-----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, HQoglygxdL5nuGhnje47qNs+u6xsNCcSbgFFagAllOLr3mE0npoeaeZ1XHc8XAgm gteNfV0eUXl7NTJwBqhuSw== 0000897069-96-000154.txt : 19960605 0000897069-96-000154.hdr.sgml : 19960605 ACCESSION NUMBER: 0000897069-96-000154 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960420 FILED AS OF DATE: 19960604 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: 96576451 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 April 20, 1996 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 May 24, 1996, 4,619,098 shares of common stock, $0.05 par value, were issued and outstanding. SCHULTZ SAV-O STORES, INC. FORM 10-Q INDEX PAGE NUMBER PART I - FINANCIAL INFORMATION Item 1. - Financial Statements Unaudited Consolidated Balance Sheets 3 Unaudited Consolidated Statements of Earnings 4 Unaudited Consolidated Statements of Cash Flows 5 Notes to Unaudited Consolidated Financial Statements 6 Item 2. - Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II - OTHER INFORMATION Item 6. - Exhibits and Reports on Form 8-K 10 SIGNATURES 10 PART I - FINANCIAL INFORMATION Item 1. Financial Statements SCHULTZ SAV-O STORES, INC. & SUBSIDIARY UNAUDITED CONSOLIDATED BALANCE SHEETS April 20 December 30 ASSETS 1996 1995 CURRENT ASSETS: Cash and equivalents $14,924,000 $14,424,000 Accounts receivable 6,762,000 5,562,000 Inventories 20,730,000 20,458,000 Other current assets 3,730,000 5,025,000 Amounts currently receivable under capital sublease agreements 581,000 581,000 Deferred income taxes 3,504,000 3,504,000 --------- --------- Total currents assets 50,231,000 49,554,000 AMOUNTS RECEIVABLE UNDER CAPITAL SUBLEASE AGREEMENTS 9,185,000 9,361,000 LEASED PROPERTY UNDER CAPITAL LEASES, net 3,005,000 3,089,000 OTHER NONCURRENT ASSETS 2,170,000 2,203,000 PROPERTY AND EQUIPMENT, net 22,253,000 22,827,000 ---------- ---------- Total assets $86,844,000 $87,034,000 ========== ========== LIABILITIES AND SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES: Accounts payable $13,463,000 $12,340,000 Accrued liabilities- Employee benefits 2,500,000 2,440,000 Retail repositioning reserve 1,098,000 1,145,000 Insurance related 2,869,000 2,805,000 Other 3,995,000 4,855,000 Current maturities of long-term debt 310,000 337,000 Current obligations under capital leases 777,000 777,000 -------- -------- Total current liabilities 25,012,000 24,699,000 ---------- ---------- DEFERRED INCOME TAXES 2,060,000 2,060,000 LONG-TERM DEBT 3,631,000 3,719,000 CAPITAL LEASE OBLIGATIONS 13,029,000 13,268,000 SHAREHOLDERS' INVESTMENT: Preferred stock 16,000 16,000 Common stock 292,000 292,000 Additional paid-in capital 12,990,000 12,990,000 Retained earnings 41,744,000 40,855,000 ---------- ---------- Total 55,042,000 54,153,000 Less treasury stock (11,930,000) (10,865,000) ---------- ----------- Total shareholders' investment 43,112,000 43,288,000 ---------- ---------- Total liabilities and shareholders' investment $86,844,000 $87,034,000 ========== =========== SCHULTZ SAV-O STORES, INC. & SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS For the 16-weeks ended April 20 April 22 1996 1995 NET SALES $134,079,000 $132,278,000 COSTS AND EXPENSES: Cost of products sold 112,548,000 110,989,000 Operating and administrative expenses 19,417,000 19,255,000 ---------- ---------- Operating income 2,114,000 2,034,000 Interest expense (268,000) (287,000) Interest income 204,000 265,000 --------- --------- Earnings before income taxes 2,050,000 2,012,000 PROVISION FOR INCOME TAXES 789,000 775,000 ---------- ---------- Net earnings $1,261,000 $1,237,000 ========= ========= NET EARNINGS PER SHARE - PRIMARY AND FULLY DILUTED $0.26 $0.24 ===== ===== CASH DIVIDENDS PAID PER SHARE OF COMMON STOCK $0.08 $0.03 ===== ===== AVERAGE OUTSTANDING COMMON AND EQUIVALENT SHARES 4,824,000 4,984,000 ========= ========= SCHULTZ SAV-O STORES, INC. & SUBSIDIARY UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS For the 16-weeks ended April 20 April 22 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $1,261,000 $1,237,000 Adjustments to reconcile net earnings to net cash flows from operating activities- Depreciation and amortization 1,352,000 1,408,000 Other non-cash items - 154,000 Changes in assets and liabilities- (Increase) in receivables (1,200,000) (1,137,000) (Increase) decrease in inventories (272,000) 1,063,000 Decrease in other current assets 1,295,000 48,000 Increase in accounts payable 1,123,000 2,859,000 (Decrease) in accrued liabilities (810,000) (1,614,000) --------- --------- Net cash flows from operating activities 2,749,000 4,018,000 ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property and equipment (660,000) (716,000) Receipt of principal amounts under capital sublease agreements and notes receivable 176,000 159,000 Proceeds from asset sales - 559,000 --------- -------- Net cash flows from investing activities (484,000) 2,000 --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment for acquisition of treasury stock (1,065,000) (620,000) Payment of cash dividends (373,000) (155,000) Principal payments under capital lease obligations (239,000) (220,000) Principal payments on long-term debt (88,000) (88,000) --------- --------- Net cash flows from financing activities (1,765,000) (1,083,000) --------- --------- CASH AND EQUIVALENTS: Net increase 500,000 2,937,000 Balance, beginning of period 14,424,000 14,310,000 Balance, end of period $14,924,000 $17,247,000 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for- Interest $297,000 $291,000 Taxes 959,000 2,043,000 SCHULTZ SAV-O STORES, INC. & SUBSIDIARY NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (1) Basis of Presentation The financial statements include the accounts of Schultz Sav-O Stores, Inc. (referred to as "Company") and PW Trucking, Inc., a wholly-owned subsidiary that began operations on January 1, 1996. The subsidiary was created to provide contract and common carrier services for the Company and other companies in Sheboygan County throughout a seven-state Midwest territory. All significant inter-company accounts and transactions between the Company and its subsidiary have been eliminated. 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 1995 annual report to shareholders, as incorporated by reference in the Company's Form 10-K for the fiscal year ended December 30, 1995. (2) Interest Expense Interest expense consists of the following: For the 16-weeks ended April 20 April 22 1996 1995 Interest expense: Long-term debt $120,000 $131,000 Imputed - capital leases 148,000 156,000 ------- ------- Interest expense $268,000 $287,000 ======= ======= (3) Other Current Assets Other current assets consists of following: April 20 December 30 1996 1995 Retail systems for resale and other assets $2,296,000 $1,979,000 Land and building for resale 771,000 2,389,000 Prepaid expenses 663,000 657,000 --------- --------- Other current assets $3,730,000 $5,025,000 ========= ========= (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. All references in the financial statements to per share amounts and average number of shares have been restated. (5) Accounting Pronouncement In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," which the Company adopted during the first quarter of fiscal 1996. As allowable under this pronouncement, the Company will continue to present financial statement information under APB Opinion 25. However, the Company will be required to provide additional disclosures of proforma net income and proforma earnings per share as if the fair value based method of accounting for stock options had been used to account for stock-based compensation cost. 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 16-weeks ended April 20 April 22 1996 1995 Cost of products sold . . . . . . . . . . . 83.9% 83.9% Operating and administrative expenses . . . 14.5 14.6 Earnings before income taxes . . . . . . . 1.5 1.5 Net earnings . . . . . . . . . . . . . . . 0.9 0.9 Net sales for the 16-week period ended April 20, 1996 were $134,079,000 compared to the 16-week period ended April 22, 1995 net sales of $132,278,000. The increase of $1,801,000, or 1.4%, was due primarily to an increase in the Company's wholesale business volume, which more than offset the retail sales decline resulting from continued intense retail competition and from the continuing increase in the relative percentage of wholesale sales to retail sales. Since April 22, 1995, the Company has opened one new market franchise store in November 1995 and has sold one of its corporate stores and converted it to a franchise supermarket in February 1996. As of April 20, 1996, the Company had 67 franchised and 18 corporate supermarkets compared to 65 franchised and 19 corporate supermarkets at April 22, 1995. Consistent with the Company's business strategy to expand its wholesale business volume, the Company expects that the level of its wholesale sales will continue to increase relative to its total sales for the remainder of 1996. Currently, there are expansion or renovation projects at six franchise retail projects in various phases of planning or construction. These projects involve two franchise expansions, one new market franchise and three replacement franchise stores ranging in size from 21,000 to 35,000 square feet. Additionally, the Company continues to implement its new 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. As of April 20, 1996, there were 19 franchise and corporate supermarkets on the program with another 11 stores planned to be added in June 1996. Cost of products sold, as a percent of sales, was 83.9% for the 16-week period ended April 20, 1996, unchanged from the same period in 1995. While the percentage did not change, total cost of products sold increased $1,559,000 for the first quarter of 1996 compared to the first quarter of 1995. The Company expects that its sales mix trend resulting from its greater emphasis on lower margin wholesale sales compared to higher margin retail sales will continue throughout 1996. This continuing emphasis is expected to result in a nominal decrease in gross margin for the rest of 1996. While operating and administrative expenses, as a percent of sales, decreased by 0.1% to 14.5% for the 16-week period ended April 20, 1996, compared to the same period in 1995, the nominal decrease was not as significant as otherwise would have resulted from the Company's changing sales mix. Total operating and administrative expenses increased $162,000 between the comparable periods. These results were due primarily to additional expenses incurred for the nonrealization of receivables from franchise customers caused by continuing highly competitive retail market conditions. It is likely that the Company will continue to incur these expenses until competitive market conditions stabilize. Additionally, the Company incurred expenses relating to the continuing implementation of its business system upgrades and electronic card marketing program. During the first quarter of 1996, the Company, however, continued to realize a reduction in expenses associated with the corporate retail supermarkets that have either been closed or sold and converted into franchise stores. The effective income tax rate for the first quarter ended April 20, 1996 was 38.5%, unchanged from the rate for the same quarter in 1995. The provision for income taxes during the 16-week periods ended April 20, 1996 and April 22, 1995 was $789,000 and $775,000, respectively. As a result of the foregoing, net earnings for the 16-weeks ended April 20, 1996 totaled $1,261,000, compared to $1,237,000 for the same period in 1995, or an increase of 2.0%. The Company's 1996 first quarter earnings per share increased by $0.02, or 8.3%, compared to the same period in 1995. Earnings per share increased on a percentage basis more than net earnings as a result of share repurchases effected during the first 16 weeks of 1996 which reduced the number of average shares outstanding for the quarter. The decrease in the average outstanding shares for the 16- week periods ended April 20, 1996 and April 22, 1995 was partially reduced due to the dilutive effect of stock options which were treated as common stock equivalents under the treasury stock method. Some of the Company's corporate retail supermarkets continue to be underperforming or noncompetitive in their respective marketplaces and, as a result, continue to incur operating losses. In order to further improve the Company's results of operations, the Company is continuing to evaluate various business alternatives relating to these operations, including, but not limited to, selling these corporate stores and converting them into franchise supermarkets, closing the stores or implementing other operational changes. Similar to prior fiscal years, implementation of these actions will likely result in the Company incurring certain repositioning charges involving the termination costs of replaced, closed or sold stores. While these charges may reduce the Company's reported net earnings for the period or periods in which the actions are taken, the Company believes that such actions will improve the Company's long-term profitability. Liquidity and Capital Resources Net cash inflows from operating activities for the 16-week period ended April 20, 1996 were $2,749,000, a decrease of $1,269,000 from the prior year 16-week period ended April 22, 1995. The decrease was attributable primarily to increased inventory purchases as well as smaller incremental increases in accounts payable. This difference was attributable to the timing of cash payments. The decrease was offset partially by the change in accrued liabilities primarily resulting from significant tax payments made by the Company during the first quarter of 1995. Net cash outflows from investing activities for the first quarter of 1996 totaled $484,000, compared to net cash inflows of $2,000 during the same period in 1995. The change was due primarily to proceeds from asset sales of $559,000 during the first quarter of 1995. Capital expenditures for property and equipment during the first quarter of 1996 totaled $660,000, compared to the 1995 first quarter total of $716,000. The Company has a 1996 capital budget of $3,300,000, of which, $2,640,000 remain for future expenditures. The Company anticipates financing these needs from internally generated capital. Net cash outflows from financing activities for the 16-week period ended April 20, 1996 were $1,765,000, compared to $1,083,000 during the same period in 1995. The increase in cash outflows was due principally to the $445,000 incremental cost of repurchasing common stock during the first quarter of 1996, compared to the first quarter of 1995. Additionally, cash dividends paid during the first quarter of 1996 totaled $373,000, an increase of $218,000 from the same period in 1995. As of April 20, 1996, the Company had available the entire amount of unsecured revolving bank credit facilities totaling $16,000,000. As a result of the foregoing, net cash increased $500,000 during the 16- weeks ended April 20, 1996, compared to an increase of $2,937,000 during the same period in 1995. In view of the Company's significant cash and other liquid assets, its consistent ability to generate cash flows from operations and the availability of external financing, the Company foresees no difficulty in providing financing necessary to fund its capital commitments and working capital needs for the foreseeable future. PART II - OTHER INFORMATION 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 first quarter of fiscal 1996. 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) May 29, 1996 /s/ John H. Dahly (Date) John H. Dahly, Executive Vice President, Chief Financial Officer and Treasurer EXHIBIT INDEX Exhibit No. Description 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF SCHULTZ SAV-O STORES, INC. AS OF AND FOR THE 16 WEEKS ENDED APRIL 20, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 4-MOS DEC-28-1996 DEC-31-1995 APR-20-1996 14,924,000 0 6,762,000 0 20,730,000 50,231,000 55,847,000 33,594,000 86,844,000 25,012,000 3,631,000 16,000 0 292,000 42,804,000 86,844,000 134,079,000 134,079,000 112,548,000 0 19,417,000 0 268,000 2,050,000 789,000 1,261,000 0 0 0 1,261,000 0.26 0.26 Amounts included in "Other costs and expenses". Net of "Allowances for doubtful accounts". 1st Quarter is 16 weeks.
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