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 July 29, 1995
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: 10,872,049 shares
outstanding as of September 1, 1995
1 of 15
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 TWENTY-SIX WEEKS ENDED
July 29, July 30, July 29, July 30,
1995 1994 1995 1994
---------- ---------- ---------- ----------
TOTAL REVENUES $ 884,229 $ 835,767 $1,744,257 $1,645,728
COST AND OPERATING EXPENSES:
Cost of sales (including
buying and occupancy
costs) 685,857 642,930 1,348,306 1,274,388
Selling and administrative
expenses 164,780 150,440 329,002 295,552
Unusual item (Note 6) 65,237 65,237
---------- ---------- ---------- ----------
OPERATING (LOSS) INCOME (31,645) 42,397 1,712 75,788
Interest expense 32,994 28,767 66,028 57,791
---------- ---------- ---------- ----------
(LOSS) INCOME BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (64,639) 13,630 (64,316) 17,997
Benefit (provision) for
income taxes 12,935 (6,762) 12,741 (8,873)
---------- ---------- ---------- ----------
(LOSS) INCOME BEFORE EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING
PRINCIPLE (51,704) 6,868 (51,575) 9,124
Extraordinary item (net of
tax benefit) (Note 4) (691) (2,967)
---------- ---------- ---------- ----------
(LOSS) INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (51,704) 6,177 (51,575) 6,157
Cumulative effect of
change in accounting
principle (net of tax
benefit) (Note 5) (5,790)
---------- ---------- ---------- ----------
NET (LOSS) INCOME APPLICABLE
TO COMMON STOCK $ (51,704) $ 6,177 $ (51,575) $ 367
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
PER SHARE DATA:
(Loss) income before
extraordinary item and
cumulative effect of
change in accounting
principle $ (4.65) $ .62 $ (4.64) $ .82
Extraordinary item (.07) (.27)
Cumulative effect of change
in accounting principle (.52)
---------- ---------- ---------- ----------
Net (loss) income $ (4.65) $ .55 $ (4.64) $ .03
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Average number of common
shares outstanding 11,118,230 11,167,258 11,127,148 11,165,057
See Notes to Interim Consolidated Financial Statements.
-2-
THE PENN TRAFFIC COMPANY
CONSOLIDATED BALANCE SHEET
(All dollar amounts in thousands)
Unaudited
July 29, 1995 January 28, 1995
------------- ----------------
ASSETS
CURRENT ASSETS:
Cash and short-term investments $ 44,319 $ 46,519
Accounts and notes receivable
(less allowance for doubtful accounts
of $2,267 and $1,374, respectively) 71,400 81,967
Inventories (Note 3) 392,907 385,968
Prepaid expenses and other current assets 14,886 10,913
---------- -----------
Total Current Assets 523,512 525,367
NONCURRENT ASSETS:
Capital leases - net 123,190 127,748
Property, plant and equipment - net 608,886 600,797
Intangible assets - net 436,732 451,897
Other assets and deferred charges - net 85,398 88,157
---------- -----------
$1,777,718 $1,793,966
---------- -----------
---------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,747 $ 4,118
Current portion of obligations
under capital leases 10,604 9,962
Trade accounts and drafts payable 224,551 209,890
Payroll and other accrued liabilities 83,980 79,434
Accrued interest expense 30,662 30,686
Payroll taxes and other taxes payable 19,592 19,582
Deferred income taxes 27,384 27,384
---------- -----------
Total Current Liabilities 400,520 381,056
NONCURRENT LIABILITIES:
Long-term debt 1,166,351 1,136,302
Obligations under capital leases 125,381 126,894
Deferred income taxes 59,784 73,598
Other noncurrent liabilities 44,038 43,189
---------- -----------
Total Liabilities 1,796,074 1,761,039
---------- -----------
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; 10,871,301
shares and 10,846,701 shares
issued and outstanding, respectively 13,588 13,558
Capital in excess of par value 179,427 179,165
Retained deficit (205,118) (149,681)
Minimum pension liability adjustment (356) (356)
Unearned compensation (5,897) (9,759)
---------- -----------
Total Shareholders' Equity (18,356) 32,927
---------- -----------
$1,777,718 $1,793,966
---------- -----------
---------- -----------
See Notes to Interim Consolidated Financial Statements.
-3-
THE PENN TRAFFIC COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
(All dollar amounts in thousands)
TWENTY-SIX TWENTY-SIX
WEEKS ENDED WEEKS ENDED
July 29, 1995 July 30, 1994
------------- -------------
OPERATING ACTIVITIES:
Net (loss) income $ (51,575) $ 367
Adjustments to reconcile
net (loss) income
to net cash provided by
operating activities:
Cumulative effect of change in
accounting principle 5,790
Depreciation and amortization 37,276 35,894
Amortization of intangibles 8,476 7,350
Write-off of fixed assets 16,416
Write-off of intangible assets 32,809
Deferred tax benefit (13,331)
Other - net (8,923) (4,491)
Net change in assets and liabilities:
Accounts receivable and prepaid expenses 8,309 (7,248)
Inventories (6,939) (399)
Accounts payable and accrued expenses 17,226 (617)
Deferred charges and other assets 964 2,939
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 40,708 39,585
------------- -------------
INVESTING ACTIVITIES:
Capital expenditures (67,326) (40,312)
Proceeds from sale of assets 144 1,634
Other - net (1,010) (415)
------------- -------------
NET CASH (USED IN) INVESTING ACTIVITIES (68,192) (39,093)
------------- -------------
FINANCING ACTIVITIES:
Payments to settle long-term debt (1,822) (60,131)
Borrowings of revolver debt 281,000 229,100
Payment of revolver debt (249,500) (206,500)
Reduction of capital lease obligations (4,591) (3,914)
Payment of debt issuance costs (141) (338)
Other - net 338 128
------------- -------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 25,284 (41,655)
------------- -------------
DECREASE IN CASH AND CASH EQUIVALENTS (2,200) (41,163)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 46,519 82,467
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 44,319 $ 41,304
------------- -------------
------------- -------------
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 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 28, 1995.
Net (loss) income per share of common stock is based on the
average number of shares and equivalents of common stock
outstanding during each period. Fully diluted income (loss) per
share is not presented for each of the periods since conversion
of the Company's shares under option would be anti-dilutive or the
reduction from primary income (loss) per share is less than three
percent.
-5-
NOTE 2 - SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands of dollars)
Second Quarter Twenty-six Weeks
-------------- ----------------
Fiscal 1996
-----------
Operating Income * $ 33,592 $ 66,949
Unusual Item 65,237 65,237
Depreciation and Amortization 22,607 45,752
LIFO Provision* 858 858
Cash Interest Expense 31,922 63,886
* Excludes the effect of the
unusual item.
Fiscal 1995
-----------
Operating Income $ 42,397 $ 75,788
Depreciation and Amortization 21,539 43,245
LIFO Provision 425 450
Cash Interest Expense 27,796 55,809
NOTE 3 - INVENTORIES
If the first-in, first-out (FIFO) method had been used by the Company,
inventories would have been $19,378,000 and $17,145,000 higher than reported at
July 29, 1995 and January 28, 1995, respectively.
NOTE 4 - EXTRAORDINARY ITEM
During the second quarter ended July 30, 1994, the Company had an
extraordinary charge of $0.7 million (net of $0.5 million income tax benefit).
The extraordinary charge for the twenty-six weeks ended July 30, 1994 was $3.0
million (net of $2.1 million income tax benefit). These extraordinary charges
relate to the early retirement of debt.
-6-
NOTE 5 - 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 reduced net
income by $5.8 million (net of $4.1 million income tax benefit) in the fiscal
year ended January 28, 1995.
NOTE 6 - UNUSUAL ITEM
The Company has decided to commence in January 1996 the closing of 11 of
its 15 remaining stand alone general merchandise stores (Harts) in Ohio. This
process is expected to be completed by August 1996. These 11 stores currently
generate approximately $50 million of revenues or about 1.4% of the Company's
annual revenues. The remaining four Harts stores will be converted to the
Company's "Big Bear Plus" format. Accordingly, the Company recorded during
the second quarter ended July 29, 1995, an unusual item of $53.0 million as a
result of this decision. This charge specifically relates to the write-off of
goodwill ($32.8 million), the write-off of fixed assets ($8.4 million) and
store closing costs consisting principally of inventory markdowns ($11.8
million).
The Company expects that this program will generate net cash proceeds
of approximately $15 million by the middle of Fiscal 1997. These funds will
be used for debt retirement.
When the process is completed in July 1996, the Company expects to
realize an approximate annual impact of an increase in operating income of
$2.0 million, a reduction of interest expense of between $1.2 million to $1.5
million, and an increase in net income of $2.0 million.
In addition to the Harts related charges, the unusual item also
includes $12.2 million in connection with the noncash write-off of certain
fixed assets which the Company determined during the second quarter that it
will no longer utilize in its business ($8.0 million), costs incurred in
connection with the implementation of the Company's expense reduction
programs ($2.0 million), and an increase in the Company's closed store
reserve ($2.2 million).
The noncash portion of the unusual item is approximately $59.8 million
and the cash portion is approximately $5.4 million. All costs related to the
unusual item are expected to be incurred by August 1996 with the exception of
certain facility carrying costs (primarily lease payments) for stores to be
closed of approximately $1.9 million. The last scheduled lease payment will
occur in 2001. The accrued expense amount relating to the unusual item was
$14.6 million at July 29, 1995.
-7-
NOTE 7 - INVESTMENT
EQUITY INTEREST IN THE GRAND UNION COMPANY
In July 1989, Penn Traffic through its limited partnership investment in
Grand Acquisition Company, L.P. ("GAC, L.P."), acquired an indirect ownership
interest in approximately 24.3% of the outstanding common stock of
Grand Union Holdings Corporation (formerly named GND Holdings Corporation)
("Holdings") which was the corporate parent of The Grand Union Company
("Grand Union").
The Company accounted for its investment in Grand Union under the equity
method. The investment was recorded originally at a cost of $18,250,000. The
carrying value of the investment was reduced to zero as of February 2, 1991.
On January 25, 1995, Grand Union filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code with the
United States Bankruptcy Court, District of Delaware (the "Bankruptcy Court").
On February 16, 1995, Holdings filed a voluntary Chapter 11 petition in the
Bankruptcy Court. Penn Traffic's equity interest in Holdings became worthless
as a result of these bankruptcy proceedings, and, on March 24, 1995 Penn
Traffic's limited partnership interest in GAC, L.P. was redeemed for nominal
consideration.
-8-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THIRTEEN WEEKS ("SECOND QUARTER FISCAL 1996") AND TWENTY-SIX WEEKS ENDED JULY
29, 1995 COMPARED TO THIRTEEN WEEKS ("SECOND QUARTER FISCAL 1995") AND TWENTY-
SIX WEEKS ENDED JULY 30, 1994
The following table sets forth statement of operations components expressed
as a percentage of total revenues for Second Quarter Fiscal 1996 and Second
Quarter Fiscal 1995 and for the twenty-six weeks ended July 29, 1995 and July
30, 1994, respectively:
Second Quarter Ended Twenty-six Weeks Ended
JULY 29, July 30, JULY 29, July 30,
1995 1994 1995 1994
-------- -------- -------- --------
Total revenues 100.0% 100.0% 100.0% 100.0%
Gross profit (1) 22.4 23.1 22.7 22.6
Selling and administrative
expenses 18.6 18.0 18.9 18.0
Unusual item 7.4 3.7
Operating (loss) income (3.6) 5.1 0.1 4.6
Interest expense 3.7 3.5 3.8 3.5
(Loss) income before
income taxes,
extraordinary item
and cumulative effect of
change in accounting
principle (7.3) 1.6 (3.7) 1.1
Net (loss) income (5.8) 0.7 (3.0) 0.0
<FN>
(1) Total revenues less cost of sales.
-9-
RESULTS OF OPERATIONS (CONTINUED)
Total revenues for Second Quarter Fiscal 1996 increased to $884.2
million from $835.8 million in Second Quarter Fiscal 1995. Total revenues for
the twenty-six week period ended July 29, 1995 increased to $1.74 billion from
$1.65 billion for the twenty-six week period ended July 30, 1994. The increase
in total revenues is the result of the increase in retail supermarket sales
resulting from the acquisition of 45 former Acme stores in January 1995.
Wholesale supermarket sales decreased in Second Quarter Fiscal 1996 to $102.3
million from Second Quarter Fiscal 1995 sales of $111.1 million and decreased to
$203.7 million for the twenty-six weeks ended July 29, 1995 from $220.3 million
for the twenty-six weeks ended July 30, 1994. Same store sales for Second
Quarter Fiscal 1996 declined 0.9%.
In Second Quarter Fiscal 1996, gross profit was $198.4 million compared to
Second Quarter Fiscal 1995 gross profit of $192.8 million, representing 22.4%
and 23.1% of total revenues, respectively. Gross profit as a percentage of
total revenues increased to 22.7% for the twenty-six week period ended July 29,
1995 from 22.6% for the twenty-six weeks ended July 30, 1994. The decrease in
gross profit as a percentage of total revenues for Second Quarter Fiscal 1996
primarily resulted from increased competitive promotional and price initiatives.
Selling and administrative expenses for Second Quarter Fiscal 1996 were
$164.8 million compared with $150.4 million in Second Quarter Fiscal 1995.
Selling and administrative expenses as a percentage of total revenues increased
to 18.6% for Second Quarter Fiscal 1996 from 18.0% in Second Quarter Fiscal
1995. Selling and administrative expenses for the twenty-six week period ended
July 29, 1995 were $329.0 million compared to $295.6 million for the twenty-six
week period ended July 30, 1994. Selling and administrative expenses as a
percentage of total revenues increased to 18.9% for the twenty-six week period
ended July 29, 1995 from 18.0% for the twenty-six week period ended July 30,
1994. The increase in selling and administrative expenses as a percentage of
total revenues for Second Quarter Fiscal 1996 primarily resulted from the
relative increase in retail revenues compared to wholesale revenues, increased
promotional expense and an increase in fixed and semi-variable expenses as a
percentage of total revenues during a period with a decline in same store sales.
Depreciation and amortization of $22.6 million in Second Quarter Fiscal
1996 and $21.5 million in Second Quarter Fiscal 1995 represented 2.6% of total
revenues for both periods. Depreciation and amortization of $45.8 million for
the twenty-six weeks ended July 29, 1995 and $43.2 million for the twenty-six
weeks ended July 30, 1994 represented 2.6% of total revenues in both periods.
-10-
RESULTS OF OPERATIONS (CONTINUED)
During Second Quarter Fiscal 1996, the Company recorded an unusual item
(charge) of $65.2 million. This unusual item yielded a tax benefit of $13.3
million. The components of this unusual item are as follows:
($ millions)
------------
Loss from closure of stand alone
general merchandise business (Harts)
- Write-off of goodwill $32.8
- Write-off of fixed assets 8.4
- Wind-down costs
(principally inventory markdowns) 11.8 $53.0
-----
Obsolete equipment write-off,
cost of expense reduction program
and increase in closed store reserve 12.2
-----
Total $65.2
-----
-----
The Company has decided to commence in January 1996 the closing of 11 of
its 15 remaining stand alone general merchandise stores (Harts) in Ohio. This
process is expected to be completed by August 1996. These 11 stores currently
generate approximately $50 million of revenues or about 1.4% of the Company's
annual revenues. The remaining four Harts stores will be converted to the
Company's "Big Bear Plus" format. Accordingly, the Company recorded during
the second quarter ended July 29, 1995, an unusual item of $53.0 million as
a result of this decision. This charge specifically relates to the write-off
of goodwill ($32.8 million), the write-off of fixed assets ($8.4 million) and
store closing costs consisting principally of inventory markdowns ($11.8
million).
The Company expects that this program will generate net cash proceeds of
approximately $15 million by the middle of Fiscal 1997. These funds will be
used for debt retirement.
When the process is completed in July 1996, the Company expects to
realize an approximate annual impact of an increase in operating income of
$2.0 million, a reduction of interest expense of between $1.2 million to $1.5
million, and an increase in net income of $2.0 million.
In addition to the Harts related charges, the unusual item also
includes $12.2 million in connection with the noncash write-off of certain
fixed assets which the Company determined during the second quarter that it
will no longer utilize in its business ($8.0 million), costs incurred in
connection with the implementation of the Company's expense reduction
programs ($2.0 million), and an increase in the Company's closed store
reserve ($2.2 million).
The noncash portion of the unusual item is approximately $59.8 million
and the cash portion is approximately $5.4 million. All costs related to the
unusual item are expected to be incurred by August 1996 with the exception
of certain facility carrying costs (primarily lease payments) for stores to be
closed of approximately $1.9 million. The last scheduled lease payment will
occur in 2001. The accrued expense amount relating to the unusual item was
$14.6 million at July 29, 1995.
-11-
RESULTS OF OPERATIONS (CONTINUED)
Operating income (excluding the unusual item) for Second Quarter Fiscal
1996 was $33.6 million or 3.8% of total revenues compared to $42.4 million or
5.1% of total revenues in Second Quarter Fiscal 1995. Operating income
(excluding the unusual item) for the twenty-six week period ended July 29, 1995
was $66.9 million or 3.8% of total revenues compared to $75.8 million or 4.6% of
total revenues for the twenty-six weeks ended July 30, 1994.
Interest expense for Second Quarter Fiscal 1996 and Second Quarter Fiscal
1995 was $33.0 million and $28.8 million, respectively. Interest expense for
the twenty-six weeks ended July 29, 1995 and July 30, 1994 was $66.0 million and
$57.8 million, respectively. The increase in interest expense is due to the
higher debt levels outstanding during the first half of Fiscal 1996, which are
primarily the result of the acquisition of 45 stores from American Stores
Company in January 1995.
Loss before income taxes and extraordinary item was $64.6 million for
Second Quarter Fiscal 1996, compared to income of $13.6 million for Second
Quarter Fiscal 1995. Loss before income taxes, extraordinary item, and the
cumulative effect of a change in accounting principle for the twenty-six weeks
ended July 29, 1995 was $64.3 million compared to income of $18.0 million for
the twenty-six weeks ended July 30, 1994. The reason for the decline is the
decrease in operating income (excluding the unusual item), the unusual item and
an increase in interest expense.
The income tax benefit was $12.9 million for Second Quarter Fiscal 1996
compared to a provision of $6.8 million in Second Quarter Fiscal 1995. The
income tax benefit was $12.7 million for the twenty-six week period ended July
29, 1995 compared to a provision of $8.9 million in the prior year. Excluding
the unusual item, the tax provision was $0.4 million for Second Quarter Fiscal
1996 and $0.6 million for the twenty-six week period ended July 29, 1995. 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.
Excluding the impact of the unusual item, net income was $0.2 million in
Second Quarter Fiscal 1996 compared to $6.9 million (before extraordinary item)
in Second Quarter Fiscal 1995. Excluding the impact of the unusual item, net
income was $0.3 million for the twenty-six weeks ended July 29, 1995 compared to
$9.1 million (before extraordinary item and the cumulative effect of a change in
accounting principle) for the twenty-six weeks ended July 30, 1994.
The $0.7 million extraordinary item (net of $0.5 million income tax
benefit) for Second Quarter Fiscal 1995, and the $3.0 million extraordinary item
(net of $2.1 million income tax benefit) for the twenty-six week period ended
July 30, 1994 related 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 5).
-12-
LIQUIDITY AND CAPITAL RESOURCES
During Second Quarter Fiscal 1996, operating income (before unusual item)
decreased to $33.6 million from $42.4 million for Second Quarter Fiscal 1995.
Interest expense for Second Quarter Fiscal 1996 was $33.0 million as compared to
$28.8 million during Second Quarter Fiscal 1995. Income before unusual item,
extraordinary item and the cumulative effect of a change in accounting principle
for Second Quarter Fiscal 1996 was $0.2 million as compared to $6.9 million for
Second Quarter Fiscal 1995.
Payments of principal and interest on the Company's $1.17 billion of 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 $2.3 million, $2.7 million and $2.2 million are
due during the remainder of Fiscal 1996, Fiscal 1997 and Fiscal 1998,
respectively.
The Company has a revolving credit facility (the "Revolving Credit
Facility") which provides for borrowings of up to $250 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 $112.0
million at July 29, 1995.
During Second Quarter Fiscal 1996, 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.
The Company has entered into four interest rate swap agreements, each of
which expires within the next three 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 Second Quarter Fiscal 1996 are reported in the
Consolidated Statement of Cash Flows. For the twenty-six week period ended July
29, 1995, the Company experienced a positive cash flow from operating activities
of $40.7 million.
-13-
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Working capital decreased by $21.4 million from January 28, 1995 to July
29, 1995.
The Company is in compliance with all terms and restrictive covenants of
its long-term debt agreements.
The Company expects to spend approximately $140 to $145 million on capital
expenditures, including capital leases, during Fiscal 1996. 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, remodeled
store facilities and a new distribution center in Scranton, Pennsylvania. In
Second Quarter Fiscal 1996, the Company acquired two new stores, opened one
replacement store and completed two remodels. In addition, six new or
replacement stores are under construction and seven remodels are in process.
PART II. OTHER INFORMATION
All items which are not applicable or to which the answer is negative have
been omitted from this report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description
-------------- -----------
10.9K Amendment No. 10, dated as of
August 31, 1995, to the Loan and
Security Agreement.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fiscal quarter ended July
29, 1995.
-14-
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
September 12, 1995 /s/- John T. Dixon
---------------------------
By: John T. Dixon
(President and Chief
Executive Officer, and
Director)
September 12, 1995 /s/- Eugene R. Sunderhaft
---------------------------
By: Eugene R. Sunderhaft
(Senior Vice President and
Secretary, Principal Financial
Officer and Principal Accounting
Officer)
-15-