-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VQkdB+oYiDnqEiQA7b3SPiFOdsIpcg1iDLzSKXbGZdui0Uo+g32t+YntogZJeG+F OfCYNlqR/DuHMv0V8MXdkA== 0000897069-95-000194.txt : 19951120 0000897069-95-000194.hdr.sgml : 19951120 ACCESSION NUMBER: 0000897069-95-000194 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951007 FILED AS OF DATE: 19951116 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCHULTZ SAV O STORES INC CENTRAL INDEX KEY: 0000087588 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 390600405 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00549 FILM NUMBER: 95594264 BUSINESS ADDRESS: STREET 1: 2215 UNION AVE CITY: SHEBOYGAN STATE: WI ZIP: 53081 BUSINESS PHONE: 4144574433 MAIL ADDRESS: STREET 1: 2215 UNION AVE CITY: SHEBOYGAN STATE: WI ZIP: 53081 10-Q 1 SCHULTZ SAV-O STORES, INC. FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _____________________ FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 7, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 0-549 SCHULTZ SAV-O STORES, INC. (Exact Name of Registrant as Specified in its Charter) WISCONSIN 39-0600405 (State or other jurisdiction (I.R.S. Employer of incorporation of organization) Identification No.) 2215 UNION AVENUE 53082-0419 SHEBOYGAN, WISCONSIN (Zip Code) (Address of principal executive offices) Registrant's telephone number including area code 414-457-4433 Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (of for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes X NO APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes NO APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of November 10, 1995, 4,653,598 shares of common stock, $0.05 par value, were issued and outstanding. SCHULTZ SAV-O STORES, INC. INDEX PAGE NUMBER PART I - FINANCIAL INFORMATION: Item 1. - Financial Statements Unaudited Condensed Balance Sheets 3 Unaudited Condensed Statements of Earnings 4 Unaudited Statements of Cash Flows 5 Notes to Unaudited Financial Statements 6 Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - OTHER INFORMATION Item 2. - Changes in Securities 9 Item 6. - Exhibits and Reports on Form 8-K 9 SIGNATURES 10 PART I - FINANCIAL INFORMATION Item 1. Financial Statements SCHULTZ SAV-O STORES, INC. UNAUDITED CONDENSED BALANCE SHEETS October 7 December 31 ASSETS 1995 1994 CURRENT ASSETS: Cash and equivalents $15,585,000 $14,310,000 Accounts receivable 8,950,000 7,453,000 Inventories 20,569,000 21,327,000 Prepaid expenses and other 5,170,000 2,344,000 Deferred income taxes 4,868,000 3,875,000 ---------- --------- Total currents assets 55,142,000 49,309,000 OTHER ASSETS, net 1,260,000 1,331,000 AMOUNTS RECEIVABLE UNDER CAPITAL SUBLEASE AGREEMENTS 9,545,000 9,943,000 LEASED PROPERTY UNDER CAPITAL LEASES, net 3,155,000 3,372,000 PROPERTY AND EQUIPMENT, net 23,335,000 25,144,000 ---------- ---------- Total assets $92,437,000 $89,099,000 ========== ========== LIABILITIES AND SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES: Accounts payable $13,171,000 $11,356,000 Accrued liabilities- Salaries and wages 487,000 532,000 Vacation pay 1,990,000 1,710,000 Retail facilities and operations 4,413,000 5,046,000 Insurance related 2,398,000 2,316,000 Other 6,898,000 6,115,000 Current maturities of long-term debt 335,000 323,000 Current obligations under capital leases 714,000 714,000 ---------- ---------- Total current liabilities 30,406,000 28,112,000 ---------- ---------- DEFERRED INCOME TAXES 2,427,000 1,428,000 LONG-TERM DEBT 3,789,000 4,056,000 CAPITAL LEASE OBLIGATIONS 13,497,000 14,046,000 SHAREHOLDERS' INVESTMENT: Preferred stock 300,000 300,000 Common stock 262,000 146,000 Additional paid-in capital 12,680,000 12,680,000 Retained earnings 39,537,000 36,179,000 ---------- ---------- Total 52,779,000 49,305,000 Less treasury stock (10,461,000) (7,848,000) ----------- ---------- Total shareholders' investment 42,318,000 41,457,000 ---------- ---------- Total liabilities and shareholders' investment $92,437,000 $89,099,000 ========== ========== SCHULTZ SAV-O STORES, INC. UNAUDITED CONDENSED STATEMENTS OF EARNINGS For the 12-weeks ended For the 40-weeks ended October 7 October 8 October 7 October 8 1995 1994 1995 1994 NET SALES $99,373,000 $101,894,000 $333,647,000 $341,241,000 COSTS AND EXPENSES: Cost of products sold 83,109,000 85,280,000 279,360,000 285,316,000 Operating and administrative expenses 14,027,000 14,466,000 47,495,000 49,557,000 ---------- ---------- ---------- ---------- Operating income 2,237,000 2,148,000 6,792,000 6,368,000 Interest expense (213,000) (287,000) (715,000) (668,000) Interest income 230,000 159,000 720,000 343,000 ---------- ---------- ---------- ---------- Earnings before income taxes 2,254,000 2,020,000 6,797,000 6,043,000 PROVISION FOR INCOME TAXES 869,000 765,000 2,619,000 2,263,000 --------- --------- --------- --------- Net earnings $ 1,385,000 $ 1,255,000 $ 4,178,000 $ 3,780,000 ========= ========= ========= ========= NET EARNINGS PER SHARE - PRIMARY AND FULLY DILUTED $ 0.28 $ 0.24 $ 0.83 $ 0.70 ===== ====== ====== ====== CASH DIVIDENDS PAID PER SHARE OF COMMON STOCK $ 0.08 $ 0.03 $ 0.14 $ 0.07 ===== ====== ====== ====== AVERAGE OUTSTANDING COMMON AND EQUIVALENT SHARES 4,952,000 5,152,000 5,019,000 5,353,000 ======== ========= ========= ========= SCHULTZ SAV-O STORES, INC. UNAUDITED STATEMENTS OF CASH FLOWS For the 40-weeks ended October 7 October 8 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 4,178,000 $3,780,000 Adjustments to reconcile net earnings to net cash flows from operating activities- Depreciation and amortization 3,450,000 3,562,000 Other non-cash items 119,000 75,000 Changes in assets and liabilities- (Increase) in receivables (1,497,000) (922,000) Decrease (increase) in inventories 758,000 (1,072,000) (Increase) decrease in prepaids and other assets (2,826,000) 168,000 Increase in accounts payable 1,815,000 3,402,000 Increase in accrued liabilities 479,000 1,938,000 --------- --------- Net cash flows from operating activities 6,476,000 10,931,000 --------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property and equipment (2,065,000) (3,135,000) Proceeds from asset sales 599,000 437,000 Receipt of principal amounts under capital sublease agreements and notes receivable 398,000 434,000 Proceeds from maturity of short-term investments - 2,953,000 --------- --------- Net cash flows from investing activities (1,068,000) 689,000 ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment for acquisition of treasury stock (2,642,000) (4,907,000) Payment of cash dividends (675,000) (373,000) Principal payments under capital lease obligations (549,000) (613,000) Principal payments on long-term debt (267,000) (238,000) --------- ---------- Net cash flows from financing activities (4,133,000) (6,131,000) --------- ---------- CASH AND EQUIVALENTS: Net increase 1,275,000 5,489,000 Balance, beginning of period 14,310,000 6,014,000 ---------- ---------- Balance, end of period $15,585,000 $11,503,000 ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for- Interest $ 723,000 $ 689,000 Income taxes, net of refunds 3,369,000 1,757,000 ========= ========= SCHULTZ SAV-O STORES, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS (1) Basis of Presentation The financial statements included herein have been prepared by the Company, without audit. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although the Company believes that the disclosures are adequate to make the information presented not misleading. The interim financial statements furnished with this report reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. It is suggested that these financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Company's 1994 annual report to shareholders, as incorporated by reference in the Company's Form 10-K for the fiscal year ended December 31, 1994. (2) Interest Expense Interest expense consists of the following: For the 12-weeks ended For the 40-weeks ended October 7 October 8 October 7 October 8 1995 1994 1995 1994 Interest expense: Long-term debt $ 96,000 $153,000 $ 325,000 $ 220,000 Imputed - capital leases 117,000 134,000 390,000 448,000 -------- -------- -------- -------- Interest expense $ 213,000 $287,000 $ 715,000 $ 668,000 ======== ======== ======== ======== (3) Prepaid Expenses and Other Prepaid expenses and other consists of following: October 7 December 31 1995 1994 Land and building held for resale $2,584,000 $733,000 Prepaid expenses and other assets 2,586,000 1,611,000 --------- --------- Prepaid expenses and other $5,170,000 $2,344,000 ========= ========= (4) Shareholders' Investment On July 28, 1995, the Company's Board of Directors declared a two-for-one stock split on the Company's Common Stock, effected in the form of a 100 percent stock dividend distributed on September 15, 1995 to shareholders of record on September 1, 1995. Shareholders' investment has been restated to give retroactive recognition to the stock split for all periods presented. In addition, all references in the financial statements to per share amounts and average number of shares have been restated. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Selected costs and results as a percent of net sales: For the 12-weeks ended For the 40-weeks ended October 7 October 8 October 7 October 8 1995 1994 1995 1994 Cost of products sold 83.6% 83.7% 83.7% 83.6% Operating and administrative expenses 14.1 14.2 14.2 14.5 Earnings before income taxes 2.3 2.0 2.0 1.8 Net earnings 1.4 1.2 1.3 1.1 Net sales for the 12- and 40-week periods ended October 7, 1995, were $99,373,000 and $333,647,000, respectively, compared to $101,894,000 and $341,241,000 for the same periods ended October 8, 1994. The decrease of $2,521,000 and $7,594,000, or 2.5% and 2.2%, respectively, was due primarily to the continuing increase in the relative percentage of wholesale sales to retail sales, as the Company continues to dispose of underperforming or noncompetitive corporate retail stores through conversion to franchise units or closures. Since October 8, 1994, the Company has sold one corporate retail store and converted it to a franchised unit. In February 1995, the Company also closed its underperforming corporate retail store in Palatine, Illinois, after management determined that the store was likely to continue incurring significant operating losses. These actions, in addition to a general softness in regional retail sales, competitive store openings, and increased sales of lower priced advertised items, were the principal reasons for the Company's reduced sales levels. As of October 7, 1995, the Company had 65 franchised and 19 corporate retail stores compared to 64 franchised and 21 corporate supermarkets at October 8, 1994, and 62 franchised and 23 corporate supermarkets at October 9, 1993. Consistent with management's business plan to expand the Company's wholesale volume, it is expected that the level of wholesale sales will continue to increase relative to total sales for the remainder of 1995. Currently, the Company plans to increase wholesale sales volume through the completion of three franchise addition or remodeling projects, the opening of a new market franchise store and the replacement of one existing franchise store during the fourth quarter of 1995. Additionally, during the fourth quarter, the Company will begin implementing a new and exciting electronic card marketing program designed to increase customer savings without negatively impacting retail store gross margin, make grocery shopping easier and faster, and ultimately reward loyal customers. Cost of products sold, as a percentage of sales, decreased by 0.1% for the 12-week period and increased by 0.1% for the 40-week period ended October 7, 1995, compared to the same periods in 1994. While the year-to-date percentage increased, total cost of products sold decreased by $5,956,000. The increased percentage was a direct result of a reduction in the amount of higher margin retail sales compared to increased levels of lower margin wholesale sales. The lower gross margins associated with wholesale sales continued to be fully offset by the elimination of operating expenses in connection with the closure or conversion of corporate retail stores to franchise units. Operating and administrative expenses, as a percentage of sales, decreased by 0.1% and 0.3%, or $439,000 and $2,062,000, respectively, for the 12- and 40-week periods ended October 7, 1995, compared to the same periods in 1994. The decreases were primarily a result of the elimination of certain operating expenses (consisting of payroll, supplies, rent, utilities, depreciation and other administrative expenses) associated with the corporate retail stores that have either been closed or sold and converted into franchise stores. The effective income tax rate for the 12- and 40-week periods ended October 7, 1995, increased to 38.6% and 38.5%, respectively, compared to 37.9% and 37.4% for the same periods in 1994. The provision for income taxes for the 12- and 40-week periods ended October 7, 1995, was $869,000 and $2,619,000 compared to $765,000 and $2,263,000 for the same periods in 1994. As a result of the foregoing, net earnings for the 12- and 40-weeks ended October 7, 1995, totaled $1,385,000 and $4,178,000, respectively, compared to $1,255,000 and $3,780,000 for the same periods in 1994. The Company's earnings per share for the 12- and 40-week periods ended October 7, 1995, increased by $0.04 and $0.13, or 16.7% and 18.6%, respectively, compared to the same periods in 1994. Earnings per share increased on a percentage basis more than net earnings as a result of treasury share repurchases during the first three quarters. These repurchases reduced the weighted average shares outstanding during the current period compared to the prior year period. The decrease in the average outstanding shares was partially offset by the dilutive effect of the stock options which were treated as common stock equivalents under the treasury stock method. Average outstanding common and equivalent shares for all periods have been restated to reflect a two-for-one stock split effected in the form of a 100% stock dividend as of the close of business on September 15, 1995. Certain Company retail stores continue to be under performing or noncompetitive in their respective marketplaces and, as a result, continue to incur operating losses. In order to further improve the Company's results from operations, management continues to evaluate various business alternatives relating to these operations, including the sale and subsequent conversion of these stores into franchise units, closing the stores or implementing other operational changes. Similar to prior fiscal years, implementation of these changes will likely result in the Company incurring certain repositioning charges involving the termination costs of replaced, closed or sold stores. While these repositioning charges may decrease the Company's reported net earnings for the period or periods in which the actions are taken, management believes that such actions may help improve the Company's long-term profitability. Liquidity and Capital Resources Net cash inflow from operating activities for the 40-week period ended October 7, 1995 was $6,476,000, a decrease of $4,455,000 over the prior year 40-week period ended October 8, 1995 cash inflow of $10,931,000. The decrease was attributable to a significant increase in prepaids and other assets during the first three quarters of 1995, along with a smaller increase in accounts payable and accrued liabilities. Prepaids and other assets increased due principally to significant additional net expenditures for land and building being held for resale associated with the development of one new replacement franchise supermarket and one new market store. Additionally, prepaids and other assets also increased due to advance payments made by the Company for the acquisition of a new financial software and a database management system software. The changes in accounts payable and accrued liabilities were due primarily to timing of various payments and accruals. Net cash outflow from investing activities for the 40-week period ended October 7, 1995, totaled $1,068,000, compared to net cash inflows of $689,000 during the same period in 1994. The change was due primarily to proceeds of $2,953,000 from the maturity of short-term investments during the first three quarters of 1994. This was partially offset by decreased capital expenditures for property and equipment. Expenditures for property and equipment during the first three quarters of 1995 totaled $2,065,000, compared to total capital expenditures of $3,135,000 for the same period in 1994. Net cash outflow from financing activities for the 40-week period ended October 7, 1995, totaled $4,133,000, compared to $6,131,000 during the same period in 1994. The substantial decrease in cash outflows was due primarily to the reduction of Common Stock repurchased by the Company during the first three quarters of 1995 totaling $2,642,000, compared to $4,907,000 for the same period in 1994. This was partially offset by an increase in cash dividends paid to the Company's common stockholders during this period. In accordance with a shareholder value enhancement plan announced at the July 1995 Board of Directors' meeting, cash dividends paid through the 40-weeks ended October 7, 1995, totaled $675,000, compared to $373,000 during the same period in 1994. As a result of the foregoing, net cash increased $1,275,000 during the 40- week period ended October 7, 1995, compared to $5,489,000 during the same period in 1994. Management believes that the Company's financial condition provides it with adequate flexibility to finance anticipated capital requirements without adversely affecting its financial position or liquidity. PART II - OTHER INFORMATION Item 2. Changes in Securities On September 11, 1995, the Company commenced a tender offer for all 3,000 outstanding shares of its Preferred Stock, $100 par value (the "Preferred Stock"), at a cash price of $50 per share. The tender offer was not for and did not affect the Company's Common Stock, $.05 par value (the "Common Stock"). The offer, which was originally scheduled to expire at midnight on October 11, 1995, was subsequently extended to, and expired at, midnight on October 30, 1995. A total of 2,841 shares, representing approximately 94.7% of the outstanding Preferred Stock, were tendered in the offer. The Company accepted the tendered shares of Preferred Stock and paid the $142,050 aggregate purchase price for the tendered shares from its available cash on hand on November 7, 1995. The Company's Restated Articles of Incorporation limit dividends on the Company's common Stock if annual dividends are not declared and paid on the Preferred Stock. The 159 shares of Preferred Stock remaining outstanding after the tender offer are therefore entitled to aggregate annual dividends of $477, or 3% of the aggregate par value of such shares, before the Company may pay the current $0.24 per share annual dividend on the Common Stock. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. Exhibit 27 - Financial Data Schedule. (b) No reports of Form 8-K were filed by the Company during the third quarter of fiscal 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SCHULTZ SAV-O STORES, INC. (Registrant) November 15, 1995 (Date) John H. Dahly, Executive Vice President, Chief Financial Officer and Treasurer EXHIBIT INDEX Exhibit No. Description 27 Financial Data Schedule EX-27 2 EXHIBIT 27 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED FINANCIAL STATEMENTS OF SCHULTZ SAV-O STORES, INC. AS OF AND FOR THE QUARTER ENDED OCTOBER 7, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 9-MOS DEC-30-1995 JAN-02-1995 OCT-07-1995 15,585,000 0 8,950,000 0 20,569,000 55,142,000 55,536,000 32,201,000 92,437,000 30,406,000 3,789,000 262,000 300,000 0 41,756,000 92,437,000 333,647,000 333,647,000 279,360,000 0 47,495,000 0 715,000 6,797,000 2,619,000 4,178,000 0 0 0 4,178,000 0.83 0.83 Amounts included in "Other costs and expenses". Net of "Allowances for doubtful accounts". 3rd Quarter is 40 weeks.
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