FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT TO
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended January 29, 1995 Commission File No.
33-25621
34-0-25260
KASH N' KARRY FOOD STORES, INC.
(Exact name of registrant as specified in charter)
Delaware 95-4161591
(State of incorporation) (IRS employer identification number)
6422 Harney Road, Tampa, Florida 33610
(Address of registrant's principal executive offices)
(813) 621-0200
(Registrant's telephone number, including area code)
The registrant 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 and has been subject to such filing
requirements for the past 90 days. The registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
As of May 9, 1995, there were 3,100,000 shares
outstanding of the registrant's common stock, $0.01 par value.
Page one of 15 pages.
Item 1. Financial Statements.
The undersigned registrant hereby amends its Quarterly Report on Form 10-Q
for the quarter ended January 29, 1995 by deleting Item 1 in its entirety, and
substituting the following in lieu thereof. As amended, the unaudited condensed
statements of operations reflect that the "net income per common share" for the
four-week period ended January 29, 1995 was $0.26.
"Item 1. Financial Statements.
(Financial Statements begin on page 3)
2
KASH N' KARRY FOOD STORES, INC.
BALANCE SHEETS
(Dollar Amounts in Thousands, Except Per Share Amounts)
ASSETS
Reorganized Predecessor
Company Company
------------ -----------
January 29, July 31,
1995 1994
------------ -----------
(Unaudited)
(Note 1)
Current assets:
Cash and cash equivalents $ 10,517 $ 6,852
Accounts receivable 6,701 8,084
Inventories 78,756 76,094
Prepaid expenses and other current assets 3,246 12,805
--------- ---------
Total current assets 99,220 103,835
Property and equipment, at cost, less
accumulated depreciation 143,813 160,491
Favorable lease interests, less accumulated
amortization of $192 and $13,543 29,762 12,312
Deferred financing costs, less accumulated
amortization of $182 and $22,572 4,043 12,630
Reorganization value in excess of amount allocable
to identifiable assets, less accumulated
amortization of $460 at January 29, 1995 102,059 --
Excess of cost over net assets acquired, less
accumulated amortization of $16,288 at
July 31, 1994 -- 96,758
Other assets 2,854 3,867
--------- ---------
Total assets $381,751 $389,893
========= =========
See accompanying notes to condensed financial statements.
3
KASH N' KARRY FOOD STORES, INC.
BALANCE SHEETS
(Dollar Amounts in Thousands, Except Per Share Amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Reorganized Predecessor
Company Company
------------ -----------
January 29, July 31,
1995 1994
------------ -----------
(Unaudited)
(Note 1)
Current liabilities:
Current portion of long-term debt $ 12,764 $ 42,740
Accounts payable 39,883 34,908
Accrued payroll and benefits 9,023 5,579
Accrued interest 4,618 15,849
Taxes, other than income 4,052 6,056
Other accrued expenses 21,673 11,450
--------- ---------
Total current liabilities 92,013 116,582
Long-term debt, less current obligations 227,522 317,381
Other long-term liabilities 14,914 12,334
Old Series B Cumulative Preferred Stock of $.01 par
value and a stated value of $100 a share.
Authorized 50,000 shares; 38,750 shares
outstanding at July 31, 1994. -- 3,875
Old Series C Convertible Preferred Stock of
$.01 par value. Authorized 100,000 shares;
77,500 shares outstanding at July 31, 1994. -- 775
Stockholders' equity (deficit):
New Common Stock of $.01 par value.
Authorized 5,500,000 shares; 3,100,000
shares outstanding at January 29, 1995. 31 --
Old Common Stock of $.01 par value.
Authorized 4,000,000 shares; 2,819,589
shares outstanding at July 31, 1994. -- 28
Capital in excess of par value 46,464 77,695
Retained earnings (deficit) 807 (138,740)
Less cost of treasury stock - 2,437 shares
at July 31, 1994 -- (37)
--------- ---------
Total stockholders' equity (deficit) 47,302 (61,054)
--------- ---------
Total liabilities & stockholders' equity $381,751 $389,893
========= =========
See accompanying notes to condensed financial statements.
4
KASH N' KARRY FOOD STORES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In Thousands)
(Unaudited)
Reorganized Predecessor
Company Company
----------- --------------------------
Four Nine Thirteen
Weeks Ended Weeks Ended Weeks Ended
January 29, January 1, January 30,
1995 1995 1994
----------- ----------- -----------
Sales $ 86,354 $186,535 $278,166
Cost of sales 68,940 149,070 221,706
--------- ----------- ----------
Gross profit 17,414 37,465 56,460
Selling, general and
administrative expenses 12,226 28,319 45,300
Depreciation and amortization 1,979 4,161 6,220
--------- --------- ----------
Operating income 3,209 4,985 4,940
Interest expense 2,402 3,159 11,372
--------- --------- ----------
Income (loss) before reorganization
items, income taxes, extra-
ordinary item and change in
accounting principle 807 1,826 (6,432)
Reorganization items -- (219) --
--------- --------- ----------
Income (loss) before income taxes,
extraordinary item and change
in accounting principle 807 1,607 (6,432)
Provision for income taxes -- -- --
--------- --------- ----------
Income (loss) before extra-
ordinary item and change in
accounting principle 807 1,607 (6,432)
Extraordinary item - gain on
debt discharge -- 70,166 --
Cumulative effect of change in
accounting principle -
postretirement medical benefits -- (2,000) --
--------- --------- ----------
Net income (loss) $ 807 $69,773 $ (6,432)
========= ========= ==========
Net income per common share (A)(B) $ 0.26
=========
(A) Based on a weighted average number of shares of common stock of 3,100,000
outstanding.
(B) Net income per common share is not meaningful prior to January 1, 1995
due to the significant change in the capital structure in connection with
the Restructuring.
See accompanying notes to condensed financial statements.
5
KASH N' KARRY FOOD STORES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In Thousands)
(Unaudited)
Reorganized Predecessor
Company Company
----------- --------------------------
Four Twenty-Two Twenty-Six
Weeks Ended Weeks Ended Weeks Ended
January 29, January 1, January 30,
1995 1995 1994
----------- ----------- -----------
Sales $ 86,354 $426,681 $534,801
Cost of sales 68,940 340,802 425,915
--------- ----------- ----------
Gross profit 17,414 85,879 108,886
Selling, general and
administrative expenses 12,226 68,819 90,128
Depreciation and amortization 1,979 10,234 12,111
Store closing and other costs -- -- 11,016
--------- --------- ----------
Operating income (loss) 3,209 6,826 (4,369)
Interest expense 2,402 13,719 22,513
--------- --------- ----------
Income (loss) before reorganization
items, income taxes, extra-
ordinary item and change in
accounting principle 807 (6,893) (26,882)
Reorganization items -- (219) --
--------- --------- ----------
Income (loss) before income taxes,
extraordinary item and change
in accounting principle 807 (7,112) (26,882)
Provision for income taxes -- -- --
--------- --------- ----------
Income (loss) before extra-
ordinary item and change
in accounting principle 807 (7,112) (26,882)
Extraordinary item - gain on
debt discharge -- 70,166 --
Cumulative effect of change in
accounting principle -
postretirement medical benefits -- (2,000) --
--------- --------- ----------
Net income (loss) $ 807 $ 61,054 $ (26,882)
========= ========= ==========
Net income per common share (A)(B) $ 0.26
=========
(A) Based on a weighted average number of shares of common stock of 3,100,000
outstanding.
(B) Net income per common share is not meaningful prior to January 1, 1995
due to the significant change in the capital structure in connection with
the Restructuring.
See accompanying notes to condensed financial statements.
6
KASH N' KARRY FOOD STORES, INC.
STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Reorganized Predecessor
Company Company
------------ -----------------------
Four Weeks Twenty-Two Twenty-Six
Ended Weeks Ended Weeks Ended
January 29, January 1, January 30,
1995 1995 1994
----------- ----------- -----------
Net cash flow from operating activities:
Net income (loss) $ 807 $61,054 $(26,882)
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation and amortization,
excluding deferred financing costs 1,979 11,234 12,111
Store closing and other costs -- -- 11,016
Amortization of deferred financing costs 182 1,152 1,549
Reorganization expense -- 4,329 --
Adjustment of accounts to fair value -- (4,110) --
Change in accounting principle -- 2,000 --
Write-off of transaction costs -- 12,989 --
Gain on discharge of debt -- (70,166) --
(Increase) decrease in assets:
Accounts receivable (939) 2,322 660
Inventories 8,358 (5,917) 9,433
Prepaid expenses and other assets (149) (270) (454)
Increase (decrease) in liabilities:
Accounts payable 3,175 1,800 1,652
Accrued expenses and other
liabilities (1,072) (4,012) 2,697
--------- -------- ---------
Net cash provided (used) by
operating activities 12,341 12,405 11,782
---------- -------- ---------
Cash used by investing activities:
Additions to property and equipment (162) (665) (6,194)
Leased/financed asset additions -- -- (4,412)
Proceeds from sale of property and
equipment -- -- 359
---------- -------- ---------
Net cash used by investing
activities (162) (665) (10,247)
---------- -------- ---------
See accompanying notes to condensed financial statements.
7
KASH N' KARRY FOOD STORES, INC.
STATEMENTS OF CASH FLOWS
(Continued)
(In Thousands)
(Unaudited)
Reorganized Predecessor
Company Company
------------ -----------------------
Four Weeks Twenty-Two Twenty-Six
Ended Weeks Ended Weeks Ended
January 29, January 1, January 30,
1995 1995 1994
----------- ----------- -----------
Cash provided (used) by financing activities:
Borrowings under revolving loan facility $ 4,200 $ 800 $ 15,700
Additions to obligations under
capital leases and notes payable -- -- 799
Repayments on revolving loan facility (6,700) (18,000) (9,100)
Repayments on term loan facility -- (3,098) (2,925)
Repayments of other long-term liabilities (151) (2,235) (2,642)
Sale of Common Stock -- 10,000 --
Other financing activities -- (5,070) (512)
--------- --------- ----------
Net cash provided (used) by
financing activities (2,651) (17,603) 1,320
--------- --------- ----------
Net increase (decrease) in cash
and cash equivalents 9,528 (5,863) 2,855
Cash and cash equivalents at beginning
of period 989 6,852 2,145
--------- --------- ----------
Cash and cash equivalents at end of period $ 10,517 $ 989 $ 5,000
========= ========= ==========
See accompanying notes to condensed financial statements.
8
KASH N' KARRY FOOD STORES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
1. On September 3, 1994, the Company began to solicit acceptances of all
impaired parties of a restructuring of the Company which would be implemented
through the consummation of a "prepackaged" plan of reorganization under
Chapter 11 of the United States Bankruptcy Code (the "Restructuring"). As a
result of this solicitation, the voting requirements prescribed by Section
1126 of the Bankruptcy Code were satisfied, and on November 9, 1994 (the
"Petition Date") the Company filed with the Bankruptcy Court a voluntary
petition for reorganization under Chapter 11 of the Bankruptcy Code. On
December 12, 1994, the Bankruptcy Court confirmed the plan of reorganization,
and the Company emerged from bankruptcy on December 29, 1994 (the "Effective
Date"). During the pendency of the bankruptcy case, the Company, with the
Bankruptcy Court's approval, operated its business in the ordinary course, and
paid all pre-petition and post-petition claims of the Company's general
unsecured creditors, trade creditors and employees in full. In connection
with the Restructuring:
(i) Each $1,000 principal amount of the Company's Old Senior Floating
Rate Notes was exchanged for (a) new Senior Floating Rate Notes due February
1, 2003 (the "New Senior Floating Rate Notes") in an original principal amount
equal to $1,000 plus 100% of the accrued interest under the Old Senior
Floating Rate Notes from and including February 3, 1994, through but not
including the Petition Date, or, at such holder's election, (b) new 11.5%
Senior Fixed Rate Notes due February 1, 2003 (the "New Senior Fixed Rate
Notes") in the same original principal amount, or, at such holder's election,
(c) an amount of New Senior Floating Rate Notes and an amount of New Senior
Fixed Rate Notes equal, in the aggregate, to 100% of such claim;
(ii) Each $1,000 principal amount of the Company's Old Senior Fixed Rate
Notes was exchanged for (a) New Senior Floating Rate Notes in an original
principal amount equal to $1,000 plus 100% of the accrued interest under the
Old Senior Fixed Rate Notes from and including February 2, 1994, through but
not including the Petition Date, or, at such holder's election, (b) New Senior
Fixed Rate Notes in the same original principal amount, or, at such holder's
election, (c) an amount of New Senior Floating Rate Notes and an amount of New
Senior Fixed Rate Notes equal, in the aggregate, to 100% of such claim;
(iii) the Old Subordinated Debentures were exchanged for newly-issued
common stock of the Company representing 85 percent of the common stock
outstanding on the Effective Date;
(iv) Green Equity Investors, L.P. invested $10,000 cash in exchange for
newly-issued common stock of the Company representing 15 percent of the common
stock outstanding on the Effective Date;
(v) the Company entered into a new credit agreement with The CIT
Group/Business Credit, Inc. as Administrative Agent, and the lenders under its
old bank credit agreement; and
9
KASH N' KARRY FOOD STORES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(vi) all of the existing preferred stock, common stock, and options and
warrants to purchase common stock of the Company was extinguished.
2. The condensed financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the fiscal
1994 Form 10-K filed by the Company. The accompanying condensed financial
statements have not been audited by independent accountants in accordance with
generally accepted auditing standards, but in the opinion of management the
condensed financial statements for the period ended January 30, 1994 includes
all adjustments, consisting only of normal recurring adjustments, necessary to
summarize fairly the Company's financial position and results of operations.
The condensed financial statements as of and for the period ended January
29, 1995 reflect the Company's emergence from Chapter 11 and were prepared
according to the principles of fresh start reporting contained in American
Institute of Certified Public Accountants' Statement of Position 90-7
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
("SOP 90-7"). Operations during the period from the Effective Date through
January 1, 1995 had no significant impact on the emergence transactions and as
a result have not been separately identified. As a result of the
implementation of fresh start accounting, the Company's condensed financial
statements are not comparable to the Company's condensed financial statements
of prior periods. Results for the periods ended January 29, 1995 or January
1, 1995 are not necessarily indicative of the results for the full year.
The total reorganization value assigned to the Company's assets was
estimated by calculating projected cash flows before debt service requirements
discounted back to present value using a discount rate of 13.3% (representing
the estimated weighted cost of capital), as well as by analyzing market cash
flow multiples applied to the Company's adjusted 12-month trailing cash flows.
After extensive negotiations between independent investment banking firms
representing the Company and an ad hoc committee of bondholders, the
reorganization value was agreed to by the parties and confirmed by the
Bankruptcy Court. The excess of the reorganization value over the value of
the identifiable assets is reported as "Reorganization Value in Excess of
Amounts Allocable to Identifiable Assets" and is being amortized over twenty
years. Under the principles of fresh start accounting, the Company's total
assets were recorded at this assumed reorganization value, with the
reorganization value allocated to identifiable tangible and intangible assets
on the basis of their estimated fair value. In addition, the Company's
accumulated deficit was eliminated.
The effect of the Restructuring and the implementation of fresh start
accounting on the Company's condensed balance sheet as of January 1, 1995 was
as follows:
10
KASH N' KARRY FOOD STORES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited) Fresh
Start
Pre-Fresh Balance
Start Balance Adjustments Sheet
Sheet January of Fair Value January
1, 1995 Restructuring Adjustment 1, 1995
(A) (B)
------------- ------------- ---------- --------
Cash and cash equivalents $ 9,166 $ (8,177) $ -- $ 989
Accounts receivable 5,762 -- -- 5,762
Inventories 82,011 -- 5,104 87,115
Prepaid expenses and other
current assets 3,088 -- -- 3,088
--------- --------- --------- --------
Total current assets 100,027 (8,177) 5,104 96,954
Property and equipment, net 162,754 -- (17,775) 144,979
Favorable lease interests, net 11,673 -- 18,280 29,953
Deferred financing costs 17,769 (7,456) (6,088) 4,225
Reorganization value in
excess of amount alloc-
able to identifiable
assets -- -- 102,519 102,519
Excess of cost over net
assets acquired 95,560 -- (95,560) --
Other assets 3,790 -- (928) 2,862
--------- --------- --------- --------
Total assets $391,573 $(15,633) $ 5,552 $381,492
========= ========== ========= ========
Current liabilities, excluding
current portion of long-
term debt $ 82,983 $(12,617) $ 6,779 $ 77,145
Long-term debt, including
current obligations 366,231 (119,486) (3,959) 242,786
Other long-term liabilities 6,226 -- 8,840 15,066
Redeemable Preferred Stock 4,650 (4,650) -- --
Stockholders' equity (deficit) (68,517) 121,120 (6,108) 46,495
--------- --------- --------- --------
Total liabilities
and stockholders'
equity $391,573 $(15,633) $ 5,552 $381,492
========= ========== ========= ========
(A) To record the transactions applicable to the Restructuring as outlined
in footnote 1 and eliminate the deficit in accumulated deficit.
(B) To record the adjustments to state assets and liabilities at fair value,
and to record the cumulative effect of adopting SFAS No. 106 as of the
Effective Date.
3. Inventories consist of merchandise held for resale and are stated at the
lower of cost or market; cost is determined using average cost, which
approximates the first-in, first-out (FIFO) method.
11
KASH N' KARRY FOOD STORES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
4. The Company had a policy of classifying capital expenditures to be
refinanced within one year as prepaid expenses and other current assets.
These amounts have been classified as property and equipment at January 29,
1995. At July 31, 1994, prepaid expenses and other current assets included
$9,987 of expenditures for construction in progress expected to be financed
within one year.
5. Long-term debt consists of the following:
January 29, July 31,
1995 1994
----------- --------
New term loan and revolving
credit facilities (A) $ 47,000 $ --
Old bank term and revolving
credit facilities (A) -- 59,629
New Senior Floating
Rate Notes (B) 22,953 --
New Senior Fixed Rate
Notes (C) 121,162 --
Old Senior Floating
Rate Notes (B) -- 85,000
Old Senior Fixed
Rate Notes (C) -- 50,000
Subordinated Debentures -- 105,000
Mortgages payable 33,555 34,368
Capital lease obligations 8,410 13,877
Other 7,206 12,247
--------- ---------
Long-term debt including
current portion 240,286 360,121
Less current portion (12,764) (42,740)
--------- ---------
Long-term debt $227,522 $317,381
========= =========
(A) In connection with the Restructuring, the Company entered into a new
term loan and revolving credit agreement (the "New Credit Agreement") on
December 29, 1994. At January 29, 1995, the Company's New Credit Agreement
provides for borrowings of up to $35,000 under a term loan facility (with
quarterly principal repayments of $1,750 and a $14,000 repayment due when the
facility terminates on December 29, 1997) and a $50,000 revolving credit
facility with a $25,000 sublimit for letters of credit. At January 29, 1995,
the Company had $12,000 in borrowings under the working capital line, and had
$17,300 of letters of credit issued against the revolving credit facility.
Amounts outstanding under the term facility bear interest (11.0% at January
29, 1995) equal to the prime rate (as defined) plus 250 basis points.
Amounts outstanding under the revolving credit facility bear interest (9.50%
at January 29, 1995) equal to the prime rate plus 100 basis points.
12
KASH N' KARRY FOOD STORES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
(B) The New Senior Floating Rate Notes mature on February 1, 2003, and bear
interest (7.31% at January 29, 1995) payable semiegral multiple
thereof, at 100% of the principal amount and unpaid interest, if any, to the
redemption date. Through August 1, 1995, all interest on the New Notes are
redeemable in whole or in part, at the option of the Company, on not less
than 30 nor more than 60 days' prior notice in amounts of $1,000 or an
integral multiple thereof, at 100% of the principal amount and unpaid interest,
if any, to the redemption date. Through August 1, 1995, all interest on the New
Senior Floating Rate Notes may, at the option of the Company, be paid by issuing
in lieu of cash additional New Senior Floating Rate Notes in an aggregate
principal amount equal to the amount of interest due. The Old Senior Floating
Rate Notes bore interest (5.88% at July 31, 1994) payable semiannually, at a
rate equal to six-month LIBOR plus 250 basis points.
(C) The New Senior Fixed Rate Notes mature on February 1, 2003, and bear
interest at 11.5% per annum, payable semiannually. The New Senior Fixed Rate
Notes are redeemable in whole or in part, at the option of the Company, on not
less than 30 nor more than 60 days' prior notice in amounts of $1,000 or an
integral multiple thereof, at 100% of the principal amount and unpaid
interest, if any, to the redemption date. Through February 1, 1996, all
interest on the New Senior Fixed Rate Notes may, at the option of the Company,
be paid by issuing in lieu of cash additional New Senior Fixed Rate Notes in
an aggregate principal amount equal to the amount of interest due. The Old
Senior Fixed Rate Notes bore interest, payable semiannually, at an annual rate
of 12.375%.
6. Reorganization items included in the condensed statements of operations
consist of restructuring costs, adjustments to fair value, professional fees
and other expenses.
7. The Company has a retiree medical plan under which medical coverage is
available to current retirees and those active employees who, on August 1,
1993, had attained age 65 with at least 15 years of service. In accordance
with SOP 90-7, which the Company adopted on the Effective Date of the
Restructuring, the provisions of Financial Accounting Standards Board
Statement 106 "Employers' Accounting for Postretirement Benefits Other Than
Pensions" were also adopted as of that date. The following table sets forth
the projected actuarial present value of unfunded postretirement benefit
obligations for the plan at January 29, 1995:
Accumulated postretirement
benefit obligation:
Retirees $1,915
Fully eligible active
plan participants 85
-------
Accrued postretirement
benefit obligation $2,000
=======
13
KASH N' KARRY FOOD STORES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(In Thousands)
(Unaudited)
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8.0%.
8. During the first quarter of fiscal 1994, the Company recorded a
non-recurring charge of $11,016 which reflects expenses associated with a
program of closing twelve underperforming stores and expensing costs
associated with unsuccessful financing activities.
14
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this amendment to its
Quarterly Report on Form 10-Q for the quarter ended January 29,
1995 to be signed on its behalf by the undersigned thereunto duly
authorized.
KASH N' KARRY FOOD STORES, INC.
Date: May 9, 1995 /s/ Raymond P. Springer
-------------------------------
Raymond P. Springer
Senior Vice President,
Administration
Date: May 9, 1995 /s/ Richard D. Coleman
-------------------------------
Richard D. Coleman
Vice President, Controller
20/lwh/knk.sec/10Q2.95/10Q-A.ASC
15