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 June 2, 1996.
[ ] 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 1-7013
SLOAN'S SUPERMARKETS, INC.
--------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-1829183
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
823 Eleventh Avenue, New York, New York 10019
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(Address of Principal Executive Offices)
(212) 956-5803
--------------
(Registrant's Telephone Number, Including Area Code)
N/A
---
(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 to be
filed by Section 13 or 15 (d) of the Securities Exchange Act 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 July 16, 1996, the registrant had issued and outstanding 3,132,289 shares of
common stock.
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 2, 1996
and March 3, 1996 Page 3
Consolidated Statements of Operations for
the thirteen weeks ended June 2, 1996
and May 28, 1995 Page 4
Consolidated Statements of Stockholders'
Equity for the thirteen weeks ended
June 2, 1996 and May 28, 1995 Page 5
Consolidated Statements of Cash Flows for
the thirteen weeks ended June 2, 1996
and May 28, 1995 Page 6
Notes to Consolidated Financial Statements Page 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations Page 9
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<PAGE>
Item 1
Financial Statements
<TABLE>
<CAPTION>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 2, March 3,
1996 1996
unaudited audited
--------- -------
<S> <C> <C>
ASSETS
Cash .............................................................. $ 74,765 $ 71,242
Accounts receivable - net of allowance for doubtful accounts
of $30,000 at June 2, and March 3, 1996 ........................ 238,895 282,182
Inventory ......................................................... 5,570,239 5,461,283
Prepaid expenses and other current assets ......................... 182,411 167,512
Due from related parties .......................................... 873,093 527,694
Total current assets ..................................... 6,939,403 6,509,913
------------ ------------
PROPERTY AND EQUIPMENT:
Furniture, fixtures and equipment ................................. 5,483,077 5,461,146
Leaseholds and leasehold improvements ............................. 11,665,032 11,657,126
------------ ------------
17,148,109 17,118,272
Less accumulated depreciation and amortization .................... 3,341,241 2,947,116
------------ ------------
Net property and equipment ............................... 13,806,868 14,171,156
Receivable from officer ........................................... 322,830 318,005
Deposits and other assets ......................................... 313,584 301,230
Deferred costs .................................................... 111,919 115,358
Noncompete agreement - net of accumulated amortization of
$252,293 at June 2, 1996 and $232,535 at March 3, 1996 ......... 538,023 557,781
Deferred finance costs - net of accumulated amortization of
$15,653 at June 2, 1996 and $9,190 at March 3, 1996 ............ 113,641 120,105
------------ ------------
TOTAL ....................................................................... $ 22,146,268 $ 22,093,548
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable, trade ........................................... $ 5,424,036 $ 5,591,948
Accrued payroll, vacation and withholdings ........................ 547,929 703,785
Accrued expenses and other current liabilities .................... 779,273 473,506
Revolving credit facility ......................................... 1,000,000 1,000,000
Current portion of long term debt ................................. 1,200,000 1,200,000
------------ ------------
Total current liabilities ................................ 8,951,238 8,969,239
Long-term debt .................................................... 5,100,000 5,400,000
Deferred credits .................................................. 148,575 172,442
Deferred rents .................................................... 617,764 553,429
------------ ------------
Total liabilities ........................................ 14,817,577 15,095,110
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $50 par, - shares authorized 500,000; none issued
Common stock, $.02 par, - shares authorized 10,000,000; outstanding
3,132,289 shares issued at June 2, and March 3, 1996 ....... 62,646 62,646
Additional paid-in capital ........................................ 18,248,286 18,248,286
Accumulated deficit ............................................... (10,982,241) (11,312,494)
------------ ------------
Total stockholders' equity ............................... 7,328,691 6,998,438
------------ ------------
TOTAL ....................................................................... $ 22,146,268 $ 22,093,548
============ ============
</TABLE>
See accompanying notes.
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<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
13 WEEKS ENDED JUNE 2, 1996 AND MAY 28, 1995
13 weeks 13 weeks
ended ended
June 2, May 28,
1996 1995
--------- ---------
Sales ............................... $13,538,008 $12,103,359
Cost of sales ....................... 8,113,439 7,568,758
--------- ---------
Gross profit ........................ 5,424,569 4,534,601
Store operating, general and
administrative expense ............ 4,655,726 3,998,980
Management fee ...................... 169,225 151,292
--------- ---------
Store operating profit .............. 599,618 384,329
Non-store operating expense ......... 88,218 119,105
--------- ---------
Operating profit .................... 511,400 265,224
--------- ---------
Other income (expense)
Interest income ..................... 6,385 6,083
Other income ........................ 4,495 2,758
Management fee income ............... 0 50,000
Interest expense .................... (178,021) (95,235)
--------- ---------
(167,141) (36,394)
--------- ---------
Income from continuing operations
before income taxes ............... 344,259 228,830
Provision for income taxes .......... 14,006 10,540
--------- ---------
Net income .......................... $ 330,253 $218,290
============ =========
Income per share .................... $ 0.10 $ 0.07
============ =========
Weighted average number of shares and
equivalents outstanding ............. 3,151,000 3,208,200
============ =========
See accompanying notes
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<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
13 WEEKS ENDED JUNE 2, 1996 AND FOR THE YEAR ENDED MARCH 3, 1996
<TABLE>
<CAPTION>
Additional Total
Common stock Paid-In Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at February 26, 1995 .... 3,132,289 62,646 18,248,286 (13,054,760) 5,256,172
Net income for the year ended
March 3, 1996 ................ 1,742,266 1,742,266
------------ ------------ ------------ ------------ ------------
Balance at March 3, 1996 ........ 3,132,289 62,646 18,248,286 (11,312,494) 6,998,438
Net income for the thirteen weeks
ended June 2, 1996 ........... 330,253 330,253
------------ ------------ ------------ ------------ ------------
Balance at June 2, 1996 ......... 3,132,289 $ 62,646 $ 18,248,286 $(10,982,241) $ 7,328,691
============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
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<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
13 WEEKS ENDED JUNE 2, 1996 AND MAY 28, 1995
<TABLE>
<CAPTION>
JUNE 2, MAY 28,
1996 1995
--------- ---------
<S> <C> <C>
Net income ........................................................... $ 330,250 $ 218,290
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ........................................ 423,786 277,683
Changes in operating assets and liabilities, net of effect from
acquisition of supermarkets:
Accounts receivable - net ............................................ 43,287 21,867
Inventory ............................................................ (108,956) (3,307)
Prepaid expenses and other current assets ............................ (14,899) (64,469)
Receivable from related party - net .................................. (345,399) 128,460
Due from related parties ............................................. (4,825) (5,206)
Other assets ......................................................... (12,354) (17,561)
Deferred credits ..................................................... (23,867) (11,550)
Accounts payable, trade .............................................. (167,912) (483,540)
Accrued payroll, vacation and withholdings ........................... (155,856) (104,261)
Accrued expenses and other current liabilities ....................... 305,770 266,637
Deferred rents ....................................................... 64,338 42,424
--------- ---------
Net cash provided by operating activities .................... 333,363 265,467
--------- ---------
Capital expenditures - net ........................................... (29,837) (9,776)
--------- ---------
Net cash used in investing activities ........................ (29,837) (9,776)
--------- ---------
Repayments of bank loan .............................................. (300,000) (263,158)
--------- ---------
Net cash used in financing activities ....................... (300,000) (263,158)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ................. 3,526 (7,467)
CASH AND CASH EQUIVALENTS, begining of period ........................ 71,242 75,503
--------- ---------
CASH AND CASH EQUIVALENTS, end of period ............................. $ 74,768 $ 68,036
========= =========
</TABLE>
See accompanying notes.
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<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
BUSINESS - The Company owns and operates fourteen supermarkets and one health
and beauty aids store (the "Supermarkets") under the "Sloan's" name in New York
City (thirteen are located in Manhattan and two are located in Brooklyn). Eleven
Supermarkets were acquired in March 1993 from CKMR Corporation ("CKMR"),a
privately-held corporation unaffiliated with the Company. In August 1995, the
Company sold the leasehold of one of its supermarkets; in October 1995, the
Company purchased three other Supermarkets from Supermarket Acquisition
Corp.("SAC"), a company owned and controlled by the Company's Chairman of the
Board and Chief Executive Officer, John Catsimatidis. In February 1996, the
Company opened one new Supermarket and on March 7, 1996, the Company opened a
health and beauty aids store. The Company leases all of its Supermarket
locations.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary. All material
intercompany accounts and transactions have been eliminated in consolidation.
QUARTER END - The Company operates using the conventional retail 52/53 week
fiscal year. The fiscal quarter ends on the last Sunday of the quarter.
INVENTORY - Store inventories are valued principally at the lower of cost or
market with cost determined under the retail first in, first out (FIFO) method.
PROPERTY AND EQUIPMENT - Depreciation of furniture, fixtures and equipment is
computed by the straight-line method over the estimated useful lives of the
assets.
LEASES - The Company charges the cost of noncancelable operating lease payments
and beneficial leaseholds to operations on a straight-line basis over the lives
of the leases.
RECLASSIFICATIONS - Certain reclassifications have been made to the presentation
of the quarter ended May 28, 1995 to conform to the presentation for the quarter
ended June 2, 1996 and fiscal 1996.
PROVISION FOR INCOME TAXES - Income taxes reflect Federal and State alternative
minimum tax only, as all regular income taxes have been offset by utilization of
the Company's net operating loss carryforward.
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<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
INCOME PER SHARE - Per share data are based on the weighted average number of
shares of common stock and equivalents outstanding during each quarter. Income
per share is computed by the treasury stock method; primary and fully diluted
income per share are the same.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION-
Cash paid during the three months ended:
June 2, 1996 May 28, 1995
------------ ------------
Interest $178,021 $62,732
Income taxes $ 20,000 $29,987
In the opinion of management, the information furnished reflects all adjustments
(consisting of normal recurring adjustments) which are necessary for a fair
statement of the results of operations for the interim period. The interim
figures are not necessarily indicative of the results to be expected for the
fiscal year.
The Company's Form 10-K for the year ended March 3, 1996 contains information
which should be read in conjunction herewith.
2. RELATED PARTY TRANSACTIONS
The Company has advanced funds to a company owned by the Chairman of the Board
who is also the principal stockholder of the Company. As of June 2, 1996 the
Company is owed $322,830 including accrued interest. As of March 3, 1996,
advances and accrued interest totaled $318,005.
Red Apple Group, Inc. (Red Apple), a company wholly owned by the Company's
Chairman of the Board, supervises all operations of the Company under a
management agreement. The agreement requires the Company to pay to Red Apple one
and one quarter percent of sales as a management fee. Management fees for the 13
weeks ended June 3, 1996 and May 28, 1995 were $169,225 and $151,292,
respectively.
Red Apple periodically provides maintenance services for the Company which are
not covered by the management agreement. During the quarters ended June 2, 1996
and May 28, 1995, there were no such services rendered.
-8-
<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
2. RELATED PARTY TRANSACTIONS (Continued)
Red Apple also operates 37 supermarkets in the New York metropolitan area under
the Sloan's and Gristede's banners. The Company's advertising program is
combined with all of these Red Apple supermarket entities. Consistent with this
shared advertising program the Company is allocated advertising income and
expense by Red Apple based on the Company's portion of sales to total Red Apple
supermarket sales. Certain direct store advertising expense is charged on a
store by store basis.
The Company purchases produce and certain sundry items from a subsidiary of Red
Apple at prices consistent with those charged to other Red Apple entities as
well as non-affiliated customers. Purchases for the 13 weeks ended June 2, 1996
and May 28, 1995 were $1,283,769 and $712,778, respectively.
Legal fees incurred by the Company to a law firm, of which a director of the
Company is a member, were $36,000 and $76,000 for the 13 weeks ended June 2,
1996 and May 28, 1995, respectively.
PART I
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
For the 13 weeks ended
June 2, 1996 and May 28, 1995
FINANCIAL CONDITION
The Company's working capital deficiency decreased by approximately
$447,500 during the 13 weeks ended June 2, 1996. The major changes in the
components of working capital are as follows:
Due from related parties increased by approximately $345,400, primarily
reflecting the billing for advertising income and volume achievement discounts
by Red Apple on behalf of the Company.
Inventory increased by approximately $109,000, reflecting management's
continued desire to take advantage of volume achievement allowances.
Accounts payable and other current liabilities remained consistent with
the prior period.
Long term debt decreased by $300,000 reflecting scheduled principal
payments during the period.
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<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
Liquidity and Capital Resources
The Company believes that it will be able to satisfy its bank loan
agreement and supermarket operating requirements from internally generated
funds. In addition, the Company has in place a $1 million dollar revolving
credit facility to provide short term working capital. As of June 2, 1996 the
revolving credit facility was fully utilized.
RESULTS OF OPERATIONS
Net income was $330,253 for the 13 weeks in 1996 compared to $218,290
for the 13 weeks in 1995, an increase of 51%.
Sales totaled $13,538,008 for the 13 weeks in 1996 compared to
$12,103,359 for the same period in 1995. The increase is attributed to the
acquisition of additional stores (see, Basis of Presentation and Summary of
Significant Accounting Policies "Business"). Same store sales decreased
approximately $595,000 during the 13 weeks ended in 1996 compared to the same
period in 1995. The decrease is partially the result of the Memorial Day
holiday, the start of the summer season, coming one week earlier in the 1996
quarter than the 1995 quarter, this traditionally being the start of the
Company's weakest sales period.
Gross profit as a percentage of sales was 40.07% for the 13 weeks in
1996 compared to 37.47% for the same period in 1995. The improvement in 1996
primarily reflects improved cost controls, more efficient inventory purchasing
and a better product mix.
Store operating expenses were $4.65 million or 34.39% of sales for the
13 weeks in 1996 compared to $4.0 million or 33.04% of sales for the same period
in 1995. The increase as a percentage of sales is primarily attributable to an
increase in depreciation expense of $146,100 or 1% of sales. The increase in
depreciation expense is directly attributable to the acquisition and opening of
additional supermarket locations.
Non-store operating expenses were $88,218 for the 13 weeks in 1996
compared to $116,530 for the same period in 1995. The decrease primarily relates
to provisions for legal fees for a class action lawsuit (See Company's Annual
Report filed on Form 10-K for fiscal year ended March 3, 1996, Item 3. "Legal
Proceedings")accrued for during the 13 weeks in 1995. No such accruals were made
during the 13 weeks in 1996.
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<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS (continued)
Interest expense was $178,021 for the 13 weeks in 1996 compared to
$95,235 for the 13 weeks in 1995. The increase is primarily the result of
additional borrowing used to finance the purchase of 3 additional supermarkets
and provided the Company with a $1 million revolving credit facility. As of June
2, 1996 the revolving credit facility was fully utilized.
All other income and expense items, remained consistent as a percentage
of sales for the comparable periods.
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
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<PAGE>
SLOAN'S SUPERMARKETS, INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
None.
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.
Sloan's Supermarkets, Inc.
By: /s/ John A. Catsimatidis
-----------------------------
John A. Catsimatidis
Chairman of the Board and
Chief Executive Officer
Dated: July 16, 1996
By: /s/ Mark S. Kassner
------------------------
Mark S. Kassner
Vice President and
Chief Financial Officer
Dated: July 16, 1996
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