100)
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities - (12) (2,592) (2,604)
Financing activities
Payments on long-term debt (488) - (6,616) (7,104)
Short term borrowings (payments), net - - (5,000) (5,000)
Issuance of treasury stock - - 321 321
- -----------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities (488) - (11,295) (11,783)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 2 - (816) (814)
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 53 106 8,496 8,655
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 55 $ 106 $ 7,680 $ 7,841
=======================================================================================================================
</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
39 Weeks Ended September 29, 1996 CGF Properties (Combined) Only Consolidated
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 393 $ 4 $ 13,083 $ 13,480
- -----------------------------------------------------------------------------------------------------------------------
Investing activities
Addition to property and equipment - (4) (3,212) (3,216)
Proceeds from sale of property and equipment - - 232 232
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities - - (4) (2,984)
- -----------------------------------------------------------------------------------------------------------------------
Financing activities
Payments on long-term debt (393) - (2,817) (3,210)
Short term borrowings, net - - (5,900) (5,900)
Purchase of treasury stock - - 62 62
Change in stock subscription receivable - - 44 44
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (393) - (8,611) (9,004)
- -----------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents - - 1,492 1,492
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 55 83 2,679 2,817
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 55 $ 83 $ 4,171 $ 4,309
=======================================================================================================================
</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 September 28, 1997 Compared to 13 Weeks Ended September 29, 1996
Sales. Sales for the 13 weeks ended September 28, 1997 were $152.0
million compared to $158.5 million for the 13 weeks ended September 29, 1996.
The 4.1% decrease was due primarily to decreases at the wholesale and freight
divisions resulting from the closure of the YES Foods institutional food service
business and the discontinuance of service to a Russian export business as well
as generally softer comparable store sales at the retail division. Sales at the
retail division were impacted by increased competitive activity and strong
comparable sales in the prior year period. The decrease in sales for the third
quarter of 1997 reflects a 2.1% decrease in comparable store sales at the retail
division.
Gross Profit. Gross profit for the 13 weeks ended September 28, 1997
was $43.4 million compared to $44.3 million for the 13 weeks ended September 29,
1996. The decrease in gross margin dollars is primarily attributable to the
decrease in sales. As a percentage of sales, gross profit was 28.6% for the 13
weeks 1997 compared to 27.9% 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 September 28, 1997 were $35.5 million compared
to $37.1 million for the 13 weeks ended September 29, 1996. Operating and
administrative expenses as a percentage of sales were 23.3% for the 13 weeks
1997 compared to 23.4% for the 13 weeks 1996.
Operating Income. Operating income for the 13 weeks ended September 28,
1997 increased $0.8 million from $7.2 million in the third quarter of 1996 to
$8.0 million in the third 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 September 28, 1997 compared to $6.8 million for the 13 weeks
ended September 29, 1996. The decrease in interest expense was due primarily to
lower average debt balances in the 1997 quarter.
Income Taxes. Income tax expense for the 13 weeks ended September
28, 1997 was $0.7 million compared to $0.5 million for the 13 weeks ended
September 29, 1996.
Net Income. Net income for the 13 weeks ended September 28, was $0.3
million, or $0.04 per share, versus a net loss of $0.1 million, or $0.01 per
share for the 13 weeks ended September 29, 1996.
<PAGE>
39 Weeks Ended September 28, 1997 Compared to 39 Weeks Ended September 29, 1996
Sales. Sales for the 39 weeks ended September 28, 1997 were $445.5
million compared to $462.3 million for the 39 weeks ended September 29, 1996.
The decrease in sales for the 39 weeks of 1997 reflects a decrease of 1.8% in
total retail comparable store sales. The decrease was due primarily to decreases
at the wholesale and freight divisions resulting from the closure of the YES
Foods institutional food service business and the discontinuance of service to a
Russian export business as well as generally softer comparable store sales at
the retail division. Sales at the retail division were impacted by increased
competitive activity and strong comparable sales in the prior year period.
Gross Profit. Gross profit for the 39 weeks ended September 28, 1997
was $128.1 million compared to $128.2 million for the 39 weeks ended September
29, 1996. As a percentage of sales, gross profit was 28.8% for the 39 weeks 1997
compared to 27.7% for the 39 weeks 1996. The improvement in the 1997 gross
margin rate is partially attributable to improved buying practices and to
improved gross margins at the wholesale division.
Operating and Administrative Expenses. Operating and administrative
expenses for the 39 weeks ended September 28, 1997 were $107.2 million compared
to $109.5 million for the 39 weeks ended September 29, 1996. Operating and
administrative expenses as a percentage of sales were 24.1% for the 39 weeks
1997 compared to 23.7% for the 39 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 nine months of 1997.
Operating Income. Operating income for the 39 weeks ended September 28,
1997, before the non-recurring pre-tax restructuring charge of $8.9 million
recognized in June 1997, increased $2.3 million from $18.7 million, or 4.0% of
sales, in 1996 to $21.0 million, or 4.7% of sales in 1997. The improvement was
due primarily to the improved gross profit margin rate and effective expense
control. The non-recurring pre-tax charge was principally associated with the
Company's decision to close its YES Foods institutional food service business
and discontinue its wholesaling services to a Russian export business.
Other Income and Expense. Net interest expense was $20.1 million for
the 39 weeks ended September 28, 1997 compared to $20.8 million for the 39 weeks
ended September 29, 1996. The decrease in interest expense is due to lower
average debt balances during the first nine months of 1997.
Income Taxes. The Company recognized an income tax benefit for the 39
weeks ended September 28, 1997 of $2.5 million compared to a $34,000 expense for
the 39 weeks ended September 29, 1996.
Net Loss. Net loss for the 39 weeks ended September 28, 1997 before the
non-recurring pre-tax restructuring charge of $8.9 million was $0.5 million, or
$0.06 per share, versus a net loss of $2.1 million, or $0.27 per share for the
39 weeks ended September 29, 1996. The net loss for the 39 weeks 1997 including
the non-recurring charge was $5.8 million, or $0.73 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 for
capital expenditures, debt service, and lease payments.
Net cash provided by operating activities was $13.6 million for the 39
weeks ended September 28, 1997 compared to net cash provided by operating
activities of $13.5 million for the same period in 1996. The slight increase in
the 39 weeks 1997 compared to 1996 was due primarily to smaller increases in
inventories, receivables and larger increases in accrued expenses offset in part
by the increased net loss for the period.
<PAGE>
Capital expenditures for the 39 weeks ended September 28, 1997 were
$3.2 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 39 weeks ended September
28, 1997 was $11.8 million. During this time period, the Company decreased its
borrowings under its revolving line of credit by $5.0 million and made payments
against its long-term debt in the amount of $7.1 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 September 28, 1997 there was $2.0 million outstanding on the
revolving debt. The Company had available unused credit of $33.0 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 - 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 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
September 28, 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: November 11, 1997
By: s/s Donald J. Anderson
Donald J. Anderson
Senior Vice-President and
Chief Financial Officer
Date: November 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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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> SEP-28-1997
<CASH> 7841
<SECURITIES> 0
<RECEIVABLES> 17595
<ALLOWANCES> 832
<INVENTORY> 55240
<CURRENT-ASSETS> 87890
<PP&E> 216517
<DEPRECIATION> 82029
<TOTAL-ASSETS> 323805
<CURRENT-LIABILITIES> 76680
<BONDS> 0
0
0
<COMMON> 97
<OTHER-SE> 24067
<TOTAL-LIABILITY-AND-EQUITY> 323805
<SALES> 152007
<TOTAL-REVENUES> 152007
<CGS> 108567
<TOTAL-COSTS> 35467
<OTHER-EXPENSES> 218
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6687
<INCOME-PRETAX> 1059
<INCOME-TAX> 720
<INCOME-CONTINUING> 339
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 339
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0
</TABLE>
