Item 1. Business.
General
Bruno's, Inc. ("Bruno's" or the "Company"), a corporation organized in 1959 under the laws of the State of Alabama, is a leading regional supermarket retailer operating in the southeastern United States. The Company operates a total of 257 supermarkets and combination food and drug stores, of which 125 are located in Alabama, 90 in Georgia, 20 in Florida, 11 in Tennessee, 6 in Mississippi and 5 in South Carolina. The Company attempts to achieve high sales volume by offering a wide variety of nationally-advertised brands at prices equal to or below those of competing stores. The Company, through pricing, merchandising and promotion, attempts to achieve a first or second market share position in each market area in which it operates. The Company also operates eight liquor stores in Florida which are adjacent to supermarkets operated by the Company.
The Company operates conventional, discount and warehouse supermarkets and combination food and drug stores of various sizes, primarily under five separate store formats. The Company utilizes these different formats to enable it to vary its pricing strategy, store size, product mix, and decor and design to best suit the demographic conditions and competitive environment of each store location.
The Company's major formats include:
Food World. The Company's 80 Food World supermarkets range in size from 30,000 to 60,000 square feet, and offer a wide selection of brand-name merchandise in a modern format that includes expanded specialty departments. These supermarkets advertise everyday low prices on television, radio and in newspapers in an effort to draw customers from a wide area around each location.
Food Max. The Company's 50 Food Max stores are large "superwarehouse" stores emphasizing an open warehouse appearance with modern decor and ranging in size from 34,000 to 75,000 square feet. In addition to a wide selection of brand-name merchandise, these superwarehouse stores emphasize private label and generic merchandise, bulk foods, large delicatessens and expanded meat and produce departments. These stores, which achieve low overhead through reduced staffing, are promoted primarily through newspaper advertising and regularly offer unadvertised specials.
Food Fair. The Company's 32 Food Fair supermarkets range in size from 21,000 to 42,000 square feet. These smaller supermarkets are designed to operate with a lower overhead and competitive pricing in areas that will not support the volume necessary for a larger supermarket. These stores are promoted primarily through newspaper and radio advertising. Bruno's Food and Pharmacy. The Company's 17 Bruno's Food and Pharmacy stores generally are located in markets with suburban shoppers who appreciate "one-stop shopping" and a wide range of merchandise. These combination stores range in size from 48,000 to 60,000 square feet and typically contain expanded produce, bakery and delicatessen departments, full service seafood and meat departments, a floral department, pharmacy, and a large selection of general merchandise. These stores carry specialty and gourmet foods generally not found in conventional supermarkets, as well as a variety of products normally found in large drug stores. Many also have in-store banking services. The Bruno's Food and Pharmacy stores are promoted primarily through newspaper advertising.
Piggly Wiggly. The Company's 56 Piggly Wiggly stores are conventional supermarkets, ranging in size from 18,000 to 48,000 square feet and are typically located in medium to small towns all in central and southern Georgia. These Piggly Wiggly stores offer weekly specials on selected merchandise, store specials and double manufacturers' coupons. They are promoted primarily through newspaper advertising and printed circulars available in the stores.
The majority of the Company's other supermarkets operate under the names Bruno's Finer Foods (12 stores), Bruno's Super Center (5 stores), and Consumer Warehouse Foods (2 stores).
All of the Company's stores offer fresh produce, meat and poultry and a wide selection of groceries, including dairy and bakery products, frozen foods, soft drinks, health and beauty aids and a variety of other general merchandise customarily carried by supermarkets. Many of the Company's stores, including all of the Food World, Bruno's Food & Pharmacy, Bruno's Finer Foods, Bruno's Super Center and Food Max stores, have delicatessens and bakery departments. All of the Company's stores are air-conditioned, well-lighted, and equipped with modern fixtures and adjacent to off street parking facilities. All of the Company's stores are equipped with electronic scanning equipment except the Piggly Wiggly stores, of which the majority are so equipped. The Company varies the inventory in its stores to take into account seasonal changes in consumer demand.
Distribution
The Company minimizes the square footage utilized for warehousing in each store in order to maximize the square footage available in each store to display merchandise for sale. Restocking of inventory is achieved primarily through the Company's warehouses. Each of the Company's stores receives frequent deliveries from the Company's distribution fleet of 153 tractors, 152 refrigerated trailers and 184 dry trailers. The approximately 1,375,000 square foot Birmingham warehouse, distribution center and executive headquarters are located on a 200-acre site. The Company-owned
Vidalia warehouse and distribution center is located in southeastern Georgia on a 90-acre site. The Birmingham warehouse utilizes a computerized inventory control and ordering system that is linked directly to the stores it serves. Approximately 26% of the Company's purchases, including beverages, tobacco products, milk, bread and snack foods, are supplied directly to the stores by local distributors. The Company believes that the existing warehouse capacity will be sufficient to serve all stores proposed to be opened during the next two years. The Company owns ample adjacent acreage for expansion thereafter. Generally, it is efficient to supply stores within a 300-mile radius of a distribution facility.
Expansion
The Company has expanded through the development of individual stores and the acquisition of existing stores. The Company's expansion policy is to seek locations for new stores in areas believed to be capable of supporting a high level of sales volume. The Company plans to continue to expand through the development of new stores in Alabama and Georgia and in the surrounding southeastern states and may acquire existing stores or supermarket chains, if attractive opportunities become available. There are no current agreements or negotiations with respect to any acquisitions, and there can be no assurances that opportunities to make acquisitions will become available on terms deemed favorable by the Company or that the Company will be able to effect any acquisitions. During the past several years, the Company has emphasized the development of larger stores. The Company plans to open approximately 8 new stores during the current fiscal year and 10 new stores during the following year.
The following table sets forth certain statistical information with respect to the Company's supermarket operations for the fiscal years indicated.
Competition
The Company's business is highly competitive. In each of the markets in which the Company operates, it competes directly with a
number of national and regional chains, as well as with various local chains and numerous single unit stores. Many items sold by the Company's combination stores also can be found in variety stores, discount stores, drug stores and department stores. The supermarket business is characterized by narrow profit margins and, accordingly, the Company's earnings depend primarily on the efficiency of its operations and on its ability to maintain a large sales volume. Competition among supermarkets and drug stores generally takes the form of price competition, store location, product selection and service performance. The Company believes that its policy of pricing its merchandise competitively with, and generally lower than, competing stores is an important competitive factor.
The number of competitors and the amount of competition experienced by the Company's stores varies from city to city and in various locations within cities. The main competitors of the Company are the supermarket chains operated by Winn-Dixie Stores, Inc., the Kroger Company, BiLo, Food Lion and Delchamps, Inc. Winn-Dixie Stores, Inc. competes with the Company throughout Alabama and Georgia, and the Kroger Company competes with the Company throughout Alabama, with the exception of the Birmingham, Montgomery and Mobile markets and certain parts of Georgia. BiLo and Food Lion compete with the Company throughout Georgia with the exception of Atlanta.
Employees
At July 2, 1994, the Company employed approximately 11,084 full time and 16,136 part-time employees. Of this number, approximately 25,553 are employed in the supermarkets and combination stores, 1,363 are employed in the warehousing operations and 304 are employed in the Company's business offices. Approximately 69% of such employees are covered under collective bargaining agreements. The Company believes that its relationship with its employees is good.
The Company has an incentive compensation plan covering its key purchasing, warehouse and management staff and with each district manager, store manager, co-manager and assistant manager in which their compensation is based upon the profitability of the operations within the scope of their management responsibility.
Other Matters
Bruno's does not include industry segments. The Company's business is not seasonal to any material extent. No part of the business of Bruno's is dependent upon a single customer, or a few customers, the loss of any one of which would have a materially adverse effect upon the Company. Bruno's does not engage in any operations in foreign countries, nor is any portion of its sales or revenue derived from customers in any foreign countries.
Item 2.

Item 2. Properties.
Store Properties
As of the end of the latest fiscal year, Bruno's leased 185 of its 257 food stores and seven of its eight liquor stores under standard commercial leases, no one of which is deemed to be materially important to the Company. All of these leases are long-term leases, generally with one or more renewal options. The Company generally owns the furniture and fixtures in each leased location, and has made various leasehold improvements in the store locations. Thirteen of the leases are with PM Associates, a joint venture owned 50% by a wholly-owned subsidiary of Bruno's and 50% by Metropolitan Life Insurance Company.
As of the end of the latest fiscal year, Bruno's owned 72 of its 257 food stores. Of these 72 stores, 48 are free-standing stores situated on tracts of land owned by Bruno's in various locations in Alabama and one store in Florida situated on leased land. In addition, 24 stores owned by the Company are located in shopping centers owned by Bruno's in various locations in Alabama, Tennessee and Georgia, with the remaining space in these shopping centers leased to commercial tenants. Bruno's also owns one shopping center in the Roebuck area of Birmingham, Alabama, in which the Company does not operate a store, with all space being leased to other commercial tenants.
Warehouse Properties
The approximately 1,375,000 square foot Birmingham warehouse, distribution center and office complex is located on a 200-acre site in the Oxmoor West Industrial Park in Birmingham, Alabama. The Company leases the Birmingham warehouse from The Industrial Development Board of the City of Birmingham, pursuant to a lease entered into in connection with the issuance of industrial revenue bonds. The lease has a primary term of 20 years. Upon the expiration of the lease term, the Company has the right to purchase the entire property for nominal consideration.
The approximately 686,000 square foot Vidalia warehouse and distribution center, owned by the Company, is located on a 90-acre site owned by the Company in Vidalia, Georgia.
The Company owns four additional warehouses in the Birmingham area, located on two separate parcels of land owned by the Company, which warehouses were formerly used for its central warehouse facility prior to the completion of its new distribution center in May of 1986. The Company is using one of these additional warehouses and three are vacant. The Company intends to sell these warehouses whenever it locates a suitable purchaser and has written the carrying value of these assets down to the estimated net realizable values.
Item 3.

Item 3. Legal Proceedings.
In 1991, the Company received a favorable termination letter with respect to the termination of the employee pension plan of a supermarket chain acquired by the Company in 1989. Pursuant to that termination, distributions were made to all participants of that employee pension plan. After all of the benefit liabilities were paid, there remained a balance of $2,716,795 which was transferred to the Company as a reversion of excess pension assets. On June 15, 1992, the Company received a letter from the Pension Benefit Guaranty Corporation contending that inappropriate actuarial assumptions were used to determine the value of the employee's benefits distributed and that additional distributions must be made to numerous former participants of the said plan. It is impossible to quantify the extent of any liability at this time, if any, but any liability is not expected to exceed $2,716,795.
Except for this matter, there are no material, pending legal proceedings, other than ordinary, routine litigation incidental to the business, to which Bruno's is a party or of which any of its property is the subject.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders.
Bruno's did not submit any matters to a vote of its security holders during the fourth quarter of its fiscal year ended July 2, 1994.
PART II
Item 5.

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
The Company's Common Stock trades on the NASDAQ National Market System under the symbol BRNO. The following table sets forth, by fiscal quarter, the high and low sales prices, rounded to the nearest eighth, reported by the NASDAQ National Market System for the periods indicated.
As of September 7, 1994, there were approximately 8,077 holders of record of the Company's Common Stock.
The following table sets forth the dividends paid by Bruno's to its shareholders during the last two fiscal years. Bruno's intends to continue its policy of paying quarterly cash dividends. Future dividends will be dependent, however, upon the Company's earnings, financial requirements and other relevant factors.
Item 6.

Item 6. Selected Financial Data.
The information set forth under the caption "Selected Financial Data", appearing on page 23 of the Bruno's, Inc. Annual Report to Shareholders for the Fiscal Year Ended July 2, 1994, is incorporated herein by reference.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The information set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations", appearing on pages 24 through 26 of the Bruno's, Inc. Annual Report to Shareholders for the Fiscal Year Ended July 2, 1994, is incorporated herein by reference.
Item 8.

Item 8. Financial Statements and Supplementary Data.
The Financial Statements appearing on pages 9 through 22, and the Unaudited Quarterly Financial Data appearing on page 27, of the Bruno's, Inc. Annual Report to Shareholders for the Fiscal Year Ended July 2, 1994, are incorporated herein by reference.
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not Applicable.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant.
The information set forth under the captions "NOMINEES" and "OFFICERS", appearing in the Bruno's, Inc. Proxy Statement for the 1994 Annual Meeting of Shareholders dated September 16, 1994, is incorporated herein by reference.
Item 11.

Item 11. Executive Compensation.
The information set forth under the captions "BOARD OF DIRECTORS" and "COMPENSATION TO EXECUTIVE OFFICERS", appearing in the Bruno's, Inc. Proxy Statement for the 1994 Annual Meeting of Shareholders dated September 16, 1994, is incorporated herein by reference.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information set forth under the captions "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" and "NOMINEES", appearing in the Bruno's, Inc. Proxy Statement for the 1994 Annual Meeting of Shareholders dated September 16, 1994, is incorporated herein by reference.
Item 13.

Item 13. Certain Relationships and Related Transactions.
The information set forth under the caption "INTERESTS OF OFFICERS, DIRECTORS AND OTHERS IN CERTAIN TRANSACTIONS", appearing in the Bruno's, Inc. Proxy Statement for the 1994 Annual Meeting of Shareholders dated September 16, 1994, is incorporated herein by reference.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as a part of this report:
1. Financial Statements
The following financial statements of the Company and report of independent public accountants are incorporated herein by reference to the Bruno's, Inc. Annual Report to Shareholders for the Fiscal Year Ended July 2, 1994:
Consolidated Balance Sheets as of July 2, 1994, and July 3, 1993.
Consolidated Statements of Income for Fiscal Years Ended July 2, 1994, July 3, 1993, and June 27, 1992.
Consolidated Statements of Shareholders' Investment for Fiscal Years Ended July 2, 1994, July 3, 1993, and June 27, 1992.
Consolidated Statements of Cash Flows for Fiscal Years Ended July 2, 1994, July 3, 1993, and June 27, 1992.
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Unaudited Quarterly Financial Data
2. Schedules to Financial Statements
Index to Schedules
Report of Independent Public Accountants
Schedule V - Property and Equipment
Schedule VI - Reserves for Depreciation and Amortization of Property and Equipment
3. Exhibits
Exhibit No. Description
3(i) Certificate of Incorporation of the Company, and amendments thereto, incorporated by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K, dated September 24, 1990.
1994, into this Form 10-K Annual Report and the Company's Form S-8 Registration Statement No. 2-81642.
27 Financial Data Schedule
BRUNO'S, INC. WILL FURNISH TO EACH SHAREHOLDER, UPON WRITTEN REQUEST, COPIES OF THE EXHIBITS REFERRED TO ABOVE AT A COST OF TEN CENTS PER PAGE. REQUESTS SHOULD BE ADDRESSED TO: GLENN J. GRIFFIN, ASSISTANT SECRETARY, BRUNO'S, INC., POST OFFICE BOX 2486, BIRMINGHAM, ALABAMA 35201.
(b) No report on Form 8-K has been filed by Bruno's during the last quarter of the fiscal year ended July 2, 1994.
BRUNO'S, INC. AND SUBSIDIARIES
INDEX TO SCHEDULES
JULY 2, 1994
Schedules other than those listed above have been omitted since the information is not applicable, not required, or is included in the financial statements or notes thereto.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Bruno's, Inc.:
We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in the BRUNO'S, INC. fiscal 1994 annual report to shareholders incorporated by reference in this Form l0-K, and have issued our report thereon dated July 29, 1994. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in the accompanying index are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Birmingham, Alabama July 29, 1994
BRUNO'S, INC. AND SUBSIDIARIES
SCHEDULE V -- PROPERTY AND EQUIPMENT
(DOLLAR AMOUNTS IN THOUSANDS)
(1) Leasehold improvements, investment in property under capital leases, and leasehold interests in the consolidated financial statements are net of the related reserves for amortization, as follows:
BRUNO'S, INC. AND SUBSIDIARIES
SCHEDULE VI--RESERVES FOR DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
(DOLLAR AMOUNTS IN THOUSANDS)
(1) The reserves for amortization of leasehold improvements, investment in property under capital leases and leasehold interests have been netted against the respective cost of leasehold improvements, investment in property under capital leases and leasehold interests in the consolidated financial statements (see reconciliation on Schedule V). A reconciliation of the reserves for depreciation, as reflected in the consolidated financial statements, are as follows:
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Bruno's, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BRUNO'S, INC.
By /s/ Ronald G. Bruno -------------------------------- Ronald G. Bruno, Chief Executive Officer and Chairman of the Board
DATED: September 29, 1994
By /s/ Glenn J. Griffin -------------------------------- Glenn J. Griffin, Treasurer, Chief Financial Officer, Executive Vice President and Assistant Secretary
DATED: September 29, 1994
Pursuant to the requirements of the Securities 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.
INDEX TO EXHIBITS