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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended January 27, 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: 33-63372
PUEBLO XTRA INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 65-0415593
------------------------------------ -----------------------------
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
1300 N.W. 22nd Street
Pompano Beach, Florida 33069
------------------------------------ -----------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (954) 977-2500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
No voting stock of the Registrant is held by non-affiliates of the
Registrant.
Number of shares of the Registrant's Common Stock, $ .10 par value,
outstanding as of April 26, 2001 -- 200.
PART I
ITEM 1. BUSINESS
General
Pueblo Xtra International, Inc. (the "Company") is a Delaware holding
company that owns all of the common stock of Pueblo International, Inc., a
Delaware company (together with its subsidiaries, "Pueblo"). Pueblo owns all
of the common stock of Xtra Super Food Center, Inc. ("Xtra"), the subsidiary
that operates the supermarkets and video rental stores in the U.S. Virgin
Islands. Pueblo, which was founded in 1955 with the opening of the first
mainland-style supermarkets in Puerto Rico, is the leading supermarket chain
in the Commonwealth of Puerto Rico and the Territory of the U.S. Virgin
Islands. In addition, Pueblo is the leading operator of video rental outlets
in Puerto Rico and the U.S. Virgin Islands through its franchise rights with
Blockbuster, Inc. ("BI"). The Company currently operates 42 supermarkets in
Puerto Rico and 6 supermarkets in the U.S. Virgin Islands. The Company also
currently operates 41 video rental stores in Puerto Rico and 2 video rental
stores in the U.S. Virgin Islands.
On July 28, 1993, the Company acquired all of the outstanding shares of
common stock of Pueblo for an aggregate purchase price of $283.6 million plus
transaction costs (hereinafter referred to as the "Acquisition"). Pursuant
to the Acquisition, Pueblo became a wholly-owned subsidiary of the Company.
The shares were acquired from an investor group including affiliates of
Metropolitan Life Insurance Company, The First Boston Corporation and certain
current and former members of Pueblo management and its Board of Directors.
The Acquisition has been accounted for under the purchase method
effective July 31, 1993 as discussed in Note (2)-- Goodwill of the notes to
the Company's consolidated financial statements referenced in Part II, Item 8
of this Form 10-K.
Business of the Company
Supermarket Industry Overview
The top four chains in the retail grocery industry in Puerto Rico
account for approximately 66% of total industry sales, with the remainder
divided among smaller chains and numerous independent operations. Total
supermarket chain sales in calendar year 2000 were approximately $2.6
billion, a significant portion of which was attributable to the more densely
populated greater San Juan metropolitan area, where the larger chains are
concentrated. The grocery industry in less populated parts of the island is
characterized by smaller family-run operations with limited selection and
less competitive prices. No major U.S. supermarket chains have established
operations in the Puerto Rico grocery market, although a number of national
general merchandise chains have significant Puerto Rican operations.
National warehouse clubs and mass merchandisers, which have entered the
Puerto Rico and U.S. Virgin Islands markets since 1990 offering various bulk
grocery and general merchandise items, have increased pricing pressures on
grocery retailers including the Company.
Puerto Rico
The Company operates its supermarkets under the names Pueblo and
PuebloXtra with emphasis on service, variety and high quality products at
competitive prices. In Puerto Rico, the Company has a grocery retailing
market share of approximately 23%. In addition, the Company estimates that
it has a 32% market share in the greater San Juan metropolitan area, the
most densely populated region of Puerto Rico, with more than one-third of the
island's 3.8 million residents. In fiscal year 2001 in Puerto Rico, the
Company's stores averaged approximately 41,000 gross square feet and
generated an average of approximately $452 of sales per selling square foot.
Since the Acquisition, the Company has constructed six new supermarkets and
remodeled 30 existing supermarkets in Puerto Rico.
U.S. Virgin Islands
In fiscal 2001, the six supermarkets in the U.S. Virgin Islands averaged
31,634 gross square feet and generated an average of approximately $414 of
sales per selling square foot. The Company has an estimated U.S. Virgin
Islands grocery retailing market share of approximately 35%. Since the
Acquisition, the Company has added one new supermarket and remodeled five
existing supermarkets in the U.S. Virgin Islands.
Video Operations
The Company has operated franchised video rental locations in Puerto
Rico since 1989 and in the U.S. Virgin Islands since 1993 and currently
operates 43 video rental locations in Puerto Rico and the U.S. Virgin
Islands. In Puerto Rico, the Company operates 17 in-store video rental
outlets and 24 free-standing video rental stores, most of which are adjacent
to its supermarkets. In the U.S. Virgin Islands, the Company operates two
video rental stores. The Company's free-standing video rental stores average
approximately 5,500 gross square feet, while the Company's in-store video
rental outlets average approximately 3,900 gross square feet. During fiscal
1998, the Company converted all of the remaining video outlets which it
operated in its supermarkets under the name Pueblo Video Clubs into its Video
Rental Division. In order to increase customer traffic in its supermarkets,
the Company's typical in-store video rental outlet has a separate entrance
but its principal exit leads into the supermarket. In addition, the Company
is able to take advantage of cross-marketing opportunities with its
supermarket operations, including promotional video rental and merchandising
offers.
The Company's Video Rental Operations are currently the largest major
video chain operating in Puerto Rico and the U.S. Virgin Islands. In the
last several years Video Avenue has opened 15 stores in competition with the
Company. Each of the Company's free-standing video rental locations carries
an average of approximately 10,800 tapes dedicated to video rental whereas
its in-store video rental locations average approximately 8,100. Each
location also offers for sale a selection of recorded and blank video tapes,
music compact discs, video game cartridges, self-activated cellular phones,
prepaid phone cards, accessories, and snack food products. For promotions of
its Video Rental Division operations, the Company primarily utilizes print,
television, radio, billboards and in-store signage. The Company's franchisor
also provides product and support services to the Company. These include,
among other things, marketing programs and computer software.
The Company's successful development of its video rental franchise has
been the result of its ability to leverage its knowledge of Puerto Rico and
existing market and retailing expertise. The Company's knowledge of real
estate and its existing portfolio of desirable supermarket locations has
enabled it to obtain attractive, high traffic locations for its Video Rental
Operations. The Company will continue to evaluate expansion opportunities in
its markets.
The Company's Development Agreements with its franchisor provide for the
Company's right to open video rental locations in Puerto Rico and the U.S.
Virgin Islands during the term of such agreements. The Development
Agreements contain development quotas which the Company has fulfilled
requiring the Company to open a certain number of video rental locations in
Puerto Rico and in the U.S. Virgin Islands. Each video rental location is
subject to a Franchise Agreement with the Company's franchisor that provides
the right for such location to conduct video rental operations for a 20-year
period.
Disposal of Florida Retail Operations
On January 16, 1996, the Company announced its decision to discontinue
its retail operations in Florida (the "Florida Disposal"). The announcement
was made as part of a restructuring plan whereby the Company exited the
Florida retail market and placed more emphasis on its operations in Puerto
Rico and the U.S. Virgin Islands. The Florida Disposal, which included the
disposal of all eight supermarkets and one warehouse and distribution center,
by sale or abandonment, was completed in the first quarter of fiscal year
1997. All property related to the discontinued Florida operations has been
disposed of.
Store Composition
Since the Acquisition, the Company has made capital expenditures of
approximately $112.3 million in its supermarket operations in Puerto Rico and
the U.S. Virgin Islands, including the opening of six new supermarkets, the
acquisition of one new supermarket and the remodeling of 35 existing
supermarkets. In the same period, the Company has made capital expenditures
totaling approximately $10.9 million in its Video Rental Division operations.
The history of store openings, closings and remodelings, beginning with
fiscal 1997, is set forth in the table below:
Fiscal Year
---------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Stores in Operation:
At beginning of year . . . . . . . 93 94 94 77 82
Stores opened:
Supermarkets . . . . . . . . . - - 1 - -
video rental stores . . . . . . 1 - 1 17** 5
Stores closed:
Puerto Rico - Supermarket . . . 2 - 1* - 2
Puerto Rico - video rental . . 1 1 1* - -
Florida . . . . . . . . . . . . - - - - 8
---- ---- ---- ---- ----
At end of year . . . . . . . . . 91 93 94 94 77
==== ==== ==== ==== ====
Remodels and/or conversions . . . 8 9 2 16 9
==== ==== ==== ==== ====
Store Composition at Year-End:
By division:
Supermarkets . . . . . . . . 48 50 50 50 50
video rental stores . . . . 43 43 44 44 27
---- ---- ---- ---- ----
Total 91 93 94 94 77
==== ==== ==== ==== ====
By location:
Puerto Rico . . . . . . . . 83 85 86 86 70
U.S. Virgin Islands . . . . 8 8 8 8 7
---- ---- ---- ---- ----
Total 91 93 94 94 77
==== ==== ==== ==== ====
* Closed as a result of Hurricane Georges; will not be reopened.
** Includes conversion of Pueblo Video Clubs into its Video Rental Division
stores.
Supermarket Purchasing and Distribution
The Company's buying staff actively purchases products from distributors,
as well as directly from the producer or manufacturer. The Company generally
controls shipping from the point of purchase in an effort to reduce costs and
control delivery times. The Company currently buys approximately 59% of its
total dollar volume of product purchases directly from manufacturers and is
seeking to increase this percentage to reduce costs and to obtain superior
payment terms.
The Company owns a full-line distribution center in greater San Juan with
approximately 300,000 square feet. The only facility of its type on the
island with both refrigerated and freezer capacity, the San Juan distribution
center has capacity to store approximately 1.5 million cases of assorted
products and serves as the Company's central distribution center for the
island. The distribution center is equipped with a computerized tracking
system which is integrated with the Company's purchasing, inventory
management and shipping systems. This system enables the Company to make
rapid procurement decisions, optimize inventory levels and increase labor
productivity. In fiscal 2001, this facility provided approximately 57% of
the goods (measured by purchase cost) supplied to the Company's stores in
Puerto Rico.
Supermarket Merchandising
General
The Company's merchandising strategies integrate one-stop shopping
convenience, premium quality products, attractive pricing and effective
advertising and promotions. The Company reinforces its merchandising
strategies with friendly and efficient service, effective promotional
programs, in-store activities, and both brand name and high quality private
label product offerings.
Product Offerings
Over the past several years management greatly increased the number of
items offered, analyzed the preferences of its customers, and then eliminated
certain low demand items. The Company expanded its supermarket stock keeping
units ("SKUs") from approximately 23,000 to approximately 67,000. Management
believes the Company's supermarkets offer the greatest product variety within
their market areas, as its competitors generally lack the sales volume, store
size and procurement efficiencies to stock and merchandise the wide variety
of products and services offered by the Company. The Company's management
believes the convenience and quality of its specialty department products
contribute to customer satisfaction.
The following table sets forth the mix of products sold (as measured in
sales dollars) in the Company's supermarkets for the fiscal years indicated:
Fiscal Year Ended
-------------------------------------------
January 27, January 29, January 30,
Product Category 2001 2000 1999
----------- ----------- -----------
Grocery . . . . . . . . . . . . 45.2% 45.7% 46.8%
Health/Beauty Care/General Merchandise 8.2 7.7 7.7
Dairy . . . . . . . . . . . . . . 17.8 18.0 17.5
Meat/Seafood . . . . . . . . . . . 15.1 14.4 14.7
Produce . . . . . . . . . . . . . . 9.1 9.7 9.0
Deli/Bakery . . . . . . . . . . . . 4.6 4.5 4.3
------ ------ ------
Total . . . . . . . . . . . . 100.0% 100.0% 100.0%
====== ====== ======
Pricing
As the largest grocery store chain operator in its markets, the Company
is able to take advantage of volume purchase discounts and shipping
efficiencies to offer competitive pricing at its supermarkets. During the
year, the Company switched from weekly to biweekly circulars to emphasize
special offers.
Private Label
During fiscal 1998 the Company began selling Pueblo brand private label
grocery, dairy, and frozen food items in its supermarkets. As of fiscal
2001 year-end the Company continues to have approximately 350 SKUs of
manufactured Pueblo brand items offered in its supermarkets. Product
selection seeks to achieve quality that is equal to or better than
competitive national brand products and sourcing that will enhance gross
margin.
Historically, the Company utilized only Food Club manufactured private
label products through the Company's membership with Topco Associates, Inc.
Utilization of these products has not been discontinued. Rather, product
offerings among Pueblo private label products, Food Club private label
products and national brands are chosen on the basis of quality, cost, gross
margin and sales volume in order to offer what management believes is the
best selection and value to its customers.
The Company's private label program consists of the products discussed
in the two preceding paragraphs as well as Pueblo private label products sold
in its bakery and deli departments and a variety of brand labels sold
exclusively at its supermarkets. Private label sales are approximately 14.9%
of total supermarket sales.
Category Management
During fiscal 1998, the Company implemented a category management system
designed to combine traditional buying, reordering and pricing functions
under the leadership of corporate level category merchandisers. The system
allows the company to assign profit management to the individual responsible
for a product category. The Company's management believes such a system
improves sales, optimizes inventory levels, reduces purchase costs and
thereby enhances gross profit and operating profit margins.
Advertising and Promotion
The Company primarily utilizes newspaper, radio, television and in-store
advertising in Puerto Rico and the U.S. Virgin Islands. The Company's
grocery operations run multi-page newspaper inserts and full-page color
advertisements.
In March of 2001, the Company introduced the new "Pueblo Card" to its
customers in Puerto Rico and the U. S. Virgin Islands. The Pueblo Card will
serve many functions, including enhancing customer loyalty, through providing
discounts available only to customers using the card, check cashing services,
and target marketing.
All advertising is created and designed through the Company's
wholly-owned advertising agency, CaribAd, Inc. ("Adteam"). Adteam, based in
Puerto Rico, develops promotional programs for all of the Company's markets,
thereby providing advertising cost advantages over the Company's competitors.
Competition
The grocery retailing business is highly competitive. Competition is
based primarily on price, quality of goods and service, convenience and
product mix. The number and type of competitors, and the degree of
competition experienced by individual stores, vary by location.
The Company competes with local food chains, such as Supermercados
Amigo, Supermercados Grande, Supermercados Econo, Mr. Special Supermarkets,
Plaza Gigante Supermarkets, and Supermercados Selecto in Puerto Rico, and
Plaza Extra and Cost-U-Less in the U. S. Virgin Islands, as well as numerous
independent operations throughout Puerto Rico and the U.S. Virgin Islands.
In addition, several warehouse clubs and mass merchandisers, such as Sam's
Warehouse Clubs, Wal-Mart, Kmart (including its Big K format) and Walgreens,
have opened locations in Puerto Rico and the U.S. Virgin Islands. Despite
these competitive challenges, the Company continues to maintain its position
as market share leader in each of its respective markets.
Although the Company's Video Rental Operations constitute the largest
video chain in Puerto Rico and the U.S. Virgin Islands, the Company competes
with 15 Video Avenue stores and numerous local, independent video retailers.
In addition, the Company's video rental stores compete against cable,
television, satellite broadcasting, movie theaters, the Internet, and other
forms of entertainment.
Management Information Systems
The Company believes high levels of automation and technology are
essential to its operations and has invested considerable resources in
computer hardware, systems applications and networking capabilities. These
systems integrate all major aspects of the Company's business, including the
monitoring of store sales, inventory control, merchandise planning, labor
utilization, distribution and financial reporting.
All of the Company's stores are equipped with state-of-the-art point of
sale terminals with full price look-up capabilities that capture sales at the
time of transaction down to the SKU level through the use of bar-code
scanners. These scanners facilitate customer check-out and provide, by
store, valuable stock-replenishment information for buyers and financial
information used by management. Similar scanning technology is used by each
store to electronically record goods received and orders generated. To
provide the best service possible, the Company has installed a labor
scheduling system that schedules optimal staffing based on sales, customer
traffic and defined service objectives. In addition, the Company has
installed software to monitor cash register check out transactions, by
cashier, according to type and frequency in order to improve check out
operations and reduce inventory shrinkage. The Company's management
information systems at its Video Rental Operations are state-of-the art
systems which are licensed to the Company by its franchisor.
Employees
As of January 27, 2001, the Company had approximately 4,800 employees
(full- and part-time) of whom approximately 3,700 were employed at the
supermarket level, 500 at the administrative and financial services offices
and distribution center and 600 by the Video Rental Division. Approximately
62% of the Company's supermarket employees are employed on a part-time
basis. Approximately 3,100 store employees are represented by a
nonaffiliated collective bargaining organization under a contract expiring in
2002. The Company considers its relations with its employees to be good.
Trademarks, Tradenames and Service Marks
The Company owns certain trademarks, tradenames and service marks used
in its business, which are duly registered with the U. S. Patent and Trade
office, and the appropriate governmental authorities in Florida, Puerto Rico,
the U. S. Virgin Islands, and selected foreign jurisdictions. The Company
believes that its trademarks, tradenames, and service marks, including
Pueblo, PuebloXtra, and Xtra, are valuable assets due to the fact that brand
name recognition and logos are important considerations in the Company's
consumer markets. As a franchisee, the Company has exclusive rights to use
the Blockbuster trademark in its specified franchise territories.
Regulation
Compliance by the Company with federal, state and local environmental
protection laws has not had, and is not expected to have, a material effect
on capital expenditures, earnings or the competitive position of the Company.
ITEM 2. PROPERTIES
The following table sets forth information as of January 27, 2001 with
respect to the owned and leased stores and support facilities used by Pueblo
in its business:
Owned (1) Leased Total
----------------- ----------------- ----------------
No. Gross Sq. Ft. No. Gross Sq. Ft. No. Gross Sq. Ft
--- ------------- --- ------------- --- ------------
Supermarkets . . . . . . . 6 270,000 43 1,688,000 48 1,958,000
video rental stores . . . 3 17,000 40 192,000 43 209,000
Distribution center & offices 1 300,000 1 13,000 2 313,000
- ----------
(1) For four of the owned stores the Company owns the building and leases
the land. Three of these are in Puerto Rico and one is in the U.S. Virgin
Islands.
The majority of the Company's supermarket operations are conducted on
leased premises which have initial terms generally ranging from 20 to 25
years. The lease terms typically contain renewal options allowing the
Company to extend the lease term in five to ten year increments. The leases
provide for fixed monthly rental payments subject to various periodic
adjustments. The leases often require the Company to pay percentage annual
rent and certain expenses related to the premises such as insurance, taxes
and maintenance. See Note (5)-- Leases and Leasehold Interests of the notes
to the Company's consolidated financial statements referenced in Part II,
Item 8 of this Form 10-K. The Company does not anticipate any difficulties
in renewing its leases as they expire.
The construction of new owned facilities and remodeling of existing
facilities are financed principally with internally generated funds. All
owned properties of Pueblo are pledged as collateral (by a pledge of the
assets of the Company's subsidiaries) under the Company's existing bank
credit agreement dated as of April 29, 1997 (the "New Bank Credit Agreement")
with a syndicate of banks (see Note (4)-- Debt in the notes to the Company's
consolidated financial statements referenced in Part II, Item 8 of this Form
10-K).
The Company owns its headquarters, which includes the supermarket and
Video Rental Division offices and the Distribution Center located in
Carolina, Puerto Rico (near San Juan), and leases its administrative offices
located in Pompano Beach, Florida.
The Company's management believes that its properties are adequately
maintained and sufficient for its business needs.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to a number of legal proceedings involving claims
for money damages arising in the ordinary course of conducting its business
which are either covered by insurance or are within the Company's
self-insurance program, and in a number of other proceedings which are not
deemed material. The Company's management does not believe that the ultimate
resolution of any of these matters is likely to have a material adverse
effect on the Company's results of operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
quarter ended January 27, 2001.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
Market Information
There is no established public trading market for the Company's common
equity.
Holders
The Company is a wholly-owned subsidiary of PXC&M Holdings, Inc. a
Delaware Corporation ("Holdings"). Shares of Holdings are indirectly
beneficially owned by a trust for the benefit of the family of Gustavo
Cisneros, and a trust for the benefit of the family of Ricardo Cisneros, with
each trust having a 50% indirect beneficial ownership interest in the shares
of Holdings. These trusts are referred to herein as the "Principal
Shareholders." Messrs. Gustavo and Ricardo Cisneros disclaim beneficial
ownership of the shares.
Dividends
No cash dividends have been declared on the common stock since the
Company's inception. Certain restrictive covenants in the New Bank Credit
Agreement impose limitations on the declaration or payment of dividends by
the Company. Additionally, dividend payments by Pueblo to the Company are
restricted under the terms of the New Bank Credit Agreement. The New Bank
Credit Agreement, however, provides that so long as no default or event of
default (as defined in the New Bank Credit Agreement) exists, or would exist
as a result, Pueblo is permitted to pay cash dividends to the Company in an
aggregate amount necessary to pay interest on the Company's 9 1/2 % Senior
Notes due 2003 (the "Notes") and the Company's 9 1/2 % Series C Notes due
2003 (the "Series C Senior Notes") then due and payable in accordance with
the terms thereof (see Note (4)-- Debt in the notes to Consolidated Financial
Statements).
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except average sales per selling square
foot amounts)
Fiscal Year Ended
--------------------------------------------------------------
January 27, January 29, January 30, January 31, January 25,
2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- ----------
Operating Statement Data
Net sales $622,050 $674,145 $784,774 $938,506 $1,020,056
Cost of goods sold 423,755 456,143 528,395 667,043 760,329
--------- --------- ----------- ---------- ----------
Gross profit 198,295 218,002 256,379 271,463 259,727
Selling, general and admin-
istrative expenses (1) 165,667 163,785 172,964 204,185 213,485
Gain on insurance settlement(2) (2,464) (15,066) - - -
Store Closings:
Exit costs (3) 685 - - - -
Write down of impaired
assets (3) 3,534 - - - -
Depreciation and amortization 34,142 31,632 36,529 40,175 41,128
Division closure costs (4) - - - - 4,160
--------- --------- ----------- ----------- ----------
Operating (loss) profit (3,269) 37,651 46,886 27,103 954
Sundry, net - - - (36) 122
Interest expense-debt and
capital lease obligations (28,830) (30,371) (29,556) (30,527) (30,458)
Interest and investment
income, net 2,500 2,750 1,379 910 276
Loss on sale of real
property (5) - (1,291) - - -
Income tax benefit (expense) 11,691 (4,015) (9,832) (583) 9,535
--------- --------- ----------- ----------- ----------
(Loss) Income before
extraordinary item (17,908) 4,724 8,877 (3,133) (19,571)
Extraordinary item, net of
taxes (6) 20,603 - - (2,444) -
--------- --------- ----------- ----------- ----------
Net income (loss) 2,695 $4,724 $8,877 $(5,577) $(19,571)
========= ========= =========== =========== ==========
See notes to Selected Financial Data at the end of Item 6.
As of
-------------------------------------------------------------------
January 27, January 29, January 30, January 31, January 25,
2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- -----------
Balance Sheet Data
Cash and cash equivalents (7) $34,833 $95,711 $55,500 $28,770 $12,148
Working capital (deficit) (6,899) 22,214 1,578 (23,535) (56,217)
Property and equipment, net 118,598 122,263 129,860 135,844 150,915
Total assets 434,790 521,564 507,002 502,176 522,641
Total debt and capital
lease obligations 218,047 283,705 276,032 275,576 295,204
Stockholder's equity 43,601 40,906 36,182 27,305 32,882
For the Fiscal Year Ended
-------------------------------------------------------------------
January 27, January 29, January 30, January 31, January 25,
2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- -----------
Certain Financial Ratios
and Other Data
EBITDA (as defined) (8) $34,407 $69,283 $83,415 $67,278 $42,082
Cash flow (used in) provided
by investing activities (5) (17,249) 1,077 (8,209) 187 (1,364)
Cash flow used in
financing activities (31,685) (576) (591) (20,343) (8,298)
Cash flow (used in) provided
by operating activities (11,944) 39,710 35,530 36,778 14,812
Capital expenditures 17,452 21,650 * 15,271 10,938 14,455
EBITDA (as defined) margin (8) 5.5% 10.3% 10.6% 7.2% 4.1%
Debt to EBITDA (as defined) 6.34:1 4.09:1 3.30:1 4.10:1 7.01:1
* Excludes replacements of approximately $13.1 million as a result of damages from Hurricane Georges.
See notes to Selected Financial Data at the end of Item 6.
Fiscal Year
------------------------------------------------------
2001 2000 1999 1998 1997
--------- -------- --------- -------- --------
RETAIL FOOD DIVISION DATA
Puerto Rico
Number of stores (at fiscal year-end) 42 44 44 44 44
Average sales per store (9) $ 11,943 $ 12,901 $ 14,804 $ 18,221 $ 19,672
Average selling square footage 28,149 28,243 27,179 26,455 27,652
Average sales per selling square foot (9) $ 452 $ 491 $ 590 $ 701 $ 711
Total sales $522,059 $567,658 $650,816 $801,732 $886,765
Same store sales % change (7.6)% (13.1)% (17.8)% (10.2)% (2.6)%
U.S. Virgin Islands
Number of stores (at fiscal year-end) 6 6 6 6 6
Average sales per store (9) $ 8,085 $ 8,364 $ 11,326 $ 14,777 $ 15,110
Average selling square footage 19,421 19,421 19,421 19,421 20,104
Average sales per selling square foot (9) $ 414 $ 427 $ 580 $ 754 $ 752
Total sales $ 48,509 $ 50,185 $ 67,958 $ 88,659 $ 90,659
Same store sales % change (3.3)% (26.2)% (21.7)% (3.9)% 7.0%
VIDEO RENTAL DIVISION DATA
Video Rental Stores
Number of stores (at fiscal year-end) 43 43 44 44 27
Average sales per store (9) $ 1,000 $ 1,146 $ 1,381 $ 1,371 $ 1,588
Average weekly sales $ 837 $ 962 $ 1,184 $ 683 $ 794
Total sales $ 42,954 $ 49,920 $60,972 $48,115 $35,938
Same store sales % change (13.5)% (18.6)% 10.8% (4.5)% 10.5%
See notes to Selected Financial Data at the end of Item 6.
NOTES TO SELECTED FINANCIAL DATA
(1) Selling, general and administrative expenses for fiscal year 1997 include
certain expenses and charges related to the implementation of the
Company's strategic initiatives and other matters. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations
--General".
(2) The Company realized a gain from an insurance settlement relating to
Hurricane Georges on the excess of replacement costs over book value of
assets replaced that were damaged by the storm.
(3) The company recorded a charge of $0.7 million for the estimated carrying
costs of stores that were closed and $3.5 million for the write down of
related assets.
(4) The Company recorded charges of approximately $4.2 million in fiscal 1997
as a result of the Company's exit from the Florida market. Costs
associated with such closings, when recognized, are included in selling,
general and administrative expenses.
(5) The Company received $35.5 million in cash and incurred a loss in a
sale/leaseback of real estate.
(6) The fiscal year 2001 amount relates to a gain on early extinguishment of
debt, net of income taxes of $13,264. The fiscal year 1998 amount relates
to a loss on the early extinguishment of debt, net of income taxes of
$1,567.
(7) Highly liquid investments purchased with a maturity of three months or
less are considered cash equivalents.
(8) EBITDA (as defined) represents Earnings Before Interest, Taxes,
Depreciation, Amortization, the loss on sale/leaseback transaction,
sundry, and the write down of impaired assets. EBITDA (as defined) is not
intended to represent cash flow from operations as defined by accounting
principles generally accepted in the United States of America and should
not be considered as an alternative to net income (loss) as an indication
of the Company's operating performance or to cash flows as a measure of
liquidity. EBITDA (as defined) is included as it is the basis upon which
the Company assesses its financial performance. EBITDA (as defined)
margin represents EBITDA (as defined) divided by net sales.
(9) For all periods presented, average sales are weighted for the period of
time stores are open during the year.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
The Company was organized in 1993 to acquire Pueblo in the Acquisition.
In connection with the Acquisition, the Company incurred significant
indebtedness and recorded significant goodwill. Following the Acquisition,
the Company continued an existing operating strategy designed to expand its
supermarket penetration through new supermarket openings in Puerto Rico and
Florida and new video rental locations in Puerto Rico. The number of the
Company's supermarkets in Puerto Rico and the U.S. Virgin Islands grew from
46 to 50 and the number of the Company's video rental locations (including
conversions) grew from 20 to 43, in each case measured from the Acquisition
through the end of fiscal 2000. During fiscal 2001, the Company closed 2
under-performing supermarkets in Puerto Rico, reducing the number of
supermarkets to 48. Also in fiscal 2001 the Company relocated a video rental
store that was in one of the closed supermarkets to a new free standing
location. From the Acquisition through fiscal 2001, the Company made capital
expenditures totaling $132.3 million, of which $123.2 million related to
Puerto Rico and the U.S. Virgin Islands.
Throughout this time period, the Company's markets have been affected by
an increasing level of competition from local supermarket chains, independent
supermarkets, warehouse club stores, discount drug stores and convenience
stores. Warehouse club stores and mass merchandisers, which began entering
the Puerto Rico and U.S. Virgin Islands markets in 1990 offering various
grocery and general merchandise items, have increased pricing pressures on
grocery retailers including the Company. In addition, low inflation in food
prices in recent years has made it difficult for the Company and other
grocery store operators to increase prices and has intensified the
competitive environment by causing such retailers to emphasize promotional
activities and discount pricing to maintain or gain market share.
The Company's focus from the date of Acquisition through the end of
fiscal 1997 on new supermarket development rather than supermarket
operations, as well as the effects of increased competition, resulted in
declines in net sales (from $1,199.1 million in fiscal 1994 to $1,020.1
million in fiscal 1997), same store sales (from $931.3 million in fiscal 1994
to $861.1 million in fiscal 1997), and consolidated operating results (from
$27.4 million in fiscal 1994 to $1.0 million in fiscal 1997). The declining
operating results together with the Company's high level of interest expense
resulting from its significant indebtedness resulted in annual net losses
from fiscal 1994 through fiscal 1998.
In October 1995, William T. Keon, III was named President and Chief
Executive Officer of the Company. Following his arrival at the Company, Mr.
Keon conducted a thorough review of the Company's operating business
practices and its financial performance. As a result of such review, the
Company determined in January 1996 to discontinue its retail operations in
the competitive Florida market in order to focus on its core markets where it
has a stronger competitive position and greater profit opportunities. In
fiscal 1996, management also began to take several other actions designed to
improve the financial performance of the Company, including the closing of
two under-performing supermarkets in Puerto Rico, an increase in the
Company's advertising expenditures in Puerto Rico, and the conversion of six
Pueblo Video Clubs into in-store Video Rental Division outlets. Throughout
fiscal 1997 and fiscal 1998, the Company completed its conversion of Pueblo
Video Clubs into Video Rental Division outlets. Additionally, from fiscal
1997 through fiscal 2001, the Company continued its program to remodel
existing stores and open new stores in appropriate locations. In fiscal 1999
one new supermarket and one new video rental store were opened in Puerto
Rico. Although the remodeling program was delayed in the latter part of
fiscal 1999, and the early part of fiscal 2000, due to the business
interruption as a result of Hurricane Georges, the Company continued the
program in fiscal 2000 and fiscal 2001 with the completion of seventeen
remodels, nine of which were completed in fiscal 2000 and eight in fiscal
2001.
In fiscal 1997, in conjunction with the implementation of a revised
business strategy, the Company retained a retail industry consulting firm to
assist management in analyzing the Company's operating practices. One result
of such analysis was the reorganization of labor scheduling practices, which
enabled the Company to eliminate 440 store employees in January 1997 and
reduce annual labor costs in fiscal 1998 by approximately $9.0 million. It
is management's belief that the decision to exit the Florida market, together
with the actions which the Company began to take in the spring of 1996 and
the implementation of its revised business strategy, were appropriate steps
to improve operating results. Management's comprehensive program to refocus
on repositioning the business in terms of product mix and modernizing stores
contributed to net losses decreasing from fiscal 1996 through fiscal 1998 and
in fiscal years 1999, 2000, and 2001 the Company realized net income of $8.9
million, $4.7 million, and $2.7 million, respectively.
Other measures being undertaken by the Company include: (i) continual
evaluation of the supermarket formats to expand the breadth of product and
values offered to customers and to increase customer traffic and convenience,
such as adding in-store banking and fast food restaurants for select
locations and (ii) adding products such as music department items,
self-activated cellular phones, and prepaid phone cards to the video rental
stores to expand their entertainment offerings. The Company's management
believes that these measures will enhance sales by increasing customer
traffic in its supermarkets and video rental stores.
In connection with the strategic initiatives begun in January 1996, the
Company incurred a number of charges and other items that have adversely
affected the Company's operating profit, including the following items which
aggregated $31.9 million in fiscal 1996 and $12.3 million in fiscal 1997.
The Company recorded charges of approximately $25.8 million in fiscal 1996
and $4.2 million in fiscal 1997 as a result of the Company's exit from the
Florida market, and a charge of $2.2 million in fiscal 1996 as a result of
the Company's restructuring of its Puerto Rico operations. Other items which
adversely affected the Company's operating profit and were related to the
implementation of the Company's strategic initiatives included the following,
which aggregated $3.9 million in fiscal 1996 and $8.1 million in fiscal 1997.
In fiscal 1996, an adjustment to the net realizable value of certain
nonoperating real property in Puerto Rico caused a charge of $3.9 million.
In fiscal 1997, the elimination of 440 store employees resulted in a charge
of approximately $1.1 million in severance costs and the closing of two
Puerto Rico stores resulted in a $2.9 million charge. Additionally, the
Company established reserves totaling $5.6 million during fiscal years 1994
through 1998 pursuant to claims, all of which have been settled.
The Company has no operations of its own, and its only assets are its
equity interest in Pueblo and intercompany notes issued to the Company by its
subsidiaries in connection with its investment of the net proceeds of the
9 1/2% senior notes (the "Notes") and the 9 1/2% Series C Senior Notes Due 2003
(the "Series C Senior Notes"). The Company has no source of cash to meet its
obligations, including its obligations under the Notes and the Series C
Senior Notes, other than payments by its subsidiaries on such intercompany
notes, which are restricted and effectively subordinated to Pueblo's
obligations under the New Bank Credit Agreement, and dividends from its
subsidiaries. The New Bank Credit Agreement contains an exception to the
restriction on the payment of dividends which provides that so long as no
default or event of default (as defined in the New Bank Credit Agreement)
exists, or would exist as a result thereof, Pueblo is permitted to pay cash
dividends to the Company in an aggregate amount necessary to pay interest on
the Notes and the Series C Senior Notes then due and payable in accordance
with the terms thereof.
Hurricane Georges
Hurricane Georges struck all of the Company's operating facilities on
September 20 and 21, 1998. All of the Company's stores, with the exception
of two, were reopened. During fiscal year 2000, the Company settled the
property portion of its hurricane insurance claims for approximately $42.0
million and, with the exception of some minor items outstanding, all agreed
amounts have been paid. As a result, during fiscal 2000, the Company
recorded an insurance settlement gain of $15.1 million ($9.2 million, net of
applicable income taxes). During fiscal 2001, the Company recorded an
additional gain of $2.5 million ($1.5 million, net of applicable income
taxes), realized upon completion of the repairs for the damages caused by the
hurricane and the related final accounting for the same.
The Company's insurance also includes business interruption coverage
which provides for reimbursement for lost profits as a result of the
storm. On December 1, 2000 the Company submitted to its insurance carriers a
$69.4 million proof of loss for business interruption losses to its grocery
stores and video outlets in Puerto Rico and the U. S. Virgin Islands (the
"claim") as a result of Hurricane Georges. The Company has received $5.3
million from its insurance carriers related to this portion of the claim,
$4.7 million of which was received prior to January 27, 2001 and the
remaining amount soon thereafter. The $5.3 million is comprised of a $5.0
million advance and reimbursement of $0.3 million of the Company's claim
preparation fees. The claim is based on the Company's estimate of the impact
the storm had on its business from the time the storm occurred through
September 9, 2000, which is the end of the applicable indemnity period. The
carriers have invoked the appraisal provisions of the policy which,
essentially, require an arbitration process to value the claim. Consequently,
the Company is unable to predict what amount, if any, eventually will be
recovered or when the appraisal process will conclude. The Company has not
recorded any anticipated recovery from the business interruption portion of
the claim as all recoveries will be gains which may be recorded only at such
time as they are settled and realized.
Results of Operations
Fiscal 2001 vs. Fiscal 2000
As of January 27, 2001, the Company operated a total of 48 supermarkets
and 43 video rental locations in Puerto Rico and the U. S. Virgin Islands.
In fiscal 2001, the Company closed two of its supermarkets and relocated one
of its video rental stores in Puerto Rico. Additionally, the Company
continued its reenineering of the entire business including the remodeling
process scheduled for all of its stores.
Total sales for the year ended January 27, 2001 were $622.1 million
versus $674.1 million in the year ended January 29, 2000, a decline of 7.7%.
Same store sales were $614.0 million this year versus $662.6 million for the
prior year, a decline of 7.3%. "Same stores" are defined as those stores
that were open as of the beginning of both periods and remained open through
the end of the periods. Same store sales in the Retail Food Division
declined 6.8% from the prior year. The principal factor contributing to the
fiscal 2001 decline in same stores sales in the Retail Food Division is
increased competition. In addition the disruption caused by Hurricane
Georges, the related effect on the Division's customer base, and remodeling
stores negatively impacted sales. Video Rental Division same store sales
decreased 13.5% from the prior year. The decrease in Video Rental Division
same store sales was a result of increased competition, the disruption caused
by Hurricane Georges and a decline in customer response to new releases for
both rental and sell-through videos. Increased competition has come from new
competing video outlets and more significantly from increased competition
from mass merchandising, in Puerto Rico, of self-activated cellular phones
and prepaid phone cards.
Gross profit for the year ended January 27, 2001 was $198.3 million
versus $218.0 million for the prior year, a decline of $19.7 million. Gross
profit for the Retail Food Division was $165.2 million for fiscal 2001
compared to $181.0 million for fiscal 2000, a $15.8 million decline. The
decline in sales accounted for $13.1 million of the total decline in the
Retail Food Division. Additionally, the rate of gross profit for the Retail
Food Division declined by 0.5% from 29.0% in fiscal 2000 to 28.5% in fiscal
2001, which resulted in a $2.7 million decline in gross profit. One of the
primary reasons for the decline in the rate of gross profit was retail
pricing adjustments made as part of the fiscal 2001 marketing plan. The
gross profit for the Video Rental Division for the year ended January 27,
2001 was $33.0 million versus $37.0 million in the prior year, a decline of
$4.0 million. The gross profit rate for the Video Rental Division increased
by 2.8%, to 76.9% in fiscal 2001. The increase in the gross profit rate is a
result of an increase in video rental sales, which have a higher gross margin
rate than product sales, as a percentage of total Video Rental Division
sales.
Selling, general and administrative expenses were $165.7 million for the
year ended January 27, 2001 compared to $163.8 million for the prior year.
The increase of $1.9 million from the prior year was primarily a result of an
increase in utility expenses due to rate increases in Puerto Rico and the
U.S. Virgin Islands, only partially offset by operational efficiencies during
fiscal Additionally, the sale/leaseback transaction that occurred in the
first quarter of fiscal 2000 resulted in an increase in rental expense, net
of rental income, of $1.4 million between fiscal 2001 and fiscal 2000.
Fiscal 2001 and fiscal 2000 also included non-recurring adjustments related
to the Company's reenineering programs in the areas of health insurance and
general liability claims costs and the closure of its Florida retail
locations. These adjustments which impacted the comparability between fiscal
2001 and fiscal 2000 resulted in reductions in Selling, general and
administrative costs of $1.2 million for fiscal 2001 whereas they reduced
Selling, general and administrative costs for fiscal 2000 by $8.9 million.
Store closings for the year ended January 27, 2001 include a charge of
$0.7 million for the estimated carrying costs of stores that were closed and
$3.5 million for the write down of related assets.
Depreciation and Amortization was $34.1 million for fiscal 2001 compared
to $31.6 million for fiscal 2000, an increase of $2.5 million. This increase
was primarily a result of the write off of property, plant and equipment that
has been replaced during the past year as the Company's reenineering program
to remodel its stores progresses.
Interest expense, net of interest income decreased by $1.3 million
primarily as a result of the Company's purchase of $87.7 million principal
amount of its Notes and Series C Senior Notes which occurred on October 2,
This reduction was partially offset by interest on $30.0 million in
borrowings under the Company's revolving credit facility. The decrease was
also partially offset by an increase in interest expense on capital leases of
$0.3 million due primarily to establishment of new capital leases in the
sale/leaseback transaction which occurred in the second quarter of fiscal
2000.
Income tax benefit for the year was $11.7 million compared to income tax
expense of $4.0 millon in the prior year, a difference of $15.7 million. The
income tax benefit for the year did not include a $13.3 million income tax
provision related to the Company's extraordinary gain on the purchase of
$87.7 million principal amount of its Notes and Series C Senior Notes. The
effective rates for fiscal 2001 and 2000 were 36.9% (net of the applicable
income taxes on the extraordinary gain) and 45.9%, respectively. Variances
in the effective tax rate are a result of variances in tax rates among the
tax jurisdictions in which the Company operates and the results of operations
in those specific jurisdictions.
Net income for the year ended January 27, 2001 was $2.7 million as
compared to $4.7 million for the prior year, a decrease of $2.0 million. The
results for fiscal 2001 include a $20.6 million extraordinary gain, net of
applicable income taxes, resulting from the Company purchasing $87.7 million
principal amount of its Notes and Series C Senior Notes. Also included in
the results for fiscal 2001 are a charge of $2.7 million, net of applicable
income taxes, pertaining to the estimated carrying cost of stores closed and
the write down of related assets and a $1.5 million gain, net of applicable
income taxes, related to the final accounting for the property damaged by
Hurricane Georges. The results for fiscal 2000 include a $9.2 million gain,
net of applicable income taxes, from the settlement of the property portion
of the Hurricane Georges insurance claim. Also included in the results for
fiscal 2000 is a $1.2 million loss, net of applicable income taxes, on a
sale/leaseback transaction.
Fiscal 2000 vs. Fiscal 1999
As of January 29, 2000, the Company operated a total of 50 supermarkets
and 43 video rental locations in Puerto Rico and the U. S. Virgin Islands.
In fiscal 2000 the Company continued its reenineering of the entire business
including the remodeling process scheduled for all of its stores while
reconstructing its facilities at all of its locations damaged by Hurricane
Georges. During fiscal 2000 one video rental store within a supermarket was
closed to better utilize floor space for supermarket operations. The Company
is investigating alternative locations for the video store.
Total sales for the year ended January 29, 2000 were $674.1 million
versus $784.8 million in the year ended January 30, 1999, a decrease of
14.1%. Same store sales were $653.3 million for fiscal 2000 versus $765.3
million for the prior year, a decline of 14.6%. Same store sales in the
Retail Food Division declined 14.3% from the prior year. The principal
Factors contributing to the decline in same stores sales in the Retail Food
Division were increased competition, the disruption in fiscal 2000 and a
portion of fiscal 1999 caused by repairing and replacing components of the
stores damaged by Hurricane Georges, and the disruption associated with
remodeling stores. While essentially all of the repairs were complete, the
adverse effect on the Company's customer base caused by the disruption
continued. Video Rental Division same store sales decreased 18.6% from the
prior year. The decrease in Video Rental Division same store sales was a
result of increased competition, a lackluster year for popular new releases
of both rental and sell-through videos and the downsizing of the music
departments. The lack of new releases impacted the video sell-through
business to a greater extent than the rental business. Increased competition
was in two forms. One was new competing video outlets. The second, a more
significant factor, was mass merchandising of self-activated cellular phones
and prepaid phone cards on the island of Puerto Rico during the fiscal year
that ended January 29, 2000. During the prior year, the Company's Video
Rental Division enjoyed a leadership position in this special segment of the
market as it was the only island-wide retailer.
Gross profit percentages were 32.3% and 32.7% for fiscal years 2000 and
1999, respectively, compared to the 28.9% of fiscal 1998. The improved gross
margin in recent years is attributed to the reenineering processes
implemented by management as detailed above. The reduction of 0.4% between
fiscal 2000 and fiscal 1999 was primarily due to increased costs associated
with changes in distribution practices.
Selling, general, and administrative expenses were 24.3% as a percentage
of sales compared to the 22.0% as a percentage of sales of the prior year.
The $9.2 million decline in selling, general, and administrative expenses was
a result of the Company's ongoing reenineering program, which had been in
process over the previous 36 months. The program involves all areas of the
Company's operations and seeks to eliminate excess costs and to control
operating costs in light of declining sales.
Depreciation and amortization decreased by $4.9 million from $36.5
million to $31.6 million. Approximately $3.5 million of the decrease was a
result of various assets becoming fully depreciated during the fiscal year.
The remaining $1.4 million was a result of the sale/leaseback transaction of
seven of the Company's properties.
Interest expense, net of interest income decreased by $0.6 million due
to a $1.4 million increase in interest income due primarily to maintenance of
larger balances of cash and cash equivalents on hand throughout the year.
The decrease was offset by an increase in interest expense on capital leases
and other interest expense of $0.8 million due primarily to establishment of
new capital leases in the sale/leaseback transaction.
Income tax provision decreased by $5.8 million from $9.8 million to $4.0
million due to the decrease in pretax income. The effective rates for fiscal
2000 and 1999 were 45.9% and 52.6%, respectively. Variances in the effective
tax rate are a result of variances in tax rates among the tax jurisdictions
in which the Company operates and the results of operations in those specific
jurisdictions.
Net income for the year ended January 29, 2000 was $4.7 million, a
decrease of $4.2 million from the $8.9 million net income of the prior year.
Net income includes a $9.2 million gain, net of applicable income taxes,
from the settlement of the Hurricane Georges insurance claim and a $1.2
million loss, net of applicable income taxes, on the sale/leaseback
transaction.
Liquidity and Capital Resources
Company operations have historically provided a cash flow which, along
with the available credit facility, have provided adequate liquidity for the
Company's operational needs.
On April 29, 1997 the Company entered into a refinancing plan (the
"Refinancing Plan") in connection with which it issued $85.0 million
principal amount of Series C Senior Notes. The net proceeds from the sale of
the Series C Senior Notes of approximately $73.9 million after deducting
expenses, together with available cash of the Company, were used to repay the
senior secured indebtedness outstanding under a bank agreement dated July 31,
1993 (the "Old Bank Credit Agreement.") In connection with the Refinancing
Plan, the Company entered into an amended bank agreement (the "New Bank
Credit Agreement"), which provides for a $65.0 million revolving credit
facility with less restrictive covenants compared to the Old Bank Credit
Agreement.
In August 2000 the Company signed an agreement with its lender banks to
amend or adjust certain covenants in its credit facility principally to adapt
the financial covenants to changes in the Company's performance and the
impact of the Company's purchase of $87.7 million of principal amount of its
Notes and Series C Senior Notes. Adjustment of the covenants for the impact
of the purchase of the Notes had been completed as of January 26, 2001.
During the year ended January 27, 2001, the Company borrowed $30.0
million under its revolving credit facility. The weighted average per annum
interest rate on these borrowings for fiscal 2001 was 10.625%. Additionally,
after the issuance of standby letters of credit in the amount of $3.3
million, as of January 27, 2001, the borrowing availability on a revolving
basis under the terms of the New Bank Credit Agreement was $31.7 million.
Cash used by operating activities was $11.9 million during fiscal 2001
compared to cash provided by operating activities of $39.7 million in the
prior year. The difference is a result of a decline in earnings and the
increase in cash used for components of working capital.
Net cash (used in) provided by investing activities was ($17.2) million,
$1.1 million, and ($8.2) million in fiscal years 2001, 2000, and 1999,
respectively. During fiscal year 2001, the Company invested $17.5 million in
improvements to property and equipment compared to $21.6 million in fiscal
In fiscal 2000, the Company incurred $13.1 million in reconstruction
of property and replacement of equipment destroyed in Hurricane Georges. The
Company also received proceeds of $35.8 million, in fiscal 2000, from
disposition of assets primarily from the sale/leaseback transaction.
Net cash used in financing activities was $31.7 million, $0.6 million,
and $0.6 million in fiscal years 2001, 2000, and 1999, respectively. During
fiscal 2001 the company purchased $87.7 million principal amount of its Notes
and Series C Senior Notes for $51.0 million, including expenses, and repaid
industrial revenue bonds totaling $10.0 million. Additionally, the Company
borrowed $30.0 million under its $65.0 million revolving credit facility.
During fiscal years 2000 and 1999 the only financing activity was payment of
a portion of the capital lease obligations.
Working capital as of January 27, 2001 was a deficit of $6.9 million, a
decrease of $29.1 million from the $22.2 million positive working capital as
of January 29, 2000, producing a current ratio of 0.94:1 versus the 1.15:1
current ratio as of the beginning of this fiscal year. The primary reasons
for this decrease are due to the resources utilized as discussed in the three
preceding paragraphs. Working capital during fiscal 2000 increased by $20.6
million to $22.2 million from $1.6 million at the end of fiscal 1999,
producing a current ratio of 1.15:1 in fiscal 2000 versus 1.01:1 in fiscal
The increase in working capital was primarily due to the sale/leaseback
transaction in which the Company received $35.5 million in proceeds. The
increase was offset by the reclassification of $10 million in long-term debt
during fiscal 2000 to a current liability.
The Company's general liability and certain of its workers compensation
insurance programs are self-insured. The Company maintains insurance
coverage for claims in excess of $250,000. The current portion of the
reserve, representing amounts expected to be paid in the next fiscal year, is
$4.3 million as of January 27, 2001 and is anticipated to be funded with cash
provided by operating activities.
Capital expenditures for fiscal 2002 are expected to be approximately
$11.5 million. This capital program (which is subject to continuing change
and review) includes new stores, the remodeling of certain existing
locations, and updating of equipment and software.
The Company's management believes that the cash flows generated by its
normal business operations together with its available revolving credit
facility will be adequate for its liquidity and capital resource needs.
Impact of Inflation, Currency Fluctuations, and Market Risk
The inflation rate for food prices continues to be lower than the
overall increase in the U.S. Consumer Price Index. The Company's primary
costs, products and labor, usually increase with inflation. Increases in
inventory costs can typically be passed on to the customer. Other cost
increases must by recovered through operating efficiencies and improved gross
margins. Currency in Puerto Rico and the U.S. Virgin Islands is the
U.S. dollar. As such, the Company has no exposure to foreign currency
fluctuations.
The Company is exposed to certain market risks from transactions that
are entered into during the normal course of business. The Company does not
trade or speculate in derivative financial instruments. The Company's
primary market risk exposure relates to interest rate risk. The Company
manages its interest rate risk in order to balance its exposure between fixed
and variable rates while attempting to minimize its interest costs. As
detailed in Note 4-- Debt in the notes to Consolidated Financial Statements,
the Company's long-term debt consists of the Notes and Series C Senior Notes
of $177 million principal amount, bearing interest at a fixed rate of 9 1/2%
per annum and due in 2003 and $30 million under the Company's revolving
credit facility.
Forward Looking Statements
Statements, other than statements of historical information, under the
caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and elsewhere in this Form 10-K may constitute
forward looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such statements include, among others,
statements concerning: (1) Company management's belief that the cash flows
generated by its normal business operations together with its available
credit facility will be adequate for its liquidity and capital resource
needs, (2) insurance recovery expectations, (3) the extent to which future
operations may be inhibited by, and the expected period to recover from, the
hurricane, and (4) anticipated capital expenditures. These statements are
based on Company management's expectations and are subject to various risks
and uncertainties. Actual results could differ materially from those
anticipated due to a number of factors, including but not limited to the
Company's substantial indebtedness and high degree of leverage, which
continue as a result of the Refinancing Plan (including limitations on the
Company's ability to obtain additional financing and trade credit, to apply
operating cash flow for purposes in addition to debt service, to respond to
price competition in economic downturns and to dispose of assets pledged to
secure such indebtedness or to freely use proceeds of any such dispositions),
the Company's limited geographic markets and competitive conditions in the
markets in which the Company operates and buying patterns of consumers.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages F-1 through F-25 and S-1 through S-4 appearing at the end of
this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements with the Company's accountants on
accounting and financial disclosure during the applicable periods.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following is a list, as of the date of this filing, of the names of
the directors and executive officers of the Company, their respective ages
and their respective positions with the Company. The terms of the directors
and executive officers of the Company expire annually upon the holding of the
annual meeting of stockholders.
Directors
- ---------
Name Age Position
- ---- ---- --------
Gustavo A. Cisneros . . . . . 55 Chairman of the Board; Member of the
Executive Committee
William T. Keon, III . . . . . 54 Director; President and Chief Executive
Officer; Chairman of the Executive
Committee; Chairman of the Audit and
Risk Committee; Member of the
Compensation and Benefits Committee
Steven I. Bandel . . . . . . . 47 Director; Member of the Executive
Committee; Chairman of the Compensation
and Benefits Committee
Guillermo A. Cisneros . . . . 29 Director
Cristina Pieretti . . . . . . 49 Director
Alejandro Rivera . . . . . . . 58 Director; Member of the Audit and Risk
Committee; Member of the
Compensation and Benefits Committee
Executive Officers
- ------------------
William T. Keon, III . . . . . 54 President and Chief Executive Officer
Daniel J. O'Leary . . . . . . 54 Executive Vice President and Chief
Financial Officer, Assistant Secretary
Charles M. Newsom . . . . . . 51 Senior Vice President; President of
Retail Food Division
Melissa Lammers . . . . . . . 44 Senior Vice President; Chief Marketing
Officer
Fernando J. Bonilla . . . . . 40 Vice President, General Counsel and
Secretary
Alicia Echevarria . . . . . . 48 Vice President of Human Resources,
Assistant Secretary
Gustavo A. Cisneros has been the Chairman of the Board of the Company
since its inception (July 28, 1993). He was appointed to the Executive
Committee in October 1995. Since prior to 1992, he (and trusts established
for the benefit of his family) has been a direct or indirect beneficial owner
of interests in and a director of certain companies that own or are engaged
in a number of diverse commercial enterprises in Venezuela, the United
States, Brazil, Chile and Mexico (the "Cisneros Group"), including the
Company. He is a member of the board of directors of America Online Latin
America, Pan American Beverages Corporation and Spalding Holdings
Corporation.
William T. Keon, III has been a Director of the Company since October
1995. He assumed the position of President and Chief Executive Officer and
was appointed Chairman of the Executive Committee and Audit and Risk
Committee also in October 1995. He is also a member of the Compensation and
Benefits Committee. Since January 1983, Mr. Keon has served in senior
managerial roles in the Cisneros Group.
Steven I. Bandel has been a Director of the Company since the
Acquisition. He was appointed to the Executive Committee in October 1995.
Since prior to 1992, he has been actively involved in the operations and
management of certain companies in the Cisneros Group, other than a period
from February 1990 to May 1992 during which he was a partner in a Venezuelan
investment banking firm. He is also a member of the board of directors of
America Online Latin America.
Guillermo A. Cisneros was appointed a Director in April, 1998. Since
1998 he has been Program Director for a non-profit educational television
station in Caracas, Venezuela. Prior to 1998 he participated in several
internships. He is the son of Gustavo Cisneros.
Cristina Pieretti was appointed a Director in March 1997. During most
of the last eight years, she has been actively involved in operations of
companies in the Cisneros Group in areas related to consumer goods, retailing
and telecommunications, other than a period from March 1995 to February 1997
during which she was a partner in a consulting firm. She is also a member of
the board of directors of America Online Latin America.
Alejandro Rivera has been a Director of the Company since April 1, 1997.
He was previously a Director of the Company from the Acquisition until June
30, 1995. Since 1976, he has been actively involved in the operations and
management of certain companies in the Cisneros Group. Mr. Rivera is also a
Director of Univision Communications, Inc. Mr. Rivera is a member of the
Audit and Risk Committee and of the Compensation and Benefits Committee.
Daniel J. O'Leary joined the Company in June 1997 as Executive Vice
President and Chief Financial Officer. From December 1992 until the time he
joined the Company, Mr. O'Leary served as Senior Vice President of Finance
and Chief Financial Officer of Phar-Mor, Inc., a deep discount drugstore
chain. Prior to that time, he served as a Director and, at various times,
President and Chief Operating Officer, Executive Vice President, Vice
President of Finance and Chief Financial Officer at Fay's, Inc., a
multi-concept retailer with drugstores and auto parts stores. From 1969 to
1987, Mr. O'Leary was a member of the accounting firm of Touche, Ross & Co.
(now known as Deloitte & Touche LLP).
Charles Newsom joined the Company in June, 1997 and has over 31 years
experience in the retail grocery business. In December, 2000 the Company
named Mr. Newsom President of the Retail Food Division. Previously, Mr.
Newsom held the position of Vice President of Merchandising and Marketing for
the Retail Food Division. Prior to joining the Company, Mr. Newsom worked
for Kroger for 15 years as Store Manager, District Manager, Human Resource
Manager, and head of Store Manager Training. Mr. Newsom also worked for Big
V Supermarkets in New York as Vice President of Operations and Bruno's
Supermarket as Vice President of Merchandising.
Melissa Lammers joined the Company in January 2001 as Senior Vice
President and Chief Marketing Officer. Before joining the Company, she
served as President of Young and Rubicam Puerto Rico, Puerto Rico's number
one advertising agency as rated by Caribbean Business. Ms. Lammers has spent
the past seventeen years in advertising in the Northern Caribbean market.
Fernando J. Bonilla joined the Company in September 1997 as Vice
President, General Counsel and Secretary. Before joining the Company, Mr.
Bonilla served as General Counsel and Secretary to the Board of Directors of
the Puerto Rico Maritime Shipping Authority and a junior partner of Fiddler
Gonzalez and Rodriguez, a law firm in Puerto Rico.
Alicia Echevarria joined the Company in April 1996 as Vice President of
Human Resources for the Puerto Rico Division. In March 1997 she became
Assistant Secretary to the Company. Prior to joining the Company, she was
Director of Human Resources for R.J. Reynolds Tobacco Company (Inc.) in
Puerto Rico, where she was employed for 15 years.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid or distributed
by the Company through January 27, 2001 to, or accrued through such date for
the account of the Chief Executive Officer as well as each of the four most
highly compensated executive officers of the Company serving at January 27,
2001.
SUMMARY COMPENSATION TABLE
Annual Compensation
--------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
Other
Name Annual All Other
and Compen- Compen-
Principal Fiscal Salary Bonus sation sation
Position Year ($) ($) ($) ($)
- -------------------------- -------- -------- --------- ----------- -----------
William T. Keon, III, 2001 480,000 220,000 21,853(2) 24,592(1)
President and Chief 2000 450,000 425,000 19,460(2) 19,500(1)
Executive Officer 1999 360,000 715,000 22,014(2) 32,586(1)
David L. Aston 2001 322,581 0 29,416(3) 9,677(1)
Executive Vice President; 2000 304,654 60,000 14,293(3) 9,140(1)
President, Retail Food 1999 289,279 347,515 15,461(3) 19,104(1)
Division (Retired 12/22/00)
Daniel J. O'Leary 2001 259,000 60,000 17,332(4) -
Executive Vice President; 2000 245,193 60,000 18,174(4) -
Chief Financial Officer 1999 232,452 279,231 13,920(4) -
Charles R. Newsom 2001 206,465 40,300 22,714(5) -
Senior Vice President; 2000 191,057 30,300 10,450(5) -
President, Retail Food 1999 181,072 162,963 12,831(5) -
Division
Alicia Echevarria 2001 151,368 20,300 13,730(6) -
Vice President of 2000 142,958 10,300 10,493(6) -
Human Resources 1999 135,125 81,075 9,651(6) -
Melissa Lammers (Started 1/8/01) 2001 13,846 - - -
NOTES TO SUMMARY COMPENSATION TABLE
(1) Amount represents the Company matching contribution to an elective
non-qualified deferred compensation plan maintained by the Company.
(2) Includes costs related to the reimbursement of executive medical expense
of $9,503, $7,110, and $9,976 and an automobile allowance in the amount of
$12,350, $12,350, and $12,038 for fiscal 2001, 2000, and 1999, respectively.
(3) Includes costs related to the reimbursement of executive medical expense
of $18,366, $3,243, and $4,723 and an automobile allowance in the amount of
$11,050, $11,050, and $10,738 for fiscal 2001, 2000, and 1999, respectively.
(4) Includes costs related to the reimbursement of executive medical expense
of $6,932, $7,774, and $3,832 and an automobile allowance in the amount of
$10,400, $10,400, and $10,088 for fiscal 2001, 2000, and 1999, respectively.
(5) Includes costs related to the reimbursement of executive medical expense
of $12,834, $700, and $3,081 and an automobile allowance in the amount of
$9,880, $9,750, and $9,750 for fiscal 2001, 2000, and 1999, respectively.
(6) Includes costs related to the reimbursement of executive medical expense
of $4,630, $1,393, and $1,151 and an automobile allowance in the amount of
$9,100, $9,100, and $8,500 for fiscal 2001, 2000, and 1999, respectively.
PENSION PLAN TABLES
-------------------
The Company sponsors two defined benefit plans. The Pueblo
International, Inc. Employees' Retirement Plan (the "Retirement Plan") is
tax-qualified under the Internal Revenue Code and covers all full-time and
certain part-time employees of the Company over age 21 with one year of
service. It provides an annual benefit equal to 1% of the average annual
compensation over a five-year period per year of service. The Supplemental
Executive Retirement Plan (the "SERP") is non-qualified and covers all
officers of the Company and its subsidiaries. It provides an annual benefit
equal to 3% of the average compensation over a five-year period per year of
service (up to 20 years). Full vesting for the Retirement Plan and the SERP
occurs upon completion of five years of service. The following tables give
the estimated annual benefit payable upon retirement for participants in the
Retirement Plan and the SERP. The SERP benefits are offset by the Retirement
Plan benefits and by 100% of social security benefits. These offsets are
reflected in the benefits shown in the SERP table. The Company does not
sponsor any other defined benefit or actuarial plans.
Table 1. Retirement Plan
Years of Service
---------------------------------------------------------------------------
Remuneration 5 10 15 20 25 30 35
---------------------------------------------------------------------------
125,000 . . . . . . 6,250 12,500 18,750 25,000 31,250 37,500 43,750
150,000 . . . . . . 7,500 15,000 22,500 30,000 37,500 45,000 52,500
175,000 . . . . . . 8,000 16,000 24,000 32,000 40,000 48,000 56,000
Table 2. Supplemental Executive Retirement Plan
Years of Service
---------------------------------------------------------------------------
Remuneration 5 10 15 20 25 30 35
---------------------------------------------------------------------------
125,000 . . . . . . . - 9,069 21,569 34,069 27,819 21,569 15,319
150,000 . . . . . . . - 14,069 29,069 44,069 36,569 29,069 21,569
175,000 . . . . . . . 2,319 20,569 38,819 57,069 49,069 41,069 33,069
200,000 . . . . . . . 6,069 28,069 50,069 72,069 64,069 56,069 48,069
225,000 . . . . . . . 9,819 35,569 61,319 87,069 79,069 71,069 63,069
250,000 . . . . . . . 13,569 43,069 72,569 102,069 94,069 86,069 78,069
275,000 . . . . . . . 17,319 50,569 83,819 117,069 109,069 101,069 93,069
300,000 . . . . . . . 21,069 58,069 95,069 132,069 124,069 116,069 108,069
325,000 . . . . . . . 24,819 65,569 106,319 147,069 139,069 131,069 123,069
350,000 . . . . . . . 28,569 73,069 117,569 162,069 154,069 146,069 138,069
375,000 . . . . . . . 32,319 80,569 128,819 177,069 169,069 161,069 153,069
400,000 . . . . . . . 36,069 88,069 140,069 192,069 184,069 176,069 168,069
425,000 . . . . . . . 39,819 95,569 151,319 207,069 199,069 191,069 183,069
450,000 . . . . . . . 43,569 103,069 162,569 222,069 214,069 206,069 198,069
475,000 . . . . . . . 47,319 110,569 173,819 237,069 229,069 221,069 213,069
500,000 . . . . . . . 51,069 118,069 185,069 252,069 244,069 236,069 228,069
Compensation covered by the qualified Retirement Plan is equal to the
total compensation (excluding compensation attributable to the redemption of
certain stock options) paid to an employee during a plan year prior to any
reduction under a salary reduction agreement entered into by the employee
pursuant to a plan maintained by the employer which qualifies under Section
401(k) of the Internal Revenue Code of 1986, as amended (the "Code"), or
pursuant to a plan maintained by the employer which qualifies under Section
125 of the Code. Compensation in excess of $160,000 shall be disregarded,
provided, however, that such $160,000 limitation shall be adjusted at the
same time and in such manner as the maximum compensation limit is adjusted
under Section 401(a)(17) of the Code.
Compensation covered by the non-qualified Supplemental Executive
Retirement Plan is the same as the qualified Retirement Plan, except that the
$160,000 limit is not applicable.
The estimated years of credited service and age, respectively, for
purposes of calculating benefits through January 27, 2001 for Mr. Keon is
seven and 54, respectively, for Mr. O'Leary is four and 54, respectively, and
for Mr. Newsom is four and 51, respectively. The benefits provided by both
the Retirement Plan and the SERP are on a straight-life annuity basis, as are
the examples in the Retirement Plan table.
Compensation Committee Interlocks and Insider Participation
Messrs. Keon, Bandel, and Rivera served as members of the Compensation
and Benefits Committee of the Board of Directors of the Company during all or
a portion of the fiscal years ended January 27, 2001, January 29, 2000, and
January 30, 1999. Mr. Keon also served as an officer of the Company during
the fiscal year ended January 31, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
a) Security Ownership of Certain Beneficial Owners
As discussed in Part II, Item 5 - Market for the Registrant's Common
Equity and Related Shareholder Matters, the Company is a wholly-owned
subsidiary of Holdings.
The following table sets forth certain information regarding the
beneficial ownership of more than 5% of the common stock of Holdings as of
the date of this filing. By virtue of its ownership of the Holdings common
stock, the following entity may be deemed to own a corresponding percentage
of the Company's common stock.
Shares
Beneficially Owned
---------------------------------------------
Name and Address Number Percent
- ------------------------------- --------------------- -------------------
Parkside Investments LLC
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801 1,000 100.0%
The shares of Holdings described above are beneficially owned by the
Principal Shareholders by virtue of their indirect ownership of the entity
listed above. The principal business address of the Principal Shareholders
is Paseo Enrique Eraso, Centro Commercial Paseo Las Mercedes, Caracas,
Venezuela.
(b) Security Ownership of Management
As of the date of this filing, the directors and executive officers of
the Company have no beneficial ownership of Holdings.
(c) Changes in Control
The borrowings outstanding under the New Bank Credit Agreement are
collateralized by a pledge of the assets of the Company's subsidiaries, by
the capital stock of, and intercompany notes issued by, the Company's
subsidiaries and by the capital stock of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) Documents filed as part of this report:
Page
(1) Consolidated Financial Statements:
Independent Auditors' Report F - 1
Consolidated Balance Sheets as of
January 27, 2001 and January 29, 2000 F - 2 through F - 3
Fiscal years ended January 27, 2001, January 29, 2000,
and January 30, 1999:
Consolidated Statements of Operations F - 4
Consolidated Statements of Cash Flows F - 5
Consolidated Statements of Stockholder's Equity F - 6
Notes to Consolidated Financial Statements F - 7 through F -25
(2) Financial Statement Schedules:
Schedule II - Financial Information of Registrant..S-1 through S-3
Schedule V - Valuation and Qualifying Accounts.............. S-4
(3) Exhibits
The following documents are included as exhibits to this form 10-K.
Those exhibits below incorporated by reference herein are indicated
as such by the information supplied in the indicated footnote or in
the parenthetical thereafter. If no footnote is indicated or
parenthetical appears after an exhibit, such exhibit is filed
herewith.
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF EXHIBIT NUMBERED PAGE
- ------------------- ------------------------------------------- ----------------
3.1 RESTATED CERTIFICATE OF INCORPORATION OF
THE COMPANY (INCORPORATED BY REFERENCE TO
EXHIBIT 3.1 TO THE COMPANY'S REGISTRATION
STATEMENT NO. 33-63372 ON FORM S-1)
3.2 AMENDED AND RESTATED BY-LAWS OF THE
COMPANY (INCORPORATED BY REFERENCE TO
EXHIBIT 3.2 TO THE COMPANY'S REGISTRATION
STATEMENT NO. 33-63372 ON FORM S-1)
4.1 SPECIMEN NOTE FOR COMPANY'S 9 1/2% SENIOR
NOTES DUE 2003 (INCLUDED IN EXHIBIT 4.2)*
4.2 INDENTURE DATED AS OF JULY 28, 1993
BETWEEN THE COMPANY AND UNITED STATES
TRUST COMPANY OF NEW YORK, AS TRUSTEE*
4.3 SPECIMEN NOTE FOR THE COMPANY'S 9 1/2%
SERIES C SENIOR NOTES DUE 2003 (INCLUDED
IN EXHIBIT 4.4)
4.4 INDENTURE, DATED AS OF APRIL 24, 1997,
BETWEEN THE COMPANY AND UNITED STATES
TRUST COMPANY OF NEW YORK, AS TRUSTEE
(INCORPORATED BY REFERENCE TO EXHIBIT 4.2
TO THE COMPANY'S REGISTRATION STATEMENT
NO. 333-27523 ON FORM S-3)
4.5 REGISTRATION RIGHTS AGREEMENT, DATED AS
OF APRIL 29, 1997, BETWEEN THE COMPANY
AND NATIONSBANC CAPITAL MARKETS, INC. AND
SCOTIA CAPITAL MARKETS (USA) INC.
(INCORPORATED BY REFERENCE TO EXHIBIT 4.3
TO THE COMPANY'S REGISTRATION STATEMENT
NO. 333-27523 ON FORM S-3)
10.1 CREDIT AGREEMENT AMONG THE COMPANY,
PUEBLO MERGER CORPORATION, PUEBLO
INTERNATIONAL, INC., XTRA SUPER FOOD
CENTERS, INC., VARIOUS LENDING
INSTITUTIONS, THE CHASE MANHATTAN BANK,
N.A. AND SCOTIABANK DE PUERTO RICO, AS
CO-MANAGING AGENTS AND SCOTIABANK DE
PUERTO RICO, AS ADMINISTRATIVE AGENT (THE
"OLD BANK CREDIT AGREEMENT")*
10.2 FIRST AMENDMENT, DATED AS OF AUGUST 2,
1993, OF THE OLD BANK CREDIT AGREEMENT*
10.3 SECOND AMENDMENT, DATED AS OF DECEMBER
15, 1993, TO THE OLD BANK CREDIT
AGREEMENT (INCORPORATED BY REFERENCE TO
EXHIBIT 10.1 TO THE COMPANY'S QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED
NOVEMBER 6, 1993)
10.4 THIRD AMENDMENT, DATED AS OF JANUARY 31,
1994 (EFFECTIVE AS OF NOVEMBER 5, 1993),
TO THE OLD BANK CREDIT AGREEMENT*
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF EXHIBIT NUMBERED PAGE
- ------------------- ------------------------------------------- ----------------
10.11 MEMBERSHIP CORRESPONDENCE CONCERNING
TOPCO ASSOCIATES, INC. (INCORPORATED BY
REFERENCE TO EXHIBIT 10.3 TO COMPANY'S
REGISTRATION STATEMENT NO. 33-63372 ON
FORM S-1)
10.12 MORTGAGE NOTES DATED JUNE 6, AND 10, 1986
DUE FISCAL 1997 (INCORPORATED BY
REFERENCE TO EXHIBIT 10.4 TO THE
COMPANY'S REGISTRATION STATEMENT NO.
33-63372 ON FORM S-1)
10.13 AGREEMENT BETWEEN THE CHASE MANHATTAN
BANK (NATIONAL ASSOCIATION) (THE "BANK"),
PUERTO RICO INDUSTRIAL, MEDICAL AND
ENVIRONMENTAL POLLUTION CONTROL
FACILITIES FINANCING AUTHORITY (THE
"AUTHORITY") AND THE COMPANY; TRUST
AGREEMENT BETWEEN THE AUTHORITY AND BANCO
POPULAR DE PUERTO RICO, AS TRUSTEE;
GUARANTEE AND CONTINGENT PURCHASE
AGREEMENT BETWEEN THE REGISTRANT AND THE
BANK; LOAN AGREEMENT BETWEEN THE
AUTHORITY AND THE REGISTRANT; TENDER
AGENT AGREEMENT AMONG THE AUTHORITY;
BANCO POPULAR DE PUERTO RICO AS TRUSTEE;
RE-MARKETING AGREEMENT BETWEEN CHASE
MANHATTAN CAPITAL MARKETS CORPORATION AND
THE REGISTRANT; EACH DATED OCTOBER 1,
1985, RELATING TO A $5,000,000 FINANCING
IN OCTOBER 1985 (SUBSTANTIALLY IDENTICAL
DOCUMENTS WERE EXECUTED FOR AN ADDITIONAL
$5,000,000 FINANCING IN NOVEMBER 1985 AND
$7,500,000 IN DECEMBER 1985)
(INCORPORATED BY REFERENCE HEREIN AS
FILED WITH PUEBLO'S REGISTRATION
STATEMENT NO. 1-6376 ON FORM S-2 DATED
JANUARY 23, 1986)
10.20 EXECUTED FOURTH AMENDMENT, DATED AS OF
APRIL 8, 1994, TO THE OLD BANK CREDIT
AGREEMENT (INCORPORATED BY REFERENCE TO
EXHIBIT 10.1 TO THE COMPANY'S QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED
MAY 21, 1994)
10.21 EXECUTED FIFTH AMENDMENT, DATED AS OF
AUGUST 11, 1995, TO THE OLD BANK CREDIT
AGREEMENT (INCORPORATED BY REFERENCE TO
EXHIBIT 10.1 TO THE COMPANY'S QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED
NOVEMBER 4, 1995)
10.22 EXECUTED SIXTH AMENDMENT, DATED AS OF
NOVEMBER 3, 1995, TO THE OLD BANK CREDIT
AGREEMENT (INCORPORATED BY REFERENCE TO
EXHIBIT 10.2 TO THE COMPANY'S QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED
NOVEMBER 4, 1995)
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF EXHIBIT NUMBERED PAGE
- ------------------- ------------------------------------------- ----------------
10.23 EMPLOYMENT AGREEMENT, DATED FEBRUARY 28,
1996, BETWEEN PUEBLO INTERNATIONAL, INC.
AND EDWIN PEREZ**
10.24 AGREEMENT, DATED MARCH 1, 1996, BETWEEN
PUEBLO INTERNATIONAL, INC. AND HECTOR G.
QUINONES**
10.25 EXECUTED SEVENTH AMENDMENT, DATED AS OF
JANUARY 26, 1996, TO THE OLD BANK CREDIT
AGREEMENTS**
10.29 RECEIPT AND AGREEMENT BY PXC&M HOLDINGS,
INC. FROM BOTHWELL CORPORATION DATED
OCTOBER 18, 1996 (INCORPORATED BY
REFERENCE TO EXHIBIT 10.1 TO THE
COMPANY'S QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED NOVEMBER 2, 1996)
10.30 RECEIPT AND AGREEMENT BY PUEBLO XTRA
INTERNATIONAL, INC. FROM PXC&M HOLDINGS,
INC. DATED OCTOBER 18, 1996 (INCORPORATED
BY REFERENCE TO EXHIBIT 10.2 TO THE
COMPANY'S QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED NOVEMBER 2, 1996)
10.31 CONSENT EXECUTED BY SCOTIABANK DE PUERTO
RICO, AS ADMINISTRATIVE AGENT, DATED
OCTOBER 18, 1996 (INCORPORATED BY
REFERENCE TO EXHIBIT 10.3 TO THE
COMPANY'S QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED NOVEMBER 2, 1996)
10.32 EIGHTH AMENDMENT, DATED AS OF NOVEMBER 1,
1996, TO THE OLD CREDIT AGREEMENT AMONG
PUEBLO XTRA INTERNATIONAL, INC., PUEBLO
INTERNATIONAL, INC., XTRA SUPER FOOD
CENTERS, INC., VARIOUS LENDING
INSTITUTIONS, THE CHASE MANHATTAN BANK,
N.A. AND SCOTIABANK DE PUERTO RICO, AS
ADMINISTRATIVE AGENT (INCORPORATED BY
REFERENCE TO EXHIBIT 10.4 TO THE
COMPANY'S QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED NOVEMBER 2, 1996)
10.33 NINTH AMENDMENT, DATED AS OF JANUARY 25,
1997, TO THE OLD CREDIT AGREEMENT AMONG
PUEBLO XTRA INTERNATIONAL, INC., PUEBLO
INTERNATIONAL, INC., XTRA SUPER FOOD
CENTERS, INC., VARIOUS LENDING
INSTITUTIONS, THE CHASE MANHATTAN BANK,
N.A. AND SCOTIABANK DE PUERTO RICO, AS
ADMINISTRATIVE AGENTS***
10.34 EMPLOYMENT AGREEMENT, DATED MARCH 20, 1997,
BETWEEN PUEBLO INTERNATIONAL, INC. AND
DAVID L. ASTON****
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION OF EXHIBIT NUMBERED PAGE
- ------------------- ------------------------------------------- ----------------
21.1 SUBSIDIARIES OF THE COMPANY***
21.2 AMENDED AND RESTATED CREDIT AGREEMENT,
DATED AS OF APRIL 29, 1997, OF THE OLD
BANK CREDIT AGREEMENT (THE "NEW BANK
CREDIT AGREEMENT")****
21.3 FIRST AMENDMENT, DATED AS OF APRIL 15, 1999,
TO THE NEW BANK CREDIT AGREEMENT
21.4 SECOND AMENDMENT, DATED AS OF AUGUST 11,
2000, TO NEW BANK CREDIT AGREEMENT
(INCORPORATED BY REFERENCE TO EXHIBIT 10.1
TO THE COMPANY'S QUARTERLY REPORT ON FORM
10-Q FOR THE QUARTER ENDED AUGUST 12, 2000)
21.5 THIRD AMENDMENT , DATED AS OF JANUARY 26,
2001, TO THE NEW BANK CREDIT AGREEMENT
* Previously filed and incorporated by reference to corresponding
exhibits in the Company's Form 10-K for fiscal year ended January 29,
1994.
** Previously filed and incorporated by reference to corresponding
exhibits in the Company's Form 10-K for fiscal year ended January 27,
1996.
*** Previously filed and incorporated by reference to corresponding
exhibits in the Company's Form 10-K for fiscal year ended January 25,
1997.
**** Previously filed and incorporated by reference to corresponding
exhibits in the Company's Form 10-K for fiscal year ended January 31,
1998.
(B) Reports on Form 8-K
None
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT
No annual report to security holders covering the Company's last
fiscal year and no proxy statement, form of proxy or other proxy soliciting
material with respect to any annual or other meeting of security holders has,
as of the date hereof, been sent to security holders by the Company. If such
report or proxy material is to be furnished to security holders subsequent to
the filing of the annual report of this Form 10-K, the Company will furnish
copies of such material to the Commission when it is sent to the security
holders.
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) 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.
PUEBLO XTRA INTERNATIONAL, INC.
Dated: April 26, 2001 /s/ Daniel J. O'Leary
Daniel J. O'Leary,
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
- ---------------- ------------------------------ ------------
/s/ Gustavo A. Cisneros Chairman of the Board
Gustavo A. Cisneros
/s/ William T. Keon, III Director; President; and Chief
William T. Keon, III Executive Officer
/s/ Daniel J. O'Leary Executive Vice President and Chief
Daniel J. O'Leary Financial Officer
/s/ Steven I. Bandel Director
Steven I. Bandel
/s/ Guillermo A. Cisneros Director
Director
/s/ Cristina Pieretti Director
Cristina Pieretti
/s/ Alejandro Rivera Director
Alejandro Rivera
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
Pueblo Xtra International, Inc.
We have audited the accompanying consolidated balance sheets of Pueblo Xtra
International, Inc. and its subsidiaries (the "Company") as of January 27, 2001
and January 29, 2000, and the related consolidated statements of operations,
cash flows and stockholder's equity for each of the three years in the period
ended January 27, 2001. Our audits also included the financial statement
schedules listed in the Index at Item 14. These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Pueblo Xtra International, Inc.
and its subsidiaries as of January 27, 2001 and January 29, 2000 and the
results of their operations and their cash flows for each of the three years
in the period ended January 27, 2001 in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion,
such financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
February 13, 2001
F-1
CONSOLIDATED BALANCE SHEETS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands)
January 27, January 29,
2001 2000
------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 34,833 $ 95,711
Accounts receivable 2,123 4,012
Inventories 52,957 57,161
Prepaid expenses 7,375 7,871
Deferred income taxes 9,013 3,489
--------- ---------
TOTAL CURRENT ASSETS 106,301 168,244
--------- ---------
PROPERTY AND EQUIPMENT
Land and improvements 6,283 6,215
Buildings and improvements 39,894 39,221
Furniture, fixtures and equipment 98,610 120,103
Leasehold improvements 41,233 39,605
Construction in progress 5,972 9,928
--------- ---------
191,992 215,072
Less accumulated depreciation and amortization 86,826 107,254
--------- ---------
105,166 107,818
Property under capital leases, net 13,432 14,445
--------- ---------
TOTAL PROPERTY AND EQUIPMENT 118,598 122,263
GOODWILL, net of accumulated amortization of $38,178 at
January 27, 2001 and $33,146 at January 29, 2000 153,860 165,835
DEFERRED INCOME TAX 5,034 7,137
TRADE NAMES, net of accumulated amortization of $10,393
at January 27, 2001 and $9,527 at January 29, 2000 28,107 28,973
DEFERRED CHARGES AND OTHER ASSETS 22,890 29,112
--------- ---------
TOTAL ASSETS $ 434,790 $ 521,564
========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
F-2
CONSOLIDATED BALANCE SHEETS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands, except share data)
January 27, January 29,
2001 2000
------------- -------------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 75,819 $ 84,366
Accrued expenses 28,473 41,226
Salaries, wages and benefits payable 8,259 9,724
Current portion of long-term debt - 10,000
Current obligations under capital leases 649 714
--------- ---------
TOTAL CURRENT LIABILITIES 113,200 146,030
LONG-TERM DEBT 30,000 -
NOTES PAYABLE 174,625 259,645
CAPITAL LEASE OBLIGATIONS, net of current portion 12,773 13,346
RESERVE FOR SELF-INSURANCE CLAIMS 6,660 5,610
DEFERRED INCOME TAXES 24,096 23,100
OTHER LIABILITIES AND DEFERRED CREDITS 29,835 32,927
--------- ---------
TOTAL LIABILITIES 391,189 480,658
--------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 5 and 10)
STOCKHOLDER'S EQUITY
Common stock, $.10 par value; 200 shares
authorized and issued - -
Additional paid-in capital 91,500 91,500
Accumulated deficit (47,899) (50,594)
--------- ---------
TOTAL STOCKHOLDER'S EQUITY 43,601 40,906
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 434,790 $ 521,564
========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
CONSOLIDATED STATEMENTS OF OPERATIONS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands)
Fiscal
--------------------------------------
2001 2000 1999
---------- ---------- ----------
Net sales $ 622,050 $ 674,145 $ 784,774
Cost of goods sold 423,755 456,143 528,395
---------- ---------- ----------
GROSS PROFIT 198,295 218,002 256,379
OPERATING EXPENSES
Selling, general and administrative expenses 165,667 163,785 172,964
Gain on insurance settlement (2,464) (15,066) -
Store Closings:
Exit costs 685 - -
Write down of impaired assets 3,534 - -
Depreciation and amortization 34,142 31,632 36,529
---------- ---------- ----------
OPERATING (LOSS) PROFIT (3,269) 37,651 46,886
Interest expense on debt (26,960) (28,738) (28,556)
Interest expense on capital lease obligations (1,870) (1,633) (1,000)
Interest and investment income, net 2,500 2,750 1,379
Loss on sale of real property - (1,291) -
---------- ---------- ----------
(LOSS) INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (29,599) 8,739 18,709
Income tax benefit (expense) 11,691 (4,015) (9,832)
---------- ---------- -----------
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM (17,908) 4,724 8,877
Extraordinary item: gain on early
extinguishment of debt, net of
income taxes of $13,264 20,603 - -
---------- ---------- -----------
NET INCOME $ 2,695 $ 4,724 $ 8,877
========== ========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands)
Fiscal
----------------------------------
2001 2000 1999
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,695 $ 4,724 $ 8,877
Adjustments to reconcile net income to net cash (used in)
provided by operating activities, net of effects of disposal
of Florida retail operations:
Extraordinary gain on early extinguishment of debt (20,603) - -
Depreciation and amortization of property and equipment 20,166 17,615 20,782
Amortization of intangible and other assets 13,976 14,017 15,747
Write off of property and equipment destroyed - 4,423 -
Amortization of bond discount 1,138 1,170 1,047
Loss on sale/leaseback of real estate - 1,291 -
(Gain) loss on disposal of property and equipment, net (119) 30 (2,182)
Adjustments to goodwill 6,943 2,737 -
Gain on insurance settlement (2,464) - -
Accrual for exit costs on store closings 685 - -
Write down of impaired assets on store closings 3,534 - -
Provision for deferred income taxes (11,514) (3,375) 9,349
Provision for deferred charges and other assets 334 1,838 1,499
(Benefit) amortization in other liabilities and deferred credits (3,092) 1,963 (2,221)
Provision (benefit) from reduction of reserve for
self-insurance claims 1,050 (4,286) (1,310)
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable 1,889 703 (1,566)
Inventories (1,870) (3,253) (12,259)
Prepaid expenses 440 (151) 2,298
(Decrease) increase in:
Accounts payable and accrued expenses (25,132) 3,286 (941)
--------- --------- ---------
(11,944) 42,732 39,120
Decrease attributable to disposal of Florida retail operations - (3,022) (3,590)
--------- --------- ---------
Net cash (used in) provided by operating activities (11,944) 39,710 35,530
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (17,452) (21,650) (15,271)
Reconstruction of property and replacement of equipment destroyed - (13,102) -
Proceeds from disposal of property and equipment 203 35,829 7,062
--------- --------- ---------
Net cash (used in) provided by investing activities (17,249) 1,077 (8,209)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations (638) (576) (591)
Purchase of Senior Notes due 2003 (51,047) - -
Repayment of Industrial Revenue Bonds (10,000) - -
Borrowings under Revolving Credit Facility 30,000 - -
--------- --------- ---------
Net cash used in financing activities (31,685) (576) (591)
--------- --------- ---------
Net (decrease) increase in cash and cash equivalents (60,878) 40,211 26,730
Cash and cash equivalents at beginning of year 95,711 55,500 28,770
--------- --------- ---------
Cash and cash equivalents at end of year $ 34,833 $ 95,711 $ 55,500
========= ========= =========
The accompanying notes are an integral part of these
consolidated financial statements
F-5
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
Fiscal 2001, 2000, and 1999
(Dollars in thousands)
Additional Total
Common Paid-in Accumulated Stockholder's
Stock Capital Deficit Equity
--------- ------------ ------------- -------------
Balance at January 31, 1998 $ - $ 91,500 $ (64,195) $ 27,305
Net loss for the year - - 8,877 8,877
--------- ----------- ------------- -------------
Balance at January 30, 1999 - 91,500 (55,318) 36,182
Net income for the year - - 4,724 4,724
--------- ----------- ------------- -------------
Balance at January 29, 2000 - 91,500 (50,594) 40,906
Net income for the year - - 2,695 2,695
--------- ----------- ------------- -------------
Balance at January 27, 2001 $ - $ 91,500 $ (47,899) $ 43,601
========= =========== ============= =============
The accompanying notes are an integral part of these
consolidated financial statements
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Pueblo
Xtra International, Inc. and its wholly-owned subsidiaries (the "Company").
The Company, a wholly owned subsidiary of PXC&M Holdings, Inc., operated
retail supermarkets and video rental locations in Puerto Rico and the U. S.
Virgin Islands during fiscal years 2001, 2000, and 1999. Intercompany
accounts and transactions are eliminated in consolidation.
The Company operates and reports financial results on a fiscal year of
52 or 53 weeks ending on the last Saturday in January. Accordingly, fiscal
year 2001 ended on January 27, 2001, fiscal 2000 ended on January 29, 2000,
and fiscal 1999 ended on January 30, 1999. The three years above were all 52
week years.
Use of Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements
and the reported amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
Highly liquid investments purchased with a maturity of three months or
less are considered cash equivalents.
Inventories
Inventories held for sale are stated at the lower of cost or market. The
cost of inventories held for sale is determined, depending on the nature of
the product, either by the last-in, first-out (LIFO) method or by the
first-in, first-out (FIFO) method. Videocassette rental inventories are
recorded at cost, net of accumulated amortization. Videocassettes held for
rental are amortized over 12 months on a straight-line basis.
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment
Property and equipment, including expenditures for remodeling and
improvements, are carried at cost. Routine maintenance, repairs and minor
betterments are charged to operations as incurred. Depreciation and
amortization are computed on a straight-line basis over the estimated useful
lives of the assets or, in relation to leasehold improvements and property
under capital leases, over the lesser of the asset's useful life or the lease
term, not to exceed 20 years. Estimated useful lives are 20 years for
buildings and improvements, 5 to 12 years for furniture, fixtures and
equipment, 4 years for automotive equipment and 3 years for computer hardware
and software.
Upon the sale, retirement or other disposition of assets, the related
cost and accumulated depreciation or amortization are eliminated from the
accounts. Any resulting gains or losses from disposals are included in the
consolidated statements of operations.
Goodwill and Other Intangibles
Goodwill represents the excess of cost over the estimated fair value of
the net tangible and other intangible assets acquired in connection with the
transaction described in Note 2. Tradenames acquired at the time of the
transaction were valued by independent appraisers. Goodwill and other
intangibles are being amortized using the straight-line method over periods
not exceeding 40 years.
Self-Insurance
The Company's general liability, certain of its workers compensation,
and certain of its health insurance programs are self-insured. The general
liability and workers compensation reserves for self-insurance claims are
based upon an annual review by the Company and its independent actuary of
claims filed and claims incurred but not yet reported. Due to inherent
uncertainties in the estimation process, it is at least reasonably possible
that the Company's estimate of the reserve for self-insurance claims could
change in the near term. The liability for self-insurance is not discounted.
Individual self-insured losses are limited to $250,000 per occurrence for
general liability and certain workers compensation. The Company maintains
insurance coverage for claims in excess of $250,000. The current portion of
the reserve for general liability and workers compensation, representing the
amount expected to be paid in the next fiscal year, was $4.3 million and $6.5
million at January 27, 2001 and January 29, 2000, respectively, and is
included in the consolidated balance sheets as accrued expense. The reserve
for health insurance programs was $1.1 million and $1.3 million at January
27, 2001 and January 29, 2000, respectively, and is also included in the
consolidated balance sheets as salaries, wages, and benefits payable.
Revenue Recognition
Revenues from the sale of products are recognized at the point of sale
to the Company's customers.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES (Continued)
Long-Lived Assets
Long-lived assets are viewed on an ongoing basis for impairment based on
comparison of carrying value against undiscounted future cash flows. If an
impairment is identified, the assets carrying amount is adjusted to fair
value. During fiscal 2001, fiscal 2000, and fiscal 1999, no such adjustments
were recorded.
Pre-Opening Expenses
Store pre-opening expenses are charged to operations as they are
incurred.
Advertising Expenses
Advertising expenses are charged to operations as they are incurred.
During fiscal 2001, fiscal 2000, and fiscal 1999, advertising expenses were
$8.8 million, $11.7 million, and $11.9 million, respectively.
Income Taxes
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
SFAS 109 requires deferred tax assets and liabilities to be determined based
on the difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates currently in effect.
Earnings Per Common Share
The Company is a wholly-owned subsidiary of PXC&M Holdings, Inc.
("Holdings") with a total of 200 shares of common stock issued and
outstanding. Earnings per share is not meaningful to the presentation of the
consolidated financial statements and is therefore excluded.
New Accounting Pronouncements
In July 2000, the Financial Accounting Standards Board ("FASB") issued
SFAS 138, "Accounting for Derivative Instruments and Hedging Activities (an
amendment for FASB Statement No. 133)" which amends SFAS No. 133, to provide
additional guidance and to exclude certain provisions. SFAS No. 133 requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value and
is effective for the Company's fiscal year ended January 26, 2002. The Company
has assessed the impact of SFAS No. 133, as amended, and has determined that
its adoption will not have a material impact on its financial statements.
Reclassifications
Certain amounts in the prior year's consolidated financial statements
and related notes have been reclassified to conform to the current year's
presentation.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 2 -- GOODWILL
In July 1993, the Company acquired all of the outstanding shares of the
common stock of Pueblo International, Inc. and subsidiaries for an aggregate
purchase price of $283.6 million plus transaction costs. The shares were
acquired from an investor group including affiliates of Metropolitan Life
Insurance Company, The First Boston Corporation and certain current and
former members of the Company's management and its Board of Directors.
The acquisition of shares was accounted for as a purchase effective
July 31, 1993. Accordingly, the purchase price was allocated to the assets
acquired and liabilities assumed. The excess of the aggregate purchase price
over the fair market value of net assets acquired of approximately $210.2
million was recognized as goodwill and is being amortized over 40 years.
Since the acquisition, $18.1 million of goodwill has been written off,
including $6.9 million in fiscal 2001, resulting from adjustments to the
acquired deferred tax liability.
NOTE 3 -- INVENTORIES
The cost of approximately 84% and 81% of total inventories at
January 27, 2001 and January 29, 2000, respectively, is determined by the LIFO
method. The excess of current cost over inventories valued by the LIFO
method was $2.0 million as of both January 27, 2001 and January 29, 2000.
NOTE 4 -- DEBT
Total debt consists of the following (in thousands):
January 27, January 29,
2001 2000
----------- -----------
Notes and Series C Senior Notes due 2003,
net of unamortized discount of $2,658
and $5,355 in 2001 and 2000, respectively $ 174,625 $ 259,645
Revolving Credit Facility due 2003 30,000 ------
Payable to a Puerto Rico governmental
agency ------ 10,000
------------ ------------
$ 204,625 $ 269,645
============ ============
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 4 -- DEBT (Continued)
In 1993 the Company issued $180 million in 10-year, 9 1/2% senior notes
(the "Notes"). On April 29, 1997, the Company entered into a refinancing
plan (the "Refinancing Plan"), which included the issuance and sale of $85.0
million principal amount of 9 1/2% Series C Senior Notes Due 2003 (the
"Series C Senior Notes"), the terms of which are substantially identical to
those of the Notes. The net proceeds from the sale of the Series C Senior
Notes of approximately $73.9 million after deducting expenses, together with
available cash of the Company, were used to repay the senior secured
indebtedness outstanding under a bank credit agreement dated July 31, 1993
(the "Old Bank Credit Agreement"). During fiscal 2001 the Company purchased
at a gain $87.7 million aggregate principal amount of its Notes and Series C
Senior Notes. Additionally, the Company repaid $10.0 million in industrial
revenue bonds.
In connection with the Refinancing Plan, the Company entered into an
amended bank credit agreement (the "New Bank Credit Agreement"), which
provides for a $65.0 million revolving credit facility (the "New Credit
Facility") with less restrictive covenants compared to the Old Bank Credit
Agreement. After the issuance of standby letters of credit in the amount of
$3.3 million and borrowings of $30.0 million under the revolver, as of
January 27, 2001, the Company has borrowing availability on a revolving basis
of $31.7 million under the New Bank Credit Agreement. The Company pays a fee
of .50% per annum on unused commitments under the $65.0 million revolving
credit facility. Interest on the New Credit Facility fluctuates based on the
availability of Section 936 funds in Puerto Rico, Euroloan rates and the
prime rate.
Also in connection with the Refinancing Plan, on April 29, 1997, the
Company satisfied $10.0 million of indebtedness payable to a related party by
transferring its interest in two real estate properties from its closed
Florida operations to such related party.
The New Credit Facility is collateralized by a pledge of the assets of
the Company, by the capital stock of, and intercompany notes issued by, the
Company's subsidiaries and by the capital stock of the Company. The Company
is required, under the terms of the New Credit Facility, to meet certain
financial covenants which include minimum consolidated net worth levels,
interest and fixed charges coverage ratios and minimum EBITDA (Earnings
Before Interest, Taxes, Depreciation, and Amortization as defined in the
credit agreement). The agreement also contains certain restrictions on
additional indebtedness, capital expenditures and the declaration and payment
of dividends. Borrowings under the new credit facility have been classified
as a long-term obligation since the Company has the ability and intent to
refinance borrowings on a long-term basis through the expiration date of the
facility.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 4 -- DEBT (Continued)
The Notes and Series C Senior Notes, which mature on August 1, 2003, are
general unsecured obligations of the Company and are subordinate in right of
payment to all existing and future liabilities (including, without limitation,
obligations under the New Credit Facility) of its subsidiaries. The Notes and
Series C Senior Notes may be called by the holders of the notes at 101% in
the event of a change in control of the Company (as defined in the
indenture). The Notes and Series C Senior Notes are senior to all future
subordinated indebtedness which the Company may from time to time incur. The
Notes and Series C Senior Notes bear interest at the rate of 9.50% per annum
which is payable semiannually on February 1 and August 1. Terms of the Notes
and Series C Senior Notes include covenants which restrict the Company and its
subsidiaries from engaging in certain activities and transactions.
Outstanding borrowings from a governmental agency of the Commonwealth of Puerto
Rico from the issuance of industrial revenue bonds were $10.0 million as of
fiscal 2000. During fiscal year 2001 a principal payment of $5.0 million was
made on October 1, 2000, and the final principal payment of $5.0 million was
made on November 1, 2000. The bonds, which bore interest at variable rates
based on an index of tax-exempt borrowing, had a weighted average per annum
interest rate of 5.26% and 4.40% at November 1, 2000 and January 29, 2000,
respectively.
Annual maturities of the Company's debt are as follows (in thousands):
Fiscal Year Amount
------------- ----------
2004 $207,283
----------
Total $207,283
==========
Total interest paid on debt was $27.9 million for fiscal 2001, and $25.6
million for both fiscal 2000 and fiscal 1999. Interest payable was $8.5 million
and $12.5 million as of January 27, 2001 and January 29, 2000, respectively.
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 5 -- LEASES AND LEASEHOLD INTERESTS
The Company conducts the major part of its operations on leased premises
which have initial terms generally ranging from 20 to 25 years.
Substantially, all leases contain renewal options which extend the lease
terms in increments of 5 to 10 years and include escalation clauses. The
Company also has certain equipment leases which have terms of up to five
years. Realty and equipment leases generally require the Company to pay
operating expenses such as insurance, taxes and maintenance. Certain store
leases provide for percentage rentals based upon sales above specified
levels.
The Company leases retail space to tenants in certain of its owned and
leased properties. The lease terms generally range from two to five years.
Property recorded as assets under capital leases consists of real estate
as follows (in thousands):
January 27, January 29,
2001 2000
--------------- --------------
Real estate $ 19,192 $ 19,192
Less accumulated depreciation 5,760 4,747
--------------- --------------
Property under capital leases, net $ 13,432 $ 14,445
=============== ==============
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 5 -- LEASES AND LEASEHOLD INTERESTS (Continued)
Depreciation of assets recorded under capital leases is included with
depreciation and amortization expense in the consolidated statements of
operations. Minimum rentals payments to be made under noncancelable leases
at January 27, 2001 as well as rent to be received as lessor of owned
property and as lessor in sublease rentals of portions of leased property are
as follows (in thousands):
Capital Operating Operating
Lease Lease Lease
Payments Payments Receipts
Fiscal Year (As Lessee) (As Lessee) (As Lessor)
- -------------------------------- ------------ ------------ ------------
2002 $ 2,523 $ 12,294 $ 113
2003 2,435 11,172 113
2004 2,405 10,043 113
2005 2,252 9,772 113
2006 2,125 9,439 97
2007 and thereafter 22,451 87,948 554
------------ ------------ ------------
34,191 $140,668 $ 1,103
============ ============
Less executory costs 16
-----------
Net minimum lease payments 34,175
Less amount representing interest 20,753
-----------
Present value of net minimum lease
payments under capital lease
obligations 13,422
Less: current portion 649
----------
Capital lease obligations,
net of current portion $12,773
==========
Sublease rental receipts to be received from capital and operating leases:
Capital Operating
Leases Leases
----------- ------------
Total minimum sublease rentals
to be received in the future $ 1,289 $ 7,511
=========== ============
Rent expense and the related contingent rentals under operating leases
were $16.1 million and $0.2 million for fiscal 2001, respectively, $15.7
million and $0.2 million for fiscal 2000, respectively, and $13.2 million and
$0.3 million for fiscal 1999, respectively.
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 5 -- LEASES AND LEASEHOLD INTERESTS (Continued)
Contingent rentals under capital leases, which are directly related to
sales, were $0.1 million for both fiscal 2001 and fiscal 2000 and $0.2
million for fiscal 1999. Interest paid on capital lease obligations was $1.9
million for fiscal 2001, $1.6 million for fiscal 2000, and $1.0 million for
fiscal 1999.
Sublease rental income for operating and capital leases was $4.1 million
for fiscal 2001, $4.2 million for fiscal 2000, and $3.1 million for fiscal
1999.
NOTE 6 -- INCOME TAXES
As described in Note (1)-- Significant Accounting Policies, the
Company's method of accounting for income taxes is the liability method as
required by SFAS No. 109.
The components of income tax (benefit) expense, excluding extraordinary
items, are as follows (in thousands):
Fiscal Fiscal Fiscal
2001 2000 1999
----------- ----------- ------------
Current
Federal $ - $ 46 $ 53
State - 17 7
U.S. Possessions (177) 4,348 423
----------- ----------- ------------
(177) 4,411 483
----------- ----------- ------------
Deferred
Federal (2,764) 1,738 3,083
State 388 26 69
U.S. Possessions (9,138) (2,160) 6,197
----------- ----------- ------------
(11,514) (396) 9,349
----------- ----------- ------------
Total income tax
(Benefit) expense $ (11,691) $ 4,015 $ 9,832
=========== =========== ============
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 6 -- INCOME TAXES (Continued)
The significant components of the deferred tax assets and liabilities
are as follows (in thousands) items:
January 27, January 29,
2001 2000
--------------- --------------
Deferred tax assets:
Reserve for self-insurance claims $ 7,673 $ 5,130
Employee benefit plans 9,270 6,399
Property and equipment 9,202 2,225
Accrued expenses and other liabilities
and deferred credits 21,278 6,863
Other operating loss and tax credit
carry forwards 11,234 3,525
All other 2,075 980
Valuation Allowance (3,000) -
--------------- --------------
Total deferred tax assets 57,732 25,122
--------------- --------------
Deferred tax liabilities:
Property and equipment (18,426) (12,748)
Tradenames (20,822) (11,581)
Operating leases (9,185) (5,984)
Inventories (7,262) (4,229)
Other assets (3,667) (1,843)
Accrued expenses and other liabilities
and deferred credits (9,439) (1,809)
--------------- --------------
Total deferred tax liabilities (68,801) (38,194)
--------------- --------------
Net deferred tax liabilities $ (11,069) $(13,072)
=============== ==============
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 6 -- INCOME TAXES (Continued)
A reconciliation of the difference between actual income tax expense,
exluding extraordinary items, and income taxes computed at U. S. Federal
statutory tax rates is as follows (in thousands):
Fiscal Fiscal Fiscal
2001 2000 1999
----------- ----------- -----------
U.S. Federal Statutory rate of 35%
applied to pretax income (loss) $(10,359) $ 3,059 $ 6,548
Effect of varying rates
applicable in other taxing
jurisdictions (1,174) 272 663
Amortization of goodwill 3,233 1,761 1,761
State and local taxes (262) 40 53
Alternative minimum taxes - - 413
Branch taxes (possession -
US/VI) (2,777) (686) 92
All others, net (351) (431) 302
----------- ----------- -----------
Income tax (benefit) expense $(11,690) $ 4,015 $ 9,832
=========== =========== ===========
The Company's operations are located in U. S. possessions where they are
subject to U. S. and local taxation.
The Company revoked its election under Section 936 of the Internal
Revenue Code effective for its tax year beginning January 30, 2000.
The net deferred tax liability decreased by $2.0 million during the
year. Of this amount, $11.5 million was recorded as a deferred tax benefit
related to continuing operations and $9.5 million was recorded as a deferred
tax expense related to extraordinary items.
SFAS 109 requires a valuation allowance against deferred tax assets if,
based on the weight of available evidence, it is more likely than not that
some or all of the deferred tax assets may not be realized. Management
believes that some portion of the deferred tax assets will not be realized
based on this criterion. Consequently, the Company has recorded a valuation
allowance of $3.0 million.
As of January 27, 2001, the Company has unused net operating loss
carryforwards of $6.2 million and $21.3 million available to offset future
taxable income in the U.S. Virgin Islands and Puerto Rico, respectively,
through fiscal years 2021 and 2008, respectively.
The Company has unused tax credits of approximately $0.2 million
available to offset future United States income tax liabilities. Such tax
credits expire as follows: 2001 - $248,000. Utilization of the tax credit
carryforward may be limited each year.
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 6 -- INCOME TAXES (Continued)
The Company also has unused alternative minimum tax credits in the
amount of $0.2 million and $0.1 million to offset future income tax
liabilities in Puerto Rico and the United States, respectively. These
credits are carried forward indefinitely.
Total income taxes paid were $3.8 million during fiscal 2001, $0.7
million during fiscal 2000, and $0.05 million during fiscal 1999.
NOTE 7 -- RETIREMENT BENEFITS
The Company has a noncontributory defined benefit plan (the "Retirement
Plan") covering substantially all full-time and certain part-time associates.
Retirement Plan benefits are based on years of service and a base level of
compensation. The Company funds retirement plan costs in accordance with the
requirements of the Employee Retirement Income Security Act of 1974.
Contributions are intended to provide not only for benefits attributed to
service to date but also for those expected to be earned in the future.
Retirement Plan assets consist primarily of stocks, bonds and U. S.
Government securities. Full vesting for the Retirement Plan occurs upon the
completion of five years of service.
Net pension cost under the Retirement Plan includes the following
components (in thousands):
Fiscal Fiscal Fiscal
2001 2000 1999
----------- ----------- -----------
Service cost - benefits
earned during the period $ 1,546 $ 1,546 $ 1,370
Interest cost on projected
benefit obligation 1,668 1,509 1,433
Expected return on plan
assets (1,477) (1,262) (1,157)
Net amortization and
deferrals (129) (6) (6)
----------- ----------- -----------
NET PENSION COST $ 1,608 $ 1,787 $ 1,640
=========== =========== ===========
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 7 -- RETIREMENT BENEFITS (Continued)
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of the net periodic pension
cost for the Retirement Plan are 7.75% and 5.0%, respectively, for fiscal
2001 and fiscal 2000, and 6.75% and 5.0%, respectively, for fiscal 1999. The
average expected long-term rate of return on plan assets is 9.0% for the
three-year period.
The funded status and amounts recognized in the Company's consolidated
balance sheets for the Retirement Plan are as follows (in thousands):
January 27, January 29,
2001 2000
--------------- --------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $14,507 at January 27,
2001 and $13,834 at January 29, 2000 $15,551 $ 14,708
=============== ==============
Plan assets at fair value - beginning of the year $16,846 $ 14,562
Actual return on plan assets 2,234 2,792
Employer contributions 1,237 1,306
Benefits paid (2,377) (1,814)
--------------- --------------
Plan assets at fair value - end of the year 17,940 16,846
--------------- --------------
Projected benefit obligation for service
rendered to date - beginning of the year (22,610) (23,433)
Service cost (1,546) (1,546)
Interest cost (1,668) (1,509)
Actuarial gain 115 2,064
Benefits paid 2,377 1,814
--------------- --------------
Projected benefit obligation for service
rendered to date - end of the year (23,332) (22,610)
--------------- --------------
FUNDED STATUS (5,392) (5,764)
Unrecognized net gain (4,817) (4,068)
Unrecognized prior service cost (55) (61)
--------------- --------------
NET PENSION LIABILITY $ (10,264) $ (9,893)
=============== ==============
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 7 -- RETIREMENT BENEFITS (Continued)
The Company maintains a Supplemental Executive Retirement Plan (the
"SERP") for its officers under which the Company will pay, from general
corporate funds, a supplemental pension equal to the difference between the
annual amount of pension calculated under the SERP and the amount the
participant will receive under the Retirement Plan. Effective January 1,
1992, the Board of Directors amended the SERP in order to conform various
provisions and definitions with those of the Retirement Plan. The pension
benefit calculation under the SERP is limited to a total of 20 years
employment and is based on a specified percentage of the average annual
compensation received for the five highest consecutive years during a
participant's last 10 years of service, reduced by the participant's annual
Retirement Plan and social security benefits. Full vesting for the SERP
occurs upon the completion of five years of service.
Net pension cost under the SERP includes the following components (in
thousands):
Fiscal Fiscal Fiscal
2001 2000 1999
----------- ----------- -----------
Service cost - benefits earned
during the period $ 215 $ 260 $ 150
Interest cost on projected
benefit obligation 255 271 309
Net amortization and deferrals (173) (79) (94)
----------- ----------- -----------
NET PENSION COST $ 297 $ 452 $ 365
=========== =========== ===========
The discount rate and rate of increase in future compensation levels
used in determining the actuarial present value of the net periodic pension
cost for the SERP are 7.75% and 5.0%, respectively, for fiscal 2001 and
fiscal 2000, and 6.75% and 5.0%, respectively, for fiscal 1999.
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 7 -- RETIREMENT BENEFITS (Continued)
The funded status and amounts recognized in the Company's consolidated
balance sheets for the SERP are as follows (in thousands):
January 27, January 29,
2001 2000
--------------- --------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $3,830 at January 27,
2001 and $3,173 at January 29, 2000 $ 3,990 $ 3,180
=============== ==============
Projected benefit obligation for service
rendered to date $ (4,557) $ (3,467)
--------------- --------------
FUNDED STATUS (4,557) (3,467)
Unrecognized net gain (1,088) (2,194)
Unrecognized prior service cost 24 30
--------------- --------------
NET PENSION LIABILITY $ (5,621) $ (5,631)
=============== ==============
Change in benefit obligations was as follows (in thousands):
January 27, January 29,
2001 2000
--------------- --------------
Benefit obligation as of beginning of the year $ 3,467 $ 4,179
Service costs 215 260
Interest costs 255 271
Actuarial loss (gain) 926 (933)
Benefits paid (306) (310)
--------------- --------------
Benefit obligation as of end of the year $ 4,557 $ 3,467
=============== ==============
Change in plan assets were as follows (in thousands):
January 27, January 29,
2001 2000
--------------- --------------
Fair value of assets as of beginning of the year $ - $ -
Employer contribution 306 310
Benefits paid (306) (310)
--------------- --------------
Fair value of assets as of end of the year $ - $ -
=============== ==============
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 7 -- RETIREMENT BENEFITS (Continued)
The Company has a noncontributory defined contribution plan covering its
eligible associates in Puerto Rico and the U. S. Virgin Islands.
Contributions to this plan are at the discretion of the Board of Directors.
The Company also has a contributory thrift savings plan in which it matches
eligible contributions made by participating eligible associates in the
United States. Expenses related to these plans, which are recognized in the
year the cost is incurred, were $697,000 for fiscal 2001, $620,000 for fiscal
2000, and $758,000 for fiscal 1999.
NOTE 8 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments.
Cash and Cash Equivalents
The carrying amount of cash and cash equivalents approximates fair value
due to the short maturity of these instruments.
Debt
The fair value of the Company's indebtedness, excluding the Notes and
Series C Senior Notes, is estimated based on quoted market prices for similar
instruments. The fair value of the Notes and Series C Senior Notes is
determined based on market quotes.
The estimated fair value of the Company's financial instruments are as
follows (in thousands):
January 27, January 29,
2001 2000
---------------------- ----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- ---------
Cash and cash equivalents $ 34,833 $ 34,833 $ 95,711 $ 95,711
Debt (204,625) (100,913) (269,645) (129,308)
NOTE 9 -- CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents.
The Company places its temporary cash investments with highly-rated
financial institutions in investment grade short-term debt instruments.
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 10 -- CONTINGENCIES
At January 27, 2001, the Company was party to a number of legal
proceedings involving claims for money damages arising in the ordinary course
of conducting its business which are either covered by insurance or are
within the Company's self-insurance program, and in a number of other
proceedings which are not deemed material. Management believes there were no
material contingencies as of January 27, 2001. It is not possible to
determine the ultimate outcome of these matters; however, management is of
the opinion that the final resolution of any threatened or pending litigation
is not likely to have a material adverse effect on the financial position or
results of operations of the Company.
NOTE 11 -- HURRICANE GEORGES
Hurricane Georges struck all of the Company's operating facilities on
September 20 and 21, 1998. All of the Company's stores, with the exception
of two, were reopened.
The insurance claim settlement for property damage and extra expenses
involved inventory losses, reconstruction of property and replacement of
equipment and expenses the Company incurred specifically as a result of the
storm. The related insurance coverage for losses resulting from the storm is
as follows:
Inventory at retail value
Reconstruction of property and replacement of equipment at replacement
cost
Extra expenses reimbursed dollar for dollar
During fiscal year 2000 and 2001 the Company recorded a $15.1 million
Gain and $2.5 million gain, respectively, which was a result of the excess of
insurance coverage for inventory, property, and equipment over the net book
value of these items at the time the storm occurred.
The property damage portion of the insurance claim resulting from
Hurricane Georges has been agreed to in the amount of approximately $42.0
million and, with the exception of some minor items outstanding, all agreed
amounts have been received.
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 11 -- HURRICANE GEORGES (Continued)
The Company's insurance also includes business interruption coverage
which provides for reimbursement for lost profits as a result of the
storm. On December 1, 2000 the Company submitted to its insurance carriers a
$69.4 million proof of loss for business interruption losses to its grocery
stores and video outlets in Puerto Rico and the U. S. Virgin Islands
(the "claim") as a result of Hurricane Georges. The claim is based on the
Company's management's estimate of the impact the storm had on its business
from the time the storm occurred through September 9, 2000, which is the end
of the applicable indemnity period. The Company has received $5.3
million from its insurance carriers related to this portion of the claim,
$4.7 million of which was received prior to January 27, 2001 and the
remaining amount soon thereafter. The $5.3 million is comprised of a $5.0
million advance and reimbursement of $0.3 million of the Company's claim
preparation fees. The carriers have invoked the appraisal provisions of the
policy which, essentially, require an arbitration process to value the claim.
Consequently, the Company is unable to predict what total amount eventually
will be recovered or when the appraisal process will conclude. The $5.0
million advance is not included in earnings for the year ended January 27,
2001 as all recoveries will be recorded as gains only at such time as they
are settled and realized.
NOTE 12-- SALE/LEASEBACK TRANSACTION
Sale/Leaseback Transaction
On June 1, 1999, the Company realized approximately $35.2 million in
cash from the sale of seven shopping centers that are located in Puerto Rico
and the U.S. Virgin Islands. The portions of these centers in which the
Company's retail stores are located are being leased back pursuant to
long-term leases. The Company incurred a $1.2 million loss (net of the
income tax benefit and a $6.9 million deferred gain) in the transaction. The
deferred gain is being amortized over the life of the related leases.
NOTE 13-- DISCLOSURE ON OPERATING SEGMENTS
The Company has two primary operating segments: retail food sales
and video tape rentals and sales. The Company's retail food division
consists of 48 supermarkets, 42 of which are in Puerto Rico and 6 of which
are in the U. S. Virgin Islands. The Company also has the exclusive
franchise rights to Blockbuster video stores for Puerto Rico and the U. S.
Virgin Islands operated through 43 video rental stores, 41 of which are in
Puerto Rico and 2 of which are in the U. S. Virgin Islands. Most of the
video rental stores are adjacent to, or a separate section within, a retail
food supermarket. Administrative support functions are located in Florida.
Although the Company maintains data by geographic location, its segment
decision making process is based on its two product lines.
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 13-- DISCLOSURE ON OPERATING SEGMENTS (Continued)
Reportable operating segment financial information is as follows (dollars in
thousands):
Retail Food Video Rental Total
Fiscal Year Ended 2001
Net sales $ 579,096 $ 42,954 $ 622,050
Depreciation and amortization (25,681) (8,461) (34,142)
Operating (loss) profit (6,348)* 3,079 (3,269)*
Total assets 412,027 22,763 434,790
Capital expenditures (17,377) (75) (17,452)
Fiscal Year Ended 2000
Net sales $ 624,225 $ 49,920 $ 674,145
Depreciation and amortization (22,838) (8,794) (31,632)
Operating profit 30,851** 6,800** 37,651**
Total assets 494,482 27,082 521,564
Capital expenditures (21,443) (207) (21,650)
Fiscal Year Ended 1999
Net sales $ 723,802 $ 60,972 $ 784,774
Depreciation and amortization (25,834) (10,695) (36,529)
Operating profit 41,746 5,140 46,886
Capital expenditures (14,965) (306) (15,271)
* Includes a gain of $2,464 related to the final accounting for the property portion of the
Hurricane Georges insurance claim.
** Includes a gain of $15,066 on the settlement of the Hurricane Georges insurance claim of which
$13,798 was in the Retail Food segment and $1,268 was in the Videotape segment.
Because the Retail Food and Video Rental Divisions are not segregated by
corporate entity structure, the operating segment amounts shown above do not
represent totals for any subsidiary of the Company and do not include the
effects of intercompany eliminations. All overhead expenses including
depreciation on assets of administrative departments are allocated to
operations. Amounts shown in the total column above correspond to amounts in
the consolidated financial statements.
F-25
Schedule II
PUEBLO XTRA INTERNATIONAL, INC.
BALANCE SHEETS-PARENT COMPANY ONLY
(Dollars in thousands)
January 27, January 29,
2001 2000
------------- -------------
ASSETS
CURRENT ASSETS $ 8,439 $ 13,160
------------- -----------
INVESTMENT IN SUBSIDIARIES 65,719 53,503
NOTE RECEIVABLE-MIRROR LOAN 167,531 256,961
DEFERRED CHARGES AND OTHER ASSETS 1,639 3,646
------------ -----------
TOTAL ASSETS $ 243,328 $ 327,270
============ ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accrued expenses $ 11,829 $ 12,451
Intercompany payable, net 13,273 14,268
------------- -----------
TOTAL CURRENT LIABILITIES 25,102 26,719
NOTES PAYABLE 174,625 259,645
------------- -----------
TOTAL LIABILITIES 199,727 286,364
------------- -----------
COMMITMENTS AND CONTINGENCIES -
STOCKHOLDER'S EQUITY
Common stock - -
Additional paid-in capital 91,500 91,500
Accumulated deficit (47,899) (50,594)
------------- ------------
TOTAL STOCKHOLDER'S EQUITY 43,601 40,906
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 243,328 $ 327,270
============= =============
(Continued)
S-1
Schedule II
PUEBLO XTRA INTERNATIONAL, INC.
STATEMENT OF OPERATIONS-PARENT COMPANY ONLY
(Dollars in thousands)
2001 2000 1999
--------- ---------- -----------
Interest income $ 23,005 $ 25,868 $ 25,744
Interest expense on debt (24,188) (26,981) (26,856)
Selling, general and administrative expenses (2) (206) (59)
---------- ---------- -----------
LOSS BEFORE INCOME TAXES, EQUITY LOSSES FROM
SUBSIDIARIES, AND EXTRAORDINARY ITEM (1,185) (1,319) (1,171)
Income tax benefit 8,778 458 427
---------- ---------- -----------
INCOME (LOSS) BEFORE EQUITY LOSSES FROM
SUBSIDIARIES AND EXTRAORDINARY ITEM 7,593 (861) (744)
(Loss) Equity gain from subsidiaries (25,501) 5,585 9,621
---------- ---------- -----------
NET (LOSS) INCOME BEFORE EXTRAORDINARY ITEM (17,908) 4,724 8,877
Extraordinary item, gain from early extinguishment
of debt, net of taxes 20,603 - -
---------- ---------- -----------
NET INCOME $ 2,695 $ 4,724 $ 8,877
========== ========== ===========
S-2
Schedule III
PUEBLO XTRA INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS-PARENT COMPANY ONLY
(Dollars in thousands)
2001 2000 1999
---------- ---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,695 $ 4,724 $ 8,877
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary gain on early extinguishment of debt (20,603) - -
Increase in deferred income taxes (8,777) (459) (427)
Decrease in deferred charges and other assets 629 705 701
Changes in operating assets and liabilities:
Decrease in:
Notes/accounts receivable 86,158 - -
Prepaid expenses 158 - -
Interest receivable, net 4,410 - 13,792
(Decrease) Increase in:
Accrued expenses (4,372) (69) (66)
Intercompany payable, net (2,646) 922 578
--------- --------- ----------
Net cash provided by operating activities 57,652 5,823 23,455
--------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (Increase) in investment in subsidiaries 25,502 (5,585) (9,622)
Increase in investment in subsidiaries due to forgiveness
of debt (37,718) - -
--------- --------- ----------
Net cash used in investing activities (12,216) (5,585) (9,622)
--------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment from notes payable to a related party (1,138) (1,103) (14,771)
Purchase of Senior Notes due 2003 (49,999) - -
Proceeds from notes payable to a related party 1,138 1,170 1,047
--------- --------- ----------
Net cash (used in) provided by financing activities (49,999) 67 (13,724)
--------- --------- ----------
Net (decrease) increase in cash and cash equivalents (4,563) 305 109
Cash and cash equivalents at beginning of period 13,002 12,697 12,588
--------- --------- ----------
Cash and cash equivalents at end of period $ 8,439 $13,002 $ 12,697
========= ========= ==========
S-3
Schedule V
Pueblo Xtra International, Inc. and Subsidiaries
Valuation and Qualifying Accounts
For the fiscal years ended January 27, 2001, January 29, 2000,
and January 30, 1999
(Dollars in thousands)
Balance at Additions Balance
Beginning Charged to at End
of Year/ Costs and of Year/
Description Period Expenses Deductions (1) Period (2)
- ----------------------------- ----------- ----------- --------------- -----------
Fiscal 2001
Reserves not deducted
from assets:
Reserve for self-
insurance claims.... $ 12,091 $ 4,233 $ 5,344 $ 10,980
Fiscal 2000
Reserves not deducted
from assets:
Reserve for self-
insurance claims.... $ 16,377 $ 794 $ 5,080 $ 12,091
Fiscal 1999
Reserves not deducted
from assets:
Reserve for self-
insurance claims.... $ 17,687 $ 4,957 $ 6,267 $ 16,377
- ----------
(1) Amounts consist primarily of payments on claims.
(2) Amounts represent both the current and long-term portions.
S-4
EXHIBIT 21.3
FIRST AMENDMENT
FIRST AMENDMENT (the "Amendment"), dated as of April 15, 1999, among
Pueblo Xtra International, Inc., Pueblo International, Inc. and Xtra Super
Foods Centers, Inc. (collectively the "Credit Parties"), the lenders party to
the Credit Agreement referred to below (the "Banks"), Bank of Nova Scotia, as
Administrative Agent and NationsBank, N.A. (South) as Syndication Agent. All
capitalized terms used herein and not otherwise defined shall have the
respective meanings provided such terms in the Credit Agreement.
WITNESSETH:
WHEREAS, the Credit Parties, the Banks, the Administrative Agent and
the Syndication Agent are parties to an Amended and Restated Credit Agreement
dated as of April 29, 1997 (as currently in effect, the "Credit Agreement");
WHEREAS, the parties hereto wish to amend the Credit Agreement as
herein provided,
NOW, THEREFORE, it is agreed:
1. Section 8.01 of the Credit Agreement is amended by (i) deleting
the "and" after clause (g) thereof, (ii) changing the period at the end of
clause (h) thereof to read ", and", and (iii) adding a new clause (i) to read:
" (i) Permitted Sale Leasebacks".
2. Section 8.02(g) of the Credit Agreement is amended by adding
the phrase "or Section 8.03(i) " after the reference therein to "Section
803(b) ".
3. Section 8.03 of the Credit Agreement is amended by (i) deleting
the "and" after clause (g) thereof, (ii) changing the period at the end of
clause (h) thereof to read ", and", and (iii) adding a new clause to
read:
" (i) Capitalized Lease Obligations created pursuant to Permitted
Sale-Leasebacks".
4. The definition of Asset Sale in Section 10 of the Credit
Agreement is amended by adding immediately prior to the period at the end
thereof the phrase:
"provided that any disposition or sale pursuant to a Permitted
Sale-Leaseback shall not constitute as Asset Sale. "
5. Section 10 of the Credit Agreement is amended by adding the
following new definition in appropriate alphabetical order:
"Permitted Sale-Leaseback" shall mean a sale-leaseback transaction
covering any of the properties described on, and subject to the
limitations contained on, Annex I, to the Amendment dated as of April
15, 1999 to this Agreement.
6. This Amendment and the rights and obligations of the parties
hereunder shall be construed in accordance with and governed by the law of the
State of New York.
7. The Amendment shall become effective on the first date (the
"Amendment Date") on which each Credit Party and the Required Lenders shall
have signed a copy hereof (whether the same or different copies) and shall
have delivered (including by way of telecopier) the same to the Administrative
Agent as its Notice Office.
8. At all times on and after the Amendment Date, all references in
the Credit Agreement and each of the Credit Documents to the Credit Agreement
shall be deemed to be references to such Credit Agreement after giving effect
to this Amendment with the result that Permitted Sale-Leasebacks will be
permitted by, and not violate or breach, any Credit Document and that any
property or assets sold pursuant to a Permitted Sale-Leaseback shall be
released from the Liens created pursuant to the Security Documents.
9. Upon the request of the Borrower, the Collateral Agent shall,
and is hereby directed to, cooperate with the Credit Parties to surrender
and/or cancel any Mortgage and to release from pledge any mortgage securing
the Subordinated Intercompany Real Estate Note, in each case to the extent
attaching to any property sold pursuant to a Permitted Sale-Leaseback.
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
PUEBLO XTRA INTERNATIONAL, INC.
By /s/ William T. Keon III
------------------------
Name: William T. Keon III
Title: President
PUEBLO INTERNATIONAL, INC.
By /s/ William T. Keon III
------------------------
Name: William T. Keon III
Title: President
BANK OF NOVA SCOTIA,
Individually and as
Administrative Agent
By /s/ W. J. Brown
------------------------
Name: W. J. Brown
Title: Vice President
NATIONS BANK, N.A. (SOUTH),
Individually and
Syndication Agent
By /s/ Richard M. Starke
------------------------
Name: Richard M. Starke
Title: Senior Vice President
ANNEX 1
Permitted Sale-Leaseback
Properties that May Be Sold Maximum Net Sale Proceeds
Resulting from Sale
I. In Puerto Rico:
Altamira (including back lot) $8,300,000
Villa Del Carmen (Caguas) $2,700,000
Arecibo Shopping Center $4,500,000
(including back lot)
Norte Shopping Center (including $8,500,000
leased premises to Pitusa Store)
65th Infantry Avenue $6,500,000
II. In U.S. Virgin Islands:
Long Bay (St. Thomas) $2,500,000
Golden Rock Shopping Center (St. Croix) $2,500,000
EXHIBIT 21.5
THIRD AMENDMENT
THIRD AMENDMENT dated as of January 26, 2001 (the "Amendment") to the
Amended and Restated Credit Agreement dated as of April 29, 1997 (as amended
to date, the "Credit Agreement") among PUEBLO XTRA INTERNATIONAL, INC., a
Delaware corporation ("PXI"), PUEBLO INTERNATIONAL, INC., a Delaware
corporation (the "Borrower"), XTRA SUPER FOOD CENTERS, INC., a Delaware
corporation ("XTRA"), the Syndication Agent, the Administrative Agent, and the
Banks party thereto from time to time. All capitalized terms used in this
Amendment and not otherwise defined shall have the respective meanings
provided such terms in the Credit Agreement.
WITNISSETH:
WHEREAS, PXI and the Borrower have requested certain amendments to
the Credit Agreement; and
WHEREAS, in accordance with Section 12.11 of the Credit Agreement the
Required Banks are willing to amend the Credit Agreement as herein provided;
NOW, THEREFORE, it is agreed:
1. Section 7 of the Credit Agreement is hereby amended by adding
the following new Section 7.12 at the end thereof:
7.12 Real Estate Appraisals. PXI will deliver to the
Administrative Agent appraisals (by an independent real estate appraiser
acceptable to the Administrative Agent) for the owned Real Property identified
on Schedule VI hereto as 104 De Diego and 125 Campo Rico within 120 days
following the Third Amendment Effective Date.
2. Section 8.04(a) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
8.04 Capital Expenditures. (a) PXI will not, and will not
permit any of its Subsidiaries to, incur Capital Expenditures except Capital
Expenditures made in compliance with this Section 8.04. Capital Expenditures
shall be permitted to be made by the Borrower, Xtra and their respective
Subsidiaries in an aggregate amount for all such Persons (i) during the fiscal
year of PXI ending January 26, 2002, not in excess of $21,000,000 and (ii)
during each fiscal year ended thereafter, $24,000,000 (or pro rata portion
thereof for the portion of the then-current fiscal year that has elapsed prior
to the Maturity Date), other than (A) Capital Expenditures made with funds
received by the Borrower pursuant to Section 8.05(l) and (B) Capital
Expenditures made with the proceeds of business interruption insurance
received by PXI and its Subsidiaries, provided that the aggregate amount of
Capital Expenditures made pursuant to this clause (B) shall not exceed the
lesser of 20% of the amount of such proceeds or $5,000,000.
3. Section 8.09 of the Credit Agreement is hereby amended and
restated in its entirety as follows:
8.09 EBITDAR to Total Cash Interest Expense. PXI will not
permit the ratio of (x) EBITDAR to (y) Total Cash Interest Expense for any
Test Period ending on the last day of any fiscal quarter set forth below to be
less than the amount set forth opposite such fiscal quarter below:
Fiscal Quarter Ending Ratio
May 18, 1997 1.50:1.00
August 9, 1997 1.50:1.00
November 1, 1997 1.50:1.00
January 31, 1998 1.50:1.00
May 23, 1998 1.50:1.00
August 15, 1998 1.50:1.00
November 7, 1998 1.50:1.00
January 30, 1999 1.75:1.00
May 22, 1999 1.75:1.00
August 14, 1999 1.75:1.00
November 6, 1999 1.75:1.00
January 29, 2000 2.00:1.00
May 20, 2000 2.00:1.00
August 12, 2000 1.50:1.00
November 4, 2000 1.45:1.00
January 27, 2001 1.20:1.00
May 19, 2001 1.10:1.00
August 11, 2001 1.25:1.00
November 3, 2001 1.35:1.00
January 26, 2002 1.45:1.00
May 18, 2002 1.50:1.00
August 10, 2002 1.50:1.00
November 2, 2002 1.50:1.00
January 25, 2003 1.50:1.00
4. Section 8.10 of the Credit Agreement is hereby amended and
restated in its entirety as follows:
8.10 Minimum EBITDA. PXI will not permit EBITDA for the Test
Period ending at the end of any fiscal quarter set forth below to be less than
the amount set forth opposite such fiscal quarter below:
Fiscal Quarter Ending Amount
January 27, 2001 $31,000,000
May 19, 2001 $27,000,000
August 11, 2001 $30,000,000
November 3, 2001 $33,000,000
January 26, 2002 $36,000,000
May 18, 2002 $38,000,000
August 10, 2002 $38,000,000
November 2, 2002 $38,000,000
January 25, 2003 $38,000,000
5. Section 8.11 of the Credit Agreement is hereby amended and
restated in its entirety as follows:
8.11 Senior Secured Debt to EBITDA. PXI will not permit the
ratio of (i) Senior Secured Debt on the last day of any fiscal quarter to (ii)
EBITDA for the Test Period ending at the end of such fiscal quarter to be
greater than the amount set forth opposite such fiscal quarter below:
Fiscal Quarter Ending Ratio
May 18, 1997 1.50:1.00
August 9, 1997 1.50:1.00
November 1, 1997 1.50:1.00
January 31, 1998 1.50:1.00
May 23, 1998 1.50:1.00
August 15, 1998 1.50:1.00
November 7, 1998 1.50:1.00
January 30, 1999 1.50:1.00
May 22, 1999 1.50:1.00
August 14, 1999 1.50:1.00
November 6, 1999 1.50:1.00
January 29, 2000 1.50:1.00
May 20, 2000 1.50:1.00
August 12, 2000 1.50:1.00
November 4, 2000 1.50:1.00
January 27, 2001 1.50:1.00
May 19, 2001 1.25:1.00
August 11, 2001 1.25:1.00
November 3, 2001 1.25:1.00
January 26, 2002 1.25:1.00
May 18, 2002 1.25:1.00
August 10, 2002 1.25:1.00
November 2, 2002 1.25:1.00
January 25, 2003 1.25:1.00
6. The defined terms "EBIT" and "Leverage Ratio" set forth in
Section 10 of the Credit Agreement are hereby amended and restated in their
entirety as follows:
"EBIT" shall mean, for any period, Consolidated Net Income, before
interest income, interest expense, LIFO adjustment and provision for
income taxes and Puerto Rico withholding taxes and without giving effect
to any non-recurring charges, extraordinary gains (including without
limitation the proceeds of any claim under business interruption
insurance), extraordinary losses or gains from sales of assets (other than
sales of inventory in the ordinary course of business).
"Leverage Ratio" shall mean the ratio of (i) Consolidated
Indebtedness on the last day of any fiscal quarter of PXI to (ii) EBITDA
for the Test Period ending at the end of such fiscal quarter.
7. Section 10 of the Credit Agreement is hereby amended by
inserting the following defined terms in the appropriate alphabetical order:
"Third Amendment" shall mean the Third Amendment to this Credit
Agreement, dated as of January 26, 2001.
"Third Amendment Effective Date" shall have the meaning provided in
the Third Amendment.
8. In order to induce the Required Banks to enter into this
Amendment, PXI and the Borrower hereby represent and warrant that:
(a) no Default or Event of Default exists as of the Third
Amendment Effective Date (as defined below), both before and after giving
effect to this Amendment; and
(b) all of the representations and warranties contained in the
Credit Agreement or the other Credit Documents are true and correct in all
material respects on and as of the Third Amendment Effective Date both
before and after giving effect to this Amendment (it being understood that
any representation or warranty made as of a specific date shall be true
and correct in all material respects as of such specific date).
9. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
10. This Amendment may be executed in any number of counterparts
and by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with the Borrower and the Administrative
Agent.
11. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
12. This Amendment shall become effective as of January 26, 2001
on the date (the "Third Amendment Effective Date") when each of PXI, the
Borrower, Xtra, the Subsidiary Guarantors and the Required Banks shall have
signed a counterpart hereof (whether the same or different counterparts) and
shall have delivered (including by way of facsimile transmission) the same to
the Administrative Agent at its Notice Office.
13. From and after the Third Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents to
the Credit Agreement shall be deemed to be references to the Credit Agreement
as amended hereby.
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
PUEBLO XTRA INTERNATIONAL, INC.
By: /s/ Daniel J. O'Leary
---------------------------------
Title: Executive Vice President
& Chief Executive Officer
PUEBLO INTERNATIONAL, INC.
By: /s/ Daniel J. O'Leary
---------------------------------
Title: Executive Vice President
& Chief Executive Officer
THE BANK OF NOVA SCOTIA
By: /s/ W. J. Brown
-------------------------
Title: Vice President
BANK OF AMERICA, N.A.
By: /s/ Richard M. Starke
-------------------------
Title: Managing Director
ACKNOWLEDGED:
XTRA SUPER FOOD CENTERS, INC.
By: /s/ Daniel J. O'Leary
-------------------------
Title: Executive Vice President
& Chief Financial Officer
PUEBLO MARKETS, INC.
By: /s/ Daniel J. O'Leary
-------------------------
Title: Executive Vice President
& Chief Financial Officer
PUEBLO SUPER VIDEOS, INC.
By: /s/ Daniel J. O'Leary
-------------------------
Title: Executive Vice President
& Chief Financial Officer
ALL TRUCK, INC.
By: /s/ Daniel J. O'Leary
-------------------------
Title: Executive Vice President
& Chief Financial Officer
XTRA DRUGSTORE, INC.
By: /s/ Daniel J. O'Leary
-------------------------
Title: Executive Vice President
& Chief Financial Officer
PUEBLO CARIBBEAN VIDEOS, INC.
By: /s/ Daniel J. O'Leary
-------------------------
Title: Executive Vice President
& Chief Financial Officer
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