<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 3, 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 0-19802
BUTTREY FOOD AND DRUG STORES COMPANY
(Exact name of registrant as specified in its charter)
Delaware 81-0466189
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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 16,
1997 was 8,640,556 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 3, 1997
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
a) Consolidated Balance Sheets as of May 3, 1997 (unaudited)
and February 1, 1997 3
b) Consolidated Statements of Operations for the 13 weeks ended
May 3, 1997 (unaudited) and May 4, 1996 (unaudited) 4
c) Consolidated Statement of Stockholders' Equity as of
February 1, 1997 and May 3, 1997 (unaudited) 4
d) Consolidated Statements of Cash Flows for the 13
weeks ended May 3, 1997 (unaudited) and May 4, 1996 (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
<TABLE>
<CAPTION>
Consolidated Balance Sheets
=====================================================================================================================
(Dollar Amounts in Thousands)
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
May 3, February 1,
1997 1997
- ---------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,064 $ 5,075
Accounts receivable 4,748 4,905
Inventories 43,754 42,741
Prepaid expenses 1,542 1,514
Deferred tax asset 1,897 1,897
- ---------------------------------------------------------------------------------------------------------------------
Total current assets 57,005 56,132
Property and equipment, at cost 154,811 152,900
Less accumulated depreciation 56,483 54,417
- ---------------------------------------------------------------------------------------------------------------------
Net property and equipment 98,328 98,483
Intangible assets, net 4,953 4,145
Other assets 662 591
- ---------------------------------------------------------------------------------------------------------------------
Total assets $160,948 $159,351
=====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 8,110 $ 6,128
Current obligations under capital leases 441 428
Accounts payable 18,768 18,561
Accrued payroll and benefits 7,209 7,551
Accrued expenses and reserves 4,580 5,383
Accrued interest payable 92 131
Notes payable - -
Income taxes 740 10
- ---------------------------------------------------------------------------------------------------------------------
Total current liabilities 39,940 38,192
Long-term debt 17,552 18,569
Obligations under capital leases 8,842 8,957
Deferred taxes payable 1,735 1,735
Stockholders' equity:
Preferred stock $.01 par value, authorized 1,000,000 shares - -
Common stock $.01 par value, authorized 15,000,000 shares;
issued and outstanding 8,640,556 shares as of May 3, 1997
and 8,639,056 shares as of February 1, 1997 86 86
Paid-in capital 79,144 79,133
Retained earnings 14,174 13,079
- ---------------------------------------------------------------------------------------------------------------------
93,404 92,298
Less stock subscriptions receivable 525 400
- ---------------------------------------------------------------------------------------------------------------------
Net stockholders' equity 92,879 91,898
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $160,948 $159,351
=====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
Buttrey Food and Drug Stores Company and Subsidiary
<TABLE>
<CAPTION>
Consolidated Statements of Operations
=====================================================================================================================
(Dollar Amounts in Thousands, Except Per Share Data)
- ---------------------------------------------------------------------------------------------------------------------
13 Weeks Ended
--------------------------
May 3, May 4,
1997 1996
- ---------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Sales $ 94,934 $ 88,135
Cost of sales and related occupancy expenses 71,090 67,013
- ---------------------------------------------------------------------------------------------------------------------
Gross Profit 23,844 21,122
Marketing, general, and administrative expenses 21,222 19,291
- ---------------------------------------------------------------------------------------------------------------------
Operating income 2,621 1,831
Other income / (expense):
Loss on disposal of owned property (1) -
Interest income 13 27
Interest expense (808) (640)
- ---------------------------------------------------------------------------------------------------------------------
(796) (613)
- ---------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 1,825 1,218
Income tax provision 730 487
- ---------------------------------------------------------------------------------------------------------------------
Net earnings $ 1,095 $ 731
=====================================================================================================================
Net earnings per share $ 0.13 $ 0.08
=====================================================================================================================
Weighted average common and common
equivalent shares outstanding 8,724,944 8,612,525
=====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity
=====================================================================================================================
(Dollar Amounts in Thousands)
- ---------------------------------------------------------------------------------------------------------------------
Net
Common Paid-in Retained Stock stockholders'
stock capital earnings subscriptions equity
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at February 1, 1997 $86 $79,133 $13,079 $(400) $91,898
Net additions on stock subscriptions - 11 - (125) (114)
Net earnings - - 1,095 - 1,095
- ---------------------------------------------------------------------------------------------------------------------
Balance at May 3, 1997 (unaudited) $86 $79,144 $14,174 $(525) $92,879
=====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
Buttrey Food and Drug Stores Company and Subsidiary
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
=====================================================================================================================
(Dollar Amounts in Thousands)
- ---------------------------------------------------------------------------------------------------------------------
13 Weeks Ended
---------------------------
May 3, May 4,
1997 1996
- ---------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,095 $ 731
Adjustments to reconcile income to net cash
provided by operating activities:
Depreciation 2,481 2,026
Amortization 112 45
Loss on disposal of owned property (1) -
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 156 (61)
Decrease (increase) in inventories (1,013) 379
Increase in prepaid expenses (28) (3)
Increase in accounts payable 207 2,918
Decrease in accrued payroll and benefits (342) (1,062)
Decrease in accrued expenses and reserves (805) (624)
Decrease in accrued interest payable (38) (55)
Increase in accrued income taxes 730 703
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,554 4,997
- ---------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of property and equipment (2,326) (3,252)
Proceeds from sale of property and equipment - 6
Increase in other assets (988) (64)
- ---------------------------------------------------------------------------------------------------------------------
Net cash (used) by investing activities (3,314) (3,310)
- ---------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Increase (decrease) on long-term debt 965 (568)
Increase on stock subscriptions receivable (125) -
Issuance of common stock 11 -
Payments on capital lease obligations (102) (91)
Decrease in notes payable, net - (15)
- ---------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 749 (674)
- ---------------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents (11) 1,013
Cash and cash equivalents at beginning of period 5,075 6,140
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 5,064 $ 7,153
=====================================================================================================================
</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 1, 1997.
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.
SFAS No. 128, Earnings per Share, was issued in February 1997 and will
replace the presentation of primary earnings per share ("EPS") with a
presentation of basic and diluted EPS on the face of the income statement for
all entities with complex capital structures. SFAS No. 128 also requires a
reconciliation of the numerator and denominator of the diluted EPS computation.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. 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 equity.
This statement will be effective for the Company commencing February 1,
1998 and earlier application is not permitted. Once effective, this statement
requires restatement of all prior-period EPS data. Pro forma basic and diluted
net income per share as determined under this statement does not differ from the
amounts as currently reported herein.
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 43 stores, and a mail order pharmacy business. 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.
<PAGE>
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, limitations on the amount of the
Company's capital expenditures, restrictions on the ability of the Company to
incur indebtedness, to pay dividends and to take certain other corporate
actions, and requirements that the Company maintain certain financial ratios and
satisfy certain financial tests. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - 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.
Expansion Plans
During the first quarter of 1997, the Company opened its fifth Buttrey Big
Fresh store in Bozeman, Montana (replacing a smaller, outmoded Buttrey Food &
Drug store previously located there), which occurred in February 1997, and
acquired a store in Cody, Wyoming, which occurred in April 1997. The Company
also plans to remodel approximately two stores during 1997. In addition, the
Company continues to seek sites for new store construction and intends to
continue the acquisition of existing stores. 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. In addition, the
Company historically has experienced temporary disruptions and lost sales during
store remodelings, and believes that this will continue in connection with
future remodelings.
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"). 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 3, 1997 Compared to 13 Weeks Ended May 4, 1996
Sales for the 13 weeks ended May 3, 1997 increased $6.8 million, or 7.7%,
from $88.1 million in the first quarter of 1996 to $94.9 million in the first
quarter of 1997. The increase in sales reflects additional sales from the stores
in Cheyenne, Laramie and Cody, Wyoming that the Company acquired during the past
year and have yet to anniversary; the replacement of the Company's Bozeman,
Montana store as a Buttrey Big Fresh; and an increase in comparable store sales.
Comparable store sales increased 0.6% despite a more aggressive competitive
environment, the severity of this year's winter, promotions run in 1996 which
were not duplicated in 1997, and limited inflation.
<PAGE>
Gross profit for the 13 weeks ended May 3, 1997 increased $2.7 million from
$21.1 million in the first quarter of 1996 to $23.8 million in the first quarter
of 1997. Gross profit as a percentage of sales increased 1.1% from 24.0% in the
first quarter of 1996 to 25.1% in the first quarter of 1997 as a result of lower
product procurement costs and reductions in distribution expenses.
Marketing, general and administrative ("MG&A") expenses for the 13 weeks
ended May 3, 1997 increased $1.9 million from $19.3 million in the first quarter
of 1996 to $21.2 million in the first quarter of 1997. The increase in MG&A is
principally attributable to the operating expenses of the new stores described
above, an increase in depreciation expense, an increase in administration
expense, and pre-opening expenses during the quarter for both the Bozeman,
Montana and the Cody, Wyoming stores. MG&A expenses as a percentage of sales
increased 0.5% from 21.9% in the first quarter of 1996 to 22.4% in the first
quarter of 1997.
Operating income for the 13 weeks ended May 3, 1997 increased $0.8 million
from $1.8 million, or 2.1% of sales, in the first quarter of 1996 to $2.6
million, or 2.8% of sales, in the first quarter of 1997. The increase in
operating income primarily reflects the improvement in gross profit offset by
the increase in MG&A expenses described above.
Interest expense, net of interest income, for the 13 weeks ended May 3,
1997 increased $0.2 million from $0.6 million, or 0.7% of sales, in the first
quarter of 1996 to $0.8 million, or 0.8% of sales, in the first quarter of 1997.
The increase in net interest expense is attributable to an increase in
outstanding long-term debt. See "--Liquidity and Capital Resources."
Net income for the 13 weeks ended May 3, 1997 increased $0.4 million from
$0.7 million, or $0.08 per share, in the first quarter of 1996 to $1.1 million,
or $0.13 per share, in the first quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise primarily from debt service on its
indebtedness and the funding of the Company's capital expenditure and 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 revolving
credit facility (with a $10.0 million sublimit for letters of credit) and
includes variable rate term loans totaling $12.8 million, which the Company used
to refinance existing equipment financing loans resulting in lower interest
rates and extended maturities. The borrowing base under which the revolving
credit facility can be utilized is equal to 65% of Eligible Inventory
(essentially non-perishable inventory). The estimated borrowing base as of May
3, 1997 was $24.5 million. During the third quarter of 1996, the Financing
Agreement was amended to provide for a third term loan in an amount of up to
$5.0 million (which the Company used to finance a substantial portion of the
purchase price related to its June 1996 acquisition of the Cheyenne, Wyoming
store), to increase the flexibility of the covenants relating to capital
expenditures contained therein, and to make other technical changes. 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:
<PAGE>
$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%
$5.0 Term Loan III prime rate plus 1.50% or LIBOR plus 2.25%
The Financing Agreement matures five years from inception, however, the
principal portion of Term Loans I and II are amortized on a straight-line basis
over 84 months and the principal portion of Term Loan III is amortized on a
straight-line basis over 60 months. In the event that the Financing Agreement is
not extended at the end of five years, the term loans will 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 in the Company.
Borrowings under the Financing Agreement are secured by the Great Falls
Distribution Center, a retail store location in Butte, Montana and substantially
all of the personal property of the Company. The Financing Agreement contains
certain financial and operating covenants, including limitations on the amount
of the Company's capital expenditures, its ability to pay 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 3, 1997 are as follows:
<TABLE>
<CAPTION>
Actual Test
<S> <C> <C>
Minimum Net Worth $92.9 Million $75.0 Million
Maximum Capital Expenditures $ 2.3 Million $19.0 Million
Maximum Net Capital Expenditures $ 2.3 Million $13.0 Million
Minimum Interest Charge Coverage Ratio 6.29 4.70
</TABLE>
As of May 3, 1997, the Company had borrowings outstanding under the
revolving credit facility of $3.6 million, and letter of credit commitments of
$2.6 million. The outstanding balance under Term Loan I was $6.2 million (of
which $1.2 million is classified as current), under Term Loan II was $3.6
million (of which $0.7 million is classified as current), and under Term Loan
III was $4.2 million (of which $1.0 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 utilized equipment financing from time to time in order to
finance the purchases of store equipment and vehicles. The proceeds from each of
Term Loan I and Term Loan II were used by the Company to repay the remaining
outstanding obligations of all prior equipment financing loans. In addition to
these 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. On July 26, 1996, the Company completed a $4.0
million loan transaction with NationsBanc Leasing Corporation ("NationsBanc") to
finance the purchase of new equipment for the recently completed Great Falls,
Montana remodels and to upgrade the Company's transportation fleet.
Approximately $3.5 million of this loan bears interest at an 8.03% fixed rate
while the
<PAGE>
remaining $0.5 million bears interest at LIBOR plus 2.35%. The loan is payable
in monthly installments over 48 months. On November 4, 1996, the Company
completed an additional loan transaction with NationsBanc in an amount of
approximately $1.6 million, which proceeds were used by the Company to finance
the Lewistown, Montana remodel and to further upgrade the Company's
transportation fleet. The new loan is payable in monthly installments over 48
months and bears interest at LIBOR plus 2.35%. As of May 3, 1997, the
outstanding obligation under these equipment loans aggregated $5.5 million (of
which $1.6 million is classified as current).
The Company has also entered into commitments to finance a portion of its
1997 capital expenditures. The first commitment is with MetLife Capital
Corporation to finance up to $2.0 million of new store equipment and the second
commitment is with General Electric Capital Corporation ("GE Capital")to finance
up to $10.0 million of new store equipment. Subsequent to the close of the first
quarter, the Company completed a $2.4 million dollar loan transaction with GE
Capital for the financing of the fixtures and equipment at the Company's new
Bozeman, Montana store. The new loan is payable in monthly installments over 60
months and bears interest at the 30-day commercial paper rate plus 2.18%.
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 3, 1997 was $9.3 million (of which $0.4 million is classified as current).
Net cash provided by operating activities was $2.6 million for the 13 weeks
ended May 3, 1997, as compared with $5.0 million for the 13 weeks ended May 4,
1996. The decrease in net cash provided by operating activities was primarily
attributable to the net change of $3.3 million for operating assets and
liabilities as a result of a larger build-up of trade payables in the first
quarter of 1996, and an increase in inventory which reflected the opening of two
new stores in the first quarter of 1997, partially offset by a $0.9 million
increase in net income before depreciation, amortization and disposal of owned
property.
The Company spent an aggregate of $22.9 million, $10.0 million and $8.8
million on capital expenditures (primarily for acquisitions, store remodelings
and ongoing maintenance of its existing store base and support functions),
during 1996, 1995 and 1994, respectively. Of these amounts, the Company has
funded approximately $10.6 million, $1.2 million and $9.2 million through
equipment and real estate financings in 1996, 1995 and 1994, respectively. The
Company plans to continue its store remodeling and development program. During
the first quarter of 1997, the Company completed the acquisition of one store in
Cody, Wyoming and also opened its fifth Buttrey Big Fresh store in Bozeman,
Montana (replacing a smaller, outmoded Buttrey Food & Drug store previously
located there). The purchase price for the Cody store was $2.4 million for
fixtures and equipment and a non-compete agreement, plus $0.3 million for
inventory. The Company also entered into a lease with the seller of the business
for the real property on which the grocery store was previously located. The
Company plans to remodel approximately two stores during 1997. For 1997, capital
expenditures by the Company, including the foregoing, are estimated to be
approximately $19.0 million, including approximately $7.2 million for the
remodels and for the ongoing maintenance of its existing store base and support
functions. 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 Cody
acquisition, the projected capital expenditure amount for 1997 does not include
any additional amounts for potential acquisitions.
Based upon the foregoing, and considering current and projected operating
results as well as the current budgeted capital expenditures of approximately
$19.0 million, 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 which would eliminate the Company's
net operating loss and alternative minimum tax credit carryover and would result
in additional federal taxes of $5.6 million plus interest from the date when
such additional taxes are asserted to have been due to the date of payment.
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 Company, after consultation with tax counsel, continues to believe in
the propriety of its positions set forth in this 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 expensed when accruable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of stockholders was held on May 28, 1997 to
elect ten directors to hold office until the next annual meeting of stockholders
and until their successors are elected and qualified.
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 8,258,590 12,247 0
Matt L. Figel 8,260,226 10,611 0
Robert P. Gannon 8,260,226 10,611 0
Michael P. Malone 8,260,026 10,811 0
Wayne S. Peterson 8,258,790 12,047 0
J. Frederick Simmons 8,260,226 10,611 0
Peter J. Sodini 8,260,226 10,611 0
Ronald P. Spogli 8,260,226 10,611 0
William M. Wardlaw 8,260,226 10,611 0
Thomas C. Young 8,260,426 10,411 0
</TABLE>
<PAGE>
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 16, 1997 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> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> MAY-03-1997
<CASH> 5,064
<SECURITIES> 0
<RECEIVABLES> 4,748
<ALLOWANCES> 0
<INVENTORY> 43,754
<CURRENT-ASSETS> 57,005
<PP&E> 154,811
<DEPRECIATION> 56,483
<TOTAL-ASSETS> 160,948
<CURRENT-LIABILITIES> 39,940
<BONDS> 26,394
0
0
<COMMON> 78,705
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 160,948
<SALES> 94,934
<TOTAL-REVENUES> 94,934
<CGS> 71,090
<TOTAL-COSTS> 71,090
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 795
<INCOME-PRETAX> 1,825
<INCOME-TAX> 730
<INCOME-CONTINUING> 1,095
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,095
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
