UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 4, 2001
|_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from .............to ............
Commission File Number 1-7013
GRISTEDE'S FOODS, INC.
---------- ------ ----
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-1829183
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
823 Eleventh Avenue, New York, New York 10019
--- -------- ------- --- ----- --- ---- -----
(Address of Principal Executive Offices)
(212) 956-5803
----- --------
(Registrant's Telephone Number, Including Area Code)
N/A
---
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15 (d) of the Securities Exchange Act during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes |X| No |_|
At April 6, 2001, registrant had issued and outstanding 19,636,574 shares of
common stock.
GRISTEDE'S FOODS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 4, 2001 and December 3, 2000 Page 3
Consolidated Statements of Operations for
the quarters ended March 4, 2001
and February 27, 2000 Page 4
Consolidated Statements of Stockholders'
Equity for the year ended
December 3, 2000 and the
quarter ended March 4, 2001 Page 5
Consolidated Statements of Cash Flows for
the quarters ended March 4, 2001
and February 27, 2000 Page 6
Notes to Consolidated Financial Statements Page 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations Page 11
PART II - OTHER INFORMATION Page 15
2
Item 1
Financial Statements
GRISTEDE'S FOODS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
March 4, December 3,
ASSETS 2001 2000
------------ ------------
CURRENT ASSETS:
Cash $ 449,882 $ 412,408
Accounts receivable - net of allowance for doubtful accounts
of $168,000 at March 4, 2001 and $150,000 at December 3, 2000 7,184,885 6,864,329
Inventory 29,533,450 30,104,955
Due from related parties - trade 1,183,171 879,000
Due from related parties - other 872,774 3,072,000
Prepaid expenses and other current assets 2,032,563 2,488,337
------------ ------------
Total current assets 41,256,725 43,821,029
------------ ------------
PROPERTY AND EQUIPMENT:
Furniture, fixtures and equipment 17,065,648 16,838,262
Capitalized equipment leases 19,520,103 18,714,519
Leaseholds and leasehold improvements 48,947,075 47,963,768
------------ ------------
85,532,826 83,516,549
Less accumulated depreciation and amortization 36,442,101 35,228,221
------------ ------------
Net property and equipment 49,090,725 48,288,328
Deposits and other assets 979,534 951,596
Other assets 3,259,241 3,385,104
------------ ------------
TOTAL $ 94,586,225 $ 96,446,057
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade $ 25,091,380 $ 26,956,398
Accrued payroll, vacation and withholdings 2,359,157 2,397,593
Accrued expenses and other current liabilities 602,800 1,343,421
Capitalized lease obligation - current portion 2,478,495 2,362,457
Current portion of long term debt 7,916,664 6,388,426
------------ ------------
Total current liabilities 38,448,496 39,448,295
Long-term debt - noncurrent portion 19,799,414 22,027,652
Due to affiliates 12,802,411 12,129,031
Capitalized lease obligation - noncurrent portion 8,252,695 8,221,842
Deferred rent 3,504,593 3,301,793
------------ ------------
Total liabilities 82,807,609 85,128,613
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $50 Par, -share authorized 500,000; none issued 0 0
Common stock, $0.02 par value - shares authorized 25,000,000; outstanding
19,636,574 shares at March 4, 2001 and December 3, 2000 392,732 392,732
Additional paid-in capital 14,136,674 14,136,674
Retained earnings/ (deficit) (2,750,790) (3,211,962)
------------ ------------
Total stockholders' equity 11,778,616 11,317,444
------------ ------------
TOTAL $ 94,586,225 $ 96,446,057
============ ============
See accompanying notes.
3
GRISTEDE'S FOODS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE 13 WEEKS ENDED MARCH 4, 2001 AND FEBRUARY 27, 2000
13 weeks 13 weeks
ended ended
March 4, February 27,
2001 2000
------------ ------------
Sales $ 59,586,146 $ 53,747,897
Cost of sales 36,488,204 32,408,079
------------ ------------
Gross profit 23,097,942 21,339,818
Store operating, general and administrative expenses 18,061,742 16,260,186
Pre-store opening startup costs 66,000 283,333
Depreciation and amortization 1,683,734 1,271,300
Non-store operating expenses:
Administrative payroll and fringes 1,247,632 1,076,338
General office expense 609,919 411,418
Professional fees 146,367 110,573
Corporate expense 43,992 42,315
------------ ------------
Total non-store operating expense 2,047,910 1,640,644
------------ ------------
Operating income 1,238,556 1,884,355
------------ ------------
Other income (expense):
Interest expense (957,007) (886,186)
Interest income 4,670 14,707
Other income 184,953 0
------------ ------------
Total other expense - net (767,384) (871,479)
------------ ------------
Income before income taxes 471,172 1,012,876
Provision for income taxes 10,000 6,500
------------ ------------
Net income $ 461,172 $ 1,006,376
============ ============
Income per share, basic and diluted $ 0.02 $ 0.05
============ ============
Weighted average number of shares and
equivalents outstanding 19,636,574 19,636,574
============ ============
See accompanying notes
4
GRISTEDE'S FOODS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 3, 2000
AND FOR THE QUARTER ENDED MARCH 4, 2001
Additional Retained Total
Common stock Paid-In earnings Stockholders'
Shares Amount Capital (Deficit) Equity
------------ ------------ ------------ ------------ ------------
Balance at November 28, 1999 19,636,574 $ 392,732 $ 14,136,674 $ (3,021,054) $ 11,508,352
Net loss for the year ended
December 3, 2000 (190,908) (190,908)
------------ ------------ ------------ ------------ ------------
Balance at December 3, 2000 19,636,574 $ 392,732 $ 14,136,674 $ (3,211,962) $ 11,317,444
Net income for the quarter
ended March 4, 2001 461,172 461,172
------------ ------------ ------------ ------------ ------------
Balance at March 4, 2001 19,636,574 $ 392,732 $ 14,136,674 $ (2,750,790) $ 11,778,616
============ ============ ============ ============ ============
See accompanying notes.
5
GRISTEDE'S FOODS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED MARCH 4, 2001 AND FEBRUARY 27, 2000
13 weeks 13 weeks
ended ended
March 4, February 27,
2001 2000
----------- -----------
Cash flows from operating activities:
Net income $ 461,172 $ 1,006,376
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,683,734 1,271,300
Change in allowance for bad debts 18,000
Gain on sale of store (192,177)
Changes in operating assets and liabilities:
Accounts receivable (338,556) 600,159
Inventory 571,505 (1,159,853)
Notes receivable 0 72,524
Due from related parties - trade (304,171) 0
Prepaid expenses and other current assets 455,774 (171,297)
Other assets (97,088) 3,163
Accounts payable, trade (1,865,018) (726,718)
Accrued payroll, vacation and withholdings (38,436) (72,807)
Accrued expenses and other current liabilities (740,335) 24,714
Deferred rents 202,800 166,489
Other credits 0 (197,700)
----------- -----------
Net cash provided by (used in) operating activities (182,796) 816,350
----------- -----------
Cash flows from investing activities:
Proceeds from sale of store 225,000 0
Capital expenditures - net (1,519,029) (2,580,809)
----------- -----------
Net cash used in investing activities (1,294,029) (2,580,809)
----------- -----------
Cash flows from financing activities:
Repayments of bank loan (700,000) (300,000)
Proceeds from bank loans 0 800,000
Repayment capitalized lease obligations (658,308) (444,853)
Advances from affiliates 2,872,607 1,750,000
----------- -----------
Net cash provided by financing activities 1,514,299 1,805,147
----------- -----------
NET INCREASE IN CASH 37,474 40,688
CASH, begining of period 412,408 298,582
----------- -----------
CASH, end of period $ 449,882 $ 339,270
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 973,224 $ 339,270
Cash paid for taxes $ 63,632 $ 89,050
Supplemental schedule of non cash financing activity:
Assets acquired under capital lease obligations $ 805,198 $ 1,165,034
See accompanying notes.
6
GRISTEDE'S FOODS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - On November 4, 1997, Sloan's Supermarkets, Inc. ("Sloan's") changed
its name to Gristede's Sloan's, Inc. ("GRI" or the "Company"). On November 10,
1997, GRI acquired certain assets, net of liabilities, of 29 selected
supermarkets and a wholesale distribution business ("The Food Group") controlled
by Mr. John Catsimatidis, Chairman and 37% stockholder of Sloan's. The
transaction was accounted for as the acquisition of Sloan's by The Food Group
pursuant to Emerging Issues Task Force 90-13 as a result of The Food Group
obtaining control of Sloan's after the transaction. The assets and liabilities
of The Food Group were recorded at their historical cost. Sloan's assets and
liabilities were recorded at their fair value to the extent acquired.
Consideration for the transaction was based on an aggregate of $36,000,000 in
market value of the Company's common stock and the assumption of $4,000,000 of
liabilities. 16,504,298 shares of common stock were issued on the date of the
acquisition based on a market price of $2.18 per share. On August 16, 1999 the
Company changed its name to Gristede's Foods, Inc.
The Company operates 42 supermarkets (the "Supermarkets") and two pharmacy
stores. 37 Supermarkets and two pharmacy stores are located in Manhattan, New
York, three Supermarkets are located in Westchester County, New York, one
Supermarket is located in Brooklyn, New York and one Supermarket is located in
Long Island, New York. Five of the Supermarkets are operated under the "Sloan's"
name and 37 are operated under the "Gristede's" name. The Company leases all of
its store locations.
The Company also owns City Produce Operating Corp., a corporation which operates
a warehouse and distribution center primarily for fresh produce on leased
premises in the Bronx, New York.
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated in consolidation.
Quarter End - The Company operates using the conventional retail 52/53 week
fiscal year. The fiscal quarter ends on the Sunday closest to the end of the
quarter. The Company's fiscal year ends on the Sunday closest to November 30.
Inventory - Store inventories are valued principally at the lower of cost or
market with cost determined under the retail first in, first out (FIFO) method.
Property and Equipment - Depreciation of furniture, fixtures and equipment is
computed by the straight-line method over the estimated useful lives of the
assets.
Leases - The Company charges the cost of noncancelable operating lease payments
and beneficial leaseholds to operations on a straight-line basis over the lives
of the leases.
7
GRISTEDE'S FOODS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Provision for income taxes - Income taxes reflect Federal and State alternative
minimum tax only, as all regular income taxes have been offset by utilization of
the Company's net operating loss carry forward.
Income per share - Per share data are based on the weighted average number of
shares of common stock and equivalents outstanding during each quarter. Income
per share is computed by the treasury stock method; basic and diluted income per
share are the same.
In the opinion of management, the information furnished reflects all adjustments
(consisting of normal recurring adjustments), which are necessary for a fair
statement of the results of operations for the interim period. The interim
figures are not necessarily indicative of the results to be expected for the
fiscal year.
The Company's Annual Report on Form 10-K for the 12 month period ended December
3, 2000 contains information which should be read in conjunction herewith.
2. RELATED PARTY TRANSACTIONS
Under a management agreement dated November 10, 1997, Namdor Inc., a subsidiary
of the Company, performs consulting and managerial services for one supermarket
owned by a corporation controlled by John Catsimatidis. In consideration of such
services, Namdor Inc. is entitled to receive on a quarterly basis a management
fee of 1.25% of all sales of merchandise made at the managed supermarket. During
the quarter ended March 4, 2001, the management fee income was $11,721. For the
quarter ended February 27, 2000 the management fee income was $23,976. During
the 2000 period there were two additional stores included in this agreement, one
of which has since closed and another which has been contributed to the Company
and is now included in the Company's operations.
C&S Acquisition Corp. (formerly Red Apple Leasing, Inc.) a corporation wholly
owned by John Catsimatidis, leases equipment to the Company. Such leases are
primarily for store operating equipment. There were no obligations under capital
leases remaining at March 4, 2001 which previously required monthly payments of
$35,114 through March 1, 2001. Obligations under operating leases were $41,676
per month during the quarter ended March 4, 2001.
Advertising services are provided to the Company by an affiliated company, MCV
Advertising Associates Inc., a company owned by John Catsimatidis. For the
quarter ended March 4, 2001 the costs incurred were $20,448. For the quarter
ended February 27, 2000 the costs incurred were
8
$375,102. During the quarter ended March 4, 2001, the Company began dealing
directly with various media and no longer utilizes MCV Advertising Associates
Inc.
The Company leases a 25,000 square foot warehouse, its office facilities and
four supermarket locations from Red Apple Real Estate, Inc., a company solely
owned by John Catsimatidis. For the quarter ended March 4, 2001 the Company paid
to Red Apple Real Estate, Inc. $383,450 for rent under such leases. The lease
terms provide for an aggregate of $1,561,000 per year in lease payments. The
leases are triple net whereby the tenant pays all real estate taxes and
maintenance.
Wolf, Block, Schorr and Solis-Cohen LLP, a law firm of which Martin Bring, a
director of the Company, is a partner, charged fees of approximately $9,200 for
rendering legal services to the Company during the quarter ended March 4, 2001.
Amounts due to affiliates are primarily to United Acquisition Corp., a
corporation wholly owned by John Catsimatidis, and represent liabilities in
connection with the consummation of the merger, as discussed in Item 13 to the
Form 10-K for the year ended December 3, 2000, and additional advances made by
the affiliates since the merger. The affiliates have agreed not to demand
payment of these liabilities in the next fiscal year. Accordingly, the liability
has been classified as noncurrent. As part of post-closing adjustments in
connection with the Food Group Acquisition, approximately $3,600,000 in due from
affiliates has been offset against the amounts due to affiliates. The net amount
due to affiliates at March 4, 2001 and December 3, 2000 was $12,802,411 and
$12,129,031, respectively; of these amounts $9,000,000 was subordinated to the
Company's banks. The liability does not bear interest.
Due from related parties - trade, represents amounts due from affiliated
companies for merchandise shipped from the Company's subsidiary City Produce
Operating Corp. in the ordinary course of business and for which payments are
made to such subsidiary on a continuous basis, as well as management fees
receivable for administrative and managerial services performed for the
affiliated companies by the Company. For the quarter ended March 4, 2001,
merchandise sales to affiliates were approximately $675,000. This affiliate
purchased its merchandise from a third party prior to 2000.
On February 6, 1998, the Company agreed to purchase substantially all of the
assets and assumed certain of the liabilities of a supermarket located at 1644
York Avenue, New York City, that was owned by a corporation controlled by John
Catsimatidis. On March 1, 2000 the Company and the affiliate determined to
restructure the transaction by rescinding the purchase effective as as of
February 6, 1998, and entering into an operating agreement which gives the
Company full control of the supermarket and the right to operate the supermarket
for the account of the Company. The operating agreement terminates on December
2, 2001, but the term shall be extended for additional one year periods unless
either party shall give notice of termination not later than 90 days prior to
the end of the then current term of the agreement. Under the operating
agreement, the Company shall pay to the affiliate $1 per annum, plus such other
consideration as may be approved by the Company's directors (excluding John
Catsimatidis). Pursuant to the operating agreement the Company or any designee
of the Company, also has the option until December 31, 2005 to purchase the
supermarket for $2,778,000, which price is the fair market price of the
supermarket established on October 11, 1999 by the Company's directors
(excluding John Catsimatidis).
In May 2000, another affiliate and the Company entered into a similar operating
agreement for a store owned by the affiliate. As consideration, the affiliate
receives $1 per annum, plus such other consideration as may be approved by the
Company's directors (excluding John Catsimatidis). The
9
operating agreement terminates on May 10, 2001, but the term shall be extended
for additional one year periods unless either party shall give notice of
termination not later than 90 days prior to the end of the then current term of
the agreement. Since such notice was not given, the agreement has been renewed
by one year until May 10, 2002. Pursuant to the operating agreement, the
Company, or any designee of the Company, also has the option until December 31,
2005 to purchase the supermarket for the fair market price of the supermarket as
established by the Company's directors (excluding John Catsimatidis) using a
valuation criterion similar to that issued for valuing the store at 1644 York
Avenue, New York City. It is management's opinion that the fair market value of
this store is approximately $3 million.
The affiliates' intention in entering into these two operating agreements where
the Company enjoys full benefits of ownership for the nominal consideration of
$1 per annum per store was to effect post closing adjustments in connection with
the Food Group acquisition. If the option to purchase the supermarkets is
exercised, the excess of the purchase price over the net book value of the
assets will be shown as a charge to equity.
In connection with the restructure of the transaction relating to the
supermarket located at 1644 York Avenue, approximately $872,000 is included in
"Due from related parties - other" on the accompanying balance sheet.
During fiscal 1999 Mr. John Catsimatidis issued a limited $600,000 guarantee of
the collection of all accounts receivable acquired pursuant to the Food Group
acquisition and agreed not to permit the level of the Company's liability due to
the affiliate to fall below $600,000, prior to the issuance of the fiscal year
ended December 3, 2000 audited financial statements. In fiscal 2000 such limited
guarantee and commitment regarding the level of the Company's liability to the
affiliate was extended until prior to the issuance of the fiscal year ending
December 2, 2001 audited financial statements, in the amount of $700,000.
3. LITIGATION
Reference is made to Item 3 (2) contained in the Company's Annual Report on Form
10-K for the year ended December 3, 2000 to the matter captioned: Ansoumana v.
various defendants. On April 2, 2001, The Court certified a Rule 23(b)(3) class,
with no sub-classes. To date, approximately 60 employees of The Great American
Delivery Service Company have opted into the class action. Management expects
the matter will be resolved in the near future. The Company will vigorously
defend the fact that these workers are employees of Great American, and not
employees of the Company.
10
GRISTEDE'S FOODS, INC. AND SUBSIDIARIES
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE QUARTERS ENDED MARCH 4, 2001 AND FEBRUARY 27, 2000
RESULTS OF OPERATIONS
The following table sets forth items from the Company's Consolidated Statements
of Operations as a percentage on sales.
13 weeks 13 weeks
ended ended
3/4/01 2/27/00
------ -------
Sales 100.0% 100.0%
Cost of sales 61.2 60.3
----- -----
Gross profit 38.8 39.7
Store operating, general and
administrative expenses 30.3 30.3
Pre-store opening startup costs 0.1 0.5
Depreciation and amortization 2.8 2.4
Non-store operating expense 3.4 3.1
----- -----
Operating income 2.1 3.5
Other income (expense) (1.3) (1.6)
----- -----
Income from operations before
income taxes 0.8 1.9
Provisions for income taxes 0.0 0.0
----- -----
Net income 0.8% 1.9%
----- -----
Sales for the quarter ended March 4, 2001 were $59,586,146 as compared to sales
for the quarter ended February 27, 2000 of $53,747,897. The increase in sales
during the 2001 period was primarily the result of the Company's remodeling
program, which is continuing and two new stores which opened subsequent to the
2000 period.
Gross profit was $23,097,942 or 38.8% of sales for the quarter ended March 4,
2001 as compared with $21,339,818 or 39.7% of sales for the quarter ended
February 27, 2000. The decrease in gross profit as a percentage of sales, during
the
11
2001 period, was primarily due to the recovery of certain stores in the 2000
period from unusually low gross margins during the fourth quarter of fiscal
1999, which resulted in above normal margins during the 2000 period.
Store operating, general and administrative expenses was $18,061,742 or 30.3% of
sales for the quarter ended March 4, 2001 as compared with $16,260,186 or 30.3%
of sales for the quarter ended February 27, 2000. Store operating, general and
administrative expenses as a percentage of sales were unchanged in the 2001
period as compared to the 2000 period mainly due to substantially greater
electric costs in our trading area, offset by lower labor costs as a percentage
of sales, lower advertising expense and equipment rentals converted to
capitalized leases.
Pre-store opening startup costs were $66,000 or 0.1% of sales for the quarter
ended March 4, 2001 as compared with $283,333 or 0.5% of sales for the quarter
ended February 27, 2000. The decrease in pre-store opening startup costs in the
quarter ended March 4, 2001 was due to the fact that fewer stores were remodeled
or new stores opened as compared to the same quarter in 2000. The stores
remodeled required less pre-opening advertising and store set-up labor costs.
Non-store operating expenses were $2,047,910 or 3.4% of sales for the quarter
ended March 4, 2001 as compared with $1,640,644 or 3.1% of sales for the quarter
ended February 27, 2000. Administrative payroll and fringes were 2.1% of sales
for the quarter ended March 4, 2001 as compared with 2.0% of sales for the
quarter ended February 27, 2000. The small change in the 2001 period as a
percent of sales reflects the containment of costs associated with the
supervisory personnel required as a result of the additional business generated
by the store remodeling program. General office expenses were 1.0% of sales for
the quarter ended March 4, 2001 as compared with 0.8% of sales for the quarter
ended February 27, 2000. The increase during the 2001 period was primarily due
to additional back office costs in relation to the increased sales. Professional
fees were 0.2% of sales for both the quarter ended March 4, 2001 and for the
quarter ended February 27, 2000. Corporate expenses were 0.1% of sales for both
the quarter ended March 4, 2001 and for the quarter ended February 27, 2000.
Interest expense was $957,007 or 1.6% of sales for the quarter ended March 4,
2001 as compared with $886,186 or 1.6% of sales for the quarter ended February
27, 2000. The increase in the 2001 period was primarily attributable to
increased borrowings under capital leases for equipment financing, partially
offset by lower interest rates.
Other income was $184,953 or 0.3% of sales for the quarter ended March 4, 2001
as compared with $0 for the quarter ended February 27, 2000. This was
attributable to the closure of a store and the sale of its lease in the 2001
period.
As a result of the items reviewed above the net income before provision for
income taxes for the quarter ended March 4, 2001 was $471,172, as compared to
$1,012,876 for the quarter ended February 27, 2000.
12
LIQUIDITY AND CAPITAL RESOURCES
Liquidity:
The consolidated financial statements of the Company indicate that at March 4,
2001 current assets exceed current liabilities by $2,105,092 and stockholders'
equity was $11,778,616. Management believes that cash flows generated from
operations, supplemented by financing from third party leasing companies and/or
additional financing from the Company's majority shareholder, will be sufficient
to pay the Company's debts as they may come due, provide for its capital
expenditure program and meet its other cash requirements.
Debt and Debt Service:
On November 10, 1997, the Company completed its financial arrangements with a
group of banks for a credit facility in the aggregate amount of $25,000,000.
Under the credit agreement the Company obtained a term loan in the amount of
$12,000,000 to refinance prior bank debt, an improvement term loan line of
credit in the amount of $8,000,000 to finance capital improvements to its
Supermarkets and a revolving line of credit in the amount of $5,000,000 to
provide working capital. Subsequently, the banks amended the credit facility to
(i) extend its maturity date until November 30, 2003, (ii) change certain
financial covenants, and (iii) change the amortization of the term loan and the
improvement term loans, and increased the revolving credit facility to
$14,000,000 all as follows: at fiscal year end December 3, 2000, the term loan
amortizes at $142,857 per month, with the balance due at maturity; the
improvement term loan amortizes $0 during December, 2000, $262,500 during
January 2001, $137,500 during February, 2001, $50,000 per month commencing March
1, 2001 through and including June 1, 2001 and $133,333 per month thereafter,
with the balance due at maturity; the revolving credit commitment reduces by
$466,667 per month commencing July 1, 2001.
Presently, the bank facilities are fully utilized and the Company is negotiating
an increase in the credit facilities with its banks. There is no assurance that
the Company will be able to negotiate such an increase on terms satisfactory to
the Company. If the Company is unable to obtain its desired financing from its
banks, the Company will seek increased financing from third party leasing
companies and/or additional financing from the Company's majority shareholder
and other sources.
Borrowings under the facility bear interest at a spread over either the prime
rate of the bank acting as agent for the group of banks or a LIBOR rate, with
the spread dependent on the ratio of the Company's funded debt to EBITDA ratio,
as defined in the credit agreement. The average interest rate on amounts
outstanding under the facility during the quarter ended March 4, 2001 was 9.50%
per annum.
The credit facility contains covenants, representations and events of default
typical of credit facility agreements, including financial covenants which
require the Company to meet, among other things, a minimum tangible net worth,
debt service coverage ratios and fixed charge coverage ratios, and which limit
transactions with affiliates. The facility is secured by equipment, inventories
and accounts receivable.
The Company's majority shareholder, through affiliates, has contributed in
excess of $12,000,000 through March 4, 2001, in the form of assumed liabilities
and unsecured non-interest bearing demand loans, with $9,000,000 subordinated to
its banks.
Capital Expenditures:
The Company has not incurred any material commitments for capital expenditures,
although it anticipates spending approximately $8 million to $10 million on its
store remodeling and expansion program in fiscal 2001. Such amount is subject to
adjustment based on the availability of funds.
13
Cash Flows:
Cash provided by operating activities amounted to $0.5 million in fiscal 2001
compared to $0.8 million in the prior year. The change in cash flow from
operating activities was primarily due to cash provided by operating assets and
liabilities and a smaller net income. Cash used for investing activities was
$1.3 million in 2001 compared to $2.6 million in 2000, resulting from reduced
capital expenditures. Cash provided by financing acitivities was $0.8 million in
2001 compared with $1.8 million in 2000 reflecting the bank financing drawn upon
in 2000, the additional proceeds provided by an affiliate, offset by repayments
of bank loans and capital leases. Presently, the bank facilities are fully
utilized and the Company is negotiating an increase in the credit facilities
with its banks.
Recent Accounting Pronouncements:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 represents a
comprehensive framework of accounting rules that standardizes the accounting for
all derivatives. SFAS No. 133 applies to all entities and to all types of
derivatives, and is effective as amended in fiscal year 2001. The adoption of
SFAS 133 is not expected to materially affect the financial statements of the
Company.
14
GRISTEDE'S FOODS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Change in Securities And Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) No Current Reports on Form 8-K were filed for the quarter for which
this report is being filed.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Gristede's Foods, Inc.
By: /s/ John A. Catsimatidis
----------------------------
John A. Catsimatidis
Chairman of the Board and
Chief Executive Officer
Dated: April 18, 2001
By: /s/ Gary Pokrassa
----------------------------
Gary Pokrassa
Chief Financial Officer
Dated: April 18, 2001
16