UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended October 29, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _________ to _________
Commission file number 1-9930
THE PENN TRAFFIC COMPANY
(Exact name of registrant as specified in its charter)
Delaware 25-0716800
(State of incorporation) (IRS Employer Identification No.)
1200 State Fair Blvd., Syracuse, NY 13209
(Address of principal executive offices) (Zip Code)
(315) 453-7284
(Telephone number)
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 ____.
Common stock, par value $1.25 per share: 10,846,701 shares
outstanding as of December 1, 1994
1 of 14
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
THE PENN TRAFFIC COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
(All dollar amounts in thousands,
except per share data) THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
OCTOBER 29, OCTOBER 30, OCTOBER 29, OCTOBER 30,
1994 1993 1994 1993
----------- ----------- ----------- -----------
Total Revenues $ 828,064 $ 783,253 $ 2,473,792 $ 2,326,289
Cost and Operating Expenses:
Cost of sales (including buying and
occupancy costs) 639,939 610,245 1,914,327 1,812,896
Selling and administrative
expenses 151,854 140,233 447,406 412,182
Unusual item (Note 3) 6,400
----------- ----------- ----------- -----------
Operating Income 36,271 32,775 112,059 94,811
Interest expense 28,626 28,516 86,417 88,172
----------- ----------- ----------- -----------
Income Before Income Taxes, Extraordinary
Item and Cumulative Effect of Change
in Accounting Principle 7,645 4,259 25,642 6,639
Provision for income taxes 2,868 4,762 11,741 6,089
----------- ----------- ----------- -----------
Income (Loss) Before Extraordinary
Item and Cumulative Effect of Change
in Accounting Principle 4,777 (503) 13,901 550
Extraordinary item (net of tax benefit)
(Note 5) (58) (1,091) (3,025) (23,170)
----------- ----------- ----------- -----------
Income (Loss) Before Cumulative Effect
of Change in Accounting Principle 4,719 (1,594) 10,876 (22,620)
Cumulative effect of change in
accounting principle (net of tax
benefit) (Note 6) (5,790)
----------- ----------- ----------- -----------
Net Income (Loss) 4,719 (1,594) 5,086 (22,620)
Preferred dividends (159)
----------- ----------- ----------- -----------
Net Income (Loss) Applicable to
Common Stock $ 4,719 $ (1,594) $ 5,086 $ (22,779)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Per Share Data:
Income (loss) before extraordinary item
and cumulative effect of change in
accounting principle (after preferred
dividends) $ .43 $ (.04) $ 1.25 $ .04
Extraordinary item (.01) (.10) (.27) (2.24)
Cumulative effect of change in
accounting principle (.52)
----------- ----------- ----------- -----------
Net income (loss) $ .42 $ (.14) $ .46 $ (2.20)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Average Number of Common Shares
Outstanding 11,178,910 11,177,993 11,169,814 10,363,887
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
See Notes to Interim Consolidated Financial Statements.
-2-
THE PENN TRAFFIC COMPANY
CONSOLIDATED BALANCE SHEET
(All dollar amounts in thousands) UNAUDITED
OCTOBER 29, 1994 JANUARY 29, 1994
ASSETS ---------------- ----------------
Current Assets:
Cash and short-term investments $ 56,077 $ 82,467
Accounts and notes receivable
(less allowance for doubtful accounts
of $1,418 and $740, respectively) 72,650 60,020
Inventories (Note 4) 386,191 348,455
Prepaid expenses and other current assets 10,064 9,939
---------- ----------
Total Current Assets 524,982 500,881
Noncurrent Assets:
Capital leases - net 128,144 134,101
Property, plant and equipment - net 559,165 535,728
Intangible assets - net 370,796 377,450
Other assets and deferred charges - net 87,387 84,741
---------- ----------
Total Assets $1,670,474 $1,632,901
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 4,071 $ 4,208
Current portion of obligations
under capital leases 9,006 8,773
Trade accounts and drafts payable 210,806 183,967
Payroll and other accrued liabilities 68,204 74,028
Accrued interest expense 14,060 28,690
Payroll taxes and other taxes payable 23,420 18,901
Deferred income taxes 20,570 24,669
---------- ----------
Total Current Liabilities 350,137 343,236
Noncurrent Liabilities:
Long-term debt 1,061,190 1,021,896
Obligations under capital leases 127,426 131,148
Deferred income taxes 71,298 72,411
Other noncurrent liabilities 40,227 49,228
---------- ----------
Total Liabilities 1,650,278 1,617,919
---------- ----------
Shareholders' Equity:
Preferred Stock - authorized 10,000,000
shares at $1.00 par value, none issued
Common Stock - authorized 30,000,000
shares at $1.25 par value; 10,846,701
shares and 10,840,151 shares issued and
outstanding, respectively 13,560 13,550
Capital in excess of par value 179,205 179,087
Retained deficit (156,794) (162,924)
Minimum pension liability adjustment (4,963) (4,963)
Unearned compensation (10,812) (9,768)
---------- ----------
Total Shareholders' Equity 20,196 14,982
---------- ----------
Total Liabilities and Shareholders' Equity $1,670,474 $1,632,901
---------- ----------
---------- ----------
See Notes to Interim Consolidated Financial Statements.
-3-
THE PENN TRAFFIC COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
(All dollar amounts in thousands) THIRTY-NINE THIRTY-NINE
WEEKS ENDED WEEKS ENDED
OCTOBER 29, 1994 OCTOBER 30, 1993
---------------- ----------------
Operating Activities:
Net income (loss) $ 5,086 $ (22,620)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Cumulative effect of change in
accounting principle 5,790
Depreciation and amortization 54,133 53,952
Amortization of intangibles 10,999 7,179
Other - net (9,071) 7,525
Net change in assets and liabilities:
Accounts receivable and prepaid expenses (13,449) (6,979)
Inventories (37,736) (78,196)
Accounts payable and accrued expenses (5,468) (3,529)
Deferred charges and other assets 3,233 3,873
---------- ----------
Net Cash Provided By (Used In)
Operating Activities 13,517 (38,795)
---------- ----------
Investing Activities:
Capital expenditures (71,342) (99,437)
Proceeds from sale of assets 1,832 2,312
Purchase of Insalaco Markets (45,539)
Other - net (800) (336)
---------- ----------
Net Cash (Used In) Investing Activities (70,310) (143,000)
---------- ----------
Financing Activities:
Net proceeds from equity offering 74,800
Purchase of preferred stock - Big Bear (9,424)
Purchase of common stock - Big Bear (1,390)
Increase in long-term debt 100,000 415,500
Payments to settle long-term debt (60,843) (390,064)
Increase in revolver debt 381,400 443,336
Payments to settle revolver debt (381,400) (331,277)
Reduction of capital lease obligations (6,400) (5,781)
Payment of debt issuance costs (2,482) (14,698)
Preferred dividends and other - net 128 (159)
---------- ----------
Net Cash Provided By Financing Activities 30,403 180,843
---------- ----------
(Decrease) in Cash and Cash Equivalents (26,390) (952)
Cash and Cash Equivalents at Beginning of Period 82,467 54,840
---------- ----------
Cash and Cash Equivalents at End of Period $ 56,077 $ 53,888
---------- ----------
---------- ----------
See Notes to Interim Consolidated Financial Statements.
-4-
THE PENN TRAFFIC COMPANY
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
The results of operations for the interim periods are not necessarily an
indication of results to be expected for the year. In the opinion of
management, all adjustments necessary for a fair presentation of the results are
included for the interim periods, and all of such adjustments are normal and
recurring. These unaudited interim financial statements should be read in
conjunction with the consolidated financial statements and related notes
contained in the Annual Report on Form 10-K for the fiscal year ended January
29, 1994 ("Fiscal 1994").
Net income (loss) per share of common stock is based on the average number
of shares of common stock outstanding during each period, after giving effect to
preferred stock dividends. Fully diluted income per share is not presented for
each of the periods since the reduction from primary income per share is less
than three percent.
During the first quarter of the fiscal year ending January 28, 1995
("Fiscal 1995"), the Company adopted Statement of Financial Accounting Standards
No. 112, "Employers' Accounting for Postemployment Benefits" (Note 7).
- 5 -
NOTE 2 - SUPPLEMENTAL FINANCIAL INFORMATION
(in thousands of dollars)
Third Quarter Thirty-nine Weeks
------------- -----------------
Fiscal 1995
Operating Income $ 36,271 $ 112,059
Depreciation and Amortization 21,887 65,132
LIFO Adjustment 450
Cash Interest Expense 27,554 83,363
Fiscal 1994
Operating Income $ 32,775 $ 94,811
Unusual Item 6,400
Depreciation and Amortization 20,894 61,131
LIFO Adjustment 100 1,090
Cash Interest Expense 27,757 85,415
NOTE 3 - UNUSUAL ITEM
During the second quarter of Fiscal 1994, the Company recorded certain
expenses totalling $6.4 million classified as an unusual item. This unusual
item is comprised of $4.0 million related to a voluntary employee separation
program at the Company's P&C division and $2.4 million related to the
realignment of certain operations.
NOTE 4 - INVENTORIES
If the first-in, first-out (FIFO) method had been used by the Company,
inventories would have been $14,803,000 and $14,353,000 higher than reported at
October 29, 1994 and January 29, 1994, respectively.
NOTE 5 - EXTRAORDINARY ITEM
During the third quarter of Fiscal 1995 and the third quarter of Fiscal
1994, the Company had extraordinary charges of $0.1 million and $1.1 million
(net of $0.7 million income tax benefit), respectively. During the thirty-nine
week periods ended October 29, 1994 and October 30, 1993, the Company had
extraordinary charges of $3.0 million (net of $2.1 million income tax benefit)
and $23.2 million (net of $15.1 million income tax benefit), respectively. All
of these extraordinary charges related to the early retirement of debt.
- 6 -
NOTE 6 - CHANGE IN ACCOUNTING PRINCIPLE
Effective January 30, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("SFAS 112"). SFAS 112 requires employers to recognize the obligation
to provide postemployment benefits on an accrual basis if certain conditions are
met. The Company's postemployment benefits covered by SFAS 112 are primarily
disability related claims covering indemnity and medical payments. The
obligation for these claims is measured using actuarial techniques and
assumptions including appropriate discount rates. The cumulative effect of the
change in accounting principle determined as of January 30, 1994 was recorded in
the first quarter of Fiscal 1995, reducing net income by $5.8 million (net of
$4.1 million income tax benefit).
NOTE 7 - ACQUISITION AND DEBT OFFERING
In September 1994, the Company reached an agreement with American Stores
Company to acquire 45 supermarkets currently operating under the Acme trade
name. Forty-one of these stores are located in north central and northeastern
Pennsylvania and four are located in south central New York State. The
purchase price for the 45 stores is approximately $75 million plus inventory
(estimated to be approximately $19 million). The Company is currently awaiting
regulatory approval of the acquisition and expects to finalize the transaction
by the end of the current fiscal year. In October 1994, the Company issued
$100,000,000 of 10.65% Senior Notes due November 1, 2004 (the "10.65% Senior
Notes") in an underwritten public offering. Proceeds of the issuance of the
10.65% Senior Notes will be used to fund the purchase price for the acquisition.
Pending completion of the acquisition, the net proceeds of the issuance of the
10.65% Senior Notes have been used to repay indebtedness outstanding under the
Company's revolving credit facility and invested in short-term securities.
NOTE 8 - INVESTMENT
EQUITY INTEREST IN THE GRAND UNION COMPANY
Penn Traffic holds an indirect ownership interest representing
approximately 17.8% of the common stock of Grand Union Holdings Corporation
("GU Holdings"), the indirect corporate parent of The Grand Union Company
("Grand Union"), on a fully diluted basis. Penn Traffic's ownership interest
in GU Holdings was acquired in July 1989 (Fiscal 1990) and is held through GAC
Holdings, whose other investors include Miller Tabak Hirsch + Co. ("MTH") and
individuals affiliated with MTH, certain management employees of Penn Traffic
and other investors.
Penn Traffic accounts for its investment in Grand Union under the equity
method. The investment was recorded initially at a cost of $18,250,000. The
carrying value of the investment was totally written off as of February 2, 1991.
On November 29, 1994, Grand Union announced that it expects to propose a
capital restructuring early in calendar year 1995. Penn Traffic has certain
ongoing relationships with Grand Union (see Note 10 to Penn Traffic's
consolidated financial statements for the fiscal year ended January 29, 1994).
Penn Traffic does not expect that the proposed capital restructuring of Grand
Union will have any material impact on Penn Traffic.
- 7 -
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS ("THIRD QUARTER FISCAL 1995") AND THIRTY-NINE WEEKS ENDED OCTOBER
29, 1994 COMPARED TO THIRTEEN WEEKS ("THIRD QUARTER FISCAL 1994") AND THIRTY-
NINE WEEKS ENDED OCTOBER 30, 1993
Income before cumulative effect of change in accounting principle was $4.7
million for Third Quarter Fiscal 1995 and $10.9 million for the thirty-nine
weeks ended October 29, 1994, compared to a loss of $1.6 million for Third
Quarter Fiscal 1994 and a loss of $22.6 million for the thirty-nine weeks ended
October 30, 1993. The improvement in Third Quarter Fiscal 1995 was primarily
due to a $3.5 million increase in operating income combined with a $1.0 million
decrease in extraordinary charges related to debt retirement and a $1.9 million
decrease in the provision for income taxes. The improvement for the thirty-nine
week period was primarily due to a $17.2 million increase in operating income
combined with a $20.1 million decrease in extraordinary charges related to debt
retirement, partially offset by a $5.7 million increase in the provision for
income taxes.
The following table sets forth statement of operations components expressed
as a percentage of total revenues for Third Quarter Fiscal 1995 and Third
Quarter Fiscal 1994 and for the thirty-nine weeks ended October 29, 1994 and
October 30, 1993, respectively:
Third Quarter Ended Thirty-nine Weeks Ended
OCTOBER 29, October 30, OCTOBER 29, October 30,
1994 1993 1994 1993
--------- --------- --------- ---------
Total revenues 100.0% 100.0% 100.0% 100.0%
Gross profit (1) 22.7 22.1 22.6 22.1
Selling and
administrative
expenses 18.3 17.9 18.1 17.7
Unusual item .3
Operating income 4.4 4.2 4.5 4.1
Interest expense 3.5 3.7 3.5 3.8
Income before
income taxes,
extraordinary item
and cumulative effect
of change in accounting
principle .9 .5 1.0 .3
Net income (loss) .6 (.2) .2 (1.0)
<FN>
(1) Total revenues less cost of goods sold.
- 8 -
RESULTS OF OPERATIONS (CONTINUED)
Total revenues for Third Quarter Fiscal 1995 increased to $828.1 million
from $783.3 million in Third Quarter Fiscal 1994. Total revenues for the
thirty-nine week period ended October 29, 1994 increased to $2.47 billion from
$2.33 billion for the thirty-nine week period ended October 30, 1993. Sales
from retail supermarkets existing in both periods, "same store sales," increased
1.7% in Third Quarter Fiscal 1995, and 1.4% for the thirty-nine weeks ended
October 29, 1994. The increase in total revenues is primarily the result of the
increase in retail supermarket sales resulting from the acquisition of the
Insalaco stores in September 1993, the increase in same store sales, and
revenues from new and enlarged stores resulting from the Company's capital
expenditure program. Wholesale supermarket sales decreased in Third Quarter
Fiscal 1995 to $109.0 million from Third Quarter Fiscal 1994 sales of $114.2
million and decreased to $329.2 million for the thirty-nine weeks ended October
29, 1994 from $372.9 million for the thirty-nine weeks ended October 30, 1993.
In Third Quarter Fiscal 1995, gross profit as a percentage of total
revenues increased to 22.7% from 22.1% for Third Quarter Fiscal 1994. Gross
profit as a percentage of total revenues increased to 22.6% for the thirty-nine
week period ended October 29, 1994 from 22.1% for the thirty-nine weeks ended
October 30, 1993. The increase in gross profit as a percentage of total
revenues primarily resulted from a combination of reduced product procurement
costs and the relative increase in retail revenues compared to wholesale
revenues.
Selling and administrative expenses as a percentage of total revenues
increased to 18.3% for Third Quarter Fiscal 1995 from 17.9% in Third Quarter
Fiscal 1994. Selling and administrative expenses as a percentage of total
revenues increased to 18.1% for the thirty-nine week period ended October 29,
1994 from 17.7% for the thirty-nine week period ended October 30, 1993. The
increase in selling and administrative expenses as a percentage of total
revenues primarily resulted from the relative increase in retail revenues
compared to wholesale revenues and an increase in fixed and semi-variable
expenses as a percentage of total revenues during a period without food price
inflation and continued consumer preferences towards lower-priced products.
Depreciation and amortization of $21.9 million in Third Quarter Fiscal 1995
and $20.9 million in Third Quarter Fiscal 1994 represented 2.6% and 2.7% of
total revenues, respectively. Depreciation and amortization of $65.1 million
for the thirty-nine weeks ended October 29, 1994 and $61.1 million for the
thirty-nine weeks ended October 30, 1993, represented 2.6% of total revenues in
both periods.
Operating income for Third Quarter Fiscal 1995 was $36.3 million or 4.4% of
total revenues compared to $32.8 million or 4.2% of total revenues in Third
Quarter Fiscal 1994. Operating income for the thirty-nine week period ended
October 29, 1994 was $112.1 million or 4.5% of total revenues compared to $94.8
million or 4.1% of total revenues for the thirty-nine weeks ended October 30,
1993. Operating income excluding the effect of the unusual item for the thirty-
nine week period ended October 30, 1993 was $101.2 million or 4.4% of total
revenues. Operating income increased primarily as a result of an increase in
gross profit partially offset by an increase in selling and administrative
expenses.
- 9 -
RESULTS OF OPERATIONS (CONTINUED)
Interest expense for Third Quarter Fiscal 1995 and Third Quarter Fiscal
1994 was $28.6 million and $28.5 million, respectively. Interest expense for
the thirty-nine weeks ended October 29, 1994 and October 30, 1993 was $86.4
million and $88.2 million, respectively.
Income before income taxes, extraordinary item, and the cumulative effect
of a change in accounting principle was $7.6 million for Third Quarter Fiscal
1995, compared to $4.3 million for Third Quarter Fiscal 1994. Income before
income taxes, extraordinary item, and the cumulative effect of a change in
accounting principle for the thirty-nine weeks ended October 29, 1994 was $25.6
million compared to $6.6 million for the thirty-nine weeks ended October 30,
1993. Results for the thirty-nine week period ended October 30, 1993 were
significantly impacted by the $6.4 million unusual item (Note 3).
The income tax provision was $2.9 million for Third Quarter Fiscal 1995
compared to $4.8 million in Third Quarter Fiscal 1994. The income tax provision
was $11.7 million for the thirty-nine week period ended October 29, 1994
compared to $6.1 million in the prior year. The Third Quarter Fiscal 1995 tax
provision includes a reduction of income tax expense of $1.0 million, Third
Quarter Fiscal 1994 tax provision includes a $2.4 million charge to income tax
expense. These adjustments are the result of statutory state and federal tax
rate changes, respectively, and have been recorded in accordance with the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." In addition to these adjustments, the effective tax rates
vary from the statutory rates due to differences between income for financial
reporting and tax reporting purposes, primarily related to goodwill amortization
resulting from prior acquisitions.
The $0.1 million extraordinary item and $1.1 million (net of $0.7 million
income tax benefit) for Third Quarter Fiscal 1995 and Third Quarter Fiscal 1994,
respectively, and the extraordinary items of $3.0 million (net of $2.1 million
income tax benefit) and $23.2 million (net of $15.1 million income tax benefit)
for the thirty-nine week period ended October 29, 1994 and the thirty-nine week
period ended October 30, 1993, respectively, all relate to the early retirement
of debt.
The Company adopted SFAS 112 in First Quarter Fiscal 1995. The cumulative
effect of this change in accounting principle was a charge of $5.8 million (net
of $4.1 million income tax benefit) (Note 6).
- 10 -
LIQUIDITY AND CAPITAL RESOURCES
During Third Quarter Fiscal 1995, operating income increased to $36.3
million from $32.8 million for Third Quarter Fiscal 1994. Interest expense for
Third Quarter Fiscal 1995 was $28.6 million as compared to $28.5 million during
Third Quarter Fiscal 1994. Income before extraordinary item and the cumulative
effect of a change in accounting principle for Third Quarter Fiscal 1995 was
$4.8 million as compared to a loss of $0.5 million for Third Quarter Fiscal
1994.
Payments of principal and interest on the Company's $1,065.3 million long-
term debt (excluding capital leases) will materially restrict Company funds
available to finance capital expenditures and working capital. Principal
payments of long-term debt of $1.6 million, $4.1 million and $2.7 million are
due during the remainder of Fiscal 1995, Fiscal 1996 and Fiscal 1997,
respectively.
The Company has a revolving credit facility (the "Revolving Credit
Facility") which provides for borrowings of up to $225 million, subject to a
borrowing base limitation measured by eligible inventory and accounts receivable
of the Company. The Revolving Credit Facility matures in April 2000 and is
secured by a pledge of the Company's inventory, accounts receivable and related
assets. Total availability under the Revolving Credit Facility was $194.6
million at October 29, 1994. Effective August 24, 1994, the Revolving Credit
Facility was amended to provide for certain interest rate reductions on
borrowings made thereunder. Pursuant to the terms of the amendment, based on
the interest coverage ratio which the Company has attained, the interest rate on
borrowings as to which the Company elects a LIBOR-based rate option is reduced
from LIBOR plus 2.25% to LIBOR plus 1.75%, and the interest rate on borrowings
as to which the Company elects a prime-based rate option is reduced from prime
plus .75% to prime plus .50%.
In September 1994, the Company reached an agreement with American Stores
Company to acquire 45 supermarkets currently operating under the Acme trade
name. Forty-one of these stores are located in north central and northeastern
Pennsylvania and four are located in south central New York State. The purchase
price for the 45 stores is approximately $75 million plus inventory (estimated
to be approximately $19 million). The Company is currently awaiting regulatory
approval of the acquisition and expects to finalize the transaction by the end
of the current fiscal year. In October 1994, the Company issued $100 million of
10.65% Senior Notes due November 1, 2004 (the "10.65% Senior Notes") in an
underwritten public offering. Proceeds of the issuance of the 10.65% Senior
Notes will be used to fund the purchase of 45 supermarkets currently operating
under the Acme trade name described above. Pending completion of the
acquisition, the net proceeds of the issuance of the 10.65% Senior Notes have
been used to repay indebtedness outstanding under the Revolving Credit Facility
and invested in short-term securities.
During Third Quarter Fiscal 1995, the Company's internally generated funds
from operations and amounts available under the Revolving Credit Facility
provided sufficient liquidity to meet the Company's operating, capital
expenditure and debt service needs.
- 11 -
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
During the thirty-nine week period ended October 29, 1994, the Company
redeemed or repurchased $52.4 million of 13 3/4% Senior Subordinated Notes due
1999 and $5.8 million of 11 1/2% Senior Notes due 2001.
The Company has entered into four interest rate swap agreements, each of
which expires within the next four years, that effectively convert $155 million
of its fixed rate borrowings into variable rate obligations. Under the terms of
these agreements, the Company makes payments at variable rates which are based
on LIBOR and receives payments at fixed interest rates. The net amount paid or
received is included in interest expense.
Cash flows to meet the Company's requirements for operating, investing and
financing activities in Third Quarter Fiscal 1995 are reported in the
Consolidated Statement of Cash Flows. For the thirty-nine week period ended
October 29, 1994, the Company experienced a positive cash flow from operating
activities of $13.5 million.
Working capital increased by $17.2 million from January 29, 1994 to October
29, 1994.
The Company is in compliance with all terms and restrictive covenants of
its long-term debt agreements. The Company's debt agreements provide
restrictive covenants on the payment of dividends to its shareholders. As of
October 29, 1994, no dividend payments to its shareholders could have been made
under the most restrictive of these covenants.
The Company expects to spend approximately $130 million on capital
expenditures, including capital leases, during Fiscal 1995. The Company expects
to finance such capital expenditures through internally generated cash flow,
borrowings under the Revolving Credit Facility and new capital leases. Capital
expenditures will be principally for new stores, replacement stores and
remodels. During Third Quarter Fiscal 1995, three new stores were opened and
three remodels were completed. Additionally, as of October 29, 1994, one new
store and four replacement stores were under construction and nine remodels were
in process. The majority of these projects will be completed by the end of
Fiscal 1995.
- 12 -
PART II. OTHER INFORMATION
All items which are not applicable or to which the answer is negative have
been omitted from this report.
ITEM 5. OTHER INFORMATION
On December 12, 1994, the Company announced that Claude J. Incaudo
will retire as President and Chief Executive Officer of the Company at the end
of the Company's current fiscal year and that the Board of Directors had elected
John T. Dixon, currently President of the Company's P&C Foods division, to
succeed Mr. Incaudo. Mr. Dixon has also been elected to the Board of Directors
of the Company. Mr. Incaudo will continue as a director of the Company and also
will serve as consultant to the Company during the two-year period following his
retirement.
The Company also announced the appointment of Roy Flood, currently
Executive Vice President - Merchandising of the Company's Big Bear Stores
division, to succeed Mr. Dixon as President of the Company's P&C Foods division
and as Senior Vice President of the Company. In addition, Raymond J. Heath,
currently President of the Riverside Division; John E. Josephson, currently
President of the Big Bear division; and Eugene R. Sunderhaft, currently Vice
President - Finance and Chief Financial Officer, have been appointed Senior Vice
Presidents of the Company, effective January 29, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description
-------------- -----------
10.9I Consent and Amendment, dated as of
September 29, 1994, to the Loan and
Security Agreement among The Penn
Traffic Company, Dairy Deli, Big M
Supermarkets, Inc., Penny Curtiss
Baking Company, Inc., the lenders
party thereto and NatWest USA Credit
Corp., as Agent.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
On October 13, 1994, the Company filed a report on Form 8-K relating
to the pending acquisition of 45 stores owned by American Stores
Company.
- 13 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE PENN TRAFFIC COMPANY
December 12, 1994 /s/- Claude J. Incaudo
---------------------------
By: Claude J. Incaudo
(President and Chief
Executive Officer -
Director)
December 12, 1994 /s/- Eugene R. Sunderhaft
---------------------------
By: Eugene R. Sunderhaft
(Vice President,
Secretary and Treasurer -
Chief Financial Officer)
- 14 -