-----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, GxkJfToGaqqNeSRVZRMioazWxLmL/9zDq9na5gnPRFZRq4Fr3pOCilC9GA53n3oT jSh6O0jmMPhRqnw5AUEiNA== 0000897069-00-000327.txt : 20010312 0000897069-00-000327.hdr.sgml : 20010312 ACCESSION NUMBER: 0000897069-00-000327 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000422 FILED AS OF DATE: 20000601 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCHULTZ SAV O STORES INC CENTRAL INDEX KEY: 0000087588 STANDARD INDUSTRIAL CLASSIFICATION: 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: 647715 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 0001.txt 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 22, 2000 ------------- 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 SHEBOYGAN, WISCONSIN 53081 ---------------------- ------------ (Address of principal (Zip Code) 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 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 30, 2000, 5,938,569 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 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 Item 3. Quantitative and Qualitative Disclosures about Market Risk 11 PART II OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 11 2 PART I FINANCIAL INFORMATION Item 1. Financial Statements SCHULTZ SAV-O STORES, INC. CONSOLIDATED BALANCE SHEETS - - -------------------------------------------------------------------------------- (Unaudited) (Audited) April 22, January 1, Assets 2000 2000 - - -------------------------------------------------------------------------------- Current assets: Cash and equivalents $ 24,675,000 $ 22,433,000 Receivables 11,314,000 6,629,000 Inventories 22,248,000 26,313,000 Other current assets 4,831,000 3,410,000 Deferred Income taxes 3,900,000 3,900,000 - - -------------------------------------------------------------------------------- Total current assets 66,968,000 62,685,000 - - -------------------------------------------------------------------------------- Noncurrent receivable under capital subleases 4,418,000 4,531,000 Property under capital leases, net 3,335,000 3,462,000 Other noncurrent assets 2,467,000 2,664,000 Property and equipment, net 20,446,000 20,285,000 - - -------------------------------------------------------------------------------- Total assets $ 97,634,000 $ 93,627,000 ================================================================================ Liabilities and Shareholders' Investment - - -------------------------------------------------------------------------------- Current liabilities: Accounts payable $ 23,584,000 $ 19,545,000 Accrued salaries and benefits 5,007,000 5,284,000 Accrued insurance 3,217,000 3,002,000 Retail repositioning reserve 373,000 450,000 Other accrued liabilities 2,792,000 3,765,000 Current obligations under capital leases 723,000 696,000 Current maturities of long-term debt 160,000 146,000 - - -------------------------------------------------------------------------------- Total current liabilities 35,856,000 32,888,000 - - -------------------------------------------------------------------------------- Long-term obligations under capital leases 8,827,000 9,069,000 Long-term debt 2,789,000 2,865,000 Deferred income taxes 836,000 836,000 Shareholders' investment: Common stock 438,000 438,000 Additional paid-in capital 14,961,000 14,961,000 Retained earnings 65,328,000 63,995,000 Treasury stock (31,401,000) (31,425,000) - - -------------------------------------------------------------------------------- Total shareholders' investment 49,326,000 47,969,000 - - -------------------------------------------------------------------------------- Total liabilities and shareholder's investment $ 97,634,000 $ 93,627,000 ================================================================================ 3 SCHULTZ SAV-O STORES, INC. UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS - - -------------------------------------------------------------------------------- For the 16-weeks ended April 22, 2000 April 24, 1999 - - -------------------------------------------------------------------------------- Net sales $147,688,000 $146,951,000 Costs and expenses: Cost of products sold 123,230,000 123,155,000 Operating and administrative expenses 21,459,000 20,965,000 Operating income 2,999,000 2,831,000 Interest income 276,000 392,000 Interest expense (262,000) (231,000) Earnings before income taxes 3,013,000 2,992,000 Provision for income taxes 1,145,000 1,161,000 - - -------------------------------------------------------------------------------- Net earnings $ 1,868,000 $ 1,831,000 ================================================================================ Earnings per share - basic $ 0.31 $ 0.28 Earnings per share - diluted $ 0.31 $ 0.27 Cash dividends paid per share of common stock $ 0.09 $ 0.08 Weighted average common shares and equivalents 5,999,000 6,756,000 4 SCHULTZ SAV-O STORES, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - - -------------------------------------------------------------------------------- For the 16-weeks ended April 22, 2000 April 24, 1999 - - -------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 1,868,000 $ 1,831,000 Adjustments to reconcile net earnings to net cash flows from operating activities Depreciation and amortization 1,601,000 1,527,000 Changes in assets and liabilities Receivables (4,685,000) (3,421,000) Inventories 4,065,000 1,992,000 Other current assets (1,409,000) (1,032,000) Accounts payable 4,039,000 (1,541,000) Accrued liabilities (1,112,000) (1,194,000) - - -------------------------------------------------------------------------------- Net cash flows from operating activities 4,367,000 (1,838,000) - - -------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property and equipment (1,438,000) (787,000) Receipt of principal amounts under capital sublease agreements 100,000 125,000 Other investing activities 1,000 2,000 - - -------------------------------------------------------------------------------- Net cash flows from investing activities (1,337,000) (660,000) - - -------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of cash dividends (535,000) (528,000) Principal payments under capital lease obligations (215,000) (201,000) Principal payments on long-term debt (62,000) (61,000) Other financing activities 24,000 13,000 Payment for acquisition of treasury stock - (1,627,000) - - -------------------------------------------------------------------------------- Net cash flows from financing activities (788,000) (2,404,000) - - -------------------------------------------------------------------------------- CASH AND EQUIVALENTS: Net change 2,242,000 (4,902,000) Balance, beginning of period 22,433,000 34,334,000 - - -------------------------------------------------------------------------------- Balance, end of period $ 24,675,000 $ 29,432,000 ================================================================================ SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid $ 257,000 $ 226,000 Income taxes paid 1,013,000 1,349,000 5 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 1999 annual report to shareholders, as incorporated by reference in the Company's Form 10-K for the fiscal year ended January 1, 2000. (2) Interest Expense - - -------------------------------------------------------------------------------- For the 16-weeks ended April 22, 2000 April 24, 1999 - - -------------------------------------------------------------------------------- Imputed - capital leases $ 174,000 $ 137,000 Long-term debt 88,000 94,000 - - -------------------------------------------------------------------------------- Interest expense $ 262,000 $ 231,000 ================================================================================ (3) Other Current Assets - - -------------------------------------------------------------------------------- April 22, 2000 January 1, 2000 - - -------------------------------------------------------------------------------- Property held for resale $ 2,725,000 $ 1,088,000 Prepaid expenses 1,102,000 1,500,000 Retail systems and supplies for resale 665,000 496,000 Receivable under capital subleases 339,000 326,000 - - -------------------------------------------------------------------------------- Other current assets $ 4,831,000 $ 3,410,000 ================================================================================ (4) Segment Reporting The Company adopted FAS Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information" for its fiscal 1998. Based on management responsibility, the Company identified two business segments, wholesale and retail, in which it operates. The Company's management utilizes several measurement tools in evaluating each segment's performance and each segment's resource requirements. However, the principal measurement tools are consistent with the Company's consolidated financial statements and accordingly are reported on a similar basis. Wholesale operating profits on sales through the Company's corporate stores are allocated to the retail segment. 6 Summarized financial information for the first quarters of 2000 and 1999 concerning the Company's reportable segments is shown in the following tables (in thousands): - - -------------------------------------------------------------------------------- Sales 2000 1999 - - -------------------------------------------------------------------------------- Wholesale sales $ 120,394 $ 122,493 Intracompany sales (34,950) (38,304) ------------ ------------ Net wholesale sales 85,444 84,189 Retail sales 62,244 62,762 - - -------------------------------------------------------------------------------- Total sales $ 147,688 $ 146,951 ================================================================================ - - -------------------------------------------------------------------------------- Earnings Before Income Tax 2000 1999 - - -------------------------------------------------------------------------------- Wholesale $ 2,475 $ 2,326 Retail 524 505 ------------ ------------ Total operating income 2,999 2,831 Interest income 276 392 Interest expense (262) (231) ================================================================================ Earnings before income taxes $ 3,013 $ 2,992 ================================================================================ 7 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 22, 2000 April 24, 1999 - - -------------------------------------------------------------------------------- Gross margin 16.6% 16.2% Operating and administrative expenses 14.5 14.3 Earnings before income taxes 2.0 2.0 Net earnings 1.3 1.2 - - -------------------------------------------------------------------------------- Net Sales Net sales for the 16-week first quarter ended April 22, 2000 were $147.7 million, compared to nearly $147.0 million for the same period in 1999. The increase of $700,000, or 0.5%, was due to increased wholesale sales volume, substantially offset by a decrease in retail sales. Retail sales for the first quarter of 2000 decreased nearly 1.0% to $62.2 million compared to $62.8 million for the same period last year. This decrease was due primarily to intense competitive pressures in certain market areas, including the opening of new competitive stores in four of the Company's markets. Net wholesale sales volume for the first quarter of 2000 increased 1.5%, or $1,255,000, to $85.5 million, compared to $84.2 million for the same quarter in 1999. The net wholesale sales improvement was attributable to the following: (1) the completion since April 24, 1999 of four Wisconsin franchise store facility projects; (2) the successful conversion since April 24, 1999 to the Piggly Wiggly program of three new market Wisconsin franchise stores in Niagara, Winneconne and Markesan from other wholesalers; and (3) the opening in May 1999 of one new market franchise store in Cottage Grove, Wisconsin. The conversion of one franchise supermarket into a corporate store in November 1999 and additional competitive activity in certain franchise market areas offset some of the net wholesale sales volume increase. As of April 22, 2000, the Company had 70 franchise supermarkets and 19 corporate stores, all operating under the Piggly Wiggly banner. Since April 22, 2000, the Company has completed the following facility projects: > The opening of one replacement franchise supermarket in Pardeeville, Wisconsin, resulting in double the square footage of the old store; and > The opening of one replacement corporate supermarket in Racine, Wisconsin, increasing square footage by 86%. In addition to these recently completed projects, the Company expects to complete the construction of one new market franchise store in Kewaskum, Wisconsin during the second quarter of 2000, the replacement of franchise supermarkets in New Holstein and Slinger, Wisconsin during the second half of 2000 and the replacement of one corporate store in Zion, Illinois during the first half of 2001. The Company anticipates that these projects will have a positive impact on wholesale sales. Additionally, the Company plans to build a flagship Piggly Wiggly store of 60,000 square feet in Sheboygan, Wisconsin. This corporate replacement store is targeted to open in the middle of 2001. 8 Gross Margin Gross margin, as a percent of sales, improved 0.4% to 16.6% for the first quarter of 2000, compared to 16.2% for the same quarter in 1999. This increase was primarily attributable to improved retail gross margin. The retail gross margin was enhanced by the Company's continuing ability to utilize vendor marketing funds more effectively, thereby resulting in more competitive product costing. Also, retail gross margin benefited from a positive change in merchandising mix for certain products, primarily within the meat and produce departments. Operating and Administrative Expenses Operating and administrative expenses, as a percent of sales, increased 0.2% to 14.5% for the first quarter ended April 22, 2000 compared to 14.3% for the same quarter in 1999. Total operating and administrative expenses increased by nearly $500,000 for the 2000 period due to the following factors: 1. Increased health and accident insurance costs relating to retail stores; and 2. Increased operating expenses due to the conversion of a franchise unit to a corporate store in November 1999. The Company expects both factors to continue to increase operating and administrative expenses throughout the remainder of 2000. Due to the ongoing highly competitive nature of the industry in the Company's markets, certain Company franchise operators and corporate retail supermarkets continue to experience operational difficulties in their respective marketplaces. The Company continues to evaluate various business alternatives relating to its underperforming operations. The Company's business alternatives include, but are not limited to, the sale and subsequent conversion of corporate stores to franchise units, closing stores, or implementing other operational changes. As in certain prior years, implementation of these alternatives may result in the Company incurring certain repositioning or restructuring charges for replaced, closed or sold stores. These actions can negatively impact net earnings in the short-term, but the Company believes that such actions will help improve the Company's long-term profitability. Net Earnings Net earnings for the first quarter of 2000 increased $37,000, or 2.0%, to $1,868,000, compared to $1,831,000 for the same period in 1999. Net earnings for the first quarter of 2000 benefited from higher retail gross margins, which were offset by increased operating and administrative expenses and lower interest income from short-term investments. Interest income from short-term investments decreased period-to-period due to a reduction in the Company's cash position as a result of share repurchases totaling 723,500 shares, or $11.2 million, since April 24, 1999. The Company's net earnings-to-sales ratio improved nominally to 1.3% for the first quarter of 2000, compared to 1.2% for the same period in 1999. Diluted earnings per share for the first quarter of 2000 increased 14.8% to $0.31 from $0.27 for the same period last year. Due to share repurchases in 1999, the weighted average common shares and equivalents for the first quarter of 2000 were 5,999,000, compared to 6,756,000 for the same quarter in 1999, a decrease of 11.2%. Liquidity and Capital Resources - - ------------------------------- At April 22, 2000, the Company had cash and equivalents totaling $24.7 million. At year-end 1999, cash and equivalents aggregated $22.4 million. The net cash inflow of $2.2 million was attributable to certain operational, investing and financing activities as described below. The Company had net cash inflows from operating activities totaling nearly $4.4 million during the first quarter of 2000, compared to net cash outflows of $1.8 million from operations for the same quarter in 9 1999. The increase in cash flows from operations was due primarily to the timing of cash receipts, cash payments and changes in short-term financing to the Company's wholesale customers. The Company incurred $1.4 million in capital expenditures during the first quarter of 2000, compared to nearly $800,000 for the same period last year. The increase of $600,000 was due primarily to equipment purchases for the replacement supermarket in Racine, Wisconsin as well as other equipment and technological upgrades at other corporate retail supermarkets. At April 22, 2000, of the fiscal 2000 capital budget of $5.4 million, the Company has approximately $4.0 million available for the rest of the year. During the first quarter of 2000, the Company continued its comprehensive evaluation of upgrading and replacing its core business systems. As part of this process, the Company continues to explore several alternatives and courses of action which, if implemented, would likely involve substantial additional capital expenditures and amortization costs. The Company anticipates a decision will be made on its business systems later this year. The Company had net cash outflows from financing activities aggregating $800,000 during the first quarter of 2000, compared to net cash outflows of $2.4 million for the same quarter in 1999. The significant decrease was due exclusively to stock repurchases of $1.6 million during the first quarter of 1999. The quarter-to-quarter cash dividend per share increased to $0.09, or 12.5%, from $0.08 last year. Additionally, on May 10, 2000, the Company's Board of Directors authorized an increase in the stock repurchase program from $15 million to $20 million. Only $2 million of the $15 million previously authorized was available as of May 10, 2000. The Company's working capital position at April 22, 2000 was $31.1 million, compared to $29.8 million at year-end 1999. The Company's current ratio at April 22, 2000 was 1.87 to 1.00 with cash and equivalents constituting substantially all of the working capital. The Company also has unsecured revolving bank credit facilities aggregating $16.0 million, which remain available for use in their entirety. At April 22, 2000, the Company's liquidity position continued to be very favorable and strong. 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 including, but not limited, to the following: (i) presence of intense competitive market activity in the Company's market areas; (ii) ability to identify and develop new market locations for expansion purposes; (iii) continuing ability to obtain reasonable vendor marketing funds for promotional purposes; (iv) ongoing advancing information technology requirements; and (v) the Company's ability to continue to recruit, train and retain quality franchise and corporate retail store operators. Due principally to the competitive nature of the industry and to the quality of its retail store operators, the Company continues to evaluate various courses of action relating to its underperforming retail operations. These courses of action include closures, conversions and consolidations of retail stores. Implementation of these actions can result in certain repositioning charges to the Company. 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. 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company believes that its exposure to market risks related to changes in foreign currency exchange rates, interest rate fluctuations and trade accounts receivable is immaterial. PART II Other Information Item 2. Changes in Securities and Use of Proceeds In accordance with its program for annual compensation of independent directors, on January 26, 2000, the Company issued 556 shares of its Common Stock to each of its four non-employee directors that are not otherwise compensated by the Company for professional services. The Company issued such shares without registration under the Securities Act of 1933 in reliance on Section 4(2) of such Act. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 10 Form of Key Executive Employment and Severance Agreement between the Company and each of James H. Dickelman, Elwood F. Winn, John H. Dahly, Michael R. Houser and William K. Jacobson. Incorporated by reference to Exhibit 10.13 to the Company's Quarterly Report on Form 10-Q for the period ended July 18, 1998. Exhibit 27 Financial Data Schedule. (b) No reports of Form 8-K were filed by the Company during the first quarter of fiscal 2000. 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 31, 2000 /s/ Armand C. Go - - --------------------- --------------------------------------- (Date) Armand C. Go, Vice President, Treasurer and Chief Accounting Officer 11 EXHIBIT INDEX Exhibit Description 27 Financial Data Schedule 12 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF SCHULTZ, SAV-O STORES, INC. AS OF AND FOR THE 16 WEEKS ENDED APRIL 22, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 OTHER DEC-30-2000 JAN-02-2000 APR-22-2000 24,675,000 0 11,314,000 0 22,248,000 66,968,000 60,618,000 40,172,000 97,634,000 35,856,000 2,789,000 438,000 0 0 49,326,000 97,634,000 147,688,000 147,688,000 123,230,000 0 21,459,000 0 262,000 3,013,000 1,145,000 1,868,000 0 0 0 1,868,000 0.31 0.31 16 weeks. Net of "Allowances for doubtful accounts". Amounts included in "Other Costs and expenses".
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