<PAGE> 1
UNITED STATES
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 30, 1994
--------------
( ) 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 0-1946
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DART GROUP CORPORATION
- - ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 53-0242973
- - -------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3300 75th Avenue, Landover, Maryland, 20785
---------------------------------------------
(Address of principal executive offices)
(Zip Code)
(301) 731-1200
----------------------------------------------------
(Registrant's telephone number, including area code)
----------------------------------------------------
(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 (or for such shorter period that
the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days.
Yes x No
------ ------
At June 13, 1994, registrant had 1,453,423 shares of Class A Common Stock
outstanding and 302,952 shares of Class B Common Stock outstanding. The
Class B Stock is the only voting stock and is not publicly traded.
Page 1 of 17 pages
1
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The consolidated financial statements included herein have been prepared by
Dart Group Corporation (the "Corporation"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Corporation believes that the disclosures are adequate to make the information
presented not misleading.
It is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in the Corporation's report on Form 10-K for the fiscal year ended
January 31, 1994.
2
<PAGE> 3
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 30,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
Sales $354,217,000 $312,167,000
Income from bankers' acceptances 409,000 612,000
Real estate revenue 4,673,000 4,483,000
Other interest and other income 2,262,000 2,949,000
------------ ------------
361,561,000 320,211,000
------------ ------------
Expenses:
Cost of sales, store occupancy and
warehousing 287,275,000 249,721,000
Selling and administrative 58,597,000 54,984,000
Depreciation and amortization 6,854,000 6,751,000
Interest 3,180,000 3,418,000
------------ ------------
355,906,000 314,874,000
------------ ------------
Income before income taxes and
minority interests 5,655,000 5,337,000
Income taxes 2,678,000 2,675,000
------------ ------------
Income before minority interests 2,977,000 2,662,000
Minority interests in income of
consolidated subsidiaries and
partnerships 1,880,000 2,112,000
------------ ------------
Net income $ 1,097,000 $ 550,000
============ ============
Earnings per share:
Net income $ .52 $ .24
============ ============
Weighted average shares outstanding 1,875,000 1,866,000
============ ============
Dividends per share of Class A Common Stock $ .033 $ .033
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
<TABLE>
<CAPTION>
April 30, January 31,
1994 1994
------------ ------------
<S> <C> <C>
Current Assets:
Cash $ 17,819,000 $ 17,955,000
Short-term instruments, including
$102,833,000 and $133,315,000 held
by majority owned subsidiaries at
April 30, 1994 and January 31, 1994,
respectively 106,025,000 138,278,000
Marketable debt securities 128,055,000 68,837,000
Bankers' acceptances 12,980,000 62,307,000
Accounts receivable, trade 11,454,000 15,351,000
Accounts receivable, other 562,000 1,044,000
Merchandise inventories 220,159,000 203,036,000
Deferred income tax benefit 6,174,000 6,522,000
Other current assets 3,647,000 4,048,000
------------ ------------
Total Current Assets 506,875,000 517,378,000
------------ ------------
Property and Equipment, at cost:
Furniture, fixtures and equipment 131,413,000 128,982,000
Buildings and leasehold improvements 169,282,000 166,250,000
Land 33,252,000 33,396,000
Property under capital leases 35,792,000 35,792,000
------------ ------------
369,739,000 364,420,000
Accumulated Depreciation and
Amortization 110,367,000 104,137,000
------------ ------------
259,372,000 260,283,000
------------ ------------
Other Assets 9,603,000 9,369,000
------------ ------------
Excess of Purchase Price Over Net
Assets Acquired net of accumulated
amortization of $6,326,000 and
$6,074,000, respectively 3,440,000 3,659,000
------------ ------------
Deferred Income Tax Benefit 13,441,000 12,209,000
------------ ------------
Total Assets $792,731,000 $802,898,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
4
<PAGE> 5
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
April 30, January 31,
1994 1994
------------ ------------
<S> <C> <C>
Current Liabilities:
Current portion of mortgage payable $ 988,000 $ 988,000
Accounts payable, trade 148,348,000 154,926,000
Income taxes payable 5,822,000 4,968,000
Accrued salaries and employee benefits 22,923,000 22,791,000
Accrued taxes other than income taxes 10,557,000 11,831,000
Other accrued liabilities 37,761,000 40,287,000
Current portion of obligations under
capital leases 345,000 345,000
------------ ------------
Total Current Liabilities 226,744,000 236,136,000
------------ ------------
Mortgage Payable 80,458,000 80,709,000
------------ ------------
Obligations Under Capital Leases 39,335,000 39,295,000
------------ ------------
Reserve for Closed Facilities and
Restructuring 27,930,000 28,595,000
------------ ------------
Other Long-term Liabilities 3,224,000 3,219,000
------------ ------------
Commitments and Contingencies
Minority Interests 140,450,000 140,637,000
------------ ------------
Stockholders' Equity
Class A common stock, non-voting,
par value $1.00 per share; 3,000,000
shares authorized; 1,655,763 shares
issued 1,656,000 1,656,000
Class B common stock, voting par value
$1.00 per share; 500,000 shares
authorized; 302,952 shares issued and
outstanding 303,000 303,000
Paid-in capital 65,302,000 65,323,000
Unrealized losses on short-term
investments (745,000) -
Retained earnings 209,823,000 208,774,000
Treasury Stock, 202,340 shares of Class
A common stock, at cost (1,749,000) (1,749,000)
------------ ------------
Total Stockholders' Equity 274,590,000 274,307,000
------------ ------------
Total Liabilities and Stockholders' Equity $792,731,000 $802,898,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
5
<PAGE> 6
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 30,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 1,097,000 $ 550,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,854,000 6,751,000
Provision for closed facilities - (243,000)
Change in assets and liabilities:
Accounts receivable, trade 3,897,000 1,091,000
Accounts receivable, other 482,000 3,201,000
Merchandise inventories (17,123,000) (28,635,000)
Other current assets 401,000 (138,000)
Deferred income tax benefits (884,000) (106,000)
Other assets (234,000) (503,000)
Accounts payable, trade (6,578,000) 24,639,000
Income taxes payable 854,000 (404,000)
Accrued salaries and
employee benefits 132,000 89,000
Accrued taxes other than
income taxes (1,274,000) (739,000)
Other accrued liabilities (2,642,000) 2,957,000
Deferred income 5,000 (96,000)
Reserve for closed facilities (618,000) (433,000)
Minority interest 1,880,000 3,496,000
------------ ------------
Net cash provided by (used for)
operating activities $(13,751,000) $ 11,477,000
------------ ------------
Cash Flows from Securities and Capital
Investment Activities:
Capital expenditures $ (5,771,000) $ (7,440,000)
Maturities of bankers' acceptances 77,525,000 113,856,000
Purchase of bankers' acceptances (28,198,000) (109,700,000)
Dispositions of United States
Treasury Bills 4,226,000 105,598,000
Purchase of United States Treasury
Bills (50,783,000) (107,873,000)
Maturities of United States Treasury
Bills 1,189,000 9,857,000
</TABLE>
6
<PAGE> 7
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 30,
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
Purchases of marketable debt
securities (86,510,000) (53,838,000)
Dispositions of marketable debt
securities 68,930,000 19,476,000
Maturities of marketable debt
securities 2,985,000 -
------------ ------------
Net cash used for securities and
capital investment activities $(16,407,000) $(30,064,000)
------------ ------------
Cash Flows from Financing Activities:
Cash dividends $ (48,000) $ (48,000)
Stock options exercised 10,000 42,000
Distributions paid to minority
partners (1,856,000) -
Principal payments under mortgage
obligations (251,000) (55,000)
Principal payments under capital
lease obligations (86,000) (103,000)
------------ ------------
Net cash used for financing
activities $ (2,231,000) $ (164,000)
------------ ------------
Net Decrease in Cash and Cash
Equivalents $(32,389,000) $(18,751,000)
Cash and Cash Equivalents at
Beginning of Year 156,233,000 170,361,000
------------ ------------
Cash and Cash Equivalents at
End of Period $123,844,000 $151,610,000
============ ============
</TABLE>
Supplemental Disclosures of Cash Flow Information:
<TABLE>
<S> <C> <C>
Cash paid during the quarter for:
Interest $ 3,390,000 $ 3,418,000
Income taxes 2,302,000 2,800,000
Reconciliation of Cash and Cash Equivalents
to Balance Sheet Captions:
Cash $ 17,819,000 $ 17,043,000
Short-term investments 106,025,000 134,567,000
------------ ------------
$123,844,000 $151,610,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1994 AND 1993
(Unaudited)
(1) General:
The accompanying consolidated financial statements reflect the accounts of
Dart Group Corporation (the "Corporation") and its direct and indirect
wholly-owned and majority-owned subsidiaries and majority-owned partnerships,
including Trak Auto Corporation ("Trak Auto"), Crown Books Corporation ("Crown
Books"), Shoppers Food Warehouse Corp. ("Shoppers Food"), Total Beverage
Corporation ("Total Beverage"), Cabot- Morgan Real Estate Company ("CMREC"),
and Dart Group Financial Corporation ("Dart Financial). The accounts of Total
Beverage are included from the date of its purchase on February 28, 1993. The
Corporation, Trak Auto, Crown Books, Shoppers Food, Total Beverage, CMREC and
Dart Financial and the Corporation's other direct and indirect wholly-owned and
majority-owned subsidiaries and majority-owned partnerships are referred to
collectively as the "Company". All significant intercompany accounts and
transactions have been eliminated. The unaudited statements as of April 30,
1994 and 1993 reflect, in the opinion of management, all adjustments (normal
and recurring in nature) necessary to present fairly the consolidated financial
position as of April 30, 1994 and 1993 and the results of operations and cash
flows for the periods indicated.
(2) Earnings Per Common Share and Common Share Equivalents:
Earnings per share is based on the weighted average number of the
Corporation's Class A and Class B common stock and common stock equivalents
(certain stock options) outstanding during the period. In reporting earnings
per share, the Corporation's interest in the earnings of its majority-owned
subsidiaries is adjusted for the dilutive effect, if any, of these
subsidiaries' outstanding stock options. The difference between primary
earnings per share and fully diluted earnings per share is not significant for
either period.
(3) Short-term Instruments and Marketable Debt Securities:
At April 30, 1994, the Company's short-term instruments included United
States Treasury Bills (held by subsidiaries) and Overnight Repurchase
Agreements (collateralized by United States Treasury obligations), and
marketable debt securities included United States Treasury Bills (held by the
Corporation), United States Treasury Notes, corporate notes, municipal
securities and United States Agency Securities Acceptances. Additionally,
approximately $10,000,000 of United States Treasury Obligations serve as
security for reverse repurchase agreements, the liability for which has been
netted against the associated assets in the accompanying balance sheets. The
Company adopted Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities, effective February 1,
1994. In accordance with the standard these short-term instruments and
marketable debt securities are recorded at fair market value and unrealized
losses are classified as a component of stockholders' equity. At April 30,
1994, market was $745,000 less than cost, net of minority interest and income
taxes.
8
<PAGE> 9
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
APRIL 30, 1994 AND 1993
(Unaudited)
(4) Interim Inventory Estimates:
Trak Auto and Shoppers Food inventories are priced at the lower of last-in,
first-out (LIFO) cost or market. At April 30, 1994 and January 31, 1994,
inventories determined on a lower of first-in, first-out (FIFO) cost or market
basis would have been greater by $7,446,000 and $7,187,000, respectively.
Crown Books' and Total Beverage's inventories are priced at the lower of FIFO
cost or market.
Trak Auto, Crown Books and Total Beverage take a physical count of their
store and warehouse inventories semi-annually. Shoppers Food takes an annual
physical count of its store and warehouse inventories. Complete physical
inventories were not taken for the quarter ended April 30, 1994. The Company
uses a gross profit method combined with available perpetual inventory
information to determine Trak Auto's, Crown Books', Shoppers Food's and Total
Beverage's inventories for quarters when complete physical counts are not
taken.
(5) Credit Agreement:
The Corporation is party to a revolving credit agreement, together with
Trak Auto and Crown Books, for a $6,000,000 revolving line of credit. The
$6,000,000 is an aggregate amount and not specifically allocated to any of the
parties. The line is intended to be used for the issuance of standby and trade
letters of credit. At April 30, 1994, there had been no borrowings under the
credit agreement. This line of credit expires May 1, 1995.
(6) Minority Interests:
The $140,450,000 of minority interests reflected in the Consolidated
Balance Sheet as of April 30, 1994 represents the portion of real estate
partnership equity owned by Haft family partnerships, the portion of Trak Auto
and Crown Books equity owned by the public shareholders of Trak Auto and Crown
Books and the portion of Shoppers Food equity owned by the shareholders of
Shoppers Food (other than the Corporation). Income attributed to the minority
shareholders of Trak Auto was $874,000 and $32,000 for the three months ended
April 30, 1994 and 1993, respectively. Income attributed to the minority
shareholders of Crown Books was $202,000 and $514,000 for the three months
ended April 30, 1994 and 1993, respectively. Income attributed to the minority
ownership of Shoppers Food was $747,000 and $1,515,000 for the three months
ended April 30, 1994 and 1993, respectively. Income attributed to the minority
ownership of the real estate partnerships was $57,000 and $51,000 for the three
months ended April 30, 1994 and 1993, respectively.
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
Cash, including short-term instruments, U.S. government and other
securities and bankers' acceptances, is the Company's primary source of
liquidity. Cash, including short-term instruments, U.S. government and other
marketable debt securities and bankers' acceptances, decreased by $22,498,000
to $264,879,000 at April 30, 1994 from $287,377,000 at January 31, 1994. This
decrease was primarily due to capital expenditures and increased inventory
levels for Trak Auto and Crown Books superstore expansion and was partially
offset by operating results.
For the quarter ended April 30, 1994, the Company realized a pre-tax yield
of approximately 3.3% on the bankers' acceptances, approximately 2.7% on United
States Treasury Bills and approximately 4.9% on the marketable debt securities.
Operating activities used $13,751,000 of the Company's funds for the three
months ended April 30, 1994 compared to providing $11,477,000 of the Company's
funds for the same period one year ago. The primary use of cash for the three
months ended April 30, 1994 was for increased merchandise, inventory for Trak
Auto and Crown Books and the paydown of Crown Books accounts payable balances
outstanding on January 29, 1994.
Investing activities used $16,407,000 of the Company's funds for the three
months ended April 30, 1994, compared to $30,064,000 for the same period last
year. The primary use of funds was the conversion of Trak Auto and Crown Books
United States Treasury Bills to marketable debt securities. Capital
expenditures decreased $1,669,000 to $5,771,000 compared to last year, as a
result of fewer Super Trak and Super Crown stores opening compared to the same
period last year and to Crown Books' efforts to reduce leasehold improvements
in new store expansion.
The Company used $2,231,000 and $164,000 for net financing activities for
the three months ended April 30, 1994 and 1993, respectively. The primary use
of funds was for distributions by CMREC partnerships to the partners.
The Corporation, together with Crown Books and Trak Auto, has a $6,000,000
revolving credit facility agreement. As of April 30, 1994 there has been no
borrowing under this credit agreement (see Note 6 to the Consolidated Financial
Statements).
At April 30, 1994, Crown Books had four signed leases for Super Crown
stores, Trak Auto had eleven signed leases for new stores and 13 signed
agreements for additional space in existing stores for Super Trak stores,
Shoppers Food had two signed lease for a new store, two signed agreements for
additional space in existing stores and CMREC's Bull Run Plaza is undergoing
renovation and expansion.
The Company anticipates that funds necessary to fund these capital
expenditures, as well as purchase inventory for new stores, meet the Company's
long-term lease obligations, and pay current liabilities will come from
operations, existing current assets and, if necessary, the aforementioned
credit agreement.
10
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, (Continued)
Liquidity and Capital Resources (Continued)
The liquid assets maintained by the Company are intended to fund the
expansion of the Company's retail business through the opening of stores in new
markets, converting selected existing stores to superstores and opening
additional stores in existing markets.
Results of Operations
Trak Auto
Sales of $88,387,000 during the thirteen weeks ended April 30, 1994
increased by $10,504,000 or 13.5% over the same period one year ago. The
increase was primarily attributable to increased sales for Super Trak stores
converted from classic Trak stores and to a 7.7% increase in sales for all
stores open more than one year. Sales for comparable Super Trak stores open
more than one year increased 7.5% and sales for comparable classic Trak stores
open more than one year increased 7.7%. Sales for Super Trak stores
represented 36.1% of total sales during the thirteen weeks ended April 30, 1994
compared to 12.7% for the thirteen weeks ended May 1, 1993.
During the thirteen weeks ended April 30, 1994, Trak Auto opened twelve new
Super Trak stores, and closed twenty classic Trak stores. At April 30, 1994,
Trak Auto had 306 stores, including 85 Super Trak stores.
Interest and other income decreased by $132,000 when compared to the prior
year, largely due to a decrease in funds available for short- term investment.
Cost of sales, store occupancy and warehousing expenses as a percentage of
sales was 73.2% for the thirteen weeks ended April 30, 1994 compared to 74.2%
for the same period in the prior year. The decrease was primarily due to an
increase in store margins as a result of higher margins and a favorable change
in sales mix (increased hard parts and decreased motor oils) and merchandise,
and was partially offset by decreased advertising credits from vendors.
Selling and administrative expenses were 19.8% and 23.0% as a percentage of
sales for the thirteen weeks ended April 30, 1994 and May 1, 1993,
respectively. The decrease was due primarily to decrease in payroll costs as a
result of Trak Auto's efforts to control store hours and administrative
overhead and to Super Trak store maturity. Payroll costs during the thirteen
weeks ended May 1, 1993, were unusually high due to the opening of a large
number of Super Trak stores during the quarter.
Depreciation and amortization expenses increased $80,000 for the thirteen
weeks ended April 30, 1994 compared to the same period one year ago. The
increase was due to increasing fixed asset purchases for new and converted
Super Trak stores.
11
<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, (Continued)
Trak Auto (Continued)
The effective income tax rate was 36.8% for the thirteen weeks ended April
30, 1994 compared to 33.8% for the thirteen weeks ended May 1, 1993. The
increase is primarily due to anticipated income before taxes for fiscal 1995 at
a higher Federal statutory rate and a lower portion of income before taxes that
is tax exempt municipal bond interest.
Crown Books
Sales of $65,642,000 for the thirteen weeks ended April 30, 1994 increased
by $11,119,000 or 20.4% over the same period one year ago. Comparable sales
(sales for stores open for fifteen months) increased 1.7% during the thirteen
weeks. Sales for Super Crown Books stores represented 51.5% and 30.0% of total
sales for the thirteen weeks ended April 30, 1994 and May 1, 1993,
respectively. Super Crown Books stores sales of $33,776,000 increased 106.6%
over the prior year and sales for comparable Super Crown Books stores increased
7.2%. Classic Crown Books stores' sales of $31,866,000 decreased 16.5% from the
prior year and sales for comparable classic Crown Books stores decreased 0.3%.
During the thirteen weeks ended April 30, 1994, Crown Books opened six
Super Crown Books stores while closing nine classic Crown Books stores and one
Super Crown Books store. At April 30, 1994, Crown Books had 236 stores
including 66 Super Crown Books stores.
Interest and other income decreased by $215,000 when compared to the same
period one year ago. The decrease was due to a decrease in funds available for
short-term investment primarily as a result of payments on accounts payable
balances outstanding on January 29, 1994 as well as lower yields on
investments.
Cost of sales, store occupancy and warehousing as a percentage of sales was
82.2% for the thirteen weeks ended April 30, 1994 compared to 79.4% for the
same period last year. The increase was primarily due to a decrease in store
margins as a result of increased purchasing from wholesalers, and to increased
store occupancy costs for Super Crown Books stores.
Selling and administrative expenses as a percentage of sales were 15.6% for
the thirteen weeks ended April 30, 1994 compared to 17.3% for the same period
last year. The decrease was due primarily to reduced payroll costs at both the
store and administrative levels as a result of Crown Books' efforts to control
store payroll hours and administrative overhead.
12
<PAGE> 13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, (Continued)
Crown Books (Continued)
Depreciation expense increased $579,000 for the thirteen weeks ended April
30, 1994 compared to the same period one year ago. The increase was primarily
due to the increase in fixed assets as a result of the acquisition and
installation of a point-of-sale system in all stores during the second quarter
of fiscal 1994 and to the purchase of fixed assets for new Super Crown Books
stores.
Interest expense decreased by $12,000 due to the reduction of amounts owned
under capital lease obligations.
The effective income tax rate was 37.0% for the thirteen weeks ended April
30, 1994, compared to 41.0% for the thirteen weeks ended May 1, 1993. The
decrease is primarily due to increased tax exempt interest income from
municipal securities.
Shoppers Food
Shoppers Food sales increased $17,239,000 or 9.7% to $195,158,000 during
the thirteen weeks ended April 30, 1994 when compared to the same period in the
prior year. The increase was primarily due to two new stores opened in fiscal
1994 and to a 4.1% increase in sales for stores open more than one year as a
result of Shoppers Food campaign of lower prices to increase its market share.
Cost of sales, store occupancy and warehousing, as a percentage of sales,
increased to 84.4% from 82.5% during the thirteen weeks ended April 30, 1994
when compared to the thirteen weeks ended May 1, 1993. The increase is due to
decreased store margins as a result of lower prices (discussed above).
Selling and administrative expenses, as a percentage of sales, was 13.5%
during the thirteen weeks ended April 30, 1994 and May 1, 1993.
Depreciation and amortization decreased $708,000 during the thirteen weeks
ended April 30, 1994 when compared to the same period last year. The decrease
was primarily the result of Shoppers Food utilizing an accelerated depreciation
method that resulted in higher depreciation in the prior year.
The effective tax rate was 39.2% during the thirteen weeks ended April 30,
1994 compared to 38.4% for the thirteen weeks ended May 1, 1993. The increase
is primarily due to the increase in the Federal statutory tax rate.
13
<PAGE> 14
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, (Continued)
Total Beverage
Total Beverage purchased the assets of a discount beverage superstore in
February 1993 and opened two additional stores in October 1993. During the
three months ended April 30, 1994 sales were $5,030,000 and Total Beverage
recorded a net operating loss of $679,000.
Cabot-Morgan Real Estate
Revenues from real estate properties increased by $190,000 to $4,673,000
during the quarter ended April 30, 1994 when compared to the same period one
year ago. The increase was the result of a higher occupancy rate at Bull Run
Plaza during the quarter ended April 30, 1994.
Administrative expenses for CMREC partnerships increased $18,000 during
the quarter ended April 30, 1994 compared to the quarter ended April 30, 1993.
Depreciation expense increased $138,000 during the quarter ended April 30,
1994 when compared to the same one year ago. The increase is due to the
increased basis of the buildings at Bull Run Plaza as a result of continuing
renovation.
Interest expense increased by $79,000 to $2,062,000 during the quarter
ended April 30, 1994 primarily due to the mortgage at Bull Run Plaza, and was
partially offset by the refinancing of the mortgages at Briggs Chaney.
Dart Financial and Other Corporate
Income from bankers' acceptances decreased $203,000 during the quarter
ended April 30, 1994 when compared to the same period in the prior year. The
decrease was primarily due to the Corporation converting bankers' acceptances
to United States Treasury Bills during the quarter ended April 30, 1994.
Interest and other income decreased $135,000 during the quarter ended April
30, 1994 when compared to the same period in the prior year. The decrease was
primarily due to declining yields on certain marketable debt securities.
Administrative expenses decreased $496,000 during the quarter ended April
30, 1994, due primarily to decreased payroll costs.
Depreciation expense decreased by $33,000 during the quarter ended April
30, 1994 when compared to the same period in the prior year. The decrease was
the result of the expiration of a capital lease in January 1994.
Trak Auto, Crown Books and Shoppers Food file separate income tax returns.
CMREC, Total Beverage and Dart Financial are included in the Corporation's
income tax returns. The Corporation's current net operating loss was not tax
benefitted as a result of the complete utilization of all available carrybacks.
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, (Continued)
Dart Financial and Other Corporate (Continued)
As a result of the Corporation's operating loss for the three months ended
April 30, 1994, a net tax operating loss carryforward of $916,000 was created.
The Corporation's cumulative total net tax operating loss carryforward is
$9,559,000. All net operating loss carryforwards will expire by fiscal 2010.
In addition, the Corporation has an Alternative Minimum Tax credit carryforward
of approximately $1,010,000.
Effect of New Financial Accounting Standards
The Company does not offer any of the benefits covered under Statement of
Financial Accounting Standards ("SFAS") No. 106, Employers' Accounting of
Postretirement Benefits Other Than Pensions, and as such the standard will have
no impact on the Company.
The Company has adopted SFAS No. 112, Employer's Accounting for
Postemployment Benefits. Implementation of the standard has not had a
significant impact on the financial statements.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On May 17, 1994, members of the Haft family settled all legal disputes
among themselves relating to, among other things, their ownership of the
restrictions on their holdings of the Corporation's Common Stock, including
those reported in the Corporation's Annual Report on Form 10-K for the fiscal
year ended January 31, 1994. There are now no contractual restrictions on the
ability of any member of the Haft family to freely transfer his or her Class B
or Class A Common Stock of the Corporation. All shares of the Corporation's
Common Stock previously held by members of the family, directly or through
partnerships, will now be directly held and voted.
In addition, the settlement agreements, by providing that all claims
between the family and between members of the family and the Corporation
(except for the federal lawsuit between Robert M. Haft and the Corporation,
Trak Auto and Crown Books over his termination) were settled, resolves insofar
as possible the direct and derivative claims asserted by Robert M. Haft in his
lawsuit filed in November 1993 in the Delaware Court of Chancery in New Castle
County. While Robert M. Haft's suit in the United States District Court for
the District of Delaware relating to his employment contracts has not been
settled, the parties have agreed to submit the claims to a non-binding
mediation process. The derivative lawsuit filed by Alan R. Kahn and Tudor
Trust is not affected by this settlement.
See the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 1994, at pages 50-51, for a description of litigation.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits None
(b) Reports on Form 8-K
No report on Form 8-K was filed by the Corporation
during the quarter ended April 30, 1994.
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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.
DART GROUP CORPORATION
Date June 14, 1994 By Herbert H. Haft
-------------------- -----------------------------
HERBERT H. HAFT
Chief Executive Officer
Date June 14, 1994 Ronald S. Haft
-------------------- -----------------------------
RONALD S. HAFT
Chief Operating Officer
Date June 14, 1994 Ron Marshall
-------------------- -----------------------------
RON MARSHALL
Senior Vice President and
Chief Financial Officer
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