MILAN, Ill. -- Eagle Food Centers here will not be sold, but it is expected to continue to lose money, shareholders were told last week.
At the company's 13th annual meeting here, a shareholder's proposal to sell the company was strongly defeated. The seven-member board of directors was re-elected to another one-year term.
The proposal to sell the company garnered support from shareholders holding 269,653 shares, compared with a majority of shareholders holding 1.74 million shares who voted against selling. There was no public comment or discussion about the proposal.
Moline, Ill., attorney James Zmuda, representing the dissenting shareholder Raymond Povalski of Arctic Financial Corp. of Oldwick, N.J., said he was not surprised by the outcome.
"It was the same as last year," he said.
Last year, before a four-for-one reverse stock split in August, shareholders holding 1.3 million shares voted for the sale, while shareholders with 7.3 million shares voted not to sell.
A grim-faced Robert Kelly, chairman and CEO, said he did not expect the company to turn a profit this year and maybe not for another two or three years.
Kelly returned as president and chief executive officer March 18 when former President Jeffrey Little resigned.
"It's a tough road, a long road, but we'll do the best we can to get us back to profit," Kelly said, before fielding questions from concerned shareholders.
Last week, the company said it lost $3.2 million in this year's first quarter, ended May 4. Eagle lost $1.6 million, or 51 cents a share, in fiscal 2001.
Kelly said there was no magic wand that would slow the company's downward spiral, but he and his management team had put together "a set of action plans" to reverse the process.
One of the measures targets inventory, which has already been reduced by $7 million. Eagle's goal is to reduce it further, Kelly said.
The company also overspent on advertising in the first quarter and has put in a new program to bring those costs back in line in the second quarter, he said.
Eagle has started to revamp its in-store bakeries and delis. A shareholder encouraged the deli and bakery improvements as a way of creating new profit centers for the company.
The company also has scrapped plans to convert some of its Eagle Country Markets into Eagle Discount Food stores. It spent $2.1 million converting seven stores in the first quarter, and those stores also incurred an incremental loss of $1.1 million during the period.
The concept failed because Eagle could not lower its cost at the same rate as the lower price it charged for its products, and Eagle customers did not see enough of a difference to buy more volume, he said.
Changing the stores back into Eagle Country Markets will not cost anywhere near the same as the conversions, he said.
Company officials plan to continue their practice of buying back their senior notes -- long-term debt with high interest rates -- and replacing them with short-term debt.
Eagle has not determined how much it will spend on store remodels and new store developments this year, said Patric Plumley, senior vice president and chief financial officer. Eagle operates 64 supermarkets in northern Illinois and eastern Iowa.
Several shareholders said they were pleased with Kelly's candidness.
"There were no smoke and mirrors as in the past," said shareholder Dave Miller of Davenport, Iowa, a former Eagle employee. "They were very candid. They can make it with hard work. They've made some positive changes."
Eagle is in a tough business, said Harold Becker, a shareholder from Cedar Rapids, Iowa.
"They are doing the right things to get it back on track," he said. "They can do it if they work hard. It can be done."
Besides Kelly and Plumley, the directors re-elected for another one-year term were: Peter B. Foreman, Steven M. Friedman, Alain M. Oberrotman, Jerry I. Reitman and William J. Snyder.
