UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ ] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended _____________________
[X] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from January 28, 2001 to November 3, 2001
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 February 1, 2002 -- 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, LLC and
Pueblo Entertainment, Inc., both Delaware companies. Throughout this report
Pueblo International, LLC, together with its subsidiaries, is referred to as
Pueblo and Pueblo Entertainment, Inc. is referred to as Pueblo Entertainment.
Pueblo Entertainment was created on January 28, 2001 to own and operate the
video rental store assets in Puerto Rico. Prior to that date those assets
were owned and operated by Pueblo International, Inc.. Pueblo International,
Inc. was converted to a Delaware limited liability corporation on November 4,
2001 and its name was changed to Pueblo International, LLC. 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 one of the leading
supermarket chains in the Commonwealth of Puerto Rico and the Territory of
the U.S. Virgin Islands. In addition, the Company, through its ownership of
Pueblo and Pueblo Entertainment, 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 39 video rental stores in Puerto Rico and
2 video rental stores in the U.S. Virgin Islands.
On November 2, 2001 the Company and its subsidiaries changed their
fiscal year end from the Saturday closest to January 31 to the Saturday
closest to October 31. Consequently, the transition period being reported
in this Annual Report on Form 10-K is the forty weeks ended November 3, 2001.
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 2001 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 21%. In addition, the Company estimates that
it has a 30% 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 3.9 million residents. During the 40 weeks ending November 3, 2001,
the Company's stores in Puerto Rico averaged approximately 41,100 gross
square feet and generated an average of approximately $319 of sales per
selling square foot. Since the Acquisition, the Company has constructed six
new supermarkets and remodeled 32 existing supermarkets in Puerto Rico.
U.S. Virgin Islands
During the 40 weeks ending November 3, 2001, the six supermarkets in the
U.S. Virgin Islands averaged 34,367 gross square feet and generated an
average of approximately $305 of sales per selling square foot. The Company
has an estimated U.S. Virgin Islands grocery retailing market share of
approximately 36%. 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 41 video rental locations in Puerto Rico and the U.S. Virgin
Islands. In Puerto Rico, the Company operates 15 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 4,050 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 Puerto Rico in
competition with the Company. Each of the Company's free-standing video
rental locations carries an average of approximately 11,000 tapes dedicated
to video rental whereas its in-store video rental locations average
approximately 8,900. 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.
Store Composition
Since the Acquisition, the Company has made capital expenditures of
approximately $117.5 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 37 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 1998, is set forth in the table below:
40 Weeks
Ended
November 3, Fiscal Year
----------- ------------------------------
2001 2001 2000 1999 1998
---- ---- ---- ---- ----
Stores in Operation:
At beginning of year . . . . . . . 91 93 94 94 77
Stores opened:
Supermarkets . . . . . . . . . - - - 1 -
video rental stores . . . . . . - 1 - 1 17**
Stores closed:
Puerto Rico - Supermarket . . . - 2 - 1* -
Puerto Rico - video rental . . 2 1 1 1* -
---- ---- ---- ---- ----
At end of year . . . . . . . . . 89 91 93 94 94
==== ==== ==== ==== ====
Remodels and/or conversions . . . 2 8 9 2 16
==== ==== ==== ==== ====
Store Composition at Year-End:
By division:
Supermarkets . . . . . . . . 48 48 50 50 50
video rental stores . . . . 41 43 43 44 44
---- ---- ---- ---- ----
Total 89 91 93 94 94
==== ==== ==== ==== ====
By location:
Puerto Rico . . . . . . . . 81 83 85 86 86
U.S. Virgin Islands . . . . 8 8 8 8 8
---- ---- ---- ---- ----
Total 89 91 93 94 94
==== ==== ==== ==== ====
* 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 57% 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. During the fiscal year ended November 3, 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:
40 Weeks Fiscal Year Ended
Ended ---------------------------
November 3, January 27, January 29,
Product Category 2001 2001 2000
----------- ----------- -----------
Grocery . . . . . . . . . . . . 43.8% 45.2% 45.7%
Health/Beauty Care/General Merchandise 8.2 8.2 7.7
Dairy . . . . . . . . . . . . . . 18.6 17.8 18.0
Meat/Seafood . . . . . . . . . . . 15.7 15.1 14.4
Produce . . . . . . . . . . . . . . 9.1 9.1 9.7
Deli/Bakery . . . . . . . . . . . . 4.6 4.6 4.5
------ ------ ------
Total . . . . . . . . . . . . 100.0% 100.0% 100.0%
====== ====== ======
Pricing
As one of the largest grocery store chain operators in its markets, the
Company is able to take advantage of volume purchase discounts and shipping
efficiencies to offer competitive pricing at its supermarkets. The Company
utilizes weekly 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 November 3,
2001, the Company continues to have approximately 320 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 14.3%
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 "PuebloCard" to its
customers in Puerto Rico and the U. S. Virgin Islands. The PuebloCard 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. (dba "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
Club, Wal-Mart, Kmart (including its Big K format), Costco and Walgreens,
have opened new locations in Puerto Rico and the U.S. Virgin Islands.
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 November 3, 2001, the Company had approximately 4,800 employees
(full- and part-time) of whom approximately 3,800 were employed at the
supermarket level, 500 at the administrative and financial services offices
and distribution center and 500 by the Video Rental Division. Approximately
66% of the Company's supermarket employees are employed on a part-time basis.
Approximately 3,300 store employees are represented by a nonaffiliated
collective bargaining organization under a three year 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 November 3, 2001 with
respect to the owned and leased stores and support facilities used by Pueblo
in its business:
Owned (1) Leased (2) Total
----------------- ----------------- ----------------
No. Gross Sq. Ft. No. Gross Sq. Ft. No. Gross Sq. Ft
--- ------------- --- ------------- --- ------------
Supermarkets . . . . . . . 6 273,000 42 1,660,000 48 1,933,000
Video rental stores . . . 3 17,000 38 187,000 41 204,000
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.
(2) Total supermarkets and leased gross square footage includes 42,080 square
feet for the Cayey store closed 12/30/00 whose lease has not been assigned.
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
At November 3, 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 November 3, 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
40 weeks ended November 3, 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 and Pueblo
Entertainment 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)
40 Weeks Ended
------------------------ Fiscal Year Ended
(unaudited) --------------------------------------------------
November 3, November 4, January 27, January 29, January 30, January 31,
2001 2000 2001 2000 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
Operating Statement Data
Net sales $433,342 $478,799 $622,050 $674,145 $784,774 $938,506
Cost of goods sold 290,997 326,066 423,755 456,143 528,395 667,043
--------- --------- --------- --------- --------- ---------
Gross profit 142,345 152,733 198,295 218,002 256,379 271,463
Selling, general and admin-
istrative expenses 116,541 127,101 165,667 163,785 172,964 204,185
Gain on insurance settlement(1) - (2,464) (2,464) (15,066) - -
Store Closings:
Exit costs (2) - 685 685 - - -
Write down of impaired
assets (2) - 3,578 3,534 - - -
Depreciation and amortization 22,671 25,945 34,142 31,632 36,529 40,175
--------- --------- --------- --------- --------- ---------
Operating profit (loss) 3,133 (2,112) (3,269) 37,651 46,886 27,103
Sundry, net - - - - (36)
Interest expense-debt and
capital lease obligations (18,376) (23,272) (28,830) (30,371) (29,556) (30,527)
Interest and investment
income, net 415 2,256 2,500 2,750 1,379 910
Loss on sale of real
property (3) - - (1,291) - -
Income tax benefit (expense) 6,612 8,497 11,691 (4,015) (9,832) (583)
--------- --------- --------- --------- --------- ---------
(Loss) Income before
extraordinary item (8,216) (14,631) (17,908) 4,724 8,877 (3,133)
Extraordinary item, net of
taxes (4) - 20,603 20,603 - - (2,444)
--------- --------- ----------- ----------- ----------- ---------
Net (loss) income $ (8,216) $ 5,972 $ 2,695 $ 4,724 $ 8,877 $(5,577)
========= ========= ========= ========= ========= =========
See notes to Selected Financial Data at the end of Item 6.
As of
-------------------------------------------------------------------
November 3, January 27, January 29, January 30, January 31,
2001 2001 2000 1999 1998
----------- ----------- ----------- ----------- -----------
Balance Sheet Data
Cash and cash equivalents (5) $ 2,169 $34,833 $95,711 $55,500 $28,770
Working capital (deficit) 252 (6,899) 22,214 1,578 (23,535)
Property and equipment, net 111,227 118,598 122,263 129,860 135,844
Total assets 394,159 434,790 521,564 507,002 502,176
Total debt and capital
lease obligations 218,277 218,047 283,705 276,032 275,576
Stockholder's equity 35,385 43,601 40,906 36,182 27,305
40 Weeks Ended
------------------------ Fiscal Year Ended
(unaudited) --------------------------------------------------
November 3, November 4, January 27, January 29, January 30, January 31,
2001 2000 2001 2000 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
Certain Financial Ratios
and Other Data
EBITDA (as defined) (6) $25,804 $27,411 $34,407 $69,283 $83,415 $67,278
Cash flow (used in) provided
by investing activities (3) (5,240) (15,970) (17,249) 1,077 (8,209) 187
Cash flow used in
financing activities (503) (31,415) (31,685) (576) (591) (20,343)
Cash flow (used in) provided
by operating activities (26,921) (41,663) (11,944) 39,710 35,530 36,778
Capital expenditures (5,271) (16,154) 17,452 21,650 * 15,271 10,938
EBITDA (as defined) margin (6) 6.0% 5.7% 5.5% 10.3% 10.6% 7.2%
Debt to EBITDA (as defined) 6.65:1** 4.94:1** 6.34:1 4.09:1 3.30:1 4.10:1
* Excludes replacements of approximately $13.1 million as a result of damages from Hurricane Georges.
** For comparison purposes, these ratios were computed using the EBITDA for the trailing 52 week period.
See notes to Selected Financial Data at the end of Item 6.
40 Weeks Ended
------------------------
(unaudited) Fiscal Year
November 3, November 4, ----------------------------------------
2001 2000 2001 2000 1999 1998
----------- ----------- -------- -------- -------- --------
RETAIL FOOD DIVISION DATA
Puerto Rico
Number of stores (at fiscal year-end) 42 44 42 44 44 44
Average sales per store (7) $ 8,698 $ 9,144 $ 11,943 $ 12,901 $ 14,804 $ 18,221
Average selling square footage 28,895 28,632 28,149 28,243 27,179 26,455
Average sales per selling square foot (7) $ 319 $ 346 $ 452 $ 491 $ 590 $ 701
Total sales $365,311 $402,357 $522,059 $567,658 $650,816 $801,732
Same store sales % change (7.6)% (8.3)% (7.6)% (13.1)% (17.8)% (10.2)%
U.S. Virgin Islands
Number of stores (at fiscal year-end) 6 6 6 6 6 6
Average sales per store (7) $ 5,916 $ 6,194 $ 8,085 $ 8,364 $ 11,326 $ 14,777
Average selling square footage 19,421 19,421 19,421 19,421 19,421 19,421
Average sales per selling square foot (7) $ 305 $ 317 $ 414 $ 427 $ 580 $ 754
Total sales $ 35,497 $ 37,163 $ 48,509 $ 50,185 $ 67,958 $ 88,659
Same store sales % change (4.5)% (3.0)% (3.3)% (26.2)% (21.7)% (3.9)%
VIDEO RENTAL DIVISION DATA
Video Rental Stores
Number of stores (at fiscal year-end) 41 43 43 43 44 44
Average sales per store (7) $ 702 $ 746 $ 1,000 $ 1,146 $ 1,381 $ 1,371
Average weekly sales $ 740 $ 802 $ 837 $ 962 $ 1,184 $ 683
Total sales $ 29,421 $ 32,084 $ 42,954 $ 49,920 $60,972 $48,115
Same store sales % change (7.8)% (13.8)% (13.5)% (18.6)% 10.8% (4.5)%
See notes to Selected Financial Data at the end of Item 6.
NOTES TO SELECTED FINANCIAL DATA
(1) 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.
(2) 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.
(3) The Company received $35.5 million in cash and incurred a loss in a
sale/leaseback of real estate.
(4) The 40 weeks ended November 4, 2000 and the fiscal year ended January 27,
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.
(5) Highly liquid investments purchased with a maturity of three months or
less are considered cash equivalents.
(6) 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.
(7) 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 the fiscal year ended January 27,
2001, the Company closed 2 under-performing supermarkets in Puerto Rico,
reducing the number of supermarkets to 48. Also in such year, the Company
relocated a video rental store that was in one of the closed supermarkets to
a new free standing location. On November 2, 2001 the Company changed its
fiscal year end from the Saturday closest to January 31 to the Saturday
closest to October 31. Consequently, the fiscal period being reported in
this Annual Report on Form 10-K is the 40 weeks ended November 3, 2001.
During the 40 weeks ended November 3, 2001, the Company closed 2
under-performing video rental stores, reducing the number to 41. From the
Acquisition through November 3, 2001, the Company made capital expenditures
totaling $137.6 million, of which $128.5 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, mass merchandisers, department 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 both net sales and same store sales and in consolidated operating
results.
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. During fiscal 1998 a new
management team was put in place which embarked on converting the Puerto Rico
and U. S. Virgin Islands supermarkets to "combo" stores which offer expanded
grocery items, a wide selection of health and beauty care products and
general merchandise. In addition, services such as banks and private postal
services were added to many of the stores. Management also embarked on a
program to remodel the supermarkets and open new stores where appropriate. A
total of twenty-three supermarkets were remodeled from fiscal 1997 through
November 3, 2001. 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 of
the twenty-three remodels, nine of which were completed in fiscal 2000 and
eight in fiscal 2001. The Company's store remodel program continued during
the 40 weeks ended November 3, 2001, with two additional remodels. In fiscal
1999 one new supermarket and one new video rental store were opened in Puerto
Rico. Currently, the company has an additional supermarket and video rental
location under construction.
The Company has no operations of its own, and its only assets are its
equity interests in Pueblo and Pueblo Entertainment 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 the fiscal year ended January 27, 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 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, in management's
opinion, the end of the applicable indemnity period. The Company has
received $6.9 million from its insurance carriers related to this portion of
the claim. The $6.9 million is comprised of a $5.0 million advance and
reimbursement of $1.9 million of the Company's claim preparation fees. The
$5.0 million advance will not be included in earnings until such time as the
claim is settled and the related gain is realized. During the Company's
fiscal year that ended January 27, 2001 the carriers invoked the appraisal
provisions of the policy which, essentially, require an arbitration process
to value the claim. The Company and the carriers have been unable to agree
which court has jurisdiction over appointing the umpire. Consequently, the
appointment of the umpire is being litigated in two jurisdictions. On October
30, 2001 the Federal Court for the Southern District of Florida appointed an
umpire as a result of litigation initiated by the Company. The umpire and the
appraisers for the Company and the insurance carriers have taken initial
steps to organize the appraisal process. The insurance carriers have asked
that the appraisal process in Florida be stayed while they appeal the
appointment of the umpire to the U.S. Court of Appeals for the Eleventh
District. At the date of this report the appraisal process in Florida has not
been stayed and no decision has been rendered by the U.S. Court of Appeals.
The litigation initiated in Puerto Rico by the carriers for the appointment
of an umpire is stayed pending the decision on the appeal filed by the
insurance carriers with the U.S. Court of Appeals for the Eleventh District.
The Company is unable to predict when the appraisal process will conclude or
what total amount eventually may be recovered.
Results of Operations
40 Weeks Ended November 3, 2001 vs. 40 Weeks Ended November 4, 2000
As of November 3, 2001, the Company operated a total of 48 supermarkets
and 41 video rental locations in Puerto Rico and the U. S. Virgin Islands.
During the fiscal year ended November 3, 2001, the Company closed two of its
video rental stores in Puerto Rico. Additionally, the Company continued its
reengineering including the remodeling process scheduled for all of its
stores.
Total sales for the 40 weeks ended November 3, 2001 were $433.3 million
versus and $478.8 million in the comparable periods of the prior year, a
decrease of 9.5%. For the comparable 40 week periods, same store sales were
$432.7 million this year versus $470.9 million for the prior year, a decline
of 8.1%. "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 8.1% for the 40 weeks
ended November 3, 2001 as compared to the same period of the prior year.
The principal factors contributing to the decline in same store sales in the
Retail Food Division are increased competition and weakness in the economy in
both Puerto Rico and the U.S. Virgin Islands. Video Rental Division same
store sales decreased 7.8% for the 40 weeks, respectively, as compared to the
same periods in the prior year.
Gross profit for the 40 weeks ended November 3, 2001 was $142.3 million
versus $152.7 million for the comparable period of the prior year, a decline
of $10.4 million. Gross profit for the Retail Food Division was $119.0 million
for the 40 weeks ended November 3, 2001 compared to $127.8 million for the
comparable period of the prior year, a $8.8 million decline. The $8.8 million
decline in gross profit for the Retail Food Division was a result of the
decline in sales and was offset by a 0.9% increase in the rate of gross
profit, from 28.6% in the 40 weeks ended November 4, 2000 to 29.5% in the
40 weeks ended November 3, 2001. The primary reason for the improvement in
the rate of gross profit was the impact of the Company's loyalty program,
which began in March of 2001. In addition to providing loyal customers with
enhanced values the program provides the Company the ability to improve
control of its promotional programs. The program is based on the PuebloCard
which identifies the card holder as a member of the program and the special
pricing the card holder is entitled to on the specific item(s) being checked
out. Currently, Pueblo is the only supermarket retailer offering such a
program in Puerto Rico and the U. S. Virgin Islands. The gross profit for the
Video Rental Division for the 40 weeks ended November 3, 2001 was $23.4
million versus $25.0 million for the comparable period of the prior year, a
decline of $1.6 million. The gross profit rate for the Video Rental Division
increased by 1.7%, to 79.5% in the 40 weeks ended November 3, 2001. The
increase in the gross profit rate was 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 $116.5 million for the
40 weeks ended November 3, 2001 compared to $127.1 million for the comparable
period of the prior year. The decrease of $10.6 million in the 40 weeks ended
November 3, 2001 from the comparable period of the prior year was a result of
the decline in sales and cost reductions implemented in April of 2001.
Depreciation and Amortization was $22.7 million for the 40 weeks ended
November 3, 2001 compared to $25.9 million for the comparable period of the
prior year, a decrease of $3.2 million. This decrease was primarily a result
of the write off, during the 40 weeks ended November 4, 2000, of property,
plant and equipment that had been replaced during fiscal years 2001 and 2000
when the majority of the Company's remodels were completed.
Interest expense, net of interest income, decreased by $3.1 million
between the 40 weeks ended November 3, 2001 and the comparable period of the
prior year 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, 2000. This reduction was partially offset by interest on $30.0
million in borrowings under the Company's revolving credit facility.
Income tax benefit for the 40 weeks year ended November 3, 2001 was $6.6
million compared to a benefit of $8.5 million in the comparable period of the
prior year, a decrease of $1.9 million. The income tax benefit for the 40
weeks ended November 4, 2000 did not include the impact of 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 the 40 weeks ended November 3, 2001 and the
comparable period of the prior year were 44.6% and 36.8%, respectively.
Variances in the effective tax rate were 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 loss for the 40 weeks ended November 3, 2001 was $8.2 million, a
decrease of $14.2 million from the net income in the comparable period of
the prior year. Net income for the 40 weeks ended November 4, 2000 was $6.0
million. The 40 weeks ended November 4, 2000 include a $20.6 million
extraordinary gain, net of applicable income taxes, from early extinguishment
of the Company's debt. The 40 weeks ended November 4, 2000 also include a
charge of $2.7 million, net of applicable income taxes, pertaining to the
write-down of assets of stores closed and a $1.5 million gain, net of
applicable income taxes, related to the final accounting for the property
damaged by Hurricane Georges in September of 1998.
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.
During fiscal 2001, the Company closed two of its supermarkets and relocated
one of its video rental stores in Puerto Rico. Additionally, the Company
continued the reengineering of its business including the remodeling process
scheduled for all of its stores.
Total sales for the fiscal 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 in fiscal 2001 versus $662.6
million for the prior year, a decline of 7.3%. 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% in fiscal 2001 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 came 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 fiscal 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 was
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 in fiscal 2001 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 2001. 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 reengineering 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
had been replaced during fiscal 2001 as the Company's reengineering program
to remodel its stores progresses.
Interest expense, net of interest income, decreased by $1.3 million
between fiscal 2001 and fiscal 2000 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, 2000. 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 fiscal 2001 was $11.7 million compared to income
tax expense of $4.0 million in the prior year, a difference of $15.7 million.
The income tax benefit for fiscal 2001 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 were 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.
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 provided for a $65.0 million revolving credit
facility with less restrictive covenants compared to the Old Bank Credit
Agreement.
During the 40 weeks ended November 3, 2001, the Company signed an
amendment to the New Bank Credit Agreement to reduce the total availability
under its credit facility to $41.7 million through November 3, 2001 and $43.9
million through January 26, 2002 and to amend or adjust certain covenants.
The changes were made principally to adapt the facility to the Company's
needs and adapt the financial covenants to changes in the Company's
performance. The company has complied with all covenants. On January 31,
2002, the Company signed the Sixth Amendment, effective that date, to the New
Bank Credit Agreement which adjusted total availability under the facility to
$43.0 million through May 18, 2002, and to $40.0 million from May 19, 2002
through the maturity date (February 2003). The Company believes such
availability will be sufficient to meet its working capital needs until
February 2003. The Company will continue to explore its options for such
financing after February 2003, but no assurances can be given that such
financing can be obtained on acceptable terms or at all.
As of November 3, 2001, the Company had borrowings of $30.0 million
under its revolving credit facility. The weighted average per annum interest
rate on these borrowings for the 40 weeks ended November 3, 2001 and fiscal
year ended January 27, 2001 was 8.406% and 10.625%, respectively.
Additionally, after the issuance of standby letters of credit in the amount
of $3.9 million, as of November 3, 2001, the borrowing availability on a
revolving basis under the terms of the New Bank Credit Agreement was $7.8
million which increased on November 4, 2001 to $10 million through January
26, 2002, and decreased to 9.1 million on January 31, 2002.
Cash used in operating activities was $26.9 million during the 40 weeks
ended November 3, 2001 compared to $41.7 million in the comparable period of
the prior year. The improvement is a result of a decline in net loss from
operations and a decrease in cash used for components of working capital.
Net cash used in investing activities was $5.2 million and $16.0 million
in the 40 weeks ended November 3, 2001 and the comparable period of the prior
year, respectively. This reduction is a result of there only being two major
store remodel projects in the 40 weeks ended November 3, 2001 compared to
eight major store remodel projects during the comparable period of the prior
year.
Net cash used in financing activities was $0.5 million and $31.4 million
in the 40 weeks ended November 3, 2001 and the comparable period of the prior
year, respectively. During the 40 weeks ended November 4, 2000 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 the 40 weeks
ended November 4, 2000.
Working capital as of November 3, 2001 was $0.3 million, an increase
of $7.2 million from the $6.9 million negative working capital as of January
27, 2001, producing a current ratio of 1.0:1 and 0.94:1, respectively. The
primary reason for this increase is due to the change in the fiscal year end
and its impact on prepaid expenses, inventory, and accrued interest balances.
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 November 3, 2001 and is anticipated to be funded with cash
provided by operating activities.
Capital expenditures for fiscal 2002 are expected to be approximately
$9.7 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.
The Company is considering potential options regarding the refinancing
or payment of its outstanding Notes and Series C Senior Notes which mature on
August 1, 2003. There can be no assurance that such a refinancing can be
obtained on acceptable terms or at all.
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.
ITEM 7A. QUANTITATIVE AND QUALTITATIVE DISCLOSURES ABOUT MARKET RISK
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 $177.3 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 expiring February 2003.
****
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, and (3) 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-24 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 . . . . . 56 Chairman of the Board; Member of the
Executive Committee
William T. Keon, III . . . . . 55 Director; President and Chief Executive
Officer; Chairman of the Executive
Committee; Chairman of the Audit
Committee; Member of the Compensation
and Benefits Committee
Steven I. Bandel . . . . . . . 48 Director; Member of the Executive and
Audit Committees; Chairman of the
Compensation and Benefits Committee
Guillermo A. Cisneros . . . . 30 Director
Cristina Pieretti . . . . . . 49 Director
Alejandro Rivera . . . . . . . 58 Director; Member of the Audit Committee;
Member of the Compensation and Benefits
Committee
Executive Officers
- ------------------
William T. Keon, III . . . . . 55 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 . . . . . . . 45 Senior Vice President; Chief Marketing
Officer
Fernando J. Bonilla . . . . . 41 Vice President, General Counsel and
Secretary
Alicia Echevarria . . . . . . 49 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. Mr. Cisneros is Chairman and Chief Executive
Officer of the Cisneros Group. The "Cisneros Group" is a name used to
describe a group of investments, joint ventures, strategic alliances and
companies that are engaged in diversified commercial businesses in Latin
America and the United States, including broadcast, media, telecommunications
and consumer enterprises, and that are associated with Gustavo A. and Ricardo
J. Cisneros and trusts established by them for the benefit of themselves and
members of their families. Since 1975, Mr. Cisneros has overseen the
management and operations of the Cisneros Group and is an executive officer
and director of many of its member companies. He is a member of the board of
directors of America Online Latin America, Inc., PanAmerican Beverages, Inc.,
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 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 1995, Mr. Bandel has held several senior management positions at
companies within the Cisneros Group, with responsibilities in the areas of
finance and business development. Mr. Bandel has the title of President and
Chief Operating Officer of the Cisneros Group. He is also a member of the
board of directors of America Online Latin America, Inc.
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 A. Cisneros.
Cristina Pieretti was appointed a Director in March 1997. Since
February 1996, Ms. Pieretti has held a number of senior management positions
within the Cisneros Group in the consumer goods, retail and
telecommunications industries. From March 1995 to February 1996, Ms.
Pieretti was a partner at Booz-Allen & Hamilton, a consulting firm. Ms.
Pieretti has the title of vice president of operations of the Cisneros Group.
She is also a member of the board of directors of America Online Latin
America, Inc.
Alejandro Rivera has been a Director of the Company since the
Acquisition. 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 32 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 (a weekly business
publication in San Juan). 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 November 3, 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 November 3,
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(8) 384,616 240,000 15,021(2) 11,538(1)
President and Chief 2001 480,000 220,000 21,853(2) 24,592(1)
Executive Officer 2000 450,000 425,000 19,460(2) 19,500(1)
David L. Aston 2001(8) - - - -
Executive Vice President; 2001 322,581 - 29,416(3) 9,677(1)
President, Retail Food 2000 304,654 60,000 14,293(3) 9,140(1)
Division (Retired 12/22/00)
Daniel J. O'Leary 2001(8) 203,846 - 10,413(4) -
Executive Vice President; 2001 259,000 60,000 17,332(4) -
Chief Financial Officer 2000 245,193 60,000 18,174(4) -
Charles R. Newsom 2001(8) 192,308 - 11,621(5) -
Senior Vice President; 2001 206,465 40,300 22,714(5) -
President, Retail Food 2000 191,057 30,300 10,450(5) -
Division
Alicia Echevarria 2001(8) 118,362 - 9,108(6) -
Vice President of 2001 151,368 20,300 13,730(6) -
Human Resources 2000 142,958 10,300 10,493(6) -
Melissa Lammers (Started 1/8/01) 2001(8) 184,616 8,322 7,723(7) -
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 $5,521, $9,503, and $7,110 and an automobile allowance in the amount of
$9,500, $12,350, and $12,350 for the 40 weeks ended November 3, 2001,
fiscal 2001, and 2000, respectively.
(3) Includes costs related to the reimbursement of executive medical expense
of $18,366, and $3,243 and an automobile allowance in the amount of
$11,050, and $11,050 for fiscal 2001 and 2000, respectively.
(4) Includes costs related to the reimbursement of executive medical expense
of $2,413, $6,932, and $7,774 and an automobile allowance in the amount of
$8,000 $10,400, and $10,400 for the 40 weeks ended November 3, 2001,
fiscal 2001, and 2000, respectively.
(5) Includes costs related to the reimbursement of executive medical expense
of $3,121, $12,834, and $700 and an automobile allowance in the amount of
$8,500, $9,880, and $9,750 for the 40 weeks ended November 3, 2001, fiscal
2001, and 2000, respectively.
(6) Includes costs related to the reimbursement of executive medical expense
of $2,108, $4,630, and $1,393 and an automobile allowance in the amount of
$7,000 $9,100, and $9,100 for the 40 weeks ended November 3, 2001, fiscal
2001, and 2000, respectively.
(7) Includes costs related to the reimbursement of executive medical expense
of $223 and an automobile allowance in the amount of $7,500 for the 40 weeks
ended November 3, 2001
(8) Represents the 40 weeks ended November 3, 2001.
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 $170,000 shall be disregarded,
provided, however, that such $170,000 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
$170,000 limit is not applicable.
The estimated years of credited service and age, respectively, for
purposes of calculating benefits through November 3, 2001 for Mr. Keon is
eight and 55, 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 40 weeks ended November 3, 2001 and fiscal year ended
January 27, 2001. Mr. Keon also served as an officer of the Company during
those periods.
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 6 Place des Eaux - Vives, 1207 Geneva, Switzerland
(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 which has not been
disclaimed.
(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
PART IV
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 F - 2 through F - 3
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 -24
(2) Financial Statement Schedules:
Schedule I - Financial Information of Registrant...S-1 through S-3
Schedule II - 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 *****
21.6 FOURTH AMENDMENT, DATED AS OF AUGUST 11,
2001, TO THE NEW BANK CREDIT AGREEMENT
(INCORPORATED BY REFERNECE TO EXHIBIT 10.1
TO THE COMPANY'S QUARTERLY REPORT ON FORM
10-Q FOR THE QUARTER ENDED AUGUST 11, 2001)
21.7 FIFTH AMENDMENT, DATED AS OF NOVEMBER 2,
2001, TO THE NEW BANK CREDIT AGREEMENT
21.8 SIXTH AMENDMENT, DATED AS OF JANUARY 31,
2002, 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.
***** Previously filed and incorporated by reference to corresponding
exhibits in the Company's Form 10-K for fiscal year ended January 27,
2001
(B) Reports on Form 8-K
The Company filed a current Report on Form 8-K dated
November 16, 2001 reporting the change of the subsidiary
Pueblo International, Inc. to Pueblo International, LLC, and
the change of the Company's fiscal year from the Saturday
closest to January 31 to the Saturday closest to October 31.
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: February 1, 2002 /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/ Evis H. Lois Controller
Evis H. Lois, CPA
/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 November 3,
2001 and January 27, 2001, and the related consolidated statements of
operations, cash flows and stockholder's equity for the 40 weeks ended
November 3, 2001 and for each of the two fiscal 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 November 3, 2001 and January 27, 2001 and the
results of their operations and their cash flows for the 40 weeks ended
November 3, 2001 and for each of the two fiscal 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
December 21, 2001 (January 31, 2002 as to the effects of the Sixth Amendment
to the New Bank Credit Agreement described in Note 4).
F-1
CONSOLIDATED BALANCE SHEETS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
(Dollars in thousands)
November 3, January 27,
2001 2001
------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,169 $ 34,833
Accounts receivable, net of allowance for doubtful
accounts of $520 at November 3, 2001 and $546 at
January 27, 2001 3,450 2,123
Inventories 54,228 52,957
Prepaid expenses 8,997 7,375
Deferred income taxes 14,534 9,013
--------- ---------
TOTAL CURRENT ASSETS 83,378 106,301
--------- ---------
PROPERTY AND EQUIPMENT
Land and improvements 6,299 6,283
Buildings and improvements 40,051 39,894
Furniture, fixtures and equipment 99,758 98,610
Leasehold improvements 43,736 41,233
Construction in progress 2,803 5,972
--------- ---------
192,647 191,992
Less accumulated depreciation and amortization 94,110 86,826
--------- ---------
98,537 105,166
Property under capital leases, net 12,690 13,432
--------- ---------
TOTAL PROPERTY AND EQUIPMENT 111,227 118,598
GOODWILL, net of accumulated amortization of $41,821 at
November 3, 2001 and $38,178 at January 27, 2001 150,217 153,860
DEFERRED INCOME TAX 1,080 5,034
TRADE NAMES, net of accumulated amortization of $11,059
at November 3, 2001 and $10,393 at January 27, 2001 27,441 28,107
DEFERRED CHARGES AND OTHER ASSETS 20,816 22,890
--------- ---------
TOTAL ASSETS $ 394,159 $ 434,790
========= =========
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)
November 3, January 27,
2001 2001
------------- -------------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable $ 53,539 $ 75,819
Accrued expenses 16,669 19,933
Accrued interest 4,432 8,540
Salaries, wages and benefits payable 7,862 8,259
Current obligations under capital leases 623 649
--------- ---------
TOTAL CURRENT LIABILITIES 83,125 113,200
LONG-TERM DEBT 30,000 30,000
NOTES PAYABLE 175,358 174,625
CAPITAL LEASE OBLIGATIONS, net of current portion 12,296 12,773
RESERVE FOR SELF-INSURANCE CLAIMS 6,008 6,660
DEFERRED INCOME TAXES 20,486 24,096
OTHER LIABILITIES AND DEFERRED CREDITS 31,501 29,835
--------- ---------
TOTAL LIABILITIES 358,774 391,189
--------- ---------
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 (56,115) (47,899)
--------- ---------
TOTAL STOCKHOLDER'S EQUITY 35,385 43,601
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 394,159 $ 434,790
========= =========
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)
40 weeks ended Fiscal Year
------------------------- --------------------------
(unaudited)
November 3, November 4,
2001 2000 2001 2000
---------- ---------- ---------- ----------
Net sales $ 433,342 $ 478,799 $ 622,050 $ 674,145
Cost of goods sold 290,997 326,066 423,755 456,143
--------- --------- --------- ---------
GROSS PROFIT 142,345 152,733 198,295 218,002
OPERATING EXPENSES
Selling, general and administrative expenses 116,541 127,101 165,667 163,785
Gain on insurance settlement - (2,464) (2,464) (15,066)
Store Closings:
Exit costs - 685 685 -
Write down of impaired assets 3,578 3,534 -
Depreciation and amortization 22,671 25,945 34,142 31,632
---------- ---------- --------- ---------
OPERATING (LOSS) PROFIT 3,133 (2,112) (3,269) 37,651
Interest expense on debt (16,967) (21,779) (26,960) (28,738)
Interest expense on capital lease obligations (1,409) (1,493) (1,870) (1,633)
Interest and investment income, net 415 2,256 2,500 2,750
Loss on sale of real property - - - (1,291)
--------- --------- --------- ---------
(LOSS) INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (14,828) (23,128) (29,599) 8,739
Income tax benefit (expense) 6,612 8,497 11,691 (4,015)
--------- --------- --------- ---------
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM (8,216) (14,631) (17,908) 4,724
Extraordinary item: gain on early
extinguishment of debt, net of
income taxes of $13,264 - 20,603 20,603 -
---------- ---------- ---------- ---------
NET (LOSS) INCOME $ (8,216) $ 5,972 $ 2,695 $ 4,724
========== ========== ========== =========
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)
40 weeks ended Fiscal Year
----------------------- -------------------
(unaudited)
Novmmber 3, Novmeber 4,
2001 2000 2001 2000
--------- --------- --------- --------
- --
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (8,216) $ 5,972 $ 2,695 $ 4,724
Adjustments to reconcile net (loss) 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) (20,603) -
Depreciation and amortization of property and equipment 12,635 15,041 20,166 17,615
Amortization of intangibles, other assets and inventories 10,036 10,904 13,976 14,017
Write off of property and equipment destroyed - - - 4,423
Amortization of bond discount 733 933 1,138 1,170
Loss on sale/leaseback of real estate - - - 1,291
(Gain) loss on disposal of property and equipment, net (31) (102) (119) 30
Adjustments to goodwill - - 6,943 2,737
Gain on insurance settlement - (2,464) (2,464) -
Accrual for exit costs on store closings - 685 685 -
Write down of impaired assets on store closings - 3,577 3,534 -
Provision for deferred income taxes (6,203) 442 (11,514) (3,375)
Provision for deferred charges and other assets - (17) 334 1,838
Amortization (benefit) in other liabilities and
deferred credits 1,666 662 (3,092) 1,963
Provision (benefit) from reduction of reserve for
self-insurance claims - (1,592) 1,050 (4,286)
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable (1,327) 454 1,889 703
Inventories (5,843) (3,954) (1,870) (3,253)
Prepaid expenses (1,622) (2,385) 440 (151)
Other assets 919 - - -
(Decrease) increase in:
Accounts payable, accrued expenses and accrued interest (29,668) (49,216) (25,132) 3,286
--------- --------- --------- ---------
(26,921) (41,663) (11,944) 42,732
Decrease attributable to disposal of Florida retail operations - - - (3,022)
--------- --------- --------- ---------
Net cash (used in) provided by operating activities (26,921) (41,663) (11,944) 39,710
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (5,271) (16,154) (17,452) (21,650)
Reconstruction of property and replacement of equipment destroyed - - - (13,102)
Proceeds from disposal of property and equipment 31 184 203 35,829
--------- --------- --------- ---------
Net cash (used in) provided by investing activities (5,240) (15,970) (17,249) 1,077
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations (503) (507) (638) (576)
Purchase of Senior Notes due 2003 - (50,908) (51,047) -
Repayment of Industrial Revenue Bonds - (10,000) (10,000) -
Borrowings under Revolving Credit Facility - 30,000 30,000 -
--------- --------- --------- ---------
Net cash used in financing activities (503) (31,415) (31,685) (576)
--------- --------- --------- ---------
Net (decrease) increase in cash and cash equivalents (32,664) (89,048) (60,878) 40,211
Cash and cash equivalents at beginning of year 34,833 95,711 95,711 55,500
--------- --------- --------- ---------
Cash and cash equivalents at end of year $ 2,169 $ 6,663 $ 34,833 $ 95,711
========= ========= ========= =========
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
40 weeks ended November 3, 2001, and fiscal years ended January 27, 2001
and January 29, 2000
(Dollars in thousands)
Additional Total
Common Paid-in Accumulated Stockholder's
Stock Capital Deficit Equity
--------- ------------ ------------- -------------
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
Net loss for the 40 weeks
ended November 3, 2001 (8,216) (8,216)
--------- ----------- ------------- -------------
Balance at November 3, 2001 - $ 91,500 $ (56,115) $ 35,385
========= =========== ============= =============
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., operates
retail supermarkets and video rental locations in Puerto Rico and the U. S.
Virgin Islands. Intercompany accounts and transactions are eliminated in
consolidation.
Effective November 2, 2001, the Company changed its fiscal year end to
the Saturday closest to October 31. Previously, the Company's fiscal year
ended on the Saturday closest to January 31. Consequently, the current
fiscal period is the 40 weeks ended November 3, 2001. Fiscal 2001 and 2000
were both 52 week years and ended on January 27, 2001 and January 29, 2000,
respectively.
Further, effective November 4, 2001, Pueblo International, Inc. a wholly
owned subsidiary of Pueblo Xtra International, Inc. was converted to a
limited liability corporation and its name changed to Pueblo International,
LLC.
Operations
The Company has experienced a decrease in its sales and profitability over
the past several years. As a result, the Company's financial position has
been negatively impacted. Management believes the decrease is due to the
negative effects of Hurricane George's which occurred in September 1998,
increased competition and weakness in the economy in both Puerto Rico and the
U.S. Virgin Islands. The Company has taken certain initiatives to improve
its profitability and financial position including repurchase of $87.7
million of its Notes and Series C Senior Notes for $51.5 million (including
expenses), operating cost reductions, closing under performing stores,
remodeling the majority of its remaining stores and the introduction of its
PuebloCard loyalty and discount program. Although no assurances can be
given, management believes the above steps will improve the Company's
operating performance and cash flows. Further, management believes that the
cash flows generated by its normal business operations together with it's
available credit facility will be adequate to meet its obligations through
the end of its fiscal year which ends on November 2, 2002.
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.
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 52 weeks on a straight-line basis.
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 then 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 recorded based on valuations 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 at both
November 3, 2001 and January 27, 2001, and is included in the consolidated
balance sheets as accrued expense. The reserve for health insurance programs
was $1.1 million at both November 3, 2001 and January 27, 2001. It is
included in the consolidated balance sheets caption entitled salaries, wages,
and benefits payable.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
Revenues from the sale of products are recognized at the point of sale
to the Company's customers.
Long-Lived Assets
Long-lived assets are reviewed 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 the 40 weeks ended November 3, 2001, fiscal 2001, and fiscal
2000, 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 the 40 weeks ended November 3, 2001, fiscal 2001 and, fiscal 2000,
advertising expenses were $6.0 million, $8.8 million, and $11.7 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 period ended November 3,
2001. The adoption of SFAS No. 133, as amended, did not have a material
impact on the financial statements.
In July 2001, the FASB issued SFAS No.141 "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires
that all business combinations be accounted for under the purchase method.
The statement further requires separate recognition of intangible assets that
meet one of two criteria. The statement applies to all business combinations
initiated after June 30, 2001
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES (Continued)
SFAS No. 142 requires that an intangible asset that is acquired shall
be initially recognized and measured based on its fair value. The statement
also provides that goodwill should not be amortized, but shall be tested for
impairment annually, or more frequently if circumstances indicate potential
impairment, through a comparison of fair value to its carrying amount.
Existing goodwill will continue to be amortized through the remainder of the
fiscal year ending November 2, 2002 at which time amortization will cease and
the Company will perform a transitional goodwill impairment test. SFAS No.
142 is effective for fiscal periods beginning after December 15, 2001. The
Company is currently evaluating the impact of the new accounting standards on
existing Goodwill and other intangible assets. Goodwill amortization expense
was $3.6 million for the 40 weeks ended November 3, 2001 and $5.0 million for
both fiscal 2001 and fiscal 2000.
In July 2001, the FASB issued SFAS No. 144,"Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses
financial accounting and reporting for the impairment or disposal of long-
lived assets. This statement supercedes SFAS No. 121 on the same topic and
the accounting and certain reporting provisions of Accounting Principles
Board ("APB") Opinion No. 30, "Reporting the Results of Operations-Reporting
the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions", for the disposal
of a segment of a business (as defined in that Opinion). This Statement also
amends Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to eliminate the exception to consolidation for a subsidiary for
which control is likely to be temporary. SFAS No. 144 is effective for
fiscal periods beginning after December 15, 2001. The Company will implement
the pronouncement beginning in the first quarter of fiscal year ending
November 2, 2002. The Company is currently evaluating the impact of the new
accounting standards on existing long-lived assets.
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.
Unaudited Period
The financial statements for the 40 weeks ended November 4, 2000 are
unaudited and, in the opinion of management, include all adjustments
(consisting only of normal and recurring adjustments) necessary for a fair
presentation of results for the period.
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.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 2 -- GOODWILL (Continued)
Since the acquisition, $18.1 million of goodwill has been written off,
including $6.9 million in the fiscal year ended January 27, 2001, resulting
from adjustments to the acquired deferred tax liability.
NOTE 3 -- INVENTORIES
The cost of approximately 78% and 84% of total inventories at November
3, 2001 and January 27, 2001, respectively, is determined by the LIFO method.
The excess of current cost over inventories valued by the LIFO method was
$2.2 million and $2.0 million as of November 3, 2001 and January 27, 2001.
In the 40 weeks ended November 3, 2001 and for each of the prior two fiscal
years, inventory quantities were reduced resulting in a liquidation of
certain inventory base layers carried at costs that were lower than the cost
of current purchases, the effect of which reduced the net loss for the 40
weeks ended November 3, 2001 by $120,000 and increased net income by $20,000
and $73,000 in the fiscal years 2001 and 2000, respectively.
NOTE 4 -- DEBT
Total debt consists of the following (in thousands):
November 3, January 27,
2001 2001
----------- -----------
Notes and Series C Senior Notes due 2003,
net of unamortized discount of $1,925
and $2,658 at November 3, 2001 and
January 27, 2001, respectively $ 175,358 $ 174,625
Revolving Credit Facility due 2003 30,000 30,000
------------ ------------
$ 205,358 $ 204,625
============ ============
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.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 4 -- DEBT (Continued)
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. The Fourth Amendment has placed limits on the availability of the
credit facility. The Fifth Amendment has adjusted certain covenants to
conform to the Company's results. Consequently, availability through
November 3, 2001 was limited to $41.7 million and subsequently to $43.9
million. After the issuance of standby letters of credit in the amount of
$3.9 million and borrowings of $30.0 million under the revolver, as of
November 3, 2001, the Company has borrowing availability on a revolving basis
of $7.8 million under the New Bank Credit Agreement. On January 31, 2002, the
Company signed the Sixth Amendment, effective that date, to the New Bank
Credit Agreement which adjusted total availability under the facility to
$43.0 million through May 18, 2002 and to $40.0 million from May 19, 2002
through the maturity date (February 2003). Consequently, as of January 31,
2002, the Company has borrowing availability on a revolving credit basis of
$9.1 million. 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
New Credit Facility. The New Credit Facility 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 New Credit Facility.
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.
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
Annual maturities of the Company's debt are as follows (in thousands):
Fiscal Year Amount
------------- ----------
2003 $207,283
----------
Total $207,283
==========
Total interest paid on debt was $19.2 million, $28.3 million, and $26.1
million for the 40 weeks ended November 3, 2001 and fiscal years ended
January 27, 2001 and January 29, 2000, respectively. Interest payable was
$4.4 million and $8.5 million as of November 3, 2001 and January 27, 2001,
respectively.
NOTE 5 -- LEASES
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):
November 3, January 27,
2001 2001
--------------- --------------
Real estate $ 19,192 $ 19,192
Less accumulated depreciation 6,502 5,760
--------------- --------------
Property under capital leases, net $ 12,690 $ 13,432
=============== ==============
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 5 -- LEASES (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 November 3, 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 Years Ending (As Lessee) (As Lessee) (As Lessor)
- -------------------------------- ------------ ------------ ------------
November 2, 2002 $ 2,428 $ 12,531 $ 113
November 1, 2003 2,439 11,291 113
October 30, 2004 2,259 10,866 113
October 29, 2005 2,176 10,676 106
October 28, 2006 2,126 10,075 56
November 3, 2007 and thereafter 20,845 88,815 508
------------ ------------ ------------
32,273 $144,254 $ 1,009
============ ============
Less executory costs -
-----------
Net minimum lease payments 32,273
Less amount representing interest 19,354
-----------
Present value of net minimum lease
payments under capital lease
obligations 12,919
Less: current portion 623
----------
Capital lease obligations,
net of current portion $12,296
==========
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 $ 1,118 $ 6,876
=========== ============
Rent expense and the related contingent rentals under operating leases
were $11.8 and $0.2 million for the 40 weeks ended November 3, 2001,
respectively, $16.1 million and $0.2 million for fiscal 2001, respectively,
and $15.7 million and $0.2 million for fiscal 2000, respectively.
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 5 -- LEASES (Continued)
Contingent rentals under capital leases, which are directly related to
sales, were $0.03 million for the 40 weeks ended November 3, 2001, and $0.1
million for both fiscal 2001 and fiscal 2000. Interest paid on capital lease
obligations was $1.4 million for the 40 weeks ended November 3, 2001, $1.9
million for fiscal 2001, and $1.6 million for fiscal 2000.
Sublease rental income for operating and capital leases was $3.7 million
for the 40 weeks ended November 3, 2001, $4.1 million for fiscal 2001, and
$4.2 million for fiscal 2000.
NOTE 6 -- INCOME TAXES
The components of income tax (benefit) expense, excluding extraordinary
items, are as follows (in thousands):
40 weeks Fiscal Year Ended
ended --------------------------
November 3, January 27, January 29,
2001 2001 2000
----------- ----------- ------------
Current
Federal $ (429) $ - $ 46
State (3) - 17
U.S. Possessions 23 (177) 4,348
----------- ----------- ------------
(409) (177) 4,411
----------- ----------- ------------
Deferred
Federal (1,785) (2,764) 1,738
State (12) 388 26
U.S. Possessions (4,406) (9,138) (2,160)
----------- ----------- ------------
(6,203) (11,514) (396)
----------- ----------- ------------
Total income tax
(Benefit) expense $ (6,612) $ (11,691) $ 4,015
=========== =========== ============
The deferred tax assets and liabilities are presented on a net basis by
Jurisdiction in the accompanying balance sheets.
The significant components of the deferred tax assets and liabilities
(on a gross basis) are as follows (in thousands):
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 6 -- INCOME TAXES (Continued)
November 3, January 27,
2001 2001
--------------- --------------
Deferred tax assets:
Reserve for self-insurance claims $ 7,153 $ 7,673
Employee benefit plans 10,287 9,270
Property and equipment 7,167 9,202
Accrued expenses and other liabilities
and deferred credits 11,555 21,278
Other operating loss and tax credit
carry forwards 11,402 11,234
All other 5,316 2,075
Valuation Allowance (3,788) (3,000)
--------------- --------------
Total deferred tax assets 49,092 57,732
--------------- --------------
Deferred tax liabilities:
Property and equipment (14,314) (18,426)
Tradenames (20,674) (20,822)
Operating leases (7,173) (9,185)
Inventories (7,255) (7,262)
Other assets (3,820) (3,667)
Accrued expenses and other liabilities
and deferred credits (721) (9,439)
--------------- --------------
Total deferred tax liabilities (53,957) (68,801)
--------------- --------------
Net deferred tax liabilities $ (4,865) $(11,069)
=============== ==============
A reconciliation of the difference between actual income tax expense,
excluding extraordinary items, and income taxes computed at U. S. Federal
statutory tax rates is as follows (in thousands):
40 weeks Fiscal Year Ended
ended ------------------------
November 3, January 27, January 29,
2001 2001 2000
----------- ----------- -----------
U.S. Federal Statutory rate of 35%
applied to pretax income (loss) $(5,190) $(10,359) $ 3,059
Effect of varying rates
applicable in other taxing
jurisdictions (338) (1,174) 272
Amortization of goodwill 2,356 3,233 1,761
State and local taxes (17) (262) 40
Foreign Tax Credit 214 - -
Branch taxes (possession -
United States / Virgin Islands) (5,207) (2,777) (686)
All others, net 1,570 (352) (431)
----------- ----------- -----------
Income tax (benefit) expense $(6,612) $(11,691) $ 4,015
=========== =========== ===========
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 6 -- INCOME TAXES (Continued)
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.
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 $3.8 million.
As of November 3, 2001, the Company has unused net operating loss
carryforwards of $7.7 million and $24.8 million available to offset future
taxable income in the U.S. Virgin Islands and Puerto Rico, respectively,
through fiscal years 2021 and 2008, respectively. Utilization of the tax
credit carryforward may be limited each year.
The Company has unused general business tax credits of approximately
$19,000 available to offset future United States income tax liabilities.
Such tax credits expires on 2011.
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 $45,000 for the 40 weeks ended November
3, 2001, $3.8 million during the fiscal year ended January 27, 2001 and $0.7
million during fiscal 2000.
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.
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 7 -- RETIREMENT BENEFITS (Continued)
Net pension cost under the Retirement Plan includes the following
components (in thousands):
40 weeks Fiscal Year Ended
ended --------------------------
November 3, January 27, January 29,
2001 2001 2000
----------- ----------- -----------
Service cost - benefits
earned during the period $ 1,119 $ 1,546 $ 1,546
Interest cost on projected
benefit obligation 1,293 1,668 1,509
Expected return on plan
assets (1,166) (1,477) (1,262)
Net amortization and
deferrals (135) (129) (6)
----------- ----------- -----------
NET PENSION COST $ 1,111 $ 1,608 $ 1,787
=========== =========== ===========
The discount rate, average expected long-term rate of return on plan
assets, 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%, 9.0%, and 5.0%, respectively, for the 40 weeks
ended November 3, 2001, fiscal 2001, and fiscal 2000.
F-18
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 Retirement Plan are as follows (in thousands):
November 3, January 27,
2001 2001
--------------- --------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $15,175 at November 3,
2001 and $14,507 at January 27, 2001 $16,393 $ 15,551
=============== ==============
Plan assets at fair value - beginning of
the year/period $17,940 $ 16,846
Actual return on plan assets (3,907) 2,234
Employer contributions 795 1,237
Benefits paid (2,788) (2,377)
--------------- --------------
Plan assets at fair value - end of the
year/period 12,040 17,940
--------------- --------------
Projected benefit obligation for service
rendered to date - beginning of the
year/period (23,332) (22,610)
Service cost (1,119) (1,546)
Interest cost (1,293) (1,668)
Actuarial gain (1,817) 115
Benefits paid 2,788 2,377
--------------- --------------
Projected benefit obligation for service
rendered to date - end of the year/period (24,773) (23,332)
--------------- --------------
FUNDED STATUS (12,733) (5,392)
Unrecognized net gain 2,203 (4,817)
Unrecognized prior service cost (50) (55)
--------------- --------------
NET PENSION LIABILITY $ (10,580) $ (10,264)
=============== ==============
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.
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 7 -- RETIREMENT BENEFITS (Continued)
Net pension cost under the SERP includes the following components (in
thousands):
40 weeks Fiscal Year Ended
ended --------------------------
November 3, January 27, January 29,
2001 2001 2000
----------- ----------- -----------
Service cost - benefits earned
during the year/period $ 274 $ 215 $ 260
Interest cost on projected
benefit obligation 255 255 271
Net amortization and deferrals (41) (173) (79)
----------- ----------- -----------
NET PENSION COST $ 488 $ 297 $ 452
=========== =========== ===========
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 the 40 weeks ended
November 3, 2001, fiscal 2001, and fiscal 2000.
The funded status and amounts recognized in the Company's consolidated
balance sheets for the SERP are as follows (in thousands):
November 3, January 27,
2001 2001
--------------- --------------
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $4,563 at November 3,
2001 and $3,830 at January 27, 2001 $ 4,668 $ 3,990
=============== ==============
Projected benefit obligation for service
rendered to date $ (5,359) $ (4,557)
--------------- --------------
FUNDED STATUS (5,359) (4,557)
Unrecognized net gain (540) (1,088)
Unrecognized prior service cost 19 24
--------------- --------------
NET PENSION LIABILITY $ (5,880) $ (5,621)
=============== ==============
Change in benefit obligations was as follows (in thousands):
November 3, January 27,
2001 2001
--------------- --------------
Benefit obligation as of beginning of the
year/period $ 4,557 $ 3,467
Service costs 274 215
Interest costs 255 255
Actuarial loss 503 926
Benefits paid (230) (306)
--------------- --------------
Benefit obligation as of end of the
year/period $ 5,359 $ 4,557
=============== ==============
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 7 -- RETIREMENT BENEFITS (Continued)
Change in plan assets were as follows (in thousands):
November 3, January 27,
2001 2001
--------------- --------------
Fair value of assets as of beginning of the
year/period $ - $ -
Employer contribution 230 306
Benefits paid (230) (306)
--------------- --------------
Fair value of assets as of end of the
year/period $ - $ -
=============== ==============
The Company has a noncontributory defined contribution plan covering its
eligible associates in Puerto Rico. Contributions to this plan are at the
discretion of the Board of Directors. During the 40 weeks ended November 3,
2001, the Board of Directors elected not to pay its contribution for the 2001
calendar year. The Company also has a contributory thrift savings plan in
which it matches eligible contributions made by participating eligible
associates in the United States and the U. S. Virgin Islands. The cost of
these plans are recognized in the year the cost is incurred. As a result of
its decision not to make its contribution and an over accrual during fiscal
2001 related to the noncontributory defined contribution plan, the Company
recognized a net credit during the 40 weeks ended November 3, 2001 of $12,000
for these plans versus expenses of $697,000 and $620,000 for fiscal 2001 and
fiscal 2000, respectively.
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.
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 8 -- FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The estimated fair value of the Company's financial instruments are as
follows (in thousands):
November 3, January 27,
2001 2001
---------------------- ----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- ---------
Cash and cash equivalents $ 2,169 $ 2,169 $ 34,833 $ 34,833
Debt (205,358) (56,592) (204,625) (100,913)
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.
NOTE 10 -- CONTINGENCIES
At November 3, 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 November 3, 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
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTE 11 -- HURRICANE GEORGES (Continued)
During fiscal years ended January 29, 2000 and January 27, 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.
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 $6.9
million from its insurance carriers related to this portion of the claim.
The $6.9 million is comprised of a $5.0 million advance and reimbursement of
$1.9 million of the Company's claim preparation fees. The $5.0 million
advance will not be included in earnings until such time as the claim is
settled and the related gain is realized. During the Company's fiscal year
that ended January 27, 2001 the carriers invoked the appraisal provisions of
the policy which, essentially, require an arbitration process to value the
claim. The Company and the carriers have been unable to agree which court has
jurisdiction over appointing the umpire. Consequently, the appointment of the
umpire is being litigated in two jurisdictions. On October 30, 2001 the
Federal Court for the Southern District of Florida appointed an umpire as a
result of litigation initiated by the Company. The umpire and the appraisers
for the Company and the insurance carriers have taken initial steps to
organize the appraisal process. The insurance carriers have asked that the
appraisal process in Florida be stayed while they appeal the appointment of
the umpire to the U.S. Court of Appeals for the Eleventh District. At the
date of this release the appraisal process in Florida has not been stayed and
no decision has been rendered by the U.S. Court of Appeals. The litigation
initiated in Puerto Rico by the carriers for the appointment of an umpire is
continuing. The Company is unable to predict when the appraisal process will
conclude or what total amount eventually may be recovered.
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.
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PUEBLO XTRA INTERNATIONAL, INC. AND SUBSIDIARIES
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 41 video rental stores, 39 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.
Reportable operating segment financial information is as follows (dollars in
thousands):
Retail Food Video Rental Total
40 weeks ended November 3, 2001
Net sales $ 403,921 $ 29,421 $ 433,342
Depreciation and amortization (16,508) (6,163) (22,671)
Operating profit 1,158 1,975 3,133
Total assets 371,899 22,260 394,159
Capital expenditures (5,237) (34) (5,271)
(Unaudited)
40 weeks ended November 4, 2000
Net sales $ 446,715 $ 32,084 $ 478,799
Depreciation and amortization (19,368) (6,577) (25,945)
Operating (loss) profit (3,433) 1,321 (2,112)
Total assets 399,209 24,226 423,435
Capital expenditures (16,115) (39) (16,154)
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**
Capital expenditures (21,443) (207) (21,650)
* 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. 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-24
Schedule I
PUEBLO XTRA INTERNATIONAL, INC.
BALANCE SHEETS-PARENT COMPANY ONLY
(Dollars in thousands)
November 3, January 27,
2001 2001
------------- -------------
ASSETS
CURRENT ASSETS $ 5 $ 8,439
------------- -----------
INVESTMENT IN SUBSIDIARIES 57,286 65,719
NOTE RECEIVABLE-MIRROR LOAN 164,531 167,531
DEFERRED CHARGES AND OTHER ASSETS 2,037 1,639
------------ -----------
TOTAL ASSETS $ 223,859 $ 243,328
============ ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accrued expenses $ 3,533 $ 11,829
Intercompany payable, net 9,583 13,273
------------- -----------
TOTAL CURRENT LIABILITIES 13,116 25,102
NOTES PAYABLE 175,358 174,625
------------- -----------
TOTAL LIABILITIES 188,474 199,727
------------- -----------
COMMITMENTS AND CONTINGENCIES -
STOCKHOLDER'S EQUITY
Common stock - -
Additional paid-in capital 91,500 91,500
Accumulated deficit (56,115) (47,899)
------------- ------------
TOTAL STOCKHOLDER'S EQUITY 35,385 43,601
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 223,859 $ 243,328
============= =============
(Continued)
S-1
PUEBLO XTRA INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS-PARENT COMPANY ONLY
(Dollars in thousands)
40 weeks Fiscal Year Ended
ended --------------------------
November 3 , January 27, January 29,
2001 2001 2000
--------- ---------- -----------
Interest income $ 13,074 $ 23,005 $ 25,868
Interest expense on debt (14,049) (24,188) (26,981)
Selling, general and administrative expenses - (2) (206)
---------- ---------- -----------
LOSS BEFORE INCOME TAXES, EQUITY LOSSES FROM
SUBSIDIARIES, AND EXTRAORDINARY ITEM (975) (1,185) (1,319)
Income tax benefit 1,192 8,778 458
---------- ---------- -----------
INCOME (LOSS) BEFORE EQUITY LOSSES FROM
SUBSIDIARIES AND EXTRAORDINARY ITEM 217 7,593 (861)
(Loss) Equity gain from subsidiaries (8,433) (25,501) 5,585
---------- ---------- -----------
NET (LOSS) INCOME BEFORE EXTRAORDINARY ITEM (8,216) (17,908) 4,724
Extraordinary item, gain from early extinguishment
of debt, net of taxes - 20,603 -
---------- ---------- -----------
NET (LOSS) INCOME $ (8,216) $ 2,695 $ 4,724
========== ========== ===========
S-2
PUEBLO XTRA INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS-PARENT COMPANY ONLY
(Dollars in thousands)
40 weeks Fiscal Year Ended
ended -----------------------
November 3, January 27, January 29,
2001 2001 2000
---------- ---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (8,216) $ 2,695 $ 4,724
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary gain on early extinguishment of debt (20,603) -
Decrease in deferred charges and other assets 363 629 705
Changes in operating assets and liabilities:
Decrease in:
Notes/accounts receivable - 86,158 -
Prepaid expenses - 158 -
Interest receivable, net 3,000 4,410 -
Deferred income taxes (761) (8,777) (459)
(Decrease) Increase in:
Accrued expenses (8,296) (4,372) (69)
Intercompany payable, net (3,690) (2,646) 922
--------- --------- ----------
Net cash (used in) provided by operating activities (17,600) 57,652 5,823
--------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (Increase) in investment in subsidiaries 8,433 25,501 (5,585)
Increase in investment in subsidiaries due to forgiveness
of debt - (37,717) -
--------- --------- ----------
Net cash provided by (used in) investing activities 8,433 (12,216) (5,585)
--------- --------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment from notes payable to a related party - (1,138) (1,103)
Purchase of Senior Notes due 2003 - (49,999) -
Proceeds from notes payable to a related party 733 1,138 1,170
--------- --------- ----------
Net cash (used in) provided by financing activities 733 (49,999) 67
--------- --------- ----------
Net (decrease) increase in cash and cash equivalents (8,434) (4,563) 305
Cash and cash equivalents at beginning of period 8,439 13,002 12,697
--------- --------- ----------
Cash and cash equivalents at end of period $ 5 $ 8,439 $ 13,002
========= ========= ==========
S-3
Schedule II
Pueblo Xtra International, Inc. and Subsidiaries
Valuation and Qualifying Accounts
For the 40 weeks ended November 3, 2001 and Fiscal Years Ended
January 27, 2001 and January 29, 2000
(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)
- ----------------------------- ----------- ----------- --------------- -----------
40 Weeks Ended November 3, 2001
Reserves not deducted
from assets:
Reserve for self-
insurance claims.... $ 10,980 $ 2,896 $ 3,549 $ 10,327
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
- ----------
(1) Amounts consist primarily of payments on claims.
(2)Amounts represent both the current and long-term portions.
S-4
EXIBIT 21.7
FIFTH AMENDMENT
FIFTH AMENDMENT dated as of November 2, 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.
W I T N E S S E T H :
WHEREAS, subject to the terms and conditions of this Amendment, the parties
hereto wish to amend the Credit Agreement;
NOW, THEREFORE, it is agreed:
1. Section 7.08 of the Credit Agreement is hereby amended by (x)
deleting the phrase "last Saturday of January" where such phrase appears in
clause (i), and (y) inserting the phrase "Saturday closest to October 31" in
lieu thereof.
2. Section 8.11 of the Credit Agreement is hereby amended by (x)
deleting the ratio "1.25:1.00" set forth opposite the heading "Fiscal Quarter
Ending November 3, 2001", and (y) inserting the ratio "1.55:1.00" in lieu
thereof.
3. Section 8.12(a)(ii) of the Credit Agreement is hereby amended by
inserting immediately following the word "By Laws" the phrase "or, in the case
of the Borrower following its conversion to a Delaware limited liability
company, its certificate of formation or its limited liability company
agreement".
4. Section 10 of the Credit Agreement is hereby amended by deleting the
definition of "Borrower" in its entirety and inserting the following new
definition in lieu thereof: "Borrower" shall mean Pueblo International Inc.,
and following its conversion to a Delaware limited liability company, Pueblo
International LLC.
5. Each Bank hereby consents to the conversion of Pueblo International
Inc. to a Delaware limited liability company with the name of "Pueblo
International LLC" and with the initial Certificate of Formation, dated as of
November 2, 2001 and the Limited Liability Company Agreement and Single Member
Declaration, dated as of November 2, 2001, provided that 100% of the
membership interests in Pueblo International LLC are certificated and are
pledged to the Collateral Agent pursuant to the PXI Pledge Agreement.
6. For purposes of Sections 3.04, 8.09, 8.10, and 8.11 of the Credit
Agreement, the fiscal quarter of PXI and its Subsidiaries that commences on
November 4, 2001 will end (or be deemed to end) on January 26, 2002 (as stated
in such Sections), however for other reporting purposes (including the filing
of PXI's report on form 10-Q) such fiscal quarter may end on February 23,
2002'.
7. 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 Fifth
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 Fifth 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).
8. 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.
9. 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.
10. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNEDBY THE LAW OF THE STATE OF
NEW YORK.
11. This Amendment shall become effective as of November 2, 2001 on the
date (the "Fifth Amendment Effective Date") when (i) the Administrative Agent
has received the amendment fee in relation to this Amendment as provided in
the separate fee letter, (ii) 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, and (iii) PXI shall have delivered 100% of the
membership interests in Pueblo International LLC in certificated form to the
Collateral Agent.
12. From and after the Fifth 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 Financial Officer
PUEBLO INTERNATIONAL, INC.
By: /s/ Daniel J. O'Leary
Title: Executive Vice President
& Chief Financial Officer
XTRA SUPER FOOD CENTERS, INC.
By: /s/ Daniel J. O'Leary
Title: Executive Vice President
& Chief Financial Officer
THE BANK OF NOVA SCOTTIA
By: /s/ W. Brown
Title: Managing Director
BANK OF AMERICA, N.A
By: /s/ Wayne R. Porritt
Title: Managing Director
ACKNOWLEDGED:
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
EXIBIT 21.8
SIXTH AMENDMENT
SIXTH AMENDMENT dated as of January 31, 2002 (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.
W I T N E S S E T H :
WHEREAS, subject to the terms and conditions of this Amendment,
the parties hereto wish to amend the Credit Agreement;
NOW, THEREFORE, it is agreed:
1. Section 3.04 of the Credit Agreement is hereby amended and
restated inits entirety as follows:
"3.04 Limitation on Availability. (a)(i) At any time during each
period set forth below, the sum of (x) the aggregate principal amount of
Loans outstanding and (y) the aggregate amount of L/C Oustandings, shall not
exceed the amount (as further reduced pursuant to clause (ii) below) set
forth opposite such period:
Period (dates are inclusive) Amount
August 12, 2001 - November 3, 2001 $41,700,000.00
November 4, 2001 - January 26, 2002 $43,900,000.00
January 27, 2002 - May 18, 2002 $43,000,000.00
May 19, 2002 - Maturity Date $40,000,000.00
(ii) The aggregate available amounts set forth in clause (i)
above shall be reduced by the amount of any reductions in the Total
Unutilized Revolving Commitment or Total Revolving Commitment pursuant
to Section 3.02 or Section 3.03.
(b) During any period set forth in Section 3.04(a), the Borrower
shall be required to make mandatory prepayments in the manner set forth in
Section 4.02(A)(a) as if the Adjusted Total Revolving Commitment in effect
were equal to the aggregate amount then available under Section 3.04(a)."
2. 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 Sixth
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 Sixth 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).
3. 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.
4. 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.
5. 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.
6. This Amendment shall become effective as of January 31, 2002
on the date (the "Sixth 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.
7. From and after the Sixth 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 Financial Officer
PUEBLO INTERNATIONAL, INC.
By: /s/ Daniel J. O'Leary
Title: Executive Vice President
& Chief Financial Officer
XTRA SUPER FOOD CENTERS,INC.
By: /s/ Daniel J. O'Leary
Title: Executive Vice President
& Chief Financial Officer
THE BANK OF NOVA SCOTIA
By: /s/ Patrick J. Hawes
Title: Comptroller
BANK OF AMERICA, N.A.
By: /s/ Wayne R. Porritt
Title: Managing Director
ACKNOWLEDGED:
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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