<PAGE> 1
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 9, 1997
[ ] 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 10, 1997 -- 200.
<PAGE> 2
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Page(s)
-------
Consolidated Balance Sheets (Unaudited) -
August 9, 1997 and January 25, 1997...........................3-4
Consolidated Statements of Operations (Unaudited)
Twelve and 28 weeks ended August 9, 1997
and August 10, 1996.............................................5
Consolidated Statements of Cash Flows (Unaudited) -
Twenty-eight weeks ended August 9, 1997
and August 10, 1996.............................................6
Notes to Consolidated Financial Statements (Unaudited) ...............7-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..........................9-13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...............................14
<PAGE> 3
CONSOLIDATED BALANCE SHEETS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
August 9, January 25,
1997 1997
------------ -------------
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS
Cash and cash equivalents $ 3,263 $ 12,148
Marketable securities (market value of $89
at January 25, 1997) -- 89
Accounts receivable 2,747 4,443
Inventories 54,749 59,503
Assets held for sale 2,991 13,804
Prepaid expenses 15,529 10,428
Deferred income taxes 3,793 3,316
--------- ---------
TOTAL CURRENT ASSETS 83,072 103,731
--------- ---------
PROPERTY AND EQUIPMENT
Land and improvements 18,292 18,278
Buildings and improvements 63,271 62,388
Furniture, fixtures and equipment 99,532 98,138
Leasehold improvements 34,979 35,408
Construction in progress 4,748 4,253
--------- ---------
220,822 218,465
Less accumulated depreciation and amortization 87,627 77,289
--------- ---------
133,195 141,176
Property under capital leases, net 9,334 9,739
--------- ---------
TOTAL PROPERTY AND EQUIPMENT, NET 142,529 150,915
GOODWILL, net of accumulated amortization of $20,759
at August 9, 1997 and $18,050 at January 25, 1997 180,959 183,668
DEFERRED INCOME TAXES 11,415 12,824
TRADENAMES 31,104 31,570
DEFERRED CHARGES AND OTHER ASSETS 38,593 39,933
--------- ---------
TOTAL ASSETS $ 487,672 $ 522,641
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE> 4
CONSOLIDATED BALANCE SHEETS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
August 9, January 25,
1997 1997
------------ -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable $ 62,934 $ 74,951
Accrued expenses 33,702 36,054
Salaries, wages and benefits payable 11,608 11,563
Short-term borrowing -- 7,000
Note payable to a related party -- 10,000
Income taxes payable 110 110
Current installments of long-term debt 7,500 18,250
Current obligations under capital leases 647 617
Deferred income taxes 1,033 1,403
---------- ----------
TOTAL CURRENT LIABILITIES 117,534 159,948
LONG-TERM DEBT, net of current portion 10,000 71,227
NOTES PAYABLE 256,971 180,000
CAPITAL LEASE OBLIGATIONS, net of current portion 7,754 8,110
RESERVE FOR SELF-INSURANCE CLAIMS 11,586 12,201
DEFERRED INCOME TAXES 20,580 22,921
OTHER LIABILITIES AND DEFERRED CREDITS 35,469 35,352
---------- ----------
TOTAL LIABILITIES 459,894 489,759
---------- ----------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDER'S EQUITY
Common stock, $.10 par value; 200 shares authorized
and issued -- --
Additional paid-in capital 91,500 91,500
Accumulated deficit (63,722) (58,618)
---------- ----------
TOTAL STOCKHOLDER'S EQUITY 27,778 32,882
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 487,672 $ 522,641
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE> 5
CONSOLIDATED STATEMENTS OF OPERATIONS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
12 weeks 12 weeks || 28 weeks 28 weeks
ended ended || ended ended
August 9, August 10, || August 9, August 10,
1997 1996 || 1997 1996
------------ ------------ || ------------ -------------
<S> <C> <C> || <C> <C>
Net sales $ 217,141 $ 226,008 || $ 514,333 $ 543,068
Cost of goods sold 152,700 165,705 || 372,402 402,262
--------- --------- || --------- ---------
||
GROSS PROFIT 64,441 60,303 || 141,931 140,806
--------- --------- || --------- ---------
||
OPERATING EXPENSES ||
Selling, general and administrative ||
expenses 47,971 45,338 || 107,585 112,213
Depreciation and amortization 9,340 9,045 || 21,388 21,048
--------- --------- || --------- ---------
||
OPERATING PROFIT 7,130 5,920 || 12,958 7,545
||
Sundry, net (18) (13) || (37) (56)
--------- --------- || --------- ---------
||
INCOME BEFORE INTEREST, ||
INCOME TAXES AND ||
EXTRAORDINARY ITEM 7,112 5,907 || 12,921 7,489
||
Interest expense on debt (6,713) (6,920) || (15,381) (16,016)
Interest expense on capital lease ||
obligations (263) (258) || (629) (614)
Interest and investment income, net 137 41 || 437 91
--------- --------- || --------- ---------
||
INCOME (LOSS) BEFORE ||
INCOME TAXES AND ||
EXTRAORDINARY ITEM 273 (1,230) || (2,652) (9,050)
||
Income tax benefit (expense) (587) 146 || (8) 2,293
--------- --------- || --------- ---------
||
LOSS BEFORE EXTRAORDINARY ||
ITEM (314) (1,084) || (2,660) (6,757)
||
Extraordinary item: ||
Loss on early extinguishment of debt, net ||
of deferred taxes of $1,567 -- -- || (2,444) --
--------- --------- || --------- ---------
||
||
NET LOSS $ (314) $ (1,084) || $ (5,104) $ (6,757)
========= ========= || ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
28 weeks ended 28 weeks ended
August 9, August 10,
1997 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,104) $ (6,757)
Adjustments to reconcile net loss to net cash used in
operating activities, net of effects of disposal of
Florida retail operations:
Extraordinary loss from early extinguishment of debt 2,444 --
Depreciation and amortization of property and equipment 12,781 13,731
Amortization of intangible and other assets 8,607 7,317
Amortization of bond discounts 258 --
Deferred income taxes (212) (2,759)
Loss on disposal of property and equipment, net 36 204
Decrease (increase) in deferred charges, goodwill, and
other assets (2,900) 640
Decrease in reserve for self-insurance claims (615) (263)
Increase (decrease) in other liabilities and deferred credits 3,554 (842)
Changes in operating assets and liabilities:
Decrease in accounts receivable 1,696 2,014
Decrease in inventories 294 4,962
Increase in prepaid expenses (5,101) (5,122)
Decrease in accounts payable and accrued expenses (14,324) (17,035)
Increase in income taxes payable -- 143
---------- ---------
1,414 (3,767)
Decrease attributable to disposal of Florida retail operations (3,438) (10,301)
---------- ---------
Net cash used in operating activities (2,024) (14,068)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (4,397) (3,162)
Proceeds from disposal of property and equipment 37 --
Proceeds from disposal of Florida retail operations 10,000 11,663
Proceeds from sale of marketable securities 89 --
---------- ---------
Net cash provided by investing activities 5,729 8,501
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable to a related party (10,000) --
Principal payments on long-term debt (61,227) (15,214)
Principal payments on short-term debt (17,750) --
Principal payments on capital lease obligations (326) (466)
Proceeds from long-term borrowing 76,713 --
Proceeds from short-term borrowing -- 10,600
Proceeds from capital contribution -- 5,000
---------- ---------
Net cash used in financing activities (12,590) (80)
---------- ---------
Net decrease in cash and cash equivalents (8,885) (5,647)
Cash and cash equivalents at beginning of period 12,148 6,998
---------- ---------
Cash and cash equivalents at end of period $ 3,263 $ 1,351
========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 13,739 $ 22,018
Income taxes (net of refunds) (783) 309
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE> 7
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 9, 1997 and August 10, 1996, 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)--Division
Closure and Corporate Restructuring Charges or the business combination
described in Note (3)--Acquisitions of the audited consolidated financial
statements contained in the Company's Amendment No. 1 on Form 10-K/A for the
fiscal year ended January 25, 1997 filed with the Securities and Exchange
Commission (hereinafter referred to as the "Form 10-K/A"). The unaudited
financial information should be read in conjunction with the Company's Form
10-K/A. The consolidated balance sheet at January 25, 1997 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 weeks ended August 9, 1997 and
August 10, 1996 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
On April 29, 1997, the Company entered into a refinancing plan (the
"Refinancing Plan"), which included the issuance and sale of $85.0 million
principal amount of 9 1/2% Senior Notes Due 2003 (the "Notes"), the terms of
which are substantially identical to those of the Company's $180 million
principal amount of 9 1/2% Senior Notes (the "Existing Notes"), which were
issued in 1993. The net proceeds from the sale of the Notes of approximately
$73.9 million after deducting expenses, together with available cash of the
Company, were used to repay the senior secured indebtedness outstanding under
the Bank Credit Agreement dated July 31, 1993 (the "Old Bank Credit Agreement").
In connection with the Refinancing Plan, the Company entered into an amended
bank credit agreement (the "New Bank Credit Agreement"), which provides for a
$65.0 million revolving credit facility with less restrictive covenants compared
to the Old Bank Credit Agreement. After the issuance of standby letters of
credit in the amount of $25.2 million, as of August 9, 1997, the Company has
borrowing availability on a revolving basis of $39.8 million under the New Bank
Credit Agreement. This transaction resulted in an extraordinary loss of $2.4
million, net of deferred income taxes of $1.6 million, by reason of the early
extinguishment of debt. As of August 9, 1997, the Company had no borrowings
outstanding under the revolver of the New Bank Credit Agreement.
-7-
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES, CONTINUED
(Unaudited)
NOTE 3 -- DEBT (Continued)
In connection with the Refinancing Plan, on April 29, 1997, the Company
satisfied $10 million of indebtedness payable to a related party by transferring
its interest in two real estate properties from its closed Florida operations to
such related party.
-8-
<PAGE> 9
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.
During fiscal 1996, the Company determined to discontinue its retail
operations in Florida. The operations of all eight of the Florida stores ceased
during the first quarter of fiscal 1997. The following table presents selected
comparative operating data of the Company for the 12 and 28 weeks ended August
9, 1997 and August 10, 1996, as well as for the 28 weeks ended August 10, 1996
after excluding the discontinued Florida retail operations.
SELECTED OPERATING RESULTS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
12 WEEKS ENDED 28 WEEKS ENDED
---------------------------------- ------------------------------------------------------------------------
AUGUST 10, 1996
-----------------------------------------------------
ADJUSTMENT
TO REMOVE
RESULTS OF PROFORMA PER
AUGUST 9, AUGUST 10, AUGUST 9, AS FLORIDA CONTINUING
1997 1996 1997 REPORTED OPERATIONS(1) OPERATIONS(2)
---------------- ---------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $ 217.1 100.0% $ 226.0 100.0% $ 514.3 100.0% $ 543.1 100.0% $ 6.7 100.0% $ 536.4 100.0%
======= ======= ======= ======= ======= =======
Gross Profit 64.4 29.7 60.3 26.7 141.9 27.6 140.8 25.9 0.4 6.0 140.4 26.2
Selling, general
and administrative
expenses 48.0 22.1 45.3 20.1 107.6 20.9 112.2 20.7 4.6 68.7 107.6 20.1
------- ------- ------- ------- ------- -------
EBITDA (3) 16.4 7.6 15.0 6.6 34.3 6.7 28.6 5.3 (4.2) (62.7) 32.8 6.1
Depreciation
and amortization 9.3 4.3 9.0 4.0 21.4 4.2 21.0 3.9 0.0 0.0 21.0 3.9
------- ------- ------- ------- ------- -------
Operating profit 7.1 3.3 6.0 2.6 12.9 2.5 7.6 1.4 (4.2) (62.7) 11.8 2.2
======= ======= ======= ======= ======= =======
Income (loss)
before income
taxes and extra-
ordinary item 0.3 0.1 (1.2) (0.5) (2.7) (0.5) (9.1) (1.7) (4.2) (62.7) (4.9) (0.9)
======= ======= ======= ======= ======= =======
Net loss (0.3) (0.1) (1.1) (0.5) (5.1) (1.0) (6.8) (1.2) (2.7) (40.3) (4.1) (0.8)
======= ======= ======= ======= ======= =======
</TABLE>
- --------
(1) Represents operating results of the Florida retail operations during
the first quarter of fiscal 1997.
(2) Proforma activity excludes Florida retail operations incurred during
the first quarter of fiscal 1997 and represents Puerto Rico and U.S.
Virgin Islands operations for the 28 weeks ended August 10, 1996.
(3) Represents income before interest, income taxes, sundry 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.
-9-
<PAGE> 10
RESULTS OF OPERATIONS
The following discussion relates to the Company's continuing operations
and does not include any discussion of the Florida stores that were closed
during the first quarter of fiscal 1997.
As the market leader in Puerto Rico and the U.S. Virgin Islands, the
Company operated a total of 50 supermarkets and 35 BLOCKBUSTER video stores as
of August 9, 1997. The history of store openings, closings and conversions of
in-store PUEBLO VIDEO CLUB outlets to in-store BLOCKBUSTER outlets through
August 9, 1997, since the end of the same period of the prior year, as well as
the store composition, is set forth in the tables below:
Stores in operation at August 10, 1996 73
Stores opened:
Supermarkets --
BLOCKBUSTER converted stores 12
BLOCKBUSTER free-standing stores 1
Stores closed:
Supermarkets (1)
-----------
Stores in operation at August 9, 1997 85
===========
August 9, August 10,
1997 1996
-------------- ----------------
Store composition at quarter-end:
XTRA stores 30 29
PUEBLO supermarkets 20 22
BLOCKBUSTER video stores 35 22
By location:
Puerto Rico 77 66
U.S. Virgin Islands 8 7
Net sales for the 12 and 28 weeks ended August 9, 1997 decreased by
$8.9 million, or 3.9%, and $22.1 million, or 4.1%, respectively, in comparison
to the 12 and 28 (Proforma) weeks ended August 10, 1996. Contributing to the
decrease in net sales was the temporary interruption of various departments in
the Company's supermarket operations due to the construction of in-store
BLOCKBUSTER outlets which are being converted from in-store PUEBLO VIDEO CLUB
outlets. These conversions should ultimately increase traffic in the
supermarkets since a typical in-store BLOCKBUSTER outlet has a separate entrance
but its principal exit leads into the supermarket. On a comparable store basis,
sales decreased by 3.9% and 3.5%, respectively, for the 12 and 28 weeks ended
August 9, 1997. This decline reflected a same store sales decrease of 3.8% and
3.5%, respectively, for the 12 and 28 weeks ended August 9, 1997, in the
Company's Puerto Rico supermarket operations as competition continued to
adversely affect the operating division's sales performance. The Company's
BLOCKBUSTER operations experienced a same store decrease of 9.2% for the 12 and
28 weeks ended August 9, 1997, as the 12 stores, which have been converted from
PUEBLO VIDEO CLUBS to BLOCKBUSTER stores since December 1996, have temporarily
affected the sales performance of existing stores.
Gross profit margin for the 12 and 28 weeks ended August 9, 1997, as a
percentage of sales, was 29.7% and 27.6%, respectively, or 3.0% and 1.4% above
the 26.7% and 26.2%, respectively, for the 12 and 28 (Proforma) weeks ended
August 10, 1996. The increase for the 12 and 28 weeks ended August 9, 1997 is a
result of the implementation of new merchandising strategies as well as a
continued emphasis on the reduction of shrink.
-10-
<PAGE> 11
Selling, general and administrative expenses for the 12 and 28 weeks
ended August 9, 1997, as a percentage of sales, was 22.1% and 20.9%,
respectively, or 2.0% and 0.8% above the 20.1% for both the 12 and 28 (Proforma)
weeks ended August 10, 1996. The increase for the 12 and 28 weeks ended August
9, 1997 in comparison to the 12 and 28 (Proforma) weeks ended August 10, 1996
was due to higher general and administrative expenses resulting from costs
incurred for consulting fees arising from an ongoing project to improve
supermarket operations in Puerto Rico. Partially offsetting this increase was a
favorable reduction in direct store selling expenses due to the reorganization
of labor scheduling practices and ongoing labor control programs.
The increase in depreciation and amortization for the 12 and 28 weeks
ended August 9, 1997 was due primarily to an increase in the capital
expenditures incurred at the Company's BLOCKBUSTER operations as compared to the
same periods last year. The increase in capital expenditures at the Company's
BLOCKBUSTER operations is due to the increased number of stores in operations
for the 12 and 28 weeks ended August 9, 1997 as compared to the same periods
last year.
Interest expense, net of interest and investment income, for the 12 and
28 weeks ended August 9, 1997 decreased by $0.3 million, or 4.2%, and $1.0
million, or 5.8%, respectively, compared to the same periods last year due
primarily to a decrease in the average amount of borrowings outstanding during
the period.
The income tax expense for the 12 and 28 weeks ended August 9, 1997 was
$0.6 million and $0.01 million, respectively. The income tax benefit for the 12
and 28 weeks ended August 10, 1996 was $0.1 million and $2.3 million,
respectively. The income tax expense for the 12 and 28 weeks ended August 9,
1997 is a result of permanent non-deductible expenses such as goodwill that are
added back to pretax income (loss). The pretax loss for the 12 and 28 weeks
ended August 10, 1996 was large enough to exceed any permanent non-deductible
expenses resulting in a taxable loss which created a tax benefit. The pretax
income (loss) for the 12 and 28 weeks ended August 9, 1997 was not sufficient to
exceed the permanent non-deductible expenses resulting in taxable income which
created a tax expense.
During the 28 weeks ended August 9, 1997, the Company recorded a $2.4
million extraordinary loss, net of deferred income taxes of $1.6 million, by
reason of the early extinguishment of debt due to the Refinancing Plan as
described in Note (3) - Debt of the notes to the Company's consolidated
financial statements in this Form 10-Q. The extraordinary loss pertains to the
unamortized portion of deferred Bank Credit Agreement costs associated with the
Old Bank Credit Agreement.
LIQUIDITY AND CAPITAL RESOURCES
Company operations have historically provided a cash flow which, along
with the available credit facility, have provided adequate liquidity for the
Company's operational needs.
On April 29, 1997 the Company entered into a refinancing plan (the
"Refinancing Plan") in connection with which it issued $85 million principal
amount of 9 1/2 Senior Notes Due 2003 (the "Notes"). The net proceeds from the
sale of the Notes of approximately $73.9 million after deducting expenses,
together with available cash of the Company, were used to repay the senior
secured indebtedness outstanding under the Old Bank Credit Agreement. In
connection with the Refinancing Plan, the Company entered into the New Bank
Credit Agreement, which provides for a $65.0 million revolving credit facility
with less restrictive covenants compared to the Old Bank Credit Agreement. After
the issuance of standby letters of credit in the amount of $25.2 million, as of
August 9, 1997, the Company has borrowing availability on a revolving basis of
$39.8 million under the New Bank Credit Agreement. As of August 9, 1997, the
Company had no borrowings outstanding under the revolver of the New Bank Credit
Agreement.
-11-
<PAGE> 12
Net cash used in operating activities was $2.0 million and $14.1
million for the 28 weeks ended August 9, 1997 and August 10, 1996,
respectively. The decrease in net cash used in operating activities was
due to the decrease in net cash outlay related to the closing of the Florida
retail operations for the 28 weeks ended August 9, 1997 in comparison to the
same period last year.
Working capital during the 28 weeks ended August 9, 1997 increased from
a deficit of $56.2 million at January 25, 1997 to a deficit of $34.5 million at
August 9, 1997. The improvement in working capital was primarily attributable to
the repayment of certain obligations associated with the Refinancing Plan
described above.
Net cash provided by investing activities was $5.7 million and $8.5
million for the 28 weeks ended August 9, 1997 and August 10, 1996, respectively.
The Company received $10.0 million for its interest in two real estate
properties from its closed Florida operations during the 28 weeks ended August
9, 1997 compared to $11.7 million received for the sale of two Florida XTRA
stores and certain equipment during the 28 weeks ended August 10, 1996. Total
capital expenditures, net of proceeds from disposals, were $4.4 million and $3.2
million for the 28 weeks ended August 9, 1997 and August 10, 1996, respectively.
Net cash used in financing activities increased by $12.5 million for
the 28 weeks ended August 9, 1997. On April 29, 1997, the Company entered into a
Refinancing Plan (as described above) which provided net proceeds of $76.7
million. These proceeds together with available cash were used to repay $63.0
million in term loans and $16.0 million in revolving loans under the Old Bank
Credit Agreement. The Company also satisfied $10.0 million of indebtedness
payable to a related party.
Outstanding borrowings with a governmental agency of Puerto Rico from
the issuance of industrial revenue bonds were $17.5 million as of August 9,
1997, including $7.5 million of principal payments due in the current fiscal
year. Management anticipates that the principal payments will be financed by
operations.
In early November 1996, the Company reached a settlement (the
"Settlement") of the Premium Sales litigation described in Item 3, Legal
Proceedings, in the Company's Amendment No. 1 on Form 10-K/A for the year ended
January 25, 1997. The Settlement has been confirmed and approved by the court.
The terms of the Settlement do not materially affect the Company's financial
position or results of operations.
The Company believes that the cash flows generated by its normal
business operations together with its available credit facility will be adequate
for its liquidity and capital resource needs.
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
Certain of the matters discussed under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this Form 10-Q contain certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section
-12-
<PAGE> 13
FORWARD LOOKING STATEMENTS (Continued)
21E of the Securities Exchange Act of 1934, as amended, concerning the Company's
belief that the cash flows generated by its normal business operations together
with its available credit facility will be adequate for its liquidity and
capital resource needs. These statements are based on the Company's expectations
and are subject to various risks and uncertainties. Actual results could differ
materially from those anticipated due to a number of factors, including but not
limited to the Company's substantial indebtedness and high degree of leverage,
which will continue with the Refinancing Plan (including limiting effects on
ability to obtain additional financing and trade credit, to apply operating cash
flow for purposes in addition to debt service, to respond to price competition
in economic downturns and to dispose of assets pledged to secure such
indebtedness or to freely use proceeds of any such dispositions), the Company's
limited geographic markets and competitive conditions in the markets in which
the Company operates and buying patterns of consumers.
-13-
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule.
(b) Reports on Form 8-K
None.
-14-
<PAGE> 15
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 10, 1997 /s/ DANIEL J. O' LEARY
----------------------------
Daniel J. O' Leary
Executive Vice President
and Chief Financial Officer
/s/ DANIEL CAMMARATA
----------------------------
Daniel Cammarata
Controller
and Chief Accounting Officer
-15-
<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 28 WEEKS ENDED AUGUST 9,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-END> AUG-09-1997
<CASH> 3,263
<SECURITIES> 0
<RECEIVABLES> 2,747
<ALLOWANCES> 0
<INVENTORY> 54,749
<CURRENT-ASSETS> 83,072
<PP&E> 220,822
<DEPRECIATION> (87,627)
<TOTAL-ASSETS> 487,672
<CURRENT-LIABILITIES> 117,534
<BONDS> 282,872
0
0
<COMMON> 0
<OTHER-SE> 27,778
<TOTAL-LIABILITY-AND-EQUITY> 487,672
<SALES> 514,333
<TOTAL-REVENUES> 514,333
<CGS> (372,402)
<TOTAL-COSTS> (125,475)
<OTHER-EXPENSES> (3,535)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (15,573)
<INCOME-PRETAX> (2,652)
<INCOME-TAX> (8)
<INCOME-CONTINUING> (2,660)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,444)
<CHANGES> 0
<NET-INCOME> (5,104)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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