VONS REPORTS HIGHER THIRD QUARTER EARNINGS FROM OPERATIONS
ARCADIA, Calif., Nov. 5 /PRNewswire/ -- The Vons Companies Inc. (NYSE: VON) reported income before extraordinary items in the 16-week quarter ended Oct. 6, 1991, of $18.1 million or $.42 per share compared with $13.4 million or $.34 per share in the year ago quarter, a 23.5 percent increase in income per share before extraordinary items.
Sales for the third quarter were flat over the year ago quarter, with sales of $1.64 billion in both quarters. Same store sales in the third quarter decreased 1.0 percent. Sales results reflect the impact of the soft economy which has changed purchasing patterns, including an increase in advertised product purchases and other product mix changes. In addition, sales were impacted by deflation in certain product categories, specifically produce and meat, as well as an overall decrease in the inflation rate.
Gross margin in third quarter 1991 was 24.0 percent compared with 22.7 percent in the year ago quarter. The improvement in gross margin reflects the benefit of the company's ongoing remodel program which includes the remerchandising and "densing-up" of the stores. These remodels improve the stores' selection and introduce higher margin product categories. In addition, the company continues to benefit from forward buy and other promotional buying opportunities as well as its ability to pass through market-wide cost increases such as union wages and benefits.
"We are pleased with these results as they reflect our ability to improve our business in a soft sales environment. Our ongoing remodel program provides customers with expanded selection and enables stores to improve their gross margin," said Roger E. Stangeland, chairman and chief executive officer.
Selling and administrative expenses in the third quarter of 1991 were 20.2 percent vs. 19.2 percent in the year ago quarter. This increase reflects the impact of contractual retail clerks and meat cutters union wage rate increases which went into effect in the third quarter of 1990 as well as the effect of the softer sales environment.
Operating cash flow (defined as operating income plus depreciation and amortization of property, amortization of goodwill and other assets and LIFO charge) in the third quarter of 1991 was $83.7 million, or 5.1 percent of sales compared with $78.6 million, or 4.8 percent in the year ago quarter. The ratio of operating cash flow to net interest expense at the end of the third quarter was 3.3 times vs. 2.7 times in the year ago quarter.
"While we continue to experience a soft sales environment, our strategy is to continue to build the business through better utilization of existing assets and investment in new stores. Programs such as remodeling and densing-up, investment in technology and an accelerating new store program position us well for the future," Stangeland said.
Net income in the third quarter which was impacted by a $2.9 million after tax charge arising from expenses on debt refinancing was $22.5 million, or $.52 per share compared with $21.4 million or $.55 per share in the year ago quarter, a 5.5 percent decrease in net income per share. Results include utilization of net operating loss and investment tax credit carryforwards for the third quarters of 1991 and 1990 of $7.3 million and $8.0 million, respectively.
Sales for the 40-week period ended Oct. 6, 1991, were $4.11 billion compared with $4.07 billion a year ago, a 0.9 percent increase. Same store sales increased 1.1 percent in the 40-week period.
Net income for the 40-week period was $68.1 million or $1.66 per share compared with $52.5 million or $1.35 per share in the year ago period. Year to date net income reflects utilization of net operating loss and investment tax credit carryforwards of $24.4 million as well as a $2.9 million after tax charge arising from expenses on debt refinancing.
At Oct. 6, 1991, senior debt and capital lease obligations were $250.5 million and subordinated debt was $441.0 million. The average cost of borrowing for the 40-week period was 8.1 percent. Debt as a percent of total capitalization was 60 percent at the end of third quarter of 1991, compared with 74 percent at year end 1990.
The company replaced its Revolving Loan with a $475 million revolving credit facility which matures Jan. 31, 1996. Third quarter results include an extraordinary after tax charge of $2.9 million for unamortized bank fees associated with the prior agreement.
During the quarter, the company announced that it had signed a letter of intent to acquire substantially all of the Williams Bros. supermarket chain, a 19-unit privately held chain located in the Central Coast of California.
The company also successfully renegotiated a three-year Teamsters contract. The next major union contract expires in the Fall of 1993.
During the quarter, the company opened one Pavilions store in Agoura Hills and one Vons store in Las Vegas and closed four stores.
Cash capital expenditures in the third quarter were $53.5 million and $119.3 million for the 40-week period.
Vons, headquartered in Arcadia, is the largest supermarket chain in Southern California. The company currently operates 319 stores under the names Vons, Pavilions and Tianguis and also operates the Jerseymaid dairy and ice cream plant. The Vons Companies Inc. is traded on the New York Stock Exchange under the symbol VON.
THE VONS COMPANIES INC.
Results of Operations
(in millions, except share data)
16 weeks ended 40 weeks ended
Oct. 6, Oct. 7, Oct. 6, Oct. 7,
1991 1990 1991 1990
Sales $1,636.5 $1,638.5 $4,110.6 $4,072.0
Cost of sales,
occupancy 1,243.1 1,266.6 3,131.5 3,152.4
expenses 331.4 314.3 817.3 774.0
excess cost over
acquired 4.4 4.5 10.8 11.3
Operating income 57.6 53.1 151.0 134.3
net 25.4 29.3 68.3 75.6
income taxes and
items 32.2 23.8 82.7 58.7
provision 14.1 10.4 36.1 26.7
items 18.1 13.4 46.6 32.0
net operating loss
carryforwards 7.3 8.0 24.4 20.5
Expenses on debt
of income tax
benefit of $2.0
million (2.9) --- (2.9) ---
Net income $22.5 $21.4 $68.1 $52.5
Income per common share:
items $.42 $.34 $1.14 $.82
items .10 .21 .52 .53
Net income $.52 $.55 $1.66 $1.35
lents 43,572,568 38,828,332 41,012,926 38,821,771
Certain Non-Cash Charges
LIFO charge $1.8 $2.0 $5.4 $7.4
capital leases 18.7 17.7 46.1 41.7
excess cost over
other assets 5.6 5.8 13.9 14.4
financing costs 2.4 3.7 6.1 15.0
charges $28.5 $29.2 $71.5 $78.5
/CONTACT: Mary McAboy of The Vons Companies, 818-821-7897/
(VON) CO: The Vons Companies Inc. ST: California IN: REA SU: ERN EH-SE -- LA005 -- 1088 11/05/91 08:33 EST