AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1997
REGISTRATION NO. 33-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
JITNEY-JUNGLE STORES OF AMERICA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MISSISSIPPI 5411 64-0280539
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
------------------------
1770 ELLIS AVENUE, SUITE 200
JACKSON, MISSISSIPPI 39204
(601) 965-8600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
SEE TABLE OF ADDITIONAL REGISTRANTS BELOW
------------------------
DAVID R. BLACK
SENIOR VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER
JITNEY-JUNGLE STORES OF AMERICA, INC.
1770 ELLIS AVENUE, SUITE 200
JACKSON, MISSISSIPPI 39204
(601) 965-8600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------------
WITH COPIES TO:
BRUCE B. WOOD, ESQ.
DECHERT PRICE & RHOADS
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10112
(212) 698-3500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
10% Senior Subordinated Notes due 2007........... $200,000,000 100% $200,000,000 $60,607
Guarantees of Senior Subordinated Notes.......... $200,000,000 -- -- None
(1) Estimated pursuant to Rule 457(f) solely for purposes of calculating the
registration fee.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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JITNEY-JUNGLE STORES OF AMERICA, INC.
TABLE OF ADDITIONAL REGISTRANTS
STATE OR
OTHER PRIMARY STANDARD
JURISDICTION INDUSTRIAL IRS EMPLOYER
OF CLASSIFICATION IDENTIFICATION
NAME INCORPORATION CODE NUMBER NUMBER
- -------------------------------------------------------------- ----------- ---------------------- -------------
Interstate Jitney-Jungle Stores, Inc.......................... Alabama 5411 64-0728553
McCarty-Holman Co., Inc....................................... Mississippi 5411 64-0294093
Southern Jitney-Jungle Company................................ Mississippi 5411 64-0280601
Pump And Save, Inc............................................ Mississippi 5411 64-0779730
Delta Acquisition Corporation................................. Alabama 5411 72-1394134
Supermarket Cigarette Sales, Inc.............................. Louisiana 5194 72-1029831
Jitney-Jungle Bakery, Inc..................................... Mississippi 2051 64-0462232
Delchamps, Inc................................................ Alabama 5411 63-0245434
The address, including zip code, and telephone number, including area code,
for each of the additional registrants' principal executive offices, other than
Supermarket Cigarette Sales, Inc. and Delchamps, Inc., is 1770 Ellis Avenue,
Suite 200, Jackson, Mississippi 39204 (601) 965-8600, and the address, including
zip code, and telephone number, including area code, for the principal executive
offices of Supermarket Cigarette Sales, Inc. and Delchamps, Inc. is 305
Delchamps Drive, Mobile, Alabama 36602 (334) 433-0437.
ii
SUBJECT TO COMPLETION, DATED OCTOBER 29, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. UNDER NO CIRCUMSTANCES SHALL THIS PROSPECTUS CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH JURISDICTION.
PROSPECTUS
[LOGO]
OFFER TO EXCHANGE
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
FOR ALL OUTSTANDING
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
OF
JITNEY-JUNGLE STORES OF AMERICA, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON , 1997, UNLESS EXTENDED
Jitney-Jungle Stores of America, Inc., a Mississippi corporation
("Jitney-Jungle" or the "Company"), hereby offers to exchange an aggregate
principal amount of up to $200,000,000 of its 10 3/8% Senior Subordinated Notes
due 2007 (the "New Notes") for a like principal amount of its 10 3/8% Senior
Subordinated Notes due 2007 (the "Existing Notes") outstanding on the date
hereof upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying letter of transmittal (the "Letter of Transmittal" and,
together with this Prospectus, the "Exchange Offer"). The New Notes and the
Existing Notes are hereinafter collectively referred to as the "Notes." The
terms of the New Notes are identical in all material respects to those of the
Existing Notes, except for certain transfer restrictions and registration rights
relating to the Existing Notes. The New Notes will be issued pursuant to, and be
entitled to the benefits of, the Indenture (as defined) governing the Existing
Notes.
The New Notes will bear interest from and including the date of consummation
of the Exchange Offer. Interest on the New Notes will be payable semi-annually
on March 15 and September 15 of each year, commencing March 15, 1998.
Additionally, interest on the New Notes will accrue from the last interest
payment date on which interest was paid on the Existing Notes surrendered in
exchange therefor or, if no interest has been paid on the Existing Notes, from
the date of original issue of the Existing Notes.
The New Notes will be general unsecured obligations of the Company,
subordinated in right of payment to all existing and future Senior Debt (as
defined) of the Company, including indebtedness pursuant to the 12% Senior Notes
due 2006 of the Company (the "Senior Notes") and the Senior Credit Facility (as
defined). The New Notes will be guaranteed (the "Subsidiary Guarantees"),
jointly and severally, on a senior subordinated basis by all of the Company's
Restricted Subsidiaries (as defined)(the "Subsidiary Guarantors"). The
Subsidiary Guarantees will be subordinated in right of payment to all existing
and future Senior Debt of the Subsidiary Guarantors, including the guarantees of
the Subsidiary Guarantors of the Company's obligations under the Senior Notes
and the Senior Credit Facility. At July 26, 1996, on a Pro Forma Basis (as
defined), the Company would have had approximately $348.1 million of Senior Debt
outstanding (exclusive of an unused commitment of up to $66.1 million under the
Senior Credit Facility) and the Subsidiary Guarantors would have had
approximately $10.4 million of Senior Debt outstanding (excluding guarantees by
the Subsidiary Guarantors of the Company's obligations under the Senior Notes
and the Senior Credit Facility).
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement dated
September 15, 1997 (the "Registration Rights Agreement") by and among the
Company, the Subsidiary Guarantors, Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") and Credit Suisse First Boston (together with DLJ, the
"Initial Purchasers") with respect to the initial sale of the Existing Notes.
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of
Existing Notes pursuant to the Exchange Offer may be withdrawn at any time prior
to the Expiration Date (as defined) for the Exchange Offer. In the event the
Company terminates the Exchange Offer and does not accept for exchange any
Existing Notes with respect to the Exchange Offer, the Company will promptly
return such Existing Notes to the holders thereof. See "The Exchange Offer."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivery of a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Existing Notes where such Existing Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities. The Company
has agreed that, for a period of 180 days after the Expiration Date, it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale. See "Plan of Distribution."
Prior to the Exchange Offer, there has been no public market for the
Existing Notes. If a market for the New Notes should develop, such New Notes
could trade at a discount from their principal amount. The Company currently
does not intend to list the New Notes on any securities exchange or to seek
approval for quotation through any automated quotation system, and no active
public market for the New Notes is currently anticipated. There can be no
assurance that an active public market for the New Notes will develop.
The Exchange Offer is not conditioned upon any minimum principal amount of
Existing Notes being tendered for exchange pursuant to the Exchange Offer.
--------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT HOLDERS OF EXISTING NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE
OFFER.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------
The date of this Prospectus is , 1997.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission" or the "SEC") a Registration Statement on Form S-4 (the "Exchange
Offer Registration Statement," which term shall encompass all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the
rules and regulations promulgated thereunder, covering the New Notes being
offered hereby. This Prospectus does not contain all the information set forth
in the Exchange Offer Registration Statement. For further information with
respect to the Company and the Exchange Offer, reference is made to the Exchange
Offer Registration Statement. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Exchange Offer Registration Statement,
reference is made to the exhibit for a more complete description of the document
or matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. Such reports
and other information, including the Exchange Offer Registration Statement and
exhibits thereto, can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington
D.C. 20549, and at the Commission's regional offices in Suite 1400, Northwest
Atrium Center, West Madison Street, Chicago, Illinois 60661, and 7 World Trade
Center (13th floor), New York, New York 10048. Copies of such material can be
obtained from the Commission at prescribed rates through its Public Reference
Section at 450 Fifth Street. N.W., Washington, D.C. 20549. The Commission also
maintains a site on the World Wide Web, the address of which is
http://www.sec.gov, that contains reports, proxy and information statements and
other information regarding issuers, such as the Company, that file
electronically with the Commission. The obligation of the Company under the
Exchange Act to file reports with the Commission will be suspended if the Notes
are held of record by fewer than 300 holders at the beginning of any fiscal year
of the Company after the fiscal year commencing on April 30, 1995. In the event
the Company ceases to be subject to the informational requirements of the
Exchange Act, the Indenture provides that the Company will be required, for so
long as any of the Notes remain outstanding, to furnish to the Trustee (as
defined) and deliver or cause to be delivered to the holders of the Notes and
file with the Commission (provided that the Commission will accept such filing)
(i) all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such forms, including for each a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and, with respect
to the annual information only, a report thereon by the Company's certified
independent accountants, and (ii) all reports that would be required to be filed
with the Commission on Form 8-K if the Company were required to file such
reports.
This Prospectus includes forward-looking statements which involve risks and
uncertainties as to future events. Actual events or results may differ
materially from those discussed in the forward-looking statements as a result of
various factors, including, without limitation, those set forth under "Risk
Factors".
2
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, (I) THE
TERM "JITNEY-JUNGLE" REFERS TO JITNEY-JUNGLE STORES OF AMERICA, INC., (II) THE
TERM "DELCHAMPS" REFERS TO DELCHAMPS, INC., AN ALABAMA CORPORATION, (III) THE
TERM "THE COMPANY" REFERS TO JITNEY-JUNGLE AND ITS CONSOLIDATED SUBSIDIARIES
(INCLUDING DELCHAMPS) AS IF THE DELCHAMPS ACQUISITION (AS DEFINED) HAD BEEN
CONSUMMATED AND (IV) THE TERM "MANAGEMENT" REFERS TO THE MANAGEMENT TEAM OF
JITNEY-JUNGLE. REFERENCES HEREIN TO 'FISCAL YEARS' ARE TO THE FISCAL YEARS OF
JITNEY-JUNGLE AND DELCHAMPS, AS APPLICABLE, WHICH END ON THE SATURDAY NEAREST TO
APRIL 30 AND THE SATURDAY NEAREST TO JUNE 30, RESPECTIVELY, IN THE CALENDAR
YEAR. PRO FORMA DATA INCLUDED HEREIN FOR THE "LTM PERIOD" REFLECT THE RESULTS OF
OPERATIONS OF JITNEY-JUNGLE FOR THE 53 WEEKS ENDED JULY 26, 1997 AND THE RESULTS
OF OPERATIONS OF DELCHAMPS FOR THE FISCAL YEAR ENDED JUNE 28, 1997, AND INCLUDE
THE PRO FORMA ADJUSTMENTS DESCRIBED UNDER "PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS." REFERENCES HEREIN TO THE "SOUTHEAST" ARE TO THE STATES OF
ALABAMA, ARKANSAS, FLORIDA, LOUISIANA, MISSISSIPPI AND TENNESSEE, AND REFERENCES
HEREIN TO THE NUMBER OF SUPERMARKETS OPERATED BY THE COMPANY ARE TO THE ACTUAL
TOTALS AFTER GIVING EFFECT TO THE ANTICIPATED STORE DISPOSITIONS (AS DEFINED).
CERTAIN MARKET DATA USED IN THIS PROSPECTUS REFLECT MANAGEMENT ESTIMATES; WHILE
SUCH ESTIMATES ARE BELIEVED TO BE RELIABLE, NO ASSURANCE CAN BE GIVEN THAT SUCH
DATA IS ACCURATE IN ALL MATERIAL RESPECTS.
THE COMPANY
The Company is a leading operator of supermarkets in the Southeast. Upon
consummation of the Delchamps Acquisition, the Company will operate 199
supermarkets located throughout Mississippi and Alabama as well as in selected
markets in Tennessee, Arkansas, Louisiana and Florida. In addition, the Company
will be the largest supermarket operator in Mississippi and the second largest
supermarket operator in Alabama, with 81 supermarkets in Mississippi and 49
supermarkets in Alabama. The Company will account for an estimated 32% of the
grocery sales in Mississippi and an estimated 18% of the grocery sales in
Alabama. Jitney-Jungle currently has an estimated 50% of the grocery sales in
Jackson, Mississippi and Delchamps has an estimated 37% of the grocery sales in
Mobile, Alabama. Jitney-Jungle and Delchamps also have the number one, two or
three market share position in approximately 80% of the major markets in which
they operate. The Delchamps Acquisition is expected to increase the Company's
geographic diversification because the Delchamps stores are primarily located in
areas in which Jitney-Jungle currently has no stores. At the same time, the
Delchamps Acquisition is expected to result in valuable purchasing, distribution
and marketing synergies for the Company. On a Pro Forma Basis, the Company would
have had approximately $2.2 billion of net sales and approximately $127.8
million of EBITDA (as defined) for the LTM Period.
Management believes that the Company has significant competitive advantages,
which include:
STRONG FRANCHISE AND PRIME SITES. The Company has a strong consumer
franchise built around the "Jitney-Jungle" and "Delchamps" names. Management
believes that the Company's customers associate these names with quality, value,
convenience and superior service. In addition, Management believes that most of
the Company's urban supermarkets are in high-traffic locations that offer
significant competitive advantages, and that many of its supermarkets located in
smaller towns and rural areas are located on prime, non-replicable sites.
MODERN SUPERMARKET BASE. During the last five fiscal years, Jitney-Jungle
and Delchamps invested approximately $147.0 million and $111.0 million,
respectively, in capital expenditures, a substantial majority of which was for
building new supermarkets and expanding or remodeling existing supermarkets.
Approximately 81% of the Company's supermarket base has been built or remodeled
within the past five fiscal years.
3
SUCCESSFUL PRIVATE LABEL PROGRAM. In addition to branded products, the
Company's supermarkets offer a selection of private label products bearing the
brand names of Topco Associates, Inc. ("Topco"), the largest cooperative grocery
products purchasing organization in the United States. The Company's affiliation
with Topco enables it to procure quality merchandise on a competitive basis with
larger, national food retailers. Pro forma net sales of private label products,
which generally have a lower unit sales price than national brands but provide a
higher gross margin due to lower unit costs, accounted for approximately 18.2%
of pro forma net non-perishable sales of the Company during the LTM Period.
CENTRALIZED AND EFFICIENT DISTRIBUTION FACILITIES. The Company's
distribution facility located in Jackson, Mississippi is conveniently located
close to major highways and provides a central delivery site for vendors. This
facility includes an aggregate of 814,000 square feet of warehouse space and can
efficiently supply the Company's 199 supermarkets, as well as potential new
markets contiguous to existing markets.
THE ACQUISITION AND EXPECTED BENEFITS
During fiscal 1997, Delchamps generated net sales and EBITDA of
approximately $1.1 billion and $44.1 million, respectively. In addition to the
incremental net sales, EBITDA and market share expected to result from the
Delchamps Acquisition, Management believes that it should be able to achieve
significant cash cost savings as a result of the elimination of certain
duplicative costs, increased operating efficiencies and increased purchasing
leverage in connection with the combined operation of the Jitney-Jungle and
Delchamps businesses following the Delchamps Acquisition. While the exact timing
and amount of such cash cost savings is inherently uncertain, Management
currently expects that the Company should begin to realize such cash cost
savings within three to nine months following the Delchamps Acquisition.
Specific anticipated benefits of the Delchamps Acquisition include:
- REDUCED GENERAL AND ADMINISTRATIVE EXPENSE. In connection with the
Delchamps Acquisition, Management expects to consolidate the corporate
headquarters of the Company's combined operations in the existing
corporate headquarters of Jitney-Jungle. Although a divisional office will
be opened in Mobile, Alabama, the Delchamps Mobile headquarters will be
closed and approximately 160 positions currently held by employees at the
Jitney-Jungle and Delchamps corporate headquarters will be eliminated.
Management estimates that such measures should result in approximately
$9.3 million of annualized cash cost savings, which the Company should
begin to realize within three to six months following the Delchamps
Acquisition.
- IMPROVED WAREHOUSING AND DISTRIBUTION EFFICIENCIES. Jitney-Jungle owns or
leases 814,000 square feet of warehouse space located in Jackson,
Mississippi which is central to, and can efficiently supply, all of the
Company's 199 supermarkets. In connection with the Delchamps Acquisition,
Management expects to close the Hammond, Louisiana warehouse owned by
Delchamps and to utilize Jitney-Jungle's Jackson facility as the Company's
central distribution center, thereby reducing headcount and general and
administrative expenses. In addition, in order to more efficiently utilize
the Jackson facility Jitney-Jungle has negotiated a long-term supply
agreement with a supplier to provide direct store delivery of frozen foods
and selected grocery products to the Company's supermarkets, which
Management believes should result in lower distribution costs and a
decrease of approximately 35% in inventory levels. Management believes
that, on an annualized basis, the combined effect of these warehousing and
distribution efficiencies should result in approximately $3.9 million of
cash cost savings, which the Company should to begin to realize within
three to six months following the Delchamps Acquisition.
- REDUCED ADVERTISING AND PRINTING EXPENSES. Jitney-Jungle and Delchamps
operate in contiguous and overlapping geographic areas, particularly in
south Mississippi and Florida. As a result, Management believes that it
will be able to consolidate the Company's advertising in these regions,
thus reducing advertising expenses. In addition, while Delchamps currently
outsources the printing of its advertising circulars, after the Delchamps
Acquisition approximately 50% of such printing will be
4
performed at Jitney-Jungle's in-house printing facility. Management
estimates that moving a portion of Delchamps' printing in-house should
result in annualized cash cost savings of approximately $1.0 million,
which the Company should begin to realize within three to six months
following the Delchamps Acquisition.
- INCREASED PURCHASING LEVERAGE. Management expects that Jitney-Jungle's
merchandise purchases will approximately double following the Delchamps
Acquisition. As a result of this increase and the Company's leading market
position, Management believes that the Company should be able to negotiate
more favorable terms from vendors, including suppliers of products carried
on an exclusive or promoted basis, and to convert some less-than-truckload
shipping quantities to full truckload quantities. Management believes that
this increased purchasing leverage should result in approximately $3.4
million in annualized cash cost savings, which the Company should begin to
realize within six to nine months following the Delchamps Acquisition.
- INCREASED BACKHAUL INCOME. The expected increase in merchandise purchases
following the Delchamps Acquisition and the resulting improvements in the
Company's purchasing leverage are expected to create additional
opportunities to increase backhaul income, thereby reducing the Company's
operating costs. In particular, the Company's increased presence in the
Louisiana and Florida markets should result in a higher number of
deliveries to those areas, which have historically provided Jitney-Jungle
with backhaul opportunities. Management believes that increased backhaul
income should result in annualized cash cost savings of approximately $1.8
million, which the Company should begin to realize within three to six
months following the Delchamps Acquisition.
Of the aggregate potential $19.4 million in annualized cash cost savings
discussed above, approximately $14.2 million are reflected in the Pro Forma
Condensed Consolidated Financial Statements included elsewhere herein because
Management believes that they are factually supportable and directly related to
the Transactions (as defined) and the Delchamps Merger (as defined). Actual cash
cost savings achieved by the Company may vary considerably from the estimates
discussed above. See 'Risk Factors-- Integration of Delchamps.'
BUSINESS STRATEGY
The Company's business strategy is focused on enhancing the Company's
revenues and profitability by capitalizing on its leading market positions and
continuing its growth in certain attractive Southeast markets. Management
believes that the Company's leading perishables and grocery merchandising,
competitive pricing, range of specialty departments and reputation for quality
will help the Company continue its strong history of growth and profitability.
The Company's specific business strategies include:
- EXPAND SUPERMARKET BASE. Management believes there are a number of
attractive Southeast markets in which to continue to grow the Company's
supermarket base. Jitney-Jungle has a history of successfully making
supermarket acquisitions in both existing and contiguous markets. Since
fiscal l990, Jitney-Jungle has acquired 51 supermarkets in 41 markets,
excluding the 100 supermarkets to be acquired in the Delchamps
Acquisition. In addition, over the past five fiscal years the Company has
built or expanded 58 supermarkets in the Southeast. To continue expanding
its supermarket base, Management intends to open new supermarkets and make
strategic acquisitions in certain of the larger metropolitan areas where
it currently operates (including Memphis and Little Rock), as well as in
smaller cities and surrounding areas that are contiguous to areas where it
currently operates.
- CONTINUE TO IMPROVE OPERATING MARGINS. Jitney-Jungle and Delchamps have
improved their EBITDA margins from 5.5% and 2.9%, respectively, in fiscal
1992 to 5.7% and 4.0%, respectively, in fiscal 1997. The Company
continuously reviews its operations to identify initiatives designed to
reduce operating costs and increase EBITDA margins. As a result of the
following initiatives, Management
5
believes that the Company can further improve its EBITDA margins during
fiscal 1998: (i) headcount reductions implemented by Jitney-Jungle in May
1997, which are expected to result in annualized cost savings of
approximately $0.9 million in fiscal 1998; and (ii) improved labor
scheduling currently being implemented at Jitney-Jungle supermarkets,
which is expected to result in annualized cost savings of approximately
$3.5 million in fiscal 1998 and which may also result in additional cost
savings when implemented during the next 12 to 18 months at the Delchamps
supermarkets. In addition, Management expects to implement programs at
Delchamps to reduce inventory shrink to levels comparable to those
achieved at Jitney-Jungle.
- DECREASE WORKING CAPITAL NEEDS. During fiscal 1997, Jitney-Jungle
successfully implemented programs to reduce inventories by eliminating
slow moving items, as well as renegotiating its payment terms to bring
them more in line with industry practice. As a result of these efforts,
Jitney-Jungle improved its ratio of accounts payable to inventory from
51.7% in fiscal 1996 to 77.3% in fiscal 1997. Jitney-Jungle believes that
these measures enabled it to decrease its working capital needs by
approximately $20.0 million. Management intends to implement similar
programs at Delchamps.
- CAPITALIZE ON MARKET SEGMENTATION OPPORTUNITIES. The Company attempts to
optimize operating results by selecting a format for each of its
supermarkets that is best suited to a site's demographics, local
preferences and competitive position. The Company's conventional
supermarkets offer a range of departments and high-quality services; the
Company's combination supermarkets offer a combined supermarket and drug
format with a wider variety of premium, full-service departments,
merchandise and services; and the Company's discount supermarkets offer
items throughout the supermarket at everyday low prices and generally
place greater emphasis on self-service. In general, the Company's
conventional and combination supermarkets generate higher operating
margins than its discount supermarkets. Management believes that there is
a growing consumer demand for higher service levels and convenience and,
as a result, expects that the Company will open combination supermarkets
in preference to conventional and discount supermarkets at all sites where
adequate space and consumer demand exist. Management also expects that a
significant number of conventional and discount formats will be converted
to combination formats. In addition, because the Company's discount
supermarkets attract a price sensitive customer who generally would not
shop at a combination or conventional supermarket, Management also
believes there will be opportunities to open new discount supermarkets in
areas where limited or no competing discount supermarkets operate
(including Mobile and New Orleans), with minimal risk of cannibalizing
sales of the Company's conventional and combination supermarkets located
in those areas.
- PURSUE INNOVATIVE MARKET INITIATIVES. The Company's goal is to utilize
innovative marketing and advertising programs to increase sales while
maintaining or increasing profitability. At its conventional and
combination stores, Jitney-Jungle has introduced a frequent shopper
program utilizing a "Gold Card" designed to increase customer traffic and
net sales by offering incentives to its most loyal customers. The
"Gold-Card" entitles holders to discounts on certain products every week
as well as check cashing privileges, and also serves as a base for market
basket analysis and customer-oriented direct marketing. Since the
introduction of the Gold Card, Management believes that the number of
customers and the amount of the average purchase at Jitney-Jungle
supermarkets has increased and, as a result, Management intends to
introduce a similar frequent shopper card at Delchamps supermarkets
following the Delchamps Acquisition. At its discount supermarkets, the
Company employs marketing campaigns designed to appeal to the value
conscious consumer, including "truckload sales," private label promotions
and bulk produce and similar purchasing incentives.
- FOCUS ON "PUMP AND SAVE" GASOLINE STATION OPPORTUNITIES. The Company
operates gasoline stations under the name "Pump And Save" at or near 53 of
its supermarkets that offer attractive gasoline retailing sites on heavily
traveled roads and highways. The Company entered the gasoline business
6
to take advantage of (i) the low incremental capital costs of building
gasoline stations on its supermarket parking lots and (ii) the
efficiencies associated with operating gasoline stations with the same
management and labor as its supermarkets. The Company has opened 25 new
gasoline stations over the last five fiscal years and plans to continue
this growth with expansion at many of the 100 Delchamps supermarkets.
THE TRANSACTIONS
Pursuant to the terms of an Agreement and Plan of Merger dated as of July 8,
1997 (the "Merger Agreement") among the Company, Delchamps and Delta Acquisition
Corporation, an Alabama corporation and a wholly-owned subsidiary of
Jitney-Jungle ("DAC"), on July 14, 1997 DAC commenced a tender offer to purchase
all of the issued and outstanding shares of common stock and associated
preferred share purchase rights of Delchamps (the "Delchamps Tender Offer"). On
September 12, 1997, DAC accepted for payment pursuant to the Delchamps Tender
Offer an aggregate of 5,317,510 such shares and preferred share purchase rights.
Pursuant to the Merger Agreement and subject to certain conditions, DAC will be
merged with and into Delchamps (the "Delchamps Merger" and, together with the
Delchamps Tender Offer, the "Delchamps Acquisition"). It is anticipated that
Delchamps will continue as the surviving corporation in the Delchamps Merger and
will be a wholly-owned subsidiary of Jitney-Jungle. The aggregate consideration
expected to be paid in connection with the Delchamps Acquisition is
approximately $218.2 million (the "Delchamps Purchase Price"). The Existing
Notes were issued on September 12, 1997 concurrently with the consummation of
the Delchamps Tender Offer.
Upon consummation of the Delchamps Tender Offer, Jitney-Jungle's existing
revolving credit agreement with Fleet Capital Corporation, as successor agent to
Fleet Bank, N.A., and certain other banks was amended and restated to increase
the commitments thereunder from $100.0 million to $150.0 million (as so amended
and restated, the "Senior Credit Facility"), the Company borrowed approximately
$72.7 million thereunder and the Company repaid approximately $15.4 million of
Delchamps' outstanding indebtedness (collectively, the "Refinancing"). See "The
Transactions--The Refinancing."
In order to permit the Delchamps Acquisition and related financings,
Jitney-Jungle solicited and obtained consents (the "Consent Solicitation") from
the holders of a majority in principal amount of its 12% Senior Notes due 2006
(the "Senior Notes") to certain amendments to the indenture governing the Senior
Notes (the "Senior Note Indenture") that, among other things, permit the Company
to issue, and the Subsidiary Guarantors to guarantee, the Notes and increase the
amount of borrowings available under the Senior Credit Facility. In connection
with the Consent Solicitation, the Company has agreed to pay to the consenting
holders of Senior Notes a consent payment. See "The Transactions--The Consent
Solicitation."
In connection with the Delchamps Acquisition, Management has determined to
close 13 Delchamps supermarkets that are unprofitable or that in other respects
have not performed in accordance with expectations. In addition, Jitney-Jungle
and Delchamps reached a settlement agreement with the Federal Trade Commission
(the "FTC") in order to address FTC concerns about the proposed combination with
respect to certain markets in which Jitney-Jungle and Delchamps have stores, and
pursuant to which Jitney-Jungle and Delchamps have agreed to divest five
Jitney-Jungle stores and five Delchamps stores. These supermarket closings and
divestitures are collectively referred to herein as the "Anticipated Store
Dispositions." See "The Transactions--Expected Store Closures and Divestitures"
and "Pro Forma Condensed Consolidated Financial Statements."
The Delchamps Tender Offer, the Refinancing and the Consent Solicitation,
together with the issuance of the Existing Notes, the initial borrowing under
the Senior Credit Facility, the application of the proceeds thereof and the
payment of related fees and expenses (including fees and expenses relating to
the Consent Solicitation), are collectively referred to herein as the
"Transactions." Information provided herein on a "Pro Forma Basis" gives effect
to the Transactions, the Delchamps Merger and the Anticipated
7
Store Dispositions. See the Pro Forma Condensed Consolidated Financial
Statements included elsewhere in this Prospectus.
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The gross
proceeds to the Company from the sale of the Existing Notes, together with
initial borrowings by the Company of approximately $72.7 million under the
Senior Credit Facility, were used as follows: (i) approximately $218.2 million
was or will be applied to pay the Delchamps Purchase Price; (ii) approximately
$15.4 million was or will be applied to repay certain of Delchamps' outstanding
indebtedness; (iii) approximately $12.1 million was applied to make change of
control payments to certain Delchamps executives pursuant to the requirements of
existing contractual provisions; and (iv) approximately $27.0 million was or
will be applied to pay the fees and expenses incurred in connection with the
Transactions and the Delchamps Merger. Approximately $4.6 million of the
Delchamps indebtedness which was repaid had a maturity date of June 1998 and
bore interest at a rate equal to LIBOR plus 1.25% (currently 7.26%) and
approximately $10.8 million of the remaining Delchamps indebtedness had a
maturity date of July 2000 and bore interest at a rate of 5.51%.
The following table sets forth the sources and uses of funds in connection
with the Transactions.
(DOLLARS IN
MILLIONS)
SOURCES OF FUNDS:
10 3/8% Senior Subordinated Notes due 2007.............................. $ 200.0
Senior Credit Facility.................................................. 72.7
------
Total Sources of Funds................................................ $ 272.7
------
------
USES OF FUNDS:
Delchamps Purchase Price................................................ $ 218.2
Repayment of Delchamps' indebtedness.................................... 15.4
Change of control payments.............................................. 12.1
Transaction fees and expenses........................................... 27.0
------
Total Uses of Funds................................................... $ 272.7
------
------
8
THE EXCHANGE OFFER
Securities Offered........ Up to $200,000,000 aggregate principal amount of 10 3/8% Senior
Subordinated Notes due 2007. The terms of the New Notes and
Existing Notes are identical in all material respects, except
for certain transfer restrictions and registration rights
relating to the Existing Notes.
The Exchange Offer........ The New Notes are being offered in exchange for a like principal
amount of Existing Notes. Existing Notes may be exchanged only
in integral multiples of $1,000. The issuance of the New Notes
is intended to satisfy obligations of the Company contained in
the Registration Rights Agreement.
Expiration Date;
Withdrawal of Tender.... The Exchange Offer will expire at 5:00 p.m., New York City time,
on , 1997, or such later date and time to which it may be
extended by the Company. The tender of Existing Notes pursuant
to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. Any Existing Notes not accepted for exchange
for any reason will be returned without expense to the tendering
holder thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
Certain Conditions to the
Exchange Offer.......... The Company's obligation to accept for exchange, or to issue New
Notes in exchange for, any Existing Notes is subject to certain
customary conditions relating to compliance with any applicable
law or any applicable interpretation by the staff of the
Commission, which may be waived by the Company in its reasonable
discretion. The Company currently expects that each of the
conditions will be satisfied and that no waivers will be
necessary. See "The Exchange Offer--Certain Conditions to the
Exchange Offer."
Procedures for Tendering
Existing Notes.......... Each holder of Existing Notes wishing to accept the Exchange
Offer must complete, sign and date the Letter of Transmittal, or
a facsimile thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together with such
Existing Notes and any other required documentation, to the
Exchange Agent (as defined) at the address set forth herein. See
"The Exchange Offer--Procedures for Tendering Existing Notes."
Use of Proceeds........... The Company will not receive any proceeds from the Exchange
Offer.
Exchange Agent............ Marine Midland Bank (the "Exchange Agent") is serving as the
Exchange Agent in connection with the Exchange Offer.
Federal Income Tax
Consequences............ The exchange of Notes pursuant to the Exchange Offer should not
be a taxable event for federal income tax purposes. See "Certain
Federal Income Tax Considerations."
9
CONSEQUENCES OF EXCHANGING EXISTING NOTES PURSUANT TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, the Company is of the view that
holders of Existing Notes (other than any holder who is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act, who exchange
their Existing Notes for New Notes pursuant to the Exchange Offer generally may
offer such New Notes for resale, resell such New Notes and otherwise transfer
such New Notes without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided such New Notes are acquired in the
ordinary course of the holders' business and such holders have no arrangement
with any person to participate in a distribution of such New Notes. Each
broker-dealer that receives New Notes for its own account in exchange for
Existing Notes must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." In addition, to
comply with the securities laws of certain jurisdictions, if applicable, the New
Notes may not be offered or sold unless they have been registered or qualified
for sale in such jurisdictions or in compliance with an available exemption from
registration or qualification. The Company has agreed, pursuant to the
Registration Rights Agreement and subject to certain specified limitations
therein, to register or qualify the New Notes for offer or sale under the
securities or blue sky laws of such jurisdictions as any holder of the Notes
reasonably requests in writing. If a holder of Existing Notes does not exchange
such Existing Notes for New Notes pursuant to the Exchange Offer, such Existing
Notes will continue to be subject to the restrictions on transfer contained in
the legend thereon. In general, the Existing Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. Holders of Existing Notes do not have any appraisal or
dissenters' rights under the Mississippi Business Corporation Act in connection
with the Exchange Offer. See "The Exchange Offer--Consequences of Failure to
Exchange; Resales of New Notes."
The Existing Notes are currently eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market.
Following commencement of the Exchange Offer but prior to its consummation, the
Existing Notes may continue to be traded in the PORTAL market. Following
consummation of the Exchange Offer, the New Notes will not be eligible for
PORTAL trading.
THE NEW NOTES
The terms of the New Notes are identical in all material respects to the
Existing Notes, except for certain transfer restrictions and registration rights
relating to the Existing Notes.
Securities Offered.............. $200.0 million in aggregate principal amount of 10 3/8%
Senior Subordinated Notes due 2007.
Maturity........................ September 17, 2007.
Interest Payment Dates.......... March 15 and September 15 of each year, commencing March
15, 1998.
Mandatory Redemption............ The Company will not be required to make mandatory
redemption or sinking fund payments with respect to the
New Notes.
Optional Redemption............. The New Notes (and any outstanding Existing Notes) will be
redeemable at the option of the Company, in whole or in
part, at any time on or after September 15, 2002 at the
redemption prices set forth herein, plus accrued and
unpaid interest and Liquidated Damages (as defined), if
any, to the date of redemption. In addition, at any time
prior to September 15, 2000 the Company may, on one or
more occasions, redeem up to 33 1/3% of the then
outstanding Notes with any of the net proceeds of one or
more public offerings of common stock of the Company at a
redemption price of 110.375% of the principal amount
thereof plus accrued and unpaid interest and Liquidated
Damages, if any, to the applicable
10
date of redemption; PROVIDED that at least 66 2/3% of the
original principal amount of Notes remain outstanding
immediately after the occurrence of each such redemption.
Change of Control............... In the event of a Change of Control (as defined), each
holder of the Notes will have the right to require the
Company to purchase the Notes held by such holder at a
price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase.
Ranking......................... The New Notes will be general unsecured obligations of the
Company subordinated in right of payment to all existing
and future Senior Debt of the Company, including
indebtedness pursuant to the Senior Notes and the Senior
Credit Facility. At July 26, 1997, on a Pro Forma Basis,
the aggregate principal amount of outstanding Senior Debt
of the Company would have been approximately $348.1
million (exclusive of an unused commitment of up to $66.1
million under the Senior Credit Facility).
Subsidiary Guarantees........... The New Notes will be guaranteed, jointly and severally,
on a senior subordinated basis by each of the Subsidiary
Guarantors. The Subsidiary Guarantees will be subordinated
in right of payment to all existing and future Senior Debt
of the Subsidiary Guarantors, including the guarantees of
the Subsidiary Guarantors of the Company's obligations
under the Senior Notes and the Senior Credit Facility. At
July 26, 1997, on a Pro Forma Basis, the aggregate
principal amount of outstanding Senior Debt of the
Subsidiary Guarantors would have been approximately $10.4
million (excluding guarantees by the Subsidiary Guarantors
of the Company's obligations under the Senior Notes and
the Senior Credit Facility).
Covenants....................... The Indenture (as defined) contains covenants that, among
other things; (i) limit the incurrence by the Company and
its Restricted Subsidiaries of additional indebtedness;
(ii) limit the issuance by the Company and the Subsidiary
Guarantors of Disqualified Stock (as defined); (iii)
restrict the ability of the Company and its Restricted
Subsidiaries to make dividends and other restricted
payments or investments; (iv) limit the ability of the
Company and its Restricted Subsidiaries to enter into
sale-leaseback transactions; (v) limit transactions by the
Company and its Restricted Subsidiaries with affiliates;
(vi) limit the ability of the Company and its Restricted
Subsidiaries to make asset sales; (vii) limit the ability
of the Company and its Restricted Subsidiaries to incur
certain liens; (viii) limit the ability of the Company to
consolidate or merge with or into, or to transfer all or
substantially all of its assets to, another person; and
(ix) prohibit the Company and the Subsidiary Guarantors
from incurring any indebtedness that is junior to Senior
Debt and senior to the Notes or the Subsidiary Guarantees,
as applicable.
RISK FACTORS
Holders of Existing Notes should carefully consider all of the information
set forth in this Prospectus and, in particular, should evaluate the specific
factors under "Risk Factors" beginning on page 14 in connection with the
Exchange Offer.
11
SUMMARY PRO FORMA CONDENSED CONSOLIDATED FINANCIAL AND OTHER DATA
The summary pro forma statement of operations and other data for the LTM
Period and balance sheet data at July 26, 1997 set forth below are calculated on
a Pro Forma Basis, and have been prepared on the basis set forth in, are
qualified in their entirety by reference to, and should be read in conjunction
with, the Pro Forma Condensed Consolidated Financial Statements included
elsewhere in this Prospectus. The summary pro forma statement of operations data
and other data do not purport to represent what the Company's results of
operations would have been if the Transactions, the Delchamps Merger and the
Anticipated Store Dispositions had actually occurred at the beginning of the
period specified nor does such data purport to represent the Company's results
of operations for any future period.
LTM PERIOD
(DOLLARS IN
THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales................................................................................... $ 2,166,461
Gross profit................................................................................ 564,903
Direct store expense........................................................................ 392,673
Warehouse, administrative and general expenses.............................................. 95,462
Special charges, net(1)..................................................................... 4,957
-----------
Operating income............................................................................ 71,811
Interest expense, net....................................................................... 67,484
-----------
Earnings before income taxes................................................................ 4,327
Income taxes................................................................................ 3,260
-----------
Net earnings................................................................................ $ 1,067
-----------
-----------
OTHER DATA:
EBITDA(2)................................................................................... $ 127,800
Depreciation and amortization............................................................... 51,632
LIFO benefit................................................................................ (600)
Capital expenditures........................................................................ 38,513
Supermarkets open at end of period.......................................................... 199
Remodels during period...................................................................... 17
Gross profit as a percentage of sales....................................................... 26.1%
EBITDA as a percentage of sales............................................................. 5.9%
Ratio of EBITDA to cash interest expense(3)................................................. 2.0x
Ratio of net debt to EBITDA(4).............................................................. 4.3x
PRO FORMA
AT JULY 26,
1997
BALANCE SHEET DATA:
Cash and cash equivalents........................................................................ $ 14,761
Working capital.................................................................................. 38,829
Total assets..................................................................................... 698,054
Total debt....................................................................................... 558,461
Other long-term liabilities, including current portion........................................... 67,827
Stockholders' deficit............................................................................ (154,328)
- ------------------------
(1) Includes (i) a $1.8 million non-cash charge accrued in fiscal 1997 relating
to future payments that will be made under an employment agreement with
Jitney-Jungle's former Chief Executive Officer; (ii) a $1.0 million charge
relating to termination benefits payable to employees of Jitney-Jungle whose
positions were eliminated in May 1997; (iii) a $4.3 million charge relating
to cash payments made by Delchamps in connection the settlement of a lawsuit
in March 1997; and (iv) a $2.1 million gain on the sale of certain assets of
Delchamps in fiscal 1997.
12
SUMMARY PRO FORMA CONDENSED CONSOLIDATED FINANCIAL AND OTHER DATA
(2) EBITDA is defined as income from continuing operations before interest,
taxes, depreciation, amortization, LIFO expense (benefit) and special items,
net. EBITDA is presented because it is a widely accepted financial indicator
of a company's ability to service indebtedness. However, EBITDA should not
be considered as an alternative to income from operations or to cash flows
from operating activities (as determined in accordance with generally
accepted accounting principles) and should not be construed as an indication
of a company's operating performance or as a measure of liquidity. EBITDA
reflects $14.2 million of anticipated cash cost savings which Management has
identified related to the elimination of duplicative costs for functional
areas and facilities which are based on assumptions that Management believes
are factually supportable and directly related to the Delchamps Acquisition.
EBITDA does not include an additional $5.2 million of estimated cash cost
savings that Management believes may occur as a result of increased
purchasing leverage and backhaul income. The components of these estimated
cash cost savings are set forth in the notes to the Pro Forma Condensed
Consolidated Statements of Operations and Other Data included elsewhere in
this Prospectus and are summarized as follows (in millions):
ANTICIPATED CASH COST SAVINGS REFLECTED IN THE PRO FORMA STATEMENT OF
OPERATIONS AND OTHER DATA:
Reduced general and administrative expenses................................ $ 9.3
Improved warehousing and distribution efficiencies......................... 3.9
Reduced advertising and printing expenses.................................. 1.0
---------
Total.................................................................... $ 14.2
---------
---------
ADDITIONAL POTENTIAL CASH COST SAVINGS:
Increased purchasing leverage.............................................. $ 3.4
Increased backhaul income.................................................. 1.8
---------
Total.................................................................... $ 5.2
---------
---------
Total estimated cash cost savings............................................ $ 19.4
---------
---------
(3) Cash interest expense excludes $2.8 million of amortization of deferred
financing fees.
(4) Represents the ratio of (i) pro forma indebtedness less pro forma cash as of
July 26, 1997 to (ii) pro forma EBITDA for the LTM Period.
13
RISK FACTORS
Holders of Existing Notes should carefully consider the specific factors set
forth below as well as the other information included in this Prospectus in
connection with the Exchange Offer. The risk factors set forth below are
generally applicable to the Existing Notes as well as the New Notes.
THIS PROSPECTUS INCLUDES "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. ALTHOUGH
JITNEY-JUNGLE BELIEVES THAT ITS PLANS, INTENTIONS AND EXPECTATIONS REFLECTED IN
SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT
SUCH PLANS, INTENTIONS OR EXPECTATIONS WILL BE ACHIEVED. IMPORTANT FACTORS THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM JITNEY-JUNGLE'S FORWARD
LOOKING STATEMENTS ARE SET FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS. ALL
FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO JITNEY-JUNGLE OR PERSONS ACTING ON
ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY
STATEMENTS SET FORTH BELOW.
INTEGRATION OF DELCHAMPS
The integration of the administrative, finance and other operations of
Delchamps with those of Jitney-Jungle, the coordination of Delchamps' sales and
marketing organizations with those of Jitney-Jungle and the implementation of
appropriate operational, financial and management systems and controls in
connection with the Delchamps Acquisition will require significant financial
resources and substantial attention from Management, and could result in the
diversion of such resources and attention from the core businesses of
Jitney-Jungle and Delchamps. Specifically, Jitney-Jungle's supermarket base will
nearly double as a result of the Delchamps Acquisition and Management expects
that the coordination of purchasing and distribution and warehousing for the
combined operations following the Delchamps Acquisition will be a significant
focus of Management. In addition, Jitney-Jungle's business plan with respect to
the combined operations of the Company following the Delchamps Acquisition
contemplates anticipated cash cost savings that are expected to result from (i)
reduced general and administrative expenses arising from the closure of the
corporate headquarters of Delchamps and associated headcount reductions, (ii)
improved warehouse and distribution efficiencies, (iii) reduced advertising and
printing expenses resulting from moving a portion of Delchamps' print
advertising needs to Jitney-Jungle's in-house printing facilities, (iv)
increased purchasing leverage that may enable the Company to negotiate more
favorable terms from its vendors, and (v) increased backhaul income. Of the
aggregate potential $19.4 million in such annualized cash cost savings,
approximately $14.2 million are reflected in the Pro Forma Condensed
Consolidated Financial Statements included elsewhere herein because Management
believes they are factually supportable and directly related to the Transactions
and the Delchamps Merger. In addition, certain marketing and cost saving
initiatives undertaken at Jitney-Jungle prior to the Delchamps Acquisition will
be extended to the Delchamps supermarkets, including introduction of a "frequent
shopper card" and implementation of improved labor scheduling, in each case, at
the acquired Delchamps supermarkets. The potential cash cost savings discussed
above are based on estimates prepared solely by members of Management based on
information available to them and have not been independently reviewed. The
estimates necessarily make assumptions as to future events, including general
industry, competitive and business conditions, many of which are beyond the
control of the Company. Actual cash cost savings achieved by the Company may
vary considerably from the estimates discussed above. Any inability of the
Company to integrate Delchamps successfully or to achieve the cash cost savings
described above in a timely and efficient manner could adversely affect the
Company's financial condition and results of operations.
SUBSTANTIAL LEVERAGE
The Company is highly leveraged and its debt instruments contain and will
continue to contain restrictions on its operations. See "Description of Certain
Indebtedness" and "Description of the Notes." At July 26, 1997, on a Pro Forma
Basis, the Company would have had approximately $558.5 million of total debt
(including capitalized leases and current installments) and a shareholders'
deficit of approximately
14
$154.3 million. On a Pro Forma Basis, the Company's ratio of earnings to fixed
charges would have been 1.1 to 1 for the LTM Period.
The significant indebtedness of the Company will have several important
consequences to the holders of the Notes, including, but not limited to, the
following: (i) a substantial portion of the Company's cash flow from operations
must be dedicated to the payment of principal and interest with respect to the
indebtedness under the Senior Credit Facility, the Senior Notes and the Notes;
(ii) indebtedness under the Senior Credit Facility and the Senior Notes will
become due prior to the time the Notes will become due and may adversely affect
the Company's ability to pay principal of and interest when due on the Notes;
(iii) indebtedness under the Senior Credit Facility will bear interest at
fluctuating rates, and a substantial increase in interest rates could adversely
affect the Company's ability to meet its debt service obligations; (iv) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions or other purposes may be impaired;
(v) the Company's flexibility may be limited in responding to changes in the
industry and economic conditions generally; (vi) the Senior Credit Facility, the
Senior Note Indenture, the Indenture and other agreements of the Company related
to its indebtedness contain numerous financial and other restrictive covenants,
the failure to comply with which may result in an event of default, which, if
not cured or waived, could have a material adverse effect on the Company; and
(vii) the ability of the Company to satisfy its obligations pursuant to such
indebtedness will be dependent upon its future performance which, in turn, will
be subject to management, financial, competitive and other factors affecting the
business and operations of the Company, some of which are beyond the control of
the Company. See "Pro Forma Condensed Consolidated Financial Statements," "Pro
Forma Liquidity," "Selected Historical Financial Data of Jitney-Jungle,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Jitney-Jungle," "Selected Historical Financial Data of Delchamps"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations of Delchamps."
If the Company is unable to generate sufficient cash flow to meet its debt
obligations, the Company may be required to renegotiate the payment terms or to
refinance all or a portion of the Senior Credit Facility, the Senior Notes or
the Notes, to sell assets or to obtain additional financing. If the Company
could not successfully refinance its indebtedness, substantially all of the
Company's long-term debt would be in default and could be declared immediately
due and payable. Furthermore, the Senior Credit Facility, the Senior Note
Indenture and the Indenture contain numerous financial and operating covenants,
including, among others, covenants requiring the Company to maintain certain
leverage, interest coverage and fixed charge coverage ratios and restricting the
ability of the Company and its subsidiaries to incur indebtedness or to create
or suffer to exist certain liens. The ability of the Company to comply with such
provisions may be affected by events beyond its control. In the event the
Company fails to comply with these covenants, it could be in default under the
Senior Credit Facility, the Senior Note Indenture and/or the Indenture. In the
event of such default, substantially all of the Company's long-term debt could
be declared immediately due and payable. See "Description of Certain
Indebtedness" and "Description of the Notes."
SUBORDINATION AND RANKING OF THE NOTES
The New Notes, like the Existing Notes, will be general unsecured
obligations of the Company subordinated in right of payment to all existing and
future Senior Debt of the Company, including indebtedness pursuant to the Senior
Notes and the Senior Credit Facility. By reason of such subordination, in the
event of an insolvency, liquidation, reorganization, dissolution or other
winding-up of the Company, the Senior Debt must be paid in full before the
principal of, premium, if any, and interest or Liquidated Damages, if any, on
the Notes may be paid. At July 26, 1997, on a Pro Forma Basis, the aggregate
principal amount of outstanding Senior Debt of the Company would have been
approximately $348.1 million (exclusive of an unused commitment of up to $66.1
million under the Senior Credit Facility). If the Company incurs any additional
PARI PASSU DEBT, the holders of such debt would be entitled to share ratably
15
with the holders of the Notes in any proceeds distributed in connection with any
insolvency, liquidation, reorganization, dissolution or other winding up of the
Company. This may have the effect of reducing the amount of proceeds paid to
holders of the Notes. The Indenture permits the Company to incur additional
Senior Debt or PARI PASSU debt if certain conditions are met. See "Pro Forma
Capitalization," "Description of Certain Indebtedness" and "Description of the
Notes--Certain Covenants."
In addition, certain holders of Senior Debt may prevent cash payments with
respect to the principal of, premium, if any, and interest or Liquidated
Damages, if any, on the Notes for a period of up to 179 days following a
non-payment default with respect to Senior Debt. In addition, the Indenture
permits the subsidiaries of the Company to incur debt under certain
circumstances. Any such debt incurred by a subsidiary of the Company that is not
a Subsidiary Guarantor would be structurally senior to the Notes. All of the
Company's subsidiaries are Subsidiary Guarantors with respect to the Notes. The
guarantee of the Notes by each Subsidiary Guarantor is subordinated in right of
payment to the Senior Debt of such Subsidiary Guarantor on substantially the
same terms as the Notes are subordinated to the Senior Debt of the Company. See
"Description of the Notes--Subordination."
COMPETITION
The supermarket industry is highly competitive and characterized by narrow
profit margins. The Company's competitors include national and regional
supermarket chains, independent and specialty grocers, drug and convenience
stores, and the newer "alternative format" food stores, including warehouse club
stores, deep discount drug stores and "Supercenters;" in certain areas, the
Company also competes with military commissaries. Supermarket chains generally
compete on the basis of location, quality of products, service, price, product
variety and store condition. During the past three years, an overall lack of
inflation in food prices and increasingly competitive markets have made it
difficult for the Company and other supermarket operators to achieve comparable
store sales gains. Because sales growth has been difficult to attain, many
operators, including the Company, have attempted to maintain market share
through increased levels of promotional activities and discount pricing,
creating a more difficult environment in which to increase year-over-year sales
gains consistently. In addition, because of the growth in the Southeast market,
where all of the Company's supermarkets are located, many existing operators,
including the Company, have opened new supermarkets in existing markets which
has resulted in declines in same store sales for the existing (comparable) store
base of these same grocery chains. The Company regularly monitors its
competitors' prices and adjusts its prices and marketing strategy as Management
deems appropriate in light of existing conditions. The Company faces increased
competitive pressure in all of its markets, including Jackson, Mississippi and
Mobile, Alabama where it has historically held leading market positions, from
existing competitors and from the threatened entry by one or more major new
competitors. Some of the Company's competitors have greater financial resources
and could use these resources to take measures which could adversely affect the
Company's competitive position. See "Business--Markets and Competition."
RISK OF INABILITY TO SATISFY CHANGE OF CONTROL OFFER
Upon the occurrence of a "Change of Control," the Company will be required
to make an offer to purchase all of the outstanding Notes at a purchase price in
cash equal to 101% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase. See
"Description of the Notes--Repurchase at the Option of Holders--Change of
Control" for the definition of "Change of Control." There can be no assurance
that the Company will have the funds necessary to effect such a purchase if such
an event were to occur. In addition, the Senior Credit Facility would prohibit,
and the Senior Notes would restrict, the Company from purchasing any Notes. The
Senior Credit Facility also provides that certain changes in control of the
Company would constitute a default thereunder. Any future credit agreements or
other agreements relating to Senior Debt to which the Company becomes a party
may contain similar restrictions and provisions. In the event a Change of
16
Control occurs at a time when the Company is prohibited from purchasing Notes,
the Company could seek the consent of its lenders to purchase the Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such a consent or repay such borrowings, the Company
will remain prohibited from purchasing Notes. In such case, the Company's
failure to purchase tendered Notes would constitute an Event of Default under
the Indenture, which would cause a default under the Senior Credit Facility and
the Senior Notes. In such circumstances, the subordination provisions in the
Notes would likely restrict payments to the holders of the Notes. See
"Description of the Notes."
RISKS RELATING TO FUTURE ACQUISITIONS
The Company's future growth is dependent, in part, on its ability to
consummate additional supermarket acquisitions. There can be no assurance,
however, that the Company will be able to identify additional acquisitions or
that, if consummated, any anticipated benefits will be realized from such
acquisitions. Moreover, future acquisitions by the Company could result in the
incurrence of additional indebtedness, exposure to contingent liabilities and
the amortization of expenses related to goodwill and other intangible assets,
all of which could adversely affect the Company's financial condition and
results of operations.
SUBSIDIARY GUARANTEES
The holders of the Notes will have no direct claims against the subsidiaries
of the Company other than the claim created by the Subsidiary Guarantees. The
Subsidiary Guarantees are subordinated in right of payment to all existing and
future Senior Debt of the Subsidiary Guarantors, including the guarantees of the
Subsidiary Guarantors of the Company's obligations under the Senior Notes and
the Senior Credit Facility. At July 26, 1997, on a Pro Forma Basis, the
aggregate principal amount of outstanding Senior Debt of the Subsidiary
Guarantors would have been approximately $10.4 million (excluding guarantees by
the Subsidiary Guarantors of the Company's obligations under the Senior Notes
and the Senior Credit Facility). See "Description of Certain Indebtedness." In
addition, the Subsidiary Guarantees may be subject to legal challenge under
applicable provisions of the United States Bankruptcy Code or comparable
provisions of state fraudulent transfer or conveyance laws. If such a challenge
were upheld, the Subsidiary Guarantees would be invalidated and unenforceable
and it is possible that holders of the Notes would be ordered by a court to turn
over to other creditors of the Subsidiary Guarantors or to their trustees in
bankruptcy all or a portion of the payments made to them pursuant to the
Subsidiary Guarantees. To the extent that the Subsidiary Guarantees are not
enforceable in amounts sufficient to satisfy the claims of the holders of the
Notes, the rights of holders of the Notes to participate in any distribution of
assets of any Subsidiary Guarantors upon liquidation, bankruptcy, reorganization
or otherwise would be subject to prior claims of creditors of that Guarantor.
GEOGRAPHIC CONCENTRATION
All of the Company's supermarkets are located in the Southeast region, with
a strong concentration in Mississippi and Alabama, and thus the performance of
the Company will be particularly influenced by the economic and demographic
trends in this area. Although the Southeast region has experienced economic and
demographic growth over the past several years, a significant economic downturn
in the region could have a material adverse effect on the Company.
RELIANCE ON KEY MANAGEMENT
The Company's success depends to a significant degree upon the continued
contributions of Management as well as the Company's sales and marketing,
finance and manufacturing personnel, certain of whom would be difficult to
replace. The loss of the services of certain of these executives could have an
adverse effect on the Company. Although certain of these executives are
shareholders of Jitney-Jungle and have employment contracts with the Company,
there can be no assurance that the services of such personnel will continue to
be available to the Company. See "Management" and "Ownership of Capital Stock."
17
ENVIRONMENTAL RISKS
The Company is subject to federal, state and local laws and regulations
including those relating to environmental protection, work place safety, public
health and community right-to-know. The Company's supermarkets are not highly
regulated under environmental laws since the Company does not engage in any
industrial activities at those locations. The Company's expenditures to comply
with such laws and regulations at its supermarkets primarily consist of those
related to retrofitting chlorofluorocarbon ("CFC") chiller units. In addition,
56 of the Company's facilities (including all 53 of the Pump And Save
facilities) and one former facility for which the Company has retained
responsibility, contain or contained underground tanks for the storage of
petroleum products, such as gasoline and diesel fuel. The Company maintains an
environmental compliance program that includes the implementation of required
technical and operational activities designed to minimize the potential for
leaks and spills, maintenance of records and the regular testing and monitoring
of tank systems for tightness. There can be no assurance, however, that these
tank systems will at all times remain free from leaks or that the use of these
tanks will not result in spills. Sixteen of the facilities have had leaks or
spills, 12 of which were related to underground or above-ground petroleum
storage tanks and four of which were unrelated to tank storage. All of such
leaks or spills have been or are being responded to in conjunction with the
appropriate regulatory agencies. Historically, none of the 16 locations which
have had leaks or spills have required expenditures that would have had a
material effect on the results of operations, liquidity or financial condition
of the Company. All significant required expenditures in connection with the
clean up of such leaks and spills have been made at these 16 sites, except at
three newly discovered locations which are still undergoing investigation and
one location awaiting state approval of its remediation plan. Any future leak or
spill, depending on such factors as the material involved, quantity,
environmental setting and availability of state clean-up funds, could result in
response activities that could interrupt the Company's operations and could
result in costs to the Company that could have a material adverse effect on the
Company. In addition, there can be no assurance that future environmental
legislation and regulation will not require material expenditures by the Company
or otherwise have a material adverse effect on the Company's operations. See
"Business-- Environmental Matters."
CONTROL BY BRS
Approximately 71%, on a fully diluted basis, of the outstanding shares of
Jitney-Jungle's common stock is held by Bruckmann, Rosser, Sherrill & Co., L.P.
(the "Fund") and certain related investors (collectively, the "Fund Entities").
As a result, the Fund controls Jitney-Jungle and has the power to elect a
majority of its directors, appoint new management and approve any action
requiring the approval of shareholders, including adopting certain amendments to
Jitney-Jungle's articles of incorporation and approving mergers or sales of
substantially all of Jitney-Jungle's assets. The directors elected by the Fund
will have the authority to effect decisions affecting the capital structure of
Jitney-Jungle including the issuance of additional capital stock, the
implementation of stock repurchase programs and the declaration of dividends.
See "Ownership of Capital Stock."
FRAUDULENT CONVEYANCE CONSIDERATIONS
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer or conveyance law, if, at the
time it issued the Existing Notes, the Company (a) incurred such indebtedness
with intent to hinder, delay or defraud creditors, or (b)(i) received less than
reasonably equivalent value or fair consideration therefor and (ii)(A) was
insolvent at the time of the incurrence, (B) was rendered insolvent by reason of
such incurrence (and the application of the proceeds thereof), (C) was engaged
or was about to engage in a business or transaction for which the assets
remaining with the Company constituted unreasonably small capital to carry on
its business, or (D) intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they mature, then, in each such case, a
court of competent jurisdiction could void, in whole or in part, the Notes
18
or, in the alternative, subordinate the Notes to existing and future
indebtedness of the Company. The measure of insolvency for purposes of the
foregoing will vary depending upon the law applied in such case. Generally,
however, the Company would be considered insolvent if the sum of its debts,
taking contingent liabilities into account, was greater than all of its assets
at fair valuation or if the present fair saleable value of its assets was less
than the amount that would be required to pay the probable liability on its
existing debts, including contingent liabilities, as they become absolute and
matured. Under Mississippi fraudulent conveyance law, a transaction may be set
aside for lack of consideration, regardless of the solvency of the parties.
For purposes of the United States Bankruptcy Code and state fraudulent
transfer or conveyance laws, Management believes that, (i) indebtedness under
the Existing Notes was incurred without the intent to hinder, delay or defraud
creditors and for proper purposes and in good faith, (ii) the Company received
reasonably equivalent value or fair consideration, and (iii) based on forecasts,
asset valuations and other financial information, the Company, after
consummation of the Transactions and the Delchamps Merger, including the
incurrence of indebtedness under the Existing Notes and the application of the
proceeds thereof, will be solvent, did and will have sufficient capital for
carrying on its business and will be able to pay its debts as they mature. There
can be no assurance, however, that a court passing on such questions would agree
with Management's view.
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Existing Notes currently are eligible for trading in the PORTAL Market.
The New Notes are new securities for which there is currently no established
market. The Company does not intend to list the New Notes on any national
securities exchange or to seek the admission thereof to trading in the National
Association of Securities Dealers Automated Quotation System. The Initial
Purchasers have advised the Company that they currently intend to make a market
in the New Notes but that they are not obligated to do so and any such market
making may be discontinued at any time. There can be no assurance as to the
development of any market or the liquidity of any market that may develop for
the New Notes. If an active public market does not develop, the market, price
and liquidity of the New Notes may be adversely affected. Future trading prices
of the New Notes will depend on prevailing interest rates, the market for
similar securities and other factors, including general economic conditions and
the financial condition and performance of the Company. Holders of the New Notes
should be aware that they may be required to bear the financial risks of their
investment for an indefinite period of time. See "Description of the Notes."
19
THE TRANSACTIONS
Concurrently with the Delchamps Tender Offer, Management consummated the
Transactions, including the sale of the Existing Notes, the amendment and
restatement of the Senior Credit Facility and the initial borrowing thereunder,
the repayment of approximately $15.4 million of indebtedness of Delchamps and
the Consent Solicitation pursuant to which certain amendments to the Senior Note
Indenture were approved by the holders of the Senior Notes.
THE DELCHAMPS ACQUISITION
The Delchamps Acquisition will be consummated pursuant to the Delchamps
Merger Agreement. The aggregate Delchamps Purchase Price will be approximately
$218.2 million. The Board of Directors of Delchamps has unanimously approved the
Delchamps Acquisition and the Delchamps Merger Agreement, has determined that
the Delchamps Purchase Price is fair to the shareholders of Delchamps and has
recommended that all shareholders of Delchamps vote in favor of the Delchamps
Merger.
In accordance with the Delchamps Merger Agreement, on July 14, 1997 DAC
commenced the Delchamps Tender Offer to purchase all of the issued and
outstanding shares of common stock, par value $.01 per share, and associated
preferred share purchase rights of Delchamps (collectively, "Shares"). On
September 12, 1997, DAC accepted for payment pursuant to the Delchamps Tender
Offer an aggregate of 5,317,510 Shares. Pursuant to the Merger Agreement and
subject to the satisfaction of the conditions set forth therein, DAC will be
merged with and into Delchamps in accordance with the relevant provisions of the
Alabama Business Corporation Act ("ABCA"), the separate corporate existence of
DAC will cease and Delchamps will become a wholly owned subsidiary of
Jitney-Jungle.
The Delchamps Merger Agreement contains customary representations,
warranties and covenants and provides for termination prior to closing under
certain circumstances. If (i) the Delchamps Merger Agreement is terminated by
either Jitney-Jungle or DAC because of a material willful breach of the
Delchamps Merger Agreement by Delchamps, or (ii) any Change of Control (as
defined in the Delchamps Merger Agreement) occurs during the term of the
Delchamps Merger Agreement or, under certain circumstances, within 180 days
following the termination thereof, then Delchamps will be required to pay
Jitney-Jungle a termination fee of $7.0 million and to reimburse Jitney-Jungle
and DAC for up to $3.0 million of their out-of-pocket fees and expenses.
THE REFINANCING
Upon consummation of the Delchamps Tender Offer, Jitney-Jungle's existing
revolving credit agreement with Fleet Capital Corporation, as successor agent to
Fleet Bank, N.A., and certain other banks was amended and restated to provide
for up to $150.0 million of revolving loans under the Senior Credit Facility,
the Company borrowed approximately $72.7 million thereunder and the Company
repaid approximately $15.4 million of Delchamps' outstanding indebtedness.
THE CONSENT SOLICITATION
In order to permit the Delchamps Acquisition and related financings,
Jitney-Jungle consummated the Consent Solicitation and obtained from holders of
its Senior Notes approval of certain amendments to the Senior Note Indenture
that, among other things, permit the Company to issue, and the Subsidiary
Guarantors to guarantee, the Notes and increase the amount of borrowings
available under the Senior Credit Facility. In connection with the Consent
Solicitation, the Company paid to the consenting holders of Senior Notes a
consent payment.
20
EXPECTED STORE CLOSURES AND DIVESTITURES
In connection with the Delchamps Acquisition, Management has determined to
close 13 Delchamps supermarkets that are unprofitable or that in other respects
have not performed in accordance with expectations. Seven of such stores are
located in Alabama, four are located in Louisiana, one is located in Florida and
one is located in Mississippi.
In connection with the Delchamps Acquisition, Jitney-Jungle received a
request for additional information from the FTC under the Hart-Scott-Rodino
Antitrust Improvement Act of 1976, as amended (the "HSR Act"). As a result of
negotiations with the staff of the FTC which addressed the FTC's concerns about
the proposed combination with respect to certain markets in which Jitney-Jungle
and Delchamps have stores, Jitney-Jungle and Delchamps reached a settlement
agreement with the FTC. Pursuant to the terms of the settlement agreement, the
FTC terminated the waiting period imposed by the HSR Act, and Jitney-Jungle and
Delchamps agreed under the terms of a proposed consent agreement to divest five
Jitney-Jungle stores and five Delchamps stores to SUPERVALU, Inc. ("SUPERVALU")
by February 12, 1998 or one month after the consent agreement becomes effective,
whichever is later. The consent agreement is subject to a final FTC approval
following a 60 day public notice period. The five Delchamps stores are located
in Hancock, Harrison, Lamar and Forrest Counties, Mississippi. The aggregate
proposed purchase price for the five Delchamps' stores will be the sum of the
purchase price for the merchandise as determined by a physical inventory and the
purchase price for the equipment of $725,000, subject to certain adjustments.
The proposed consent agreement would require Jitney-Jungle and Delchamps, for
ten years, to notify the FTC before acquiring any supermarkets in Hancock,
Jackson, Lamar, Forrest and Warren Counties, Mississippi and Escambia County in
Florida. Jitney-Jungle and Delchamps would also be prohibited from attempting to
restrict the ability of others to operate any supermarket they formerly owned in
those counties.
The Pro Forma Condensed Consolidated Financial Statements contained
elsewhere in this Prospectus contemplate, in connection with the settlement
agreement reached with the FTC, the sale by Jitney-Jungle of an aggregate of ten
stores currently operated by Jitney-Jungle and Delchamps. This pro forma
adjustment is solely for illustrative purposes and may not represent the actual
number of stores finally approved by the FTC for divestment pursuant to the
proposed consent agreement among Jitney-Jungle, Delchamps and SUPERVALU. See
"Pro Forma Condensed Consolidated Financial Statements."
21
PRO FORMA CAPITALIZATION
The following table sets forth the unaudited pro forma cash and cash
equivalents and pro forma capitalization of the Company at July 26, 1997, on a
Pro Forma Basis. The pro forma data set forth in this table may not be
indicative of the actual cash and cash equivalents or capitalization that would
have occurred had the Transactions and the Delchamps Merger in fact occurred on
the date specified. This table should be read in conjunction with "Pro Forma
Condensed Consolidated Financial Statements" and the notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Jitney-Jungle," "Management's Discussion and Analysis of Financial
Condition and Results of Operations of Delchamps" and the historical financial
statements of Jitney-Jungle and Delchamps and the notes thereto included
elsewhere in this Prospectus.
AT JULY 26, 1997
(DOLLARS IN
THOUSANDS)
Cash and cash equivalents................................................................... $ 14,761
----------
----------
Long-term debt, including current portion:
Senior Credit Facility(1)................................................................. $ 72,700
Senior Notes.............................................................................. 200,000
10 3/8% Senior Subordinated Notes due 2007................................................ 200,000
Capitalized lease obligations............................................................. 73,962
Other long-term debt...................................................................... 11,799
----------
Total debt.............................................................................. 558,461
Mandatorily redeemable preferred stock:
225,000 shares Class A Preferred Stock authorized, par value $.01 per share, 225,000
shares outstanding; 275,000 shares Class B Preferred Stock authorized, par value $.01
per share, 274,460.24 shares outstanding; 23,958.33 shares Class C Preferred Stock,
Series 2 authorized, par value $.01 per share, 23,958.33 shares outstanding............. 59,508
----------
Stockholders' deficit:
76,041.67 shares Class C Preferred Stock, Series 1 authorized, par value $.01 per share,
76,041.67 shares outstanding............................................................ 8,663
5,000,000 shares Common Stock authorized, par value $.01 per share, 425,000 shares
outstanding............................................................................. 4
Additional paid-in capital................................................................ (302,326)
Retained earnings......................................................................... 139,331
----------
Total stockholders' deficit............................................................. (154,328)
----------
Total capitalization........................................................................ $ 463,641
----------
----------
- ------------------------
(1) Excludes $10.5 million of letters of credit issued under the Senior Credit
Facility and $0.7 million of letters of credit issued under the Senior
Credit Facility upon consummation of the Transactions.
22
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following Pro Forma Condensed Consolidated Balance Sheet is based on the
historical balance sheet of Jitney-Jungle at July 26, 1997 and of Delchamps at
June 28, 1997 and was prepared as if the Transactions, the Delchamps Merger and
the Anticipated Store Dispositions had occurred on July 26, 1997. The Delchamps
Acquisition will be accounted for as a purchase, and the total purchase price
will be allocated to Delchamps' tangible and intangible assets and liabilities
based on their estimated fair values at the closing date of the acquisition,
based on valuations and studies which have not yet been performed. Accordingly,
the excess of the purchase price over the historical book value of the net
assets to be acquired has not yet been allocated to individual assets and
liabilities other than the amounts described in the notes to the Pro Forma
Condensed Consolidated Financial Statements. Any variation between such amounts
and the final allocation will change the amount of goodwill recognized in
connection with the Delchamps Acquisition and the related amortization expense.
Management believes, however, that when the final valuation of the net assets
acquired is completed, the allocation of the purchase price will not differ
materially from the amounts shown herein.
The following Pro Forma Condensed Consolidated Statements of Operations and
Other Data for the fiscal year ended May 3, 1997, the 12 weeks ended July 20,
1996, the 12 weeks ended July 26, 1997 and the LTM Period include (i) the
historical results of Jitney-Jungle for the fiscal year ended May 3, 1997 and of
Delchamps for the fiscal year ended June 28, 1997, (ii) the historical results
of Jitney-Jungle for the 12 weeks ended July 20, 1996 and of Delchamps for the
13 weeks ended June 29, 1996, (iii) the historical results of Jitney-Jungle for
the 12 weeks ended July 26, 1997 and of Delchamps for the 13 weeks ended June
28, 1997, and (iv) the historical results of Jitney-Jungle for the 53 weeks
ended July 26, 1997 and of Delchamps for the fiscal year ended June 28, 1997.
Each of these pro forma statements was prepared as if the Transactions, the
Delchamps Merger and the Anticipated Store Dispositions had occurred on April
28, 1996. These pro forma statements reflect certain cost savings that
Management has identified related to the elimination of duplicative costs for
functional areas and facilities in connection with the Delchamps Acquisition
which are based on assumptions that Management believes are both factually
supportable and directly related to the Transactions and the Delchamps Merger.
However, these pro forma statements do not reflect certain additional potential
cost savings described in Note (D) to the Pro Forma Condensed Consolidated
Statements of Operations and Other Data that Management believes should arise as
a result of expected synergies from increased purchasing leverage and backhaul
income. Actual cost savings achieved by the Company may vary considerably from
the estimates discussed above. See "Risk Factors-- Integration of Delchamps."
These pro forma statements also do not reflect (i) a $2.0 million charge
relating to the write-off of commitment fees paid in connection with a bridge
commitment obtained to fund the Delchamps Purchase Price if the sale of the
Existing Notes was not consummated, (ii) approximately $1.4 million of deferred
financing fees relating to Jitney-Jungle's existing credit facility that was
written off in connection with the Transactions and (iii) the estimated loss of
$1.2 million relating to the expected divestiture of certain Jitney-Jungle
stores under an FTC consent decree. Such charges will be recognized by the
Company and reflected in its results of operations in the quarter in which the
Transactions are consummated.
The pro forma financial statements have been prepared by applying to the
historical financial statements of Jitney-Jungle and Delchamps the assumptions
and adjustments described in the accompanying notes. Such pro forma financial
statements are not necessarily indicative of either future results of operations
or results that might have occurred had the Transactions, the Delchamps Merger
and the Anticipated Store Dispositions been consummated as of the indicated
date. Such pro forma financial statements should be read in conjunction with the
Consolidated Financial Statements of Jitney-Jungle and Delchamps and the
respective accompanying notes thereto included elsewhere in this Prospectus.
23
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(DOLLARS IN THOUSANDS)
AT JULY 26, 1997
------------------------------------------------------------------------------------------------
COMPANY PRO
HISTORICAL FORMA FOR FTC
-------------------------- PRO FORMA ADJUSTMENTS COMPANY PRO DIVESTITURES
ASSETS JITNEY-JUNGLE DELCHAMPS COMBINED FORMA (H)
------------- ----------- ----------- ---------------------- -------------- ---------------
CURRENT ASSETS:
Cash and cash equivalents....... $ 5,255 $ 5,670 $ 10,925 $ 67,840 (A) $ 10,886 $ 14,761
190,420 (B)
(2,000) (C)
(7,500) (D)
(233,360) (E)
(15,439) (F)
Receivables..................... 7,423 7,961 15,384 15,384 15,384
Inventories..................... 77,694 89,726 167,420 14,171 (E) 181,591 181,591
Prepaid expenses and other...... 6,507 2,094 8,601 8,601 8,601
Deferred income taxes........... 2,152 6,525 8,677 760 (C) 12,178 13,234
(3,517) (E)
44 (E)
5,665 (E)
549 (G)
------------- ----------- ----------- ----------- -------------- ---------------
Total current assets.......... 99,031 111,976 211,007 17,633 228,640 233,571
Property and equipment, net....... 169,168 129,319 298,487 (4,260) (E) 294,227 287,575
Goodwill.......................... 136,672 (E) 136,672 137,632
Other assets, net................. 16,732 2,166 18,898 4,860 (A) 39,276 39,276
9,580 (B)
7,500 (D)
(1,446) (G)
(116) (E)
------------- ----------- ----------- ----------- -------------- ---------------
Total assets...................... $ 284,931 $ 243,461 $ 528,392 $ 170,423 $ 698,815 $ 698,054
------------- ----------- ----------- ----------- -------------- ---------------
------------- ----------- ----------- ----------- -------------- ---------------
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
CURRENT LIABILITIES:
Delchamps notes payable......... $ -- $ 4,600 $ 4,600 $ (4,600) (F) $ -- $ --
Current portion of long-term
debt.......................... 4,923 3,697 8,620 (3,697) (F) 4,923 4,923
Current portion of capitalized
leases........................ 4,899 844 5,743 5,743 5,743
Current portion of restructuring
obligation.................... 2,273 2,273 15,217 (E) 17,490 17,490
Accounts payable................ 60,940 41,571 102,511 102,511 102,511
Accrued expenses................ 34,224 28,996 63,220 63,220 63,220
Income taxes.................... 855 855 855 855
------------- ----------- ----------- ----------- -------------- ---------------
Total current liabilities..... 104,986 82,836 187,822 6,920 194,742 194,742
Senior Credit Facility............ -- 72,700 (A) 72,700 72,700
Senior Notes...................... 200,000 200,000 200,000 200,000
Senior Subordinated Notes offered
hereby.......................... 200,000 (B) 200,000 200,000
Obligations under capitalized
leases.......................... 58,663 9,556 68,219 68,219 68,219
Long term debt.................... 6,876 7,142 14,018 (7,142) (F) 6,876 6,876
Restructuring obligation.......... 13,453 13,453 31,807 (E) 45,260 45,260
Deferred income taxes............. 6,328 10,211 16,539 (13,706) (E) 2,833 2,833
Other long term liabilities....... 2,244 2,244 2,244 2,244
------------- ----------- ----------- ----------- -------------- ---------------
Total liabilities............. 376,853 125,442 502,295 290,579 792,874 792,874
Redeemable preferred stock........ 59,508 59,508 59,508 59,508
Stockholders' equity (deficit):
Preferred stock................. 8,663 8,663 8,663 8,663
Common stock.................... 4 71 75 (71) (E) 4 4
Additional paid in capital...... (302,326) 19,766 (282,560) (19,766) (E) (302,326) (302,326)
Retained earnings............... 142,229 98,182 240,411 (98,182) (E) 140,092 139,331
(897) (G)
(1,240) (C)
------------- ----------- ----------- ----------- -------------- ---------------
Total stockholders' equity
(deficit)................... (151,430) 118,019 (33,411) (120,156) (153,567) (154,328)
------------- ----------- ----------- ----------- -------------- ---------------
Total liabilities and
stockholders' equity
(deficit)....................... $ 284,931 $ 243,461 $ 528,392 $ 170,423 $ 698,815 $ 698,054
------------- ----------- ----------- ----------- -------------- ---------------
------------- ----------- ----------- ----------- -------------- ---------------
See accompanying notes to Pro Forma Condensed Consolidated Balance Sheet.
24
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(A) Reflects receipt of gross proceeds of $72,700 from the initial borrowing
under the Senior Credit Facility, net of financing fees of $4,860, which
have been included in other assets, net.
(B) Reflects receipt of gross proceeds of $200,000 from the issuance of the
Existing Notes, net of $9,580 of selling commissions and other offering
expenses, which have been reflected as debt issuance costs and included in
other assets, net.
(C) Reflects the payment and write-off of $2,000 of fees related to a commitment
to provide bridge financing, which terminated upon issuance of the Existing
Notes, as well as the related tax benefit of $760 and reduction to retained
earnings of $1,240.
(D) Reflects consent and related solicitation fees totaling $7,500, which have
been included in other assets, net, relating to the Consent Solicitation.
(E) Reflects (i) the preliminary calculation of the excess of the purchase price
in the Delchamps Acquisition over the book value of the net assets acquired
and (ii) the preliminary allocation of such excess, in each case, as set
forth below. The Delchamps Acquisition will be accounted for as a purchase,
and the total purchase price will be allocated to Delchamps' tangible and
intangible assets and liabilities based on their estimated fair values at
the closing date of the acquisition, based on valuations and studies which
have not yet been performed. Accordingly, the excess of the purchase price
over the historical book value of the net assets to be acquired has not yet
been allocated to individual assets and liabilities, other than as shown
below. Any variation between such amounts and the final allocation will
change the amount of goodwill recognized in connection with the Delchamps
Acquisition and the related amortization expense. Management believes,
however, that when the final valuation of the net assets acquired is
completed, the allocation of the purchase price will not differ materially
from the amounts shown herein.
25
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The purchase price and preliminary pro forma calculation of the excess of
the purchase price over the book value of net assets acquired is as follows:
Cash purchase price............................... $ 218,200
Estimated transaction fees in addition to debt
issuance costs.................................. 3,060
Change of control payments to Delchamps
management...................................... 12,100
---------
Total cash payments in connection with the
Delchamps Acquisition....................... 233,360
Delchamps stockholders' equity:
Common stock.................................. 71
Additional paid in capital.................... 19,766
Retained earnings............................. 98,182
---------
Total......................................... 118,019
Elimination of existing deferred financing
costs of $116, net of $44 tax benefit....... (72)
---------
Book value of net assets acquired............. 117,947
---------
Excess of purchase price over net book value.... $ 115,413
---------
---------
Preliminary allocation of excess of purchase price
over net book value:
Amount assigned to inventory...................... $ 14,171
Deferred tax liability - current(1)............... (3,517)
Deferred tax asset - current(2)................... 5,665
Deferred tax asset - non-current(1)............... 13,706
Adjustments related to Delchamps facilities to be
closed in connection with the Delchamps
Acquisition(3):
Write-off of property and equipment............. (4,260)
Current portion of restructuring obligation..... (15,217)
Long-term portion of restructuring obligation... (31,807)
Amount assigned to goodwill....................... 136,672
---------
Total......................................... $ 115,413
---------
---------
- ------------------------
(1) Relates to differences between the book and tax basis of assets acquired
and liabilities assumed.
(2) Relates to change of control payments to Delchamps management and
accrued severance costs.
(3) Excludes any sales of stores to address FTC concerns. See Note (H)
below.
(F) Reflects the retirement of $15,439 of Delchamps current and long-term debt
obligations.
(G) Reflects the write-off of $1,446 of deferred financing costs relating to the
March 1996 execution of the Senior Credit Facility, as well as the related
tax benefit of $549 and reduction to retained earnings of $897.
26
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(H) As discussed under "The Transactions - Expected Store Closures and
Divestitures," Management expects that the Company will be required to
divest approximately ten stores under a consent decree with the FTC.
Adjustments reflected herein for such divestitures are estimated as follows:
Jitney-Jungle stores:
Book value of property and equipment sold.................................... $ 3,201
Net proceeds from sale....................................................... (1,973)
---------
Loss on sale before tax benefit.............................................. 1,228
Tax benefit.................................................................. (467)
---------
Net loss (charged to retained earnings)...................................... $ 761
---------
---------
Delchamps stores:
Book value of property and equipment sold.................................... $ 3,451
Net proceeds from sale....................................................... (1,902)
---------
Loss on sale before tax benefit.............................................. 1,549
Tax benefit.................................................................. (589)
---------
Net loss (increase in goodwill).............................................. $ 960
---------
---------
27
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS)
YEAR ENDED MAY 3, 1997
----------------------------------------------------------------------------------------------
HISTORICAL COMPANY PRO
---------------------------------------- CLOSED PRO FORMA COMPANY FORMA FOR FTC
JITNEY-JUNGLE DELCHAMPS(A) COMBINED STORES(B) ADJUSTMENTS PRO FORMA DIVESTITURES(C)
------------- -------------- --------- --------- ----------- ----------- ---------------
NET SALES........................ $ 1,228,533 $1,102,947 $2,331,480 $ (80,757) $2,250,723 $ 2,159,542
COSTS AND EXPENSES:
Cost of sales.................. 925,446 805,832 1,731,278 (62,671) 1,668,607 1,596,277
Direct store expense........... 199,956 231,835 431,791 (22,899) $ (998)(D) 407,894 390,119
Warehouse, administrative and
general expenses............. 63,094 45,273 108,367 (16,335)(D) 96,899 96,931
4,556(E)
750(F)
(439)(I)
Special charges, net(G)........ 2,737 2,220 4,957 4,957 4,957
------------- -------------- --------- --------- ----------- ----------- ---------------
Operating income............... 37,300 17,787 55,087 4,813 12,466 72,366 71,258
Interest expense, net.......... 36,215 4,982 41,197 -- 31,317(H) 67,492 67,492
(5,022)(I)
------------- -------------- --------- --------- ----------- ----------- ---------------
Earnings (loss) before taxes on
income....................... 1,085 12,805 13,890 4,813 (13,829) 4,874 3,766
Income tax expense (benefit)... 339 4,851 5,190 1,798 (3,524)(J) 3,464 3,050
------------- -------------- --------- --------- ----------- ----------- ---------------
NET EARNINGS (LOSS).............. $ 746 $ 7,954 $ 8,700 $ 3,015 $ (10,305) $ 1,410 $ 716
------------- -------------- --------- --------- ----------- ----------- ---------------
------------- -------------- --------- --------- ----------- ----------- ---------------
OTHER DATA:
EBITDA(K)........................ $ 70,344 $ 44,117 $ 114,461 $ 2,513 $ 13,435 $ 130,409 $ 127,235
Depreciation and amortization.... 31,319 23,719 55,038 (2,245) 969 53,762 51,670
LIFO expense (benefit)........... (1,012) 391 (621) (55) -- (676) (650)
Capital expenditures............. 24,099 15,551 39,650 -- -- 39,650 39,650
Gross profit as a percentage of
sales............................ 24.7% 26.9% 25.7% 25.9% 26.1%
EBITDA as a percentage of
sales............................ 5.7% 4.0% 4.9% 5.8% 5.9%
Ratio of earnings to fixed
charges(L)..................... 1.0x 1.6x 1.2x 1.1x 1.0x
Ratio of EBITDA to cash interest
expense(M)..................... 1.9x 8.9x 2.8x 2.0x 2.0x
See accompanying notes to Pro Forma Condensed Consolidated Statements of
Operations and Other Data.
28
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS)
12 WEEKS ENDED JULY 20, 1996
-----------------------------------------------------------------------------------------------
COMPANY PRO
HISTORICAL FORMA FOR FTC
---------------------------------------- CLOSED PRO FORMA COMPANY PRO DIVESTITURES
JITNEY-JUNGLE DELCHAMPS (A) COMBINED STORES (B) ADJUSTMENTS FORMA (C)
------------- -------------- --------- ---------- ----------- ----------- ---------------
NET SALES........................ $ 282,166 $ 284,662 $ 566,828 $ (21,964) $ 544,864 $ 522,745
COSTS AND EXPENSES:
Cost of sales.................. 211,627 210,158 421,785 (17,150) 404,635 387,010
Direct store expense........... 45,447 55,813 101,260 (5,880) $ (230)(D) 95,150 90,955
Warehouse, administrative and
general expenses............. 14,241 13,148 27,389 (3,769)(D) 24,742 24,749
1,051(E)
173(F)
(102)(I)
Special charges, net(G)........ (187) (187) (187) (187)
------------- -------------- --------- ---------- ----------- ----------- ---------------
Operating income............... 10,851 5,730 16,581 1,066 2,877 20,524 20,218
Interest expense, net.......... 8,378 1,494 9,872 -- 7,271(H) 15,580 15,580
(1,563)(I)
------------- -------------- --------- ---------- ----------- ----------- ---------------
Earnings (loss) before taxes on
income....................... 2,473 4,236 6,709 1,066 (2,831) 4,944 4,638
Income tax expense (benefit)... 921 1,583 2,504 398 (676)(J) 2,226 2,112
------------- -------------- --------- ---------- ----------- ----------- ---------------
NET EARNINGS (LOSS).............. $ 1,552 $ 2,653 $ 4,205 $ 668 $ (2,155) $ 2,718 $ 2,526
------------- -------------- --------- ---------- ----------- ----------- ---------------
------------- -------------- --------- ---------- ----------- ----------- ---------------
OTHER DATA:
EBITDA(K)........................ $ 17,813 $ 11,343 $ 29,156 $ 505 $ 3,100 $ 32,761 $ 31,986
Depreciation and amortization.... 7,062 5,486 12,548 (546) 223 12,225 11,750
LIFO expense (benefit)........... (100) 314 214 (15) -- 199 205
Capital expenditures............. 6,122 7,563 13,685 -- -- 13,685 13,685
Gross profit as a percentage of
sales............................ 25.0% 26.2% 25.6% 25.7% 26.0%
EBITDA as a percentage of
sales............................ 6.3% 4.0% 5.1% 6.0% 6.1%
Ratio of earnings to fixed
charges(L)..................... 1.3x 1.8x 1.5x 1.2x 1.2x
Ratio of EBITDA to cash interest
expense(M)..................... 2.1x 7.6x 3.0x 2.2x 2.1x
See accompanying notes to Pro Forma Condensed Consolidated Statements of
Operations and Other Data.
29
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS)
12 WEEKS ENDED JULY 26, 1997
-----------------------------------------------------------------------------------------------
COMPANY PRO
HISTORICAL FORMA FOR FTC
---------------------------------------- CLOSED PRO FORMA COMPANY PRO DIVESTITURES
JITNEY-JUNGLE DELCHAMPS (A) COMBINED STORES (B) ADJUSTMENTS FORMA (C)
------------- -------------- --------- ---------- ----------- ----------- ---------------
NET SALES........................ $ 288,978 $ 266,893 $ 555,871 $ (18,194) $ 537,677 $ 515,582
COSTS AND EXPENSES:
Cost of sales.................. 216,464 188,261 404,725 (13,359) 391,366 374,388
Direct store expense........... 48,058 57,272 105,330 (5,563) $ (230)(D) 99,537 95,089
Warehouse, administrative and
general expenses............. 12,772 12,643 25,415 (3,769)(D) 22,768 22,775
1,051(E)
173(F)
(102) (I)
Special charges, net(G)........ 5 5 5 5
------------- -------------- --------- ---------- ----------- ----------- ---------------
Operating income............... 11,684 8,712 20,396 728 2,877 24,001 23,325
Interest expense, net.......... 8,241 999 9,240 -- 6,797(H) 15,530 15,530
(507)(I)
------------- -------------- --------- ---------- ----------- ----------- ---------------
Earnings (loss) before taxes on
income....................... 3,443 7,713 11,156 728 (3,413) 8,471 7,795
Income tax expense (benefit)... 1,284 2,859 4,143 272 (897)(J) 3,518 3,265
------------- -------------- --------- ---------- ----------- ----------- ---------------
NET EARNINGS (LOSS).............. $ 2,159 $ 4,854 $ 7,013 $ 456 $ (2,516) $ 4,953 $ 4,530
------------- -------------- --------- ---------- ----------- ----------- ---------------
------------- -------------- --------- ---------- ----------- ----------- ---------------
OTHER DATA:
EBITDA(K)........................ $ 18,616 $ 14,778 $ 33,394 $ 193 $ 3,100 $ 36,687 $ 35,543
Depreciation and amortization.... 6,982 6,120 13,102 (523) 223 12,802 12,328
LIFO expense (benefit)........... (50) (59) (109) (12) -- (121) (115)
Capital expenditures............. 4,985 4,409 9,394 -- -- 9,394 9,394
Gross profit as a percentage of
sales............................ 25.1% 29.5% 27.2% 27.2% 27.4%
EBITDA as a percentage of
sales............................ 6.4% 5.5% 6.0% 6.8% 6.9%
Ratio of earnings to fixed
charges(L)..................... 1.4x 2.6x 1.8x 1.4x 1.4x
Ratio of EBITDA to cash interest
expense(M)..................... 2.3x 14.8x 3.6x 2.5x 2.4x
See accompanying notes to Pro Forma Condensed Consolidated Statements of
Operations and Other Data.
30
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS)
LTM PERIOD
----------------------------------------------------------------------------------------------
HISTORICAL COMPANY PRO
---------------------------------------- CLOSED PRO FORMA COMPANY FORMA FOR FTC
JITNEY-JUNGLE DELCHAMPS(A) COMBINED STORES(B) ADJUSTMENTS PRO FORMA DIVESTITURES(C)
------------- -------------- --------- --------- ----------- ----------- ---------------
NET SALES........................ $ 1,235,345 1,102,947 $2,338,292 $ (80,757) $2,257,535 $ 2,166,461
COSTS AND EXPENSES:
Cost of sales.................. 930,283 805,832 1,736,115 (62,671) 1,673,444 1,601,558
Direct store expense........... 202,567 231,835 434,402 (22,899) $ (998)(D) 410,505 392,673
Warehouse, administrative and
general expenses............. 61,625 45,273 106,898 (16,335)(D) 95,430 95,462
4,556(E)
750(F)
(439)(I)
Special charges, net(G)........ 2,737 2,220 4,957 4,957 4,957
------------- -------------- --------- --------- ----------- ----------- ---------------
Operating income............... 38,133 17,787 55,920 4,813 12,466 73,199 71,811
Interest expense, net.......... 36,078 4,982 41,060 -- 30,843(H) 67,484 67,484
(4,419)(I)
------------- -------------- --------- --------- ----------- ----------- ---------------
Earnings (loss) before taxes on
income....................... 2,055 12,805 14,860 4,813 (13,958) 5,715 4,327
Income tax expense (benefit)... 702 4,851 5,553 1,798 (3,573)(J) 3,778 3,260
------------- -------------- --------- --------- ----------- ----------- ---------------
NET EARNINGS (LOSS).............. $ 1,353 $ 7,954 $ 9,307 $ 3,015 $ (10,385) $ 1,937 $ 1,067
------------- -------------- --------- --------- ----------- ----------- ---------------
------------- -------------- --------- --------- ----------- ----------- ---------------
OTHER DATA:
EBITDA(K)........................ 71,147 $ 44,117 115,264 $ 2,513 $ 13,435 $ 131,212 $ 127,800
Depreciation and amortization.... 31,239 23,719 54,958 (2,245) 969 53,682 51,632
LIFO expense (benefit)........... (962) 391 (571) (55) -- (626) (600)
Capital expenditures............. 22,962 15,551 38,513 -- -- 38,513 38,513
Gross profit as a percentage of
sales.......................... 24.7% 26.9% 25.8% 25.9% 26.1%
EBITDA as a percentage of
sales............................ 5.8% 4.0% 4.9% 5.8% 5.9%
Ratio of earnings to fixed
charges(L)..................... 1.1x 1.6x 1.2x 1.1x 1.1x
Ratio of EBITDA to cash interest
expense(M)..................... 2.0x 8.9x 2.8x 2.0x 2.0x
See accompanying notes to Pro Forma Condensed Consolidated Statements of
Operations and Other Data.
31
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND OTHER DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(A) Delchamps historically has accounted for warehouse costs as part of cost of
goods sold, while Jitney-Jungle has accounted for such costs as part of
warehouse, administrative and general expenses. The historical data for
Delchamps reflects a reclassification of gross profit and selling, general
and administrative expenses as though such warehouse costs had been
accounted for in accordance with the historical financial statements of
Jitney-Jungle.
(B) In connection with the Delchamps Acquisition, Management has identified 13
Delchamps stores which it intends to close due to unprofitability. Pro
forma adjustments have been made to eliminate the historical operating
results of these stores.
(C) As discussed under "The Transactions--Expected Store Closures and
Divestitures," Management expects that the Company will be required to
divest approximately ten stores under a consent decree with the FTC. Pro
forma adjustments have been made to eliminate the historical operating
results of these stores. In addition, the difference between the historical
carrying amount of the net assets of such stores and the estimated net
proceeds to be realized on their disposal (i) in the case of Jitney-Jungle
stores, will be recorded as a non-recurring charge or credit to income and
(ii) in the case of Delchamps stores, has been reflected herein as an
increase in the amount of goodwill recorded in connection with the
acquisition and the related goodwill amortization. Because the price at
which such stores will ultimately be divested is not yet certain, any
variation between the actual price and the price estimated herein (see Note
H to the Pro Forma Condensed Consolidated Balance Sheet) will change (i)
the non-recurring charge or credit to income in the case of Jitney-Jungle
stores and (ii) goodwill and related amortization expense in the case of
Delchamps stores.
(D) In connection with the Delchamps Acquisition, Management has performed a
review of operating activities of Jitney-Jungle and Delchamps and identified
duplicative costs of $17,333 (which includes $14,185 of cash costs and
$3,148 of depreciation and amortization) that it believes can be eliminated
in connection with the Delchamps Acquisition, as follows.
(i) Management has decided to consolidate the Mobile, Alabama headquarters
of Delchamps with Jitney-Jungle's existing Jackson, Mississippi
headquarters. Although a divisional office will be opened in Mobile, the
Delchamps headquarters will be closed. Cost savings associated with such
closing include savings resulting from headcount reductions at both
facilities of $5,951 for the year ended May 3, 1997 and the LTM Period
and $1,373 for the 12 weeks ended July 20, 1996 and the 12 weeks ended
July 26, 1997. Cost savings resulting from the elimination of other
operating costs are estimated at $4,281 (including $975 of reduced
depreciation and amortization) for the year ended May 3, 1997 and the
LTM Period and $988 (including $225 of reduced depreciation and
amortization) for the 12 weeks ended July 20, 1996 and the 12 weeks
ended July 26, 1997.
(ii) Management has decided to close Delchamps' Hammond, Louisiana warehouse
facility and consolidate such operations at the Company's existing
warehouse facilities. Total cost savings resulting from this facility
consolidation are estimated at $6,103 (including $2,173 of reduced
depreciation and amortization) for the year ended May 3, 1997 and the
LTM Period and $1,408 (including $501 of reduced depreciation and
amortization) for the 12 weeks ended July 20, 1996 and the 12 weeks
ended July 26, 1997.
(iii) It has been Delchamps' practice to outsource all of its advertising
printing to third parties, whereas Jitney-Jungle has utilized an
in-house advertising printing facility. Because of excess capacity at
Jitney-Jungle's facility, all Delchamps' advertising circulars will be
printed at Jitney-Jungle's facility. Annualized cost savings resulting
therefrom are estimated at $998 for the year ended May 3, 1997 and the
LTM Period and $230 for the 12 weeks ended July 20, 1996 and the 12
weeks ended July 26, 1997.
32
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND OTHER DATA (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
In addition to the cost savings identified above, Management has identified
certain other cost savings opportunities. As a result of the increase in
purchasing volume requirements resulting from the Delchamps Acquisition,
Management believes that the Company should be able to negotiate more
favorable terms from vendors. Management believes that this increased
purchasing leverage should result in approximately $3,352 in annualized cost
savings, which the Company should begin realizing within six to nine months
following the Delchamps Acquisition. Management also believes the increase
in purchasing volume will enable the Company to increase its backhaul income
by approximately $1,841 on an annualized basis. In addition, Management
plans to take certain steps to improve warehouse and distribution
efficiencies, including negotiation of a long-term agreement to supply slow
turning items to the Company's supermarkets and thereby reduce inventory
levels.
(E) Reflects amortization of goodwill using an estimated useful life of 30
years.
(F) Reflects a $750 increase in the annual BRS management fee pursuant to the
amendment of the BRS Management Agreement in connection with the Delchamps
Acquisition. See "Certain Relationships and Related Transactions--BRS
Management Agreement."
(G) Includes for the year ended May 3, 1997 and the LTM Period (i) a $1,779
non-cash charge accrued in fiscal 1997 relating to future payments that will
be made under an employment agreement with Jitney-Jungle's former Chief
Executive Officer; (ii) a $958 charge relating to termination benefits
payable to employees of Jitney-Jungle whose positions were eliminated in May
1997; (iii) a $4,300 charge relating to cash payments made by Delchamps in
connection the settlement of a lawsuit in March 1997; and (iv) a $2,080 gain
on the sale of certain assets of Delchamps in fiscal 1997. Includes a $187
gain and a $5 loss on the sale of certain assets of Delchamps for the 12
weeks ended July 20, 1996 and the 12 weeks ended July 26, 1997,
respectively.
(H) Reflects interest expense related to borrowings outstanding under (i) the
Senior Credit Facility upon consummation of the Delchamps Acquisition
(giving effect to the change in interest rate which occurred in connection
with the restatement thereof) and (ii) the Notes:
12 WEEKS ENDED
YEAR ENDED ----------------------------
MAY 3, 1997 JULY 20, 1996 JULY 26, 1997 LTM PERIOD
----------- ------------- ------------- -----------
Senior Credit Facility (at a weighted average
interest rate of 7.65%):
Existing borrowings........................... $ 1,985 $ 507 $ -- $ 1,478
Borrowings in connection with the Delchamps
Acquisition................................. 5,562 1,283 1,283 5,562
Amortization of financing fees - Senior Credit
Facility(1)................................. 972 224 224 972
Commitment fee under Senior Credit Facility... 257 56 89 290
Notes (10.375%):
Cash interest expense......................... 20,750 4,788 4,788 20,750
Amortization of debt issuance costs(1)........ 958 221 221 958
Amortization of consent and related solicitation
fees pertaining to the Consent
Solicitation(1)............................... 833 192 192 833
----------- ------ ------ -----------
$ 31,317 $ 7,271 $ 6,797 $ 30,843
----------- ------ ------ -----------
----------- ------ ------ -----------
- ------------------------
(1) Debt issuance costs associated with the Notes are amortized over ten
years on a straight-line basis. Deferred financing fees associated with
the Senior Credit Facility are amortized over five years on a
straight-line basis. The consent and related solicitation fees
pertaining to the Consent Solicitation are amortized over the remaining
life of the Senior Notes on a straight-line basis.
33
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND OTHER DATA (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(I) Reflects elimination of interest expense, including amortization of debt
issuance costs, in connection with (i) the repayment of Delchamps debt and
(ii) existing borrowings under the Senior Credit Facility:
12 WEEKS ENDED
YEAR ENDED ----------------------------
MAY 3, 1997 JULY 20, 1996 JULY 26, 1997 LTM PERIOD
----------- ------------- ------------- -----------
Delchamps debt:
Notes payable....................... $ 1,748 $ 691 $ 276 $ 1,748
Delchamps long-term debt............ 750 213 175 750
Senior Credit Facility:
Cash interest expense related to
existing borrowings............... 2,144 584 -- 1,560
Commitment fee under Senior Credit
Facility.......................... 380 75 56 361
----------- ------ ------ -----------
5,022 1,563 507 4,419
----------- ------ ------ -----------
Amortization of Delchamps debt
issuance costs...................... 39 10 10 39
Amortization of financing fees--
Senior Credit Facility.............. 400 92 92 400
----------- ------ ------ -----------
439 102 102 439
----------- ------ ------ -----------
$ 5,461 $ 1,665 $ 609 $ 4,858
----------- ------ ------ -----------
----------- ------ ------ -----------
(J) Reflects the effect on income tax expense of pro forma adjustments
described in these footnotes, other than non-deductible goodwill
amortization, at an effective statutory tax rate of 38%.
(K) EBITDA is defined as income from continuing operations before interest,
taxes, depreciation, amortization, LIFO expense (benefit) and special items,
net. EBITDA is presented because it is a widely accepted financial indicator
of a company's ability to service indebtedness. However, EBITDA should not
be considered as an alternative to income from operations or to cash flows
from operating activities (as determined in accordance with generally
accepted accounting principles) and should not be construed as an indication
of a company's operating performance or as a measure of liquidity.
(L) The ratio of earnings to fixed charges is computed by adding fixed charges
to earnings (loss) before taxes on income and dividing that amount by fixed
charges. Fixed charges consist of interest (including amortization of debt
issuance costs) and a portion of rent expense that management considers to
be interest.
(M) Pro forma cash interest expense excludes amortization of deferred financing
fees of $2,763 for the year ended May 3, 1997 and the LTM Period and $637
for the 12 weeks ended July 20, 1996 and the 12 weeks ended July 26, 1997.
34
PRO FORMA LIQUIDITY
It is anticipated that the Company's principal sources of liquidity will be
cash flow from operations and borrowings under the Senior Credit Facility and
its principal uses of cash will be to fund working capital and acquisitions and
to meet debt service requirements. The Company incurred significant indebtedness
in connection with the Transactions. At July 26, 1997, on a Pro Forma Basis, the
Company would have had approximately $558.5 million of total debt (including
capitalized leases and current installments) as compared to $275.4 million of
actual long-term indebtedness at July 26, 1997. In addition, on a Pro Forma
Basis, the Company would have had a shareholders' deficit of approximately
$154.3 million at July 26, 1997, as compared to an actual shareholders' deficit
of $151.4 million as of July 26, 1997. The Company's significant debt service
obligations following the Delchamps Acquisition could, under certain
circumstances, have material consequences to security holders of the Company.
See "Risk Factors."
In connection with the Transactions, the Company borrowed approximately
$72.7 million under the Senior Credit Facility. Following the consummation of
the Delchamps Merger, the Company will have approximately $11.2 million of
outstanding letters of credit under the Senior Credit Facility. Giving effect to
such letters of credit, Management expects that approximately $66.1 million of
additional borrowings will be available under the Senior Credit Facility
immediately following the Delchamps Acquisition to fund ongoing capital
requirements. See "Description of Certain Indebtedness--Senior Credit Facility."
As of July 26, 1997, the Company had no commitments for capital
expenditures. For fiscal 1998 and fiscal 1999, the Company has budgeted
approximately $50.0 million and $64.0 million, respectively, of capital
expenditures. Such planned capital expenditures primarily relate to new
supermarket openings and remodelings and expansions of existing supermarkets.
Capital expenditure plans of the Company are frequently reviewed and are
modified from time to time depending on cash availability and other economic
factors.
The Company's expenditures to comply with environmental laws and regulations
at its supermarkets primarily consist of those related to remediation of
underground storage tank leaks and spills and retrofitting chlorofluorocarbon
("CFC") chiller units. The Company's unreimbursed cost for remediation at the 16
facilities which have had leaks or spills from underground storage tanks has not
been material. All significant required expenditures in connection with the
clean up of such leaks and spills have been made at these 16 locations, except
at three newly discovered locations which are still undergoing investigation and
one location awaiting state approval of its remediation plan. Based on past
experience, the Company does not anticipate material expenditures at these
locations. In addition, the Company has obtained insurance coverage for bodily
injury, property damage and corrective action expenses resulting from releases
of petroleum products from underground storage tanks during the covered period
at 53 of its 57 underground storage tank locations, and an application for such
coverage is pending at one of the four remaining locations. The Company spent
$515,000, $468,000 and $914,000 retrofitting CFC containing chiller units and
upgrading tanks during fiscal 1995, fiscal 1996 and the LTM Period,
respectively. Between approximately $472,000 and $1,055,000 in expenditures are
contemplated for retrofitting the CFC units and between approximately $455,000
and $755,000 in expenditures are contemplated for tank upgrading to comply with
the 1998 tank standards or closure in fiscal 1998 and fiscal 1999. These
regulatory compliance costs are not covered by insurance.
The Company's ability to fund working capital and acquisitions, and to meet
its debt service requirements, will be dependent on its future performance
which, in turn, will be subject to management, financial, competitive and other
factors affecting the business and operations of the Company, some of which are
beyond the control of the Company. Specifically, the Company's future
performance will be dependent upon its ability to successfully integrate the
Delchamps business and to achieve estimated cost savings both in connection with
the Delchamps Acquisition and on an ongoing basis. If the Company is unable to
generate sufficient cash flow to meet its debt service obligations, the Company
may be required
35
to renegotiate the payment terms or to refinance all or a portion of the Senior
Credit Facility, the Senior Notes or the Notes, to sell assets or to obtain
additional financing. If the Company could not successfully refinance its
indebtedness, substantially all of the Company's long-term debt would be in
default and could be declared immediately due and payable. See "Risk
Factors--Substantial Leverage."
During the fiscal year ended June 28, 1997, Delchamps generated
approximately $1.1 billion and $44.1 million, respectively, of net sales and
EBITDA. In addition to the incremental net sales, EBITDA and market share
expected to result from the Delchamps Acquisition, Management believes that it
should be able to achieve significant cash cost savings in connection with the
combined operation of the Jitney-Jungle and Delchamps businesses following the
Delchamps Acquisition. While the exact timing and amount of such cash cost
savings is inherently uncertain, Management currently expects that the Company
should begin to realize such cash cost savings within three to nine months after
the Delchamps Acquisition. Generally, such cash cost savings are expected to
result from (i) reduced general and administrative expenses arising from the
closure of the corporate headquarters of Delchamps and associated headcount
reductions, (ii) improved warehouse and distribution efficiencies, (iii) reduced
advertising and printing expenses resulting from moving a portion of Delchamps'
print advertising needs to Jitney-Jungle's in-house printing facilities, (iv)
increased purchasing leverage that may enable the Company to negotiate more
favorable terms from its vendors, and (v) increased backhaul income.
Of the aggregate potential $19.4 million in annualized cash cost savings
discussed above, approximately $14.2 million are reflected in the Pro Forma
Condensed Consolidated Financial Statements included elsewhere herein because
Management believes they are factually supportable and directly related to the
Transactions and the Delchamps Merger. The potential cash cost savings discussed
above are based on estimates prepared solely by members of Management based on
information available to them and have not been independently reviewed. The
estimates necessarily make assumptions as to future events, including general
industry, competitive and business conditions, many of which are beyond the
control of the Company. Actual cash cost savings achieved by the Company may
vary considerably from the estimates discussed above. See "Risk
Factors--Integration of Delchamps."
Jitney-Jungle and Delchamps have improved their EBITDA margins from 5.5% and
2.9%, respectively, in fiscal 1992 to 5.7% and 4.0%, respectively, in fiscal
1997. The Company continuously reviews its operations to identify initiatives
designed to reduce operating costs and increase EBITDA margins. As a result of
the following initiatives, Management believes that the Company can further
improve its EBITDA margins during fiscal 1998: (i) headcount reductions
implemented by Jitney-Jungle in May 1997 which are expected to result in
annualized cost savings of approximately $0.9 million in fiscal 1998; and (ii)
improved labor scheduling currently being implemented at Jitney-Jungle
supermarkets, which is expected to result in annualized cost savings of
approximately $3.5 million in fiscal 1998 and which may also result in
additional cost savings when implemented during the next 12 to 18 months at the
Delchamps supermarkets. In addition, Management expects to implement programs at
Delchamps to reduce inventory shrink to levels comparable to those achieved at
Jitney-Jungle. There can be no assurance, however, that the Company will be able
to implement such programs and other changes within the expected time periods,
or that such programs and changes, if implemented, will produce the expected
cost savings described above.
During fiscal 1997, Jitney-Jungle successfully implemented programs to
reduce inventories by eliminating slow moving items, as well as renegotiating
more favorable payment terms with certain of its vendors. Management believes
that these measures enabled Jitney-Jungle to decrease its working capital needs
by approximately $20.0 million. Management intends to implement similar programs
at Delchamps.
36
SELECTED HISTORICAL FINANCIAL INFORMATION OF JITNEY-JUNGLE
The following table sets forth selected historical financial information of
Jitney-Jungle for the five years ended May 3, 1997 and for the 12 weeks ended
July 20, 1996 and July 26, 1997. The selected financial information for the
three years ended May 3, 1997 was derived from the audited consolidated
financial statements of Jitney-Jungle included elsewhere in this Prospectus. The
selected financial information for the two years ended April 30, 1994 was
derived from audited consolidated financial statements of Jitney-Jungle. The
selected financial information as of July 20, 1996 and July 26, 1997 and for the
12 weeks ended July 20, 1996 and July 26, 1997 was derived from unaudited
consolidated financial statements of Jitney-Jungle included elsewhere in this
Prospectus which, in the opinion of Management, include all adjustments
necessary for a fair presentation of the financial condition and results of
operations of Jitney-Jungle for such periods. The results of operations for
interim periods are not necessarily indicative of a full year's operations. The
following table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Jitney-Jungle" and
the historical consolidated financial statements of Jitney-Jungle included
elsewhere in this Prospectus.
12 WEEKS
FISCAL YEAR ENDED ENDED
--------------------------------------------------------------- -----------
MAY 1, APRIL 30, APRIL 29, APRIL 27, MAY 3,
1993 1994 1995 1996 1997
(52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS)
JULY 20,
1996
(DOLLARS IN THOUSANDS)
OPERATING DATA:
Net sales......................................... $ 1,070,693 $ 1,152,333 $ 1,173,927 $ 1,179,318 $ 1,228,533 $ 282,166
Gross profit...................................... 250,999 276,546 288,188 292,063 303,087 70,539
Direct store expense.............................. 167,162 184,121 189,422 193,483 199,956 45,447
Warehouse, administrative and general expenses.... 47,446 53,664 57,723 60,603 63,094 14,241
Special charges, net(1)........................... -- -- -- -- 2,737 --
----------- ----------- ----------- ----------- ----------- -----------
Operating income.................................. 36,391 38,761 41,043 37,977 37,300 10,851
Interest expense, net............................. 9,920 11,626 10,823 13,000 36,215 8,378
----------- ----------- ----------- ----------- ----------- -----------
Income from continuing operations before provision
for income taxes................................ 26,471 27,135 30,220 24,977 1,085 2,473
Provision for income taxes........................ 9,354 9,956 11,417 9,062 339 921
Extraordinary item(2)............................. -- -- -- (1,456) -- --
----------- ----------- ----------- ----------- ----------- -----------
Net income........................................ $ 17,117 $ 17,179 $ 18,803 $ 14,459 $ 746 $ 1,552
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
OTHER DATA:
EBITDA(3)......................................... $ 57,232 $ 63,457 $ 65,207 $ 64,863 $ 70,344 $ 17,813
Depreciation and amortization..................... 20,119 23,428 25,444 27,323 31,319 7,062
LIFO expense (benefit)............................ 722 1,268 (1,280) (437) (1,012) (100)
Capital expenditures.............................. 38,686 30,225 23,921 30,111 24,099 6,122
Supermarkets open at end of period................ 100 106 106 103 105 104
Remodels during period............................ 12 22 40 33 19 7
Gross profit as a percentage of sales............. 23.4% 24.0% 24.5% 24.8% 24.7% 25.0%
EBITDA as a percentage of sales................... 5.3% 5.5% 5.6% 5.5% 5.7% 6.3%
Ratio of earnings to fixed charges(4)............. 3.1x 2.8x 3.1x 2.4x 1.0x 1.3x
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents......................... $ 13,031 $ 30,737 $ 20,159 $ 5,676 $ 14,426 $ 3,033
Working capital................................... 60,108 60,385 71,929 26,449 (92) 15,561
Total assets...................................... 269,798 296,803 312,415 279,003 267,845 274,011
Total debt........................................ 98,665 102,814 99,198 302,461 272,462 286,372
Redeemable preferred stock........................ -- -- -- 49,988 57,921 50,035
Stockholders' equity (deficit).................... 111,099 124,857 140,216 (144,815) (152,002) (143,280)
JULY 26,
1997
OPERATING DATA:
Net sales......................................... $ 288,978
Gross profit...................................... 72,514
Direct store expense.............................. 48,058
Warehouse, administrative and general expenses.... 12,772
Special charges, net(1)........................... --
-----------
Operating income.................................. 11,684
Interest expense, net............................. 8,241
-----------
Income from continuing operations before provision
for income taxes................................ 3,443
Provision for income taxes........................ 1,284
Extraordinary item(2)............................. --
-----------
Net income........................................ $ 2,159
-----------
-----------
OTHER DATA:
EBITDA(3)......................................... $ 18,616
Depreciation and amortization..................... 6,982
LIFO expense (benefit)............................ (50)
Capital expenditures.............................. 4,985
Supermarkets open at end of period................ 104
Remodels during period............................ 4
Gross profit as a percentage of sales............. 25.1%
EBITDA as a percentage of sales................... 6.4%
Ratio of earnings to fixed charges(4)............. 1.4x
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents......................... $ 5,255
Working capital................................... (5,955)
Total assets...................................... 284,931
Total debt........................................ 275,361
Redeemable preferred stock........................ 59,508
Stockholders' equity (deficit).................... (151,430)
- ------------------------------
(1) Includes (i) a $1.8 million non-cash charge accrued in fiscal 1997 relating
to future payments that will be made under an employment agreement with
Jitney-Jungle's former Chief Executive Officer and (ii) a $1.0 million
charge relating to termination benefits payable to employees of
Jitney-Jungle whose positions were eliminated in May 1997.
(2) Reflects a loss on early retirement of debt, net of an income tax benefit of
$0.9 million.
(3) EBITDA is defined as income from continuing operations before interest,
taxes, depreciation, amortization, LIFO expense (benefit) and special items,
net. EBITDA is presented because it is a widely accepted financial indicator
of a company's ability to service indebtedness. However, EBITDA should not
be considered as an alternative to income from operations or to cash flows
from operating activities (as determined in accordance with generally
accepted accounting principles) and should not be construed as an indication
of a company's operating performance or as a measure of liquidity.
(4) The ratio of earnings to fixed charges is computed by adding fixed charges
to earnings (loss) before taxes on income and dividing that sum by the fixed
charges. Fixed charges consist of interest (including amortization costs)
and a portion of rent expense that management considers to be interest.
37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF JITNEY-JUNGLE
The following discussion should be read in conjunction with the financial
statements and related notes, and the other financial information, included
elsewhere in this Prospectus. References in this discussion to fiscal years are
to Jitney-Jungle's fiscal years, which end on the Saturday nearest to April 30
in the calendar year. The consolidated statements of earnings for fiscal 1995
and 1996 include 52 weeks of operations and the consolidated statements of
earnings for fiscal 1997 include 53 weeks of operations. References to Interim
1997 are to the 12 weeks ended July 20, 1996 and references to Interim 1998 are
to the 12 weeks ended July 26, 1997.
GENERAL
Jitney-Jungle operates a chain of 104 supermarkets and 53 gasoline stations.
Net sales from gasoline stations during fiscal 1995, 1996 and 1997 were 4.0%,
5.2% and 6.9%, respectively, of Jitney-Jungle's net sales for such fiscal years.
Approximately 21.0% of Jitney-Jungle's net non-perishable sales result from its
private label program. Private label products generally have a lower unit sales
price than national brands, but provide a higher gross margin to Jitney-Jungle
due to lower unit costs.
Prior to fiscal 1995, Jitney-Jungle used a LIFO valuation method derived
from the Consumer Price Index (CPI). The CPI, a Federal government index that
measures changes in retail prices, is published by the Bureau of Labor
Statistics on a monthly basis. Due to a general absence of inflation in food
prices, Jitney-Jungle changed to an internally developed price index at the
beginning of fiscal 1995 to more accurately reflect price level changes that
were specific to Jitney-Jungle's actual experience. Jitney-Jungle does not
believe that the CPI index provides a satisfactory measure of its inventory.
After switching to its own internally generated price index, which measures over
20,000 different SKUs, Jitney-Jungle experienced a LIFO credit in fiscal 1995,
1996 and 1997.
During the past three years, an overall lack of inflation in food prices and
increasingly competitive markets have made it difficult for Jitney-Jungle and
other supermarket operators to achieve comparable store sales gains. Because
sales growth has been difficult to attain, many operators, including
Jitney-Jungle, have attempted to maintain market share through increased levels
of promotional activities and discount pricing, creating a more difficult
environment in which to increase year-over-year sales gains consistently. In
addition, because of the growth in the Southeast market, many existing
operators, including Jitney-Jungle, have opened new supermarkets in existing
markets which has resulted in declines in same store sales for the existing
(comparable) store base of these same grocery chains. In an effort to offset
this trend, Jitney-Jungle intends to focus future new supermarket openings on
its combination and conventional supermarket formats which, historically, have
achieved higher operating profit margins than its discount supermarkets.
THE RECAPITALIZATION
On March 5, 1996, Jitney-Jungle effected a recapitalization (the
"Recapitalization") pursuant to an Agreement and Plan of Exchange and of Merger
dated as of November 16, 1995 by and among Jitney-Jungle, certain of its
affiliates and JJ Acquisitions Corp., a Delaware corporation formed by BRS
("JJAC"). Prior to the Recapitalization, Jitney-Jungle had five affiliates
(Southern Jitney Jungle Company, McLemore's Wholesale & Retail Stores, Inc.,
McCarty-Holman Co., Inc., Pump And Save, Inc. and Jitney-Jungle Bakery, Inc.,
each of which was under common ownership and management with Jitney-Jungle) and
five subsidiaries (Florida Jitney-Jungle Stores, Inc., Jitney-Jungle Wholesale
Co., Inc., Jackson Jet Corporation, Interstate Jitney Jungle Stores, Inc. and
Foodway, Inc., each of which was wholly-owned by Jitney-Jungle). In connection
with the Recapitalization, the common stock of each of Southern Jitney Jungle
Company, McCarty-Holman Co., Inc. and Jitney-Jungle Bakery, Inc. was exchanged
for newly-issued shares of common stock of Jitney-Jungle and certain existing
subsidiaries of Jitney-Jungle were merged with and into Jitney-Jungle or another
subsidiary of Jitney-Jungle; as a result, Jitney-Jungle had four direct,
38
wholly-owned subsidiaries (Interstate Jitney-Jungle Stores, Inc., Southern
Jitney Jungle Company, McCarty-Holman Co., Inc. and Jitney-Jungle Bakery, Inc.)
and one indirect wholly-owned subsidiary, Pump And Save, Inc. Immediately
thereafter, JJAC was merged with and into Jitney-Jungle and the separate
existence of JJAC ceased. The shareholders of Jitney-Jungle received
consideration of $272.5 million in cash and $27.5 million aggregate liquidation
preference of Class B Preferred Stock. Upon completion of the Recapitalization,
71.25%, on a fully diluted basis, of the outstanding shares of Jitney-Jungle's
Common Stock was held by the Fund Entities and 10.0%, on a fully diluted basis,
continued to be held by certain shareholders of Jitney-Jungle.
THE DELCHAMPS ACQUISITION
On July 8, 1997, Jitney-Jungle entered into the Delchamps Merger Agreement
pursuant to which the Delchamps Acquisition will be effected. In connection with
the Delchamps Acquisition, the Company issued and sold $200.0 million principal
amount of the Existing Notes and the Company amended and restated the Senior
Credit Facility to increase the commitments thereunder from $100.0 million to
$150.0 million. The Company used and will use the $200.0 million of gross
proceeds from the sale of the Existing Notes, together with approximately $72.7
million of borrowings under the Senior Credit Facility, to pay the $218.2
million Delchamps Purchase Price, to repay approximately $15.4 million of
Delchamps' outstanding indebtedness, to make approximately $12.1 million of
change of control payments to certain Delchamps executives and to pay
approximately $27.0 million of transaction fees and expenses. As a result of the
Transactions, Management anticipates that a one-time pre-tax charge of $4.7
million ($2.9 million after tax) will be recorded in the quarter in which the
Transactions are consummated.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
financial information expressed as a percentage of net sales:
FISCAL YEAR ENDED 12 WEEKS ENDED
------------------------------------------- ------------------------
APRIL 29, APRIL 27, MAY 3,
1995 1996 1997
(52 WEEKS) (52 WEEKS) (53 WEEKS)
JULY 20, JULY 26,
1996 1997
Net sales................................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit............................................. 24.5 24.8 24.7 25.0 25.1
Direct store expense..................................... 16.1 16.4 16.3 16.1 16.6
Warehouse, administrative and general expenses........... 4.9 5.1 5.1 5.0 4.4
Special charges.......................................... -- -- 0.2 -- --
Operating income......................................... 3.5 3.2 3.0 3.9 4.1
Interest expense, net.................................... 0.9 1.1 2.9 3.0 2.9
Provision for income taxes............................... 1.0 0.8 -- 0.3 0.4
Net income before extraordinary item..................... 1.6 1.3 0.1 0.6 0.8
OTHER DATA:
EBITDA................................................... 5.6% 5.5% 5.7% 6.3% 6.4%
INTERIM 1998 VS. INTERIM 1997
NET SALES. Net sales increased $6.8 million or 2.4% in Interim 1998 as
compared to Interim 1997. The net sales increase was primarily attributable to
the continued favorable results of the Jitney-Jungle Gold Card (a frequent
shopper program which was launched by Jitney-Jungle in January, 1997) and sales
improvements at five discount supermarkets that were converted during that
period (two to the conventional store format and three to the combination store
format). Same store sales increased approximately 2.3% in Interim 1998.
Jitney-Jungle's store count at the end of Interim 1998 was 104 supermarkets (22
discount stores, 77 conventional stores and five combination stores) and 53
gasoline stations as compared
39
to 104 supermarkets (30 discount stores, 72 conventional stores and two
combination stores) and 49 gasoline stations at the end of Interim 1997.
GROSS PROFIT. Gross profit in Interim 1998 increased $2.0 million to $72.5
million, or 25.1% of net sales, compared to $70.5 million, or 25.0% of net
sales, during Interim 1997. Gross profit increased primarily due to an increase
in sales in Interim 1998.
DIRECT STORE EXPENSE. Direct store expense was $48.1 million, or 16.6% of
net sales, for Interim 1998 as compared to $45.4 million, or 16.1% of net sales,
for Interim 1997. Direct store expense increased primarily due to an increase in
net sales in Interim 1998. The increase in direct store expense as a percentage
of net sales in Interim 1998 was principally due to increases in labor costs and
advertising expense associated with the conversion of five discount stores
during that period.
WAREHOUSE, ADMINISTRATIVE AND GENERAL EXPENSES. Warehouse, administrative
and general expenses were $12.8 million, or 4.4% of net sales in Interim 1998
compared to $14.2 million, or 5.0% of net sales, in Interim 1997. The decrease
in warehouse, administrative and general expenses was primarily due to (i) a
decrease in administrative labor costs as a result of a headcount reduction
implemented during Interim 1998, (ii) a decrease in various expenses including
travel and supplies and (iii) an increase in backhaul income.
OPERATING INCOME. Operating income was $11.7 million, or 4.1% of net sales,
in Interim 1998 as compared to $10.9 million, or 3.9% of net sales, in Interim
1997. The increase in operating income was due to the factors discussed above.
EBITDA. EBITDA was $18.6 million, or 6.4% of net sales, in Interim 1998 as
compared to $17.8 million, or 6.3% of net sales, in Interim 1997. EBITDA
increased primarily due to an increase in sales in Interim 1998 and a reduction
in warehouse, administrative and general expenses.
INTEREST EXPENSE, NET. Interest expense, net was $8.2 million in Interim
1998 as compared to $8.4 million in Interim 1997. The decrease in interest
expense was primarily due to a reduction in indebtedness outstanding under the
existing Credit Facility.
INCOME TAXES. Income taxes were $1.3 million with an effective tax rate of
37.3% for Interim 1998 as compared to $0.9 million with an effective tax rate of
37.2% for Interim 1997. The increase in income taxes was principally due to
higher pretax earnings.
NET INCOME. Net income for Interim 1998 increased $0.6 million to $2.2
million, compared to $1.6 million in Interim 1997. The increase in net income
was due to the factors discussed above.
FISCAL 1997 VS. FISCAL 1996
NET SALES. Net sales for fiscal 1997 increased 4.2% to $1,228.5 million
compared to $1,179.3 million in fiscal 1996. The increase in net sales was
primarily due to the opening of two stores, the opening of seven new gasoline
stations and the addition of a "53rd" week in fiscal 1997. Without the
additional "53rd" week, net sales would have increased approximately 2.2%. In
addition, Jitney-Jungle launched its Gold Card, a frequent shopper card program,
in the fourth quarter of fiscal 1997 which increased customer count and, as a
result, increased net sales. Same store sales increased 0.2% in fiscal 1997 over
fiscal 1996.
GROSS PROFIT. Gross profit for fiscal 1997 increased $11.0 million to
$303.1 million, or 24.7% of net sales, compared to $292.1 million, or 24.8% of
net sales, for fiscal 1996. Gross profit increased primarily due to an increase
in net sales in fiscal 1997. The decrease in gross profit as a percentage of net
sales in fiscal 1997 was primarily due to the initial effect of the new
Jitney-Jungle Gold Card which entitles customers to discounts on certain
products.
DIRECT STORE EXPENSE. Direct store expense for fiscal 1997 increased $6.5
million to $200.0 million, or 16.3% of net sales, compared to $193.5 million, or
16.4% of net sales, for fiscal 1996. Direct store expenses
40
increased primarily due to an increase in net sales in fiscal 1997. The decrease
in direct store expenses as a percentage of net sales in fiscal 1997 was
principally due to decreases in store supplies and advertising costs which were
partially offset by increases in group insurance expense due to an increase in
medical claims paid during the year by the self-insured plan and increases in
depreciation expense principally due to acquisitions of property and equipment
(including capital leases) associated with Jitney-Jungle's remodeling program
and the acquisition of new stores and gasoline stations.
WAREHOUSE, ADMINISTRATIVE AND GENERAL EXPENSES. Warehouse, administrative
and general expenses for fiscal 1997 increased $2.5 million to $63.1 million, or
5.1% of net sales, compared to $60.6 million, or 5.1% of net sales, for fiscal
1996. Warehouse, administrative and general expenses increased primarily due to
(i) an increase in net sales in fiscal 1997 and (ii) an increase in amortization
expense due to increased debt issuance costs related to the Recapitalization.
The increase in warehouse, administrative and general expenses was partially
offset by an increase in backhaul income during fiscal 1997.
SPECIAL CHARGES. Includes (i) a $1.8 million non-cash charge accrued in
fiscal 1997 relating to future payments that will be made under an employment
agreement with Jitney-Jungle's former Chief Executive Officer and (ii) a $1.0
million charge relating to termination benefits payable to employees of
Jitney-Jungle whose positions were eliminated in May 1997. There were no
comparable charges in fiscal 1996.
OPERATING INCOME. Operating income for fiscal 1997 decreased $0.7 million
to $37.3 million, or 3.0% of net sales, compared to $38.0 million, or 3.2% of
net sales for fiscal 1996. The decrease in operating income was due to the
factors discussed above.
EBITDA. EBITDA for fiscal 1997 increased $5.4 million to $70.3 million, or
5.7% of net sales, compared to $64.9 million, or 5.5% of net sales, for fiscal
1996. EBITDA increased primarily due to an increase in net sales in fiscal 1997.
The increase in EBITDA as a percentage of net sales in fiscal 1997 was primarily
due to the renegotiation of a supply agreement with a major supplier and to
decreases in direct store expense as discussed above which were offset in part
by a decrease in gross profit due primarily to the initial effect of the
introduction of the Gold Card.
INTEREST EXPENSE, NET. Interest expense, net for fiscal 1997 increased
$23.2 million to $36.2 million, compared to $13.0 million for fiscal 1996. The
increase in interest expense, net was due to interest expense on the Senior
Notes and the existing Credit Facility, which were in place all of fiscal 1997
and only for two months in fiscal 1996.
INCOME TAXES. The effective rate for income taxes for fiscal 1997 decreased
to 31.2% compared to 36.3% for fiscal 1996. The decrease in effective rate for
fiscal 1997 was primarily due to lower pretax earnings which qualified
Jitney-Jungle for a lower tax bracket.
NET INCOME. Net income for fiscal 1997 decreased $13.8 million to $0.7
million, compared to $14.5 million for fiscal 1996. The decrease in net income
was due to the factors discussed above.
FISCAL 1996 VS. FISCAL 1995
NET SALES. Net sales for fiscal 1996 increased 0.5% to $1,179.3 million
compared to $1,173.9 million in fiscal 1995. The increase in net sales was
primarily due to the opening of four supermarkets and the opening of eleven new
gasoline stations, partially offset by the effect of closing seven supermarkets
and two gasoline stations in fiscal 1996. Same store sales remained relatively
flat in fiscal 1996 as compared to fiscal 1995.
GROSS PROFIT. Gross profit for fiscal 1996 increased $3.9 million to $292.1
million, or 24.8% of net sales, compared to $288.2 million, or 24.5% of net
sales, for fiscal 1995. Gross profit increased primarily due to higher net
sales. Gross profit as a percentage of net sales increased primarily due to
improved procurement results due to (i) continued enhancements and improved
utilization of Jitney-Jungle's
41
information systems, which resulted in better buying decisions at better prices
and (ii) the renegotiation of a supply contract of Fleming Companies, Inc.
DIRECT STORE EXPENSE. Direct store expense for fiscal 1996 increased $4.1
million to $193.5 million, or 16.4% of net sales, compared to $189.4 million, or
16.1% of net sales, for fiscal 1995. Direct store expense increased primarily
due to higher net sales. Direct store expense as a percentage of net sales
increased primarily due to increases in personnel costs, repairs and maintenance
and depreciation expense as a result of increased capital expenditures relating
to the remodeling of stores in fiscal 1995.
WAREHOUSE, ADMINISTRATIVE AND GENERAL EXPENSES. Warehouse, administrative
and general expenses for fiscal 1996 increased $2.9 million to $60.6 million, or
5.1% of net sales, compared to $57.7 million, or 4.9% of net sales, for fiscal
1995. Warehouse, administrative and general expenses increased primarily due to
higher net sales. Warehouse, administrative and general expenses as a percentage
of net sales increased primarily due to increases in personnel costs, insurance
expense as a result of a larger provision for workers compensation and general
liability insurance and amortization expenses as a result of increased debt
issuance costs related to the Recapitalization.
OPERATING INCOME. Operating income for fiscal 1996 decreased $3.1 million
to $38.0 million, or 3.2% of net sales, from $41.0 million, or 3.5% of net
sales, for fiscal 1995. The decrease in operating income was due to the factors
discussed above.
EBITDA. EBITDA for fiscal 1996 decreased $0.3 million to $64.9 million, or
5.5% of net sales, compared to $65.2 million, or 5.6% of net sales, for fiscal
1995. EBITDA decreased primarily due to higher direct store expenses and higher
warehouse, administrative and general expenses as discussed above.
INTEREST EXPENSE, NET. Interest expense, net for fiscal 1996 increased $2.2
million to $13.0 million, compared to $10.8 million for fiscal 1995. The
increase in interest expense, net was due to an increase in Jitney-Jungle's
outstanding indebtedness pursuant to the Senior Notes and the existing Credit
Facility as a result of the Recapitalization in February 1996, partially offset
by an increase in interest income.
INCOME TAXES. The effective rate for income taxes for fiscal 1996 decreased
to 36.3% compared to 37.8% for fiscal 1995. The decrease in effective rate for
fiscal 1996 was principally due to the elimination of inter-company profit of a
wholly owned subsidiary which previously was not included in the consolidated
tax return.
EXTRAORDINARY ITEM. In connection with the Recapitalization, Jitney-Jungle
retired $35.7 million in long-term debt prior to its scheduled maturity.
Prepayment penalties associated with early retirement of this debt resulted in
an extraordinary loss of $1.5 million, net of an income tax benefit of $0.9
million.
NET INCOME. Net income for fiscal 1996 decreased $4.3 million to $14.5
million, from $18.8 million for fiscal 1995. The decrease in net income was due
to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Jitney-Jungle has funded its working capital requirements,
capital expenditures and other needs principally from operating cash flows. Due
to the Recapitalization, however, Jitney-Jungle has become highly leveraged and
its debt instruments contain restrictions on its operations. At July 26, 1997,
Jitney-Jungle had $275.4 million of total long-term debt (including capitalized
leases and current installments) and a shareholders deficit of $151.4 million.
Jitney-Jungle's principal uses of liquidity have been to fund working
capital, meet debt service requirements and finance Jitney-Jungle's strategic
plans. Jitney-Jungle's principal sources of liquidity have been cash flow from
operations and borrowings under the Senior Credit Facility. Jitney-Jungle has
outstanding letters of credit with a face amount of $10.5 million issued under
the Senior Credit Facility principally to secure obligations pursuant to a
capitalized lease and to secure obligations under an existing
42
supply contract with Topco. At July 26, 1997, Jitney-Jungle had no outstanding
borrowings under the Senior Credit Facility.
The commitments under the Senior Credit Facility terminate, and all loans
outstanding thereunder are required to be repaid in full on March 5, 2001.
Borrowings under the Senior Credit Facility, including revolving loans and up to
$20.0 million in letters of credit, may not exceed the lesser of (i) the "Total
Commitment," which is currently $96.3 million, and (ii) an amount equal to the
sum of (A) up to 60% of eligible inventory (valued at the lessor of FIFO cost or
market value) of Jitney-Jungle and (B) the "Supplemental Availability", which is
currently $41.3 million. Each of the Total Commitment and the Supplemental
Availability decline by $1.25 million per quarter.
Cash provided by operating activities during fiscal 1995 was $45.7 million
compared to $55.5 million for fiscal 1996 and $66.5 million for fiscal 1997.
Cash provided by operating activities for Interim 1997 was $18.1 million
compared to $5.8 million for Interim 1998. In fiscal 1997, inventories decreased
due to an inventory reduction plan implemented by Management and accounts
payable increased due to improvement of customer terms to industry standards.
These working capital improvements were partially offset by the reduction in net
income due principally to the increase in cash interest expense during fiscal
1997 as a result of Jitney-Jungle's higher total indebtedness as discussed
above. The principal reason for the increase of cash provided by operating
activities for fiscal 1996 was a decrease in inventories due, in part, to store
closings and a decrease in receivables which reflects a reduction in the
uncollected billbacks due from vendors. In Interim 1998, accounts payable
increased due to improvement of customer terms to industry standards and
inventories increased due to (i) planned remodel sales associated with store
conversions, (ii) the improvement of service levels in Jitney-Jungle's warehouse
inventories and (iii) increased purchasing of deal merchandise at a lower cost.
Net cash used in investing activities was $46.0 million for fiscal 1995,
$12.4 million for fiscal 1996 and $22.3 million during fiscal 1997, and was $4.7
million for Interim 1997 and $4.9 million for Interim 1998. Such cash was
primarily used for capital expenditures. Capital expenditures were $23.9 million
for fiscal 1995, $30.1 million for fiscal 1996 and $24.1 million for fiscal
1997, and were $6.1 million for Interim 1997 and $5.0 million for Interim 1998.
In addition to capital expenditures related to new stores opened in fiscal 1995,
1996 and 1997, Jitney-Jungle converted two discount stores to conventional
stores, and expanded ten additional stores.
Net cash used in financing activities was $10.2 million for fiscal 1995,
$57.6 million for fiscal 1996 and $35.4 million for fiscal 1997, and was $16.1
million for Interim 1997 and $10.1 million for Interim 1998. The principal uses
of funds in financing activities for fiscal 1995 and fiscal 1997 were the
payment of long-term debt and capital lease obligations. The principal uses of
funds in financing activities in fiscal 1996 were the redemption of Common Stock
and related costs in connection with the Recapitalization, principal payments on
debt and capital lease obligations and payments of dividends to stockholders.
The principal uses of funds in financing activities for Interim 1998 were the
payment of principal on long-term debt and capital lease obligations.
Jitney-Jungle's expenditures to comply with environmental laws and
regulations at its grocery stores primarily consist of those related to
remediation of underground storage tank leaks and spills and retrofitting
chlorofluorocarbon ("CFC") chiller units and tank upgrading to meet 1998
standards. Jitney-Jungle's unreimbursed cost for remediation at the nine
Jitney-Jungle facilities which have had leaks or spills has not been material.
All significant required expenditures in connection with the cleanup of such
leaks and spills have been made at the nine locations. In addition,
Jitney-Jungle has obtained insurance coverage for bodily injury, property damage
and corrective action expenses resulting from releases of petroleum products
from underground storage tanks during the covered period at 53 of its 54
underground storage tank locations, and an application for such coverage is
pending at the remaining location. Jitney-Jungle spent $480,000, $246,000 and
$500,000 for retrofitting CFC-containing chiller units during fiscal 1995, 1996
and 1997, respectively. Jitney-Jungle spent $0, $130,000 and $220,000 for tank
upgrades during fiscal 1995, 1996 and 1997, respectively.
43
SELECTED HISTORICAL FINANCIAL INFORMATION OF DELCHAMPS
The following table sets forth selected historical financial information of
Delchamps for the five years ended June 28, 1997. The operating and balance
sheet data for the three years ended June 28, 1997 were derived from the audited
consolidated financial statements of Delchamps included elsewhere in this
Prospectus. The operating and balance sheet data for the two years ended July 2,
1994 was derived from audited consolidated financial statements of Delchamps.
The following table should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations of Delchamps" and
the audited consolidated financial statements of Delchamps included elsewhere in
this Prospectus.
Delchamps historically has accounted for warehouse costs as part of cost of
goods sold, while Jitney-Jungle has accounted for such costs as part of
warehouse, administrative and general expenses. Following the Delchamps
Acquisition, the Company will include such costs in warehouse, administrative
and general expenses. The data set forth below under the heading "Reclassified
Data" reflect the reclassification of Delchamps' warehouse costs as though such
warehouse costs had been accounted for in accordance with the historical
financial statements of Jitney-Jungle.
FISCAL YEAR ENDED
------------------------------------------------------
JULY 3, JULY 2, JULY 1, JUNE 29, JUNE 28,
1993 1994 1995 1996 1997
(DOLLARS IN THOUSANDS)
OPERATING DATA:
Net sales........................................................... $1,034,531 $1,067,191 $1,054,088 $1,126,629 $1,102,947
Gross profit........................................................ 264,074 270,827 255,551 263,240 272,069
Selling, general and administrative expenses ("SG&A"):
Restructuring charge(1)........................................... -- -- 28,779 -- --
Other SG&A........................................................ 236,167 248,808 261,763 250,121 254,282
--------- --------- --------- --------- ----------
Operating income (loss)............................................. 27,907 22,019 (34,991) 13,119 17,787
Interest expense, net............................................... 5,169 4,161 5,275 6,820 4,982
--------- --------- --------- --------- ----------
Earnings (loss) before income taxes and cumulative effect of changes
in accounting principles.......................................... 22,738 17,858 (40,266) 6,299 12,805
Income tax expense.................................................. 8,365 6,207 (14,600) 2,447 4,851
--------- --------- --------- --------- ----------
Earnings (loss) before cumulative effect of change
in accounting principles.......................................... 14,373 11,651 (25,666) 3,852 7,954
Cumulative effect of change in accounting principles for:
Income taxes...................................................... -- 900 -- -- --
Post-employment benefits.......................................... -- (1,600) -- -- --
--------- --------- --------- --------- ----------
Net earnings (loss)................................................. $ 14,373 $ 10,951 $ (25,666) $ 3,852 $ 7,954
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
OTHER DATA:
EBITDA(2)........................................................... $ 46,228 $ 40,636 $ 19,077 $ 34,892 $ 44,117
Depreciation and amortization....................................... 18,099 18,770 19,472 21,771 23,719
LIFO expense (benefit).............................................. 210 (38) 536 422 391
Restructuring and other special charges(1).......................... 12 (115) 34,060 (420) 2,220
Capital expenditures................................................ 20,824 17,705 35,239 21,671 15,551
Supermarkets open at end of period.................................. 118 120 118 117 118
Remodels during period.............................................. 7 4 5 1 5
Gross profit as a percentage of sales 25.5% 25.4% 24.2% 23.4% 24.7%
EBITDA as a percentage of sales..................................... 4.5% 3.8% 1.8% 3.1% 4.0%
Ratio of earnings to fixed charges(3)............................... 2.4x 2.1x -- 1.3x 1.6x
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents........................................... $ 12,070 $ 15,378 $ 15,906 $ 10,503 $ 5,670
Working capital..................................................... 49,511 54,926 22,920 22,067 29,140
Total assets........................................................ 252,052 263,269 269,412 255,183 243,461
Total debt.......................................................... 50,814 51,079 62,170 39,746 25,839
Long term portion of restructuring obligation(1).................... -- -- 19,219 15,668 13,453
Stockholders' equity................................................ 126,262 136,300 110,042 112,925 118,019
RECLASSIFIED DATA:
Gross profit........................................................ $ 288,761 $ 295,937 $ 279,689 $ 289,539 $ 297,115
Gross profit as a percentage of sales............................... 27.9% 27.7% 26.5% 25.7% 26.9%
Other SG&A.......................................................... $ 260,854 $ 273,918 $ 285,901 $ 276,420 $ 277,108
44
- ------------------------
(1) During fiscal 1995, Delchamps recorded a pretax restructuring charge of
$28,779. The charge reflected anticipated costs associated with a program to
close certain underperforming supermarkets which could not be subleased in
whole or in part and, to a lesser extent, severance costs related to the
termination of employment of former executives. In March 1997, Delchamps
incurred a charge of $4,300, resulting from the settlement of a lawsuit,
which was partially offset by a gain of $2,080 resulting from the sale of
real property in fiscal 1997.
(2) EBITDA is defined as income from continuing operations before interest,
taxes, depreciation, amortization, LIFO expense (benefit) and special items,
net. EBITDA is presented because it is a widely accepted financial indicator
of a company's ability to service indebtedness. However, EBITDA should not
be considered as an alternative to income from operations or to cash flows
from operating activities (as determined in accordance with generally
accepted accounting principles) and should not be construed as an indication
of a company's operating performance or as a measure of liquidity.
(3) The ratio of earnings to fixed charges is computed by adding fixed charges
to earnings (loss) before taxes on income and dividing that sum by the fixed
charges. Fixed charges consist of interest (including amortization costs)
and a portion of rent expense that management considers to be interest.
Earnings were insufficient to cover fixed charges in fiscal 1995 by $40,266.
45
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF DELCHAMPS
The following discussion should be read in conjunction with the audited
consolidated financial statements and related notes, and the other financial
information, included elsewhere in this Prospectus. References in this
discussion to fiscal years are to Delchamps' fiscal years, which end on the
Saturday nearest to June 30 in the calendar year.
GENERAL
Delchamps operates a chain of 118 supermarkets in the states of Alabama,
Florida, Mississippi and Louisiana, as well as ten liquor stores in the State of
Florida.
Delchamps historically has accounted for warehouse costs as part of cost of
goods sold, while Jitney-Jungle has accounted for such costs as part of
warehouse, administrative and general expenses. Following the Delchamps
Acquisition, the Company will account for such costs as part of warehouse,
administrative and general expenses. The data set forth below under the heading
"Reclassified Data" reflect the reclassification of Delchamps' warehouse costs
as though such warehouse costs had been accounted for in accordance with the
historical financial statements of Jitney-Jungle.
During the past three years, increasingly competitive markets have made it
difficult for Delchamps to achieve comparable store sales gains and improve
profitability. During Delchamps' last three fiscal years, competitors have
opened approximately 82 new supermarkets in Delchamps' operating regions,
approximately 21 of which were opened in fiscal 1997. In fiscal 1997, Delchamps
experienced a 2.1% decline in net sales and a 3.5% decline in same store sales.
Although net sales and same store sales declined, gross margin improved,
primarily as a result of selective retail price increases. Delchamps can give no
assurances that improvements in profitability can be achieved if net sales and
same store sales continue to decline as a result of competitive pressures.
On July 8, 1997, Delchamps announced that it had entered into the Delchamps
Merger Agreement pursuant to which it had agreed to be acquired by
Jitney-Jungle. The terms of the Delchamps Merger Agreement are described in
Delchamps' Schedule 14D-9, as amended, and in Jitney-Jungle's 14D-1, as amended,
both of which have been filed with the Commission. Pursuant to the Delchamps
Merger Agreement, DAC, a wholly-owned subsidiary of Jitney-Jungle, commenced the
Delchamps Tender Offer for all outstanding shares of Delchamps' common stock at
a price of $30 per share. On September 12, 1997 DAC accepted for payment
pursuant to the Delchamps Tender Offer an aggregate of 5,317,510 of such shares.
The Delchamps Merger Agreement provides, generally, that as soon as practicable
after the satisfaction or waiver of the conditions set forth in the Delchamps
Merger Agreement, DAC will be merged with and into Delchamps, with Delchamps
continuing as the surviving corporation and the remaining shareholders of
Delchamps receiving $30 per share.
Delchamps' Board of Directors has unanimously approved the Delchamps
Acquisition and the Delchamps Merger Agreement, and has determined that the
consideration to be paid for the shares of Delchamps' common stock is fair to
Delchamps' shareholders and that the Delchamps Acquisition is otherwise in the
best interests of Delchamps and its shareholders. Delchamps' Board of Directors
has unanimously recommended that Delchamps' shareholders vote in favor of the
Delchamps Merger.
46
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected
financial information expressed as a percentage of net sales:
FISCAL YEAR ENDED
-------------------------------------
JULY 1, JUNE 29, JUNE 28,
1995 1996 1997
Net sales............................................................................ 100.0% 100.0% 100.0%
Gross profit......................................................................... 24.2 23.4 24.7
SG&A:
Restructuring charge............................................................... 2.7 -- --
Other SG&A......................................................................... 24.8 22.2 23.1
Operating income..................................................................... (3.4) 1.2 1.6
Interest expense, net................................................................ 0.5 0.6 0.5
Earnings before income taxes......................................................... (3.8) 0.6 1.2
Provision for income taxes........................................................... (1.4) 0.2 0.4
Net income........................................................................... (2.4) 0.3 0.7
OTHER DATA:
EBITDA............................................................................... 1.8% 3.1% 4.0%
RECLASSIFIED DATA:
Gross profit......................................................................... 26.5% 25.7% 26.9%
Other SG&A........................................................................... 27.1 24.5 25.1
FISCAL 1997 VS. FISCAL 1996
NET SALES. Net sales for fiscal 1997 decreased 2.1% to $1,103.0 million
compared to $1,127.0 million for fiscal 1996. The decrease in net sales during
fiscal 1997 occurred primarily because a significant number of new supermarkets
were opened by competitors (approximately 21 new supermarkets were opened by
competitors during fiscal 1997) and competitors increased levels of promotional
activity (which included the introduction of a frequent shopper card by a
competitor).
GROSS PROFIT. Gross profit for fiscal 1997 increased $8.8 million to $272.1
million, or 24.7% of net sales, compared to $263.2 million, or 23.4% of net
sales, for fiscal 1996. The increase in gross profit as a percentage of net
sales was primarily due to selective retail price adjustments and increased
levels of promotional and buying allowances from vendors which resulted in a
lower cost of merchandise and fewer promotional programs as compared to fiscal
1996. Assuming the reclassification of warehouse expenses from cost of sales to
SG&A, gross profit would have been $297.1 million, or 26.9% of net sales, for
fiscal 1997, compared to $289.5 million, or 25.7% of net sales, for fiscal 1996.
SG&A. SG&A expenses for fiscal 1997 increased $4.2 million to $254.3
million, or 23.1% of net sales, compared to $250.1 million, or 22.2% of net
sales, for fiscal 1996. SG&A expenses for fiscal 1997 included a $4.3 million
increase in legal expenses relating to the settlement of five related lawsuits
and a $1.7 million increase in incentive expenses which resulted from improved
pretax earnings. SG&A was favorably impacted by a $2.1 million gain on the sale
of certain real property (a former warehouse in Mobile, Alabama and land near
Birmingham, Alabama). Excluding the legal settlement and gain on sale of real
property, SG&A expenses for fiscal 1997 increased to 22.9% of net sales,
compared to 22.2% of net sales for fiscal 1996. Assuming the reclassification of
warehouse expenses from cost of sales to SG&A, SG&A would have been $277.1
million, or 25.1% of net sales, for fiscal 1997, compared to $276.4 million, or
24.5% of net sales, for fiscal 1996.
OPERATING INCOME. Operating income for fiscal 1997 increased $4.7 million
to $17.8 million, or 1.6% of net sales, compared to $13.1 million, or 1.1% of
net sales for fiscal 1996. Excluding the charge for the lawsuit settlement and
the gain from sale of certain real property, operating income for fiscal 1997
increased $6.9 million to $20.0 million, or 1.8% of net sales, compared to $13.1
million, or 1.1% of net sales for fiscal 1996. The increase in operating income
was due to an increase in gross profit partially offset by an increase in SG&A.
47
INTEREST EXPENSE, NET. Interest expense, net for fiscal 1997 decreased $1.8
million to $5.0 million, compared to $6.8 million for fiscal 1996. The decrease
in interest expense, net was due to lower levels of indebtedness under
Delchamps' revolving credit line and lower levels of long-term indebtedness.
INCOME TAXES. The effective rate for income taxes for fiscal 1997 decreased
to 37.9% compared to 38.8% for fiscal 1996. The effective rate for fiscal 1997
approximates the combined federal and state statutory rates.
NET INCOME. Net income for fiscal 1997 increased $4.1 million to $8.0
million, compared to $3.9 million, for fiscal 1996. Excluding the effects of the
charge for the lawsuit settlement and gain from the sale of certain real
property, net income increased $5.6 million to $9.5 million for fiscal 1997,
compared to $3.9 million for fiscal 1996. The increase in net income was
primarily due to an increase in gross profit margins which resulted from
selected retail price adjustments and increased levels of promotional and buying
allowances and decreases in interest expense and effective rate for income taxes
as compared to fiscal 1996.
FISCAL 1996 VS. FISCAL 1995
NET SALES. Net sales for fiscal 1996 increased 6.9% to $1,126.6 million
compared to $1,054.1 million in fiscal 1995. The increase in net sales was
primarily due to the implementation of (i) a new merchandising program, (ii) a
new supermarket renovation program and (iii) new programs to improve customer
service. The new merchandising program (a) primarily reduced retail prices on
thousands of items, (b) increased the amount by which coupons are doubled from
$0.49 to $0.50 and (c) introduced a new advertising campaign to promote these
changes. The new supermarket renovation program affected 48 supermarkets and
included new decor packages, new in-store signage, painting, and for some
stores, new fixtures, cases, and shelving. New programs to improve customer
service included new training programs for all levels of store personnel, and
the enhancement of a field specialist program in which field specialists visit
perishable departments in all supermarkets to improve quality and freshness of
product, signage, and displays.
GROSS PROFIT. Gross profit for fiscal 1996 increased $7.6 million to $263.2
million, or 23.4% of net sales, compared to $255.6 million, or 24.2% of net
sales, for fiscal 1995. Gross profit increased primarily due to an increase in
net sales in fiscal 1996. The decrease in gross profit as a percentage of net
sales in fiscal 1996 was primarily due to the new merchandising program, in
which retail prices for thousands of items were reduced, which was implemented
for all of fiscal 1996 and was only in place for the last quarter of fiscal
1995. Assuming the reclassification of warehouse expenses from cost of sales to
SG&A, gross profit would have been $289.5 million, or 25.7% of net sales, for
fiscal 1996, compared to $279.7 million, or 26.5% of net sales, for fiscal 1995.
SG&A. SG&A expenses in fiscal 1995 included $28.8 million of restructuring
charges which were primarily due to leases for certain stores that were closed
in fiscal 1995 that could not be subleased in whole or in part, and a $5.1
million write-off of goodwill related to acquired assets which were consistently
producing negative results. Excluding such charges, SG&A expenses for fiscal
1996 decreased $6.6 million to $250.1 million, or 22.2% of net sales, compared
to $256.7 million, or 24.3% of net sales, for fiscal 1995. The decrease in SG&A
expenses was primarily due to a $5.4 million decrease in salaries and wages from
the implementation of a labor scheduling program. Assuming the reclassification
of warehouse expenses from cost of sales to SG&A, and excluding the
restructuring charge and write-off referred to above SG&A would have been $276.4
million, or 24.5% of net sales, for fiscal 1996, compared to $280.9 million, or
26.6% of net sales, for fiscal 1995.
OPERATING INCOME. Excluding the restructuring charges and write-off of
goodwill in fiscal 1995 described above, operating income for fiscal 1996
increased $14.3 million to $13.1 million, or 1.2% of net sales, compared to loss
of $1.2 million, or (0.9%) of net sales, for fiscal 1995. The increase in
operating income was due to an increase in gross profit and a reduction in SG&A
as described above.
INTEREST EXPENSE, NET. Interest expense, net for fiscal 1996 increased $1.5
million to $6.8 million, compared to $5.3 million for fiscal 1995. The increase
in interest expense, net was due to Delchamps' restructure obligation being
outstanding for all of fiscal 1996 compared to being outstanding for only the
fourth quarter of fiscal 1995.
48
INCOME TAXES. The effective rate for income taxes for fiscal 1996 increased
to 38.8% compared to 36.3% for fiscal 1995. The increase in fiscal 1996 was due
to the expiration of the targeted jobs tax credit. The effective rate in fiscal
1996 approximates the combined federal and state statutory rates.
NET INCOME. Excluding the restructuring charges and write-off of goodwill
in fiscal 1995 described above, net income for fiscal 1996 increased $7.3
million to $3.9 million, compared to a net loss of $3.4 million, for fiscal
1995. The increase in net income was primarily due to an increase in gross
profit and decrease in SG&A partially offset by increases in interest expense,
net and effective rate for income taxes as compared to fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL SPENDING
The following table shows capital expenditures during the last three fiscal
years, as well as the number of supermarkets that were opened, closed and
remodeled during that same period:
1995 1996 1997
Capital expenditures (millions).............................................................. $ 35.2 $ 21.7 $ 15.6
--------- --------- ---------
--------- --------- ---------
Supermarkets opened.......................................................................... 10 1 2
Supermarkets closed.......................................................................... 12 2 1
Remodels:
Expansions/remodels completed.......................................................... 5 1 5
Renovations completed.................................................................. -- 48 --
FINANCING AND LIQUIDITY
Although Delchamps' supermarket locations are leased, Delchamps makes
substantial expenditures to equip new and expanded supermarkets. The cost to
equip a new supermarket is approximately $2.3 million while the additional cost
to equip an expanded supermarket is approximately $1.5 million. In addition,
Delchamps makes substantial expenditures for distribution center facilities and
equipment. Delchamps plans to finance its capital expenditures with funds
provided by operations. However, if an insufficient amount of funds in
generated, Delchamps may obtain long-term financing or draw on short-term credit
lines. Delchamps has a $75.0 million credit line from financial institutions of
which $70.4 million was available for future use at June 28, 1997. The credit
line is committed to Delchamps through June 1998.
Cash flow generated by operating activities was $25.2 million for fiscal
1995, $39.1 million for fiscal 1996 and $23.3 million for fiscal 1997. Cash
flows from operating activities decreased in fiscal 1997 as compared to fiscal
1996 primarily because of lower levels of accounts payable. Fiscal 1996
increased over fiscal 1995 because of improved earnings.
Cash used in investing activities was $34.6 million for fiscal 1995, $21.0
million for fiscal 1996 and $11.2 million for fiscal 1997. Cash was primarily
used for capital expenditures. Capital expenditures were $35.2 million for
fiscal 1995, $21.7 million for fiscal 1996 and $15.6 million for fiscal 1997.
During fiscal 1995, Delchamps purchased seven supermarkets from the Kroger Co.,
opened three supermarkets, remodeled five supermarkets, and purchased equipment
which had been previously leased at Delchamps' distribution facilities. During
fiscal 1996, Delchamps opened one supermarket, remodeled one supermarket,
renovated 42 supermarkets, purchased technology to enhance debit and credit
transactions, and purchased security systems for substantially all locations.
During fiscal 1997, Delchamps opened two new supermarkets and remodeled five
supermarkets.
Cash generated by financing activities was $10.0 million in fiscal 1995 and
cash used in financing activities was $23.5 million in fiscal 1996 and $17.0
million in fiscal 1997. The changes for all periods were the result of activity
under Delchamps' revolving loan agreement. At the end of fiscal 1997, the
Company was in compliance with all financial covenants under the revolving loan
agreement and its long-term debt agreement.
49
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING EXISTING NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Existing Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on , 1997; provided, however, that if the Company has
extended the period of time for which the Exchange Offer is open, the term
"Expiration Date" means the latest time and date to which the Exchange Offer is
extended.
As of the date of this Prospectus, $200.0 million aggregate principal amount
of the Existing Notes are outstanding. This Prospectus, together with the Letter
of Transmittal, is first being sent on or about , 1997 to all holders of
Existing Notes known to the Company. The Company's obligation to accept Existing
Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth under "--Certain Conditions to the Exchange Offer"
below.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for any exchange of any Existing Notes, by giving
notice of such extension to the holders thereof. During any such extension, all
Existing Notes previously tendered will remain subject to the Exchange Offer and
may be accepted for exchange by the Company. Any Existing Notes not accepted for
exchange for any reason will be returned without expense to the tendering holder
thereof as promptly as practicable after the expiration or termination of the
Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Existing Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified below under "--Certain Conditions to the Exchange
Offer." The Company will give notice of any extension, amendment, non-acceptance
or termination to the holders of the Existing Notes as promptly as practicable,
such notice in the case of any extension to be issued no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date.
Holders of Existing Notes do not have any appraisal or dissenters' rights
under the Mississippi Business Corporation Act in connection with the Exchange
Offer.
PROCEDURES FOR TENDERING EXISTING NOTES
The tender to the Company of Existing Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Existing Notes for exchange pursuant to the Exchange Offer must transmit a
properly completed and duly executed Letter of Transmittal, including all other
documents required by such Letter of Transmittal, to Marine Midland Bank at the
address set forth below under "Exchange Agent" on or prior to the Expiration
Date. In addition, either (i) certificates for such Existing Notes must be
received by the Exchange Agent along with the Letter of Transmittal, or (ii) a
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of
such Existing Notes, if such procedure is available, into the Exchange Agent's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date, or the holder must
comply with the guaranteed delivery procedure described below. THE METHOD OF
DELIVERY OF EXISTING NOTES, LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF
50
SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR
EXISTING NOTES SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Existing Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Existing Notes
who has not completed the box entitled "Special Issuance Instruction" or
"Special Delivery Instruction" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined below). In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantees must be by a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Existing Notes are registered in the name of a person other
than a signer of the Letter of Transmittal, the Existing Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company in its sole discretion, duly executed by, the registered holder with the
signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Existing Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and all
tenders of any particular Existing Notes not properly tendered or to not accept
any particular Existing Notes which acceptance might, in the judgment of the
Company or its counsel, be unlawful. The Company also reserves the absolute
right to waive any defects or irregularities or conditions of the Exchange Offer
as to any particular Existing Notes either before or after the Expiration Date
(including the right to waive the ineligibility of any holder who seeks to
tender Existing Notes in the Exchange Offer). The interpretation of the terms
and conditions of the Exchange Offer as to any particular Existing Notes either
before or after the Expiration Date (including the Letter of Transmittal and the
instructions thereto) by the Company shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
Existing Notes for exchange must be cured within such reasonable period of time
as the Company shall determine. Neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Existing Notes for exchange, nor
shall any of them incur any liability for failure to give such notification.
If the Letter of Transmittal or any Existing Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each holder of Existing Notes will represent to the Company
that, among other things, the New Notes acquired pursuant to the Exchange Offer
are being obtained in the ordinary course of business of the holder and any
beneficial holder, that neither the holder nor any such beneficial holder has an
arrangement or understanding with any person to participate in the distribution
of such New Notes and that neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of the Company. If
the holder is not a broker-dealer, the holder must represent that it is not
engaged in nor does it intend to engage in a distribution of the New Notes.
ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
For each Existing Note accepted for exchange, the holder of such Existing
Note will receive a New Note having a principal amount equal to that of the
surrendered Existing Note. For purposes of the
51
Exchange Offer, the Company shall be deemed to have accepted properly tendered
Existing Notes for exchange when, as and if the Company has given oral and
written notice thereof to the Exchange Agent.
In all cases, issuance of New Notes for Existing Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Existing Notes or a timely
Book-Entry Confirmation of such Existing Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility, a properly completed and duly executed
Letter of Transmittal and all other required documents. If any tendered Existing
Notes are not accepted for any reason set forth in the terms and conditions of
the Exchange Offer or if Existing Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged
Existing Notes will be returned without expense to the tendering holder thereof
(or, in the case of Existing Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described below, such non-exchanged Existing
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility) as promptly as practicable after the expiration of the Exchange Offer.
BOOK-ENTRY TRANSFER
Any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Existing Notes by causing the
Book-Entry Transfer Facility to transfer such Existing Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Existing Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the Exchange Agent at the address
set forth below under "Exchange Agent" on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Existing Notes desires to tender such Existing
Notes and the Existing Notes are not immediately available, or time will not
permit such holder's Existing Notes or other required documents to reach the
Exchange Agent before the Expiration Date, or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if (i)
the tender is made through an Eligible Institution, (ii) prior to the Expiration
Date, the Exchange Agent received from such Eligible Institution a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) and
Notice of Guaranteed Delivery, substantially in the form provided by the Company
(by telegram, telex, facsimile transmission, mail or hand delivery), setting
forth the name and address of the holder of Existing Notes and the amount of
Existing Notes tendered, stating that the tender is being made thereby and
guaranteeing that within five New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Existing Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent and (iii) the certificates for all
physically tendered Existing Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and all other documents required by the Letter
of Transmittal are received by the Exchange Agent within five NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Existing Notes may be withdrawn at any time prior to the
Expiration Date. For a withdrawal to be effective, a written notice of
withdrawal must be received by the Exchange Agent at the address set forth below
under "Exchange Agent." Any such notice of withdrawal must specify the name of
52
the person having tendered the Existing Notes to be withdrawn, identify the
Existing Notes to be withdrawn (including the principal amount of such Existing
Notes), and (where certificates for Existing Notes have been transmitted)
specify the name in which such Existing Notes are registered, if different from
that of the withdrawing holder. If certificates for Existing Notes have been
delivered or otherwise identified to the Exchange Agent then, prior to the
release of such certificates, the withdrawing holder must also submit the serial
numbers of the particular certificates to be withdrawn and a signed notice of
withdrawal with signatures guaranteed by an Eligible Institution unless such
holder is an Eligible Institution. If Existing Notes have been tendered pursuant
to the procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Existing Notes and otherwise
comply with the procedures of such facility. All questions as to the validity,
form and eligibility (including time of receipt) of such notices will be
determined by the Company, whose determination shall be final and binding on all
parties. Any Existing Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Existing Notes
which have been tendered for exchange but which are not exchanged for any reason
will be returned to the holder thereof without cost to such holder (or, in the
case of Existing Notes tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Existing Notes will be credited to an account
maintained with such Book-Entry Transfer Facility for the Existing Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Existing Notes may be retendered by following
one of the procedures described under "--Procedures for Tendering Existing
Notes" above at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Existing Notes and may terminate or amend the Exchange Offer if at any time
before the acceptance of such Existing Notes for exchange or the exchange of New
Notes for such Existing Notes, the Company determines that the Exchange Offer
violates applicable law, any applicable interpretation of the staff of the
Commission.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its reasonable discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Existing Notes
tendered, and no New Notes will be issued in exchange for any such Existing
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). In any such event the Company is
required to use every reasonable effort to obtain the withdrawal of any stop
order at the earliest possible time.
EXCHANGE AGENT
Marine Midland Bank has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at the address set forth below. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
53
BY MAIL, OVERNIGHT COURIER OR HAND:
Marine Midland Bank
140 Broadway, Level A
New York, New York 10005-1180
Attention: Corporate Trust Operations
BY FACSIMILE:
(212) 658-2292
CONFIRM BY TELEPHONE:
(212) 658-5931
Delivery other than as set forth above will not constitute a valid delivery.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Existing
Notes, which is the principal amount as reflected in the Company's accounting
records on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized. The debt issuance costs will be capitalized for
accounting purposes.
TRANSFER TAXES
Holders who tender their Existing Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct the Company to register New Notes in the name of, or request that
Existing Notes not tendered or not accepted in the Exchange Offer be returned
to, a person other than the registered tendering holder will be responsible for
the payment of any applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF NEW NOTES
Holders of Existing Notes who do not exchange their Existing Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Existing Notes as set forth in the legend
thereon as a consequence of the issuance of the Existing Notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of, the Securities Act and applicable state securities laws.
Existing Notes not exchanged pursuant to the Exchange Offer will continue to
accrue interest at 10 3/8% per annum and will otherwise remain outstanding in
accordance with their terms. Holders of Existing Notes do not have any appraisal
or dissenters' rights under the Mississippi Business Corporation Act in
connection with the Exchange Offer. In general, the Existing Notes may not be
offered or sold unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Existing Notes under the Securities Act. However, (i) the
Company is not required to file the Exchange Offer Registration Statement or
permitted to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy
54
or (ii) any holder of Transfer Restricted Securities notifies the Company within
the specified time period that (A) it is prohibited by law or Commission policy
from participating in the Exchange Offer or (B) that it may not resell the New
Notes acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales or (C) that it is a
broker-dealer and owns Existing Notes acquired directly from the Company or an
affiliate of the Company, the Company will file with the Commission a shelf
registration statement to cover resales of the Notes by the Holders thereof who
satisfy certain conditions relating to the provision of information in
connection with the shelf registration statement. For purposes of the foregoing,
"Transfer Restricted Securities" means each Existing Note until the earlier of
(i) the date on which such Existing Note has been exchanged by a person other
than a broker-dealer for a New Note in the Exchange Offer, (ii) following the
exchange by a broker-dealer in the Exchange Offer of an Existing Note for a New
Note, the date on which such New Note is sold to a purchaser who receives from
such broker-dealer on or prior to the date of such sale a copy of this
Prospectus, (iii) the date on which such Existing Note has been effectively
registered under the Securities Act and disposed of in accordance with the shelf
registration statement or (iv) the date on which such Existing Note is
distributed to the public pursuant to Rule 144 under the Act.
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, the Company is of the view that New
Notes issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any such holder which
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or (ii) any broker-dealer that purchases Notes from the Company
to resell pursuant to Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holders' business and such holders have no arrangement or understanding
with any person to participate in the distribution of such New Notes. If any
holder has any arrangement or understanding with respect to the distribution of
the New Notes to be acquired pursuant to the Exchange Offer, such holder (i)
could not rely on the applicable interpretations of the staff of the Commission
and (ii) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale transaction. A
broker-dealer who holds Existing Notes that were acquired for its own account as
a result of market-making or other trading activities may be deemed to be an
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of New Notes. Each such broker-dealer that receives
New Notes for its own account in exchange for Existing Notes, where such
Existing Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge in the Letter of
Transmittal that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the New Notes for offer or
sale under the securities or blue sky laws of such jurisdictions as any holder
of the Notes reasonably requests in writing.
55
BUSINESS
GENERAL
The Company is a leading operator of supermarkets in the Southeast. Upon
consummation of the Delchamps Acquisition, the Company will operate 199
supermarkets located throughout Mississippi and Alabama as well as in selected
markets in Tennessee, Arkansas, Louisiana and Florida. In addition, the Company
will be the largest supermarket operator in Mississippi and the second largest
supermarket operator in Alabama, with 81 supermarkets in Mississippi and 49
supermarkets in Alabama. The Company will account for an estimated 32% of the
grocery sales in Mississippi and an estimated 18% of the grocery sales in
Alabama. Jitney-Jungle currently has an estimated 50% of the grocery sales in
Jackson, Mississippi and Delchamps has an estimated 37% of the grocery sales in
Mobile, Alabama. Jitney-Jungle and Delchamps also have the number one, two or
three market share position in approximately 80% of the major markets in which
they operate. The Delchamps Acquisition is expected to increase the Company's
geographic diversification because the Delchamps stores are primarily located in
areas in which Jitney-Jungle currently has no stores. At the same time, the
Delchamps Acquisition is expected to result in valuable purchasing, distribution
and marketing synergies for the Company. On a Pro Forma Basis, the Company would
have had approximately $2.2 billion of net sales and approximately $127.8
million of EBITDA for the LTM Period.
Management believes that the Company has significant competitive advantages,
which include:
STRONG FRANCHISE AND PRIME SITES. The Company has a strong consumer
franchise built around the "Jitney-Jungle" and "Delchamps" names. Management
believes that the Company's customers associate these names with quality, value,
convenience and superior service. In addition, Management believes that most of
the Company's urban supermarkets are in high-traffic locations that offer
significant competitive advantages, and that many of its supermarkets located in
smaller towns and rural areas are located on prime, non-replicable sites.
MODERN SUPERMARKET BASE. During the last five fiscal years, Jitney-Jungle
and Delchamps invested approximately $147.0 million and $111.0 million,
respectively, in capital expenditures, a substantial majority of which was for
building new supermarkets and expanding or remodeling existing supermarkets.
Approximately 81% of the Company's supermarket base has been built or remodeled
within the past five fiscal years.
SUCCESSFUL PRIVATE LABEL PROGRAM. In addition to branded products, the
Company's supermarkets offer a selection of private label products bearing the
brand names of Topco, the largest cooperative grocery products purchasing
organization in the United States. The Company's affiliation with Topco enables
it to procure quality merchandise on a competitive basis with larger, national
food retailers. Pro forma net sales of private label products, which generally
have a lower unit sales price than national brands but provide a higher gross
margin due to lower unit costs, accounted for approximately 18.2% of pro forma
net non-perishable sales of the Company during the LTM Period.
CENTRALIZED AND EFFICIENT DISTRIBUTION FACILITIES. The Company's
distribution facility located in Jackson, Mississippi is conveniently located
close to major highways and provides a central delivery site for vendors. This
facility includes an aggregate of 814,000 square feet of warehouse space and can
efficiently supply the Company's 199 supermarkets, as well as potential new
markets contiguous to existing markets.
ANTICIPATED COST SAVINGS
During fiscal 1997, Delchamps generated net sales and EBITDA of
approximately $1.1 billion and $44.1 million, respectively. In addition to the
incremental net sales, EBITDA and market share expected to result from the
Delchamps Acquisition, Management believes that it should be able to achieve
significant
56
cash cost savings as a result of the elimination of certain duplicative costs,
increased operating efficiencies and increased purchasing leverage in connection
with the combined operation of the Jitney-Jungle and Delchamps businesses
following the Delchamps Acquisition. While the exact timing and amount of such
cash cost savings is inherently uncertain, Management currently expects that the
Company should begin to realize such cash cost savings within three to nine
months after the Delchamps Acquisition. Specific anticipated benefits of the
Delchamps Acquisition include:
REDUCED GENERAL AND ADMINISTRATIVE EXPENSE. In connection with the
Delchamps Acquisition, Management expects to consolidate the corporate
headquarters of the Company's combined operations in the existing corporate
headquarters of Jitney-Jungle. Although divisional offices will be opened in
Mobile, Alabama, the Delchamps Mobile headquarters will be closed and
approximately 160 positions currently held by employees at the Jitney-Jungle and
Delchamps corporate headquarters will be eliminated. Management estimates that
such measures should result in approximately $9.3 million of annualized cash
cost savings, which the Company should begin to realize within three to six
months following the Delchamps Acquisition.
IMPROVED WAREHOUSING AND DISTRIBUTION EFFICIENCIES. Jitney-Jungle owns or
leases 814,000 square feet of warehouse space located in Jackson, Mississippi
which is central to, and can efficiently supply, all of the Company's 199
supermarkets. In connection with the Delchamps Acquisition, Management expects
to close the Hammond, Louisiana warehouse owned by Delchamps and to utilize
Jitney-Jungle's Jackson facility as the Company's central distribution center,
thereby reducing headcount and general and administrative expenses. In addition,
in order to more efficiently utilize the Jackson facility Jitney-Jungle has
negotiated a long-term supply agreement with a supplier to provide direct store
delivery of slow moving items to the Company's supermarkets, which Management
believes should result in lower distribution costs and a decrease of
approximately 35% in inventory levels. Management believes that, on an
annualized basis, the combined effect of these warehousing and distribution
efficiencies should result in approximately $3.9 million of cash cost savings,
which the Company should begin to realize within three to six months following
the Delchamps Acquisition.
REDUCED ADVERTISING AND PRINTING EXPENSES. Jitney-Jungle and Delchamps
operate in contiguous and overlapping geographic areas, particularly in south
Mississippi and Florida. As a result, Management believes that it will be able
to consolidate the Company's advertising in these regions, thus reducing
advertising expenses. In addition, while Delchamps currently outsources the
printing of its advertising circulars, after the Delchamps Acquisition
approximately 50% of such printing will be performed at Jitney-Jungle's in-house
printing facility. Management estimates that moving a portion of Delchamps'
printing in-house should result in annualized cash cost savings of approximately
$1.0 million, which the Company should begin to realize within three to six
months following the Delchamps Acquisition.
INCREASED PURCHASING LEVERAGE. Management expects that Jitney-Jungle's
merchandise purchases will approximately double following the Delchamps
Acquisition. As a result of this increase and the Company's leading market
position, Management believes that the Company should be able to negotiate more
favorable terms from vendors, including suppliers of products carried on an
exclusive or promoted basis, and to convert some less-than-truckload shipping
quantities to full truckload quantities. Management believes that this increased
purchasing leverage should result in approximately $3.4 million in annualized
cash cost savings, which the Company should begin to realize within six to nine
months following the Delchamps Acquisition.
INCREASED BACKHAUL INCOME. The expected increase in merchandise purchases
following the Delchamps Acquisition and the resulting improvements in the
Company's purchasing leverage are expected to create additional opportunities to
increase backhaul income, thereby reducing the Company's operating costs. In
particular, the Company's increased presence in the Louisiana and Florida
markets should result in a higher number of deliveries to those areas, which
have historically provided Jitney-Jungle with backhaul opportunities. Management
believes that increased backhaul income should result in
57
annualized cash cost savings of approximately $1.8 million, which the Company
should begin to realize within three to six months following the Delchamps
Acquisition.
Of the aggregate potential $19.4 million in annualized cash cost savings
discussed above, approximately $14.2 million are reflected in the Pro Forma
Condensed Consolidated Financial Statements included elsewhere herein because
Management believes that they are factually supportable and directly related to
the Transactions and the Delchamps Merger. Actual cash cost savings achieved by
the Company may vary considerably from the estimates discussed above. See 'Risk
Factors--Integration of Delchamps.'
BUSINESS STRATEGY
The Company's business strategy is focused on enhancing the Company's
revenues and profitability by capitalizing on its leading market positions and
continuing its growth in certain attractive Southeast markets. Management
believes that the Company's leading perishables and grocery merchandising,
competitive pricing, range of specialty departments and reputation for quality
will help the Company continue its strong history of growth and profitability.
The Company's specific business strategies include:
EXPAND SUPERMARKET BASE. Management believes there are a number of
attractive Southeast markets in which to continue to grow the Company's
supermarket base. Jitney-Jungle has a history of successfully making supermarket
acquisitions in both existing and contiguous markets. Since fiscal l990,
Jitney-Jungle has acquired 51 supermarkets in 41 markets, excluding the 100
supermarkets to be acquired in the Delchamps Acquisition. In addition, over the
past five fiscal years the Company has built or expanded 58 supermarkets in the
Southeast. To continue expanding its supermarket base, Management intends to
open new supermarkets and make strategic acquisitions in certain of the larger
metropolitan areas where it currently operates (including Memphis and Little
Rock), as well as in smaller cities and surrounding areas that are contiguous to
areas where it currently operates.
CONTINUE TO IMPROVE OPERATING MARGINS. Jitney-Jungle and Delchamps have
improved their EBITDA margins from 5.5% and 2.9%, respectively, in fiscal 1992
to 5.7% and 4.0%, respectively, in fiscal 1997. The Company continuously reviews
its operations to identify initiatives designed to reduce operating costs and
increase EBITDA margins. As a result of the following initiatives, Management
believes that the Company can further improve its EBITDA margins during fiscal
1998: (i) headcount reductions implemented by Jitney-Jungle in May 1997, which
are expected to result in annualized cost savings of approximately $0.9 million
in fiscal 1998; and (ii) improved labor scheduling currently being implemented
at Jitney-Jungle supermarkets, which is expected to result in annualized cost
savings of approximately $3.5 million in fiscal 1998 and which may also result
in additional cost savings when implemented during the next 12 to 18 months at
the Delchamps supermarkets. In addition, Management expects to implement
programs at Delchamps to reduce inventory shrink to levels comparable to those
achieved at Jitney-Jungle.
DECREASE WORKING CAPITAL NEEDS. During fiscal 1997, Jitney-Jungle
successfully implemented programs to reduce inventories by eliminating slow
moving items, as well as renegotiating its payment terms to bring them more in
line with industry practice. As a result of these efforts, Jitney-Jungle
improved its ratio of accounts payable to inventory from 51.7% in fiscal 1996 to
77.3% in fiscal 1997. Jitney-Jungle believes that these measures enabled it to
decrease its working capital needs by approximately $20.0 million. Management
intends to implement similar programs at Delchamps.
CAPITALIZE ON MARKET SEGMENTATION OPPORTUNITIES. The Company attempts to
optimize operating results by selecting a format for each of its supermarkets
that is best suited to a site's demographics, local preferences and competitive
position. The Company's conventional supermarkets offer a range of departments
and high-quality services; the Company's combination supermarkets offer a
combined supermarket and drug format with a wider variety of premium,
full-service departments, merchandise and services; and the Company's discount
supermarkets offer items throughout the supermarket at everyday low prices and
generally place greater emphasis on self-service. In general, the Company's
conventional and combination
58
supermarkets generate higher operating margins than its discount supermarkets.
Management believes that there is a growing consumer demand for higher service
levels and convenience and, as a result, expects that the Company will open
combination supermarkets in preference to conventional and discount supermarkets
at all sites where adequate space and consumer demand exist. Management also
expects that a significant number of conventional and discount formats will be
converted to combination formats. In addition, because the Company's discount
supermarkets attract a price sensitive customer who generally would not shop at
a combination or conventional supermarket, Management also believes there will
be opportunities to open new discount supermarkets in areas where limited or no
competing discount supermarkets operate (including Mobile and New Orleans), with
minimal risk of cannibalizing sales of the Company's conventional and
combination supermarkets located in those areas.
PURSUE INNOVATIVE MARKET INITIATIVES. The Company's goal is to utilize
innovative marketing and advertising programs to increase sales while
maintaining or increasing profitability. At its conventional and combination
stores, Jitney-Jungle has introduced a frequent shopper program utilizing a
"Gold Card" designed to increase customer traffic and net sales by offering
incentives to its most loyal customers. The "Gold-Card" entitles holders to
discounts on certain products every week as well as check cashing privileges,
and also serves as a base for market basket analysis and customer-oriented
direct marketing. Since the introduction of the Gold Card, Management believes
that the number of customers and the amount of the average purchase at
Jitney-Jungle supermarkets has increased and, as a result, Management intends to
introduce a similar frequent shopper card at Delchamps supermarkets following
the Delchamps Acquisition. At its discount supermarkets, the Company employs
marketing campaigns designed to appeal to the value conscious consumer,
including "truckload sales," private label promotions and bulk produce and
similar purchasing incentives.
FOCUS ON "PUMP AND SAVE" GASOLINE STATION OPPORTUNITIES. The Company
operates gasoline stations under the name "Pump And Save" at or near 53 of its
supermarkets that offer attractive gasoline retailing sites on heavily traveled
roads and highways. The Company entered the gasoline business to take advantage
of (i) the low incremental capital costs of building gasoline stations on its
supermarket parking lots and (ii) the efficiencies associated with operating
gasoline stations with the same management and labor as its supermarkets. The
Company has opened 25 new gasoline stations over the last five fiscal years and
plans to continue this growth with expansion at many of the 100 Delchamps
supermarkets.
GROWING SOUTHEAST MARKET AREA
The Southeast is one of the fastest growing regions in the United States in
terms of population, income and employment. According to the Bureau of the
Census, the population of the Southeast has increased at an annual rate of 1.6%
since 1990, compared to the national average of 1.2% over the same period.
Furthermore, the Southeast has experienced faster growth than the United States
since 1990 in terms of per capita income (4.9% versus 4.1%) and overall
employment (2.3% versus 1.4%). Since all of the Company's existing supermarkets
and planned new supermarkets will be in the Southeast, the Company believes that
it will continue to benefit from the economic strength of this region.
Nevertheless, individual markets or regions within the Southeast where the
Company operates may experience economic and demographic trends which differ
from those of the region as a whole. Notwithstanding growth in these markets,
during the past three years an overall lack of inflation in food prices and
increasingly competitive markets have made it difficult for supermarket
operators to achieve comparable store sales gains. Because sales growth has been
difficult to attain, many operators, including the Company, have attempted to
maintain market share through increased levels of promotional activities and
discount pricing, creating a more difficult environment in which to increase
year-over-year sales gains consistently. In addition, because of growth in the
Southeast, where all of the Company's supermarkets are located, many existing
operators, including the Company, have opened new supermarkets in existing
markets. This has resulted in declines in some same store sales for the existing
(comparable) store base of the Company as well as other grocery chains.
59
SUPERMARKET FORMATS
The Company attempts to optimize operating results by selecting a format for
each supermarket that is best suited to a locality's demographics, local
preferences and competitive positioning. In this respect, Management believes
that its local market knowledge and community awareness are major competitive
advantages. Each district manager and supermarket manager will have significant
responsibility for merchandising each individual supermarket in a manner that
caters specifically to its local customer base. In recent years, the Company has
devoted a greater proportion of its new or remodeled supermarket space to fresh,
high-quality perishables such as produce, delicatessen items, baked goods,
prepared foods, fresh seafood and floral items, and to convenience-oriented
services such as pharmacies and video and carpet-cleaning equipment rentals.
Management believes that the Company's fresh produce presentation and its
delicatessens which serve over 100,000 hot meals weekly, in particular, are
competitive advantages and represent important attractions for customers.
The Company currently operates its supermarkets in three supermarket format
categories: (i) the combination food and drug format, which offers a wide
variety of premium, full-service departments, merchandise and services as well
as a broad range of non-perishable products; (ii) the conventional format, which
offers a range of departments and high-quality services; and (iii) the discount
supermarket format, which offers items throughout the supermarket at every day
low prices and generally places greater emphasis on self-service. While the
combination and conventional formats use a higher margin pricing strategy
appropriate for a more service-oriented customer base, the discount format uses
a higher volume, lower margin strategy appropriate for a more price-conscious
customer base.
COMBINATION SUPERMARKETS. In 1993, the Company opened its first combination
supermarket, a 57,276 square foot "Jitney-Premier" in Jackson which features
enhanced specialty departments and perishables presentations as well as a food
court. This supermarket was named "Supermarket of the Year" by Chain Store Age
Executive. The Company currently operates seven combination supermarkets,
averaging approximately 56,000 square feet. Pro forma net sales from combination
supermarkets were approximately $121.8 million in the LTM Period, which
represented approximately 5.6% of the Company's pro forma net sales for that
period.
The Company's combination supermarkets utilize a "Hi-Lo" pricing strategy
(featuring competitive prices on all product offerings as well as a selection of
items that are promoted at lower prices to generate increased customer traffic),
and are open 24-hours a day, seven days a week. Management believes that its
combination supermarkets will enable the Company to increase customer loyalty by
offering competitively priced merchandise, including expanded general and
specialty merchandise, a wider range of full-service departments such as branch
banking facilities, expanded beauty care and pharmacy departments, and superior
customer service.
In light of the perceived growth in consumer demand for higher service
levels and convenience, Management has adopted the combination food and drug
format as its primary base supermarket for the future at sites where adequate
space and consumer demand exist. Management plans to convert three conventional
stores and one discount store to combination stores by the end of calendar year
1997. Management also will consider strategic conversions of up to 20
Jitney-Jungle conventional and discount stores to the combination format, and
has identified approximately 30 Delchamps' supermarkets as potentially
convertible to the combination supermarket format because of their size and
location in high traffic, metropolitan areas where customers are generally more
receptive to the combination format.
CONVENTIONAL SUPERMARKETS. The Company operates 171 conventional
supermarkets. Pro Forma net sales from these supermarkets were approximately
$1.5 billion in the LTM Period, which represented approximately 69.8% of the
Company's pro forma net sales for that period. All of the Company's conventional
supermarkets utilize the "Hi-Lo" pricing strategy and are market leaders in many
of their trade areas. The average size of the conventional supermarket is
approximately 35,000 square feet.
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DISCOUNT SUPERMARKETS. The Company currently operates 21 discount
supermarkets primarily under the name "Sack and Save." Pro Forma net sales from
these supermarkets were approximately $429.8 million in the LTM Period, which
represented approximately 19.8% of the Company's pro forma net sales for that
period. The average size of the discount supermarket is approximately 60,000
square feet.
The Company's discount supermarkets utilize an everyday low price strategy
(featuring consistently low prices aimed at the value-conscious shopper). These
supermarkets use the slogan "Lowest Food Prices in the South" and provide
national brand and private label items at everyday low prices. Merchandising
programs carried on by those supermarkets include: (i) "Made in the South"
sales; (ii) truckload sales of paper products, detergents and similar volume
items; (iii) canned meat sales; (iv) private label merchandise promotions; and
(v) bulk produce merchandising in pallet quantities. The discount supermarkets
have lower operating costs than the combination and conventional supermarkets
due to fewer service departments, lower customer service levels and enhanced
productivity methods.
Approximately half of the Company's discount supermarkets are located in the
metropolitan areas of Jackson, Memphis and Little Rock. Management believes that
these discount supermarkets attract a price sensitive customer who generally
would not shop the combination or conventional supermarket, thereby minimizing
the cannibalizing of sales in the Company's nearby combination and conventional
supermarkets. In those discount locations where the Company has perceived
relatively higher demand for service among its customers, it has made strategic
conversions from the discount format to the conventional or combination format,
as appropriate, given the size of a particular market. Since the end of fiscal
1997, the Company has converted five supermarkets formerly operated as discount
supermarkets; two were converted to conventional supermarkets and three were
converted to combination supermarkets. Another conversion is planned for the end
of calendar year 1997. By contrast, Management believes that there are discount
supermarket expansion opportunities in areas where limited or no competing
discount supermarkets operate, including Mobile, New Orleans and Birmingham.
GASOLINE STATIONS
Through a subsidiary, the Company operates 53 gasoline stations under the
"Pump And Save" name. The stations are generally located on parking lots in
front of the Company's supermarkets and provide an additional service for its
customers. Because the gasoline stations are in close proximity to the
supermarkets, they benefit from the high volume supermarket traffic and can be
operated with the same management and labor as the Company's supermarkets. In
the LTM Period, gasoline station sales were approximately $86.5 million, which
represented approximately 4.0% of the Company's pro forma net sales for that
period. Management believes that there will be similar opportunities to open
gasoline stations in the proximity of many Delchamps supermarkets, which
currently do not have gasoline station operations.
LIQUOR STORES AND CIGARETTE SALES
The Company operates ten liquor stores in the state of Florida, which are
located adjacent to the Company's supermarkets. In the LTM Period, liquor store
sales were approximately $17.3 million, which represented approximately 0.8% of
the Company's pro forma net sales for that period. In addition, a wholly-owned
subsidiary of the Company functions as the purchasing agent and distributor for
cigarettes sold by certain of the Company's supermarkets.
61
MARKETS AND COMPETITION
The Company holds the number one, two or three market share position in
approximately 80% of the major markets in which it operates. The Company
attributes this success to: (i) its strong franchise and prime sites; (ii) its
modern supermarket base; (iii) its successful private label program; and (iv)
its centralized and efficient distribution facilities. Given these strengths,
Management believes the Company is well positioned to retain its market
leadership.
The supermarket business is intensely competitive. The number of competitors
and the amount of competition experienced by the Company's supermarkets vary by
location. Principal competitive factors include supermarket location, price,
service, convenience, cleanliness and product quality and variety. Because the
supermarket business is characterized by narrow profit margins, the Company's
earnings depend primarily on the efficiency of its operations and its ability to
maintain a large sales volume. Management believes that the Delchamps
Acquisition should enhance the Company's ability to compete with its largest
competitors, and will result in opportunities to increase market share in
Memphis, Little Rock, Birmingham, Mobile and New Orleans.
The Company's primary markets are Jackson, Mississippi and Mobile, Alabama.
During the LTM Period, Jitney-Jungle's three combination supermarkets, 17
conventional supermarkets and three discount supermarkets located in Jackson
represented a market share of approximately 50% in that area, and Delchamps' two
combination supermarkets and 17 conventional supermarkets located in Mobile
represented a share of approximately 37% in that market. The Company also has
growing market share in the metropolitan markets of Little Rock, Memphis and New
Orleans, which in the LTM Period was approximately 13%, 8% and 9%, respectively.
The Company's principal competitors are Kroger's (in Alabama, Mississippi,
Tennessee and Arkansas), Food World/Bruno's (in Alabama, Florida and
Mississippi), Wal-Mart Supercenters (in Alabama, Arkansas, Florida, Louisiana,
Mississippi and Tennessee), Winn Dixie (in Alabama, Florida, Louisiana and
Mississippi) and Albertson's (in Alabama, Florida, Louisiana and Mississippi).
The Company's supermarkets also compete with other regional and national
supermarket chains as well as local chains and independent, specialty and
convenience food stores that have significant market shares in limited areas,
such as the Schwegmann Giant Supermarkets chain in Southeastern Louisiana and
Seessels/Bruno's in Tennessee. In addition, the Company's principal competitors
in the Florida pandhandle region and the Mississippi Gulf Coast include the
commissaries at the U.S. military bases in Pensacola, Florida and Biloxi,
Mississippi.
PURCHASING AND MERCHANDISING
The Company's principal merchandising strategies are to promote an "overall
value" image and to achieve high sales volume by offering quality products and
services at competitive prices. The Company's supermarkets carry fresh meat and
produce, frozen and other convenience foods, dairy products, specialty and
gourmet products, and general grocery products, as well as selected lines of
non-grocery merchandise. Most supermarkets opened and remodeled during the last
several years contain bakeries and delicatessens, which offer prepared
ready-to-eat foods, service meat departments, seafood departments and video
departments. The Company also operates pharmacies at selected locations.
The Company has established strong relationships with a variety of major
manufacturers over many years, none of which represents a major source of supply
to the Company. Since the Company's supermarkets carry many of the same
products, centralized purchasing and distribution facilities are essential. All
purchases are made under central buying procedures, rather than on a
store-by-store basis, which allows the Company to maintain quality control of
its products and to take advantage of volume discounts, more favorable payment
terms and more frequent inventory turns. Following the Delchamps Acquisition,
Management expects that the Company's merchandise purchases will approximately
double. As a result of this increase in the Company's combined volume
requirements and its leading market
62
position, Management believes that the Company should be able to negotiate more
favorable terms from vendors.
PRIVATE LABEL PROGRAM
The Company's supermarkets offer a selection of national and regional
brand-name products, generic products and products bearing brand names of Topco,
a cooperative purchasing organization of which both Jitney-Jungle and Delchamps
are shareholding members. The Company's affiliation with Topco, the largest
cooperative grocery products purchasing organization in the United States,
enables it to procure quality merchandise on a competitive basis with larger,
national food retailers. Topco's membership of 30 retail grocery chains and
wholesalers located throughout the United States enables it to employ large
volume buying techniques on behalf of its members. Topco products are sold under
its own brand names, such as "Food Club," "Topco," "Top Fresh" and "Top Frost,"
or under generic labels. The Company also recently began using a "Delchamps"
label to replace the Topco labels on certain products.
Private label products generally have a lower unit sales price than national
brands but provide a higher gross margin due to lower unit costs. Pro forma net
sales of private label products accounted for approximately 18.2% of pro forma
net non-perishable sales of the Company during the LTM Period.
ADVERTISING AND MARKETING
The Company features nationally advertised and distributed merchandise, and
also markets both food and non-food products under a private label program. The
Company's advertising programs are designed to reinforce for the customer its
low prices, high-quality selection and convenience. In each of its major
markets, the Company advertises through various media including circulars,
newspapers, radio and television. Prior to July 1997, print media was the
primary form of advertising and was used extensively on a weekly basis to
advertise featured items; however, in July 1997 the Company began shifting a
significant portion of its total advertising expenditures to television and
radio media, focusing on a quality and service image, in order to reach a wider
target audience. The Company's in-house capabilities include an advertising
department, which handles most creative work, and the printing of over 1.7
million pieces of print media per week in the Company's full-line print shop.
Management intends to print approximately 0.9 million pieces of print media per
week for the Delchamps stores after the Delchamps Acquisition. Advertising
costs, net of advertising allowances, constituted less than 1.0% of net sales in
the LTM Period.
Various sales enhancement promotional activities, including coupons and
special pricing discounts, are currently conducted under the Company's frequent
shopper program. At its conventional and combination stores, the Company has
introduced (or, in the case of the Delchamps supermarkets, expects to introduce)
a frequent shopper program utilizing a "Gold Card" designed to increase customer
traffic and net sales by offering incentives to the Company's most loyal
customers. The "Gold Card" entitles holders to discounts on certain products
every week as well as check cashing privileges, and also serves as a base for
market basket analysis and customer-oriented direct marketing. Since the
introduction of the Gold Card, Management believes that the number of customers
and the amount of the average purchase has increased at Jitney-Jungle
supermarkets and, as a result, Management intends to introduce a similar
frequent shopper card at Delchamps supermarkets following the Delchamps
Acquisition. At its discount supermarkets, the Company employs marketing
campaigns designed to appeal to the value-conscious consumer including truckload
sales, private label promotions and similar purchasing incentives.
WAREHOUSING AND DISTRIBUTION
Jitney-Jungle owns or leases 814,000 square feet of warehouse space located
in Jackson, Mississippi which is central to, and can efficiently supply, all of
the Company's 199 supermarkets. In connection with the Delchamps Acquisition,
Management expects to close the Hammond, Louisiana warehouse owned by Delchamps
and to utilize Jitney-Jungle's Jackson facility as the Company's central
distribution center, thereby reducing headcount and general and administrative
expenses. In addition, in order to more efficiently utilize the Jackson
facility, Jitney-Jungle has negotiated a long-term supply agreement with
63
SUPERVALU under which SUPERVALU will become the primary supplier of frozen foods
to the combined Jitney-Jungle and Delchamps group of companies and a secondary
supplier of selected grocery products to a number of stores within the group.
Management believes that the agreement reached with SUPERVALU should result in
lower distribution costs and a decrease of approximately 35% in inventory
levels. The agreement takes effect in January 1998.
The Company leases and maintains a fleet of 143 tractors and 332 trailers
with full-time, non-unionized drivers to handle distribution and ensure the
timely delivery of products to all of its supermarkets. The Company's trucks
also backhaul goods from suppliers to its warehouses, which reduces the
Company's overall cost of transportation.
SUPERMARKET OPERATIONS
Supermarket operations are the responsibility of three regional operating
executives who supervise the Company's 14 district managers. Each district
manager is responsible for nine to 15 supermarkets in his area. District
managers regularly visit the supermarkets under their jurisdiction, thereby
providing continuous, direct supervision of day-to-day supermarket operations,
including such matters as quality of merchandise, adequacy of staffing levels
and adherence to Company policies. Each supermarket is individually supervised
by a supermarket manager, assistant supermarket manager and department managers.
Management monitors the results of operations of each supermarket through the
close and direct supervision of the regional operating executives and the
district managers.
EMPLOYEES AND LABOR RELATIONS
As of May 3, 1997, Jitney-Jungle had 10,600 employees and Delchamps had
7,900 employees. Management believes that the Company enjoys good relations with
its employees.
Employees at the Hammond, Louisiana distribution facility recently voted to
establish a union; however, certification of the election results is currently
pending. With the possible exception of the employees at the Hammond
distribution facility, none of the Company's employees are subject to a
collective bargaining agreement.
In connection with the Delchamps Acquisition, Management expects to
consolidate the corporate headquarters of the combined operations in the
existing corporate headquarters of Jitney-Jungle. Although a divisional office
will be opened in Mobile, Alabama, the Delchamps Mobile headquarters will be
closed and approximately 160 positions currently held by employees at the
Jitney-Jungle and Delchamps corporate headquarters will be eliminated.
Management currently expects that the Delchamps headquarters will be closed
within three to six months after the Delchamps Acquisition. In addition, in
connection with the Delchamps Acquisition, Management expects to close the
Hammond, Louisiana warehouse owned by Delchamps and to close 13 supermarkets.
INFORMATION SERVICES
The Company's Information Services Department provides the software
applications, hardware systems and telecommunications technologies necessary to
support the Company's operations. The supermarket-based systems are fully
integrated via an in-store network and include the following: (i) point-of-sale
("POS") store front-end systems with integrated scanner/scale capability; (ii)
Unix-based, In-Store Processors ("ISP") which support business functions such as
direct store delivery, inventory management, video rental and pharmacy; (iii)
personal computers which support labor scheduling; (iv) an on-line procurement
system which supports the purchasing department with a sophisticated forecasting
algorithm that assists buying decisions and inventory control; (v) an advanced
forecasting module that forecasts product movement and recommends purchases to
replenish inventories; (vi) Electronic Data Interchange ("EDI") communication
which transmits purchase orders and receives invoices with about 70.0% of the
Company's high volume vendors; and (vii) a complete business recovery plan to
prevent a data center
64
disaster, which includes mainframe applications, client-server applications and
network telecommunications.
In addition, the Company's procurement system is interfaced into an
extensive warehousing system that controls facets of merchandise receiving and
shipping to the supermarkets. The warehousing system utilizes radio
frequency-based technology to accomplish merchandise storage at a minimum cost
by reducing labor cost and improving warehouse flow. This system also utilizes a
complete transportation module for the loading of trailers based upon delivery
routes. Additionally, the system has been improved with the implementation of
hand-held scanners in the supermarkets for routine processing of supermarket
orders.
Advances in technology are important to the Company's ability to improve
productivity and keep costs in line, and emphasis will continue to be placed on
innovations in this area.
PROPERTIES
Management believes that the Company's retail supermarkets are well situated
in high-traffic locations. With the exception of one owned supermarket, all of
the Company's supermarket properties are leased pursuant to long-term contracts
at market rates. Certain parties affiliated with Jitney-Jungle hold 18 leases,
representing 21% of the dollar amount of the Company's capital leases.
Management believes that each of these leases is on an arm's length basis and is
on terms that are no less favorable to the Company than could have been obtained
with non-affiliated parties at the time each was entered into. See "Certain
Relationships and Related Transactions". Two other landlords each lease seven
supermarkets to Jitney-Jungle. No other landlords hold a significant number of
supermarket leases with the Company. With the exception of one lease, which will
expire in 2001, all leases for supermarkets operated under the names
"Jitney-Jungle", "Sack and Save" and "Jitney-Premier" will expire between 2005
and 2036 if the Company exercises all its options to renew. Five Delchamps
supermarket leases expired during the LTM Period, and no more than five
Delchamps leases will expire in any one year until the year 2005.
The Company has a real estate department the functions of which include (i)
negotiation and preparation of legal documents, (ii) the screening of
preliminary sites and the disposition of property, and (iii) the management of
properties. Management believes that a vital factor in a successful supermarket
expansion program is the careful selection of supermarket locations. Management
analyzes prospective locations on a continuous basis, both internally and with
assistance of outside consultants. The Company regularly enlarges, modernizes,
relocates or closes supermarkets in light of their past performance and
Management's assessment of their future potential.
Except for approximately $3.2 million of supermarket "POS" equipment which
is leased, the Company owns the furnishings and fixtures in all supermarkets and
has made various leasehold improvements to these supermarket sites. It is
anticipated that the Company will own the furnishings and fixtures in all
supermarkets presently under construction.
The Company owns all of its warehouse and distribution facilities except for
a 120,000 square foot dry grocery and health and beauty care facility. The lease
for that facility expires on July 31, 2004 (including all renewal options). The
table below sets forth the Company's warehouse and distribution capacity in its
Jackson and Hammond facilities:
FUNCTION JACKSON HAMMOND
(SQUARE FEET IN THOUSANDS)
Dry Grocery and Health and Beauty Care.............................. 578 470
Perishables......................................................... 157 101
Frozen.............................................................. 79 63
--- ---
Total........................................................... 814 634
Upon consummation of the Delchamps Acquisition, the Company will own the
65,000 square foot building which houses the corporate headquarters of Delchamps
in Mobile, Alabama (including a 2.7 acre
65
parcel adjacent to such headquarters), the Hammond warehouse (including a 165
acre parcel adjacent to such warehouse) and interests in six additional parcels,
some of which are undeveloped. In connection with the Delchamps Acquisition,
Management expects to consolidate the corporate headquarters of the Company's
combined operations in the existing corporate headquarters of Jitney-Jungle.
Although a divisional office will be opened in Mobile, Alabama, the Delchamps
Mobile headquarters will be closed. Management also expects to close the Hammond
warehouse, and the Company may determine to sell, or develop for sale, certain
of such parcels of real estate.
In the first quarter of fiscal 1997, the Company sold the operating assets
of Jitney-Jungle's 24,000 square foot bakery for $750,000. The Company purchases
bakery products from the new owner of the bakery and additional bread products
from outside suppliers.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws and regulations
including those relating to environmental protection, workplace safety, public
health and community right-to-know. The Company's supermarkets are not highly
regulated under environmental laws since the Company does not engage in any
industrial activities at these locations. The principal environmental
requirements applicable to Jitney-Jungle's operations relate to the ownership or
use of tanks for the storage of petroleum products, such as gasoline and diesel
fuel, the operation of on-site paper trash incinerators, and the operation of an
on-site printing facility. The Company operates 56 locations (including all 53
of the Pump And Save locations), and has retained responsibility for one former
facility, at which petroleum products are stored in underground tanks. The
Company has instituted an environmental compliance program designed to insure
that these tanks are in compliance with applicable technical, operational and
regulatory requirements, including periodic inventory reconciliation and
integrity testing. Jitney-Jungle also operates small incinerators at 21
locations which burn paper trash and has air permits for these facilities. In
addition, the Company's printing facility is subject to air and hazardous waste
regulations. In addition, the Company's locations may have asbestos-containing
materials which must be managed in accordance with environmental laws and
regulations. However, the Company does not believe that the cost of such
management will be material. The Company believes that the locations where it
currently operates are in substantial compliance with regulatory requirements.
The Company has undertaken programs to comply with upcoming regulatory
obligations. First, at five locations, the Company must comply with petroleum
tank upgrade or closure requirements under the Resource Conservation and
Recovery Act of 1980, as amended, ("RCRA") (including all applicable
requirements of state regulatory agencies) which must be met by 1998. Second,
over the next several years, the Company is planning to complete retrofitting of
its chloroflurocarbon ("CFC") chiller units to utilize non-CFC based
refrigerants pursuant to the phase-out of CFCs under the Clean Air Act. Future
events, such as changes in existing laws and regulations or their interpretation
and the approach of other compliance deadlines may or will give rise to
additional compliance costs or liabilities. Compliance with more stringent laws
or regulations, as well as different interpretations of existing laws, may
require additional expenditures by the Company which may be material.
The Company may also be subject to requirements related to the remediation
of, or the liability for remediation of, substances that have been released to
the environment at properties owned or operated by the Company or at properties
to which Jitney-Jungle sends substances for treatment or disposal. Such
remediation requirements may be imposed without regard to fault and liability
for environmental rernediation can be substantial. Other than one previously
owned property for which the Company retained responsibility for a clean-up in
progress at the time of the sale, the Company has not been notified of any such
releases relating to off-site treatment or disposal or to previously owned
properties. However, 16 of the Company's locations have been or currently are
the subject of environmental investigation or remediation, 12 as a consequence
of known or suspected petroluem-related leaks or spills from storage tanks and
four for minor spills or releases unrelated to tank usage. See "Risk
Factors--Environmental
66
Risks." Four other properties have undergone investigation or remediation for
minor spills unrelated to tank usage.
The Company may be eligible for reimbursement or payment for remediation
costs associated with future releases from its regulated underground storage
tanks and has obtained such reimbursement in the past. The states in which the
Company operates each maintain a fund to assist in the payment of remediation
costs and injury or damage to third parties from releases from certain
registered underground tanks. Subject to certain deductibles, the availability
of funds, compliance status of the tanks and the nature of the release, these
funds have been and may be available to Jitney-Jungle for use in remediating
releases from its tank systems. Due to the availability of such funds, the
Company's unreimbursed cost for remediation at all of the facilities which have
had leaks or spills from underground storage tanks has not been material. All
significant required expenditures in connection with the clean up of such leaks
and spills have been made at such locations, except at three newly discovered
locations which are still undergoing investigation and one location awaiting
state approval of its remediation plan. Remediation expenses at all the
locations which are currently the subject of environmental investigation or
remediation are anticipated to cost up to $240,000 in fiscal 1998 and
approximately $125,000 per year thereafter, substantially all of which is
subject to reimbursement as described above. In addition, the Company has
obtained insurance coverage for bodily injury, property damage and corrective
action expenses resulting from releases of petroleum products from underground
storage tanks during the covered period at 53 of its 57 underground storage tank
locations, and an application for such coverage is pending at one of the four
remaining locations.
Other than expenditures relating to the remediation of tank leaks and spills
described above, the Company's expenditures to comply with environmental laws
and regulations have primarily consisted of those related to tank upgrading and
retrofitting CFC chiller units. The Company spent $515,000, $468,000 and
$914,000 for such activities during fiscal 1995, fiscal 1996 and the LTM Period,
respectively. Between approximately $472,000 and $1,055,000 in expenditures are
contemplated for retrofitting the CFC units and between approximately $455,000
and $755,000 in expenditures are contemplated for tank upgrading to comply with
the 1998 tank standards or closure in fiscal 1998 and fiscal 1999. These
regulatory compliance costs are not covered by insurance.
INTELLECTUAL PROPERTY
The Company uses a variety of trade names, service marks and trademarks.
Except for "Jitney-Jungle," "Jitney-Premier," "Delchamps," "Sack and Save" and
"Pump And Save," Management does not believe any of such trade names, service
marks or trademarks are material to its business.
GOVERNMENT REGULATION
The Company is subject to regulation by a variety of governmental agencies,
including but not limited to the United States Food and Drug Administration, the
United States Department of Agriculture and other federal, state and local
agencies.
LEGAL PROCEEDINGS
The Company is subject to periodic litigation in the ordinary course of its
business, including lawsuits brought by employees and former employees alleging
discriminatory termination and promotion practices. Delchamps recently settled a
claim of alleged race discrimination for approximately $4.3 million in which a
potential class of plaintiffs was denied certification of the class on
procedural grounds, and Delchamps is reviewing, revising and improving its
termination and promotion policies as part of the related settlement agreement.
There can be no assurance that future litigation alleging discrimination in the
Company's termination or promotion practices would not have an adverse effect on
the Company's financial condition or results of operation.
Other than with respect to the foregoing matters, the Company is not a party
to any to any material pending legal proceedings except ordinary litigation
incidental to the conduct of its business and the ownership of its properties.
67
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF JITNEY-JUNGLE
The following table sets forth the directors and senior executive officers
of Jitney-Jungle. Directors of Jitney-Jungle hold their offices for a term of
one year or until their successors are elected and qualified; executive officers
of Jitney-Jungle serve at the discretion of the Board of Directors. For
information concerning certain arrangements with respect to the election of
directors, see "Certain Relationships and Related Transactions--Shareholders
Agreement."
NAME AGE POSITION
W.H. Holman, Jr....................................... 67 Chairman
Michael E. Julian..................................... 46 Director, Chief Executive Officer and President
David K. Essary....................................... 47 Executive Vice President
David R. Black........................................ 44 Senior Vice President--Finance, Chief Financial
Officer
Harold D. Evans....................................... 52 Senior Vice President--Store Operations
J.R. Hansbrough....................................... 41 Senior Vice President--Information Services
Jerry L. Jones........................................ 45 Senior Vice President--Retail Operations
James P. Riley........................................ 47 Senior Vice President--Engineering
Clyde D. Staley....................................... 60 Senior Vice President--Real Estate
W.H. Holman, III...................................... 33 Secretary
Bernard E. Ebbers..................................... 55 Director
Roger P. Friou........................................ 62 Director
Ronald E. Johnson..................................... 47 Director
John M. Moriarty, Jr.................................. 40 Director
Bruce C. Bruckmann.................................... 43 Director
Harold O. Rosser II................................... 48 Director
Stephen C. Sherrill................................... 44 Director
W.H. HOLMAN, JR., CHAIRMAN, has been Chairman of the Board of Jitney-Jungle
since 1967 and served as Chief Executive Officer from 1967 until January 1997.
Mr. Holman is a director of two private companies.
MICHAEL E. JULIAN, DIRECTOR, CHIEF EXECUTIVE OFFICER AND PRESIDENT, was
appointed as Chief Executive Officer in January 1997 and as President in May
1997. He has served as a director since April 1996. Prior to January 1997, he
was Chairman, President and Chief Executive Officer of Farm Fresh, Inc. Mr.
Julian is a director of Jackson Hewitt Inc. and one private company.
DAVID K. ESSARY, EXECUTIVE VICE PRESIDENT, has spent 21 of his 25 years in
the industry with Jitney-Jungle, and has been Executive Vice President since
March 1996. Other positions previously held by Mr. Essary within Jitney-Jungle
include Executive Vice President--Retail Operations, Senior Vice
President--Marketing, Vice President--Perishables and Vice President--Meat
Operations.
DAVID R. BLACK, SENIOR VICE PRESIDENT--FINANCE, CHIEF FINANCIAL OFFICER
since 1996, joined the Company in 1976. During his Jitney-Jungle career, Mr.
Black has held various other positions with the Company including Treasurer,
Controller and Assistant Controller.
HAROLD D. EVANS, SENIOR VICE PRESIDENT--STORE OPERATIONS since 1993, began
his retail food career when he joined the Company in 1970. He has also served as
Vice President--Store Operations.
J.R. HANSBROUGH, SENIOR VICE PRESIDENT--INFORMATION SERVICES, has held that
position since 1996. He previously served as Vice President--Information
Services from 1994. Prior to 1994, he was a Consulting and Marketing
Representative with IBM Corporation.
68
JERRY L. JONES, SENIOR VICE PRESIDENT--RETAIL OPERATIONS, has held that
position since March 1996. Prior to that time, he served as Senior Vice
President--Human Resources since 1991, having joined the Company in 1986 as
District Manager. Mr. Jones was employed with a large regional supermarket chain
from 1968 to 1986 and was a District Manager at the time he left the company.
JAMES P. RILEY, SENIOR VICE PRESIDENT--ENGINEERING since 1996, previously
served as Vice President-- Engineering from 1991. He served as Director of
Engineering Services from 1985 to 1991.
CLYDE D. STALEY, SENIOR VICE PRESIDENT--REAL ESTATE, has held that position
since 1996. He previously served as Vice President--Real Estate from 1985.
W.H. HOLMAN, III, SECRETARY, since 1996, is also President of Pump And Save,
the Company's petroleum subsidiary. He has 13 years of industry experience, and
previously served as Senior Vice President--Sales and Marketing. Mr. Holman is
the son of W.H. Holman, Jr.
BERNARD E. EBBERS, DIRECTOR, has been President, Chief Executive Officer and
a director of WorldCom, Inc. since 1983.
ROGER P. FRIOU, DIRECTOR, has 24 years of industry experience having
originally joined Jitney-Jungle in 1966. Between March 1996 and May 1997 he
served as President of Jitney-Jungle, and between 1991 and 1996 he served as
Vice Chairman, Chief Financial Officer and Secretary. Other positions previously
held by Mr. Friou at Jitney-Jungle include President, Executive Vice President
and Vice President--Finance and Controller. Mr. Friou is a director of The
Parkway Properties, Inc.
RONALD E. JOHNSON, DIRECTOR, has been President, Chief Executive Officer and
a director of Farm Fresh, Inc. since January 1997. Previously, he served as
Chairman, President and Chief Executive Officer of Kash n' Karry and as
Executive Vice President and Chief Operating Officer of Farm Fresh, Inc.
JOHN M. MORIARTY, JR., DIRECTOR, has been a Managing Director of Donaldson,
Lufkin & Jenrette Securities Corporation since 1989 and a Managing Director of
DLJ Merchant Banking, Inc. since 1996. Mr. Moriarty is a director of a private
company.
BRUCE C. BRUCKMANN, DIRECTOR, has been a principal of BRS since its
formation in 1995. Mr. Bruckmann was an officer and subsequently a Managing
Director of Citicorp Venture Capital from 1983 through 1994. Previously, Mr.
Bruckmann was an associate at the New York law firm of Patterson, Belknap, Webb
& Tyler. Mr. Bruckmann is a director of Mohawk Industries, Inc., AmeriSource
Distribution Corporation, Chromcraft Revington Corporation, Anvil Knitwear,
Inc., CORT Business Services Corporation and of several private companies.
HAROLD O. ROSSER II, DIRECTOR, has been a principal of BRS since its
formation in 1995. Mr. Rosser was an officer and subsequently a Managing
Director of Citicorp Venture Capital from 1987 through 1994. Previously, he
spent 12 years with Citicorp/Citibank in various management and corporate
finance positions. Mr. Rosser is a director of DavCo Restaurants, Inc. and of
several private companies.
STEPHEN C. SHERRILL, DIRECTOR, has been a principal of BRS since its
formation in 1995. Mr. Sherrill was an officer and subsequently a Managing
Director of Citicorp Venture Capital from 1983 through 1994. Previously, he was
an associate at the New York law firm of Paul, Weiss, Rifkind, Wharton &
Garrison. Mr. Sherrill is a director of Galey & Lord, Inc., Windy Hill Pet Food
Company, Inc. and of several private companies.
DIRECTOR COMPENSATION AND COMMITTEE INTERLOCKS
Each non-employee director of Jitney-Jungle is currently paid an annual
retainer of $12,000 plus fees of $1,000 for each board meeting attended and $500
for each committee meeting attended. Directors who are employees of the Company
do not receive additional compensation as directors. The Board of
69
Directors held four regular meetings during fiscal 1997 and all directors
attended at least 75% of the total meetings of the Board of Directors and the
committees of which they were members.
Jitney-Jungle has a Compensation Committee of the Board of Directors which
is responsible for reviewing annual salaries and bonuses paid to senior
management and administering Jitney-Jungle's stock option programs. The members
of the Compensation Committee are Harold O. Rosser II, Chairman, Michael E.
Julian, Roger P. Friou and Bernard E. Ebbers. Robert R. Onstead was also a
member of the Compensation Committee but resigned from the Board in March 1997.
The Compensation Committee held one meeting during fiscal 1997.
Jitney-Jungle has an Audit Committee which reviews external and internal
auditing matters and recommends the selection of Jitney-Jungle's independent
auditors for approval by the Board of Directors. The members of the Audit
Committee are Steven C. Sherrill, Chairman, John M. Moriarty, Jr., and Ronald E.
Johnson. The Audit Committee held one meeting during fiscal 1997.
In fiscal 1997, Messrs. Julian, Ebbers and Johnson each received fees of
$16,000 for serving on the Board of Directors.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued for fiscal
1997, 1996 and 1995 to the Chief Executive Officer of Jitney-Jungle and to each
of the four other most highly compensated executive officers of Jitney-Jungle
(each such person being referred to as a "Named Executive Officer").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
NAME AND OTHER ANNUAL LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) PAYOUTS(3) COMPENSATION
W.H. Holman, Jr.,............. 1997 $ 331,182 $ 162,920 $ 2,633 $ -- $ 15,795(5)
Chairman(4) 1996 315,100 121,193 2,216 1,894,039 15,840
1995 315,100 121,193 2,100 439,147 10,094
Michael E. Julian,............ 1997 57,692 75,000 -- -- --
Chief Executive Officer(4) 1996 -- -- -- -- --
1995 -- -- -- -- --
Roger P. Friou,............... 1997 223,637 96,537 2,356 -- 106,736(6)
President(4) 1996 182,600 68,461 1,807 2,247,911 106,578
1995 172,800 65,230 1,800 444,040 6,594
David K. Essary,.............. 1997 192,463 89,653 2,251 -- 103,485(7)
Executive Vice 1996 176,700 67,307 1,745 110,229 103,425
President 1995 145,800 53,422 1,700 -- 3,294
Jerry L. Jones,............... 1997 133,000 33,250 1,790 -- 3,149(8)
Senior Vice 1996 125,200 23,654 1,727 -- 3,141
President--Retail 1995 115,000 22,116 1,700 -- 2,907
Operations
Harold D. Evans,.............. 1997 121,500 30,376 1,978 -- 3,444(9)
Senior Vice 1996 114,000 21,923 1,863 -- 3,394
President--Store 1995 108,100 20,693 1,900 -- 3,330
Operations
70
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(1) The amounts shown in this column include amounts contributed as salary
deferral contributions in fiscal 1997, 1996 and 1995, respectively, under
the Jitney-Jungle Stores of America, Inc. and Affiliates Profit Sharing Plan
and Trust (the "401(k) Plan"), as follows: $8,236, $9,407 and $9,405 for Mr.
Holman; $0, $0 and $0 for Mr. Julian; $9,043, $9,288 and $9,287 for Mr.
Friou; $8,490, $9,500 and $8,715 for Mr. Essary; $7,507, $7,340 and $6,825
for Mr. Jones; and $6,835, $6,772 and $6,388 for Mr. Evans.
(2) Other annual compensation includes the annual estimated value of an
automobile furnished by the Company.
(3) Includes distributions from the Phantom Stock Plan.
(4) W.H. Holman, Jr. served as the Chief Executive Officer of the Company until
January 1997. Michael E. Julian became the Chief Executive Officer of the
Company in January 1997, and his salary reflects approximately 2/12ths of
his annual compensation. In May 1997, Mr. Friou resigned as President of the
Company, and Mr. Julian was appointed to serve in that position.
(5) Includes for fiscal 1997 $3,000 of Company matching contributions under the
401(k) Plan, $150 of Company profit sharing contributions under the 401(k)
Plan, and approximately $12,645 of premiums for group term life insurance.
(6) Includes for fiscal 1997 $3,000 of Company matching contributions under the
401(k) Plan, $150 of Company profit sharing contributions under the 401(k)
Plan, approximately $3,586 of premiums for group term life insurance, and
$100,000 as the second of three annual installments per an employment
agreement with Mr. Friou; subsequent to fiscal 1997, Mr. Friou retired and
forfeited the third payment.
(7) Includes for fiscal 1997 $3,000 of Company matching contributions under the
401(k) Plan, $150 of Company profit sharing contributions under the 401(k)
Plan, approximately $335 of premiums for group term life insurance, and
$100,000 as the second of three annual installments per an employment
agreement with Mr. Essary.
(8) Includes for fiscal 1997 $3,000 of Company matching contributions under the
401(k) Plan and $149 of Company profit sharing contributions under the
401(k) Plan.
(9) Includes for fiscal 1997 $2,746 of Company matching contributions under the
401(k) Plan, $135 of Company profit sharing contributions under the 401(k)
Plan, and approximately $563 of premiums for group term life insurance.
EMPLOYMENT AGREEMENTS
W.H. Holman, Jr. has an employment contract with Jitney-Jungle covering the
period through February 28, 2001. The agreement provides that Mr. Holman, Jr.
will serve as Chairman of the Board at the discretion of the Board of Directors.
If Mr. Holman, Jr. ceases to be Chairman of the Board prior to March 1, 2001, he
will continue to serve on the Board of Directors as Chairman Emeritus until
March 1, 2001, with a salary equal to his base salary then in effect until
February 28, 1999, and 50% of such base salary thereafter. Mr. Holman, Jr. is
also eligible for a bonus through February 28, 1999.
David K. Essary has an employment contract with Jitney-Jungle providing for
a base salary of approximately $186,000 per year for the period from March 1,
1995 through February 28, 1998. Mr. Essary is eligible to receive a bonus of up
to 50% of his base salary less $11,000. A provision in the employment contract
states that upon a change of control of Jitney-Jungle, Mr. Essary will be
awarded a payment of up to $300,000 to be paid in three annual installments of
$100,000. Because the Recapitalization constituted a change of control under
such employment agreement, Mr. Essary became entitled to receive such payment;
the first two $100,000 installments thereof were paid in March 1996 and March
1997, respectively. Provided he is still employed by Jitney-Jungle when the
final installment is due or his employment has been terminated by Jitney-Jungle
without cause or terminated by the employee for good reason, Jitney-Jungle will
pay Mr. Essary the last annual installment in 1998. No further payments are
required under the employment agreement upon any subsequent change of control.
In addition, Mr. Essary is entitled to his base salary plus anticipated bonus
for the remainder of the term of the agreement if his employment with
Jitney-Jungle is terminated by Jitney-Jungle without cause, he resigns his
employment at Jitney-Jungle's request without cause, or he terminates his
employment for good reason.
71
W.H. Holman, III has an employment contract with Jitney-Jungle covering the
period through February 28, 1998 and will serve at the discretion of the Board
of Directors as Secretary of Jitney-Jungle and as President of Pump And Save.
Mr. Holman, III will receive a base salary of no less than $110,000 per year
through February 28, 1998 subject to periodic increases as determined by the
Board of Directors. Mr. Holman, III is also entitled to a bonus of up to 50% of
his base salary less $11,000.
Until his retirement in May 1997, Roger P. Friou had an employment contract
with Jitney-Jungle. The terms of such employment contract were substantially
identical to those of Mr. Essary's contract, except that Mr. Friou was entitled
to receive a base salary of approximately $201,000 per year and a bonus of up to
50% of his base salary less $23,000. Mr. Friou's employment contract terminated
upon his retirement.
PHANTOM STOCK PLAN
On April 17, 1991 the Board of Directors of Jitney-Jungle adopted, and the
shareholders approved, the Amended and Restated Consolidated Phantom Stock Plan
of Jitney-Jungle (the "Phantom Stock Plan"). The Phantom Stock Plan provided
that phantom stock units could be awarded if combined net earnings exceed 15% of
stockholders' equity (as defined in the plan) at the beginning of the applicable
fiscal year; if earnings exceeded 15% of this base amount, awards could be made
equal to 10% of that excess to each participant. W.H. Holman, Jr., Roger P.
Friou and David K. Essary are the only three participants who currently have
units credited to them under this plan. Effective with the Recapitalization, the
Phantom Stock Plan was amended, restated and renamed "the Deferred Compensation
Plan for Jitney-Jungle Stores of America, Inc." Under this amended plan, no
further awards may be made and no other individuals may become participants. The
units credited to each of the three participants effectively have been divided
into two component amounts: a cash amount that will be payable in accordance
with the terms of the Phantom Stock Plan as in effect before its amendment, and
an amount that will continue to be credited under the terms of the plan to an
account, the value of which will be equal to the value of the number of shares
of Class C Preferred Stock of Jitney-Jungle that could be acquired with that
amount.
The accrued amounts payable in accordance with the pre-amendment provisions
of the Phantom Stock Plan became fully vested and payable in a single lump sum
effective with the Recapitalization on March 5, 1996. The amounts paid to
Messrs. Holman, Jr., Friou and Essary on March 7, 1996 were approximately
$1,894,000, $2,248,000 and $110,000, respectively, and Messrs. Holman, Jr.,
Friou and Essary applied an additional $474,000, $125,000 and $112,500,
respectively, toward the purchase price for shares of Class C Preferred Stock of
Jitney-Jungle in connection with the Recapitalization.
The Phantom Stock Plan is an unfunded deferred compensation arrangement with
an associated rabbi trust. The rabbi trust provides that the initial
contributions to the trust will be invested in shares of Class C Preferred
Stock. The initial contributions to the rabbi trust should equal the amounts
that will continue to be credited under the plan described above.
With respect to the amounts that continue to be credited under the plan as
amended, an amount equal to the amount of any cash dividends that would have
been paid on the number of shares of preferred stock credited to each
participant's account will be paid to the participant at the same time as any
cash dividends actually are paid on the preferred stock. Payment otherwise will
be made under the amended plan at the same time as the preferred stock is
redeemed, in an amount equal to the redemption price times the number (or
proportionate number, in the event of a partial redemption) of shares of
preferred stock credited to the participant's account.
401(K) PLAN
Jitney-Jungle maintains a Profit Sharing Plan and Trust (the "401(k) Plan")
for the benefit of its employees who have satisfied the plan's eligibility
requirements. Participants are permitted to make pre-tax salary reduction
contributions, up to the amount permitted under applicable tax law.
Jitney-Jungle makes a matching contribution equal to 50% of each participant's
salary reduction contribution, up to a maximum
72
of 2% of the participant's compensation. In addition, Jitney-Jungle may make
additional profit sharing contributions in its discretion. Although in prior
years Jitney-Jungle has made discretionary profit sharing contributions, it has
no obligation or present intention to do so in the future. Jitney-Jungle's
contributions become vested when the participant has been credited with five
years of service. Shares of Common Stock of Jitney-Jungle held under the 401(k)
Plan were surrendered in connection with the Recapitalization and exchanged for
cash and Class B Preferred Stock in accordance with the Recapitalization
documentation.
DELCHAMPS PLANS
Delchamps currently provides welfare and retirement benefits to its eligible
employees under various plans and arrangements, including an employee stock
option plan and a 401(k) plan. Following the Delchamps Acquisition, Management
intends to terminate the employee stock option plan and the 401(k) plan and
provide ongoing welfare and retirement benefits to such employees under the
existing plans of Jitney-Jungle.
73
OWNERSHIP OF CAPITAL STOCK
PRINCIPAL SHAREHOLDERS
The authorized capital stock of Jitney-Jungle consists of 5,000,000 shares
of common stock, par value $0.01 per share (the "Common Stock"), and 600,000
shares of preferred stock, par value $0.01 per share (the "Preferred Stock").
The Preferred Stock is issuable in one or more classes.
The following table sets forth certain information with respect to (i) the
beneficial ownership of Common Stock of Jitney-Jungle by each person or entity
who owns five percent or more thereof and (ii) the beneficial ownership of each
class of equity securities of Jitney-Jungle by each director of Jitney-Jungle
who is a shareholder, the Chief Executive Officer of Jitney-Jungle and the other
executive officers named in the "Summary Compensation Table" above who are
shareholders and all directors and officers of Jitney-Jungle as a group. Unless
otherwise specified, all shares are directly held.
NUMBER AND PERCENT OF SHARES
CLASS B CLASS C
PREFERRED PREFERRED
NAME OF BENEFICIAL OWNER COMMON STOCK STOCK STOCK
Bruckmann, Rosser, Sherrill &
Co., L.P.(1)........................................ 331,732/78.05% -- 70,808/70.81%
Two Greenwich Plaza
Suite 100
Greenwich, CT 06830
DLJ Merchant Banking Partners,
L.P. and related investors.......................... 75,000/15.00 (2) -- 15,000/15.00%
277 Park Avenue
New York, NY 10172
W.H. Holman, Jr....................................... 29,699/6.99 (3) 21,516/7.84%(4) 4,742/4.72%
Jitney-Jungle Stores of
America, Inc.
P.O. Box 3409
Jackson, MS 39207
Michael E. Julian..................................... 2,500* -- 534*
Roger E. Friou........................................ 12,510/2.94% 14(4) 1,252/1.25%
David K. Essary....................................... 11,250/2.65% -- 1,125/1.13%
Jerry L. Jones........................................ 1,200* -- 120*
Harold D. Evans....................................... 850* -- 85*
Bruce C. Bruckmann(5)................................. 353,750/83.24% -- 75,508/75.51%
Harold O. Rosser II(5)................................ 353,750/83.24% -- 75,508/75.51%
Stephen C. Sherrill(5)................................ 353,750/83.24% -- 75,508/75.51%
Stephen F. Edwards(5)................................. 332,663/78.27% -- 71,007/71.01%
All directors and officers as a group
(18 persons)........................................ 421,359/99.14% 26,729/9.74%(4) 92,207/92.21%
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* Less than one percent of total outstanding Common Stock, Class B Preferred
Stock and Class C Preferred Stock.
(1) The Fund is a limited partnership, the sole general partner of which is BRS
Partners, Limited Partnership ("BRS Partners") and the manager of which is
BRS. The sole general partner of BRS Partners is BRSE Associates, Inc.
("BRSE Associates"). Bruce C. Bruckmann, Harold O. Rosser II, Stephen C.
Sherrill and Stephen F. Edwards are the only stockholders of BRS and BRSE
Associates and may be deemed to share beneficial ownership of the shares
shown as beneficially owned by the Fund. Such individuals disclaim
beneficial ownership of any such shares.
74
(2) Represents warrants to acquire 15%, on a fully diluted basis, of the Common
Stock.
(3) Includes 19,699 shares held by Performance Partnership, L.P. W.H. Holman,
Jr. is the general partner of such partnership and possesses voting power
with respect to such shares.
(4) All outstanding shares of Class B Preferred Stock are held by Trustmark
National Bank ("Trustmark") pursuant to an escrow agreement by and among
Trustmark, Jitney-Jungle and the persons who were shareholders of
Jitney-Jungle prior to the Recapitalization. Messrs. Holman, Jr. and Friou
own an interest in the escrow account through which they have a beneficial
interest in the shares of Class B Preferred Stock listed in this table.
(5) Includes shares of Common Stock and Class C Preferred Stock which are owned
by the Fund and certain other entities and individuals affiliated with BRS.
Although Messrs. Bruckmann, Rosser, Sherrill and Edwards may be deemed to
share beneficial ownership of such shares, such individuals disclaim
beneficial ownership thereof. See Note 1 above.
CLASS A PREFERRED STOCK
An aggregate of $22.5 million in liquidation preference of the Class A
Preferred Stock is outstanding. The Class A Preferred Stock ranks senior in
right of payment of cash dividends, liquidation preference and redemption (both
mandatory and optional as described below) to the Class B Preferred Stock and
the Class C Preferred Stock.
Dividends on the Class A Preferred Stock are payable quarterly at an annual
rate of 15%. Dividends for the first five years following the Recapitalization
are payable, at Jitney-Jungle's option, either by cumulation to liquidation
preference or in cash and, thereafter, dividends will be payable in cash. The
Senior Credit Facility, the Senior Note Indenture and the Indenture will
restrict Jitney-Jungle's ability to pay cash dividends on the Class A Preferred
Stock.
The Class A Preferred Stock is redeemable at Jitney-Jungle's option, (i) at
any time after March 1, 2001 at a price per share equal to the then applicable
liquidation preference plus accrued and unpaid dividends and a prepayment
premium or (ii) on or prior to March 1, 1999 with the proceeds of a public
offering of Common Stock at a price per share equal to 114% of the then
applicable liquidation preference plus accrued and unpaid dividends thereon. All
of the Class A Preferred Stock is required to be redeemed on or before the
twelfth anniversary of issuance at a price per share equal to the then
applicable liquidation preference plus accrued and unpaid dividends.
Jitney-Jungle is required to offer to repurchase (to the extent permitted by the
terms of the Senior Credit Facility) all shares of Class A Preferred Stock upon
a Change of Control (as defined in the certificate of designations with respect
to the Class A Preferred Stock) at a price per share equal to 101% of the then
applicable liquidation preference, plus accrued and unpaid dividends thereon.
The Senior Credit Facility will restrict Jitney-Jungle's ability to redeem or
repurchase the Class A Preferred Stock.
The Class A Preferred Stock does not have any voting rights, except (i) as
required by law and (ii) with respect to the issuance of pari passu and senior
securities, certain mergers and certain amendments to the Articles of
Incorporation of Jitney-Jungle or the Exchange Debenture Indenture.
Additionally, in the event of certain defaults, including the failure to pay
dividends when required, then the number of directors constituting the Board of
Directors will be increased by two, and the holders of Class A Preferred Stock
will be entitled to elect two directors to the Board of Directors. The Class A
Preferred Stock is exchangeable (with cumulated dividends) at Jitney-Jungle's
option, in whole but not in part, for subordinated exchange debentures (the
"Exchange Debentures") of Jitney-Jungle. The Exchange Debentures will pay
interest from the date of exchange at the rate of 15% per annum, consisting of,
at Jitney-Jungle's option, additional Exchange Debentures or cash on or prior to
March 1, 2001 and cash thereafter. The Exchange Debentures will mature on March
1, 2008. The Senior Credit Facility, the Senior Note Indenture
75
and the Indenture will restrict Jitney-Jungle's ability to exchange the Class A
Preferred Stock for Exchange Debentures and Jitney-Jungle's ability to redeem or
repurchase the Exchange Debentures.
CLASS B PREFERRED STOCK
An aggregate of $27.5 million in liquidation preference of the Class B
Preferred Stock is outstanding. The Class B Preferred Stock ranks junior in
right of payment of cash dividends, liquidation preference and redemption (both
mandatory and optional as described below) to the Class A Preferred Stock and
senior in right of payment of cash dividends, liquidation preference and
redemption (both mandatory and optional as described below) to the Class C
Preferred Stock.
Dividends on the Class B Preferred Stock are payable annually when and as
declared by the Board of Directors of Jitney-Jungle at a rate of 10.0% per
annum. Dividends cumulate on a compounding basis until paid. The Senior Credit
Facility, the Senior Note Indenture, the Indenture and the Class A Preferred
Stock restrict Jitney-Jungle's ability to pay cash dividends on the Class B
Preferred Stock.
The Class B Preferred Stock is redeemable at Jitney-Jungle's option at any
time, in whole or in part, at a price per share equal to the then applicable
liquidation preference plus accrued and unpaid dividends. All of the Class B
Preferred Stock is required to be redeemed on the fourteenth anniversary of
issuance at a price per share equal to the then applicable liquidation
preference plus accrued and unpaid dividends. Jitney-Jungle will also be
required to offer to repurchase (to the extent permitted by the terms of the
Class A Preferred Stock and any indebtedness to which Jitney-Jungle is a party)
all shares upon a Change in Control (as defined in the certificate of
designations with respect to the Class B Preferred Stock) at a price in cash
equal to 100.0% of the liquidation preference thereof plus accrued and unpaid
dividends.
Jitney-Jungle is required to offer to repurchase (to the extent permitted by
the terms of the Class A Preferred Stock and any indebtedness to which
Jitney-Jungle is a party) all shares of Class B Preferred Stock upon the sale by
the Fund (or its affiliates) of more than 10.0% of the outstanding shares of the
Common Stock of Jitney-Jungle, except that the Fund (or its affiliates) may (i)
sell up to 5.0% of the outstanding shares to original shareholders, officers,
directors, consultants or employees of Jitney-Jungle; (ii) sell outstanding
shares to certain affiliates and principals of the Fund and persons related
thereto; or (iii) exchange Common Stock or Class C Preferred Stock for
securities which rank junior to the Class B Preferred Stock. Jitney-Jungle is
also required to offer to repurchase (to the extent permitted by the terms of
the Class A Preferred Stock and any indebtedness to which Jitney-Jungle is a
party) all shares of Class B Preferred Stock if Jitney-Jungle changes its state
of incorporation.
In addition, Jitney-Jungle is required to offer to apply (to the extent
permitted by the terms of the Class A Preferred Stock and any indebtedness to
which Jitney-Jungle is a party) Net Proceeds (as defined) raised through any
primary issuance of securities junior to Class B Preferred Stock to repurchase
shares of Class B Preferred Stock. "Net Proceeds" means the net cash proceeds
received by Jitney-Jungle from the issuance of such junior securities after
payment of expenses of issuance of such securities and application of such funds
to repay or redeem senior securities (to the extent required) and the repayment
of indebtedness (to the extent required).
The Senior Credit Facility, the Senior Note Indenture, the Indenture and the
Class A Preferred Stock restrict Jitney-Jungle's ability to redeem or repurchase
shares of the Class B Preferred Stock.
The Class B Preferred Stock does not have any voting rights except as
required by Mississippi law, as in effect on the date of issuance.
CLASS C PREFERRED STOCK
An aggregate of $10.0 million in liquidation preference of the Class C
Preferred Stock, Series 1 and Series 2, is outstanding. The Series 1 is not
redeemable by Jitney-Jungle at any time; the Series 2 is redeemable, as
described below. The Class C Preferred Stock ranks junior in right of payment of
cash
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dividends, liquidation preference and redemption (both mandatory and optional as
described below) to the Class A Preferred Stock and the Class B Preferred Stock.
Dividends on the Class C Preferred Stock are payable annually when and as
declared by the Board of Directors of Jitney-Jungle at a rate of up to 10.0% per
annum. Dividends cumulate on a compounding basis until paid. The Senior Credit
Facility, the Senior Note Indenture, the Indenture, the Class A Preferred Stock
and the Class B Preferred Stock restrict Jitney-Jungle's ability to pay cash
dividends on the Class C Preferred Stock.
The Class C Preferred Stock, Series 2, is redeemable at Jitney-Jungle's
option at any time, in whole or in part, at a price per share equal to the
liquidation preference plus accrued and unpaid dividends (including cumulated
dividends). The Class C Preferred Stock, Series 2, is required to be redeemed on
the fifteenth anniversary of issuance at a price per share equal to the
liquidation preference plus accrued and unpaid dividends (including cumulated
dividends). Jitney-Jungle is required to offer to repurchase (to the extent
permitted by the terms of the Class A Preferred Stock, the Class B Preferred
Stock and any indebtedness to which Jitney-Jungle is a party) all shares of
Series C Preferred Stock, Series 1 and Series 2, upon a Change of Control (as
defined in the certificate of designations with respect to the Class C Preferred
Stock) at a price in cash equal to 100% of the then applicable liquidation
preference, plus accrued and unpaid dividends thereon. The Senior Credit
Facility, the Senior Note Indenture, the Indenture, the Class A Preferred Stock,
the Exchange Debentures and the Class B Preferred Stock restrict Jitney-Jungle's
ability to redeem or repurchase the Class C Preferred Stock.
The Class C Preferred Stock does not have any voting rights, except as
required by law.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record and all matters submitted to a vote of shareholders. The holders of
Common Stock have no preemptive rights, rights to maintain their respective
percentage ownership interests in Jitney-Jungle or other rights to subscribe for
additional shares of Jitney-Jungle other than as set forth in the Shareholders
Agreement.
WARRANTS
In connection with the Recapitalization, warrants to purchase 75,000 shares
of Common Stock (the "Warrants"), representing 15.0% of the Common Stock of
Jitney-Jungle (on a fully diluted basis) outstanding immediately following the
Recapitalization, were issued to DLJ Merchant Banking Partners, L.P. and related
investors. The Warrants have an exercise price of $0.01 per share and expire 12
years after issuance.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LEASING AGENT AGREEMENT
Pursuant to an agreement with Jitney-Jungle, McCarty-Holman Co., L.P. (the
"Partnership") is the exclusive agent for Jitney-Jungle to rent, lease, operate
and manage all locations where Jitney-Jungle has sublet space to various tenants
and where it has space vacant and available for subleasing. W.H. Holman, Jr.
owns a noncontrolling interest in the Partnership. Under the agreement, the
Partnership is entitled to fees as follows: (i) for management, 4% of all
rental/lease collections; (ii) for leasing, 6% of the annual rent (for a
month-to-month tenancy, one-half of the first month's rent); and (iii) for
services other than those delineated above, fees are negotiated. In fiscal 1997,
the Partnership received approximately $41,000 in fees pursuant to this
agreement. Management believes that the agreement is on an arm's length basis
and is on terms that are no less favorable to Jitney-Jungle than could have been
obtained with non-affiliated parties at the time the agreement was entered into.
LEASES OF CERTAIN SUPERMARKETS AND FACILITIES
W.H. Holman, Jr., W.H. Holman, III and Roger P. Friou own in the aggregate
noncontrolling interests in certain partnerships that are landlords under 18
leases for supermarkets or other facilities where Jitney-Jungle and its
affiliates are the tenants. In fiscal 1997 and 1996, Jitney-Jungle paid a
combined total rent under these 18 leases of approximately $3.6 million and $3.6
million, respectively. Management believes that each of these leases is on an
arm's length basis and is on terms that are no less favorable to Jitney-Jungle
than could have been obtained with non-affiliated parties at the time each lease
was entered into.
MANAGEMENT LOANS
David K. Essary, Executive Vice President of Jitney-Jungle has an
outstanding loan for the purchase of Common Stock from Jitney-Jungle in an
amount of $79,906 as of May 3, 1997. The loan is evidenced by an unsecured note
which bears interest at the rate of 8.25% per annum and is payable in three
annual installments, the first of which was paid in March 1997. Eight other
executive officers of Jitney-Jungle have borrowed an aggregate of $69,824 for
the purchase of Common Stock and Class C Preferred Stock from Jitney-Jungle.
SHAREHOLDERS AGREEMENT
Certain shareholders of Jitney-Jungle, including the Fund Entities, the DLJ
Entities and Messrs. Holman, Jr., Holman III and Friou (the "Management
Shareholders") are parties to a Shareholders Agreement which contains certain
agreements among such shareholders with respect to the capital stock and
corporate governance of Jitney-Jungle. The following is a summary of the
material terms of the Shareholders Agreement.
Pursuant to the Shareholders Agreement, the maximum number of members of the
Board of Directors of Jitney-Jungle is 12 (plus any additional directors who may
be elected in accordance with the terms of Jitney-Jungle's preferred stock). The
DLJ Entities and the Management Shareholders each have the right to appoint one
member to the Board of Directors. In addition, the approval of the director
appointed by the DLJ Entities is required in order for Jitney-Jungle to enter
into certain transactions. The DLJ Entities' rights to appoint a director and to
approve of such transactions will terminate upon certain reductions in the DLJ
Entities' ownership of the Warrants or upon a person or persons (other than the
Fund Entities, DLJ Entities or Management Shareholders) acquiring a majority of
the then outstanding Common Stock.
The Shareholders Agreement contains certain provisions which with certain
exceptions (i) restrict the ability of the Fund Entities, the DLJ Entities and
the Management Shareholders from transferring any shares of Common Stock or
Warrants until the earlier to occur of the initial public offering of Common
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Stock of Jitney-Jungle and the second anniversary of the consummation of the
Recapitalization, (ii) restrict the ability of the Fund Entities from
transferring any shares of Class C Preferred Stock until the earlier to occur of
the initial public offering of Common Stock of Jitney-Jungle and the fourth
anniversary of the consummation of the Recapitalization and (iii) restrict the
ability of the DLJ Entities and the Management Shareholders from transferring
any shares of Class C Preferred Stock until the earlier to occur of the initial
public offering of Common Stock of Jitney-Jungle and the second anniversary of
the consummation of the Recapitalization. The foregoing will not restrict the
ability of the DLJ Entities to transfer shares of Common Stock, Class C
Preferred Stock or Warrants in connection with a transfer of Class A Preferred
Stock or of any shareholder to transfer securities in connection with any public
offering of Common Stock of Jitney-Jungle pursuant to certain registration
rights set forth in the Shareholders Agreement. Prior to sales of Common Stock
by the Fund Entities, the DLJ Entities have the right to negotiate with such
Fund Entity for the purchase of any and all shares that Fund Entity desires to
sell. With respect to proposed dispositions by the Fund Entities of their
securities, the DLJ Entities have the right to require the proposed transferee
to purchase, on the same terms and conditions as given to the Fund Entities, a
pro rata portion of like securities (or Warrants therefor) held by the DLJ
Entities. Subject to certain exceptions, if Jitney-Jungle proposes to issue
Common Stock or rights to purchase Common Stock, the Fund Entities and the DLJ
Entities have the right, on the same terms and conditions of the proposed
issuance, to purchase pro rata portions of the securities to be issued.
Jitney-Jungle has granted the Fund Entities three separate demand registration
rights with respect to their securities. Jitney-Jungle has granted the DLJ
Entities (i) three demand registration rights with respect to their shares of
Common Stock, Class C Preferred Stock and Warrants, in the aggregate, which
demand rights are not exercisable prior to the earlier to occur of the initial
public offering of Common Stock of Jitney-Jungle and the fifth anniversary of
the consummation of the Recapitalization and (ii) three demand registration
rights with respect to their shares of Class A Preferred Stock. All of the
shareholders party to the Shareholders Agreement have the right to participate,
or "piggyback," in certain registrations initiated by Jitney-Jungle or pursuant
to a demand.
DEALER-MANAGER; SOLICITATION AGENT; UNDERWRITER
Donaldson, Lufkin & Jenrette Securities Corporation, one of the Initial
Purchasers and an affiliate of DLJ Merchant Banking Partners, L.P., acted as
Dealer-Manager in connection with the Delchamps Tender Offer and as Solicitation
Agent in connection with the Consent Solicitation, and it received customary
fees and reimbursement of expenses in connection with the services rendered by
it in the latter capacity. Donaldson, Lufkin & Jenrette Securities Corporation
also acted as underwriter in connection with the offering of the Senior Notes by
the Company, for which it received customary fees and reimbursement of expenses.
BRS MANAGEMENT AGREEMENT; CLOSING FEE
Pursuant to a management agreement between Jitney-Jungle and BRS, BRS is
entitled to receive an annual management fee from Jitney-Jungle for the
performance of strategic and financial planning services. The amount of the fee
ranges from $250,000 to $1.0 million per year and is based on certain
performance criterion. In connection with the Consent Solicitation,
Jitney-Jungle solicited and obtained consents to an amendment to the Senior Note
Indenture to permit the amendment of the management agreement to eliminate the
performance criteria set forth therein and permit the payment of fees to BRS
after the end of each fiscal quarter of the greater of (i) $250,000 or (ii) 1.0%
of the Company's EBITDA for such quarter (provided that the total amount of all
such payments in any fiscal year may not exceed the greater of (x) $1.0 million
or (y) one percent of EBITDA for such fiscal year). The amendment of the
management agreement occurred simultaneously with the consummation of the
Transactions. In addition, upon consummation of the Transactions the Company
paid BRS a closing fee of $4.0 million.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of certain indebtedness of the Company which will
remain outstanding following consummation of the Delchamps Merger. See
"Summary--Use of Proceeds." To the extent such summary contains descriptions of
the Senior Credit Facility, the Senior Note Indenture and other loan documents,
such descriptions do not purport to be complete and are qualified in their
entirety by reference to such documents, which are available upon request from
the Company.
SENIOR CREDIT FACILITY
In connection with the Delchamps Acquisition, Jitney-Jungle's existing
revolving credit facility with Fleet Capital Corporation (as successor agent to
Fleet Bank, N.A.) and certain other lenders (collectively, the "Lender") was
amended and restated to provide for a $150.0 million Senior Credit Facility.
Borrowings by the Company and its subsidiaries (including Delchamps following
the consummation of the Delchamps Tender Offer) of $72.7 million under the
Senior Credit Facility were used to finance a portion of the Delchamps Purchase
Price, to repay certain indebtedness of Delchamps and to pay fees and expenses
incurred in connection with the Transactions and the Delchamps Merger. The
Senior Credit Facility will also be available to provide for the ongoing working
capital requirements of the Company and its subsidiaries.
The commitments under the Senior Credit Facility will terminate, and all
loans outstanding thereunder will be required to be repaid in full, six and
one-half years following the consummation of the Delchamps Tender Offer (the
"Closing Date"). Borrowings under the Senior Credit Facility, including
revolving loans and up to $30.0 million in letters of credit, will not exceed
the lesser of (i) the "Total Commitment," which initially will be $150.0 million
and (ii) an amount equal to the sum of (A) up to 65% of eligible inventory
(valued at the lesser of FIFO cost or current market value) of the Company and
its subsidiaries and (B) the "Supplemental Availability," which initially will
be $53.0 million. The maximum amount available for borrowing under the Senior
Credit Facility and the Supplemental Availability will be reduced in quarterly
installments during each year in the aggregate annual amounts set forth below:
SENIOR CREDIT
FACILITY
YEAR FOLLOWING CLOSING DATE REDUCTION
1....................................................................................... $ 0
2....................................................................................... $ 5,000,000
3....................................................................................... $ 7,000,000
4....................................................................................... $ 8,000,000
5....................................................................................... $ 9,000,000
6....................................................................................... $ 11,000,000
First quarter year 7............................................................................ $ 6,500,000
Second quarter year 7........................................................................... $ 6,500,000
The Senior Credit Facility is guaranteed by all subsidiaries of the Company
who, except for Supermarket Cigarette Sales, Inc., are also borrowers under the
Senior Credit Facility. Obligations under the Senior Credit Facility are secured
by a first priority lien on all of the Company's and the guarantors' existing
and after-acquired tangible and intangible assets, including but not limited to
accounts and notes receivable, inventory, machinery, equipment and other fixed
assets (including, but not limited to, fixtures and leasehold improvements),
real property (including leasehold interests but excluding real property already
subject to liens), all related documents, instruments, chattel paper, subsidiary
stock, and general intangibles (including, but not limited to, patents,
trademarks, trade names and tax refunds) and all proceeds and products thereof.
Loans under the Senior Credit Facility, at the Company's option, may be
either Base Rate Loans or Eurodollar Loans, provided that not more than six
Eurodollar Loans may be outstanding at any one time. Base Rate Loans will bear
interest at a Base Rate plus the Applicable Margin and Eurodollar Loans will
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bear interest at the LIBO Rate (as adjusted pursuant to the terms of the Senior
Credit Facility) plus the Applicable Margin for 1-, 2-, 3- or 6-month interest
periods. The Base Rate is defined as the higher of (i) the announced prime rate
of Fleet Bank, N.A. and (ii) the federal funds rate plus 1/2%, with changes
effective as of the date of change in such prime rate or federal funds rate. The
Company may convert all or any portion of the Base Rate Loans into Eurodollar
Loans, and all or any portion of the Eurodollar Loans into Base Rate Loans
provided no event of default has occurred or is continuing.
At all times on and after the Closing Date until the date the Company
delivers to the agent under the Senior Credit Facility its financial statements
for the Company's fiscal quarter ending on or about January 10, 1998 (the "First
Adjustment Date"), the Applicable Margin will be 0.75% for Base Rate Loans and
2.0% for Eurodollar Loans.
At the Closing Date, the Senior Credit Facility bore interest at
approximately 7.65% based on the LIBO Rate plus the Applicable Margin. Beginning
on the First Adjustment Date, interest rates will fluctuate based on the
Company's ratio of Indebtedness to EBITDA (each as defined in the Senior Credit
Facility) for the four most recently concluded fiscal quarters, based upon the
following table:
APPLICABLE MARGIN
BASE RATE/EURODOLLAR
INDEBTEDNESS/EBITDA RATE
Greater Than or Equal to 5.............................................................. 1.00%/2.25%
Greater Than 4.25 but Less Than 5....................................................... 0.75%/2.00%
Greater Than 3.75 but Less Than 4.25.................................................... 0.50%/1.75%
Greater Than 3.25 but Less Than 3.75.................................................... 0.25%/1.50%
Less Than 3.25.......................................................................... 0%/1.25%
Notwithstanding the foregoing, on and after a default or event of default
under the Senior Credit Facility which is continuing, there will be no reduction
in the Applicable Margin. After and during the continuance of any such event of
default, the interest rate will be 2% above the otherwise applicable rate.
The Senior Credit Facility contains numerous restrictive financial and other
covenants, including, but not limited to (i) limitations on the incurrence of
liens and indebtedness, (ii) restrictions on sale and lease-back transactions,
consolidations, mergers and sales of assets, investments (including the purchase
of stock or assets), loans, capital expenditures, changes in business,
prepayment of indebtedness, including the Senior Notes and the Notes, affiliate
transactions, consulting fees and creation of subsidiaries, (iii) a prohibition
(with certain limited exceptions) on dividends, distributions and payments on
shares of capital stock, and (iv) a requirement to meet certain identified
financial targets, based generally on rolling four fiscal quarter periods, such
as a maximum leverage ratio, a minimum interest coverage ratio, a minimum cash
flow and, under certain circumstances, a minimum fixed charge coverage ratio.
Events of default under the Senior Credit Facility include, among others,
(i) false representations and warranties, (ii) nonpayment of interest, fees or
principal when due under the Senior Credit Facility, (iii) breach in the
observance or performance of any covenant, condition or agreement, (iv)
voluntary or involuntary bankruptcy proceedings, (v) default in any other
indebtedness that permits acceleration of such indebtedness, (vi) any events or
conditions which would result in the termination of a pension plan or the
creation of certain liabilities under ERISA, (vii) judgments or decrees that
remain undischarged or unbonded for 30 consecutive days, (viii) the invalidity
of the Senior Credit Facility, the other security documents, security interests
or guarantees and (ix) the occurrence of a Change of Control. Change of Control
is defined as (A) the failure of the Fund to own, beneficially and all voting
rights with respect to, at least 35% of each class of issued and outstanding
shares of voting stock of the Company, (B) the failure of the Fund to own
capital stock of the Company entitling it to cast the votes required to elect a
majority of members of the Board of Directors of the Company, (C) the failure of
the Company to own, beneficially and all voting rights with respect to, 100% of
all the issued and outstanding shares of each class of capital stock of each of
its subsidiaries (other than Delchamps, following the Delchamps Tender Offer and
prior to the Delchamps Merger) or (D) the occurrence of a "Change of Control"
under the Senior Note Indenture.
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Upon the occurrence of any event of default under the Senior Credit Facility,
the Lender may accelerate the maturity of the loans made thereunder and
terminate the commitments under the Senior Credit Facility.
SENIOR NOTES
Jitney-Jungle is the primary obligor on $200,000,000 in aggregate principal
amount of Senior Notes. The Senior Notes bear interest at a rate of 12% per
annum, payable semi-annually on March 1 and September 1 of each year.
Jitney-Jungle is not required to make any mandatory redemption or sinking
fund payment with respect to the Senior Notes prior to maturity. The Senior
Notes are redeemable, at the option of Jitney-Jungle, in whole or in part, at
any time after March 1, 2001 at the redemption prices set forth in the Senior
Note Indenture. In addition, at any time prior to March 1, 1999, Jitney-Jungle
may redeem up to 33 1/3% of the aggregate principal amount of the Senior Notes
with the net proceeds of one or more public offerings of equity securities;
provided that at least 66 2/3% of the original aggregate principal amount of
Senior Notes remains outstanding following each such redemption.
Upon the occurrence of a "Change of Control" under the Senior Note
Indenture, Jitney-Jungle will be required to make an offer to purchase all of
the outstanding Senior Notes at 101% of the principal amount thereof, plus
accrued and unpaid interest to the date of purchase.
The Senior Notes are unsecured senior obligations of Jitney-Jungle and rank
pari passu in right of payment with all existing and future Senior Debt of
Jitney-Jungle, including indebtedness under the Senior Credit Facility.
Jitney-Jungle's obligations under certain outstanding Senior Debt, including its
obligations under the Senior Credit Facility, are secured by liens on all of the
assets of Jitney-Jungle and, accordingly, such indebtedness ranks prior to the
Senior Notes with respect to such assets. The Senior Notes rank senior in right
of payment to all future subordinated indebtedness of Jitney-Jungle, including
the Notes.
The payment of principal, premium, if any, and interest on the Senior Notes
has been guaranteed on a full, unconditional, joint and several, unsecured
senior basis (the "Senior Note Guarantees") by all of the Subsidiary Guarantors,
and Delchamps will execute a Senior Note Guarantee within three business days
following the consummation of the Delchamps Tender Offer. The Senior Note
Guarantees rank pari passu in right of payment with all Senior Debt of the
Subsidiary Guarantors. The Subsidiary Guarantors' obligations under certain
outstanding Senior Debt, including their obligations under the Senior Credit
Facility, are secured by liens on substantially all of the assets of the
Subsidiary Guarantors and, accordingly, rank prior to the Senior Notes with
respect to such assets. The guarantee of a Subsidiary Guarantor may be released
upon a sale of such Subsidiary Guarantor or upon repayment or defeasance of the
Senior Notes, in each case as permitted by the Senior Note Indenture.
The Senior Note Indenture contains restrictive covenants substantially
identical to those contained in the Indenture governing the Notes (except with
respect to the subordination provisions of the Indenture), including covenants
that limit, among other things, (i) the ability of Jitney-Jungle and its
Restricted Subsidiaries to pay dividends or make certain other restricted
payments or investments, incur additional indebtedness or issue preferred stock,
in each case, unless specified financial targets are met, (ii) the ability of
Jitney-Jungle to merge, consolidate or sell all or substantially all of its
assets, (iii) the ability of Jitney-Jungle and its Restricted Subsidiaries to
create liens on assets, (iv) the ability of Jitney-Jungle and its Restricted
Subsidiaries to enter into transactions with affiliates and (v) the ability of
Jitney-Jungle and its Restricted Subsidiaries to engage in other lines of
business. See "Description of the Notes" for a more complete description of such
provisions.
The Senior Note Indenture would prohibit the issuance of the Notes. The
Company has obtained consents from the holders of a majority in principal amount
of the outstanding Senior Notes to such issuance. See "Summary--The
Transactions" and "The Transactions--The Consent Solicitation."
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DESCRIPTION OF THE NOTES
GENERAL
The Existing Notes were issued pursuant to an Indenture (the "Indenture") by
and among the Company, each Subsidiary of the Company as Subsidiary Guarantors
and Marine Midland Bank, as trustee (the "Trustee") in a private transaction
that was not subject to the registration requirements of the Securities Act. The
terms of the Indenture apply to the Existing Notes and to the New Notes to be
issued in exchange therefor pursuant to the Exchange Offer (all such Notes being
referred to herein collectively as the "Notes"). The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. The following
summary of certain provisions of the Indenture is qualified by reference to the
Indenture, including the definitions therein of certain terms used below. Copies
of the proposed form of Indenture and Registration Rights Agreement are
available as set forth under "--Additional Information." The definitions of
certain terms used in the following summary are set forth below under "Certain
Definitions."
The Notes are general unsecured obligations of the Company and are
subordinated in right of payment to all current and future Senior Debt. At July
26, 1997, on a Pro Forma Basis, the Company would have had Senior Debt of
approximately $348.1 million (exclusive of an unused commitment of up to $66.1
million under the Senior Credit Facility). The Indenture permits the incurrence
of additional Senior Debt in the future. See "Certain Covenants--Incurrence of
Indebtedness and Issuance of Disqualified Stock."
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $200.0 million and
will mature on September 15, 2007. Interest on the Notes will accrue at the rate
of 10 3/8% per annum and will be payable semi-annually in arrears on March 15
and September 15 of each year, commencing on March 15, 1998 to Holders of record
on the immediately preceding March 1 and September 1. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal, premium, if any, and interest and Liquidated Damages, if any, on the
Notes will be payable at the office or agency of the Company maintained for such
purpose within the City and State of New York or, at the option of the Company,
payment of interest and Liquidated Damages, if any, may be made by check mailed
to the Holders of the Notes at their respective addresses set forth in the
register of Holders of Notes; provided that all payments of principal, premium,
if any, and interest with respect to the Notes the Holders of which have given
wire transfer instructions to the Company will be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof. Until otherwise designated by the Company, the Company's office or
agency in New York will be the office of the Trustee maintained for such
purpose. The Notes will be issued in denominations of $1,000 and integral
multiples thereof.
SUBORDINATION
The payment of principal of, premium, if any, and interest and Liquidated
Damages, if any, on the Notes will be subordinated in right of payment, as set
forth in the Indenture, to the prior payment in full of all Senior Debt, whether
outstanding on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full in cash of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at
83
the rate specified in the applicable Senior Debt) before the Holders will be
entitled to receive any payment with respect to the Notes, and until all
Obligations with respect to Senior Debt are paid in full in cash, any
distribution to which the Holders would be entitled shall be made to the holders
of Senior Debt (except that Holders may receive Permitted Junior Securities and
payments made from the trust described under "--Legal Defeasance and Covenant
Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under
"--Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of
the principal of, premium, if any, or interest on Designated Senior Debt occurs
and is continuing beyond any applicable period of grace or (ii) any other
default occurs and is continuing with respect to Designated Senior Debt that
permits holders of such Designated Senior Debt to accelerate its maturity and
the Trustee receives a notice of such default (a "Payment Blockage Notice") from
the Company or the representative of the holders of such Designated Senior Debt.
Payments on the Notes may and shall be resumed (a) in the case of a payment
default, upon the date on which such default is cured or waived and (b) in case
of a nonpayment default, the earlier of (x) the date on which such nonpayment
default is cured or waived, (y) 179 days after the date on which the applicable
Payment Blockage Notice is received, in each case, unless the maturity of any
Designated Senior Debt has been accelerated or (z) the date on which such
Payment Blockage Period (as defined below) shall have been terminated by written
notice to the Trustee from the representative of the holders of Designated
Senior Debt initiating such Payment Blockage Period. During any consecutive
360-day period, the aggregate number of days in which payments due on the Notes
may not be made as a result of nonpayment defaults on Designated Senior Debt (a
"Payment Blockage Period") shall not exceed 179 days, and there shall be a
period of at least 181 consecutive days in each consecutive 360-day period
during which no Payment Blockage Period is in effect. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been cured or waived for a period of not
less than 90 days.
The Indenture further requires that the Company promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of the Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. See "Risk
Factors--Subordination."
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes are guaranteed on a full,
unconditional, joint and several, general unsecured basis (the "Subsidiary
Guarantees") by the Subsidiary Guarantors. The obligations of each Subsidiary
Guarantor under its Subsidiary Guarantee is limited to the lesser of (i) the
aggregate amount of the Obligations of the Company under the Notes and the
Indenture and (ii) the amount, if any, which would not have (A) rendered such
Subsidiary Guarantor "insolvent" (as such term is defined in the United States
Bankruptcy Code and in the Debtor and Creditor Law of the State of New York) or
(B) left such Subsidiary Guarantor with unreasonably small capital at the time
its Subsidiary Guarantee of the Notes was entered into; provided that it will be
a presumption in any lawsuit or other proceeding in which a Subsidiary Guarantor
is a party that the amount guaranteed pursuant to the Subsidiary Guarantee is
the amount set forth in clause (i) above unless any creditor, or representative
of creditors of such Subsidiary Guarantor, or debtor in possession or trustee in
bankruptcy of the Subsidiary Guarantor, otherwise proves in such a lawsuit that
the aggregate liability of the Subsidiary Guarantor is the amount set forth in
clause (ii) above. The Indenture provides that, in making any determination as
to solvency or sufficiency of capital of a Subsidiary Guarantor in accordance
with the previous sentence, the right of such Subsidiary Guarantor to
contribution from other Subsidiary Guarantors, and any other rights such
Subsidiary Guarantor may have, will be taken into account. See, however, "Risk
Factors--Fraudulent Conveyance Considerations."
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The Subsidiary Guarantee of each Subsidiary Guarantor is subordinated to the
prior payment in full of all existing and future Senior Debt of such Subsidiary
Guarantor, including the guarantee of such Subsidiary Guarantor of the Company's
obligations under the Senior Notes and the Senior Credit Facility. At July 26,
1997, on a Pro Forma Basis, the Subsidiary Guarantors would have had an
aggregate of approximately $10.4 million of Senior Debt outstanding (excluding
guarantees by the Subsidiary Guarantors of the Company's obligations under the
Senior Notes and the Senior Credit Facility). The Indenture permits the
Subsidiary Guarantors to incur additional Senior Debt, subject to certain
limitations.
The Indenture provides that, except as may be prohibited by the terms of the
Indenture described herein under "Certain Covenants" and "Repurchase at the
Option of Holders--Change of Control" and "--Asset Sales," nothing contained in
the Indenture or in any of the Notes will prevent any consolidation or merger of
a Subsidiary Guarantor with or into a corporation or corporations other than the
Company or any other Subsidiary Guarantor (in each case, whether or not
affiliated with the Subsidiary Guarantor), or successive consolidations or
mergers in which a Subsidiary Guarantor or its successor or successors will be a
party or parties, or will prevent any sale or conveyance of the property of a
Subsidiary Guarantor as an entirety or substantially as an entirety, to a
corporation other than the Company or any other Subsidiary Guarantor (in each
case, whether or not affiliated with the Subsidiary Guarantor) authorized to
acquire and operate the same; PROVIDED, however, that each Subsidiary Guarantor
covenants and agrees that: (i) upon any such consolidation, merger, sale or
conveyance, the Subsidiary Guarantee endorsed on the Notes, and the due and
punctual performance and observance of all of the covenants and conditions of
the Indenture to be performed by such Subsidiary Guarantor, will be expressly
assumed (in the event that the Subsidiary Guarantor is not the surviving
corporation in the merger), by a supplemental indenture substantially in the
form provided for in the Indenture, executed and delivered to the Trustee, by
the corporation formed by such consolidation, or into which the Subsidiary
Guarantor shall have been merged, or by the corporation which shall have
acquired such property; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; and (iii) the Company would
be permitted, immediately after giving effect to such transaction, to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the covenant described below under the caption "Certain
Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock." The
foregoing will not prohibit (i) any consolidation or merger of a Subsidiary
Guarantor with or into the Company or any other Subsidiary Guarantor or (ii) any
sale or conveyance of the property of a Subsidiary Guarantor as an entirety or
substantially as an entirety, to the Company or any other Subsidiary Guarantor.
The Indenture provides that concurrently with any sale of assets (including,
if applicable, all of the Capital Stock of any Subsidiary Guarantor), any Liens
in favor of the Trustee in the assets sold thereby will be released; PROVIDED
that, in the event of an Asset Sale, the Net Proceeds from such sale or other
disposition are treated in accordance with the provisions of the covenant
described herein under the caption "Repurchase at the Option of Holders--Asset
Sales." The Indenture further provides that if the assets sold in such sale or
other disposition include all or substantially all of the assets of any
Subsidiary Guarantor or all of the Capital Stock of any Subsidiary Guarantor,
then such Subsidiary Guarantor (in the event of a sale or other disposition of
all of the Capital Stock of such Subsidiary Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of a Subsidiary Guarantor) will be released from
and relieved of its Obligations under its Subsidiary Guarantee; PROVIDED that
(i) in the event of an Asset Sale, the Net Proceeds from such sale or other
disposition are treated in accordance with the provisions of the covenant
described herein under the caption "Repurchase at the Option of Holders--Asset
Sales" and (ii) the Company is in compliance with all other provisions of the
Indenture applicable to such disposition.
OPTIONAL REDEMPTION
Except as provided in the following paragraph, the Notes are not redeemable
at the Company's option prior to September 15, 2002. Thereafter, the Notes are
subject to redemption at the option of the
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Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on September 15 of the years indicated below:
YEAR PERCENTAGE
2002.......................................................... 105.188%
2003.......................................................... 103.458%
2004.......................................................... 101.729%
2005 and thereafter........................................... 100.000%
Notwithstanding the foregoing, at any time prior to September 15, 2000 the
Company may on any one or more occasions redeem up to 33 1/3% of the aggregate
principal amount of Notes originally issued in the Offering at a redemption
price of 110.375% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date, with
the net proceeds of one or more Public Equity Offerings; PROVIDED that at least
66 2/3% of the original aggregate principal amount of Notes remains outstanding
immediately after the occurrence of each such redemption; and PROVIDED, further,
that each such redemption shall occur within 120 days of the date of the closing
of the Public Equity Offering to which it relates.
MANDATORY REDEMPTION
Except as set forth below under "Repurchase at the Option of Holders," the
Company is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, each
Holder will have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Change of Control Offer") at a price
in cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of purchase
(the "Change of Control Payment"). Within 30 days following any Change of
Control, the Company will mail or cause to be mailed a notice to each Holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase Notes pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of the Indenture, the Company will
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations described in the Indenture by virtue
thereof.
The Indenture provides that, prior to complying with the provisions of this
covenant, but in any event within 30 days following a Change of Control, the
Company will either repay all outstanding Senior Debt, or offer to repay in full
all outstanding Senior Debt and repay the Senior Debt with respect to which such
offer has been accepted, or obtain the requisite consents, if any, under all
outstanding Senior Debt to permit the repurchase of the Notes required by this
covenant.
The Indenture provides that on the payment date set forth in the Change of
Control Offer (the "Change of Control Payment Date"), the Company will, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Trustee
or with the Paying Agent (or, if the Company or any of its subsidiaries is the
Paying Agent,
86
separate and hold in trust) an amount in same-day funds equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered and (3)
deliver or cause to be delivered to the Trustee for cancellation the Notes so
accepted together with an Officers' Certificate stating that such Notes or
portions thereof have been tendered to and purchased by the Company. The
Indenture provides that the Paying Agent will promptly mail to each Holder of
Notes so tendered the Change of Control Payment for such Notes, and the Trustee
will promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder a new Note equal in principal amount to any unpurchased portion
of the Notes surrendered, if any; PROVIDED that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the Holders of the Notes to require that
the Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar restructuring.
The existence of a Holder's right to require the Company to repurchase such
Holder's Notes upon the occurrence of a Change of Control may deter a third
party from seeking to acquire the Company in a transaction that would constitute
a Change of Control.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than the Principals, their Related Parties, the DLJ
Entities or their Affiliates, (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iii) the Company consolidates with,
or merges with or into, another "person" (as defined above) in a transaction or
series of related transactions in which the voting stock of the Company is
converted into or exchanged for cash, securities or other property, other than
any transaction where (A) the outstanding voting stock of the Company is
converted into or exchanged for voting stock (other than Disqualified Stock) of
the surviving or transferee corporation and (B) either (1) the "beneficial
owners" (as such term is defined in Rule 13d-3 and 13d-5 under the Exchange Act)
of the voting power of the voting stock of the Company immediately prior to such
transaction own, directly or indirectly through one or more Subsidiaries, not
less than a majority of the total voting power of the voting stock of the
surviving or transferee corporation immediately after such transaction or (2) if
immediately prior to such transaction the Company is a direct or indirect
Subsidiary of any other Person (the "Holding Company"), then the "beneficial
owners" (as defined above) of the voting stock of such Holding Company
immediately prior to such transaction own, directly or indirectly through one or
more Subsidiaries, not less than a majority of the voting power of the voting
stock of the surviving or transferee corporation immediately after such
transaction, (iv) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that (A) the
Principals, their Related Parties, the DLJ Entities or their Affiliates cease to
be the "beneficial owners" (as defined above), directly or indirectly, of at
least 35% of the voting power of the voting stock of the Company and (B) any
"person" (as defined above) becomes the "beneficial owner" (as defined above;
PROVIDED that at any time following the occurrence of a Public Equity Offering,
the term "beneficial owner" shall exclude for such purpose the effect of Rule
13d-3(d)(1), other than any such effect with respect to the Warrants) directly
or indirectly, of more of the voting power of the voting stock of the Company
than is at the time "beneficially owned" (as defined above) by the Principals,
their Related Parties, the DLJ Entities and their Affiliates in the aggregate,
or (v) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors. For purposes of this
definition, any transfer of an equity interest of an entity that was formed for
the purpose of acquiring voting stock of the Company will be deemed to be a
transfer of such portion of such voting stock as corresponds to the portion of
the equity of such entity that has been so transferred.
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The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Restricted Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Notes to require
the Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Restricted Subsidiaries taken as a whole to another Person or group may
be uncertain.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"DLJ ENTITIES" means DLJ Merchant Banking Partners, L.P., DLJ Offshore
Partners, C.V. and DLJ Merchant Banking Funding, Inc.
"PRINCIPALS" means (i) the Fund and any of its Affiliates and (ii) Messrs.
W. H. Holman, Jr., W. H. Holman III, Essary, Friou, Bruckmann, Rosser, Sherrill
and Edwards.
"RELATED PARTY" means (i) any controlling stockholder, general partner, 80%
(or more) owned Subsidiary, or spouse or immediate family member (in the case of
an individual) of any Principal or (ii) any trust, corporation, partnership or
other entity, the beneficiaries, stockholders, partners, owners or Persons
holding an 80% or more controlling interest of which consist solely of one or
more Principals and/or such other Persons referred to in the immediately
preceding clause (i).
ASSET SALES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, engage in an Asset Sale unless (i) the Company
(or the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of; and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash or
Cash Equivalents; PROVIDED that the amount of (x) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet or in
the notes thereto) of the Company or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets and (y) any notes
or other obligations received by the Company or any such Restricted Subsidiary
from such transferee that are immediately converted by the Company or such
Restricted Subsidiary into cash (to the extent of the cash received), shall be
deemed to be cash for purposes of this provision and PROVIDED further that (1)
the 75% limitation referred to above shall not apply to any Asset Sale in which
the cash or Cash Equivalents portion of the consideration received therefor,
determined in accordance with the foregoing proviso, is equal to or greater than
what the net after-tax proceeds would have been had such Asset Sale complied
with the aforementioned 75% limitation and (2) the provisions of clauses (i) and
(ii) above shall not apply to any sale or other disposition of assets required
pursuant to a consent order or other agreement entered into by the Company with
the Federal Trade Commission or the Department of Justice in connection with the
Delchamps Acquisition.
Within 435 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or its Restricted Subsidiary, as the case may be, may apply such Net
Proceeds by (i) permanently reducing Indebtedness under the Senior Credit
Facility (and correspondingly reducing commitments with respect thereto) or
other Senior Debt, (ii) investing (or entering into a binding commitment to
invest) in any one or more business, capital expenditure or other tangible
asset, in each case in the same line of business as the Company or its
Restricted Subsidiaries was engaged in on the date of the Indenture or a line of
88
business reasonably related thereto, (iii) investing (or entering into a binding
commitment to invest) in properties or assets that replace the properties and
assets that are the subject of such Asset Sale and (iv) in the case of a sale of
a store or stores, deeming such Net Proceeds to have been applied to the extent
of any capital expenditures made to acquire or construct another store within
435 days preceding the date of the Asset Sale; PROVIDED that if such Net
Proceeds are applied by entering into a binding commitment under clause (ii) or
(iii) above, then the investment contemplated by such commitment shall be made
no later than 45 days following the end of such 435 day period. Pending the
final application of any such Net Proceeds, the Company or its Restricted
Subsidiary, as the case may be, may temporarily reduce Indebtedness under the
Senior Credit Facility or otherwise invest such Net Proceeds in any manner that
is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are
not applied or invested as provided in the first sentence of this paragraph will
be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $15.0 million, the Company will be required to make an offer to
all Holders (an "Asset Sale Offer") to purchase the maximum principal amount of
Notes that may be purchased out of the Excess Proceeds, at a price in cash equal
to 100% of the principal amount thereof plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the date of purchase, in accordance with
the procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the
aggregate amount of Excess Proceeds, the Company or its Restricted Subsidiary,
as the case may be, may use any remaining Excess Proceeds for general corporate
purposes. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the aggregate amount of Excess Proceeds, the Trustee shall
select the Notes to be purchased in accordance with the terms of the Indenture.
Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
CERTAIN RESTRICTIONS ON REPURCHASES
Certain of the Company's Senior Debt, including Indebtedness under the
Senior Credit Facility and the Senior Notes, currently prohibits or restricts
the Company from purchasing any Notes, and also provides that certain changes in
control of the Company and certain dispositions of Company assets would
constitute a default thereunder. Any future credit agreements or other
agreements relating to Senior Debt to which the Company becomes a party may
contain similar restrictions and provisions. In the event a Change of Control
occurs, or an Asset Sale Offer is required to be made, at a time when the
Company is prohibited from purchasing Notes, the Company could seek the consent
of its lenders to the purchase of Notes or could attempt to refinance the
borrowings that contain such prohibition. If the Company does not obtain such a
consent or repay such borrowings, the Company will remain prohibited from
purchasing Notes. In such case, the Company's failure to purchase tendered Notes
would constitute an Event of Default under the Indenture.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot
or by such other method as the Trustee shall deem fair and appropriate; PROVIDED
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. On and after the redemption date, interest
will cease to accrue on Notes or portions thereof called for redemption.
89
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any distribution (other than dividends or distributions payable
in Equity Interests (other than Disqualified Stock) of the Company or dividends
or distributions payable to the Company or any Restricted Subsidiary of the
Company that is a Subsidiary Guarantor) on account of the Company's or any of
its Restricted Subsidiaries' Equity Interests (including in connection with a
merger or consolidation); (ii) purchase, redeem or otherwise acquire or retire
for value any outstanding Equity Interests of the Company or any Affiliate of
the Company (other than any such Equity Interests owned by the Company or any
Wholly Owned Restricted Subsidiary of the Company that is a Subsidiary
Guarantor); (iii) make any principal payment on, or purchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal payment,
any sinking fund date or its scheduled maturity date, any Indebtedness that is
subordinated to the Notes or the Subsidiary Guarantees; (iv) make any Restricted
Investment or (v) make any payment pursuant to the BRS Management Agreement (all
such payments and other actions set forth in clauses (i) through (v) above being
collectively referred to as "Restricted Payments"), unless:
(a) at the time of and after giving effect to such Restricted Payment,
no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "Certain Covenants--Incurrence of
Indebtedness and Issuance of Disqualified Stock"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Indenture (excluding Restricted Payments permitted by
clauses (o), (s)(ii), (x) and (y) of the next succeeding paragraph), is less
than the sum of (i) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of the Indenture to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, 100% of such deficit),
plus (ii) 100% of the aggregate net cash proceeds (or non-cash proceeds when
converted into cash) received by the Company in the form of capital
contributions or from the issue, sale or exercise since the date of the
Indenture of Equity Interests of the Company or of debt securities of the
Company that have been converted into such Equity Interests (other than
Equity Interests (or convertible debt securities) sold to a Subsidiary of
the Company and other than Disqualified Stock or debt securities that have
been converted into Disqualified Stock), plus (iii) to the extent that any
Restricted Investment that was made after the date of the Indenture is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (A) the
cash return of capital with respect to such Restricted Investment (less the
cost of disposition, if any) and (B) the initial amount of such Restricted
Investment, plus (iv) 50% of the excess, if any, of the cash received upon
the sale or other disposition of a Restricted Investment over the amount
described in clause (iii) above.
The foregoing provisions do not prohibit: (o) any repurchase, redemption or
retirement for value of capital stock of a Restricted Subsidiary of the Company
deemed to occur upon the merger of such Restricted Subsidiary with or into the
Company or another Wholly Owned Restricted Subsidiary of the Company within one
year following the date on which such merged Restricted Subsidiary became a
Restricted Subsidiary of the Company; (p) acquisition and retirement by the
Company of any Class B Preferred Stock in satisfaction of any claim by the
Company for indemnity pursuant to the 1996 Merger
90
Agreement; (q) retirement of the Class A Preferred Stock in connection with the
issuance by the Company of the Exchange Debentures; (r) the payment of cash in
lieu of the issuance of (A) fractional shares of common stock upon exercise of
the Warrants and (B) any Exchange Debenture that is not an integral multiple of
$1,000 upon any exchange of Class A Preferred Stock for Exchange Debentures; (s)
the amendment of the BRS Management Agreement to permit the payment of, and the
payment of, fees to BRS or any Affiliate of BRS (i) under the BRS Management
Agreement after the end of each fiscal quarter in an amount not to exceed the
greater of (a) $250,000 or (b) 1.0% of the Company's EBITDA for such fiscal
quarter (PROVIDED, that the total amount of all such payments shall not exceed
in any fiscal year the greater of (x) $1.0 million or (y) one percent of the
Company's EBITDA for such fiscal year) and (ii) in connection with the Delchamps
Acquisition in an amount not to exceed $5.0 million in the aggregate; (t) the
payment of dividends on the Company's capital stock, following the first Public
Equity Offering after the date of the Indenture, of up to 6.0% of the aggregate
proceeds to the Company in such Public Equity Offering, other than a public
offering with respect to the Company's common stock registered on Form S-8; (u)
the payment of any dividend within 60 days after the date of declaration
thereof, if at said date of declaration such payment would have complied with
the provisions of the Indenture; (v) the repurchase of the Class A Preferred
Stock in accordance with the terms thereof upon the occurrence of a Change of
Control; (w) the redemption of Exchange Debentures in accordance with the terms
thereof upon the occurrence of a Change of Control; (x) the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Company in exchange for, or out of the proceeds of, the substantially concurrent
sale (other than to a Restricted Subsidiary of the Company) of other Equity
Interests of the Company (other than any Disqualified Stock); PROVIDED that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition shall be excluded from clause (c)
(ii) of the preceding paragraph; (y) the defeasance, redemption, repurchase,
retirement or other acquisition of subordinated Indebtedness with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness or the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of Equity Interests of the Company (other than Disqualified Stock);
PROVIDED that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, defeasance, retirement or other acquisition shall
be excluded from clause (c) (ii) of the preceding paragraph; and (z) the
repurchase, redemption, defeasance or other acquisition or retirement for value
of any Equity Interests of the Company or any Restricted Subsidiary of the
Company held by any member of the Company's (or any of its Restricted
Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement in effect as of the date of the Indenture or
any other option plan adopted by the Board of Directors of the Company; PROVIDED
that the aggregate price paid for all such repurchased, redeemed, defeased,
acquired or retired Equity Interests shall not exceed $2.0 million in any
twelve-month period plus (i) the aggregate cash proceeds received by the Company
during such twelve-month period from any issuance of Equity Interests by the
Company to members of management of the Company and its Restricted Subsidiaries
and (ii) the proceeds of any insurance policy to the extent applied toward such
repurchase, redemption, defeasance or other acquisition or retirement for value
of such Equity Interests; PROVIDED, that with respect to clause (z) above, no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction.
As of the date of the Indenture, all of the Company's Subsidiaries are
Restricted Subsidiaries. The Board of Directors may designate any Restricted
Subsidiary (other than Interstate Jitney Jungle Stores, Inc., McCarty-Holman
Co., Inc., Southern Jitney Jungle Company, Pump And Save, Inc., DAC, Supermarket
Cigarette Sales, Inc. ("SCSI") and Delchamps, Inc.) to be an Unrestricted
Subsidiary if such designation would not cause a Default. For purposes of making
such determination, all outstanding Investments by the Company and its
Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary
so designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments in an amount equal to the greatest of (x) the
net book value of such Investments at the time of such designation and (y) the
fair market value of
91
such Investments at the time of such designation. Such designation will only be
permitted if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Restricted Payments" were computed, which calculations
may be based upon the Company's latest available internal financial statements.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, Guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Indebtedness) and that the Company will not
issue and will not permit any of its Restricted Subsidiaries to issue any
Disqualified Stock (other than the Preferred Stock); PROVIDED, however, that the
Company or its Restricted Subsidiaries may incur Indebtedness (including
Acquired Indebtedness) or issue shares of Disqualified Stock if the Fixed Charge
Coverage Ratio for the Company's most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such Disqualified
Stock is issued would have been (A) at least 2.25 to 1.0 if such date is prior
to September 15, 2000 and (B) 2.50 to 1.0 if such date is on or after September
15, 2000, in each case determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, at the beginning of such four-quarter period.
The foregoing provisions do not apply to:
(i) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness and reimbursement obligations in respect of letters of
credit pursuant to the Senior Credit Facility (with letters of credit being
deemed to have a principal amount equal to the maximum potential liability
of the Company and its Restricted Subsidiaries thereunder) in an aggregate
principal amount not to exceed an amount equal to (x) the greater of (1) the
amount of the Borrowing Base and (2) $150.0 million less the aggregate
amount of all Net Proceeds of Asset Sales applied to permanently reduce the
total commitments with respect to such Indebtedness pursuant to the covenant
described above under the caption "Repurchase at Option of Holders--Asset
Sales" plus (y) $50.0 million less any outstanding Indebtedness incurred
pursuant to clause (viii) below;
(ii) the incurrence by the Company or any of its Restricted Subsidiaries
of the Existing Indebtedness;
(iii) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by the Notes, the New Notes and the Subsidiary
Guarantees;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage or
construction financing or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property used in the business of the
Company or such Restricted Subsidiary, in an aggregate principal amount not
to exceed $30.0 million in any fiscal year; PROVIDED that the principal
amount (or, in the case of a Capital Lease Obligation, the amount required
to be capitalized on a balance sheet under GAAP) of such Indebtedness when
incurred shall not
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exceed the purchase price and/or actual cost of construction or improvement,
as the case may be, to which such incurrence relates;
(v) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by the Indenture to be incurred;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Wholly Owned Restricted Subsidiaries; PROVIDED, however, that (i) any
subsequent issuance or transfer (other than for security purposes) of Equity
Interests that results in any such Indebtedness being held by a Person other
than a Wholly Owned Restricted Subsidiary and (ii) any sale or other
transfer of any such Indebtedness to a Person that is not either the Company
or a Wholly Owned Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of the Indenture to be outstanding;
(viii) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness (in addition to Indebtedness permitted by any other clause
of this paragraph) in an aggregate principal amount at any time outstanding
not to exceed $50.0 million less the amount of any Indebtedness incurred
pursuant to clause (i)(y) of this paragraph;
(ix) the incurrence by the Company or any of its Restricted Subsidiaries
of Acquired Indebtedness, PROVIDED that such Indebtedness (A) is not
incurred in contemplation of the acquisition to which it relates and (B) is
nonrecourse to the Company and its Restricted Subsidiaries, or to any of
their respective assets (other than the acquired Subsidiary and its
Subsidiaries, or the acquired assets, as applicable);
(x) the incurrence by the Company of Indebtedness pursuant to Exchange
Debentures described under clause (2) of the definition of Exchange
Debentures;
(xi) the Guarantee of any Indebtedness otherwise permitted to be
incurred pursuant to the Indenture; and
(xii) Obligations in respect of performance and surety bonds.
LIENS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien securing Pari Passu Indebtedness or Subordinated
Indebtedness on any asset now owned or hereafter acquired by the Company or any
of its Restricted Subsidiaries, or any income or profits therefrom, or assign or
convey any right to receive income therefrom; PROVIDED, however that the Company
and its Restricted Subsidiaries may create, incur, assume or suffer to exist a
Lien securing Pari Passu Indebtedness if the Notes are equally and ratably
secured with the obligations so secured until such time as such obligations are
no longer secured by a Lien.
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DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to:
(i)(a) pay dividends or make any other distributions to the Company or
any of its Restricted Subsidiaries on its Capital Stock or (b) pay any
indebtedness owed to the Company or any of its Restricted Subsidiaries;
(ii) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(iii) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries, except (in each case) for such encumbrances or
restrictions existing under or by reason of:
(a) the Existing Indebtedness as in effect on the date of the
Indenture;
(b) the Senior Credit Facility, as in effect as of the date of the
Indenture, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof;
PROVIDED that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are no
more restrictive in the aggregate than those contained in the Senior
Credit Facility, as in effect on the date of the Indenture;
(c) the Indenture, the Subsidiary Guarantees and the Notes;
(d) applicable law;
(e) any instrument governing Capital Stock or Indebtedness of any
Person acquired by the Company or any of its Restricted Subsidiaries, as
in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with, or in contemplation of,
such acquisition), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the
Person, or the properties or assets of the Person, so acquired;
(f) customary non-assignment and subletting provisions in leases and
other contracts entered into in the ordinary course of business and
consistent with past practices;
(g) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired;
(h) Permitted Refinancing Indebtedness, PROVIDED that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive in the aggregate than
those contained in the agreements governing the Indebtedness being
refinanced;
(i) contractual encumbrances or restrictions in effect on the date of
the Indenture;
(j) mortgage or construction financing that imposes restrictions on
the real property acquired or improved;
(k) contracts for the sale of assets that include customary
restrictions concerning the disposition of property;
(l) secured indebtedness permitted by the Indenture that limits the
right to dispose of the assets securing the indebtedness; and
(m) encumbrances or restrictions imposed by any amendments to the
contracts, agreements or obligations referred to in clauses (a) through
(l) above if not more restrictive in the aggregate than under existing
contracts.
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ADDITIONAL GUARANTEES
The Indenture provides that if the Company or any of its Restricted
Subsidiaries shall, after the date of the Indenture, transfer or cause to be
transferred, in one transaction or a series of related transactions, any assets,
businesses, divisions, real property or equipment having an aggregate fair
market value (as determined in good faith by the Board of Directors) in excess
of $1.0 million to any Subsidiary that is not a Subsidiary Guarantor, or if the
Company or any of its Restricted Subsidiaries shall acquire another Subsidiary
having total assets with a fair market value (as determined in good faith by the
Board of Directors) in excess of $1.0 million, then such transferee or acquired
Subsidiary shall execute a Subsidiary Guarantee and a supplemental indenture and
deliver to the Trustee an opinion of counsel in accordance with the terms of the
Indenture. Notwithstanding the foregoing, if such transferee or acquired
Subsidiary has been properly designated as an Unrestricted Subsidiary in
accordance with the Indenture, then for so long as it continues to constitute an
Unrestricted Subsidiary that transferee or acquired Subsidiary shall not be
required to execute a Subsidiary Guarantee or deliver to the Trustee an opinion
of counsel in accordance with the terms of the Indenture.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions to, another Person
unless (i) the Company is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof, the District of Columbia or a territory
thereof; (ii) the Person formed by or surviving any such consolidation or merger
(if other than the Company) or the Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of the Company under the Notes and the Indenture pursuant to
a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) the Company or the Person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made will, at the time of
such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the covenant described above under
the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of
Disqualified Stock." The foregoing will not prohibit any consolidation or merger
of, or transfer of all or part of the property and assets of, any Restricted
Subsidiary with or to the Company or any Subsidiary Guarantor.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of
any of its properties or assets to, or purchase any property or assets from, or
enter into or make any contract, agreement, understanding, loan, advance or
Guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that
are no less favorable to the Company or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by the Company
or such Restricted Subsidiary with an unrelated Person and (ii) the Company
delivers to the Trustee (a) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction or series of related
Affiliate Transactions complies with clause (i) above and that such Affiliate
Transaction or series of related Affiliate Transactions
95
has been approved by a majority of the disinterested members of the Board of
Directors and (b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $5.0
million (other than Affiliate Transactions in the ordinary course of business of
the Company and its Restricted Subsidiaries between or among the Company or any
Restricted Subsidiary of the Company and any Person providing goods and/or
services to the Company or any Restricted Subsidiary in the ordinary course of
business that is an Affiliate of the Company or such Restricted Subsidiary
solely by virtue of the fact that the Fund, or any Person controlling the Fund,
directly or indirectly controls both the Company or such Restricted Subsidiary
and such Affiliate; PROVIDED, however, that such Affiliate Transaction shall
comply with clause (i) above), an opinion as to the fairness to the Company or
such Restricted Subsidiary of such Affiliate Transaction from a financial point
of view issued by an independent nationally recognized investment banking or
appraisal firm experienced in the appraisal or similar review of similar types
of transactions (or if an opinion is unavailable as to the fairness from a
financial point of view of any transaction for which a fairness opinion is not
customarily rendered then an opinion that such transaction meets the
requirements of clause (i) above); PROVIDED that (u) payments by Delchamps
pursuant to change of control agreements with certain employees of Delchamps in
an amount not to exceed $13.0 million, (v) payments to McCarty-Holman Co., L.P.
in accordance with the terms of the Management Agreement in an amount not to
exceed $100,000 in each fiscal year, (w) the 18 leases described elsewhere in
this Offering Memorandum under the caption "Certain Transactions--Leases of
Certain Stores and Facilities," (x)(1) any employment agreement entered into by
the Company or any of its Restricted Subsidiaries and (2) payment of employee
benefits, including bonuses, retirement plans and stock options, in each case,
in the ordinary course of business and consistent with the past practice of the
Company or such Restricted Subsidiary, (y) transactions between or among the
Company and/or its Restricted Subsidiaries and (z) transactions permitted by the
provisions of the Indenture described above under the caption "Certain
Covenants--Restricted Payments," in each case, shall not be deemed Affiliate
Transactions.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction
(other than the sale and leaseback of newly constructed grocery stores as part
of the development of grocery store sites); PROVIDED that the Company and its
Restricted Subsidiaries may enter into a sale and leaseback transaction if (i)
the Company or such Restricted Subsidiary could have (a) incurred Indebtedness
in an amount equal to the Attributable Debt relating to such sale and leaseback
transaction pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "Certain
Covenants--Incurrence of Additional Indebtedness and Issuance of Disqualified
Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to the
covenant described above under the caption "Certain Covenants--Liens," (ii) the
gross cash proceeds of such sale and leaseback transaction are at least equal to
the fair market value (as determined in good faith by the Company's Board of
Directors and set forth in an Officers' Certificate delivered to the Trustee) of
the property that is the subject of such sale and leaseback transaction and
(iii) the transfer of assets in such sale and leaseback transaction is permitted
by, and the Company or such Restricted Subsidiary applies the proceeds of such
transaction in compliance with, the covenant described above under the caption
"Repurchase at Option of Holders--Asset Sales."
LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF GUARANTORS
The Indenture provides that, except with respect to the pledge of Capital
Stock of its Subsidiaries pursuant to the Senior Credit Facility, the Company
(i) will not, and will not permit any Wholly Owned Restricted Subsidiary of the
Company to, transfer, convey, sell, lease or otherwise dispose of any Capital
Stock of any Subsidiary Guarantor to any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company that is a Subsidiary
Guarantor), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Capital Stock of such Subsidiary Guarantor and (b) the
cash Net Proceeds
96
from such transfer, conveyance, sale, lease or other disposition are applied in
accordance with the covenant described above under the caption "Repurchase at
Option of Holders--Asset Sales," and (ii) will not permit any Subsidiary
Guarantor to issue any of its Equity Interests (other than, if necessary, shares
of its Capital Stock constituting directors' qualifying shares) to any Person
other than to the Company or another Subsidiary Guarantor.
NO SENIOR SUBORDINATED DEBT
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes, and (ii) no Subsidiary Guarantor will
incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to the Senior
Debt of such Subsidiary Guarantor and senior in any respect in right of payment
to the Subsidiary Guarantees. For purposes of this provision, no Indebtedness
shall be deemed to be subordinated in right of payment to any other Indebtedness
solely by reason of the fact that such other Indebtedness is secured by a Lien
or is subject to a Guarantee.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than (i) the retail and wholesale grocery business
and such business activities as are incidental or reasonably related thereto,
including the sale of liquor and the retail gasoline business, and (ii) such
other businesses as the Company or its Restricted Subsidiaries are engaged in on
the date of the Indenture.
NO RESTRICTIONS ON CONSUMMATION OF DELCHAMPS ACQUISITION
The Indenture provides that, notwithstanding any provision contained herein
to the contrary, the Indenture will not prohibit the consummation of the
Delchamps Acquisition and the transactions related thereto in accordance with
the terms set forth in this Prospectus and in the tender offer statement on
Schedule 14D-1, as filed with the Securities and Exchange Commission (the
"Commission") on July 14, 1997 and as subsequently amended or supplemented,
naming Delchamps, Inc. as the subject company.
REPORTS
The Indenture provides that so long as required to do so under the Exchange
Act, the Company shall file with the Commission and distribute to the Holders
copies of the quarterly and annual financial information required to be filed
with the Commission pursuant to the Exchange Act. All such financial information
shall include consolidated financial statements (including footnotes) prepared
in accordance with GAAP. Such annual financial information shall also include an
opinion thereon expressed by an independent accounting firm of established
national reputation. All such consolidated financial statements shall be
accompanied by a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Company and its Restricted Subsidiaries. In addition, the
Indenture provides that, whether or not required by the rules and regulations of
the Commission, so long as any Notes are outstanding, the Company will furnish
to the Holders (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
complies with the rules and regulations of the Commission and that describes the
financial condition and results of operations of the Company and its Restricted
Subsidiaries and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the Commission on Form 8-K if the
Company were required to file such reports. In addition, whether or not required
by the rules and regulations of the Commission, the Company will submit a copy
of all such information and reports to the Commission for
97
public availability (unless the Commission will not accept such materials) and
make such information available to prospective investors upon written request.
In addition, the Company has agreed that, during any period in which the Company
is not subject to the reporting requirements of the Exchange Act, it will
furnish to holders and prospective purchasers of the Notes the information
required by Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due, upon redemption,
acceleration or otherwise, of interest on, or Liquidated Damages with respect
to, the Notes; (ii) default in payment when due of the principal of or premium,
if any, on the Notes; (iii) failure by the Company for 30 days after receipt of
written notice from the Trustee or from Holders of at least 25% of the aggregate
principal amount of the Notes then outstanding to comply with the provisions
described under the captions "Repurchase at Option of Holders--Change of
Control" and "--Asset Sales," and under the captions "Certain
Covenants--Restricted Payments" and "-- Incurrence of Indebtedness and Issuance
of Disqualified Stock"; (iv) failure by the Company for 60 days after receipt of
written notice from the Trustee or from Holders of at least 25% of the aggregate
principal amount of the Notes then outstanding to comply with any of its other
agreements in the Indenture or the Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries or the payment of which is Guaranteed by the
Company or any of its Restricted Subsidiaries (other than Indebtedness owed to
the Company or its Restricted Subsidiaries) whether such Indebtedness or
Guarantee now exists, or is created after the date of the Indenture, if both (a)
such default either (1) results from the failure to pay any such Indebtedness at
its stated final maturity (after giving effect to any applicable grace periods)
or (2) relates to an obligation other than the obligation to pay principal of
any such Indebtedness at its stated maturity and results in the holder or
holders of such Indebtedness causing such Indebtedness to become due prior to
its stated maturity and (b) the principal amount of such Indebtedness, together
with the principal amount of any other such Indebtedness in default for failure
to pay principal at stated final maturity (after giving effect to any applicable
grace periods), or the maturity of which has been so accelerated, aggregate
$15.0 million or more; (vi) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments (other than any judgments as to which a
reputable insurance company has accepted liability) aggregating in excess of
$15.0 million, which judgments are not paid, discharged, bonded or stayed for a
period of 60 days after their entry; (vii) except as permitted by the Indenture,
any Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of any Subsidiary
Guarantor, shall deny or disaffirm its obligations under its Subsidiary
Guarantee; and (viii) certain events of bankruptcy or insolvency with respect to
the Company, any of its Significant Restricted Subsidiaries or any group of
Restricted Subsidiaries that, taken together, would constitute a Significant
Restricted Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in aggregate principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately; PROVIDED, however,
that, so long as any Designated Senior Debt shall be outstanding, no such
acceleration shall be effective until the earlier of (i) acceleration of any
such Designated Senior Debt or (ii) five business days after the giving of
written notice to the Company and the representatives under the Designated
Senior Debt of such acceleration. Notwithstanding the foregoing, in the case of
an Event of Default arising from certain events of bankruptcy or insolvency with
respect to the Company, any Significant Restricted Subsidiary or any group of
Restricted Subsidiaries that, taken together, would constitute a Significant
Restricted Subsidiary, all outstanding Notes will become due and payable without
further action or notice. Holders of the Notes may not enforce the Indenture or
the Notes except as provided in the Indenture. In the event of any Event of
Default specified in clause (v) above, such Event of Default and all
consequences thereof (including, without limitation, any acceleration or
resulting payment
98
default) shall be annulled, waived and rescinded, automatically and without any
action by the Trustee or the Holders of the Notes, if within 20 days after such
Event of Default arose (x) the Indebtedness or guarantee that is the basis for
such Event of Default has been discharged in a manner that does not violate the
terms of the Indenture or (y) the holders thereof have rescinded or waived the
acceleration, notice or action (as the case may be) giving rise to such Event of
Default. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the Notes notice of
any continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal, interest or Liquidated Damages) if it
determines that withholding notice is in their interest. In addition, the
Trustee shall have no obligation to accelerate the Notes if, in the best
judgment of the Trustee, acceleration is not in the best interests of the
Holders.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
September 15, 2002 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to September 15, 2002, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or Liquidated Damages with respect to, or the principal of, any
such Note held by a non-consenting Holder.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company
or any Subsidiary Guarantor, as such, shall have any liability for any
obligations of the Company under the Notes, any Subsidiary Guarantee or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes and the Subsidiary Guarantees. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all
obligations of the Company and the Subsidiary Guarantors discharged with respect
to the outstanding Notes and the Subsidiary Guarantees ("Legal Defeasance")
except for (i) the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest and Liquidated
Damages, if any, on such Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company
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may, at its option and at any time, elect to have the obligations of the Company
and the Subsidiary Guarantors released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or Event
of Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages,
if any, on the outstanding Notes on the stated maturity date or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, subject to customary assumptions and exclusions, the Holders of
the outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Company shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that, subject to customary assumptions and exclusions, the Holders of
the outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such Covenant Defeasance had not occurred; (iv)
no Default or Event of Default shall have occurred and be continuing on the date
of such deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit; (v) such Legal
Defeasance or Covenant Defeasance will not result in a breach or violation of,
or constitute a default under any material agreement or instrument (other than
the Indenture) to which the Company or any of the Subsidiary Guarantors is a
party or by which the Company or any of the Subsidiary Guarantors is bound; (vi)
on or prior to the 91st day following the deposit, the Company must have
delivered to the Trustee an opinion of counsel to the effect that, subject to
customary assumptions and exclusions, after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company must have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and (viii) the Company must have delivered to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that, subject to
customary assumptions and exclusions, all conditions precedent provided for in
the Indenture relating to the Legal Defeasance or the Covenant Defeasance have
been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
is not required to transfer or exchange any Note selected for redemption. Also,
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the Registrar is not required to transfer or exchange any Note for a period of
15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture, the
Subsidiary Guarantees or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange offer for Notes), and any existing default or compliance with any
provision of the Indenture, the Subsidiary Guarantees or the Notes may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest or Liquidated Damages on any Note, (iv) waive a
Default or Event of Default in the payment of principal of or premium, if any,
or interest or Liquidated Damages on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration), (v) make any Note payable in money other than that
stated in the Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders to receive
payments of principal of or premium, if any, or interest on the Notes, (vii)
waive a redemption payment with respect to any Note (other than a payment
required by one of the covenants described above under the caption "--Repurchase
at the Option of Holders") or (viii) make any change in the foregoing amendment
and waiver provisions. In addition, any amendment to the subordination
provisions of the Indenture will require the consent of the Holders of at least
75% in aggregate principal amount of the Notes then outstanding if such
amendment would adversely affect the legal rights of Holders.
Notwithstanding the foregoing, without the consent of any Holder, the
Company, the Subsidiary Guarantors and the Trustee may amend or supplement the
Indenture, the Subsidiary Guarantees or the Notes to cure any ambiguity, defect
or inconsistency, to provide for uncertificated Notes in addition to or in place
of certificated Notes, to provide for the assumption of the Company's
obligations to Holders in the case of a merger, consolidation or sale of assets
in accordance with the terms of the Indenture, to make any change that would
provide any additional rights or benefits to the Holders or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
The consent of the Holders is not necessary under the Indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
GOVERNING LAW
The Indenture, the Subsidiary Guarantees and the Notes are, subject to
certain exceptions, governed by and construed in accordance with the internal
laws of the State of New York, without regard to the choice of law rules
thereof.
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CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee is permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that in case an Event of Default shall occur
(which shall not be cured), the Trustee will be required, in the exercise of its
power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee is under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
Holder of Notes, unless such Holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"1996 MERGER" means the transactions contemplated by the 1996 Merger
Agreement.
"1996 MERGER AGREEMENT" means the Merger Agreement and Plan of Exchange and
Merger, dated as of November 16, 1995, by and among BRS No. 1, Inc. (renamed JJ
Acquisitions Corp.) and Jitney-Jungle Stores of America, Inc., Southern Jitney
Jungle Company, McCarty-Holman Co., Inc. and Jitney-Jungle Bakery, Inc., as
amended.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person
and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control. Notwithstanding the foregoing, in no event will the
holders of Indebtedness under or in respect of the Senior Credit Facility (by
reason of holding such Indebtedness) or Donaldson, Lufkin & Jenrette Securities
Corporation or any of their respective Affiliates be deemed Affiliates of the
Company or any of its Affiliates.
"ASSET SALE" means: (i) the sale, conveyance, transfer or other disposition
of any assets (including, without limitation, by way of a sale and leaseback)
other than sales of inventory in the ordinary course of business (provided that
the sale, conveyance, transfer or other disposition of all or substantially all
of the assets of the Company and its Restricted Subsidiaries taken as a whole
will be governed by the provisions of the Indenture described above under the
caption "Repurchase at Option of Holders--Change of Control" and/or the
provisions described above under the caption "Merger, Consolidation or Sale of
Assets" and not by the provisions of the Asset Sale covenant) or (ii) the
issuance or sale by the Company or any of its Restricted Subsidiaries of Equity
Interests of any of the Company's Restricted Subsidiaries, in the case of
clauses (i) and (ii) above, whether in a single transaction or a series of
related transactions for net proceeds in excess of $1.0 million. Notwithstanding
the foregoing: (i) a sale, conveyance, transfer or other disposition of assets
by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned
Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary; (ii) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary and
(iii) a Restricted Payment that is permitted by the covenant described above
under the caption "Certain Covenants--Restricted Payments," in each case, shall
not be deemed to be Asset Sales.
"ATTRIBUTABLE DEBT" means, in respect of a sale and leaseback transaction,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
103
"BRS MANAGEMENT AGREEMENT" means that certain management agreement, dated
September 8, 1995 between BRS and the Company, as amended on February 29, 1996
and on the date of the Indenture, and as it may be further amended from time to
time.
"BORROWING BASE" means 60% of the net book value of all inventory of the
Company and its Restricted Subsidiaries.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than one
year from the date of acquisition, (iii) certificates of deposit and eurodollar
time deposits with maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any lender party to the Senior Credit Facility or
with any domestic commercial bank having capital and surplus in excess of $500
million and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii) above
and (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within one year after the date of acquisition.
"CLASS A PREFERRED STOCK" means the Class A Senior Exchangeable Preferred
Stock, par value $0.01 per share, of the Company.
"CLASS B PREFERRED STOCK" means the Class B Compounding Cumulative
Redeemable Preferred Stock, par value $0.01 per share, of the Company.
"CLASS C PREFERRED STOCK" means the Class C Compounding Cumulative Preferred
Stock, Series 1 and Series 2, par value $0.01 per share, of the Company.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included to the extent of the amount of dividends or
distributions paid in cash (or converted into cash) to the referent Person or a
Wholly Owned Restricted Subsidiary thereof that is a Subsidiary Guarantor, (ii)
the Net Income of any Restricted Subsidiary shall be excluded to the extent that
the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (which has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would become an Event of Default.
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"DELCHAMPS ACQUISITION" means the Delchamps Merger and the Delchamps Tender
Offer.
"DELCHAMPS MERGER" means the merger contemplated by the Delchamps Merger
Agreement.
"DELCHAMPS MERGER AGREEMENT" means the Agreement and Plan of Merger, dated
July 8, 1997, by and among the Company, Delta Acquisition Corporation and
Delchamps, Inc.
"DELCHAMPS TENDER OFFER" means the tender offer contemplated by the
Delchamps Merger Agreement.
"DESIGNATED SENIOR DEBT" means (i) for so long as any Indebtedness is
outstanding under the Senior Credit Facility or the Senior Notes, any such
Indebtedness, and (ii) any other Senior Debt permitted under the Indenture the
principal amount of which is $25.0 million or more and that has been designated
by the Company as "Designated Senior Debt."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part, on or prior to the date
on which the Notes mature.
"EBITDA" means, with respect to any Person for any period, the Consolidated
Net Income of such Person for such period plus (i) an amount equal to any
extraordinary or non-recurring loss plus any net loss realized in connection
with (a) any Asset Sale (including, without limitation, dispositions pursuant to
sale and leaseback transactions) or (b) the dispositions of any securities by
such Person or any of its Restricted Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Restricted Subsidiaries (in the case
of clauses (a) and (b) above, to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based on
income or profits of such Person and its Restricted Subsidiaries for such
period, to the extent that such provision for taxes was included in computing
such Consolidated Net Income, plus (iii) consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
and whether or not capitalized (including, without limitation, amortization of
original issue discount, non- cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financing, and net payments (if any) pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated Net
Income, plus (iv) non-cash LIFO charges (credits) of such person and its
Restricted Subsidiaries for such period, plus (v) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash charges (excluding any such non-cash charge to the extent that it
represents an accrual of or reserve for cash charges in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash charges were deducted in computing
such Consolidated Net Income, plus (vi) non-recurring severance and transaction
costs incurred in connection with any acquisition, in each case, on a
consolidated basis and determined in accordance with GAAP. Notwithstanding the
foregoing, the provision for taxes on the income or profits of, and the
depreciation and amortization and other non-cash charges of, a Restricted
Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute EBITDA only to the extent (and in the same proportion) that the Net
Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXCHANGE DEBENTURES" means the Company's Class A Exchange Debentures due
2008 issuable (1) in exchange for outstanding shares of Class A Preferred Stock
at the Company's option on the date of any scheduled dividend payment with
respect to the Class A Preferred Stock and (2) as payment of interest
105
with respect to outstanding Class A Exchange Debentures due 2008, in each case,
pursuant to the indenture related thereto in the form as in effect on the date
of the Indenture.
"EXISTING INDEBTEDNESS" means (i) up to $75.0 million of Indebtedness under
Capital Lease Obligations of the Company and its Restricted Subsidiaries in
existence on the date of the Indenture, (ii) up to $200.0 million in aggregate
principal amount of Indebtedness of the Company and its Restricted Subsidiaries
under the Senior Notes, (iii) up to $13.0 million in aggregate principal amount
of other Indebtedness of the Company and its Restricted Subsidiaries (excluding
Indebtedness under the Senior Credit Facility) in existence on the date of the
Indenture until such amounts are repaid and (iv) up to $16.0 million of Acquired
Indebtedness in connection with the Delchamps Acquisition.
"FIXED CHARGES" means, with respect to any Person for any period, the sum of
(i) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, to the extent such
expense was included in computing Consolidated Net Income (including, without
limitation, amortization of original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations, imputed
interest with respect to Attributable Debt, commissions, discounts and other
fees and charges incurred in respect of letter of credit or bankers' acceptance
financing, and net payments (if any) pursuant to Hedging Obligations), (ii) the
consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period, (iii) any interest expense on
Indebtedness of another Person that is Guaranteed by such Person or one of its
Restricted Subsidiaries or secured by a Lien on assets of such Person or one of
its Restricted Subsidiaries (whether or not such Guarantee or Lien is called
upon) and (iv) the product of (a) all dividend payments, whether or not in cash
(other than dividend payments to the Company or any Restricted Subsidiary and
other than dividend payments on Equity Interests of the Company and its
Restricted Subsidiaries that are paid solely in additional shares, or by
accretion to the liquidation preference, of such Equity Interests) on any series
of preferred stock of such Person and its Restricted Subsidiaries, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person and its Restricted Subsidiaries, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the EBITDA of such Person and its Restricted Subsidiaries
for such period to the Fixed Charges of such Person and its Restricted
Subsidiaries for such period. In the event that the Company or any of its
Restricted Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness
(other than revolving credit borrowings) or issues preferred stock subsequent to
the commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. For purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period, and (ii) the EBITDA attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
106
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"INDEBTEDNESS" means, with respect to any Person and without duplication,
any indebtedness of such Person, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar instruments
or letters of credit (or reimbursement agreements in respect thereof) or
banker's acceptances or representing Capital Lease Obligations or the balance
deferred and unpaid of the purchase price of any property or representing any
Hedging Obligations, except any such balance that constitutes an accrued expense
or trade payable, if and to the extent any of the foregoing indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability upon
a balance sheet of such Person prepared in accordance with GAAP, as well as all
indebtedness of others secured by a Lien on any asset of such Person (whether or
not such indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Guarantee by such Person of any indebtedness of any
other Person.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees), advances or capital contributions
(excluding commission, travel and similar advances to officers and employees
made in the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities and all
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP; PROVIDED that an acquisition of assets, Equity
Interests or other securities by the Company for consideration consisting of
common equity securities of the Company shall not be deemed to be an Investment.
"IRB INDEBTEDNESS" means that certain Indebtedness of McCarty-Holman Co.,
Inc. pursuant to the Industrial Revenue Bond Issue with the City of Jackson,
Mississippi, dated December 1, 1985, evidenced by the Lease recorded in Book
3166 at Page 443 of the Land Records of Hinds County, First Judicial District,
Mississippi, including all agreements and documents related thereto.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement (other than with
respect to a lease that does not create a Capital Lease Obligation) under the
Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"MANAGEMENT AGREEMENT" means that certain Management Agreement, dated March
19, 1980, between McCarty-Holman Co., L.P. and the Company, concerning the
management of leased properties.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person and its Restricted Subsidiaries, determined in accordance with GAAP
and before any reduction in respect of preferred stock dividends, excluding,
however, (i) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with (a) any Asset
Sale (including, without limitation, dispositions pursuant to sale and leaseback
transactions) or (b) the disposition of any
107
securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness described in clause (i) of the second paragraph under
"--Asset Sales") secured by a Lien on the asset or assets that were the subject
of such Asset Sale and any reserve for adjustment in respect of the sale price
of such asset or assets established in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness) and (b) is directly or indirectly liable (as a guarantor or
otherwise); and (ii) no default with respect to which (including any rights that
the holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of any
other Indebtedness of the Company or any of its Restricted Subsidiaries to
declare a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PARI PASSU INDEBTEDNESS" means Indebtedness of the Company or any of its
Restricted Subsidiaries that ranks PARI PASSU in right of payment to the Notes
or any Guarantee thereof.
"PERMITTED INVESTMENTS" means (a) any Investments in the Company or in a
Restricted Subsidiary of the Company that is a Subsidiary Guarantor; (b) any
Investments in Cash Equivalents; (c) Investments by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (i) such Person becomes a Restricted Subsidiary of the Company and a
Subsidiary Guarantor or (ii) such Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company that is a
Subsidiary Guarantor; (d) Restricted Investments made as a result of the receipt
of non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "Repurchase at
the Option of Holders--Asset Sales"; and (e) other Investments in any Person
that do not exceed $1.5 million at any time outstanding.
"PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company and debt
securities of the Company or any Subsidiary Guarantor that are subordinated to
all Senior Debt (and any debt securities issued in exchange for Senior Debt of
the Company or such Subsidiary Guarantor) to substantially the same extent as,
or to a greater extent than, the Notes or Subsidiary Guarantees, as applicable,
are subordinated to Senior Debt pursuant to the subordination provisions of the
Indenture.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
that is permitted to be incurred by the provisions of the Indenture; PROVIDED,
that, except with respect to Capital Lease Obligations, (i) the principal amount
(or accreted value, as applicable) of, or (with respect to
108
revolving credit Indebtedness) maximum commitment under, such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, as applicable) of, or (with respect to revolving credit Indebtedness)
maximum commitment under, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of premiums and reasonable
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and (other than with respect to revolving credit Indebtedness) has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable to the Holders as those contained
in the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred
either by the Company and/or by a Subsidiary Guarantor.
"PERSON" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"PREFERRED STOCK" means the Class A Preferred Stock, the Class B Preferred
Stock and the Class C Preferred Stock.
"PUBLIC EQUITY OFFERING" means a public offering of common stock of the
Company.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SENIOR CREDIT FACILITY" means that certain revolving credit agreement,
dated as of March 5, 1996, as amended and restated on or prior to the date of
the Indenture, by and among the Company, each of the Subsidiary Guarantors and
the lenders named therein, and Fleet Capital Corporation, as successor agent to
Fleet Bank, N.A., including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, as it may from time
to time be amended, renewed, supplemented or otherwise modified at the option of
the parties thereto and any other agreement pursuant to which any of the
Indebtedness, commitments, Obligations, costs, expenses, fees, reimbursements
and other indemnities payable or owing thereunder may be refinanced,
restructured, renewed, extended, increased, replaced or refunded, as any such
other agreements may from time to time at the option of the parties thereto be
amended, supplemented, renewed or otherwise modified, in each case, whether or
not with the same group of lenders.
"SENIOR DEBT" means (i) Indebtedness pursuant to the Senior Credit Facility,
(ii) Indebtedness pursuant to the Senior Notes or guarantees thereof, as
applicable, (iii) the IRB Indebtedness, (iv) any other Indebtedness permitted to
be incurred by the Company or a Restricted Subsidiary under the terms of the
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes or the Subsidiary Guarantees, as applicable, and (v) all
Obligations with respect to the foregoing. Notwithstanding anything to the
contrary in the foregoing, Senior Debt will not include (w) any liability for
federal, state, local or other taxes owed or owing by the Company or any
Subsidiary Guarantor, (x) any Indebtedness of the Company or any Subsidiary
Guarantor to any of their respective Subsidiaries or other Affiliates, (y) any
trade payables or (z) any Indebtedness that is incurred in violation of the
Indenture.
"SENIOR NOTES" means the 12% Senior Notes of the Company due 2006.
109
"SIGNIFICANT RESTRICTED SUBSIDIARY" means any Restricted Subsidiary that
would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect
on the date hereof.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company or any of
its Restricted Subsidiaries which is by its terms expressly subordinated in
right of payment to the Notes, any Subsidiary Guarantee or any other
Indebtedness that is subordinated in right of payment to the Notes or any
Subsidiary Guarantee.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"SUBSIDIARY GUARANTORS" means each of (i) Interstate Jitney-Jungle Stores,
Inc., an Alabama corporation; (b) McCarty-Holman Co., Inc., a Mississippi
corporation; (c) Southern Jitney Jungle Company, a Mississippi Corporation; (d)
Pump And Save, Inc., a Mississippi corporation; (e) DAC; (f) SCSI and (g)
Delchamps and (ii) any other Subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of the Indenture, and their respective successors
and assigns.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company (other
than Interstate Jitney-Jungle Stores, Inc., McCarty-Holman Co., Inc., Southern
Jitney Jungle Company, Pump And Save, Inc. DAC, SCSI and Delchamps or any
successor to any of them) that is designated by the Board of Directors as an
Unrestricted Subsidiary pursuant to a Board Resolution and (ii) any Subsidiary
of an Unrestricted Subsidiary; but, in each case, only to the extent that such
Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not
party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; (d) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e)
has at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries and has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors shall be evidenced to the Trustee by filing with the Trustee
a certified copy of the Board Resolution giving effect to such designation and
an officers' certificate indicating that such designation complied with the
foregoing conditions and was permitted by the covenant described above under the
caption "Certain Covenants--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "Certain
Covenants--Incurrence of Indebtedness and Issuance of Disqualified Stock," the
Company shall be in default of such covenant). The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; PROVIDED that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall
110
only be permitted if (i) such Indebtedness is permitted under the covenant
described under the caption "Certain Covenants--Incurrence of Indebtedness and
Issuance of Disqualified Stock," (ii) no Default or Event of Default would be in
existence immediately following such designation and (iii) the Company shall
have delivered to the Trustee an officers' certificate indicating that such
designation complied with the foregoing conditions.
"WARRANTS" means the warrants to purchase up to 15% (on a fully diluted
basis) of the common stock, par value $0.01 per share, of the Company dated
March 5, 1996.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person, or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
111
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the New Notes will initially be issued in the
form of one registered note in global form without coupons (the "Global Note").
Upon issuance, the Global Note will be deposited with, or on behalf of, the
Depository Trust Company (the "Depositary") and registered in the name of Cede &
Co., as nominee of the Depository.
If a holder tendering Existing Notes so requests, such holder's New Notes
will be issued as described below under "Certificated Securities" in registered
form without coupons (the "Certificated Securities").
The Depository has advised the Company that it is (i) a limited purpose
trust company organized under the laws of the State of New York, (ii) a member
of the Federal Reserve System, (iii) a "clearing corporation" within the meaning
of the Uniform Commercial Code, as amended, and (iv) a "Clearing Agency"
registered pursuant to Section 17A of the Exchange Act. The Depository was
created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry changes to the
accounts of its Participants, thereby eliminating the need for physical transfer
and delivery of certificates. The Depository's Participants include securities
brokers and dealers (including the Initial Purchaser), banks and trust
companies, clearing corporations and certain other organizations. Access to the
Depository's system is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, the "Indirect Participants") that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly.
The Company expects that pursuant to procedures established by the
Depository (i) upon deposit of the Global Notes, the Depository will credit the
accounts of Participants who elect to exchange Existing Notes with an interest
in the Global Note and (ii) ownership of the New Notes will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by the Depository (with respect to the interest of Participants), the
Participants and the Indirect Participants. The laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own and that securities interests in negotiable instruments can only be
perfected by delivery of certificates representing the instruments.
So long as the Depository or its nominee is the registered owner of the
Global Note, the Depository or such nominee, as the case may be, will be
considered the sole owner or holder of the New Notes represented by the Global
Note for all purposes under the Indenture. Except as provided below, owners of
beneficial interests in the Global Note will not be entitled to have New Notes
represented by such Global Note registered in their names, will not receive or
be entitled to receive physical delivery of Certificated Securities, and will
not be considered the owners or holders thereof under the Indenture for any
purpose, including with respect to the giving of any directions, instruction or
approval to the Trustee thereunder. As a result, the ability of a person having
a beneficial interest in New Notes represented by the Global Note to pledge such
interest to persons or entities that do not participate in the Depository's
system, or to otherwise take action with respect to such interest, may be
affected by the lack of a physical certificate evidencing such interest.
The Company understands that under existing industry practice, in the event
the Company requests any action of holders or an owner of a beneficial interest
in the Global Note desires to take any action that the Depository, as the holder
of such Global Note, is entitled to take, the Depository would authorize the
Participants to take such action and the Participant would authorize persons
owning through such Participants to take such action or would otherwise act upon
the instruction of such persons. Neither the Company nor the Trustee will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of New Notes by the Depository, or for maintaining,
supervising or reviewing any records of the Depository relating to such New
Notes.
112
Payments with respect to the principal of, premium, if any, and interest on
any New Notes represented by the Global Note registered in the name of the
Depository or its nominee on the applicable record date will be payable by the
Trustee to or at the direction of the Depository or its nominee in its capacity
as the registered holder of the Global Note representing such New Notes under
the Indenture. Under the terms of the Indenture, the Company and the Trustee may
treat the persons in whose names the New Notes, including the Global Note, are
registered as the owners thereof for the purpose of receiving such payment and
for any and all other purposes whatsoever. Consequently, neither the Company nor
the Trustee has or will have any responsibility for liability for the payment of
such amounts to beneficial owners of New Notes (including principal, premium, if
any, and interest), or to immediately credit the accounts of the relevant
Participants with such payment, in amounts proportionate to their respective
holdings in principal amount of beneficial interest in the Global Note as shown
on the records of the Depository. Payments by the Participants and the Indirect
Participants to the beneficial owners of New Notes will be governed by standing
instructions and customary practice and will be the responsibility of the
Participants or the Indirect Participants.
CERTIFIED SECURITIES
If (i) the Company notifies the Trustee in writing that the Depository is no
longer willing or able to act as a depository and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, then, upon surrender by the Depository of
its Global Note, Certificated Securities will be issued to each person that the
Depository identifies as the beneficial owner of the New Notes represented by
the Global Note. In addition, any person having a beneficial interest in the
Global Note or any holder of Exiting Notes whose Existing Notes have been
accepted for exchange may, upon request to the Trustee or the Exchange Agent, as
the case may be, exchange such beneficial interest or Existing Notes for
Certificated Securities. Upon any such issuance, the Trustee is required to
register such Certificated Securities in the name of such person or persons (or
the nominee of any thereof), and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by the
Depository or any Participant or Indirect Participant in identifying the
beneficial owners of the related New Notes and each such person may conclusively
rely on, and shall be protected in relying on, instructions from the Depository
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the New Notes to the issued).
113
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material United States federal
income tax consequences of the Exchange Offer to a holder of Existing Notes that
is an individual citizen or resident of the United States or a United States
corporation that purchased the Existing Notes pursuant to their original issue
(a "U.S. Holder"). It is based on the Internal Revenue Code of 1986, as amended
to the date hereof (the "Code"), existing and proposed Treasury regulations, and
judicial and administrative determinations, all of which are subject to change
at any time, possibly on a retroactive basis. The following relates only to the
Existing Notes, and the New Notes received therefor, that are held as "capital
assets" within the meaning of Section 1221 of the Code by U.S. Holders. It does
not discuss state, local, or foreign tax consequences, nor does it discuss tax
consequences to subsequent purchasers (persons who did not purchase the Existing
Notes pursuant to their original issue), or to categories of holders that are
subject to special rules, such as foreign persons, tax-exempt organizations,
insurance companies, banks, and dealers in stocks and securities. Tax
consequences may vary depending on the particular status of an investor. No
rulings will be sought from the Internal Revenue Service with respect to the
federal income tax consequences of the Exchange Offer.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO EXCHANGE EXISTING
NOTES FOR NEW NOTES. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR
CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO
ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE EXISTING NOTES
FOR NEW NOTES.
THE EXCHANGE OFFER
The exchange of Existing Notes pursuant to the Exchange Offer should be
treated as a continuation of the corresponding Existing Notes because the terms
of the New Notes are not materially different from the terms of the Existing
Notes. Accordingly, such exchange should not constitute a taxable event to U.S.
Holders and, therefore, (i) no gain or loss should be realized by a U.S. Holder
upon receipt of a New Note, (ii) the holding period of the New Note should
include the holding period of the Existing Note exchanged therefor and (iii) the
adjusted tax basis of the New Note should be the same as the adjusted tax basis
of the Existing Note exchanged therefor immediately before the exchange.
STATED INTEREST
Stated interest on a Note will be taxable to a U.S. Holder as ordinary
interest income at the time that such interest accrues or is received, in
accordance with the U.S. Holder's regular method of accounting for federal
income tax purposes. The Notes are not considered to have been issued with
original issue discount for federal income tax purposes.
SALE, EXCHANGE OR RETIREMENT OF THE NOTES
A U.S. Holder's tax basis in a Note generally will be its cost. A U.S.
Holder generally will recognize gain or loss on the sale, exchange or retirement
of a Note in an amount equal to the difference between the amount realized on
the sale, exchange or retirement and the tax basis of the Note. Gain or loss
recognized on the sale, exchange or retirement of a Note (excluding amounts
received in respect of accrued interest, which will be taxable as ordinary
interest income) generally will be capital gain or loss. In the case of a U.S.
Holder who is an individual, such capital gain may be taxed at a maximum rate of
28% if the holding period of the New Notes exceeds one year or a maximum rate of
20% if the holding period of the New Notes exceeds eighteen months.
114
BACKUP WITHHOLDING
Under certain circumstances, a U.S. Holder of a Note may be subject to
"backup withholding" at a 31% rate with respect to payments of interest thereon
or the gross proceeds from the disposition thereof. This withholding generally
applies if the U.S. Holder fails to furnish his or her social security number or
other taxpayer identification number in the specified manner and in certain
other circumstances. Any amount withheld from a payment to a U.S. Holder under
the backup withholding rules is allowable as a credit against such U.S. Holder's
federal income tax liability, provided that the required information is
furnished to the IRS. Corporations and certain other entities described in the
Code and Treasury regulations are exempt from backup withholding if their exempt
status is properly established.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Existing Notes
where such Existing Notes were acquired as a result of market-making activities
or other trading activities. The Company has agreed that, for a period of 180
days after the Exchange Offer Registration Statement is declared effective, it
will make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
, 1998 (90 days after the date of this Prospectus), all dealers
effecting transactions in the New Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Existing Notes) other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the Existing Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
115
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for the
Company by Dechert Price & Rhoads, New York, New York.
EXPERTS
The consolidated financial statements of Jitney-Jungle included in this
Prospectus and Registration Statement have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report thereon appearing elsewhere
herein, and are included in reliance upon such firm given upon their authority
as experts in accounting and auditing. The consolidated financial statements of
Delchamps Inc., and subsidiary as of June 28, 1997 and June 29, 1996 and for
each of the years in the three-year period ended June 28, 1997 have been
included in this Prospectus and in the Registration Statement in reliance on the
report of KPMG Peat Marwick L.L.P., independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
116
INDEX TO FINANCIAL STATEMENTS
JITNEY-JUNGLE STORES OF AMERICA, INC.
PAGE
---------
Independent Auditors' Report............................................................................... F-3
Consolidated Balance Sheets as of April 27, 1996, May 3, 1997 and July 26, 1997 (unaudited)................ F-4
Consolidated Statements of Earnings for the Years Ended April 29, 1995, April 27, 1996 and May 3, 1997 and
the 12 weeks Ended July 20, 1996 (unaudited) and July 26, 1997 (unaudited)............................... F-6
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended April 29, 1995, April 27,
1996 and May 3, 1997 and the 12 weeks Ended July 20, 1996 (unaudited) and July 26, 1997 (unaudited)...... F-7
Consolidated Statements of Cash Flows for the Years Ended April 29, 1995, April 27, 1996 and and May 3,
1997 and the 12 weeks Ended July 20, 1996 (unaudited) and July 26, 1997 (unaudited)...................... F-8
Notes to Consolidated Financial Statements................................................................. F-9
DELCHAMPS, INC.
PAGE
---------
Independent Auditors' Report............................................................................... F-22
Consolidated Balance Sheets as of June 29, 1996 and June 28, 1997.......................................... F-23
Consolidated Statements of Earnings for the Years Ended
July 1, 1995, June 29, 1996 and June 28, 1997............................................................ F-24
Consolidated Statements of Stockholders' Equity for the Years Ended July 1, 1995, June 29, 1996 and June
28, 1997................................................................................................. F-25
Consolidated Statements of Cash Flows for the Years Ended July 1, 1995,
June 29, 1996 and June 28, 1997.......................................................................... F-26
Notes to Consolidated Financial Statements................................................................. F-27
F-1
(This page has been left blank intentionally.)
F-2
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Jitney-Jungle Stores of America, Inc.:
We have audited the accompanying consolidated balance sheets of Jitney-Jungle
Stores of America, Inc. and subsidiaries (the "Company") as of May 3, 1997 and
April 27, 1996, and the related consolidated statements of earnings, changes in
stockholders' equity, and cash flows for each of the three fiscal years in the
period ended May 3, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Jitney-Jungle Stores of America,
Inc. and subsidiaries as of May 3, 1997 and April 27, 1996, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended May 3, 1997, in conformity with generally accepted accounting
principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
July 10, 1997
Jackson, Mississippi
F-3
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
APRIL 27, MAY 3, JULY 26,
1996 1997 1997
---------- ---------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................. $ 5,676 $ 14,426 $ 5,255
Investments in debt securities............................................ 337 -- --
Receivables............................................................... 4,892 5,463 7,423
Inventories:
Stores.................................................................. 48,907 43,462 47,328
Warehouses.............................................................. 28,538 21,157 30,366
Prepaid expenses and other................................................ 5,155 1,213 6,507
Deferred income taxes..................................................... 376 2,152 2,152
---------- ---------- -----------
Total current assets.................................................... 93,881 87,873 99,031
PROPERTY AND EQUIPMENT, at cost:
Land...................................................................... 2,782 2,648 2,573
Buildings................................................................. 22,537 26,370 26,568
Fixtures and equipment.................................................... 165,202 167,241 170,186
Property under capitalized leases......................................... 76,371 74,089 74,089
Leasehold improvements.................................................... 39,003 41,518 43,014
---------- ---------- -----------
Total................................................................... 305,895 311,866 316,430
Less accumulated depreciation and amortization............................ 130,480 140,378 147,262
Net property and equipment.............................................. 175,415 171,488 169,168
---------- ---------- -----------
OTHER ASSETS................................................................ 9,707 8,484 16,732
---------- ---------- -----------
TOTAL ASSETS................................................................ $ 279,003 $ 267,845 $ 284,931
---------- ---------- -----------
---------- ---------- -----------
See notes to consolidated financial statements.
F-4
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
APRIL 27, MAY 3, JULY 26,
1996 1997 1997
----------- ----------- -----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable......................................................... $ 40,008 $ 49,978 $ 60,940
Accrued expenses:
Personnel costs........................................................ 6,042 9,350 7,548
Taxes, other than income taxes......................................... 6,738 8,436 8,148
Insurance claims....................................................... 4,110 5,972 7,006
Interest............................................................... 3,742 4,298 9,679
Other.................................................................. 2,533 5,032 1,843
Current portion of capitalized leases.................................... 4,259 4,899 4,899
Current portion of long-term debt........................................ -- -- 4,923
----------- ----------- -----------
Total current liabilities............................................ 67,432 87,965 104,986
LONG-TERM DEBT............................................................. 239,059 208,000 206,876
OBLIGATIONS UNDER CAPITALIZED LEASES,
less current installments................................................ 59,143 59,563 58,663
DEFERRED INCOME TAXES...................................................... 8,196 6,398 6,328
----------- ----------- -----------
Total liabilities...................................................... 373,830 361,926 376,853
COMMITMENTS AND CONTINGENCIES (Notes 6, 7, 9 and 14)
REDEEMABLE PREFERRED STOCK (aggregate liquidation
preference value of $52,342 at April 27, 1996, $60,086 at
May 3, 1997 and $61,624 at July 26, 1997)................................ 49,988 57,921 59,508
STOCKHOLDERS' EQUITY (DEFICIT):
Class C Preferred Stock--Series 1 (at liquidation preference value)...... 7,604 8,502 8,663
Common Stock ($.01 par value, authorized 5,000,000 shares, issued and
outstanding 425,000 shares)............................................ 4 4 4
Additional paid-in capital............................................... (302,326) (302,326) (302,326)
Retained earnings........................................................ 149,903 141,818 142,229
----------- ----------- -----------
Total stockholders' equity (deficit)................................... (144,815) (152,002) (151,430)
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)................................................................ $ 279,003 $ 267,845 $ 284,931
----------- ----------- -----------
----------- ----------- -----------
See notes to consolidated financial statements.
F-5
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEAR ENDED 12 WEEKS ENDED
---------------------------------------- ----------------------
APRIL 29, APRIL 27, MAY 3, JULY 20, JULY 26,
1995 1996 1997 1996 1997
------------ ------------ ------------ ---------- ----------
(UNAUDITED)
NET SALES...................................... $ 1,173,927 $ 1,179,318 $ 1,228,533 $ 282,166 $ 288,978
COSTS AND EXPENSES:
Cost of sales................................ 885,739 887,255 925,446 211,627 216,464
Direct store expenses........................ 189,422 193,483 199,956 45,447 48,058
Warehouse, administrative and general........ 57,723 60,603 63,094 14,241 12,772
Interest expense, net........................ 10,823 13,000 36,215 8,378 8,241
Special charges.............................. -- -- 2,737 -- --
------------ ------------ ------------ ---------- ----------
Total costs and expenses................... 1,143,707 1,154,341 1,227,448 279,693 285,535
------------ ------------ ------------ ---------- ----------
Earnings before taxes on income and
extraordinary item........................... 30,220 24,977 1,085 2,473 3,443
TAXES ON INCOME................................ 11,417 9,062 339 921 1,284
------------ ------------ ------------ ---------- ----------
Earnings before extraordinary item............. $ 18,803 $ 15,915 $ 746 $ 1,552 $ 2,159
EXTRAORDINARY ITEM, NET OF INCOME TAX BENEFIT
OF $866...................................... -- (1,456) -- -- --
------------ ------------ ------------ ---------- ----------
NET EARNINGS................................... $ 18,803 $ 14,459 $ 746 $ 1,552 $ 2,159
------------ ------------ ------------ ---------- ----------
------------ ------------ ------------ ---------- ----------
EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Earnings (loss) before extraordinary item...... $ 923.15 $ 162.88 $ (16.26) $ (0.12) $ 0.92
Extraordinary item............................. -- (15.96) -- -- --
------------ ------------ ------------ ---------- ----------
Net earnings (loss)............................ $ 923.15 $ 146.92 $ (16.26) $ (0.12) $ 0.92
------------ ------------ ------------ ---------- ----------
------------ ------------ ------------ ---------- ----------
See notes to consolidated financial statements.
F-6
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
CLASS C
PREFERRED STOCK
SERIES 1 COMMON STOCK
---------------------- --------------------
NUMBER NUMBER ADDITIONAL
OF OF PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
----------- --------- --------- --------- ----------- ----------
BALANCE, APRIL 30, 1994.................................. -- -- 20,368 $ 1,061 $ 1,807 $ 121,989
Cash dividends ($169.09 per share)....................... -- -- -- -- -- (3,444)
Net earnings............................................. -- -- -- -- -- 18,803
----------- --------- --------- --------- ----------- ----------
BALANCE, APRIL 29, 1995.................................. -- -- 20,368 1,061 1,807 137,348
Cash dividends ($92.15 per share)........................ -- -- -- -- -- (1,877)
Net earnings............................................. -- -- -- -- -- 14,459
Issuance of shares and warrants.......................... 76,042 $ 7,604 425,000 4 7,377 --
Redemption of common stock and related merger costs...... -- -- (20,368) (1,061) (311,510) --
Accretion of discount on Class A Preferred
Stock.................................................. -- -- -- -- -- (27)
----------- --------- --------- --------- ----------- ----------
BALANCE, APRIL 27, 1996.................................. 76,042 7,604 425,000 4 (302,326) 149,903
Net earnings............................................. -- -- -- -- -- 1,552
Accretion of discount on Class A Preferred
Stock.................................................. -- -- -- -- -- (47)
Cumulation of dividends on Preferred Stock............... -- 898 -- -- -- (8,642)
----------- --------- --------- --------- ----------- ----------
BALANCE, MAY 3, 1997..................................... 76,042 8,502 425,000 4 (302,326) 141,818
Net earnings............................................. -- -- -- -- -- 2,159
Accretion of discount on Class A Preferred
Stock.................................................. -- -- -- -- -- (48)
Cumulation of dividends on Preferred Stock............... -- 161 -- -- -- (1,700)
----------- --------- --------- --------- ----------- ----------
BALANCE, JULY 26, 1997 (UNAUDITED)....................... 76,042 $ 8,663 425,000 $ 4 $ (302,326) $ 142,229
----------- --------- --------- --------- ----------- ----------
----------- --------- --------- --------- ----------- ----------
See notes to consolidated financial statements.
F-7
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
12 WEEKS
YEAR ENDED ENDED
--------------------------------- -----------
APRIL 29, APRIL 27, MAY 3, JULY 20,
1995 1996 1997 1996
----------- --------- --------- -----------
(UNAUDITED)
OPERATING ACTIVITIES:
Net earnings.............................................................. $ 18,803 $ 14,459 $ 746 $ 1,552
Adjustment to reconcile net earnings to net cash
provided by operating activities:
Extraordinary Item...................................................... -- 1,456 -- --
Depreciation and amortization........................................... 25,444 27,323 31,319 7,062
Loss on disposition of property and other
assets.................................................................. 1,037 817 1,899 (46)
Deferred income tax expense (benefit)................................... 2,260 2,577 (3,574) --
Changes in assets and liabilities:
Receivables........................................................... 43 5,866 (571) (707)
Store and warehouse inventories....................................... (3,621) 5,826 12,826 (2,034)
Prepaid expenses and other............................................ (1,630) (2,011) 3,941 1,064
Accounts payable...................................................... 2,690 1,562 9,970 9,663
Accrued expenses...................................................... 644 (2,356) 9,923 1,550
----------- --------- --------- -----------
Net cash provided by operating
activities........................................................ 45,670 55,519 66,479 18,104
----------- --------- --------- -----------
INVESTING ACTIVITIES:
Capital expenditures...................................................... (23,921) (30,111) (24,099) (6,122)
Debt issue costs.......................................................... -- (8,214) -- --
Proceeds from sale of property and other assets........................... 1,210 2,617 1,477 1,097
Purchase of investments in debt securities................................ (65,416) (23,026) -- --
Maturities of investments in debt securities.............................. 42,096 46,301 337 337
----------- --------- --------- -----------
Net cash used in investing activities............................... (46,031) (12,433) (22,285) (4,688)
----------- --------- --------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.................................. -- 239,059 -- --
Proceeds from issuance of stock and warrants.............................. -- 35,840 -- --
Redemption of common stock and related merger
costs..................................................................... -- (286,824) -- 30
Payments on long-term debt................................................ (2,431) (38,412) (31,059) (15,826)
Payments on capitalized lease obligations................................. (4,342) (5,355) (4,385) (263)
Dividends paid............................................................ (3,444) (1,877) -- --
----------- --------- --------- -----------
Net cash used in financing activities............................... (10,217) (57,569) (35,444) (16,059)
----------- --------- --------- -----------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................................................... (10,578) (14,483) 8,750 (2,643)
----------- --------- --------- -----------
CASH AND CASH EQUIVALENTS,
Beginning of Year........................................................ 30,737 20,159 5,676 5,676
----------- --------- --------- -----------
CASH AND CASH EQUIVALENTS, End of Year...................................... $ 20,159 $ 5,676 $ 14,426 $ 3,033
----------- --------- --------- -----------
----------- --------- --------- -----------
NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Capitalized lease obligations incurred.................................... $ 3,158 $ 7,971 $ 3,538
----------- --------- ---------
----------- --------- ---------
Insurance premiums financed...............................................
Recapitalization transactions:
Preferred stock issued in exchange for notes
receivable and common stock........................................... $ 184
Preferred stock issued in settlement of
deferred compensation obligation...................................... 712
Preferred stock issued in redemption of
common stock.......................................................... 27,446
Common stock issued in exchange for
notes receivable...................................................... 176
Common stock issued in redemption of
common stock.......................................................... 588
---------
$ 29,106
---------
---------
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest.................................................... $ 12,534 $ 12,915 $ 35,902 $ 2,786
----------- --------- --------- -----------
----------- --------- --------- -----------
Cash paid for income taxes, net of refunds................................ $ 10,283 $ 7,700 $ (1,521) $ 15
----------- --------- --------- -----------
----------- --------- --------- -----------
JULY 26,
1997
---------
OPERATING ACTIVITIES:
Net earnings.............................................................. $ 2,159
Adjustment to reconcile net earnings to net cash
provided by operating activities:
Extraordinary Item...................................................... --
Depreciation and amortization........................................... 6,982
Loss on disposition of property and other
assets.................................................................. (3)
Deferred income tax expense (benefit)................................... --
Changes in assets and liabilities:
Receivables........................................................... (1,960)
Store and warehouse inventories....................................... (13,075)
Prepaid expenses and other............................................ (371)
Accounts payable...................................................... 10,962
Accrued expenses...................................................... 1,136
---------
Net cash provided by operating
activities........................................................ 5,830
---------
INVESTING ACTIVITIES:
Capital expenditures...................................................... (4,985)
Debt issue costs.......................................................... --
Proceeds from sale of property and other assets........................... 81
Purchase of investments in debt securities................................ --
Maturities of investments in debt securities.............................. --
---------
Net cash used in investing activities............................... (4,904)
---------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.................................. --
Proceeds from issuance of stock and warrants.............................. --
Redemption of common stock and related merger
costs..................................................................... --
Payments on long-term debt................................................ (9,197)
Payments on capitalized lease obligations................................. (900)
Dividends paid............................................................ --
---------
Net cash used in financing activities............................... (10,097)
---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................................................... (9,171)
---------
CASH AND CASH EQUIVALENTS,
Beginning of Year........................................................ 14,426
---------
CASH AND CASH EQUIVALENTS, End of Year...................................... $ 5,255
---------
---------
NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Capitalized lease obligations incurred....................................
Insurance premiums financed............................................... $ 12,996
---------
---------
Recapitalization transactions:
Preferred stock issued in exchange for notes
receivable and common stock...........................................
Preferred stock issued in settlement of
deferred compensation obligation......................................
Preferred stock issued in redemption of
common stock..........................................................
Common stock issued in exchange for
notes receivable......................................................
Common stock issued in redemption of
common stock..........................................................
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest.................................................... $ 2,860
---------
---------
Cash paid for income taxes, net of refunds................................ $ 2,895
---------
---------
See notes to consolidated financial statements.
F-8
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. NATURE OF OPERATIONS AND BASIS OF PRESENTATION -- Jitney-Jungle operates
supermarkets and gasoline stations located in six southeastern states primarily
using distribution centers located in Jackson, Mississippi.
The consolidated financial statements include those of Jitney-Jungle Stores
of America, Inc. and its wholly-owned subsidiaries, Southern Jitney Jungle
Company, Interstate Jitney Jungle Stores, Inc., McCarty-Holman Co., Inc. and
subsidiary, and Jitney Jungle Bakery, Inc. All material intercompany profits,
transactions and balances have been eliminated.
B. USE OF ESTIMATES -- The consolidated financial statements are prepared in
conformity with generally accepted accounting principles which require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
C. FISCAL YEAR -- Jitney-Jungle's fiscal year ends on the Saturday nearest
April 30. Fiscal 1995 and 1996 include the operations of 52 weeks and fiscal
1997 includes the operations of 53 weeks.
D. INVESTMENTS IN DEBT SECURITIES -- Debt securities have been categorized
as available for sale and as a result are stated at fair value. The cost of debt
securities is adjusted for amortization of premiums and accretion of discounts
to maturity. Such amortization and interest are included in interest income.
Realized gains and losses are included in other income or expense. Unrealized
holding gains and losses are included as a component of stockholders' equity
until realized. The cost of securities sold is based on the specific
identification method.
E. INVENTORIES -- Store inventories are stated at cost (last-in, first-out
method), as determined principally by the retail inventory method. Warehouse
inventories are stated at cost (last-in, first-out method).
F. CAPITALIZATION, DEPRECIATION AND AMORTIZATION -- The cost of property,
fixtures, equipment and improvements is depreciated and amortized by the
straight-line method over the estimated useful lives of the assets. The
estimated useful lives of buildings range up to forty years and the estimated
useful life of fixtures and equipment is eight years. Capitalized lease assets
are recorded at the lower of fair market value or the present value of future
minimum lease payments. These assets and leasehold improvements are amortized by
the straight-line method over their primary lease term. License and franchise
rights are amortized by the straight-line method over twenty years. Debt issue
costs are amortized over the life of the related debt by the interest method. At
each balance sheet date the Company evaluates the recoverability of property,
equipment and other long-term assets based upon expectations of nondiscounted
cash flows and operating income.
G. STORE OPENING/CLOSING COSTS -- Non-capital expenditures incurred for new
or remodeled retail stores are expensed as incurred. When a store is closed, the
remaining investment in fixtures and leasehold improvements, net of expected
salvage, is charged against earnings; the present value of any remaining lease
liability, net of expected sublease recovery, is also expensed.
F-9
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
H. INCOME TAXES -- Deferred tax liabilities and assets are determined based
on the differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.
I. CASH EQUIVALENTS -- For purposes of reporting cash flows, cash
equivalents include investments with maturities of three months or less when
purchased.
J. PER SHARE AMOUNTS -- Earnings per common and common equivalent share is
based on net income (loss) after preferred stock dividend requirements ($987 in
fiscal 1996, $7,655 in fiscal 1997, and the weighted average number of shares
outstanding during each year including shares attributed to outstanding warrants
to purchase common stock. For fiscal 1997, warrants have not been included as
their effect is antidilutive. The number of shares used in computing the
earnings (loss) per share was 20,368 in fiscal 1995, 91,241 in fiscal 1996 and
425,000 in fiscal 1997.
Dividends per common share are presented on the basis of total dividends
paid, including dividends paid by the entities acquired in the business
acquisitions accounted for in a manner similar to that followed for poolings of
interest (see Note 2), divided by common shares outstanding after giving
retroactive effect to common shares issued in such business acquisitions.
K. RECLASSIFICATIONS -- Certain reclassifications have been made in the 1995
and 1996 consolidated financial statements to conform to the 1997 method of
presentation.
2. MERGER ACTIVITIES
In a series of transactions that were consummated on March 5, 1996,
Jitney-Jungle acquired all of the issued and outstanding stock of Southern
Jitney Jungle Company, McCarty-Holman Company, Inc. and Jitney Jungle Bakery
(each of which was under common control with Jitney-Jungle) in exchange for
7,495 shares of common stock. These acquisitions have been accounted for at
historical cost in a manner similar to that followed for poolings of interest.
Prior to the acquisition, the operating results of the acquired entities had
been included in Jitney-Jungle's financial statements on a combined basis.
Accordingly, the acquisitions had no effect on the previously reported results
of operations of Jitney-Jungle; however, for purposes of computing earnings per
share the issuance of the additional shares of common stock has been given
retroactive effect.
On March 5, 1996, JJ Acquisitions Corp. (JJAC) merged with and into
Jitney-Jungle with Jitney-Jungle continuing as the surviving corporation (the
"Merger"). JJAC was a wholly-owned subsidiary of Bruckmann, Rosser, Sherrill &
Co., L.P. (the "Fund"). Upon consummation of the Merger, the Fund and related
investors received 83.82% of Jitney-Jungle's common stock and 11.76% was
retained by the shareholders at the time of the Merger.
The Merger was accounted for as a recapitalization which resulted in a
charge to equity of $312,571 to reflect the redemption of common stock of
Jitney-Jungle outstanding immediately prior to the Merger and related merger
costs, including a closing fee of $4,000 paid to the Fund Manager, an affiliate
of the Fund's sole General Partner.
F-10
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
2. MERGER ACTIVITIES (CONTINUED)
Prior to the Merger, JJAC issued 425,000 shares of common stock for an
aggregate of $6,500, issued an aggregate of $22,500 in liquidation preference of
Class A Preferred Stock, issued $10,000 in liquidation preference of Class C
Preferred Stock, and issued warrants to purchase 75,000 shares of common stock
to the then holder (along with related investors) of 100% of the Class A
Preferred Stock and 15% of the Class C Preferred Stock. Jitney-Jungle issued
$27,446 in liquidation preference of Class B Preferred Stock as part of the
consideration to shareholders at the time of the Merger. In the Merger the
common stock, Class A Preferred Stock, and Class C Preferred Stock issued by
JJAC were converted into like shares of Jitney-Jungle and Jitney-Jungle assumed
the obligations of JJAC under the warrants.
In connection with the Merger, Jitney-Jungle retired $35,700 of long-term
debt prior to its scheduled maturity. Early retirement of this debt resulted in
an extraordinary loss of $1,456, net of an income tax benefit of $866.
3. INVENTORIES
Had the cost for all inventories been determined on the first-in, first-out
method, inventories would have been higher by approximately $18,227 at April 27,
1996 and $17,245 at May 3, 1997. LIFO liquidations resulted in an increase in
fiscal year 1997 net earnings of approximately $148. The effect on net earnings
of LIFO liquidations in fiscal years 1995 and 1996 was not material.
4. INVESTMENTS IN DEBT SECURITIES
Investments in debt securities consisted of U.S. Treasury securities which
matured in fiscal 1997. Such investments, classified as available for sale, had
no unrealized gains or losses at April 27, 1996. Proceeds from sale of
investments in debt securities were approximately $6,100 in fiscal 1995 and
$13,000 in fiscal 1996. Gains of $14 (1995) and losses of $43 (1996) were
realized on those sales.
5. OTHER ASSETS
Other assets, net of accumulated amortization of $3,059 (1996) and $3,916
(1997), consisted of the following:
APRIL 27, MAY 3,
1996 1997
----------- ---------
Debt issue costs.............................................................................. $ 7,917 $ 6,913
License and franchise rights.................................................................. 838 746
Other, primarily covenant not to compete...................................................... 952 825
----------- ---------
Total....................................................................................... $ 9,707 $ 8,484
----------- ---------
----------- ---------
F-11
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
6. PROPERTY UNDER CAPITAL LEASES AND LEASE COMMITMENTS
Leased property capitalized in the financial statements is summarized as
follows:
APRIL 27, MAY 3,
1996 1997
--------- ---------
Store property.............................................................................. $ 76,371 $ 70,920
Computer equipment.......................................................................... -- 3,169
Less accumulated depreciation............................................................... (32,993) (32,112)
--------- ---------
$ 43,378 $ 41,977
--------- ---------
--------- ---------
Most store leases provide for contingent rentals based on percentages of
sales in excess of stipulated amounts. The leases have primary terms are ranging
from five to twenty years and generally contain renewal options. Portions of
store space are sublet under leases. The present value of future minimum lease
payments relative to capitalized leases is included in the financial statements
as obligations under capitalized leases. Lease liabilities are amortized over
the lease term using the interest method.
The future minimum rental commitments for capital leases and noncancelable
operating leases as of May 3, 1997, were as follows:
CAPITAL OPERATING
LEASES LEASES
---------- -----------
1998...................................................................................... $ 13,840 $ 6,056
1999...................................................................................... 13,693 5,176
2000...................................................................................... 13,261 4,401
2001...................................................................................... 12,114 2,557
2002...................................................................................... 10,796 1,777
Remaining balance......................................................................... 70,024 4,895
---------- -----------
Total minimum lease commitments........................................................... $ 133,728 $ 24,862
---------- -----------
---------- -----------
CAPITAL
LEASES
---------
Less amount representing estimated executory costs (taxes, maintenance and insurance)....... $ 1,917
---------
Net minimum lease commitments............................................................... 131,811
Less amount representing imputed interest................................................... 67,349
---------
Present value of minimum lease commitments.................................................. 64,462
Current portion of obligations under capitalized leases..................................... 4,899
---------
Obligations under capitalized leases, less current installments............................. $ 59,563
---------
---------
F-12
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
6. PROPERTY UNDER CAPITAL LEASES AND LEASE COMMITMENTS (CONTINUED)
Minimum rental commitments have not been reduced by minimum sublease rentals
of $1,306 applicable to capital leases and $841 applicable to operating leases
due in the future under noncancelable subleases.
The following schedule shows the composition of total rental expense for all
operating leases:
YEAR ENDED
---------------------------------
APRIL 29, APRIL 27, MAY 3,
1995 1996 1997
----------- --------- ---------
Minimum rentals................................................................ $ 10,075 $ 10,211 $ 10,717
Continent rentals.............................................................. 328 346 325
Less: Sublease rentals......................................................... (323) (219) (288)
----------- --------- ---------
$ 10,080 $ 10,338 $ 10,754
----------- --------- ---------
----------- --------- ---------
Rents, net of sublease income, paid to affiliated partnerships under
long-term lease commitments were as follows:
YEAR ENDED
-----------------------------------
APRIL 29, APRIL 27, MAY 3,
1995 1996 1997
----------- ----------- ---------
Capitalized Leases............................................................... $ 3,001 $ 3,017 $ 3,062
Operating leases................................................................. 321 334 331
----------- ----------- ---------
$ 3,322 $ 3,351 $ 3,393
----------- ----------- ---------
----------- ----------- ---------
Obligations to affiliated partnerships under capitalized leases were $9,150
at April 27, 1996 and $8,602 at May 3, 1997.
7. LONG-TERM DEBT
Long-term debt consisted of the following:
APRIL 27, MAY 3,
1996 1997
---------- ----------
Senior notes.............................................................................. $ 200,000 $ 200,000
Revolving credit loans.................................................................... 39,059 8,000
---------- ----------
Long-term debt............................................................................ $ 239,059 $ 208,000
---------- ----------
---------- ----------
Aggregate maturities of long-term debt for the fiscal years following May 3,
1997 are as follows:
2001.............................................................................. $ 8,000
2006.............................................................................. 200,000
---------
$ 208,000
---------
---------
F-13
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
7. LONG-TERM DEBT (CONTINUED)
In March 1996, Jitney-Jungle issued $200,000 of unsecured Senior Notes which
mature on March 1, 2006 and accrue interest at the rate of 12% per annum payable
semi-annually. The proceeds from issuance of the Senior Notes were used to fund
a portion of the Merger consideration (See Note 2). Except under certain
conditions, the Senior Notes are not redeemable at Jitney-Jungle's option prior
to March 1, 2001. Thereafter, the Senior Notes are subject to redemption at the
option of Jitney-Jungle at 106% of principal amount if redeemed during the
twelve-month period beginning March 1, 2001 decreasing to 100% of principal
amount if redeemed during the twelve-month period beginning March 1, 2004 and
thereafter plus accrued and unpaid interest thereon.
In the event of a change of control as defined in the Indenture, holders of
Senior Notes have the right to require Jitney-Jungle to repurchase all or any
part of such holder's notes at a price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest thereon.
In March 1996, Jitney-Jungle entered into a revolving credit agreement with
a bank which provides a $100,000 Credit Facility. The Credit Facility was used
to finance a portion of the Merger consideration, refinance certain
indebtedness, and provide for working capital requirements. The commitments
under the Credit Facility will terminate and all loans outstanding thereunder
will be required to be repaid in full in March, 2001. Borrowings under the
Credit Facility, including revolving loans and up to $20,000 in letters of
credit, are limited to the lesser of (i) the "total commitment" which initially
was $100,000 and (ii) an amount equal to the sum of (a) up to 60% of eligible
inventory (valued at the lesser of FIFO cost or current market) and (b) the
"supplemental availability" which initially was $45,000. Each of the total
commitment and the supplemental availability will be reduced by $1,250 per
quarter, commencing December 31, 1996. The interest rates on borrowings under
the Credit Facility are, at Jitney-Jungle's option, a function of the bank's
prime rate or LIBOR. The weighted average interest rate of loans under the
Credit Facility was 8.62% at April 27, 1996 and 8.44% at May 3, 1997. The
agreement requires Jitney-Jungle to pay a facility fee at an annual rate of .50%
(.25% subsequent to March 31, 1997) of the unused amount available under the
Credit Facility. Letters of credit aggregating $10,481 were outstanding as of
April 27, 1996 and May 3, 1997 under the Credit Facility.
The Senior Notes are guaranteed on a full, unconditional and joint and
several basis by each of Jitney-Jungle's subsidiaries. The Credit Facility is
guaranteed by each of Jitney-Jungle's subsidiaries. In addition, obligations
under the Credit Facility are secured by a first lien on all of Jitney-Jungle's
and its subsidiaries' assets.
The Credit Facility and the Indenture pursuant to which the Senior Notes
were issued contain numerous covenants which, among other things, restrict or
limit the incurrence of indebtedness, payments of dividends and distributions,
and capital expenditures. The Credit Facility also contains numerous financial
covenants, the more significant of which relate to leverage ratio, interest
coverage ratio and cash flows. As of May 3, 1997 Jitney-Jungle was in compliance
with the covenants under its debt agreements.
F-14
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
8. INCOME TAXES
Income taxes were composed of the following:
YEAR ENDED
---------------------------------
APRIL 29, APRIL 27, MAY 3,
1995 1996 1997
--------- ----------- ---------
Current provision................................................................. $ 9,157 $ 6,485 $ 3,913
Deferred provision (benefit)...................................................... 2,260 2,577 (3,574)
--------- ----------- ---------
Total........................................................................... $ 11,417 $ 9,062 $ 339
--------- ----------- ---------
--------- ----------- ---------
The effective tax rate varied from the federal statutory rate of 35% as
follows:
YEAR ENDED
-----------------------------------
APRIL 29, APRIL 27, MAY 3,
1995 1996 1997
--------- ----------- -----------
Federal tax at statutory rate..................................................... $ 10,577 $ 8,742 $ 380
State income taxes, net of federal tax benefit.................................... 665 400 (25)
Other............................................................................. 175 (80) (16)
--------- ----------- -----
Income tax provision.............................................................. $ 11,417 $ 9,062 $ 339
--------- ----------- -----
--------- ----------- -----
Deferred income tax expense relates to the following:
YEAR ENDED
-----------------------------------
APRIL 29, APRIL 27, MAY 3,
1995 1996 1997
----------- ----------- ---------
LIFO inventory................................................................... $ 1,499 $ 669 $ 773
Deferred compensation............................................................ (24) 2,290 9
Accrued estimated insurance claims............................................... (166) (285) (690)
Deferred income.................................................................. -- -- (1,567)
Property and equipment........................................................... 1,345 158 (676)
Capital leases................................................................... (448) (147) (1,004)
Other............................................................................ 54 (108) (419)
----------- ----------- ---------
Total............................................................................ $ 2,260 $ 2,577 $ (3,574)
----------- ----------- ---------
----------- ----------- ---------
F-15
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
8. INCOME TAXES (CONTINUED)
The sources of temporary differences and the related deferred income tax
effects were as follows:
APRIL 27, MAY 3,
1996 1997
--------- ---------
CURRENT DEFERRED TAX ASSETS (LIABILITIES):
LIFO inventory............................................................................ $ (1,739) $ (2,152)
Deferred compensation and compensated absences............................................ 571 562
Deferred income........................................................................... -- 1,567
Accrual of estimated insurance claims..................................................... 1,538 2,228
Other..................................................................................... 436 307
--------- ---------
Total net current deferred tax asset.................................................... $ 376 $ 2,152
--------- ---------
--------- ---------
NONCURRENT DEFERRED TAX (ASSETS) LIABILITIES:
Property and equipment.................................................................... $ 13,651 $ 12,975
Capital and closed store leases........................................................... (5,706) (6,710)
Other..................................................................................... 251 133
--------- ---------
Total net noncurrent deferred tax liability............................................. $ 8,196 $ 6,398
--------- ---------
--------- ---------
Currently payable income taxes of $1,835 at May 3, 1997 are included in
accrued expenses.
Refundable income taxes of $3,890 at April 27, 1996 represent an overpayment
of estimated taxes and are included in prepaid expenses and other in the balance
sheet.
The Company's income tax returns through fiscal year 1994 have been examined
by the Internal Revenue Service.
F-16
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
9. CAPITAL STOCK
PREFERRED STOCK
Preferred stock consisted of the following:
APRIL 27, 1996 MAY 3, 1997
----------------------- -----------------------
DIVIDEND OUTSTANDING LIQUIDATION CARRYING LIQUIDATION CARRYING
CLASS RATE SHARES PREFERENCE AMOUNT PREFERENCE AMOUNT
- --------------------------------------- ------------- ----------- ----------- ---------- ----------- ----------
A...................................... 15% 225,000 $ 22,500 $ 20,146 $ 26,722 $ 24,557
B...................................... 10% 274,460 27,446 27,446 30,685 30,685
C--Series 2............................ 10% 23,958 2,396 2,396 2,679 2,679
----------- ---------- ----------- ----------
Total Mandatorily Redeemable....................................... $ 52,342 $ 49,988 $ 60,086 $ 57,921
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
C--Series 1............................ 10% 76,042 $ 7,604 $ 7,604 $ 8,502 $ 8,502
----------- ---------- ----------- ----------
----------- ---------- ----------- ----------
The excess of liquidation preference over the carrying amount of the Class A
Preferred Stock is being accreted by periodic charges to retained earnings to
the mandatory redemption date.
Dividends on Class A Preferred Stock are payable quarterly. Through March,
2001, such dividends are payable, at Jitney-Jungle's option, either by
cumulation to liquidation preference or in cash and thereafter are payable in
cash. Dividends on Class B Preferred Stock and Class C Preferred Stock cumulate
on a compounding basis until paid. Cumulative dividends not declared or paid on
preferred shares aggregated $8,642 at May 3, 1997.
The Class A Preferred Stock is redeemable at Jitney-Jungle's option, (i) at
any time after March 1, 2001 at a price equal to the then applicable liquidation
preference plus accrued and unpaid dividends and a prepayment premium or (ii) on
or prior to March 1, 1999 with the proceeds of a public offering of common stock
at a price per share equal to 114% of the then applicable liquidation preference
plus accrued and unpaid dividends thereon. All of the Class A Preferred Stock is
required to be redeemed on or before March, 2008 at a price per share equal to
the then applicable liquidation preference, plus accrued and unpaid dividends
thereon.
The Class B Preferred Stock and Class C Preferred Stock, Series 2, are
redeemable at Jitney-Jungle's option at any time, in whole or in part, at a
price per share equal to the then applicable liquidation preference, plus
accrued and unpaid dividends. All of the Class B Preferred Stock and all of the
Class C Preferred Stock, Series 2, are required to be redeemed in March, 2010
and March, 2011, respectively, at a price per share equal to the then applicable
liquidation preference plus accrued and unpaid dividends (including cumulated
dividends). The Class C Preferred Stock, Series 1, is not redeemable by
Jitney-Jungle at any time.
Under certain conditions, as defined, Jitney-Jungle is required to offer to
repurchase all shares of preferred stock. Upon a change in control,
Jitney-Jungle is required to offer to repurchase all shares of the
F-17
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
9. CAPITAL STOCK (CONTINUED)
Class A Preferred Stock at 101% of the then applicable liquidation preference
plus accrued and unpaid dividends and all shares of Class B Preferred Stock and
all shares of Class C Preferred Stock, Series 1 and Series 2, at 100% of the
liquidation preference thereof plus accrued and unpaid dividends. In addition,
Jitney-Jungle is required to offer to apply, subject to certain limitations, net
proceeds raised through a primary issuance of securities junior to Class B
Preferred Stock to repurchase shares of Class B Preferred Stock.
Except as required by law and with respect to certain specified matters,
Class A Preferred Stock has no voting rights. Neither the Class B Preferred
Stock nor the Class C Preferred Stock has any voting rights, except as required
by law.
The Class A Preferred Stock is exchangeable (with cumulated dividends) at
Jitney-Jungle's option, in whole but not in part, for subordinated exchange
debentures of Jitney-Jungle. The exchange debentures will pay interest from the
date of the exchange at the rate of 15% per annum, consisting of, at Jitney-
Jungle's option, additional exchange debentures or cash on or prior to March
2001 and cash thereafter. The exchange debentures will mature in March 2008.
Class A Preferred Stock ranks senior to Class B Preferred Stock and Class C
Preferred Stock in right of payment of cash dividends, liquidation preference
and redemption (both mandatory and optional). The Class C Preferred Stock ranks
junior to the Class B Preferred Stock in right of such cash payments.
The Credit Facility and the Indenture (See Note 7) restrict Jitney-Jungle's
ability to pay cash dividends, exchange Class A Preferred Stock for exchange
debentures and redeem or repurchase Class A Preferred Stock, Class B Preferred
Stock, Class C Preferred Stock and exchange debentures.
WARRANTS
Warrants to purchase 75,000 shares of common stock were issued in
conjunction with the Merger (See Note 2) and were outstanding as of April 27,
1996 and May 3, 1997. The warrants were recorded at fair value of $881 at date
of issue. The warrants have an exercise price of $.01 per share and will expire
in 2008.
10. EMPLOYEE BENEFIT AND COMPENSATION PLANS
Jitney-Jungle has a profit-sharing plan covering substantially all employees
with one or more years' service. Contributions are made at the discretion of the
Board of Directors of Jitney-Jungle and totaled $1,200 in fiscal 1995, 1996, and
1997.
Prior to March 1996, Jitney-Jungle had a Phantom Stock Plan for certain key
officers whereby deferred compensation units (expressed in shares of common
stock) were earned to the extent that performance targets (expressed in terms of
growth in stockholders' equity) were met. The amounts payable in accordance with
the provisions of the Phantom Stock Plan became fully vested and immediately
payable at the time of the Merger and Recapitalization (see Note 2). Effective
with the Merger, $4,252 was paid to the participants and $712 was applied
against the purchase price for shares of Class C Preferred Stock acquired by
them in connection with the Recapitalization.
F-18
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
10. EMPLOYEE BENEFIT AND COMPENSATION PLANS (CONTINUED)
Effective with the Recapitalization, the Phantom Stock Plan was amended and
restated and renamed the Deferred Compensation Plan for Jitney-Jungle Stores of
America, Inc. Under the amended plan no further awards may be made and no other
individuals will become participants. Units credited to the participants consist
of a cash amount payable in accordance with the terms of the Phantom Stock Plan
before its amendment and an amount that will continue to be credited under the
terms of the plan to an account, the value of which will be equal to the value
of the number of shares of Class C Preferred Stock of Jitney-Jungle that could
be acquired with that amount.
With respect to the amounts that continue to be credited under the plan as
amended, an amount equal to the amount of any cash dividends that would have
been paid on the number of shares of preferred stock credited to each
participant's account will be paid to the participant at the same time as any
cash dividends actually are paid on the preferred stock. Payment otherwise will
be made under the amended plan at the same time as the preferred stock is
redeemed, in an amount equal to the redemption price times the number (or
proportionate number, in the event of a partial redemption) of shares of
preferred stock credited to the participant's account.
11. SPECIAL CHARGES
Included in special charges is approximately $1,779 attributable to the
employment agreement with Jitney-Jungle's then Chairman and Chief Executive
Officer who, in January 1997, relinquished his position and duties as Chief
Executive Officer. Payments to be made under the employment agreement were
deemed to not relate to future services to be provided by the Chairman and,
accordingly, such amounts were charged to expense in fiscal 1997.
Special charges also include termination and retirement benefits payable to
employees whose positions were eliminated.
12. FAIR VALUES OF FINANCIAL INSTRUMENTS
In accordance with Statement of Financial Accounting Standards (SFAS) No.
107, "Disclosures About Fair Value of Financial Instruments", information is
provided about the fair value of certain financial instruments for which it is
practicable to estimate that value. The fair value amounts disclosed represent
management's best estimate of fair value. In accordance with SFAS No. 107, this
disclosure excludes certain financial instruments and all nonfinancial
instruments. The aggregate fair value amounts presented are not intended to
represent the underlying aggregate fair value of Jitney-Jungle.
The estimated fair values are significantly affected by assumptions used,
principally the timing of future cash flows, the discount rate, judgments
regarding current economic conditions, risk characteristics of various financial
instruments and other factors. Because assumptions are inherently subjective in
nature, the estimated fair values cannot be substantiated by comparison to
independent quotes and, in many cases, the estimated fair values could not
necessarily be realized in an immediate sale or settlement of the instrument.
The following methods and assumptions were used by Jitney-Jungle in estimating
fair value disclosures for financial instruments:
F-19
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
12. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
CASH AND CASH EQUIVALENTS: The carrying amount reported in the balance
sheet approximates fair value.
INVESTMENTS IN DEBT SECURITIES: The securities are carried at fair value
and are based on quoted market prices.
RECEIVABLES, ACCOUNTS PAYABLE AND ACCRUED EXPENSES: The carrying amount
reported in the balance sheet approximates fair value.
LONG-TERM DEBT: The fair value of Jitney-Jungle's Senior Notes is based on
quoted market prices. The interest rates on borrowings under the Credit Facility
reset periodically. Consequently, the carrying value of borrowings under the
Credit Facility approximates fair value.
REDEEMABLE PREFERRED STOCK: The fair value of redeemable preferred stock is
estimated at carrying value as such stock is not traded in the open market and a
market price is not readily available.
The carrying amounts and fair values of Jitney-Jungle's financial
instruments were as follows:
APRIL 27, 1996 MAY 3, 1997
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
--------- --------- --------- ---------
Cash and cash equivalents............................................. $ 5,676 $ 5,676 $ 14,426 14,426
Investments in debt securities........................................ 337 337
Receivables........................................................... 4,892 4,892 5,463 5,463
Accounts payable...................................................... 40,008 40,008 49,978 49,978
Accrued expenses...................................................... 23,165 23,165 33,088 33,088
Long-term debt:
Senior Notes........................................................ 200,000 204,700 200,000 217,000
Credit Facility..................................................... 39,059 39,059 8,000 8,000
Redeemable preferred stock............................................ 49,988 49,988 57,921 57,921
13. ACCOUNTING STANDARD TO BE ADOPTED IN THE FUTURE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." The new
standard changes, the presentation and method in which earnings per share are
computed and is effective for Jitney-Jungle's year ending May 2, 1998. The new
standard will be applied on a "retroactive restatement of all prior periods"
basis. Jitney-Jungle is currently in the process of ascertaining the impact the
new standard will have on its earnings per share amounts for fiscal 1997 and
prior periods.
F-20
JITNEY-JUNGLE STORES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED APRIL 29, 1995, APRIL 27, 1996 AND MAY 3, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
14. COMMITMENTS AND CONTINGENCIES
Jitney-Jungle is defendant in certain litigation incurred in the normal
course of business. Management, after consulting legal counsel, is of the
opinion that the liability, if any, which may result from this litigation will
not have a material adverse effect on Jitney-Jungle's financial position or
results of operations.
In 1996, Jitney-Jungle entered into a five-year supply agreement, which
replaced a previously existing agreement, relating to merchandise purchases for
stores located in Memphis, Tennessee and Little Rock and Pine Bluff, Arkansas.
In fiscal 1997, Jitney-Jungle sold the operating assets of its bakery
subsidiary for $750 and received $5,250 as consideration for entering into a
five-year supply agreement with the purchaser of such operating assets. The
$5,250 is being amortized over the term of the supply agreement.
In connection with the Merger and Recapitalization, Jitney-Jungle entered
into an agreement whereby the Fund Manager is entitled to receive $250 per year
from Jitney-Jungle as a management fee for the performance of strategic and
financial planning services. The amount of the annual management fee may be
increased by up to an additional $750 per year based upon certain performance
criteria. Management fees for fiscal year 1997 approximated $250.
15. SUBSEQUENT EVENTS
On June 3, 1997, Jitney-Jungle entered into a $12,996 insurance premium
finance agreement payable in monthly installments of $473, including interest at
6.75% per annum.
On July 8, 1997, Jitney-Jungle entered into a merger agreement with
Delchamps, Inc. ("Delchamps") which operates retail supermarkets in Alabama,
Florida, Louisiana and Mississippi. Pursuant to the agreement, Jitney-Jungle has
commenced an all-cash tender offer for all of Delchamps' outstanding common
stock at a price of $30 per share. The offer is conditioned upon, among other
things, there being tendered and not withdrawn prior to the expiration date of
the offer at least two-thirds of the outstanding shares of Delchamps' common
stock. In addition, regulatory approval and consent of the holders of Jitney-
Jungle's senior notes are required. Jitney-Jungle intends to issue up to $280
million of debt to finance the acquisition and to repay indebtedness of
Delchamps in connection with the acquisition.
16. INTERIM FINANCIAL DATA
The unaudited consolidated balance sheet as of July 26, 1997 and the related
unaudited consolidated statements of earnings and of cash flows for the 12 weeks
ended July 20, 1996 and July 26, 1997 have been prepared in accordance with the
accounting policies in effect as of May 3, 1997 as set forth in the annual
consolidated financial statements. In the opinion of management, such interim
financial statements contain all adjustments (all of which are normal and
recurring in nature) necessary to present fairly Jitney-Jungle's consolidated
financial position, results of operations and cash flows.
The results of operations for the 12 weeks ended July 26, 1997 are not
necessarily indicative of results to be expected for the full year.
F-21
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of:
Delchamps, Inc.:
We have audited the accompanying consolidated balance sheets of Delchamps,
Inc. and subsidiary as of June 28, 1997 and June 29, 1996, and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
each of the years in the three-year period ended June 28, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Delchamps,
Inc. and subsidiary at June 28, 1997 and June 29, 1996 and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 28, 1997, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick L.L.P.
KPMG PEAT MARWICK L.L.P.
August 8, 1997
Atlanta, Georgia
F-22
DELCHAMPS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
JUNE 29, 1996 JUNE 28, 1997
------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (2)............................................................... $ 10,503 $ 5,670
Trade and other accounts receivable......................................................... 8,422 7,961
Merchandise inventories (3 and 6)........................................................... 90,797 89,726
Prepaid expenses............................................................................ 1,376 2,094
Income taxes receivable (10)................................................................ 764 --
Deferred income taxes (10).................................................................. 3,878 6,525
------------- -------------
Total current assets.................................................................... 115,740 111,976
PROPERTY AND EQUIPMENT (4):
Land........................................................................................ 15,210 13,744
Buildings and improvements.................................................................. 58,111 59,079
Fixtures and equipment...................................................................... 221,090 233,542
Construction in progress.................................................................... 9,771 2,626
------------- -------------
304,182 308,991
Less accumulated depreciation and amortization.............................................. 166,931 179,672
------------- -------------
Net property and equipment.............................................................. 137,251 129,319
OTHER ASSETS.................................................................................... 2,192 2,166
------------- -------------
TOTAL ASSETS.................................................................................... $ 255,183 $ 243,461
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments of obligations under capital leases (4)................................ $ 749 $ 844
Current installments of long-term debt (5).................................................. 3,760 3,697
Notes payable (6)........................................................................... 14,000 4,600
Restructure obligation (12)................................................................. 3,996 2,273
Accounts payable............................................................................ 48,308 41,571
ACCRUED EXPENSES:
Salaries and wages.......................................................................... 4,603 7,026
Licenses and other taxes.................................................................... 8,017 7,778
Other....................................................................................... 10,240 14,192
------------- -------------
Total accrued expenses...................................................................... 22,860 28,996
Income taxes(10)............................................................................ -- 885
------------- -------------
Total current liabilities................................................................... 93,673 82,836
Obligations under capital leases, excluding current installments (4)............................ 10,398 9,556
Long-term debt, excluding current installments (5).............................................. 10,839 7,142
Restructure obligation, excluding current installments (12)..................................... 15,668 13,453
Deferred income taxes (10)...................................................................... 9,225 10,211
Other liabilities............................................................................... 2,455 2,244
------------- -------------
Total liabilities........................................................................... 142,258 125,442
------------- -------------
STOCKHOLDERS' EQUITY (5 and 11):
Junior participating preferred stock of no par value. Authorized 5,000,000 shares; no shares
issued..................................................................................... -- --
Common stock of $.01 par value. Authorized 25,000,000 shares; issued 7,112,320 shares at
June 29, 1996 and 7,121,749 shares at June 28, 1997........................................ 71 71
Additional paid-in capital.................................................................. 19,657 19,856
Retained earnings........................................................................... 93,359 98,182
------------- -------------
113,087 118,109
Less:
Unamortized restricted stock award compensation (8)..................................... (162) (90)
------------- -------------
Total stockholders' equity.............................................................. 112,925 118,019
Commitments and contingencies (4, 9, and 13)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................................... $ 255,183 $ 243,461
------------- -------------
------------- -------------
See notes to consolidated financial statements.
F-23
DELCHAMPS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEAR ENDED
----------------------------------------
JULY 1, JUNE 29, JUNE 28,
1995 1996 1997
------------ ------------ ------------
Sales................................................................... $ 1,054,088 $ 1,126,629 $ 1,102,947
Cost of Sales (3)....................................................... 798,537 863,389 830,878
Gross profit.......................................................... 255,551 263,240 272,069
Selling, general and administrative expenses ("SG&A"):
Restructuring charge (12)............................................. 28,779 -- --
Other SG&A............................................................ 261,763 250,121 254,282
Total SG&A............................................................ 290,542 250,121 254,282
Operating income (loss)............................................. (34,991) 13,119 17,787
Other (expense) income:
Interest expense...................................................... (5,375) (7,169) (5,215)
Interest income....................................................... 100 349 233
------------ ------------ ------------
Total other (expense) income............................................ (5,275) (6,820) (4,982)
Earnings (loss) before income taxes..................................... (40,266) 6,299 12,805
Income tax expense (benefit) (10)....................................... (14,600) 2,447 4,851
------------ ------------ ------------
Net earnings (loss)................................................. $ (25,666) $ 3,852 $ 7,954
------------ ------------ ------------
------------ ------------ ------------
Net earnings (loss) per common share.................................... $ (3.61) $ 0.54 $ 1.12
------------ ------------ ------------
------------ ------------ ------------
Weighted average number of common shares................................ 7,113 7,110 7,116
------------ ------------ ------------
------------ ------------ ------------
See notes to consolidated financial statements.
F-24
DELCHAMPS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
COMMON STOCK
ISSUED ADDITIONAL
------------------------ PAID-IN RETAINED GUARANTEED STOCK STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS ESOP DEBT AWARDS EQUITY
----------- ----------- ----------- ----------- ----------- ----------- -------------
Balances at July 2, 1994............ 7,114 $ 71 $ 19,731 $ 121,434 $ (4,000) $ (936) $ 136,300
Amortization of restricted stock
awards............................ -- -- -- -- -- 539 539
Retirement of restricted stock
awards............................ (5) -- (128) -- -- 128 --
Reduction of guaranteed ESOP debt... -- -- -- -- 2,000 -- 2,000
Net loss............................ -- -- -- (25,666) -- -- (25,666)
Dividends declared of $.44 per
share............................. -- -- -- (3,131) -- -- (3,131)
----- --- ----------- ----------- ----------- ----------- -------------
Balances at July 1, 1995............ 7,109 71 19,603 92,637 (2,000) (269) 110,042
Amortization of restricted stock
awards............................ -- -- -- -- -- 21 21
Retirement of restricted stock
awards............................ (3) -- (86) -- -- 86 --
Reduction of guaranteed ESOP debt... -- -- -- -- 2,000 -- 2,000
Issuance of shares for director
compensation...................... 4 -- 108 -- -- -- 108
Stock options exercised (14)........ 2 -- 32 -- -- -- 32
Net earnings........................ -- -- -- 3,852 -- -- 3,852
Dividends declared of $.44 per
share............................. -- -- -- (3,130) -- -- (3,130)
----- --- ----------- ----------- ----------- ----------- -------------
Balances at June 29, 1996........... 7,112 71 19,657 93,359 -- (162) 112,925
Amortization of restricted stock
awards............................ -- -- -- -- -- 72 72
Issuance of shares for director
compensation...................... 8 -- 167 -- -- -- 167
Stock options exercised (14)........ 2 -- 32 -- -- -- 32
Net earnings........................ -- -- -- 7,954 -- -- 7,954
Dividends declared of $.44 per
share............................. -- -- -- (3,131) -- -- (3,131)
----- --- ----------- ----------- ----------- ----------- -------------
Balances at June 28, 1997........... 7,122 $ 71 $ 19,856 $ 98,182 $ -- $ (90) $ 118,019
----- --- ----------- ----------- ----------- ----------- -------------
----- --- ----------- ----------- ----------- ----------- -------------
See notes to consolidated financial statements.
F-25
DELCHAMPS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
YEAR ENDED
JULY 1, JUNE 29, JUNE 28,
1995 1996 1997
--------- ----------- ----------
Cash flows from operating activities:
Net earnings (loss)............................................................. $ (25,666) $ 3,852 $ 7,954
Adjustment to reconcile net earnings (loss) to net cash provided by operating
activities:
Depreciation and amortization................................................... 19,472 21,771 23,719
Write-off of cost in excess of fair value of assets acquired.................... 5,050 -- --
(Gain) loss on sale of property and equipment................................... 231 (420) (2,054)
Restricted stock award amortization............................................. 667 21 72
Non cash director compensation expense.......................................... -- 108 167
Deferred income tax expense (benefit)........................................... (9,206) 1,928 (1,661)
Decrease (increase) in merchandise inventories.................................. 11,855 3,011 1,071
Increase in accounts payable, accrued expenses, and current portion of
restructure obligation........................................................ 10,887 5,567 (2,324)
Increase (decrease) in income taxes, net........................................ (6,491) 5,785 1,619
(Decrease) increase in other liabilities and restructure obligation............. 19,113 (1,653) (2,023)
Increase in other assets........................................................ (716) (890) (3,203)
--------- ----------- ----------
Net cash flows provided by operating activities................................. 25,196 39,080 23,337
--------- ----------- ----------
Cash flows from investing activities:
Additions to property and equipment............................................. (35,239) (21,671) (15,551)
Proceeds from sale of property and equipment, net............................... 611 710 4,387
--------- ----------- ----------
Net cash used in investing activities........................................... (34,628) (20,961) (11,164)
--------- ----------- ----------
Cash flows from financing activities:
Principal payments on obligation under capital leases........................... (1,576) (665) (747)
Principal payments on long-term debt and notes payable.......................... (15,333) (25,239) (26,760)
Proceeds from issuance of long-term debt and notes payable...................... 30,000 5,480 13,600
Issuance of stock options....................................................... -- 32 32
Dividends paid.................................................................. (3,131) (3,130) (3,131)
--------- ----------- ----------
Net cash (used in) provided by financing activities........................... 9,960 (23,522) (17,006)
--------- ----------- ----------
Net (decrease) increase in cash and cash equivalents............................ 528 (5,403) (4,833)
Cash and cash equivalents at beginning of year.................................. 15,378 15,906 10,503
--------- ----------- ----------
Cash and cash equivalents at end of year........................................ $ 15,906 $ 10,503 $ 5,670
--------- ----------- ----------
--------- ----------- ----------
See notes to consolidated financial statements.
F-26
DELCHAMPS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. DESCRIPTION OF BUSINESS
Delchamps, Inc. and subsidiary ("Delchamps") are engaged in the business of
retail food distribution through Delchamp's supermarkets located in Alabama,
Florida, Louisiana, and Mississippi.
B. DEFINITION OF FISCAL YEAR
Delchamp's fiscal year ends on the Saturday closest to June 30. Fiscal 1995,
1996 and 1997 all comprised 52 weeks.
C. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Delchamps,
Inc. and its wholly owned wholesale subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.
D. CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the company
considers all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
E. MERCHANDISE INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined on
the last-in, first-out ("LIFO") basis for 87% in 1995, 88% in 1996 and 89% in
1997. With respect to the remaining inventories, primarily produce and market,
cost is determined on the first-in, first-out ("FIFO") basis. Inventories
developed from the retail method comprised approximately 55% of total
inventories in 1995, 58% in 1996 and 59% in 1997.
F. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Buildings and equipment acquired
prior to July 1, 1984 are depreciated over the estimated useful lives of the
respective assets using primarily the double-declining balance method. Buildings
and equipment acquired subsequent to July 1, 1984, are depreciated over the
estimated useful lives of the respective assets using the straight-line method.
Buildings and equipment under the capital leases are stated at the lower of the
present value of the minimum lease payments at the beginning of the lease term
or fair value of the property at the inception of the lease. Assets leased under
capital leases and leasehold improvements are amortized using the straight-line
method over the lesser of the lease term or the estimated useful lives of the
related assets. Delchamps uses the following periods for depreciating and
amortizing property and equipment:
10-50
Buildings............................................................... years
Leasehold improvements.................................................. 10 years
Fixtures and equipment.................................................. 5-10 years
F-27
DELCHAMPS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G. COST IN EXCESS OF FAIR VALUE OF ASSETS ACQUIRED
Cost in excess of fair value of assets acquired arose from the purchase of
three supermarkets and real estate in fiscal 1988. For fiscal 1988 through 1994,
amortization was recorded over a 40 year period on a straight-line basis.
The acquired property did not achieve sales and earnings projections
prepared at the time of the acquisition. The primary cause of the short-fall in
Delchamp's projections was because of the competitors increasing promotional
activity, competitors opening new supermarkets, and competitors expanding
existing supermarkets. Delchamps determined, based on the trend of operating
results for 1988 through 1995, that the projected results of the acquired
property would not support the future amortization of the remaining balance of
the costs in excess of fair value of assets acquired. Accordingly, Delchamps
wrote-off its remaining balance of cost in excess of fair value of assets
acquired of $5.1 million in the fourth quarter of fiscal 1995.
H. INCOME TAXES
Deferred tax liabilities or assets are established for temporary differences
between financial and tax reporting bases and are subsequently adjusted to
reflect changes in tax rates expected to be in effect when the temporary
differences reverse. The major temporary differences and their net effect are
shown in the "Income Taxes" note.
Job credits are recorded as a reduction of the provision for Federal income
taxes in the year realized.
I. EARNINGS PER SHARE
Earnings per share are computed by dividing net earnings by the weighted
average number of shares of common stock outstanding.
J. MANAGEMENT ESTIMATES
Management of Delchamps has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from these estimates.
K. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts receivable, accounts payable, and
accrued expenses approximate fair value because of the short maturity of these
items.
The carrying amounts of the notes payable and long-term debt approximate
fair value because the interest rates in these instruments approximate market
interest rates.
L. IMPAIRMENT OF LONG-LIVED ASSETS
Effective June 30, 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be
F-28
DELCHAMPS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Disposed Of" ("SFAS No. 121"). SFAS No. 121 establishes accounting standards for
the impairment of long-lived assets, certain identifiable intangibles and
goodwill related to those assets to be held and used, or to be disposed of. The
implementation did not have a significant impact on the Company's financial
condition or results of operation.
(M) STOCK COMPENSATION
During fiscal 1997, Delchamps adopted Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation," which
was effective for fiscal years beginning after December 15, 1995. The statement
encourages the use of a fair-value-based method of accounting for stock-based
awards under which the fair value of stock options is determined on the date of
grant and expensed over the vesting period. Companies may, however, continue to
measure compensation costs for those plans using the method prescribed by
Accounting Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock
Issued to Employees." Companies that continue to apply APB No. 25 are required
to include pro forma disclosures of net earnings and earnings per share as if
the fair-value-based method of accounting had been applied. Delchamps has
elected to continue to account for such plans under the provisions of APB No.
25. Compensation expense computed under the fair-value-based method is not
significant to the financial statements as a whole, therefore pro forma
disclosures have not been included.
(2) CASH EQUIVALENTS
Cash equivalents are stated at cost which approximates market value. Cash
equivalents at June 29, 1996 and June 28, 1997 consisted of the following:
(IN THOUSANDS)
1996 1997
--------- ---------
Euro Dollar Time Deposits...................................................................... $ 1,130 $ 2
Marketable Unit Investment Fund................................................................ 856 856
Cash Management Tax Exempt Fund................................................................ 20 77
--------- ---------
$ 2,006 $ 935
--------- ---------
--------- ---------
(3) MERCHANDISE INVENTORIES
Delchamps uses the LIFO method of valuing certain of its merchandise
inventories to minimize inflation-induced inventory profits and to achieve a
better matching of current costs with current revenues. Inventories would
increase by approximately $13,780,000 at June 29, 1996 and $14,171,000 at June
28, 1997 if all of Delchamp's inventories were stated at cost determined by the
first-in, first-out method. Further, net earnings would increase by
approximately $322,000 in fiscal year 1995, increase $262,000 in fiscal year
1996, and increase $240,000 in fiscal year 1997, after applying Delchamp's
marginal tax rate and without assuming an investment return on the applicable
income tax savings
Delchamps is a member of a cooperative association from which it purchases
private label merchandise for resale and certain supermarket equipment.
Merchandise inventories purchased from this cooperative association approximated
19% of total inventory purchases in 1995, 1996 and 1997.
F-29
DELCHAMPS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997
(4) LEASES
Delchamps leases certain supermarket properties and equipment under capital
leases that expire over the next 11 years. Delchamps also leases warehouses,
store properties, and store equipment under noncancelable operating leases that
expire over the next 20 years. Contingent rentals on store properties are paid
as a percentage of sales in excess of a stipulated minimum. In the normal course
of business, it is expected that most leases will be renewed or replaced by
leases on other properties and equipment.
Included in property and equipment are the following amounts applicable to
capital leases:
(IN THOUSANDS)
--------------------
1996 1997
--------- ---------
Buildings................................................................................... $ 13,998 $ 13,998
Fixtures and equipment...................................................................... 19,040 19,040
--------- ---------
33,038 33,038
Less accumulated amortization............................................................... 26,888 27,578
--------- ---------
$ 6,150 $ 5,460
--------- ---------
--------- ---------
Future minimum lease payments under noncancelable operating leases and the
present value of future minimum capital lease payments as of June 28, 1997 are
as follows:
(IN THOUSANDS)
CAPITAL OPERATING
LEASES LEASES
--------- -----------
Fiscal Year
1998....................................................................................... $ 2,081 $ 38,292
1999....................................................................................... 2,081 37,702
2000....................................................................................... 2,081 37,081
2001....................................................................................... 2,081 34,989
2002....................................................................................... 1,961 33,766
Later years.................................................................................. 6,968 241,182
--------- -----------
Total minimum lease payments............................................. 17,253 $ 423,012
---------
---------
Less amount representing interest........................................ 6,853
---------
Present value of net minimum capital lease payments...................... 10,400
Less current installments of obligations under capital leases............ 844
---------
Long-term obligations under capital leases............................... $ 9,556
---------
---------
F-30
DELCHAMPS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997
(4) LEASES (CONTINUED)
Rental expense and contingent rentals for operating leases are as follows:
(IN THOUSANDS)
1995 1996 1997
--------- --------- ---------
Minimum rentals.................................................................. $ 43,552 $ 45,514 $ 45,329
Contingent rentals............................................................... 99 66 129
--------- --------- ---------
$ 43,651 $ 45,580 $ 45,458
--------- --------- ---------
--------- --------- ---------
Most of Delchamp's leases stipulate that Delchamps pay taxes, maintenance,
insurance, and certain other operating expenses applicable to the leased
property.
(5) LONG-TERM DEBT
Long-term debt as of June 29, 1996 and June 28, 1997 consisted of the
following:
(IN THOUSANDS)
1996 1997
--------- ---------
5.51% note payable, due in 84 monthly installments of $297,619 in principal plus interest,
with the final installment due July 1, 2000, unsecured.................................... $ 14,286 $ 10,714
Note payable, with interest rates based on LIBOR + 1.5%, due in 60 monthly installments of
$15,625 in principal plus interest, with the final installment due March 1, 1998, secured
by deposit accounts with the lender....................................................... 313 125
--------- ---------
Total long-term debt........................................................................ 14,599 10,839
Less current installments................................................................... 3,760 3,697
--------- ---------
Long-term debt, excluding current installments.............................................. $ 10,839 $ 7,142
--------- ---------
--------- ---------
Agreements underlying the notes payable contain restrictive covenants which
limit the payment of dividends, additional debt, lease rentals, and transactions
with affiliates, and require maintenance of certain working capital and equity
levels. At June 28, 1997, Delchamps was in compliance with all covenants. At
June 28, 1997, approximately $4,950,000 of Delchamp's retained earnings was
available for the payment of dividends under such restrictive provisions.
Cash payments for interest were approximately $5,368,000, $7,129,000 and
$5,268,000 in 1995, 1996 and 1997, respectively.
Aggregate annual maturities of long-term debt for fiscal years after June
28, 1997 are approximately as follows:
(IN THOUSANDS)
FISCAL YEAR ANNUAL MATURITIES
- ----------------------------------------------------------------------------------------------- -----------------
1998........................................................................................... $ 3,697
1999........................................................................................... 3,571
2000........................................................................................... 3,571
-------
$ 10,839
-------
-------
F-31
DELCHAMPS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997
(5) LONG-TERM DEBT (CONTINUED)
Based on the borrowing rates currently available to Delchamps for long-term
debt with similar terms and maturities, the fair value of the long-term debt
outstanding at June 29, 1996 and June 28, 1997 approximated the carrying value,
with the exception of the 5.51% note payable, the fair value of which
approximated $13.7 million and $10.0 million at June 29, 1996 and June 28, 1997,
respectively. The fair value was estimated using a discounted cash flow analysis
based on Delchamps' borrowing rate for similar liabilities.
(6) NOTES PAYABLE
Short-term borrowings as of June 29, 1996 and June 28, 1997 consisted of the
following:
(IN THOUSANDS)
1996 1997
--------- ---------
Revolving loan commitments, due on various dates throughout fiscal 1996 and fiscal 1997,
respectively, with interest rates based on LIBOR + 1.25%, secured by all of Delchamps'
inventory................................................................................. $ 14,000 $ 4,600
On June 29, 1995, Delchamps entered into a $75,000,000 revolving loan credit
agreement. The revolving loan agreement is committed through June, 1998. There
is an annual commitment fee of .25 of 1% on the unused portion. At Delchamps'
option, interest under the agreement may be based on LIBOR or the prime rate. As
of June 28, 1997, Delchamps is committed to a LIBOR contract which expires July
28, 1997 and has a weighted average interest rate of 6.9375%.
The credit agreement requires Delchamps to maintain minimum levels of
earnings and to comply with stated debt covenants. At June 28, 1997, Delchamps
was in compliance with all covenants.
(7) LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN
In November 1987, Delchamps leveraged its existing Employee Stock Ownership
Plan ("ESOP"). The ESOP used the proceeds of the loan to purchase approximately
1,097,000 shares of Delchamps' common stock. The common stock was held by the
ESOP trustee in a suspense account and these shares served as collateral for the
loan. Each year through fiscal 1996, Delchamps made a contribution to the ESOP
which the trustee used to make principal payments. With each loan payment a
portion of the common stock was released from the suspense account and allocated
to participating employees. Delchamps was required to pay interest on the loan
in excess of any dividends received on unallocated shares. Delchamps guaranteed
$20 million of ESOP debt under the loan agreement. On June 26, 1996, the ESOP
loan was repaid in full. Therefore, as of June 29, 1996 and June 28, 1997, all
shares had been allocated to participants and no shares remain in the "suspense
account."
F-32
DELCHAMPS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997
(8) EMPLOYEE BENEFIT AND INCENTIVE PLANS
Delchamps has an employee stock ownership plan and a profit sharing plan
pursuant to section 401(k) of the Internal Revenue Code (the "Code") which cover
substantially all employees who have completed two years of service. The profit
sharing plan was implemented in fiscal year 1995. Participants may contribute a
percentage of compensation, but not in excess of the maximum allowed under the
Code. The plan provides for a matching contribution by Delchamps. The total
annual contributions to these plans by Delchamps for fiscal 1995, 1996 and 1997
were as follows:
(IN THOUSANDS)
1995 1996 1997
--------- --------- ---------
Employee stock ownership plan........................................................ $ 2,000 $ 2,000 $ --
Profit sharing plan.................................................................. 1,421 1,157 1,055
--------- --------- ---------
$ 3,421 $ 3,157 $ 1,055
--------- --------- ---------
--------- --------- ---------
Delchamps has an incentive compensation plan for certain management
personnel tied to Delchamps' overall performance. Incentive compensation expense
was $1,252,000 in fiscal 1996 and $2,943,000 in fiscal 1997. Incentive
compensation was not paid in 1995.
In fiscal 1988, Delchamps adopted, with stockholder approval, a restricted
stock award plan. The plan provides that a maximum of 150,000 shares of common
stock be awarded to key executives. During 1989, 138,000 shares were awarded to
key executives at a price of $.01 per share. No shares have been awarded since
1989. These awarded shares are held by Delchamps for future distribution in
accordance with the provisions of the plan. Total compensation expense to be
charged to operations over the term of the plan is approximately $3,209,000.
Total compensation expense associated with the plan was determined based on the
market value of the stock at the date of award, and is being amortized on a
straight-line basis over the period the restrictions lapse. Charges to
operations for this plan were approximately $293,000 in 1995, $21,000 in 1996
and $72,000 in 1997.
(9) POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS
Delchamps provides a postemployment longevity bonus to associates that leave
employment after either attaining age 55 or completing 25 years of service. The
amount of longevity bonus is based on length of service and is recognized on an
accrual basis as employees perform services to earn the benefits. Longevity
bonus expense was $276,000 in 1995 and $304,000 in 1996 and 1997.
F-33
DELCHAMPS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997
(10) INCOME TAXES
The components of income tax expense (benefit) are as follows:
(IN THOUSANDS)
CURRENT DEFERRED TOTAL
--------- --------- ----------
1995:
Federal........................................................................ $ (4,746) $ (8,101) $ (12,847)
State.......................................................................... (648) (1,105) (1,753)
--------- --------- ----------
$ (5,394) $ (9,206) $ (14,600)
--------- --------- ----------
--------- --------- ----------
1996:
Federal........................................................................ $ 461 $ 1,711 $ 2,172
State.......................................................................... 58 217 275
--------- --------- ----------
$ 519 $ 1,928 $ 2,447
--------- --------- ----------
--------- --------- ----------
1997:
Federal........................................................................ $ 5,750 $ (1,467) $ 4,283
State.......................................................................... 762 (194) 568
--------- --------- ----------
$ 6,512 $ (1,661) $ 4,851
--------- --------- ----------
--------- --------- ----------
The actual income tax expense (benefit) differs from the statutory tax rate
for all years (computed by applying the U.S. federal corporate rate to earnings
(loss) before income taxes) as follows:
(IN THOUSANDS)
1995 1996 1997
---------- ---------- ---------
Statutory tax rate.............................................................. $ (13,690) $ 2,142 $ 4,354
Increase (reduction) in income taxes resulting from:
State income taxes, net of Federal income tax benefit......................... (2,219) 270 570
Targeted jobs tax credits..................................................... (385) (25) --
Cost in excess of fair value of assets acquired............................... 1,771 -- --
Other, net.................................................................... (77) 60 (73)
---------- ---------- ---------
Actual tax expense (benefit)................................................ $ (14,600) $ 2,447 $ 4,851
---------- ---------- ---------
---------- ---------- ---------
Effective tax rate.............................................................. 36.3% 38.8% 37.9%
---------- ---------- ---------
---------- ---------- ---------
F-34
DELCHAMPS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997
(10) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to the deferred tax
assets and deferred tax liabilities are as follows:
(IN THOUSANDS)
1996 1997
--------- ---------
Deferred tax assets:
Restructure obligation..................................................................... $ 7,531 $ 6,054
Capital lease obligation................................................................... 1,939 1,901
Accrued self-insurance..................................................................... 2,879 4,515
Accrued postemployment benefits............................................................ 888 847
Other accrued liabilities.................................................................. 1,585 2,099
--------- ---------
Net deferred tax assets.................................................................... 14,797 15,416
--------- ---------
Deferred tax liabilities:
Accelerated depreciation................................................................... 19,985 18,942
Other...................................................................................... 159 160
--------- ---------
Total gross deferred liabilities........................................................... 20,144 19,102
--------- ---------
Net deferred tax liability................................................................... $ 5,347 $ 3,686
--------- ---------
--------- ---------
No valuation allowance was recorded against the deferred tax assets at June
28, 1997. Delchamps' management believes the existing net deductible temporary
differences comprising the total gross deferred tax assets will reverse during
the periods in which Delchamps generates net taxable income.
Cash payments for income taxes were approximately $1,437,000, $67,000 and
$5,454,000 in fiscal 1995, 1996 and 1997, respectively.
(11) SHARE PURCHASE RIGHTS PLAN
In October 1988, Delchamps adopted a Share Purchase Rights Plan and declared
a dividend distribution of one Right for each outstanding share of common stock.
Under certain conditions, each Right may be exercised to purchase one
one-hundredth of a share of Junior Participating Preferred Stock at a purchase
price of $70, subject to adjustment. Delchamps will be entitled to redeem the
Rights at $.01 per Right at any time prior to the earlier of the expiration of
the Rights in October 1998 or ten days following the time a person or group
acquires or obtains the right to acquire a 15% position in Delchamps. The Rights
do not have voting or dividend privileges. Until such time as they become
exercisable, the Rights have no dilutive effect on the earnings per share of
Delchamps.
(12) RESTRUCTURING CHARGE
During fiscal 1995, Delchamps recorded a pretax restructuring charge of
$28.8 million. The charge reflected anticipated costs associated with a program
to close certain underperforming stores which could not be subleased in whole or
in part and, to a lesser extent, severance costs related to the termination of
employment of former executives. Of the total $28.8 million restructuring
reserve, $3.2 million, $5.9 million
F-35
DELCHAMPS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997
(12) RESTRUCTURING CHARGE (CONTINUED)
and $3.9 million of costs and payments have been charged against the reserve for
fiscal 1995, 1996 and 1997, respectively. A detail of charges against the
restructure obligation follows:
(IN THOUSANDS)
1995 1996 1997
--------- --------- ---------
Lease payments....................................................................... $ 1,421 $ 3,438 $ 2,745
Inventory write-offs................................................................. -- 253 300
Fixture and equipment write-offs..................................................... 24 1,828 138
Severance payments................................................................... 1,752 400 755
--------- --------- ---------
$ 3,197 $ 5,919 $ 3,938
--------- --------- ---------
--------- --------- ---------
(13) COMMITMENTS AND CONTINGENCIES
Delchamps is a defendant in various claims and legal actions considered to
be in the normal course of business. Management intends to vigorously defend
these claims and believes that the ultimate disposition of these matters will
not have a material adverse effect on Delchamps' consolidated financial
condition.
In fiscal 1989, and subsequently, Delchamps has entered into certain
agreements with officers and key management. The agreements contain provisions
entitling each officer or employee covered by these agreements to receive from 1
to 3 times his annual compensation (as defined) if there is a change in control
of Delchamps (as defined) and a termination of his employment. The agreements
also provide for severance benefits under certain other circumstances. The
agreements do not constitute employment contracts and only apply in
circumstances following a change in control of Delchamps. In the event of a
change in control of Delchamps and termination of all persons covered by these
agreements, the cost would be approximately $12,100,000.
(14) STOCK INCENTIVE PLAN
Key employees of Delchamps (including officers and directors who are also
full-time employees of Delchamps) are eligible to receive one or more of the
following: incentive stock options and non-qualified stock options, stock
awards, restricted stock, performance shares, and cash awards. Approximately
460,800 stock options have been granted of which approximately 351,550 shares
are exercisable as of June 28, 1997. The stock options expire from December 2000
through October 2006. During fiscal 1997, approximately 2,000 options were
exercised. Exercise prices range from $17.88 to $23.00 which was market value at
date of grant.
F-36
DELCHAMPS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED JULY 1, 1995, JUNE 29, 1996 AND JUNE 28, 1997
(15) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data for the years ended June 29, 1996 and June
28, 1997 is summarized as follows:
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------
FISCAL
QUARTERS
1996 FIRST SECOND THIRD FOURTH
- ------------------------------------------------------------- ---------- -------------- ---------- ----------
Sales........................................................ $ 284,689 $ 277,053 $ 280,225 $ 284,662
Gross profit................................................. 64,470 64,915 65,684 68,171
Earnings (loss) before tax................................... (1,124) 1,290 1,897 4,236
Net earnings (loss).......................................... (756) 808 1,147 2,653
Net earnings (loss) per common share......................... (0.11) 0.12 0.16 0.37
Dividends declared per common share.......................... 0.11 0.11 0.11 0.11
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------
FISCAL
QUARTERS
1997 FIRST SECOND THIRD FOURTH
- ------------------------------------------------------------- ---------- -------------- ---------- ----------
Sales........................................................ $ 289,699 $ 272,602 $ 273,753 $ 266,893
Gross profit................................................. 65,367 65,116 69,182 72,404
Earnings before tax.......................................... 343 321 4,428 7,713
Net earnings................................................. 204 176 2,720 4,854
Net earnings per common share................................ .03 .03 .38 .68
Dividends declared per common share.......................... 0.11 0.11 0.11 0.11
(16) SUBSEQUENT EVENT
On July 8, 1997, Delchamps announced that it had entered into an agreement
to be acquired by Jitney-Jungle Stores of America, Inc. ("Jitney-Jungle"). The
terms of the agreement are described in Delchamps' 14D-9 and in Jitney-Jungle's
14D-1, both of which have been filed with the Securities and Exchange
Commission. Pursuant to the agreement, Jitney-Jungle has begun an all-cash
tender offer for all of Delchamps' outstanding common stock at a price of $30
per share. Following successful completion of the tender offer, Jitney-Jungle
will acquire for the same cash price any shares that are not tendered by means
of a merger of Delchamps with a wholly owned subsidiary of Jitney-Jungle.
Delchamps' Board of Directors has approved the transaction unanimously and has
recommended approval by Delchamps' stockholders.
F-37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
------------------------------
TABLE OF CONTENTS
PAGE
----
Available Information..................................................... 2
Summary................................................................... 3
Use of Proceeds........................................................... 8
Risk Factors.............................................................. 14
The Transactions.......................................................... 20
Pro Forma Capitalization.................................................. 22
Pro Forma Condensed Consolidated Financial Statements..................... 23
Pro Forma Liquidity....................................................... 35
Selected Historical Financial Information of Jitney-Jungle................ 37
Management's Discussion and Analysis of Financial Condition and Results of
Operations of Jitney-Jungle............................................. 38
Selected Historical Financial Information of Delchamps.................... 44
Management's Discussion and Analysis of Financial Condition and Results of
Operations of Delchamps................................................. 46
The Exchange Offer........................................................ 50
Business.................................................................. 56
Management................................................................ 68
Ownership of Capital Stock................................................ 74
Certain Relationships and Related Transactions............................ 78
Description of Certain Indebtedness....................................... 80
Description of the Notes.................................................. 83
Book-Entry; Delivery and Form............................................. 112
Certain Federal Income Tax Considerations................................. 114
Plan of Distribution...................................................... 115
Legal Matters............................................................. 116
Experts................................................................... 116
Index to Financial Statements............................................. F-1
------------------------
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT PARTICIPATING IN THE
ORIGINAL DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
PROSPECTUS
$200,000,000
[LOGO]
JITNEY-JUNGLE STORES OF AMERICA, INC.
OFFER TO EXCHANGE
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
FOR ALL OUTSTANDING
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 79-48.51 of the Mississippi Business Corporation Act provides that a
Mississippi corporation may indemnify an individual made a party to a proceeding
because he is or was a director against liability incurred in the proceeding if
the individual (1) conducted himself in good faith; (2) reasonably believed (i)
in the case of conduct in his official capacity with the corporation, that his
conduct was in its best interests; and (ii) in all other cases, that his conduct
was a least not opposed to its best interests; and (3) in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. A corporation may indemnify a director in these circumstances only
upon specific authorization by the board of directors (or in certain
circumstances, a committee thereof) special legal counsel or by shareholders as
provided in Section 79-4-8.55. Section 79-4-8.52 of the Mississippi Business
Corporation Act provides that a Mississippi corporation must indemnify a
director who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which he was a party because he is or was a director of the
corporation against reasonable expenses incurred by him in connection with the
proceeding, unless the articles of incorporation provide otherwise.
The Articles of Incorporation of the Company provide that a director of the
Company shall not be liable to the corporation or its shareholders for money
damages for an action taken, or any failure to take any action, as a director,
except liability for: (i) the amount of a financial benefit received by a
director to which he is not entitled: (ii) an intentional infliction of harm on
the corporation or the shareholders; (ii) a violation Section 79-4-8.33 of the
Mississippi Business Corporation Act regarding unlawful distributions; or (iv)
an intentional violation of criminal law.
The bylaws of the Company provide that the Company will indemnify any person
who is a party or is threatened to be made a party to any threatened, pending or
instituted action, suit or proceedings, whether civil, criminal, administrative
or investigative by reason of the fact that he is or was a director or officer
of the Company, or is or was servicing at the request of the Company as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonable incurred by him in connection
with such action, suit or proceeding interests of the Company, and, with respect
to any criminal action or proceeding, had no reasonable judgment, order,
settlement, conviction, or plea or nolo contendere or its equivalent, will not,
in itself, create a presumption that the person did not act in good faith and in
a manner which reasonably believed to be in or not opposed to the best interests
of the Company, and with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful. The provision does
not apply to such claims on behalf of the Company against such director or
officer.
To the extent that any person described above has been successful on the
merits or otherwise in defense of any action, suit or proceeding or in defense
of any claim, issue or matter discussed above, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Such indemnification under the bylaws may be made by the Company only as
authorized in each specific case upon a determination that indemnification of
the director or officer is proper under the determination shall be made, (i) by
the Board of Directors by a majority vote of a quorum consisting of directors
who were not parties to such actions, suit or proceedings, or (ii) if such
quorum is not obtainable, or even if obtainable a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or
(iii) by the shareholders.
Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Company in advance of the final disposition of
such action, suit or proceeding if authorized by the Board
II-1
of Directors in a specific case upon receipt of an undertaking by or on behalf
of the director or officer to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Company.
The indemnification provided by the bylaws should not be deemed exclusive of
any other rights to which a person seeking indemnification maybe e entitled
under any statute, by-law, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director or officer and shall inure to the benefit
of the heirs, executors and administrators or such a person.
The Company has power to purchase and maintain insurance on behalf of any
person who is or was a director or officer of the Company, or is or was serving
at the request of the Company as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, against any lability
asserted against him or incurred by him in any such capacity, or arising out of
his status as such, whether or not the Company would have the power to indemnify
him against such liability under the provisions of the bylaws. The Company has
the power to designate an attorney for such persons, and in any event, any
officer or director must notify the Board of Directors, in writing of any
potential claim or threatened action against him in order to be entitled to
indemnification. The requisite notice must be given within a reasonable time.
The foregoing summary of the Mississippi Business Corporation Act, of the
Company's Articles of Incorporation and of the Company's Bylaws, is qualified in
its entirety by reference to the relevant provisions of the Mississippi Business
Corporation Act and by reference to the relevant provisions of the Company's
Articles of Incorporation (filed as Exhibit 3.1) and the relevant provisions of
the Company's By-laws (filed as Exhibit 3.2).
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
EXHIBIT
NO. DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
2.1 Agreement and Plan of Exchange and of Merger, dated as of November 16, 1995 by and among JJ Acquisitions
Corp. and the Company, Southern Jitney-Jungle Company, McCarty-Holman Co., Inc. and Jitney-Jungle Bakery,
Inc. (incorporated by reference to Exhibit 2.1 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ
Acquisitions Corp. filed with the Commission on February 27, 1996)
3.1 Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.3
to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on
February 27, 1996)
3.2 Restated by-laws of the Company (incorporated by reference to Exhibit 3.6 to Amendment No. 2 to Form S-1
[No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996)
4.1 Indenture dated as of September 15, 1997 between the Company, the Subsidiary Guarantors and Marine
Midland Bank, as Trustee
4.2 Registration Rights Agreement dated as of September 15, 1997 among the Company, the Subsidiary
Guarantors, Donaldson, Lufkin & Jenrette Securities Corporation and Credit Suisse First Boston
4.3 Form of the Company's 10 3/8% Senior Subordinated Notes due 2007 (included in Exhibit 4.1)
II-2
EXHIBIT
NO. DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
4.4 Revolving Credit Agreement dated September 15, 1997 by and among Fleet Capital Corporation and the
Company
4.5 Indenture dated March 5, 1996 between the Company and Marine Midland Bank, as Trustee, relating to the
issuance and sale of $200,000,000 aggregate principal amount of 12% Senior Notes due 2006 (incorporated
by reference to Exhibit No. 4.2 to Amendment No. 2 to Form S- 1 [No. 33-80833] of JJ Acquisition Corp.
filed with the Commission on February 27, 1996)
4.6 Warrant dated March 4, 1996 to purchase 75,000 shares of Common Stock of the Company by DLJ Merchant
Banking Partners, L.P. and related investors (incorporated by reference by Exhibit No. 4.3 to Amendment
No. 2 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisition Corp. filed with the Commission on
February 27, 1996)
4.7 Memorandum of Agreement dated October 15, 1985 by and among the City of Jackson, Mississippi and
McCarty-Holman Co., Inc. ($3,650,000)(incorporated by reference to Exhibit No. 4.8 to Amendment No. 2 to
Form S-1 [No. 33-80833] of JJ Acquisitions corp. filed with the Commission on February 27, 1996)
5.1 Opinion of Dechert Price & Rhoads*
9.1 Voting Trust Agreement dated November 1, 1990 by and among Carolyn Holman Kroeze, as Executrix and the
parties named therein (incorporated by reference to Exhibit No. 9.1 to Amendment No. 2 to Form S-1 [No.
33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996)
10.1 Purchase Agreement dated September 10, 1997 among the Company, Donaldson, Lufkin & Jenrette Securities
Corporation and Credit Suisse First Boston with respect to the 10 3/8% Senior Subordinated Notes due 2007
10.2 Supply Agreement dated March 19, 1989 as amended by and among Fleming Companies Inc. (successor in
interest to Malone & Hyde, Inc.), the Company and Interstate Jitney-Jungle Stores, Inc. (incorporated by
reference to Exhibit No. 10.2 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp.
filed with the Commission on February 27, 1996)
10.3 Membership in Topco Associates, Inc. (Cooperative) by ownership of six hundred (600) shares of Common
Stock, such stock certificate being dated July 1, 1991 (incorporated by reference to Exhibit No. 10.3 to
Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisition Corp. filed with the Commission on February
27, 1996)
10.4 Flour Sale Confirmation and Contract dated July 19, 1995 by and among Cargill, Incorporated and
Jitney-Jungle Bakery, Inc. (incorporated by reference to Exhibit No. 10.4 to Amendment No. 2 to Form S-1
[No. 33-808833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996)
10.5 Employment Agreement dated as of February 15, 1995 by and among the Company and Roger P. Friou
(incorporated by reference to Exhibit 10.6 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ
Acquisitions corp. filed with the Commission on February 27, 1996)
10.6 Employment Agreement dated as of February 24, 1995 by and among the Company and David K. Essary
(incorporated by reference to Exhibit 10.7 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ
Acquisitions Corp. filed with the Commission on February 27, 1996)
10.7 Employment Agreement dated as of March 5, 1996 by and among the Company and W.H. Holman, Jr.
(incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K, dated July 24,
1997)
II-3
EXHIBIT
NO. DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
10.8 Employment Agreement dated as of March 5, 1996 by and among the Company and W.H. Holman, III
(incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K, dated July 24,
1997)
10.9 Restatement and Amendment by the Entirety of the Jitney-Jungle Stores of America, Inc. and Affiliates
Profit Sharing Plan and Trust (incorporated by reference to Exhibit No. 10.8 to Amendment No. 2 to Form
S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996)
10.10 Deferred Compensation Plan for the Company dated as of November 16, 1995 by and among the Company,
Southern Jitney-Jungle Company, Jitney-Jungle Bakery, Inc. McCarty-Holman Co., Inc. and W.H. Holman, Jr.,
Roger P. Friou and David K. Essary (incorporated by reference to Exhibit No. 10.9 to Amendment No. 2 to
Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996)
10.11 Shareholders Agreement dated as of March 5, 1996 by and among DLJ Merchant Banking Partners, L.P. JJ
Acquisitions Corp., and certain other signatories party thereto (incorporated by reference to Exhibit No.
10.10 to Amendment No. 2 to Forms S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission
on February 27, 1996)
10.12 Securities Purchase and Holders Agreement dated as of March 5, 1996 by and among JJ Acquisitions Corp.,
Bruckmann, Rosser, Sherrill & Co., L.P. and other parties thereto (incorporated by reference to Exhibit
No. 10.12 to Amendment No. 2 to Form S-1 [No. 33- 80833] of JJ Acquisitions Corp. filed with the
commission on February 27, 1996)
10.13 Registration Rights Agreement dated as of March 5, 1996 dated as of March 5, 1996 by and among the
Company and other parties named therein (incorporated by reference to Exhibit No. 10.13 to Amendment No.
2 to Form S-1 [No.33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996)
12.1 Statement of Ratio of Earnings to Fixed Charges
21.1 Subsidiaries of the Company
23.1 Consent of Dechert Price & Rhoads (included in Exhibit 5.1)
23.3 Consent of Deloitte & Touche LLP
23.4 Consent of KPMG Peat Marwick
24 Power of Attorney (included on signature pages of this Registration Statement)
25 Statement of Eligibility and Qualification, Form T-1, of Marine Midland Bank
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
- ------------------------
* To be supplied by amendment.
(b) Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts and Reserves
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required by
such omitted schedules is set forth in the financial statements or the notes
thereto.
II-4
ITEM 22. UNDERTAKINGS
(a) The undersigned registrants hereby undertake:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the foregoing provisions, or otherwise, the
registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrants of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(d) The undersigned registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
SIGNATURES
JITNEY-JUNGLE STORES OF AMERICA, INC.
Pursuant to the requirements of the Securities Act of 1933, as amended, the
above-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Jackson, State of Mississippi, on the 28th day of October, 1997.
JITNEY-JUNGLE STORES OF AMERICA, INC.
By: /s/ MICHAEL E. JULIAN
-----------------------------------------
Michael E. Julian
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below appoints Michael E. Julian and
David R. Black, either of whom may act without the joinder of the other, as his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities indicated on October 28, 1997.
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ W.H. HOLMAN, JR.
- ------------------------------ Chairman of the Board
W.H. Holman, Jr.
President, Chief Executive
/s/ MICHAEL E. JULIAN Officer and Director
- ------------------------------ (Principal Executive
Michael E. Julian Officer)
Senior Vice President,
/s/ DAVID R. BLACK Finance and Chief
- ------------------------------ Financial Officer
David R. Black (Principal Accounting
Officer)
II-6
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ ROGER P. FRIOU
- ------------------------------ Director
Roger P. Friou
/s/ BRUCE C. BRUCKMANN
- ------------------------------ Director
Bruce C. Bruckmann
/s/ HAROLD O. ROSSER II
- ------------------------------ Director
Harold O. Rosser II
/s/ STEPHEN C. SHERRILL
- ------------------------------ Director
Stephen C. Sherrill
/s/ JOHN M. MORIARTY, JR.
- ------------------------------ Director
John M. Moriarty, Jr.
/s/ RONALD E. JOHNSON
- ------------------------------ Director
Ronald E. Johnson
/s/ BERNARD E. EBBERS
- ------------------------------ Director
Bernard E. Ebbers
/s/ DONALD BENNETT
- ------------------------------ Director
Donald Bennett
II-7
INTERSTATE JITNEY-JUNGLE STORES, INC.
Pursuant to the requirements of the Securities Act of 1933, as amended, the
above-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Jackson, State of Mississippi, on the 28th day of October, 1997.
INTERSTATE JITNEY-JUNGLE STORES, INC.
By: /s/ MICHAEL E. JULIAN
-----------------------------------------
Michael E. Julian
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below appoints Michael E. Julian and
David R. Black, either of whom may act without the joinder of the other, as his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 28, 1997.
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ W.H. HOLMAN, JR.
- ------------------------------ Chairman of the Board
W.H. Holman, Jr.
President, Chief Executive
/s/ MICHAEL E. JULIAN Officer and Director
- ------------------------------ (Principal Executive
Michael E. Julian Officer)
Senior Vice President,
/s/ DAVID R. BLACK Chief Financial Officer
- ------------------------------ and Assistant Secretary
David R. Black (Principal Accounting
Officer)
/s/ ROGER P. FRIOU
- ------------------------------ Director
Roger P. Friou
/s/ BRUCE C. BRUCKMANN
- ------------------------------ Director
Bruce C. Bruckmann
/s/ HAROLD O. ROSSER II
- ------------------------------ Director
Harold O. Rosser II
/s/ STEPHEN C. SHERRILL
- ------------------------------ Director
Stephen C. Sherrill
II-8
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ JOHN M. MORIARTY, JR.
- ------------------------------ Director
John M. Moriarty, Jr.
/s/ RONALD E. JOHNSON
- ------------------------------ Director
Ronald E. Johnson
/s/ BERNARD E. EBBERS
- ------------------------------ Director
Bernard E. Ebbers
/s/ DONALD BENNETT
- ------------------------------ Director
Donald Bennett
II-9
MCCARTY-HOLMAN CO., INC.
Pursuant to the requirements of the Securities Act of 1933, as amended, the
above-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Jackson, State of Mississippi, on the 28th day of October, 1997.
MCCARTY-HOLMAN CO., INC.
By: /s/ MICHAEL E. JULIAN
-----------------------------------------
Michael E. Julian
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below appoints Michael E. Julian and
David R. Black, either of whom may act without the joinder of the other, as his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 28, 1997.
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ W.H. HOLMAN, JR.
- ------------------------------ Chairman of the Board
W.H. Holman, Jr.
President, Chief Executive
/s/ MICHAEL E. JULIAN Officer and Director
- ------------------------------ (Principal Executive
Michael E. Julian Officer)
Senior Vice President,
/s/ DAVID R. BLACK Chief Financial Officer
- ------------------------------ and Assistant Secretary
David R. Black (Principal Accounting
Officer)
/s/ ROGER P. FRIOU
- ------------------------------ Director
Roger P. Friou
/s/ BRUCE C. BRUCKMANN
- ------------------------------ Director
Bruce C. Bruckmann
/s/ HAROLD O. ROSSER II
- ------------------------------ Director
Harold O. Rosser II
/s/ STEPHEN C. SHERRILL
- ------------------------------ Director
Stephen C. Sherrill
II-10
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ JOHN M. MORIARTY, JR.
- ------------------------------ Director
John M. Moriarty, Jr.
/s/ RONALD E. JOHNSON
- ------------------------------ Director
Ronald E. Johnson
/s/ BERNARD E. EBBERS
- ------------------------------ Director
Bernard E. Ebbers
/s/ DONALD BENNETT
- ------------------------------ Director
Donald Bennett
II-11
SOUTHERN JITNEY JUNGLE COMPANY
Pursuant to the requirements of the Securities Act of 1933, as amended, the
above-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Jackson, State of Mississippi, on the 28th day of October, 1997.
SOUTHERN JITNEY JUNGLE COMPANY
By: /s/ MICHAEL E. JULIAN
-----------------------------------------
Michael E. Julian
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below appoints Michael E. Julian and
David R. Black, either of whom may act without the joinder of the other, as his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 28, 1997.
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ W.H. HOLMAN, JR.
- ------------------------------ Chairman of the Board
W.H. Holman, Jr.
President, Chief Executive
/s/ MICHAEL E. JULIAN Officer and Director
- ------------------------------ (Principal Executive
Michael E. Julian Officer)
Senior Vice President,
/s/ DAVID R. BLACK Chief Financial Officer
- ------------------------------ and Assistant Secretary
David R. Black (Principal Accounting
Officer)
/s/ ROBER P. FRIOU
- ------------------------------ Director
Roger P. Friou
/s/ BRUCE C. BRUCKMANN
- ------------------------------ Director
Bruce C. Bruckmann
/s/ HAROLD O. ROSSER II
- ------------------------------ Director
Harold O. Rosser II
/s/ STEPHEN C. SHERRILL
- ------------------------------ Director
Stephen C. Sherrill
II-12
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ JOHN M. MORIARTY, JR.
- ------------------------------ Director
John M. Moriarty, Jr.
/s/ RONALD E. JOHNSON
- ------------------------------ Director
Ronald E. Johnson
/s/ BERNARD E. EBBERS
- ------------------------------ Director
Bernard E. Ebbers
/s/ DONALD BENNETT
- ------------------------------ Director
Donald Bennett
II-13
PUMP AND SAVE, INC.
Pursuant to the requirements of the Securities Act of 1933, as amended, the
above-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Jackson, State of Mississippi, on the 28th day of October, 1997.
PUMP AND SAVE, INC.
By: /s/ MICHAEL E. JULIAN
-----------------------------------------
Michael E. Julian
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below appoints Michael E. Julian and
David R. Black, either of whom may act without the joinder of the other, as his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 28, 1997.
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ W.H. HOLMAN, JR.
- ------------------------------ Chairman of the Board
W.H. Holman, Jr.
/s/ MICHAEL E. JULIAN Chief Executive Officer
- ------------------------------ and Director (Principal
Michael E. Julian Executive Officer)
Senior Vice President,
/s/ DAVID R. BLACK Chief Financial Officer
- ------------------------------ and Assistant Secretary
David R. Black (Principal Accounting
Officer)
/s/ ROGER P. FRIOU
- ------------------------------ Director
Roger P. Friou
/s/ BRUCE C. BRUCKMANN
- ------------------------------ Director
Bruce C. Bruckmann
/s/ HAROLD O. ROSSER II
- ------------------------------ Director
Harold O. Rosser II
/s/ STEPHEN C. SHERRILL
- ------------------------------ Director
Stephen C. Sherrill
II-14
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ JOHN M. MORIARTY, JR.
- ------------------------------ Director
John M. Moriarty, Jr.
/s/ RONALD E. JOHNSON
- ------------------------------ Director
Ronald E. Johnson
/s/ BERNARD E. EBBERS
- ------------------------------ Director
Bernard E. Ebbers
/s/ DONALD BENNETT
- ------------------------------ Director
Donald Bennett
II-15
DELTA ACQUISITION CORPORATION
Pursuant to the requirements of the Securities Act of 1933, as amended, the
above-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Jackson, State of Mississippi, on the 28th day of October, 1997.
DELTA ACQUISITION CORPORATION
By: /s/ MICHAEL E. JULIAN
-----------------------------------------
Michael E. Julian
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below appoints Michael E. Julian, and
David R. Black, either of whom may act as his true and lawful attorney-in-fact
and agent with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto and all other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or their substitute or substitutes
may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 28, 1997.
SIGNATURE TITLE
- ------------------------------ --------------------------
President, Chief Executive
/s/ MICHAEL E. JULIAN Officer, Secretary and
- ------------------------------ Director (Principal
Michael E. Julian Executive Officer)
Senior Vice President,
/s/ DAVID R. BLACK Chief Financial Officer,
- ------------------------------ Assistant Secretary and
David R. Black Treasurer (Principal
Accounting Officer)
II-16
SUPERMARKET CIGARETTE SALES, INC.
Pursuant to the requirements of the Securities Act of 1933, as amended, the
above-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Jackson, State of Mississippi, on the 28th day of October, 1997.
SUPERMARKET CIGARETTE SALES, INC.
By: /s/ MICHAEL E. JULIAN
-----------------------------------------
Michael E. Julian
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below appoints Michael E. Julian and
David R. Black, either of whom may act without the joinder of the other, as his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 28, 1997.
SIGNATURE TITLE
- ------------------------------ --------------------------
President, Chief Executive
/s/ MICHAEL E. JULIAN Officer and Director
- ------------------------------ (Principal Executive
Michael E. Julian Officer)
Senior Vice President,
Treasurer, Chief
/s/ DAVID R. BLACK Financial Officer and
- ------------------------------ Assistant Secretary
David R. Black (Principal Accounting
Officer)
/s/ W.H. HOLMAN, JR.
- ------------------------------ Director
W.H. Holman, Jr.
/s/ ROGER P. FRIOU
- ------------------------------ Director
Roger P. Friou
/s/ BRUCE C. BRUCKMANN
- ------------------------------ Director
Bruce C. Bruckmann
/s/ HAROLD O. ROSSER II
- ------------------------------ Director
Harold O. Rosser II
/s/ STEPHEN C. SHERRILL
- ------------------------------ Director
Stephen C. Sherrill
II-17
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ CARL F. BAILEY
- ------------------------------ Director
Carl F. Bailey
/s/ E.E. BISHOP
- ------------------------------ Director
E.E. Bishop
/s/ WILLIAM W. CRAWFORD
- ------------------------------ Director
William W. Crawford
II-18
JITNEY-JUNGLE BAKERY, INC.
Pursuant to the requirements of the Securities Act of 1933, as amended, the
above-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Jackson, State of Mississippi, on the 28th day of October, 1997.
JITNEY-JUNGLE BAKERY, INC.
By: /s/ MICHAEL E. JULIAN
-----------------------------------------
Michael E. Julian
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below appoints Michael E. Julian and
David R. Black, either of whom may act without the joinder of the other, as his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 28, 1997.
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ W.H. HOLMAN, JR.
- ------------------------------ Chairman of the Board
W.H. Holman, Jr.
President, Chief Executive
/s/ MICHAEL E. JULIAN Officer and Director
- ------------------------------ (Principal Executive
Michael E. Julian Officer)
Senior Vice President,
/s/ DAVID R. BLACK Chief Financial Officer
- ------------------------------ and Assistant Secretary
David R. Black (Principal Accounting
Officer)
/s/ ROGER P. FRIOU
- ------------------------------ Director
Roger P. Friou
/s/ BRUCE C. BRUCKMANN
- ------------------------------ Director
Bruce C. Bruckmann
/s/ HAROLD O. ROSSER II
- ------------------------------ Director
Harold O. Rosser II
/s/ STEPHEN C. SHERRILL
- ------------------------------ Director
Stephen C. Sherrill
II-19
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ JOHN M. MORIARTY, JR.
- ------------------------------ Director
John M. Moriarty, Jr.
/s/ RONALD E. JOHNSON
- ------------------------------ Director
Ronald E. Johnson
/s/ BERNARD E. EBBERS
- ------------------------------ Director
Bernard E. Ebbers
/s/ DONALD BENNETT
- ------------------------------ Director
Donald Bennett
II-20
DELCHAMPS, INC.
Pursuant to the requirements of the Securities Act of 1933, as amended, the
above-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Jackson, State of Mississippi, on the 28th day of October, 1997.
DELCHAMPS, INC.
By: /s/ MICHAEL E. JULIAN
-----------------------------------------
Michael E. Julian
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
Each person whose signature appears below appoints Michael E. Julian and
David R. Black, either of whom may act without the joinder of the other, as his
true and lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and all other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents or their substitute or substitutes may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 28, 1997.
SIGNATURE TITLE
- ------------------------------ --------------------------
Chairman of the Board and
/s/ MICHAEL E. JULIAN Chief Executive Officer
- ------------------------------ (Principal Executive
Michael E. Julian Officer)
Senior Vice President,
/s/ DAVID R. BLACK Treasurer, Chief
- ------------------------------ Financial Officer and
David R. Black Secretary (Principal
Accounting Officer)
/s/ E.E. BISHOP
- ------------------------------ Director
E.E. Bishop
/s/ BRUCE C. BRUCKMANN
- ------------------------------ Director
Bruce C. Bruckmann
/s/ ROGER P. FRIOU
- ------------------------------ Director
Roger P. Friou
/s/ WILLIAM W. CRAWFORD
- ------------------------------ Director
William W. Crawford
/s/ W.H. HOLMAN, JR.
- ------------------------------ Director
W.H. Holman, Jr.
II-21
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ CARL F. BAILEY
- ------------------------------ Director
Carl F. Bailey
/s/ HAROLD O. ROSSER II
- ------------------------------ Director
Harold O. Rosser II
/s/ STEPHEN C. SHERRILL
- ------------------------------ Director
Stephen C. Sherrill
II-22
EXHIBIT
NO. DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
2.1 Agreement and Plan of Exchange and of Merger, dated as of November 16, 1995 by and among JJ Acquisitions
Corp. and the Company, Southern Jitney-Jungle Company, McCarty-Holman Co., Inc. and Jitney-Jungle Bakery,
Inc. (incorporated by reference to Exhibit 2.1 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ
Acquisitions Corp. filed with the Commission on February 27, 1996)
3.1 Amended and Restated Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.3
to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on
February 27, 1996)
3.2 Restated by-laws of the Company (incorporated by reference to Exhibit 3.6 to Amendment No. 2 to Form S-1
[No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996)
4.1 Indenture dated as of September 15, 1997 between the Company, the Subsidiary Guarantors and Marine
Midland Bank, as Trustee
4.2 Registration Rights Agreement dated as of September 15, 1997 among the Company, the Subsidiary
Guarantors, Donaldson, Lufkin & Jenrette Securities Corporation and Credit Suisse First Boston
4.3 Form of the Company's 10 3/8% Senior Subordinated Notes due 2007 (included in Exhibit 4.1)
4.4 Revolving Credit Agreement dated September 15, 1997 by and among Fleet Capital Corporation and the
Company
4.5 Indenture dated March 5, 1996 between the Company and Marine Midland Bank, as Trustee, relating to the
issuance and sale of $200,000,000 aggregate principal amount of 12% Senior Notes due 2006 (incorporated
by reference to Exhibit No. 4.2 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisition Corp.
filed with the Commission on February 27, 1996)
4.6 Warrant dated March 4, 1996 to purchase 75,000 shares of Common Stock of the Company by DLJ Merchant
Banking Partners, L.P. and related investors (incorporated by reference by Exhibit No. 4.3 to Amendment
No. 2 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisition Corp. filed with the Commission on
February 27, 1996)
4.7 Memorandum of Agreement dated October 15, 1985 by and among the City of Jackson, Mississippi and
McCarty-Holman Co., Inc. ($3,650,000)(incorporated by reference to Exhibit No. 4.8 to Amendment No. 2 to
Form S-1 [No. 33-80833] of JJ Acquisitions corp. filed with the Commission on February 27, 1996)
5.1 Opinion of Dechert Price & Rhoads*
9.1 Voting Trust Agreement dated November 1, 1990 by and among Carolyn Holman Kroeze, as Executrix and the
parties named therein (incorporated by reference to Exhibit No. 9.1 to Amendment No. 2 to Form S-1 [No.
33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996)
10.1 Purchase Agreement dated September 10, 1997 among the Company, Donaldson, Lufkin & Jenrette Securities
Corporation and Credit Suisse First Boston with respect to the 10% Senior Subordinated Notes due 2007
10.2 Supply Agreement dated March 19, 1989 as amended by and among Fleming Companies Inc. (successor in
interest to Malone & Hyde, Inc.), the Company and Interstate Jitney-Jungle Stores, Inc. (incorporated by
reference to Exhibit No. 10.2 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp.
filed with the Commission on February 27, 1996)
EXHIBIT
NO. DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
10.3 Membership in Topco Associates, Inc. (Cooperative) by ownership of six hundred (600) shares of Common
Stock, such stock certificate being dated July 1, 1991 (incorporated by reference to Exhibit No. 10.3 to
Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisition Corp. filed with the Commission on February
27, 1996)
10.4 Flour Sale Confirmation and Contract dated July 19, 1995 by and among Cargill, Incorporated and
Jitney-Jungle Bakery, Inc. (incorporated by reference to Exhibit No. 10.4 to Amendment No. 2 to Form S-1
[No. 33-808833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996)
10.5 Employment Agreement dated as of February 15, 1995 by and among the Company and Roger P. Friou
(incorporated by reference to Exhibit 10.6 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ
Acquisitions corp. filed with the Commission on February 27, 1996)
10.6 Employment Agreement dated as of February 24, 1995 by and among the Company and David K. Essary
(incorporated by reference to Exhibit 10.7 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ
Acquisitions Corp. filed with the Commission on February 27, 1996)
10.7 Employment Agreement dated as of March 5, 1996 by and among the Company and W.H. Holman, Jr.
(incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K, dated July 24,
1997)
10.8 Employment Agreement dated as of March 5, 1996 by and among the Company and W.H. Holman, III
(incorporated by reference to Exhibit 10.7 to the Company's Annual Report on Form 10-K, dated July 24,
1997)
10.9 Restatement and Amendment by the Entirety of the Jitney-Jungle Stores of America, Inc. and Affiliates
Profit Sharing Plan and Trust (incorporated by reference to Exhibit No. 10.8 to Amendment No. 2 to Form
S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996)
10.10 Deferred Compensation Plan for the Company dated as of November 16, 1995 by and among the Company,
Southern Jitney-Jungle Company, Jitney-Jungle Bakery, Inc. McCarty-Holman Co., Inc. and W.H. Holman, Jr.,
Roger P. Friou and David K. Essary (incorporated by reference to Exhibit No. 10.9 to Amendment No. 2 to
Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996)
10.11 Shareholders Agreement dated as of March 5, 1996 by and among DLJ Merchant Banking Partners, L.P. JJ
Acquisitions Corp., and certain other signatories party thereto (incorporated by reference to Exhibit No.
10.10 to Amendment No. 2 to Forms S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the Commission
on February 27, 1996)
10.12 Securities Purchase and Holders Agreement dated as of March 5, 1996 by and among JJ Acquisitions Corp.,
Bruckmann, Rosser, Sherrill & Co., L.P. and other parties thereto (incorporated by reference to Exhibit
No. 10.12 to Amendment No. 2 to Form S-1 [No. 33-80833] of JJ Acquisitions Corp. filed with the
commission on February 27, 1996)
10.13 Registration Rights Agreement dated as of March 5, 1996 dated as of March 5, 1996 by and among the
Company and other parties named therein (incorporated by reference to Exhibit No. 10.13 to Amendment No.
2 to Form S-1 [No.33-80833] of JJ Acquisitions Corp. filed with the Commission on February 27, 1996)
12.1 Statement of Ratio of Earnings to Fixed Charges
21.1 Subsidiaries of the Company
23.1 Consent of Dechert Price & Rhoads (included in Exhibit 5.1)
23.3 Consent of Deloitte & Touche LLP
EXHIBIT
NO. DESCRIPTION
- ---------- ---------------------------------------------------------------------------------------------------------
23.4 Consent of KPMG Peat Marwick
24 Power of Attorney (included on signature pages of this Registration Statement)
25 Statement of Eligibility and Qualification, Form T-1, of Marine Midland Bank
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
- ------------------------
* To be supplied by amendment.