<PAGE>
===============================================================================
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 May 4, 1996
or
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from to
Commission File Number 0-19802
BUTTREY FOOD AND DRUG STORES COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 81-0466189
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
601 6th Street, S.W.
Great Falls, Montana 59404
(Address of principal executive offices)
Registrants telephone number, including area code: (406) 761-3401
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 June
17, 1995 was 8,639,056 shares
There are no exhibits filed with this Form
======================================================
Page 1 of 12
<PAGE>
BUTTREY FOOD AND DRUG STORES COMPANY
AND SUBSIDIARY
FORM 10-Q
For the Quarterly Period Ended May 4, 1996
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
a) Consolidated Balance Sheets
as of May 4, 1996 (unaudited) and February 3, 1996 3
b) Consolidated Statements of Operations for the 13 weeks
ended May 4, 1996 (unaudited) and April 29, 1995 (unaudited) 4
c) Consolidated Statement of Stockholders' Equity
as of February 3, 1996 and for the 13 weeks ended
May 4, 1996 (unaudited) 4
d) Consolidated Statements of Cash Flows for the 13 weeks
ended May 4, 1996 (unaudited) and April 29, 1995 (unaudited) 5
e) Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II. Other Information
Item 1. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Signatures 12
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BUTTREY FOOD AND DRUG STORES COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
===============================================================================
(Dollar Amounts in Thousands)
- -------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
May 4, February 3,
1996 1996
- ------------------------------------------------------------------------------------------
unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 7,153 $6,140
Accounts receivable 4,548 4,488
Inventories 42,925 43,304
Prepaid expenses 1,233 1,230
Deferred tax asset 1,271 1,271
- -----------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 57,130 56,433
Property and equipment, at cost 133,420 130,174
Less accumulated depreciation 47,790 45,765
- -----------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 85,630 84,409
Intangible assets, net 3,251 3,259
Other assets 562 530
- -----------------------------------------------------------------------------------------
TOTAL ASSETS $146,573 $144,631
=========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 2,208 $ 2,205
Current obligations under capital leases 388 379
Accounts payable 19,263 16,345
Accrued payroll and benefits 6,468 7,530
Accrued expenses and reserves 4,485 5,106
Accrued interest payable 56 111
Notes payable 5 20
Income taxes 703 -
- ----------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 33,576 31,696
Long-term debt 12,940 13,510
Obligations under capital leases 9,286 9,385
Deferred taxes payable 1,735 1,735
Stockholders' equity:
Preferred stock $.01 par value, authorized 1,000 - -
Common stock $.01 par value, authorized 15,000,000
shares; issued and outstanding 8,639,056 shares as
and as of February 3, 1996 86 86
Paid-in capital 79,133 79,133
Retained earnings 10,217 9,486
- ----------------------------------------------------------------------------------------
89,436 88,705
Less stock subscriptions receivable 400 400
- ----------------------------------------------------------------------------------------
NET STOCKHOLDERS' EQUITY 89,036 88,305
- ----------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $146,573 $144,631
========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
BUTTREY FOOD AND DRUG STORES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
===============================================================================
(Dollar Amounts in Thousands, Except Per Share Data)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
13 Weeks Ended
--------------------
May 4, April 29,
1996 1995
- -------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
SALES $ 88,135 $ 87,213
Cost of sales and related occupancy expenses 67,013 66,705
- -----------------------------------------------------------------------------------
GROSS PROFIT 21,122 20,508
Marketing, general, and administrative expenses 19,291 19,533
- -----------------------------------------------------------------------------------
OPERATING INCOME 1,831 975
Other income / (expense):
Gain on disposal of owned property - 255
Interest income 27 173
Interest expense (640) (1,006)
- -----------------------------------------------------------------------------------
(613) (578)
- -----------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES AND EXTRAORDINARY CHARGE 1,218 397
Income tax provision 487 159
- -----------------------------------------------------------------------------------
EARNINGS BEFORE EXTRAORDINARY CHARGE 731 238
Extraordinary charge (net of tax) - (51)
- -----------------------------------------------------------------------------------
NET EARNINGS $ 731 $ 187
===================================================================================
Earnings per share before extraordinary charge $ 0.08 $ 0.03
Extraordinary charge per share - (0.01)
- -----------------------------------------------------------------------------------
Net earnings per share $ 0.08 $ 0.02
===================================================================================
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 8,612,525 8,618,967
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
============================================================================================================
(Dollar Amounts in Thousands)
- ------------------------------------------------------------------------------------------------------------
Retained Net
Common Paid-in earnings Stock stockholders'
stock capital (deficit) subscript equity
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at February 3, 1996 $ 86 $ 79,133 $ 9,486 $ (400) $ 88,305
Net additions on stock subscript - - - 0 0
Net earnings - - 731 - 731
- -----------------------------------------------------------------------------------------------------------
BALANCE AT mAY 4, 1996 (UNAUDITED) $ 86 $ 79,133 $ 10,217 $ (400) $ 89,036
===========================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
BUTTREY FOOD AND DRUG STORES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
===============================================================================
(Dollar Amounts in Thousands)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
13 Weeks Ended
---------------------
May 4, April 29,
1996 1995
- -------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 731 $ 187
Adjustments to reconcile income to net cash
provided by operating activities:
Depreciation 2,026 2,921
Amortization 45 161
Gain on disposal of owned property - (255)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (61) (332)
Decrease (increase) in inventories 379 (2,449)
Decrease (increase) in prepaid expenses (3) 21
Increase (decrease) in accounts payable 2,918 2,681
Increase (decrease) in accrued payroll and benefits (1,062) (601)
Increase (decrease) in accrued expenses and reserves (624) (112)
Increase (decrease) in accrued interest payable (55) (43)
Increase (decrease) in accrued income taxes 703 -
- -------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 4,997 2,179
- -------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of property and equipment (3,252) (1,829)
Proceeds from sale of property and equipment 6 9,309
Increase in other assets (64) (42)
- -------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (3,310) 7,438
- -------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Payments on long-term debt (568) (14,392)
Collection on stock subscriptions receivable - 15
Payments on capital lease obligations (91) (80)
Decrease in notes payable, net (15) (14)
- -------------------------------------------------------------------------------
NET CASH (USED) BY FINANCING ACTIVITIES (674) (14,471)
- -------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 1,013 (4,854)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,140 16,765
- -------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,153 $ 11,911
===============================================================================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
BUTTREY FOOD AND DRUG STORES COMPANY AND SUBSIDIARY
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The unaudited interim consolidated financial statements and related
notes have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have not been presented. The
accompanying unaudited interim consolidated financial statements and related
notes should be read in conjunction with the financial statements and related
notes included in the Buttrey Food and Drug Stores Company ("Buttrey" or the
"Company") Annual Report on Form 10-K for the year ended February 3, 1996.
The information furnished reflects, in the opinion of the management of
the Company, all material adjustments consisting only of normal recurring
accruals necessary to present fairly the Company's financial condition and its
results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the
financial statements and related notes included elsewhere in this Form 10-Q.
GENERAL
Buttrey is a food and drug retailer in Montana and in the market areas
it serves in Wyoming and western North Dakota. Founded in Montana in 1896, the
Company currently operates 40 stores and a mail order pharmacy business, which
began operations during the second quarter of 1994. The Company is the successor
to the Buttrey Food and Drug division (the "Predecessor Division") of Skaggs
Alpha Beta, Inc. ("Skaggs"), an indirect, wholly-owned subsidiary of American
Stores Company ("ASC"). The Company acquired certain assets and liabilities of
the Predecessor Division in October 1990 in a transaction (the "Acquisition")
organized by Freeman Spogli & Co. Incorporated ("FS&Co."), a private investment
firm.
RISK FACTORS
The following risk factors should be carefully considered, in addition
to other information contained in this Form 10-Q.
Certain Restrictions Imposed by Lenders
The Company's credit agreement contains significant financial and
operating covenants including, among other things, requirements that the Company
maintain certain financial ratios and satisfy certain financial tests,
limitations on the amount of capital expenditures and restrictions on the
ability of the Company to incur indebtedness, to pay dividends or to take
certain corporate actions. See "--Liquidity and Capital Resources."
Competition
The food and drug retailing business is highly competitive. The
Company's competitors include, among others, multi-regional supermarket chains,
smaller, independent supermarket chains, drug stores, convenience stores,
discount hardware stores and large chain discount retailers. Some of these
competitors have substantially greater resources than the Company. The Company
expects competition from large chain discount retailers to further increase as
stores are opened in market areas served by the Company.
<PAGE>
Expansion Plans
During the first quarter of 1996, the Company completed the conversion
of one Great Falls store to the Big Fresh format and completed the acquisition
of one store in Cheyenne, Wyoming. Also during 1996, the Company plans to expand
and convert its Lewistown store to the Big Fresh format, to complete four minor
remodels, including the expansion of its Malta store, and to replace an existing
store. In addition, the Company intends to construct one or two new stores per
year over the next two years. These plans are subject to site availability and
financing, competition, zoning and other governmental regulations and general
economic conditions, and no assurances can be given that such plans will not be
revised as a result of such factors. Historically, the Company has experienced
temporary disruptions and lost sales during store remodelings, and believes that
this will continue in connection with future remodelings. Additionally, the
Company may make selective acquisitions of existing food or drug stores that
will complement the Company's operations. See "--Liquidity and Capital
Resources."
Control of the Company
A majority of the members of the Board of Directors of the Company are
affiliated with FS&Co., which controls FS Equity Partners II, L.P., the
Company's principal stockholder. FSEP currently holds 50.8% of the outstanding
Common Stock of the Company. As a result, FS&Co. controls and will continue to
control the Company's management policy and financing decisions.
RESULTS OF OPERATIONS
13 Weeks Ended May 4, 1996 Compared to 13 Weeks Ended April 29,
1995
Sales for the 13 weeks ended May 4, 1996 increased $0.9 million, or
1.1%, from $87.2 million in the first quarter of 1995 to $88.1 million in the
first quarter of 1996. Comparable store sales increased 0.3% despite the loss of
sales during the remodeling of the Company's highest volume store during the
beginning of the quarter and the opening of one new competitor.
Gross profit for the 13 weeks ended May 4, 1996 increased $0.6 million
from $20.5 million in the first quarter of 1995 to $21.1 million in the first
quarter of 1996, primarily reflecting the increase in sales and an increase in
gross profit as a percentage of sales in the Company's perishable departments.
Gross profit as a percentage of sales increased 0.5% from 23.5% in the first
quarter of 1995 to 24.0% in the first quarter of 1996.
Marketing, general and administrative ("MG&A") expenses for the 13 weeks
ended May 4, 1996 decreased $0.2 million from $19.5 million in the first
quarter of 1995 to $19.3 million in the first quarter of 1996. The decrease in
MG&A is principally attributable to a reduction in depreciation and
amortization expenses, partially offset by an increase in employee benefits and
advertising costs. MG&A expenses as a percentage of sales decreased 0.5% from
22.4% in the first quarter of 1995 to 21.9% in the first quarter of 1996.
Operating income for the 13 weeks ended May 4, 1996 increased $0.8
million from $1.0 million, or 1.1% of sales, in the first quarter of 1995 to
$1.8 million, or 2.1% of sales, in the first quarter of 1996.
In the first quarter of 1995, the Company recorded a gain on disposal of
assets of $0.3 million primarily from the sale of excess land and the Payson
distribution center.
Interest expense, net of interest income, for the 13 weeks ended May 4,
1996 decreased $0.2 million from $0.8 million, or 1.0% of sales, in the first
quarter of 1995 to $0.6 million, or 0.7% of sales, in the first quarter of
1996. The decrease in net interest expenses is the result of reductions in
long-term debt and the reductions in interest rates. See "--Liquidity and
Capital Resources."
<PAGE>
Net income before extraordinary charge for the 13 weeks ended May 4,
1996 increased $0.5 million from $0.2 million, or $0.03 per share, in the first
quarter of 1995 to $0.7 million, or $0.08 per share, in the first quarter of
1996. Excluding the gain on disposal of assets that occurred during the first
quarter of 1995, net income before extraordinary charge for the 13 weeks ended
May 4, 1996 increased $0.6 million from $0.1 million, or $0.01 per share, in the
first quarter of 1995 to $0.7 million, or $0.08 per share, in the first quarter
of 1996.
In the first quarter of 1995, the Company recorded an extraordinary
charge of $85,000 ($51,000 on an after-tax basis, or $0.01 per share) as a
result of the early retirement of debt. See "--Liquidity and Capital Resources."
Net income for the 13 weeks ended May 4, 1996 increased $0.5 million
from $0.2 million, or $0.02 per share, in the first quarter of 1995 to $0.7
million, or $0.08 per share, in the first quarter of 1996. Excluding the gain on
disposal of assets that occurred during the first quarter of 1995, net income
for the 13 weeks ended May 4, 1996 increased $697,000 from $34,000, or $0.00 per
share, in the first quarter of 1995 to $731,000, or $0.08 per share, in the
first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise primarily from capital expenditures,
debt service on its indebtedness and the funding of the Company's working
capital requirements. The Company has financed its liquidity needs primarily
using cash flow from operations, lease and debt financing of capital
expenditures, cash provided by certain asset sales, temporary borrowings under
the Company's working capital facility and the public sale of equity securities
in an initial public offering of Common Stock in February 1992.
On September 7, 1995, the Company entered into a new credit facility
with The CIT Group/Business Credit, Inc. ("CITBC") and The CIT Group/Equipment
Financing, Inc. ("CEF") providing available credit of up to $42.8 million (the
"Financing Agreement"). The new facility includes a $30.0 million working
capital facility and includes variable rate term loans totaling $12.8 million,
which refinanced existing equipment financing loans resulting in lower interest
rates and extended maturities. The borrowing base under which the working
capital revolver can be utilized is equal to 65% of Eligible Inventory
(essentially non-perishable inventory). The estimated borrowing base as of May
4, 1996 was $24.1 million. Under the Financing Agreement, interest is
determined, at the Company's option, at a defined prime rate or at the London
Interbank Offered Rate ("LIBOR") for each applicable loan as follows:
<TABLE>
<S> <C>
$30.0 Working Capital Facility prime rate plus 0.50% or LIBOR plus 2.00%
$8.1 Term Loan I prime rate plus 1.00% or LIBOR plus 2.25%
$4.7 Term Loan II prime rate plus 1.50% or LIBOR plus 2.65%
</TABLE>
The Financing Agreement matures five years from inception, however, the
principal portion of the term loans are amortized on a straight-line basis over
84 months. In the event that the Financing Agreement is not extended at the
end of five years, the term loans become due and payable. Additionally, the
Financing Agreement also provides that the maturity date of all balances shall
become accelerated upon a specified change in control or ownership.
<PAGE>
Borrowings under the Financing Agreement are secured by the Great Falls
Distribution Center, a retail store location in Butte, Montana and all of the
personal property of the Company. The Financing Agreement contains financial
and operating covenants including limitations on the amount of capital
expenditures, dividends and its ability to incur additional debt. The
Financing Agreement also requires the maintenance of certain financial ratios
and the satisfaction of certain tests which require escalating levels of
performance over time. The Company is currently in compliance with all such
financial ratios and tests.
The principal financial covenants defined in the Financing Agreement
compared to the Company's actual results for the 13 weeks ended May 4, 1996 are
as follows:
<TABLE>
<CAPTION>
Actual Test
<S> <C> <C>
Minimum Net Worth $89.0 Million $72.5 Million
Maximum Capital Expenditures $3.2 Million $19.9 Million
Maximum Net Capital Expenditures $3.2 Million $13.9 Million
Minimum Interest Charge Coverage Ratio 7.50 4.50
</TABLE>
As of May 4, 1996, there were no borrowings or commitments under the
working capital facility other than letter of credit commitments of $2.7
million. In addition, the outstanding balance under Term Loan I was $7.3
million (of which $1.2 million is classified as current) and under Term Loan II
was $4.3 million (of which $0.7 million is classified as current). The
Company's borrowing requirements for working capital are somewhat seasonal,
reflecting increases in inventory in the fourth calendar quarter due to holiday
purchases and, historically, the Company's funding of employee benefit program
contributions in the first calendar quarter of each year.
The Company has entered into a number of capital lease obligations for
store facilities. The Company's total outstanding capital lease obligation as
of May 4, 1996 was $9.7 million (of which $0.4 million is classified as
current).
On April 17, 1995, the Company completed the sale of the Payson
Distribution Center to Associated Food Stores, Inc. of Salt Lake City, Utah
("Associated"), and received proceeds totaling $8.8 million ($3.5 million for
property and equipment and $5.3 million for inventory). The Company used
approximately $7.3 million of these proceeds to retire obligations under
long-term debt. In connection with the early retirement of debt, the Company
recorded an extraordinary charge of $0.1 million ($0.1 million on an after-tax
basis) reflecting the non-cash write-off of unamortized deferred debt issuance
costs. Additionally, in conjunction with the sale of the Payson Distribution
Center, the Company also entered into a supply agreement with Associated
whereby the Company agreed to purchase from Associated certain products
previously distributed from the Payson Distribution Center. In March 1996, the
Company negotiated a new supply agreement with McKesson Drug Company for the
purchase of pharmaceutical products. Associated continues to supply
over-the-counter products, health and beauty care items and general merchandise.
During the 13 weeks ended May 4, 1996, net cash provided by operating
activities was $5.0 million, and reflected the fact that the Company incurred
noncash charges of $2.1 million in depreciation and amortization expenses
during this period. Net cash provided by operating activities was favorably
impacted by a $2.9 million increase in accounts payable and a $0.4 million
reduction in inventories, and was partially offset by a decrease in accrued
payroll and benefits of $1.1 million, which is primarily attributable to the
funding of the Company's 1995 BCRE retirement plan contribution and management
incentive bonus plans in the first quarter of 1996.
<PAGE>
The Company spent an aggregate of $10.0 million, $8.8 million and $12.8
million on capital expenditures, primarily for store remodelings and new store
expansion, during 1995, 1994 and 1993, respectively. Of these amounts, the
Company has funded approximately $1.2 million, $9.2 million and $5.2 million
through equipment and real estate financings in 1995, 1994 and 1993,
respectively. The Company plans to continue its store remodeling and
development program. During the first quarter of 1996, the Company completed
the conversion of one Great Falls store to the Big Fresh format and announced
the acquisition of a one store in Cheyenne, Wyoming (the Company has two
existing stores in this market). The purchase price for the new Cheyenne store
was $5.2 million for real property, fixtures and equipment, and a non-compete
agreement plus $0.3 million for inventory. The transaction was completed on
June 11, 1996, subsequent to the close of the first quarter. During 1996, the
Company plans to expand and convert its Lewistown store to the Big Fresh format
and to complete four minor remodels, including the expansion of its Malta
store, and to replace an existing store. For 1996, capital expenditures by the
Company, including the foregoing, are estimated to be approximately $20.0
million. Additionally, the Company also may expand the number of stores it
operates through additional selective acquisitions of existing food or drug
stores that will complement the Company's operations. Except for the Cheyenne
acquisition, the capital expenditure amount for 1996 does not include any
additional amounts for potential acquisitions.
The Company has utilized equipment financing from time to time in order
to finance the purchases of store equipment and vehicles. In addition to the
outstanding term loans, on September 1, 1995, the Company completed a $1.2
million financing of new store equipment for the Company's new store in Butte,
Montana. The loan bears interest at LIBOR plus 2.65% and is payable in equal
monthly installments over four years. As of May 4, 1996, the outstanding
obligation under this loan was $1.0 million (of which $0.3 million is classified
as current). The Company has also entered into commitments with institutional
financing sources to finance an aggregate of $14.0 million of its 1996 capital
expenditures, none of which has been funded.
Based upon the foregoing, and considering current and projected
operating results as well as the current budgeted capital expenditures described
above, the Company believes that it will have sufficient cash available,
including amounts available under the Financing Agreement and cash generated
from operations, and amounts available from lease and mortgage financings, to
meet its liquidity needs for debt service, its capital expenditure program,
working capital and general corporate purposes for the foreseeable future.
<PAGE>
BUTTREY FOOD AND DRUG STORES COMPANY
AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Internal Revenue Service ("IRS") has completed its examination of
the Company's income tax returns for the periods ended February 1, 1992 and
February 2, 1991, the period of the Company's initial acquisition of assets. On
December 1, 1995, the Company received notice from the IRS of proposed
adjustments for the Company's fiscal periods 1991 to 1994. These adjustments
generally relate to the Company's allocation of purchase price among the assets
initially acquired by the Company and the treatment of certain of these assets
for tax depreciation and amortization purposes. The notice proposes adjustments
which would reduce the Company's net operating loss and alternative minimum tax
credit carryover and would result in additional federal taxes of up to $5.6
million plus interest from the date when such additional taxes are asserted to
have been due to the date of payment.
The Company, after consultation with tax counsel, continues to believe
in the propriety of its positions set forth in its tax returns and it will
vigorously contest the adjustments being proposed by the IRS. If the IRS were to
ultimately prevail, in whole or in part, with respect to its proposed
adjustments, the Company would account for such change in its tax liability by
adjusting deferred tax assets and liabilities to reflect the revised tax basis
of its assets, by adjusting the current tax liability to reflect the prior year
taxes due, and by applying the effect of those adjustments to increase goodwill.
Any interest related to prior year taxes due would be expenses when accruable.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of stockholders was held on May 29, 1996 to
elect ten directors to hold office until the next annual meeting of
stockholders and until their successors are elected and qualified and to
approve the 1996 Non-Employee Directors Stock Option Plan.
All ten nominees for director were duly elected. The following sets
forth the number of votes cast for, against or withheld, as well as the number
of abstentions and broker nonvotes, as to each nominee:
<TABLE>
<CAPTION>
Abstentions
Against or and Broker
Nominee For Withheld Nonvotes
- ------- --- ---------- -----------
<S> <C> <C> <C>
Joseph H. Fernandez 6,118,997 5,491 0
Matt L. Figel 6,120,338 4,150 0
Robert P. Gannon 6,120,738 3,750 0
Michael P. Malone 6,120,738 3,750 0
Wayne S. Peterson 6,120,738 3,750 0
J. Frederick Simmons 6,120,338 4,150 0
Peter J. Sodini 6,120,733 3,755 0
Ronald P. Spogli 6,120,338 4,150 0
William M. Wardlaw 6,120,338 4,150 0
Thomas C. Young 6,120,738 3,750 0
</TABLE>
<PAGE>
Proposal number 2 regarding the 1996 Non-Employee Directors Stock Option
Plan was also approved. The number of votes cast for, against or withheld, as
well as the number of abstentions and broker nonvotes, was as follows:
<TABLE>
<CAPTION>
Abstentions
Against or and Broker
For Withheld Nonvotes
--- ----------- ------------
<S> <C> <C>
6,007,542 114,750 2,196
</TABLE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: June 17, 1996 BUTTREY FOOD AND DRUG
STORES COMPANY
(Registrant)
/s/ Wayne S. Peterson
---------------------------------------.
Wayne S. Peterson
Senior Vice President, Chief Financial
Officer and Secretary
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> MAY-04-1996
<CASH> 7,153
<SECURITIES> 0
<RECEIVABLES> 4,548
<ALLOWANCES> 0
<INVENTORY> 42,925
<CURRENT-ASSETS> 57,130
<PP&E> 133,420
<DEPRECIATION> 47,790
<TOTAL-ASSETS> 146,573
<CURRENT-LIABILITIES> 33,576
<BONDS> 22,226
0
0
<COMMON> 78,819
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 146,573
<SALES> 88,135
<TOTAL-REVENUES> 88,135
<CGS> 67,013
<TOTAL-COSTS> 67,013
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 613
<INCOME-PRETAX> 1,218
<INCOME-TAX> 427
<INCOME-CONTINUING> 731
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> 731
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
