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 29, 1998
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
May 11, 1998 was 8,190,796 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 29, 1998
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
a) Consolidated Balance Sheets
as of March 29, 1998 (unaudited) and December 28, 1997 1
b) Consolidated Statements of Operations for the 13 weeks
ended March 29, 1998 (unaudited) and March 30, 1997 (unaudited) 2
c) Consolidated Statements of Cash Flows for the 13 weeks ended
March 29, 1998 (unaudited) and March 30, 1997 (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 13
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Carr-Gottstein Foods Co. and Subsidiaries
Consolidated Balance Sheets
- --------------------------------------------------------------------------------------------------------------------------
Amounts In Thousands
- --------------------------------------------------------------------------------------------------------------------------
March 29, December 28,
1998 1997
- ----------------------------------------------------------------------------------- -------------------- ------------------
<S> <C> <C>
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 8,008 $ 11,081
Accounts receivable, net 11,476 11,513
Income taxes receivable 778 949
Inventories 51,442 51,471
Deferred taxes 2,690 2,690
Prepaid expenses and other current assets 2,813 2,380
- ----------------------------------------------------------------------------------- -------------------- ------------------
Total current assets 77,207 80,084
Property, plant and equipment, at cost, net of accumulated depreciation 131,728 134,090
Intangible assets, net of accumulated amortization 88,271 88,973
Deferred taxes 783 783
Other assets 11,148 11,535
- ----------------------------------------------------------------------------------- -------------------- ------------------
$ 309,137 $ 315,465
=================================================================================== ==================== ==================
Liabilities and Stockholders' Equity Current liabilities:
Accounts payable $ 36,520 $ 37,187
Accrued expenses 21,025 22,797
Income taxes payable 40 -
Current maturities of long-term debt 8,375 12,220
- ----------------------------------------------------------------------------------- -------------------- ------------------
Total current liabilities 65,960 72,204
Long-term debt, excluding current maturities 215,284 215,420
Other liabilities 3,486 3,527
- ----------------------------------------------------------------------------------- -------------------- ------------------
Total liabilities 284,730 291,151
- ----------------------------------------------------------------------------------- -------------------- ------------------
Stockholders' equity:
Common stock, $.01 par value, authorized 25,000 shares,
issued 9,680 shares 97 97
Additional paid in capital 51,123 52,088
Deficit (16,783) (16,149)
- ----------------------------------------------------------------------------------- -------------------- ------------------
34,437 36,036
Less treasury stock, 1,489 and 1,741 shares, respectively, at cost 10,030 11,722
- ----------------------------------------------------------------------------------- -------------------- ------------------
Total stockholders' equity 24,407 24,314
- ----------------------------------------------------------------------------------- -------------------- ------------------
Commitments and contingencies
=================================================================================== ==================== ==================
$ 309,137 $ 315,465
=================================================================================== ==================== ==================
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
March 29, March 30,
1998 1997
- ------------------------------------------------------------------------------------ ------------------- ------------------
(unaudited) (unaudited)
<S> <C> <C>
Sales $ 135,113 $ 141,467
Cost of merchandise sold, including warehousing
and transportation expenses 95,647 100,475
- ------------------------------------------------------------------------------------ ------------------- ------------------
Gross profit 39,466 40,992
Operating and administrative expenses 33,557 35,514
- ------------------------------------------------------------------------------------ ------------------- ------------------
Operating income 5,909 5,478
- ------------------------------------------------------------------------------------ ------------------- ------------------
Other income (expense):
Interest expense, net (6,514) (6,711)
Other income 11 -
- ------------------------------------------------------------------------------------ ------------------- ------------------
Total other expense (6,503) (6,711)
- ------------------------------------------------------------------------------------ ------------------- ------------------
Net loss before income tax expense (594) (1,233)
Income tax (expense) benefit (40) 214
- ------------------------------------------------------------------------------------ ------------------- ------------------
Net loss $ (634) $ (1,019)
==================================================================================== =================== ==================
Basic loss per common share (0.08) (0.13)
Diluted loss per common share (0.08) (0.13)
==================================================================================== =================== ==================
Weighted average common shares outstanding - basic 8,147 7,884
Weighted average common shares outstanding - diluted 8,147 7,884
==================================================================================== =================== ==================
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
- ---------------------------------------------------------------------------------------------------------------------------
13 Weeks Ended
March 29, March 30,
1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited)
<S> <C> <C>
Operating activities:
Net loss $ (634) $ (1,019)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 3,352 3,461
Amortization of intangibles 702 713
Amortization of loan fees and discounts 311 344
Gain on disposal of property and equipment (11) -
(Increase) decrease in current assets:
Income tax receivable 171 (499)
Accounts receivable 37 (1,957)
Inventories 29 258
Prepaid expenses (433) (403)
Other assets 76 356
(Decrease) increase in current liabilities:
Accounts payable (667) 1,845
Accrued expenses (1,772) 1,414
Income taxes payable 40 (298)
Other liabilities (41) (82)
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,160 4,133
- ---------------------------------------------------------------------------------------------------------------------------
Investing activities:
Additions to property and equipment (990) (474)
Proceeds from sale of property and equipment 11 -
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (979) (474)
- ---------------------------------------------------------------------------------------------------------------------------
Financing activities:
Payments on short-term borrowings, net - (500)
Payments on long-term debt (3,981) (2,963)
Issuance of treasury stock 727 304
- ---------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (3,254) (3,159)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (3,073) 500
Cash and cash equivalents at beginning of period 11,081 8,655
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 8,008 $ 9,155
===========================================================================================================================
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest $ 3,479 $ 4,016
Income taxes - 501
===========================================================================================================================
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 28, 1997 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) Statement Financial Accounting Standard No. 128 (SFAS 128), Earnings Per
Share, which 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. The Company has adopted the provisions of SFAS No. 128 and
has restated all prior period EPS amounts accordingly.
<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 29, 1998 CGF Properties (Combined) Only Elimination Consolidated
- -----------------------------------------------------------------------------------------------------------------------
Assets
<S> <C> <C> <C> <C> <C>
Inventories $ - $ 3,228 $ 48,214 $ - $ 51,442
Other current assets 7,096 75,777 912 (58,020) 25,765
- -----------------------------------------------------------------------------------------------------------------------
Total current assets 7,096 79,005 49,126 (58,020) 77,207
Property, plant and equipment, net 63,575 4,620 63,533 - 131,728
Intangible assets, net - - 88,271 - 88,271
Investments in subsidiaries - - 109,702 (109,702) -
Other assets 32 573 11,326 - 11,931
- -----------------------------------------------------------------------------------------------------------------------
$ 70,703 $ 84,198 $ 321,958 $ (167,722) $ 309,137
=======================================================================================================================
Liabilities and Stockholders' Equity
Current liabilities $ 1,265 $ 2,993 $ 119,722 $ (58,020) $ 65,960
Long-term debt, excluding current
maturities 40,941 - 174,343 - 215,284
Other liabilities - - 3,486 - 3,486
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 42,206 2,993 297,551 (58,020) 284,730
- -----------------------------------------------------------------------------------------------------------------------
Common stock 10 44 97 (54) 97
Additional paid-in capital 28,966 39,381 51,123 (68,347) 51,123
Retained earnings (deficit) (479) 41,780 (16,783) (41,301) (16,783)
- -----------------------------------------------------------------------------------------------------------------------
28,497 81,205 34,437 (109,702) 34,437
Less treasury stock - - (10,030) - (10,030)
- ----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 28,497 81,205 24,407 (109,702) 24,407
- -----------------------------------------------------------------------------------------------------------------------
$ 70,703 $ 84,198 $ 321,958 $ (167,722) $ 309,137
=======================================================================================================================
</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
March 30, 1997 CGF Properties (Combined) Only Elimination Consolidated
- -----------------------------------------------------------------------------------------------------------------------
Assets
<S> <C> <C> <C> <C> <C>
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 assets, 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>
<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 1998 CGF Properties (Combined) Only Elimination Consolidated
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ 18,449 $ 126,135 $ (9,471) $ 135,113
Cost of merchandise sold, including
warehousing and transportation
expenses - 13,613 91,505 (9,471) 95,647
- --------------------------------------------------------------------------------------------------------------------------
Gross profit - 4,836 34,630 - 39,466
Operating and administrative
expenses (income) (1,332) 2,531 32,358 - 33,557
- --------------------------------------------------------------------------------------------------------------------------
Operating income 1,332 2,305 2,272 - 5,909
Interest expense, net (1,103) - (5,411) - (6,514)
Other income - - 11 - 11
Equity in subsidiary earnings - - 1,495 (1,495) -
- --------------------------------------------------------------------------------------------------------------------------
Earnings before income tax 229 2,305 (1,633) (1,495) (594)
Income tax (expense) benefit (94) (945) 999 - (40)
- --------------------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 135 $ 1,360 $ (634) $ (1,495) $ (634)
==========================================================================================================================
</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
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 (income) (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 (loss) $ 31 1,201 $ (1,019) $ (1,232) $ (1,019)
==========================================================================================================================
</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
First Quarter 1998 CGF Properties (Combined) Only Consolidated
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net cash provided by operating activities $ 399 $ 3 $ 758 $ 1,160
- --------------------------------------------------------------------------------------------------------------------------
Investing activities
Additions to property and equipment (223) (3) (764) (990)
Proceeds from sale of property and equipment - - 11 11
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (223) (3) (753) (979)
- --------------------------------------------------------------------------------------------------------------------------
Financing activities
Payments on long-term debt (176) - (3,805) (3,981)
Issuance of treasury stock - - 727 727
- -------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (176) - (3,078) (3,254)
- -------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents - - (3,073) (3,073)
Cash and cash equivalents at beginning of period 53 106 10,922 11,081
- -------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 53 $ 106 $ 7,849 $ 8,008
=========================================================================================================================
</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
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
Additions to property and equipment - (9) (465) (474)
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities - (9) (465) (474)
- --------------------------------------------------------------------------------------------------------------------------
Financing activities
Payments on short-term borrowings, net - - (500) (500)
Payments on long-term debt (128) - (2,835) (2,963)
Issuance of treasury stock - - 304 304
- --------------------------------------------------------------------------------------------------------------------------
Net cash used in 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>
<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 29, 1998 Compared to 13 Weeks Ended March 30, 1997
Sales. Sales for the 13 weeks ended March 29, 1998 were $135.1 million
compared to $141.5 million for the 13 weeks ended March 30, 1997. The 4.5%
decrease was due primarily to the closure of YES Foods, which closed in the
third quarter of 1997, and the change in the Easter holiday, which fell into the
second quarter of 1998 versus the first quarter of 1997. Excluding the impact of
YES Foods, sales decreased $0.6 million, or 0.4%. Retail comparable store sales
for the 13 weeks of 1998, decreased 0.6% from the 13 week period in 1997.
Gross Profit. Gross profit for the 13 weeks ended March 29, 1998 was
$39.5 million compared to $41.0 million for the 13 weeks ended March 30, 1997.
As a percentage of sales, gross profit was 29.2% for the 13 weeks 1998 compared
to 29.0% for the 13 weeks 1997. Gross profit as a percentage of sales for the 13
weeks 1998 increased primarily due to the closure of YES Foods, which was
operating at lower average gross margins during the 1997 period.
Operating and Administrative Expenses. Operating and administrative
expenses for the 13 weeks ended March 29, 1998 were $33.6 million compared to
$35.5 million for the 13 weeks ended March 30, 1997. Operating and
administrative expenses as a percentage of sales were 24.8% for the 13 weeks
1998 compared to 25.1% for the 13 weeks 1997. Operating expenses for the 1998
quarter decreased as compared to the 1997 quarter primarily due to effective
expense control and the closure of YES Foods.
Operating Income. Operating income for the 13 weeks ended March 29,
1998 increased to $5.9 million from $5.5 million for the 13 weeks ended March
30, 1997. The increase in the quarter was due to improved gross margin,
effective expense control and the elimination of expenses attributable to YES
Foods.
Other Income and Expense. Net interest expense was $6.5 million for the
13 weeks ended March 29, 1998 compared to $6.7 million for the 13 weeks ended
March 30, 1997. The decrease in interest expense was due primarily to lower
average debt balances in the quarter.
Income Taxes. The Company's income tax expense for the 13 weeks ended
March 29, 1998 of $40,000 compared to a $0.2 million benefit for the 13 weeks
ended March 30, 1997.
Net Loss. Net loss for the 13 weeks ended March 29, 1998 was $0.6
million, or $0.08 per share, versus a net loss of $1.0 million, or $0.13 per
share for the 13 weeks ended March 30, 1997.
<PAGE>
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 $1.2 million for the 13
weeks ended March 29, 1998 compared to net cash provided by operating activities
of $4.1 million for the same period in 1997. The change in the 13 weeks 1998
compared to 1997 was due primarily to decreases in accrued expenses and accounts
payable.
Capital expenditures for the 13 weeks ended March 29, 1998 were $1.0
million. Capital expenditures are expected to range between $8.0 and $12.0
million for fiscal 1998. It is anticipated that the balance of 1998 capital
expenditures will be funded out of cash provided by operations and borrowings
under the working capital revolver.
Net cash used in financing activities for the 13 weeks ended March 29,
1998 was $3.3 million. During this time period, the Company made payments
against its long-term debt in the amount of $4.0 million. At March 29, 1998
there were no borrowings outstanding on the revolving debt. The Company had
available unused credit of $35.0 million. Funds borrowed under the revolving
credit portion of the Company's credit facility are restricted to working
capital and general corporate purposes. 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
expenditure requirements.
On April 9, 1998 the Company completed a transaction whereby it
purchased the fixtures, equipment and inventory of the three retail locations of
Market Basket, Inc. located in Fairbanks and North Pole, Alaska. The transaction
also included the purchase of certain real estate in Fairbanks. As part of the
agreement, the Company entered into a long-term lease for the store in North
Pole, Alaska.
On April 17, 1998 the Company amended its Senior Credit Agreement. The
amendment reduced the Company's borrowing rates by 50 basis points on its $35.0
working capital revolver and $23.0 million Term A facilities, and by 75 basis
points on its $58.8 million Term B facility. The amendment also modified certain
financial covenants and restrictions.
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 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 29, 1998.
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 11, 1998
By: s/s Donald J. Anderson
Donald J. Anderson
Senior Vice-President and
Chief Financial Officer
Date: May 11, 1998
<PAGE>
CARR-GOTTSTEIN FOODS CO.
Exhibit Index
The following exhibits are attached as indicated:
Exhibit
Number Description of Exhibit
27 Financial Data Schedule
27.1 Restated financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-START> DEC-29-1998
<PERIOD-END> MAR-29-1998
<CASH> 8008
<SECURITIES> 0
<RECEIVABLES> 12771
<ALLOWANCES> 1295
<INVENTORY> 51442
<CURRENT-ASSETS> 77207
<PP&E> 219586
<DEPRECIATION> 87858
<TOTAL-ASSETS> 309137
<CURRENT-LIABILITIES> 65960
<BONDS> 0
0
0
<COMMON> 97
<OTHER-SE> 24310
<TOTAL-LIABILITY-AND-EQUITY> 309137
<SALES> 135113
<TOTAL-REVENUES> 135113
<CGS> 95647
<TOTAL-COSTS> 95647
<OTHER-EXPENSES> 33568
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6514
<INCOME-PRETAX> (594)
<INCOME-TAX> 40
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (634)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> MAR-30-1997
<CASH> 9155
<SECURITIES> 0
<RECEIVABLES> 19096
<ALLOWANCES> 489
<INVENTORY> 53974
<CURRENT-ASSETS> 87365
<PP&E> 214650<F1>
<DEPRECIATION> 75458<F1>
<TOTAL-ASSETS> 329545
<CURRENT-LIABILITIES> 73628
<BONDS> 0
0
0
<COMMON> 97
<OTHER-SE> 28786
<TOTAL-LIABILITY-AND-EQUITY> 329545
<SALES> 141467
<TOTAL-REVENUES> 141467
<CGS> 100475
<TOTAL-COSTS> 100475<F1>
<OTHER-EXPENSES> 35514<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6711
<INCOME-PRETAX> (1233)
<INCOME-TAX> (214)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1019)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)<F2>
<FN>
<F1> Restated to be consistent with 1998 presentation.
<F2> Restated to reflect adoption in fourth quarter 1997 of FAS 128 which is
a new standard of computing and presenting both basic and diluted net
income per share.
</FN>
</TABLE>
