-----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, RJingTtrLD6cchX5ihZR4Fm6JdYnXwAzRM2CUKI3IclNsgZUsFMOzMlISpwLCvQT Wq0jPnugbYReOlaUWLsyFQ== 0000897069-99-000571.txt : 20010312 0000897069-99-000571.hdr.sgml : 20010312 ACCESSION NUMBER: 0000897069-99-000571 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991009 FILED AS OF DATE: 19991119 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: 99760929 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 9, 1999 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 November 15, 1999, 6,041,029 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 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 12 2 PART I FINANCIAL INFORMATION Item 1. Financial Statements SCHULTZ SAV-O STORES, INC. CONSOLIDATED BALANCE SHEETS - - -------------------------------------------------------------------------------- (Unaudited) (Audited) October 9, January 2, Assets 1999 1999 - - -------------------------------------------------------------------------------- Current assets: Cash and equivalents $ 27,977,000 $ 34,334,000 Receivables 12,635,000 6,233,000 Inventories 23,838,000 23,951,000 Other current assets 2,660,000 2,385,000 Deferred income taxes 4,645,000 4,376,000 - - -------------------------------------------------------------------------------- Total current assets 71,755,000 71,279,000 - - -------------------------------------------------------------------------------- Noncurrent receivable under capital subleases 5,805,000 6,107,000 Property under capital leases, net 2,278,000 2,499,000 Other noncurrent assets 3,464,000 3,524,000 Property and equipment, net 20,204,000 21,687,000 - - -------------------------------------------------------------------------------- $ 103,506,000 $ 105,096,000 ================================================================================ Liabilities and Shareholders' Investment - - -------------------------------------------------------------------------------- Current liabilities: Accounts payable $ 26,806,000 $ 24,798,000 Accrued salaries and benefits 5,607,000 5,040,000 Accrued insurance 3,619,000 3,020,000 Retail repositioning reserve 485,000 685,000 Other accrued liabilities 4,767,000 4,060,000 Current obligations under capital leases 687,000 656,000 Current maturities of long-term debt 154,000 136,000 - - -------------------------------------------------------------------------------- Total current liabilities 42,125,000 38,395,000 - - -------------------------------------------------------------------------------- Long-term obligations under capital leases 9,229,000 9,764,000 Long-term debt 2,886,000 3,021,000 Deferred income taxes 695,000 831,000 Shareholders' investment: Common stock 438,000 438,000 Additional paid-in capital 14,359,000 14,359,000 Retained earnings 61,723,000 57,792,000 Treasury stock (27,949,000) (19,504,000) - - -------------------------------------------------------------------------------- Total shareholders' investment 48,571,000 53,085,000 - - -------------------------------------------------------------------------------- $ 103,506,000 $ 105,096,000 ================================================================================ 3 SCHULTZ SAV-O STORES, INC. UNAUDITED CONSOLIDATED STATEMENTS OF EARNINGS
-------------------------------------------------------------------------------------------------------------------------------- For the 12-weeks ended For the 40-weeks ended October 9, October 10, October 9, October 10, 1999 1998 1999 1998 -------------------------------------------------------------------------------------------------------------------------------- Net sales $ 113,406,000 $ 112,550,000 $ 375,481,000 $ 368,760,000 Costs and expenses: Cost of products sold 95,053,000 94,459,000 314,584,000 309,156,000 Operating and administrative expenses 15,774,000 15,019,000 52,225,000 50,564,000 -------------------------------------------------------------------------------------------------------------------------------- Operating income 2,579,000 3,072,000 8,672,000 9,040,000 Interest income 331,000 366,000 973,000 956,000 Interest expense (177,000) (181,000) (590,000) (634,000) -------------------------------------------------------------------------------------------------------------------------------- Earnings before income taxes 2,733,000 3,257,000 9,055,000 9,362,000 Provision for income taxes 1,060,000 1,263,000 3,513,000 3,632,000 -------------------------------------------------------------------------------------------------------------------------------- Net earnings $ 1,673,000 $ 1,994,000 $ 5,542,000 $ 5,730,000 ================================================================================================================================ Earnings per share - basic $ 0.27 $ 0.29 $ 0.86 $ 0.84 Earnings per share - diluted $ 0.26 $ 0.29 $ 0.84 $ 0.82 Cash dividends paid per share of common stock $ 0.09 $ 0.08 $ 0.25 $ 0.22 Weighted average common shares and equivalents 6,421,000 6,937,000 6,607,000 6,978,000
4 SCHULTZ SAV-O STORES, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
- - ----------------------------------------------------------------------------------------- For the 40-weeks ended October 9, October 10, 1999 1998 - - ----------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 5,542,000 $ 5,730,000 Adjustments to reconcile net earnings to net cash flows from operating activities Depreciation and amortization 3,809,000 3,900,000 Changes in assets and liabilities Receivables (6,402,000) 409,000 Inventories 113,000 745,000 Other current assets (340,000) 1,093,000 Accounts payable 2,008,000 2,614,000 Accrued liabilities 1,268,000 1,173,000 - - ----------------------------------------------------------------------------------------- Net cash flows from operating activities 5,998,000 15,664,000 - - ----------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property and equipment (2,120,000) (2,431,000) Receipt of principal amounts under capital sublease agreements 313,000 341,000 Other 129,000 296,000 - - ----------------------------------------------------------------------------------------- Net cash flows from investing activities (1,678,000) (1,794,000) - - ----------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment for acquisition of treasury stock (8,503,000) (4,599,000) Payment of cash dividends (1,611,000) (1,499,000) Principal payments under capital lease obligations (504,000) (511,000) Principal payments on long-term debt (117,000) (183,000) Proceeds from exercise of stock options - 612,000 Other 58,000 14,000 - - ----------------------------------------------------------------------------------------- Net cash flows from financing activities (10,677,000) (6,166,000) - - ----------------------------------------------------------------------------------------- CASH AND EQUIVALENTS: Net change (6,357,000) 7,704,000 Balance, beginning of period 34,334,000 23,124,000 - - ----------------------------------------------------------------------------------------- Balance, end of period $27,977,000 $30,828,000 ========================================================================================= SUPPLEMENTAL CASH FLOW DISCLOSURES: Interest paid $ 587,000 $ 640,000 Income taxes paid 3,794,000 4,147,000
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 1998 annual report to shareholders, as incorporated by reference in the Company's Form 10-K for the fiscal year ended January 2, 1999. (2) Interest Expense
- - --------------------------------------------------------------------------------------------------------------------- For the 12-weeks ended For the 40-weeks ended October 9, October 10, October 9, October 10, 1999 1998 1999 1998 - - --------------------------------------------------------------------------------------------------------------------- Imputed - capital leases $ 103,000 $ 109,000 $ 342,000 $ 363,000 Long-term debt 70,000 72,000 235,000 245,000 Other 4,000 - 13,000 26,000 - - --------------------------------------------------------------------------------------------------------------------- Interest expense $ 177,000 $ 181,000 $ 590,000 $ 634,000 =====================================================================================================================
(3) Other Current Assets - - -------------------------------------------------------------------------------- October 9, 1999 January 2, 1999 - - -------------------------------------------------------------------------------- Prepaid expenses $ 1,320,000 $ 1,086,000 Property held for resale 817,000 578,000 Receivable under capital subleases 396,000 407,000 Retail systems and supplies for resale 127,000 314,000 - - -------------------------------------------------------------------------------- Other current assets $ 2,660,000 $ 2,385,000 ================================================================================ (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. The "corporate" heading includes corporate-related items, principally cash and 6 equivalents. As it relates to operating income, the "corporate" heading includes corporate-related items allocated to the appropriate segments. Summarized financial information for the third quarter and year-to-date of 1999 and 1998 concerning the Company's reportable segments is shown in the following tables (in thousands):
- - ------------------------------------------------------------------------------------------------------------------ For the 12-weeks ended For the 40-weeks ended October 9, October 10, October 9, October 10, Sales 1999 1998 1999 1998 - - ------------------------------------------------------------------------------------------------------------------ Wholesale sales $ 94,360 $ 93,472 $ 312,075 $ 307,382 Intracompany sales (27,787) (28,622) (94,103) (94,053) Net wholesale sales 66,573 64,850 217,972 213,329 Retail sales 46,833 47,700 157,509 155,431 - - ------------------------------------------------------------------------------------------------------------------ Total sales $ 113,406 $ 112,550 $ 375,481 $ 368,760 ================================================================================================================== - - ------------------------------------------------------------------------------------------------------------------ For the 12-weeks ended For the 40-weeks ended October 9, October 10, October 9, October 10, Earnings before Income Tax 1999 1998 1999 1998 - - ------------------------------------------------------------------------------------------------------------------ Wholesale $ 2,089 $ 2,203 $ 6,772 $ 6,561 Retail 490 869 1,900 2,479 Total operating income 2,579 3,072 8,672 9,040 Interest income 331 366 973 956 Interest expense (177) (181) (590) (634) - - ------------------------------------------------------------------------------------------------------------------ Earnings before income taxes $ 2,733 $ 3,257 $ 9,055 $ 9,362 ==================================================================================================================
(5) Reclassification Certain third quarter 1998 information previously reported has been reclassified to conform to the third quarter 1999 presentation. 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 12-weeks ended For the 40-weeks ended October 9, October 10, October 9, October 10, 1999 1998 1999 1998 - - --------------------------------------------------------------------------------------------------------------------- Cost of products sold 83.8% 83.9% 83.8% 83.8% Operating and administrative expenses 13.9 13.3 13.9 13.7 Earnings before income taxes 2.4 2.9 2.4 2.5 Net earnings 1.5 1.8 1.5 1.6 - - ---------------------------------------------------------------------------------------------------------------------
Net Sales Net sales for the 12- and 40- week periods ended October 9, 1999 were $113.4 million and $375.5 million, respectively, compared to $112.6 million and $368.8 million, respectively, for the same periods in 1998. The increases of $800,000 and $6.7 million, or 0.8% and 1.8%, respectively, were primarily attributable to the improvements in wholesale sales volume. Retail sales for the 12- and 40- week periods ended October 9, 1999 were $46.8 million and $157.5 million, respectively, compared to $47.7 million and $155.4 million for the same periods in 1998. The third quarter retail sales decreased 1.8%, or nearly $900,000, due principally to competitive pressures in certain market areas. Year-to-date retail sales increased $2.1 million, or 1.3%, due primarily to the Appleton market replacement corporate store that opened in the third quarter of 1998. Net wholesale sales for the 12- and 40-week periods ended October 9, 1999 were $66.6 million and $218.0 million, respectively, compared to $64.9 million and $213.3 million for the same periods in 1998. The increases of $1.7 million and $4.7 million, or 2.6% and 2.2%, respectively, benefited from the completion of a number of franchise facility projects. As of October 9, 1999, the Company had 70 independent franchise-owned supermarkets and 18 corporate stores, all operating under the Piggly Wiggly banner. During the third quarter, the Company continued to expand the wholesale segment of the business when the Company converted independent operators in Niagara and Winneconne, Wisconsin from other wholesalers into Piggly Wiggly franchise units. The Company has also commenced construction projects on one replacement franchise unit and one new market franchise store during the fourth quarter. These projects are scheduled to be completed during the second quarter of 2000. As part of the Company's efforts to also improve the quality of our corporate supermarkets, it has a major remodeling and expansion project currently in progress in one corporate store in Racine, Wisconsin. The Company hopes to complete this expansion during the first quarter of 2000 and the Company anticipates the store square footage will nearly double its current size. Although the third quarter results were disappointing, the Company has seen improved retail and wholesale sales trends since mid-September. This positive trend is being driven, in large part, by the kick-off of a major advertising and marketing effort celebrating the Company's 50 years as Piggly Wiggly in Wisconsin and a rebound in sales from certain stores that have recently been affected by the opening of competitive stores. The Company believes it has developed an aggressive marketing plan to carry it through the end of 1999 and management anticipates that these efforts will generate sales increases for the remainder of the year. 8 Cost of Products Sold The Company's sales mix of 41.9% retail and 58.1% wholesale for the first three quarters of 1999 represented a nominal change from the sales mix of 42.1% retail and 57.9% wholesale for the same period last year. The retail sales mix decreased 0.2% due principally to the $900,000, or 1.8%, decrease in retail sales for the third quarter of 1999 compared to the third quarter of 1998. Although the Company's retail sales mix decreased, the Company's cost of products sold, as a percent of sales, for the third quarters of 1999 and 1998 were comparable at 83.8% and 83.9%, respectively. For the year-to-date, as a percent of sales, cost of products sold remained constant at 83.8%. Therefore, gross margin for both years was 16.2%. This consistency in gross margin between years was achieved despite the reduction in retail sales mix, largely due to improved retail gross margin, especially in grocery, during the third quarter of 1999, compared to the same quarter last year. The Company anticipates that the additions of franchise supermarkets in Niagara and Winneconne, Wisconsin during the third quarter of 1999 will have a positive impact on wholesale sales. A resulting wholesale sales mix improvement will, however, be partially offset by the Company's conversion of a franchise unit in Oshkosh, Wisconsin into a corporate supermarket during the fourth quarter of 1999. Therefore, the Company anticipates that the retail-to-wholesale sales mix for the rest of the year should remain approximately 42% to 58%. Operating and Administrative Expenses Operating and administrative expenses, as a percent of sales, increased to 13.9% for 12- and 40-week periods ended October 9, 1999, compared to 13.3% and 13.7%, respectively for the same period in 1998. The increase in operating and administrative expenses was due primarily to two main factors. First, retail operating expenses for the first three quarters of 1999 increased approximately $1.1, million due principally to increased expenses incurred for the Company's Appleton store that opened in August 1998. Second, wholesale operating and administrative expenses also increased. Specifically, warehouse payroll costs have increased by $250,000, due principally to additional overtime hours resulting from a lack of qualified personnel in the labor market. 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 a variety of operational issues in their respective marketplaces. The Company continues to evaluate various business alternatives relating to these underperforming operations. The Company's business alternatives include, but are not limited to, the sale and conversion of corporate stores to franchise units, closing stores, or implementing other operational changes. As in certain prior years, implementation of these alternatives is likely to result in the Company incurring certain repositioning or restructuring charges for these replaced, closed or sold stores and negatively impact net earnings in the short term. However, the Company believes that such actions can help improve the Company's long-term profitability. The Company began a comprehensive business systems review to analyze and replace its existing core systems with an integrated business system more responsive to the Company's strategic plan, while incorporating best business practices and best technology practices currently available. The Board of Directors created a steering committee and a project team composed of internal professionals and outside retail industry consultants. The estimated consulting fee for the comprehensive planning stage of this project is in the range of $500,000, most of which is projected to be incurred and expensed during 1999. The Company expects to complete this business systems review process during the first half of 2000. Cost estimates for the actual core systems implementation, which may be a significant amount, will be determined as part of the comprehensive plan which will then be presented to the Board of Directors for their review and approval. 9 Net Earnings Net earnings for the 12- and 40- week periods ended October 9, 1999 were $1.7 million and $5.5 million, respectively, compared to $2.0 million and $5.7 million, respectively, for the same periods in 1998. The decreases of $300,000 and $200,000, or 16.1% and 3.3%, respectively, were principally attributable to weak retail segment performance that was affected by intense competitive pressures in certain market areas. Diluted earnings per share for the 12- and 40-week periods ended October 9, 1999 decreased 10.3% to $0.26, compared to $0.29 in 1998, and increased 2.4% to $0.84 compared to $0.82 in 1998, respectively. The weighted average common shares and equivalents were 6,421,000 and 6,937,000 for the third quarters of 1999 and 1998, and 6,607,000 and 6,978,000 for the first three quarters of 1999 and 1998. The decrease in weighted average common shares and equivalents was a result of the Company's ongoing stock repurchase program. Liquidity and Capital Resources - - ------------------------------- At October 9, 1999, the Company had cash and equivalents totaling $28.0 million. At year-end 1998, cash and equivalents aggregated $34.3 million. The net cash utilization of $6.3 million was attributable to certain significant operational, investing and financing activities as described below. The Company had net cash inflows from operating activities of $6.0 million during the first three quarters of 1999, compared to a net cash inflow of $15.7 million for the same period in 1998. The change in cash flows from operating activities between quarters of $9.7 million was due primarily to the timing of cash receipts, cash payments, and a change in short-term financing to its wholesale customers. Net cash outflows from investing activities for the 40-week period ended October 9, 1999 totaled $1.7 million, compared to nearly $1.8 million for the same period in 1998. The Company incurred $2.1 million in capital expenditures during the first three quarters of 1999. A significant portion of the expenditures related to retail store equipment and technological upgrades. As of October 9, 1999, the Company still has approximately $1.2 million available as part of its fiscal 1999 capital budget of $3.3 million. The Company does not anticipate investing all of the remaining $1.2 million during the fourth quarter of 1999. Instead, the Company expects to carry over into fiscal 2000 any unused portion of the 1999 capital budget. Net cash outflows from financing activities for the 40-week period ended October 9, 1999, totaled $10.7 million, compared to nearly $6.2 million for the same period in 1998. Approximately $8.5 million of the cash outflow was attributable to the 523,600 shares of common stock the Company has repurchased in the open market in 1999 as part of its ongoing stock repurchase program. The Company's Board of Directors also authorized an increase in the stock repurchase program from $10 million to $15 million. Cash dividends paid increased 7.5% to $1.6 million for the first three quarters of 1999, compared to the same period in 1998. The Company's working capital position at October 9, 1999 was $29.6 million, compared to $32.9 million at January 2, 1999. The Company's current ratio at October 9, 1999 was 1.70 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 remains available for use in its entirety. At October 9, 1999, the Company's liquidity position continues to be very favorable and strong. 10 Year 2000 Issues - - ---------------- As of October 9, 1999, the Company believes it is essentially on schedule to complete all testing, validation and implementation of all IT and non-IT systems before the end of the year. Based on tests, validation and implementation that have been completed to date, the Company expects its IT and non-IT systems to be completely tested, validated and implemented on or before December 1, 1999. Total year 2000 expenses are not expected to exceed $500,000, of which approximately $360,000 will be charged to operations during fiscal 1999. During the first three quarters of 1999, the Company incurred nearly $300,000. As part of the year 2000 project, the Company has identified business relationships with third parties, including suppliers, vendors, financial institutions and other service providers, which the Company believes are critical to its business operations. The Company has been communicating with these third parties through correspondence and/or interviews to ascertain the extent to which they are addressing their year 2000 compliance issues. The Company will continue to assess and monitor the progress of these third parties in resolving year 2000 issues. The Company undertakes a certain amount of risk by relying on the third parties' own year 2000 assessments. Because of this, the Company believes that a key vendor's failure to resolve its year 2000 issues is the most likely worst case scenario for the Company. Such failure could result in the Company not being able to procure products from a key vendor on a timely basis. The Company does not expect this most likely worst case scenario to have a material adverse impact on its core retail and wholesale businesses due principally to the Company's network of alternative suppliers and vendors. The Company will, however, develop contingency plans to work with these key third parties. 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. 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," "projects" 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; (v) ongoing absence of food price inflation; and (vi) 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. 11 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 third quarter of fiscal 1999. 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 18, 1999 /s/ Armand C. Go - - --------------------- ------------------------------------------- (Date) Armand C. Go, Vice President, Treasurer and Chief Accounting Officer 12 EXHIBIT INDEX Exhbit No. Description - - ---------- ----------- 27 Financial Data Schedule 13 EX-27 2 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 40 WEEKS ENDED OCTOBER 9, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 OTHER JAN-01-2000 JAN-03-1999 OCT-09-1999 27,977,000 0 13,336,000 0 23,838,000 71,755,000 59,048,000 38,844,000 103,506,000 42,125,000 2,886,000 438,000 0 0 48,133,000 103,506,000 375,481,000 375,481,000 314,584,000 0 52,225,000 0 973,000 9,055,000 3,513,000 5,542,000 0 0 0 5,542,000 0.86 0.84 40 weeks. Net of "Allowances for doubtful accounts". Amounts included in "Other Costs and expenses".
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