<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, 1995
----------------
( ) 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
------
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, 1995, the registrant had 1,458,338 shares outstanding of Class A
Common Stock, $1.00 par value per share, and 302,952 shares outstanding of
Class B Common Stock, $1.00 par value per share. The Class B Stock is the
only voting stock and is not publicly traded.
Page 1 of 21 pages
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Certain 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, 1995.
2
<PAGE> 3
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 30,
---------------------------
1995 1994
------------ ------------
<S> <C> <C>
Sales $145,381,000 $354,217,000
Income from bankers' acceptances - 409,000
Real estate revenue 4,840,000 4,673,000
Other interest and other income 2,609,000 2,262,000
------------ ------------
152,830,000 361,561,000
------------ ------------
Expenses:
Cost of sales, store occupancy and
warehousing 112,895,000 287,275,000
Selling and administrative 32,455,000 58,597,000
Depreciation and amortization 3,991,000 6,854,000
Interest 3,957,000 3,180,000
------------ ------------
153,298,000 355,906,000
------------ ------------
Income (loss) before income taxes, equity
in affiliate and minority interests (468,000) 5,655,000
Income taxes 448,000 2,678,000
------------ ------------
Income (loss) before equity in affiliate
and minority interests (916,000) 2,977,000
Equity in affiliate 2,151,000 -
Minority interests in income of
consolidated subsidiaries and
partnerships (322,000) (1,880,000)
------------ ------------
Net income $ 913,000 $ 1,097,000
============ ============
Net income per share $ .31 $ .52
============ ============
Weighted average shares outstanding 1,889,000 1,875,000
============ ============
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
<TABLE>
<CAPTION>
(Unaudited) (Audited)
April 30, January 31,
1995 1995
------------ ------------
<S> <C> <C>
Current Assets:
Cash $ 17,003,000 $ 17,984,000
Short-term instruments, including
$26,269,000 and $44,346,000 held
by majority owned subsidiaries at
April 30, 1995 and January 31, 1995,
respectively 76,990,000 84,390,000
Marketable debt securities 73,387,000 89,330,000
Accounts receivable 9,519,000 10,108,000
Merchandise inventories 200,623,000 195,675,000
Deferred income tax benefit 17,900,000 17,799,000
Other current assets 1,660,000 1,988,000
------------ ------------
Total Current Assets 397,082,000 417,274,000
------------ ------------
Property and Equipment, at cost:
Furniture, fixtures and equipment 80,820,000 76,713,000
Buildings and leasehold improvements 165,451,000 165,017,000
Land 33,396,000 33,396,000
Property under capital leases 27,129,000 27,129,000
------------ ------------
306,796,000 302,255,000
Accumulated Depreciation and
Amortization 80,472,000 76,451,000
------------ ------------
226,324,000 225,804,000
------------ ------------
Other Assets 8,697,000 8,643,000
------------ ------------
Share of Equity in Shoppers Food
Warehouse Corporation 43,134,000 40,983,000
------------ ------------
Excess of Purchase Price Over Net Assets
Acquired net of accumulated
amortization of $32,000 1,863,000 -
------------ ------------
Deferred Income Tax Benefit 11,669,000 13,785,000
------------ ------------
Total Assets $688,769,000 $706,489,000
============ ============
</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
<TABLE>
<CAPTION>
(Unaudited) (Audited)
April 30, January 31,
1995 1995
------------ ------------
<S> <C> <C>
Current Liabilities:
Current portion of mortgages payable $ 1,958,000 $ 1,981,000
Accounts payable, trade 104,645,000 106,292,000
Income taxes payable 2,326,000 7,148,000
Accrued salaries and employee benefits 16,775,000 18,837,000
Accrued taxes other than income taxes 8,714,000 9,475,000
Accrued judgement in favor of
Robert M. Haft 33,059,000 32,199,000
Current portion of reserve for closed
facilities and restructuring 10,558,000 10,427,000
Other accrued liabilities 45,952,000 50,132,000
Current portion of obligations under
capital leases 275,000 368,000
------------ ------------
Total Current Liabilities 224,262,000 236,859,000
------------ ------------
Mortgages Payable 79,319,000 79,620,000
------------ ------------
Obligations Under Capital Leases 29,890,000 29,792,000
------------ ------------
Reserve for Closed Facilities and
Restructuring 59,183,000 61,005,000
------------ ------------
Commitments and Contingencies
Minority Interests 95,358,000 99,850,000
------------ ------------
Stockholders' Equity
Class A common stock, non-voting,
par value $1.00 per share; 3,000,000
shares authorized; 1,660,678 shares
issued 1,661,000 1,661,000
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 65,378,000 65,384,000
Unrealized losses on short-term
investments (488,000) (1,024,000)
Retained earnings 135,652,000 134,788,000
</TABLE>
5
<PAGE> 6
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(Unaudited) (Audited)
April 30, January 31,
1995 1995
------------ ------------
<S> <C> <C>
Treasury Stock, 202,340 shares of Class
A common stock, at cost (1,749,000) (1,749,000)
------------ ------------
Total Stockholders' Equity 200,757,000 199,363,000
------------ ------------
Total Liabilities and Stockholders' Equity $688,769,000 $706,489,000
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
6
<PAGE> 7
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 30,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 913,000 $ 1,097,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,991,000 6,854,000
Provision for closed facilities 450,000 -
Equity in affiliate (2,151,000) -
Change in assets and liabilities:
Accounts receivable, trade (413,000) 3,897,000
Accounts receivable, other 633,000 482,000
Merchandise inventories (4,948,000) (17,123,000)
Other current assets 328,000 401,000
Deferred income tax benefits 1,717,000 (884,000)
Other assets (21,000) (234,000)
Accounts payable, trade (1,647,000) (6,578,000)
Income taxes payable (4,822,000) 854,000
Accrued salaries and
employee benefits (1,202,000) 132,000
Accrued taxes other than
income taxes (761,000) (1,274,000)
Other accrued liabilities (4,088,000) (2,642,000)
Deferred income - 5,000
Reserve for closed facilities (2,112,000) (618,000)
Minority interest 495,000 1,880,000
------------ ------------
Net cash used for
operating activities $(13,638,000) $(13,751,000)
------------ ------------
Cash Flows from Securities and Capital
Investment Activities:
Capital expenditures $ (4,541,000) $ (5,771,000)
Acquisition of Treasury Shares by
subsidiary (6,882,000) -
Maturities of bankers' acceptances - 77,525,000
Purchase of bankers' acceptances - (28,198,000)
Dispositions of United States
Treasury Bills - 4,226,000
</TABLE>
7
<PAGE> 8
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 30,
---------------------------
1995 1994
------------- ------------
<S> <C> <C>
Purchase of United States Treasury
Bills (7,914,000) (50,783,000)
Maturities of United States Treasury
Bills 22,810,000 1,189,000
Purchases of marketable debt
securities - (86,510,000)
Dispositions of marketable debt
securities 50,000 68,930,000
Maturities of marketable debt
securities 2,200,000 2,985,000
------------ ------------
Net cash provided (used) for securities
and capital investment activities $ 5,723,000 $(16,407,000)
------------ ------------
Cash Flows from Financing Activities:
Cash dividends $ (49,000) $ (48,000)
Stock options exercised - 10,000
Distributions paid to minority
partners - (1,856,000)
Principal payments under mortgage
obligations (324,000) (251,000)
Principal payments under capital
lease obligations (93,000) (86,000)
------------ ------------
Net cash used for financing
activities $ ( 466,000) $ (2,231,000)
------------ ------------
Net Decrease in Cash and Cash
Equivalents $ (8,381,000) $(32,389,000)
Cash and Cash Equivalents at
Beginning of Year 102,374,000 156,233,000
------------ ------------
Cash and Cash Equivalents at
End of Period $ 93,993,000 $123,844,000
============ ============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the quarter for:
Interest $ 3,058,000 $ 3,390,000
Income taxes 3,625,000 2,302,000
</TABLE>
8
<PAGE> 9
DART GROUP CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
April 30,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Reconciliation of Cash and Cash Equivalents
to Balance Sheet Captions:
Cash $ 17,003,000 $ 17,819,000
Short-term investments 76,990,000 106,025,000
------------ ------------
$ 93,993,000 $123,844,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
9
<PAGE> 10
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1995 AND 1994
(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"), Total Beverage Corporation ("Total Beverage"), Cabot-Morgan Real
Estate Company ("CMREC"), and Dart Group Financial Corporation ("Dart
Financial"). The accounts of Shoppers Food Warehouse Corp. ("Shoppers Food")
are consolidated with the Corporation's financial statements through May 28,
1994, but not thereafter, as a result of a reduction of the Corporation's
ownership to 50%. The Corporation's investment in Shoppers Food is reflected
in the financial statements using the equity method of accounting for periods
subsequent to May 28, 1994. The Corporation, Trak Auto, Crown Books, Shoppers
Food (for periods through May 28, 1994), 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,
1995 and 1994 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, 1995 and 1994 and the results of operations and cash
flows for the periods indicated.
The results of operations for the three months ended April 30, 1995 are
not necessarily indicative of the results to be achieved for the full fiscal
year.
(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.
10
<PAGE> 11
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1995 AND 1994
(Unaudited)
(3) Short-term Instruments and Marketable Debt Securities:
At April 30, 1995, the Company's short-term instruments included United
States Treasury Bills and money market funds. Marketable debt securities
included United States Treasury Notes, corporate notes, municipal securities
and United States Agency Securities Acceptances.
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 115, Accounting for Certain Investments in Debt and Equity Securities,
effective February 1, 1994.
Management determines the appropriate classification of its investments in
debt securities at the time of purchase and reevaluates such determination at
each balance sheet date. Debt securities for which the Company does not have
the intent or ability to hold to maturity are classified as available for sale.
Securities available for sale are carried at fair value, with the unrealized
gains and losses, net of tax, reported as a separate component of stockholders'
equity. At April 30, 1995, market value of short-term instruments and
marketable debt securities was $488,000 less than cost (adjusted for income
taxes). At April 30, 1995, the Company had no investments that qualified as
trading or held to maturity.
The amortized cost of debt securities classified as available for sale is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization and interest are included in interest income. Realized gains
and losses are included in other income or expense. The cost of securities
sold is based on the specific identification method.
(4) Interim Inventory Estimates:
Trak Auto inventories are priced at the lower of last-in, first-out
("LIFO") cost or market. At April 30, 1995 and January 31, 1995, Trak Auto
inventories determined on a lower of first-in, first-out ("FIFO") cost or
market basis would have been greater by $6,141,000 and $5,870,000,
respectively. Crown Books' and Total Beverage's inventories are priced at the
lower of FIFO cost or market.
11
<PAGE> 12
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30,1995 AND 1994
(Unaudited)
(4) Interim Inventory Estimates (Continued):
Trak Auto, Crown Books and Total Beverage take a physical count of their
store and warehouse inventories semi-annually. Complete physical inventories
were not taken for the quarter ended April 30, 1995. The Company uses a gross
profit method combined with available perpetual inventory information to
determine Trak Auto's, Crown Books', and Total Beverage's inventories for
quarters when complete physical counts are not taken.
(5) Credit Agreement:
The Corporation has entered into a $10 million revolving credit
agreement with Trak Auto. The credit agreement is intended to be used for the
Trak Auto's short-term working capital purposes. Any advance under this credit
agreement bears interest at an annual rate equal to the prime rate as set
forth in the "Money Rates" column of the Wall Street Journal, as such rate may
change from time to time, plus one percent (1%). Interest shall be paid
monthly in arrears and the agreement expires on May 1, 1996.
The Corporation is party to a revolving credit agreement, together with
Trak Auto and Crown Books, for a $6 million revolving line of credit. The $6
million 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. This line of credit expires July 1, 1995.
At April 30, 1995, there had been no borrowings under these credit
agreements.
(6) Minority Interests:
The $95,358,000 of minority interests reflected in the Consolidated
Balance Sheet as of April 30, 1995 represents the minority portion of real
estate partnership equity owned by Haft family partnerships (CMREC owns the
majority interest in these partnerships) and the portion of Trak Auto and Crown
Books equity owned by the public shareholders of Trak Auto and Crown Books.
Income attributed to the minority shareholders of Trak Auto was $370,000 and
$874,000 for the three months ended April 30, 1995 and 1994, respectively.
Income (loss) attributed to the minority shareholders of Crown Books was
$(187,000) and $202,000 for the three months ended April 30,
12
<PAGE> 13
DART GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1995 AND 1994
(Unaudited)
(6) Minority Interests (Continued):
1995 and 1994, respectively. Income attributed to the minority ownership of
Shoppers Food was $747,000 for the three months ended April 30, 1994 (no income
for Shoppers Food was attributed to minority interest for periods after May 28,
1994). Income attributed to the minority ownership of the real estate
partnerships was $139,000 and $57,000 for the three months ended April 30,
1995 and 1994, respectively.
(7) Tender Offer:
On December 21, 1994, Trak Auto offered to buy back from its
shareholders approximately 24% of its outstanding common stock, or 1,500,000
shares, at a price of $17.50 per share. On February 6, 1995, Trak Auto amended
the offer by increasing the purchase price to $20.50 per share, and made
certain other changes. When the offer expired on February 28, 1995, Trak Auto
had repurchased approximately 310,000 shares for a total consideration of
$6,363,000 plus expenses of approximately $520,000.
As a result of the repurchase, the Corporation's interest in Trak Auto
increased to 68.3%. The repurchase has been accounted for as a step
acquisition, minority interest decreased approximately $4,900,000 with a
related increase in goodwill of $1,895,000, which is being amortized over ten
years.
13
<PAGE> 14
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Cash, including short-term instruments and U.S. government and other
securities, is the Company's primary source of liquidity. Cash, including
short-term instruments and U.S. government and other marketable debt securities
decreased by $24,324,000 to $167,380,000 at April 30, 1995 from $191,704,000 at
January 31, 1995. This decrease was primarily due to Trak Auto's repurchase of
approximately 310,000 shares of its outstanding Common Stock, capital
expenditures and operating activities.
For the quarter ended April 30, 1995, the Company realized a pre-tax yield
of approximately 5.7% on United States Treasury Bills and approximately 6.3% on
the marketable debt securities.
Operating activities used $13,638,000 of the Company's funds for the three
months ended April 30, 1995 compared to $13,751,000 of the Company's funds for
the same period one year ago. The primary use of cash for the three months
ended April 30, 1995 was for payments for Trak Auto's increased merchandise
inventory levels and Crown Books' payments for income taxes and expense
liabilities outstanding at January 31, 1995.
Investing activities provided $5,723,000 to the Company for the three
months ended April 30, 1995, compared to using $16,407,000 for the same period
last year. The primary source of funds was due primarily to maturity of United
States Treasury Bills and was partially offset by Trak Auto's repurchase of
its outstanding common stock.
The Company used $466,000 and $2,231,000 for net financing activities
for the three months ended April 30, 1995 and 1994, respectively. The primary
use of funds during the three months ended April 30, 1995 was for principal
payments under capital lease and mortgage obligations.
The Corporation, together with Crown Books and Trak Auto, has a
$6,000,000 revolving credit facility agreement. As of April 30, 1995 there has
been no borrowing under this credit agreement (see Note 5 to the Consolidated
Financial Statements).
At April 30, 1995, Crown Books had seven signed leases for Super Crown
stores and four signed amendments to existing leases for expansion to Super
Crown stores. Trak Auto had nine signed leases for new Super Trak or Super
Trak Warehouse stores and one signed amendment for additional space in an
existing store for a Super Trak store. Total Beverage had an agreement for a
new store.
14
<PAGE> 15
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations, (Continued)
Liquidity and Capital Resources (Continued)
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 and existing current assets.
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
During the thirteen weeks ended April 29, 1995, Trak Auto opened two new
Super Trak stores and one new Super Trak Warehouse store, and closed 13 classic
Trak stores. At April 29, 1995, Trak Auto had 272 stores, including 108 Super
Trak stores and 8 Super Trak Warehouse stores.
Sales of $79,611,000 during the thirteen weeks ended April 29, 1995
decreased by $8,776,000 or 9.9% over the same period one year ago. The
decrease was primarily attributable to the mild winter in the Chicago and
Washington, D.C. metropolitan areas, the continuing rains and floods in the Los
Angeles area and to a net decrease in the number of stores. Sales for
comparable Super Trak Stores (open more than one year) decreased 6.7% and sales
for comparable classic Trak stores (open more than one year) decreased 9.0%.
Sales for Super Trak stores represented 52.8% of total sales during the
thirteen weeks ended April 29, 1995 compared to 36.1% for the thirteen weeks
ended April 30, 1994.
Interest and other income increased by $188,000 when compared to the prior
year, largely due to an increase in the average balance in funds available for
short-term investment and to higher interest rates.
Cost of sales, store occupancy and warehousing expenses as a percentage of
sales was 74.3% for the thirteen weeks ended April 29, 1995 compared to 73.2%
for the same period in the prior year. The increase was primarily due to
increased occupancy costs as a percentage of sales (although the dollars spent
for such costs remained approximately the same) and reduced advertising credits
from automotive vendors. These increases were partially
15
<PAGE> 16
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations, (Continued)
Results of Operations, Continued
offset by increased store margins as a result of a continuing favorable change
in sales mix.
Selling and administrative expenses were 21.3% and 19.8% as a percentage of
sales for the thirteen weeks ended April 29, 1995 and April 30, 1994,
respectively. The increase was due primarily to increased payroll costs, as a
percentage of sales (actual payroll dollars remained virtually the same as last
year) and to costs associated with the continuing shareholder litigation and
executive committee activity.
Depreciation and amortization expenses decreased $280,000 for the thirteen
weeks ended April 29, 1995 compared to the same period one year ago. The
decrease was due to store closing and to the point-of-sale register systems
being fully depreciated.
The effective income tax rate was 36.9.% for the thirteen weeks ended April
29, 1995 compared to 36.8% for the thirteen weeks ended April 30, 1994.
Crown Books
Sales of $61,038,000 for the thirteen weeks ended April 29, 1995 decreased
by $4,604,000 or 7.0% over the same period one year ago primarily the result of
closing 37 stores in January 1995. Comparable sales (sales for stores open for
fifteen months) decreased 3.5% during the thirteen weeks. Sales for Super
Crown Books stores represented 62.0% and 51.5% of total sales for the thirteen
weeks ended April 29, 1995 and April 30, 1994, respectively. Super Crown Books
stores sales of $37,855,000 increased 18.8% over the prior year and sales for
comparable Super Crown Books stores decreased 2.0%. Classic Crown Books stores'
sales of $23,183,000 decreased 31.4% from the prior year and sales for
comparable classic Crown Books stores decreased 5.5%.
During the thirteen weeks ended April 29, 1995, Crown Books closed three
classic Crown Books stores. At April 29, 1995, Crown Books had 194 stores
including 70 Super Crown Books stores.
Interest and other income increased by $247,000 when compared to the same
period one year ago. The increase was primarily due to higher interest rates
on Crown Books' short-term investments.
16
<PAGE> 17
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations, (Continued)
Results of Operations, Continued
Cost of sales, store occupancy and warehousing as a percentage of sales was
81.9% for the thirteen weeks ended April 29, 1995 compared to 82.2% for the
same period last year. The decrease was primarily due to increased store
margins as a result of a favorable change in sales mix and improved controls
over store shrink and purchasing, and was partially offset by increased store
occupancy costs.
Selling and administrative expenses as a percentage of sales were 17.7% for
the thirteen weeks ended April 29, 1995 compared to 15.6% for the same period
last year. The increase was due primarily to increased payroll costs (as a
percentage of sales while total payroll dollars decreased), increased insurance
costs, costs associated with the executive committee and costs incurred to
identify and improve Crown Books' market share.
Depreciation expense increased $80,000 for the thirteen weeks ended April
29, 1995 compared to the same period one year ago. The increase was primarily
due to increase fixed assets for new Super Crown stores, an upgrade to the
point-of-sale register system and additional computer hardware at the
distribution centers.
Interest expense increased by $208,000 due to interest accrued for the
Robert M. Haft judgement.
Crown Books recorded a tax benefit of $205,000 for the thirteen weeks ended
April 28, 1995, as compared to income tax expense of $244,000 for the same
period one year ago. Crown Books recorded a $2,500,000, valuation allowance in
fiscal year 1995 due to uncertainties relating to the timing of the reversals
of certain temporary tax difference. In management's opinion no additional
valuation allowance is necessary at this time.
Total Beverage
During the three months ended April 30, 1995, Total Beverage opened a
new store that returned its store count to three.
Total Beverage sales were $4,732,000 during the three months ended April
30, 1995 compared to $5,030,000 for the same period one year ago. The decrease
was due to the closure of the Bull Run Plaza store in January 1995. Comparable
sales increased 2.9% during the three months ended April 30, 1995.
17
<PAGE> 18
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations, (Continued)
Results of Operations, Continued
Cost of sales and store occupancy as a percentage of sales was 79.8%
during the three months ended April 30, 1995 compared to 83.8% for the same
period one year ago. The decrease was primarily due to increased margins as a
result of improved controls over purchasing and pricing.
Total Beverage recorded a net operating loss of $372,000 during the three
months ended April 30, 1995 compared to a net operating loss of $679,000 during
the three months ended April 30, 1994. Management of the Corporation and Total
Beverage believe that the Total Beverage concept is viable and that with more
stores to absorb overhead costs, Total Beverage will generate a reasonable
return on investment.
Cabot-Morgan Real Estate
Revenues from real estate properties increased by $167,000 to $4,840,000
during the quarter ended April 30, 1995 when compared to the same period one
year ago. The increase was the result of higher minimum rentals at Bull Run
Plaza as a result of a higher occupancy rate.
Administrative expenses for CMREC partnerships increased $13,000 during the
quarter ended April 30, 1995 compared to the quarter ended April 30, 1994
primarily due to increased repair and maintenance charges at Greenway Center.
Depreciation expense was $1,141,000 during the quarter ended April 30,
1995 compared to $1,138,000 for the same period one year ago and interest
expense increased by $13,000 to $2,075,000 during the quarter ended April 30,
1995 compared to the same period one year ago.
Dart Group and Other Corporate
Interest and other income increased $994,000 during the quarter ended April
30, 1995 when compared to the same period in the prior year. The increase was
primarily due to the Corporation's decision to invest in United States Treasury
Bills as its bankers' acceptances matured during the last year.
Administrative expenses increased $480,000 during the quarter ended April
30, 1995, primarily due to costs associated with the continuing shareholder
litigation and executive committee activity.
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<PAGE> 19
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations, (Continued)
Results of Operations, Continued
Interest expense increased by $732,000 during the quarter ended April 30,
1995 when compared to the same period in the prior year. The increase was the
result of interest accrued for the Pennsy Warehouse Lease reserve and the
Robert M. Haft judgement.
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.
As a result of the Corporation's operating loss for the three months ended
April 30, 1995, a net tax operating loss carryforward of $994,000 was created.
The Corporation's cumulative total net tax operating loss carryforward is
$19,329,000. All net operating loss carryforwards will expire by fiscal 2011.
In addition, the Corporation has an Alternative Minimum Tax credit carryforward
of approximately $1,010,000. The Corporation has a deferred tax valuation
allowance of $25,948,000 as of April 30, 1995. Management will continue to
evaluate the need for a valuation allowance on a periodic basis.
Effect of New Financial Accounting Standard
The Company is required to adopt Statement of Financial Account Standards
No. 121, Accounting for Long Lived Assets, no later than its fiscal year
ending January 31, 1997. The Company has not determined the impact of this
recently issued accounting standard on the Company's consolidated financial
statements.
19
<PAGE> 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings pending against the Corporation or
its subsidiaries other than such proceedings described in the Corporation's
Annual Report on Form 10-K for the year ended January 31, 1995 (the "Annual
Report"). There have been no material developments in any legal proceeding
reported in the Annual Report.
Item 5. Other Information
As previously disclosed, a 1987 resolution of the Corporation's Board of
Directors (the "1987 Resolution") stated that it would be appropriate for
Herbert H. Haft and Robert M. Haft each to have the option to participate
individually in acquisitions of other companies by the Corporation on the same
terms and conditions as management of the acquired company might participate or
by the purchase by each of ten percent (10%) of the Corporation's interest in
the acquired company on an equivalent basis as the Corporation.
On February 22, 1995, the United States District Court for the District of
Delaware, in the case of Robert M. Haft v. Dart Group Corporation, et al.
(Civil Action No. 93-384-SLR), ruled that this resolution entitled Robert M.
Haft to purchase for $149,400 ten percent of the Corporation's interest in the
entity that acquired the assets of Total Beverage's Chantilly, Virginia store.
The ruling of the Court in this case is subject to a pending motion by the
Corporation and Crown Books for a new trial and possible future appeal. In
June 1995, Herbert H. Haft advised the Corporation's Board of Directors of his
claim that the 1987 Resolution entitles him to a call on a 10% interest in
Total Beverage Corporation. The Corporation's Executive Committee has advised
Herbert H. Haft of its opposition to this claim.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits None
(b) Reports on Form 8-K
The Corporation has filed the following two Current Reports on Form 8-K
during the quarter ended April 30, 1995.
1. The Corporation filed a Current Report on Form 8-K on March 1,
1995, reporting the February 22, 1995, opinion of the Federal
District Court in Robert M. Haft v. Dart Group Corporation, et
al., D. Del. Civil Action No. 93-384-SLR.
2. The Corporation filed a Current Report on Form 8-K on March 13,
1995, reporting (1) the response of the Executive Committee to
the settlement agreement proposed by Ronald S. Haft and
defendants-intervenors Alan R. Kahn and the Tudor Trust in
Ronald S. Haft v. Dart Group Corporation, Del. Ch., C.A. No.
13736; and (2) the defendants-intervenors' withdrawal from such
proposed settlement on March 10, 1995.
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<PAGE> 21
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, 1995 By Herbert H. Haft
---------------------- -----------------------------
HERBERT H. HAFT
Chief Executive Officer
Date June 14, 1995 Robert A. Marmon
---------------------- -----------------------------
ROBERT A. MARMON
Senior Vice President and
Chief Financial Officer
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