<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 2, 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 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
incorporation or organization) Identification No.)
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 15,
1998 was 8,645,306 shares
THERE ARE NO EXHIBITS FILED WITH THIS FORM 10-Q
===================================================
Page 1 of 11
<PAGE>
BUTTREY FOOD AND DRUG STORES COMPANY
AND SUBSIDIARY
FORM 10-Q
For the Quarterly Period Ended May 2, 1998
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
a) Consolidated Balance Sheets as of May 2, 1998 (unaudited) and January 31, 1998 3
b) Consolidated Statements of Operations for the 13 weeks ended May 2, 1998
(unaudited) and May 3, 1997 (unaudited) 4
c) Consolidated Statement of Stockholders' Equity as of January 31, 1998
and May 2, 1998 (unaudited) 4
d) Consolidated Statements of Cash Flows for the 13 weeks ended May 2, 1998
(unaudited) and May 3, 1997 (unaudited) 5
e) Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7
Part II. Other Information
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 11
</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 2, January 31,
1998 1998
- ----------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,745 $ 5,173
Accounts receivable 4,882 5,671
Inventories 43,880 45,230
Prepaid expenses 1,376 1,352
Deferred tax asset 694 694
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 56,577 58,120
Property and equipment, at cost 170,912 167,758
Less accumulated depreciation 67,111 64,312
- ----------------------------------------------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 103,801 103,446
Intangible assets, net 6,416 6,573
Other assets 759 759
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $167,553 $168,898
============================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 16,140 $ 12,743
Current obligations under capital leases 483 483
Accounts payable 16,028 17,773
Accrued payroll and benefits 6,237 8,031
Accrued expenses and reserves 3,919 3,491
Accrued interest payable 46 169
Income taxes 238 -
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 43,091 42,690
Long-term debt 18,770 20,456
Obligations under capital leases 8,359 8,475
Deferred taxes payable 1,950 1,950
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 8,644,856 shares as of May 2, 1998
and 8,644,631 shares as of January 31, 1998 86 86
Paid-in capital 79,174 79,174
Retained earnings 16,648 16,592
- ----------------------------------------------------------------------------------------------------------------------------
95,908 95,852
Less stock subscriptions receivable 525 525
- ----------------------------------------------------------------------------------------------------------------------------
NET STOCKHOLDERS' EQUITY 95,383 95,327
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $167,553 $168,898
============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
3
<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 2, May 3,
1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Sales $ 93,690 $ 94,934
Cost of sales and related occupancy expenses 70,278 71,090
- ----------------------------------------------------------------------------------------------------------------------------
Gross Profit 23,412 23,844
Marketing, general, and administrative expenses 22,207 21,223
- ----------------------------------------------------------------------------------------------------------------------------
Operating income 1,205 2,621
Other income / (expense):
Loss on disposal of owned property - (1)
Interest income 14 13
Interest expense (925) (808)
- ----------------------------------------------------------------------------------------------------------------------------
(911) (796)
- ----------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 294 1,825
Income tax provision 238 730
- ----------------------------------------------------------------------------------------------------------------------------
Net earnings $ 56 $ 1,095
============================================================================================================================
Net earnings per share:
Basic $ 0.01 $ 0.13
Diluted 0.01 0.12
============================================================================================================================
Weighted average common and common
equivalent shares outstanding:
Basic 8,644,646 8,639,369
Diluted 8,935,078 8,781,084
- ----------------------------------------------------------------------------------------------------------------------------
</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 January 31, 1998 $86 $79,174 $16,592 $(525) $95,327
Net additions on stock subscriptions - - - - -
Net earnings - - 56 - 56
- ---------------------------------------------------------------------------------------------------------------------------
Balance at May 2, 1998 (unaudited) $86 $79,174 $16,648 $(525) $95,383
===========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
BUTTREY FOOD AND DRUG STORES COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
============================================================================================================================
(Dollar Amounts in Thousands)
- ----------------------------------------------------------------------------------------------------------------------------
13 Weeks Ended
-----------------------------
May 2, May 3,
1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 56 $ 1,095
Adjustments to reconcile income to net cash
provided by operating activities:
Depreciation 2,800 2,481
Amortization 159 112
Loss on disposal of owned property - (1)
Changes in operating assets and liabilities:
Increase in accounts receivable 790 156
Decrease (increase) in inventories 1,350 (1,013)
Increase in prepaid expenses (25) (28)
Increase (decrease) in accounts payable (1,746) 207
Decrease in accrued payroll and benefits (1,794) (342)
Increase (decrease) in accrued expenses and reserves 428 (805)
Decrease in accrued interest payable (124) (38)
Increase in accrued income taxes 238 730
- ----------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,132 2,554
- ----------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchase of property and equipment (3,155) (2,326)
Increase in other assets - (988)
- ----------------------------------------------------------------------------------------------------------------------------
NET CASH (USED) BY INVESTING ACTIVITIES (3,155) (3,314)
- ----------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Increase on long-term debt 1,710 965
Increase on stock subscriptions receivable - (125)
Issuance of common stock - 11
Payments on capital lease obligations (115) (102)
- ----------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 1,595 749
- ----------------------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 572 (11)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,173 5,075
- ----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,745 $ 5,064
============================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
5
<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 January 31, 1998.
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.
In June, 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 130, "Reporting
Comprehensive Income," which establishes standards for reporting and displaying
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. This statement requires
that all items required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. SFAS No. 130
is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The Company does not have any elements of
comprehensive income other net income.
In June 1997, FASB issued SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information." This statement requires public business to
disclose selected information about operating segments including segment income,
revenues and asset data. Operating segments, as defined in SFAS No. 131, would
include those components for which financial information is available and
evaluated regularly by the chief operating decision maker in assessing
performance and making resource allocation determinations for operating
components such as those which contribute ten percent or more of combined
revenue, income or assets. SFAS No. 131 is effective for financial statements
for periods beginning after December 31, 1997. Adoption did not have a material
impact on the Company's presentation of consolidated financial statements.
On April 3, 1998, the AICPA Accounting Standards Executive Committee issued
Statement of Position 98-5. "Reporting on the Costs of Start-up Activities"
(SOP 98-5). SOP 98-5 requires that costs of start-up activities, including
organization costs, be expensed as incurred. Costs of start-up activities may
have been referred to as preopening costs, preoperating costs, start-up costs,
organization costs, or other terms. In other cases, costs of start-up activities
may have been included as a component of the cost of tangible or intangible
assets. Regardless of what these costs have been called or how these costs have
been classified in the past, the SOP applies to all costs of start-up
activities, including organization costs.
SOP 98-5 is effective for financial statements for fiscal years beginning
after December 15, 1998. Earlier application is encouraged in fiscal years for
which financial statements have not been issued. Restatement of previously
issued financial statements is not permitted. Initial application of the SOP
should be as the beginning of the fiscal year in which the SOP is first adopted
and should be reported as the cumulative effect of a change in accounting
principle as described in APB Opinion No. 20, "Accounting Changes". Management
expects that adoption will not have a material impact on the Company's
consolidated financial statements.
<PAGE>
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 44 stores. 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.
RESULTS OF OPERATIONS
13 Weeks Ended May 2, 1998 Compared to 13 Weeks Ended May 3, 1997
Sales for the 13 weeks ended May 2, 1998 decreased $1.2 million, or 1.3%, from
$94.9 million in the first quarter of 1997 to $93.7 million in the first quarter
of 1998. The decrease in sales reflects a 2.6% decline in comparable store
sales partially offset by additional sales from the Cody, Wyoming store that the
Company acquired during the past year, and from the Company's new store in Great
Falls, Montana that opened in late March. The decline in comparable store sales
is attributable to the opening of competitor new stores during the current
quarter, the impact from competitor new stores, remodels and expansions during
the past year which have yet to anniversary, and the deflection of sales from
the Company's two largest stores in Great Falls into the Company's new store.
Additionally, management believes that comparable store sales have been
negatively impacted by a more aggressive competitive environment and customer
response to the Company's pending merger with Albertson's, Inc. (NYSE:ABS).
Gross profit for the 13 weeks ended May 2, 1998 decreased $0.4 million from
$23.8 million in the first quarter of 1997 to $23.4 million in the first quarter
of 1998. The decrease in gross profit is attributable to the decline in sales
and to decreased vendor support as a result of the pending merger with
Albertson's, including reductions in new item allowances and buy-in
opportunities due to the announced closure of the Great Falls distribution
center by Albertson's upon completion of the merger transaction, and market
development funds. Gross profit as a percentage of sales decreased 0.1% from
25.1% in the first quarter of 1997 to 25.0% in the first quarter of 1998.
Marketing, general and administrative ("MG&A") expenses for the 13 weeks ended
May 2, 1998 increased $1.0 million from $21.2 million in the first quarter of
1997 to $22.2 million in the first quarter of 1998. The increase in MG&A is
principally attributable to merger costs, to pre-opening expenses associated
with the Harlem, Montana replacement store and the new store in Great Falls, and
to increases in depreciation, employee benefit and advertising expenses. MG&A
expenses as a percentage of sales increased 1.3% from 22.4% in the first quarter
of 1997 to 23.7% in the first quarter of 1998.
Operating income for the 13 weeks ended May 2, 1998 decreased $1.4 million
from $2.6 million, or 2.8% of sales, in the first quarter of 1997 to $1.2
million, or 1.3% of sales, in the first quarter of 1998.
Interest expense, net of interest income, for the 13 weeks ended May 2, 1998
increased $0.1 million from $0.8 million, or 0.8% of sales, in the first quarter
of 1998 to $0.9 million, or 1.0% of sales, in the first quarter of 1997. The
increase is attributable to the additional outstanding long-term debt.
<PAGE>
Net income for the 13 weeks ended May 2, 1998 decreased $1.0 million from $1.1
million, or $0.12 per share, in the first quarter of 1997 to $0.1 million, or
$0.01 per share, in the first quarter of 1998. The decrease in net income is
attributable to the decline in operating income, the increase in interest
expense and the non-deductibility of merger costs for tax purposes which has
resulted in an increased effective tax rate.
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, and temporary borrowings
under the Company's working capital facility.
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 January 31, 1998 was
$24.7 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
("Term Loan III") 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:
$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, all three term loans will become due and
payable. 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 2, 1998 are as follows:
<PAGE>
Actual Test
Minimum Net Worth $95.4 Million $80.0 Million
Maximum Capital Expenditures $ 3.1 Million $18.6 Million
Maximum Net Capital Expenditures $ 3.1 Million $12.6 Million
Minimum Interest Charge Coverage Ratio 6.19 5.00
As of May 2, 1998, the Company had $9.7 million in borrowings outstanding
under the revolving credit facility and letter of credit commitments of $2.6
million. The outstanding balance under Term Loan I was $5.0 million (of which
$1.2 million is classified as current), under Term Loan II was $2.9 million (of
which $0.7 million is classified as current), and under Term Loan III was $3.2
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 related to the remodel of two stores in
Great Falls, Montana 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 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 a 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%. On December 15, 1997, the
Company completed a loan transaction with NationsBanc in an amount of
approximately $1.0 million, which proceeds were used by the Company 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
2, 1998, the outstanding obligation under these equipment loans aggregated $4.7
million (of which $2.0 million is classified as current).
The Company has also entered into a commitment to finance capital expenditures
with General Electric Capital Corporation ("GE Capital")to finance up to $10.0
million of new store equipment. During the second quarter 1997, the Company
completed a $2.4 million 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%. On December 19, 1997, the Company
completed a $5.3 million loan transaction with GE Capital for the financing of
the primarily fixtures and equipment associated with the Company's three
remodeled stores in Billings, Montana. The new loan is payable in monthly
installments over 60 months and bears interest at the 30-day commercial paper
rate plus 2.18%. As of May 2, 1998, the outstanding obligation under these
equipment loans aggregated $6.8 million (of which $1.5 million is classified as
current).
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
2, 1998 was $8.8 million (of which $0.5 million is classified as current).
<PAGE>
On April 1, 1997, the Company completed the acquisition of a conventional
store in Cody, Wyoming. The purchase price 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.
Net cash provided by operating activities was $2.1 million for the 13 weeks
ended May 2, 1998, as compared with $2.6 million for the 13 weeks ended May 3,
1998. The decrease in net cash provided by operating activities was primarily
attributable to a $0.7 million decrease in net income before depreciation,
amortization, LIFO provision, deferred taxes and disposal of owned property
partially offset by a $0.2 million decrease for net changes in operating assets
and liabilities.
The Company spent an aggregate of $15.4 million, $22.9 million and $10.0
million on capital expenditures (primarily for acquisitions, store remodelings
and ongoing maintenance of its existing store base and support functions),
during fiscal years 1997, 1996 and 1995, respectively. Of these amounts, the
Company has funded approximately $8.6 million, $10.6 million and $1.2 million
through equipment and real estate financings in fiscal years 1997, 1996 and
1995, respectively. The Company plans to continue its store remodeling and
development program. During the first quarter, the Company completed the
replacement of an older store with a Buttrey Fresh Foods store in Harlem,
Montana, and the Company opened its ninth Buttrey Big Fresh store, in Great
Falls, Montana. The Company has spent $3.1 million for capital expenditures in
1998 primarily for the two stores described above. For the remainder of 1998,
capital expenditures will be limited pursuant to the Merger Agreement with
Albertson's Inc. to approximately $0.1 million per month.
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.
COMPUTERIZED OPERATIONS AND THE YEAR 2000
During recent years, there has been increasing global awareness regarding the
potential disruption to business operations worldwide resulting from the
inability of current technology to process properly the change from the year
1999 to 2000. The Company has evaluated the significance of the change from the
year 1999 to the year 2000 on its existing computer systems and has taken steps
designed to ensure that its computer systems will not be adversely affected
thereby. The financial impact of such steps is not anticipated to be material.
In addition, the Company's systems rely in part on computer-based systems of
other companies. As a result, if any such company failed to become year 2000
compliant, the Company could be adversely affected.
<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.
During August 1997, the Company reached a proposed settlement with the IRS
with regard to adjustments associated with the Company's initial acquisition of
assets. The settlement was formally approved on September 17, 1997. Under the
terms of the settlement, the Company paid approximately $1,386,000 in federal
taxes plus approximately $1,086,000 in interest. Additionally, the Company will
have corresponding state tax liabilities of approximately $483,000 plus
approximately $188,000 in interest. The aggregate $2,092,000 in tax liability
has been recorded on the Company's balance sheet 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 associated with
the Company's initial acquisition of assets. The aggregate interest of
$1,274,000 ($764,000 after-tax, or $0.09 per share), however, has been recorded
as an expense in the fiscal quarter ended August 2, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Number
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
27.3 Restated Financial Data Schedule
(b) Reports on Form 8-K
During the quarter ended May 2, 1998, the Company did not file any reports on
Form 8-k
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 15, 1998 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-30-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> MAY-02-1998
<CASH> 5,745
<SECURITIES> 0
<RECEIVABLES> 4,882
<ALLOWANCES> 0
<INVENTORY> 43,880
<CURRENT-ASSETS> 56,577
<PP&E> 170,912
<DEPRECIATION> 67,111
<TOTAL-ASSETS> 167,553
<CURRENT-LIABILITIES> 43,091
<BONDS> 27,129
0
0
<COMMON> 78,735
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 167,553
<SALES> 93,690
<TOTAL-REVENUES> 93,690
<CGS> 70,278
<TOTAL-COSTS> 70,278
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 911
<INCOME-PRETAX> 294
<INCOME-TAX> 238
<INCOME-CONTINUING> 56
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56
<EPS-PRIMARY> 0.01
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