KASH N' KARRY TURNS PROFIT BUT SALES SLIDE

GLEN A. BERES

TAMPA, Fla. -- Kash n' Karry Food Stores here said a restructuring that allowed it to emerge from Chapter 11 bankruptcy protection in December helped improve its earnings picture but hurt sales for the third quarter and 39 weeks ended April 30.

The company reported net income of $2.7 million for the quarter, compared with a loss of $2.8 million for the same period last year. The chain attributed the turnaround to increased operating cash flow and reduced interest expense following the restructuring.

Operating cash flow for the quarter increased 33.1% to $19.3 million.

Sales for the quarter were $269.9 million, a 3.5% drop. The company attributed the decrease to a 1.9% decline in same-store sales and fewer stores in operation following the restructuring. (Three stores were closed and one opened during the period, according to a 10-Q report filed with the Securities and Exchange Commission).

For the year-to-date, the company reported income of $64.6 million vs. a loss of $29.7 million in the corresponding period last year. However, the most recent period included a $70.2 million gain on debt discharge related to the restructuring, which the company said made comparisons with 1994 meaningless.

Sales for nine months fell 3.9% to $783 million. Same-store sales dropped 0.8%. Kash n' Karry attributed the decreases to the net effect of 18 store closings and two store openings during fiscal 1994.

"[Kash n' Karry has] really turned things around very quickly," said Ken Bann, a high-yield analyst with Lehman Bros., New York. "They've cut costs, improved gross profit and have clearly reduced debt.

"Same-store sales are still weak, but the company is putting together an expanded capital expenditures program for next year. "Hopefully, with some remodels and new stores, they can turn things around on the sales side."

3RD-QUARTER RESULTS

Qtr Ended 4/30/95 5/1/94

Sales $269.9 million $279.8 million

Change - 3.5%

Same-store - 1.9%

Net Income $2.7 million ($2.8 million)

Inc/Share 88 cents N.A.*

39 Weeks 1995 1994

Sales $783 million $814.6 million

Change - 3.9%

Same-store - 0.8%

Net Income $64.6 million ($29.7 million)

Inc/Share $1.14 N.A.*

*Kash n' Karry said net income per common share is not meaningful prior to Jan. 1 due to the significant change in its capital structure in connection with its reorganization.