- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
-------------------
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
DATE OF REPORT (Date of earliest event reported) September 12, 1997
JITNEY-JUNGLE STORES OF AMERICA, INC.
(Exact name of registrant as specified in its charter.)
MISSISSIPPI 33-80833 64-0280539
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification
Number)
1770 Ellis Avenue, Suite 200, Jackson, MS 39204
(Address of Principal Executive Offices - Zip Code)
(601) 965-8600
(Registrant's telephone number, including area code)
N/A
(Former name and former address, if changed since last report.)
- -----------------------------------------------------------------------------
This form 8-K/A amends the Form 8-K filed with the Securities and Exchange
Commission (the "Commission") on September 26, 1997, relating to the acquisition
by Delta Acquisition Corporation, an Alabama corporation ("Delta") and a
wholly-owned subsidiary of Jitney-Jungle Stores of America, Inc., a Mississippi
corporation ("Jitney-Jungle") of 5,317,510 shares of common stock, par value
$.01 per share (the "Shares"), of Delchamps, Inc., an Alabama corporation
("Delchamps") for $30.00 net per share in a tender offer. The Shares so
purchased represented approximately 73.9% of the Shares outstanding on such
date. This Form 8-K/A contains the information referred to in Item 7 of the Form
8-K.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
2
INDEPENDENT AUDITORS' REPORT
The Board of Directors
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 standard 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.
KPMG Peat Marwick LLP
August 8, 1997
Atlanta, Georgia
3
FIVE YEAR FINANCIAL HIGHLIGHTS
(In thousands except per share amounts)
---------------------------------------------------------------
JUNE 28, JUNE 29, JULY 1, JULY 2, JULY 3,
1997 1996 1995 1994 1993
STATEMENT OF EARNINGS DATA: (52 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS) (53 WEEKS)
- ----------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Sales...................................................... $1,102,947 $1,126,629 $1,054,088 $1,067,191 $1,034,531
Operating income (loss).................................... 17,787 13,119 (34,991) 22,019 27,907
Earnings (loss) before income taxes and cumulative effect
of changes in accounting principles...................... 12,805 6,299 (40,266) 17,858 22,738
Net earnings (loss)........................................ 7,954 3,852 (25,666) 10,951 14,373
Net earnings (loss) per common share....................... 1.12 0.54 (3.61) 1.54 2.02
Dividends per common share................................. 0.44 0.44 0.44 0.44 0.44
Weighted average shares outstanding........................ 7,116 7,110 7,113 7,114 7,114
BALANCE SHEET DATA:
- ----------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Working capital............................................ $ 29,140 $ 22,067 $ 22,920 $ 54,926 $ 49,511
Total assets............................................... 243,461 255,183 269,412 263,269 252,052
Long-term debt and obligations under capital leases,
excluding current installments........................... 16,698 21,237 25,745 32,169 39,503
Stockholders' equity....................................... 118,019 112,925 110,042 136,300 126,262
Delchamps, Inc. founded in 1921, operates 118 grocery stores in Alabama,
Florida, Louisiana and Mississippi. The Company also operates 10 liquor stores
in Florida. A distribution center is located in Hammond, Louisiana. Delchamps
employs 8,000 people. The Company's stock is traded on the Nasdaq National
Market, under the symbol DLCH.
4
DELCHAMPS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 28, 1997 and June 29, 1996
(In thousands except share data)
ASSETS 1997 1996
- ------------------------------------------------------------------------------------------ ---------- ----------
Current assets:
Cash and cash equivalents (note 2)...................................................... $ 5,670 10,503
Trade and other accounts receivable..................................................... 7,961 8,422
Merchandise inventories (notes 3 and 6)................................................. 89,726 90,797
Prepaid expenses........................................................................ 2,094 1,376
Income taxes receivable (note 10)....................................................... -- 764
Deferred income taxes (note 10)......................................................... 6,525 3,878
---------- ----------
Total current assets................................................................ 111,976 115,740
---------- ----------
Property and equipment (note 4):
Land.................................................................................... 13,744 15,210
Buildings and improvements.............................................................. 59,079 58,111
Fixtures and equipment.................................................................. 233,542 221,090
Construction in progress................................................................ 2,626 9,771
---------- ----------
308,991 304,182
Less accumulated depreciation and amortization.......................................... 179,672 166,931
---------- ----------
Net property and equipment.......................................................... 129,319 137,251
---------- ----------
Other assets.............................................................................. 2,166 2,192
---------- ----------
Total assets............................................................................ $ 243,461 255,183
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
- ------------------------------------------------------------------------------------------- ---------- ---------
Current liabilities:
Current installments of obligations under capital leases (note 4)........................ $ 844 749
Current installments of long-term debt (note 5).......................................... 3,697 3,760
Notes payable (note 6)................................................................... 4,600 14,000
Restructure obligation (note 12)......................................................... 2,273 3,996
Accounts payable......................................................................... 41,571 48,308
Accrued expenses:
Salaries and wages..................................................................... 7,026 4,603
Licenses and other taxes............................................................... 7,778 8,017
Other.................................................................................. 14,192 10,240
---------- ---------
Total accrued expenses............................................................... 28,996 22,860
---------- ---------
Income taxes (note 10)................................................................. 855 --
Total current liabilities............................................................ 82,836 93,673
---------- ---------
Obligations under capital leases, excluding current installments (note 4).................. 9,556 10,398
Long-term debt, excluding current installments (note 5).................................... 7,142 10,839
Restructure obligation (note 12)........................................................... 13,453 15,668
Deferred income taxes (note 10)............................................................ 10,211 9,225
Other liabilities.......................................................................... 2,244 2,455
---------- ---------
Total liabilities.................................................................... 125,442 142,258
---------- ---------
Stockholders' equity (notes 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 7,121,749
shares in 1997 and 7,112,320 shares in 1996............................................ 71 71
Additional paid-in capital............................................................... 19,856 19,657
Retained earnings........................................................................ 98,182 93,359
---------- ---------
118,109 113,087
Less:
Unamortized restricted stock award compensation (note 8)............................... 90 162
---------- ---------
Total stockholders' equity........................................................... 118,019 112,925
---------- ---------
Commitments and contingencies (notes 4, 8, 9, and 13)
Total liabilities and stockholders' equity............................................... $ 243,461 255,183
---------- ---------
---------- ---------
See accompanying notes to consolidated financial statements.
5
DELCHAMPS, INC. AND SUBSIDIARY
Consolidated Statements of Earnings
Years ended June 28, 1997, June 29, 1996, and July 1, 1995
(In thousands except per share data)
1997 1996 1995
------------ ------------ ------------
Sales................................................................... $ 1,102,947 1,126,629 1,054,088
Cost of sales (note 3).................................................. 830,878 863,389 798,537
------------ ------------ ------------
Gross profit...................................................... 272,069 263,240 255,551
Selling, general and administrative expenses ("S G & A"):
Restructuring charge (note 12)........................................ -- -- 28,779
Other S G & A......................................................... 254,282 250,121 261,763
------------ ------------ ------------
Total S G & A......................................................... 254,282 250,121 290,542
------------ ------------ ------------
Operating income (loss)........................................... 17,787 13,119 (34,991)
------------ ------------ ------------
Other (expense) income:
Interest expense...................................................... (5,215) (7,169) (5,375)
Interest income....................................................... 233 349 100
------------ ------------ ------------
Total other (expense) income.......................................... (4,982) (6,820) (5,275)
------------ ------------ ------------
Earnings (loss) before income taxes............................... 12,805 6,299 (40,266)
Income tax expense (benefit) (note 10).................................. 4,851 2,447 (14,600)
------------ ------------ ------------
Net earnings (loss)..................................................... $ 7,954 3,852 (25,666)
------------ ------------ ------------
Net earnings (loss) per common share.................................... $ 1.12 0.54 (3.61)
------------ ------------ ------------
Weighted average number of common shares................................ 7,116 7,110 7,113
------------ ------------ ------------
See accompanying notes to consolidated financial statements.
6
DELCHAMPS, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended June 28, 1997, June 29, 1996, and July 1, 1995
(In thousands)
COMMON STOCK
---------------
ISSUED ADDITIONAL RESTRICTED TOTAL
--------------- PAID-IN RETAINED GUARANTEED STOCK STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS ESOP DEBT AWARDS AWARDS
------ ------ ---------- -------- ---------- ---------- -------------
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 (note 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 (note 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 accompanying notes to consolidated financial statements.
7
DELCHAMPS, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended June 28, 1997, June 29, 1996, and July 1, 1995
(In thousands)
1997 1996 1995
--------- --------- ---------
Cash flows from operating activities:
Net earnings (loss)............................................................. $ 7,954 3,852 (25,666)
Adjustments to reconcile net earnings to net cash (loss) provided by operating
activities:
Depreciation and amortization................................................. 23,719 21,771 19,472
Write-off of cost in excess of fair value of assets acquired.................. -- -- 5,050
(Gain) loss on sale of property and equipment................................. (2,054) (420) 231
Restricted stock award amortization........................................... 72 21 667
Non cash director compensation expense........................................ 167 108 --
Deferred income tax (benefit) expense......................................... (1,661) 1,928 (9,206)
Decrease in merchandise inventories........................................... 1,071 3,011 11,855
(Decrease) increase in accounts payable, accrued expenses, and current portion
of restructure obligation................................................... (2,324) 5,567 10,887
Increase (decrease) in income taxes, net...................................... 1,619 5,785 (6,491)
(Decrease) increase in other liabilities and restructure obligation........... (2,023) (1,653) 19,113
Increase in other assets...................................................... (3,203) (890) (716)
--------- --------- ---------
Net cash flows provided by operating activities............................... 23,337 39,080 25,196
Cash flows from investing activities:
Additions to property and equipment............................................. (15,551) (21,671) (35,239)
Proceeds from sale of property and equipment, net............................... 4,387 710 611
--------- --------- ---------
Net cash used in investing activities......................................... (11,164) (20,961) (34,628)
Cash flows from financing activities:
Principal payments on obligations under capital leases.......................... (747) (665) (1,576)
Principal payments on long-term debt and notes payable.......................... (26,760) (25,239) (15,333)
Proceeds from issuance of long-term debt and notes payable...................... 13,600 5,480 30,000
Issuance of stock options....................................................... 32 32 --
Dividends paid.................................................................. (3,131) (3,130) (3,131)
--------- --------- ---------
Net cash (used in) provided by financing activities........................... (17,006) (23,522) 9,960
Net (decrease) increase in cash and cash equivalents.............................. (4,833) (5,403) 528
Cash and cash equivalents at beginning of year.................................... 10,503 15,906 15,378
--------- --------- ---------
Cash and cash equivalents at end of year.......................................... $ 5,670 10,503 15,906
--------- --------- ---------
--------- --------- ---------
See accompanying notes to consolidated financial statements.
8
DELCHAMPS, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 28, 1997, June 29, 1996, and July 1, 1995
(1) Summary of Significant Accounting Policies
(a) Description of Business
Delchamps, Inc. and subsidiary (the "Company") are engaged in the
business of retail food distribution through the Company's supermarkets
located in Alabama, Florida, Louisiana, and Mississippi.
(b) Definition of Fiscal Year
The Company's fiscal year ends on the Saturday closest to June 30.
Fiscal years 1997, 1996 and 1995 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 89% of inventories
in 1997, and 88% in 1996 and 87% in 1995. 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 59% of total inventories in 1997, 58% in
1996, and 55% in 1995.
(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 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. The
Company uses the following periods for depreciating and amortizing property
and equipment:
Buildings..................................................................... 10--50 years
Leasehold improvement......................................................... 10 years
Fixtures and equipment........................................................ 5--10 years
9
(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 year 1988. For fiscal years
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 shortfall in the Company's projections was because of
competitors increasing promotional activity, competitors opening new
supermarkets, and competitors expanding existing supermarkets. The Company
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 cost in excess of fair
value of assets acquired. Accordingly, the Company 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 year 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 the Company 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.
(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 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.
10
(m) Stock Compensation
During fiscal year 1997, the Company 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. The Company
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 28, 1997 and June 29, 1996 consisted of the following:
(IN THOUSANDS)
--------------------
1997 1996
--------- ---------
Euro Dollar Time Deposits......................................................................... $ 2 1,130
Marketable Unit Investment Fund................................................................... 856 856
Cash Management Tax Exempt Fund................................................................... 77 20
--------- ---------
$ 935 2,006
--------- ---------
--------- ---------
(3) Merchandise Inventories
The Company 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 $14,171,000 at June 28, 1997 and $13,780,000 at June
29, 1996 if all of the Company's inventories were stated at cost determined by
the first-in, first-out method. Further, net earnings would increase by
approximately $240,000 in fiscal year 1997, $262,000 in fiscal year 1996, and
$322,000 in fiscal year 1995, after applying the Company's marginal tax rate and
without assuming an investment return on the applicable income tax savings.
The Company is a member of a cooperative association from which it purchases
private label merchandise for resale and certain store equipment. Merchandise
inventories purchased from this cooperative association approximated 19% of
total inventory purchases in 1997, 1996, and 1995.
11
(4) Leases
The Company leases certain store properties under capital leases that expire
over the next 11 years. The Company also leases warehouses, store properties,
and store equipment under noncancellable 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)
--------------------
1997 1996
--------- ---------
Buildings.................................................................................... $ 13,998 13,998
Fixtures and equipment....................................................................... 19,040 19,040
--------- ---------
33,038 33,038
Less accumulated amortization................................................................ 27,578 26,888
--------- ---------
$ 5,460 6,150
--------- ---------
--------- ---------
Future minimum lease payments under noncancellable 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
---------
---------
Rental expense and contingent rentals for operating leases are as follows:
(IN THOUSANDS)
-------------------------------
1997 1996 1995
--------- --------- ---------
Minimum rentals..................................................................... $ 45,329 45,514 43,552
Contingent rentals.................................................................. 129 66 99
--------- --------- ---------
$ 45,458 45,580 43,651
--------- --------- ---------
--------- --------- ---------
12
Most of the Company's leases stipulate that the Company pay taxes,
maintenance, insurance, and certain other operating expenses applicable to the
leased property.
(5) Long-term Debt
Long-term debt as of June 28, 1997 and June 29, 1996 consisted of the
following:
(IN THOUSANDS)
--------------------
1997 1996
--------- ---------
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..................................... $ 10,714 14,286
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........................................................ 125 313
--------- -------
Total long-term debt..................................................................... 10,839 14,599
--------- -------
Less current installments.................................................................. 3,697 3,760
--------- -------
Long-term debt, excluding current installments............................................. $ 7,142 10,839
--------- -------
--------- -------
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, the Company was in compliance with all covenants. At
June 28, 1997, approximately $4,950,000 of the Company's retained earnings was
available for the payment of dividends under such restrictive provisions.
Cash payments for interest were approximately $5,268,000, $7,129,000, and
$5,368,000 in 1997, 1996 and 1995, respectively.
Aggregate annual maturities of long-term debt for fiscal years after June
28, 1997 are approximately as follows:
(IN
THOUSANDS)
FISCAL ANNUAL
YEAR MATURITIES
- --------- -----------
1998..... $ 3,697
1999..... 3,571
2000..... 3,571
-----------
$ 10,839
-----------
-----------
Based on the borrowing rates currently available to the Company for
long-term debt with similar terms and maturities, the fair value of the
long-term debt outstanding at June 28, 1997 approximates the carrying value,
with the exception of the 5.51% note payable which the fair value approximates
$10.0 million at June 28, 1997 and $13.7 million at June 29, 1996.
The fair value was estimated using a discounted cash flow analysis based on
the Company's borrowing rate for similar liabilities.
13
(6) Notes Payable
Short-term borrowings as of June 28, 1997 and June 29, 1996 consisted of the
following:
(IN THOUSANDS)
-------------------------------
1997 1996
------- ---------
Revolving loan commitments, due on various
dates throughout fiscal 1998 and fiscal
1997, respectively, with interest rates
based on LIBOR + 1.25%, secured by all of
the Company's inventory..................... $4,600 14,000
On June 29, 1995, the Company 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 the
Company's option, interest under the agreement may be based on LIBOR or the
prime rate. As of June 28, 1997, the Company is committed to LIBOR contracts
which expire no later than July 28, 1997 and have a weighted average interest
rate of 6.9375%.
The credit agreement requires the Company to maintain minimum levels of
earnings and to comply with stated debt covenants. At June 28, 1997, the Company
was in compliance with all covenants.
(7) Leveraged Employee Stock Ownership Plan
In November 1987, the Company leveraged its existing Employee Stock
Ownership Plan ("ESOP"). The ESOP used the proceeds of the loan to purchase
approximately 1,097,000 shares of the Company's 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 year 1996, the Company 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. The Company was required to
pay interest on the loan in excess of any dividends received on unallocated
shares. The Company 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 28, 1997 and June 29, 1996, all shares have been allocated to participants
and no shares remain in the "suspense account."
(8) Employee Benefit and Incentive Plans
The Company has an employee stock ownership plan and a profit sharing plan
pursuant to section 401(k) of the Internal Revenue 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
Internal Revenue Code. The plan provides for a matching contribution by the
Company. The total annual contributions to these plans by the Company for fiscal
years 1997, 1996, and 1995 were as follows:
14
(IN THOUSANDS)
-------------------------------
1997 1996 1995
--------- --------- ---------
Employee stock ownership plan.......................................................... $ -- 2,000 2,000
Profit sharing plan.................................................................... 1,055 1,157 1,421
--------- --------- ---------
$ 1,055 3,157 3,421
--------- --------- ---------
--------- --------- ---------
The Company has an incentive compensation plan for certain management
personnel tied to the Company's overall performance. Incentive compensation
expense was $2,943,000 in 1997 and $1,252,000 in 1996. Incentive compensation
was not paid in 1995.
In fiscal 1988, the Company 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 the Company 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 $72,000 in 1997, $21,000 in 1996,
and $293,000 in 1995.
(9) Postemployment Benefits Other Than Pensions
The Company 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 $304,000 in 1997 and 1996, and $276,000
in 1995.
(10) Income Taxes
The components of income tax expense (benefit) are as follows:
(IN THOUSANDS)
---------------------------------
CURRENT DEFERRED TOTAL
--------- ----------- ---------
1997:
Federal......................................................................... $ 5,750 (1,467) 4,283
State........................................................................... 762 (194) 568
--------- ----------- ---------
$ 6,512 (1,661) 4,851
--------- ----------- ---------
--------- ----------- ---------
1996:
Federal......................................................................... $ 461 1,711 2,172
State........................................................................... 58 217 275
--------- ----------- ---------
$ 519 1,928 2,447
--------- ----------- ---------
--------- ----------- ---------
1995:
Federal......................................................................... $ (4,746) (8,101) (12,847)
State........................................................................... (648) (1,105) (1,753)
--------- ----------- ---------
$ (5,394) (9,206) (14,600)
--------- ----------- ---------
--------- ----------- ---------
15
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)
-------------------------------
1997 1996 1995
--------- --------- ---------
Statutory tax rate........................................................................ $ 4,354 2,142 (13,690)
Increase (reduction) in income taxes resulting from:
State income taxes, net of Federal income tax benefit................................... 570 270 (2,219)
Targeted jobs tax credits................................................................. -- (25) (385)
Cost in excess of fair value of assets acquired.......................................... -- -- 1,771
Other, net................................................................................ (73) 60 (77)
--------- --------- ---------
Actual tax expense (benefit).............................................................. $ 4,851 2,447 (14,600)
--------- --------- ---------
--------- --------- ---------
Effective tax rate........................................................................ 37.9% 38.8% 36.3%
--------- --------- ---------
--------- --------- ---------
The tax effects of temporary differences that give rise to the deferred tax
assets and deferred tax liabilities are as follows:
(IN THOUSANDS)
--------------------
1997 1996
--------- ---------
Deferred tax assets:
Restructure obligation....................................................................... $ 6,054 7,531
Capital lease obligation..................................................................... 1,901 1,914
Accrued self-insurance....................................................................... 4,515 2,879
Accrued postemployment benefits.............................................................. 847 888
Other accrued liabilities.................................................................... 2,099 1,585
--------- ---------
Net deferred tax assets...................................................................... 15,416 14,797
--------- ---------
Deferred tax liabilities:
Accelerated depreciation..................................................................... 18,942 19,985
Other........................................................................................ 160 159
--------- ---------
Total gross deferred liabilities............................................................. 19,102 20,144
--------- ---------
Net deferred tax liabilities................................................................... $ 3,686 5,347
--------- ---------
--------- ---------
No valuation allowance was recorded against the deferred tax assets at June
28, 1997. The Company's management believes the existing net deductible
temporary differences comprising the total gross deferred tax assets will
reverse during the periods in which the Company generates net taxable income.
Cash payments for income taxes were approximately $5,454,000, $67,000, and
$1,437,000 in 1997, 1996, and 1995, respectively.
16
(11) Share Purchase Rights Plan
In October 1988, the Company 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. The Company 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 the Company.
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 the Company.
(12) Restructuring Charge
During fiscal year 1995, the Company 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, $3.9 million, $5.9 million, and $3.2 million of costs and
payments have been charged against the reserve for fiscal years 1997, 1996, and
1995, respectively. A detail of charges against the restructure obligation
follows:
(IN THOUSANDS)
-------------------------------
1997 1996 1995
--------- --------- ---------
Lease payments......................................................................... $ 3,045 3,691 1,421
Fixture and equipment write-offs....................................................... 138 1,828 24
Severance payments..................................................................... 755 400 1,752
--------- --------- ---------
$ 3,938 5,919 3,197
--------- --------- ---------
--------- --------- ---------
(13) Commitments and Contingencies
The Company 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 the Company's consolidated financial
condition.
In fiscal 1989, and subsequently, the Company 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 the Company (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 the Company. In the event of a
change in control of the Company and termination of all persons covered by these
agreements, the cost would be approximately $12,100,000.
17
(14) Stock Incentive Plan
Key employees of the Company (including officers and directors who are also
full-time employees of the Company) 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. Approximately 2,000 options were exercised in each of
fiscal years 1997 and 1996. Exercise prices range from $17.88 to $23.00 which
was market value at date of grant.
(15) Selected Quarterly Financial Data (Unaudited)
Selected quarterly financial data for the years ended June 28, 1997, and
June 29, 1996 is summarized as follows:
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FISCAL QUARTERS
-------------------------------------------
1997 FOURTH THIRD SECOND FIRST
- --------------------------------------------------------------------- ---------- --------- --------- ---------
Sales................................................................ $ 266,893 273,753 272,602 289,699
Gross profit......................................................... 72,404 69,182 65,116 65,367
Earnings before tax.................................................. 7,713 4,428 321 343
Net earnings......................................................... 4,854 2,720 176 204
Net earnings per common share........................................ $68 .38 .03 .03
Dividends declared per common share.................................. $ 0.11 0.11 0.11 0.11
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FISCAL QUARTERS
-------------------------------------------
1996 FOURTH THIRD SECOND FIRST
- --------------------------------------------------------------------- ---------- --------- --------- ---------
Sales................................................................ $ 284,662 280,225 277,053 284,689
Gross profit......................................................... 68,171 65,684 64,915 64,470
Earnings (loss) before tax........................................... 4,236 1,897 1,290 (1,124)
Net earnings (loss).................................................. 2,653 1,147 808 (756)
Net earnings (loss) per common share................................. $ 0.37 0.16 0.12 (0.11)
Dividends declared per common share.................................. $ 0.11 0.11 0.11 0.11
18
(16) Subsequent Event
On July 8, 1997, the Company announced that it had entered into an agreement
to be acquired by Jitney-Jungle Stores of America, Inc. The terms of the
agreement are described in the Company's 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 the Company's 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. The Company's Board
of Directors has approved the transaction unanimously and has recommended
approval by the Delchamps' stockholders.
19
(b) Pro Forma Financial Information.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following Pro Forma Condensed Consolidated Balance Sheet is based on the
historical consolidated balance sheet of Jitney-Jungle Stores of America, Inc.
("Jitney-Jungle") at July 26, 1997 and of Delchamps, Inc. ("Delchamps") at June
28, 1997 and was prepared as if the Delchamps merger and related transactions
had occurred on July 26, 1997. As used herein, the term "the Company" refers to
Jitney-Jungle and its consolidated subsidiaries (including Delchamps) as if the
Delchamps acquisition had been consummated. 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 for
the fiscal year ended May 3, 1997, the 12 weeks ended July 20, 1996 and the 12
weeks ended July 26, 1997 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 and
(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. Each of these pro
forma statements was prepared as if the Delchamps merger and related
transactions 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 Delchamps merger and
related transactions. 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 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. 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 senior subordinated 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 Delchamps merger and related
transactions been consummated as of the indicated date. Such pro forma financial
statements should be read in conjunction with the historical consolidated
financial statements of Jitney-Jungle and Delchamps and the respective
accompanying notes thereto.
20
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(DOLLARS IN THOUSANDS)
AT JULY 26, 1997
---------------------------------------------------------------------------------
HISTORICAL COMPANY PRO
------------------------- PRO FORMA COMPANY PRO FORMA FOR FTC
JITNEY-JUNGLE DELCHAMPS COMBINED ADJUSTMENTS FORMA DIVESTITURES(H)
------------- --------- -------- ----------- ----------- ---------------
ASSETS
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
------------- --------- -------- ----------- ----------- ---------------
------------- --------- -------- ----------- ----------- ---------------
See accompanying notes to Pro Forma Condensed Consolidated Balance Sheet.
21
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (continued)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
AT JULY 26, 1997
-----------------------------------------------------------------------------------
HISTORICAL COMPANY PRO
------------------------- PRO FORMA COMPANY PRO FORMA FOR FTC
JITNEY-JUNGLE DELCHAMPS COMBINED ADJUSTMENTS FORMA DIVESTITURES (H)
------------- --------- --------- ----------- ----------- ----------------
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............. 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.
22
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
senior subordinated 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
senior subordinated 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.
(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.
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
---------
---------
23
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
(Unaudited)
(dollars in thousands)
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.
(H) 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
---------
---------
24
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
YEAR ENDED MAY 3, 1997
-------------------------------------------------------------------------------------------------
HISTORICAL COMPANY PRO
---------------------------- CLOSED PRO FORMA 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)
Non-recurring
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
------------- ------------ ---------- --------- ----------- ---------- ----------------
------------- ------------ ---------- --------- ----------- ---------- ----------------
See accompanying notes to Pro Forma Condensed Consolidated Statements of
Operations.
25
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
12 WEEKS ENDED JULY 20, 1996
-------------------------------------------------------------------------------------------
HISTORICAL COMPANY PRO
------------------------- CLOSED PRO FORMA COMPANY FORMA FOR FTC
JITNEY-JUNGLE DELCHAMPS(A) COMBINED STORES(B) ADJUSTMENTS FORMA DIVESTITURES(H)
------------- --------- -------- -------- ----------- ----------- ----------------
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)
Non-recurring
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
------------- --------- -------- -------- ----------- ----------- ---------------
------------- --------- -------- -------- ----------- ----------- ---------------
See accompanying notes to Pro Forma Condensed Consolidated Statements of
Operations.
26
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
12 WEEKS ENDED JULY 26, 1997
-------------------------------------------------------------------------------------------
HISTORICAL COMPANY PRO
------------------------- CLOSED PRO FORMA COMPANY FORMA FOR FTC
JITNEY-JUNGLE DELCHAMPS COMBINED STORES(B) ADJUSTMENTS FORMA DIVESTITURES(H)
------------- --------- -------- -------- ----------- ----------- ----------------
NET SALES........... $288,978 $266,893 $555,871 $(18,197) $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)
Non-recurring
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
------------- --------- -------- -------- ----------- ----------- ---------------
------------- --------- -------- -------- ----------- ----------- ---------------
See accompanying notes to Pro Forma Condensed Consolidated Statements of
Operations.
27
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(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) 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 $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 $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 $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.
28
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(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 $230 for the 12 weeks ended
July 20, 1996 and the 12 weeks ended July 26, 1997.
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 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.
(G) Includes for the year ended May 3, 1997 (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 week 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 senior subordinated notes:
29
12 WEEKS ENDED
YEAR ENDED ----------------------------
MAY 3, 1997 JULY 20, 1996 JULY 26,1997
----------- ------------- -------------
Senior Credit Facility (at a weighted average
interest rate of 7.65%):
Existing borrowings............................... $ 1,985 $ 507 $ --
Borrowings in connection with the Delchamps
acquisition..................................... 5,562 1,283 1,283
Amortization of financing fees-Senior Credit
Facility(1)..................................... 972 224 224
Commitment fee under Senior Credit Facility....... 257 56 89
Senior Subordinated Notes (10.375%):
Cash interest expense............................. 20,750 4,788 4,788
Amortization of debt issuance costs(1)............ 958 221 221
Amortization of consent and related solicitation
fees(1)......................................... 833 192 192
----------- ------ ------
$ 31,317 $ 7,271 $ 6,797
----------- ------ ------
----------- ------ ------
- ------------------------
(1) Debt issuance costs associated with the senior subordinated notes are
amortized over ten years on a straight-line basis. (1) 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 are
amortized over the remaining life of the senior subordinated notes on a
straight-line basis.
(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
----------- ------------- ---------------
Delchamps debt:
Notes payable......................................................... $ 1,748 $ 691 $ 276
Delchamps long-term debt.............................................. 750 213 175
Senior credit facility:
Cash interest expense related to existing borrowings.................. 2,144 584 --
Commitment fee under senior credit facility........................... 380 75 56
----------- ------ -----
5,022 1,563 507
----------- ------ -----
Amortization of Delchamps debt issuance costs........................... 39 10 10
Amortization of financing fees--senior credit facility.................. 400 92 92
----------- ------ -----
439 102 102
----------- ------ -----
$ 5,461 $ 1,665 $ 609
----------- ------ -----
----------- ------ -----
(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%.
30
(c) Exhibits.
Exhibit No. Description
99.1 Jitney-Jungle Stores of America, Inc. Press Release,
dated September 12, 1997, regarding Jitney-Jungle's
acquisition of Delchamps.
31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
JITNEY-JUNGLE STORES OF AMERICA, INC.
(Registrant)
By: Michael E. Julian
-----------------------------
Michael E. Julian
President and Chief
Executive Officer
Date: November 21, 1997
32