UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED AUGUST 10, 1996
[ ] 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: 33-63372
PUEBLO XTRA INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 65-0415593
- ---------------------------------------- ------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1300 N.W. 22ND STREET
POMPANO BEACH, FLORIDA 33069
- ---------------------------------------- ------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (954) 977-2500
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH 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 [ ]
NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK, $ .10 PAR VALUE,
OUTSTANDING AS OF SEPTEMBER 19, 1996 -- 200.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS PAGE(S)
-------
Consolidated Balance Sheets (Unaudited) -
August 10, 1996 and January 27, 1996...........................3-4
Consolidated Statements of Operations (Unaudited)
Twelve and 28 weeks ended August 10, 1996
and August 12, 1995..............................................5
Consolidated Statements of Cash Flows (Unaudited) -
Twenty-eight weeks ended August 10, 1996
and August 12, 1995..............................................6
Notes to Consolidated Financial Statements (Unaudited) ......................7-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...........................9-12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................13
<PAGE>
CONSOLIDATED BALANCE SHEETS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands)
(Unaudited)
August 10, January 27,
1996 1996
---------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,351 $ 6,998
Marketable securities (market value
of $1,077 at August 10, 1996 and
$888 at January 27, 1996) 1,077 888
Accounts receivable 6,907 10,071
Inventories 59,135 67,237
Assets held for sale 14,337 26,000
Prepaid expenses 15,664 10,670
Deferred income taxes 8,264 9,215
-------- --------
TOTAL CURRENT ASSETS 106,735 131,079
-------- --------
PROPERTY AND EQUIPMENT
Land and improvements 18,116 18,116
Buildings and improvements 61,039 60,766
Furniture, fixtures and equipment 96,403 95,591
Leasehold improvements 32,173 31,617
Construction in progress 5,111 4,139
-------- --------
212,842 210,229
Less accumulated depreciation
and amortization 67,783 55,505
-------- --------
145,059 154,724
Property under capital leases, net 10,890 11,559
-------- --------
TOTAL PROPERTY AND EQUIPMENT, NET 155,949 166,283
GOODWILL, net of accumulated amortization of
$15,728 at August 10, 1996 and $13,018 at
January 27, 1996 185,991 188,700
DEFERRED INCOME TAXES 11,159 10,272
TRADENAMES 31,970 32,436
DEFERRED CHARGES AND OTHER ASSETS 42,311 44,613
-------- --------
TOTAL ASSETS $534,115 $573,383
======== ========
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
CONSOLIDATED BALANCE SHEETS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
(Unaudited)
August 10, January 27,
1996 1996
---------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 56,236 $ 65,112
Accrued expenses 34,221 52,610
Salaries, wages and benefits payable 12,107 14,315
Short-term borrowing 10,600 --
Current installments of long-term debt 19,375 29,214
Current obligations under capital leases 933 859
Income taxes payable 110 94
--------- ---------
TOTAL CURRENT LIABILITIES 133,582 162,204
LONG-TERM DEBT, net of current portion 84,102 89,477
NOTES PAYABLE 180,000 180,000
CAPITAL LEASE OBLIGATIONS,
net of current portion 8,407 8,947
RESERVE FOR SELF-INSURANCE CLAIMS 11,028 12,862
DEFERRED INCOME TAXES 34,008 35,335
OTHER LIABILITIES AND DEFERRED CREDITS 37,193 39,659
--------- ---------
TOTAL LIABILITIES 488,320 528,484
--------- ---------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDER'S EQUITY
Common stock, $.10 par value;
200 shares authorized
and issued -- --
Additional paid-in capital 91,500 86,500
Accumulated deficit (45,705) (41,601)
--------- ---------
TOTAL STOCKHOLDER'S EQUITY 45,795 44,899
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 534,115 $ 573,383
========= =========
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands)
(Unaudited)
12 weeks 12 weeks 28 weeks 28 weeks
ended ended ended ended
August 10, August 12, August 10, August 12,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 226,008 $ 267,240 $ 536,376 $ 619,272
Cost of goods sold 165,705 197,344 396,006 456,235
--------- --------- --------- ---------
GROSS PROFIT 60,303 69,896 140,370 163,037
--------- --------- --------- ---------
OPERATING EXPENSES
Selling, general and administrative
expenses 45,338 54,405 107,628 126,855
Depreciation and amortization 9,045 9,857 21,048 23,181
--------- --------- --------- ---------
OPERATING PROFIT 5,920 5,634 11,694 13,001
Sundry, net (13) (13) (56) (21)
--------- --------- --------- ---------
INCOME BEFORE INTEREST AND
INCOME TAXES 5,907 5,621 11,638 12,980
Interest expense on debt (6,920) (7,167) (16,016) (16,811)
Interest expense on capital lease
obligations (258) (526) (614) (1,271)
Interest and investment income, net 41 235 91 682
--------- --------- --------- ---------
LOSS BEFORE INCOME TAXES (1,230) (1,837) (4,901) (4,420)
Income tax benefit 146 501 797 1,146
--------- --------- --------- ---------
NET LOSS $ (1,084) $ (1,336) $ (4,104) $ (3,274)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands)
(Unaudited)
28 weeks ended 28 weeks ended
August 10, August 12,
1996 1995
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,104) $ (3,274)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities, net of effects of disposal of
Florida retail operations:
Depreciation and amortization of property and equipment 13,731 15,883
Amortization of intangible and other assets 7,317 7,298
Deferred income taxes (1,263) (2,255)
Loss on disposal of property and equipment, net 204 304
Decrease in deferred charges, goodwill, and other assets 640 1,357
Decrease in reserve for self-insurance claims (263) (702)
Decrease in other liabilities and deferred credits (842) (892)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 2,014 (2,738)
Decrease (increase) in inventories 4,962 (1,434)
Increase in prepaid expenses (5,122) (3,928)
Decrease in accounts payable and accrued expenses (17,035) (7,503)
Increase in income taxes payable 143 107
-------- --------
382 2,223
Decrease attributable to disposal of Florida retail operations (14,450) --
-------- --------
Net cash provided by (used in) operating activities (14,068) 2,223
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,162) (10,243)
Proceeds from disposal of property and equipment -- 460
Proceeds from disposal of Florida retail operations 11,663 --
-------- --------
Net cash provided by (used in) investing activities 8,501 (9,783)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (15,214) (4,662)
Principal payments on capital lease obligations (466) (706)
Proceeds from short-term borrowing, net 10,600 --
Proceeds from capital contribution 5,000 --
-------- --------
Net cash used in financing activities (80) (5,368)
-------- --------
Net decrease in cash and cash equivalents (5,647) (12,928)
Cash and cash equivalents at beginning of period 6,998 15,680
-------- --------
Cash and cash equivalents at end of period $ 1,351 $ 2,752
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 22,018 $ 23,424
Income taxes (net of refunds) 309 425
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(UNAUDITED)
NOTE 1 -- INTERIM FINANCIAL STATEMENTS
With respect to the unaudited financial information for each of the 12
and 28 weeks ended August 10, 1996 and August 12, 1995, it is the opinion of
management of Pueblo Xtra International, Inc. and its wholly-owned subsidiaries
(collectively, the "Company") that the adjustments necessary to prepare a fair
statement of the results for such interim periods have been included. Such
adjustments were of a normal and recurring nature, or as a result of the
strategic measures implemented by the Company described in Note (2)--Unusual
Charges or the business combination described in Note (3)--Acquisitions of the
audited consolidated financial statements contained in the Company's Form 10-K
for the fiscal year ended January 27, 1996 filed with the Securities and
Exchange Commission (hereinafter referred to as the "Form 10-K"). The unaudited
financial information should be read in conjunction with the Company's Form
10-K. The consolidated balance sheet at January 27, 1996 included herein has
been derived from the audited consolidated financial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
Operating results for the 12- and 28-week periods ended August 10, 1996
and August 12, 1995 are not necessarily indicative of results that may be
expected for the full fiscal years. The Company's fiscal year ends on the last
Saturday in January.
NOTE 2 -- INVENTORY
The results of the Company's operations reflect the application of the
last-in, first-out ("LIFO") method of valuing certain inventories of grocery,
non-food and dairy products. Since an actual valuation of inventories under the
LIFO method is only made at the end of a fiscal year based on inventory levels
and costs at that time, interim LIFO calculations are based on management's
estimates of expected year-end inventory levels and costs and are subject to
year-end adjustments.
NOTE 3 -- DEBT
During April 1996, the Company amended the credit facility consisting
of $115.0 million in term loans and a maximum of $60.0 million in revolving
loans (the "Credit Facility") with a syndicate of banks led by The Chase
Manhattan Bank (National Association) and Scotiabank de Puerto Rico. In
accordance with the terms of the amendment, the sole shareholder of the Company,
PXC&M Holdings, Inc. ("Holdings"), contributed $5.0 million in additional
capital to the Company on April 18, 1996 which was immediately used to reduce
the Company's term loans under the Credit Facility. In addition, in connection
with the amendment of the Credit Facility, Holdings has agreed to provide $10.0
million in additional funds to the Company by October 18, 1996 in return for
interest-bearing redeemable subordinated notes bearing interest at a rate not to
exceed that of the Credit Facility, plus 1%. Final maturity of such subordinated
notes will be after the expiration of the Credit Facility and may be redeemed
earlier subject to the Company meeting various performance and financial
criteria. Pursuant to the amendment, the Company may maintain the level of its
$60.0 million revolving facility during the remaining term of the credit
agreement, under certain circumstances. The amendment also provides certain
revised financial covenant requirements and a modification in the Company's
scheduled principal payments under the Credit Facility during the next two
fiscal years.
-7-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES, CONTINUED
(UNAUDITED)
NOTE 4 -- SUBSEQUENT EVENT
On September 9, 1996, Puerto Rico was directly impacted by Hurricane
Hortense. The Company's physical structures in Puerto Rico were not
significantly damaged. Management anticipates that any damage and expenses
resulting from the storm (primarily inventory-related) will not materially
affect the financial condition of the Company and should be adequately covered
by its existing insurance policies. Although utilities on the island were
inoperable for several days, the Company was able to reopen all stores within 24
hours after being hit by the storm.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW AND BASIS OF PRESENTATION
The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this Form 10-Q.
<TABLE>
<CAPTION>
12 Weeks Ended 28 Weeks Ended
-------------------------------------- ---------------------------------------
August 10, August 12, August 10, August 12,
1996 1995 1996 1995
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
SELECTED OPERATING RESULTS
(AS A PERCENTAGE OF SALES)
Gross profit 26.7% 26.2% 26.2% 26.3%
Selling, general and
administrative expenses 20.1 20.4 20.1 20.5
EBITDA (1) 6.6 5.8 6.1 5.8
Depreciation and amortization 4.0 3.7 3.9 3.7
Operating profit 2.6 2.1 2.2 2.1
Loss before income taxes (.5) (.7) (.9) (.7)
Net loss (.5) (.5) (.8) (.5)
</TABLE>
- -----------
(1) Represents income before interest, income taxes and depreciation and
amortization. EBITDA, as disclosed herein, is neither a measurement
pursuant to generally accepted accounting principles (GAAP) nor a
measurement of operating results and is included for informative
purposes only.
RESULTS OF OPERATIONS
As of August 10, 1996, the Company operated a total of 51 supermarkets
and 22 BLOCKBUSTER video stores throughout Puerto Rico and the U.S. Virgin
Islands. As of the same period last year, the Company operated a total of 57
supermarkets and 22 BLOCKBUSTER video stores throughout Puerto Rico, the U.S.
Virgin Islands and south Florida. The change in store count since August 12,
1995 consists of the closing of all eight XTRA stores in Florida as part of the
Company's strategic restructuring measures, which included closing the Florida
operating division, the closing of one XTRA store in Puerto Rico, and the
opening of two new XTRA stores in Puerto Rico and one new PUEBLO store in the
U.S. Virgin Islands. During the most recent quarter, the Company closed one XTRA
store and converted four PUEBLO supermarkets to XTRA stores, all in Puerto Rico.
As a result of the closing and conversions, store composition at August 10, 1996
is comprised of 22 PUEBLo stores, under the conventional supermarket format, six
of which are located in the U.S. Virgin Islands, and 29 stores under the XTRA
format.
Sales for the 12- and 28-week periods ended August 10, 1996 were $41.2
million, or 15.4%, and $82.9 million, or 13.4%, respectively, below that of the
same period last year. The primary factor in the overall sales reductions
relative to the comparable periods of last year is the closing of the Florida
retail operations which had sales of $41.4 and $96.3 million for the 12- and
28-week periods ended August 12, 1995,
-9-
<PAGE>
respectively. The effective closing date of the Florida operating division was
December 30, 1995. On a comparable store basis, sales declined by 5.0% and 3.1%,
respectively, for the 12 and 28 weeks ended August 10, 1996. The same store
sales decrease was primarily due to the effect of competition on supermarket
operations in Puerto Rico. Sales performance in the U.S. Virgin Islands remains
consistent with management's previous expectations of continued improvement, as
evidenced by same store sales increases of 8.1% and 8.9%, respectively, for the
12 and 28 weeks ended August 10, 1996. Favorable results in the U.S. Virgin
Islands are expected to continue as the Company maintains its position as the
market leader on the islands. The Blockbuster video operations remain strong
with same store sales increases of 11.8% and 13.8%, respectively, for the 12 and
28 weeks ended August 10, 1996.
Strategic measures implemented by the Company in Puerto Rico to deal
with the competitive environment on the island include launching a major
advertising campaign during the first quarter of fiscal 1997 which reemphasized
the two different store formats offered to customers. Since stores under the
XTRA format appeal to the more price-conscious consumer, the Company is
undergoing conversions of certain conventional PUEBLO supermarkets to XTRA
stores to effectively address price competition and demographic considerations.
In addition to the four PUEBLO stores converted to XTRA units this fiscal
quarter, the Company plans to continually evaluate the store formats relative to
the consumer markets they serve and make future conversions, as it deems
appropriate. The Company is also in the process of converting several
in-supermarket video departments to Blockbuster video operations. In
management's opinion, this, along with other contemplated interior changes
(including in-store banking), will enhance the customer's shopping experience
and benefit the supermarket operations.
On September 9, 1996, Puerto Rico was directly impacted by Hurricane
Hortense. The Company's physical structures in Puerto Rico were not
significantly damaged. Management anticipates that any damage and expenses
resulting from the storm (primarily inventory-related) will not materially
affect the financial condition of the Company and should be adequately covered
by its existing insurance policies. Although utilities on the island were
inoperable for several days, the Company was able to reopen all stores within 24
hours after being hit by the storm.
Gross profit margin, as a percentage of sales, for the current quarter
exceeded that of the prior year by 50 basis points and was comparable on a
28-week basis. Gross margin for the quarter improved in comparison to the same
period last year principally as a result of selected retail price increases and
improved warehouse labor costs partially offset by increased retail shrink and
lower meat margins. In addition, the prior year comparable quarter included a
one-time adjustment for a change in estimate for the reversal of certain
liabilities due to the passage of time resulting in a $1.0 million increase to
gross margin.
Selling, general and administrative expenses, as a percentage of sales,
for the 12- and 28-week periods ended August 10, 1996 reflect a 0.3% and 0.4%
decrease, respectively, on a rate-to-sales basis. The favorable reduction in
direct store selling expenses occurred primarily due to improved labor costs and
reduced repairs and maintenance costs partially offset by higher sales taxes,
utility expenses and advertising costs. On a rate to sales basis, general and
administrative expenses increased slightly in comparison to the same periods of
the prior year, despite decreased administrative labor costs.
The decrease in depreciation and amortization stemmed primarily from
the closing of the Florida retail operations effective December 30, 1995 (the
"Florida Closing") which included the reclassification of the Florida division
depreciable assets to a non-depreciable category, assets held for sale.
Net interest expense decreased by $0.3 million and $0.9 million,
respectively, for the 12- and 28-week periods ended August 10, 1996 primarily
due to a reduction in interest on capital lease obligations resulting from the
Florida Closing.
-10-
<PAGE>
The income tax benefit for the 12 and 28 weeks ended August 10, 1996
decreased by $0.4 million and $0.3 million, respectively. The decrease was
primarily attributable to the existence of a valuation allowance for Florida
operations in the prior year and the change in income tax rates in Puerto Rico
from 42% to 39% effective in fiscal 1997.
The net loss for the 12 weeks ended August 10, 1996 was a $0.3 million
improvement compared to the same period last year; for the 28-week period ended
August 10, 1996, the net loss increased by $0.8 million in comparison to the
same period last year.
LIQUIDITY AND CAPITAL RESOURCES
Company operations have historically provided a sufficient cash flow
which, along with the available credit facility, have provided adequate
liquidity for the Company's operational needs.
Net cash used in operating activities increased by $16.3 million versus
the comparable 28-week period last year. Major factors contributing to this
increased use of cash from operations were net cash outlays totaling $14.5
million related to the Florida Closing combined with changes in working capital
as a result of timing of receipts and disbursements.
The working capital deficit decreased by $4.3 million for the 28-week
period ended August 10, 1996 primarily due to the payment of certain obligations
relating to the closing of retail operations in Florida financed, in part, by
the sale of certain assets in the Florida operating division as well as the
timing of certain receipts and disbursements.
Net cash provided by (used in) investing activities was $8.5 million
and $(9.8) million for the 28 weeks ended August 10, 1996 and August 12, 1995,
respectively. This $18.3 million increase in cash from investing activities
pertains primarily to $11.7 million in proceeds received during the current
28-week period for the sale of two XTRA stores and certain store equipment in
Florida as part of the Florida Closing coupled with a reduction in capital
expenditures. Capital expenditures for the current period include four
PUEBLO-TO-XTRA conversions in Puerto Rico and remodeling of certain existing
locations. Capital expenditures for the comparable period of the prior year
included the opening of one XTRA store in Puerto Rico, a deposit for a pending
acquisition of two stores in the U.S. Virgin Islands and minor remodels.
Capital expenditures for all of fiscal 1997 are not anticipated to
exceed approximately $16.0 million. The capital program, which is subject to
continuing change and review, includes five major remodels (four of which have
occurred to date via the aforementioned conversions) and the purchase of land
for an XTRA store, all in Puerto Rico, in addition to the remodeling of certain
existing locations.
Net cash used in financing activities decreased by $5.3 million for the
28 weeks ended August 10, 1996 as compared to the same period ended August 12,
1995. During April 1996, the Company executed an amendment to its credit
agreement with its bank syndicate ("the Amendment") which included an additional
capital contribution of $5.0 million by Holdings, the sole shareholder of the
Company, with the proceeds therefrom used to immediately reduce the Company's
term loans under the Credit Facility. Principal payments on long-term debt for
the 28-week period also include the pay-off of the mortgages for certain
properties in Florida which matured during the second quarter of fiscal 1997 or
were satisfied pursuant to the sale of the underlying collateral. In addition,
the Company had net borrowings under the revolving facility of the Credit
Facility of $10.6 million principally resulting from timing of receipts and
disbursements, in part due to the Florida Closing.
-11-
<PAGE>
In connection with the Amendment, Holdings has agreed to lend the
Company $10.0 million in return for the issuance of interest-bearing redeemable
subordinated notes (the "Subordinated Notes") by October 18, 1996 with the
proceeds therefrom to be used to immediately reduce the Company's term loans
under the Credit Facility. The Subordinated Notes will bear interest at a rate
not to exceed 1.0% above the rate on the Credit Facility and will mature after
the expiration of the Credit Facility. However, the Subordinated Notes may be
redeemed earlier subject to the Company meeting various performance and
financial criteria. Pursuant to the Amendment, the Company may maintain the
level of its $60.0 million revolving facility during the remaining term of the
credit agreement, under certain circumstances. In addition, the Amendment
provides certain revised financial covenant requirements and modifications to
the Company's scheduled principal payment of the Credit Facility during the next
two fiscal years.
The Company expects to continue to realize significant losses in the
future, much of which pertains to depreciation and amortization and interest
expense related to the July 1993 transaction described in Note (3)--Acquisitions
to the Company's Form 10-K; therefore, it anticipates that it will continue to
have an accumulated earnings deficit that will increase in the foreseeable
future. The Company's future results of operations will be affected by its
ability to react to changes in the competitive environment. However, management
believes that competition and the accumulated earnings deficit will not
significantly affect its ability to fund its liquidity and capital needs.
The Company believes that it will be able to meet its current and
long-term liquidity and capital requirements through the cash flows generated by
its normal business operations and its available revolving credit facility.
IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS
The inflation rate for food prices continues to be lower than the
overall increase in the U.S. Consumer Price Index. The Company's primary costs,
products and labor, can be affected by inflation. Increases in inventory costs
can typically be passed on to the customer. Other cost increases must be
recovered through operating efficiencies and improved gross margins. Currency in
Puerto Rico and the U.S. Virgin Islands is the U.S. dollar. As such, the Company
has no exposure to foreign currency fluctuations.
FORWARD LOOKING STATEMENTS
The foregoing statements regarding the Company's anticipation of
continued improvements in sales performance in the U.S. Virgin Islands, the
impact of Hurricane Hortense on operations and recoverability from insurance,
the Company's expectations that certain contemplated interior changes, including
video departments and in-store banking, will improve the supermarket operations,
the Company's belief that its current and long-term capital needs will be
adequately provided through the cash flows generated by its normal business
operations and its available revolving credit facility, the Company's
expectation that it will continue to have an accumulated earnings deficit and
the Company's belief that competition and the accumulated earnings deficit will
not significantly affect its ability to fund its liquidity and capital needs are
forward looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, which represent the Company's expectations and beliefs concerning
future events. The Company cautions that its discussion of these matters is
further qualified by important factors that could cause actual results to differ
materially from those in the forward looking statements, including but not
limited to competitive conditions in the markets in which the Company operates,
buying patterns of consumers and the prospective outcome of litigation as
discussed in Item 3, Legal Proceedings, in the Company's Form 10-K.
-12-
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
-13-
<PAGE>
SIGNATURES
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.
PUEBLO XTRA INTERNATIONAL, INC.
Dated: September 19, 1996 /S/ JEFFREY P. FREIMARK
---------------------------
Jeffrey P. Freimark
Executive Vice President
and Chief Financial Officer
/S/ MARC P. APPLEBAUM
---------------------------
Marc P. Applebaum
Senior Vice President,
Finance and Control
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the consolidated balance sheets and consolidated statements of operations on
pages three through five of the Company's Form 10-Q for the quarter ended
August 10, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-END> AUG-10-1996
<CASH> 1,351
<SECURITIES> 1,077
<RECEIVABLES> 6,907
<ALLOWANCES> 0
<INVENTORY> 59,135
<CURRENT-ASSETS> 106,735
<PP&E> 212,842
<DEPRECIATION> (67,783)
<TOTAL-ASSETS> 534,115
<CURRENT-LIABILITIES> 133,582
<BONDS> 303,417
0
0
<COMMON> 0
<OTHER-SE> 45,795
<TOTAL-LIABILITY-AND-EQUITY> 534,115
<SALES> 226,008
<TOTAL-REVENUES> 226,008
<CGS> (165,705)
<TOTAL-COSTS> (40,548)
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