SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended August 9, 1997
Commission file number 1-12353
DOMINICK'S SUPERMARKETS, INC.
(Exact name of registrant as specified in charter)
Delaware 94-3220603
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
505 Railroad Avenue
Northlake, Illinois 60164
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 562-1000
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 at least the past 90 days. YES [X] NO [ ].
At September 15, 1997, there were 17,844,384 shares of Common
Stock outstanding and 3,522,493 shares of Non-Voting Common
Stock outstanding.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of
August 9, 1997 (unaudited) and November 2, 1996 1
Consolidated Statements of Operations for
the 16 weeks ended August 9, 1997 and
August 3, 1996 (unaudited) 2
Consolidated Statements of Operations for the
40 weeks ended August 9, 1997 and
August 3, 1996 (unaudited) 3
Consolidated Statements of Cash Flows for the
40 weeks ended August 9, 1997 and
August 3, 1996 (unaudited) 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...............................10
Item 2. Changes in Securities ...........................10
Item 3. Defaults Upon Senior Securities .................10
Item 4. Submission of Matters to a Vote of
Security Holders...............................10
Item 5. Other Information ...............................10
Item 6. Exhibits and Reports on Form 8-K ................10
Signatures ...............................................11
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<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
DOMINICK'S SUPERMARKETS, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
ASSETS
August 9, 1997 November 2, 1996
(unaudited)
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Current assets:
Cash and cash equivalents $ 47,560 $ 32,735
Cash reserved for stock redemption - 50,780
Receivables, net 31,972 16,723
Inventories 213,927 203,411
Prepaid expenses and other 25,693 21,860
Total current assets 319,152 325,509
Property and equipment, net 406,823 368,224
Other assets:
Deferred financing costs, net 10,748 11,524
Goodwill, net 411,809 420,182
Other 27,514 27,546
Total other assets 450,071 459,252
Total assets $ 1,176,046 $ 1,152,985
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<TABLE>
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 194,444 $ 187,787
Accrued payroll and related
liabilities 32,962 30,896
Taxes payable 31,696 18,234
Other accrued liabilities 71,241 61,465
Current portion of long-term debt 5,374 376
Current portion of capital
lease obligations 12,826 9,676
Total current liabilities 348,543 308,434
Long-term debt:
Bank credit facilities and other 214,356 200,644
Senior subordinated debt 200,000 200,000
Capital lease obligations 135,014 130,052
Deferred income taxes and other
liabilities 84,288 84,004
Redeemable Exchangeable Cumulative
Preferred Stock Series A, $.01 par
value, 40,000 shares authorized,
issued and outstanding at November 2,
1996, liquidation and redemption at
$1,000 per share plus accumulated
and unpaid divendends - 50,780
Stockholders' equity:
Common Stock, $.01 par value,
50,000,000 shares authorized,
17,844,384 shares issued and outstanding
at August 9, 1997 and 16,080,074 shares
issued and outstanding at November 2,
1996 178 161
Non-Voting Common Stock, $.01 par
value, 10,000,000 shares authorized,
3,522,493 shares issued and
outstanding at August 9, 1997 and
5,278,962 shares issued and
outstanding at November 2, 1996 35 52
Additional paid-in capital 205,461 205,394
Retained deficit (11,829) (26,536)
Total stockholders' equity 193,845 179,071
Total liabilities and stockholders'
equity $ 1,176,046 $ 1,152,985
See accompanying notes.
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<TABLE>
DOMINICK'S SUPERMARKETS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
(unaudited)
16 Weeks 16 Weeks
Ended Ended
August 9, 1997 August 3, 1996
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Sales $ 813,690 $ 759,309
Cost of sales 618,555 583,234
Gross profit 195,135 176,075
Selling, general and
administrative expenses 165,459 149,632
Operating income 29,676 26,443
Interest expense 18,515 21,078
Income before income taxes 11,161 5,365
Income tax expense 5,521 3,648
Net income 5,640 1,717
Preferred stock accretion - 2,164
Net income (loss) available to
common stockholders $ 5,640 $ (447)
Per Share
Net income (loss) per common share $ 0.25 $ (.03)
Average number of common and
common equivalent shares outstanding 22,885 15,489
See accompanying notes.
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<TABLE>
DOMINICK'S SUPERMARKETS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
(unaudited)
40 Weeks 40 Weeks
Ended Ended
August 9, 1997 August 3, 1996
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Sales $ 2,000,068 $ 1,900,550
Cost of sales 1,521,598 1,463,514
Gross profit 478,470 437,036
Selling, general and
administrative expenses 403,690 372,376
Operating income 74,780 64,660
Interest expense 45,191 53,409
Income before income taxes 29,589 11,251
Income tax expense 14,882 8,138
Net income 14,707 3,113
Preferred stock accretion - 5,229
Net income (loss) available to
common stockholders $ 14,707 $ ( 2,116)
Per Share
Income (loss) per common share $ 0.66 $ (.14)
Average number of common and
common equivalent shares outstanding 22,425 15,489
See accompanying notes.
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<TABLE>
DOMINICK'S SUPERMARKETS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
40 Weeks 40 Weeks
Ended Ended
August 9, 1997 August 3, 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 14,707 $ 3,113
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 44,642 34,722
Amortization of deferred financing
costs 877 2,137
(Gain) loss on disposal of assets (137) 5
Changes in operating assets
and liabilities:
Receivables (15,249) 13,427
Inventory (10,516) 2,918
Prepaid expenses (2,675) (2,063)
Accounts payable 6,657 (30,148)
Accrued liabilities and
taxes payable 19,812 8,324
Total adjustments 43,411 29,322
Net cash provided by operating
activities 58,118 32,435
Cash flows from investing activities:
Capital expenditures (66,598) (25,264)
Proceeds from sale of assets 272 293
Net cash used in investing activities (66,326) (24,971)
Cash flows from financing activities:
Principal payments for long-term
debt and capital lease obligations (10,550) (20,052)
Proceeds from sale-leaseback of assets 15,142 24,702
Increase in revolving debt 19,000 -
Redemption of preferred stock (50,780) -
Deferred financing costs and other (559) (838)
Net cash provided by financing
activities ( 27,747) 3,812
Net increase (decrease) in cash
and cash equivalents (35,955) 11,276
Cash and cash equivalents (including
$50,780 of cash reserved for preferred
stock redemption in 1997) at beginning
of period 83,515 55,551
Cash and cash equivalents at
end of period $ 47,560 $ 66,827
See accompanying notes
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DOMINICK'S SUPERMARKETS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated balance sheet of Dominick's Supermarkets. Inc.
(together with its subsidiaries, the "Company") as of August 9, 1997,
and the consolidated statements of operations and cash flows for the
16 week and 40 week periods ended August 9, 1997 and August 3, 1996
are unaudited, but include all adjustments which the Company
considers necessary for a fair presentation of its consolidated
financial position, results of operations and cash flows for these
periods. These interim financial statements do not include all
disclosures required by generally accepted accounting principles and,
therefore, should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended November 2, 1996. Results of
operations for interim periods are not necessarily indicative of the
results for a full fiscal year.
On November 1, 1996, the Company completed its initial public
offering of Common Stock (the "IPO") which resulted in the issuance
of 5.9 million additional shares of Common Stock. Net proceeds to
the Company from the IPO, after deducting issuance costs, were $97.7
million. The Company used $51.7 million of the proceeds to
repurchase all of its outstanding redeemable preferred stock on
January 2, 1997 and to pay a $0.9 million preferred stock dividend on
November 1, 1996. Additionally, $35.9 million of the IPO proceeds,
together with $45.0 million of available cash and $193.6 million of
proceeds under the Company's credit facility, were used to repay all
of the outstanding borrowings under the Company's prior credit
facility. The remaining IPO proceeds were used to terminate a
consulting agreement.
The Company uses a 52-53 week fiscal year ending on the
Saturday closest to October 31. The Company operates supermarkets in
Chicago, Illinois, and its suburbs. The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. The Company has no operations other than those of its
subsidiaries.
Inventories
Inventories are stated at the lower of cost, primarily using the
last-in, first-out (LIFO) method, or market. If inventories had been
valued using replacement cost, inventories would have been higher by
$5,119,000 and $3,355,000 at August 9, 1997 and November 2, 1996,
respectively, and gross profit and operating income would have been
greater by $1,764,000 and $556,000, $1,500,000 and $600,000 for the
40 weeks and 16 weeks ended August 9, 1997 and August 3, 1996,
respectively.
<PAGE>
Earnings Per Share
In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, Earnings per Share, which the Company will
adopt in the first quarter of 1998. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock
options will be excluded. The Company has not yet determined the
impact that Statement No. 128 will have on earnings per share.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
<TABLE>
Results of Operations
The following table sets forth the historical results of the
Company for the 16 and 40 weeks ended August 9, 1997 and August 3,
1996, expressed in millions of dollars and as a percentage of sales.
16 Weeks Ended 40 Weeks Ended
August 9, 1997 August 3,1996 August 9,1997 August 3, 1996
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales................... $813.7 100.0 % $759.3 100.0 % $2,000.1 100.0 % $1,900.6 100.0 %
Gross profit............ 195.1 24.0 % 176.1 23.2 % 478.5 24.0 % 437.0 23.0 %
Selling, general and
administrative expenses. 165.5 20.3 % 149.7 19.7 % 403.7 20.2 % 372.4 19.6 %
Operating income........ 29.7 3.7 % 26.4 3.5 % 74.8 3.7 % 64.6 3.4 %
Interest expense........ 18.5 2.3 % 21.1 2.8 % 45.2 2.3 % 53.4 2.8 %
Income tax expense...... 5.5 0.7 % 3.6 0.5 % 14.9 0.7 % 8.1 0.4 %
Net income.............. 5.6 0.7 % 1.7 0.2 % 14.7 0.7 % 3.1 0.2 %
Preferred stock accretion - - 2.1 0.2 % - - 5.2 0.3 %
Net income (loss) available
to common stockholders 5.6 0.7 % (0.4) (0.1)% 14.7 0.7 % (2.1) (0.1)%
</TABLE>
<PAGE>
Comparison of Results of Operations for the 16 Weeks Ended August 9,
1997 with the 16 Weeks Ended August 3, 1996
Sales: Sales increased $54.4 million, or 7.2%, from $759.3 million
in the 16 weeks ended August 3, 1996 to $813.7 million in the 16
weeks ended August 9, 1997. The increase in sales in the fiscal 1997
period was primarily attributable to the opening of four new
Dominick's Fresh Stores in the fourth quarter of 1996, four new
Fresh Stores in 1997, and increase in comparable store sales of 1.0%.
Gross Profit: Gross profit increased $19.0 million, or 10.8%, from
$176.1 million in the 16 weeks ended August 3, 1996 to $195.1 million
in the 16 weeks ended August 9, 1997. Gross profit as a percentage
of sales increased from 23.2% in the 16 weeks ended August 3, 1996 to
24.0% in the 16 weeks ended August 9, 1997, due primarily to the
Company's ongoing efforts to reduce its cost of goods through
purchasing improvements and to increased sales and margins in its
grocery, perishable and drug departments.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses ("SG&A") increased $15.8 million, or 10.6%,
from $149.7 million in the 16 weeks ended August 3, 1996 to $165.5
million in the 16 weeks ended August 9, 1997. SG&A increased from
19.7% of sales in the 16 weeks ended August 3, 1996 to 20.3% of sales
in the 16 weeks ended August 9, 1997. The increase in SG&A as a
percentage of sales reflects planned increases in rent and occupancy
costs associated with new and replacement stores.
Operating Income: Operating income increased $3.3 million, or
12.5%, from $26.4 million in the 16 weeks ended August 3, 1996 to
$29.7 million for the 16 weeks ended August 9, 1997 as a result of
the factors discussed above.
Interest Expense: Interest expense decreased from $21.1 million in
the 16 weeks ended August 3, 1996 to $18.5 million in the 16 weeks
ended August 9, 1997. The decrease in interest expense was due to
lower borrowings and interest rates following the IPO.
Net Income: Net income increased $3.9 million from $1.7 million in
the 16 weeks ended August 3, 1996 to $5.6 million in the 16 weeks
ended August 9, 1997 as a result of the factors discussed above.
After deducting preferred stock accretion of $2.1 million in the 16
weeks ended August 3, 1996, net income (loss) available to common
stockholders improved from a net loss of $0.4 million in the 16
weeks ended August 3, 1996 to net income of $5.6 million in the 16
weeks ended August 9, 1997.
<PAGE>
Comparison of Results of Operations for the 40 Weeks Ended August 9,
1997 with the 40 Weeks Ended August 3, 1996
Sales: Sales increased $99.5 million, or 5.2%, from $1,900.6
million in the 40 weeks ended August 3, 1996 to $2,000.1 million in
the 40 weeks ended August 9, 1997. The increase in sales in the
fiscal 1997 period was primarily attributable to the opening of four
new Dominick's Fresh Stores in the fourth quarter of 1996, four new
Fresh Stores in 1997, and an increase in comparable store sales of 0.6%.
Gross Profit: Gross profit increased $41.5 million, or 9.5%, from
$437.0 million in the 40 weeks ended August 3, 1996 to $478.5 million
in the 40 weeks ended August 9, 1997. Gross profit as a percentage
of sales increased from 23.0% in the 40 weeks ended August 3, 1996 to
24.0% in the 40 weeks ended August 9, 1997, due primarily to the
Company's ongoing efforts to reduce its cost of goods through
purchasing improvements and to increased sales and margins in its
grocery, perishable and drug departments.
Selling, General and Administrative Expenses: SG&A increased $31.3
million, or 8.4%, from $372.4 million in the 40 weeks ended August 3,
1996 to $403.7 million in the 40 weeks ended August 9, 1997. SG&A as
a percentage of sales increased from 19.6% in the 40 weeks ended
August 3, 1996 to 20.2% in the 40 weeks ended August 9, 1997. The
increase in SG&A as a percentage of sales was primarily attributable
to planned increases in rent and occupancy costs associated with new
and replacement stores opening in the second half of fiscal 1996.
Operating Income: Operating income increased $10.2 million, or
15.7%, from $64.6 million in the 40 weeks ended August 3, 1996 to
$74.8 million for the 40 weeks ended August 9, 1997 as a result of
the factors discussed above.
Interest Expense: Interest expense decreased from $53.4 million in
the 40 weeks ended August 3, 1996 to $45.2 million in the 40 weeks
ended August 9, 1997. The decrease in interest expense was due to a
reduced level of indebtedness and lower interest costs following the
IPO.
Net Income: Net income increased $11.6 million from $3.1 million
in the 40 weeks ended August 3, 1996 to $14.7 million in the 40 weeks
ended August 9,1997 as a result of the factors discussed above.
After deducting preferred stock accretion of $5.2 million in the 40
weeks ended August 3, 1996, net income (loss) available to common
stockholders improved from a net loss of $2.1 million in the 40 weeks
ended August 3, 1996 to net income of $14.7 million in the 40 weeks
ended August 9, 1997.
<PAGE>
Liquidity and Capital Resources
The Company's principal sources of liquidity are cash flow from
operations, borrowings under the New Revolving Facility (as defined
below) and capital and operating leases. The Company's principal
uses of liquidity are to provide working capital, finance capital
expenditures and meet debt service requirements.
On November 1, 1996, the Company completed its IPO which resulted
in net proceeds to the Company of $97.7 million. The Company used
$51.7 million of such proceeds to repurchase all of its outstanding
redeemable preferred stock on January 2, 1997 and to pay a $0.9
million preferred stock dividend on November 1, 1996.
Additionally, $35.9 million of the IPO proceeds, together with $45.0
million of available cash and $193.6 million of proceeds under the
New Credit Facility (as defined below), were used to repay all of the
outstanding borrowings under the Company's prior credit facility.
The remaining IPO proceeds were used to terminate a consulting
agreement. As a result of these changes, the Company's overall level
of indebtedness was reduced and it is anticipated that future results
of operations will reflect reduced levels of interest expense.
On November 1, 1996, the Company entered into a credit facility
with a syndicate of financial institutions (the "New Credit
Facility"). The New Credit Facility provides for a $100 million
amortizing term loan (the "New Term Loan"), a $105 million revolving
term facility (the "New Revolving Term Facility") and a $120 million
revolving facility (the "New Revolving Facility," and together with
the New Revolving Term Facility, the "New Revolving Facilities"),
each of which has a six and one-half year term. The New Revolving
Facility is available for working capital and general corporate
purposes, including up to $50 million to support letters of credit.
Up to $20 million of the New Revolving Facility is available as a
swingline facility (i.e., a facility which permits same-day
borrowings directly from the agent under the New Credit Facility).
The New Credit Facility has no annual cleandown provision. The New
Term Loan requires quarterly amortization payments commencing in the
second quarter of fiscal 1998 in amounts ranging from $2.5 million to
$7.5 million per quarter. The Company will also be required to make
prepayments under the New Credit Facility, subject to certain
exceptions, with a percentage of its consolidated excess cash flow
and with the proceeds from certain asset sales, issuances of debt
securities and any pension plan reversions.
Additionally, in August, 1997 the Company entered into an agreement
with a third party which provides up to $75.0 million of
real property lease financing for new stores.
<PAGE>
The Company generated approximately $58.1 million of net cash from
operating activities during the 40 weeks ended August 9, 1997
compared to $32.4 million in the same period last year. The increase
in cash provided by operating activities during the 40 weeks ended
August 9, 1997 is attributable to higher operating income and the
timing of cash payments for interest. Supermarket operators
typically require small amounts of working capital since inventory is
generally sold prior to the time that payments to suppliers are due.
This reduces the need for short-term borrowings and allows cash from
operations to be used for non-current purposes such as financing
capital expenditures and other investing activities. Consistent with
this pattern, the Company had a working capital deficit of $29.2
million at August 9, 1997.
The Company used $66.3 million in investing activities for the 40
weeks ended August 9, 1997, which consisted principally of capital
expenditures related primarily to new stores, store remodels and, to
a lesser extent, expenditures for warehousing, distribution and
manufacturing facilities and equipment, including data processing and
computer systems.
The Company plans to make gross capital expenditures of
approximately $21 million (or $9 million net of expected capital
leases) in the fourth quarter of fiscal 1997. Such expenditures
consist of approximately $15 million related to remodels and new
stores, as well as ongoing store expenditures for equipment and
maintenance and approximately $6 million related to warehousing,
distribution and manufacturing facilities and equipment, including
data processing and computer systems. Management expects that these
capital expenditures will be financed primarily through cash flow
from operations and lease financing. During the 40 weeks ended
August 9, 1997, the Company sold and leased-back under capital leases
approximately $15 million of certain existing owned equipment.
The capital expenditure plans discussed above do not include
potential acquisitions which the Company could make to expand within
its existing market or to enter contiguous markets. The Company
considers such acquisition opportunities from time to time. In March
1997, the Company completed the purchase of Byerly's two Chicago area
stores. Any such future acquisition, depending on its size and the
form of consideration, may require the Company to seek additional
debt or equity financing.
The Company, is a holding company that has no material
operations other than its ownership of the capital stock of
Dominick's Finer Foods, Inc. ("Dominick's"). As a result, the
Company is dependent upon distributions or advances from Dominick's
to obtain cash to pay dividends or for other corporate purposes.
Dominick's principal debt instruments generally restrict Dominick's
from paying dividends or otherwise distributing cash to the Company,
except under certain limited circumstances, including for the payment
of taxes and, subject to limitations, for general administrative
purposes.
<PAGE>
The Company, in the ordinary course of its business, is party
to various legal actions. One case currently pending alleges gender
discrimination by Dominick's and seeks compensatory and punitive
damages in an unspecified amount. The plantiffs' motion for class
certification was recently granted by the Court as to the female
subclass. Due to the numerous legal and factual issues which must be
resolved during the course of this litigation, the Company is unable
to predict the ultimate outcome of this lawsuit. If Dominick's were
held liable for the alleged discrimination (or otherwise concludes
that it is in the Company's best interest to settle the matter), it
could be required to pay monetary damages (or settlement payments)
which, depending on the theory of recovery or the resolution of the
plaintiffs' claims for compensatory and punitive damages, could be
substantial and could have a material adverse effect on the Company.
Based upon the current state of the proceedings, the Company's
assessment to date of the underlying facts and circumstances and the
other information currently available, and although no assurances can
be given, the Company does not believe that the resolution of this
litigation will have a material adverse effect on the Company's
overall liquidity. As additional information is gathered and the
litigation proceeds, the Company will continue to assess its
potential impact.
The Company is highly leveraged. Based upon current levels of
operations and anticipated cost savings and future growth, the
Company believes that its cash flows from operations, together with
available borrowings under the New Revolving Facility and its other
sources of liquidity (including capital and operating leases) will be
adequate to meet its anticipated requirements for working capital,
debt service and capital expenditures over the next few years.
However, there can be no assurance that the Company will generate
sufficient cash flow from operations or that it will be able to make
future borrowings under the New Credit Facility.
On September 23, 1997, Dominick's entered into a commitment letter
with certain financial institutions to provide a senior revolving
credit facility to Dominick's in an aggregate amount of up to $575
million. The facility will replace the existing New Credit Facility
and further reduce the Company's costs of borrowing. It is presently
anticipated that such credit facility will be guaranteed by the
Company and the material subsidiaries of Dominick's. Concurrently,
Dominick's announced that it will commence an offer to purchase for
cash (the "Offer to Purchase") any and all of its outstanding 10 7/8%
Senior Subordinated Notes due 2005 (the "Notes"). In connection with
the Offer to Purchase, Dominick's will solicit consents from holders
of the Notes to certain amendments to the indenture governing the
Notes. Consummation of the Offer to Purchase is subject to the tender
of, and receipt of consents from, the holders of at least a majority
of the outstanding aggregate principal amount of Notes, the receipt
of financing under the new revolving credit facility and certain
other conditions. As of September 23, 1997, $200 million aggregate
principal amount of Notes were outstanding. The Company presently
aniticipates that it will record an after-tax extraordinary charge of
approximately $25 million in the fourth quarter related to the
write-off of deferred financing costs, debt repayment premiums and
transaction expenses.
<PAGE>
Effects of Inflation
The Company's primary costs, inventory and labor, are affected by a
number of factors that are beyond its control, including the
availability and price of merchandise, the competitive climate and
general and regional economic conditions. As is typical of the
supermarket industry, the Company has generally been able to maintain
gross profit margins by adjusting its retail prices, but competitive
conditions may from time to time render it unable to do so while
maintaining its market share.
Cautionary Statement for Purposes of "Safe Harbor Provisions" of the
Private Securities Litigation Reform Act of 1995
When used in this report, the words "estimate," "expect,"
"project" and similar expressions, together with other discussion of
future trends or results, are intended to identify forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933, as amended (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Such statements are subject to certain risks and uncertainties,
including those discussed below, that could cause actual results to
differ materially from those projected. These forward-looking
statements speak only as of the date hereof. All of these forward-
looking statements are based on estimates and assumptions made by
management of the Company, which although believed to be reasonable,
are inherently uncertain and difficult to predict; therefore, undue
reliance should not be placed upon such estimates. There can be no
assurance that the savings or other benefits anticipated in these
forward-looking statements will be achieved. The following important
factors, among others, could cause the Company not to achieve the
cost savings or other benefits contemplated herein or otherwise cause
the Company's results of operations to be adversely affected in
future periods: (i) continued or increased competitive pressures from
existing competitors and new entrants, including price-cutting
strategies; (ii) unanticipated costs related to the Company's growth
and operating strategies; (iii) loss or retirement of key members of
management; (iv) inability to negotiate more favorable terms with
suppliers or to improve working capital management; (v) increase in
interest rates of the Company's cost of borrowing or a default under
any material debt agreements; (vi) inability to develop new stores in
advantageous locations or to successfully convert existing stores;
(vii) prolonged labor disruption; (viii) deterioration in general of
regional economic conditions; (ix) adverse state or federal
legislation or regulation that increases the cost of compliance, or
adverse findings by a regulator with respect to existing operations;
(x) loss of customers as result of the conversion of store formats;
(xi) adverse determinations in connection with pending or future
litigation or other material claims and judgments against the
Company; (xii) inability to achieve future sales ; and (xiii) the
unavailability of funds for capital expenditures. Many of such
factors are beyond the control of the Company. In addition, there
can be no assurance that unforeseen costs and expenses or other
factors will not offset or adversely affect the projected cost
savings or other benefits in whole or in part.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On March 16, 1995, a lawsuit was filed in the United States
District Court for the Northern District of Illinois against
Dominick's by two employees of Dominick's. The plaintiffs' original
complaint asserted allegations of gender discrimination and sought
compensatory and punitive damages in an unspecified amount. The
plaintiffs filed an amended complaint on May 1, 1995. The amended
complaint added four additional plaintiffs and asserted allegations
of gender and national origin discrimination. The plaintiffs filed a
second amended complaint on August 16, 1996 adding three additional
plaintiffs. On April 8, 1997, the plaintiffs' motion for class
certification was granted by the court as to the female subclass.
The Company plans to vigorously defend this lawsuit. Due to the
numerous legal and factual issues which must be resolved during the
course of this litigation, the Company is unable to predict the
ultimate outcome of this lawsuit. If Dominick's were held liable for
the alleged discrimination (or otherwise concludes that is is in the
Company's best interest to settle the matter), it could be required
to pay monetary damages (or settlement payments) which, depending on
the theory of recovery or the resolution of the plaintiffs' claims
for compensatory and punitive damages, could be substantial and could
have a material adverse effect on the Company. Based upon the
current state of the proceedings, the Company's assessment to date of
the underlying facts and circumstances and the other information
currently available, and although no assurances can be given, the
Company does not believe that the resolution of this litigation will
have a material adverse effect on the Company's overall liquidity.
As additional information is gathered and the litigation proceeds,
the Company will continue to assess its potential impact.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
<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.
Dated: September 23, 1997 DOMINICK'S SUPERMARKETS, INC.
/s/Robert A. Mariano
Robert A. Mariano
President and Chief Executive Officer
/s/ Darren W. Karst
Darren W. Karst
Executive Vice President, Chief Financial Officer
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