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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 Commission File Number
May 4, 1996 1-5287
PATHMARK STORES, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2879612
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
301 Blair Road, P.O. Box 5301 07095-0915
Woodbridge, New Jersey (Zip Code)
(Address of principal executive
offices)
908-499-3000
(Registrant's telephone number, including area code)
___________________
Securities registered pursuant to Section 12(b) of the Act:
Junior Subordinated Deferred Coupon Notes due 2003
Securities registered pursuant to Section 12(g) of the Act: None
___________________
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
------- -------
As of May 4, 1996, there were outstanding 100 shares of Common Stock, $0.10
par value, all of which are privately owned and not traded on a public market.
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<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements.
PATHMARK STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands)
<TABLE><CAPTION>
13 Weeks Ended
----------------------
May 4, April 29,
1996 1995
---------- ---------
<S> <C> <C>
Sales........................................................... $ 961,095 $ 1,033,037
Cost of sales (exclusive of depreciation and amortization
shown separately below)..................................... 676,480 735,862
--------- ----------
Gross profit.................................................... 284,615 297,175
Selling, general and administrative expenses.................... 232,271 233,475
Depreciation and amortization................................... 20,639 19,945
--------- ----------
Operating earnings.............................................. 31,705 43,755
Interest expense................................................ (39,889) (41,105)
---------- -----------
Earnings (loss) from operations before
income tax benefit (provision) and extraordinary item ....... (8,184) 2,650
Income tax benefit (provision) ................................. 3,321 (328)
---------- -----------
Earnings (loss) before extraordinary item ..................... (4,863) 2,322
Extraordinary item, net of an income tax benefit ............... (673) --
----------- -------------
Net earnings (loss)............................................. $ (5,536) $ 2,322
=========== =============
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
PATHMARK STORES, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands except share amounts)
<TABLE><CAPTION>
May 4, February 3,
1996 1996
------------ -------------
<S> <C> <C>
ASSETS
Currents Assets
Cash and cash equivalents ................................ $ 11,153 $ 11,648
Accounts receivable, net.................................. 10,848 10,553
Merchandise inventories................................... 223,804 225,448
Deferred income taxes .................................... 3,749 4,156
Prepaid expenses.......................................... 25,570 25,189
Due from suppliers........................................ 11,182 13,178
Other current assets...................................... 5,182 5,854
------------- -------------
Total Current Assets .................................. 291,488 296,026
Property and Equipment, Net................................... 596,243 602,888
Deferred Financing Costs, Net................................. 32,272 33,685
Deferred Income Taxes......................................... 15,195 13,243
Other Assets.................................................. 39,561 39,915
------------- -------------
$ 974,759 $ 985,757
============= =============
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities
Accounts payable............................................ $ 182,828 $ 184,082
Book overdrafts ............................................ 34,990 43,720
Current maturities of long-term debt........................ 57,860 51,753
Income taxes payable ....................................... 218 4,057
Accrued payroll and payroll taxes........................... 50,394 54,322
Current portion of obligations under capital leases......... 20,880 20,680
Accrued interest payable.................................... 17,914 19,309
Accrued expenses and other current liabilities.............. 90,292 91,223
------------- -------------
Total Current Liabilities............................... 455,376 469,146
------------- -------------
Long-Term Debt................................................ 1,219,514 1,214,645
------------- -------------
Obligations Under Capital Leases, Long-Term................... 139,425 140,161
------------- -------------
Other Noncurrent Liabilities.................................. 190,211 186,036
------------- -------------
Commitments and Contingencies (Note 6)
Stockholder's Deficit
Common Stock, $.10 par value............................ -- --
Authorized, issued and outstanding:100 shares
Paid-in Capital........................................... 65,303 65,303
Accumulated Deficit....................................... (1,095,070) (1,089,534)
------------- -------------
Total Stockholder's Deficit............................. (1,029,767) (1,024,231)
------------- -------------
$ 974,759 $ 985,757
============= =============
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
PATHMARK STORES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT (Unaudited)
(in thousands)
<TABLE><CAPTION>
Total
Common Paid-in Accumulated Stockholder's
Stock Capital Deficit Deficit
-------- ------- ------------- -------------
<S> <C> <C> <C> <C>
Balance, February 3, 1996 .................... $ -- $ 65,303 $ (1,089,534) $ (1,024,231)
Net loss................................... -- -- (5,536) (5,536)
------- -------- ------------- -------------
Balance, May 4, 1996 ....................... $ $ 65,303 $ (1,095,070) $ (1,029,767)
======= ======== ============= =============
<CAPTION>
<S> <C> <C> <C> <C>
Balance, January 28, 1995 .................... $ -- $ 91,809 $ (1,122,281) $ (1,030,472)
Net earnings .............................. -- -- 2,322 2,322
Dividend to PTK Holdings, Inc.,
in conjunction with the disposal
of the home centers segment............ -- (4,706) -- (4,706)
------ -------- ------------ ------------
Balance, April 29, 1995....................... $ -- $ 87,103 $ (1,119,959) $ (1,032,856)
======= ======== ============= =============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
PATHMARK STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands)
<TABLE><CAPTION>
13 Weeks Ended
---------------------------
May 4, April 29,
1996 1995
-------- ----------
<S> <C> <C>
Operating Activities
Net earnings (loss).............................................. $ (5,536) $ 2,322
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Extraordinary loss on early extinguishment of debt ......... 673 --
Depreciation and amortization............................... 21,481 20,595
Deferred income tax benefit................................. (1,545) (1,965)
Interest accruable but not payable.......................... 4,008 3,611
Amortization of original issue discount..................... 88 88
Amortization of debt issuance costs ........................ 1,816 1,779
Gain on disposal of property and equipment.................. (5,542) (93)
Cash provided by (used for) operating assets and liabilities:
Accounts receivable, net.................................. (295) 887
Merchandise inventories................................... 1,644 1,020
Income taxes ............................................. (3,374) 9,847
Prepaid expenses.......................................... (1,152) (380)
Due from suppliers........................................ 1,996 3,420
Other current assets...................................... 1,079 5,718
Other assets.............................................. (162) 2,371
Accounts payable.......................................... (1,254) (15,466)
Accrued payroll and payroll taxes......................... (3,928) (2,536)
Accrued interest payable.................................. (1,395) 19,736
Accrued expenses and other current liabilities .......... (962) (4,643)
Other noncurrent liabilities.............................. 4,175 979
---------- ------------
Cash provided by operating activities.................. 11,815 47,290
---------- ------------
Investing Activities
Property and equipment expenditures.............................. (10,654) (10,018)
Proceeds from disposition of property and equipment.............. 6,589 559
Proceeds from sale of home centers segment ...................... -- 4,706
---------- ------------
Cash used for investing activities.................... (4,065) (4,753)
---------- ------------
Financing Activities
Increase (decrease) in Working Capital Facility borrowings....... 18,500 (28,500)
Decrease in Term Loan............................................ (10,400) (8,750)
Increase (decrease) book overdrafts ............................. (8,730) 4,108
Repayment of other long-term borrowings ......................... (1,220) (1,651)
Reduction in obligations under capital leases.................... (4,892) (4,437)
Deferred financing fees ......................................... (1,503) --
Dividend to PTK Holdings, Inc.................................... -- (4,706)
---------- ------------
Cash used for financing activities ................... (8,245) (43,936)
---------- ------------
Decrease in cash and cash equivalents ............................. (495) (1,399)
Cash and cash equivalents at beginning of period .................. 11,648 22,012
---------- ------------
Cash and cash equivalents at end of period ........................ $ 11,153 $ 20,613
========== ============
Supplemental Disclosures of Cash Flow Information:
Interest paid ................................................... $ 33,800 $ 14,016
========== ============
Income taxes paid ............................................... $ 1,401 $ 214
========== ============
Noncash Investing and Financing Activities:
Capital lease obligations ....................................... $ 4,507 $ 6,116
========== ============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
PATHMARK STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 1-Organization and Basis of Presentation
Pathmark Stores, Inc. (the "Company") operates 144 supermarkets in the Middle
Atlantic States, primarily in the New York-New Jersey and Philadelphia
metropolitan areas and is a wholly owned subsidiary of PTK Holdings, Inc.
("PTK") and an indirect wholly owned subsidiary of Supermarkets General Holdings
Corporation ("Holdings"). On March 1, 1996, the Company reacquired all of the
outstanding capital stock of Plainbridge, Inc. ("Plainbridge") by means of a
capital contribution from PTK. Since the acquisition of the capital stock of
Plainbridge is a transfer of interest among entities under common control, it is
being accounted for at historical cost in a manner similar to pooling-of-
interests accounting. Accordingly, the consolidated financial statements
presented herein reflect the assets and liabilities and related results of
operations of the combined entity for all periods.
The unaudited consolidated financial statements included herein have been
prepared by the Company in accordance with the same accounting principles
followed in the presentation of the Company's annual financial statements for
the year ended February 3, 1996, except for the new accounting standard adopted
effective February 4, 1996 (see Note 2), pursuant to the rules and regulations
of the Securities and Exchange Commission. In the opinion of management, the
consolidated financial statements included herein reflect all adjustments which
are of a normal and recurring nature and are necessary to present fairly the
results of operations and financial position of the Company. This report should
be read in conjunction with the financial statements and notes thereto included
in the Company's Form 10-K Annual Report for the year ended February 3, 1996.
The accompanying consolidated financial statements of the Company indicated
that, at May 4, 1996, current liabilities exceed current assets by $163.9
million and stockholder's deficit approximates $1.03 billion. Management
believes that cash flows generated from operations, supplemented by the unused
borrowing capacity under the Working Capital Facility and the availability of
capital lease financing will be sufficient to pay the Company's debts as they
come due, provide for its capital expenditure program and meet its seasonal cash
requirements. Further, the Company believes it will be in compliance throughout
the fiscal year with its various debt covenants.
Income taxes for the interim period are based on the estimated effective tax
rate expected to be applicable for the full fiscal year.
Since the Company is a wholly owned subsidiary, earnings (loss) per share
information is not presented.
Note 2-New Accounting Standard
Effective February 4, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS No. 121"). SFAS No.
121 establishes accounting standards for the measurement of the impairment of
long-lived assets, certain identifiable intangibles and goodwill related to
those assets. SFAS No. 121 requires that an asset to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
5
<PAGE>
PATHMARK STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 2-New Accounting Standard-(Continued)
The Company has performed its review based upon groups of assets and the
undiscounted estimated future cash flows from such assets and determined that
the carrying value of such assets were recoverable from the respective cash
flows. The adoption of SFAS No. 121 did not have an effect on the financial
position or results of operations of the Company.
Selling, general and administrative expenses for the 13 weeks ended
May 4, 1996 are net of a gain of $5.6 million related to the sale of certain
real estate.
Note 3-Long-Term Debt
Long-term debt is comprised of the following (dollars in thousands):
May 4, February 3,
1996 1996
----------- -----------
Term Loan . . . . . . . . . . . . . $ 277,555 $ 287,955
Working Capital Facilities. . . . . . 64,500 46,000
9.625% Senior Subordinated Notes due 2003 437,514 437,426
10.75% Deferred Coupon Notes due 2003 155,889 151,881
12.625% Subordinated Debentures due 2002 95,750 95,750
11.625% Subordinated Notes due 2002 199,017 199,017
Debt payable to Holdings . . . . . . 983 983
Industrial revenue bonds . . . . . . 6,375 6,375
Other debt (primarily mortgages) . . 39,791 41,011
----------- -----------
Total debt . . . . . . . . . . . . . 1,277,374 1,266,398
Less: current maturities . . . . . . 57,860 51,753
----------- -----------
Long-term portion . . . . . . . . . $1,219,514 $1,214,645
=========== ===========
Note 4-Interest Expense
Interest expense is comprised of the following (dollars in thousands):
13 Weeks Ended
------------------
May 4, April 29,
1996 1995
-------- --------
Term Loan . . . . . . . . . . . . . $ 5,901 $ 7,925
Working Capital Facilities. . . . . . 1,210 1,290
9.625% Senior Subordinated Notes due 2003
Amortization of original issue discount
88 88
Currently payable . . . . . . . . . . . 10,588 10,588
10.75% Deferred Coupon Notes due 2003
Accrued but not payable . . . . . . . . 4,008 3,611
12.625% Subordinated Debentures due 2002 3,022 3,022
11.625% Subordinated Notes due 2002 . 5,813 5,813
Amortization of debt issuance costs 1,816 1,779
Obligations under capital leases . . 4,338 4,048
Other, net . . . . . . . . . . . . . 3,105 2,941
-------- --------
Interest expense . . . . . . . . . . $39,889 $41,105
======== ========
6
<PAGE>
PATHMARK STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Note 4-Interest Expense-(Continued)
The majority of the cash interest payments are scheduled in the second and
fourth quarters. The $21.2 million semi-annual interest payment on the 9.625%
Senior Subordinated Notes, due May 1, was paid in the first quarter of Fiscal
1996 and in the second quarter of Fiscal 1995.
Note 5-Extraordinary Item
During the first quarter of Fiscal 1996, in connection with the termination
of the Plainbridge credit agreement due to the reacquisition of Plainbridge by
Pathmark, the Company wrote off deferred financing fees resulting in a net loss
on early extinguishment of debt of $0.7 million, net of an income tax benefit of
$0.5 million.
Note 6-Contingencies
In connection with the sale of its home centers segment, the Company has, as
lessor, entered into leases for certain real property with Rickel Home Centers
Inc. ("Rickel"), as tenant (the "Leases"), pursuant to which the Company is
entitled to receive annual aggregate rentals of approximately $7.2 million. In
addition, as part of the sale, the Company assigned to Rickel, and Rickel
assumed, various liabilities of the home centers segment, primarily third party
leases (the "Assumed Liabilities"). As of February 3, 1996, the estimated
present value of obligations under the Assumed Liabilities is approximately
$33.0 million. In January 1996, Rickel filed for bankruptcy protection under
Chapter 11 of the United States Bankruptcy Code. The bankruptcy is in its early
stages and it is too early to determine whether Rickel will reject any of the
Leases or the extent to which the Company may become liable with respect to the
Assumed Liabilities in the event of Rickel's nonpayment thereof. On April 29,
1996, the Company filed its proofs of claim in connection with the bankruptcy
proceedings.
The Company is a party to a number of legal proceedings in the ordinary
course of business. Management believes that the ultimate resolution of these
proceedings will not, in the aggregate, have a material adverse impact on the
financial condition, results of operations or business of the Company.
7
<PAGE>
PATHMARK STORES, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Sales:
Sales for the first quarter of Fiscal 1996 were $961.1 million compared to
$1,033.0 million in the prior-year period. Fiscal 1996 total sales were impacted
by the disposition of the freestanding drug stores during Fiscal 1995. The
freestanding drug stores generated sales of $0.4 million and $45.5 million for
the first quarter of Fiscal 1996 and Fiscal 1995, respectively. Sales from
supermarkets opened in both years decreased 3.5%. Same store sales were
negatively impacted by a significant increase in competitive new store openings
and remodels, as well as the inclement weather during the quarter compared to
the unusually mild weather in the same period last year. The Company operated
144 supermarkets at both the end of the first quarter of Fiscal 1996 and the end
of Fiscal 1995 including 46 and 44 Pathmark 2000 format stores, respectively.
The Company operated one freestanding drug store, which was closed in the second
quarter of Fiscal 1996, at both quarter end and Fiscal 1995 year end compared to
36 freestanding drug stores at the end of the first quarter of Fiscal 1995.
Gross Profit:
Gross profit for the first quarter of Fiscal 1996 was $284.6 million or 29.6%
of sales compared with $297.2 million or 28.8% of sales for the prior-year
period. The decrease in gross profit in the first quarter of Fiscal 1996
compared to the prior-year period was primarily attributable to the lower sales.
The improvement in gross profit as a percentage of sales for the quarter
compared to the prior-year period was primarily due to increased focus on
merchandising programs as well as the Company's continuing emphasis on the
Pathmark 2000 format stores which allow expanded variety in all departments
particularly high margin perishables. The cost of goods sold comparisons were
affected by a pretax LIFO charge of $0.9 million and $0.8 million in the first
quarters of Fiscal 1996 and Fiscal 1995, respectively.
Selling, General and Administrative Expenses ("SG&A"):
SG&A for the first quarter of Fiscal 1996 decreased $1.2 million or 0.5%
compared to the prior-year period. SG&A, on a proforma basis eliminating the
SG&A impact of the freestanding drug stores in last year's first quarter,
increased 4.5% compared to the prior-year period. As a percentage of sales,
SG&A were 24.2% for the first quarter of Fiscal 1996, up from 22.6% in the
prior-year period. The increase as a percentage of sales for the first quarter
of Fiscal 1996 compared to the prior-year period was due to higher labor and
labor related expenses and occupancy costs, partially offset by lower
promotional costs. SG&A for the first quarter of Fiscal 1996 included a
provision of $5.8 million representing the termination costs for two former
executives of the Company and a gain of $5.6 million recognized on the sale of
certain real estate.
Depreciation and Amortization:
Depreciation and amortization of $20.6 million for the first quarter of
Fiscal 1996 was $0.7 million higher than the prior-year period of $19.9 million.
The increase for the first quarter of Fiscal 1996 was primarily due to capital
expenditures. Depreciation and amortization excludes video tape amortization,
which is recorded in cost of goods sold, of $0.75 million and $0.65 million in
the first quarter of Fiscal 1996 and Fiscal 1995, respectively.
8
<PAGE>
PATHMARK STORES, INC.
Operating Earnings:
Operating earnings for the first quarter of Fiscal 1996 were $31.7 million
compared with the prior-year period of $43.8 million. The decrease in operating
earnings during the first quarter of Fiscal 1996 compared to the prior-year
period was due to lower sales.
Interest Expense:
Interest expense was $39.9 million for the first quarter of Fiscal 1996
compared to $41.1 million in the prior-year period primarily due to reductions
in the Term Loan.
Income Tax:
Income taxes for the interim period are based on the estimated effective tax
rate expected to be applicable for the full fiscal year. Although the Company
generated a $3.3 million income tax benefit in the first quarter quarter of
Fiscal 1996, management expects an annual tax provision as a result of taxable
income for the full fiscal year. The income tax provision of $0.3 million for
the first quarter of Fiscal 1995 is net of a reduction in deferred income tax
assets and related valuation allowance of $1.0 million due to utilization of the
net operating loss carryforwards.
During the first quarter of Fiscal 1996, the Company made income tax payments
of $1.4 million and received income tax refunds of $0.3 million. During the
first quarter of Fiscal 1995, the Company made income tax payments of $0.2
million and received income tax refunds of $8.0 million.
Extraordinary Item:
During the first quarter of Fiscal 1996, in connection with the termination
of the Plainbridge credit agreement due to the reacquisition of Plainbridge by
Pathmark, the Company wrote off deferred financing fees resulting in a net loss
on early extinguishment of debt of $0.7 million, net of an income tax benefit of
$0.5 million.
Summary of Operations:
For the first quarter of Fiscal 1996, the Company's net loss was $5.5 million
compared to net earnings of $2.3 million for the prior-year period. The
decrease in net earnings for the quarter compared to the prior-year period was
due to lower operating earnings and an extraordinary loss on early
extinguishment of debt, partially offset by lower interest expense and an income
tax benefit of $3.3 million in Fiscal 1996 compared to an income tax provision
of $0.3 million in Fiscal 1995.
Financial Condition
Debt Service:
During the first quarter of Fiscal 1996, total debt increased $11.0 million
from Fiscal 1995 year end primarily due to borrowings under the Working Capital
Facility and debt accretion on the Deferred Coupon Notes, partially offset by
scheduled Term Loan repayments. Borrowings under the Working Capital Facility
were $64.5 million at May 4, 1996 and have decreased to $50.5 million at June
12, 1996.
In conjunction with the reacquisition of the Plainbridge capital stock, the
outstanding obligations of Plainbridge under its credit agreement were satisfied
by the Company and the Plainbridge credit agreement was terminated. The Company
simultaneously entered into an amendment to its credit agreement with its
existing lenders increasing the Company's Working Capital Facility from $175
million to $200 million (of which the maximum of $125.0 million can be in
letters of credit) to satisfy any additional liquidity needs and prospectively
modifying certain of its financial covenants to take into account the operations
of Plainbridge. The Working Capital Facility is subject to an annual cleandown
provision. Under the terms of the cleandown provision, in each fiscal year
loans cannot exceed $60.0 million (formerly $50.0 million) under the Working
9
<PAGE>
PATHMARK STORES, INC.
Capital Facility for a period of 30 consecutive days. The Company satisfied the
terms of the Fiscal 1996 cleandown provision during the quarter ended May 4,
1996.
The indebtedness under the Working Capital Facility and the Term Loan bear
interest at floating rates and cash interest payments on that indebtedness may
vary in future years. The Company does not currently maintain any interest rate
hedging arrangements due to the reasonable risk that near term interest rates
will not rise significantly. The Company is continuously evaluating this risk
and will implement interest rate hedging arrangements if deemed appropriate.
The majority of the cash interest payments are scheduled in the second and
fourth quarters.
The amount of principal payments required each year on outstanding long-term
debt (excluding the original issue discount with respect to the Deferred Coupon
Notes) are as follows (dollars in millions):
Principal
Fiscal Years Payments
------------ -----------
1996(a) . . . . . . . . . . $ 40.4
1997 . . . . . . . . . . . . 58.0
1998 . . . . . . . . . . . . 161.1
1999 . . . . . . . . . . . . 128.1
2000 . . . . . . . . . . . . 50.2
2001 . . . . . . . . . . . . 50.0
2002 . . . . . . . . . . . . 194.8
2003 . . . . . . . . . . . . 594.8
__________
(a) Subsequent to May 4, 1996.
Liquidity:
The consolidated financial statements of the Company indicate that at May 4,
1996, current liabilities exceed its current assets by $163.9 million and the
stockholder's deficit approximates $1.03 billion. Management believes that cash
flows generated from operations, supplemented by the unused borrowing capacity
under the Working Capital Facility and the availability of capital lease
financing will be sufficient to pay the Company's debts as they come due,
provide for its capital expenditure program and meet its seasonal cash
requirements. Further, the Company believes it will continue to be in
compliance with its various debt covenants, which include certain levels of
operating cash flow (as defined), minimum interest coverage and a maximum
leverage ratio.
The Company believes that it will be able to make the scheduled payments or
refinance its obligations with respect to its indebtedness through a combination
of operating funds and borrowing facilities. Future refinancing will be
necessary if the Company's cash flow from operations is not sufficient to meet
its debt service requirements related to the maturity of a portion of the Term
Loan, the Working Capital Facility and certain mortgages in Fiscal 1998, the
amortization and subsequent maturity of the balance of the Term Loan in Fiscal
1999 and the maturity of the Subordinated Notes and Subordinated Debentures in
Fiscal 2002. The Company expects that it will be necessary to refinance all or
a portion of the Senior Subordinated Notes and the Deferred Coupon Notes due in
Fiscal 2003. The Company may undertake a refinancing of some or all of such
indebtedness sometime prior to its maturity. The Company's ability to make
scheduled payments or to refinance its obligations with respect to its
indebtedness depends on its financial and operating performance, which, in turn,
is subject to prevailing economic conditions and to
10
<PAGE>
PATHMARK STORES, INC.
financial, business and other factors beyond its control. Although the
Company's cash flow from its operations and borrowings has been sufficient to
meet its debt service obligations, there can be no assurance that the Company's
operating results will continue to be sufficient or that future borrowing
facilities will be available for payment or refinancing of the Company's
indebtedness. While it is the Company's intention to enter into refinancings
that it considers advantageous, there can be no assurances that the prevailing
market conditions will be favorable to the Company. In the event the Company
obtains any future refinancing on less than favorable terms, the holders of
outstanding indebtedness could experience increased credit risk and could
experience a decrease in the market value of their investment, because the
Company might be forced to operate under terms that would restrict its
operations and might find its cash flow reduced.
Capital Expenditures:
Capital expenditures for the first quarter of Fiscal 1996, including property
acquired under capital leases, were approximately $15.2 million compared to
approximately $16.1 million for the prior-year period. During the first quarter
of Fiscal 1996, the Company completed two enlargements to existing supermarkets.
In June, through the date of this report, the Company opened three new Pathmark
2000 format stores, two of which replaced smaller stores. During the remainder
of Fiscal 1996, the Company plans to open three new Pathmark 2000 format stores
and plans to complete up to 18 major renovations and enlargements.
Cash Flows:
Cash provided by operating activities amounted to $11.8 million in the first
quarter of Fiscal 1996 compared to $47.3 million in the prior-year period. The
decrease in net cash provided by operating activities is primarily due to a
decline in cash provided by operating assets and liabilities and a decrease in
net earnings. Cash used for investing activities in the first quarter of Fiscal
1996 was $4.1 million primarily due to expenditures of property and equipment,
partially offset by proceeds from property dispositions. During the first
quarter of Fiscal 1995, cash used for investing activities was $4.8 million
primarily reflecting the expenditures for property and equipment, partially
offset by proceeds from the disposal of the home centers segment. Cash used for
financing activities in the first quarter of Fiscal 1996 was $8.2 million
compared to $43.9 million in the prior-year period. The decrease in cash used
for financing activities is primarily due to an increase in borrowings under the
Working Capital Facility, partially offset by a decrease in book overdrafts.
11
<PAGE>
PATHMARK STORES, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
One report on Form 8-K has been filed during the quarter for which this
report has been filed. On March 15, 1996, the registrant filed a report on Form
8-K reporting information under "Item 2. Acquisition or Disposition of Assets"
and "Item 7. Financial Statements, Pro-Forma Financial Information and Exhibits"
concerning the reacquisition of Plainbridge, Inc. by Pathmark Stores, Inc.
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.
PATHMARK STORES, INC.
By /s/ RON MARSHALL
-------------------------------------
(Ron Marshall)
Executive Vice President
and Chief Financial Officer
By /s/ JOSEPH ADELHARDT
-------------------------------------
(Joseph Adelhardt)
Senior Vice President and Controller,
Chief Accounting Officer
Date: June 17, 1996
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Pathmark Stores, Inc.
301 Blair Road, Woodbridge, New Jersey 07095
This schedule contains summary financial information extracted from
Pathmark Stores, Inc. Consolidated Statement of Operations for the 13 weeks
ended May 4, 1996 and Consolidated Balance Sheet as of May 4, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> MAY-04-1996
<CASH> 11,153
<SECURITIES> 0
<RECEIVABLES> 11,898
<ALLOWANCES> (1,050)
<INVENTORY> 223,804
<CURRENT-ASSETS> 291,488
<PP&E> 962,383
<DEPRECIATION> (366,140)
<TOTAL-ASSETS> 974,759
<CURRENT-LIABILITIES> 455,376
<BONDS> 1,219,514
0
0
<COMMON> 0
<OTHER-SE> (1,029,767)
<TOTAL-LIABILITY-AND-EQUITY> 974,759
<SALES> 961,095
<TOTAL-REVENUES> 961,095
<CGS> 676,480
<TOTAL-COSTS> 676,480
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 55
<INTEREST-EXPENSE> (39,889)
<INCOME-PRETAX> (8,184)
<INCOME-TAX> 3,321
<INCOME-CONTINUING> (4,863)
<DISCONTINUED> 0
<EXTRAORDINARY> (673)
<CHANGES> 0
<NET-INCOME> (5,536)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
