-----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, Nk3dzERSXA/GRRU2ku296hk0+oxoLZxgn2pUHqIPLjrBp7YdcaRik02YGjKAf/AX AjikXXK7mbDoh7jPkP05qQ== 0000897069-97-000469.txt : 19971119 0000897069-97-000469.hdr.sgml : 19971119 ACCESSION NUMBER: 0000897069-97-000469 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971004 FILED AS OF DATE: 19971118 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: SEC FILE NUMBER: 000-00549 FILM NUMBER: 97723325 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. 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 4, 1997 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 920-457-4433 Former name, former address and former fiscal year, if changed since last report Indicate by check mark v 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 v 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 11, 1997, 6,818,879 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 7 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. UNAUDITED CONSOLIDATED BALANCE SHEETS October 4, December 28, Assets 1997 1996 Current assets: Cash and equivalents $28,437,000 $27,763,000 Receivables 12,128,000 5,676,000 Inventories 19,415,000 22,316,000 Other current assets 5,970,000 3,367,000 Deferred income taxes 3,824,000 3,824,000 ------------ ------------ Total current assets 69,774,000 62,946,000 Noncurrent receivable under capital subleases 7,866,000 8,239,000 Property under capital leases, net 2,810,000 3,073,000 Other noncurrent assets 2,058,000 2,402,000 Property and equipment, net 19,716,000 21,544,000 ----------- ------------ Total Assets $102,224,000 $98,204,000 =========== ============ Liabilities and Shareholders' Investment Current liabilities: Accounts payable $24,970,000 $20,564,000 Accrued salaries and benefits 4,703,000 4,189,000 Accrued insurance 3,487,000 3,328,000 Retail repositioning reserve 1,741,000 852,000 Other accrued liabilities 1,148,000 3,692,000 Current obligations under capital leases 747,000 702,000 Current maturities of long-term debt 263,000 345,000 ----------- ------------ Total current liabilities 37,059,000 33,672,000 Long-term obligations under capital leases 11,783,000 12,368,000 Long-term debt 3,183,000 3,375,000 Deferred income taxes 1,754,000 1,754,000 Shareholders' investment: Common stock, $0.05 par value Authorized: 20,000,000 shares Issued: 8,750,342 as of October 4, 1997 and 5,833,570 as of December 28, 1996 438,000 292,000 Additional paid-in capital 13,940,000 13,331,000 Retained earnings 49,251,000 45,654,000 Treasury stock at cost Held: 1,931,463 as of October 4, 1997 and 1,214,472 as of December 28, 1996 (15,184,000) (12,242,000) ------------ ------------- Total shareholders' investment 48,445,000 47,035,000 ------------ ------------- Total Liabilities and Shareholders' Investment $102,224,000 $98,204,000 ============ ============= SCHULTZ SAV-O STORES, INC. UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
For the 12-weeks ended For the 40-weeks ended October 4, October 5, October 4, October 5, 1997 1996 1997 1996 Net sales $105,826,000 $105,383,000 $354,496,000 $345,006,000 Costs and expenses: Cost of products sold 89,409,000 88,737,000 298,805,000 289,824,000 Operating and administrative expenses 13,763,000 14,254,000 47,627,000 48,085,000 ------------ ------------ ------------ ------------ Operating income 2,654,000 2,392,000 8,064,000 7,097,000 Interest expense (195,000) (200,000) (653,000) (668,000) Interest income 362,000 201,000 902,000 577,000 ------------ ------------ ------------ ------------ Earnings before income taxes 2,821,000 2,393,000 8,313,000 7,006,000 Provision for income taxes 1,087,000 921,000 3,201,000 2,697,000 ------------ ------------ ------------ ------------ Net earnings $1,734,000 $1,472,000 $5,112,000 $4,309,000 ============ ============ ============ ============ Net earnings per share - primary and fully diluted $0.24 $0.21 $0.71 $0.60 ============ ============ ============ ============ Cash dividends paid per share of common stock $0.070 $0.067 $0.203 $0.173 ============ ============ ============ ============ Weighted average common shares outstanding 7,175,000 7,155,000 7,241,000 7,174,000 ============ ============ ============ ============
SCHULTZ SAV-O STORES, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS For the 40-weeks ended October 4, October 5, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $5,112,000 $4,309,000 Adjustments to reconcile net earnings to net cash flows from operating activities Depreciation and other noncash items 3,326,000 3,408,000 Changes in assets and liabilities Receivables (6,452,000) (2,913,000) Inventories 2,901,000 (483,000) Other current assets (2,304,000) (207,000) Accounts payable 4,406,000 1,966,000 Accrued liabilities (373,000) 527,000 ----------- ----------- Net cash flows from operating activities 6,616,000 6,607,000 CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property and equipment (1,325,000) (2,885,000) Receipt of principal amounts under capital sublease agreements 388,000 445,000 Proceeds from asset sales 120,000 38,000 ---------- ---------- Net cash flows from investing activities (817,000) (2,402,000) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment for acquisition of treasury stock (3,727,000) (1,377,000) Payment of cash dividends (1,401,000) (1,204,000) Proceeds from exercise of stock options 817,000 - Principal payments under capital lease obligations (540,000) (598,000) Principal payments on long-term debt (274,000) (267,000) Redemption of preferred stock - (16,000) ----------- ----------- Net cash flows from financing activities (5,125,000) (3,462,000) ----------- ----------- CASH AND EQUIVALENTS: Net increase 674,000 743,000 Balance, beginning of period 27,763,000 21,593,000 ----------- ----------- Balance, end of period $28,437,000 $22,336,000 =========== =========== SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid $686,000 $704,000 Income taxes paid 4,582,000 2,924,000 SCHULTZ SAV-O STORES, INC. NOTES TO UNAUDITED CONSOLIDATED 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 1996 annual report to shareholders, as incorporated by reference in the Company's Form 10-K for the fiscal year ended December 28, 1996. (2) Interest Expense For the 12-weeks ended For the 40-weeks ended October 4, October 5, October 4, October 5, 1997 1996 1997 1996 Long-term debt $80,000 $88,000 $270,000 $296,000 Imputed - capital leases 115,000 112,000 383,000 372,000 -------- -------- -------- -------- Interest expense $195,000 $200,000 $653,000 $668,000 ======== ======== ======== ========
(3) Other Current Assets October 4, December 28, 1997 1996 Property held for resale $4,117,000 $940,000 Prepaid expenses 1,030,000 615,000 Receivable under capital subleases 531,000 504,000 Retail systems for resale and other assets 292,000 1,308,000 ---------- ---------- Other current assets $5,970,000 $3,367,000 ========== ========== (4) Earnings per Share In the first quarter of 1997, the Financial Accounting Standards Board (FASB) issued the Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share," which is effective for fiscal years ending after December 15, 1997. The Company does not anticipate that the adoption of this statement will have any material impact on its consolidated financial statements. (5) Shareholders' Investment On July 25, 1997, the Company's Board of Directors declared a three-for- two stock split on the Company's Common Stock, effected in the form of a 50% stock dividend distributed on September 5, 1997 to shareholders of record on August 20, 1997. All references in the financial statements to per share amounts and average number of shares have been restated. (6) Reclassification Certain 1996 amounts previously reported have been reclassified to conform to the 1997 presentation. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Special Note Regarding Forward-Looking Statements Certain matters discussed in this Form 10-Q are "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement will include words such as the Company "believes," "anticipates," "expects" or words of similar import. Similarly, statements that describe the Company's future plans, objectives, strategies or goals are also forward-looking statements. Such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those currently anticipated. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward- looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this report and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. Results of Operations Selected costs and results as a percent of net sales:
For the 12-weeks ended For the 40-weeks ended October 4, October 5, October 4, October 5, 1997 1996 1997 1996 Cost of products sold 84.49% 84.20% 84.29% 84.01% Operating and administrative expenses 13.01 13.53 13.44 13.94 Earnings before income taxes 2.67 2.27 2.35 2.03 Net earnings 1.64 1.40 1.44 1.25
Net Sales Net sales for the 12- and 40-week periods ended October 4, 1997 were $105,826,000 and $354,496,000, respectively, compared to $105,383,000 and $345,006,000 for the same periods ended October 5, 1996. These nominal increases of $443,000 and $9,490,000, or 0.42% and 2.75%, respectively, were due principally to the Company's continuing emphasis on wholesale business volume, coupled with increases in same store retail sales. The increased wholesale business volume resulted mainly from the recently completed roll-out and success of the Piggly Wiggly Preferred Club electronic card marketing program. Additionally, the Company has completed six major Wisconsin franchise facility projects in Hubertus, Edgerton, Plymouth, DePere, Manitowoc and Evansville since October 5, 1996. These expansion and replacement projects yielded an increase of nearly 94,000 square feet of aggregate selling space, or an increase in excess of 109% at the six stores. During the third quarter of 1997, sales were essentially flat compared to the same period in 1996 due to increased competitive pressures in certain market areas, the closing of an underperforming franchise unit in Plover, Wisconsin and aggregate product cost deflation. As of October 4, 1997, the Company had 69 franchise and 16 corporate supermarkets compared to 68 franchise and 17 corporate supermarkets at October 5, 1996. On October 15, 1997, the Company completed the expansion of a franchise unit in Waterloo, Wisconsin. This facility project more than doubled the previous aggregate square footage of the store. On October 19, 1997, the Company acquired one franchise unit in Oshkosh, Wisconsin and converted it into a corporate supermarket. On October 29, 1997, the Company opened a new 43,000 square foot corporate store in Appleton, Wisconsin. The Company expects these events to result in increased total sales by at least $3,500,000 for the fourth quarter of 1997. Additionally, the Company acquired two operating supermarkets in the Menasha and Appleton, Wisconsin market areas from Nash Finch Company on October 26 and November 5, 1997, respectively. The Company is presently renovating the Menasha store and the Company expects to open this corporate store on November 11, 1997. As part of an expansion plan, the Company has temporarily closed the acquired Appleton store. The Company projects the expanded and completely renovated Appleton corporate store to open during the second quarter of 1998. Upon completion of both the renovation and expansion projects, the Company will close its two smaller, noncompetitive and older corporate Appleton stores and combine these operations into the two renovated units. The two replacement corporate supermarkets will aggregate 99,300 square feet, an increase of 125% over the combined 44,160 square feet of the present units. Consistent with the Company's continuing business strategy to expand its wholesale volume, the Company expects that the level of its wholesale sales will continue to be strong for the remainder of 1997. However, due to additional corporate retail stores in Oshkosh, Appleton and Menasha, the Company expects the level of retail sales during the fourth quarter of 1997 to increase relative to total sales. In addition to the Menasha and Appleton projects already mentioned, there are expansion or renovation projects at four franchise retail operations in various phases of planning or construction. These projects involve two expansions, one replacement store and one new market store. These projects are scheduled to be completed between the fourth quarter of 1997 through the second quarter of 1998. Additionally, the Company continues to support and enhance the Piggly Wiggly Preferred Club electronic card marketing program designed to increase sales without negatively impacting retail store gross margin, by rewarding current customers and attracting new customers through the offering of "clipless coupons" on weekly advertised specials and "automatic" savings on monthly store specials. As of the end of October, all of the Company's franchise and corporate supermarkets are fully operational with the card marketing program. Cost of Products Sold Cost of products sold, as a percent of sales, increased by 0.29% and 0.28%, respectively, to 84.49% and 84.29% for the 12- and 40-week periods ended October 4, 1997, compared to the same periods in 1996. The respective increases of $672,000 and $8,981,000 were the result of a reduction in the amount of higher margin retail sales compared to lower margin wholesale sales. However, with additional corporate stores in Oshkosh, Appleton and Menasha, the Company expects that the ratio of higher margin retail sales relative to total sales to increase nominally during the remainder of the year. Operating and Administrative Expenses Operating and administrative expenses, as a percent of sales, decreased by 0.52% and 0.50%, respectively, to 13.01% and 13.44% for the 12- and 40- week periods ended October 4, 1997, compared to the same periods in 1996. The Company acquired two supermarkets in the greater Appleton area from Nash Finch subsequent to the end of the third quarter. The Company is currently renovating or expanding both supermarkets. As a result of the acquisition and upon completion of the renovation or expansion projects, the Company plans to close its two smaller, noncompetitive and older corporate stores in the Appleton area. Due to the imminent closures of these two older corporate stores, the Company has taken a pretax charge of $300,000 for projected repositioning expenses. Despite the one-time pretax charge, total operating and administrative expenses decreased, in large part, due to the closure of two smaller, outdated and underperforming corporate stores located in Racine and Stevens Point, Wisconsin in September and October 1996. Net Earnings The effective income tax rate for both the 12- and 40-week periods ended October 4, 1997 was 38.5%, unchanged from the rate for the same periods in 1996. The provision for income taxes during the 12- and 40-week periods ended October 4, 1997 was $1,087,000 and $3,201,000, compared to $921,000 and $2,697,000 for the same periods in 1996. With continuing improvements in sales and productivity, the Company's net earnings-to-sales ratio for the 12- and 40-week periods ended October 4, 1997 improved to 1.64% and 1.44%, respectively, compared to 1.40% and 1.25% for the same periods in 1996. As a result of the foregoing, net earnings for the 12- and 40-weeks ended October 4, 1997 totaled $1,734,000 and $5,112,000 compared to $1,472,000 and $4,309,000 for the same periods in 1996, or increases of 17.8% and 18.6%, respectively. Net earnings per share, after reflecting the three- for-two stock split effective September 5, 1997, for the 12- and 40-week periods ended October 4, 1997 increased 14.3% to $0.24 compared with $0.21 in 1996 , and 18.3% to $0.71 compared with $0.60 in 1996. Certain Company corporate and franchise 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 continues 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 repositioning charges may decrease 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 The Company's operating results continue to enhance its strong financial position. The primary source of liquidity for the 40-week period ended October 4, 1997 was cash generated from operating activities. Cash provided by operating activities for the 40-weeks ended October 4, 1997 and October 5, 1996 were very comparable at $6,616,000 and $6,607,000, respectively. The nominal increase was principally attributable to higher net earnings for the 40-week period ended October 4, 1997, compared to the same period in 1996. Net cash outflow from investing activities for the 40-week period ended October 4, 1997 totaled $817,000, compared to $2,402,000 during the same period in 1996. The change was due primarily to a substantial decrease in capital expenditures for business system hardware and software during 1997, compared to 1996. The Company has a 1997 capital budget of $5,200,000, of which approximately $3,875,000 remain for future expenditures. With the opening of the 43,000 square foot Appleton store on October 29, 1997 and the acquisition of various equipment and fixtures from Nash Finch relating to the two operating supermarkets in the greater Appleton area, the Company has incurred additional expenditures in the range of $3,000,000 since October 4, 1997. The Company has financed and anticipates financing these needs from internally generated capital. Net cash outflow from financing activities for the 40-week period ended October 4, 1997 was $5,125,000, compared to $3,462,000 during the same period in 1996. The additional cash outflows was due principally to the increase in common stock repurchased by the Company during 1997, compared to 1996. Of the $3,727,000 common stock repurchased to date, 154,000 shares, or $1,743,000, was acquired from the open market while 129,000 shares, or $1,984,000, was reacquired subsequent to stock option exercises from officers. The 283,000 shares repurchased is reported after taking into account the three-for two stock split effective September 5, 1997. The Company's Board of Directors declared a three-for-two stock split in the form of a 50% stock dividend and simultaneously increased the amount of regular quarterly cash dividends by 5% to $0.07 per share on a post- stock split basis. The Company's regular quarterly cash dividend prior to the announced stock split was $0.10 per share on a pre-stock split basis. Both the stock dividend and cash dividend was paid on September 5, 1997 to shareholders of record on August 20, 1997. Fractional shares otherwise issuable pursuant to the stock split were paid in cash. The cash dividend was paid on a post-stock split basis. Cash dividends paid during the first three quarters of 1997 totaled $1,401,000 or $0.203 per share, an increase of $197,000 or 16% from the same period a year ago. After the three-for-two stock split, the Company had 6,824,000 shares outstanding. In summary, cash and equivalents increased $674,000 during the first three quarters of 1997, compared to an increase of $743,000 during the same period in 1996. Due to the Company's significant cash and other liquid assets, its consistent ability to generate cash flows from operations and 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. 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 three quarters of fiscal 1997. 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 11, 1997 /s/ John H. Dahly (Date) John H. Dahly, Executive Vice President, Chief Financial Officer and Treasurer EXHIBIT INDEX Exhibit Description 27 Financial Data Schedule EX-27 2
5 1 OTHER JAN-03-1998 DEC-29-1996 JUL-12-1997 28,437,000 0 12,128,000 0 19,415,000 69,774,000 54,406,000 34,690,000 102,224,000 37,059,000 3,183,000 0 0 438,000 48,007,000 102,224,000 354,496,000 354,496,000 298,805,000 0 47,627,000 0 653,000 8,313,000 3,201,000 5,112,000 0 0 0 5,112,000 0.71 0.71 40 weeks Net of "Allowances for doubtful accounts". Amounts included in "Other costs and expenses".
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