Harris Teeter Supermarkets, Inc. (NYSE:HTSI) (the “Company”)
today reported that sales for the 52 weeks ended October 1, 2013
increased by 3.8% to $4.71 billion from $4.54 billion in fiscal
2012. Sales for the fourth quarter of fiscal 2013 increased by 4.5%
to $1.19 billion from $1.14 billion in the fourth quarter of fiscal
2012. The increase in sales for the year and quarter was driven by
an increase in comparable store sales and sales from new stores,
partially offset by store closings. Comparable store sales
increased by 2.23% for the year, and 1.49% for the fourth quarter
of fiscal 2013, from the respective comparable periods of fiscal
2012.
During fiscal 2013, the Company opened nine new stores, two of
which were the stores acquired from Lowe’s Food Stores, Inc.
(“Lowes Foods”) in 2012 that were re-opened under a new format and
banner - “201central,” and one of which replaced a store previously
closed, and closed one store that will be replaced with a new store
to be opened in fiscal 2014, for a net addition of eight stores.
The Company operated 216 stores as of the end of fiscal 2013 and
retail square footage increased by 4.2% in fiscal 2013, as compared
to an increase of 4.5% in fiscal 2012.
On July 8, 2013, the Company and The Kroger Co. (“Kroger”)
entered into a definitive merger agreement under which Kroger will
acquire all outstanding shares of the Company for $49.38 per share
in cash (“The Merger Agreement”). The terms of the Merger Agreement
were approved by the Boards of Directors of both companies and has
been approved by the Company’s shareholders; however, it remains
subject to regulatory approvals (including under the
Hart-Scott-Rodino Antitrust Improvements Act of 1974, as amended)
and other customary closing conditions, and is expected to close in
the fourth quarter of calendar year 2013.
On September 12, 2013, the Company announced that its operating
subsidiary, Harris Teeter, Inc. entered into an agreement with
Greenbax Enterprises, Inc. and certain of its subsidiaries (“Piggly
Wiggly”) to purchase six Piggly Wiggly store locations and one
future store location in the Charleston, S.C. area (the “Piggly
Wiggly Acquisition”). The acquisition was completed during the
first quarter of fiscal 2014 with five of the locations being
re-opened shortly after the acquisition date. The remaining two
locations are expected to be opened during fiscal 2014.
Gross profit increased in fiscal 2013 by 4.3% to $1.42 billion
(30.08% of sales) from $1.36 billion (29.95% of sales) in fiscal
2012. For the fourth quarter of fiscal 2013, gross profit increased
by 6.1% to $360.5 million (30.19% of sales) from $339.8 million
(29.73% of sales) in the fourth quarter of fiscal 2012. The LIFO
adjustment for fiscal 2013 was a credit of $1.7 million (0.04% of
sales) as compared to a charge of $3.0 million (0.07% of sales) for
fiscal 2012. During the fourth quarter of fiscal 2013 the LIFO
adjustment was a credit of $2.4 million (0.20% of sales) as
compared to a credit of $4.4 million (0.38% of sales) in the fourth
quarter of fiscal 2012.
Selling, general and administrative (“SG&A”) expenses for
fiscal 2013 increased by $35.1 million from fiscal 2012 as a result
of incremental store growth and its impact on associated
operational costs. On a percent of sales basis, SG&A expenses
for fiscal 2013 decreased by 22 basis points over fiscal 2012.
SG&A expenses for fiscal 2013 include an aggregate of $7.4
million of incremental costs related to our pending merger with
Kroger and expenses related to the Piggly Wiggly Acquisition
(“Merger Related and Acquisition Costs”). As reported in the prior
year, SG&A expenses for fiscal 2012 included $29.8 million of
impairment losses and other incremental costs associated with the
store purchase and sale transaction with Lowe’s Food Stores, Inc.
(“Lowes Foods Transaction Costs”), which was partially offset by
gains of $3.1 million recognized from life insurance proceeds the
Company recorded in the third quarter of fiscal 2012.
SG&A expenses for the fourth quarter of fiscal 2013
increased by $17.8 million (37 basis points) from the fourth
quarter of fiscal 2012 as a result of incremental store growth and
its impact on associated operational costs. Merger Related and
Acquisition Costs included in the fourth quarter of fiscal 2013
amounted to $6.2 million, while Lowes Foods Transaction Costs
included in the fourth quarter of fiscal 2012 were $7.5
million.
Operating profit for fiscal 2013 increased by 13.7% to $194.3
million (4.13% of sales) from $171.0 million (3.77% of sales) in
fiscal 2012. For the fourth quarter of fiscal 2013, operating
profit increased by 7.2% to $42.5 million (3.56% of sales) from
$39.7 million (3.47% of sales) in the comparable period of fiscal
2012.
The Company reported net earnings of $107.9 million for fiscal
2013, compared to net earnings of $82.5 million for fiscal 2012.
Net earnings for fiscal 2013 were comprised of earnings from
continuing operations of $109.0 million, or $2.21 per diluted
share, and losses from discontinued operations of $1.1 million. The
Merger Related and Acquisition Costs reduced earnings from
continuing operations after tax in fiscal 2013 by $6.6 million, or
$0.13 per diluted share. Net earnings for fiscal 2012 were
comprised of earnings from continuing operations of $99.9 million,
or $2.04 per diluted share, and losses from discontinued operations
of $17.4 million. The net impact of the Lowes Foods Transaction
incremental costs offset by the insurance gains reduced earnings
from continuing operations after tax in fiscal 2012 by $15.0
million, or $0.31 per diluted share. Earnings from continuing
operations for fiscal 2012 were also favorably impacted by a
reversal of accrued interest amounting to $1.3 million that was
associated with a reduction of the Company’s unrecognized tax
positions.
Net earnings for the fourth quarter of fiscal 2013 totaled $21.1
million, or $0.43 per diluted share. The Merger Related and
Acquisition Costs reduced net earnings in the fourth quarter of
fiscal 2013 by $5.9 million, or $0.12 per diluted share. Net
earnings for the fourth quarter of fiscal 2012 totaled $22.8
million and were comprised of earnings from continuing operations
of $23.7 million, or $0.48 per diluted share and losses from
discontinued operations of $0.9 million. The net impact of the
Lowes Foods Transaction incremental costs reduced earnings from
continuing operations after tax in the fourth quarter of fiscal
2012 by $4.5 million, or $0.09 per diluted share.
The loss from discontinued operations in fiscal 2013 resulted
from adjustments required to true up the tax benefits realized from
the loss on the sale of the Company’s wholly-owned industrial
thread manufacturing company American & Efird (“A&E”).
Pre-tax losses from discontinued operations for fiscal 2012
amounted to $19.5 million, $17.4 million after tax benefits or
$0.36 per diluted share and were primarily driven by non-cash
charges for the settlement of pension liabilities and other
employee benefits in connection with the sale of A&E.
Thomas W. Dickson, Chairman of the Board and Chief Executive
Officer stated, “We are pleased with our results for fiscal 2013
and the opportunities ahead of us with the Kroger merger and our
recent store acquisitions. Our pricing and promotional strategies
were effective during fiscal 2013 in driving unit sales and
customer visits. On a comparable store basis, we experienced
increased unit sales compared to fiscal 2012 and our store brand
penetration continues to improve. We believe these positive results
are attributable to our continuing commitment to our customers to
deliver outstanding values and excellent customer service.”
The Company’s operating performance and strong financial
position provides the flexibility to continue with its store
development program for new and replacement stores along with the
remodeling and expansion of existing stores. Capital expenditures
for fiscal 2013 totaled $191 million and are expected to total
approximately $240 million for fiscal 2014. The fiscal 2014 capital
plan includes 18 new stores (which includes two replacements and
seven acquired Piggly Wiggly store locations). The fiscal 2014 new
store openings are currently scheduled for eight in the first
quarter, three in the second quarter, two in the third quarter and
five in the fourth quarter. Subsequent to the end of fiscal 2013,
the Company re-opened the store in the Washington D.C. market that
was closed to repair damage caused by flooding. The 2014 store
development program is expected to result in a 7.9% increase in
retail square footage as compared to a 4.2% increase realized in
fiscal 2013. The Company routinely evaluates its existing store
operations in regards to its overall business strategy and from
time to time will close or divest underperforming stores.
The Company’s capital expenditure plans entail the continued
expansion of its existing markets, including the Washington, D.C.
metro area which incorporates northern Virginia, the District of
Columbia, southern Maryland and coastal Delaware. Real estate
development by its nature is both unpredictable and subject to
external factors including weather, construction schedules and
costs. Any change in the amount and timing of new store development
can impact the expected capital expenditures, sales and operating
results.
This news release may contain forward-looking statements that
involve uncertainties. A discussion of various important factors
that could cause results to differ materially from those expressed
in such forward-looking statements is shown in reports filed by the
Company with the Securities and Exchange Commission and include:
generally adverse economic and industry conditions; changes in the
competitive environment; economic or political changes; changes in
federal, state or local regulations affecting the Company; the
passage of future tax legislation, or any negative regulatory or
judicial position which prevails; management's ability to predict
the adequacy of the Company's liquidity to meet future
requirements; volatility of financial and credit markets which
would affect access to capital for the Company; changes in the
Company's expansion plans and their effect on store openings,
closings and other investments; the ability to predict the required
contributions to the Company's pension and other retirement plans;
the Company’s requirement to impair recorded goodwill or other
long-lived assets; the cost and availability of energy and raw
materials; the continued solvency of third parties on leases that
the Company guarantees; the Company’s ability to recruit, train and
retain effective employees; changes in labor and employer benefits
costs, such as increased health care and other insurance costs; the
Company’s ability to successfully integrate the operations of
acquired businesses; the extent and speed of successful execution
of strategic initiatives; unexpected outcomes of any legal
proceedings arising in the normal course of business; the
occurrence of any event, change or other circumstances that could
give rise to the termination of the Merger Agreement; the failure
to receive, on a timely basis or otherwise, the approval of
government or regulatory agencies with regard to the Merger
Agreement; the failure of one or more conditions to the closing of
the Merger Agreement to be satisfied; the amount of the costs,
fees, expenses and charges related to the Merger Agreement or
merger; risks arising from the merger’s diversion of management’s
attention from our ongoing business operations; risks that our
stock price may decline significantly if the merger is not
completed; and, the ability to retain and hire key personnel and
maintain relationships with customers, suppliers and other business
partners pending the completion of the merger. Other factors not
identified above could cause actual results to differ materially
from those included, contemplated or implied by the forward-looking
statements made in this news release.
Harris Teeter Supermarkets, Inc. operates a leading regional
supermarket chain in eight states primarily in the southeastern and
mid-Atlantic United States, and the District of Columbia.
Selected information regarding Harris Teeter Supermarkets, Inc.
and its subsidiaries follows. For more information on Harris Teeter
Supermarkets, Inc., visit our web site at:
www.harristeeter.com.
Harris Teeter Supermarkets, Inc.
Consolidated Condensed Statements of Earnings (in thousands,
except per share data) (unaudited) 13 Weeks Ended 52 Weeks
Ended October 1, 2013 October 2, 2012 October 1, 2013 October 2,
2012
Sales $ 1,193,856 100.00 % $ 1,142,793
100.00 % $ 4,709,866 100.00 % $ 4,535,414 100.00 %
Cost of Sales 833,391 69.81 %
803,009 70.27 % 3,292,903
69.92 % 3,176,914 70.05 %
Gross Profit 360,465 30.19 % 339,784 29.73 % 1,416,963 30.08
% 1,358,500 29.95 %
Selling, General and
Administrative 317,934 26.63 %
300,112 26.26 % 1,222,615
25.96 % 1,187,522 26.18 %
Operating Profit 42,531 3.56 %
39,672 3.47 % 194,348
4.13 % 170,978 3.77 %
Other Expense (Income): Interest expense 3,937 0.33 %
4,395 0.38 % 16,425 0.35 % 16,998 0.37 % Interest income
(57)
0.00 %
(103)
-0.01 %
(263)
-0.01 %
(587)
-0.01 % 3,880 0.32 %
4,292 0.38 % 16,162
0.34 % 16,411 0.36 %
Earnings From Continuing Operations Before Income
Taxes 38,651 3.24 % 35,380 3.10 % 178,186 3.78 % 154,567 3.41 %
Income Tax Expense 17,497 1.47 %
11,686 1.02 % 69,206
1.47 % 54,640 1.20 %
Earnings from Continuing Operations, Net 21,154
1.77 % 23,694 2.07
% 108,980 2.31 % 99,927
2.20 %
Loss from Operations of Discontinued
Operations - - -
(15,755)
Loss on Disposition of Discontinued Operations -
(436)
-
(3,717)
Income Tax Expense (Benefit) -
444 1,088
(2,057)
Loss from Discontinued Operations, Net -
(880)
(1,088)
(17,415)
Net Earnings $ 21,154 $ 22,814
$ 107,892 $ 82,512
Earnings (Loss) Per Share - Basic: Continuing Operations $
0.43 $ 0.49 $ 2.23 $ 2.05 Discontinued Operations $ - $
(0.02)
$
(0.02)
$
(0.36)
Net Earnings $ 0.43 $ 0.47 $ 2.21 $ 1.69
Earnings (Loss)
Per Share - Diluted: Continuing Operations $ 0.43 $ 0.48 $ 2.21
$ 2.04 Discontinued Operations $ - $
(0.02)
$
(0.02)
$
(0.36)
Net Earnings $ 0.43 $ 0.46 $ 2.19 $ 1.68
Weighted Average
Number of Shares of Common Stock Outstanding: Basic
48,937 48,790 48,916 48,751 Diluted 49,261 49,110 49,212 49,053
Quarterly Dividends Declared Per Common Share $ 0.15
$ 0.14 $ 0.60 $ 0.55
Special Dividends Declared Per Common
Share $ - $ - $ 0.50 $ -
Effective Tax Rate on
Continuing Operations 45.3 % 33.0 % 38.8 % 35.4 %
Harris Teeter Supermarkets, Inc.
Consolidated Condensed Balance Sheets (in thousands)
(unaudited) October 1, October 2, 2013 2012
Assets
Current Assets: Cash and Cash Equivalents $ 187,612 $ 212,211
Accounts Receivable, Net 62,165 59,267 Refundable Income Taxes
1,722 27,583 Inventories 316,809 305,106 Deferred Income Taxes
7,696 6,044 Prepaid Expenses and Other Current Assets 30,026
24,182 Total Current Assets 606,030 634,393
Property, Net 1,142,245 1,102,703 Investments 103,365
107,424 Goodwill 19,301 19,301 Intangible Assets 13,759 15,039
Other Long-Term Assets 128,537 73,628
Total
Assets $ 2,013,237 $ 1,952,488
Liabilities and
Shareholders' Equity
Current Liabilities: Current Portion of Long-Term Debt and Capital
Lease Obligations $ 4,788 $ 4,219 Accounts Payable 275,909 281,142
Accrued Compensation 71,371 69,390 Other Current Liabilities
100,261 96,887 Total Current Liabilities
452,329 451,638 Long-Term Debt and Capital Lease Obligations
208,691 208,271 Deferred Income Taxes 8,096 10,941 Pension
Liabilities 88,740 119,883 Other Long-Term Liabilities 126,509
124,136 Equity: Common Stock 117,927 111,347 Retained
Earnings 1,093,414 1,039,935 Accumulated Other Comprehensive Loss
(82,469 ) (113,663 ) Total Equity 1,128,872 1,037,619
Total Liabilities and Equity $ 2,013,237
$ 1,952,488
Harris Teeter Supermarkets,
Inc. Consolidated
Condensed Statements of Cash Flows (in thousands) (unaudited)
52 Weeks Ended October 1, October 2, 2013 2012
Cash Flow From
Operating Activities: Net Earnings $ 107,892 $ 82,512 Loss from
Discontinued Operations 1,088 17,415 Non-Cash Items Included in Net
Income Depreciation and Amortization 149,098 135,542 Deferred
Income Taxes (23,003 ) 1,814 Net Loss (Gain) on Sale of Property
and Investments 120 (132 ) Share-Based Compensation 7,720 7,121
Other, Net 3,300 (1,863 ) Changes in Operating Accounts Providing
(Utilizing) Cash Accounts Receivable (2,898 ) (12,179 ) Inventories
(11,703 ) (17,969 ) Prepaid Expenses and Other Current Assets
17,010 864 Accounts Payable (5,211 ) 24,665 Other Current
Liabilities 5,513 (4,513 ) Other Long-Term Operating Accounts
(24,876 ) (25,980 )
Net Cash Provided by Operating
Activities 224,050 207,297
Investing Activities: Capital Expenditures (190,717 )
(199,946 ) Purchase of Other Investments (7,760 ) (3,448 ) Business
Acquisition - (26,296 ) Proceeds from Sale of Property and
Investments 15,283 172,143 Net (Investments in) Proceeds from
Company-Owned Life Insurance (5,788 ) 12,486 Other, Net -
(28 )
Net Cash Used by Investing Activities
(188,982 ) (45,089 )
Financing
Activities: Payments on Long-Term Debt and Capital Lease
Obligations (4,325 ) (83,706 ) Dividends Paid (54,413 ) (27,112 )
Proceeds from Stock Issued 375 486 Share-Based Compensation Tax
Benefits 635 1,760 Shares Effectively Purchased and Retired for
Withholding Taxes (2,155 ) (5,129 ) Other, Net 216
(775 )
Net Cash Used by Financing Activities
(59,667 ) (114,476 )
(Decrease) Increase in Cash
and Cash Equivalents (24,599 ) 47,732
Cash and Cash
Equivalents at Beginning of Period 212,211 164,479
Cash and Cash Equivalents at End of Period $ 187,612
$ 212,211
Supplemental Disclosures of Cash
Flow Information Cash Paid During the Year for: Interest, Net
of Amounts Capitalized $ 16,365 $ 18,141 Income Taxes 81,157 77,824
Non-Cash Activity - Assets Acquired Under Capital Leases 5,315
8,866
Harris Teeter Supermarkets, Inc.
Other Statistics (dollars in thousands) 13 Weeks Ended 52
Weeks Ended October 1, 2013 October 2, 2012 October 1, 2013 October
2, 2012
Operating Profit
Analysis:
Dollars Margin Dollars Margin Dollars
Margin Dollars Margin
Operating profit without incremental
merger
related costs, Lowes Foods transaction
costs
and gains from insurance proceeds
$ 48,734 4.08 % $ 47,154 4.13 % $ 201,752 4.28
% $ 197,672 4.36 %
Incremental merger related and
acquisition
costs
(6,203)
-0.52 % - 0.00 % (7,404 ) -0.16 % - 0.00 % Lowes Foods transaction
costs - 0.00 % (7,482 ) -0.65 % - 0.00 %
(29,810)
-0.66 % Gains from insurance proceeds -
0.00 % - 0.00 % -
0.00 % 3,116
0.07 % Consolidated operating profit $
42,531 3.56 % $ 39,672
3.47 % $ 194,348 4.13 % $
170,978 3.77 % LIFO (Credit) Charge
(Included in COGS): $
(2,370)
-0.20 % $ (4,364 ) -0.38 % $ (1,700 )
-0.04 % $ 3,024 0.07 %
New Store Pre-Opening Costs (excluding stores acquired from
Lowes Foods) (1) $ 2,359 0.20 %
$ 1,365 0.12 % $ 5,961
0.13 % $ 5,839 0.13 %
13 Weeks Ended 52 Weeks Ended October 1, October 2, October
1, October 2, 2013 2012 2013 2012
Comparable Store Statistics: Increase in Comparable Store Sales
1.49 % 3.01 % 2.23 % 3.97 % (Decrease) Increase in Active Household
- VIC Customers -0.54 % 1.18 % 0.52 % 1.61 % (Decrease) Increase in
Number of Items Sold -1.29 % 0.68 % 0.48 % 0.27 % Store
Brand Penetration Based on Units 24.95 % 24.74 % 24.60 % 24.26 %
Store Brand Penetration Based on Sales 25.57 % 25.22 % 25.32 %
25.15 % Store Count Beginning number of stores 212 201 208
204 Opened during the period 4 7 9 13 Temporarily closed during the
period - - - (1 ) Closed during the period -
- (1 ) (8 ) Stores in operation
at end of period 216 208
216 208 Number of Major Store
Remodels Completed 2 9 5 12 Number of Expansion Remodels Included
Above 2 5 2 6 Total Square Footage at Beginning of Period
10,421,259 9,811,378 10,218,118 9,818,232 New Stores and Remodels
229,827 406,740 449,174 750,023 Closed Stores -
- (16,206 ) (350,137 )
Total Square Footage at End of Period 10,651,086
10,218,118 10,651,086
10,218,118
Definition of
Comparable Store Sales:
Comparable store sales are computed using corresponding calendar
weeks to account for the occasional extra week included in a fiscal
year. A new store must be in operation for 14 months before it
enters into the calculation of comparable store sales. A closed
store is removed from the calculation in the month in which its
closure is announced. A new store opening within an approximate
two-mile radius of an existing store that is to be closed upon the
new store opening is included as a replacement store in the
comparable store sales measure as if it were the same store. Sales
increases resulting from existing comparable stores that are
expanded in size are included in the calculations of comparable
store sales, if the store remains open during the construction
period. If the location is closed, the sales during the store sales
calculation for the weeks actually open. (1) Pre-opening
costs are included with SG&A expenses and consist of rent,
labor and associated fringe benefits, and recruiting and relocation
costs incurred prior to a new store opening.
Harris Teeter Supermarkets, Inc.John B. Woodlief,
704-844-3100Executive Vice Presidentand Chief Financial Officer
Harris Teeter Supermarkets, Inc. (NYSE:HTSI)
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