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 28, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
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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: 10,839,349 shares
outstanding as of December 1, 1995
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 28, OCTOBER 29, OCTOBER 28, OCTOBER 29,
1995 1994 1995 1994
---------- ---------- ---------- ----------
TOTAL REVENUES $ 844,619 $ 828,064 $2,588,876 $2,473,792
COST AND OPERATING EXPENSES:
Cost of sales (including
buying and occupancy
costs) 651,972 639,939 2,000,278 1,914,327
Selling and administrative
expenses 163,010 151,854 492,012 447,406
Unusual item (Note 6) 65,237
---------- ---------- ---------- ----------
OPERATING INCOME 29,637 36,271 31,349 112,059
Interest expense 33,406 28,626 99,434 86,417
---------- ---------- ---------- ----------
(LOSS) INCOME BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (3,769) 7,645 (68,085) 25,642
Benefit (provision) for
income taxes 3,419 (2,868) 16,160 (11,741)
---------- ---------- ---------- ----------
(LOSS) INCOME BEFORE EXTRAORDINARY
ITEM AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING
PRINCIPLE (350) 4,777 (51,925) 13,901
Extraordinary item (net of
tax benefit) (Note 4) (58) (3,025)
---------- ---------- ---------- ----------
(LOSS) INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (350) 4,719 (51,925) 10,876
Cumulative effect of
change in accounting
principle (net of tax
benefit) (Note 5) (5,790)
---------- ---------- ---------- ----------
NET (LOSS) INCOME APPLICABLE
TO COMMON STOCK $ (350) $ 4,719 $ (51,925) $ 5,086
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
PER SHARE DATA:
(Loss) income before
extraordinary item and
cumulative effect of
change in accounting
principle $ (.03) $ .43 $ (4.78) $ 1.25
Extraordinary item (.01) (.27)
Cumulative effect of change
in accounting principle (.52)
---------- ---------- ---------- ----------
Net (loss) income $ (.03) $ .42 $ (4.78) $ .46
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Average number of common
shares outstanding 10,867,977 11,178,910 10,861,394 11,169,814
See Notes to Interim Consolidated Financial Statements.
- 2 -
THE PENN TRAFFIC COMPANY
CONSOLIDATED BALANCE SHEET
(All dollar amounts in thousands)
UNAUDITED
OCTOBER 28, 1995 JANUARY 28, 1995
---------------- ----------------
ASSETS
CURRENT ASSETS:
Cash and short-term investments $ 41,318 $ 46,519
Accounts and notes receivable
(less allowance for doubtful accounts
of $2,410 and $1,374, respectively) 76,069 81,967
Inventories (Note 3) 389,791 385,968
Prepaid expenses and other current assets 15,539 10,913
---------- ----------
Total Current Assets 522,717 525,367
NONCURRENT ASSETS:
Capital leases - net 122,410 127,748
Property, plant and equipment - net 639,848 600,797
Intangible assets - net 431,629 451,897
Other assets and deferred charges - net 84,457 88,157
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$1,801,061 $1,793,966
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,855 $ 4,118
Current portion of obligations
under capital leases 10,783 9,962
Trade accounts and drafts payable 222,056 209,890
Payroll and other accrued liabilities 83,533 79,434
Accrued interest expense 19,157 30,686
Payroll taxes and other taxes payable 12,501 19,582
Deferred income taxes 27,384 27,384
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Total Current Liabilities 379,269 381,056
NONCURRENT LIABILITIES:
Long-term debt 1,214,903 1,136,302
Obligations under capital leases 122,952 126,894
Deferred income taxes 58,292 73,598
Other noncurrent liabilities 44,771 43,189
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Total Liabilities 1,820,187 1,761,039
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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; 10,872,049
shares and 10,846,701 shares
issued, respectively 13,589 13,558
Capital in excess of par value 179,436 179,165
Retained deficit (208,404) (149,681)
Minimum pension liability adjustment (356) (356)
Unearned compensation (2,917) (9,759)
Treasury stock, at cost (474)
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Total Shareholders' Equity (19,126) 32,927
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$1,801,061 $1,793,966
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---------- ----------
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 28, 1995 OCTOBER 29, 1994
---------------- ----------------
OPERATING ACTIVITIES:
Net (loss) income $ (51,925) $ 5,086
Adjustments to reconcile
net (loss) income
to net cash provided by (used in)
operating activities:
Cumulative effect of change in
accounting principle 5,790
Depreciation and amortization 55,610 54,133
Amortization of intangibles 12,489 10,999
Write-off of fixed assets 16,416
Write-off of intangible assets 32,809
Deferred tax benefit (13,313)
Other - net (14,148) (9,071)
Net change in assets and liabilities:
Accounts receivable and prepaid expenses 2,847 (13,449)
Inventories (3,823) (37,736)
Accounts payable and accrued expenses (12,784) (5,468)
Deferred charges and other assets 1,052 3,233
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NET CASH PROVIDED BY OPERATING ACTIVITIES 25,230 13,517
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INVESTING ACTIVITIES:
Capital expenditures (102,004) (71,342)
Other - net 502 1,032
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NET CASH (USED IN) INVESTING ACTIVITIES (101,502) (70,310)
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FINANCING ACTIVITIES:
Increase in long-term debt 100,000
Payments to settle long-term debt (2,462) (60,843)
Borrowings of revolver debt 452,200 381,400
Payment of revolver debt (371,400) (381,400)
Reduction of capital lease obligations (6,972) (6,400)
Payment of debt issuance costs (168) (2,482)
Purchase of treasury stock (474)
Other - net 347 128
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NET CASH PROVIDED BY
FINANCING ACTIVITIES 71,071 30,403
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(DECREASE) IN CASH AND CASH EQUIVALENTS (5,201) (26,390)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 46,519 82,467
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 41,318 $ 56,077
---------- ----------
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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, as applicable, of common stock outstanding during
each period. Fully diluted (loss) income 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 (loss) income per share is less than
three percent.
In January 1995, the Company acquired 45 supermarkets from American Stores
Company formerly operated under the Acme trade name. Results for the quarter
and 39 weeks ended October 28, 1995 include the results for 29 of these acquired
Acme stores that the Company intends to continue to operate.
- 5 -
NOTE 2 - SUPPLEMENTAL FINANCIAL INFORMATION
(In thousands of dollars) Third Quarter Thirty-nine Weeks
------------- -----------------
FISCAL 1996
Operating Income $ 29,637 $ 96,586 *
Unusual Item 65,237
Depreciation and Amortization 22,347 68,099
LIFO Provision 858 1,717 *
Cash Interest Expense 32,334 96,219
* Excludes the effect of the unusual item.
FISCAL 1995
Operating Income $ 36,271 $ 112,059
Depreciation and Amortization 21,887 65,132
LIFO Provision 450
Cash Interest Expense 27,554 83,363
NOTE 3 - INVENTORIES
If the first-in, first-out (FIFO) method had been used by the Company,
inventories would have been $20,237,000 and $17,145,000 higher than reported at
October 28, 1995 and January 28, 1995, respectively.
NOTE 4 - EXTRAORDINARY ITEM
During the third quarter ended October 29, 1994, the Company had an
extraordinary charge of $0.1 million (net of income tax benefit). The
extraordinary charge for the thirty-nine weeks ended October 29, 1994 was $3.0
million (net of $2.1 million income tax benefit). This extraordinary charge
relates to the early retirement of debt.
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.
- 6 -
NOTE 6 - UNUSUAL ITEM
During the second quarter of Fiscal 1996, the Company recorded an unusual
item (charge) of $65.2 million. The Company also recorded a tax benefit of
$13.3 million in connection with this charge. At October 28, 1995, the
components of this unusual item are as follows:
($ 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) 9.4 $50.6
-----
Obsolete equipment write-off,
cost of expense reduction program
and increase in closed store reserve 14.6
-----
Total $65.2
-----
-----
CLOSURE OF STAND ALONE GENERAL MERCHANDISE BUSINESS (HARTS)
During the second quarter of Fiscal 1996, the Company decided to close 11
of its 15 remaining stand alone general merchandise stores (Harts) in Ohio.
These 11 stores generated approximately $50 million of revenues or about 1.4% of
the Company's annual revenues. The Company currently expects that the remaining
four Harts stores will be converted to the Company's "Big Bear Plus" format. As
a result of the decision to close the 11 Harts stores and convert the remaining
four stores, during the second quarter ended July 29, 1995, the Company recorded
an unusual item (charge). At October 28, 1995, the amount of this charge is
$50.6 million. 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 ($9.4 million). These
amounts reflect an adjustment made in the third quarter of Fiscal 1996 reducing
the charge for store closing costs consisting principally of inventory markdowns
by $2.4 million, as a result of the event described below.
In October 1995, the Company engaged a third party to liquidate the assets
of nine of the 11 Harts stores to be closed. The Company retains ownership of
the assets of the 11 Harts stores to be closed until the process of closing
those stores is completed (expected to be by the end of the Company's current
fiscal year, February 3, 1996.) The Company expects that this program will
generate net cash proceeds of approximately $15 million, most of which was
received by Penn Traffic in the third quarter of Fiscal 1996. These funds will
be used for debt retirement.
When the liquidation is completed, 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.
- 7 -
NOTE 6 - UNUSUAL ITEM (CONTINUED)
OTHER CHARGES
The unusual item also includes $14.6 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 ($4.0 million), and an increase in the
Company's closed store reserve ($2.6 million). These amounts reflect
adjustments made in the third quarter of Fiscal 1996 increasing the charge for
costs incurred in connection with the implementation of the Company's expense
reduction programs by $2.0 million and increasing the Company's closed store
reserve by $0.4 million.
The noncash portion of the unusual item is approximately $57.5 million and
the cash portion is approximately $7.7 million. All costs related to the
unusual item are expected to be incurred by February 1996 with the exception of
certain facility carrying costs (primarily lease payments) for stores to be
closed. The last scheduled lease payment will occur in 2001. The accrued
expense amount relating to the unusual item was $14.6 million at October 28,
1995.
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 ("THIRD QUARTER FISCAL 1996") AND THIRTY-NINE WEEKS ENDED OCTOBER
28, 1995 COMPARED TO THIRTEEN WEEKS ("THIRD QUARTER FISCAL 1995") AND THIRTY-
NINE WEEKS ENDED OCTOBER 29, 1994
The following table sets forth statement of operations components expressed
as a percentage of total revenues for Third Quarter Fiscal 1996 and Third
Quarter Fiscal 1995 and for the thirty-nine weeks ended October 28, 1995 and
October 29, 1994, respectively:
Third Quarter Ended Thirty-nine Weeks Ended
OCTOBER 28, October 29, OCTOBER 28, October 29,
1995 1994 1995 1994
---------- ---------- ---------- ----------
Total revenues 100.0% 100.0% 100.0% 100.0%
Gross profit (1) 22.8 22.7 22.7 22.6
Selling and administrative
expenses 19.3 18.3 19.0 18.1
Unusual item 2.5
Operating income 3.5 4.4 1.2 4.5
Interest expense 4.0 3.5 3.8 3.5
(Loss) income before
income taxes,
extraordinary item
and cumulative effect of
change in accounting
principle (0.5) 0.9 (2.6) 1.0
Net (loss) income 0.0 0.6 (2.0) 0.2
(1) Total revenues less cost of sales.
Total revenues for Third Quarter Fiscal 1996 increased to $844.6 million
from $828.1 million in Third Quarter Fiscal 1995. Total revenues for the
thirty-nine week period ended October 28, 1995 increased to $2.59 billion from
$2.47 billion for the thirty-nine week period ended October 29, 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 Third Quarter Fiscal 1996 to $101.1
million from Third Quarter Fiscal 1995 sales of $109.0 million and decreased to
$304.8 million for the thirty-nine weeks ended October 28, 1995 from $329.2
million for the thirty-nine weeks ended October 28, 1994. Same store sales for
Third Quarter Fiscal 1996 declined 3.9%.
The Company's total revenues and same store sales results for the quarter
were adversely affected by weak consumer spending and competitive promotional
activity. In addition, total revenues and same store sales were negatively
impacted by the accelerated closing of 11 of the Company's Harts general
merchandise stores, which adversely affected the Company's nonfood business
during Third Quarter Fiscal 1996.
- 9 -
RESULTS OF OPERATIONS (CONTINUED)
In Third Quarter Fiscal 1996, gross profit was $192.6 million compared to
Third Quarter Fiscal 1995 gross profit of $188.1 million, representing 22.8% and
22.7% of total revenues, respectively. Gross profit as a percentage of total
revenues increased to 22.7% for the thirty-nine week period ended October 28,
1995 from 22.6% for the thirty-nine weeks ended October 29, 1994. The increase
in gross profit as a percentage of total revenues for Third Quarter Fiscal 1996
resulted from the relative increase in retail revenues compared to wholesale
revenues.
Selling and administrative expenses for Third Quarter Fiscal 1996 were
$652.0 million compared with $640.0 million in Third Quarter Fiscal 1995.
Selling and administrative expenses as a percentage of total revenues increased
to 19.3% for Third Quarter Fiscal 1996 from 18.3% in Third Quarter Fiscal 1995.
Selling and administrative expenses for the thirty-nine week period ended
October 28, 1995 were $492.0 million compared to $447.4 million for the thirty-
nine week period ended October 28, 1994. Selling and administrative expenses as
a percentage of total revenues increased to 19.0% for the thirty-nine week
period ended October 28, 1995 from 18.1% for the thirty-nine week period ended
October 29, 1994. The increase in selling and administrative expenses as a
percentage of total revenues for Third 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 of low price
inflation and a decline in same store sales.
Depreciation and amortization of $22.3 million in Third Quarter Fiscal 1996
and $21.9 million in Third Quarter Fiscal 1995 represented 2.6% of total
revenues for both periods. Depreciation and amortization of $68.1 million for
the thirty-nine weeks ended October 28, 1995 and $65.1 million for the thirty-
nine weeks ended October 29, 1994 represented 2.6% of total revenues in both
periods.
During the second quarter of Fiscal 1996, the Company recorded an unusual
item (charge) of $65.2 million. The Company also recorded a tax benefit of
$13.3 million in connection with this charge. At October 28, 1995, this unusual
item was comprised of $50.6 million related to the future closure of the stand
alone general merchandise business (Harts) and $14.6 million related to 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, costs
incurred in connection with the Company's expense reduction programs and an
increase in the Company's closed store reserve (Note 6).
- 10 -
RESULTS OF OPERATIONS (CONTINUED)
Operating income for Third Quarter Fiscal 1996 was $29.6 million or 3.5% of
total revenues compared to $36.3 million or 4.4% of total revenues in Third
Quarter Fiscal 1995. Operating income (excluding the unusual item) for the
thirty-nine week period ended October 28, 1995 was $96.6 million or 3.7% of
total revenues compared to $112.1 million or 4.5% of total revenues for the
thirty-nine weeks ended October 29, 1994.
Interest expense for Third Quarter Fiscal 1996 and Third Quarter Fiscal
1995 was $33.4 million and $28.6 million, respectively. Interest expense for
the thirty-nine weeks ended October 28, 1995 and October 29, 1994 was $99.4
million and $86.4 million, respectively. The increase in interest expense is
due to the higher debt levels outstanding during the first three quarters of
Fiscal 1996, which are primarily the result of funding the acquisition of 45
stores from American Stores Company in January 1995 and the Company's capital
investment program.
Loss before income taxes and extraordinary item was $3.8 million for Third
Quarter Fiscal 1996, compared to income of $7.6 million for Third Quarter Fiscal
1995. The reason for the decline is the decrease in operating income combined
with an increase in interest expense. Loss before income taxes, extraordinary
item, and the cumulative effect of a change in accounting principle for the
thirty-nine weeks ended October 28, 1995 was $68.1 million compared to income of
$25.6 million for the thirty-nine weeks ended October 29, 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 $3.4 million for Third Quarter Fiscal 1996
compared to a provision of $2.9 million in Third Quarter Fiscal 1995. The
income tax benefit was $16.2 million for the thirty-nine week period ended
October 28, 1995 compared to an income tax provision of $11.7 million in the
prior year. Excluding the unusual item, the income tax benefit was $2.9 million
for the thirty-nine week period ended October 28, 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.
Net loss was $0.4 million in Third Quarter Fiscal 1996 compared to income
of $4.8 million (before extraordinary item) in Third Quarter Fiscal 1995.
Excluding the impact of the unusual item, net income was $0.0 million for the
thirty-nine weeks ended October 28, 1995 compared to $13.9 million (before
extraordinary item and the cumulative effect of a change in accounting
principle) for the thirty-nine weeks ended October 29, 1994.
The $0.1 million extraordinary item (net of tax benefit) for Third Quarter
Fiscal 1995, and the $3.0 million extraordinary item (net of $2.1 million income
tax benefit) for the thirty-nine week period ended October 29, 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).
- 11 -
LIQUIDITY AND CAPITAL RESOURCES
During Third Quarter Fiscal 1996, operating income decreased to $29.6
million from $36.3 million for Third Quarter Fiscal 1995. Interest expense for
Third Quarter Fiscal 1996 was $33.4 million as compared to $28.6 million during
Third Quarter Fiscal 1995. Loss before unusual item, extraordinary item and the
cumulative effect of a change in accounting principle for Third Quarter Fiscal
1996 was $0.4 million as compared to income of $4.8 million for Third Quarter
Fiscal 1995.
Payments of principal and interest on the Company's $1.22 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 $1.7 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 $64.0
million at October 28, 1995.
During Third 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 three interest rate swap agreements, each of
which expires within the next three years, that effectively convert $125 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 1996 are reported in the
Consolidated Statement of Cash Flows. For the thirty-nine week period ended
October 28, 1995, the Company experienced a positive cash flow from operating
activities of $25.2 million.
- 12 -
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Working capital decreased by $0.9 million from January 28, 1995 to October
28, 1995.
The Company is in compliance with all terms and restrictive covenants of
its long-term debt agreements.
The Company expects to spend approximately $135 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
Third Quarter Fiscal 1996, the Company opened three replacement stores and
completed six remodels. In addition, seven new or replacement stores are under
construction and eight remodels are in process. During the quarter, the Company
also opened a new warehouse in Columbus, Ohio.
The Company currently expects to spend approximately $80 million on capital
expenditures in Fiscal 1997.
On October 5, 1995, Penn Traffic's Board of Directors authorized the
repurchase by the Company of up to 500,000 shares of its outstanding common
stock. Penn Traffic's debt agreements contain limitations on the Company's
ability to repurchase its common stock. Under the most restrictive limitations
contained in the Company's debt agreements, Penn Traffic could spend a total of
approximately $6 million on stock repurchases. Between October 5, 1995 and
October 28, 1995, the Company acquired 32,700 shares of its outstanding common
stock, at a cost of approximately $474,000, which are being held in treasury.
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
-------------- -----------
10.9 L Amendment No. 11, dated as of
October 16, 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
October 28, 1995.
- 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, 1995 /s/- John T. Dixon
---------------------------------
By: John T. Dixon
(President and Chief
Executive Officer, and
Director)
December 12, 1995 /s/- Eugene R. Sunderhaft
--------------------------------
By: Eugene R. Sunderhaft
(Senior Vice President and
Secretary, Principal Financial
Officer and Principal Accounting
Officer)
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