<PAGE>
==============================================================================
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 3, 1997 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)
(732) 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 3, 1997, 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.
==============================================================================
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
PATHMARK STORES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
13 WEEKS ENDED
-------------------------------
MAY 3, MAY 4,
1997 1996
--------- ---------
<S> <C> <C>
Sales............................................................... $922,319 $912,837
Cost of sales (exclusive of depreciation and amortization
shown separately below).......................................... 663,057 646,813
--------- ---------
Gross profit........................................................ 259,262 266,024
Selling, general and administrative expenses........................ 212,341 213,680
Depreciation and amortization....................................... 20,174 20,639
--------- ---------
Operating earnings.................................................. 26,747 31,705
Interest expense.................................................... (41,290) (39,889)
--------- ---------
Loss before income tax benefit and extraordinary item............... (14,543) (8,184)
Income tax benefit.................................................. 5,701 3,321
--------- ---------
Loss before extraordinary item...................................... (8,842) (4,863)
Extraordinary item, net of an income tax benefit.................... -- (673)
--------- ---------
Net loss............................................................ $ (8,842) $ (5,536)
========= =========
</TABLE>
See notes to consolidated financial statements (unaudited).
1
<PAGE>
PATHMARK STORES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands except share amounts)
<TABLE>
<CAPTION>
MAY 3, FEBRUARY 1,
1997 1997
------------ ------------
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents.................................... $ 13,938 $ 9,880
Accounts receivable, net..................................... 12,331 12,492
Merchandise inventories...................................... 215,715 216,931
Income taxes receivable...................................... 789 --
Deferred income taxes........................................ 7,070 7,111
Prepaid expenses............................................. 25,305 24,951
Due from suppliers........................................... 12,376 13,923
Other current assets......................................... 5,656 5,908
------------ ------------
Total Current Assets...................................... 293,180 291,196
Property and Equipment, Net....................................... 593,711 603,577
Deferred Financing Costs, Net..................................... 27,113 28,743
Deferred Income Taxes............................................. 28,132 22,846
Other Assets...................................................... 45,164 43,534
------------ ------------
$ 987,300 $ 989,896
============ ============
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities
Accounts payable............................................. $ 171,824 $ 166,199
Book overdrafts.............................................. 29,287 41,085
Current maturities of long-term debt......................... 113,100 74,431
Income taxes payable......................................... -- 860
Accrued payroll and payroll taxes............................ 56,189 56,335
Current portion of lease obligations......................... 23,360 23,133
Accrued interest payable..................................... 18,914 20,712
Accrued expenses and other current liabilities............... 87,981 90,589
------------ -----------
Total Current Liabilities................................. 500,655 473,344
------------ -----------
Long-Term Debt.................................................... 1,171,452 1,185,639
------------ -----------
Lease Obligations, Long-Term...................................... 176,555 175,353
------------ -----------
Other Noncurrent Liabilities...................................... 189,146 197,226
------------ -----------
Commitments and Contingencies (Note 4)
Stockholder's Deficit
Common Stock, $.10 par value................................. -- --
Authorized, issued and outstanding: 100 shares
Paid-in Capital.............................................. 68,703 68,703
Accumulated Deficit.......................................... (1,119,211) (1,110,369)
------------ -----------
Total Stockholder's Deficit............................... (1,050,508) (1,041,666)
------------ -----------
$ 987,300 $ 989,896
============ ===========
</TABLE>
See notes to consolidated financial statements (unaudited).
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 1, 1997................. $ -- $68,703 $(1,110,369) $(1,041,666)
Net loss............................... -- -- (8,842) (8,842)
------- ------- ----------- ------------
Balance, May 3, 1997...................... $ -- $68,703 $(1,119,211) $(1,050,508)
======= ======= =========== ============
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)
======= ======= =========== ============
</TABLE>
See notes to consolidated financial statements (unaudited).
3
<PAGE>
PATHMARK STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
13 WEEKS ENDED
-----------------------------
MAY 3, MAY 4,
1997 1996
-------- ---------
Operating Activities
<S> <C> <C>
Net loss.......................................................................... $ (8,842) $ (5,536)
Adjustments to reconcile net loss to net cash provided by operating activities:
Extraordinary loss on early extinguishment of debt.............................. -- 673
Depreciation and amortization................................................... 21,130 21,481
Deferred income tax benefit..................................................... (5,246) (1,545)
Interest accruable but not payable.............................................. 4,448 4,008
Amortization of original issue discount......................................... 88 88
Amortization of debt issuance costs............................................. 1,901 1,816
(Gain) loss on disposal of property and equipment............................... 33 (5,542)
Cash provided by (used for) operating assets and liabilities:
Accounts receivable, net...................................................... 161 (295)
Merchandise inventories....................................................... 1,216 1,644
Income taxes.................................................................. (1,649) (3,374)
Other current assets.......................................................... 665 1,923
Other assets.................................................................. (1,808) (162)
Accounts payable.............................................................. 5,625 (1,254)
Accrued interest payable...................................................... (1,798) (1,395)
Accrued expenses and other current liabilities................................ (2,706) (4,890)
Other noncurrent liabilities.................................................. (8,079) 4,175
-------- ---------
Cash provided by operating activities....................................... 5,139 11,815
-------- ---------
Investing Activities
Property and equipment expenditures............................................... (5,035) (10,654)
Proceeds from disposition of property and equipment............................... 1,243 6,589
-------- ---------
Cash used for investing activities.......................................... (3,792) (4,065)
-------- ---------
Financing Activities
Increase in Working Capital Facility borrowings................................... 33,000 18,500
Decrease in Term Loan............................................................. (12,627) (10,400)
Decrease in book overdrafts....................................................... (11,798) (8,730)
Increase in other borrowings...................................................... 214 --
Repayment of other long-term borrowings........................................... (642) (1,220)
Reduction in lease obligations.................................................... (5,168) (4,892)
Deferred financing fees........................................................... (268) (1,503)
-------- ---------
Cash provided by (used for) financing activities............................ 2,711 (8,245)
-------- ---------
Increase (decrease) in cash and cash equivalents...................................... 4,058 (495)
Cash and cash equivalents at beginning of period...................................... 9,880 11,648
-------- ---------
Cash and cash equivalents at end of period............................................ $ 13,938 $ 11,153
======== =========
Supplemental Disclosures of Cash Flow Information
Interest paid..................................................................... $ 35,148 $ 33,800
======== =========
Income taxes paid................................................................. $ 1,650 $ 1,401
======== =========
Noncash Investing and Financing Activities
Capital lease obligations......................................................... $ 6,807 $ 4,507
======== =========
</TABLE>
See notes to consolidated financial statements (unaudited).
4
<PAGE>
PATHMARK STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION
Pathmark Stores, Inc. (the "Company") operated 144 supermarkets as of May
3, 1997, 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").
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 1, 1997, 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 1, 1997.
Income taxes for the interim period are based on the estimated effective tax
rate expected to be applicable for the full fiscal year.
NOTE 2--LONG-TERM DEBT
Long-term debt is comprised of the following (dollars in thousands):
<TABLE>
<CAPTION>
MAY 3, FEBRUARY 1,
1997 1997
---------- -----------
<S> <C> <C>
Term Loan............................................................................ $ 230,500 $ 243,127
Working Capital Facility............................................................. 106,500 73,500
9.625% Senior Subordinated Notes due 2003 ("Senior Subordinated Notes").............. 437,869 437,780
10.75% Deferred Coupon Notes due 2003 ("Deferred Coupon Notes")...................... 173,007 168,559
12.625% Subordinated Debentures due 2002 ("Subordinated Debentures")................. 95,750 95,750
11.625% Subordinated Notes due 2002 ("Subordinated Notes")........................... 199,017 199,017
Debt payable to Holdings............................................................. 983 983
Industrial revenue bonds............................................................. 6,375 6,375
Other debt (primarily mortgages)..................................................... 34,551 34,979
---------- -----------
Total debt........................................................................... 1,284,552 1,260,070
Less: current maturities............................................................. 113,100 74,431
---------- -----------
Long-term portion.................................................................... $1,171,452 $1,185,639
========== ===========
</TABLE>
On May 27, 1997, The Chase Manhattan Bank committed, subject to the
execution of a definitive credit agreement, to provide to the Company senior
secured facilities in an aggregate principal amount of $500 million pursuant
to which the Company will repay in full all amounts outstanding under its
existing Bank Credit Agreement. The senior securied facilities include two
term facilities in an aggregate principal amount of $300 million and a
revolving credit facility in the aggregate principal amount of $200 million.
The Company believes it will successfully refinance its existing Bank Credit
Agreement, however, there can be no assurances that the refinancing will
occur.
5
<PAGE>
PATHMARK STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
NOTE 3--INTEREST EXPENSE
Interest expense is comprised of the following (dollars in thousands):
<TABLE>
<CAPTION>
13 WEEKS ENDED
-------------------------
MAY 3, MAY 4,
1997 1996
------- --------
<S> <C> <C>
Term Loan........................................................................... $ 5,130 $ 5,901
Working Capital Facility............................................................ 1,767 1,210
Senior Subordinated Notes
Amortization of original issue discount......................................... 88 88
Currently payable............................................................... 10,588 10,588
Deferred Coupon Notes
Accrued but not payable......................................................... 4,448 4,008
Subordinated Debentures............................................................. 3,022 3,022
Subordinated Notes.................................................................. 5,813 5,813
Amortization of debt issuance costs................................................. 1,901 1,816
Obligations under capital leases.................................................... 4,790 4,338
Other, net.......................................................................... 3,743 3,105
------- --------
Interest expense.................................................................... $41,290 $39,889
======= ========
</TABLE>
The majority of the cash interest payments are scheduled in the second and
fourth quarters. However, the May 1 semi-annual interest payment of $21.2
million on the Senior Subordinated Notes was paid in the first quarters of
Fiscal 1997 and Fiscal 1996 due to the timing of the quarter end dates.
NOTE 4--CONTINGENCIES
RICKEL:
In connection with the sale of its home centers segment in Fiscal 1994,
the Company, as lessor, entered into leases for certain real estate properties
with Rickel, as tenant (the "Leases"), pursuant to which the Company is
entitled to receive annual aggregate rentals of approximately $4.2 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 May 3, 1997, the estimated
present value of obligations under the Assumed Liabilities approximated $28.5
million.
In January 1996, Rickel filed for bankruptcy protection under Chapter 11
of the United States Bankruptcy Code. In April 1996, the Company filed its
proofs of claim in connection with the bankruptcy proceedings. In August 1996,
Rickel filed an order with the Bankruptcy Court to reject a third party lease.
The estimated present value of this lease obligation is approximately $4.4
million. In November 1996, Rickel filed an order with the Bankruptcy Court to
reject four Leases related to property owned by the Company, with aggregate
annual rentals of approximately $2.4 million. The Company is actively marketing
these properties to other prospective tenants. In February 1997, Rickel filed an
order with the Bankruptcy Court to reject one additional third party lease,
which the Company has settled with the landlord. In May 1997, Rickel filed an
order with the Bankruptcy Court to reject a lease related to property owned by
the Company, with aggregate annual rentals of approximately $0.3 million.
Management has evaluated its exposure with respect to these rejected Leases and
has concluded that the Company has sufficient reserves to cover any resulting
liability which may occur with respect to these rejected Leases. Since the
bankruptcy is not concluded, the Company cannot determine whether Rickel will
reject any additional Leases or the extent to which the Company has become
liable with respect to the Assumed Liabilities in the event of Rickel's
nonpayment thereof.
OTHER:
The Company is also 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.
6
<PAGE>
PATHMARK STORES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The matters discussed herein, with the exception of historical information,
are "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks, uncertainties and other factors which could cause actual results to
differ materially from future results expressed or implied by such
forward-looking statements. Potential risks and uncertainties include, but are
not limited to, the competitive environment in which the Company operates and
the general economic conditions in the Company's trading areas.
RESULTS OF OPERATIONS
SALES:
Sales in the first quarter of Fiscal 1997 were $922.3 million compared to
$912.8 million in the prior year, an increase of 1% with same store sales from
supermarkets increasing 0.6%. The increase in sales resulted from the Company's
new store openings and remodels over the past year and the Company's promotional
pricing program which commenced in the first quarter of Fiscal 1997. The Company
operated 144 supermarkets at both the end of the first quarters of Fiscal 1997
and Fiscal 1996, including 55 and 46 Pathmark 2000 format stores, respectively.
GROSS PROFIT:
Gross profit in the first quarter of Fiscal 1997 was $259.3 million or
28.1% of sales compared with $266.0 million or 29.1% of sales for the prior
year. The decrease in gross profit in both dollars and as a percentage of sales
for the first quarter Fiscal 1997 compared to the prior year was primarily due
to the promotional pricing program introduced during the first quarter of Fiscal
1997. The cost of goods sold comparisons were affected by a pretax LIFO charge
of $0.4 million and $0.9 million in the first quarters of Fiscal 1997 and Fiscal
1996, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A"):
SG&A in the first quarter of Fiscal 1997 decreased $1.3 million or 0.6%
compared to the prior year. As a percentage of sales, SG&A were 23.0% in the
first quarter of Fiscal 1997, down from 23.4% in the prior year. The decrease in
SG&A as a percentage of sales in the first quarter of Fiscal 1997 compared to
the prior year was primarily due to lower advertising and administrative
expenses, partially offset by higher labor and labor related expenses.
DEPRECIATION AND AMORTIZATION:
Depreciation and amortization of $20.2 million in the first quarter of
Fiscal 1997 was $0.4 million lower than the prior year of $20.6 million. The
decrease in depreciation and amortization expense in the first quarter of Fiscal
1997 compared to the prior year was primarily due to the write down in the
fourth quarter of Fiscal 1996 of certain fixed assets held for sale, principally
in the Company's southern region, partially offset by capital expenditures in
Fiscal 1997. Depreciation and amortization excludes video tape amortization,
which is recorded in cost of goods sold, of $0.8 million and $0.75 million in
the first quarters of Fiscal 1997 and Fiscal 1996, respectively.
OPERATING EARNINGS:
Operating earnings in the first quarter of Fiscal 1997 were $26.7 million
compared with the prior year of $31.7 million. The decrease in operating
earnings in the first quarter of Fiscal 1997 compared to the prior year was
due to lower gross profit, partially offset by lower SG&A and depreciation and
amortization expense.
7
<PAGE>
PATHMARK STORES, INC.
INTEREST EXPENSE:
Interest expense was $41.3 million in the first quarter of Fiscal 1997
compared to $39.9 million in the prior year primarily due to an increase in the
Working Capital Facility along with higher interest rates, partially offset by
reductions in the Term Loan.
INCOME TAXES:
Income taxes for the interim period are based on the estimated effective tax
rate expected to be applicable for the full fiscal year. The income tax benefit
in the first quarters of Fiscal 1997 and Fiscal 1996 were $5.7 million and $3.3
million, respectively.
During the first quarter of Fiscal 1997, the Company made income tax
payments of $1.7 million and received income tax refunds of $0.5 million. 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.
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.
SUMMARY OF OPERATIONS:
For the first quarter of Fiscal 1997, the Company's net loss was $8.8
million compared to a net loss of $5.5 million for the prior year. The increase
in net loss in the first quarter of Fiscal 1997 compared to the prior year was
primarily due to lower operating earnings and higher interest expense, partially
offset by a higher income tax benefit.
EBITDA-FIFO:
EBITDA-FIFO was $48.3 million and $54.2 million in the first quarters of
Fiscal 1997 and Fiscal 1996, respectively. EBITDA-FIFO represents net earnings
before interest expense, income taxes, depreciation, amortization, the LIFO
charge (credit) and unusual transactions. EBITDA-FIFO is a widely accepted
financial indicator of a company's ability to service and/or incur debt.
EBITDA-FIFO should not be construed as an alternative to, or a better indicator
of operating income or to cash flows from operating activities, as determined in
accordance with generally accepted accounting principles.
FINANCIAL CONDITION
DEBT SERVICE:
During the first quarter of Fiscal 1997, total debt increased $24.5 million
from Fiscal 1996 year end primarily due to borrowings under the Working Capital
Facility and debt accretion on the Deferred Coupon Notes, partially offset by
Term Loan repayments. Borrowings under the Working Capital Facility were $106.5
million at May 3, 1997 and have decreased to $70.5 million at June 12, 1997.
During the second quarter of Fiscal 1997, the Company sold four of its 12
stores that it announced for divestiture at the end of Fiscal 1996 for $14.9
million. The proceeds were used to paydown a portion of the Working Capital
Facility.
8
<PAGE>
PATHMARK STORES, INC.
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
------------ --------
1997(a)................................................. $ 94.4
1998.................................................... 155.7
1999.................................................... 127.2
2000.................................................... 50.6
2001.................................................... 50.0
2002.................................................... 195.8
2003.................................................... 610.9
- ----------
(a) Subsequent to May 3, 1997.
LIQUIDITY:
The consolidated financial statements of the Company indicate that, at May
3, 1997, current liabilities exceeded current assets by $207.5 million and
stockholder's deficit was $1.05 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 meets its other cash requirements.
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, Working Capital Facility and certain mortgages in Fiscal 1998, the
amortization and subsequent maturity 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 Bank Credit Agreement includes an annual
cleandown provision requiring borrowings under the Company's Working Capital
Facility not to exceed $60.0 million for a period of 30 consecutive days. The
Company was in compliance with its various debt covenants at May 3, 1997, and,
based on management's operating projections for Fiscal 1997, the Company
believes that it will be able to satisfy this cleandown provision and continue
to be in compliance with its other debt covenants. The Company's ability to make
scheduled payments, to refinance or otherwise meet 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 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.
9
<PAGE>
PATHMARK STORES, INC.
On May 27, 1997, The Chase Manhattan Bank committed, subject to the
execution of a definitive credit agreement, to provide to the Company senior
secured facilities in an aggregate principal amount of $500 million pursuant
to which the Company will repay in full all amounts outstanding under its
existing Bank Credit Agreement. The senior secured facilities include two term
facilities in an aggregate principal amount of $300 million and a revolving
credit facility in the aggregate principal amount of $200 million. The Company
believes it will successfully refinance its existing Bank Credit Agreement,
however, there can be no assurances that the refinancing will occur.
While it is the Company's intention to enter into other 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 derease 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 1997, including
property acquired under capital leases, were $11.8 million compared to $15.2
million for the prior year. During the first quarter of Fiscal 1997, the Company
opened one new Pathmark 2000 format store, completed one enlargement to an
existing supermarket and closed one of the 12 stores announced for divestiture
at the end of Fiscal 1996. Subsequent to the first quarter of Fiscal 1997, the
Company opened one new Pathmark 2000 format store and sold or closed six of the
12 stores announced for divestiture. During the remainder of Fiscal 1997, the
Company plans to open one new Pathmark 2000 format store and to complete up to
an aggregate of nine major renovations and enlargements.
CASH FLOWS:
Cash provided by operating activities amounted to $5.1 million in the
first quarter of Fiscal 1997 compared to $11.8 million in the prior year. The
decrease in net cash provided by operating activities is primarily due to a
decline in cash provided by operating assets and liabilities and an increase in
the net loss. Cash used for investing activities was $3.8 million in the first
quarter of Fiscal 1997 compared to $4.1 million in the prior year, primarily due
to expenditures of property and equipment, partially offset by proceeds from
property dispositions. Cash provided by financing activities was $2.7 million in
the first quarter of Fiscal 1997 compared to cash used for financing activities
of $8.2 million in the prior year. The increase in cash provided by financing
activities is primarily due to an increase in borrowings under the Working
Capital Facility.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter for which this
report has been filed.
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, 1997
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Pathmark
Stores, Inc. Consolidated Statements of Operations for the 13 weeks ended May 3,
1997 and Consolidated Balance Sheet as of May 3, 1997 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> JAN-31-1998
<PERIOD-END> MAY-03-1997
<CASH> 13,938
<SECURITIES> 0
<RECEIVABLES> 13,519
<ALLOWANCES> (1,188)
<INVENTORY> 215,715
<CURRENT-ASSETS> 293,180
<PP&E> 993,768
<DEPRECIATION> (400,057)
<TOTAL-ASSETS> 987,300
<CURRENT-LIABILITIES> 500,655
<BONDS> 1,171,452
0
0
<COMMON> 0
<OTHER-SE> (1,050,508)
<TOTAL-LIABILITY-AND-EQUITY> 987,300
<SALES> 922,319
<TOTAL-REVENUES> 922,319
<CGS> 663,057
<TOTAL-COSTS> 663,057
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 23
<INTEREST-EXPENSE> (41,290)
<INCOME-PRETAX> (14,543)
<INCOME-TAX> 5,701
<INCOME-CONTINUING> (8,842)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,842)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
