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 ARCADIA, Calif., Nov. 9 /PRNewswire/ -- The Vons Companies Inc. (NYSE: VON) today announced, in conjunction with its third quarter earnings release, a cost containment and strategic restructuring program. This program is expected to produce significant expense reductions. As the expense savings are realized, the company intends to reinvest them in the business in the form of better customer service and improved product pricing and promotions. This plan is intended to initially benefit sales and market share, which in turn will position the company to achieve strong, sustainable earnings growth over the long run.
 "Vons is particularly well-positioned to successfully implement and benefit from this program. We have a contemporary store base and have invested heavily in technology. Both of these factors should enhance the success of our marketing and promotional efforts," said Roger E. Stangeland, chairman and chief executive officer.
 For the third quarter ended Oct. 10, 1993, the company recorded a loss of $20.9 million, or $.48 per share, compared with a profit of $22.3 million, or $.51 a share, in the year-ago quarter. Third quarter 1993 results include a one-time charge of $56.9 million, or $.77 per share, related to the company's restructuring program, and an extraordinary item charge of $1.4 million, or $.03 per share, related to debt refinancing. In addition, third quarter 1993 results include the impact of the 1993 federal income tax increase of $2.3 million, or a charge of $.05 per share, of which $2.0 million represents one-time charges. Excluding one-time charges related to the company's restructuring program, debt refinancing and one-time tax-related expenses, 1993 third quarter earnings were $16.0 million, or $.37 per share.
 Sales for the third quarter were $1.5 billion, compared with $1.7 billion, an 8.8 percent decrease. Same store sales for the third quarter declined 10.6 percent.
 Gross margin in the third quarter of 1993 was 24.5 percent of sales, compared to 24.7 percent of sales a year ago, a decline of 20 basis points. The decrease was largely due to increased occupancy and other expenses related to the new store program, which was partially offset by improved product gross margin.
 Selling and administrative expense as a percent of sales improved slightly from 20.9 percent in the third quarter of 1992, to 20.8 percent in the third quarter of 1993. The improved selling and administrative expense percent reflects continued high levels of labor productivity and ongoing control of expenses, which offset market-wide union contractual wage increases.
 Operating income in the third quarter of 1993 was $52.5 million, compared with $60.1 million in the year-ago quarter, a decrease of 12.6 percent. The decrease in operating income is largely due to the decrease in sales in the quarter.
 Operating cash flow (defined as operating income plus depreciation and amortization of goodwill and other assets, LIFO charge and restructuring charge) was $88.3 million, or 5.8 percent of sales in the third quarter of 1993, compared with $91.9 million, or 5.5 percent of sales in the third quarter of 1992.
 The $56.9 million one-time charge reflects anticipated expenses relating to the company's restructuring program, and is the result of management's comprehensive review of the business and its operations. The program will begin immediately. Expense reductions will occur throughout the company. Some of the key initiatives which will occur prior to year-end are:
 -- Reductions in administrative staff
 -- Salary reductions for senior executives
 -- Elimination of all executive company cars
 -- Closure of approximately six under-performing stores, by year-end
 1993 (and approximately another five to be closed when
 appropriate thereafter)
 -- Freezing of administrative salaries, and elimination or material
 reduction of performance bonuses for 1993.
 In addition, the company will reorganize its store district operations in 1993 to be leaner and more efficient, and will pursue other potentially significant initiatives designed to increase efficiency and lower its cost structure over time.
 "An important aspect of the program is that it is not static in its design. The program is structured to identify additional savings opportunities. Our goal is to ensure that Vons is successful in any competitive and economic environment," Stangeland said.
 During the third quarter of 1993, the company opened seven stores, closed three stores and completed 15 remodels. Gross square footage at the end of the third quarter of 1993 was 12,090,834.
 Cash capital expenditures in the third quarter of 1993 were $106 million and for the 40 weeks ended Oct. 10, 1993, cash capital expenditures were $182 million.
 At Oct. 10, 1993, the company's revolving debt borrowings totaled $354 million and the company had available unused credit of $41 million under its Revolving Credit Facility. The company expects to complete arrangements for an additional $150 million credit facility with its banks in the near future. At the end of the third quarter, debt as a percent of capitalization was 64 percent.
 The company also announced that Steven A. Burd, president and chief executive officer of Safeway Inc., and James H. Greene, Jr., General Partner of Kohlberg Kravis Roberts & Co. L.P., have been elected to the Vons board of directors effective immediately, filling two recent vacancies on the 11-person board.
 It was announced that the Executive Committee of Vons board of directors comprised of Stangeland, and outside directors Fritz Duda, Robert MacDonnell and William Tauscher, is developing a management succession plan. This plan will include selection of a new chief executive officer to succeed Stangeland, 64.
 In addition, the company noted that during the remainder of Stangeland's recuperation from September heart surgery, Bill Davila, president emeritus, will play an active role in the business in order to assist Stangeland as necessary, act for him when he is unavailable and assist in executing the restructuring program. Stangeland is expected to complete his recovery by early next year.
 Vons is the largest supermarket operator in Southern California. The company currently operates 350 stores under the Vons, Pavilions, Tianguis, Williams Bros. and EXPO names.
 Condensed Consolidated Results of Operations
 (In millions of dollars, except share data)
 16 Weeks Ended 40 Weeks Ended
 Oct. 10, Oct. 4, Oct. 10, Oct. 4,
 1993 1992 1993 1992
 (Restated) (Restated)
 Sales $1,534.5 $1,681.7 $3,904.0 $4,235.9
 Costs and expenses:
 Cost of sales, buying
 and occupancy 1,158.0 1,266.0 2,927.9 3,191.0
 Selling and
 expenses 319.4 351.1 821.4 879.0
 Amortization of
 excess cost over
 net assets acquired 4.6 4.5 11.6 11.4
 Operating income 52.5 60.1 143.1 154.5
 Restructuring charge 56.9 --- 56.9 ---
 Interest expense, net 20.6 20.0 50.7 56.6
 Income (loss) before
 income taxes (25.0) 40.1 35.5 97.9
 Income taxes (5.5) 17.8 21.4 43.4
 Income (loss) before
 extraordinary item
 and cumulative
 effect of change in
 accounting for retiree
 medical benefits (19.5) 22.3 14.1 54.5
 Extraordinary item -
 debt refinancing,
 net of tax benefit
 of $1.0 million,
 $1.0 million and
 $8.6 million,
 respectively (1.4) --- (1.4) (12.7)
 Income (loss) before
 cumulative effect of
 change in accounting
 for retiree
 medical benefits (20.9) 22.3 12.7 41.8
 Cumulative effect of
 change in accounting
 for retiree
 medical benefits,
 net of tax benefits
 of $10.2 million --- --- --- (15.5)
 Net income (loss) ($20.9) $22.3 $12.7 $26.3
 Income (loss)
 per common share:
 Income (loss) before
 extraordinary item
 and cumulative
 effect of change
 in accounting for
 retiree medical
 benefits ($0.45) $0.51 $0.32 $1.26
 item (0.03) --- (0.03) (0.29)
 Cumulative effect
 of change in
 accounting for
 retiree medical
 benefits --- --- --- (0.36)
 Net income (loss) ($0.48) $0.51 $0.29 $0.61
 Weighted average
 common shares and
 common share
 equivalents 43,500,000 43,500,000 43,500,000 43,500,000
 Certain non-cash
 LIFO charge $1.5 $2.0 $4.4 $4.9
 Depreciation and
 amortization of
 property and
 capital leases 28.7 23.7 68.2 56.2
 Amortization of
 excess cost over
 net assets
 acquired and
 other assets 5.6 6.1 14.9 15.2
 Amortization of
 debt discount
 and deferred
 financing costs 2.0 1.8 4.9 4.8
 Total non-cash
 charges $37.8 $33.6 $92.4 $81.1
 Condensed Consolidated Balance Sheets
 (In millions of dollars)
 Oct. 10, Jan. 3,
 1993 1993
 Current assets:
 Cash $6.5 $8.3
 Accounts receivable 38.3 41.7
 Inventories 387.1 371.7
 Other 45.7 43.0
 Total current assets 477.6 464.7
 Property and equipment, net 1,149.1 1,032.2
 Excess of cost over net
 assets acquired 516.3 527.9
 Other 45.0 41.2
 Total assets $2,188.0 $2,066.0
 Liabilities and
 shareholders' equity:
 Current liabilities:
 Current maturities of
 long-term debt and
 capital lease obligations $10.0 $7.1
 Accounts payable 273.8 299.7
 Accrued liabilities 202.8 232.8
 Total current liabilities 486.6 539.6
 Accrued self-insurance and
 non-current liabilities 306.5 245.1
 Senior debt and capital
 lease obligations 542.7 445.6
 Subordinated debt, net 346.2 342.5
 Shareholders' equity 506.0 493.2
 Total liabilities and
 shareholders' equity $2,188.0 $2,066.0
 -0- 11/9/93
 /CONTACT: Mary McAboy of The Vons Companies, 818-821-7897/

CO: The Vons Companies Inc. ST: California IN: REA SU: ERN RCN

JL-LM -- LA013 -- 2063 11/09/93 08:33 EST
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Publication:PR Newswire
Date:Nov 9, 1993

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