<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 November 7, 1998
[ ] 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
incorporation or organization) identification no.)
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 December 15, 1998 -- 200.
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE(S)
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets (Unaudited) -
November 7, 1998 and January 31, 1998 ........................... 3-4
Consolidated Statements of Operations (Unaudited) Twelve and forty weeks
ended November 7, 1998 and November 1, 1997 ..................... 5
Consolidated Statements of Cash Flows (Unaudited) -
Forty weeks ended November 7, 1998
and November 1, 1997 ............................................ 6
Notes to Consolidated Financial Statements (Unaudited) ........................ 7-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .................................. 9-14
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ..................................... 15
</TABLE>
<PAGE> 3
CONSOLIDATED BALANCE SHEETS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
November 7, January 31,
1998 1998
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 25,084 $ 28,770
Accounts receivable 7,390 2,845
Inventories 62,077 55,945
Assets held for sale -- 4,711
Prepaid expenses 11,542 10,461
Deferred income taxes 1,381 6,993
-------- --------
TOTAL CURRENT ASSETS 107,474 109,725
-------- --------
PROPERTY AND EQUIPMENT
Land and improvements 16,501 16,143
Buildings and improvements 63,896 63,936
Furniture, fixtures and equipment 107,853 102,799
Leasehold improvements 36,605 36,214
Construction in progress 9,924 5,191
-------- --------
234,779 224,283
Less accumulated depreciation and amortization 111,531 97,419
-------- --------
123,248 126,864
Property under capital leases, net 8,424 8,980
-------- --------
TOTAL PROPERTY AND EQUIPMENT 131,672 135,844
GOODWILL, net of accumulated amortization of $26,952
at November 7, 1998 and $23,082 at January 31, 1998 174,766 178,636
DEFERRED INCOME TAXES 11,145 11,145
TRADENAMES 30,038 30,704
DEFERRED CHARGES AND OTHER ASSETS 33,590 36,122
-------- --------
TOTAL ASSETS $488,685 $502,176
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 4
CONSOLIDATED BALANCE SHEETS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
November 7, January 31,
1998 1998
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<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 65,087 $ 69,340
Accrued expenses 39,486 51,584
Salaries, wages and benefits payable 15,318 11,701
Current obligations under capital leases 632 635
--------- ---------
TOTAL CURRENT LIABILITIES 120,523 133,260
LONG-TERM DEBT, net of current portion 10,000 10,000
NOTES PAYABLE 258,224 257,428
CAPITAL LEASE OBLIGATIONS, net of current portion 7,019 7,513
RESERVE FOR SELF-INSURANCE CLAIMS 10,679 11,206
DEFERRED INCOME TAXES 24,985 24,985
OTHER LIABILITIES AND DEFERRED CREDITS 26,354 30,479
--------- ---------
TOTAL LIABILITIES 457,784 474,871
--------- ---------
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 (60,599) (64,195)
--------- ---------
TOTAL STOCKHOLDER'S EQUITY 30,901 27,305
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 488,685 $ 502,176
========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 5
CONSOLIDATED STATEMENTS OF OPERATIONS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
12 weeks 12 weeks 40 weeks 40 weeks
ended ended ended ended
November 7, November 1, November 7, November 1,
1998 1997 1998 1997
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $ 168,047 $ 197,915 $ 594,089 $ 712,248
Cost of goods sold 111,066 138,317 398,011 510,719
--------- --------- --------- ---------
GROSS PROFIT 56,981 59,598 196,078 201,529
--------- --------- --------- ---------
OPERATING EXPENSES
Selling, general and administrative expenses 39,756 44,544 138,342 152,166
Less: gain on disposal of real property (1,840) -- (2,164) --
Depreciation and amortization 8,119 9,417 28,852 30,804
--------- --------- --------- ---------
OPERATING PROFIT 10,946 5,637 31,048 18,559
Interest expense on debt (6,397) (6,683) (21,968) (22,065)
Interest expense on capital lease
obligations (218) (258) (781) (887)
Interest and investment income, net 272 157 789 594
--------- --------- --------- ---------
INCOME, (LOSS), BEFORE
INCOME TAXES AND
EXTRAORDINARY ITEM 4,603 (1,147) 9,088 (3,799)
Income tax expense (4,277) (330) (5,492) (339)
--------- --------- --------- ---------
INCOME, (LOSS), BEFORE
EXTRAORDINARY ITEM 326 (1,477) 3,596 (4,138)
Extraordinary item:
Loss on early extinguishment of debt, net of
deferred income taxes of $1,567 -- -- -- (2,444)
--------- --------- --------- ---------
NET INCOME, (LOSS) $ 326 $ (1,477) $ 3,596 $ (6,582)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOWS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
40 weeks ended 40 weeks ended
November 7, November 1,
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,596 $ (6,582)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities, net of effects of disposal of
Florida retail operations:
Extraordinary loss on early extinguishment of debt -- 2,444
Depreciation and amortization of property and equipment 16,522 18,352
Amortization of intangible and other assets 12,330 12,452
Amortization of bond discount 796 475
Deferred income taxes 5,612 524
Gain on disposal of property and equipment, net (1,720) (264)
Increase in deferred charges, goodwill, and other assets (1,185) (3,074)
Decrease in reserve for self-insurance claims (527) (656)
Increase (decrease) in other liabilities and deferred credits (2,129) 3,194
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (4,545) 1,520
Increase in inventories (12,512) (5,592)
Increase in prepaid expenses (1,081) (2,542)
Decrease in accounts payable and accrued expenses (13,487) (2,869)
-------- --------
1,670 17,382
Decrease attributable to disposal of Florida retail operations (1,243) (4,810)
-------- --------
Net cash provided by operating activities 427 12,572
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (13,034) (7,242)
Proceeds from disposal of property and equipment 9,418 1,026
Proceeds from disposal of Florida retail operations -- 10,000
Proceeds from sales of marketable securities -- 88
-------- --------
Net cash (used in) provided by investing activities (3,616) 3,872
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments from notes payable to a related party -- (10,000)
Principal payments on long-term debt -- (61,227)
Principal payments on short-term debt -- (17,750)
Principal payments on capital lease obligations (497) (475)
Proceed from long-term borrowing -- 76,713
-------- --------
Net cash used in financing activities (497) (12,739)
-------- --------
Net (decrease) increase in cash and cash equivalents (3,686) 3,705
Cash and cash equivalents at beginning of period 28,770 12,148
-------- --------
Cash and cash equivalents at end of period $ 25,084 $ 15,853
======== ========
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest $ 25,997 $ 13,886
Income taxes (net of refunds) (648) (708)
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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<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 the 12 and 40
weeks ended November 7, 1998 and November 1, 1997, 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.
Operating results for the 12 and 40 weeks ended November 7, 1998 and
November 1, 1997 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.
RECLASSIFICATIONS
Certain amounts in the prior year's consolidated financial statements
and related notes have been reclassified to conform to the current year's
presentation.
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% Series C Senior Notes Due 2003 (the "Series C Senior
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 "Notes"),
which were issued in 1993. The net proceeds from the sale of the Series C Senior
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 $14.2 million, as of
November 7, 1998, the Company has borrowing availability on a revolving basis of
$50.8 million under the New Bank Credit Agreement. The Refinancing Plan 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 November 7, 1998,
the Company had no borrowings outstanding under the revolver of the New Bank
Credit Agreement.
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<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(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.
SELECTED OPERATING RESULTS
(AS A PERCENTAGE OF SALES)
<TABLE>
<CAPTION>
12 WEEKS ENDED 40 WEEKS ENDED
---------------------------------- -----------------------------------
November 7, November 1, November 7, November 1,
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Gross Profit 33.9% 30.1% 33.0% 28.3%
Selling General & Administrative
Expenses 23.7 22.5 23.3 21.4
Less: gain on disposal of real property 1.1 -- 0.4 --
EBITDA (1) 11.3 7.6 10.1 6.9
Depreciation & Amortization 4.8 4.8 4.9 4.3
Operating Profit 6.5 2.8 5.2 2.6
Income (loss) Before Income Taxes
& Extraordinary Item 2.7 (0.6) 1.5 (0.5)
Net Income (loss) 0.2 (0.7) 0.6 (0.9)
</TABLE>
- ----------
(1) Represents earnings 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 information
purposes only.
RESULTS OF OPERATIONS
As the market leader in Puerto Rico and the U.S. Virgin Islands, the
Company operated a total of 50 supermarkets and 43 BLOCKBUSTER video stores as
of November 7, 1998. The history of store openings, closings and conversions of
in-store PUEBLO VIDEO CLUB outlets to in-store BLOCKBUSTER outlets through
November 7, 1998, since the end of the same 40 week period of the prior year,
as well as the
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<PAGE> 10
RESULTS OF OPERATIONS (CONTINUED)
store composition, is set forth in the tables below:
<TABLE>
<S> <C>
Stores in operation at November 1, 1997 90
Stores opened:
Supermarkets 1
BLOCKBUSTER video stores 2
BLOCKBUSTER video store conversions from
supermarket in-store video outlets 3
Stores closed due to Hurricane Georges:
Supermarkets 1
BLOCKBUSTER video stores 2
-----
Stores in operation at November 7, 1998 93
=====
</TABLE>
<TABLE>
<CAPTION>
November 7, 1998 November 1, 1997
---------------- -----------------
<S> <C> <C>
Store composition at period-end:
Retail food stores 50 50
BLOCKBUSTER video stores 43 40
By location:
Puerto Rico 85 82
U.S. Virgin Islands 8 8
</TABLE>
As of the date of this filing, one of the two Blockbuster video stores
that was closed due to Hurricane Georges has re-opened.
The following is the summary of total and comparable store sales:
<TABLE>
<CAPTION>
PERCENTAGE INCREASE (DECREASE) IN SALES FOR THE
PERIOD ENDED NOVEMBER 7, 1998
-----------------------------------------------
12 Weeks Ended 40 Weeks Ended
-------------- --------------
<S> <C> <C>
Total Sales (15.09)% (16.59)%
======== ========
Comparable Stores:
Retail Food Division (18.52) (19.45)
======== ========
Blockbuster Video 12.00 14.03
======== ========
Total Comparable Store Sales (17.06) (18.13)
======== ========
</TABLE>
Hurricane Georges struck all of the Company's operating facilities on
September 20 and 21, 1998. All of the Company's retail stores, with the
exception of three, and its distribution facility were operating within two days
of the storm. Subsequent to the storm, operations have been at varying degrees
of full capacity depending on the extent of damage at each location and the
extent to which public utilities were available in lieu of the Company's
emergency power plants and water supplies at each location. This situation,
continuing adverse weather, limited availability of merchandise due to storm
damage at the Port of San Juan, Puerto Rico and recovery efforts continue to
inhibit operations of both the Retail Food and Blockbuster divisions.
The Company's insurance is expected to cover losses associated with the
storm, including the
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<PAGE> 11
RESULTS OF OPERATIONS (CONTINUED)
retail value of lost inventory, the replacement cost of damaged or destroyed
operating assets, recovery costs and the impact of business interruption. The
Company does not expect to record any losses as a result of the hurricane in the
carrying value of its assets or recovery related costs. Any gains will be
recorded at such time as the proceeds are realized.
The Company reported that total sales for the third period were $168.0
million, versus $197.9 million in sales for the third period of the prior year.
For the comparable twelve week period same store sales were $162.0 million
versus $195.3 million for the prior year, a decline of 17.1%. "Same stores" are
defined as those stores that were open as of the beginning of both periods and
remained open as of the end of the periods. New stores during these periods and
the stores closed as a result of Hurricane Georges are excluded from "same
stores". Same store sales in the Retail Food Division declined 18.5%.
Blockbuster Division same store sales increased 12.0% for the quarter as a
result of increased product sales.
During the third period same store sales for the comparable periods
before and after the hurricane increased (decreased) as follows:
5 WEEKS 7 WEEKS
BEFORE AFTER
------ -----
Retail Food Division (12.8%) (22.7%)
Blockbuster Division 20.5 6.2%
Consolidated total (11.3%) (21.3%)
Competition and the repositioning of Pueblo's supermarkets to offer a
broader product mix while eliminating marginally profitable product lines have
been the primary factors contributing to the decline in same store sales in the
Retail Food Division. During the second and third periods, prior to Hurricane
Georges, the rate of decline had been lessening. The exaggerated decline in same
store sales caused by the hurricane is abating as operations progress toward
normalization. Same store sales for the Retail Food Division in the first four
weeks of the fourth period have decreased 14.3% versus the comparable weeks of
the prior year. Blockbuster Division same store sales for this same period have
increased 24.0%.
For the 40 weeks ended November 7, 1998 total sales were $594.1
million, versus $712.2 million in sales for the similar period of the prior
fiscal year. For the comparable 40 weeks period same store sales were $572.8
million versus $699.6 million for the prior year, a decline of 18.1%. Same store
sales in the Retail Food Division declined 19.5%. Blockbuster Division same
store sales increased 14.0% as a result of increased product sales.
Gross profit margin for the 12 and 40 weeks ended November 7, 1998, as
a percentage of sales (gross profit rate), was 33.9% and 33.0% compared to 30.1%
and 28.3%, respectively. Approximately five-sixths and two-thirds, respectively,
of the increases in the consolidated gross profit rate are attributed to the
Retail Food Division operations for the 12 and 40 weeks ended November 7, 1998.
Decreased inventory shrinkage, improved acquisition costs, vendor allowances,
and the change in the Division's promotional programs are factors contributing
to this increase. The remainder of the increase in the consolidated gross profit
rate is attributable to expansion of the Blockbuster Division which has resulted
in that Division representing a larger percentage of consolidated sales and,
therefore, consolidated gross profit.
Selling, general and administrative expenses for the 12 and 40 weeks
ended November 7, 1998, as a percentage of sales, was 23.7% and 23.3%, compared
to 22.5% and 21.4%, of sales for the 12 and 40 weeks ended November 1, 1997.
However, selling, general and administrative expenses for the 12 and 40 weeks
ended November 7, 1998 decreased by $4.8 million and $13.8 million in comparison
to the same period last year. The $13.8 million decrease is due to a $16.1
million decrease in the Retail Food Division
-11-
<PAGE> 12
RESULTS OF OPERATIONS (CONTINUED)
store operating expenses as a result of cost containment efforts. This decrease
in costs was offset by a $2.3 million increase in the Blockbuster Division
operating costs as a result of the expansion of the chain.
Depreciation and amortization for the 12 and 40 weeks ended November 7,
1998 decreased by $1.3 million and $2.0 million in comparison to the same period
last year.
Interest expense, net of interest and investment income, for the 12 and
40 weeks ended November 7, 1998 decreased by $0.4 million or 6.5% and $0.4
million or 1.8%, compared to the same period last year due primarily 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 income tax expense for the 12 and 40 weeks ended November 7, 1998
was $4.3 million and $5.5 million compared to the income tax expense of $0.3
million and $0.3 million for the 12 and 40 weeks ended November 1, 1997. The
income tax expense for the 12 and 40 weeks ended November 7, 1998 and for the 12
and 40 weeks ended November 1, 1997 is a result of permanent book-tax
differences such as goodwill that are added back to pretax income.
During the 40 weeks ended November 1, 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 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, has provided adequate liquidity for the
Company's operational needs.
On April 29, 1997 the Company entered into the Refinancing Plan in
connection with which it issued $85.0 million principal amount of the Series C
Senior Notes. The net proceeds from the sale of the Series C Senior 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 $14.2 million, as of November 7,
1998, the Company has borrowing availability on a revolving basis of $50.8
million under the New Bank Credit Agreement. As of November 7, 1998, the Company
had no borrowings outstanding under the revolver of the New Bank Credit
Agreement.
The working capital deficit during the 40 weeks ended November 7, 1998
decreased from $23.5 million at January 31, 1998 to $13.0 million at November 7,
1998.
Net cash provided by operating activities was $0.4 million for the 40
weeks ended November 7, 1998.
Net cash used in investing activities was $3.6 million for the 40 weeks
ended November 7, 1998. Total capital expenditures, net of proceeds from
disposals, were $3.6 million for the 40 weeks ended November 7, 1998.
-12-
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Net cash used in financing activities decreased to $0.5 million for the
40 weeks ended November 7, 1998. 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 for the 40 weeks ended November 1, 1997.
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.
YEAR 2000 COMPLIANCE
In March 1998, the Company completed the planning phase of a project to
modify its information technology systems for compliance with the year 2000 and
beyond. The Company's plan also includes a review of the implications of the
Year 2000 problem on telecommunications systems, electronic equipment and
facilities systems. The Company is now in the process of executing its plan and
expects all systems to be compliant by mid-calendar year 1999. The financial
impact of making the required system changes is not expected to be material to
the Company's consolidated financial position, results of operations or cash
flows. The Company has initiated formal communications with all of its
significant suppliers and service providers and large customers to determine
the extent to which the Company's interface systems are vulnerable to those
third parties' failure to remediate their own year 2000 issues. There can be no
guarantee that the systems of other companies that the Company does business
with, and in some cases with which the Company's systems interface, will be
timely converted and would not have an adverse effect on the Company's systems.
Contingency plans are being developed to address the possibility that
critical internal and third party Year 2000 issues are not resolved in the time
frame outlined in the preceding paragraph.
If the Company is unsuccessful or if the remediation efforts of its key
suppliers and service providers and large customers are unsuccessful with regard
to Year 2000, there may be a material adverse impact on the Company's
consolidated results of operations or financial condition. The Company is unable
to estimate the financial impact of this possible eventuality because it cannot
predict the magnitude or time length of potential Year 2000 business
interruptions.
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
Statements, other than statements of historical information, under the
caption "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and elsewhere in this Form 10-Q may constitute 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.
Such statements include, among others, statements concerning: (1) 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, (2) insurance recovery expectations, and (3) the extent
to which future operations may be inhibited by the hurricane. 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 continue as a result of the
Refinancing Plan (including limitations on the Company's 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
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.
PUEBLO XTRA INTERNATIONAL, INC.
Dated: December 15, 1998 /s/ Daniel J. O'Leary
-----------------------------------------
Daniel J. O'Leary
Executive Vice President
and Chief Financial 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 40 WEEKS ENDED NOVEMBER 7,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-END> NOV-07-1998
<CASH> 25,084
<SECURITIES> 0
<RECEIVABLES> 7,390
<ALLOWANCES> 0
<INVENTORY> 62,077
<CURRENT-ASSETS> 107,474
<PP&E> 246,892
<DEPRECIATION> 115,220
<TOTAL-ASSETS> 488,685
<CURRENT-LIABILITIES> 120,523
<BONDS> 268,224
0
0
<COMMON> 0
<OTHER-SE> 30,901
<TOTAL-LIABILITY-AND-EQUITY> 488,685
<SALES> 594,089
<TOTAL-REVENUES> 594,089
<CGS> 398,011
<TOTAL-COSTS> 165,030
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,960
<INCOME-PRETAX> 9,088
<INCOME-TAX> 5,492
<INCOME-CONTINUING> 3,596
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,596
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
